Naka Reg

NAKAREG HOLDINGS BERHAD
PROSPECTUS
THIS EXPOSURE DRAFT PROSPECTUS HAS NOT BEEN REGISTERED WITH THE SECURITIES
COMMISSION MALAYSIA ("SC"). THE INFORMATION CONTAINED IN THIS EXPOSURE DRAFT
PROSPECTUS MAY BE SUBJECT TO FURTHER AMENDMENTS BEFORE BEING REGISTERED
WITH THE Sc. UNDER NO CIRCUMSTANCES SHALL THIS EXPOSURE DRAFT PROSPECTUS
CONSTITUTE AN OFFER FOR SUBSCRIPTION

NKG

(Company No. 918382-T)
(Incorporated in Malaysia under the Companies Act, 1965)
INITIAL PUBLIC OFFERING OF 52,000,000 NEW ORDINARY SHARES OF RMO.I0 EACH ("IPO
SHARES") IN CONJUNCTION WITH OUR LISTING ON THE ACE MARKET OF BURSA MALAYSIA
SECURITIES BERHAD COMPRISING:
44,000,000 IPO SHARES BY WAY OF PRIVATE PLACEMENT TO THE SELECTED INVESTORS;
5,000,000 IPO SHARES MADE AVAILABLE FOR APPLICATION BY OUR ELIGIBLE DIRECTORS,
EMPLOYEES AND BUSINESS ASSOCIA TESIPERSONS WHO HAVE CONTRIBUTED TO THE
SUCCESS OF OUR GROUP; AND
3,000,000 IPO SHARES FOR APPLICATION BY THE PUBLIC
AT AN ISSUE PRICE OF RM [.] PER IPO SHARE, PAY ABLE IN FULL UPON APPLICATION
Adviser, Sponsor, Underwriter and Placement Agent
PM Securities Sdn. Bhd.
YOU ARE ADVISED TO READ AND UNDERSTAND THE CONTENTS OF THIS PROSPECTUS. IF IN
DOUBT, PLEASE CONSULT A PROFESSIONAL ADVISER.
FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS, SEE "RISK FACTORS" IN SECTION 5 OF THIS PROSPECTUS.
INVESTORS ARE ADVISED TO NOTE THAT COMPANIES LISTED ON THE ACE MARKET MAY BE
OF HIGH INVESTMENT RISK.
This Prospectus is dated [.] 2011
RESPONSIBILITY STATEMENTS
OUR DIRECTORS AND PROMOTERS (AS DEFINED HEREIN) HAVE SEEN AND APPROVED THIS
PROSPECTUS. THEY COLLECTIVELY AND INDIVIDUALLY ACCEPT FULL RESPONSmILITY FOR
THE ACCURACY OF THE INFORMATION CONTAINED IN THIS PROSPECTUS. HAVING MADE
ALL REASONABLE ENQUIRIES AND TO THE BEST OF THEIR KNOWLEDGE AND BELIEF, THEY
CONFIRM THAT THERE IS NO FALSE OR MISLEADING STATEMENT OR OTHER FACTS WHICH,
IF OMITTED, WOULD MAKE ANY STATEMENT IN THIS PROSPECTUS FALSE OR MISLEADING.
PM SECURITIES SDN BHD (COMPANY NO. 66299-A) ("PM SECURITIES"), BEING THE ADVISER,
SPONSOR, UNDERWRITER AND PLACEMENT AGENT, ACKNOWLEDGES THAT, BASED ON ALL
AVAILABLE INFORMATION AND TO THE BEST OF ITS KNOWLEDGE AND BELIEF, THIS
PROSPECTUS CONSTITUTES A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS
CONCERNING OUR IPO (AS DEFINED HEREIN).
STATEMENTS OF DISCLAIMER
A COpy OF THIS PROSPECTUS [-HAS BEEN] REGISTERED WITH THE SECURITIES COMMISSION
MALAYSIA ("SC'). THE REGISTRATION OF THIS PROSPECTUS SHOULD NOT BE TAKEN TO
INDICATE THAT THE SC RECOMMENDS OUR IPO OR ASSUMES RESPONSmILITY FOR THE
CORRECTNESS OF ANY STATEMENT MADE OR OPINION OR REPORT EXPRESSED IN THIS
PROSPECTUS. THE SC HAS NOT, IN ANY WAY, CONSIDERED THE MERITS OF THE SECURITIES
BEING OFFERED FOR INVESTMENT.
THE SC IS NOT LIABLE FOR ANY NON-DISCLOSURE ON OUR PART. THE SC ALSO TAKES NO
RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS, MAKES NO REPRESENTATION
AS TO ITS ACCURACY OR COMPLETENESS AND EXPRESSLY DISCLAIMS ANY LIABILITY FOR
ANY LOSS YOU MAY SUFFER ARISING FROM OR IN RELIANCE UPON THE WHOLE OR ANY
PART OF THE CONTENTS OF THIS PROSPECTUS.
YOU SHOULD RELY ON YOUR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF
THE INVESTMENT. IF YOU ARE IN ANY DOUBT AS TO THE ACTION TO BE TAKEN, YOU
SHOULD CONSULT YOUR STOCKBROKERS, BANK MANAGERS, SOLICITORS,
ACCOUNTANTS OR OTHER PROFESSIONAL ADVISERS IMMEDIATELY.
APPROVAL [- HAS BEEN] OBTAINED FROM BURSA MALAYSIA SECURITIES BERHAD ("BURSA
SECURITIES") FOR THE LISTING OF AND QUOTATION FOR THE SECURITIES BEING ISSUED
AND/OR OFFERED. OUR ADMISSION TO THE OFFICIAL LIST OF BURSA SECURITIES IS NOT TO
BE TAKEN AS AN INDICATION OF THE MERITS OF THE INVITATION, OUR COMPANY OR OUR
SECURITIES.
BURSA SECURITIES SHALL NOT BE LIABLE FOR ANY NONDISCLOSURE ON OUR PART AND
TAKES NO RESPONSmILITY FOR THE CONTENTS OF THIS PROSPECTUS, MAKES NO
REPRESENTATION AS TO ITS ACCURACY OR COMPLETENESS AND EXPRESSLY DISCLAIMS
ANY LIABILITY WHATSOEVER FOR ANY LOSS YOU MAY SUFFER ARISING FROM OR IN
RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS PROSPECTUS.
A COPY OF THIS PROSPECTUS, TOGETHER WITH THE APPLICATION FORMS (AS DEFINED
HEREIN), [-HAS ALSO BEEN LODGED] WITH THE REGISTRAR OF COMPANIES, WHO TAKES NO
RESPONSmILITY FOR ITS CONTENTS.
OTHER STATEMENTS
COMPANIES LISTED ON THE ACE MARKET MA Y HAVE A LIMITED OPERATING HISTORY OR
MA Y NOT HAVE ANY PROFIT TRACK RECORD PRIOR TO LISTING. SUCH COMPANIES MAYBE
OF HIGH INVESTMENT RISK. AS WITH ALL INVESTMENTS, YOU SHOULD BE A WARE OF ALL
POTENTIAL RISKS IN INVESTING IN SUCH COMPANIES AND SHOULD MAKE THE DECISION TO
INVEST AFTER GIVING DUE AND CAREFUL CONSIDERATION BY REFERRING TO, AMONG
OTHERS, THE PROSPECTUS, LATEST FINANCIAL STATEMENTS AND CORPORATE
ANNOUNCEMENTS. YOU ARE STRONGLY RECOMMENDED TO SEEK ADVICE FROM A
SECURITIES PROFESSIONAL/ADVISER.
OUR IPO IS AN EXEMPT TRANSACTION UNDER SECTION 213 OF THE CAPITAL MARKETS AND
SERVICES ACT 2007 ("CMSA") AND IS THEREFORE NOT SUBJECT TO THE APPROVAL OF THE
SC. YOU ARE ADVISED TO NOTE THAT RECOURSE FOR FALSE OR MISLEADING STATEMENTS
OR ACTS MADE IN CONNECTION WITH THIS PROSPECTUS IS DIRECTLY AVAILABLE
THROUGH SECTIONS 248, 249 AND 357 OF THE CMSA.
SECURITIES LISTED ON BURSA SECURITIES ARE OFFERED TO THE PUBLIC PREMISED ON
FULL AND ACCURATE DISCLOSURE OF ALL MATERIAL INFORMATION CONCERNING THE IPO
FOR WHICH ANY OF THE PERSONS SET OUT IN SECTION 236 OF THE CMSA, E.G. DIRECTORS
AND ADVISERS, ARE RESPONSIBLE.
THIS PROSPECTUS HAS NOT BEEN AND WILL NOT BE MADE TO COMPLY WITH THE LAWS OF
ANY JURISDICTION OTHER THAN MALAYSIA, AND HAS NOT BEEN AND WILL NOT BE
LODGED, REGISTERED OR APPROVED PURSUANT TO OR UNDER ANY APPLICABLE
SECURITIES OR EQUIVALENT LEGISLATION OR WITH OR BY ANY REGULATORY AUTHORITY
OR OTHER RELEVANT BODY OF ANY JURISDICTION OTHER THAN MALAYSIA. THE
DISTRIBUTION OF THIS PROSPECTUS AND OUR IPO ARE SUBJECT TO THE LAWS OF
MALA YSIA. THE PROSPECTUS WILL NOT BE DISTRIBUTED OUTSIDE OF MALAYSIA EXCEPT IN
SO FAR AS IT IS PART OF THE OFFERING MEMORANDUM DISTRIBUTED TO FOREIGN
INSTITUTIONAL INVESTORS OUTSIDE MALAYSIA IN CONNECTION WITH OUR IPO. OUR
COMPANY, PROMOTERS, ADVISER, UNDERWRITER AND PLACEMENT AGENT NAMED IN THIS
PROSPECTUS HAVE NOT AUTHORISED AND ARE NOT RESPONSIBLE FOR THE DISTRIBUTION
OF THIS PROSPECTUS OUTSIDE MALAYSIA EXCEPT IN SO FAR AS IT IS PART OF THE
OFFERING MEMORANDUM DISTRIBUTED TO FOREIGN INSTITUTIONAL INVESTORS OUTSIDE
MALAYSIA IN CONNECTION WITH OUR IPO. NO ACTION HAD BEEN TAKEN TO PERMIT A
PUBLIC OFFERING OF OUR SHARES IN ANY JURISDICTION OTHER THAN MALAYSIA BASED
ON THIS PROSPECTUS. ACCORDINGLY, THIS PROSPECTUS MAY NOT BE USED FOR THE
PURPOSE OF AND DOES NOT CONSTITUTE AN OFFER FOR SUBSCRIPTION OR PURCHASE OR
INVITATION TO SUBSCRIBE FOR OR PURCHASE OF OUR SHARES UNDER OUR IPO IN ANY
JURISDICTION OR IN ANY CIRCUMSTANCES IN WHICH AN OFFER IS NOT AUTHORISED OR
LA WFUL OR TO A1\yY PERSON TO WHOM IT ITS LAWFUL TO MAKE SUCH OFFER OR
INVITATION. THE DISTRIBUTION OF THIS PROSPECTUS AND THE SALE OF OUR SHARES
OFFERED UNDER OUR IPO IN CERTAIN JURISDICTIONS MAY BE RESTRICTED BY LAW.
PERSONS WHO MAY BE IN POSSESSION OF THIS PROSPECTUS ARE REQUIRED TO INFORM
THEMSELVES OF AND TO OBSERVE SUCH RESTRICTIONS.
WE WILL NOT, PRIOR TO ACTING ON ANY ACCEPTANCE IN RESPECT OF OUR IPO, MAKE OR
BE BOUND TO MAKE ANY ENQUIRY AS TO WHETHER YOU HAVE A REGISTERED ADDRESS IN
MALAYSIA AND WILL NOT ACCEPT OR BE DEEMED TO ACCEPT ANY LIABILITY IN RELATION
THERETO WHETHER OR NOT ANY ENQUIRY OR INVESTIGATION IS MADE IN CONNECTION
THEREWITH.
IT SHALL BE YOUR SOLE RESPONSIBILITY IF YOU ARE OR MAYBE SUBJECT TO THE LAWS OF
COUNTRIES OR JURISDICTIONS OTHER THAN MALAYSIA, TO CONSULT YOUR LEGAL AND/OR
OTHER PROFESSIONAL ADVISERS AS TO WHETHER OUR IPO WOULD RESULT IN THE
CONTRAVENTION OF ANY LAW OF SUCH COUNTRIES OR JURISDICTIONS.
ii
FURTHER, IT SHALL ALSO BE YOUR RESPONSIBILITY TO ENSURE THAT YOUR APPLICATION
FOR OUR IPO WOULD BE IN COMPLIANCE WITH THE TERMS OF OUR IPO AS STATED IN THIS
PROSPECTUS AND THE APPLICATION FORMS (AS DEFINED HEREIN) AND WOULD NOT BE IN
CONTRAVENTION OF ANY LAW OF COUNTRIES OR JURISDICTIONS OTHER THAN MALAYSIA
TO WHICH YOU MAY BE SUBJECTED TO. WE WILL FURTHER ASSUME THAT YOU HAD
ACCEPTED OUR IPO IN MALAYSIA AND WILL AT ALL APPLICABLE TIMES BE SUBJECTED
ONLY TO THE LAWS OF MALAYSIA IN CONNECTION THEREWITH. HOWEVER, WE RESERVE
THE RIGHT, IN OUR ABSOLUTE DISCRETION TO TREAT ANY ACCEPTANCE AS INVALID IF WE
BELIEVE THAT SUCH ACCEPTANCE MAY VIOLATE ANY LAW OR APPLICABLE LEGAL OR
REGULATORY REQUIREMENTS.
NO ACTION HAS BEEN OR WILL BE TAKEN TO ENSURE THAT THIS PROSPECTUS COMPLIES
WITH THE LAWS OF ANY COUNTRY OR JURISDICTION OTHER THAN THE LAWS OF
MALAYSIA. IT SHALL BE YOUR SOLE RESPONSIBILITY TO CONSULT YOUR LEGAL ANDIOR
OTHER PROFESSIONAL ADVISER ON THE LAWS TO WHICH OUR IPO OR YOU ARE OR MIGHT
BE SUBJECTED TO. NEITHER US NOR OUR ADVISER NOR ANY OTHER ADVISERS IN RELATION
TO OUR IPO SHALL ACCEPT ANY RESPONSIBILITY OR LIABILITY IN THE EVENT THAT ANY
APPLICATION MADE BY YOU SHALL BECOME ILLEGAL, UNENFORCEABLE, A VOIDABLE OR
VOID IN ANY COUNTRY OR JURISDICTION.
ELECTRONIC PROSPECTUS
[-THE CONTENTS OF THE ELECTRONIC PROSPECllJS AND THE COPY OF THIS PROSPECTUS
REGISTERED WITH THE SC ARE THE SAME. THIS PROSPECTUS CAN ALSO BE VIEWED OR
DOWNLOADED FROM BURSA SECURITIES' WEBSITE AT www.bursamalaysia.com.l
[-YOU MAY ALSO OBTAIN A COPY OF THE ELECTRONIC PROSPECTUS FROM THE WEBSITE
OF RHB BANK BERHAD AT www.rhb.com.my. MALAYAN BANKING BERHAD AT
www.maybank2u.com.my, CIMB BANK BERHAD AT www.cimbclicks.com.my, AFFIN BANK BERHAD
AT www.affinOnline.com, CIMB INVESTMENT BANK BERHAD AT www.eipocimb.com AND PUBLIC
BANK BERHAD AT www.pbebank.com.]
YOU ARE ADVISED THAT THE INTERNET IS NOT A FULLY SECURED MEDIUM, AND THAT
YOUR INTERNET SHARE APPLICATION (AS DEFINED HEREIN) MAYBE SUBJECT TO THE RISKS
IN DATA TRANSMISSION, COMPUTER SECURITY THREATS SUCH AS VIRUSES, HACKERS AND
CRACKERS, FAULTS WITH COMPUTER SOFTWARE AND OTHER EVENTS BEYOND THE
CONTROL OF THE INTERNET PARTICIPATING FINANCIAL INSTITUTIONS (AS DEFINED
HEREIN). THESE RISKS CANNOT BE BORNE BY THE INTERNET PARTICIPATING FINANCIAL
INSTITUTIONS.
IF YOU ARE IN DOUBT ABOUT THE VALIDITY OR INTEGRITY OF AN ELECTRONIC
PROSPECTUS, YOU SHOULD IMMEDIATELY REQUEST FROM US, OUR ADVISER OR THE
ISSUING HOUSE, A P APERIPRINTED COpy OF THIS PROSPECTUS. IN THE EVENT OF ANY
DISCREPANCY ARISING BETWEEN THE CONTENTS OF THE ELECTRONIC PROSPECTUS AND
THE CONTENTS OF THE PAPERIPRINTED COPY OF THE PROSPECTUS FOR ANY REASON
WHATSOEVER, THE CONTENTS OF THE PAPERIPRINTED COpy OF THIS PROSPECTUS, WHICH
ARE IDENTICAL TO THE COpy OF THE PROSPECTUS [-REGISTERED WITH THE sq, SHALL
PREVAIL. [-THE ELECTRONIC PROSPECTUS SUBMITTED TO THE SC AND BURSA SECURITIES
IS THE SAME AS THE REGISTERED PAPERIPRINTED COPY.]
IN RELATION TO ANY REFERENCE IN THIS PROSPECTUS TO THIRD PARTY INTERNET SITES
(REFERRED TO AS "THIRD PARTY INTERNET SITES"), WHETHER BY WAY OF HYPERLINKS OR
BY WAY OF DESCRIPTION OF THE THIRD PARTY INTERNET SITES, YOU ACKNOWLEDGE AND
AGREE THAT:
iii
Company No. 918382-T
(I) WE AND OUR ADVISER DO NOT ENDORSE AND ARE NOT AFFILIATED IN ANY WAY
WITH THE THIRD PARTY INTERNET SITES. ACCORDINGLY, WE AND OUR ADVISER
ARE NOT RESPONSIBLE FOR THE AVAILABILITY OF, OR THE CONTENTS OR ANY
DATA, INFORMATION, FILES OR OTHER MATERIALS PROVIDED ON THE TIITRD PARTY
INTERNET SITES. YOU SHALL BEAR ALL RISKS ASSOCIA TED WITH THE ACCESS TO OR
USE OF THE THIRD PARTY INTERNET SITES;
(II) WE AND OUR ADVISER ARE NOT RESPONSIBLE FOR THE QUALITY OF PRODUCTS OR
SERVICES IN THE THIRD PARTY INTERNET SITES, PARTICULARLY IN FULFILLING
ANY OF THE TERMS OF YOUR AGREEMENTS WITH THE THIRD PARTY INTERNET
SITES. WE AND OUR ADVISER ARE ALSO NOT RESPONSIBLE FOR ANY LOSS OR
DAMAGE OR COSTS THAT YOU MAY SUFFER OR INCUR IN CONNECTION WITH OR AS
A RESULT OF DEALING WITH THE THIRD PARTY INTERNET SITES OR THE USE OF OR
RELIANCE ON ANY DATA, INFORMATION, FILES OR OTHER MATERIAL PROVIDED BY
SUCH PARTIES; AND
(III) ANY DATA, FILES OR OTHER MATERIAL DOWNLOADED FROM THE THIRD PARTY
INTERNET SITES IS DONE AT YOUR OWN DISCRETION AND RISK. WE AND OUR
ADVISER ARE NOT RESPONSIBLE, LIABLE OR UNDER OBLIGATION FOR ANY DAMAGE
TO YOUR COMPUTER SYSTEM OR LOSS OF DATA RESULTING FROM THE
DOWNLOADING OF ANY SUCH DATA, INFORMATION, FILES OR OTHER MATERIALS.
WHERE AN ELECTRONIC PROSPECTUS IS HOSTED ON THE WEB SITES OF THE INTERNET
PARTICIPATING FINANCIAL INSTITUTIONS, YOU ARE ADVISED THAT:
(I) THE INTERNET PARTICIPATING FINANCIAL INSTITUTIONS ARE ONLY LIABLE IN
RESPECT OF THE INTEGRITY OF THE CONTENTS OF AN ELECTRONlC PROSPECTUS, TO
THE EXTENT OF THE CONTENTS OF THE ELECTRONlC PROSPECTUS SITUATED ON
THE WEB SERVERS OF THE INTERNET PARTICIPATING FINANCIAL INSTITUTIONS
WHICH MAYBE VIEWED VIA YOUR WEB BROWSER OR OTHER RELEVANT
SOFTWARE. THE INTERNET PARTICIPATING FINANCIAL INSTITUTIONS SHALL NOT BE
RESPONSIBLE IN ANY WAY FOR THE INTEGRITY OF THE CONTENTS OF AN
ELECTRONIC PROSPECTUS WHICH HAS BEEN DOWNLOADED OR OTHERWISE
OBTAINED FROM THE WEB SERVERS OF THE INTERNET PARTICIPATING FINANCIAL
INSTITUTIONS AND THEREAFTER COMMUNICATED OR DISSEMINATED IN ANY
MANNER TO YOU OR OTHER PARTIES; AND
(II) WHILE ALL REASONABLE MEASURES HAVE BEEN TAKEN TO ENSURE THE
ACCURACY AND RELIABILITY OF THE INFORMATION PROVIDED IN AN ELECTRONlC
PROSPECTUS, THE ACCURACY AND RELIABILITY OF AN ELECTRONIC PROSPECTUS
CANNOT BE GUARANTEED AS THE INTERNET IS NOT A FULLY SECURED MEDIUM.
THE INTERNET PARTICIPATING FINANCIAL INSTITUTIONS SHALL NOT BE LIABLE (WHETHER
IN TORT OR CONTRACT OR OTHERWISE) FOR ANY LOSS, DAMAGE OR COSTS, YOU OR ANY
OTHER PERSON MAY SUFFER OR INCUR DUE TO, AS A CONSEQUENCE OF OR IN CONNECTION
WITH ANY INACCURACIES, CHANGES, ALTERATIONS, DELETIONS OR OMISSIONS IN RESPECT
OF THE INFORMATION PROVIDED IN AN ELECTRONlC PROSPECTUS WHICH MAY ARISE IN
CONNECTION WITH OR AS A RESULT OF ANY FAULT WITH WEB BROWSERS OR OTHER
RELEVANT SOFTWARE, ANY FAULT ON YOUR OR ANY THIRD PARTY'S PERSONAL
COMPUTER, OPERATING SYSTEM OR OTHER SOFTWARE, VIRUSES OR OTHER SECURITY
THREATS, UNAUTHORISED ACCESS TO INFORMATION OR SYSTEMS IN RELATION TO THE
WEBSITE OF THE INTERNET PARTICIPATING FINANCIAL INSTITUTIONS, AND/OR PROBLEMS
OCCURRING DURING DATA TRANSMISSION, WHICH MAY RESULT IN INACCURATE OR
INCOMPLETE COPIES OF INFORMATION BEING DOWNLOADED OR DISPLAYED ON YOUR
PERSONAL COMPUTER.
lV
TENTATIVE TIMETABLE
The following events are intended to take place on the following tentative dates:
Event Tentative date
Issuance of Prospectus/opening of the applications of our ]PO (as defmed
herein)
Closing of the application for our ]PO Shares
Tentative date for balloting of applications for our ]PO Shares
Tentative date for allotment of our ]PO Shares to successful applicants
Tentative listing date
[e] at 10.00 a.m.
[e] at 5.00 p.m.
[e]
[e]
[e]
This timetable is tentative and is subject to change which may be necessary to facilitate implementation procedures.
Our Directors and our Underwriter may mutually decide, at their absolute discretion, to extend the closing date and
time for application ofour ]PO to any later date or dates.
Ifthe closing date for the application of our ]PO Shares be extended, we will advertise a notice of extension in a
widely-circulated English and Bahasa Malaysia daily newspaper prior to the original closing date of
applications of our IPO. Following this, the dates for the balloting of applications for the IPO Shares and
allotment of the IPO Shares as well as Listing will be extended accordingly.
All terms used are defined under the 'Defmitions' section commencing on page (viii).
THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK
v
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Any discrepancies in the tables between the amounts listed and the totals in this Prospectus are due to rounding.
All references to "our Company" or "Nakareg Holdings" in this Prospectus are to Nakareg Holdings Berhad,
while references to "our Group", "we", "us", "our" and "ourselves" are to our Company and our subsidiary
companies, save where the context otherwise requires. Unless the context otherwise requires, references to
"Management" are to our Directors and key management personnel as disclosed in this Prospectus and as at the
date of this Prospectus. Statements as to our beliefs, expectations, estimates and opinions are those of our
Management.
Certain abbreviations, acronyms and technical terms used are defmed in the "Definitions" and "Technical
Terms" sections ofthis Prospectus. Words importing the singular shall, where applicable, include the plural and
vice versa, and words importing the masculine gender shall, where applicable, include the feminine and neuter
genders and vice versa. References to persons shall include companies and corporations.
Any reference to any enactment in this Prospectus shall be a reference to that enactment as for the time being
amended or re-enacted and includes any rules or regulations made under such act or enactment. All references to
dates and times are references to dates and times in Malaysia.
This Prospectus includes statistical data provided by various third parties relating to the industry in which we
operate. This data is taken or derived from information published by industry sources and from our internal data. In
each such case, the source is stated in this Prospectus, provided that where no source is stated, it can be assumed
that the information originates from us. In particular, certain information in this Prospectus is extracted or derived
from the Independent Market Research Report prepared by Vital Factor Consulting, the Independent Business
and Market Research Consultants, for inclusion in this Prospectus. We believe that the statistical data cited in
this Prospectus are useful in helping you understand the major trends in the industry in which we operate.
However, neither we nor our advisers have independently verified these data. Neither we nor our advisers make
any representation as to the correctness, accuracy or completeness of such data. Accordingly, you should not
place undue reliance on the statistical data cited in this Prospectus. Similarly, third party projections, cited in
this Prospectus are subject to significant uncertainties that could cause actual data to differ materially from the
projected figures. We give no assurance that the projected figures will be achieved. Hence, you should not place
undue reliance on the third-party projections.
The information on our website, or any website directly or indirectly linked to such website does not form part
ofthis Prospectus and you should not rely on it.
vi
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements. All statements other than those of historical facts included
in this Prospectus, including, without limitation, those regarding our Group's financial position, business
strategies, plans and objectives of our Management for future operations, are forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties, contingencies and other
factors which may cause our actual results, our performance or achievements, or industry results, to be
materially different from any future results, performance or achievements expressed or implied by such forward
looking statements. Such forward-looking statements are based on numerous assumptions regarding our Group's
present and future business strategies and the environment in which our Group will operate in the future. Such
forward-looking statements reflect our Management's current view with respect to future events and are not a
guarantee of future performance.
Some of these forward-looking statements can be identified by the use of forward-looking terminology such as
the words "may", "will", "would", "could", "believe", "expecf', "anticipate", "intend", "estimate", "aim",
"plan", "forecast" or similar expressions and include all statements that are not historical facts. Such forward
looking statements include, without limitation, statements relating to:
(i) demand for our products and services;
(ii) our business strategies;
(iii) plans and objectives of our Management for future operations;
(iv) our financial position; and
(v) our future earnings, cash flows and liquidity.
Our actual results may differ materially from the information contained in such forward-looking statements as a
result of numerous factors beyond our control, including, without limitation:
(i) the economic, political and investment environment in Malaysia and globally; and
(ii) government policies, legislations or regulations.
Additional factors that could cause our actual results, performance, achievements or industry results to differ
materially include, but are not limited to, those discussed in Section 5 (Risk factors) and Section 13.2
(Management's discussion and analysis of financial condition and results of operations) of this Prospectus. Due
to these and other uncertainties, we cannot assure you that the forward-looking statements included in this
Prospectus will be realised.
These forward-looking statements are based on information available to us as at the date of this Prospectus. You
will be deemed to have read and understood the descriptions of the assumptions and uncertainties underlying the
forward looking statements that are contained herein.
vii
DEFINITIONS
The following tenns in this Prospectus bear the same meanings as set out below unless the tenn is defmed
otherwise or the context requires otherwise:
COMPANIES WITHIN OUR GROUP:
Nakareg Holdings or Company
Nakareg Holdings Group or
Group
Nakareg
Nakareg International
NKG Technology
Shanghai Optimus
Nakareg KlUlshan
Changshu Nakareg
Nakareg International Group
GENERAL:
ACE Market
Acquisitions by Nakareg
Holdings
International
Acquisition ofNakareg
International
Nakareg Holdings Berhad (918382-n
Nakareg Holdings and its subsidiaries, namely Nakareg, NKG Technology
and Nakareg International (including its subsidiaries, Shanghai Optimus,
Nakareg KlUlshan and Changsbu Nakareg, collectively)
Nakareg Sdn Bhd (29008-D), our wholly-owned subsidiary
Nakareg International Company Limited (1089954), our wbolly-owned
subsidiary
NKG Technology Sdn Bhd (338518-X), our wholly-owned subsidiary
Shanghai Optimus Electronics Company Limited (pRC Company
Registration Number: Qi Du Hu Zong Zi No_ 022578 (Fengxian, a
wholly-owned subsidiary ofNakareg International
Nakareg Electronics (KlUlshan) Company Limited (PRC Company
Registration Number: 320583400027252) (fonnerly known as Hitec
Electronics (KlUlshan) Company Limited), a wholly-owned subsidiary of
Changshu Nakareg Precision Components Company Limited (pRC
Company Registration Number: 320581400000234), a wholly-owned
subsidiary ofNakareg International
Nakareg International and its subsidiaries, namely Shanghai Optimus,
Nakareg Kunshan and Changshu Nakareg
ACE Market ofBursa Securities
The acquisitions ofNakareg, Nakareg International and NKG Technology,
collectively by Nakareg Holdings
The acquisitions of Shanghai Optimus, Nakareg KlUlshan and Changshu
Nakareg, collectively by Nakareg International pursuant to an internal
restructuri."lg
The acquisition of the entire issued and paid-up share capital of Nakareg
comprising 733,333 Nakareg Shares for a total purchase consideration of
RM4,981,000 satisfied wholly by the issuance of 4,981,000 new ordinary
shares of RMl.OO-each in our Company, which was completed on 26
September 2011
The acquisition of the entire issued and paid-up share capital of Nakareg
International comprising 11,062,035 Nakareg International Shares for a
total purchase consideration of RM8,564,000 satisfied wholly by the
issuance of 8,564,000 new ordinary shares of RMl.OO each in our
Company, which was completed on 26 September 20 11
viii
DEFINITIONS (Cont'd)
Acquisition ofNKG
Technology
Acquisition of Shanghai
Optimus
Kunshan
Acquisition of Changshu
Nakareg
Act
ADA
Application Form(s)
ATM
Authorised Financial
Institution( s)
BNM
Board
Bursa Depository
Bursa Securities
CCM
CDS
CIF
CMSA
D&D
Director(s)
EBITDA
The acquisition of the entire issued and paid-up share capital of NKG
Technology comprising 500,000 NKG Technology Shares for a total
purchase consideration of RM354,998 satisfied wholly by the issuance of
354,998 new ordinary shares ofRMLOO each in our Company, which was
completed on 26 September 2011
The acquisition of the entire registered capital of Shanghai Optimus of
USD420,000 for a total purchase consideration of HKD3,268,912
(equivalent to USD420,000 or RMI,270,590) (translated at the exchange
rate of USDI.00:HKD7.7831, HKDl.OO:RMBO.8415 and RMBI.OO:
RM0.4619 as at 31 March 2011) satisfied wholly by the issuance of
3,268,912 new Nakareg International Shares
The acquisition of the entire registered capital of Nakareg Kunshan of
USD300,000 for a total purchase consideration of HKD2,334,937
(equivalent to USD300,000 or RM907,564) (translated at the exchange rate
ofUSDl.OO:HKD7.7831, HKDl.OO:RMBO.8415 and RMBl.OO:RM0.4619
as at 31 March 2011) reflected as an amount owing to Nakareg
The acquisition of the entire registered capital of Changshu Nakareg of
USD1,000,000 for a total purchase consideration of HKD7,783,123
(equivalent to USD1,000,000 or RM3,025,213) (translated at the exchange
rate of USD1.00:HKD7.7831, HK.D1.00:RMBO.8415 and RMBl.OO:
RM0.4619 as at 31 March 2011) satisfied wholly by the issuance of
7,783,123 new Nakareg International Shares
Companies Act, 1965 including any statutory modification, amendment or
re-enactment thereoffor the time being in force
Authorised Depository Agent
The printed application formes) for the application of the IPO Shares
Automated teller machine
The authorised financial institution(s) participating in the Internet Share
Applications with respect to payments for our IPO Shares under the Public
Issue
Bank Negara Malaysia
Board ofDirectors of our Company
Bursa Malaysia Depository Sdn Bhd (165570-W)
Bursa Malaysia Securities Berhad (635998-W)
Companies Commission of Malaysia
Central Depository System
Cost, insurance and freight, whereby the selling price includes the cost of
the goods, the freight or transport costs and also the cost of marine
insurance
Capital Markets and Services Act 2007, including any statutory
modification, amendment or re-enactment thereof for the time being in
force
Design and development
Either an executive director or non-executive director of our Company
within the meaning given in Section 4 ofthe Act
Earnings before interest, taxation, depreciation and amortisation
ix
DEFINITIONS (Conl'd)
Electronic Prospectus
Electronic Share Application
EPS
FYE
FPE
GP
Hong Kong
Independent Market Research
Report
Internet Participating Financial
Institution(s)
Internet Share Application(s)
IPC
IPO
IPO Price
IPO Share( s)
Issuing House or MIH
Listing
Listing Requirements
Listing Scheme
LPD
Market Day( s)
MIDA
MITI
NA
Copy of this Prospectus that is issued, circulated or disseminated via the
internet and/or an electronic storage medium, including but not limited to
CD-ROMs or floppy diskettes
Application for the 52,000,000 IPO Shares under the Public Issue through a
Participating Financial Institution's ATM
Earnings per Share
Financial year(s) ended/ending
Financial period(s) ended
Gross profit
Hong Kong Special Administrative Region ofthe PRC
The "Independent Assessment of the Manufacture of Electronic
Transformer Industry in Malaysia and the PRC" prepared by Vital Factor
Consulting
Participating organisation(s) in the Internet Share Application as listed in
Section 17 ofthis Prospectus
The application(s) for the 52,000,000 IPO Shares under the Public Issue
through an online share application service provided by the Internet
Participating Financial Institution(s)
International procurement centre, a locally incorporated company which
carries on a business in Malaysia to undertake procurement and sale ofraw
. materials, components and finished products to its group of related
companies and to unrelated companies in Malaysia and abroad
Initial public offering ofour IPO Shares
RM[.] for each IPO Share
52,000,000 new Shares to be issued pursuant to the Public Issue
Malaysian Issuing House Sdn Bhd (258345-X)
Admission of our Company to the Official List of Bursa Securities and the
listing of and quotation for our entire enlarged issued and paid-up share
capital of RMI9,100,000 comprising 191,000,000 Shares on the ACE
Market ofBursa Securities
ACE Market Listing Requirements of Bursa Securities and any
amendments thereto from time to time
The Public Issue and Listing, collectively.
15 September 2011, being the latest practicable date prior to the
registration of this Prospectus
Any day on which Bursa Securities is open for the trading of securities
Malaysian Investment Development Authority (formerly known as
Malaysian Industrial Development Authority)
Ministry ofInternational Trade and Industry Malaysia
Net assets
x
Nakareg Agreement
Nakareg Holdings Share(s) or
Share(s)
Agreement
Nakareg International Share(s)
Nakareg Share(s)
NKG Technology Agreement
NKG Technology Share(s)
Official List
Participating Financial
Institution( s)
PAT
PBT
PE multiple
PM Securities or Adviser or
Sponsor or Underwriter or
Placement Agent
Pink Form Shares Allocation
PRC
Promoters
Public
Public Issue
Record ofDepositors
\
RDC
Reporting Accountants
R&D
SSA dated 26 September 2011 entered into between the Company and
Leong Yeok Fang, Pang Kong Chek, Lian Yoon Hing, Kazutaka Misawa
and Hong Chin Chye in relation to the Acquisition ofNakareg
Ordinary shares ofRMO.IO each in Nakareg Holdings
SSA dated 26 September 2011 entered into between the Company and Hau
Mun Meng in relation to the Acquisition ofNakareg International
Ordinary shares ofHKD1.00 each in Nakareg International
Ordinary shares ofRM1.00 each in Nakareg
SSA dated 26 September 2011 entered into between the Company and Hau
Mun Meng and Hong Chin Chye in relation to the Acquisition of NKG
Technology
Ordinary shares ofRM1.00 each in NKG Technology
A list specifying all securities which have been admitted for listing on
Bursa Securities and not removed
Participating financial institution(s) for Electronic Share Application, a list
as set out in Section 17.5.2 ofthis Prospectus
Profit after taxation
Profit before taxation
Price earnings mUltiple
PM Securities Sdn Bhd (66299-A)
5,000,000 IPO Shares to be made available for application by the eligible
Directors, employees and business associates/persons who have
contributed to the success ofour Group
People's RepubJic of China
Promoters of our Company namely, Hau Mun Meng, Hong Chin Chye and
Leong Yeok Fang, collectively
All persons or members of the public comprising citizens of Malaysia and
companies, societies, co-operatives and institutions incorporated or
organised under the laws of Malaysia excluding our Directors, substantial
shareholders and persons connected or associated with them (as defmed in
the Listing Requirements)
Public issue by our Company of the IPO Shares at the IPO Price to be
allocated in the manner set out in Section 4.3 ofthis Prospectus
A record of depositors provided by Bursa Depository under the rules of
Bursa Depository
Regional distribution centre, a collection and consolidation centre for
finished goods, components and spare parts produced by its own group of
companies for its own brand to be distributed to dealers, importers or its
subsidiaries or other unrelated companies within or outside the country
and such activities includes bulk breaking, repackaging and labeling
UHY Chartered Accountants.
Research and development
xi
SC Securities Commission Malaysia
Share Split The subdivision of one (1) ordinary share of RMl.OO each in Nakareg
Holdings to ten (10) Shares.
SSA(s) Conditional share sale agreements
Sq.ft. Square feet
Underwriting Agreement Underwriting agreement dated [.] entered into between our Company
and PM Securities
US United States of America
Vital Factor Consulting Vital Factor Consulting Sdn Bhd (266797-T), the independent business
and market research consultants
WFOE Wholly Foreign-Owned Enterprise
CURRENCIES:
HKD Hong Kong Dollar
RM and sen Ringgit Malaysia and sen respectively
RMB Chinese Renminbi
USD United States Dollar
xii
panyNo.918382-T
TECHNICAL TERMS
To facilitate better understanding of the business of our Group, the following glossary contains an explanation
and description of certain terms used in this Prospectus in connection with our Group. The terms and their
meanings may not correspond to standard industry meanings or usage of these terms.
Alternating current ("AC")
ATE
AV
CNC
Conductor
CPU
Current
Direct current ("DC")
EDM
EMI
Electronic transformer
Insulator
Inverter
IT
LAN
LCD
LED
Linear power transformer
Mains electricity
Printed circuit board assembly
("PCBA")
POS
Power distribution transformer
Rectifier
In an AC, the flow of electricity periodically reverses direction.
Automatic test equipment
Audio visual
Computer numeric control
A conductor is a material that allows electricity to flow through it readily.
Examples of materials that are currently commonly used as conductors
include copper and aluminium
Central processing unit
Current refers to the rate of flow of electricity in an electric circuit. The unit
for measuring current is the ampere
In a DC, the flow of electricity is in one direction only
Electrical discharge machining
Electromagnetic interference
An electronic transformer is a transformer that is designed to be used in
electrical or electronic devices. (See explanation for transformer)
An insulator is a material that does not allow electricity to flow through it
readily. Examples of materials that are currently commonly used as
insulators include rubber, most types of plastics and air
An inverter is an electrical device that converts DC into AC
Information technology
Local area network
Liquid crystal display, a thin, flat electronic visual display that uses the light
modulating properties of liquid crystals. It is used in a wide range of
applications including computer monitors and TV signage
Light emitting diode, a display and lighting technology used in various
electrical and electronic products, from a tiny on/off light to digital readouts,
flashlights, traffic lights and perimeter lighting.
A linear power transformer is a transformer in which electricity passes
through the device directly from the power source
Mains electricity refers to the alternating current electric power supply that is
commonly encountered by users in houses and buildings. In Malaysia, mains
electricity is supplied to users at a voltage of230 or 240 volts
A PCBA is a printed circuit board that has been populated with electronic
components to create an electronic circuit that performs specific functions
Point of sale
A power distribution transformer is a transformer that is designed to be used
as part ofthe electrical grid, or electrical power distribution system
A rectifier is an electrical device that converts AC into DC
xiii
!Company No. 918382-T ~
TECHNICAL TERMS (Conl'd)
Restriction of hazardous
substances directive ("ROHS")
SMT
Step-down transformer
Step-up transformer
Switch mode power supply
("SMPS")
Thin client
Transformer
UPS
Voltage
The "Directive on the restriction of the use of certain hazardous substances
in electrical and electronic equipment 2002/95IEC", commonly known as
the ROHS, is an European Union directive that restricts the use of six
hazardous materials in the manufacture of various types of electronic and
electrical equipment. The ROHS directive took effect on 1 July 2006, and is
required to be enforced and become law in each European Union member
state
Surface Mount Technology
A step-down transformer is a transformer that is designed such that the
output voltage is lower than the input voltage
A step-up transformer is a transformer that is designed such that the output
voltage is higher than the input voltage
A SMPS is an electronic power supply device that is used to convert
electricity at one voltage or current into electricity at some other voltage or
current. In a SMPS, AC input is converted into DC by a rectifier. The DC is
switched on and off at a high frequency by an electronic switching regulator,
and then passed through a transformer to convert the voltage or current to
the desired level
A thin client refers to a computer that depends heavily on some other
computer (its server) to fulfil its computational roles. Thin clients usually
occur as components of a broader computer infrastructure, where several
thin clients share their computations with the same server
A transformer is a device designed to convert (step-up or step-down)
electricity in an AC system from one voltage or current into some other
desired voltage or current
Uninterrupted power supply
Voltage refers to the capacity of an electric field to do work. The unit for
measuring voltage is the volt
XIV
EXCHANGE RATES
The average and closing exchange rates as outlined in the table below are extracted from BNM. The average
exchange rate for each fmancial period is the average of the closing exchange rates on the last date of each
month during that financial period. These exchange rates have been presented solely for information only and
should not be construed as a representation that those HKD, RMB or USD amounts could have been, or could be,
or was converted into RM, at any particular rates, the rates stated below, or at all.
HKD:RM RMB:RM USD:RM
Average Closing Averae:e Closine: _Averal!e Closin1!
FYE 31 December 2008 0.4287 0.4470 0.4820 0.5076 3.3362 3.4640
FYE 31 December 2009 0.4544 0.4418 0.5157 0.5019 3.5225 .4265
FYE 31 December 2010 0.4131 0.3964 0.4748 0.4674 3.2105 3.0855
Closin
7.7831 31 March 2011
(Source: BNM)
The high and low exchange rates between HKD and RM, RMB and RM and USD and RM for each of the past
six (6) months prior and up to the LPD were as follows:
HKD:RM
Low Hie:h
RMB:RM
Low High
USD:RM
Low High
March 2011 0.3879 0.3927 0.4612 0.4664 3.0259 3.0640
April 2011 0.3812 0.3898 0.4555 0.4637 2.9615 3.0305
May 2011 0.3823 0.3935 0.4571 0.4714 2.9700 3.0605
June 2011 0.3853 0.3926 0.4626 0.4721 2.9975 3.0575
July 2011 0.3772 0.3887 0.4563 0.4680 2.9385 3.0152
August 2011 0.3772 0.3887 0.4568 0.4715 2.9395 3.0360
(Source: BNM)
As at the LPD, the closing exchange rate between HKD and RM was HKDI to RM0.3964, between RMB and
RM was RMBI to RM0.4838 and between USD and RM was USDI to RM3.0905.
The above exchange rates have been calculated with reference to the exchange rates quoted from BNM and
should not be construed as representations that the HKD, RMB or USD amounts actually represent such amounts
or could be or was converted into the RM at the rate indicated, or at any other rate, or at all.
We believe we have extracted the relevant information in its proper form and context in this prospectus and have
not verified the above exchange rates.
xv
Company No. 91838
TABLE OF CONTENTS
Page
1. INTRODUCTION
2. CORPORATE DIRECTORY 3
3. INFORMATION SUMMARY 6
3.1 Overview of our Group and business 6
3.2 Our competitive advantages and key strengths 7
3.3 Our future plans and strategies 7
3.4 Our prospects 7
3.5 Financial highlights 8
3.6 Summary of our IPO 11
3.7 Risk factors 11
4. PARTICULARS OF OUR IPO 13
4.1 Opening and closing of applications 13
4.2 Tentative timetable 13
4.3 Details of our IPO 13
4.4 Listing 15
4.5 Share capital 15
4.6 Market capitalisation 16
4.7 Purposes of our IPO 16
4.8 Basis of arriving at the IPO Price 16
4.9 Dilution 17
4.10 Use ofproceeds 18
4.11 Financial impact from utilisation of proceeds 21
4.12 Brokerage, underwriting commission and placement fee 21
4.13 Salient terms of the Underwriting Agreement 21
5. RISK FACTORS 22
5.1 Risks relating to our business and industry 22
5.2 Risks relating to our Listing and investment in our IPO Shares 28
5.3 Other risks 30
6. INFORMATION ON OUR GROUP 31
6.1 History and business 31
6.3 Information on our subsidiary companies 37
6.4 Property, plant and equipment 43
6.5 Material capital expenditure and divestitures 46
6.6 Regulatory requirement and environmental issue 46
6.7 Listing Scheme 47
7. BUSINESS OVERVIEW 50
7.1 Business model 50
7.2 Principal activities and services provided 55
7.3 Our products, services and operations
56
7.4 Process flow
70
7.5 Quality management system
77
7.6 R&D
82
7.7 Operational facilities
83
7.8 Production output, capacity and utilisation
84
7.9 Types, sources and availability of raw materials! input 85
7.10 Technology used
87
xvi
TABLE OF CONTENTS (Cont'd)
Page
7. BUSINESS OVERVIEW (Cont'd)
7.11 Distribution and marketing strategy 91
7.12 Trademark 92
7.13 Principal markets 93
7.14 Major customers 93
7.15 Major suppliers 95
7.16 Seasonality 96
7.17 Interruptions to business 97
7.18 Future plans, strategies and prospects 97
8. INDEPENDENT MARKET RESEARCH REPORT 103
9. LEGAL OPINION 137
9.1 Legal opinion on the relevant laws and regulations of Hong Kong 137
9.2 Legal opinion on the relevant laws and regulations of the PRC 139
10. INFORMATION ON OUR PROMOTERS, SUBSTANTIAL SHAREHOLDERS, 149
DIRECTORS, KEY MANAGEMENT AND KEY TECHNICAL PERSONNEL
10.1 Promoters and substantial shareholders 149
10.2 Board ofDirectors 151
10.3 Key management and key technical personnel 156
10.4 Declarations from our Promoters, Directors, key management and key technical 159
personnel
10.5 Family relationships and associations 159
10.6 Service agreements 159
10.7 Other matters 159
10.8 Employees 160
11. APPROVALS AND CONDITIONS 164
11.1 Approvals from the relevant authorities in Malaysia 164
11.2 Approvals from the relevant authorities in Hong Kong 180
11.3 Approvals from the relevant authorities in the PRC 180
11.4 Moratorium on sale of our Shares 180
12. CONFLICT OF INTERESTS AND RELATED PARTY TRANSACTIONS 182
12.1 Interests in similar business 182
12.2 Related party transactions 182
12.3 Monitoring and oversight of conflict of interests and related party transactions 182
12.4 Transactions that are unusual in nature or condition 182
12.5 Outstanding loans made to or for the benefit of related parties 182
12.6 Promotion of material assets acquired 182
12.7 Declaration by advisers 183
13. FINANCIAL INFORMATION 184
13.1 Historical financial information 184
13.2 Management's discussion and analysis of financial condition and results of operations 189
13.3 Capitalisation and indebtedness 206
13.4 Liquidity and capital resources 206
13.5 Trend analysis 211
13.6 Dividend policy 213
13.7 Reporting Accountants' Letter on Proforma Consolidated Financial Information 214
14. ACCOUNTANTS' REPORT 238
15. DIRECTORS'REPORT 385
XVll
i Company No. 9l8382-T ~
TABLE OF CONTENTS (Cont'd)
Page
16. ADDITIONAL INFORMATION 386
16.2 Articles of Association 386
16.3 Benefits to our Promoters, Directors and substantial shareholders 390
16.4 Material litigation 390
16.5 Material contracts 390
16.6 Material agreements 391
16.7 Repatriation of capital and remittance of profits 391
16.8 Public take-overs 392
16.9 Consents 392
16.10 Documents available for inspection 393
16.11 Responsibility statements 393
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE 394
17.1 Opening and closing dates for application 394
17.2 Methods of application 394
17.3 Procedures for application 394
17.4 Application using Application Form 395
17.5 Application using Electronic Share Application 398
17.6 Application using Internet Share Application 403
17.7 Application and acceptance 410
17.8 CDS account 411
17.9 Notice of allotment 412
17.10 Enquiries 412
17.11 List of ADAs 413
xviii
yNo.9I8382-T
1. INTRODUCTION
This Prospectus is dated [e) 2011.
We [ehave registered] a copy of this Prospectus together with the Application Fonns with the SC. We [ehave
also lodged] a copy of this Prospectus, together with the Application Fonns with the Registrar of Companies.
Neither the SC nor the Registrar of Companies takes any responsibility for its contents.
We [ehave obtained] the approval from Bursa Securities on [e], for, inter-alia, our admission to the Official
List of the ACE Market of Bursa Securities and for the listing of and quotation for our entire enlarged issued
and paid-up share capital, including the IPO Shares, which are the subject of this Prospectus, on the ACE
Market of Bursa Securities. Our Shares will be admitted to the Official List of the ACE Market of Bursa
Securities and official quotation will commence upon receipt of confrrmation from Bursa Depository that all the
IPO Shares have been credited into the respective CDS accounts of the successful applicants and the notices of
allotment have been issued and despatched to all successful applicants.
Bursa Securities assumes no responsibility for the correctness of any statement made or ofany opinion or report
expressed in this Prospectus. Our admission to the Official List of the ACE Market of Bursa Securities shall not
be taken as an indication ofthe merits of our Company, our Shares and/or our Listing exercise.
Pursuant to Section 14(1) of the Securities Industry (Central Depositories) Act, 1991, Bursa Securities has
prescribed our Shares as prescribed securities. Therefore, we will deposit our Shares directly with Bursa
Depository. Any dealings in our Shares will be carried out in accordance with the Securities Industry (Central
Depositories) Act, 1991 and the Rules of Bursa Depository. We will not issue share certificates to successful
applicants.
Persons submitting applications by way of Application Fonn or by way of Electronic Share Application or
Internet Share Application (refer to Section 17.4, Section 17.5 and Section 17.6 respectively of this Prospectus)
MUST have a CDS account. If you do not presently have a CDS account, you should open a CDS account at an
ADA prior to making an application for our IPO Shares.
In the case of an application by way of Application Fonn, you should state your CDS account number
in the space provided in the Application Fonn; or
In the case of an application by way of Electronic Share Application, only an applicant who has a CDS
account number can make an Electronic Share Application and you shall furnish your CDS account
number to the Participating Financial Institution by way of keying in your CDS account number if the
instructions on the A TM screen at which you submit your Electronic Share Application require you to
do so; or
In the case of an application by way of Internet Share Application, only an applicant who has a CDS
account opened with the Internet Participating Financial Institution can make an Internet Share
Application. Arising therewith, your CDS account number will automatically appear in the electronic
IPO online application fonn.
A corporation or institution cannot apply for our IPO Shares by way of Electronic Share Application or Internet
Share Application.
Pursuant to the Listing Requirements, at least 25% of the total number of our Shares for which Listing is sought
must be held by a minimum number of two hundred (200) public shareholders holding not less than one hundred
(100) Shares each at the point of our Listing. We expect to meet this public shareholding spread requirement at
the point of Listing. If we do not meet the public shareholding requirement, we may not be allowed to proceed
with the Listing. In such an event, all monies paid in respect of all applications will be returned in full without
interest and if such monies are not returned in full within fourteen (14) days after we become liable to do so, the
provision of subsection 243(2) ofthe CMSA shall apply accordingly.
1. INTRODUCTION (Cont'd)
You should rely on the information contained in this Prospectus or any applicable Prospectus supplement.
Neither we nor our Adviser have authorised anyone to provide you with information that is different and not
contained in this Prospectus. The delivery of this Prospectus or any issue or offer made in connection with this
Prospectus shall not, under any circumstances, constitute a representation or create any implication that there
has been no change in our affairs since the date of this Prospectus. Nonetheless, should we become aware of any
material change or development affecting a matter disclosed in this Prospectus from the date of registration of
this Prospectus with the SC up to the date of our Listing, we shall further issue a supplemental or replacement
prospectus, as the case may be, in accordance with the provisions of Section 238 ofthe CMSA.
The distribution of this Prospectus and the sale of our IPO Shares in other jurisdictions outside of Malaysia may
be restricted by law. If you have come into possession of this Prospectus, we require you to inform yourself of
and to observe such restrictions. This Prospectus does not constitute and may not be used for the purpose of an
offer or invitation which is not authorised or unlawful, or to any person to whom it is unlawful to make such
offer or invitation.
YOU SHOULD RELY ON YOUR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF
THE INVESTMENT. IN CONSIDERING THE INVESTMENT, IF YOU ARE IN ANY DOUBT AS TO
THE ACTION TO BE TAKEN, YOU SHOULD CONSULT YOUR STOCKBROKERS, BANK
MANAGERS, SOLICITORS, ACCOUNTANTS OR OTHER PROFESSIONAL ADVISERS
IMMEDIATELY BEFORE APPLYING FOR OUR IPO SHARES.
2
2. CORPORATE DIRECTORY
BOARD OF DIRECTORS
Name
Teh Kok Lim
(Independent Non-Executive Chairman)
HauMunMeng
(Group Managing Director)
Hong Chin Chye
(Executive Director)
Kazutaka Misawa
(Non-Independent Non-Executive Director)
ChuKheh Wee
(Independent Non-Executive Director)
AUDIT COMMITTEE
Name
ChuKheh Wee
TehKokLim
Kazutaka Misawa
NOMINATION COMMITTEE
Name
TehKokLim
ChuKheh Wee
Kazutaka Misawa
Address
No. 44, lalan USl III1D
47620 Subang laya
Selangor Darnl Ehsan
No.9, lalan Desa 6/5
Bandar Country Homes
48000 Rawang
No.5, lalan Bestari 36/2
Taman Bestari Indah
81800 Ulu Tiram, Johor
No. B-19-3, Tingkat 19
USJ One A venue
Persiaran Mewah, usn
47600 Subang Jaya
No. 12 AC, Mewah Court
Taman Bukit Mewah
43000 Kajang
Designation
Chairman
Member
Member
Designation
Chairman
Member
Member
Profession Nationality
Company Malaysian
Director
Company Malaysian
Director
Company Malaysian
Director
Company Japanese
Director
Company Malaysian
Director
Directorsbip
Independent Non-Executive Director
Non-Independent Non-Executive Director
Directorsbip
Non-Independent Non-Executive Director
3
2. CORPORATE DIRECTORY (Cont'd)
REMUNERATION COMMITTEE
Name
Kazutaka Misawa
Hau Mun Meng
TehKokLim
REGISTERED OFFICE
HEAD I MANAGEMENT OFFICE I
PRINCIPAL PLACE OF BUSINESS
COMPANY SECRETARIES
AUDITORS AND REPORTING
ACCOUNTANTS
DUE DILIGENCE SOLICITORS ON
NAKAREG HOLDINGS, NAKAREG AND
NKG TECHNOLOGY, AND LEGAL
ADVISERS FOR THE PUBLIC ISSUE
NAKAREG INTERNATIONAL AND THE
LEGAL ADVISERS ON THE LAWS OF
HONG KONG
Designation Directorship
Chainnan Non-Independent Non-Executive Director
Member Executive Director
Member Independent Non-Executive Director
Level 8, Symphony House
Pusat Dagangan Dana 1
Jalan PJU lA146
47301 Petaling Jaya
Se1angor Darul Ehsan
Tel No.: 03-7841 8000
No.2, Jalan BJ 5
Taman Perindustrian Belmas Johan
48000 Rawang
Selangor Darul Ehsan
Tel No. : 03-6091 0133
Fax No.: 03-60910141
Website: www.nakareg.com
E-mail address:enquiry@my.nakareg.com
See Siew Cheng (MAICSA 7011225)
Leong Shiak Wan (MAICSA 7012855)
c/o Level 8, Symphony House
Jalan PJU lA146
47301 Petaling Jaya
Se1angor Darul Ehsan
Tel No.: 03-7841 8000
UHY Chartered Accountants (AF 1411)
Suite 1 L05, Level 11
The Gardens South Tower
Mid Valley City
Lingkaran Syed Putra
59200 Kuala Lumpur
Tel No. : 03-2279 3088
Christina Chia Law Chambers
Advocates and Solicitors
Suite 5001, 5th Floor
President House (ParkRoyal)
Jalan Sultan Ismail
50250 Kuala Lumpur
Tel No. : 03-2141 7711
Stevenson, Wong & Co.
4fF & 5fF, Central Tower
No. 28, Queen's Road
Central, Hong Kong
Tel No.: +8522526 6311
4
2. CORPORATE DIRECTORY (Coot'd)
SHANGHAI OPTIMUS, NAKAREG
KUNSHAN AND CHANGSHU NAKAREG,
AND THE LEGAL ADVISERS ON THE
LAWS OF THE PRC
Martin Hu & Partners
81F, Kerry Parkside Office
1155 Fang Dian Road, Pudong
Shanghai, 201204 PRC
Tel No.: +862150101666
PRINCIPAL BANKER Public Bank Berhad (6463-H)
Rawang Branch
45, lalan 1 B, Taman lati
48000 Rawang, Selangor
Tel No.: 03-6091 0378
Fax No.: 03-6091 7424
ISSUING HOUSE Malaysian Issuing House Sdn Bhd (258345-X)
lalan PJU IN46
47301 Petaling laya
Tel No. : 03-7841 8000
SHARE REGISTRAR Tricor Investor Services Sdn Bhd (118401-V)
Level 17, The Gardens North Tower
Mid Valley City
59200 Kuala Lumpur
Tel No. : 03-2264 3883
INDEPENDENT BUSINESS AND
MARKET RESEARCH CONSULTANTS
Vital Factor Consulting Sdn Bhd (266797-T)
75C & nc, lalan SS22119
Damansara laya
47400 Petaling laya
Tel No. : 03-7728 0248
ADVISER, SPONSOR, UNDERWRITER
AND PLACEMENT AGENT
PM Securities Sdn Bhd
Mezzanine Floor, Menara PMI
No.2, lalan Changkat Ceylon
50200 Kuala Lumpur
Tel No. : 03-2715 1330
LISTING SOUGHT ACE Market of Bursa Securities
5
3. INFORMATION SUMMARY
TIDS SECTION IS ONLY A SUMMARY OF THE SALIENT INFORMATION ABOUT OUR GROUP
AND OUR IPO, AND DOES NOT PURPORT TO BE COMPLETE AND SHOULD BE READ IN
CONJUNCTION WITH, AND IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. YOU SHOULD READ AND
UNDERSTAND THIS SECTION TOGETHER WITH THE ENTIRE PROSPECTUS BEFORE
DECIDING WHETHER OR NOT TO INVEST IN OUR COMPANY.
3.1 Overview of our Group and business
Nakareg Holdings was incorporated in Malaysia on 15 October 2010 under the Act as a public limited
company under its present name. Nakareg Holdings is an investment holding company and our Group is
primarily engaged in the manufacturing of electronic transformers and related products, namely
electronic noise filters, SMPS systems and related components, such as transformer coils and inductors.
In addition, we manufacture parts and components for electrical and electronic products, such as
precision parts and components, PCBA and wire harness as well as computer and electronic products,
such as industrial server and electronic weighing scales.
Our Group structure as at the LPD is as follows:
100%
lOO%
Nakareg Kunshan
The main activities ofour Group are summarised below:
Company Principal activities
Nakareg Holdings Investment holding
Nakareg Manufacture of electronic transformers and related components
Nakareg International Investment holding, trading and distribution
NKG Technology Manufacture of electronic transformers
Subsidiaries ofNakareg International
Shanghai Optimus Manufacture of electronic transformers and related products, PCBA and
electronic weighing scales
Nakareg Kunshan Manufacture of electronic transformers and related components, PCBA, wire
harness and industrial server
Changshu Nakareg
Manufacture of precision parts and components for electrical and electronic
products
6
3. INFORMAnON SUMMARY (Coot'd)
As at the date of this Prospectus, we do not have any associated company.
Please refer to Sections 6 and 7 of this Prospectus for further information on our Group and our
business respectively.
3.2 Our competitive advantages and key strengths
Our competitive strengths and advantages are important in sustaining our business as well as providing
us with the platform for future business growth which include the following:
Our in-house design capabilities;
The quality of our products;
We are an approved supplier to some ofour customers;
Our manufacturing facilities are located close to our customers;
Our products have a diverse range ofapplications; and
We have an established track record.
Please refer to Section 7.1.3 of this Prospectus for further information on our Group's competitive
advantages and key strengths.
3.3 Our future plans and strategies
Our future plans and strategies include the following:
New manufacturing facilities:
Relocating the Changshu Nakareg manufacturing facilities; and
Establishing a new manufacturing facility in Malaysia.
Expanding our existing facilities:
Precision parts and components manufacturing; and
PCBA manufacturing.
Developing our existing businesses:
Growing and developing our precision parts and components, industrial server and PCBA
and wire harness manufacturing businesses.
Product branding:
Branding ofour own products; and
Trademark registration.
Please refer to Section 7.18.1 of this Prospectus for further details on our Group's future plans and
strategies.
3.4 Our prospects
Our Group's core business is focused on manufacturing of electronic transformers and related products
as most of our Group's revenue for the FYE 31 December 2010 was derived from the manufacturing of
electronic transformers and related products from our customers in Malaysia and the PRC. Please refer
to Section 8 of this Prospectus for information on the Independent Market Research Report.
7
3. INFORMATION SUMMARY (Cont'd)
Our Directors are ofthe view that the prospects of our Group are favourable in light of our competitive
advantages and key strengths, our future plans to create growth and development of our precision parts
and components as well as the industrial server manufacturing businesses. These factors would enable
us to sustain our business and provide business growth opportunities.
Please refer to Section 7.18.2 of this Prospectus for further details on our Group's prospects.
3.5 Financial highligbts
3.5.1 Proforma consolidated statement of comprehensive income
We have prepared our proforma consolidated statement of comprehensive income for each of
the past three (3) FYE 31 December 2008 to FYE 31 December 2010 below, for illustrative
purposes only. The proforma consolidated statement of comprehensive income have been
prepared based on the audited fmancial statements of our Company for the FPE 31 December
20 I 0 and our subsidiaries for the past three (3) FYE 31 December 2008 to FYE 31 December
2010 and on the assumption that the current structure of our Group has been in existence
throughout the past three (3) financial years under review. Our proforma consolidated
statement of comprehensive income below have also been prepared in accordance with the
applicable approved accounting standards in Malaysia.
You should read the summary of our financial data regarding our business for the past three
(3) financial years that we have presented below together with our management's discussion
and analysis of fmancial condition and results of operations, the Reporting Accountants'
Letter on our Proforma Consolidated Financial Information and the Accountants' Report as
set out in Sections 13.2, 13.7 and 14 ofthis Prospectus, respectively.
< Proforma >
FYE 31 December
2008 2009 2010
RM RM RM
Revenue 41,646,922 38,451,076 39,059,087
Cost ofsales (34,379,703) (27,373,875) (30,812,661)
GP 7,267,219 11,077,201 8,246,426
Other operating income 401,513 318,417 1,195,345
Administrative expenses (3,082,744) (2,739,607) (4,009,297)
Selling and distribution expenses (96,692) (164,090) (115,872)
Other operating expenses (548,309) (303,939) (335,310)
Finance costs (115,487) (86,774) (170,137)
PBT 3,825,500 8,101,208 4,81I,155
Taxation (l,562,675) (1,594,020) (829,345)
Net profit for the financial year 2,262,825 6,507,188 3,981,810
Other comprehensive income
Foreign exchange differences, 1,176,698 (288,626) (1,188,363)
representing net profit not recognised
in the proforma consolidated
statement ofcomprehensive income
Net profit for the financial year, 3,439,523 6,218,562 2,793,447
representing total comprehensive
income for the financial year
8
2010
0.918382-T
< Proforma >
FYE 31 December
2008 2009
EBlTDA
Number ofShares in issue{l) 139,000,000 139,000,000 139,000,000
GP margin (%)(2) 17.45 28.81 21.11
PBT margin (%l3) 9.19 21.07 12.32
PAT margin (%l4) 5.43 16.92 10.19
Effective tax rate (%) 40.85 19.68 17.24
Gross EPS (sen)(5) 5.23 7.97 5.93
NetEPS (senf6) 1.63 4.68 2.86
Diluted net EPS (sent) 1.18 3.41 2.08
Notes:
(1) Number ofexisting Shares in issue after the Acquisitions by Nakareg International, Acquisitions by Nakareg
Holdings and Share Split but before the Public Issue.
(2) The GP margin is computed by dividing the GP by the reverrue earned in the respective financial years.
(3) The P BT margin is computed by dividing the PBT by the revenue earned in the respective financial years.
(4) The PATmargin is computed by dividing the PAT by the revenue earned in the respective financial years.
(5) The gross EPS is computed by dividing the PBT by 139,000,000 Shares.
(6) The net EPS is computed by dividing the PAT by 139,000,000 Shares.
(7) The diluted net EPS is computed by dividing PAT by the enlarged rrumber ofShares after the Listing Scheme
of191,000,000 Shares.
There were no exceptional or extraordinary items throughout the fmancial period and years
under review.
3.5.2 Proforma consolidated statement of financial position
We have prepared our proforma consolidated statement of fmancial pOSItIOn below for
illustrative purposes only, based on the audited fmandal statements of our Company for the
FPE 31 December 2010 and our subsidiaries for the FYE 31 December 2010 to show the
effects of our Public Issue and the utilisation of the proceeds arising from the IPO on the
assumption that these transactions had been effected as at 31 December 2010.
We advise you to read the proforma consolidated statement of financial position together with
the accompanying notes and assumptions included in the Reporting Accountants' Letter on
our Proforma Consolidated Financial Information enclosed in Section 13.7 ofthis Prospectus.
9
3. INFORMATION SUMMARY (Coord)
Audited as at
31 December
2010
RM
(I)
After Acquisitions
by Nakareg
International,
Acquisitions by
Nakareg Holdings
and Share Split
RM
(II)
After
proforma (I)
and Public
Issue
RM
(III)
After
proforma
(II) and
utilisation
of proceeds
from the
Public
Issue
RM
Non- current assets
Property, plant and equipment 6,281,406 6,281,406 (e)
Current assets
Inventories
Trade receivable and other
receivables
Tax recoverable
Cash and bank balances
56,774
6,004,322
9,842,059
441,654
6,004,322
9,842,059
441,654
6,004,322
9,842,059
441,654
Total assets
2
56,776 19,074,934
Equity
Share capital 2 13,900,000 19,100,000 19,100,000
Share premium 204,018 (e) (e)
Merger reserve (7,455,694) (7,455,694) (7,455,694)
Reserves 6,569,010 6,569,010
Total Equity (4,462) 13,217,334 (e] (e]
Non-current liabilities
Hire-purchase payables 66,414 66,414 66,414
Bank borrowings 1,109,295 1,109,295 1,109,295
Deferred tax liability 400 400 400
1,176,109 1,176,109 1,176,109
Current liabilities
Trade payable and other payables 61,238 8,947,939 8,947,939 8,947,939
Hire purchase payabJes 859,986 859,986 859,986
Bank borrowings 965,378 965,378 965,378
Tax payable 189,594 189,594 189,594
Total liabilities
Total equity and liabilities
61,238 10,962,897 10,962,897 10,962,897
(4,462) 23,356,340 (e] (e] Net (Iiabilities)/assets
Number of ordinary shares 2 139,000,000 191,000,000 191,000,000
Net (liability)/assets attributable (223,100) 16.80 (e]
'e]
to equity holders per ordinary
share (sen)
10
0.918382-T I
3. INFORMATION SUMMARY (Conl'd)
3.5,3 Auditors' qualification
The audited fmancial statements of our Company for the FPE 31 December 2010 and our
subsidiaries for the FYE 31 December 2008, FYE 31 December 2009 and FYE 3] December
2010 are not subject to any audit qualification as disclosed in Section 13.1.1 of this
Prospectus.
3.6 Summary of our IPO
lPO size 52,000,000 IPO Shares by our Company, which will be allocated as follows:
44,000,000 IPO Shares by way of private placement to the selected investors
at the IPO Price;
5,000,000 IPO Shares to Eligible Directors, employees and business
associates! persons who have contributed to the success of our Group; and
3,000,000 lPO Shares for the application by the Public at the IPO Price.
IPO Price RM[.] per IPO Share.
Use of We intend to utilise the gross proceeds from the Public Issue ofRM[e] million in
proceeds the following manner:
Percentage Estimated timeframe
of gross for utilisation upon
proceeds Listing
RM'OOO (%)
Expanding our manufacturing [e] 37.4 Within 24 months
operations
Relocating the Changshu [e] 26.7 Within 24 months
Nakareg manufacturing facility
and expansion ofour existing
manufacturing capabilities in
thePRC
Product branding [e] 3.8 Within 12 months
Working capital [e] 10.7 Within 12 months
Estimated listing expenses [e] 21.4 Within 2 weeks
Total gross proceeds [e]
Please refer to Section 4 ofthis Prospectus for detailed information on our lPO.
3.7 Risk factors
An investment in our IPO Shares involves a certain degree of risk. Before investing in our IPO Shares,
you should carefully consider the following risk factors (which may not be exhaustive), along with
other matters in this Prospectus. .
Risks relating to our business and industry which we operate
(i) Revenue contribution from our major customers;
(ii) Purchases from our major suppliers;
(iii) Foreign exchange risk fluctuations;
(iv) Global fmancial crisis;
(v) Fluctuation in raw material prices;
(vi) Competition from other manufacturers in the same country;
(vii) Bargaining power of our customers;
(viii) Changes in political, economy and regulatory conditions;
II
(ix) Dependency on Executive Directors and key management personnel; and
(x) Production/operational risks.
Risks relating to our Listing and investment in our ]PO Shares
(i) Potential delay or failure of our Listing;
(ii) Delay between admission and trading of our IPO Shares;
(iii) No prior market for our Shares;
(iv) Volatility in our Share price and trading volume; and
(v) Our Promoters will retain control over our Group upon Listing.
Other risks
(i) Disclosure regarding forward-looking statements.
Please refer to Section 5 of this Prospectus for further details on the above risk factors.
12
4. PARTICULARS OF OUR IPO
4.1 Opening and closing of applications
. Applications will be accepted from 10.00 a.m. on [e] and will be closed at 5.00 p.m. on [e] or such
later date or dates as our Directors and Underwriter may in their absolute discretion mutually decide.
Late applications will not be accepted.
4.2 Tentative timetable
The tentative timing ofevents leading up to our Listing is set out below:
Event Tentative date
Issuance ofProspectus/ opening of the application for our IPO Shares
Closing ofthe application for our IPO Shares
Tentative date for balloting of applications for our IPO Shares
Tentative date for allotment of our IPO Shares to successful applicants
Tentative listing date
[e] at 10.00 a.m.
[ e] at 5.00 p.m.
[e]
[e]
[e]
This timetable is tentative and is subject to change, which may be necessary to facilitate implementation
procedures. The application for our IPO Shares will close on the time and date stated above or such
later date or dates as our Directors and Underwriter may in their absolute discretion mutually decide.
Should the closing date for the application of our IPO Shares be extended, the dates for the allotment of
our IPO Shares pursuant to our IPO and our Listing will be extended accordingly. We will announce
any extension of time for the application of our IPO Shares by way of advertisements in a widely
circulated English and Bahasa Malaysia newspaper within Malaysia prior to the original closing date of
applications for our IPO Shares.
4.3 Details of our IPO
Public Issue
The Public Issue of 52,000,000 IPO Shares, representing approximately 27.2% of the enlarged issued
and paid-up share capital our Company, at the IPO Price of RM[ e] payable in full on application upon
the terms and conditions as set out in the Prospectus and will be allocated in the following manner:
4.3.1 Private placement
44,000,000 IPO Shares, representing approximately 23.0% of the enlarged issued and paid-up
share capital of our Company, will be made available to selected investors by way of private
placement.
The IPO Shares for allocation to the selected investors pursuant to the private placement will not
be underwritten as irrevocable written undertakings have been obtained from the respective
selected investors to subscribe for our IPO Shares.
4.3.2 Eligible Directors, employees and business associates/persons who have contributed to
the success of our Group
share capital of our Company, will be made available for application by the eligible Directors,
employees and business associates/persons who have contributed to the success of our Group
under the Pink Form Shares Allocation.
13
4. PARTICULARS OF OUR IPO (Cont'd)
The Pink Fonn Shares Allocation will be allocated as follows:
Category No. of persons No. of Shares
Eligible Directors 2 1,000,000
Eligible employees 33 3,500,000
Eligible business associates
- Suppliers 5 500,000
Total 40 5,000,000
The allocation to the eligible Directors and employees of our Group is based on the following
criteria as approved by our Board:
(a) At least eighteen (18) years of age;
(b) Job position; and
(c) Length of service.
For the allocation to the business associates/persons who have contributed to the success of
our Group, our Board has taken into consideration their length of business relationship with
our Group and their contribution to the success of our Group.
Save for our eligible Directors as set out below, none of our other Directors is entitled for the
Pink Fonn Shares Allocation:
Name ofDireetors Designation No. of Shares
TehKokLim
ChuKheh Wee
500,000
500,000
The above Pink Fonn Shares Allocation is subject to eligible Directors, employees and
business associates/persons who have contributed to the success of our Group subscribing to
their respective allocations.
In the event that any of the IPO Shares are not taken up by our eligible Directors, employees
and business associates/persons who have contributed to the success of our Group, such IPO
Shares will be made available for application by the Public by way of balloting or be allocated
by way of private placement. The IPO Shares above have been fully underwritten by our
Underwriter.
4.3.3 Public
share capital of our Company to be allocated by way of balloting, will be made available for
application by the Public.
Any IPO Shares reserved under this tranche which are not fully subscribed for by the Public
will be made available for subscription by our eligible Directors, employees and business
associates/persons who have contributed to the success of our Group under the Pink Fonn
Shares Allocation. Any remaining Public Issue Shares will subsequently be made available for
SUbscription by our selected investors under the private placement tranche as described in
Section 4.3.1 and if undersubscribed, such IPO Shares will be subscribed by our Underwriter
based on the tenns ofthe Underwriting Agreement.
14
4. PARTICULARS OF OURIPO (Cont'd)
In summary, IPO Shares will be allocated in the following manner:
Public Issue
No. of Shares %
Private placement 44,000,000 84.6
Eligible Directors, employees and business associates/persons who
5,000,000 9.6
have contributed success of our Group
Public (via balloting) 3,000,000 5.8
Total 52,000,000 100.0
The Public Issue will increase our issued and paid-up share capital from 139,000,000 Shares to
191,000,000 Shares.
The basis of allocation for our IPO Shares takes into account the desirability of distributing the IPO
Shares to a reasonable number of applicants with a view of broadening our shareholders base to meet
the public spread requirements as per the Listing Requirements and to establish a liquid and adequate
market for our Shares.
The salient terms ofthe Underwriting Agreement are set out in Section 4.13 of this Prospectus.
4.4 Listing
In conjunction with our IPO, we have sought the admission to the Official List and the listing of and
quotation for our entire enlarged issued and paid-up share capital comprising 191,000,000 Shares on
the ACE Market ofBursa Securities, of which the approval was obtained on [.].
4.5 Share capital
No. of Shares RM Total (RM)
Authorised share capital 250,000,000 0.10 25,000,000
Issued and fully paid-Up share capital as at the date of this
139,000,000 0.10 13,900,000
Prospectus
To be issued pursuant to the Public Issue 52,000,000 0.10 5,200,000
Enlarged issued and fully paid-up share capital upon Listing 191;000,000 0.10 19,100,000
The IPO Price of RM[.] is payable in full on application.
As at the date of this Prospectus, we have only one (1) class of shares, namely ordinary shares of
RMO.l 0 each, all of which rank pari passu with each other. Our IPO Shares, upon allotment and
issuance, will rank pari passu in all respects with our existing issued and paid-up share capital
including voting rights and will be entitled to all dividends, rights and distributions that may be
declared subsequent to the date of allotment and issuance of our IPO Shares.
Subject to any special rights attaching to any Shares which we may issue in the future, the holders of
the Shares in our Company shall, in proportion to the amount paid-Up on the Shares held by them, be
entitled to share the profits paid out by us as dividends and other distributions. Similarly, if our
Company is liquidated, our shareholders shall be entitled to the surplus, in accordance with our Articles
ofAssociation.
15
Each ofour shareholders shall be entitled to vote at any ofour general meeting in person or by proxy or
by attorney or by duly authorised representative. On a show ofhands, every person present who is our
shareholder or representative or proxy or attorney of our shareholders shall have one (1) vote, and in
the case of poll, every of our shareholders present in person or by proxy or by attorney or other duly
authorised representative shall have one (I) vote for each of the Shares held. A proxy may but need not
be a member of our Company and the provisions of Section 149(1)(b) of the Act shall not apply to our
Company.
There is no limitation on the right to own our Shares, including the right of non-resident or foreign
shareholders to hold or exercise voting rights on our Shares imposed by law or by constituent
documents ofour Company.
4.6 Market capitalisation
Based on the IPO Price of RM[.] per IPO Share and our enlarged issued and paid-up share capital of
191,000,000 Shares, our market capitalisation on the ACE Market ofBursa Securities will be RM[.].
4.7 Purposes of our IPO
The purposes of our IPO are as follows:
(i) To achieve listing status for our Company to enable us to gain recognition, enhance our
corporate reputation and assist us in expanding our customer base;
(ii) To provide an opportunity for the investing community including the Public, to participate in
our continuing growth by way of equity participation;
(iii) To enable us to have access to the capital market and raise funds for our Group's future and
continued expansion, diversification and growth. See Section 4.10 of this Prospectus for
further information on how we plan to utilise the proceeds from the Public Issue of our Shares;
and
(iv) To enhance the liquidity of our Shares.
4.8 Basis of arriving at the IPO Price
Our Directors, together with PM Securities as the Adviser, Sponsor, Underwriter and Placement Agent,
have determined and agreed to the IPO Price ofRM[.] per IPO Share, based on the following factors:
(i) A net PE mUltiple of [.] times based on our Group's historical EPS of approximately RM[.],
(computed based on the consolidated PAT for the FYEIFPE [.] and our enlarged issued and
paid-up share capital) after the Public Issue of 191,000,000 Shares.
(ii) Our proforma consolidated NA per Share as at [.] of approximately RM[.] (computed after
the Public Issue and our enlarged issued and paid-up share capital);
(iii) Our competitive advantages and key strengths, which include the following:
our in-house design capabilities;
the quality of our products;
we are an approved supplier to some of our customers;
our manufacturing facilities are located close to our customers;
our products have a diverse range of applications; and
we have an established track record.
16
4. PARTICULARS OF OUR IPO (Cool'd)
For further details on our competitive advantages and key strengths, please refer to Section
7.1.3 of this Prospectus;
(iv) Our future plans and strategies include the following:
New manufacturing facilities:
(i) Relocating the Changshu Nakareg manufacturing facilities; and
(ii) Establishing a new manufacturing facility in Malaysia.
Expanding our existing facilities:
(i) Precision parts and components manufacturing; and
(ii) PCBA manufacturing.
Developing our existing businesses:
(i) Growing and developing our precision parts and components, industrial server
and PCBA and wire harness manufacturing businesses.
Product branding:
(i) Branding of our own products; and
(ii) Trademark registration.
For further details of our future plans and strategies, please refer to Section 7.18.1 of this
Prospectus.
(v) The prospects of our Group as set out in Section 7.18.2 ofthis Prospectus and the Independent
Market Research Report as set out in Section 8 of this Prospectus.
Our Directors and PM Securities are of the opinion that the lPO Price is fair and reasonable after
careful consideration ofthe abovementioned factors.
However, you should also take note that upon and subsequent to our Listing, the market price of
our Shares is subject to the vagaries of market forces and other uncertainties, which may affect
the pricing of our Shares being traded. You are reminded to consider carefully the risk factors as
set out in Section 5 of this Prospectus before deciding to invest in our Shares.
4.9 Dilution
Dilution for our new shareholders pursuant to our IPO is the amoWlt by which the IPO Price to be paid
by our new shareholders of our IPO Shares exceeds the NA per Share after our IPO. The proforma NA
per Share of our Group as at [.], before adjusting for the net proceeds from the Public Issue, was
approximately RM[.] based on number of Shares in issue before the Public Issue.
Pursuant to the issuance of 52,000,000 lPO Shares at the IPO Price and after deducting the estimated
listing expenses, the proforma consolidated NA per Share of our Group as at [ .] based on our enlarged
issued and paid-up share capital of 191,000,000 Shares will be approximately RM[.] per Share. This
represents an immediate increase in NA per Share of RM[.] to our existing Shareholders and an
immediate dilution in NA per Share of RM[.] to our new shareholders.
17
ICompany No. 918382-T II
The following table illustrates such dilution on a per Share basis:
RM
IPO Price [e)
Profonna NA per Share as at [ e ] [e]
NA per Share after our IPO [e)
Increase in NA per Share to existing shareholders [e)
Dilution in NA per Share to new shareholders [e)
Dilution in NA per Share to new shareholders as a percentage to the IPO Price [e%]
The following table summarises the total number of Shares received by our substantial shareholders
(who are also Promoters) from the Acquisitions by Nakareg Holdings and the cost per Share to them
and to the new shareholders who subscribe to our IPO Shares pursuant to our IPO:
Substantial shareholders Number of Shares received Total consideration Cost per Share
pursuant to the Acquisitions (RM) (RM)
by Nakareg Holdingsf
l
)
HauMunMeng 87,415,000 8,741,500 0.10
Hong Chin Chye 16,718,000 1,671,800 0.10
Leong Yeok Fang 23,627,900 2,362,790 0.10
Number ofIPO Shares Total consideration Cost per Share
(RM) (RM)
New shareholders 52,000,000 [e] [e)
Note:
(J) After the Share Spill.
Save for the Shares received by our substantial shareholders from the Acquisitions by Nakareg
Holdings, there is no material acquisition of any existing Shares that involved cash in our Company by
our Directors, Promoters and substantial shareholders or person connected to them, or in which they
have the right to acquire, during the past three (3) years prior to the date oftbis Prospectus.
4.10 Use of proceeds
The expected total gross proceeds from the Public Issue are RM[ e] million. We intend to utilise the
gross proceeds in the following manner:
Notes RM'OOO % Estimated timeframe for
utilisation upon Listing
Expanding our manufacturing 37.4 Within 24 months
operations in Malaysia
Relocating the Changshu 2 26.7 Within 24 months
Nakareg manufacturing facility
and expansion ofour existing
manufacturing capabilities in
the PRC
Product branding 3 3.8 Within 12 months
Working capital 4 10.7 Within 12 months
Estimated listing expenses 5 21.4 Within 2 weeks
Total gross proceeds 100.0
18
No. 918382-T
4. PARTICULARS OF OUR IPO (Conl'd)
Notes:
1. Expanding our manufacturing operations in Malaysia
As part of our future plans, we intend to expand our manufacturing operations in Malaysia by
purchasing a new factory building within the Klang Valley. A total ofapproximately RM[.) million from
our /PO proceeds will be utilisedfor the establishment ofa new manufacturing facility with built up area
ofapproximately /5,000 sq. ft. within the Klang Valley over the next twenty four (24) months. The new
facility will host our corporate headquarters, manufacturing operations and D&D centre.
In the event the above estimated amount is insufficient, we will utilise our internally generated funds or
bank borrowings to offset any shortfall.
2. Relocating the Chang shu Nakareg manufacturing facility and expansion of our existing
manufacturing capabilities in the PRe.
A total ofapproximately RM[.) million from our IPO proceeds will be set aside for the relocation ofthe
manufacturing facility of Changshu Nakareg, expansion of the precision parts and components
manufacturing capabilities as well as the expansion of the PCBA manufacturing facility over the next
twenty four (24) months.
We are planning to relocate our existing Changshu Nakareg manufacturing facility to a larger
manufacturing facility located in Suzhou Province, PRe. The new factory has a built up area of
approximately 20,000 sq. ft. and the estimated cost ofrelocation are as follows:
Description ofexpenditure Estimated amount
% RM'OOO
Relocation costs 2.0 r
e
]
Factory renovation 12.0
r
e
]
Office equipment 4.0 r
e
]
Furniture andfittings 2.0 r
e
]
Total 20.0 r
e
]
We intend to expand our precision parts and components manufacturing capability by purchasing
additional CNC machines that are of di.f.fo.rent models from our existing machines to increase the
product range ofour precision parts and components.
Description ofexpenditwe Estimated amount
% RM'OOO
CNC machines- eight (8) units 60.0 r
e
)
We intend to expand our PCBA manufacturing facility in Nakareg Kunshan with the investment in an
additional machine. Upon completion, the production capacity is estimated to increase by 60,000 boards
per annum.
Description ofexpenditure Estimated amount
% RM'OOO
SMT machine-one (/) unit 20.0 r
e
)
3. Product branding
We intend to utilise approximately RM[.) million from our IPO proceeds to register our trademark in
Malaysia and to engage in promotional events to enhance the recognition ofour 'NKG' brand name by
participating in various trade fairs and exhibitions. We believe these will enhance our brand recognition
and ultimately promote our products, particularly our industrial server.
4. Working capital
Our working capital will increase in tandem with our future plans. Therefore, the IPO proceeds of
approximately RM[.) million will be utilised for our Group's day-to-day operations that include
payments to creditors, salaries and operating expenses.
19
5. Estimated listing expenses
Our Company will bear the entire listing expenses and foes incidental to our Listing of approximately
RM re] million asfollows:
Estimated amount
% RM'OOO
Professional fees 15.0
Authoritiesfees 0.8
Issuing house's fees, underwriting commission and 2.0
placement foes
Advertisement, printing and contingencies 3.6
If the actual listing expenses are higher than budgeted, the deficit will be funded out if the portion
allocated for working capital. Conversely, if the actual listing expenses are lower than budgeted, the
excess will be used for working capital purposes.
20
4. PARTICULARS OF OUR IPO (Coord)
4.11 Financial impact from utilisation of proceeds
Our utilisation of proceeds from the Public Issue is expected to have a fmancial impact on our Group as
follows:
(i) Interest savings
Had we not undertaken the Listing, we may have incurred incremental borrowing of
approximately RM[ -] million for our intended capital expenditure, product branding and
general working capital requirements. In such event, the notional interest savings arising from
the potential additional borrowing based on the assumed interest rate of about 8% per annum
amount to approximately RM[-] annually. Accordingly, the IPO proceeds are expected to
enhance our future earnings.
(ii) Enhancement of working capital
We intend to utilise RM[-] million from our IPO proceeds for our working capital
requirements for day-to-day operations, which include payments to creditors and operating
expenses. Our cash and cash equivalents will increase to approximately RM[ -] million after
our Listing, based on the proforma cash flow statement for the [-]. This will allow us to
internally fund our daily operational activities without being dependent on external funding
while strengthening the liquidity and cash flow position of our Group in the future.
Pending the utilisation of the proceeds from the IPO for the above-mentioned purposes, the IPO
proceeds would be placed as deposits with banks or licensed financial institutions or short-term money
market instruments.
4.12 Brokerage, underwriting commission and placement fee
(i) Brokerage
We will bear the brokerage fees relating to the IPO Shares, at the rate of[-1.0]% ofthe IPO Price
in respect of successful applications, which bear the stamp of PM Securities, a participating
organisation of Bursa Securities, a member of the Association of Stockbroking Companies in
Malaysia or the Issuing House.
(ii) Underwriting commission
We will pay the Underwriter an underwriting commission of [-2.0%] of the IPO Price in
respect of the 8,000,000 IPO Shares to be issued to the public and our eligible Directors,
employees and business associates/persons who have contributed to the success ofour Group.
(iii) Placement fee
We will pay the Placement Agent a placement commission of [-0.5]% and [-2.0]% of the
value of the Shares to be placed out under the private placement in relation to placees
identified by our Group and the Placement Agent, respectively.
4.13 Salient terms of the Underwriting Agreement
[-to be included]
21
5.1
5. RISK FACTORS
WE ARE EXPOSED TO A NUMBER OF POSSmLE RISKS THAT MAY ARISE FROM ECONOMIC,
BUSINESS, MARKET AND FINANCIAL FACTORS AND DEVELOPMENTS, WHICH MAY HAVE
AN ADVERSE IMPACT ON OUR FUTURE PERFORMANCE. YOU SHOULD CAREFULLY
CONSIDER THE RISKS AND INVESTMENT CONSIDERATIONS SET OUT BELOW ALONG
WITH THE OTHER MATTERS IN THIS PROSPECTUS BEFORE YOU MAKE YOUR
INVESTMENT DECISION.
THE RISKS AND INVESTMENT CONSIDERATIONS SET OUT BELOW ARE NOT AN
EXHAUSTIVE LIST OF THE CHALLENGES THAT WE CURRENTLY FACE OR THAT MAY
DEVELOP IN THE FUTURE. ADDITIONAL RISKS, WHETHER KNOWN OR UNKNOWN, MAY
HAVE A MATERIAL ADVERSE EFFECT ON THE FINANCIAL PERFORMANCE OF OUR GROUP
AND/OR OUR SHARE PRICE.
Risks relating to our business and industry
(i) Revenue contribution from our major customers
Two (2) of our major customers, namely Wuxi TDK-Lambda Electronics Co., Ltd and
Yamaha Electronics (Suzhou) Ltd, accounted for more than ten percent (10.0%) each of our
total revenue for each of the FYE 31 December 2010, FYE 31 December 2009 and FYE 31
December 2008. There is a risk that our financial results may be affected if one or both of
these companies stop buying our products or reduce the level of their purchases from our
Group in the future.
However, the risk of a material drop in revenue contribution from Wuxi TDK-Lambda
Electronics Co., Ltd as a customer is mitigated by the following factors:
Wuxi TDK-Lambda Electronics Co., Ltd has been our customer for fifteen (15) years,
indicating a long-term business relationship. This provides a basis for a continuing
business relationship;
Our subsidiary, Shanghai Optimus, is an approved supplier of Wuxi TDK-Lambda
Electronics Co., Ltd for the supply of electronic transformers and electronic noise
filters. As an approved supplier, Shanghai Optimus is normally given first priority to
bid for orders relating to the supply of electronic transformers and electronic noise
filters; and
We have entered into a one (I)-year renewable contract with Wuxi TDK-Lambda
Electronics Co., Ltd, which provides a basis for a continuing business relationship with
Wuxi TDK-Lambda Electronics Co., Ltd for the length ofthe contract.
The risk ofa material drop in revenue contribution from Yamaha Electronics (Suzhou) Ltd as
a customer is mitigated by the following factors:
Yamaha Electronics (Suzhou) Ltd has been our customer for eight (8) years, indicating
a long-term business relationship. This provides a basis for a continuing business
relationship;
Our subsidiary, Nakareg Kunshan, is an approved supplier of Yamaha Electronics
(Suzhou) Ltd for the supply of electronic transformers. As an approved supplier,
Nakareg Kunshan is normally given first priority to bid for orders relating to the supply
ofelectronic transformers; and
We have entered into a one (I)-year contract that is automatically renewed with
Yamaha Electronics (Suzhou) Ltd, which provides a basis for a continuing business
relationship with Yamaha Electronics (Suzhou) Ltd for the length ofthe contract.
22
S. RISK FACTORS (Cont'd)
Nevertheless, there can be no assurance that Wuxi TDK-Lambda Electronics Co., Ltd and/or
Yamaha Electronics (Suzhou) Ltd will continue to be our customers, or maintain their level of
purchases from our Group in the future.
(ii) Purchases from our major suppliers
Five (5) of our suppliers, namely Zhangjiagang Huayang Electronic Co., Ltd, Zhejiang JFE
Shoji Steel Products Co., Ltd, TDK-Lambda Corporation, Tongli Development Limited and
Hung's Enterprise (Xiamen) Co., Ltd, accounted for ten percent (10.0%) or more each of our
total purchases for at least one of our past three (3) FYE 31 December 2008 to FYE 31
December 2010.
Although Zhangjiagang Huayang Electronic Co., Ltd. accounted for more than ten percent
(10.0%) of our purchases for the FYE 31 December 2010, we will not likely be materially
affected if Zhangjiagang Huayang Electronic Co., Ltd. reduces or stops its supply to us due to
the following mitigating factors:
Zhangjiagang Huayang Electronic Co., Ltd. was not our major supplier in the FYE 31
December 2009 or FYE 31 December 2008, suggesting that we do not have a long
term dependency on Zhangjiagang Huayang Electronic Co., Ltd as a supplier;
We manufacture transformers and have the capability to manufacture electronic
transformers of the type purchased from Zhangjiagang Huayang Electronic Co., Ltd.
should there be a need to do so;
The transformers purchased from Zhangjiagang Huayang Electronic Co., Ltd. were
manufactured for our Group on an Original Equipment Manufacturer (OEM) basis.
The purchase of transformers from Zhangjiagang Huayang Electronic Co. Ltd., was
mainly due to the surge in demand from a customer during a particular period in the
said financial year. We are gradually building up our capacity to manufacture for our
customers' future models as reflected in our future plans, strategies and prospects set
out in Section 7.18; and
We do not expect such purchases to be recurring and as at the LPD, we have reduced
our purchases of electronic transformers from Zhangjiagang Huayang Electronic Co.,
Ltd.
Although Zhejiang JFE Shoji Steel Products Co., Ltd accounted for more than ten percent
(10.0%) of our purchases for the FYE 31 December 2009 and FYE 31 December 2008
respectively, we will not likely be materially affected if Zhejiang JFE Shoji Steel Products Co.,
Ltd. reduces or stops its supply to us due to the following mitigating factors:
Zhejiang JFE Shoji Steel Products Co., Ltd was not our major supplier in the FYE 31
December 2010, suggesting that we do not have a long-term dependency on Zhejiang
JFE Shoji Steel Products Co., Ltd as a supplier; and
Our primary purchase from Zhejiang JFE Shoji Steel Products Co., Ltd comprise parts
for E-1 transformer cores. For the FYE 31 December 2010, we purchased parts for E-1
transformer cores from four (4) other suppliers from our list of top twenty (20)
suppliers. This suggests that we have ready access to other suppliers ofE-I transformer
cores should there be a need to purchase from an alternative supplier.
Our Group will also not likely be materially affected if TDK-Lambda Corporation, Tongli
Development Limited and Hung's Enterprise (Xiamen) Co., Ltd. reduce or stop their supplies to
us as these companies accounted for more than ten (10.0%) each of our total purchases in only
one (1) ofthe past three (3) FYE 31 December 2008 to FYE 31 December 2010.
23
5. RISK FACTORS (Conl'd)
Nevertheless, there can be no assurance that we our operations may not be adversely affected if
one or more ofthese suppliers reduces or stop supply to us.
(iii) Foreign exchange risk fluctuations
Our revenue and purchases were mainly transacted in USD, RM and RMB. For the FYE 31
December 2010, 36.4% of our revenue and 37.8% of our purchases were denominated in USD,
35.0% of our revenue and 22.2% of our purchases were denominated in RM and 28.5% of our
revenue and 38.0% of our purchases were denominated in RMB. The remaining 2.0% of our
purchases were denominated in HKD, Japanese Yen and Singapore Dollars. As such, our
business is subjected to some risk arising from foreign exchange rate fluctuations, particularly
with regards to the USD and RMB.
The mitigating factors against the risk to our operations in Malaysia arising from foreign
exchange rate fluctuations include the following:
On 21 July 2005, the Malaysian Government removed the pegging of the RM to USD
and replaced it with a managed float system. Promoting stability of the exchange rate
continues to be a primary objective ofBNM policy;
(Source: Independent assessment of the electronic transformer industry in Malaysia and the
PRC prepared by Vital Factor Consulting)
A large proportion of the revenue and purchases of our operations in Malaysia were
denominated in RM. We utilise the revenue that is denominated in RM to pay for
purchases denominated in the same currency; and
Our Malaysian operations maintain foreign currency bank accounts to handle foreign
currency transactions. Some of our foreign currency earnings are maintained in the
respective foreign currency accounts, and these are later used to make payments in the
respective foreign currencies. This approach also reduces the cost of carrying out
currency conversion.
The mitigating factors against the risk to our operations in the PRC arising from foreign
exchange rate fluctuations include the following:
A large proportion of the revenue and purchases of our operations in China were
denominated in RMB and the USD. We utilise the revenue that is denominated in RMB
or USD to pay for purchases denominated in the corresponding currency;
Since 2005, the foreign exchange rate of the RMB operates on a managed float system
where the People's Bank of China monitors the value of the RMB relative to a basket
of world currencies. The People's Bank of China's primary policy objective is to
promote the stability of the RMB foreign exchange rate; and
(Source: Independent assessment of the electronic transformer industry in Malaysia and the
PRC prepared by Vital Factor Consulting)
Our operations in the PRC maintain foreign currency bank accounts to handle foreign
currency transactions. Some of our foreign currency earnings are maintained in the
respective foreign currency accounts, and these are later used to make payments in the
respective foreign currencies. This approach also reduces the cost of carrying out
currency conversion.
Nevertheless, there can be no assurance that we will not be affected by the effects of foreign
exchange rate fluctuations in the future.
24
5. RISK FACTORS (Cont'd)
(iv) Global financial crisis
A prolonged and/or widespread economic downturn such as the recent global fmancial crisis
may affect the Malaysian, PRC and/or global economies. An economic downturn may affect
consumer and business spending and confidence.
A slowdown in the Malaysian, PRC and/or the global economies may to reduce demand for
products that utilise transformers, including electrical and electronic devices, as well as
machinery and equipment.
As transformers are regarded as important or mandatory parts of many electronic and
electrical products, it is likely that demand for these products will still continue, albeit at a
lower expenditure level during an economic slowdown.
In 2010, the Malaysian economy registered a real GDP growth of 7.2%, and is forecasted to
grow between 5% and 6% in 2011. Meanwhile, PRC experienced a real GDP growth of
10.3%, and is projected to grow by 8% in 2011.
As evidenced in the past, the Malaysian government's continued prompt policy flexibility in
implementing pro-growth measures to sustain the country's growth momentum, by raising
domestic demand to compensate for slower external growth, has helped Malaysian companies
to counter some ofthe effects ofthe slowdown in the global economy.
In November 2008, the PRC government announced an economic stimulus package to
minimise the effect of the global economic crisis in the PRC. The 2008-2009 economic
stimulus package comprised approximately RMB4.0 trillion investment in infrastructure and
social welfare programmes by the end of2010.
(Source: Independent assessment of the electronic transformer industry in Malaysia and the PRC
prepared by Vital Factor Consulting)
Additional government spending and measures designed to increase confidence and boost
spending contained in the stimulus packages by the Malaysian government and PRC
government in their respective countries may stimulate economic activity, thereby reducing
the negative impact of the global frnancial crisis on operators in Malaysia and/or the PRC.
However, even with all the measures the Malaysian and the PRC governments have taken,
there is no assurance that global financial crisis risks will not materially affect our business.
(v) Fluctuation in raw material prices
Copper is one of the main raw materials that is used to manufacture electronic transformers. As
copper is a commodity, it is subjected to fluctuations in worJd prices.
After reaching 274 points in April 2008, the global copper price index fell by 64.6% to 97
points in December2008.
From its six-year low in December 2008, the global copper price index increased fairly
steadily to reach 311 points in February 2011. The global copper price index was 283 points in
May 2011.
(Source: Independent assessment of the electronic transformer industry in MalaySia and the PRC
prepared by Vital Factor Consulting)
25
0.9183
In most situations, increases in the price of raw materials may be passed on to the customers,
which reduces the fmancial impact on operators. Our Board believes that the volatility of our
raw material cost thus far has been manageable by passing part or all of the cost increase to
our customers.
Notwithstanding the above, no assurance can be given that any fluctuation in raw material
prices will not affect the future profitability or our Group.
(vi) Competition from other manufacturers in the same country
Manufacturers of electronic transformers compete with local manufacturers as well as imports.
The competitive intensity may impact on operators within the industry.
The manufacturing of electronic transformer industry in Malaysia and the PRC services the
global market as there is a large base of user industries there are sufficient business
opportunities to sustain the manufacturers. However, transformer manufacturers that have an
established track record and customer base, in-house R&D capabilities and large
manufacturing capacity have economies of scale and are in a stronger position to compete
effectively.
As such, with our Group's competitive advantages and key strengths set out in Section 7.1.3
of this Prospectus, our Directors are confident that our Group is in a position to compete
effectively.
Nevertheless, there can be no assurance that competition from other manufacturers will not
impact our Group's competitiveness in the industry.
(vii) . Bargaining power of our customers
In general, electronic transformers are fairly undifferentiated as they share common functionality
and use similar parts.
The large number of electronic transformer manufacturers in the industry coupled with the fairly
undifferentiated nature oftransformers creates bargaining power for customers, as they face low
switching costs.
In order to compete in the industry, suppliers may have to absorb the high cost of production
while exercising a low-price strategy, which may result in the profit margin of manufacturers
deteriorating.
However, we are able to retain our customers by providing quality assurance while
maintaining a reasonable price for our products. We noted that product quality is important to
customers as electronic transformers affects efficiency in stepping up or stepping down
electrical power and product safety. Further in order to counter our customer's bargaining
power, we provide value-added services, such as in-house product design capability, product
customisation and technical service. These value-added services help to differentiate our
Group from our competitors as well as providing our Group with a competitive advantage.
(viii) Changes in the political, economic and regulatory conditions
Our Group's main manufacturing operations are located in Malaysia and the PRC. Further
details on our Group's revenue segmentation by types of products are set out in Section 7.2.2
of this Prospectus.
26
Like all other business entities, adverse developments in the political, economic, regulatory
and social conditions in Malaysia and the PRC could materially affect our fmancial and
business prospects. Other political uncertainties that could unfavourably affect us include
changes in political leadership, war, economic downturn, financial crisis, expropriation,
nationalisation, renegotiation or nullification of existing contracts, changes in interest rates
and methods oftaxation.
Much of the above changes are beyond our control. Whilst we practice prudent fmancial
management and efficient operating procedures, there can be no assurance that any adverse
economic, political and regulatory developments will not materially affect the performance of
our Group.
In view that a substantial portion of our business and the operations of our subsidiary
company, Nakareg International which serves as an investment holding, international trading
and distribution company to its wholly-owned subsidiaries, namely Shanghai Optimus,
Nakareg Kunshan and Changshu Nakareg, are conducted in the PRC and this will continue
into the foreseeable future. As such, the continued development of our Group's business is
dependent on, amongst other factors, the prevailing political, economic and regulatory
conditions in the PRe.
The economy of the PRC differs from the economies of most developed countries in many
aspects, including structure, government involvement, level of development, capital
reinvestment, control over currency conversion, rate of inflation and allocation of resources.
Although a series of economic reforms have been implemented in recent years and the
transition of the country from a planned economy to a market-oriented economy, the
government still plays a significant role in regulating industry development through industrial
policies. Additionally, the PRC government also exercises a significant amount of control
over the PRC's economic growth via the allocation of resources, controlling payment of
foreign currency denominated obligations, implementing monetary policies and providing
preferential treatment to particular industries or companies.
Our Group has taken efforts to diversify our range of services and markets, improve on our
marketing and distribution strategies as well as pre-empting certain regulations to mitigate any
possible adverse impact on our Group from any adverse development in political, economic
and regulatory authorities.
However, there can be no assurance that these political and socio-economic policies will not
change and have an adverse effect on our fmancial performance and future prospects.
(ix) Dependency on Executive Directors and key management personnel
We attribute our success to the leadership and contributions of our Executive Directors and
key management team, in particular, to our Group Managing Director (Hau Mun Meng) and
Executive Director (Hong Chin Chye). Each ofthem has twenty-three (23) years of experience
in the electronic industry.
Our Board recognises and believes that our Group's continued success depend on, to a
significant extent our key management and key technical personnel who have contributed to
the development, growth and expansion of our Group. With his experience in the electronics
industry since 1988, Hau Mun Meng is instrumental in developing the strategic direction of
our Group whilst Hong Chin Chye who has been working in the electronics industry since
1988, is responsible for the manufacturing operations of our Group.
The loss of any of our Executive Directors and key management and key technical personnel
could adversely affect our Group's ability to continue our business operations and hence, our
revenues and profits.
27
Thus, we recognise the importance of our Group's ability to attract and retain key
management and key technical personnel, and have in place remuneration packages that are on
par with the industry standards for employees, especially for key management and key
technical. personnel as well as providing a good working envrronment which promotes
productivity and loyalty. Efforts are made to continuously attract new skilled personnel to
strengthen our existing team.
Notwithstanding the above, there is no assurance that any change in the key management and
technical personnel structure will not have a material adverse effect on our Group's future
performance.
(x) Production/operational risks
Our revenue is dependent on our production and manufacturing process ability to run
smoothly and efficiently. Our daily operations are susceptible to events of emergency such as
breakdowns, fire, energy crisis, health crisis, sabotage, civil commotion, war or natural
disasters. Our management is aware of the adverse consequences arising from such damage
that could cripple our business operations.
Further, ifthere is a delay or constrain in our production and manufacturing facilities, this may
affect our processes and we may not be able to deliver our products to customers in a timely
manner. This could also have material adverse effect on our business and the results of our
operations.
We have taken precautionary steps to minimise the risks of fire outbreaks through the
installation of fire hydrants, fire extinguishers, sprinklers throughout our factory and have also
provided training to our employees' in basic fire-fighting techniques. Our employees are
trained to resolve a majority of the production interruptions which we may face. Further, we
ensure production planning for sales orders are undertaken before embarking on new orders
and perform maintenance on our machineries on a timely basis to avoid any non-performance
to our customers.
We also ensure that we have adequate insurance coverage for our operations. We have taken
up fire insurance policies for our office equipment, plant, machinery, premises and all-risks
policies for our machineries.
However, even with all the precautions we have taken to limit these risks, there is no
assurance that these production/operational risks will not materially affect our business andlor
the insurance coverage we have taken would be comprehensive enough to reflect the
replacement cost of the assets or any consequential loss we may suffer.
5.2 Risks relating to our Listing and investment in our IPO Shares
(i) Potential delay or failure of our Listing
Our Listing may potentially be delayed or aborted in the event of the following:
(a) the Underwriter exercising its rights pursuant to the Underwriting Agreement to
discharge itself from its stated obligations;
(b) the placees identified under the private placement fail to pay for the subscription of
our IPO Shares allocated to them, notwithstanding that they have furnished their
irrevocable undertaking letters to subscribe for such IPO Shares;
28
5. RISK FACTORS (Conl'd)
(c) we are unable to meet the public spread requirements of at least 25% of the enlarged
issued and paid-up share capital of our Company being held by a minimum of 200
public shareholders holding not less than 100 Shares each at the point ofListing; and
(d) any force majeure event(s), which are beyond our control before our Listing.
In such event, subject to the restrictions set out in Section 5.2 (ii) below, we will return in full
without interest, all monies paid in respect of any application accepted within fourteen (14)
days from the date our Listing is aborted.
Nevertheless, our Directors will endeavour to ensure compliance with the various
requirements for our successful Listing.
(ii) Delay between admission and trading of our IPO Shares
Delay in the admission and the commencement of trading in shares on Bursa Securities have
occurred in the past. In respect of our IPO Shares, following the allotment and issuance of the
same to investors, the return of monies to such investors may be affected by way of either a
repurchase by us of those shares at IPQ Price, or by way of a reduction of our share capital.
However, such capital reduction may not be sanctioned by the High Court if the High Court
does not have reasonable grounds in believing that we are, or after the reduction would be,
able to settle our liabilities as they become due.
There can be no assurance that monies can be recovered within a short period of time. IfBursa
Securities does not admit our Shares for Listing, our Shares will be illiquid and it may not be
possible to trade our Shares. This may also have a material adverse effect on the value of our
Shares.
(iii) No prior market for our Shares
Prior to our IPQ, there has been no market for our Shares. Accordingly, there can be no
assurance that an active market for our Shares will develop upon our Listing or, if developed,
that such market will be sustained.
We, together with our Adviser and Underwriter, have determined and agreed to the IPQ Price,
after taking into consideration several factors including, but are not limited to, our Group's
fmancial performance, our Group's future plans and prospects, the prospects ofthe industry in
which our Group operates and the prevailing market conditions. The prices, at which our
Shares will trade on Bursa Securities at any point in time after our Listing, may vary
significantly from the IPQ Price.
(iv) Volatility in our Share price and trading volume
Shares of other companies listed on Bursa Securities have experienced considerable price
volatility in the past. It is possible that our Shares will be subjected to price volatility, which
may have no direct correlation with our Company's NA value, financial results or
performance. Price volatility may also affect the ability of our shareholders to sell and the
price at which our Shares can be sold.
The market price of our Shares may fluctuate in response to inter alia, such factors, some of
which are beyond our control including variations in the liquidity ofthe market for our Shares;
differences between our actual financial operating results and those expected by investors and
analysts; changes in analysts' recommendations or projections; changes in general market
conditions and broad market fluctuations; or new developments within the manufacturing of
electronic transformer industry, such as acquisition or strategic alliance by our competitors.
29
On the other hand, the performance of Bursa Securities, which affects the volatility of our
Share price, is very much dependent on external factors such as the performance of the
regional and world bourses and the inflow or outflow of foreign funds. Sentiments are also
largely driven by internal factors such as the economic and political conditions of the country
as well as the growth potential of the various economic sectors. These factors invariably
contribute to the volatility of trading volumes witnessed on Bursa Securities, thus adding to
the risk to the market price of our Shares, which could potentially result in substantial losses
for investors in acquiring our Shares.
(v) Our Promoters will retain control over our Group upon Listing
Following the Public Issue, our Company will be controlled by our Promoters which will
control 67.0% of the enlarged issued and paid-up share capital of our Company. As a result,
our Promoters will be able to effectively control the outcome of certain matters requiring the
vote of our shareholders inCluding the constitution of our Board and thus, the direction and
future operations of our Group, decisions regarding acquisitions and other business
opportunities, the declaration of dividends and the issuance of additional shares and other
securities, unless they are required to abstain from voting by law and/or the relevant
authorities.
5.3 Other risks
(i) Disclosure regarding forward-looking statements
Certain statements in this Prospectus are based on historical data which may not be reflective
of the future results, and others are forward-looking in nature, which are subject to
uncertainties and contingencies.
All forward looking statements are based on estimates and assumptions made by our Board
and although believed to be reasonable, are subject to known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or achievements to differ
materially from the future results, performance or achievements expressed or implied in such
forward-looking statements.
Such factors include, inter-alia, general economic and business conditions, competition, the
impact of new laws and regulations affecting our Group and the industry, changes in interest
rates and changes in foreign exchange rates. In light of these uncertainties, the inclusion of
forward-looking statements in this Prospectus should not be regarded as a representation or
warranty by us or our advisers that the plans and objectives of our Group will be achieved.
Given the risks and uncertainties that may cause our Group's actual future results,
performance or achievements to be materially different from that expected, expressed or
implied by the forward-looking statements in this Prospectus, we advise investors not to place
undue over reliance on those statements. Weare not warranting nor representing to investors
that our Group's actual future results, performance or achievements will approximate those as
discussed in those statements.
30
6.1
6. INFORM A TION ON OUR GROUP
History and business
Nakareg Holdings was incorporated in Malaysia on 15 October 2010 under the Act as a public limited
company under its present name. Nakareg Holdings is an investment holding company. As part of our
Listing, we bad on 26 September 2011 entered into the following SSAs with the respective vendors for the
Acquisitions by Nakareg Holdings:
Companies Vendors % No. of shares of Purchase No. of Nakareg
acquired RMl.OO each consideration Holdings shares
(unless otherwise of RM1.00 each
stated) acquired issued as
(RM) consideration
Nakareg Leong Yeok Fang 47.4 347,864 2,362,790 2,362,790
Pang Kong Chek 8.2 60,068 408,000 408,000
Lian Y oon Hing 8.2 60,068 408,000 408,000
Hong Chin Chye 30.0 220,000 1,494,300 1,494,300
Kazutaka Misawa 6.2 45,333 307,910 307,910
100.0 733,333 4,981
2
000 4,981,000
Nakareg
International
Hau Mun Meng 100.0 11,062,035 shares
ofHKDl.OO each
8,564,000 8,564,000
NKG
Technology
Hong Chin Chye
Hau Mun Meng
50.0
50.0
100.0
250,000
250,000
500,000
177,499
177!499
354,998
177,499
177,499
354,998
The respective purchase considerations for the above acquisitions were arrived at on a willing-buyer
willing-seller basis after taking into consideration the unaudited NA of the respective companies as at
30 June 2011 as follows:
Companies Unaudited NA as at
30 June 2011
(RM)
Nakareg 4,980,252
Nakareg International 8,563,856
NKG Technology 354,952
Total 13,899,060
The Acquisitions by Nakareg Holdings were completed on 26 September 2011 which resulted in
Nakareg, Nakareg International and NKG Technology becoming wholly-owned subsidiaries of
Nakareg Holdings.
Upon completion of the Acquisitions by Nakareg Holdings, our issued and paid up share capital
increased from two (2) ordinary shares of RMl.OO each to RMI3,900,000 comprising 13,900,000
ordinary shares of RM l.OO each.
31
6. INFORMATION ON OUR GROUP (Conl'd)
Nakareg International had on 1 January 20 II entered into SSAs with the respective vendors for the
Acquisitions byNakareg International:
Companies Vendors
0/0
Registered Purchase No.ofNakareg
acquired capital consideration International shares
(USD) (HKD) at HKDl.OO each
issued as
consideration
Shanghai Hau MunMeng 100.0 420,000 3,268,912 3,268,912
Optimus
Nakareg Nakareg 100.0 300,000 2,334,937
N/Mi)
Kunshan
Changshu Hau MunMeng 100.0 1,000,000 7,783,123 7,783,123
Nakareg
Note:
(1) Nakareg Kunshan 's purchase consideration was reflected as an amount owing to Nakareg.
The purchase considerations for the above acquisitions were arrived at on a willing-buyer
willing-seller basis after taking into consideration the registered capital of the respective
companies as at 31 March 2011 as follows: .
Companies Registered Based on exchange rate Based on exchange rate of
capital as at 31 ofUSDl.OO: HKD7.7831 HKD1.00:RMBO.8415 and
March 2011 as at31 March 2011 RMBl.00:RMO.4619 as at
31 March 2011
(USD} (HKD) (RM}
Shanghai Optimus 420,000 3,268,912 1,270,590
Nakareg Kunshan 300,000 2,334,937 907,564
Changshu Nakareg 1,000,000 7,783,123 3,025,213
Total 1
2
720
2
000
The above acquisitions were completed in March 2011 which resulted in Shanghai Optimus,
Nakareg Kunshan and Changshu Nakareg becoming wholly-owned subsidiaries of Nakareg
International. Nakareg Kunshan was previously a subsidiary of Nakareg and as part of the
internal restructuring ofour Group, Nakareg Kunshan was disposed offto Nakareg InternationaL
The issued and paid-up share capital of Nakareg International increased accordingly from
10,000 ordinary shares of HKDLOO each to HKDII,062,035 comprising of 11,062,035
ordinary shares ofHKDI.OO each.
Please refer to Section 6.3 oftIlls Prospectus for information on our subsidiaries.
32
6. INFORMATION ON OUR GROUP (Cont'd)
Nakareg Holdings is an investment holding company and our Group is primarily engaged in the
manufacturing of electronic transfoimers and related products, namely electronic noise filters, SMPS
systems and related components, such as transformer coils and inductors. In addition, we manufacture
parts and components for electrical and electronic products, such as precision parts and components,
PCBA and wire harness as well as computer and electronic products, such as industrial server and
electronic weighing scales.
Our Group-'s continued success depend on, to a significant extent our key management and key
technical personnel who have contributed to the development, growth and expansion of our Group.
With his experience in the electronics industry since 1988, Hau Mun Meng is instrumental in
developing the strategic direction of our Group whilst Hong Chin Chye who has been working in the
electronics industry since 1988 is responsible for the manufacturing operations ofour Group.
The history of Nakareg can be traced back to 1999 when Nakareg was acquired and was a
manufacturer ofelectronic linear transformers in Ulu Tiram, Johor. In 1999, Nakareg established a new
factory in Taman Industri KRI, Rawang, Selangor. Subsequently in 2006, Nakareg relocated its
production operations from Taman Industri KRl, Rawang, Selangor to Perindustrian Belmas Johan in
Rawang, Selangor which also serves as the head office for our Group.
NKG Technology (formerly known as Rollwell Packaging Sdn Bhd) was incorporated in 1995 and
commenced its business activities as a manufacturer of vacuum forming trays for the packaging
industry in the same year. The NKG Technology discontinued its vacuum forming tray business in
2003 and did not record any revenue in 2004 and 2005. In 2006, the said company changed its name to
NKG Technology and began to manufacture electronic transformers, primarily for customers in
Malaysia.
In 2002, Nakareg acquired a 50.0% equity interest in Nakareg Kunshan, a company located in
KUDshan, Jiangsu in the PRC which was involved in producing PCBA for third parties. Nakareg
Kunshan began to manufacture electronic transformers and related products in 2003. Nakareg acquired
the remaining equity stake in Nakareg Kunshan in 2005 and stopped its PCBA manufacturing business.
In 2004, Hau Mun Meng acquired Shanghai Optimus, a manufacturer of electronic transformer related
parts and components, electronic noise filters and SMPS systems with production facilities in
Longyang Industrial Park in Shanghai. Shanghai Optimus' SMPS system manufacturing businesses
were discontinued in the same year and then we began to manufacture electronic transformers in the
PRC. As part of our intention to comply with the European Union's ROHS directive, we also started to
manufacture lead-free electronic transformers and electronic noise filters in the same year. Shanghai
Optimus fully adopted production methods and raw materials that comply with the ROHS directive in
2005.
In 2006, we started to expand our product portfolio by manufacturing electronic weighing scales and
resuming PCBA manufacturing through Shanghai Optimus in the PRC. During the same year,
Changshu Nakareg was incorporated in Jiangsu, PRC, which commenced operations in 2007 as a
manufacturer of precision parts and components.
In 2009, Nakareg was granted the IPC status by MIDA.
In 2010, through Nakareg Kunshan, we acquired an existing industrial server business in the PRe. In
the same year, Nakareg Kunshan began to manufacture industrial server as well as resumed the
manufacturing of PCBA, wire harness, parts and components used in the production of our industrial
server. We also began to manufacture SMPS systems through Nakareg Kunshan.
In 2006, Nakareg International was incorporated and Nakareg International commenced operations in
2010. Nakareg International is primarily involved in investment holding, trading and distributing
products manufactured by Shanghai Optimus, Nakareg Kunshan and Changshu Nakareg to customers
in countries outside of the PRe. In 2011, Nakareg International started to trade precision parts and
components manufactured by third parties.
33
Our commitment in providing quality products is evidenced by the fact that several of our subsidiaries
have received ISO 9001 quality management system certifications as follows:
Changshu Nakareg obtained ISO 9001:2008 certification for the scope of "Manufacture and
sale of precision parts for computers and electronic products" from Guardian Independent
Certification Ltd in 2008;
Shanghai Optimus obtained ISO 900 I :2008 certification for the scope of "Manufacture of
EMI filters and magnetic products (high frequency transformer and inductor)" from AQA
International, LLC in 2009;
Nakareg Kunshan obtained ISO 9001:2008 certification for the scope of "Manufacture of
magnetic electronic components (convertor, transformer, filter and inductor)" from AQA
International., LLC in 2009; and
Nakareg obtained ISO 9001 :2008 certification for the scope of "The design and manufacturing
ofadaptor, transformer and magnetic coils" from Care Certification International (M) Sdn Bhd
in 2009.
We are also committed to minimising the impact that our business activities have on the environment.
This is reflected by the fact that, Shanghai Optimus obtained ISO 14001:2004 certification for the
scope of the "Manufacture of EMI Filters and magnetic products" from AQA International., LLC in
2006.
In 2011, Nakareg obtained certification from United Laboratories Ltd for an industrial server model
and some models of electronic transformers manufactured by Nakareg Kunshan.
Our achievements have been recognised by our customers. Shanghai Optimus has won the following
awards and recognition:
"Excellent Supplier" award from Shanghai RICOH Facsimile Co., Ltd in 2003; and
"Best Supplier A ward" from Nemic-Lambda in 2006.
Our Group has also been recognised as a good corporate citizen by government bodies in the PRC.
Shanghai Optimus has won the following awards and recognition:
"Nanquao District Excellent Working Group, 2005" from the Shanghai Fengxian Area
Nanqiao District Labour Union in 2006;
"Excellent Company ofTax Payment A ward" from the Shanghai Government in 2008;
"Enterprise with Harmonious Labour Relations" from the People's Government of Fengxian
District in 2008;
"Excellent Company ofTax Payment Award" from the Shanghai Government in 2009;
"Excellent Company ofTax Payment Award" from the Shanghai Government in 2010;
"Top Ten Employee Satisfaction Manager, 2008 and 2009" from the Shanghai Fengxian Area
Nanquai District General Labour Union in 2010.
Since 1999, we have established ourselves as a manufacturer of electronic transformers and related
products as well as a manufacturer of electrical and electronic parts and components, computers and
electronic products. For the FYE 31 December 2010, we achieved proforma consolidated revenue of
RM39.1 million.
34
We have achieved numerous milestones since our inception and some ofthe major milestones are listed
below:
Year Milestones/Achievements
1995 NKG Teclmology (formerly known as Rollwell Packaging Sdn Bhd) was incorporated. NKG
Technology commenced operations as a manufacturer of vacuum forming trays for the packaging
industry.
1999 Hau Mun Meng and Hong Chin Chye acquired Nakareg.
1999 Nakareg set up a new factory to manufacture electronic transformers in Taman Industri KRl,
Rawang.
2002 Nakareg Kunshan was registered as ajoint venture company.
i 2003 Nakareg Kunshan commenced operations as a manufacturer of electronic transformers and related
products, and manufacturer of PCBA for third party customers.
2003 NKG Teclmology discontinued its vacuum forming tray manufacturing business.
2004 Shanghai Optimus was acquired by Hau Mun Meng. As part of Shanghai Optimus' restructuring, its
industrial server and SMPS system manufacturing businesses were sold.
2004 Shanghai Optimus began to manufacture electronic transformers.
~ :
Shanghai Optimus began to manufacture lead-free electronic noise filters and electronic
transformers as part of its program to comply with the European Union's ROHS directive.
The remaining 50% equity interest in Nakareg Kunshan was acquired by Nakareg. Nakareg
Kunshan discontinued the manufacturing ofPCBA for third parties.
2005 Shanghai Optimus fully adopted production methods and raw materials that comply with the ROHS
directive.
2006 Nakareg moved its Rawang-based manufacturing facilities to its current location at the Taman
Perindustrian Belmas Johan, Rawang, Selangor.
2006 Shanghai Optimus began to manufacture electronic weighing scales and PCBA.
2006 Shanghai Optimus received certification that its environmental management system complied with
ISO 14001:2004 standards for the scope of the "Manufacture ofEMI filters and magnetic products"
from AQA International, LLC.
2006 NKG Teclmology assumed its current name and began to manufacture electronic transformers for
customers in Malaysia.
2006 Changshu Nakareg and Nakareg International were incorporated.
2007 Changshu Nakareg commenced operations and began to manufacture precision parts and
components primarily for data storage devices.
2008 Changshu Nakareg obtained ISO 9001 :2008 quality management system certification for the scope
of"Mailufacture and sale of precision parts for computers and electronic products" from Guardian
Independent Certification Ltd.
2009 Shanghai Optimus established its Product Engineering Department.
2009 Shanghai Optimus obtained ISO 900I :2008 quality management system certification for the scope
of"Manufacture of EMI filters and magnetic products (high frequency transformer and inductor)"
35
I Company No. 918382-T ,
Year Milestones/Achievements
2009 Nakareg Kunshan obtained ISO 9001 :2008 quality management system certification for the scope
of"Manufacture of magnetic electronic components (convertor, transformer, filter and inductor)"
2009 Nakareg obtained ISO 9001 :2008 quality management system certification for the scope of"The
design and manufacturing of adaptor, transformer and magnetic coils" from Care Certification
International (M) Sdn Bhd.
2009 Nakareg was granted the IPC status by MIDA.
2010 Nakareg Kunshan acquired an existing industrial server business. In the same year, Nakareg
Kunshan began to manufacture industrial server and SMPS systems. Nakareg Kunshan also
resumed manufacturing PCBA and wire harness for use in the industrial server manufactured by our
Group and for third-party customers.
2010 Changshu Nakareg began to manufacture precision parts and components for use in other types of
products.
2010 Nakareg International commenced business operations.
2011 Nakareg obtained certification from United Laboratories Ltd for an industrial server model and
some electronic transformer models manufactured by Nakareg Kunshan.
Over the years, we have won a number of awards and recognition from our customers, as summarised
in the following table:
Award or Recognition Customer Main products supplied Year
awarded
Excellent Supplier Shanghai RICOH
Facsimile Co., Ltd
SMPS systems 2003
Best Supplier Award for 2006 Nemic Lambda Electronic transformers and
electronic noise filters
2006
Our Group has also been recognised as a good corporate citizen by government bodies in the PRC, as
summarised in the following table:
Award or Recognition Awardin!! body Year awarded
Nanquao District Excellent Working
Group, 2005
Shanghai Fengxian Area Nanqiao District Labour
Union
2006
Enterprise with Harmonious Labour
Relations
People's Government of Fengxian District 2008
Excellent Company of Tax Paym
Award for 2008*
ghai Government 2009
Excellent Company ofTax Payment
Award for 2009*
Shanghai Government 2010
Top Ten Employee Satisfaction
Manager, 2008 and 2009
Shanghai Fengxian Area Nanquai District General
Labour Union
2010
Excellent Company of Tax Payment
Award for 2010*
Shanghai Government 2011
Note:
*
The Shanghai Government presented the award 10 Shanghai Optimus which had the highest tax contribution per unil of
land area used during thaI year.
36
! 918382-T II
6.2 Share capital
As at 26 September 2011, our authorised and issued and paid-up share capital is as follows:
Number of Shares Par value Amount
(RM) (RM)
Authorised 250,000,000 0.10 25,000,000
Issued and fully paid-up 139,000,000 0.10 13,900,000
The changes in our issued and paid-up share capital since our incorporation are as follows:
Date of
allotment
No. of shares
allotted Par value
(RM)
Consideration
Cumulative issued
and paid-up share
capital
(RM)
15/1012010
26/912011
26/9/2011
2
13,899,998
-
1.00
1.00
0.10
Cash
Acquisitions by Nakareg Holdings
Share split
2.00
13,900,000
13,900,000
As at 26 September 2011, our Company does not have any outstanding warrants, options, convertible
securities and uncalled capital. Upon completion of our IPO, our issued and paid-up share capital will
increase to RMI9,100,000 comprising 191,000,000 Shares as a result ofa Public Issue of 52,000,000
IPO Shares.
6.3 Information on our subsidiary companies
The corporate structure of our Group is set out below:
100%
100% 100% 100%
Shanghai Optirnus Nakareg Kunshan Changshu Nakareg
Our Company is principally an investment holding company. The details ofour subsidiary companies are
as follows:
Company Registration
number
Datel Place of
incorporation
Principal activities
Nakareg 29008-D 28 August ]976
Malaysia
Manufacture ofelectronic transformers and
related components
NKG
Technology
3385]8-X 4 April 1995
Malaysia
Manufacture ofelectronic transformers
37
6. INFORMATION ON OUR GROUP (Coot'd)
Company Registration
number
Date! Place of
incorporation
Principal activities
Nakareg
International
1089954 23 November 2006
Hong Kong
Investment holding, trading and distribution
Shanghai
Optimus
PRCcompany
registration number
Qi Du Hu Zong Zi
No. 022578
(Fengxian)
4 July 2006
PRC
Manufacture of electronic transformers and
related products, PCBA and electronic
weighing scales.
Nakareg
Kunshan
PRCcompany
registration number
320583400027252
4 February 1999
PRC
Manufacture of electronic transformers and
related components, PCBA, wire harness and
industrial server.
i Changshu
Nakareg
PRCcompany
registration number
320581400000234
19 July 1996
PRC
Manufacture of precision parts and
components for electrical and electronic
products.
6.3.1 Nakareg
(i) History and business
Nakareg was incorporated in Malaysia as a private limited company under the Act on
28 August 1976. At the time of its acquisition in 1999, Nakareg was a manufacturer
of electronic linear transformers. The current principal activities of Nakareg are
stated in Section 6.3 of this Prospectus.
(ii) Share capital
The present authorised share capital of Nakareg is RMI,OOO,OOO compnsmg
1,000,000 ordinary shares of RMl.OO each in Nakareg of which 733,333 ordinary
shares ofRMl.OO each in Nakareg have been issued and fully paid-up.
The changes in the issued and paid-up share capital of Nakareg since its
incorporation are as follows:
Date of
allotment
No. of shares
allotted Par value
(RM)
Consideration
Cumulative
issued and paid-
up share capital
(RM)
28.08.1976
23.10.1976
17.11.1976
31.12.1976
06.10.1988
11.05.2001
25.07.2001
03.10.2007
4
7,998
8,000
6,000
77,998
400,000
33,333
200,000
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
Cash
Cash
Cash
Cash
Cash
Otherwise than cash
Cash
Otherwise than cash
4
8,002
16,002
22,002
100,000
500,000
533,333
733,333
(iii) Substantial shareholders
Nakareg is a wholly-owned subsidiary of Nakareg Holdings.
38
(iv) Subsidiary and associated company
As at the LPD, Nakareg does not have any subsidiary or associate company. However,
Nakareg Kunshan was previously a subsidiary of Nakareg and as part of the internal
restructuring ofour Group, Nakareg Kunshan was disposed off to Nakareg International.
6.3.2 Nakareg International
Nakareg International was incorporated under the laws of Hong Kong as an
investment holding and a limited liability company on 23 November 2006. Nakareg
International commenced its trading and distribution activities in June 2010. The
current principal activities of Nakareg International are stated in Section 6.3 of this
Prospectus.
(ii) Share capital
The present authorised share capital of Nakareg International is HKDll,062,035
comprising 11,062,035 ordinary shares of HKDLOO each in Nakareg International
and all of which have been issued and fully paid-Up.
The changes in the issued and paid-up share capital ofNakareg International since its
Date of
allotment
No. of
shares
allotted Par value
(HKD)
Consideration
Cumulative
issued and paid-
up share capital
(HKD)
23.11.2006
16.09.2011
10,000
11,052,035
1.00
1.00
Cash
Otherwise than cash
10,000
11,062,035
Nakareg International is a wholly-owned subsidiary Nakareg Holdings.
As at the LPD, Nakareg International has three (3) wholly-owned subsidiaries,
namely Shanghai Optimus, Nakareg Kunshan and Changshu Nakareg.
(a) Shanghai Optimus
Shanghai Optimus was established under the laws of the PRC as a
WFOE with limited liability on 19 July 1996 in Shanghai. Shanghai
Optimus commenced operations in July 1996 with manufacturing of
electronic transformers and related products, PCBA and electronic
weighing scales. The current principal activities of Shanghai
Optimus are stated in Section 6.3 of this Prospectus.
39
(ii) Registered capital
As at the LPD, the registered capital of Shanghai Optimus is
USD420,000 comprising 100% shares ofUSD420,OOO.
The changes in the registered capital of Shanghai Optimus since its
Date of
contribution
of the
registered
capital
Contribution
of registered
capital
Percentage
of registered
capital
allotted
Method of
contribution
Cumulative
registered
capital
(USD)
12.08.2004 - 100% Cash 420,000
Shanghai Optimus is a wholly-owned subsidiary Nakareg
International.
(iv) Subsidiary aud associated company
As at the LPD, Shanghai Optimus does not have any subsidiary or
associate company.
(b) Nakareg Kunshan
Nakareg Kunshan was established under the laws of the PRC as a
WFOE with limited liability on 4 February 1999 in Jiangsu.
Nakareg Kunshan commenced operations in February 1999 with
the manufacturing of electronic transformers and related
components, PCBA, wire harness and industrial server. The current
principal activities ofNakareg Kunshan are stated in Section 6.3 of
this Prospectus.
As at the LPD, the registered capital of Nakareg Kunshan is
USD300,OOO comprising 100% shares ofUSD300,000.
The changes in the registered capital of Nakareg Kunshan since its
Date of
contribution of
the registered
capital
Contribution
of registered
capital
(USD)
Percentage of
registered
capital
allotted
Method of
contribution
Cumulative
registered
capital
(USD)
14.03.2000
24.06.2004
100,000
200,000
100%
100%
Cash
Cash
100,000
300,000
40
yNo.918382
(iii) Substantial sbareholders
Nakareg Kunshan is a wholly-owned subsidiary Nakareg
International. However, Nakareg Kunshan was previously a
subsidiary of Nakareg and as part of the internal restructuring of our
Group, Nakareg Kunshan was disposed offto Nakareg International.
As at the LPD, Nakareg Kunshan does not have any subsidiary or
associate company.
(c) Changshu Nakareg
Changshu Nakareg was established under the laws of the PRC as a
WFOE with limited liability on 4 July 2006 in Jiangsu. Changshu
Nakareg commenced operations in July 2006 with manufacturing
of precision parts and components for electrical and electronic
products. The current principal activities of Changshu Nakareg are
stated in Section 6.3 ofthis Prospectus.
As at the LPD, the registered capital of Changshu Nakareg is
USD1,000,000 comprising 100% shares of USD1 ,000,000.
The changes in the registered capital of Changshu Nakareg since
its incorporation are as follows:
Date of
contribution
ofthe
registered
capital
Contribution
of registered
capital
(USD)
Percentage of
registered
capital
allotted
Method of
contribution
Cumulative
issued and
paid-up
share capital
JUSD)
149,998 11.08.2006 149,988 ]00% Cash
25.01.2007 200,000 ]000/0 Second-hand
equipment
349,988
12.08.2007 150,012 100% Cash 500,000
12.08.2007 75,000 ]00% Otherwise
than cash
575,000
27.04.2010 96,000 ]000/0 Second-hand
equipment
671,000
21.07.2010 329,000 100% In the form of
foreign
exchange
currency and
second-hand
equipment
],000,000
41
mpanyNo.918382-T I
6. INFORMATION ON OUR GROUP (Conrd)
Changshu Nakareg is a wholly-owned subsidiary Nakareg
International.
As at the LPD, Changshu Nakareg does not have any subsidiary or
associate company.
6.3.3 NKG Technology
NKG Technology was incorporated in Malaysia as a private limited company under
the Act on 4 April 1995 and commenced its business activities as a manufacturer of
vacuum forming trays for the packaging industry. NKG Technology then cease
operation of its vacuum forming trays in 2003 and began manufacturing electronic
transformers in 2006. The current principal activities of NKG Technology are stated
in Section 6.3 ofthis Prospectus.
(ii) Share capital
The present authorised share capital of NKG Technology is RM500,OOO comprising
500,000 ordinary shares ofRMl.OO each in NKG Technology and all of which have
been issued and fully paid-up.
The changes in the issued and paid-Up share capital of NKG Technology since its
Date of
allotment
No. of
shares
allotted Par value
(RM)
Consideration
Cumulative
issued and paid-
up share capital
(RM)
4.()4.1995
21.10.1996
11.03.1997
11.03.1997
3
199,997
200,000
100,000
1.00
1.00
1.00
1.00
Cash
Cash
Cash
Otherwise than cash
3
200,000
400,000
500,000
NKG Technology is a wholly-owned subsidiary ofNakareg Holdings.
As at the LPD, NKG Technology does not have any subsidiary or associate company.
42
6.4 Property, plant and equipment
6.4.1 Properties owned
Registered
beneficial
owner
Title address Descriptionl
Existing use
Tenure Encumbrances Land areal
Built-up
area
(sq.ft.)
Audited carrying
amount as at 31
December 2010
RM'OOO
Issuance date of
certificate of fitness
Nakareg HS (D) 346671, PTD
1782, Mukim
Tiram, Daerah Johor
Bahru, Negeri Johor
bearing the postal
address ofNo.1 I, Jalan
Tiram Dua, Taman
Perindustrian Tiram
Batu 15, Jalan Sg.
Tiram, 81800 Ulu
Johor, Malaysia
Nakareg Geran 114160 Lot
13049 (fonnerly held
under HS (D) 24317,
PT No. 11539) Mukim
Rawang, Daerah
Gombak, Negeri
Selangor bearing the
postal address of No.2,
Jalan BJ 5, Taman
Perindustrian Belmas
Johan, Rawang
Greatway Industrial
Park, 48000 Rawang,
Selangor, Malaysia
Factory Freehold
Factory and head Freehold
office
One (I) charge in favour
of Public Bank Berhad
registered on 201712006
vide Presentation No.
4728112006
One (I) charge in favour
of Public Bank Berhad
registered on 23/312006
vide Presentation No.
1955112006
approximately 939 23 October 2002
40,365.07
(land area)
approximately 617 9 February 1999
4,305.6
area)
approximately
8,3
up area)
43
6. INFORMATION ON OUR GROUP (Conf'dj
Registered I Title address Description/ Tenure Encumbrances Land areal Audited carrying Issuance date of
beneficial Existing use Built-up amount as at 31 certificate of fitness
owner area December 2010
(sQ. ft.) RM'OOO
Nakareg Geran 114161, Lot No. Factory Freehold One (1) charge in favour approximately 316 9 Febmary 1999
13050, Mukim Rawang, of Public Bank Berhad 2,195.04
Daerah Gombak, registered on 231712010 area)
Negeri Selangor bearing vide Presentation No.
the postal address of 76780/2010 approximately
No.6, Jalan BJ 5,
Taman Perindustrian area)
Belmas Johan, Rawang
Greatway Industrial
Park, 48000 Rawang,
Selangor, Malaysia
The abovementioned properties have not been revalued by an independent finn of valuers.
6.4.2 Tenancy
Tenant Landlord Address Description/ Existing Rental period Built-up area Yearly rental
use
(sq. ft.)
4,394.37
Nakareg Lim Chin 100 (NRIC
No. 5094260) and
Lim Chin Beng
(NRfC No. 4658509)
Unit No.3 & 3A, lalan BI5,
Taman Perindustrian Belmas
Johan, Rawang, 48000,
Selangor, Malaysia
Light industrial 15/3/20\ 0 to 14/3/2012 approximately
4,994.5
RM15,600
Nakareg Baiasingam NL
Velautharn (NRIC
No. 710429-10
5937)
No. 17B, lalan B15, Taman
Perindustrian Belmas Johan,
Rawang, 48000, Selangor,
Malaysia
Staffs hostel 11112011 to 31112/2011 approximately
2,497.25
44
Tenant Landlord Address Descriptionl Existing Rental period Built-up area Yearly rental
use
(sq.ft.)
Nakareg (sub-tenant) Goh Sook Liaang No. 48 (1
st
Floor only), Jalan Light industrial lI4/20 11 to 3113/2012 approximately RM4,800
(NRlC No. 580515 BJ 6, Taman Perindustrian 771.56
06-5465) Trading as Belmas Johan, Rawang, 48000,
Aj Alfa Marketing Selangor, Malaysia
(being the main
tenant)
Shanghai Optimus Shanghai Longyang No. 21, Longyang Industrial Factory lI5/2010 to 30/412013 approximately RMB393,400
Industrial Park Park, No. 1515, Yuandong 27,092.99
Development Co. Road (North), Fengxian
Ltd. District, Shanghai, PRC
Nakareg Kunshan Kunshan Huanuo No.3131, Beimen Road, Factory 18/4/2010 to 17/412013 approximately RMB572,862
Electronic Yushan Township, Kunshan 48,405.06
Technology Co. Ltd. City, Jiangsu Province, PRC
Changshu Nakareg Jiangsu Huanhu Block 18, Huanhu Hongshun Factory l/812009 to lI8/2012 approximately RMBllO,860
Hongshun Colored Industry Park, JinJin Road, 10,376.50
Steel and Polyfoam Southeast Development Zone,
Co., Ltd. Changshu, Jiangsu Province,
PRC
Changshu Nakareg Jiangsu Huanhu Room ]20, B]ock 1 ofHuanhu, Employee dormitories 10/512010 to lI8120 12 approximately RMB4,560
Hongshun Colored Hongshun Industry Park, Jinlin 430.56
Steel and Polyfoam Road, South-East Development
Co., Ltd. Zone, Changshu, Jiangsu
Province
Changshu Nakareg Jiangsu Huanhu Room 1 ]9, Block 1 ofHuanhu, Employee dormitories 20/6/2010 to 118/2012 approximately RMB4,560
Hongshun Colored Hongshun Industry Park, linlin 430.56
Steel and Polyfoam Road, South-East Development
Co., Ltd. Zone, Changshu, Jiangsu
Province, PRC
45
6.5 Material capital expenditure and divestitures
6.5.1 Capital expenditure
Save as disclosed below, we did not incur any other material capital expenditure for the past
three (3) FYE 31 December 2008 to 31 December 2010 and up to the LPD:
Plant & machinery
Motor vehicles
Transaction value (RM'OOO)
FYE 31 December 1/112011 up
toLPD 2008 2009 2010
268.25
-
365.31
-
1,271.97
-
1,371.13
843.95
Total 268.25 365.31 1,271.97 1,371.13
6.5.2 Divestiture
As at the LPD, our Group did not carry out any material divestitures.
6.5.3 Material plans to construct, expand or improve facilities
As at the LPD, our Group has no immediate plans to construct, expand or improve our
existing facilities save as disclosed in Sections 4.10 and 7.18.1 ofthis Prospectus.
6.5.4 Material plant and equipment
As at LPD, our material plant and equipment are as follows:
Unit(s) Carrying
line
Items Function Product I Category
amount as
at31
December
2010
Annual
capacity
FYE31
December
2010
Estimated Utilisation
utilisation rate
FYE31 FYE31
December December
2010 2010
Plant & CNC
machinery machine
CNC
machine
CNC
CNC
4 1
1 8
(RM'OOO) ('000
pieces)
332 360
1,179 720
('000 (%)
pieces) .
300 83.3
600 83.3
6.6 Regulatory requirement and environmental issue
Our Group believes that we are in compliance in respect of all regulatory requirements and
enviromnental issues which may materially affect our Group's operations and/or utilisation of assets as
disclosed in Sections 7.7 and 7.8, respectively of this Prospectus. As at the LPD, our Group is not
aware of any enviromnental proceedings or investigations to which we are or might become a party to.
46
yNo.918382-T
6.7 Listing Scheme
As part ofthe Listing, we have undertaken the following internal restructuring as set out as follows:
Acquisitions by Nakareg International;
Acquisitions by Nakareg Holdings; and
Share Split.
(i) Acquisitions by Nakareg International
Nakareg International had on 1 January 2011 entered into SSAs with the respective
vendors for the Acquisitions by Nakareg International:
Companies Vendors % Registered Purchase No. of Nakareg
acquired capital
(Usn)
consideration
(HKD)(J)
International
shares at
HKD1.00 each
issued as
consideration
Shanghai Hau Mun Meng 100.0 420,000 3,268,912 3,268,912
Optimus
Nakareg Nakareg 100.0 300,000 2,334,937
N/A(2)
Kunshan
Changshu HauMunMeng 100.0 1,000,000 7,783,123 7,783,123
Nakareg
Total 13,386,972 11,052,035
Notes:
(I) The purchase considerations/or the above acquisitions were arrived at on a willing-buyer Willing-seller
basis after taking into consideration the registered capital 0/ the respective companies as at 31 March
2011 as/ollows:
Companies Registered capital Basedon exchange rate 0/ Based on exchange rate
as at 31 March 2011 USDJ.oo: HKD7.7831 asaJ ojHKD1.oo:RMBO.8415
31 March 1011 andRMB1.00:RMO.4619
as at 31 March 1011
( U S D ~ (HKDl (RM)
Shanghai Optimus 420,000 3,268,912 1,270,590
Nakareg Kunshan 300,000 2,334,937 907,564
Changshu Nakareg 1,000,000 7,783,123 3,025,213
Total 1
l
710
l
ooo 13,386
l
971 5,103,367
(2) Nakareg Kunshan 'spurchase consideration was reflected as an amount due to Nakareg.
The above acquisitions were completed in March 20 II which resulted in Shanghai
Optimus, Nakareg Kunshan and Changshu Nakareg becoming wholly owned
subsidiaries ofNakareg International. Nakareg Kunshan was previously a subsidiary of
Nakareg and as part of the internal restructuring of our Group, Nakareg Kunshan was
disposed off to Nakareg International.
The issued and paid up share capital of Nakareg International increased accordingly
from 10,000 ordinary shares of HKDl.OO each to HKDll,062,035 comprising of
11,062,035 ordinary shares ofHKD1.00 each.
47
(ii) Acquisitions by Nakareg Holdings
On 26 September 2011, Nakareg Holdings entered into the following SSAs with the
respective vendors for the Acquisitions by Nakareg Holdings:
Companies Vendors
acquired
No. of shares
RM1.00each
(unless otherwise
stated) acquired
consideration
(RM)(1)
No. of Nakareg
Holdings
shares at
RM1.00 each
issued as
consideration
Nakareg Leong Yeok Fang
Pang Kong Chek
Lian Yoon Hing
Hong Chin Chye
Kazutaka Misawa
47.4
8.2
8.2
30.0
6.2
347,864
60,068
60,068
220,000
45,333
2,362,790
408,000
408,000
1,494,300
307,910
2,362,790
408,000
408,000
1,494,300
307,910
100.0 733,333 4,981,000 4,981,000
Nakareg Hau Mun Meng 100.0 11,062,035 shares of 8,564,000 8,564,000
International HKDl.OO each
NKG Hong Chin Chye 50.0 250,000 177,499 177,499
Technology Hau Mun Meng 50.0 250,000 177,499 177,499
500,000 354,998 354,998
Total 13,899,998 13,899,998
The respective purchase considerations for the above acquisitions were arrived at on
a willing-buyer wi1ling-seller basis after taking into consideration the unaudited NA
ofthe respective companies as at 30 June 2011 as follows:
Companies Unaudited NA as at
30 June 2011
(RM)
Nakareg 4,980,252
Nakareg International 8,563,856
NKG Technology 354,952
Total 13,899,060
The Acquisitions by Nakareg Holdings were completed on 26 September 2011 which
resulted in Nakareg, Nakareg International and NKG Technology becoming wholly
owned subsidiaries ofNakareg Holdings.
Upon completion of the Acquisitions by Nakareg Holdings, our issued and paid up
share capital increased from two (2) ordinary shares of RMl.00 each to
RMI3,900,000 comprising of 13,900,000 ordinary shares ofRMl.OO each.
(iii) Share Split
After the completion of the Acquisitions by Nakareg Holdings, our Company on 26
September 2011 undertook a share split involving the subdivision of every one (1)
existing ordinary share of RM 1.00 each in Nakareg Holdings into ten (10) Nakareg
Holdings Shares.
48
6. INFORMATION ON OUR GROUP (Conrd)
Upon completion of the Share Split, our issued and paid-up share capital changed
from RM13,900,000 comprising 13,900,000 ordinary shares of RM1.00 each to
RM13,900,000 comprising 139,000,000 Nakareg Holdings Shares.
In conjunction with, and as an integral part of our Listing and quotation for our entire issued
and paid-up share capital on the ACE Market of Bursa Securities, the Listing Scheme is set
out as follows:
6.7.1 Public Issue
The Public Issue of 52,000,000 IPO Shares representing approximately 27.2% of the
enlarged issued and paid-up share capital our Company at the IPO Price of RM[.]
payable in full on application upon the terms and conditions as set out in the
Prospectus and will be allocated in the following manner:
(i) Selected investors via private placement;
44,000,000 IPO Shares, representing approximately 23.0% of the enlarged
issued and paid-up share capital of our Company will be made available to
selected investors by way of private placement.
Oi) Eligible Directors, employees and business associates/persons who have
contributed to the success of our Group;
issued and paid-up share capital of our Company will be made available for
application by the eligible Directors, employees and business
associates/persons who have contributed to the success of our Group; and
(iii) Public
issued and paid-up share capital of our Company to be allocated by way of
balloting, will be made available for application by the Public.
6.7.2 Listing of and quotation for our Shares
Upon completion of the abovementioned IPO, our Company will seek the listing of
and quotation for our entire enlarged issued and paid-Up share capital of 191,000,000
Shares on the ACE Market ofBursa Securities.
49
7.1
7. BUSINESS OVERVIEW
Business model
Our business model is depicted as follow:
Business Focus Manufaoture of Electronic Manufacture of Electrical of
and Transformers and and Electronic Compllters and
Revenue Streams Related Products Parts and Components Electronic Products
{
{
Electrical and Machinery and
Target Markets
Electronic Products Equipment
Approved Supplier to Design
Product Quality
Some of Our Customers Capabilities
Diverse Range of Manufacturing Facilities Established Track
Applications Close to Customers Record
Competitive
Advantages And
Key Strengths
7.1.1 Our business focus and core revenue streams
We are principally involved in manufacturing electronic transformers and related products,
namely electronic noise filters, SMPS systems and related components, namely transformer
coils and inductors. In addition, we manufacture parts and components for electrical and
electronic products, namely precision parts and components, PCBA and wire harness, and
computers and electronic products, namely industrial server and electronic weighing scales.
(a) Manufacture of electronic transformers and related products
We have the capability to produce electronic transformers ranging from 0.5 volt
ampere (VA) to 1 kilovolt-ampere (kVA) and these are used in a variety of
applications including among others, home A V products, IT products, office
equipment, machinery and automation, home appliances and security systems.
We manufacture SMPS systems that supply constant output voltage, and also SMPS
systems that supply adjustable output voltage. Our SMPS systems also incorporate
features that protect against open circuit, power overload and short circuit. Our
SMPS systems are used in a range of electrical and electronic devices, such as LCD
television sets, drivers for LED lighting systems, and industrial machinery and
equipment. We also manufacture SMPS systems for use in the industrial server that
we manufacture.
The electronic noise filters that we manufacture are used to reduce electronic noise or
electromagnetic interference in electrical and electronic devices. They are mainly
installed in sensitive electrical and electronic devices such as high-end audio
speakers, medical equipment and industrial machinery and equipment.
50
7. BUSINESS OVERVIEW (Coot'd)
Our in-house transfonner manufacturing capability allows us to design and
manufacture customised transfonner parts and components with minimum input from
our customers. The transfonner parts and components that we manufacture for our
customers include transfonner coils and inductors.
(b) Manufacture of electrical and electronic parts and components
Most of the precision parts and components that we currently manufacture are used
in digital data storage devices such as hard disk drives. We also manufacture
precision parts and components that are used in other products such as bicycle gear
systems and camera lens holders. Our Group primarily utilises CNC machining
systems to manufacture precision parts and components. We manufacture PCBA and
wire harness which are components for electrical and electronic products.
(c) Manufacture of computers and electronic prodncts
Under the manufacture of computers, we produce industrial server which may be
incorporated in a wide range of machinery and equipment to provide computing
power and connectivity to the Internet or some other network. Our industrial server
are also suitable for use as thin client tenninal workstations, and as conventional
computer terminals.
Our Group also manufactures a range of electronic weighing scales that are designed
primarily for commercial applications.
7.1.2 Our target markets
Our target markets are focused on the electrical and electronic, and machinery and equipment
industries. Some of our customers within the electrical and electronic industry include, among
others, manufacturers of A V products, air conditioning systems, security systems,
telecommunications equipment and IT products. Among machinery and equipment
manufacturers, some of our customers include, among others, semiconductor test equipment,
elevators and escalators.
7.1.3 Our competitive advantages and key strengths
Our competitive advantages and key strengths are important in sustaining our business as well
as providing us with the platfonn for future business growth.
(a) Design capabilities
Our manufacturing capabilities are supported by our in-house design facilities
through our subsidiaries, Nakareg, Shanghai Optimus and Nakareg Kunshan.
We have developed the designs for most of the electronic transfonners and related
products, industrial server and electronic weighing scales that we currently
manufacture. The designs that we have developed in-house are proprietary to our
Group. We are not dependent on external parties for these designs and do not have to
pay any licensing fees or royalties.
Our in-house capability to design and manufacture electronic transfonners and
related products enables us to design and manufacture customised electronic
transfonners and related products with minimum input from our customers.
51
Company No. 91838
7. BUSINESS OVERVIEW (ConPd)
Our Group's in-house design capability is a competitive advantage as it allows us to
independently design new types of electronic transformers and related products,
industrial server and electronic weighing scales to meet changing customer and
market requirements.
(b) Product quality
Weare committed to maintaining product quality and have obtained ISO 9001
certifications to provide assurance to our customers that we have quality management
systems in place.
The following subsidiaries that have obtained ISO 9001 :2008 certifications are:
Changshu Nakareg for the scope of, "Manufacture and sale of precision
parts for computers and electronic products";
Shanghai Optimus for the scope of, "Manufacture of EM! filters and
magnetic products (high frequency transformer and inductor)";
Nakareg Kunshan for the scope of, "Manufacture of magnetic electronic
components (convertor, transformer, filter and inductor)"; and
Nakareg for the scope of, "The design and manufacturing of adaptor,
transformer and magnetic coils".
In addition to quality management systems, we are committed to ensuring product
safety. Nakareg has obtained Underwriters Laboratories Ltd certification for one of
the industrial server models manufactured by Nakareg Kunshan (covered under the
category of "IT equipment including electrical business equipment").
Nakareg has also obtained Underwriters Laboratories Ltd certification for some of
the transformers manufactured by Nakareg Kunshan (covered under the category of
"Systems, electrical insulation - component").
One of our customers, Bando Electronics (Malaysia) Sdn Bhd, has obtained
Underwriters Laboratories Ltd certification for some of the transformers
manufactured by Nakareg Kunshan for Bando Electronics (Malaysia) Sdn Bhd
(under the category "Component - audio/video apparatus").
One of our customers, TDK-Lambda Corporation, has obtained certification from
Underwriters Laboratories Ltd for some of the electronic transformers (under the
category of "Component - systems, electrical insulation") and some ofthe electronic
noise filters (covered under the categories of "Component - EM! filters" and
"Component power supplies, IT equipment including electrical business
equipment") manufactured by Shanghai Optimus for TDK-Lambda Corporation.
TDK-Lambda Americas Inc. (a company within the TDK-Lambda group of
companies) has obtained certification from Underwriters Laboratories Ltd for some
of the electronic transformers manufactured by Shanghai Optimus for TDK-Lambda
Americas Inc. (under the category of "Component - systems, electrical insulation").
The products manufactured by our Group that are covered by the certification
(including the certification obtained by our customers for products that our Group
manufactures) have passed product safety tests carried out by Underwriters
Laboratories Ltd. With the Underwriters Laboratories Ltd certification, the products
covered by the certification manufactured by the respective companies within our
Group may bear the "UL" mark.
52
This is a key strength as it indicates that some of the products that we manufacture
. comply with internationally accepted product safety standards.
(c) We are an approved supplier to some of our customers
We are an approved supplier for electronic transformers and related products, and
precision parts and components to a number of our customers. As at the LPD, we are
an approved supplier for, among others, the following customers:
Products Covered
Nakareg
Customer Status Our subsidia
Bando Electronics Electronic
SdnBhd
Approved supplier
transfonners
Nakareg Disk Precision Precision parts and
Industries (M)
Approved supplier
components
SdnBhd
Nakareg Precision parts and
com onents
Nakareg
Approved supplier
Electronic
transformers
Nakareg Kunshan
Approved supplier
Electronic
transformers
Shanghai Optimus
Approved supplier
Electronic
Electronics Co., Ltd.
Approved supplier
transformers and
As an approved supplier for a customer's electronic transformers and related
products, and precision parts and components, we are normally given the first
opportunity to bid for any orders relating to these products. In such situations, we
normally compete against a limited number of companies that are also approved
suppliers to our customers for the corresponding products.
(d) Our manufacturing facilities are located close to our customers
Our manufacturing facilities are located close to our customers. As at the LPD, our
Group operates manufacturing facilities in the following locations:
Rawang, Selangor in Malaysia;
Ulu Tiram, Johor in Malaysia;
Changshu, Jiangsu in the PRC.
Kunshan, Jiangsu in the PRC; and
Fengxian, Shanghai in the PRC.
The close geographic proximity of our manufacturing facilities to our customers is a
key strength as it enables us to ensure that our products are delivered to our
customers on schedule and in a timely manner. This is an important consideration for
some manufacturers that utilise "just-in-time" manufacturing practices.
We are also able to provide a higher level of customer service and support to our
customers. The close geographic proximity allows us work closely with our
customers and respond in a timely manner when our customers request a change in
the products that we supply to them, for example in the event of a change in the
model they purchase from our Group_
53
7. BUSINESS OVERVIEW (Conl'd)
(e) Our products have a diverse range of applications
The products that our Group manufactures have a diverse range of applications. The
electronic transformers and related products that we manufacture are used in
electrical and electronic products such as audio equipment, air conditioniIig systems,
telecommunications equipment and IT products. They are also used in industrial
Most of the precision parts and components that we currently manufacture are used
in digital data storage deviCes such as hard disk drives. We also manufacture
precision parts and components that are used in other products, such as bicycle gear
systems and camera lens holders.
Our industrial server may be embedded in a wide range of machinery and equipment
to provide computing power and connectivity to the Internet, local area network or
some other network, including physical security systems, network security systems,
A TM, transaction stations, POS terminals, industrial equipment control and automation
systems, testing systems and telecommunications and media broadcast systems.
The diverse range of applications to which the products that our Group manufacture
may be regarded as a key strength and that provides our Group with the capability to
address opportunities across a wide range ofuser industries. In addition, the diversity
of applications will reduce our dependency on anyone or small group of user
industries.
(1) We have an established track record
We have built an established track record since our Group began manufacturing
electroniC transformers through our subsidiary, Nakareg in 1999.
Our established track record will provide us with the platform to continue to secure
new orders and use as a reference site to secure new customers.
THE REST OF TIllS PAGE IS INTENTIONALLY LEFT BLANK
54
7. BUSINESS OVERVIEW (Cont'dj
7.2 Principal activities and services provided
7.2.1 Business activities overview
Our business activities are as follows:
Electronic
Transformers
Electronic
Noise Filters
Switch Mode Power
Supply Systems
Electronic Transformer
Parts and Components
Precision Parts and
Components
Printed Circuit Board
Assembly and
Wire Harnesses
Industrial Servers
Electronic Weighing
Scales
Our business activities can be categorised in the following key areas:
Manufucturing of electronic transformers and related products;
Manufucturing of electrical and electronic parts and components; and
Manufacturing of computers and electronic products.
7.2.2 Revenue segmentation by types of products
Our revenue segmentation by types ofproducts for the FYE 31 December 2010 is as follows:
Revenue for the
FYE 31 December 2010
Types of products RM'OOO . %
Electronic transformers and related products 28,451 72.8*
Electronic transformers 23,724 60.7
Electronic noise filters 2,865 7.3
Electronic transformer components 1,691 4.3
SMPS systems 171 0.4
Electrical and electronic parts and components 5,754 14.7
Precision parts and components 4,723 12.1
PCBA and wire harness 1,031 2.6
Computers and electronic products 4,855 12.4
Industrial server 4,230 10.8
Electronic weighing scales 625 1.6
Total 39,059* 100.0*
Note:
Does not add up due to rounding.
*
55
7. BUSINESS OVERVIEW (Coord)
During the FYE 31 December 2010, revenue from our electronic transformers and related
products amounted to RM28.5 million, which accounted for 72.8% of our total revenue.
Revenue from electrical and electronic parts and components amounted to RM5.8 million,
which accounted for 14.7% of our total revenue for the FYE 31 December 2010. This is
followed by revenue from computers and electronic products amounted to RM4.9 million,
which accounted for 12.4% of our total revenue for the FYE 31 December 2010.
For further details on our Group's revenue- segmentation by subsidiary companies,
geographical location and products, please refer to Section 13.2.2 ofthis Prospectus.
7.3 Our products, services and operations
7.3.1 Electronic transformers and related products
We manumcture a wide range of electronic transformers and related products.
The types ofelectronic transformers that we currently manufacture include:
Electronic transformers;
SMPS systems; and
Electronic noise filters.
We also manufucture transformer parts and components, such as transformer coils and
inductors.
Fig 1: Some ofthe electronic transformer and transformer coils that we manufacture
(i) Electronic transformers
A transformer is a device designed to convert (step-up or step-down) electricity in an
alternating current system from one voltage or current into some other desired
voltage or current. An electronic transformer is a transformer that is designed to be
used in electrical or electronic devices.
56
In general, the electronic transformers that we currently manufacture can be grouped
into two (2) broad categories:
Linear power transfonner; and
Switching transfonners.
Some of the electronic power transformer models that we manufacture comply with
Underwriters Laboratories Ltd product safety standards.
Details on the certifications obtained by our Group are set out in Sections 7.5.2 to
7.5.4 ofthls Prospectus.
(a) Linear power transformers
In general, a linear power transformer is a transformer in which electricity
passes through the device directly from the power source. Linear 'power
transformers are used to convert voltage and current in a range of electrical
and electronic products.
Linear power transformers usually function at a lower frequency compared
to switching transformers. Most of the linear power transformers that we
manufacture are designed to function at between 50 hertz (Hz) to 60 Hz.
Our electronic linear power transformers are sold as fully functioning
transformer units, complete with windings, connectors and housing. Most of
our electronic linear power transformers use a silicon steel core.
Our Group has a range of standardised electronic linear power transformers,
and have the in-house capability to design and manufacture customised
electronic linear power transformers to meet our customer's requirements.
We also manufacture encapsulated linear power transformers, which are
optimised to operate in high humidity and high dust environments.
The encapsulated electronic linear power transformers that we design and
manufacture incorporate the following features to protect the transformer
winding and core from water and dust:
The transfonner winding and core is encapsulated in a solid resin
matrix;
The points where the terminal and connectors exit the housing are
made waterproof and dust proof; and
Tough waterproof and dust proofhousing.
57
We design and manufacture encapsulated electronic linear power
transformers for applications ranging from 0.5 V A to 50 VA.
Fig 2: Examples ofencapsulated electronic linear power transformers manufactured
by our Group
Our Group has a range of standardised encapsulated electronic linear power
transformers. We also have in-house capability to design and manufacture
customised encapsulated electronic linear power transformers to meet our
customers' requirements.
The encapsulated electronic linear power transformers that we manufacture
are used in electrical and electronic products, such as industrial machinery
and equipment, industrial products and ventilation systems. They are also
used in switch boxes and outdoor power supply systems.
(b) Switching transformers
In general, switching transformers are usually used as components of SMPS
systems and are rarely designed to supply power to electrical and electronic
products on their own.
Switching transformers are usually smaller in size compared to linear power
transformers, and usually function at a higher frequency. Most of the
switching transformers that we manufacture are designed to function at
between 20,000 Hz to 30,000 Hz.
Our switching transformers are designed to be directly mounted and
soldered onto PCB, and may be mounted in a vertical or horizontal position.
Most of our switching transformers use an iron powder core.
Our Group has a range of standardised switching transformers and have the
in-house capability to design and manufacture customised switching
transformers to meet our customers' requirements.
58
No. 918382-T
7. BUSINESS OVERVIEW (Conl'dj
r"i .
~ ~ r '
rt:l
". '4h.,. ~
Fig 3: Examples ofswitching transformers manufactured by our Group
The small size of some of our switchlng transformers is illustrated in the
picture below:
Fig 4: One ofour switching transformers next to a ten (10) sen coin
The switching transformers that we manufacture are used in a range of
applications, including in SMPS systems, rectifier systems for
telecommunications equipment and in industrial server.
(ii) SMPS systems
We manufacture a range of SMPS systems that are used to provide power supply
solutions for high, medium and low power applications.
A SMPS is an electronic power supply device that is used to convert electricity at one
. voltage or current into electricity at some other voltage or current. In a SMPS, AC
input is converted into DC by a rectifier. The DC is switched on and off at a high
frequency by an electronic switchlng regulator and then passed through a switching
transformer to convert the voltage or current to the desired level.
SMPS transfer power from a source ofelectrical power (such as mains electricity) to a
load while converti,ng its voltage and current. SMPS are usually employed to provide
a regulated output voltage, typically at a level different from the input voltage.
Our SMPS systems are designed to achieve energy efficiency, reduced stand-by
power consumption while meeting our customers' requirements.
59
No. 918382-T
Fig 5: One ofour SMPS systems
We manufacture SMPS systems that supply constant output voltage, and also SMPS
systems that supply adjustable output voltage. Our SMPS systems also incorporate
features that protect against open circuit, power overload and short circuit.
We take the following measures to maintain a high level of product safety for the
SPMS systems that we produce:
The transformers used in our SMPS systems are properly insulated so that the
output voltage is electrically isolated from the input voltage;
In-process quality assurance inspection;
We use only approved components to produce our SMPS systems; and
All ofour SMPS systems undergo a full on-line insulation strength test.
We currently manufacture SMPS systems that utilise AC input and supply DC
output.
We also have in-house capability to design and manufacture customised SMPS
systems to meet our customer's requirements.
Our SMPS systems are used in a range of electrical and electronic devices, such as
LCD television sets, drivers for LED lighting systems, and industrial machinery and
equipment.
Some of the SMPS systems that we manufacture are used in industrial server that our
Group manufactures.
60
0.918382-T
7. BUSINESS OVERVIEW (Conf'd)
(ill) Electronic noise filter
The electronic noise filters that we manufacture are used to reduce electronic noise or
electromagnetic interference in electrical and electronic devices.
Fig 6: Examples ofour electronic noise filters
Our electronic noise filters are mainly installed in sensitive electrical and electronic
devices such as high-end audio speakers, medical equipment and industrial
machinery and equipment
Some of the electronic noise filter models that we manufacture comply with
Underwriters Laboratories Ltd product safety standards.
Details on the certifications obtained by our Group are set out in Sections 7.5.2 to 7.5.4
ofthis Prospectus.
Fig 7: Our Group's Electronic Noise Filters Being Filled with Resin
61
yNo.918382-T
(iv) Transformer parts and components
We manufacture transformer parts and components for our customers. Our in-house
transformer manufacturing capability allows us to design and manufacture
customised transformer parts and components with minimum input from our
customers.
The transformer parts and components that we manufacture for our customers
include transformer coils and inductors.
We can manufacture transformer parts and components in the following manner:
(a) Turnkey basis (i.e., whereby we are responsible for purchasing the raw
materials and other components); or
(b) Consignment basis (i.e., whereby the customer supplies the raw materials
and other components).
Our Group adds value to the products that we manufacture on a turnkey basis by
leveraging on our existing supply chain management functions. Weare able to source
the required raw materials and components from a range of suppliers, including oUr
long term suppliers. We also add value through our material management and in
house quality assurance functions to optimise raw material usage and product quality.
Our Group adds value to the products that we manufacture on a consignment basis by
using our existing manufacturing facilities and capabilities supported by our current
manufacturing practices to serve our consignment customers. Our close geographic
proximity with our consignment customers also allows us to turn around orders in a
timely manner.
62
(v) Adaptors
We have manufactured a range of adaptors in the past. However, there were no
orders received for the FYE 31 December 2010 and thus we did not recognise
revenue from adaptors for the said financial year.
The adaptors that we manufacture are direct wall mounted adaptors and plug-in cord
adaptors that are used to power electrical and electronic devices. Our adaptors step
down the voltage of mains electricity to a voltage that is usable by the electrical and
electronic device.
Our adaptors are designed to function wide input with up to 15% voltage variation
without extreme heat generation. We manufacture adaptors with power output
ranging from 3 W to 50 W. Our adaptors are used to power electrical and electronic
products such as audio equipment, industrial machinery and equipment, security
systems and IT products.
7.3.1 Electrical and electronic parts and components
We manufacture the following types ofelectrical and electronic parts and components:
Precision parts and components; and
PCBA and wire harness.
(i) Precision parts and components
We are also involved in manufacturing precision parts and components that are used
in other products. Most of the precision parts and components that we currently
manufacture are used in digital data storage devices such as hal:d disk drives. We also
manufacture precision parts and components that are used in other products, such as
bicycle gear systems and camera lens holders.
Our Group primarily utilises CNC machining systems to manufacture precision parts
and components. The processes utilised by our Group includes the following:
CNC milling operations; and
CNC lathe (turning) operatious.
We currently manufacture precision parts and components with a dimensional
tolerance ofup to 2 microns using CNC machining systems.
We have the capability to manufacture precision parts and components out of a wide
range of ferrous and non-ferrous materials. We currently work with the following
materials:
Stainless steel;
Carbon steel;
Tool steel;
Aluminium;
Copper; and
Brass.
63
ICompany No. 918382-T ~
7. BUSJNESS OVERVIEW (Cont'd)
Fig 9: Examples ofthe precision parts and components manufactured by our Group
64
Fig 10: High-speed CNC machining systems at Changshu Naknreg
The precision parts and components that our Group manufactures are typically based
on designs and specifications that are provided by our customers. We usually work
with our customers to develop the most efficient means of manufacturing the
precision parts and components by optimising the yield to output ratio and
minimising rejects.
We are also responsible for quality control management to ensure that the precision
parts and components that we deliver to our customers meet with the required
customer specifications and the applicable international standards.
(ii) PCBA and wire harness
We manufacture PCBA and wire harness for our customers.
A PCBA is a PCB that has been populated with electronic components to create an
electronic circuit that performs specific functions. PCBAs are commonly used as
components of an electrical or electronic device.
To increase customer flexibility, we can accept low Minimum Order Quantity
(MOQ) for the PCBA that we manufacture. This enables our Group to serve
customers who are planning to manufacture small quantities of products.
A wire harness is an assembly of wires and connectors that are used to transmit
information and/or electricity. The wires in a wire harness are typically bound
together and organised so as to facilitate easy installation in the electrical or
electronic device for which it is intended.
65
7. BUSINESS OVERVIEW (Col1t'd)
7.3.3 Computers and electronic products
We manufacture the following types of computers and electronic products:
Industrial server, and
Electronic weighing scales.
(i) Industrial server
We manufacture a range of industrial server that are primarily intended for industrial
and commercial use.
Our in-house industrial server design capabilities include:
Industrial server power electronics design, including power supply, UPS and
battery design;
Motherboard integration;
Design ofradio frequency and other wireless communication systems;
Computer interface circuit design; and
Customised software design and programming.
We have the in-house capability to design and manufacture customised industrial
server to meet our customers' requirements.
Our industrial server use space saving designs and are smaller in size than most
conventional computers and servers while retaining full functionality.
The industrial server that we manufacture can incorporate one or more of the
following features, depending on our customer's requirements:
Fanless cooling system, for lower noise and power consumption and better
energy efficiency;
Built-in UPS system to prevent industrial server and application failure in the
event of short power outage. 1bis helps to improve uptime and is suitable for
business critical applications. Our UPS system does not use batteries; and
Built-in brownout protection that provides five seconds of uninterrupted
operations in the event ofmomentary loss ofelectrical power.
Our industrial server may be embedded in a wide range ofmachinery and equipment
to provide computing power and connectivity to the Internet, local area network or
some other network. Some ofthese machinery and equipment include:
Physical security systems;
Network security systems;
AIM;
Transaction stations;
POS terminals;
Industrial equipment control and automation systems;
Testing systems; and
Telecommunications and media broadcast systems.
We can accept low MOQ for our industrial server to increase customer flexibility.
This enables our Group to serve customers who are planning to manufacture small
quantities ofproducts.
66
!Company No. 918382-T II
Our industrial server are also suitable for use as thin client terminal workstations, in
vehicle computers, and as normal computer terminals.
Some of the industrial server models that we manufacture comply with Underwriters
Laboratories Ltd product safety standards.
Fig 11: Our industrial servers displaying some oftheir electronic components
Fig 12: Some examples our industrial servers
67
(ii) Electronic weighing scales
We manufacture a range of electronic weighing scales that are designed primarily for
commercial applications.
(a) Counting scales
The counting scales that we manufacture are used to display accurate. weight
information to their users. The standard features of our counting scales include
stainless steel pan and dust cover, electronic weight display, and the option of using
plug in mains power or internal battery power. The internal battery allows for up to
90 hours of continuous usage.
Our counting scales can include an optional module that allows the scale to be
connected to a computer or printer.
Our counting scales are mainly used to count and weigh items, particularly small
items. They are commonly used in inventory control and management applications.
We currently manufacture counting scales, namely "ARC" and "ARC Plus" models,
with the following capacity and accuracy:
Degree of accuracy
Weight capacity "AHC" Model "ARC Plus" Model
3kg 0.1 g O.OS g
6kg 0.2g 0.1 g
IS kg O.Sg 0.2 g
30 kg LOg O.S g
Our counting scales are installed with programmes to perform the following
applications:
Piece counting;
Presenttare*;
Piece checking alarm (piece counting based on weight);
Accumulation (cumulative counting); and
Unit conversion (from one unit ofmeasure to another).
68
!Company No. 918382-T
*
Present tare refers to the electronic scale's counting function, where the number of
items in a batch is calculated based on the total weight of that batch. The operator
first weighs a single item, and saves the weight on the electronic scale. The
electronic scale can then calculate the number of individual items contained in
subsequent batches by dividing the total weight ofsubsequent batches by the saved
weight ofthe single item. This fonction is usefolfor counting small items.
(b) Price computing scales
The price computing scales that we manufacture are used to accurately calculate the
price of an item based on its weight.
Our price computing scales can be customised and programmed by the user using an
integrated keypad. The standard features of our price computing scales include
s t a i n l ~ s s steel pan and dust cover, electronic weight and price display and the option
of using plug in mains power or internal battery power. The internal battery allows
for up to 60 hours of continuous usage.
Similar to our counting scales, our price computing scales can incorporate an
optional module that allows the scale to be connected to a computer or printer.
Our price computing scales are commonly used to weigh and compute the price of
items, for example in a supennarket or grocery store.
The price computing scales that we currently manufacture, namely "AHP" and
"ASP" models, are of the following capacity and accuracy:
Degree of Accuracy
Weight Capacity "AHP" Model "ASP" Model
3kg 1 g Ig
6kg 2g 2g
15 kg 5g 5g
30 kg 10 g 10 g
Our price computing scales are installed with programmes to perform the following
applications:

Price computing;

Present tare*;

Accumulation; and

Unit conversion.
*
Present tare refers to the electronic scale's counting fonction, where the number of
items in a batch is calculated based on the total weight ofthat batch. The operator
first weighs a single item, and saves the weight on the electronic scale. The
electronic scale can then calculate the number of individual items contained in
subsequent batches by dividing the total weight ofsubsequent batches by the saved
weight ofthe single item. This fonction is usefol for counting small items.
69
7.4 Process flow
The general process flow our Group's main manufacturing activities namely, manufacturing of
transformers, electronic noise filters, industrial server and precision parts and components are provided
in the following section.
7.4.1 General process flow for manufacturing transformers
The general process flow for the manufacturing oftransformers is depicted below:
Once an order is received, we will prepare the production plan and progress schedule. After
that, the raw materials collected will be inspected before being stored in the warehouse. Any
defective items will be rejected and a re-collection of raw materials will take place to replace
these items.
Further collection of accessories and parts to manufacture transformers will also be
undertaken. At the pre-production stage, the transformer core and winding and other sub
components will have to be collated before the core and winding assembly takes place.
An inductance test is then carried out to test the electrical properties ofthe transformer such as
its inductance, capacitance and resistance test and the checking of the fixture of the
components. Transformers that do not pass the test will be disposed as defective items.
70
The transformer core will then be filled with resin or insulating material and solidified. During
this process, glue machines, ovens and various gripping devices are used. The transformer
components are then welded and joined in a controlled temperature environment.
The core of the transformer is then attached and fixed onto the transformer's framework. The
pins of the transformer are trimmed to the desired length and a high voltage test is carried out
with test results being recorded.
Transformers are also tested using ATE. The checklist for these test procedures is prepared
and followed, and any product that fails the test will be disposed ofas defective products.
The transformer is then cleaned and labelled. The labelling provides details on the model and
date of manufucture of the transformer. A final inspection Will then take place and any
negative feedback on the quality ofthe finished products will be lodged.
The transformer is then packaged and sent to our quality assurance department where random
checks are performed. Finally, products are checked against the storage list before they are
stored at the warehouse.
71
7.4.2 General process flow for manufacturing electronic noise filters
The general process flow that we use to manufacture electronic noise filters is depicted below:
Fail
Fail
Fail
Fail
Repair or Disposal
of Defective
Products
Fail
Fail
Once an order is received, we will prepare the production plan and progress schedule. The raw
materials are inspected before being stored in the warehouse. Any defective items or raw
materials will be rejected and a re-collection of raw materials will take place to replace these
items.
Further collection of accessories and parts to manufacture electronic noise filters will also be
undertaken. Prior to winding the coils for the electronic noise filters, the frame will be marked
according to their colour groups and the core and wire will also be prepared for production
during the preparation stage.
72
mpany No. 918382-T
7. BUSINESS OVERVIEW (ConFd)
Trimming of the pins' length will be carried out and the insulation paint will be scrapped of(
Pins will then be tinned before being sent for inductance test and quality control test of the
balun coil (a sub-component in electronic noise filters). Products that fail these tests will be
returned to the preparation stage and reworked.
During the preparation stage, sub-components will be assembled before being used in the
manufacturing line. Prior to the plugging-in and welding of these components, they will be
sent to the quality assurance department, where random checks will be performed. Sub
components that fail to meet the quality benchmark will be re-assembled.
The semi-finished products will be cleaned-up before the first inspection is carried out.
Products that pass the test will then be sent for the first high voltage and ATE test, with the
test results being recorded. The checklist for these test procedures will be prepared and
followed and any product that failed the tests will either be disposed of as defective products,
or repaired ifpossible.
The semi-finished products will then be filled with resin insulating material, which is
solidified before the covers are installed. During this process, glue machines, ovens, air
conditioners and vacuum pumps are used. The products are then being sent for further tests
. such as the Line-Nature test, current leakage test, second high voltage test, the second ATE
Test and DC resistance test. Any products that fail the tests will either be repaired ifpossible,
or disposed of as defective products.
This is followed by assembling the nuts and labelling the products. A second clean-up of
products is then carried out before final inspection. After that, products are packaged and sent
to our quality assurance department where random checks will be performed. Complaints of
rejected or returned products will be lodged here. Finally, products will be checked against the
storage list before they are stored at the warehouse.
73
i Company No. 918382-T II
7.4.3 General process flow for manufacturing industrial server
The general process flow that we use to manufacture industrial server is depicted below:
Fail
Repair or Disposal of
Defective Products
Fail
Packaging and
Storage
. T
Final Visual
Inspection
T
Cleaning
T
Final Test
T
Aging Test
T
Assemble Outer
Casing
J Pass
Burn In Test
T
CMOS Clear
T
Install Operating
System
@ ; ' ~ l i l ~ .. ; , ; ~ , ~ ~
t
Material Issuance
~
Back Chassis
Input and Output
Assembly
~
Affix Label and
Serial Number
~
Assemble Power
Supply System
~
Assemble Mother
Board
~
Assemble Hard
Disk Drive
J
Assemble Wire
Harness
J
Assemble RAM
and CPU
~
Assemble Heat Sink
and Casing
Note: RAM =Random Access Memory.
CPU =Central Processing Unit
The materials to manufacture the industrial server are issued. The back chassis input and
output ports are assembled flrst. The industrial server's label and serial number are then
affixed.
The industrial server's power supply system, mother board, hard disk drive, wire harness,
RAM, CPU, heatsink and casing are then assembled.
The operating system is installed onto the industrial server units that passed the fIrst visual
inspection. The industrial server's Complementary Metal Oxide Semiconductor (CMOS) is
then cleared to reset the unit's Basic Input/Output System (BIOS) to its default setting.
74
The industrial server is then subjected to a burn in test, whereby the industrial server is made
to run a test program for a specified period of time. This is to ensure that the industrial server
is functioning properly. Industrial server units that fail the burn in test are repaired (if
possible) or discarded (ifrepair is not possible).The external cover is installed on the industrial
server units that pass the burn in test.
The industrial server will have to undergo an aging test to ensure that it is running smoothly
and that there are no problems involving automatic shutdowns. Besides that, the same test is
also applied to the software to check for any errors. Finally, the audio output of the industrial
server is tested. .
The industrial server is subjected to the final test to ensure that all of the industrial server's
functions and applications are functioning properly. Industrial server units that fail the final
test are repaired (if possible) or discarded (ifrepair is not possible).
Industrial server units that pass the. final test are cleaned and then subjected to the final visual
inspection. Industrial server units that fail the final visual inspection are reworked (ifpossible)
or discarded (if rework is not possible).
Industrial server units that pass the final visual inspection are packaged and stored at the
warehouse.
THE REST OF TIllS PAGE IS INTENTIONAlLY LEFT BLANK
75
7.4.4 General process flow for manufacturing precision parts and components
The general process flow that we use to manufacture precision parts and components is
depicted below:
Test Cut
Fail
'V
Fail In-process
Inspection
Disposal of
Defective Products
~
Fail
+
Quality
Assurance
Inspection
t
Pass
After securing an order, our Group issues the material to manufacture the precision parts and
components. The material is obtained from our inventory (if available) or ordered from
suppliers (if unavailable). Incoming materials are subjected to quality control inspection.
76
A part drawing will be prepared based on the customer's specifications andlor product sample.
We typically work from drawings and engineering instructions provided by the customer to
fulfil repeat orders.
This is followed by the engineering process, which involves, among other tasks:
Designing the machining fixtures and jigs;
Designing the machining process;
Programming CNe code; and
Tooling selection.
A test cut is carried out on a sample of the specified material to verify that the production
process created by the engineering process is correct.
The first step in the production process of any order (including repeat orders) is to produce the
first piece. Mass production will only be aUthorised after the first piece has passed first piece
inspection.
In-process inspection is carried out during full production to identify and correct any defects
that may occur. The production process may be modified to correct for systematic defects.
Finished products are sent to our quality assnrance department for outgoing inspection.
Finished products are packed and stored prior to shipping to the client.
7.5 Quality management system
We have in place various quality control processes to ensure that quality of our products are
maintained. This is reflected by the fact some of our subsidiaries have received ISO 9001:2008
certification.
7.5.1 Quality management policy
We adopt the following general policy in our manufacturing operations to ensure that our
quality standards are maintained and adhered to:
In-coming raw materials and components are SUbjected to inspection before they are
accepted by our Group. This is to ensure that the products that we manufacture meet
the desired specifications;
In-line process inspection is part of our manufacturing process flow,. where the
products that are being manufactured are subjected to quality assnrance inspection
andlor testing at specified points of the production process. This enables us to spot
defects and take remedial action as they occur; and
Finished products are subjected to inspection andlor testing to ensure that they are
functional and meet with customer specifications. Depending on the type of product
manufactured, finished products may be subjected to 100% inspection or to random
sampling.
77
Some of the quality assurance testing that we carry out on the products that we manufacture
includes:
High potential test to verifY the quality and electrical safety characteristics of a
product. The test is carried out by subjecting the product to voltage that is much
higher than the normal voltage that it is designed to operate at for a specified period
of time. The assumption is that if the product's insulation can withstand the much
higher voltage for the specified period of time, it will be able to function adequately
and safely at its normal operating voltage;
Insulation Resistance ("IR") test to measure the electrical resistance value of the
product. The IR test gives an indication of the relative quality of the product's
electrical insulation system.
Some of the quality assurance testing that we carry out on the transformers and related
products that we manufacture includes:
Turn ratio test, which ensures that no materials or tools are short-circuiting the
windings;
Winding resistance test is used for comparison to the specified readings. A reading
that is more than ten percent (10%) higher could indicate loose internal connections
or wrong tum ratio; and
Functional test to determine the performance or quality of the product. The two
common tests conducted on transformers are the short circuit test and open circuit
test. The results of these tests will enable us to determine the quality of the product in
terms ofparameters such as impedance, voltage regulation and efficiency.
As at the LPD, we had fourteen (14) quality assurance personnel, of whom six were based in
Malaysia and eight were based in the PRe.
7.5.2 Quality management system certification
Changshu Nakareg has received ISO 9001:2008 certification, as detailed below:
Certificate Address Scope Issuing body
Date of
initial
aDProval
Current
validity
period
ISO
9001:2008
Block 18, Huanhu
Hongshllil Industry
Park, Jinlin Rd,
South-East
Development Zone,
Changshu City,
Jiangsu Province,
215500,PRC
Manufacture
and sale of
precision parts
for computers
and electronic
products
Guardian
Independent
Certification
Ltd
28 December
2008
12 October
2010 to 25
December
2011
78
Shanghai Optimus has received ISO 9001:2008 certification, as detailed below:
Date of Current
initial validity
Certificate Address Scope Issuing body approval period
ISO No. 21, Longyang Manufacture of AQA 20 October 20 October
9001:2008 Industrial Zone, EM! filters and International, 2009 2009 to 25
No. 1515, magnetic LLC September
Yuandong Road products (high 2011*
(N), Fengxian, frequency
Shanghai,201401, transformer and
PRC inductor).
i
Note:
* Pending issuance ofthe new certificate.
Nakareg Kunshan has received ISO 900 I :2008 certification, as detailed below:
Date of Current
initial validity
Certificate Address Scone Issuiol! body approval period
ISO 900 1 :2008 No. 3131 Beimen Manufacture of AQA 11 Novembel 11 November
Road, Yushan magnetic International, 2009 2009 to 24
Town, Kunshan, electronic LLC February 2012
Suzhou City, components
Jiangsu Province, (convertor,
215316, PRC transformer, filter
and inductor).
Nakareg has received ISO 9001 :2008 certification, as detailed below:
Certificate Address Scope Issuiol! body
Date of
initial
approval
Current
validity
period
ISO
9001:2008
No.2, Jalan BJ5,
Taman Belmas
Johan,48000
Rawang, Selangor
Darnl Ehsan,
Malaysia
The design and
manufacturing
of adaptor,
transformer and
magnetic coils.
Care
Certification
International
(M) SdnBhd
14 November
2009
27 March
2010 to 13
November
2012
7.5.3 Environmental management system certification
Our subsidiary Shanghai Optimus has received ISO 14001:2004 certification, as detailed
below:
Certificate Address Scope Issuing body
Date of
initial
approval
Current
validity
period
ISO
14001:2004
No. 21, Longyang
Industrial Zone, No.
1515, YmmdongNorth
Road, Fengxian
District, Shanghai,
201401, PRC
Manufacture
ofEM! filters
and magnetic
products.
AQA
International,
LLC
30 May 2006 29 May
2009 to 28
May 2012
79
I Company No. 918382-T II
7. BUSINESS OVERVIEW
7.5.4 Product safety certification
Nakareg has obtained certification from Underwriters Laboratories Ltd for an industrial server
model manufactured by Nakareg Kunshan, as detailed below:
Registered
company Manufacturer Product catel!ory Product covered Issued date
Nakareg Hitec Electronics
(Kunshan) Company
Liririted(I), No. 3131
Beimen Road,
Kunshan, Jiangsu
215316,PRC
IT equipment including
electrical business
equipment
Server, model NKG-
DC-P-OOl
9 May 2011
Nakareg Hitec Electronics
(Kunshan) Company
Limited(I), No.3131
Beimen Road,
Kunshan, Jiangsu
215316,PRC
IT equipment including
electrical business
equipment certified for
Canada
Server, model NKG
DC-P-OOI
9 May 2011
Note:
(1) Now known as Nakareg Kunshan.
Nakareg has obtained certification from Underwriters Laboratories Ltd for some of the
electronic transformer models manufactured by Nakareg Kunshan, as detailed below:
Registered
company Manufacturer Product category Product covered Issued date
Nakareg Nakareg Kunshan,
313i Beimen Rd,
Yushan, Kunshan,
Jiangsu 215316,
PRC
Systems, electrical
insulation -
component
Class 155 (F)
electrical insulation
system, designated
Viking F-2 and GH
155.
1 June 2011
80
One of our customers, Bando Electronics (Malaysia) Sdn Bhd, has obtained certification from
Underwriters Laboratories Ltd for some of the electronic transformers manufactured by
Nakareg Kunshan for Bimdo Electronics (Malaysia) Sdn Bhd, as detailed below:
Registered
Manufacturer
Product
catel!orv Products covered Issued date
Bando Hitec Electronics Component- Power transfonners, 6 February
Electronics (Kunshan) Company audio/visual models 2004
(Malaysia) Limited(J), No.3131 apparatus BD31AI-0002,
SdnBhd Beimen Rd, Kunshan,
Jiangsu 215316,PRC
BD3IBI-000l,
BD3IBI-0002,
BD3lB1-0003,
BD3lB1-0004,
BD3IBI-0005,
BD3IBI-0006,
BD3IBI-0007,
BD31B 1-0008,
BD3lB1-0009,
BD3IBI-00I0,
BD3IBI-0011,
BD31BI-0012,
BD3IBI-0013,
BD3IBI-0015,
BD3IBI-0015A,
BD3IBI-0016,
BE77AI-000l,
BE77A2-0001,
BE77 A2-0002,
BE77A3-0001 and
BE77A4-000L
Note:
(1) Now known as Nakareg Kunshan.
One of our customers, TDK-Lambda Corporation, has obtained certification from
Underwriters Laboratories Ltd for some of the electronic transformers and electronic noise
filters by Shanghai Optimus for TDK-Lambda Corporation, as detailed below:
Registered
company Manufacturer Product Products covered Issued date
IDK- Shanghai Optimus, Component- Class 130 (B) 9 August
Lambda 1515 Yuandong Rd Systems, electrical transfonner insulation 1996
Corporation Block 21, Longyang
Industrial Zone,
Fengx.ian, Shanghai
20140l,PRC
insulation system, designated
NLBl, NLB2, NLB4 or
NLB 5; Class 155 (F)
transfonner insulation
system, designated
NLFI; Class 155 (F)
system, designated
NLF2; Class 180 (II)
system, designated
NLHI, NLH2 or NLH3.
81
Registered
company Manufacturer Product category Products covered Issued date
IDK-
Lambda
Corporation
Shanghai Optimus,
1515 YuandongRd
Block 21, Longyang
fudustrial Zone,
Fengxian, Shanghai
201401, PRC
Component-
Power supplies,
information
tecimology
equipment
including electrical
business equipment
Electronic noise filters,
model numbers
PAN4820, MBS4850S,
MBS4850SF.
16 May 2002
IDK-
Lambda
Corporation
Shanghai Optimus,
1515 YuandongRd
Block 21, Longyang
Industrial Zone,
Fengxian, Shanghai
201401, PRC
Component-
electromagnetic
interference filters
Electronic noise filters,
various models.
16 May 1996
IDK-Lambda Americas Inc, (a company within the TDK-Lambda group of companies), has
obtained certification from Underwriters Laboratories Ltd for some of the electronic
transformers manufactured by Shanghai Optimus for IDK-Lambda Americas Inc. as detailed
below:
Registered
company Manufacturer Product category Products covered Issued date
IDK-
Lambda
Americas
Inc
Shanghai Optimus,
1515 YuandongRd
Block 2], Longyang
Industrial Zone,
Fengxian, Shanghai
201401, PRC
Component-
Systems, electrical
insulation
Class 130 (B)
transformer insulation
system, designated 130,
BOA. BOB, l30C; Class
155 (F) transformer
insulation system,
designated 1551; Class
180 (H) transformer
insulation system,
designated 180, 180A,
180B,180C.
]8 June ]971
7.6 R&D
7.6.1 R&D policy
Our Gronp does not carry out R&D per se, due to the nature of our current business
operations. However, we actively carry out D&D work. D&D is an important activity for our
Group. Our D&D helps to create and sustain our competitiveness through the following:
Continuous product quality improvement to ensure customer satisfaction;
Increase production efficiency and productivity to lower costs;
Continuously enhance existing products' performance to better meet the needs of our
customers; and
Developing new products to address areas ofgrowth and opportunity.
82
7.6.1 Facilities and personnel
Our Group has in-house D&D facilities and personnel to allow us. to carry out D&D and
product development. The main equipment that our Group utilises in our D&D activities
include the following:
Hi-potential testers;
Inductance capacitance resistance meters;
Transformers ATE;
Transformer vibration tester;
Variable resistor load;
Probe; and
Aging facilities.
Most of our D&D work is carried out in-house. In some instances, we may work together with
our customers to develop new product designs. We may also design products in accordance to
our customers' specifications and requirements.
As at the LPD, our Group has a total of nine (9) personnel engaged in D&D activities. Our
D&D personnel are distributed among our facilities as follows:
Subsidiary Facility Number of personnel involved
in D&D activities
Nakareg Rawang, Selangor 3
Shanghai Optimus Shanghai I
Nakareg Kunshan Kunshan, Jiangsu Province 5
7.6.2 D&D expenditure
Our Group's estimated D&D expenditure for the last three (3) financial years was as follows:
<------------FYE 31 December---------->
2010 2009 2008
D&D capital expenses (RM'OOO) 5 7 37
D&D operating expenses (RM'OOO) 292 181 142
Total D&D expenses (RM'OOO) 297 188 179
Total D&D expenses as a proportion of the 0.8 0.5 0.4
Group's total revenue (%)
7.7 Operational facilities
Our Group's main operational facilities are at the following locations:
Company Principal operations
Approximate
built-up area
(sq. ft.) Location of operational facility
Nakareg and NKG
Technology
- Head office
-
Manufacture of
electronic transformers
and related components
- D&D centre
8,317.0
4,394.37
No.2, 1alan BJ 5, Taman Perindustrian
Belmas 1ohan, 48000 Rawang,
Selangor DaTUI Ehsan, Malaysia
No.2, lalan B1 5, Taman Perindustrian
Be1mas Johan, 48000 Rawang,
Selangor Darul Ehsan, Malaysia
Nakareg Manufacture of electronic
transformers
8,556.0 No.ll, Jalan Tiram Dua, Taman
Perindustrian Tiram, Batu 15, 1alan
Sungai Tiram, 81800 Ulu Tiram, Johor,
Malaysia
83
Company Principal operations
Approximate
built-up area
(sq. ft.) Location of operational facility
Shanghai Optimus -
Manufacture of electronic
transfonners and related
products, PCBA and
electronic scales
- D&Dcentre
27,092.99 No. 21, Lonyang Industrial Park
No.1515, Yuan dong Road (North),
Fengxian District, Shanghai, PRC
Nakareg Kunshan - Manufacture ofelectronic
transfonners and related
products and components,
PCBA and wire harness
and industrial server
-
D&Dcentre
48,405.06 No. 3131, Beimen Road, Yushan
Township, Kunshan City, Jiangsu
Province, PRC
Changshu Nakareg
- Manufacturing of
precision parts and
components for electrical
and electronic products.
10,376.50 Block 18, Huanhu Hongshun Industry
Park:, Jinlin Road, South-East
Development Zone, Changshu,
Jiangsu, PRC
Nakareg
International
- Investment holding,
trading and distribution
NA Unit 202, 2fF, Malaysia Building, 50,
Gloucester Road, Wanchai, Hong
Kong
Note:
NA = Not applicable, as this is the company's registered address. Nakareg International does not operate an office in Hong Kong.
7.8 Production output, capacity and utilisation
The average capacity, production and utilisation rates of our manufacturing activities for the FYE 31
December 2010 are estimated as follows:
Product Monthly capacity
(pieces)
Monthly production
output
(pieces)
Utilisation
rate
(%)
Electronic transfonners (II
Electronic noise filters (I)
Electronic transfonners components (1)
SMPS systems (l)
Precision parts and components (2)
PCBA and wire harness (I)
Industrial server (1)
Electronic scales (1)
391,800
100,000
10,000
2,000
2,961,764
37,800
2,000
4,000
327,300
83,000
6,500
750
1,891,275
28,565
750
1,500
84
83
65
38
64
76
38
38
Notes:
(1) Monthly azpacity is based on one (i) twelve (J2)-haur shift per working day, with twenty (24) working days per month.
(2) Monthly <X1pacity is based on two (2) twelve (i2)-hour shift per working day, with twenty (24) working days per month
In general, during the FYE 31 December 2010 the capacity utilisation rates of our electronic
transfonners, electronic noise filter, PCBA, wire harness and precision parts and components
manufacturing activities were relatively high.
84
The capacity utilisation rates for our SMPS systems, industrial server and electronic scales were
relatively low as we only began to manufacture these products in 2010, as a result of which production
volume were still low. Although the capacity utilisation rate for manufacturing electronic scales was
relatively low during the FYE 31 December 2010, the personnel and equipment normally used to
manufacture electronic scales did not remain idle as they were used to manufacture other products such
as electronic transformers.
7.9 Types, sources and availability of raw materials/input
7.9.1 Purchases of raw materials, finished products (i.e., electronic transformers) and services
The following are the main raw materials, finished products (i.e., electronic transformers) and
components purchased by our Group for the FYE 31 December 2010:
Raw materials,
finished products and
components
Value of
purcbases
(RM'OOO)
Percentage of
total purchases
(%)
Sources ofsupply
Malaysia
(%)
PRC
(%)
Other
countries
(%)
Electronic transformers 5,515 22.1
-
100.0 -
Copper wire 4,362 17.4 38.4 53.5 8.0
Transformer cores 2,964 11.9 24.5 69.5 6.0
Aluminium 2,372 9.5 -
91.9 8.1
Computer parts and
components
2,245 9.0 -
71.7 28.3
Servers 1,563 6.3 -
100.0
-
Bobbins 1,514 6.1 7.7 26.2 66.2
Sheet metal (steel) 727 2.9 - 100.0 -
PCB 540 2.2 3.8 11.0 85.2
Other products (/)
3,199 12.8 11.6 69.9 18.6
Total 25,000* 100.0* 11.6
11
74.1' 13.1'
Notes:
(1) Other products include insulation tape, connectors, lead and other types ofwire, tinplated terminals, load cells,
.fUses, battery covers, varnish, plastics, LED displaypanels and other electronic components.
Does not add up due to raunding.
Represents the percentage of raw materials purchased from the respective countries over the Group's total
purchases
Most ofthe raw materials, finished products (i.e, electronic transformers) and components that
we purchased from suppliers in Malaysia were for our operations in Malaysia. Similarly, most
of the raw materials, finished products (Le., electronic transformers) and components that we
purchased from suppliers in the PRC were for our operations in the PRe. During the FYE 31
December 20lO, purchases from suppliers in the PRC accounted for 74.7% of our total
purchases, while suppliers in Malaysia accounted for 11.6% of our total purchases. Suppliers
in other countries (such as Japan and Hong Kong) accounted for the remaining 13.7% of our
purchases.
85
Our largest purchase was of electronic transformers, which accounted for 22.1 % of our total
purchases. We sourced all of the electronic transformers from the PRC. These electronic
transformers were manufactured for our Group by a supplier on an Original Equipment
Manufacturer (OEM) basis. As at LPD, we have reduced our purchases of electronic
transformers from this supplier. Please refer to Sections 5.1(ii) and 7.15 of this Prospectus for
further details on this.
Our second largest purchase was of copper wire, which accounted for 17.4% of our total
purchases. Suppliers in the PRC accounted for 53.5% of our purchases of copper wire, while
suppliers in Malaysia and other countries respectively accounted for 38.4% and 8.0% of our
purchases.
Our third largest purchase was of transformer cores, which accounted for 11.9% of our total
purchases. Suppliers in the PRC accounted for 69.5% of our purchases of transformer cores,
while suppliers in Malaysia and other countries respectively accounted for 24.5% and 6.0% of
our purchases.
Purchases of aluminium accounted for 9.5% of our total purchases. Suppliers in the PRC
accounted for 91.9% of our purchases of aluminium, while suppliers in other countries
accounted for the remaining 8.1 % of our purchases.
Purchases of computer parts and components accounted for 9.0% of our total purchases.
Suppliers in the PRC accounted for 71.7% of our purchases of computer parts and
components, while suppliers in other countries accounted for the remaining 28.3% of our
purchases.
Purchases of servers accounted for 6.3% of our total purchases. Our Group purchased all of
our servers from suppliers in the PRC.
Purchases of bobbins accounted for 6.1% of our total purchases. Suppliers in other countries
accounted for 66.2% of our purchases of bobbins, while suppliers in the PRC and Malaysia
respectively accounted for 26.2% and 7.7% ofour purchases.
Purchases of steel sheet metal accounted for 2.9% of our total purchases. Our Group
purchased all of our steel sheet metal from suppliers in the PRC.
Purchases of PCB accounted for 2.2% of our total purchases. Suppliers in other countries
accounted for 85.2% of our purchases of PCB, while suppliers in the PRC and Malaysia
respectively accounted for 11.0% and 3.8% of our purchases .
. The other products purchased by our Group during the FYE 31 December 2010 included
insulation tape, connectors, lead and other types of wire, tinplated terminals, load cells, fuses,
battery covers, varnish, plastics, LED display panels and other electronic components.
Purchases of these other products accounted for 12.8% of our total purchases. Suppliers in the
PRC accounted for 69.9% of our purchases of these raw materials, finished products and
components, while suppliers in other countries and Malaysia respectively accounted for 18.6%
and 11.6% ofour purchases.
7.9.2 Availability of inputs
The earthquake and tsunami that struck Japan on 11 March 2011 resulted in some disruption
in the supply of some of the parts and components purchased by our Group that were
manufactured in Japan. The parts and components that were affected included transformer
cores and electronic components such as capacitors. As at the LPD, the supply of these parts
and components has stabilised.
86
7. BUSINESS OVERVIEW (Conf'dj
Save as disclosed above, as at the LPD we have not faced any shortages in the availability of
raw materials and components that are purchased by our Group and sub-contracted services.
7.10 Technology used
The main technologies used that are relevant to our Group are those that are in relation to transformers,
which include the following:
Transformers;
Winding; and
Core construction.
Our Group also manufactures SMPS devices.
Other technologies that are relevant to our Group include those that are in relation to the following:
Industrial server;
Electronic weighing scales; and
Precision parts and components.
7.10.1 Transformers
A transformer is a device that is designed to convert electricity in an alternating current system
at one voltage or current into electricity at some other voltage or current.
Transformers range in sizes from small transformers, which may be referred to as electronic
transformers which are used as components in electrical and electronic devices to larger power
distribution transformers which are used to interconnect portions of electrical grids.
Our Group only manufactures electronic transformers and related products and does not
manufacture power distribution transformers.
However, all transformers operate with the same basic principles and possess the same major
components. In general, the basic design for a transformer comprises the following major
components:
Primary winding;
Secondary winding; and
Transformer core.
Primary winding and secondary winding
The primary winding is the winding of the transformer that is connected to the power source.
The secondary winding is the winding of the transformer that delivers electricity to the load.
The primary and secondary windings are usually made from insulated wire, normally copper.
Transformer core
The transformer core serves to confine the magnetic flux to a path that closely couples the
windings. Most transformer designs make use of a ferromagnetic core.
87
Solid cores are rarely used due to the large eddy currents that develop within the solid core.
These eddy currents lead to a loss of electrical power and reduce the efficiency of the
transformer. Instead, ferromagnetic transformer cores are usually constructed by stacking thin
sheets of laminated silicon steel. The lamination insulates each sheet from its neighbours, and
from the transformer winding.
. As each sheet is thin and insulated from other sheets, the eddy currents that develop in the
sheet are confined to highly elliptical paths that enclose little flux, which reduces their
magnitude and consequently reduces the loss of electrical power and loss of efficiency.
There are currently two (2) common designs of ferromagnetic core transformers:
E-I transformers; and
Toroidal transformers.
E-I transformers are so named as their cores are made from interleaved stacks of E-shaped
steel sheets capped with I-shaped steel sheets.
The core of a toroidal transformer is ring shaped. The closed ring shape eliminates air gaps
that are inherent in the construction of E-I transformers. Toroidal transformers are generally
more efficient than E-I transformers of the same power. However, toroidal transformers are
also usually more expensive to manufacture.
How transformers function
When electricity in an alternating current system passes through the transformer's primary
winding, it creates an alternating magnetic flux in the transformer's core. The magnetic flux
will expand as the electricity passes through the primary winding then collapse as the voltage
ofthe alternating current drops to zero, and expand again as the electricity reverses polarity.
The alternating expansion and collapse of the magnetic flux will create a varying magnetic
field through the secondary winding. This varying magnetic field induces a varying voltage in
the secondary winding. This effect is called "mutual induction".
If a load is connected to the secondary winding, electricity will flow through the secondary
winding and electrical energy will be transferred from the primary circuit through the
transformer to the secondary winding and the load.
The ratio of the number turns in the primary winding to the number of turns in the secondary
winding (known as the turns ratio) will determine the relationship between the voltage and
electric current in the primary winding and the secondary winding. The voltage is converted in
accordance to the turns ratio, while the electric current is converted in an inverse ratio to the
turns ratio.
For example, consider a transformer that has 10 turns in the primary winding and 100 turns in
the secondary winding, which gives a turn ratio of 1O. If the primary winding carries
alternating current with voltage of 240 volts and current of 10 amperes then the secondary
winding will have voltage of2,400 volts and current of 1 ampere.
Common applications
Transformers are used in a wide range of applications to convert electricity in an alternating
current system at one voltage or current into electricity at some other voltage or current.
88
Very large transformers are used to step up the voltage of electricity at electricity generating
plants before it is transmitted over long distances through wires to users. This reduces energy
loss during transmission by reducing the resistance encountered by the electricity as it travels
through the wires. At the other end, step down transformers are used to reduce the voltage
before the electricity is distributed to residential, commercial and industrial users.
Household electrical and electronic devices incorporate a transformer to step down the voltage
of mains electricity to a voltage that is usable by that device. The transformer also serves to
electrically isolate the user from contact with the mains electricity voltage. In the case of
devices such as laptops and mobile phones, the transformer is housed in a separate external
adapter that is plugged into an electrical outlet.
In electrical and electronic circuits, transformers may be used to step down the voltage from
the circuit's power supply to a level that is usable by its components.
Transformers are used to couple stages of amplifiers and to match devices such as
microphones and music playing devices to the input of amplifiers. Transformers also allow
telephone circuits to carry on a two-way conversation over a single pair of wires.
7.10.2 SMPS
A SMPS is an electronic power supply device that is used to convert electricity at one voltage
or current into electricity at some other voltage or current. In a SMPS, AC input is converted
into DC by a rectifier. The DC is switched on and off at a high frequency by an electronic
switching regulator, and then passed through a transformer to convert the voltage or current to
the desired level.
SMPS transfer power from a source of electrical power (such as mains electricity) to a load
while converting its voltage and current. SMPS are usually employed to provide a regulated
output voltage, typically at a level different from the input voltage.
In general, SMPS may be classified into four (4) types according to the waveform ofthe input
and output electricity. The four (4) types of SMPS and some examples of each waveform are
Input waveform Output waveform Examples
AC DC Rectifier, off-line converter input stage
DC DC Voltage converter
AC AC Frequency charger, cyclo-converter, phase
converter
DC AC Inverter
7.10.3 Precision parts and components
Nakareg Holdings Group manufactures preCISIon parts and components by machining.
Machining refers to a class of material working processes that involves using a power-driven
machine tool to produce items by the selective removal of metal. Various engineering plastics
are also machined.
Machining tools and techniques that remove metal from an item includes:
Lathes; and
Milling.
Other advanced machining operations include EDM, electro-chemical erosion, and laser
cutting.
89
Machine tools may be manually controlled by an operator, or controlled by a CNC. CNC is
required in the modem industrial manufacturing of precision parts and components, where a
large volume ofitems are produced to a high degree of accuracy.
CNC refers specifically to a computer controller that reads computer programme instructions
to control a machine tool. CNC does numerically directed interpolation of a cutting tool in the
work envelope of a machine. Machine tools that are controlled by CNC are commonly
referred to as CNC machine tools or systems.
7.10.4 Industrial server
An industrial server is a type of computer that is designed to control industrial and commercial
In general, industrial server is similar to more familiar computers such as desktop and laptop
computers. All of these electronic devices are built around a central processing unit and are
designed to perform various computing tasks. The main differences between industrial server
and the more familiar computers is that industrial server is usually optimised to perform a
narrow range oftasks tied to the machinery and equipment that they control.
Other features that differentiate industrial server from the more familiar computers may
include:
Industrial server is designed to be more durable, robust and reliable;
Greater emphasis placed on functionality over aesthetics; and
Industrial server is designed to be more cost effective.
Industrial server may include the following parts and components:
Central processing unit;
Storage device such as a hard disk drive;
Power supply system;
May include back-up power supply or uninterrupted power supply system;
Input and output slots; and
Networking equipment, such as LAN port or wireless communications systems.
Examples of industrial and commercial machinery and equipment that may be controlled by
industrial server include:
CNC machinery;
Industrial processes;
ATM;
Gaming machines;
Self service kiosks such as self check -in kiosks at airports; and
POS systems.
7.10.5 Electronic weighing scales
An electronic weighing scale is a device that is used to determine the weight of an object.
There are three (3) main methods of measuring weight:
Balance scale;
Spring scale; and
Strain gauge.
90
ICompany No. 918382-T !
7. BUSINESS OVERVIEW (Conf'd)
An electronic weighing scale electronically obtains the measurement generated by one of
these, calculates the weight and displays the result to the user. Electronic weighing scales are
generally more accurate than traditional weighing scales.
7.11 Distribution and marketing strategy
7.11.1 Marketing Strategies
We adopt the following strategies to sustain and expand our husiness:
Position ourselves as a one-stop sQlutions provider for transformers and related
products, with in-house design, manufacturing and testing capabilities to meet all of
our customers' requirements;
Work closely with customers to design transformers and related products. We have the
capability to design transformers and related products with minimal input and
specifications from our customers;
Design and manufacture a range of industrial server with features that are not
commonly found, such as a fan less cooling system, relatively small size, and UPS
system;
Design and manufacture electronic weighing scales, and preCISIOn parts and
components for digital data storage devices and other products; and
Consistently deliver quality products to cultivate customer loyalty through customer
satisfaction.
As at the LPD, we have three (3) sales and marketing personnel that are based in Malaysia and
the PRC. Our Group Managing Director (Mr Hau Mun Meng) and Executive Director (Mr
Hong Chin Chye) are also involved in sales and marketing functions i.e., focusing on business
development and serVicing of existing customers in Malaysia and the PRe.
91
7.11.2 Distribution channel strategy
We distribute our products using both direct distribution and indirect distribution channels as
depicted in the diagram below:
Manufacturers of
Electrical and
Electronic Products
Manufacturers of
Machinery and
Equipment
Distributors
We rely primarily on the direct distribution channel strategy as our technical staff and sales
personnel are best equipped to sell the commercial and technical benefits of our products to
potential customers. In addition, some of our products require some degree of customisation to.
meet the specifications ofour customers which require us to work closely with our customers.
We use the direct distribution channel strategy to distribute our transformers and related
products, industrial server and precision parts and components.
We also use the indirect distribution channel strategy to distribute some of our products,
particularly in countries where we do not have a physical presence. We distribute electronic
scales through the indirect channel. Our distributors purchase electronic scales from us, and
sell them to customers through their distribution channels. By using the indirect distribution
channel, we can distribute our in new countries without having to make significant
investments in personnel and other costs.
7.12 Trademark
As at the LPD, our Group has not submitted any applications to register trademarks with the
Intellectual Property Corporation of Malaysia and in other jurisdictions outside of Malaysia.
Nevertheless, in order to build brand equity, we intend to register our ''NKG'' brand as a trademark. We
plan to submit the applications to register our "NKG" brand as a trademark in Malaysia by the fourth
quarter of2011.
TIlE REST OF TInS PAGE IS INTENTIONALLY LEFT BLANK
92
7.13 Principal markets
Our principal markets comprise of local and overseas markets. For the FYE 31 December 2010, our
revenue contribution segmented by geographical markets is as follows:
Revenue for the FYE 31 December 2010
RM'OOO %
Country
47.2 18,461 Malaysia
Overseas Countries 20,598* 52.8
16,434 42.1 -PRC
-Taiwan 2,462 6.3
-Japan 2.2 853
323 - Ukraine 0.83
-Russia 301 0.77
- Singapore 112 0.3
- The United States 112 0.3
Total 39,059 100.0
Note:
* Does not add up due 10 rounding.
The PRe is currently our largest overseas market and is expected to remain as our largest export
market moving forward.
7.14 Major customers
The customers that accounted for ten percent (10%) or more of our revenue for the FYE 31 December
2010, FYE 31 December 2009, FYE 31 December 2008 are as follows:
(i) FYE 31 December 2010
Customers Services provided
Length of
relationsbip
Level of revenue
FYE2010
(Years) (RM'OOO) (%)
Wuxi IDK -Lambda Electronics 15 7,901 20.2
Electronics Co., Ltd transfonners,
16.7 IDK Lambda (M)
SdnBhd
Electronic
transfonners
3 6,542
Disk: Precision Precision parts and 4 4,548 11.6
Industries (M) Sdn components
Bhd
Yamaha Electronics
(Suzhou}Ud
Electronic
transfonners
8 4,123 10.6
Total 23114 59.1
Total GrouD Revenue 39059 100.0
93
!Company No. 91 8382-T
(ii) FYE 31 December 2009
Length of
relationship
Level of revenue
FYE2009
JBM?OOQl -.Lo/'!l
Wuxi TDK -Lambda
Electronics Co., Ltd
Electronics
transfonners,
14 12,557 32.7
Yamaha Electronics
(Suzhou) Ltd
Electronic
transfonners
7 12,824 33.4
Total 25,381 66.1
Total Group Revenue 38451 100.0
(iii) FYE 31 December 2008
Length of
relationship
Level of revenue
FYE2008
JBM'OOQl
Wuxi TDK -Lambda
Electronics Co., Ltd
Electronics
transfonners,
13 14,369 34.5
Yamaha Electronics
(Suzhou) Ltd
Electronic
transfonners
6 17,068 41.0
Total 31,437 75.5
Total Group Revenue 41..647 100.0
Wuxi TDK-Lambda Electronics Co., Ltd accounted for more than ten percent (10.0%) of our
Group's total revenue for the FYE 31 December 2010, FYE 31 December 2009 and FYE 31
December 2008. Our dependency on the company as a customer is mitigated by the following
factors:
Wuxi TDK-Lambda Electronics Co., Ltd has been our customer for fifteen (15) years
Our subsidiary, Shanghai Optimus, is an approved supplier of Wuxi TDK-Lambda
Electronics Co., Ltd for the supply of electronic transformers and electronic noise
filters. As an approved supplier, Shanghai Optimus is normally given first priority to
bid for orders relating to the supply of electronic transformers and electronic noise
filters; and
We have entered into a one (I)-year renewable contract with Wuxi TDK-Lambda
Electronics Co., Ltd, which provides a basis for a continuing business relationship
with the company for the length ofthe contract.
Yamaha Electronics (Suzhou) Ltd accounted for more than ten percent (10.0%) of our Group's
total revenue for the FYE 31 December 2010, FYE 31 December 2009 and FYE 31 December
2008. Our dependency on the company as a customer is mitigated by the following factors:
Yamaha Electronics (Suzhou) Ltd has been our customer for eight (8) years,
Our subsidiary, Nakareg Kunshan, is an approved supplier of Yamaha Electronics
(Suzhou) Ltd for the supply of electronic transformers. As an approved supplier,
Nakareg Kunshan is normally given first priority to bid for orders relating to the
supply of electronic transformers; and
94
We have entered into a one (I)-year contract that is automatically renewed with
Yamaha Electronics (Suzhou) Ltd, which provides a basis for a continuing business
relationship with the company for the length of the contract.
Our Group is not dependent on IDK Lambda (M) Sdn Bhd and Disk Precision Industries (M)
Sdn Bhd as customers as these companies accounted for more than ten percent (10.0%) of our
total revenue in only one (1) ofthe past three (3) financial years.
7.15 Major suppliers
The suppliers that accounted for ten percent (l0%) or more of our purchases for the FYE 31 December
2010, FYE 31 December 2009 and FYE 31 December 2008 are as follows:
(i) FYE 31 December 2010
Supplier Services provided
Length of
relationship
Level of purchases
FYE2010
i Zhangjiagang
Huayang Electronic
Co. Ltd
Transfonners 2 5,362 21.4 I
Total 5,362 21.4
Total Group Purchases 39,059 100.0
(ii) FYE 31 December 2009
Length of Level of purchases
Supplier Services provided relationship FYE2009
Zhejiang JFE Shoji E-l transfonner core 7 3,554 16.9
Steel Products Co., parts
Ltd
TDK-Lambda Printed circuit boards, 6 2,736 13.0
Corporation copper wire,
transfonner
components and
chemicals
Tongli Development
.
1 2,532 12.1
Limited
Total 8,822 42.0
Total Group Purchases 21003 100.0
(iii) FYE 31 December 2008
Supplier
Services provided
Length of
relationship
Level of purchases
FYE2008
Zhejiang JFE Shoji
Steel Products Co.,
Ltd
E-l transfonner core
parts
6 4,389 15.6
I Hung's Enterprise
(Xiamen) Co., Ltd.
Copper wire 3 5,824 20.8
Total 10,213 36.4
Total Group Purchases 28,065 100.0
95
y No. 918382-T
Although Zhangjiagang Huayang Electronic Co., Ltd. accounted for 2] .8% of our purchases
for the FYE 31 December 2010, we are not dependent on the company as a supplier due to the
following mitigating factors:
Zhangjiagang Huayang Electronic Co., Ltd. was not our major supplier in the FYE 31
December 2009 or FYE 31 December 2008 suggesting that we do not have a long
term dependency on the company as a supplier;
We manufacture transformers, and have the capability to manufacture electronic
transfOImers of the type purchased from ZhaIigjiagang Huayang Electronic Co., Ltd.
should there be a need to do so;
The transformers purchased from Zhangjiagang Huayang Electronic Co., Ltd. were
manufactured for our Group on an Original Equipment Manufacturer (OEM) basis.
The purchase of transformers from Zhangjiagang Huayang Electronic Co., Ltd was
mainly due to a surge from demand from a customer during a particular period in the
said financial period. We are gradually building up our capacity for our customers'
future models as reflected in our future plans, strategies and prospects set out in
Section 7.18; and
We do not expect such purchases to be recurring and as at the LPD, we have reduced
our purchases of electronic transformers from Zhangjiagang Huayang Electronic Co.,
Ltd.
Although Zhejiang JFE Shoji Steel Products Co., Ltd accounted for 16.9% and 15.6% of our
purchases for the FYE 31 December 2009 and FYE 31 December 2008 respectively, our
Group is not dependent on the company as a supplier due to the following mitigating factors:
Zhejiang JFE Shoji Steel Products Co., Ltd was not our major supplier in the FYE 31
December 2010 suggesting that we do not have a long-term dependency on the
company as a supplier; and
Our primary purchase from Zhejiang JFE Shoji Steel Products Co., Ltd comprise parts
for E-I transformer cores. For the FYE 31 December 2010, we purchased parts for E-I
transformer cores from four (4) other suppliers from our list of top twenty (20)
suppliers. This suggests that we have ready access to other suppliers of E-I
transformer cores should there be a need to purchase from an alternative supplier.
Our Group is not dependent on TDK-Lambda Corporation, Tongli Development Limited and
Hung's Enterprise (Xiamen) Co., Ltd as suppliers as these companies accounted for more than
ten percent (10.0%) of our total purchases in only one (1) of the past three (3) FYE 31
December 2008 to FYE 31 December 2010.
7.16 Seasonality
We do not experience any material seasonality in our business, as our business operations are relatively
stable throughout the year, with the exception of a minor slowdown in business activity at the
beginning of each calendar year.
Generally, the level of business activity of our operations in the PRC is lower during the frrst quarter
compared to the other quarters due to the Chinese New Year festive season.
Generally, the level of business activity of our operations in Malaysia is fairly constant throughout the
year.
96
i Company No. 918382-T ~
The demand for our transformers and related products that are intended for use in consumer electrical
and electrorllc devices are higher during the third quarter of each calendar year, as manufacturers of
consumer electrical and electronic devices increase production in advance of the year-end shopping
season.
The demand for our transformers and related products that are intended for use in industrial electrical
and electronic devices is fairly constant throughout the year.
7.17 Interruptions to business
Our Group has not experienced any material disruption in operations that had a sigllificant effect on our
operations/revenue for the past twelve (12) months prior to the date ofthis Prospectus.
7.18 Future plans, strategies and prospects
7.18.1 Future plans and strategies
(i) Overview of future plans
Our future plans are focused in the following key areas:
Establishing a New
Manufacturing
Facility in Malaysia
Establishing a New
Manufacturing
Facility in China
Precision Parts
And Components
Manufacturing
Printed Circuit
Board Assembly
Manufacturing
Growing and
Developing our
Precision Parts and
Components, Industrial
Server and PCBA
and Wire Harnesses
Manufactu ring
Businesses
Industrial Servers
Trademark
Registration
(ii) New manufacturing facilities
(a) Expanding our manufacturing operations in Malaysia
As part of our future plans, we intend to expand our manufacturing
operations in Malaysia by purchasing a new factory building within the
Klang Valley. Our new manufacturing facility will have a built up area of
approximately 15,000 sq. ft.
We estimate that it will take our Group twenty four (24) months to establish
the new manufacturing facility. The new facility will host our corporate
headquarters, manufacturing operations and D&D centre.
The purchase of the factory will be funded via internally generated funds
and/or bank borrowings. We intend to utilise some of our IPO proceeds to
repay the borrowings.
97
yNo.918382-T
(b) Relocating the Changshu Nakareg manufacturing facility
As part of our future expansion pians, we intend to relocate Changshu
Nakareg's existing manufacturing operations to a larger manufacturing
facility in Suzhou Province, PRe.
We have identified an existing factory of approximately 20,000 sq.ft. in size
in Suzhou Province as the location of our new manufacturing facility in
PRC. We intend to rent the factory.
We plan to begin relocating the machinery and equipment used to
manufacture precision parts and components from Changshu Nakareg's
existing facilities at Changshu, Jiangsu Province by the first quarter of
2012. We intend to manufacture precision parts and components at the new
manufacturing facility.
The larger size of the proposed new facility will enable our Group to
increase the number of precision CNC machines that we operate.
Additional information on our plan to expand our precision parts and
components manufacturing capability may be found in Section 7.18.1 (iii)
(a) below.
We expect to begin commercial operations at our new manufacturing
facility in Suzhou Province by the first quarter of2012.
(iii) Expansion of existing manufacturing capabilities
(a) Expansion of precision parts and components manufacturing
ca pa biIities
As part of our future plans, we intend to purchase additional machinery and
equipment to expand Changshu Nakareg's precision parts and components
manufacturing capabilities.
Between 1 January 2011 and the LPD, we have purchased an additional
seven (7) precision CNC machines to expand our precision parts and
components manufacturing capacity. In addition to these purchases, we also
plan to purchase eight (8) additional precision CNC machines by 2012 to
complete our expansion plans.
By increasing the number of precision CNC machines that we purchase, we
hope to enhance our economies of scale in manufacturing precision parts
and components.
We also intend to increase the range of precision parts and components that
we manufacture by seeking to manufacture parts and components that are
used in products for other industries, such as the telecommunications
industry and the medical equipment industry. Currently, the range of
precision parts and components that we manufacture are for the IT industry.
We intend to utilise some of our IPO proceeds to expand our precision parts
and components manufacturing facility.
98
(b) Expansion of PCBA manufacturing capabilities
We intend to expand the PCBA manufacturing facilities of Nakareg
Kunshan by investing in an additional SMT machines at the existing
facilities in Kunshan, Jiangsu Province, PRC. Upon completion,. the
production capacity is estimated to increase by 60,000 boards per annum.
We intend to utilise some of our IPO proceeds to expand our PCBA
manufacturing facility.
(iv) Developing our existing businesses
(a) Growing and developing our precIsion parts and components,
industrial server and PCBA and wire harness manufacturing businesses
Although our Group has historically been focused on manufacturing
electronic transformers and related products, we have also actively
developed our other manufacturing businesses, including our precision parts
and components, industrial server and PCBA and wire harness
manufacturing businesses. As part of our future plans, we intend to further
grow and develop these businesses.
We first began to manufacture precision parts and components in 2007, and
industrial server in 2010. We resumed manufacturing PCBA and wire
harness in 2006.
Our revenue from manufacturing precision parts and components, industrial
server and PCBA and wire harness over the past three financial years are
Precision parts
and components
2010
%of
Group
RM'OOO revenue
5,286 13.2
FYE 31 December
2009
%of
Group
RM'OOO revenue
2,865 7.5
2008
%of
Group
RM'OOO revenue
2,076 5.0
Industrial server 2,699 6.8
- - - -
PCBA and wire
harness
1,031 2.6 654 1.7 246 0.6
We expect that moving forward, our Group's revenue from our precision
parts and components, industrial server and PCBA and wire harness
manufacturing businesses will continue to grow and progressively
contribute towards a larger percentage ofour revenue.
We intend to expand our precision parts and components manufacturing
capabilities by purchasing eight (8) additional precision CNC machines
(described in Section 7.18.1 (iii) (a)), and to expand our PCBA
manufacturing capabilities by investing in additional SMT machines
(described in Section 7.18.1 (iii) (b)).
99
!Company No. 918382-T i
In addition, we also intend to grow and develop these businesses by
developing the capability to broaden the range of precision parts and
components, industrial server and PCBA and wire harness that we
manufacture and intensify our sales and marketing effort for these products.
Our precision parts and components, industrial server and PCBA and wire
harness manufacturing businesses will enable us to diversify our business,
enlarge our potential customer base, and create new areas of business
growth.
(v) Product branding
(a) Branding of our own products
We intend to create and develop a brand for some of our products.
As part of our future plans, we intend to create a brand to market our .
products and actively promote the brand to build on our brand equity. By
building brand equity we hope to differentiate our products from competing
products and create customer loyalty.
We intend to commence the branding of our products by 2012 and will be
utilising some of our IPO proceeds for this initiative.
(b) Trademark registration
In order to build brand equity, we intend to register our "NKG" brand as a
trademark. We plan to submit the applications to register our ''NKG'' brand
as a trademark in Malaysia by the fourth quarter of2011.
(vi) Future plan milestones
The following table indicates the timing for the commercialisation and operation of
our future plans:
Future Plans
Commencing in the
FYE 31 December
2011 2012
New facilities
Expanding our manufacturing facilities in Malaysia
Relocating the Changshu Nakareg manufacturing facilities
Expansion of existing manufacturing capabilities
Precision parts and components manufacturing capability
PCBA manufacturing capability
Developing our existing businesses
Growing and developing our precision parts and components,
industrial server and PCBA and wire harness manufacturing
businesses
..J
..J
..J
..J
..J
100
7. BUSINESS OVERVIEW (Coned)
Commencing in the
FYE 31 December
Future Plans
Product branding
Branding ofour products
2011 2012
"
Trademark registration
-
Trademark registration in Malaysia
"
7.18.2 Prospects of our Group
The prospects ofour Group are primarily dependent on the following factors:
Oui: competitive advantages and key strengths;
Our future plans to create growth; and
The growth and development of our precision parts and components and industrial
server manufacturing businesses.
(i) Our competitive advantages and key strengths
Our competitive advantages and key strengths will serve as a platform for continuing
growth and success. This includes the following:
We have in-house design capahility to support our manufacturing
capabilities, through Nakareg, Shanghai Optimus and Nakareg Kunshan. Our
Group's in-house design capability is a competitive advantage as it allows us
to design different types oftransformers, electronic scales and industrial server
to meet changing customer and market requirements;
We are committed to maintaining product quality, and have obtained ISO
9001 certifications to provide assurance to our customers that we have a
quality management system in place. We have also obtained Underwriters
Laboratories Ltd certification for some of the products manufactured by our
Group;
We are an approved supplier for some of our customers for electronic
transformers mid related products, and precision parts and components to a
number of our customers;
Our manufacturing facilities are located close to our customers. The close
geographic proximity is a key strength as it enables us to ensure that oUr
products ate delivered to our customers on schedule and in a timely manner.
We are also able to provide a higher level of customer service and support to
our customers; and
We have built an established track record since our Group began
manufacturing electronic transformers through our subsidiary Nakareg in
1999. Our established track record will provide us with the platform and
reference site to secure new customers.
101
(ii) Our future plans to create growth
We have in place a sound business plan moving forward, and are focused in
the following areas;
We plan to relocate Changshu Nakareg's existing preclSlon parts and
components manufacturing operations to a larger manufacturing facility in
Suzhou Province, PRC;
We intend to expand our manufacturing operations in Malaysia by
purchasing a new factory building within the Klang Valley. We may
relocate our existing manufacturing operations and D&D centre located in
Rawang, Selangor to this new facility;
We intend to expand Changshu Nakareg's precision parts and components
manufacturing capabilities by purchasing eight (8) additional new CNC
machines for this purpose;
We intend to expand Nakareg Kunshan's PCBA manufacturing capabilities
by investing in additional SMT machines;
We plan to create a brand to market our own products and actively promote
.the brand to build on brand equity;
Although oUr Group has historically been focused on manufacturing
electronic transformers and related products, we have also actively
developed our other manufacturing businesses, including our precision parts
and components, industrial server and PCBA wire harness manufacturing
business.
We first began to manufacture precision parts and components in 2007, and
industrial server in 2010. For the past three (3) FYE 31 December 2008 to
31 December 2010, the revenue contribution from the manufacture of
precision parts and components to the Group's total revenue increased from
5.0% to 13%, whilst, for the FYE 31 December 2010, manufacture of
industrial server contributes approximately 6.8% to the entire Group's
revenue for the year.
We expect that moving forward, our Group's revenue from our precision
parts and components, and industrial server manufacturing businesses will
continue to grow and progressively contribute towards a larger percentage
of our revenue. Our precision parts and components and industrial server
manufacturing businesses will enable us to diversify our business, enlarge
our potential customer base, and create new areas of business growth. As
part of our future plans, we intend to further' grow and develop these
businesses; and
We plan to submit applications to register our ''NKG'' brand as a trademark in
Malaysia and the PRC.
Our future plans would provide us with the platform to grow and sustain our business.
102
8. INDEPENDENT MARKET RESEARCH REPORT
(Independent Market Research report preparedfor inclusion in this Prospectus)
Q
VITAL FACTOR CONSULTING
Vital Factor Consulting Sdn Bhd
Creating Winning Business Solutions
(Company No.: 266797.T)
75C& 77C Jalan SS22119
Oamansara Jaya
47400 Petaling Jaya
2 9 SEP ZOl1 Selangor Oarol Ehsan, Malaysia
Tel: (603) 7728-0248
The Board of Directors Fax: (603) 7728-7248
Nakareg Holdings Berhad
Email: enquiries@vitalfactor.com
Website: www.vitalfactor.com
Jalan PJU lAJ46
47301 Petaling Jaya
Selangor Dand Ehsan
Dear Sirs
Independent Assessment of the Manufacture of Electronic Transformer Industry in Malaysia and
the People's Republic of China
The following is an independent assessment of the Manufacture of Electronic Transformer Industry in
Malaysia and the People's Republic of China (PRC) prepared by Vital Factor Consulting Sdn Bhd for
inclusion in the prospectus of Nakareg Holdings Berhad (herein together with all or anyone or more of
its subsidiaries will be referred as "Nakareg Holdings Group" or the "Group") in relation to its listing
on the ACE Market of Bursa Malaysia Securities Berhad.
1. BACKGROUND
Nakareg Holdings Group's main business is focused on manufacturing electronic
transformers and related products. The Group's main manufacturing operations are
located in Malaysia and the PRC. Most of the Group's revenue for the financial year
ended 31 December 2010 was derived from customers in Malaysia and the PRC. As
such, this report will focus on the Manufacture of Electronic Transformer Industry in
Malaysia and the PRe.
Nakareg Holdings Group also manufactures other products, including industrial
servers, electronic scales and electrical and electronic parts and components.
All figures converted from USD to RMB are based on an exchange rate of USDI
RMB6.46 as at 30 June 2011.
2. SOCIOECONOMIC PERFORMANCE OF MALAYSIA
2.1 Economy
Malaysia's real GDP had been growing every year from 2006 to 2008. The Malaysian
economy registered a growth of 4.8% in 2008, amidst the international financial
turmoil and sharp deterioration in the global economic environment. Robust domestic
demand, in particular private consumption and strong public spending, supported
growth during the year.
Nakareg Holdings Berhad Page 1 0/34 Industry Assessment
103
8. INDEPENDENT MARKET RESEARCH REPORT (Cont'd)
0.

The Malaysian economy registered a 8%
7.2%
growth of 4.8% in 2008, amidst the
international financial turmoil and sharp 6%
deterioration in the global economic
environment. Robust domestic demand, in 4%
particular private consumption and strong
public spending, supported growth during 2%
the year.
0%

While external demand was strong in the
first half of 2008, the sharp and rapid -2%
deterioration in the global economic Source: Bank Negara Malaysia
conditions as well as major correction in
the commodity prices in the second halfled Figure 1. Real GDP Growth in Malaysia
to a contraction in Malaysia's export
perfonnance in the latter part of the second half of the year.
Malaysia's real GDP contracted by 6.2% during the frrst quarter of2009 (compared to the
frrst quarter of 2008). However, the implementation of fiscal stimulus measures by the
Malaysian Government led to the subsequent recovery in the last quarter of2009. Overall,
Malaysia's real GDP for 2009 contracted moderately by 1.6%.
The Malaysian economy registered real GDP growth of 7.2% in 2010. The growth was
driven by expansion in domestic demand, which was supported by higher private and
public sector spending.
During the frrst quarter of 2011, real GDP growth was 4.6%. The expansion in
domestic demand was supported by higher private sector spending. External demand
also recorded a stronger growth during the quarter, mainly as a result of regional
demand for commodities and non-electrical and electronic products. All major
economic sectors, except the primary commodity sector, continued to expand during
the quarter, albeit at a more moderate pace.
In 2011, the real GDP growth rate for the Malaysian economy is forecasted at between
5% and 6%.
(Source: Bank Negara Malaysia)
2.2 Business Conditions
Nakareg Holdings Group's customer base in Malaysia primarily comprises
manufacturers in the electrical and electronics industry. Business conditions in Malaysia
would have a direct impact on operators serving the electrical and electronics industry.
The level of confidence in the Malaysian economy among the business community
provides an indication of the robustness and likely trend of business activity in
Malaysia. A high level ofbusiness confidence is likely to support economic activities
that will benefit businesses operating in Malaysia.
-1.6%
104
Company No. 918382
8. INDEPENDENT MARKET RESEARCH REPORT (Conl'd)
0.

The Business Conditions Index
200
(BCI) continued to grow by 4.5% to
reach 118.8 points by the fourth
quarter of2009. The manufacturing 150
sector continued to improve with
expected increases in export sales
100
and local sales.

In the fIrst quarter of20l0, the BCI
grew further by 4.4% to reach 124.0
points. The growth is attributable to
the continued increase in domestic
50
o

order, expected production and Source: Malaysian Institute ofEconomic Research
expected export sales.
Figure 2. Business Condition Index in Malaysia
The BCI declined by 3.5% to 119.6
points in the second quarter of20 1O. The decline was due to quarter-on-quarter losses
recorded in the sales, production, new domestic orders, new export orders and capacity
utilisation sub-indices.
In the third quarter of20 1 0, the BCI decreased by 12.3% to 104.9 points. However, it
remained above the 100-point threshold. The decline implied the sector was still
expanding though at a considerably slower pace relative to the second quarter.
The BCI fell marginally below the 100-point threshold in the fourth quarter of 20 1 0,
declining by 5.1 % to 99.5 points. While production and expected production were
marginally higher, sales were signifIcantly lower. Export sales were also expected to
be lower. Capacity utilisation was stable.
However, in the fIrst quarter of20l1, the BCI grew by 13.9% to reach 113.3 points. The
growth was mainly contributed by higher sales and new exports order. Although
productions had decreased, production and export sales are expected to increase over the
next three months.
In the second quarter of 2011, the BCI grew marginally by 0.6% to 114.0 points.
Although new domestic orders and production increased while export orders remained
stable, there were concerns over expected production and export sales.
(Source: Malaysian Institute ofEconomic Research)
10lr10 2Qlrl0 30lr10 4Qlr10 101r11 2Qlr11
30%
0%
-30%
-60%
-90%
Nakareg Holdings Berhad Page 3 of34 Industry Assessment
105
12.7%
'Growth Rate
14.2%
9.2%
0.
3. SOCIO-ECONOMIC PERFORMANCE OF PRC
3.1 Economy

30% 60

In 2006, PRC's real GDP registered
growth of 12.7%. Many economic
10%
sectors continued to experience 40
growth, including investments in fixed
-10%
assets, domestic spending, increased in
foreign trading, expansion in the 20
-30''k
private sector and growth in household
income.
50%
2006 2007 2008 2009 2010
o

In 2007, PRC's real GDP continued to
expand, growing by 14.2%. The
Source:National Bureau o/Statistics o/China
Chinese economy maintained a good
momentum characterised by rapid
Figure 3. Real GDP Growth in PRC
growth, improved economic structure,
maintained efficiency and improved living standards despite the increasing
uncertainties in the international economic and financial performance, and rising
inflationary pressure in PRC.

Despite the global slowdown in 2008, PRC's real GDP grew by 9.6%, surpassing
many more advanced economies, such as the United States, the United Kingdom and
Japan, which recorded real GDP of 0.0%, -0.1 % and -1.2% respectively.

In 2009, in spite ofthe severe impact brought about by the global financial crisis, PRC
continued to register real GDP growth of 9.2% while the real GDP growth for more
advanced economies, such as the United States, the United Kingdom and Japan in
2009 were -2.6%, -4.9% and -6.3% respectively. The Chinese Government's
implementation of proactive fiscal policy and moderation ofmonetary policy helped to
counter the sliding of the economy and moved it towards a favourable direction.

In 2010, PRC's real GDP growth was 10.3%, while that the real GDP growth for more
advanced economies like the United States, the United Kingdom and Japan in 2010
were 2.9%, 1.3% and 3.9% respectively, which were lower compared to China's real
GDP.

The relatively stronger growth of the PRC's economy compared to other advanced
economies augurs well for companies like Nakareg Holdings Group who also services
the PRC market.
(Sources: National Bureau 0/ Statistics 0/ China and Secondary Market Research
undertaken by Vital Factor Consulting Sdn Bhd)
3.2 Entrepreneur Confidence Index
During the fourth quarter of2009, the Entrepreneur Confidence Index (ECI) increased
by 6.3% to reach 127.7 points. Almost all sectors registered growth except for the
social services sector.
106
Q
In the fIrst quarter of 20 I 0, the Eel increased by 6.1% to reach 135.5 points. This
indicates that confIdence of entrepreneurs from most of the sectors continued to
increase during this period.
During the second quarter of20 I 0, the
j -Eel ........----.-......-,

250
L..:Growth Rate Eel decreased sJightly by 1.8% to
6.3% 6.1 %
~ - " ~ " ' " 2.2% 0.8% 0.3% 133.0 points. ConfIdence levels of
200
..-.......,...........
entrepreneurs were varied across the
150
various sectors where the individual
sectors either recorded a slight
100
increase or decrease compared to the
previous quarter, with the exception of
50
the real estate sector, which recorded a
drop of 23 points.
o

In the third quarter of 2010, the ECI
133.0 135.9 137.0 137.4
4Qtr09 1Qtr10 2Qtr10 3Qtr10 4Qtr10 1Qlr11
30%
0%
-30%
-60%
-90%
increased by 2.2% to reach 135.9
points. ConfIdence of entrepreneurs
increased or remained the same in
almost all sectors with the exceptions
Source: National Bureau o/Statistics o/China
Figure 4. Entrepreneur Confidence Index in
PRC
of social services, where there is a slight decrease over the previous quarter.

During the fourth quarter of 2010, the ECI increased by 0.8% to reach 137.0 points.
The growth can be attributed to the signifIcant increase in confIdence among
entrepreneurs in the information transmission, computer services and software sector
as well as those in the industry and construction sectors.

