· 5/31/2011 · ANNUAL REPORT 2010 | 1 Audit Committee Cheong Kee Yoong (Chairman) Yu Chee Sing Tan Chuan Hock Yek Deiw See Nomination Committee …

CONTENTS

COVER RATIONALE

1

9

20

90

2

11

25

93

3

12

27

95 96

4

13

28

7

17

29

Corporate Information

FinancialHighlights

Audit Committee Report

Analysis of Shareholdings

Corporate Profile

Calendar of Events

Statement on Internal Control

Analysis of Warrantholdings

Corporate Structure

Board of Directors

Other Compliance Information

List of Properties

Messagefrom theChairman

Directors’ Profile

Statement of Directors’ Responsibility

Notice of AGM

Proxy Form

Management Review

Statement onCorporateGovernance

Financial Contents

2010 ANNUAL REPORT

ACCELERATING AHEAD

(607392-W)

ANN

UAL REPORT 2010

Guangzhou, China Office:Guangzhou CL Solutions LimitedRoom 3811, Jiangwan Business Center,No. 298, Yanjiang Zhong Road,Guangzhou, People’s Republic of China.Tel: 8620 8386 3338 Fax: 8620 8387 3355

Hong Kong Office:CL Solutions LtdUnit 4, G/F, Po Lung Centre, 11 Wang Chiu Road, Kowloon Bay, Hong Kong.Tel: 852-2989 0300 Fax: 852-2754 3038

Kuala Lumpur Office:L1-1, Wisma Ehsan Bina, No.3,Jalan Kuchai Maju 12,Kuchai Entreprenuers Park,58200 Kuala Lumpur, Malaysia.Tel: 603-7980 8580 Fax: 603-7980 8790

57-01, Jalan Harmonium 33/1,Taman Desa Tebrau,81100 Johor Bahru, Malaysia.Tel: 607–351 1972 Fax: 607–352 6125

Johor Office: No. G-9-2 & 3, Lorong Bayan Indah 1, Bay Avenue, Queensbay, Sg. Nibong, 11900 Penang, Malaysia.Tel: 604-645 6991 Fax: 604-645 6993E-mail: [email protected]

Penang Office:

180 Paya Lebar Road, #10-01 Yi Guang Building, 409032, Singapore. Tel: + 65 65933535 Fax: +65 65933534E-mail: [email protected]

Singapore Office:

No. 3-5 Block D2, Jalan PJU 1/39, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia.Tel: 603-7880 2222 Fax: 603-7880 3913E-mail: [email protected]

Head Office:

Sino Trading & Services Corporation &High Rich Trading & Services Corporation27 Dang Tat Street, District 1, Ho Chi Minh City, Vietnam.Tel: 848-848 2620 Fax: 848-404 6724

Vietnam Office:

Simat Technologies Public Company LtdNo.123 Chalongkrung31 Ladkrabang Industrial Estate, Chalongkrung Road., Lamplatiew, Ladkrabang Bangkok 10520 Thailand.Tel: 662-326 0999 Fax: 662-326 1013E-mail: [email protected]

Thailand Office:

Malacca Office:No. 11-1, Jalan BU5,Taman Bacang Utama, Bacang,75350 Melaka, Malaysia.Tel: 606-2817 806 Fax: 606-2817 827

The years have seen Grand-Flo taking steps to expand the depth and breadth of our business.

Today, equipped with our comprehensive product range and wide geographical spread, our focus is to accelerate ahead to become the preferred provider of tracking solutions in the region.

ANNUAL REPORT 2010 | 1

Audit CommitteeCheong Kee Yoong (Chairman)

Yu Chee SingTan Chuan Hock

Yek Deiw See

Nomination CommitteeTan Sri Datuk Adzmi bin Abdul Wahab (Chairman)

Tan Chuan HockYek Deiw See

Remuneration CommitteeTan Chuan Hock (Chairman)

Yek Deiw SeeYu Chee Sing

Company SecretariesTea Sor Hua (MACS 01324)

Chan Bee Fang (MAICSA 7032385)

AuditorsSJ Grant Thornton

Chartered AccountantsLevel 11, Sheraton Imperial Court

Jalan Sultan Ismail50250 Kuala Lumpur, Malaysia

Tel: 603-2692 4022Fax: 603-2691 5229

Share RegistrarTricor Investor Services Sdn. Bhd.

Level 17, The Gardens North TowerMid Valley City

Lingkaran Syed Putra59200 Kuala Lumpur, Malaysia

Tel: 603-2264 3883Fax: 603-2282 1886

CORPORATE INFORMATION

Board of DirectorsTan Sri Datuk Adzmi bin Abdul Wahab, Independent Non-Executive Chairman

Tan Bak Hong, Group Managing Director/Group PresidentCheng Ping Liong, Executive Director

Tan Bak Leng, Executive DirectorYap Li Li, Executive Director

Thongkam Manasilapapan, Executive DirectorWan Kok Weng, Executive Director

Othman bin Bakri, Non-Independent Non-Executive DirectorTan Chuan Hock, Non-Independent Non-Executive DirectorCheong Kee Yoong, Independent Non-Executive Director

Yu Chee Sing, Independent Non-Executive DirectorYek Deiw See, Independent Non-Executive Director

Chan Pik Khew, Alternate Director to Wan Kok Weng

Principal BankersAlliance Bank Malaysia Berhad

Kenanga Investment Bank BerhadPublic Bank Berhad

Public Bank (Hong Kong) LimitedMalayan Banking Berhad

Registered OfficeThird Floor No.79 (Room A)

Jalan SS 21/60Damansara Utama

47400 Petaling JayaSelangor Darul Ehsan, Malaysia

Tel: 603-7728 4778Fax: 603-7722 3668

Business Office3-5, Block D2, Jalan PJU 1/39

Dataran Prima, 47301 Petaling JayaSelangor Darul Ehsan, Malaysia

Tel: 603-7880 2222Fax: 603-7880 3913

Email: [email protected] Website: www.grand-flo.com

Stock Information ACE Market of

Bursa Malaysia Securities Berhad

Stock Code: 0056Bloomberg Code: GFLO MK

Reuters Code: GRFL.KLStock name: GRANFLO

2 | GRAND-FLO SOLUTION BERHAD (607392-W) ANNUAL REPORT 2010 | 3

CORPORATE PROFILE

VISION To enhance global businesses with solution, innovation and technology

MISSIONTo be the partner of choice and trusted adviser in Enterprise Data Collection and Collation System

Grand-Flo Solution Berhad (“Grand-Flo”), listed on the ACE Market of Bursa Malaysia Securities Berhad, is a leading player in the Enterprise Data Collection and Collation System (“EDCCS”) sector in the region.

Grand-Flo specialises in providing comprehensive EDCCS or tracking solutions to businesses across all industrial sectors. At Grand-Flo, our value proposition is clear-we offer a complete combination of products and services that have revolutionised the way many companies do business today. Our One Stop EDCCS Solution Centre takes care of all your retail data tracking and management needs ranging from hardware, middleware, software to media and consumables such as barcode ribbons and labels.

Our proprietary suite of solutions “ManageSuite”, is a powerhouse of precision tools that is proven to increase overall efficiency, gain accurate market intelligence, facilitate sales force mobility and eliminate errors commonly associated with manual functions. With the fully integrated and customisable software solutions that make up “ManageSuite”, businesses can unlock the full potential of existing Enterprise Resource Planning systems; streamlining their supply chains into leaner, more efficient machines.

Presently, we have direct offices in Malaysia, Thailand, Singapore, Vietnam, Hong Kong, and China as well as presence via value-added resellers in Indonesia and the Philippines. Our products and services are employed by multinational corporations, major retailers, financial institutions and government-linked bodies across a broad range of industries including manufacturing, logistics, warehousing, fast moving consumer goods, and healthcare.

ManageSales

A trend-setting Field Force Management system that allows mobile workers to perform their route sales, direct store deliveries as well as market and distribution checks efficiently.

ManageWare

Your ultimate solution for Raw Materials and Finished Goods warehouse management. Offers the monitoring capabilities and traceability you need for ultimate livery efficiency and customer satisfaction.

ManageSync

This tool ensures fl awless data synchronisation between a mobile terminal and its server.The buit-in compression and encryption capabilities ensure rapid and secure data transfer.

ManageLine

Operate your production floor with the support of a system that allows you to plan, execute and capture performance as well as assure exceptional traceability.

ManageAsset

You will never lose track of your assets, even when they are moved or rotated regularly. Tracking the whereabouts of your assets and identifying their condition is easy with this Asset Tracking system.

ManageLink

Getting your data to your backend server for processing and reporting has never been simpler. This tool allows you to link to the data you need in real-time or in scheduled format and extract the data from our products to your backend application.

+ +

+ +Manage Suite


CORPORATE STRUCTURE

100% 100%

100% 20%

100%

80%

100%

100%

100%

100%

100%

100%

100%

100%

Grand-Flo ElectronicSystem Sdn Bhd

Grand-Flo SpritvestSdn Bhd

Data Centrix Sdn Bhd

Grand-Flo RFIDSdn Bhd

Simat Label Co Ltd

Sino Trading & ServiceCorporation

E- Tech IT Sdn Bhd

CL Solutions Ltd.

Victor Group Ltd Guangzhou CL Solutions Ltd

CL Solutions (China) Ltd

Labels NetworkSdn Bhd

Kopacklabels (PG)Sdn Bhd

Labels4U Automation Sdn Bhd

20%

80%

40%

40%

25%

60%60%

Malaysia

Vietnam

China

Singapore

Kopacklabels PressSdn Bhd

Kopacklabels (M)Sdn Bhd

High Rich Trading & Service Corporation

Vietsun Technologies& Investment JointStock Company

E- Tech ITSolution Pte Ltd

49%51%

E- Tech Distribution Co. Ltd

60% E-Tech IT Frontline Sdn Bhd

100% Grand-Flo Systems (S)Pte Ltd

33.17%Simat TechnologiesPublic Company Limited*

ACE Listed

* Simat Technologies Public Company Limited is entitled to 20% - 30% corporate tax reduction for 3 years from 2008 onward.

** Simat Soft Co Ltd has been granted certain privileges, including exemption from corporate tax for 8 years from date of first income, exemption from import duty for imports of machinery including computers and notebooks, and employment of foreigners as skilled technicians or experts.

ACE Listed

China

Malaysia

Thailand

Singapore

Vietnam


MESSAGE FROM THE CHAIRMAN

Dear Shareholders,

It is my privilege to present to you the 2010 Annual Report and financial results of Grand-Flo Solution Berhad (“Grand-Flo”) for the financial year ended 31 December 2010 (“FY2010”).

The year under review had seen a modest economic recovery worldwide which made a positive impact across all industries. The improved business and consumer sentiment in turn played a major role in expanding Malaysia’s Gross Domestic Product (“GDP”) by 7.2% in 2010, compared to the contraction of 1.7% in 2009.

The demand uptrend for products and services, as well as greater emphasis on operations efficiency and scalability helped to stimulate the adoption of Information and Communication Technology (“ICT”) industry in Malaysia. The International Data Corporation (“IDC”) reported that ICT spending charted 4.6% growth year-on-year to be worth USD 5.9 billion in 2010, compared to USD 5.6 billion in the previous year.

The Group recorded commendable top line growth of 47.6% year-on-year to RM68.65 million, from RM46.53 million the previous year

“”


MESSAGE FROM THE CHAIRMANCONT’D

Financial Performance

FY2010 had seen the Group aggressively implementing holistic plans to grow our various business segments. I am pleased to report that our strategies, coupled with the buoyant economic sentiment, bore fruits in the year under review, as demonstrated by our outstanding financial performance.

The Group recorded strong top line growth of 47.6% year-on-year to RM68.65 million, from RM46.53 million the previous year.

The Enterprise Data Collection and Collation System (“EDCCS”) or tracking solutions segment contributed 67.1% of the total revenue, while the labels business made up the balance 32.9%. Both segments recorded encouraging growth in sales volumes year-on-year, in line with the Group’s increasing reputation as an integrated tracking solutions provider in the region.

Group profits before tax charted higher expansion of 70.3% year-on-year to RM8.54 million from RM5.01 million previously, driven by sustained operating costs as well as improved share of associates in the year.

This resulted in group net profits doubling to RM7.39 million in the year under review compared to RM3.19 million in FY2009, an impressive performance that affirmed the Group’s entry into the high-growth phase. Correspondingly, earnings per share jumped to 5.18 sen from 2.38 sen previously.

The enhanced performance enabled the Group to strengthen its balance sheet as well. Shareholders’ equity improved by 30.4% to RM48.71 million from RM38.12 million, while total borrowings and cash and cash equivalents stood at RM13.98 million and RM3.89 million respectively. Therefore, group net gearing improved to 0.20 as at end-2010 from 0.24 previously.

The strong financial report card in FY2010 demonstrates the intended results of our growth strategies. Without a doubt, this success reiterate our commitment to attain even greater heights in the coming years.

Dividend

In appreciation of shareholders’ support, the Company has recommended a final tax exempt dividend of 10% or 1 sen per share in respect of the financial year ended 31 December 2010. The proposed dividend is subject to shareholders’ approval at the forthcoming Annual General Meeting.

Corporate Developments

Renounceable Rights Issue of Warrants

The Group had undertaken a renounceable rights issue of 67,912,455 five-year 2010/2015 warrants on the basis of one new warrant for every two ordinary shares of RM0.10 each held in Grand-Flo.

The rights issue was oversubscribed by 1.48 times, and was deemed completed on 28 April 2010 following the listing of and quotation for the warrants on Bursa Malaysia on the same day.

The rights issue was a gesture of appreciation to shareholders for their unwavering support to the Group.


MESSAGE FROM THE CHAIRMANCONT’D

Business Outlook

Although Asian economies are largely expected to stage continuous recovery in 2011, economists have also stated that growth rates could be tempered by the uncertainty stemming from inflationary pressures as well as widespread implications of the Japan earthquake on a global scale.

Against this backdrop, Grand-Flo intends to leverage on our strong foundation to continue on our growth path.

To this end, FY2011 will see the Group concentrating efforts on developing new industry segments and geographical markets, expanding recurring-revenue base, and prioritizing R&D efforts towards higher value-add solutions.

With these initiatives underway, we are optimistic of the Group’s prospects as we move towards a higher plane of growth for Grand-Flo.

Corporate Social Responsibility (“CSR”)

The Group has consistently kept a keen interest in the community at large, with a view towards upholding the wellbeing of all stakeholders.

To this end, on 6 November 2010, the Group paid a visit to the Agathians Shelter in Petaling Jaya, Selangor – a welfare home for boys that are orphaned, of single-parent, or neglected by their families. The home aims to provide them with a balanced childhood and a new start in life. The Grand-Flo team spent some time with the boys and donated money and various items to the home, including home-made foodstuff, grocery, clothing, school books and uniforms and a freezer full of ice-cream – much to the delight of the children (and some adults too).

Furthermore, the Group implements regular skills and technical training sessions to upgrade the technical knowledge of the team, as well as team building and self-development programmes to further enhance good aptitude and attitude of our team members. We believe that these initiatives go a long way in establishing a single-minded workforce towards enhancing productivity within the Group.

Corporate Governance

The Board opines that a business that upholds integrity and corporate governance would ensure long-term sustainability of the Group.

The Corporate Governance statement enclosed in this Annual Report details the measures taken to this respect.

Appreciation

I would like to take this opportunity to express my deepest appreciation to the Board of Directors for the warm welcome since my appointment as Chairman on 1 July 2010. My sincerest thanks to the retiring Chairman, Dato’ Seri Dr. Mohd. Ariff bin Araff, for his years of contribution to the Group.

On behalf of the Board of Directors, I would like to express my deepest gratitude to our customers, business partners, bankers, shareholders and other stakeholders for their unwavering support.

Last but not least, we would like to extend our gratitude to the team at Grand-Flo, without whom we would not have achieved an excellent year. Kudos to the team, as we look forward to greater accomplishments ahead.

Tan Sri Datuk Adzmi Bin Abdul Wahab,Independent Non-Executive Chairman26 April 2011


MANAGEMENT REVIEW

I am pleased to inform you that Grand-Flo achieved in Financial Year (“FY”) 2010 what we set out to do: to gain more ground in the local and regional markets, and effectively position ourselves as the preferred tracking solutions provider for our customers. The success of our growth strategies was accelerated by the buoyant economic sentiment in our target markets.

Domestic Market

The domestic market remained the Group’s major contributor, constituting 85.8% or RM58.96 million of group revenues in FY2010, demonstrating a strong 48.2% increase from local revenues of RM39.80 million in FY2009.

In term of product segmentation, sales of tracking solutions noted significant increase of 65.2% year-on-year to RM46.1 million in FY2010 from RM27.9 million previously, in line with higher spending on efficiency–enhancement systems by the business community.

The Group is heartened that we were able to undertake a number of projects for existing and new clients in the fast moving consumer goods (“FMCG”), retail and government-related sectors; thus playing a part in increasing their overall operations transparency and delivery. Furthermore, we expanded our footprint

into new sectors, such as healthcare – a venture that we are keen to grow further.

Our labels division under Labels Network Sdn. Bhd. (“Labels Network”), contributed RM22.60 million or 32.9% to FY2010 group revenues. This was substantially higher than the previous year’s RM18.66 million, partly due to the fact that FY2010 recorded 9 months’ full contribution from Labels Network as a wholly-owned subsidiary of the Group as compared to 55% in the previous year.

Not only that, as a recurring-revenue component, sales of our labels division saw a steady stream of repeat orders and larger clientele in tandem with broadening customer base in the tracking solutions segment.

The Group’s improved performance in the domestic market underscores our successful integration between the tracking solutions and labels businesses, and sets us on track for even higher achievements.

Regional Market

Hong Kong & China

Our Hong Kong and China operations under wholly-owned subsidiary CL Solutions (China) Limited (“CL Solutions”) saw a strong rebound in the economy, which positively impacted its results.

CL Solutions contributed 14.1% to FY2010 group revenues, recording sales growth of 43.8% year-on-year to RM9.69 million from RM6.74 million previously. This was the result of economic recovery, particularly in Hong Kong, and the awareness-creation activities undertaken in the year to promote the Company’s comprehensive and end-to-end product spectrum.

I am pleased to note that CL Solutions is making headway in its target markets, with its reputable clientele to date including global leaders in the Electronic Manufacturing Services, courier, power generation and FMCG sectors. This is a promising start and we hope to grow alongside our clients’ expansion in the future.

The Group improved performance in the domestic market underscored our successful integration and set us on the track for even higher achievements

“”


MANAGEMENT REVIEWCONT’D

Research and Development (“R&D”)

The Group retained its focus to move up the value chain and maintain its competitive edge via R&D initiatives. To this end, the Group invested RM1.0 million in R&D efforts to upgrade and develop new solutions in FY2010, versus RM0.7 million incurred in the previous year.

Business Strategies

The tracking solutions industry is anticipated to continue recording high demand in FY2011, as both Government corporations and commercial entities begin to adopt technologies to resolve labour shortage issues and adequately face the keener competitive environment in the local or regional platform. Given this scenario, the Group remains resolute in expanding the Company further as a means to create higher value for all our stakeholders.

Our plans for FY2011 are summarised as follows:

• Todevelopnewmarketsegments

Based on our proven track record in successful implementing tracking solutions for clients, the Group intends to identify new markets to develop in order to broaden our revenue base and mitigate business risk.

To this end, we are actively bidding for projects in sectors such as aviation and banking, and believe that these new segments would complement the Group’s current mainstay in the FMCG, retail and manufacturing industries.

• Toexpandourregionalpresence

With direct presence in major cities in the Asia, the Group has undertaken numerous regional integration projects for multinational corporations thus far. We are ready to implement more of such deployments, and intend to step up cross-marketing of tracking solutions based on our past reference sites.

We believe that this approach would set us apart as a truly regional player in the integrated tracking solutions industry.

• Toenhanceourrecurringincomecomponent

We plan to enhance our recurring income component v i a a t w o -p r o n g e d approach: providing high-quality customer service to encourage repeat business, and continuing to boost sales in our labels segment.

On the latter, the Group not only intends to expand its labels production capacity but also to move up the value chain to produce higher-grade labels. Specifically, the Group is setting up a cleanroom in its production facility in Puchong, Selangor, in preparation to supply cleanroom labels to the semi-conductor sector and medical grade labels for the healthcare sector.

• TohoneakeenercompetitiveedgethroughR&D

Finally, the Group targets to sustain our R&D efforts to increase the efficacy of our solutions in adapting to customers’ growing needs.

With this, Grand-Flo will continue to execute intensive R&D to provide high-performance product lines to ably support our clientele.

With these strategies in place, the Group is optimistic of capturing larger market share in our target markets, and reinforcing our position as the preferred provider of comprehensive tracking solutions in the region.

Tan Bak Hong,Group Managing Director /Group President26 April 2011

Thailand&Vietnam

Although Thailand remained in socio-political uncertainty in FY2010, our associate, Simat Technologies Public Co., Ltd (“Simat”) made commendable progress with group revenues of THB1,133.1 million in FY2010 compared to THB543.2 million in FY2009. Net profits increased 57% to THB34.7 million in FY2010 from THB22.0 million previously.

Simat’s 40% associate in Vietnam – consisting of Sino Trading and Service Corporation (“Sino”), and High Rich Trading and Service Corporation (“High Rich”) – continued to make considerable inroads into the fledgling but fast-growing market, recording net profit of THB9.4 million, of which THB3.8 million was attributable to Simat. This was a significant rise from net profit of THB9.7 million achieved in FY2009, of which Simat’s portion amounted to THB3.9 million.

Indeed, the Simat Group expounded on its track record to serve wide-ranging clientele in retail, oil and gas, manufacturing, courier and market research sectors in the year under review.

Given our strong profile in the market, Simat aims to further expand its presence in Thailand and Vietnam by bidding for more projects in the public and private sectors, and thus play a pivotal role in enhancing the economy.


