Business Overview

4. INFORMATION ON THE KNM GROUP 4. INFORMATION ON THE KNM GROUP 4.1 Incorporatioa And Principal Activities KNM was incorporated in Malaysia on 22 July 2000 under the Companies Act, 1965 as a private limited company. It was subsequently converted into a public limited company on 12 September 2000 and assumed its present name. KNM is principally an investment holding company while the principal activities of its subsidiary and associated companies are as foUows: Name 01 Company Equity l.oterest Principal Activities % Subsidiary ofKNM KNMPS 100 KNMI 100 Subsidiary ofKNMPS KNMO 100 PASS 100 DE 100 SubsidiDry 0/KNMI KNMOC 100 Subsidiary 0/KNMOC KNMSPEC 100 Associat, COmpGRy 0/KNMPS KNM-DP 28
Design, manufacture, assembly, commissioning and maintenance of process equipment, pressure vessels, heat exchangers, skid mounted assemblies, process pipe systems. storage tanks, specialised ~rudural assemblies and module assemblies for the oil, gas and petrochemical industries Provision of management, technical advisory, licence and trademark: 5elVices 10 international related companies and related international invesCments. Fabrication and maintenance of oil, gas and petrochemical process equipment, ~orage tanks, modular assembli.es and strudural assemblies for oil. gas and petrochemical induslries. Property investment Provision of project manpower, engineering, non­destructive testing and technical consultancy services Investment holding Design, manufacture. assembly, commissioning and maintenance of process equipment, pressure vessels, beat exchangers, skid mounted assemblies, process pipe systems, storage tanks, specialised structural assemblies and module assemblies for the oil, gas aDd petrochemical industries within the Chinese market. Fabrication and maintenance of process equipment, ~orage tanks, modular assemblies and steel structural components for oil, gas and petrochemical industries 4. INFORMATION ON TIlE KNM GROUP (0″,”4) KNM-DPHB I Name ofCOIIlpaoy  EquIty ..,….. % 49  PriDdpal Activities Dormanl (intended principal activity is property investment)  Subsidiary ofKNM·DP KNM-DPHB  51  Donnant (intended principal activity is properly investment)  The structure of KNM is as follows:

,; I
KNMPSII IOO’?~

1’00% I ‘00% 1’00% DE PASB KNMI
II II II I
‘00% KNMOCII
‘00% I KNMSPEC I ;, , ;KNM , II I
100% KNMPS KNMI ‘00%
II II 1’00% I ‘00% 1’00% ‘00% DE PASB KNMOC
II II II I 100% I KNMSPEC I 4. INFORMATION ON THE KNM GROUP (Coo’-d) 4.2 Changes In Share Capital The present authorised share capital of KNM is 50,000,000 divided into 50,000,000 ordinary shares of RM1.00 each. The present issued and paid-up share capital is RM32,920,OOO comprising 32,920.000 ordinary shares of RM1.00 each. Details of the changes in the issued and paid-up share capital of the Company since its incorporation are as follows: Date of Allotment  No. of Ordinary Shares Allotted  Par Value RM  22.07.2000  2  1.00  02.05.2003  28,253,182  1.00  20.06.2003  4,666.816  1.00
Consideration Subscribers’ shares Shares issued in consideration fo< lhe Acquisition of KNMPS Rights Issue of 4,666,816 new ordinary shares of RM1.00 each at Dar Resultant Issued and Paid-Up Share Capital RM  2  28,253,184  32.920,000

4.3 Tbe Restructuring Scbeme In conjunction with the listing of KNM’s shares on the Second Board of the KLSE, the Company undertook a restructuring exercise which was approved by the FIC on 19 February 2001 and 2 May 2003, MITI on 15 May 2001 and SC on 3 December 2002 and 5 May 2003, respectively. The details of the restructuring scheme are as follows: ­4.3.1 Incorporation Of Revaluation Surplus A revaluation of the landed properties of KNMPS and PASH was carried out on 4 October 2000 by Messrs W.M. Malik & Kamaruzaman, a firm of independent professional valuers. The revaluation surplus amounting to RM6,199,786 and the revaluation deficit amounting to RM131,111 for the property owned by KNMPS and the revaluation surplus amounting to RM2,822,670 for the property owned by PASS have been incorporated into the fmancial statements of KNMPS and PASS, respectively, for the fmancial year ended 31 December 2000. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
4. INFORMATION ON THE KNM GROUP (CoN’d) Details of the compulation of the revalualion surplus are as follows:­I’ro\>i’i1le5 ‘0;-MarkotAPiiiiidn
V…. AI AI ,’.vAl31
~:J Dale” _her::,~~;r V….tl@__ ~~.., ,:-“””””””,,,J,-“,,,,, RM RM KNMPS (1) Lot PT S23, HS(D) 30213 8,783,650 6,959,602 , 1,824,048 Mukim Tanjong Minyak, District Melaka Tcngah, Melaka (lndustrwl Buildins) (2) Lot PT 7S52, HS(D) 9,137,769 4.762,031 4,37S,738 17934, Mukim of Sungai Kamng, District of Kuantan, Pahang Darul Makmur (Industrial Building) 17.921,419 11,721,633 6,199,786 (3) Lot PT 523, HS(D) 30213 1,966,3SO 2,097,461 “‘(131,111) Mukim Tanjong Minyak, District Mclaka Tcngah, Melaka (Industrial Land) PASS Lot PT 7552, HS(D) 17934, 4,312,231 1,489,561 2.822,670 Mukim of Sungai ((arang, District of Kuantan, Pahang Darul Makmur (Industrial Land) (I) As per the valuation report dated 4 October 2000 as valued by Messrs W.M. Malile & Kamaurzaman, a firm ofindependent professional valuers.
(2) The revaluation deficit is to be written off against the incO/IIe statement of KNMPS.

The valuation certificate by W.M.Malik & Kamaruzaman dated 16 June 2003 is enclosed in Section 12 of this Prospectus.
4.3.2 AcqaWtlo. orKNMPS On 18 December 2000, KNM entered into a CondilionaJ Sale and Purchase Agreement with the shareholders of KNMPS namely IMSB and TKSB for the acquisiltcn of Ihe entire issued and paid-up capilal of KNMPS, comprising 3,100,000 ordinary shares of RMl.00 each for a purchase consideration of RM34,186,350. The acquisition of KNMPS was satisfied by the issuance of 28,253,182 new ordinary shares of RM1.00 each in KNM at an issue price of approximalely RMl.21 per share. The 28,253,182 new KNM shares shall mnk pari passu in all respects with one another and the then existing issued and paid~up ordinary shares of the Company including voting rights and the right to all dividends and other distributions Utat may be declared subsequent to the date of this Prospectus. 42 4. INFORMATION ON mE KNM GROUP (CoN’d) The purchase consideration for the Acquisition of KNMPS of RM34.186,350 or approximately RMl1.03 per sbare was arrived on a willing buyer willing seller basis after taking into consideration KNMPS’s audited NTA value of RM27,64S.444 as at 31 December 1999 and after adjusting for the total revaluation surplus of RM6,672.017 and the revalution deficil of RM131,111 arising from tbe revaluation of landed properties owned by KNM in Section 4.3.1 above. The purchase consideration of tbe entire issued and paid-up share capital of KNMPS are free from all claims, cbarges, liens, equities or any other encumbrances whatsoever thereto. Based on tbe audited financial statements as at 31 December 1999, tbe adjusted NTA of KNMPS after adjusting for the revaluation surplus is as foUows:­RM’ooe  RM’OOO  Share Capital  3,100  Retained Profits  24,552  Less: Deferred Expenditure  (7)  Audited NTA  27,645  Revaluation Deficit Written Off Against  (131)  lncome Statement  Add: Revaluation surplus·  (a) KNMPS  6,200  (b) PASB  ‘472  __—;;’;6’7,6″’72,…  Adjusted NTA  34.186
• Upon consolidation ofthe financi41 stmements ofKNM and its subsidiaries as at 31 December 1999, the net book \’aluc ofthe land owned by PASS was revalued upwards by RM2.350,439 in order to reflect the fair value of the land. The net booA: value ofthis land has therefore been reflected in the financial statements of KNMPS as at 31 December 1999 as RM3.84fJ,OOQ. Th/4$, the rem/ring revalution surplus /C be toun up by KNMPS in its consolidated financwl statement.! in respect ofthe land owned by PASS should only be RM472,231, and not RM2,822,670 as shown in Section 4.3.1 above, in order to avoid double counting. •• Further detoils of the landed properties of Ille KNM Group are slwwn in Sections 4.4.16 and8. The vendors of the shares in KNMPS arc as foUows:·
PurcbaIJe’, ‘ Sads/ied By No. or CODIiderado..::’ KNMSba…. , ,:,..:.RM 29 775.208
24 607 610 d411 142 3.645,57234 I =50′——‘-_—=28==1″’82’——–‘ IMSB t!TKSQ!B~±:i4MOO~000~Ct:=!~C±:=J~4TOTAL 3100 000 The Acquisition of KNMPS was completed on 2 May 2003. ICompany No: 521348~H 4. INFORMATION ON THE KNM GROUP (ConN) 4.3.3 4.3.4 4.3.5 4.3.6 Acquisitio. Of KNMI On Z June 2003, KNM eatered into a Conditional Sale and Purchase Agreement with lhe shareholders of KNMI namely KNMPS, for tbe acquisition of the enlire issued and paid-up capital of KNMI comprising 500,002 ordinary shares of RMl.00, at par. The purchase consideration of RM500,OO2 for the acquisition of KNMI was satisfied by cash. The Acquisition of KNMJ was completed on 2 June 2003. Rigbts Issue Upon complelion of the Acquisitions of KNMPS and KNMI as set out in Sections 4.3.2 and 4.3.3 above, KNM has undertaken a rights issue of 4,666,816 new ordinary shares of RMl.oo each at par 10 aU the existing sharebolders of KNM. The Rights Issue will be: undertaken on the basis of approximately 165 new ordinary shares for every existing 1,000 ordinary shares in KNM. The gross proceeds raised amounting to RM4.666,816 from the Rights Issue and the details of the utilisation of the proceeds thereof are set out in Section 2.6 of this prospectus. The 4,666,816 new KNM shares shall rank pari passu in all respects with one another and the then existing issued and paid-up ordinary shares of the Company including voting rights and the right to all dividends and other distributions that may be declared subsequent to the date of this Prospectus. The Rights Issue was completed on 20 June 2003 and together wilh the Acquisition of KNMPS, the issued and paid~up share capital of KNM was further increased 10 32,920,000 ordinary shares of RM1.00 each. Placement Of Shares Following the completion of the Acquisition of KNMPS and the Rights Issue, KNM shall carry out Placement of 4,400,000 new ordinary shares of RM1.00 each representing 10% of the enlarged issued and paid~up share capital of KNM 10 identified parties at an issue price of RMl.48 per ordinary share. The Company will raise RM6,512,OOO from the Placement and the details of the utilisation of the proceeds thereof are set out in Section 2.6 of this Prospectus. Public Issue To facilitale the Listing of and quotation for KNM shares on the Second Board of the KlSE, the Company will also carry out a Public lssue of 6,680,000 new ordinary shares of RM1.00 each representing approximately 15.2% of the enlarged issued and paid~up share capital of KNM to the Malaysian pUblic, eligible employees and directors of KNM and other parties at an issue price of RMt.48 per ordinary share. The Company wiU raise RM9,886.400 from the Public Issue and the details of the utilisation of the proceeds thereof arc set out in Section 2.6 of tbis Prospectus. Upon completion of the Public Issue, the Company’s issued and paid up share capital of KNM will increase to 44,000,000 ordinary shares of RM1.00 each. 4. INFORMATION ON THE KNM GROUP (Conl’d) 4.4 History ADd Basiaess Overview OfKNM 4.4.1 History KNM was incorporated in Malaysia as a private limited company under the Companies Act 1965 on 22 July 2000 and was subsequently convened inlO a public limited company on 12 September 2000. KNM is an investment Ilolding company with wholly owned subsidiaries, KNMPS and KNMI. The Group is principally involved in the design, manufacture. fabrication, assembly, commissioning and maintenance of process equipment, pressure vessels, heat exchangers. skid \Daunted assemblies, process pipe systems, storage tanks, specialised structural assemblies and module assemblies for Ibe oil, gas and petrochemical industries. On 2 May 2003 and 2 June 2003 respectively, KNM acquired the entire equity interesl In KNMPS and KNMI pursuant to the Restructuring Scheme as set out in Section 4.3 of this Prospectus. KNMPS, incorporated on 28 June 1990. commenced operations on 27 February 1991 and KNMl was incorporated on 10 May 2002. KNM operates out of its bead office at Taman Sungei Besi lodab, Sen Kcmbangan, SelangOf (opposite the Mines Wonderland) of 3,016 square melres which houses the corporate management, fmance, engineering, procurement and project management staffs and four manufacturing plants in Melaka, Geheng, BintuJu and Changshu. The plant in Changshu, China is under construction and is expected to be oompleted by 2-d Quarter 2003. THE REST OF THIS PAGE HAS BEEN INfENTIONALLYLEFT BLANK 4. INFORMATION ON THE KNM GROUP (Cant’d) The location ofKNM Group’s offices and plants are shown below:
An analysis ofthe paS! 5 years of the Group’s turnover amongst the Group’s products and services are shown below: Process Equipmmrt:I 77%

 

I Terminals, Refineries &2% Process Plants Steel S1ructural Systems 20% 1% [ Company No: 521348-H 4. INFORMATION ON THE KNM GROUP (Co”N) 4.4.2 Business Principal Activities OfThe KNM Group As an investment holding company, KNM Group was incorporated to organise the subsidiary companies. which serve a wide spectrum of the oil and gas industry and the related petrochemical sectors. Details of the KNM Group’s core business activities are further elaborated below: (II) Systeau Deslp aDd EagioeeriDg The business of KNM Group is supported by strong in-bouse design and engineering expertise, which is ISO 9001 accredited, with the ability to meet international design codes including the ASME, API, BS, DIN, GB and ns. KNM Group currently has 28 qualified engineers and designers in its design leam. The design and engineering capabilities of KNM Group serve as a major competitive advantage for the Group. This has been highlighted by MIDA as one of the main areas of priority for the developmcnl of Malaysia’s Machinery and Equipment industry. KNM Group also offers engineering and project management servkes to support turnkey projects including installation, erectton, commissioning and maintenance of process equipment, refineries and terminals, (b) Iaternatiooal Procurement Within KNM Group, there is an International Procurement Office that undertakes global procurement for all its raw material requirements. In sourcing for materials, the Group takes into consideration its customers’ technical specifications, the cost-effectiveness, high quality as well as the timely delivery of the materials. Where possible, the Group sources from local supply. KNM Group’s ability to undertake its own procurement provides the Group with another value-adding service to generate revenue for the Group. This is opposed 10 other fabrication houses, which only fabricates from materials provided by customers. (c) MB.ufacture or Process EqDipments For 1be Oil, Gas and PdrodtelDical bd.stries KNM Group’s manufac1uring facilities comprises four manufac1uring plants, three of which are in Malaysia and a new plant in China. All of the plants are equipped with plate rolling and bending machines. Its largest machine is automated using a. series of hydraulic systems for loading, unloading and roUing, and is capable of I:UIndling steel plates up 10 100 mm thick and 4 metres wide. This creates a signiftcant competilive advantage over other manufacturers as it enables the Group to produce process equipments at lower production costs by reducing the amount of handling, welding, testing and reworking required on the steel plates. KNM Group has invested in a new manufacturing plant in Changshu, China with the capacity to produce 10,000 metric toones per annum of process and storage equipment. The plant is located within the Changshu Xinghua Port, about 500 metres from the wharf, providing KNM Group with logistic benefits. 47 4. INFORMATION ON THE KNM GROUP (Conl’d) 4.4.3 (d) Testing Capabilitit’S The testing facilities of KNM Group include some of the most advanced non-destructive testing undertaken to test the integrity of pressure vessels and the quality of welding. KNM Group uses the internationally accepted TOFD technology based on ultrasonic waves. Using the TOFU technique enables KNM Group to undertake testing during manufacturing without the need to evacuate personnel and stop work-in­progress unlike the traditional radiography techniques such as the X-ray or gamma-ray. This innovative process provides a significant advantage to KNM Group in terms of saving significant manufacturing time. This enables KNM to provide faster turnaround with shorter delivery schedule to meet customers’ requirements. In addition, this technology also offers better safety work practices. (e) Site Assembly, CommissioDiag ADd Maintenance KNM Group, as an integrated manufacturer of process equipments, also provides post-manufacturing services including site assembly, erection, commissioning, hook-up, refurbishment, revamp and maintenance services. These post-manufacturing services enable KNM Group to provide turnkey solutions and thus provides the Group with significant competitive advantages over other operators in the industry that do not have such capabilities. Source: Vital Factor’s Business Overview Report updated on 30 April 2003 Mannfacturing Process The main manufacturing processes are as follows: Cutting ADd Rolling Steel plates are marked, cut and rolled into shape as per technical specifications. Welding orSections ADd Peripherals Each rolled sheet is welded together to form a cylindrical section. Each of these sections is then welded together to fonn the final length of the pressure vessel. Dish heads and other external and internal peripherals are also welded onto the pressure vessel as per technical specifications. Testing Testing is undertaken on an on-going basis during the manufacturing process as well as on completion of the pressure vessel. On an on-going basis, KNM Group uses the innovative TOFD testing throughout the duration of the manufacturing process. On completion of the pressure vessel, X-rays or TOFU testing are taken on all the welding seams to ensure compliance with standards. The final test is the hydrotest where the pressure vessel is filled up with water to test for leakages and the ability for the final product to handle the resultant pressure exerted by the water. 4. INFORMATION ON TIlE KNM GROUP (Conl’d)
On compleHon of all the testing of the completed pressure vessel. it tben undergoes post weld heat treatment, subjecting the pressure vessel to a temperature of ()(X)°C for 48 hours. For the purpose of this process, a ponabJe furnace is used. However. for mega-sized pressure vessels. KNM Group uses its in-house developed innovation of ‘self-contained furnace’, Gamet BlastiIlg.oo PaiJItiag The final process is to garnet-blast the exterior to prepare it for painting. For ID-site blasting. KNM Group uses a more expensive material called garnet, instead of the commonly used sand or copper slag. This reduces tbe amount of dust resulting from the blasting process and thus ensures a more pleasant working environment for the factory floor staff. Depending on the environment in which tbe final product is to be installed, the appropriate paints and coatings arc appUed. Source: Vital Factor’s Business Overview Report updated on 30 April 2003 THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
4. INFORMATION ON THE KNM GROUP (Con/’dj The diagram below provides an illustration of the major manufacturing processes undertaken by KNM Group. being that for the manufacture of pressure vessels: Marking ..
C uUing/Edge Preparation
..
Press ..

