Business Overview

History and Principal Activities History and Principal Activities IQGHB was incorporated in Malaysia under the Companies Act, 1965 on 13 December 2003 as a private limited company. The Company was subsequently converted to a public limited company on 20 August 2004 and it assumed its present name on the same date. The principal activity of IQGHB is an investment holding and provision of management services to its subsidiary companies. The principal activities ofthe subsidiary companies of IQGHB are as follows:­Name of Company  Principal Place of Business  Effective Equity Interest %  Principal Activities  IQM IQC IQE IQJ IQGL  Malaysia China UK Japan Taiwan  100.00 100.00 100.00 100.00 100.00  Design and manufacture of PIR sensor lighting, motion sensors, wireless video and RF products Manufacture of PIR sensor lighting and motion sensors Sales., marketing and distribution of PIR sensor lighting and motion sensors Sales, marketing and distribution of PIR sensor lighting and motion sensors Distribution ofPIR sensor lighting and motion sensors
The Group has a representative office in Taiwan which is primarily involved in sourcing and procurement of raw materials and undertaking R&D activities. As at the Latest Practicable Date, IQGHB does not have any associated company. Share Capital
The current authorised share capital of IQGHB is RM 150,000,000 comprising 150.000,000 Shares, of which 71,994,000 Shares have been issued and fully paid-up. The changes in the issued and paid-up share capital of IQGHB since its incorporation are as follows:­Date of Allotment  No. of Shares Allotted  Par V_lue RM  Consideration  Issued and Paid-up Share Capital RM  13.12.2003 04.04.2005  2 71,993,998  1.00 100  Subscribers’ shares Issued pursuant to the acquisition of 100% equity interest in IQM at an issue price of RM 1.00 per share  2 71,994,000
4.0 INFORMATION ON IQGHB GROUP (coIII’d) 4.3 Restructuring and Listing Scheme In conjunction with and as an integral part of the listing exercise of IQGHB on the Main Board of Bursa Securities, the Company undertook the following exercises which were approved by the MITI on 30 November 2004 and the SC on 27 January 2005:­(al IQM Acquisition IQGHB had on 4 April 2005 acquired the entire issued and paid-up share capital of IQM of RM25,500,OOO comprising 25,500,000 ordinary shares of RM 1.00 each for a total purchase consideration of RM7 1,993,998 satisfied by the issuance of 71,993,998 new Shares in IQGHB at the issue price of RMl.OO per Share. The purchase consideration of RM71,993,998 was arrived at based on the audited consolidated net assets value of IQM as at 31 March 2004 of RM71 ,993,803. The consolidated net assets value of IQM as at 31 March 2005 based on the audited financial statements of IQM for the financial year ended 31 March 2005 stood at RM76.63 million (excluding the proposed tax-exempt dividend of RM7,650,000 which was approved by the SC on 6 Iune 2005 and subsequently fully paid to the former shareholders of IQM on 23 Iune 2005, 24 June 2005, 17 August 2005 and 18 August 2005). The new IQGHB Shares issued pursuant to the IQM Acquisition rank pari passu in all respects with the existing IQGHB Shares. The 71,993,998 new shares of RM 1.00 each in rQGHB were issued to the vendors of IQM as follows:­No, of New IQGHB <-No, of IQM Shares Held-> <-Shares Issued -> No, ofOrdillary No, ofOrdillury Shares of Share.’ of Vendors of IQM RMI,OO eac/I % RMI,00 eacll % Kenneth Ian MacKay  735,000  2.88  2,075,121  2.88  Chang, Su-Chu  735,000  2.88  2,075,121  2.88  Sensorlite (M) Sdn Bhd  510,000  2.00  1,439,880  2.00  Graham Arthur Clancy  3,150,000  12.36  8,893,376  12.36  Sensorlite Limited  13,612,500  53.38  38,432,090  53.38  Framework Associates Limited  1,657,500  6.50  4,679,610  6.50  Yayasan lslam Terengganu  5,100,000  20.00  14,398,800  20.00  25,500,000  100.00  71,993,998  100.00
Subsequent to the IQM Acquisition which was based on the consolidated net assets of IQM Group as at 31 March 2004, IQGHB had acquired 100% equity interesls in lQC, IQE, IQI and IQGL from IQM based on the nominal cash consideration as follows:­(i) the entire capital of IQC amounting to RMB 11,909,60 I from 10M for a nominal cash consideration of RM 1.00. The acquisition was completed on 7 Iuly 2005;
(ii) the entire issued and fully paid-up share capital of rQE comprising 150,000 ordinary shares of £ 1.00 each tram 10M for a nominal cash consideration of RM 1.00. The acquisition was completed on 21 April 2005;

(iii) the entire issued and fully paid-Up share capital of rQJ comprising 600 ordinary shares of ¥50,OOO each from IQM for a nominal cash consideration of RM 1.00. The acquisition was completed on 5 April 2005: and (Iv) the entire issued and fully paid-Up share capital of IQGL comprising 1,000 ordinary shares of USDI.OO each from IQM for a nominal cash con5ideration of RM 1.00. The acquisition was completed on 5 April 2005. 36
4.0 INFORMATION ON IQGHB GROUP (con/’d) The nominal consideration of RM 1.00 for each of the aforesaid acquisition has been arrived at on the basis that the net assets value of the four (4) companies have been taken into consideration in arriving at the purchase consideration of IQM payable by IQGHB pursuant to the IQM Acquisition. (b) Public Issue and Offer for Sale In conjunction with its listing on the Main Board of Bursa Securities, IQGHB will undertake the Public Issue and the Offerors will concurrently undertake the Offer for Sale in the following
manner:­(i) 5,106,000 Public Issue Shares to be made available for application by the Malaysian citizens, companies, co-operatives, societies and institutions, and to the extent possible. 30% of the Public Issue Shares to be allocated for Bumiputera individuals, companies, societies and institutions; (ii) 7,900,000 Public Issue Shares to be reserved for eligible Directors, employees and persons who have contributed to the success of the IQGHB Group; and (iii) II,I01 ,200 Offer Shares to be reserved for Bumiputera investors approved by MITI. Upon completion of the IPO, the existing issued and paid-up share capital of IQGHB will be increased from RM71,994,000 comprising 71,994,000 Shares to RM85,000,000 comprising 85,000,000 Shares. The aggregate of 13,006,000 Public Issue Shares and 11,101,200 Offer Shares represent approximately 15.30% and 13.06% of the said enlarged issued and paid-up share capital after the IPO of RM85,000,000 comprising 85,000,000 Shares, respectively. (c) ESOS In conjunction with the IPO. the Company had on 9 September 2005 established the ESOS which entails the offering of ESOS Options involving up to 15% of the enlarged issued and paid-Up share capital of IQGHB for a duration of five (5) years forthe benefit of the eligible Directors and employees of IQGHB and its subsidiary companies (provided that the subsidiary companies are not donnant). The principal features of the ESOS are as follows:­(i) the number of ESOS Shares shall be subject to a maximum of 15% of the issued and paid-up share capital of IQGHB at any time during the existence of the ESOS;
(ii) Directors and eligible employees employed full time by IQGHB or any of its subsidiary companies (provided that the subsidiary companies are not donnant) shall be eligible to participate in the ESOS;

(iii) the ESOS shall be in force for a period of live (5) years trom its commencement on 9 September 2005; (iv) (a) where the ESOS Options are offered and granted before the Company is listed on Bursa Securities. the exercise price of the ESOS Options shall not be less than the IPO Price ofRMI.80 per Share. (b) where the ESOS Options are offered and granted on or after the Company is listed on Bursa Securities. the exercise price shall be determined at the discretion of the option committee appointed by the Directors of IQGHB based on the following:­(aa) the weighted average market price of the Shares for the five (5) market days immediately preceding the date of offer with an allowance for a discount at the option commineels discretion, of not more than 10% therefrom or such higher limit as may be pennined from time to time by Bursa Securities and any other relevant authorities; or 37
4.0 INFORMATION ON IQGHB GROUP (collt’d) (bb) such price as may be permilled from rime to time by Bursa Securities and any other relevant authorities as amended from time to time. The exercise price of the Oplions shall in no evenI be less than the par value oflhe Shares. (v) (a) not more than 50% (or such percenlage as allowable by the relevant authorities) of the ESOS Shares should be allocated, in aggregare, to directors and senior management of the IQGHB Group: and (b) not more than 10% (or such percentage as allowable by the relevant authorities) of the Shares available under the ESOS should be allocaled to any individual director or employee who, either singly or collectively through persons connected with the director or employee (as defined in the Listing Requirements), hold 20% or more in the issued and paid-up share capital of the Company. Concurrent with the Public Issue and Orfer for Sale, the Directors of the Company, via the option comminee, propose to offer and grant up to 1.058,000 Options to the eligible Directors and employees of the Group (“Initial Offer”). In addition to the Initial Offer, the Company may, within the duration of the ESOS. make further offers to grant Options to the eligible Directors and employees of the Group in accordance with the By-Laws constituting the ESOS, as set out in Section 14.0 of this Prospectus. subject to Seclion 4.3(c}(i} above. The Directors of IQGHB intend to utilise the proceeds to be received by the Company from the exercise of the ESOS Options for working capital purposes. The new ESOS Shares shall upon allotment, rank pari passu in all respecls with the existing issued and paid-up shares of Ihe Company except that the new Shares so allolled shall nOI be entitled 10 any dividend, righls. a)Jorment or olher distribution unless the Shares so allotted have been crediled into the relevanl securilies accounlS maintained by the Depository before the enlitlemenl date and will be subject to all the provisions of the Articles of Association of the Company relating to the transfer, transmission or otherwise of the Shares of the Company. Details oflhe By-Laws constiluling Ihe ESOS are set out in Section 14.0 of this Prospectus. (d) Listing and Quotation on Bursa Securities Approval in-principle from Bursa Securities was obtained on 25 May 2005 for admission to Ihc Official List of the Main Board of Bursa Securities and for permission to deal in and for Ihe listing of and quotation for the entire issued and paid-up shares of IQGHB of RM85,000,000 comprising 85,000,000 Shares. The IQGHB Shares shall be admined 10 Ihe Official List of the Main Board of Bursa Securities and official quotation will commence after receipl of confirmation from Ihe Depository Ihat all CDS accounts of the successful applicants have been duly crediled and nOlices of allotments have been despatched 10 all successful applicants. 4.4 Business Overview 4.4.1 Background lQGHB is principally an investment holding company and provides management services 10 its subsidiary companies. Please refer to Section 1.1 and 4.1 of this Prospectus for the principal activities of its subsidiary companies. Chen, Wen-Chin also known as Kent Chen is the founder of the IQGHB Group. He brings with him approximately twenty-five (25) years of experience in the sensor ligbting induslry. The hislory of IQGHB Group can be traced back to the incorporalion of IQM, previously known as Interquartz (M) Sdn Bhd in 1989, Ihe firsl manufacturing facility based in Penang focusing on design and manufacture of PIR sensor lighting and motion sensors. The company commenced operations in the same year. The company later changed its name 10 IQ Group Sdn Bhd on 16 March 1999. As part of IQM’s expansion plans to extend its distribution network to the European markets, IQE, based in UK was incorporated in 1993. IQE was established to focus on sales, marketing and distribution activities. The company commenced operations in September 1993. Using similar strategy, IQJ was established in 1998 to capitalise on opportunities in Japan and South East Asia. In 1998, IQM extended its presence to Taiwan, where the Group maintains a representative office. The Taiwanese representative office carries out some sourcing of components in Taiwan and undertakes R&D activities. In June 2000, rQM established IQC, its second manufacturing facility based in Dong Guan in China focusing on lhe manufacturing of PIR sensor lighting and motion sensors. In March 2000, IQGL was established to distribute products manufactured by IQe. The present business activities of IQGHB Group are summarised as follow:­Business Activities of lQGHB Group

I Distribution of General Lighting 4.4.2 IQGHB’s Group Structure The group structure and principal activities of the IQGHB Group are summarised in Section 1.1 of this Prospectus. The Group’s existing proposed corporate structure is as follows:­IQGHB

 

4.4.3 Principal Products The IQGHB Group’s product range includes the following:­(0 Sensor lighting and motion sensors PI R security lighting; P!R decorative outdoor lighting; and PlR motion sensors. (ii) Door chimes RF door chimes; and Electromechanical door chimes. (iii) Wireless Video Communication Products Wireless video door entry products (iv) Others General lighting; Floodlights; and Lighting fLxtures.