FINANCIAL HIGHLIGHTS

0 15,000 30,000 45,000 60,000 75,000

2006

2007

2008

2009

2010

0 2,000 4,000 6,000 8,000 10,000

2006

2007

2008

2009

2010

(2,000) 0 2,000 4,000 6,000 8,000

2006

2007

2008

2009

2010

- 10,000 20,000 30,000 40,000 50,000 60,000

2006

2007

2008

2009

2010

- 20,000 40,000 60,000 80,000

2006

2007

2008

2009

2010

Turnover (RM’000)

Profit Before Tax (RM’000)

Net Profit / (Loss) (RM’000)

Shareholders’ Equity (RM’000)

Total Assets (RM’000)

Summarized Group Income Statement

Year Ended 31 December (RM’000) 2006 2007 2008 2009 2010

Revenue 46,736 64,670 36,850 46,534 68,647

EBITDA^ 9,193 10,508 2,296 6,179 9,637

Operating Profit 7,543 8,067 769 4,943 7,982

Profit Before Tax 7,366 8,934 710 5,013 8,535

Profit After Tax 5,405 7,778 104 4,238 7,695

Net Profit 3,616 6,261 (349) 3,186 7,392

Summarized Group Balance Sheet

As at 31 December (RM'000) 2006 2007 2008 2009 2010

Non-Current Assets 20,913 25,048 33,287 42,406 46,103

Current Assets 29,136 19,749 19,281 25,412 29,652

Total Assets 50,049 44,797 52,568 67,818 75,755

Non-Current Liabilities 2,237 1,917 5,169 4,748 4,823

Current Liabilities 16,141 9,659 15,067 22,054 20,937

Total Liabilities 18,378 11,576 20,236 26,802 25,760

Shareholders' Equity 27,255 33,221 30,490 38,122 49,713

Minority Interest 4,416 - 1,842 2,894 282

Total Equity and Liabilities 50,049 44,797 52,568 67,818 75,755

Summarized Group Cash Flows

Year Ended 31 December (RM'000) 2006 2007 2008 2009 2010

Operating Profit Before Working Capital Changes

9,325 9,343 4,066 5,846 9,040

Net Cash Flows From Operating Activities 9,184 5,459 3,028 3,115 3,042

Net Cash Flows From Investing Activities (8,476) (5,655) (6,521) (1,700) (3,442)

Net Cash Flows From Financing Activities 3,372 (2,519) 576 991 (34)

Net Increase in Cash and Cash Equivalents*

4,080 (2,715) (2,916) 2,160 (109)

Cash and Cash Equivalents at Beginning of Year

2,962 7,546 5,084 2,168 4,314

Cash and Cash Equivalents at End of Year* 7,546 5,084 2,168 4,314 3,892

* Net of effect of forex translation

Financial Analysis

Year Ended 31 December 2006 2007 2008 2009 2010

Turnover Growth 54.6% 38.4% -43.0% 26.3% 47.5%

Operating Profit Growth 33.5% 7.0% -90.5% >+100% 61.5%

Profit Before Tax Growth 34.6% 21.3% -92.0% >+100% 70.3%

Net Profit Growth 43.8% 73.2% >-100% >+100% >+100%

Operating Profit Margin 16.1% 12.5% 2.1% 10.6% 11.6%

Profit Before Tax Margin 15.8% 13.8% 1.9% 10.8% 12.4%

Net Profit Margin 7.7% 9.7% n/m 6.8% 10.8%

Gearing (Net of Cash) Net Cash Net Cash 0.29 0.24 0.20

Cash and Cash Equivalents (RM’000) 7,546 5,084 2,168 4,314 3,892

ROE (Average Equity) 17.8% 20.7% n/m 9.3% 16.8%

ROA (Average Total Assets) 9.7% 13.2% n/m 5.3% 10.3%

NTA Per Share (Sen) 11.2 17.2 13.0 11.3 18.1

^ Earnings Before Interest, Taxation, Depreciation and Amortisation


FINANCIAL HIGHLIGHTSCONT’D

0 15,000 30,000 45,000 60,000 75,000

2006

2007

2008

2009

2010

0 2,000 4,000 6,000 8,000 10,000

2006

2007

2008

2009

2010

(2,000) 0 2,000 4,000 6,000 8,000

2006

2007

2008

2009

2010

- 10,000 20,000 30,000 40,000 50,000 60,000

2006

2007

2008

2009

2010

- 20,000 40,000 60,000 80,000

2006

2007

2008

2009

2010

0 5,000 10,000 15,000 20,000

20102009

- 1,000 2,000 3,000

2010 2009

BarcodeLabels33%

TrackingSolutions

67%

21.1%yoy

65.2%yoy

19,45615,165

17,81213,349

17,426

10,205

13,9537,815

1,410

1,981

2,4861,000

1,723

177

1,77327

Turnover By Quarter

(RM’000)

Net Profit By Quarter

(RM’000)

FY2010 Turnover By Segments

(%)

Share Capital Changes And Dilution

Date of allotment Capital Exercise Change in Number of Shares

Total Number of Shares of RM0.10 each

11 Jan 2007 Employees’ Share Option Scheme

300,000 122,143,333

8 Feb 2007 Private Placement 2,039,200 124,182,533

8 May 2007 Employees’ Share Option Scheme

30,000 124,212,533

3 Jan 2008 Employees’ Share Option Scheme

244,000 124,456,533

28 Feb 2009 Issuance of new shares pursuant to the acquisition

of CL Solutions (China) Limited

11,398,176 135,854,709

31 Mar 2010 Issuance of new shares pursuant to the acquisition of Labels Network Sdn Bhd

9,230,769 145,085,478


CALENDAR OF EVENTS

8 Mar 10

7 - 9 Oct 10

10 Nov 10

5 Mar 10

15 Oct 10

20 - 21 Nov 10

15-17 June 10

29 Oct 10

14 -15 July 10

6 Nov 10

2 Sept 10

12 Nov 10

Participation in IBM event -Featuring live interactive solution demonstrations @ Building Customer Satisfaction Through Smarter Retail Solutions Event.

Grand-Flo Spritvest exhibit in 3P- Plastic and Rubber, Packaging and Food Processing, Sign & Printing

Grand-Flo Spritvest BBQ Dinner and exchanged gifts activity @ Pullman, Putrajaya

FY2009 Fund Managers and Analysts’ Briefing

Bowling competition between Grand-Flo Spritvest and Principals: Intermec, Motorola, Zebra

Grand-Flo’s team building activitiy @ Summerset Resort, Rompin, Pahang

Joint event with Zebra in Nepcone event which is the single largest electronics manufacturing exhibition in Malaysia

Grand-Flo Spritvest customer appreciation day @ WIP Kuala Lumpur

Grand-Flo Spritvest participation in 3G’s in Hospital Management - Governance, Giving and Greening @ Kuala Lumpur Convention Centre

Charity Program For Orphanage - Agathians Shelter

1H10 Fund Managers and Analysts’ Briefing

Grand-Flo Spritvest customer appreciation day @ G Hotel, Penang

Grand-Flo’s Corporate Social Responsibilty Initiative at Agathians’ Shelter, Petaling Jaya.


BOARD OF DIRECTORS

1 23

11

613 5

1210

978

4

1) TAN SRI DATUK ADZMI BIN ABDUL WAHAB, Independent Non-Executive Chairman2) TAN BAK HONG, Group Managing Director / Group President 3) CHENG PING LIONG, Executive Director4) TAN BAK LENG, Executive Director5) YAP LI LI, Executive Director6) THONGKAM MANASILAPAPAN, Executive Director7) WAN KOK WENG, Executive Director8) OTHMAN BIN BAKRI, Non-Independent Non-Executive Director 9) TAN CHUAN HOCK, Non-Independent Non-Executive Director10) CHEONG KEE YOONG, Independent Non-Executive Director11) YU CHEE SING, Independent Non-Executive Director12) YEK DEIW SEE, Independent Non-Executive Director13) CHAN PIK KHEW, Alternate Director to Wan Kok Weng


DIRECTORS’ PROFILE

TAN SRI DATUK ADZMI BIN ABDUL WAHABIndependent Non-Executive Chairman

Tan Sri Datuk Adzmi bin Abdul Wahab, a Malaysian, aged 68, is the Independent Non-Executive Chairman of the Company. He was appointed to the Board on 1 July 2010. He is also the Chairman of the Nomination Committee of the Company. He holds a Master in Business Administration from University of Southern California.

Tan Sri Datuk Adzmi is the Chairman and Director of three public listed companies namely Magna Prima Berhad, Dataprep Holdings Berhad and Lebar Daun Berhad and some private companies involved in information technology, automotive, construction, property development and franchise businesses.

Tan Sri Datuk Adzmi was appointed as the longest serving Managing Director of Edaran Otomobil Nasional Berhad (EON) from November 1992 until May 2005. In 2003, he was conferred Malaysia CEO of the Year by American Express and Business Times and Most PR Savvy CEO by Institute of Public Relations Malaysia (IPRM).

He served in PROTON from 1985 to 1992 and his last position there was Director/Corporate General Manager, Administration and Finance Division. Prior to that, he was Manager, Corporate Planning Division of HICOM Berhad from 1982-1985 and was involved in development of heavy industries projects.

Tan Sri Datuk Adzmi served the Malaysian Administrative and Diplomatic Service in the following capacities from 1967 to 1982: Central Procurement and Contract Management in Ministry of Finance; Investment Promotion in Pahang Tenggara Development Authority, Public Enterprise Management in Implementation Coordination Unit (Prime Minister’s Department), Regional Planning in Klang Valley Planning Secretariat (Prime Minister’s Department).

TAN BAK HONGGroup Managing Director / Group President

Mr. Tan Bak Hong, a Malaysian, aged 48, is the Group Managing Director / Group President and founder of the Company. He was appointed to the Board on 1 December 2003 and is a substantial shareholder of the Company. Mr. Tan obtained a Bachelor in Engineering from the University of Malaya in 1988 and possesses more than twenty-two (22) years experience in the field of automation and tracking solution business.

He started his career as a Sales and Application Engineer and in 1989, founded Grand-Flo Engineering Supply & Service Sdn Bhd (“GFESS”), a company which is principally involved in fluid and motion control engineering.

In 1994, Mr. Tan diversified into the business of tracking goods and business processes with the aim of increasing efficiencies via automated data collection system under GFESS. As he experienced rapid growth in the business and seeing its promising potential, he decided to establish Grand-Flo Electronic System Sdn Bhd (“GFES”) in 1996. The tracking solution business was later termed as Enterprise Collection & Collation System (“EDCCS”) to reflect a comprehensive range of solution offered.

Mr. Tan is responsible for the strategic planning and management of the Group. He is the key person responsible for the establishment of Grand-Flo Solution Berhad (“Grand-Flo”), a company which has developed numerous automation solution software to complement the integration solution provided by GFES.

A visionary leader, Mr. Tan led Grand-Flo Solution Berhad to acquire GFES in 2004 and later on, in a series of successful corporate exercises which included acquisitions and business partnerships that developed the Group into not only the largest EDCCS provider in Malaysia, but also a regional player in the EDCCS industry.

Currently, Grand-Flo has established direct presence in Malaysia, Thailand, Singapore, Vietnam, Hong Kong and China and good business partnership with authorized resellers in Philippines and Indonesia.

Mr. Tan currently sits on the board of several private limited companies and Simat Technologies Public Company Limited, a public listed company in the Stock Exchange of Thailand. He has deemed interest by virtue of his spouse, Yap Li Li and his interest in Grand-Flo Corporation Sdn. Bhd.


DIRECTORS’ PROFILE CONT’D

CHENG PING LIONGExecutive Director

Mr. Cheng Ping Liong, a Malaysian, aged 46, is an Executive Director of the Company. He was appointed to the Board on 29 September 2006. He graduated with a Bachelor of Business Administration in Finance from the University of Iowa, USA in 1988.

His first employment was with RES Malaysia where he held the position of Trainee Programmer from 1989 to 1990. In 1990 he was promoted to the position of an analyst programmer and this was followed by his ascension to the position of system analyst in 1991. During the years 1992 to 1995, he took on the role of a Technical Manager in RES Malaysia. It was in 1995 when he, together with En. Othman bin Bakri, jointly incorporated Grand-Flo Spritvest Sdn Bhd.

He spearheads Grand-Flo Spritvest Sdn Bhd’s R&D initiatives and plays a pivotal role in the conceptualization of the Enterprise Data Capture solution, namely Direct Store Delivery. He is actively involved in the formation of strategic alliances with business and technology partners for the company as well as formulating the company’s sales strategies targeted at multinational companies and the fast moving consumer goods (“FMCG”) and retail industries.

In August 2007, Mr. Cheng was appointed Chief Executive Officer of the integrated company between Grand-Flo Electronic System Sdn Bhd and Grand-Flo Spritvest Sdn Bhd. Together with Mr. Tan Bak Leng, they are responsible for the Malaysian business.

TAN BAK LENGExecutive Director

Mr. Tan Bak Leng, a Malaysian, aged 46, is an Executive Director of the Company. He was appointed to the Board on 2 October 2004 and is a substantial shareholder of the Company and a sibling of the Group Managing Director / Group President of the Company, Mr. Tan Bak Hong. He graduated with a Diploma in Electronics Engineering from French-Singapore Institute in 1988.

Upon graduation, he ventured into the sales profession in 1991 and was attached to an electronics hardware company (i.e. audio electronics and computer monitors) in Singapore before returning to Malaysia. In 1994, he joined Mr. Tan Bak Hong and together they provided the integrated Enterprise Data Collection & Collation System (“EDCCS”) solution under Grand-Flo Engineering Supply & Service Sdn Bhd. As business grew, they founded Grand-Flo Electronic System Sdn Bhd.

Mr. Tan is instrumental in leading the company to be a reputable EDCCS solution provider in Malaysia. In 2005, together with Mr. Tan Bak Hong, they expanded the EDCCS business to Thailand, Singapore and other neighbouring countries.

Currently, Mr. Tan is also sitting on the board of Simat Technologies Public Company Limited, a public listed company in the Stock Exchange of Thailand.

YAP LI LIExecutive Director

Madam Yap Li Li, a Malaysian, age 44 is the Executive Director of the Company. Madam Yap was appointed to the Board on 22 April 2009 and is a substantial shareholder of the Company. Madam Yap obtained a Bachelor in Arts (Economics) from the University of Malaya in 1990 and possesses more than fifteen (15) years experience in the roles of management, corporate planning and business expansion.

She joined Grand-Flo Group in 1996 to head the Group’s operations and had been instrumental in the Group’s restructuring and streamlining exercises, as well as played an active role in the then, Group’s new business division namely, the automated identification system business. Currently, the Vice President, Operations in Grand-Flo Solution Berhad, Madam Yap has been active in the business expansion of the Group, including its mergers and acquisitions exercises. Prior to joining Grand-Flo, she was in the fields of business development and networking with a well-known networking company and thereafter, a major well-established Group in Malaysia for more than 7 years. Madam Yap currently sits on the board of several private limited companies. She has deemed interest by virtue of her spouse, Tan Bak Hong’s interest in Grand-Flo and her interest in Grand-Flo Corporation Sdn Bhd.


DIRECTORS’ PROFILECONT’D

THONGKAM MANASILAPAPANExecutive Director

Mr. Thongkam Manasilapapan, a Thai, aged 45, is an Executive Director of the Company and was appointed to the Board on 20 June 2005. He obtained a Bachelor of Civil Engineering (BCE) from Southeast Asia University, Thailand in 1988. He also has a certificate in Managing Information System from University of California, USA. He received his Executive MBAs from Chulalongkorn University, Thailand in 1995.

From 1992 to 1998, he was a Management Information System Manager of President Bakery Co. Ltd (Farmhouse) Bangkok, Thailand. Mr. Thongkam is currently the Chief Executive Officer of Simat Technologies Public Company Limited, Bangkok since 1998.

Under Mr. Thongkam’s dynamic leadership, Simat was listed in the Market for Alternative Investment in the Thailand Stock Exchange on 12 December 2007 and formed Simat Labels Company Limited, a 80:20 joint venture with Labels Network Sdn Bhd, a subsidiary of Grand-Flo Solution Berhad.

He is also the Director of S. Siri Transportation Co. Ltd Bangkok from 1998 till present.

WAN KOK WENGExecutive Director

Mr. Wan Kok Weng, a Malaysian, aged 49, is an Executive Director of the Company. He was appointed to the Board on 26 February 2008 and is a substantial shareholder of the Company. He is the founder of Labels Network Sdn Bhd which is now a 100%-owned subsidiary of Grand-Flo Solution Berhad. He brings with him more than twenty-five (25) years of experience in the wide range of labels manufacturing business. Prior to setting up Labels Network Sdn Bhd, Mr. Wan was the Sales Manager of General Labels & Labelling (M) Sdn Bhd from 1990 to 1995 and moved on to become the Executive Director from 1995 to 1997. Currently, he is the Chief Executive Officer of Labels Network Sdn Bhd.

OTHMAN BIN BAKRINon-Independent Non-Executive Director

En. Othman bin Bakri, a Malaysian, aged 47, is a Non-Independent Non-Executive Director of the Company. He was appointed to the Board as an Executive Director of the company on 29 September 2006. On 30 April 2010, he was re-designated as a Non-Independent Non-Executive Director of the Company. He graduated from the University Nevada-Reno, Nevada USA in 1987.

He began his career at Melewar Technologies Sdn Bhd in 1987 as a sales manager, responsible for the coordination of the company’s sales efforts. In 1991, he moved on to RES Malaysia Sdn Bhd (“RES Malaysia”) to take on the position of a sales manager and remained there until 1995. In 1995, he left RES Malaysia to start up Grand-Flo Spritvest Sdn Bhd. He has more than 19 years of experience in the Information Technology industry, specializing in Auto-ID and Enterprise end-to-end data storage technologies.

He was instrumental in developing the Enterprise Data Capture solutions namely IDCardware and SpeedCapture.

TAN CHUAN HOCKNon-Independent Non-Executive Director

Mr. Tan Chuan Hock, a Malaysian, aged 50, is a Non-Independent Non-Executive Director of the Company and was appointed to the Board on 2 October 2004. He is the Chairman of the Remuneration Committee and a member of both the Audit Committee and Nomination Committee of the Company. He is also a substantial shareholder of the Company. He is the executive proprietor and also the founder of William C.H. Tan & Associates, a Chartered Accountants firm.

Mr. Tan is a member of the Malaysian Institute of Accountants, Malaysian Institute of Taxation and is a fellow Member of the Association of Chartered Certified Accountants (“ACCA”).

He has more than twenty-five years of experience particularly in financial reporting, auditing, taxation and planning, company secretarial as well as corporate management and advisory.

He holds directorships in several limited companies. Presently, he sits as an Independent Non-Executive Director in PCCS Group Berhad, Careplus Group Berhad and EITA Resources Berhad. He also sits on the Board of Simat Technologies Public Company Limited, a public company listed on the Stock Exchange of Thailand.


DIRECTORS’ PROFILE CONT’D

CHEONG KEE YOONGIndependent Non-Executive Director

Mr. Cheong Kee Yoong, a Malaysian, aged 43, is an Independent Non-Executive Director of the Company and was appointed to the Board on 30 June 2008. He is also the Chairman of the Audit Committee of the Company. Mr. Cheong is a graduate of the Association of Chartered Certified Accountants (ACCA) UK and a member of Malaysia Institute of Accountants (MIA).

He has more than 20 years of working experience particularly in corporate planning, fund raising, treasury management, investors relation activities, tax planning, financial reporting and risk management in various industries and mainly attached to the corporate office of public listed companies. He is currently the Chief Financial Officer of a main market company listed in Bursa Malaysia Securities Berhad and holds directorships in several private limited companies.

YU CHEE SINGIndependent Non-Executive Director

Mr. Yu Chee Sing, a Malaysian, aged 48, is an Independent Non-Executive Director of the Company and was appointed to the Board on 2 October 2004. He is a member of the Audit Committee and Remuneration Committee of the Company. Mr. Yu obtained a Bachelor in Engineering from University of Malaya in 1988, and has more than twenty (20) years of experience in the construction industry.

Upon graduation, he started his career as an Engineer in Design Deco Sdn Bhd. Subsequently, he joined SMU Sdn Bhd as a Project Manager in 1992. He left the company in 1995 and joined Lintasan Baru Sdn Bhd as a Project Director. Mr. Yu is currently a director of several private limited companies.

YEK DEIW SEEIndependent Non-Executive Director

Mr. Yek Deiw See, a Malaysian, aged 48, is an Independent Non-Executive Director of the Company and was appointed to the Board on 29 December 2006. He is a member of the Audit Committee, Nomination and Remuneration Committees of the Company. He obtained a Bachelor in Civil Engineering degree from the University of Malaya in 1988. He has more than 20 years of experience in the management, marketing and business of building materials and computer products.

Mr. Yek started his career with Panglobal Sistemaju Sdn Bhd to distribute and promote WANG computers. He later joined CMCM Perniagaan Sdn Bhd, a leading building materials trading firm in the region. In 1997, he jointly formed Vistagard Sdn Bhd, an established general building materials trading company, as an Executive Director. He is currently also a director of several private limited companies.

CHAN PIK KHEWAlternate Director to Wan Kok Weng

Madam Chan Pik Khew, a Malaysian, aged 40, was appointed to the Board as an alternate director to Mr. Wan Kok Weng on 26 February 2008. She is also a substantial shareholder of the Company. Madam Chan has more than 16 years of experience in the labels industries. She was instrumental in securing high value projects for KopackLabels Press Sdn Bhd, a wholly-owned subsidiary of Labels Network Sdn Bhd.

Madam Chan started her career in sales in General Labels & Labeling (M) Sdn Bhd in 1992. In 1995, she founded Kopack Enterprise and teamed up with Mr. Wan Kok Weng to co-found Labels Network Sdn Bhd. Together they led Labels Network Sdn Bhd and its subsidiary into a dynamic, well-managed and reputable company in the labeling industry.

Currently, Madam Chan is the Sales Director of Labels Network Sdn Bhd.

Notes:1. None of the directors have family relationship with other directors or major shareholders except of the following:-

a) Mr. Tan Bak Hong and Mr. Tan Bak Leng are brothers.b) Mr. Tan Bak Hong is the spouse of Madam Yap Li Li.c) Mr. Wan Kok Weng is the spouse of Madam Chan Pik Khew.d) Mr. Tan Bak Hong and Madam Yap Li Li who are the directors and shareholders of Grand-Flo Corporation Sdn Bhd, a substantial

shareholder of the Company.2. None of the Directors have any personal interest in any business arrangement involving the Company and all the Directors have had no

convictions for offences other than traffic offences for the past ten years.

Annual Report 2010 | 17

The Board of Directors of Grand-Flo Solution Berhad (“the Board”) is fully committed towards ensuring that the Group applies the principles set out in Part 1 of the Malaysian Code of Corporate Governance (“the Code”) and the extent of the Group compliance with the Best Practices in Corporate Governance set out in Part 2 of the Code since its listing on the ACE Market (formerly known as MESDAQ Market) of Bursa Malaysia Securities Berhad (“Bursa Securities”) on 3 November 2004.

The compliance with the Code by the Board is the fundamental part of the Group’s responsibility to protect and enhance long term shareholders’ value and the financial performance of the Group, whilst taking into account the interest of other stakeholders.

A. DIRECTORS

Composition and Balance

The strength of the Board lies in the composition of its members, who has a wide range of expertise, extensive experience and diverse background in business, finance and technical knowledge.

The current Board has twelve (12) members, comprising six (6) Executive Directors, two (2) Non-Independent Non-Executive Directors, four (4) Independent Non-Executive Directors. This composition complies with the ACE Market Listing Requirements of Bursa Securities. The profile of each Director is presented separately in the annual report.

The Board retains full and effective control over the Group and ensures the Group moves towards its strategic direction in establishing goals and ultimately the enhancement of long-term shareholders’ value.

Board Meetings

The Board meets on a quarterly basis and additionally as and when required. During the financial year, six (6) Board meetings were held and all the Directors have complied with the requirements in respect of board meeting attendance as provided in the Company’s Articles of Association. During these meetings, the Board deliberated upon and considered a variety of matters including the Group’s corporate developments, financial result, investment and strategic decisions and direction of the Group.

The meetings attendance record of the Directors is as follows:-

Director Number of meetings attended

Tan Sri Datuk Adzmi bin Abdul Wahab (appointed on 1 July 2010) 2/2

Dato’ Seri Dr. Mohd Ariff bin Araff (retired on 28 June 2010) 4/4

Tan Bak Hong 6/6

Tan Bak Leng 6/6

Yap Li Li 6/6

Thongkam Manasilapapan 4/6

Othman bin Bakri 5/6

Cheng Ping Liong 6/6

Wan Kok Weng (Alternate: Chan Pik Khew) 6/6

Tan Chuan Hock 5/6

Cheong Kee Yoong 6/6

Yu Chee Sing 6/6

Yek Deiw See 6/6

STATEMENT ON CORPORATE GOVERNANCE

18 | Grand-Flo Solution Berhad (607392-W) Annual Report 2010 | 19

A. DIRECTORS (CONT’D)

Board Responsibilities and Supply of Information

The Board is responsible for the overall corporate governance of the Group including reviewing, adopting and approving the Group’s strategic plans, key operational initiatives, major investment and funding decisions. Further, the Board also oversees the conduct of the Group’s business, assuming the responsibility for succession planning, reviewing the risk management process and internal control systems to minimize the downside risk for the Group in its business endeavours and to ensure compliance with relevant rules and regulations.

The Board is provided with comprehensive Board papers containing information pertaining to the business of the meeting in sufficient time to enable the Board to obtain further explanations, where necessary, in order to be properly briefed before meetings.

The proceedings and resolutions pass at each Board Meeting are minuted and kept in the statutory minutes book at the registered office of the Company.

