Business Overview

5. GENERAL INFORMATION ON OUR GROUP 5. GENERAL INFORMATION ON OUR GROUP INCORPORATION AND HISTORY We were incorporated in Malaysia as a public limited company on 6 February 2008. Our principal activities are those of investment holding and the provision of management services. The Company is a listing vehicle incorporated to undertake the flotation exercise of HUI and USF, our wholly-owned subsidiaries. The sole activity of USF is property investment holding where it owns Lot 8726, which houses Factory A and our head office. We are principally an integrated ODM and OEM player with a complete range of upholstered home furniture products. As an ODM, we design and manufacture furniture for our customers whereas, as an OEM, we manufacture furniture based on their designs provided to us. For the FYE 2009, approximately 86% of our Group’s revenue was contributed by ODM sales with the remaining 14% from OEM sales. Our primary activity revolves around the design, manufacture and sale of upholstered home furniture which includes upholstered sofas, upholstered dining chairs and upholstered bed frames. We are one of the leading upholstered home furniture manufacturers in Malaysia and our products are mainly focused on ‘medium to high end range’ of upholstered home furniture. We design our furniture products primarily based on Western stylishness and preferences. We believe we have earned a strong reputation for our product quality and reliability with approximately 99% of our Group’s revenue contributed from overseas. Since commencement of business in 1997, Chua Fen Fart, our Managing Director, has been instrumental in the success, growth and development of our Group. He has had over 22 years of working experience in the furniture industry, particularly in the upholstered furniture industry. We made our first foray into the overseas market in 1997 when we exported to Singapore and in 1999, we ventured into Reunion Island, Bahrain, Australia and Cyprus. Presently, we export our products to more than 40 countries across the world covering Europe, Australasia, North and South America, Asia and Africa. In 2001, we started participating in the Malaysian International Furniture Fair and thereafter, we continued to participate annually in the fair as well as other international furniture fairs held in different countries such as Spain, Ukraine, Belgium, Germany and China. The participation in the furniture fairs is very important to us as they provide a platform for us to create awareness for our products in the international markets. Initially, we were only involved in the manufacturing of upholstered sofas from a tenanted factory with a built up area of 7,200 sq. ft. and in 2002, we began manufacturing upholstered dining chairs. To cater for the rapid growth in demand for our products, we moved our operations into several tenanted factories with total built up area of about 32,200 sq. ft. in 2003. To improve overall efficiency and to achieve greater economy of scale, we then acquired Factory A with a total built up area of97,400 sq. ft. and shifted our entire operations to Factory A from the tenanted factories in 2005. In 2005, we introduced upholstered bed frames in addition to the upholstered sofas and dining chairs to accomplish our main vision in becoming one of the manufacturers/producers of a complete range of upholstered home furniture products in Malaysia. With Factories Band C commissioned in November 2006 and August 2007 respectively, we now own and occupy 3 manufacturing plants with a total built up area of 330,000 sq. ft. All of our plants are located in Kawasan Perindustrian Bukit Bakri, Muar, Johor. In addition, since November 2007, we have been renting Factory D with a built up area of 18,000 sq. ft., which is principally used for woodworking activities for our upholstered dining chair frames as well as for our wooden dining tables. 5. GENERAL INFORMATION ON OUR GROUP Further, we have acquired 2 pieces of freehold land in 2007 with a total land area of 167,315 sq. ft. located adjacent to our existing manufacturing plants and head office where we intend to set up our new plant, which we envisage to commence construction work within the next 24 months (from the Listing), to increase our production capacity. Besides, the new plant is also intended to house the operation of the woodworking activities for our upholstered dining chair frames as well as the wooden dining tables which are currently being carried out in the rented Factory D. In 2008, we attained the ISO 900 I :2000 certification and were honoured at the prestigious Golden Bull Awards 2008 organised by Nanyang Siang Pau, where we ranked Ist out of 100 Outstanding Small and Medium Enterprises. We were also declared a winner of the Enterprise 50 Award Programme 2008 which was jointly organised by the Small and Medium Industries Development Corporation (SMIDEC) and Deloitte Consulting (M) Sdn Bhd. We believe such awards have been accorded to us in recognition of our business acumen, entrepreneurship and vision in running our Company. In 2009, in line with our continuous effort in new product development, we had introduced and successfully commercialised the sofa bed, our new product, to the Australian market. For the 2nd year running, we won the Enterprise 50 Award Programme 2009. In addition, we also won the 2009 Product Excellence and Asian Furniture Leadership Award at the Malaysian Furniture Leadership Award organised by the Furniture & Furnishing Export International. Our current group structure is set out as follow:-Homeritz Corporation Berhad 100% 100% Home Upholstery Industries Sdn Bhd U. S. Furniture Manufacturing Sdn Bhd 5.2 SHARE CAPITAL Our authorised share capital is RMIOO,OOO,OOO comprising 500,000,000 ordinary shares of RM0.20 each, of which 191,000,000 Shares have been issued and fully paid-up as at the date of this Prospectus. Upon completion of the Public Issue, our enlarged issued and paid-up share capital will be increased to RM40,000,000 comprising 200,000,000 Shares. The movements in our issued and paid-up share capital since the date of our incorporation are set out below:­Resultant Issued Date of No. of Shares Consideration/ and Paid-up Allotment Allotted Par Value Types of Issue Share Capital RM RM 06.02.08 2 1.00 Subscribers’ shares 2 25.02.08 4 0.50 Subdivision 2

15.09.09 72,358,950 0.50 Acquisition of HUI 36,179,477 26.11.09 361,794,770 0.10 Share split I : 5 36,179,477 26.11.09 180,897,385 0.20 Share consolidation 2 : I 36,179,477 30.11.09 10,102,615 0.20 Rights Issue 38,200,000
5. GENERAL INFORMATION ON OUR GROUP 5.3 LISTING SCHEME In conjunction with and as an integral part of our Listing, we undertook a listing scheme which was approved by the SC on 26 September 2008,26 March 2009,8 September 2009 and 6 November 2009 as well as the MIT! on 25 July 2008, I September 2009 and 26 November 2009, involving the following:­
5.3.1 Acquisitions Acquisitions by our Company in respect ofthe entire issued and paid-up share capital of:­(a) HUI comprising 450,000 ordinary shares of RMl.OO each for a purchase consideration of RM36, 179,475 to be satisfied by an issuance of 72,358,950 new Homeritz Shares at an issue price ofRMO.50 per Share.
The purchase consideration was based on the audited consolidated NTA of the HUI Group as at 31 August 2008 of RM36,179,475 (after adjusting for the payment of first and fmal dividend ofRM3.0 million in respect of the fmancial year ended 31 August 2008).
(b) USF comprising 50,002 ordinary shares of RMI.OO each for a purchase consideration of RMI,012,324 to be satisfied in cash.

The purchase consideration was based on the original cost of investment in USF in the books ofHUI. The Acquisitions were completed on 15 September 2009. Following the Acquisitions, the existing subscribers’ shares in the Company were also transferred to Chua Fen Fatt and Tee Hwee Ing on an equal basis on the same date.
5.3.2 Subdivision A share split involving the subdivision of each of the existing 72,358,954 ordinary shares of RMO.50 each in Homeritz (after the Acquisitions and transfer of the existing subscribers’ shares in the Company) into 361,794,770 ordinary shares of RM0.10 each in Homeritz by subdividing one (1) ordinary share ofRMO.50 each in Homeritz into five (5) ordinary shares ofRMO.IO each in Homeritz. The Subdivision was completed on 26 November 2009.
5.3.3 Share Consolidation A share consolidation was undertaken immediately after the Subdivision but prior to the Rights Issue involving the consolidation of each of the 361,794,770 ordinary shares ofRMO.lO each in Homeritz into 180,897,385 ordinary shares ofRM0.20 each in Homeritz by consolidating two (2) ordinary shares of RM0.10 each in Homeritz into one (I) ordinary share of RMO.20 each in Homeritz. The Share Consolidation was completed on 26 November 2009.
5.3.4 Rights Issue A renounceable rights issue of 10,102,615 new Homeritz Shares at an issue price ofRM0.20 per share to all shareholders of the Company was implemented after the Acquisitions, Subdivision and Share Consolidation on the basis of approximately 0.0558 new Homeritz Shares for every one (1) existing ordinary share then held in the Company. The Rights Issue was completed on 30 November 2009.

5. GENERAL INFORMATION ON OUR GROUP 5.3.5 Offer for Sale The Offerors shall offer for sale an aggregate of 35,020,000 existing Homeritz Shares at the IPO Price in the following manner:­(a) 20,000,000 Shares by way of private placement to Bumiputera investors approved by the MIT!;
(b) 8,020,000 Shares by way of private placement to identified investors; and
(c) 7,000,000 Shares available for application by the Malaysian Public, as detailed below:-

 

Offerors No. of Shares Chua Fen Fatt 17,510,000 Tee Hwee Ing 17,510,000 Total 35,020,000
5.3.6 Public Issue In conjunction with our Listing, we are undertaking a public issue of9,000,000 new Homeritz Shares at the IPO Price comprising the following:­(a) 1,000,000 new Shares available for application by our eligible Directors, employees and business associates under the Pink Form Allocations; and
(b) 8,000,000 new Shares available for application by the Malaysian Public.

 

5.3.7 Listing and Quotation Following the Offer for Sale and Public Issue, we shall seek the permission of Bursa Securities for the listing of and quotation for our entire enlarged issued and paid up share capital comprising 200,000,000 Homeritz Shares on the Main Market of Bursa Securities.

5.4 SUBSIDIARY COMPANIES All of our subsidiary companies are wholly-owned by our Company. As at the date of this Prospectus, we do not have any associated companies. Details of our subsidiary companies are summarised as follows:­Issued and Date/ Place of Authorised Paid-up Share Equity Company Incorporation Share Capital Capital Interest Principal Activity (RM) (RM) % HUI 4 August 1997 / 500,000 450,000 100.00 Design, manufacture and (Company No: Malaysia sale of upholstered 441363-V) furniture products USF 24 October 1992 / 100,000 50,002 100.00 Property investment (Company No: Malaysia holding 251531-U) 5. GENERAL INFORMATION ON OUR GROUP 5.4.1  HUI  (a)  History and business  HUI was incorporated in Malaysia under the Act on 4 August 1997 as a private limited  company under its present name. The principal activity of HUI is that of design, manufacture  and sale of upholstered furniture products.  (b)  Share capital  HUI’s present authorised share capital is RM500,000 comprising 500,000 ordinary shares of  RM1.00 each, of which 450,000 ordinary shares ofRM1.00 each have been issued and fully  paid-up. The movements in issued and paid-up share capital of HUI since its incorporation are  as foIlows:­ Resultant Issued  Date of No. of Shares Consideration/ and Paid-up  Allotment Allotted Par Value Types of Issue Share Capital  RM RM  04.08.1997 3 1.00 Subscribers’ shares 3  05.11.1997 49,997 1.00 Cash 50,000  22.10.2002 50,000 1.00 Cash 100,000  19.03.2004 100,000 1.00 Bonus issue 1 : 1 200,000  09.06.2006 100,000 1.00 Cash 300,000  30.06.2006 100,000 1.00 Cash 400,000  30.08.2007 50,000 1.00 Cash 450,000  (c)  Substantial shareholders and Directors  HUI is a wholly-owned subsidiary company of Homeritz and the Directors are Chua Fen Fatt  and Tee Hwee Ing.  (d)  Subsidiary and associated companies  As at the date of this Prospectus, HUI does not have any subsidiary or associated company.  5.4.2  USF  (a)  History and Business  USF was incorporated in Malaysia under the Act on 24 October 1992 as a private limited  company under its present name. The principal activity of USF is that of a property investment  holding since incorporation.  (b)  Share Capital  USF’s present authorised share capital is RMI00,000 comprising 100,000 ordinary shares of  RM1.00 each of which 50,002 ordinary shares of RM1.00 each have been issued and fully  paid-up. The movements in issued and paid-up share capital of USF since its incorporation are  as follows:­ Resultant Issued  Date of No. of Shares Consideration/ and Paid-up  Allotment Allotted Par Value Types of Issue Share Capital  RM RM  24.10.1992 2 1.00 Subscribers’ shares 2  12.08.1995 50,000 1.00 Cash 50,002