In the fIrst quarter of 2011, the Eel increased marginally by 0.3% to reach 137.4
points. The growth was contributed by the slight increases in the wholesale and retail
trades sector as well as social services sector.
A continuing growth of Eel will augur well for overall manufacturing industry in
PRC.
(Source: National Bureau o/Statistics a/China)
]07
I Company No. 918382-T
8. INDEPENDENT MARKET RESEARCH REPORT (Conf'dj
0.
4. INDUSTRY STRUCTURE
4.1 Overall Structure
The electronics manufacturing industry can be segmented into three different
categories as follows:
o Nakare2 Holdin2s Group operates within this sector
Figure 5. Structure of the Electronics Manufacturing Industry
Electronic components refer to basic electronic elements that are normally produced in
a discrete form with at least two connecting leads or metallic pads. Electronic
components are intended to be connected to one another, for example by being
soldered onto a printed circuit board to form an electronic circuit that performs a
particular function. Examples of electronic components include semiconductors,
electronic transformers, resistors, connectors, switches, capacitors and inductors.
Consumer electronics refer to electronic devices that are mainly used by individuals in
their daily lives. These include television, home entertainment systems, audio-visual
products such as players/recorders, electronic games consoles and cameras.
Industrial electronics refer to electronic devices that are mainly intended for business
use covering commercia1 and industrial sectors. Industrial electronics consist of
Information Technology (IT) products, office equipment, communications devices,
medical devices, advertising display screens, and machineries and equipment.
Electronic transformers and related products ofthe type designed and manufactured by
Nakareg Holdings Group are examples of electronic components.
The electronic components sector can be segmented into two categories as shown
below:
Active Passive
Components Components
o Nakareg Holdings Group operates within this sector
Figure 6. Structure of the Electronic Components Industry
Nakareg Holdings Berhad Page 60f34 Industry Assessment
108
0.
Passive components are components that do not require external power source in order
to execute their operations, and are incapable of power gain (where the ratio of output
signal to input signal being less than one). Examples of passive components include
electronic transformers, resistors, coils, capacitors and inductors.
Active components are components that require external source of power (for
example, electrical power) to operate and are capable of power gain (where the ratio of
output signal to input signal being more than one). Examples of active components
include transistors, vacuum tubes and operational amplifiers.
Electronic transformers and related products of the type manufactured by Nakareg
Holdings Group are categorised as passive components.
A transformer is a device that is used to step-up (increase) or step-down (decrease)
voltage in an Alternating Current (AC) system. Transformers can be segmented as
follows:
Power
DistJibution
Transformer
Electronic
Transfonner
o Nakareg Holdings Group operates within this sector
Figure 7. Types of Transformers
Nakareg Holdings Group manufactures electronic transformers.
Electronic transformers refer to transformers that are used in electrical or electronic
devices. They may be mounted, connected or encapsulated as part of the device.
Electronic transformers are usually small in size.
Power distribution transformers refer to transformers that are used in the electrical grid
in the transmission and distribution of electricity from power plants to end-users. For
instance, power distribution transformers installed at a local electricity substation are
used to step down the electricity's voltage so that it can be distributed to end-users.
Power distribution transformers are usually large and heavy.
Nakareg Holdings Berhad Page 70f34 Industry Assessment
109
No. 9183
Q
4.2 Vertical Structure of Electronic Transformer Manufacturing Industry
The Manufacture of Electronic Transformer Industry can also be vertically extended to
include upstream and downstream activities as follows:
Upstream
Feedstock
Copper
Wire
Downstream
Design
Procurement
Others
Assembly
Testing
Others
(*Grain-oriented silicon-electrical steel and other silicon-electrical steel are used in
the core ofthe electronic transformers. Ferro-silicon is the feedstock to manufacture
grain-oriented silicon-electrical steel and other silicon-electrical steel)
Figure 8. Vertical Structure of the Electronic Transformer Manufacturing
Industry
Upstream
Upstream activities primarily involve manufacturers and suppliers of raw materials
and components that are used to manufacture electronic transformers. They include
copper wire, silicon-electrical steel, plastic parts and others such as metal-coated
materials, rubber, and composite materials.
Downstream
Downstream activities include designing and manufacturing electronic transformer,
incorporating one or more ofthe following processes:
Design;
Procurement;
AssemblylManufacturing;
Testing;
Others, include welding, trimming of pins and packaging.
Nakareg Holdings Group's business activities are mainly in the downstream
manufacturing ofelectronic transformers.
110
8. INDEPENDENT MARKET RESEARCH REPORT (Cont'dj
Q
5. SUBSTITUTE PRODUCTS
Rectifier-inverter System .
Rectifier-inverter systems may be a substitute for electronic transformers in some
applications. A rectifier-inverter system comprises two separate units, the rectifier and
the inverter.
A rectifier converts AC to Direct Current (DC) by using diodes, which are electronic
components that conduct electrical current in only one direction.
An inverter is an electronic component that converts DC into AC.
When used in combination in a rectifier-inverter system, the diode rectifies the
incoming AC to DC, and the DC is then reconverted to AC at the desired voltage by the
inverter.
Sharing similar functions as electronic transformer, the main advantage of using a
rectifier-inverter system in place of an electronic transformer is that the
rectifier-inverter system is lightweight. Rectifier-inverter systems may be used in
variable frequency drive controls to control the speed of electrical motors in electric
vehicles and air conditioning systems.
However, the cost of a rectifier-inverter system is normally significantly higher
compared to an electronic transformer that performs a similar function. As a result,
rectifier-inverter systems are generally not perfect substitutes for electronic
transformers in all applications.
6. GOVERNMENT REGULATIONS, POLICIES AND INCENTIVES
6.1 Government Regulations, Policies and Incentives in Malaysia
Manufacturing Licence
Application of a Manufacturing Licence under the Industrial Coordination Act, 1975 is
required for companies with shareholders' funds of RM2.5 million or above, or
engaging 75 or more full-time employees (Source: Malaysian Industrial Development
Authority).
International Procurement Centre
An International Procurement Centre (IPC) is a company incorporated in Malaysia that
carries out business in Malaysia to undertake the procurement and sale of raw
materials, components and fmished products to related and unrelated companies in
Malaysia and other countries.
An approved IPC status company may enjoy a number of benefits, including:
Retain any amount of export proceeds in foreign currency accounts
maintained with onshore licensed banks for the approved IPC activities only;
Nakareg Holdings Berhad Page 90/34 Industry Assessment
III
8. INDEPENDENT MARKET RESEARCH REPORT (Cool'd)
0.
Enter into forward foreign exchange contracts with onshore licensed banks to
hedge exchange risks based on the projected volume of export;
Bring in raw materials, components or finished products with customs duty
exemption into free industrial zones, licensed manufacturing warehouses,
free commercial zones and bonded warehouses for repackaging, cargo
consolidation and integration before distribution to its final customers.
An approved IPC status company may also be eligible for the following tax incentives:
Full tax exemption of its statutory income for 10 years;
Dividends paid from the exempt income will be exempted from tax in the
hands of its shareholders
However, the approved IPC status must also fulfil several additional criteria to qualify
for the tax incentives mentioned above, including achieving annual sales turnover of at
least RMI00 million, of which annual value of export sales of RM80 million and the
value of direct export sales of RM50 million in respect of the qualifying activities in
the basis period for a year of assessment.
(Source: Malaysian Industrial Development Authority)
Environmental Regulations
According to the Environmental Quality (Scheduled Waste) Regulations 2005, every
generator of waste that is classified as a Scheduled Waste under the abovementioned
regul.ations shall ensure that the Scheduled Wastes generated by the operator are
properly stored, treated on-site, recovered on-site for material or product from such
Scheduled Waste, or delivered to and received at prescribed premises for treatment,
disposal or recovery of material from Scheduled Wastes (Source: Environmental
Quality (Scheduled Waste) Regulations 2005).
6.2 Government Regulations, Policies and Incentives in PRC
Business Licence
Application of a business licence with the local Administration of Industry and
Commerce is required for establishing an enterprise in China. (Source: State
Administration for Industry and Commerce)
Business Registration Certificate
Under the Business Registration Ordinance, every person who carries on a business in
Hong Kong is required to apply for business registration within I month from the date
of commencement of the business, and to display a valid Business Registration
Certificate at the place ofbusiness. (Source: Inland Revenue Department, Hong Kong)
112
0.
Enterprise Income Tax Incentive for Wholly Foreign Owned Enterprises
A Wholly Foreign Owned Enterprise (WFOE) may be exempted from Enterprise
Income Tax for a period of two years from its first profit making year, or from 1
January 2008 jfno profit was made till such date when the Enterprise Income Tax Law
came into effect. Subsequent to the period during which the WFOE was exempted
from Enterprise Income Tax, WFOE can also receive a preferential Enterprise Income
Tax rate of 12.5% (which is a 50% reduction ofthe full Enterprise Income Tax rate of
25.0%) for the next three years.
Environmental Regulations
According to the Environmental Protection Law of PRC and the Environmental
Protection Regulations of Shanghai and Jiangsu cities, all parties must obtain a pollutant
or temporary pollutant discharge pennit and pay fees for discharge of pollutant All
relevant parties are also liable for fmes ifthere is excessive discharge ofpollutant.
According to the Solid Waste Pollution Prevention and Control Law of PRC and
Environmental Protection Regulations of Shanghai and Jiangsu cities, any party engaged
in the activities of collection, storage and disposal of hazardous waste, must apply for a
hazardous waste management licence.
According to Shanghai Industrial Enterprises' Interim Provisions on Energy
Consumption, all industrial enterprises should strictly implement the power plan based on
the distribution of power index, time and power load rate ofelectricity production.
7. SUPPLY - MALAYSIA
7.1 Manufacture of Electronic Components
Note: Electronic,trans/ormers are a sub-set 0/electronic components.
Electronic components include both active and passive components. Nakareg
Holdings Group is focused on the manufacture ofpassive electronic components.
Between 2006 and 201 0, the sales value for the manufacturing of other electronic
components, not elsewhere classified in Malaysia decreased at an average annual rate of
20.5%. In 2010, the sales value declined by 9.3% to reach RM1.4 billion. (Source:
Department o/Statistics Malaysia)
7.2 Manufacture of Electronic Transformer
Between 2006 and 2010, the sales value for the manufacturing of all types of electronic
transfonners in Malaysia decreased at an average annual rate of24.3%. In 2010, the sales
value declined by 37.5% to reach RM688.8 million.(Source: Department o/Statistics
Malaysia)
113
0.
7.3 Imports of Transformers
Note: Inductors and static converters (for example, rectifiers) are used to form switch mode
power supply regulators, which are also manufactured by Nakareg Holdings Group.
Between 2006 and 20 I 0, the import value ofelectrical transfonners, static converters (for
example, rectifiers) and inductors in Malaysia grew at an average annual rate of 0.1 %. In
2010, it increased by 25.5% to RM3.6 billion.
In 20 10, China was the largest source of imports for electrical transfonners, static
converters (for example, rectifiers) and inductors in Malaysia, which accounted for 27.2%
of the total import value. This was followed by Hong Kong, United States and Singapore
accounting for 8.7%, 7.9% and 7.8% ofthe total import value respectively. Some of the
other sources of imports in 2010 include Japan, Indonesia and Taiwan.
(Source: Department ofStatistics Malaysia)
7.4 Imports of Transformers Not Exceeding 1 kV A
Note: Electronic transformers including the types manufactured by Nakareg Holdings Group
fall within this category.
Between 2006 and 2010, the import value of other transfonners, rated capacity not
exceeding I kilo volt-ampere (kVA) (sub-sector of electrical transfonner, static
converters (for example, rectifiers) and inductors) in Malaysia declined at an average
annual rate of 11.9%. In 2010, it increased by 4.6% to RM281.0 million.
In 2010, China was the largest source ofimport for other transfonners, rated capacity not
exceeding lkVA (sub-sector of electrical transfonner, static converters (for example,
rectifiers) and inductors) in Malaysia, which accounted for 47.1 % of the total import
value. This was followed by Hong Kong, Indonesia and United States accounting for
13.6%,9.7% and 6.4% of the total import value respectively. Some of the other sources
of imports in 2010 include Thailand, Japan and Singapore.
Between 2006 and 2010, the import value of other transfonners with rated capacity not
exceeding lkVA, other than transfonners for toys and matching transfonners (sub-sector
of other transfonner, rated capacity not exceeding lkVA) in Malaysia declined at an
average annual rate of5.8%. In 2010, it increased by 4.7% to RM241.3 million.
In 2010, China was the largest source of import for transfonners with rated capacity not
exceeding lkVA, other than transfonners for toys and matching transfonners (sub-sector
of other transfonner, rated capacity not exceeding IkVA) in Malaysia, which accounted
for 45.6% of the total import value. This was followed by Hong Kong, Indonesia and
United States, accounting for 13.4%, 9.2% and 7.2% of the total import value
respectively. Some of the other sources of imports in 2010 include Thailand, Japan and
Singapore.
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8. SUPPLY-PRC
Manufacture of Electronic Components 8.1
Between 2005 and 2009, the gross industrial output value for the manufacturing of
electronic components in PRC increased at an average annual rate of 18.7%. In 2009, the
gross industrial output value increased by 3.6% to reach RMB852.9 billion.{Source:
National Bureau ofStatistics ofChina)
Note: Electronic transformers are a sub-set ofelectronic components. There are no
data availablefor electronic transformers.
8.2 Manufacture of Transformers
Between 2004 and 2008, total output volume for the manufacture of transformers in
PRC decline at an average annual rate of 16.6%. In 2008, total output volume
increased by 27.5% to 1,160.8 million kVA *. (Source: National Bureau ofStatistics
ofChina)
*Output volume in terms of apparent power that can be handled by all of the
transformers manufactured during that year.
Note: Electronic transformers are a sub-set of Transformers. There are no data
available for electronic transformers.
8.3 Imports of Transformers
Between 2006 and 2010, the import value of electrical transformers, static converters (for
example, rectifiers) and inductors into PRC grew at an average annual rate of 15.8%. In
2010, it increased by 37.5% to USD11.9 billion (equivalent to RMB76.7 billion).
In 2010, China (re-import*) was the largest source of imports for electrical transformer,
static converters (for example, rectifiers) and inductors in PRC, which accOlmted for
35.3% ofthe total import value. This was followed by Japan, Germany and South Korea,
accounting for 17.1%, 13.6% and 4.3% of the total import value respectively. Some of
the other sources of imports in 2010 include United States, Taiwan and France.
(Source: National Bureau ofStatistics ofChina)
Note: '" Re-imported goods are goods that were exported from PRC, but were
subsequently imported into PRC.
8.4 Imports of Transformers Not Exceeding 1 kV A
Note: Electronic transformers including the types manufactured by Nakareg Holdings Group
fall within this category.
Between 2006 and 2010, the import value of other transformers, rated capacity not
exceeding IkVA (sub-sector of electrical transformer, static converters (for example,
rectifiers) and inductors) in PRC grew at an average annual rate of 6.9%. In 2010, it
increased by 17.8% to USD688.4 million (equivalent to RMB4.4 billion).
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In 2010, China (re-import) was the largest source of import for other transformers, rated
capacity not exceeding IkVA of electrical transformer, static converters (for
example, rectifiers) and inductors) in PRC, which accounted for 62.7% ofthe total import
value. This was followed by Japan, Thailand and South Korea, accounting for 7.4%,
4.3% and 3.2% of the total import value respectively. Some of the other sources of
imports in 2010 include Vietnam, United States, France and Taiwan.
Between 2006 and 20 I 0, the import value of transformers with rated capacity not
exceeding IkVA, not elsewhere specified of other transformer, rated capacity
not exceeding IkVA) in PRC grew at an average annual rate of 6.2%. In 2010, it
increased by 18.0% to USD634.0 million (equivalent to RMB4.1 billion).
In 2010, China was the largest source of import for transformers with rated
capacity not exceeding IkVA, not elsewhere specified of other transformer,
rated capacity not exceeding IkVA) in PRC, which accounted for 67.7% of the total
import value. This was followed by Japan, Thailand and South Korea, accounting for
6.2%,4.6% and 3.4% of the total import value respectively. Some of the other sources of
imports in 20 I 0 include Vietnam, United States, Taiwan and Hong Kong.
(Source: China Customs andNational Bureau ofStatistics ofChina)
9. SUPPLY DEPENDENCIES
Raw Materials and Feedstock
The major raw materials used by manufacturers of electronic transformers include:
Copper wire;
Silicon-Electrical Steel;
Plastic.
As such, the supply of these main materials would be crucial to ensure continuous
operation for manufacturers. The following statistics on local production and imports in
Malaysia and PRC are used to assess the supply of these types of materials.
9.1 Malaysia
9.1.1 Local Production
Copper Bars and Rods
As there is no local production statistics available for copper wire, the statistics of
copper bars and rods are used as an indicator ofthe availability and the market status of
copper wire. This is because copper bars and rods are used as feedstock for drawing
into copper wires.
Between 2006 and 20 I 0, the sales value for the manufacture of copper bars and rods
increased at an average annual rate of 6.3%. In 20 I 0, the sales value for the
manufacture of copper bars and rods grew by 39.1 % to RM 1.3 billion.
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Plastic
Between 2006 and 2010, the sales value for the manufacture of plastic extruded products
in Malaysia increased at an average annual rate of 4.9%. In 2010, sales value grew by
16.0% to RM604.5 million.
Between 2006 and 2010, the sales value for the manufacture of plastic injection moulded
components in Malaysia decreased at an average annual rate of 0.8%. In 2010, sales
value grew by 3.8% to RM6.6 billion.
9.1.2 Imports
Copper Wire
Between 2006 and 2010, the import value of copper wires in Malaysia increased at an
average annual rate of5.9%. In 2010, import value increased by 10104% to reach RM1.2
billion.
In 2010, Indonesia was the largest source of imports for copper wires in Malaysia,
accounting for 30.7% of the total import value. This was followed by Japan and India,
accounting for 22.5% and 1804% ofthe total import value respectively. Some of the other
sources of imports in 2010 include Korea, Taiwan, China and Singapore.
Silicon-Electrical Steel
Between 2006 and 2010, the import value of ferro-silicon in Malaysia decreased at an
average annual rate of 25.0%. In 2010, import value declined by 16.0% to reach
RM15004 million. (Note: Ferro-silicon is the feedstock for grain-oriented
silicon-electrical steel and other silicon-electrical steel, where either one is used in the
core ofthe electronic transformers)
Between 2006 and 2010, the import value of flat-rolled products of grain-oriented
silicon-electrical steel, of a width of 600mm or more in Malaysia increased at an average
annual rate of 18.2%. In 2010, import value grew by 143.9% to reach RM173.0 million.
Between 2006 and 2010, the import value ofother flat -rolled products ofsilicon-electrical
steel, of a width of 600mm or more in Malaysia decreased at an average annual rate of
0.6%. In 2010, import value grew by 7404% to reach RM340.3 million.
Between 2006 and 2010, the import value of flat-rolled products of grain-oriented
silicon-electrical steel, ofa width of less than 600mm in Malaysia decreased at an average
annual rate of21.3%. In 2010, import value grew by 125.1% to reach RM20.8 million.
Between 2006 and 2010, the import value ofother flat-rolled products ofsilicon-electrical
steel, of a width of less than 600mm in Malaysia increased at an average annual rate of
904%. In 2010, import value grew by 101.8% to reach RM1.8 million.
(Source: Department a/Statistics Malaysia)
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9.2 PRC
9.2.1 Local Production
Copper
Between 2004 and 2008, the production quantity of copper in PRC increased at an
average annual rate of 14.6%. In 2008, production quantity grew by 10.5% to reach 38.0
million tonnes.
(Source: National Bureau ofStatistics ofChina)
Silicon Steel
Note: Silicon Steel is also referred to as silicon-electrical steel
In 20 I 0, the local production ofcold-rolled silicon steel (including grain-oriented) by the
five major steel mills in PRC amounted to 4.8 million tonnes. The first private owned
silicon steel manufacturing plant is expected to start production in December 2012 with
the annual production capacity of300,000 tonnes of silicon steel.
(Source: Ministry ofIndustry and Information Technology ofthe People's Republic of
China and Vital Factor Consulting Sdn Bhd)
Plastic
In 2008, the sales value of plastic in PRCincreased by 19.9%to reach RMB 940.7
billion.
Between 2005 and 2009, the nwnber ofentetprises manufacturing plastics in PRC grew at
an average annual rate of 13.4%. In 2009, the number ofentetprises increased by 2.1% to
19,894 entetprises.
(Source: National Bureau ofStat/sties ofChina)
9.2.2 Imports
Copper Wires
Between 2006 and 2010, the import value ofcopper wires in PRC increased at an average
annual rate of3.4%. In 2010, import value increased by 34.1% to reach USD2.0 billion
(equivalent to RMB 12.6 billion).
In 2010, South Korea was the largest source of imports for copper wires in PRC,
accounting for 31.3% of the total import value. This was followed by Taiwan and
Indonesia, accounting for 24.6% and 13.1% ofthe total import value respectively. Some
of the other sources of imports in 20 I 0 include Kazakhstan, Japan, Malaysia, and the
Russian Federation.
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Silicon-Electrical Steel
Between 2006 and 2010, the import value of ferro-silicon in PRC increased at an average
annual rate of 35.1%. In 2010, import value increased by 77.3% to reach USD20.9
million (equivalent to RMB134.9 million).{Note: Ferro-silicon is thefeedstockfor the
manufacture ofsilicon-electrical steel)
Between 2006 and 2010, the import value of flat-rolled products of grain oriented
silicon-electrical steel, of a width of 600mm or more in PRC decreased at an average
annual rate of 5.3%. In 2010, import value declined by 49.2% to USD626.0 million
(equivalent to RMB4.0 billion).
Between 2006 and 2010, the import value offlat-rolled products of other silicon-electrical
steel, of a width of 600mm or more in PRC increased at an average annual rate of9.4%.
In 2010, import value grew by 69.1% to USD621.9 million (equivalent to RMB4.0
billion).
Between 2006 and 2010, the import value of flat-rolled products of grain oriented
silicon-electrical steel, of a width of less than 600mm in PRC decreased at an average
annual rate of 6.6%. In 2010, import value declined by 29.7% to USD28.5 million
(equivalent to RMB 184.4 million).
Between 2006 and 20 10, the import value offlat-rolled products ofother silicon-electrical
steel, ofa width ofless than 600mm in PRC increased at an average annual rate of 19.4%.
In 2010, import value grew by 39.6% to USD50.4 million (equivalent to RMB325.8
million).
(Source: China Customs)
Plastic
Between 2006 and 2008, the import value of plastic in PRC increased at an average
annual rate of 10.8%. In 2008, import value increased by 7.2% to reach USD 11.9 billion
(equivalent to RMB76.9 billion).
(Source: China National Light Industry Council)
10. DEMAND
10.1 Exports - Malaysia
Electrical Transformers
Between 2006 and 2010, the export value ofelectrical transformers, static converters (for
example, rectifiers) and inductors from Malaysia grew at an average annual rate of2.4%.
In 2010, export value increased by 38.9% to reach RM2.1 billion.
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In 2010, Japan was the largest export market for electrical transformers, static converters,
(for example, rectifiers) and inductors, accounting for 15.5% of the total export value.
This was followed by Singapore and United States, which accounted for 10.8% and
10.4% of the total export value respectively. The other export markets included Hong
Kong, China, Thailand and Netherlands.
Transformers Not Exceeding 1 kVA
Between 2006 and 2010, the export value of other transformers, rated capacity not
exceeding lkVA (sub-sector of electrical transformer, static converters (for example,
rectifiers) and inductors) from Malaysia grew at an average annual rate of 6.2%. In 2010,
export value increased by 31.9% to RM20I.l million.
In 2010, Thailand was the largest export market for other transformers, rated capacity
not exceeding lkVA (sub-sector of electrical transformer, static converters (for
example, rectifiers) and inductors) in Malaysia, which accounted for 20.9% ofthe total
export value. This was followed by Singapore, Hong Kong and Japan, accounting for
19.4%,15.7% and 15.4% ofthe total export value respectively. Some of the other export
destinations in 2010 include United States, Korea, Vietnam and United Kingdom.
Between 2006 and 2010, the export value of transformers with rated capacity not
exceeding IkVA, other than transformers for toys and matching transformers (sub-sector
of other transformer, rated capacity not exceeding IkV A) from Malaysia grew at an
average annual rate of 21.7%. In 2010, export value increased by 31.2% to RM147.8
million.
In 2010, Thailand was the largest export market for transformers with rated capacity not
exceeding IkVA, other than transformers for toys and matching transformers(sub-sector
of other transformer, rated capacity not exceeding IkVA) in Malaysia, which accounted
for 21.4% of the total export value. This was followed by Hong Kong, Japan and
United States accounting for 21.2%, 20.0% and 8.8% of the total export value
respectively. Some of the other export destinations in 2010 include Korea, Singapore,
Vietnam and United Kingdom.
(Source: Department o/Statistics Malaysia)
10.2 Exports - PRC
Electrical Transformers
Between 2006 and 2010, the export value ofelectrical transformers, static converters (for
example, rectifiers) and inductors from PRe grew at an average annual rate of 16.4%. In
2010, export value increased by 37.7% to reach USD20.2 billion (equivalent to
RMB 130.5 billion).
In 2010, Hong Kong was the largest export market for electrical transformers, static
converters (for example, rectifiers) and inductors, accounting for 28.4% ofthe total export
value. This was followed by United States and Japan, which accounted for 14.5% and
7.1% of the total export value respectively. The other export markets included South
Korea, Germany, India, Taiwan and Mexico.
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Transformers Not Exceeding 1 kV A
Between 2006 and 2010, the export value of other transformers, rated capacity not
exceeding lkVA (sub-sector of electrical transformer, static converters (for example,
rectifiers) and inductors) from PRC grew at an average annual rate of 8.5%. In 2010,
export value increased by 18.9% to USD 1.5 billion (equivalent to RMB9.5 billion).
In 2010, Hong Kong was the largest export market for other transformers, rated
capacity not exceeding lkVA (sub-sector of electrical transformer, static converters
(for example, rectifiers) and inductors) in PRC, which accounted for 32.4% ofthe total
export value. This was followed by United States, Japan, and Germany, accounting for
10.8%,8.6% and 6.9% of the total export value respectively. Some of the other export
destinations in 20 I 0 include South Korea, Philippines, India and Malaysia.
Between 2006 and 2010, the export value of transformers with rated capacity not
exceeding lkVA, not elsewhere specified (sub-sector of other transformer, rated capacity
not exceeding 1 kVA) from PRC grew at an average annual rate of7.5%. In 20 I 0, export
value increased by 20.9% to USD1.4 billion (equivalent to RMB9.0 billion).
In 2010, Hong Kong was the largest export market for transformers with rated capacity
not exceeding lkVA, not elsewhere specified (sub-sector of other transformer, rated
capacity not exceeding lkVA) in PRC, which accounted for 34.0% of the total export
value. This was followed by United States, Japan, and Germany, accounting for 10.2%,
9.0% and 7.2% of the total export value respectively. Some of the other export
destinations in 2010 include South Korea, Philippines, India and Malaysia.
(Source: China Customs)
11. DEMAND DEPENDENCIES
The end-user industries of electronic transformers and related products are diverse, as
virtually all electrical and electronic devices require these components.
Some ofthe applications of electronic transformers and related products are as follows:
Consumer electronics such as computers and related peripherals and
accessories including tablet computers, net books, notebooks, routers,
modems, hard disk drives and flash drives, communication products like
fixed line, cordless and mobile phones, GPS products, digital cameras and
games consoles;
Electrical appliances like fridges, freezers, kettles, rice cookers, lighting
systems and accessories, fans, air-conditioning units, vacuum cleaners,
humidifiers, ionisers, air filters, dish washer, laundry washing machine,
dryer, blenders, coffee makers, juice extractors, food processors, hair dryer,
water dispenser and food steamer;
Home entertainment products like home audio systems, televisions, radios,
DVD players, and portable audio/video devices;
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Industrial machinery and equipment such as medical equipment, computer
numerical control machine, and robotics.
The diversity in applications and user industries will continue to provide diversity in
customer base ensuring continuing demand and opportunities for electronic
components manufacturers.
This section will include an analysis on the performance of electrical and electronic
products in Malaysia and PRe as one of the main user industries for electronic
transformers and related products.
11.1 Malaysia
The electrical and electronics industry is the largest export oriented industry in
Malaysia. In 2010, the electrical and electronics industry grew by 9.7% to reach
RM249.8 billion, which represented 39.1% of Malaysia's total exports. (Source:
Department o/Statistics, MalaySia)
In 2010, the manufacturing production index of electrical and electronics product
cluster increased by 17.4% to reach 97.7 points compared to 83.2 points in 2009.
Between 2006 and 2010, the manufacturing production index ofthe electrical products
cluster grew at an average annual rate 1.9%. In 2010, it increased by 47.4% to reach
116.3 points compared to 78.9 points in 2009.
(Source: Annual Report 2010, Bank Negara Malaysia)
11.2 PRC
Nakareg Holdings Group manufactures electronic transformers for use in
air-conditioners, facsimile machines and televisions. As such, the performance of
these end-user industries will have an impact on operators within the manufacture of
electronic transformer industry including Nakareg Holdings Group.
Between 2004 and 2008, the total output for air-conditioners in PRe increased at an
average annual growth rate of 6.5%. In 2008, it grew by 2.7% to reach 82.3 million
units.
Between 2004 and 2008, the total output for facsimile machines in PRe decreased at an
average annual rate of2.5%. In 2008, it decreased by 13.4% to reach 7.7 million units.
Between 2005 and 2009, the gross industrial output value for the manufacturing of
domestic TV set and radio receivers in PRe increased at an average annual growth rate of
6.4%. In 2009, it increased by 9.1% to reach RMB391.8 billion. In 2009, there were
approximately 1,088 manufacturers ofdomestic TV sets and radio receivers in PRe.
Between 2005 and 2009, the sales value of specialty retail trade of household electric
appliances and electronic products in PRe grew at an average annual rate of 19.3%. In
2009, it increased by 3.1 % to reach RMB367.1 billion.
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Between 2005 and 2009, the sales value of retail trade of household electric appliances
in PRC grew at an average annual rate of20.4%. In 2009, it increased by 5.7% to reach
RMB254.1 billion.
(Source: National Bureau of Statistics of China and Secondary Market Research
12. COMPETITION
12.1 Nature of Competition in the Manufacture of Electronic Transformer Industry
In general, as with most free enterprise environments competition amongst operators
in the Manufacturing of Electronic Transformer Industry is characterised by the
following:
There are no undue government regulations or licensing requirements;
The industry is not dominated by a single or small number of operators;
No single or small group of operators is large enough to dictate pricing;
Operators may enter and leave the industry freely.
In such an environment, the industry is subjected to normal supply and demand
conditions moderated by the price mechanism. Operators compete based on a number
of factors of competition.
12.2 Factors of Competition
As with most free enterprise environment, competition within the Manufacture of
Electronic Transformer Industry is based on a number of factors, including
Product quality;
Manufacturing capabilities;
Price competitiveness;
Track record;
Design capabilities.
Product Quality: Product quality is an important consideration as electronic
transformers and related products are used to control AC voltage and also to prevent
voltage fluctuation. Quality becomes even more important when electronic
transformers are used in devices that are designed for long usage, as high core losses
from the electronic transformer might lead to overheating. Thus, manufacturers that
have stringent in-house quality assurance and inspection programmes and quality
management system certification in place will be in a better competitive position.
Manufacturing Capabilities: A certain level of technical expertise and experience
are required in the manufacture of electronic transformers to meet customer
specifications. This is particularly pertinent for specialised transformers, for example
very small electronic transformers. In addition, management of the entire
manufacturing process, from material specification and sourcing to work flow may
impact on work efficiencies and effectiveness to minimise cost of production.
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Price Competitiveness: The need for price competitiveness is driven by competition
from other manufacturers, and cost consciousness among user industries such as
manufacturers of electronic and electrical products. Manufacturers that are able to
provide price competitive solutions will be in a better competitive position.
Track Record: Customers would normally select manufacturers with a strong track
record. This is important, as customers expect a high level of product quality, as well
as reliability and timeliness of delivery. As such, a potential supplier with a strong
track record would be in a better position to retain existing customers and win new
customers.
Design capabilities: Manufacturers that are able to design products according to
customers' specifications will be able to provide a one-stop solution for their
customers. The time span between product conceptualisation to the start of production
may also be shorter compared to manufacturers who have to obtain designs from third
parties. Communication between in-house designers and the factory floor is also
easier, and can ensure products are manufactured according to specification and
design. Design changes and modifications can also be carried out more speedily and
accurately.
12.3 Competitive Intensity
Competition for operators within the industry primarily comes from other manufacturers
of electronic transformers and related products. For Nakareg Holdings Group,
competition comes from other manufacturers in Malaysia and PRC.
In 2010, there were approximately 25 enterprises in Peninsular Malaysia
engaged in the manufacturing of electronic transformers (Source: Vital Factor
Consulting Sdn Bhd)
As at 2008, there were approximately 6,226 enterprises in PRC engaged in the
manufacturing of electronic components, with approximately 500 enterprises
involved in the manufacturing of transformers (including power distribution
transformers and electronic transformers). (Source: National Bureau 0/
Statistics 0/China)
Nevertheless, manufacturers of electronic transformer and related products in
Malaysia and PRe also compete against imported products:
In 2010, the import value of electrical transformers, static converters (for
example, rectifiers) and inductors in Malaysia amounted to RM3.6 billion.
(Source: Department o/Statistics Malaysia)
In 2010, the import value of other electrical transformer, static converters (for
example, rectifiers) and inductors in PRCamounted to USD11.9 billion
(equivalent to RMB 76.7 billion). (Source: China Customs)
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12.4 Players in the Industry
Malaysia
As at May 2011, there were approximately 25 enterprises in Peninsular Malaysia engaged
in manufacture of electronic transformers. (Source: Primary Market Research
Some ofthe manufacturers of electronic transformers and related products in Malaysia
are as follows (listed in alphabetical order):
Bando Electronics (M) Sdn Bhd;
Coilstec Electric (M) Sdn Bhd;
Communico Electronics Sdn Bhd;
Grand Holly Electrical Industries Sdn Bhd;
Incoils Electronics Sdn Bhd;
KAMI Electronics Industry (M) Sdn Bhd;
KL V A (M) Sdn Bhd;
Nakareg Holdings Group;
Para Manufacturing Sdn Bhd;
Relcotech Transformer Manufacturer Sdn Bhd;
Seoul Electronics & Telecommunications (M) Sdn Bhd;
Stanford Industries Sdn Bhd;
Tamura Group.
(Note: The above is not an exhaustive list.)
(Source: Vital Factor Consulting Sdn Bhd)
PRC
As at 2008, there were approximately 6,226 enterprises in PRC engaged in manufacture
of electronic components with approximately 500 enterprises involved in the
manufacturing of transformers (including power distribution transformers and
electronic transformers). (Source: Vital Factor Consulting Sdn Bhd)
Some ofthe manufacturers of electronic transformers and related products in PRC are
as follows (listed in alphabetical order):
Ahead Electrical Co Ltd;
Beijing New Chuang Si Fang Electronic Co Ltd;
Beijing Seven Star Flight Electronic Co Ltd (a subsidiary of Sevenstar
Science & Technology Co Ltd);
Click Technology Limited;
Createmax Electronics Technology (Wuxi) Co Ltd;
Darfon Electronics Corporation;
Dongguan Shijie Tornlee Electronics Factory;
EPCOS (Shanghai) Ltd;
Fenghua Advanced Technology Holding Co Ltd;
Fujian Furi Electronics Co Ltd;
Gauss Electronics (Qingyuan) Co Ltd;
Guangzhou Bang Da Electric Co Ltd;
Hangzhou Hisitre Technology Co Ltd;
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Helms-Man Transformers Co Ltd;
Huizhou Sunshine Electronics Co Ltd;
Keentech Electronics Co Ltd;
Kunshang Hao-chang Electronics Co Ltd;
LinkCom Manufacturing Co Ltd;
Maggold Technology Co Ltd;
Main Power Electric Co Ltd;
Mentech Electronics Corp Ltd.
Mu Shih Industry Co Ltd;
Nakareg Holdings Group;
Ningbo Zettler Electronics Co Ltd;
Northern Optoelectronics Technology Co Ltd;
Qingdao Asia Pacific Co Ltd;
Shanghai Meixing Electronics Co Ltd;
Shanghai Suntronics Technology Co Ltd;
Shenzhen Belta Technology Co Ltd;
Shenzhen Highlight electronic Co Ltd;
Shenzhen Meikai Electronics Stock Co Ltd;
Shenzhen Transformer Electronics Co Ltd;
Suzhou Efox Power Technology Ltd;
TDK China Co Ltd;
Technics United Electronic Co Ltd;
TMP International Corporation;
Top-View Coils Products Co Ltd;
Transtek Magnetics Co Ltd;
Tronson Electronics Company Limited;
V dson (HZ) Electronics Co Ltd;
Weihai Feelux Electronics Co Ltd;
Zhongshan Jisheng Electronics Co Ltd.
(Note: The above is not an exhaustive list.)
13. BARRIERS TO ENTRY
13.1 Capital and Set-up Costs
The capital set-up cost for the Manufacture ofElectronic Transformer Industry is low.
The capital investment required to start up an electronic transformer manufacturing
plant in Malaysia or PRC would cost approximately RM3 million (excluding land and
building). This includes:
RMO.5 million for the purchase ofmachinery and equipment;
RM2.5 million working capital.
This level of investment is to set up a relatively small electronic transformer
manufacturing operation with estimated annual turnover of RMl2 million (Source:
Vital Factor Consulting Sdn Bhd).
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However, smaller sized operators are likely to face difficulties in competing with
larger operators that have the advantage of economies of scale as well as being ab Ie to
fulfil large orders within a relatively short period of time. The amount of capital
required to achieve economies of scale would be higher.
13.2 Technical Skills
There is also a certain level of technical expertise and experience required in the
Manufacture of Electronic Transformer IndUStry. This is in relation to the expertise
and experience required in the research and development, design, manufacturing, and
testing processes to meet the required specifications of final products.
Experienced and trained workers are also required in the manufacturing process to
maximise productivity and minimise raw material wastage.
Technical skills in the design and manufacturing of electronic transformer are also
required to ensure that product complies with quality and safety standards. This is
because electronic transformers deal with electricity and safety is a priority.
Other areas that require a certain degree oftechnical skills and experience is the ability to
develop new types ofelectronic transformers that meet customer specifications, such as
rating, size, and design (in terms ofdifferent mounting positions).
The ability to develop new products would enable manufacturers to maintain their
competitive edge by keeping abreast with changing consumer preferences and trends,
and needs of industrial users.
13.3 Established Track Record
Established track record is an important factor for operators in this industry. A new
entrant will take time to establish a credible track record in the industry.
It is common that an established customer base also serves as an important reference for
new or potential customers.
As such, having an established track record would pose a barrier to entry for new entrants.
13.4 Product Quality
Product quality is an important competitive factor among operators in the Electronic
Transformer Manufacturing Industry.
Operators that implement stringent quality assurance programmes and possess quality
management system certification (such as the IS09000-series quality management
system certification) are generally in a better position to provide some assurance of the
quality of their electronic transformers. This is generally an advantage in securing
sales orders.
Nakareg Holdings Berhad Page 25 0[34 Industry Assessment
127
G.
New entrants into the industry would take some time to develop the capability to meet
product industry standards and quality, and to obtain the necessary quality and safety
certifications.
14. RELIANCE ON AND VULNERABILITY TO IMPORTS
14.1 Reliance on Imports
For the financial year ended 31 December 2010, the main raw materials and
components purchased by Nakareg Group for its manufacturing operations in
Malaysia and PRC were copper wire, transformer cores, aluminum, computer parts
and components, servers, bobbins, steel sheet metal and Printed Circuit Boards (PCB).
In general, the Group was able to purchase most of the copper wire, transformer cores,
aluminum, servers and steel sheet metal raw materials and components for use by its
manufacturing operations in Malaysia from suppliers in Malaysia. Similarly, in
general the Group was able to purchase most of these raw materials and components
for use by its manufacturing operations in PRC from suppliers in PRe.
The Group was somewhat reliant on suppliers from other countries for the supply of
some of the computer parts and components, bobbins and PCB used in its
manufacturing operations. However, these materials are available from suppliers from
a number of countries, and Malaysia and PRC have a past record of importing these
materials from various overseas countries, any disruption in supply would therefore be
minimized.
IS. INDUSTRY OUTLOOK
IS.1 Malaysia
Economic Conditions in Malaysia
An improving economy will provide opportunities for operators within the
Manufacture ofElectronic Transformer Industry. Economic conditions in Malaysia in
2010 have shown to be better than 2009 as indicated below:
While real GDP for 2009 was -1.7%, real GDP for 2010 grew by 7.2% based
on preliminary figures. The real GDP is forecasted to grow between 5.0% and
6.0% in 2011.
(Source: Ministry ofFinance)
128
0.
Performance of the Manufacture of Electronic Transformer Industry
Trends of the Manufacture of Electronic Transformer Industry in 2010 would also
provide some indication of the outlook for the industry:
In 2010, the sales value for the manufacturing of all types of electronic
transformers in Malaysia declined by 37.5% to reach RM688.8 million.
In 2010, the import value of other transformers, rated capacity not exceeding 1
kVA (sub-sector of electrical transformer, static converters (for example,
rectifiers) and inductors) in Malaysia increased by 4.6% to RM281.0 million.
In 2010, the import value of other transformers with rated capacity not
exceeding lkVA, other than transformers for toys and matching transformers
(sub-sector of other transformer, rated capacity not exceeding lkVA) in
Malaysia increased by 4.7% to RM241.3 million.
In 2010, the export value of other transformers, rated capacity not exceeding
IkVA (sub-sector of electrical transformer, static converters (for example,
rectifiers) and inductors) from Malaysia increased by 31.9% to RM201.1
million.
In 2010, the export value of transformers with rated capacity not exceeding
lkVA, other than transformers for toys and matching transformers (sub-sector
of other transformer, rated capacity not exceeding IkVA) from Malaysia
increased by 31.2% to RM147.8 million.
Note: Electronic transformers including the types manufactured by Nakareg
Holdings Group fall within these categories.
Performance of User Industries
In addition, the industry outlook will also be dependent on its major user industries.
The real GDP in the manufacturing sector registered a growth of 11.4%% in 20 I 0 and
is forecasted to grow by 5.7% in 20 11.{Source: Ministry ofFinance)
The Electrical and Electronic Industry is the largest user of electronic transformers and
its performance would have an impact on operators within the electronic transformer
industry:
The electrical and electronics industry is the largest export oriented industry
in Malaysia. In 2010, the electrical and electronics industry was valued at
RM249.8 billion, which represented 39.1% of Malaysia's total exports.
(Source: Department ofStatistics, Malaysia)
In light of a recovery of Malaysia's economy in 2010 as well as many of the
economies of developed countries, Malaysia's exports of electrical and
electronic products grew by 9.7% to reach RM249.8 billion in 2010. (Source:
Department ofStatistics, MalaySia)
129
pany No. 918382-T
8.
Q
In 2010, the manufacturing production index of electrical and electronics
product cluster increased by 17.4% to reach 97.7 points compared to 83.2
points in 2009. (Source: Annual Report 2010, Bank Negara Malaysia)
15.2 PRC
Economic Conditions in PRC
Looking forward into 2011, real GDP performance in PRC is forecasted to continue
growing at approximately 8%. Although the real GDP forecasted for 2011 is slightly
lower compared to 2010 at 10.3%, nevertheless growth continues to be strong.
Entrepreneur confidence in the first quarter of2011 also continued to improve by 0.3%
compared to the previous quarter, and by 1.4% compared to the same period in 2010.
Continuing economic growth combined with stronger entrepreneur confidence will
continue to provide opportunities and help sustain operators within the Manufacture of
Electronic Transformer Industry.
Economic Conditions in PRC relative to Selected Economies
PRC's real GDP growth rate projection of approximately 8% for 2011 is expected to
be more robust compared to the projected real GDP growth rates in 2011 for some of
the more advanced economies, for example:
United States =2.8%
United Kingdom 1.7%
Euro Area = 1.6%
Japan 1.4%.
As such, operators whose main markets are in PRC are expected to be in a better
position in terms of growth opportunities compared to companies whose main markets
are projected to have slower growth. PRC's prospects in terms of outlook are further
boosted by its large population, which registered 1.3 billion persons in 2010. (Source:
National Bureau ofStatistics ofChina)
Performance of User-Industries
The size and performance of user industries also provide an indication of the outlook
ofthe Manufacture of Electronic Transformer Industry in the PRC:
Between 2005 and 2009, the gross industrial output value ofthe manufacture
of electronic and communication equipment in the PRC grew by an average
annual rate of 14.5%, where in 2009 it reached RMB2,895 billion.
130
8.
INDEPENDENT MARKET RESEARCH REPORT (Conl'dj
0.
Between 2005 and 2009, the gross industrial output value of the manufacture
of computer and office communication equipment in the PRe grew by an
average annual rate of 11.2%, where in 2009 it reached RMB 1 ,629 billion.
Between 2005 and 2009, the gross industrial output value of the manufacture
of medical equipment and measuring instrument in the PRe grew by an
average annual rate of25.3%, where in 2009 it reached RMB439.4 billion.
(Source: National Bureau a/Statistics a/China)
16. THREATS AND RISKS ANALYSIS
16.1 Global Financial Crisis
A prolonged and/or widespread economic downturn such as the recent global financial
crisis may affect the Malaysian, PRe and/or global economy. An economic downturn
may affect consumer and business spending and confidence.
A slowdown in Malaysia, PRe and/or the global economy may to reduce demand for
products that utilise transformers, including electrical and electronic devices, as well
as machinery and equipment.
Mitigating Factors
As transformers are regarded as important or mandatory parts of many electronic and
electrical products, it is likely that demand on these products will still continue, albeit
at a lower expenditure level during an economic slowdown.
In 2010, Malaysia economy registered a real GDP growth of 7.2%, and is forecasted to
grow between 5% and 6% in 2011. Meanwhile, PRe experienced a real GDP growth
of 10.3%, and is projected to grow by 8% in 2011 (Sources: Bank Negara Malaysia
and National Bureau o/Statistics a/China).
As evidenced in the past, the Malaysian Government's continued prompt policy
flexibility in implementing pro-growth measures to sustain the country's growth
momentum, by raising domestic demand to compensate for slower external growth,
has helped Malaysian companies to counter some ofthe effects ofthe slowdown in the
global economy.
In November 2008, the PRe Government annotnlced an economic stimulus package to
minimise the effect of the global economic crisis on the PRe. The 2008-2009
economic stimulus package comprised approximately RMB4.0 trillion investment in
infrastructure and social welfare programmes by the end of 20 I 0 (Source: State
Council a/the People's Republic a/China).
Additional government spending and measures designed to increase confidence and
boost spending contained in the stimulus packages by the Malaysian government and
PRe government in their respective countries may stimulate economic activity,
thereby reducing the negative impact of the global financial crisis on operators in
Malaysia and/or PRe.
131
8.
0.
16.2 Fluctuation in Raw Material Prices
Copper is one of the main raw materials that are used to manufacture electronic
transformers. As copper is a commodity, it is subjected to fluctuations in world prices.
350
_ 300

K
8 250
'"
1:'
..
i'! 200
..
:::!.

150
3
-Global Copper Price Index
lJanuary2OO!i" 1(0)
Oec..08: 97
;t
100
i
j 50
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C)
.. ....- ..
Jan-OS Jul-05 JanOS JarHl7 Jul-07 JanOS Jut-OS Jan-09 JuI..Q9 Jan10 Jut-l0 Janl1 May.11
Figure 9. Global Copper Price Index
After reaching 274 points in April 2008, the global copper price index fell by 64.6% to
97 points in December 2008.
From its six-year low in December 2008, the global copper price index increased to
reach 311 points in February 2011. The global copper price index was 283 points in
May 2011.
Mitigating Factors
In most situations, increases in the price of raw materials may be passed onto the
customers, which reduce the financial impact on operators.
Electronic transformers are necessity items with few practical substitutes. In addition,
the cost component of electronic transformers in comparison to the total cost is
relatively small. As such, any increase in their prices would normally not deter users
from using electronic transformers.
16.3 Competition from Manufacturers in the Same Country
Manufacturers of electronic transformers compete with local manufacturers as well as
imports. The competitive intensity may impact on operators within the industry.
132
0.
Mitigating Factor
As the Manufacture ofElectronic Transformer Industry in Malaysia and PRC services
the global market and a large base of user industries, there are sufficient business
opportunities to sustain manufacturers. However, transformer manufacturers that have
an established track record and customer base, in-house research and development
capabilities and large manufacturing capacity to obtain economies of scale are in
stronger position to compete effectively.
16.4 Bargaining Power of Customers
In general, electronic transformers are fairly undifferentiated as they share common
functionality and use similar parts.
The large number ofelectronic transformer manufacturers in the industry coupled with
the fairly undifferentiated nature of transformers creates bargaining power for
customers, as they face low switching costs.
In order to compete in the industry, suppliers may have to absorb the high cost of
production while exercising a low-price strategy, which may result in the profit margin
of manufacturers deteriorating.
Mitigating Factor
By providing quality assurance, manufacturers of electronic transformers are able to
retain customers while still charging reasonable prices. Product quality is important to
customers as electronic transformers affects efficiency in stepping-up or stepping down
electrical power, and product safety.
Manufacturers can also counter customer's bargaining power by providing value-added
service, such as in-house product design capability, product customisation and technical
service. This will help differentiate their electronic transformers and raise switching
costs.
16.5 Foreign Exchange Risk
Some of the raw materials used by the electronic transformer manufacturers in
Malaysia and PRC are derived from imported sources. In addition, some of the
products produced by Malaysia and PRC electronic transformer manufacturers are
exported. Most ofthese transactions are denominated in foreign currencies.
As such, fluctuations in foreign exchange rates will have an impact on the Ringgit and
RMB value of imported raw materials and exported productS.
This may have an impact on the profitability of operators within the Manufacture of
Electronic Transformer IndUStry. An unfavourable foreign exchange movement
against the Ringgit and RMB would either reduce demand as prices would need to be
increased or manufacturer's profitability would suffer ifthey decide to absorb the price
increases.
133
8. INDEPENDENT MARKET RESEARCH REPORT (CoIlt'd)
Q
Mitigating Factors
The exchange rate of both Ringgit and RMB now operates on a managed float. Bank
Negara Malaysia and The People's Bank of China now monitor the value of the
Ringgit and RMB relative to a basket of currencies. Promoting stability of the
currency remains a primary policy objective for both countries. This will provide
some mitigation against foreign currency risk.
A manufacturer that earns revenue denominated in a foreign currency may use its
foreign currency earnings to pay for purchases denominated in the same foreign
currency. This could provide some natural hedging against foreign exchange
fluctuations.
17. AREAS OF GROWTH AND OPPORTUNITIES
17.1 New Export Markets
The Manufacture of Electronic Transformer Industry is a generator of foreign
exchange earnings for Malaysia and PRe. This is reflected by the fact below:
In 2010, export value of electrical transformer, static converters (for example,
rectifiers) and inductors from Malaysia amounted to RM2.1 billion.
In 2010, export value of electrical transformer, static converters (for example,
rectifiers) and inductors from PRC amounted to USD20.2 billion (equivalent to
RMB 130.5 billion).
(Source: Department ofStatistics Malaysia and China Customs)
Thus, there are opportunities for operators in Malaysia and PRC to further explore the
potential of export markets for electronic transformers. Operators that can serve
various markets will have increased areas of opportunities for growth as well as
diversity risks of dependency on anyone single market.
17.2 Import Substitution Market
In 2010, the import value of electrical transformer, static converters (for example,
rectifiers) and inductors in Malaysia and PRC amounted to RM3.6 billion and USD11.9
billion (equivalent to RMB76.7 billion) respectively.{Source: Department ofStatistics
Malaysia and China Customs)
The large amount of imports generates potential for import substitution.
17.3 Product Diversification
Product diversification presents opportunities for manufacturers to enlarge their
customer base, and to minimise the risk of over dependency on certain products.
134
918382-T II
8.
0.
17.4 Product Improvement
Research and development should emphasise on developing energy efficient
electronic transformers with minimal core losses. If the energy transfer from the
primary circuit to the secondary circuit has little energy loss in the form of heat, this
can increase the electronic transformer's life expectancy, along with that ofthe product
that it is installed in.
Design and component selection can be developed to improve an electronic
transformer'S performance in terms of reduced heat generation, electrical stress,
operating current and noise generation.
17.5 Environmental Friendly Electronics Manufacturing
With the proposal of regulated ban on certain hazardous substances in the
manufacturing industries, environmental friendly electronics manufacturing has begun
to play a more important role. Examples of hazardous substances include lead,
mercury and cadmium.
Restrictions of Hazardous Substances (RoHS) compliant products are gaining more
popularity, as people are more environmentally conscious nowadays. "Green
products" have become a marketing strategy for certain companies as consumers are
heading towards the trend of environmental friendly products. In addition, electronic
and electrical products manufactured for use in the European region have to comply
with the RoHS standards.
Manufacturers can implement technologies that emphasize environmental friendly
manufacturing in order to increase product reliability and business competitiveness.
For instance, lead-free soldering is able to reduce the impact of lead poisoning to
human health as well as the environment.
18. CRITICAL SUCCESS FACTORS
Quality of Finished Products: To ensure business sustainability, manufacturers must
be able to continually meet and deliver quality products to customers. Those who
adopt stringent controls in their manufacturing processes and have attained
internationally recognised product and quality management system certifications are
in a better position to compete effectively.
Established Track Record: As electronic transformers are critical components of
electrical and electronic products, customers must have some assurance of the quality of
the products. As such, other than possessing manufacturing capabilities, a reputable
track record is required to secure new sales order.
Design Capability: Manufacturer's design capability is important to ensure business
sustainability and growth. Customers are more likely to be attracted to manufacturers
who provide design services where both parties can work together to better meet
customer's requirements and overall product improvement.
135
o
Financial Stability: Manufacturers who are in a healthy financial position are more
likely to retain and attract new customers. Potential customers may emphasise
financial stability as a key criterion in the evaluation of a prospective supplier as they
would not want any disruption in the supply of products. In addition, a financially
strong manufacturer would be in a better position to upgrade its facilities; if necessary,
to keep abreast oftechnology or to meet future demand for increased capacity.
Diverse Customer Base: Manufacturers with a diverse customer base covering
different industry sectors and products are in a stronger position to minimise any
dependency on anyone particular industry sector or type of customers. In addition,
serving diverse industry sectors and types of customers would provide growth
opportunities.
19. MARKET SIZE AND SHARE
In 2010, the market size for the manufacture of electronic transformers in Malaysia
was estimated at RM688.8 million.{Source: Department o/Statistics Malaysia)
In 2010, Nakareg Holdings Group's market share of the manufacture of electronic
transformers in Malaysia was estimated at approximately 3%. (Source: Vital Factor
Consulting Sdn Bhd)
Vital Factor Consulting Sdn Bhd has prepared this report in an independent and objective manner and has
taken all reasonable consideration and care to ensure the accuracy and completeness of the report. It is
our opinion that the report represents a true and fair assessment ofthe industry within the limitations of,
among others, secondary statistics and information, and primary market research. Our assessment is for
the overall industry and may not necessarily reflect the individual performance of any company. We do
not take any responsibilities for the decisions or actions of readers ofthis document. This report should
not be taken as a recommendation to buy or not to buy the shares of any company.
Yours sincerely
WooiTan
Managing Director
136
9. LEGAL OPINION
9.1 Legal opinion on relevant laws and regulations of Hong Kong
(Preparedfor inclusion in this prospectus)
Partners:

Stevenson,Wong &CO.
Angus Forsyth
WillyY.P.Cheng
9:. X it gffi $ pff
HankH.f.Lo
Catherine KG.Por* t5S: 5C
Solicitors and Notaries, Agents for Trade Marks & Patents
NevilleJ.J.Watkins
Head Office:
WendyW. S. Lam' :l*iHi
4/F & 5/F, Central Tower, No. 28 Queen's Road Central, Hong Kong
LaiS.Lam' :l*11!I1lI!
Corneli. W. C Chu' *' :tr. lit
2!'.ff:
EricCH.Lui 8$ll
'i' ji <p *- i.m <p Ii
Email .l!i9!:general@sw-hk.com Telephone : (852) 2526 6311 Consultant:
Website !!iJ jjl: : http://www.sw-hk.com Facsimile fjji: (852) 2845 0638 Sherlynn G. Chan Ii 1I
Interchange DX No: 009220 Central 1
(852) 28459184
Notary Publk of Hong Kon9
lIiil!illil1f!il
China Office:
0) China-Appointed Attesting OffICer
Suite 1704, Citic Plaza, 233 Tian He N. Road, Guangzhou 510613, China
Civil Celebrant of Marriages
<p
IIHI'I!!:lIA
i1lii: 510613
Telephone 'I! : (8620) 8752 1228 Facsimile fj : (8620) 8752 1268
Our Ref: ECLlHLO(P)/70605/11 (Comm.) Date: 26 September 2011
Your Ref:
Reply Fax:
No.2, Jalan BJ 5,
Tmn Perindustrian Belmas Johan,
48000 Rawang,
Selangor Darul Ehsan,
Malaysia
("Nakareg Holdings")
PM SECURITIES SON BHD (Company No: 66299-A)
Mezzanine Floor,
Menara PMI,
No.2, Jalan Changkat Ceylon,
50200 Kuala Lumpur
(as Adviser, Sponsor, Underwriter and Placement Agent to Nakareg Holdings)
Christina Chia Law Chambers
Advocates and Solicitors
Suite 5001, 5th Floor
President House (ParkRoyal)
Jalan Sultan Ismail
50250 Kuala Lumpur
(as legal counsel for Nakareg Holdings)
Dear Sirs
NAKAREG INTERNATIONAL COMPANY LIMITED ("NAKAREG INTERNATIONAL");
OPINION ON REPATRIATION OF CAPITAL AND REMITTANCE OF PROFIT
We are a firm of solicitors qualified to practice and practising in the Hong Kong Special Administrative Region of
the People's Republic of China ("Hong Kong"). We have acted as legal counsel in Hong Kong to Nakareg
International in connection with the proposed listing of the shares (the "IPO") of I\lakareg Holdings on the ACE
Market of Bursa Malaysia Securities Berhad ("Bursa Securities"). Nakareg Holdings is the holding company of
a group (the "Group") of companies comprising amongst others, Nakareg International. We are requested to
provide information on the restrictions under Hong Kong laws and regulations relating to the repatriation of
capital and remittance of profits by Nakareg International to Nakareg Holdings.
Asia Pacific Europe/Africa/Middle East North and South America
Auckland' Bangalore' Bangkok' Brisbane Amsterdam Athens' Barcelona Brussels Budapest Atlanta" Boston Buenos Aires Chicago" Dallas" Denver
Guangzhou' Hang Kong' Kuala Lumpur Copenhagen - Dublin - Edinburgh' Frankfurt Geneva' Helsinki Houston" Los Angeles' Mexico City Miami" Milwaukee .. Montreal
Manila' Melbourne' Mumbai' New Delhi Istanbul Johannesburg -lagos' Lisbon' Landon' Madrid' Moscow New York Orlando Panama City Rio de Janeiro" Santiago
Perth Seoul' Shanghai' Sydney' Tokyo Oslo Paris" Prague' Stockholm Tel Aviv' Vienna Zurich Seattle" Toronto" Vancouver Was hington. DC
Member of Interlaw, an international association of law firms with principal offices worldwide induding those set out above.
137
9. LEGAL OPINION (Cont'dj
Legal opinion
Save for the legislations which create criminal liability for the transfer of profit between corporations and/or
outside Hong Kong under certain circumstances, such as Organized and Serious Crime Ordinance (Cap. 455)
and United Nations (Anti-Terrorism) Measures Ordinance (Cap. 575):
(a) there are no specific laws in Hong Kong that may affect the import or export of capital, the availability
of cash and cash equivalents for the use by a company, or the remittance of dividends, interest or
other payments to the company's shareholder (irrespective of the residency of the company's
shareholder); and
(b) there is no restriction under Hong Kong laws on the repatriation of profits, and repatriation of profits
via dividends is tax-free in Hong Kong as Hong Kong does not assess dividends to profit tax and
there is no withholding tax on dividends.
Qualification
This opinion is also subject to the following qualifications:
(a) This opinion is solely for the benefit of Nakareg Holdings. Save that the addressees of this legal opinion
may rely on this opinion in giving its opinion, its contents may not be disclosed or relied upon by any
third party except for the Bursa Securities, or used for any other purpose except for the IPO in any
circumstances whatsoever without our prior written consent.
(b) This opinion relates only to the laws of Hong Kong and it is assumed that no law of any other
jurisdiction affects the conclusions of this opinion.
(c) This opinion is limited to the matters addressed herein and is not to be read as an opinion with
respect to any other matters.
Yours faithfully
"'U
3.Wong & Co.
138
9. LEGAL OPINION (Coot'd)
9.2 Legal opinion on relevant laws and regulations of the PRe
(Preparedfor inclusion in this prospectus)

BlF, Kerry Parkside Office, 1155 Fang Dian Road, Pudong
Shanghai 201204, P. R. China
!l!. i5(Tel): +86215010-1666
(ol)p
ffl A(Fax); +86 215010-1222
www.mhplawyer.com
Date: September 21,2011
The Board ofDirectors
Jalan PJU 1N46
47301 Petaling Jaya
Attention:Mr Hau Mun Meng
Dear Sirs,
LEGAL OPINION ON NAKAREG ELECTRONICS (KUNSHAN) CO., LTD.
("NAKAREG KUNSHAN"), CHAN GSHU NAKAREG PRECISION
COMPONENTS CO., LTD. ("CHANGSHU NAKAREG") AND SHANGHAI
OPTIMUS ELECTRONICS CO., LTD. ("SHANGHAI OPTIMUS")
(COLLECTIVELY, THE "PRC COMPANIES") ON THE OWNERSHIP OF
TITLE TO THE SECURITIES/ASSETS IN THE PEOPLE'S REPUBLIC OF
CHINA ("PRC", FOR THE PURPOSE OF THIS LEGAL OPINION,
EXCLUDING HONG KONG SPECIAL ADMINISTRATIVE REGION OF
PRC, MACAO SPECIAL ADMINISTRATIVE REGION OF PRC AND
TAIWAN PROVINCE) AND THE ENFORCEABILITY OF AGREEMENTS,
REPRESENTATIONS AND UNDERTAKINGS UNDER THE RELEVANT
LAWS OF PRC IN RELATION TO THE INITIAL PUBLIC OFFERING OF
NAKAREG HOLDINGS BERHAD ("COMPANY") IN CONJUNCTION \lIITH
ITS LISTING ON THE ACE MARKET OF BURSA MALAYSIA SECURITIES
BERDAD ("PROPOSED LISTING").
1 Introduction
1.1 We have acted as legal adviser for the Company in respect ofthe laws
ofPRC for its Proposed Listing. We are duly qualified to practice law
within PRC and such qualification has not been revoked, suspended,
restricted or limited in any manner whatsoever. Accordingly, we are
duly qualified to issue this legal opinion (the "Legal Opinion").
1
139
9. LEGAL OPINION (Cont'd)
1.2 We have been requested by the Company to provide a legal opinion on
the PRC Companies on the foreign investment policies, repatriation of
capital and remittance of profits, ownership of title to the
securities/assets in the PRC and the enforceability of agreements,
representations and undertakings under the relevant laws of the PRC
for the purposes ofthe Proposed Listing.
1.3 In this regard, we understand that this Legal Opinion may be relied
upon in connection with the submission of an application for approval
of the Proposed Listing to the Securities Commission of Malaysia and
the issuance of the prospectus of the Company in relation to the
Proposed Listing by PM Securities Sdn Bhd, the adviser for the
Proposed Listing, Christina Chia Law Chambers, the solicitors for the
Proposed Listing and the board of directors of the Company.
Accordingly, this Legal Opinion has been prepared for inclusion in the
prospectus in relation to the Proposed Listing.
2 Documents examined and searches
2.1 In connection with this Legal Opinion, we have examined the original
copies and/or photocopies of the documents disclosed by the
management of the PRC Companies. We have also examined the
original copies and/or photocopies of such corporate records of the
PRC Companies, governmental authorizations or orders, laws, treaties,
certificates of public officials and/or officers of the PRC Companies
and such other documents and material documents as we have
considered necessary or appropriate. Further we have made such other
investigations and inquiries as we have considered necessary or
appropriate.
2.2 We have, in addition, made the following searches (collectively, the
"PRC Searches")
2.2.1 Company searches on the PRC Companies with Kunshan,
Changshu and Shanghai Administration of Industry and
Commerce;
2.2.2 Property search on the properties leased by the PRC Companies
with Kunshan, Changshu and Shanghai Property Files Center.
3 Assumption
3.1 For the purposes of this Legal Opinion, we have assumed (without
making any independent investigation) that:
3.1.1 All the documents are true and genuine, if any of the
documents submitted to us are photocopies, such photocopies
are in conformity to their respective original documents;
3.1.2 All the seals affixed on the documents are genuine and all the
persons who signed the documents were duly authorized to do
so;
2
140
4
3.1.3 The factual statements ill the documents are correct and
accurate;
3.1.4 All the information that may influence this Legal Opinion has
been provided and/or disclosed to us without any concealment,
omission or misleading statement;
3.1.5 All the written statements and confirmations given by the PRC
Companies to us are true and accurate; and
3.1.6 Up to the date of this Legal Opinion, there have been no
amendments to the documents since they were provided to us.
Opinion
Based on the foregoing, we are of the opinion as far as the laws of PRC are
concerned:
4.1 The PRC Companies are duly incorporated and existing under the laws
of PRC and are in good standing and validly existing under the laws of
PRC, possessing the capacity to sue and be sued in their respective
own names under the laws ofPRC.
4.2 The PRC Companies have the necessary corporate power and authority
to enter into and perform their respective obligations under their
commercial or employment agreements to which they are a party. The
execution and delivery of the agreements by the PRC Companies and
the performance by the PRC Companies oftheir obligations thereunder
will not violate the Articles of Association of the PRC Companies nor
any applicable law, regulation, order or decree in PRC.
4.3 The PRC Companies have taken all corporate actions required to
authorize its execution, delivery and performance of the agreements.
The agreements have been duly executed and delivered by or on behalf
of the respective PRC Companies, and constitute legal, valid and
binding obligations of the respective parties to it in accordance with
their respective terms thereof
4.4 The tenns of the representations and undertakings given and/or made
by the counter-parties in the agreements are enforceable against them
under the PRC law.
4.5 All orders, consents, approvals, licenses, authorizations or validations
of or exemptions by any government or public body or authority of
PRC or any sub-division thereofwhich are required to authorize or are
required in connection with the execution, delivery, performance and
enforcement of the agreements, if any, have been duly obtained in
accordance with PRC law.
4.6 All registrations and filings with governmental authorities or regulatory
bodies in the PRC necessary or desirable to ensure the enforceability in
the PRC of any ofthe agreements, ifany, have been made.
141
3
Company No. 91838
4.7 The choice of the laws ofPRC as the governing law in the agreements
is a valid choice of law and would be recognized and given effect in
any action brought before a court of competent jurisdiction in PRC.
4.8 Nakareg International Company Limited is the legal and beneficial
owner of the registered capital of Nakareg Kunshan, Changshu
Nakareg and Shanghai Optimus.
5 Qualification
5.1 This Legal Opinion is limited to the laws of PRC in force at the date
hereof in respect of the matters in article 1.2 above, and we express no
opinion on any other matter.
5.2 We express no opinion as to any laws, rules and regulations other than
the laws ofPRC.
5.3 We have not made any investigations of; nor do we express or imply
any opinion as to any law, rule and regulation of any other jurisdiction
and we have assumed that there is nothing in any other law that affects
this Legal Opinion.
6 Governing Law
This Legal Opinion is governed by and shall be construed in accordance with
the laws ofPRC.
7 Confidentiality and reliance
This Legal Opinion is given for the sole benefit of the Company, PM
Securities Sdn Bhd and Christina Chia Law Chambers for the purpose set out
in article 1.2 above. It may not be relied on by or distributed to any other
person, nor may it be relied on in any other context, nor is it to be quoted or
made public in any way without our prior written consent except extracted for
disclosure in the prospectus in a manner previously consented by us or
pursuant to a demand by a competent regulatory authority in Malaysia in
connection with the Proposed Listing.
Yours faithfully
For and on behalf of
Messrs Martin Bu & Partners
142
4
This section sets our summaries of certain aspects ofPRC laws and regulations which
are relevant to the PRC Companies' operations and business.
If you intend to have a detailed review of the relevant laws and regulations of
PRe, or a detailed explanation on the comparability and/or discrepancy of the
relevant laws and regulations between PRC and Malaysia, you are recommended
to seek independent legal advice from the relevant experts.
1. FOREIGN EXCHANGE CONTROL
Major reforms have been introduced on the foreign exchange control system of
the PRC since 1993. The People's Bank of China ("PBOC"), with the
authorization of the State Council, issued on 20 June 1996 the Provisional
Regulations on the Settlement, Sale and Payment of Foreign Exchange ...
which came into effect on 1 July1994. On 29 January
1996, the State Council promulgated the PRC Foreign Exchange Administration
Regulations which took effect on 1 April 1996
and was revised on 14 January 1997 and 5 August 2008. On 20 June 1996, the
PBOC issued the Administration Regulations on the Settlement, Sale and
Payment of Foreign Exchange ... which took effect
on 1 July 1996. On 25 October 1998, the PBOC and the State Administration for
Foreign Exchange ("SAFE") issued a Joint Announcement on Abolishment of
Foreign Exchange Swap Business which stated that from 1 December 1998, all
foreign exchange transactions for foreign-invested enterprises may only be
conducted through authorized banks.
These regulations contain detailed provisions regulating the holding, sale and
purchase of foreign exchange by individuals, enterprises, economic bodies and.
social organizations in the PRC.
On 21 July 2005, the Public Announcement of the PBOC on Reforming the
RMB Exchange Rate Regime ("the Announcement") (iGtfA
fljIJa1f!:lf**1r0-e-) was promulgated by PBOC. Under the Announcement,
the previous dual exchange rate system for RMB was abolished and a unified
floating exchange rate system based largely on supply and demand with
reference to a basket of currencies, giving more flexibility as compared with the
former system in which the RMB was pegged to the US dollar, was introduced.
The PBOC having regard to the trading prices between RMB and major foreign
currencies on the inter-bank foreign exchange market publishes on each bank
business day the RMB exchange rates against major foreign currencies.
In accordance with the PRC Foreign Exchange Administration Regulations (CP
promulgated on 5 August 2008, all organization
and individuals, including foreign invested enterprises ("PIEs"), within the PRC
can remit their foreign exchange earnings back to the PRC or deposit them
abroad. The terms and conditions for such remittance/deposit are prescribed by
5
143
9. LEGAL OPINION (Conrd)
the SAFE or its delegated authorities in accordance with the PRC's international
balance of payments and foreign exchange management needs. In relation to
PRC enterprises, their foreign exchange earnings under current account can be
retained or exchanged through financial institutions that have foreign exchange
settlement, sale and payment operations. Before retaining the foreign exchange
income under capital account or selling it to any designated financial institution,
the approval of the SAFE or its delegated authorities shall be obtained, unless it
is otherwise provided by the state.
At present, control on the purchase of foreign exchange is being relaxed.
Enterprises which require foreign exchange for their current activities such as
trading activities and payment of staff remuneration may purchase foreign
exchange from designated banks, subject to the production ofrelevant supporting
documents without the need for any prior approvals ofthe SAFE.
In addition, where an enterprise requires any foreign exchange fur the payment
of dividends that are payable in foreign currencies under applicable regulations,
such as the distribution of profits by a FIE to its foreign investment party, then,
subject to the due payment oftax on such dividends, the amount required may be
withdrawn from funds in foreign exchange accounts maintained with designated
banks, and where the amount ofthe funds in foreign exchange is insufficient, the
enterprise may purchase additional foreign exchange from designated banks
upon the presentation ofthe resolutions of the directors on the profit distribution
plan ofthat enterprise.
Despite the relaxation of foreign exchange control over current account
transaction, the approval ofthe foreign exchange administration authority is still
required before a PRC enterprise may borrow a loan in foreign currency or
provide any foreign exchange guarantee or make any investment outside of the
PRC or to enter into any other capital account transaction involving the purchase
of foreign exchange.
When conducting actual foreign exchange transactions, the designated banks
may, based on the exchange rate published by the PBOC and subject to certain
limits, freely determine the applicable exchange rate.
2. TAXATION
(a) Income tax on FlEs
There was no standardized enterprise income tax law which applied to all forms
of enterprises in the PRC before the NPC promulgated the PRC Corporate
Income Tax Law on 16 March 2007 which became effective on I January 2008.
The former applicable income tax laws, regulations, notices and decisions
(collectively referred to as "Old Foreign Enterprises Tax Law") related to FIEs
and their investors before 1 January 2008 were as follows:
6
144
i Company No. 918382-T ,
(1 )Income Tax Law of the PRC on FIEs and Foreign Enterprises adopted by the
NPC on 9 April 1991 ;
(2)Implementing Rules of the Income Tax Law of the PRC on FIEs and Foreign
Enterprises promulgated by the State Council, which came into effect on I
July 1991;
(3)Notice Relating to Taxes Applicable to FIEs/ Foreign Enterprises and Foreign
Nationals in Relation to Dividends and Gains obtained from Holding and
Transferring of Shares promulgated by State Tax Bureau on 21 July 1993;
(4)Notice on Some Policy Questions Concerning Individual Income Tax issued
by Ministry of Finance and the State Tax Bureau on 13 May 1994;
(5)Notice on Relevant Policies Concerning the Reduction of Income Tax on
Interest and Other Income of Foreign Enterprises Derived from Sources in
China issued by the S t a t ~ Council, which came into effect on I January 2000;
(6)The third amendments to the Income Tax Law Applicable to Individuals ofthe
PRC promulgated by Standing Committee ofNPC on 27 October 2005.
According to the Old Foreign Enterprises Tax Law, FIEs (including Sino-foreign
equity joint ventures, Sino-foreign co-operative joint ventures and wholly foreign
owned enterprises established in the territory of PRC) are required to pay a
national income tax at a rate of 30% oftheir taxable income and a local income
tax at a rate of3% oftheir taxable income.
A FIE engaged in production having a period of operation of not less than ten
years shall enjoy the tax preferential tax treatment of a two-year tax exemption,
followed by a three-year 50% reduced tax rate.
FIE established in special economic zones, foreign enterprises having an
establishment in special economic zones engaged in production or business
operations and FIE engaged in production in economic and technological
development zones may pay income tax at a reduced rate of 15%. FIE engaged
in production established in coastal economic open zones or in the old urban
districts of cities where the special economic zones or the economic and
technological development zones are located may pay income taxes at a reduced
rate of 24%. A reduced income tax rate of 15% may apply to an enterprise
located in such regions which is engaged in energy, communication, harbour,
wharf or other projects encouraged by the State.
On 16 March 2007, the NPC promulgated the new Corporate Income Tax Law
which became effective on 1 January 2008. On 28 November 2007, the
Implementing Regulations of the Corporate Income Tax Law was promulgated
by the State Council and became effective on 1 January 2008.
7
145
mpanyNo.918382-T
According to the Corporate Income Tax Law and its implementing regulations, a
standardized corporate income tax is applied to all PRC resident enterprises
(including FIEs) and the tax rate is 25%, which means the aforesaid tax
preferential treatment on the FIEs in accordance with the Old Foreign
Enterprises Tax Law is terminated.
On 26 December 2007, the State Council promulgated Notice on the
Implementation of Corporate Income Tax Transitional Preferential Policy (::kT
According to this Policy, with effect
from 1 January 2008, enterprises established before 16 March 2007 and which
enjoy the preferential tax treatment of a two-year tax exemption, followed by a
three-year 50% reduced tax rate or a five-year tax exemption, followed by a
five-year 50% reduced tax rate, will continue to enjoy such preferential tax
treatment until the expiry of the aforesaid respective periods. In addition, the
previous 15% preferential tax rate enjoyed by certain enterprises will gradually
be increased from this current preferential tax rate to the unified 25% tax rate
within five years commencing from 1 January 2008. Enterprises which
previously enjoy the 24% preferential tax rate will be imposed with the unified
25% tax rate with effect from 1 January 2008. Further, the tax preferential
treatments applicable to enterprises within the designated western region in the
PRC will continue to be in force. However, regarding those enterprises that have
not enjoyed the aforesaid preferential policy due to them not being profit-making,
the preferential period shall commence from I January 2008.
(b) Value added tax
The Provisional Regulation ofthe People's Republic of China Concerning Value
Added Tax promulgated by the State Council came into effect on 1 January 1994,
which was amended on 10 November 2008. Under the Regulation and the
Implementing Rules of the Provisional Regulations of the People's Republic of
China Concerning Value Added Tax, value added tax is imposed on goods sold
in or imported into the PRC and on processing, repair and replacement services
provided within the PRC.
Value added tax payable in the PRC is charged on an aggregated basis at a rate
of 13% or 17% (depending on the type of goods involved) on the full price
collected for the goods sold or, in the case oftaxable services provided, at a rate
of 17% on the charges for the taxable services provided but excluding, in respect
of both goods and services, any amount paid in respect of value added tax
included in the price or charges, and less any deductible value added tax already
paid by the taxpayer on purchases of goods and services in the same fmancial
year.
(c) Business tax
The Provisional Regulation of the PRC Concerning Business Tax was adopted
by the State Council on 13 December 1993 and revised on 5 November 2008.
Under the Regulation and the newly amended Implementing Rules of the
8
146
Company No. 918382
9. LEGAL OPINION (Conl'd)
Provisional Regulation of the PRC Concerning Business Tax, businesses that
provide services (including entertainment businesses), assign intangible assets or
sell immovable property are liable to business tax at a rate ranging from 3% to
20% of the charges for the services provided, intangible assets assigned or
immovable property sold, as the case may be. The formula for calculation ofthe
amount oftax payable is set forth below:
Amount oftax payable = amount ofbusiness * tax rate
The amount of tax payable shall be calculated in RMB. Taxpayers that settle
their amounts of business income in foreign exchange shall convert the amounts
into RMB at the foreign exchange market rate.
(d) Withholding tax
With the effectiveness of new Corporate Income Tax Law since 1 January 2008,
dividends derived by a foreign enterprise, which has no establishment in the PRC
or has establishment but the dividends have no relationship with such
establishment, from a PRC enterprise with foreign investment shall pay income
tax at the rate of20%.
In addition, according to the Implementing Regulations of the Corporate Income
Tax Law, the aforesaid withholding tax on foreign enterprise which has no
establishment in the PRC or has establishment but the dividends have no
relationship with such establishment is reduced to 10%.
3. WHOLLY FOREIGNOWNED ENTERPRISE
Wholly foreign-owned enterprises are governed by the Law of the People's
Republic of China Concerning Enterprises with Sole Foreign Investments which
was promulgated on 12 April 1986 and was revised on 31 October 2000, and its
Implementing Regulations promulgated on 12 December 1990 and amended on
12 April 2001 (together the "WFOE Law").
(a) Procedures for establishment of a wholly foreign-owned enterprise
The establishment ofa wholly foreign-owned enterprise will have to be approved
by Ministry of Commerce ("MOC") (or its delegated authorities). If two or more
foreign investors jointly apply for the establishment of a wholly foreign-owned
enterprise, a copy of the contract between the parties must also be submitted to
MOC (or its delegated authorities) for its record. A wholly foreign-owned
enterprise must also obtain a business license from State Administration for
Industry and Commerce ("SAIC") before it can commence business.
(b) Nature
A wholly foreign-owned enterprise IS a limited liability company under the
9
147
WFOE Law. It is a legal person which may independently assume civil
obligations, enjoy civil rights and has the right to own, use and dispose of
property. It is required to have a registered capital contributed by the foreign
investor(s). The liability of the foreign investor(s) is limited to the amount of
registered capital subscribed. A foreign investor may make its contributions by
installments and the registered capital must be contributed within the period as
approved by MOC (or its delegated authorities) in accordance with relevant
regulations.
(c) Profit distribution
The WFOE Law provides that after payment of taxes, a wholly foreign-owned
enterprise must make contributions to a reserve fund and an employee bonus and
welfare fund. The allocation rate for the employee bonus and welfare fund may
be detennined by the enterprise. However, at least 10% of the after-tax profits
must be allocated to the reserve fund. If the cumulative amount of allocated
funds reaches 50% ofan enterprise's registered capital, the enterprise will not be
required to make any additional contnbution. The enterprise is prohibited from
distributing dividends unless the losses (if any) of previous years have been
made up. The reserve fund can be used for expanding the capital base of the
company by way of capitalization. The employee bonus and welfare fund can
only be used for the collective benefit and facilities of the employees of the
wholly foreign-owned enterprise.
(d) Repatriation of capital
Foreign investors are not allowed to repatriate the capital of foreign investment
enterprises out of PRC during the duration of their operations unless the
repatriation of the capital has been duly approved by the MOC (or its delegated
authorities) under the registered capital change or liquidation situations. The
repatriation of the capital is further subject to the approval of the SAFE (or its
delegated authorities).
(e) Remittance ofprofit
After payment oftax on dividends, loss ofprevious years (if any), reserve fund in
accordance with Chinese laws and regulations and employee bonus and welfare
funds in accordance with the decision of a WFOE, the foreign investor may remit
abroad lawful profits earned from the WFOE. Dividends not distributed in
previous years may be distributed together with those of the current year.
Moreover, remittance of profits by a WFOE needs to be verified by a bank
licensed to conduct foreign exchange business.
10
148
10. INFORMATION ON OUR PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS,
KEY MANAGEMENT AND KEY TECHNICAL PERSONNEL
10.1 Promoters. and substantial shareholders
10.1.1 Promoters and substantial shareholders' shareholding
As at 26 September 2011, our Promoters and substantial shareholders and their respective
shareholdings in our Company before and after our IPO are as follows:
After our IPO
Dh.... Ind;red
Before our IPO
Direct Indirect
No. of I No. of
j
No. of No. of
Name Designation Nationality Shares %
12.4(2) ,
Shares Sbares % Shares %
17.0(2)
45.8 23,627,900
Meng (/)
87,415,000 62.9 23,627,900 87,415,000 HauMWl Group Malaysian
Managing
Director
16,718,000 Hong Chin Executive Malaysian 16,718,000 12.0 8.8 - - "
Chye (/)
Director
62.9(3) 45.8(3)
23,627,900 LeongYeok Shareholder Malaysian 23,627,900 17.0 87,415,000 12.4 187,415,000
Fang (1)
NOles:
(1) Promoters and substantial shareholders;
(2) Deemed interested by virtue a/his spouse, Leong Yeok Fang's shareholding in the Com parry; and
(3) Deemed interested by virtue a/her spouse, Hau Mun Meng's shareholding in the Com parry.
Save as disclosed above, our Company is not aware of any other persons who directly or
indirectly, jointly or severally, have control over our Company.
10.1.2 Background information on our Promoters and substantial shareholders
A brief background of our Promoters and substantial shareholders is set out below:
(i) Hau Mun Meng, a Malaysian aged 46, is a Promoter and the Group Managing Director
of Nakareg Holdings Group. His profile is disclosed in Section 10.2.1 of this
Prospectus;
(ii) Hong Chin Chye, a Malaysian aged 47, is a Promoter and the Executive Director of
Nakareg Holdings Group. His profile is disclosed in Section 10.2.1 of this Prospectus;
and
(iii) Leong Yeok Fang, aged 39, is a Promoter and the substantial shareholder ofNakareg
Holdings Group. She is the spouse of Hau Mun Meng and is a housewife. She is not
involved in the day-to-day operations ofour Group.
THE REST OF TillS PAGE IS INTENTIONALLY LEFT BLANK
149
------------ -------------
10. INFORMATION ON OUR PROMOTERS, SUBSTANTIAL SHAREHOLDERS, DIRECTORS, KEY MANAGEMENT AND KEY TECHNICAL
PERSONNEL (Cont'd)
10.1.3 Changes in Promoters' and substantial shareholders' shareholdings in our Company
The changes in Promoters' and substantial shareholders' shareholdings in our Company since the date of incorporation (being 15 October 2010) up to 26
September 2011 are as follow:
Promoters I
Substantial
Shareholders
As at the date ofincorporation
(beinlt 15 October 2010)
Direct Indirect
No. of No. of
ordinary ordinary
shares of shares of
RMl.OO RM1.00
each % each %
After the Acquisitions by
Nakareg Holdinlts and Share Split
Direct Indirect
No. of No. of
Shares % Shares %
Before our IPO
Direct Indirect
No. of No. of
Shares % Shares %
After our IPO
Direct Indirect
No. of No. of
Shares % Shares %
HauMun
Meng
1 50.0 - -
87,415,000 62.9 23,627,900 17.0 (I) 87,415,000 62.9 23,627,900 17.0 (!) 87,415,000 45.8 23,627,900
12.4 (I)
Hong Chin
Chye
I 50.0 - - 16,718,000 12.0
- -
16,718,000 12.0
- - 16,718,000 8.8
- -
LeongYeok
Fang
- - - - 23,627,900 17.0 87,415,000 62.9(.!) 23,627,900 17.0 87,415,000
62.9(2)
23,627,900 12.4 87,415,000
45.8 (2)
Notes:
(1) Deemed interested by virtue ofhis spouse, Leong Yeok Fang's shareholding in the Company; and
(2) Deemed interested by virtue ofher spouse, Hau Mun Meng's shareholding in the Company.
150
KEY MANAGEMENT AND KEY TECHNICAL PERSONNEL (Conrd)
10.2 Board of Directors
10.2.1 Profiles
The profiles of the Directors of our Company are set out below:
Hau Mun Meng, aged 46, is a Promoter and the Group Managing Director of Nakareg
Holdings Group. He obtained his Bachelor of Engineering degree in Mechanical Engineering
from Universiti Teknologi Malaysia in 1987. Upon his graduation, he started his career as a
Quality Engineer with Texas Instruments Malaysia in 1988. Between January and October
1989, he was a Project Engineer (Section Head) with Tan Chong Motor Assembly Sdn Bhd. He
subsequently joined Nemic-Lambda Malaysia Sdn Bhd in November 1989 and was a Senior
Engineer (Section Head) when he left the company in 1993. Between 1994 and 2000, he
founded ESE Technology Sdn Bhd, a company involved in trading which he subsequently
divested and Synersis Automation Sdn Bhd, a company involved in moulding (which is
currently in liquidation). He was also the Managing Director of Rollwell Packaging Sdn Bhd, a
company that was involved in manufacturing vacuum forming trays for the packaging industry
at that time. Rollwell Packaging Sdn Bhd changed its name to NKG Technology in 2006.
Subsequently in 1999, he acquired Nakareg with Mr Hong Chin Chye via Art Lab Sdn Bhd
(formerly known as Continental Power Sdn Bhd). He is currently our Group Managing Director,
where he is responsible for overseeing our Group's overall operations. He is also a Director of
our subsidiaries, namely Nakareg, Nakareg International, NKG Technology, Shanghai Optimus,
Nakareg Kunshan and Changshu Nakareg. He is also a director and shareholder of Art Lab Sdn
Bhd (formerly known as Continental Power Sdn Bhd), a company that is currently dormant.
Hong Chin Chye, aged 47, is a Promoter and the Executive Director of Nakareg Holdings
Group. He obtained his Diploma in Mechanical Engineering majoring in Marine from Universiti
Teknologi Malaysia in 1986. He began his career with Rohm-Wako Electronics (Malaysia) Sdn
Bhd in 1988. He held the position of Section Head when he left the company in 1994. He
joined Bando Electronic (M) Sdn Bhd as a Manager in 1994, where he was responsible for
managing the company's manufacturing operations. Subsequently he acquired Nakareg in 1999
with Mr Hau Mun Meng Art Lab Sdn Bhd (formerly known as Continental Power Sdn Bhd). He
is the Executive Director and is responsible of running our Group's operations. He is also the
Chief Operating Officer of our subsidiaries, namely Nakareg International, NKG Technology,
Shanghai Optimus, Nakareg Kunshan and Changshu Nakareg.
Kazutaka Misawa, a Japanese national aged 66, is a Non-Independent Non-Executive Director
of Nakareg Holdings Group. He obtained his Bachelor of Economics degree from Tokyo
Metropolitan University, Japan in 1968. He began his career as a Purchasing Officer with Aiwa
Co. Ltd in 1968. Between August and December 1975, he served as a Procurement Officer at
the Hong Kong representative office of Aiwa Atlas Electronics (S) Pte Ltd in 1975. He served
as a Procurement Manager with Aiwa Atlas Electronics (S) Pte Ltd from December 1975 to
December 1981. He was a Procurement Manager with Aiwa Co., Ltd between December 1981
and April 1987. Between April 1987 and October 1991, he was the General Manager
Procurement ofAiwa Electronics (S) Pte Ltd. He was then posted as the Director Procurement
of Aiwa Electronics (M) Sdn Bhd between October 1991 and January 1998, before being posted
to PT Aiwa Indonesia as the Senior Vice President Director of Procurement between January
1998 and April 2000. He then returned to Aiwa Electronics (M) Sdn Bhd, where he was the
Deputy Managing Director between April 2000 and August 2001. He then joined Tamura
Electronics (M) Sdn Bhd, where he was the General Manager Procurement between August
2001 and September 2006.
151
KEY MANAGEMENT AND KEY TECHNICAL PERSONNEL (Conf'dj
Teh Kok Lim, aged 48, is the Independent Non-Executive Chairman of Nakareg Holdings
Group. He obtained his Bachelor of Engineering degree in Mechanical Engineering from
Universiti Teknologi Malaysia in 1987. In 1987, he was admitted as a Graduate Member by the
Institute of Engineers Malaysia, and was registered by the Board of Engineers Malaysia. He
began his career with Hicom Yamaha Manufacturing Malaysia Sdn Bhd, where he worked
between October 1987 and March 1994. He held the positions of Engineering Assistant
Manager, Engineering Manager, Production Manager and Plant Manager. He joined Carnaud
MetalBox BevCan Malaysia Sdn Bhd, where he was the Plant Manager between April 1994 and
February 1998. In March 1998 he joined KJM Aluminium Can Sdn Bhd as the General
Manager, a position he currently holds.
In June 2005, he was appointed as the Division General Manager ofKJM Aluminium Can Sdn
Bhd, Kian Joo Packaging Sdn Bhd, Metal-Pak (M) Sdn Bhd, and Kian Joo Canpack Sdn Bhd.
He is currently a Director ofKJM Aluminium Can Sdn Bhd and Kian Joo Packaging Sdn Bhd.
Cbu Kheb Wee, aged 41, is an Independent Non-Executive Director of Nakareg Holdings
Group. He attended the Locke Academy, Malaysia and obtained his LCCI International
Qualification in 1990. He was admitted as an Associate of The Chartered Institute of
Management Accountants in 1996, and as a Registered Accountant by the Malaysian Institute of
Accountants in 1999. He started his career as an Assistant Accountant in 1993. In 1996, he
joined Golden Plus Builders Sdn Bhd as a Finance Manager. He then joined Chase Perdana
Berhad in 1999, where he was the Group Finance Manager. He joined Worthy Builders Sdn
Bhd as the Senior Finance Manager in 2000. He then joined Oilcorp Berhad as Senior Manager
- Corporate Finance in 2002. Between 2007 and 2008, he was the Chief Financial Officer of
D'Tiara Corp Limited (a subsidiary ofOilcorp Berhad), where he was responsible for managing
the company's financial matters, including corporate evaluation, fund raising, statutory
compliance, public listing and corporate affairs. He left Oilcorp Berhad at the end of2008. He is
currently a Director of Tracklink Resources Sdn Bhd, Gilauan Mercu Sdn Bhd, ER Projects
Sdn Bhd and sole proprietor of Executive Prosight Resources and KW Chu Trading Services.
He is also currently an Independent Director of AsiaEP Resources Berhad (fonnerly known as
AsiaEP Berhad),
10.2.2 Directors' shareboldings in our Company
As at 26 September 2011, our Directors and their respective shareholdings in our Company
before and after our IPO are as follows:
Before our IPO After our IPO
Direct indirect Direct Indirect
No. of No. of No. of No. of
Shares Shares Shares Shares
Name Designation ('000) 0/0 ('000) % ('000) % ('000) %
HauMun Group Managing 87,415,000 62.9 23,627,900
17.0 (1)
87,415,000 45.8 23,627,900
12.4(1)
Meng Director
Hong Chin Executive Director 16,718,000 12.0
- - 16,718,000 8.8 - -
Chye
Kazutaka Non-Independent 3,079,100 2.2 - - 3,079,100 1.6
- -
Misawa Non-Executive
Director
152
KEY MANAGEMENT AND KEY TECHNICAL PERSONNEL (Cont'dj
Name
TehKok
Lim
Designation
Independent Non-
Executive Director
Before our IPO
Direct Indirect
No. of No. of
Shares Shares
('000) % ('000)
- - -
%
-
After our IPO
Direct Indirect
No. of No. of
Shares Shares
('000) % ('000)
500,000 0.26 -
%
-
ChuKheh
Wee
Independent Non-
Executive Director
- -
- -
500,000 0.26
-
-
Note:
(1) Deemed interested by virtue ofhis spouse, Leong Yeok Fang's shareholding in the Company.
10.2.3 Representative of corporate shareholders
None of OUI Directors represent any corporate shareholders.
10.2.4 Other principal directorships and principal business activities
The following table sets out OUI Directors' other principal directorships in other corporations for
the past five (5) years up to the LPD and other principal business activities perfonned outside OUI
Group.
Name Company Principal activity Position
HauMunMeng Art Lab Sdn Hhd (formerly
known as Continental Power
SdnBhd)
(Company No. 220830-K)
Synersis Manufacturing (M)
Sdn Bhd (striking oft)
(Company No. 487625-X)
General trader and sub
contractor
Moulding
Director and
shareholder
Shareholder
Kazutaka Christine Resort Berhad Business of golf club and to Shareholder
Misawa (Company No. 19401 I-A) establish, maintain and
provide golf course and
recreational facilities
Teh KokLim KJM Aluminium Can Sdn
Bhd
(Company No. 433691-H)
Kian 100 Packaging Sdn
Bhd
(Company No. 164303-H)
Manufacture and distribution of
aluminium cans
Manufactures of beverage
cans
Director
Director
ChuKheh Wee AsiaEP Bhd (Company
No. 253387-W)
Tracklink Resources Sdn
Bhd (Company No.
666317-V)
Gilauan Mercu Sdn Bhd
(Company No. 442886-A)
ER Projects Sdn Bhd
(Company No.942559-D)
Provider ofE-Commerce
solution and E-Marketplace
developer
Dormant
Investment holding
Trading, energy saving
solutions
Independent
Director
Director
Director
Director and
Shareholder
153
KEY MANAGEMENT AND KEY TECHNICAL PERSONNEL (Cont'd)
Executive Prosight Business and corporate Sole proprietor
Resources (Business advisory, employment services
Registration No.
002018514-H)
K W Chu Trading Services To provide management, Sole proprietor
(Company No. accounting services and
001612520A) consulting works
As at the LPD, Hau Mun Meng and Hong Chin Chye are also directors and shareholders of
Optimus (Malaysia) Sdn Bhd (Company No.868327-W) (which is not part of the Nakareg
Holdings Group) wherein an application has been made pursuant to Section 308 of the Act on 25
June 2010 to strike-off the said company.
The involvement in other business activities outside our Group and other directorships held by our
Directors do not give rise to a conflict of interest situation with our business.
10.2.5 Directors' remuneration, fees and material benefits-in-kind
The remuneration, fees and material benefits-in-kind (including any contingent or deferred
compensation accrued for the year) paid or payable to our Directors for their services to our Group
are as follows:
Directors
Remuneration, fees and material benefits-in-kind band
FYE 31 December
2009 2010 2011
(Actual) (Actual) (proposed)
HauMunMeng
Hong Chin Chye
Kazutaka Misawa
Teh KokLim
ChuKheh Wee
1- 50,000
50,000 - 100,000
*
*
*
150,000 - 200,000
150,000 - 200,000
*
*
*
150,000 - 200,000
150,000 - 200,000
< 50,000
< 50,000
< 50,000
Note:
*
Only appointed on 26 September 2011.
The remuneration of our Directors, which includes salaries, bonuses, fees and allowances as well
as other benefits, must be considered and recommended by our Remuneration Committee and
subsequently, be approved by our Board. Any change in Directors' fees, as set out in our
Company's Articles of Association, must be approved by our shareholders pursuant to a resolution
in a general meeting where notice of any proposed increase shall be given. Please refer to Section
16.2 ofthis Prospectus for further details on our Articles ofAssociation.
154
10.2.6 Board practices
(i) Directors' term in office
As at the 26 September 2011, the details of the date of expiration of the current term of
office for each of our Directors and the period for which our Directors has served in that
office are as follows:
Date of expiration of
Date of the current term of No. of years in
Director appointment office office
HauMunMeng 15/1012010
*
< 1 year
Hong Chin Chye 15/10/2010
*
< 1 year
Kazutaka Misawa 26/912011
*
< 1 year
ChuKheh Wee 26/9/2011
*
< 1 year
TehKokLim 26/912011
'"
< 1 year
Note:
These Directors are subject to retire at the next annual general meeting of our Company pursuant to
*
Article 70 ofour Company's Articles ofAssociation.
(ii) Audit Committee
Our Audit Committee, established on 26 September 2011, was appointed by our Board
and comprises the following members:
Name Desienation
ChuKheh Wee Chairman
TehKokLim Member
Kazutaka Misawa Member
Our Audit Committee is responsible for the recommendations to our Board regarding
the selection of the external auditors, reviewing the results and scope of the audit and
other services provided by our Group's external auditors and reviews and evaluates our
Group's internal audit and control functions. Our Audit Committee is also responsible
for the assessment of fmancial risk and matters relating to related party transactions
and conflict of interests. Our Audit Committee may obtain advice from independent
parties and other professionals in the performance ofits duties.
(iii) Remuneration Committee
Our Remuneration Committee, established on 26 September 20 II, was appointed by
our Board and comprises the following members:
Name Designation
Kazutaka Misawa Chairman
HauMunMeng Member
TehKokLim Member
Our Remuneration Committee is primarily responsible for, amongst others,
recommending to our Board the policy and framework for our Directors' remuneration
including remuneration and terms of service of our Executive Directors in all its forms,
drawing from external advice, ifnecessary.
155
Com
KEY MANAGEMENT AND KEY TECHNICAL PERSONNEL (Cont'dj
The detennination of remuneration of our Executive and Non-Executive Directors shall
be a matter to be detennined by our Board as a whole after taking into consideration
our Remuneration Committee's recommendations.
(iv) Nomination Committee
Our Nomination Committee, established on 26 September 2011, was appointed by our
Board and comprises the following members:
Name Desi2nation
Teh KokLim Chainnan
ChuKhehWee Member
Kazutaka Misawa Member
Our Nomination Committee is primarily responsible for, amongst others, proposing
new nominees for our Board as well as our Directors to fill the seats on board
committees, and assessing our Directors on an ongoing basis.
In particular, our Board through our Nomination Committee would review on an
annual basis the required mix of skills and experience and other core qualities,
including core competencies, which our Non-Executive Directors should bring to our
Board.
10.3 Key management and key technical personnel
10.3.1 Profiles
The profile ofthe following key managements and key technical personnel of our Group is set
out in Section 10.2.1:
(i) Hau Mun Meng; and
(ii) Hong Chin Chye
The profiles ofother key management and key technical personnel of our Group are set out
below:
Pang Kong Chek, aged 35, is the Financial Controller of Nakareg Holdings Group. He
obtained his Bachelor's Degree in Accounting from the Royal Melbourne Institute of
Technology, Australia in 1998. In 2004, he was admitted as a Member by the Malaysian
Institute of Accountants, and CPA Australia. He began his career in 2000 as a Senior Associate
with Ernst & Young, Kuala Lumpur before joining KZen Solutions Berhad as an Accountant in
2004. He then joined Hewlett-Packard Multimedia Sdn Bhd as a Senior Financial Analyst in
2009, where he was responsible for analysing financial, revenue and margin forecasts.
Subsequently, he joined our Group in his current capacity as our Financial Controller in 2010.
He is currently responsible for overseeing the fmandal management aspects of our Group. .
How Kah Kowng, aged 41, is the General Manager of Changshu Nakareg. He obtained his
Graduate Diploma in Electrical and Electronics Engineering from Tafe College, Malaysia in
1992. He began his career as an Engineer with Hualon Corporations (M) Sdn Bhd in 1992,
before he was promoted to the position of Assistant Chief of Section (Maintenance) in 1994,
Chief of Section (Maintenance) in 1995, and Plant Manager in 1999. Between March and
November 2002, he was a Senior Engineer with Asia Spinning Co., Ltd before he left the
company in 2002 to join Golden Memory Goldsmith (Malaysia) Sdn Bhd as the General
Manager. He then joined Pillowtex Co Ltd in the United States in 2004 as a Senior Engineer,
where he was responsible for dismantling the company's entire plant and machinery in the
United States, and transporting and setting up the plant and machinery in Vietnam. He then
joined B+H (Asia) Pte Ltd in China as the Sourcing Manager in 2005. He was responsible for
managing and supervising the company's sourcing strategy with local and overseas vendors.
156
KEY MANAGEMENT AND KEY TECHNICAL PERSONNEL (Conl'd)
He joined Changshu Nakareg as the Factory Manager in 2006, where he was responsible for
initiating and developing the company's plans and objectives. He was promoted to his current
position as the General Manager of Changshu Nakareg. He is currently responsible for
overseeing the company's operations and administration. He is also a Director of Nakareg
Kunshan.
Lian Yoon Hing, aged 45, is the General Manager of Nakareg Kunshan. He obtained his
Diploma from Ungku Omar Polytechnic, Malaysia in 1987. He began his career with PNE
Electric (M) Sdn Bhd as a Product Superintendent before he left the company and joined EDA
Industries Sdn Bhd as an Operation Manager in 1992. In 1999, he joined Sanken Transformer
(M) Sdn Bhd as a Quality Manager. He subsequently joined Bando Electronics (M) Sdn Bhd as
the Deputy Factory Manager. In 2009, he joined Samsung Electronics (M) Sdn Bhd as the
Production Manager. He joined Nakareg as the Deputy General Manager in 2010, where he was
responsible for managing the manufacturing operations. He subsequently transferred to Nakareg
Kunshan as the General Manager in 2010. He is currently responsible for managing the overall
operations ofNakareg Kunshan.
Liu Shu Guang, a Chinese national aged 43, is the General Manager and Director of Shanghai
Optimus. He obtained his Bachelor's Degree in Engineering from the Shanghai University of
Engineering Science, China in 1991. He began his career as a Research and Development
Assistant Engineer and Manufacturing Assistant Engineer in 1991. Subsequently he then joined
Shanghai Nemic-Lambda Electronics Co., Ltd as a Production Supervisor and Quality
Assurance Engineer in 1994 before he left the company and joined Shanghai Optimus as an
Assistant Quality Assurance Manager in 1998. He was promoted to the position of Quality
Assurance Manager later that same year. He was then promoted to the position of Assistant
Factory Manager in January 2000, and Factory Manager in May 2000. In 2005, he was
promoted to the position of Assistant General Manager. He was promoted to his current position
as the General Manager of Shanghai Optimus in 2006, where he is responsible for managing the
company's overall operations.
10.3.2 Key management and key technical personnel's sbareboldings in our Company
The shareholdings of our key management and key technical personnel in our Company before
and after our IPO are as follows:
Name
Pang Kong Chek
Designation
Financial
Controller
Nationality
Malaysian
Before our IPO
Direct Indirect
No. of No. of
Shares % Shares %
4,080,000 2.9 - -
After our IPO
Direct Indirect
No. of No. of
Shares % Shares %
4,380,000 2.3
- -
How Kah Kowng General Manager Malaysian
- - - - 300,000 0.16
- -
Lian Yoon Hing General Manager Malaysian 4,080,000 2.9 - - 4,380,000 2.3 - -
Liu Shu Guang I General Manager Chinese
- - - -
300,000 0.16
-
-
157
10.3.3 Other principal directorships and principal business activities
As at the 26 September 2011, save as disclosed below, none of key management and key
technical personnel's holding directorship or are involve in any principal business activities
outside our Group.
Pang Kong Chek MClean Technologies Berhad
(Company No. 893631-1)
Investment holding Independent Non-
Executive
Director
Totalchild Excellence Sdn Bhd
(Company No. 876139-V)
Providing education and
children learning centre
Shareholder
Lian Yoon Hing Tropical Aquatic Breeders Sdn Dormant Director and
Bhd (striking oft) Shareholder
(Company No. 74304-V)
Our key management and key technical personnel are of the view that their directorships and
involvement in other business activities outside our Group do not affect their contributions to
our Group. The involvement in other business activities outside our Group and other
directorships held by our key management and key technical personnel do not give rise to a
conflict of interest situation with our businesses.
10.3.4 Management succession planning
We recognise the need to ensure continuity in our management in order to maintain our
competitive edge over our competitors. We believe that the continued success of our Group
depends, among other factors, on the support and dedication of our management personneL Our
Group has put in place human resource strategies, which include competitive compensation, fit
for-purpose recruitment and succession plan.
We are aware that the loss of any ofour key personnel could materially and adversely affect our
Group. In view thereof, our Group has made efforts to motivate and retain our staff through
performance-based incentives, and to enhance their skills and competencies by providing
training.
To this end, we engage our employees for continuous training to enable them to acquire and
eru'lance relevant skills and competencies in line with our business objectives and also as part of
our employees' career advancement programme. On-the-job training is another significant
approach of transferring knowledge from specialists to new or junior employees. Hence, the
investment in human capital increases the competency of our existing employees. In addition,
these development activities serve to groom the lower and middle management staff to
progressively assume the responsibilities of senior management.
Further, our Group's middle management team is constantly exposed to various aspects of our
Group's business activities in order to ensure that they have a full understanding of our Group's
businesses to be adequately equipped with the knowledge necessary for them to assume the
senior management position.
Notwithstanding the above, our Group has also set up operation manuals to ensure the technical
know-how of the entire process is fully documented. The operation manual will serve as a
reference guide for new recruits.
Where necessary, we will recruit capable and professional staff as part ofour management team.
Please refer to Section 103.1 of this Prospectus on the profiles and working experience of our
key management and key technical personnel.
158
10.4 Declarations from our Promoters, Directors, key management and key technical personnel
As at the LPD, none of our Promoters, Directors, key management and key technical personnel is or has
been involved in any ofthe following events (whether in or outside Malaysia):
(i) a petition under any bankruptcy or insolvency laws was filed (and not struck out) against such
person or any partnership in which he was a partner or any corporation of which he was a
director or key personnel;
(ii) disqualified from acting as a director of any corporation, or from taking part directly or
indirectly in the management of any corporation;
(iii) charged and/or convicted in a criminal proceeding or is a named subject of a pending criminal
proceeding;
(iv) any judgment was entered against such person involving a breach of any law or regulatory
requirement that relates to the securities or futures industry; or
(v) the subject of any order, judgment or ruling of any court, government or regulatory authority or
body temporarily enjoining him from engaging in any type ofbusiness practice or activity.
10.5 Family relationships and associations
As at the LPD, save for Hau Mun Meng and Leong Yeok Fang who are husband and wife, there are no
other family relationships and/or associations between/amongst our Promoters, substantial shareholders,
Directors, key management and key technical personnel.
10.6 Service agreements
As at the LPD, there are no existing or proposed service agreements between our Directors, key
management and key technical personnel with our Group.
10.7 Other matters
No amount has been paid or benefits given within the two (2) years preceding the date of this Prospectus,
Dor is it intended to be so paid or given, to our Promoters, Directors and substantial shareholders except
for the remuneration, fees and material benefits-in-kind paid and payable to our Directors as set out in
Section 10.2.5 ofthis Prospectus.
159
KEY MANAGEMENT AND KEY TECHNICAL PERSONNEL (ConPd)
10.8 Employees
The number of employees of our Group as at 31 December 2008,31 December 2009,31 December 2010
and the LPD are as follows:
10.8.1 Malaysian Operations
(a) Malaysian
As at31 December~
As at the
Category of employees LPD
Management and
2008 2009
2 3 4 2
professionals(J)
Technical 5 10 8 5
professionals
-Engineers - - -
2 - Quality assurance 2 6 5
-Design and 4 3 3 3
development
Clerical and 8 8 2 5
ad ministrative
Factory floor workers 49 76 89 88
- Skilled workerP) 76 75 50 25
- Semi-skilled workerP) 16 6 13
-
Unskilledworkers(4) 23 18
Total 101 111 67 85
Notes:
(1) Not including Directors;
(2) Skilled workers are factory floor workers who have been employed with our Group for two (2) or
more years;
(3) Semi-skilled workers are factory floor workers who have been employed with our Group for between
one (1) andtwo (2) years; and
(4) Unskilled workers are factory floor workers who have been employed with our Group for less than
one (1) year. .
(b) Foreign
Category of employees
As at 31 December
2008 2009 2010
As attbe
LPD
Management and
professionals(/)
- - - -
Technical
professionals
Engineers
Quality assurance
-Design and
development
-
-
-
-
-
-
-
-
-
-
-
-
1
-
1
-
160
KEY MANAGEMENT AND KEY TECHNICAL PERSONNEL (Conl'd)
As at 31 December
As at the
LPD 2008 2009 2010
Sales and marketing
Factory floor workers
Skilled workerP)
- Semiskilled workerP)
- Unskilled workeri
4
)
.
38
38
-
.
44
38
6
-
.
48
25
8
15
-
37
18
9
10
Total 38 44 48 38
I
Notes:
(l) Not including Directors;
moreyeors;
(3) Semi-skilled workers are factory floor workers who have been employed with our Group for between
one (1) and two (2) years;
(4) Unskilled workers are factory floor workers who have been employed with our Group for less than
one (l) year.
Based on the above and as at the LPD, 63.8% of our employees in Malaysia were
Malaysians and 36.2% were foreign nationals.
As at the LPD, our Group has 67 permanent employees and 38 employees are on
contractual basis in the Malaysian operations.
(c) Permanent employees
As at the LPD, the permanent employee structure and the length of our employees'
service with our Group's Malaysian operations are as follows:
Total
employees
Length of service (years)
<2 years >2 years
Management and
professionals
Technical professionals
Sales and marketing
Clerical and
administrative
2
8
-
8
49
1
4
-
3
29
1
4
-
5
20
Total 67 37 30
(d) Contractual employees
As at the LPD, our Group's Malaysian operations has 38 employees that are on a
contractual basis and they are involved mainly as machine operators.
161
mpanyNo.918382-T
10.8.2 PRC Operations
The segmentation of our Group's employees at our PRC's operations are as follows:
(a) PRC nationals
As at 31 December As at the
Category of employees LPD
Management and
2009 2010
7 6* 6 6
professionals(l)
Technical 24
professionals
17 19 22
Engineers 11 11 11 11
- Quality assurance 6 6 6 8
- 5 -Design and 2 5
development
2
Clerical and
Sales and marketing 2 -
10 12 11 12
administrative
Factory floor workers 297 274 262 244
- Skilled workerP) 130 113 91 87
- Semi-skilled workerP) 83 56 47 31
Unskilled workers{4} 105
I
124 126
Total
84
330 310 305 288
Notes:
(I) Not including Directors.
more years;
(3) Semi-skilled workers are factory floor workers who hove been employed with our Group for between
one (l) and two (2) years;
(4) Unskilled workers are factory floor workers who have been employed with our Group for less thon
one (l) year.
*Two (2) ofthe employees under the management andprofessional category are Malaysians.
Based on the above and as at the LPD, 99.3% of our employees in the PRC were Chinese
nationals and 0.7% were Malaysians.
As at the LPD, all of our employees in our Group's operations in the PRC are permanent
employees.
162
KEY MANAGEMENT AND KEY TECHNlCAL PERSONNEL (Conl'd)
(b) Permanent employees
As at the LPD, the pennanent employee structure and the length of our employees'
service with our Group's PRe operations are as follows:
Category of employees Total employees Length ofservice (years)
<2 years >2 years
Management and professionals
Technical professionals
Sales and marketing
Clerical and administrative
6
24
2
12
244
3
16
-
6
108
3
8
2
6
136
I 288 133 155
10.8.3 Segmentation of employees by subsidiaries
As at the LPD, our employees were distributed among the subsidiaries within our Group as
follows:
I Company Number of employees
as at LPD
I Nakareg Holdings -
! Nakareg 102
NKG Technology 3
Nakareg International -
Shanghai Optimus 169
Nakareg Kunshan 76
I Changshu Nakareg 43
I Total 393
None of our employees belongs to any union nor have there been any major industrial disputes in the
past.
Our Group recognises the importance of human resource as a central element of any successful
organisation and aims to build an experienced, capable and dynamic team. As part of our Group's
general human resource planning, members of our staff are required to attend in-house and external
training programmes aimed at improving efficiency, skills and technical knowledge as well as product
safety handling procedures.
For employees who are supervisors and above, external training are provided annually at various
recognised training centres to develop their skills and knowledge. Such training covers courses on
technical updates, current best practices, continuous improvement, people management, team-building
and personal development.
163
11. APPROVALS AND CONDITIONS
(.To be completed on receipt of approvals]
11.1 Approvals from the relevant authorities in Malaysia
Our Listing is an exempt transaction under Section 213 of the CMSA and is therefore not subject to the
approval ofthe SC.
The approval of the SC (Equity Compliance Unit) for the resultant equity structure of our Group was
obtained on [.].
The approval of Bursa Securities for our admission to the Official List of the ACE Market of Bursa
Securities and the listing of and quotation of our entire issued and paid-up share capital on the ACE
Market ofBursa Securities was obtained on [.].
The MIDA and MITI have via a letter dated [.] taken note and [ehave no objection to the listing of our
Company on the ACE Market of Bursa Securities. eThere were no conditions imposed by the MIDA and
MITII eThe conditions imposed by the MIDA and MITI are set out below:]
[e]
11.1.1 Conditions to the approvals and compliance thereof
The approvals from the SC (Equity Compliance Unit) and Bursa Securities were subject to,
inter-alia, the following conditions:
(i) the SC (Equity Compliance Unit)
Conditions imposed Status of compliance
l. [.] [.]
2. [.] [.]
(ii) Bursa Securities
1. [.] [.]
2. [e] [e]
(iii) MlDA and MITI
1. [.] [.]
2. [.] [.]
]64
11. APPROVALS AND CONDITIONS (Cont'dj
11.1.2 Approval, major licenses and permit obtained in Malaysia
We are currently operating under the following approvals, licences and permits:
Name of
subsidiary
Authority Reference number Date of
license
Description Details of salient conditions imposed Status of compliance
Nakareg
Nakareg
Royal Customs and
Excise Malaysia
MIDA
WI 0-0 1000215/200 1
200/9/2/144(IPC)
23/11/2005
Approval
letter dated
23112/2009
Grant to act as licensed
manufacturer as from
914/2011 at the place of
manufacturing at No.2,
lalan B15, Taman
Industri Belmas lohan,
48000 Rawang,
Selangor Darul Ehsan,
for the product "coil".
Grant of approval to
obtain IPC status under
separate accounts under
the terms and
conditions contained
therein.
Nil
1. Nakareg must be incorporated
under the Act.
2. A minimum paid-up of
RM500,000.
3. A minimum total business
spending (operating expenditure)
for IPC activities ofRMI,500,000.
4. A minimum annual sales turnover
ofRM50,OOO,000 by the third year
of operation.
5. Not more than 30% of its annual
sales turnover is derived from
sourcing of goods from outside
Malaysia to overseas destinations
via "drop shipment".
Not applicable
In compliance
In compliance
Tn compliance
To be complied
In compliance
165
11. APPROVALS AND CONDITIONS (Cont'd)
Name of
subsidiary
license
Nakareg MJDA (cont'd) 200/912/144(IPC)
-
Approval
letter dated
23112/2009
the terms and
therein.
6. Nakareg shall provide eligible
activity to its related manufacturing
company in Malaysia.
7. IPC activities shall be operated in
free industrial zones, free
commercial zones, licensed
manufacturing warehouse and
public/private bonded warehouse.
Nakareg should make a separate
application to the respective
Ministry of Finance or Royal
Malaysia Customs, for conducting
activities at the respective places.
8. Nakareg shall maintain separate
accounts for approved IPC
activities, subject always to the
prior approval ofInland Revenue
Board. Documentary evidence and
further details of the separate
account and foreign currency
account (if applicable) shall be
submitted to MJDA.
9. Nakareg shall submit its income
tax form for each year of
assessment to Inland Revenue
Board.
10. Nakareg shall submit its annual
financial statement (IPC) to MJDA
annually together with detailed
information on its goods and
structure sales (import/export,
domestic sales etc).
In compliance
In compliance
In compliance
In compliance
In compliance
166
[Company No. 918382-T II
Name of
subsidiary
license
Nakareg MIDA (cant 'd) 200/9/2/144(1PC) Approval
I etter dated
23112/2009
the terms and
therein.
II. This approval is subject to
import/export of physical goods
which have been approved based
on the proposed products to be
distributed by an IPC/RDC
proposed by Nakareg.
In compliance
12. Nakareg is to establish an IPC
within six (6) months from the date
of this approval.
In compliance
Nakareg MIDA 200/9/2/1 44(1PC) Approval Application to increase Nil Not applicable
letter dated sales output for IPC.
26/3/2010
Nakareg Royal Malaysia License No JIO-G6 License/ Manufacturing and I. The license holder has to submit a In compliance
Customs 2006-00000451 certi fi cate warehousing (Licensed monthly statement in Malay on or
dated manufacturing before 28th of the following month
Certificate No JI 0 2711/2011 warehouse being the to the Custom Office's Industrial
GPB-0019/2011 warehouse licensed
under Section 65/65A
Customs Act 1967 to
conduct manufacturing
and warehousing
activities for export
oriented products)
Department. The Statements have
to be certified by the accountant of
the company and to contain the
following information:
1.1 The excess of each type of
raw materials/components in
storage at the beginning of the
month.
In compliance
The total each type of raw materials/
components issued in the particular
month and its CIF's price.
In compliance
167
Name of
subsidiary
license
Description Details ofsalient conditions imposed Status of compliance
Nakareg Royal Malaysia
Customs (cont'd)
License No JIO-G6
2006-00000451
Certificate No J1 0
GPB0019!2011
License/
certificate
dated
27/1/2011
Manufacturing and
warehousing (Licensed
manufacturing
warehouse being the
warehouse licensed
under Section 65/65A
Customs Act 1967 to
conduct manufacturing
and warehousing
oriented products)
1.2 The total of each type of
imported raw materials/
components in the particular
month for the purpose of
manufacturing.
raw materials/ components in
storage at the end of the
month.
1.4 The balance of each type of
finished products in storage at
the beginning of the month.
finished products which are
produced/ manufactured in the
particular month.
finished products sold to the
local market in the particular
month.
1.7 The total of each finished
product sold to the local
market in the particular month
(with the relevant Customs
Form No. 9's registration
number stated).
finished products in storage at
the end of the particular
month.
In compliance
In compliance
In compliance
In compliance
In compliance
In compliance
In compliance
I
168
yNo.918382
Name of Authority Reference number Date of Description Details of salient conditions imposed Status of compliance
subsidiary license
Nakareg Royal Malaysia License No Jl0-G6 License/ Manufacturing and 1.9 The total of manufacturing In compliance
Customs (cont'd) 2006-00000451 certificate warehousing (Licensed waste, residual and refuse in
dated manufacturing the particular month.
Certificate No J1 0 27/112011 warehouse being the
GPB-0019/2011 warehouse licensed 1.10 The total of manufacturing In compliance
under Section 65/65A waste, residual and refuse
Customs Act 1967 to disposed in the particular
conduct manufacturing month.
and warehousing
activities for export 2. The license holder shall submit an In compliance
oriented products) annual statement audited by
independent auditors before the 15th
of January ofthe following year to
the control station (the manufacturer
will be compounded should they
submit the annual statement after the
31 st of January). The statement
should include details of raw
material or components used,
finished products, excess stocks and
list of machinery and equipment used
in manufacturing.
3. The finished products are to be In compliance
stored separately from the raw
materials/components or residual of
manufacturing as directed by the
State Custom Director.
169
subsidiary license
Nakareg Royal Malaysia License No 11 0-G6 License/ Manufacturing and 4. The license holder has to comply In compliance
Customs (cont'd) 2006-000004SI certificate warehousing (Licensed with the condition that 80% of
dated manufacturing finished products is to be exported
Certificate No 110 27/1/2011 warehouse being the and 20% of the same shall be sold
GPB-00l9/2011 warehouse licensed to local market. Any release to local
under Section 6S/6SA market should be pledged in
Customs Act 1967 to advance prior to release and are
conduct manufacturing subjected to relevant duty/tax at the
and warehousing time.
oriented products) S. The licensed holder shall be In compliance
imposed a Bank Guarantee worth
RMIO,OOO.OO and General Bond
worth RMSO,OOO.OO to warrant the
safety of the dutyltax on the raw
material/components, finished
products stored in the Licensed
manufacturing warehouse and the
transfer of dutiable items.
Nakareg MIDA 180/38310/0397/0002 16/S/2011 Grant to act as licensed I. Act as a licensed manufacturer as at In compliance
ACI License No manufacturer as from the place of manufacturing at No.2,
AO18122 Serial No 24/8/2010 at the place lalan BIS, Taman Industri Belmas
A030799 of manufacturing at No. 10han, 48000, Rawang, Selangor
2, lalan BlS, Taman subject to the approval from the
License no. AOl8I22 Industri Belmas 10han, relevant state government and
Serial No. A030799 48000 Rawang, Department of Environment.
issued by MITI Selangor Darul Ehsan
for the products 2. Sale ofNakareg's shares have to be In compliance
"transformers" and notified to MITI and MIDA.
"adaptor".
170
Company No. 9183
Name of
subsidiary
license
Description Details of salient conditions im posed Status of compliance
Nakareg
Nakareg
MIDA
Ibu Pejabat Kastam
Diraja Malaysia
(Royal Malaysian
Customs
Headquarters)
180/38310/0397/0003
ACI, License No
AOl8154 Serial No
A030839
License No AO 18122
Serial No. A030799
issued by MITI
KE.HE(83)264/06
73(7)
13/6/2011
Approval
letter dated
I2/8/20lJ
Grant to act as licensed
manufacturer as from
24/8/2010 at the place
of manufacturing at No.
11, Jalan Tiram 2,
Taman Perindustrian
Tiram, Batu 15, Jalan
Sg Tiram, 81800 DIu
Tiram, Johor Daml
Takzim for the products
"transformer",
"inductor" and "noise
filter".
Application to renew
approved period to
conduct IPC activities.
I. Act as a licensed manufacturer as
from 24/8/2010 at the place of
manufacturing at No. 11, Jalan
Tiram 2, Taman Perindustrian
Tiram, Batu 15, Jalan Sg Tiram,
81800 DIu Tiram, Johor Darul
Takzim subject to the approval
from the relevant state government
and Department of Environment.
2. Sale ofNakareg's shares have to be
notified to MITI and MIDA.
1. To comply with IPC Approval's
conditions.
1.1 IPC approved companies to
keep records of all raw
materials/components! finished
products for IPC activities at
the company's warehouse for
inspection/ checking by the
Customs Officer at all times.
The records shall consist of:
a. Excess stocks of
materialslcomponentslfini
shed products brought
forward;
b. Total quantity of
materials/components/
finished products
accepted in (import and
local);
In compliance
In compliance
In compliance
171
Name of
subsidiary
license
Nakareg Ibu Pejabat Kastam
Diraja Malaysia
(Royal Malaysian
Customs
Headquarters)
(cant 'd)
KE.HE(83)264/06
73(7)
Approval
letter dated
12/8/2011
Application to renew
approved period to
conduct IPe activities.
c. Total quantity of
materials/components/
finished products used for
IPe activity;
d. Excess stocks of
materials! components/
finished products in
storage.
1.2 License holder to present a
monthly statement on IPe
activity on or before the 10th of
every succeeding month to the
station guard. The statements
are to be verified by the
company's accountant and
containing the following items:
a. Excess ofIPe items to be
brought forward at the
beginning of the month;
b. Total IPe items that were
repackaged, integrated
and consolidated in the
said month;
c. Total IPe items that were
exported in the said
month; and
d. Excess stocks of IPe per
items in storage at the end
of the said month.
172
~ Company No. 918382-T II
subsidiary license
Nakareg Ibu Pejabat Kastam KE.HE(83)264/06 Approval Application to renew 2. The work process is conducted as In compliance
Diraja Malaysia 73(7) letter dated approved period to per described in the approval letter;
(Royal Malaysian 12/8/2011 conduct IPC activities.
Customs 3. The list of raw materials and the In compliance
Headquarters) quantities approved and described
(cont'd) in the approval letter;
4. To present a general bond (Form
18)/ adequate bank guarantee to the In compliance
lohore State Customs Director.
Industrial branch for the safety of
the duty/tax of the said items.
Nakareg Johore Bahru Tengah MPJBT
-
Business Nil Not applicable
Municipal Council (L/I)2007/111088 Premise/Advertising
License for year 20 II
for II, Jalan Tiram 2,
Taman Perindustrian
Tiram, 81800 Ulu
Tiram,lohor
NKG Technology Royal Customs and Licence No. Approval Application to Each manufacturer is required to keep In compliance
Excise Malaysia A079000IWlO dated import/purchase the following records in respect of goods
06000081/2006 221712011 materials and acquired tax-free as materials for
11002732 components free of manufacture:
sales tax for use in
manufacture of goods (a) date of importation/purchase;
(b) quantity;
(c) quantity used in manufacture;
(d) quantity otherwise disposed of; and
(e) balance in stock.
These records should be kept in a
suitable form on a monthly acquisition
and usage basis.
173
11. APPROVALS AND CONDITIONS (Coot'd)
Name of
subsidiary
license
Description Details of salient conditions im posed Status of compliance
NKG Technology
NKG Technology
Royal Customs and
Excise Malaysia
Royal Customs and
Excise Malaysia
Licence No.
A079000/WIO
06000081/2006
11002733
Licence No.
A079000/WIO
06000081/2006
11002734
Approval
dated
22n12011
Approval
dated
221712011
Application to
import/purchase
materials and
components free of
manufacture of goods
Application to
import/purchase
materials and
components free of
Each manufacturer is required to keep
the following records in respect of goods
acquired tax-free as materials for
manufacture:
(a) date of importation/purchase;
(b) quantity;
suitable fonn on a monthly acquisition
and usage basis.
manufacture:
(b) quantity;
suitable fonn on a monthly acquisition
and usage basis.
In compliance
In compliance
174
------------------
c:;ompany No. 918382-T
Name of
subsidiary
NKG Technology
NKG Technology
Authority Reference number
Royal Customs and
Excise Malaysia
Licence No.
A079000fWIO
0600008112006
11002735
MPS 215- 1565 (PI) Selayang Municipal
Council
Date of
license
Approval
dated
2217/201 I
-
Description
Application to
import/purchase
materials and
components free of
Grant of business
license at No.2 & 6,
Jalan BJ 5, Taman
Perindustrian Belmas
Johan, 48000, Rawang.
until 31112/2011.
Details of salient conditions imposed
manufacture:
(b) quantity;
suitable form on a monthly acquisition
and usage basis.
Nil
Status of compliance
In compliance
Not applicable
175
any No. 918382-T
11.1.3 Approval, major licenses and permit obtained in Hong Kong
There is no other license, permit and/or approval required for the Company's existing business under the Hong Kong laws except the business registration certificate
which has been obtained by Nakareg International as required by the Business Registration Ordinance (Chapter 310 of the laws of Hong Kong). Nakareg
International has obtained the business registration certificate and such business registration certificate is valid and subsisting.
11.1.4 Approval, major licenses and permit obtained in the PRC
Name of subsidiary Authority Reference number Date of Description Details of salient conditions Status of compliance
license imoosed
Nakareg Kunshan Kunshan Bureau of Shang Wai Zi Su Fu 2/3/2011 Certificate of approval for

