Business Overview

5. MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERAnONS 5. MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERAnONS The world is presently undergoing a revolution brought about with the advent of the Information Age. Recognising the opportunity at hand, the Prime Minister of Malaysia launched Malaysia’s information technology initiative with the creation of the Multimedia Super Corridor (“MSC”). Aimed at being the launch pad to propel Malaysia into the Tnfonnation Age, the MSC represents a comprehensive action plan encompassing physical and technology infrastructure and logistics, legislative framework and fiscal incentives, all promulgated in its Bill of Guarantees. As part of the MSC initiative, the Government formulated seven flagship applications that were meant to-be the focus of the drive towards achieving the vision. The seven flagship applications being the primary areas for multimedia application arc the introduction of multi-purpose cards, smart schools, Iclemedicine, borderless markding center, world-wide manufacturing web, electronic government and R&D cluster. The Government’s initiative to establish a sole and universal platform for the WC (“Multi-Purpose Card”) is with the intention of it being the standard platform adopted by both the public and private sectors. The MPC card, incorporating a microprocessor, would perform multiple tasks including data processing, storage and file management. With enhanced security features and memory capacity, the card was envisaged to be more than an ordinary memory card. It was anticipated that this eiifd would facilitate more efficient, trouble-free transactions with the public and private sectors. Further, other flagship applications of the MSC like electronic government would involve extensive use of the ‘MPc. The introduction of smart eards is ex.peeted to lead to more cost-effective and quality services, and at the same time allow Government agencies to reenginecr the way things are done presently. ICA has crystallised this vision with the MyKad, one of the flagship applications of the MSC. Tn the early 1990’s one of the promoters of TCB, Yap Hock Eng struck upon the idea of electronic identification as a means of preventing forgeries that occur on document based crimes a..<; electronic identification would have the advantage of enhanced security features. I.R.I.S. technology was born ofl”ering the ability to store vast amounts of data and images onto a speciall)! developed silicon chip. On 23 March 1998, this technology saw its first commercial application with the launch of the MEP. The Group has since developed further applications based on the core technology for use in the telecommunication industry, entertainment theme parks, and for identification and data stomgc purposes. The Group has invested heavily in research and development and in the acquisition of complementary technologies, its associated compan)’ IRISTeeh and in plant and machinery. As such the Group’s performance is very much dependent on achieving market acceptance for its smart card based security solutions and a critical volume of sales, and this is further dependent on the Group expanding its activities bc:yoncl the shores of Malaysia. At present, reB Group is already in negotiations with a South East Asian country for the licensing of the lCaS software and is supplying telephone cards to the Philippines through IRISTech. The Group has also participated in tenders for supply of electronic passport and identification card solutions to Ireland and Indonesia. Through strategic alliances, the Group hopes to market its products around the world. The Group’s operations are located at the Technology Park Malaysia, l3uki! Jalil, Kuala Lumpur which is located in the MSC corridor. Believed to be the Erst fully integrated smart eard producer in this region, this 330,000 square feet facility is designed to meet the security standards required for a security document printer. Two ofthe companies in the Group have been conferred the benefit ofMSC status, namely ICB and TRTSTeeh, and therefore enjoy the benefits granted to companies with such status, including tax incentives. It is believed that benefits derived from the above mentioned status will be passed on to its shareholders. The Group also believes that its proprietary know-how, the copyrights and patents of whieh arc registered and filed with Ihe United States Department of Commerce, Patent and Trademark Office, the South Africa Patent Office and Ell Patent Office, would enable the Group to forge a competitive advantage in the smart card industry. rCB Group has not filed any patent application in Malaysia or any country other than the USA, South Africa and ED. Apart from the above, the Group’s continued R & D effort, manned by more than 45 professionals, is a proactive effort to ensure that it remains at the cutting edge of sm art card based security solution technology. s. MANAGEMENT’S DlSCUSSIONS AND ANALYSIS OF FINANCL\L CONDlTION AND RESULTS or OPERATlONS (CONT’O) 1be Group’s main contracts to date include the supply of hardware and software 10 lhe Oovemmem for the MEP project. The infrastructure for the MEP project has been implemented across Malaysia and lIS at to-dnte, 36 units ofImmigration Autogate System had been installed. The Group is also currently actively participating in the Consonium, through its 20% equity participation in Gesa, which has been awarded the contract for the Sl.Ipply of the MyKJUi. The project, being one of the nagship applicalions of the MSC, is deemed a projecl of naliona! importance, more so due 10 lhe symbolic element of the GMPC card to the MSC initiative. “!be implementation of Ih(: OMl”C began in AugU’lt 2000 lI.fIU lhe initial launch was in April 2001, Iargeling at the population of the MSC corridor amounting to some 2 million eitizen~ As at 31 December 2001, more than 2 million GMPC cards were supplied. The Group is expecting a national rollout ofMyKad in thc near fulure. On 24 July 2001, lCa has received the Proton World Certification (being products which comply with certain minimum international stand:ltds certified by Proton World International B.V.) for its E-Cash ~Jlplication using MCOS opcratingsystem. flnRDcial Aftalysis .and Result! orOperations The Group has heen, until recently. in whal em be termed as tht: ‘development stage’ and as such has not generated sign.ificant revenues prior to this. The main manufacturing arm of the Group, IRISTcch only bcgll.fl opt..’I’iltions in mid-1998. As such the Group believes that its early investlm..-nts in capital, R & D llnd pt.’tsonnel will only bear results in the medium term. The above is further illustrated with the huge eharg~ in the profit and loss account for intereST cost, depreciation llnd research and development over the fiIUncial years prior 10 the date of this Prospectus. There has heer! a significant cash requirement hy the Group to fund its C3pilal requiremenK This has been funded mainly through bank: bmowings but it is envisaged that the Group’s gearing will be reduced witb the proceeds raised from the Public Issue. Although as at 31 December 2001, the Group has accumulated losses of RMlO.91 million (including an exchange los~ of R.\1L6!million), these losses are seen as nece~ly incurred to fund the development of the Group and are attributable to the abovementioned factors. For further di.~cussion on the financial results ofthe Group, n:fer to Section 8.2 “Fin.ancial Analysis”. THE REMAINDER OF THiS PAGE liAS BEt.N INTEA7/0NALLY LEFf BLANK 6. INFORMATION ON THE ICD GROUP 6.1 Incorporation ICB was incorporated in MaJaysia on 31 May 1994 as 11. Technology R~arcb (M) Sdn Bhd under the Companies Act 1965 as a private limited company. The Company was connrtcd to a public compilJl)’ and assumed its present namc on 18 and 20 August 1999, respectively. ICD was awarded MSC status by lIIe MDC on 25 July 1991. The MSC status grant.~ rCB, amongst others, a live (:5) )’e2r (renC\o\-·o.ble up 10 ten (10) years) tax exemption on Slatutory income and fr~–dom or ownership i.e. exemption from thc NOP requirements. For more delails, please see Seclion 7.15.4 on “‘Incentives for the Sman Cud Industry in Malaysia”. 11te Company currently operates in Kuala Lumpur and functions as the Head Office Of Ute Group. ICB is priocipally involved in information technology consulting, implementation IlJld research and dc”elopmenl. The Company has dlree (3) subsidiary and lour (4) asSOCilllcd companies with principal activities ranging from flmar1 curd manufacturing, marketing to R&D. As at 6 June 2002, leu had 80 employees and the Group (including IRISTech) had mOfe than 270 employees.
6.2 Sbare Capital AulJumsedShare Capilol RM • 2,000,000,000 ordinary shllIes ofRMO, 1S each 300,000,000 ISnJed i1nd Pald·up Share Capilal • Existing: 622.000.000 ordin31y shares ofRMO.IS each 93,300,000
• Public Issue of 2 J 1.333,333 ordinary shares of RMO.IS each 31,700,000 125,000.000

I’)elail~ oflhe changes in the Company’s i~..ucd and paid-up share capiUaI since its incorporation are set out below:­Ordinary Shores Dale of .!Jatmenl  No,ofsbarg  Par nlue  <:onsjderallotl  Total  (RM)  (RM)  31.05.94  !  1.00  C”h  2  30.05.96  6,124,m  1.00  Cash  6,12:5.000  24.06.96  2,105.000  1.00  C,sh  3,330,000  20.02.97  1.670,000  1.00  C””,  10,000,000  23.07.98  20,000.000  1.00  “””  30,000,000  28.07.98  10.000,000  1.00  C”,h  40.000,000  20.05.99  10,000,000  1.00  CMh  .50,000,000  2:5.06.99  1,000.000  1.00  C”‘.  5L,OOO,OOO  28.06.99  5,000,000  1.00  Cash  56,000.000  02.07.99  6,000,000  1.00  Co>h  62,000,000  05.07.99  500,000  1.00  “””  62,:500,000  06.07.99  4,:500,000  1.00  Co>h  67,000,000  09.07.99  L,3oo,ooo  1.00  “””  63.300,000  13.12.01  25,000.000  1.00  Olller than cash’  93,300,000  02.05.02  622,000 000  0.15  Other [han cash’  93,300 000
Note.! :­1. fSlUed a.r consltkraJionjor the purchase ojTSR’s state in fRlSTech. Although lh~ Lssue has been filed wilh its cOluiderotion being Ollter lhan cQS/~ the transaction ….as tfficted via a cOn/ra of cash reeeipifor 1M Acquisition and TSR’s subscriptioll ofshores In Jcn. Refer 10 Stetion 6.3.
2. Par value offGB shares split to RMO. /5.

6. INFORMATION ON THE leB GROUP (CONT’D) Preference Shares Date of allotment t’I’o.ofshares Class Par value Consideration Total (RM) (RM) 16.08.96 5,000,000 A’ 100 Cash 5,000,000 20.02.97 5,000,000 A’ 100 C,,” 10,000,000 27,05,97 10,000,000 B’ 100 Cash 20,000,000
02.06.98 (10,000,000) A’ 100 Converted to B 10,000,000 shares 02,06,98 10,000,000 B’ 100 Cash 20,000,000 27.07-98 (20,000,000) B’ 100 Redeemed Noles 1. Class A Preference Shares are not convertible i nlo ordinary shares. 2 Class B Preference Shares are convertible into ordinary shares.
6.3 Restructuring and Listing Scheme Ibe SC and KLSE had via their letters dated 15 June 2001 and 21 June 2001, respectively approved the restrut.1:uring and listing proposals of [Cii on MRSDAQ Market which involves, amongst others, the proposed acquisition by rCB ofTSR’s 30.0% equity interest in lRrSTech. Under a sale and purchase agreement dated 25 April 2000, fCB has acquired TSR’s 20,100,000 ordinary shares of RMI.OO each representing 30.0% shareholding in IRISTech for a total cash consideration of RM25,000,OOO. In turn TSR, has simultaneously utilised all of the abovementioned proceeds to subscribe for 25,000,000 new ordinary shares ofRMI.OO each in rcB. Prior 10 the above, on 23 April 1999, ICe entered imo a sale and purchase agreement with TSR for the disposal of the same 20,100,000 ordinary shares ofRM1.00 each representing 30% of the issued and paid-up share capital oflRrSTeeh for RMl.OO per share. The consideration was settled by cash. TSR’s participation in the Group was initially at IRrSTech but there was always an informal understanding between TSR and rCB that in the event that rCB obtained listing approval from KLSE and SC, TSR would participate in the listing of the Group. rCB was also desirious of having a meaningful stake in IRISTech pursuant to the listing proposals. The runsideration for the disposal and the subsequent re-acquistion is the same at RM25 million and is arrived at on a willing seller willing buyer basis. TSR was a director oflCR until 6 April 1999. The shareholders on 22 September 1999 ratified the said disposal to TSR. A legal opinion from Messrs Jeff Leong, Poon & Wong -dated 22 July 2000 has been procured which opines that this transaction does not infringe Section 132C of the Companies Act, 1965. With the completion of the Acquisition on 3r Dt.-cembcr 2001, rRlSTech became a 49.5% associated eompanyofICB. On 2 May 2002, TSR was re-appointed to the rCB Board of Directors.