5. GENERAL INFORMATION ON OUR GROUP (c) Substantial shareholders and Directors USF is a wholly-owned subsidiary company of Homeritz and the Directors are Chua Fen Fatt and Tee Hwee Ing.
(d) Subsidiary and associated companies As at the date ofthis Prospectus, USF does not have any subsidiary or associated company. [ The rest ofthis page is intentionally left blankJ ICompany No.: 805792-X I 5. GENERAL INFORMATION ON OUR GROUP
5.5 MAJOR ApPROVALS AND LICENCES The details of major approvals and licences granted to or held by us are as follows:­Issuing Authority MITI MIT! MITI  Date of Issue (Renewal) 07.09.2005 07.05.2008 07.05.2008  Date of Expiry Not applicable Not applicable Not applicable  Nature of Approval! Licences Manufacturing licence for the manufacture of wooden furniture at Lot 8726, Batu 8, Kawasan Perindustrian Bukit Bakri, 84200 Muar, Johor Manufacturing licence for the manufacture of upholstered furniture at Lot 8726, Batu 8, Kawasan Perindustrian Bukit Bakri, 84200 Muar, Johor Manufacturing licence for the manufacture of upholstered furniture and wooden furniture at Lot PTD 9495, Batu 7 Y” Jalan Bakri, Kawasan Perindustrian Bukit Bakri, 84200 Muar, Johor  Equity and!or Major Conditions Imposed (i) The site is subject to the approval of the State Government and DOE. (ii) MIT! needs to be informed of any sale of shares in HUI. (iii) HUI shall train Malaysians to ensure the transfer of technology and expertise is filtered to all levels. (iv) HUI shall implement its project as approved and in compliance with the law and other regulations of Malaysia. (i) The site is subject to the approval of the State Government and DOE. (ii) MITI needs to be informed of any sale of shares in HUI. (iii) HUI is not allowed to use logs in the manufacturing without prior approval of the relevant State Forestry Department. (iv) HUI shall train Malaysians to ensure the transfer of technology and expertise is filtered to all levels. (v) HUI shall implement its project as approved and in compliance with the law and other regulations of Malaysia. (i) The site is subject to the approval of the State Government and DOE. (ii) MIT! needs to be informed of any sale of shares in HUI. (iii) HUI is not allowed to use logs in the manufacturing without prior approval of the relevant State Forestry Department. (iv) HUI shall train Malaysians to ensure the transfer of technology and expertise is filtered to all levels. (v) HUI shall implement its project as approved and in compliance with the law and other regulations of Malaysia.  Compliance Complied. Noted. Complied. Complied. Complied. Noted. Complied. Complied. Complied. Complied. Noted. Complied. Complied. Complied.
39 ICompany No.: 805792-X I 5. GENERAL INFORMATION ON OUR GROUP
Issuing  Date of Issue  Date of  Authority  (Renewal)  Expirv  Nature of Approval/ Licences  Equity and/or Maior Conditions Imposed  Compliance  MITI  07.05.2008  Not applicable  Manufacturing licence for the manufacture of wooden furniture and upholstered furniture at Lot 4943 & 4944, Batu 7 Y2, lalan Bakri, Kawasan Perindustrian Bukit Bakri, 84200 Muar, lohor  (i) The site is subject to the approval of the State Government and DOE; (ii) MITI needs to be informed of any sale of shares in HUI; (iii) HUI is not allowed to use logs in the manufacturing without prior approval ofthe relevant State Forestry Department; (iv) HUI shall train Malaysians to ensure the transfer of technology and expertise is filtered to ail levels; and (v) HUI shall implement its project as approved and in compliance with the law and other regulations of Malaysia.  Complied. Noted. Complied. Complied. Complied.  MITI  07.05.2008  Not applicable  Manufacturing licence for the manufacture of upholstered furniture and wooden furniture at Lot 4947, PTD 9493, Batu 8, Kawasan Perindustrian Bukit Bakri, 84200 Muar, lohor (rented Factory D)  (i) The site is subject to the approval of the State Government and DOE; (ii) MITI needs to be informed of any sale of shares in HUI; (iii) HUI is not allowed to use logs in the manufacturing without prior approval of the relevant State Forestry Department; (iv) HUI shall train Malaysians to ensure the transfer of technology and expertise is filtered to all levels; (v) HUI shall implement its project as approved and in compliance with the law and other regulations of Malaysia.  Complied. Noted. Complied. Complied. Complied.  MITI  02.06.2008  30.09.2012  Pioneer Certificate for Pioneer Status with 70% tax exemption on statutory income for 5 years from the manufacture of “Wooden Furniture” and “Upholstered Furniture With Wooden Frame”.  (i) Value-added of the products should be at least 35%. (ii) Design and development expenses should be at least 1% of the gross annual sales ofHUI. (iii) A minimum of 51% of HUI’s shares must be acquired and held by Malaysian citizens.  Complied. Complied. Complied.
40
ICompany No.: 805792-X I 5. GENERAL INFORMATION ON OUR GROUP Issuing Authority  Date oflssue (Renewal)  Date of Expiry  Nature of Approval/ Licences  Equity and/or Major Conditions Imposed  Compliance  Johor Forestry Department*  13.05.2008 (01.01.2010)  31.12.2010  Licence to site, erect, establish, operate or maintain a woodworking/furniture/wood moulding factory (i) HUI shall not: (a) transfer the licence; (b) rent, lease, lend, mortgage or sell the whole factory or any part thereof or any equipment or any part of any equipment therein; or (c) effect any change in the shareholding of the whole factory or any part thereof; without the written approval of the State Authority. (ii) The woodworking/furniture/wood moulding factory shall be constructed according to the location, site, layout and building plans approved by the State Director of Forestry and no alteration/addition shall be carried out without the written approval of the State Director of Forestry. (iii) The woodworking/furniture/wood moulding factory shall be used for manufacture of finished or semi-finished wood products from sawn timber, rattan, bamboo and other forest produce. Under no circumstances shall logs of any kind, including those that are quartered and halved be brought into or processed in the factory compound. (iv) The licensee shall obtain approval from the Local AuthoritylDOE within the period of the temporary licence. Failure to obtain the approval from the agencies shall result in the issuance of the permanent licence being disrupted.  Noted & to be complied with, where required. Complied. Complied. Complied.  Malaysian Timber Industry Board Department of Customs and Excise  I06.06.2005 (25.08.2009) 06.09.1997  I 30.09.2010 Not applicable  IRegistration as exporter of timber I None products (Type J) Manufacturer’s Licence under the Sales I None Tax Act, 1972  ‘ ‘  —
41 ICompany No.: 805792-X I 5. GENERAL INFORMATION ON OUR GROUP Issuing Authority  Date oflssue (Renewal)  Date of Expiry  DOE  30.06.2005  Not applicable  DOE  03.08.2006  Not applicable  DOE  21.02.2008  Not applicable  DOE  16.04.2007  Not applicable
Nature of Approval/ Licences Letter of no objection to application of business premise licence at Lot 8726 (PTD 6023) Batu 8, Kawasan Perindustrian Bukit Bakri, 84200 Muar, Johor Letter of no objection to application to construct a furniture factory at Lot PTD 9495, Kawasan Perindustrian Bukit Bakri, Mukim Jalan Bakri, 84200 Muar, Johor Letter of no objection to application of business premise licence at Lot PTD 9495, Kawasan Perindustrian Bukit Bakri, 84200 Muar, Johor Letter of no objection to application to construct a furniture factory and 2 storey office at Lot 4943 GRN 85825 and Lot 4944 GRN 85826, Kawasan Perindustrian Bukit Bakri, Mukim Jalan Bakri, 84200 Muar, Johor Equ ity and/or Major Conditions Imposed  Compliance  (i) (ii)  HUI is only allowed to operate at the premises for the industry of wooden furniture and upholstered furniture. Any activity other than the above stated is not allowed. The Department is entitled to withdraw and/or impose additional terms if necessary and the approval is subject to the approval of the State Authority and any other relevant agencies.  Complied. Noted.  (i) (ii)  HUI is only allowed to operate at the premises for the industry of wooden furniture and upholstered furniture. Any activity other than the above stated is not allowed. The Department is entitled to withdraw and/or impose additional terms if necessary and the approval is subject to the approval of the State Authority and any other relevant agencies.  Complied. Noted.  (i) (ii)  HUI is only allowed to operate at the premises for the industry of wooden furniture and upholstered furniture. Any activity other than the above stated is not allowed. The Department may withdraw and/or impose additional terms if necessary and the approval is subject to the approval of the State Authority and any other relevant agencies.  Complied. Noted.  (i) (ii)  HUI is only allowed to operate at the premises for the industry of wooden furniture and upholstered furniture. Any activity other than the above stated is not allowed. The Department may withdraw and/or impose additional terms if necessary and the approval is subject to the approval of the State Authority and any other relevant agencies.  Complied. Noted.
42 ICompany No.: 805792-X I 5. GENERAL INFORMATION ON OUR GROUP Issuing Authoritv  Date of Issue (Renewal)  Date of EXDirv  DOE  06.02.2008  Not applicable  MPM  01.01.2010  31.12.2010  MPM  01.01.2010  31.12.2010  MPM  01.01.2010  31.12.2010  MPM/\  01.01.2010  31.12.2010  MPM  01.01.2010  31.12.2010
Nature of Approval/ Licences Letter of no objection to application of business premise licence at Lot 4943/4944, Kawasan Perindustrian Bukit Bakri, 84200 Muar, Johor Business premise licence for Lot PTD 6023 (Lot 8726), Bt 8, Kaw. Perindustrian Bukit Bakri, Bukit Bakri, 84200 Muar, Johor Business premise licence for Lot PTD 9495, Kaw. Perindustrian Bkt Bakri, 84200 Muar, Johor Business premise licence for Lot 4943 Kaw. Perindustrian Bkt Bakri, 84200 Muar, Johor Temporary business premise licence for Lot 4947 PTD 9493, Bt 8, Kaw. Perindustrian Bkt Bakri, 84200 Muar, Johor (rented Factory D) Advertising licence for Lot 8726, PTD 6023, Bt. 8, Kawasan Perindustrian Bukit Bakri, 84200 Muar, Johor Equity and/or Maior Conditions ImDosed  Compliance  (i) HUI is only allowed to operate at the premises for the industry of wooden furniture and upholstered furniture. Any activity other than the above stated is not allowed. (ii) The Department may withdraw and/or impose additional terms if necessary and the approval is subject to the approval ofthe State Authority and any other relevant agencies.  Complied. Noted.  None  – None  – None  – None  – None  –
Notes:-Pendingissuance ofthefinallicence byJohorForestryDepartment. /\ Pending issuance offinal business premise licences by MPM * 43 ICompany No.: 805792-X I 5. GENERAL INFORMAnON ON OUR GROUP 5.6 PROPERTIES OF OUR GROUP 5.6.1 Land and Buildings The summary of the information on the material land and buildings owned/leased by our Group is set out below:­Registered Owner USF HUI ofMuar, State of lohor Date of Issuance Age of NBVas atCategory of Market of Certificate Tenure! Expiry value IBuildings Land Use! 31.08.09 of Fitness for Description (Years) OccupationLand Area RMof Lease RM 5,020,000 03.01.2001 erected with a block of single-A plot of industrial land Leasehold for a 9 IndustriaV 5,088,397 term of 99 years! 9,030 sq. m. storey factory building (about 97,198 together with a three-storey Expiring on 29 December 2094 sq. ft.) office annexe, a guard house, a pump house, a TNB sub­station, an extended first floor factory and lean-to sheds, located at Lot No. 8726, PN 9634, Mukim of lalan Bakri, District of Muar, State of lohor 2 2 2,970,922 3,050,000 10.07.2009 3 erected with a block of single-A plot of industrial land Freehold Industriall 7,262 sq. m. storey factory building and a (about 78,168 guard house, located at Lot sq. ft.) PID No. 9495, HSD 31616, Mukim of lalan Bakri, District Encumbrances Presently charged to Public Bank Berhad vide Presentation No. 2862612004, registered on 26 April 2004 Nil Restrictions in Interest This alienated land cannot be sold, mortgaged, charged, leased or transferred in anyway whatsoever, including by way of entering into any contract with the purpose to part with/sell this land, without the consent of the State Authority. This  land  cannot  be  transferred  in  anyway  whatsoever  unless  the  construction  of  a  factory
building as imposed in the Express Conditions has commenced in accordance with the plans approved by the State Authority. 44
ICompany No.: 805792-X I 5. GENERAL INFORMATION ON OUR GROUP
Registered Owner  HUI  HUI
Description Two (2) adjoining plots of industrial land erected with a block of single-storey factory building together with a double-storey office annexe, a production office, a canteen building, a pump house, a TNB sub-station, 2 guard houses, a locker room and a compressor room, located at Lot Nos. 4943 and 4944, Geran 85825 and 85826, both in the Mukim of Jalan Bakri, District of Muar, State of Johor Two (2) adjoining plots of industrial land located at HS(D) 33704 and HS(D) 33703, Lots PTD 10628 and 10629, both in the Mukim of Jalan Bakri, District of Muar, State of Johor Tenurel Expiry of Lease  Age of Buildings (Years)  Category of Land Usel Land Area  NBVas at 31.08.09 RM  Market value 1 RM  Date ofIssuance of Certificate of Fitness for Occupation  Freehold  2  Industriall 24,282 sq. m. (about 261,369 sq. ft.)  11,030,624  11,100,000  24.11.2009  Freehold  N/A  Industrial! 15,544 sq. m. (about 167,315 sq. ft.)  2,095,180  N/A  N/A
Encumbrances Presently charged to AmBank (M) Bhd and Amlslamic Bank Berhad vide Presentation No. 58336/2009 and 58337/2009 respectively, registered on 13 August 2009. Nil Restrictions in Interest Nil. This land as described in this title cannot be transferred in anyway whatsoever unless the construction of a factory building as imposed in the Express Conditions has commenced in accordance with the plans approved by the relevant State Authority. 45 ICompany No.: 805792-X I

5. GENERAL INFORMATION ON OUR GROUP Notes:­(1) Market values of the Properties are based on the valuation report prepared by the Valuers dated 12 February 2008 using the Cost and Investment methods of valuation. The net surplus on revaluation ofthe Properties amounted to RM2.43 million had already been incorporated in our auditedfinancial statements for FYE2008.
(2) HUI owns the factory building which was built on Lot 8726.
(3) Theissuanceofthefinalcertificate offitnessforoccupationforFactoryBbythelocalcouncil ispendingthecompletion ofconstructionoftheaccessroadbythe land developer which is underway. Nonetheless, the Group had obtained the temporary certificate offitnessfor occupationfrom MPM, which will expire on 10 July 2010 and which is renewable (ifrequired) until thefinal certificate offitnessfor occupation is issued. Upon completion ofthe construction ofthe access road, the Group would undertake all necessary and appropriate steps to obtain the final certificate offitness for occupation.

To the best of our Directors’ knowledge and belief, there is no material non-compliance with current statutory requirements, land rules or building regulations in respect of the landed properties owned/leased by our Group. In addition, none ofthe above lands has breached any land-use condition or permissible land-use. [The rest ofthis page is intentionally left blankJ 46 5. GENERAL INFORMAnON ON OUR GROUP 5.6.2 Plant and Equipment The summary ofthe material plant and equipment owned by our Group is as follows:­Type of Equipment  Description  No. of units  NBVas at 31.08.09 RM’OOO  PVC/Fabric cutting machine  Multi Ply CutterlMulti Ply Table Size/XLC7000 Automatic Leather Cutting System, which is an automated, variable-speed cutting system that comes with cutter control, integrated vacuum system, automatic knife sharpening and chilled air coolant system  483  Leather cutting  Gerber Technology Taurus XD Leather Cutting  4  2,591  machine  System, which is an automated, high-speed, modular cutting system that comes with a cutting control computer, digital colour camera, automated colour hide scanning, flaw recognition, production tracking and reporting functions  Sewing machine  Sewing and 10ckstitch machines, which are automated, high speed sewing machines that come with automatic lubricating mechanisms and thread trimmers as well as a unique feed mechanism  193  1,160
5.6.3 Regulatory Requirements and Environmental Issues To the best of our Directors’ knowledge and belief, there are no regulatory requirements and/or major environmental issues which may affect our Company’s operations arising from the utilisation of our assets. Generally, the upholstered furniture manufacturing industry does not have any major environmental issues or concerns because there are no emissions of noxious gases or production of toxic fluids or industrial wastes. Our manufacturing wastes such as saw dust and leather cuttings are relatively minor, and we easily eliminate such waste in a hygienic and orderly manner, in accordance with guidelines and regulations as stipulated by the DOE. [ The rest ofthis page is intentionally left blankJ 5. GENERAL INFORMATION ON OUR GROUP 5.6.4 Material Capital Expenditures and Divestitures Save as disclosed below, there were no other material capital expenditures (including interests in other corporations) made by us for the past three (3) financial years:­FYE 2007 FYE 2008 FYE 2009 RM’OOO RM’OOO RM’OOO Land and buildings 10,341 2,095 Plant and machinery 1,492 900 1,667 Total 11,833 2,995 1,667 The above material capital expenditures were primarily financed by a combination of bank borrowings and internally generated funds. There were no material capital divestitures by our Group for the past 3 financial years. Save for our planned capital expenditures relating to our expansion plans as set out in Section 6.18 of this Prospectus, we do not have any material capital expenditures and divestitures currently in progress, within or outside Malaysia. 5.6.5 Material Plans to Construct, Expand or Improve Facilities We intend to construct our new plant which will be located nearby our existing plants and also to set up manufacturing operations in Vietnam, to increase our production capacity. The details of such expansion plans are set out in Section 6.18 of this Prospectus. Save as disclosed above, we do not have immediate plans to construct, expand or improve our existing facilities. [ The rest 01this page is intentionally left blankJ

6. BUSINESS OVERVIEW 6.1 GENERAL OVERVIEW Our Directors believe that we have established a reputation as one of the leading upholstered home furniture manufacturers in Malaysia. We are principally an integrated ODM and OEM player who produce a complete range of upholstered home furniture products. Our customers are mainly overseas wholesalers and retailers. Our primary activity revolves around the design, manufacture and sale of upholstered home furniture which include the following products:­(a) upholstered sofas;
(b) upholstered dining chairs;
(c) upholstered bed frames; and
(d) other home furniture such as cushion seats, sofa beds and tables.

Our products are mainly focused on ‘medium to high end range’ of upholstered home furniture and the designs are primarily based on Western stylishness and preferences. We made our first foray into the overseas market by exporting to Singapore in 1997 and in 1999, we ventured into Reunion Island, Bahrain, Australia and Cyprus. Presently, we export our products to more than 40 countries across the world covering Europe, Australasia, North and South America, Asia and Africa. Approximately 99% of our Group’s revenue is contributed from overseas. 6.2 PRODUCTS Our principal products for the past five (5) years are as follows:­Sofa beds In terms of revenue contribution, upholstered sofas, upholstered dining chairs and upholstered bed frames contributed 55%, 30% and 13% respectively to our revenue for FYE 2009, whilst other home furniture products accounted for the remaining sales. A brief description of our principal products is provided below:­1. Upholstered Sofas We manufacture a broad collection of both leather and fabric sofas including recliner chairs. Our sofas usually come in 1+2+3 seaters, 1+1 +3 seaters, 2+3 seaters or L-shape seaters and are made using quality materials including treated leather imported from Vietnam, Korea, Thailand and India, and fabric imported from China and Taiwan. Behind every piece of ODM sofa is extensive planning and creativity with emphasis on simplistic, lightweight, space saving and contemporary designs. 6. BUSINESS OVERVIEW 2. Upholstered Dining Chairs We manufacture a broad collection of both leather and fabric dining chairs using steel or wood based frames. Due to our unique and wide range of designs, our upholstered dining chairs would easily complement any types of dining table, from traditional to contemporary and wooden to glass designs. We have gained vast experience over the years manufacturing upholstered dining chairs which enable us to cater to the demands and requirements of our clients. 3. Upholstered Bed Frames We manufacture a wide range of upholstered bed frames which undergo strict production supervision and quality control. Upholstered bed frames are considered premium products whereby typical wood or steel bed frames, which are common in the market, are upholstered with leather or fabric to provide a sense of luxurious comfort. 4. Dining Tables We produce dining tables to complement our existing upholstered dining chairs, thus enabling us to market them easily as dining sets. Our dining tables are made using either wooden or steel frames, topped with glass or wood. 5. Sofa Beds In 2009, we also began commercialisation of a new product, namely the sofa bed. The upholstery materials used in the manufacture of sofa beds are identical to that of upholstered sofas, however additional metal parts, springs as well as mattresses are required for sofa beds. Further, the technology and design of sofa beds are more complicated than sofas as they involve additional mechanisms to enable the sofa beds to be unfolded and refolded in a speedy and convenient manner. [ The rest ofthis page is intentionally left blank] 6. BUSINESS OVERVIEW PRINCIPAL MARKETS Approximately 99% of our Group’s revenue was contributed from overseas and the segmental analysis ofour revenue by countries for the FYE 2009 is as follows:­Australia Norway Poland Belgium Denmark Netherlands Portugal USA Sweden Germany Switzerland Finland France South Africa New Zealand Canada Kuwait Malaysia Peru United Kingdom Chile Italy United Arab Emirates Angola Mexico Japan Singapore Other countries Total

6.4 SEASONALITY % Total Revenue 23.9 18.2 5.5 5.1 4.6 5.9 4.7 4.2 3.1 2.9 2.4 3.0 1.7 1.5 1.7 1.3 1.1 1.1 1.4 0.7 0.8 0.7 0.6 0.6 OJ OJ 0.3 2.4 100.0
There is no significant seasonal pattern in our sales during the past financial year due to the diversity of our customer base. Nonetheless, our sales are usually higher in the months prior to the year-end and following our participation in the international furniture fairs. [ The rest ofthis page is intentionally left blankJ 6. BUSINESS OVERVIEW 6.5 PRODUCTION PROCESS All our current Group’s manufacturing processes are located in the same vicinity in Kawasan Perindustrian Bukit Bakri, Muar, Johor for better economies of scale and production efficiency. The basic processes for our products are very similar and involve 2 key processes running in parallel. The production process for upholstered home furniture involves several key stages, from receiving of materials to delivery of products as shown in the diagram below. Processing orRaw Materials Retrieve Raw Materials
[ The rest ofthis page is intentionally left blankJ 6. BUSINESS OVERVIEW We source most of our wood and wooden frames domestically while our upholstery materials such as leather and fabric are mostly imported. The raw materials we purchase are subject to general visual and manual inspection by our quality control personnel. The leather and fabric we purchase are usually fully treated; as such, no further treatment is required on our part. Nevertheless, we will perform visual checking with regards to the type, colour and quality of the leather and fabric samples by comparison with master samples. Foam is normally inspected to ensure specification and density are acceptable. Wood is generally subject to inspection for correct specification, size, moisture content and quantity. Raw materials which do not meet our requirements would be returned to the suppliers. Plywood, rubber and tropical wood are drawn and cut into the specific sizes or desired shapes required to form the wooden frames of the furniture. These customized wood parts are then assembled and processed into wooden frames. The assembled wooden frames are then passed on to be affixed with springs, base cloths and also sponges, this then becomes the wooden base frames used in many upholstered furniture. Running in parallel at the start of the production process is the processing, drawing and cutting of upholstery material such as leather and fabric into the desired shapes and sizes that will fit into the wooden base frames. Thereafter, the various pieces are then sewn together using the sewing machines. Assemblv into Finished Goods
Send Back To Respective Sections for Rework ReworK Shipping of Fin ished Goods The wooden base frames, leather and other upholstery materials are received and inspected by our quality control personnel and then assembled into the finished product in this part of the manufacturing process. Final inspection would also be performed on fmished products prior to packing. After the assembled products are ascertained to have met our stringent quality requirements, the base of the assembled products are then affixed with non-woven and then packaged and packed. Our products are now ready to be shipped and will be loaded into containers for transport. 6. BUSINESS OVERVIEW 6.6 RAw MATERIALS Our major raw materials used in the production of our upholstered home furniture products and the principal sources ofthese raw materials are set out below:­(i) Upholstery materials:­
(a) Leather -Vietnam, Korea, Thailand and India.
(b) PU -China, Vietnam and Malaysia.
(c) PVC -Malaysia.
(d) Fabric -China, Taiwan and Malaysia.
(e) Non-woven fabric -China and Malaysia.
(f) Polyester/Loose fibre -China and Malaysia.

 

(ii) Wood related materials including wood frame, rubber wood, oak wood, plywood and tropical wood which are mainly sourced locally.