Feasibility study report of the Obtained
Commerce Zi (1999) No. establishment of Chinese entity
31518 enterprises with foreign

Article of association of the
investment in the PRC
Chinese entity

Notarization letter for the
certificate of incorporation of
the foreign investor

Office Jease agreement
Nakareg Kunshan Kunshan 320583400027252 15/3/2011 Business license Certificate of approval Obtained

Administration of

Industry and
Chinese entity
Commerce


Office lease agreement
Nakareg Kunshan Kunshan Bureau of 71150989-0 3/8/2010 Organization Code Certificate of approval Obtained

Quality and Technical Certificate

Business license
Supervision
Nakareg Kunshan State Administration 3205832008002380 4/2/1999 Foreign Exchange

Certificate of approval Obtained
of Foreign Exchange Registration Card Business license

Chinese entity

Organization code certificate
176
Company No. 9183
Name of subsidiary Authority Reference number
Nakareg Kunshan Kunshan State Tax Su Di Shui Zi
Bureau/ Kunshan 320583711509890
Local Tax Bureau
Nakareg Kunshan Kunshan Customs 3223940638
Changshu Nakareg Changshu Bureau of Shang Wai Zi Su Fu
Commerce Zi Zi (2006) 67344
Changshu Nakareg Changshu 320581400000234
Administration of
Industry and
Commerce
Changshu Nakareg Changshu Bureau of 78888165-8
Quality and Technical
Supervision
Date of
license
22/3/2011
18/5/1999
7/3/2011
15/3/2011
71712010
Description
Tax Registration
Certificate
Customs Registration
Certificate
Certificate of approval for
establishment of
enterprises with foreign
Business license
Organization Code
Certificate
Details of salient conditions
imDosed

Certificate of approval

Business license

Chinese entity



Business license

Tax registration certificate

Chinese entity


Feasibility study report of the
Chinese entity

Chinese entity




Chinese entity



Business license
Obtained
Obtained
Obtained
Obtained
Obtained
177
~ Company No. 918382-T ~
II. APPROVALS AND CONDITIONS (Conf'dj
Name of subsidiary
Changshu Nakareg
Authority
State Administration
of Foreign Exchange
Reference number
3205812000000273
Date of
license
41712006
Description
Foreign Exchange
Registration Card
Details of salient conditions
imoosed


Business license

Chinese entity

Obtained
Changshu Nakareg Changshu State Tax
Bureau/ Changshu
Local Tax Bureau
Changshu Guo Shui
Deng Zi No.
320581788881658
29/4/2007 Tax Registration
Certificate


Business license

Chinese entity


Obtained
Changshu Nakareg Changshu Customs 3214940441 18/9/2006 Customs Registration
Certificate

Business license


Chinese entity

Obtained
Shanghai Optimus Shanghai Municipal
Bureau of Commerce
Shang Wai Zi Hu
FengDuZiZi
(1996) No. 0452.
March
2011
Certificate of approval for
establishment of
enterprises with foreign

Feasibility study report of the
Chinese entity
Chinese entity
Obtained
Shanghai Optimus Shanghai
Administration of
Industry and
Commerce
310000400151193 14/3/2011 Business license

Chinese entity
Obtained
178
Name of subsidiary Authority Reference number Date of
license
Description Details of salient conditions
imoosed
Shanghai Optimus Shanghai Bureau of 60735630-2 30/6/2010 Organization Code

Certificate of approval Obtained
Quality and Technical Certificate Business license

Supervision
Shanghai Optimus State Administration 3100002006019246 19/7/1996 Foreign Exchange Certificate of approval Obtained

of Foreign Exchange Registration Card Business license

Chinese entity

Shanghai Optimus Shanghai State Tax Guo/Di Shui Hu Zi 22/3/2011 Tax Registration Certificate of approval Obtained

Bureau/ Shanghai No. Certificate

Business license
Local Tax Bureau 310226607356302

Chinese entity


Shanghai Optimus Shanghai Customs 3117940053 18/12/1996 Customs Registration Business license Obtained

