k-one technology berhad as an engineer, manager and finally chief executive officer of tfp precision...

AN

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EPORT 2011

K-O

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D (539757-K

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K-One Technology Berhad (539757-K)

66 & 68, Jalan SS22/21, Damansara Jaya, 47400 Petaling Jaya, Selangor, Malaysia Tel: +603 7728 1111 Fax: +603 7728 6212 Website: www.k-one.com.my

ANNUAL REPORT 2011

Years of Innovations and Achievements

K-One Technology Berhad(539757-K)

Cover RationaleJust as technology evolves through time, K-One adapts to change by navigating through the winds of innovation to create innovative products to make daily living more comfortable.

K-One pursues boundless imagination, constantly exploring possibilities, while retaining depth of experience and expertise in pushing the technology envelope.

K-One’s charter is to bring the future frontier for today’s application.

Past Financial Information Summary

1

Corporate Information 2

Corporate Structure 3

Directors’ Profile 4

Group Executive Chairman’s Statement 6

Group CEO’s Operations Review 8

Corporate Social Responsibility (CSR) 10

Statement on Corporate Governance 12

Statement of Internal Control 16

Audit Committee Report 17

Other Information 21

Financial Statements 22

List of Properties 77

Analysis of Shareholdings 78

Analysis of Warrant Holdings 80

Notice of Eleventh Annual General Meeting

82

Statement Accompanying Notice of Eleventh Annual General Meeting

83

Appendix I 84

Form of Proxy

Contents

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2007 2008 2009 2010 2011

2007 2008 2009 2010 2011

2007 2008 2009 2010 2011

2007 2008 2009 2010 2011

2007 2008 2009 2010 2011

2007 2008 2009 2010 2011

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395

SALESRM’MIL

TOTAL ASSETSRM’MIL

EARNINGS PER SHARE (DILUTED)SEN

PROFITRM’MIL

SHAREHOLDER EQUITYRM’MIL

HUMAN RESOURCESNO. OF EMPLOYEES

1ANNUAL REPORT 2011

PAST FINANCIAL INFORMATION SUMMARY

BOARD OF DIRECTORS

Ir. Edwin Lim Beng FookGroup Executive Chairman

Martin Lim Soon SengGroup Chief Executive Officer

Bjørn BråtenNon-Independent Non-Executive Director

Goh Chong ChuangIndependent Non-Executive Director

Loi Kim FahIndependent Non-Executive Director

COMPANY SECRETARY

Ng Yim Kong (LS 0009297)

AUDITORS

Messrs Hasnan THL Wong & Partners Chartered Accountants

SOLICITORS

Messrs Azman Davidson & Co Advocates & Solicitors

SHARE REGISTRAR

Symphony Share Registrars Sdn Bhd Level 6, Symphony House Block D13, Pusat Dagangan Dana 1 Jalan PJU 1A/46 47301 Petaling Jaya Selangor Darul Ehsan Tel: +603 7841 8000 Fax: +603 7841 8008

STOCK ExCHANGE LISTING

ACE Market of Bursa Malaysia Securities Berhad (Listed since 5 January 2006)

STOCK SHORT NAME & CODE

K1 (0111)

REGISTERED OFFICE

Unit 07-02, Level 7, Persoft Tower 6B Persiaran Tropicana 47410 Petaling Jaya Selangor Darul Ehsan Tel: +603 7804 5929 Fax: +603 7805 2559

HEAD OFFICE

66 & 68, Jalan SS22/21 Damansara Jaya 47400 Petaling Jaya Selangor Darul Ehsan Tel: +603 7728 1111 Fax: +603 7728 6212

GROUP PRINCIPAL BANKERS

HSBC Bank Malaysia Berhad

United Overseas Bank (Malaysia) Berhad

CIMB Bank Berhad

WEBSITE

www.k-one.com.my

2K-ONE TECHNOLOGY BERHAD

CORPORATE INFORMATION

The above are K-One Technology Berhad’s group of companies herein referred to as the “K-One Group” or the “Group”.

K-One Technology (Korea) Corporation 100%

K-One Electronics Sdn Bhd (formerly known as Syslink Sdn Bhd 100%

K-One International Ltd

100%

China Representative

Office

BIG’ant (M) Sdn Bhd 55%

BIG’ant (Australia) Pty Ltd 100%

K-ONE TECHNOLOGY

BERHAD

K-One Systems Sdn Bhd

100%

K-One Resources

Sdn Bhd 100%

EMB Technology

Sdn Bhd 100%

K-One Industry Sdn Bhd 100%

K-One Manufacturing

Sdn Bhd 100%

3ANNUAL REPORT 2011

CORPORATE STRUCTURE


Ir. Edwin Lim Beng Fook co-founded K-One Technology Berhad in 2001. He was appointed as an Executive Director on 20 February 2001 and has been the Group Executive Chairman since its inception in 2001.

He holds a Bachelor of Science (Hons) in Engineering with Business Studies from Sheffield Hallam University, United Kingdom and a Master of Science

in Mechanical Engineering from the University of Alberta, Canada. He is a professional engineer registered with the Board of Engineers, Malaysia and a corporate member of the Institution of Engineers, Malaysia. He is also a Chartered Engineer registered with the Institution of Engineering & Technology, United Kingdom.

He is a member of the Employees’ Share Option Scheme Committee and Remuneration Committee.

Ir. Edwin Lim Beng Fook was awarded the Entrepreneur of the Year Award by the Malaysia-Canada Business Council in 2004 and the Alumni Award of Excellence by the University of Alberta in 2005. He was also a top nominee in both the Emerging and Technology Entrepreneur categories in the Ernst & Young Entrepreneur of the Year Awards 2005 and 2006 respectively.

His career spanned almost 20 years with three multinationals, namely; Mobil Oil (Malaysia) Sdn Bhd, Renold (Malaysia) Sdn Bhd and AMP Products (Malaysia) Sdn Bhd (now known as Tyco Electronics). His global experience in the electronics industry started when he was engaged to lead AMP as its Country General Manager in 1992, building up the Malaysian operation from a sales outfit of RM20 million sales turnover in 1992 to RM250 million sales turnover in 1999, on top of which established from greenfield AMP’s manufacturing facility and Research & Development Centre in 1995. In addition to his Country General Manager’s role, he also held the dual role of being the Director, Automotive Industry responsible for the ASEAN region for a period of two years for which he was responsible for approximately RM150 million sales turnover.

His directorships in other companies in the K-One Group are EMB Technology Sdn Bhd, K-One Industry Sdn Bhd, BIG’ant (M) Sdn Bhd, K-One Resources Sdn Bhd, K-One Manufacturing Sdn Bhd, K-One Electronics Sdn Bhd, K-One Systems Sdn Bhd, BIG’ant (Australia) Pty Ltd and K-One Technology (Korea) Corporation.

Martin Lim Soon Seng was appointed as the Group Chief Executive Officer in December 2001and Executive Director of K-One Technology Berhad on 29 July 2002.

He holds both the Bachelor of Engineering (Hons) in Electronics Engineering and Master of Engineering in Electronics Engineering from the University

of Hull, United Kingdom. He also holds a Master of Business Administration from the University of Coventry, United Kingdom. He is a registered Chartered Engineer of the Institution of Engineering & Technology, United Kingdom.

He is a member of the Employees’ Share Option Scheme Committee.

He worked in the UK as an engineer in a precision plastic moulding company after graduation, followed by career progression as an engineer, manager and finally Chief Executive Officer of TFP Precision Industries Sdn Bhd (a local/European joint venture) spanning a period of about 14 years. He is adept with electro-mechanical product design, development and manufacturing of Bluetooth devices, RFID devices, mobile phone accessories, audio and imaging products. He has extensive business development experience in Europe and the US.

His directorships in other companies in the K-One Group are EMB Technology Sdn Bhd, K-One Industry Sdn Bhd, K-One Resources Sdn Bhd, K-One Manufacturing Sdn Bhd, K-One Systems Sdn Bhd, K-One Electronics Sdn Bhd, K-One International Ltd and K-One Technology (Korea) Corporation.

DIRECTORS’ PROFILE

Ir. EdwIn LIm BEng Fook

Group Executive Chairman Malaysian, Age 54

Martin LiM Soon Seng

Group Chief Executive Officer Malaysian, Age 49

5ANNUAL REPORT 2011

Bjørn Bråten co-founded K-One Technology Berhad in 2001 and was appointed as an Executive Director on 20 February 2001. He became a Non-Independent Non-Executive Director on 19 December 2008.

He has a Diploma in Engineering from the Telecom College, Norway and Bachelor of Economics and Master in Management from the Norwegian School of Management, Norway.

He is a member of the Audit Committee and Nomination Committee.

He has been involved in the global communications business for more than 20 years and has served in a variety of leadership roles including Director of Marketing, Vice President and President/CEO for various international companies. He has worked closely with senior executives on projects worldwide including establishing greenfield and joint venture operations globally.

His directorship in other companies in the K-One Group is K-One Industry Sdn Bhd.

Goh Chong Chuang was appointed as an Independent Non-Executive Director of K-One Technology Berhad on 3 February 2005.

He holds a Certificate in Electrical Engineering from City & Guild of London, United Kingdom, Certificate in Mechanical Engineering from Collier MacMillan School, Australia and Certificate Advance Manufacturing Co-Ordinator from Sanno Institute of Business Administration, Japan.

He is the Chairman of the Nomination and Remuneration Committees respectively and a member of the Audit Committee.

He started his career with Naito Electronics (M) Sdn Bhd, a Japanese semiconductor assembly plant in 1974. He had proven himself to be assigned to key positions as the Manufacturing Superintendent, Production Manager and finally Engineering Manager over 14 years tenure until 1988. He then joined Alps Electric (Malaysia) Sdn Bhd, a Japanese multinational where he assumed the positions of Product Manager, Plant Manager, Deputy General Manager, Executive Director and finally Advisor over a period of 12 years until 2000, thereafter venturing out as an entrepreneur. He was the Chairman of the Federation of Malaysian Manufacturers (FMM) Negeri Sembilan branch, a position he held from 1998 to 2006.

Loi Kim Fah was appointed as an Independent Non-Executive Director of K-One Technology Berhad on 3 February 2005.

He holds a Bachelor of Accounting from the University of Malaya. He is a member of the Malaysian Institute of Certified Public Accountants, Malaysian Institute of Accountants and the Malaysian Institute of Taxation respectively. He is currently the principal of Loi & Co, an audit firm.

He is the Chairman of the Audit Committee and a member of the Remuneration and Nomination Committees respectively.

He has been in public practice since 1991 with initial engagements with international accounting firms prior to starting his own practice in 1996. Over the years, he has been involved in the audit of companies in various industries which include securities, banking, finance, construction, aquaculture and manufacturing. He has also been engaged in business advisory assignments in the like of merger and acquisition, internal control review, accounting system consultation, feasibility study, listing exercise and business planning.

He is also currently an Independent Non-Executive Director of Yong Tai Berhad.

Goh ChonG ChuanG

Independent Non-Executive Director Malaysian, Age 59

Loi Kim Fah

Independent Non-Executive Director Malaysian, Age 45

Bjørn Bråten

Non-Independent Non-Executive Director Norwegian, Age 54

None of the Directors, except Ir. Edwin Lim Beng Fook and Martin Lim Soon Seng who are brothers, has any family relationship with any Director and/or major shareholder of the Company and has no conflict of interest with the Company. None of the Directors had any convictions for offences within the past 10 years, except for traffic offences.

BUSINESS PERFORMANCE FOR 2011

Sales revenue in financial year 2011 grew by a marginal 3% to RM137.3 million as compared to RM132.8 million in the previous financial year. Sales growth was dragged down by a weak US economy, the Euro Zone economic crisis, the Tsunami which swept Japan in March 2011 resulting in component shortages and the floods in Thailand at the end of the year which crippled the manufacturing hub in the vicinity of Bangkok.

The Group for the first time in its history incurred loss attributable to equity holders of the parent company of RM12.2 million for financial year 2011 as compared

to a profit attributable to equity holders of the parent company of RM8.0 million in the previous financial year. The poor profitability performance was attributed mainly to inventory write-down of slow moving and obsolete inventories for specific projects and inventory re-valuation of the GPS to reflect current market prices. Furthermore, selling price pressure caused by more intense competition due to a gloomy global economy adversely affected profit margins of our ODM (original design manufacturer) and OEM (original equipment manufacturer) businesses. The volatile commodity prices and foreign exchange fluctuations also put additional pressure on profit margins.