4.4.4 Patents, Licences, Brand Names and Copyright Protection (i) Patents Patent No.  Authority  Company  Type of Technology  Expiry Date  I. 2. 3. 4. 5. 6. 7.  US 6.653.635 lJS6.844,555 150096 01115634.1 02253625.4 04250060.3 93101348  United Statl.:s Patent and Trademark Office United States Patent and Trademark Otlice Ministry of Economic Affairs. BurC3U of Intellectual Property. Republic of China National Intellectual Property Right Bureau. China European Patent Office European Patent Otlice Mini,try of Economic Affairs, Bureau of Intellectual Properly. RepublIC of China  IQM IQM IQM IQM IQM IQM IQM  Detector with wide detecting range & method of e~[cnding the detecting range A covering and mounling structure for owtlon dctcclor having LEDs and electronic adjustment controls (tdescopic) Iktt:ctm with wide: detecting. range and method of extending the detecting. range Detector with \l,o’idc detecting range A (;()vcring ,md mounting means fur motion Jelectur. I.EDs and electronic adjustment controls (tel~scopic) Method ()f recording and playing CD quality sound signals for a doorbell system. and a receiver embodying such method (CD Quality Suund) Method of recording and playing CD quality sound signals for a doorbell system. and a receiver embodying such method (CD Qualit), Sound)  24.04.2021 10.062022 23.11.2020 27.04.2021 • • •
4.0 INFORMATION ON IQGHB GROUP (cont’d) Patent No.  Authority  Company  Type of Technology  Expiry Date  8.  10/745.971  United States Patent and Trademark OfTLcc  IQM  Method of recording and playing cn quality sound signals for a doorbell system. and a receIver embodying such method (CD Quality Sound).  •  9.  20041008117. o  National Intellectual Properly Right Bureau. China  IQM  Method of recording and playing CD quality sound signals for a doorbell system, and a receiver embodying such method (CD Quality Sound).  •  10.  10/769.029  United States Patent and Trademark Office  IQM  An alerting system communication (EncodcrJD~coder)  using a protocol  •  11.  04250568.5  European Patent Oflice  IQM  An alerting. 5Y5tcm communic(l.tion (Encoder/Decoder)  using a protocol  •  12.  01112597.8  European Patent Office  IQM  Detector range  with  \….ide  detecting  •  13.  2001-154884  Japan Patent Office  IQM  Detector range  \.,.ich  \vide  detecting  •  14.  10/623.820  United States Patent and Trademark Otlkc  lQM  Remote doorbell chime cx(cndcr  •  1S.  601503.626  Unild States Palent and Trademark unice  IQM  Point of S<.”tle display for doorbell ­provisional  16.  10/798.836  United States Patent and “‘radernark Office  IQM  Point of sale dispJay for doorbell ­utility  •  17.  10/664.424  United Siaies Patent and Trademark Oflkc  IQM  Remote doorbell transmitter  push  bunon  •  IK  29/190.563  United Smlcs Patent and Trademark Office  IQM  I,amp housing  19.  03394092.5  European Patent Office  lQM  Remote doorhell chime extender  20.  04394003.0  European Patcnt Office  IQM  Remote doorbell tmmmitter  push  bUllon  •  21.  04394050.1  European Patent Office  IQM  Point ofsale display for doorbell  •  22.  P20050660  Patent Regislnuion Office. Malaysia  IQM  A motion detector device with rotatable focuslng vit:w,::> llI1d a method of selecting a speciJi(: focusing vicw  •  23.  P20050665  Patt:nt Registnnion Office, Malaysia  IQM  An integral detector-lighting apparatus ,\lith multiple mounting orientations.
Note:­ •  Awaiting approvals from the relevant authorities.  41
(ii) Manufacturing Licence Authorityl Licence No.1 Serial No.1 Effective Date  Type of Licence  Equity Conditionsl Other Material Conditions Imposed  Status of Compliance  MITI A U056171 AOl91941 25.10.2000  Manufacturing licence for the manufacturing of passive infrared detectors. motiun sensor light controllers. infrasonic sensors, microwave detectors. RF transmitters! reCClvers, line carrier wireless systems for home automation. home securit)’ $ystems. photo electric smoke detectors.  Any sale of IQM shares is required to be notified [0 the MITl.  Met. The IQM Acquisition was approved by the MITI on 30.112004.
MITII  Manufacturing licence for the  Any sale of IQM shares  Mcl.  The  IQM  A 0056171  manufacturing  of  PCB  is. required to be notified  AcqUIsition  was  A0204771  assemblies.  tothc MIT!.  approved by the MITI  3U.04.2002  011 30.11.2004.
JQe Industrial and Commercial Administrative Management Bureau orDong (;uan Cityl 0059061 0367049/ 23.06.2000 Manufacturing and sales of Not applicahlc::.
Not applicable. electronic pruducts (indudc::s wireless sc::curity alarm system, passive infrared sensor. passive infrared Iighling. lighling controller). plastic products. hardw<tn:. rubhcr products. (iii) Brand Name Approximately 50% of lQGHB Group’s products, based on revenue, are manufactured under its own “IQ-group” brand name. (iv) Copyrigbts The IQGHB Group has also raken the necessary measures to prolect their copyrights in relation to a series of sound files in wave fonnat developed by the Groop which are used in the Group’s products such as Hi-Fi door chimes and video door entry products. TilE REST OFTIIIS PAGE IS INTENTIONALLY LEFT BLANK

 

4.4.5 Process Flow The process flow for the manufacturing operations for RF products, PIR motion sensors and plastic moulding are as follows:­(i) The generic process flow of the IQGHB Group’s manufacturing operations is depicted below:­

Nute:­• QC procedlJre.
Sel out below is the brief explanation in relation to the above process flow chan:­• Raw materials are purchased from various suppliers. Wherever possible, key components are dual sourced. For long lead time or customised components, approximately three (3) months buffer stock is maintained.
• Raw materials, components and sub assemblies are inspected upon delivery to the Group’s

manufacturing plants. Incoming QC takes various fonns including random, pre-determined sampling and 100% inspection. • The Group purchases, pre-kits and supplies surface mount devices. The surface mount components are then bonded and re-flow soldered to the PCBs at various sub contractors.
• Axial and radial components are automatically insened into the PCBs. Wherever possible, this process is carried out at the Group’s manufacturing plant in Penang, Malaysia.
• Components which cannot be loaded onto the PCBs automatically, for example wires, large relays, pyro sensors etc are then insened manually.
• The full printed board assembly is then wave soldered.
• Afier wave soldering, a certain amount of touch up is often required for example, to remove solder shorts, re-align components that are mounted too high and re-solder dry joints. The PCB assemblies are visually inspected and undergo ICT.
• The PCB assemblies along with various plastic pans, additional components, labels,

instruction manuals and packaging are pre-kitted on an order by order basis prior to final produci assembly. • Sub assembly is carried out as and when necessary prior to final product assembly.
• The relevant parts are then fully assembled to make the final products.

• Completed products undergo various tests and a final inspection prior to packing and shipping.
TilE REST OF TillS PAGE IS INTENTIONALLY LEFT BLANK

4.0 INFORMATION ON IQGHB GROUP (con/’d) (ii) Assembly Process Flow for RF Products The assembly process flow for RF products undenaken by IQM is depicted below:­Production Inspection·
Final Assembly
Pre-shipment Audit· Nole:­• QC procedure. 45 Incoming Quality Control· In-Circuit Testing” PCB Functional Test” Complete Product Functional Test·
Outgoing Quality Assurance”

4.0 INFORMATION ON IQGHB GROUP (conI ‘d) Set out below is the brief explanation in relation to the above assembly process flow for RF products:­• Raw materials are purchased from various suppliers. Wherever possible, key components are dual sourced. For long lead time or customised components, approximately 3 months buffer stock is maintained. • Raw marerials, components and sub assemblies are inspected upon deHvery to the Group’s manufacturing plants. Incoming QC takes various forms including random, pre-determined sampling and 100% inspection. • The Group purchases, pre-kits and supplies surface mount devices. The surface mount components are then bonded and re·flow soldered to the PCBs at various sub contractors.
• Axial and radial components are automatically insened into the PCBs. Wherever possible,

this process is carried out at the Group’s manufacturing plant in Penang, Malaysia. • Semiconductor chips are then mounted onto the PCBs (the COB Process). The Group generally sub contract the COB work. • A certain amount of prework is often required prior to the manual insertion of components. Typical manual insenion prework may include component lead trimming, lead bending and polyvinyl chloride (“PVC) insulator cuning. • Components which cannot be loaded onto the PCBs automatically, for example wires. large relays, pyro sensors etc are then inserted manually. • The fuJI printed board assembly is then wave soldered. • After wave soldering, a certain amount of touch up is often required for example. to remove solder shons, re-align components that are mounted too high and re-solder dry joints. The PCB assemblies are visually inspected and undergo ICT. • EEPROM programming is carried out as and when required. • The PCB assemblies along with various plastic parts, additional components, labels, instruction manuals and packaging are pre-kitted on an order by order basis prior to final product assembly. • Sub assembly is carried out as and when necessary prior to final product assembly. • The relevant pans are then fully assembled to make the final products. • Completed products undergo various tests and a final inspecrion prior to packing and shipping. TIlE RI’ST OFTIIIS PAGE IS INTENTIONAI.LY LEFT BLANK 4.0 INFORMATION ON lQGHB GROUP (cont’d) (iii) Assembly Process Flow for PIR Motion Sensors The assembly process flow for PIR motion sensors undertaken by IQM and IQC is depicted below:­
Incoming Quality Control’ Surface Mount Technology Auto Insertion (Axial & Radial)
Manual Insertion Pre-work Manual Insertion In-Circuit Testing’ Wave Soldering
Production Inspection· Complete Product Assembly Final Packing Pre Shipment Audit’ Shipping Note:­• QC procedure. PCB Functional Test’
In Process Quality Control’
PIR Sensor Head Functional Test’
Complete Product Functional Test* Out-going Quality Assurance· 4.0 INFORMATION ON IQGHB GROUP (com’d) Set oul below is the brief explanation in relation 10 lhe above assembly process flow for PIR motion sensor products:­• Raw materials are purchased from various suppliers. Wherever possible. key components are dual sourced. For long lead time or customised components, approximately 3 months butTer stock is maintained. • Raw materials, components and sub assemblies are inspecled upon delivery to the Group’s manufacturing plants. Incoming QC takes various fanTIs including random, pre-determined sampling and 1000/0 inspection. • The Group purchases, pre-kits and supplies surface mount devices. The surface mount components are then bonded and re-flow soldered to the PCBs at various sub contractors.
• Axial and radial components are automatically inserted into the PCBs. Wherever possible,

this process is carried out at the Group’s manufacturing plant in Penang, Malaysia. • A certain amount of prework is often required prior to the manual insertion of components. Typical manual insertion prework may include component lead trimming, lead bending and PVC insulator cutting. • Components which cannot be loaded onto the PCBs automatically. for example wires, large relays, pyro sensors etc are then inserted manually. • The full printed board assembly is then wave soldered.
• After wave soldering, a certain amount of touch up is often required for example, to remove solder shorts, fe-align components that arc mounted too high and re-solder dry joints. The PCB assemblies are visually inspected and undergo ICT.
• The PCB assemblies along with various plastic pans, additional components, labels,

instruction manuals and packaging are pre-kitted on an order by order basis prior to PIR sensor head and complete product assembly. • When the PIR sensor head has been loaded with the sensor PCB(s), various connectors. switches. controls and ceiling gaskets, a full functional test is carried OUL • The PIR sensor head and other relevant parts are then fully assembled to make the final product. Completed products may include standalone, waH. eave and ceiling mounted motion sensors, PI R controlled decorative, security and garden lighting. • Completed products undergo various tests and a final inspection prior to packing and shipping. I THE REST OF THIS PAGE IS INTENTIONALLYLEIT BI.ANK I

4.0 INFORMAnON ON IQGHB GROUP (cont’dj (iv) The Plastic Moulding Process Flow The plastic moulding process flow for PIR motion sensors undenaken by IQC is depicted below:­[ Raw Plastic Materials .l. Drying -r
Mould Preparation and Set-up .l.  In-Process VerifICation and Approval of Sample’  First Artide Approval J. Injection of Plastic Parts  -r
Ejection of Plastic Parts from Mould Cavity
.l.  QC Sampling Inspeclion”  Product Packing .l. Quality Confirmation  (  Marking of ‘Pass'”  I  –r
Storage Now:­• QC procedure. Set out below is the brief explanation in relation to the above plastic moulding process flow for PIR motion sensor products:­• Raw plastic materials are purchased. compounded where necessary and checked for colour and batch matching. • Various plastic materials in the form of pallets or granules are hygroscopic in nature and therefore need drying before injection. • Jigs, fixtures, packing materials (canons, polyethylene bags and nesting), operating instructions and reference samples are killed prior to the moulding machine parameters being set e.g. tool temperature. injection pressure, setting time etc. • Prior to mass production, a short run of plastic parts are injected and “First Article” approval is obtained from QA. QA personnel verify the quality of the first unit/anicle moulded. The plastic pans are typically inspected for dimensional accuracy, stability, tolerance, signs of stress cracking and visual defects etc. • Following approval of the first article, ongoing mass production of plastic parts is commenced. 49 • Plastic parts are ejected automatically and removed from the mould cavity. They are then inspected for various defects such as colour variation, surface blemishes i.e. moisture marks etc prior to the gating being removed along with any burrs or flash.
• A visual inspection of the plastic parts is then undertaken prior to packing.
• A sample ofthe parts is taken for reference and final QA before storage.