Certificate


Chinese entity

179
11.2 Approvals from the relevant authorities in Hong Kong
Stevenson, Wong & Co, our legal advisers in Hong Kong have confmned that:
(i) There are no governmental or regulatory consents, approvals, authorisations or orders which are
required in Hong Kong to enable our Company to carry out or perform any ofthe matters listed
below:
(a) list on the ACE Market ofBursa Securities; and
(b) carry out the listing scheme as set out in Section 6.7 ofthis Prospectus;
(the matters referred to in (a) and (b) above shall be referred to as "Matters")
(ii) There are no registrations, filing or similar formalities required in Hong Kong in respect of the
Matters.
11.3 Approvals from the relevant authorities in the PRC
Martin Hu & Partners, our legal advisers in the PRC have confumed that:
(i) There are no governmental or regulatory consents, approvals, authorisations or orders which are
required in the PRC to enable our Company to carry out or perform any of the matters listed
below:
(a) list on the ACE Market ofBursa Securities; and
(b) carry out the listing scheme as set out in Section 6.7 ofthis Prospectus;
(the matters referred to in (a) and (b) above shall be referred to as "Matters")
(ii) There are no registrations, filing or similar formalities required in the PRC in respect of the
Matters.
11.4 Moratorium on sale of our Shares
In accordance with Rule 3.19 of the ACE Market Listing Requirements, a moratorium will be imposed on
the sale, transfer or assignment of Shares held by our Promoters as follow:
(i) The moratorium applies to the entire shareholdings of our Promoters for a period of six (6) months
from the date ofadmission ofour Company to the ACE Market of Bursa Securities;
(ii) Upon the expiry of the six (6) months period stated above, our Promoters' shareholdings
amounting to at least 45% of our nominal issued and paid-up share capital remain under
moratorium for another period ofsix (6) months; and
(iii) Thereafter, our Promoters may sell, transfer or assign up to a maximum of 1I3
rd
per annum (on a
straight-line basis) of the shares held under moratorium.
180
11. APPROVALS AND CONDITIONS (Coot'd)
Details of our Promoters, who will be subjected to moratorium, are set out below:
Subsequent
Shareholdings after our Shareholdings under shareholdings under
IPO moratorium{l} moratorium(2)
% of %of %of
enlarged enlarged enlarged
issued issued and issued
and paid- paid-up and paid-
No. of up share No. of share No. of up share
Promoters Shares capital Shares capital Shares capital
Hau Mun Meng 87,415,000 45.8 87,415,000 45.8 58,807,658 30.8
Hong Chin Chye 16,718,000 8.8 16,718,000 8.8 11,246,885 5.9
Leong Yeok Fang 23,627,900 12.4 23,627,900 12.4 15,895,458 8.3
Total 127,760,900 67.0 127,760,900 67.0 85,950,001 45.0
Notes:
(1) Moratorium ofthe entire shareholdings of our Promoters for a period ofsix (6) months from the date of
admission ofour Company to the ACE Market ofBursa Securities.
(2) After the expiry ofthe six (6) months period stated in note above, our Promoters' shareholdings amounting
to at least 45% of our nominal issued and paid-up share capital shall remain under moratorium for
another period ofsix (6) months.
The moratorium, which has been fully accepted by our Promoters, is specifically endorsed on the share
certificate representing our Promoters' shareholdings which are under moratorium to ensure that our
Company's share registrar does not register any transfer not in compliance with the restrictions imposed
by Bursa Securities.
The endorsement which will be affixed on these share certificates are as follows:
"The shares comprised herein are not capable of being sold, transferred or assigned for a period as
determined by Bursa Securities ("Moratorium Period"). Accordingly, the shares comprised herein will
not constitute good delivery pursuant to the Rules ofBursa Securities during the Moratorium Period No
share certificate or certificates will be issued to replace this certificate during the Moratorium Period
unless the same shall be endorsed with this restriction. "
In addition, Hau Mun Meng, Hong Chin Chye and Leong Yeok Fang have given their respective
undertakings that they will comply with Rule 3.19 of the ACE Market Listing Requirements pursuant to the
moratorium conditions.
181
12. CONFLICT OF INTERESTS AND RELATED PARTY TRANSACTIONS
12.1 Interests in similar business
As at the LPD, none of our Directors or substantial shareholders has any interest, whether direct or
indirect, in any businesses or corporations which are (i) carrying on a similar trade as our Group; and (ii)
customers of and/or suppliers of our Group.
12.2 Related party transactions
As at the LPD, our Group has not entered into or are involved in any other material on-going or proposed
related party transactions (including recurrent related party transactions) that involve the interests, direct
or indirect, of our Directors, substantial shareholders and/or person connected with them (as defmed in
the Listing Requirements).
12.3 Monitoring and oversight of conflict of interests and related party transactions
Our Audit Committee will review any related party transactions and conflict of interests that may arise
within our Group. Our Audit Committee will periodically review the procedures set by our Company to
monitor related party transactions to ensure that these transactions are carried out on normal commercial
terms not more favourable to the related party than those generally available to the third parties dealing at
arm's length and are not detrimental of our Company's minority shareholders. All reviews of our Audit
Committee will be reported to our Board for its further action.
We will, after our Listing, procure a mandate from our shareholders, if necessary, for all our recurrent
related party transactions of revenue or trading in nature or those necessary for our day-to-day
operations. Further, the interested persons shall abstain from voting on the resolution(s) pertaining to the
respective transactions. Furthermore, we will make disclosures in our annual report of the aggregate
value of the recurrent related party transactions entered into by us conducted based on the nature of
transactions made, names of the related parties involved and their relationship with our Group during the
financial year and in the annual reports for the subsequent financial years.
12.4 Transactions that are unusual in nature or condition
Our Group has not entered into any transactions that are unusual in nature or conditions, involving
goods, services, tangible or intangible assets, to which our Company or our subsidiary was a party in the
FYE 31 December 2008 to 31 December 2010.
12.5 Outstanding loans made to or for the benefit of related parties
There are no outstanding loans (including guarantees of any kind), made by us, or any of our parent or
subsidiary to or for the benefit of related parties during the FYE 31 December 2008 to 31 December
2010 and the subsequent fmancial period thereof, immediately preceding the date ofthis Prospectus.
12.6 Promotion of material assets acquired
As at the LPD, none of our Directors or substantial shareholders has any interest, direct or indirect, in the
promotion of, or in any material assets acquired or proposed to be acquired or disposed or proposed to be
disposed or leased to or proposed to be leased to our Group within the FYE 31 December 2008 to 31
December 2010.
182
12. CONFLICT OF INTERESTS AND RELATED PARTY TRANSACTIONS (Cont'd)
12.7 Declaration by advisers
(i) PM Securities confmns that there is no existing or potential conflict of interest in its capacity as
the Adviser, Sponsor, Underwriter and Placement Agent for the IPO.
(ii) UHY Chartered Accountants confirms that there is no existing and potential conflict of interest
in respect of its role as the Reporting Accountants and Auditors for the IPO.
(iii) Messrs Christina Chia Law Chambers confirms that there is no existing and potential conflict of
interest in respect of its role as the Due Diligence Solicitors on Nakareg Holdings, Nakareg and
NKG Technology and the legal advisers for the IPO.
(iv) Messrs Stevenson, Wong & Co confirms that there is no existing or potential conflict of interest
in respect of its role as the due diligence solicitors on Nakareg International and the legal
advisers on the laws of Hong Kong.
(v) Messrs Martin Hu & Partners confmns that there is no existing or potential conflict of interest
in respect of its role as the due diligence solicitors on Shanghai Optimus, Nakareg Kunshan and
Changshu Nakareg and the legal advisers on the laws of the PRC.
(vi) Vital Factor Consulting Sdn Bhd confmns that there is no existing imd potential conflict of
interest in respect of its role as the independent business and market research consultants for the
IPO.
183
13. FINANCIAL INFORMAnON
13.1 Historical financial information
Our proforma consolidated financial statement have been compiled based on the basis and accounting
policies consistent with those currently adopted by our Group which are set out in the notes and
assumptions included in the Reporting Accountants' Letter on Proforma Consolidated Financial
Information as set out in Section 13.7 of this Prospectus. The financial statements used in the
preparation of our Proforma Consolidated Financial Information were prepared in accordance with
approved accounting standards issued by the Malaysian Accounting Standard Board ("MASB"). Any
adjustments which were dealt with when preparing our Proforma Consolidated Financial Information
have been highlighted and disclosed in Section 14 of this Prospectus.
13.1.1 Proforma consolidated statement of comprehensive income
The following table sets out our proforma consolidated statement of comprehensive income
for each of the past three (3) FYE 31 December 2008 to 31 December 2010, which have been
prepared for illustrative purposes only based on the assumption that our current Group
structure has been in existence throughout the financial years under review.
You should read this proforma consolidated statement of comprehensive income together with
the accompanying notes and assumptions included in the Reporting Accountants' Letter on
Proforma Consolidated Financial Information and the Accountants' Report as set out in
Sections 13.7 and 14, respectively of this Prospectus.
<-----------Proforma >
FYE 31 December
2008 2009 2010
RM RM RM
Revenue 41,646,922 38,451,076 39,059,087
Cost of sales (34,379,703) (27,373,875) (30,812,661 )
GP 7,267,219 11,077,201 8,246,426
Finance costs (115,487) (86,774) (170,137)
PBT 3,825,500 8,101,208 4,811,155
Taxation (1,562,675) (1,594,020) (829,345)
Net profit for the fmancial year 2,262,825 6,507,188 3,981,810
Foreign exchange differences, 1,176,698 (288,626) (1,188,363)
representing net profit not recognised
in the proforma consolidated
statement of comprehensive income
Net profit for the financial year,
representing total comprehensive 3,439,523 6,218,562 2,793,447
income for the financial year
EBITDA 4,368,159 8,623,657 5,663,746
184
ICompany No. 9l8382-T !
13. FINANCIAL INFORMATION (Coot'd)
<---------Proforma ------->
FYE 31 December
2008 2009 2010
RM RM RM
Number of Shares in issue(J) 139,000,000 139,000,000 139,000,000
GP margin (%)(2) 17.45 28.81 21.11
PBT margin (%i) 9.19 21.07 12.32
PAT margin (%i
4
) 5.43 16.92 10.19
Gross EPS (sent) 5.23 7.97 5.93
Net EPS (seni
6
) 1.63 4.68 2.86
Diluted net EPS (sen)(7) 1.18 3.41 2.08
Notes:
(I) Number of existing Shares in issue after the Acquisitions by Nakareg Intemational, Acquisitions by Nakareg
Holdings and Share Split but before the Public Issue.
(2) The GP margin is computed by dividing the GP by the revenue earned in the respective financial years.
(3) The PBT margin is computed by dividing the PBT by the revenue earned in the respective financial years.
(4) The PAT margin is computed by dividing the PAT by the revenue earned in the respectivefinancialyears.
(5) The gross EPS is computed by dividing the PBT by 139,000,000 Shares.
(6) The net EPS is computed by dividing the PAT by 139,000,000 Shares.
(7) The diluted net EPS is computed by dividing PAT by the enlarged number ofShares after the Listing Scheme
of191,000,000 Shares.
There were no exceptional or extraordinary items throughout the fmancial period and years
under review.
The audited fmancial statements of our Company for the FPE 31 December 2010 and our
subsidiaries for the FYE 31 December 2008, FYE 31 December 2009 and FYE 31 December
2010 are not subject to any audit qualification.
185
yNo.9183
13. FINANCIAL INFORMAnON (Cont'd)
13.1.2 Proforma consolidated statement of financial position
The following table set out our proforma consolidated statement of financial position as at 31
December 2010, assuming that the Public Issue and utilisation of proceeds had been effected
as at that date, for illustrative purposes only, and should be read in conjunction with the notes
and assumptions included in the Reporting Accountant's Letter on Proforma Consolidated
Financial Information as set out in Section 13.7 ofthis Prospectus.
Non- current assets
Property, plant and equipment
Audited as at
31 December
2010
RM
(I)
After Acquisitions
by Nakareg
International,
Acquisitions by
Nakareg Holdings
and Share Split
RM
6,281,406
(IT)
After (I) and
after Public
Issue
RM
6,281,406
(III)
After (II)
and
utilisation
of proceeds
RM
[e]
Current assets
Inventories
Trade receivable and other
receivables
Tax recoverable
56,774
6,004,322
9,842,059
441,654
6,004,322
9,842,059
441,654
6,004,322
9,842,059
441,654
Total assets
2
56,776
56,776
2,786,899
19,074,934
25,356,340
Ie]
[e]
[e]
[e]
[e]
[e]
Equity
Share capital
Share premium
Merger reserve
Reserves
Total Equity
2
(4,464)
(4,462)
13,900,000
204,018
(7,455,694)
6,569,010
13,217,334
19,100,000
[e]
(7,455,694)
6,569,010
[e]
19,100,000
[e]
(7,455,694)
[e]
(e]
Non-current liabilities
Hire-purchase payables
Bank borrowings
Deferred tax liability
66,414
1,109,295
400
1,176,109
66,414
1,109,295
400
1,176,109
66,414
1,109,295
400
1,176,109
Current liabilities
Trade payable and other payables
Hire purchase payables
Bank borrowings
Tax payable
Total liabilities
Total equity and liabilities
Net (Iiabilities)/assets
61,238
61,238
61,238
56,776
(4,462)
8,947,939
859,986
965,378
189,594
10,962,897
12,139,006
25,356,340
23,356,340
8,947,939
859,986
965,378
189,594
10,962,897
12,139,006
[e]
[e]
8,947,939
859,986
965,378
189,594
10,962,897
12,139,006
[e]
(e]
Number of ordinary shares 2 139,000,000 191,000,000 191,000,000
186
13. FINANCIAL INFORMATION (Conf'd)
(I) (II) (III)
Audited as After After (I) After (II)
at 31 Acquisitions by and after and
December Nakareg Public utilisation
2010 International, Issue of proceeds
Acquisitions by
Nakareg
Holdings and
Share Split
RM RM RM RM
Net (liability)/assets attributable (223,100) 16.80 Ie] Ie]
to equity holders per ordinary
share (sen)
13.1.3 Proforma consolidated cash flow statement
The following table sets outs our profonna consolidated statement of cash flows for the FYE
31 December 2010, which have been prepared for illustrative purposes only based on the
assumption that our current Group structure has been in existence throughout the financial
years under review and should be read in conjunction with the notes and assumptions included
in the Reporting Accountants' Letter on Profonna Consolidated Financial Infonnation as set
out in Section 13.7 of this Prospectus.
RM
Cash flows from operating activities
PBT 4,811,155
Adjustment for:
Bad debts written off 189,224
Depreciation of property, plants and equipment 682,454
Deposits written off 4,580
Property, plant and equipment written off 6,712
Gain on disposal of property, plant and equipment (12,521)
Gain on disposal of other investment (8,145)
Gain on unrealised foreign exchange (116,200)
Interest expense 170,137
Interest income (20,717)
Operating profit before working capital changes 5,706,679
(Increase)/Decrease in working capital:
Inventories (2,667,901 )
Trade and other receivables (1,059,580)
Trade and other payables 4,442,088
715,417
Cash generated from operations 6,422,096
Tax paid (1,712,692)
Interest paid (170,137)
Interest received
20,717
Exchange fluctuation adjustment (988,165)
(2,850,277)
Net cash from operating activities 3,517,819
187
ICompany No. 918382-T i
13. FINANCIAL INFORMATION (Cont'd)
Cash flows from investing activities
Acquisition of property, plant and equipment
Proceeds from disposal of other investment
Proceeds from disposal of property, plant and equipment
Net cash flows arising from merger with subsidiary companies
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue ofshare
Proceeds from Public Issue
Drawdown ofterm loans
Increase in bankers' acceptance
Repayment of hire purchase payables
Payment of listing expenses
Dividend paid
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Cash and cash equivalents at end of the financial year
Cash and cash equivalents at end of the financial year comprises:
Bank overdrafts
RM
[e]
957,578
50,691
1,038,449
[e]
2
[e]
272,000
117,000
(1,176,752)
Ie]
(6,331,806)
[e]
[e]
5,147,038
[e]
[-]
(508,831)
188
13. FINANCIAL INFORMATION (Conl'dj
13.2 Management's discussion and analysis of financial condition and results of operations
The following management's discussion and analysis of our Group's past financial performance and
results of operations should be read in conjunction with the Reporting Accountants' Letter on Proforma
Consolidated Financial Information and the related notes thereon for each of the past three (3) FYE 31
December 2008 to 31 December 2010 included in Section 13.7 of this Prospectus. Our Proforma
Consolidated Financial Information has been prepared on the basis that our Group has been in existence
throughout the fmancial years under review.
This discussion and analysis contains data derived from our audited financial statements as well as
forward-looking statements that involve risks and uncertainties. The results may differ significantly
from those projected in the forward-looking statements. Factors that may cause future results to differ
significantly from those included in the forward-looking statements include, but are not limited to,
those discussed below and elsewhere in this Prospectus, particularly the risk factors as set out in
Section 5 of this Prospectus.
13.2.1 Overview of our operations
Introduction
Our business is primarily engaged in the manufacturing of electronic transformers and related
products, namely electronic noise filters, SMPS systems, and related components, namely
transformer coils and inductors. In addition, we manufacture parts and components for
electrical and electronic products, namely precision parts and components, PCBA and wire
harness as well as computer and electronics products, namely industrial server and electronic
weighing scales. Presently, most of our revenue is derived from electronic transformers and
related products which contributed to approximately 72.84% of our Group's revenue for the
FYE 31 December 2010.
Our target markets are focused on the electrical and electronic and machinery and equipment
industries. Some of our customers within the electrical and electronic industry include, among
others, manufacturers of AV products, air conditioning systems, security systems,
telecommunications equipment and IT products. Among machinery and equipment
manufacturers, some of our customers include, among others, semiconductor test equipment,
elevators and escalators.
For the FYE 31 December 2008 to FYE 31 December 2010, we have been able to sustain our
revenue in the region ofRM38.45 million to RM41.65 million and achieved PAT in the region
of RM2.26 million to RM6.51 million. We have been able to retain and maintain long term
relationships with our current customers due to our competitive advantages and key strengths
which include our manufacturing design capabilities, consistent product quality, being an
approved supplier to some of our customers, our diverse range of products and services as
well as our established track record.
We have D&D personnel to drive our continuous efforts to streamline and improve our
manufacturing and testing processes. This is aimed at building and sustaining our
competitiveness through continuous product quality improvement, increase product efficiency
and productivity to lower costs and develop new products to address new areas of growth.
Our D&D expenses for the FYE 31 December 2010 was approximately RM297,000.
189
ny No. 918382-T
(i) Revenue
Our Group derives revenue from the following business activities:
Manufacture of electronic transformers and related products;
Manufacture of electrical and electronic parts and components; and
Manufacture of computers and electronic products.
For the past three (3) FYE 31 December 2008 to 31 December 2010, our Group
recorded the following revenue levels:
41,647
45,000
38,451
39,059
-
r--
r--
Q'
Q
Q
~ 30,000
~
G>
:I
=
15,000 G>
>
G>
c::
0
FYE31 FYE31 FYE31
December December December
2008 2009 2010
Our Group's revenue declined by 7.68% from RM41.65 million to RM38.45 million
for the FYE 31 December 2008 and FYE 31 DecemlJer 2009, respectively and
subsequently improved by 1.59% to RM39.06 million for the FYE 31 December
2010.
For further information on the factors affecting the revenue of our Group, please refer
to Sections 13.2.2 and 13.2.3 of this Prospectus.
(ii) Cost of sales
The analysis of our cost of sales for the past three (3) FYE 31 December 2008 to 31
December 2010 is as follows:
FYE 31 December
2008 2009 2010
RM'OOO % RM'OOO % RM'OOO %
Materials cost 27,679 80.86 20,595 75.24 22,077 71.65
Direct labour 3,567 10.42 3,695 13.50 4,718 15.31
Production 2,982 8.72 3,084 11.26 4,018 13.04
overhead
Total 34,228 100.00 27,374 100.00 30813 100.00
190
mpanyNo.918382-T
13. FINANCIAL INFORMATION (Conf'dj
The major components of our materials cost are as follows:
FYE 31 December
2008 2009 2010
RM'OOO % RM'OOO % RM'OOO 0/0
Copper wire 6,816 24.29 4,616 21.98 4,362 17.45
Transformer 4,844 17.26 5,061 24.10 2,964 11.86
cores
Aluminium 1,382 4.92 1,656 7.88 2,372 9.49
Transformers 1,435 5.11 350 1.67 5,515 22.06
Total 14,477 51.58 11683 55.63 15.213 60.86
Materials cost
Materials cost accounted for a significant portion of our total cost of sales, having
contributed approximately 80.86%, 75.24% and 71.65% for the past three (3) FYE
31 December 2008 to 31 December 2010. Based on the above, the major
components of our materials cost are copper wire, transformer cores and
transformers. For further information on the principal materials used by our Group,
please refer to Section 7.9.1 ofthis Prospectus.
The fluctuation in our materials cost were driven, in part, by fluctuations in the price
of our raw materials, particularly copper. The graph below provides an indication of
the fluctuations in the global price of copper for the period between January 2008 and
May 2011:
160
-Global Copper Price Index
(January 2008 = 100)
140
0"
0
...
II
120
CJ:)
0
0
N
~
til
100
:J
<:
til
~
80
><
Gl
"t:l
E
Gl
60
.!:!
a.
Cii
a- 40
a
0
U
"iii
..c 20
0
(5
0
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11
(Source: Vital Factor Consulting)
Based on the above, copper prices were generally lower for the FYE 31 December
2009 and this contributed to the decrease in materials cost compared to the FYE 31
December 2008 and 31 December 2010.
191
!Company No. 91 8382-T ~
The increase in the purchases of transformers from RM350,000 to RM5.52 million
for the FYE 31 December 2009 and 31 December 2010, respectively was mainly due
to purchases from Zhangjiagang Huayang Electronic Co., Ltd for the FYE 31
December 2010, as disclosed in Section 7.15 of this Prospectus. The purchases from
Zhangjiagang Huayang Electronic Co., Ltd ofRM5.36 million accounted for 97.10%
of the total transformer purchase of our Group of RM5.52 million for the FYE 31
December 2010. The purchase oftransformers from the said supplier was to cater for
the surge in demand from a customer during a particular period in the FYE 31
December 2010. Nevertheless, we are gradually building up our capacity for our
customers' future models as reflected in our future plans, strategies and prospectus as
set out in Section 7.18 of this Prospectus.
In line with the increased purchases of transformers for the FYE 31 December 2010
to meet our customer's demand, the purchases of transformer cores decreased
correspondingly.
We are not overly dependent on any particular supplier and we believe that we are
able to source our materials from alternative suppliers. For further details on the
availability of raw materials/input and fluctuations in the prices of raw materials,
please refer to Sections 7.9 and 5.l(v), respectively.
Direct labour
Our direct labour cost comprises salaries, wages, bonus and other staff-related costs
of employees who are directly involved in manufacturing activities.
Our direct labour cost remained fairly consistent for the FYE 31 December 2008 and
31 December 2009 notwithstanding the annual increment in workers' wages and
other related costs. The increase in the proportion of direct labour cost to the cost of
sales was mainly due to the decreased materials cost.
The increase in direct labour cost for the FYE 31 December 20I0 was mainly due to
the purchase of an existing industrial server business in the PRC in May 2010 which
included all its existing employees and assets.
Production overheads
Our production overheads cost comprises mainly factory utilities charges,
depreciation of property, plant and machinery, repair and maintenance of plant
machinery, as well as packaging materials.
Our production overheads cost remained fairly consistent for the FYE 31 December
2008 and 31 December 2009. The increase in the proportion of production overheads
cost to the cost of sales was mainly due to the decreased materials cost.
The acquisition of the existing industrial server business in the PRC in May 2010
also contributed to the increased production overheads cost for the FYE 31 December
2010.
192
13. FINANCIAL INFORMAnON (Coord)
(iii) Other operating income
The analysis of our other operating income for the past three (3) FYE 31 December
2008 to 31 December 2010 is as follows:
FYE 31 December
2008 2009 2010
RM'OOO RM'OOO RM'OOO
Interest income 25 15 21
Foreign exchange gain 315 36 908
Scrap income 24 29 29
Tax incentive 35 162 162
Others 3 76 75
Total 402 318 1.195
Our other operating income comprised mainly foreign exchange gain, tax incentives
awarded by the PRC government and others (i.e., insurance claims for loss of
vehicles).
The foreign exchange gain was higher for the FYE 31 December 2010 mainly due to
the timing of purchases and payments for the purchases of transformers (i.e., from
Zhangjiagang Huayang Electronic Co., Ltd) in USD.
The tax incentives were cash incentives awarded by the PRC government to
Shanghai Optimus as it was awarded the "Excellent Company of Tax Payment
Award for 2008", "Excellent Company of Tax Payment Award for 2009" and
"Excellent Company of Tax Payment Award for 2010."
(iv) Administrative and other expenses
The administrative and other expenses for the past three (3) FYE 31 December 2008
to 31 December 2010 are as follows:
FYE 31 December
2008 2009 2010
RM'OOO % RM'OOO % RM'OOO %
Administrative 3,083 80.23 2,740 83.15 4,009 86.59
expenses
Selling and 97 2.52 164 4.98 116 2.50
distribution
expenses
Other operating 548 14.26 304 9.23 335 7.24
expenses
Finance costs 115 2.99 87 2.64 170 3.67
Total 3843 100.00 3.295 100.00 4630 100.00
Administrative expenses consist mainly of directors' remuneration, staff salaries,
employee provident funds contribution, social security costs and other staff-related
expenses.
193
nyNo.918382-T
The decrease in administrative expenses by 11.04% from RM3.08 million for the
FYE 31 December 2008 to RM2.74 million for the FYE 31 December 2009 was
mainly due to payment to a foreign R&D consultant for RM56,000 and sales
commission payout ofRM55,000.
Administrative expenses increased by 46.35% from RM2.74 million for the FYE 31
December 2009 to RM4.01 million for the FYE 31 December 2010 mainly due to
group wide increase of directors' remunerations from RM128,000 to RM346,000,
staff wages from RM1.43 million to RM1.76 million, staff welfare from RM604,000
to RM664,000 and in Shanghai Optimus, there were bad debts written off of
RM157,000. These four items amounted to approximately 73% of total
administrative expenses for the FYE 31 December 2010.
The higher selling and distribution expenses for the FYE 31 December 2009 was
mainly due to a one-off request by a customer for a specific form of packaging for
the electrical and electronic parts and components manufactured by our Group.
Other operating expenses consist mainly of depreciation of property, plant and
equipment, staff hostel electricity and water, professional fees and travelling and
accommodation charges and foreign exchange losses.
The higher other operating expenses in FYE 31 December 2008 compared to the
FYE 31 December 2009 and 31 December 2010 were mainly due to foreign
exchange losses amounting approximately RM77,OOO by Shanghai Optimus.
Our fmance costs comprised mainly interest charges on our borrowings. The
breakdown of our finance costs is as follows:
FYE 31 December
2008 2009 2010
Tenn loans S4 S4 7S
Hire purchase 21 6 S7
Bankers' acceptance 26 17 17
Bank overdraft 14 9 21
Total 115 87 170
The increase in fmance costs in the FYE 31 December 2010 is mainly due to
increased teon loan interest as a result of the acquisition of an additional factory in
Rawang, Malaysia and increased hire purchase interest from the leasing of eight (8)
units of precision machines.
194
(v) Effective tax rates
The statutory tax rates and the effective tax rates for our Group for the past three (3)
FYE 31 December 2008 to 31 December 2010 are set out as follows:
FYE 31 December
2008 2009 2010
PBT 3,826 8,101 4,811
Taxation (1,563) (1,594) (829)
PAT 2,263 6,507 3,982
Effective tax rate (%) (40.85) (19.68) (17.24)
Malaysian statutory tax rate (%) 26.0 25.0 25.0
Hong Kong statutory tax rate (%) 16.5 16.5 16.5
PRe statutory tax rate (%) 25.0 25.0 25.0
The effective tax rate for the FYE 31 December 2008 was higher than the Malaysian
statutory tax rate and the PRC statutory tax rate mainly due to the payment of
Shanghai Optimus' tax expense for the FYE 31 December 2007 which was taken-up
in the FYE 31 December 2008.
For the FYE 31 December 2009, our Group's effective tax rate was 19.68%, which
was lower than the Malaysian and PRC statutory tax rates mainly due to the tax
exemptions enjoyed by our two (2) PRC subsidiaries, namely Nakareg Kunshan
(which was exempted from tax of 50% of its taxable income) and Changshu Nakareg
(which enjoyed full tax exemption) for the year of assessment of 2009 as part of the
tax exemption for WFOE in the PRe.
No comparison was made between the effective tax rate and statutory tax rate in
Hong Kong as Nakareg International commenced operations only in 2010.
Our Group's effective tax rate for the FYE 31 December 20 I0 was 17.24% which
was lower than the Malaysian, Hong Kong and the PRC statutory tax rates mainly
due to the utilisation of tax losses and capital allowances for Nakareg, Changshu
Nakareg being exempted from tax of 50% of its taxable income arising from its status
as a WFOE and there were no provisions for taxes made for Nakareg International as
Nakareg International did not generate any assessable profits in Hong Kong for the
said financial year.
Please refer to Section 13.2.4 (iv) of the Prospectus on the Enterprise Income Tax (as
defined therein) applicable to both Nakareg Kunshan and Changshu Nakareg arising
from their status as WFOEs.
195
!Company No. 918382-T !
13.2.2 Segmental analysis
The following is a segmental analysis by subsidiary companies, geographical segments and
products and services for the past three (3) FYE 31 December 2008 to 31 December 2010
based on the assumption that our current Group structure has been in existence throughout the
financial years under review.
(i) Analysis of revenue by subsidiary companies
FYE 31 December
2008 2009 2010
RM'OOO % RM'OOO % RM'OOO
0/0
Nakareg International 36,019 86.49 33,570 87.30 25,157 64.41
Group
Nakareg 4,714 11.32 4,182 10.88 12,975 33.22
NKG Technology 914 2.19 699 1.82 927 2.37
Total 41.647 100.00 38.451 100.00 39059 100.00
(ii) Analysis of GP and GP margin by subsidiary companies
FYE 31 December
2008 2009 2010
0/0
GP
Nakareg International 6,802 93.60 9,889 89.27 3,413 41.39
Group
Nakareg 149 2.05 1,011 9.13 4,641 56.28
NKG Technology 316 4.35 177 1.60 192 2.33
Total 7.267 100.00 11077 100.00 8246 100.00
FYE 31 December
2008 2009 2010
Overall GP margin 17.45% 28.81% 21.11%
Nakareg International 18.89% 29.46% 13.57%
Group
Nakareg 3.16% 24.17% 35.77%
NKG Technology 34.55% 25.36% 20.76%
For the past three (3) FYE 31 December 2008 to 31 December 2010, Nakareg
International Group was the major revenue and GP contributor to our Group.
However, since Nakareg was granted the IPC status in December 2009, part of the
sales that were originally carried out through Nakareg International Group were
instead passed on to Nakareg. For example, there was an internal realignment of one
of our major customers' operations in 2010 wherein purchases that were previously
made from the PRC were made from Malaysia instead. The IPC status enabled and
facilitated the trade between our Group and the said customer whereby both parties
were able to mutually benefit via increased costs savings and better tax management.
This resulted in an increase in the revenue and profits of our Malaysian subsidiaries
and a corresponding decline in the revenue and profits of Nakareg International
Group. The increase in our revenue from other countries for the FYE 31 December
2010 was mainly due to the commencement of our industrial server business wherein
the industrial server sales were mainly to the Republic of China (Taiwan).
196
II Company No. 918382-T ~
Moving forward, with the IPC status, the revenue and profit contributions from our
Malaysian operations are expected to increase as we intend to centralise our Group's
international procurement activities in Malaysia in order to achieve cost savings in
terms of logistic arrangements and bulk purchases.
The GP and GP margin for our PRC operations were also higher compared our
Malaysian operations due to the nature of products manufactured. Based on the
principal activities set out in Section 6.3 of this Prospectus, our Malaysian operations
(via Nakareg and Nakareg Technology) are mainly involved in the manufacturing of
electronic transformers and related components while our PRC operations (via
Shanghai Optimus, Nakareg Kunshan and Changshu Nakareg) are more diversified
and the higher revenue contribution from the electrical and electronic parts and
components as well as the computers and electronic products yielded higher margins.
For further details on analysis of GP and GP margin by products and services, please
refer to Section 13.2.2 (v) of this Prospectus.
(iii) Analysis of revenue by geographical location
FYE 31 December
2008 2009 2010
0/0
PRe 32,664 78.43 27,494 71.50 16,434 42.07
Malaysia 5,277 12.67 7,589 19.74 18,461 47.26
Others 3,706 8.90 3,368 8.76 4,164 10.66
Total 41647 100.00 38451 100.00 39059 100.00
Our operations in the PRC also supply to a larger customer base comprising both
domestic (i.e., in the PRC) and overseas customers as compared to our operations in
Malaysia which focus mainly on supporting Malaysian customers.
The higher revenue derived from Malaysia for the FYE 31 December 2010 was
mainly due to the internal realignment of one of our major customers' operations in
2010 wherein purchases that were previously made from the PRC were made from
Malaysia instead.
197
o.918382-T
13. FINANCIAL INFORMATION (Conl'd)
(iv) Analysis of revenue by products and services
Tvnes of nroducts
Electronic transformers
and related products
Electronic noise filters
components
SMPS systems
2008
RM'OOO
38,602
35,423
2,631
548
-
0/0
92.69
85.06
6.32
1.31
-
FYE 31 December
2009
RM'OOO
0/0
32,604 84.79
30,294 78.79
1,874 4.87
436 1.13
- -
2010
RM'OOO
28,451
23,724
2,865
1,691
171
0/0
72.84
60.74
7.33
4.33
0.44
Electrical and electronic
parts and components
Precision parts and
components
PCBA and wire harness
2,322
2,076
246
5.57
4.98
0.59
3,519
2,865
654
9.15
7.45
1.70
5,754
4,723
1,031
14.73
12.09
2.64
Computers and
electronic products
Industrial server
Electronic weighing scales
723
-
723
1.74
-
1.74
2,328
-
2,328
6.06
-
6.06
4,855
4,230
625
12.43
10.83
1.60
Total 41647 100.00 38.451 100.00 39059 100.00
(v) Analysis of GP and GP margin by products and services
GP
Electronic transformers and
related products
2008
RM'OOO
6,743
0/0
92.79
FYE 31 December
2009
RM'OOO
0/0
9,143 82.54
2010
RM'OOO
5,214
%
63.23
452 6.22 1,748 17.78 2,154 26.13
Computers and electronic
products
Total
72
7.267
0.99
100.00
186
11 030
1.68
100.00
877
8246
10.64
100.00
GP margin
Electronic transformers and
related products
17.47% 28.04% 18.33%
19.46% 49.67% 37.43%
Computers and electronic
products
9.96% 7.99% 18.06%
198
Electronic transformers and related products
Based on the revenue and GP analysis above, the majority of our revenue and GP
were derived from electronics transformers and related products. Our Group has
been involved in the business of manufacturing electronic transformers for more than
a decade while our Group's involvement in the manufacturing of precision parts and
components and industrial server only commenced in 2007 and 20 10, respectively.
Revenue contribution from electronic transformers and related products was on a
decreasing trend i.e., by 15.54% from RM38.60 million to RM32.60 million for the
FYE 31 December 2008 to 31 December 2009 and by 12.73% from RM32.60 million
to RM28.45 million for the FYE 31 December 2009 to 31 December 2010. As such,
the GP contribution from electronic transformers and related products decreased
correspondingly.
The said decrease in revenue and GP from electronic transformer was partly due to
the global fmancial crisis which affected demand as well as the product life cycle for
our customers' products. This would be reflected in our sales to customers wherein
sales would be lower at the initial stages of a product's life cycle, peak and then
taper-off at the end of the product's life cycle. For example, please refer to Section
7.14 of this Prospectus wherein there were fluctuations in the revenues from Wuxi
TDK-Lambda Electronics Co., Ltd and Yamaha Electronics (Suzhou) Ltd while the
length of relationships with these major customers in the FYE 31 December 2010
were 15 and 8 years, respectively.
Electrical and electronic parts and components and computers and electronic
products
Although revenue and GP contributions electronic transformers decreased, there were
increases in revenue from electronic transformer components and PCBA and wire
harness for the FYE 31 December 2010. The said increases were mainly due to
higher orders received by Nakareg Kunshan. Correspondingly, the GP from
electrical and electronic parts and components increased accordingly.
The revenue contribution from electronic scales was much higher for the FYE 31
December 2009 due to a one-off big order received by Shanghai Optirnus.
Nevertheless, it is our intention to grow our electronic scale business.
Notwithstanding that the Group is relatively new in the business of manufacturing of
precision parts and components and industrial server, both of these business
segments increased their contribution in terms of revenue and profits to the Group for
the past three (3) FYE 31 December 2008 to 31 December 2010. For the precision
parts and components business, the Group recorded a revenue growth of 37.98%
from RM2.08 million to RM2.87 million for the FYE 31 December 2008 to 31
December 2009 and 64.46% from RM2.87 million to RM4.72 million for the FYE 31
December 2009 to 31 December 2010. For the industrial server business (which
commenced in the FYE 31 December 2010), the Group recorded a revenue of
RM4.23 million which contributed 10.83% of the Group's revenue for the said
financial year.
199
ompany No. 918382-T II
It is our Group's intention to grow our electrical and electronic parts and components
and computers and electronic products businesses as reflected in our future plans set
out in Section 7.18.1 of this Prospectus. Furthermore, the GP margin for the
electrical and electronic parts and components for the past three (3) FYE 31
December 2008 to 31 December 2010 were much higher compared to the GP margin
for electronic transformers and related products while the GP margin for computers
and electronic products for the FYE 31 December 2009 to 31 December 2010 was on
an upward trend.
As such, these businesses are expected to play an important role in diversifying the
Group's future sources of revenue.
13.2.3 Commentary on our performance
Revenue
Our Group's revenue of approximately RM41.65 million was mainly generated from the
electronic transformers and related products business which contributed 92.69% of revenue.
Within this segment, sales of transformers represented 85.06% of the revenue whereby the
remaining were contributed from the sales of adaptors, magnetic coils and noise filter
assembly. The electrical and electronic parts and components business contributing 5.57% of
revenue comprised the sales of precision parts and components, PCBA and wire harness. The
computers and electronic products business comprised the sales of electronic weighing scales.
Our PRC subsidiaries contributed 86.76% of our Group's revenue as more transformers
orders were fulfilled as a result of higher orders from Yamaha Electronics (Suzhou) Ltd and
Wuxi TDK-Lambda Electronics Co., Ltd. Our Malaysia subsidiaries contributed to the
remaining 13.24% of the Group's revenue and were mainly derived from the manufacture of
encapsulated electronic linear power transformers and adaptors.
GP and GP margin
Our Group recorded a GP of approximately RM7.27 million, representing an overall GP
margin of 17.45%. Our PRC operations contributed 95.16% ofGP as a result of additional
orders received for the current products portfolio. Our overall GP margin was lower as it was
affected by the lower GP margin of our Malaysian subsidiaries mainly due to higher cost of
sales. Cost of sales was higher due to higher average purchase price of copper wire due to the
generally higher price of copper during the fmancia1 year.
PBT and PBT margin
The PBT for the FYE 31 December 2008 was approximately RM3.83 million representing a
PBT margin of9.19%.
Revenue
Despite the economic downturn which affected the global economy and including the
electronics industry, our Group achieved revenue of approximately RM38.45 million for the
FYE 31 December 2009, representing a decrease of 7.68% from the revenue of approximately
RM41.65 million recorded for the FYE 31 December 2008 with our PRC subsidiaries
contributing 88.19% of our Group's revenue. Revenue contribution from our Malaysian
subsidiaries reduced to 11.81 % of our Group's revenue.
200
Company No. 9183
13. FINANCIAL INFORMATION (Cont'dj
electronic transformers and related products business which contributed 84.79% of our
Group's revenue. Within this segment, sales of electronic transformers represented 78.79% of
our Group's revenue. The impact of lower sales of electronic transformers and related
products was cushioned by the growth of our electrical and electronic parts and components
(by 51.75% from RM2.32 million to RM3.52 million for the FYE 31 December 2008 to 31
December 2009) as well as computers and electronic products (by 222.27% from RM723,000
to RM2.33 million for the FYE 31 December 2008 to 31 December 2009). The said increases
were mainly from improved revenue contribution from Changshu Nakareg for the revenue
contribution for precision parts and components (amounting to 7.45% of our Group's revenue)
as well as the revenue contribution from Shanghai Optimus for a one-off order for electronic
scales (amounting to 6.06% of our Group's revenue).
Furthermore, the economic stimulus package implemented by the PRC government in 2009
had benefited our customers via increased public spending. This in tum partly contributed to
sustaining our revenue as our PRC subsidiaries were able to maintain the orders received from
the customers for our existing products.
GP and GP margin
Our Group recorded a GP of approximately RMI1.08 million, representing an increase of
52.41% in comparison to the GP of approximately RM7.27 million for the FYE 31 December
2008 despite the decreased revenue. The overall GP margin of 28.81 % for the FYE 31
December 2009 was a significant increase compared to the overall GP margin of 17.45% for
the FYE 31 December 2008 which was mainly attributable to generally lower materials cost.
Furthermore, our Group's efforts in increasing the sources of supply from the PRC and in
tum, our ability to negotiate better terms for bulk purchases also contributed to the cost
savings as we were able to make more favourable procurement decisions.
In addition, the economic stimulus package introduced by the PRC government had benefited
our PRC subsidiaries in terms of higher demand for certain high margin electronic transformer
products for industrial applications as reflected in the GP margin for electronic transformer
and related products. The revenue from Changshu Nakareg from precision parts and
components also contributed to the improved overall GP margin.
PBT and PBT margin
In line with the increase in GP, our Group recorded a PBT of approximately RM8.10 million
for the FYE 31 December 2009, representing an increase of 111.49% compared to the PBT of
approximately RM3.83 million in the FYE 31 December 2008.
Revenue
Our Group's revenue grew marginally to RM39.06 million or 1.59% for the FYE 31
December 2010 compared to RM38.45 million for the FYE 31 December 2009. The decrease
in revenue from our PRC subsidiaries was off-set by the increase in revenue from our
Malaysian subsidiaries.
201
The decrease in revenue from our PRC subsidiaries was mainly due to certain transfonner
models manufactured for Yamaha Electronics (Suzhou) Ltd that commenced at the end of
2007 approaching the tail-end of the product life cycle in the FYE 31 December 2010. This is
reflected in the fluctuations in revenue from the said customer set out in Section 7.14 of this
Prospectus. The increase in revenue from our Malaysian subsidiaries was mainly due to the
internal realignment of one of our major customers' operations wherein purchases that were
previously made from the PRC were made from Malaysia instead.
electronic transfonners and related products which contributed 72.84% of our Group's
revenue. Within this segment, sales of electronic transfonners represented 60.74% of the
revenue. Although electronic transfonners remain an important contributor to our Group's
revenue, our Group has made efforts to diversify our product range by increasing the revenue
contributions from precision parts and components, PCBA and wire harness and industrial
server that contributed 12.09%, 2.64% and 10.83% respectively of our Group's revenue for
the FYE 31 December 2010. Moving forward, this would also increase the product range and
in turn our potential customer base.
GP and GP margin
Our Group recorded a GP of approximately RM8.25 million for the FYE 31 December 2010,
representing a decrease of 25.54% in comparison to the GP of RM11.08 million for the FYE
31 December 2009. The overall GP margin of 21.11 % for the FYE 31 December 2010
represents a decrease in comparison to the overall GP margin of 28.81 % for the FYE 31
December 2009. The decrease was mainly attributable to the increase in the global market
price for copper. Further, direct labour cost (by 27.57% from RM3.70 million to RM4.72
million for the FYE 31 December 2009 to 31 December 2010) and production overheads cost
(by 30.52% from RM3.08 million to RM4.02 million for the FYE 31 December 2009 to 31
December 2010) also increased.
In the said financial year, our Group undertook measures to diversify the revenue of our PRC
subsidiaries by engaging/commencing in industrial server manufacturing.
Our overall GP margin for the FYE 31 December 2010 was impacted as a result of high initial
investments in tenns of factory leasing, machineries and low economies of scale as the said
financial year was the "start-up period" of our new business activities (Le., industrial server
business, SMPS and PCBA manufacturing lines and other related set-up costs). In view of the
additional investments made by our PRC subsidiaries, this resulted in higher depreciation,
rental and other production overheads cost thus affecting our GP for the said financial year.
PBT and PBT margin
In line with the lower GP, our Group registered a PBT of RM4.81 million for the FYE 31
December 2010, representing a decrease of 40.62% compared to the PBT of RM8.l 0 million
for the FYE 31 December 2009.
202
13. FINANCIAL INFORMATION (eonl'd)
13.2.4 Significant factors and trends affecting our results and future operations
The main factors that affected the results of our operations historically are expected to
continue affecting the results of our operations going forward. Furthermore, various other
external factors that are not within the control of the management of our Group
("Management") which includes the economic and fmancial conditions in the countries
where we operate could also affect our Group's performance.
(i) Availability of labour
The availability of production labour in Malaysia as well as during the Chinese New
Year period in the PRC may affect our ability to expand our operations. As we
compete with other companies to retain our employees and to employ new
employees, we expect salaries to increase and this may impact our profits moving
forward.
To mitigate the increasing cost of labour, we are in the process of streamlining our
production processes by increasing the level of automation and improving the design
of our assembly line, so as to optimise the use of manual labour and achieve a higher
efficiency per worker. We have also engaged human resource agencies in both
Malaysia and the PRC to source for manpower for our operations.
(ii) Supply of raw materials and fluctuation in the prices of raw materials
The increase in the cost of raw materials will to a certain extent affect the
profitability of our Group. As such, we endeavour to source for raw materials at the
lowest cost possible, and establish long-term relationships with reliable suppliers that
can provide a consistent supply of quality raw materials. Nevertheless, raw materials
such as copper wire and transformer cores among others, are subject to fluctuations
in prices, driven by market volatility, market supply and demand conditions and
government regulations. Given that copper is a major component of our raw
materials, fluctuations in the prices of copper will to a certain extent affect our GP
margin as experienced previously by our Group.
In general, the increase in the cost of raw materials can be passed on to our
customers. Please refer to Section 5.1(v) of this Prospectus for further details.
(iii) Enterprise Income Tax (as defined below)
Nakareg Kunshan, being a WFOE, is exempted from the state enterprise income tax
("Enterprise Income Tax"), for a period of two (2) years from its first profit making
year, or, from 1 January 2005 if no profit has been made till such date when the
Enterprise Income Tax law came into effect, and is further subject to the Enterprise
Income Tax at a 50% reduction for the next three (3) years subsequently.
For FYE 31 December 2008 and 31 December 2009, Nakareg Kunshan was
subjected to the Enterprise Income Tax at a preferential rate of 12.5%. Commencing
the FYE 31 December 2010, Nakareg Kunshan is paying full taxation at 25%.
203
yNo.918382-T I
13. FINANCIAL INFORMAnON (Conl'd)
Changshu Nakareg, being another WFOE, is exempted from the Enterprise Income
Tax, for a period of two (2) years from its first (lSI) profit making year, or, from 1
January 2008 if no profit has been made till such date when the Enterprise Income
Tax law came into effect, and is further subject to the Enterprise Income Tax at a
50% reduction for the next three (3) years subsequently. Since Changshu Nakareg
has not made any profits prior to 1 January 2008, Changshu Nakareg is therefore
exempted from the Enterprise Income Tax for the FYE 31 December 2008 and 31
December 2009 and will be subjected to the Enterprise Income Tax at a preferential
rate of 12.5% in the FYE 31 December 2010,31 December 2011 and 31 December
2012. Commencing from the FYE 31 December 2013, Changshu Nakareg shall be
subject to the full taxation at 25%.
(iv) Foreign exchange
Our functional and reporting currency is RM. Our revenues and costs are primarily
denominated in USD and RMB. As a result, we are exposed to foreign currency risk.
We maintain several foreign currency accounts (predominantly USD denominated
accounts) in the countries where we operate (namely Malaysia and the PRC) with our
fmancial institutions to facilitate the deposits of our revenue denominated in USD as
well as to pay some of our purchases denominated in USD. This provides some form
of natural hedge against foreign exchange fluctuations.
In addition, the risk of foreign currency exchange fluctuations is, to certain extent,
mitigated by the managed float mechanism adopted by BNM on the RM against the
USD conversion rate since the de-pegging of the RM. This may prevent extreme
fluctuation ofthe RM against USD.
Please refer to Section 5.1(iii) of this Prospectus for further details on the foreign
exchange risk fluctuations.
(v) Dependence on certain customers
For the FYE 31 December 2010, our top four (4) customers, namely Wuxi TDK
Lambda Electronics Co., Ltd, TDK Lambda (M) Sdn Bhd, Disk Precision Industries
(M) Sdn Bhd and Yamaha (Suzhou) Ltd contributed 20.2%, 16.7%, 11.6% and
10.6% of our Group's total revenue respectively, as disclosed in Section 7.14 of this
Prospectus. As such, we may be considered to be fairly dependent on these
customers.
13.2.5 Exceptional and extraordinary items
There were no other exceptional items including acquisition of assets and/or disposals other
than in the ordinary course ofbusiness for the fmancial years under review.
13.2.6 Impact of foreign exchange! interest rate! commodity prices on operating profit
Save as disclosed below, there is no material impact of foreign exchange, interest rate and
commodity prices on our historical profits for the financial years under review.
204
yNo.918382-T
(i) Foreign exchange
Our Group is exposed to foreign currency risks as our sales and purchases are
denominated in USD and RMB due to our operations in the PRC and that our
customers consist substantially of MNCs. Any future significant fluctuation in the
exchange rate may have a material impact on our Group's financial performance.
Please refer to Section 5.1(iii) of this Prospectus for further details on the foreign
exchange risk fluctuations.
(ii) Interest rate
Our borrowings comprise bank overdrafts, bankers' acceptance, hire purchase
facilities and term loans. Other than hire purchase, any fluctuations of interest rates
in future will result in us incurring higher finance costs. Our Group does not hedge
interest rate risk as the exposure is not material.
(iii) Commodity prices
Given that copper wire and transformer cores are major components of our raw
materials, fluctuations in the prices of copper would to a certain extent affect our GP
margin. In general, the cost of raw materials can be passed through to our customers.
Nonetheless, in the event that the prices of raw materials increase significantly, we
may absorb part of the price increase to remain competitive.
13.2.7 Impact of inflation
There has been no material impact of inflation on our historical profits for the fmancial years
under review.
13.2.8 Government! economic! fiscal! monetary policies
Risks relating to government, economic, fiscal or monetary policies, which may materially
affect our operations, are set out in Section 5 of this Prospectus. Save for the risks disclosed
in Section 5 of this Prospectus, there is no government, economic, fiscal or monetary policies
or factors that would have a material impact on our profitability and financial position.
205
Company No. 9183
13. FlNANCIAL INFORMATION (Con/'d)
13.3 Capitalisation and indebtedness
<-------------------.-------- Proforma ---------------------------->
Cash and cash equivalents
Indebtedness
Long Term (Due after twelve (12) months)
(interest bearing)
Term loans
Hire Purchase payables
Short Term (Due within twelve (12)
months) (interest bearing)
Bank Overdrafts
Bankers' acceptance
Term loans
Hire Purchase payables
Total indebtedness
Capitalisation
Total shareholders' equity
Total capitalisation
Total capitalisation and indebtedness
Audited as at 31
December 2010
2
1,109
860
509
299
158
66
3,001
13,217
13,217
16,218
After
Acquisitions of
Nakareg
International,
Acquisitions of After Public
Nakareg Issue and
Holdings and utilisation of
Share Split proceeds
RM'OOO RM'OOO
2,787 [e]
1,109 1,109
860 860
509 509
299 299
158 158
66 66
3,001 3,001
13,217
13,217 13,217
13,217
16,218
16,218 1,109
The contingent liabilities of our Group are set out in Section 13.4.7 of this Prospectus.
13.4 Liquidity and capital resources
13.4.1 Working capital
Our Group has been financing our operations through cash generated from our operations and
external sources of funds. Our Group's external sources of funds comprise mainly shareholders'
equity, loans from related parties and bank borrowings.
As at 31 December 2010, our Group' s material sources of unutilised liquidity comprises cash and
cash equivalents of approximately RM2.28 million. Further details of our borrowings are set out
below in Section 13.3.3 of this Prospectus.
206
13. FINANCIAL INFORMAnON (Coot'd)
Our Directors are of the opinion that, after taking into account our consolidated cashflow
position, banking facilities available and the net proceeds from the Public Issue, our Group
will have adequate working capital for the period of twelve (12) months from the date of this
Prospectus.
13.4.2 Proforma consolidated statement of cash flows
A summary of our Group's proforma consolidated statement of cash flows for the FYE 31
December 2010 based on the proforma consolidated statement of cash flows as set out in
Section 13.7 of this Prospectus (without taking into account the Public Issue, the intended
utilisation ofthe IPO proceeds and payment of the listing expenses) is as follows:
FYE
31 December 2010
RM'OOO
Net cash generated from operating activities 3,572
Net cash generated from investing activities 803
Net cash used in financing activities (7,244)
Net decrease in cash and cash equivalents (2,869)
Cash and cash equivalents at beginning of the year 5,147
Cash and cash equivalents at end of the year 2,278
To the best of our Director's knowledge and subject to the risk factors as set out in Section 5
ofthis Prospectus and the applicable policies on foreign investments and repatriation of profits
as set out in Section 9 of this Prospectus, there is currently no legal, fmancial or economic
restriction on the ability or requirements to obtain any approvals for our subsidiary companies
to transfer funds to us in the form of cash dividends, loans or advances.
Net cashflow from operating activities
The cash flow from operating activities was mainly due to our operating profit before working
capital changes amounting to RM5.71 million but is offset by increases in inventories and
trade and other receivables that amounted to cash outflow of RM2.67 million and RM1.06
million, respectively. Nevertheless, there was a cash inflow from increase in amount due to
trade and other payables ofRM4.44 million.
Net cashflow from investing activities
The net cash inflow of approximately RMO.80 million from investing activities was mainly
due to net cash inflows arising from merger with subsidiary companies ofRM1.04 million and
disposal of other investment of RMO.96 million but was offset by an outflow from the
purchase of property, plant and equipment amounting to RMl.24 million.
Net cashflow used in financing activities
For the FYE 31 December 2010, the net cash outflow of approximately RM7.24 million for
financing activities was mainly due to dividend payment ofRM6.33 million and repayment of
borrowings (comprising hire purchase payables and term loans) amounted to RM1.30 million.
207
13.4.3 BorrOWings
As at 31 December 2010, the total outstanding borrowings of our proforma Group, comprising
outstanding bank overdrafts, bills payable, hire purchase facilities and term loans amount to
RM3.0 million. The details of our borrowings, all of which are denominated in RMB and
RM, are set out as follows:
Amount Amount
RMB'OOO RM'OOO
Long term (due after twelve (12) months) (interest bearing)
Term loans - 1,109
- PRC 1,758 822
-
Malaysia - 38
Short term (due within twelve (12) months) (interest bearing)
Bank overdrafts - 509
Bankers' acceptance - 299
Term loans - 157
Hire purchase payables - 66
Total interest-bearing borrowings 1,758 3,000
Amount owing to a shareholder 700 327
Amount owing to a Director
- PRC 35 16
- Malaysia - 1,357
Total non interest-bearing borrowings 735 1,700
Total 2,493 4,700
Gearing ratio of our Group as at 31 December 2010 - 0.36
Gearing ratio after the IPa - [e]
Our Group has not defaulted on payments of either interest and/or principal sums in respect of
any borrowings throughout the fmancial years under review and the intervening period
immediately preceding the date of this Prospectus.
As at the LPD, our Company and subsidiary companies are not in breach of any terms and
conditions or covenants associated with any credit arrangement or bank loan, which can
materially affect our fmancial position and the results or business operations or the
investments by holders of securities in our Company.
13.4.4 Treasury policies and objectives
We have been financing our operations from cash generated internally from our operations
and through external sources of funds as described in Section 13.3.3 of this Prospectus.
We have short term and long term borrowing facilities that are available to our Group. The
interest rate for our borrowings is based on the base lending rate prevailing at the dates of the
respective transactions as well as the base lending rate plus a margin agreed upon by our
bankers when those respective loans were granted.
208
We conduct our operations mainly in denominations of USD, RM and RMB. As set out in
Section 5.1 (iii) of this Prospectus, our Group is exposed to foreign exchange fluctuation risks.
Our Management constantly monitors our Group's foreign currency exposure and reviews our
Group's hedging needs. We maintain several foreign currency accounts (predominantly USD
denominated accounts) in the countries where we operate (namely Malaysia and the PRC)
with our fmancial institutions to facilitate the deposits of our revenue denominated in USD as
well as to pay some of our purchases denominated in USD. This provides some form of
natural hedge against foreign exchange fluctuations.
13.4.5 Material commitment
As at the LPD, save as disclosed below, our Group has not incurred or known to have incurred
any material commitment for capital expenditure that may have a material and adverse impact
on our financial position:
Amount Amount
RMB'OOO RM'OOO
Non-cancellable operating lease
Future minimum rental payable
Within 1 year 1,077 503
More than 1year and not later than 5 years 1,329 621
2,406 1,124
13.4.6 Material litigation
As at the LPD, we are not engaged in any material litigation or arbitration, either as plaintiff
or defendant, which has or might have material effects on our business and fmancial position,
and our Directors do not know of any proceeding pending and threatened, and or any fact
likely to give rise to any proceeding which might materially and adversely affect our business
and fmancial position.
13.4.7 Contingent liabilities
As at the LPD, our Directors are not aware of any contingent liabilities which, upon becoming
enforceable might materially and adversely affect our business and fmancial position.
13.4.8 Key financial ratios
The table below sets out the key financial ratios of our Group for the past three (3) FYE 31
December 2008 to 31 December 2010 that have been prepared for illustrative purposes only
based on our proforma fmancial statement:
FYE 31 December
2008 2009 2010
(months) (months) (months)
Trade receivables turnover period 2.30 2.40 2.27
Trade payables turnover period 2.14 2.34 1.79
Inventory turnover period 0.93 1.38 1.82
209
Company No. 918382
Notes:
Average trade receivables
Trade receivables turnover period = .r 12 months
Sales
Average trade payables
Trade payables turnover period = .r 12 months
Purchases
Average inventories
Inventory turnover period = .r 12 months
Cost ofgoods sold
Trade receivables turnover period
Our Group generally grants credit terms ranging from 30 to 90 days (or 1 to 3 months) to our
customers. Other credit terms are assessed and approved are on a case-by-case basis. Our
Group's trade receivables turnover has been relatively consistent within the range of between
2.27 months to 2.4 months.
Trade payable turnover period
Our Group generally receives credit terms ranging from 30 to 90 days (or I to 3 months) from
our suppliers. Our Group's trade payable turnover has been relatively consistent within the
range of 1.79 to 2.34 months.
Inventory turnover period
Our inventory levels for the past three (3) FYE 31 December 2008 to 31 December 20 10
under review were RM2.96 million, RM3.34 million and RM6.0 million respectively. The
inventory turnover period was 0.93 months, 1.38 months and 1.82 months, respectively. For
the FYE 31 December 2010, we recorded the highest inventory turnover period as compared
to the rest of the fmancial years under review. This was mainly attributable to the high
inventories level of transformers and precision parts held by our Group towards the end of
FYE 31 December 20 I0 to cater for the anticipated increase in demand in the following
financial year.
Trade receivables ageing analysis
An ageing analysis of our trade receivables of our Group as at 31 December 20 lOis set out as
follows:
Within credit terms Exceeding credit terms
0-30 31-60 61-90 91-120 > 120 Total
days days days days days
RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO
Trade receivables 3,049 2,561 894 985 288 7,777
Less: Provision for
- - - - (155) (155)
doubtful debts
Net trade receivables 3,049 2,561 894 985 133 7,622
Subsequent receipts up to (3,049) (2,524) (894) (977) (121) (7,565)
the LPD
Balance as at the LPD
- 37 - 8 12 57
% of subsequent receipts
100.00 98.56 100.00 99.19 90.98 99.25
to net trade receivables
210
Our Group's normal credit terms given to our trade receivables range from 30 days to 90 days
(or 1 to 3 months). Other credit terms are assessed and approved on a case-by-case basis after
taking into consideration, inter-alia, the background and credit-worthiness of the customers,
payment history of the customers and our relationships with our customers. As at 31
December 2010, about 83.63% of our trade receivables amounting to approximately RM6.50
million are within the credit terms given. The remaining balance of approximately RM 1.27
million of the trade debts have exceeded the credit terms given. Based on our management
records of subsequent receipts up to the LPD, approximately RM7.57 million has been
collected. There is no further provision for doubtful debts necessary and our management
believes that the remaining amount is collectible after taking into consideration the stable
relationships between our Group and our customers.
Trade payables ageing analysis
An ageing analysis of the trade payables of our Group as at 31 December 2010 is set out as
follows:
Within credit terms Exceeding credit terms
0-30 days 31-60 61-90 91-120 > 120 Total
days days days days
RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO RM'OOO
Trade payables 2,331 1,394 274 88 92 4,179
Subsequent payments (2,327) (1,393) (254) (77) (14) (4,065)
up to the LPD
Balance as at the LPD 4 I 20 11 78 114
% of subsequent
payments to net trade 99.83 99.93 94.07 87.50 15.22 97.27
payables
The normal credit terms granted to us by our trade suppliers range from 30 days to 90 days (or
1 to 3 months).
As at 31 December 2010, 95.69% of our trade payables, amounting to approximately RM3.99
million, were within credit period given. The remaining balance of approximately
RM180,OOO exceeded our suppliers' credit period. Based on our management records of
subsequent payments up to the LPD, 50.56% of the amount owing to our suppliers that had
exceeded the credit period had been paid. The remaining outstanding balance of RM89,000
equivalent to 49.44% owing to our suppliers that had exceeded the credit period has not been
settled pending satisfactory delivery of products from our suppliers.
13.5 Trend analysis
Based on the forecast orders received from our customers for the FYE 31 December 2010 prepared at
the end of 2010, most of our major customers had maintained their forecast orders. As a result, in
anticipation of further increases in sales volume, our Group intends to expand its capacity in the
manner set out in Section 7.18.1 of this Prospectus.
Due to the nature of our business, we do not maintain an order book as we generate our revenues as and
when we manufacture our products pursuant to the purchase orders received.
211
No. 91 8382-T
Based on the above, our Board is of the opinion that:
(i) Our Group's revenue is expected to remain sustainable in line with the forecast orders from
our major customers;
(ii) Our liquidity is expected to improve further subsequent to our Public Issue given the
additional funds that will be raised for our Group to carry out our future plans as stated in
Section 7.18.1 of this Prospectus; and
(iii) Our capital resources are expected to be strengthened, taking into account an amount of
RM[.] from the IPO proceeds to be utilised for capital expenditure, as well as our internally
generated funds. We may consider debt funding for our capital expansion should the need
arises.
In addition to the above and barring any unforeseen circumstances, our Board is not aware of any
circumstances which would result in a significant decline in our revenue and GP margins or known
factors that are likely to have a material impact on our liquidity, revenue or profitlloss.
As at the LPD, our Group's conditions and operations have not been and are not expected to be affected
by any of the following:
known trends, demands, commitments, events or uncertainties that have had or that we
reasonably expect to have, a material favourable or unfavourable impact on our Group's
fmancial performance, position and operations other than those disclosed in this section,
Sections 5, 7 and 8 of this Prospectus;
material commitment for capital expenditure, as set out in Section 13.4.5 of this Prospectus;
unusual, infrequent events or transactions or any significant economic changes that have
resulted in a material impact on our Group's revenue and/or profits, save for those that have
been disclosed in this section, Sections 5, 7 and 8 of this prospectus;
known trends, demands, commitments, events or uncertainties that have had or that we
reasonably to expect to have, a material favourable or unfavourable impact on our Group's
liquidity and capital resources, other than those disclosed in this section, Sections 5, 7 and 8 of
this Prospectus; and
known trends, demands, commitments, events or uncertainties that are reasonably likely to
make our Group's historical fmancial statements not indicative of the future fmancial
performance and position other than those disclosed in this section and in Section 5, 7 and 8 of
this Prospectus.
Our Board is optimistic about the future prospects of our Group after taking into account our Group's
competitive advantages and key strengths as set out in Section 7.1.3 of this Prospectus and our Group's
commitment to implement our future plans and strategies as set out in Section 7.18 ofthis Prospectus.
212
13.6 Dividend policy
It is our Directors' policy to recommend dividend to allow our shareholders to participate in the profits
of our Group. However, our ability to declare dividends or make other distributions to our
shareholders in the future years is subject to various factors such as having profits and excess funds,
which are not required to be retained to fund our business.
Our Directors will consider the following factors that they currently intend to apply when
recommending dividends for approval by our shareholders or when declaring any interim dividends:
(i) the level of cash and level of indebtedness;
(ii) required and expected interest expense, cash flows, our profits, return on equity and retained
earnings;
(iii) our expected results of operations and future level of operations; and
(iv) our projected levels of capital expenditure and other investment plans.
The payment and amount of any dividends or distributions to our shareholders will be at the discretion
of our Directors and will depend on factors stated above. There can be no assurance as to whether the
dividend distribution will occur as intended, the amount of dividend payment or timing of such
payment.
THE REST OF TillS PAGE IS INTENTIONALLY LEFT BLANK
213
!CornpanyNo. 918382-T II
13.7 Reporting Accountants' Letter on Proforma Consolidated Financial Information
(Preparedfor the inclusion in this Prospectus)
UHy ---
UHY (AF141l)
Chartered Accountants
29 September 2011
Suite 11.05, Level 11
The Board of Directors
Mid Valley City
Ungkaran Syed Putra
59200 Kuala Lumpur
No.2, Jalan BJ 5
Taman Industri Belmas Johan
Phone +60 3 2279 3088
Fax +60 3 2279 3099
48000 Rawang
Email uhykl@uhy.com.my
Web www.uhy.com.my .
Dear Sirs,
NAKAREG HOLDINGS BERHAD ("Nakareg Holdings" or "the Company")
PROFORMA CONSOLIDATED FINANCIAL INFORMATION
We report on the proforma consolidated fmancial information of Nakareg Holdings and its
subsidiary companies, namely Nakareg International Company Limited ("Nakareg
International") and its group of subsidiary companies comprising Shanghai Optimus
Electronics Company Limited ("Shanghai Optimus"), Nakareg Electronics (Kunshan)
Company Limited (formerly known as Hitec Electronics (Kunshan) Company Limited)
("Nakareg Kunshan") and Changshu Nakareg Precision Components Company Limited
("Changshu Nakareg"), (collectively referred as "Nakareg International Group"), Nakareg
Sdn. Bhd. ("Nakareg") and NKG Technology Sdn. Bhd. ("NKG Technology") (collectively
referred as "Nakareg Holdings Group", "Proforma Group" or "Group") for the three financial
years ended ("FYE") 31 December 2008, 31 December 2009 and 31 December 2010 together
with the accompanying notes thereon, which we have stamped for the purpose of
identification.
The proforma consolidated financial information of the Nakareg Holdings Group has been
prepared for illustrative purposes only for inclusion in the Prospectus in connection with the
listing of and quotation for the entire enlarged issued and paid-up share capital of Nakareg
Holdings on the ACE Market of Bursa Malaysia Securities Berhad ("Bursa Securities"), after
making certain assumptions and such adjustments to show the effects on:
(a) the financial results of Nakareg Holdings Group for the financial years under review
had the Nakareg Holdings Group structure as of the date of the Prospectus been in
existence throughout the financial years under review;
(b) the financial position of the Nakareg Holdings Group as at 31 December 2010 had the
Nakareg Holdings Group structure as of the date of the Prospectus been in existence
on 31 December 2010; and
(c) the cash flows of the Nakareg Holdings Group for the FYE 31 December 2010 had
the Nakareg Holdings Group structure as of the date of the Prospectus been in
existence throughout the FYE 31 December 2010, adjusted for the effects of the
Listing Scheme as defined in the accompanying notes and utilisation ofproceeds from
Public Issue.
A member of Urbach Hacker Young International limited, 1
an international network of independent accounting and consulting firms
214
i Company No. 918382-T i
13. FINANCIAL INFORMATION (Conrd)
UHy _
PROFORMA CONSOLIDATED FINANCIAL INFORMATION (CONT'D)
As the proforma consolidated financial information has been prepared for illustrative
purposes only, such information, because of its nature, may not reflect the Nakareg Holdings
Group's actual financial results, financial position and cash flows. Further, such information
does not predict the Group's future financial results, financial position and cash flows.
It is the sole responsibility of the Directors of Nakareg Holdings to prepare the proforma
consolidated financial information in accordance with the requirements of the Prospectus
Guidelines issued by the Securities Commission ("Prospectus Guidelines").
It is our responsibility to form an opinion, as required by the Prospectus Guidelines, as to the
proper compilation of the proforma consolidated financial information and to report our
opinion to you.
In providing this opinion, we are not responsible in updating or refreshing any report or
opinion previously made by us on any financial information used in the compilation of the
proforma consolidated financial information, nor do we accept responsibility for such report
or opinion beyond that owed to those to whom the report or opinion were addressed by us at
the date of issue.
Our work consisted primarily of comparing the proforma consolidated financial information
with the audited financial statements of Nakareg Holdings for the financial period ended
("FPE") 31 December 2010 and the audited financial statements of its subsidiary companies
for the FYE 31 December 2008 to 31 December 2010, considering the evidence supporting
the adjustments and discussing the proforma consolidated financial information with the
Directors/Officers of Nakareg Holdings. Our work involved no independent examination of
any of the underlying financial information.
In our opinion:
(a) the proforma consolidated financial information ofNakareg Holdings Group as set out
in the accompanying notes, which are -provided for illustrative purposes only, has
been prepared based on the audited financial statements of Nakareg Holdings for the
FPE 31 December 2010 and the audited financial statements of its subsidiary
companies for the FYE 31 December 2008 to 31 December 2010 and in accordance
with applicable approved Financial Reporting Standards ("FRS") in Malaysia and is
presented on a basis consistent with both the format and accounting policies normally
adopted by Nakareg Holdings and its subsidiary companies and after taking into
account adjustments appropriate for the purposes of the proforma consolidated
financial information as set out in the accompanying notes; and
(b) that the adjustments made in the preparation of the proforma consolidated financial
information are appropriate for the purposes of preparing the proforma consolidated
financial information.
A member of Urbach Hacker Young International limited.
215
2
i Company No. 918382-T I]
UHy _
PROFORMA CONSOLIDATED FINANCIAL INFORMATION (CONT'D)
This letter has been prepared for the purpose of inclusion in the Prospectus issued in
connection with the listing of and quotation for the entire enlarged issued and paid-up share
capital of Nakareg Holdings on the ACE Market of Bursa Securities. As such, this letter
should not be relied on for any other purposes.
Yours faithfully,
UHY
Firm Number: AF 1411
TEE GUAN PIAN
Approved Number: 1886/05/12 (JIPH)
Chartered Accountant
Kuala Lumpur
A member of Urbach Hacker Young International Limited,
216
3
Company No. 91838
NOTES TO THE PROFORMA CONSOLIDATED FINANCIAL INFORMATION
1. Introduction
The profoma consolidated financial information, comprising the proforma consolidated
statement of comprehensive income for the FYE 31 December 2008 to 31 December
2010, proforma consolidated statement of financial position as at 31 December 2010
and the proforma consolidated statement of cash flows for the FYE 31 December 20I0,
have been prepared for inclusion in the Prospectus in connection with the listing of and
quotation for the entire enlarged issued and paid-up share capital ofNakareg Holdings
on the ACE Market of Bursa Securities ("Listing").
2. Effects on the Proforma Consolidated Statement of Financial Position
The following events which occurred subsequent to the FYE 31 December 2010 have
been taken into consideration before the Listing Scheme:
2.1 Acquisitions by Nakareg International
Nakareg International undertook the acquisition of:
(a) the entire registered capital ofUSD420,000 in Shanghai Optimus for a
total purchase consideration of HKD3,268,912, which was wholly
satisfied by the issuance of 3,268,912 new shares ofHKDl.OO each in
Nakareg International at an issue price 0 f HKDI. 00 per share;
(b) the entire registered capital of USD300,000 in Nakareg Kunshan for a
total purchase consideration of HKD2,334,937 and reflected as an
amount owing to Nakareg; and
(c) the entire registered capital ofUSDI,OOO,OOO in Changshu Nakareg for
a total purchase consideration of HKD7,783,123, which was wholly
satisfied by the issuance of7,783,123 new shares ofHKDl.OO each in
Nakareg International at an issue price ofHKDl.OO per share,
(collectively the "Acquisitions by Nakareg International").
217
4
(CONT'D)
2. Effects on the Proforma Consolidated Statement of Financial Position (Cont'd)
2.2 Acquisitions by Nakareg Holdings
Subsequent to the Acquisitions by Nakareg International, Nakareg Holdings
undertook the acquisitions ofthe following:
(a) the acquisition by Nakareg Holdings of the entire issued and paid-up
share capital in Nakareg comprising 733,333 ordinary shares of
RM1.00 each in Nakareg;
(b) the acquisition by Nakareg Holdings of the entire issued and paid-up
share capital in Nakareg International comprising 11,062,035 shares of
HKD 1.00 each in Nakareg International; and
(c) the acquisition by Nakareg Holdings of the entire issued and paid-up
share capital in NKG Technology comprising 500,000 ordinary shares
ofRM1.00 each in NKG Technology,
for a total purchase consideration of RM13,899,998, which was wholly
satisfied by the issuance of 13,899,998 new Nakareg Holdings shares at an
issue price ofRM1.00 per share ("Acquisitions by Nakareg Holdings").
2.3 Share Split
After the completion of the Acquisitions by Nakareg Holdings, the Company
on 26 September 2011 undertook a share split involving the subdivision of
everyone (1) existing ordinary share of RM1.00 each in Nakareg Holdings
into ten (10) Nakareg Holdings Shares ofRMO.lO each.
Upon completion of the Share Split, the issued and paid-up share capital
changed from RM13,900,000 comprising 13,900,000 ordinary shares of
RM1.00 each to RM13,900,000 comprising 139,000,000 Nakareg Holdings
Shares ofRMO.10 each.
218
5
13. FINANCIAL INFORMATION (ConPd)
(CONT'D)
2. Effects on the Proforma Consolidated Statement of Financial Position (Cont'd)
Listing Scheme
In conjunction with, and as an integral part of on Nakareg Holdings's Listing, the
Listing Scheme is set out as follows:
2.4 Public Issue
The Public Issue of 52,000,000 IPO (Initial Public Offering) Shares
representing approximately 27.2% of the enlarged issued and paid-up share
capital the Company at the IPO Price of RM[ .] payable in full on
application upon the terms and conditions as set out in the Prospectus and will
be allocated in the following manner:
(i) Selected investors via placement;
44,000,000 IPO Shares, representing approximately 23.0% of the
enlarged issued and paid-up share capital of the Company will be made
available to selected investors by way ofprivate placement.
(ii) Eligible Directors, employees and business associates/persons who have
contributed to the success ofthe Group;
issued and paid-up share capital of the Company will be made available
for application by the eligible Directors, employees and business
associates/persons who have contributed to the success ofthe Group; and
(iii) Public
issued and paid-up share capital of the Company to be allocated by way
ofballoting, will be made available for application by the Public.
2.5 Listing and quotation for the Shares
Upon completion of the abovementioned IPO, the Company will seek the
Listing of 191,000,000 Shares on the ACE Market ofBursa Securities.
219
6
(CONT'D)
3. Basis of preparation
3.1 The profoma consolidated financial information of Nakareg Holdings Group is
prepared for illustrative purposes only and have been prepared using the bases and
accounting policies consistent with those to be adopted by Nakareg Holdings, after
giving effect to the adjustments considered appropriate.
The proforma consolidated financial information has been prepared for illustrative
purposes based on the the audited financial statements ofNakareg Holdings for the FPE
31 December 2010 and the audited financial statements of its subsidiary companies for
the FYE 31 December 2008 to 31 December 2010. The audited financial statements
used in the preparation of this report for the financial period/years under review were
not subject to any qualification or modification.
The proforma consolidated financial information, because of its nature, may not reflect
the Nakareg Holdings Group's actual financial position, financial results and cash flows.
Further, such information does not predict the future financial position, financial results
and cash flows ofNakareg Holding Group.
3.2 The proforma consolidated financial information comprises the following:
(a) the Proforma Consolidated Statement of Comprehensive Income for the FYE 31
December 2008 to 31 December 2010 on the assumption that the Nakareg
Holdings Group structure as of the date of the Prospectus had been in existence
throughout the financial years under review;
(b) the Proforma Consolidated Statement of Financial Position as at 31 December
2010 on the assumption that the Nakareg Holdings Group structure as ofthe date
ofthe Prospectus had been in existence on 31 December 2010; and
(c) the Proforma Consolidated Statement of Cash Flows for the FYE 31 December
2010 on the assumption that the Nakareg Holdings Group structure as of the date
of the Prospectus had been in existence throughout the FYE 31 December 2010,
adjusted for the effects of the Listing Scheme as defined in the accompanying
notes and utilisation ofproceeds from Public Issue.
The Acquisitions by Nakareg International and Acquisitions by Nakareg Holdings are
accounted for in the proforma consolidated financial information using the pooling of
interests method of accounting.
220
7
13. FINANCIAL INFORMAnON (Conl'd)
(CONT'D)
3. Basis of preparation (Cont'd)
3.3 The proforma consolidated financial information has been prepared in accordance with
FRS in Malaysia consistent with those previously adopted in the preparation of the
audited financial statements of Nakareg Holdings for the FPE 31 December 2010 and
the audited financial statements of its subsidiary companies for the FYE 31 December
2008 to 31 December 2010, and after incorporating adjustments that are appropriate for
the preparation ofthe proforma consolidated financial information.
3.4 The audited financial statements of Nakareg International were presented in The
People's Republic of China Reminbi ("RMB"). In preparing this report, the financial
information was translated into Ringgit Malaysia ("RM") for information purposes.
The exchange rates used for the purposes of this report are extracted from Bank Negara
Malaysia as follows:
Financial period/years ended (average rate)
31 December 2008 RMB 1.00 : RM0.4820
31 December 2009 RMB1.00 : RMO.5157
31 December 2010 RMB1.00 : RM0.4748
31 December 2008 USD1.00 : RM3.3362
31 December 2009 USD1.00 : RM3.5225
31 December 2010 USD1.00 : RM3.2105
Financial period/years ended (closing rate)
31 December 2010 RMB1.00 : RM0.4674
31 March 2011 USD1.00 : HKD7.7831
31 March 2011 HKD1.00 : RMBO.8415
31 March 2011 RMB1.00 : RM0.4619
221
8
13. FINANCIAL INFORMAnON (ConPd)
NOTES TO THE PROFORMA CONSOLIDATED FINANCIAL INFORMATION (CONT'D)
4. Proforma Consolidated Statement of Comprehensive Income for the FYE
31 December 2008 to 31 December 2010
4.1 The proforma consolidated statement of comprehensive income ofNakareg Holdings
Group for the FYE 31 December 2008 to 31 December 2010 are set out below, which
have been prepared for illustration purposes assuming that the Nakareg Holdings
Group had been existence throughout the financial years under review.
<-------------------- FYE 31 December--------------------7
2008 2009 2010
RM RM RM
Revenue 41,646,922 38,451,076 39,059,087
Cost of sales (34,379,703) (27,373,875) (30,812,661)
Gross profit 7,267,219 11,077,201 8,246,426
Finance costs (115,487) (86,774) (170,137)
Profit before taxation 3,825,500 8,101,208 4,811,155
Taxation (1,562,675) (1,594,020) (829,345)
Profit after taxation 2,262,825 6,507,188 3,981,810
Foreign exchange differences,
representing net profit not
recognised in the proforma
consolidated statement of
comprehensive income
1,176,698 (288,626) (1,188,363)
3,439,523 6,218,562 2,793,447
222
9
yNo.918382-T
31 December 2008 to 31 December 2010
<-------------------- FYE 31 December--------------------->
2008 2009 2010
RM RM RM
Earnings before interest, taxation
and depreciation 4,368,159 8,623,657 5,663,746
Gross profit margin (%) 17.45 28.81 21.11
Profit before tax margin (%) 9.19 21.07 12.32
Profit after tax margin (%) 5.43 16.92 10.19
Gross earning per share (sen) 5.23 7.97 5.93
Net earnings per share (sen) 1.63 4.68 2.86
Diluted net earnings per share
(sen) 1.18 3.41 2.08
THE REST OF TillS PAGE IS INTENTIONALLY LEFf BLANK
223
10
13. FINANCIAL INFORMATION (Coned)
31 December 2008 to 31 December 2010 (Cont'd)
4.2 Notes to the proforma consolidated statement of comprehensive income are as follows:
4.2.1 The gross profit margin is computed by dividing the gross profit by the
revenue earned in the respective financial years.
4.2.2 The profit before tax margin is computed by dividing the profit before taxation
by the revenue earned in the respective financial years.
4.2.3 The profit after tax margin is computed by dividing the profit after taxation by
the revenue earned in the respective financial years.
4.2.4 The gross earnings per share is computed by dividing the profit before taxation
by the number of ordinary shares assumed to be in issue of 139,000,000
Nakareg Holdings Shares.
4.2.5 The net earnings per share is computed by dividing the profit after taxation by
the number of ordinary shares assumed to be in issue of 139,000,000 Nakareg
Holdings Shares.
4.2.6 The diluted net earnings per share is computed by dividing profit after taxation
by the enlarged number of ordinary shares after the Listing Scheme of
191,000,000 Nakareg Holdings Shares.
4.2.7 All significant inter-company transactions are eliminated on consolidation and
the consolidated results reflect external transactions only.
4.2.8 There was no share of profits of joint venture or associates throughout the
fmancial years under review.
4.2.9 There were no exceptional or extraordinary items throughout the financial
years under review.
224
11
NAKAREG HOLDINGS BERDAD
5. Proforma Consolidated Statement of Financial Position as at 31 December 2010
The proforma consolidated statement of financial position ofNakareg Holdings as at
31 December 2010 have been prepared for illustrative purposes only and after making
such adjustments as considered necessary assuming that the Nakareg Holdings Group
had been in existence on 31 December 2010 and the Listing Scheme completed on
that date.
< ------------------------- Proforma -------------------------->
I IT ill
After
Acquistions by After
Nakareg Proforma IT
Nakareg International, After and
Holdings as Acquisitions by Proforma I Utilisation of
at 31 Nakareg and Proceeds
December Holdings and After Public from Public
2010 Share Split Issue Issue
Note RM RM RM RM
Non-Current Asset
Property, plant and
equipment 5.2 6,281,406 6,281,406
Current Assets
Inventories 5.3 6,004,322 6,004,322 6,004,322
Trade and other
receivables 5.4 56,774 9,842,059 9,842,059 9,842,059
Tax recoverable
441,654 441,654 441,654
Cash and bank
balances
5.5 2 2,786,899 [ -j [ -j
56,776 19,074,934 [ -j [ -j
Total Assets 56,776 25,356,340 [ -j [ -j
Equity
Share capital 5.6 2 13,900,000 19,100,000 19,100,000
Share premium 5.7 204,018 [ -j [ -j
Merger deficit 5.8 (7,455,694) (7,455,694) (7,455,694)
Reserves
5.9 (4,464) 6,569,010 6,569,010
[ -j
Total Equity
(4,462) 13,217,334 [ -j [ -j
225
12
(Cont'd)
< ------------------------- Profonna -------------------------->
I II ill
After
Acquistions by After
Nakareg Profonnall
Nakareg International, After and
Holdings as Acquisitions by Profonna I Utilisation of
at 31 Nakareg and Proceeds
December Holdings and After Public from Public
2010 Share Split Issue Issue
Note RM RM RM RM
Non-Current Liabilities
Hire purchase
payables
Bank borrowings
Deferred tax
liability
5.10
5.11
5.12
66,414
1,109,295
400
1,176,109
66,414
1,109,295
400
1,176,109
66,414
1,109,295
400
1,176,109
Current Liabilities
Trade and other
payables
Hire purchase
payables
Bank borrowings
Tax payable
Total Liabilities
Total Equity and
Liabilities
5.13
5.10
5.11
61,238
61,238
61,238
56,776
8,947,939
859,986
965,378
189,594
10,962,897
12,139,006
25,356,340
8,947,939
859,986
965,378
189,594
10,962,897
12,139,006
[ -j
8,947,939
859,986
965,378
189,594
10,962,897
12,139,006
[ -j
Net (liability)/assets (4,462) 23,356,340 [ -j [ -j
Number of
ordinary shares 2 139,000,000 191,000,000 191,000,000
Net Oiability)/assets
attributable to
equity holders per
ordinary share (sen) (223,100) 16.80 [ -j [ -j
226
13
(Cont'd)
5.1 Proforma Adjustments to the Proforma Consolidated Statement of Financial
Position
Proforma I
Proforma I incorporates the effects of the Acquisitions by Nakareg International,
Acquisitions by Nakareg Holdings and Share Split.
Proforma II
Proforma II incorporates the effects of Proforma I and after the incorportion of the
Public Issue.
Upon completion. of the Public Issue, the issued and paid-up share capital of the
Company will increase from RM13,900,000 comprising 139,000,000 Nakareg
Holdings Shares to RMI 9, 100,000 comprising 191,000,000 Nakareg Holdings Shares.
Proforma III
Proforma III incorporates the effects of Proforma I, II and after the incorporation of
the proposed utilisation ofproceeds from Public Issue.
The gross proceeds arising from the Public Issue will be utilised by Nakareg Holdings
Group in the following manner:
RM %
Expanding ofmanufacturing operations in Malaysia 37.4
Relocating the Changshu Nakareg manufacturing
facility and expansion ofthe existing manufacturing
capabilities in the People's Republic of China 26.7
Product branding
3.8
Working capital
10.7
Estimated listing expenses
21.4
Total gross proceeds
100.0
The listing expenses are estimated to be RM[ ], of which an amount ofRM[ ] in
respect of share issuance expenses will be set off against the share premium account
and the balance of RM[ ] will be charged to the statement of comprehensive
come.
14
227
yNo.918382-T
(Cont'd)
5.2 Property, Plant and Equipment
Cost
RM
Accumulated
Depreciation
RM
Carrying
Amount
RM
At 31 December 2010
Arising from Acquisitions by Nakareg International,
Acquisitions by Nakareg Holdings and Share Split
- Freehold land
- Factory buildings
- Plant and machinery
- Furniture, fittings and equipment
- Motor vehicles
- Tools and equipment
- Electrical installation and
renovation
As per Proforma I / II
Proposed utilisation ofproceeds
from Public Issue
As per Proforma III
382,000
1,634,712
5,333,261
553,418
649,980
167,700
630,004
9,351,075
9,351,075
-
144,570
1,647,701
395,974
433,824
78,356
369,244
3,069,669
3,069,669
382,000
1,490,142
3685,560
157,444
216,156
89,344
260,760
6,281,406
6,281,406
5.3 Inventories
RM
At 31 December 2010
At cost
Raw materials
Finished goods
3,008,646
2,995,676
6,004,322
6,004,322
15
228
(Cont'd)
5.4 Trade and Other Receivables
At 31 December 2010
- Prepayment
Trade receivables
- third parties
Other receivables
Other receivables
- third parties
Deposits
Prepayments
As per Proforma I / II / III
5.5 Cash and Bank Balances
Movements in cash and bank balances are as follows:
At 31 December 2010
As per Proforma I
Public Issue
As per Proforma II
Proposed utilisation ofproceeds from Public Issue
As per Proforma III
RM
56,774
7,622,308
852,256
104,065
1,206,656
2,162,977
9,785,285
9,842,059
RM
2
2,786,897
2,786,899
[ .]
229
16
rc<>:mpanyNo.918382-T II
(Cont'd)
5.6 Share Capital
The details of the changes in the issued and paid-up share capital are as follows:
Cumulative
Cumulative total issued
No of shares no. of shares Par and paid-up
allotted allotted value Consideration share capital
RM RM
At 31
December 2010 2 2 1.00 Cash 2
Proforma I 138,999,998 139,000,000 0.10 Share Split 13,900,000
Proforma II / III 52,000,000 191,000,000 0.10 Public Issue 19,100,000
Movements in issued and paid-up share capital are as follows:
Number of
ordinary Share capital
shares RM
At 31 December 2010 2 2
Issuance of shares pursuant to the Acquisitions
by Nakareg International, Acquisitions by
Nakareg Holdings and Share Split 138,999,998 13,899,998
As per Proforma I 139,000,000 13,900,000
Proposed utilisation of proceeds from
Public Issue 52,000,000 5,200,000
As per Proforma II / III 191,000,000 19,100,000
230
17
(Cont'd)
5.7 Share Premium
Movements in share premium account are as follows:
RM
At 31 December 2010
Acquisitions by Nakareg Holdings and Share Split 204,018
As per Proforma I 204,018
Public Issue [ .]
As per Proforma II
Proposed utilisation ofproceeds from Public Issue
As per Proforma III
The share premium is arrived at after accounting for the premium received (less
listing expenses of RM [ ]) over the nominal value of shares issued to the public.
5.8 Merger Reserve
The merger reserve arising from the difference between the nominal value of shares
issued and the nominal value of shares of subsidiary companies acquired under the
pooling of interests method of accounting.
231
18
y No. 918382-T
(Cont'd)
5.9 Reserves
Note RM
At 31 December 2010
- Accumulated loss (4,464)
- Capital reserve 75,646
- Enterprise Development Fund 152,181
- Statutory Reserve 5.9(a) 1,485,938
- Exchange translation reserve 5.9(b) (300,291)
- Retained profits 5.9(c) 5,160,000
6,573,474
As per Proforma 1/ II 6,569,010
Proposed utilisation ofproceeds from
Public Issue
As per Proforma III
(a) Statutory Reserve
The statutory reserves represents Statutory Reseve Fund ("SRF"). In accordance
with the Foreign Enterprise Law applicable to the subsidiary in The People's
Republic of China ("PRC"), the subsidiary is required to make appropriation to
a SRF. At least 10% of the statutory after tax profits as determined in
accordance with the applicable PRC accounting standards and regulations must
be allocated to the SRF until the cumulative total ofthe SRF reaches 50% ofthe
subsidiary's registered capital. Subject to approval from the relevant PRC
authorities, the SRF may be used to offset any accumulated losses or increase
the registered capital of the subsidiary. The SRF is not available for dividend
distribution to shareholders.
232
19
13. FINANCIAL INFORMATION (Coot'd)
(Cont'd)
5.9 Reserves (Cont'd)
(b) Exchange translation reserve
The exchange reserve is used to record foreign exchange differences arising
from the translation ofthe financial statements of foreign operations.
(c) Retained profits/(Accumulated loss)
Movements in retained profits are as follows:
RM
At 31 December 2010 (4,464)
Acquisitions by Nakareg Holdings and Share Split 5,160,000
As per Proforma I / II 5,155,536
Proposed utilisation ofproceeds from Public Issue [ .]
As per Proforma III
5.10 Hire Purchase Payables
Non-current Current
liabilities liabilities Total
RM RM RM
At 31 December 20I0
Arising from Acquisitions
by Nakareg International,
Holdings and Share Split 66,414 859,986 926,400
As per Proforma I, II, III 66,414 859,986 926,400
233
20
~ Company No. 918382-T !
13. FINANCIAL INFORMAnON (Cont'dj
(Cont'd)
5.11 Bank Borrowings
At 31 December 2010
Arising from Acquisitions
by Nakareg International,
Holdings and Share Split
- Bank overdrafts
- Bankers' acceptance
- Term loans
Non-current
liabilities
RM
1,109,295
1,109,295
1.109,295
Current
liabilities
RM
508,831
299,000
157,547
965,378
965,378
Total
RM
508,831
299,000
1,266,842
2,074,673
2.074,673
234
21
13. FINANCIAL INFORMAnON (Conl'dj
(Cont'd)
5.12 Deferred Tax Liability
RM
At 31 December 2010
400
400
The components and movement ofdeferred tax liability are as follows:
RM
Accelerated capital allowances
At 31 December 2010
400
400
5.13 Trade and Other Payables
RM
At 31 December 2010
- Other payables - third parties 61,238
Trade payables - third parties 4,179,123
Amount owing to a former shareholders 327,180
Amount owing to Directors 1,372,820
Other payables
- Other payables - third parties
- Accruals
- Dividend payable to former shareholders
530,098
420,920
2,056,560
3,007,578
8,886,701
8,947,939
22
235
6. Proforma Consolidated Statement of Cash Flows
The proforma consolidated statement of cash flows for the FYE 31 December 2010
has been prepared for illustrative purposes only and after making such adjustments as
considered necessary assuming that the Nakareg Holdings Group had been in
existence throughout the FYE 31 December 2010 and the Listing Scheme completed
on that date.
Cash Flows From Operating Activities
Adjustments for:
Bad debts written off
Depreciation ofproperty, plant and equipment
Deposits written off
Property, plant and equipment written off
Gain on disposal ofproperty, plant and equipment
Gain on disposal of other investment
Gain on unrealised foreign exchange
Interest expense
Interest income
Operating profit before working capital changes
(Increase)/Decrease in working capital
Inventories
Trade and other receivables
Trade and other payables
Cash generated from operations
Tax paid
Interest paid
Interest received
Exchange fluctuation adjustment
Net cash from operating activities
Cash Flows From Investing Activities
Acquisition ofproperty, plant and equipment
Proceeds from disposal of other investment
Proceeds from disposal ofproperty, plant and equipment
Net cash flows arising from merger with subsidiary
companies
Net cash from investing activities
RM
4,811,155
189,224
682,454
4,580
6,712
(12,521)
(8,145)
(116,200)
170,137
(20,717)
5,706,679
(2,667,091)
(1,059,580)
4,442,088
715,417
6,422,096
(1,712,692)
(170,137)
20,717
(988,165)
(2,850,277)
3,571,819
[. ]
957,578
50,691
1,038,449
236
23
6. Proforma Consolidated Statement of Cash Flows (Cont'd)
Cash Flows From Financing Activities
Proceeds from issue of shares
Proceeds from Public Issue
Drawdown of term loans
Increased in banker's acceptance
Repayment of hire purchase payables
Repayment of term loan
Payment of listing expenses
Dividend paid
Net cash from fmancing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the fmancial year
Cash and cash equivalents at end ofthe fmancial year
Cash and cash equivalents at end of the financial year
comprises:
Bank: overdrafts
RM
2
[. ]
272,000
117,000
(1,176,752)
(124,600)
[. ]
(6,331,806)
[ .]
5,147,038
[. ]
(508,831)
237
24
14. ACCOUNTANTS'REPORT
14 Accountants' Report
(Preparedfor the inclusion in this Prospectus)
UHy _
UHY (AF1411)
29 September 2011
Mid Valley City
The Board of Directors
59200 Kuala Lumpur
No.2, J1n. BJ 5,
Phone +60 3 2279 3088
Taman Perindustrian Be1mas Johan
Fax +60 3 2279 3099
48000 Rawang
Se1angor Daru1 Ehsan Web www.uhy.com.my
Dear Sirs,
NAKAREG HOLDINGS BERHAD ("Nakareg Holdings" OR "the Company")
ACCOlmTANTS'REPORT
1. INTRODUCTION
This report has been prepared by UHY, Malaysia, an international accounting finn of chartered
accountants registered in Malaysia and an approved company auditor, for inclusion in the
Prospectus ofNakareg Holdings, in connection with the listing of and quotation for the enlarged
issued and paid up share capital of Nakareg Holdings on the ACE Market of Bursa Malaysia
Securities Berhad ("Bursa Securities") ("Listing"). Details of the proposal are disclosed in
Section 2 of this report.
2. DETAILS OF THE LISTING SCHEME
2.1 The internal restructuring is set out as follows:
2.1.1 Acquisitions by Nakareg International Company Limited ("Nakareg
International")
Nakareg International undertook the acquisition of:
(a) the entire registered capital of USD420,000 in Shanghai Optimus
Electronics Company Limited ("Shanghai Optimus") for a total
purchase consideration ofHKD3,268,912, which was wholly satisfied
by the issuance of3,268,912 new shares ofHKDl.OO each in Nakareg
International at an issue price ofHKDl.OO per share;
(b) the entire registered capital of USD300,000 in Nakareg Electronics
(Kunshan) Company Limited (fonnerly known as Hitec Electronics
(Kunshan) Company Limited) ("Nakareg Kunshan") for a total
purchase consideration of HKD2,334,937 and reflected as an amount
owing to Nakareg; and
(c) the entire registered capital of USD1,000,000 in Changshu Nakareg
Precision Components Company Limited ("Changshu Nakareg") for a
total purchase consideration of HKD7,783,123, which was wholly
satisfied by the issuance of7,783,123 new shares ofHKDl.OO each in
Nakareg International at an issue price ofHKDl.OO per share,
(collectively the "Acquisitions by Nakareg International").
Page 1 of 130
an international network. of independent accounting and consulting firms
238
14. ACCOUNTANTS' REPORT (ConPd)
UHy _
2. DETAILS OF THE LISTING SCHEME (CONT'D)
2.1 The internal restructuring is set out as follows (Cont'd):
2.1.2 Acquisitions by Nakareg Holdings
Subsequent to the Acquisitions by Nakareg International, Nakareg Holdings
undertook the acquisitions of the following:
(a) the acquisition by Nakareg Holdings of the entire issued and paid-up
share capital in Nakareg Sdn Bhd ("Nakareg") comprising 733,333
ordinary shares ofRM1.00 each in Nakareg;
(b) the acquisition by Nakareg Holdings of the entire issued and paid-up
share capital in Nakareg International comprising 11,062,035 shares
ofHKD1.00 each in Nakareg International; and
(c) the acquisition by Nakareg Holdings of the entire issued and paid-up
share capital in NKG Technology Sdn Bhd ("NKG Technology")
comprising 500,000 ordinary shares of RMl.00 each in NKG
Technology,
for a total purchase consideration of RM13,899,998, which was wholly
satisfied by the issuance of 13,899,998 new Nakareg Holdings shares at an
issue price ofRM1.00 per share ("Acquisitions by Nakareg Holdings").
2.1.3 Share Split
After the completion of the Acquisitions by Nakareg Holdings, the Company
on 26 September 2011 undertook a share split involving the subdivision of
every one (1) existing ordinary share of RM1.00 each in Nakareg Holdings
into ten (10) Nakareg Holdings Shares ofRMO.10 each.
Upon completion of the Share Split, the issued and paid-up share capital
changed from RM13,900,000 comprising 13,900,000 ordinary shares of
RM1.00 each to RM13,900,000 comprising 139,000,000 Nakareg Holdings
Shares ofRM0.10 each.
Page 2 of 130
A member of Urbach Hacker Young International Limited.
239
14. ACCOUNTANTS' REPORT (Coot'd)
UHy _
2. DETAILS OF THE LISTING SCHEME (CONT'D)
2.2 The Listing Scheme is set out as follows:
In conjunction with, and as an integral part of on Nakareg Holdings's Listing, the
Listing Scheme is set out as follows:
2.2.1 Public Issue
The Public Issue of 52,000,000 IPO (Initial Public Offering) Shares
representing approximately 27.2% of the enlarged issued and paid-up share
capital the Company at the IPO Price payable in full on application upon the
terms and conditions as set out in the Prospectus and will be allocated in the
following manner:
(i) Selected investors via placement;
enlarged issued and paid-up share capital of the Company will be
made available to selected investors by way of private placement.
(ii) Eligible Directors, employees and business associates/persons who
have contributed to the success of the Group;
enlarged issued and paid-up share capital of the Company will be
made available for application by the eligible Directors, employees
and business associates/persons who have contributed to the success
of the Group; and
(iii) Public
enlarged issued and paid-up share capital of the Company to be
allocated by way of balloting, will be made available for application
by the Public.
2.2.2 Listing and quotation for the Shares