On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements

of K-One Technology Berhad for the financial year ended 31 December 2011.


GROUP ExECUTIvE CHAIRMAN’S STATEMENT

PROSPECTIvE BUSINESS OUTLOOK

We expect 2012 to be another challenging year as the US economy is expected to remain weak and unstable, the Euro Zone economic crisis is anticipated to prolong and China, the second largest economy in the world is anticipated to be sluggish.

Notwithstanding this uncertain global economic backdrop, we have nevertheless adopted a strategy to defend and grow our sales. We expect significant sales growth in 2012. Our business strategy is two prong. The first is to retain existing customers through enhanced customer services, competitive pricing and developing more innovative products to cater to their needs. The second, includes, not only to embark actively in

expanding our customer base in our usual radar coverage of mobile phone accessories, computer peripherals and consumer technology product markets but also seeking out new customers in the automotive and healthcare/ medical markets which tend to have longer product life cycles and premium profit margins. In this respect, we have strengthened our business development team by the hiring of experienced staff with extensive sales network since the 2nd half of 2011. Therefore, we expect sales revenue to escalate as 2012 unfolds, culminating towards year end as new customers are put in place.

With the long running products phasing out and new products being streamed for manufacturing following the design and development stages, profit is expected to improve as we move forward in 2012. With sales anticipated to be back on track to high double digit growth, the Group is expected to benefit from economies of scale in the long term, although it may seem to compromise on profit margin in the short term.

We will continue to implement cost reduction programs to improve profitability. At the same time, it will take appropriate measures to mitigate all types of risks arising from such an uncertain and weak global business environment.

ACKNOWLEDGEMENT

On behalf of the Board, I would like to express my deepest appreciation to all our customers, business associates, financiers and shareholders for their continued support and confidence in the Group. I also wish to express my sincere appreciation to the Management and staff for their dedication and contribution in 2011.

Ir. Edwin Lim Beng FookGroup Executive Chairman

7ANNUAL REPORT 2011

SALES & FINANCIALS

The Group achieved sales revenue of RM137.3 million in 2011, representing a marginal increase of 3% over last year’s sales of RM132.8 million. Although starting off with optimism in the beginning of 2011, the Group’s business encountered strong headwinds as 2011 unfolded. The US economy was weak while Europe was plagued with the Euro Zone economic crisis throughout the year. To make matters worse, Japan was hit with the Tsunami, causing major disruption in the electronics supply chain at the beginning of the year and unforeseen, Thailand was caught in one of the worst floods in Bangkok, resulting in the paralysis of its manufacturing hub. These natural disasters which initially were thought to have minimum adverse impact on our business turned out to be worse than expected. In conclusion, the gloomy US economy, the Euro Zone crisis and the natural calamities curtailed our sales growth in 2011.

From the financial aspect, the Group ended the year with loss attributable to owners of the parent company amounting to RM12.2 million as compared to profit attributable to owners of the parent company of RM8.0 million in the previous year. The loss was mainly due to inventory write-down of slow moving and obsolete inventories for specific projects and inventory re-valuation write-down for GPS to reflect current market prices amounting to a total of RM10.6 million.

The write-down was necessary in view of specific long-running products being phased-out by customer to pave way for newer products to match their re-alignment of business focus on high end devices and smart phones respectively, which were expected to have better market response. Additionally, the shrinking global electronics market posed stiffer competition, resulting in selling price pressure and profit margin compromise. The volatile commodity prices and foreign currency fluctuations contributed to a double whammy effect on profit margins.

DESIGN & DEvELOPMENT

In the course of the year, the Group developed a few new mobile phone accessories for bundling with handsets which were successfully launched by our customer.

Much efforts were also expended in the development of new network cameras, new electronics sports headlamps, new USB cable variants and other new accessories.

The Group also continuously worked on improving existing products for manufacturing efficiency or to make them more appealing to customers.

MANUFACTURING

After months of discussion and preparation, we joined hands with one of our key customers to introduce lean manufacturing in our Ipoh factories in 2011. Lean manufacturing is not a cost reduction program but a discipline that seeks to bring to the customer the most value by simplifying the assembly process and eliminating waste. Through the use of less human effort, less space, less capital and less time, increased efficiency and flexibility are made possible, which allow for not just faster response to changing customer demands but also greater variety and quality in products.

We certainly benefitted from the lean manufacturing implementation and look forward to encouraging our strategic suppliers to adopt it for our mutual benefits in the near future.

I would like to take this opportunity to report the key aspects and performance of our operations for the financial year ended

31 December 2011.


GROUP CEO’S OPERATIONS REvIEW

It is with regret that one of our secondary factories located at Kawasan Perindustrian Silibin, Ipoh was gutted by fire on 10 April, 2012. It was fortunate that no one was injured. Jabatan Bomba dan Penyelamat Malaysia confirmed in its report that the source and cause of the fire was due to an electrical fault i.e. arcing on trunking wire and it was accidental. The last count of the total estimated damages without prejudice, inclusive of raw materials, work-in-progress, finished goods, machineries, equipment, renovations, fittings, etc were approximately RM10 million. These damages were fully mitigated by fire insurance coverage and the claim process is in progress. Recovery plans were put in place in the main factory for replacement production of finished goods damaged by the blaze. Spare capacity is available to cope with the replacement production, on top of meeting the existing orders in the medium term until a replacement factory is streamed for operation. If necessary, additional shifts, including running on 24 hours could be effected to cope with the or any additional demands. Affected customers had been advised and they were satisfied with our recovery plans. The relevant suppliers were also activated and they were co-operative to produce parts or sub-assemblies to replace those damaged by the fire incident.

HUMAN RESOURCES

As always, we believe our staff is one of our most important assets. In anticipation of the setting up of a Design & Development (D&D) Centre in China, we brought in the new hires from China for familiarization and training at our main D&D Centre in Petaling Jaya (PJ), Malaysia. They are currently undergoing a minimum of 6 months training before being seconded back to China as our

pioneer team of D&D engineers who would work in conjunction with our PJ team to pitch for new business with multinationals based in China and other parts of the world.

Our staff were treated to a gala dinner to celebrate our 10th Year Anniversary towards the end of 2011. At the same time, we took the opportunity to honour long service staff of more than 5 and 10 years respectively which were more than a handful. We were indeed proud that there are so many long service staff in our Group.

CORPORATE DEvELOPMENT

On 17 February 2011, the proposed Bonus Issue enlarging the issued and paid-up share capital of K-One Technology Berhad to RM34,185,900 on the back of 341,859,000 shares was completed. The respective Bonus Shares were credited to the entitled shareholders’ accounts on 22 February 2011. At the same time, 40,824,000 Additional Warrants arising from the adjustment to the 20,412,000 outstanding warrants were also listed and credited to the entitled shareholders’ accounts respectively.

On 21 December 2011, the Group announced its proposed implementation of private placement of up to ten (10) per cent of the total issued and paid-up share capital of K-One Technology Berhad to independent third party investors. The main objectives of the proposed private placement exercise were to reduce its outstanding trade facilities, upgrading and expansion of production and development facilities and to raise additional working capital to finance business growth. Bursa Securities approved the listing of and quotation for up to 40,545,800 K-One Technology Berhad’s private placement shares on 9 January 2012.

The price was fixed at RM0.21 and the Group managed to raise approximately RM6.9 million from the private placement exercise with additional shares of 32,689,200 listed and quoted on 2 May, 2012. Consequently, the enlarged issued share capital of K-One Technology Berhad stands at 374,548,200 shares.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Various CSR programs were launched to foster community and neighborhood care. The Group’s CSR initiatives are illustrated in more detail in our Corporate Social Responsibility (CSR) chapter.

ACKNOWLEDGEMENT

I am pleased to note that the Group has reached its 10th year milestone. It has been a good 10 years filled with achievements and innovations, interspersed with challenges and disappointments. Overall, we are pleased to have gone through the first 10 years with more triumphs than defeats. We have grown wiser and stronger to weather the next 10 years which we hope to achieve more notable milestones and attain greater heights.

On behalf of the Board of Directors, I would like to express our appreciation to the Management, staff, valued customers, vendors, business partners and shareholders for their trust, support and working together with us in such a challenging year – 2011.

Martin Lim Soon SengGroup CEO

9ANNUAL REPORT 2011

The K-One Group’s commitment towards Corporate Social Responsibility (CSR) has been upheld through a series of initiatives as outlined in due course. Since day one of our inception, CSR has always been a significant element of the Group’s corporate culture. The Group believes that CSR holds a wider meaning besides charity. Hence, it is committed to upholding its philosophy that CSR requires integrating economics, environmental and social considerations into its management system, business culture and core values.

The year – 2011 saw a very challenging year with a series of global financial crisis and natural disasters which has in one way or another left an economic impact on companies around the world. Nevertheless, we had still tried our very best to do our part in giving back to society.

CARING FOR THE ENvIRONMENT

The Group’s Environment Policy states that it will design, develop, manufacture and market products that are safe for their intended use and do not adversely affect the environment, to dispose waste in a safe and responsible manner and to comply to ISO 14001 standards. The Group has been ISO 14001 certified since 2008. The Group would stay committed in reducing adverse environmental impact and to operate ethically in accordance to this policy at all times.

In fact, the Group’s long term business dealings with its major European customers who religiously practise green technology are great testimonials of our excellent commitment to environmental preservation all these years.

CARING FOR OUR CUSTOMERS

We believe that our customers should be a key focus of all our endeavours. In this regards, we are always looking into ways to improving our service and products we design and manufacture for them.

The Group is committed to provide exceptional customer service at all times. In order to achieve this, we take serious consideration of their feedbacks, concerns and needs by maintaining close interaction at all times. Only through this, would we able to align with our customers’ needs and to provide crucial business value-add to them. We firmly believe in building trust with our customers for long term partnerships.

CARING FOR THE COMMUNITY

As with previous years, the Group continued with its long-term efforts in providing industrial training programs to undergraduates from universities and polytechnics in the country as well as overseas. These undergraduates were provided with on-the-job training and formal coaching. This is an on-going program which the Group would undertake on a long term basis as part of its initiative to build high calibre graduates to meet the human resource needs in the country.

The Group continued to provide opportunities to the physically disabled by employing them in suitable positions, with equal opportunities in terms of career advancement, skill training and performance rewards. This is also another on-going CSR initiative which the Group has been practising for many years in its effort to help the unfortunates to stand on their own two feet.

As part of its effort to contribute to the neighbourhood community, the Group has in September 2011 organised a Mid-Autumn festival celebration for children from the Salvation Army Children Home in Ipoh, Perak. It was an event spearheaded by the staff. The children were treated to a feast, goodies, moon cakes, lanterns as well as a series of games were organised for them. Prizes were given away to winning teams as the highlight of the evening. It was all laughter

for the children at the end of the evening. For the staff, certainly a sense of fulfilment to be able to share the special once a year festive celebration with the children.

The year – 2011 also marked our second year of collaboration with the police officers from the Ipoh District Head Quarters and affiliate police stations whereby we provided the conference room at our Ipoh factory for the senior police officers to hold one of their monthly meetings. This is part of the Group’s attempts to maintain close relations and foster mutual understanding with the local government authorities.


CORPORATE SOCIAL RESPONSIBILITY (CSR)

CARING FOR OUR STAFF

We recognise the significant value of our staff. Hence, a very key priority is to provide our staff with a safe and conducive working environment, particularly at our manufacturing plants. The Management adhered uncompromisingly to industrial health and safety measures, besides, always looking into ways to improve them from time to time.

The Group encourages social interaction amongst staff to promote teamwork. Through the K-One Club, staff within the Group could interact with one another in a more relaxed manner such as participating in sports, recreational and social activities. This is part of the Group’s effort in creating a positive work place for the staff.

In terms of staff development, we encourage them to freely develop their abilities and potential by playing significant roles in their fields of expertise. We strongly encourage and value innovative thinking. We strive to build leaders at every level of the organisation. Staff are encouraged to play a major role in ensuring that the Group continues to remain progressive.

In 2011, the Group celebrated its 10th year anniversary with a Gala Dinner to mark this major milestone. It was a way for us to thank everybody for their hard work, commitment and contributions to the Group all these years. The Gala Dinner was attended by the Board of Directors, management and staff, as well as business associates comprising of our valued customers, business partners, bankers, suppliers and invited guests.

