Business Overview

4. INDUSTRY OVERVIEW 4. INDUSTRY OVERVIEW The Malaysian economy Oven’;ew ofthe Malaysia” economy The t\”1alaysian economy expanded by 4.1% in the second quarter of 2005 (1″ quarter 2005:5.8%). Private sector activity continued 10 be the main driver ofgrowth. The services sector provided the main impetus to growth, contributing to 3.1 percentage point1i to growth, underpinned by strong consumer spending, travel and business activity. Meanwhile, the manufacturing sector expanded at a more moderate pace, sustained by growth in selected resource-based industries as well as improvement in the electronics industry. Perfonn3nce of the primary commodity sector was mixed, with conrinued expansion in the agriculture sector, while the mining sector recorded a decline following a contrnction in crude oil production. Domestic demand increased by 5.6% in the second quarter of 2005 underpinned by strong private consumption spending and continued increase in private investment activity. Stable income and employment, amidst high export earnings and savings, as well as competitive credit market conditions, contributed to positive consumer confidence and consumer spending. Indicators of consumption spending such as credit disbursed for consumption purposes and consumer-oriented businesses as well as imports of consumption goods point to robust underlying demand. On the supply side, grov.1h in the services sector remained finn, expanding by 5.4% in the second quarter of 2005, supported by both intermediate and final services segments, which grew by 5.1% and 5.6% respectively. The wholesale and retail trade, ootels and restaurants; transport, storage and communication; and electricity, gas and water sub-secIOrs., which account for about one-fourth of the enrire GOP continued to expand rapidly in line with the expansion in business activities and strong consumer demand. The hospitality and transport activities were enhanced by continued increase in tourist arrivals, particularly from Korea, India and Singapore. In addition, the telecommunications industry conrinue to perform strongly, led by the mobile segment, following the introduction of attractive packages which increased subscriber base and usage of new mobile data features. The quarter also saw the launcn oftile third-generation (3G) mobile phone services in selected areas of western region of Peninsular Malaysia. The 3G technology ofTer high value-added services such as faster transmission of information via text, digitised voice, video mail Ilnd multimedia. Value added in the manufacturing sector el’>panded by 3.20/, in the second quarter of 2005 (I” quarter 2005:5.7%). Output of the export-oriented industries grew by 4.1% (,” quarter 2005:5.4%) suprorted by continued expansion of selecled resource-based industries, and an improvement in the eleclrical and electronics products industry (1.1 %; I” quarter 2005:·1.2%). During the quarter, resource-based industries, such as chemical products and off-estate processing industries sustained double-digit growth rates of 10.6% and 18.9% respectively (151 qUllrter 2005:16% and 24.6% respectively). The expansion in the chemical products industry was led by higher production of plastic products in response to the strong demand from the regional countries. Off-estate processing benefited from the strong outpUI of crude palm oil production during the quarter. Meanwhile, output of rubber producls declined marginally by O.l’¥. (111 quarter 2005: IO.90Io) due partly 10 Ihe lower outpUI oftyres 3rising from difficulty in sourcing components. Malaysia’s trade account recorded a large surplus of RM22.9 billion (1<1 quarter 2005:RM25 billion). Gross exports and imports continued to expand, albeit at more moderate rotes of 10.8% aoo 8% respectively. Gross exports grew by 10.8% (lSi quarter 2005:13.70/.) supported mainly by robust growth in mineral exports (3 I.5%) and reinforced by expansion in manufactured goods (9.2%) and agriculture commodities (5.3%). Exports of manufactured goods expanded by 9.2% (I>l quarter 2005: 12%), reflecting the increase of8.7% in electronics and electrical (E&E) products (1″ quaner 2005:9.9%). While external demand for semiconductors remained subdued, exports of personal computers and laplops had improved. Of significance, exports of resource-based products continued to be robust, led mainly by exports of petroleum, fumiture and rubber products. Overall, {he increase in exports of manufactured goods during the quarter was due to increases in both unit value (3%) and volume (6.1%). 4. INDUSTRY OVERVIEW (Cont’d) The increase in gross imports of 8% renectcd expansion in private invt”Slment activity un<! demand for inputs for the produclion of exports of manufactured goods as well as domestic consumption. Imports of imermediate goods, which were input used for manufactllred goods, expanded by 5.8%. The growth in imemlcdiate imports was supportcd mainly by higher imports of primary materials used by the food and beverages industry, electronics and industrial supplies. particularly metal and chemical products. Consistent with the growth in the motor assembly industry, imports of transport equipment as well as parts and accessories of motor vehicles continued to expand. Higher oil prices also led to growth in imports of fuel and lubricants. Imports of capital goods expanded by 17% in the 2M quarter 2005. Capital imports excluding lumpy itcms grew by 5.9″10. The increase in imports for capacity expansion and upgrading of technology QCcllrreti in the services sector, as evidenced by the strong growth in imports of office equipment and generators, turbines and electric m~ors. Imports of office equipment strengthened as corporations in the services industry improved their service delivery by upgrading infrastructure in infonnation technology. Strong external demand for commodity exports and fleet expansion to service new markets also led to higher imports of aircraft and ships. Growth in imports of consumption goods of 4.1% reflected mainly growth in imports of processed food and beverages for household cOllsumption aoo consumer goods. Gross inflows of foreign direct investment (FDI), on cash basis, increase to RM8.7 billion in the 2M quarter of 2005 (I” quarter of 200S:RM5 billion), reOecting larger inflows of inter-company loans and equity capital. More than II third of the FDI inflows were channelled into the oil and gas sector, particularly in the fonn of loans extended by a foreign company to its subsidiary in Malaysia. Meanwhile, FDI inflows into the services sector were channelled mainly into the financing, insurance and business services. as well as restaurants, hotels, wholesale and retail trade sub-sectors. In the manufacturing sector, FDI inflows were received mainly by companies in (he petroleum products, photographic and optical products as well as electrical and electronics sub-sedors. After adjustment for outfJows due mainly to larger repayment of loans to related companies abroad, net FDI recorded an inflow of RM3 billion. On 21 July 2005, the ringgit peg to the US dollar was removed and a managed float was introduced, whereby the value of the ringgit would be detennined by economic fundamentals. Bank Negara Malaysia now monitors the exchange rate against a basket of currencies. Given that the ringgit has strengthened since the beginning of 2005, much of the undervaluation derived from the US dollar depreciation in 2004 had betn reversed. At the time of the Wlpegging, the ringgit tllerefore was close to its fair value. Consequently, the exchange mte of the ringgit has not shifted significantly following the adoption ofthe new regime. Promoting stability ofthe exchange mte would continue to be a primary objective of policy. Prospects for tht: Malaysian economy in the second h<llf·year 2005 remains favourable. Global demand is eltpected to be sustained in the second half of the year based on the favourable indicators emerging recently from the US, Japan and the Euro area, and further reinforced by the expected Improvement in the global electronics sector in the latter part of the year. In the US, consumption spending is expected to remain strong, untlerpinned by the buoyant housing market. For semiconductor products. illdustry experts have revised upward their growth forecast for 2005 as a whole. The favourable external environment is thcrdore expected to support the expansion in domestic demand. (&mrce: BNM Quarterly Bullet;”, Second Quarter 2005 doted 24 August 2(05) Outlook for the Malaysian economy The Malaysian economy remains resilient despite moderation in the growth of global economy amidst high oil prices and less accommodative monetary policy, particularly in the U”ited Slates. Economic fundamentals have further strengthened while domestic demand continued to be resilient amidst finn consumer spending as well ;IS continued uptrend in private investment Activities. These factors provided the enabling environment for the Malaysian economy 10 expand favourably albeit at a slower rate of 4.9% in the first half of 2005, compared with 8.1 % during the same period of 2004. Growth is expected to be broad-based with major sectors recording positive growth, backed by recovery in global electronics demand. The continuing build-up in international reserves arising from larger current account surplus and inflows of foreign capital has also Slrengthencd domestic macroeconomc fundamentals. 31 4. INDUSTRY OVERVIEW (Coul’dj Tbe Malaysian economy is expected to record a healthy growth with most sectors contributing positively to the overall GDP expansion. The services sector. in particular, with a share of 57.80/. to GOP is envisaged to continue to be the key driver of growth. Agriculture sector continues to bCI)tfir from the revitalising efforts aimed at modemising and tl1lnsfomling agriculture activities into commercially viable source of economic growth. Nevcnhelcss, the manufacturing sector wilh a share of 31.5%, to GDP remains the second most important source of growth and continues to playa prominent role in the economy. The services sector is estimated to expand al a rate of5.8% (2004:6.8%) with all sub~sectors recording positive growth, supported by sustained domestic demand activities. Registering a 4.4% growth in lhe first half of 2005, the manufacturing sector is envisaged to pick up pace in the second half, leading 10 a 4.8% growth for the year (2004:9.8%), following bener prospects in global electronics demand. Value-added of the agriculturc sector is anticipated to grow at 4.8% (1004:5%), supported by higher production of palm oil on account of increased matured areas and better productivity. Value·added in the mining sector is, however, expected to experience a slower growth of 1.5% (2004:3.9%), underpinned by higher production of natural gas, which cushioned the lower production of crude oil. The construction sector is envisaged to reeord a smaller decline of 1.1 % (2004:·1.5%), following lower civil engineering activities. Output of the manufacturing sector grew moderately during the first seven months of 2005 resulting from the slowdown in global e<:onomy, led by rhe softer demand for semiconductors. The downcycle of the semiconductor industry was shon-lived and far less severe than the one experienced in 2001, with the industry showing signs of re<:overy from the second quarter of 2005. Further growth is anticipated in the second half of 2005, mainly due to increasing demand for convergent products, particularly telecommunication appliances, consumer electronics and personal computers, lhus pushing manufacturing to a higher value plane. Overall output of export-oriented industries moderated by 0.1 % during the first seven months of 2005. The moderation was due to the global downcycle for electrical and ele<:tronic products, in particular semiconductors, since the last quarter of 2004. Consequently, manufacturers made adjustments to their production and invelUories. Despile the downcycle, semiconductors’ contribution to the manufacturing sector remained high at 34.4%. Capacity utilisation of the industry, which is usunl1y higher than the average of the manufacturing sector, also remained high at above 85% as manufacturers in the industry anticipated stronger demand in the second halfof2005. Vibrant design and development activities in the electronics and infonnation and communications technologies (ICT) industries, panicularly software and systems development as well as high-te<:h knowledge-based manufacturing processes also contributed to the rebound in the electrical and electronics subsector. These industries are also expected to benefit from dynamic changes in consumer electronics, brought about by changes in technologies, innovation and new products in the market. Leading the technology growth are digital convergent products., such as eco­friendly flat-screen panel televi~ion sets, digital cameras, digilal video disc (DVO) players and camera­phones and entertainment boutique outlelS. The industry also benefited from new development in auto­electronics such as systems and sensors for safety (airbags and antilock brakes) and dedicated auto­entertainment and infonnation devices (navigation and entertainment circuits and display control sy~tems). The electrical and electronics industry also attracted new entrants such as electronic manufacturing service (EMS) companies. Some of these EMS companies., which are original design manufacturers (ODM), have developed into CORlract mallufacrurers for established companies, manufacturing products at more competitive prices under their own or the latter’s brand. Exports of electrical and electronics sector is expected to improve in 2005 as worldwide sales of semiconductors staged a tumaraouDd and recorded a 5.8% increase during the firsl seven months of2005. In line with the book-to-bill ratio ofthe North American semiconductor industry. which trended upwards in anticipation of a pick-Up in demand for leT-related products, the Semiconductor Industry Association of the US forecasted a sales growth of 6% for the global semiconductor industry (2004:2S%). Hertce demand for Malaysia’s electrical and electronics exports is also anticipated ro improve for the rest of the year. The key drivers of the sector’s groWlb will be persollaJ computers and optoelectronic products (high-end mobile phones and cameras., LCD and plasma digital televisions). 4, INDUSTRY OVERVIEW (Com’d) The year 2006 will face greater challenges arising from high oil prices, tightening monetary policies especially in the US, widening global imbalances as well as continued geo-political tensions aoo security concerns. Nevertheless, given the resilience of major ecooomies, the global economy is expected to expand at 4.3% supported by China and lhe us. Accordingly, Malaysia’s real GDP growth is: forecast to expand by 5.5% in 2006 and per capital income envisaged to rise further by 7.1% to RMI8,995 (200S:6.8%;RM 17,741). (Source: Economic Report 200512006) 4.1 The llIat’hinery and equipment industry MMSV Group’s business activities are mainly focused on the design and manufacture of Industrial Automation Systems and Machinery as well as design of precision Die Sets, Jigs and Fixtures. Based on MIDA’s classification, the Group’s business falls under a component of the machil\ery and equipnlent industry, within the category ofspecialised machinery for specific industries. The following SC\:tions inc:lude extracts from the Vita! Fnctor Report, which was prepared for inclusion in this Prospectus. A summary ofthe Vital Factor Report is set out in Section 12 ofthis Prospectus. 4,2.1 Industry overview The developmem of the Machinery and Equipmem Industry in Malaysia began sometime between 1960 and 1970. The industry progressed from the repair and servicing works of machinery and equipment as well as related parts and components for the primary rubber processing and tin mining sectors to the growth of machinery and equipment manufacturing. Today, rhe Machinery and Equipment Industry is more diversified, which involves the manufacturing and supplying of machinery and equipment, incorporating more locally manufactured parts and components, to support the growth of various industries including: downstream rubber products manufacturing; upstream and downstream palm oil processing: electrical and electronics; telecommunications; automotive; food and beverage; construction; and oil and gas industries.
Despite the growth in the indUStry over the years, as of 2004, Malaysia is still it net importer of machinery and equipment, with a total import value of RM32.9 billion against a total export value of only RM 15.6 billion. The Government has identified the machinery and equipment industry as one of the key areas for growth and development. Accordingly, as a measure to promote the industry, the Govemment has introduced attractive fiscal and non·fiscal incentives for producers alld assemblers of all types of machinery and equipment. In 2004, a total of 82 applicalions were registered with MIDA, with tolal investments of RM402.3 million re<:eived with the machinery and equipment industry. Further, the trade liberalisation under the Asean Free Trade Area (“AFTA”) has also offered market potential for the industry. [n 2004, Malaysian exports of machinery and equipment to Asean countries such as Singapore, Thailand, Indonesia, Philippines and Brunei amounted to a (otal ofRM6.4 billioll. Apart from its contribution to the nation’s earnings, Ihe machinery and equipment industry is expected 10 have great potential in contributing significantly towards employment generation, value-added creation alld income generation for the country. 4. INDUSTRY OVERVIEW (Cont’d) 4.2.2 Characteri~tics or industry J1JdU~”lrYstructure The machinery and equipment industry can be categorised into 4 broad categories as illustrated below: Machinery and Equipment Industry
I III I Specialised Machinery for Spedfic Industries  Power Generating Machinery and Equipmcni  Metalworking Machinery  Generallnduslrial Machinery. Compooenls & Parts
As the MMSV Group falls under the classification of specialised machinery for specific industries sector, the focus of the discussion in the ensuing sections will be concentrated on the machinery and equipment industry and specialised machinery for specific industries sector. TBe: specialised machinery for specific industries sector manufactures products which caters to the needs of specific manufacfUring industries. Therefore, most of the machinery and equipment are customised to meet specific requirements of individual companies. The major machinery and equipmenl manufactured under this sector include processing machinery for rubber and palm oil industries and automation machinery and equipment for the electrical and electronics industry. In 2004, there were about 20 companies involved in the manufacturing ofrubber and palm oil processing machinery and equipment, and 30 companies involved in the manufacturing of aulomation machinery and equipment catering to the electrical and electronics industry. Amongst the automation machinery and equipment manufactured include, pick and place machine, vision inspection systems, Ie leSI handlers, lrim and form machines, laser marking machines aocl many more, most of which are manufactured by the Group. In 2004, Malaysia was a net importer of specialised machinery, with imports amounting to RMlO.5 billion whilst export value was only RM4.2 billion. Overall for 2004, the total export value or specialised machinery amounted to 27% ofthe total export value of machinery and equipment of RM 15.6 billion. The manufacturing of machinery and equipment can be funber exlended vertically 10 include I.Ips1ream and downstream activities as follows: Upstream { Midstream I Downstream
4. INDUSTRY OVERVIEW (Cont’d) Upstream activities involve primarily the supply of raw materials such <IS parts and components, metal products and others. Some of {he locally manufactured parts arxl components in support of the machinery and equipment industry include precision machined parts, metal fabricated structures. stamped parts and assemblies. The mid stream activities, in which the Group operates under, include design of machinery and equipment, design of precision Die Sets, Jigs and Fixtures and manufacturing of machinery and equipment The machioery and equipment produced are usually calered fOJ niche market applications, low volume or batch produclion or made 10 order, rdlccling local manufacturers’ capabiliries in engineering design, innovation and R&D. Meanwhile downstream activities involve the sales, distribution and exports services. The machinery and equipment industry is extensively linked to oHler activities, either upstream, downstream or midstream. The wide linkages of Ihe machinery and equipment induslry shown below illustrate its critical role to many other dependent industries.