 

4.4.6 Principal Markels and Market Share The principal markets for the IQGHB Group’s products are mainly from overseas and approximately 0.2% of the total sales of the Group for the financial year ended 31 March 2005 are sold locally. As at 3\ March 2005, the IQGHB Group’s export market covered approximately fifty-one (51) overseas customers around fifteen (15) countries in three (3) regions. An analysis of the number of customers in the regions to which the Group exports based on the total sales of the Group for the financial year ended 31 March 2005 is as follows:­Number of 010 of Continents Customers Total Sales Europe 40 79.23 Asia Pacific 9 14.87 US 2 5.70 Total 51 99.80 The fifty·one (51) overseas customers consist of manufacturers, importers. distributors, wholesalers and retailers. In 2004, the estimated output value for the Manufacture of Sensor Lighting in Malaysia, based on production output is approximately RM95 million. In 2004, the market share of IQGHB Group for the Manufacture of Sensor Lighting in Malaysia based on output value is estimated at 76%. Based on the Group’s estimated output share of 76% for the Manufacture of Sensor Lighting in Malaysia in 2004, IQGHB Group is ranked first among manufacturers of Sensor Lighting operating in Malaysia. (Source: Summary Independenl Business and Markel Research Consultant…. ‘ Report updated 9 September 2005 prepared by Vital FaclOr Consulting Sdn Bhdfor the inclusian in thi.! Prospectus)
4.4.7 Sources and Availability of Raw Materials (i) Principal Raw Materials
The principal raw materials used in the manufacturing of P1R sensor lighting and motion sensors include amongst others, electronic components, hardware, plastic parts, packaging and lighting fixtures.
(ii) Availability of Raw Materials

The principal raw materials are sourced mostly from overseas suppliers (from China. Hong Kong, Japan. Taiwan, US and Singapore). As at the date of this Prospectus, the Group has not experienced any difficulties in sourcing for these raw materials as these principal raw materials are readily available in the market. However, raw material prices do fluctuate from time to time due to foreign exchange rate. further details on the major suppliers of raw materials for the IQGHB Group arc set out in Section 4.8 of this Prospectus.
4.48 QC IQGHS Group places significant emphasis on quality. Stringent QCs are implemented in each aspect of its operations and the Group adopts the following procedures to ensure that quality standards are maintained:­In-coming Taw materials and components are inspected to ensure confonnily with technical speclftcat[ons. Extensive product testing is undertaken to confirm that the products manufactured by the Group confonn to external quality, safety standards and other requirements. Quality checks are undertaken at each stage of the production process. A final quality check consisting of complete product sampling inspection ensures that finished goods Shipped to clients do not comain defects and conform to individual customer specifications. As part of the Group’s emphasis on quality, IQGHS Group’s products comply with the following quality and safety standards:­European Nonn (“EN”) Low Vohage Directive standards -Europe; EN Electromagnetic Compatibility standards -Europe; Underwriters Laboratories (“UL”) safety standards -US United States Federal Communication Council (“FCC”) standards; Japanese Standards (“JS”) -Japan.
IQM, a subsidiary of IQGHS, obtained ISO 9002 accreditation in 1998 and was upgraded to ISO 900 I In 2001. IQC, also a subsidiary of IQGHS, obtained ISO 900 J accreditation in 2002. The IQGHS Group has an experienced QC and assurance team that ensures product quality conforms to client needs and specifications, as well as external quality and safety standards and requirements. 4.4.9 R&[) 4.4.9. I Policies of R&D The IQGHB Group is committed to carrying out R&D in order to Create and sustain competitive advantages through the foJlowing:­continuously developing new technologies that can be applied to new and existing products; continuously developing new products to create areas of new growth and opportunity; continuously driving product quality improvements to ensure customer satisfaction; and enhancing production effectiveness, efficiency and productivity to optimise production costs. IQGHS Group’s R&D activities are closely linked to its marketing efforts. The Group’s R&D projects are carried out to fulfil the market opportunities identified by the Group’s marketing personnel, thereby reducing the uncertainty associated with the applicability of R&D. 4.4.9.2 R&D Facilities and Personnel Involved IQGHS Group has in-house R&D facilities located in Penang, Malaysia, Dong Guan, China and Taipei. Taiwan. In-house product testing facilities are also located in the Group’s two (2) manufacturing facilities in Penang, Malaysia and Dong Guan, China. The Group carries out product testing activities as part of its manufacturing processes, as well as for post­production QA purposes. IQGHB Group’s major manufacturing process testing activities include:­COB testing, utilising a COB test jig to test for the following:­(i) Die functionality; and

(ii) Wire bonding. ICT, utilising an ICT jig to confirm the following:­

(i)  Component pOlarity;  (ii)  Component value and tolerance;  (iii)  Whether or not the component is present or absent; and  (iv)  Whether or not the correct component is in place.
PCB functional testing, utilising a PCB functional test jig to test for the following:­(i) Centre frequency;
(ii) Electrical power strength; and

(iii) Low battery energy level. Final testing, utilising a final test jig to test for the following:­(i) Power strength;
(ii) Centre frequency;

(iii) Standby currenl; and (iv) Operating current. IQGHB Group also carries oul full QA lesling on a pre-determined number of randomly selecled packed finished goods. Major QA testing procedures include:· finallesting, utilising a final test jig to lest for Ihe following:­(i) Power slrenglh;
(ii) Centre frequency;

(iii) Standby current; and (iv) Operating current. IP testing, utilising an IP tesljig to test for the unit’s water protection for outdoor usc. Outdoor range testing, utilising a range test set·up to test for RF receiver range. Sound output level testing, utilising a sound level test set-up to test for output sound level. Ultraviolet (“UV”) testing, utilising a relative magnetic bearing (“‘QUV”) accelerated weathering tester to test for Ihe level of UV protection of plastic parts. Operaling temperature leSl, utilising a temperamre and humidity chamber to test for the unit’s functionalily within a specified operating temperature range. Packaging drop testing, utilising a drop tester, to test for the degree of packaging protection. As al the Latest Practicable Date, IQGHB Group has thirty-four (34) R&D engineers and technicians, seven (7) QA engineers and technicians, and twenty-nine (29) QA/QC inspectors. The types of testing equipment in use in IQC’s in-house R&D department are:­Type of Testing Equipment  Quantity  Constant Temperalure & Humidity Machine IP X 4 Rain Tester IP X 5 Rain Tester UL Rain Tester High Potential Test Machine Earth Resistance  I 2 2 1 3 I
4.0 INFORMATION ON IQGHB GROUP (colll’d) The following R&D and testing equipment in use by IQM’s in-house R&D department in Penang and

 

 

 

Taiwan are:­R&D and Test Equipment  Quantity  Computer Aided Design Workstations -ProiENGINEER Software Universal Programmer Mix Signal/Standard Oscilloscope Digital Sweep Function Generator Noise Figure Analyser Network Analyser Power Amplifier Data Acquisition/Switch UnitslData Logger Electromagnetic Compatibility Tester ICT Radio Communication Service Monitor Spectrum Analyser Signal Generator Fluke Multimeler RF Shield Room Thermal Chamber UL 1598 Rain Tester IP X3/4 Rain Tester IP X5 Rain Tester UV Weathering Tester UL J598 Impact Tester EN 60669 Impact Test Fixture Ul J598 Ceiling Mount Thermal Fixture Ul J598 Wall Mount Thermal Fixture Drop Tester Programmable AC Power Analyser E-field Meter Antenna Fast Transient Noise Simulator Hi-Pot and Insulation Tester  8 seats 2 14 I I 2 I 3 1 4 9 21 7 19 2 4 J J I I I J J J J 2 2 3 J 2
4.4.9.3 Present Status of R&D Relevant TechllOlogies PIR motion sensor technology and other technologies related to sensor lighting are currently the key technologies utilised by the IQGHB Group. The Group is also currently developing and deploying RF controllers and Hi-Fi door chimes, two (2) new technologies that will be among the key drivers of the Group’s growth in the future. Technologies relevant to the IQGHB Group include the following:­(a) PIR motion sensors;
(b) ASIC;
(c) Advanced optical devices;
(d) Light sensitive controllers;
(e) Dusk timers;
(I) RF controllers; and