 

6.4 Publi.c Issue The initial otlering by ICB will involve a public issue of 211,333,333 new Shares representing at least 25.36% of the enlarged share capital of the Company at an issue price of RMU.30 per Share Lu the following parties: a) 4,000,000 Issue Shares will be made available for application under the public offer; 6. INFORMATION ON THE ICD GROUP (CONT’D) b) 3,000,000 Issue Sh:tres will be mad~ available for application by the employees ufthe Group; ond c) 204,333,333 of the Issue Shan..’S will be made available for application under the private placement. HistoriclllLnformation on the ICB Croup ICB WIIS incorporated in Malaysia on 31 May 1994 wldcr the Companies Act 1965 as TL Technolog)· Research (M) Sdn Bhd. The ComJXlny’s founders are Tan Say Jim, Lee Kwcc Hiang and Yap I-lock Eng. In the early nineties, Yap lIock Eng. who wa.~ then Managing Director of MCS, developed <In electronic idcntificalion technology Ihat could compress and S10re \’as!. amounts oflincar/gruphical data in a limited space of a microchip which he believed would revolutionise idenlification methods for high-level securily. The decision to transfer this technology, known as the I.R.I.S., back borne wus c:l.1a1)7.ed by !he Government’s call to Malaysian scientislS living abroad 10 relurn 10 Mala)osia and help Ih~ country to n..’lliise ilS goal to become a developed nation by the year 2020. On 13 January 1995, a Technology Transfer Agreemenl was sigrn:-d bctw~cn MCS and ICR. Pursuanl to this agreement, MCS had transferred and delivered to feB all rights, litle and interest owned or held by MCS in I.R.I.S., the I.R.I.S. technology and lhe suhsunte, including all i ntdleclUal property righls 10 enahle TCa to dcsign, manufacture on a commercial busis, prcpm-e derivative works 01: distribute and sell such technology exclusively around the world excepl in Egypt, United Arnh Emimtcs, Turkey and the United Kingdom. Under the agreement, ICO is required to pay to MCS a ro)·ally of2% oflhe fiel sales value of all f>ubstratcs sold for a period of 5 years commencing from the date when such sales is effected by rCB, i.e 4 August 1997. rCB had to raise RM4.2 million to complele lhe technology transfl:r. Udng a newly incorporated entit)· wilh limited shareholders funds, the Company decided to team up with BGB. On the same day, the I.R.I.S technology was transferred to lKISTech, in which 8GB then held 70’% equity inu:rest and lhe rcmllining inlerest held by ICB. Upon the transfer of I.R.I.S. to Malaysia, an operating system, l11lInely ICOS, was developed hy Icn under the supervision of Y<lP Hock Eng. Today, rRlSTech owns lhe copyri&ht to the I.R.I.S technology whereas patent applications with regards to the methods WId applicalions of the LR.I.S lies with rCB. lCB owns three (3) approved patents and is awaiting approval for four (4) others made in the USA. ICB has also been awarded an approved patent in South Africa and filed a patent application in the F.U, approvLlI of which is pending to-date. In 1996, the construction for the IRIS Smart Complex commenced, funucu by investments from BGB. The complex togcther with plane and machinery, costing RM8.5 million, is built on a 4.5 acre lease-hold land located at the Technology Park Malaysia in Bukit Jalil, Kualn Lumpur. ICe believes the complex is Asia’s first fully intesrated sm:lrt card manufacturing facility. Lee Kwee Hiang, one of the Company’s founders was responsible for the designing of the manufacturing facilities. ‘The plant is equipped with a complete manufacturing process from silicon processing, to module embedding and personalised printing of the finished sman cards. ICB’s subsidiaries, listed below, r<;:presents the Company’s investments in various projects that are off shoots from its core technology, the I.R.I.S. 6. JNFORMATION ON THE leB GROUP (CONT’D) lnrormation on Subsidiary and Assodatcd Compa.D.its The: details of tile subsidiary and associated companies or len are as follows:·
l\”amc IRIS Tct:ht1Olog~~ (M) Sdn 8hd (302552-H) tIRiSTech”) Asiatronics SdJIllIlI..I (380605-!1) (“Asiatronics/ n. Autrnnation Electronics (M) &In 8hU (3U967.U) (“TLAE’,
TL Tecllnology Ro;earch (Aust) Ply Limil<:tl (ACN075’J13478) enTR (Austn Held rhruugh IR’.~Tech IRIS Information Technology Systems Sdn Bhd (22281Q·K) (“illS”) Confidential Matter Limiled (4549S6) (“CML~) GMPC Corporation &in Bhd (3J4U28-H) (“OMSB”) llatc/l’lac” ur )ncorp(lrati””, 02.06.1994 Mala)’Sia 21.03.19% Malaysill
06.10.1994 Malaysia 09.10.1996 Austrulia 13.08.1991 Malaysia 23.1J.l993 IJung Kong 18.02.I’J’Jj Mllbysia Pri~ip”1 8.5i~~ Smart card design and manufacturing Distributor ofdelllronic boarding p:tlS and bawgelags Di~tnbutor of sman card readers Investment Holding Marketing COlllacl and eontaetlcss smart techn’Jlogy based product:; Donnm’ SupplyofGMPC solutions to the Malaysian Govemrueru …… ShIre Capllal  0,…,,01 %  RM67,000,000 (Ordinary Shares) RM180,OOO (RepS) RM500,OOO (Ordinary Shares)  49.5 80  RMI,OOO,OOO (Ordmary Shares)  7l  AllD3,500,OOO (Ordinary Shares)  100  RMl.OOO.OOO (Ordinary SIN/res)  100  IIKS20 (Ordinury Shares)  100  RMS,OOO,OOO (Ordinary ShflftJ)  20

6.6.1 Information on IRISTech a) History and Business IRISTech was incorporated in Malaysia on 2 June 1994 under the Companies ACI 1965 as a J’II’ivate limited company under the name of Ar:iunan Citra Sdn Bhd, The Company assumed its present name on 4 February 1995. TRISTech is principully engaged in information technology ownership, research and development in the use of smart Icclmology amI manufocturing of contact and contact less smart tcchnolog)’ based products. IRISTcch was awarded MSC status on 10 October 1997 by the MDC which en3btes the company 10 enjoy, amongst others, R five (5) year lax holiday renewable for UllOtht:r five (5) years. IRISTeeh is a 50.5% StIbsidiary of 8GB. 6. lNFORMATTON ON THE lCB GROUP (CONT’D) One of IRISTC(h’s biggest achievement to date is being awarded the contract (through its wholly owned subsidiary, IITS) for the MEP Project.. The electronic passport comes with a microprocessor chip embedded in its coyer, which electronically compn:sscs nnd stores the photOgrdph and biodata of the passport holder. It is belicyed to be the tim of its kind in lhe world. The projcct was launched by lhe Prime Minister Datuk Seri Dr. Mahathir Mohamad on 23 March 1998 and is expected to replace all the Malaysian passports currenlly in circulation. It has also been successful (through its associate company, GCSB) in securing the GMPC project for the supply of MyKad. The GMPC project represents one of the flagship application of the MSC, The MyKad was officially launched by the Deputy Prime Minister on S September 2001. IRISTech is the manufacturing arm of the ICB Oroup. fRISTech owns the IRIS SOlan Complex which is located on :l. 4.50 acre:; Itase·hold land at Technology Park Malaysia, Buki! Jalil, Kuala Lumpur which the Group bclicvtS is Asia’s first fully integrnted manufoc;luring facility for contact and conlllCtless microchip cards (memory and microproccssor), magnetic slripc cards, contacdess document inserts and assembled module in tapes and reels for commercial usage. The manufacluring f:lcility has the capacity to house 4 production lines, and is able to operate up to 24 hours a day. Currently, the plant has one (I) production line, operating eight (8) hours i.c. one (I) shill a day with a production capacity of 1.3 million fmished smart cards per month. IRISTech holds the copyright to the I.R.I.S [or the design, development and manufacture orsmart card:;. b) Share Capital AUlhorised Share Capital RM • 85,000,000 ordinary shares of RM 1.00 eoch 85,000,000
• 1,500,000,000 redl.lemable convertible preference shares of 15,000,000

RMO.OI e~h 100.000,000 Issued and Paid-up Share Uipilul • 67,000,000 ordinary shsn::8 ofRM t.OO each 67,000,000
• 18,000,000 redeemable conyertible prcfcrene< shurc:.s of 180,000 RMO.OI each

67.180.000 THEREJIAINDER OF THiS P,IGE HAS BEEN fNT£NTJOA’rtLLY LEFT BLANK 6. iNFORMATION ON THE ICD GROUP (CONT’D) Details of the changes in IRISTech’s issued and paid-up share cllpital since ils incorporation arc scI oul below:-Ordinory shares 02.06.94 21.01.95 20.03.98-03.04.9& 04.12.98 20.03.98 8% Preference shares 30.04.96 19.09.96 26.l2.96 20.03.98  No. of , •.,q 2 15,299.998 35,700,000 16,000,000 18,000,000 3,000,000 6,000,000 1,710,000 (10,710,000)  p” ….11fe (Ri\I) 1.00 1.00 1.00 1.00 om 1.00 1.00 1.00 1.00  Consitkrtlioo Ca.~h Cash Cash Cash Ca~h Cash Cash Cash Redeemed for “‘h  Total (RM) 2 15.300.000 31,000,000 67,000,000 180,000 3.000.000 9,000.000 10,710,00
NOft~· :. J. The RepS holdtrs are entitled to participate in profits pari paS.11i witll ordinary .fhnreholJers subjoct to the ronw:rsion ratio described in SeCt/Oil 16 and. has priority Q\·e,. ordinary shares ill ….-indillg-up bill has no \'()ling rights. cj SubSidlory olld Associated Companies IRISTcch has two wholly owned subsidiary companies, ill’S and CML. and an associated company namely, GCSB. Ddllils of the three companies areas follows:-Issuedalll! Subsidiary Country and Date PaId-up Shllrc t:rrccti…t Company yfloS’oroora!iog ~ !!!.!£m! Prigcinal Acsjyitiq lITS 13.08.1991 RM2,OOO.OOO 100% Marketing l,:ontael tlnd Malaysia contacttcss smart tcochllOlogy based ”’,””” eM). 23.11.1993 HK$20 100% Donn”‘l Hong Kong GCSB 18.02.1995 RM5,000,OOO 20% Supply of GMPC Malaysia solutions to the Malaysian Government 6. JNFORMATION ON THE ICB GROUP (CONT’D) d) Employees As al6 June: 2002, IRISTech has L94 employees. 6.6.2. Injormation on TUE a) Ilistory and Business TLAE was incorporated in Mala}’j;ia on 6 October 1994 under the Comp3nie~ Act 1965 but has nol commenced commercial operations. The company is principally involved in the development and manufacture of computer hardwurc and software. The oLher major shnreholdl’T ofTLAE, who hold the remaining 25% equity interest, is Sin Hock Ke:ln. b) Shure Capital Authorised Shure Capitol  RM  •  J.000.000 ordinary shares ofRMI.Q.O each  RMl,OOO,OOO  Isswd and (‘aid-up Share Capital  •  1.000.000 ordiMrYshares ofRM:I.OO each  RM I,000.000
Details of lite changes in TLAE’s issued and paid-up shiU’c capilal since its incorporation are set out below:­Date of No. of Par valle Total IIUMmeot sharts IRM) Consideration ll\Ml 6.10.94 2 1.00 C”h 2
5.07.96 999 9IJ1I 1.00 Ca:sh 1.000.000 c) Subsidiary and Associated Companies TLAF. has neither subsitliar)’ nor nssocialed company. d) Empluyee.~ As at 6 June 2002, TLAE has no employees. 6.6.3. Injormatlon on Aslatronics q) History and Business Asiatronics was incorporated in Malaysia on 21 March 1996 under the Companies Act 1965. Asialronics is principally involved in \he marketing and development of airline and airplane security systems:, one of the key applications of the I.R.i.S. technology. A major achievement for Asiatronics is the development of the UP3SS which Involves eleclronie boording passes, radio frequency baggage tags and lag readers. The IIPBSS underwent a test run at the Langkawi Intcm:ltional Airport in November 1997. This system docs a “bag matching” i.e. positively identities fhe passenger with his baggage to ensure thllt tht’ luggage of passengers who had checked in but did nOl: board the plane are not left on board the plane in line with IATt\ regulations. 6. iNFORl\1ATION ON THE leB GROUP (CONT’D) The innovation of lIle IlPliSS received media attention from as far as the UK. On 3 December 1997, lite British Broadcasting Corporation (“BBC”) featured the llP13SS system in tlte documcnlary “Tomorrow’s World”. The olher major shareholckr of AsilllrOnics, who holds; tht: remaining 20010 equilY interest, is Tirai Ombak Sun Bhel. which is owned by the estale of Ihe Jale Dato’ Dr Wan Adli bin Wan lhrahim and Wan Hamdy bin Data’ Wanlbruhlm. bj Share Capilal Au/horisM Share CapiJai RM • 1,000,000 ordiuary sham ofRM 1.00 each 1,000,000 Issued and Paid’l«I Shau Capila/ • 500.000 ordinar)’ sllares of RM 1.00 each 500,000 Details of the r.;hanges in Asiatronics’s issued and paid-up share capital since its incorporation are set out below:­nate of .llotnw-nt  No. of !.hill!  P.r value lliMl  ConsidcfIltjQP  Tobll l!!lli  21.03.96 09.05.96 m~.07.%  2 2 499.996  Cash Cash Cash  2 4 500,000
c) Subsidiary and Associate(/ Companies Asiatronics has neither a subsidiary nor an associaled company. t() Employees As at 6 June 2002, Asiatronics has no employees. 6.6.4. Tn/ormatiun OR TLT/l (Aust) a) History and Business TLTR (Aust) was incorporated in AuslJalill wilh !he name Middle Eas, Nominees Ptc Ltd on 9 October 1996. Its present name was assumed on 14 March 1998. TLTR (Aus!) is a wholly owned subsidiary of rcB. II is Ihe investment holding arm [or the Group for investments in Australia. Its investments include a 10.8% equilY i.nterest in Intcrcllfd, an Auslralian company cUlTentl)· sct:king re-quotation on Ihe Australian Stock Exchange, making it one of lntercard’s largest shareholders. Inlercard is involved in the development of automatic contactless identification and communicalion systems. 6. INFORMATION ON THE ICD GROUP (CONT’D) b) Share CCl{Jilal Authorised Share Capitol hun • 8,970,000 ordinary ~hares of AUD1.OO cach 8,970,000
• 1,030,000 preference shares of AUDl.OO each 1,030,000