~ ~ ~ -~ ~ ~ ~ Rolling ..
Longitudinal Welding
..
Cylindrical Welding

Cylindrical Welding
(Hud W.ld) …
Man-Hole Nozzle Hole Opening
..
Man-Hole Nozzle Hole Weld
..
Internal Weld ..
Cylindrical Welding
(Head W91d) I
Marking Packing
Painting f Garnet Blasting
f Post-Weld Heat Treatment… .,. ~’Ii ~ ~ L~ Quality Testing ~ >l I ~ & 0f 0 Name Plate Lug Weld Z'” Saddle Weld f Source: Vital Factor’s Business Overview Report updated on 30 April 2003 4. INFORMATION ON THE KNM GROUP (C.m’d) 4.4.4
Principal Products 11K main products of KNM Group are as follows:·
(I) PresSUft Vessels The$C are vessels that bold fluid in a liquid or gaseous state uDder pressure. Examples of pressure vessels include columns, towers, drums, reactors and separators. (ii) Horizontal MOIlnded Bullets These arc elevated storage buUets (large cylindrical tanks) and systems for gaseous and liquefied gas. (W) Refineries And Process Plants These are planls for the processing of crude oil or petrochemicals inlo various products. (iv) Hellt Extbagers! Air Coolers A beat exchanger is a device that transfers heat from a bot to cold fluid. In many engineering applications, it is desirable to increase Ihe temperature of one fluid while cooling another. As an example, heat excbangers arc used to cool one petroleum fraction while warming anotber. (v) Storage: Ta.k3! Spheres These art used as storage facilities.
(vi) Process Skid Packaga

These comprise a pre-fabricated base for the assembly of process equipments. Skid mounted equipment is usually readily movable and mounted on a frame or skid structure. (vii) Flare Stacks In the event of an eqllipment failure or plant shutdown, it is necessary 10 purge volatile hydrocarbons (gases) from operating equipment so that it may be serviced. The flare stacks, which art vertical gas pipings or towers are used for releasing and/or burning sueb gases into the atmospbere. (viii) Otbers Apart from the above products, KNM Group also manufactures specialised piping and pipeline systems, used mainly in the oil, gas and petrochemical processing plants and specialized steel structures, including steel roofing structures and complex structures. Source: Vital Factor’s Business Overview Report upduted on 30 April 2003 4. INFORMAnON ON THE KNM GROUP (Cont’d) 4.4.5 Projects Completed AJtd Oaaomg A summary of the major projects completed and delivered by the KNM Group as well as the contracts in band are set out below:­(a) Projects Completed As at 3 June 2003, the KNM Group has undertaken and completed projects of various kinds for a large number of clients in Malaysia with a total contract value in excess of RM690 million since its inception. The major projects completed are listed below: Descriptioll .r,~j«t  CNtatllOwlHr  lAa&o  Approxi-..tev_  ….of  OM….  CI~=””  Design. Procurement,  Sarawat SbeU Bbd  Min .1Id  44,186  1993/1995  Manllf.aure, Te:stillgaoo Delivety  “””””  of Pfoo;:esoj EquipmelltS for MLNO­ ….wn  Du.a Gas Supply Project  -2 EDC Ma!erial CoodeD5&k  A«umWalOB  -2 Stabiliscr CoolUlOOS  -2 Koodt-oul Dnams  -Prod.a.ion AiroolIen;  -HP, MP & LP SepantOnii  -Degassing Boots  -OIyool Ccntactors  -CoDdensate Dryer Towt’IS  -Rewened Gas Glycol  Ccntaetors  -Production Separators  -CommisliioniD Services  Design. Procuremeot,  Toyo Engineering  Kerceb,  34.884  1998/1999  Manufacture. Testing llIId Delivety  Corporation f  1’crensBanu  of ProccSll Equipment for Kerteh  Aromatics Malaysia  Aromatics Project (KR-2)  Sdn Bhd  -9 Mixed LPG Bullets  -20 Drums  · Platforms & Ladders  Design. Procurement,  Petrooas Carigali  BiDculu,  3t,831  2000/2002  CollStruction, Commissioning of  SdnB~  SatIWlt  Condensate Storage Tallk. Slop  Tank aDd As$ociated facililies for  Ml..J’lG-Tt<r” Pro”eel  Design. ProClm:ment. MlllufaecUfC, Testing and Deli\fCry of Process EquipmeDe for Pc:lronas Sec<Jud Refinery Phase 2 (PSR-2) “”*”· 3 U’G BttlIe1 TIJIks · 2 Belaoe SlonIge V~. -2CoIWllO$ · 2 Drums · Coke Truct Lnading Silos -WliDJ Lu~ Disassembly f Coke Drums  OIiyoda/MMC/ CMSBN/ PetfOOllS Penapisu (Melab) Sdll 8bd  ..”…  28,888  1996/1998  Desir, Procurement.  JGC Corporalioo /  “””  26.3~J  1997 f 1998  MITlIlfaclure. T~ing and  Shell Refi.aing  Dicksoa,  Delivery of Process Equipmellt fOI  Company (FOM)  Negeri  loog Residue C3.u.lylic Cracking  Bhd  SembiJan  CompleJ­ · 3 Mounded Swlets  · 2 Hoppers  · S High Gndc Vessels  · Denick SU\lC!ure for Alre  Sileo  · Flue GM pIping. Stack Ind0,,,,,  · J Davits
4. INFORMATION ON TIlE KNM GROUP (Conl’d) Descriptloa 01 projKt Design, Prrx:urement. Manufaclure, Tesling and Delivery of PJocess Equipment for Shell Rcfinery -3 LPG Mouaded Bu1Iet Tanb ·2 U’O Moullded S.uet Tlnks J)ujgn, Procwt:melll, Mlmufu:ture. Testing aod Delivery of P’n:M::e$s EquipclWl’Il for Propane DehydrogeClalioo Phn’ Project -1 Propue Propylene Spliner -t [)e·Etbaai5er S1riptler -t DcbuuDlzer -I [)epropaaizer -1 [)c.Etllaftize’ Rectifier
Desigt., ProcuremellC, MaoufaClure, Testina, Delivery and Installation for J HorizonlaJ Moo~d PropylellC Vessels fur OUtanking SeRya Cbemkal StOrlJl1! Pio~ct Shop Dtawina, ProcurelDCnt, Fabrication. Tesdog. Delivery, Assembly aDd Erection of the Steel Strncrures Systci115 for tbe national Sports Complex · Main Outdoor Stadium · Swimming Ulmplex · Trainio Pool Dtsigtt. Procurement, Maaufaeture, Tesling and Delivcry of Process Equipment for Optimal Butauol/ Derivatives Project • BOE Reactors
• Stainless Stccl Columns
• Catboo Steel Columns
• API S10rage Taw

.s….. • C.rboo Steel Vesstls -SfliAleM Sleel VCSlie:~….,r.
• Sben &-Tube Heal Ell III De:sign, Pr(lCllreme”. MilMfllCturing, Asse~y &IllI Delivcry VariOllS Process Equip~lItl5 fuI.Iows for lbe BII field Dcvdopmeal Project: -Air Fin (Production) Cooling System -.5 Pressttre VCli’lCls -4 Clad Pressure VCS$Cb Daig., PfOClIremcll!. Manufacture, Testiag and Delivery of Columns and Towern for Brlaoak FPSO Project.

DesigDl’rocuremcn1, Manufacturing, Construction. Te:’lting and Delivcry of Process Equipment and Storage Tanks for Op1imalln£rastructurc Project, for the Op1imal Petrochemical Complcx · 5 Pressure Vesseb · .5 Shop Fabrica1ed Tanks · 7 Yield F.mc:fc.d Siorl.ll.c Tanks CUeats/OwDer Shell RefmiDg Ulmpany (FOM) BM  LotatiOA Port Dickson., Negeri Sembilan  Appro:dBllMf V~H RM’OOO 23,.514  …..r eom_eA«lMacI e-…… 199311994  M11lE Sdn BM  Malaysia  ….,… Pahang  21.328  199811999  OiIlUlkiDg Singapore U. / RoCary Eng.ioeeriogU.  Siagapore  19,20  2000/2001  ACPI Eoginecrmg Sda Bhd / Kemcoterian Bold da.n Sukan Malaysia  <oW. Lumpur  17,614  19%/1998  Bechtel Bina Sdn Bhd / Optimol Chemicals Sdn Sbd  Ketteb, Tcrengganu  16.710  1999/2000  Sara…..llk SbeU Bbd 1  SIIrawak. Mala)’iill  1.5,717  2002/2003  H,jlibuttoll Fir East ~, LId I Dresser KeUogg EneriY Servitt.s “”. / eo””” lndooesia IDC. Ltd Tecllnlp Gcoprodudion (M) SIIn BM 1 1’elrolllS I Dow Chemical  ~ia Kerteb, Malaysia  15.503 15.490  2002/2003 1999/2000
4. INFORMATION ON THE KNM GROUP (Conl’d) Descriptioll or projec1  OIralS/Owlltf  “””….  Approximate V….e RM’OOO  Date or COmmtlleemtlll&! Comolttion  Design. Proc1Ireme.t, MilDlIfaeture, Testing and Delivery of Proocsll Equ.ipmenl for MI F”.eld ~nsion Project -Gas hllel Sepanuor -Uquid SepaJlllor -Gas Scrubber -Glycol Contaelor r.ttnlll Modificalioa  Sll1IWlk Shell Bhd  “”””‘~ SlUlIIwak  13,831  2001/2002  Iksign. Pnx:wemelll, Manllfaeture, Te5IiDj: IlIld DcliYery of Pr~ Equi~nt for Reut Gas Devtlopmeot ProjecC -Condeasalc SeplCltOIS -Production Separatt>n -Title Plate Separators -High Pressure Flare Knock Out Drums -Low Pressure Koock Qui Drn= -2 Coalescer Vessels -Installation, Stalt-up & commissioninll services  FeuonlS Caripli Sd.Bd  K,,,”” Tertowallu  11,400  1998/1999  Design, Procurement, Maoufacturi.Dg and Delivery Various Process Equlpmen. as follows for the Sawan au Pbue 1 & 2 Development -002M2S Ab50rbet &; SUipper -Qsd Pressure Vessels .”””””,.  Clouah Engincering LAd.! OMY (pakistan) GmbH  Pakistan  11,33g  2002 12003  Desiga, Procuremut, Fabricilioo. &odion. TestiAg and Complellon of SloBgC Taw for Oebeng Cenuafued Ulility Faciliw 1­ I’cltonas Gas Bbd  Kuantan, Pahlng  1O,6Z2  1998/1999
(b) O.,…g Projects The projects currenLly being undertaken by Ihe KNM Group ate worth approximately RMl42 million and are as detailed below: Dacriptiea .r,reJ«t  eue.t!lOwae.r  ….­ Approdrna4e  …..” C____tI  ~:::  c_…….  Design. ProcurelJltol and  Toyo Engineering &;  Malaysia  41,024,829  April 2002/  Construction of bullet taw and  CoostT1lClion Sdn  hloe 2003  reillcd civil C~ioD works for for  BbdI BASF Petronas  Butane SlOfliC ProjOCl  Chemicals Sdn Bhd  Design. Procurement,  Jacobs Engineering  USA  12,220,040  October 2002/  Manufaeturina and Delivery of  Group, Inc. /  (USD3,21s,800)  July 2003  CDHYDRO Naphtba Splitter,  Valero Refining,  CDHDS Column and Stripper /1’1  TCXlS, LP  for Valeto Refinery Gasoline  DesulphurizalioD Unit II Corpus  Chrisll Refine  EngIOCf:rina. ProcureDX’ol,  Fluor Canada Ltd 1  Canada  11.182.400  [)c(:ember 2002/  Mamrfllcturin.g and Delivery of J  Ultramar Canada Ltd  (Canadiao Dollar  September 2003  GOU CclUIllDS for Ultramar Clcan  4,664,000)  Flltl Pro’Cd  Faboolion, CouslruetiOll, COIDOIissiofti.ni and Testing ofOlle (I) Ul’Iil Crude Oil Tan~~Miri CrwJe Oil TefIIlinai IMe  feltonas Carigali Sd. BOd  Mallysia  10,560,000  Novcmber 2002/ August 2003
4. INFORMATION ON THE KNM GROUP (ConN) 4. INFORMATION ON THE KNM GROUP (Cont’dj De.l:npdoD of proJtct  CIiNbIOwKr  Loao_  Appro~te =  o.te or Com”::’~.raI!COllI. diG.  MechaniC41 wofb for 0upI0l  Malay.sil ~G Sdn  Malaysia  5,675,500  JUDe 2002/  ofbilc and Common Facilities aad  Bhd  NoYember 2003  delnolilioa of Veot Stack for  MLNG lI.ejuvelUlooo &. RevlUDip  Pro'”
EngiDcerina. Procurement, Manwactllriq and Dellvel)’ of  AMln BiDtIllo Fertilizer Sdn Bhd  Malaysia  6,644,160  0″””2OO2J5epu;mber 2003  pressure vesseb for NO CO2  removal unit .nd for Ammonia and  Urel Plant  EDgineeriD&. Procwre~ot,  Saipem SAl  Nigeria  5,770,300  December 2001/  MlIJIUfaeturiDg .nd Delivery of  Mobil Producing  (USD1,518,soo)  Augus12003  Pressure Vessels for YOM FIeld  Nlpil UlIlimikd  DevelDtlmenl Pro’ee1 BPC2  ~igD, Procurement,  JGC OHporattool  CItin>  5,806,854  April 2003 1  Manufacturing and Testl-g with  CNCl<X: and Shell  (RMB12,651,099)  February 2004  IIp(m for Delivery of3 CuOOIi  Petmcllemk:aB  Sleel TowtlS and Equip~”  CompanyUd  P1Mfumas, ladders and Pipe  Suppocta for CSPe Nln.bai LOP  P…;kt i.D China  Desig8 Prlx:\IRment, Manufteturiq, TeSlin& and Delivery of 3 CoIIlWlli .nd Drum!; for Oman Government Train Proiect  CME Engineerma I’ZCO 1The Govelllmeni of the Sullanate of Oman  omu  4,151,667 (USDI,092,544)  ApriJ 20031 April 2004  De$ign, ProcuremeDl, Malufacturillg, TealUlg aad Delivery of One Higb ~ssu.rc Boiler Feed Water Prcbcalcr  PetIVIIlI.!l Methaool (labuao) SlIn Bhd  Mal,ym  3,535.000  April 2003/ April 2004  EnginecriD&, Pnx:uremeot.  PetrollM Fertilize,  Malaysia  3,312,545  February 20021  ComtnK:tion and Pre-CoIIIlrlissioning ofWUle WalCl  (Kedah) Sdn 8hd  “””‘” 2003  Strippms Unit and Guard Pood for  PetroDlS KedaJl Fertiliser Planl  Engineering, Procwrcmcnt.  F1uor DaniellDc.1  USA  2…..304  Novembc:1 20021  Manufaauring and Delivery of  Alofina  (USD780,080)  Seplembc’r 2003  HOS RclClor for Alofina FCC  Petrochemicals Inc.  Gasoline HvdfOlreMer Unil  Engineering. Procureme…  Brooke Dockyard &  Malaysia  2,300,000  December 20021  Manufacturing IIld Delivery of lnIet  Eniineering Sdn  August 200J  Separator and Mdbaool SlOl’tliC  BhdI  Drum for Sel1li FICId Devclop01CnlPro..,  Satawak SbeU Bbd  [)eQgD, Supply, MaJlUhelwriltg, Fabricalion. Documeotatioa, lnspeaion, Testing, Cenifiallkm IJld Delivery of IP Compressor DischllgC Cooler for Dan PO Field DeveloD.tcnt  SMOE PIc 1.ld I Mearsk OIic Gall AS  Do='”  1.930.400 (USDS08,OOO)  June 2003/ JallUMy 2004  Design, Procuremenl.  SioclaiI Oil  USA  1,480,000  FcbntalJ’ 2003 1  ManufaCluring aod Delivery of  Corporation  (USD389,460)  November 2003  Main Reactor aod Diolefin  SaturalOf for Sinclair Clcao FIIe15  Proiect  EniinecriDg, Procuremelli.  Toyo Engifteering  Cblo.  1.136,200  October 20071  Ml.llufaeturmg and Delivery of  CotPOlltioo 1  (USD299.000)  JlI1y 2003  Slainless Steel CoI.UIII8S for BASF­ BASF-YPC  ¥PC Acrylic Acid 1Aaylic Esler  Colllpany lJd  PilOt II 8ASF-YPC InIc.graled  hlroc~mical Comnlex  Engioccring, Procurcmenl.  Ranhill Worley Sdn  Myanmar  732,336  November 20021  Manufac:ruriDg and Delivery of  BhdJ  (\JSD192,720)  July 2003  Knock Qui Dnuns for Yeragun  PtelUier Pelroleum  Field Cal»cilv Up2rade ~i«:l  MYll.llJl1lrUd
EogiKering, Procurement.  PT. Jaya Kal)’a  ~.  618,708  Novenmcr 20021  Maoufleturing aad Delivery of  UlIma / B;u:onMobiI  (USDI62,818)  JUDe 2003  shell and tube Heat ExchaQier for  Oil Indonesia Inc.  NSO Rflllledial Proiecl
4.4.6
4.4.7 4.4.8 Market Share I RaDkiDg Based on a production of 15,600 tonnes of steel used for the manufacture of process equipment in 2002, KNM Group ranked first in comparison to other local manufacturers of process equipment for the Oil, Gas and Petrochemical Industries in Malaysia. Based on a turnover of RM107.67 million in 2002, KNM Group ranked fourth compared to other local manufacturers of process equipment for the Oil, Gas and Petrochemical Industries in Malaysia. Companies selected for market ranking purposes do not exclusively manufacture process equipment for the Oil, Gas and Petrochemical Industries. Companies that were selected for comparison must at least undertake some manufacturing of process equipment for the Oil, Gas and Petrochemical Industries. In terms of ranking by tonnage, the majority of the productions are for process equipment. In terms of ranking by turnover, total turnover is used, which incorporates other activities that may not be related to process equipment for the Oil, Gas and Petrochemical Industries. Source: Vital Factor’s Industry Assessment Report updated on 30 April 2003 Principal Markets KNM’s current (2003) principal markets cover North America (USA, Canada and Mexico), South America (Venezuela, Trinidad and Brazil), Europe (Norway, Germany and France), Africa (Algeria, Angola, Chad, Sudan, Nigeria, South Africa and Egypt), West Asia (UAE, Saudi Arabia, Bahrain, Iran, Oman and Jordan), East Asia (China, Myanmar, Vietnam, Indonesia, Philippines and Russia), Australia and Oceania. As at 3 June 2003, export markets contribute approximately 48% in value terms of total orders in hand. Availability Of Raw Materials The major raw materials used by KNM Group are hot-rolled steel plates, other iron and steel material, tubes and tube sheets, dish head, paints and coatings, pipes and fittings, and electrodes. Overall, KNM Group sources its raw materials predominantly from imports. This is largely due to the fact that the customers’ specifications for the raw materials to be used in production are not locally available. Occasionally, the customers also provide KNM Group with a list of approved manufacturers of raw materials for which KNM Group has to adhere to strictly. In most cases, these approved manufacturers of raw materials are overseas and thus, KNM Group would have to import these raw materials. • Supply orHot-RoUed Steel Plates Hot-rolled steel plates are the main raw materials used in the manufacturing of process equipments. The steel plates used by KNM Group are high-grade boiler plates with specially specified quality, which are specially made to withstand high pressure and temperature, particularly for the oil, gas and petrochemical industries. 4. INFORMATION ON mE KNM GROUP leoM’d) KNM Group’s supply of bot-rolled steel plates is almost 100% imported. The Group has to import its hot-rolled steel plates as there is no domestic production currently available in Malaysia that can mect the material specificalkms. However, there are ample sources of hot-roUed sleel plates overseas, including Japan, Europe, Korea and China. Thus. tDe shortage of bot-rolled steel plates should not pose as a ttlreat to the Group’s business. Currently, KNM Group sources from approx.imately 13 suppliers from a Dumber of countries including Japan and Europe. Based on this, it can be deduced that KNM Group is not over­reliant on one supplier for tDe supply of hot-roUed steel plates. • Supply Of OtHr Iron And Steel Materia) These include materials such as angies, beams, chanlltls, round bars, flat bars, wires and wire mesh. KNM Group sources these materials from a combination of local suppliers and importers. There are currently 51 producers of barslwire rods/sections. and 40 producers of wire mesh in MaJaysia. According to the Report on States and Outlook of the Malaysian Iron and Steel Industry by the Malaysian Iron and Steel JDdustry Federation, the production of bars is especially well catered for in Malaysia. Thus, with tbe number of local producers available to produce these raw materials. there should not be any threats in the shortage of supply of these materials. • Supply OtTubes ADd Tube SHets
Tubes and tube sbeets are part of the components of heat exchangers, manufactured by KNM Group. However, the kind of tubes and tube sheets required are of special grades, which are not available in Malaysia. Therefore, 100% of these materials are imported from overseas. However, as there is ample supply of these materials from a number of countries, iocluding the United Kingdom, Japan, Korea, United States and Germany, the tbreat of a shortage of supply in these materials are minimal.
• Supply or Dish Head
Dish heads are parts of a pressure vessel that are used to close off the ends of the vessel shelL As all the raw materials for the dish head have to be compatible and equivalent to the rest of tbe pressure vessel, which are fanned using bot-rolled steel plates, this material is predominanlly imported from overseas. KNM Group sources its supply of distI heads mainly from Japan and Europe. According to management, there have not been any shortages in the supply of dish heads thus far. lbere are 3 local manufacturers of dish heads, however tt.ese are limited in leons of size and thickness.
• Supply Of Paint ADd Coatblgs