The Gala Dinner started off with two lions from the Perak Wushu Association making their appearance at the grand opening followed by a great performance of terrific stunts. It was a colourful event with lots of fun, entertainment, dances, lucky draw prizes and a cake cutting ceremony to mark the 10th year anniversary. The highlight of the evening was the presentation of awards to long-service staff. The Group is delighted to be able to present these meaningful awards to quite a handful of staff who have been with us since the early years of our establishment.

At the end of the evening, as we reminisced through all these years, it was indeed a significant moment to be remembered and certainly an evening cherished by all the attendees. One decade on, the Group has indeed come a long way.

11ANNUAL REPORT 2011

K-One Technology Berhad was listed on the ACE Market of Bursa Malaysia Securities Berhad on 5 January 2006. Being a listed company, the Board of Directors (“the Board”) acknowledges the importance of adopting high standards of corporate governance within the Group as set out in the Revised Code on Corporate Governance (“the Code”) and strives to maintain the management of the Group with integrity, transparency and accountability. The Board emphasizes sound internal control and prudent management to safeguard and enhance shareholders’ investment and value as well as to protect the interest of minority shareholders.

PRINCIPLE STATEMENT

The following statement sets out how the Company will adopt the principle of self-regulation, which adheres closely to the Code.

A. Board of Directors

i. The Board

The Company is led by an experienced Board, with high personal integrity, wide mix of knowledge, business acumen, management skills and industry expertise from various backgrounds, which is an invaluable asset for the stewardship of the Company’s direction and operation.

The Board adopts best practices approach as set out in “Best Practices Provision AA I” of the Code and will assume the responsibility to identify principal risks associated in running the business and to ensure implementation of appropriate systems to manage such risks.

Meetings

The attendance of the Board meetings by the Directors during the financial year ended 31 December 2011 is as follows:

ATTENDANCE BY DIRECTORSDATE OF MEETING TOTAL DIRECTORS ExECUTIvE NON-ExECUTIvE

25 February 2011 (Friday) 5 2 (100%) 3 (100%)

13 May 2011 (Friday) 5 2 (100%) 3 (100%)

10 August 2011 (Wednesday) 5 2 (100%) 3 (100%)

22 November 2011 (Tuesday) 5 2 (100%) 3 (100%)

Details of attendance by individual Directors:

TOTAL MEETINGS PERCENTAGE OF NAME OF DIRECTOR ATTENDED BY DIRECTORS ATTENDANCE

Ir. Edwin Lim Beng Fook 4/4 100%

Martin Lim Soon Seng 4/4 100%

Bjørn Bråten 4/4 100%

Loi Kim Fah 4/4 100%

Goh Chong Chuang 4/4 100%

Board Committees

The Board has delegated specific responsibilities to Board Committees, namely Audit Committee, Nomination Committee and Remuneration Committee in order to enhance business, operational and administration efficiency as well as efficacy. The members of the committees appoint the Chairman of their respective committees. These committees have the authority to examine particular issues and report to the Board with their recommendations. The ultimate responsibility for the final decision on all the matters, however, lies with the Board.

(a) Audit Committee

The Audit Committee Report is presented on pages 17 to 20 of this Annual Report.

(b) Nomination Committee and Remuneration Committee

Reports of the Nomination and Remuneration Committees are set out under items A(v) and B.


STATEMENT ON CORPORATE GOvERNANCE

ii. Board Balance

The Board consists of five (5) Directors, of which two (2) are Executive Directors, two (2) are Independent Non-Executive Directors and one (1) is a Non-Independent Non-Executive Director. This is in compliance with Rule 15.02 of the Listing Requirements of Bursa Malaysia Securities Berhad for the ACE Market (“ALR”) which requires at least two (2) Directors or one- third (1/3) of the Board, whichever is higher, are Independent Directors. The Board maintains full control over the Company and monitors the management. The Executive Directors have overall responsibility for the operational activities of the Group and implementation of the Board’s policies and decisions. The Independent Non-Executive Directors play a pivotal role in incorporating accountability as they provide objective and independent views to the decision-making process of the Board. The presence of the Independent Non-Executive Directors brings an additional element of check and balance to the Board.

iii. Supply of Information

Directors are provided with timely notices for each Board meeting and Board papers are issued prior to the Board meetings to enable the Directors to review and consider the agenda to be discussed in the Board meeting. This will include reports relevant to the agenda of the meetings covering the areas of strategic, financial, operational and regulatory compliance matters.

The Chairman ensures that the Board has unrestricted access to timely and accurate information in furtherance of its duties. They are unhindered to seek advice and services of the Company Secretary who is responsible for ensuring that Board meeting procedures are adhered to and that applicable rules and regulations are complied with.

iv. Directors’ Training

During the financial year under review, the Board of Directors had attended the briefing on “Amendment to the Listing Requirement of Bursa Malaysia Securities Berhad for the ACE Market” given by the Company Secretary. In addition to that, the following Director had attended the undermentioned conferences, seminars and/or training programmes:

• Loi Kim Fah

DATE ORGANISER TOPIC

16/03/2011 Lembaga Hasil Dalam Negeri Malaysia Executive Talk 2011

The Directors will continue to evaluate the training needed and attend relevant training programmes in order to broaden their perspectives and to keep abreast with developments in the market place such as new statutory and governance requirements in order to enhance their knowledge in fulfilling their responsibilities.

v. Appointment to the Board

There is a formal and transparent procedure which has been approved for the appointment of new Directors to the Board. The Board is constantly reviewing the performance of its existing Directors as well as appointing new Directors to the Board whenever the need arises.

Nomination Committee

In compliance with the Code, a Nomination Committee was set up on 24 February 2006 and is delegated with the following specific tasks:

(a) To recommend to the Board, candidates for all directorships to be filled by the shareholders or the Board;

(b) To consider, in making its recommendations, candidates for directorships proposed by the Executive Directors and, within the bounds of practicability, by any other senior executive or any director or shareholder;

(c) To recommend to the Board, Directors to fill the seats of Board Committees;

(d) To annually review the required mix of skills and experience and other qualities, including core competencies which Non-Executive Directors should bring to the Board;

(e) To assess Directors on an on-going basis, the effectiveness of the Board as a whole, the Committees of the Board and the contribution of each individual Director, including Independent Non-Executive Directors, as well as the Group Chief Executive Officer. All assessments and evaluations carried out by the Committee in the discharge of all its functions should be properly documented.

The Nomination Committee comprises three (3) Non-Executive Directors. The members of the Nomination Committee are as follows:

Chairman Goh Chong Chuang Independent Non-Executive DirectorMembers Loi Kim Fah Independent Non-Executive Director

Bjørn Bråten Non-Independent Non-Executive Director


vi. Re-election

The Company’s Articles of Association provides that one third (1/3) or nearest to one-third (1/3) of the Directors for the time being shall retire from office and be eligible for re-election provided always that all the Directors shall retire from office at least once in every three (3) years, but shall be eligible for re-election.

B. Directors’ Remuneration

In compliance with the Code, a Remuneration Committee was set up on 24 February 2006 and is delegated with the following specific tasks:

(a) To establish policies on remuneration of Executive Directors;

(b) To recommend to the Board the remuneration of the Executive Directors in all its forms, drawing from outside advice as necessary.

The Remuneration Committee comprises two (2) Independent Non-Executive Directors and one (1) Executive Director. The members of the Remuneration Committee are as follows:

Chairman Goh Chong Chuang Independent Non-Executive DirectorMembers Ir. Edwin Lim Beng Fook Executive Director

Loi Kim Fah Independent Non-Executive Director

Detail of Directors’ Remuneration

Details of Directors’ remuneration for the financial year ended 31 December 2011, distinguishing between Executive and Non-Executive Directors in aggregate, with categorisation into appropriate components are set out below:

i. The aggregate remuneration of Directors categorised into appropriate components are as follows:

ExECUTIvE NON-ExECUTIvE DIRECTORS DIRECTORS CATEGORISATION (RM) (RM)

Fees – 48,000

Salaries & Bonuses 1,083,790* –

Benefit-in-kind 28,000 –

Total 1,111,790 48,000

* includes contributions paid to the Employees Provident Fund (EPF) and Social Security Organisation (SOCSO).

ii. The number of Directors whose total remuneration falls within the following bands are:

ExECUTIvE NON-ExECUTIvE RANGE OF REMUNERATION DIRECTORS DIRECTORS

Below RM50,000 – 2

RM50,001 – RM100,000 – –

RM100,001 – RM150,000 – –

RM150,001 – RM200,000 – –

RM200,001 – RM250,000 – –

RM250,001 – RM300,000 – –

RM300,001 – RM350,000 – –

RM350,001 – RM400,000 – –

RM400,001 – RM450,000 – –

RM450,001 – RM500,000 – –

RM500,001 – RM550,000 2 –

Total 2 2


STATEMENT ON CORPORATE GOvERNANCE

C. Shareholders

Dialogue between the Company and Investors

The Company 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. Such information is disseminated via the Company’s annual reports, various disclosures to Bursa Malaysia Securities Berhad including quarterly financial results, research papers and various announcements made from time to time. Regular discussions were also held between senior management and shareholders, selected investment analysts and investors, highlighting to them the Group’s performance.

Annual General Meeting

The forthcoming Annual General Meeting (“AGM”) is the Company’s Eleventh AGM as a listed company and this will provide the opportunity for shareholders to raise questions pertaining to issues in the Annual Report, Audited Financial Statements and corporate developments in the Group, the resolutions being proposed and/or on the business of the Group. Shareholders who are unable to attend may appoint proxies to attend and vote on their behalf. Members of the Board as well as the Auditors of the Company would be present to answer questions raised at the meeting.

D. Accountability and Audit

i. Financial Reporting

The aim of the Directors in relation to financial reporting is to present a balanced and meaningful assessment of the Group’s position and prospects primarily through its annual financial statements and quarterly financial results to its shareholders. In presenting the financial statements, the Group has used appropriate accounting policies, consistently applied and supported by reasonable judgements and estimates.

The quarterly financial results were reviewed by the Audit Committee and approved by the Board before its release to Bursa Malaysia Securities Berhad.

ii. Statement of Directors’ Responsibility for Preparing the Financial Statements

The Board is responsible for ensuring that the financial statements of the Group give a true and fair view of the state of affairs of the Group and the Company as at the end of the financial year and of the results of their operations and cash flows for the year then ended. In preparing the financial statements, the Directors have ensured that applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 have been applied.

In preparing the financial statements, the Directors have selected and applied consistently suitable accounting policies and made reasonable and prudent judgements and estimates. The Directors also have a general responsibility for 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.

iii. Internal Control

The Directors acknowledge their responsibility for the Group’s system of internal controls covering not only financial controls but also operational and compliance controls as well as risk management. The Statement on Internal Control is furnished on page 16 of this Annual Report and this provides an overview of the state of internal controls within the Group.

For the financial year ended 31 December 2011, the cost incurred in respect of the internal audit review performed by in-house Internal Auditors was RM110,176.

iv. Relationship with Auditors

The Company maintains a transparent and professional relationship with the Company’s Auditors in seeking their professional advice towards ensuring compliance with the accounting standards. Key features underlying the relationships of the Auditors through the Audit Committee is described on pages 17 to 20 of this Annual Report.


The Malaysian Code on Corporate Governance requires the Board of Directors to maintain a sound system of internal control to safeguard shareholders’ investment and the Group’s assets. The Board is pleased to include a statement on the state of the Group’s internal controls.

BOARD RESPONSIBILITIES

The Board affirms its responsibility in maintaining the Group’s system of internal controls and in seeking regular assurance on the adequacy and integrity of the internal control system to safeguard shareholders’ value and the Group’s assets.

Key elements of the Group’s internal controls that have been in place include the following:

FORMAL ORGANISATIONAL STRUCTURE

• The Group has in place a well defined organisational structure with well defined lines of reporting, responsibilities and level of authority to ensure quick response to changes in an ever changing and challenging business environment and to ensure effective supervision of day to day operations.

REGULAR PERFORMANCE REPORTING

• Periodic up-to-date and comprehensive management reports are generated to facilitate the Board and the senior management in performing financial and operating reviews on the various operating units of the companies within the Group. The reviews comprise both financial and non-financial key business indicators and variances between budget and operating results.

• Monthly management meetings are chaired by the Group Chief Executive Officer to discuss the Group’s operations and performance, including sales opportunity tracking. Other matters being discussed are collections, marketing strategy to be adopted for new product launches, feedback on progress of product design and development and highlights on shortcomings or problems together with the proposed corrective actions and potential risks that may affect the achievements of the Group’s business objectives together with the proposed mitigating plans.

