Business Overview

V, INFORMATION ON THE SKRB GROUP V, INFORMATION ON THE SKRB GROUP 1. INFORMATION ON SKRB 1~1 Incorporation SKRB was incorporated in Malaysia under the Companies Act, 1965 on 5 July 2000 as a private limited company under the name Sern Kou Resources Sdn Bhd. It was converted into a public company on 13 March 2003 and assumed its present name. The principal activities of the Company are investment holding and provision of management services~ 1.2 Changes in share capital The authorised share capital of SKRB is RM200~OOO~OOO comprising 400,000,000 ordinary shares of R1vIO.50 each. The issued and paid-up share capital of SKRB is R1vI38~660~OOO comprising 77,320~OOO ordinary shares ofRMO.50 each. The changes in the issued and paid-up share capital of SKRB since its incorporation are as follows: No. of ordinary Total issued Date of shares and paid-up allotment aJlotted ConsiderationlType of issue share capital RJ\.{ 05.07.2000 2 Subscriber shares 2 05.03~2003 1,998 Cash 2,000
19.11.2003 4,000 Sub-division of par value from RM1.00 2,000 to R}JO.50 per ordinary share

30.11.2003 44,870,000 [ssued in respect ofthe Acquisitions 22,437~OOO 09.01.2004 32)446,000 Rights Issue 38,(60)000 2. LISTING EXERCISE In conjunction wit~ and as an integral part of the listing of and quotation for the entire enlarged issued and paid-Up share capital of SKRB on the Second Board of MSEB, the Company undertook a restructuring scheme which was approved by the MITI on 28 May 2003, the SC on 24 September 2003 and II November 2003 and the SC on behalf ofFIC on 24 September 2003 involving the following inter-conditional transactions: (i) Share Split At the general meeting of SKRB held on 19 November 2003, the shareholders of SKRB had by way of an ordinary resolution approved the sub-division of the par value of the existing ordinary shares in SKRB from RM1.00 to RNIO.50 per ordinary share. The Share Split was completed on 19 November 2003. (ii) Parting of Dividend On 31 August 2003~ SKFI, SK and VPM declared a tax-exempt dividend amounting to a total of RM6.00 million for the 8 month period ended 31 August 2003 to the shareholders who were registered as members of SKFI, SK and VPM~ respectively as at 31 August 2003. The dividend was paid on 14 November 2003. v. INFORMATION ON THE SKRB GROUP (CONT’Dj (iii) Acquisitions (a) Acquisition of SKFI On 25 March 2003~ SKRB entered into a conditional share sale agreement with the vendors of SKFI) Koh Kun ChuaR) Quek Wee Seng, Wa Ang Ka @ Kua Aug Ka, MBSB and WHSB to acquire the entire issued and fully paid­up share capital of SKFI comprising 5,000,000 ordinary shares of RMI.OO each for a total purchase consideration of RMll ,942,952 to be satisfied by the issuance of 21,928)642 new SKRB Shares at approximately R1edO.54 per SKRB Share. The Acquisition ofSKFI was completed on 30 November 2003~ (b) Acquisition of SK On 25 March 2003, SKRB entered into a conditional share sale agreement with the vendors of SK Koh Kun Chuan, Quek Wee Seng, Wa Ang Ka @ Kua Ang Ka, MBSB and WHSB to acquire the entire issued and fully paid­up share capital of SK comprising 2,500,000 ordinary shares of RlVIl~OO each for a total plUchase consideration of Rlv13,434,280 to be satisfied by the issuance of 6~305,736 new SKRB Shares at approximately RMO.54 per SKRB Share. The Acquisition ofSK was completed on 30 November 2003. (c) Acquisition ofVPM On 25 March 2003~ SKRB entered into a conditional share sale agreement with the vendors of VPM, Koh Kun Chuan, Quek Gim Hong @ Keh Gim Hong, MBSB and WHSB to acquire the entire issued and fully paid-up share capital ofVPM comprising 5,”000,000 ordinary shares ofRMl.OO each for a total purchase consideration of RM9,060,225 to be satisfied by the issuance of 16,635,622 new SKRB Shares at approximately RlJO.54 per SKRB Share. The Acquisition of VPM was completed on 30 November 2003. All the shares of the aforesaid companies were acquired by SKRB free from all claims, charges, liens and encumbrances. The purchase consideration for SKFI~ SK and VPM are based on the respective companies’ audited NTA as at 31 December 2002 of RMll,942,952) RM3~434,280 and RM9,060,225. v. INFORMATION ON THE SKRB GROUP (CONT’D) The details of the vendors~ shareholdings in SKFI, SK and VPM are as follows: <——SKFI —–> <—-SK_ .._–> <—-WM –_.> No. of No. of No. of I);{.shares shares 0/0 shares 0/0 Koh Kun Chuan 1,645,000 32.90 822,500 32.90 1)750,000 35.00 Quck Wee Seng 1;225~OOO 24.50 612)500 24.50 WaAngKa @KuaAngKa 630,000 12.60 315,000 12.60 Quek Gim Hong @ Kch Gim Hong 1,750,000 35.00 MBSB 750,000 15.00 375,000 15.00 750,000 15.00 WHSB 750~OOO 15.00 375,000 15.00 750,000 15.00 5,000,000 100.00 2,500,000 100.00 5~OOO~OOO 100.00 The new SKRB Shares to be issued to the vendors pursuant to the Acquisitions are as follows: Acquisition of AcquisitioD of Acquisition of  SKFI  SK  VPM  Total  Koh Kun Chuan  7,214,523  2~O74~587  5,822,468  15;111,578  Quek Wee Seng  5~372,517  1,544,906  6,917,423  Wa AngKa  @ Kua AngKa  2,763,010  794,523  3)557~533  Quck Glm Hong  @ Kch Gim Hong  S,g22~468  5,822,468  MBSB  3)289,296  945,860  2t 4951 343  6,730,499  WHSB  3,289,296  945,860  2t 495)343  6~730,499
21,928,642 6,305,736 16,635)622 44,870,000 As part of the Acquisitions, Koh Kun Chuan,. Quek Wee Seng, Wa Ang Ka @ Kua Ang Ka and Quek Gim Hong @ Keh Gim Hong nominated their shareholdings of 11~100,267 SKRB Shares~ 4,276,916 SKRB Shares) 5,081)220 SKRB Shares and 2,264,769 SKRB Shares respectively to AHSB. The nomination of the SKRB Shares by the existing promoters to AHSB is to enable the promoters to consolidate and establish a single point ofcontrol over SKRB via a private limited company. The Acquisitions resulted in the issued and paid-up share capital of SKRB being increased from RM:2,OOO to RM22,437,OOO. (iv) Rights Issue On 9 January 2004, SKRB implemented a rights issue of 32,446,000 new SKRB Shares at par on the basis of approximately 7.23 new ordinary shares for every 10 ordinary shares held after the Acquisitions. v. INFORM:ATION ON THE SKRB GROUP (CONT’D) The Rights Issue resulted in the issued and paid-up share capital of SKRB being further increased from RM:22,437,OOO to RM38,660,OOO. Proceeds from the Rights Issue and Public Issue amounting to RM27,635,OOO will be utilised in the manner set out in Section 111(7) ofthis Prospectus. (v) Offer for Sale Following the completion ofthe Acquisitions and the Rights Issue and in conjunction with the flotation of SKRB, the OfferoTS will undertake an offer for sale of 11,782,000 SKRB Shares at an offer price of RJvfO.90 per Offer Share of which 7,282,000 SKRB Shares are reserved for Bumiputera investors approved by the MITI and 4,500,000 SKRB Shares to be allocated to eligible Directors, employees, suppliers and customers of the SKRB Group. (vi) Public Issue Following the completion ofthe Acquisitions and the Rights Issue and in conjunction with the flotation of SKRB, the Company is implementing a public issue of 12,680)000 new SKRB Shares at an issue pric.e of RMO.90 per Issue Share to the Malaysian public. Proceeds from the Rights Issue and Public Issue amounting to RM27,635,OOO will be utilised in the manner set out in Section 111(7) of this Prospec.tus. (vii) Listing and Quotation The listing ofand quotation for the entire enlarged issued and paid-up share capital of SKRB comprising 90,000,000 SKRB Shares on the Second Board ofthe MSEB. 3<1 BUSINESS OVERVIEW 3111 History and Business The history of the SKRB Group can be humbly traced back to the commencement of business of its flIst wholly-owned subsidiary, SKFI in 1993 by its founders and current Managing Director and Executive Director of SKRB~ Koh Kun Chuan and Quek Wee Seng, respectively~ The in-depth knowledge and skills of both the founders has spearhead SKFI from a small household furniture manufacturing company since its commencement in 1993 to the current establish wooden furniture manufactureL SKFrs turnover grew from a mere RMOr5 million in 1993 to Rl\.136.6 million for the 8 month period ended 31 August 2003~ In 1995, based on the favourable prospects and the increased acceptance of Malaysian manufactured furniture products, VPM was incorporated on 6 January 1995. VPM is principally involved in the manufacture and processing of rubberwood and related products. VPM commenced operations in January 1996. VPM operates the Group’s kiln drying, pressure treatment plant, finger joint and lamination line. As part of its expansion plans to diversify its activities and complement its core furniture activities, SK.; another wholly-owned subsidiary of the SKRB Group was incorporated on 4 May 1996 and commenced operations in June 1996r SK is principally involved in the manufacture and trading of metal furniture and parts~ SK is the Group~s manufacturing arm for tube and nletal fumiture~ Together with SKFI, the SKRB Group is able to provide a wide range of furniture products with the combination ofwood and metal. v. INFORM:ATION ON THE SKRB GROUP (CONT’D) 3.1.1