(iii) Foam which is sourced locally. (iv) Other raw materials such as metal base, packing material, sofa leg, elastic webbing, glue, hardware and nylon thread which are mainly sourced locally. Set out in the table below is the analysis of our raw materials:­% of Total Group Purchases Source of supply for FYE 2009 Raw Materials FYE 2007 FYE 2008 FYE 2009 Local (%) Import (%) Upholstery materials 49.0 53.3 51.4 3.6 96.4 Wood 24.6 17.7 15.7 98.6 1.4 Foam 13.2 13.3 13.4 100.0 Others 13.2 15.7 19.5 78.0 22.0 Total 100.0 100.0 100.0 Volatility and Increase in Prices ofKey Raw Material Prices of certain raw materials such as leather, wood and wood frame, foam, PU and fabric may fluctuate rapidly due to intervening factors such as global demand and supply conditions. As such, the prices of raw materials at the point of commitment to our customers may differ from those at the time of actual billing. Any shortages or interruptions in the supply of raw materials, such as an outbreak of bovine spongiform encephalopathy (or commonly known as the mad cow disease), may affect the supply and price of leather, one of our key raw materials. If there are significant increases in costs of our major raw materials and our Group is unable to pass on such price increases in the costs of our major raw materials to our customers or our Group is unable to find alternative sources for such raw materials at competitive prices, our Group’s fmancial performance may be adversely affected. However, we believe that we have the experiences and abilities to source from alternative suppliers should the need arises. [ The rest ofthis page is intentionally left blank1 6. BUSINESS OVERVIEW KEY ACHIEVEMENTS AND MILESTONES The major achievements and milestones achieved by our Group are listed below:­Key Milestones 1997 Year • Commenced manufacturing of upholstered sofas in a rented factory with a built up area of7,200 sq. ft. • Successfully exported for the fIrst time to Singapore 1999
• Penetrated into the European, Australasia and Middle Eastern markets. 2000
• Penetrated into the South American market. 2001
• Participation in the Malaysian International Furniture Fair for the fIrst time. 2002
• Introduction of a new product, upholstered dining chairs.
• Penetrated into the North American market. 2003

• Shifted our manufacturing operation into several rented factories with total built up area of about 32,200 sq. ft. 2004 • Penetrated into the African market. 2005 • Commissioning of Factory A and relocation of our entire manufacturing operations from rented premises to Factory A with a built up area of 97,400 sq. ft.
• Introduction of a new product, namely upholstered bed frames.
• Participation in an overseas international furniture fair for the fIrst time; namely the 420d International Furniture Fair 2005 in Valencia, Spain.
• Participation in the 16th International Fair Kiev Expo Furniture 2005 in Ukraine for the fIrst time.

2006 • Commissioning of Factory B with a built up area of 47,300 sq. ftoo
• Participation in the International Furniture Fair in Cologne, Germany for the fIrst time.
• Participation in the 69th Brussels International Furniture Fair 2006 in Brussels, Belgium for the fIrst time.

2007 • CommissioningofFactoryCwithabuilt upareaof185,300sq. ft..
• Participation in the 13th China International Furniture Expo in Shanghai, China for the fIrst time.
• Upstream venture into manufacturing of wooden chair frames to have integrated production line for our upholstered dining chair.
• Reorganisation of production flow/facilities and commenced operations in rented Factory D with a built up area of 18,000 sq. ft.

2008 • Created own brand “ERITZ” and registered the trademarks in Malaysia (Class 20), Australia and New Zealand.
• Ranked 151 out of 100 Outstanding Small and Medium Enterprises awarded with the Golden Bull Awards 2008 organised by Nanyang Siang Pau.
• Winner of the Enterprise 50 Award Programme 2008 jointly organised by the Small and Medium Industries Development Corporation (SMIDEC) and Deloitte Consulting (M) Sdn Bhd.
• Attained ISO 9001:2000 certifIcation.
• Introduction of a new product, namely wooden dining tables to complement the upholstered dining chairs in making a complete dining set.

6. BUSINESS OVERVIEW Key Milestones 2009
Year • Introduction of a new product, namely sofa beds.
• Winner of the Enterprise 50 Award Programme 2009 jointly organised by SME Corp Malaysia and Deloitte Consulting (M) Sdn Bhd.
• Winner of Product Excellence Award and Asian Furniture Leadership Award 2009 organised by Furniture & Furnishing Export International.

6.8 RESEARCH, DESIGN AND DEVELOPMENT 6.8.1 R&D Policies We recognise the importance of R&D to ensure we stay ahead of our competitors and sustain our continuous growth in the long run. Our R&D activities are divided into 2 main areas: (I) product design and development and (2) research activities, which are undertaken through the following initiatives:­Product Design and Development • Regular introduction and creation of new models/designs as well as new product lines to keep abreast with the latest market trends.
• Continuous monitoring and analysis of the latest designs introduced by our competitors both locally and overseas to stay competitive in the market.
• Identifying and utilising appropriate and cost effective raw materials for different products and designs to reduce costs of production.
Research Activities
• Continuous improvement in manufacturing processes and techniques to increase production output and efficiency.
• Continuous acquisition of and gaining up-to-date knowledge of production technology to keep abreast with rapid technological progress.

Through R&D, we aim to realise the following benefits:­(a) Sustain and grow our business through the development of new and improved designs/models and products.
(b) Increase revenue and profitability by addressing new market segments.
(c) Increase production output and efficiency whilst reducing costs of production through improved manufacturing processes and optimal use of raw materials.

[ The rest ojthis page is intentionally left blank1 6. BUSINESS OVERVIEW
6.8.2 R&D Facilities and Personnel Our in-house R&D facilities include a design workshop and prototyping laboratory which would enable us to undertake our R&D activities. We have in-house expertise to create prototypes and product samples for testing purposes which are vital in new design or product development. Such testing includes types of materials to be used and functionality of new designs. In addition, our in­house facilities are equipped with designing tools such as Computer Aided Design (CAD) system and upgraded computer systems to facilitate design activities. Our R&D team is headed by our Managing Director, Chua Fen Fatt and aided by the Chief Designer, Tan Yang Song. They are aided by a team of 14 capable and experienced personnel. 6.8.3 Achievements in R&D For the past three (3) FYE 2007 to 2009, our Group introduced more than 480 prototype models of our products with more than 70% of the models reaching commercialization and mass production. Further, we have successfully introduced and commercialised two (2) new products in FYE 2008 and 2009, namely wooden dining tables and sofa beds respectively. The wooden dining tables were introduced to complement our upholstered dining chairs as a complete dining set. As of FYE 2009, we have designed more than 10 new models of dining tables. As for the sofa beds, they are initially intended to be sold in the Australian market. As of FYE 2009, we have designed 2 new models for the sofa beds. We have also accomplished significant achievements where our research activities for the continuous improvement of manufacturing processes are concerned. In August 2007, we successfully undertook a reorganisation of the entire Group’s production process flow. This has resulted in a smooth flow on the production floor, with the various production sections arranged in a systematic and complementary order, thus optimising worker output and production turnaround time. 6.8.4 On-going and Future R&D Development of new product designs We are targeting to design 260 new models for both our existing and new products in FYE 2010, which represents a 30% increase in the number of new models designed from the 200 new models designed in FYE 2009. Presently, we are undertaking R&D activities to use cold cure moulded foam cushion for our recliner sofa products which provides enhanced comfort and superior quality seating medium. Cold cure cushions are individually moulded into the shape of the chair and is made from a high density classification foam. These moulded cushions use a high resilience polymer which is specifically designed for seating applications and has the ability to create a ‘sit in’ feel and has a greater durability compared to standard seats. We intend to introduce and commercialise it in FYE 2010. Improvements in manufacturing processes We are committed to undertaking continuous process improvements particularly in our manufacturing process which is critical as they have direct impact on our manufacturing efficiency, effectiveness and productivity. These inc1ude:­• Improving the efficiency of existing processes;
• Identifying areas to reduce wastage, rejects and operation time;
• Increasing the productivity of our resources; and
• Maintaining consistency of output quality.

6. BUSINESS OVERVIEW Our R&D personnel works closely with our production and marketing team to collate feedback pertaining to the design and quality of our products. In addition, some of our senior R&D personnel also attend trade missions along with production and marketing personnel. This enables improvements to be identified and effected where necessary in the production process and optimises our production capabilities to achieve desired quality products. Through improvements in manufacturing processes, we aim to achieve the following key benefits:­• Increased cost competitiveness of our products;
• Improved product quality and functionality;
• Increased production volume; and
• Improved customer satisfaction.

6.8.5 R&D Expenditure Our R&D expenditure for the past three (3) FYE 2007 to 2009 are as follows:­FYE 2007 FYE 2008 FYE 2009 RM’OOO RM’OOO RM’OOO Operating related expenses 362 966 1,158 Capital related expenses 61 93 8 Total R&D expenditure 423 1,059 1,166 Revenue 73,804 92,550 108,439 % of Revenue 0.57 1.14 1.08 To strengthen our R&D capabilities, we set aside a portion of our revenue for our R&D related activities. We plan to increase our Group’s involvement in the various areas of product R&D, which involve the area of product design and manufacturing process development through more efficient product designs. With the increased involvement and investment, we hope to substantially provide greater value-added products as well as improve our overall production techniques and efficiency. Moving forward, we are committed to invest at least I% of our total annual revenue for R&D purposes. 6.9 INTELLECTUAL PROPERTY Within the next five (5) years, we aim to manufacture and sell 50% of the total upholstered home furniture under our own brand name. To realise this goal, we have created our own brand name “ERITZ” in January 2008.
During the FYE 2009, the sale of “ERITZ” brand of home furniture products contributed approximately 4% to our Group’s revenue. 58 6. BUSINESS OVERVIEW We have successfully obtained the following certificates of registration in respect of our trade mark:­(a) Certificate for Registration of Trade Mark No. 1237356 dated 15 January 2009 issued by IP Australia certifying that the trade mark “ERITZ and device” has been registered as a trade mark for a period often (10) years commencing from 29 April 2008.
(b) Certificate of Trade Mark Registration No. 788348 issued by the Intellectual Property Office of New Zealand certifying that the trade mark “ERITZ and device” has been entered on the Register of Trade Marks on 30 October 2008 with a deemed date of registration of 29 April 2008 for a period often (10) years.
(c) Certificate of Registration for Trade Mark No. 08003588 issued by the Intellectual Property Corporation of Malaysia certifying that the trade mark “ERITZ and device” has been registered under Class 20 for a period often (10) years commencing from 26 February 2008.

Nevertheless, the trademark application under Class 16 is still pending the approval from the Intellectual Property Corporation of Malaysia. In addition to the above countries, we also intend to register our trademark in certain selected European countries in FYE 2010. Save as disclosed above, we do not have any other licences, franchises or technical assistance agreements in relation to the intellectual property rights. 6.10 QUALITY CONTROL We recognise that our ability to produce consistently high quality products is critical to the success of our business. As such, we place extensive and substantial emphasis on the ultimate quality of our products and maintain stringent quality control throughout our manufacturing processes. This enables us to produce high quality products to satisfy the demands and expectations of our customers. We have a team of 15 quality control personnel headed by the Quality Assurance Manager with the relevant technical expertise to ensure that our quality control procedures are adhered to for all our products at every stage in our production process. As a testament and recognition of the quality of our products and the manufacturing processes in place, we have obtained the following certifications/licences:­Certification/ Product Testing and Country of Expiry Date Licence Organisation Issue ISO 9001:2000 SGS United Kingdom Ltd United 15 February 2011 Kingdom Ontario Certificate of Registration Technical Standards and Canada 25 September 2010 for Upholstered and Stuffed Articles Safety Authority Importer Licence into the State of State of California USA 30 September 2010 California Department of Consumer Affairs Upholstered Furniture Manufacturer Department of Health, USA 1 May 2010 Certificate Commonwealth of Virginia Certificate for Registration for Ohio Department of USA 31 May 2010 Bedding, Upholstered Furniture and Commerce Stuffed Toys 6. BUSINESS OVERVIEW Certification/ Product Testing and Country of Expiry Date Licence Organisation Issue Pennsylvania Bedding and Department ofLabor and USA 31 May 2010 Upholstery Law Licence Certificate Industry, Commonwealth of PennsyIvania Our main quality control procedures include the following:­1. Raw Materials Inspection To ensure that only raw materials of the highest quality are used in our products, we implement 100% inspection on in-coming raw materials. These checks are done by our Quality Control personnel to check for consistency in quality and quantity and then stored in designated areas. Prior to usage, these same raw materials are inspected again to ensure there are no storage damages. 2. Inspection during production process Our products are checked 100% for production defects, especially sewing and assembly. Checks are done by designated Quality Control personnel after every major stage of production such as completion of wooden base frames, sewing of leather / fabric, upon assembly of finished products and prior to the shipping. 3. Final Inspection All finished goods are checked 100% prior to the packing and loading into the containers. Being a manufacturer of export goods, we are required to adhere to the product quality requirements of countries in which we export to. These include, but are not limited to fire safety, fumigation and dye test requirements. To ensure that we keep ourselves updated with knowledge of the latest product quality requirements in such countries, we are a member of both the Malaysian External Trade Development Corporation (MATRADE), as well as the Malaysian Furniture Industry Council (MFIC) whereby any updates or information on such requirements would be disseminated to members via weekly and quarterly bulletins respectively. In addition, we also work closely with our customers to ensure that our products are in proper compliance with prevailing local requirements or quality standards. We have not had any significant return of defective goods or faced any major cancellation of orders from our customers for the past twelve (12) months. [ The rest ofthis page is intentionally left blankJ 6. BUSINESS OVERVIEW 6.11 MAJOR CUSTOMERS Our major customers (i.e. those individually contributing 10% or more of our Group’s revenue) for each of the past three (3) FYE 2007 to 2009 are as follows:­<—————-As a % of Total Revenue —————-> Years of Name of Country Relation- Products FYE 2007 FYE 2008 FYE 2009 Customer of Origin ship Sales RM’OOO % RM’OOO % RM’OOO % 9,663 13.1 13,107 14.2 17,181 15.8Super Arnart Australia 8 Sofas, dining Pty Ltd chairs, bed frame and others
19,402 26.3 25,201 27.2 19,688 18.2Interstil As Norway 7 Sofas, dining Furniture chairs and others
With our diversified customer base originating from many different countries and our top customers each currently accounting for less than 20%, we believe we are not overly dependent on any single customer. Notwithstanding that, we have recorded significant revenue contribution from our top two (2) major customers, which collectively contributed 39.4%, 41.4% and 34.0% to our total revenue for the past three (3) FYE 2007 to 2009 respectively. We have had good business relationships with them and have not encountered any major problems in our past dealings with them. In fact, we have been dealing with both of them for more than seven (7) years. We have been successful in our efforts to widen our customer base to lower the dependence on our top two (2) major customers over the last three (3) fmancial years, which we aim to continue. This is an indication of our ability to increase revenue contribution from other customers but at the same time reduce our dependency on our top two (2) major customers. In addition, as part of our expansion plans, we intend to further diversify our customer base and expand our presence particularly in North and South America and Africa which presently has minimal sales contribution and at the same time to continue to identify new customers in countries to which we have been presently exporting. [ The rest ofthis page is intentionally left blank1 6. BUSINESS OVERVIEW 6.12 MAJOR SUPPLIERS Our major suppliers (i.e. those individually contributing 10% or more of our Group’s purchases) for each of the past three (3) FYE 2007 to 2009 are as follows:­<——————As a % of Total Purchases——————> Years of Name of Country Relation-Raw FYE2007 FYE2008 FYE2009 Supplier of Origin ship Material RM’OOO 0/0 RM’OOO 0/0 RM’OOO % ReeDs Malaysia 10 Foam 6,651 13.2 9,196 13.2 8,232 13.4 Industries Sdn Bhd Allied India 3 Leather 1,117 2.2 8,554 12.3 3,923 6.4 Exims Green Tech Vietnam 3 Leather 4,593 9.2 7,352 10.6 5,686 9.2 Vietnam Co., Ltd Veromca * Malaysia 5 Wooden 6,976 13.9 1,447 2.1 chair frames
* Veromca is 90% owned by Chua Fen Fatt and Tee Hwee Ing. Please refer to Section 10.3.3 of this Prospectus for further information on Veromca. Our key raw materials include leather, wood and wood frame, foam, PU and fabric. We usually purchase in bulk and mostly on cash terms; hence we are in a better position for price negotiation. Over the years, we have built good business relationships with most of our suppliers and with our large supplier base, we believe we are not overly dependent on any single supplier. Notwithstanding, our senior management is constantly on the look out for new or alternative suppliers which offer similar or better quality materials at favourable terms or prices. [ The rest ofthis page is intentionally left blankJ 6. BUSINESS OVERVIEW
6.13  LOCATION OF OPERATIONS AND PRODUCTION CAPACITY  6.13.1  Locations  Details of our present manufacturing operations and administrative office are as follows:­
Location & Address  Built-up Area (sq. ft.)  Main Functions • Administration office • Storage of raw materials • Draw & Cut sections • Studio and Showroom • Sewing section • Assembly section • Woodworking section (sofa and bed frames) • Storage of raw materials and fmished goods • Training centre • Production office • Purchasing office • Design workshop • Prototyping laboratory  Factory A Lot No. 8726, PN 9634, Mukim of Jalan Bakri, District of Muar, State of Johor  97,400  Factory B iLot PTD No. 9495, HSD 31616, Mukim of Jalan Bakri, District of Muar, State of Johor.  47,300  factory C ~ot Nos. 4943 and 4944, Geran 85825 and 85826, both in the Mukim of Ja1an Bakri, ~istrict ofMuar, State of Johor  185,300  Factory D Lot PTD 9493, HS(D) 31614, Mukim of Jalan Bakri, District of Muar, State of Johor  18,000  • Woodworking section (dining chair frames and dining tables)  [TOTAL  348,000
Factories A, B and C were commissioned in January 2005, November 2006 and August 2007 respectively whilst we began renting Factory D since November 2007. The close vicinity of all our plants enables us to facilitate administrative control and ensure production processes are carried out and linked smoothly and efficiently. [ The rest ofthis page is intentionally left blankJ 6. BUSINESS OVERVIEW
6.13.2 Production Capacity The estimated annual production output (for our principal products) and the utilisation capacity of our Group’s manufacturing facilities for the past three (3) FYE 2007 to 2009 were as follows:­Main Products  Actual  Production  (Units)  FYE 2007  Bed frames  23,741  Sofas 28,864  Dining chairs  315,611  FYE2008  Bed frames  31,522  Sofas  57,059  Dining chairs  295,657  FYE2009  Bed frames  28,348  Sofas  55,809  Dining chairs  294,562
Estimated Annual Capacity Production Capacity Utilisation (Units) (0/0) } 70,000 } 75.2 345,000 91.5 } 120,000 } 73.8 360,000 82.1 } 120,000 } 70.1 360,000 81.8 Presently, our production is running on 1 shift per day of 8 hours for six working days per week. We have not experienced any major constraints in our production or operating activities. 6.14 SALES AND MARKETING We have a dedicated marketing team led by our Marketing Manager who has made concerted efforts with strong initiatives and programs to maintain an ongoing long term strategy for our products. Our Group’s sales and marketing arm utilises the following marketing strategies to sustain and expand our business:­• Providing a platform to survey and gather market feedbacks which are used to observe and analyse industry and market developments.
• Introduction of suitable marketing techniques that are in line with our product development plan.
• Working thoroughly across departments to ensure that products have a competitive advantage and are commercially acceptable to clients.
• Participation in international furniture exhibition/fairs such as the International Furniture Fair (IMM), Cologne, China International Furniture Expo, Shanghai and Malaysian International Furniture Fair, Kuala Lumpur to expand customer network, to introduce our products to international buyers and to keep abreast of the current market trends.
• Placement of strategic advertorials in recognised furniture magazines and Internet websites to showcase our products and to constantly create public awareness.
• Regular goodwill visits to customers’ premises to maintain good business relationships as well as to gather information on latest market trends. I:ikewise, we regularly invite our customers, both existing and new, to visit our plants to have a first hand look on our production facilities.
• Engagement of suitable sales agents for our new products under the “ERITZ” brand.

