Business Overview

5. INFORMATION ON THE DUFU GROUP 5. INFORMATION ON THE DUFU GROUP HISTORY AND BUSINF-SS Dufu was incorporated in Malaysia under the Act on 30 May 2002 as a private limited company under the name of Dufu Technology Corp. Sdn Bhd. It was subsequently converted into a public limited company on 26 December 2002. Duru commenced operations upon its completion of the acquisition of DISB and IPG on :;0 August 2006. Dufu is the listing vehicle and the investment holding company of DISB. IPG and DlSPL in conjunction with the listing of the Group on the Second Board of the Securities Exchange. Dufu also provides management services to its subsidiary companies. The principal activities of its subsidiary companies are as follows:
DISB 22 October 19871 Develop and manufacture of RM5.000,OOO 100.00 Malaysia precision machining components for the HDD industry. industrial safely and sensor industries. telecommunication industry computer industry and consumer electronics industry RM2,OOO,000IPG 19 September 19891 Design and manufacture of
100.00 Malaysia precision steel moulds and stamping parts and components DISPL 29 May 20021 Marketing and engineering SGD2 100.00* Singapore support services Note: • Held rhrollgh DISB. The Dufu Group’s humble beginning started with the establishment of DISB to develop and manufacture precision machining components in 1987 at a rented facility in Penang by its Executive Chairman. Hsu, Chin-Shui and Executive Director/Chief Financial Officer, Lee, Hui-Ta a.k.a. Li Hui Ta. In 1990. DISB successfully acquired Seagate Technology International, Singapore as a customer for the manufacture of 5.25-inch HDD disk spacers. Since then, DISB has grown steadily to be a reputable supplier of HOD components and other precision components to leading MNCs such as Western Digital. MMI and First Technology group in the Asia Pacific region. In 1994, DISH completed and moved to its current owned building. Due to the fast expansion of the Group’s operations. DISH built its second building adjacent to its first building, in 1998. During 1999 to 2001, DISH focused on expanding its factory facilities by setting up an auto–Iathe division, a laboratory and installing multi­index, multi-spindle machine for high-volume maChining components. In 2004, DISH constructed a third building to house lPG’s tool room and stamping facility. Following the growth of DISB. the founders invested in IPG in 1996 to extend the Group’s range of products and services. One year later. IPG set up a tool room for tooling fabrication for the purpose of complementing metal stamping activities. To-date, IPG has the capability of manufacturing a wide rang~ of precision moulds, parts and stamping. IPG not only complements the internal tooling needs of the Dufu Group but also generates income by providing services to external customers. IPa has helped shorten the Group’s production lead time by providing quick supplies to DISH. S. INFORMATION ON THE DUFU GROUP (Conl’d) In 2002. DlSPL was set up to strengthen the Group’s presence in this region in view of increasing MNC customers. DISPL is positioned as the service and marketing arm of the Dufu Group to provide better support to the Group’s customers in this region. This has enabled the Group to foster an active service culture that responds rapidly to customers’ feedback and problems. Presently, the Group has five (5) broad main categories of products, namely, HDD components. industrial safety and sensor components, telecommunication components. computer peripheral components and consumer electronics components. As a result of the management’s emphasis on quality, DISB and IPG were awarded ISO 9001 :2000 status from 8M Trada Certification Ltd in 2002 and 2003, respectively. The Group’s key milestones and achievements can be summarised as follows: Key Milestones
• DISB acquired Seagate Technology International, Singapore as a customer for S.25-inch HDD disk s acers. 1993 DISB acquired Western Digital, Singapore as a customer for the manufaclUre of 5.25­inch HDD disk s acers. 1994 DISB com leted and shifted its 0 eration to its own premjscs. 1997 DISB achieved ISO 9002 certification. 1998 DISB eom leted second buildin for ex ansion of manufacmrin facilities. J999 • DISB set up auto-lathe di vision. • DISB set u laboratory. 2001 DISB installed multi-index, multi-spindle machine for high volume machining com onents. 2002 • DISB achieved ISO 9001 :2000 certification. • Inco oration of Dufu. 2003 £PO achieved 1509001 :2000 certification. 2004 DISB constructed third buildin to house lPG’s tool room and starn ing facilit 2006 DISB and IPG achieved ISO 14001 :2004 certification. The kcy objectives for the certification. amongst others, are to ensure effective implementation of environment mana ement and conserve eoer utilisation. 2006 DISB starts the construction of its founh building to increase the production and warehouse s ace Ke
G Shank Enter rise (M) Sdn Bhd Thank Your Su ort Award 1995 [lest Vendor A ward1997 G Shank Enter rise (M) Sdn Bhd Sea ate Technolo International Certified Su lier Achievement Award Valuable Contribution Award 2000 Seagate Technolo Intcrnational Invcntec Electronics (M) Sdn Bhd Excellent Su lier Award 2001 Valuable Contribution Award 2002 Seagate Technolo International National Council for Occupational Keselamatan dan Kesihatan Pekcrjaan 2003 Keban saan (SME)-Pcmenan PenamaSafet and Health Sea ate Technolo International Valuable Contribution Award 2005 G Shank Enter rise (M) Sdn Bhd Best Vendor Award 2006 Scagate Technolo International A rcciation Award (Source: D&B Malaysia Report) 5. INFORMATlON ON THE DUFU GROUP (Com’d) The Group’s corporate structure is as follows:

5.1.1 Competitive Strengths The Group believes that its competitive strengths in the market are as follow:­(i) Experienced Management Team The Duru Group is managed by a tcam of professionals with vast experience in the precision machining industry, in particular, in servicing the HOD market. The key directors, Hsu. Chin­Shui, Lee, Hui-Ta a.k.a. Li Hui Ta and Yang Pob Yow, as well as the key management learn, have an average of twenty (20) years of experience in the design, development. manufacturing, marketing and distribution of precision machining parts and components. and stamped parts for the HDD, industrial safety and sensor, telecommunication. electronics. and computer pcripheral markets. Most of the key personnel possess an engineering qualification, creating a strong technical foundation that permits the hands-on culture of the Group. (ii) Established Customer Relationship and Proven Track Record As at 31 July 2006, the Group’s three (3) largest customers are Seagate Technology International, Singapore. Seagate Technology International (Wuxi) Co. Ltd and Western Digital (Thailand) Company Limited. The Group has been supplying the manufacturing operations of Seagate for many years, the longest being Seagatc Technology International of Singapore at eighteen (18) years followed by Seagate Technology (Thailand) Ltd and Seagate Technology International (Wuxi) Co. Ltd.. both at seven (7) years. Western Digital (M) Sdn Bhd is the Group’s other oldest customer. at thirteen (13) years. in the past decade. the Group has obtained numerous awards from its cuslomers for outstanding performance and achievements. These awards are recognition of the Group’s continuous commitment to producing quality products and ils ability to meet these MNC customers’ requirements. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 5. INFORMATION ON THE DUFU GROUP (Cont’d) (iii) Focus on Customer Service The Group works closely with its cuslOmers to develop components and parts with the view of meeting the customers’ short to medium-term production demands. The Group also set up complete in-house laboratory testing facilities in order to provide high quality precision parts to its customers. These have enabled the Group to secure and retain MNCs such as Scagate and Western Digital as its customers. The Group’s commitment to customer service can also be evidenced hy numerous best service awards, best vendor award and valuables contribution awards received by the Group over the past few years as set out in Seclion 5.1. (lV) Integrated Manufacturing Process The availability of an in-house mould, tool and die fabrication division is a business strength as the Group is able to provide its customers with an integrated manufacturing process that promotes shorter lead times from design to production. By controlling the fahrication of its manufacturing tools, the Group is able to obL1in better control of its manufacturing processes and atti:lin the following benefits: • Minimise down time.
• Better cost comrol.
• Better quality control, and
• Less production re-funs.