Principal Products SKFI and SK are both involved in the manufacturing and sale of a broad range of rubberwood and metal furniture which can be classified into 5 broad categories as follows: Category  Furniture type  Dining  Dining sets in a variety of material including solid rubberwood, veneer) glass and natural stone; extendable table in butterfly, leat: drop leaf and folding styles; and bar stools and bar tables.
Occasional End tables and corner racks, coffee tables and console tables, nesting tables, planter stands~ television stands; and shelves and baker racks. Living room Futons, book cases) benches and entertainment units. Buffet and Hutch Curios, servers and sideboards. Bedroom Bed frames~ dressing tables, bed sides and chests and other case goods. Most of SKFI’s and SK’s furniture pToducts are manufactured under the brand name “SK” and are mainly used for household putposes. Almost all of the Group’s furniture products are exported. Major export regions include North and South America, Australia~ New Zealand, UK~ Middle East and other parts of the Asian region such as Korea, Philippines, Japan and Singapore. VPM provides pressure treatment and kiln drying for rough savm rubberwood. These services mainly cater for the Group’s in-house requirements. However~ VPM also sells treated filbberwood to smaller furniture manufacturers locally, who do not have the facilities to treat rough sawn rubberwood. The Group is able to maintain the quality of the furniture products as a result of its own in-house kiln drying and pressure treatment facilities. This would also shorten the delivery time of ra\v materials to SKFI and SK and thus reduce the overalI production lead time. The SKRB Group’s focus is mainly on household furniture products and is able to provide a wide range of furniture products “‘lith the combination of wood and metal to cater for the consumers) needs in a diverse market This is achieved through aesthetic enhancements, stringent quality control) customer service, competitive pricing and short delivery lead time. The short delivery lead time has also enabled the overseas customers to reduce their stockholdings and their investment in inventory. The management is aware that furniture design and quality is important for the Group’s products to remain competitive and has taken various initiatives such as sending personnel to various trade fairs and exhibitions,. providing in-house product and design training~ undertaking R&D on experimenting with other raw materials and constantly gathering feedback from customers to keep abreast with the latest trends and styles in the furniture market
V. INFORMATION ON THE SKRB GROUP (CONT’D) 3.. 1112 Principal Markets The principal export markets of the SKRB Group~s furniture products and the percentage of contribution to the Group’s turnover are as follows: 0/0 contribution to the Group’s turnover for the 8 month period ended Export Market for Furniture Products 31 August 2003 0/0 Asia (comprising Korea~ Japan and Philippines) 1.98 Australia and New Zealand 19.35 Middle East 7.22 North and South America 29.3] UK 5.33 Europe 3.48 66.67 The balance of the Group’s turnover of 33.330/0 is derived from local sales of kiln­dried rubberwood and laminated boards. The sales mix by categories ofproduc-rs for the Group are as follows: % contribution to the Group’s turnover for the 8 month period ended Product Type 31 August 2003 0/0 Tables and chairs 49.97 Dining sets 5.97 Buffets and Hutches 2.82 Planters stand 1.67 Bedroom sets 2.56 Others such as racks, cabinets, stoolSt chest) shelves, nest~ etc 3.68 Kiln-dried rubberwood 32.25 Laminated boards 1.08 100.00 The growth of the principal export markets of the SKRB Group is dependent on the prospects of the manufacturing sector, in particular, the furniture industry and the ability of the Group in increasing its market share and penetrating into new markets. The prospects of the Malaysian economy, the manufacturing sector and the furniture industry are detailed in Sections V(5~2) to V(5.4) ofthis Prospectus. v. INFORMATION ON THE SKRB GROUP (CONT’D) The Group has also established a good long term business relationship with its major customers such as Coaster Inc in US, Endeavour Trading Sdn Bhd, L.G. Sourcing Inc~ in US and Tradewinds International Pty Ltd in Australia, which have had business dealings with the Group for an average of 6 years~ Another key success factor of the SKRB Group is the practice of allowing customers to purchase mixed containers of furniwre products thus allowing the flexibility of purchasing small quantities of varying types of furniture with different designs. The Group also prides itself in on-time delivery and a well diversified range of furniture products. The Group believes that customer satisfaction is important and that the management of the Group will strive to provide quality products at competitive prices to its customers in order to remain as one ofthe major integrated furniture manufacturers. 3.13 Mallufacturing Processes The Group~s operations are located at Kawasan Perindustrian Bukit Bakri, Muar” Johor and all the factories are located in the same vicinity for production efficiency. The Group practises a Hworkstation~’ setup for its furniture manufacnuing process which means that each workstation ‘Will specialise in a particular process or job function. This setup has been successfully implemented by the Group as a variety of furniture models can be produced simultaneously in smaller quantities 1.e+ not mass production of homogeneous products. This is one of the critical success factors behind the Group~s marketing strategy. Further, in a workstation setup where many furniture models are produced simultaneously, the production change-over time is faster as compared to a production line method thereby reducing machine downtime. A diagram depicting the manufacturing process undertaken by each of the subsidiary and a brief explanation ofthe processes is further described in parts (a) to (c) below~ (a) Rubberwood kiln drying~ chemical treatment, finger joint and lamination
Finger Joint/Lamination (Vatue added proccss) Packing I ~ Delivery I INFORMATION ON THE SKRB GROUP (CONT’D) The raw materials comprising wet Tubberwood are purchased in various sizes, such as 3”’x3’\ 2~’x3″ and 3’~xl n, The rough sawn rubberwood are sent for chemical treatment in an impregnation chamber where the rubbernrood would be treated with boric acid to prevent any fungus or bore worm attacks. The chemical treatment typically takes 2 hours, after which the treated rubberwood are sent for kiln drying. The kiln drying process takes 12-30 days with the kiln chamber running 24 hours a day” The number of days required for the kiln drying process depend on the size and weight of the rubbenvood being kiln-dried in the chamber~ The capacity of each kiln chamber is 30-45 tonnes and VPM currently has 32 kiln chambers. For a more efficient use of resources, the fuel used for the steam boiler to operate the kiln chambers are from scrap timber, which is a waste product from the manufacturing of the rubberwood furniture. Once the moisture content of the rubberwood reaches the optimum level of 9-11%~ the rubberwood \Vill be removed from the kiln chamber) Mapped and packed to prevent moisture absorption. The kiln-dried rubberwood may also be sent for further value~added process or sent for packing and subsequent delivery, The processed rubberwood is then Mapped, packed and sent to SKFI and SK for the manufacturing of furniture while the excess is sold to external customerSr At present, the Group sources approximately 70% of laminated boards from third party suppliers as VPM does not have adequate production capacity to cater for SKFI and SK’s production needs. To overcome this, VPM has entered into a Sale and Purchase Agreement for the purchase of a land and building together with plant and machinery for the purpose of investing into the new lamination line~ The new lamination line is expected to commence commercial production by mid-2004. Further details are set out in Section XIII(8)(iv) of this Prospectus. INFORl\1:ATION ON THE SKRB GROUP (CONT’D) (b) Manufacturing of rubberwood furniture Kiln dried ruhherwood