[uued and Paid-up Share Capital • 3,SOO,OOO ordinary share ofAUDl.OO cach 3,500,000 Dt:lails of Ihe changes in TLTR (Aust) issued and paid-up shore capital since its incorporation are sel OUI below:-Ullt of No.of Parvalut Totul allotment shares lAJ.!l!) COllsidel’lllion WlJl) 09.10.96 I 1.00 C3!’JJ 1.00 25.10.97 1,249,999 1.00 Cash 1,250,000 15.02.97 500,000 1.00 Cash 1,750,000 01.07.97 1,100,000 1.00 Cash 2.850,000 05.03.98 650,000 1.00 Cash 3.500,000 Subsidiary and Associated Companies<‘ TI..TR (Aust) h;lS neither a subsidiar)’ nor an associated company. d) Employees I\s at 6 June 2002, TLTR (Aust) had no employees. 6.6.5. Information on 11TS a) History and Business UTS was incorpornted ill Malaysia on 13 August 19’JI under the Companies Act, 1965 as Bcrjaya Infonnation Technology Sdn Bhd. The company changed its name to Berjaya Information Technology Systems Sun Bhd on 14 October 1994 before assuming its present name on 25 August 1998. IITS serves as an intennediary for the Group in supplying silicon substrates manufactured by [RISTceh to JiM for the MEP project. b) Share Capita! AUlhorised Share Capllal  RM  •  5,000,000 ordinary shares ofRM 1.00 eolCh  5,000.000  IsnJed and PaiJ.up Sha~ Capilo!  •  2,000,000 ardinary shares ofRMI.OO rnch  2.000,000
6. INFORMATION ON THE leB GROUP (CONT’D) Details of the changes in lITS issued and paid-up share capital since ilS incorporation are set out below:­Date or allotmegt 13.08.91 06.12.95  2 1,999,998  (IlM)  Coosklention Cash Cash  2 2,000,000
c) Subsidiary and Associated Companies IITS has neither a subsidiary nor an associate company.
d) Employees As at 6 June 2002, nTS had no employees. 6.6.6. Information un CML Q) History and Business CML was incorporated in Hong Kong under the Companies Ordinance on 23 November 1993 as a private Ii mited company. The company is currently dormwl1. b) Slul’/:. Capital AUlhorised Shore Capitol HK’ • 1.000 ordinary shares oflll<.$lO.oo each 10,000 Issued and Paid-up Share Capilal • 2ordinarvsharcsofHKSIO.OOcach 20 Details of lhe changes in CML’s issued and paid-up share capital since its incorporation are ~l out below:­Dale of No. or Par value Totlll allotment shares ContldmlliOl IHKll~ 23.11.93 2 to Cash 20 c) Subsidiary and ASSOr:iated Companies CML has neither a subsidiary nor an associate company.
AS at fl June 2002, CML had no employees. 6. INFORMATION ON THE ICB GROUP (CONT’D) 6.6. 7. Information on GCSB aj History and Business GCSB was incorporated in Malaysia on 18 Fcbruary 1995 under the Companies Act, 1965 as Abad Merdeka Sdn Bhd, The company changed its name to GMPC Corporation Sdn Bhd on 17 September 1998. GCSB is thc company set up by the Consortium and was awarded the contract for the GMPC project by the Malaysian Ministry of Home Affairs on 3 May 1999. The Group’s role in the project is to provide card technology inclusive of tbe operating system for the GMPC project and the MyKad. GCSB is equally owned by each ofthe company of the Consortium. b) Share Capital c) d) Autlwrised Share Capital R.\l • 5,000,000 ordinary shares ofRMl.00 each 5,000,000 Issued and Paid-up Share Capital • 5,000,000 ordinary shares of RMl.00 each 5,000,000 Details of thc changes in GCSB issued and paid-up share capital since its incorporation are set out below:­Date of allotment  No. of shares  Par value (RM)  Consideration  Total (&\1)  18.02.95 24.08.98 28.05.99 22.07.99  2 3 249,995 4,750()(1O  Cash C~h Cash Cash  2 5 250,000 5,000,000
Subsidiary and Associated Companies GCSB has neither a subsidiary nor an associate company. Emplayees As at 6 June 2002, GeSB had three (3) employees. TlIE RE.lIfAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEn’ BLANK 7. BUSINESS OVERVIEW 7.1. Group Structure The ICB Group consists of reB JS the holding company, three (3) subsidiary companies namel}’, Asiacronics, TLAE and TI..TR (Aust) und four (4) associated companies, namely IRJSTech, UTS, CML and (lCSB. TLTR (Aust) a wholly owned subsidiary of leB, is incorporated in Australia which holds an investment in intercard. a company currently seeking re-quotation on the Australian Stock Exchange. Inlercard. Details on the Group’s subsidiaries and associated companies are disclosed in Section 6.6 on “lnfonnation on Subsidiaries and Associated Companies”. A graphical dcs,,:ription of the Group is depictcd below. IlrlT”d””:J!Og~)1R.el.””,b (Anlt) …….. I
Tcdmolugic:.I “” I I Sdn8hd ~ Pl’I Limite<!M) Sdn Bhd (D<v.Ioprn..” .I:;(Manuf><tuT< of (l1>tJ:8″‘ted J’u’i<ng<Y (InH,!mont.”,m C2’1i,) ond b”U”l;~ ding)M.~~r_ftof t,.,…..,•s<c\I1ity bgI} 1M.
.,-,. .’• ””’ 10.’ IRIS lnrrn..ti…
(;MPC (:orponotiOll eouf””””;.! MIU…T«llooloiYS~’ Limitrd “” ‘”” “”‘””