Unless requested specifically by customers, KNM Group sources nearly all of its paints and coatings from local manufacturers. As indicated by MJD~ Ihere are currently 38 formulators of paints and coatings in operation in Malaysia. Thus, with these numbers,. there should not be any shortage of supply that would impact the Group’s business. 4. INFORMATION ON THE KNM GROUP (Conl’tI) 4.4.’
• Supply or PIpeo, FittiDgs ADd Fo<giDgli Pipes and fittings are required for the production of process equipment, particularly those that can withstand extreme temperature and pressure. As there are no local companies that manufacture these special grade pipes such materials. KNM Group sources these supplies from overseas. However, these type:s of pipes, fittings and forgings are available from various countries, including Korea, Japan and Europe. Thus, any threat of disruptions in supply is minimised. • Supply or Electrodes Electrodes are used for the welding of pressure boiler plates. At present, there are no Malaysiao manufacturers that produce electrodes for this purpose with the exception of those that are mainly for m1Jd steel welding for general industrial use. However, there arc many overseas suppliers that produce these electrodes, namely Smgapore, Korea, Japan, Indonesia and Olina for which KNM Group is able to import their electrodes from. Source: Vital Factor’s Business Overview Report updated on 30 April 2003 Quilty Control Proctd.ures KNM Groop undergoes two types of product and quality testing as follows:· Destructi’tl~ T~sting Metlwd%gJ Under this method of testing, a portion of the raw materials is tested for its tensile strength and weaknesses of the material. The sample material is usuaUy taken to an independent laboratory for testing. Non-Destructive Testing MethotlololfJ Under this method of testing. KNM Group uses the TOfU technique, which is based on ultrasonic waves to delermine the quality of the welding. As an alternative, the Group also undertakes X-my imaging to test its products. Whicbever method is used, the results of these tests wHi be documented and provided 10 tbe customers for their inspection. The above procedures have been approved by the ABS Quality Evaluations Incorporation of the United StaleS for the [SO 9001 accreditation of KNM Group. It should. however, be highlighted that KNM Group has received many other accreditations and approvals from internationally certification bodies as fol1ows:­(a) Authorisation to use the U. U2 and S Stamps by the ASME for the manutadure of pressure vessels and boilers;
(b) Authorisation 10 use the NB mark by the National Board for the manufacture of boiler and pressure vessel;
(c) Approval from Germanischer Lloyd to manufacture welded pressurized lanks for liquefied gas; and
(d) Gennan code of practice, AD-Merkblatt liP-a and TRD 201 Certificates for fulfilling the comprehensive quality requirements in accordance with EN729-2 for quality welding of its pressure vessels and boilers awarded by TIN SuddeutschJand of Gennany.
(e) Safety Quality Licence for Boiler and Pressure Vessel for “Stationary Pressure Vessels” granted by the Stale General Administration of the People’s Republic of China for Quality Supervision and Inspection and Quarantine.

4. INFORMATION ON THE KNM GROUP (Conl’d) 4.4.10 4.4.11 The capabilities of KNM Group to meet international quality standards help ensure that tbe company continues to be viable in the Malaysian market, previously dominated by overseas manufacturers. More imponanlly, it is a demonstration that the company is poised to meet export market requirements and compete in the international arena. Source: Vital Factor’s Report on Prospects and Future Plans ofthe KNM Group updated on 30 April 2003 laterruptioo I Disroptio. In BasiDess The Group did not experience any disruption in business having signifICant effect on its operations for the twelve (12) months prior to tbe date of this Prospectus. Regular periods of long holidays are taken into account in management planning and their disruptive effects are minimized as much as possible. R&D One of the areas thai provide KNM Group with a significant competitive advantage over other players in a similar industry is in research and development. In this respect, KNM Group undertakes 4 major areas of research and development as folJows:­(a) R&D On Product Design Anti Engin.etring R&D in product design and engineering is mainly focused on complex or mega-sized projects. This is because these types of projects are not commonly repeated projects, or otherwise. always have significant differences within each project that mandates R&D. In this area of R&D, the design and engineering team essentially forms the blueprint for the manufacturing of the end-product. Amongst tbe activities undertaken are as follows: research On lbe customers’ technical requirements which will feed into the overall design of the process equipment including compliance with industry and quality standard codes and rules; research and identify the most cost effective materials to procure which would meet technical specifications: undertake sample testing of materials, processes and prototypes to ensure compliance with technical and quality specifications and customers’ requirements; develop Ibe processes or blueprint for fabrication, production and testing of the eod-product The Group currently has a team of 28 engineers and cksigners in its design team who are responsible for the design and engineering of process equipmeots. (b) R&D On Manufocturln, Processes KNM Group also under1akes processes R&D with the objective of achieving high effici.ency, productivity, cost savings and meeting customer needs. Most of tbe process R&D undertaken by the Group are engineering configured and calculaled, some of which have resulled in innovations such as the ·collift’. ‘synchronised jacking system’. ‘post weld heat treatment’ and ‘modular furnace’ as featured in Section 1.3 of this Prospectus. 59 4. INFORMATION ON THE KNM GROUP (Conl’d) 4.4.12
(c) Research On AlteTMtive MaJerials KNM Group also procures materials as part of its turnkey solutions. This process is critical to ensure the highest quality, (owest cost and reliability of supply. As It result, KNM Group also undertakes research 10 source for competitive and compatible ma1erials for the manufacturing of process equipmen1s. Amongst the areas of research activilies undertaken by the Group include: researcb on alternative and new materials that meet customers’ speculCations and requirements; research on sourcing of reliable and cost-effective supplieffi; research 00 materials for compliance through intensive lesting for compliance and acceptability; and implementatiOll of alternative materials ioto the production phase.
(4) R&D On. New Materials KNM Group, in line with its business vision and mission to stay ahead of its competitors as well as: 10 become a world class engineering and manufacturing concern is undertaking intensive R&D in the use of new materials including Exotic Materials. 1I is anticipated that the development of products using these Exotic Materials would bring significant business opporlunilies 10 the Group. The abovementioned R&D was carried out during the Group’s project operations. 1be company did not capitalise the cost because the R&D cost has been absorbed by the respective projects. Source: Vital Factor’s Business Overview Report updared on 30 April 2003 Govtmmeut Rqulalio. ADd Licensing KNM Group is dependent on several factors to undertake its businesses locally and internationally. Such factors are licences. registrations and certuK:3.tions with relevant customer and authorities. KNM Group is licensed by PETRONAS and MIDA as tbe manufacturer, registered with CIDB, PKK and KKM as manufacturer, certified by ASME and NB as user of the U, U2 and S stamps. Approved as manufacturer according to the Gennany Code AD·Merkblan HP 0 and TRD201 in conjunction with EN729-2 and granted tbe Safety Quality Licence Certificate for ]mport Boiler & Pressure Vessel of State General Administration of the People’s Republic of China. WilMut the aforesaid licences, registrations and certifications,lhe operation of KNM Group in its core business and/or its profitability will be affected. However, KNM Group’s dependency on Ihe aforesaid licences, registrations and certifications shall be limited 10 the extent of these following circumstances: In respect of the licences. without which KNM Group is not able to tender for any project directly with the local customers in connection to only projects of the upstream of the oil and gas industries ill Malaysia. This 011 the other hand wiD oot limit KNM Group 10 lender to the downstream custOJ1lCfS alKl obtaining the projects from the main EPee contractOis which contributes more tban tbe upstream in domestic sales. 4. INFORMATION ON THE KNM GROUP (ConN)
4.4.13 IDtellectul Property And TttbDical KDow·R..w KNM Group has invested sigrilllCanUy in R&D to develop a number of proprietary and innovative engineering techniques. methodologies and work processes for manufacturing of its products. These innovative techniques, methods and work processes which ioelude CoUift, Post Weld Heal Treatment using Modular Furnace, Syncllronised Jacking System and Post Weld Heat Treatment on Sand may constitute KNM Group’s intellectual properties. 1be Group has applied for a Malaysian patent for its Collift, which is pending approval These in-bouse developed technical know-how have provided KNM Group with significant competitive advantages, as it is able to undertake manufacturing with increased employee safety, effectiveness, efficiency and productivity, and reduced manufacturing costs. in some situations, these technical know-how have provided KNM Group with tbe technical solutions to win tenders. particularly for mega-sized projects, where some competing companies were unable to provide practical solutions. Recognising the competitive advantages provided by its in-bouse developed technical know-how, KNM Group is continuously undertaking R&D to improve existing and to develop new and innovative engineering techniques., methodologies and work. processes through prudent use of technology and engineering ingenuity. KNM Group has put in place proper procedures and methodologies 10 enable future inventions to be patented. KNM has submitted a Patent Application for the invention of a “Tank Roof Lift Using the Column System (“COLLIFT””) with the Registrar of Patents in Malaysia. However, the approval for the regisbalion is still pending. KN’M Group has submitted its trademark application for the “KNM” logo in Oasses 6, 7, 11, 14 and 16 to the Registrar of Trade Marks in Malaysia. The Registrar of Trade Marks in Malaysia had instructed KNM Group 10 proceed with the official gazetting and publication of the lrademark under Oass 16 and thereafter the Ministry of Domestic Trade and Consumer Affairs Malaysia, Intellectual Property Division confirmed that the trademark bad been gazetted in the Govemmenl Gazette dated 23/SnOO2. The trademark under Class 16 is now pending issuance of tbe trademark certificate.
KNM Group also has submitted its trademark. application for the “KNM” logo and the description of “KNM” ( ;f;.I. w. -~ ke en ml) in Chinese and English in Classes 6, 7 and 11 to the Trademark Office of tbe State Administration for Industry and Commerce, Cbina. The application is now pending registration.
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4. INFORMATION ON THE KNM GROUP (Conl’d) •.•.14
4.4.15
Distribution Network KNM Group utilizes a two-prong approach in marketing its products and services locally and oven;eas as follows:­(tI) DinctDistribudon For the local and some of the overseas markets, KNM Group utilizes direct dis1ribution channels using its own business development and marketing team to target customers in the oil, gas and petrochemical induscries. KNM Group’s strategy is mainly based on proactively marketing irs prodUCIS and services to cUSComers. Due to the highly technical nature of its product and services, it is DOl appropriate for KNM Group to utilize distributors to market their products and services. (b) Indind Dis/ributWn For overseas markets. KNM Group utilizes channels using independent agents to proactively identify opportunities. collect lender documents and lobby for projects. Ooce agents identify opportunities, representatives from KNM Group would still be required to personally study tbe customers’ requirements and scope and specify the work to be done. The need 10 get directly involved with overseas customers during the sales cycle is a reflection of the highly technical nature of projects. After the submission of proposals and responses 10 tenders, the KNM Group subsidiary involved, togelher with the ageol would jointly lobby for Ihe projects. Currenlly, KNM has agents covering Oman, Jordan, Kuwait, Qatar, Iran, Indonesia, Europe and USA. Apart (rom the above, the KNM Group also utilizes business associates to identify business opponunities and to lobby for projects. Such arrangements are under1aken on a project-by·project basis. Source: Vital Factor’s Business Overview Report updated on 30 April 2003 Key Achievements And Milestones Certification and awards received by KNM are summarised as follows: (i) The ISO 9001 by ABS Quality Evaluations Incorporated of USA
(ii) AD-Merkblatt HP 0 and TRD 301 in conjunction with EN729·2 by TIJV Suddeutschland.