(v) Stringent Quality Control DISB and U’G arc both ISO 900I:2000 certified. The ISO 900I:2000 standard are one of the world’s foremost standards for recognising quality management and are an international reference for quality requirements. As ISO 9001:2000 certified companies, DJSB and (PO have established, documented and implemented a quality management system which is internationally recognised as a new standard in understanding the customer and satisfying their needs. The Group adopts stringent quality policies to ensure that components and parts manufactured and supplied are of the highest quality, meet the specifications and stringent requirements of its customers and conform to the relevant regulatory standards. The components and parts are manufactured under the supervision of the quality management team. led by the Chief Operation Officer. In addition to the ISO 9001 :2000 standard, the Group has also implemented several quality initiatives. such as Six Sigma Projects. Design for Six Sigma and Real Time Statistical Process Conlro] as discussed further in Section 5.5.12. Supporting the Group’s quality policies and quality initiatives is the laboratory. The laboratory was sel up by the Group to facilitate produCl certification, material qualificalion, process monitoring and on-going qualily improvement~. The laboratory has enabled lhe Group to specialise in manufactllring products that require stringent contamination controls. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 5. INFORMAnON ON THE DUFU GROUP (Col/I’d) 5.2 SHARE CAPITAL As at the dale of this Prospectus. Dufu’s authorised share capital is RMlOO,OOO,OOO comprising 200,000,000 shares of RMO.50 each, of which 65,800,000 ordinary shares have been issued and fully paid-up. Upon completion of the Public Issue, our issued and paid-up share capital will he increased to RM45,OOO,OOO comprising 90,000,000 ordinary shares. The changes in our issued and paid-up share capital since incorporation are as follows:
30.05.2002 24.01.2006 30.08.2006  2 4 65,799.996  1.00 0.50 0.50  Cash Subdivision of par value Issued pursuant to the Acquisitions at par  2 2 32,900,000
As al the date of this Prospectus, there are no outstanding warrants, options, convertible securities or uncalled capital in the Company. other than the ESOS Options. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFf BLANK

5. INFORMATION ON THE DUFU GROUP (Cont’d) 5.3 LISTING SCHEME For the purpose of our listing on the Second Board of the Securities Exchange, the Group undertook a Usting scheme which was approved by the following: (i) the SC (including the approval under the Fie Guidelines) vide its letter dated 28 August 2006: and
(ii) the MITl vide its leiters daled 24 May 2006 and 27 September 2006.

The listing scheme entails the following: 5.3.1 Acquisitions (a) DISB Acquisition Dufu. on 30 August 2006, acquired the entire issued and paid-up share capital of DISB comprising 5.000,0<Xl ordinary shares of RM 1.00 each for a total purchase consideration of RM29,11O.000 after laking into consideration the audited NTA of D1SB 01 RM29,121.255 as at 31 December 2005 fully satisfied by the issue of 58,220,000 new Duru Shares al par. The vendors and their respective equity interests acquired by Duru together with the number of new Dufu Shares issued as consideration are as follows:
HSll, Chin-Shui  1.939,600  38.79 ,  It ,292,351  22.585.000  Lee, Hui-Ta a.k.a Li Hui Ta  1,939.600  38.79  11,292.351  22,585,000  Wong Ser Yian  713,202  14,27  4,152,262  8,304,000  Yong Poh Yow  407,598  8.15  2,373,036  4,746.000  5,000,000  100.00  29,110,000  58,220,000
The number of Dufu Shares issued were rounded up!down, to the extent possible, to the nearest thousand. The DISB shares acquired by Dufu are free from all liens. pledges. charges. mortgages and other encumbrances whatsoever and with all rights attached thereto including all dividends and bonus or rights issues thereafter to be declared. (b) IPG Acquisition Dufu. on 30 August 2006, acquired the entire issued and paid-up share capital of IPG comprising 2,000,000 ordinary shares of RM 1.00 each for a total purchase consideration of RM3,789,998 after taking into consideration the audited NTA of IPO of RM3,790J74 as at 31 December 2005 fully satisfied by the issue of 7.579,996 new Dufu Shares at par. 5. INFORMATION ON THE DUFU GROUP (Co..t’d) The vendors and their respective equity interests acquired by Duru together with the number of new Duru Shares issued as <.:onsideration arc as follows:
Hsu, Chin-Shui Lee, Hui~Ta a.k.a Li Hui Ta Wong SeT Yian Yang Poh Yow  775,840 775,840 285,281 163,039  38.79 38.79 14.27 8.15  1.470.216 1,470,216 540,607 308,959  2.939,998 2.939,998 1,082.000 618,000  2,000,000  100.00  3,789,998  7,579,9%
• The number of Dufu Shares issued was rounded up/down. to the exte1lt possible, to (he nearest rhotl!wnd. The IPG shares acquired by Duru are free from all liens. pledges, charges, mortgages and other encumbrances whatsoever and with all rights attached thereto including all dividends and bonus or rights issues thereafter to be declared.

5.3.2 IPO In conjunction with irs listing. Dufu will undertake a public issue of 24,200,000 new DUrll Shares while the Offerors will offer for sale 9,800.000 Dufu Shares at an issue/offer price of RMO.70 per Share which are the subject of this Prospectus.
5.4 ESOS Dufu had on 4 April 2006 and 18 January 2007 obtained the approvals of the Securities Exchange and its existing shareholders respectively to establish an ESOS to motivate. retain and reward eligible DirecLOrs and employees whose services are vital to the operation and continued growth of the Group. ESOS Options will be granted for new Dufu Shares representing up to 15% of the issued and paid-up share capital of the Company at any time during the existence of the ESOS. The maximum number of new Dufu Shares that may be issued under the ESOS afler the Public.: Issue is 13,500,000. The new Dufu Shares to be issued pursuant to the exercise of the ESOS Options shall. upon allotment and issue, rank equally in all respects with the existing Dufu Shares and shall carryall rights to receive all dividends and other distributions declared and paid subsequent to the allotment thereot”. Offers of ESOS Options to eligible DirecLOrs and employees will be in accordance with the ESOS By-Laws. The proceeds from the exercise of the ESOS Options as and when received will be used as working capital. 5. INFORMAnON ON THE DUFU GROUP (Cont’d) 5.5  BUSINESS OVERVIEW  5.5.1  Principal Products and Services  The Group’s products and services consist of the following five (5) main categories:
Desciiution  (i)  HDD components  The Group prototypes. develops, manufactures and sells HDD components, namely disk clamps, disk spacers. hexagon nuts and latch pins, primarily to Seagatc in Singapore/Chinaffhailand, Western Digital in MaJaysiafThailand and MMI in Singapore. These companies are regional procurement centres for all manufacturing facilities located in the Asia continent. For example, the Group cxpons its components to various Seagate HDD manufacturing facilities in Singapore, China and Thailand.  (ii)  Industrial safety and sensor components  The Group prototypes, develops. manufactures and sells safety and sensor device components to a world class, sensor-based technology group of companies, with global operations developing and providing innovative solutions for a safer world. These components are used primarily for gas sensing devkcs for the mining and automotive industries.  (iii)  Telecommunication components  The Group manufactures and sells telecommunication components used in mobile phones, wireless routers and modems, and Bluetooth devices. These components are principally sold to (i) a leading global designer and manufacturer of antennas and power products for wireless applications and (ii) a global manufacturer and supplier of telecommunications. information technology-related, consumer electronics and electrical products and components.  (iv)  Computer peripherals components  The Group manufactures and peripherals such as industrial photocopiers. sells components for computer and commercial printers and The customers under this category include electronics manufacturing services providers.  (v)  Consumer electronics components  The Group manufactures and sells metal components for consumer electronics products such as digital music players (MP3). digital cameras, high-quality audio equipment (HiFi), liquid-crystal display (LCD) panels and cable television decoders. These components are mainly sold to consumer electronic manufacturing services providers and contract manufacturers.
In addition, the Group also manufactures and sells meta) stamping parts such as terminals and shunt resistors which are used in the automotive industry. (Source: D&B Malaysia Report) S. INFORi”lATION ON THE DUFU GROUP (Col/I’d) The Group’s revenue contribution by market segment for the seven (7)-month period ended 31 July 2006 and (he FYE 31 December 2005 can be diagrammatically illustrated as follows: 7-mooth period ended 31 July 2006
Industrial .’i1fel)” and SC’lln’ component. (i’/, “I”c1ccl1mmunio (“WI “”‘PO”””’ 2″,. Unl$Ulntt t:Jcclrnnic comfXmcnrs “, Computer!’ pcnphcrnJ compoocms 1°’,
FY E 31 December 2005 Industrii1.l 51fe!)” ~nd P.cnsor CUmponlllr~ 5″0
‘l’clceommuTl1C2t\Oll componentS 50
‘0 Consumer J:JCClfOl’llC COO~lCnlS
1100 compOOCfJIS 6’,81~o
eoo.p.,'<n pcriphml C~ts l~o THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFr BLANK