(g) Hi-Fi sound generation. (aJ PIR Motion Sensor., A PIR motion sensor is a passive sensor that has the ability to detect the presence of an object emitting infrared radiation. Objects that generate heat, including animals and humans, also generate infrared radiation. Although infrared radiation is invisible to the human eye, it can be detected. The IQGHB Group manufactures PIR motion sensors for integration with lighting products manufactured by the Group. IQGHB Group also manufactures stand-alone PIR motion sensors that can be integrated with other lighting fixtures or electrical appliances. The Group also customises the design of PIR motion sensors to meet individual customer specifications. The PIR motion sensors manufactured by IQGHB Group incorporate a number of refinements that make the Group’s producls more capable than a basic PIR motion sensor. These refinements
include:­sophisticated signal processing capabilities; advanced optical devices including fitters and Fresnel lenses to increase the detection field, range and angle; ability to integrate two or more motion sensors in a single unit to provide a wider detection
angle and to eliminate “creep zones” below the detector unit; RF modules; light sensitive controllers; and
a dusk timer. (b) ASIC Sophisticated signal processing is enabled by the use of an ASIC. ASICs are customised to perform a particular function. As SUCh. an ASIC’s performance is generally superior when compared to that of a general integrated circuit. Sophisticated signal processing reduces the rate of nuisance and false alanns, this In turn increases user convenience and confidence in the reliability of the PIR motion sensors. Sophisticated signal processing may also be utilised to ignore signals that do nol fit the typical infrared radiation emission profile of a human being. For example, PIR sensors are designed to ignore changes in the background infrared content due to the gradual heating and cooling of the atmosphere caused by the passage of the sun. (c) Advanced Optical Devices Advanced oplical devices including the use of filter lenses. Filter lenses allow the passage of infrared radiation of wavelength close to that radiated by the human body, and absorb infrared radiation of other wavelengths. The use of filter lenses can reduce the rate of false triggering which can be a nuisance to users. A filter window may be fitled in front of the silicon photodiode so as to limit incoming infrared radiation to a frequency close to that of human body infrared radiation, which is strongest at 9.4/lm. Filter windows allowing transmission of infrared radiation in the 5.5/lm to 14/lm range are generally used. A Fresnel lens is used to concentrate light onto a focal point, much like a magnifying glass. However, a Fresnel lens is designed in such a way that it retains the optical characteristics of the plano convex lens but this is achieved with reduced weight and volume of material used. As the lens is flat, energy losses are also much lower when compared to those of a plano convex lens of similar optical performance. (d) Liglrt Semi/ive CollIrollers The IQGHB Group’s PIR motion sensors are equipped with a light sensitive controller that controls the period of operation of the PIR motion sensors based on the intensity of ambient light. This is achieved with the use of a photocell which absorbs the light hitting its surface and measures its imensity. The light sensitive controller is particularly useful in countries with distinct seasons, where the number of daylight hours varies depending on the seasons. [n such ctrcumstances, using only a timer to regulate operation would be sub~optimal as dusk arrives much earlier in the winter months than it does in summer. (e) Dusk Timers PIR motion sensors may also include a user selectable one (I) to twenty-four (24) hours ‘dusk timer’ to provide additional control. This enables the PIR motion sensors to begin detection later than the time determined by the amount of ambient light. For example. if it gets dark at 6.00 p.m., the dusk timer can be set to add another three (3) hours. thlls delaying the operation of the PIR motion sensors until 9.00 p.m. (f) RF Controllers A RF controller set comprises an RF transmitter and receiver. An RF controller is designed to replace physical wiring (e.g. insulated copper wires. fibre-optic cables) and as SUCh. the transmission of signals between [he two (1) components is commonly referred to as “wireless”. The use of radio frequencies for data transmission is well established and widespread. In general, an RF transmitter consists ofthe following components:­an RF transmitting device, incorporating an antenna; electronic components to control the RF transmission in terms of signal generation, data rate. signal strength. frequency and other characteristics; and a power source. In general, an RF receiver consists ofthe following components:­an RF receiving device, incorporating an antenna~ electronic components to receive and interpret the signal; a filtering mechanism to distinguish between legitimate and other radio signals; and a power source. 55 (g) Hi-Fi Sound Generofioll A Hi-Fi door chime is a compact, economical digital device that has the ability to reproduce high fidelity. CD quality sound. The Hi~Fi door chime unit uses a solid-state digital data storage device, a microprocessor, an amplifier and a speaker to create a compact and low power consuming product. The sound that is to be played back is stored in a digital fonnat on a solid-state digital data storage device. The size and number of sound files that can be stored depends on the memory size of the data storage device. Sound quality is generally directly related to the amount of data used to encode sound of a given duration. The microprocessor decodes the digital sound data and converts it into an audio fonnat, which is replayed upon receipt of a pre-detennined signal. An amplifier amplifies the signal from the microprocessor and transmits it to the speakers which convert the electrical signals into audio/sound. 4.4.9.4 R&D Strategy The ultimate aim of IQGHB Group’s R&D strategy is to drive future business growth by creating a wide range of consumer products that appeal to a broad spectrum of consumers. To implement this strategy, the Group plans to develop a number of enabling technologies that can then be used to create new product opportunities and enhance its existing products. Enabling technology that the Group plans to develop andlor apply includes:­Miniature sensors; RF links; CMOS imaging; Video technology; and Presence detection.
The application of these technologies will enable the Group to develop new products, including:­Wireless video door phones; Inlelligent home security systems; Intelligent home controls; Internet-based security systems; and Innovative decorative and garden lighting. The application of these technologies will enable the Group to enhance its existing products, including;­Hi-Fi door chimes; Solar powered LED security lighting; RF controlled security lighting; Security lighting with video combination;
PJR and image capture sensor combination; and Wireless video door entry product’. The IQGHB Group plans to invest in the development and application of enabling technology in parallel with its existing new product development and product enhancement plan.
4.0 INFORMATION ON IQGHB GROUP (cont’d) 4.4.9.5 On-going R&D (a) Development of Enabling Technology (aa) Miniatllre PIR Motion Sensors The IQGHB Group is currently developing a range of miniature PIR motion sensors. The miniature PIR motion sensors are also planned to be modular in construction. A miniature PIR motion sensor is a smaller. more compact version of the PIR motion sensors currently in use. The modular sensor will contain a fully capable PIR motion sensOr device and associated electronic components. The modular sensor witl interface with a base unit. Communication between the two (2) components will be achieved using a contact-less method. (bb) Alternative RF Links The IQGHB Group is currently continuing the development of its RF technology to create alternative RF links. The RF devices in development use the following frequencies:­433.92 megaHertz; and 2.4 -2.5 gigaHem. The higher data transfer rates achievable with the use of the 2.4 gigaHenz band will make it possible to transmit still or moving video images from a video capture device to a video display device without the cost or effon of laying down a wire. RF technology, as a means of enabling high·volume wireless data transfer, has a wide range of potential applications. R F TrfJ/lsceivers The IQGHB Group intends to undenake the development of RF transceivers. A transceiver is a device that is able to both transmit and receive radio signals. The use of transceivers makes possible bi-directional transfer of data, enabling such applications as telephony and the remote control of electronic devices. (cc) CMOS Imaging The IQGHB Group plans to develop video capture devices utilising CMOS imagIng technology, A CMOS video capture devise utilises a CMOS camera as the Image capture/sensor. It is also possible to utilise CMOS image capture devices in applications that require high-definition image capture, for example in image recognition. (dd) Video Techl/ology The IQGHB Group plans to develop digital video technology that is suitable for use in the Group’s planned future products. Video technology comprises three elements namely:­Image capture technology; Image display technology; and Digital signal processing. 4.0 INFORMATION ON IQGHB GROUP (conl’d) (ee) Presence Delec/ion IQGHB Group plans to develop presence detection technology. PIR motion sensors fail to trigger in the absence of movemen! within the detection field, for example if a person within the detection field remains completely still. A presence detector is able to detect the presence of a person within its detection field even when there is no apparent movement. Potential presence detection technologies which may be utilised by the Group include RFlO, CMOS camera sensors and biometrics. (b) New Product Development lQGHB Group proposes to extend its current product portfolio by developing the following new products:­(aa) Wireless video door phones; (bb) Intelligent home security systems;
(cc) Intelligent home controls; (dd) Internet-based security systems; and (ee) Innovative decorative and garden lighting.
(aa) Wireless Video Door PlIO/leJ IQGHB Group is developing a range of video door phone products, These video door phones are an extension of the video door entry system and will include the capability of half or full duplex speech.
The video door phone may also incorporate devices that enable a consumer to control door entry/access. (bb) Inlel/ige/ll HOllie Security SyJlellls Intelligent home security systems will incorporate sensors and mher devices that are able to detect the presence of people and are sufficiently ‘intelligent’ to enable the device to automatically take a number of actions based on signals received from the sensors. Presence detection devices may include or utilise the following technologies:-PfR motion sensors; Video image recognition; CMOS imaging; CMOS camera sensors; and Biometric identification. The intelligent home security systems may also incorporate control devices to enable an intelligent home security product to communicate with/control other devices remotely for example lighting fixtures, door chimes, image capture devices and security alarms. (cc) 11IIelligeni Home Colllrol,’ The IQGHB Group plans to develop intelligent home control devices. Intelligent home control devices are designed to increase user convenience by enabling certain household appliances to be automatically controlled. Intelligent home control devices may utilise a sensor device that is able to both detect and identify individual users. This device will then be linked to one or more other devices that it is able to control. 58 Sensor devices that may be used incJude:­RFID devices; Video imaging technology coupled with biometric identification; and CMOS imaging technology coupled with biometric identification. RF technology is the most beneficial method of linking intelligent home control devices, as it eliminates the cost and inconvenience associated with laying wires. The use of RF transceivers will allow the bi-directional transfer of data and other signals. (dd) In/erne/-baud Security Syslems lQGHB Group plans to develop the software and related hardware to produce various internet-based security system products. Internet-based security systems utilise the internet as a means of Jinking devices that may be in different or remote locations.
The use of an intemet-based security system may have a wide range of benefits, incJuding:­allowing residential property owners to monitor their homes from remOle locations; allowing commercial security providers to monitor locations from a centralised remote control centre; and enhancing the function of intelligent home security and intelligent home control products. (ee) IImova/ive Decora/ive and Garden Mgil/ing lQGHB Group plans to develop a range of innovative decorative and garden lighting utilising miniature PIR motion sensors. Decorative and garden lighting utilising mmlature PIR motion sensor modules will provide security and convenience lighting in and around the house and garden. By utilising miniature PIR motion sensor modules, IQGHB Group will have more design freedom and will be able to select from a wider range of materials thereby increasing the aesthetic appeal of the products. (c) Enhancing Existing Products (aa) Hi-Fi Door Chimes The IQGHB Group plans to further enhance the door chimes that are currently marketed by the Group for example, by including polyphonic sound reproduction and using alternative decorative materials. (bb) Solar-powered LED Security Lig/lling The IQGHB Group is developing solar-powered LED security lighting products particularly to meet demand from the Japanese market. Solar-powered LED security lights are similar to the existing security lighting products, except for two main differences:­electrical power is generated by a solar cell panel and stored in a rechargeable battery; and the lighting fixture will use a number of LED illumination devices, rather than incandescent, halogen or compact fluorescent lamps. 59