Finishing (Stainingl Sealing, Lacquer)
The kiln dried rubberwood is sent to SKFI and SK (if certain metal parts are used as part of the product) for the next manufacturing process where required. The next stage is the shaping of the laminated boards which involves the boring, moulding of dry timber and grinding process. This is done via various shaping tools and machinery such as the computerised numeric control router which is used to mould and shape the laminated boards into the desired shape and size~ Other furniture parts such as table legs, chair legs” back rest and others are also sent for shaping and moulding. Upon completion ofthe shaping and moulding process~ the furniture parts are sent for sanding for a finer and smoother surface. The sanded furniture parts are then sent for finishing which involves staining and spraying to achieve the desired aesthetic effects. The spraying process which is semi-automated, involves the application of the undercoat and topcoat on the furniture parts~ The parts are also lac.quered to provide fmer touches~ v~ INFQRM:ATION ON THE SKRB GROUP (CONT’D) Once the fmishing process is completed, the furniture parts are sent for a final quality control check and then discharged for packing~ The furniture parts are sold as semi-knocked dovm or fully knocked do\Vl1 furniture and is flat packed for shipment pwposes~ At each stage of the manufacturing process, the moisture content is checked to ensure that the moisture content of the furniture parts are maintained at the optimum level. Quality control measures are also undertaken throughout each process where the furniture parts are visually inspected by the supenrisors to ensure that an quality issues are detected at the root level and to prevent the defective part from moving on to the next process~ (c) Manufacturing of metal furniture and parts
v. INFORMATION ON THE SKRB GROUP (CONTJD) Company SKFT SK VPM The major raw materials used for the manufacturing of steel furniture are steel rods and tubes. These steel rods and tubes are normally purchased in lengths of 6 metres. The steel rods and tubes are firstly sent for cutting to achieve the desired length and size for the manufacturing of furniture parts. These steel parts will then Wldergo a hot pressing process to either shrink or taper the parts. TIle processed steel parts will be bent to the desired shape and furniture parts such as the joints will be drilled with holes for assembly purposes. Some ofthese parts are table legs, bracket legs, side rail and bed post. These parts are then sent for the welding process. Subsequently, the steel furniture parts are sent for the grinding and sanding processes in order to smoothen the surface of the parts. The next stage will involve the finishing process where the steel furniture parts will be sprayed with epoxy powder and dried. This process involves heating and drying4 Upon completing the fmishing touches, some of the furniture parts will be assembled and the final finished product “Will undergo a final quality control check. The furniture parts will then be flat-packed prior to shipment to customers~ 3.1~4 Production Output and Capacity The Group~s manufacturing of furniture and pressure treatment and kiln… drying are carried out within a combined built up area of 260,550 sq. ft. in factories located in Kawasan Perindustrian Bukit Bakri in MuaI~ JahoT Darul Takzim The SKRB Group has not experienced any major intemlptions in its manufacturing operations over the last 12 months. The production output and capacity of the SKRB Group analysed by subsidiary are as folIo \Vs: Averag£  Average  Production  Production  Location and addru!tii  Build-up  Broad Category  Capacity  Output  sq. ft.  Per annum  Per annum  Lot PTD 6019 ([.ot 8804) and  128,320  Rubber\vood  Lot PTD 6020 (Lot 8805)  fum1turc:  Jalan Perindustrian 1  -Chairs  400~OOO units  320,000 units  Kawasan Perindustrian Bukit  -Tables  180,000 unlts  144!OOO units  8akri  -Buffet and IIutches  8,000 units  6,400 units  Mukim Bakri  84200 Muar  Jobor Darul Takzim  Lot PTD 6028 (Lot 8721)  25,170  Steel furniture:  Kawasan Perindustrian Bukjt  ~ Bedroom sets  20,000 units  18,500 units  Bakri  -Dining sets  7i OOO units  5J>OO units  Datu 8, Jalan Bakri  84200 Muar  lobar Darul Takxim  Lot PTD 5999 (Lot 8789) and  107,060  Trcated and kiIn  36!OOO tonnes  33~600 tonnes  Lot PTD 6015 (Lot 8803)  dried rubberwood  Ja’an Perindustrian 5 and 1  respectively at Kawasan  Perindustna.n Bukit Bakri  MukimBakri  84200 Muar  lobar Darul Takdm
V. INFORMATION ON THE SKRB GROUP (CONT’D) 3.1.5 Save for VPM, the Group practices the ‘just-in-timet (‘~JIT)’) inventory system which reduc.es their investment in inventory. The JIT system also reduces wastages from stockholding and space required for storage, thus translating into cost savings. As a result of the successful implementation of the JIT system, the average stock turnover period for SKFI and SK is approximately 1.4 months and this has enabled SKFI and SK to practise a delivery lead-time of approximately one month. Quality Control The SKRB Group is fully conmritted to maintaining a high standard of product quality in order to meet the stringent quality requirements from its international customers. At present, the Group has a team of 48 supervisors overseeing the quality control function. The Group has incorporated strict quality specifications for its products to meet its customers’ expectations. In order to meet this requirement, the Group has built in a series of check points that have been incorporated into the production process~ that is~ from procurement of raw materials right up to finished goods. One of the key important process for the SKRB Group is the monitoring of defects and courbing of wastage. Defective parts are detected at the earliest possible stage of the manufacturing process to prevent any defective parts from being processed into finished good, thereby preventing a finished product from being rejected. The SKRB Group has in place stringent quality controls at each stage of the manufacturing process and defects identified at each stage will be dealt with in the following manner: (a) Defects identified during the manufacturing process are usually sent for rework such as re-spraying, fe-sanding or fe-shaping to achieve the required level of surface smoothness or colour intensity. Such reworked parts will then be sent for the next stage of the manufacturing process. For defected parts which call110t be reworked, such parts may be cut and processed into internal parts such as corner blocks for other models; and
(b) Rejects are normally parts which can no longer be reworked.. Rejected steel parts can be sold off as scrap metal while rejected dry rubberwood or rubbenvood parts can be cut into different sizes and used for the lamination ofjoints or sold to third parties at a discounted price, Rubberwood residues which cannot be reused or sold vvill be used as fuel for heating its kiln drying chambers.

v. INFORMATION ON THE SKRB GROUP (CONT’D) 3.1.6
311.7
Research and Development The SKRB Group recognises the need to undertake R&D activities in order to keep abreast with competition. The R&D department currently comprises 3 experienced personnel in product design, detailing, development and prototyping and comes under the purview of the Managing Director, Koh Kun Chuan. With the aid of computer.aided design (“AutoCAD”), the SKRB Group has the capacity to design and develop its products from the conceptual stage) through technical drawings~ The AutoCAD enables the Company to reduce the time in designing, varying and modifying products to suit various requirements prior to actual prodllction~ The role of the R&D team in the design and development of the products involves the following: (a) information gathering on consumer preference;
(b) maintaining product quality;
(c) creation ofnew designs and products; and
(d) modifying the design to improve efficiency and minimise production costs.