The Board has full and unrestricted access to all of the Group’s information whether as a full board or in their

individual capacity to enable them to discharge their duties to their full capacity pertaining to the Group’s affairs and business.

External professional advisors, consultants and company secretaries are made available to render their independent views and advise to the Board.

Directors’ Training

The Directors of the Group have attended and successfully completed the Mandatory Accreditation Programme as required by Bursa Securities and are encouraged to attend continuous education programmes and seminars to keep abreast with the latest developments in the business environment and new regulatory requirements.

Seminars and conference attended by Directors during the financial year ended 31 December 2010 are as follows:

Directors ProgrammeTan Sri Datuk Adzmi bin Abdul Wahab • Malaysian FRS – Recent Developments and Updates

Tan Bak Hong • Zebra Partner Conference - Technology Update• Asia Partner Conference 2010

Cheng Ping Liong • Understanding Your Management Style/Individual Profile• Talent Management and Succession Planning• Developing a Fraud Risk Management Plan• Organizational Diagnosis• Talent Management: 5A’s Approach• Creative Mindset for Excellence• Malaysia Economic Transformation Programme (ETP)

Tan Bak Leng • Zebra SEA Partner Conference - New product training and business update

Tan Chuan Hock • Tax Audit & Investigation Workshop• Tax Practitioner and the Anti-Fraud Forensic Accounting

Perspectives• Seminar on Tax Planning & Latest Tax Developments• Malaysian Corporate Tax Practices and Principles• Practical approach to tax incentives in Malaysia• Witholding Tax & Cross Border Transactions• Seminar Percukaian Kebangsaan 2010

Cheong Kee Yoong • Directors’ training programme on - Key Amendments to Listing Requirements for Main Market- Continuing Obligations of Directors of Listed Corporations

STATEMENT ON CORPORATE GOVERNANCE(CONT’D)



Ms. Yap Li Li, Mr. Thongkam Manasilapapan, En. Othman bin Bakri, Mr. Wan Kok Weng, Ms. Chan Pik Khew, Mr. Yu Chee Sing and Mr. Yek Deiw See have not attended any trainings during this financial year, however, they have kept themselves abreast on financial and business matters through readings to enable them to contribute to the Board.

The Directors will continue to attend other relevant training programmes as appropriate to enhance their skills and knowledge.

Appointments to the Board and Re-election of Directors

The Nomination Committee assists the Board in ensuring that the Board is comprised of individuals of a required caliber whose background, skills, experience, integrity and professionalism will augment the present Board and meet its future needs. Where there is a need to appoint new Directors, the Nomination Committee will assess the suitability of candidates and recommend to the Board for appointment. Newly appointed Directors must submit themselves to shareholders for election at the Annual General Meeting (“AGM”) following their appointment.

In accordance with the Company Articles of Association, one-third of the Directors shall subject to retirement by rotation at each AGM and all Directors shall retire at least once in every three years. Directors who are appointed by the Board in the course of the year shall subject to re-election at the next AGM to be held following their appointment.

Directors who are over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, 1965.

Committees of the Board

The Board delegates certain responsibilities to the Board committees to assist in the discharge of its responsibilities. The Board committees are:-

• AuditCommittee• NominationCommittee• RemunerationCommittee

The role of the Board Committees is to advise and make recommendations to the Board. The Chairman of various committees provide a verbal report on the outcome of their committee meetings to the Board, and any further deliberation is made at the Board level, if required.

Each committee operates in accordance with written terms of reference approved by the Board. The Board

appoints the members and Chairman of each committee. A brief description of each committee is as follows:

Audit Committee

The members of the Committee comprising all Non-Executive Directors. The Audit Committee Report set out on page 22 to 24 provides details of the composition of the Audit Committee, its terms of reference and a summary of its activities.

Nomination Committee

The role of the Nomination Committee is to review annually the required mix of skills, experience and other qualities of the Directors and to recommend the new appointment, if any, to the Board.




The members of the Nomination Committee during the year under review are as follows:-

• TanSriDatukAdzmibinAbdulWahab(appointedon1July2010) Chairman, Independent Non-Executive Chairman• TanChuanHock Member, Non-Independent Non-Executive Director• YekDeiwSee Member, Independent Non-Executive Director• Dato’SeriDr.MohdAriffbinAraff(resignedon28June2010) Chairman, Independent Non-Executive Chairman

Remuneration Committee

The role of the Remuneration Committee is to assist the Board in its oversight of the remuneration policy and its specific application to the Executive Directors and Managing Director, the determination levels of reward to the Executive Directors and annual evaluation of the performance of the Managing Director.

The members of the Remuneration Committee during the year under review are as follows:-

• TanChuanHock Chairman, Non-Independent Non-Executive Director• YuCheeSing Member, Independent Non-Executive Director• YekDeiwSee Member, Independent Non-Executive Director

B. DIRECTORS’ REMUNERATION

Directors’ remuneration is evaluated by the Board and the annual remuneration of the Directors as at 31 December 2010 in bands of RM100,000 is tabled as follows:

Range of Remuneration Executive Non-ExecutiveRM100,000 and below - 7RM100,001 – RM200,000 - -RM200,001 – RM300,000 - -RM300,001 – RM400,000 - -RM400,001 – RM500,000 3 -RM500,001 – RM600,000 3 -

Details of the Directors’ remuneration for the financial year ended 31 December 2010 are as follows:

(RM’000) Salaries & Allowance

Fee Total

Executive Directors 2,111 - 2,111Non-Executive Directors - 171 171Total 2,111 171 2,282

The Board has chosen to disclose the remuneration in bands pursuant to the ACE Market Listing Requirements of Bursa Securities as the separate and detailed disclosure of individual director’s remuneration will not add significantly to the understanding and evaluation of Grand-Flo’s governance.



C. RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS

The Group values the importance of dialogue between the Group and its investors in order to provide them with the clearest and most complete picture of the Group’s performance and financial position.

The Group communicates with its shareholders and investors primarily through its AGM, Annual Report, Quarterly Financial Statements, Research Reports and the various announcements made to the Bursa Securities.

At the AGM, the shareholders are encouraged to participate and to voice up questions about the resolutions being proposed and about the Group’s operations in general.

D. ACCOUNTABILITY AND AUDIT

Financial Reporting

In presenting the annual financial statements and quarterly unaudited results, the Directors aim to present a fair assessment of the Group’s position and prospects to the shareholders. The Audit Committee assists the Board in scrutinizing information for disclosure to ensure accuracy, adequacy and completeness.

The statement by Directors made pursuant to Section 169 of the Companies Act, 1965 is set out in this Annual Report.

Internal Control

Information pertaining to the Company’s Internal Controls is presented in the statement of Internal Control laid out on pages 25 to 26 of this Annual Report.

Relationship with Auditors

The Board has always maintained a formal and transparent arrangement with its auditors in seeking professional advice and ensuring compliance with the accounting standards in Malaysia.

The Auditors will from time to time brief the Audit Committee and the Board on all relevant matters requiring the Audit Committee’s and the Board’s attention. The auditors attended all the Audit Committee meetings held to review the Quarterly Results and the financial statements.

Statement of Compliance with the Best Practices of the Code

The Company is committed to achieving high standards of corporate governance throughout the group and highest level of integrity and ethical standards in all of its business dealings.

The Board will continue to strive for the full compliance with the Code in the coming financial year.



COMPOSITION AND DESIGNATION OF AUDIT COMMITTEE

The Audit Committee (“the Committee”) comprises the following:

Chairman:Cheong Kee Yoong Independent Non-Executive Director

Members:Tan Chuan HockYu Chee SingYek Deiw See (appointed on 1 July 2010)

Non-Independent Non-Executive DirectorIndependent Non-Executive DirectorIndependent Non-Executive Director

Terms of Reference

The terms of reference of the Committee are as follows:

Membership

1. The Committee shall be appointed by the Board from among its members and shall comprise not less than three (3) members, whereby all members must be non-executive directors and financially literate with a majority of them being Independent Directors, and at least one (1) member of the Committee:-

a) must be a member of the Malaysian Institute of Accountants; or

b) if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years’ working experience and:

i. he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or

ii. he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967; or

c) fulfils such other requirements as prescribed or approved by the Bursa Malaysia Securities Berhad.

2. Alternate Director shall not be appointed as a member of the Committee.

3. The Committee shall elect a Chairman from among its members and the elected Chairman shall be an Independent Director.

4. In the event, the elected Chairman is not able to attend a meeting, the remaining members present shall elect one of themselves as Chairman for the meeting. The elected Chairman shall be an Independent Director.

5. If a member of the Audit Committee resigns, retires, dies or for any other reason ceases to be a member which results in the non-compliance with point 1 above, the Board shall fill the vacancy within three (3) months.

6. The Board shall review the term of office and performance of the Committee and each member at least once every three (3) years.

Frequency of meetings

1. Meetings shall be held not less than four (4) times a year. However, additional meetings may be called at anytime depending on the scope of activities of the Committee.

2. Other Board members, Senior management, Internal and External auditors may be invited to attend meetings.

3. The Committee should meet with the external auditors without the presence of executive board members at least twice in a financial year.

4. Prior notice shall be given for all meetings.

AUDIT COMMITTEE REPORT


Quorum

The minimum quorum for the meeting is two (2) members of the Committee, a majority of members present must be Independent Directors.

Secretary

The Company Secretary shall be the secretary of the Committee. The Secretary shall circulate the notice and minutes of the Committee to all members of Board.

Functions

The functions of the Committee are as follows:

1. To consider the appointment of external auditors, the audit fee and any questions of resignation or dismissal.

2. To review with the external auditors:a) the audit plan, scope and nature of the audit of the Group;b) their evaluation and findings of the system of internal controls; and the audit reports on the financial

statements.

3. To review the adequacy of the scope, function, competency and resources of internal audit and to ensure that it has the necessary authority to carry its work.

4. To review any appraisal or assessment of the performance of the internal audit functions and the internal audit function should report directly to the Committee.

5. To review the quality, adequacy and effectiveness of the Group’s internal control environment.

6. To review the findings of the internal and external auditors.

7. To review the quarterly and year end financial statements of the Group, focusing particularly on any changes in or implementation of major accounting policies and practices, significant adjustments arising from the audit, the going concern assumption and compliance with applicable approved accounting standards and other legal and regulatory requirements.

8. To review any related party transactions and conflicts of interest situation that may arise within the Group including any transactions, procedures or course of conduct that raises questions of management integrity.

9. To review the external auditors’ management letter and management’s response.

10. To review and verify the allocation of options pursuant to the Employees’ Share Option Scheme (“ESOS”) in compliance with the criteria as stipulated in the by-law of ESOS of the Group, if any.

11. Any other function that may be mutually agreed upon by the Committee and the Board which would be beneficial to the Company and ensure the effective discharge of the Committee’s duties and responsibilities.

Authority

The Committee is authorised by the Board to investigate any activity within its term of reference at the cost of the Company, to:

1. secure full and unrestricted access to any information pertaining to the Company and its subsidiaries (“the Group”).

2. communicate directly with the external and internal auditors and all employees of the Group.

3. seek and obtain independent professional advice and to secure the attendance of outsiders with relevant experience and expertise as it considers necessary.

4. convene meetings with the external auditors and internal auditors or both excluding the attendance of other directors and employees of the company, whenever deemed necessary.

AUDIT COMMITTEE REPORT(CONT’D)


AUDIT COMMITTEE REPORT(CONT’D)

Summary of Activities of The Committee During The Financial Year Ended 31 December 2010

During the financial year under review, the Committee convened six (6) meetings and attendance of Committee members at meetings is set out as follows:

Committee Members No. of Meetings Attended

Cheong Kee Yoong 6/6

Tan Chuan Hock 6/6

Yu Chee Sing 6/6

Yek Deiw See 2/2

The Committee had carried out the following activities during the six (6) meetings in discharging their duties and responsibilities:-

1. Reviewed the Company’s unaudited quarterly results and the audited financial results together with the relevant announcements thereon and ensured compliance with approved accounting standards and adherence to other legal regulatory requirements as well as making relevant recommendation to the Board for approval.

2. Reviewed the audit plan of the external auditors for the financial year.

3. Reviewed and approved the internal audit plan prepared by the outsourced Internal Auditors.

4. Reviewed the internal audit reports and ensured the implementation of the action plans are carried out by Management on a quarterly basis.

Internal Audit Function

Internal audit function of the Group is outsourced to an independent professional services firm to carry out internal audit services for the Group. Internal audit reports are presented, together with Management’s response and proposed action plans to the Committee quarterly.

The Internal Auditors undertake internal audit functions based on the operational, compliance and risk based audit plan that is reviewed by the Committee and approved by the Board. The risk-based audit plans covers the review of the key operational and financial activities including the efficacy of risk management practices, efficiency and effectiveness of operational controls and compliance with relevant laws and regulations.

Activities of the Internal Audit Function during the financial year were as follows:

i) Developed the internal audit plan for the financial year under review;ii) Execution of the approved internal audit plan;iii) Presentation of the internal audit findings at the quarterly Audit Committee meetings. All findings raised by the

Internal Auditors have been appropriately addressed by Management; andiv) Conducted follow up reviews to ensure that action plans are properly and appropriately implemented by

Management.

The internal audits conducted did not reveal any weakness which would result in material losses, contingencies or uncertainties that would require disclosure in the annual report.


INTRODUCTION

The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of internal control to safeguard shareholders’ investments and Group’s assets. Rule 15.26(b) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) requires the Board of Directors to include in its annual report a statement on the state of internal control.

The Board of Directors recognises the importance of good practice of corporate governance and is committed to maintain a sound system of internal control to safeguard shareholders’ investments and Group’s assets and is pleased to provide the following statement, which outlines the nature and scope of internal control of the Group for the financial year ended 31 December 2010.

BOARD RESPONSIBILITY

The Board of Directors recognizes the importance of a sound system of internal control and effective risk management practices to good corporate governance. The Board affirms its overall responsibility and reviews the adequacy and integrity of the system of internal control. However, it is recognized that such system is designed to improve the governance process to manage rather than eliminate risk.

KEY ELEMENTS OF INTERNAL CONTROL

The key elements of the Group’s internal control system include:-

• ClearlydefinedorganizationalstructurewithclearlinesofdelegationofresponsibilitytoCommitteesoftheBoard, management and operating subsidiaries.

• Experiencedandcompetentstaffareplacedinareasofresponsibilitytosupportandcontinuouslymonitortheeffectiveness of the Group’s system of internal control.

• RegularmeetingsareheldtodiscussontheoverallGroupandoperatingsubsidiaries’operationalmattersandto resolve key operational, financial, human resource and other related issues.

• TimelygenerationoffinancialandoperationsreportsforManagementreview.

• Regularriskbasedinternalauditreviewsarecarriedouttomonitorcompliancewithoperationalandfinancialprocedures and to review and assess risks that the Group’s operations are exposed to. These periodic reviews are outsourced to Internal Auditors who report to the Audit Committee.

• TheAuditCommitteereviewsthequarterlyandannualfinancialstatementsandresultsannouncementsandrecommended to the Board for approval.

• BudgetisreviewedandapprovedbythemanagementofeachsubsidiarybeforeconsolidationintotheGroup’sbudget for the Board of Directors’ review.

• Regular visits to operating subsidiaries by members of the Board and senior management wheneverappropriate.

The Board is satisfied that, during the financial year under review, there is an ongoing process of identifying, evaluating and managing significant risks faced by the Group. The Board is of the view that the existing system of internal controls is sound and adequate to safeguard the Group’s operations and assets at the existing level of operations of the Group.

STATEMENT ON INTERNAL CONTROL


INTERNAL AUDIT FUNCTION

The Board acknowledges the importance of the internal audit function and has outsourced its internal audit function to an independent business consulting firm as part of its efforts to provide adequate and effective internal control systems. The performance of internal audit function is carried out as per the annual audit plan approved by the Audit Committee. The internal audit function adopts a risk-based approach in addition to an independent and objective reporting on the state of the Group’s internal control system. The total cost incurred for the internal audit function is RM42,885 for the financial year ended 31 December 2010.

During the financial year, the internal audit reviews the Human Resources, Technology Development and Implementation function of the major subsidiaries. Internal audit has reviewed and commented on the effectiveness and adequacy of the existing control policies and procedures; and provided recommendations, if any, for the improvement of the control policies and procedures of the parent company and all the subsidiaries within the Group.

The board of directors continues to take measures to strengthen the control environment. In the year under review, there were no material losses, incurred as a result of weakness in the internal control that would require disclosure in this annual report. The Board will continue to improve and enhance the existing system of internal control to ensure its adequacy and relevance in safeguarding the shareholders’ interests and the Group’s assets.

RISK MANAGEMENT

Risk management is an integral part of our business operations and this process goes through a review process by the Board. Based on the assessment of the internal control systems of the Group, the Board is of the view that there is an on-going process for identifying, evaluating, monitoring and managing the significant risks affecting the achievement of its business objectives in their daily activities throughout the financial year up to the date of approval of the annual report. The system of internal controls that the Group intends to enhance throughout the financial year provides a level of confidence on which the Board relies on for assurance.

REVIEW BY EXTERNAL AUDITORS

The External Auditors have reviewed this Statement on Internal Control and reported to the Board that nothing has come to their attention that causes them to believe that the Statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the Group internal control system.

STATEMENT ON INTERNAL CONTROL(CONT’D)


SHARE BUYBACK

Details of the share bought back and retained as treasury shares by the Company during the financial year under review are set out as below:-

Date No. of shares purchased and retained in treasury

Highest price (RM)

Lowest price (RM)

Average price (RM)

Total amount paid* (RM)

2.3.2010 5,000 0.390 0.390 0.390 1,950.0025.8.2010 20,000 0.370 0.380 0.373 7,450.0028.9.2010 60,000 0.350 0.360 0.360 21,607.142.12.2010 26,000 0.350 0.370 0.356 9,259.903.12.2010 55,000 0.355 0.375 0.360 19,775.2513.12.2010 20,000 0.375 0.375 0.375 7,500.0014.12.2010 20,000 0.375 0.375 0.375 7,500.0017.12.2010 25,000 0.345 0.380 0.348 8,702.5024.12.2010 20,000 0.345 0.375 0.368 7,350.0030.12.2010 24,000 0.370 0.375 0.374 8,985.12

*Including brokerage, commission, clearing house fee and stamp duty.

None of the treasury shares held was resold or cancelled during the financial year under review.

Options, Warrants or Convertible Securities

During the financial year under review, the total outstanding Employee Share Option Scheme granted have been lapsed pursuant to the by-laws.

On 22 April 2010, the Company allotted and issued 67,912,455 new warrants 2010/2015 at an issue price of RM0.02 each (“Warrants”) on the basis of one (1) Warrant for every two (2) existing ordinary shares of RM0.10 each held in the Company on 30 March 2010. Each Warrant entitles the registered holder to subscribe for 1 new ordinary share in the Company at any time on or after 22 April 2010 to 21 April 2015, at an exercise price of RM0.25 in accordance with the Deed Poll.

As at 31 December 2010, 67,912,455 Warrants have yet to be converted to ordinary shares.

Save as above, the Company did not issue any warrants or convertible securities during the financial year under review.

American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) ProgramThe Company did not sponsor any ADR or GDR program during the financial year under review.

Imposition of Sanctions/penaltiesThere were no public sanctions and/or public penalties imposed on the Company and its subsidiaries, directors or management by the relevant regulatory bodies during the financial year under review.

Non-Audit FeesThere wasn’t any non-audit fee for non-audit related work paid or payable to the external auditors by the Group for the financial year under review.

Variation in ResultsThere was no profit estimation, forecast or projection made or released by the Company during the financial year under review. There were no material variance in the audited results from the unaudited results announced for the financial year under review.

Profit GuaranteeThe Company did not give any profit guarantee during the financial year under review.

Material Contracts Involving Directors’ and Major Shareholders’ InterestsDuring the financial year under review, there were no material contracts entered by the Company and its subsidiaries which involved Directors’ or major shareholders’ interests.

Revaluation Policy on Landed PropertyThe Group does not have a revaluation policy in respect of the Group’s properties.

Recurrent Related Party TransactionsThere were no recurrent related party transactions during the financial year under review.

OTHER COMPLIANCE INFORMATION


The Board is fully accountable to ensure that the financial statements are drawn up in accordance with Companies’ Act, 1965 and the applicable approved accounting standards set by Malaysian Accounting Standards Board so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2010 and of the results and cash flows of the Group and Company for the financial year ended on that date.

In the preparation of the financial statements, the Directors have:-

a. Applied relevant and appropriate accounting policies consistently and in accordance with applicable approved accounting standards;

b. Made judgments and estimates that are prudent and reasonable; and

c. Used the going concern basis for the preparation of the financial statements.

The Directors are responsible for ensuring that proper accounting records are kept in accordance with the Act. The Directors also have overall responsibility in taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

This statement is made in accordance with a resolution of the Board of Directors dated 26 April 2011.

STATEMENT OF DIRECTORS’ RESPONSIBILITY


Financial ContentsDirectors’ Report 30-34Statement by Directors and Statutory Declaration 35Independent Auditors’ Report 36-37Statements of Financial Position 38-39 Statements of Comprehensive Income 40 Statements of Changes in Equity 41-42Statements of Cash Flows 43-45Notes to the Financial Statements 46-89


DIRECTORS’ REPORT

The Directors have pleasure in submitting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2010.

PRINCIPAL ACTIVITIES

The principal activities of the Company are the provision of information technology solutions and investment holding. The principal activities of the subsidiaries are disclosed in Note 6 to the financial statements.

There have been no significant changes in the nature of these activities of the Company and its subsidiaries during the financial year.

FINANCIAL RESULTS

Group CompanyRM RM

Net profit for the year 7,695,412 557,702

Attributable to:-Owners of the parent 7,391,929Minority interest 303,483

7,695,412

DIVIDENDS

The final tax exempted dividend in respect of the financial year ended 31 December 2010 of RM0.01 per share amounting to RM1,450,855 will be proposed for shareholders’ approval at the upcoming annual general meeting. This proposed dividend is not reflected in the current year’s financial statements. Such dividend, if approved by the shareholders will be accounted for in shareholders’ equity as appropriation of retained earnings in the financial year ending 31 December 2011.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements.

DIRECTORS

The Directors in office since the date of the last report are:-

Tan Sri Datuk Adzmi Bin Abdul Wahab (appointed on 1.7.2010)Tan Bak HongCheng Ping LiongTan Bak LengYap Li Li Thongkam ManasilapapanWan Kok WengOthman Bin BakriTan Chuan HockCheong Kee YoongYu Chee SingYek Deiw SeeChan Pik Khew (alternate director to Wan Kok Weng)Dato’ Seri Dr. Mohd Ariff bin Araff (retired on 28.6.2010)


DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings, the beneficial interest of those who were Directors at the end of the financial year in the shares and warrants of the Company were as follows:-

Number of ordinary shares of RM0.10 eachBalance at Balance at

The Company 1.1.2010 Bought Sold 31.12.2010

Direct interests:-Tan Bak Hong 4,824,736 304,600 - 5,129,336Cheng Ping Liong 6,666,667 - - 6,666,667Thongkam Manasilapapan 6,599,900 - - 6,599,900Tan Bak Leng 11,480,660 - - 11,480,660Othman Bin Bakri 6,666,666 - - 6,666,666Tan Chuan Hock 4,200,000 - - 4,200,000Wan Kok WengChan Pik Khew

1,500,000-

4,615,3854,615,384

--

6,115,3854,615,384

Deemed interests:-Tan Bak Hong 1 23,559,990 - - 23,559,990Yap Li Li 2 28,384,726 304,600 - 28,689,326Tan Chuan Hock 3

Wan Kok Weng 4

4,000,000-

-4,615,384

--

4,000,0004,615,384

Chan Pik Khew 5 1,500,000 4,615,385 - 6,115,385

1 Deemed interested by virtue of his interest in Grand-Flo Corporation Sdn. Bhd.2 Deemed interested by virtue of her spouse, Mr. Tan Bak Hong and by virtue of her and Mr. Tan Bak Hong’s interest

in Grand-Flo Corporation Sdn. Bhd.3 Deemed interested by virtue of his interest in AI Capital Sdn. Bhd.4 Deemed interested by virtue of the interest of his spouse, Ms. Chan Pik Khew’s interest in the Company5 Deemed interested by virtue of the interest of her spouse, Mr. Wan Kok Weng’s interest in the Company

By virtue of Mr. Tan Bak Hong’s and Ms. Yap Li Li’s interest in the shares of the Company, they are deemed to have interest in the subsidiary companies under Section 6A of the Companies Act, 1965 to the extent that the Company has an interest.