(GMPC Project) “‘;oI.lts:­I. 20% ojhia/runics Is held by Timi Ombak Sdn Bhd, whkh Is owned by the eSfUlf! oj the late Dato’ Dr Wan Adll bin IVan lbrahim and Wan Hamdy bin Da/t>’ Wan Ibrahim. 1. 25% QJ1lAE is he(J by an individual. name{l’ Sin Hock Keufl. 7.2. Principal Activittes Ihe ICB Group is principally involved in the prOVISIon of smart card based sec\lrity solutions. Identification is the hasis of all high security applications. ]be conventional document/manuscript type identilication leaves much to be desired in tenns of security, leaving room for global fraud and terrorism to prevail in today’s society. Thcn:fore, a forge-proof method of identification has always been a highly sought after commodity. In this age of infonnation technolog)’ and paperless society. microprocessors are seen to be hener ahernalives for storing security-sensitive information, based on the rationale thai the infonnatioo stored cannot be re:KI by the human eye and thus bctu:r protected from anempts 10 tamper with tile slored information. Moreover, microproct:ssor chips like those developed by the Group, are dillicult to be latllpered with. as any aUemplS to do so could fcnder the microchip useless. Smart cards are one of the many. lhough more ubiquitous of me vuriel.y of mediums used to house a microprocessor chip. 7. BUSINESS OVERVIEW (CONT’D) Today, computerized identity vcrifkation tukes the fonn of either a Personal Identification Number (“PIN”) or password, but lately, human biometrics e.g. finger prints, iris patterns, voice, facial recognition etc. are creating a huge impact on clectronic idmtification systems. Without contest, the latter provides higher security and is thus a preferred reference ofa person’s identity. Nevertheless, the problem arising from storing voluminous biometrics data into a limited space on a microchip is greatly underestimated. ICll Group’s solution to security issues concerning card and document based crimes is an electronic identification technology called the “I.R.I.S” solution. I.R.I.S or also !rnown a.’I the Image Retrieval Identification System, is copyrighted with the Patent and Copyright Office in Washington, USA. The LR.I.S technology was developed by Yap Hock Eng, one of ICB’s Directors, a Malaysian residing in the lJK who subsequently transferred the technology back to Malaysia in 1994. More information on lhe technology transfer is detailed in Section 6.5 on “Historical Information on the ICB Group”. The kI:)’ feature of the I.R.I.S. is its ability to capture live images and hwuWl biometrics and compress this information into the limited space available in a microchip and is able to later decompress these Unltgesldata wilhout any discernible loss in resolution. By maintaining the image integrity, this technology is particularl}’ suitable for high security applications which require distinct image and pn.'(;jse biometrics verification. Examples of such application include national identification cards, passpOItS, electronic travel documents, electronic bagg3ge tags, computer network acce.<>s, pay TV, dectronic commerce or ::lny other application which emphasize on so.:urity. ICD has 10 date made seven {7} patent applications to the US Patent/Copyright Office in Wa.<Jlington D.C. USA in relation to the I.R.I.S technology three (3) ofwhich havc been approved. lea also has one (I) patent approved by the South Africa Palt:nt Office and u patent application has also been filed with the EU PRienl Office, which is still awaiting approval lo·date. ICB ha’l not filed :1l1)’ patent appli(”alion in Malaysia or an)’ other countries other th3l1 the USA, South Africa and the EU. 1be Group conducts in-house research and development to ensure continuous product development. Research and develupment ut.’tivities an: focused on technology integration to develop unique smart Cl!rd solutions for the ever changing demands of high security applicafions. The Group also conducts extensive research on a myriad of emerging technologies inclu<1ing Radio Frequency Identification, Silicon Polymcrisatiol1 and FClT~c1eetric Random Access Memor)’. Access to patented tochnology is dooe through technology transfer, acquisition, licensing ugrec:mt:nls und global la;hnulogy partnerships. Based on the notion that a full-proof identification is a never ending quest by any govcrnment in the world, the Grour’s core technology, the I.R.I.S, prest:nts an opportunity for the GrOllP to enler the high technology world ofelectronic or non-document based idcntification for sccurit)’ purposes. ‘.The Group’s earliest achievement to date is being awarded the contract [or the MEP projocl. “fbt: electronic passport comes with a microprocessor chip embedded in its cover, which elcctrooically compresses and stores the photograph and biodata ofthe passport holder. reB believes the MEP is the first of its kind in the world. The project \vas I<lunehed by the Prime Minister Datuk Sen Dr. Mahatir Mohwnad on 23 March 1998 and is expected to replace all the conventional passpons cumnUy in circulation. The Group is also a member uf a Consortium with a 2~;” t:quity stake in GCSB i.e. the company which has bo..-cn Ilwllrdcd the conlract for the MyKad project. The MyKad \\’115 launched on 5 September 2001 by the Deputy Prime Minister. 7.3 Prodacts The Group’s fMe lies in security-based products designed around smart cards. The I.R.I.S technology is tht: underlining technology for all smart card-security applications developed by the Group as it provides a secure method for identification that is diftkult to forge. Depending on the applica!ion. innovative technologies such a” Biometric Verification, Radio Frequency Identification, FRAM etc. nre integrated with the I.R.I.S. lcchnology to provide customist:d security solutions to meet the highest securit), requircmcnl. 7. ‘BUSINESS OVERVIEW (CONT’D) The Group’s first achievement is designing and implementing \”hat rCB helieves to be the world’s first elt”Ctronic passport. The Group’s existing product range includes the following: 7.3.1 EJ~ctronic Fussporl The MEV was launched hy the Malaysian Government on 23 March 1998, which the Directors ofleB believe to be the first of its kind in the world. The MEP contains an I.R.I.S, microchip with 8KB of memory embedded in the back cover, The chip can slOre a digiti7.ed photograph, a thumb print, digital signature and severaJ pages of infonnation about the passport holder, “be I.R,I.S. solution i!l equipped with a highly secure encryption technique that prcVI.’fllS the slored data from being read illegally or tampered with, This information can be retrieved within seconds using proprietary readers that will decrypt and decode the information stored in the microchip, enabling the authorised immigration officers to compare and verify the imag~ stored in the microchip with the person bearing the passport The real securily features found in the I.R.l.S. chip acts as an effe,;;live delerr~t 10 g[obal fraud, terrorism and forgeries, The Group as at mill May 2002 has supplied over 4,3 milliOll sub~trates and is expected to receive c\Jntinuing purchase orders to supply appro”,imately 100,000 substrntcs per month to PKN, the current suppli~r of Malaysian passport to JIM to be inserted into Ih… back cover of the new passports. The Group bc:tic-ves there are currently 7 million passports in circulation, IRISTech was awarded the Asian Technology Awards Bronze Medal by the Far Easlern Economic Review in its 22 October 1998 issue lor ils MEP where il declared that “Iris’ new passport marks a giant technoi()gicnlleap from thc corn,.’m electronic passports,…”, The MEP was on 21 March 2001 award~d the Hest of Electronic Government Applications under the Asia Pacific Multimedia Super Corridor Information Technology and Telecommunication Awards. [n 2001, the MEP has also emerged as the winner for the Information and Communications Technology (“ICT) Product of the Ycar 2001 awarded by lhe Association ofthe Computer and Multimedia Induslry of Malaysia (“PrKOM”). This application can also be modified to facilitate border illX:eS-S control fOr frequent trdvclcrs. For this purpose, an automatic facial recognilion method would be incorpollltcd in the tR.L.S. to replace the task of:ul immigration officer who currently has to do a visual verification of the passport holder. 7.3,2 MyKad The inconvenience of owning a multitude of single-purpose cards :mu the im.:rellsing need to tighten sl:curily measures in card·bascd applications have given rise to demand fOl” a single card for multiple applications which is also forge-proof. The GMPC i~ one of the seven (7) MSC flagship applications, The multi-purpose smlllt card initiative of the MSC consis.t of two (2) eards -the payment eard for applications like debit, credit, e-cash and ATM transactions and the go\’ernment card, which will clUTY details such as nalional identification card (“10”), driving license, immigration anJ medical records, The GMPC WB.’\ awarded Lhe World Quality Commitment International Star Award (Gold Category) by the Business Initiative Directions Committee based in Spain in May 2001. The a\’,.-ard recognizes unique projects around the world showing outstanding commitment to qUlIlity arnJ excellence, The government card initiative now manifest in the foml of the MyKad. The Group’s con: competitive advantoge lies in its proprietary electronic identification technology which has heen 3Jrea.dy tried and tested in the MEP, Just as important, the Group, via IRISTcch has its very own fully integrated smart card manufacturing facility already in operation in Malaysia. The Group teamed-up with Motorola Inc. to develop a specian)· dcsignW silicon chip which provides a platform to enable multiple applications to he run on n single nlicroproces:;or chip. This division of Motorola Inc. WIIS subsel.juently acquired b)’ Atme! Sari, a company incorporated in France. This combination is expected to deliver II 7. BUSINESS OVERVIEW (CONT’Dj highly efficient system that will not only support multiple-applications efficiently but also ensures <I high level of security based on the I.RJ.S. technology. The GMPC pilot project has been successfully completed and the Company is eXpecling the national rollOUI of Ihe project to take place in the ncar future. From its participation on the UMPC projecl., rRISTech expects the project to generate revenues for the leB Group since the: Group possesses the essential technical and milllufacluring capability require!.! for the successful implementation of lhe project. Nevertheless, there arc uppurenl risks involved. Please: refer to the Soction 4 on “Risk Factors” 7.3.3 I.R.I.S. lmegrl1ted Ptl5senger and Baggage Security System (“IIPBSS”) llPBSS is an airport security system which mms ul making air travel safer and more orl!:anisec.l by a compUlerised method cclloo “positive bag matching”. When a pnsscngcr pre&nlS himself at the check-in counter his image :md biometrics e.g. palm print are captured and slon::d together with hi~ flight details in a microchip located in the boarding pa!lS and baggage tag. The baggage tags are channeled through thc airport’s conveyor ~”Stem …..hich is c.:quipped …..ith a radio frequency smart card reader. The reader identifies the d~tination of (he luggage and directs it to the proper location. Before boarding the: aircraft the pas..o;engers’ image and biomelrics are C:Jptured once again 10 be compared with those stored in the microchip OIl the boarding pass. Only upon positive vl:rifi~ation is the baggage released onto the aircnUt; therefore Ihe baggage is not 1I11owcd on board the aircraft unaccompanied. In the evenl a passenger …..ho has checked-in his luggage but does not board the plane, the aircraft should not be allowed to lake off unleo;s his baggage is removed [rom the aircmfi. Flights are usually dclu)”ed because of the onerous task of locating the identified baggage. To counter this delay, the nPBSS uses Radio Frequency Identification (“RFJn”), whereby each baggage tag is equipped with a tadio frequency antenna, which makes it possible 10 easily detect and retrieve the baggage from the hold. The ILPBSS helps airlines to minimise flight delays, reduce baggage handling, impro..c passenger and baggage reconciliatioollnd enhance passenger security. In the US, the Federation Aviation Administration (“FAA”) have staned test-run:. ofsimih~r “baggage mlllching” security devices in airports throughout the Continen!, due 10 increasing pUblic pressure to tighu.:n airporl security after the terrorist bumbing of the PAN AM Flight 103 and TW Flight 800. Gmunmcnts …..orldwide recognise terrorism as a global threat and that airlines are most vulnerable 10 tCITurisl bombings, more so subsequent to the events of 11 September 2001. Positive bag matching is seen as one ofthe more effective mean~ of preventing bombs th:u llIe not detected during pa.~sengcr check-in, from being left on board all air~’raft, The IlPSSS unden.’Ient a test run at the Langkawi International Airport in November 1997. The ilUtovation ofthe IJP8SS has ~ived media attention from as far as the UK. On 3 December 1997, the British l3roadcaSling Corporation (“88C”) featured the ITPBSS system in the documentary “Tomorrow’s World”. However, this product requires further enhancement before it can be introduced comml”TCially and is currently only at prototype Slage. 7.3.4 JJlgi/al Conjerendng System (“DeS”) The DeS is the Group’s a;,:hicvcmenl in conference management and seturity. The DeS provide~ W1 advanced mechanism for VFD display, voting, personal identification and microphone management. The patented stethoscope-like head set combines both headphone and microphone in a single unit to allow speakers 10 talk in a more relaxed and comfortable position. The DeS also offers up to tvielve (12) different interpreted languages. This system facilitales both “open” and “secret” voting. The DeS will automaticaJly compule the results of the voting exercise and display the results on the individual screen. For security access control, the smart card, holding information on personal identitication of the authorised pet:’l0fl 7. BUSINESS OVERVIEW (CONT’D) is incorporated into this system to avoid any unauthorised par1icipation. The smart card also acts as s.n attendanc.e checklist. The OCS works as a stand alone system with the ability to cope ,,\’ilb. up to 28 delegate units. The delegate units are connectal to the distribution module which is connected to the group control. If the need arisc5 for anything exceeding 28 delegate units. the DeS can be supported by an additional central control uniL The DeS was used at the Group of I S Summit and Association of South East Asian Nations informal summit hosted in Kuala Lumpur in ()ctober and Novcmbcr J991 respectively. The DeS wa~ also u~d at Ihc Asia Pacific Economic Conference meetings held in Kuala Lumpur in November 1998. 7.3.5 Smart Lock Srnorl Lock is a computer keyboard wilh a SmOft card interface as a more secure measure 10 prevent unauthorised acces.<; into a personal computer, comp:m:d with the conventional password”! routine. With lhe Smart Lock., keystrokes an: channeled direclly from me ke}’board into tnc sman card via the built in card reader. This process b)])aSSCs the central processing unit (“CPU”) preventing keystroke sniffef!o and “Trojan Hon;es” from capruring the passwords. The Smart Lock uses encryption and electronic 5igMwte for applications wh~re high security becomes priurity. A comprehensive development kit is provided 10 allow users to customi~ their applications. These unique features of the Smart Lock provides positive user idenlificalion, log-on automation, internet prepaid.aa:e!O…. :lnd account-rooming IlJ1d e-mail privacy. To-date, scvcrul units ofSman Lock: had been sold. 7.3.6 Smart Smuy Smart Sentry is an electronic idcntificalion Syslem carried in a smart card which can be u~d in a variet)’ of applications from providing cash, to opening dOOTS or acce~.. to information, i.e. for SO:.lcurity acces…. control. Designed around the I.R.I.S. technology, the Smart Sentry can store a complete database of information from access privileges. pasonal biodata, photo image, transaction log to biometrics in a microchip to ensure a positive and secured identification of the cardholder even if the system is not connected to a central database. Applications for the Smart Sentry can be seen in the IIPBSS. 7.3.7 Contiletless Cards and Electronic TlIgs The Group believes IRTSTech is a forerunner in employing a 8·bit CPU and 8 Kbyte memocy together in a cootaetle:ss substrate. The contactle)S cards has broader applications compared with contact cards due to the enhanced user eonvcnil:ll.ce since the information from the card <::an be read from a distance instead of requiring direcl physical contact_ 1be MEP is similar to a conlaetless card excepl lhat the microchip lies in the passporl itlSlead of a plaslic card. Conlaetlcss cards llJ”C suilable for highly secured access control mlo ftStricled areas, buildings, and across borders. As il can also be used for loyalty cards. electrooic ticketing a.’ld aUlomaled loll payment, the potential ofconlacUcss card application is deemed limiUcss. Electronic tags are principally u5ed for tagging purposes using RFID to read and write infonnation in the tag from a distance. The si7.e of the data stored in the lag may be as little as 64bits of memory. However, even such modest memory offers scope for numerous unique applications thot require tagging. Most thingg CM be tagged: animals. vehicles, goods and even individuals. Tbe wire·less, non·contact nature of the RFID tags is ideally suited for 7. “BUSINESS OVERVIEW (CONT’D) providing low COS\., short range, high speed, identification of moving objects. The key benefit offered by the RFID is the ability to automate processes among others, automatic highway tolling, vehich: anu personal ueccss control, article sorting and tracking such ~ required for airline baggage, courier parcels, library books etc., logistics management, theft detection systems and much more. 7.3.8 Contact Cards Thl: Group manufactures 2 types of contact cards i.e. 16bytes to IKBy1e memory cards and I Kbyte to 32Kbyte CPU cards. Besides developing products from in-house R&D as described above, the Group also manufactures smart cards for customer-specific applications providing customer satisfaction through excellence in service and manufacturing. ThI: Group also manufaaures modules and smart cards for pay-phones. Through locn! distrihulors/agents the Group’s pay-phone card customers include the Philippines Long Distance Telephone Company. 7.3.9 Smart Card Readen’ A reader is a hardware device that functions as an imerfaee media tu cnabk communication between cards and terminal err applialtion. In general, its function is \0 read and verify data from a card or e”t:Il “rite on or update the card. To enhance the security of the I.R.I.S. smal1 card applications, IC13 Group provides its customer:j with proprictary rcallc~ which arc customized according to the applications, lben: art: two (2) types of n:adcrs: Stand-alone IXsktopIPC Integrated Reader and PortabldHandhcld Reader that can be used for any application e.g. N:ltionaIID, Immigration and Health Care. lCo has also developed a 3·in-1 rdlder, which can read and write Cllntact cards, contactless ClU’US anJ I.R.I.S. embedded substrates (e.g. travel documents). The 3-in-l reader is II. personal computer (“PC'”) Iype reader which interfaces with an as)’nchronous RS-232. A security application module chip is placed in I.:ach n:Oldcr to increase the security fenture of the readers. The MEr project, utilises II. 2-in-1 readec which is able to read and write (optional) contact cards and travel documents. The contact cards arc used to identify the immigration officer in charge and to access the immigration online dlltabase. To-date ICD has suppli..:d some 13,000 key ring readers for the GMPC project. The readers could be a stand-alone unit i.e. need not be connected to a central database giving rise 10 lhe possibility of hand held readers ferr user convenience. For contaetless smart cards readers, information on the smart card can be rend from II. distance ranging from IOmm to 600mm using radio frequen<:y. In the case of electronic baggage tags, the readers llot only read the information stored in the microchip embedded in the tag but also powers-up the microchip. The reader t~hnology used by the Group provides high speed encoding, decoding lUId retrieval of dala from the substrate which facUitales fast and efficient verification. It takes approximately 4-5 seconds to read the standard data for a passport. lbe Group is also looking into making readers ,vhich are compatible to different lypes of cards, llS well liS signature biometrics, which enhances the consistency of readings unlike fingerprint or facial verification. 7. BUSINESS OVERVIEW (CONT’D) 7.3.10 Immigration Autogate System (“IA System ‘1 The IA System is an automated immigration clearance system for pedestrian travellers at immigration entry and exit points. The lA System consists of the following:­(a) Autogate Barricr; and
(b) System and Application Software.