(iii) NB Stamps by The National Board of Boiler & Pressure VessellnspeCiors in accordance with ASME U, U2 aDd S Stamp (iv) R Stamp by The National Board of Boiler & Pressure Vessellspedors.
(v) U &. U2 Stamps by ASME
(vi) S Stamps by ASME.

4. INFORMATION ON mE KNM GROUP (Com’d) (vw) (ix) (x)
(xi)

(xli) (xiii) (xiv) (xv) Safety Quality Licence for Boiler and Pressure Vessel for “Stationary Pressure Vessel” granted by the Slate General Administration of tbe People’s Republic of China for Quality Supervision and lospection and Quarantine. Safety Awards on various projects by Tecbnip Geproduction (M) Sdn Bhd (Optimal Infrastructure Project). Optimal Group (Optimal Project), MTBE Malaysia Sdn Bhd (propane Debydrogenation Project), Petron8S Gas Bhd / Petronas Ammonia Sdn Bbd / Foster Wheeler (M) Sdn Bhd (CUF / Ammonia Syngas Project), Petronas Gas Bhd / Foster Wheeler (M) Sdn BM (CUF Gebeng Project), SheD Refmiog CD. (FOM) Bnd, Technip Far East Sdn Bhd (polyethylene Project), OGP Technical Services Sdn Bbd / Petronas Carigali Sdn Bhd I RuhiU Engineers & Coostructors Sdn BMI (MLNG-Tiga Pipeline Projec1). &0>0 Production Malaysia Inc (Angsi Host Tie-los Project). Sarawak Shell Berhad (M1 Glycol Conlactors Retrofitting Works Offshore M1) and JGC·KBR-OGP N (MLNG MRR Project) Raoked 15u in the Eolerprise 50 Award, 1999 in recognition for excelleocc in management and fmandal performance for Malaysian compaQies. The Enterprise 50 Award was sponsored by Small and Medium Industries Development Corporation (SMIDEC) and Andersen Consulting Rank 3>4 in the Enterprise 50 Award, 2001 in recognition for excellence in management and financial pefformance for Malaysian companies. 1be Enterprise 50 Award was sponsored by SMIDEC and Accenture In 1996, KNMPS completed the design and manufacturing of Malaysia’s largest and heaviest LPG Mounded Bullets measuring 50.78 meters in length and weighing approximately 528 tonnes, delivered 10 Tawau, Sabah. The record is currently in the Malaysia Book of Records. (Source: Malaysian Book ofRecords) In 1998. KNMPS completed Malaysia’s tallest roof supporting single mast for the National Sports Complex in Bukil Jalil for tbe 16th Commonwealth Games in Kuala Lumpur in 10 months. The mast, which stands 8t 102 meters high and weighs 250 tonnes supporting 7,500 square metres in membrane roof. This engineering feat is also cunently in the Malaysia Book of Records. (SOlITU: Malaysian Book ofRecords) In 1998/1999, KNMPS completed the tallest aDd heaviest pressure vessel in Malaysia. The pressure vessel. a Propane-Propylene splitter stands al 105.5 metres high witb a bare weighl of 1.070 tonnes and a fully dressed weighl with internals of 1,640 Ionnes, This record is cunently in the Malaysia Book of Records. (Source: Malaysian BookofRecords) In 1999, KNMPS received a Special Mention Award from Cost Reduction Alliance (“‘CORAL”) Malaysia (a Pelronas initiated project) for its Propane Dehydrogenalion Planl in recognition for its exemplary performance. In 2000, KNMPS received 2000 Gold Star Project Completion Award (Medium Project Category) by Esso Production Malaysia Inc for the Execution of Angsi Host-Tie-In Project in recognition of Ihe excellent safety performance. 4. INFORMATION ON THE KNM GROUP (ConN) (xvi) In 2001. KNMPS toppled its own record made in 1996 by delivering the largest and heaviest LPG Mounded vessels. KNMPS took too construction of the Ihree 3,S0Qm3 capacity, 812 lonnes vessels in its stride. The record is currently in the Malaysia Book. of Records. (Source: MakJys;o.n Book of Records) (xvii) In 2002, KNMPS received the “Supplier of the Month for June 2002” by Halliburton / ConocoPbillips for the Belanak Floating Production Storage and Offloading (“FPSO”) project and has been elected to receive a Gold Award in the Delivering Supplier Excellence Scheme for its lowers/columns. Source: Vital Factor’s BusiJ’less Ol’f’rview Report updated on J(J April 2003 TIlE REST OF TIllS PAGE HAS BEEN INTENTIONALLY LEFr BLANK 4. INFORMATION ON THE KNM GROUP (Co.-‘d) “.4.1’ LaDded Properties ADd Buildings 4. INFORMATION ON THE KNM GROUP (Cont’d) ………., ….-.­oW’lter KNMPS Lot PT 523, HS(D) 30213, MIIk.im Tanjona Min)llk, District Mclaka Tcngalt, Melaka  Itdldll Ute-­”””‘……………. … Appro:n.ale TtllRre…………. . Fabrication -Plant and Offi« Building 96,875 sq. ft. Raftling from 4 to 10 yurs (NoIt4)  Net Book V_Ao Ao JUz.lJ9t IlM 6,959.602  Co-IIlhla…–ForKNMPS G…. “‘-au RM – NlIV Ao p” IOOIPS . G<oop _u 11M 6,959.602  ….-V……. ………. byVm.r• ··IIM 8,783,650  Rtvalu…. (Ddldl” Sttrpl..­RM 1.824,(1.48  “…………… V_Ao At 31.l2.l4IOl 11M 8.738.200  Lot PT 75S2. HS(D) 11934, Mukim Sungai Kallq, District KIlllIlli1, Pabal!8 DuuI MakInur  F.briealion Plant and Offi« SIlildina 145,3113 sq. ft. Rang.ing from 2 to 4 year.; Nore 1J  – .,762,031  – 4,762,031  9,137,769  4,375,738  1).467,495  s…….  11,711,633  ·  11,72l.633  17,911..419  ‘-1″,186  :Z2.Z0S,695  PAS”  1.ol PT75S2, HS(D) 17934, Mukim SuDgai KaBOg DislriCl IWantan, PllbaDg DaruI. Molomo,  Lud (lndllSlrial) 36.420ml (NOft 7)  66 yelll’S (leasehold) Expires GIl llune 2064  1.489,561  2,350,439′”‘  3,840.000  4,312.231  472,231  4.106,887  Tolal Reval..tiN, s.ll’kts To Be Tab:. Up KNMPS Lot IT 523, HS(D) ,,,’ 99 }’Uf:S 30213, Mukim (lndllsllial) (k-hold) Tanjong Minyalt. 18,268 Tn: I!1pires 00 District Melakl tNottl4) Z8 t.by Tcngah, Melak.& “‘”  13,211,1″4 2,097.461  1,JS~t – 15,S6il,633 2,097,461  22,233,65t 1,966,350  6,671,011 (131.111)1″  Nt” 1,905.523  Lol PT 522, HS(D) 30212, Mukim TilDjung Minyak, District Me1aka Tengah, Mclaka  IA… (lndl&Wial) 5.145 m1 (HottlS)  99yea15 (lcl!ioChold) Expil”C$ on 28 May 209′  – – – – – 461,020  LotPT52I,HS{D) 30211. Mukim Tanjung Minyak. Dislrict Melab Tcnph, Melaka  Lm<I (Indulrial) ~,972 m1 (Nottl 6)  99 yelr.; (lea.5ellold) Erpires on 28 May 2094  ·  – – .  ””656  PlolI, being pu1 of pateO( lois 124 Ind 128, Block 20. Kemetl.1 Land DUtro a, Kidurong Industrial Area  IA… (IlIduslrial) 13.400m1 (Note 3)  6O,~ (kascllold)  – ·  – .  – t,237,336  (KlNDA). Bintulu, Sarawak
., ,,~,·il” ,…’ ‘,~U.i NIIV…NeIBeH: CoMoIJdet4oe “”,.,”” ~ , Net’..Lud,AN V”AI………1″i:”‘,)
‘….. -… “””’ii….. ,:i ‘,: ArQAIIlI” v…..Iilad\Ciu/; ,” .Ild JU PGI’ KN’MPS’ “ICNMI’S’ v…'” -an ‘,;i,’ i”I”;,'” ,.. ” ” ‘ ‘,” .’ …………. )l.Uoi9f9 -Gro.,:..;,/ i;iJ’,~P ‘–‘
JUTeiI”te -“‘” .”, ….., .., Vu.er; ­~ JU12OO2″ ,” ,, ro, ,;’;’ ,C ­, .. “,:”, RM li~’ RMBdI~,, –‘,: _; i””””‘1IM'”‘ iP;’, :1′ ),;””RM , “,,1&, “””, -4,435,918Pioll. being part of BuiJdiDg 60 years -·· · pareIll lots 124 lDd (Industrial) (Ieasebold) 128. BJo.:k 2:0. 2,500 m’ Kemena Land
2 years District a’ TGdWOD&
(Nou8) lodlJStrial Arta (K.INDA). Binlul••
s..JlWlk PM 372 Lo4 2136, 74.967BuiWiDg -99y= · ·· · (Resideulial)Mutim Taaju”l (k-boId) Miflyak. Dtslrn.’1 of
Expircl_IlIml 7 yeapMello Teogall, IOMa, Me-Iaka
(Not~9) 2093 74,961PM 423 Lac 2132, BuildiDg 99y= · · ·· · Mukim Taujuug (Residential) (Ieuebold) Mlnyak, Dislrid of
III m2 Expires 011 Melaka Tengall,
7 years 10Ma, Melaka
(Nore9) 2093 PM 339 Lot 2170.
93.100Building 99 years –·· · Mukim Taojuog (Residential) (leasehold) Miny”. Dislrict of
250m2 Expires on Melaka Tengab,
7 years 10 May Melllka
(Note 9) 2093 99 years 73.500PM 340 Lot 2171. Building -··-· (leasehold) Minyak. District of
MutimTaojung (Residential) 113m2 Expircson Melab Tefiillb,
7 years 10 May Melaka
(Nore9) 2093 99 years 73,500PM 341 Lot 21n. BtIilding –· · · Mukim Tanjung (Residential) (leasehold) MiDyak. District of
113 mZ Elrpires 011 Melab Teogah,
7 ycalli 10 May Melab
(HOle 9) 2093 SOyeaJSKNMSPEC Jiangsu Province –RMB·· · (lndl&Strial) ~vt:1opmt’1I1Area
Cbaagslw Economic “”” _bold) 3.521,000 EJ:pjrq Oft “ChIng RlDg Guo
33,537m> (NOlt! 10) 9JuJy Yoog (2002) Zi
2052 No.l9T Jiaagllu Proyince FllC’loty and 50 years RMB·· ·· · 10,11)6.580 ~yelopmeot Area ChangsMi Economic Offi~ (Ie.uehold) BuildiDg-Expires on ~CJaang Rang 0.0
33,537 m~ 9 July YOIlg (2002) Zi
(Note 10) 2OS2 No.19r 4. INFORMATION ON THE KNM GROUP (Cont’d) Notes: II Building is still under construction and does nOi hove Certificate ofFiuress (1) As per the vallUltion report dated 4 October 2000 as valued by Messrs W.M. Malile & Kamanaamall. a firm ofindependent professional valuers and as approved by the SC
(2) Upon consolidation of the financiJJl statements of KNMPS and its subsidiarks as at 31 December 1999, the net book value of the land owned by PASB was revalued upwards by RM2,350,439 in order to reflect the fair value of the land. The net book value of this land has therefore been reflected in the consolidated financial statements ofKNMPS as at 31 December 1999 as RM3,840,OOO
(3) 1’he revaluation deficit is to be written offagainst the income statement ofKNMPS
(4) The alienated land may not be transferred, leased or rented to any party wiliwut the written consellt of the State Authority except for the first transfer from the Melaka State DeJfClopment Body to the first purchaser. This restriction is eumpted only in tlte case of leasing to Tenaga Nasicnal Berllad. The land is presently chorged to RHB Bank Berhad
The total floor area ofthe buildings as ”(Iliad on 4 October 2000 and contained in the valuation certificate prepared by the Valuers (enclosed in Section 12) is 87,461 sq. ft. However, the plant has since been expanded to inclutk another production bay, sewerage treatment plant and additional office space, bringing the current total floor area of the buildings to approximately 96,875 sq. ft
(5) The land may not be transferred, rented or leased except with the consent ofthe State Authority. This restriction shall not be lJpplicable to Tenaga Nasional Ber/uId OIIty. The land is presen.tly charged 10 HSBC Bank Malaysia Berhad
(6) The land may not be transferred, rented orleasedexceptwith theconsenloftheStateAuthority. This restriction shall not be applicable to Ten.aga Nasional Berhad. only. The land is presently charged to HSBC Banic MlJlaysia Berhtul
(7) The land may not be trlJnsferred, leased, or charged except widl dIe written consent ofthe Stilte AUlhority. HQWe’l,’er, approvlJl to charge the land was obtained from the State Authority on 18 November 2002 lJnd dIe land is presently charged to Ci,ibank Berhad
The totalfloorarea ofthebuildingsas ,’ailled 011 .,October 2000 and contained in the valuation cerrificate prepared by the Valuers (enclosed in Section 12) is 109,()52 sq. ft. However, the plant has since been expanded to include another production bay and sewerage treatment plant, bringing the current total floor area ofthe buildings to approximately 145,313 sq. ft.
(8) No restrictions in interest as no document of title has been issued. The land is assigned to Bumiputra Commerce Bank Berhad
(9) No restrictions in interest. PM339 Lot2170, PM340 Lot2171 and PM341 Lot2172 are chargt!d to Bumiputra Commerce Bank Be-rhad. Whereas PM372 Lot2136 and PM423 Lot2132 art! free from encumbrances
(10) No restrictions in interest as no document oftille has been issued. The land is presently clwrged to the International Commercial Bank ofChirw