Number of warrantsAt date of

issue on22.4.2010 Bought Sold

At31.12.2010

Direct holdingTan Bak Hong 2,412,368 5,000 - 2,417,368Cheng Ping Liong 3,514,200 - 1,750,000 1,764,200Thongkam Manasilapan 3,299,950 - 250,000 3,049,950Tan Bak Leng 5,740,330 - 750,000 4,990,330Othman Bin Bakri 3,333,333 - - 3,333,333Tan Chuan Hock 2,100,000 - - 2,100,000

Wan Kok Weng 790,700 - - 790,700

Indirect holdingTan Bak Hong 1 12,345,600 - - 12,345,600Yap Li Li 2 14,757,968 5,000 - 14,762,968Tan Chuan Hock 3 2,000,000 - - 2,000,000Chan Pik Khew 4 790,700 - - 790,700

DIRECTORS’ REPORT(CONT’D)


1 Deemed interested by virtue of his interest in Grand-Flo Corporation Sdn. Bhd.2 Deemed interested by virtue of her spouse, Mr. Tan Bak Hong’s interest in the Company and by virtue of her and

Mr. Tan Bak Hong’s interest in Grand-Flo Corporation Sdn. Bhd.3 Deemed interested by virtue of his interest in AI Capital Sdn. Bhd.4 Deemed interested by virtue of her spouse, Mr. Wan Kok Weng’s interest in the Company.

Each Warrant 2010/2015 entitled the registered holder to subscribe for two ordinary shares at the exercise price of RM0.25 each at any time within five years from the date of issue on 22 April 2010.

Other than as disclosed above, no other Directors in office at the end of the financial year held any interest in the shares of the Company or its related corporations during the financial year.

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or objects of enabling the Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive any benefits (except as disclosed in Note 30 and 36 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest.

ISSUE OF SHARES AND DEBENTURES

During the financial year, the Company increased its authorised ordinary share capital from RM25,000,000 to RM50,000,000 through the creation of 250,000,000 ordinary shares of RM0.10 each.

During the financial year, the following shares of RM0.10 each were issued: -

Date of issue Purpose of issue Class of share Number of shares Term of issue

31.3.2010 Acquisition of the remaining shares in existing subsidiaries

Ordinary 9,230,769 Non-cash

The new ordinary shares issued during the financial year ranked pari passu in all respect with the existing ordinary shares of the Company.

There were no debentures issued during the financial year.

TREASURY SHARES

During the financial year, the Company repurchased 275,000 of its issued ordinary shares from the open market at an average price of RM0.3676 per share. The total consideration paid for the repurchase including transaction costs was RM100,684. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.

As at 31 December 2010, the Company held treasury shares at a total of 299,800 out of its 145,085,478 issued ordinary shares. Such treasury shares are held at a carrying amount of RM109,203 and further relevant details are disclosed in Note 18 to the financial statements.

WARRANTS 2010/2015

On 22 April 2010, the Company allotted and issued 67,912,455 new Warrants 2010/2015 at an issue price of RM0.02 each on the basis of 1 Warrant 2010/2015 for every 2 existing ordinary shares held in the Company on 30 March 2010 (“Rights Issue of Warrants”). Each Warrant 2010/2015 entitles the registered holder to subscribe for 1 new ordinary share in the Company at any time on or after 22 April 2010 to 21 April 2015, at an exercise price of RM0.25 in accordance with the Deed Poll. Any Warrant 2010/2015 not exercised by the date of maturity will lapse thereafter and cease to be valid for all purposes. As at the reporting date, all Warrants 2010/2015 were fully exercised.



The ordinary shares issued from the exercise of Warrants 2010/2015 shall rank pari passu in all respects with the existing issue ordinary shares of the Company except that they shall not be entitled to any dividends, rights, allotments and/or other distributions declared, the entitlement date of which is prior to the date of allotment of the new shares arising from the exercise of Warrants 2010/2015.

The Warrants 2010/2015 are constituted by a Deed Poll dated 12 March 2010.

OTHER STATUTORY INFORMATION

Before the Statements of Comprehensive Income and Statements of Financial Position of the Group and of the Company were made out, the Directors took reasonable steps:-

(a) to ascertain that action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all bad debts had been written off and adequate provision had been made for doubtful debts; and

(b) to ensure that any current assets which were unlikely to be realised in the ordinary course of business including their values as shown in the accounting records of the Group and of the Company have been written down to an amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:-

(a) which would render the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or

(b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; and

(d) not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.

At the date of this report, there does not exist:-

(a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liability of any other person; or

(b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year.

In opinion of the Directors:-

(a) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Company to meet its obligations as and when they fall due; or

(b) the results of the Company’s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(c) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Company for the financial year in which this report is made.

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

The significant events during the financial year are disclosed in Note 41 to the financial statements.



AUDITORS

Messrs SJ Grant Thornton have expressed their willingness to continue in offi ce.

Signed on behalf of the Board of Directors in accordance with a resolution of the Board of Directors,

)TAN BAK HONG ) )

) ) ) )

) ) DIRECTORS )

) ) )

) ) )

)CHENG PING LIONG )

Kuala Lumpur26 April 2011


TAN BAK HONG )

) ) ) )

) ) )

) ) )

) ) )

CHENG PING LIONG )


In the opinion of the Directors, the fi nancial statements set out on pages 38 to 88 are drawn up in accordance with the Companies Act, 1965 and Financial Reporting Standards in Malaysia so as to give a true and fair view of the fi nancial position of the Group and of the Company as at 31 December 2010 and of their fi nancial performance and cash fl ows for the fi nancial year then ended.

Signed on behalf of the Board of Directors in accordance with a resolution ofthe Board of Directors,

TAN BAK HONG CHENG PING LIONG


I, Tan Bak Hong, being the Director primarily responsible for the fi nancial management of Grand-Flo Solution Berhad, do solemnly and sincerely declare that to the best of my knowledge and belief, the fi nancial statements set out on pages 38 to 88 are correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by )the abovenamed at Kuala Lumpur in )the Federal Territory this day of )26 April 2011 ) TAN BAK HONG

Before me:

Commissioner for Oaths

STATEMENT BY DIRECTORS

STATUTORY DECLARATION

the Board of Directors,

TAN BAK HONG CHENG PING LIONG

Subscribed and solemnly declared by )the abovenamed at Kuala Lumpur in )the Federal Territory this day of )26 April 2011 )

TAN BAK HONG

Before me:

Commissioner for Oaths


Report on the Financial Statements

We have audited the fi nancial statements of Grand-Flo Solution Berhad, which comprise the Statements of Financial 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 fi nancial year then ended, and a summary of signifi cant accounting policies and other explanatory notes set out on pages 38 to 88.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of fi nancial 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 is necessary to enable the preparation of the fi nancial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these fi nancial 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 fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of fi nancial 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 fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the fi nancial 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 fi nancial position of the Group and of the Company as of 31 December 2010 and of their fi nancial performance and cash fl ows for the fi nancial year then ended.

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF GRAND-FLO SOLUTION BERHAD


Report on Other Legal and Regulatory Requirements

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 and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We have considered the fi nancial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, as disclosed in Note 6 to the fi nancial statements.

(c) We are satisfi ed that the fi nancial statements of the subsidiaries that have been consolidated with the Company’s fi nancial statements are in form and content appropriate and proper for the purposes of the preparation of the fi nancial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(d) The auditors’ reports on the fi nancial statements of the subsidiaries did not contain any qualifi cation or any adverse comment made under Section 174 (3) of the Act.

Other Reporting Responsibilities

The supplementary information set out in Note 42 page 89 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the fi nancial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosure pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

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.

SJ GRANT THORNTON NG CHEE HOONG(NO. AF: 0737) CHARTERED ACCOUNTANT

CHARTERED ACCOUNTANTS (NO: 2278/10/12(J))PARTNER


INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF GRAND-FLO SOLUTION BERHAD (CONT’D)


STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2010

Group CompanyNote 2010 2009 2010 2009

RM RM RM RM

ASSETSNon-current assetsProperty, plant and equipment 4 11,084,908 9,385,846 9,991 4,359 Prepaid land lease payments 5 968,446 774,070 - - Investment in subsidiaries 6 - - 36,315,508 33,914,058 Investment in associates 7 10,562,562 9,363,508 4,402,288 4,402,288 Other investment 8 71,830 73,629 - - Development costs 9 1,197,739 594,621 1,197,739 594,621 Goodwill on consolidation 10 22,217,707 22,214,574 - -

Total non-current assets 46,103,192 42,406,248 41,925,526 38,915,326

Current assetsInventories 11 8,211,318 5,924,719 - - Trade receivables 12 15,410,325 13,704,050 - - Other receivables 13 522,009 437,446 45,673 21,682 Amount due from subsidiaries 14 - - 571,516 57,190 Amount due from associates 14 145,776 218,256 64,614 58,645 Tax recoverable 403,451 362,310 98,633 98,628 Fixed deposits with licensed banks 15 484,068 392,750 - - Cash and bank balances 16 4,474,560 4,372,213 12,268 27,144

Total current assets 29,651,507 25,411,744 792,704 263,289

Total assets 75,754,699 67,817,992 42,718,230 39,178,615

EQUITY AND LIABILITIESEQUITYEquity attributable to owners of the parentShare capital 17 14,508,548 13,585,470 14,508,548 13,585,470 Share premium 17 15,030,846 12,353,924 15,030,846 12,353,924 Treasury shares 18 (109,203) (8,519) (109,203) (8,519)Warrant reserves 19 1,180,873 - 1,180,873 - Other reserves 20 1,109,451 1,109,451 - - Foreign exchange fluctuation reserve (226,990) 254,828 - - Retained earnings 21 18,218,864 10,826,935 3,999,049 3,441,347

49,712,389 38,122,089 34,610,113 29,372,222 Minority interest 282,246 2,894,309 - -

Total equity 49,994,635 41,016,398 34,610,113 29,372,222

The accompanying notes form an integral part of the financial statements.



RM RM RM RM

LIABILITIESNon-current liabilitiesFinance lease liabilities 22 833,053 1,018,943 - - Term loans 23 3,537,711 3,407,211 - 633,551 Deferred tax liabilities 24 452,070 321,800 - -

Total non-current liabilities 4,822,834 4,747,954 - 633,551

Current liabilitiesTrade payables 25 6,899,278 6,296,929 - - Other payables 26 2,943,850 4,972,339 334,890 2,839,106 Amount due to Directors 27 476,250 952,502 476,250 952,502 Amount due to subsidiaries 14 - - 6,664,519 3,853,803 Finance lease liabilities 22 909,723 886,606 - - Borrowings 28 9,606,542 8,633,521 632,458 1,527,431 Tax payable 101,587 311,743 - -

Total current liabilities 20,937,230 22,053,640 8,108,117 9,172,842

Total liabilities 25,760,064 26,801,594 8,108,117 9,806,393

Total equity and liabilities 75,754,699 67,817,992 42,718,230 39,178,615

STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2010 (CONT’D)




RM RM RM RM

Revenue 29 68,647,343 46,533,798 1,656,681 413,308 Costs of sales (47,995,741) (31,420,441) (358,291) (154,693)Gross profit 20,651,602 15,113,357 1,298,390 258,615

Other income 1,640,534 1,093,424 697,273 666,808 Administration expenses (12,222,620) (9,544,662) (1,191,569) (1,199,809)Distribution expenses (1,969,354) (1,572,342) (139,393) (78,523)Other expenses (118,169) (146,989) (1,095) (3,026)Finance costs (674,159) (605,631) (92,094) (148,986)Share of profit of associates 1,227,630 675,493 - - Profit/(Loss) before tax 30 8,535,464 5,012,650 571,512 (504,921)

Tax (expense)/income 31 (840,052) (774,789) (13,810) 273,042 Net profit/(loss) for the year 7,695,412 4,237,861 557,702 (231,879)

Other comprehensive income :Exchange translation differences (481,818) (334,060) - - Total comprehensive income/(loss) for

the financial year 7,213,594 3,903,801 557,702 (231,879)

Profit/(Loss) for the financial year attributable to :-

Owners of the parent 7,391,929 3,185,560 557,702 (231,879)Minority interest 303,483 1,052,301 - -

7,695,412 4,237,861 557,702 (231,879)

Total comprehensive income/(loss) attributable to :-

Owners of the parent 6,910,111 2,851,500 557,702 (231,879)Minority interest 303,483 1,052,301 - -

7,213,594 3,903,801 557,702 (231,879)

Earning per share attributable to owners of the parent (sen):-

Earning per share - Basic 32 5.18 2.38 - Diluted 32 3.92 -

STATEMENTS OF COMPREHENSIVE INCOMEFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010



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tere

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MR

MR

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Bal

ance

at

1 Ja

nuar

y 20

09 1

2,44

5,65

3 8

,706

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(2

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5

88,8

88

76,

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7,5

64,8

15

30,4

89,8

32

1,8

42,0

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32,3

31,8

40

Tota

l com

pre

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ive

inco

me

for

the

year

-

-

-

-

(334

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3

,185

,560

2

,851

,500

1

,052

,301

3

,903

,801

Tran

sact

ions

with

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:

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-

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-

-

-

(76,

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76,

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-

-

-

Sha

re r

epur

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-

(6

,386

) -

-

-

-

(6

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(6

,386

)

Tran

sact

ion

cost

s -

-

(9

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-

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(9

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(9

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shar

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1,1

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4,7

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33

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4,7

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33

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1,1

39,8

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76,

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4,7

80,7

57

-

4,7

80,7

57

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at

31 D

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200

9 1

3,58

5,47

0 12

,353

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(8

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2

54,8

28

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26,9

35

38,1

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89

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98

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-

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7

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6

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3

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83

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13,5

94

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923

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-

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1

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1

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1

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cost

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-

(804

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-

(178

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78)

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923

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84)

1,1

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73

-

-

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4,6

80,1

89

(2,9

15,5

46)

1,7

64,6

43

Bal

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at

31 D

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201

0 1

4,50

8,54

8 15

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(1

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03)

1,1

80,8

73

(226

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1

8,21

8,86

4 49

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2

82,2

46

49,9

94,6

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STA

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STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 (CONT’D)

Non-Distributable Distributable

Sharecapital

Share premium

Treasuryshares

Warrantreserves

Shareoption

reserveRetainedearnings

Total

RM RM RM RM RM RM RMCompany

Balance at 1 January 2009 12,445,653 8,706,508 (2,043) - 76,560 3,596,666 24,823,344

Total comprehensive loss for the year - - - - - (231,879) (231,879)

Transactions with owners:

Share options granted under ESOS lapsed - - - - (76,560) 76,560 -

Share repurchased - - (6,386) - - - (6,386)

Transaction costs - - (90) - - - (90)

Issuance of ordinary shares pursuant to acquisition of subsidiaries 1,139,817 3,647,416 - - - - 4,787,233

Total transactions with owners 1,139,817 3,647,416 (6,476) - (76,560) 76,560 4,780,757

Balance at 31 December 2009 13,585,470 12,353,924 (8,519) - - 3,441,347 29,372,222

Total comprehensive income for the year - - - - - 557,702 557,702

Transactions with owners:

Warrants issued - - - 1,180,873 - - 1,180,873

Share repurchased - - (99,927) - - - (99,927)

Transaction costs - - (757) - - - (757)

Issuance of ordinary shares pursuant to acquisition of subsidiaries 923,078 2,676,922 - - - - 3,600,000

Total transactions with owners 923,078 2,676,922 (100,684) 1,180,873 - - 4,680,189

Balance at 31 December 2010

14,508,548

15,030,846 (109,203) 1,180,873 - 3,999,049 34,610,113



Group Company2010 2009 2010 2009

RM RM RM RMCASH FLOWS FROM OPERATING

ACTIVITIESProfit/(loss) before tax 8,535,464 5,012,650 571,512 (504,921) Adjustments for:-Amortisation of development cost 335,474 148,655 335,474 148,655 Amortisation of prepaid land lease payments 9,550 9,146 - - Amortisation of other investment 1,799 1,800 - - Bad debts written off 7,561 129,217 - - Depreciation 1,308,379 1,076,243 1,168 1,162 Dividend income (151,918) - (688,108) (248,465)(Gain)/loss on disposal of property, plant and

equipment (109,342) (153,785) - 1,718

Gain on deemed disposal of associate (181,499) (165,680) - - Impairment for doubtful debts - 18,554 - - Impairment for doubtful debts no longer

required (79,546) (204,135) - -

Impairment for slow moving inventories - 3,275 - - Interest income (9,561) (13,493) - (3,120)Inventories written off 108,001 46,069 - - Interest expense 674,159 605,631 92,094 148,986 Property, plant and equipment written off 1,958 7,521 - - Share of profit of associate companies (1,199,054) (675,493) - - Unrealised gain on foreign exchange (211,805) - - -

Operating profit/(loss) before working capital changes

9,039,620 5,846,175 312,140 (455,985)

Changes in working capital:-Inventories (2,394,600) (1,071,137) - - Receivables (1,507,048) (588,583) (23,991) (1,812,884)Payables (1,426,140) 1,171,886 (2,519,097) 2,737,650 Subsidiaries - - 3,212,207 5,107,947 Associates 86,290 (102,510) (5,969) (49,645)Directors (476,252) (1,652,500) (476,252) (952,500)

Cash generated from operations 3,321,870 3,603,331 499,038 4,574,583

Tax paid (279,401) (488,709) (13,810) -

Net cash from operating activities 3,042,469 3,114,622 485,228 4,574,583

STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010



STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 (CONT’D)


RM RM RM RM

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of subsidiary companies, net of cash and cash equivalents acquired 34 (300,674) (1,148,955) 297,609 (4,512,961)

Development costs incurred (938,592) (743,276) (938,592) (743,276)Dividend received from associate 138,108 - 138,108 - Dividend received from subsidiaries - 248,465 550,000 248,465 Interest received 9,561 13,493 - 3,120 Proceeds from disposal of property,

plant and equipment 172,296 351,648 - - Prepaid land lease payment (203,926) - - - Purchase of property, plant and

equipment A (2,318,890) (421,422) (6,800) (775)

Net cash (used in)/from investing activities (3,442,117) (1,700,047) 40,325 (5,005,427)

CASH FLOWS FROM FINANCING ACTIVITIES

Interest paid (674,159) (605,631) (92,094) (148,986)Net drawndown/(repayment) of term

loans and short term borrowings 487,848 2,687,964 (1,528,524) 349,687 Proceeds from issuance of warrants 1,180,873 - 1,180,873 - Purchase of treasury shares (100,685) (6,476) (100,684) (6,476)Repayment of finance lease payables (927,773) (1,084,526) - -

Net cash (used in)/from financing activities (33,896) 991,331 (540,429) 194,225

Effect of foreign exchange translation 324,525 (246,047) - -

CASH AND CASH EQUIVALENTSNet (decrease)/increase (109,019) 2,159,859 (14,876) (236,619)

As at beginning of the year:-As previously reported 4,313,640 2,168,047 27,144 263,763 Effect of foreign exchange translation (312,988) (14,266) - - As restated 4,000,652 2,153,781 27,144 263,763

As at end of the year B 3,891,633 4,313,640 12,268 27,144




NOTES TO THE STATEMENT OF CASH FLOW

A. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

During the financial year, the Group acquired property, plant and equipment with aggregate costs of RM3,083,890 (2009: RM1,316,422) of which RM765,000 (2009: RM895,000) were financed by finance lease facilities. Cash payments of RM2,318,890 (2009: RM421,422) were made to purchase these property, plant and equipment.

B. CASH AND CASH EQUIVALENTS

Cash and cash equivalents included in the Statements of Cash Flows comprise the following:-

Group Company2010 2009 2010 2009

RM RM RM RM

Cash and bank balances 4,474,560 4,372,213 12,268 27,144 Fixed deposits with licensed banks 484,068 392,750 - - Bank overdrafts (Note 28) (1,066,995) (451,323) - -

3,891,633 4,313,640 12,268 27,144

STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 (CONT’D)

Annual Report 2010 | 4746 | Grand-Flo Solution Berhad (607392-W) Annual Report 2010 | 47

1. GENERAL INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the ACE Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Third Floor, No. 79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan. The principal place of business of the Company is located at No. 3-5, Block D2, Jalan PJU 1/39, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan.

The principal activities of the Company are the provision of information technology solutions and investment holding. The principal activities of the subsidiaries are disclosed in Note 6 to the financial statements.

There have been no significant changes in the nature of these activities of the Company and its subsidiaries

during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors passed on 26 April 2011.

2. BASIS OF PREPARATION

2.1 Statement of Compliance

The financial statements of the Group and of the Company have been prepared in accordance with the Companies Act 1965 in Malaysia and Financial Reporting Standards issued by the Malaysian Accounting Standards Board (“MASB”).

2.2 Basis of Measurement The financial statements of the Group and of the Company are prepared under the historical cost

convention, unless otherwise indicated in the summary of significant accounting policies.

2.3 Functional and Presentation Currency The financial statements are presented in Ringgit Malaysia (RM) which is the Company’s functional

currency.