Each immigration cntry or exit point will consist of one or more Autogate Barriers linked to the JIM system. Therefore, each immigration clearance site will consist of one IA system for entry clearance and another IA systcm for exit clearance. As at to-date, 36 units of the IA System has been installed throughout Malaysia. Core Technology -Tmage Rrtrieval ldentification System The I.R.I.S. solution is a result of a complex and uniquc integration process comprising the Group’s proprietary I.R.I.S. tcchnology and othcr gcncric technologies to produce a fully operational computing solution for high security applications. It encompas~s real security features that the Company believes to be effective in combating global fraud, terrorism and forgerics prevalent in most document and card based crimes. I.R.I.S. technology is an electronic identification technology which counters forgery by storing a complete set of identification details of a person i.e. imagcs, biodata and biometrics, in a microchip using a proprietary compression technique. The microchip can then be inserted into documents, cards, or any other choice of eomcnicnt medium which lransfornts the card or document into an intelligent, portable, external data storage ready to be retrieved by proprictar)’ contact or contactless readers developcd by ICB Group to identify Ute card holder. The data is electronically stored in a manner unique to I.R.I.S. and completely invisible to thc human cyc, limiting the chance of document tampering. The technology also cnables data stored in Ute microchip to be searched and retrieved speedily and simplifies checking and updating of data. The compression/decompression algorithm can retrieve textual data and a color photograph in one (1) second and four (4) seconds respcetively. The process of electrically encoding and encrypting provides the additional security on the verified data that is stored in the chip. Application for the I.R.I.S technology is highly marketable fur any high security smart card application where compression of infonnation is of key importance. The five (5) elements of the I.R.I.S. technology are (i) lCOS, (ii) image digitizing, (iii) proprietary encryption/decr)ption algorithms, (iv) proprietary compression/decompression algorithms and (v) silicon masking. The Group’s proprietary compression/decompression algorithm, is the underlining technology of I.R.I.S.. The compression/dccomprcssion algorithm is able to compress and store images, including biometrics such as thumb print, palm print, retina patterns etc in the EEPROM of a 8Kbyte microchip. The compression/decompression algorithm can achieve a compression ratio of 160:1 for color photographs. Although the proprietary compressionJdecompression algorithm is a lossy data compression algorithm, which reproduces an approximation of the original image, the replica has no discernible loss in image quality. By maintaining the image integrity, it is well suited for identity authentication applications as it assures distinct image and precise biometric verification. Ba~d on a technological assessment, the level of compression ratio achieved by the compression/decompression algorithm exceeds that of widely accepted compression algorithms such as JPEG, EPIC and Fractal Image Encoding/Compression. The Group’s proprietary operating system, the leos. is designed in compliance with ISO 7816 standards. Thc Icas is masked onto the ROM codc of the processor, while the data/files reside in the EEPROM. Communication between applications and the operating system is via the serial port and always encrypted. A file manager within the operating systcm converts all logical addresses into the 7. BUSINESS OVERVIEW (CONT’D) card’s physical ones. It also supervises the address range and i,;hel,;ks the aCi,;ess conditions in the relevant file. For enhanced security, the lCOS system uses a dual smart card system instead of the conventional single card system. One card being the “enabler” and the other termed as “interrogator”. In the dual smart card system, an enabled card is employed to authorise the interrogated card to access highly confidential infonnation, eliminating reliance on multiple passwords for various operations. Proprietary encrypli-on keys are used [or communication between two modules. The compatibility of the enabler card and the interrogated card is done through the process of “hand shaking”. Aft-er which, the authentication of the enabler is verified by means of a cballenge-and-response routine in itiated by the interrogated card, as opposed to the use of passwords. The dual card method also liberates smart card readers from the requirement of being on-line or to store passwords and therefore reduce:s the risk of “eaves-dropping”. The biometrics digitizing process involves transfonning visual imagesJbiometrics into digitised images that can he stored in EEPROM located in the chip. The I.R.I.S. solution, depending on the type of application, may also incorporate biometrics verification software which allows personal biometrics to be verified and the uscrs identity authenticated automatically or electronically. Presently, for the MEP project, image verification is done visually. Nevertheless, for future applications, rCB Group has built a technology partnership with Denno Tralle Manufacturing and Trading Company Limited, a Hungarian company to use its finger printing verification software/hardware and a licensing agreement with Visionics Corporation for its facial recognition technology to enhance thc I.R.I.S. technology. The Group has identified several silicon manufacturers such as Atmel Sari, Hitachi, Motorola, NEC, Philips, Siemens, Toshiha and Rahm Co Ltd to mask the rcos onto their respective wafer fah. Ry making the ICOS widely available to major silicon manufacturers it is hoped that the rcos would soon be accepted as an industry standard and subsequently the I.R.I.S. solution would be adopted by software giants to enhance the security features of their products. Key features oftbe I.RI.S. based solution i. The operating system for the substrate can be individually tailored to meet the highest level of security. ii A single substrate! silicon chip can be software-partitioned to provide multiple applications for multiple use (All-In-One Identity Card). Ill. Unique retrieval design architecture makes I.R.I.S. a truly flexible verification system in that it can be made portable, stand-alone, or part of a network environment, either nationally or internationally. iv. Open hardware and software interface architecture of I.R.I.S. provide ease of interconnections with third-party systems.
v. Intrinsic intelligence in the substrate provide verification procedures during a retrieval operation which alleviates the necessity for costly communications links to host computers.

vi. High speed writing and retrieval of data to/from the substrate makes an efficient verification process. vii. I.R.I.S. based solutions can be easily implemented to complement currently applied security technolog.ies. viii. Every I.R.I.S. solution is configured and customised to individual user specifications, making I.R.I.S. solution unique. 7. BUSINESS OVERVIEW (CONT’D) 7.5 Intellectual Properties
7.5.1 Patents and Copyrights rCB has three (3) patents approved by the United States Department of Commerce, Patent and Trademark Officc, Washington D.C. ICB has a further four (4) patents applications filed with the abovementioned authority on 14 October and 14 November 1997 and is currently awaiting their approval. ICB also has one (1) patent approved by the South Africa Patent Office and a patent application has also been filed witb the EU Patent Office, which is still awaiting approval to-datc. lCB has not filed any patent application in Malaysia or any other COl,mtry other than the USA, South Africa and the ED. The patents cover the rcos, proprietary techniques and applications commercialised by the Group. Please refer to Section 4.12 of this Prospectus for the risk involved in any patents fillings by rCB being di:;approved. The I.R.I.S, technology was procured via a Technology Transfer Agreement entered into by lCB and MCS on 13 January 1995 to acquire the I.R.I.S. technology and the related substrate for a consideration of RM4,200,OOO. ICB later onward transferr~d the same to its associated company, IRISTech, on 13 January 1995 for a purchase consideration of RM4,500,OOO. IRISTech holds the copyright to the I.R.I.S. technology. Description of the patents and cop)’Tight, and their respective status are as follows:­Copyright held by IRISTech I.R.rS. Copyright (Registration No. TXu 653-151) (approved on 4 February 1995) The I.R.I.S Copyright was filed by MCS on 3 October 1994 and later transferred to IRISTech and has been approved on 4 February 1995 by the United States Department of Commerce, Patent and Trademark Office in Washington D.C. The Cop)Tight is held by JRISTeeh which effectively gives the company the right to manufacture and market products using the Image Rctrievalldcntificl1tion System (“I.R.I.S.”). Patents owned/applied by ICB in the USA a. Apparatus and Method For Providinf: Access to Secured Data or Area -Serial No. 081970,689 (approved on 21 March 2000) This patent describes the I,R,I.S. Chip Operating System. It describes the Group’s proprietary method of controlling access to infomtation stored in a smart card/document hy using another smart card to provide access clearance to limit the human element in the process. This method requires a specialised reader that is able to read both cards simultaneously. b. Impraved Security Identification Document Including Contactless Communication Insert Unil -Serial No, 081950,0059 (pending appraval) This patent covers contactless applications with biometric data stored in a non­alterable device and printed on any document used for identification purpo:;cs. C. A Method OJ Making An Improved Security Identifica/ion Document including Contactless Communication Insert Unit -Seriai ,/1;’0. 081950,057 (approved on 29 August 2000) This patent descrihes the process of making a smart security document hy inserting a plastic contactless f>ubstrate attached onto a paper based document in a tamper proof manner using a special adhesive. The integrated circuit of the substrate is protected against mechanical damage by first using a metallic ring to strengthen the module and the second layer of protecti on is provided by a thin layer ofelX’xy adhesive, The final document is durable to at least 5 years with normal usage. d. A Security System Using An Improved Security tdentification Document fncluding Contactfess Communication Insert Unit. Seriai No. 081950J)()58 (pendingappravatj 7. BUSINESS OVERVIEW (CONT’D) II describes the proprietlry encryption and oompression algorithm used 10 prolecl the I>io:nelries data stored in the integrated circuil from forgery or data Iampcring. Airport Security Syntm Using An lmprQ~’f!d Securiry ldentificotion Documf!nJ Induding Contoctlt$S CommWlicution Insen Unit· Serial No. 081950,198 (pending OpprOllaJ) Describes an automated personal idcntifiClllion ami verification syslem including luggage ha:ldling and identification, m1tching airplane passenger wilh one or more secured ~oal identification documents, i,e. a luggage tag, travel document and boarding pass. f Mi!thud For COIl/rolling AcceJs Tn A S4!curr Area U$ing An InJfXO’I-.:d Security Idmtijication Docume1I1 Including CotUacl1ess Communication In.Jl’rt Unit.-&rial No. 0S/950.399 (penrJingapprm’al) Describes data encryption and det..-ryption Icchni4ues used to discriminate between “write-once” and “‘write-many'” mcmcwy areas. “‘Write-once” memory areas are used 10 slore biometric data. so any uttGllpts to al~ the informalion slored in lhe memory of a conlaetles!> document or card “‘ill render it useless. Meanwhile olher variable information can be altered by authoru.cd personnel. g. Inrpruved Luggage /landling And Rl!Cmtdliati(m Including Security IdenJijiCaiiof/ ­Serial No, 081950.011 (app”O’IIed 011 22 AugllSt 2(00) ·l1J.is palent describes the use of a eontaelless imcrt uscd as a luggage identification t::Ig which contains the pt:rsonw biomctrics ofthe owoer, flight details and destination which arc read using a radio frequency reader, This is to tacililale reconcilialion hetween flight passenger and luggltgc upon arrival or before d~panure in case of chlillgcs in flight plans. This is in accordance with the lATA ruling wht:n: a passengers’ luggage must be removed from the aircrun in the eVerIt it.. owner fails to bootd the aircraft. Palent owned by ICB in South Afrkl Apparatus and Method For Providing Access to SeClired Data or Area -Seriol No. 2000/1386 (approved on 1/ January 2ooi) This patent describes the 1.R.J.S. Chip Operating Syslem, (I describes the Group’!> proprietary method of controlling access to information stored in n smart cardldotument by using ll.IIolher smart card to provide access clearance to limit the human clement in the process. This method requires a specialised retider thllt is aule to read both cards simultaneously. PalmI applied by rCB in the EU Apparatus and -‘tlethod For Providing Access to Secur~d DaJa or Area -.~ No. ]001/35 (Pending apprUl.’ul) This patent describes the I.R.I.S. Chip Operating S)’stem, It describes the Group’s proprietary method of conlrolling access. to information S10red in a smart cardldocumem by using another flmart card 10 provide acc-ess clearance to iimit the human clement in the proces….. This m~lhod requires a specialised rcadc:r thai. is able to read bmh cards simuh:mcously. 7.5.1 Li«nJing Agreements and JUDUs In its cfron to enhance appticatioos 00 the I.R.I.S. technology, leU Group has ent’C1’ed into V”dl”iou:J Licensing Agrtt:nenlS and MOU, with global technology proprietOf”S. Details:u-e as follows:­53 7. BUSINESS OVERVIEW (CONT’D) G. [)(]rmo Trade Mamifucturing and Trading Company Limited (“Vermo Trade~) Dermo ‘rrade, a Hungarian based company is Ine designer and manufacturer of fmger print capture and verification device. On 13 November 1997, reB Group through LRISTech signed an OEM Agreement with Dermo Trade, whereby IJrI:rmo Tntdc hIlS agreed to provide its finger printing verification software and hardware for sman carrl appliea.tions developed by the reB Group. the agreement will continue until nmtual consent to terminate or upon termination notice served by a party to thc agreement in the events of breach of agreement, receivership or liquidation or material 3dver~ ehange in the ownership, management or control ofthe parties to the agreement. Dermo Trode is to supply the OEM version of the finger print verilicntiun devices to IRISTeeh. The agreement also outlined provisions for technical support and developmenl tools tfl enable Ihe Group to undertake software integration between the LN..I.S. technology and Dermo Trade’s linger and palm printing technology. With Ihe provision or !he lJt;vdopmcnt tools, it would enable lell Groop to develop the soflwan: locall)’ for its range of smart card :;lpplic(ltions. b. D.lrmafoc Ajl.t Asia Sdn fJhd (“Dermalog”) lCB entered into a teaming agreement with Derma/og, on 30 June 2000 to l;ollaborate in resellI1,;h and development activities involving l.>ermalug’s fingerpr;nt verifieation technology i.e. for the MEP and GMPC projects. Dermalog’s AUlomalic Fingerprint Identification System is produced and distributed by Dennalog GmbH, a company based in H(lmburg, GemuU1y. Dermalog will provide the necessary consultation for Ihe tcchnology transfer with regards to thes!;; pr~ieets. The agreement was valid for a pt:riod of 60 mOnlhs until 30 June 2005. c. Vi.nonic.f Cnrpnrali{)fl C·Vfsio”ics”) Visionic.”, based in New Jersey. US is a developer of face recognition technology worldwide. Vis.ioniai has developed a software known l:IS FaccWM for automatically locating heads, capluring faces, normal ising f3.ee.~ and performing identification. On 16 June 1997, TlTR (N.A.), a company owned b)· Yap Hock Eng, enlered into u license agreement with Visionics. ln essence, the agreement grants TLTR (N.A.), its affiliales and subsidiaries the right to use, reproduce and distribute copies of the FaceUDI for applications which involve airport security i.e., airport pll.’lScnger eheck­in and luggage systems (located within an airport or at My airport terminal) wId/or HlIj pilgrimage systems (whether or not located at an airport) for use in Malaysia. The agreement is effective until Visionics no longer has any intellectual property righls in or to Faeelt11ol • The Directors of lell believe that this term represents the life of thc intcllectual property protection filed for by Visionics. A license fee of USS,400,OOO was paid by TLTR (N.A.) and was subsequently sublicensed to the Group for an equal license fcc. TLTR (N.A.) is permitted 10 do so under the said license agreement. n TR (N.A.) has on 24 April 1998 authorised its affiliate, leB Group to use FACelirM on si.milar terms. The authority relnains effective as 1000g a… 11.TR (N.A.) has the rights to Faedt. Please refer to lhe Section 7.3.3 on ITPRSS for details on the use of Visionics’ FaccltT’M technology in this application. 54 7. BUSINESS OVERVIEW (CONT’D) d Sun Microsystems, Inc. (“Sun ‘J ICB entered into an agreement with Sun Mierosystems Inc. on 13 September 1997, to license its Java™ technology for smart card applications, i.e. the Java API. Under this agreement, the Group is given the right to manufacture and distribute products based on Sun’s Java™ Technology (which would carry the Java-compatible logo) in 147 specified countries around the world such as Canada, France, New Zealand, Australia, Hong Kong, UK, Taiwan and Singapore. The licensing agreement shall expire on 3 September 2002 and shall automatically he renewed for another 5 years aftcr the initial five years, unless terminated by ICB. EssentiallY, ICB Group has subscribed to three (3) licenses for development of its smart card application and its derivatives as follows:. • Java Card Environment
• .Tava Applet Environment
• JavaCard Post Processor