DOCUMENTED POLICIES AND PROCEDURES

• We have in place documented policies and procedures which form an integral part of the internal control system to safeguard shareholders’ investment and the Group’s assets against material losses.

INTERNAL AUDIT FUNCTION

• The Internal Audit Department that reports to the Audit Committee, conducts reviews on the adequacy and effectiveness of the internal control system of the Group. Where areas of improvement in the system are recommended, the Board considers the recommendation made by the Audit Committee and senior management.

There are inherent limitations in any system of internal controls. Thus, the system of internal controls put in place by the management can only reduce but not eliminate all risks that may impede the achievement of the Group’s business objectives. Therefore, the internal control system can only provide reasonable and not absolute assurance against material misstatement or loss.

The Board is keen to continue ensuring that necessary steps are taken to enhance the system of internal controls.

AUDIT COMMITTEE

The Audit Committee was set up with a view to assist and provide the Board with added focus in discharging its duties. For 2011, the Audit Committee met four (4) times with the Board to review operation and financial performance of the Group. Henceforth, the Audit Committee will continue to convene quarterly meetings to advise the Board on findings and improvements of the internal controls of the Group.

INTERNAL AUDIT

The Group has since the beginning of 2007 set up an Internal Audit Department. During the year, there were no weaknesses in the system of internal control that has resulted in any material losses, contingencies or uncertainties, which would require disclosure in the Company’s Annual Report.


STATEMENT OF INTERNAL CONTROL

The Company established an Audit Committee on 3 February 2005. The Audit Committee comprises three (3) members who are as follows:

Chairman Loi Kim Fah Independent Non-Executive DirectorMembers Goh Chong Chuang Independent Non-Executive Director

Bjørn Bråten Non-Independent Non-Executive Director

TERMS OF REFERENCE

1. Composition

The Audit Committee shall be appointed by the Board from amongst its Directors and shall consist of no fewer than three (3) members. All the Audit Committee members must be Non-Executive Directors, with a majority of them being Independent Directors. No Alternate Director shall be appointed as a member of the Audit Committee.

The Chairman, who shall be elected by the Audit Committee, shall be an Independent Director.

All the Audit Committee members should be financially literate and at least one (1) member of the Audit Committee:

i. must be a member of the Malaysian Institute of Accountants (“MIA”); or

ii. if he is not a member of MIA:

(a) he must have at least three (3) years’ working experience; and:

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

• he must be a member of one (1) of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act, 1967; or

(b) he must have a degree/masters/doctorate in accounting or finance and at least three (3) years’ post qualification experience in accounting or finance; or

(c) he must have at least seven (7) years’ experience being a chief financial officer of a corporation or having the function of being primarily responsible for the management of the financial affairs of a corporation; or

(d) he fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad.

The Board must review the terms of office and performance of the Audit Committee and each of its members at least once in every three (3) years to determine whether such committee and its members have carried out their duties in accordance with their terms of reference.

In the event of any vacancy with the result that the number of members is reduced to below three (3), the vacancy shall be filled within three (3) months. Therefore, a member of the Audit Committee who wishes to retire or resign should provide sufficient written notice to the Company so that a replacement may be appointed before he leaves.

2. Attendance and Frequency of Meeting

The Audit Committee shall meet at least four (4) times in each financial year although additional meetings may be called at any time at the discretion of the Chairman. The quorum for a meeting shall be two (2) members of the Audit Committee. The majority of members present at the meeting shall be Independent Directors. The Group Finance Director, the Head of Internal Audit and a representative of the External Auditors should normally attend meetings. Other Board members may attend meetings upon the invitation of the Audit Committee. However, the Audit Committee should meet with the External Auditors without the presence of any executive Board member at least twice a year.


AUDIT COMMITTEE REPORT

3. Procedures of Meetings

(a) The Audit Committee Chairman shall preside at all meetings. In his absence, the Audit Committee members present shall elect among themselves an Independent Director to be the Chairman of the meeting.

(b) The Audit Committee may call for a meeting as and when required with reasonable notice as the Audit Committee members deem fit.

(c) The Company Secretary shall be the Secretary of the Audit Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and circulating it prior to each meeting.

(d) A minimum of seven (7) days’ notice shall be given for all meetings. Nevertheless, a shorter notice is permitted subject to agreement by all Audit Committee members.

(e) All decisions are determined by a majority of votes. In case of equality of votes, the Audit Committee Chairman shall have a casting vote.

(f) A resolution in writing signed by a majority of the Audit Committee members and constituting a quorum shall be effective as a resolution passed at a meeting of the Audit Committee.

4. Minutes of Meetings

The Company Secretary shall be responsible for keeping the minutes of meetings of the Audit Committee and circulating them to the Audit Committee members. The Audit Committee members may inspect the minutes of the Audit Committee at the Registered Office or such other place as may be determined by the Audit Committee.

5. Authority

The Audit Committee shall:

(a) have authority to investigate any matter within its terms of reference.

(b) have the resources which are required to perform its duties.

(c) have full and unrestricted access to any information pertaining to the Company.

(d) have direct communication channels with the External Auditors and person(s) carrying out the internal audit function or activity.

(e) be able to obtain independent professional or other advice.

(f) be able to convene meetings with the External Auditors, the Internal Auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary.

6. Functions

The functions of the Audit Committee shall include the following:

(a) To review with the External Auditors on the following and report the same to the Board of Directors of the Company:

• the audit plan, its scope and nature;

• the audit report;

• the results of their evaluation of the accounting policies and system of internal controls within the Group;

• the management letter and management’s response; and

• the major audit findings arising from the interim and final external audits, the audit report and the assistance given by the Group’s officers to the External Auditors.



(b) To do the following, in relation to the internal audit function:

• review the adequacy of the scope, functions, competency and resources and setting of performance standards of the internal audit function;

• review the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function;

• review the major findings of internal audit investigations and management’s response, and ensure that appropriate actions are taken on the recommendations of the internal audit function;

• review any appraisal or assessment of the performance of members of the internal audit function;

• review and approve any appointment or termination of senior staff members of the internal audit function; and

• take cognisance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning.

(c) To provide assurance to the Board of Directors on the effectiveness of the system of internal controls and risk management practices of the Group.

(d) To review with management:

• the audit reports and the implementation of audit recommendations; and

• interim financial information.

(e) To review related party transaction (if any) entered into by the Company or the Group to be undertaken on an arm’s length basis and normal commercial terms and on terms not more favourable to the related parties than those generally available to the public, and to ensure that the Directors report such transactions annually to shareholders via the annual report and to review conflict of interest situation that may arise within the Company or the Group including any transaction, procedure or course of conduct that raises questions of management integrity.

(f) To review the quarterly results and annual financial statements prior to approval of the Board of Directors, focusing particularly on:

• changes in or implementation of major accounting policies changes;

• significant and unusual events;

• the going concern assumption; and

• compliance with accounting standards and other legal requirements.

(g) To review and report to the Board any letter of resignation from the External Auditors of the Group as well as whether there is any reason (supported by grounds) to believe that the Group’s External Auditors are not suitable for re-appointment.

(h) To make recommendations concerning the appointment of External Auditors and their remuneration to the Board.

(i) To verify that the allocation of options pursuant to Employees’ Share Option Scheme of the Company is in accordance with the criteria for allocation established under the scheme at the end of each financial year.

(j) Promptly reporting to Bursa Malaysia Securities Berhad on any matter reported by the Audit Committee to the Board which has not been satisfactorily resolved resulting in a breach of the Listing Requirements.


SUMMARY OF ACTIvITIES

There were four (4) Audit Committee meetings held during the financial year ended 31 December 2011. The details of the attendance of each member of the Audit Committee are as follows:

TOTAL MEETINGS ATTENDED BY PERCENTAGE OF AUDIT COMMITTEE MEMBERS ATTENDANCE

Loi Kim Fah – Chairman/Independent Non-Executive Director 4/4 100%

Goh Chong Chuang – Member/Independent Non-Executive Director 4/4 100%

Bjørn Bråten – Member/Non-Independent Non-Executive Director 4/4 100%

During the financial year, the main activities undertaken by the Audit Committee include:

(a) Reviewing the quarterly financial results’ announcements before recommending them for the Board’s approval;

(b) Reviewing the presentation of the financial statements of the Group with the External Auditors to ensure adequacy of disclosure of information essential to a fair and full presentation of the financial affairs of the Group for recommendation to the Board for approval.

(c) Reviewing the related/interested party transactions (if any) that may arise within the Company and the Group to ensure compliance with the Malaysian Accounting Standards Board, AMLR and other relevant authorities and to ensure that such transactions are:

• undertaken in the ordinary course of business;

• carried out at arm’s length and based on normal commercial terms consistent with the Group’s usual business practices and policies;

• on terms not more favourable to the related parties than those generally available to the public; and

• not detrimental to the minority shareholders of the Company.

(d) Reporting to the Board of Directors on its activities and significant findings and results.

(e) Reviewing the Internal Audit Reports on findings and recommendations and management’s response thereto to ensure adequate remedial actions have been taken.

As there was no allocation of options in respect of the Employees’ Share Option Scheme of the Company during the financial year under review, no verification on the allocation of options was carried out by the Audit Committee.

INTERNAL AUDIT FUNCTION

An Internal Audit Department under an Internal Audit Manager which stands independent of the activities or operations was set up on 3 January 2007 to support the Audit Committee in the discharge of its duties. The main role of the Internal Audit Department is to review the effectiveness of the systems of internal controls within the Group and to recommend any necessary improvements.



SHARE BUY BACK

There was no share buy back carried out by the Company during the financial year.

OPTIONS, WARRANTS OR CONvERTIBLES SECURITIES

There were no convertible securities exercised but 1,242,000 ordinary shares of RM0.10 each at RM0.28 per share pursuant to the Employee Share Option Scheme (“ESOS”) were exercised during the financial year.

AMERICAN DEPOSITORY RECEIPT (“ADR”) OR GLOBAL DEPOSITORY RECEIPT (”GDR”)

The Company did not sponsor any ADR or GDR Programme during the financial year.

IMPOSITION OF SANCTIONS AND/OR PENALTIES

There were no sanctions or penalties imposed on the Company and its subsidiaries, Directors and management by the relevant regulatory bodies during the financial year.

vARIATION IN RESULTS

There was no material variance between the results for the financial year and the unaudited results previously announced.

PROFIT ESTIMATE, FORECAST OR PROjECTION

The Company did not make any release on the profit estimate, forecast or projection during the financial year.

PROFIT GUARANTEE

There was no profit guarantee given by the Company during the financial year.

MATERIAL CONTRACTS INvOLvING DIRECTORS’ AND MAjOR SHAREHOLDERS’ INTERESTS

There were no material contracts entered into by the Company and its subsidiaries involving Directors and major shareholders’ interests.

REvALUATION OF LANDED PROPERTIES

The Group has not adopted a policy of regular revaluation of its landed properties.

RELATED PARTY TRANSACTIONS

The details of the transactions with related parties undertaken by the Group during the financial year are disclosed in Note 32 of the Notes to the Financial Statements on page 71 of this Annual Report.


OTHER INFORMATION

Directors’ Report 23

Statement by Directors 27

Statutory Declaration 27

Independent Auditors’ Report 28

Statements of Financial Position 30

Statements of Comprehensive Income 31

Statements of Changes in Equity 32

Statements of Cash Flows 33

Notes to the Financial Statements 35

FINANCIAL STATEMENTS

The Directors hereby submit their report together with the audited financial statements of the Group and the Company for the financial year ended 31 December 2011.

PRINCIPAL ACTIvITIES

The principal activities of the Company are in research, design and development of electronic end-products and sub-systems for the communication, computer and consumer electronics industries.

The principal activities of the subsidiary companies are described in Note 9 of the Notes to the Financial Statements.

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

FINANCIAL RESULTS

GROUP COMPANY RM RM

Loss before taxation (12,305,436) (1,279,724)Taxation 79,524 (11)

Net loss for the year (12,225,912) (1,279,735)

Attributable to: Owners of the parent (12,225,912) (1,279,735)

DIvIDENDS

No dividend has been paid or declared by the Company since the end of the previous financial year.

The Directors do not recommend any dividend for the year ended 31 December 2011.