In the endeavour to keep abreast with competition, the recent and plarmed activities undertaken by the R&D team are as follows: (a) research into alternative raw materials such as medium density fibreboard, chipboard and metal; and
(b) re-engineering the existing design process.

The Group has spent approximately RlvI121~OOO on R&D for the last 2 financial years ended 31 December 2002 and 8 month period ended 31 August 2003. The amounts spent on R&D represents less than 1% of the annual turnover of the respective fmancial years/period~ Material Sourcing The main raw materials used for the Group~s manufacturing process are rubbenvood and steel. Other raw materials used include chemicals used for the treatment of the rough sawn rubbenvood, lacquers, stains, thinners, sealers and fillers for the finishing stage and nuts, screws and other hardware items for the furniture fittings~ Approxinlately 98% of the Group’s raw material is sourced locally while the remaining 20/0 is imported~ Raw materials sOlITced locally consist of packaging materials~ painting materials, hardware materials, rubberwood, laminated boards and steel. Items imported are mainly fabric and glass from Indonesia, UK, China and Australia. To-date, the Group has not encountered any problems in sourcing for raw materials+ While the supply of rubberwood has been sustained over the past years, the continued supply of rubberwood depends on the Government~s future development plans and objectives in the implementation of rubbenvood replantation progranunes, While rubberwood is generally obtained as a by-product franl agricultural rubber estates, measures have been taken to encourage the establishment of rubber tree plantations solely for timber production. The Government had since the Sixth Malaysia Plan (1991-1995), embarked on a pilot rubber forest plantation project which was undertaken to encourage the planting of rubber trees as forest plantation for the purposes of timber production. With such pro-active measures being undertaken by the Government, the supply of rubberwood is expected to be sustainable in the foreseeable future. Further, the Group could also source for alternative supply of rubberwood from neighbouring countries such as Myanmar, Thailand or Indonesia. v. INFORM:ATION ON THE SKRB GROUP (CONT’D) 3.1.8 3111.9 The Group currently has access to a regular supply of raw materials at competitive prices and over the years has maintained a good working relationship with its suppliers where it has an established track record for its purchase and payment commitments. In order to mitigate the risk of disruption in raw material supply, VPM~ a subsidiary of SKRB had on 16 May 2003 entered into a long-term contract with Souncern Timber Sdn Bhdits major supplier of rubbenvood for the supply oft rubberwood for a period of 3 years up to 31 December 2005. The Group expects that its suppliers \YiIl be able to support any increase in raw material requirements arising from the expected increase in the future output ofthe Group. Marketing and Method of Distribution The Group’s products are mainly distributed through furniture wholesalers, importers, retailers and buying houses or agents. As wholesalers are generally aware of the dynamics and latest development within the furniture industry and have their respective established distribution networks, the Group is able to capitalise on tlleir existing networks to distribute and promote its products in the markets where the wholesalers are located. For its export market, the Group currently has a total of 123 foreign wholesalers, importers, retailers, buying houses and agents. The SKRB Group has its own sales and marketing team comprising 6 personnel who will establish direct contact with potential and existing customers. Further” all levels of management are exposed to the Group~s customers to enable them to gain a better understanding of the customers~ needs and also the furniture market as a whole. The sales and marketing team regularly attend international and domestic furniture trade fairs and exhibitions to showcase the Group’s products as well as observe the latest trends and designs in the furniture market. The international furniture trade fairs and exhibitions which the Group attends are as follows: (a) ColobfJle International Furniture Fair~ Germany;
(b) Binningham International Furniture Show, UK;
(c) Fumitex Melboume~ Australia; and
(d) China International Furniture Fair, Guangzhou, China.

The annual local furniture trade fairs and exhibitions in which the Group participates are as follows: (a) Malaysian International Furniture Fair; and
(b) Muar Association Furniture Exhibition.

Competitive Advantage The furniture industry in Malaysia is broad based and hence, it is not possible for a single company to dominate the industry. This industry is highly fragmented with a few thousand furninrre manufacturers operating in Malaysia. Most manufacturers possess similar manufacturing facilities due to the homogeneous nature of the production process of furniture. In this industry, profitability is mainly driven by quality, cost efficiency~ reliability and optimum use of resources. Vlhile there are numerous players in this industry, the barriers of entry in tenns of the high level of capital expenditure required, technical expertise, difficulties in securing skilled and experienced workers., establishment of clientele base and sound marketing and distribution network may deter potential new entrants into this induStrY4 Some of SKRB’s major local competitors which are listed on the MSEB include Kimble Corporation Berhad” Yeo Aik Resources Berhad and Bas\vell Resources Berhad. V. INFORMATION ON THE SKRB GROUP (CONT’D) 3..1.10 3.1.t 1 3.1 ..12 3..1.13 The SKRB Group has established itself as a reliable manufacturer of quality wooden and steel furniture which is evidenced by the long tenn business relationship with their overseas customers and the repeat sales to these customers~ The Group estimates that repeat sales to existing customers make up approximately 80% of the Group~ s sales~ One of the key factors underlying the Group’s competitive edge is its ability to offer a wide range of fumimre products from dining sets and bedroom sets as well as living room and occasional fumiture. The Group also observes developments in the latest consumer tastes and trends in house furnishings in order to be able to provide the latest furniture designs for its customers. One of the critical success factors of the SKRB Group lies in the Group’s ability to sell to its customers, containers with single products or mixed products. However, the Group’s focus is on the sale of mixed containers i~e. containers with small quantity of different models and designs+ This marketing strategy practised by the Group is advantageous to its customers as they would be able to reduce their stockholdings and inventory holding costs. In addition~ SKFI and SK practises the JIT inventory system which enable those companies to have a short delivery lead-time Le. delivery is made within approximately one month from the customer’s purchase order. Patents, Trademarks, Licences and Franchises The Group markets its finished products lUlder the name ~SK~. SKFI has applied to the Registrar of Trademark, Malaysia for the registration of the logo with the word uSK’~ under class 20 and the registration is pending approvaL Governing Laws and Regulation including Environmental Concerns Save as disclased in Section V{ 10) of this Prospectus, there are no other laws, regulations or guidelines governing the furniture industry. The Group has obtained the necessary approvals from the Johar Department of Environment for the installation of scrubber and incinerator equipment. A”,psrds and Recognition’ SKFI and SK were accredited with the ANSIIISO/ASQC Q9001:2000 and ISO Q9001:2000 issued by AOQC Moody International, Inc, AOQC Moody (Malaysia) Sdn Bhd and Moody International Certification Limited on 28 June 2002~ 5 September 2002 and 11 October 2002 for SKFI and 29 June 2002, 24 August 2002 and 11 December 2002 for SK for quality management system. The aforementioned accreditation endorses the quality control procedures practised by the SKRB Group. In November 2002, SKFI was awarded the H32nd International AVlard For Connnercial PrestigeH by the President of the Editorial Office~ Rome~ Italy in recognition ofexcellent quality and design. Risk Management Plan The SKRB Group acknowledges the importance of a risk management plan to be in place so as to minimise any major disruption to the operation and financial perfonnance of the Group. As such, the Group has in place some of the following risk management plans and policies and practices other than the adequate insurance coverage on consequential loss and damages to its premises, plant and equipment and stocks:

 

V.. INFORMATION ON THE SKRB GROUP (CONT’D) Fire outbreak and energy crisis Fire fighting equipments such as water sprinkler~ hose reels and [lIe extinguishers have been installed in various locations with easy access. The Group also has a quarterly inspection performed on the fire protection system by the maintenance contractor who also conducts regular fire fighting techniques and fire drills for the Group~s employees~ As part of the Group~s plan to mitigate disruption in electricity supply, the Group have backup generator sets in each of the manufacturing sites. As electricity usage is high, arrangement has been made with suppliers of generator sets to supply heavy duty generator sets on short notice. The Group could also request for Tenaga Nasional Berhad to provide generator sets in the event of a prolonged interruption to electricity supply. In addition, the Group is able to outsource some of its manufacturing activities to subcontractors when such circumstance arises and when customers request for deliveries within a short time frame. Raw material supply To ensure an uninterrupted supply of quality raw materials, ongoing efforts are made by the Directors of SKRB to identify suitable suppliers for its raw materials so as to reduce any dependence on anyone supplier. The Directors of SKRB are of the view that the long term relationship with its existing suppliers and the continuing efforts of the Group in seeking new sources ofra\\7 material will mitigate the risk of shortage in any ofits major raw material supply. 4. SUBSIDIARIES AND ASSOCIATED COMPANY The principal activities of the subsidiaries of SKRB as at the date of this Prospectus are as follows~ Date and Authorised Issued and place of share paid..up Effective Name incorporation capital share capital interest Principal activities RM RM °k SKFI 07.09J992; 5,000,000 51000,000 100.00 Manufacturing of wooden Malaysia furniture SK 04.05.] 996; 5,000)000 2,500,000 100.00 Manufacturing and trading Malaysia of meta] furniture and parts VPM 06.01.1995~ 5)000,000 5,000,000 100.00 Manufacturing and Malaysia processing of rubberwood and related products As at the date hereof~ SKRB does not have any associated company. v. INFORMATION ON THE SKRB GROUP (CONT’D) Further details ofthe subsidiaries ofSKRB are as follows:
4.1 SKFI History and Business SKFI was incorporated on 7 September 1992 in Malaysia under the Companies Act, 1965 as a private limited company. The principal activity of the company is the manufacturing ofwooden furniture. Share Capital The authorised share capital of SKFI is lUv15~OOO,OOO comprising 5,OOO~OOO ordinary shares of RMI.OO each. The issued and paid-up share capital of SKFI is R1VI5,OOO,OOO comprising 5~OOO~OOO ordinary shares ofRMI.00 each. The changes in the issued and paid-up share capital of SKFT since its incorporation are as follows; No. of  ordinary  shares of  Total issued  Date of  RMl.OO each  and paid-up  allotment  allotted  ConsiderationlTypc of issue  share capital  RM  07+09.1992  4  Subscriber shares  4  15+03.1993  42,000  Other than cash(l)  42,004  27+02.1995  57,996  Cash  ]OO~OOO  24.04.]997  400,000  Cash  500,000  15~Og.2000  2,000,000  Bonus issue of 4 new ordinary shares for  2~500~OOO  every 1 existing ordinary share held  10.02.2001  2,500~OOO  Bonus issue of 1 new ordinary share for  5t OOO1OOO  every 1 existing ordinary share held
Note: (1) In satisfaction ofthe purchase price ofthe machineries and equipment purchased. Substantial Shareholder SKFI is a wholly-o\l/lled subsidiary ofSKRB. Subsidiary and Associated Company As at the date hereo~ SKFI does not have any subsidiary or associated company. V.. INFORMATION ON THE SKRB GROUP (CONT’D) 4.2 SK 1listory and Business SK was incorporated on 4 May 1996 in Malaysia under the Companies Act, 1965 as a private limited company. The principal activities of the company are the manufacturing and trading ofmetal furniture and parts. Share Capital The authorised share capital of SK is RM5,OOO~OOO comprising 5,000,000 ordinary shares of Rl\11.00 each. The issued and paid~up share capital of SK is RM:2,500,OOO comprising 2,500,000 ordinary shares ofRM1.00 each. The changes in the issued and paid-up share capital of SK since its incorporation are as follows: No. of ordinary shares of Total issued Date of Rl\il.OO each and paid-up allotment allotted ConsiderationfType of issue share capital RM 04+05.1996 2 Subscribcr shares 2 26.03.1999 299)998 Cash 300 JOOO 30.06.1999 200J)OO Cash 500,000

 

01.08.2001 2,000,000 Bonus issue of 4 new ordinary shares 2,500,000 for every 1 existing ordinary share held Substantial Shareholder SK is a wholly-ovmed subsidiary ofSKRB. Subsidiary and Associated Company As at the date hereof~ SK does not have any subsidiary or associated c.ompany.