The partnership will commence with Sun providing Java core classes and open c:Iasses, which will enable the operating system that resides in the chip to interact with any Java application. ICB Group is expected to send the modified version of the open class in the binary form to Sun for future testing. Only when the executable library has ber:n tcstr:d, can it then be distributed to I.R.I.S. and others. The Java API provides smart card vendors a uniform way to build Java applications fOr their smart cards. This move would create a common platform between smari card manufacturers, enabling Java Cards manufactured by IRISTech to communicate with readers from other Java-compliant manufacturers, and vice versa. Among other features, Java Cards also supports secure “interapplet communication”, i.e. 0….0 applets can exchange payment transaction information. Java applcts can provide calculating capabilities, sophisticated security checks, customised interface, and othcr kinds of onhoard inte11igence. By virtue of Java’s technological ubiquity, the Group believes that Java API would offer a more secure and inexpensive infrastructure for smart cards in general. Bulf CPS IRISTech, on 13 April 1999, entered into a MOU with Bull CPS (France) to co­operate in developing, customising, manufacturing and markcting a variet)’ of smart cards and smart card based solutions. Principally the MOU was entered into to addrr:ss thr: GMPC requirements by supplying Prolon compliant products (being products which comply with certain minimum international standards certified by Proton World International B.Y.) for integration into the project. The MOU encompasses the marketing and customisation of GSM cards and installation of personalization cards. According to the MOD, Bu11 CPS will make available the Bull Proton CC for use in thc initial ro11 out oflhc GMPC and IRISTcch will introduce Bull Cpg as the E-Cash supplier to the GMPC consortium. Bull Cpg and fRlSTech will jointly commercialise Bull’s existing GSM products and Bull Cpg willlicr:nse IRISTeeh to manufacture Bull’s GSM cards once CPS quality label is granted to IRISTech. tCA had on 24 November 1999 entered into a collaboration agreement (“eN’) with Bull CPS to formalise the abovementioned MOU. Under the CA, IRISTech will pay Bull Cpg a royalty of USDO.964 per card for the first 2,055,000 GMPC cards to he supplied to the Malaysian Government. After the initial 2,055,00{) cards supplied to the Malaysian Government, Bull CPS and IRISTr:ch wiB jointly commercialised the cards to other countries. In the event that IRISTech sells in Malaysia, Indonesia, the Philippines, Bangladesh and Thailand, BuH CPS will receive 20% of gross margin from JRISTech’s sales and vice versa. For sales in China, Hong Kong, Taiwan, India, Pakistan, Sri Lanka, South Africa and South Korea, the party who secured the 7. BUSINESS OVERVIEW (CONT’D) projects will take the sales leadership and the other party will be entitled to 20% of sales’ gross margin. For projects which are secured on a joint basis, the sharing of margins will be determined on a case by case basis. 7.5.3 Strategic Alliances In keeping ahead of competition in the security business, the Group is continuously seeking business partners for strategic alliances that will give it leverage in the market. One of the examples of these alliances is: through its interest in Intereard. lntcrcard is an Australian incorporated company currently seeking re-quotation on the Australia Stock Exchange. It is involved in contactless communication system and has recently developed a radio frequency identifiea.tion system used to automate the sorting and control of conveyor fed articles. On 18 June 2001, a Distribution Agreement was signed between Intercard and IRISTech for marketing and distribution rights for products and systems manufactured and marketed by IRTSTech. The agreement is for a period o[ two (2) years from the date of equipment commissioning. As at the date of this Prospectus, the equipment per the agreement has yet to be commissioned. As consideration, IRISTech will receive USD250,OOO for reimbursement o[ development cost and also guaranteed royalty payments over the 24 months for another USD250,OOO from lntcrcard. This agreement is renewable for another three (3) years with corresponding royalty payments. The marketing and distribution rights arc limited within the boundaries of New Zealand, Australia, Saudi Arahia, Iran, Kuwait and United Arab Emirates. 7.6 Market Coverage/SegmentITarget The Group believes thc global market potential and opportunities for the I.R.I.S. solution are innumerable. However, in line with the Group’s vision to make I.R.I.S. the de facto standard in target markets, the Group believes it has carved a niche in high-security identification applications for smart cards. Riding on the success of the MEP project, the Group has also identified similar target markets with demanding security rcquircmcnts such as the USA, UK, South Korea, Indonesia and Ireland. The Group is also supplying in the regional telephone card market in anticipation of the demand for smart cards when payphonc companics switch from magnetic strip cards to chip cards. Besides manufacturing of telephone cards for local telecommunication company, lhl: Group also supply such cards to similar companies in the region, e.g. the Philippines. The Group is also targeting the transportation industry as a potential area for smart card application. The Group also produces contactless cards based on the Mifarc Systcm (Philip’s Proprietary ContactIess Smart Card Operating System) tor transportation based applications such as payment of toll charges and transport ticketing systems in Malaysia. The Group has since October 1998 commenced supply to Rangkaian Segar Sdn Bhd the Touch ‘n Go cards for the highway toll fare in Malaysia It is also hoped that the integrated ticketing system for all public transportation in Kuala Lumpur which allows commuters to use one smart card for different public transportation may be a potential application for the Group’s smart cards. As mentioned earlier, the I.R.I.S. technology offers a unique solution with its high security and multifunctional feature. 1be I.R.I.S. Solution can be applied to any application that requires identity verification and control. All over the world, especially after the event of 11 September 2001, as security issues become increasingly important as elements of fraud, forgeries and terrorism becomes apparent, the I.R.I.S. solution is expected to fill the void of providing solutions that require greater security, and higher efficiency and cost effectiveness. 7. BUSlNESSOVERVIEW (CONT’D) Types, SOUr«5 and Availa.bility of Raw Materialsllnput All manufacturing Itctivities in the Group is carried out by IRISIoch, which is focused on manufacturing smart cards and smart card related products. ‘Below is a list ohaw materials required in the production of smart card.. lll1d the com:sponding suppliers. As for a majority of raw malerials, JRISTech has at least two (2) alternative suppliers, which would limit dependence on anyone supplier. However, some materials are sourced from one supplier either because alternati …e suppliers are either currently non~islcnt or are unable to offer competitive pricing, As one of tbe key players in the smart card manufOCAuring business in this region, the Group believes that it has the potential to cxert strong bargaining power over its suppliers. Other key global players in the smart card manufacluring industry are companies such as Gemplus (France), SchlumbergerSema (France) and Bull Smart Cards & Terminal (France), 1lI1 of which are diwrsified IT solutions providers with global businesses and market COYCrllgc. CATECORY  SUPPLIER  Length or  Annual  Relationship  PUn:bHSes  (RM’OOO)  PVC Monolayer  0)  Lucehc~i, Italy  3 years  330  AilS Resin  (i)  Bayer (M) Sdn 13hd  3 )’eill”S  236  Surface Printing UV Ink  (i)  SICPA Mala)’sia Sdn Bhd  4 years  102  WafcrlDice  (i)  MCS Microsystcms, UK  3 years  19,246  -memory/CPU  (ii) MCS MicTlJsysl~ms Sdn Bhd  3 years  16,142  (iii) Inflneon Technologies (Asia  5 years  60’  Pacific) Ltd  PC Core Film  (i)  Bayer AG  2 years  627  Module Tape  (i)  Gul Tech, Sil~gapo.-e  3 years  730  Almel Module  (i)  Atmel Sari  2 years  31,025  Ag Capacitor  (i)  Syfer Technology tid  4 years  3,115  Coil  (i)  Qd03 Flcxcircuits Sdn Rhd  4,.,..-,  ‘,460  PET Sheet  (i)  GIS Flexible Materials Ltd  4 years  1,228
Production/Operating Capaeities and Output The manufacturing facilil}’ of the Group, operated by IRISTech, is one of Asia’s first fully inlegl<ued manufacturing facility for the design, development, and manufacturing of contact and conlactles… smart cards, contaetless substrates, asscmbk.-d module in tapes and reels or even bLank/printed cards. 7. BUSINESS OVERVIEW (CONT’D) 1be produc1ion capacity and current O\ltput arc given bclow:­Avtral;l:e Production Production Capacity Product Description (‘000 unIWmontb*) (‘000 un its/month-) IRIS Mooule Production 895 1,000 IRIS Contact Curd ProductiOl1 540 800 IRIS Substrates & Contactless Cards 110 150 Proouction I.R.I.S. Card Productinn
J. Injection Moulding 500 1,000