6. BUSINESS OVERVIEW
Participation in the local and international trade fairs is very important to us as they provide a platform for us to create awareness of our products in the international markets. Besides the annual Malaysian International Furniture Fair which we have taken part since 2001, we have also participated in other international furniture fairs held in Europe and China. Such participation would also enable us to collate relevant market information and trends, and further provide us with an opportunity to meet potential customers. Additionally, participation in these trade fairs enables us to further keep abreast of the latest market trends in our key target segment. Set out below are other international furniture exhibitions or fairs that we participated in the past. Furniture Fair  Venue  42nd International Furniture Fair 2005 (FIM 2005)  Feria Valencia, Spain,  16th International Fair Kiev Expo Furniture 2005  Ukraine  69th Brussels International Furniture Fair 2006  Brussels, Belgium  IMM Cologne International Furniture Fair 2006 -2009  Cologne, Germany  China International Furniture Expo 2007 -2009  Shanghai, China
Going forward, in line with our goal to manufacture and sell 50% of the total upholstered home furniture under our own brand name “ERITZ” within the next five (5) years, more efforts would be directed towards its brand building and establishing its distribution channels. 6.15 MANAGEMENT AND EMPLOYEES Our management team is spearheaded by our Managing Director, Chua Fen Fatt, who has more than 22 years of experience in the upholstered home furniture industry. He is supported by a team of dedicated and experienced management personnel who have contributed significantly to our progress and who have many years of experience in this industry. The knowledge and experience particularly of our Executive Directors and senior management are valuable assets to our Group and essential to our growth. As at the Latest Practicable Date, we have a total workforce of 451 employees including 384 foreign workers based on contractual basis out of which 7 are based in R&D department, 8 are clerical staff whilst the remaining 369 are based in production department. The breakdown of the total number of our employees by category is as follows:­<——–Number of Employees ——–> Less than Ito 5 Mote than Total of Category of Employees 1 year years 5 years Employees Management & professional 7 2 9 Production 27 333 32 392 R&D I 10 415 Executive 3 2 2 7 Clerical & non executive 9 18 1 28 Grand Total 40 370 41 451 6. BUSINESS OVERVIEW
The breakdown of the total number of our employees as at the end of the past three (3) FYE 2007 to 2009 are as follows:­As at the end of FYE 2007 <——–Number of Employees ——-> Less than 1 to 5 More than Total of Category of Employees 1 year years 5 years Employees Management & professional 1 2 2 5 Production 154 232 11 397 R&D 516 Executive 2 2 Clerical & non executive 11 4 15 Grand Total 171 240 14 425 As at the end ofFYE 2008 <——Number of Employees ——-> Less than Ito 5 More than Total of Category of Employees 1 year years 5 years Employees Management & professional 4 3 2 9 Production 150 304 18 472 R&D 94215 Executive 3 2 5 Clerical & non executive 12 15 27 Grand Total 178 326 24 528 As at the end of FYE 2009 <——–Number of Employees ——–> Less than 1 to 5 More than Total of Category of Employees 1 year years 5 years Employees Management & professional 3 5 2 10 Production 50 312 32 394 R&D 29314 Executive 2 2 2 6 Clerical & non executive 11 19 30 Grand Total 68 347 39 454 None of our Group’s employees are represented by any union and there have not been any major disputes between the management and our employees in the past. We have always enjoyed cordial relationships with our employees. For the past three (3) FYE 2007 to 2009, all the employees of our Group have been based at our factories and head office in Muar, lohor. 6. BUSINESS OVERVIEW Training and Development Programmes We recognise the importance of our employees and place strong emphasis on human resource development to maintain a competent and dynamic workforce. Our training policies are geared towards ensuring that the knowledge and skills of our employees remain relevant in the rapidly changing environment. Some of the past and current external training programmes undertaken by the employees of our Group are as follows:­(a) Standard operating procedure
(b) Production productivity
(c) Calculation & method
(d) Inventory control
(e) Quality control5’S program
(f) Obstacles to success
(g) Industrial safety
(h) Export/ import shipping procedure
(i) R&D procedure G) ISO 9001:2000 quality management services awareness

(k) ISO 9001:2000 internal quality audit
(I) 5’S housekeeping
(m) Security awareness training
(n) Fire prevention briefing/fire drilVfrre practice
(0) Productivity-Linked Wage System (PLWS) workshop
(p) Perspectives on the Employment Act, 1955
(q) “Beyond Excellence All Rounded Success” training
(r) Team & culture establishment
(s) Occupational health and safety in the small medium industry seminar
(t) Marketing strategies
(u) Orang Kurang Upaya (OKU) Training
(v) Corporate Restructuring and Tax Management
(w) Budget 2010
(x) Seminar Pengurusan Penggajian Pekerja Asing
(y) Understanding International Financial Reporting Standards and International Accounting Standards
(z) Cardiopulmonary resuscitation (CPR) and First Aid Training

Management Succession Plan We recognise the importance of our ability to attract and retain our key management personnel. Hence, we have made concerted efforts to identify and groom middle management at all key areas as an integral part of our management succession plan. The plan also includes offering a competitive remuneration package to and providing training and career development opportunities for our employees in all key functions of our operations. 6.16 INTERRUPTION IN BUSINESS OPERATIONS We have not experienced any interruption in business which had significant effects on our operations for the twelve (12) months preceding the Latest Practicable Date. 6. BUSINESS OVERVIEW 6.17 COMPETITIVE STRENGTHS Our competitive strengths and advantages include:­(a) A leading player with complete range ofupholstered home furniture products Our products are mainly focused on ‘medium to high end range’ of upholstered home furniture. Unlike the majority of our local peers who are principally involved in the manufacturing and sale of wooden based products, we focus and specialise in upholstered home furniture, most of which are leather-based and normally considered to be premium products. Weare one of the leading upholstered home furniture manufacturers in Malaysia and Frost & Sullivan* estimates that our industry revenue share in 2008 is approximately 10.7%, placing us as the fourth ranked Malaysian based upholstered furniture manufacturing company. In addition, we present ourselves as a ‘one-stop centre’ by offering a complete range of upholstered home furniture which includes upholstered sofas, upholstered dining chairs (with dining tables) and upholstered bed frames. Frost & Sullivan* believes that we are one of the only two companies in Malaysia which produces complete range of upholstered home furniture, which is our key differentiating factor from many of our competitors. * (Source: Independent Market Research Report on the Upholstered Furniture Market in Malaysia, Australia and Europe prepared by Frost & Sullivan). (b) Integrated manufacturing operations We are a fully integrated home furniture manufacturer as we are involved in the various key stages of the manufacturing process of all our products. We are involved in the design and development of our products, the manufacture of main components used in the manufacture of our products (including the wooden chair frames) and the assembly of our products. As a result, we are able to have better control over the quality of our products and our production costs. Hence, these would enable us to offer high quality home furniture products at competitive prices to our customers. (c) Outstanding product design and development Our product design and development team is led by our Managing Director, Chua Fen Fatt, and together with our Chief Designer, Tan Yang Song, the team has had extensive knowledge and hands-on experience in the upholstered home furniture industry. We have designed more than 480 new models in the past three (3) FYE 2007 to 2009, with more than 70% of the models successfully commercialised. The high number of designs has provided our ODM customers with more choices to meet their expectations. As part of our R&D capabilities, we aim to introduce unique and innovative designs in our products and to continue to improve on our products range and to introduce new models in order for us to keep up with the changing markets or consumer preferences. In addition, we are also committed to undertaking continuous process improvements particularly in our manufacturing process to enable us to, amongst others, increase production output and efficiency whilst reducing costs of production. 6. BUSINESS OVERVIEW (d) Strong commitment to quality We place great emphasis on and have strong commitment to produce quality home furniture products that meet the demands and expectations of our customers, who are mainly from overseas. As a testament and recognition of the quality of our products and the manufacturing processes in place, we have obtained several certifications including the ISO 9001 :2000 which was received in March 2008. We also recognise the importance of maintaining and improving our quality standards and as such, we have made efforts to implement stringent quality control procedures for the manufacturing process particularly in the sewing and assembly areas, where 100% checks are conducted to ensure high customer satisfaction thus resulting in low return of goods sold. We also use certain equipment and machinery in our production process to enhance the quality of our products. Due to our emphasis on overall quality control, we enjoy low rejection rates from our customers. (e) Own brand name We created our own brand name “ERITZ” in January 2008 and we aim to manufacture and sell 50% of the total upholstered home furniture under the brand name within the next five (5) years. We believe that our own products will give us a competitive advantage in capturing business opportunities in this highly competitive industry and provide us with a solid platform for expanding into new markets. We also believe that through our brand building process, we will develop brand loyalty among our customers. To protect our brand name, we have successfully registered the trademark in New Zealand, Australia and Malaysia (Class 20) and we intend to register the trademark in certain selected European countries in FYE 2010. (f) Established and diversified clientele base We have successfully established ourselves with a reputable track record associated with quality and reliability with more than 10 years of experience as a manufacturer of upholstered home furniture products particularly in the ODM sector. We strive to produce high quality products with unique and exclusive designs and deliver to our customers on a timely basis. This can be reflected by the fact that, over the past five (5) years, our diversified clientele base has grown from 23 countries (in FYE 2005) to more than 40 countries around the world particularly those from the Europe and Australasia regions. To date, all of our top 10 customers (for the FYE 2009) have been dealing with our Group for more than 3 years, which we endeavour to maintain good business relationships with. In addition, we are also strategizing to further diversify into new markets and expand our presence in other regions such as North and South America and Africa which presently has minimal sales contribution. (g) Low gearing and strong cash flows Our Group’s total proforma borrowings as at 31 August 2009 stood at RM7.8 million against the Group’s proforma shareholders’ funds of approximately RM36.4 million (after Acquisitions but before Rights Issue and Public Issue), giving a gearing ratio of 0.21 times. The Group’s cash flow position is healthy as they are able to tum the profits into cash with our net cash and cash equivalents balance amounting to RM20.7 million as at 31 August 2009. In addition, most of our revenue is transacted on cash terms. For the FYE 2009, approximately 81.8% of our sales were based on cash terms thereby strengthening our cash flow position and minimising any potential credit risks. 6. BUSINESS OVERVIEW 6.18 PROSPECTS AND FUTURE PLANS Vision and Mission Statements Our performance to date, as a competitive player in the upholstered home furniture segment; is reflected in our corporate vision and mission of establishing our Group to be well respected by our clients and business associates for our product quality, competency, professionalism and contribution. This is clearly embodied in our Group’s Corporate Vision and Mission Statement as follows:­To be one of the top 10 Asian players in the supply of conceptualized lifestyle home furniture worldwide; recognizedfor its brands, design innovations and quality commitment Our Corporate Vision and Mission are expected to be realised through the following commitment:­• Strengthen our R&D capabilities to continue improving on existing designs in order to develop new innovative designs.
• Continually upgrade our equipment and machinery to boost efficiency and productivity and to enhance our product quality.
• Diligently seek and test new raw materials to facilitate production of quality products at competitive costs.
• Continue to diversify and introduce new products to clients.
• Build upon and strengthen our own brand of home furniture products.
• Adopt more aggressive marketing strategies and to continue to work hand-in-hand with our clients to secure bigger segments ofthe market.
• Improve production efficiency, hence becoming more competitive in pricing.
• Continually motivate our staff and personnel to achieve the highest level of commitment and performance.

Future Plans & Strategies Weare well positioned to further grow our business and further capitalise on the market opportunity given our strong competitive advantages. We seek to broaden our market reach and geographical presence by introducing new scope of products within the upholstery furniture market. In order to achieve these plans, we have set out the following key strategies:­(a) To increase our production capacity bv expanding locally and overseas As part of our expansion plan, on 10 September 2007 we acquired two (2) contiguous pieces of freehold land measuring approximately 167,315 sq. ft. strategically located adjacent to our existing factories and head office. We intend to construct our new plant within 24 months from the Listing. Upon completion, the new plant, with a total built up area of approximately 100,000 sq. ft., is expected:­(i) to increase our existing production capacity by about 15%, to cater to the rising demand for our products;
(ii) to undertake the woodworking activities for our upholstered dining chairs which are presently carried out in the rented Factory D; and