RESERvES AND PROvISIONS

There were no material transfers to or from reserves and provisions during the financial year other than those disclosed in the statements of changes in equity.

ISSUE OF SHARES AND/OR DEBENTURES

On 21 February 2011, the Company increased its share capital from RM11,395,300 to RM34,185,900 by issuance of 227,906,000 ordinary shares of RM0.10 each at par value by the capitalisation of RM22,790,600 of reserves as at 31 December 2010 by way of an issue of bonus shares of 2 for 1 ordinary share held.

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

No debentures were issued during the financial year.

WARRANTS AND EMPLOYEE SHARE OPTION SCHEME (“ESOS”)

The details of K-One Technology Berhad’s Warrants and Employee Share Option Scheme (“ESOS”) are as disclosed in Note 30 of the Notes to the Financial Statements.

The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the names of warrants and option holders, other than the Directors, who have been granted warrants and options to subscribe for the shares of the Company.

The Employees’ Share Option Scheme (“ESOS”) has expired on 30 December 2010. However, the ESOS Committee has reviewed, discussed and recommended that the ESOS be extended for a further period of five (5) years from the date of expiry.


DIRECTORS’ REPORT

INFORMATION ON THE FINANCIAL STATEMENTS

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

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

(b) to ensure that any current assets which were unlikely to realise in the ordinary course of business including their value as shown in the accounting records of the Group and 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 allowance for doubtful debts in the financial statements of the Group and the Company inadequate to any substantial extent; or

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

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 substantially affect the ability of the Group and the Company to meet its obligations as and when they fall due.

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

(a) any charge on the assets of the Group and 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 the Company which has arisen since the end of the financial year.

OTHER STATUTORY INFORMATION

The Directors state that:

At the date of this report, they are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.

In their opinion:

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

(b) 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 Group and the Company for the financial year in which this report is made, other than as disclosed in Note 38 of the Notes to the Financial Statements.


DIRECTORS’ REPORT

DIRECTORS

The Directors who have held office during the year since the date of the last report are as follows:

Lim Beng Fook

Lim Soon Seng

Bjørn Bråten

Goh Chong Chuang

Loi Kim Fah

In accordance with Article 104 of the Company’s Articles of Association, Lim Soon Seng and Goh Chong Chuang, shall retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-election.

According to the Register of Directors’ Shareholdings, particulars of interests of Directors in office at the end of the financial year in shares, warrants and options over shares in the Company and its related corporations are as follows:

NO. OF ORDINARY SHARES OF RM0.10 EACHINTEREST IN THE COMPANY AT 01.01.11 BOUGHT BONUS ISSUE SOLD AT 31.12.11

Lim Beng Fook – direct 23,985,330 – 47,970,660 – 71,955,990Lim Soon Seng – direct 19,652,820 – 39,305,640 (4,000,000) 54,958,460Bjørn Bråten – direct 15,344,985 – 30,689,970 – 46,034,955Goh Chong Chuang – direct 154,440 – 308,880 – 463,320Loi Kim Fah – direct 29,700 – 59,400 – 89,100

By virtue of the interest in the Company, Lim Beng Fook and Lim Soon Seng are also deemed to have interest in the shares of all subsidiary companies to the extent the Company has an interest.

The following are the unexercised options and warrants as at 31 December 2011 granted to the Directors to subscribe for the ordinary shares of RM0.10 each of the Company pursuant to the Company’s Employee Share Option Scheme and constituted under the Deed Poll respectively.

NO. OF OPTIONS OvER ORDINARY SHARES OF RM0.10 EACH ExERCISE PRICE AT 01.01.11 ExERCISED BONUS ISSUE GRANTED AT 31.12.11 RM

Lim Beng Fook 0.10 696,000 – 1,392,000 – 2,088,000Lim Soon Seng 0.10 682,500 – 1,365,000 – 2,047,500

None of the other Directors holding office at the end of the financial year were granted any Options.

NO. OF WARRANTS OvER ORDINARY SHARES OF RM0.10 EACH AT 01.01.11 BOUGHT BONUS ISSUE SOLD AT 31.12.11

Lim Beng Fook 4,294,222 – 8,588,444 – 12,882,666Lim Soon Seng 3,513,240 – 7,026,480 – 10,539,720Bjørn Bråten 2,777,270 – 5,554,540 – 8,331,810Goh Chong Chuang 28,080 – 56,160 – 84,240Loi Kim Fah 5,400 – 10,800 – 16,200


DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling 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, other than the share options and warrants granted pursuant to the Company’s Employee Share Option Scheme and constituted under the Deed Poll respectively.

Since the end of the previous financial year, no Director has received or become entitled to receive any benefit (other than as disclosed in the Notes 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 substantial financial interest other than the benefit arising from the options and warrants over shares in the Company granted to the Directors under the Employee Share Option Scheme and constituted under the Deed Poll respectively.

AUDITORS

Messrs Hasnan THL Wong & Partners, the retiring Auditors, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 27 April 2012.

Lim Beng Fook Director

Lim Soon Seng Director

Petaling Jaya


DIRECTORS’ REPORT

We, LIM BENG FOOK and LIM SOON SENG, being two of the Directors of K-ONE TECHNOLOGY BERHAD, do hereby state, in the opinion of the Directors, the financial statements set out on pages 30 to 76 are drawn up so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2011 and of the results of the operations, changes in equity and cash flows of the Group and the Company for the financial year ended on that date in accordance with the applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board and the provisions of the Companies Act, 1965 in Malaysia.

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

Lim Beng Fook

Lim Soon Seng

Petaling Jaya 27 April 2012

STATUTORY DECLARATION

I, GOH SAI KEONG, I/C No. 651118-05-5509, the Officer primarily responsible for the financial management of K-ONE TECHNOLOGY BERHAD, do solemnly and sincerely declare that the financial statements set out on pages 30 to 76 are, to the best of my knowledge and belief, 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 GOH SAI KEONG, I/C No. 651118-05-5509, at Petaling Jaya on 27 April 2012 Goh Sai Keong

Before me:

N. Madhavan Nair (No. B 064) Commissioner for Oaths


STATEMENT BY DIRECTORS

REPORT ON THE FINANCIAL STATEMENTS

We have audited the financial statements of K-One Technology Berhad, which comprise the statements of financial position of the Group and the Company as at 31 December 2011, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 30 to 76.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and the Company as at 31 December 2011 and of their financial performance and cash flows for the financial year then ended.


INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF K-ONE TECHNOLOGY 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 subsidiary companies of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

b) We have considered the accounts and the auditors’ reports of all the subsidiaries and sub-subsidiary companies of which we have not acted as auditors, which are indicated in Note 9 of the Notes to the Financial Statements.

c) We are satisfied that the accounts of the subsidiary companies that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

d) The audit reports on the financial statements of the subsidiary companies did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

OTHER MATTERS

The supplementary information set out in Note 39 of the Notes to the Financial Statements is disclosed to meet the requirement of Bursa Malaysia Securities Berhad. 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 Profits 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 MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

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.

Hasnan THL Wong & Partners (No. AF 0942) Chartered Accountants

Hasnan Bin Abdullah Chartered Accountant (No: 1666/12/12 (J))

Petaling Jaya 27 April 2012


GROUP COMPANY 2011 2010 2011 2010 NOTE RM RM RM RM

ASSETSNON-CURRENT ASSETS

Property, plant and equipment 6 12,469,865 10,954,415 2,456,296 2,720,211 Prepaid land leases 7 805,264 828,948 – – Intangible assets 8 821,463 821,419 769,504 793,393Investment in subsidiary and

sub-subsidiary companies 9 – – 9,224,845 7,024,845Goodwill on consolidation 10 5,545,761 5,545,761 – –

19,642,353 18,150,543 12,450,645 10,538,449

CURRENT ASSETS Inventories 11 50,935,124 56,303,471 5,331,418 10,341,108 Trade receivables 12 24,146,621 31,285,313 1,104,987 1,242,034 Other receivables 13 2,522,859 1,905,045 1,321,612 946,638 Amount due from subsidiary companies 14 – – 20,638,372 14,809,264 Tax in credit 311,336 124,498 32,189 16,200 Fixed deposits 15 503,740 – – – Cash and bank balances 15 12,776,061 7,473,873 2,496,741 105,900

91,195,741 97,092,200 30,925,319 27,461,144

TOTAL ASSETS 110,838,094 115,242,743 43,375,964 37,999,593

EQUITY AND LIABILITIESCURRENT LIABILITIES

Trade payables 29,347,497 28,141,963 67,700 135,315 Other payables 16 1,370,764 1,564,909 297,695 323,519 Amount due to a Director 17 2,209,517 2,209,517 2,351 2,351 Amount due to subsidiary companies 14 – – 6,771,934 8,000 Bank overdraft 15 6,854,875 1,963,071 – – Borrowings 18 24,711,983 21,942,735 – 14,389 Tax payable 43 – – –

64,494,679 55,822,195 7,139,680 483,574

NON-CURRENT LIABILITIES Borrowings 18 2,493,361 3,306,715 – – Deferred tax liability 19 – 76,771 – –

2,493,361 3,383,486 – –

TOTAL LIABILITIES 66,988,040 59,205,681 7,139,680 483,574

EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT Share capital 20 34,185,900 11,395,300 34,185,900 11,395,300 Reserves 21 9,664,154 44,641,762 2,050,384 26,120,719

43,850,054 56,037,062 36,236,284 37,516,019Non-controlling interest – – – –

TOTAL EQUITY 43,850,054 56,037,062 36,236,284 37,516,019

TOTAL EQUITY AND LIABILITIES 110,838,094 115,242,743 43,375,964 37,999,593

The above statements of financial position are to be read in conjunction with the notes to the financial statements set out on pages 35 to 76.


STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2011


Revenue 22 137,256,065 132,798,881 6,450,230 5,628,466Less: Cost of sales (122,567,539) (107,154,391) (3,167,954) (3,668,523)

Gross profit 14,688,526 25,644,490 3,282,276 1,959,943Add: Other income 1,019,919 164,722 254,770 7,720,683

15,708,445 25,809,212 3,537,046 9,680,626Less: Sales and distribution costs (1,354,330) (1,433,108) (108,603) (156,766)

Administrative expenses (11,406,302) (11,352,962) (979,276) (2,135,691) Other operating expenses (13,440,650) (3,817,333) (3,728,687) (651,306) Finance costs 23 (1,812,599) (1,212,823) (204) (1,456)

(Loss)/profit before taxation 24 (12,305,436) 7,992,986 (1,279,724) 6,735,407Taxation 25 79,524 (126,084) (11) (16,761)

(Loss)/profit for the year (12,225,912) 7,866,902 (1,279,735) 6,718,646Other comprehensive income/(expense):

Foreign currency translation 38,904 (473,301) – –

Total comprehensive (expense)/income for the year (12,187,008) 7,393,601 (1,279,735) 6,718,646

(Loss)/profit attributable to: Owners of the parent (12,225,912) 8,043,515 (1,279,735) 6,718,646 Non-controlling interest – (176,613) – –

(12,225,912) 7,866,902 (1,279,735) 6,718,646

Total comprehensive (expense)/income attributable to: Owners of the parent (12,187,008) 7,910,417 (1,279,735) 6,718,646 Non-controlling interest – (516,816) – –

(12,187,008) 7,393,601 (1,279,735) 6,718,646

(Loss)/earnings per share attributable to owners of the parent: – basic (sen) 26 (3.95) 7.10

– diluted (sen) 26 (3.29) 5.91

The above statements of comprehensive income are to be read in conjunction with the notes to the financial statements set out on pages 35 to 76.