2. Card Puncher 1,100 1,200 t Note: Based on a single work shlj/ of8 hOllrs a day. 7.9 Quality Control Procedures The pnx.’edures and methods employed hy the Group ill it~ uperlltions are as follows:­7.9.1 Ri!C~Mnt: Jns~etjon Inspection of in-coming material is carried out hy trained inspectors in accordance to inspection specifications and acceptance criteria and recorded on an impcction sllcct. The inspection specifications mate the sampling plan, item~ to be measured, mt:asuring equipment u~d and tests to be done. Any non-conforming m:lterial is ~fcrred to the Material Review (3oard for disposition. 7.9.2 In·PTlxe.’is ‘nsp~(‘tion ond Testing The production manager exercises control on all production processes, in accordance to procedures and work inS[nJctioml written for critical processes. Critical processes are monitored using statistical techniques or other suitable methods. The production manager ensures personnel involved in prOl.luI..1ioo are well trained. Equipment used is properly and regularly maintained. The Quality Assurance Department (“Qi\”) monitors the effecliveness of process control at the manufacturing lint: through process audit. All employees arc n::>ponsible fOf the quality of their work and must be in accordance with written procedures and specifications at all times. All appropriate inspection, measuring lUld test equipments used are calibrated periodically. Non-conforming parts arc identified, segregated and refer 10 the Material Review Board for disposition. 7.9.1 Final Outgoing Inspection and Test Outgoing inspection and test nre performed by QA to assure that finished producl<; confonn 10 customer’s specification. Inspection is carried out as per the outgoing inspection procedures and 3l:ccptant:~ criteria. Non-electrical and electrical inspections and tests are performed at Acceptable Quality Level of 0.65% and 0.01% respectively. Status ofinspeetion is idenlified with the usc of rubber stomping or llppropriate document on the packaging. Products which fail final nUlgoing inspt:ction and lest nre referred to the Material Review Board for appropriate OOlion. 7. lJUSINESS OVERVlEW (CONT’D) 7.9… Customer Comp/nittts Sales nnd Marketing Department (“SM>’) Iiaises with customers pertaining to product non· confonnities and co-ordinate in·house investigation with the production mWlager and QA. A “Customer Complaints Form” is initiated by SM and forwarded to QA LO facilitate detennination of root cause and countermeasures. Onee the rOOl cause is dCltTmined, a corrective aClion will be taken accordingly. QA shall audit the effectiveness or the corrective action taken. 7.10 Location or Opttfttions Most of ICB’s commercial sctivilies are centered in Malaysia. The manufacturing arm of the Group is IRISTech. The manufacturing fa.cility is hom.ed in a 4 storey IRIS Smart Complex built on a 4.5 acre leasehold land located at Technology Park Malaysia, 8uldt Jalil. Kuala lumpur. All intellectual propcrt)· rights are held by Malaysian incorporated cumpanies i.e ICB and LRiSTec.h. The Group’s over.>eas operation in Australia consists of an investment in lntercard (10.8%). The Group’s administrative activities arc also bused in Kuala Lumpur. There has been no interruption in the business which has significant effect on the operations of the Group for the past 12 nlonths from the date oflhis ProspeCIUS. 7.11 Research And Development The ICB Group places strong emphasis on R&U to achieve technology and production innovatiOfl. The Groop’s R&D efforts :uc focused on improving lh~ efficiency and capabilities of its production process and on developing new proprietary systems by improvising on existing commercially available· materials and technology. Presently, the R&D team consists of more than forty five (45) professional staff with expertise in electronics Bud telecommunication, electronic manufacturing, and product design and development. Details of the Group’s on-going research and development program lin:: described below. 7.11.1 Sman C(lrd Technology -Imace Retrieval Identification Sfltem For the smart card technology, the ICB Group is currently researching the following: . a. To incorporate FRAM technology into l.R.I.S. technology llriefly, the advantages thaI FRAM otTers Don-voilltile (i.e. the infonnation stored in memory cell does not disappear when power is ofl), higher read/write speed, low internal operating voltage and low power cuosumpLion. reB intends to exploit these llllributes by incorporating FRAM tcchnology. b. To develop and adapt Facial Biometrics and Voice Pallem Recognition processing to the I.R.I.S. te<:hnnlogy These enhancement of the technology is being developed. These two unique recognition features further add 10 the generic security llSpects of the IRIS technology, mQking the overall I.R.I.S. solution more markelllble in the global marh:t place in terms of enhanced security. Thc above development WOl’k is targeteu to ensure the I.R.I.S. products are applicable for II wider spectrum ofthe market usage and be accepted globally. 7. BUSINESS OVERViEW (CONT’D) [n addition, current development projects cover the proprietary manufacturing process in Ull: production of: ­• Contactlcss substrates which ore being used in the MEP project
• Electronic Visas for use by lmmigration Depanments, Foreign Embassies
• Paperised Baggagt: Tags using PRAM for the airport baggage sccurilY
• Banery and Display Technologies for weilf3ble PC