(iii) to undertake the production of wooden dining tables which is presently being produced in the rented Factory D. 6. BUSINESS OVERVIEW The estimated cost of construction of the new plant is expected to amount to RM4.0 million whilst the estimated cost of purchase of new machinery and equipment is expected to amount to RM1.72 million, both of which will be fmanced via the proceeds to be raised from the Listing. To date, we have yet to incur any significant expenditure relating to the construction ofthe new plant. Besides constructing our new plant, we also intend to set up manufacturing operations in Vietnam. We are presently in advanced stage of negotiation to lease an existing two (2) single­storey factory buildings (with a double storey office annexed) with a built-up area of about 4,900 square metres located in Binh Duong Province, Vietnam. We expect to obtain the investment certificate and other necessary approvals from the local authorities in Vietnam by the end of2nd quarter of 20 1O. Our Vietnam operations are expected to produce about 24,000 sofa sets annually. The estimated cost of setting up the Vietnam plant, including purchase of new machinery and equipment, is approximately RM3.4 million which will be financed via a combination of internally generated funds and/or external borrowings. To date, we have yet to incur any significant expenditure relating to the Vietnam plant. (b) To develop new product designs Over the past three (3) FYE 2007 to 2009, we have designed more than 480 new models for our existing products, out of which more than 70% of the models were successfully commercialised. Further, we have successfully introduced and commercialised two (2) new products in FYE 2008 and 2009, namely wooden dining tables and sofa beds respectively. In order to further gain and exploit the market opportunities, we have been continuously developing new products and designs for the existing products. We are targeting to design 260 new models for both our existing and new products in FYE 2010, which represents a 30% increase in the number of new models designed in FYE 2009. In addition, we are presently undertaking R&D activities to use cold cure moulded foam cushion for our recliner sofa products which provides enhanced comfort and superior quality seating medium. Cold cure cushions are individually moulded into the shape of the chair and is made from a high density classification foam. These moulded cushions use a high resilience polymer which is specifically designed for seating applications and has the ability to create a ‘sit in’ feel and has a greater durability compared to standard seats. We intend to introduce and commercialise it in FYE 2010. To strengthen our R&D and as part of our R&D plans, we are committed to invest at least 1% of our annual revenue for R&D related activities annually. We also plan to increase our Group’s involvement in the various areas of product R&D, which include the area of product design and manufacturing process development through more efficient product designs. With the increased involvement and investment, we hope to substantially provide greater value-added products as well as improve our overall production techniques and efficiency. [ The rest ofthis page is intentionally left blank] 6. BUSINESS OVERVIEW (c) To further expand and diversifv our customer base and broaden our geographical coverage Apart from maintaining relationships with our existing customers, we are also focused on acquiring new customers as well as penetrating into new markets. In particular, we intend to further expand our products into North and South America and Africa. Although we have already made inroads into some of these regions, the present revenue contribution is relatively minimal. For the FYE 2009, our revenue contributions from Canada, USA, countries in Africa (on aggregate) and countries in South America (on aggregate) were 1.3%, 4.2%, 2.2% and 2.4% respectively. Hence, we are planning to increase our marketing efforts in these regions with the aim of increasing the revenue contributions from these countries. We believe that by expanding our presence to new customers and new markets, we can increase our revenue sources as well as reduce our reliance on anyone particular region or customer. (d) To place greater emphasis and focus on our own brand Within the next five (5) years, we aim to manufacture and sell 50% of the total upholstered home furniture under our own brand name. To realise this goal, we have created our own brand name “ERITZ” in January 2008. We have successfully registered the trademark in New Zealand, Australia and Malaysia (Class 20) and we intend to register the trademark in certain European countries in FYE 2010. Over the years, we have built up a wealth of experience, resources and achieved optimal economies of scale to enable us to explore the potential of producing our own products. We also understand that to achieve the goal, we would require considerable amount of time and investments and would face stiff competition from existing players. As part of the marketing strategies, we have and will continue to commission suitable sales agents and distributors to market and distribute our “ERITZ” products in selected countries. In addition, we have and will continue to carry out strategic promotional activities and advertisement campaign to create awareness for our own products. Countries targeted include Australia, New Zealand as well as those within the European region, as these are the countries in which we have already established a foothold or presence. Future Prospects Based on our future plans and strategies as well as our competitive strengths as outlined above, our Board foresees that we will achieve revenue growth and be able to provide a meaningful return to all our stakeholders. Whilst our Group recognises the existence of market challenges of the upholstered home furniture industry and the various risk factors faced by our Group as outlined in Section 4 of this Prospectus, we are committed to our business and growth strategies which have been put in place to propel the Group towards achieving its vision to be one of the top ten (10) Asian players in the supply of conceptualized lifestyle home furniture worldwide; recognized for its brands, design innovations and quality commitment. [The rest ofthis page is intentionally left blank] 7. INDUSTRY OVERVIEW AND OUTLOOK OVERVIEW OF THE GLOBAL ECONOMY The world economy showed signs of emerging from the worst recession since World War II, earlier than expected. The turnaround in early 2009 was encouraging given the unprecedented severity of the global fmancial crisis which emanated from the United States (US) and Europe and evolved into an economic crisis as asset prices fell and global demand plunged. The subsequent fall out impacted developing economies and resulted in a moderation in their growth. The recovery was attributed to a number of factors. Principal among them were the trillions of dollars injected by major central banks to unlock credit markets and the coordinated efforts to keep interest rates low to boost investments and consumption. At the same time, a number of countries launched fiscal stimulus packages to mitigate the effects of the crisis and to pump prime the economies. As a result, the global downturn is expected to stabilise, albeit with a smaller contraction, spurred by the better-than-expected performance of China, India and the rest of Asia. The prospect for emerging and developing economies is expected to be positive in 2010. This is due to the full impact of monetary and fiscal measures working through the economies and efforts to diversify away from export dependency to domestic consumption taking effect. Developed economies, on the other hand, continue to grapple with financial institutions that face additional losses, businesses and households that experience difficulty accessing credit, as well as high unemployment. Notwithstanding the various uncertainties, the global economy is expected to register modest growth in 2010. The positive prospect is primarily a reflection of the effectiveness of the stimulus packages undertaken by a number of economies as well as international efforts to manage the crisis. Various multilateral meetings helped generate a synchronised and coherent international response to forestall an even harder landing of the global economy. Economies remain committed to the longer term objectives of reforming the global financial architecture and safeguarding the world trading system. In the immediate term, they will continue to work together to restore financial stability and economic growth. The growing signs of recovery in the global economy are expected to firm up in 2010, with emerging and developing countries, particularly Asia, leading the rebound. However, recovery is expected to be sluggish and not strong enough to mitigate the impact of high unemployment, especially in the developed countries. Additionally, with banks continuing to rebuild their balance sheets, credit flows will be constrained in advance economies. This could impact capital flows to emerging and developing economies. The massive fiscal stimulus measures, which supported demand and lowered systemic risk in the financial markets, have also increased fiscal burdens significantly, especially in the developed countries. Public debt in developed countries, which was about 80% of GDP before the crisis, is projected to exceed 110% in the next five years. This raises issues of fiscal sustainability as well as the need to rein in spending and reduce debt levels over the medium term. Nevertheless, with consumption and investment continuing to be weak, caution remains against early unwinding of the stimulus packages before recovery is on firmer footing. With growth among advanced economies expected to be tepid, global trade growth expected to remain weaker than usual at 2.5%. The US is projected to register a recovery of 1.5% in 2010, while the euro area is expected to grow at a slower pace of 0.3%. Stronger growth of almost 5% is nevertheless expected to be recorded by emerging economies, with Asian economies, particularly China and India, providing the impetus for global growth. As such, the global economy in 2010 is expected to resume growth at 3.1% (2009: -1.1%). (Source: Economic Report 200912010, Ministry ofFinance) 7. INDUSTRY OVERVIEW AND OUTLOOK Signs of improvements in the global economy became more pronounced in the third quarter of 2009. Global production, trade and retail sales revived, while conditions in the international financial markets continued to stabilise. In some of the major advanced economies, notably the US, Japan, Germany and France, economic activity gained momentum as evidenced by the positive growth on a quarterly basis. The rebound in economic activity was stronger in the emerging economies, particularly in Asia. However, the pace of recovery in the global economy continues to be uneven and remains dependent on policy support. Going forward, global economic conditions are expected to improve further as most of the policy measures supporting demand are still in place. While the risks to growth have receded in recent months, the pace of recovery in the global economy is likely to be gradual and uneven as the outlook remains uncertain. A strong rebound will be constrained by problems in the advanced economies as financial, non-financial and household sectors continue to repair their balance sheets amidst tight financial conditions. (Source: Quarterly Bulletinfor Third Quarter 2009, Bank Negara Malaysia) OVERVIEW OF THE MALAYSIAN ECONOMY Malaysia being an open economy is adversely affected with exports contracting sharply, following the global financial crisis and economic downturn. The significant decline in exports in tum affected domestic demand. Consequently, economic growth contracted 6.2% in the first quarter of 2009. However, the Gross Domestic Product (GDP) recorded a smaller decline of 3.9% in the second quarter, aided by speedy and effective implementation of stimulus packages as well as monetary easing. Economic performance is expected to improve in the second half of the year supported by counter­cyclical measures and reinforced by stabilisation in the global economic environment. As such, the economy is expected to tum around in the fourth quarter of2009, though for the year it is estimated to contract 3.0% Domestic demand will be the main driver of the economy attributed to public sector expenditure and private consumption. Public investment is estimated to expand following the implementation of projects under the stimulus packages. In contrast, private investment is expected to contract, reflecting the lower business sentiment. Meanwhile, private consumption is envisaged to record positive growth on account of firm household disposable income, as a result of stabilisation in the job market and recovery in commodity prices. On the supply side, growth is expected to emanate from services and construction sectors. The services sector is envisaged to register positive growth contributed by strong performance in the communication, finance and insurance as well as accommodation and restaurant sub-sectors. The construction sector continues to strengthen driven by implementation of various Government projects, particularly construction works under the stimulus packages. However, manufacturing output is envisaged to decline on account of weak external demand. Growth in the agriculture sector is expected to be propelled by sturdy expansion of the non-commodity sub-sector, while the mining sector continues to contract due to lower crude oil production. The balance of payments (BOP) is expected to remain favourable despite the contraction in global trade. The current account surplus is anticipated to narrow in 2009, but remains large at RM91.8 billion or 13.5% of Gross National Product (GNP). The surplus in the goods account is expected to be lower with exports and imports recording slower growth in 2009. Nevertheless, the surplus will be more than sufficient to offset the deficits in the services, income and current transfers accounts. Given the contraction of economic activities in the first half of the year and expected recovery in the second half, nominal national income as measured by GNP is estimated to decline 4.8% to RM681.0 billion (2008: 14.2%; RM715.0 billion). In terms of purchasing power parity (PPP), per capita income is envisaged to decrease 14.7% to USD12,826 in 2009 (2008: 13.7%; USD15,040). 7. INDUSTRY OVERVIEW AND OUTLOOK The economy is expected to benefit from stabilising global economic conditions, augmented by fiscal measures and accommodative monetary policy. GDP growth is forecast to tum around to 2.0% -3.0% in 2010 (2009: -3.0%) driven by domestic demand, particularly the private expenditure and supported by expected recovery with positive contribution from all sectors in the economy is expected to raise nominal per capita GNP by 2.5% to RM24,661 (2009: -6.7%; RM24,055). In terms of purchasing power parity (PPP), per capita income is expected to increase 2.7% to USDI3,177 (2009: -14.7%; USDl2,826). (Source: Economic Report 200912010, Ministry ofFinance) The Malaysian economy registered an improvement in the third quarter with a reduced contraction of 1.2% (2Q 09: -3.9%) amidst positive growth in domestic demand and stabilisation of external demand. The growth impetus emanated mainly from domestic demand, as a result of stronger private consumption and higher public sector spending. Improvements in the global economy, particularly the regional economies, helped to stabilise the external sector. On the supply side, all economic sectors, except agriculture, recorded improved performance. The Malaysian economy has exhibited stronger signs of improvement in the third quarter and evidence suggests that domestic economic activity is gaining strength. Domestic demand, particularly private consumption and public sector spending, has been the main impetus of growth. Going forward, the pace of economic recovery is expected to gain momentum, as business and consumer sentiment improve further in an environment of continued implementation of fiscal measures, accommodative monetary policy and continued access to financing. In addition, the gradual improvement in the global economy will continue to contribute positively to the recovery of the domestic economy. (Source: Quarterly Bulletin for Third Quarter 2009, Bank Negara Malaysia) [The rest a/this page is intentionally left blank] 7. INDUSTRY OVERVIEW AND OUTLOOK The contents of this section onwards have been extracted from the Independent Market Research Report on the Upholstered Furniture Market in Malaysia, Australia and Europe prepared by Frost & Sullivan. 7.3 INDUSTRY OVERVIEW 7.3.1 Furniture Industry The furniture industry is one of the most basic industries; the furniture sector generally represents between 2 and 4 percent of total production value of most countries’ manufacturing industries. The global furniture industry production value was approximately USD302.5 billion (RMI,058.8 billion) in 2008, having shown a growth rate of approximately 6.9 percent from 2007. China is currently the world’s largest furniture exporting country with furniture exports ofUSDI9.8 billion (RM69.3 billion) in 2008. The furniture industry has a very wide range of products; it covers all movable objects that provide storage, or hold objects on horizontal surfaces above the ground, or objects which help support the human body such as beds and seating furniture. Storage furniture is used to hold or keep certain small items such as clothes, tools, books, and household goods. Home or domestic furniture is one of the major categories of furniture; it includes beds, sofas, chairs, and tables that are used at home. The major groups of home furniture and its most common items are as set out below. Category  Product Group  Most Common Items  Furniture  Upholstered seating  Sofas (including armchairs, reclining chairs and couches), footstools, seating elements upholstered with leather, wool, synthetic material, cotton, and so on  Non-upholstered seating  Seats, armchairs, rocking chairs, seats convertible into beds, and stools  Dining and living room furniture  Dining sets (tables and chairs), dressers, coffee tables, sideboards, shelf systems, room dividers, and television! video/music system storage units  Kitchen furniture  Fitted cabinets and kitchen units, kitchen tables and chairs, free-standing pieces such as moveable trolleys, and butcher blocks  Bedroom furniture  Beds, headboards, bedside tables, dressing tables, chests of drawers, and wardrobes (fitted or free-standing)  Home office furniture  Desks, chairs, drawer unit, filing cabinets, and integrated workstations, also known as Small Office Home Office (SOHO)  Other Furniture  Storage furniture  Cupboards, bookcases, and wall units  Occasional furniture  Small tables, desks, mirrors, and hall-stands  Bathroom furniture  Storage cabinets, baskets, and so on  Furniture Parts  Furniture Parts  Parts offurniture or seats, also including semi-finished furniture
7. INDUSTRY OVERVIEW AND OUTLOOK 7.3.2 Market Segmentation The global upholstered furniture industry had estimated revenues of USD42 billion (RM147 billion) in 2008. This represents approximately 13.9% of the global furniture industry in 2008. At present, we export most of our upholstered home furniture products with about 80% being exported mainly to Europe and Australia whilst the rest are being sold to New Zealand, North America, Asia and South Africa. As such, general overview of upholstered furniture market in Australia and Europe (specifically the EU region) is presented herein together with an analysis of the upholstered home furniture competitive landscape in Malaysia. Both Europe and Australia have upholstered furniture market sizes of approximately USD33.5 billion (RMI17.3 billion) and USD2.5 billion (RM8.8 billion) respectively. 7.3.3 General Overview of Furniture Market in European Union (EV) The EU is a political and economic community of twenty-seven member states with supranational and intergovernmental features, located primarily in continental Europe. The EU’s member states cover a combined area of 4,422,773 square kilometers and the total territory of the EU is the seventh largest in the world by area. With almost 500 million citizens, the EU generated an estimated 30% share of the world’s nominal Gross Domestic Product (GDP) in 2008. If it were considered a single unified state, the EU’s twenty­seven member states would be the world’s largest national economy, surpassing that of the USA by USD4.0 trillion (RMI4.0 trillion) in 2008. The EU is a single market economy created by a system of which apply in all member states; these laws guarantee the freedom of movement of people, goods, services and also capital. The EU member states also maintain a common agricultural, fisheries and trade policy. In 1999, the EU introduced a common currency, the Euro, which has been adopted by fifteen of its member states. The EU represents its members in the World Trade Organization (WTO) and also observes at United Nations (UN) and Group of Eight (G8) summits. The European Commission, the European Parliament, the Council of the European Union, the European Council, the European Court of Justice and the European Central Bank are a few of the key institutions in the EU. EU citizens elect the Parliament every five (5) years. The EU comprises 27 independent sovereign countries (EU27) which are known as member states: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. Market size and growth trends in the EU27: The market size for furniture in the EU27 member states in 2008 was estimated to be USD119.4 billion (RM417.9 billion), having grown approximately 1.4% since 2007. However, this figure does not provide a clear picture of each individual country’s growth rate. Generally, growth rates in the 12 new EU countries, along some of the smaller EU27 countries were higher than the rest of the member states. Bigger markets such as the United Kingdom, Germany and Italy generally showed a small positive growth rate. In 2008, Germany accounted for approximately 23.1 % of all sales and is currently the largest furniture market in the EU27. 7. INDUSTRY OVERVIEW AND OUTLOOK Domestic furniture production in the EU27 member states was estimated to be worth USDII2.3 billion (RM393.1 billion) in 2008, accounting for approximately 35 percent of global production. Italy and Germany were the top two furniture manufacturers in the EU27 by far, accounting for 21.0 and 20.0 percent, respectively, of the total production. Most furniture manufacturers in Germany are large companies, which produce furniture on a large scale commercial basis. The situation in Italy is different, with most of the furniture manufacturers there being small-medium family owned enterprises. Although the furniture industry in the EU27 is still largely dominated by large corporations, the vast majority of the companies involved in the furniture industry consist of small-medium enterprises with a low degree of clustering. It is estimated that there is only 8.1 employees for every furniture company in the EU27 member states, illustrating the small scale of the furniture manufacturing scenario in the EU27. Upholstered Furniture Market in the EU27: The upholstered furniture market remains the single largest furniture market in terms of revenues. The upholstered furniture product group, which includes upholstered bed frames, sofas, and upholstered steel and wood based chairs, accounted for sales of an estimated USD33.5 billion (RMII7.3 billion) in the EU27 in 2008. The chart below shows the market size percentage breakdown of the different furniture product groups in the EU27 market in 2007.
Market Engineering Measurement Analysis ofEU27: In 2008, the EU27 upholstered furniture market was valued at USD33.5 billion (RMI17.3 billion) having grown 4.4 percent from 2007. The market is expected to grow at a CAGR of approximately 4.3 percent during the forecast period of2009-2013. The EU27 upholstered furniture market revenues from 2005-2008 are as depicted in the table below. As a market that is currently mature, the EU27 upholstered furniture market will likely experience annual growth rates in the region of 3 to 5 percent. The growth rates in the three years prior to 2007 had risen from a low of 0.4 percent in 2005 to a relative high of 4.4 percent in 2008. However, in the EU27 upholstered furniture market a growth rate of 4.4 percent translates to a significant value ofapproximately USD1.4 billion (RM4.9 billion), as was experienced by the industry in 2008. Therefore, growth rates in EU27 upholstered furniture market should not be taken at face value, because they represent a fairly large quantum in terms of dollar value. 7. INDUSTRY OVERVIEW AND OUTLOOK Historical Revenue Growthfor the EU27 Upholstered Furniture Market, (2005-2008) Year  Approximate Marl{et Size (USD billion)  Growth Rates (%)  2005  26.8  0.4  2006  28.7  7.1  2007  32.1  11.6  2008  33.5  4.4
Overall, the upholstered furniture markets in many Western European countries are mature, with growing supplies mainly from China and Eastern Europe. Consumer tastes are experiencing a long-term shift from traditional to contemporary style of furniture. This shift is mostly due to the fact that currently, most houses lack the space to fit more items; contemporary furniture that has been developed using intelligent space saving ideas has thus become very popular. Market Engineering Measurement and Analysis -EU27 Upholstered Furniture Market (2008)
Measurement Name Measurement Trend Market age  Mature stage  Stable  Approximate revenues, 2008  USD33.5 billion  Stable  Market growth rate, 2008  4.4%  Stable  Compound annual ~rowth rate (2009-2013)  4.3%  Stable  Pricing trend  Medium to High  Increasing  Competitors (active market competitors in base year)  Industry is highly fragmented with few players dominating a major share. Cheap imports are increasingly becoming a threat  Increasing but competition remains stable for established brands  Degree of competition  High  Increasing
[ The rest ofthis page is intentionally left blankJ 7. INDUSTRY OVERVIEW AND OUTLOOK Production of Upholstered Furniture in the EU27: The EU27, as a bloc, is the largest upholstered furniture manufacturer in the world. Production of upholstered furniture was the second biggest product group in the EU27 member states in 2008 after kitchen furniture. Production of upholstered furniture was valued at USD2504 billion (RM88.9 billion) and constituted approximately 2104 per cent of the total EU27 production value in 2008. The chart below shows the percentage breakdown ofthe different furniture product groups in the EU27 market in 2008. Rattan, $595
Dining & Living, $10,952 Import Trends of Upholstered Furniture into the EU27: It should be noted that although the EU27 is taken as a bloc in most of this research service, when discussing import statistics, import sources also include imports from other EU27 member countries (intra-EU27). Therefore, import statistics for the EU27, unless otherwise stated, translates to the summation of total imports of each individual EU27 member country. Since a peak in production attained in 2000, production volume of upholstered furniture in the EU27 has been on a downward trend. This is despite the marginal increase in production value during the same period. This trend is expected to continue in the near future with the EU27’s furniture manufacturing industry facing significant competitive pressure, not just from Asia Pacific, but also from Latin America and parts of Africa. The import of upholstered furniture was the single largest imported product group in 2008 at approximately 14.6 percent of total imports. This import of upholstered furniture has been increasing in recent years and has grown over 40 percent from 2002 to 2008. Main import sources for upholstered furniture were from Italy, Poland, and China, who accounted for 58 percent of total imported upholstered furniture in 2008. It has to be noted that although Italy and Poland were still the main suppliers of upholstered furniture to the EU27 with 24 and 17 percent shares, respectively, China’s share of 17 percent is increasing at a rate of approximately 10 percent per annum. [The rest ofthis page is intentionally left blank] 7. INDUSTRY OVERVIEW AND OUTLOOK

The chart below illustrates the breakdown of imported furniture into the EU27 in 2008. 9.4% 9.7% Traditionally, this product group has been less susceptible to low-cost foreign imports from developing countries due to the complexity and value-added design element required to produce upholstered furniture. However, the share of imports from developing countries has been increasing in recent years as manufacturers have become more proficient at producing upholstered furniture products that meet the standards required by their Eun customers. In addition to this, social and environmental standards in developing countries are much less stringent compared to the EU27. This translates into huge amounts of costs savings for these third-world manufacturers, as they do not have to invest in costly machinery and equipment to process industrial waste. Currently, Asia Pacific accounts for approximately 80 percent of the developing countries’ exports to the EU27. The dominant exporter of upholstered furniture from Asia Pacific is China, followed by Vietnam and Malaysia, which are registering particularly strong growth. The chart below illustrates the breakdown of the EU27 upholstered furniture importing sources in 2008. DeveIOPing~~~..d ::::::::::::::::::::~:” cO~8~~es’.~~~II~~~r~~r~~~~:::_
\~ —————-­—————_.:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:—————-_.—————–_.:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:.iIIII1~ Intra-EU Imports, 68% Notes:­1. 1ntra-EU imports include imports from all other parts ofEurope
2. Developing countries imports include imports from developing countries worldwide, with China (53%), Malaysia (2%), Thailand (1%), Turkey (1%) and others (2%).