STATEMENTS OF COMPREHENSIvE INCOMEFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011

ATTRIBUTABLE TO OWNERS OF THE PARENTNON-DISTRIBUTABLE DISTRIBUTABLE

FOREIGN UNAPPRO- NON SHARE SHARE ExCHANGE PRIATED CONTROLLING TOTAL NOTE CAPITAL PREMIUM RESERvE PROFITS INTEREST EQUITY GROUP RM RM RM RM RM RM

Balance at 01.01.10 11,271,100 14,893,220 57,812 21,556,753 516,816 48,295,701Issuance of

ordinary shares pursuant to ESOS 27 124,200 223,560 – – – 347,760

Total comprehensive (expense)/income for the year – – (133,098) 8,043,515 (516,816) 7,393,601

Balance at 31.12.10 11,395,300 15,116,780 (75,286) 29,600,268 – 56,037,062Bonus issue 27 22,790,600 (15,116,780) – (7,673,820) – –Total comprehensive

income/(expense) for the year – – 38,904 (12,225,912) – (12,187,008)

Balance at 31.12.11 34,185,900 – (36,382) 9,700,536 – 43,850,054

2011 2010 RM RM

Unappropriated profits retained by:Company 2,050,384 11,003,939Subsidiary companies 7,650,152 18,596,329

9,700,536 29,600,268

NON- DISTRIBUTABLE DISTRIBUTABLE UNAPPRO- SHARE SHARE PRIATED TOTAL CAPITAL PREMIUM PROFITS EQUITY COMPANY NOTE RM RM RM RM

Balance at 01.01.10 11,271,100 14,893,220 4,285,293 30,449,613Issuance of ordinary shares pursuant to ESOS 27 124,200 223,560 – 347,760Total comprehensive income for the year – – 6,718,646 6,718,646

Balance at 31.12.10 11,395,300 15,116,780 11,003,939 37,516,019Bonus issue 27 22,790,600 (15,116,780) (7,673,820) –Total comprehensive expense for the year – – (1,279,735) (1,279,735)

Balance at 31.12.11 34,185,900 – 2,050,384 36,236,284

The above statements of changes in equity are to be read in conjunction with the notes to the financial statements set out on pages 35 to 76.


STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011

GROUP COMPANY 2011 2010 2011 2010 RM RM RM RM

CASH FLOWS FROM OPERATING ACTIvITIES(Loss)/profit before taxation (12,305,436) 7,992,986 (1,279,724) 6,735,407Adjustments for:

Amortisation of computer software 80,757 81,218 61,089 60,535 Amortisation of prepaid land lease 23,684 23,684 – – Bad debts written off 92,470 – – – Depreciation of property, plant and equipment 1,939,870 1,676,926 289,874 308,283 Foreign currency exchange loss/(gain) – unrealised 64,208 (276,967) (16,182) 11,834Impairment loss on investment

in subsidiary companies – – – 491,774Impairment loss on receivables – 1,088,669 – 796,774Intangible assets written off 744 – – –Interest expense 1,812,599 1,212,823 204 1,456Inventories written down 3,250,347 – 3,250,347 –Inventories written off 7,379,116 – – –Investment in subsidiary company written off – (6,447) – 2,350Property, plant and equipment written off 793 – – –Gain on disposal of property, plant and equipment (56,550) (30,212) – –Dividend income – – – (7,690,600)Interest income (4,480) (65,093) – (44)

Operating profit before working capital changes carried forward 2,278,122 11,697,587 2,305,608 717,769(Increase)/decrease in inventories (5,260,735) (11,589,307) 1,759,343 1,805,145Decrease/(increase) in receivables 6,706,968 (6,518,468) (221,731) (256,784)Increase in amount due from

subsidiary companies – – (8,029,108) (1,122,314)Increase/(decrease) in payables 910,893 5,124,213 (93,453) (1,097,379) Increase/(decrease) in amount due

to subsidiary companies – – 6,763,934 (1,293,199)

Cash generated from/(absorbed by) operations 4,635,248 (1,285,975) 2,484,593 (1,246,762) Interest paid (1,812,599) (1,212,823) (204) (1,456) Tax paid (185,271) (73,357) (16,000) 14,297

Net cash from/(used in) operating activities 2,637,378 (2,572,155) 2,468,389 (1,233,921)


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011


CASH FLOWS FROM INvESTING ACTIvITIESInterest received 740 2,703 – 44Placement of fixed deposits (500,000) – – –Proceeds from disposal of

property, plant and equipment 66,420 30,213 – –Purchase of intangible assets 28 (81,535) – (37,200) –Purchase of property, plant and equipment 29 (3,465,558) (1,305,415) (25,959) (45,822)

Net cash used in investing activities (3,979,933) (1,272,499) (63,159) (45,778)

CASH FLOWS FROM FINANCING ACTIvITIES Net proceeds from short term borrowing 2,788,099 7,055,522 – –Net repayment of term loans (528,791) (1,296,358) – –Proceeds from issuance of

ordinary shares at a premium 27 – 347,760 – 347,760Repayment of hire purchase creditors (303,414) (225,419) (14,389) (27,848)

Net cash from/(used in) financing activities 1,955,894 5,881,505 (14,389) 319,912

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIvALENTS 613,339 2,036,851 2,390,841 (959,787)

Effect of foreign exchange rate changes (202,955) (60,959) – –CASH AND CASH EQUIvALENTS

BROUGHT FORWARD 5,510,802 3,534,910 105,900 1,065,687

CASH AND CASH EQUIvALENTS CARRIED FORWARD 15 5,921,186 5,510,802 2,496,741 105,900

The above statements of cash flows are to be read in conjunction with the notes to the financial statements set out on pages 35 to 76.


STATEMENTS OF CASH FLOWS

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 principal activities of the Company are in research, design and development of electronic end-products and sub-systems for the communication, computer and consumer electronics industries.

The principal activities of the subsidiary companies are described in Note 9 of the Notes to the Financial Statements.

The address of the registered office of the Company is Unit 07-02, Level 7, Persoft Tower, 6B, Persiaran Tropicana, 47410 Petaling Jaya, Selangor Darul Ehsan, Malaysia.

The principal place of business of the Company is 66 & 68, Jalan SS 22/21, Damansara Jaya, 47400 Petaling Jaya, Selangor Darul Ehsan, Malaysia.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors dated 27 April 2012.

2. SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise stated, the following accounting policies have been applied consistently in dealing with items that are considered material in relation to the financial statements.

a) Basis of preparation

The financial statements of the Group and the Company have been prepared:

(i) in accordance with the applicable approved Financial Reporting Standards (FRS) issued by the Malaysian Accounting Standards Board (MASB) and the provisions of the Companies Act, 1965 in Malaysia; and

(ii) under the historical cost convention, unless otherwise indicated.

The financial statements are presented in Ringgit Malaysia (RM), unless otherwise indicated.

b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries made up to the end of the financial year.

All intergroup balances, transactions and resulting unrealised gains are eliminated on consolidation. Unrealised losses are eliminated on consolidation unless cost cannot be recovered. Consolidated financial statements reflect external transactions only.

The financial statements of subsidiaries acquired or disposed off during the financial year are included in the consolidated financial statements based on the purchase method from the effective date of acquisition or up to the effective date of disposal respectively. These assets, liabilities and contingent liabilities assumed of a subsidiary are measured at their fair values at the date of acquisition and these values are reflected in the consolidated statements of financial position. Acquisition costs incurred are expensed and included in administration expenses.

Any excess of the cost of the acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities assumed represents goodwill. The accounting policy for goodwill is set out in Note 2 (c). Any excess of the Group’s interest in the fair value of identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised in the statements of comprehensive income.

In business combinations achieved in stages, previously held equity interest in the acquiree is remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in the statements of comprehensive income.

Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to the owners of the Company, and are presented separately in the statements of comprehensive income and within equity in the statements of financial position, separately from shareholders’ equity. It is measured at the non-controlling interests’ share of the fair value of net assets at the acquisition date and the non controlling interests’ share of changes in the equity since then. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.

Changes in the Group’s equity interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their respective interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in shareholders’ equity.


NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2011

2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

b) Basis of consolidation (cont’d)

If the Group loses control over a subsidiary, at the date the Group loses control, it:

i) Derecognises the assets (including goodwill) and liabilities of the subsidiary at their respective carrying amounts;

ii) Derecognises the carrying amount of any non-controlling interest;

iii) Derecognises the cumulative translation differences recorded in equity;

iv) Recognises the fair value of the consideration or distribution received;

v) Recognises the fair value of any investment retained;

vi) Recognises any surplus or deficit in statements of comprehensive income; and

vii) Reclassifies the parent’s share of components previously recognised in other comprehensive income to statements of comprehensive income or retained earnings, as appropriate.

c) Goodwill

Goodwill represents the difference between the purchase consideration and the fair value of the Group’s share of net assets of the subsidiaries at the date of acquisition.

Goodwill is stated at cost less accumulated impairment losses, if any. Impairment test is performed annually. Goodwill is also tested for impairment when indication of impairment exists. Impairment losses recognised are not reversed in subsequent periods.

Upon disposal of an interest in a subsidiary, the related goodwill will be included in the computation of gain or loss on disposal of the interest in the subsidiary in the statements of comprehensive income.

d) Subsidiary companies

A subsidiary is a company in which the Group has the power, directly or indirectly, to exercise control over its financial and operating policies so as to obtain benefits from its activities.

Investments in subsidiaries, which are eliminated on consolidation, are stated at cost less accumulated impairment losses, if any, unless the investment is classified as held for sale, in the Company’s financial statements. An impairment loss is recognised when there is impairment in the value of the investments determined on an individual basis and is charged to the statements of comprehensive income as an expense. The difference between the net disposal proceeds and its carrying amount is charged or credited to statements of comprehensive income upon disposal of the investment.

e) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the statements of comprehensive income as incurred.

Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation of other property, plant and equipment is calculated on the straight line method to write off the cost of the property, plant and equipment over their estimated useful lives.

The principal annual rates of depreciation used are as follows:

Office buildings 38 – 48 years Air conditioners 15% Electrical installation 15% Equipment 15% Furniture and fittings 15% Office equipment 15% – 20% Renovation 15% Machineries and equipment 20% Motor vehicles 20% Testing equipment 20% Computers 20% – 40%


NOTES TO THE FINANCIAL STATEMENTS


e) Property, plant and equipment (cont’d)

The residual values, useful lives and depreciation methods are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the 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. The difference between the net disposal proceeds, if any, and the net carrying amount is recognised in the statements of comprehensive income.

Fully depreciated property, plant and equipment are retained in the financial statements until they are no longer in use and no further charge for depreciation is made in respect of these property, plant and equipment.

f) Construction in progress

Construction in progress represents progress billings and incidental costs of construction of a plant and machinery and related capital expenditure. The amount is stated at cost based on progress billings.

g) Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

Operating lease payments are recognised as an operating expense in statements of comprehensive income on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

Finance leases, which transfer to the Group and the Company substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction balance of the liability. Finance charges are charged to the statement of comprehensive income. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group and the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.

h) Intangible assets

The other intangible assets of the Group and the Company consist of computer software. These intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair values as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.

Intangible assets with indefinite useful lives are not amortised but tested for impairment annually or more frequently if the events or changes in circumstances indicate the carrying value may be impaired either individually or at the cash-generating unit level. The useful life of an intangible asset with an indefinite life is also reviewed annually to determine whether the useful life assessment continues to be supportable.

i) Inventories

Inventories are stated at the lower of cost and net realisable value and are determined on the first-in-first-out method. The cost of inventories comprises actual costs of purchase, incidental costs in bringing the inventories into store and appropriate proportions of manufacturing overheads.

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



j) Financial assets

Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include loans and receivables.

Loans and Receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

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

A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in statements of comprehensive income.

k) Impairment of financial assets

The Group and the Company assess at each financial year end whether there is any objective evidence that a financial asset is impaired.

i) Trade and other receivables and other financial assets 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 debtor 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 of receivables could include the Group’s and the Company’s past experience of 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.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in statements of comprehensive income.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in statements of comprehensive income.

ii) Unquoted equity securities carried at cost

If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.




l) Cash and cash equivalents

Cash comprises of cash at bank and cash on hand including bank overdraft and deposits. Cash equivalents comprise of investments maturing within three months from the date of acquisition and which are readily convertible to known amount of cash which are subject to an insignificant risk of change in value.

m) Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.

Financial liabilities, within the scope of FRS 139, are recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. The Group and Company’s financial liabilities are classified as other financial liabilities.

Other financial liabilities

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

Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group and the Company has an unconditional right to defer settlement of the liability for at least 12 months after the end of financial year.

For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.

n) Impairment of non-financial assets

The carrying values of assets (other than inventories, deferred tax assets and financial assets) are reviewed for impairment to determine whether there is an indication that the assets might be impaired. If any such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The recoverable amount is the higher of an asset’s net selling price and its value in use, which is measured by reference to discounted future cash flows. Recoverable amounts are estimated for individual assets, or if it is not possible, for the cash-generating unit.

An impairment loss is charged to the statements of comprehensive income immediately, unless the asset is carried at the revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of previously recognised revaluation surplus for the same asset.