7.11.2. Smart Curd Product Designs The IRIS Technology Development team (“ITO”) is developing J.R.I.s. proprietary contactlcss hybrid cards, (which arc contact as well as contactless cards). These are being designed fOl” manufacturability (“DFM”) while conforming to the quality and reliability standards per ISO as well as I.R.i.S. quality !lpecification. The ITO defines its own set of design rules that meets high volume ffillnufacturnbility requi~menlS (Le. defects immunity). The developed products with its inherent technologies are tailored to mect thl; ever in<:reasing security requjrement~ demandl.’d by the market. The wide rnnge of applications include banking, transportation, mass telecommunication llnd areas that ca.ll for high level security cootrols such as acces~ to high sccurilj areas etc. The continuous developmcnt of J.R.I.S. operating system involves the development of the I.R.I.S. Chip O~raling Syslem II (“ICOS IF) to enable the IR.J.S. operating system to he more adaptable, as an open platform with multi sc;curity tl~atures. In addition design and development ofllIt: MeOS, will enable multiple applications to be interoperable with a single chip operating environment. ICB’s commitment to research and development will be the driving force of the Group 10 progress into technolugies which would otherwise be difficult to acquire under a compclilive and dynamic environment in the sm:u1 card industry. TN!:.: REMAfNDER OF T///S PAGE HAS BEEN flVTEi’vT/ONALLY LEFf BLA,VK 7. BUSJNESS OVERVIEW (CONT’D) 7.11 Employees As at 6 Junc 2002, the ICB Group has more than of 270 employees, all of whom are Malaysian. By virtut: of its smart card manufacturing activity, IRISTeeh hils the highest number of workers in the Group by comparison with 194 employces. On !he other hand, TLAF., Asiatronics, CML, IITS Illld TLTR (Aust) currently have no employees. The breakdown of employees according to company and professional levels an.: iL’l follows:­No. of Workers Managerial! Executive Technical Clerical General Toml Professional Worker ,IS 665 80 IRISTech Ice 32 36 25’2 194 Gcsn I”2 .. -J AvcNl2.e Lencth of Service (Years) Ice 3.3 3.3 2.5 2.5 I., LRISTech 3.2 3.4 4.1 3.5 2.6
leD Group believes that its rela.tions with its employets afl;l good. Stafl’turnover is minimal, which thc Directors of lea believe is anributed to good industrial relations within the Group. None of the Group’s employees are n:prcsented by a union. nlcrc is. no industrial dispute in the pasl ICB Group belicves in It’aining and development through on the job experience and external courses. Thc IRJS Smart Technology Complex, provides its cmployees with first band expt.’fience ofa full scale manufaewring facility equipped with high precision equipment. Machinery ranges from high speed injection molding, card printing, plastic sheet laminator 10 semiconductor component asscmbly including wafer saw, dit: attach, \,ire bond, encapsulation and tcst handler. The Group is currcntly grooming a pioneer leam ofmulti-skillcd engineers who will be proficient in all the different processes in smart card manufacturing. lCB has from time to time Sl:nt its employees for cxternal courses, both technical and managerial, to complement the on-job training and 10 k.eep abrt:<lSl with the lalest development. The Group’s dedication to research and development presenl<; an opportw1ity for its engineers 10 continuOlJsly develop their technical expertise. Morc importantly, employees arc alwuys abreast with the latest developments in smart card tceMology by virtue of the Group’s continuous search for new cm(”fging llo”Chnologies to enhance ifS prOdUCl<i. Toduy, the lCll Group’s rcscar..:h and development team consists of more than 45 profcssionau. in electronics and telecommunication, electronic manufacturing, and product design and development 7.13 Cunomers Being relative!)’ new, the Group is bl:ginning to make it,> pn.”SCnce felt in the market with its fll’st success being the rvwp Project. The lCD Group is the sole supplier of the I.R.I.S. contactless subslrates and readers for the MEP Project since 1998. The totul sa.les for the ycur ended 31 December 2001 amounts to approximately RM37.8 million. The Group, through its associated company GCSB has been awarded thc contract for the OMPC project for the supply of GWC system and cards to lhe Ministry of Home Affairs since 1 June 1999. The total sales for the year ended 31 December 2001 amounts to approximatel)’ RM49.2 million. The fCB Group is also currently actively marketing il~ memory cards and modules that arc used in tbt: a”isembly of telephone cards. Telephooe cards are supplied to tht: Philippines Long DisHlOce Telephone Cumpany. Thus it is evident that the Group is making headway in diversifying its customer base and is trying to secure revenue from its catalogue of pr<Xiuct.<i. The Group is eonl1denllh:lt the quality ofits product and service will be its strongcst compelili ve advantage to secure a wide and loyal customc:r base. 7. BUSINESS OVERVIEW (CONT’D) An app3rent risk to the Group’s ~ustomer profile would be the reliance on the Government as a customer in respect oCthe MEr and the GMPe contracts. At present, these projecl represent the largest contributors to the Group’s results. ICB is actively lIl3.rketing its security solutions to ovcrsea:> markets. There are two main components to the MEr proj\Xt and they are the hardware and software supply agreement lind the ugreement for the supply of substrates which is embedded in the ele<:tronic passports. The agreement for the supply of the hardware llnd software was signed on 13 March 1998 between the Govemmt..l1t of Malaysia and IITS (a wholly owned subsidiary of IRISTech) f(1(” a total contruct sum of approximately RM24 million. As at the date of this Prospectus, the substrates supply agreement between the Group and PKN has not been finalised. The above is such as PKN, the supplier of the electronic passports to JIM, and the Government have not finalised the electronic passpon supply agreement. The Group believes that there are no other locally incorpoTllted company presently which poSSlOSses lhe technological acumcn to develop a better if not similu.r substrate or the MyKad. It is belie\’ed that it may be difficult for foreign competitors to penetrate these market since lhe projects concerns national security and the Malaysian government may be morc reluctant 10 award such sensitive proje<:ts to foreign enterprises. Therefore, the absence of competiti on secures the Group’s position with respect to the MEl’ and the GMPC projcl:ts. Changinl;t supplier at this juncture, especially in respect ofthe MEP, may also prove to be: inconvenient. Iu the infrastructure is customized and specially designed to accommodate the I.R.I.S. tcchnolo&,.v, alternative substrates woolJ be rendered useless unlcss it was l.R.r.S. compatible. Further, as JIM has invested up to RM24 million lor the new infrastructure, it is unlikely that JIM would request a changc in infrastructure in the foreseeable future. Although JIM/ PKN and GCSR are presently ICB’s major customers with eomribution of more than 85% 10 Group turnover, the Group is confide”, that it will bt: able 10 expand its customcr base in the near future. This will be possible hy virtue urthe various endeavors undertaken by the ICB Group to market in; mwn products to foreign markets. 7.14 Modes or Markftin~Sal”‘ Distribution To date, the Group has unl)· conducted limited marketing activities, most of which are carried out directly through its Marketing and Sales Division in Malaysia. This is because smart card based security solutions require direcl selling efrort~. For the owrseas market, the Group has a distribution agreement with lntcrcurd of Australia for the distribution of it!> produas in New Zealand, Australia, Saudi Arabia, United Arab Emirates, Kuwait and Iran (Refer to Seclion 7.5.3. on “Strategic Alliances • Intercard”), The Group believes it is only appropriate that the overseas market is dealt with together with the respective local partners. In future the Group expects 10 establish more ext.ensive SITalegic marketing alliances and licensing or other arrangcments with systems integrators, value-added resel1crs and other smart card vendors world wido :lOd will continue to reutin the services of current sales representatives and marketing and other consultants. 7.15 Smart Canllndlutry -Future ProspecU 7. 15.1. Brieflntroduction on Smart Cards a. Aficroprocessor Based Smart Curds Microprocessor (“MP”) b.”l.’led smart cards CWTy an em bedded MP-chip, which has the same configuflltion as a personal computer. With its own operating system software, the: MP.c:;hip ~urely controls access \0 infOffitation stored on the card. The MP·based smart card has a higher level or inrormation security such as the 7. BUSINESS OVERVIEW (CONT’D) secure storage ofa private encryption key, which makes it very useful for high value transaction and infonnation Sl::usitive applications. Two basic types of microprocessor cards are contact cards and contuetless cards. The former requircs an extcrnal power source and clock to drive the microprocessor chip and an input· output path for transmission of data. Data transmission occurs when the card makes direct contact with an external card reader, thus the name, contact can:ts.. On the other hand, contactless cards do not have to make direct l:ootact with an external card reader, providing marc cnd user flexibility. h. Memory Cards The simpler version of a MP-based smart cards are the memory card:’>. Memory card are typically used 10 slore and dispcruic monetary value. These slored-value cards are confined to straight-forward applications such as IOY’lll)’ cards, pay-phone cards and vending machines. Memory csrds are single-purpose cards, and are disposed oft’ once the stored value has been depleted. Magnetk Stripe earth The predecessors of the smart cards, the magnetic siripe cards” commonly used in credit cards and ATM applications are sometimes confus\ld or generalised as smart cards, though by definition they are no\. It i!\ envistlgeu thaI before long, magnetic ATM cords would soon be replaced hy smart cards in line with increasing consumer demwHJ for lighter security in e:lSh related transactions. At a glance, ICB seems to be involved in the mainstream smorl card manufacturing busil’le’ls dominated by lhe likes of Gcmplus and SchlumbergerSema. On the conlTary, the Company has designed for itself a niche market, wht.’Te high security solutions are designed through the integration of numerous smart card technologies. Nevertheless, the company’s future is highly linked 10 the growth of the smW”1 Cll.nJ industry. 7.15.2 Industry Overview Smart Cllrd usc hus proliferated and the spread of smart cards into financial services and telecommunication markets has been one ofthe most significant areas for growth for the smart card industry in fCCdll years. Other vertical smart card markets that have mushroomed over lhe past five years have been health services, multifunctional cnnis, transport, pay-TV and retaiL Future opportunities 3re virtually limitless. The good saito’S in the end user markets have had a knock. 011 effect for the demand for smtu1. cards in 2000 according to Frost & Sullivan. 1bc increased SOlIes of GSM mobile phones and strong demand in lhe payphone cards sector, transportation seclor and government services sector resulted in approximately 1.56 billion smart cards shipped in the year 2000. This is a 13.8% increase from the estimated L37 billion cards shipped in 1999. The new sectors have given impetus for growth foc smart card manufacturers, away from the traditional SCCIOrs of smart card demand such as banking. It is estimlited that smart card production will increase by 25.6% in 2001. The latest breakthrough for the smart eard industry is advancements in biometric identitication tedmology. Biometric identification which includes among others finger/palm prints patterns and voice recogni!ion is a boon compared with less secure means of identification such as conventional script: identification documents. Moreover, generic differentiation is undoubtedly more secure than passwords. Smart card, on its own, is a highl)’ secure means of identification simply because information stored in a chip is less likely to he tampered with due to requisite technical appreciation. The winning combination is expected 10 give end­users peace of mind. Similar technology advancements are expected 10 unleash the hidden potential of the smart cards in more diverse markets. 63 7. BUSINESS OVERVIEW (CONT’D) The development of contaetlcss cards over the last year has opened up significant opportunities for the smart card industry. Contactless cards lend themselves p3rticulllIly well lo applications in the transport and Personal ldcntificalion (;”D”) sectors where growth polcntial is highly anticipatcd. Mass transit schemes in Seoul and Hong Kong and electrooic road pricing in Singapore are already u~ing contuclless teehnology. ID schcmes wb:n: high Ihrougbput of card holders ll1e desirllble, such as conferences, corporate campuses, and even ror government proje(ts such as the immigration department has done in Malaysia. COnlactless cards undoubtedly gives an added convenience. Table I ; Total Smart Cards Market:: Market Share by Chip Type (World), 2000 Memory Micro-controller Total (%) (%) (Vo) Gemplus 38.1 29.0 34.9 SchlumbergerSema 35.2 23.9 3 \.4 Giesecke & Devrient 9.7 14.8 11.5 Obcrthur Curds System 2.4 13.8 6.5 Orga Kartensysteme GmbH 2.7 10.0 5.3 In Data 5.0 2.5 4.1 lncmd 3.1 1.1 2.4 Other 3.7 4.9 4.1 TOTAL 100.0 100.0 100.0 Source. Frost & Sullivan, 2001 The forerunners in tht: smart c<Jrd business are Frances’ Gemplus and SchlumbcrgerScma which dominate both the m~mory card and micro-controller industry with a combined markl.’t share of more thllt 73% and 53% respectively. Market dominance showed hy Gemplus and Schlumberger presenL~ a threat to up ami coming players in the arena, inciuJing the likl.’:S of the fCB “roup, wbo wthough do not compete directly with the smart card manulaeLurer’s but laces anxiety over the possibility of the key players illtcgntting forward (0 eompete in their niche market, e.g. security rela1ed applications. Nevertheless the whole market registered an inerease in oVl::r.;IlI amOllniS shipped of 14% in the year 2000 and estimated to increase by 26% in year 2001. This represents a healthy growth for the industry. Frost & Sullivan anticipates that by the year 2004, 3.2 billion sman cards will have becn issued globally. The industry is expected to move in the direction or multi application cards I.e. curds serving several functions. This is in line with the products offered by tlx: ICB Group namely the GMPC card which not only is n eombimltion of un identification card, driving license, health and immigracioll card. Western Europe is anticipated to remain as the largest smart card consumer and Asia Pacific is anticipated to be the fastest growing. The Asia Pacific share or the total smart card market is set to increase from 19% in 1999 to 31 % by 2004, thus being the second largest market in the world. Table 2 : Total Smart Cards Market; Unit Shipmeft’ by ApplicatioD (World), 2000-2004 AppliratioD  1000 (million)  1064 (million)  Compound AnDual Growth w.)  Payphonc Cards  1,020  1,779  IJ  GSMl3G SIM Cards  237  708  34  Pay-TV Smart Cards  3J  38  6  Health Smart Cards  52  114  23  Transit Smart Cards  37  171  42  Govemment Smart Cards  4  3J  101  Univl::rsitic:s Smart Cards  0.5  I  6  Access Control SmM Cards  1  2  6  Olhl::r  179  387  21  Source: FrOSI & Sullh’an, lor} I  64
7. BUSINESS OVERVIEW (CONT’D) It is llmicipated that pay-phone cards will be the main market for smart cards together with GSMI 3G SlM canis and government sman cards! appliClltions seCtors. Thus h is undeniable that the smart card induslfy is a gro\\1h induslry and lhat the leB Group being located in the middle of the AsiaIPacific region can take advantage ofthc Mlicipaled growth in AsiaIPacific region. 7.1 S.J Prospects The smart card industry, which consists of twO major sub-sectors i.e. the memory cards IIIId microprocessor, is currently undergoing rapid growth. With the envisaged reduction in costs of putting in place smart card infrastructure like readers and such, it is believed that the use of smart cards will propagnle exponentially. The incorporation of sman card readers OnlO keyboards produced by major computer hardware producers would invariably funlter ~duce infrastructure costs. Further to the above, the advent of e·commereC in everyday transactions will hllSten the use of smart cards. Qne of the major ouractions ofsm3rt cards is its olf-line feature which translates to it being OJ. lower cost :tItcrnutive \0 present on-line systems a’> thc card has both processing and storage of date. capabilities. Prepaid transactions are also seen to be a major source of smart c~rd demand. Apan from the above, the enhanced security provided by off-line transactions is viewed us the: answer to the financial industry’S woes of transaction Iraud. The Increased use of mobile handphones with the GSM s~tcms, which incorporate Subscriber Identification Modules CSIM”) card’>., which arc essclllially smart cards, would also result in greater demand for sman cards. As such, it is believ~d th<tt the diverse range of applications, as well as the more efficient solutions provided by smart cards will ml1ur:J.1I y incrcase smlitt card demand. However there cxists some challenges to the smart card industry whieh have to be addressed before its use becomes commonplace. There are the issues ofestablishing a cnmmon standard for all smart card applications as well as the conversion of existing systems to the smart card systems. Allhough the ISO 78t6 protocol has defined certain aspecl~ of smart card liI’chitectlJre, the oper:1ting system and the Application Progr::Jmming language lOr mUltiple application interaction have yet to be ugn:ed upon universally. The olher obstacle that faces the smart card industry is the inertia of service providers to change from the existing magnetic stripe-card infrastructure to offer smm elii’d based solutions. Nevertheless” it is bclicV<,”tJ that the more user friendly, improved service and security offered by the sman card ahemative would invariably lead to eventual convcrsiun to smart card based solutions. 7.15.4 Incentives For The Smart Card Industry Tn Malaysia In 1997, the Mllla)’sian Government introduced the MSC project aimed at grooming Kuala Lumpur tu be the next Silicon Valley. Despite the economic down turn then affecting the Asian region, the Malaysian Government was determined to proceed with thc IT related proje<::ts, in plU1iculu the MSC project. The MDe, a qUElSi-govemment agency, which has been given the responsibility to ensure the MSC acbieves ils objectives, seeks out companie.’> that it feels con contribute significantly to lhe development of the MSC and grants them MSC status. Both ICB and its subsidiary IRISTech are MSC-status companies. The MSC status comes witlt it numerous incentives and benefits backed by the Malaysian Government’s Bill of Gm:lT’.mtees. The Io-point Bill is as follows:­• Provide a world-class physical and infonntllion infraslructure
• Allow unrestricted employment of local and foreign knowledge workers
• Ensure freedom of ownership by exempting companies with the MSC Status from local ownership requirement…

65 7. BUSINESS OVERVIEW (CONT’D) • Give freedom to source capital globally for MSC infmstructure, the right to borrow funds globally
• Provide competitive financial incentives, including Pioneer stat-us (l00% ta'( CJ\;emplion) for up to ten (10) years or an invcstmt:t1l tux allowance for up to five years and no dUlies on the importation ofmultimcdilll:Cjuipment
• Become a regional leader in Intellectual Property Protection and Cyberlaws
• Ensure no censorship of the Internet
• Provide globally competitive telecommunications tariffs
• Tender key MSC infrdStructurc conLracts to leading companies willing to use the MSC II their regional hub
• Provide a high powered implemel1lation 3gency 10 llct as an effective one-stop super shop

The MSC-st3tus companies may enjoy tne following financial and non-financial incentives. Financial incentives include a fhoc year exemption from Malaysian income tax, renewable up to 10 yc-.iCS. A company may apply to renew the exemption for a second five year term. Renewal <If the exemption will depend on the company’s performance in tran5ferring technology or knowleJgc to Malaysi3. For companies nlready opentting in Malaysia, MSC tax incentives will apply to the ‘valu~ added’, defined as the company’s additional statutory income liOOVo;’ its average income for the past three years, or as the value of new investments made in MSC. 10 addition, MSC status companies are allowed to impott multimedia equipment duty free, provided that the equipment is used by the company in the operation of its business. The exemption ~pplit:S to cquipmenl used directly in facililating the openlional processes ofMSC status companies, but excluding impons for the purpose of direct sales and trading or use as components in manufactured items. And lastly, MSC status companies that are at least 51% Malaysian u…..ncJ arc also eligible 1<1 apply for R&D grants of up 10 70% of the total approved cost of the R&D project. Non-financial incentives include unrestricted employment of loreign knowledge workerx. Foreign experts are required to meet minimum prerequisites to ensure this privilege is not abused. Expatriates employed within the MSC must have eilher more than 5 yean; expet>ience in !hI: IT business, or otherwise be a degree holder in any discipline or a gradullte diploma in IT plus 2-3 relevant c:xperience or a Masters Degree in any discipline. This will ensure th:l1 companies do not face a shortage oftechnical experts which are vital to their operations. MSC-status companies also enjoy freedom of ownership and can be 100% foreign owned. This would cncuurage more foreign entrepreneur» to set up business here without being subjected to the New Economic Devclopmt:nt requirement of 30% Bumipulera equity rule which nun-MSC companies in Malaysia are obliged to comply with. All MSC stalus companies are given automatic exemption from the Controller of Foreign Exchange from exchange control requirements. With this foreign currency exemptions, companies will be free to:­• execute transactions ill any currency in Malaysia or else wht,.c in the world
• Borrow any amount from financial institutions, associate companies, ur non-resiJents
• Hedge their foreign-cxchan.ge exposure
• Remit globally for any purpose
• Open foreign currency accounts in Malaysia or abroad with no limits on the balances. including accounts for the retention of expon proceeds.

Other benefits Ilccrued to companies under the MSC arc intcllectuill prott:ction ami a wurlcl­first comprehensive framework of cyberlaws, world class physical and IT infrastructure, globally competitive telecommunication tariffs and service guarantees, Censorship of the Internet, high quality planned urban develupments, excellent educational facilities, including the region’s frrsl Multimedia University llnd a green environment protected b>· strict zoning. TIle opcroting flexibility, opportunities, benefits and incentives laid out by the Government to make MSC a success \vill playa major role in promoting the development of tcchnology 7. BUSINESS OVERVlEW (CONT’D) intensive industries including the smart card induslry. Nevertheless, in the spirit of globaJisalion and free-markel enterprise, the Government has refrained from imposing bllITiers of (‘nlly 10 foreign companies which may prove 10 be a bane for stan-ups such as len whicll are being forced 10 compe:c ion a non-level playing field. THE REMAINDER OF TIllS PAGE HASBE”;N INTElVTlONALLY LEFT BLANK

 

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