7. INDUSTRY OVERVIEW AND OUTLOOK Key Demand Conditions: (i) Market Drivers
The EU27 upholstered furniture market is largely driven by growth from Eastern European countries, appreciation in the Euro and domestic household sales. The impact of these drivers is illustrated below.
(ii) Market restraints

Rank  Driver  2009-2010  2011-2013  1  Growth from Eastern European countries  Medium  Medium/High  2  Appreciation in the Euro  Medium  Medium  3  Shift in consumer preference to upholstered furniture with minimalist and contemporary designs  Medium  Medium  4  Growth in residential housing sales  Medium  Low/Medium  5  Decrease in size of households leading to the increase in number of households  Low/Medium  Low/Medium
The EU27 upholstered furniture market, although growing at a moderate pace, is restrained by the low spending on durable goods and the EU27 population growth rate. Impacts of these restraints are illustrated below. Rank  Restraint  2009-2010  2011-2013  1  Lower spending on durable goods  HighlMedium  Low /Medium  2  Relatively low population growth rate  Medium  Medium  3  WorId Market expected to recover from financial crisis  Low/Medium  Low/Medium
Consumer Buying Trends Most Europeans consider their homes as a very important place and this contributes to the forecast that there will be continuous growth in the mature furniture industry in Europe, although a relatively slow one due to its large size. Upholstered furniture is a key item in every household’s consideration when purchasing furniture to decorate their homes. Essentially, this means that each home would ideally like to own a set of sofas for the living room/home theater, upholstered bed frames for the bedrooms, and also upholstered chairs for the dining room. 7. INDUSTRY OVERVIEW AND OUTLOOK Shift from Traditional to Contemporary Style Furniture There is currently a sustained long term trend whereby consumer tastes have shifted from traditional to more contemporary furniture. Contemporary furniture has been mostly designed and developed using intelligent space saving ideas. This furniture must be multi-functional with attractive designs that can suit all kinds of moods and tastes. Consumer tastes when purchasing upholstered furniture can be segregated into four basic trends, most of which indicate the purchasing trends of general furniture. The trends are:­• Lightweight furniture with increasingly smaller dimensions.
• A high degree of functionality.
• High quality designs with clear cut forms and a degree of aesthetic features.
• Excellent material quality such as leather and textiles.

Simplistic Luxurious Design A trend that is increasingly becoming popular is the luxury furniture set in the minimally decorated living room. With the decrease in household size, many European homes have thus decreased in size, with space to fit more items increasingly lacking. This has consequently led to a process of reduction of furniture sizes, which can be seen in the design of upholstered items sold in Europe. Upholstered furniture, mostly sofas, which have sold well, exhibited simplistic yet luxurious designs and qualities. Increased Demand for Furniture Functionality The increasing lack of space has resulted in more consumers demanding greater functionality from their furniture items. TV armchairs with integrated massage systems and easy action snap hinges on upholstered furniture are some of the items combining furniture and functionality. The same also applies to a single sofa recliner with an integrated multimedia system. Relevance and Importance of Branding The European furniture market is a highly competitive one. To ensure growth in this competitive environment, manufacturers need to differentiate themselves through devising and implementing branding strategies by advertisements placed in print media, on the Internet or television and participating in a greater number of trade fairs and exhibitions. In addition, manufacturers must constantly develop innovative products so as to attract more customers. Although large companies dominate the European furniture industry, in numerical terms, the European furniture industry is highly fragmented and is largely characterized by the presence of small to medium-sized companies. The top ten countries provide less than 11 percent of total European furniture supply, a large proportion of their output being destined for export. [ The rest ofthis page is intentionally left blankJ 7. INDUSTRY OVERVIEW AND OUTLOOK 7.3.4 General Overview of Furniture Market in Australia Brief Overview of Australia As a whole, Australia is a prosperous western-style market economy with services contributing the majority of GDP at 68.0 percent in 2008. Rich in natural resources, Australia is a major exporter of agricultural products, particularly grains and wool, and minerals, including various metals, coal, and natural gas. Due to its high cost base, there is very minimal manufacturing activity in Australia. Service industries have expanded in recent decades at the expense of the manufacturing sector, which currently accounts for less than 12 percent of its GDP. Overall Furniture Market in Australia The total Australian furniture market size was estimated to be USD6.9 billion (RM24.2 billion) in 2008; with the wood and upholstered furniture markets being one of the largest furniture market segments in terms of revenues. Due to the extremely high freight costs in Australia, most transportation across the country is done by rail; the majority of furniture manufacturers are located around the major population centers in the coastal cities such as Sydney, Melbourne, Brisbane, Adelaide, and Perth. Furniture selling and distribution centres also only focus on population centres closest to it. It has to be noted that throughout this chapter, the upholstered furniture market is classified as the wood and upholstered furniture market. This is mainly because in Australia the market is classified as such, and market data specifically on upholstered furniture are not readily available. Upholstered Furniture Market in Australia The wood and upholstered furniture market accounted for USD2.5 billion (RM8.8 billion), or 36.7 percent of the total Australian furniture market size, in 2008, growing 0.8 percent over 2007. The chart below shows the market sizes of different product groups in Australia in 2008. Searoom 11.6% Office
7. INDUSTRY OVERVIEW AND OUTLOOK Market Engineering Measurement Analysis The Australian wood and upholstered furniture market was estimated to have a market size of USD2.5 billion (RM8.8 billion) in 2008. During the forecast period of2009-2013, the market size is expected to grow at a CAGR of 2.6 percent. Overall, the market is mature with a significant amount of imports from developing countries. Similar to the EU27 upholstered furniture market, the Australian wood and upholstered furniture market is a mature one. Growth rates in the market are in the region of 1 to 3 percent per annum. Although the market for wood and upholstered furniture in Australia is relatively small if compared to the EU27 market, a growth rate of 0.80 percent still represents a fairly large quantum, approximately USD51.0 million (RMI78.5 million) as was experienced by the market in 2008. Historical Revenue Growthfor the Australian Wood and Upholstered Furniture Market, (2005-2008) Year  Revenues (USD Billion)  Revenue Growth Rate (%)  2005  2.36  3.51  2006  2.45  3.81  2007  2.50  2.04  2008  2.52  0.80
During the forecast period of 2009-2013 the market size of the Australian wood and upholstered furniture market is expected to grow at a CAGR of 2.6 percent. Overall, the market is mature with a significant amount of imports from developing countries. The table below provides a summary of the Australian wood and upholstered furniture market in 2008. Measurement Narne  Measurement  Trend  Market age  Mature stage  Stable  Approximate revenues for 2008  USD2.52 billion  Stable  Market growth rate, 2008  0.80%  Stable  Compound annual growth rate (2009-2013)  2.6%  Stable  Pricing trend  Medium to High  Increasing  Competitors (active market competitors in base year)  Industry is highly fragmented with few players dominating a major share. Imports make up an estimated 40% of domestic demand  Increasing, with many local manufacturers threatened by imports  Degree of competition  High  Increasing
7. INDUSTRY OVERVIEW AND OUTLOOK Production of upholstered furniture in Australia The furniture manufacturing industry in Australia comprises a major part of the manufacturing economy. In 2008, production of furniture in Australia was estimated to be USD4.6 billion (RM16.l billion), with furnishing-related activities contributing an estimated USD8.6 billion (RM30.1 billion) to the economy. The three main sectors of the industry are residential furniture/furnishings, commercial (office or corporate), and hospitality (hotels, motels, resorts, and so on). Residential furniture makes up about two-thirds of production output. The furniture manufacturing industry in Australia is a highly fragmented one. In the wood and upholstered furniture sector alone, there are over 4,500 firms with approximately 90 percent employing fewer than 20 workers. It is estimated that approximately 4.5 percent of all manufacturing employees are employed in the wood and upholstered furniture industry. Import trends of upholstered furniture into Australia In 2008, Australia imported approximately USD2.2 billion (RM7.7 billion) worth of furniture with upholstered furniture accounting for approximately 30 percent or USD660 million (RM2,3 billion). Wood and upholstered furniture is the largest import category and registers almost three times the import value of the next largest category, which is bedroom furniture. Main import sources of wood and upholstered furniture are from Malaysia, Italy, and China. It has to be noted that, similar to existing trends in the EU27, China’s share of the wood and upholstered furniture segment is growing, mostly at the expense ofItaly. The chart below depicts the estimated Australian import of wood and upholstered furniture ratios for 2008. OfficeFrarre -not 4.8%upholstered 7.8% Kitchen 1.2% Bedroom 13.2%

Other 40.1% Frarre ­upholstered 32.8% 7. INDUSTRY OVERVIEW AND OUTLOOK
Key Demand Conditions: (i) Market Drivers
(ii) Market restraints