4.0 INFORMAnON ON IQGHB GROUP (cont’d) Current LED technology is limited to the production of relatively small, low power consumption and low output lighting devices. The development of more efficient and higher power LEDs is ongoing. (cc) RF Controlled Security Liglttillg The IQGHB Group is developing security lighting devices that incorporate a RF communication link. The radio link can be used to connect the PIR motion sensors with the illumination device. This means of wireless communication will enable the user to discretely position the PIR motion sensors independently of the lighting fixture, increasing the nexibility of the product. The wireless nature of the communication system will also potentially enable a single PfR motion sensor to control the function of one or more devices. For example. a radio Itnk security lighting device might incorporate a door chime unit. (dd) Security Liglrtillg witlr Video Combillatioll The IQGHB Group plans to develop security lighting devices that incorporate video technology, including CMOS imaging (security lighting and video combination). RF link technology will be used to facilitate communication between remotely placed sensor elements, image capture devices and image display devices. The incorporation of video technology, including CMOS imaging will enhance the capabilities of the Group’s security lighting products. This device will allow consumers to view an image capture by the image caplUre device, in addition to providing illumination when the sensor is activated. (ee) PIR lmd Image Capture Sensor Combillation The IQGHB Group plans to develop PIR and image capture sensor combination devices. The IQGHB Group plans to commence development of PIR and image capture sensor combination products in the financial year ending 31 March 2007, and expects PIR and image capture sensor combination products to generate revenue in the financial year ending 31 March 2008. (ff) Wireless Video Door Elltry The IQGHB Group has developed a range of wireless video door entry products. Wireless video door entry products utilise both image capture technology and RF links. Video door entry products will be designed to meet the needs of residential property owners. As such, they will be easy to install, affordable and offer a high degree of security and reliability. Video images captured by the image capture device will be transmined without wire to the image display device, eliminating the cost and inconvenience involved in connecting the devices with wires.
4.0 INFORMATION ON IQGHB GROUP (cont’d) The video door entry products may also incorporate PIR motion sensors or presence detectors which will automatically capture and transmit images when a person enters into the plOduct’s field of detection. In addition, the video door entry products may also incorporate devices that enable a consumer to control door entry/access. The following table indicates the plOposed liming for the commencement of the fulure R&D activities of the GIOUp:­Commencing in the Financial Year Ended/Ending 31 March During or From From From Business Activities Prior to 2005 2006 2007 2008 Development of Enabling Technology ..-CMOS imaging ,(-RF link ..-RF link transceivers -Video technology -TFT-LCD image display .. ,(-Digital signal processing -Miniature PIR motion sensur .. ..-Presence deteelion New Product Development ..-Wireless video duor phones -Dec.;orative and garden lighting utilising ..Miniature fIR motion sensor module.f -Intelligent home securify systems .. ..-lnrdligenl home COn/rots ,(-Internet-based security !iys/ems Enhancing Existing Products ..-Hi-Fi door chimes ..-Solar-powered LED security lighting ..-RF con/rolled secl/rity ligh/ing -Security Ii~hling with video combination .. -PfR and imagfJ capture sensor combination .. ..-Wireless video door entry ITHE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK I 4.4.9.6 Achievements in R&D The lQGHB Group’s R&D activities have resulted in the creation of a number of important innovations, particularly in the use of PIR motion sensors and lighting apparatus. Please refer to Section 4.4.4(a) for the list of patents held by the Group. As at the Latest Practicable Date, the Group owns four (4) patents, covering two (2) technologies, granted by three (3) issuing authorities. To-date, the Group has also submitted an additional nineteen (I9) patent applications covering ten (10) technologies and is awaiting approvals from the relevant issuing authorities. 4.4.9.7 Application of R&D Most of the technologies and innovation described in the patents above are in use by IQGHB Group for the manufacture of its products, including:­PIR motion sensors; RF controllers; and Hi-Fi door chimes.
PIR Motion Semors The IQGHB Group has conducted extensive R&D and succeeded In improving the performance of its motion sensors. Specific improvements include:­increased detection field; reduction in the occurrence of false alarms through the use of various filters lenses and an ASIC processor; and Elimination of “creep-zone” blind spots through the use of paired or multiple PIR motion sensors. The Group has succeeded in increasing the detection angle (field of view) of its PIR motion sensors through the use of mirrors, which effectively widen the angle of detection without materially reducing the detection range. The Group has succeeded in utilising various filters to reduce the occurrence of false triggers. Filters selectively allow electromagnetic radiation that is close to that of human body infrared radiation to pCiSS through, while absorbing electromagnetic radiation of other frequencies. The IQGHB Group has utilised ASICs to improve the signal processing capability of its PIR motion sensors. Specific benefits of advanced signal processing include:­the ability to ignore changes in the background infrared content due to the gradual heating and cooling of the atmosphere caused by the passage of the sun; and the ability to distinguish between infrared radiation originating from humans and radiation originating from other sources, for example household pets and other animals. The Group has also developed a range of PIR motion sensors thaI utilise paired or multiple PIR sensors which eliminate the “creep zone” that may exist directly below a conventional PIR motion sensor. RF COl/trollers An RF controller is an electronic device which has the capability to send andlor receive data/signals without the use of wire. 4.0 INFORMAnON ON IQGHB GROUP (conN) The IQGHB Group has successfully developed or is in the process of developing three types of RF link as follows:­433.92 megaHenz (ISM-Band): suitable for transmission of audio and other data signals; 2.4 -2.5 gigaHertz: suitable for transmission of both static images and moving video signals; and Transceiver Sets: a transceiver is a device that is able to both transmit and receive RF signals. The use of transceivers makes possible the bi-directional transfer of information enabling applications such as telephony and the remote control of electronic devices. The IQGHB Group’s wireless products include a number of unique and patented features including:­the use ofSMD technology and double sided plated through hole (PTH) PCBs to reduce the size of the Rf modules, enabling greater application flexibility and improving radio perfomlance by reducing the impact of electromagnetic interference from external sources; and the replacement of the conventional DIP switch house code settings with an ASIC bum-in running code (encoder) on the transmitters and a micro controller to decode at the receiver. The IQGHB Group’s radio links are used in a number of its products to create a range of reliable and easy to install security and home control products. Many of the Group’s outdoor PIR motion sensor products are available with a wireless RF link enabling for example the automatic switching on and off of inrerior lights to warn off unwanted guests, activation of one or more outdoor lights when intruders enter specific zones of detection around the propeny and audible and visual indication of movements in places that are out of view. The IQGHB Group’s wireless devices can be customised to meet specific customer requirements and have a transmission range of between fifty (50) and three hundred (300) metres depending on their specification and operating environment. Hi-Fi Door Chimes The IQGHB Group has overcome a number of existing technical challenges and developed Ihe technology to enable the manufacture of Hi-Fi door chimes. The IQGHB Group R&D efforts have resulted in the design of the microprocessor unit and the development of the software currently utilised by the Hi-Fi door chimes manufactured by the Group. The Group believes it is a pioneer in developing Hi-Fi door chimes technology. and is in the process of submitting patent applications in the US, Europe. Taiwan and China for this technology. Wireless Video Door Elltry The IQGHB Group has developed a range of wireless video door entry products. Wireless video door entry products utilise both image capture technology and RF links. The initial market launch of the wireless video door entry products was completed in May 2005 and the Board of IQGHB expects the response to be encouraging. ITHE REST OF THIS PAGE IS INTENTIONALLY I.EFT BLANK I 4.4.9.8 R&D Expenses For the past three (3) financial years ended 31 March 2005, the Group has incurred the following R&D expenditure:­Financial Vear Ended  31.03.2003 RM’OOO  31.03.2004 RM’OOO  31.03.2005 RM’OOO  R& D capital expenses R&D operatin~ expenses  196 5,229  126 6,056  86 6,744  Total R&D expenses  5,425  6,182  6,830  Total R&D expenses as a proportion of the IQGHB Group’s total revenue (%)  4.80  560  4.90
4.4.10 Interruptions to Operations The Group has not experienced any major disruption in its business, which had significant effects on its operations for the past twelve (12) months prior to the date ofthis Prospectus. 4.4.1 I Modes of Marketing! Distribution The IQGHB Group services the following types ofcustomers:­original brand owners comprising manufacturers. distributors and retailers; and retailers and distributors of the “IQ-group” brand. Approximately 70% of the IQGHB Group’s products, based on revenue, are manufactured under the brand name oforiginal brand owners whilst the remainder arc under its own “IQ-group” brand name.
M anUraClurcr~ Types of () istribulors Customers Retailers Therefore. the Group utilises the indirect distribution strategy for the following reasons:­the IQGHB Group’s core competencies are in R&D. design and manufacturing, and thus it does not have the network to distribute its products directly to end-users; and the IQGHB Group’s products are primarily focused on consumer households. As such, the extensive spread of consumers across the globe would make it impractical for IQGHB Group to adopt direct distribution to end-users. As at Latest Practicable Date, the IQGHB Group had eleven (I I) sales and marketing personnel. fQE and IQJ maintain sales offices in the UK and Japan respectively. The Group’s physical presence in these key markets and regions enables the IQGHB Group to work closely with its customers to conduct product development and marketing activities. The Group’s physical presence in those key markets and regions also enables the Group to quickly and effectively gauge consumer end-users demand and to tailor its R&D and product offerings accordingly. 64 4.4.12 Production, Facilities, Capacity and Utilisation IQGHB Group’s production facilities by type of products manufactured are based in the following locations:­Subsidiaries  Products Manufactured  Approximate Built-up Area (square feet)  Location of Production Facility  IQM  PIR security lighting, PIR motion sensors, wireless video and RF products  97,852  Plot 149 & Plot 151 Jalan Sultan Azlan Shah Taman Perindustrian Bayan Lepas Fasa I, 11900 Bayan Lepas Penang, Malaysia  IQC  PIR security lighting, PIR decorative outdoor lighting, PIR motion sensors  94,748  Huang Tang Village, Xin Si District Heng Li Town, Dong Guan City Guang Dong Province China
The Group carries out R&D, production and product testing activities at the two (2) manufacturing plants in Penang, Malaysia and Dong Guan, China. R&D activities are also undertaken at IQM’s representative office in Taiwan. The production capacity and utilisation rate of the IQGHB Group’s manufacturing facilities are as follows:­Production Facility  Production Capacity (A verage Pieces per mOllth/OI )  Current Production Output (Average PieL’es per moutll/'”  Utilisation (%)  IQM  220,000  132,000  60  IQC  400.000  245.000 to)  50 1’1
NOles:­fa) Based on three 8-hour shifts running seven (7) days a week. (h) Both lQM “nd lQC normally run on” single (8.5 hour) shift ba.<i.<, wilh “ddilionalovertime. The (:urrent production ou/put (average pieces per mon/h) calculation is derived from the aClltaJ output for the financial year ending] I March 2005 and includes lufl overlime utilisation. (c) The aclual production Dutpul of IQC of 245,000 pieces per month involves ceriain produclion processes which were oUlsourced to maximise utilisation ofresources. (d) Ac!justed to exclude approximately 20% of lQC”s production processes u’hich were vlltsuurced during Ihe financial year ended 31 March 2005. THE REST or TillS PAGE IS tNTENTIONALL Y LEn BLANK 4.4.13 Location of Principal Place of Business and Production Facilities Th. locations of th. principal place of business and production facilities of the IQGHB Group are as follows:­Location  Description of Usage by IQGHB Group  Plot 149 & Plot 151 Jalan Sultan Azlan Shah Taman Perindustrian Bayan Lepas Fasa I (FTZ) I 1900 Penang Malaysia  (i)  Head offLce of the lQGHB Group for group general management and administration, business planning and co­ordination and corporate fmancial advisory services;  (ii)  Factory cum office building of IQM; and  (iii)  R&D centre of IQM  Sandbeck Land, Wetherby West Yorksh ire LS227TW UK  I , Marketing and distribution offic. of IQ£.  Espo RiIlO, 2-19 I-Chome, Ryosenji Rillo City. Shiga Pref. 520-3035 Japan  ! Marketing and distribution office ofIQ!.  Huang Tang Village Xin Si Districl, Heng Li Town, Dong Guan City Guang Dong Province China  (i) (ii)  Factory cum office building of IQC; and R&D centre of IQC.  5′” Floor. No 16. Lane 130 Ming Chun Road, Hsin Tien, Taipei Hsien Taiwan, Republic of China  (i) (ii)  Representative omce of IQM for the sourcing and procurement of raw materials and undertaking R&D activities; and Distribution office of IQGL.
ITltE REST OF THIS PAGE IS INTENTIONALLY LfFT BLANK I Subsidiary Companies Details of the subsidiary companies of IQGHB are sel out beJow:-Nameof Company  Date/Place of (ncorporation  Authorised Share Capital  Issued and Paid-up Share Capital  Effective Equity Interest  Principal Activities  IQM  12.01.1989/ Malaysia  RM50.ooo.0oo  RM25.500.oo0.oo  100″/0  Design and manufacture of PIR sensor lightin@. motion sensors. wireless video and RF products  10<.:  23.06.20001 China  USD2.ooo.000  •USD 1.474.033.88  100″/0  Manufacture: or PIR sensor lighting and motion sensors  lQE  28.09.1993/ UK  £250.000  £t50.0oo00  100″/.  Sales, marketing and distribution of PIR sensor lighting and motion sensors  IQJ  15.05.1998/ Japan  ¥120.000.000  ¥30.00<J.000.00  100″/0  Sales. marketing and distribution of I’IR sensor lighting and mOlion sensors  IQGI.  23.03.2000/ British Virgin Islands  USD50.000  USDI.OOO.OO  100%  Distribution of PIR sensor lighting and motion .sensors
,.vOle:­• This represents the capital contributed ;n fQC. As atlhe dale of Ihis Prospectus, the IQGHB Group does not have any associate company. 4.5.1 IQM (I) History and Business IQM was incorporated in Malaysia on 12 January 1989 under the Companies Act, 1965 as a private limited company under the name of Inlerquartz (M) Sdn Bhd. On 15 June 1994, Ihe company was convened into a public company and adopled the name of Interquanz (M) Berhad. Thereafter, on 7 October 1998, the company changed its name to Imerquanz (Malaysia) Berhad. On 12 February 1999, the company convened back to a private limited company and changed its name to lnterquanz (Malaysia) Sdn Bhd. Subsequently, on 16 March 1999, the company changed its name and since then assumed its present name. IQM is principally involved in design and manufacture of PIR sensor lighting and motion sensors. IQM commenced operations in September 1989. ITilE REST OF TillS PAGE IS INTENTIONAl.I.Y LEFT BLANK I (ii) Share Capital The present authorised share capital of IQM is RM50,Ooo,ooO comprising 50,000,000 ordinary shares of RM1.00 each of which 25,500,000 ordinary shares of RM 1.00 each have been issued and fully paid-up. The changes in the issued and paid-up share capital of IQM since its incorporation are as fol1ows:­Date of Allotment  Number of Ordinary Shares Allotted  Par Value RM  Consideration  Resultant Issued and Paid-up Share Capital RM  \2.01.1989 \5.12.1989 02.08.1999 10.\ 1.2000  4 2,999,996 18,000,000 4,500,000  1.00 1.00 1.00 1.00  Subscribers’ shares Cash Bonus issue on the basis of six new shares for every one (I) existing share held Right issue on the basis of 10,7\5 new shares for every 50,000 existing shares held  4 3,000,000 21,000,000 25,500,000
(iii)  Subsidiary and Associate Company  AS at the date of this Prospecrus, IQM does not have any subsidiary or associate company.  (iv)  Substantial Shareholder  IQM is a wholly-owned subsidiary company of IQGHB.  4.5.2  IQC  (i)  History and Business  IQC was incorporated in China on 23 June 2000 as a private limited company. The principal  activity of IQC is the manufacture of PIR sensor Ijghting and motion sensors. IQC commenced its  operations in September 2000.  (ii)  Share Capital  The present authorised capital of IQC is USD2,OOO,OOO of which the capital contributed is  approXimately  USDI,470,OOO.  The  changes  of  the  capital  contributed  in  IQC  since  its  incorporation are as follows:­
Date of Allotment  Number of Ordinary Shares Allotted  Par Value USD  Consideration  Contributed Capital USD  06.09.2000 16.12.2001  N/A N/A  N/A N/A  Capital Capital  668,718.15 1,474,033.88
Note:­ NIA  Nol applicable as there is no .lpeciflc number ojshares being issued.  68
4.0 INFORMATlON ON IQGHB GROUP (cont’d) (iii)  Subsidiary and Associate Company  As at the date Oflhis Prospectus, IQC does not have any subsidiary or associale company.  (iv)  Substantial Shareholder  IQC is a wholly-owned subsidiary company of IQGHB.  4.5.3  IQE  (i}  History and Business  IQE was incorporated in UK on 28 September 1993 as a private limiled company. The principal  activities of IQE are sales, marketing and distribution of PIR sensor lighting and motion sensors.  IQE commenced business in September 1993.  {ii}  Share Capital  The present authorised share capital of lQE is £250,000 comprising 250,000 ordinary shares of  £1.00 each of which 150,000 ordinary shares of £1.00 each have been issued and fully paid-up.  The changes in the issued and paid-up share capilal of IQE since its incorporation are as follows:­
Dale of Allotment  Number of Ordinary Shares Allotted  Par Value £  Consideration  Resultant Issued and Paid-up Share Capital £  28.09.1993 1706.1994 31.12.1998 26.02.1999  2 7,498 100,000 42,500  1.00 1.00 1.00 1.00  Subscribers’ shares Cash Cash Cash  2 7,500 107,500 150,000