Industry lif~ cycle Th~ machinery and equipment industry is in the growth stages of the industry life cycle. This is demonstrated through the continuous groYJth in the local production within the industry. Based on latest available statistics, in 2002, gross output value of manufacture of special purpose machinery increased by 26.7% to reach approximately RM2.7 billioll. The gross output value of the manufacrure Or other special purpose machinery not elsewhere classified (sub-sector of special purpose machil)Cty) increased by 29.20/. to reach RM247.5 million in 2002. The growth phase of .he life cycle of lhe machinery and equipment industry is expected to coll1inue to be fuelled by lhe Govemment’s effort in promoting the machinery and equipment industry which has been identified as one of the key areas for growth and development, the continued growth in the exports of machinery and equipment stimulating demand for local manufacture, and the effect of the gro’Nth in the performance of the user industry sectors. 4. INDUSTRY OV[RVIEW (Cont’d) Barriers to entry aud exit There are about 20 companies specialising in the manufacturing of rub~r and oil palm processing machinery and equipment and 30 companies specialising in the production of aUI(lmalion machiltery and equipment for the eleclronics and electrical ioouSiry. Genemlly, the degree of barriers to entry into the machinery and equipment industry is considered moderate to high due 10 the following factors: • Capital rfquiremenfs The capital investment required to start up a small sized manufacturing facility is approximately RMO.5 million (excluding land and building). Revenue for such companies would depend on the ability to generate sal~s. Gener.llly, small sized manufacturing set up could possibly generate revenue of RM2 million to RM4 million per year. As such, barriers to entry are considerably low. However, capital costs required are nmch higher for larger operations within the industry due to substantial investment on advanced technology and production capacities. The small sized set up will face difficulties competing against larger openuions with capital resources and capability to innovate, design, engineer and manufacture various types of machinery and equipment aod enjoy economies of scale. • Technical experience and slcills The requirement for skilled labour in the machinery and equipment induSiry is relatively high, particularly the speciillised machinery sector which is highly technical in nature and requires complex and multi-skills sets. Therefore, access to experienced and skilled technical professionals is critical to sustain competitive advantage. Key personnel required include professional engineers and technical personnel, large pool of semi-skilled and general labour with extensive training and experience, and skilled labour with extensive experience in machinery alKl equipment manufacturing operations. This poses a barrier to eUlry for new entrants. In addition, the knowledge and expericnce in developing machinery and equipment based on end user requirements would provide manufacturers with a competitive edge as they will be more aware of the changing trends and needs of industrial users. • Established track record and quality (l;)’sllrance Quality assurance is an important factor in Ihe industry as machinery and equipment are lools for the production of various end users. Manufacturers muSi be able to c(lfllply with quality standards as well as technical specifications, particularly in electronics industry where the tolerance level of accuracy in material handling, processing and testing is very low. As such, manufacturers employing stringent quality assurDnce programmes including accreditation from ISO and compliance to international standards will be a factor that could influence the choice of the customcrs. Manufacturers with established strong track record would have a significant advantage over new entrants as it serves as a reference of the reliability of the manufacturers in delivering products. The lack (lftrack record poses a barrier 10 entry for new players. On the other hand, Ihe barriers to exit are considerably low as there are large numbers of operators within each sector of the industry. As such, it would not be expensive or difficult for exiting manufacturers to sell their entire production line to other manufacturers within the industry, which could then be converted or modified to suit the different types of applications. The rest or Ihis page has betn intentionally Jeri bI.nL: 4. INDUSTRY OVERVIEW (Cont’d) Lubour imensity Labour intensity in the overall manufacturing industry and the manufacture of specialised industrial machinery and equipment can be measured using the percentage of labour cost 10 total input cost. Based on the labour and productivity indicators for 2003, the unit labour costs of the manufacture of specialised industrial machinery and equipmem is higher than the overall manufacturing industry. However, the labour productivity in the manufacture of specialised industrial machinery and equipment is higher than the overall manufacturing industry. The manufacture of specialised industrial machinery and equipment may not be as labour cost competitive compared to the overall manufacturing industry due to the need for skilled labour which are usually more costly. the productivity of the labour in the manufacture of specialised industrial machinery and equipment is much higher than the ovemll manufacturing irKiustry. Capital intensity Th~ capital intensity in the manufacturing industry and the overall manufacturing industry and the machinery of special purpose machinery can be measured using the fixed assets per employee (“FAPE”). Based on the FAPE measured in 2003. the capital intensity of the overall manufacturing industry was higher compared to the manufacture of special purpose machinery. Between 200 I and 2003, the average annual grovtlh of FAPE for the manufacture of specialised industrial machinery arH! equipment of 3.M~ while the overall manufacturing industry grew at an average annual rate of 5.00/. between 2001 and 2003. In 2003. FAPE for the manufacture of special purpose machinery grew by 5.0010 over the previoos year. The growth may imply the need for substantial capital investment as stan up coSt to operate in the specialised industrial machinery and equipment industry which requires investments in technology. Threats and risks • Lackofengineeringsupportingandancillaryactivities One of the threats to the operators within the machinery and equipment industry is tbe lack of engineering supporting and ancillary activities. Such activities including foundries, forging. heavy and precise machining, heat treatment electroplating and moulds and dies making are critical to growth of the machinery and equipment industry. However, the existing engineering supponing and ancillary industry are weak and fragmented, thus potentilt.lly shrinking the existing market and deterring any development in the machinery and equipment industry. As a measure to mitigate this situation, some major developments have taken place in the engineering supporting and ancillary industry, including the establishment of the Rasah Machinery and Equipment Technology Centre (“RAMET”) under SIRIM Berhad in 2003 eannarked to develop human TeSOOTCeS within the engineering sector and provide standards testing facilities and promoting cluster development through the grouping of all the activities. At the same time, the Mould and Die Design Centre (“MODe”) approved under the Eighth Malaysian Plan is in its first phase of implementation and is providing computer aided system services to 16 small medium enterprises. These developments are in line with the Government’s aim to strengthen the foundation of local engineering supporting and ancillary industry in support of funher growth within the machinery alld equipment industry. • Competitive pressurefrom overseas players Another threat faced by local opefluors in the industry is the competitive pressure from overseas players. As Malaysia is still a net importer, majority of the machinery and equipment required to meet the industrial and high technology industries’ needs are still imported from Japan, Germany, Taiwan and China. As a measure to minimise tnc reliance on imponed machinery and equipment, the Government has introduced various incentives 10 high technology companies to promot~ the growth and d~velopmenl of the machinery and equipment industry. 37 4. -INDUSTRV OVERVIEW (CulIt’dj • Availability ofskilled manpower Currently, there is also a shortage of skilled technical workers in the machinery and equipment industry in Malaysia. The $hortage of skilled afld experienced labour may potentially hamper the growth ofthe iooustry in general. Accordingly, in order to ensure long tenn and sufficient supply of skilled technical professionals, technical institutions and centres namely RAMET and MODe are providing technical training and assistance to fortify the engineering base in the country. Further, it is also estimated that 64,516 students will be enrolled in engineering courses by 2005, representing 98.90/. of overall technical courses enrolment in local public higher education institutions. As such, the industry is anticipated to have a pool of skilled resources to sustain the growth. • MOl’emenf o/multinatiunal corporariofU in electrical and electronic industries to Chinn China is becoming a major attraction for Foreign Direct Investment C”FDI”) particularly in the electrical and electronics m:mufacturing industry. Over the years, there has been a movement of multinational corporations into China. According to the Ministry ofCOlmnerce in China. rol into China recorded a growth of 1.4%, which amounted to USD53.5 billion in 2003, out of which the manufacturing sector (including electronics, telecommunications equipment, chemicals and Olhers) contributed 70″10 oflhe total fOI. In contrast, FDI in the electrical and electronics industry in Malaysia had declined over the last 5 years. In 2003, FDI in the eleclrical and electronic industries dropped by 9.4% amounting to RM:3.6 billion. Further, between 1999 and 20m, FDI in the electrical and electronic industries decreased at an average annual rate of 11.6%. This increasing movement of multinational corporations to China may have an impact on the manufacturers in the machinery and equipment industry who are servicing Hus group of customers. Neverttleless. according to MIOA, the lrade liberalisation under AFTA has opened up new e:q>Ort market opportunities for the industry. In 2004, Malaysia’s exports of machinery and equipment to Asean totalled RM6.4 billion, with Singapore. Thailand, Indonesia. Philippines and Brunei being the top five destinations. In addition, operutors which are financially stable will be in a stronger position to expand its business operations overseas and continue to service these customers by setting-up their own operations in China, • Trade liberalisation under the AFTA Under the AFTA agreement initiated by the Asean countries, a comprehensive programme of regionallariff reduction has been laid out, whereby the Common Effective Preferential Tariff has been proposed for goods traded within the Asean region. Tariffs on such goods which meet a 40% Asean content requirement, will be reduced to between 0% and 5% from 2003 onwards. As at the date of this Prospectus, the imports of Specialised Machinery under Machines and Mechanical Appliances having individual functions, not specified elsewhere are free or import duties. Such tariffs …..;1[ also be reduced for Vietnam and Myanmar in 2006 and 2008 respectively. The implementation of AFTA has meant that intensity ofcompetition !Tom imports has increased (or certain types of machinery and equipment due to the reduction in import tariff. However, the gradual reduction of tariffs will also generate opportunities for the export of machinery and equipment and for local operators 10 create their oWn niche markets and compete successfully within the Asean region. The rtst oflhis page has been intentionally left blank Compilny No. 647125 -P 4. INDUSTRY OVERVIEW (ConI ‘d) 4.3 Supply aod deman.d Supply In 2002, gross output value of manufacture of special purpose machinery in~rcased by 26.7% to reach approximately RM2.7 billion. The gross oUlput value of the manufacture of other special purpose madlinery nOI elsewhere classified (sub-sector of special purpose machinery) increased by 29.2% to reach RM247.5 million in 2002. Under the manufacture of specialised industrial machinery and equipmenl. the operations of the Group can be subcategorised under lhe manufacluring of lifting and handling equipment and other special purpose machinery not elsewhere classified. In 2002, the gross outpul value of lite manufacture of Iifling and handling equipment and other special pur~ machinery amounted to RM294.1 million and RM247.5 million respectively. Comparatively, the impon value of machinery specialised for particular industries grew at an annual ratc of 7.3% from 1999 to 2004, with an increase of 30.5% 10 RMIO.4 billion in 2004. The major impon counlries for the various products are Japan (for machines or mechanical appliances having individual functions) and US (for measuring or checking instruments, appliances and machines, and other oplical instruments and appliancu for semiconductor devices). Other sources of imports include Germany, China and Singapore. Meanwhile, in lerms of the supply for di((erent types of ,aw materials required for the manufacture of specialised industrial machinery and equipmenl. Malaysia is a producer of other fabricated metals products, one of the major raw materials. In 2004, the sales value of the manufacture of other fabricated metal products amounted to RM4.2 billion, recording a growth of 17.9% compared 10 the previous year.
The demand for machinery and equipment is dependent on demand from both the local market and overseas expolt mluket. For the local market, the demand for specialised industrial machinery and equipmc:nt is directly linked to the performance of thl;: manufacturing industry and the relevant sub sectors, particularly, th~ electronics and electrkal products. Between 1999 and 2004, the manufacturing industry grew at an average annual growth rate of 6.6%, recording a growth of 9.8% with RM78.3 billion in 2<XH. For the same period, the production index of the c:lectronics and electrical products, being one of the major end users of the industrial machinery and equipment, grew at an average rale of 10.5%. Meanwhile, for the export market, the value of exporls of machinery specialised for particular industries grew al tin average annual rate of 16.3% between 1999 and 2004, rcc.,’ording a growth of 30.3% with RM4.2 billion in 2004. The continued growth of some of the cnd user industry sectors is expecled to generate continuous demand for machinery and equipment including specialised industrial machinery and equipment. This provides opportunities for manufacturers of automation systems nnd equipment such as the MMSV Group. 4,4 Substitute Products Manual systems, in some situations, would be the substitute for machinery and equipment automation. However, machinery and equipment automation has thtl significant benefit of ~ing more effective and efficient than manual systems, which allows for mass manufacturing to achieve cost-efficiencies. In addition, some operations cannot do “,,”iihoul automation due 10 the need for the following: highly precision processing and handling; consistently achieve a high standard ofquali.ty; minimise contamination; handling of hazardous materials or operating under harsh environment
As businesses compete mole aggressively. Dta(:hinery and equipment automation is sun as one of lite necessary business tools to Slay ahead of the oompetition. 4. INDUSTRY OVERVIEW (Cont’d)
4.5 Competition In 1004, approximately 30 companies registered under MIDA were involved in the manufacturing of automation machinery and equipment catering to the electrical and electronics industry in Malaysia. This represents a relrttively small number of operrttors in the industry with gross exports RM2S7.1 billion worth of electrical and electronics products in 2004. As the group of operrttors in the industry is relatively small, the intensity of competition among the operators in the industry is reduced. Further, the requirements of the electrical and electronics industry arc more stringent compared to other industries such as the mclalworling machinery seClor, due to its requirements for machinery and equipment which meets operating conditions such as high speed, precision, high sensitivity of components and finished products and clean environment. As such, there are typically less manufacturers which are able to meet such stringent requirements, hence moderating the intensity ofcompetition within the industry. Another factor that reduces the competitiveness in the industry is the need for specialised automation machinery and equipment catered for specific manufacturing environmenl and requirement’J. Manufacturers which are able to conform to intemational quality standards including lSO accreditation and compliance, integrate machinery and systems 10 achieve funclional flexibility, reliability, efficiency and speed and possess the capability to undenake in-house R&D, engineering design and testing, will be able to gain compt’titive edge against its competitors. As not all manufacturers are able to offer the same sets of specialised skills and capabilities, differentiation is the key towards competitive positioning in the industry. Nevertheless, as Malaysia is still a net importer of machinery and equipment (in value temlS), local manufacturers face significant competition from imported machiflCT)’ and equipment from countries such as Japan, Gennany, Taiwan and China. On the other end, there are also backyard manufacturers not registered with MJDA which are capable of meeting some of the requirements of the machinery and equipment of the electrical and electronics industry. Such manufacturers focus on meeting low end requirements at relatively lower cost, thus creating pressure for competitive pricing.
4.6 Industry’s reliance on and vulnerability en imports Malaysia is a net importer of Machinery and Equipment including Specialised Machinery. Some examples of Specialised Milchinery include automation Mllchinery and Equipment for the Electrical and Electronics Industry, for example, pick and place machines, vision inspection systems, IC test handlers, tape and reel machines, laser marking machines and die bonders. In 2004, the import value of Specialised Machinery reached RMIO.S billion whilst expon value was RM4.2 billion. The large proportion of imports provides oppoltUJlities for impon substitution for Malaysian manufacturers of Machinery and Equipment. The industry is also reliant on imports of various types of electrical parts and components such as motors, programmable and computer controllers, sensors, pneumatic parts and other mechanical parts for the manufacturing of Specialised Machinery. Some of the main reasons for importing these types of materials are as follows: specific types ofequipment parts or raw materials are not produced locally; some of these parts are based on customers’ specifications; some oflhe parts, components and modules are the lalesl technologies, which are still nol available locally.
However these types of materials are easily available from imports. Thus far, the management of the Group has Ilot experienced any disruption in the supply of any materials required for the manufacturing of Specialised Machinery. 4. INDUSTRY OVERVIEW (Cont’d) 4.7 Government legislation, policies lind incentives Currently, operators within the machinery and equipment industry such as the MMSV Group are nol restricted by any material government laws, regulations and policies, olher Ihan the normal requiremem for a manufacluring license. Under the lndustrial Coonlination Act, 1975, it is mandatory fot colllp:mies with shareholders funds’ of RM2.5 million Ot mote or engaging 75 or more full time employees to apply for a manufacturing license. However, there is no restriction on foreign equity participation for companies in the machinery and equipment industry. As such, local and foreign investors may hold up to 100% equity in a local company irrespective of the level of exports. The Government has introduced various types of incentives for companies in the manufacture of machinery and machinery components under the Promotion of Investments Act, 1986, as a measure to promote growth and developments in the industry. Amongst the incentives provided include pioneer status, investment tax allowance and reinvestmem allowance. Various activities and products are promoted by the Government including the development and production of industriol machinery and equipment, material handling equipment and machine tools, hand tools or power tools, which are the core businesses of the MMSV Group. In addition, incentives are also provided for high technology companies in tile automation and flexible manufacturing systems, which refers to companies engaging in promOled activilies or production of promoted products in the area of new and emerging technologies. Some of sucfl activities include the development and production of computer process control system/equipment, process instrumelllalion. robotic equipment and CNC machine tools. Further, licensed manufacturing warehouse are also entitled to duty exemption of imported raw materials., component parts, machinery and equipment which are required directly in the manufacturing process. Manufacturers that are entitled to the exemption are toose with the entire production or ool less than 80% meant for export and the raw materials/components are mainly imported. MMSV Groop is currently enjoying the licensed manufaclUring warehouse facilities. Apart from the above, manufacturers of certain sub sectors within the machinery and equipment industry are also provided tax·related incentives based on level of value-added input. Other than lhe regulations imposed by the Government mentioned above, the manufacturing activities are also governed by environmental regulations. The manufacturing of machinery and equipment produces waste oil which is created due to the change of machine lubricating oil and degreaser. The disposal of waste oil is regulated under ‘spent oil or grease used for lubricating industrial machines’ of scheduled wastes from non specific sources under the Environmental Quality Act 1974 and Environmental Quality (Scheduled Wastes) Regulations 1989. 4.8 Outlook of industry The outlook of the specialised industrial machinery and equipment ifldustry in Malaysia is expected to be favourable with a forecast annual growtn of approximately 5% (0 8% for the next 5 years. Sucn favourable outlook is mainly substantiated by the growth in direct demand in the local and exports markets and import substitution, coupled with development in the performance of the end-USers industry such as the electrical and eJectTonics industry. Operators within the industry are expected to benefit from growth and opportunities in the following key areas: • Export markets Export markets for the machinery and equipment industry provides significant growth opportunities, particularly for machinery specialised for particular industries which grew at an average rate of 16.30/. annually between 1999 and 2004. There are opportunities for Malaysian operators to export machinery and equipment to developing countries, as the machinery and equipment are crucial in the development of the manufacturing sector ofthese countries. 4. INDUSTRY OVERVIEW (Collt’d) •  Manufilcrllrillg process aulOfl/uliOll  As major manufacturing sectors in Malaysia including electrical and eleclronics industry shift its reliance on labour intensive processes 10 high technology applications. the demand for manufHclUring process automation will b~ome more pervasive. This creates significant opportunities for opemtors providing automation machinery and equipment to improve flexibility, increase production output and allow faMer cycle times to accommodate the increasing labour costs and shorter product life cycles.  •  Imparl replacement  There are ample opportunities for local operators to replace imports by leveraging on local support, prompt delivery and cost effecti veness provided the fUllCtionality and quality of prodocts offered as well as the local operators ability to meet customers needs are assured.
The rcst of this page has betn intentionally left blank 5. INFORMATJON ON THE MI\1SV GROUP 5.1 History MMSV was incorporated in Malaysia under the Act on 29 March 2004 as a private limited company under the name MMS Ventures Sdn Bhd. Thc Company was converted into a public company and assumed its present name on 19 October 2004. The Company was established as the investment holding company of the MMSV Group in conjunction with the listing of MMSV on the MESDAQ Markel. Currently, MMSV is principally involved in investment holding with 2 subsidiary companies namely MMS which is involved in the design and manufacture of Industrial Automation Systems and Machinery and design of precision Die Sets, Jigs and Fixtures. arxl Evolusys which is involved in the provision of software development. The Group’s corporate structure is summarised as follows: MMSV 100% 100″10 MMS Evolusys MMS was incorporated in Malaysia under the Act 011 14 February 1997. In 1999, MMS commenced operations in the design and manufacture of Industrial Automation Systems and Machinery focusing on handler systems for the semiconductor and optoelectronics industries. Subsequently, in 2000, as pan of its product development, MMS began manufacturing trim and form systems, incorporating precision tooling and automated systems as pan of its core business. In 2001. MMS successfully developed its first LED assembly machinery with servo driven press utilising clinching technology. In the same year, MMS also successfully developed a complete PC·based software platfonn to facilitate the design and control of its Industrial Automation Systems and Machinery. By 2002, MMS had extended its produci range to include the design and manufacture of high speed lurret test handling systems, an integrated system with testing, trimming, fom\ing, vision inspection, sorting and taping capabilities. Since then, MMS has been continuously expanding its range of products, the latest being the design and manufacture of test handling systems including MMS’ precision encoder reader tester system and integrated test manufacturing system. As part of the management’s emphasis on quality. MMS was awarded the ISO 9001 :2000 accreditation in Quality Management System by SGS United Kingdom Ltd on 2 May 2000, which was subsequently renewed on 18 June 2004. Evolusys was incorporated in Malaysia under the Act on 22 June 2002. In 2002, Evolusys commenced its operations as a software development company principally engaged in lhe business of providing consultancy services and supply of so~ware on industrial automation control systems 10 MMS and external panies. However. in line with the Group’s business development plan, the activities of Evolusys were streamlined in 2004 to provide support solely for the design and manufacture operations of MMS, focusing on mainly the development of software for the Group’s industri:ll <lutomation systems. The res4 oUhis page has been Intentionally Jert blank I 5, INFORMATION ON THE MMSV GROUP (Conl’d) Share capital The present authorisct.l share capital of MMSV is RM25.000,OOO comprising 150,000,000 MMSV Shares. of which 126,392.140 MMSV Shares are issued and fully paid-up. The changes in the issued and paid-up share capital of MMSV from the date of incorporation are as follows:

5.3 Flotation Scheme In conjunction with, and as an integral part of, the listing of aoo quotation for the entire issued and paid-up share capital of MMSV on the MESDAQ Market. tnc Company undertook a restructuring exercise. which was approved by MITT Oil 10 January 2005 and SC (and under the Fie Guidelines) on 6 July 2005. Details ofthe Flotaiion Scheme are as follows: 5.3.1 Acquisitions (a) Acquisition ofMMS On 23 November 2004. MMSV entered into a conditional sale alld purchase agreement wilh the shareholders of MMS for the acquisition of 3.500,000 ordinary shares of RM 1.00 each in MMS representing the entire issued and paid-up share capital ofMMS for a purchase consideration of RMI2,639,212 wholly satisfied by the issuance of 126,392,120 new MMSV Shares at par as follows:
liew Woei Chieh  6.127  0.2  221,258  Saw Chong Ke:1I  60.180  l.7  2,173,222  Sia Teik Keat  476,495  13.6  17,207.204  Goh Kim Hock  476,495  13.6  17,207,204  Tan Beng Chuan  476,495  13.6  17.207.204  KSSB  476,495  13.6  17.207,2G4  IMTSB  476,495  13.6  17,207,204  AJFSB  476.495  13.6  17,201,204  Tan Beng Cheong  374,458  10.7  13,522,440  Teoh Soo Kuang  170.175  4.’  6,145,365  Cheong Kin Seng  12,072  0.4  435.944  Lim Beng Aik  18,018  0.5  650,667  Total  3560,000  100.0  126392,120
I S. INFORMATION ON THE MMSV GROUP (Cont’dj The purchase consideration of RM12,639,212 was arrived at on a willing buyer-willing seller basis, based on the proforma consolidated NTA of MMS as at 31 May 2004 of RM 12,639.212 after taking into account the adjustments as set out below:
, Audited NTAofMMS as al31 May 2004 9,126,510 Adjustmen/!I: Issuance of 3,499,998 new ordinary shares of RM 1.00 each in MMS at par for cash 3,499,998 pursuant to subscription ofshares on I June 2004 Auditw NTA of Evolusys, a wbolly-owned subsidiary, as at 31 May 2004, after 12,704 deducting cOSt of investment ofMMS Proforma (:on50Udlled NTA of I\IMS as al 31 MI 2004 12,639,212
The MMSV Shares issued and a)1otted pursuant to the Acquisition of MMS will, upon allotment and issue, rank pari passu in all respect with the existing issued MMSV Shares. save and except that they will not be entitled to any dividend, rights, aUounent or other distribution declared, made or paid to shareholders prior to the date of their allotment. The Acquisition ofMMS was completed on 8 September 2005. (b) Al:quisition of Evolusys On 23 November 2004. MMSV entered into a conditional share sale agreement with MMS for the acquisition of 10.000 ordinary shares of RM [.00 each in Evolusys, representing Inc entire issued and paid-up share capital of Evolusys tleld by MMS for a purchase consideration of RM 10,000 10 be wholly satisfied in cash. The purchase consideration of RMIO,OOO was arrived at on a willing buyer-willing seller basis after taking into account the cost of investment of MMS in Evolusys as at 31 May 2004 of RM I0,000. The cash consideration is treated as an inter-company debt owing by MMSV to MMS. The Acquisition of Evolusys was completed 011 8 September 2005. 5.3_2 TraMfer of Shares On 8 September 2005, the existing 20 MMSV Shares held by Khew Sin Mei and Lim Phaik Lan were tronsferred to Saw Chong Keat for a cash consideration of RM2.00. Khew Sin Mei, who is the company secretary of MMSV, and Lim Phaik Lan are effectively the incorporating shareholders of MMSV. The said transfer is to neaten the shareholding structure of MMSV by transferring the said shares from the incorporating shareholders to Saw Chong Kent, the Executive Director ofMMSV.
5.3.3 Public Issue In conjunction with lhe proposed flotation of MMSV on the MESDAQ Market, the Company will undertake a public issue of 36,607,860 Issue Shares, representing approximately 22.46% of the enlarged issued and paid-up share capital of MMSV, at an issue price of RMO.27 per Issue Share. Further details of the Public Issue are set out in Section 2.5 ofthis Prospectus. 5.3,4 listing Upon completion of the Public Issue, MMSV shall be admitted to the Official List of Bursa Securities for the listing of and Quotation for its entire enlarged issued and paid-up share capital of RM16,300,OOO comprising 16\000,000 MMSV Shares on the MESDAQ Market. 5. INFORMATION ON TilE MMSV GROUP (ConI/d)
5.3.5 Approvals and conditions MMSV’s F1Olation Scheme was approved by SC (and under the Fie Guidelines) on 6 July 2005 and MITl on 10 January 1005 respectively. The approval by SC (and under the FIC Guidelines) were subject 10 conditions outlined in Section 7.2 of this Prospectus. Subsequently, on 16 August 2005, MMSV had made an application to MIT! and the SC to increase the Pink Fonn Allocation of lhe Issue Shares from 2.444,960 Issue Shares 10 6.607,860 Issue Shares wilh the lolal Public Issue remaining unchanged (“Pink Form Reallocation”). The Pink Fonn Reallocation was approved by MITl on I September 2005. MITI’s approval was subject to MMSV obtaining the approval of the SC for the Pink Form Reallocation and compliance with FIC Guidelines. The Pink Fonn Reallocation was approved by the SC (and under the FIe Guidelines) on 26 October 2005. The rest of this page has been intentionally lert blank
5. INFORMATION ON THE MMSV GROUP (C”nI’dj Busia~ overview The MMSV Group is principally involved in the design and manufacture of Industrial Automation Systems and Machinery, design of precision Die Sets, Jigs and Fixtures and provision of software development. The types of Industrial Automation Systems and Machinery currently manufactured by the Group include camera focusing and testing systems, trim and form systems, test handling systems, vision inspection systems, marking systems and others. The breakdown of the revenue contribution from each of the product l:ategories for lhe financial year ended 31 December 2004 and 6-month period ended 30 June 2005 is summarised below: 1. lksig.. Ilnd lIUJIIulac/Llu ofQ/htr [ndus/rial AUIQmllfWn Systems and Machinery comprisa prQd”crs ruch as oplicill mQUse Ud a/fadtment ~Slems, L.E.D JeflS IltUJCh~1l1 sySf(mJ, stand·aWrre temperl1.lure chartlcterisl1.lion r:Jltlmber, LED de-11l1Tlp st’:llli’lluto ftS/er and pillS QIlti beud IlIXmbly foofi1’lg mIlchine 2, Design services un<krathers include modificl1.f;Otl, replacement, spare parIS and OIher des/gil service charges Subject II) rOUlld/ng di!fereJlf:es For the financial year ended 31 Decl.lmber 2004, the design and manufactute of Industrial Automation Systems and Machinery accounted for 92.8% of the Group’s total revenue with a contribution of approximately RM19.5 million revenue, whilst, design of precision Die Sets, Jigs and Fixtnres contributed 7.2% of the Group’s revenue with approximately RM1.5 million n:venue. Design aad Manufacture or Industrial Automatioa Systems and Machinery Camera Focusing and Testing Systems Focusing System Testing System
Trim and Form Systems Clinching Turret Trim and Form Semi-Automated Trim and Fonn Linetlr Trim and Form Tesl Handling Syslems Tray ro Tray Tube /() Tube Tapeto Tape Precision Encoder Reader Integrated Test Manufacturing System Vision Inspection Systems Marking Systems Others’ Deslg. Services Die SeTs Olhers2 Software development Total N()Iu: 13,037 62.0 10,036-63.2 6,996′ 33.3 4,485 28.2 6.()41 28.7 5,552 35.0 ,.,.1,8Ig’ B.6 5.3 332 1.6 290 18 1,272 6.0 32 0.2 215 1.0 522 3.3 1,891 9.0 1.358 8.6 42. 20 277 1.7 607 2.• 517 25 660 4.2 338 1.6 421 2.7 32 0.2 214 1.3 2,024 9.6 t,103 6.9 725 3.4 646 4.1 345 1.7 1,362 8.6 1,163 5.5 320 2.0 21.03.5 100.0 15 (00.0 5. INfORMATION ON THE MMSV GROUP (Conl’d) For the 6 month period ended 30 June 2005, (he dC’sign and manufacture of Industrial AUiomation Systems and Machinery accounted for 89.4% of th~ Group’s IOtal revenue with a contribution of approximately RJ\.1 t4.2 million revenue, whilst, design of precision Die Sets, Jigs and Fixtures contributed 10.6% of the Group’s revenue with approx.imately RM 1.7 million revenue. Since 2004, the provision of software development by Evolusys is only to support the design and manufacturing operations of MMS. As such, there is no direct revenue contribution from the provision of software development. Instead, the contribution of the provision of software development becomes an integral part ofthe design and manufacture activities ofthe Group.