4.3 VPM History and Business VPM \vas incorporated on 6 January 1995 in Malaysia under the Companies Act, 1965 as a private limited company. The principal activities of the company are the manufacturing and processing ofrubberwood and related products. Share Capital The authorised share capital of VPM is R115~OOO~OOO comprising 5,000,000 ordinary shares of RMl.OO each. The issued and paid-up share capital of VPM is RM5,OOO,OOO comprising 5,000,000 ordinary shares ofRMl.OO each. v. INFORMATION ON THE SKRB GROUP (CONT’Dj The changes in the issued and paid-up share capital of VPM since its incorporation are as follows: No. of ordinary shares of Total issued Date ot· RMl.OO ea£h and paid-up allotment allotted Consideration/Type of issue share capital RM 06.01.1995 2 Subscribers’ shares 2 15JO.1996 99,998 Cash 100,000 01.07.1997 400,000 Cash 500,000 02.10.1997 500,000 Cash 1,000,000 15.08.2000 4)000)000 Bonus issue of 4 new ordinary shares 5,000)000 for every] existing ordinary share held Substantial Shareholder VPM is a wholly-owned subsidiary of SKRB. Subsidiary and Associated Company As at the date hereo~ VPM does not have any subsidiary or associated company. 5. INDUSTRY OVERVIEW
5.1 Global Economy The world economic perfonnance in the first half of 2003 took a dive on account of the war in Iraq and the outbreak of Severe Acute Respiratory Syndrome (~’SARS”). With the end of the Iraq war and containment of SARS, global economic perfonnance in the second half of 2003 is expected to improve supported by indications of an upturn in the major economies towards the end of the second quarter of 2003~ The expected return of investor and consumer confidence, resulting from accommodative monetary policies and fiscal easing in major economies~ will further boost demand. The prevailing global current account imbalance has arisen out of the world~s over-reliance on the US, which since 1995 has been the only real engine of world economic gro\Vth. Even though world economic growth was lethargic, the fmancial markets were active in the frrst half of 2003. With prevailing low interest rates and high liquidity in the markett funds sought for equities in the hope for higher yields on the expectations that the global economy would recover towards the second half of 2003. In a global economic environmenl weighed do\Vll by uncertainties and lackluster global demand, the concern in all international fronts continues to focus on the need to stimulate economic growth and nmintain financial stability. At the same time, countries are increasingly looking towards regional and bilateral arrangements to spur trade and economic growth. v. INFORMATION ON THE SKRB GROUP (CONTtD) ASEAN econonries are expected lo perfonn reasonably well in 2003, despite the adverse external environment in the first half of 2003, the SARS outbreak and sporadic acts of militancy in the region. With higher agricultural prices boosting incomes in Southeast Asia~ coupled with the wealth effects from the improved stock market performance, regional economies continue to be largely sustained by domestic demandj particularly private conswnption and investment. The economic recovery in 2002~ which carried over into the first quarter of 2003 but slowed down in the second quarter due to SARS, is expected to pick up again in the later half of 2003+ The economic perfonnance of the ASEAN ec.onomies for the rest of 2003 is expected to be more positive given improved prospects for a global and regional pick up. (Source: Economic Report 2003/2004) 5..2 Overvie\v of the Malaysian Economy After experiencing sluggish gro\Vth in 2001 ~ the Malaysian economy reboWlded strongly in 2002. Higher gro’N1h in 2002 bolstered optimism for a stronger economic performance in 2003 in anticipation of an improved world economic outlook. The prospect for a global economic recovery was~ however~ affected by recent geopolitical developments, in particular the war in Iraq, sporadic incidences of militancy and outbreak of the SARS. During the second quarter of 2003, consumer and business sentiments in regional economies were particularly affected by the anxiety of a probably prolonged and widespread SARS epidemic that curtailed transport and tourism.related activities besides trade and investment flows. Against this adverse global environment and concerns of further weakening of the aheady sluggish global economy~ the Government has put in place a package of broad-base pro-grovrth measures in May 2003. The Government’s proactive stimulus package, apart from providing immediate relief for the SARS-affected sectorSt was to address structural and organisational issues towards sustaining economic growth in the medium and longer term. The strategic measures inbToduced boosted confidence necessary to stimulate domestic consumption and investment In addition, the short war in Iraq and the quick containment of SARS provided the much-needed relief for the economy to ride over the difficult times and remain on track to a fumer growth trajectory~ Malaysia’s sound economic fimdamentals and expansionary fiscal and accommodative monetary policies, supplemented by the Government’s proaclive stimulus package, have helped to sustain high gro\Vth in the real GDP. After expanding 4~5% in the flIst half of 2003 and v-rith prospects of sustained gro\Vth in the second half of2003~ the economy is set to achieve its targeted growth of 4.50/0 in 2003~ higher than the 4.1% in 2002. The economy is expected to be driven by stronger domestic demand reinforced by a modest pick-up in external demand in the second half of 2003r Exports will continue to be buoyed by global economic recovery and the upturn in electronics, especially in information technology-related products and equipment. On the domestic front, consumer spending continues to pick up,. on account of favourable commodity prices, positive wealth effect from better stock market performance as well as sti mulus packages introduced in May 2003. All sectors registered positive growth with manufacturing and services driving the economy. (Source: Economic Report 2003/2004) v. INFORl\1ATION ON THE SKRB GROUP (CONT’D)