4. INFORMATION ON THE KNM GROUP (C<ml’d) 4.5 Promoters The details of the promoters of KNM and their shareholding after the Public Issue are as follows: •
.. Deemed interested by virtue ofIMSB’s 19.47% direct interest in TKS8 4.6 Subsidiary ADd Associated Companies The subsidiary companies of KNM, aU of which are incorporated in Malaysia (with the exception of KNMSPEC which is incorporated in Gina) are as follows: • 1.oIued&….., _..
Pold·Up……. –Sha.. Eq….
N._ Capital Capital PrWlpaI Adieities -11M 11M % -Subsidiary COlllpaUes KNMPS 28.06.1990 S,OClO,OClO 3,100,000 100 Design, manufacture, Malaysia assembly and commissioning of pl’OlXSS equipment, pressure yessels, heat exchangers, skid mounted assemblies. process pipe systems, storage tanks, specialised structural assemblies and module assemblies for the oil, gas and petrochemical industries KNMI 10.05.2002 1,000,000 500,002 100 Provision of management, Malaysia technical advisory, licence and trademark services 10 international related compantes aod related international investment Subsidiary of KNMPS KNMO 30.05.1994 100,000 100.000 100 Fabrication and Malaysia maintenance of oil, gas and petrochemicaJ process equipment, storage tanks, modular assemblies and structural assemblies for oil, gas and pe1rochemical industries PASB 17.10.1992 25,000 100 100 Property investment Malaysia 4. IN.·ORMATION ON THE KNM GROUP (CoN’d) _.to
_.PoId·Up A.tIoorilled SIlo… £qui.,. N….
Copi'” Coplrol \oIe_
RM RM ‘lIo DE 14.11.2000 100,000 2 100 Provision of project of Malaysia project manpower, engineering, DOO­deslruc1ive lesting and lechnical consultancy services Sabsidiary of KNMJ KNMOC 21.01.2002 100,000 2 Onlinary 100 [nveslmenl holding Malaysia Shares & 1,330 RPS· Subsidiary of KNMOC KNMSPEC 14.06.2002 Registered Capila1 : 100 Design, manufacture, China USD3.1 million assembly, commissioning and mainlenance of process equipment, pressure vessels, heat exchangers, skid mounted assemblies, process pipe systems, slorage lanks, specialized structural assemblies and module assemblies for the oil, gas and pelrochemical industries within Ihe martel in China ~teorKNMPS KNM-DP 22.01.1992 1,000,000 528.570 28 Fabrication and Malaysia maintenance of process equipment, storage tanks, modular assemblies and steel structural components for oil. gas and pelrochemicaJ industries KNM-DP HB 24.09.1994 500,000 200,000 49 Donnanl (intended Malaysia principal activily is property investment) Subsidiary of KNM·DP KNM-DP HB 24.09.1994 500,000 200,000 51 Dormant (intended Malaysia principal aClivity is properly inv~meol) • Redeemable Preference Shares 4. INFORMATION ON THE KNM GROUP (CoN’d) Further details of the stlbsiwaries of KNM are as follows:­4.M
KNMPS
KNMPS was incorporated in Malaysia on 28 June 1990 as a private limited company under the Companies Act, 1965. KNMPS commenced Us operation on 27 February 1991. The priocipaJ activity of KNMPS is in the design, manufacture, assembly aDd commissioning of process equipment, pressure vessels, heat exchangers. skid IDOUntcd assemblies, process pipe systems, storage tanks, specialised structural assemblies and module assemblies for the oil, gas and petrochemical industries. KNMPS was ro-fouoded by Data’ Abdul Rani Bin Mohd Razalli, a &miputra Entrepreneur 00 28 JUDe 1990 as a company specialised in design and manufacturing of process equipment, storage tanks and other facilities for the oil, gas and petrochemical industries, laking advantage of their robust growth in Malaysia. Over a period of twelve years, under the leadership of Data’ Abdul Rani Bin MoM RazaUi and assisted by co­founder Jr. Lee Swee Eng, a professional mechanical engineer and a team of experienced engineers, KNMPS has managed to pene1rale into .he oil, gas and petrochemical industries resulling in a steady growth into a leading position today in Malaysia and recognition worldwide. In 1992, KNMPS set up its first manufacturing plant in Melaka at Lol 208 Bukit Rambai Industrial Estate Phase IV with a land area of 27,000 square metres and a covered area of 3,700 square metres. The plant was set up to provide production facilities for too process equipment, steel structural systems, piping systems of the oil, gas and petrochemical plants. KNMPS has managed to increase customer confidence resulting in continuous increase and repealed orders from the same customers who are major oil, gas and petrochemical producers or operators and international engineering contractors over the last tcn years. KNMPS expanded its manufacturing plant from a covered area of 3,700 square metres to 5,900 square metres in 1994 and to 8,065 square metres in 1997 to cater for the continued growth in sales. KNMPS gained acceptance of its quality products and services io the oil, gas and petrochemical industries leading to its accreditation and approval by the ASME for U, U2 and S Stamps for manufacture pressured vessels and boilers and by ABS Quality Evaluations Incorporated of USA for ISO 9001 quality standard. In May 2000, it bas further been accredited the AD-Melkbla” HP-o and TRD 201 certificates in conjunction with EN729·2 by TOv Siiddeutsehland of Germany. 10 1993, ICNMPS successfully completed 2 units of Polymerisatioo Reactors, a feat, tbe first of its Ic.ind achieved by a Malaysian company. 10 1996, it scored a Malaysian Book of Record for successfully completing the latgest shop fabricated pressure vessels for a LPG Terminal and Bottling Plant. 4. INFORMATION ON THE KNM GROUP (Cont’d) In 1995, KNMPS secured its ftrst export order to deliver eight units of gas ship tanks to a Gennan client. The company’s export market continued to grow with more orders from other countries such as Singapore, Brunei, Indonesia, Myanmar, China, Phillipines, Pakistan, Sri Lanka, Kuwait, Qatar, Oman, Nigeria, New Caledonia, USA and Canada. The company is pre­qualifted in Jordan and is registered as approved suppliers in Kuwait, Oman and Qatar and is very well placed for more export orders-in the Middle East, USA and Canada. KNMPS has also made in routes to other countries in West Asia, Europe, Africa, Australia and Latin America. KNMPS expanded its operations in 1998 with a second manufacturing plant in Keeteh Industrial Estate on a rented land with covered area of 7,029squace metres bring the total covered shop space of KNMPS to 15,094 square metres. With this expansion, KNMPS secured in 1997, a single largest order of pressure vessels for the Aromatic Plant with total tonnage exceeding 3,000 metric tonnes and was successfully executed and delivered in 1999. However, the biggest feat of all was an order from MTBE Malaysia Sdn Bhd in 1998 for one of world’s longest and heaviest columns ever built by a Malaysian company, the Propylene-Propane Splitter, a high technology based process vessel for the Propane Dehydrogenation Plant. Along with this order, KNMPS was also entrusted with all the major columns for the whole plant, making it a strategic partner in ensuring the success of the plant. KNMPS successfully executed the order and was given a special mentioned award by PEfRONAS for the achievement which is another fust in the Malaysia Book of Records. As a strategic move and also to reduce logistic cost, KNMPS also purchased a nine acres industrial land in Gebeng and built its third manufacturing plant in 1999. In 2001, KNMPS built a new plant in Bintulu to service the East Malaysia and Brunei region. The Kertih Plant was relocated to Gebeng, as part of the Gebeng Plant expansion in 2002. Details of KNMPS’s manufacturing plants are set out below: Plants  Location  Total  Covered  Manufacturing  Area  Area  Capacities  (m2)  (m2)  (MT)  Melaka Plant  Melaka  29,385  9,000  6,000  Gebeng Plant  Kuantan, Pahang  36,420  13,500  9,000  Bintulu Plant  Sarawak  13,400  2,500  2,000  China Plant  Changshu, China  33,537  17,230*  11,500*  Total Area  112,742  42,230  28,500
* Estimated (upon completion) THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK •• INFORMATION ON THE KNM GROUP (Conl’d) (ii) Share Capibl The presenl authorised share capital of KNMPS is RM5,OOO,OOO divided iDlo 5.000,000 ordinary shares of RM].OO each. The issued and paid-up share capilal is RM3,100,OOO comprising 3,100.000 ordinary shares of RM1.00 each. The changes in the issued and paid-up share: capital of KNMPS since its incorporation are as follows:
_.. _…. Par Paid-Up SIIan: Va/oe Comiduacioa Copilal RM RM 28.06.1990 2 1.00 Oish 2 12.03.1991 99,998 1.00 Oish 100.000 09.08.1991 400.000 1.00 Oish 500,000 25.08.1992 500,000 1.00 Oisb 1.000,000 07.10.1993 1,100,000 1.00 Oisb 2,100,000 01.121993 1,000,000 1.00 Oisb 3,100,000 • On 27 J~ 2000, l,115,300 orJiNlry slwres of RMl.OO eodt represelfling approximotely 36% (‘qf4ily ;nlUt!$1 in KNMPS ..-a.:s p”rcMSt!d by llller Merger Sdn Slidfrom KotUnklijke 5cltdde Gr04’ BV (NetherlatUh) (Ui) S.bsidiary And Associated Completes The subsidiary and associate companies of KNMPS are as follows: _a. paid-up Etrecttve Aathoriwd Share EquityDatt/.Pla« ofSubsidiary Capital Capital laterat Priudpal1DcorporatioDCompallY RM RM (‘II) Activities KNMO 30.05.1994 100,000 100,000 100 Fabrication and maintenance of Malaysia oil. gas and petrochemical process equipment. PASB 17.10.1992 25,000 100 100 Property investment Malaysia
DE 14.11.2000 100,000 2 100 Provision of project of project Malaysia manpower, engineering, nOD­destrudive t~ing and technical consultancy services Associate of KNMPS KNM·DP 22.01.1992 1,000.000 528.570 28 Fabricalion and mamlenance of Malaysia process equipment, storage tanks.. modular assemblies and s1eel structural components for oil, gas and petrochemical industries. KNM·DP 24.09.1994 500,000 200,000 49 Dormant (intended principal HB Malaysia activity is property investment) 4. INFORMATION ON THE KNM GROUP (Conl’d) Issued &  paid-up  Effective  Subsidiary Compaay  Date,lPlace of Incorpontion  Authorised Capital RM  Sbare Capital RM  Equity IDterest (%)  Priadpal ActivWes  Subsidiary ofKNM-DP
KNM-DP lIB  24.09.1994 Malaysia  500,000  200,000  51  Dormant (intended principal activity is property investment)  4.6.2  KNMI  (i)  History And Business  KNMI was incorporated in Malaysia on 10 May 2002 as a private limited company under the Companies Act 1965 and commenced operations on 5 July 2002. The principal activity of KNMI is in the provision of management and technical advisory services to international related companies and related international investments,  (ii)  Share Capital  The present authorized share capital of KNMI is RM1,000,000 divided into 700,000 ordinary shares of RM1.00 each and 300,000 redeemable preference shares (“RPS”) of RM1.00 each. The issued and paid-up share capital is RM500,002 ordinary shares of RM1.00.  The changes in the issued and paid-up share capital of KNMI since its incorporation are as follows:­ Date of Allotment 10.05.2002 05.07.2002  No. of Ordinary Sores Allotted 2 500,000  Par Value RM \,00 \,00  CODsideratioa Cash Cash  Resultant Issued aad Paid·Up Share Capital RM 2 500,002  (iii)  Subsidiary And Associated Companies  The subsidiary company of KNMI is as follows:­ Subsidiary Company KNMOC  Date/Place of Incorporatioa 21.01.2002 Malaysia  Authorised Capital RM 100,000  Issued & paid••p Share Capital RM -2 ordinary shares of RMl.oo each -1,330 RPS of RMl.oo each issued at a premium of RM999 pcr share  Effective Equity Interest (%) 100  PriDclpal Activities Investment holding
4. INFORMATION ON 11IE KNM GROUP (CooN) 4.6.3 KNMOC (I) Hbtory Aod ………
KNMOC was incorporated in Malaysia on 21 January 2002 as a private limited company under the Companies Act 1965 and commenced operations on 5 July 2002. The principaJ activity of KNMOC is tbat of an investment holding company. (ii) Share Capital The present authorised share capital or KNMOC is RMlOO,OOO divided into 2O.<XXl ordinary shares of RM1.00 each and 80,000 RPS of RM1.00 each. The issued and paid up share capital is RMl,332 comprising 2 ordinary shares of RMt.oo each and 1.330 RPS of RM1.00 with a premium of RM999 each. The changes in the issued and paid up share capital of KNMOC since its incorporation are as follows: No. of Res”tant Ordinary Issuedud Date ofSbo… Por hid.UpSUre_.t AlIo….. Value Considfl1ltio. ea….’ RM RM 21.01.2002 2 1.00 Casb 2 05.07.2002 1.330 RPS 1.00 with Cash 1.332 premium ofRM999 (iii) Subsidiary a-.d As50ciakd Compa. The subsidiary company of KNMOC is as follows:­Subsidiary Da.~lPlac~of Total Regi>teftd Effective Principal Company hlcorpontioll l.vestm~.t Capital Eqnity Activities Value usn Inl…… usn (%) KNMSPEC 14.06.2002 6,200.000 3,100,000 100 Design. manufaCTUre, assembly China and commissioning of process equipment, pressure vessels, heat exchangers, skid mounted assemblies, process pipe syslem. storage lanks, specialized structural assemblies and module assemblies for the oil. gas and petrochemical industries within the market in China 4. INFORMATION ON THE KNM GROUP (Co”l’d) 4.6.4 KNMSPEC (1) History ADd B-.siDess KNMSPEC was incorporaled in Cbina on 4 June 2002 as a private limited company under the Laws of Olina and has commenced business. The principal activity of KNMSPEC is in design, manufacture, assembly and commissioning of process equipment. pressure vessels, heat exchangers, skid mounted assemblies, process pipe systems, storage tanks, specialised structural assemblies and module assemblies for the oil, gas and petrochemical industries within the market in China.. KNMSPEC is building a new manufacturing plant which will be completed by the 2nd quarter of 2003 and bas secured orders worth RMBl1.13 million. (il) Total Iavestmeot V.I.e ADd Registered C.pital The total investment value intended for the company is USD6.2 million with a registered capital of USD3.1 miUion. (iii) Subsidiary ADd ~ted Companies As at the date of this prospectus, the Company does not have any subsiwary nor associaled companies. Note: In accordance with China law, KNMSPEC is a limited liability company and the amount of regiSlered capital of KNMSPEC refers to the total amount of capilal registered with the administrative authority for industry and commerce for the establishment of KNMSPEC, namely, the total amount of investment thot KNMOC is obliged to contribute to KNMSPEC. The totalinvestment value ofKNMSPECreferstothetotalamount offunds required to operate KNMSPEC, namely, the sum total of capital construction funds and the amount of working capital required in accordance with KNMSPEC’s produ.ction scale. Therefore, the total investment value must be equal to or superior than the amount ofregistered capital. 4.6.5 PASO (I) History Aad Business PASB was incorporated in Malaysia on 17 October 1992 as a private limited company under the Companies Act, 1965 and commenced operations on 1 January 2000. The principal acei”ily of PASB is in property investment (ii) Share Capital The present aUlborised share capital of PASB is RM25,OOO divided into 25,000 ordinary shares of RMl.OO each. The issued and paid-up share capital is RMlOO comprising 100 ordinary shares of RM1.00 each. 4. INFORMATION ON THE KNM GROUP (Co”l’d) The changes in the issued and paid-up share capiCal of PASB since its incorporation are as follows: No. of Rau1tant Ordinary Issued aod D8te of Sbares Par Paid.Up Share AIlotlDent AUot.ed Value Coasideration Capital RM RM 17.10.1992 2 1.00 Cash 2 3.03.1997 98 1.00 Cash 100 (ill) Subsidiary ADd Associated Compames As al the date of this prospectus, the company does not have any subsidiary nor associated companies. 4.6.6 KNM-DP (I) History And Business KNM·DP, an associate company of KNMPS, was incorporated in Malaysia on 22 January 1992 as a private limited company under the Companies Act, 1965 and commenced operations in January 1992. The principal activity of KNM·DP is in tnt fabrication and maintenance of process equipment, storage tanks, modular assemblies and steel structural components for oil, gas and petrochemical industries. (U) Sbare Capital The present authorised share capital of KNM·DP is RMI,OOO,OOO divided into 1,000,000 ordinary shares of RM1.00 each. The issued and paid-up share capital is RM528,570 comprising 528,570 ordinary shares of RM1.00 each. The changes in tbe issued and paid-up share capilal of KNM-DP since its incorporation arc as follows: No. of Ihsult.., Ordinary Lssotd aDd Date of AlIotmeat Sba…. !’lor Paid.Up Share Allotted Value CoasideratioD Capital RM RM 22.01.1992 2 1.00 Cash 2 6.02.1992 99,998 1.00 Cash 100,000 28.02.1994 42,857 1.00 Cash 142,857 8.03.1994 385,713 1.00 Bonus issue by way 528,570 of capitalisation of share premium accounts 4. INFORMATION ON THE KNM GROUP (Con/’d) (ill) Substantial Shareholders Shareholders Nationantyl No. of % PIa-ce of Ordiury IDcorporation Shares Held Perbadanan Kemajuan Malaysia 158,571 30.0 Negeri Melaka KNMPS Malaysia 147,999 28.0 TKSB Malaysia 74,000 14.0 Daya Venture Sdn Bhd Malaysia 74,000 14.0 Panoramic Team Sdn Bhd Malaysia 74,000 14.0 (iv) Subsidiary And Associated Companies The subsidiary company of KNM-DP is as follows:­Subsidiary DatelPlace 01 Authorised Paid-up Effective Principal Company Incorporation Capital Capital Equlty Activities RM RM laterest (%)
KNM-DPHB 24.09.1994 500,000 200,000 51 Dormant (intended principal Malaysia activity is property investment) 4.6.7 KNM·DPHB (i) History And Business
KNM-DP HB was incorporated in Malaysia on 24 September 1994 as a private limited company under the Companies Act, 1965. The intended principal activity of KNM-DP lIB is in property investment. KNM-DP lIB has not commenced operations since the date of its incorporation.
(ii) Share Capital