(iii)  Subsidiary and Associate Company  As al the date orlhis Prospectus, IQE does not have any subsidiary or associate company.  (iv)  Substantial Shareholder  IQE is a wholly-owned subsidiary company of IQGHB.  4.5.4  IQJ  (i)  History and Business  IQJ  was  incorporated in Japan  on  15 May 1998 as a private limited company. The principal  activities of IQl  are  the sales, marketing and distribution of PIR  sensor  lighting and motion  sensors. IQJ commenced business in May 1998.  ITilE REST OF THIS PAGE IS INn:NTIONALLY LEFT BLANK I
4.0 INFORMATION ON IQGHB GROUP (con/’d) (ii) Share Capital The present authorised share capital of IQJ is 1’120,000,000 comprising 2,400 ordinary shares of 1’50,000 each, of which 600 ordinary shares of 1’50,000 each have been issued and fully paid-up. The changes in the issued and paid-up share capital of IQJ since its incorporation are as follows:­Date of Allotment  Number of Ordinary Shares Allotted  Par Value l’  Consideration  Resultant Issued and Paid-up Share Capital l’  15.05.\998  600  50,000  Cash  30,000.000
(iii)  Subsidiary and Associate Company  As at the date oflhis Prospectus, IQJ does not have any subsidiary or associate company.  (iv)  Substantial Shareholder  [QJ is a wholly·owned subsidiary company of lQGHB.  4.5.5  IQGL  (i)  History and Business  IQGL was incorporated in British Virgin Islands on 23 March 2000 as an international business  company. The principal activity of IQGL is distribution of PIR sensor lighting and motion  sensors. IQGL commenced business in September 2000.  (ii)  Share Capital  The present authorised share capital of IQGL is USD50,000 comprising 50.000 ordinary shares of  USDI.OO each, of which 1,000 ordinary shares of USDI.OO each have been issued and fully paid­ up. The changes in the issued and paid-up share capital of IQGL since its incorporation are as  follows:­
Date of Allotment  Number of Ordinary Shares Allotted  Par Value USD  Consideration  Resultant Issued and Paid-up Share Capital USD  23.03.2000  1,000  1.00  Cash  1,000
(iii) Subsidiary and Associate Company As at the date of this Prospectus, IQGL does not have any subsidiary or associate company. (iv) Substantial Shareholder IQGL is a wholly-owned subsidiary company of [QGHB. 4.0 INFORMATION ON IQGHB GROUP (cont’d) 4.6 Industry Overview 4.6.1 Global Economic Outlook The outlook for 2005 remains favourable. World output and world trade are projected to expand at a steady pace of 4% and 5.8% respectively in 2005. The pace of slowdown in the US and China is expected to be modest, on Ihe basis that adjustmenls of the imbalances in these economies would be gradual. The scenario assumes that the USD weakness would be orderly and that the US fiscal deficit narrows, albeit moderately. In addition, as oil prices recede from its peak in October 2004, inflationary pressures are expected to remain manageable. providing flexibility fOT gradual increases in interest rates in the US to a neutral level. Monetary conditions are, therefore, expecled to remain supportive of growth. Meanwhile, China is expected to manage some softening of Ihe economy. While global growth could be sustained at a sleady pace in 2005, several risks could adversely affect the outlook. Inflation could rise more than expected, resuiling in higher interest rates globally. In the financial markets, a disorderly realignment of the major currencies could dampen trade and investments. As a supportive engine of global growth, a significantly slower growth in China would lower growth prospects in the rest of Asia. The monelary policy stance in 2005 will continue to take into consideration both global and domestic developments. On the external fronl. sustained global growth will ensure that Ihe external sector continues to contribute positively to domeslic growth. While the pace of global growth is expected to moderate, it will, nonetheless, remain strong. Indicators of economic activity in the major and regional economies continue to remain positive and point towards further expansion in global economic activity. Of importance, the adverse effects lrom the high crude oil prices on both global growth and inflation have been modest and have not threatened the prospect for cOnlinued global growth. While several major and regional countries have pre-emptively tightened their monetary policies, the pace of tightening has been gradual and overall monetary conditions continue to support growth. The inflation outlook in most of these countries has stabilised and any further monetary tightening is likely to be gradual and modest. (Source: Bonk N.ogum Malaysia Annual Report 1004) 4.6.2 Malaysian Economic Outlook With the more robust growth in global trade and domestic demand, the momentum of economic growth in Malaysia, which began in the second half of 2003, gathered pace in 2004. Real gross domestic producI (“GDP”) increased by 7.1% in 2004 (2003: 5.3%), Ihe fastest growth since 2000. The economy benefited from the rapid growth of global trade in manufactures and higher prices for primary commodities. Although global growth moderated somewhat in the second half of the year, the Malaysian economy remained resilient wilh stronger domestic demand providing the impetus for sustained expansion. The private sector was the main force ofeconomic expansion. while the Government continued with fiscal consolidation. The improvemem in the economy was reflected by positive growth across all sectors except construction. The main drivers of growth were the manufactur}ng. services and primary commodities sectors. Value added in the manufacturing sector expanded strongly by 9.80/0, as output growth in both expoT1-and domestic-oriented industries reflected stronger external and domestic d~mand for manufactured goods. The favourable performance of the manufacturing sector was also reflected in the stronger expansion in manufactured exports (19.7%) and sustained high capacity utilisation level (79″10), in spite of investments in new capacity during the year. The prospects for the Malaysian economy in 2005 remain sound. Real GDP is expected 10 expand by 5 ­6%. The sustained global growth, the modesl downturn in the global semiconductor industry as well as relatively favourable prices for primary commodities are expected to provide support to export growth. While the global electronics industry is consolidaling after reaching a peak in mid-2004, the cyclical downturn is forecast to be modest in view of the strong Asian demand, the rapid inventory adjustments and relatively low inventory levels. Current indications point 10 an expected upturn in the global electronics cycle in the second half-year. In the domeslic economy, the private seclor would remain as Ihe main driver of growth, as the Government remains committed to optimising expenditure in order to strengthen the fiscal position. With the core inflation projected to remain low in 2005 (1.8%), monetary policy is able to remain supponive of the further expansion in private sector activities. The manufacturing sector, which accounts for about a third of total private sector investment, is projected to record a strong positive growth for the third consecutive year. Capital expenditure for projects already committed to would extend into 2005. In periods of favourable business operating conditions. manufacturers are expected to continue to replace their old or obsolete machinery and equipment to improve their efficiency and enhance nexibility 10 meet changing demand. (Source: Bank Negara Malaysia Annual Report 2004) The Malaysian economy remained resilient despite a moderation in global economic activity amidsl high oil prices and the continued downcycJe of the global semiconductor industry. Real GDP growth of the Malaysian economy remained favourable and was within expeclalions, expanding by 5.7% in the first quaner of 2005. During the period under review, Malaysia continued to be one of the strong economic perfonners in the region. Going forward, the near-term outlook for Malaysia remains favourable despite some signs of moderating growlh in the global economy and rising prices. Global growth is nevertheless still expected 10 be strong, supported by continued growth in consumer and investment demand. (Source: Bank Negara Malaysia Fir.” Quarter Report 2005) 4.6.3 The Malaysian Lighting Industry The lighting industry is a sub-sector of the consumer electrical products industry, and is under the total umbrella of the electrical induslry. The lighting industry can be segmented into general lighting, sensor lighting and other lighting. The past performance of Ihe lighting industry in Malaysia is as follows:­• In 2004, exports of consumer electrical products (a sub-sector of the electrical industry. which includes the lighting industry) amounted to RM5.2 billion. • Export value of electrical sound or visual signalling apparatus. other visual signalling apparatus (which included security lighting/sensor lighting, standalone PIR motion sensors, and PIR controlled decorative outdoor lighting) increased at an average annual rate of 28.50/0 between 2000 and 2004. Export value for Ihis category was RM 168.2 million in 2004. • The export value of other electrrc lamps and lighting fittings declined at an average annual rate of 30.9% between 2000 and 2004. Export value for this category reached RM8.9 million in 2004. In addition to its contribution to the nation’s foreign exchange earnings. the consumer electrical products industry also contributes towards employment generation, value-added creation and income generation. (Source: Su/)//)/ary Independent Business and Markel Research Consullants’ Repor/ updated 9 Septemher 2005 prepared by Vilal FaClOr Consl/lting Sdn Bhdfor Ihe inclusion in this ProspeClus) TilE RESTOFTIIIS PAGE IS INTENTIONAI.I,Y I.F.FT BI.ANK Eleclricallnduslry The structure ofthe electrical industry is as follows:­Electrical Industry ., I  Electrical Industrial  Consumer  Ekctrical  Equipment  Electrical Products  Components  I  Household Appliances  (  Lighting  J  Other Consumer Electrical
Electrical industry is segmented into the following:­Electrical industrial equipment; Electrical components; and Consumer electrical products. Electrical industrial equipment comprises the manufacturing of electric motors, generators, electricity transmission or distribution equipment, switchgear, transformer Or other electrical machinery and equipment. Electrical components refer to components such as resistors. inductors, conductors and capacitors, cables and wires, batteries and insulators, which do not require power to operate. Consumer eleclrical products refer to household appliances, lighting and other consumer electrical products. (Source_’ Summary Independent Business and Markel Research Con.w.!tantJ’ Report updated 9 Sepfemher 2005 prepared hy Vital Factor Consulting Sdn Bhdlor (he inclusion in this Prospectus) Ligllting I”dll.<lry The lighting induslry is further segmented as follows:­I I General Lighting Sensor Lighting Other Lighting
General lighting reters to electrically powered lighting devi_es that require some form of direct human action to function, for example, the working of a switch or the setting of a timer. Sensor lighting refers to electrically powered lighting devices whose function is automatically determined by the detection ofexternal signals. for example, presence of infrared radiation or sound. 73 4.0 INFORMATION ON IQGHB GROUP (cont’d) Other lighting refers to electrically powered lighting devices whose function is determined by instructions received from remote means, for example through instructions received via the intemet or through wireless communications as found in some “smart” home applications. [QGHB Group is primarily involved in the manufacture of sensor lighting using PIR. (Source: Summary Independent Business and Market Research Consultants’ Report updated 9 September 2005 prepared by Vital Factor Consulting Sdn Bhdfor the inclusIOn in this Prospectus) Vertical Structure o/the Lighting Industry The vertical structure of the lighting industry is as follows:­
Midstream  {  r  1  1 Manufacture of Lighting  1  1  I  Downslream  {  I  .I. Distribution  I I  1 ‘I  .I. Retail  I  The  activities  within  the  lighting industry incorporating  sensor  lightings  can  be segmented  into  the  following categories:­ (i)  Upstream;  (ii)  Midstream; and  (iii)  Downstream.  (i)  Upstream
Upstream activities primarily involve the supply of key componellls that are commonly made by third panies. These could include highly technical components like electronic components, P[R sensor heads, radio wave transceivers, filters, and lenses, and parts like plastic injected moulded pans. metal casing and parts and glass parts. [n 2004, the ex-factory value for the manufacture of semiconductors and other electronic components and communication equipment and apparatus amounted to RM 110.0 billion. (ii) Midstream Midstream activities include the manufacturing of general lighting, PIR sensor lighting and PIR motion sensors. In 20M, there were approximately seventy-seven (77) manufacturers in the consumer electrical products industry in Malaysia. There ate currently two (2) companies engaged in the manufacture of sensor lighting and motion sensors currently operating in Malaysia. IQGHB Group is actively involved in the midstream activities of design and manufacturing of PJR sensor lightings and PIR motion sensors. 74 4.0 INFORMATION ON IQGHB GROUP (cont’d) (iii) Downstream Downstream activities involve distribution and retailing. The downstream activities of consumer­based lighting involve distribution and retailing, while downstream activity for industrial and commercial lightings involve only distribution. IQGHB Group sells its products to both distributors as well as directly to retailers. (Source: SummGlY Independent Business and Market Research ConsulwllTs’ Repor/ updated 9 September 2005 prepared by Vital Factor Consulting Sdn Bhdfor the inclusion in this Prospectus) I”dustry Linkages The lighting industry has extensive linkages to many industries, as depicted in the diagram below:-ElectroniC  Tolecom 5  Plastic  Injeclicn  Components  E quipm Elnt  Moulding  E lec!rlcal A.ccessories  F”,brlcated Melal Products  Glass Products
Sensor Lightmg Industry
Infra’ tru c 11.1 rtll BUIlding IiiInd Int.Hlor F 11·01.11Public Am enittes C ollSlruction DrSlribvtionl loglslocsRetailIng J
The wide linkages of the lighting industry illustrate its contributory role to many other dependent industries, As such, the significant role of the lighting industry will act as a catalyst for economic activities, employment and creation of wealth for the nation. (Source: Summary Independenl Business and Market Research Consultants’ Report updated 9 September 2005 prepared by Vi/al Factor Consulting Sdn Bhdfor the inclusion in/hi,’ Prospectus) Illdustry Life Cycle The overall lighting industry in general and the sensor lighting sector in particular in Malaysia is in its growth phase. This is mainly substantiated through the following:­Local Production Between 2000 and 2004, the electrical products production index declined at an average annual rate of 6.1%. In 2004, the production index of electrical products decreased by 9.4% to 133.3. Exports Between 2000 and 2004, the export value of “electric sound or visual signalling apparatus (for example, bells, sirens, indicator panels, burglar or fire alarms), other than those of heading No. 85.12 or 85.30. Other apparatus: visual signalling” increased at an average annual rate of28,5%, In 2004, exports of electrical products (including consumer electrical products) continue to be a major export earner, increasing at an annual rate of28.4%1 to RM 17.2 billion. In 2004, the export value of the electric consumer products industry increased at an annual rate of 52.9% to RM5.2 billion. Exports of the electrical consumer products industry accounted for 30.2% of the total electrical products industry’s exports for that year. 75 Imports Between 2000 and 2004, the import value of “electrical sound or visual signalling apparatus (for example, bells, sirens, indicator panels, burglar or fire alarms). other than those of heading No. 85.12 or 85.30. Other apparatus: visual signalling” declined at an average annual rate of 17.7%. In 2004. the import value of electrical visual signalling apparatus declined by 82.9% 10 reach RM21. I million. In 20M, imports of electrical products (including consumer electrical products) amounted 10 RM 15.2 billion. (.~ource. Summory Independent Business and Market Research Consullallls’ Repar! updQ/ed 9 September 2005 prepared by Vital Factor COllsu/tillg Sdn Bhdfor the inclusion in Ihis Prospectus) 4.6.4 Industry Players Manufacturers of sensor lighting and motion sensors face normal competitive conditions. As with most free enterprise environments, competition is based on a number of faclors, including the quality of product and service, cost competitiveness, prompt delivery schedules and overall manufacturing capabilities. The IQGHB Group is one (I) of two (2) companies engaged in the manufacture of sensor lighting and motion sensors currently operating in Malaysia. As IQGHB Group is primarily export-oriented, local competitive conditions do not have a major impact on its business. A large proportion of manufacturers of PIR products are based in Taiwan and China. China’s lower cost of production could create price pressure for PIR product manufacturers. However, PIR products are becoming increasingly more technologically sophisticated. There are some significant areas of product differentiation as fbllows:­Functionality (for example, the additional dusk-dawn timer);
Innovations (for example, positioning the PIR sensor in a remote location and using RF to achieve wirefree signal transmission to the appliance); and Quality (for example, filtering to handle various nuisance factors such as false triggering). Some of the manufacturers of sensor lighting and motion sensors include:~ Cooper Industries, IncJRegent Lighting (US) Des. [ntemational [nc.lHeath Zenith (US) Proteclion Technologies Inc. (US) Malsushita Electric Works (Japan) Clipsa[ Integrated Systems Pty Ltd (Australia) Steinel Vertriebs GmbH & Co. (Germany) Ansen Electronics Company (Hong Kong) Everspring Industry Co. LId (Taiwan) Aurum Electronics Corporation (Taiwan) Aurex Industries Inc. (Taiwan)
uzon Technology Inc. (Taiwan) Wellmike Enterprise (Taiwan) Class Technology Co. Ltd (Taiwan) Huaning Imemational Technical and Trading Corporation (China) Colite Enterprise Co. LId (China) Cixi Maste Electronic Technology Co. LId (China) CSI Lighting Company (China) Aucan Industrial Developmem Corporation (China)
(Source: Summary Independenl Business and Market Research COllsultants’ Report updated 9 September 2005 prepared by Vila/ Factor COllsulting Sdll Bhdfor the inclusion in this ProspeCIllS) 4.6.5 Government Legislation, Policies and Incentives (a) Government Regulations The Industrial Coordination Act, 1975 mandates all manufacturing companies with shareholders’ funds of RM2.5 million or above, Or engaging seventy-five (75) or more full-time employees to obtain a manufacturing licence. Apart from the nOffilal manufacturing licence, there are no material government laws, regulations and policies that may impede the perfonnance and growth of operators within a free enterprise environment. (b) Government Incentives The major incentives for companies investing in the manufacturing sector are as follows:~ (i) Pioneer Status and Investment Tax Allowance;
(ii) Reinvestment allowances;