S. INFORMATION ON THE DUFU GROUP (Cont’d) A description of the principal products manufactured by the Group is as follows:
HDD components  Disk Spacer  This component is used to create a space between the disk media stack (where data is ultimately stored), to allow the head stack (actuator and read/write head) access to the storage data lone. This part is typically made of aluminium alloy or stainless steel, and electro-less nickel plated. It shapes like a metal ring, and has tight precision in thickness, flatness and parallelism.  Precision machining  Disk Clamp  This component is used for clamping and to hold the disk media stack together. This part is typically made of aluminium alloy and electro-less nickel plated. It shapes like a metal ring with special contact profile surfaces and assembled with washer (stainless steel) to allow well distribution of clamp forces. It also has mUltiple holes for fastening purposes.  Precision machining and stamping  Latch Pin  This component is used for locking the head stack on the storage data zone. It is also used as pivot for the mechanical shock latch to improve HDD shock resistance. This part is typically made of stainless steel, and plated. It shapes like a round pin with several outer diameters. and has tight tolerance on the diameter.  Precision machining  Ground Pin  This component is used for electrical grounding on the HDD actuator body to reduce electrical noise. The part is shaped like a straight pin. It is typically made of brass and tin or gold plated.  Precision machining  Hexagon  This component is used for locking the pivot bearing onto  Precision  Nut  the actuator. The part shapes like a nut with hexagon in outer profile and a super fine thread in the inner diameter. The part is lypically made of stainless steel with plating.  machining
THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
5. INFORMAnON ON THE DUFU GROUP (Cont’d) Industrial safety and sensor components  Sensor Housing  This component is used for housing a heat or gas sensor. It shapes like a round metal connector with an inner hole, and typically has threads in inner and outer diameter. The part is typically made of stainless steel.  Precision machining  Infra-red Sensor Housing  This componem is used for housing infra-red sensor. It has no typical shape or size. Its unique feature is the finishing whereby it can either be reflective or in matted finish.  Precision machining
Sensor This component is used as electrical contacts within Precision Terminal chemical sensors. It is shaped like a round metal pin with machining Pins several diameter sizes. It also has threads depending on application. The part is typically made of brass, nickel silver and mild steel. This component is a metal protective cap used in gas Precision sensor assembly. The part is typically made of cold-rolled Sensor Cap stamping steel and stainless steel. Lead Frame This component is an electrical contact used for gas Precision sensor assembly. The part is made of beryllium copper. stamping This component is used as a bracket to mount a lighting Mounting Precision Bar sensor. The part is made of mild steeL stamping Precision Plate Reflection This part is used as a reflection for a sensor light. The part is made of aluminium. stamping This part is used as a electrical contact for hattery cells. Precision munications Telecom­Battery stamping Components 1-c~——1~C7–~—-”-‘—‘–~—-‘—‘—=-‘–~–‘——-1–=—-‘~—-1 connector Balance This part is used in telephone handset. This is to increase Precision weight handset weight and avoid a toy-like feeling to users. stamping This part is used as an electrical contact for computer Prcdsion peripheral Computer Contact stamping com onents Consumer solder interconnects. This part is used as a back cab for a Hi-Fi decoder system. Stamping, electronics Back cab bending, and components The part is made of mild steel with coating and printing as cosmetic requirements. sland off assembly Chassis This part is a metal casing for a Hi-Fi decoder system. The Stamping, part is made of aluminium alloy. bending, and stand off assembly 5. INFORMATION ON THE DUFU GROUP (Cont’d) 5.5.2 Production Process The primary production processes of the Dufu Group can be segregated into two (2) main categories, namely (i) precision machining and stamping, and (ii) tooling. (i) Production Process Flow for Precision Machining and Stamping
Incuming C,2uality Inspection
,——­___ P,im,’Y I’mc””,”‘ ­• 111 Process Quality Control _~hchining / Stamping 1
surface finishing / In Procc:;s Quality Control
l~”-“‘~~””!•grinding / plating
Outgoing Quality Control
,—-­I Delivery
(a) Materials Received Raw materials for precision and precision machining purposes are shipped in on a weekly basis in containers. Most of the raw materials arc in bar or rod shape or in coil form, ranging from aluminium alloy and copper alloy to stainless steci ferrous-based malerials. Once received, the raw malerials are placed and properly arranged inside the material store. 5. INFORMATION ON THE DUFU GROUP (eonl’d) (b) Incoming Quality Inspection All incoming raw materials are inspected by QC inspectors attached to the Incoming Quality Control section. The raw materials, which are benchmarked against the Acceptable Quality Level (“AQL”) sampling plan, are inspected for dimensional, cosmetics and the material grade. Raw materials which do not conform to the AQL are rejected and returned to suppliers. (c) Primary Processes -Machining/Stamping The Group utilises two (2) primary manufacturing processes for its component manufacturing, namely CNC machining and stamping. Depending on the produc( requirement, a combinalion of special processes onto primary processes may be required to derive a finished component. For instance, CNC turning, milling, tapping, knurling, broaching can be combined into one single machining process. Blanking. forming and bending can also he combined into one progressive stamping process. Through the combination of specialised engineering and technical disciplines, the Group has the capability to develop different machining processes 1O manufacture components for various industries sut:h as HDD, safety devices, telecommunication and consumer electronics. (d) Secondary Processes (Surface Finishing/Grinding/Plating) Some components such as hard disk spacers are required to go through a surface finishing process to achieve higher precision in thickness, flatness and parallelism. The tolerance requirement is essential for HDD makers to achieve high production yield. and obtain a product of higher reliability. The Group utilises a double disc grinding process for surface finishing. capable of achieving the final thickness of +/-3 microns and sub-microns in surface flatness. There are also components called for no sharp edges or mirror surface finishing. This can be achieved through secondary tumbling or polishing processes. In most cases. plating is also required to satisfy the cleanliness requirement. surface hardness as well as corrosion protection. (e) In-Process QC The QC Department will perform two-hourly in-process inspections during the production run. Five samples will be pulled randomly from the machines to inspect the dimensions and cosmetics of the finiShed components. (I) Outgoing QC Once a production run is completed, the lot will be submitted to the QC Department for the lots buy-off. This is the process where QC will inspect the lots based on acceptance criteria set by the QA Department and the customers. The instruction is generated from the QC engineer based on customers’ defined critical parameters. Prior to delivery. outgoing QC inspectors will perform outgoing final inspection for all outgoing shipment lots based on customers’ defined quality criteria in the form of a General Inspection Plan. S. INFORMAnON ON THE DUFU GROUP (Cont’d) (ii) Production process flow for Tooling
M alL’rial Preparation
L_ _M=’=”=,”=”c-‘~__…J ……..
II cat ‘J’rt;:ttm t-~-‘–!
r-:-r ,–d—-,! ~ur aCt’ ,fln lng I i-J ……..
Tooling :\sscmbll’ l
———,Tool lc~t run and buy-ofr ~
Rt·lcasc for I\-‘ ass Production
5. INFORMATION ON THE DUFU GROUP (Cont’d) (a) Receive Part Drawing Upon confirmation of part drawing and sales order. the sales personnel will hold a meeting with the Tooling Engineer, Toolmaker and other personnel from the Industrial Engineering Department to review the part drawing. (b) Tooling Design The Tooling Engineer will then proceed to design the tooling required using AutoCAD (drahing software). Upon completion of the 1001 design, a work order will then be released for looling fabrication, The final drawing of the tooling will be issued to the Tool Fabrication Department, A list known as the Material Preparation List setting out details of the material requirements will then be issued to the Production Control Department. (c) Material Preparation Based on the Material Preparation List received, the Production Control Department will coordinate to gel in the required material such as tool steel and mould components. The Production Control Department will then release the tooling schedule to all related departments and to the customer. The Production Control Department is also responsible for the tracking of the tooling fabrication status on a weekly basis. (d) Milling The Tooling Fabrication Department will tirst program the CNC milling machines based on the final drawing of the tooling. Upon receiving the material from the Production Control Department, the Tooling Fabrication Department will start the milling process. The milling machines will CUI and drill the material into a semi-finished or finished tooling as per specifications. (e) Heat Treatment After the milling operation, the tooling is subjected [0 heat treatment for hardening of the based material. which is steel. (I) Wire Cut Electrical Discharge Macbine (EDM) Upon completion of the heat treatment. the tooling will be prepared for wire cut EDM processing, whereby mould-plate, inserts and punches are produced according to the tooling drawing. The wire cutting process is generated directly from graphic file produced by CAD (Computer Aided Design) drafting software with the aid of CAM (Computer Aided Manufacturing) software. This process cuts very narrow kerfs and sharp angles. (g) Surface Grinding Whenever tool surface finishing is critical to produce sharp cutting edges, precision and improved wear resistance, the tooling is sem for surface grinding to achieve the highest quality of surface finishing. The grinding process will remove unwanted material/layer from tooling to a fine tolerance level depending on the specifications, s. INFORMATION ON THE DUFU GROUP (ConI ‘d) (h) Tooling Assembly At the final tooling assembly, the Tool Maker will fit all the tooling components according to the too) design drawing. (i) Tool Test Run and Customer Buy.-otT After completing the LOal assembly, the Tool Setter will test the tooling to produce a first article (“FA”) sample (first prototype produced). The Tool Setter will further fine tune the tooling or process until the FA sample meets the customer’s specifications. All process parameters will then be logged for future production reference. The QA Personnel will then perform a final FA inspection and submillhc FA packages to the customer for tooling inspection and approval (customer buy~oft). The FA packages will include the part sample, a 100% inspection repon, a material certification and a process management/control plan. (j) Release for Mass Production Upon obtaining the customer’s FA approval, the tooling is released for production and La be delivered to customer. 5.5.3 Process Engineering and Process Development Activities In order to improve production efficiencies and quality consistency, the Group’s Engineering Team continuously performs process engineering and process development activities as follows: (i) Process Engineering Activities There are principally two (2) main process engineering activities conducted regularly, namely. improving process cycle Lime and improving process capability. Improve process cycle time It is the focus of the Process Engineer to continuously look for opponunities to reduce the machine setup time as well as process cycle time. An example would be the design and use of swndard blocks and tooling that can be utilised across many different products. By doing this. the setup time is greatly reduced due to common hardware setup. This technique has enabled quick product changeovers, and minimises unnecessary down time. The process cycle time is mostly reduced by adopting a combination of: • cutting tool and coolant for optimising spindle speed,
• minimising tool change frequency by combining processes with customised tooling,