Upon completion of the abovementioned IPO, the Company will seek the
Listing of 191,000,000 Shares on the ACE Market of Bursa Securities.
Page 3 of 130
240
14. ACCOUNTANTS' REPORT (Cont'dj
uHY-------
3. GENERAL INFORMATION
3.1 Background
Nakareg Holdings was incorporated and domiciled in Malaysia under the Companies
Act, 1965 on 15 October 2010 as a public limited company. The principal activity of
Nakareg Holdings is that of investment holding.
3.2 Share Capital
At the date of incorporation, the authorised share capital of Nakareg Holdings was
RMI00,000 comprising 100,000 ordinary shares of RM1.00 each. As at the date of
this report, the issued and paid-up share capital of Nakareg Holdings was
RM13,900,000 comprising 139,000,000 ordinary shares ofRM0.10 each.
The movements in the issued and paid-up share capital ofNakareg Holdings since its
<-- Cumulative Total -->
Total Issued
No. of No. of and Paid-up
Date of Shares Par Ordinary Share
Allotment Consideration Allotted Value Shares Capital
RM RM
15 October Cash; 2 1.00 2 2
2010 Subscribers'
shares
26 Acquisations 13,899,998 1.00 13,899,998 13,900,000
September by Nakareg
2010 Holdings
26 Share Split 0.10 139,000,000 13,900,000
September
2010
Page 4 of130
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UHy _
4. RELEVANT FINANCIAL YEAR AND AUDITORS
The relevant financial period/year of the audited financial statements presented for the
purpose of this report ("Relevant Financial PeriodIYear") and the auditors of the respective
companies within the Nakareg Holdings Group for the Relevant Financial PeriodlYear are set
out below:
Company Relevant Financial PeriodIYear Auditor Auditor Report
Nakareg Holdings Financial Period Ended ("FPE") UlN Appendix I
Nakareg Financial Year Ended ("FYE") WHHau&Co Appendix
31 December 2010
II
31 December 2008
FYE 31 December 2009 WHHau&Co Appendix III
FYE 31 December 2010 UHY Appendix IV
NKG Technology FYE 31 December 2008 WHHau&Co Appendix V
FYE 31 December 2009 WHHau &Co Appendix VI
FYE 31 December 2010 UHY Appendix VII
Nakareg International FYE 31 December 2008 UHY Appendix VIII
FYE 31 December 2009 UlN Appendix VIII
FYE 31 December 2010 UlN Appendix VIII
The audited financial statements of respective companies within the Nakareg Holdings Group
for the Relevant Financial PeriodNear were reported upon without any audit qualification.
Page 6 of 130
243
UHy _
5. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
Nakareg Holdings was incorporated in Malaysia as a public limited company under the
Companies Act, 1965 on 15 October 2010. There were no consolidated financial statements
prepared for Nakareg Holdings Group for the FYE 31 December 2008, 31 December 2009
and 31 December 2010 as the Group was not in existence as at the end of these financial years.
Accordingly, for the purpose of this report, we have presented the financial information of
Nakareg Holdings for the FPE 31 December 2010, Nakareg, NKG Technology and Nakareg
International (as detailed below) for the FYE 31 December 2008, 31 December 2009 and 31
December 2010 in Section 7, which are extracted from their audited financial statements,
modified as appropriate, for the purpose of this report.
This report is prepared on a basis consistent with the accounting policies adopted by the
Group as disclosed in Section 5.1 of this report.
5.1 Basis of preparation
The financial statements of the Group have been prepared in accordance with Financial
Reporting Standards (FRSs), generally accepted accounting principles and the Companies Act,
1965 in Malaysia.
(a) Adoption of New FRSs, Amendments to FRSs and IC Interpretations
For the purpose of this report, the Group has adopted all the following Financial
Reporting Standards ("FRSs"), amendments to FRSs and Issues Committee ("IC")
Interpretations, issued by the Malaysian Accounting in Malaysia that are effective on
or before 1 January 2010 for the presentation of the financial statements for the FYE
31 December 2008, 31 December 2009 and 31 December 2010:
FRS 1 First-time Adoption of Financial Reporting Standards
FRS 2 Share-based Payment
FRS 3 Business Combinations
FRS 4 Insurance Contracts
FRS 5 Non-current Assets Held for Sale and Discontinued
Operations
FRS 6 Exploration for and Evaluation of Mineral
FRS 7 Financial Instruments: Disclosures
FRS 8 Operating segments
FRS 101 Presentation of Financial Statements
FRS 102 Inventories
FRSI07 Cash Flow Statements
FRS 108 Accounting Policies, Changes in Accounting Estimates
and Errors
FRS 110 Events After the Balance Sheet Date
FRS 111 Construction Contracts
FRS 112 Income Taxes
FRS 116 Property, Plant and Equipment
FRS 117 Leases
Amendment to Leases
FRS 117
Page 7 of 130
244
14. ACCOUNTANTS' REPORT (Cont'd)
UHy _
5. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
5.1 Basis of preparation (Cont'd)
(a) Adoption of New FRSs, Amendments to FRSs and IC Interpretations (Cont'd)
FRS 118 Revenue
FRS 119 Employee Benefits
Amendment FRS Employee Benefits - Actuarial Gains and Losses, Group
119 2004 Plans and Disclosures
FRS 120 Accounting for Government Grants and Disclosure of
Government Assistance
Amendment to The Effects of Changes in Foreign Exchange Rates Net
FRS 121 Investment in a Foreign Operation
FRS 123 Borrowing Costs
FRS 124 Related Party Disclosures
FRS 126 Accounting and Reporting by Retirement Benefit Plans
FRS 127 Consolidated and Separate Financial Statements
FRS 128 Investment in Associates
FRS 129 Financial Reporting in Hyperinflationary Economies
FRS 131 Interests in Joint Ventures
FRS 132 Financial Instruments: Disclosure and Presentation
FRS 133 Earnings Per Share
FRS 134 Interim Financial Reporting
FRS 136 Impairment of Assets
FRS 137 Provisions, Contingent Liabilities and Contingent Assets
FRS 138 Intangible Assets
FRS 139 Financial Instruments: Recognition and Measurement
FRS 140 Investment Property
FRS i-I 2004 Presentation of Financial Statements of Islamic Financial
Institutions
FRS 201
2004
Property Development Activities
FRS 202 2004 General Insurance Business
FRS 203
2004
Life Insurance Business
FRS 204 2004 Accounting for Aquaculture
Amendments to FRS1, First-time Adoption Financial Reporting Standards and
FRS 127, Consolidated and Separate Financial Statements - Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or Associate
Amendments to Share-based Payment-Vesting Conditions and Cancellations
FRS 2
Amendments to Financial Instruments: Presentation
FRS 132
Amendments to FRS 139, Financial Instruments: Recognition and Measurement,
FRS 7, Financial Instruments: Disclosures and IC Interpretation 9,
Reassessment of Embedded Derivatives
Page 8 of 130
245
UHy _
Amendments to FRSs contained in the document entitled "Improvements to
FRSs (2009)"
IC Interpretation 1 Changes in Existing Decommissioning, Restoration and
Similar Liabilities
IC Interpretation 2 Members' Shares in Co-operative Entities and Similar
Instruments
IC Interpretation 5 Rights to Interest arising from Decommissioning, Restoration
and Environmental Rehabilitation Funds
IC Interpretation 6 Liability arising from Participating in a Specific Market
- Waste Electrical and Electrical Equipment
IC Interpretation 7 Applying The Restatement Approach Under FRS 129
2004
Financial Reporting In Hyperinflationery Economies
IC Interpretation 8 Scope of FRS 2
IC Interpretation 9 Reassessment of Embedded Derivatives
IC Interpretation 10 Interim Financial Reporting and Impairment
IC Interpretation 11 FRS 2 - Group and Treasury Share Transactions
IC Interpretation 13 Customer Loyalty Programmes
IC Interpretation 14 FRS 119 - The Limit on a defined Benefit Asset, Minimum
Funding Requirements and their Interaction
The Group have not early adopted the following new FRSs, revised FRSs, IC
Interpretations and amendments to FRSs, which have been issued as at the date of
authorisation of these financial statements and will be effective for the financial
periods as stated below:
Effective date for
financial periods
beginning on or after
Amendments to Financial Instruments: Presentation 1 March 2010
FRS 132
FRS 1 First-time Adoption of Financial 1 July 2010
Reporting Standards
FRS 3 Business Combinations 1 July 2010
FRS 127 Consolidated & Separate Financial 1 July 2010
Statements
Amendments to Share-based Payment 1 July 2010
FRS 2
Amendments to Non-current Assets Held for Sale 1 July 2010
FRS 5 and Discontinued Operations
Amendments to Intangible Assets 1 July 2010
FRS 138
IC Interpretation 12 Service Concession Arrangements 1 July 2010
IC Interpretation 16 Hedges of a Net Investment in a 1 July 2010
Foreign Operation
Page 9 of 130
A member of Urbach Hacker Young Internalionallimited,
246
14. ACCOUNTANTS' REPORT (Conl'dj
UHy _
Effective date for
financial periods
beginning on or after
IC Interpretation 17 Distributions of Non-cash Assets to 1 July 2010
Owners
Amendments to IC Interpretation 9 Reassessment of 1 July 2010
Embedded Derivatives
Amendment to Limited Exemption from 1 January 2011
FRS 1 Comparative FRS 7 Disclosure for
First-time Adopters
Amendment to Improving Disclosures about 1 January 2011
FRS 7 Financial Instruments
IC Interpretation 4 Determining whether an Arrangement 1 January 2011
contains a Lease
IC Interpretation 18 Transfers of Assets from Customers 1 January 2011
Amendments to FRSs contained in the documents entitled 1 January 2011
"Improvements to FRSs (2010)"
IC Interpretation 19 Extinguishing Financial Liabilities 1 July 2011
with Equity Instruments
Amendments to IC Prepayment of a Minimum Funding 1 July 201 1
Interpretation 14 Requirement
IC Interpretation 15 Agreements for Construction of 1 January 2012
Real Estate
FRS 124 Related Party Disclosures 1 January 2012
The initial applications of the above applicable new FRSs, revised FRSs, IC
Interpretations, and amendments to FRSs is not expected to have any material impact
on the financial statements ofthe Group, except as discussed below:
(i) FRS 7 Financial Instruments: Disclosures
This new standard requires disclosures in financial statements that enable
users to evaluate the significance of financial instruments for the entity's
financial position and performance, and the nature and extent of risks arising
from financial instruments to which an entity is exposed and how these risks
are managed. This standard requires both qualitative disclosures describing
management's objectives, policies and processes for managing those risks,
and quantitative disclosures providing information about the extent to which
an entity is exposed to risk, based on information provided internally to the
entity's key management personnel.
Page 10 of 130
A member of Urbach Hacker YO\Jng International limited,
247
No. 918382-T
14. ACCOUNTANTS' REPORT (Conf'd)
UHy _
(ii) FRS 123 Borrowing Costs
This new standard removes the option of immediately recoglllsmg as an
expense borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset. However, capitalisation of
borrowing costs is not required for assets measured at fair value, and
inventories that are manufactured or produced in large quantities on a
repetitive basis, even if they take a substantial period of time to get ready for
use or sale.
(iii) FRS 139 Financial Instruments: Recognition and Measurement
This new standard establishes the principles for the recognition, derecognition
and measurement of an entity's financial instruments and for hedge
accounting. The impact of applying FRS 139 on the financial statements upon
first adoption of this standard as required by paragraph 30(b) of FRS 108
Accounting Policies, Changes in Accounting Estimates and Errors is not
required to be disclosed by virtue of exemptions provided under paragraph
103AB of FRS 139.
The Group has applied the transitional provisions in FRS 7 and FRS 139 which
exempt entities from disclosing the possible impact arising from initial application of
the respective standards on the financial statements ofthe Group.
(b) Basis of measurement
The financial statements have been prepared on the historical cost convention.
(c) Functional and presentation currency
The individual financial statements of each entity in the Group are measured using
the currency of the primary economic environment in which the entity operates ("the
functional currency"). The consolidated financial statements are presented in Ringgit
Malaysia ("RM"), which is also the Company's functional currency.
(d) Use of estimates and judgements
Estimates, assumptions concerning the future and judgements are made in the
preparation of the financial statements. They affect the application of the Group's
accounting policies, reported amounts of assets, liabilities, income and expenses, and
disclosures made. They are assessed on an on-going basis and are based on historical
experience and other relevant factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The key assumptions concerning the future and other key sources of estimation or
uncertainty at the end of the reporting period, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next
financial year are set out below.
Page 11 of 130
248
14. ACCOUNTANTS' REPORT (Conl'd)
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(d) Use of estimates and judgements (Cont'd)
(i) Depreciation of property, plant and equipment
The costs of property, plant and equipment of the Group are depreciated on a
straight-line basis over the useful lives of the assets. Management estimates the
useful lives of the property, plant and equipment as disclosed in Note 5.2(c)(ii)
to the financial statements. These are common life expectancies applied in the
industries. Changes in the expected level of usage and technological
developments could impact the economic useful lives and the residual values of
these assets, therefore future depreciation charges could be revised.
(ii) Estimation of fair value of properties
In the absence of current prices in an active market for similar properties, the
Group considers information from a variety of sources, including:
(1) current prices in an active market for properties of a different nature,
condition or location (or subject to different lease or other contracts),
adjusted to reflect those differences; or
(2) recent prices of similar properties based on less active market, with
adjustments to reflect any changes in economic conditions since the date
of the transactions that occurred at those prices.
(iii) Impairment of financial assets
The Group assess at the end of each reporting period whether there is any
objective evidence that a financial assets is impaired. To determine whether
there is objective evidence of impairment, the Group considers factors such as
the probability of significant financial difficulties of the debtor and default or
significant delay in payments.
Where there is objective evidence of impairment, the amount and timing of
future cash flows are estimated based on historical loss experience for assets
with similar credit risk characteristics.
(iv) Income taxes
The Group has exposure to income taxes in numerous jurisdictions. There are
certain transactions and computations for which the ultimate tax determination
is uncertain during the ordinary course of business. Significant judgement is
involved especially in determining tax base allowances and deductibility of
certain expenses in determining the Group-wide provision for income taxes.
The Group recognises liabilities for expected tax issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recognised, such
differences will impact the income tax and deferred tax provisions in the period
in which such determination is made.
an international network of independent accounting and consulting firms Page 12 of 130
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No. 9183
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5.2 Significant accounting policies
The following are the significant accounting policies of the Group which have been applied
consistently to the periods presented in the financial statements, unless otherwise stated.
(a) Basis of consolidation
(i) Subsidiary companies
Subsidiary companies are those companies in which the Group has long term
equity interest and has the power, directly or indirectly to govern the financial
and operating policies so as to obtain benefits from its activities, generally
accompanying a shareholding of more than one half of the voting rights.
For acquisition of subsidiaries under common control, the identifiable assets
and liabilities were accounted for at their carrying values, in a manner similar
to the pooling of interests method of consolidation.
Intra-group balance, and any unrealised income and expenses arising from
intra-group transactions, are eliminated in preparing the consolidated financial
statements.
The gain or loss on disposal of a subsidiary company is the difference
between net disposal proceeds and the Group's share of its net assets
recognised in the consolidated statement of comprehensive income.
Minority interest is measured at the minorities' share of the fair value of
identifiable assets and liabilities at the date of acquisition by the Group and
the minorities' share of changes in equity since the date of acquisition, except
when the losses applicable to the minority in a subsidiary exceed the minority
interest in the equity of that subsidiary. In such cases, the excess and further
losses applicable to the minority are attributed to the equity holders of the
Group.
(ii) Changes in Group composition
Where a subsidiary issues new equity shares to minority shareholders for cash
consideration and the issue price has been established at fair value, the
reduction in the Group's interests in the subsidiary is accounted for as a
disposal of equity interest with the corresponding gain or loss recognised in
the statements of comprehensive income.
(b) Affiliated companies
The Group treats an affiliated company (other than holding, subsidiary or associated
company) as a company in which the shareholders and Directors are substantially in
common with those of the Group.
Page 13 of 130
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14. ACCOUNTANTS' REPORT (Coord)
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5.2 Significant accounting policies (Cont'd)
(c) Property, plant and equipment
(i) Recognition and measurement
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses. The policy of recognition and
measurement of impairment losses is in accordance with Note 5.2(d).
Cost includes expenditures that are directly attributable to the acquisition of
the asset. The cost of self-constructed assets includes the cost of materials and
direct labour, any other costs directly attributable to bringing the asset to
working condition for its intended use, and the costs of dismantling and
removing the items and restoring the site on which they are located.
Purchased software that is integral to the functionality of the related
equipment is capitalised as part of that equipment.
When significant parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items (major
components) of property, plant and equipment.
(ii) Depreciation
Depreciation is recognised in the statement of comprehensive income on a
straight-line basis over the estimated useful lives of property, plant and
equipment. Freehold land is not depreciated.
The estimated useful lives for the current and comparative periods are as
follows:
Factory buildings 50 years
Plant and machinery 10 to 11 years
Furniture and fittings 5 years
Office equipment 2.5 to 10 years
Motor vehicles 5 to 5.5 years
Tools and equipment 10 years
Electrical installation and renovation 5 to 10 years
The depreciable amount is determined after deducting the residual value.
Page 14 of 130
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(c) Property, plant and equipment (Cont'd)
(ii) Depreciation (Cont'd)
Depreciation methods, useful lives and residual values are reassessed at each
financial year end.
Gains or losses on disposals are determined by comparing net disposal
proceeds with carrying amount and are recognised in the statement of
comprehensive income.
(d) Impairment of non-financial assets
The carrying amounts of assets except for inventories are reviewed at the end of each
reporting period to determine whether there is any indication of impairment. Ifany such
indication exists then the asset's recoverable amount is estimated.
An impairment loss is recognised ifthe carrying amount of an asset or its cash-generating
unit exceeds its recoverable amount unless the asset is carried at a revalued amount. A
cash-generating unit is the smallest identifiable asset group that generates cash flows
that largely are independent from other assets and groups. Impairment losses are
recognised in the statement of comprehensive income in the period in which it arises.
The recoverable amount of an asset or cash-generating unit is the greater of its value in
use and its fair value less costs to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value ofmoney and the risks specific to the asset.
An impairment loss for an asset is reversed if, and only if, there has been a change in
the estimates used to determine the asset's recoverable amount since the last
impairment loss was recognised. The carrying amount of an asset is increased to its
revised recoverable amount, provided that this amount does not exceed the carrying
amount that would have been determined (net of amortisation or depreciation) had no
impairment loss been recognised for the asset in prior years. A reversal of impairment
loss for an asset is recognised in profit or loss, unless the asset is carried at revalued
amount, in which case, such reversal is treated as a revaluation increase.
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any No. 918382-T
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(e) Financial assets
Financial assets are recognised on the statements of financial position when, and only
when the Group becomes a party to the contractual provisions of the financial
instrument.
(i) Initial measurement
Financial assets are initially recognised at fair value plus transaction costs
except for financial assets at fair value through profit or loss, which are
recognised at fair value. Transaction costs for financial assets at fair value
through profit or loss are recognised immediately in the statement of
(ii) Subsequent measurement
Financial assets, both available-for-sale and at fair value through profit or
loss are subsequently carried at fair value. The fair value measurement
considerations of the Group are disclosed in Note 5.2(f). Equity instrument
that do not have a quoted market price in an active market and whose fair
value cannot be reliably measured, and derivatives that are linked to and
must be settled by delivery of such unquoted equity instruments, are
measured at cost. Loans and receivables are subsequently carried at
amortised cost using the effective interest method.
Changes in the fair values of financial assets, at fair value through profit or
loss including the effects of currency translation, interest and dividends, are
recognised in the statement of comprehensive income when the changes
arise.
Interest and dividend income on financial assets, available-for-sale are
recognised separately in the statement of comprehensive income. Changes
in fair values of available-for-sale equity securities (i.e. non-monetary items)
are recognised in the fair value reserve, together with the related currency
translation differences.
Page 16 of 130
253
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(e) Financial assets (Cont'd)
(iii) Classification
The Group classifies its financial assets in the following categories: at fair
value through profit or loss, loans and receivables and available-for-sale.
The classification depends on the purpose for which the assets were
acquired. Management determines the classification of its financial assets at
initial recognition. The designation of financial assets at fair value through
profit or loss is irrevocable.
Financial assets, atfair value through profit or loss
Financial assets designated as at fair value through profit or loss at inception
are those that are managed and their performances are evaluated on a fair
value basis, in accordance with a documented Company investment strategy.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are
presented as current assets, except for those maturing later than 12 months
after the statement of financial position date which are presented as non
current assets. Loans and receivables are presented as "trade and other
receivables" and "cash and cash equivalents" on the statement of financial
position.
Financial assets, available-for-sale
Financial assets, available-for-sale is non-derivatives that are either
designated in this category or not classified in any of the other categories.
They are presented as non-current assets unless management intends to
dispose of the assets within 12 months after the statement of financial
position date.
'Held-to-Maturity'Investment
'Held-to-maturity' investments are non-derivative financial assets with fixed
or determinable payments and fixed maturity that the Group have the
positive intention and ability to hold to maturity.
Subsequent to initial recognition, 'held-to-maturity' investments are
measured at amortised cost using the effective interest method less any
accumulated impairment losses. Gains or losses are recognised in profit or
loss when 'held-to-maturity' investments are derecognised or impaired.
Held-to-maturity investment are classified as non-current assets, except for
those having maturity date within 12 months after the reporting period
which are classified as current.
Page 17 of 130
254
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(iv) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on a
trade-date basis - the date on which the Group commits to purchase or sell
the asset.
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred and the Group has
transferred substantially all risks and rewards of ownership. On disposal of a
financial asset, the difference between the carrying amount and the sales
proceeds is recognised in the statement of comprehensive income.
(v) Impairment
The Group assesses at the end of each reporting period whether there is
objective evidence that a financial asset or a group of financial assets is
impaired and recognises an allowance for impairment when such evidence
exists.
Loans and receivables
Significant financial difficulties of the debtor, probability that the debtor will
enter bankruptcy, and default or significant delay in payments are objective
evidence that these financial assets are impaired. The carrying amount of
these assets is reduced through the use of an impairment allowance account
which is calculated as the difference between the carrying amount and the
present value of estimated future cash flows, discounted at the original
effective interest rate. When the asset becomes uncollectible, it is written off
against the allowance account. Subsequent recoveries of amounts previously
written off are recognised against the same line item in the statement of
The allowance for impairment loss account is reduced through the statement
of comprehensive income in a subsequent period when the amount of
impairment loss decreases and the related decrease can be objectively
measured. The carrying amount of the asset previously impaired is increased
to the extent that the new carrying amount does not exceed the amortised
cost, had no impairment been recognised in prior periods.
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~ Company No. 918382-T I]
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Financial assets, available-for-sale
Significant or prolonged declines in the fair value of the security below its
cost and the disappearance of an active trading market for the security are
objective evidence that the security is impaired.
The cumulative loss that was recognised in the fair value reserve is
transferred to the statement of comprehensive income. The impairment
losses recognised in the statement of comprehensive income on equity
securities are not reversed through the statement of comprehensive income.
Financial assets, held-to-maturity
Impairment in respect of held-to-maturity investment carried at amortised
cost are measured as the difference between the assets carrying amount and
the present values of their estimated future cash flows discounted at the
"held-to-maturity" investments' original effective interest rate.
(1) Fair value estimation of financial assets and liabilities
The fair values of financial instruments traded in active markets (such as exchange
traded and over-the-counter securities) are based on quoted market prices at the
statement of financial position date. The quoted market prices used for financial
assets are current bid prices; the appropriate quoted market prices for financial
liabilities are the current risk prices.
The fair values of financial instruments that are not traded in an active market are
determined by using a variety of methods and makes assumptions based on market
conditions existing at each statement of financial position date. Where appropriate,
quoted market prices or dealer quotes for similar instruments are used. Valuation
techniques, such as discounted cash flow analyses, are also used to determine the fair
values of the financial instruments. However, if the probabilities of various estimates
cannot be reasonably measured the Group is precluded from measuring the
instruments at fair value, and the financial instruments are measured at cost.
The fair values of current financial assets and liabilities carried at amortised cost
approximate their carrying amounts.
(g) Derivatives
Derivatives relate to fair value hedges on financial assets held through profit or loss.
Derivatives are initially recognised at fair values on the date the contract is entered
into and is subsequently carried at fair value.
The fair value hedges are not designated as effective hedging investments therefore
changes in fair value are recognised immediately in the statement of comprehensive
income.
Page 19 of 130
A member of Urbach Hacker Young International limited,
256
UHy _
(h) Financial liabilities
Financial liabilities are recognised on the statement of financial position when, and
only when the Group becomes a party to the contractual provisions of the financial
instrument.
Financial liabilities are recognised initially at fair value, plus, in the case of financial
liabilities other than derivatives, directly attributable transaction costs.
Subsequent to initial recognition, derivatives are measured at fair value. Other
financial liabilities (except for financial guarantee) are measured at amortised cost
using the effective interest method.
A financial liability is derecognised when the obligation under the liability is
extinguished. When an existing financial liability is replaced by another from the
same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a derecognition
of the original liability and the recognition of a new liability, and the difference in the
respective carrying amounts is recognised in the profit or loss account.
Financial liabilities are classified as either financial liabilities at fair value through
profit or loss or other financial liabilities.
Financial liabilities at jair value through profit or loss'
Financial liabilities at fair value through profit or loss include financial liabilities held
for trading and financial liabilities designated upon initial recognition as at fair value
through profit or loss.
A financial liability held for trading include derivative enter by the Group that do not
meet the hedge accounting criteria. Derivative liabilities are initially measured at fair
value and subsequently stated at fair value, with any resultant gains or losses
recognised in profit or loss. Net gains or losses on derivatives include exchange
difference.
The Group have not designated any financial liabilities as at fair value through profit
or loss.
Otherfinancial liabilities
The Group's other financial liabilities includes trade payables, other payables and
loans and borrowings.
Trade and other payables are recognised initially at fair value plus directly
attributable transaction cost and subsequently measured at amortised cost using the
effective interest method.
Loan and borrowings are recognised initially at fair value, net of transaction costs
incurred, and subsequently measured at amortised cost using the effective interest
method. Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months after the
reporting period.
Page 20 of 130
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(i) Inventories
Inventories are valued at the lower of cost and net realisable value after adequate
allowance has been made for all deteriorated, damaged, obsolete or slow-moving
inventories.
Cost is determined using the weighted average method. The cost of raw materials
comprises the original cost of purchase plus the cost of bringing the stocks to its present
location and condition.
Net realisable value is the estimate of the selling price in the ordinary course of business,
less the costs of completion and selling expenses.
G) Cash and cash equivalents
Cash and cash equivalent consist of cash in hand, bank balances and deposits with
banks and highly liquid investments which have an insignificant risk of changes in
value. For the purpose of the statement of cash flows, cash and cash equivalent are
presented net of bank overdrafts and pledged deposits, if any.
(k) Share capital
Ordinary shares are recorded at the nominal value and proceeds in excess of the
nominal value of shares issued, if any, are accounted for as share premium. Both
ordinary shares and share premium are classified as equity. Cost incurred directly
attributable to the issuance of shares is accounted for as a deduction from share
premium, otherwise, it is charged to the statement of comprehensive income.
Dividends on the ordinary shares, when declared or proposed by the Director of the
Company are disclosed within the components of equity. Upon approval and when
paid, such dividends will be accounted for in the shareholders' equity as an
appropriation of retained profits in the financial year in which the dividends are paid.
(I) Provision for liabilities
Provisions for liabilities are recognised when the Group has a present obligation as a
result of a past event and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation, and a reliable estimate of
the amount can be made. Provisions are reviewed at the end of each reporting period
and adjusted to reflect the current best estimate. Where the effect of the time value of
money is material, the amount of a provision is the present value of the expenditure
expected to be required to settle the obligation.
Page 21 of 130
258
UHy _
(m) Hire purchase payables
A lease is recognised as a finance lease if it transfers substantially to the Group all
the risks and rewards incident to ownership. All other leases are treated as operating
leases.
Assets acquired by way of hire purchase are stated at an amount equal to the lower of
their fair values and the present value of the minimum hire purchase payments at the
inception of the leases, less accumulated depreciation and impairment losses. The
corresponding liability is included in the statement of financial position as liabilities.
In calculating the present value of the minimum hire purchase payments, the discount
factor used is the interest rate implicit in the lease, when it is practical to determine;
otherwise, the Group's incremental borrowing rate is used.
Hire purchase payments are apportioned between the finance costs and the reduction
of the outstanding liability. Finance costs, which represent the difference between the
total hire purchase commitments and the fair value of the assets acquired, are
recognised as an expense in the statement of comprehensive income over the term of
the relevant lease so as to produce a constant periodic rate of charge on the remaining
balance of the obligations for each accounting period.
The depreciation policy for assets acquired under hire purchase is consistent with that
for depreciable property, plant and equipment which are owned.
Lease rental under operating lease is charged to the statement of comprehensive
income on a straight line basis over the term of the relevant lease.
(n) Revenue recognition
Revenue is recognised when it is probable that the economic benefits associated with
the transaction will flow to the enterprise and the amount of the revenue can be
measured reliably.
Revenue from sale of goods is measured at the fair value of the consideration
receivable and is recognised when the significant risks and rewards of ownership
have been transferred to the buyer.
(0) Foreign currencies
Foreign currency transactions are translated into the functional currency using the
exchange rates prevailing at the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the statement of comprehensive income.
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i Company No. 91&3&2-T ~
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(0) Foreign currency (Cont' d)
Translation differences on non-monetary items, such as financial assets held for
trading held at fair value through profit or loss, are reported as part of the fair value
gain or loss. Translation differences on non-monetary items, such as equities
classified as available-for-sale financial assets, are included in the exchange
fluctuation reserve in the equity.
The average and closing exchange rates used for the main foreign currency in the
Group is:
Financial period/year ended (average rate)
31 December 2008 RMB 1.00 : RM0.4820
31 December 2009 RNlBl.OO : RMO.5157
31 December 2010 RMBl.OO: RM0.4748
31 December 2008 HKDl.OO: RM0.4287
31 December 2010 HKDl.OO : RM0.4131
31 December 2008 USDl.OO : RM3.3362
31 December 2009 USDl.OO: RM3.5225
Financial period/year ended (closing rate)
31 December 2008 RMB 1.00 : RMO.5076
31 December 2009 RMBl.OO : RMO.5019
31 December 2010 RMBl.OO: RM0.4674
31 December 2008 USD1.00: RM3.4640
31 March 2011 USD1.00: HKD7.7831
31 March 2011 HKDl.OO : RMBO.8415
31 March 2011 RMBl.OO : RM0.4619
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(p) Income taxes
Income tax on the profit or loss for the financial year comprises current and deferred
tax. Current tax is the expected amount of income taxes payable in respect of the
taxable profit for the financial year and is measured using the tax rates that have been
enacted at the end of the reporting period.
Deferred tax is recognised on the liability method for all temporary differences
between the carrying amount of an asset or liability in the statements of financial
position and its tax base at the end of the reporting period. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax assets are recognised
for all deductible temporary differences, unused tax losses and unused tax credits to
the extent that it is probable that future taxable profit will be available against which
the deductible temporary differences, unused tax losses and unused tax credits can be
utilised.
Deferred tax asset and liability is measured at the tax rates that are expected to apply
to the period when the asset is realised or the liability is settled, based on the tax rates
that have been enacted or substantively enacted by the end of the reporting period.
The carrying amount of a deferred tax asset is reviewed at the end of each reporting
period and is reduced to the extent that it becomes probable that sufficient future
taxable profit will be available.
Deferred tax is recognised in the statements of comprehensive income, except when it
arises from a transaction which is recognised directly in equity, in which case the
deferred tax is also charged or credited directly in equity.
(q) Employee benefits
(i) Short term employee benefits
Wages, salaries, bonuses and social security contributions are recognised as
an expense in the year in which the associated services are rendered by
employees of the Group. Short term accumulating compensated absences
such as paid annual leave are recognised when services are rendered by
employees that increase their entitlement to future compensation absences.
Short term non-accumulating compensated absences such as sick and medical
leave are recognised when the absences occur.
The expected cost of accumulating compensated absences is measured as
additional amount expected to be paid as a result of the unused entitlement
that has accumulated at the statement of financial position date.
(ii) Defined contribution plans
As required by law, companies in Malaysia make contributions to the
Employees Provident Fund ("EPF"). Such contributions are recognised as an
expense in the statement of comprehensive income as incurred.
Page 24 of 130
26]
!CornpanyNo. 918382-T II
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6.0 FINANCIAL INFORMATION AND LIMITATION
Nakareg Holdings was incorporated in Malaysia as a public limited company under the
Companies Act, 1965 on 15 October 2010. There were no consolidated financial statements
prepared for Nakareg Holdings and its subsidiary companies for the FYE 31 December
2008, 31 December 2009 and 31 December 2010 as the Group was not in existence as at the
end of these financial years.
The financial information of Nakareg Holdings as presented in section 7 for the FPE 31
December 2010 are extracted from its audited financial statements in view that it was
incorporated on 15 October 2010.
The financial information of Nakareg, NKG Technology and Nakareg International as
presented in section 7 for FYE 31 December 2008, 31 December 2009 and 31 December
2010 are extracted from their audited financial statements, modified as appropriate, for the
purpose of this report. Detail of and/or reclassifications are disclosed under the respective
financial statements itself.
The scope of work conducted in the preparation of this report does not constitute an audit in
accordance with the approved standards of auditing in Malaysia. Except where otherwise
explicitly stated, information contained in this report was not independently verified by us.
In preparing this report, we have relied upon information and representations given to us by
Directors, officers and employees of the respective companies and sought explanations for
apparent discrepancies, if any.
DRY has not audited all the financial statements contained in this report. The information
contained in this report has been compiled from the financial statements of Nakareg
Holdings and its subsidiary companies which were reported on by their respective auditors
without any qualification.
No audits have been performed for the financial statements of Nakareg Holdings and its
subsidiary companies subsequent to 31 December 2010.
Page 25 of 130
A member of Urbach HaCKer Young International Limited,
an international networK of independent accounting and consulting firms
262
uHY-------
7.0 mSTORICAL FINANCIAL STATEMENTS
7.1 Nakareg Holdings Berhad ("Nakareg Holdings")
7.1.1 Statement of comprehensive income of Nakareg Holdings
The statement of comprehensive income of Nakareg Holdings for the financial period from 15
October 2010 (date of incorporation) to 31 December 2010 is set out below:
FPE 31
December
2010
Note RM
Revenue
Administrative expenses (4,464)
Net loss for the financial period 7.1.5.1 (4,464)
7.1.2 Statement of financial position ofNakareg Holdings
FPE 31
December
2010
Note RM
Current Assets
Prepayment 56,774
Cash in hand 2
Total Assets 56,776
Equity
Share capital 7.1.5.2 2
Accumulated loss (4,464)
(4,462)
Current Liability
Other payab1es 61,238
Total Liability 61,238
56,776
Page 26 of 130
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7.0 HISTORICAL FINANCIAL STATEMENTS
7.1 Nakareg Holdings (Cont'd)
7.1.3 Statement of changes in equity of Nakareg Holdings
The statement of changes in equity of Nakareg Holdings for the financial period from IS
October 20I 0 (date of incorporation) to 31 December 20 lOis set out below:
Share Accumulated
Capital Loss Total
RM RM RM
At date of incorporation 2 2
Net loss for the financial period,
representing total
income for the financial period (4,464) (4,464)
At 31 December 2010 2 (4,464) (4,462)
7.1.4 Statement of cash flows ofNakareg Holdings
The statement of cash flows of Nakareg Holdings for the financial period from IS October
2010 (date of incorporation) to 31 December 2010 is set out below:
FPE31
December
2010
RM
Cash Flows from Operating Activities
Net loss for the financial period (4,464)
Decrease/(Increase) in working capital
Prepayment (56,774)
Other payables 61,238
4,464
Net cash flows from/(to) operating activities
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at date of
incorporation 2
Cash and cash equivalents at end of
the financial period 2
Cash and cash equivalents at end of
the financial period comprises:
Cash in hand 2
Page 27 of 130
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14. ACCOUNTANTS' REPORT {Conl'dj
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7.0 HISTORICAL FINANCIAL STATEMENTS
7.1 Nakareg Holdings (Cont'd)
7.1.5 Notes to the financial statements
7.1.5.1 Net Loss for the Financial Period
Net loss for the financial
amounting to RM2,750.
period IS derived after charging incorporation fee
7.1.5.2 Share Capital
Ordinary shares ofRM1.00 each
FPE 31
December
2010
RM
Authorised
At date of incorporation/31 December 100,000
Issued and fully paid
At date of incorporation/31 December 2
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!Company No. 918382-T I
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7.0 mSTORICAL FINANCIAL STATEMENTS
7.2 Nakareg Sdn Bhd ("Nakareg")
7.2.1 Statement of comprehensive income ofNakareg
<--------------- FYE 31 December --------------->
2008 2009 2010
Note RM RM RM
Revenue 7.2.5.1 4,714,062 4,182,452 12,969,516
Cost of sales (4,678,203) (3,510,766) (11,694,121)
Gross profit 35,859 671,686 1,275,395
Other operating income 1,610,965 57,918 2,958,339
Administration expenses (683,441) (597,943) (1,109,248)
Finance costs 7.2.5.2 (115,487) (86,774) (115,321)
Profit/CLoss) before taxation 7.2.5.3 562,896 (197,683) 2,754,580
Taxation 7.2.5.4 44,597
Net profit/(loss) for the financial
year, representing total
comprehensive income for
the financial year 607,493 (197,683) 2,754,580
Page 29 of 130
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7.0 HISTORICAL FINANCIAL STATEMENTS (CONT'D)
7.2 Nakareg (Cont'd)
7.2.2 Statement of financial position ofNakareg
<--------------- FYE 31 December --------------->
2008 2009 2010
Note RM RM RM
Non-Current Asset
Property, plant and equipment 7.2.5.5 2,346,072 2,396,482 2,598,421
Current Assets
Inventories 7.2.5.6 744,454 530,542 1,779,666
Trade receivables 7.2.5.7 927,002 1,304,510 3,475,340
Other receivables 7.2.5.8 690,196 291,807 2,608,419
Amount owing by holding
company 7.2.5.9 4,464
Amount owing by related
companies 7.2.5.10 939,340 939,340 907,564
Amount due by Directors 7.2.5.11 120,110
Tax recoverable 36,318 89,114 105,778
Cash and bank balances 7.2.5.12 74,472 212,740 117,759
3,411,782 3,488,163 8,998,990
Total Assets 5,757,854 5,884,645 11,597,411
Page 30 of 130
267
UHy _
7.2.2 Statement of financial position ofNakareg (Cont'd)
<--------------- FYE 31 December --------------->
2008 2009 2010
Note RM RM RM
Equity
Share capital 7.2.5.13 733,333 733,333 733,333
Share premium 193,329 193,329 193,329
Retained profits 1,349,844 1,152,161 3,906,741
Total Equity 2,276,506 2,078,823 4,833,403
Hire purchase payables 7.2.5.14 312,328 108,322 66,414
Bank borrowings 7.2.5.15 751,722 911,686 1,047,729
1,064,050 1,020,008 1,114,143
Current Liabilities
Trade payables 7.2.5.16 448,302 381,186 1,315,537
Other payables 7.2.5.17 140,667 963,855 213,323
Amount due to related
companies 7.2.5.10 567,732 822,416 2,060,161
Amount due to Directors 7.2.5.11 563,760 1,075,768
Hire purchase payables 7.2.5.14 74,962 55,751 38,372
Bank borrowings 7.2.5.15 621,875 562,606 946,704
2,417,298 2,785,814 5,649,865
Total Liabilities 3,481,348 3,805,822 6,764,008
Total Equity and Liabilities 5,757,854 5,884,645 11,597,411
Page 31 of 130
268
UHy
7.0 mSTORICAL FINANCIAL STATEMENTS (CONT'D)
7.2 Nakareg (Coot'd)
7.2.3 Statement of changes in equity ofNakareg
Share Share Retained
Capital Premium Profits Total
RM RM RM RM
At 1 January 2008 733,333 193,329 742,351 1,669,013
representing total
comprehensive income for the
financial year 607,493 607,493
At 31 December 2008 733,333 193,329 1,349,844 2,276,506
At 1 January 2009 733,333 193,329 1,349,844 2,276,506
Net loss for the financial year,
representing total
financial year (197,683) (197,683)
At 31 December 2009 733,333 193,329 1,152,161 2,078,823
At 1 January 2010 733,333 193,329 1,152,161 2,078,823
representing total
financial year 2,754,580 2,754,580
At 31 December 201O 733,333 193,329 3,906,741 4,833,403
Page 32 of 130
269
UHy _
7.2.4 Statement of cash flows of Nakareg
<-------------------- FYE 3I December ----------------->
2008 2009 2010
RM RM RM
Profit/CLoss) before taxation 562,896 (197,683) 2,754,580
Adjustment for:
Depreciation of property, plant and equipment 224,315 180,169 266,355
Gain on foreign exchange - Unrealised (368,528)
Gain on disposal of property, plant and
equipment (45,650) (26,362)
Interest expense 115,487 86,774 115,321
Dividend income (1,606,356) (2,004,690)
Operating (loss)/profit before working capital
changes (703,658) 23,610 773,032
Decrease/(lncrease) in working capital
Inventories (326,226) 213,912
Trade receivables 87,189 (377,508)
Other receivables (38,789) (50,061)
Trade payables (10) (67, II6)
Other payables (37,809) 823,188
Amount owing by holding company
Amount owing by/to Directors (683,870)
Amount owing by/to related companies 254,684
113,229
Cash generated from/(used in) operations 136,839
Interest paid (86,774)
Tax paid (52,796
(139,570)
Net cash used in operating activities (2,731)
Cash Flows From Investing Activities
Dividend received 1,157,906 448,450
Proceeds from disposal of plant and equipment 214,600 33,000
Purchase of property, plant and equipment
[Note 7.2.5.5 (a)] (42,348) (340,529) (474,932)
Net cash from/(used in) investing activities 1,115,558 322,521 (441,932)
(Decreased)Increased in bankers' acceptance (283,000) 32,000 117,000
Drawdown of term loans 300,000 272,000
Repayment of term loans (51,063) (73,493) (107,206)
Repayment to hire purchase payables (60,780) (282,217) (59,287)
Net cash (used in)/from financing activities (394,843) (23,710) 222,507
Net (decrease)/increase in cash and cash
equivalents
(304,603) 296,080 (333,328)
Cash and cash equivalents at beginning
of the financial year (49,221) (353,824) (57,744)
Cash and cash equivalents at end of the
financial year (353,824) (57,744) (391,072)
financial year comprises:
Cash and bank balances 74,472 212,740 117,759
Bank overdrafts (secured) (428,296) (270,484) (508,831)
(353,824) (57,744) (391,072)
Page 33 of 130
270
UHy _
7.2.5 Notes to the financial statements
7.2.5.1 Revenue
Revenue represents the invoiced value of goods sold net of trade discounts and
returns for transformer products during the financial year.
7.2.5.2 Finance Costs
<------------- FYE 31 December ------------>
2008 2009 2010
RM RM RM
Interest expense on:
Bankers' acceptance 26,529 17,511 17,355
Bank overdraft 13,713 9,246 20,750
Hire purchase 21,161 6,285 7,698
Term loans 54,084 53,732 69,518
115,487 86,774 115,321
7.2.5.3 Profit/CLoss) before Taxation
Profit/CLoss) before taxation is derived after charging/(crediting):
<------------- FYE 31 December ------------>
2008 2009 2010
RM RM RM
Auditors' remuneration
- current year 8,600 8,600 8,000
- other provision in respect of prior
years (4,690) (920)
Depreciation of property, plant and
equipment 224,315 180,169 266,355
Directors' remuneration
- salaries and other emoluments 114,000 114,000 308,827
-EPF 13,680 13,680 37,068
Gain on disposal of plant and
equipment (45,650) (26,362)
Gain on foreign exchange
- realised (8,929) (520,991)
- unrealised (3,593) (368,528)
Rental of factory 14,700 12,664 26,240
Dividend income receivable from
a former subsidiary company (l,606,356) (2,004,690)
Page 34 of 130
271
14. ACCOUNTANTS' REPORT {Conf'dj
UHy _
7.2.5 Notes to the financial statements (Cont'd)
7.2.5.4 Taxation
<------------- FYE 31 December ------------>
2008 2009 2010
RM RM RM
Current income tax
- under provision in prior years 2,336
2,336
Deferred tax:
- Relating to origination and
reversal of temporary differences (34,183)
- over provision in prior years (12,750)
(46,933)
Tax expense for the financial year (44,597)
Income tax is calculated at a rate of 20% on the first RM500,000 and 25% (2009: 25%,
2008: 26%) on the balance of chargeable income of the estimated assessable profit/(loss)
for the financial year.
A reconciliation of income tax expense applicable to profit/(loss) before taxation at the
statutory income tax rate to income tax expense at the effective income tax rate of
Nakareg is as follows:
<------------- FYE 31 December ------------>
2008 2009 2010
RM RM RM
Profit/(Loss) before taxation
Taxation at statutory tax rate of 25%
(2009: 25%, 2008: 26%)
Expenses not deductible for tax
purposes
Tax incentive for small and medium
scale companies at 20% tax rate
Income not subject to tax purposes
Deferred tax assets not recognised
Reversal of deferred tax assets
not recognised
Under provision of taxation in respect
of prior years
Over provision of deferred tax in
respect of prior years
Tax expense for the financial year
272
UHy _
7.2.5.4 Taxation (Cont'd)
Subject to the agreement from Inland Revenue Board, Nakareg has unused tax losses,
unutilised capital allowances and unutilised reinvestment allowances available for carry
forward to set-off against future taxable profits as follows:
<------------- FYE 31 December ------------>
2008 2009 2010
RM RM RM
Unused tax losses 816,558 848,000 716,000
Unutilised capital allowances 126,856 282,000
Unutilised reinvestment al10wances 508,000 508,000 508,000
1,451,414 1,638,000 1,224,000
Under the single-tier tax system which came into effect from year of assessment 2008,
companies are not required to have tax credits under Section 108 of the Income Tax Act
1967 for dividend payment purposes. Dividends paid under this system are tax exempt
in the hands of shareholders.
Nakareg has sufficient tax credit under Section 108 of the Income Tax Act, 1967 and
tax exempt account to pay dividend of approximately RM643,000, RM643,000 and
RM643,000 respectively out of its entire retained profits as at 31 December 2008, 31
December 2009 and 31 December 2010 respectively without incurring additional tax
liability. If the balance of the retained profits were to distributed as dividends, Nakareg
would have a Section 108 shortfall of approximately RM313,000, RM247,000 and
RMl,165,000 respectively as at 31 December 2008, 31 December 2009 and 31
December 2010 as no election has been made to disregard the Section 108 as at todate
by Nakareg.
Page 36 of 130
273
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14. ACCOUNTANTS' REPORT (Conf'dj
UHy _
7.2.5.5 Property, Plant and Equipment (Cont'd)
(a) The aggregate additional cost for the property, plant and equipment of Nakareg
during the financial year under hire purchase financing and cash payments are as
follows:
<------------ FYE 31 December ------'---->
2008 2009 2010
RM RM RM
Aggregate costs 42,348 399,529 474,932
Less: Hire purchase financing (59,000)
Cash payments 42,348 340,529 474,932
(b) The freehold land and factory buildings of Nakareg with carrying amount of
RMI,556,442 (2009: RMI,582,559, 2008: RMI,609,956) have been pledged to
licensed banks for credit facilities granted to Nakareg as disclosed on Note 7.2.5.15.
(c) Included in the property, plant and equipment ofNakareg is motor vehicle acquired
under hire purchase with carrying amount ofRM53,536 (2009: RMI08,722, 2008:
RM296,408) respectively.
7.2.5.6 Inventories
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
At cost:
Raw materials 408,474 423,528 477,688
Finished goods 335,980 107,014 1,301,978
744,454 530,542 1,779,666
Page - 40 - of 130
277
UHy _
7.2.5.7 Trade Receivables
The normal trade credit terms ofNakareg is 90 days (2009: 90 days, 2008: 90 days). Other
credit terms are assessed and approved on a case to case basis.
Trade receivables are recognised at their original invoice amounts which represent their
fair value on initial recognition.
Analysis of the trade receivables ageing is as follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Neither past due nor impair 112,074 1,239,135 3,361,441
Past due less than 30 days not impaired 163,572 49,428 29,284
Past due for more than 31 to 60 days
not impaired 264,419 7,191 84,615
Past due for more than 61 to 90 days
not impaired 158,108 8,756
Past due for more than 90 days not impaired 228,829
927,002 1,304,510 3,475,340
Nakareg has not made any impairment on its past due receivables as the Directors are of
the view that all the receivables are recoverable.
The credit exposure profile of trade receivables is as follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Number of debtor 2 3 3
% of the total gross trade receivables
as at financial year end 89 93 90
The currency exposure profile oftrade receivables is as follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Ringgit Malaysia 896,595 1,219,353 3,330,965
United States Dollar 30,407 85,157 144,375
927,002 1,304,510 3,475,340
Page - 41 - of 130
278
Company No. 918382
UHy _
7.2.5.8 Other Receivables
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Other receivables 129,928 208,273 64,873
Prepayments 56,233 30,239 434,791
Deposits 55,585 53,295 104,065
Dividend receivable from a former
subsidiary company 448,450 2,004,690
690,196 291,807 2,608,419
The currency exposure profile of other receivables is as follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Ringgit Malaysia 241,746 291,807 2,543,546
United States Dollars 448,450 64,873
690,196 291,807 2,608,419
7.2.5.9 Amount Owing by Holding Company
This represents unsecured, interest free advances which are repayable on demand.
7.2.5.10 Amount Owing by/(to) Related Companies
(a) Amount owing by related companies
This represents unsecured, interest free advances and repayable on demand.
The foreign currency exposure profile of amount owing by related companies is as
follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Page - 42 - of 130
279
!CornpanyNo. 918382-T ~
UHy _
7.1.5.10 Amount Owing by/(to) Related Companies (Cont'd)
(b) Amount owing to related companies
This represents unsecured, interest free advances and repayable on demand except
for an amount ofRM1,490,533 (2009: RM822,416, 2008: Nil) which is made up of
trade balances.
The foreign currency exposure profile of amount owing to related companies is as
follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Ringgit Malaysia 537,754 573,740 569,628
United States Dollar 29,978 248,676 1,490,533
567,732 822,416 2,060,161
7.2.5.11 Amount Owing by/(to) Directors
These represent unsecured, interest free advances which are repayable on demand.
7.2.5.12 Cash and Bank Balances
The foreign currency exposure profile of cash and bank balances are as follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
74,472 212,740 117,759
Page - 43 - of 130
A member of Urbach Hacker Young Internationa/limited,
280
UHy _
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Authorised 1,000,000 1,000,000 1,000,000
Issued and fully paid 733,333 733,333 733,333
7.2.5.14 Hire Purchase Payables
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
(a) Minimum hire purchase payments
Payable within one year
Payable between one and five years
Less: Future finance charges
91,644
342,127
433,771
(46,481)
387,290
63,848
116,648
180,496
(16,423)
164,073
43,069
69,897
112,966
(8,180)
104,786
(b) Present value of hire
purchase liabilities
Payable within one year 74,962 55,751 38,372
Payable between one and five years 312,328 108,322 66,414
387,290 164,073 104,786
Analysed as:
Repayable within twelve months 74,962 55,751 38,372
Repayable after twelve months 312,328 108,322 66,414
387,290 164,073 104,786
The interest rate of the hire purchase liabilities at the end of the reporting period is as
follows:
<------------ FYE 31 December ---------->
2008 2009 2010
% % %
Hire purchase payables 4.25 to 4.25 to 2.60 to
10.68 10.68 5.90
Page - 44 - of 130
281
uHY-------
7.2.5.15 Bank Borrowings
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Secured
Bank overdrafts 428,296 270,484 508,831
Term loans 795,301 1,021,808 1,186,602
Total borrowings 1,373,597 1,474,292 1,994,433
Analysed as:
Repayable within twelve months
Secured
Bank overdrafts 428,296 270,484 508,831
Term loans 43,579 110,122 138,873
621,875 562,606 946,704
Repayable after twelve months
Secured
Term loans 751,722 911,686 1,047,729
1,373,597 1,474,292 1,994,433
The above credit facilities obtained from licensed banks is secured by the following:
(a) Certain freehold land and factory buildings ofNakareg as disclosed in Note 7.2.5.5
(b); and
(b) Jointly and severally guaranteed by the Directors ofNakareg.
The maturity of bank borrowings is as follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Analyse as:
Within one year
621,875 562,606 946,704
Within one and two years 54,572 116,484 116,938
Within two and five years
199,907 376,511 398,539
After five years
497,243 418,691 532,252
1,373,597 1,474,292 1,994,433
Page - 45 - of 130
A member 01 Urbach Hacker Young International Limited,
an international network 01 independent accounting and consulting lirms
282
UHy _
7.2.5.15 Bank Borrowings (Cont'd)
The interest rate of the above credit facilities at the end of the reporting period is as
follows:
<------------ FYE 31 December ---------->
2008 2009 2010
% % %
Bank overdrafts 7.75
7.05 7.14
Bankers' acceptances 3.85 4.50 7.22
Term loans 4.00 to 4.00 to
7.05 6.85 7.33
7.2.5.16 Trade Payables
The normal trade credit terms granted to Nakareg is 60 days (2009: 60 days, 2008: 60
days). Other credit terms are assessed and approved on a case by case basis.
The foreign currency exposure profile of trade payables is as follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
United States Dollar 773,030
Japanese Yen 20,673
448,302 381,186 1,315,537
Page - 46 - of 130
283
14. ACCOUNTANTS' REPORT {Conf'dj
UHy _
7.2.5 Notes to the fmancia1 statements (Cont'd)
7.2.5.17 Other Payab1es
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Others payab1es 6,000 850,365 114,990
Accruals 134,667 113,490 98,333
140,667 963,855 213,323
7.2.5.18 Deferred Tax Assets
Deferred tax assets have not been recognised in respect of the following temporary
differences:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Accelerated capital allowances (34,997) (188,926) (169,366)
Unused tax losses 816,558 848,130 716,314
Unutilised capital allowances 126,856 282,848
Unutilised reinvestment allowances 508,909 508,909 508,909
1,417,326 1,450,961 1,055,857
7.2.5.19 Staff Costs
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Staff costs (excluding Directors) 1,478,494 1,270,511 1,561,855
Included in the staff costs above are contributions made to the Employees Provident Fund
under a defined contribution plan for Nakareg amounting to RM131,537 (2009:
RM77,472, 2008: RM86,970) respectively.
Page - 47 - of 130
284
UHy _
7.2.5.20 Related Party Disclosures
(a) In addition to the transactions detailed elsewhere in the fmancial statements,
Nakareg had the following transactions with related parties during the financial year.
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Related companies
Dividend received/receivable 1,606,356 2,004,690
Purchase of materials 113,023 339,158 3,360,332
Sale of goods 5,615
The Directors are of the opinion that all the transactions above have been entered
into in the normal course of business and have been established on terms and
conditions that are not materially different from those obtainable in transactions with
unrelated parties.
(b) Information regarding outstanding balances arising from related party transactions as
at 31 December 2008, 31 December 2009 and 31 December 2010 is disclosed in
Notes 7.2.5.9 and 7.2.5.10.
(c) Information regarding the compensation of key management personnel is as follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Short-term employee
benefits
- Salaries and other emoluments 114,000 114,000 308,827
-EPF 13,680 13,680 37,068
127,680 127,680 345,895
Key management personnel include personnel having authority and responsibility
for planning, directing and controlling the activities of the entity, including any
Director ofNakareg.
Page - 48 - of 130
285
14. ACCOUNTANTS' REPORT (Conrd)
UHy _
7.2.5.21 Financial Instruments
Certain comparative figures have not been presented for 31 December 2008 and 31
December 2009 by virtue of the exemption given in paragraph 44AA of FRS 7, which is
effective for annual periods beginning on and after 1 January 2010.
(a) Classification of financial instruments
Financial assets and financial liabilities are measured on an ongoing basis either at
fair value or at amortised cost. The principal accounting policies in Section 5
describe how the classes of financial instruments are measured, and how income
and expense, including fair value gains and losses, are recognised. The following
table analyses the financial assets and financial liabilities in the statement of
financial position by the class of financial instruments to which they are assigned,
and therefore by the measurement basis:
Financial
Loans and liabilities at
receivables amortised cost Total
RM RM RM
2008
Financial Assets
Trade receivables 927,002 927,002
Other receivables 690,196 690,196
Amount owing by
related companies 939,340 939,340
Cash and bank balances 74,472 74,472
Total financial assets 2,631,010 2,631,010
2009
Financial Assets
Trade receivables 1,304,510 1,304,510
Amount owing by
Amount owing by
Directors 120,110 120,110
Total financial assets 2,868,507 2,868,507
2010
Financial Assets
Trade receivables
3,475,340
3,475,340
Other receivables
2,608,419
2,608,419
company
4,464
4,464
Amount owing by
related companies
907,564
907,564
117,759
117,759
Total financial assets 7,113,546
7,113,546
Page - 49 - of 130
286
UHy _
7.2.5.21 Financial Instruments (Cont'd)
Loans and
receivables
Financial
liabilities at
amortised cost Total
2008
Financial Liabilities
Trade payables
Other payables
Amount owing to related
companies
Amount owing to Directors
Bank borrowings
Total financial liabilities
RM RM
448,302
140,667
567,732
563,760
387,290
1,373,597
3,481,348
RM
448,302
140,667
567,732
563,760
387,290
1,373,597
3,481,348
2009
Trade payables 381,186 381,186
Other payables 963,855 963,855
companies 822,416 822,416
Hire purchase payables 164,073 164,073
Bank borrowings 1,474,292 1,474,292
Total financial liabilities 3,805,822 3,805,822
2010
Trade payables 1,315,537 1,315,537
companies
2,060,161 2,060,161
Amount owing to Directors 1,075,768 1,075,768
104,786 104,786
Bank borrowings
1,994,433 1,994,433
6,764,008 6,764,008
Page - 50 - of 130
287
UHy _
(b) Financial assets/(liabilities) at "fair value through profit or loss"
There is no fair value through profit or loss has been imposed as Nakareg's credit
risk and liquidity risk are within the acceptable collection/payment period.
(c) Capital risk management objectives and policies
Nakareg's management manages its capital to ensure that Nakareg is able to
continue as a going concern and maintains an optimal capital structure so as to
maximise shareholder value. The management reviews the capital structure by
considering the cost of capital and the risks associated with the capital.
The capital of Nakareg consists of issued capital, cash and cash equivalents and
bank borrowings.
(d) Financial risk management objectives and policies
Nakareg's financial risk management policy is to ensure that adequate financial
resources are available for the development of Nakareg's operations whilst
managing its financial risks, including credit risk, liquidity risk and market risks.
Nakareg operate within clearly defined guidelines that are approved by the Board
and Nakareg's policy is not to engage in speculative transactions.
(e) Credit risk
Cash at banks are placed with a credit worthy financial institutions.
Credit risk arises mainly from the inability of its customers to make payments when
due. Nakareg has adopted a policy of only dealing with creditworthy counterparties.
Receivables are monitored on an ongoing basis via Nakareg's management
reporting procedures and action will be taken for long outstanding debts.
The carrying amounts of the financial assets recorded on the statement of financial
position at end of each reporting period represents Nakareg's maximum exposure to
credit risk in relation to financial assets. No financial assets carry a significant
exposure to credit risk except as disclosed in Note 7.2.5.7 to the financial statements.
(t) Liquidity risk
Nakareg's funding requirements and liquidity risks are managed with the objective
of meeting business obligations on a timely basis. Nakareg monitors its cash flows
and ensures that sufficient funding is in place to meet the obligations as and when
they fall due.
The following table analyses the remaining contractual maturity for non-derivative
financial liabilities. The tables have been drawn up based on the undiscounted cash
flows of financial liabilities based on the earliest date Nakareg can be required to
pay.
Page - 51 - of 130
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UHy _
(g) Market risks
(i) Foreign currency exchange risk
Nakareg incurs foreign currency risk on transactions that are denominated
in foreign currencies. The currencies giving rise to this risk are primarily
the United States Dollar (USD). Nakareg has not entered into any derivative
instruments for hedging or trading purposes as the net exposure to foreign
currency risk is not significant.
The carrying amounts of the Nakareg's foreign currency denominated
financial assets and financial liabilities at end of each reporting period are
as follows:
Financial Assets
United
States Dollar Total
RM RM
2008
Amount owing by related companies 939,340 939,340
1,483,302 1,483,302
2009
1,177,084 1,177,084
2010
1,128,584 1,128,584
Page - 54 - of 130
291
UHy _
(g) Market risks (Cont'd)
(i) Foreign currency exchange risk (Cont'd)
United Japanes
States Dollar Yen Total
RM RM RM
2008
Amount owing to
2009
Amount owing to
248,676 20,673 269,349
2010
Amount owing to
related companies 1,490,533 1,490,533
2,263,563 2,263,563
(ii) Foreign currency risk sensitivity
A 10% strengthening of Ringgit Malaysia against the following foreign
currencies at the end of the reporting period would increase/(decrease)
the profit before tax and other comprehensive income by the amounts
shown below. This analysis assumes that all other variables remain
unchanged.
(Loss)/Profit before Taxation
2008 2009 2010
RM RM RM
United States Dollar (145,332) (92,841) 113,498
Japanese Yen 2,067
(145,332) (90,774) 113,498
A 10% weakening of Ringgit Malaysia against the above foreign
currencies at the end of the reporting period would have had the equal
but opposite effect on the above currencies to the amounts shown above,
on the basis that all other variables remain unchanged.
Page 55 of 130
292
UHy _
(f) Market risk
(iii) Interest rate risk
Nakareg obtains financing through other financial liabilities. Nakareg's
policy is to obtain the financing with the most favourable interest rates in
the market.
Nakareg constantly monitors its interest rate risk and does not utilise
interest swap contracts or other derivative instruments for trading or
speculative purposes. At the end of the reporting period, there were no
such arrangements, interest rate swap contracts or other derivative
instruments outstanding.
The carrying amounts of the Nakareg's financial instruments that are
exposed to interest rate risk are as follows:
Financial Liability
2008 2009 2010
RM RM RM
Bank borrowings 1,373,597 1,474,292 1,994,433
Nakareg is exposed to interest rate risk arising from its short and long
term debts obligations.
(iv) Interest rate risk sensitivity
An increase in market interest rates by 1% on financial liability of
Nakareg which have variable interest rates at the end of the reporting
period would decrease the profit before taxation by RM199,443 (2009:
RM147,429 and 2008: RM137,360) respectively. This analysis assumes
that all other variables remain unchanged.
A decrease in market interest rates by 1% on financial liability of
Nakareg which have variable interest rates at the end of the reporting
period would have had the equal but opposite effect on the amounts
shown above, on the basis that all other variables remain unchanged.
A member of Urbach Hacker Young International Limited, Page 56 of 130
293
any No. 918382-T
UHy _
(g) Fair values of financial assets and financial liabilities
(i) Fair value of financial instruments by categories that are carried at fair
value and whose carrying amounts are reasonable approximation of fair
value:
The carrying amount of these financial assets and financial liabilities are
reasonable approximation of fair values, either due to their short-term
nature or that they are floating rate instruments that are re-priced to market
interest rates on or near the end of the reporting period.
(ii) Fair value of financial instruments by categories that are not carried at fair
value and whose carrying amounts are not reasonable approximation of fair
value:
Financial Liability
Carrying Fair
amount val ue
RM RM
2008
2009
2010
Page 57 of 130
294
UHy _
7.2.5.22 Comparative Figures
As
previously
stated Reclassification As restated
RM RM RM
2008
Statement of Financial Position
Non-Current Asset
Investment in a subsidiary
company 1,140,000 (1,140,000)
Current Assets
Other receivables 645,687 44,509 690,196
Amount owing by a
subsidiary company 31,776 (31,776)
Amount owing by a
related company 939,340 939,340
Current Liabilities
Trada payables 478,280 (29,978) 448,302
Amount owing to affiliated
companies 493,245 (493,245)
companies 567,732 567,732
Bank borrowings 696,837 (74,962) 621,875
Bank borrowings 1,064,050 (312,328) 751,722
Equity
Retained profits 1,582,280 (232,436) 1,349,844
Statement of Comprehensive Income
Cost of sales 4,526,465 151,738 4,678,203
Other operating expenses 436,738 (151,738) 285,000
A member of Urbach Hacker Young International Limited, Page 58 of 130
295
UHy
7.2.5.22 Comparative Figures (Cont'd)
As
previously
stated
RM
2008
Statement of Cash Flows
Decrease/(Increase) in
Working Capital
Receivables 92,909
Trade receivables
Other receivables
Payables (7,841)
Trade payables
Other payables
Amount owing by/to
affiliated companies 242,146
Amount owing by/to
related companies
2009
Current Assets
Other receivables 232,576
Amount owing by a
subsidiary company 31,776
Amount owing by
related companies
Current Liabilities
Trade payables 572,829
Amount owing by affiliated
companies 1,413,542
Amount owing by related
companies
Bank borrowings 618,357
Bank borrowings 1,020,008
Equity
Retained profits 1,384,597
296
Reclassification
RM
(92,909)
87,189
(38,789)
7,841
(10)
(37,809)
(242,146)
316,633
59,231
(31,776)
939,340
(191,643)
842,000
(1,413,542)
822,416
55,751
(55,751)
108,322
(108,322)
(232,436)
_
As restated
RM
87,189
(38,789)
(10)
(37,809)
316,633
291,807
939,340
381,186
963,855
822,416
55,751
562,606
108,322
911,686
1,152,161
Page 59 of 130
UHy_______________
7.2.5.22 Comparative Figures (Cont'd)
As
previously
stated
RM
2009
Decrease!(Increase) in
Working Capital
Receivables ( 412,847)
Trade receivables
Other receivables
Payables 75,737
Trade payables
Other payables
Amount owing by/to
affiliated companies 920,297
Amount owing by/to
related companies
2010
Current Assets
company
Amount owing by
related companies
Current Liability
Equity
Retained profits 4,139,177
Decreasel(Increase) in
Working Capital
company
Reclassification
RM
412,847
(377,508)
(50,061)
(75,737)
(67,116)
823,188
(920,297)
254,684
4,464
907,564
4,464
(232,436)
(4,464)
4,464
As restated
RM
(377,508)
(50,061)
(67,116)
823,188
254,684
4,464
907,564
213,323
3,906,741
(4,464)
91,468
A member of Urbach Hacker Young International limited. Page 60 of 130
297
14. ACCOUNTANTS' REPORT ( C o o t ~ d )
UHy_______________
7.3 NKG Technology Sdn Bhd (''NKG Technology")
7.3.1 Statement of comprehensive income ofNKG Technology
<----------------- FYE 31 December --------------->
2008 2009 2010
Note RM RM RM
Revenue 7.3.5.1 914,115 698,683 926,913
Cost of sales (598,293) (521,527) (734,521)
Gross profit 315,822 177,156 192,392
Administrative expenses (3,520) (100,356) (110,491)
Other operating expenses (802) (10,680) (631)
Finance cost 7.3.5.2 (5,838)
Profit before taxation 7.3.5.3 311,500 66,120 75,432
Taxation 7.3.5.4 (19,613) (15,510) (16,510)
Net profit for the financial
year, representing total
for the financial year 291,887 50,610 58,922
Page 61 of 130
298
u ~ _______________
7.3 NKG Technology (Cont'd)
7.3.2 Statement of financial position ofNKG Technology
Non-Current Asset
Plant and equipment
Current Assets
Inventories
Trade receivables
Other receivables
Amount owing by a Director
Amount owing by a related
company
Cash at bank
Total Assets
Equity
Share capital
Accumulated losses
Total equity
Non-Current LiabiJities
Finance lease
Term loan
Deferred tax liability
Current Liabilities
Trade payables
Other payables
Amount owing to a Director
Finance lease
Term loan
Tax payable
Total Liabilities
Total Equity and Liabilities
A member of Urbach Hacker Young Intemationallimited,
<---------------- FYE 31 December -------------->
2008 2009 2010
Note RM RM RM
7.3.5.5 6,004 2,001
7.3.5.6 217,070 152,230 288,787
7.3.5.7 117,486 224,013 137,219
703,616
7.3.5.8 64,080
7.3.5.9 536,334 572,485 569,628
57,743 6,119 2,044
928,633 1,722,543 997,678
928,633 1,728,547 999,679
7.3.5.10 500,000 500,000 500,000
(228,925) (178,315) (119,393)
271,075 321,685
7.3.5.11 475,845
7.3.5.12 79,821 61,566
7.3.5.l3 _____ 400 400
556,066 61
7.3.5.14 126,552 64,723 238,907
7.3.5.15 511,393 510,268 8,690
7.3.5.8 280,588
7.3.5.11 244,255
7.3.5.12 17,813 18,674
19,613 l3,737
657,558 850,796
657,558 1,406,862
928,633 1,728,547
Page 62 of 130
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UHY
7.3.3 Statement of changes in equity ofNKG Technology
Share Accumulated
Capital Losses Total
RM RM RM
At 1 January 2008 500,000 (520,812) (20,812)
Net proft for the financial year,
income for the financial year 291,887 291,887
At 31 December 2008 500,000 (228,925) 271,075
At 1 January 2009 500,000 (228,925) 271,075
At 31 December 2009 500,000 (178,315) 321,685
At 1 January 2010 500,000 (178,315) 321,685
At 31 December 2010 500,000 (119,393) 380,607
Page 63 of 130
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UHY
7.3.4 Statement of cash flows ofNKG Technology
Adjustment for:
equipment
Interest expense
<--------------- FYE 31 December ------------->
2008 2009 2010
RM RM RM
311,500 66,120 75,432
4,003 4,003
5,838
Operating profit before working capital
changes 311,500 70,123 85,273
Decrease/(Increase) in working capital
Inventories (156,973) 64,840
Trade receivables 23,414 (106,527)
Other receivables 103,504
Amount owing by/to a Director 109,094
Trade payables 14,050 (61,829)
Other payables 2,500 (1,125)
(7,915) (1, 1371
Cash generated from operations 303,585 68,986
Tax paid - (20,986)
Interest paid
I I
(20,986)
Net cash from operating activities 303,585 48,000
Cash Flows From Investing Activity
Purchase of property, plant and
equipment (10,0071
Net cash used in investing activity (10,007)
Drawdown/(Repayment) of term loan 97,634 (17,394)
Decrease/(Increase) in amount owing to
a related company (241,948) (36,151) 2,857
Repayment offinance lease (151,100) (720, 1001
Net cash used in financing activities {241,9482 (89,6171 (734,6371
Page 64 of 130
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7.3.4 Statement of cash flows ofNKG Technology (Cont'd)
<--------------- FYE 31 December ------------->
2008 2009 2010
RM RM RM
Net increase/(decrease) in cash and
cash equivalents 61,637 (51,624) (4,075)
Cash and cash equivalents at
beginning of the financial year (3,894) 57,743
Cash and cash equivalents at end
of the financial year 57,743 6,119 2,044
financial year comprises:
Cash at bank 57,743 6,119 2,044
Page 65 of 130
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No. 918382-T
14. ACCOUNTANTS' REPORT
UHy_______________
7.3.5 Notes to financial statements
7.3.5.1 Revenne
Revenue represents invoiced value of electrical products sold net of trade discounts
and returns during the financial year.
7.3.5.2 Finance Cost
FYE31
December
2010
RM
Term loan 5,838
7.3.5.3 Profit before Taxation
Profit before taxation is derived after charging:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Auditors' remuneration
- current year 2,500 2,500 2,000
- under provision in respect of prior
years 1,265 950
equipment 4,003 4,003
7.3.5.4 Taxation
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Current income tax
- current year provision 19,613 13,737 16,510
- under provision in respect of prior
years 1,373
19,613 15,110 16,510
Deferred taxation
- Relating to origination and reversal
of temporary differences 400
Tax expense for the financial year 19,613 15,510 16,510
Page 66 of 130
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8382-T
UHy_______________
7.3.5 Notes to financial statements (Cont'd)
7.3.5.4 Taxation (Cont'd)
The taxation of:NKG Technology, a small scale company, varies from the amount of
the income tax detennined by applying the Malaysian income tax rate of 25% (2009:
25%, 2008: 26%) respectively to profit before taxation mainly because the first
RM500,000 of chargeable income was sUbjected to a lower rate of 20% as stipulated
in paragraph 2A, Schedule I, Part I of the income Tax Act, 1967.
A reconciliation of income tax expense applicable to profit before taxation at the
statutory income tax rate to income tax expense at the effective income tax rate of
NKG Technology is as follows:
<--------------- FYE 31 December ---------->
2008 2009 2010
RM RM RM
Profit before taxation 311,500 66,120 75,432
Taxation at statutory tax rate of 25%
(2009: 25%,2008: 26%) 80,990 16,530 18,858
Expenses not deductible for tax purposes 146 913 1,780
Utilisation ofpreviously unrecognised
deferred tax assets (42,833)
Tax incentive obtained from a
differential tax rate of20% (18,690) (3,306) (4,128)
Under provision of current taxation
in prior years 1,373
Tax expense for the financial year 19,613 15,510 16,510
Page 67 of 130
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14. ACCOUNTANTS' REPORT (CoDrd)
UHy_______________
7.3.5.5 Property, Plant and Equipment
2009
Cost
At 1 January 2009
Addition
At 31 December 2009
Accumulated depreciation
At 1 January 2009
Charge for the financial year
At 31 December 2009
Carrying amount
At 31 December 2009
2010
Cost
At 1 January 2010/31 December 2010
Accumulated depreciation
At 1 January 2010
Charge for the financial year
At 31 December 2010
Carrying amount
At 31 December 2010
7.3.5.6 Inventories
At cost:
Raw materials
Finished goods
Computer Total
RM RM
10,007 10,007
10,007 10,007
4,003 4,003
4,003 4,003
6,004 6,004
10,007 10,007
4,003 4,003
4,003 4,003
8,006 8,006
2,001 2,001
<------------ FYE 31 December ---------->
2008
RM
2009
RM
2010
RM
123,324
93,746
217,070
123,166
29,064
152,230
145,750
143,037
288,787
Page 68 of 130
Amember of Urbach Hacker Young International Limited.
305
UHy_______________
7.3.5.7 Trade Receivables
The nonnal trade credit tenns ofNKG Technology is 60 days (2009: 60 days, 2008:
60 to 120 days) respectively. Other credit tenns are assessed and approved on a
case to case basis.
NKG Technology's credit exposures are concentrated mainly on 1 debtor (2009: 1
debtor, 2008: 1 debtor), which accounted for 98.6% (2009: 100.0%,2008: 94.7%)
ofthe total gross trade receivables as at year end.
Analysis of the trade receivables ageing is as follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Neither past due nor impair 46,707 224,013 137,219
Past due for more than 30 days
not impaired 70,779
117,486 224,013 137,219
NKG Technology has not made any impainnent on all its receivables as the
Directors are of the view that all the receivables are recoverable.
7.3.5.8 Amount Owing by/(to) a Director
These represent unsecured, interest free advances and repayable on demand.
7.3.5.9 Amount Owing by a Related Company
This represents unsecured, interest free advances and repayable on demand.
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Authorised 500,000 500,000 500,000
Issued and fully paid 500,000 500,000 500,000
Page 69 of 130
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7.3 .5.11 Finance Lease
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
(a) Minimum hire purchase payments
Payable within one year 290,400
Payable between one and
five years 508,146
798,546
Less: Future finance charges (78,446)
720,100
(b) Present value of hire
purchase liabilities
Payable within one year 244,255
Payable between one and
five years 475,845
720,100
Analysed as:
Repayable within twelve
months 244,255
Repayable after twelve
months 475,845
720,100
The finance lease is obtained for the purpose of financing printing machinery on
behalf of another company. Accordingly, the interest expense will not be accounted
for by NKG Technology.
Page 70 of 130
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307
UHy_______________
7.3.5.12 Term Loan
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Secured
Term loan 97,634
Total Borrowing 97,634 80,240
Analysed as:
Repayable within twelve months
Secured
Term loan 17,813 18,674
Repayable after twelve months
Secured
Term loan 1 61,566
97,634 80,240
The term loan obtained from a licensed bank is secured on the following:
(a) Guanrantee by the Government of Malaysia under Working Capital
Guarantee Scheme; and
(b) Jointly and severally guaranteed by the Directors ofNKG Technology.
The term loan bore interest at a rate of 6.35% (2009: 6.05%, 2008: Nil) per annum
during the financial year.
Maturity of term loan is as follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Analyse as:
Within one year 17,813 18,674
Within one to two years 18,922 19,895
Within two to three years 20,099 21,196
Within three to four years 21,349 20,475
Within four to five years 1
97,634 80,240
Page 71 of 130
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o.918382-T
UHy_______________
7.3.5.13 Deferred Tax Liability
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
At 1 January 400
Recognised in statement of
comprehensive income 400
At 31 December 400 400
The components and movements of deferred tax liability are as follows:
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Accelerated capital al10wances
At 1 January 400
Recognised in statement of
comprehensive income 400
At 31 December 400 400
7.3.5.14 Trade Payables
The normal trade credit terms granted to NKG Technology is 60 to 120 days (2009:
60 to 120 days, 2008: 60 to120 days) respectively. Other credit terms are assessed
and approved on a case by case basis.
7.3.5.15 Other Payables
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Amount owing to former holding
company 502,453 502,453
Accruals 8,940 15 2,000
511,393 510,268 8,690
The amount owing to former holding company in unsecured, interest free advances
and repayable on demand.
Page 72 of 130
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7.3.5.16 Staff Costs
<------------ FYE 31 December ---------->
2008 2009 2010
RM RM RM
Staff costs (excluding Directors) 124,578 109,247
Included in the staff costs above are contributions made to the Employees Provident
Fund under a defined contribution plan for NKG Technology amounting to
RM8,822 (2009: RM8,881 and 2008: Nil) respectively.
7.3.5.17 Related Party Disclosures
(a) NKG Technology does not have any transaction with related party during
the financial year ended 31 December 2008, 31 December 2009 and 31
December 2010.
(b) Information regarding outstanding balances arIsmg from related party
transactions as at 31 December 2010 is disclosed in Notes 7.3.5.9 and
7.3.5.11 to the financial statements.
(c) NKG Teknology does not have any key management personnel during the
financial year.
7.3.5.18 Financial Instruments
Certain comparative figures have not been presented for 31 December 2008 and 31
December 2009 by virtue of the exception given in paragraph 44AA of FRS 7,
which is effective for annual periods beginning on and after 1 January 2010.
(a) Classification of financial instruments
Financial assets and financial liabilities are measured on an ongoing basis
either at fair value or at amortised cost. The principal accounting policies in
Section 5 describe how the classes of financial instruments are measured, and
how income and expense, including fair value gains and losses, are
recognised. The following table analyses the financial assets and financial
liabilities in the statement of financial position by the class of financial
instruments to which they are assigned, and therefore by the measurement
basis:
Page 73 of 130
310
UHy_______________
7.3 NKG Teknology (Cont'd)
Loans and
receivables
RM
2008
Financial Assets
Trade receivables 117,486
Amount owing by a
related company 536,334
Cash at bank 57,743
Financial
liabilities at
amortised cost
RM
Total
RM
117,486
536,334
57,743
Total financial assets 711,563 711,563
2009
Financial Assets
Trade receivables
Other receivables
Amount owing by a
Director
Amount owing by a
related company
Cash at bank
Total financial assets
224,013
703,616
64,080
572,485
6,119
1,570,313
224,013
703,616
64,080
572,485
6,119
1,570,313
2010
Financial Assets
Trade receivables 137,219
Amount owing by a
related company 569,628
Cash at bank 2,044
Total financial assets 708,891 708,891
137,219
569,628
2,044
Page 74 of 130
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14. ACCOUNTANTS' REPORT (Cool'd)
UHy_______________
7.3 NKG Technology(Cont'd)
Loans and
receivables
RM
Financial
liabilities at
amortised cost
RM
Total
RM
2008
Trade payables
Other payables
126,552
511,393
637,945
126,552
511,393
637,945
2009
Trade payables
Other payables
Finance lease
Term loan
64,723
510,268
720,100
97,634
1,392,725
64,723
510,268
720,100
97,634
1,392,725
2010
Amount owing to a
Director 280,588 280,588
Term loan 80,240 80,240
Total financial liabilities 608,425 608,425
(b) Financial assetsl(liabilities) at "fair value through profit or loss"
There is no fair value through profit or loss has been imposed as NKG
Technology credit risks and liquidity risk are within the acceptable
collection/payment period.
NKG Technology's management manages its capital to ensure that NKG
Technology is able to continue as a going concern and maintains an optimal
capital structure so as to maximise shareholder value. NKG Technology's
management reviews the capital structure by considering the cost of capital
and the risks associated with the capital.
The capital of NKG Technology consists of issued capital, cash and cash
equivalents and bank borrowing.
Page 75 of 130
312
UHy_______________
7.3.5.18 Financia1 Instrnments (Cont'd)
NKG Technology's financial risk management policy is to ensure that
adequate financial resources are available for the development of NKG
Technology's operations whilst managing its financial risks, including credit
risk, liquidity risk and market risks. NKG Technology operates within clearly
defined guidelines that are approved by the Board and the NKG
Technology's policy is not to engage in speculative transactions.
(e) Credit risk
Cash at bank are placed with a credit worthy financial institutions.
Credit risk arises mainly from the inability of its customers to make payments
when due. NKG Technology has adopted a policy of only dealing with
creditworthy counterparties. Receivables are monitored on an ongoing basis
via NKG Technology's management reporting procedures and action will be
taken for long outstanding debts.
The carrying amounts of the financial assets recorded on the statement of
financial position at end of each reporting period represents NKG
Technology's maximum exposure to credit risk in relation to financial assets.
NKG Technology's credit exposures are disclosed in Note 7.2.5.7 to the
financial statements.
(f) Liquidity risk
NKG Technology's funding requirements and liquidity risks are managed
with the objective of meeting business obligations on a timely basis. NKG
Technology monitors its cash flows and ensures that sufficient funding is in
place to meet the obligations as and when they fall due.
The following table analyses the remaining contractual maturity for non
derivative financial liabilities. The tables have been drawn up based on the
undiscounted cash flows of financial liabilities based on the earliest date NKG
Technology can be required to pay.
Page 76 of 130
313
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7.0
7.3.2
7.3.5
mSTORICAL FINANCIAL STATEMENTS (CONT'D)
NKG Technology (Cont'd)
Notes to financial statements (Cont'd)
(g) Market risks
(i) Foreign currency exchange risk
NKG Technology does not have foreign currency denominated
financial assets and financial liabilities at the end of the reporting
period.
(ii) Interest rate risk
NKG Technology obtains financing through other financial liabilities.
NKG Technology's policy is to obtain the financing with the most
favourable interest rates in the market.
NKG Technology constantly monitors its interest rate risk and does not
utilise interest swap contracts or other derivative instruments for trading
or speCUlative purposes. At the end of the reporting period, there were
no such arrangements, interest rate swap contracts or other derivative
instruments outstanding.
The carrying amounts of the NKG Technology's financial instruments
that are exposed to interest rate risk are as follows:
Financial Liability
2008 2009 2010
RM RM RM
Term loan 97,634 80,240
NKG Technology is exposed to interest rate risk arising from its short
and long term debts obligations.
(iii) Interest rate risk sensitivity
An increase in market interest rates by 1 % on financial liability of NKG
Technology which have variable interest rates at the end of the reporting
period would decrease the profit before taxation by RM802 (2009:
RM976 and 2008: Nil) respectively. This analysis assumes that all other
variables remain unchanged.
A decrease in market interest rates by 1% on financial liability of NKG
Technology which have variable interest rates at the end of the reporting
period would have had the equal but opposite effect on the amounts
shown above, on the basis that all other variables remain unchanged.
Page 78 of 130
315
UHy_______________
(g) Fair values of financial assets and financial liabilities
(i) Fair value of financial instruments by categories that are carried at fair
value and whose carrying amounts are reasonable approximation of fair
value:
The carrying amount of these financial assets and financial liabilities are
reasonable approximation of fair values, either due to their short-term
nature or that they are floating rate instruments that are re-priced to market
interest rates on or near the end of the reporting period.
(ii) Fair value of financial instruments by categories that are not carried at fair
value and whose carrying amounts are not reasonable approximation of fair
value:
Financia1 Liability
Carrying Fair
amount value
RM RM
2009
Finance tease 475,845 432,527
Page 79 of 130
an international network of independent accDunting and consulting firms
316
UHy_______________
7.3.5.19 Comparative Figures
As
previously
stated
RM
Reclassification
RM
As restated
RM
2008
Current Liabilities
Other payables
Amount owing to holding
company
8,940
502,453
502,453
(502,453)
511,393
2009
Current Liabilities
Other payables
company
7,815
502,453
502,453
(502,453)
510,268
2010
Decrease/(Increase) in
Working Capital
Other payables
company
875
(502,453)
(502,453)
502,453
(501,578)
Page 80 of 130
A member of Urbach Hacker Yaung International limited.
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7.4 Nakareg International (Cont'd)
7.4.5 Notes to financial statement of Nakareg International
7.4.5.1 Revenue
This represents sales of switching and linear power transformer, magnetic components,
switch mode power supply, PCBA, electronic scale, precision parts and industrial servers.
7.4.5.2 Finance Costs
<-- FYE 31 December 2010 -->
RMB RM
Leasing 103,146 48,978
Page 98 of 130
Amember of Urbach Hacker Young International limited.
335
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7.4.5 Notes to financial statements ofNakareg International (Cont'd)
7.4.5.20 Lease Payable
RMB
2010
RM
(a) Minimum lease payments
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(b) Present value of lease payable
Within one year 1,757,840 821,614
Analysed as:
Repayable within twelve months 1,757,840 821,614
The interest rate of lease payable is 4.64% per annum.
Page I I 6 of 130
A member of Urbach Hacker Young International limIted,
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7.4.5 Notes to financial statements ofNakareg International (Cont'd)
Nakareg International's management manages its capital to ensure that Nakareg
International is able to continue as a going concern and maintains an optimal
capital structure so as to maximise shareholder value. The management reviews
the capital structure by considering the cost of capital and the risks associated
with the capital.
The capital of Nakareg International consists of issued capital and cash and cash
equivalent.
Nakareg International's financial risk management policy is to ensure that
adequate financial resources are available for the development of Nakareg
International's operations whilst managing its financial risks, including credit risk,
liquidity risk and market risks.
(e) Credit risk
Cash at banks are placed with credit worthy financial institutions.
Credit risk arises mainly from the inability of its customers to make payments
when due. Nakareg International has adopted a policy of only dealing with
creditworthy counterparties. Receivables are monitored on an ongoing basis via
Nakareg International's management reporting procedures and action will be
taken for long outstanding debts.
The carrying amounts of the financial assets recorded on the statements of
financial position at the end of the reporting period represents the Nakareg
International's maximum exposure to credit risk in relation to financial assets. No
financial assets carry a significant exposure to credit risk.
Page 122 of 130
A of Urbach Young Limited.
an intemational network 01 independent accounting and consulting firms
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UHy_______________
8.0 SIGNIFICANT EVENTS SUBSEQUENT TO THE REPORTING DATE
Save for the implementation of the Listing Scheme as mentioned in Section 2, there were no
significant events between the date of the last financial statements used in the preparation of the
report and the date of the report which will affect materially the contents of this report.
Yours faithfu lIy,
Finn Number: AF 1411
T ~ A N
Approved Number: 1886/05/12 (J/PH)
29 SEP 2011
Page 130 of 130
A member of Urbach Hacker Young Internat,onal LImIted.
an international network of independent accountin9 and consulling firms
367
Appendix I
UHy_______________
UHY (Af1411l
The Gardens South Tow!'!r
Mid Valley City
lingkaran Syed Putra
59200 Kuala Lumpur
INDEPENDENT AUDITORS' REPORT TO THE DIRECTORS OF
Phone +603 2279 3088
Fax +60 3 2279 3099
(Company No.: 918382-T)
Web www.uhy.com.my
(Incorporated in Malaysia)
Report on the Financial Statements
We have audited the financial statements of Nakareg Holdings Berhad which comprise the
statement of financial position as at 31 December 2010 of the Company, and the statement of
comprehensive income, statement of changes in equity and statement of cash flows of the
Company for the financial period then ended, as set out on pages 4 to 7.
Directors' Responsibility for the Financial Statements
The Directors of the Company are responsible for the preparation of financial statements that
give a true and fair view in accordance with Financial Reporting Standards and the Companies
Act, 1965 in Malaysia, and for such internal control as the Directors determine are necessary to
enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements ba;;ed on our audit. We
..conducted our audit in accordance with approved standards on auditing in Malaysia. Those
standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on our judgement,
including the assessment of risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, we consider internal control relevant to
the entity's preparation of financial statements that give a true and fair view in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating
the approptiateness of accounting policies used and the reasonableness of accounting estimates
made by the Directors, as well as evaluating the overall presentation ofthe financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
A member of Urbadt Hader Young International limited.
368
14. ACCOUNTANTS' REPORT (coord)
UHy_______________
INDEPENDENT AUDITORS' REPORT TO THE DIRECTORS OF
(Company No.: 918382-T)
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with
Financial Reporting Standards so as to give a true and fair view of the financial position of the
Company as of 31 December 2010 and of its fmancial performance and cash flows for the
financial period then ended.
Other Matters
Tbis report is made solely for the proposed listing of and quotation for the entire enlarged issued
and -paid-up share capital of Nakareg Holdings Berhad on the ACE Market of Bursa Malaysia
Securities Berhad, and accordingly, we do not assume responsibility to any other person for the
content of this report.
0 ~
UHY
29 SEP 2011
A member of Urbach Hacller Young International limited.
369
Company No. 2900B-D
Appendix 'u
WHHAU &CO
(Firm No: AF 1076)
No. 7.19B, 7th Floor, Wisma Central, Jalan Ampang, 50450 Kuala Lumpur. Tel:(6} 03-21634137,21634139.21649709 Fax:(6) 0321624217
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF
NAKAREG SDN. BHD.
(fncorporated in Malaysia)
We have audited the financial statements of Nakareg Sdn. Bhd., which comprise the balance sheets as at 31
December 2008 of the Group and of the Company, and the income statements, statements of changes in equity
and cash flow statements of the Group and of the Company for the year then ended, and a summary ofsigni:ficant
accounting policies and other explanatory notes, as set out on p.ages 8 to 30.
The directors of the Group and of the Company are responsible for the preparation and fair presentation of these
financial statements in accordance with applicable Private Entity Reporting Standards and the Companies Act,
1965 in Malaysia. This responsibility Includes: designing, implementing and maintaining internal control relevant
to the preparation and fair presentation of financial statements that are free from material misstatement, whether
due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates
that are reasonable in the circumstances.
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial
statements are free fronl material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on our judgment, including the assessment of risks of
material misstatement oftlle financial statements, whether due to fraud or error. In making dIose risk assessments,
we consider internal control relevant to the Company's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group and of the Company's internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with a p p l i c a ~ l e Private Entity
Rep0l1ing Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial
position of the Group and of the Company as of 31 December 2008 and of its financial pelformance and cash
flows for the year then ended.
370
Company No. 29008-D
Report on Other Legal and Regulatory Requirements
In accordance with the requirements ofthe Compat-ues Act, 1965 in Malaysia, we also report the foHowing:
(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the
Company and its subsidiary of which we have acted as auditors have been properly kept in accordance with
the provisions of the Act.
(b) We have considered the accounts and the auditors' reports of the subsidiary of which we have not acted as
auditors, which are indicated in Note 5 to the financial statements.
(c) We are satisfied that the accounts of the subsidiary that have been consolidated with the Company's
financial stateme.nts are in fonn and content appropriate and proper for the purposes ofthe preparation ofthe
financial statements of the Group and we have received satisfactory information and exphmations required
by us for those purposes"
(d) Tne auditors' repOlts on the accounts of the subsidiary did not contain 'any qualification or any adverse
comment made under Section 1 74(3)of the Act.
Other Matters
This report is made-solely to the members of the Company, as a body, in accordance with Section 174 of the
Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person
for the content of this report.
WHHAU&CO
[No : AF - 1076]
Date: 0 3 JUN 2009
Kuala Lumpur, Malaysia
HAUWANHOCK
[No: 1703/02111(J)]
Partner
371
Company No. 29008-D Appendix III
WHHAU &CO
(Firm No: AF 1076)
No. 7.19B, 7th Floor, Wisma Central, Jalan Ampang, 50450 Kuala Lumpur. Tel:(6) 03-21634137,21634139.21649709 Fax:(6) 03-21624217
NAKAREG SDN. BHD.
(Incorporated in Malaysia) .
We have audited the financial statements of Nakareg Sdn. Bhd., which comprise the balance sheets as at 31
December 2009 of the Group and of the Company, and the income statements, statements of changes in equity and
cash flow statements of the Group and of the Company for the year then ended, and a summary of significant
accounting policies and other explanatory notes, as set out on pages 8 to 30.
The directors of the Group and of the Company are responsible for the preparation and fair presentation of these
financial statements in accordance with applicable Private Entity Reporting Standards and the Companies Act,
1965 in Malaysia. This responsibility includes: designing,' implementing and maintaining internal control relevant
to the preparation and fair presentation of financial statements that are free from material misstatement, whether
due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that
are reasonable in the circumstances.
Auditors 'Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on our judgment, including the assessment of risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,
we consider internal control relevant to tl1e Company's preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group and of the Company's internal control. An audit also includes
evaluating the appropriatenessof,accounting p o l i c i e ~ used and the reasonableness of accounting estimates made by
the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the finaq.cial statements have be.en properly drawn up in accordance with applicable Private Entity
Reporting Standards and the Companies Act. 1965 in Malaysia s!l as to give a true and fair view of the financial
position ofthe Group and of the Company as of31 December 2009 and of its financial performance and cash flows
for the year then ended.
372
Company No. 29008-D
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:
(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the
Company have been properly kept in accordance with the provisions of the Act.
(b) We have considered the accounts and the auditors' reports of the subsidiary of which we have not acted as
auditors, which are indicated in Note 5 to the financial statements.
(c) We are $atisfied that the accounts of the subsidiary that have been consolidated with the Company's
financial statements are in fonn and content appropriate and proper for the purposes of the preparation of
the financial statements of the Group and we have received satisfactory information and explanations
required by us for those purposes.
(d) The auditors' reports on the accounts of the subsidiary did not contain any qualification or any adverse
comment made under Section 174(3} of the Act.
Other Matters
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the
Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person
for the content ofthis report.
WHHAU&CO
[No: AF - 1076]
Date: 0 9 JUN 2010
HAUWANHOCK
[No : 1703/02/11 (J)]
Partner
373
Jr Appendix IV