2.4 Financial Reporting Standards (“FRSs”)

2.4.1 Adoption of New or Revised FRSs

The accounting policies adopted by the Group and the Company are consistent with those of the previous financial year except the following new and revised FRSs and IC Interpretations which are mandatory for annual financial periods beginning on or after 1 January 2010:-

a) FRS 7 - Financial Instruments: Disclosuresb) FRS 8 - Operating Segmentsc) FRS 101 - Presentation of Financial Statements (Revised)d) FRS 123 - Borrowing Costs (Revised)e) FRS 139 - Financial Instruments: Recognition and Measurementf) Amendments to FRS 1 and

FRS 127- First-time Adoption of Financial Reporting Standards

and Consolidated and Separate Financial Statements. Amendments relating to cost of an investment in a subsidiary, jointly controlled entity or associate

g) Amendments to FRS 2 - Share Based Payment. Amendments relating to vesting conditions and cancellations

NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2010

Annual Report 2010 | 47

NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2010 (CONT’D)


h) Amendment to FRS 5 - Non-Current Assets Held for Sale and Discontinued Operations. Amendment relating to disclosures of non-current assets (or disposal groups) classified as held for sale or discontinued operations

i) Amendment to FRS 7 - Financial Instruments: Disclosures. Amendment relating to financial assets

j) Amendment to FRS 8 - Operating Segments. Amendment relating to disclosure information about segment assets

k) Amendment to FRS 107 - Statement of Cash Flows. Amendment relating to classification of expenditures on unrecognsised assets

l) Amendment to FRS 108 - Accounting Policies, Changes in Accounting Estimates and Errors. Amendment relating to selection and application of accounting policies

m) Amendments to FRS 110 - Events After the Reporting Period. Amendment relating to reason for dividend not recognised as a liability at the end of the reporting period

n) Amendments to FRS 116 - Property, Plant and Equipment. Amendment relating to derecognition of asset

o) Amendments to FRS 117 - Leases. Amendment relating to classification of leases p) Amendments to FRS 118 - Revenue. Amendment relating to Appendix of this standard

and recognition and measurement q) Amendments to FRS 119 - Employee Benefits. Amendment relating to definition,

curtailment and settlements r) Amendments to FRS 120 - Accounting for Government Grants and Disclosure of

Government Assistance. Amendment relating to definition and government loan at a below – market rate of interest

s) Amendments to FRS 123 - Borrowing costs. Amendment relating to exclusion of incidental cost to borrowing

t) Amendments to FRS 127 - Consolidated and Separate Financial Statements. Amendments relating to cost of an investment in a subsidiary, jointly controlled entity or associate

u) Amendments to FRS 128 - Investment in Associates. Amendment relating to Impairment losses in application of the equity method and the scope of this standard

v) Amendments to FRS 129 - Financial Reporting in Hyperinflationary Economies. Amendment relating to changing of terms used

w) Amendments to FRS 131 - Interests in Joint Ventures. Amendment relating to additional disclosure required for joint venture that does not apply FRS 131

x) Amendments to FRS 132 - Financial Instruments: Presentation. Amendments relating to puttable financial instruments and effective date and transition of the classification of compound instruments

y) Amendments to FRS 134 - Interim Financial Reporting. Amendment relating to disclosure of earnings per share

z) Amendments to FRS 136 - Impairment of assets. Amendment relating to the disclosure of recoverable amount

aa) Amendments to FRS 138 - Intangible assets. Amendment relating to recognition of an expense

2. BASIS OF PREPARATION (CONT’D)

2.4 Financial Reporting Standards (“FRSs”) (cont’d)

2.4.1 Adoption of New or Revised FRSs (cont’d)


NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2010 (CONT’D)

ab) Amendments to FRS 139, FRS 132 and IC Interpretation 9

- Financial Instruments: Recognition and Measurement, Financial Instruments: Disclosure and Reassessment of Embedded Derivatives. Amendments relating to eligible hedged items, reclassification of financial assets and embedded derivatives

ac) Amendments to FRS 140 - Investment Property. Amendment relating to inability to determine fair value reliably

ad) IC Interpretation 9 - Reassessment of Embedded Derivativesae) IC Interpretation 10 - Interim Financial Reporting and Impairmentaf) IC Interpretation 11 - FRS 2 – Group and Treasury Share Transactionsag) IC Interpretation 13 - Customer Loyalty Programmesah) IC Interpretation 14 - FRS 119 – The Limit on a Defined Benefit Asset, Minimum

Funding Requirements and their interaction

Adoption of the above standards did not have any material effect on the financial performance or position of the Group and of the Company except for the following:-

FRS 7 Financial Instruments: Disclosures

Prior to 1 January 2010, information about financial instruments was disclosed in accordance with the requirements of FRS 132 Financial Instruments: Disclosure and Presentation. FRS 7 requires the disclosure of information about the significance of financial instruments for the Group’s and the Company’s financial position and performance, the nature and extent of risks arising from financial instruments and the objectives, policies and processes for managing capital.

The Group and the Company have applied FRS 7 prospectively in accordance with the transitional provisions. Hence, the new disclosures have not been applied to the comparatives. The new disclosures are included throughout the Group’s and the Company’s financial statements for the financial year ended 31 December 2010.

FRS 8 Operating Segments

FRS 8, which replaces FRS 1142004 - Segment Reporting, requires identification of operating segments based on internal reports that are regularly reviewed by the Group’s chief operating decision maker in order to allocate resources to the segments and to assess their performance. Currently, the Group identifies two sets of segments (business and geographical) using a risks and rewards approach, with the Group’s system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. The Group has adopted FRS 8 retrospectively.

FRS 101 Presentation of Financial Statements (Revised)

The revised FRS 101 introduces changes in the presentation and disclosures of financial statements. The Standard introduces the statement of comprehensive income, with all items of income and expense recognised in profit or loss, together with all other items of recognised income and expense recognised directly in equity, either in one single statement, or in two linked statements. The Group and the Company have elected to present this statement as one single statement.

A statement of financial position is required at the beginning of the earliest comparative period following a change in accounting policy, the correction of an error or the classification of items in the financial statements. The revised FRS 101 also requires the Group and the Company to make new disclosures to enable users of the financial statements to evaluate the Group’s and the Company’s objectives, policies and processes for managing capital.

The revised FRS 101 was adopted retrospectively by the Group and the Company.









FRS 123 Borrowing Costs

FRS 123 removed the option of recognising borrowing cost directly attributable to the acquisition, construction or production of a qualifying asset in profit or loss as available under the previous version of FRS 123. The Group and the Company shall capitalise such costs as part of the cost of that asset prospectively.

FRS 139 Financial Instruments: Recognition and Measurement

FRS 139 establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. The Group and the Company have adopted FRS 139 prospectively on 1 January 2010 in accordance with the transitional provisions. Any effects arising from the adoption of this Standard will be accounted for by adjusting the opening balance of unappropriated profit as at 1 January 2010. Comparatives are not restated. The details of the changes in accounting policy and the effects arising from the adoption of FRS 139 are discussed below:-

Impairment of trade receivables

Prior to 1 January 2010, allowance for doubtful debts was recognised when it was considered uncollectible. Upon the adoption of FRS 139, an impairment loss is recognised when there is objective evidence that an impairment loss has been incurred. The amount of the loss is measured as the difference between the receivable’s carrying amount and the present value of the estimated future cash flows discounted at the receivable’s original effective interest rate.

2.5 Standards issued but not yet effective

The following are standards and IC Interpretations which are not yet effective and have not been early adopted by the Group and the Company:-

Effective for financial period beginning on or after 1 March 2010

Amendment to FRS 132 - Financial Instruments: Presentation. Amendments relating to classification of right issues

Effective for financial period beginning on or after 1 July 2010

a) FRS 1 - First-time Adoption of Financial Reporting Standards (Revised)b) Amendments to FRS 2 - Share Based Payment. Amendments relating to the scope of the

Standardc) FRS 3 - Business Combinations (Revised)d) Amendments to FRS 5 - Non-Current Assets Held for Sale and Discontinued Operations.

Amendment relating to the inclusion of non-current assets as held for distribution to owners in the standard

e) FRS 127 - Consolidated and Separate Financial Statements (Revised)f) Amendments to FRS 138 - Intangible assets. Amendments relating to the revision to FRS 3g) Amendments to IC

Interpretation 9- Reassessment of Embedded Derivatives. Amendments relating

to the scope of the IC and revision to FRS 3h) IC Interpretation 12 - Service Concession Arrangementsi) IC Interpretation 16 - Hedges of a Net Investment in a Foreign Operationj) IC Interpretation 17 - Distributions of Non-cash Assets to Owners




2.5 Standards issued but not yet effective (cont’d)

Effective for financial period beginning on or after 1 January 2011

a) Amendments to FRS 1 - Limited Exemption from Comparative FRS 7 Disclosures for First time Adopters. Amendment relating to transition provisions for first-time adopter

b) Amendments to FRS 1 - Additional Exemptions for First-time Adopters. Amendments relating to exemptions for entities in the oil and gas industry and those with leasing contracts

c) Amendments to FRS 1 - First-time Adoption of Financial Reporting Standards. Amendments relating to accounting policy changes in the year of adoption, revaluation basis as deemed cost and use of deemed cost for operations subject to rate regulation

d) Amendments to FRS 2 - Group cash-settled share-based Payment Transactions. Amendments to prescribe the accounting treatment for share-based payment transaction

e) Amendments to FRS 3 - Business Combinations. Amendments relating to measurement of non-controlling interests and un-replaced and voluntarily replaced share-based payment awards

f) Amendments to FRS 7 - Improving Disclosures about Financial Instruments. Amendments relating to the fair value measurement using fair value hierarchy and disclosure of liquidity risk

g) Amendments to FRS 7 - Financial Instruments: Disclosures. Amendments relating to classification of disclosures and transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised FRS

h) Amendments to FRS 101 - Presentation of Financial Statements. Amendment relating to clarification of statement of changes in equity

i) Amendments to FRS 121 - The Effects of Changes in Foreign Exchange Rates. Amendment relating to transition requirements for amendments arising as a result of FRS 127

j) Amendment to FRS 128 - Investment in Associates. Amendment relating to transition requirements for amendments arising as a result of FRS 127

k) Amendment to FRS 131 - Interest in Joint Ventures. Amendment relating to transition requirements for amendments arising as a result of FRS 127

l) Amendment to FRS 132 - Financial Instruments: Presentation. Amendment relating to transition requirements for contingent consideration from a business combination that occurred before the effective date of revised FRS 3

m) Amendment to FRS 134 - Interim Financial Reporting. Amendment relating to significant events and transactions

n) Amendment to FRS 139 - Financial Instruments: Recognition and Measurement. Amendment relating to transition requirements for contingent consideration from a business combination that occurred before the effective date of revised FRS 3

o) IC Interpretation 4 - Determining whether an Arrangement contains a Leasep) Amendment to

IC Interpretation 13- Fair value of award credits

q) IC Interpretation 18 - Transfer of Assets from customers




2.5 Standards issued but not yet effective (cont’d)

Effective for financial periods beginning on or after 1 July 2011

a) Amendment to IC Interpretation 14

- Prepayments of A Minimum Funding Requirement

b) IC Interpretation 19 - Extinguishing Financial Liabilities with Equity Instruments

Effective for financial periods beginning on or after 1 January 2012

a) FRS 124 - Related Party Disclosures (Revised)b) IC Interpretation 15 - Agreements for the Construction of Real Estate

The existing FRS 1, FRS 3 and FRS 127 as well as FRS 2012004-Property Development Activities will be withdrawn upon the adoption of the new requirements that take effect on 1 July 2010. IC Interpretation 8 and 11 shall be withdrawn on the application of Amendments to FRS 2 effective for the accounting period beginning on or after 1 January 2011.

All the above Amendments, IC Interpretations and FRS except for FRS 3, 124 and 127, Amendments to FRS 3, 7 and 101 are not expected to be relevant to the operations of the Group and of the Company. The Directors anticipate that the adoption of those applicable FRS and amendments to FRS will have no material impact on the financial statements of the Group and of the Company in the period for initial application except for the following:-

FRS 3 Business Combinations (Revised)

The revised standard continues to apply the acquisition method to business combinations, with some significant changes. All payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice to measure the non-controlling interest in the acquiree at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed.

FRS 124 Related Party Disclosures (Revised)

The revised standard modifies the definition of a related party and simplifies disclosures for government-related entities. The disclosure exemptions introduced in the standard do not affect the Group and the Company because the Group and the Company are not government-related entities. However, disclosures regarding related party transactions and balances in the financial statements may be affected when the revised standard is applied in future accounting periods because some counterparties that did not previously meet the definition of a related party may come within the scope of such standard.

FRS 127 Consolidated and Separate Financial Statements (Revised)

The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value, and a gain or loss is recognised in profit or loss. Losses are required to allocate to non-controlling interests, even if it results in the non-controlling interest to be in a deficit position.




2.6 Significant Accounting 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 and reported amounts of assets, liabilities, income and expenses, and disclosures made. Estimates and underlying assumptions are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.

Information about significant judgements, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses are discussed below.

2.6.1 Key sources of estimation uncertainty

Key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:-

Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their useful life. However, significant judgement is involved in estimating the useful life and residual value of property, plant and equipment which are subjected to technological development and level of usage. Therefore residual values of these assets and future depreciation charges may vary.

Impairment of property, plant and equipment and prepaid land lease payments

The Group carried out impairment tests where there are indications of impairment based on a variety of estimation including value-in-use of cash-generating unit to which the property, plant and equipment and the prepaid land lease payments are allocated. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from cash-generating unit and also to choose a suitable discount rate in order to calculate present value of those cash flows.

Inventories

The management reviews inventories to identify damaged, obsolete and slow-moving inventories which require judgement and changes in such estimates could result in revision to valuation of inventories.

Impairment of loans and receivables

The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. Factors such as probability of insolvency or significant financial difficulties of the receivables and default or significant delay in payments are considered in determining whether there is objective evidence of impairment.

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.

Deferred tax assets

The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group’s latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in the numerous jurisdictions in which the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.



3. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of consolidation

The Group’s financial statements which consolidate the audited financial statements of the Company and all of its subsidiaries, are prepared in accordance with Group’s accounting policies. All financial statements are drawn up to the same reporting date.

All intercompany transactions, balances and unrealised gains on transactions between group

companies are eliminated, unrealised losses are also eliminated on consolidation unless cost cannot be recovered.

Acquisition of subsidiaries is accounted for using the acquisition method. The cost of an acquisition is measured as the fair values of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.

Any excess of cost of business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill.

Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised as income on the date of acquisition.

Minority interest represents the portion of profit or loss and net assets in subsidiaries not held by the Group. It is presented in the consolidated statement of financial position within equity, separately from the parent shareholders’ equity, and is separately disclosed in the consolidated profit or loss.

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 together with any unimpaired balance of goodwill on acquisition and exchange differences.

(b) Subsidiaries

A subsidiary is a company in which the Group or the Company has the power to exercise control over the financial and operating policies so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

Investment in subsidiaries is stated at cost or in accordance with FRS 139 less any impairment losses in the Company’s statement of financial position.

(c) Associates

An associate is a company in which the Group or the Company has a long term equity interest of between 20 to 50 percent and is in the position to exercise significant influence over its financial and operating policies through management participation but not to exert control over those policies.

Investment in associates are accounted for in the consolidated financial statements using equity accounting method which involves recognising in profit or loss the Group’s share of the results of associates based on audited/management financial statements of the associates. The Group’s investments in associates are carried in the Statement of Financial Position at an amount that reflects its share of the net assets of the associates. Equity accounting is discontinued when the carrying amount of the investment in an associate reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associate.



3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(c) Associates (cont’d)

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investments in its associates. The Group determines at each reporting date whether there is any objective evidence that the investments in the associate are impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognise the amount in profit or loss.

The financial statements of associates are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

In the Company’s separate financial statements, investments in associates are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

(d) Foreign currency transactions

Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at year-end exchange rates, whether realised or unrealised, are recognised in profit or loss except for exchange differences arising from monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity.

Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than RM (the Group’s presentation currency) are translated into RM upon consolidation. The functional currency of the entities in the Group has remained unchanged during the reporting period.

On consolidation, assets and liabilities have been translated into RM at the closing rate at the reporting date. Income and expense have been translated into the Group’s presentation currency at the average rate over the reporting period. Exchange differences are charged or credited to other comprehensive income and recognised in the currency translation reserve in equity. On disposal of a foreign operation the cumulative translation difference recognised in equity (the exchange translation reserve) are reclassified to profit or loss and recognised as part of the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into RM at the closing rate.

(e) Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and impairment loss. Freehold land and building under construction are not depreciated. Depreciation on other property, plant and equipment is provided on a straight line method so as to write off the cost over the estimated useful lives of the property, plant and equipment concerned.




(e) Property, plant and equipment and depreciation

The principal annual depreciation rates used are as follows: -

Buildings 2%Computers 20% - 60%Renovation 8% - 20%Motor vehicles 20%Factory/office furniture and equipment 8% - 25%Plant and machinery 10%

Restoration cost relating to an item of the property, plant and equipment is capitalised only if such expenditure is expected to increase the future benefits from the existing property, plant and equipment beyond its previously assessed standard of performance.

Property, plant and equipment are written down to recoverable amount if, in the opinion of the Directors, it is less than their carrying value. Recoverable amount is the net selling price of the property, plant and equipment i.e. the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.

The residual values, useful life and depreciation method are reviewed at each financial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and expected pattern of consumption of future economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in profit or loss in the financial year the asset is derecognised.

(f) Goodwill

Goodwill represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary, associate and jointly controlled entities at the date of acquisition.

Goodwill arising on the acquisition of subsidiaries is presented separately in the Statement of Financial Position while goodwill arising on the acquisition of associate is included within the carrying amount of investment in associate.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying values may be impaired.

A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for impairment annually and, whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including goodwill, with the recoverable amount of the unit. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised in profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent period.

An impairment loss recognised for goodwill should not be reversed in subsequent period. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operations within that unit is disposed off, the goodwill associated with the operations disposed off is included in the carrying amount of the operations when determining the gain or loss on disposal of the operations. Goodwill disposed off in these circumstances is measured based on the relative fair values of the operations disposed off and portion of the cash-generating unit retained.




(g) Assets acquired under lease arrangements Finance lease

Lease of property, plant and equipment acquired under finance lease arrangements which transfer substantially all the risks and rewards of ownership to the Group and the Company are capitalised. Depreciation policy on these assets is similar to that of the Group’s and the Company’s property, plant and equipment depreciation policy.

Outstanding obligation due under finance lease arrangements after deducting finance expenses are

included as liabilities in the financial statements. Finance charges on finance lease arrangements are allocated to profit or loss over the period of respective agreements.

Leasehold land

Leasehold land that normally has an indefinite economic life and the title which is not expected to pass to the Group by the end of the lease term is treated as operating lease. The payments made on entering into or acquiring a leasehold land are accounted for as prepaid land lease payments and are amortised over the lease term of 86 years.

Operating leases

Lease payments for operating leases, where substantially all the risk and benefits remain with lessor, are charged as expenses in the period in which they are incurred.

(h) Impairment of non-financial assets

At each reporting date, the Group and the Company reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment by comparing its carrying amount with its recoverable amount. Recoverable amount is the higher of an asset’s fair value less cost to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identified cash flow (cash generating units).

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 of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a cash-generating unit or groups of cash-generating units are allocated to those units or group of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rate basis.

An impairment loss is recognised as an expense in profit or loss immediately.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses for an asset may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed 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. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.

An impairment loss recognised for goodwill shall not be reversed in a subsequent period.




(i) Financial instruments

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.

Financial assets and financial liabilities are measured initially at fair value plus transactions costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value. Financial assets and financial liabilities are measured subsequently as described below.

Embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

Financial assets

For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition:-

a) loans and receivables;b) financial assets at fair value through profit or loss; c) held to maturity investments; and d) available-for-sale financial assets.

The above category determines subsequent measurement and whether any resulting income and expense is recognised in profit or loss or in other comprehensive income.

All financial assets except for those at fair value through profit or loss are subject to review for impairment at least once at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described below.

A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired or when the financial assets and all substantial risks and rewards are transferred.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date, i.e. the date that the Group and the Company commit to purchase or sell the asset.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. Gains or losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current.




(i) Financial instruments (cont’d) Financial assets (cont’d)

Available-for-sale financial assets

Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss.

Impairment losses on available-for-sale equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For available-for-sale debt investments, impairment losses are subsequently reversed in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss.

Financial liabilities

After the initial recognition, financial liability is classified as financial liability at fair value through profit or loss or other financial liabilities measure at amortised cost using the effective interest method.

A financial liability is derecognised when the obligation under the liability is extinguished, discharged, cancelled or expired, or through amortisation process. 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 amount is recognised in profit or loss.

Financial liabilities at fair 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.

Financial liabilities held for trading include derivatives entered into by the Group and the Company 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 differences.

The Group and the Company have not designated any financial liabilities as at fair value through profit or loss.

Other financial liabilities

The Group’s financial liabilities include borrowings, trade and other payables.

Other financial liabilities are 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 date.




(j) Impairment of financial assets

The Group and the Company assess at each reporting date whether there is any objective evidence indicating that a financial assets is impaired.

Trade and other receivables carried at amortised cost

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the receivables and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio or receivables could include the Group’s and the Company’s past experience or collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

(k) Research and development expenditure

All research costs are recognised in profit or loss as incurred. Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group or the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development. Product development expenditure which do not meet these criteria are expensed off when incurred.

Development costs, considered to have finite useful lives, are stated at cost less any impairment losses and are amortised using the straight-line basis over the commercial lives of the underlying products not exceeding five years. Impairment is assessed whenever there is an indication of impairment and the amortisation period and method are also reviewed at least once at each reporting date.

(l) Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is determined on the weighted average basis and comprises the purchase price and incidental expenses in bringing the inventories to their present location and condition.

The cost of raw materials comprises the cost of purchase. The cost of finished goods comprise costs of raw materials, direct labour, other direct costs and appropriate proportions of manufacturing overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary cost of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(m) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, bank balances, short term demand deposits, bank overdraft and highly liquid investments which are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value.

Bank overdrafts are shown in current liabilities in the statement of financial position. For the purpose of the statement of financial position, cash and cash equivalents restricted to be used to settle a liability of 12 months or more after the reporting date are classified as non-current asset.




(n) Equity, reserves and dividend payments

An equity instrument is any contract that evidences a residual interest in the assets of the Group and of the Company after deducting all of its liabilities. Ordinary shares are equity instruments.

Share capital represents the nominal value of shares that have been issued.

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

The revaluation reserve within equity comprises gains and losses due to the revaluation of property, plant and equipment. Foreign currency translation differences arising on the translation of the Group's foreign entities are included in the exchange translation reserve. Gains and losses on certain financial instruments are included in reserves for available-for-sale financial assets and cash-flow hedges respectively.

Retained earnings include all current and prior period retained profits.

Dividends on redeemable preference shares are recognised as a liability and expressed on an accrual basis. Other dividends are accounted for in shareholder’s equity as an appropriation of retained earnings and recognised as a liability in the period in which they are declared.

All transactions with owners of the parent are recorded separately within equity.

(o) Treasury shares

When issued share of the Company are repurchased, the consideration paid, including directly attributable costs is presented as a change in equity. Repurchased shares that have not been cancelled are classify as treasury shares and presented as a deduction from equity. No gain or loss is recognised in profit or loss on the sale, reissuance or cancellation of treasury shares.

When treasury shares are distributed as share dividends, the cost of the treasury shares is applied in the reduction of the share premium account or distributable reserves, or both.

When treasury shares are reissued by resale, the difference between the sale consideration net of directly attributable costs and the carrying amount of the treasury shares is shown as a movement in equity.

(p) Provisions Provisions are recognised when there is a present obligation, legal or constructive, as a result of a past

event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. Where the effect of the time of money is material, provision are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

(q) Borrowing costs

Borrowing costs are recognised as expenses in profit or loss in the period in which they are incurred. However, borrowing costs incurred to finance the construction of property, plant and equipment are capitalised as part of the cost of those assets during the period of time that is required to complete and prepare the assets for its intended use.




(r) Interest-bearing borrowings

Interest-bearing borrowings are recorded at the amount of proceeds received, net of transaction costs incurred.

(s) Employee benefits

Short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the financial 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 compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into independent entities of funds and will have no legal or constructive obligation to pay further contribution if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years.

Such contributions are recognised as an expense in the profit or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (“EPF”). Some of the Group’s foreign subsidiaries also make contributions to their respective countries’ statutory pension schemes.

(t) Revenue recognition

Sale of goods/ services

Revenue from sale of goods is recognised upon delivery of products and customers’ acceptance, or performance of services, and after eliminating sales within the Group.

Management fee income

Management fees are recognised when the services are rendered.

Rental income

Rental income is recognised when the rent is due.

Dividend income

Dividend income is recognised when the right to receive payment is established.

Interest income

Interest income is recognised in profit or loss as it accrues, taking into account the effective yield on the asset.




(u) Income tax

Current tax

Current tax expense 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 or substantively enacted by the reporting date. Current tax for current and prior periods is recognised as liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax liabilities and assets are provided for under liability method in respect of all temporary differences at reporting date between carrying amount of an asset or liability in the statement of financial position and its tax base including unused tax losses and capital allowances.

Deferred tax assets are recognised only to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised. The carrying amount of a deferred tax asset is reviewed at each reporting date. If it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or that entire deferred tax asset to be utilised, the carrying amount of the deferred tax asset will be reduced accordingly. When it becomes probable that sufficient taxable profit will be available, such reductions will be reversed to the extent of the taxable profit.

Current and deferred tax is recognised as an expense or income in profit or loss, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted by the reporting date.

(v) Segmental results

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified to makes strategic decisions. Additional disclosures on each of these segments are shown in Note 37.

(w) Contingent liabilities/assets

A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only the occurrences or non-occurrence of uncertain future events not wholly within the control of the Group.