(iii) Impon duty exemption; (iv) Double tax deduction; and
(v) Operalional headquaners status (“OHO”) and tax exemption.
(i) Pioneer Status and Investment Tax Allowance

Eligibility for incentives under Pioneer Status and Investment Tax Allowance will be determined according to the priorities telmed as “promoted activities’ or “promoted products”. In addition, the level of value-added, technology and industrial linkages will also be taken into consideration. 10M was granted full Pioneer Status by the Malaysian Industrial Development Authority for the manufacture of “Passive lnfrared Detectors & Motion Sensor Light Controllers” on I September 1989. The incentive expired on 31 August 1994. No extension related to the manufacture of Passive Infrared Detectors & Motion Sensor Light Controllers has been sought, as IQM no longer qua Jines for Ihe Pioneer Status and Investment Tax Allowance incentive. On II April 2005, IQM tiled an application for Pioneer Status for the manufacture of wireless (RF) video communication, wireless (RF) video communication with close circuit TV (CCTV) monitoring capability and video doorphone and ‘Audio Only’ two­

 

way doorphone. To date, (he application is pending a decision from the MIDA. (ii) Reinvestment Allowance All manufacturing companies that have been in operation for at least twelve (12) months and incur qualifying capital expenditure to expand production capacity, modernise and upgrade production facilities, diversify into related products, and automate its production facilities can claim Reinvestment Allowance. Eligible manufacturers for Reinvestment Allowance are entitled to the following:­the Reinvestment Allowance is 60% of qualifying capital expenditure incurred by the company, and can be offset against 70% of its statutory income for the year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised. the Reinvestment Allowance will be given for a period of fifteen (15) consecutive years beginning from the year the first reinvestment is made. Companies can only claim upon completion of the qualifying project. tor example after the building is completed or when the plant/machinery is put to operational use. Assets acquired for the reinvestment cannot be disposed during two years from the time of reinvestment. IQM is currently enjoying the Reinvestment Allowance inccn(ive. This incentive will expire on 31 March 2012. 4.0 INFORMATION ON IQGHB GROUP (cont’d) (iii) Import Duty Exemption As an export-oriented manufacturer operating in a Free Trade Zone, IQM is exempted lrom paying import duties on components and raw materials that are used in the manufaclure ofgoods that are ullimately exported. (iv) Double Tax Deduction IQGHB Group was allowed to claim double tax deduction for R&D expenses incurred on certain projects during the financial year ended 3 I March 2003 under Section 34A. Income Tax Act 1967 from the Inland Revenue Board Malaysia. The sum allowed was RM636,865. As at I September 2005, the Group has submitted an application to the Inland Revenue Board Malaysia with respect to a double tax deduction claim under Section 34A, Income Tax Act 1967 with respect to eligible R&D expenses incurred during the financial year ended 3 I March 2005. To date, the application is still pending approval from the Inland Revenue Board Malaysia. (v) Operational Headquarters Status and Tax Exemption On 29 August 2005. the Malaysian Industrial Development Authority approved 10GHB Group’s application for Operational Headquarters (OHO) status and OHO tax exemplion under Section 127, Income Tax Act 1967 for a period of 10 years, from the year of assessment 2005 to the year of assessment 2014, for undertaking OHO activities in Malaysia, which involve the provision of qualifying services to related companies outside Malaysia. The MJDA granted IQGH Group approval for income tax exemption, not exceeding 20% of tbe total income of the OHQ operations in relation [0 qualifying service provided to related companies in Malaysia. (c) Environmental Regulations Solder dross. which is generated during the course of the IQM’s normal manufacturing activities is classified as a Scheduled Waste classified as “N202. Dross lrom soldering process” under the Environmental Quality (Scheduled Wastes) Regulations 1989. IQM has appointed Excelbond Metal Recycling Industries Sdn Bhd (“Excelbond”) to transport and recycle solder dross. Excelbond is located in Pasir Gudang, lahar and is licensed by the Department of Environment to carry out the following activities under Section II of the Environment Quality Act,I974:­offsite storage: collection and transport of scheduled waste: and offsite recycling facility for scheduled waste. (Source: Summary Independent Business and A1arkel Research Consul/anls’ Report updated 9 Septemher 2005 prepared by Vilal Factvr Consulting Sdn BhdJor Ihe inclusion in this Prospectus) 4.6.6 Demand of Products The demand for PIR Sensor Lighting and Motion Sensors is primarily dependent on the following sectors:­Industrial; Commercial, comprising commercial complexes and purpose-build offices; and ResidentiaL In addition, demand also comes from both local and overseas markets. (Source: Summary Independent Business and Market Research Consultants’ Reporl updmed 9 Sep/emher 2005 prepared by Vital Factor Conwlling Sdn Bhdjor the inclusion in this Prospectli.,j 4.0 INFORMATION ON IQGHB GROUP (CO/ll”’) 4.6.7 Substitute Products The threat of substitutes to PIR security lighting and PIR decorative outdoor lighting include the following:­(i) General lighting;
(ii) Timer controlled lighting; and