Rank  Drivers  2009-2010  2011-2013  1  Shift in consumer preference to upholstered furniture with minimalist and contemporary designs  Medium  Medium  2  Rising purchasing power of Australians  Low/Medium  Medium  3  World economy likely to recover in 2010  Low/Medium  Medium
Flat per capita consumption growth MediumlHigh MediumlHigh1
Rank Restraints 2009-2010 2011-2013 Global Financial Crisis MediumlHigh Medium2 Consumer Buying Trends The Australian wood and upholstered furniture buying trends at present have not changed much in the past few years. The long standing preference of leather upholstered sofas over fabric covered ones has not changed. The quality of leather is still used as a determining factor by many consumers when purchasing a sofa. Similar to the tastes of most EU27 markets, most Australian consumers are more focused on the purchase of wood and upholstered furniture with increased functionality. This means that consumer tastes are shifting from stationary sofas towards upholstered furniture that provide increased functionality. Basically, Australian consumers prefer wood and upholstered furniture that have simplistic contemporary designs, smaller dimensions, increased functionality, and also excellent leather and textile quality. With consumer tastes in Australia very similar to consumers in the EUn, there is not much customization needed by HUI in order for it to penetrate the Australian wood and upholstered furniture market. Its lightweight, simple, and space saving upholstered furniture are designed with targeting this specific type of customers. Relevance and Importance of Branding The wood and upholstered furniture market in Australia is a mature one, with consumers who are very selective of the products they purchase. A few factors come into play when consumers decide to purchase a product, these factors being branding, pricing, quality of product, and also country of origin. Similar to any consumer good, the perception on the quality and prestige of the brand plays an important part in determining whether the retailer is able to obtain a higher margin for the product or not. Consumers are also highly brand conscious, when it comes to purchasing wood and upholstered products. Products that are designed in Italy or are remotely linked to having Italian origins can command a slightly higher price than a comparable model. 7. INDUSTRY OVERVIEW AND OUTLOOK 7.3.5 Analysis of Competitive Landscape in Malaysia Industry Overview and Lifecycle Malaysia’s forests, with over 80 species of wood, provide abundant resources for the country’s large furniture manufacturing and furniture export industry. The furniture industry in Malaysia continues to show strong growth in 2008 despite the global financial crisis with exports growing by 2.0 percent from 2007 to RM8.7 billion in 2008. The markets for furniture exports from Malaysia continues to be diversified, with the strongest growth in 2008 coming from countries such as United States of America, Japan, Australia, the United Arab Emirates, India, China, Germany, and Saudi Arabia. Wooden furniture continues to be the largest export item, accounting for 78.2 percent of Malaysia’s furniture exports, increasing by 6.5 percent from 2007 to RM6.8 billion in 2008. The total export value for upholstered wooden furniture in 2008 was estimated at RM870 million, holding approximately 12.8 percent of total wooden furniture exports. The availability of Malaysian rubber wood, one of the main raw materials, is expected to keep pace with the demand for Malaysia-made furniture as the Malaysian Timber Industry Board (MTIB) has developed plans to plant 25,000 hectares of rubber forests plantations annually. Together with existing plantations of 1.7 million hectares of rubber plantations and the ones in the pipeline, the country is well placed in terms of raw material supply for future furniture industry demands. There are approximately 60 to 70 medium to large upholstered home furniture manufacturers in Malaysia, out of which more than 80 percent focus on the manufacture of sofas. The major upholstered home furniture manufacturers in Malaysia are located in industrial areas mainly in Johor, Penang, and Se1angor. Malaysia’s furniture industry was among the top ten largest exporters of furniture in the world in 2008; however, it lags behind other leading countries such as Italy and Canada. Due to the furniture industry being inherently labor intensive, the Malaysian furniture industry is increasingly seeing competition from emerging countries such as China and more recently, Vietnam. The Malaysian furniture industry, therefore, has to improve its design and quality and move up the value chain. It has to introduce a constant stream of models and designs that are trend setters, to stay competitive. However, it has to be noted that although the overall furniture industry has a negative perception of being low-end, most Malaysian upholstered home furniture manufacturers only produce furniture for the medium to high end. This is evidenced by their sales to Western markets such as the European countries and Australia. These Malaysian manufacturers are well-positioned to change foreign consumer perception that Malaysia is a low-end producer and give the furniture industry an image overhaul. The Malaysian upholstered home furniture manufacturer’s landscape roughly mirrors the overall furniture industry’s business model, that is, most of the furniture produced is for exports. Most Malaysian manufacturers have based their business model on an export-based one, where on average more than 90 percent of products are exported. The Malaysian upholstered furniture industry is a growing one as depicted below. At this stage, there is expected to be entry of a number of competitors, products offered by these competitors are normally undifferentiated from one another and branding levels are still at a minimal. [The rest ofthis page is intentionally left blank1 7. INDUSTRY OVERVIEW AND OUTLOOK
Introduction Growth Maturity Decline Competitive Conditions  Few  Entry of some competitors Undifferentiated prod ucts/services  Likely price cutting for volume gain Shake-out of weakest competitors  Fight to maintain share Difficulties in gaining/taking share Emphasis on efficiency/low cost Exit of some competitors
Industry Dynamics Challenges The Malaysian upholstered home furniture industry faces numerous challenges; chief among them is the growing price competition from China and Vietnam, an over dependence on the USA market and a lack of branding activities. These challenges and their impact are depicted below. Rank  Challenges  2009-2010  2011-2013  1  Growing price competition from China and Vietnam Over Dependence on the U.S. Market for Wood and Upholstered Home Furniture Exports Lack of branding in the upholstered home furniture industry in Malaysia  High  High  2  High  High  3  MediumlHigh  Medium
The biggest challenge Malaysia faces is the increasing competition from furniture manufacturers in China and more recently, from Vietnam. This competition comes mostly in the form ofreduced prices. China and Vietnam are able to offer much lower prices due to low labor and raw material costs in these countries. Labor costs are almost one-third in Vietnam as compared to Malaysia. Unless Malaysian manufacturers find ways to reduce their costs by automating or moving to high design quality furniture that are less price sensitive, it would be difficult to survive in this market. Malaysia could import inexpensive labor from neighboring countries, but it faces challenges on this front as this would create overdependence on foreign workers. The increasing competition from China is more likely to impact the small furniture companies in the short term, while in the long term; it will pose a threat to all furniture makers who do not upgrade. 7. INDUSTRY OVERVIEW AND OUTLOOK The impact of the challenge is expected to be high throughout the forecast period. Malaysia-made upholstered home furniture is considered to be of good quality. The Malaysian companies are able to meet exacting European and American import requirements and standards and are able to extensively export their products to these countries. However, Malaysia-made upholstered home furniture is sold only as brand-less products to importers and distributors. These products are then sold on to retailers, discounters, and DIY stores and are branded according to the company selling it. This lack of branding significantly reduces the profit margin that could have been attained by upholstered home furniture manufacturers. The impact of this challenge is expected to be medium to high in the short term, but decrease to medium in the long term of the forecast period. Barriers to Entry Generally, the upholstered furniture industry is perceived to have relatively low barriers to entry and the challenge for furniture manufacturers is to maintain a leadership in the market. However, despite the relative ease in entering the market, it is not easy for a company to succeed in this industry. Numerous critical success factors have to be fulfilled before a company can thrive in the industry. The barriers to entry for the Malaysian upholstered furniture industry in 2008 are as illustrated below.
Ranl{ Barriers to Entry 1  Manufacturing setup start-up costs  2  Designs that are accepted in key markets  3  Efficient supply chain
• Manufacturing Setup Start-up Costs The setting up of any manufacturing facility requires a significant amount of start-up costs. This is the same with the upholstered home furniture industry. Machines such as industrial sewing machines, automatic PVC/PU cutting machines, wood cutting machines and dust collecting systems require a significant amount of capital investment. A huge amount of factory and warehouse space is also required as upholstered home furniture are bulky and fragile objects that cannot be stacked and which need to be handled with care to avoid any storage damages. • Designs that are accepted in Key Markets Effective designs that cater to the tastes of key customer markets in developed countries such as European countries, USA and Australia are essential for any manufacturer wanting to thrive in this industry. However, changes in consumer tastes and demand are quite frequent. An upholstered home furniture manufacturer needs to constantly be able to update its designs and keep with these changing needs of the customers. Thus, only manufacturers with a suitable level of experience and skills can survive. 7. INDUSTRY OVERVIEW AND OUTLOOK • Efficient Supply Chain The manufacture of upholstered home furniture requires a number of raw materials that has to be sourced from countries around the world. Wood frames made from plywood, tropical wood and rubber wood are usually sourced from Malaysia, foam from Malaysia, leatherlPVC/PU from Vietnam, South Korea, Thailand and India and fabric from China. This diverse supply of raw material requires a certain amount of experience to manage; not only to ensure timely delivery but also to ensure raw material quality. Critical Success Factors The critical success factors for the Malaysian upholstered furniture industry in 2008 are as shown below. Rank  Critical Success Factors  1  Penetration into key developed country markets  2  Moving up the value chain  3  Exposure resulting from furniture exhibitions  4  Availability of rubber wood and timber  5  Experienced management and workforce  6  Diversified and well established client base
• Penetration into Key Developed Country Markets As an export oriented industry, the ability to penetrate the key furniture markets of the USA, Europe and Australia is critical to any manufacturer’s success. Not only does it ensure a significant and steady quantity of orders, it also helps them to charge a higher premium on their products due to the higher exchange rates. • Moving Up the Value Chain To insulate themselves from undue pncmg pressures from manufacturers in the low end of the upholstered home furniture market in Vietnam and China, Malaysian manufacturers need to position themselves in the medium to high end market. This is mainly because in the medium to high end market, pricing is not so important a buying factor for a purchaser as is design or reliability. • Exposure Resulting from Furniture Exhibitions As the Malaysian upholstered home furniture manufacturers do not enjoy any significant advantage through branding at present, they need to take part in furniture exhibitions for gaining exposure. Furniture exhibitions in Malaysia such as the Malaysian Furniture Exhibition (MAFEX) and Malaysian International Furniture Fair (MIFF) are a main source of sales for Malaysian furniture. Organizations such as Malaysian Furniture Industry Council (MFIC) have also been eagerly promoting these events and these are the main source for interaction between furniture manufacturers and end users from all over the world. Such initiatives are likely to continue to boost sales in the industry at a steady pace. 7. INDUSTRY OVERVIEW AND OUTLOOK
• Availability of Rubber Wood and Timber Malaysia has adequate resources of timber and rubber wood for furniture. The Government has also ensured the continuous development of plantations to ensure the availability of rubber wood. • Experienced Management and Workforce Despite facing a threat from the manufacturers of China and Vietnam, Malaysia has a longer history of furniture making with skilled craftsman compared to those countries. The craftsmen have been in the business for several years and thus understand the needs of the market and specifications required for each destination country. This is an important advantage that Malaysia has, keeping it ahead in the learning curve. However, in the long term, unless the local craftsmen improve their design capability, Malaysia may see its share of imports taken up by China. • Diversified and Well Established Client Base A diversified and well established client base across vast geographies is essential for a manufacturer to survive in the global market. Manufacturers with such advantage will not be affected by any economic setback in a particular region. 7.3.6 Key Industry Players and Competition The upholstered home furniture manufacturing industry in Malaysia is a largely fragmented and competitive one. At present, there are approximately 60 to 70 medium to large upholstered home furniture manufacturers in Malaysia, out of which more than 80% focus on the manufacture of sofas. The major upholstered home furniture manufacturers in Malaysia are located in industrial areas mainly in Johor, Penang, and Selangor. Out of these 60 to 70 medium to large companies, Frost & Sullivan has identified six major Malaysia­based players that manufacture leather or fabric covered furniture. Manufacturer  Upholstered Sofa  Upholstered Dining Chair  Upholstered Bed Frame  Home Upholstery Industries Sdn. Bhd.  ../  ../  ../  Master Sofa Industries Sdn. Bhd.  ../  Sin Wee Seng Industries Sdn. Bhd.  ../  ../  Virtual Couch Industries Sdn. Bhd.  ../  ../  White Feathers Industries (M) Sdn. Bhd.  ../  Yew Hoong Sofa Products (M) Sdn. Bhd.  ../  ../  ../
[The rest ofthis page is intentionally left blank} 7. INDUSTRY OVERVIEW AND OUTLOOK 7.3.7 Industry Share and Positioning The Malaysian upholstered home furniture industry mostly consists of companies focused on the manufacture of sofas for export. Most of these companies are OEM and ODM of upholstered home furniture and they export these to retailers and distributors in Europe, USA and Australia. More than 80% of the products of most manufacturers are exported at present. Since the focus is on the upholstered home furniture manufacturer’s export markets, market share of these companies in Malaysia is not covered. Moreover, most of these companies do not sell the majority of their products in the Malaysian market. Therefore, Frost & Sullivan has ranked the major upholstered home furniture companies in Malaysia solely based on company revenues as shown in the chart below as at 2008 which is an estimated industry share based on revenues. Only Malaysian based companies are profiled in this study and ranked.
Notes:­ 1  Other Major Participants include Master Sofa Industries Sdn. Bhd., Sin Wee Seng Industries Sdn. Bhd.,  Virtual Couch Industries Sdn. Bhd., White Feathers Industries (M) Sdn. Bhd., Yew Hoong Sofa Products  (M) Sdn. Bhd.  2  Others include participants not listed in the Other Major Participants category.
Based on HUI’s revenues of RM92.5 million in 2008, and estimated total revenues for the Malaysian upholstered home furniture industry of RM870 million, Frost & Sullivan estimates that HUI’s industry revenue share was approximately 10.7 percent in 2008, ranking it fourth among the Malaysia-based upholstered home furniture manufacturing companies in that year. This is a broad based comparison as some of these companies are solely in the manufacture of sofas, while some have a diverse product mix, ranging from upholstered home furniture made from a variety of raw materials (for example, leather, polyvinyl chloride (PVC), and fabrics) to upholstered dining chairs and upholstered bed frames. In this respect lies HUI’s key differentiating factor from many of its competitors. HUI appears to be one of the only two companies in Malaysia with a complete range of upholstered home furniture, which includes upholstered sofas, upholstered dining chairs, and upholstered bed frames. Frost & Sullivan believes the only other manufacturer with the same product mix as HUI is Yew Hoong Sofa Products (M) Sdn. Bhd. Although Yew Hoong has more than 20 years of experience in the industry compared to HUI’s experience of more than ten years, HUI has managed to catch up with Yew Hoong. In 2008, HUI had revenues ofRM92.5 million compared to Yew Hoong’s revenues ofRM67.0 million. 7. INDUSTRY OVERVIEW AND OUTLOOK
Companies in this category (that is, the other major participants’ category) are estimated to have individual industry revenue shares ranging from approximately 7 to 18 percent. It is estimated that the top 3 companies in Malaysia have a combined revenue share of 47.0 percent and the 3 companies below HUI, the fifth to seventh placed companies, have a combined revenue share of 18.1 percent. 7.3.8 Key Supply Conditions The upholstered furniture industry in Malaysia relies on several raw materials, the key ones being leather and wood:­Leather Leather is a material created through the tanning of hides and skins of animals, primarily cattle hide. The tanning process converts the skin into a durable, long-lasting, and versatile natural material for various uses. Leather is the main cost component for the manufacture of upholstered home furniture. Traditionally, leather is mostly sourced from countries such as Italy, USA, and Brazil. However, there is a recent trend of companies sourcing from China. The Chinese leather industry has increasingly been able to provide significant savings on leather products with flexibility and depth of product range. However, it has to be noted that leather from China are still mostly used for low-to medium-end products. High-end leather is still sourced from countries such as Italy. Wood Upholstered home furniture manufacturers in Malaysia mostly use plywood, tropical wood, and rubber wood to produce wood frames for their furniture. These are all raw materials that are abundant in Malaysia. There is an abundant supply of rubber wood in Malaysia with the MTIB developing plans to plant more than 25,000 hectares of rubber forests plantations annually. Together with existing plantations of 1.7 million hectares of rubber plantations and the ones in the pipeline, the country is well placed in terms of raw material supply for future furniture industry demands. 7.3.9 Labour Situation in the Upholstered Home Furniture Industry According to the Third Industrial Master Plan (IMP3), in 2005, the Malaysian wood products and furniture industry employed a total of 373,800 workers. The total number of workers is expected to grow at an average annual growth rate of approximately 1.7% to become 405,800 in 2010. Presently, the furniture industry in Malaysia is very labor-intensive. Shortages of labor are common mainly due to the local perception of the industry as a dangerous, dirty, and unskilled industry. It is estimated that about 60% of factory floor workers employed by most manufacturers are from developing countries such as Nepal, Vietnam, and Bangladesh. This situation is further exacerbated in the upholstered home furniture industry, where handmade furniture is usually associated with high quality and premium price. The amount of non-mechanical processes used to manufacture upholstered home furniture is usually one of the determinants of the pricing premium that can be commanded in the market. This situation is similar to the events that are and have been occurring in Europe, especially in Italy, also called the sofa capital of the world. Most Italian upholstered furniture manufacturers such as Natuzzi and Poltrona Frau have moved their high volume, low to medium end manufacturing to countries such as China and Vietnam to capitalize on the abundant low-cost skilled labor available there. High-end upholstered furniture production, which is just as labor intensive, is still maintained in Italy, mainly due to the very high premium these manufacturers are able to command having a sofa manufactured in Italy, which only the rich can now afford. 7. INDUSTRY OVERVIEW AND OUTLOOK Several global upholstered furniture manufacturers such as Natuzzi and Poltrona Frau have been successfully listed on their respective bourses (New York Stock Exchange and Milan Stock Exchange) despite the labor-intensive nature of the upholstered furniture industry. The inherent nature of upholstered home furniture manufacturing, with the required need of an operator to conduct manual sewing and stitching, the assembly of springs and sponges, makes it almost impossible to automate. There is currently no substitute machine or equipment for the human eye and hand that can handle the complex intricacies that is required in the upholstered home furniture manufacturing process. 7.3.10 Reliance and Vulnerability to Imports The upholstered furniture manufacturing industry in Malaysia is mainly for exports and therefore is not vulnerable in anyway to any foreign imports. 7.3.11 Product Substitution There are currently no direct substitutes for upholstered home furniture. Upholstered home furniture operates in a separate market from pure wood furniture. Although wood furniture can be considered an indirect substitute for upholstered furniture, usually this is not the case. Upholstered furniture has high value add and is usually categorized as more upscale and trendy compared to wood furniture, and typically command premium pricing. 7.3.12 Relevant Laws, Regulations and Incentives There are currently no relevant laws and regulations in Malaysia governing the upholstered furniture manufacturing industry. However, the Malaysian Government in its efforts to stimulate and promote the growth of the manufacturing sector has put in place various incentives which are particularly pertinent to the furniture industry including:­(i) Pioneer Status A company granted Pioneer Status enjoys a five (5)-year partial exemption from the payment of income tax. It pays tax on 30% of its statutory income, with the exemption period commencing from its Production Day (defmed as the day its production level reaches 30% of its capacity). Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company. (ii) Investment Tax Allowance As an alternative to Pioneer Status, a company may apply for Investment Tax Allowance (ITA). A company granted ITA is entitled to an allowance of 60% on its qualifying capital expenditure (such as factory, plant, machinery or other equipment used for the approved project) incurred within five (5) years from the date on which the first qualifying capital expenditure is incurred. The company can offset this allowance against 70% of its statutory income for each year of assessment. Any unutilized allowance can be carried forward to subsequent years until fully utilized. The remaining 30% of its statutory income will be taxed at the prevailing company tax rate. 7. INDUSTRY OVERVIEW AND OUTLOOK (iii) Reinvestment Allowance A manufacturing company that has been in operation for at least 12 months and incurs qualifying capital expenditure to expand, modernize or automate its existing business or diversify its existing business into any related products within the same industry can apply for Reinvestment Allowance (RA). The RA is given at the rate of 60% on the qualifying capital expenditure incurred by the company, and can be offset against 70% of its statutory income for the year of assessment. Any unutilized allowance can be carried forward to subsequent years until fully utilized. (iv) Tax Exemption on the Value oflncreased Exports To promote exports, manufacturing companies in Malaysia qualify for: A tax exemption on the statutory income equivalent to 10% of the value of increased exports, provided that the goods exported attain at least 30% value-added; or A tax exemption on the statutory income equivalent to 15% of the value of increased exports provided that the goods exported attain at least 50% value-added. To further encourage the export of Malaysian goods, a locally-owned manufacturing company with Malaysian equity of at least 60% is eligible for: A tax exemption on the statutory income equivalent to 30% of the value of increased exports, provided the company achieves a significant increase in exports; A tax exemption on the statutory income equivalent to 50% of the value of increased exports, provided the company succeeds in penetrating new markets; or A full tax exemption on the value of increased exports provided the company achieves the highest increase in export in its category. (v) Brand Promotion Grant The objective of the Brand Promotion Grant (BPG) is to develop and promote in the international market, brand names owned by Malaysian companies for products and services originating from Malaysia. Companies can apply for either one of the following forms of grant:­Small Medium Enterprises (SMEs): 100% reimbursable grant of up to a maximum ofRMI million per company per brand. A combination of 100% and 50% reimbursable grants. (Maximum grant ofRM 2 million per company per brand) Non SMEs: 50% reimbursable grant of up to a maximum ofRM2 million per company per brand. For the 100% reimbursable grant (SME):­Manufacturing companies -annual sales turnover must not exceed RM25 million or with not more than 150 full time employees. Services sectors enterprises -annual sales turnover not exceeding RM5 million or with full time employees not exceeding 50. To encourage companies to promote the brand overseas, not more than 10% of the total grant approved should be spent on branding activities of the brand in the domestic market. 96 7. INDUSTRY OVERVIEW AND OUTLOOK 7.3.13 Environmental Issues and Concerns The upholstered furniture manufacturing industry does not have any major environmental issues or concerns. 7.4 INDUSTRY OUTLOOK The EU27 upholstered furniture market was valued at USD33.5 billion (RMI17.3 billion) in 2008. It is a mature market expected to grow at a compound annual growth rate (CAGR) of 4.3 percent in the forecast period of2009 to 2013. A CAGR of 4.3 percent might seem low at fIrst glance; however, a 4.3 percent growth in a USD32.8 billion (RMl14.8 billion) market represents a fairly large quantum, where the approximate annual growth is USD1.4 billion (RM4.9 billion). Forecast Revenue Growth/or the EU27 Upholstered Furniture Market, (2009-2013) Year  Revenues (USD billion)  Revenue Growth Rate (%)  2009  32.8  (2.12)  2010  33.8  3.05  2011  35.2  4.14  2012  36.9  4.83  2013  38.8  5.15
Notes:­Compound Annual Growth Rate (2009 -2013): 4.3% Allfigures are rounded; the base year is 2008. Eastern European countries are expected to provide the bulk of the growth expected from the EU27 upholstered furniture market. Although these countries represent only less than 10 percent of the total EU27 market, there is a high degree of opportunity for growth in this part of the EU27. It should be noted that although these countries are strong from a manufacturing point of view, much of their output are exported. This is mainly because it is much more profItable to export to western European countries that provide better margins, while importing low-to medium-end products from other developing countries for domestic use. [ The rest ofthis page is intentionally left blankJ 7. INDUSTRY OVERVIEW AND OUTLOOK
Australia The Australian wood and upholstered furniture market was valued at USD2.5 billion (RM8.8 billion) in 2008. Similar to the EU27 upholstered furniture market, it is a mature market and is expected to grow at a CAGR of2.6 percent in the forecast period 00009 to 2013. Forecast Revenue Growth/or the Australian Wood and Upholstered Furniture Market, (2009-2013) Year  Revenues (USn billion)  Revenue Growth Rate (%)  2009  2.49  (1.19)  2010  2.53  1.61  2011  2.59  2.37  2012  2.67  3.09  2013  2.76  3.37
Notes:­Compound Annual Growth Rate (2009 -2013): 2.6% Allfigures are rounded; the base year is 2008. As a mature market, the Australian wood and upholstered furniture market is not expected to experience very high growth. Any increase in purchases of furniture will mostly depend on the consumers’ perception of how well the economy is doing and the amount of disposable income they possess. As mentioned above, furniture is a durable good and its purchase is easily differed if there is any change in the country’s economy. Revenue growth is expected to come mostly from replacements of furniture that have reached their end of life (EOL). The rate of replacement of wood and upholstered furniture will largely determine the growth ofthe market for the short to medium term. [The rest ofthis page is intentionally left blank] 8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL 8.1 PROMOTERS AND SUBSTANTIAL SHAREHOLDERS The profiles of our Promoters and substantial shareholders, all of whom are Malaysians, and their respective shareholdings in our Company before and after the IPO are set out below. 8.1.1 Shareholdings <————Before IPO ————> <————After IPO ————> <—–Direct —–> <–Indirect –> <—–Direct —–> <–Indirect –> No. of No. of No. of No. of Shares Shares Shares Shares Name Designation held % held % held % held % Managing Chua Fen Fatt Director 89,349,800 46.78 189,349,800 46.78 71,839,800 35.92 171,839,800 35.92 Executive Tee Hwee lng Director 89,349,800 46.78 189,349,800 46.78 71,839,800 35.92 171,839,800 35.92 Assistant Purchasing Chua Fen Lee* Manager 6,150,200 3.22 6,150,200 3.08
Notes:­1 Deemed interested by virtue ofhis/her spouse’s substantial interest in Homeritz. * Chua Fen Lee is regarded as one ofour Promoters but is not a substantial shareholder ofthe Company. 8.1.2 Profiles (a) Chua Fen Fatt, a Malaysian aged 39 years, is our Managing Director. He was appointed to our Board on 2 November 2009. He is one of the founders of HUI in 1997 and since then, he has been the driving force in our Group and has been instrumental in the success, growth and development of our Group. He has had more than 22 years of hands-on experience in the furniture industry particularly in the upholstered home furniture. Throughout his working career, he has worked in different levels and capacities and involved in various aspects of the industry, from being a production operator to sample maker and product designer. Prior to setting up of HUI, he was also involved in the sub-contracting of upholstered home furniture activities and started his own manufacturing business, Home Sofa Industries, in 1996. Over the years, he has accumulated various technical know-how and expertise in the art of manufacturing and designing upholstered home furniture. As the Managing Director, he provides the Group with its corporate vision and business strategies and is primarily responsible for the overall business, strategic planning, design and development, and the entire operations of our Group. 8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL (b)  Tee Hwee lng, a Malaysian aged 38 years, is our Executive Director. She was appointed to our Board on 2 November 2009. She is the co-founder ofHUI together with Mr Chua Fen Fatt in 1997. Prior to joining the Group, she worked with UOB Card Centre (Singapore) and Avenue Securities Sdn Bhd in 1990 and 1992 respectively. She has over 12 years of working experience in the upholstered home furniture industry. As the Executive Director, she is primarily responsible for the overall corporate and administrative functions of the Group.  (c)  Chua Fen Lee, a Malaysian aged 27 years, is our Assistant Purchasing Manager. She joined HUI in 2006 upon her graduation from Universiti Kebangsaan Malaysia with a Bachelor’s degree in Science with Honors in Food Science and Nutrition. She is primarily responsible for the procurement related activities of the Group which include material evaluation, price evaluation and supplier evaluation.  8.1.3  Changes in Shareholdings  Save for the following, there has been no change in the direct shareholdings of our Promoters and substantial shareholders since our incorporation.  Name  As at 6 February 2008 (Incorporation) No. of ordinary shares of RMl.OO each held %  After first sub-division No. of ordinary shares of RMO.50 each held 0/0  After Acquisitions No. of ordinary shares of RMO.50 each held  0/0  After Subdivision and Share Consolidation No. of ordinary shares of RMO.20 each held 0/0  After Rights Issue No. of ordinary shares of RMO.20 each held  0/0  After IPQ No. of ordinary shares of RMO.20 each held  0/0  Chua Fen Fatt  -33,849,519  46.78  84,623,798  46.78  89,349,800  46.78  71,839,800  35.92  Tee Hwee Ing  -33,849,519  46.78  84,623,797  46.78  89,349,800  46.78  71,839,800  35.92  Chua Fen Lee  2,329,958  3.22  5,824,895  3.22  6,150,200  3.22  6,150,200  3.08  8.1.4  Persons Exercising Control over the Corporation  Save for our Promoters, namely, Chua Fen Fatt, Tee Hwee Ing and Chua Fen Lee, who will collectively hold a total of approximately 74.9% of our enlarged issued and paid-up share capital upon our Listing, as disclosed in Section 8.1.1 of this Prospectus, we are not aware of any other person who are able to, directly or indirectly, jointly or severally, exercise control over our Company.  [ The rest ofthis page is intentionally left blank]
8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL 8.2 DIRECTORS The profiles of our Directors, all of whom are Malaysians, and their respective shareholdings in our Company before and after the IPO are set out below:­8.2.1  Shareholdings  Name  Designation  % No. of % Shares held <——Before IPO ——-> <—-Direct —–> < —Indirect—-> No. of Shares held  No. of Shares held % <——–After IPO ——> <-Direct —–> < —-Indirect—–> No. of Shares held  Chua Fen Fatt  Managing Director  89,349,800  46.78  189,349,800  46.78  71,839,800  35.92  171,839,800  35.92  Tee Hwee Ing  Executive Director  89,349,800  46.78  189,349,800  46.78  71,839,800  35.92  171,839,800  35.92  Mohd Khasan Bin Ahmad  Independent Non­Executive Director  A20,OOO  *  Shamsudin@ Samad Bin Kassim  Independent Non­Executive Director  A20,OOO  *  Tay Puay Chuan  Independent Non­Executive Director  A20,OOO  *
Notes:­1 Deemed interested by virtue ofhis/her spouse’s substantial interest in Homeritz. A Including his/her entitlements under the Pink Form Allocation. * Negligible. 8.2.2 Profiles The profiles of Chua Fen Fatt and Tee Hwee Ing are set out in Section 8.1.2 of this Prospectus. (a) Mohd Khasan Bin Ahmad, a Malaysian aged 48 years, is the Independent Non-Executive Director. He was appointed to our Board on 2 November 2009. Mohd Khasan obtained a diploma in Accountancy and later graduated with a degree in Accountancy from Universiti Teknologi Mara. He is a member of the Malaysian Institute of Accountants (MIA). He served Bank Negara Malaysia for a period of about 7 years from 1986, the last 2 years of which he was seconded to the Capital Issues Committee (CIC) as its Principal Assistant Secretary. Subsequently, he joined the Securities Commission in 1993 for a period of about 5 years and his last capacity was an Assistant Manager in its Issues and Investment Division. During the tenure of his above appointments, he was involved in reviewing various corporate exercises, ranging from initial public offerings, mergers and acquisitions, reverse take-overs, issuance of bonds and other capital raising exercises. 8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL He left the Securities Commission and joined the private sector in 1997. Currently, he sits on the Boards of Ta Win Holdings Berhad, Crest Builder Holdings Berhad, Wellcall Holdings Berhad, Farm’s Best Berhad and Ralco Corporation Berhad as the Independent Director. He also sits on the Board of several other private limited companies. (b) Shamsudin @ Samad Bin Kassim, a Malaysian aged 63 years, is the Independent Non­Executive Director. He was appointed to our Board on 2 November 2009. He holds a Bachelor of Economics from Universiti Malaya and a Master in Public and International Affairs (MPIA) from the University of Pittsburgh. He started his career in the Malaysian government service as an Assistant Secretary in the Ministry of Works in 1970. He was subsequently posted to various ministries and agencies in the civil service. In 1985, he was appointed as Senior Assistant Secretary of Industry Division in the Ministry of International Trade and Industry (MITI). He was Malaysia’s Trade Commissioner to Vienna, Austria from 1989 to 1996. From 1996 to 1999, he was the Director ofIndustries Division in MIT!. In early 2000, he was appointed as the Chief Executive Officer of Small and Medium Industries Development Corporation (SMIDEC) and served until his retirement from the public service.
He also sits on the Boards of Perwaja Holdings Berhad, Century Logistics Holdings Berhad, Supermax Corporation Berhad, Kinsteel Berhad, Ingress Corporation Berhad (Chairman), Multi-Code Electronics Industries (M) Berhad, Impressive Edge Group Berhad (Chairman), Winsun Technologies Berhad, BHS Industries Berhad and several other private limited companies in Malaysia.
(c) Tay Puay Chuan, Malaysian aged 45 years, is the Independent Non-Executive Director. He was appointed to our Board on 2 November 2009. He started his career with the Polis Di Raja Malaysia, Bukit Aman in 1987 and later left the police force as a Police Inspector in 1992. He joined Fajar Sawmill Sdn Bhd as a Factory Manager from 1992 to 1997. In 1997, he obtained a Bachelor of Law (Honours) degree from University of London, United Kingdom. He was called to the Bar and admitted as an advocate and solicitor in 1998. He was the partner in Fazilah, Ong Chee Seong & Associates from 1998 to 2003 until he set up his own legal practice, Tay Puay Chuan & Co in Muar, lohor in 2003.