Contingent liabilities and assets are not recognised in the statements of financial position of the Group.



4. PROPERTY, PLANT AND EQUIPMENT

GroupFreehold

land BuildingsMotor

vehicles

Computers/ factory/

office furniture

and equipment

Plantand

machinery Renovation TotalRM RM RM RM RM RM RM

CostBalance as at 1

January 2009 672,401 2,331,265 1,442,843 1,731,162 4,844,372 1,165,861 12,187,904Additions - - - 109,507 1,195,764 11,151 1,316,422Addition through

acquisition of subsidiaries - - - 372,765 - 42,965 415,730

Exchange differences - - - (28,263) - (2,756) (31,019)Disposals - - - (8,518) (213,213) (11,417) (233,418)Written off - - - (17,030) - - (17,030)

Balance as at 31 December 2009 672,401 2,331,265 1,442,843 2,159,623 5,826,923 1,205,804 13,638,859

Additions - 67,976 117,103 1,175,422 1,281,274 442,115 3,083,890Exchange differences - - - (36,543) - (2,344) (38,887)Disposals - - (468,866) (29,990) (85,000) (4,876) (588,732)Written off - - - (3,264) - - (3,264)

Balance as at 31 December 2010 672,401 2,399,241 1,091,080 3,265,248 7,023,197 1,640,699 16,091,866

Accumulated depreciation

Balance as at 1 January 2009 - 120,415 837,568 773,133 958,046 208,345 2,897,507

Charge for the year - 46,627 172,851 224,927 526,961 104,877 1,076,243Addition through

acquisition of subsidiaries - - - 332,278 - 22,083 354,361

Exchange differences - - - (28,554) - (1,750) (30,304)Disposals - - - (8,518) (22,416) (4,351) (35,285)Written off - - - (9,509) - - (9,509)

Balance as at 31 December 2009 - 167,042 1,010,419 1,283,757 1,462,591 329,204 4,253,013

Charge for the year - 46,852 168,373 310,108 653,101 129,945 1,308,379Exchange differences - - - (36,757) - (1,819) (38,576)Disposals - - (468,866) (27,037) (16,292) (2,357) (514,552)Written off - - - (1,306) - - (1,306)

Balance as at 31 December 2010 - 213,894 709,926 1,528,765 2,099,400 454,973 5,006,958

Net carrying amount 31 December 2010 672,401 2,185,347 381,154 1,736,483 4,923,797 1,185,726 11,084,908

31 December 2009 672,401 2,164,223 432,424 875,866 4,364,332 876,600 9,385,846



4. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

CompanyOffice

equipment TotalRM RM

Cost

Balance as at 1 January 2009 9611 9611Additions 775 775Disposal (5,400) (5,400)

Balance as at 31 December 2009 4,986 4,986Additions 6,800 6,800

Balance as at 31 December 2010 11,786 11,786

Accumulated depreciation

Balance as at 1 January 2009 3,147 3,147Charge for the year 1,162 1,162Disposal (3,682) (3,682)

Balance as at 31 December 2009 627 627Charge for the year 1,168 1,168

Balance as at 31 December 2010 1,795 1,795

Net carrying amount

31 December 2010 9,991 9,991

31 December 2009 4,359 4,359

(i) Freehold land and building of the Group have been pledged to licensed banks for banking facilities granted to the Group.

(ii) The net carrying amounts of property, plant and equipment under hire purchase arrangements are as follows:-

Group2010 2009

RM RM

Plant and machinery 2,656,443 2,602,907Motor vehicles 312,825 215,204Factory/office furniture and equipment - 171,270



5. PREPAID LAND LEASE PAYMENTS

Group2010 2009

Cost RM RM

At beginning of year 786,529 786,529Additions 203,926 -

At end of year 990,455 786,529

Accumulated amortization

At beginning of year 12,459 3,313Amortisation for the year 9,550 9,146

At end of year 22,009 12,459

Net carrying amount 968,446 774,070

Analysed as:- Long term leasehold land 968,446 774,070

The long term leasehold land is pledged to a licensed bank for banking facilities granted to the Group.

6. INVESTMENT IN SUBSIDIARIES

Company2010 2009

RM RMUnquoted shares, at cost - in Malaysia 25,824,412 21,926,803 - outside Malaysia 10,549,311 12,045,470

36,373,723 33,972,273Less: Impairment loss (58,215) (58,215)

36,315,508 33,914,058

Details of the subsidiaries are as follows:-

Country ofEquity

interestName of company incorporation 2010 2009 Principal activities

% %Grand-Flo Electronic System Sdn. Bhd.

Malaysia 100 100 Supply and installation of Enterprise Data Collection and Collation System and hardware, information technology solutions, computer related accessories, integrating computer system and hardware



6. INVESTMENT IN SUBSIDIARIES (CONT’D)

Details of the subsidiaries are as follows (cont’d):-

Country ofEquity

interestName of company incorporation 2010 2009 Principal activities

% %Grand-Flo Spritvest Sdn. Bhd.

Malaysia 100 100 Provision of information technology solutions specialising in automated data collection processes and mobile computing

Data Centrix Sdn. Bhd. Malaysia 100 100 Research and development of software application

Grand-Flo Systems (S) Pte. Ltd. *

Singapore 100 100 Dormant

Grand-Flo RFID Sdn. Bhd.

Malaysia 100 100 Dormant

Labels Network Sdn. Bhd.

Malaysia 100 55 Investment holding and trading of price marker system, equipment and paper rolls

CL Solutions (China) Limited *

Hong Kong, China

100 100 Investment holding and provision of IT solutions and related services

Subsidiaries of Labels Network Sdn. Bhd.

Kopacklabels Press Sdn. Bhd.

Malaysia 100 100 Adhesive labels and stickers printing

Kopacklabels (PG) Sdn. Bhd. (formerly known as Penkopack Sdn. Bhd.)

Malaysia 80 80 Adhesive labels and stickers printing

Kopacklabels (M) Sdn. Bhd.


Labels4u Automation Sdn. Bhd.


Subsidiaries of CL Solutions (China) Limited

CL Solutions Limited * Hong Kong, China

100 100 Provision of supply chain solutions and related services

Victor Group Limited * Hong Kong, China

100 100 Investment holding

Subsidiary of Victor Group Limited

Guangzhou CL Solutions Limited *

People’s Republic of

China

100 100 Provision of supply chain solutions and related services

* Not audited by SJ Grant Thornton



7. INVESTMENT IN ASSOCIATES

Group Company2010 2009 2010 2009

RM RM RM RM

Quoted shares outside Malaysia, at cost 4,402,288 4,402,288 4,402,288 4,402,288Unquoted shares outside Malaysia, at cost 491,520 491,520 - -

4,893,808 4,893,808 4,402,288 4,402,288Share of post-acquisition reserves 5,668,754 4,469,700 - -

10,562,562 9,363,508 4,402,288 4,402,288

Market value of quoted shares 10,739,453 6,576,688

Details of the associates are as follows:-

Name of companyCountry of

incorporation Equity interest Principal activities2010 2009

% %Simat Technologies Public Co., Ltd.*

Thailand 33.17 36.75 Trading of computer hardware, software, network accessories and computer system development

Through Labels Network Sdn. Bhd.

Simat Label Co., Ltd. * Thailand 20.00 40.00 Adhesive labels and stickers printing

* Not audited by SJ Grant Thornton

The summarised financial information of the associates is as follows:-

2010 2009RM RM

Assets and liabilitiesTotal assets 68,963,958 105,495,768Total liabilities 43,937,308 83,578,196

Results Revenue 116,720,793 57,905,340Net profit for the year 3,397,840 2,325,688



8. OTHER INVESTMENT

Group2010 2009

RM RMGolf club membershipCostAt beginning of year/ end of year 89,986 89,986

Accumulated amortisationAt beginning of year 16,357 14,557Amortisation for the year 1,799 1,800

At end of year 18,156 16,357

Net carrying amount 71,830 73,629

9. DEVELOPMENT COSTS

Group and Company2010 2009

Cost RM RM

At beginning of year 743,276 -Additions 938,592 743,276

At end of year 1,681,868 743,276

Accumulated amortisation

At beginning of year 148,655 -Amortisation for the year 335,474 148,655

At end of year 484,129 148,655

Net carrying amount 1,197,739 594,621

The development costs relate to the expenditure incurred for the development of “Warehouse Management Systems” Solutions and other software products of the Group and of the Company.

10. GOODWILL ON CONSOLIDATION

Group2010 2009

RM RM

At beginning of year 22,214,574 14,366,638Arising from acquisition of subsidiaries 3,133 7,847,936

At end of year 22,217,707 22,214,574

Goodwill arising from acquisition of subsidiaries during the financial year of RM1,504,028 is presented net of the shortfall in the results of the subsidiaries acquired in the previous years of RM1,500,895 (2009: Nil) which was guaranteed by the vendors of the said subsidiaries.



10. GOODWILL ON CONSOLIDATION (CONT’D)

Impairment tests for goodwill

Goodwill has been allocated to the Group’s cash-generating units (“CGU”) identified according to the subsidiaries, as follows:-

Group2010 2009

Subsidiaries RM RM

Grand-Flo Spritvest Sdn. Bhd. and Data Centrix Sdn. Bhd. 10,338,457 10,338,457Labels Network Sdn. Bhd. 4,406,457 2,902,429Kopacklabels Press Sdn. Bhd. 447,154 447,154Kopacklabels (PG) Sdn. Bhd. (formerly known as Penkopack Sdn. Bhd.) 678,598 678,598CL Solutions (China) LimitedCL Solutions Limited

6,301,31845,723

7,802,21345,723

22,217,707 22,214,574

The recoverable amount of the investment in the subsidiaries are based on its value in use and the recoverable amount are higher than the carrying amount of the investment. Thus, there is no impairment loss recognised for the financial year ended 31 December 2010.

Key assumptions used in value-in-use calculations The recoverable amount of CGU is determined based on value-in-use calculations using cash flow projections

based on financial budgets approved by management covering a five years period. Cash flows beyond the five years period are extrapolated using the estimated growth rate stated below. The growth rate does not exceed the average historical growth rate over the long term for the industry. The key assumptions used for value-in-use calculations are:-

Growth rate Gross margin Discount rate2010 2010 2009 2010 2009

% % % % %

Grand-Flo Spritvest Sdn. Bhd. and Data Centrix Sdn. Bhd. 8 21 22 5 5

Labels Network Sdn. Bhd. 8 41 39 5 5

Kopacklabels Press Sdn. Bhd. 8 17 16 5 5

Kopacklabels (PG) Sdn. Bhd. (formerly known as Penkopack Sdn. Bhd.) 8 18 24 5 5

CL Solutions (China) Limited and CL Solutions Limited 5 41 45 5 5

The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:-

(a) Budgeted growth rate

The budgeted growth rate is determined based on the industry trends and past performances of the segments.



10. GOODWILL ON CONSOLIDATION (CONT’D)

Key assumptions used in value-in-use calculations (cont’d)

(b) Budgeted gross margin

The basis used to determine the value assigned to the budgeted gross margin is the average gross margin achieved in the year immediately before the budgeted year increased for expected efficiency improvements.

(c) Discount rate

The discount rate used is pre-tax and reflect specific risks relating to the relevant segments.

The Group believes that any reasonably possible changes in the above key assumptions applied are not likely to materially cause recoverable amount to be lower than its carrying amount.

11. INVENTORIESGroup

2010 2009RM RM

Raw materials 598,439 492,226Finished goods 7,612,879 5,432,493

8,211,318 5,924,719

12. TRADE RECEIVABLESGroup

2010 2009RM RM

Trade receivables 15,499,349 13,872,620Less: Allowance for impairment (89,024) (168,570)

15,410,325 13,704,050

Movement in allowance for impairment losses of trade receivables:-

Group2010 2009

RM RM

Brought forward 168,570 354,151Impairment loss recognised - 18,554Impairment loss reversed (79,546) (204,135)

Carried forward 89,024 168,570

The foreign currency exposure profile of trade receivables are as follows:-

Group2010 2009

RM RM

United States Dollar 315,458 241,532Hong Kong Dollar 1,789,784 2,084,286Singapore Dollar 75,357 -



12. TRADE RECEIVABLES (CONT’D)

The normal trade credit terms granted by the Group ranging from 30 days to 120 days. Other credit terms are assessed and approved on a case-by-case basis.

The ageing analysis of these trade receivables is as follows:-

IndividuallyGross impaired Net

2010 RM RM RM

Not past due 6,665,474 - 6,665,474Past due 0-30 days 5,217,542 - 5,217,542Past due 31-60 days 1,924,163 - 1,924,163Past due 61-90 days 768,415 - 768,415Past due 91-120 days 245,620 - 245,620More than 121 days 678,135 89,024 589,111

15,499,349 89,024 15,410,325

IndividuallyGross impaired Net

2009 RM RM RM

Not past due 5,849,597 - 5,849,595Past due 0-30 days 3,105,877 - 3,105,877Past due 31-60 days 1,890,483 - 1,890,483Past due 61-90 days 1,578,403 - 1,578,403Past due 91-120 days 179,785 - 179,785More than 121 days 1,268,475 168,570 1,099,907

13,872,620 168,570 13,704,050

13. OTHER RECEIVABLES

Group Company2010 2009 2010 2009

RM RM RM RM

Non-trade receivables 14,154 73,255 - -Deposits 279,006 141,492 1,750 1,000Prepayments 228,849 222,699 43,923 20,682

522,009 437,446 45,673 21,682

14. AMOUNT DUE FROM SUBSIDIARIES AND ASSOCIATES

Company2010 2009

RM RMAmount due from subsidiaries- Non-trade 571,516 57,190Amount due to subsidiaries - Trade - (181,467)- Non-trade 6,664,519 4,035,270

6,664,519 3,853,803



14. AMOUNT DUE FROM SUBSIDIARIES AND ASSOCIATES (CONT’D)

Group Company2010 2009 2010 2009

RM RM RM RMAmount due from associates- Non-trade 145,776 218,256 64,614 58,645

The outstanding amounts which are trade in nature have credit terms ranging from 30 to 60 days. The outstanding amounts which are non-trade in nature are unsecured, bear no interest and repayable upon demand.

15. FIXED DEPOSITS WITH LICENSED BANKS

All the fixed deposits of the Group have been pledged to licensed banks as security for banking facilities granted to the Group.

The fixed deposits bear interest rates at 2.1% to 2.3% (2009: 2.1% to 2.3%) per annum.

16. CASH AND BANK BALANCES

The currency exposure profile of the cash and bank balances other than balances denominated in the Company’s functional currency, is as follows (foreign currency balances are unhedged):-

Group

2010 2009RM RM

United States Dollar 67,751 -Singapore Dollar 2,254 9,019Hong Kong Dollar 2,573,964 3,020,063

17. SHARE CAPITAL AND SHARE PREMIUM

Group and CompanyNumber of ordinary shares of

RM0.10 each Amount2010 2009 2010 2009

RM RM

Authorised:-At 1 January 250,000,000 250,000,000 25,000,000 25,000,000Created during the year 250,000,000 - 25,000,000 -

At 31 December 500,000,000 250,000,000 50,000,000 25,000,000



17. SHARE CAPITAL AND SHARE PREMIUM (CONT’D)

Number of ordinary

shares of RM0.10 each AmountShare capital Share capital Share premium Total

RM RM RM

Issued and fully paid:-As at 1 January 2009 124,456,533 12,445,653 8,706,508 21,152,161Ordinary shares issued during the year:-- Pursuant to acquisition of subsidiaries 11,398,176 1,139,817 3,647,416 4,787,233

As at 31 December 2009 135,854,709 13,585,470 12,353,924 25,939,394Ordinary shares issued during the year:-- Pursuant to acquisition of subsidiaries 9,230,769 923,078 2,676,922 3,600,000

As at 31 December 2010 145,085,478 14,508,548 15,030,846 29,539,394

18. TREASURY SHARES

The shareholders of the Company, by an ordinary resolution passed in an annual general meeting held on 25 June 2009, approved the Company’s plan to repurchase its own shares.

During the financial year, the Company repurchased 275,000 of its issued ordinary shares from the open market at an average price of RM0.3676 per share. The total consideration paid for the repurchase including transaction costs was RM100,684. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.

Of the total 145,085,478 issued and fully paid ordinary shares as at 31 December 2010, 299,800 are held as treasury shares by the Company. As at 31 December 2010, the number of outstanding ordinary shares in issue after the setoff is therefore 144,785,678 ordinary shares of RM0.10 each.

19. WARRANT RESERVES

On 22 April 2010, the Company allotted and issued 67,912,455 new Warrants 2010/2015 at an issue price of RM0.02 each on the basis of 1 Warrant 2010/2015 for every 2 existing ordinary shares held in the Company on 30 March 2010 (“Rights Issue of Warrants”). Each Warrant 2010/2015 entitles the registered holder to subscribe for 1 new ordinary share in the Company at any time on or after 22 April 2010 to 21 April 2015, at an exercise price of RM0.25 in accordance with the Deed Poll. Any Warrant 2010/2015 not exercised by the date of maturity will lapse thereafter and cease to be valid for all purposes. All Warrants 2010/2015 were fully exercised during the financial year.

20. OTHER RESERVES

Group2010 2009

Non- distributable:- RM RM

Capital reserve 990,796 990,796Legal reserve 118,655 118,655

1,109,451 1,109,451

Capital reserve represents share dividend received from a foreign associate.

Legal reserve represents net profit of foreign associate set aside.



21. RETAINED EARNINGS

Subject to agreement by the Inland Revenue Board, the Company has sufficient tax exempt credits to frank the payment of dividends out of its entire retained earnings as at 31 December 2010 without incurring additional tax liabilities.

The Malaysian Budget 2008 introduced a single tier company income tax system with effect from year of assessment 2008. The Company does not have any Section 108 tax credit and thus it has automatically moved to the new single tier system.

22. FINANCE LEASE LIABILITIESGroup

2010 2009RM RM

Minimum lease payments - not later than 1 year 934,662 982,111 - later than 1 year but not later than 5 years 959,366 1,081,117

1,894,028 2,063,228Less: Future finance charges (151,252) (157,679)

1,742,776 1,905,549Present value of finance lease liabilities - not later than 1 year 909,723 886,606 - later than 1 year but not later than 5 years 833,053 1,018,943

1,742,776 1,905,549 The Group’s finance lease liabilities interests are charged at rates ranging from 2.3% to 4.4% (2009: 2.3% to

4.4%) per annum.

23. TERM LOANS Group Company

2010 2009 2010 2009RM RM RM RM

SecuredTerm loans 5,060,317 5,404,753 632,458 2,160,982Less: Repayable within the next twelve months (Note 28) (1,522,606) (1,997,542) (632,458) (1,527,431)

Repayable after the next twelve months 3,537,711 3,407,211 - 633,551

Group Company2010 2009 2010 2009

RM RM RM RM

Repayments due:-Not later than 1 year 1,522,606 1,997,542 632,458 1,527,431Later than 1 year but not later than 5 years 3,192,756 2,329,618 - 633,551Later than 5 years 344,955 1,077,593 - -

5,060,317 5,404,753 632,458 2,160,982

The term loans bear interest at rates ranging from 5.2% to 9.0% (2009: 5.2% to 9.0%) per annum for the Group and 6.7% to 7.5% (2009: 6.7%) per annum for the Company.

The term loans are repayable through monthly installment and the security are as disclosed in Note 28 to the financial statements.



24. DEFERRED TAX

Deferred tax liabilitiesGroup

2010 2009RM RM

At beginning of year 321,800 118,800Recognised in profit or loss (Note 31) 130,270 203,000

At end of year 452,070 321,800

Deferred tax liabilities comprise the following:-Carrying amount of qualifying property, plant and equipment in excess of their tax base 529,070 398,800Provisions (4,000) (4,000)Unutilised capital allowances (73,000) (73,000)

452,070 321,800

Deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:-

Group Company2010 2009 2010 2009

RM RM RM RM

Tax base of qualifying property, plant and equipment in excess of their carrying amount (1,286,000) 384,000 - -Pioneer losses (1,936,000) (1,699,000) (1,936,000) (1,699,000)Unabsorbed tax losses (514,000) (2,012,000) (419,000) (206,000)Unutilised capital allowances (59,000) (308,000) (59,000) (39,000)

(3,795,000) (3,635,000) (2,414,000) (1,944,000)

The deductible temporary differences, unabsorbed tax losses and unutilised capital allowances are available indefinitely for offset against future taxable profits of the Company and the subsidiary companies in which those items arose. Deferred tax assets have not been recognised in respect of these items as they may not be used to offset taxable profits of the Company and of other subsidiary companies in the Group and they have arisen in the Company and subsidiary companies that have a recent history of losses.

25. TRADE PAYABLES The normal trade credit terms granted to the Group ranging from 30 days to 120 days.

The foreign currency exposure profile of trade payables of the Group is as follows:-

2010 2009RM RM

United States Dollar 2,311,795 1,843,322Hong Kong Dollar 1,340,077 1,308,521Singapore Dollar - 25,145



26. OTHER PAYABLES

Group Company2010 2009 2010 2009

RM RM RM RM

Non-trade payables 723,134 3,353,789 - 2,687,063Accruals 1,582,348 1,001,474 334,890 152,043Deposits received 638,368 617,076 - -

2,943,850 4,972,339 334,890 2,839,106

In prior year, included in other payables of the Group and of the Company is the balance of purchase consideration for acquisition of subsidiaries amounting to RM2,687,063.

27. AMOUNT DUE TO DIRECTORS

The amount due to Directors are unsecured, bears no interest and are repayable upon demand.

28. BORROWINGS

Group Company2010 2009 2010 2009

RM RM RM RM

Secured: Bankers’ acceptance 7,016,941 6,184,656 - - Bank overdrafts 1,066,995 451,323 - - Term loans (Note 23) 1,522,606 1,997,542 632,458 1,527,431

9,606,542 8,633,521 632,458 1,527,431

The effective annual interest rates at the reporting date for borrowings were as follows:-

2010 2009% %

Bankers’ acceptance 2.25 – 5.50 2.25 – 5.50Bank overdrafts 6.75 – 8.25 6.75 – 8.25

The bank borrowings are secured by way of:-

(a) legal charge over certain property, plant and equipment of the Group;(b) legal charge over leasehold property of the Group;(c) a pledge on the fixed deposits of the Group;(d) joint and several guaranteed by certain Directors of the Group; (e) corporate guarantee of the Company;(f) facilities agreement;(g) memorandum of deposit for pledge of entire paid out ordinary share of certain subsidiary companies;

and(h) dividends attributable to certain subsidiary companies’ shares pledged by way of revocable and

irrevocable Letter of Undertaking.



29. REVENUE

Group Company2010 2009 2010 2009

RM RM RM RM

Dividend income:- associate - - 138,108 248,465- subsidiary - - 550,000 -Sales of goods 67,152,319 45,204,516 968,573 164,843Maintenance income 1,495,024 1,329,282 - -

68,647,343 46,533,798 1,656,681 413,308

Revenue of the Group consists of gross invoiced value of sales of information technology products, adhesive labels and sticker printing and related services rendered, net of discounts and returns.

Revenue of the Company consists of gross invoiced value of sales of information technology products and

related services rendered, net of discounts and returns and dividend income.