5.3 The Manufacturing Industry The Malaysian manufacturing sector is all geared up for better times ahead, as output strengthened further starting February 2003. Domestic-oriented industries recorded double-digit gro’Wth, spurred by higher consumption in food and beverages~ and continuing demand for products of construction-related industries. With the increased activities of the manufacturing sector, demand for natural gases surged upward~ and contributed to higher growth ofthe domestic-oriented industries. The export-oriented industries also performed better in 2003 and recorded a moderate growth during the first 6 nlOnths, due to the rebound in rubber products and textile industries. Overall, output of the manufacturing sector expanded by 7+80/0 in the frrst 6 months of 2003 (January-June 2002: 1.4°h,). The better-than-anticipated growth was the result of higher production of 7.9% in the second quarter 2003 (second quarter 2002: 6.50/0). Total value of finished products and goods-in-process was about 53% or less than 1 month stock of the RM:27~694.8 million sales made in June. The lean stocks, together with broad-based growth in both domestic as well as external demand, is expected to improve capacity utilisation ofthe sector to more than 800/0 this year. (Source: Economic Report 200312004) While manufacturers and exporters were continuing to move up the value chain and improve product quality to enhance their international competitiveness~ effort were also taken to explore market opportunities~ In line with the Eighth Malaysia Plan (“8MP”)~ new approaches and initiatives were implemented to prOTIlote exports. Participation in specialised and general trade fairs abroad and organisation of Malaysian Products Exhibition in new and emerging markets will be emphasised~ with greater focus given to the promotion ofMalaysian brand nanles with the view to differentiating Malaysian products and services in the market place. (Source: 8MP 2001-2005) 5.4 The Furniture Industry Traditionally~ Malaysia has been a location of choice for original equipment manufacturing furniture manufacturers. Nevertheless, Malaysia is now moving to original design manufacturing furniture manufacturers. They are upgrading 10 the production of higher value-added furniture incorporating indigenous design and better finishing. These products are penetrating upmarket segments in developed markets such as the US~ UK and Japan. (Source: Malay,Jiia External Trade Development Corporation) In year 2000, the total exports of Malaysian furniture reached RM5.6 billion which include wooden and rattan as well~ and the phenomenal growth is expected to reach RM7 billion in exports in 2002. The availability and successful utilisation of mbbenvood as well as strong government support has largely contributed to the success of the furnihlre industry+ Today about 85% of wooden furniture exported is made from rubberwood~ The major export markets for wooden furniture (including rattan furniture) \vere US (RMl,519~6 minion)~ Japan (RM769.8 rrrillion)~ UK (RM427.6 million)~ Singapore (RM333~O million), Australia (RMJ06.6 million) and United Arab Emirates (RM126~ 1 million). Malaysia has been diversifying its n13.rkets for furniture and exports to some 135 c.ountries worldwide. v. INFORMATION ON THE SKRB GROUP (CONTfD) On top of that, the Malaysian International Furniture Fair (UMIFF~~) 2002 which was held at Kuala Lumpur in March 2002 has generated RNl2.04 billion worth of sales, an increase of 5.7% compue to the previous year~ The fair has also recorded a total of 6..115 international visitors from 116 countries and 365 exhibitors which is an increase of 1.4o/u and 4.90/0 respectively compare to the previous year. Sales from MIFF series normally accounts for up to 35-400/0 of Malaysia”s aIUlual furniture exports. (Source: Malaysian Timber Council) The decline in output of wood products in 2002 reflected lower saw milling activities and plywood productions. Nevertheless~ exports of wood products rose in 2002 due to improved prices of plywood and sawn timber as \vell as increased demand from Koreat Canada and Thailand~ Exports of furniture rebounded~ driven by the strong housing market in the US, particularly in the rust halfof 2002. (Source: Bank Negara Malaysia Annual Report 2002) As for research and developmentt Malaysian manufacturers are putting RM300 million annually into total productivity measures aimed at increasing the quality and international competitiveness of wood-based products~ These include investments in efficient new technologies, skills retraining and cost-cutting measures. (Source: Malaysia External Trade Development Corporation) v. INFORMATION ON THE SKRB GROUP (CONTJD) 6. MAJOR CUSTOMERS The SKRB Group has a wide clientele base located locally and overseas and does not have any customer which contributes to 10% or more of the Group’s turnover and as such, the SKRB Group is not dependent on any of its major customers. The details of the Group~s top 10 customers for the 8 month period ended 31 August 2003 are set out below: tJ/o Business contribution to relationship the Group’s Customers Products since turnover Coaster Inc. Tables, chajrs) buffets and 1997 8.84 hutches and dining sets L.G. Sourcing Inc Tables and pIanters stand 1999 7.16 Endeavour Trading Sdn Bhd Tables) chairs and dining sets 1993 6.34 Corporate Specialists Sdn Bhd Tables, chairs1 buffets and 2001 6.01 hutches RNA Resources Group Ltd Tables, chairs~ bedroom sets 2001 3.64 and dining sets Charmwood Furniture Group Tables and dining sets 1998 3.30 Limited * LB Furniture Industries Sdn Bhd Kiln-dried rubbelWood 1999 2.96 Chemyen Industries Sdn Bhd Kiln-dried rubberwood 1998 2.44 LA Furniture Industries Sdn Bhd Kiln-dried rubbcrwood 1998 2.38 Super A Mart Pty Ltd Tahies find chairs ]99& 1.92 * On 15 September 2003. SKRB received a writfen notificationfrom Deloitte & Touche LLP, UK that Charm)1,’ood Furniture Group LimiJed (“·Charmwood”) has been placed under receivership. As at 31 August 2003. there is G balance ofRMO.555 million outstanding from L~harm.woodout ofwhtch RMO.178 million hw~’ been collected up to 9 Jan.uary 2004. The allowancefor doubtful debts made in. respect ofCharmwood lL’i at 9 Jan.uary 2004 amounted to RMO.277 million representing the balance still outstanding Iodate. The Directors of SKRB are of the view lhat lhe loss of sales from Charmwood will not have a material impact on the Group as Ihe Group has a large customer base. v. INFORMATION ON THE SKRB GROUP (CONT’D) 7. MAJOR SUPPLIERS The main ra\v materials used for the Group’s manufacturing process are rubbenvood and steeL Other raw materials consist of packaging materials, painting materials, hardware materials~ rubbenvood, laminated boards, which are sourced locally, and fabric and glass) which are sourced overseas. The Group has a large supplier base and is not dependent on any of its major suppliers save for Souncern Timber Sdn Bhd (“SouncemH), which contributes to more than 10% of the SKRB Group’s purchases. In this respect, the SKRB Group has entered into a long term contract with Souncem to secure the supply of rubberwood for a period of 3 years from 1 January 2003 up to 31 December 2005~ The details of the Group’s top 10 suppliers for the 8 month period ended 31 August 2003 are set out below: 0/0 Business contribution to relationship the Group’s Suppliers Products since purchases Souncern Timber Sdn Bhd Rubberwood 2000 28r81 Xin Xing Timber Sdn Bhd Rubbcrwood 2003 6.16 Yll Heng Industries Sdn Bhd Laminated boards 2002 4~21 Woodvature Sdn Bhd Kiln drying services and wet 1999 3.45 rubbcrwood chemical treatment \Vegmans Furniture Industries &in Chairs 2000 3.05 Bhd Yeong Sheng Furniture Industries Buffets and hutches 2001 2~78 Sdn Bhd Pine Packaging (M) Sdn Bhd Packaging materials and carton 1993 2.74 boxes Tan Eng Huat & Sons Sdn Bhd Laminated boards 1998 2.65 Selintang Papan Sdn Bhd Laminated boards ]998 2.55 Soon Nguan Enterprise Rubberwood 2003 2.34 v~ INFORMATION ON THE SKRB GROUP (CONT’D) 8. FUTURE PLANS, STRATEGIES AND PROSPECTS The furniture industry in Malaysia is broad based and hence, it is not possible for a single company to dominate the indusu)\ The industry is highly fragmented with many furniture manufacturers operating in Malaysia. However, the Directors of SKRB are ofthe view that the long tenn prospects of the SKRB Group is promising and that the following factors will place SKRB Group in good stead: Product Diversification Moving fOf\Vard, the SKRB Group will continue to expan~ its product range. In line with the SKRB Group’s strategy of varied product range and designs to cater for the ever-changing customers’ needs, the Group plans to introduce new range of furniture products to cater for the higher end market segment. In addition, the SKRB Group will also focus on fast moving categories in its range of products and will continue to maintain its strategy on product development and market research. Market Expansion The global demand for quality furniture has provided numerous opportunities for the SKRB Group. As the Group is focused on the export marke~ it seeks to expand its market geographically. Currently, the Group’s customers are mainly located in North and South America, Australia~ New Zealand~ Middle East and Asia such as Korea) Philippines, Japan and Singapore. The SKRB Group plans to expand its market to countries located in Europe and India where there has been increasing demand for Malaysian-made wooden furniture due to the quality of the fumimre~ affordability and competitive pricing~ The Group~s market expansion plans are expected to be carried out through participation in furniture trade fairs and also via importers from those respective cOlilltries. In addition, the Group also intends to penetrate the higher end furniture market segment in the near future+ In this respect, the Group will be carrying out thorough market research and product development on this market segment prior to the introduction of such furniture products. These products will be subsequently introduced through trade fairs and through agents and importers in the future. Expansion of Production Line The Group’s existing lamination line is operated via its subsidiary, VPM. At present, VPM’s production of laminated boards is unable to cater for the production requirements of SKFI and SK resulting in the Group having to source approximately 700/0 of its laminated boards from third party suppliers. In view ofthe above, the Group plans to expand the production capacity of its lamination line via the setting up of an additional lamination process line comprising 1 unit each of fully automated fmger joint system and semi-automatic horizontal fmger joint system. The investment in the new lamination line will be funded via the proceeds raised from the Rights Issue and the Public Issue and is expected to commence commercial production by mid-2004. The expansion of the Group’s lamination line and increased production capacity, will further enhance the integration of the Group’s furniture manufacturing process as well as reduce manufacturing costs in the longer term. I Company No.: 519103-X I V. INFORMAnON ON THE SKRB GROUP (CONT’D) 9.  LANDED PROPERTIES  Details of landed properties ofthe SKRB Group are as follows:  Registered owner  Location  Description! Elisting use  Date of (:frtilkate of fitness  ApprOXimate age 01 building yeanITenun  Land areal blnt-up area sq. ft.  Audited nel book V11lue as al 31,08.2003 RM 000  Encumbrances  SKFJ  Lot 8804, PN 9630 Mukim JaJan Bakri Districi of Muar lin Perindustrian I Kawasan Perindustrian Sukit Bahi Mukim Bakri 84200 Muar Johar Darul Takzim  Single storey faelory building with double storey office annexe/ Factory and office building  19.11.2001  2 “””” 99 years leasehold expiring on 29.12.2094  88,150 sq. ft.l 58,600 sq. ft.  3,380  Charged in favour of Bumipulrn-eommerce Bank Berhael (“BCBB’).  SKFI  Lo1880S, PN 9631 Mukim Jalan Barn District ofMuar lIn Perindustrian I Kawasan Periooustrian Bukil Balrri MukimBakri 84200Muar  Single storey faCiory building! Factory  23.1 L.2oo1  2 years! 99 years leasehold expiring on 29.12.2094  96,068 sq. ft.! 69,720 sq. ft.  3,370  Charged BCBB.  in favour of  Johor Darul Takzim  SK  Lot 8721, PN 9639 Mukimlalan Bakri District of Muar Kawasan Pcrindustrian Bukil Bakri lalan Dakri Mukim Bahi 84200 Muar Johor Darnl Taklim  Single storey factory building with double storey office annexe/ Factory and office building  31.10.2000  3 yeml 99 years leasehold expiring on 29.12.2094  43,875 sq. ft.f 25,170 sq. ft.  1,454  Charged in favour of HSBe Bank Malaysia l3erhad.
-54 ­