Currently, he is the Independent Non-Executive Director of Sern Kou Resources Berhad and Guan Chong Berhad. 8.2.3 Directors’ Remuneration The aggregate remuneration (including any benefits in-kind) paid and proposed to be paid to our Directors for services rendered for FYE 2009 and FYE 2010 is RM394,240 and approximately RM945,000 respectively. The range of aggregate remuneration for FYE 2009 and FYE 2010 are as follows:­FYE 2009 FYE 2010 Name Remuneration Band Remuneration Band Chua Fen Fatt RM150,001 to RM200,000 RM400,001 to RM450,000 Tee Hwee Ing RM150,001 to RM200,000 RM400,001 to RM450,000 Mohd Khasan Bin Ahmad RMO to RM50,000 Shamsudin @ Samad Bin Kassim RMO to RM50,000 Tay Puay Chuan RMO to RM50,000 8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL Remuneration, which includes salaries, bonuses, fees, allowances and other benefits in-kinds, must be considered and recommended by the Remuneration Committees and subsequently, be approved by our Board. Our Directors’ fees must be further approved and endorsed by our shareholders at a general meeting. 8.2.4 Board PracticeslDirectors’ Terms of office According to our Articles of Association, all the Directors shall retire from office at the fust annual general meeting and one-third (or the number nearest to one-third) of our Directors are required to retire from office at each annual general meeting. Accordingly, all our Directors are required to retire from office at least once in every three (3) years. However, a retiring Director is eligible for re-election at the meeting at which he retires. An election of Directors shall take place each year. Any person appointed as Director, either to fill a casual vacancy or as an addition to the existing Directors shall hold office only until the next annual general meeting, and shall then be eligible for re­election but shall not be taken into account in determining the Directors who are to retire by rotation at that meeting. In connection thereto, Chua Fen Fatt, Tee Hwee lng, Shamsudin @ Samad Bin Kassim, Mohd Khasan Bin Ahmad and Tay Puay Chuan shall retire from office at the first annual general meeting and shall then be eligible for re-election. All our Directors were only appointed to the Board on 2 November 2009 and have served for less than one year as at the date of this Prospectus. 8.3 RELEVANT COMMITTEES 8.3.1 Audit Committee The main functions of the Audit Committee include the following:­(a) to review with the auditors the nature and scope of the audit plans, their audit reports, major findings and their evaluations of our accounting system and internal controls;
(b) to review our quarterly and annual financial statements before submission to our Board, focusing in particular on any change in or implementation of major accounting policies and practices, significant and unusual events, significant adjustments arising from the audit, the going concern assumption and compliance with accounting standards and other regulatory or legal requirements;
(c) to consider the appointment and reappointment of the external auditors and matters relating to their resignation;
(d) to review any related party transactions entered into by our Group and any conflict of interest situations that may arise within our Group;
(e) to review the assistance given by us or our employees to the auditors; and
(f) to perform such other functions as may be requested by our Board.

8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL The members ofthe Audit Committee are as follows:­Name Designation Directorship Mohd Khasan Bin Ahmad Chairman Independent Non-Executive Director Shamsudin @ Samad Bin Kassim Member Independent Non-Executive Director Tay Puay Chuan Member Independent Non-Executive Director 8.3.2 Remuneration Committee The main functions ofthe Remuneration Committee include the following:­(a) providing assistance to our Board in determining the remuneration of Directors and certain senior management personnel;
(b) providing assistance to our Board in discharging responsibilities relating to, amongst others, compensation strategy, succession planning, management development and other compensation arrangements; and
(c) ensuring corporate accountability and governance in respect of our Board remuneration and compensation functions.

The members ofthe Remuneration Committee are as follows:­Name Designation Directorship Shamsudin @ Samad Bin Kassim Chairman Independent Non-Executive Director Mohd Khasan Bin Ahmad Member Independent Non-Executive Director Tay Puay Chuan Member Independent Non-Executive Director 8.3.3 Nomination Committee The main functions of the Nomination Committee include the following:­(a) identifying and recommending to our Board, candidates for directorships of our Company and Directors as members ofthe relevant Board committees;
(b) evaluating the effectiveness of our Board and the relevant Board committees; and
(c) ensuring an appropriate framework and succession planning for our Board. The members ofthe Nomination Committee are as follows:­

Name Designation Directorship Tay Puay Chuan Chairman Independent Non-Executive Director Mohd Khasan Bin Ahmad Member Independent Non-Executive Director Shamsudin @ Samad Bin Kassim Member Independent Non-Executive Director 8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL 8.4 KEY MANAGEMENT PERSONNEL The profiles of our key management personnel, all of whom are Malaysian except for Tan Yang Song who is a Singaporean, and their respective shareholdings in our Company before and after the IPO are set out below. 8.4.1 Shareholdings < After IPO A><——Before IPO ———> Name  Designation  <—–Direct —-> No. of Shares held %  < Indirect> No. of Shares held %  <–Direct -­> No. of Shares held %  < Indirect> No. of Shares held %  Chua Fen Fatt  Managing Director  89,349,800  46.78  189,349,800  46.78  71,839,800  35.92  171,839,800  35.92  Tee Hwee Ing  Executive Director  89,349,800  46.78  189,349,800  46.78  71,839,800  35.92  171,839,800  35.92  Pua Yu Heng  Marketing Manager  6,150,200  3.22  – 6,168,200 2  3.08  Wee See Vee  Group Accountant  10,000 2  *  Tan Yang Song  Chief Designer  14,000 2  *  Chua Fen Lee  Assistant Purchasing Manager  6,150,200  3.22  6,150,200  3.08  Wong Seah Wei  Administration and Human Resources Manager  10,000 2  *  Sia Chee Shong  Quality Assurance Manager  12,000 2  *
Notes:­1 Deemed interested by virtue ofhis/her spouse’s substantial interest in Homeritz. 2 Including his/her entitlements under the Pink Form Allocation. * Negligible. 8.4.2 Profile (a) Pua Yu Heng, a Malaysian aged 32 years, is our Marketing Manager. He is responsible for sales and marketing strategies as well as the business development of the Group. He graduated with a Bachelor’s degree in Science (Human Development) from Universiti Putra Malaysia in 2001. He worked as the Marketing Executive with Poh Huat Furniture Industries Sdn Bhd, a subsidiary of main market listed furniture manufacturer Poh Huat Resources Holdings Berhad, for a period of about 3 years prior to joining HUI in 2005. 8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL (b) Wee See Yee, a Malaysian aged 31 years, is our Group Accountant. Ms. Wee has 6 years of experience in the audit and accounting field. Ms. Wee graduated with a Bachelor of Accountancy (Honours) from University Putra Malaysia in 2002 and was named to the Dean’s List. She was previously the Audit Senior in Messrs. SC Lim, Ng & Co. for 3 years, responsible for vast areas of the auditing process including planning and supervision of audits, evaluation of internal controls, preparation and review of profit/cash flow forecast, and review of interim fmancial information. Her audit experience includes a wide range of sectors/industries such as trading, manufacturing, construction, services and property development. She left the firm in 2006 and worked as the Assistant Accountant Edaran Precision Industries Sdn Bhd, a subsidiary of LNG Resources Berhad, prior to joining our Group in 2008. Ms Wee, who is also a member of the Malaysian Institute of Accountants, is currently responsible for the financial and accounting functions of the Group.
(c) Tan Yang Song, a Singaporean aged 48 years, is our Chief Designer. With over 20 years of experience in the industry he has accumulated much experience and knowledge. Prior to joining HUT in 2006, he was involved in various design and development capacities in several Malaysian and Singaporean furniture companies. As the Chief Designer, he is assisting our Managing Director in overseeing the entire spectrum of our R&D with primary roles of designing and introducing new models and designs on a regular basis.
(d) Wong Seah Wei, a Malaysian aged 36 years, is currently our Administration and Human Resources Manager. Ms. Wong is responsible for the office administration and human resource management of the Group. She has a background of more than 15 years of working experience in human resources and administrative related positions. Having graduated from Stamford Ladies College with a professional certificate in secretarial studies in 1992, she began her career with Sin Foong Hin Tayar & Bateri Sdn Bhd where she worked for more than 10 years with her last position as the Senior Executive. Subsequently, in 2004, she joined Funika (M) Sdn Bhd as the Senior Executive before she left in 2006. Prior to joining us in 2008, she was the Assistant Administrative Manager in the Human Resources Department in Bo Fung Industries (M) Sdn Bhd for almost 2 years.
(e) Sia Chee Shong, a Malaysian aged 27 years, is currently our Quality Assurance Manager. Mr Sia has been with the Group for over 10 years since 1997 and initially started off as a Production Operator. Over the years, he had worked in various positions in the production and quality assurance departments prior to be being promoted to his present post. His primary roles include maintaining and improving quality control procedures for our manufacturing processes.

The profiles of Chua Fen Fatt, Tee Hwee Ing and Chua Fen Lee are set out in Sections 8.1.2 of this Prospectus. [ The rest ofthis page is intentionally left blank1 8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL 8.5 PRINCIPAL ACTIVITIES PERFORMED OUTSIDE THE GROUP Save as disclosed below, none of our Directors has any directorship and/or principal activities performed outside our Group at present and in the past five (5) years up to the Latest Practicable Date. Name  Company  Principal activities  Date appointed/ (resigned)  Designation  Chua Fen Fatt  Veromca  Dormant. Please refer to Section lO.3.3 of this Prospectus  1 August 2005  Director  Tee Hwee Ing  Veromca  Dormant. Please refer to Section 10.3.3 ofthis Prospectus  29 March 2004  Director  Shamsudin@ Samad Bin Kassim  Century Logistics Holdings Berhad  Provision of integrated logistics activities  1 November 2001  Independent Non-Executive Director  Ingress Corporation Berhad  Manufacturing of automotive components  2 November 2001  Chairman and Independent Non-Executive Director  Supermax Corporation Berhad  Manufacturing and sale oflatex gloves  18 July 2002  Independent Non-Executive Director  Kinsteel Berhad  Manufacturing and trading of iron and steel related products  12 August 2002  Independent Non-Executive Director  Impressive Edge Group Berhad  Manufacturing of engineering spare parts, mould parts and related products  10 September 2004  Chairman and Independent Non-Executive Director  H-Displays (MSC) Berhad  Manufacturing and marketing of Liquid Crystal Display (LCD) panels  3 November 2006/ (5 January 2010)  Independent Non-Executive Director  BHS Industries Berhad  Commercial printing and publishing of educational books  7 August 2007  Independent Non-Executive Director
8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL Name  Company  Principal activities  Winsun Technologies Berhad  Provision and design of industrial automation systems  Perwaja Holdings Berhad  Manufacturing and trading of primary steel products  Multi-Code Electronics Industries (M) Berhad  Manufacturing of electronics parts and accessories for the automotive industries  Maxbiz Corporation Berhad  Commercial dyeing and knitting fabrics  Seal Polymer Industries Berhad  Manufacturing and sale of latex gloves  Boon Koon Group Berhad  Manufacturing and trading of rebuilt and reconditioned commercial vehicles  Fjarrow (M) Sdn Bhd  Trading services
Scenic Fareast Sdn Property Bhd development Pro-TEST Provision of Consultancy Sdn Bhd education services Eing Yen Language Provision of Centre Sdn Bhd education services Mohd Khasan Bin Ta Win Holdings Manufacturing of Ahmad Berhad copper wire Date appointed/ (resigned)  Designation  12 November 2007  Independent Non-Executive Director  25 June 2008  Independent Non-Executive Director  26 February 2009  Independent Non-Executive Director  21 February 2005 (26 June 2007)  Independent Non-Executive Chairman  13 May 2005 (28 August 2007)  Independent Non-Executive Director  7 January 2004 (19 February 2009)  Chairman (Non-Independent Non-Executive Director)  30 July 2002  Director  13 December 2005  Director  16 June 2003  Director  11 August 2003  Director  20 February 2002  Independent Non-Executive Director
8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL Name Company Crest Builder Holdings Berhad WeIlcalI Holdings Berhad MOL Accessportal Berhad Farm’s Best Berhad Ralco Corporation Berhad Always Wealthy Sdn Bhd Arah Sistematik (M) Sdn Bhd Eurofine (M) Sdn Bhd System Protection & Maintenance Sdn Bhd Tay Puay Chuan Sern Kou Resources Berhad Guan Chong Berhad Principal activities Construction and property development Manufacturing of industrial hoses Internet media and e-commerce Processing, marketing and distribution of poultry products and related activities Manufacturing of plastic products Provision of security services Manufacturing of fibre optic cables Production of media content and broadcasting Engineering and construction in power, oil and gas industry Manufacturing and distribution ofrubberwood and metal furniture Manufacturing and trading of cocoa-derived food ingredients Date appointed/ (resigned)  Designation  25 February 2003  Independent Non-Executive Director  17 April 2006  Independent Non-Executive Director  10 September 2004 (6 November 2008) 10 January 2002  Independent Non-Executive Director Independent Non-Executive Director  19 September 2007  Independent Non-Executive Director  8 August 2006  Executive Director  24 January 2008  Director  9 April 20081 (31 August 2009)  Director  16 June 2008  Director  18 December 2003  Independent Non-Executive Director  8 January 2005  Independent Non-Executive Director
8. INFORMATION ON PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL 8.6 INVOLVEMENT OF EXECUTIVE DIRECTORS AND KEY MANAGEMENT PERSONNEL As at the Latest Practicable Date, all our Executive Directors and key management personnel are involved in our Group on a full time basis and are not involved in other businesses or corporations in an executive capacity. 8.7 RELATIONSHIPS OR ASSOCIATIONS Save as disclosed below, there is no relationship or association between our Promoters, substantial shareholders, Directors and key management personnel:­(a) Tee Hwee Ing is the spouse of Chua Fen Fatt.
(b) Chua Fen Lee is the sister of Chua Fen Fatt.
(c) Pua Yu Heng is the cousin of Chua Fen Fatt.

8.8 SERVICE AGREEMENTS There are no existing or proposed service agreements between the companies within our Group and our Directors or key management personnel. 8.9 DECLARATIONS FROM THE PROMOTERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL As at the Latest Practicable Date, none of our Promoters, Directors or key management personnel is or has been involved in any of the following events (whether in or outside Malaysia):­(a) a petition under any bankruptcy or insolvency law filed (and not struck out) against such person or any partnership in which he was a partner or any corporation of which he was a director or key personnel;
(b) disqualified from acting as a director of any corporation, or from taking part directly or indirectly in the management of any corporation;
(c) charged and/or convicted in a criminal proceeding or is a named subject of a pending criminal proceeding;
(d) any judgment that was entered against such person involving a breach of any law or regulatory requirement that relates to the securities or futures industry; or
(e) the subject of any order, judgment or ruling of any court, government, or regulatory authority or body temporarily enjoining him from engaging in any type of business practice or activity.

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