30. PROFIT/(LOSS) BEFORE TAX

Profit/(Loss) before tax has been determined after charging/(crediting), amongst others, the following items:-

Group Company2010 2009 2010 2009

RM RM RM RM

Auditors’ remuneration - auditors of the company - other auditors

67,40024,000

63,80022,100

13,650-

12,000-

Amortisation of:- development costs 335,474 148,655 335,474 148,655- prepaid land lease payments 9,550 9,146 - -- other investment 1,799 1,800 - -Bad debts recovered - (9,141) - -Bad debts written off 7,561 129,217 - -Depreciation 1,308,379 1,076,243 1,168 1,162Directors’ remuneration - fees 171,000 154,000 171,000 154,000 - other emoluments 2,110,920 1,514,280 471,020 468,700(Gain)/Loss on disposal of property, plant and equipment (109,342) (153,785) - 1,718Gain on deemed disposal of associate (181,499) (165,680) - -Impairment for doubtful debts - 18,554 - -Impairment for doubtful debts no longer required (79,546) (204,135) - -Impairment for slow moving inventories - 3,275 - -Interest expense- bankers’ acceptance 181,041 98,800 - -- finance lease 120,283 130,092 - -- overdraft 60,505 54,888 - -- term loan 312,330 321,851 92,094 148,986



30. PROFIT/(LOSS) BEFORE TAX (CONT’D)

Profit/(Loss) before tax has been determined after charging/(crediting), amongst others, the following items (cont’d):-

Group Company2010 2009 2010 2009

RM RM RM RM

Interest income (9,561) (13,493) - (3,120)Inventories written off 108,001 46,069 - -Property, plant and equipment written off 1,958 7,521 - -Realised gain on foreign exchange (674,586) (121,637) (121,262) (87,688)Rental expenses 291,124 275,094 - 1,600Rental income (199,300) (182,900) - -Unrealised gain on foreign exchange (211,805) - - -

31. TAX EXPENSE/(INCOME)

Group Company2010 2009 2010 2009

RM RM RM RM

Current year provision- Malaysian income tax 558,546 657,264 13,810 -- Overseas taxation 181,298 187,567 - -Overprovision in prior year (30,062) (273,042) - (273,042)Transferred to deferred taxation (Note 24) 130,270 203,000 - -

840,052 774,789 13,810 (273,042)

Malaysian income tax is calculated at the statutory tax rate of 25% of the estimated assessable profits for the current financial year. Taxation for other jurisdictions is calculated at the tax rates prevailing in the respective jurisdictions.

The current taxation of the Company is in respect of dividend and management fee income. There is no tax charged on business income of the Company as the Company has been granted Multimedia Super Corridor status, which qualifies the Company for the Pioneer Status under the Promotion of Investments Act, 1986. The Company enjoys exemption from income tax on its statutory income from pioneer activities for five years, commencing from 14 May 2004 to 13 May 2009. The Multimedia Super Corridor status of the Company has been extended to 13 May 2014.

Pioneer losses, unabsorbed tax losses and unutilised capital allowances carried forward, subject to the agreement of the Inland Revenue Board are as follows:-

Group Company2010 2009 2010 2009

RM RM RM RM

Pioneer losses (1,936,000) (1,699,000) (1,936,000) (1,699,000)Unabsorbed tax losses (514,000) (2,012,000) (419,000) (206,000)Unutilised capital allowances (59,000) (308,000) (59,000) (39,000)

(2,509,000) (4,019,000) (2,414,000) (1,944,000)



31. TAX EXPENSE/(INCOME) (CONT’D)

A reconciliation of income tax expenses applicable to profit/(loss) before tax at the statutory tax rate to income tax expenses at the effective tax rate of the Group and of the Company are as follows:-

Group Company2010 2009 2010 2009

RM RM RM RM

Profit/(loss) before tax 8,535,464 5,012,650 571,512 (504,921)

Income tax at rate of 25% 2,133,866 1,253,163 142,878 126,230

Tax effect in respect of:-Effect of different tax rates in overseas

subsidiary companies (76,683) (86,280) - -Expenses not deductible for tax

purposes 312,693 516,755 149,534 (147,206)Income not subject to income tax (579,633) (154,443) (395,602) 42,976Deferred tax assets not recognised

during the year 40,000 167,000 117,000 (22,000)Tax saving arising from reinvestment

allowances (136,900) (26,000) - -Pioneer income not subject to tax (823,229) (622,364) - -Overprovision of taxation in prior years (30,062) (273,042) - (273,042)

Total tax expenses 840,052 774,789 13,810 (273,042)

32. EARNINGS PER SHARE

(a) Basic

Basic earnings per share is calculated by dividing profit for the year attributable to owners of the parent with the weighted average number of ordinary shares in issue during the financial year (excluding treasury shares held by the Company).

Group2010 2009

Profit for the financial year attributable to owners of the parent (RM) 7,391,929 3,185,560

Weighted average number of ordinary shares in issue 142,834,690 134,012,264

Basic earnings per share (sen) 5.18 2.38

(b) Diluted

For the purpose of calculating diluted earnings per share, profit for the year attributable to owners of the Parent and weighted average number of ordinary shares in issue during the financial year have been adjusted for dilutive effects of all potential ordinary shares.



32. EARNINGS PER SHARE (CONT’D)

(b) Diluted (cont’d)

Group2010 2009

Profit for the financial year attributable to owners of the parent (RM) 7,391,929 -

Weighted average number of ordinary shares in issueWeighted average number of ordinary shares in issue (basic) 142,834,690 -Effect of conversation of warrants 45,957,196 -

Weighted average number of ordinary shares in issue (diluted) 188,791,886 -

Basic earnings per share (sen) 3.92 -

No diluted earnings per share are calculated for the prior financial year as there are no potential dilutive ordinary shares.

33. EMPLOYEE BENEFITS EXPENSES

Group Company2010 2009 2010 2009

RM RM RM RM

Wages and salaries and allowances 8,410,790 6,288,608 608,462 570,841Social security contributions 62,778 54,396 1,155 1,523Contributions to defined contribution plan 649,923 547,946 22,628 22,435Other benefits 446,994 82,731 8,027 5,998

9,570,485 6,973,681 640,272 600,797

34. ACQUISITION OF SUBSIDIARIES

(i) The fair values of the identifiable assets and liabilities of the acquired subsidiaries as at the date of acquisition were as follows:-

Group

2010 2009RM RM

Property, plant and equipment 2,680,035 61,369Intangible assets 506,588 45,723Investment in associate 41,152 -Inventories 493,642 400,961Receivables 2,643,485 1,756,812Tax recoverable - 128,791Cash and bank balances 446,935 3,364,006Payables (1,310,156) (1,572,618)Borrowings (2,282,877) -Tax payable (144,925) -Deferred taxation (124,110) -



34. ACQUISITION OF SUBSIDIARIES (CONT’D)

Group2010 2009

RM RM

Fair value of net assets 2,949,769 4,185,044Less: Minority interest (106,188) -

Group’s share of net assets 2,843,581 4,185,044Goodwill on acquisition 1,504,028 7,802,213

Total purchase consideration 4,347,609 11,987,257

Less: Purchase consideration settled through issuance of shares (3,600,000) (4,787,233) Other payables (Note 26) - (2,687,063)

Total cash outflow 747,609 4,512,961

Less: Cash and cash equivalents of subsidiaries acquired (446,935) (3,364,006)

Net cash outflow 300,674 1,148,955

(ii) The acquired subsidiaries have contributed the following results to the Group:-

Group2010 2009

RM RM

Revenue 7,388,123 6,771,334

Net profit for the year 799,652 829,864

(iii) Had the acquisition occurred on 1 January 2010, the Group’s revenue for the year would remained at RM68,647,343 (2009: RM47,793,626) and the net profit would have been RM7,784,908 (2009: RM4,235,396).

35. CONTINGENT LIABILITIES

Company2010 2009

RM RMUnsecured:-Guarantees given to financial institutions in respect of facilities granted to

subsidiary companies 7,855,919 7,855,919Guarantees given to a subsidiary company’s supplier in respect of goods

supplied to the subsidiary company 1,182,300 1,182,300

Prior to 1 January 2010, the Company did not provide for corporate guarantees unless it was more likely than not that the guarantees would be called upon. The guarantees were disclosed as contingent liabilities. Following the adoption of FRS 139, the Company did not recognised the unexpired financial guarantees issued by the Company as financial liabilities as the financial guarantees granted are the pre-condition for getting credit facilities by the subsidiaries rather than in exchange for reducing interest rate.



36. SIGNIFICANT RELATED PARTY DISCLOSURE

(a) Significant related party transactions during the financial year were as follows:-Company

2010 2009RM RM

Dividend received from associates 138,108 248,465Dividend received from subsidiaries 550,000 -Management fee charged to subsidiaries 576,000 576,000Sales to subsidiaries 968,573 164,843

(b) The remunerations of Directors during the financial year were as follows:-

Group Company2010 2009 2010 2009

RM RM RM RM

Salaries 2,059,900 1,429,580 420,000 384,000Fees 171,000 154,000 171,000 154,000Allowances 51,020 84,700 51,020 84,700

2,281,920 1,668,280 642,020 622,700

The Group and the Company have no other members of key management personnel apart from the Board of Directors.

37. OPERATING SEGMENT

Business SegmentsEDCCS* Labels Eliminations Total

2010 RM RM RM RM

Revenue Sales to external customers 46,050,433 22,596,910 - 68,647,343Inter-segment sales 7,781,273 4,511,828 (12,293,101) -

Total revenue 53,831,706 27,108,738 (12,293,101) 68,647,343

ResultsInterest income 9,561 - - 9,561Finance cost 426,566 247,593 - 674,159Dividend income 688,108 - (688,108) -Depreciation and amortisation 806,099 849,103 - 1,655,202Share of results of associates 1,240,910 (13,280) - 1,227,630Income tax expense 242,108 597,944 - 840,052Segment profit 4,637,608 2,336,784 721,020 7,695,412

Assets Segment assets 89,387,055 18,017,327 (32,053,134) 75,351,248Tax recoverable 403,451 - - 403,451

Consolidated assets 89,790,506 18,017,327 (32,053,134) 75,754,699

Liabilities Segment liabilities 37,760,057 9,092,510 (21,646,160) 25,206,407Deferred tax liabilities 139,770 312,300 - 452,070Tax payable 208 101,379 - 101,587

Consolidated liabilities 37,900,035 9,506,189 (21,646,160) 25,760,064

* Enterprise Data Collection and Collation System



37. OPERATING SEGMENT (CONT’D)

Business Segments (Cont’d)

EDCCS* Labels Eliminations Total2009 RM RM RM RM

Revenue

Sales to external customers 27,874,215 18,659,583 - 46,533,798Inter-segment sales - 121,668 (121,668) -

Total revenue 27,874,215 18,781,251 (121,668) 46,533,798

ResultsInterest income 13,493 - - 13,493Finance cost 391,630 214,001 - 605,631Dividend income 248,463 - - 248,463Depreciation and amortisation 531,603 704,159 - 1,235,762Share of results of associates 835,418 (159,924) - 675,494Income tax expense (92,211) 867,000 - 774,789Segment profit 1,371,256 2,271,431 595,174 4,237,861

Assets Segment assets 54,720,125 12,897,846 (162,289) 67,455,682Tax recoverable 360,580 1,730 - 362,310

Consolidated assets 55,080,705 12,899,576 (162,289) 67,817,992

Liabilities Segment liabilities 18,208,677 8,121,663 (162,289) 26,168,051Deferred tax liabilities 46,000 275,800 - 321,800Tax payable 52,770 258,973 - 311,743

Consolidated liabilities 18,307,447 8,656,436 (162,289) 26,801,594

* Enterprise Data Collection and Collation System

Geographical Segments

Geographical segments Business activities

Malaysia Mainly consists of supply and installation of Enterprise Data Collection and Collation Systems and hardware, information technology solutions, computer related accessories, integrating computer system and hardware, trading of price marker system, equipment and paper rolls, information technology solutions specialising in automated data collection processes, mobile computing.

Hong Kong and China Mainly consists of provision of supply chain solutions and related services.



37. SEGMENTAL REPORTING (CONT’D)

Geographical Segments (Cont’d)

Revenue

Carrying amount

of segment assets

Capital expenditure

RM RM RM2010

Malaysia * 58,961,202 67,037,787 1,936,987Hong Kong and China 9,686,141 8,709,387 1,146,903Other country - 7,525 -

68,647,343 75,754,699 3,083,890

2009

Malaysia * 39,798,029 60,947,033 1,298,866Hong Kong and China 6,735,769 6,856,555 17,556Other country - 14,404 -

46,533,798 67,817,992 1,316,422

* Company’s home country

Major customers

The Group does not have any revenue from a single external customer which represents 10% or more of the Group’s revenue.

38. FINANCIAL INSTRUMENTS

Risk management objectives and policies

Financial Risks

The Group and the Company is exposed to financial risks arising from their operations and the use of financial instruments. Financial risk management policy is established to ensure that adequate resources are available for the development of the Group’s and the Company’s business whilst managing its credit risk, liquidity risk, foreign currency risk and interest rate risk. The Group and the Company operates within clearly defined policies and procedures that are approved by the Board of Directors to ensure the effectiveness of the risk management process.

The main areas of financial risks faced by the Group and Company and the policy in respect of the major areas of treasury activity are set out as follows:-

(a) Credit risk

Credit risk is the risk of a financial loss to the Group and the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It is the Group’s and the Company’s policy to enter into financial instrument with a diversity of creditworthy counterparties. The Group and the Company does not expect to incur material credit losses of its financial assets or other financial instruments.



38. FINANCIAL INSTRUMENTS (CONT’D)

Risk management objectives and policies (cont’d)

Financial Risks (Cont’d)

(a) Credit risk (cont’d)

It is the Group’s and the Company’s policy that all customers who wish to trade on credit terms is subject to credit verification procedures. The Group and the Company do not offer credit terms without the approval of the head of credit control.

As at the end of the reporting date, the maximum exposure to credit risk arising from receivables is limited to the carrying amounts in the statements of financial position.

With a credit policy in place to ensure the credit risk is monitored on an ongoing basis, management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are stated at their realisable values. A significant portion of these receivables are regular customers that have been transacting with the Group and the Company. The Group and the Company uses aging analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due more than credit terms granted are deemed to have higher credit risk, and are monitored individually.

In respect of trade and other receivables, the Group and the Company is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Trade receivables consist of a large number of customers in various industries and geographical areas. Based on the historical information about customer default rates management consider the credit quality of trade receivables.

(b) Liquidity risk

Liquidity risk is the risk that the Group and the Company will not be able to meet their financial obligations as they fall due to shortage of funds.

In managing its exposures to liquidity risk arises principally from its various payables and bank borrowings, the Group and the Company maintain a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.

The Group and the Company aim at maintaining a balance of sufficient cash and deposits and flexibility in funding by keeping diverse sources of committed and uncommitted credit facilities from various banks.

Liquidity risk analysis

Group Current Non-current

Within 1 year 2 to 5 yearsMore than 5

yearsRM RM RM

31 December 2010Bank borrowings 9,606,542 3,192,756 344,955Finance lease liabilities 909,723 833,053 -

Total 10,516,265 4,025,809 344,955





Financial Risks (Cont’d)

(c) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

To mitigate the Group’s and the Company’s exposure to foreign currency risk, the Group and the Company is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies of Group entities. The currency giving rise to this risk is primarily US Dollar (USD), Hong Kong Dollar (HKD) and Singapore Dollar (SGD).

The Group is also exposed to currency translation risk arising from its net investment in foreign operation in Singapore, Hong Kong and Thailand. The investment not hedged as currency positions in HKD, SGD and Thai Baht is considered to be long-term in nature.

The Group do not practice cash flow hedge and does not enter into forward current contracts to mitigate its exposure to foreign currency risks.

The following table demonstrates the sensitivity of the Group’s profit for the financial year to a reasonably possible change in the USD, HKD and SGD exchange rates against the respective functional currency of the Group and of the Company, with all other variables held constant.

2010Profit for the year Equity

RM RMUSD/RM - Strengthened 0.87% (34,182) (34,182)- Weakened 0.87% 34,182 34,182

HKD/RM - Strengthened 0.88% 34,134 34,134- Weakened 0.88% (34,134) (34,134)

SGD/RM - Strengthened 0.45% 235 235- Weakened 0.45% (235) (235)

Exposures to foreign exchange rates vary during the financial year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group’s and the Company’s exposures to foreign currency risk.

(d) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates.

The Group’s and the Company’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s and the Company’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Short term receivables and payables are not significantly exposed to interest rate risk.





Financial Risks (cont’d)

(d) Interest rate risk (cont’d)

Interest rate sensitivity analysis

At 31 December 2010, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. Other borrowings are at fixed interest rates. The exposure to interest rates for the Group’s short term placement is considered immaterial.

The following table illustrates the sensitivity of profit to a reasonably possible change in interest rates of +/- 50 basis points (“bp”). These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.

Effect on profit for the year+50bp -50bp

RM RMGroup

31 December 2010 (71,993) 71,993

Effect on profit for the year+50bp -50bp

RM RMCompany

31 December 2010 (3,162) 3,162

39. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of short term receivables and payable, cash and cash equivalents and short term borrowings approximate their fair values due to the relatively short term nature of these financial instruments and insignificant impact of discounting.

It was not practicable to estimate the fair value of the Group’s investment in unquoted shares due to the lack of comparable quoted prices in active market. In addition, it is impracticable to use valuation technique to estimate the fair value reliably as a result of significant variability in the inputs of the valuation technique. The Group does not intend to dispose of this investment in the near future and intends to eventually dispose of this investment through sale to capital venture company.



39. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONT’D)

The fair value of other financial assets and liabilities, together with the carrying amounts shown in the statements of financial position, are as follows:-

2010 2009Carrying amount Fair Value

Carrying amount Fair value

RM RM RM RMGroupTerm loans 5,060,317 4,760,441 5,404,753 5,084,454Finance lease liabilities 1,742,776 1,639,510 1,905,549 1,792,638Other borrowings 7,016,941 6,601,074 6,184,656 5,818,116

CompanyTerm loans 632,458 594,976 2,160,982 2,032,910

40. CAPITAL MANAGEMENT

The Group’s objectives when managing capital is to maintain a strong capital base and safeguard the Group’s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business.

There were no changes in the Group’s approach to capital management during the year.

Under the requirement of Bursa Malaysia GN3, the Group is required to maintain a consolidated shareholders’ equity equal to or not less than the 25% of the issued and paid-up capital (excluding treasury shares). The Company has complied with this requirement.

41. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

(a) The Company had entered into an additional shares acquisition with Wan Kok Weng and Chan Pik Khew (collectively referred to hereon as the “Vendors”) to acquire 369,000 ordinary shares of RM1.00 each in Labels Network Sdn Bhd (“LNSB”), a 55% owned subsidiary of the Company, representing the remaining 45% equity interest in LNSB not already held by the Company at a purchase consideration of RM3,600,000.00 to be wholly settled by way of issuance of 9,230,769 new ordinary shares of RM0.10 each in the Company to the Vendors (“Consideration Shares”) at an issue price of RM0.39 per Consideration Share. The acquisition was completed on 31 March 2010;

(b) A renounceable rights issue of up to 67,927,355 five (5) year 2010/2015 warrants (“Warrants”) on the basis of one (1) new Warrant for every two (2) Company’s shares held at an issue price of RM0.02 per Warrant were issued on 22 April 2010 and subsequently quoted on the Bursa Securities on 28 April 2010; and

(c) On 22 April 2010, the Company increased its authorised share capital from RM25,000,000, comprising 250,000,000 shares to RM50,000,000, comprising 500,000,000 shares by creation of additional 250,000,000 shares.



42. DISCLOSURE OF REALISED AND UNREALISED PROFITS

With the purpose of improving transparency, Bursa Malaysia Securities Berhad has on 25 March 2010, and subsequently on 20 December 2010, issued directives which require all listed corporations to disclose the breakdown of unappropriated profits or accumulated losses into realised and unrealised on group and company basis in the annual audited financial statements.

The breakdown of retained earnings as at the reporting date which has been prepared by the Directors in accordance with the directives from Bursa Malaysia Securities Berhad stated above and the Guidance on Special Matter No. 1 – Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants, are as follows:-

Group Company2010 2010

RM RM

Total retained earnings of the Company and its subsidiaries - Realised - Unrealised

24,359,979663,876

3,999,049-

25,023,855 3,999,049

Total share of retained earnings from the associates - Realised 3,998,160 -

29,022,015 3,999,049

Less: Consolidation adjustments (10,803,151) -

Total Group retained earnings as per consolidated financial statements 18,218,864 3,999,049

The above disclosures were approved by the Board of Directors in accordance with a resolution of the Directors on 26 April 2011.


Authorised Capital : RM50,000,000.00Issued And Fully Paid-up Capital : RM14,508,547.80Class of Shares : Ordinary Shares of RM0.10 eachVoting Rights : One vote per share

DISTRIBUTION SCHEDULE OF SHAREHOLDERS

Size of Holdings No. of Holders % No. of Shares *** %

1-99 3 0.31 128 -100-1,000 410 42.22 65,900 0.051,001-10,000 295 30.38 1,783,900 1.2410,001-100,000 190 19.57 7,153,200 4.98100,001-7,183,672 (*) 70 7.21 90,931,524 63.297,183,673 AND ABOVE(**) 3 0.31 43,738,826 30.44

TOTAL: 971 100.000 143,673,478 100.000

* Less than 5% of Issued Shares** 5% and above of Issued Shares*** Excluding a total of 1,412,000 shares bought and retained as treasury shares

ANALYSIS OF SHAREHOLDINGSAS AT 10 MAY 2011


SUBSTANTIAL SHAREHOLDERS’ SHAREHOLDINGS(As per the Register of Substantial Shareholders)

No. of Shares HeldNo. Name of Shareholders Direct Interest %* Indirect Interest %*

1. Grand-Flo Corporation Sdn Bhd 23,559,990 16.40 - -2. Tan Bak Hong 5,398,336 3.76 23,559,990(1) 16.403. Tan Bak Leng 11,480,660 7.99 - -4. Tan Chuan Hock 4,200,000 2.92 4,000,000(2) 2.785. Yap Li Li - - 28,958,326(3) 20.166. CL Solutions Services Limited

(“CLSS”) 11,398,176 7.93 - -7. CL International Holdings Limited

(“CLIHL”) - - 11,398,176(4) 7.938. Leung Fung Shan - - 11,398,176(5) 7.939. Wan Kok Weng 6,115,385 4.26 4,615,384(6) 3.2110. Chan Pik Khew 4,615,384 3.21 6,115,385(7) 4.26

Notes:-(1) Deemed interested by virtue of his interest in Grand-Flo Corporation Sdn Bhd.(2) Deemed interested by virtue of his interest in AI Capital Sdn Bhd.(3) Deemed interested by virtue of her spouse, Mr. Tan Bak Hong’s interest in Grand-Flo and by virtue of her and

Mr. Tan Bak Hong’s interest in Grand-Flo Corporation Sdn Bhd.(4) Deemed interested by virtue of CLIHL’s interest in CLSS.(5) Deemed interested by virtue of her interest in CLSS.(6) Deemed interested by virtue of his spouse, Ms. Chan Pik Khew’s interest in Grand-Flo.(7) Deemed interested by virtue of her spouse, Mr. Wan Kok Weng’s interest in Grand-Flo.

DIRECTORS’ SHAREHOLDINGS(As per the Register of Directors’ Shareholdings)

No. of Shares HeldNo. Name of Directors Direct Interest %* Indirect Interest %*

1. Tan Bak Hong 5,398,336 3.76 23,559,990(1) 16.402. Yap Li Li - - 28,958,326(2) 20.163. Tan Bak Leng 11,480,660 7.99 - -4. Cheng Ping Liong 6,666,667 4.64 - -5. Thongkam Manasilapapan 6,599,900 4.59 - -6. Wan Kok Weng 6,115,385 4.26 4,615,384(3) 3.217. Othman bin Bakri 6,666,666 4.64 - -8. Tan Chuan Hock 4,200,000 2.92 4,000,000(4) 2.789. Chan Pik Khew (Alternate to Wan Kok Weng) 4,615,384 3.21 6,115,385(5) 4.26

Notes:-(1) Deemed interested by virtue of his interest in Grand-Flo Corporation Sdn Bhd.(2) Deemed interested by virtue of her spouse, Mr. Tan Bak Hong’s interest in Grand-Flo and by virtue of her and Mr.