and • reducing machine idle time by optimising tool path (machining) and maximising the number of parts to be produced in one programme cycle. 5. INFORMAnON ON THE DUFU GROUP (Coni’d) [mprave Process Capability It is crucial for the Group to have a very stable and capable process in order to avoid rework. high rejects. product returns. which may result in potential loss of customers. Prior to a mass production run, bOlh Process Engineer and QA Personnel will work closely to identify critical specifications of the product and conduct self-assessments for the manufacturing process capability. Process capability is a measure of how well a component is produced in relation to the specifications sct by the customer. In cases whereby the process capability index is poor, several statistical techniques may be utilised to identify possible causes such as gauge repeatability and reproducibility study, statistical process control chart and design of experiments. A good repeatable gauge will minimise measurement variation and improve manufacturing process capability potential. The process control chart will also help engineers identify process abnormalities and its assignable causes. If required, a design of ex.periment will be carried out to analyse the sensitivity of process variables, and then determine optimised process parameters. A design of experiment is a systematic approach to carry out process evaluations and understand behaviours of output responses from the input factors and variables. This is one of the critical success factors for the Group, as a capable process will enable smooth production ramp ups, which in turn support the customer to achieve faster ti me-to­volume and time-to-market. The strength and ability to response to aggressive pnx:luclion ramp ups over the years have helped immensely in building the customers’ confidence and retain the Group as a business panner for future product developments. (ii) Process Development Activities There are three main process developmcI1l activities, namely: (a) Joint project development with customers;
(b) Developing cost effective solutions; and
(c) Developing process automation.

Process development activities are crucial for the Group to remain competitive in the industry and maintain its profitability. The process development has enabled the Group to provide cost effective solutions and preserve the long term business relationships with customers. (a) Joint product development with customers Some customers will request for joint review for their new products, and encourage technical inputs to improve their products’ cost and quality. The process development tcam will review the product design, and advise the customer if there is any non-cost effective process involved or any potential quality issues in high volume production. In most cases, the Group is ahle to suggest alternative solutions with the least cost impact without compromising quality. Through joint reviews and technical exchanges, the Group is able to manufaclUre their products at higher production rates and attain better production yields. (b) Developing cost effective solutions The process development team members will reengineer a product or develop processes to suit the production demand in the most cost effective way. For example, one of the Group’s customers used to pay a higher price for a metal injection component. To win the customer’s business, the Group recllgineered the product to use full CNC turning component that has resulted in a 75% cost saving for the customer withom compromising the product performance. 5. INFORMATION ON THE DUFU GROUP (Cont’d) (c) Developing Process Automation Generally, machining and stamping processes are relatively lahour intensive. In order to maximise production output. it is important to develop processes that have good line-balancing and attain minimal machine and operator idle time. Whenever possible for high volume production, the process development engineers will look for ways to improve on and enhance the features or functions of the conventional machine so that material loading, unloading, chips cleating processes are automated. This will help free up the operators’ time to address the more value-added processes. For example. a secondary lathe operation for clamp production was reenginccrcd to incorporate a low cost auto-loading mechanism designed in~housc. enabling a hatch loading of thirty (30) pieces as opposed to the previous piece-by~piece loading. In addition. the low cost alita-loading mechanism allowed one (!) operator to manage and monitor three (3) machines. Previously, one (1) operator managed and monitored only one (l) machine. The reduction in labour helped the Group improve its profitability for the product manufactured. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
5. INFORMATION ON THE DUFU GROUPieont’d) 5.5.5 Engineering Team As at the Latest Practicable Date, there are ten (10) employees involved in the Group’s engineering activities. The Group’s current engineering functional organisation chan is as presented below: l Chief Operating Officer J [ General Manager J !!! !
;’ ;’ ;”\ “- “­Tooling Design Industrial Process En gineering Process ” Engineering  Development  • Senior Engineer  Manager  • Engineer  Engineer  • Engineer  • Manager  • Assistant Engineer  • Senior Engineer  Senior Technician  • Engineer
‘—-_.// ,,’—–.// \…’——–‘ 5.5.6 Intellectual Properly The Dufu Group has not registered any intellectual properly. However, the Dufu Group had filed an application for the registration of its own trademarks. the Dufu and DTC logos on 2 June 2006. THE REST OFTHIS PAGE HAS BEEN INTENTIONALLY LEFf BLANK 5. INFORMATION ON THE DUFU GROUP (Conl’d) 5.5.7 Principal Markets For the seven OJ-month period ended 31 July 2006, approximately 86% (rYE 31 December 2005: 79%) of the Group’s sales consist of direct sales to overseas customers in countries such as Singapore, Thailand, China, the United Kingdom, the U.S., Germany and Italy. Market  FYE 31.12.2005  7-month period ended 31.07.2006  RM’OOO  %  RM’OOO  %  Overseas (direct) Overseas (indirect)  53,808 14,372  78.89 21.07  44,868 7,311  85.99 14.01  Local  68,180 27  99.96 0.04  52,179 – 100.00 – Total  6~,LU7  IU~.uU  52,179  100.00
Indirect sales to overseas customers are sales to customers located in the Free Trade Zone and Licenced Manufacturing Warehouse. A licenced manufacturing warehouse is licensed by the Royal Malaysia Customs and Excise Department to facilitate export-oriented industries whereby foreign investors are encouraged to invest in Malaysia. Raw materials/components directly used in the manufacturing process are exempted from payment of customs duty and sales tax. The breakdown of direct export sales by country is as follows: Singapore Thailand China United Kingdom U.S Germany Italy  FYE 31.12.2005  7-month period ended 31.07.2006  RM’OOO  %  RM’OOO  %  26,210 16.180 6,036 2,749 2,335 298 – 38.43 23.72 8.85 4.03 3.42 044 – 19,070 11,939 11,555 1,653 190 348 113  36.55 22.88 22.14 3.17 0.36 0.67 0.22  Total  53,808  78.89  44,868  85.99