UHY (AF1411)
Mid Valley City
Ungkaran Syed Putra
INDEPENDENT AUDITORS' REPORT TO THE MElVIBERS OF
59200 Kuala Lumpur
NAKAREG SDN. BHD.
(Company No.: 29008-D)
Phone +60 3 2279 3088
Fax +603 22793099
Web www.uhy.com.my
We have audited the financial statements ofNakareg Sdn. Bhd., which comprise the statements of
fmancial position as at 31 December 2010 of the Group and of the Company, and the statements of
comprehensive income, statements of changes in equity and statements of cash flows of the Group
and of the Company for the financial year then ended, and a summary of significant accounting
policies and other explanatory information, as set out on pages 10 to 67.
The fmancial statements of the Group and of the Company as of 31 December 2009 were audited
by another auditor whose reports dated 9 June 2010, expressed an unqualified opinion on the
The Directors of the Company are responsible for the preparation of financial statements that give
a true and fair view in accordance with Financial Reporting Standards and the Companies Act,
1965 in Malaysia, and for such internal control as the Directors determine are necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
Auditors J Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with approved standards on auditing in Malaysia. Those
obtain reasonable assurance about whether the fmancial statements are free from material
misstatement.
disclosures in the financial statements. The procedures selected depend on our judgement,
including the assessment of risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, we consider internal control relevant to the
entity's preparation of financial statements that give a true and fair view in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal controL An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made
by the Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
A member of UHY. an international association of independent accounting and firms
PENANG 51-21-F, Menara BHL Bank, Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia. Phone +60 42276888 Fax +60 42298118
lOHOR BAHRU 19-01, Public Bank Tower, 19 Jalan Wong Ah Fook, 80000 lohor Bahru, Malaysia. Phone +60 72222828 Fax +60 7 2222829
374
UHy_______________
NAKAREG SDN. BHD. (CONT'D)
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with Financial
Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of
the fmancial position of the Group and of the Company as of 31 December 2010 and of their
fmancial performance and cash flows for the financial year then ended.
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the
followings:
(a) In our opinion, the accounting and other records and the registers required by the Act to
be kept by the Company have been properly kept in accordance with the provisions of
the Act.
(b) We have considered the accounts and the auditors' reports of the subsidiary company of
which we have not acted as auditors, which are indicated in Note 4 to the financial
statements.
(c) We are satisfied that the accounts of the subsidiary company that have been consolidated
with the Company's fmancial statements are in form and content appropriate and proper
for the purposes of the preparation of the financial statements of the Group and we have
received satisfactory information and explanations required by us for those purposes.
(d) The audit reports on the accounts of the subsidiary company did not contain any
qualification or any adverse comment made under Section 174(3) of the Act.
A member of UHY, an international association of independent accounting and consulting firms
375
No. 918382-T
UHy_______________
NAKAREG SDN. BBD. (CONT'D)
Other Matters
This report is made solely to the members of the Company, as a body, in accordance with Section
174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume
responsibility to any other person for the content of this report.
0h'j
UHY
T E ~
KUALA LUMPUR
1 5 JUN 1011
Amember of UHY. an international association of independent accounting and consulting
376
Appendix V
Company No. 338S18-X
WHHAU&CO
(Firm No: AF 1076)
No. 7.19B, 7th Floor, Wisma Central, Jalan Ampang, 50450 Kuala Lumpur. Tel:(6) 03-21634137, 21634139, 21649709 Fax:(6) 03-21624217
NKG TECHNOLOGY SDN. BHD.
We have audited the financial statements ofNKG Technology Sdn. Bhd., which comprise the balance
sheet as at 31 December 2008, and the income statement, statement of changes in equity and cash
flow statement for the year then ended, and a summary of significant accounting policies and other
explanatory notes, as set out on pages 8 to 17.
The directors of the Company are responsible for the preparation and fair presentation of these
financial statements in accordance with applicable Private Entity Reporting Standards and the
Companies Act, 1965 in Malaysia. This responsibility includes: designing, implementing and
maintaining internal control relevant to the preparation and fair presentation of financial statements
that are free from material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances.
conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the fmancial statements. The procedures selected depend on our judgment, including the
assessment of risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, we consider internal control relevant to the Company's preparation
and fair presentation of the fmandal statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company's internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opInion, the financial statements have been properly drawn up in accordance with applicable
Private Entity Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and
fair view of the financial position of the Company as of 31 December 2008 and of its financial
performance and cash flows for the year then ended.
377
14. ACCOUNTANTS' REPORT
Report on Other Legal and Regulatory Req uirements
In accordance with the of the Companies Act, 1965 in Malaysia, we also report that in
our opinion the accounting and other records and the registers required by the "Act to be kept by the
Company have been properly kept in accordance with the provisions ofthe Act.
Other Matters
This report is made solely to the members of the Company, as a body, in accordance with Section 174
ofthe Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to
any other person for the content ofthis report.
WHHAU&CO HAUWANHOCK
[No: AF 1076] [No : 1703/02/11(1)]
Chartered Accountants Partner
Date: 1 2 JUN 2009
378
Appendix VI
WHHAU&CO
(Firm No: AF 1076)
No. 7.19B. 7th Floor. Wisma Central. Jalan Ampang. 50450 Kuala Lumpur. Tel:(6) 03-21634137.21634139.21649709 Fax:(6) 03-21624217
We have audited the fmancial statements ofNKG Technology Sdn. Bhd., which comprise the balance
sheet as at 31 December 2009, and the income statement, statement of changes in equity and cash flow
statement for the year then ended, and a summary of significant accounting policies and other
explanatory notes, as set out on pages 8 to 20.
The directors of the Company are responsible for the preparation and fair presentation of these financial
statements in accordance with applicable Private Entity Reporting Standards and the Companies Act,
1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control
relevant to the preparation and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the circumstances.
conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves perforriiing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on our judgment, including the assessment of
risks of material misstatement of the financial statements, whether due to fraud or error. In making those
risk assessments, we consider internal control relevant to the Company's preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by the directors, as well as evaluating the overall presentation of the
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with applicable
Private Entity Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair
view ofthe fmancial position of the Company as of 31 December 2009 and of its fmancial performance
and cash flows for the year then ended.
379
Company No. 9183
Company No. 338518-X
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that in our
opinion the accounting and other records and the registers required by the Act to be kept by the
Other Matters
This report is made solely to the members of the Company; as a body, in accordance with Section 174 of
the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any
other person for the content ofthis report.
WHHAU &CO
HAUWANHOCK
[No: AF-1076]
[No : 1703/02/11(1)]
Partner
Date: fl 7 APR 2010
380
14. ACCOUNTANTS' REPORT (Col1t'd)
L J t t ~ __________________________________AP_pe_nd_iX_V_II
UHY (AF1411)
Mid Valley City
INDEPENDENT AUDITORS' REPORT TO THE MEMBER OF
59200 Kuala Lumpur
(Company No.: 338518-X)
Phone +60 3 2279 3088
Fax +60 3 2279 3099
Web www.uhy.com.my
We have audited the financial statements of NKG Technology Sdn. Bhd., which comprise the
statement of fmancial position as at 31 December 2010 of the Company, and statement of
comprehensive income, statement of changes in equity and statement of cash flows of the
Company for the fmancial year then ended, and a summary of significant accounting policies and
other explanatory information, as set out on pages 9 to 43.
The financial statements of the Company as of 31 December 2009 were audited by another
auditor whose report dated 7 April 2010, expressed an unqualified opinion on the fmancial
statements.
The Directors of the Company are responsible for the preparation of financial statements that
give a true and fair view in accordance with Financial Reporting Standards and the Companies
Act, 1965 in Malaysia, and for such internal control as the Directors determine are necessary to
enable the preparation of fmancial statements that are free from material misstatement, whether
Our responsibility is to express an opinion on these fmancial statements based on our audit. We
conducted our audit in accordance with approved standards on auditing in Malaysia. Those
obtain reasonable assurance about whether the fmancial statements are free from material
misstatement.
disclosures in the fmancial statements. The procedures selected depend on our judgement,
including the assessment of risks of material misstatement of the fmancial statements, whether
due to fraud or error. In making those risk assessments, we consider internal control relevant to
the entity's preparation of financial statements that give a true and fair view in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the Directors, as well as evaluating the overall presentation of the financial statements.
A member of UHY. an international association of independent accounting and consulting firms
PENANG 51-21-F, Menara BHL Bank, Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia. Phone +60 4 227 6888 Fax +6042298118
JOHOR BAHRU 19-01. Public Bank Tower. 19 Jalan Wona Ah Fook. 80000 Johor Bahru. Malavsia. Phone +60 72222828 Fax +60 72222829
381
panyNo.918382-T
UHy_______________
INDEPENDENT AUDITORS' REPORT TO THE MEMBER OF
NKG TECHNOLOGY SDN. BHD. (CONT'D)
(Company No.: 338518-X)
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with Financial
Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of
the [mancial position of the Company as of31 December 2010 and of its financial performance and
cash flows for the financial year then ended.
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that in
our opinion, the accounting and other records and the registers required by the Act to be kept by the
Other Matters
This report is made solely to the member of the Company, as a body, in accordance with Section
174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume
responsibility to any other person for the content of this report.

UHY
%
TEE GUAN PIAN
KUALA LUMPUR
1,5 JUN 2011
A member of UHY. an international association of accounting and consulting firms
382
UH
1f' jf Appendix VIII