The present authorised share capital of KNM-DP HB is RM5oo,000 divided into 500,000 ordinary shares of RM1.oo each. The issued and paid-up share capital is RM2oo,ooO comprising 200,000 ordinary shares of RM1.00 each. The changes in the issued and paid-up share capital of KNM-DP lIB since its incorporation are as follows: No. of Resultaat Ordinary Issued and Date of Shares Par Paid-Up Share AIIotmeat Allotted Value Consideration Capital RM RM 24.09.1994 2 1.00 Cash 2 28.09.1994 199,998 1.00 ea,h 200,000 4. INFORMATION ON THE KNM GROUP (ConN) (iii”)  Substaotial Sbarebolden  <–Dired–>  <–1IIdlrect–>  _en  NationalityJ  No. or  %  No. of  %  PIa<e of  Onllury  OrdiDary  UcorporatioB  S1lares Held  Sores Held  KNMPS  Malaysia  98,000  49.0  102.000·  51.0  KNM·DP  Malaysia  102,000  51.0
• Deemed inJu~Sledby virtue oflire diret;1 interest in KNM-DP (Iv) Subsidiary And Associated. Campa. As at the date of this Prospectus. the company does nor have any subsidiary or associate companies. 4.6.8 KNMO (i) History And Business KNMO was incorporated in Malaysia on 30 May 1994 as a private limited company under the Companies Act. 1965 and commenced operations on 1 June 1994. The principal activity of KNMO is in the fabrication and maintenance of oil, gas and petrocbemical process equipment. (i1″) Share Capital The present authorised share capital of KNMO is RMloo,OOO divided into 100,000 ordinary shares of RMLoo each. lbe issued and paid-up share capilal is RMloo,OOOcomprising 100,000 ordinary shares or RMl.00 eacb. The issued and paid-up share capital of KNMO bas not changed since its incorporation. (iii) Subsidiary And Associated Companies As al the date of Ihis Prospectus, the company does nol bave any subsidiary Dor associated companies. 4.6.9 DE (I) Hirtory ADd B.si.Hss DE was incorporated in Malaysia on 14 November 2000 as a privale limited company undcr the Companies Act, 1965 and commcnced operations on 14 November 2000. The principal activity of DE is in the provision of project manpower, engineering, non-destructive testing and technical consultancy services. (ti) Share Capital lbe presenl authorised sbare capital of DE is RMloo.000 divided into 100,000 ordinary shares of RMl.00 each. The issued and paid-up share capital is RM2 comprising 2 ordinary shares of RMl.OO eacb. The issued and paid-up share capital of DE has not changed since its incorporation. 78 [ Company No: 521348-H 4. INFORMATION ON THE KNM GROUP (Con/’d) (iii) Subsidiary ADd Associated Companies As at the date of this Prospectus, the company does not have any subsidiary or associate companies. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
4. INFORMATION ON THE KNM GROUP (Cont’d) 4.7 Licences, Certificates Of Authorisation, Certificates Of Registration, Vendor Approvals And Memberships 4.7.1 Major Licences, Certificates Of Registration And Certificates Of Authorisation Licence I Authorit  Date orIssue  I Maior CoDditioas  Status orComDllaIlCe  KNMPS  1. Manufacturing Licence by Mm and MIDA  (a)  Manufacturing licence No. A 012075 to produce  I 19.05.03  (a)  At least 70% of the shares of the company shall be subscribed to and held by I Complied  ‘pressure & non-pressure vessels and other steel  Malaysians and at least 51 % of the shares shall be classified, and the company  fabricated  induslrial  plant  comlXlnents  and  shall consult Mm before distribution of shares;  structural steel products’ as from 23 September  (b)  The shares held by shareholders who are not Malaysians shall nol be sold  1999 at Lot 105 & 106, Gebeng Industrial Estate  wilhout prior wrilten approval of MI11;  Phase  1,  Mukim  of  Sungai  Karang,  26080  (c)  The comlXlsition of the board of directors of the company shall, in general.  Kuantan, Pahang Darul Makrnur and letter from  reflect the equity structure of the company and MITI shall be informed of the  MIDA daled 20 May 2003;  aplXlintmenl as well as any change in its board of directors;  (d)  The company should train Malaysian citizens so that the transfet of skill and  (b)  Manufacturing licence No. A 010372 to produce I 19.05.03  technology is passed to all levels within the company.  ‘pressure & non pressure vessels and other steel  fabricated  industrial  plant  comlXlnents  and  structural steel products’ as from 5 June 1996 at  Lot 208, Bukit Rambai Industrial Estate, 75250  Melaka and leiter from  MIDA dated  20 May  2003; and  (c)  Manufacturing  licence  No.  A  012759  to  I 19.05.03  produce’pressure  &  non-pressure’  vessels and  other steel fabricated industrial plant comlXlnents  and structural steel ptoducts’ as from 17 January  2001  at  Lot  130,  Kidurong  Industrial  Area  Binlulu, Sarawak and letter from MIDA dated 20  May 2003.
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4. INFORMATION ON THE KNM GROUP (Conl’d) Uceace I Au.llorlty  Date of Issue  Malor CoHiUou  Sta..oteo.~  2. Petroliam NasiooaJ Berbad (“PETRONAS”) Licence  13.11.02  (0)  The company is required to register and obtain the necessary licence, pennit  Complied  No. L·20014Q-X under Regulation 3 of the  or approval Crom the relevwt authorities prior to providing the services Of  Petroleum Regulations 197410 provide  products relating to the company’s business I>pel1ltioos or activities. These  equipment/services for CarigaJi companies and  services or supply of products mUSI also be in acwnlance with !be reJevilDt  oil/gas producers in Malaysia from 16 December  ruks.  2002 to 15 December 2004.  (b)  This lice~ will be cancelled if it is discovered that the company is io any  «)  s1age of liquidalion, winding.up or dissolutioo. 1be company is required to inform PETRONAS of any changes in the company such as chaoges in the sbarebolding structure, board of directors or  management learn wilhiD 14 days. Failure to do so will cause the company’s  liocAOe to be cancelled.  <dl  The company shaH not allow any other company to become its principle,  agent” sub-contractor or otbetwise provide any services or supply any utilities  Of equipmeot on its behaU wilhout the prior written approval of PEIRONAS.  (‘l  This licence is ooo·transferable.  3. Certificate of Registration No. 1960117·WPQOO178  29.08.01  (0)  Registration of the contractor shall be cancelled, suspended or revoked if,  Complied  under Part VI of the Malaysian Construction Industry  lupdated  among others, tbe contractor is adjudicated a banknJpt and a winding up  Development Board ACI, 1994 by the Construction  2].03.03  petition bas been presented against the contractor;  Industry Development Board Malaysia (“CIDB”) as a  (b)  This certificate is non-transferable  registerW  oontractor  for mechanical  and electrical,  fabrication  and special treatment,  special refineries  and  general  building  and  maimenance  and  civil  engineering general from 28 August 2001 to 2 August  2003.  4. Certificates of Registration from:  (,)  Ministry  of  FiollDce,  Malaysia  (MOF)  ;,  09.05.02  (0)  To inform MOF of any cbauge to infonnatioo disclosed via ~ooJioe” within  Complied  supplying products I services under the approved  10 days of the date of cbanges.  beads of manufacture: cargo tanks, storage tanks  (b)  Company  to  ensure  that  Cltegories  not  overlapping  with  lbe  category  (LPG),  stabilizer  columns,  beat  exchangers,  approved in any olber company d\at have !he same shareholder or Board of  container /Ianks, repair of ‘butt’ fuel tanks and  Directors and Management.  water pump / pipe and its components from 28  May 2002 to 27 May 2005.
81 4. INFORMATION ON THE KNM GROUP (Conl’d) LiceJKe I Aucboric’  Date of l5AIe  I M:  c_..  Stamsorco.  ”  (b)  Ministry of Entrepreneurial Development (PKK) as a Qass A, Heading m, Sub-beading 4,5.6.9.11.14,I1(a), 17(b). 17(h). 17(j) and 17(1) contractor from 30 September 2002 10 29 September 1004  I 03JtlJ.02  (I) (b) (c)  Any change 10 the company informatioo must be disclosed to PICK within 21 days from Ihe date of cblllge. PICK is entitled 10 lenninateJsuspend this registration without notice if the infurmatioo furuished is wrong or has failed to submit information requested. This registratioo will be cancelled if: i) Any sbatebolder of the compllly owns more than 5% or RM50,OOO (wbicbever is lower) in any other company registered with PKK in the  ii)  same category. Any management or tecbnically qualified staff is involved actively in any other company registered with PKK for the same category.  5.  Certificales of Authorisalion from:  (a)  The National Board of Boiler and Pressure Vessel Inspectors for the use of the ”NB” matk and register boilers, pressure vessels or other pressure retaining items manufactured in accordance with the U, U2 & S ASME Slamps with the National Board until 21 January 2006 (Melaka)  I 21.01.03  No conditions attached  Not applicable  The National Board of Boiler and Pressure Vessel1nspectors for tbe use of the “Na” mark and register boilers, pressure vessels or other pressure retaining items manufactured in accordance with tbe U, U2 and S ASME Slarnps with National Board unlil 21 January 2006 (Gebeng. Kuanlan)  I 21.01.00  The National Board of Boiler and Pressure Vessel Inspectors for lbe use of “R” symbol for repairs aIKVor alterntioos al Lot 105 -Lot 106 Gebeog Industrial Eslate, 26080 Kuantan, Pahang and extended for field repairs andior a1teratioos rontrolled by this location from 12 December 2002 to 21 January 2006.  I 12.12.02
82
<. INFORMATION ON THE KNM GROUP (c”nl’d) LiteDce I Autllorit (b) The American Society of Mechanical Engineers (ASME) authorises lhe use of U. U2 and S symbols stamps 10 manufacture pressure vessels and 10 manufacture and assembly o( power boilers at lot 208. Bukil Rambai lndllStriaJ £slate. 75250 Melaka and other field siles COCluolled by the aforegoing location until 21 January 2006.  Date of1_ I 04,02.<X!  I Malor CoDditlou No conditions attached  Status of Com’  The ASME authorises the use of U, U2 and S symbol stamps to manufacture pressure vessels and 10 manufacture and assembly of power boilers at Lot 105 -106, Gcbeng Industrial Estate, 26080 KUaJltan. Pahang and other field sites controlled by tbe aforegoing location until 21 January 2006.  I 04.02.00  The ASME authorises the use o( U, U2 and S symbol stamps 10 manufacture pressure vessels and 10 manufacture and assembly of power boilers al Lois 124 aDd 128 Kidurong Industrial Area. 91000 Bintulu, Sarawak and other field siles controlled by lbe aforcgoing localioo until 14 December 2004.  I 14.12.01  (e) TUV Suddeutsehland (TIJV) certifying that  21.03.00 and  (.j Should one of the named welding and te.’iting supervisors leave !he Company  KNMPS’s Gebeng production place bas been audited and approved as a manufacturer according to AD-Merkblall HPO and TRD 201 in conjuetion with EN 729-2 and that KNMPS has fulfilled the oomprebensive quality requiremenls according 10 EN 729-2 unlil March 2004.  01.05.00  (bj or welding and test procedures or importanl pans of equipment required (or these procedures be cbanged or any of lbe welding rclaled qualify assurance measured be modified. il musl be reponed beforehand 10 11JV. If necessary TIN will ioiliale a renewal inspection al the Company. Dis cel1ificate sball become invalid if tbe welding $UpeJVisor named therein leaves lbe Company.
83 1Company No: 521348-H I 4. INFORMATION ON THE KNM GROUP (Conl’d) & for Quality Supervision and fupires 00 30 April m;mufacturcs ., non·fired Iabatan Keselamatan dan Pekerjaan Malays;a under ‘” ~ Land District. Kidurong Pengandung Tekanan Tat Iabatan Keselamatan d” Gebeng 26080 Kuantan Pengandung Tekanan T,’ 75250 Melaka. Valid for 2
O.te of Issue 09.10.02  M.,;or Conditio., No conditions anacbed  StmIs of COIlQlIia;Ke Not applicable  30.04.02  No conditions anacbed  Not applicable  21.05.03  ,j The department bas to be informed of any changes/addition to the existing officer, machineries and premises. b) To obtain prior approval on design from the department before commencing manufacturing oj All procedures relating to manufacture of non·fired pressure vessels must be in compliance with the Quality Control Manual and any change from the manual must receive the approval of the Department. d) All welding works must be carried out by an approved wel(ler in accordance with Welding Procedure SpecifICation. All wekling 10 be conduCted under  Complied  08.11.02  supervis.ion and all records 10 be kept properly. ‘j To comply with the provisions of Factory &: Macbi~ries Act and Safety &: Health of Workers Act and the Rules tberelO.  16.01.02
84 4. INFORMATION ON THE KNM GROUP (Cont’d) Uceace / Authorit KNMO l. Manufacturing Licence under the Industrial Co-Ordination Act, 1975 by Mm and MIDA Licence A011718 to produce ‘pressure & non pressure vessels and other steel fabricated industrial plant components and structural steel products’ as from 12 November 1998 at Lot PT 1511, Kawasan Permint, Kertih, 24700 Kemaman, Terengganu Darnl Iman 2. Certificate of registration No. 1970104-WP020751 under Part VI of the Malaysian Construction Industry Development Board Act, 1994 by CIDB as a registered contractor for fabrication and special treatment and mechanical tools in the category of not more than RM 1,000,000. Valid from 3 January 2001 to 2 January 2004. Date oflssue  Maior Coaditions  Status of Comnliance  10.03.98  (‘J At least 70% of the shares of the company shall be subscribed to and held by Malaysians and at least 30% of the shares shall be classified, and the company shall consult MITI before distribution of shares; (b) The shares held by shareholders who are not Malaysians shall not be sold without the prior written approval of MITI; (oj If the company proposes to use any used maChinery, the prior written approval of Mm shall be obtained and a valuation shall be carried out by an independent valuer acceptable to MITI. The prior consent of MITI shall also be obtained before any modification, addition or reduction in the machinery is proposed where there may be substantial implication on power usage and/or output; (d) The company shall not enter into any joint venture agreement, technical assistance agreement, licence agreement, trademark and patents agreement, turnkey contracts, management agreements without the prior written approval from the MITI;  Complied  04.12.00  (,) Registration of the contractor shall be cancelled, suspended or revoked if, among others, the contractor is adjudicated a bankrupt and a winding up petition has been presented against the contractor; (b) This certificate is non-transferable.  Complied
85 ICompany No: 521348·H I 4. INFORMATION ON THE KNM GROUP (Con/’d) UceDce/Autborit  Date of ISSlH  M  CoodItio..  Sbt.sorc~  DE  1. Licen~  under class A and D to buy, process, bandle.  14.02.02  (.)  The licence holder must ensure thaI only the “Onlng Yang Bertanggungjawab  Complied  use,  carry  and  imporVexport  radioactive  substan(t  Temadap  Lesen”  Of  Ray PI'()(ec1ion  Officer for 1he radiography industry  under  Akta  Perlesenan  Tenaga  Arom  1984  dan  aaivity communicate with the Lembaga.  Peraturan-Peraturao Perlindungan Sinaran (perlesenan)  (h)  Failure of the licence holder to comply with any instruction relating to this  1986 at  premise Lot 208, Bukil Rambai lnd. Eslale  Ik:enoe can resuh in 3 Sectioo 40 Atom Power licence Act 1984 (Act 304)  Phase !VB 75250 Mela1:a valid from 26 February 2003  breach. In the event no provisions for penalty are made then the licence holder  10 25 Ftbruary 2006.  cae be subjecled to imprisonment for a period of not more than 10 years or a  flne of not more than RM 100,000.00 per month.  (e)  The  holder  must  display  a  copy  of the  licence  near  to  the  radiography  equipment to enable easy checking at any time.  (d)  Renewal application of this license must be made DOl less than 30 days and not  more than 60 days from the expiry date.
86
4. INFORMATION ON mE KNM GROUP (Conl’d) 4.7.2 Vendor Approvals KNMPS has been granted approval from the following customers:
(a) PEfRONAS under the product groups of Unftred Pressure Vessel (Class I, II & III), Heat process Equipment (Fired, & Unftred), Waste Heat Recovery Unit (Fired & Unftred), Mechanical Maintenance, Construction Work ­Major, Hook Up & Commissioning, Design Small Tanks (Less than 100 KEBL), Design Large Tanks (More than 100 KEBL), Flare System, Dehydration System, Water Treating Equipment and Minor Fabrication / Welding;
(b) Sarawak Shell Berhad, which allows the Company to submit bids for any open tenders on small tanks, large tanks and foundation and association works under the Work Categories Tanks / Tanks Fann;
(c) Shell Refming Company (FOM) Berhad as approved contractor;
(d) Brunei Shell Petroleum Company Sdn Bhd under the Products Groups of Chlorination Plants, Internal Pressure Vessels & Columns, Dryers, Furnaces, Separator (general), Separators (oil & gas), Pressure Vessels, Flare Equipments and Tower Packing (structured);
(e) Kuwait National Petroleum Company for the supply materials for gas recovery, pressure vessels (both up to and over 2 inches wall thickness), coolers, fans and heat exchangers for the Kuwait National Petroleum Company refineries;
(f) Kuwait National Petroleum Company as approved contractor for Steel Tanks for Petroleum Products; Refmery Piping and Associated Works and Plant Installation;
(g) Kuwait Oil Company (K.S.c.) as approved contractor for construction of new mega storage tanks (exceeding 500,000 BBL);
(h) Kuwait Oil Company (K.S.c.) as approved vendor for manufacture pressure vessels;
(i) Petrochemical Industries Co. (K.S.c.) as approved vendor for heat exchangers, tankage and tank farms, pressure vessels and towers, ftred heaters, boiler and flare stacks;
(j) Petroleum Development Oman LLC as approved contractors for Tank Construction, Large Tank Construction and Tank Cleaning & Repair;
(k) Qatar Petroleum for the product categorized under Plant Elements and parts for columns, condensers and coolers, cooling towers, heat exchangers, reactors, separators, stacks, ventilation stacks, process tanks and vessels;
(I) Qatar Petroleum as registered contractor for mechanical and project construction: design, supply and erection/start-up/commissioning of plant equipment;
(m) Federal Republic of Nigeria pennit to operate as an oil industry service company under the construction services category -engineering, design, metal fabrication, installation of pressure vessel process skid packages and LPG tank;

4. INFORMATION ON THE KNM GROUP (Conl’d) (n) Saudi Arabian Oil Company as one oftbe approved contractors; and
(0) Sakhalin Energy Investment Company (“SElC’) for the work-categories of the Group’s services and products.

4.7.3 ISO 9IOt Cfl1iftcate By ABS Qulity Evaluooas Inc. 01 USA KNM bas been granted a Quality Management System Registration Certificate by ABS Qualily Evaluations. Joe. of USA certifying that KNMPS bas implemented a quality system complying with lhe quality standards of ISO 9001 applicable to the design, manufaclure, construction and commissioning of process equipment, pressure vessels, heat exchangers, skid mounted assemblies, process pipe systems. storage tanks, specialized structural assemblies and module assemblies. 4.7.4 Memberships (a) KNMPS is a member of the Malaysian Structure SteeL Associatkln (‘”MSSA”):
(b) KNMPS is a member of the Federation of Malaysian Manufacturers (“FMM”);
(c) KNMPS was elected Company Member of the Institute of Materials Malaysia (“IMM”);
(d) KNMPS is an Ordinary Corporate Member of tbe Malaysian Gas Association (“MGA”);
(e) KNMPS is a member of the Construction Industry Development Board Malaysia (“aDO”) under Grade G7;
(f) KNMPS bas been reg~ered with Malaysia External Trade Development Corporation (“MATRADE”) as a MATRADE Exporter;
(g) KNM·DP has been registered with MATRADE as a MATRADEExportcr;
(h) KNMO has been registered with MATRADE as a MATRADE Exporter; and
(i) KNMI has been registered with MATRADE as a MATRADE EJ(porter.