I Co~nyNo.:519103·X I
V. INFORMATION ON THE SKRB GROUP (CONT’Dj Audited  Date of  Approximate  net book  Reg[stered  Dcscriptioll!  tcrtinute of  a~e of buildi_t:  Land arelll  vllue IS It  O””ner  Location  Existing use  fitncss  }’earsITl’nur~  built-up Ira  31.08.2003  Enrumbnn ces  sq. ft.  RMOOO  VPM  Lot 8789, PN 9612  Single storey  01.03.1999  4 yctlrsl  87,450 sq. tl.l  2,826  Charged  in  favour of  Mukim Jalon Bakri  factory building  99 years leasehold  56,480 sq. ft.  Ma[ayan  Banking  DistriclofMU3T  with doubk storey  expiring on  Berhad (“MBB”).  Kawasan Perindustrian Bukit Bakri office annexel  29.12.2094  Jln Perinduslrian 5  Facoory and office  Mukim Bakri  building  84200 Muar  Johor Darul Tak7.im  VPM  Lot 8803, PN 9626  Single storey  08.0.3.2001  .3 years!  88,146 sq. OJ  3,034  Charged  in  fallour of  Mukim Jalan BakI’i  factory buildingl  99 years leasehold  50,580 sq. fl..  MBB.  DistriclofMuar  factory building  expiring on  Kawasan Perindustrian Bukil Bakri  29.12.2094  J31an Perindusrrian I  Mukim Bakri  84200 Muar  Johor DaTUI Takzim  VPM  PID 9765. HSD 20278  3 factory buildings,  21.02.1995  9 yearsl  [88,605 sq. ft.!  3,086  Charged  in  fallour of  Mukim Jorak  a double storey  60 years leasehold  96,194 sq. ft.  MBB.  District ofMuar  office block and  expiring on  PL.O 19, Jalan Kempas 2  other ancillary  26.06.2055  Pagoh Industrial Estate  buildings  Pagoh. Moar  Johor DaTU[ Takzim
The above land cannot be sold or transferred in any ways, including through any fonn of agreement with the intention of selling/disposing of the land, without the approval of the state authority. Save as disclosed above, there are no restrictions in interest for the above properties. In addition, none of tbe eJllsting use of the land for the above landed properties is in breacb ofthe land-use conditions or permissible land use. -55 ­
v. INFORMATION ON THE SKRB GROUP (CONT’D) 10. OTHER INFORM:ATION As at the date of this Prospectus, there are no other approvals~ major licences and permits obtained by SKRB and its subsidiaries except for the details of such approvals, licences and permits, the conditions imposed and the status of compliance as disclosed below~ Date of  Type  of  businessl  Issuance!  transaction  Status of  Compan)’  Authorities  Expiry  appro\”ed  Main conditions imposed  compliance
SKFI Majlis 01.01.041 Trading licence for None. Perbandaran 31.12.04 furniture factory Muar C’MPM”) SK MPM 01.01.04f Trading licence for None. 31.11.04 fumiture factory
VPM MPM 01.01.041 Trading licence for None. 3L12+04 wood trealrnent and drYl ng factory VPM MPM 01.01.041 Trading licence for None. 31. ]2.04 wood treatment and drying factory SKFI MIll 06.09.02/ Manufacturing Conditions of the licence among Not licence ror SKf1 tn others are: applicable act as licensed C’NAU manufactllrcr from (i) The composition of the Condition)
26.06.02 a1 PID board of dircctors of the waived vide 6019 and PTD 6020 company must 1n general MITI’s for products of reflocts the equily structure 1eUer dated. wooden furniture of the company, and the 23 July MITJ nlust be infonned of 2003. the relevant appointment and any changes in the board of directors. (H) The COlnpany must employ Met. and train Malaysian citizen in order to reflect the composition of the multi-race resident for all levels of position. SK MITT 28.03.02/ I\1anufacturing Conditions of the licence umong NA licence for SK to act others are: as licensed manufacturer from (i) The composition of the Condition ] 7.01.02 at PTO board of directors of the waived vide 6028 for products of company must in general Mill’s nletal-wood reflects the equity structure Ietter dated furniture of the company~ and the 23 July MITI must be infonned of 2003. the relevant appointment and any changes in the board of directors. (ii) The company must employ Met. and train MalaysJan citizen in order to reflect the composition of the multi-race resident for all levels of position. v. INFORM::ATION ON THE SKRB GROUP (CONT’D) 10. OTHER INFORMATION (CONT’D) Date of Type of businnis/ Issuance/ transaction Company Authorities Expiry approved
Manufacturing licence for VPM to act as licensed rnanufacturer fronl 23Jl.OI at PTn 6015 for products of kiln-uIied oS awn timber and timber mouldi11gs
VPM MIll VPM Mm 30.09+021 Manufacwring NA licence for VPM to act as licensed manufacturer from 23.11.01 at PTD 5999 for products of kiIn-drieel s3’Wll timber and laminated board
VPM Johor State 01.01.031 WoodJF umitute/ Forestry 31.12.03* Moulded Wood Department Working Factory CiJSFDU Licence for VPM to) locate the site, build, erect, form, operate, or maintain a woodifumiturcJ moulded wood working faetory at PTD 599lJ and PTD 6015 Main conditions imposed Conditions of the licence among others arc~ (i) The composition of the board of di rectors of the company must 1n general rcflcc18 the equity scructure of the company, and the MITI must be infonned of the relevant appointrncnt and any changes in the board of directors. (il) The company must employ and train Malaysian citizen ln order to reflect the composition of the multi­race resident for all 1evels of position. Conditions of the licence among others are: (i) The composition of the board of directors of the company must in general reflects the cquity structure of the company, and the MITI must he informed of the relevant appointment and any changes in the board ofdireetors.
(ii) The company must employ and train Malaysian citizen in order to reflect the compos1lion of the rnulti­race resident for all 1evelS 0 f position.

Conditions of the licence among others are. the licence holder cannot: (a) transfer the licence;
(b) rent, lease, lend, charge or sell the whole of the factory or any part of it or any equipment or whatever part of any of the eq uipment in the factory; or
(C) made any changes in the shareholding of the whole factory or any part 0 fit without the written approval from the relevant state authority.

Status of compliance Condition waived vide MITI’s letter datoo 23 July 2003. Met. Condition waived vide MITt~s letter dated 23 July 2003. Met. To be complied. VPM applied for approval from JSFD for the change in shareholdings in VPM on 19 November 2003J the approval of which is pending as 3t the date of this Prospcctus~
v. INFORMATION ON THE SKRB GROUP (CONT’D) 10..  OTHER INFORMATION (CONT’D)  Date of  Type  of  businessf  Issuance!  tranS9.ction  Status of  Company  Au thorities  Expiry  approved  Main conditions imposed  compliance  SKFJ  JSFD  17.07.03/  WoodlFurnituIcJ  Conditions of the licence among  To be  complied.  3L12+03*  Moulded  Wood  others  are~  the  licence  holder  SKFI appJied for  Worting  Factory  cannot:  approval  from  Licence for SKFI to  JSPD  for  the  locate the site, buildt  (a) transfer the licence;  change  in  erect,  fo~  operate)  shareholdings  in  or  maintain  a  (b) rent,  leaset  lend,  charge  or  SKFI  on  19  wood/furniture!  sell the whole of the factory  Novelnber  2003 I  moulded  wood  or  any  part  of it  or  any  the  approval  of  working  factory  at  eqUlp nlent  or  whalever part  which is pending  PTD 6019 and PTD  of any of the equipment in  as  at the date of  6010.  the factory; or  th is Prospectus.  (c) made  any  changes  In  the  shareholding  of  the  whole  factory  or  any  part  of  it  without the written approval  from  the  relevant  state  authority.
SK  Johor  25.09.001  Licence  for  SK  to  None.  Departrnent of  NA  jnstaU machineries at  Occupational  PTD 6028  Safety and  Health~  Ministry of  Human  Resources
Note: 17te said companies have submitted applications for the ren.ewal of the licences by JSFD. the renewal o/which are stillpending as at the date ofthis Prospectus,

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