Subsequent increase in the recoverable amount of an asset is treated as reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the statements of comprehensive income immediately, unless the asset is carried at the revalued amount. A reversal of an impairment loss on a revalued asset is credited directly to revaluation surplus. However, to the extent that an impairment loss on the same revalued asset was previously recognised as an expense in the statements of comprehensive income, a reversal of that impairment loss is recognised as income in the statement of comprehensive income.

o) Equity instruments

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided.



p) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the Company and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable.

Sale of goods

Revenue from sales of goods are recognised upon delivery of significant risk and rewards of ownership of goods to the customer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

Interest income

Interest income is recognised on a time proportion basis, by reference to the principal outstanding and at the interest rate applicable.

Rental income

Rental income is recognised on an accrual basis in accordance with the substance of the relevant agreement.

Dividend income

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

q) Foreign currencies

Transactions in foreign currencies are recorded in Ringgit Malaysia at rates of exchange ruling at the time of the transactions. Foreign currency monetary assets and liabilities are translated at exchange rates ruling at the end of the financial year.

Gains and losses from conversion of short term assets and liabilities, whether realised or unrealised are included in operating profit as they arise.

The assets and liabilities of the foreign entities are translated at financial year end rates and operating results are translated at the average exchange rates for the year, which approximates the exchange rates at the dates of the transactions. Gains and losses arising on translation are taken directly to the foreign exchange translation reserve.

All other foreign exchange differences are taken to the statements of comprehensive income in the financial year in which they arise.

The principal closing rates used are as follows:

2011 2010 RM RM

1 US Dollar 3.1725 3.09051 Euro 4.1090 4.09051 Singapore Dollar 2.4418 2.39081 Australian Dollar 3.2220 3.15151 Sterling Pound 4.8895 4.79801 Hong Kong Dollar 0.4082 0.39431000 Korean Won 2.7311 2.73171 Swiss Franc 3.3735 –

r) Borrowing costs

All interest and other costs incurred in connection with borrowings are recognised in the statement of comprehensive income in the period they are incurred.




s) Taxation

Income tax on the profit or loss for the financial year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the financial year and is measured using the tax rates that have been enacted at the end of the financial year.

Deferred tax is provided in the financial statements using the liability method on temporary differences at the end of the financial year between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax credits and losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against the temporary differences and unused tax credits and losses. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.

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 at the end of the financial year. Deferred tax is recognised in the statements of comprehensive income, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or the amount of any excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the combination.

t) Employee benefits

i) Short term employee 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 Company. 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.

ii) Defined contribution plans

As required by law, companies in Malaysia make contributions to the Employees Provident Fund. Such contributions are recognised as an expense in the statements of comprehensive income as incurred.

iii) Employee Share Option Scheme

The Company implemented an Employee Share Option Scheme (“ESOS”) which came into effect on 30 December 2005 for a period of five (5) years. The same has been extended for another 5 years to expire in December 2015. The salient features and other terms of the ESOS are disclosed in Note 30 of the Notes to the Financial Statements.

The Company’s ESOS allows the Group’s employees to acquire shares of the Company. As allowed by the transitional provisions in FRS 2 “Share-based payment”, the Company does not make a charge to the statements of comprehensive income in connection with share options granted to directors and employees. When the share options are exercised, the proceeds received, net of any transaction costs, are credited to share capital (nominal value) and share premium.

u) Related parties

Related parties are entities with common directors or shareholders wherein one party has the ability to control or exercise significant influence over the other parties in financial or operating policy decision.

v) Dividends

Dividends on ordinary shares are accounted for in shareholders’ equity as an appropriation of retained earnings in the financial year in which they are declared.


3. CHANGES IN ACCOUNTING POLICIES AND EFFECTS ARISING FROM ADOPTION OF NEW AND REvISED FRSs

The financial statements of the Group and the Company have been prepared in accordance with Financial Reporting Standards (FRSs), generally accepted accounting principles and the Companies Act, 1965 in Malaysia.

During the financial year, the Group and the Company have adopted the following new and amended FRS and IC Interpretations.

FRS 1, First-time Adoption of Financial Reporting Standards (revised)

FRS 3, Business Combinations (revised)

FRS 127, Consolidated and Separate Financial Statements (revised)

Amendments to FRS 1, First-time Adoption of Financial Reporting Standards (a) Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters (b) Additional Exemptions for First-time Adopters

Amendments to FRS 2, Share-based Payment (revised)

Amendments to FRS 2, Share-based Payment: Group Cash-settled Share-based Payment Transactions

Amendments to FRS 5, Non-current Assets Held for Sale and Discontinued Operations

Amendments to FRS 7, Financial Instruments: Disclosures – Improving Disclosures about Financial Instruments

Amendments to FRS 132, Financial Instruments: Presentation

Amendments to FRS 138, Intangible Assets

Improvements to FRS issued in 2010

IC Interpretation 4, Determining Whether an Arrangement contains a Lease

IC Interpretation 12, Service Concession Arrangements

IC Interpretation 16, Hedges of a Net Investment in a Foreign Operation

IC Interpretation 17, Distribution of Non-cash Assets to Owners

IC Interpretation 18, Transfers of Assets from Customers

Amendment to IC Interpretation 9, Reassessment of Embedded Derivatives

Amendment to IC Interpretation 15, Agreements for the Construction of Real Estate

TR i-4, Shariah Compliant Sale Contracts

Adoption of the above standards and interpretations did not have any effect on the financial performance or position of the Company except those discussed below:

FRS 3: Business Combinations and FRS 127: Consolidated and Separate Financial Statements (revised)

FRS 3 (revised) introduces a number of changes to the accounting for business combinations occurring on or after 1st July 2010. These include changes that affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results.

The revised FRS 3 continues to apply the acquisition method to business combinations but with some significant changes. All payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the statement of comprehensive income. There is a choice on an acquisition-by acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition related costs are expensed.

FRS 127 (revised) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners and to be recorded in equity. Therefore, such transaction will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as loss of control of a subsidiary.

The Group has applied the changes of FRS 3 and FRS 127 (revised) prospectively. There is no financial impact on the financial statements of the Group for the current financial period other than changes in accounting policies.

The Malaysian Accounting Standards Board (MASB) has issued the following new FRSs and IC Interpretations that are yet to be effective and have not been adopted by the Group and the Company in preparing these financial statements.



3. CHANGES IN ACCOUNTING POLICIES AND EFFECTS ARISING FROM ADOPTION OF NEW AND REvISED FRSs (CONT’D)

FRSs/INTERPRETATIONSFOR FINANCIAL PERIODS

BEGINNING ON OR AFTER

Amendments to IC Interpretation 14, Prepayments of a Minimum Funding Requirements 1 July 2011IC Interpretation 19, Extinguishing Financial Liabilities with Equity Instruments 1 July 2011FRS 124, Related Party Disclosures (revised) 1 January 2012Amendments to FRS 1, First-time Adoption of Financial Reporting Standards

– Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters1 January 2012

Amendments to FRS 7, Financial Instruments: Disclosures – Transfer of Financial Assets 1 January 2012Amendments to FRS 112, Income Taxes – Deferred Tax: Recovery of Underlying Assets 1 January 2012Amendments to FRS 101, Presentation of Financial Statements – Presentation of Items of Other

Comprehensive Income1 July 2012

FRS 10, Consolidated Financial Statements 1 January 2013FRS 11, Joint Arrangements 1 January 2013FRS 12, Disclosure of Interests in Other Entities 1 January 2013FRS 13, Fair Value Measurement 1 January 2013FRS 119, Employee Benefits 1 January 2013FRS 127, Separate Financial Statements 1 January 2013FRS 128, Investment in Associates and Joint Ventures 1 January 2013IC Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine 1 January 2013Amendments to FRS 7, Financial Instruments:

Disclosures – Offsetting Financial Assets and Financial Liabilities1 January 2013

Amendments to FRS 7, Financial Instruments: Disclosures – Mandatory Date of FRS 9 and Transition Disclosures

1 January 2013

Amendments to FRS 132, Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities

1 January 2014

FRS 9, Financial Instruments (2009) 1 January 2015FRS 9, Financial Instruments (2010) 1 January 2015

On 19 November 2011, the Malaysian Accounting Standards Board (‘MASB’) issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards (‘MFRS Framework’).

The MFRS Framework is to be applied by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities that are within the scope of MFRS 141 Agriculture and IC Interpretation 15 Agreements for Construction of Real Estate, including its parent, significant investor and venturer.

The Group and the Company will be required to prepare financial statements using the MFRS Framework in its first MFRS financial statements for the year ending 31 December 2012. In presenting its first MFRS financial statements, the Group and the Company will be required to restate the comparative financial statements to amounts reflecting the application of MFRS Framework. The majority of the adjustments required on transition will be made, retrospectively, against opening retained profits. As a result of the Group’s and the Company’s adoption of the MFRS framework, the Group and the Company will not be adopting the above FRSs, Interpretations and Amendments.

The Directors are of the opinion that the financial performance and financial position as disclosed in these financial statements for the year ended 31 December 2011 would not be significantly different if prepared under the MFRS Framework.


4. SIGNIFICANT ACCOUNTING ESTIMATES AND jUDGEMENTS

Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group and the Company make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results.

The estimates and assumptions that affect the application of the Group’s accounting policies and disclosures and have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed below:

a) Depreciation of property, plant and equipment

The estimates for the residual values, useful lives and related depreciation charges for the property, plant and equipment are based on commercial and production factors which could change significantly as a result of technical innovations and competitors’ actions in response to the market conditions.

The Group and the Company anticipate that the residual values of its plant and equipment will be insignificant. As a result, residual values are not being taken into consideration for the computation of the depreciable amount.

Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

b) Allowance for inventories

Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates.

Possible changes in these estimates could result in revisions to the valuation of inventories.

c) Impairment on loans and receivables

An impairment loss is recognised when there is objective evidence that a financial asset is impaired. The management specifically reviews its loans and receivables financial assets and analyses historical bad debt, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the allowance for impairment losses. 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. If the expectation is different from the original estimate, such difference will impact the carrying value of receivables.

d) Impairment of non-financial assets

When the recoverable amount of an asset is determined based on the estimate of the value-in-use of the cash-generating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash flows from the cash-generating unit and also to apply a suitable discount rate in order to determine the present value of those cash flows.

e) Income taxes

There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises tax liabilities based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the period in which such determination is made.

No income tax and deferred tax provision are to be recognised in respect of business source income for the companies in the Group which are awarded with Pioneer Status, which grants tax exemption.

f) Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the policy stated in Note 2 (n).

The recoverable amounts of the cash-generating unit (“CGU”) are determined based on the value-in-use method, which requires the use of estimates. The value-in-use method applies a discounted cash flow model using cash flow projections based on approved budgets and forecasts covering a five year period. Further details are disclosed in Note 10(b).

g) Recognition of deferred tax

Significant management judgement is required to determine the amount of deferred tax that can be recognised, based upon the timing and level of future tax expense together with future tax planning strategies.



4. SIGNIFICANT ACCOUNTING ESTIMATES AND jUDGEMENTS (CONT’D)

h) Impairment of investment in unquoted corporations

The Group follows the guidance of the applicable FRS in Malaysia in determining whether there is a decline other than temporary in the fair value of its investment in unquoted corporations. This determination requires significant judgement. In making this judgement, the Group evaluates the quantitative and qualitative factors affecting the market position of the investee including the regulatory support it receives and its longer term business outlook and financial standing. Appropriate considerations are given to the investee’s financial gestation period, financial projections, business prospects and the proprietary technology involved.

It is also recognised that investments in new start-up investee companies may result in an initial decline of the fair value of such investments, which is deemed temporary, due to development and operational losses in the initial years. The Board of Directors and the Management of the Company are of the opinion that there is no indication of impairment in the Group’s investment in the unquoted corporations at this juncture.

i) Fair value estimates for certain financial assets and liabilities

The Group carries certain financial assets and liabilities at fair value, which require extensive use of accounting estimates and judgement. While significant components of fair value measurement were determined using verifiable objective evidence, the amount of changes in fair value would differ if the Group uses different valuation methodologies. Any changes in fair value of these assets and liabilities would affect profit and equity.

5. FINANCIAL RISK MANAGEMENT POLICIES

The Group’s and the Company’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s and the Company’s business whilst managing its risks. The Group’s and the Company’s activities expose it to limited financial risk, principally market risk, credit risk, interest rate risk, foreign currency risk, liquidity and cash flow risk. The Board reviews and agrees policies in respect of the major areas of treasury activities which are as follows:

a) Market risk

The Group has in place policies to manage its competitive risks from its competitors in providing better and more innovative products and services. The Group regularly takes part in exhibitions, advertise through the media and make face-to-face customer visits to promote its products and services.

b) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations.