5.4.1 Products and services 5.4.1.1 Design and manufacture of Industrial Automation Systems and M.chinery Industrial Automation Systems and Machinery is a set of machinery and equipment that are integrated to perform a series of manufacluring tasks automatically, thus minimising the need for manual intervention and overcome limitations of human labour. These Industrial Automation Systems and Machinery are aimed to produce high volume output, perform highly precise movements, handle small items, achieve consistent high quality output andlor minimise contamination. It is the CQre of all manufacturing operations and can be used for one process, a series of processes or an elllire manufacturing process from stan to end. The major differences among manufacturing operations are lhe differenl levels of automation and integration and the number ofaulomated processes. The Group’s Industrial Automation Systems and Machinery are essentially robotic systems that are designed to emulate human motor skills and decision·making to replace tedious manufacluring processes that are conventionally perfomled manually or 10 pcrl”orm manufacturing processes in an environment beyond human capabilities. The Group’s products currently perform various functions for a wide range of devices which involves testing, handling, trimming, forming, clinching, positioning andlor marking of fragile OLED glass screens, embedded digital cameras for mobile phones, microprocessors, LEOs, digital signal processing chips, application specific les and specialised memory les for the eleclrical and electronics industry. These products are mostly customised to meet each customer’s specific production or functional requirement. To date, the Group has a design base of over 14 models of Industrial Automation Systems and Machinery, each of which is mechanically different from one another but are capable of integration with other machinery and equipment on a similar machine platform. Generally, the different models of Industrial Automation Systems and Machinery designed aDd manufactured by the Group can be classified into 5 broad categories summarised below, each of which is designed to perform separate functions: ProdUCI  Dl’\\ nplJOIl  ,­”‘f!~i’  •  Focusing System  A set of customised machinery and equipment which incorporales testing system with focal adjustment function for camera lens  Purpose: To lest and set focal distance of micro camera lens in embedded digital camera modules including testing ofthe image quality according to specifications, checking for dirt or blemishes on lens, adjusting camera lens barrel to obtain sharp image and fixing of focus length  Usage: Mainly used in the consumer eleelranics industry such as mobile phone industry  •  Testing System  A scI of machinery and equipment programmed to recognise hundreds of tool forms and perform measuring, testing, frame grabbing and inspections functions  Purpose: To test perfonnance of the capfUte and qualily inspection  camera  including voltage, image,  video  Usage: Mainly used in the consumer electronics industry such as mobile phone industr
5. INFORMATION ON THE MMSV CROUP (Collf’d) Prutlurt IkscriptlOll
,~trJ~~nd Form,Sptem
• Turret Trim and Fonn • Linear Trim and Fornl
• Semi-Automated Trim and Fonn
• Clinching

A set of customised machinery and equipment designed to detlash, trim and form and singulate the electronic components Purpose: To detlash (to remove excessive mOlerials such as resin materials or other mouldillg materials auached on the Ie package or its leads), trim (remOVing und/or cutting off leads or legs from Ie chips 10 required length), fom_ {forming and/or bending (he leads based on specifications) and singulate (sepamle Iechips from leadframe infu individual components) electronic components Usage: Mainly used in electronics industry including optoelectronics such as LED and the semiconductor industry such as Ie chips, diode and other electronic components Designed to perform trim, form and singulate functions, component verification, electrical testing, marking and vision on lead profile Designed to perfonn detlash, trim, fonn and singulllte functions Designed to perfonn trim, form, electrical testing, vision inspection and sorting fuoctions Designed using clinching process to arrange and assemble LED on lighting device for automotive industry Test Handlin’g Systems4_:’ i”,L~-r,””‘,; ~. “‘~. •..,J;t; ~ • Tray to Tray
• Tube to Tube
• Tape to Tape
• Precision Encoder Reader
• Integrated Test Manufacturing System

A m~hanical system or machinery designed to move. position and sort packaged items during testing, which is programmable and equipped with accurate and rapid movement of multiple axis control technologies, generally utilising robotic ann to perform pick and place to move items 10 specified locations or stations Purpose: To conduct tests such as static and dynamic electrical and optical characteristics tests based on fuoctional test, resistant test, stress lest, leakage test, alternating currenl test and direct current test. Offers high throughput, low cost fault identification and diagnostic accuracy Usage: Mainly used in electronics production line such as circuit board test applications to identify defective components quickly aoo precisely Designed to handle products white calTying outlests, incorporating mUltiple axes control technologies for accurate and rapid movements with minimal vibration A programmable system that is driven by servo motors to move products through specified locations for testing A taping module with dual turret system utilising barcode scanner Designed for testing the sensitivity of electronic products and accuracy of reading from encoders that are mounted on high-speed spindle Designed to integrate many simultaneous processes into a single machine. Among the processes integrated into this machine were forming, cutting, singulation, electrical test, functional test, kaptotl tape attach and sorting. Ot:her relevant processes may be integrated into this machine on a modular basis. 1M{mi11nsprctioh<SY$l~) :’l.~ ‘¥~:1 «-<~t~ ..~ J”l
A set of machinery and equipment which incorporates a camera Bnd customised software to perform visual inspection Purpose: To differentiate objects., establish object orientation and identify defects through advanced imaging software including barcode imaging, label inspection, gauging, discolouration detection and optical character recognition S. INFORl\’IATIQN ON THE (\’1MSY GROUP (Conr’d) Prmllllt ncscri tillli Usage: Mainly used to inspect, detect, grade and isolate components with defects quickly, accurately ar}(j consistendy. Vision inspection may be used as a primary quality check before performing physical testing such as dynamic el~trical testing, where electrical current is flowed into the tested device to verify functionality.
“,lj, Ii>”f’, ~~ Arl A programmable machine to mark numbers, texts or identity code on products. Purpose: To mark numbers., texts or identity codes on products which can be manually input, bar scanned or downloaded from computers Usage; Mainly used for product identification and specifications, addition of functional elements, product traceability, protection against imitation, provide colour and design alld aesthetic printing To mark on flex circuits, printed circuit boards andlor directly onto the components devices for identification. Provides more options and greater flexibility for the management of time and date codes, shift codes and counters • Ink Marking
To provide permanent marking on surface of OLEOs using laser energy. Marking
• OLED Laser

Combines accuracy and precision with stability and ruggedness for many applications including engraving, coding and aesthetic printing. ideal for production environments requiring an automated and fast marking system that is safe and easy to use The platform was designed to mark on integrated circuit chips, optoelectronics Marking • Rotary Laser and display components or products which were movedlhandled in a rotary fashion. This platform allows for products to also undergo otber processes such as testing, inspection and packing; besides the marking process. Designed with flexibility in mind, this platform may be configured to suit each customer’s process requirements. Further dctails on the product development milestanes for each category are summarised in Section 5.4.15 of this Prospectus. Although the MMSV Group focuses on mainly designing and manufacrnring the 5 broad categories of products set out above, it is also able to undertake customised design and manufacture of other types of Industrial Automation Systems and Machinery. For instance, the Group has the in-house capabilities to undertake customised design and manufaclure of products such as LED lens anachment system, mouse lid attachment system, temperature characlerisation chamber, tED de-lamp semi-auto tester and pin and bead assembly tooling machine. Design ofIndust,ial Automation Systems and Mac/l/nery The Group’s Industrial Automalion Systems and Machinery are designed on platforms, a framework on which the Group can build its automation systems and machinery to achieve the desired arrangement of tasks as specified by its customers. There are generally 3 different basic typcs ofplatforrn, which provides the base for the Group to build its Industrial Automation Systems and Machinery, namely the M-Line, M· Matrix and Turret platfonns The Group’s M-Matrix and M-LiAe platforms are customis.able platforms designed 10 address high volume processing of semiconductor devices in different process arrangements and sequences. The M-Miltrix platform is a customisable platfonn designed for matrix and array processing of any discrete package, while the M-Line is designed for linear processes suitable for LEOs, most Ie packages and discrete products. These 2 platforms are generally used to achieve high production throughput rates at the lowest COSI of test which is essential to meeting the economic requirements in the electronics markets. As such,to cater for high volume processes, M-Matrix platfonns are mainly used for component testing, labeling (inkjet), dispensing and spot welding, whilst M-LillC platforms are used for orientation correction, attaching, trimming, forming and singulating. 50 5. INFORMATION ON THE MMSV GROUP (Cunl’d) The core of the MMSV Group’s product designs is to employ a “univcrs:tl slot” concept, a design platform which is able to offer the user the adaptability and tlcxibility to install any machinery and equipment into the tester “slots”. With this goal in mind, in 2002, the Group successfully developed a docking platfonn fOT its Trim and Form Systems called the ”Turrer’ platfonn, designed to mainly cater for the optoelectronics industry. The Turrel plalfonn effectively provides the user with the ability to integrate different machines into a dial configuration thus enabling optional testing functions to be added on a modular basis. This new configuration gives the user the flexibility to undertake a series of tests and processes on inputs in a desired sequence, The advantage ofthi:; design is that it provides cost savings to the operator by achieving flexibility for multiple tests and processes. The Turret platfonn can be used for processes which involves singularion, componenl verification. electricallcsring, marking and vision on lead profile. Notwithstanding the 3 basic platforms mentioned, the Group’s innovation in combining these basic platforms and the incorporation of precision diesets into the design of new industrial automation has resulted in a number of hybrid platforms under Ihe MMSV stable. MMSV has two platforms for product marking and identification. The technology employed for this purpose is laser and inkjet marking. One platrom is designed to mark products in a matrix tray while the other marks products moved in a rotary fashion. The latter platform allows products to undergo other combined processes such as testing, inspection and packing, which eliminate the need for a few separale machiocs. Designed with flexibililY in mind, this platform may be configured to snit each customer’s process requirements. These two platforms were designed to mark on integrated circuit chips, optoelectronics and display components. MMSV’s integr.ued test manufacturing system was designed 10 integrale many processes inlo a single compact machine. This system CQmes with a servo-powered mechanical press and a multi-anned circular motion indexer. The circular motion indexer provides efficient use of space hence keeps this machine compact. Among the processes integrated into this machine are forming, cutting, singulation, electrical test, functional test, kapton tape attach and sorting. Other appropriate processes may be integrated into this machine as well. MMSV’s automatic tray-to-tray inspe<:lion system was designed to eliminate the issues associated with human inspection. This system provides consistent results and minimises handling by operators, thus reducing quality issues and human errors. The handling of the tray and inspection process is fully automated. MMSV’s fully aulomaric parts assembly machine was developed to assemble Var10llS components for the automotive industry into a sub assembly stage prior to being installed into a car. The various components are moved and assembled into fI sub assembly state through the use of some robotic manipulators. This ensures quality consistency of assembled product. Manufacture ojlndudrial Automation Systems and Machinery The Industrial Automation Systems and Machinery manufactured by the Group are able to incorporate features and peripheral equipment which are based on customers’ requirements and specifications including robotic arms for pick and placo, automatic or semi-automatic feeder/unloading/packaging, vision inspection system, electrical and optical testing system and customised software to control timing and movements of aliloois and functions within the machinery and system. Most ofthe Industrial Automation Systems and Machinery ofthe Group are manufactured for multinational companies in Malaysia such as AgHent, Penang Seagate Industries Sdn Bhd, Globetronics rndustries Sdn Bhd, Lumileds, Osram Technologies (Malaysia) Sdn Bhd and OSlam OpIO Semiconductor (Malaysia) Sdn 8M (“Osram OpIO”) as well as overseas companies such as Flextronics, USI, Guide Corporation (US), Hana Microelectronics Public Company Limited (ThailarnJ) and Seagate Technology (Thailand) Ltd. 5. INFORMATION ON THE MMSV CROUP (COIII’d) As most of the Group’s Industrial Automlltion Systems ami Machinery are manufactured for the electrical Clnd electronics industry as well as other similar activities which require precise timing, movements, actions Clnd speed, high standard of quality is critical. Tn this regard, the Group’s emphasis on high quality standards is renected through its total quality assurance programmes ami adherence to meeting customer specifications and requirements. MMS obtained the ISO 9001:2000 accreditation in Quality Management System from SGS United Kingdom Ltd on 2 May 2000 and was subsequently renewed on 18 June 2004. 5.4.1.2 Desie:n of precision Die Scts, Jigs and Fixtures To complement the design and manufacturing activities, the Group also undertakes tt.e design of precision Die Sets, Jigs and Fixtures that IKlnnally form part of a total automation system for its internal requirements 8!1 well as for its extenml customers. The Group is capable of developing tight tolerance precision Die Sets, Jigs and Fixtures that require high accuracy manufacturing techniques using quality components and materials. The various types of precision Die Sets, Jigs and Fixtures manufactured by the Group offer functions such as punching, trimming, cutting. inserting, forming and gauging. With in-house capabilities and facilities for designing and fabricating supporting paris and equipment, the Group is able 10 control the quality of its Industrial Automation Systems and Machinery manufactured throughout the entire manufacturing process, provide faster turnaround and reduce dependencies on external parties. At the same time, the design services also provide support 10 the Group’s design and manufacturing of Industrial Automation Systems and Machinery as it helps extend the range of products offered and increase the value-adding activities to meet its customers’ specific requirements.
5.4.1.3 Other se”iI,:~s As a customised designer and manufacturer of Industrial Automation Systems alld Machinery, the Group also provides other services to its customers such as product conceptualisation, technical consultancy, project management, system and engineering design. soR.ware design and development, system assembly and integration and testing and debugging. All such activities are backed by tile R&D efforts undertaken by the Group, particularly in the conceptualisation and design phase. In addition, the Group also undertakes R&D on sub-modules or processes that could be incorporated across a number of automated and semi­automated systems.

5.4.2 Operational facilities and capabilities The Group’s operational facilities consist of machinery, equipment and software focusing on engineering design and conceplUalisatioll, software design and development and manuf..cturing of Industrial Automation Systems and Machinery. Presently, the existing operations of the Group is undertaken in a rented premise located at Plot 84-A, Jalan Lintang Bayan Lepas 9, Taman Perindustrian Bayan Lepas. Fasa 4, Pulau Pinang, Malaysia on a piece of leasehold land measuring 87,120 sq. ft.• with a tolal built-up area of55,859 sq. ft. consisting a single storey production area and a double storey office building. The operations of the Group are supported by the following: 0) m,”uf,,’uring fae;li’;” ;nduding 3 milhng m”hin”, 2 grinding machi””, , JIg grinding machine, 1 turning machine and I profile projector; and (ii) engineering design and software development facilities including general machining and quality control tools and software, engineering design and software development such as workstations. solid edges 3D computer-aided design software, programming software such as visual basic and computer aided design software, visual studio, visual C++, RTX real time software and Dynacam mechanical cam design and analysis software. COlllpany No. 647125 -P 5. INFO&\1ATlON ON THE MMSV GROUP (Conl’d) The production of the Group for the fillllIldal year ended 31 December 2004 and 6-month period ended 30 June 2005 are sununarised below:
Focusing System Tes.ting 5yslem
Trim & F.fTJD System. Tunct Trim and Form Linear Trim and Form Semi-Automated Trim and Form Clinching ‘fest Handling Systems Tray to Tray Tube 10 Tube Tape to Tape PtCCision Eoroder Reader Integmted Test Manufacturing System , Vlsioo Inspectloo System!!I-s’……Others ;,. Notes: 70 61 3 1 1 3 1 1 18 6 141 18 64 29 ”  2  4  1
12  2  4  2  2  2  1
2
“17 2 7 26 • r”…,value andprofit murgintor (Dmp!el(1 IfNitif (i!e sfgn~ifcall(ly high,,”,” than rr.m for tVlWfrJltm kif; Pieese refer ro.~criQ1l $.411 am!.&akm92(;J o!mis Prosprcms’m desaiptfOYI ofDY;ef prodl!O$ As (he Group’s business activities are liot highly dependent on machinery or other fixed assets” there is no praclicallimit on its production capacilY. Any increase in production would mainly require the increase in skilled labour and production/office space. As part of its expansion plan, the Group plans to utilise part of the pr0l-‘eeds raised from the Public Issue to partially finance the acquisition of the factory building it is currently reniing. MMSV is <:lmenl1y operating in a newly-constructed premise owned by MCE, in which the MMS Group was the principal tenant since 1 May 2005, initially occupying the entire built-up area of the planl at a renlal charge of RM44,OOO per month. The construction of the new plani cornmen,ed on I.7 May 2004 and was physically completed on 30 November 2004. Subsequently, on 26 March 2005, MMS received the Occupational Certificate (“OC”) from Majlis f’etbandaran Puiau Pimmg til operate it; the new plant. Subsequently, the plant was commissioned on 1 May 2005. On 1 August 2005, lhe rental agreement dated 1 May 2005 with MCE was mutualty revoked and replaced by a new rentlll agreement. Under the new rental agreement, MMS as tenant and MCE as landlord have mutually agreed thaI the monthly rental charge fOf the plant be reduced tQ RM30,300 per month bfl.s(~d on a revised rental area of 1′,000 sq. ft., with shared ac;;omooQdation of the piant’s common area comprising the following; (i)  1,474 sq. ft. for hoo’ing of moch”i”,,’ “d eloctrical utilitie”  (li)  5$75 sq. fc for general amenities &ucn as lobby, CQrridors: and rest rooms; and  (iii)  11,200 sq. ft reserved as production and/or asseml1ly space for future expansion  53
COlllpany No. 647125 -P 5. INFORMATION ON ruE MMSV GROliP (Conl’d) which ~hall be under the operation of MCE uotil the completion of the ilcquisitlon oftbe plant pursuant to the Public Issue. The revision in the rental arrangement by the Group had taken into cQnsideration the Group’s rental overhead’! and the immediate requlTefTl(‘nt [0f a total operating space of approximately 15,000 sq. ft., the utilis<ltion of which currently consists of approximately 9,000 sq. ft. for office space (including R&D, designing llnd programming) and approximately 6,000 sq. ft. for assembly, testing, debugging and R&D evaluation, With the completion of the acquisition or this new production plant from MCE, the MMSV GrQUP will own a manufactoring facility with total built-up area of 55,859 sq. ft. out of which 20,323 sq. ft. will be allocated for production whilst 16,887 sq. it will be allocated for office space, which will include noor space for designing, programming and R&D. Meanwhile, an area (Of 1,474 sq. ft. will be used to house the mechanical and electrical utmties while an area of 5,975 sq. Ii:. will be used for general purposes. The Group intends to ref5e(ve an area of approximately 11,100 sq. tt as prodoction and/or assembly space to catef for future expansiort This reserved floor space will allow the increase of concurrent manufacturing capacity from an avernge of 30 to 35 machines per month to an average capacity of80 machines per month. Investments estimated at approximately RM1.5 million will also be made to furthn equip the new production facilities with new software application, workstations, printers, CNC and CMM machine. The new pl.mt will provide the Group with the much-needed space to hou’!ie its expanding engineering design and software development and R&D team as well as increase the al’sembly capacity of the Group. Further, the \tew plant will also enhance the image ofthe Group as a multinational manufacturing solutions provider.
COlllpany No. 647125 -P 5. JNFoRMAnON ON THE MMSV GROUP (Com’d) ————–~ 5,4,3 Automation sY$lem~ design and manufa~turingprocess The process of the design and manufacture of Industrial Automation Systems and Machinery 1S iUufitrated below: System ]Ccncllpluatsalian
,.”.’,””,,,,,,,,, , ,,”‘. , ,.,..,,,,,,,.-“..,
.:Software O;wclcpmen!
._M_’_,”_,”_’_Ar’_’_’_~_b_”_J–~ ..—­,..__-,L__ I Final Wir;rlQ c-le$lRun ) .:=L-..–,
Dstn;gglng ,–.–‘—­~Firal Product -~ Pre design stag,~: System c(Hrceptualisatimt andprojea planning The PfQ~ ‘\I1arts “,ith system conceptualisation to meet the specifications and r<oqu-irements of customers. Through a process of discussion and R&D between the Group and its CUSI<lmerS, a customised oolution is conceptualised. A project team is then fonned comprising project engineers. design enginee~ mcehanical engineers., eleetrical engineers, softwan; engineers and wiring and assembly techniciaIi5 to undcrtake the overall planning (Ifthe proj<X:t. Design st.age Customised system design is then undertaken incorporating the designs of mechanical, electrical, software, vision, machlne control and precision parts and equipment in some cases, customers may provide their own designs, which are then User:l by the Group, usually after nmdifications to better SUtt the cusromers’ requirements, The design pr{}Cess wiU require engineers to use computer aided design and engin<ering software and tools to design the structure, mechanics, functions and capabiliti<s urthe machinery and total system to match the specificatio-ns and reqwremctlls ofcustomers, Fost d#sign srage,’ Procurement, .fabrication ofparts and equipffWnI and software d.;:velopmem Once the design or drawings of the systems are finali&e-d llnd vallfl;tted, the next process will involve the following; COlllpany No. 647125 -P 5. INFORMAtION ON HIE MMSV GROUr (Coet’d) • Procurement of common and off-the-shelf parts, components and materials, and specialiserl or proprietary pans, componcltt1;. and materials. In additkm, the Group also olliwurce ma<:;hining and tooling ofcustomised parts and components;
• Fabrication ofprecision Die Sets, Jigs and Fixtures; and
• Development of software for eorrtrol of the individual parts, maehine, processes, movements, functions and ultimately the entire system.