4.8 MiYor Customers KNM Group’s customers are mainly divided into two groups: a) EPee contractors; and b) Oil, Gas and Petrochemical companies.
There are two ways in which the Group accesses its customers: (I) Direcl customers. which are mainly oil, gas and petrochemical companies who tender oul jobs and select companies to manufacture process equipment. These direct customers comprise of owners, operators and producers of oil, gas and petrochemical companies.
(ii) Indirect customers an: mainly EPCC contractors. which are responsible for designing Ihe entire processing compkx. Once tile EPCC contraclors have completed their designs, they tender Oul jobs and selcct companies 10 manufacture process equipment for various parts of lhe emire complex.

4. INFORMATION ON THE KNM GROUP (ConN) The top ten customers of the KNM Group as at financial year ended 31 December 2002 are as follows: Customers  COIlDtry  uagthof Relationship (No. 01 Yea..)  Pen:eatage of total revenue (%)  1.  Tovo Em~·ineerinQ”Corporation Sdn Bhd  Malaysia / Japan  11  36.2  2  Sarawak Shell Bhd  Malaysia f Netherlands  13  13.8  3.  Dresser Kellogg Energy Services Inc. f Halliburton Far East Pte Ltd  USA  2  13.0  4.  Cloul!h Enl!ineerinl! Ltd  Australia  3  8.9  5.  Petronas Caril!:ali Sdn Bhd  Malaysia  12  8.6  6.  Malaysia LNG SOO Bhd  Malaysia  11  3.2  7.  Valero Refining! Jacobs Engineering GroUD Inc.  USA  3  2.9  8.  Ultramar Inc.! Fluor Daniel Inc.  USA  3  2.3  9.  Petronas Fertiliser Sdn Bhd  Malaysia  1  1.8  10.  Inco Australia Manal!ement Ptv Ltd  Australia  1  1.6
Apart from Toyo Engineering Corporation Sdn Bhd, Sarawak Shell Bhd and Dresser Kellogg Energy Services Inc(Halliburton Far East Pte Ltd which contributed approximately 36.2%, 13.8% and 13.0% respectively. None of the other KNM customers contributed more than 10% of the company’s revenue for the financial year ended 31 December 2002. The Group has established a close working relationship with its customers whereby approximately 50% of all its top 83 customers have been dealing with the Group for approximately 5 to 12 years since its inception with repeat orders. The KNM Group also has entered into a global sourcing and supply arrangement with TradeMC Inc. (a subsidiary of Fluor Qnporation) for a period of 5 years from 2001. 4.9 Major Supptiers Overall, the KNM Group sources its raw materials predominantly from imports. Imports of raw materials accounted for approximately 68% of the total raw materials used by the Group in the manufacturing of process equipment in 2002. In most of the orders, KNM Group is required to comply with the client’s specified manufacturers and country of supply of the raw materials to be used for the production of equipment purchased. On other occasions, the grade of raw materials which have been specified by customers are not locally available in Malaysia. KNM Group has established a strong working relationship with suppliers and this is indicated by the fact that most of the Group’s suppliers have been working with KNM Group between 5 to 10 years since inception. Their largest supplier is Saarstahl-Export GMBH (“Saarstahl”), which supplies hot-rolled steel plates. Purchases from Saarstahl accounted for 9.9% of the total purchases of raw materials for the financial year ended 31 December 2002. KNM has an extensive list of suppliers for its raw material and each of them do not individually contribute more than 10% of the group total purchase for the financial year ended 31 December 2002. Thus, the dependency on anyone supplier is minimized. 4. INFORMATION ON THE KNM GROUP (C.m’d) The following are the top ten suppliers of rhe KNM Group for the fmancial year ended 31 December 2002: No  Supplien Name  Cou.try  Det<riptJo.  r.e.gth of  Perce.tage  .  relatioDUip  0(10….  (No. of vean)  ~…  l.  Saarstahl Export  Germany  Supply of bot rolled  1  9.9  GMBH  steel plates  2.  Mitsui & Co. Ud.  J’P””  Supply of bot rolled  4  9.0  steel plates  3.  Tok.ki Lcd.  Japan  Supply ofsemi­ 4  9.0  euiDticaJ bead  4.  Fukusuke Kiko Co.  Japan  Supply of cladded  6  7.0  Ud.  st.eU filales  5.  Usmor Industeel  Belgium  Supply of stainless  2  5.0  steel plates  6.  DUi!woo Co. Ltd.  South Korea  Supply f1an2es  3  5.0  7.  &ab (Malaysia) Sdn  Malaysia I  Supply of welding  7  5.0  Bhd  Sweden  electrodes  8.  Special Metals  Singapore I USA  Supply of tubesheet  1  4.0  Pacific Pte Ltd  9.  Tae Woong Co. Ltd.  South Korea  Supply of flanges  4  4.0  and forging  materials  10.  NKK Trading Inc.  Japan  Supply of hot rolled  4  3.0  steel plates
4.10 Viability. Vulne….bility. Ca,.bility To Diversify, Future PIaDS ADd Strategies 4.10.1 Vlahl1lty (11.) Product Diversity KNM Group manufactures a wide diversity of equipment thai is used within processing plants for the oil, gas and pelrochemical industries. Process equipment including columns, readors., separators., pressure vessels, skid packages. heat exchangers and air coolers represenlthe largesl proportion of its products accounting for 50% of the Group’s 101ai turnover for financial year ended 2002; followed by LPG Mounded Bullets aoo construction of Terminals, Refineries and Process Plants at at 36% and 10% respectively. KNM’s capabilities in manufacturing a wide product range provides the advantage of being able to address a wider scope of business opportunities arising from the oil, gas and petrochemical industries as well as beiog able to meet the needs of a wider customer base, locally as well as globally. Moreover, tbe Group’s wide range of products also helps to minimize over­reliance on anyone or small range of products, or within a narrow sector of the oil, gas and petrochemical industries. In addition to manufacturing physical products, KNM Group also provides technical and non-technical services as part of its portfolio of products and services as well as being part of an integrated manufacturer or turnkey operator. The range of services offered by KNM includes Systems and Product Design, Systems and Product Engineering, Post Weld Heat Treatment. Sile Assembly and ErtCtion, Commissioning and Hook-Up, Mainlenance, Inspection as well as Rclrofit and Revamp. 90 4. INFORMATION ON THE KNM GROUP (CoM’d) (b) (c) The above services which complements its manufacturing capabilities provides KNM with the advantage of being able to offer total turnkey solutions, especially incorporating design and engineering services. This, in tum, helps the Group address a wider scope of business opportunities arising from the Oil, Gas and Petrochemical Industries. In addition, as the services offered are value-adding, they help maximize the Group’s profits for every project undertaken by the Group. In terms of applications, KNM Group’s products are focused in two major industries, namely, Oil and Gas., and Petrochemicals. In 2001, Petroleum products including petrochemicals represented RM129.2 million. Elasticity ofDemand In general. the elasticity of demand for KNM Group’s products is low to moderate. This is due to the fact that price is not necessarily the main consideration in winning projects. Other factors such as design and engineering capabilities, the ability to provide turnkey solutions, high standards of quality, the ability to meet stringent specifications as well as timely delivery are also critical in winning projects. However, by the same token, when bidding for projects., KNM has to be cost competitive at all times as there will always be competition from local as well as overseas manufacturers. Depending on the size of the project, the competitive intensity, which also governs the elasticity of demand, is different. For smaller projects, pricing is a more significant criterion, as there are many other operators who have the capacity to bid them these projects. For larger projects, however, there is less pressure on pricing because there are significantly less operators that have the necessary skills, resources, track record and equipment to undertake such tasks. The Group’s key competitive advantage is its capabilities in undertaking mega-sized and turnkey projects, requiring design and engineering expertise. As such, with significantly lower competition. most of KNM Group’s jobs are not as price sensitive. Competitive Advantages ofKNM Group The competitive advantages of KNM Group are as follows: (i) Quality Assurance KNM Group’s quality accreditations by international bodies are critical in an industry that is strongly governed by stringent quality standards and regulations. Contrary to the process equipment used in other industries, the oil, gas and petrochemical industries are more demanding in terms of specifications due to the higher pressure and temperature requirements as well as the volatility of the contents. The Group design and engineering team have the skills and expertise to design and manufacture process equipment according to international codes of practices including ASME, API, BS. DIN, GB and 1IS. This provides customers with the assurance and the confidence in the quality that are of international standards. 91 4. INFORMATION ON THE KNM GROUP (Conl’d) (ii) (iii) (iv)
(v)

KNM Group’s extensive quality accreditations provide the company with a competitive advantage over other manufacturers that do not have such affirmation or approvals in quality. Design and Engineering Capabilities KNM Group’s in-house design and engineering capabilities are a major advantage as it can provide customers with turnkey services from design and engineering, manufacturing, testing and erection through to commissioning and hook-up. This enables the Group to add significant value by having input into the total design of the end product, which invariably helps the Group to compete on an intemationallevel. Manufacturing Facilities and Capabilities KNM Group has a number of machineries that enables it to undertake specialized and mega-sized projects. Although these machineries are merely assets that may be purchased by competitors., not many operators have such a comprehensive range of critical machinery. This points to the fact that there must be sufficient volume of work to justify investments in these machineries and equipment. From this perspective, the Group has the volume of work to ensure good utilisation of assets. Manufacturing Innovations KNM Group, supported by many experienced and qualified staff, has been innovative in meeting customers’ requirements by creating competitive advantages to continue winning projects. Some of KNM Group’s in-house developed innovations include the ‘GlUift’ that enables faster manufacturing on the ground and safer lifting of large completed cone roof, 1,200 tonnes Synchronised Jacks used for lifting mega-sized pressure vessels and Post Weld Heat Treatment for mega-size pressure vessels up to 100 meters long. The ability to innovate to meet customers’ requirements provides them with key competitive advantages that are unable to be matched by other competitors. Timely Delivery KNM Group prides itself in being able to complete projects on time. This is key as timely delivery not only reduces the customer’s costs but also ensures repeat orders from the very same customer. Amongst others, the Group’s ability to meet a delivery time~frame is a reflection of its innovation in manufacturing that increases its effectiveness and efficiency. A reputation for timely delivery provides KNM with an added competitive advantage as virtually all KNM’s customers wish to complete projects in as short a timc~ frame as possible. 4. INFORMATION ON THE KNM GROUP (Cont’d) (vi) Turnkey SoluJions The provision of turnkey solutions are important to customers as it is significantly more convenient in terms of less administration, project management and logistic problems. From the manufacturers point of view, the ability to provide turnkey solutions provides them with the incentive to offer the highest quality job as manufacturers which provide turnkey solutions are fully responsible for the whole project from design and engineering stage to commissioning and hook-up. Due to its in-house design and engineering capabilities, KNM Group is one of the relatively few operators who are able to provide turnkey solutions. This means that the Group has yet another competitive advantage over other competitors in the process equipment for the oil, gas and petrochemical industry. (vii) Track Record A key criterion in winning projects is reference sites, which implies a track record. From this perspective, KNM Group, having operated in the industry for 12 years, comes with impeccable credentials from its past customers. The Group’s ability to win jobs from highly reputable local as well as foreign conglomerates in the oil, gas and petrochemical Industries provides it with significant competitive advantage over another operator with a less impressive track record. (viii) Market Reputation and Achievements Over the last 12 years, KNM has built a strong market reputation associated with the ability to deliver proeess equipment that is of world-class standards. To date, KNM has set the benchmark for the industry by setting records in the Malaysia Book of Records for the completion of the largest and heaviest LPG Mounded Bullet Tank, the tallest roof supporting single mast for the National Sports Complex in Bukit Jalil and the tallest and heaviest pressure vessel, a propylene-propane splitter for a Propane Dehydrogenation Plant in Malaysia. In addition, KNMS has also received a Special Mention Award from CORAL Malaysia for the completion of the Propane Dehyrogenation Plant for Petronas in recognition of its exemplary performance and the Supplier of the Month for June 2002 by Halliburton I Conoeo-Phillips for the Belanak Floating Production Storage and Offloading (“FPSO”) Project and has been elected to receive a Gold Award in the Delivering Supplier Excellence Scheme for its towers/columns. Source: Vital Factor’s Report on Prospects and Future Plans ofthe KNM Group updated on 30 April 2003 4. INFORMATION ON THE KNM GROUP (Cont’d) 4.10.2 Vu.erability (G) Long Term C01lllVcts KNM Group’s business is mainly based on contracJual agreements between c~omers and the subsidiary or associated company of KNM Group. This is according to normal inc:tugry practices as different product specifications. conditions. pricing and timing of complelion govern each project As such. in this industry, there arc: no long-term. contracts per se. Each contract is awarded based on competitive bids from local as well as overreas operators. However, in terms of business relationship, the Group has established a very dose working relationship with its customers whereby approximately 50% of all its 83 customers bave been dealing with the Group for approximately 5 to 12 years since its inception. These long term working relationships will ensure tbe coDlinuity in business between KNM Group and its customers. (11) AWlil4bility ofResources The lhree areas of resources thaI KNM Group is dependent on are as follows: Fintl”ce KNM Group bas been profitable since it started operations 12 years ago. Based on past performances.. tbe Group has a strong financial standing and has not been in any financial di~ress. The Group continues to bave good working relationships with its banks for any extension of loans if required. However. most of its operalions are currenlly fmaoced by infernally generated funds and retained profits. RGW MllIeritlls KNM Group has always been able to source its main raw materials, which are bot·rolled sleel plates from overseas. Apart from that. the Group has never bad any major problems in obtaining its supply of otber raw materials from its overseas suppliers. Thus, KNM Group has not been nor it is likely to be threatened by shortages in raw materials.
As KNM Group’s industry rely on professionally qualified labour and skilled labour, the Group will always face the potenlialthreal of shortages in labour. However, to date. shortage of labour has never been an issue, neilher has it impeded the Group·s business growth or forced the Group to miss on any manufacturing schedule. Source: Vilal Faclor’s Reporl on Prospects and Future Plans offM KNM Group updflled on 30 April 2003 4. INFORMATION ON TIlE KNM GROUP (Cont’d) 4.10.3 Capability To Diversify If there is a business case to do so, KNM Group is able to diversify into the following areas: (a) Applicalions In The Non-OU, Gas And Petrochemical Industries Apart from the oil, gas and petrochemical industries. KNM Group’s products and services could be used in pulp and paper mills. power and energy, phannaceutical, palm oil mills and refmeries, food and beverage processing plants, building, construction and infrastructure industries. inorganic chemicals and gases industries and oleochemical industry. The major difference between process equipment for the oil, gas and petrochemical industries and those industries mentioned above is that a significantly more stringent specification and higher standards of quality and durability is required in the fonner due to the highly volatile nature of the oil, gas and petrochemical products. (b) Diversity From ProvUJing Specialist Services KNM Group has many in-house services that are potential for the provision to external parties. Some of these include systems design and engineering, post weld heat treatment, ‘collifi’ for vertical lifting of completed roofing and the TOFU non-destructive testing. These services are relatively unique as they require significant amount of technical skills. the use of sophisticated equipments and in some situations, the use of the Group’s proprietary processes. (c) Diversity From The Use OfAlternativeMaterials As part of its future plans, the Group is also exploring the opportunity of diversifying into process equipments using non-ferrous metals, particularly exotic metals. As such equipments are currently all fully imported, the capability to manufacture these types of process equipments would significantly differentiate KNM Group from other operators. The capability of KNM Group to diversify into new applications and industries not only helps the Group to mitigate or minimize its exposure to any potential risks or threats that may be inherent in the oil. gas and petrochemical industries, but also provides KNM Group with further opportunities to expand its existing revenues. Source: Vital Factor’s Report on Prospects and Future Plans of the KNM Group updated on 30 April 2003 THE REST OF THIS PAGE lIAS BEEN INTENTIONALLY LEFT BLANK 4. INFORMATION ON TIlE KNM GROUP (COIII’d) 4.10.4 Future Plaos And Strategies KNM Group’s future plans are focused on three main areas of growth and expansion, detailed as follows: (a) International Focus And Expansion To fulfill KNM Group’s overall vision of becoming one of the major players in the international area, the Group intends to make inroads into overseas markets to capitalize on new opportunities. In order to enhance its presence in the region, the Group has plans for the appointment of agents and representatives and/or for the development of strategic alliances, as well as for the establishment of regional marketing or liaison offices. To date, KNM Group has already appointed agents in Oman, Jordan, Kuwait, Qatar, Iran, UAE, Indonesia, Europe and USA to assist them in lobbying for new projects in these countries. In addition, the international focus and expansion will also help reduce the Group’s over-dependence on the Malaysian market. (b) Licensing Arrnngements KNMPS, a wholly owned subsidiary of KNM Group, had also entered into a licensing agreement with JPM Ingenieurtechnik Gmbh (“JPM”), a German based company specialising in plant engineering and turnkey delivery of large scaled plants, tanks, silos, apparatus and special process equipment. Under the licensee and representative agreement signed between KNMPS and JPM on 31 July 2000, KNMPS was granted sole and exclusive rights to market all JPM products and services within the Asia Pacific Region with the exception of the Gulf Region for a period of 5 years. Simultaneously, JPM agreed to market and assist KNMPS in securing potential orders from its existing clients, particularly those which are German companies. In addition, KNMPS was also granted a sole and exclusive licence to manufacture JPM’s products, namely Gas Holder, Double Walled Tanks, Cryogenic Tanks, Large Volume Silos, Floating Roof Sealing System and Floating Roofs Special Internal Floaters. Under the same agreement, JPM has also agreed to provide technical assistance, on a required basis, to KNMPS’ specific engineering and design of certain equipment, specialised welding procedure, specialised erection and lifting procedures, and delivery of special products. It is hoped that the above licensing arrangement will expand KNM Group’s product portfolio to further provide incremental business as well as diversification from the current range of products and customers. (c) New BusinessAreas (i) Exotic Materials Many of the process equipments used in the oil, gas and petrochemical industries arc made from Exotic Materials because they are able to withstand harsh or extreme environments. KNM Group plans to diversify into the production of process equipments made of these Exotic Materials which are currently, all imported from overseas. 4. INFORMATION ON THE KNM GROUP (Con/’d) Oi) Specialist Services KNM Group also intends to commercialise a number of their in­house developed processes to external parties. Some of these include systems, design and engineering services, post weld heat treatment, ‘collift’ for vertical lifting of completed roofing and TOFD non-destructive testing of process equipments for the oil, gas and petrochemical industries. At this present time, very few operators in the industry are able to carry out the full range of the above services as they require either proprietary, highly skilled labour or very specialized and expensive equipments. Thus, the provision of these services would further enhance the Group’s revenue stream as well as provide a significant competitive edge over other operators in the industry. Source: Vital Factor’s Report on Prospects and Future Plans of the KNM Group updated on 30 April 2003 4.11 Industry Overview 4.11.1 Overview Of The MalaysiaD Economy The Malaysian economy experienced its sharpest deceleration in 1998 when Gross Domestic Product (“GDP”) contracted by 7.4%, reflecting the effects of the East Asian financial crisis, which began in July 1997. To promote economic recovery. a comprehensive set of policies consisting of expansionary fiscal and accommodative monetary policies, a fixed exchange rate, selective exchange controls and a longer-term programme of restructuring for the corporate and financial sector, was implemented. As a result of these policies and strong external demand, the economy turned around in 1999. GDP recorded strong positive growth of 6.1 % with the value of GDP returning to almost the same level as in 1997. The Malaysian economy expanded by 8.3% for the year 2000, surpassing an earlier Government forecast of 7.5%. While the performance was supported by strong external demand, the main contributor to economic growth was the increase in private consumption and a strong revival in domestic investment. Continued prudent macroeconomic policies and restructuring efforts to diversify the country’s economic structure significantly improved economic and financial fundamentals (Source: Bank Negara Malaysia Annual Report 2000). In 2001, the outlook of the global economy became uncertain largely due to the economic slowdown in the United States. As a result, the Government announced a package of pre-emptive measures worth RM3 billion on 27 March 2001. This was to counter the effects of a global economic slowdown and to sustain the country’s growth momentum built over the past 2 years. Supported by prevailing strong economic fundamentals, the new pre-emptive measures directed at stimulating domestic demand were expected to raise GDP growth closer to 6% for 2001 (Source: Bank Negara Malaysia AnnUfll Report 2000). 4. INFORMATION ON THE KNM GROUP (Conl’d) 4.11.2
However foUowing the terrorist attacks on the United States on the 11til of September 2OCIl, the outlook of the global economy became increasingly uncertain. The contagion effects of the United States’ economy on the rest of the world were significant. On 25 September 2001, the Government announced another RM4.3 billion stimulus package, to be implemented swiftly to further cushion the impact of a global slowdown on Malaysia. The RM4.3 billion package was part of the total fund allocation under The Budget 2002. In 2oo!, the economy experienced a growth of 0.4% in real GDP. The slower growth of real GOP was mainly attributed to the slowdown of the United States and global economy. In 2002, real GDP grew by 4.2%. The growth was mainly derived from domestic demand and reinforced by favourable export performance. The growth in domestic demand was contributed by strong consumer spending, continued recovery in investment activities and expansion in public sector expenditure. In 2002, the Government proposed a budget amounting to RM109.8 billion for 2003, an increase of 9.2% over the previous budget. In view of a global recovery from economic uncertainties, the 2003 Budget focuses on further stimulating economic growth through encouraging domestic activities with an expectation of the services and manufacturing industries to continue to lead the nation’s economic growth momentum. For 2003, GDP is expected to grow by 4.5%. On 21 May 2003, the Government announced a RM7.3 billion Stimulus Package aimed at mitigating some of the adverse impact brought about by external factors including the Iraq war and the outbreak of Severe Acute Respiratory Syndrome (“SARS”). The Package, which focuses on four main strategies comprising 90 measures, aims at stimulating economic activities by mobilising domestic sources of growth and, at the same time, reducing dependency on the external sector. This will help ensure Malaysia’s economic fundamentals remain strong in the medium and long term. Source: Vital Factor’s Industry Assessment Report updated on 30April 2003 Overview Of The Process EquipmeDt IDdustry For The Oil, Gas And Petrochemical Sector The Manufacture of Process Equipment for Oil, Gas and Petrochemical Industries playa significant role in supporting the growth and development of Malaysia’s Oil, Gas and Petrochemical Industries. These equipments are essentially critical components used in the production, refining and processing of crude oil and natural gas. Equipment such as distillation columns, separators, pressure vessels and heat exchangers are often regarded as the heart of oil refineries or gas processing plants. According to MIDA, process equipment for the oil, gas and petrochemical industries is within the Machinery and Equipment Industry. Equipments under the Machinery and Equipment categories include columns, towers, reactors, separators, flare stacks, process skid packages, air coolers, heat exchangers, specialised piping systems, pressure vessels, LPG mounded bullets, drums, storage tanks, spheres and cryogenic tanks. The process equipment for oil, gas and petrochemical industries can be vertically segmented into the upstream sector and the downstream sector. 4. INFORMATION ON THE KNM GROUP (Conl’d) The upstream sector of the process equipment essentially comprises: (a) owners of oil and gas production and processing facilities. which are usually the oil and gas companies,
(b) turnkey contractors or designers of the process plant or facilities normally commissioned by the plant owners. The EPCC contractors, which are the turnkey contractors, are normally the owners of proprietary plant designs and processes who design, engineer, construct and commission the entire production and process facilities; and
(c) suppliers of raw materials such as iron and steel manufacturers, steel forging companies and electrodes manufacturers.