UHY (AF1411)
. Suite 11.05, level 11
INDEPENDENT AUDITORS' REPORT ON THE COMBINED FINANCIAL The Gardens South Tower
STATEMENTS OF THE GROUP FOR THE FINANCIAL YEARS ENDED 31 Mid Valley City
DECEMBER 2008,2009 AND 2010 TO THE DIRECTOR OF
NAKAREG INTERNATIONAL COMPANY LIMITED
Phone +60 3 2279 3088
(Company No.: 1089954)
Fax +60 3 2279 3099
(Incorporated in Hong Kong)
Email uhyl::l@uhy.com.my
Web www.uhy.com.my
Report on the Combined Financial Statements
We have audited the combined financial statements ofNakareg International Company Limited
and its subsidiary companies (collectively the "Group"), which comprise the combined
statements of financial position as at 31 December 2008, 2009 and 2010 of the Group, and the
statements of comprehensive income, combined statements of changes in equity and
combined statements ofcash flow of the Group for the financial years ended 31 December 2008,
2009 and 2010, as set out on pages 4 to 23. The combined financial statements, which have been
prepared in accordance with Financial Reporting Standards in Malaysia, are the responsibility of
the management of the Company_ Our responsibility is to express an opinion on the combined
financial statements based on our audit
Management's Responsibility for the Combined Financial Statements
The Management of the Company are responsible for the preparation of combined financial
statements that give a true and fair view in accordance with Financial Reporting Standards in
Malaysia and for such internal control as the Management determine are necessary to enable the
preparation of combined financial statements that are free from material misstatement, whether
Our responsibility is to express an opinion on these combined financial statements based on our
audit. We conducted our audit in accordance with approved standards on auditing in Malaysia.
Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether the combined financial statements are free
from material misstatement.
disclosures in the combined financial statements. The procedures selected depend on our
judgement, including the assessment of risks of material misstatement of the combined fmancial
statements, whether due to fraud or error. In making those risk assessments, we consider internal
control relevant to the entity's preparation of combined financial statements that give a true and
fair view in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity's internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Director, as well as evaluating the overall
presentation ofthe combined financial statements.
Amember of Urbach HaCKer Young International limited.
383
UHy_______________
INDEPENDENT AUDITORS' REPORT ON THE COMBINED FINANCIAL
STATEMENTS OF THE GROUP FOR THE FINANCIAL YEARS ENDED 31
DECEMBER 2008,2009 AND 2010 TO THE DIRECTOR OF
NAKAREG INTERNATIONAL COMPANY LIMITED (CONT'D)
(Company No.: 1089954)
(Incorporated in Hong Kong)
Opinion
In our opinion, the combined financial statements have been properly drawn up in accordance
with Financial Reporting Standards so as to give a true and fair view of the fmancial position of
the Group as of 31 December 2008, 2009 and 2010 and of their financial performance and cash
flows for the fmandal years then ended.
This report is made solely for the proposed listing of and quotation for the entire enlarged issued
and paid-up share capital of Nakareg Holdings Berhad on the ACE Market of Bursa Malaysia
Securities Berhad, and accordingly, we do not assume responsibility to any other person for the
content ofthis report.
J,
DRY
29 SEP 2011
Amember of Urbach Hacker Younglntematiooallimited,
an international network of independent accounting and consUlting firms
384
15. DIRECTORS' REPORT
NAKAREG HOLDINGS BERHAD (918382-T)
Registered Office:
Jalan PJU lAl46
47301 Petaling Jaya
2 9 SEP 2011
The shareholders ofNakareg Holdings Berhad ("Nakareg Holdings" or "Company")
Dear Sirsl Madams,
On behalf ofthe Board of Directors of Nakareg Holdings, I wish to report that after due enquiry by the Board of
Directors ofNakareg Holdings, between the period from 31 December 2010 (being the date to which the latest
audited financial statements of Nakareg Holdings and its subsidiaries ("Group") have been made up) up to the
date of this letter (being a date not earlier than fourteen (14) days before the date of issue of the Prospectus),
that:
(a) the business of the Group has in the opinion of the Directors of the Company ("Directors"), been
satisfactorily maintained;
(b) in the opinion of the Directors, no circumstances have arisen subsequent to the last audited fmandal
statements of the Group, which have adversely affected the trading or the value of the assets of the
Group;
(c) the current assets of the Group appear in the books at the values which are believed to be realisable in
the ordinary course of business;
(d) save as disclosed in this Prospectus, no contingent liabilities have arisen by reason ofany guarantees or
indemnities given by the Group;
(e) since the last audited financial statements of the Group, there has been no default or any known event
that could give rise to a default situation, in respect of payments of either interest and/or principal sums
in relation to any borrowings ofthe Group in which the Directors are aware of; and
(f) save as disclosed in this Prospectus, there have been, since the last audited financial statements of the
Group, no material changes in the published reserves or any unusual factors affecting the profit of the
Group
Yours faithfully,
For and on behalfofthe Board ofDirectors of
Hau Mun Meng
Group Managing Director
Nakareg Holdings Berhad (918382-T)
No.2, )alan B) 5, Taman Peridustrian Belmas Johan,
48000 Rawang, Selangor D.E. Malaysia.
Tel: 603-60910133 Fax: 603-60910141
385
16. ADDITIONAL INFORMATION
16.1 Share capital
(i) Save as disclosed in this Prospectus, no securities wiII be allotted or issued on the basis of this
Prospectus later than twelve (12) months after the date of the issue ofthis Prospectus.
(ii) We have no fOuilder, management or deferred shares in our Company. As at the date of this
Prospectus, we have only one (1) class of shares in our Company, namely ordinary shares, all of
which rank equally with one another.
(iii) As at the date of this Prospectus, none of the capital of our Company or our subsidiary
companies is under any options, or agreed conditionally or unconditionally to be put under any
options.
(iv) As at the date of this Prospectus, our Group does not have any outstanding convertible debt
securities.
(v) Save as disclosed in Section 4 of this Prospectus, no shares or debentures of our Group have
been or are proposed to be issued as partly or fully paid-up, in cash or otherwise than in cash,
within the two (2) years preceding the date of this Prospectus.
(vi) There is currently no scheme involving the Directors and employees of our Group in the share
capital of our Group.
(vii) As the date of this Prospectus, there is no limitation on the right to own securities, including
limitations on the right of non-resident or foreign shareholders to hold or exercise voting rights
on the securities imposed by law or by our Memorandum and Articles ofAssociation.
16.2 Articles of Association
The following provisions are reproduced from our Company's Articles of Association and are qualified
in its entirely by the remainder of the provisions of our Company's Articles of Association and
applicable law.
The tenns defined in our Company's Articles of Association shall have the same meanings when used
here unless they are otherwise defmed here or the context otherwise requires.
(i) Transfer of security
The provisions in our Articles of Association in respect of the arrangements for transfer of
securities are as follow:
Article 21
Subject to the provisions of the Central Depositories Act and the Rules the transfer of any listed
security or class of listed security of the Company, shall be by way of book entry by the
Depository in accordance with the Rules and, notwithstanding Sections 103 and 104 of the Act,
but subject to Subsection 107C(2) of the Act and any exemption that may be made from
compliance with Subsection 107C(l) ofthe Act, the Company shall be precluded from registering
and effecting any transfer of the listed securities. Subject to these Articles, there shall be no
restriction on the transfer of fully paid shares except where required by law.
Article 22
No share shall in any circumstances be transferred or transmitted to any infant, bankrupt or
person ofunsound mind.
386
16. ADDITIONAL lNFORMATION (Cont'd)
Article 23
The registration of transfer may be suspended at such times and for such periods as the Directors
may from time to time determine, provided always that such registration shall not be suspended
for more than thirty (30) days in any year. Such notice shall state the books closing date, which
shall be ten (10) Market days (or such other period as prescnoed by the Exchange from time to
time or any relevant governing laws and/or guidelines) after the date of notification to the
Exchange, and the address of share registry at which documents will be accepted for registration.
At least three (3) market days prior notice or such other period may be prescribed under the
Listing Requirements or by the Exchange from time to time shall be given to the Depository to
enable the Depository to prepare the appropriate Record ofDepositors.
Article 24
Neither the Company nor its Directors nor any of its officers shall incur any liability for
registering or acting upon a transfer of shares apparently made by sufficient parties, although the
same may by reason of any fraud or other cause not known to the Company or its Directors or
other officers be legally in-operative or insufficient to pass the property in the shares proposed or
professed to be transferred, and although the transfer may, as between the transferor and
transferee, be liable to be set aside and in every such case, the person registered as transferee, his
executors, administrators and assignees alone shall be entitled to be recognised as the holder of
such shares and the previous holder shall, so far as the Company is concerned, be deemed to have
transferred his whole title thereto. Provided always that where the share is a Deposited Security,
subject to the Rules, a transfer or withdrawal of the share may be carried out by the person
becoming so entitled.
(ii) Remuneration of Directors
The provisions in our Articles ofAssociation in respect of the arrangements for the remuneration
ofDirectors are as follow:
Article 77
Fees payable to Directors shall not be increased except pursuant to a resolution passed at a
general meeting where notice of proposed increase has been given in the notice convening the
meeting. The Directors may also be paid all travelling, hotel and other expenses properly incurred
by them in attending and returning from meeting of the Directors or any committee of the
Directors or general meetings of the Company or in connection with the business of the
Company. PROVIDED THAT Non-Executive Directors shall not be remunerated by a
commission on or percentage of profits or turnover and that nothing herein shall prejudice the
power of the Directors to appoint any of their number to be the employee or agent of the
Company at such remuneration which may not include a commission on or percentage of
turnover. The fee payable to non-executive Directors shall be fixed sums as shall be determined
by the Company in general meeting. Salaries payable to Executive Directors may not include a
commission on or percentage oftum over.
Article 110
A Managing Director shall, subject to the terms of any agreement entered into in any particular
case, receive such remuneration (whether by way of salary, commission or participation in
profits, or partly in one way and partly in another) as the Directors may determine.
387
16. ADDITIONAL INFORMATION (Cont'd)
(iii) Voting and borrowing powers of Directors, including voting powers in relation to
proposals, arrangements or contracts in which they are interested
The provisions in our Articles of Association in respect of the arrangements for voting and
borrowing powers of Directors, including voting powers in relation to proposals, arrangements or
contracts in which they are interested are as follow:
Article 89
The Directors may from time to time at their discretion raise or borrow for the purpose
ofthe Company such sums of moneys, as they think proper.
Article 90
The Directors may raise or secure the payment of such money in such manner and
upon such terms and conditions in all respects as they think fit, and in particular by the
issue of debentures or debenture stock of the Company (both present and future)
including uncalled capital, or by means or charges, mortgages, bonds and disposition
in security or bonds of cash-credit, with or without power of sale, as the Directors shall
think fit.
Article 91
The Directors shall not borrow any money or mortgage or charge any of the
Company's or the subsidiaries' undertaking, property or any uncalled capital, or to
issue debentures and other securities whether outright or as a security for any debt,
liability or obligation of an unrelated third party.
Article 92
(1) The Directors may borrow or raise any such money as aforesaid upon by the
issue or sale of any bonds, debentures, debenture stock, or securities, and
upon such terms as to time of repayment, rate of interest, price of issue of
sale, payment of premium or bonus upon redemption or repayment or
otherwise as they may think proper. The Company may in general meeting
grant a right for the holders of bonds, debentures, debenture stock or
securities to exchange the same for shares in the Company or any class
authorised to be issued.
(2) Subject as aforesaid, the Directors may secure or provide for the payment of
any moneys to be borrowed or raised by a mortgage or a charge upon all or
any part of the undertaking or property of the Company both present and
future and upon any capital remaining unpaid upon the shares of the Company
whether called up or not by any other security and the Director may confer
upon any mortgagees or persons in whom any debentures, debenture stock or
security is vested such rights and powers as they think necessary or expedient;
and they may vest any property of the Company in trustees for the purpose of
securing any moneys so borrowed or so raised and confer upon the trustees or
any receiver to be appointed by them or by any debenture holder, such rights
and powers as the Director may think necessary or expedient in relation to the
undertaking or property of the Company, or the management or the realisation
thereof, or the making, receiving or enforcing of calls upon the Members in
respect of unpaid capital and otherwise, and may make and issue debentures
to trustees for the purpose of further security, and any such trustee may be
remunerated.
388
0.918382-T
16. ADDITIONAL INFORMATION (Conf'dj
(3) The Directors may give security for the payment of any moneys payable by
the Company in like manner as for the payment of money borrowed or raised,
but in such case the amount shall be reckoned as part of the money borrowed.
Article 99
A Director who is in any way, whether directly or indirectly interested in a contract or
proposed contract with the Company shall declare the nature of his interest in
accordance with the provisions of the Act. A Director shall not vote in respect of any
contract or proposed contract or arrangement in which he has, directly or indirectly, a
personal interest (and if he shall do so his vote shall not be counted), nor shall he be
counted for the purpose of any resolution regarding the same in the quorum present at
the meeting.
(iv) Changes in capital and variations of class rights
The provisions in our Articles of Association in respect of the arrangements for changes in capital
and variations of class rights are as follow:
Article 40
The Company may from time to time by ordinary resolution increase the share capital by such
sum, to be divided into shares of such amount, as the resolution shall prescribe.
Article 43
The Company may by ordinary resolution:
consolidate and divide all or any of its share capital into shares of larger amount than its
existing shares; or
sub-divide its existing shares, or any of them into shares of smaller amount that is fixed by the
Memorandum of Association subject, nevertheless, to the provisions of the Act, and so that as
between the resulting shares, one or more of such shares may be the resolution by which such
sub-division is effected be given any preference or advantage as regards Dividend, capital,
voting or otherwise over the others or any other of such shares; or
cancel any shares not taken or agreed to be taken by any person.
Article 44
(1) The Company may by special resolution reduce its share capital and any capital
redemption reserve fund in any manner authorised and subject to any conditions
prescribed by the Act and the Listing Requirements.
(2) The Company may reduce its issued share capital by the cancellation of shares
purchased by the Company and the amount by which the Company's issued capital is
diminished shall be transferred to the capital redemption reserve in accordance with
Section 67A of the Act and the Listing Requirements.
389
Company No. 91838
16. ADDITIONAL INFORMATION (Conl'd)
Article 45
Subject to the provisions of Section 65 of the Act, all or any of the rights, privileges or conditions
for the time being attached or belonging to any class of shares for the time being forming part of
the share capital of the Company may from time to time be modified, affected, varied, extended
or surrendered in any manner with the consent in writing of the holders of not less than three
fourths of the issue shares of that class or with the sanction of a special resolution passed at a
separate meeting of the Members ofthat class. To any such separate meeting all the provisions of
these Articles as to General Meetings of the Company shall mutatis mutandis apply, but so that
the necessary quorum shall be Members of the class holding or representing by proxy one-third
of the share capital paid or credited as paid on the issued shares of the class, and every holder of
shares of the class in question shall be entitled on a poll to one vote for every such share held by
him. To every such special resolution the provisions of Section 152 of the Act shall with such
adaptations as are necessary apply. Provided however that in the event of the necessary majority
not having been obtained in the manner aforesaid consent in writing may be secured from
Members holding at least three-fourths of the issued shares of the class and such consent if
obtained within two months from the date of the separate general meeting shall have the force
and validity of a special resolution duly carried by a vote in person or by proxy.
16.3 Benefits to our Promoters, Directors and substantial shareholders
(i) Save as disclosed in Section 10.6 of this Prospectus, none of our Directors or substantial
shareholders has any interest in any contract, agreement or arrangement, which is significant in
relation to the business of our Group taken as a whole and which is still subsisting as at the date
ofthis Prospectus.
(ii) Save as disclosed in Section 10.1.2 of this Prospectus, there are no persons who are able to,
directly or indirectly, jointly or severally, exercise control over our Company and our subsidiary
companies.
16.4 Material litigation
As at the LPD, our Company or our subsidiary companies are not engaged in any material litigation,
claims or arbitration either as plaintiff or defendant, which has a material effect on the fmancial position
of our Group and our Board is not aware of any proceedings pending or threatened, or of any fact likely to
give rise to any proceedings, which might materially and adversely affect the fmancial or business
position of our Group.
16.5 Material contracts
Save as disclosed below, there are no other contracts which are or may be material (not being contracts
entered into in the ordinary course of business) which have been entered into by our Group within the two
(2) years preceding the date ofthis Prospectus:
(a) On 26 September 2011, Nakareg Holdings entered into a conditional share sale agreement with
the shareholders of Nakareg for the acquisition of 733,333 ordinary shares of RMl.OO each,
representing the entire issued and paid-up share capital ofNakareg, for a total consideration of
RM4,98 1,000 to be satisfied via the issuance of 4,981,000 new ordinary shares ofRMl.OO each
ofNakareg Holdings. The said acquisition was completed on 26 September 2011;
390
mpanyNo.918382-T
16. ADDITIONAL INFORMATION (Cont'dj
(b) On 26 September 2011, Nakareg Holdings entered into a conditional share sale agreement with
the shareholders ofNKG Technology for the acquisition of 500,000 ordinary shares of RM1.00
each, representing the entire issued and paid-up share capital of NKG Technology, for a total
consideration of RM354,998 to be satisfied via the issuance of 354,998 new ordinary shares of
RM1.00 each of Nakareg Holdings. The said acquisition was completed on 26 September 2011;
and
(c) On 26 September 2011, Nakareg Holdings entered into a conditional share sale agreement with
the shareholder of Nakareg International for the acquisition of 11,062,053 ordinary shares of
HKDI.OO each, representing the entire issued and paid-up sbare capital of Nakareg International,
for a total consideration of RM8,564,000 to be satisfied via the issuance of 8,564,000 new
ordinary shares ofRM1.00 eacb ofNakareg Holdings. The said acquisition was completed on 26
September 201 1.
(d) On I January 2011, Nakareg International entered into a conditional share sale agreement with
Hau Mun Meng for the acquisition of the entire registered capital of Shanghai Optimus of
USD420,000 for a total purchase consideration of HKD3,268,912 (equivalent to USD420,000 or
RM1,270,590) (translated at the exchange rate of USD1.00:HKD7.783 I, HKDl.OO:RMBO.8415
and RMBl.OO:RM0.4619 as at 31 March 2011) satisfied wholly via the issuance of 3,268,912
new Nakareg International Shares. The said acquisition was completed in March 20 II;
(e) On I January 2011, Nakareg International entered into a conditional share sale agreement with
Nakareg for the acquisition of the entire registered capital ofNakareg Kunshan ofUSD300,000
for a total purchase consideration ofHKD2,334,937 (equivalent to USD300,000 or RM907,654)
(translated at the excbange rate of USDl.OO:HKD7.783I, HKDl.OO:RMBO.8415 and
RMBl.OO:RM0.4619 as at 31 March 2011) and was reflected as an amount owing to Nakareg.
The said acquisition was completed in March 20 II; and
(f) On 1 January 2011, Nakareg International entered into a conditional share sale agreement witb
Hau Mun Meng for the acquisition of the entire registered capital of Changsbu Nakareg of
USDI,OOO,OOO for a total purcbase consideration of HKD7,783,123 (equivalent to
USDI,OOO,OOO or RM3,025,213) (translated at the exchange rate of USDI.00:HKD7.7831,
HKDl.OO:RMBO.8415 and RMBI.00:RM0.4619 as at 31 March 2011) satisfied wholly via the
issuance of 7,783,123 new Nakareg International Shares. The said acquisition was completed in
March 2011.
16.6 Material agreements
There are no subsisting material agreements entered into by our Company or our subsidiary companies in
the ordinary course of business as at the LPD.
16.7 Repatriation of capital and remittance of profits
The laws of Hong Kong and of the PRC relating to the repatriation of capital and remittance of profits to
and from Malaysia are detailed in the reports set out in Sections 9.1 and 9.2 of this Prospectus.
To or from Hong Kong
Hong Kong imposes no controls on foreign exchange, and no restrictions on entry and repatriation of
capital or on conversion and remittance of profits and dividends derived from direct investments.
Therefore, there is no restriction on repatriation of capital and remittance of profits by Nakareg
International to and from Hong Kong.
39]
No. 918382-T
16. ADDITIONAL INFORMATION (Coot'd)
To or from the PRC
Repatriation of capital involving Shanghai Optimus, Nakareg Kunshan and Changshu Nakareg which are
WFOEs, (which will decrease its capital) requires the approval of the Ministry of Commerce of the PRC
or its local counterpart, the issuance of a public announcement and notice to the creditors of the capital
reduction and registration of the capital reduction with the State Administration of Industry and
Commerce in the PRe. The repatriation of capital so reduced also requires the approval of the State
Administration ofForeign Exchange.
Article 19 of Law of the PRC Concerning Enterprises with Sole Foreign Investment, states that the
foreign investors may remit abroad lawful profits earned from a WFOE, other lawful income and funds
obtained after liquidation ofthe enterprise. Wages and other lawful income of foreign staff and workers of
a WFOE may be remitted abroad after payment of individual income tax in accordance with the law.
Article 58 of the Implementing Rules of the Law of the PRC Concerning Enterprises with Sole Foreign
Investment, states that from the profit remaining after payment of income tax in accordance with the PRC
tax law provisions, a WFOE shall allocate money for a reserve fund and employee bonus and welfare
fund. The monies as the reserve fund shall be no less than 10% ofthe amount of the profit after tax. If the
accumulated amount of allocated reserve fund reaches 50% of a WFOE's registered capital, the WFOE
shall not be required to make any further allocation. The allocation rate for the employee bonus and
welfare fund may be determined by the WFOE itself.
A WFOE shall be prohibited from distributing dividends unless the losses ofthe previous years have been
made up. Dividends not distributed in previous years may be distributed together with those ofthe current
year. The profits from a WFOE may be remitted abroad after payment of tax, loss of previous years (if
any) and the reserve fund in accordance with the PRC laws and regulations. Moreover, remittance of
profits by a WFOE needs to be verified by a bank licensed to conduct foreign exchange business.
16.8 Public take-overs
During the last FYE 31 December 2010 and the subsequent period up to the LPD, there were no:
(i) public take-over offers by third parties in respect of our Shares; and
(ii) public take-over offers by our Company in respect ofother corporations' securities.
16.9 Consents
(i) The written consents of the Adviser, Sponsor, Underwriter, Placement Agent, Principal Bankers,
Company Secretary, Due Diligence Solicitors and legal advisers for the IPO, Issuing House and
Share Registrar to the inclusion in this Prospectus of their names and all references in the manner,
form and context in which such names appear have been given before the issue of this Prospectus
and have not subsequently been withdrawn.
(ii) The written consent of the Auditors and Reporting Accountants to the inclusion of their name,
Accountants' Report and the Reporting Accountants' Letter relating to the Proforma Consolidated
Financial Information and all references in the manner, form and context in which they are
contained in this Prospectus have been given before the issue of this Prospectus and have not
subsequently been withdrawn.
(iii) The written consent of the IMR to the inclusion of their name and the IMRReport, and all
references in the manner, form and context in which they are contained in this Prospectus have
been given before the issue ofthis Prospectus and have not subsequently been withdrawn.
392
ICompany No. 918382-T t
16. ADDITIONAL INFORMATION (Cont'd)
(iv) The written consent of Due Diligence Solicitors on Nakareg International and the legal advisers
on the laws of Hong Kong to the inclusion of their name and their respective legal opinion, and
all references in the manner, form and context in which they are contained in this Prospectus have
been given before the issue of this Prospectus and have not subsequently been withdrawn.
(v) The written consent of Due Diligence Solicitors on Shanghai Optimus, Nakareg Kunshan and
Changshu Nakareg and the legal advisers on the laws of the PRC to the inclusion of their name
and their respective legal opinion, and all references in the manner, form and context in which
they are contained in this Prospectus have been given before the issue of this Prospectus and have
not subsequently been withdrawn.
16.10 Documents available for inspection
Copies of the following documents may be inspected at the registered office Of our Company during
normal business hours for a period of twelve (12) months from the date ofthis Prospectus:
(i) Our Memorandum and Articles of Association;
(ii) The Reporting Accountants' Letter on the Proforma Consolidated Financial Information as
included in Section 13.7 ofthis Prospectus;
(iii) The Accountants' Report as included in Section 14 ofthis Prospectus;
(iv) The Independent Market Research Report prepared by Vital Factor Consulting as included in
Section 8 of this Prospectus;
(v) The Directors' Report as included in Section 15 of this Prospectus;
(vi) The material contracts as referred to in Section 16.5 ofthis Prospectus;
(vii) The legal opinion provided by Stevenson, Wong & Co., attached in Section 9.1 of this
Prospectus;
(viii) The legal opinion provided by Martin Hu & Partners, attached in Section 9.2 of this Prospectus;
(ix) The letters of consent referred to in Section 16.9 ofthis Prospectus;
(x) The audited fmancial statements of our Company for the FPE 31 December 2010;
(x) The audited fmancial statements of Nakareg for the FYE 31 December 2008 to 31 December
2010; and
(xi) The audited fmancial statements of Nakareg Technology for the FYE 31 December 2008 to 31
December 2010.
16.11 Responsibility statements
(i) This Prospectus has been seen and approved by our Directors and Promoters and they
collectively and individually accept full responsibility for the accuracy of the information
contained herein and confmn that, after having made all reasonable enquiries and to the best of
their knowledge and belief, there are no false or misleading statement or other facts the omission
of which would make any statement herein false or misleading.
(ii) PM Securities, being the Adviser acknowledges that, based on all available information and to the
best of its knowledge and belief, this Prospectus constitutes a full and true disclosure of all
material facts concerning the IPO.
393
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE
17.1 Opening and closing dates for application
Applications will be accepted from 10.00 a.m. on {.] and will remain open until 5.00 p.m. on [.] or
such later date or dates as our Directors and the Underwriter may in their absolute discretion mutually
decide. Late applications will not be accepted.
In the event the closing date for the application for our IPO Shares is extended, you will be notified ofthe
change in a widely circulated English and Bahasa Malaysia daily newspaper within Malaysia.
17.2 Methods ofapplication
Applications for our IPO Shares must be made using the method designated for each of the categories
of investors identified as follows:
Class of Applicants Type of Application Form
Private placement to selected investors Blue Application Form only
Eligible Directors, employees and Pink Application Form only
business associates! persons who have
contributed to the success ofour Group
Public White Application Form or Electronic Share Application
or Internet Share Application
17.3 Procedures for application
Each application for our IPO Shares must be made on the Application Form for the relevant category of
investors issued together with this Prospectus and must be completed in accordance with the notes and
instructions printed therein in the respective category of the Application Form. The Application Forms
together with the notes and instructions shall constitute an integral part of this Prospectus. Applications
which do not conform strictly to the terms ofthis Prospectus or the respective category of Application
Form or notes and instructions or which are illegible may not be accepted at the absolute discretion of
our Directors.
FULL INSTRUCTIONS FOR THE APPLICATION FOR OUR IPO SHARES AND THE
PROCEDURES TO BE FOLLOWED ARE SET OUT IN THE APPLICATION FORMS. ALL
APPLICANTS ARE ADVISED TO READ THE APPLICATION FORMS AND THE NOTES
AND INSTRUCTIONS THEREIN CAREFULLY.
You may submit only one (1) application for our IPO Shares by way of Application Form or by way of
Electronic Share Application or Internet Share Application. For example, if you submit an application
using an Application Form, you may not submit an application by way ofElectronic Share Application
or Internet Share Application and vice versa. A corporation or institution carmot apply for the IPO
Shares by way ofElectronic Share Application or Internet Share Application.
You MUST have a CDS account before you can submit your application by way of Application
Form, Electronic Share Application or Internet Share Application.
Directors and employees of Malaysian Issuing House Sdn Bhd ("Mill") and their immediate families
are strictly prohibited from applying for our IPO Shares.
394
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE (Cont'd)
17.3.1 Application by the Public
Applications for the 3,000,000 IPO Shares made available for the Public must be made on the
White Application Forms provided or by way of Electronic Share Application through a
Participating Financial Institution or Internet Share Application through an Internet Participating
Financial Institution. A corporation or institution cannot apply for shares by way of Electronic
Share Application or Internet Share Application. The amount payable in full on application is
RM[.] per IPO Share.
17.3.2 Application by eligible Directors and employees of our Group and business associates! persons
who have contributed to the success ofour Group
Application for 5,000,000 IPO Shares made available for eligible Directors and employees of our
Group and persons who have contnbuted to the success of our Group must be made on the Pink
Application Forms provided arid NOT any other Application Form or by way of Electronic Share
Application through a Participating Financial Institution or Internet Share Application through an
Internet Participating Financial Institution. The amount payable in full on application is RM[.] per
IPOShare.
17.3.3 Application by selected investors by way of private placement
Application for the 44,000,000 IPO Shares made available for selected investors must be made
on the Blue Application Forms provided and NOT any other Application Form or by way of
Electronic Share Application through a Participating Financial Institution or Internet Share
Application through an Internet Participating Financial Institution. The amount payable in full
on application is RM[.] per IPO Share.
17.4 Application using Application Form
17.4.1 Application Forms
The following relevant Application Forms issued with the notes and instructions are
accompanied with this Prospectus:
(i) White Application Forms for applications by the Public;
(ii) Pink Application Form for application by eligible Directors and employees of our
Group and business associates! persons who have contributed to the success of our
Group; and
(iii) Blue Application Forms for applications by selected investors.
White Application Forms together with copies of this Prospectus may be obtained, subject to
availability from the following parties:
(i) PM Securities;
(ii) Participating organisations of Bursa Securities;
(iii) Members of the Association of Banks in Malaysia;
(iv) Members ofthe Malaysian Investment Banking Association; and
(v) MIH.
395
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE (Conl'dj
You may submit only one (1) Application Form and your application must be for 100 Shares or
multiples thereof. Multiple applications will not be accepted. We wish to caution you that if you
submit mUltiple applications in your own name or by using the name of others, with or without
their consent, you will be committing an offence under Section 179 of the CMSA and if
convicted, may be punished with a minimum fine of RMI ,000,000 and to ajail term of up to 10
years under Section 182 of the CMSA.
Your application for the !PO Shares must be made on the Application Form accompanying this
Prospectus and must be completed in accordance with the notes and instructions printed on the
reverse side of the Application Form and on this Prospectus. Our Directors may at their absolute
discretion not accept applications, which do not STRICTLY conform, to the terms of this
Prospectus or Application Form or notes and instructions printed therein or which are illegible.
If you are an individual and you are not a member of the armed forces or police, your name and
national registration identity card ("NRIC") number must be the same as that stated in:
(i) (a) your NRIClPassport; or
(b) your "Resit Pengenalan Sementara (JPN KP09)" issued pursuant to Peraturan
5(5), Peraturan-Peraturan Pendaftaran Negara 1990; or
(c) any valid temporary identity document as issued by the National Registration
Department from time to time; or
(ii) the Records of Bursa Depository.
If you are a member of the armed forces or police, your name and your armed forces or police
personnel number (as the case may be), must be the same as that stated in your authority card.
If you are a corporation / institution, the name and certificate of incorporation number must be
the same as that stated in the corporation's / institution's certificate of incorporation.
We, together with MIH will not issue any acknowledgement of receipt for your Application
Form or application monies.
17.4.2 Terms and conditions for applications using Application Form
Your application by way of White Application Form shall be made on, and subject to, the terms
and conditions as set out below:
(i) If you are an individual, you must be a Malaysian citizen or foreign citizen residing in
Malaysia, with a CDS account and a Malaysian address.
(ii) If you are a corporation / institution incorporated in Malaysia or outside Malaysia with a
CDS account and Malaysian address.
(iii) If you are a superannuation, co-operative, foundation, provident or pension fund, you
must be established or operating in Malaysia and have a CDS account.
(iv) Applications will not be accepted from trustees, any person under 18 years of age, sole
proprietorships, partnerships or other incorporated bodies or associations, other than
corporations / institutions referred to in Sections 17.4.2 (ii) and (iii) above or the
trustees thereof.
396
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE (Cont'dj
(v) Application for our IPO Shares must be made on the respective Application Forms
accompanying this Prospectus and must be completed in accordance with the notes and
instructions printed on the reverse side of the Application Form and this Prospectus. In
accordance with Section 232 of the CMSA, the Application Form together with the
notes and instructions printed therein is accompanied by this Prospectus. Our Directors
may at their absolute discretion reject applications which do not STRICTLY conform to
the terms of this Prospectus or Application Form or notes and instructions printed
therein or which are illegible.
(vi) Your completed Application Form must be accompanied by remittance in RM for the
full amount payable by any ofthe following:
(a) BANKER'S DRAFT or CASHIER'S ORDER purchased within Malaysia only;
or
(b) MONEY ORDER or POSTAL ORDER (for applicants from Sabah and
Sarawak only); or
(c) Guaranteed Giro Order ("GGO") from Bank Simpanan Nasional Malaysia
Berhad; or
(d) ATM STATEMENT obtained from any ofthe following financial institutions:
Affin Bank Berhad;
Alliance Bank Malaysia Berhad;
AmBank (M) Berhad;
CIMB Bank Berhad;
EON Bank Berhad;
Hong Leong Bank Berhad;
Malayan Banking Berhad; or
RHB Bank Berhad,
and must be made out in favour of"MIH SHARE ISSUE ACCOUNT NUMBER (e]"
and crossed "AlC PAYEE ONLY" (excluding ATM statements) and endorsed on the
reverse side with your name and address.
(vii) We will not accept applications accompanied by any mode ofpayments other than those
stated above or with excess or insufficient remittances or inappropriate banker's draft,
cashier's order, GGO, money order, postal order or ATM statement. You must state the
details ofthe payment in the appropriate boxes provided in the Application Form.
(viii) You must state your CDS account number in the space provided in the Application
Form. You shall be deemed to have authorised Bursa Depository to disclose
information pertaining to your CDS account to MIH and/or our Company.
(ix) Jfyou are successful in your application, our Directors, reserve the right to require you
to appear in person at the registered office of MIH at anytime within fourteen (I4) days
of the date of notice issued to you to ascertain your application is genuine and valid.
Our Directors are not responsible for any loss or non-receipt of the said notice nor shall
they be accountable for any expense incurred or to be incurred by you for the purpose of
complying with this provision.
(x) MIH, on the authority ofour Directors, reserves the right to reject any application which
does not conform to these instructions or which are illegible or which are accompanied
by remittances improperly drawn.
397
(xi) MIH, on the authority of our Directors, reserves the right to reject or accept any
application in whole or in part without giving any reason. Due consideration will be
given to the desirability of allotting or allocating our IPO Shares to a reasonable number
ofapplicants with a view to establishing an adequate market for our Shares.
(xii) Where your application is not accepted or accepted in part only, the full amount or the
balance ofyour application monies, as the case may be, will be returned without interest
and despatched within ten (10) Market Days from the date of the [mal ballot of the
application lists by ordinary post or registered post to your address registered with
Bursa Depository, or if your application is rejected because you did not have a CDS
account, to the address stated in your NRIClPassport or "Resit Pengenalan Sementara
(JPN KP09)" or any valid temporary identity document as issued by the National
Registration Department from time to time or the Authority Card in the case of armed
forces! police personnel, at your own risk.
(xiii) You shall ensure that your personal particulars stated in the Application Form are
identical with your records maintained by Bursa Depository. You must inform Bursa
Depository promptly of any change in address, failing which the notification letter of
successful allocation will be sent to your registered or correspondence address last
maintained with Bursa Depository.
(xiv) You may submit your application together with the appropriate remittance and legible
photocopy of the relevant documents by ORDINARY POST in the official envelopes
provided, to the following address:
Malaysian Issuing House Sdn Bhd (258345-X)
Jalan pm lA146
47301 Petaling Jaya
SeJangor Daml Ehsan
P.O. Box 8269
Pejabat Pos Kelana Jaya
46785 Petaling Jaya
or DELIVERED BY HAND AND DEPOSITED in the drop-in boxes provided at the
front portion of Symphony House, Pusat Dagangan Dana 1, Jalan pm lA146,47301
Petaling Jaya, Selangor Daml Ehsan, on the last day of acceptance of applications
which is currently on [e], between 10.00 a.m. and 5.00 p.m. or such later date or dates
as our Board and Managing Underwriter in their absolute discretion may decide.
(xv) You may contact MIH if you have any queries on the White Application Form at the
telephone number 03-7841 8000 or 03-7841 8289 (during office hours only).
17.5 Application using Electronic Share Application
17.5.1 Steps for Electronic Share Application through a Participating Financial Institution
(i) You must have an account with a Participating Financial Institution (as detailed in
Section 17.5.2 below) and an ATM card issued by that Participating Financial
Institution to access the account;
(ii) You MUST have a CDS account;
(iii) You may apply for our IPOShares via the A TM of the Participating Financial Institution
by choosing the Electronic Share Application option. Mandatory statements required in the
398
application are set out in Section 17.5.3 below under the tenns and conditions for
Electronic Share Application. You will have to enter at least the following infonnation
through the A TM where the instructions on the A TM screen requires you to do so:
Personal Identification Number (pIN);
MIH Share Issue account number [.];
CDS account number;
Number of IPO Shares applied for and/or the RM amount to be debited from the
account; and
Confirmation of several mandatory statements.
17.5.2 Participating Financial Institutions
Electronic Share Applications may be made through an ATM of the following Participating
Financial Institutions at their branches:
Affin Bank Berhad;
AmBank (M) Berhad;
Bank Muamalat Malaysia Berhad;
CIMB Bank Berhad;
EON Bank Berhad;
HSBC Bank Malaysia Berhad;
Malayan Banking Berhad;
OCBC Bank (Malaysia) Berhad;
Public Bank Berhad;
RHB Bank Berhad; or
Standard Chartered Bank Malaysia Berhad (at selected branches only).
17.5.3 Terms and conditions for Electronic Share Applications
The procedures for Electronic Share Applications at A TMs of the Participating Financial
Institutions are set out on the A TM screens of the relevant Participating Financial Institutions
(the "Steps"). You must complete all the Steps and follow the instructions set out on the ATM
screen to complete an Electronic Share Application. You are advised to read and understand the
tenns ofthis Prospectus, the Steps and the tenns and conditions for Electronic Share Application
set out below before making an Electronic Share Application. Any reference to "applicant/you"
in the tenns and conditions for Electronic Share Application and the Steps shall mean the
applicant who applies for our IPO Shares through an A TM of any of the Participating Financial
Institutions.
If you are an individual, you must have a CDS account to be eligible to utilise the facility.
You must have an existing bank account with, and be an ATM cardholder of, one (1) of the
Participating Financial Institutions before you can make an Electronic Share Application at an
ATM of that Participating Financial Institution. Upon the completion of your Electronic Share
Application transaction, you will receive a computer-generated transaction slip ("Transaction
Record"), confinning the details of your Electronic Share Application. The Transaction Record
is a record that you have completed a transaction at the A TM and not a record that MIH or us
have received any part of your application. Do not submit your Transaction Record with any
Application Fonn. It is for your own retention.
399
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE (Coot'd)
Upon the closing of the offer for the application for our IPO Shares, on [e] at 5.00 p.m.
("Closing Date and Time"), the Participating Financial Institutions shall submit a magnetic tape
containing its respective customers' applications for our IPO Shares to MIH as soon as
practicable but not later than 12.00 p.m. of the 2nd business day after the Closing Date and Time.
You are allowed to make an Electronic Share Application for our IPO Shares via an ATM that
accepts the ATM cards of the Participating Financial Institutions with which you have an
account and its branches, subject to you making only one (1) application.
YOU MUST ENSURE THAT YOU USE YOUR OWN CDS ACCOUNT NUMBER
WHEN APPLYING FOR OUR IPO SHARES, EVEN WHEN YOU HAVE A JOINT
ACCOUNT WITH ANY OF THE PARTICIPATING FINANCIAL INSTITUTIONS.
YOU MUST ENSURE THAT YOU ENTER YOUR OWN CDS ACCOUNT NUMBER
WHEN USING AN ATM CARD ISSUED TO YOU IN YOUR OWN NAME. YOUR
APPLICATION WILL BE REJECTED IF YOU FAIL TO COMPLY WITH THE
FOREGOING CONDITIONS.
The Electronic Share Application shall be made on, and subject to, the terms and conditions
contained herein as well as the terms and conditions appearing below:
(i) The Electronic Share Application shall be made in connection with and subject to the
terms ofthis Prospectus and our Memorandum and Articles ofAssociation.
(ii) You will have to confIrm and undertake that the following statements are true and
correct (by depressing predesignated keys (or buttons) on the A TM keyboard):
You are at least 18 years of age as at the Closing Date and Time of our IPO
share application;
You are a Malaysian citizen residing in Malaysia;
You have read the Prospectus and understood and agreed with the terms and
conditions ofthis application;
This is the only application that you are submitting; and
You give consent to the Participating Financial Institution and Bursa
Depository to disclose information pertaining to yourself and your account
with the Participating Financial Institutions and Bursa Depository to MIH and
other relevant authorities.
The application will not be successfully completed and carmot be recorded as a
completed transaction at the ATM unless you complete all the Steps required by the
Participating Financial Institutions. By doing so, you will be treated as signifying your
confmnation of each of the above statements as well as giving consent in accordance
with the relevant laws of Malaysia including Section 97 of the Banking and Financial
Institutions Act, 1989 and Section 45 of the Securities Industry (Central Depositories)
Act, 1991 to the disclosure by the relevant Participating Financial Institutions or Bursa
Depository, as the case may be, of any of your particulars to MIH or any relevant
regulatory bodies.
(iii) You confirm that you are not applying for our IPO Shares as a nominee of any
other persons and that your Electronic Share Application is' made on your own
account as a beneficial owner. You will only make one (1) Electronic Share
Application and shall not make any other application for our IPO Shares, whether
at the ATMs of any Participating Financial Institutions, on the prescribed
Application Forms or via Internet Share Application.
400
Company No. 9183
(iv) You must have sufficient funds in your bank account with the relevant Participating
Financial Institutions at the time you make the Electronic Share Application, failing
which your Electronic Share Application will not be completed. Any Electronic Share
Application, which does not strictly conform to the instructions set out on the screens of
the ATM through which the Electronic Share Application is being made, will be
rejected.
(v) You agree and undertake to subscribe for or purchase and to accept the number ofIPO
Shares applied for as stated on the Transaction Record or any lesser number of IPO
Shares that may be allotted or allocated to you in respect of your Electronic Share
Application. In the event that we decide to allot or allocate any lesser number of such
IPO Shares or not to allot or allocate any IPO Shares to you, you agree to accept any
such decision as final. If your Electronic Share Application is successful, your
confmnation (by action of pressing the designated key or button on the A TM) of the
number of IPO Shares applied for shall signifY, and shall be treated as your acceptance
of the number of IPO Shares that may be allotted or allocated to you and to be bound by
our Memorandum and Articles ofAssociation.
(vi) MIH, on the authority of our Directors, reserves the right to reject or accept any
Electronic Share Application in whole or in part without giving any reason. Due
consideration will be given to the desirability of allotting or allocating our IPO Shares to
a reasonable number of applicants with a view to establishing an adequate market for
our Shares.
(vii) If your Electronic Share Application is not successful or successful in part only, MIH
shall inform the relevant Participating Financial Institutions of the non-successful or
partially successful applications within two (2) Market Days after the balloting date.
The relevant Participating Financial Institutions will credit the full amount of the
application monies or the balance of it (as the case may be) in RM (without interest or
any share of revenue or other benefit arising therefrom) into your account with that
Participating Financial Institution within two (2) Market Days after the receipt of
confirmation from MIH. You may check your account on the 5
th
Market Day from the
balloting day.
Where an Electronic Share Application is accepted in part only, the relevant
Participating Financial Institutions will credit the balance of the application monies
without interest into your account with the Participating Financial Institution within two
(2) Market Days after the receipt of confmnation from MIH. A number of applications
will be held in reserve to replace any successfully balloted applications, which are
subsequently rejected. The application monies relating to this applications which are
subsequently rejected, will be refunded (without interest or any share of revenue or
other benefit arising therefrom) by MIH by way of cheques issued by ordinary post or
registered post The cheques will be issued within ten (10) Market Days from the date
ofthe final ballot.
If you encounter any problems in your applications, you may refer to the Participating
Financial Institutions.
(viii) You request and authorise us:
(a) to credit our IPO Shares allotted or allocated to you into your CDS account;
and
(b) to issue share certificate(s) representing such IPO Shares allotted in the name
of Bursa Malaysia Depository Nominees Sdn Bhd and send them to Bursa
Depository.
401
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE (Conl'd)
(ix) You, acknowledging that the Electronic Share Application is subject to the risks of
electrical, electronic, technical, transmission, communication and computer-related
faults and breakdowns, fires and other events which are not in our control, or the control
of MIH, the Participating Financial Institutions or Bursa Depository, irrecoverably
agree that if:
(a) We or MIH do/does not receive your Electronic Share Application; and
(b) Your application data relating to your Electronic Share Application is wholly
or partially lost, corrupted or inaccessible to us or MIH, or not transmitted or
communicated to us or MIH,
you shall be deemed not to have made an Electronic Share Application and shall not
claim whatsoever against us, MIH, the Participating Financial Institutions or Bursa
Depository for our IPO Shares applied for or for any compensation, loss or damage
arising from it.
(x) All of your particulars in the records of the relevant Participating Financial Institution at
the time you make your Electronic Share Application shall be deemed to be true and
correct, and we, MIH and the relevant Participating Financial Institution shall be
entitled to rely on the accuracy thereof.
(xi) You shall ensure that your personal particulars as recorded by both Bursa Depository
and the relevant Participating Financial Institutions are correct and identical. Otherwise,
the Electronic Share Application is liable to be rejected. You must inform Bursa
Depository promptly of any change in address failing which the notification letter of
successful allocation will be sent to your registered or correspondence address last
maintained with Bursa Depository.
(xii) By making and completing an Electronic Share Application, you agree that:
(a) in consideration of our Company making available the Electronic Share
Application facility to you, through the Participating Financial Institutions at
their respective ATMs, your Electronic Share Application is irrevocable;
(b) we, MIH, the Participating Financial Institutions and Bursa Depository shall
not be liable for any delays, failures or inaccuracies in the processing of data
relating to your Electronic Share Application to us due to a breakdown or
failure of transmission or communication facilities or to any cause beyond our!
their control;
(c) notwithstanding the receipt of any payment by us or on our behalf, the
acceptance of your offer to subscribe for and purchase our IPO Shares for
which your Electronic Share Application has been successfully completed shall
be constituted by the issue of notice of allocation by us or our behalf for
prescribed securities in respect ofour IPO Shares;
(d) you irrevocably authorise Bursa Depository to complete and sign on your
behalf as transferee or renounce any instrument of transfer and/or other
documents required for the issue or transfer of our IPO Shares allotted to you;
and
(e) you agree that in the event of legal disputes arising from the use of the
Electronic Share Application, our mutual rights, obligations and liabilities shall
be determined under the laws of Malaysia and be bound by the decisions of the
Courts ofMalaysia.
402
(xiii) If you are successful in your Electronic Share Application, our Directors, reserve the
right to require you to appear in person at the registered office of MIH within fourteen
(14) days of the date of the notice issued to you to ascertain your application is genuine
and valid. Our Directors are not responsible for any loss or non-receipt of the said
notice nor shall they be accountable for any expenses incurred or to be incurred by you
for the purpose of complying with this provision.
(xiv) MIH, on the authority of our Directors, reserves the right to reject applications which do
not conform to these instructions.
(xv) The following processing fee per Electronic Share Application will be charged by the
respective Participating Financial Institutions:
Affin Bank Berhad No fee will be charged for application by their account
holders;
Ambank (M) Berhad - RM1.00;
Bank Muamalat Malaysia Berhad RM2.50;
CIMB Bank Berhad - RM2.50;
EON Bank Berhad - RM2.00;
HSBC Bank Malaysia Berhad - RM2.50;
Malayan Banking Berhad - RMl.00;
OCBC Bank Berhad RM2.50;
Public Bank Berhad - RM2.00;
RHB Bank Berhad - RM2.50; or
Standard Chartered Bank Malaysia Berhad (at selected branches only)
RM2.50.
17.6 Application using Internet Share Application
17.6.1 Steps for Internet Share Application through an Internet Participating Financial
Institution
The exact steps for Internet Share Application for our IPO Shares are as set out on the Internet
financial services websites ofthe Internet Participating Financial Institutions.
For illustration purposes only, we have set out below the possible steps of an application for our
IPO Shares using Internet Share Application.
PLEASE NOTE THAT THE ACTUAL STEPS FOR INTERNET SHARE
APPLICATIONS CONTAINED IN THE INTERNET FINANCIAL SERVICES
WEBSITES OF THE INTERNET PARTICIPATING FINANCIAL INSTITUTIONS
MAY DIFFER FROM THE STEPS OUTLINED BELOW.
(i) Connect to the Internet fmancial services website of the Internet Participating Financial
Institution with which you have an account. You are advised not to apply for our IPO
Shares through any website other than the Internet fmancial services website of the
Internet Participating Financial Institution.
(ii) Log in to the Internet fmancial services facility by entering your user identification and
PIN/password.
(iii) Navigate to the section of the website on applications in respect of initial public offerings.
(iv) Select the counter in respect of our IPO Shares to launch the Electronic Prospectus and the
terms and conditions of the Internet Share Application.
403
(v) Select the designated hyperlink on the screen to accept the abovementioned terms and
conditions, having read and understood such terms and conditions.
(vi) At the next screen, complete the online application form.
(vii) Check that the information contained in the online application form such as the share
counter, NRIC number, CDS account number, number of lPO Shares applied for and
the account number to debit are correct, and select the designated hyperlink on the
screen to confirm and submit the online application form.
(viii) After selecting the designated hyperlink on the screen, you will confinn and undertake
that the following mandatory statements are true and correct:
(a) You are at least 18 years of age as at the Closing Date and Time of our IPO
Share application.
(b) You are a Malaysian citizen residing in Malaysia.
(c) You have, prior to making the Internet Share Application, received and/or have
had access to a printed/electronic copy of this Prospectus, the contents of which
you have read and understood.
(d) You agree to all the terms and conditions ofthe Internet Share Application as set
out in this Prospectus and have carefully considered the risk factors set out in this
Prospectus, in addition to all other information contained in this Prospectus
before making the Internet Share Application for our lPO Shares.
(e) The Internet Share Application is the only application that you are submitting for
our lPO Shares.
(f) You authorise the Internet Participating Financial Institution or the Authorised
Financial Institution to deduct the full amount payable for our lPO Shares from
your account with the Internet Participating Financial Institution or the
Authorised Financial Institution.
(g) You give your express consent in accordance with the relevant laws of Malaysia
(including but not limited to Section 99 of the Banking and Financial Institutions
Act, 1989 and Section 45 of the Securities Industry (Central Depositories) Act,
1991) to the disclosure by the Internet Participating Financial Institution, the
Authorised Financial Institution and/or Bursa Depository, as the case may be, of
information pertaining to you, the Internet Share Application made by you or
your account with the Internet Participating Financial Institution, to MIH and the
Authorised Financial Institution, the SC and any other relevant authority.
(h) You are not applying for our IPO Shares as a nominee ofany other persons and
the application is made in your own name as a beneficial owner and subject to
the risks referred to in this Prospectus.
(i) You authorise the Internet Participating Financial Institution to disclose and
transfer to any person, including any government or regulatory authority in any
jurisdiction, us, Bursa Securities or other relevant parties in connection with our
IPO Shares, all information relating to you if required by any law, regulation,
court order or any government or regulatory authority in any jurisdiction or if
such disclosure and transfer is, in the reasonable opinion of the Internet
Participating Financial Institutions, necessary for the provision of the Internet
Share Application services or if such disclosure is requested or required in
connection with our lPO Shares.
404
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE (Conf'd)
Further, the Internet Participating Financial Institutions will take reasonable
precautions to preserve the confidentiality of information furnished by you to
the Internet Participating Financial Institutions in connection with the use of
the Internet Share Application services.
(ix) Upon submission ofthe online application form, you will be linked to the website of the
Authorised Financial Institution to effect the online payment of your application of our
IPO Shares.
(x) As soon as the transaction is completed, a message from the Authorised Financial
Institution pertaining to the payment status will appear on the screen on the website
through which the online payment for the application of our IPO Shares is being made.
(xi) Subsequent to the above, the Internet Participating Financial Institutions shall confirm
that the Internet Share Application has been completed, via the Confrrmation Screen on
its website.
(xii) You are advised to print out the Confirmation Screen for reference and retention.
17.6.2 Terms and Conditions of Internet Share Application
Your application for our IPO Shares may be made through the Internet financial services
websites ofthe Internet Participating Financial Institutions.
APPLICANTS ARE ADVISED NOT TO APPLY FOR OUR IPO SHARES THROUGH
ANY WEBSITE OTHER THAN THE INTERNET FINANCIAL SERVICES WEBSITE
OF THE INTERNET PARTICIPATING FINANCIAL INSTITUTIONS.
Internet Share Applications may be made through the Internet fmancial services websites of the
following Internet Participating Financial Institutions:
RHB Bank Berhad at www.rhb.com.my (via hyperlink to Bursa Securities' website at
www.bursamalaysia.com); or
Malayan Banking Berhad at www.maybank2u.com.my (via hyperlink to Bursa
Securities' website at www.bursamalavsia.com); or
CIMB Investment Bank Berhad at www.eipocimb.com: or
CIMB Bank Berhad at www.cimbclicks.com.my: or
Affm Bank Berhad at www.affinOnline.com: or
Public Bank Berhad at www.pbebank.com
PLEASE READ THE TERMS OF THIS PROSPECTUS, TERMS AND CONDITIONS
FOR INTERNET SHARE APPLICATION AND THE PROCEDURES SET OUT IN THE
INTERNET FINANCIAL SERVICES WEBSITE OF THE INTERNET
PARTICIPATING FINANCIAL INSTITUTIONS, BEFORE YOU MAKE AN
INTERNET SHARE APPLICATION.
405
THE EXACT TERMS AND CONDITIONS AND ITS SEQUENCE FOR THE INTERNET
SHARE APPLICATIONS IN RESPECT OF OUR IPO SHARES ARE AS SET OUT ON
THE INTERNET FINANCIAL SERVICES WEBSITES OF THE INTERNET
PARTICIPATING FINANCIAL INSTITUTIONS.
PLEASE NOTE THAT THE ACTUAL TERMS AND CONDITIONS OUTLINED
BELOW SUPPLEMENT THE ADDITIONAL TERMS AND CONDITIONS FOR
INTERNET SHARE APPLICATION CONTAINED IN THE INTERNET FINANCIAL
SERVICES WEBSITES OF THE INTERNET PARTICIPATING FINANCIAL
INSTITUTIONS.
An Internet Share Application shall be made on and shall be subject to the terms and conditions
set out below:
(i) In order to make an Internet Share Application, you must:
(a) be an individual with a CDS account and in the case of a joint account, an
individual CDS account registered in your name which is to be used for the
purpose of the application if you are making the application instead of a CDS
account registered in the joint account holder's name;
(b) have an existing account with access to Internet fmancial services facilities
with an Internet Participating Financial Institution. You must have ready your
user identification and PIN/password for the relevant Internet fmancial services
facilities; and
(c) be a Malaysian citizen and have a Malaysian address.
You are advised to note that the User Identification and PIN/password issued by one of
the Internet Participating Financial Institutions cannot be used to apply for our IPO
Shares at Internet fmancial service websites of other Internet Participating Financial
Institutions.
(ii) An Internet Share Application shall be made on and shall be subject to the terms and
conditions ofthis Prospectus and our Memorandum and Articles ofAssociation.
(iii) You are required to confmn the following statements (by selecting the designated
hyperlink on the relevant screen of the Internet financial services websites of the
Internet Participating Financial Institutions) and to undertake that the following
information given is true and correct:
(a) You have attained 18 years of age as at the date of the application for our IPO
Shares.
(b) You are a Malaysian citizen residing in Malaysia.
(c) You have, prior to making the Internet Share Application, received and/or have
had access to a printed/electronic copy of this Prospectus, the contents of
which you have read and understood.
(d) You agree to all the terms and conditions of the Internet Share Application as
set out in the Prospectus and have carefully considered the risk factors set out
in this Prospectus, in addition to all other information contained in this
Prospectus before making the Internet Share Application for our IPO Shares.
(e) The Internet Share Application is the only application that you are submitting
for our IPO Shares.
406
Company No. 91838
(1) You authorise the Internet Participating Financial Institution or the Authorised
Financial Institution to deduct the full amount payable for our IPO Shares from
your account with the Internet Participating Financial Institution or the
Authorised Financial Institution.
(g) You give your express consent in accordance with the relevant laws of
Malaysia (including but not limited to Section 99 of the Banking and Financial
Institutions Act, 1989 and Section 45 of the Securities Industry (Central
Depositories) Act, 1991) to the disclosure by the Internet Participating
Financial Institutions, the Authorised Financial Institutions and/or Bursa
Depository, as the case may be, of information pertaining to you, the Internet
Share Application made by you or your account with the Internet Participating
Financial Institution, to MIH and the Authorised Financial Institution, the SC
and any other relevant authority.
(h) You are not applying for our IPO Shares as a nominee of any other persons and
the application is made in your own name, as a beneficial owner and subject to
the risks referred to in this Prospectus.
(i) You authorise the Internet Participating Financial Institutions to disclose and
transfer to any person, including any government or regulatory authority in any
jurisdiction, us, Bursa Securities or other relevant parties in connection with
our IPO Shares, all information relating to you if required by any law,
regulation, court order or any government or regulatory authority in any
jurisdiction or if such disclosure and transfer is, in the reasonable opinion of
the Internet Participating Financial Institutions, necessary for the provision of
the Internet Share Application services or if such disclosure is requested or
required in connection with our IPO Shares. Further, the Internet Participating
Financial Institutions will take reasonable precautions to preserve the
confidentiality of infonnation furnished by you to the Internet Participating
Financial Institutions in connection with the use of the Internet Share
Application services.
(iv) Your application will not be successfully completed and cannot be recorded as a completed
application unless you have completed all relevant application steps and procedures for the
Internet Share Application which would result in the Internet financial services website
displaying the Confumation Screen.
For the purposes of this section ofthe Prospectus, "Confmnation Screen" shall mean the
screen which appears or is displayed on the Internet fmancial services website, which
confirms that the Internet Share Application has been completed and states the details of
your Internet Share Application, including the number of our IPO Shares applied for,
which can be printed out by you for your records.
Upon the display of the Confmnation Screen, you shall be deemed to have confmned
the truth ofthe statements set out in Section 17.6.2 (iii) above.
(v) You must have sufficient funds in your account with the Internet Participating Financial
Institution or the Authorised Financial Institution at the time of making the Internet
Share Application, to cover and pay for our IPO Shares and the related processing fees,
charges and expenses, if any, to be incurred, failing which the Internet Share
Application will not be deemed complete, notwithstanding the display of the
Confrrmation Screen. Any Internet Share Application which does not strictly confonn
to the instructions set out in this Prospectus or any instructions displayed on the screens
of the Internet financial services website through which the Internet Share Application
is made, shaH be rejected.
407
(vi) You irrevocably agree and undertake to subscribe for and to accept the number ofIPO
Shares applied for as stated on the Confirmation Screen or any lesser number of such
IPO Shares that may be allotted or allocated to you. In the event that we decide to allot
or allocate any lesser amount of IPO Shares or not to allot or allocate any IPO Shares to
you, you agree to accept our decision as final.
In the course of completing the Internet Share Application on the website ofthe Internet
Participating Financial Institution, your conftrmation of the number of IPO Shares
applied for (by way of your action of clicking the designated hyperlink-on the relevant
screen ofthe website) shall be deemed to signify and shall be treated as:
(a) your acceptance ofthe number ofIPO Shares that may be allotted or allocated
to you in the event that your Internet Share Application is successful or
successful in part, as the case may be; and
(b) your agreement to be bound by our Memorandum and Articles ofAssociation.
(vii) You are fully aware that mUltiple or suspected multiple Internet Share Applications for
our IPO Shares will be rejected. MIH, on the authority of our Directors, reserves the
right to reject or accept any Internet Share Application in whole or in part without
assigning any reason. Due consideration will be given to the desirability of allotting or
allocating our IPO Shares to a reasonable number of applicants with a view to
establishing an adequate market for our Shares.
(viii) If your Internet Share Application is unsuccessful or partially successful in part only,
MIH shall inform the relevant Internet Participating Financial Institutions of the
unsuccessful or partially successful Internet Share Applications within two (2) Market
Days after the balloting date. The Internet Participating Financing Institution will credit
or arrange with the Authorised Financial Institution to credit the full amount of the
application monies or the balance of it (as the case may be) in RM (without interest or
any share of revenue or other benefit arising there from) into your account with the
Internet Participating Financial Institution or the Authorised Financial Institution within
two (2) Market Days after receipt ofwritten con:firmation from MIH.
A number of applications will be reserved to replace any successfully balloted
applications that are subsequently rejected. The application monies relating to these
applications which are subsequently rejected, will be refunded (without interest or any
share of revenue or other benefit arising therefrom) by MIH by way of cheques by
ordinary post or registered post. The cheques will be issued within ten (10) Market Days
from the date ofthe fmal ballot.
For applications that are held in reserve and are subsequently unsuccessful (or only
partly successful), the Internet Participating Financial Institutions will credit the
application monies (or any part thereof but without interest or any share of revenue or
other benefit arising therefrom) into your account within two (2) Market Days after the
receipt ofwritten confirmation from the MIH.
Except where MIH is required to refund application monies, it is the sole responsibility
of the Internet Participating Financial Institutions to ensure the timely refund of
application monies from unsuccessful or partially successful Internet Share Applications.
Therefore, you are strongly advised to consult with the Internet Participating Financial
Institutions through which your application was made in. respect of the mode or
procedure of enquiring on the status of your Internet Share Application in order to
determine the status or exact number of IPO Shares aJIotted, if any, before trading ofour
Shares on the Bursa Securities.
408
(ix) Internet Share Applications will be closed at 5.00 p.m. on [.] or such other date(s) as
our Directors and the Managing Underwriter may in their absolute discretion mutually
decide. An Internet Share Application is deemed to be received only upon its
completion, that is when the Confmnation Screen is displayed on the Internet fmancial
services website. You are advised to print out and retain a copy of the Confmnation
Screen for record purposes. Late Internet Share Application will not be accepted.
(x) You irrevocably agree and acknowledge that the Internet Share Application is subject to
the risk of electrical, electronic, technical, transmission and communication and
computer related faults and breakdowns, fires and other events which are not in our
control, or the control of Mill, the Internet Participating Financial Institutions and the
Authorised Financial Institutions. If we, MIH, the Internet Participating Financial
Institutions and/or the Authorised Financial Institutions do not receive your Internet
Share Application and/or the payment, or if any data relating to the Internet Share
Application or the tape or any other devices containing such data is wholly or partially
lost, corrupted, destroyed or otherwise not accessible for any reason, you shall be
deemed not to have made an Internet Share Application and you shall have no claim
whatsoever against us, MIH or the Internet Participating Financial Institutions and the
Authorised Financial Institutions in relation to our IPO Shares applied for or for any
compensation, loss or damage arising from it.
(xi) All of your particulars in the records of the relevant Internet Participating Financial
Institutions at the time of the Internet Share Application shall be deemed to be true and
correct, and we, Mill, the Internet Participating Financial Institutions and all other
persons who are entitled or allowed under the law to such information or where you
expressly consent to the provision of such information shall be entitled to rely on the
accuracy thereof.
You shall ensure that your personal particulars as recorded by both Bursa Depository
and the Internet Participating Financial Institutions are correct and identical, otherwise
your Internet Share Application is liable to be rejected. The notification letter on
successful allotment will be sent to your address last registered with Bursa Depository.
It is your responsibility to notify the Internet Participating Financial Institution and
Bursa Depository of any changes in your personal particulars that may occur from time
to time.
(xii) By making and completing an Internet Share Application, you are deemed to have
agreed that:
(a) in consideration of us making available the Internet Share Application facility
to you, through the Internet Participating Financial Institutions acting as our
agents, the Internet Share Application is irrevocable;
(b) you have irrevocably requested and authorised us to register our IPO Shares
allotted to you for deposit into your CDS account;
(c) neither us nor the Internet Participating Financial Institutions, shall be liable
for any delay, failure or inaccuracy in the recording, storage or transmission or
delivery of data relating to the Internet Share Application to MIH and Bursa
Depository due to any breakdown or failure of transmission, delivery or
communication facilities or due to any risk referred to in Section 17.6.2 (x)
herein or to any cause beyond our/their control;
409
(d) you shall hold the Internet Participating Financial Institutions harmless from
any damages, claims or losses whatsoever, as a consequence of or arising from
any rejection of your Internet Share Application by us, MIH and/or the Internet
Participating Financial Institutions for reasons of multiple applications,
suspected multiple applications, inaccurate and/or incomplete details provided
by you, or any other cause beyond the control of the Internet Participating
Financial Institutions;
(e) the acceptance of your offer to subscribe for and the purchase of our IPO
Shares for which your Internet Share Application has been successfully
completed shall be constituted by the issue of a notice of allotment by us or our
behalf for prescribed securities in respect of our IPO Shares, notwithstanding
the receipt of any payment by us or on our behalf;
(f) you are not entitled to exercise any remedy of rescission for misrepresentation
at any time after we have accepted your Internet Share Application;
(g) in making the Internet Share Application, you have relied solely on the
information contained in this Prospectus. We, the Managing Underwriter,
Principal Adviser and any other person involved in our IPO shall not be liable
for any information not contained in this Prospectus which may have been
relied on by you in making the Internet Share Application; and
(h) our acceptance of your Internet Share Application and the contract resulting
from our IPO shall be governed by and construed in accordance with the laws
of Malaysia, and you irrevocably submit to the jurisdiction of the courts of
Malaysia.
(xiii) A processing fee of RM2.50 per Internet Share Application will be charged by RHB
Bank Berhad (www.rhb.com.my). RMLOO per Internet Share Application will be
charged by Malayan Banking Berhad (www.maybank2u.com.my). RM2.00 per Internet
Share Application will be charged by elMB Investment Bank Berhad
(www.eipocimb.com). RM2.00 per Internet Share Application will be charged by
Public Bank Berhad (www.pbebank.com) or via Malayan Banking Berhad and RM2.00
per Internet Share Application for applicants with CDS account held with CIMB
Investment Bank Berhad and RM2.50 for applicants with CDS accounts with other
ADAs will be charged by CIMB Bank Bemad (www.cimbclicks.com.my). No fee will
be charged by Affm Bank Berhad (www.affmOnline.com) for application by their
account holders.
17.7 Application and acceptance
Mm, on the authority of our Directors, reserves the right to reject any application which does not strictly
comply with the instructions or to accept any application in part only without giving any reason.
The submission of an Application Form does not necessarily mean that the application will be successful.
ALL APPLICATIONS MUST BE FOR AT LEAST 100 SHARES OR MULTIPLES THEREOF.
In the event of an over-subscription of the IPO Shares, MIH will conduct a ballot in a fair and equitable
manner as approved by our Directors to determine acceptance of applications. In determining the manner of
balloting, our Directors will consider the desirability of distributing the IPO Shares, to a reasonable number
of applicants for the purpose of broadening our shareholding base and establishing an adequate market in
the trading ofour Shares.
410
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE (Cool'd)
Pursuant to. the Listing Requirements, we need at least 25% o.f o.ur enlarged issued and paid-up share
capital to. be held by a minimum number o.f200 public shareho.lders holding no.t less than 100 Shares each
upon our Listing. We expect to. achieve this at the point of o.ur Listing. Ho.wever, if the above requirement
is no.t met pursuant to o.ur IPO, we may no.t be allowed to. proceed with o.ur Listing. Then, mo.nies paid in
respect o.f all applicatio.ns will be returned witho.ut interest.
In the event o.f under-subscription for our IPO Shares reserved fo.r the Public, all such IPO Shares no.t
applied fo.r will be subscribed by our Underwriter pursuant to the Underwriting Agreement.
Our IPO Shares reserved for the selected investors will no.t be underwritten as written irrevo.cable
undertakings to subscribe for such IPO Shares have been procured fro.m the respective selected investo.rs.
IF YOUR APPLICATION VIA APPLICATION FORM IS UNSUCCESSFUL OR SUCCESSFUL IN
PART ONLY, THE FULL AMOUNT OR THE BALANCE OF THE APPLICATION MONIES, AS
THE CASE MAY BE, WILL BE REFUNDED TO YOU WITHOUT INTEREST, AND
DESPATCHED BY ORDINARY POST OR REGISTERED POST TO YOU WITHIN TEN (10)
MARKET DAYS FROM THE DATE OF THE FINAL BALLOT OF THE APPLICATION TO
YOUR ADDRESS LAST MAINTAINED WITH BURSA DEPOSITORY, AT YOUR OWN RISK.
NO APPLICATION SHALL BE DEEMED TO HAVE BEEN ACCEPTED BY REASON OF THE
REMIITANCE BEING PRESENTED FOR PAYMENT.
17.8 CDS account
Pursuant to. Section 14(1) of the Securities Industry (Central Depositories) Act 1991, Bursa Securities has
prescribed our Shares as Prescribed Securities. In co.nsequence thereo.f, the Share issued/o.ffered through
this Pro.spectus will be deposited directly with Bursa Depo.sitory and any dealings in these Shares will be
carried out in accordance with the Securities Industry (Central Depository) Act, 1991 and Rules of Bursa
Depo.sitory .
Following the abo.ve, in acco.rdance with Section 29 of the Securities Industry (Central Depositories) Act,
1991, all dealings in our Shares will be by book entries thro.ugh CDS acco.unts. No share certificates will be
issued to successful applicants.
If you make an application by way of Application Fo.rm, yo.U must have a CDS acco.unt. Yo.U sho.uld state
your CDS acco.unt number in the space provided o.n the Application Form and shall be deemed to. have
autho.rised Bursa Depository to. disclo.se info.rmation pertaining to yo.ur CDS account to. MIH or us, and any
relevant regulatory bodies (as the case may be). Ifyo.U do no.t presently have a CDS acco.unt, yo.U sho.uld o.pen
a CDS acco.unt at an ADA prior to. making an applicatio.n fo.r o.ur IPO Shares.
In the case of an application by way of Electro.nic Share Application, you must have a CDS account. You
must furnish your CDS acco.unt number to the Participating Financial Institution by way of keying in yo.ur
CDS account number when the instructions o.n the ATM screen at which yo.U enter your Electronic Share
Applicatio.n requires yo.U to do. so.
If you make an application by way of Internet Share Application, you must have a CDS account. In
certain cases, yo.U can only make an Internet Share Application if you have a CDS account opened with
the Internet Participating Financial Institutions. Subsequently, yo.ur CDS account number would
automatically appear in the electronic online applicatio.n fo.rm.
Failure to comply with the specific instructions or inaccuracy in the CDS account number arising fro.m the
use o.f invalid, third party o.r nominee accounts, may result in the applicatio.n being rejected. If yo.U are
successful in yo.ur application but fail to. state yo.ur CDS acco.unt number, MIH o.n the autho.rity o.f o.ur
Directo.rs, reserves the right to. reject yo.ur application. Applicatio.ns may alSo. be rejected if yo.ur particulars
provided in the Application Fo.rm, o.r yo.ur reco.rds with the Participating Financial Institutio.ns (in the case o.f
Electro.nic Share Application) o.r Internet Participating Financial Institutio.ns (in the case o.f Internet Share
Applicatio.n) differ from those in Bursa Depo.sitory's reco.rds such as your identity card number, name and
natio.nality.
411
17.9 Notice of allotment
If you are successful or partially successful in your application, our Shares allotted to you will be credited
to your CDS account. We will not be issuing any share certificate to you. A notice of allotment will be
despatched to you at your address last maintained with Bursa Depository, at your own risk, prior to our
Listing. This is your only acknowledgement of acceptance of the application. For Electronic Share
Application or Internet Share Application, the notice of allotment will be despatched to the successful or
partially successful applicant at hislher address last maintained with Bursa Depository at the applicant's
own risk prior to our Listing. This is the only acknowledgement ofthe application.
You must inform Bursa Depository of your updated address promptly by adhering to certain rules and
regulation of Bursa Depository, failing which, the notification letter on your successful or partially
successful allotment shall be sent to your registered or correspondence address last maintained with Bursa
Depository.
17.10 Enquiries
You may contact MIH if you have any queries on the White Application Form at 03-7841 8000 or 03
78418289 between five (5) to ten (10) Market Days (during office hours only). If you have enquiry with
regards to your Electronic Share Application, you may refer to the relevant Participating Financial
Institution. If you have any enquiry with regards to your Internet Share Application, you may refer to the
relevant Internet Participating Financial Institution and Authorised Financial Institution.
If you are applying for the IPO Shares as a Public under the IPO, you may check the status of your
application by logging onto MIH's website at www.mih.com.my or by calling your ADAs at the telephone
number stated in Section 17.11 ofthis Prospectus or MIH at 03-7841 8000 or 03-7841 8289 between five
(5) to ten (10) Market Days (during office hours only) after the balloting date.
412
17.11 List of ADAs
The list of ADAs and their respective Broker codes are as follows:
Name
KUALA LUMPUR
A.A. ANTIIONY SECURITIES
SDNBHD
AMINVESTMENT BANK
BERHAD
AFFIN INVESTMENT BANK
BERHAD
ALLIANCE INVESTMENT BANK
BERHAD
BIMB SECURITIES SDN BHD
CIMB INVESTMENT BANK
BERHAD
ECM LIBRA INVESTMENT
BANKBERHAD
BANKBERHAD
HONG LEONG INVESTMENT
BANKBERHAD
Address and Telephone Number Broker Code
N3, Plaza Damas
60, Jalan Sri Hartamas 1
Sri Hartamas
50480 Kuala Lumpur
Tel No.: 03-6201 1155
078-004
15th Floor, Bangunan AmBank Group
55, Jalan Raja Chulan
50200 Kuala Lumpur
Tel No.: 03-2078 2788
086-001
Ground,Mezzanine
3rd Floor, Chulan Tower
No.3, Jalan Conlay
50450 Kuala Lumpur
Tel No.: 03-2143 8668
028-001
17th Floor Menara Multi-Purpose
Capital Square
No.8, Jalan Munshi Abdullah
50100 Kuala Lumpur
Tel No.: 03-26976333
076-001
32nd Floor, Menara Multi-Purpose
Capital Square
No.8, Jalan Munshi Abdullah
50100 Kuala Lumpur
Tel No.: 03-26918887
024-001
9th Floor, Commerce Square
Jalan Semantan, Damansara Heights
50490 Kuala Lumpur
Tel No.: 03-2084 9999
065-001
Bangunan ECM Libra
8, J alan Damansara Endah
Damansara Heights
50490 Kuala Lumpur
Tel No.: 03-20891888
052-001
1st Floor, Wisma Genting
Jalan Sultan Ismail
50250 Kuala Lumpur
Tel. No.: 03-21781133
052-009
Level 6-8, Menara HLA
No.3, Jalan Kia Peng
50450 Kuala Lumpur
Tel No.: 03-2168 1168
066-001
413
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE (Conf'dj
Name
HWANGDBS INVESTMENT
BANKBERHAD
HWANGDBS INVESTMENT
BANKBERHAD
HWANGDBS INVESTMENT
BANKBERHAD
HWANGDBS INVESTMENT
BANKBERHAD
INTER-PACIFIC SECURITIES
SDNBHD
SDNBHD
SDNBHD
nJPITER SECURITIES SDN BHD
KAF-SEAGROAIT &
CAMPBELL SECURITIES SDN
BHD
KENANGA INVESTMENT BANK
BERHAD
2nd Floor, Bangunan AHP
No.2, Jalan Tun Mohd Fuad 3
Taman Tun Dr Ismail
60000 Kuala Lumpur
Tel. No.: 03-77106688
068-009
71b., 22
nd
, 23
rd
& 23A Floor
Menara Keck Seng
203 Jalan Bukit Bintang
55100 Kuala Lumpur
Tel No.: 03-2711 6888
068-014
No. 57-10, Level 10
The Boulevard, Mid Valley City
59000 Kuala Lumpur
Tel. No.: 03-22872273
068-017
Nos. 34-5, 36-5,38-5,40-5,42-5 & 44-5
5th Floor, Cheras Commercial Centre
Jalan 51l01C
Off lalan Kaskas, 5th Mile Cheras
56100 Kuala Lumpur
Tel No.: 03-9130 3399
068-012
Ground Floor, 7-0-8 Jalan 31l09F
Danau Business Centre, Danau Desa
58100 Kuala Lumpur
Tel No.: 03-7984 7796
054-003
Stesyen Minyak: SHELL
Jalan 1I116B, Off Jalan Kuchai Lama
Kuchai Entrepreneur Park
58200 Kuala Lumpur
Tel No.: 03-7981 8811
054-005
West Wing, Level 13
Beljaya Times Square
No.1, Jalan Imbi
55100 Kuala Lumpur
TelNo.:03-21171888
054-001
7th-9th Floor, Menara Olympia
8, Jalan Raja Chulan
50200 Kuala Lumpur
Tel No.: 03-2034 1888
055-001
lIth - 14th Floor, Chulan Tower
No.3, lalan Conlay
50450 Kuala Lumpur
Tel No.: 03-21688800
053-001
8th Floor, Kenanga International
lalan Sultan Ismail
50250 Kuala Lumpur
Tel No.: 03-2164 9080
073-001
414
Name
MIMB INVESTMENT BANK
BERHAD
M & A SECURITIES SDN BHD
MERCURY SECURITIES SDN
BHD
MIDF AMANAH INVESTMENT
BANKBERHAD
MAYBAN INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
PUBLIC INVESTMENT BANK
BERHAD
Level 18-21, Menara EON Bank
288, Jalan Raja Laut
50350 Kuala Lumpur
Tel No.: 03-2691 0200
061-001
Level 1-3, No. 45 & 47
The Boulevard, Mid Valley City
59200 Kuala Lumpur
Tel No.: 03-2282 1820
057-002
L-7-2, No.2, Jalan Solaris
Solaris Mont' Kiara
50480 Kuala Lumpur
Tel No.: 03-6203 7227
093-002
Level 11 & 12, Menara MIDF
82 Jalan Raja Chulan
50200 Kuala Lumpur
Tel No.: 03-21738888
026-001
5-13 Floor, MaybanLife Tower
Dataran Maybank
No 1, Jalan Maarof
59000 Kuala Lumpur
Tel No.: 03-2297 8888
098-001
20th Floor, Plaza OSK
Jalan Ampang
50450 Kuala Lwnpur
Tel No.: 03-2333 8333
056-001
No 62 & 64, Vista Magna
Jalan Prima, Metro Prima
52100 Kuala Lumpur
Tel No.: 03-6257 5869
056-028
Ground Floor
No. M3-A-7 & M3-A-8
Jalan Pandan Indah 4/3A
Pandan Indah
55100 Kuala Lumpur
Tel No.: 03-4280 4798
056-054
Ground, 1st, 2nd & 3rd Floor
No. 55, Zone J4
Jalan Radin Anum
Bandar Baru Seri Petaling
57000 Kuala Lwnpur
Tel No.: 03-9058 7222
056-058
27th Floor, Public Bank Building
No.6, Jalan Sultan Sulaiman
50000 Kuala Lumpur
Tel No.: 03-20313011
051-001
415
Name
PM SECURITIES SDN BlID
RHB INVESTMENT BANK
BERRAD
T A SECURITIES HOLDINGS
BERRAD
SELANGORDARULEHSAN
BERRAD
BERRAD
AMINVESTMENT BANK
BERRAD
BERRAD
ECM LIDRA INVESTMENT
BANKBERHAD
Address and Telephone Number
Ground, Mezzanine & lSI Floor
MenaraPMI
No.2, Jalan Changkat Ceylon
50200 Kuala Lumpur
Tel. No.: 03-21463000
Broker Code
064-001
Level 9, Tower One
RHB Centre, Jalan Tun Razak
50400 Kuala Lumpur
Tel No.: 03-9287 3888
087-001
Floor 13-16,23,28-30,34 & 35
TAOneTower
No. 22, Jalan P. Ramlee
50250 Kuala Lumpur
Tel No.: 03-2072 1277
058-003
2nd, 3rd & 4th Floor
Wisma Amsteel Securities
No. I, Lintang Pekan Baru
Off Jalan Meru
41050 Klang
Tel No.: 03-3343 9999
028-002
Lot 229, 2
nd
Floor, The Curve
No.6, Jalan PJU 7/3
Mutiara Damansara
47800 Petaling Jaya
Tel No.: 03-7729 8016
028-003
4th Floor, Plaza Damansara Utama 086-003
No.2, Jalan SS21/60
47400 Petaling Jaya
Tel No.: 03-7710 6613
Ground Floor
Tropicana City Office Tower
3, Jalan SS20127
47400 PetaIing Jaya
Tel. No.: 03-77173319
065-009
35, (Ground & 1st Floor)
Jalan Tiara 3
Bandar Barn Klang
41150 Klang
Tel. No.: 03-3348 8080
052-015
416
Name
HWANGDBS INVESTMENT
BANKBERHAD
HWANGDBS INVESTMENT
BANKBERHAD
JF APEX SECURITIES BERHAD
JF APEX SECURITIES BERHAD
BERHAD
BERHAD
BERHAD
BERHAD
16th, 18th-20th Floor, Plaza Masalam
No.2, Jalan Tengku Ampuan Zabedah
E91E Section 9
40100 Shah Alam
Tel No.: 03-5513 3288
068-002
East Wing & Centre Link
Floor 3A, Wisma Consplant 2
No.7, Jalan SS 16/1
47500 Subang Jaya
Tel No.: 03-5635 6688
068-010
6th Floor, Menara Apex
Off Jalan Semenyih, Bukit Mewah
43000 Kajang
Tel No.: 03-8736 1118
079-001
15th & 16th Floor
Menara Choy Fook On
No. lB, Jalan Yong Shook Lin
46050 Petaling Jaya
Selangor DaruI Ehsan
Tel No.: 03-7620 1118
079-002
Ground - Fifth Floor
East Wing, Quattro West
No.4, Lorong Persiaran Barat
46200 Petaling Jaya
Tel No.: 03-7862 6200
073-005
1st Floor, Wisma UEP
Pusat Pemiagaan USJ 10
Jalan USJ 10/1A
47620 Subang Jaya
Tel No.: 03-8024 1682
073-006
Suite 7.02, Level 7, Menara ING
Intan Millenium Square
No. 68 Jalan Batai Laut 4
Taman Intan
41300 Klang
Tel No.: 03-30057550
073-007
Lot 240, 2
nd
Floor, The Curve
No.6, Jalan PJU 7/3
Mutiara Damansara
47800 Petaling Jaya
Tel No.: 03-7725 9095
073-016
417
Name
BANKBERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
Level 10
1 First A venue
Bandar Utama
47800 Petaling Jaya
Selangor Daml Ehsan
Tel. No.: 03-77246888
066-002
24, 24M, 24A, 26M, 28M, 28A & 30
Jalan SS 2/63
47300 Petaling Jaya
Selangor Daml Ehsan
Tel No.: 03-78736366
056-011
No. 37, Jalan Semenyih
43000 Kajang
Selangor Daml Ehsan
Tel No.: 03-8736 3378
056-045
Ground & 1st Floor
No. 15, Jalan Bandar Rawang 4
48000 Rawang
Tel No.: 03-6092 8916
056-047
Ground & Mezzanine Floor
No. 87 & 89, Jalan Susur
Pusat Pemiagaan NBC
Batu I Yz, Jalan Mem
41050 Klang
Selangor Daml Ehsan
Tel No.: 03-3343 9180
056-048
3
rd
Floor, IA-D
Jalan USJ 10llA
Pusat Pemiagaan USJ 10
47610 UEP Subang Jaya
Selangor Daml Ehsan
Tel No: 03-8023 6518
056-063
11-1, Jalan PJU 5112
Dataran Sun way
Kota Damansara
47810 Petaling Jaya
Selangor Dam) Ehsan
Tel. No.: 03-61483361
056-065
Ground Floor and 2nd Floor
No. 13, Jalan Kenari 3
Bandar Puchong Jaya
47100 Puchong
Se)angor Daml Ehsan
Tel. No.: 03-80706899
056-066
418
Company No. 918382
Name
PM SECURlTIES SDN BlID
PM SECURlTIES SDN BOO
S1 SECURlTIES SDN BOO
TA SECURlTIES HOLDINGS
BERHAD
TA SECURlTIES HOLDINGS
BERHAD
MELAKA
BANKBERHAD
BANKBERHAD
No. 157 & 159, 1alan Kenari 23A
Bandar Puchong 1aya
47100 Puchong
Selangor Daml Ehsan
Tel No.: 03-8070 0773
No. 18 & 20, 1alan Tiara 2
Bandar Baru Klang
41150 Klang
Tel No.: 03-33415300
Ground Floor Podium Block Wisma Synergy
Lot 72, Persiaran Jubli Perak
Section 22
40200 Shah Alam
Tel No.: 03-5192 0202
No.2-I, 2-2, 2-3 & 4-2
Jalan USJ 915T
Subang Business Centre
47620 UEP Subang Jaya
Tel No.: 03-8025 1880
Damansara Utama Branch
2nd Floor, Wisma T A
47400 Petaling Jaya
Selangor Daml Ehsan
Tel No.: 03-77295713
Ground, 1 st & 2
nd
Floor
No.191, Taman Melaka Raya
Off Jalan Parameswara
75000 Melaka
Tel No.: 06-289 8880
71 (A&B) & 73 (A&B), Jalan Merdeka
Taman Melaka Raya
75000 Melaka
Tel No.: 06-288 1720
22A & 22A-l, 26 & 26-1
Jalan MP 10
Taman Merdeka Permai
75350 Batu Berendam
Melaka
Tel. No.: 06-3372550
Broker Code
064-003
064-007
096-001
058-005
058-007
065-006
052-008
052-016
419
Name
MALACCA SECURITIES SDN
BHD
MERCURY SECUruTlliS SDN
mID
OSK INVESTMENT BANK
BERHAD
PM SECURITIES SDN BHD
RHB INVESTMENT BANK
BERHAD
PERAK DARUL RIDZUAN
A.A. ANTHONY SECURITIES
SDNBHD
BERHAD
BANKBERHAD
BANKBERHAD
No.1, 3 & 5, Jalan PPM9
Plaza Pandan Malim (Business Park)
Balai Panjang, P. O. Box 248
75250 Melaka
Tel No.: 06-337 1533
012-001
No. 81-B & 83-B, Jalan Merdeka
Taman Melaka Raya
75000 Melaka
Tel No.: 06-2921898
093-003
579,580 & 581
Taman Melaka Raya
75000 Melaka
Tel No.: 06-282 5211
056-003
No. 11 & 13, Jalan PM2
Plaza Mahkota
75000 Melaka
Tel No.: 06-286 6008
064-006
Lot 7-13 &15, 1st Floor
Tabung Haji Building
Jalan Bandar Kaba
75000 Melaka
Tel No.: 06-283 3622
087-002
29G, Jalan Intan 2
BandarBaru
36000 Teluk Intan
Perak Darul Ridzuan
Tel No.: 05-623 2328
078-009
Ground Floor, No.8, 8A-C
Persiaran Greentown 4C
Greentown Business Centre
30450lpoh
Perak Darn) Ridzuan
Tel. No.: 05-2082688
065-010
No. 63 Persiaran Greenhill
30450 Ipoh
Perak Darnl Ridzuan
Tel No.: 05-242 2828
052-002
No. 7B-l, Jalan Laman Intan
Bandar Barn Teluk Intan
36000 Teluk Intan
Perak Darnl Ridzuan
Tel No.: 05-622 2828
052-006
420
I Company No. 91 8382-T I
Name
BANKBERHAD
HWANGDBS INVESTMENT
BANKBERHAD
HWANGDBS INVESTMENT
BANKBERHAD
M & A SECURITIES SDN BHD
MAYBAN INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
Address and Telepbone Number Broker Code
Ground Floor
No. 25 &25A
Jalan Jaya 2, Medan Jaya
32000 Sitiawan
Perak Darnl Ridzuan
Tel. No.: 05-6939 828
052-014
Ground, Level I, 2 & 3
21, Jalan Stesen
34000 Taiping
Perak Darnl Ridzuan
Tel No.: 05-806 6688
068-003
Ground, 1 st & 2nd Floor
No. 22, Persiaran Greentown 1
Greentown Business Centre
30450 Ipoh
Perak Darnl Ridzuan
Tel No.: 05-255 9988
068-015
M & A Building
52A, Jalan Sultan Idris Shah
30000 Ipoh
Perak Darnl Ridzuan
Tel No.: 05-2419800
057-001
B-G-04 (Ground Floor)
Levell & 2
42 Persiaran Greentown 1
Pusat Perdagangan Greentown
30450lpoh
Perak Darnl Ridzuan
Tel No.: 05-245 3400
098-002
21-25, Jalan Seenivasagam
Greentown
30450 Ipoh
Perak Darnl Ridzuan
Tel No.: 05-2415100
056-002
Ground & I st Floor
No. 17, Jalan Intan 2, Bandar Barn
36000 Teluk Intan
Perak Darnl Ridzuan
Tel No.: 05-623 6498
056-014
Ground & I st Floor
No. 23 & 25, Jalan Lumut
32000 Sitiawan
Perak Darnl Ridzuan
Tel No.: 05-692 1228
056-016
421
Name
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
BANKBERHAD
TA SECURITIES HOLDINGS
BHD
PULAU PINANG
SDNBHD
SDNBHD
BERHAD
Ground Floor
No. 40, 42 & 44
lalan Berek
34000 Taiping
Perak Darnl Ridzuan
Tel No.: 05-808 8229
056-034
No. 72, Ground Floor
lalan Idris
31900 Kampar
Perak Darnl Ridzuan
Tel No.: 05-465 1261
056-044
Ground Floor & 1 st Floor
No.2, lalan Wawasan 4
Taman Wawasan
34200 Parit Buntar
Perak Darul Ridzuan
Tel No.: 05-717 0888
056-052
51-53, Persiaran Greenhill
30450 Ipoh
Perak Darul Ridzuan
Tel No.: 05-253 0888
066-003
Ground, 1 st & 2
nd
Floor
Plaza Teh Teng Seng
227, lalan Raja Permaisuri Bainun
30250 Ipoh
Perak Darnl Ridzuan
Tel No.: 05-253 1313
058-001
Is\ 2
nd
& 3
rd
Floor
Bangunan Heng Guan
171 lalan Burmah
10050 Pulau Pinang
Tel No.: 04-229 9318
078-002
Ground & 1
51
Floor
No.2, lalan Perniagaan 2
Pusat Perniagaan Alma
14000 Bukit Mertajam
Pulau Pinang
Tel No.: 04-554 1388
078-003
Suite 2.1 & 2.4, Level 2
Wisma Great Eastern
No. 25, Lebuh Light
10200 Penang
Tel No.: 04-261 1688
076-015
422
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE (Conrd)
Name
AMINVESTMENT BANK
BERHAD
AMINVESTMENT BANK
BERHAD
BANKBERHAD
BANKBERHAD
BERHAD
HW ANGDBS INVESTMENT
BANKBERHAD
BANKBERHAD
SDNBHD
BERHAD
BHD
Mezzanine Floor & Level 3
No. 37, 1alan Sultan Ahmad Shah
10050 Pulau Pinang
Tel No.: 04-226 1818
086-004
Level 3
No. 15, Lebuh Pantai
10300 Pulau Pinang
Tel. No.: 04-2618688
086-007
No. 111, 1alan Macalister
10400 Pulau Pinang
Tel No.: 04-228 1868
052-003
7
111
Floor, Menara Boustead Penang
39, 1alan Sultan Ahmad Shah
10050 Pulau Pinang
Tel No.: 04-228 3355
052-010
Ground Floor
Suite 1.01, Menara Boustead Penang
10050 Pulau Pinang
Tel No.: 04-238 5900
065-003
Level 2, 3, 4, 7 & 8, Wisma Sri Pinang
60, Green Hall
10200 Pulau Pinang
Tel No.: 04-263 6996
068-001
No.2&4
1alan Perda Barat
Bandar Perda
Pulau Pinang
Tel No.: 04-537 2882
068-006
Ground, Mezzanjne & 8
111
Floor
Bangunan Maybank Trust
No.3, Penang Street
10200 Pulau Pinang
Tel No.: 04-269 0888
054-002
Lot 1.02, Levell, Menara KWSP
10050 Pulau Pinang
Tel No.: 04-210 6666
073-013
Ground, 1 st, 2nd & 3rd Floor
WismaUMNO
Lorong Bagan Luar Dua
12000 Butterworth
Pulau Pinang
Tel No.: 04-3322123
093-001
423
Name
BHD
OSK INVESTMENT BANK
BERHAD
aSK INVESTMENT BANK
BERHAD
aSK INVESTMENT BANK
BERHAD
aSK INVESTMENT BANK
BERHAD
aSK INVESTMENT BANK
BERHAD
aSK INVESTMENT BANK
BERHAD
PM SECURITIES SDN BlID
2
nd
Floor, Standard Chartered Bank
Chambers
2 Lebuh Pantaj
10300 Pulau Pinang
Tel No.: 04-263 9118
093-004
64, Bishop Street
20E, 20F & 20G, Penang Street
10200 Pulau Pinang
Tel No.: 04-263 4222
056-004
Ground, 1 st & 2
nd
Floor
No. 2677, Jalan Chain Ferry
Taman lnderawasih
13600 Prai
Pulau Pinang
Tel No.: 04-3900022
056-005
Ground & Upper Floor
I1A, Jalan Keranji
aff Jalan Padang Lallang
Pulau Pinang
Tel No.: 04-540 2888
056-015
No. 834 Jalan Besar, Sungai Bakap
14200 Sungai Jawi
Seberang Perai Selatan
Pulau Pinang
Tel No.: 04-583 1888
056-032
Ground & 1 st Floor
No. 15-G-5, 15-G-6, 15-1-5, 15-1-6
Medan Kampung Relau (Bayan Point)
11950 Pulau Pinang
Tel No.: 04-6404888
056-042
41-A, 41-B and 41-C
Lintang Angsana
Bandar Baru Air !tam
11500 Pulau Pinang
Tel. No.: 04-8352988
056-064
Level 25, Menara BIrr.
51, Jalan Sultan Ahmad Shah
10050 Pulau Pinang
Tel No.: 04-227 3000
064-004
424
Name
PERLIS INDRA KAYANGAN
BERHAD
OSK INVESTMENT BANK
BERHAD
KEDAR DARUL AMAN
SDNBHD
HWANGDBS INVESTMENT
BANKBERHAD
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
2nd Floor, Podium Block
KWSP Building
01000 Kangar
Perlis Indra Kayangan
Tel No.: 04-976 5200
076-003
Ground & 1
51
Floor
No. 39, Taman Suriani
Persiaran JubJi Emas
01000 Kangar
Perlis Indra Kayangan
Tel No.: 04-9793888
056-061
Lot 4, 5 & 5A
1SI Floor EMUM 55
No. 55, Jalan Gangsa
Kawasan Perusahaan Mergong 2
Seberang Jalan Putra
05150 Alar Setar
Kedah Darul Aman
Tel No.: 04-732 2111
078-007
No. 70 A, B, C, Jalan Mawar 1
Taman Pekan Baru
08000 Sungai Petani
Kedah Darul Aman
Tel No.: 04-425 6666
068-011
2nd Floor, Wisma PKNK
Jalan Sultan Badlishah
05000 Alor Setar
Kedah Darul Arnan
Tel No.: 04-7317088
076-004
No. 112, Jalan PengkaJan
Taman Pekan Baru
08000 Sungai Petani
Kedah Darul Arnan
Tel No.: 04-4204888
056-017
No. 35, Ground Floor
Jalan Suria 1, Jalan Bayu
09000 Kulim
Kedah Darul Aman
Tel No.: 04-4964888
056-019
425
Name
aSK INVESTMENT BANK
BERHAD
Ground & 1st Floor, 215-A & 215-B
Medan Putra, lalan Putra
05150 Alor Setar
Kedah Darn1 Aman
Tel No.: 04-720 9888
Broker Code
056-021
NEGERI SEMBILAN DARUL KHUSUS
HWANGDBS INVESTMENT
BANKBERHAD
HWANGDBS INVESTMENT
BANKBERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
BANKBERHAD
Ground & 1 st Floor
105, 107 & 109, lalan Yam Tuan
70000 Seremban
Negeri Sembi1an Darnl Khusus
Tel No.: 06-7612288
068-007
No.6, Upper Level, lalan Mahligai
72100 Bahau
Negeri Sembilan Darnl Khusus
Tel No.: 06-455 3188
068-013
Ground, 1st & 2nd Floor
No. 33, lalan Dato' Bandar TunggaJ
70000 Seremban
Tel No.: 06-764 1641
056-024
1st Floor, No. 3601, la1an Besar
73000 Tampin
Negeri Sembilan Darn] Khusus
Tel No.: 06-442 1000
056-037
1 st & 2nd Floor
No. 168, la1an Mewah
(Pusat Pemiagaan UMNO Bahagian lempol)
71200 Bahau
Negeri Sembilan Darn1 Khusus
Tel No.: 06-455 3014
056-040
No. 346 & 347, Batu Y2, lalan Pantai
71000 Port Dickson
Tel No.: 06-646 1234
056-046
1st, 2nd & 3rd Floor
19-21, lalan Kong Sang
70000 Seremban
Tel No.: 06-762 3131
064-002
1 C-l & 1 D-l, First Floor
lalan Tunku Munawir
70000 Seremban
Tel No.: 06-765 5998
052-013
426
Name
JOHOR DARUL TAKZIM
SDNBHD
SDNBHD
A.A. ANTIIONY SECURITIES
SDNBHD
SDNBHD
BERHAD
AMINVESTMENT BANK
BERHAD
AMINVESTMENT BANK
BERHAD
BANKBERHAD
Level 6 & 7 Menara MSC Cyberport
No.5, Jalan Bukit Meldrum
80300 Johor Bahru
Johor DaruI Takzim
Tel No.: 07-3332000
078-001
42-8, Main Road
Kulai Besar
81000 Kulai
Johor Darnl Takzim
Tel No.: 07-663 7398
078-005
No. 70,70-01,70-02
Jalan Rosmerah 2117
Taman Johor Jaya
81100 Johor Bahru
Johor Darnl Takzim
Tel No.: 07-351 3218
078-006
No. 171 (Ground Floor)
Jalan Bestari 1/5
Taman Nusa Bestari
81300 Skudai
Johor Darnl Takzim
TeL No.: 07-5121633
078-008
No. 73, Ground & IstFloor
Jalan Rarnbutan
86000 Kluang
Johor Darnl Takzim
TeL No.: 07-7717922
076-006
2nd & 3rd Floor, Penggaram Complex
I, Ja1an Abdul Rahman
83000 Batu Pahat
Johor Darnl Takzim
Tel No.: 07-4342282
086-002
18
th
& 31
st
Floor, Selesa Tower
Jalan Dato' Abdullah Tahir
80300 Johor Bahru
Johor Darnl Takzim
Tel No.: 07-3343855
086-006
No. 57,59 & 61, Ja1an Ali
84000 Muar
Johor Darnl Takzim
Tel No.: 06-953 2222
052-004
427
Name
BANKBERHAD
SDNBHD
BANKBERHAD
BERHAD
BERHAD
BERHAD
BERHAD
BERHAD
BERHAD
Ground Floor, No. 234, Jalan Besar
Taman Semberong Baru
83700 Yong Peng
Johor Darul Takzim
Tel No.: 07-467 8885
052-005
95, Jalan Tun Abdul Razak
80000 Johor Bahru
Johor Darul Takzim
Tel No.: 07-223 1211
054-004
Level 7, Johor Bahru City Square
(Office Tower)
106-108 Jalan Wong Ah Fook
80000 Johor Bahru
Johor Darul Takzim
Tel No.: 07-2222692
068-004
No. 73, Ground & 1
51
Floor
Jalan Rambutan
86000 Kluang
Johor Darul Takzim
Tel No.: 07-771 7922
076-006
Level 2, Menara Pelangi
Jalan Kuning, Taman Pelangi
80400 Johor Bahru
Johor Darul Takzim
Tel No.: 07-333 3600
073-004
No. 31, Lorong Dato' Ahmad
Jalan Khalidi
84000 Muar
Johor Darul Takzim
Tel No.: 06-9542711
073-008
No. 34 Jalan Genuang
85000 Segamat
Johor Darul Takzim
Tel No.: 07-933 3515
073-009
No. 33 & 35
(Ground & 1st Floor A&B)
Jalan Syed Abdul Hamid Sagaff
86000 Kluang
Johor Darul Takzim
Tel No.: 07-777 1161
073-010
Ground Floor
No.4, Jalan Dataran 1
Taman Bandar Tangkak
84900 Tangkak
Johor Darul Takzim
Tel No.: 06-978 2292
073-011
428
Name
M&A SECURITIES SDN ElID
BHD
MlMB INVESTMENT BANK
BERHAD
MIMB INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
Suite 5.3A, Level 5 Menara Pelangi
lalan Kuning, Taman Pelangi
80400 lohor Bharn
lohor Darnl Takzim
Tel No.: 07-338 1233
057-003
lalan Kuning, Taman Pelangi
80400 lohor Bahru
lohor Darnl Takzim
Tel No.: 07-331 6992
093-005
Suite 25.02, Level 25, Menara Pelangi
lohor Bahru City Square (Office Tower)
No. 106-108, lalan Wong Ah Fook
80000 lohor Bahru
lohor Darnl Takzim
Tel No.: 07-222 7388
061-002
1st Floor, No.9
lalan Kundang
Taman Bukit Pasir
83000 Batu Pahat
lohor Darnl Takzim
Tel. No.: 07-4313688
061-003
6
th
Floor, Wisma Tiong-Hua
8, lalan Keris, Taman Sri Tehrau
80050 lohor Bahru
lohor Darnl Takzim
Tel No.: 07-278 8821
056-006
53, 53-A & 53-B, )alan Sultanah
83000 Batu Pahat
lohor Darnl Takzim
Tel No.: 07-438 0288
056-009
No. 33-1, 1 sl & 2
nd
Floor, lalan Ali
84000 Muar
lohor Darnl Takzim
Tel No.: 06-953 8262
056-025
Ground & 15t Floor
No. 119 & 121
lalan Sutera Tanjung 8/2
Taman Sutera Utama
81300 Skudai
lohor Darnl Takzim
Tel No.: 07-557 7628
056-029
429
Name
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
PM SECURITIES SON BHD
Ground, 1 st & 2
nd
Floor
No.3, Jalan Susur Utama 2/1
TamanUtama
85000 Segamat
Johor Darnl Takzim
Tel No.: 07-9321543
056-030
No. 17 Jalan Manggis
86000 Kluang
Johor Daml Takzim
Tel No: 07-7769655
056-031
No. 10, JaJan Anggerik 1
Taman Kulai Utama
81000 Kulai
Johor Daml Takzim
Tel No.: 07-662 6288
056-035
No. 343, Jalan Muar
84900 Tangkak
Johor Daml Takzim
Tel No.: 06-978 7180
056-038
1st Floor, No.2 & 4
Jalan Makmur, Taman Sri Arnan
85300 Labis
Johor Darn] Takzim
Tel No.: 07-925 6881
056-039
No.1 & 1-01, Jalan Rosmerah 2/11
Taman Johor Jaya
81100 Johor Bahru
Johor Darnl Takzim
Tel No.: 07-352 2293
056-043
No.4l, Jalan Molek 2/4, Taman Molek
81100 Johor Bahru
Johor Darnl Takzim
Tel No.: 07-3513232
064-005
Ground & lSI Floor
No. 43 & 43A, Jalan Penjaja 3
Taman Kim's Park Business Centre
83000 Batu Pabat
Johor Darnl Takzim
Tel No.: 07-433 3608
064-008
430
II Company No. 918382-T II
Name
PAHANG DARUL MAKMUR
BERHAD
BERHAD
BANKBERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
KELANTAN DARUL NAIM
OSK INVESTMENT BANK
BERHAD
TA SECURITIES HOLDINGS
BERHAD
A-397, A-399 & A-401
Taman Sri Kuantan III, 1alan Beserah
25300 Kuantan
Pahang Darnl Makmur
Tel No.: 09-566 0800
076-002
No. A-27 (Aras G, 1 & 2)
1alan Dato Lim Hoe Lek
25200 Kuantan
Pahang Darnl Makmur
Tel. No.: 09-5057800
065-007
A15, AI7 & A19, Ground Floor
Lorong Tun Ismail 8, Sri Dagangan II
25000 Kuantan
Pahang Darnl Makmur
Tel No.: 09-5171698
052-007
B32 & B34, Lorong Tun Ismail 8
Seri Dagangan II
25000 Kuantan
Pahang Darnl Makmur
Tel No.: 09-517 3811
056-007
Ground Floor, 98 1alan Pasdec
28700 Bentong
Pahang Darnl Makmur
Tel No.: 09-223 4943
056-022
Ground Floor & 1 st Floor
No. 76-A, Persiaran Camelia 4
TanahRata
39000 Cameron Highlands
Pahang Darnl Makmur
Tel No.: 05-4914913
056-041
Ground & 1 st Floor
No. 3953-H
1alan Kebun Sultan
15350 Kota Bharn
Kelantan Darnl Naim
Tel No.: 09-7430077
056-020
298, 1alan Tok Hakim
15000 Kota Bahru
Kelantan Darnl Nairn
Tel No.: 09-743 2288
058-004
431
Name
TERENGGANU DARUL IMAN
FA SECURITIES SDN BHD
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
SABAH
BERHAD
HWANGDBS INVESTMENT
BERHAD
INNOSABAH SECURITIES
BERHAD
No. 51 & 51A
Ground, Mezzanine & 1st Floor
lalan Tok Lam
20100 Kuala Terengganu
Terengganu Daml Iman
Tel No.: 09-623 8128
021-001
No. 1D, Ground & Mezzanine
No. IE, Ground, Mezzanine
1st & 2nd Floor, lalan Air lemeh
Tel No.: 09-631 7922
076-009
Ground & 1 st Floor, 9651, Cukai Utama
lalan Kubang Kurus
24000 Kemaman
Tel No.: 09-858 3109
056-027
31A, Ground Floor
31A&3IB,l
S'
Floor
lalan Sultan Ismail
Tel No.: 09-6261816
056-055
1Sl & 2
nd
Floor
Central Building
No.28, lalan Sagunting
88000 Kota Kinabalu
Sabah
Tel No.: 088-328878
065-005
Suite 1-9-1, 9
th
Floor
CPS Tower
Centre Point Sabah
No.1, lalan Centre Point
88000 Kota Kinabalu
Sabah
Tel No.: 088-311 688
068-008
11, Equity House, Block K
Sadong laya, Karamunsing
88100 Kota Kinabalu
Sabah
Tel No.: 088-234 090
020-001
432
Name
BANKBERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
SARAWAK
AMINVESTMENT BANK
BERHAD
BERHAD
BERHAD
HWANGDBS INVESTMENT
BANKBERHAD
HWANGDBS INVESTMENT
BANKBERHAD
Aras 8, Wisma Great Eastern
68, Jalan Gaya
88000 Kota Kinabalu
Sabah
Tel No.: 088-236188
052-012
5th Floor, Wisma BSN Sabah
Jalan Kemajuan, Karamunsing
88000 Kota Kinabalu
Sabah
Tel No.: 088-269788
056-010
Ground Floor, Block 2
Lot 4 & Lot 5, Bandar Indah, Mile 4
North Road
91000 Sandakan
Sabah
Tel No.: 089-229 286
56-057
No. 164, 166 & 168
Is" 2
nd
& 3
rd
Floor
Jalan Abell
93100 Kuching
Sarawak
Tel No.: 082-244 791
086-005
Levell, Wisma STA
26 Jalan Datuk Abang Abdul Rahim
93450 Kuching
Sarawak
Tel No.: 082-358 606
065-004
No. 6A, Ground Floor
Jalan Bako, OffBrooke Drive
96000 Sibu
Sarawak
Tel. No.: 084-367700
065-008
Lot 328, lalan Abell
93100 Kuching
Sarawak
Tel No.: 082-236 999
068-005
No. 282, 1
st
Floor
Park City Commercial Centre
Phase 4, Jalan Tun Ahmad Zaidi
97000 Bintulu
Sarawak
Tel No.: 086-330 008
068-016
433
17. PROCEDURES FOR APPLICATION AND ACCEPTANCE (Conl'dj
Name
BERHAD
BERHAD
KENANGA INVESTMENT
BANKBERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
OSK INVESTMENT BANK
BERHAD
Lot 2465, lalan Boulevard Utama
Boulevard Commercial Centre
98000 Miri
Sarawak
Tel No.: 085-435 577
073-002
Level 5, Wisma Mahmud
1alan Sungai Sarawak
93100 Kuching
Sarawak
Tel No.: 082-338 000
073-003
No. 11-12 (Ground & 1
st
Floor)
Lorong Kampung Datu 3
96000 Sibu
Sarawak
Tel No.: 084-313 855
073-012
Ground, 1 st & 6
th
Floor
Wisma Chinese Chambers
Lot 357, Section 47, K.T.L.D.
lalan Buldt Mata Kuching
93100 Kuching
Sarawak
Tel No.: 082-422 252
056-008
Lot 1268, 1 st & 2
nd
Floor
Lot 1269, 2
nd
Floor
Centre Point Commercial Centre
lalan Melayu
98000 Miri
Sarawak
Tel No.: 085-422 788
056-012
10 1 & 102, Pusat Pedada
lalan Pedada
96000 Sibu
Sarawak
Tel No.: 084-329 100
056-013
Ground & 1st Floor
No. 10, lalan Bersatu
96100 Sarikei
Sarawak
Tel No.: 084-654 100
056-050
Ground Floor & 1st Floor
No. 177, Taman Sri Dagang
97000 Bintulu
Sarawak
Tel No.: 086-311 770
056-053
434
Name
BERHAD
BERHAD
12G, H & 1, Jalan Kampung Datu
96000 Sibu
Sarawak
Tel No.: 084-319 998
2
nd
Floor, (Bahagian Hadapan)
Bangunan Binamas, Lot 138
Section 54, Jalan Pandung
93100 Kuching
Sarawak
Tel No.: 082-236 333
THE REST OF TIDS PAGE IS INTENTIONALLY LEFf BLANK
435
Broker Code
058-002
058-006

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NAKAREG HOLDINGS BERHAD

14. ACCOUNTANTS' REPORT (Cont'dj

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