All the in-house developed/fabricated, outsourced 3nd purchased parts, compooents and equipment undergo stringent quality control clled:s and testing to ensure they meet functional and quality standards and spedfications. Quality control and t-esting also -includes the software components. Assembly stage: Wiring and machine assembly Once all the various parts an? fully tested, the next phase is to assemble and integrate them into a working system. Wiring and assembly technicians mainl}’ undertake the assembly and integration of the macmnery ‘A’ith tile asslstarn.:e and supervision from the engineers. The sofhvure components developed for the systems are also integrated in this process. Final stage: Test nm and debugging Upon oompletion ofthe assembly and integration ofthe system, the systems are prepared for a test run, The system ilien underg0cs full system testing and debugging until it runs smoothly and is in compliance to customer and system specifications. Built-in safety reatu,es are also tested during this stage. Once the prodoct<; have completed all tile tests, the customer will then perfonn an inspection of the machinery at the Group’s site priQr to delivery. Once the system is ready for delivery, the machinery are crated/packed for transportation anti delivery to the customer’s premises. 5.4,4 Quality \Xlntrol and management The Group places significant emphasis on product quality and adheres to stringent quality standards in order to provide its customers with dIe 3ssurance ufhigh quality products and services. A dedicated quality control team comprising 3 personnel \comprising 1 quality assurance manager and 2 technical and d¢sign engineers) are responsible for enS\lring that products meet the specifications and expectations of customers as well as the quality standards of the Group” Amongst the key areas of the Group’s qwllity control and management programmes include; • Design cOnlrol -completed design of IndU5trial Automation Systems and Machinery has to be verified and validated by senior te.:hnical personnel and project director to enwre that it meets approved specifications and requirements ofcustomers
• Manutacturing and assembly process control -each stage of the manufacturing and assembly process has to be checked by a senior te.:hnical personuel to ensure 1t meets approved specifications aDd design
• Functional testing and test run –completed Industrial Automation Systems and Machinery will undertake functional testing and test run to detect inherent faults in the systems and machinery
• Reliability testing -completed Industrial Automation Systems and Machinery will undertake extended period of run time to ensure it functions according to specification and requirements

MMS ,;vas awarded the ISO 9001 ;2000 accreditation in Quality Management System by SGS United Kingdom Ltd on 2 May 2000, which was subsequently renewed on 18 June 2004. 5. INfORMAnON ON THE MMSV GROUP (Cont’ll) ~~­

5.4.5 Principal markets Presently, the plincipal markets of the Group can be segregated into tbe local and export market. For the financial year coded 31 December 2004, the bre-akdown ufthe revenue contribution is: summarised below:
Malaysia Local Free Trade Zone companies

17,547 &3,4 Localliceru;ed roonufacluring wtlrehouses )4 , 02 Ollre!s .29 2.0 US 0.3 Thailand -434″ 2.0 Cbina 1,453 L1.7 Australia 33-0.2 Taiwan ,3 0.2 Total 21,lJ35 100.0 As shown above, although the l(}cul market contributed 86’% of the Gtoup’s total revenue, approximately 84% of the total sale of the Group’s products were made to local Free Trade Zone companies and local licensed manufacturing warehouses which would ultimately be exported to the global market. The remaining sales to the local market comprise mainly to multinational companies operating in Malaysia. For the financial year ended 31 December 2004, the Gri>up’s direct export sales accounted for approximately 14% of the total Group revenue, with sales to new export markets such as Cbina, Taiwan and Australia, Amongst the products exported are testing systems and trim and fonn systems, For the 6-month period ended 30 June 2005, the breakdown of the Group’s revenue contribution is summarised below:
Malaysia lAcal Free Trade Zone companies Local Licensed manurncturing warehouse Others US Thailand China Australia
i Singapore 1Qtlll 5,806 36.6 362 2.3 23 0.1 16!l 1.0 302 1.9 9,00 56.9 Il2 0.7 “‘,. 0.5 I tooJ} j As iIIuslmted above. for the 6-month period ended 30 lune 2005, the Group’s direct export sales accounted for approximately 61 % of the total Gn)up revenue, with increased sales to China. Amongst the products exported are camera testing systems fmd camera focusing system. The success of the Group in gaining ac.:ess to the overseas market is mainly the result ofits ability to meet the internatIonal standards ofquality and expeectations ofoverseas custome~ 5A,6 Market share Based on the Vital Factor Report, the estimated market size of t1le specialised industrial machinery and equipment market focusing on e!eectronics and electrical sectors in Malaysia for 2004 based on production output is approximately RM850 millii>u, Based on the Group’s total revenue of approximately RM21.0 million in the fillilndal year ended 31 December 2004, lhe Group accounted for approximately 2.5% of the specialised industrial machinery and equipment market in Malaysia, Company No. 647125 -P 5.  INFORMAnON ON THE MMSV GROUP (Conl'”d)  5.4.7  Major lkens« and permits  Details of the major lic-enses lllld penuits currently held by the Group are as (ol1Qws:

Royal 22.08.2005/ Malaysian (18.08.2007) Customs Manufu.cturing (i) No dutiable!taxable gDOOs othd ‘ Complied Warehouse Lieetlse than Raw Materials} Components, rnachinerie;; that are used directlr in manufacturing and finished products as approved by the State Director of Customs can be kep1 in the Licensed Manufacturing Warehoure; <ii) The machineries lhat are used dire;.:dy in manufacturing must be new. Used machinery can only be imported on condition that the licen~ lw obtained app:rovat from MITI; (iii) A copy of the approved plan of the licensed premise must be displayed at a conspicuous place at the premise; : (jv) The licensee is required to subm-it to the Industry Division <If 1he CUSlOm.<; Department a monthly return in the national language on or before the 28t h. of the following month. The return must be certified by the company’S accounmnt with tletajls as prescribOO in the; liceu<:e; (v) The licensee is required to submit an audited annual statement of accounts 10 the wntrulJing Customs StatiQn. i The statClTleU1 of accounts must ‘ contain details of raw materials ” components used, finished productS manufactured, finished produdS released and balaoce in stock;
(vi) A tmal of 80’% of finished products (in value) is fur exp(u1 aru:i a tnral of20% of the finished produCI is for loclli market 3’i approved. Release for local sak is subject to any duty } ttL’: applicable at the time;

S, INFORMATION ON THE MMSV GROl’P (Conn/)

R0ya! MalaysJan Customs (Cont’d) Royal Malaysian Customs Majlis Perhandarall PUJaIl t>itlltrt! Majlis Perbandaran Pulau Pinang 21.08.2005/  Warehouse License  (18.08,2007)  27.12.20041  Electrical and  i3LJ2.2005)  Mechanical Works  ; license  07.1 1.2005  Provisional  Licenses  to!” Trade, Business &
1vii} The licen~e is bound by the General Bond (Bon Am) of RMI20,OOO,OO which is sealed for tne purpose of adhering to the Laws and for the safety ofdllty! ta.J<; 00 raw materials \:omponents, finished product.;; kept in the lketlsed manufacturing warehouse and the ll11)vement of the dutiable goods; and (viii) The licensee is required to illfonn the Senior Officer of Cu5tom,. controlling the factory in writing within 14 days if any of the following events occurs~ III Change it! the Boord of Dire..:.tor~ b) Any decision made for the winding up ufcbe company c) Any otd¢( made for winding up the compnny d) Any appomtment of
liquidator or receiver e} The rompany is involved in .)Ily eivi! suit or cc(tsed operations As above. The license must be exhihited in !he premise where the said nature of works will be perfQnned Mid must be ptodu<::ed llpon inspection by any officer of Majlis Perbandarall Pulau Pinang. Complied Complied Provisignal Lirense tiff” lradl,t. Complied Busimrs:; 4: industrial Activity lndu.sttial ActiVity and , Adverti:remcnt (i) MMS to maintain the doonlir;css of the premises; iii) MMS to provide adequate aren or wnste con/.ainers f(lr rubbish collecli0n Rubbish are to be contained in plastic bin liners or suitable conuiners beime disposal into garbage skip;
(iii} MMS to lake the necessary steps to avoid c011gestion at its i premises; __L COlllpany No. 647125 -P $. INFORlllATION ON TIlEMMSV GROUP le”‘·d)
Majlis Perbandaran Pulau Pinang (Com’c) MlTI 25.11.2004 (which was subsequently rountenmmded , and replacedIwHit it new MITI license issued on 4 October 20il.’i*) Now.-Manufacluring License (iv} MMS to provide and JOOinwin suitable worken’ mess hall, rest rooms, first aid box, ch:mging n:Nml; 14,d lockers; (v) MMS to avoid making, causing, ai10wing or ;,;ulborilling the dispersion of dUSI, gaseous emission, steam, heat, radiahon, smell, odour, vibratiou, smoke or particles frOItl the premises, Ihe amollllt of which tantamollnts to an irritant or air pollution; and
(vi) MMS 10 avoid making or causing irritating noises.

 

MMS is required to slale the llllverlisement pcrmil number 10 be assigned when the pemtit is issued. ti) The MlTI must be informed of Complied any snle of shares in MMS; (ii) MMS is required 10 train Malaysians 10 enable transfer of technology and knowwbow; and (iii) MMS IDcst undertake projects as approved subject tD the above mndiliolls in llCOJrdaoce with the laws and regulations of Malnysia P1l.rS#(Jflt !a the JniJw,trful Coordinar”o.’l .4ct 1975 in. reia/iOIl to the rclocatiOi1 vf MMS from its original operating premises ior~td fU 25 la/an Sungai Tiram 2, Bayan Lepas, 119()() PU/utl Pill<l/lg to fts exisling premius located at Plot 84-A, lalan Lmwl1g BOyiln Lepas 9, Taman PeriJrdlls:rian Bdldl!. L£p;1s, Fast) 4, 11900 PlJlau Piu(lug, fhis kanse mall remain valid llntil sucJ1 titr.., .MMSVI’I’kx;ates itsoperatiollS to (l different premises. 5.4.8 Marketing and distribution network The products and services of the Group are sold directly to various types of end tLS{ll” industries within ,be electronics and electrical industry such as semiconductors (ICs and electronic components manufacturers and printed circuit board a..”>Semhly), optoelectronics (paris and component.;;; for LED lights) and other electronics and electrical products (computer hardware drive componenis). As Ihc prOdUCls and services of the Group are mainly cusiomised io the specifications and requirements of each customer, significallt tC>,:hnical expertise and product knowledge is required in marketing the products effectively, As such, the products are normally distributed directly to the customers by !he Group’s marketing team together with the engineers. The use of such direct distribution approach not only enables the Group to worK closeiy with its custnmers to evaluate and beaer understand customers’ needs, but at the same t!.me allows the Groop to maintain dose working relationship with cuswmers throughollt the deveiopment process.. Currenlly, the business development efforts of the Group arc managed by the sales and marketing learn comprising 4 marketing personnel which is headed by Sia Teik Keat, the Managing Director of MMSV. COlllpany No. 647125 -P 5. INFORMATION ON THE MMSV GROUP (Conl’d) Apart from undertaking its own marketing and distribution activities, the Group has also expanded its reach to the global market indirectly through its international customers. By supplying its products and services to international customers such as Agilent, Lumileds and Penang Seagate Industries Sdn Bhd. which would ultimately be exported or used for overseas production, the Group is able to create product awareness in the global markets. As the Group’s products become increasingly visible to the global market, the Group expects to increase its sales to the international market in the future. Overall, the Group has adopted the following marketing strategies: • position itself as a customised designer and manufacturer of Industrial Automation Systems and Machinery offering wide range of products and services including in-house design, engineering, software development, manufacturing and design ofDie Sets. Jigs and Fixtures;
• position itself as an innovative solutions provider supported by in-house R&D, engineering design and software development;
• position itself as a reliable provider of customer service and support through the provision of prior consultation services and reliable network of after sales technical support locally and internationally;
• provide quality products and services backed by in-house R&D, and testing facilities to meet stringent requirements and standards in Industrial Automation Systems and Machinery; and
• expand its market presence overseas and develop new business opportunities through close partnership with existing customers and suppliers.