(iii) Lighting utilising alternative detection technology. (i) General Lighting General lighting refers to light fixtures that are manually operated through on/off switches. Currently the bulk of lighting for commercial and industrial applications, public amenities and households are general lighting. These are popular because they are cost-effective, easy to install, widely available and require relatively low maintenance. General lighting is not a direct substitute for sensor lighting per se, but rather the default lighting for the majority of lighting applications. However, the advantages of PIR sensor lighting over general lighting include:­convenience; security; and offers operating cost-savings where illumination is provided only when it is required. (ii) Timer Controlled Lighting Timer controlled lighting refers to light fixtures which rely on the action of a timing device to control the fixture’s illumination function. Timer controlled lighting can be set so as to provide illumination at pre-delennined periods, for example during the hours of darkness. Although, timer controlled lighting may be considered as a substitute to PIR sensOr lighting, it loses out significantly in terms of functionality. (iii) Alternative Detection Technologies Motion sensors may employ a number of altemative detection technologies, such as audio detection, microwave detectors and infrared cameras. Audio detectors rely on the detection of sound to control lighting fixture function. Audio detectors are generally non-discriminatory, as a relatively loud noise originating from a relatively long distance away from the detector may also trigger lighting fixture illumination. Microwave detectors are active detectors, in that they rely on the reflection of signals generated by the detector for presence detection. Microwave detectors are generally more expensive than PIR motion sensors of the same capability, and as such are not as suited for wide use targeted at consumer users. Infrared camera detectors rely on recognition of infrared images captured by an infrared camera for their function. While these systems are effective, they are currently expensive and as such are not as su ired for wide use targeted at consumer users.

(Source: Summary Independent Business and Markel Research Con.wltams’ Reporl updaled .9 Sep/ember 2005 prepared by Vi/al Factor Consulting Sdn Bhdfor the inclus;on in thi., Prospectus) ITHE REST OF TIllS I’AGE IS INTENTIONALLY LEFT BLANK I 4.0 INFORMATION ON IQGHB GROUP (cont’d) 4.6.8 Industry Outlook The outlook of the consumer electrical products induslry is favourable. The consumer electrical products industry is forecasted to grow by approximately 5% per annum for the next five (5) years. The following factors and observations in local production, imports and export performances provide support for the growth forecasI;­• Between 2000 and 2004. the electrical products produc,ion index declined at an average annual rate of
6.1 %. In 2004, the production index in electrical products decreased by 9.4% to 133.3.
• Between 2000 and 2004, the export value of “electric sound or visual signalling apparatus (for example, bells, sirens, indicator panels, burglar or fire alarms), other than those of heading No. 85.12 or 85.30. Other apparatus: visual signalling” increased at an average annual rate of28.5%.
• In 2004, the export value of the electric consumer products industry increased al an annual rate of 52.9% to RM5.2 billion. Exports of the electrical consumer products industry accounted for 30.2% of the total electrical products industry’s exports for thaI year.
• In 2004, exports of electrical products (including consumer electrical products) conlinue to be a major export earner, increasing al an annual rate of28.4% to RM 17.2 billion.
• Between 2000 and 2004, the import value of “electric sound or visual signalling apparatus (for example, bells, sirens, indicator panels, burglar or fire alarms), other than those of heading No. 85.12 or 85.30. Other apparatus: visual signalling” declined at an average annual rate of 17.7%. In 2004, the import value of electrical visual signalling Apparatus declined by 82.9% to reach RM21.1 million.

(Source: Summary Independent Business and Market Research Consultants’ Report updated 9 September 2005 prepared by Vila! FaclOr Consu(linR Sdn Bhdjor Ihe inclllsion In this Prospecllls) 4.7 Major Customers The Group has a wide customer base, comprising a total of approximately 58 customers for Ihe financial year ended 31 March 2005 and is not dcpendcnt on anyone customer. The Group’s top ten (10) customers for the financia! year ended 31 March 2005 are as follows:­~~me of Customers  Length of Relationship (No. of Years)  1% of Revenue for the Financial Year Ended 31.03.2005  B&Q pic. UK Novar ED & S. UK Wickes Building Suppliers Ltd.. UK Massive Lighting Products NV, Europe Ilomcbasc Ltd.. UK 1lager F1ectro S.A.. France Optcx Co.. LId.. Japao RAB Electric M~nufacturing Inc., US Musashi Co., I.td., Japan rimeguard Ltd.• UK  8 13 4 15 4 6 II t5 4 4  21.3 I 16.34 825 6.94 6.64 6.17 6.10 5.59 3.63 2.67
Please refer to Section 3.5 for the potential risk of dependence of the IQGHB Group 0/1 its major customers and the mitigating factors relating thereto. 4.0 INFORMAnON ON IQGHB GROUP (coIlI’,,) Major Suppliers The Group has approximately 313 suppliers and is not dependent on anyone (I) supplier. The Group’s top ten (10) suppliers for the financial year ended 3\ March 2005 are as follows:­Name of Suppliers  Length of Relationship (No. of Years)  % of Group Purchases for the financial Year Ended 31.03.2005  Jnl~rqllartz Taiwan, Taiwan'” Pak Cheung Entcrpri::ics Ltd, China Cong llua Hua En Ph\slic Factory. China Niccra Hong Kong Ltd. China Achieve Teclll1ology Limited. I-long Kong HK Wealth Company. China Lu<;n Cheong lIong Pla-slic Material Ltd” !long Kong Firmar Plastic Indu::;lrit$ Sdn Rhd, Malaysia Heng Pu F.h::ctrical Appliance Co, Ltd.. China Qi On Lighting Sourcing Co. Ltd.. China  16 5 5 5 5 5 5 9 5 4  11.14 9.27 4.9~ 455 4.25 4.06 2.15 1.~7 I.XC> 1.77
NOJe:­• hllerquol”t: Taiwan is a company in which Chen, Wen-Chin also known as Kent Chell ,:\-a direClnr ond a .l”uh.~fanlial slwreholder. Please refer to Section 3.6 for the potential risk of dependence on the major suppliers of the lQGHB Group and the mitigation factors relating thereto. 4.9 Future Plans and Prospects 4.9.1 Overview of Future Plans The future plans of IQGHB Group are focused in five (5) key arcas as depicted in the diagram below:­F.ni’lilling Technology
I il.1ini:llure JlIR Motion I SCI\:>orS New Products I Wirde~s Video nOOr rht\n~’ CMOS hll:lging  I  Intelligent Ilmlle Security System  Radio frc~lu..:ncy  Intcllig.cnI  Links  I  I!ome Control  ·1·T;lnscci”..:r~  I  ]I\((.:rn\;t ·bascd S\”cur;t)’ Sy~lcm  VIdeo I”e(;hnolug) l’res~l1cc Dl:leding SCll!iorS  I I  Ikcorat;n: and. (jardcn ]jghlin~ \llili~ing miniature I’IR l11orion :;crJ:;(Irs Mudulc~
Future Plans oflQ0I1I3 Group Enhanced Products Slllar-p(lwcrcu I.EDI S~curil~ Lightini; I Radii) rrcqui,ll\c)’ Link Security I,ighting ISecurity Lighting and Vlth:o Combination I pm and Video Capture Scn:;or Cumbination I Witdcs~ VideoI Door Ell1I’) I bpansion of Export Markels E’l:pam:ion 01 Manuf3<:.lurirJg r:”ciljli~s (‘hilla
The IQGHB Group plans to drive future business growth by creating a portfolio of consumer products that have a wide range ofapplications and appeal to a broad spectrum ofconsumers. In order to implement this strategy, the Group plans to develop enabling technologies that can be used to enhance its existing products and develop new products. • the enabling technologies that the Group plans to develop includes:­Miniature PIR motion sensors; CMOS imaging; RF links; Video technology; and
Presence detecting sensors. • the enabling technologies will allow the Group to develop new products such as:­Wireless video door entry; Wireless video door phones; Intelligent home security products; Intelligent home controls; Internet-based security systems; and
Decorative and garden lighting utilising miniature PIR motion sensor modules. • the enabling technologies will also allow the Group to enhance existing products, including:­Hi~Fi door chimes; Solar-powered LED security lighting; RF controlled security lighting; Security lighting and video combination; and PIR and video capture sensor combination. • In tandem with its technology and product expansion plans, the IQGHB Group also plans to expand its production facilities in Malaysia and China through internal generated funds. • In addition to its existing export markets, IQGHB Group plans to expand its presence in the US market. 4.9.2 Prospects The Directors of IQGHB hold a positive view on the future prospects for the Group. In addition to the favourable consumer electrical products industty prospects outlined in Section 4.6.8 of this Prospectus, the Directors of the Company hold the opinion that the Group enjoys the following competitive advantages:­(i) Palents and Technologicallnnovalion The Group’s ability to generate technological innovation is evidenced by the number of patents for technology related to PIR motion sensors held by the Group. As at the Latest Practicable Date. the Group owns four (4) patents covering two (2) technologies. The Group is currently awaiting approval for another nineteen (19) patent applications covering ten (10) technologies. The ability to generate technological innovation is a key competitive advantage which enables the Group to develop and introduce new products and continually improve its existing products. (ii) Product Development The Group has recently diversified into manufacturing of sophisticated door chimes. This new product range has also been integrated with security lighting to create innovative hybrids. The ongoing application of RF technology into products will help to expand and refresh the Group’s product portfolio. The Group’s emphasis on R&D has enabled it to create and sustain its competitive advantages. (iii) Presence in Key Export Markets IQE, which is primarily involved in marketing and distribution, covers the European market whilst IQJ covers the Japanese and other Asian markets. Its physical presence in key export markets enables the Group to undertake extensive marketing thus creating ongoing demand for its products. Physical presence in two (2) of its largest markets gives IQGHB Group a significant competitive advantage that is not commonly or easily duplicated by competitors. (iv) Extensive Distribution Network The Group’s products are extensively distributed in the UK and Japan. The Group’s products can be found in one of the UK’s largest DIY retail chains -B&Q pic, a subsidiary of Kingfisher pic. B&Q pic has over 300 stores spread throughour the UK. In addition, the Group’s products are also marketed using customers’ own brands. In most cases, the brands are considered to be leaders in their respective markets such as HFriedland” and HMassive”. (v) Market Reputation and Established Track Record The Group has successfully established a reputable track record in product innovation, quality. reliability and service excellence. The Group is also an established supplier to a number of leading retail distributors, such as B&Q pic in the UK and Massive Lighting Products NV in Western Europe. The Company has also achieved “Category Supplier” status in some major retail outlets. As the “Category Supplier”, the IQGHB Group is responsible for supplying the full range of products for the designated product category. As such, the Group can leverage on its track record as a reference point to win new customers. (vi) Established Customer Base The Group enjoys long-tenn business relationships with its customers. The average length of relationship between the Group and its top twenty (20) customers is eight (8) years, with 99.60% of these customers dealing with the Group for three (3) years or more. The two (2) longest­standing customers have been dealing with the Group for fifteen (15) years. The established customer base has been providing IQGHB Group with a steady demand for its new products. (vii) Strong Export Market Performance The Group generated 99.80% of its revenue from export markets during the financial year ended 31 March 2005. The majority of its export customerS are located in developed markets with an affluent population. The Group’s main customers are located in the UK, Japan. US, Belgium, Germany. Switzerland, Hungary, New Zealand, Mexico, France, Singapore, Eire. China and the Netherlands. The Group’s ability to access overseas markets provides a platform for future business growth and expansion. The Directors of IQGHB are also of the view that the prospects of the Group would be even bener if the Group were to further expand its sales into the large US market, a market which it has not been actively pursuing. As at 31 March 2005, approximately 94.1% of its total sales are to Europe and Asia Pacific region whilst exports to the US only accounts for 5.7% of total sales. IQGHB intends to increase its exporl to the large US home improvement market by conducting store tests with the large US DIY distributors such as Home Depot, a world renown home improvement retailer. 83

 

 

Comments are closed