5.5.8 Seasonality/Cydicality According to the Management, the Group’s production of its primary components, namely HDD components is not subject to major cyclical demand in nature. Its status as an ‘approved supplier’ to its major HDD customers, namely Seagate and Western Digital, and its long service record ensure quarterly production allocations from these customers on a continuous basis. However, the non-HOD product industry, namely stamping components for the electronics industry is cyclical in nature. The peak season for the Group’s stamping components run from March to November, while December to February are typically months of low demand, in which production operates at between 50%-60% capacity only. 5. INFORMATION ON THE DUFU GROUP (Cont’d) During the off·peak season, the Group pursues the following optiom to minimise the cyclical nature of its non-HDD product business: Reduce outsourcing orders and maximise utilisation of the Group’s production capacity; Convert production to run huffer stocks for mature products with longer life cycles per [on.:casl in orders. These arc usually high vallie-added product models which are high mixed-Jow volume in nature; Work hour.s adjustment -All ovnlirm.: adivilics will be frozen. Production work hours will be changed from (twelve) 12-hour shifts to eight (X)-hour shifts: and Work day adjustment -In the possible event of a drastic decrease in orders, the Group will adjust the numher of working days from six (6) to five (5) days.
5.5.9 Types, Sources and Availability of:Materials The main raw materials used by the Dufu Group are various grades of aluminium rods/sheets, various grades of stainles:c, steel coils/rods/sheets and other metal alloys. Por the seven (7)-month period ended :11 July 2006, approximately 29~.’ of these three 0) major raw materials arc sourced locally while the remaining 71 % arc sourced from Taiwan, Japan, Thailand, China, Switzerland and Singapore. These major raw materiab are easily available and the Group does not foresee any supply problems. The Group can always source these raw materials from overseas without difficulty when certain material grades are not available in the local market. In 2005, prices of raw materials such as aluminium and steel increased gradually throughout the year as a result of sU’ong demand amidst a shortage in supply globally. In 2006, the price continues to increase gradually. The Group purchases its raw materials direelly from manufaclurers and nol [rom stockisls, further buffering it from the volatile price fluctuations. Moreover, over the years, the Group has built strong working relationships with its suppliers where it has established track records for its purchases and payment commitments. This has resulted in access to a regular supply of raw materials at competitive prices. The average length of relationship with ilS suppliers is approximately nine (9) years, with the longest being twelve (12) years with Ebel Industries Pte Ltd of Singapore. ——————————, THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFf BLANK 5. I:”FORMATION 0’\ THE DlJFU GROUP (Conl’d)
5.5.10 Technology Lsed in Major Manufacturing Processes The Group’s technology lies in its machines’ capabilities as described below: Precision Machining Processes
:\1i1lingfTappinglDrilling
CNC Lathe -A Computer Numeric Controlled machine for machining or turning of round metal components. CNC enables quick product change OYer. and offers high flexibility to adopt enginct:ring. CNC ~Jachining Centre -A Computer Numeric Controlled machine for machining. It offers higher complexity in machining, and is also used to complement other processes in order to produce a completed product Deburring and tumbling The Group has three (3) different types of deburring system, namely vibratory finish, barrel finish and magnetic deburring. Depending on part size and geometry, selective deburring system with suitable deburring media is use to achieve optimum deburring and surface finishing result. Grinding Double disk grind machine -A machinc lhal is uscd La produce and control flatness and parallelism of a flat metal part within micron (O.OOlmm) scale. It has 2 round disks attached with abrasive stone, and rotary grind the parts in between the stones.
Centre-less grinding -A machine that is used to grind only outer diameter of round part in achieving higher dimensional precision and surface finishing. Stamping Processes
Stamping  Stamping press with a different range of tonnage capacities utilising a  comhination of different machine structures. Some machines are huill  for high speed stamping. Machine with link motion design is also Llsed  for  producing parts that require high precision cutting, bending and  forming.  Tumbling/Dehurring  The Group has three (3) different types of deburring system. namely  vibratory finish, b3rrel finish and magnetic deburring. Depending  on  part  size  and  geometry,  selective  debuning  system  with  suitable  dcburring media is used for achieving opLirnum dcburring and surf’H.::e  finishing result.
5. INFORMAnON ON THE DUFU GROUP (Cont”d) 5.5.11 Operational Capacity The Dufll Group’s production faci:ities and their respective capacities as at 31 July 2006 are as follows:
To the best knowledge of the management of the Dufu Group, there are no constraints on the capacity of the Group’s current production facilities. In view of the expected increase in production orders, the Group has budgeted approximately RM7 million to purchase additional machinery over the next three years. 5.5.12 Quality Management The Group’s quality management practices are categorised into two (2) main groups: (i) Quality assurance; and
(ii) Quality control.
(i) Quality assurance

The Group believes that the quality of products come from the manufacturing process and not from the inspection. Regular improvement activities are conducted to improve the manufacturing process. Various measurements are employed to build quality features into the manufacturing process.
Liaise  closely  with  To achieve continual improvements in meeting  CUSlOmer  cuslOmer  to ensure  that  the customers satisfaction.  Quality  all  complaints  are  Engineer  promptly  solved  and  to  implement  new  quality  requirements  with  customer  Quality  surveys  and  To  drive  suppliers  for  continuous  quality  Supplier  assessments  are  carried  improvement  and  ensure  that  all  corrective  Quality  out  to  evaluate  the  actions are effectively implemented.  Engineer  performance of suppliers  This  forms  part  of best  practices  for  supply  chain management.  All standard operating  To achieve lOtal quality improvement through  Quality  procedures and work  total iovol vemenl.  Management  instructions are carried  Representativel  out in accordance !O the  Document  ISO 9001:2000  Control  requirements  Executive
5. INf’ORMAnON ON THE DUFU GROUP (Cont’d) Iii) Quality control The following quality control activities arc carried out to ensure the quality of deliverables:

controlQuality  To identify all known quality issues and  Quality  are in placecheckpoints  feedback to production in a timely manner, so  Control  followingfor the  that prompt correcti ve actions or remedies can  Inspector  functions:  be taken immediately, This is to avoid high  Incoming inspection;  production rejects or reworks, and minimise  In-process quality  risk of potential defects reaching customers.  control: and  Any product change-over or machine  qualityOutgoing  reconfiguration will require QC approval to  as LotCOnlrol such  ensure things are carried out correctly from the  tcstAcceptanl:c  beginning.  (LAT)  All new products are  To ensure new products arc qualified during  First Article  qualified intemally  first submission in the shortest time and to gain  Engineer  before submitting the  cUSlOmer confidence in the Group’s product  sample to customer  quality as well as speed up time-to-volume  production.  All measuring  The equipments and gauges are calibrated to  Calihration  equipments and gauges  known standards or outsourced at fixed  Engineer  are regularly tracked and  intervals, to ensure that measurement errors and  maintained to ensure thal  variations are always maintained at acceptable  they are accurate and  levels. With a calibration system, the Group is  precise  able to lower the risk of making an incorrect  quality decision. The quality decision can be  either a product acceptance or a process  correction.
DISB and IPO ohtained their ISO 9001 :2000 certifications in 2002 and 2003 respecti vely from 8M Trada Certification Ltd. The ISO 9001 :2000 certification is testament to the quality and consistency of the Group’s products as well as its commitment to meeting its customers’ and regulatory requiremenLIl. As a supplier to MNCs, the Group is subject to stringent periodic audits by its customers to ensure compliance with high qllality production and environmental standards required by the MNCs. For example, pursuant to the request by the Group’s major customers, a laboratory was set up for material qualification, process monitoring, on-going quality improvement as well as product certification. The laboratory has enabled the Group to specialise in manufacturing products that require stringent contamination controls. S. INFORMATION ON THE DUFU GROUP (Cont’d) The Group’s commitmem in high quality production can be further evidenced in the following major qualitative initiatives implemented by the Group: Six Sigma Projects The Dufu Group has a learn of trained engineers who continuously works on Six Sigma projects for process optimisation to achieve higher quality and productivity and consequently, achieve significant cost saving. Six Sigma is a structured process improvement programme that utilises data and statistical analysis to measure and improve a company’s operational performance. practices and systems through the identification and prevention of defects in manufacturing and service-related processes. As a quality measurement and improvement programme. Six Sigma focuses on the control of a process to attain a measure of quality that achieves no more than 3.4 defects per million items. Design for Six Sigma The Dufu Group has participated in the Design for Six Sigma programmes with major customers to achieve their goals in developing Six Sigma products through a systematic statistical approach. The Design for Six Sigma programmes has enabled the Group’s component designs to atlain Six Sigma quality and help customers to improve their product yield and performance. Real Timc Statistical Process Control Online real time Statistical Process Control is also widely used for manufacturing process control. Statistical Process Control will help to identify any process abnormalities, so that assignable causes can be eliminaLed. This has helped the Group to develop a capable and stable process and improve on production yields. 5.5.13 Mode of Marketing and Distribution Channels The Group utilises three modes of marketing to generate awareness and secure new business, namely, through referrals. market research and the Internet. The Group’s list of existing customers. length of relationships and proven track record are the key competitive advantages when marketing to new potential clients. Due to the close nature of the Group’s relationships with its major customers. especially those in the HOD segment, distribution of the Group’s components are effected directly through the respective customers’ sales or procurement offices, not through marketing intermediaries. In addition, the components manufactured by the Group for its customers are custom-made according to specificalions and requirements provided by each customer. eliminating the need for an extensive distribution and marketing network. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 5. INFORMAnON ON THE DUFU GROUP (Coni ‘d) 5.5.14 Location OUf main places of business, including production facilities, are situated at the following locations:

Details of the landed propenies owned and rented by the Group are set out in Section 5.9 of this Prospectus.

5.5.15 Interruptions in Operations The Group did not experience any interruptions in business which has had a signiticant effect on operations during the twelve (12)~month periods prior to the date of this Prospectus. 5.5.16 Environmental Concerns There are no environmental issues or concerns regarding the manufacturing and production processl:s that the Dufu Group is involved in. There are no toxic gases or harmful chemicals used in (he manufacturing processes. However, the processes do generate certain waste products that are required to be disposed of properly. The main waste products that arise from the Group’s manufacturing processes are metal such as aluminum. steel and brass, shavings. coolant, hydraulic oil and cotton rags. The Dufu Group engaged the services of waste disposal experts to dispose of its waste products. The Group has not encountered any problems in disposing irs waste products and currently complies with the Malaysian Environmental Quality Act 1974. DISB and lPG were accredited with ISO 14001: 2004 certifications on 6 September 2006. The key objectives for the certification, amongst others, are to ensure effective implementation of environmental management and conserve energy utilisation. THE RESTOFTHIS PAGE HAS BEEN INTENTIONALLY LEFr BLANK Prim_ Product I-:’D”i”sk:’-“sp”‘llC=T::.’ Disk clamp Latch pin Ground pin Hexagon nut Sensor housing Infra-red sensor housing Sensor terminal pins  Market -1 HDD components
5. INFORMAnON ON THE DUFU GROUP (Cont’d)
5.6 SUBSIDIARY COMPANIES 5.6.1 Information 011 DISB 5.6.1.1 History and Business DISH was im:orporatcLi in Malaysia as a privalc limited company under the Act on 22 October 1987 under the name of Intertel Industries Sdn Ahd. It suhsequently assumed its present name on 28 November 1991. DISB was founded by Hsu, Chin-Shui and Lee, Hui-Ta a.k.a Li Hui Ta. The company commenced operations in the same year of incorporation. In 1990, DISB successfully aClluin:d Scagate Tecbnology International, Singapore as a customer for the manufacture of 5.2S-inch HDD disk spacers. Since then, DISH h<:l5 grown steadily to he a reputahle supplier of HDD components and other precision components to leading MNCs such as Western Digital, MMT and First Technology Group in the Asia Pacific region. In 1994, DISB completed and moved to its current owned huilding. Due to the fast expansion of the Group’s operations. DISH built its second building adjacent to its first building, in 1998. During 1999 to 2001, DISB focused on expanding its factory facilities by setting up an auto-lathe division, a lahoratory and installing multi-index, multi-spindle machine for high-volume machining components. In 2004, DISB constructed a third building to house a stamping facility. In 2006, DISB starts to construc.t its fourth building to increase its production and warehouse sp<1ce, 5.6.1.2 Principal Acthity. Products and Serv1c.es The principal activity of the company is designing and manufacturing precision machining components for the HDD industry, the industrial safdy ami sensor iwJuslries, lelecommunications industry, the computer peripheral industry and the consumer electronics industry. DISH’s principal products arc as follows: I 5.6.1.3  Share Capital  The present authorised and issued and paid-up share capital of DISH is as follows:  No. of ordinary shares of RM1.00 each  Amount RM  Authorised  5,000.000  5,000,000  Issued and paid-up  5,000,000  5,lX)O,()OO
5. INFORMAnON ON THE DUFU GROUP (ConI ‘d) 5.6.1.4 Changes in Share Capital The changes in the issued and paid-up share capital of DISB since its incorporation are as follows:

22.10.1987  2  1.00  Cash  2  02.10.1990  999.998  1.00  Cash  1.000.000  31.12.1992  1,600.000  1.00  Cash  2.600.000  02.09.1996  2.400.000  1.00  Cash  5.000,000
As at the date of this Prospectus, DlSB does not have any outstanding warrants. options, convertible securities or uncalled capital. 5.6.1.5 Suhstantial Shareholders As at the date of this Prospectus, DISB is a wholly-owned subsidiary company of Dufu. 5.6.1.6 Subsidiary and Associated Companies As at the date of this Prospectus. DISB has one (1) subsidiary company. namely DISPL. DISB does not have any associated companies. 5.6.2 Information on IPG 5.6.2.1 History and Business IPG was incorporated in Malaysia under the Act on 19 September 1989 as a private limited company under its current name. IPG commenced operations in the same year of incorporation. Hsu, Chin-Shui and Lee, Hui-Ta a.k.a. Li Hui Ta. invested in IPa in 1996 to extend the Group’s range of products and services. One year later. IPG set up tooJ room for tooling fabrication to complement metal stamping. To-date, lPG has the capability of manufacturing a wide range of precision moulds. parts and stamping. IPa not only complements the internal tooling needs of the Dufu Group but also generates income by providing services to external customers. fPG has helped shorten the Group’s production lead time by providing quick supplies to DISB. 5.6.2.2 Principal Activity, Products and Services The principal activity of the company is designing and manufacturing precision steel moulds and stamping parts and components. lPG’s principal products are as follows:

Sensor ca Industrial safety and sensor Lead frame components I-;;M”o”‘u”n”t::.in:£’b”‘a”rc-::–j Consumer electronics f-ORc:e.::fJ”e”‘ct::.io”‘n””””la::.’e::–1 components Back cab Chassis Battery connector Telecommunications ~?’-=~=——1Balance weight components Contact solder
Computer peripheral components f-:;T”‘e:.;rm=in”a::.I,—-1 Other (A utomoti \Ie) Shunt resistor Tool & die Other (General) 5. INFORMATION ON THE DUFU GROUP (ConI ‘d) 5.6.2.3 Share Capital The prescnt authorised and issued and paid-up share capital of IPG is as follows: No. of ordinary shares Amount of RMI.OO each RM Authorised 5.000.000 5.000.000 Issued and paid-up 2.000.000 2.000.000 5.6.2.4 Changes in Share Capital The changes in the issued and paid-up share capital of IPG since its incorporation are as follows:
19.09.1989 01.08.1990 30.10.1993 25.03.1994  2 699.998 300.000 1,000.000  1.00 1.00 1.00 1.00  Cash Cash Cash Cash  2 700.000 1.000,000 2,000,000
As at the date of this Prospectus, IPG does not have any outstanding warrants, options, convertible securities or uncalled capital. 5,6,2,5 Substantial Shareholders As at the date of this Prospectus. IPG is a wholly-owned subsidiary company of Dufu. 5,6.2.6 Subsidiary and Associated Companies As at the date of this Prospectus, IPG does not have any subsidiary and associated companies. THE REST OFTHIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 5. INFORMAnON ON THE DUFU GROUP (Conl’d)
5.6.3 Information on DISPL 5.6.3.1 History and Business DISPL was incorporated in Singapore under the Companies Act, Cap.50 of the Republic of Singapore on 29 May 2002 as a private limited company under its current name. DISPL commenced operations in the same year. DISPL was set up to strengthen the Group’s presence in this region in view of increasing MNC customers. DISPL is positioned as the service and marketing arm of the Duru Group to provide better support LO the Group’s customers in this region. This has enabled the Group to foster an active service culture that responds rapidly to customers’ feedback and problems. 5.6.3.2 Principal Activity, Products and Services The principal activity of the company is marketing and engineering sUPPOTt services. As the service and marketing arm of the Dufu Group, DISPL provides better support to the Group’s customers in the Asia Pacific region. 5.6.3.3 Share Capital The present authorised and issued and paid-up share capital of DISPL is as follows: No. of ordinary shares Amount of SGDI.OO each SGD Authorised 100.000 tOO.OOO Issued and paid-up 2 5.6.3.4 Changes in Share Capital As at the date of this Prospectus, there have been no changes in the issued and paid-up share capital of DISPL since its incorponItion. As at the date of this Prospectus, DISPL docs not have any outstanding warrants, options. convertible securities or uncalled capital. 5.6.3.5 Snbstantial Shareholders As at the date of this ProSpeClUS, DISPL is a wholly~owned subsidiary company of DISB. 5.6.3.6 Subsidiary and Associated Companies As at the date of this Prospectus, DISPL does nOl have any subsidiary and associated companies. 5. INFORMATION ON THE DUFU GROUP (Colll’d) 5.7 MAJOR CUSTOMERS Our major customers (accounting for 10% or more of turnover) for each of the past three (3) FYE 31 December 2005 and the seven (7)-month period ended 31 July 2006 are as follows:
……) Seven …•. c ~:WI:i i=~~ . Seagatc Technology International  Singapore  HOD components  14.0%  27  17  Scagate Technology [ntemational (Wuxi) Co. LId, China  China  HDD componcnls  10,995  21  6  Westcm Digital (Thailand) Company Limited  Thailand  HDD components  6,087  12  6  Total  31.l78  60

( ears Seagate Technology
·~:£~~;Ji; Singapore HDD components 20.756 30 16 International Seagate Technology Thailand HOD components 8,766 13 5 (Thailand) Lld Western Digital Thailand HOD components 7,761 11 5 (Thailand) Company Limiled Total 37.283 54
Seagate Technology Singapore HDD components 10.815 26 15 international Seagatc Tedmology China HOD components 5,785 4 International (Wuxi) 14 Co. Lid Western Digital (M) Malaysia HDD components 4,879 12 10 Sdn Bhd Total 21,479 52 5. INFORM AnON ON THE DUFU GROUP (Conl’d)
Western Digital (M) Sdn Bhd  Malaysia  HOD components  9,275  24  9  Seagate Technology International  Singapore  HOD components  9.250  24  14  Western Digital (Thailand) Company Limited  Thailand  HOD components  5,678  15  3  Total  24.203  63
The Group does to a certain extent depend on the customers set out above. However, the Group also seeks to expand and diversify its customer base to include both HDD and non-HOD customers, in order to further reduce its dependence on existing key customers. Further details of the Group’s mitigation on dependence on key customers arc set out in Section 4.2 of this Prospectus. THE RESTOFTHIS PAGE HAS BEEN INTENTIONALLY LEVI’ BLANK
5. INFORMATION ON THE DUFU GROUP (Conl’d) 5.8 MAJOR SUPPLIERSISUBCONTRACTORS OUf major suppliers/subcontractors (accounting for 10% or more of purchases) for each of the past three (3) FYE 31 December 2005 and the seven (7)-month period ended 31 July 2006 are as follows:
Top Expertise Enterprise Ltd Sub-Iotal  Taiwan  (a) Subcontractor for precision parts (b) Stainless steel, aluminum  6.957 2.915 9.892  19 8 27  5  Ebellndustries Pte Ltd Total  Singapore  Subcontractor for plating  6.928 16.820  19 46  11
FYE 31 December 200~5R”‘T?:-:-r–::;;;;; 8,441 t8 4 4.738 10 13.179 28 11395 24 10 24,574 52 Ebel Industries Pte Ltd Top Expertise Enterprise Ltd Sub-total Total  Singapore Taiwan  Subcontractor for plating (a) Stainless steel, aluminum (b) Subcontractor for precision parts  6.074 2.618 2.516 5.134 11.208  22 10 9 19 41  9 3
Top Expertise Enterprise Ltd Sub~total Ebellndustnes Pte Ltd Total
FYE 31 December 2004 Taiwan Singapore (a) Subcontractor for precision parts
(b) Stainless steel. aluminum

Subcontractor for plating
5. INFORM AnON ON THE DUFU GROUP (Cont’d) FYE 31 December 2003 Top Expertise Enterprise Ltd Sub·total Ebel Industries Pte. Ltd Total  Taiwan Singapore  (a)Subconlractor for precision parts (b)Stainless steel, aluminum Subcontractor for plating  3.345 2.893 6.238 4.690 10.928  15 13 28 21 49  2 8
Ebel Industries Pte Ltd remains as the Group’s major sub~contractor due to its status as an approved plaler to the Group’s main HOD customers. The Group does to a certain extent depend on the suppliers/subcontractors set out above. However. the Group has taken the initiative to source for alternative suppliers. Further details of the Group’s mitigation on dependence on key suppliers are set oul in Section 4.4 of this Prospectus. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
K:ompany No. 581612-AJ 5. INFORMATION ON THE DUFU GROUP (Col/I’d) 5.9 PROPERTY ASSETS 5.9.1 Details of Landtd Properties Owned and Rented The details of Lhe properties owned/rented by the Group as at the date of this Prospectus are set out below: ,nNi~;br :’n”··’ftered”‘1j~rf-‘:’ :tessor:~t
Please refer Note Lot 12354) held under
P.T. 1886 (Resurveyed I DISB lnduslrialland 60 years 177,691 4,057 N/A leasehold square feet (l) and Note (2) Title No. H.S.(D) 11985,
expiring on 26 Mukim 12, Daerah Barat
December 2051 Daya, Penang
Building Plot 19 I DISB
(a) 2 single-storey 67,996 (aJ P.B.36981 (LB) Free Industrial Zone 16 years and 9 4.906 N/A office-cum­dated 27 August. years square feet Phase IV production respectively 1999 Bayan Lepas
(b) P.B.39739 (LB) 11900 Penang building (b) I double-storey 2 years dated 12 June office-cum­2002 (located at the above
(e)J.B/SKM/06/0001 industrial1and) production dated 13 Januarybuilding 2006 Rental tenure -, 2,150-‘ N/A I 6.917 I N/A Rented Premise X Factor pte, Warehouse/ 623. Aljunied Road, renewed square feet #05-01, Aljunied
Ltd (Singapore) Marketing,lrading annuallyl Industrial Complex
and service Singapore 389835
support centre 25 years II Total
8,963 68
Rompany No. 581612-Al 5. INFORMATION ON THE DUFU GROUP (Conl’d) Notes: (I) The title of the subject land carries a restriction-in-interest which stipulates that (i) the land so alienated call/lOt be transferred, charged, leased or sub-leased without wrillen consent from the state authority; and (ii) the alienated land cannot he suh-divided or partitioned. (2) The subject land is charged to Public Bank Berhad, vide the following fixed charges:­(i) No. Perserahan 417211993 Ji/. 555 Fo/. 181, registered on 31 March 1993. (ii) No. Perserahan 4173/1993 Jil. 555 Fo/. 182, registered on 31 March 1993. (iii) No. Perserahan 544/1994 Jil. 588 Fo/. 41, registered on 19 January 1994. (iv) No. Perseralwn 10253/1994 Jil. 606 Fol. 45, registered on 15 July 1994. (v) No. Perserahan 10254/1994 Jil. 606 Fol. 46, registered on 15 July 1994. (vi) No. Perserahan 160/1997 Jil. 721 Fol. 175, registered on 9 January 1997. (vii) No. Perserahan 15464/1997 Jil. 751 Fo/. 121, registered on 12 August 1997. (viii) No. Perserahan 15465/1997 Ji/. 751 Fo/. 122, registered on 12 August 1997. (ix) No. Perserahan 23536/2002, registered on 24 October 2002. (x) No. Perserahan 31711/2003, registered on 15 Decemher 2003. (xi) No. Perserahan 1115212004, registered on II May 2004. (xii) No. Perserahan 18649/2005, registered on 27 June 2005. 11,e building and land are also subject to debentures registered in favour ofPublic Bank Berhad.
There were no purchases of landed properties by the Group during the two (2) years preceding the date of this Prospectus. None of the properties above have been revalued in conjunction with the listing. There were no breaches of land-use conditions.
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5. INFORMATION ON THE DUFU GROUP (Conl’d) 5.9.2 Material Plant and Equipment As at 31 July 2006, the Group’s material plant and equipment comprise the following: CNC Machine Centre Precision Machinin CNC Lathe  Precision Turnin  CNC Precision Auto Lathe  Precision Turnin  Escomatics  Precision Turning  Hydromat  Precision Turnin  Mikran  Precision Turnin  Slam in Machine  Stampin