As part of its strategy to promote its products and services, the Group is planning to participate in exhibitions and conventions locally and overseas. Amongst the overseas exhibitions which the Group had participated include the China Semicon Show 2005 in March 2005 and Singapore Semicon Show 2005 in May 2005. These exhibitions and conventions were visited by top international companies such as Agilent, Hewlett-Packard. Micron Semiconductors Asia, NEC Semiconductors and Panasonic Semiconductors. The Group’s active participation in such exhibitions and conventions is aimed at creating customer awareness of the Group’s products and services amongst multinational company. 5.4.9 Technology Technology is the backbone of the Industrial Automation Systems and Machinery and solutions offered by the Group and the Group takes pride in the fact that most of its products are developed in house through the continuous efforts undertaken by its R&D team. Amongst the teclmologies utilised by the Group for its development oflndustrial Automation Systems and Machinery are: • Vision systems Vision technology enables machinery to act or react based on a set ofmles that are dependent on differences in locations, colours, shapes and markings, and presence or absence of objects. The key component of a vision system is a camera for detection and a highly sophisticated software to interpret images to match against the set of rules. Vision systems are used in automation processes to reduce dependency on humans to undertake repetitive tasks thus enabling faster throughput and less error. COlllpany No. 647125 -P 5, INFORMATION ON THE MMSV GROliP (CO/it’d) • Robotics Robotics is a mechanism which is commonly used for perfonning certain tasks with high speed, preciw actions and accunlcy, .and quality consistency. The Group uses robotics technology for its pick and place funclion, particularly for electrical and electronics applications. • Multi·disclplluc Engineering Development of IndUstrial Automation Systems. and Madlinery relies on a combinalion ofvaril)ll$ engineering disciplines including mechanical, electroniC£, mechatroni:~ electrical, software and ergonomiC1t • Computing Technology Computing technology is the key control mechanism for automati<m which enables performance monitoring, traeking and feedback for analysis. All the computing software used by the Group are designed and developed in~house. Amongst the operational tools and languages used by the Group include Vision CH, RTX real time software and Visual Studio.net. • Servo Motor Technologlt’s Servo IOOtor technologies arc important in the tieillgn and manufa£ture of automation systems wh~r~ robotic anus are employed, 5.4.10 R&O Over the years, the MMSV Gmup has been focu\<ing its R&D efforts towards the continuous development of enhance;:! products, improvement of opemtiimal and manufacturing prO(;~esses and development of software as part of the automation ‘System. The R&D processes of the Group are primarily in the area of electrieal and mechanical engineering, electronics, computing, material ~\C;elK:e and ergonomics.. The R&D policies of the Group ltloorporate the following key “rcas: • oontinued involvemern in the design and manufacture of Industrial Automation Systems and Madtinery (0 create !leW and/or enhtlneed marketable products; • focused on strategk products that complement and add ‘<‘alue to its current products and services;
• focused on providing products and services that consider emerging technQIQgies, customers’ changing nee;:!s ;).tid pn~ferences, changes in economic. conditions affecting demand and preferences, industry trends and best practices; and
• customer focused and market driven to maximise success of commercialisation of its products.

The R&D efforts ofthe Group are aimed towards achieving the foUtiwing objectives; • sustaining business growth;
• increase in revenue and profitability;
• improvement in cost effcetiveness and efficiendes;
• increase in customer satisfacti()n

.. operatJ()n nfcompetitive advantages; and 5, iNFORMATION ON THE MMSV GROUP (CooI’d) Currently, the Group has R&D facilities which alll)\\’ the R&D team comprising 5 personnel (including technical engineers, quality assurance personnel <md R&D personnel) to design, prototype and lest its new products. The R&D team which is headed by Saw Chong Keat (‘outirmously undertakes v.ariMs R&D activities including improvement and enhancement of pnxhtct range, R&D on conceptualisation and designing processes as well as products specification, develop customised software and prototype, testing and debugging and procurement and design of retevant parts and components. To undertake its R&D activities, the Group has invested in the necess:nry infrastrncture and facilities set-up induding the use oflalest meas:uring tools and equipment. autocad design software, high speed camera and accessories, mechanical system and ;;;omponents, and other related R&D materials. For the past 4 financial years ended 31 Dec-ember 2004, the Group has spent approximately RM1.4 million on R&D representing au average of approximately 3-% of the proforma aggregate revenue of the Group. ThrQugh its continuous R&D efforts, over the years the Group has managed to increase and enhance the types of products offered. The various types of industrial Automation Sy”Slems and Machinery and predsion Die Sets, Jigs and Fixtures currently Qffered by the Group are the result of successful R&D activities undertaken by the Or-oup, This has enabled the Group to spearhead and exercise direct control over the development of its products and services” In addition, the 5Uct:CSS of the deveJnpment ofsystem control software is also one of the key achievements Qfthe Group. The system control software developed by the Group pmvides the basis for the automation of one or a :;eries of integrated machine .and equipment to perfonn a series of tasks. Other notable achievements of the Group’s R&D efforts in software development includes the replacement ofPLC-based control system wHh PC-based motion control system which offers more flexibility, <:ustomisation to meet current and future requirements witoout significant reinvestments in a new system. The developments and achievements ofMMSV’s R&D strategy is sum.mansed below:
Reader Te~1 Handling delivery of the Group’s first Pr<x:ision Encoder~ Syst<:m Reader Test Handling System for the semiconductor industry. The Precision Encoder­Reader Tesl Handling System has been successfully cuwmerdalised with:; units delivered and 2. new Qrders pending delivery, To improve the marketability of ils Predslon Encoder-Reader Test Handling System, MMSV is currently developing additional features such as tray inpul, secondary test (Jim:a!’) and COSIIIettc checking features to caler t(l i15 customers’ varying awlk:atiollS. (b) Wafer Test Visiott and Pending. Sonlng System
; (c) lntegruted Rotary TeSt Ct)mpJeteil design and assembly of proMype that HandlIng SysteJJl • • CllO test inputs between 10,000 to l4,000 units per hour. Debugging and test run eommenced in June 2005. MMSV has commenced the development of enhanced features on the Integrated Rotary Test Handling Sy~tem such as interchangeable modules to enhance the flexibility of this pn)(locl. (4) Multiple Head Test MMSV is CUrrently analysing the trends in market Handling System • tiemaT’.d, water sius and handling technologies in the electronic wafer industries. COlllpany No. 647125 -P 5. INFORMATIOj’\! ONTHE MMSV GROUP (Chot!d)
Pll1t(Qrm into se-lected mac-hines proooced by the Group, such as its Matrix Programmable Marking System (July 2004), latest Linear Trim and Form system {February 2005}, and Rotary Test Handling sy-stem {Sept 2(104). This software provides the standard program template of the machines produced by lhe Group, whk:h allows the Group’s machine;. to «Iromunicate with each other roore effectively, Ihus increasing the connectivity bctw¢¢fi machihC1>, produceil. If is currently being upgraded to i accommodate “plug ami play” functions for modules of other machines. This software IS currently being npgraded to incorporale the ‘Real Time Extcruli<>n roft…i3fe module to perfmm time ; critical tas.ks. The development of tim Real Time,. Exlemaort software module VIo1l$ successfully cornpl.eted in July 2005 and in,orporated in lI.1MSV’s first Integrated Rotary Test Handling system. Plug and Play upgrade for this sofuvart’ is : expected 10 be completed by end of 2006. (b) Control Sy~tem The existing control systems of the Group’s machines, 3uch 11$ tbat roc the Group’s Trim & form sYStems and T;;:S\ Handling Systems, are i dc!iigned to oonlrol highly synchronous and repetitive tasks, • Con!inuons enhllJ){;;;ment of existing wntrol’ sy;;.1ems is cnrremly being made to enhance USeT’S ability to programme the Group’s machines to undertake more complex repetitive tasks ao:urately al higher speeds. Further enhancement, to be introduced by end of 2005 include control systems. known as l?Cam, whi-zh will allow lUien; to programme the Qronp’$ madlines 10 undertake lask” whkh are nol synchronous thus enabling machines to multi task independently. COlllpany No. 647125 -P 5. INFORMATION ON THE MMSV GROUP (Cant-‘d) ~~~~~­NON:
The R&D effort:> arc viewed as on-going activities for the Group and are driven not only by changes in customer spedfkations und requirements but also the initiatives ofthe Group to conduct market research to understand the technological changes and outlook ofthe industry. To brace itselHor such changes and stay ahead of the competition, the Group is presently working towards enhancing its existing product portfolio to provide cust(lmers with either faster output or to handle more complex applications as well as focusing: on the areas of software and systems development to enhance the functions ofexisting software modules. Hence, as part of the fumre busiooss development plan, the Group intends to allocate part of the proceeds raised from the Public Issue amounting to RM2.5 million 10 undertake further R&D activities. Further details ofthe future pians ofthe Group for its R&D efforts are set out in Settlon 5.6 ofthis Prospectus. The Test ofthis page has heen intentionally I~ft blank COlllpany No. 647125 -P 5. INFORMATION ON THE MI\1SV GROUP (Omt’d) 5.4.11 Maj9f customers The products and services of the Glxmp afe sold directly to various. type~ of end user industries within the electronics and electrical indu:.1ry such as semiconductors (TO; and el«:tronic compQllents manufacturers and printed circuit board assembly), optoeledronics (part., <lnd components for LED lights} and othet el«:tfOmc$ and electrical products (computer hardware drive components), Detalls oftbe Group’s top 10 customers for the financial year ended 31 December 2004 are as follows:
Agilent ASE USI Lumileds ISO Technology Sdn Shd t..4CE Halm Microelectronics Puhlic Company Ltd (Thailand) Osum Technologies (M) Sdn Bhd Viewlink Technology Co. Ltd Guide Corporation “US) 44.3­24.7 11.7 9.9 2.8  ” 5 5  2.0 2.0 1.2 0.3  2 1  0,3  4  99.2
As illustrated above, in the financial year ended 3] December 2004,3 nwj(lr customers ufthe Group, namely Agilent, ASE and USI contributed approximately 80.7% (If the Group’s tQtal revenue, Agilent was an existing customer of the Group while ASE and USl were flew customers secured by the Group in 2004. ..~ The rest fif this page has ~n intentionally left blank COlllpany No. 647125 -P 5, lNFORMATJON ON THE J\lMSV GROUP ((tmt’tl) ~~­Details of the Group’s top 10 customers for the 6·month period ended 30 June 2005 arc as follows:
The Group reeogniscs the need to expand its customer base and thus seeks to minimise its dependency on certain customers. As sucb, the Group is talcing proactive steps to widen its customer base whiJe expJoring new markets-fOf its products. As the Group’s customers are mainly multinational companies ‘with Jarge globaJ operations around the world, the market Jea<krship ;md extensive global operatiQllS provide sigillficant opportunities fur the expansion of ll1e Group’s customer base. The Group believes that the global leadership ofthese customers will continue to provide business growth for the MMSV Group in the future. In this regard, the Group managed to expand its customer base frum J9 active customers for the financial year ended 31 December 2004 to 30 active customers for the 10 month period ended 3l October 2005. Further, for the 6 mond! period ended 30 June 2005, the Group was able to diversify the composition ofits top 3 .customers whereby 78.0’% ofthe Group’s revenue was contributed byFJextronlcS (56,711/1,i),LumiJeds (1l.3l)’.) and Agilctlt (l0.0%). Flextronics wa.~ a new customer secured by the Group in 2005 while Lumileds und Agilcnt were existing customers of Ute Group. Currently, the Group does not have any formal loug-tenn contracts ‘With its existing customers as it is a common industry practice to enter into short term sales contracts via confinned purchase orders as and when the requirement ror automation systems arises. Despite the absence of loog·term contracts with its customer~ the Group has nevertheless been able to establish strong relationships and pfOvt’n track record in tenns of providing quality products and services, which has earned the COl1fidenc-e and reoognition of its existing customers” The Group’s emphasis has always been in cultivating a stable business relationship with its customers. This is demonstrated by the fact that 4 out of its top 10 customers as at J 1 December 2004 have been dealing ‘With the Group for 3 Of more years, notwithstanding the Group’s effortq to enlarge and diversify iis customer base. The rest of this page has ~n intentionally left blank L-~~~~~–‘-=-“=-“~-“‘_=-“==-=.c==”,_=.=”,-.~~~~~~ COlllpany No. 647125 -P 5. INFORMATION ON THE MMSV GROlJP (COOl’d) The principal activities of Mt”lSV Group’s-major customers. relevant to MMSV’s nperatiol)s (to whom sales exceeded 2% for the 6~month period ended 30 June 2005) are as follows:
Flextronics (Singapore) Lumileds (liS) Agilent (US) ASE (Tal’W1ln) Dominant (Malaysia) Osram Opm (Germany) Flextronks is a contract manufacturer and electronics manufacturing services provider. Flextronics help customers design, build, ship and service electronics ptodw.’ts, such as solutions for cellular phones and other t:Onsumer~related devices.. through their network of manufacturing facilities, Lumileds is a manufacturer j,)f um dices, packaged LEDs and high-brightness LEDs designed fj,)f integn<tion into general lighting products. Agl1ent manufactures electronic equipment and/or components such as test and measurement equipment, semiconductor products. life Selences and chemical analysis solutions, cOInmullication fiOlutions find f1l,ltomiited test equipment. The A$E Group pf{}vides assembly and test (functioo and defect) outsourcing servi.ces for the semloond&””tof iru:lustry, The primar)’ activity of the company is the provIs1on of ootsourcing: services for the designing, develnpment, assembly and testing ofOpto semkonductofS. Osrnm Opto is a manufacturer of, inter-alia, LEDs, silicon photodetectors, optical sensors, infrared emitters.. high~power laser diodes and eleettonic displays,
Apart from the aforesaid major cust()mer~ the Group ha.li also· built Strong business relationships with the other existing customers, whereby approximately 20% of its top 10 ‘Customers as at 30 June 2005 have been dealing with the Group for ::; or nrore years. .: The rest ;itbis page has b«-nlnten~wnalIY left blank COlllpany No. 647125 -P 5,  INFORMATION ON mE MMSV GROUP (Cont’d)  5.4.12  l\<tajor suppliers  For the financial year ended 31 December 2004, the top 10 suppliers of the Group acrounted for 63,9% of the Group’s total purchases. Thus far, the Group has not experienced any shortages in the supply of raw materials for Its operation.  Details of the Group’s top 10 suppliers for the financial year ended 31 December 2004 grouped based on the raw materials supplied are as follows:

Hardware -Pneumatics Hardware -MDtorS Hardware -Electrical components Scrvices-Tooling and Machining Services -Sheet Metal Work Services -Wiring Others Total Fesro Sdlt Bhd SMC Pneumatics (SEA) San Bhd Hikari AuroIDlltion Systems Pte Ltd (Singapore) Elcomp Tradir.g. &in Bhd RDV (S) Pte Ltd Advatltedl Automation (PO) Son Rho MeE V-Metal Engineering Sdn 8M Unique Viaofi Engineering SOil 8ho Flexible Automation Systems Sdll Boo 62 6 u 6 4.7 5 41 6, 3.7 2’ 3,2 6
27.t 6 3.9 6, • 3,3 _I 4.5 61 I, 63.9 –.J For the &-month period ended 30 June 2005, the deiails of the Group’s top 10 suppliers grouped based on the raw materials supplied are as: follQws:
Hardware-Tester Hardware -PneUMatics Hardware -Motors , IHardware -Electrical i components ,,,Services ~ Sheet Metal Work i Others , L:r°tal Elsofl Research Berhad SMC Pneumatics (SEA) Sdn Bhd Festo Sdn Bhd Htkari Automation Systems Pie Ltd (Singapore) Cadence Tecl1nologies Pte. Ltd Acmulus Sdn Bhd RDY (S) Pte Ltd Eioomp ‘Trading Sdn Bhd U-Metal Engineering Scin Bhd Flexible Automation Systems Sdn Bhd 69
45.8 2.; 1.9 2.2 4.2 3.7 2,2 1.5 2.3 2.8 69.S 2 6 6 5 l 2. _2 _ COlllpany No. 647125 -P 5. INFORMATlON ON THE: !\JMSV GROUP (Cootfd) For the 6-month period ended 30 June 2005, Elson Research Berhad was the top supplier in terms of contribution to the Group’s purcha~cs during the p..;riod, which arose from the Group’s c-mnpliance with a commercial term and hardware specification required by a eertain CU$tomer. The Or(}up is of the view that it is llQt dependent on any bingle supplier as the Group can easily sQurce its supply of materials whkh are widelyavailahle. further, the Gr(}up does not have any formal long-term conttllcts with its suppliel”$ as the supply of materials require-d by the Group can be ea-sily sourced, rendering it Ulltlccessary for the Group to enrer into long-term contracts with its suppliers. 5.4.13 C<ilttpetith,c advantages The Group provides the convenience of a one~stop·solution centre offering a wide range of products and services as well as flexibility to cater for customisation and changing needs. The complete range of services offered hy the Group encompass the designing of the automation sy,,1ems ba.\Cd on the requirements of its cu,,1omers, development of the required wftware to operate the systems.. designing of the oomponent parts. a\Sembly of the complete automation systems and providing t:eclmical support and after sales service to ensure the smooth running ofthe automallon systems. The Group belh””’~$ that it has the following competitive ad,’antag~s owr its competitors: • High value adding The Group offers high value adding products and sClYices to its customers as the Group provides comprehensive services right from the stage of conceptualisation and engineering design, softw-are development and design of precision Die Sets, Jigs and Fixtures up to manufacturing of the systems and machinery. The value adding ofthe Group is derived from the following activities: (l) Knowledge and technology based products jhe Group’s design and manufacture of Industrial Automatinn Systems and Machinery essentially combines basic materials such as iron and steel, plastic parts, cables and wires witb complex components and services such as eledronJt parts, electronic switches and cnntrols, Ie chips and other electronic compOf1ents, motors and software development to create fully automated systems and machinery. The MMSV Group is able to undertake s:och highly ski:Ued and technical design and manufacture activities due to its vast knowledge and experience as 1\’e1l as its extensive skill set and expertise which includes, amongst others, trouble shooting skills, innovative ihiaking, technical skills, multi-discipline engineering expertise and manufacturing capabilities. Further, the Group also utilises advanced technologies such as vision system, robotiL”‘S, Mlllti'”<iisdpline engineenng, computer technology and servo motor technology, as well as innovatioiL~ and knowlooge-based skills to create value to its customers through the developm<:nt ofinnovative sulutions and systems. The Group is able to enhance the value of its products and services through its ability to apply and cornmerciaJisc multi-discipJine technologies such as electrical, electronic, mechatronics, mecoonlcat, computing. material sciefiCe and ergonomics, in developing manufacturing solutions in the form of lmiustrial Automation Si”stems and Machinery, The value ofthe MMSV Group’s products and services is further strengthened duelQ the constant drive tQ undertake R&D in engineering technologies in order to solve manufacturing problent& and create ititlova1ive solutions. Hence, the Group’s innovative and practical appJ:icaHon of engineering teehf1Ologies coupled with its knowledge, skills and experience signitkantly enhances the value ofthc products and services which the Group can offer to its customers. COlllpany No. 647125 -P 5. INFORMATION ON THE MMSV GROUP (Otnt’d) –~ (it} R&D Tne R&D activities of the Group are critiCfll for the design and manufacture of Industrial Automaiion Systt;ms and Macbinery as well a& product enhancement. This involves the utilisation of leading technologies to ensure products lind services arc up to date and meet cu~t()mers reqwrements. Over the ye-ars, through its cominuQu$ R&D etTmts in software development, the Group has managed to develop fasler and more intelligent automation systems. These enhanced systems are also more flexible and incorporate options whkh allow’S easy -conversion and upgrade of existing s)”btems as and when new features or specifications are required, thereby reducing the cost of replacemeut for its customers. This in tum is expecl.etl to indirct;tly gcnemte repeat orders fur the Group. thus maintaming a continuous relationship with it;; cllstomers_ Apart ITom the in-house R&D efforts to enhance its. own products, the Group also W1dertake R&D together with its customers during the im:-eption stage of the customers’ new product development. SUt;h joint effort not only en;l:bles the Gt”Qup to better understand the customers’ products and as such, the Group is able tn design suitable automation systems that meet the mam.ll;l:ctunng process requirements, but also allows both parties to share their technical knowledge and skills to assist tbe customers towards successful development of new produc-t&, (iii) Technical support and cuslamer SerFl.ce The Group a.lso emphasis!;’$ on providing technical support and customer service both before and after sales. Prior to the delivery of the automation systems, a team of engineers and technical personnel win be involved in the product development process of ihe-customers in order to design and develop the automation systems required to meet the customers specifications. Subsequently, upon delivery of the automation systems., a group of technical personnel will provide assembly and servicing services including bU)’· offs for the customers. At the same time, the technical personnel will also provide training for the customers’ personnel tu ensure smooth commissioning of the automation systems” Further, the Group provides \wemigbt service support to .distinguish itself from its competitors. (iv) High precision Die Sets, Jigf and Fixtures Apart from it’> strength in designing and manufacturing automation systems lhe Group is abo known for its in·house design capabilities for high precision Die Sell’, Jigs and Fixiures, The-Group’s ability to design Die $eft’ and cam·based systems for integration rnto automation systems enables the: producti(m of high precision, accurate, reliable and faster equipment. It also enabJ¢”$ the Group to innoY-ate as it undertakes its own design of the precision Die Sets, Jigs and Fixtures. • High quality products The Group is committed to ensuring high quality products that meet the specifications and expectations of its customers. This is demonstrated through its emphaSiS on adhering to stringent quality control management beginning with the project planning and management stage up to the testing o-fthe-completed products, As a testiml>ny of the emphasis on quality management. MMS has been accredited with the ISO 9001:2000 accredirdtion since 2 May 2000 which was subsequently renewed on 18 June 2004. Tills certification provides cu,<;tomers wiih greater assurdnce in me quality of products designed and manufactured by the MMSV Group. COlllpany No. 647125 -P 5. lNFORMATION ON THE MMSV GROtP (Omt’d) ~~~~ —~_.~._­
The Group continuously undertakes in-house R&D activities as part of the product development pmcess and customi:-;ation to meet the specifications and requirements of cat;h customer. Such R&D efforts arc undertaken at different 5t:lges of the prodll\;:t development and customisation beginning from the system cooceptualisatiou, designing of systems, parts and equipmcuts and the deployment ofrelevant technologies into the systems and machinery. The various types of Industrial Automation Systems and Machinery and prc£ision Die Sets, Jigs and Fixtures currently otTered by the Group are the result ofsuc£essful R&D activities undertaken by the Group. This has enabled the Group to spearhead and exercise direct control over the development ofits products and services. The ability of the Group to utilise such in~bouse R&D capabilities not only allows the Group to offer products which meet the specifications and requirements of customers, but also enables the Group to provide innovative engineering solutions. As aJl the products curnntly offered by the Group are the result of its successful R&D efforts, the Group is not subject to any royalties or franchise fees, except for the subcomponents procured directly {i·om its suppliers.. Through the continuous success of its R&D efforts, future products can also be created by the Group without the need to license any technologies or intellectual propemes, The development of enhanced products W(iuld provide the Gmup with a basis for sustainable business and growth in the future. Apart from the in-house R&D efforts, the Group also undertakes R&D programmes through partnership with its customers. This approach which aHows the Group to work simultaneously with its customers on product development not only shortens the delivery lead time considerably but also provides the opportunity for the Group to anticipate the changing demands of its customers through a better understanding of their product rond map_ In tum, this enables the Group to be proactive in the designing of its products and ensure timely development of new products to meet customer needs and gain a competitive edge against its competitors thrQugh product differentiation and market leadership. • In-house $tinware design Imd development The strength of MMSV Group also lies in its ability to create innov.ative and customisable software, which is the engine of intelligence <If its automaied systems and machinery. With an innate strength in software technology, the Group has been able to design software appllcations that facilitate the control of the integrated automation machinery designed by the Group. Thus, having an in-house software desIgn and development team provides the Group with another competitive edge. Software development r~uires advanced technological know-how and also the expertise of the computer system engineers. The Group has the in-house capabiHties to undertake software design and development enabling it to provide customised software to control the various functions ofthe system!> and machinery. To-date, all the systems and machinery produced by the Group are romroJJed by software which are developed in-house. ~~~~.~~-::::~c-7:;-;-~~;—-=-C–:;-:-,~-….–~~~~-.~ The rest {Jf this page has bef:n i.ntentionally left blank ‘ COlllpany No. 647125 -P 5. INFORMATION ON THE MMS’V GROtlP (Con/’a) .._ … __… _­The M,~lSV Group strives to continuoul>ly itnprove the software contents of its automation systems to cater for wider applications., increll:>ed versatility, intelligctlGc alld speed. Soch improvements are essential to meet the rapid technological changes and the short prOO.uct life cycles faced by cAl-siomers. Amongst the successful devdoptnent and impF(wement ofits Software <.Capabilities include, the suceessful development of its standard PC-based software platfonn that acts as the ··backbone” progt’am for the development of control systems for all its automation systemtl and the integration of real time system into its automation systems. Through such developments, the Group-has be¢o able to rely on one standard software platform for the design of various types of automation sy5tems, thus shortening the lead-time for design and delivery of its products. Further, tbe \L<;C of standard platform in lhe design of \tanous automation systems provides the Group with the tleJl.ibility to cater for any subsequent modification ofthe automation systems, th<:reby making it cheaper for ilS customers to vary production capabilities, The ability of the Group in integrating the various improvements in its solt’Wttre development into its hardwllTI: desigu has enabled the MM$V Group to maintain its competitive edge through the development of taster, intelligent and more cffident automation systems. • Effective £ales and marketing approach The Group’s marketing team has extensive engineering knowledge and in-depth technical understanding on the Group’s products as well as an existing marketing network within the -industry both locally and internationally. This enables the Group to market and distribute its products effe-.1ively. The Group’s engineers arc also involved in marketing the products and services of the Group as significant technical expertise and produtt knowledge is required in marketing the products eft”lxtively. This approach not only enables the Group to wQrk closely with its customers to evaluate and better unde1’staod the customers’ needs, but at the same time allow~ the Group to maintain close \VOrking relationship with the customers throughout the development process. In addition, this allows the Group to better understand the product road map of its customers. hence providing the Group with a first mover advantage to design automation syste-JtlS to cater for new product specifications. ofits existing customers. • Highly skilled and capable personnel The vast experience and expertise of the current management and key -personnel i:;. an invaluable as~ to the GmU(L The Group’s key personnel have gained valuable experience and insights while participating in customers’ products and process developments to enable them to identify new markets and cross industry borders.. The sound tedmical knowledge together with the vast experienc.e of its key personnel have enabled the Group to gain a competitive edge over its competitors and contributed significantly 10 the growth ofthe Group over the years. In order to instil a high sense of belonging 10 the Grnup and teamwork amongst its employees, the Group ih<lintains a flat organisation structure, thus creating a supportive working environment. This has enabled the-Group to maint<lin a stable workforce and continuity in the management since the commencement of its operations in 1999. Essentially, the Group’s human resource policy. which promvtes employee satisfaction and loyalty, has enabled the Group to preserve its t-echnical know-how and e.xpertise, and iostil customer confidence in the continuity of Group’s product developmenl and after sales services. The Group focuses on providing continuous in~hou.<;c technical training either throug-h Job coa;;;hillg by the sooior management or Oil the joh training, and ongoing external training to help its employees g-1lin new knowledge and experience to help the Group continue to grow in the future. COlllpany No. 647125 -P 5, lNFORMAnON ON THE MMSV (;ROUP (Conl’dj At tile same time, the Group alS{} encourages its employees to pursue higher education and self~ development by providing spt’lw>or;,;btp to its employees for tertiary education at local universities. So far, the Group has ~ponso[l;’d .3 of its employees ro further their education for Masters of Scieoce degree under a joint pl”vgnull between University of Ttllmologi Malaysia and Warwick University (United Kingdom), Further, as part of the long leon plan to nurture its key management, the Group also undertakes various efforts to groom younger management staff to participate in the management of the Group. Great emphasis is -placed on teamwork to eocoumge each employee to contribute to the success of the business of the Group, • Established track rceord and exp€rience Over the years., the Group has established <l tra.ck record ill leons of the quality standards and timely delivery of its products, This provides a good reference in terms of the capabilities and reliability ofthe Group in meeting customers’ technical and timing specifications. Further, with the vast experience in the design of various automation systems, the Group has managed to build an extensive database or design library which h….uses all the hardware and software designs developed for previous modules. The wide range of designs available allows the Group to develop new products using previous modules, resulting In faster delivery time, lower tooling and design costs and enhanced capabilities to meet customers’ specifications. This provides the Group with a competitive advantage over smaller or less experieneed companies.. • HealdlY financial position The (iroup has established a good and healthy financial performance for the past 5 financial years recording growth and profitability throughout the period. In addition, currently the Group has no borrowings. The Group has been relying on internally generated funds and capital illlectioh from its shareoolders to finance its groMh and operations. This. relieves the Group from any financial obligations and from incurring financial cost.” thus improving the profitability of the Group. Furthennore, without any existing financial obligation, the Group ‘will be in II bctter position to obtain financing for further expansion. 5.4.14 Employees As at 15 November 2005, the Group has.a total \vorkfocce of60 employees. The breakdown of the Group’s employees is as follows:

Management and profc,siDnlll1i  8  5  Tedmical profc&Sionals  EUglneers j  26  3  QuaHt)’ Assurance  1  I  R&D  6  3  Sule:> and marketing  3  J  Clerical and administrative  7  2  Factory work.m .. skilled 2  9  4  Total  61l
COlllpany No. 647125 -P 5, INFORMATION ON THE MMSV GROUP (CMt’aj I. £”1;i””«’$ inelude !>.enior Pruje<:l EngilJeers. Machine lkJigi! Engineers. Eiectrica! COi!tro( EngineT’> and COlilNI ill!jJ Sofiwmv tngilWer.;’ SkilJ.:dla((llry w’Jrken ir..eWe i.lssf:mbJy m!d .”OJ-.ke tu:r.nlclafl 0.’111 fflll(IlDti,ly As at 15 November 2005, except for two foreign employees, all of the Group’5 employees.are Malaysia.n, The relationship and co-operation between management and employees have been good and such relationship and co-operatlon are expected to continue in the near future. There have been no work stoppages or labour disputes affecting the Group’s business nor ha” the Group experietlced any significant mruoV.;lr o-f employees. The employees ofthe Group do not belong to allY organised umon. The Group fucuses on providing annual training: programmes, both ‘in-house and external training. In-house training programnws which focus on technical training by senior managemetU include cQmputer aided manufacturing dei?ignslcalculatlon, motor selection, production management, project management, velocity analysis and servo development \vhile external training which focus on management training are in the areas of supervisory, presentation skills, sales and marketing and just-in-time management system. The r~t of this page bas been intentionally Jeft blank ]__~ ..:=c=c::==:=.=.==.o==”,-,==,,—~. COlllpany No. 647125 -P 5. INFORl\tATION ON THE MMSV GROUP (Conrd) 5.4.15 Development mile5tunes The significant uevdupmem milestOJlcs fQr the Group can be segreglitcd into the hardware development and software development as described below: (0 H;ud\\-llre development \ ear Achievements 2000 • Succ<:ssful development of running prototype of the Group’s first linear trim and form machine for the semicOlliluctor industry
• Successful development of running protQtype and delivery ofthe Group’s first stand­alone vislon inspection system for the semicond1.t’Ztor industry to serially ili~”pe-ct and grade inputs according to marking: on transistors, cracks, chips or forming profile,

: void in packages of semiconductors and/or bent leads • Successful development of running prototype and detivery of the Group’s filTht LEO lens atrnchment machine to attach lells onto LED units for the semiconductor and COniiUIDCr electronics industry
• Successful development ofrunning prototype and delivery ofthe Group’s first optical

I mouse lid attachment system for the computer industry L«–t–~ «—~~—~ ~—««—~
2001 • Successful delivery of the Group’s first linear trim and form machine fur the semiconductor industry
• Successful developmem of running prototype of the Group’s first cellular phone embedded camera focusing system for the mobile phone industry
• Successful development “frunning prototype and dehvery of the Group’,” tirst LED assembly machiuc with service driven press utilising c1incbillg technology for the optoelei.-tronics indmttry. The assembly machine v.’hleh uses clinching technolQgy to assemble LEDs on vehicle taillight products, was developed for the LED production proces, patented by Lumileds. It is currently widely used to assemble taillights for weU knovm manufacturers such as Mercedes, Lexns and Ford
• Successful development of running prototype and delivery of the Group’s first high speed turret test handling system, an integrated system of testing, trimming, forming, vision inspection, sorting and taping capabilities for the photo-electronics industry
• Successful delivery of the Group’s: first cellular poone embedded camera: focusing system for the mobile phone indus.try
• SlK~ces:sful development of the Group’s first inkjet marking macbine for the electronics industry

2002 2003 • Succc56ful development of running prototype and delivery ofthe Group’s first tape to tape test handling system to conduct fests and identify defective units in reealled batches ofelectronics products.
• Successful development ofrunning prototype and delivery ofihe Group’s first optical mouse tube to tube test handling system

l .• Successful development ofrunning prototype and delivery ofthe Group’s fin;t mobile, phone embedded camera testing system for mobile llhoue applications under a joint’ R&D venture-with Agilern SllCcessful development of running prototype Df the GflJUP’S first tray to tray test handling system designed to manipulate input devices into testing stlitiollS for the electronics industry ! ..~—-<———‘ COlllpany No. 647125 -P S, INfORMATION ON THE MMSV GROUP (Cont’d)
Year AthieH·01cllts 2004 • Successful delivery of the Group’s first tray to tray test handling system designed to manipulate illput devices into testing stations for the electronics industry
• Successful development of running prototype and delivery of the Group’s first Precision Encoder Reader test handling system to test the sensitivity and data reading accuraey of a moving encoder reader used in surveillance systems and weapon targeting systems in the military
• Successful development of running prototype and delivery of the-Group’s first OLED fully automatic laser marking system to mark ooganic LEDs glass screens for TV and display applications