Tan Bak Hong’s interest in Grand-Flo Corporation Sdn Bhd.(3) Deemed interested by virtue of his spouse, Ms. Chan Pik Khew’s interest in Grand-Flo.(4) Deemed interested by virtue of his interest in AI Capital Sdn Bhd.(5) Deemed interested by virtue of her spouse, Mr. Wan Kok Weng’s interest in Grand-Flo.

ANALYSIS OF SHAREHOLDINGSAS AT 10 MAY 2011 (CONT’D)


STATEMENT OF SHAREHOLDINGSTHIRTY LARGEST REGISTERED SHAREHOLDERS AS AT 10 MAY, 2011(Without aggregating securities from different securities accounts belonging to the same person)

No. Name Holdings % *

1. Grand-Flo Corporation Sdn. Bhd. 20,859,990 14.522. Tan Bak Leng 11,480,660 7.993. AIBB Nominees (Asing) Sdn. Bhd.

Sun Hung Kai Investment Services Limited for CL Solutions Services Limited 11,398,176 7.934. Cheng Ping Liong 6,666,667 4.645. Othman Bin Bakri 6,666,666 4.646. Thongkam Manasilapapan 6,599,900 4.597. Wan Kok Weng 6,115,385 4.268. Lim Wee Chai 6,000,000 4.189. Chan Pik Khew 4,615,384 3.2110. Tan Chuan Hock 4,200,000 2.9211. AI Capital Sdn. Bhd. 4,000,000 2.7812. Cartaban Nominees (Tempatan) Sdn. Bhd.

Exempt An for Credit Industriel ET Commercial (AC Client MY R) 3,909,300 2.7213. HSBC Nominees (Asing) Sdn. Bhd.

Exempt An for Credit Suisse (SG BR-TST-ASING) 3,232,000 2.2514. Cimsec Nominees (Tempatan) Sdn. Bhd.

CIMB Bank for Tan Bak Hong (MM0731) 3,165,700 2.2015. Su Bee Leng 3,000,000 2.0916. EB Nominees (Tempatan) Sendirian Berhad

Pledged Securities Account for Grand-Flo Corporation Sdn. Bhd. (SFC) 2,700,000 1.8817. Chuah Chew Hai 2,575,500 1.7918. Tan Check Ee 2,473,314 1.7219. Cimsec Nominees (Tempatan) Sdn. Bhd.

CIMB Bank for Moi Ming Huei (MY0215) 1,900,000 1.3220. HSBC Nominees (Tempatan) Sdn. Bhd.

HSBC (M) Trustee Bhd. For OSK-UOB Small Cap Opportunity Unit Trust (3548) 1,570,100 1.0921. Tan Bak Hong 1,489,636 1.0422. Moi Ming Huei 1,466,858 1.0223. Lee Seng Thye 1,377,300 0.9624. Cimsec Nominees (Tempatan) Sdn. Bhd.

CIMB Bank for Phang Chet Ping (MY 0322) 1,100,000 0.7725. EB Nominees (Tempatan) Sendirian Berhad

Pledged Securities Account for Lim Wee Eng (TMH-SFC) 1,000,000 0.7026. NguYen QuYet Thang 1,000,000 0.7027. Tan Jyh Yaong 1,000,000 0.7028. Yew Ka On 777,800 0.5429. JF Apex Nominees (Tempatan) Sdn. Bhd.

AISB for Tan Bak Hong (STA 3) 743,000 0.5230. Yu Chee Wei 681,000 0.47

* All percentage shareholding computations are based on the issued and paid-up capital less treasury shares account (1,412,000 shares) arising from the share buy back exercise.

ANALYSIS OF SHAREHOLDINGSAS AT 10 MAY 2011 (CONT’D)


Type of Securities : Warrants 2010/2015No. of Warrants Issued : 67,912,455Exercise Price : RM0.25Exercise Period : 22 April 2010 to 21 April 2015

DISTRIBUTION 2010/2015 WARRANTS HOLDINGS

Size of HoldingsNo. of Warrants

2010/2015 Holders %No. of Warrants

2010/2015 %

1-99 5 1.62 187 0.00100-1,000 37 11.97 15,999 0.021,001-10,000 100 32.36 516,850 0.7610,001-100,000 110 35.60 4,350,400 6.41100,001-3,395,621 (*) 55 17.80 47,043,089 69.273,395,622 AND ABOVE(**) 2 0.65 15,985,930 23.54

TOTAL: 309 100.000 67,912,455 100.000

* Less than 5% of Issued Warrants** 5% and above of Issued Warrants

DIRECTORS’ WARRANT HOLDINGSAS AT 10 MAY, 2011

No. of Warrants 2010/2015 HeldNo. Name of Directors Direct Interest % Indirect Interest %

1. Tan Bak Hong 2,417,368 3.56 12,345,600(1) 18.182. Yap Li Li - - 14,762,968(2) 21.743. Tan Bak Leng 4,990,330 7.35 - -4. Cheng Ping Liong 1,764,200 2.59 - -5. Thongkam Manasilapapan 3,049,950 4.49 - -6. Wan Kok Weng 790,700 1.16 - -7. Othman bin Bakri 3,333,333 4.91 - -8. Tan Chuan Hock 2,100,000 3.09 2,000,000(3) 2.949. Chan Pik Khew (Alternate to Wan Kok Weng) - - 790,700(4) 1.16

Notes:-(1) Deemed interested by virtue of his interest in Grand-Flo Corporation Sdn Bhd.(2) Deemed interested by virtue of her spouse, Mr. Tan Bak Hong’s interest in Grand-Flo and by virtue of her and Mr.

Tan Bak Hong’s interest in Grand- Flo Corporation Sdn Bhd.(3) Deemed interested by virtue of his interest in AI Capital Sdn Bhd.(4) Deemed interested by virtue of her spouse, Mr. Wan Kok Weng’s interest in Grand-Flo.

ANALYSIS OF WARRANTHOLDINGSAS AT 10 MAY 2011


THIRTY LARGEST 2010/2015 WARRANTS HOLDERS AS AT 10 MAY 2011(Without aggregating securities from different securities accounts belonging to the same person)

No. Name Holdings %

1. Grand-Flo Corporation Sdn. Bhd. 10,995,600 16.192. Tan Bak Leng 4,990,330 7.353. Chuah Chew Hai 3,389,900 4.994. Othman Bin Bakri 3,333,333 4.915. HSBC Nominees (Tempatan) Sdn. Bhd.

HSBC (M) Trustee Bhd for OSK-UOB Small Cap Opportunity Unit Trust (3548) 3,200,000 4.716. Thongkam Manasilapapan 3,049,950 4.497. Lim Wee Chai 3,000,000 4.428. Tan Chuan Hock 2,100,000 3.099. AI Capital Sdn. Bhd. 2,000,000 2.9410. Cartaban Nominees (Tempatan) Sdn. Bhd.

Exempt An for Credit Industriel ET Commercial (AC Client MY R) 1,954,650 2.8811. Cheng Ping Liong 1,764,200 2.6012. Su Bee Leng 1,500,000 2.2113. EB Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Grand-Flo Corporation Sdn. Bhd. (SFC) 1,350,000 1.9914. Tan Check Ee 1,303,800 1.9215. Cimsec Nominees (Tempatan ) Sdn. Bhd.

CIMB Bank for Tan Bak Hong (MM0731) 1,301,050 1.9216. Yang Siew Wai 1,220,000 1.8017. AIBB Nominees (Asing) Sdn. Bhd.

Sun Hung Kai Investment Services Limited for CL Solutions Services Limited 1,199,088 1.7718. Lim Wee Eng 1,000,000 1.4719. Vibrant Model Sdn. Bhd. 1,000,000 1.4720. Khor Jan Yeow 845,000 1.2421. Wan Kok Weng 790,700 1.1622. HSBC Nominees (Tempatan) Sdn. Bhd.

HSBC (M) Trustee Bhd for OSK-UOB Growth and Income Focus Trust (4892) 786,300 1.1623. Tan Bak Hong 744,818 1.1024. UOBM Nominees (Tempatan) Sdn. Bhd.

UOB-OSK Asset Management Sdn. Bhd. for Uni Aggressive Fund 600,000 0.8825. Cimsec Nominees (Tempatan) Sdn. Bhd.

CIMB Bank for Phang Chet Ping (MY0322) 550,000 0.8126. HSBC Nominees (Tempatan) Sdn. Bhd.

HSBC (M) Trustee Bhd for OSK-UOB Smart Balanced Fund (4694-003) 518,000 0.7627. CIMSEC Nominees (Tempatan) Sdn. Bhd.

CIMB for Tan Tian Meng (PB) 500,000 0.7428. JF Apex Nominees (Tempatan) Sdn. Bhd.

AIBB For Tan Bak Hong (STA 3) 500,000 0.7429. Khor Jan Yeow 500,000 0.7430. Thammanoon Korkiatwanich 500,000 0.74

ANALYSIS OF WARRANTHOLDINGSAS AT 10 MAY 2011 (CONT’D)


LIST OF PROPERTIES

Title/Location Description/Existing Use

Current use

Tenure Age of building (Years)

Land/Built-up

Area

Carrying Value as at 31.12.2010

Date of Acquisition

No.3-1, 3-2, 3-3, 3-4, Block D2 Jalan PJU 1/39Dataran Prima 47301 Petaling Jaya Selangor Darul Ehsan Malaysia

Five storey shop office

Office Freehold 14 years 771 sq m RM1,167,665 8-Dec-04

Lot No.5 Block GBay AvenueBayan BayPenang Malaysia

Three storey shop office

Office, laboratory

and warehouse

Freehold 3 years 363 sq m RM700,144 17-Nov-05

No. 34 Jalan Utama 1/15 Taman Perindustrian Puchong Utama, Sek 147140 Puchong Selangor

Single storey industrial building

Office Leasehold for 99 years/Expires 16

August 2094

15 years 148 sq m RM166,349 10-Dec-08


Single storey factory

Factory Leasehold for 99 years/Expires 16

August 2094

15 years 148 sq m RM141,394 21-Aug-08




August 2094

15 years 148 sq m RM141,394 21-Aug-08




August 2094

15 years 148 sq m RM141,394 21-Aug-08




August 2094

15 years 148 sq m RM141,394 21-Aug-08




August 2094

15 years 148 sq m RM141,394 21-Aug-08




August 2094

15 years 148 sq m RM141,394 21-Aug-08




August 2094

15 years 148 sq m RM271,271 26-Nov-10


NOTICE IS HEREBY GIVEN that the Eighth Annual General Meeting of GRAND-FLO SOLUTION BERHAD will be held at Greens II, Main Wing, First Floor, Jalan Kelab Tropicana, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor Darul Ehsan on Wednesday, 22 June 2011 at 10.30 a.m. to transact the following business:-

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 31 December 2010 together with the Reports of the Directors and Auditors thereon.

Please refer to Note i

2. To declare a final tax exempt dividend of 10% for the financial year ended 31 December 2010.

(Resolution 1)

3. To approve the payment of Directors’ fees for the financial year ended 31 December 2010. (Resolution 2)

4. To re-elect the following Directors who retire in accordance with Article 104 of the Company’s Articles of Association :

i. Mr. Tan Chuan Hock ii. Mr. Yu Chee Sing iii. Mr. Thongkam Manasilapapan iv. Mr. Wan Kok Weng

(Resolution 3)(Resolution 4)(Resolution 5)(Resolution 6)

5. To re-elect Tan Sri Datuk Adzmi bin Abdul Wahab who retires in accordance with Article 110 of the Company’s Articles of Association.

(Resolution 7)

6. To re-appoint Messrs. SJ Grant Thornton as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration.

(Resolution 8)

7.

As Special Business :To consider and if thought fit, pass with or without any modifications, the following resolutions :-

ORDINARY RESOLUTION 1GENERAL AUTHORITY FOR THE DIRECTORS TO ISSUE SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965

“THAT pursuant to Section 132D of the Companies Act, 1965, and subject to the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered to allot and issue shares in the Company from time to time at such price, upon such terms and conditions, for such purposes and to such person or persons whomsoever as the Directors may deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being AND THAT the Directors be and are also empowered to obtain approval from the Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares so issued AND THAT such authority shall continue in force until the conclusion of the next annual general meeting of the Company.”

(Resolution 9)

NOTICE OF ANNUAL GENERAL MEETING


8. ORDINARY RESOLUTION 2PROPOSED RENEWAL OF THE AUTHORITY FOR THE SHARE BUY-BACK SCHEME OF GRAND-FLO SOLUTION BERHAD (“GRAND-FLO” OR “THE COMPANY”) TO PURCHASE ITS OWN ORDINARY SHARES OF UP TO 10% OF THE ISSUED AND PAID-UP ORDINARY SHARE CAPITAL OF GRAND-FLO (“PROPOSED RENEWAL”)

“THAT, subject always to the Companies Act, 1965 (“the Act”), the provisions of the Memorandum and Articles of Association of the Company, the Bursa Malaysia Securities Berhad (“Bursa Securities”) ACE Market Listing Requirements (“ACE LR”) and the approvals of any other relevant governmental and/or regulatory authorities, the Company be and is hereby authorised, to the extent permitted by the law, to buy-back and/or hold such amount of ordinary shares of RM0.10 each in the Company (“Grand-Flo Shares”), as may be determined by the Directors of the Company from time to time, through Bursa Securities upon such terms and conditions for such purposes as the Directors may deem fit and expedient in the interest of the Company provided that:-

i. The aggregate number of Grand-Flo Shares bought-back and/or held as treasury shares does not exceed 10% of the total issued and paid up ordinary share capital of the Company subject to a restriction that the issued and paid up share capital of the Company does not fall below the applicable minimum share capital requirement and the public shareholding spread requirement of the ACE LR;

ii. The maximum funds to be allocated for the share buy-back shall not exceed the aggregate of the retained profits and the share premium account of the Company; and

iii. The Grand-Flo Shares purchased pursuant to the Proposed Renewal are to be treated in any of the following manners:-

a) Cancel the purchased Grand-Flo Shares;

b) Retain the purchased Grand-Flo Shares as treasury shares to be held by the Company; or

c) Retain part of the purchased Grand-Flo Shares as treasury shares to be held by the Company and cancel the remainder;

(Resolution 10)

as prescribed by the Act, rules, regulations and orders made pursuant to the Act and the ACE LR and any other relevant governmental and/or regulatory authorities. The treasury shares may be distributed as dividend to the shareholders and/or resold on the market of Bursa Securities and/or subsequently cancelled;

AND THAT the authority conferred by this resolution shall commence upon the passing of this resolution until:-

i. the conclusion of the next Annual General Meeting (“AGM”) of the Company following the general meeting at which this resolution was passed, unless by an ordinary resolution passed at the meeting, the authority is renewed, either unconditionally or subject to conditions; or

ii. the expiration of the period within which the next AGM after the date it is required by law to be held; or

iii. revoked or varied by ordinary resolution passed by the shareholders of the Company at a general meeting of the Company,

NOTICE OF ANNUAL GENERAL MEETING (CONT’D)


whichever occurs first, but not so as to prejudice the completion of the purchase(s) by the Company of the Grand-Flo Shares before the aforesaid expiry date and made in any event, in accordance with the provisions of the guidelines issued by Bursa Securities and any prevailing laws, rules, regulations, orders, guidelines and requirements issued by any other relevant government and/or regulatory authorities;

AND THAT, the Directors of the Company be and are hereby authorised to take all such steps as are necessary or expedient to implement, finalise, complete or to effect the Proposed Renewal with full powers to assent to any conditions, modifications, resolutions, variations and/or amendments (if any) as may be imposed by the relevant authorities and to do all such acts and things as they may deem fit and expedient in the best interest of the Company to give effect to and to complete the purchase of the Grand-Flo Shares.”

9. SPECIAL RESOLUTIONPROPOSED AMENDMENT TO THE ARTICLES OF ASSOCIATION OF THE COMPANY

“THAT the existing Article 159 of the Articles of Association of the Company be deleted in its entirety and substituted with the new Article 159 as set out below:-

Any dividend, interest or other money payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address of the holder or by direct crediting the dividend entitlements to the bank account of the holder (as provided to the Bursa Depository from time to time) (“eDividend”) who is named on the register of Members or Record of Depositors or to such person and to such address as the holder may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent and the payment of any such cheque or warrant or direct crediting to the holder’s bank account shall operate as a good discharge to the Company in respect of the dividend represented thereby, notwithstanding that it may subsequently appear that the same has been stolen or that the endorsement thereon has been forged or there is discrepancy given by the Member in the details of bank account(s). Every such cheque or warrant shall be sent or direct credited at the risk of the person entitled to the money thereby represented. Where the holders have provided to the Bursa Depository the relevant contact details for the purposes of electronic notifications in connection with eDividend, the Company shall notify them electronically once the Company has paid the cash dividends out of its account.

AND THAT the Directors and the Secretaries of the Company be and hereby authorised to do all acts, things and deeds which are necessary to give effect to the Proposed Amendment to the Articles of Association of the Company.”

(Resolution 11)

10. To transact any other business of which due notice shall have been given in accordance with the Companies Act, 1965.

NOTICE OF ANNUAL GENERAL MEETING(CONT’D)


NOTICE OF DIVIDEND ENTITLEMENT

NOTICE IS ALSO HEREBY GIVEN that a final tax exempt dividend of 10% in respect of the financial year ended 31 December 2010, if approved by the shareholders at the Annual General Meeting of the Company, will be paid on 5 August 2011 to the shareholders whose names appear in the Record of Depositors of the Company at the close of business on 8 July 2011.

A depositor shall qualify for entitlement to the dividend only in respect of :-

i. Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 8 July 2011 in respect of ordinary transfers; and

ii. Shares bought on the Bursa Malaysia Securities Berhad on a cum-entitlement basis according to the Rules of the Bursa Malaysia Securities Berhad.

By order of the Board

TEA SOR HUA (MACS 01324)CHAN BEE FANG (MAICSA 7032385)Company Secretaries

Date : 31 May 2011Petaling Jaya, Selangor

Notes:i. The Agenda No. 1 is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965

does not require a formal approval of shareholders and hence, is not put forward for voting.

ii. A shareholder shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a shareholder appoints two (2) proxies, he shall specify the proportion of his shareholdings to be represented by each proxy.

iii. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company.

iv. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under the seal or under the hand of an officer or attorney duly authorised.

v. The instrument appointing a proxy must be deposited at the Registered Office of the Company at Third Floor, No. 79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.

NOTICE OF ANNUAL GENERAL MEETING (CONT’D)


EXPLANATORY NOTE TO SPECIAL BUSINESS

Ordinary Resolution 1

The Ordinary Resolution 1 proposed under Agenda 7 is primarily to give flexibility to the Board of Directors of the Company to allot and issue shares in the Company of up to and not exceeding 10% of the total issued share capital of the Company for the time being at their absolute discretion without convening a general meeting. This authority unless revoked or varied by the Company at a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company.

As at the date of this notice, no new shares were issued pursuant to the mandate granted to the Directors at the last Annual General Meeting held on 28 June 2010 and it will lapse at the conclusion of the Eighth Annual General Meeting of the Company.

The renewal of the above mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for the purpose of funding investment project(s), working capital and/or settlement of banking facilities.

Ordinary Resolution 2

The Ordinary Resolution 2 proposed under Agenda 8 is to renew the shareholders’ mandate for the share buy-back by the Company. The said proposed renewal of shareholders’ mandate will empower the Directors to buy-back and/or hold up to a maximum of 10% of the Company’s issued and paid-up share capital at any point of time, by utilizing the amount allocated which shall not exceed the total retained profits and/or share premium account of the Company. This authority unless revoked or varied by the Company at a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company, or the expiration of period within which the next Annual General Meeting is required by law to be held, whichever is earlier.

Please refer to the Share Buy Back Statement to Shareholders dated 31 May 2011 for further details.

Special Resolution

The Special Resolution proposed under Agenda 9 is to amend the Articles of Association of the Company to facilitate the implementation of the Electronic Dividend payment (“eDividend”) in line with the amendments to the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad pertaining to the eDividend.

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

1. The Directors standing for re-election at the Eighth Annual General Meeting of the Company are as follows:-

i. Mr. Tan Chuan Hock (Article 104)ii. Mr. Yu Chee Sing (Article 104)iii. Mr. Thongkam Manasilapapan (Article 104)iv. Mr. Wan Kok Weng (Article 104)v. Tan Sri Datuk Adzmi bin Abdul Wahab (Article 110)

Article 104 – At least one-third of the Directors for the time being shall retire from Office provided that all Directors, shall retire from office once at least in every three years but shall be eligible for re-election.

Article 110 – Any Director appointed to fill a casual vacancy or as an addition to the existing Directors shall hold office only until the next following Annual General Meeting and shall then be eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation at that meeting.

2. Details of Directors who are standing for re-election are set out in the Directors’ Profile Section (page 13 to 16 of the Annual Report); while details of their interest in the securities of the Company are set out in the Analysis of Shareholdings – Directors’ Shareholdings and Directors’ Warrantholdings, which appear on page 90 to 94 of this Annual Report.

NOTICE OF ANNUAL GENERAL MEETING(CONT’D)


PROXY FORM

NO. OF SHARES HELD

I/We (full name in capital letters) NRIC No./Company No.

of (full address)

being (a) member(s) of GRAND-FLO SOLUTION BERHAD hereby appoint (full name in capital letters)

NRIC No.

of (full address)

or failing him/her (full name in capital letters)

NRIC No. of (full address)

or failing him/her, the Chairman of the Meeting as my/

our proxy to vote for me/us on my/our behalf at the Eighth Annual General Meeting of the Company to be held at Greens

II, Main Wing, First Floor, Jalan Kelab Tropicana, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor Darul

Ehsan on Wednesday, 22 June 2011 at 10.30 a.m. and at any adjournment thereof.

Please indicate with an “X” in the appropriate spaces how you wish your votes to be cast. If no specific direction as to vote is given, the Proxy will vote or abstain from voting at his/her discretion.

No. Resolutions For Against1. To declare a final tax exempt dividend of 10% for the financial year ended 31 December 2010.2. To approve the payment of Directors’ fees for the financial year ended 31 December 2010.3. To re-elect Mr. Tan Chuan Hock as director who retires pursuant to Article No. 104 of the

Company’s Articles of Association.4. To re-elect Mr. Yu Chee Sing as director who retires pursuant to Article No. 104 of the Company’s

Articles of Association.5. To re-elect Mr. Thongkam Manasilapapan as director who retires pursuant to Article No. 104 of

the Company’s Articles of Association.6. To re-elect Mr. Wan Kok Weng as director who retires pursuant to Article No. 104 of the Company’s

Articles of Association.7. To re-elect Tan Sri Datuk Adzmi bin Abdul Wahab as director who retires pursuant to Article No.

110 of the Company’s Articles of Association.8. To re-appoint Messrs SJ Grant Thornton as Auditors of the Company.9. To approve the authority for Directors to issue shares pursuant to Section 132D of the Companies

Act, 1965.10. To approve the renewal of the authority for the Share buy-back by the Company.11. Proposed Amendment to the Articles of Association of the Company.

Dated this day of 2011

Signature of Member(s)/Common Seal

NOTES:

i. A shareholder shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a shareholder appoints two (2) proxies, he shall specify the proportion of his shareholdings to be represented by each proxy.

ii. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company.

iii. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under the seal or under the hand of an officer or attorney duly authorised.

iv. The instrument appointing a proxy must be deposited at the Registered Office of the Company at Third Floor, No. 79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.

(Incorporated in Malaysia)

THE COMPANY SECRETARY

Grand-Flo Solution Berhad (607392-W)

Third Floor, No 79 (Room A)Jalan SS 21/60Damansara Utama47400 Petaling JayaSelangor Darul Ehsan

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Documents

· 5/31/2011 · ANNUAL REPORT 2010 | 1 Audit Committee Cheong Kee Yoong (Chairman) Yu Chee Sing Tan Chuan Hock Yek Deiw See Nomination Committee …