486 6,654 6,311 1,929 667 617 1,253
THE REST Of THIS PAGE HAS BEEN INTENTIONALLY LEfT BLANK !Company No. 58l6l2-Aj S. INFORMATION ON THE DUFU GROUP (Cont’d) 5.10 LICENCES AND CERTIFICATIONS As at the date of this Prospectus, the Group possesses the following material licences for which it is dependent on to carry out its business:
Effective  Licence to act as a  The company shall endeavour to appoint Malaysian  Met except for  from  licensed manufacturer  citizens as its directors and the MITI must be informed  condition U) whereby  23.12.1993.  at Plot 19, Zon  of any appointment or changes in the Board.  DISB had obtained the  No expir  Perindustrian Bebas  (b) This project shall be executed within six (6) months  exemption from MITI  date stated.  Bayan Lepas, Fasa IV  from 28 February 1994 or within a period approved by  on 2 March 2006.  11900 Bayan Lepas,  the Licensing Officer. In the event the project is not  Pulau Pinang for  being executed within the appointed time frame, this  precision moulds, dies  licence shall be withdrawn.  and die components,  (c) This license is issued subject [0 the prior approval of  precision machining of  the relevant State Government and the Department of  vice, computer  Environment.  peripherals and parts.  (d) Shares of the company held by non-Malaysians cannot  be disposed of without prior written consent of the  MIT/.  (e) The company shall engage and train Malaysian citizens  at all levels to reflect the multi-racial composition of  the country.  (f) The company must obtain prior writtcn approval of the  MIT! and a report made by an independent valuer  acceptable to the MIT! should it proposes to make use  of used machineries. Consent from the MITI is also  required for any proposed changes. additions or  reduction to the machines which may affect the use of  manpower and/or production.  (g) The company shall endeavour to engage the services of  companies owned by Malaysian citizens in the context  of the New Economic Policy.
71 !Company No. 58I6I2-Aj S. INFORMATION ON THE DUFU GROUP (Cont’d)
(h) The MITI’s written approval must be obtain before the company can enter into any agrcement for the transfer of technology with foreign parties which include agreements such as joint venture agreement, technical assistance and know-how agreements, licensing agreement, trade-mark and patent agreement, contract turnkey agreement and management agreement.
(i) The company’s products must be of a standard acceptable to the Government.
(j) The company must endeavour to appoint companies owned by Malaysian citizens for the distribution of its products in Malaysia and to appoint Bumiputra distributors to distribute at 30% of the local sales. The selection and appointment of such Bumiputra distributors must be done after consultation with the MIT!. Prior approval from the MITI must be obtained to appoint foreign companies as distributors of the company.
(k) At least 90% of the company’s production must be exported
(I) The company must carry out the approved project in accordance with the aforesaid conditions and other prevailing laws and regulations in Malaysia.

72 f¢ompany No. 581612-A) S. INFORMAnON ON THE DUFU GROUP (CQnl’d) Licence to act as a  This licence is issued subject to the prior approval of  licensed manufacturer  the  relevant  state  government  and  Department  of  at Plot 19, Free  Environment.  Industrial Zone, Phase  (b)  Shares of the company held by non-Malaysians cannot  IV, Bayan Lepas,  be disposed of without prior notification to the MIT!.  11900 Penang for metal  (c)  The company shall engage and train Malaysian citizens  stamped parts and  at all levels to reflect the multi-racial composition of  moulds, tools and dies.  the country.  (d)  The company shall undertake all its project as per the  approval of the terms and conditions stated and any  other governed laws and regulations in Malaysia.  IPO  Manufacturing I MITI  From  Licence to act as a  (a)  This licence is issued subject to the prior approval of  Met  licence  19.7.2005.  licensed manufacturer  the  relevant  state  government  and  Department  of  No  expir  at Plot 19, Free  Environment.  date stated.  Industrial Zone, Phase  (b)  Shares of the company held by non-Malaysians cannot  IV, Bayan Lepas,  be disposed of without prior notification to the MIT!.  11900 Penang for plastic injection moulded parts for medical, electronic,  (c) (d)  The company shall engage and train Malaysian citizens at all levels to reflect the multi-racial composition of the country. The company shall undertake all its project as per the approval of the terms and conditions stated and any  telecommunication and  other governed laws and regulations in Malaysia.  automotive industries.
73 K:ompany No. 581612-AJ 5. INFORMATION ON THE DUFU GROUP (Col/I’d)
DISPL  Goods and  Inland  Effective  Eligibility to collect  (a)  The company must charge and account GST on all  Met  Services Tax  Revenue  from 1.8.  goods and services tax  taxable business transactions (3% for standard-rated  (“GST’)  Authority  2002  supplies and 0% for zero-rated supplies). Input tax can  Registration  of  No expiry  be claimed on GST paid on the company’s business  Singapore  date  purchases.  stated.  (b)  The company’s tax invoices must have the words “Tax  Invoice” printed prominently. All tax invoices,  receipts and simplified tax invoices must indicate the  GST registration number. There is no need to show the  GST amount separately on the company’s receipts and  simplified tax invoices. However, the company is  encouraged to print the words “Amount payable  includes GST” on the receipts and simplified tax  invoices.  (e)  The company has to send in the GST F5 together with  the nct GST payment within one month from the end  of each accounting period. Penalties are applicable for  late submission and late payment.  (d)  {fthis is a voluntary registration, that is, the annual  taxable turnover is less than SOOt million, it is  required to remain registered for at least two (2) years.
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f¢ompany No. 581612-A) 5. INFORMATION ON THE DUFU GROUP (Collt’d)
Exporter  Revenue  to  February 2004, the  Scheme  Authority  14.2.2007  company need not pay  (a)  maintain a good compliance record in the submission  (“MES”)  of  GST to the Singapore  of returns and payment in all tax taxes, namely GST,  Singapore  Customs on the non­ income tax and property tax;  dutiable goods  imported by the  (b)  maintain a good compliance record with Singapore  company.  Customs;  The MES status is  (c)  maintain a good accounting system;  given to the company  for its own imports or  (d)  maintain the list of authorised declaring agents  imports on behalf of its  appointed;  overseas principals who  are not registered in  (e)  inform the Inland Revenue Authority if there is any  Singapore for GST  change in the particulars furnished under the scheme;  purposes. The company  should not, in any  (I)  account GST (output tax) on the value of assets on  circumstances, import  hand including goods imported using its MES status in  goods on behalf of  the Final Return if the value of assets exceeds  other persons.  SGDIO,OOO as at the date of cancellation of its GST  Regi strati on.  Close to the expiry date of the MES status, the Comptroller  of GST will inform the company to apply for renewal for its  MES status provided it has met the conditions thereunder.  There is no automatic renewal.
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