Activities in the upstream sector include exploration and production of crude oil and Natural Gas. In 2001, the production of crude oil and condensates in Malaysia averaged 666,149 barrels per day while Natural Gas production averaged 4.5 billion standard cubic feet of gas per day. The downstream sector comprises manufacturers and fabricators of process equipments. Activities in the downstream sector include refining, gas processing, petrochemical manufacturing, marketing and retailing of oil and gas products. Currently, there are five oil refmeries in the countries producing approximately 600.000 barrels per day using mainly local crude. To date, Petronas has 47 producing oil fields and several others under development. As at 1 January 2003, Malaysia has about 3.2 billion barrels of crude oil reserves. The crude oil reserves of Malaysia will last for approximately 16 years. Currently Malaysia produces five billion cubic feet of gas per day. The products are mainly methane, the gas for power generation and petrochemical feedstock such as ethane, propane, butane and condensates. As at 1 January 2003, Malaysia has about 87.5 trillion standard cubic feet of gas reserves. The gas reserves of Malaysia will last for approximately 36 years. The three LNG plants in Malaysia have a production capacity of 23 million tones per annum. Currently two of the LNG plants produce approximately 15 million tonnes per annum, of which more than 90% is exported. The third LNG Plant is new and is scheduled to commence operation in 2003. The number of players in the manufacturing of process equipment for the oil, gas and petrochemical industries is relatively low with approximately thirty to fifty players servicing a large market dominated by imports. According to MIDA, imports of Process Equipment falls under the various categories within Machinery and Equipment In 2001, imports of power generating machinery and equipment amounted to RM6.8 billion; Import of machinery and equipment for specific industries amounted to RM8.7 billion in 2001; Import of metal working machinery and equipment amounted to RM2.8 billion in 2001.
Source: Vital Factor’s Industry Assessment Report updated on 30 April 2003 4. INFORMATION ON THE KNM GROUP (CooJ’d) 4.11.3 Industry Life-Cycle The life-cycle of the manufacturing of process equipment for oil, gas and petrochemical industries is in its growth stage and is supported by the following: (a) Growth In lbe Production Of Oil, Gas And Petrochemical Industries.
• In 2001, production of crude oil and condensates declined by 2.1%, however for the fourth quarter of 2002, production increased by 9.7% to reach 732,722 barrels per day compared to the same period in 2001.
• In 2001, production of natural gas grew by 4.0% amounting to 4,542 million standard cubic feet per day (mmscfd).
• In 2002, production volume of LPG grew by 27.6% amounting to

2.9 million tonnes. Between 1998 and 2002, production volume of LPG grew at an average annual rate of 20.2%.
(b) Strong Growth In Sales Values In lbe Oil, Gas And Petrochemical Industries
• In 2002, sales value of crude oil refmeries grew by 4.0% amounting to RM22.7 billion. Between 1998 and 2002, the sector registered an average annual growth rate of 29.7%.
• Between 1998 and 2002, the sales value of miscellaneous products of petroleum and coal grew at an average annual rate of 5.3%. In 2002, the sales value of miscellaneous products of petroleum and coal amounting to RM626.2 million.
• In 2002, sales value of synthetic resins, plastic materials and man­made fibre except glass grew by 9.6% amounting to RM5.8 billion. Between 1998 and 2002, the sector registered an average annual growth rate of 13.2%.

 

(c) Strong Growth In Export Value
• Between 1997 and 2001, gross export value of Crude Oil grew at an average annual rate of 12.0%.
• For the first eleven months of 2002, gross export value of crude oil rose by 1.0% to RMlO.5 billion mainly due to higher prices.
• Between 1997 and 2001, gross export value of LNG grew by 15.0%. In 2001, the gross export value of LNG amounting to RM11.3 billion.
• In 2001, the gross export value of petroleum products grew by 3.4% and amounted to RM8.4 billion. Between 1997 and 2001, gross export value of Petroleum Product increased at an average annual rate of25.7%.

 

Source: Viral Factor’s Independent Industry Assessmenr Reporr updared on 30 April 2003 4. INFORMATION ON THE KNM GROUP (Cont’d) 4.11.4 4.11.5 Government Legislation, PoUcies ADd Incentives Government Regulations Apart from the normal manufacturing licence, there are no material government laws” regulations and policies that may impede on the performance and growth of operators within the industry. Government Incentives And Protection The Machinery and Equipment Industry Group, in which Process Equipment is a part of it, has been identified as one of the areas of priority for further development in the Second Industrial Master Plan 1996~2005. The manufacture of mining or mineral processing machinery and equipment are regarded as promoted activities and are therefore eligible for Pioneer Status and Investment Tax Allowance under The Promotion of Investments Act 1986. Heat treatment is classified under supporting products/services, which is undertaken by KNM Group in-house, is also a promoted activity under the Promotions of Investments Act Duty and tax exemptions on the import of raw materials for the manufacturing of Process Equipment, particularly for those that are not manufactured locally, are reviewed on a case-by-case basis. Thus far, the Malaysian Industrial Development Authority has approved KNM Group’s request for duty and sales tax exemption for the import of its raw materials. Source: Vital Factor’s Industry Assessment Report updated on 30April2003 GoverniDg Bodies And Standards Quality and integrity of process equipments is critical due to the potentially hazardous nature of its usage in the oil, gas and petrochemical industries. As such, the manufacturing of process equipment is subjected to stringent quality standards and approvals by recognised governing bodies. KNM Group has been audited and approved by the following standard and quality bodies; • The ASME of USA
• ABS Quality Evaluations Inc. for its ISO 9001 of USA
• TOv Suddeutschland of Germany
• National Board of Boiler and Pressure Vessel Inspectors of USA
• State General Administration of the People’s Republic of China for Quality Supervision and Inspection and Quarantine

The certification from the relevant bodies has enabled the Group to provide local customers with the assurance of quality and also to gain access to overseas markets. These accreditations provide the Group with an added advantage over other manufacturers that do not have the full suite of standard qualifications and accreditation. Source: Vital Factor’s Business Overview Report updated on 30Apri12003 4. INFORMATION ON THE KNM GROUP (Cont’d) 4.11.6 4.11.7 Health ADd Environmental Regulations Health The KNM Group is governed by the regulations from the Department of Occupational Safety and Health. In this respect, it should be noted that the Group has, to date, received many awards from customers regarding its impeccable safety standards. Environmental The KNM Group is not governed by any environmental regulations. This is because the process of manufacturing process equipments does not involve any waste discharge. As such, there is no material impact on the environment in terms of effluent. One exception, though, is the welding process during fabrication, which creates fumes that are harmful to employees in an enclosed environment. However, as the Group’s manufacturing plant is based on an open concept, and thus very well ventilated, there is no major concern over the fumes. Source: Vital Factor’s Business Overvie»l Report updated on 30 April 2003 Industrial Competition ADd Key Players Competition Competition amongst the manufacturers of process equipments for the oil, gas and petrochemical industries is low to moderate, depending on the type of projects. For example, the competitive intensity for small and medium-sized projects are moderate, as there are between thirty to fifty manufacturers for this category of projects. On the other hand, the competitive intensity for mega-sized projects are low as there are less than ten manufacturers for this category of projects. For projects requiring design and engineering capabilities, the competitive intensity is low as there are relatively few manufacturers with in-house design and engineering skills. Competitive intensity is predicated by the following factors: • Process plant equipment for the oil, gas and petrochemical industries must be manufactured to the highest quality standard in accordance to the owner’s or EPCC’s specifications. This is particularly critical due to the stringent quality standards and safety requirements. The ability to design and manufacture equipment to such high standards is highly dependent on the design and engineering skills as well as experience of the manufacturers.
• In addition to design and engineering skills, some customers may specify that the process equipment are manufactured to internationally recognised codes such as those set by the ASME, API, BS, DIN, GB and JIS. In this respect only manufacturers that have received accreditation and approval from bodies such as ASME are authorised to use the internationally recognised stamps or mark on the equipment.
• On the other hand, the buyers of process equipment are essentially international oil companies and EPCC contractors. As such, the manufacturers, in bidding for a job, must have excellent safety records and attained recognised quality management system such as ISO 9001. It is also common in the industry for vendors and suppliers to be pre-qualified or pre-approved as authorised vendors or suppliers before they are allowed to bid for jobs.

102 4. INFORMATION ON THE KNM GROUP feom’d) 4.11.8 • ]0 the manufacturing of certain large process equipment sucb as production separators, or glycol with a thicknes;; of up to 100 mm are used, Ihe manufacturer must have appropriate machines and skills to bend and weld steel plates of such thickness. Key Players According to the Utstoms and Excise Department, pressure vessels exceeding 300 cubic centimetres and cooling towers are subjected to IS% and 25% import duties for non-AFfA members. respectively. Thus,local manufacturers have a slight advantage over impons in terms of pricing. Apart from the local players, the industry faces competltlon from foreign manufacturers including major international players from Korea. Japan, Netherlands, Australia and Singapore. However, since the recent economic downturn in 1998, most EPCC contractors began to consider sourcing for their equipments locaUy due to the insistence by Petronas and the Malaysian Government to reduce dependency on imported components and ullimately. foreign exchange outflow. II sbould also be highlighted that local manufacturers now have the advantage of being more cost competitive and are more familiar to local conditions. Source: Vital Factor’s Industry AssessmentReport updated on 30April 2{)()3 Summary Of Outlook And Prospect orne Industry Based on the S-year growth analysis and the recent growth trend observed in the fl1Sl half of 2000 in respect of tbe production quantity and sales value of the oil, gas and petrochemical sector, it is envisaged [hal the industry is expected to grow at approximately 5% 10 7% per annum for the next five years. The growth of the manufacturing of process equipment for the oil, gas and petrochemical industries is dependent on the perfonnance of its user i.ndustries., which are namely the producers and manufacturers of oil and gas products, intennediate users of oil and gas products for the manufacture of petrochemical and industrial gas products and end-user of oil, gas and petrochemical products including industrial and consumer end-users. The ultimate driver of growth is dependent on consumption or end-user demand for oil, gas and petrochemteal products. This is largely influenced by the following factors: Local Market • [ncreased demand for crude oil and natural gas driven by an increase in transportation and energy requirements as a result of the improvemeot in the Malaysian economy; aod
• Increased activities in the manufacturing sedor driven by the strong growth in the usage of petrochemical products including various types of plastic and plastic products, synthetic fibre, synthetic rubber products, industrial gases and organic chemicals.

4. INFORMAnON ON THE KNM GROUP (Conl’d) Overseas Markets • Increase in demand for crude oil and natural gas driven by tbe improvement in the performances of Asian economies;
• locreasc:: in exports of ~rochemicalproducts for the manufacturing sector; and
• Increase in CltPOrts of manufactured products and packaging materials thaI use Petrochemical products

Source: Vital Factor’s Indusrry Assessment Report updated on 30 Apri12()()3 THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK

 

 

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