The status on the Group’s hardware development as at IS November 2005, in accordance with the Group’s 5~year business development plan, is outlined in Section 5.4.10 oftms Prospectus. (ii) Software development
The statws on the Group’s softwnre development as at 15 November 2005,. in acc<)rdilnce with the Group’s 5~)’ear buslne&.<; development plan, is outlined in Section 5.4″ 10 ofthis Prospe<:tus, 5.4.J6 Interruptions to opeutious There has be-en no interruption to operations in the Group’s business or operations in the past 12 months.
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COlllpany No. 647125 -P 5. INFORMATION ON THE MMSV GROIJP (Con/’il) Subsidiary and associated companies As at 15 November 2005, the details of the subsidiary companies of MMSV, all of which were incorporated in Malaysia, are as (oU{l~1>:
MMS 14 February 1997, EvalLlS;s L L__!>_”_”_’_sia_’~__l ~_. __I’__ ….J As at 15 November 2005, MMSV does not have any associated company. Ftlt1.her information on the subsidiary companies of MMSV is set out hereafter. 5.S.1 InfonnatioD on MMS (a) History MMS (Company NoA1955&-V) was incorporated in Malaysia under tbe Act on 14 February 1997 as a private limited company under its present name. in 1999, MMS commenced operations in the design and manufacture of Industrial Automation Systems and Machinery focusing on handler systems for the semiconductor and optoe]ectmni,,-s industries, Presently, MMS is principally involved in the design and m,lJlufa<:ture of rndusttiaI Automation Systems lind Machinery and design of precision Die Sets, Jigs and Fixtures. (b) Share capital The present authorised share capital of MMS is RM5,OOO,OOO compri..<;ing 5,000,000 ordinary shares of RM1,OO each, of which 3,500,000 ordinary shares have been issued and fully paid-up. The changes in the issued and paid~up share capital of MMS since its Incorporation are as foHows: 22 June 2002, 10,000 : 100.0 Provision of software development
CumUlative Issued aDd paid­.Ilp $llaft:,c,a~_\8~ ,21.02.1997 1.00 Subscribem’ shares 2 (}l.06.2004 3,499,998 1.00 C&$h 3,500,000 (c) Substantial shanholders MMS is a wholJy owned subsidiary of MMSV. Please refer to S¢<:tiOl’l 6 for informatioll on MMSV’s substantial shareholders. (d) Subsidiary aod associated companies As at 15 November 2005″ MMS doe.s not have any subsidiary or a£SOciated company. 78 COlllpany No. 647125 -P 5. INFORMATION ON THE MMSV GROUP (Cont’d) 5.5.2 Information on Evolusys (a) History Evolusys (Company No.:583890-U) was incorporated in Malaysia under the Act on 22 June 2002 as a private limited company under its present name. In 2002, Evolusys commenced operations as a software development company principally engaged in the business of providing consultancy services and supply of software on industrial automation control systems to MMS and external parties. However, in conjunction with the Group’s business development plan, the activities of Evolusys were streamlined in 2004 to provide support solely for the design and manufacture operations of MMS, focusing on mainly the development of software for the Group’s industrial automation systems. Presently, Evolusys is principally involved in the provision of software development. (b) Share capital The present authorised share capital of Evolusys is RM100,000 comprising 100,000 ordinary shares of RMLOO each, of which 10,000 ordinary shares have been issued and fully paid-up. The changes in the issued and paid-up share capital of MMS since its incorporation are as follows:
(c) Substantial shareholders Evolusys is a wholly owned subsidiary of MMSV. Please refer to Section 6 of this Prospectus for information on MMSV’s substantial shareholders. (d) Subsidiary and associated companies As at 15 November 2005, Evolusys does not have any subsidiary or associated company. 5.6 5-year business development plan The business vision of the MMSV Group is to be “the leader and global provider of innovative and advanced Industrial Automation Systems and Machinery offering research, design, integration and manufacturing services”. In order to achieve Ihis vision, the Group strives 10 continue excelling in its core business of design and manufacture of Industrial Automation Systems and Machinery as well as continuously improving its R&D activities, its provision of customer service and technical consultation and engineering solutions and its business partnerships with customers and industry players. The Group is committed to providing total engineering solutions and to be best-in-c1ass. In line with its business vision. the Group’s business development plans are focused on achieving the following objectives: (i) enhancing its existing product portfolio to provide customers with either faster output or to handle more complex applications; COlllpany No. 647125 -P 5. INFORMATION ON TIlE MMSV GROUP (Conl’W (ii) focusing. its efforts to embark on R&D activities particularly on the areas of software and systems development to enhanc-e the functionality of Ihe lndustrial Automation Systems and Machinery designed and mlllH,tfactured by the Group; (iii) focusing its sales “HId marketing efforts t{) develop new sales and distribution chall.llCls for market expansion through collaborations aud business partnerships; and (iv) enlwndng Ihe quality of its services by rocusing on provlsion of before and after sales services and customer technlcaJ support. Product strategy The Group plans to expand its current product portfolio by incorporating new products focusing on improving areas such as functionality in tenns of handling more complex applications and continuous improycrnents in speed of processing and ultimately speed of output. The main focus of the Group’s product development strategy is to design tlexible systems suitable for multiple applications thrQugh modularisation and enhancing value a<lded features to its existing product lines, The full prodnct and service portfolio of the Group is. as illustrated below: ,piooUctand ~ce~o j,L ,o..’g.,~””,3,.-‘000-”1’,._.-II I ‘N,,”,,=~ ‘I” ::~~. !
i~;’~~~«<l~f “‘:’~~”‘”‘~~ __””_,At_! (“‘*’0_,~_POW5\t’j”‘” T-.g~ ‘O$~~ i ~ ,~­W,””NWdM””‘IQljrc;w..”‘,….. “”‘”‘” Syiil…,A””9m’:>:J:!l””””’

Examples. ofthe new products include; (l) Preclskm Encoder-Reader Test Handling Systems The Droup intends w design and develop a system for testing the sensitivity of products as well as aCClJraey of reading from encoders that are mounted on high-speed spindle, The system is featured with pick and place mechanism, carrousel turntable ant! pick up head ttnTet rotary htdc>;er, It will also be “fIIOl”,’TIlmmed to perform polarity check and corroction oforientation prior to testing, Software programmes developed by the Group will be integrated with a database management system for data collection, statistical analysi’S, information processing and c-ustomtiSation -of test functions such as electrical and optical test.s and 20 / 3D vision inspection functions, COlllpany No. 647125 -P 5. lNFORMATION ON THE MMSV GROlJP (Conl-‘d; (H) Wafer Test, Visiofl and Stwtlng S,.·stt’ms The Group intends to design a system to perform tests and categorisation specifically to handle IC'<!tHess Ie chips. The system will be designed to include turret head pid and plare mechanism with 12 ‘Servo axes. In addition, vision function will bc incorporated to determine the acCUrate location of items and perform inspection on packages defects such as cracks, chip or other dimensionalund goomelric de1ects. This system will allow critical process design variables to be changed quickly without code writing, resulting in fa.,t process changeovers and minimum machine downtime. This fleubiHty will be an imfXlrtant feature for customers as it caters far constant crulnge ofproduct specifications. (iii) Integrated Rotary Test llandUng SJ~tems The Cruup intends to design an integrated end·of..line equipment using turret machine platform for short test~time discrete products such as transistors, diode, capacitors, power devices and leadless packages” The design of the system is based on rotary technologies. driven by serv(Hl1(}tors witb multi processing. capability fur optimum speed and performance capabilities. The system wil1 he capable of handling multiple lest functions including electrival and optical test, and vision inspection for marking lead profiles and defects. (Iv) Muttiplt’ Hcad Test Handling Systenu The Gmup intends to design a standard machine platform to conduct simultaneous testing of multiple devices by applying pick and place mechanis-m using robotic tedmiques and standard linear tray-to-tray mechanism. The system is expected to offer higbly productive capability for long test-time devices applying simultaneous testing approach. With this system, 8O”/Q of the cycle time is expected to be utilised for test operations, thus incrensing efficiency and output. The system can be customis<d through software programs to include capabilities to pelform embedded diagnostics, data collection, motion control instructions, graphical presentation and statistical lln-alysis functions (\’) Matrix Programmable Marking Systems The Group intends to develop a Matrix Pmgrammable Marking System \Ising ink (J[ laser l:cdmotogies TIle system is capable of marking on surfaces in strip leadframe, either in row, matrix or loose (mits, The system can be programmed according to the arrangement ofthe Items, marking content and size, whilst th<‘: date can also be stored for retrieval purposes for ease of product conversion, The system, which is designed to cuter for smaller sized parts and components, will be capable of marking high density ba~ode symbols and storing more lufonnation within a smaller space. R&D Mrategy In order to further enhance the functionality of its products, the Group intends 1Q also focus its R&D efforts on software and systems development whilst at the same time continuously research and develop products and services to ensure product sustainability <lnd to cater for technological changes. An amount of R1v12.5 million from the proceeds raised from the Public Issue will be utilised by the Group towards such R&D efforts. The underlying impetus of the Group’s R&D strategy is to develop both its engineering and software cfiVJbilities to support its pfQducl development strategy tl:irough: (i) increasing the fiexibllily of We Gwup’, products to “te; fo, multiple ‘ppli”tion, as well as the aCClJrJcy and reliability of the Group’s machines in volume, complexity and/or in inspection; {iD increasing the dexterity of the Group’s products, i.e. capability to handle smaller andior more fragile manufacturing inpnts;. 81 COlllpany No. 647125 -P 5. INFORMATION ON THE MMSV GROUP (Cont’d) (ili) increasing the intelligence and competency of the Gwup·s products by being able to recognise different modules and undertake vanoos functions including decision making; lllKJ (tv! increasing the user-friendliness oCtile Group’s product~ as weB as the usefulness by enabling their program to interface with other factQrYlbusllli:ss management sygtems. Examples ofthe R&D activities (m software and systems development to be undertaken include:
Factory Tnfonnation Systems The Group intends to develop areal time produ(‘,tion floor monitoring system with the capability to automatically transfer data from machines on the production floor to factory managernem systems or enterprise resources planning .system. Th€ data collected by this system will he complied for analysis and statistical presentatlnn. This enables decision making to be based on current information while minimising data entry error and redundancy. Data can also be stored in the system database and tracked for performance. Web-Based Monitoring SyMcms The Group intends to incorporate web-enabled program to faeilitate remote monitoring, trouble shooting and debugging. The Group plans. to deploy local area networking loops to configure and integrate the Industrial Automation Systems and Machinery from factory floor t.o business system. This integration will provide a common point of aocess for proolittion data and a single interrnce between production and busineSS system. With real time/online system and aSWc1aled data analysis, it will provide factory decision makers with immediate access 10 detailed., real-time factory infonnatJon. Further, through the system, subtle procei..~ inefficiencies llnd product quality problem can be detected and corrected immediately, and provides centralisation ofdata for further analytical analysi-s and reporting. Oi) New software supporting systems Standardised sQjhl’are platform The Group intends to develop a standardised $Oftware platform to cater to all types oflooustrial Automation Systems and Machinery to minimise the need for ClL~omisatjf)n through developing standardised programming strllCture as well as ineorporating improvements such as embedded diagnostics, data collection and statistical analysis functions. This platfoml will also provide features such as remote debugging and trouble shooting teclmology through networking. Further are<l8 of R&D in software development include creation of advaoce graphical user interlace to enable ease of operntlon. maintenance and system performance monitoring, The successful development ofthis platform win provide the basis ofintegration into fadory infvrmation system. Control Systems One of the llreas of R&D in control sysaem includes synchronising the Industrial Automation Systems and Machinery with multi~axis motion controL The purpose ofthis R&D is to focus on the applicmion of ele<:tromc cant This technology can be applied to the control of machines having multiple synchronised <lxes. The system will be an embedded lrlodoJar control system with plug and play features and interchangeable capability to enable application for multiple processes tie-line system. The Group also plans to adopt an open system using PC~based motion control system and utilise EtlJemetloca! area tletworking for motion control network. 82 COlllpany No. 647125 -P S. JNfORMATJON ON THE MMSV GROUP (Omi’dj —~ Apart irom the above, the Group will also undertake R&D m the area of manufacturing process impn.wernent with the aim of enhancing its manufacturing processes through machine integration and optimising test debugging processes. Such R&D efforts include selection of process flow best practices, continuous evaluation and improvement of existing processes and procedures to optim-is¢ work flow, modification ofexisting machimory and equipment to -increase effi’Ciency in the production process, creation of new peripherals and jigs to increase effectiveness and efficiency of production and application of innovation and tleW technologies. Through improvements in manufacturing processes, the Group aims to iucrease cost competitiveness fOr its products and >;cry-ices, improved product quality and fa&ter rurnaround for manufactwed products. In addition, the MMSV Group will also undertake significant R&D in engineering related fields 10 improve its manufacturing procCR<Jes. The developments and achievements of MMSV’s R&D strategy:ls summarised m Section 5.4.10 of this Prospectus” Market expansion strategy The Group’s main marketing strategy is to consolidate its local base and strengthen its position in the domestic market by scrvicing a larger number of customers while expanding into the overseas market. Previously, the Group has concentrated its maxketing efforts on only certain customers in orner to gain recognition in the industry. However, as part of its plan to expand its market .coverage; the Group is looking into the possibility of obtaining new customers, both locally and internationally. To achieve this, the MMSV Group has expanded its sales and marketing team to include a total of4 marketing personnel, 2 of which are dedkated to international sales and marketing, concentrating on Burope, liS, Thailand, Cbina and Japan. To ex.pand its sales and marketing efforts both locally and oversea&, the Group intends to set up sales and marketing offices in Melaka and Seremban to cater for the ncw local markets, and appoint sales agents in Germany to cater for the new overseas markets. If the Group is successful in penetrating these new international markets, the MMSV Group intends to further strengthen its distribution channeh; by setting-up its own offshore marketing arm in the future. Further, rhe Group also plans to expand its presence globally iii the long term in order to gain worldwide recognitioIL As an inittal step. the Group wi11 be focusing its effort towards establishing a clQse relationship with its existing internattoml1 customers in order to tap into their gl(>bal customer base, In line 1A1th tbis strategy, the MMSV Group is )l)oking into the possibility of establishing business partnerships \\1th multinational equipment suppJiers by becoming their original equipment manufacturer to cater fOT the production facilities worldwide, This would not only indirectly open up new geographical markets for the Group, but would alsoindireetly enhance the technological expertise of the Group through world-dass technological transfers. At the same time, the Group will also be able to accelerate the process of brand building and marker expansion by tapping into tbe marketing and distribution channel;; of these strategic business partnerships. At the same time, through its R&D activities, the Group is also planning to penetrate inlo new industries such as the automobile, warehol.lsing and IT industries. :\part from undertaking new marketing strategies, the Group also plans to participate in loc81 and overseas exhibitions in order to promote its products in new markets, For example, in 2005, the Group had pllrticipmed in lts maiden exhlbition in China, namely the China Semicon Show 2005 in March 2005 and the Singapore Semioon Show 2005 in May 2005, where the GI’OUp displayed its range of products from test handlers for its LED package to camera module focusing test handlers, The Group also displayed its capabilities in trim and foml systems and laser marking handlers in the two exhibition..”. The Group’s main objective for its involvement in semiconductor exhibitions in the Asia Pacific is to create awareness of the Group’s comparative advantage and to showcase its capabiliries, especially on test and packaging, to a regional audienee where demand for test and assembly processes is growing, COlllpany No. 647125 -P 5. INFORMATION ON THE MMSV GROVP (COIJ(·’d) —~ Customer service.” strategy Apart trom promoting its high quality produets, the Group believes that timely delivery of products and services <lnd customer service are equally important As such, the Group intends to win the confidence of its ~ul;tome.rs by 11iCt’C!tsing the coverage and depth of its c_ustomer support to position itself as a reliable solutions provider. The customer and teclmical support strategy includes the provision of before sales services i.e. pre-order consultancy wrvkes to minimise potentia! manufacturing issues by identify;f1g tlte customers’ product development road map at c:onceptu:d stage. Meanwhile, the after sales te.:hrrical servicc involves the provision oftraining to customers: on the operation and maintenance ofthe automation systems as well as trouble shooting/debugging during on-site test nUl. In line with its market expansion strategy, the Group plans to expand its team of technical persoimeL especially in assembly and after sales service-ta cater for in1crnational customers. For this purpose. the Group is looking into the feasibility of <.letting up service centres in overseas markets to be closer to its customers in order to provide fast and efficient customer services and technical support as and when required by customers. [ Trw rest of this page has been intentionally left blaok

 

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