The Group’s exposure to credit risk or the risk of counterparties defaulting, arises mainly from receivables. The maximum exposure to credit risk is represented by the total carrying amount of these financial assets in the statement of financial position reduced by the effects of any netting arrangements with counter parties.

The Group does not have any major concentration of credit risk related to any individual customer or counter party nor does it have any major concentration of credit risk related to any financial instruments.

The Group manages its exposure to credit risk by investing its cash assets safely and profitably and by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis.

Exposure to credit risk

At the end of the financial year, the Company’s maximum exposure to credit risk is represented by:

i) The carrying amount of each class of financial assets recognised in the statements of financial position.


5. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D)

b) Credit risk (cont’d)

Credit risk concentration profile

The credit risk concentration profile of the Group’s and the Company’s trade receivables at the financial year end by geographical region are as follows:


Malaysia 1,814,174 2,665,004 253,272 417,234Europe 14,362,008 13,992,526 851,715 698,118USA 345,550 446,390 – 126,220Australia 141,341 152,651 – –North Asia 7,483,548 14,028,742 – 462

24,146,621 31,285,313 1,104,987 1,242,034

c) 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 and the Company are exposed to interest rate risk in respect of its bank overdraft and borrowings which will fluctuate as a result of changes in market interest rates. The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings.

The maturity dates and the effective interest rates of the instruments at year end are as follows:

2011 2010 EFFECTIvE EFFECTIvE INTEREST INTEREST MATURITY RATES MATURITY RATES

Group

Fixed deposit 3 months 3.03% – –

Bank borrowings– Bank acceptance 93 – 97 days 4.62% 49 – 89 days 4.33%– Export credit refinancing – – 120 days 4.30%– Hire purchase creditors 3 – 35 months 6.83% 1 – 47 months 6.17%– Revolving credit – 1.25% – 1.25%– Term loans 25 – 67 months 6.75% 37 – 81 months 6.48%– Foreign currency trust receipt 90 days 1.84% – –– Bank overdraft – 7.64% – 7.46%

Company

Bank borrowings– Hire purchase creditors – – 6 months 5.21%

Sensitivity analysis for interest rate risk

At the end of the financial year, if average interest rates increase/decrease by 1% with all other variables held constant, the Company’s profit net of tax will be lower/higher by approximately RM340,600 (2010: RM272,100). The assumed movement in interest rates for interest rate sensitivity analysis is based on the current observable market environment.




d) 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.

The Group is exposed to foreign exchange risk on sales and purchases that are denominated in foreign currencies. It manages its foreign exchange exposure by a policy of matching as far as possible receipts and payments in each individual currency.

Surpluses of convertible currencies are either retained in foreign currency or sold for Ringgit Malaysia. The Group’s foreign currency transactions and balances are substantially denominated in United States Dollar (“USD”), Euro, Singapore Dollar (“SGD”), Australian Dollar (“AUD”), Sterling Pound (“GBP”), Hong Kong Dollar (“HKD”), Korean Won (“KRW”) and Swiss Franc (“CHF”).

Foreign exchange risk is monitored closely and managed to an acceptable level.

The Group’s and the Company’s exposure to foreign currency risk, based on carrying amounts as at the end of the financial year is as follows:

TRADE AND CASH AND TRADE AND NET DENOMINATED IN: OTHER RECEIvABLES BANK BALANCES OTHER PAYABLES ExPOSURE RM RM RM RM

Group

2011USD 22,199,931 10,513,200 (21,482,820) 11,230,311Euro 962,085 228,012 (179,412) 1,010,685SGD – – (122,655) (122,655)AUD 748 93,834 (18,797) 75,785GBP – – (93,200) (93,200)HKD 3,148 144,334 (8,593) 138,889KRW 15,414 137,908 (5,537) 147,785CHF – – (734,894) (734,894)

2010USD 28,167,771 934,378 (20,713,835) 8,388,314Euro 868,620 34,953 (1,539,910) (636,337) SGD 161,358 – (185,479) (24,121) AUD 98,378 108,175 (55,952) 150,601GBP – – (55,685) (55,685) HKD 5,409 154,221 (4,732) 154,898KRW 15,418 137,940 – 153,358CHF – – – –

Company

2011USD 851,715 2,020,670 (6,240) 2,866,145

2010USD 824,800 272 (33,599) 791,473



d) Foreign currency risk (cont’d)

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s and the Company’s profit net of tax to a reasonably possible change in the USD, Euro, GBP, SGD, AUD, GBP, HKD, KRW and CHF exchange rate against the respective functional currencies of the Group, with all other variables held constant.

INCREASE/(DECREASE) IN PROFIT NET OF TAx GROUP COMPANY 2011 2010 2011 2010 RM RM RM RM

USD/MYR – strengthened by 5% 561,516 419,416 45,172 12,805 – weakened by 5% (561,516) (419,416) (45,172) (12,805)

Euro/MYR – strengthened by 5% 50,534 (31,817) – – – weakened by 5% (50,534) 31,817 – –

SGD/MYR – strengthened by 5% (6,133) (1,206) – – – weakened by 5% 6,133 1,206 – –

AUD/MYR – strengthened by 5% 3,789 7,530 – – – weakened by 5% (3,789) (7,530) – –

GBP/MYR – strengthened by 5% (4,660) (2,784) – – – weakened by 5% 4,660 2,784 – –

HKD/MYR – strengthened by 5% 6,944 7,745 – – – weakened by 5% (6,944) (7,745) – –

KRW/MYR – strengthened by 5% 7,389 7,668 – – – weakened by 5% (7,389) (7,668) – –

CHF/MYR – strengthened by 5% (36,745) – – – – weakened by 5% 36,745 – – –

e) Liquidity and cash flow risk

Liquidity risk is the risk that the Group or the Company will encounter in meeting financial obligations due to shortage of funds.

The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient levels of cash to meet its working capital requirements.

In addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from both the capital markets and financial institutions and prudently balances its portfolio with some short term fundings so as to achieve overall cost effectiveness.




e) Liquidity and cash flow risk (cont’d)

Analysis of financial instruments by remaining contractual maturities

The table below summarises the maturity profile of the Group’s and the Company’s liabilities at the reporting date based on contractual undiscounted repayment obligations.

ON DEMAND OR WITHIN ONE TO OvER FIvE ONE YEAR FIvE YEARS YEARS TOTAL RM RM RM RM

Group

2011Trade and other payables 30,718,261 – – 30,718,261Amount due to a Director 2,209,517 – – 2,209,517Loans and borrowings 31,566,858 2,297,147 196,214 34,060,219

64,494,636 2,297,147 196,214 66,987,997

2010Trade and other payables 29,706,872 – – 29,706,872Amount due to a Director 2,209,517 – – 2,209,517Loans and borrowings 23,905,806 2,601,846 704,869 27,212,521

55,822,195 2,601,846 704,869 59,128,910

Company

2011Trade and other payables 365,395 – – 365,395Amount due to a Director 2,351 – – 2,351Amount due to subsidiary companies 6,771,934 – – 6,771,934

7,139,680 – – 7,139,680

2010Trade and other payables 458,834 – – 458,834Amount due to a Director 2,351 – – 2,351Amount due to subsidiary companies 8,000 – – 8,000Loans and borrowings 14,389 – – 14,389

483,574 – – 483,574


6. PROPERTY, PLANT AND EQUIPMENT

COST AT ExCHANGE WRITTEN ADjUSTMENTS/ AT 01.01.11 DIFFERENCES ADDITIONS DISPOSALS OFF TRANSFERS 31.12.11 GROUP RM RM RM RM RM RM RM

2011At costFreehold land 1,166,667 – – – – – 1,166,667Buildings 4,495,733 – 42,671 – – – 4,538,404Air conditioners 599,989 – 1,200 – – – 601,189Electrical

installation 512,160 – 76,702 – – – 588,862Equipment 1,517,957 – 313,590 – – – 1,831,547Furniture and

fittings 770,697 (1) 8,305 – – – 779,001Office equipment 148,846 – 16,173 (1,160) – – 163,859Renovation 2,559,354 519 19,533 – – – 2,579,406Machinery and

equipment 4,384,366 – 2,369,032 – – – 6,753,398Motor vehicles 1,134,658 – – (172,669) – – 961,989Testing equipment 173,617 – 11,060 – – – 184,677Computers 1,704,273 323 153,815 (15,329) (2,333) – 1,840,749Construction

in progress – – 453,477 – – – 453,477

19,168,317 841 3,465,558 (189,158) (2,333) – 22,443,225

COST AT ExCHANGE WRITTEN ADjUSTMENTS/ AT 01.01.10 DIFFERENCES ADDITIONS DISPOSALS OFF TRANSFERS 31.12.10 GROUP RM RM RM RM RM RM RM

2010At costFreehold land 1,166,667 – – – – – 1,166,667Buildings 4,465,136 – 30,597 – – – 4,495,733Air conditioners 578,231 – 21,758 – – – 599,989Electrical

installation 506,375 – 5,785 – – – 512,160Equipment 1,321,744 – 196,213 – – – 1,517,957Furniture and

fittings 763,531 (332) 7,498 – – – 770,697Office equipment 143,476 – 5,370 – – – 148,846Renovation 2,538,562 (2,128) 22,920 – – – 2,559,354Machinery and

equipment 3,095,894 – 1,288,472 – – – 4,384,366Motor vehicles 1,220,158 – – (85,500) – – 1,134,658Testing equipment 134,515 – 39,102 – – – 173,617Computers 1,578,568 (809) 126,939 (425) – – 1,704,273

17,512,857 (3,269) 1,744,654 (85,925) – – 19,168,317



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

ACCUMULATED DEPRECIATION DEPRECIATION AT ExCHANGE CHARGE FOR WRITTEN ADjUSTMENTS/ AT 01.01.11 DIFFERENCES THE YEAR DISPOSALS OFF TRANSFERS 31.12.11 GROUP RM RM RM RM RM RM RM

2011At costFreehold land – – – – – – –Buildings 349,658 – 102,148 – – – 451,806Air conditioners 340,271 – 71,836 – – – 412,107Electrical

installation 259,935 – 76,829 – – – 336,764Equipment 640,399 – 247,022 – – – 887,421Furniture and

fittings 513,912 – 74,315 – – – 588,227Office equipment 110,877 – 14,148 (1,159) – – 123,866Renovation 1,349,939 242 378,682 – – – 1,728,863Machinery and

equipment 2,417,975 – 632,351 – – – 3,050,326Motor vehicles 679,136 – 174,126 (164,574) – – 688,688Testing equipment 112,735 – 23,735 – – – 136,470Computers 1,439,065 174 144,678 (13,555) (1,540) – 1,568,822Construction

in progress – – – – – – –

8,213,902 416 1,939,870 (179,288) (1,540) – 9,973,360

ACCUMULATED DEPRECIATION DEPRECIATION AT ExCHANGE CHARGE FOR WRITTEN ADjUSTMENTS/ AT 01.01.10 DIFFERENCES THE YEAR DISPOSALS OFF TRANSFERS 31.12.10 GROUP RM RM RM RM RM RM RM

2010At costFreehold land – – – – – – –Buildings 248,073 – 101,585 – – – 349,658Air conditioners 270,252 – 70,019 – – – 340,271Electrical

installation 192,334 – 67,601 – – – 259,935Equipment 437,375 – 203,024 – – – 640,399Furniture and

fittings 435,912 – 78,000 – – – 513,912Office equipment 97,508 – 13,369 – – – 110,877Renovation 972,690 (266) 377,515 – – – 1,349,939Machinery and

equipment 1,985,408 – 432,567 – – – 2,417,975Motor vehicles 558,139 – 206,496 (85,499) – – 679,136Testing equipment 89,659 – 23,076 – – – 112,735Computers 1,335,927 (111) 103,674 (425) – – 1,439,065

6,623,277 (377) 1,676,926 (85,924) – – 8,213,902



NET CARRYING AMOUNT AT AT 2011 2010 GROUP RM RM

Freehold land 1,166,667 1,166,667Buildings 4,086,598 4,146,075Air conditioners 189,082 259,718Electrical installation 252,098 252,225Equipment 944,126 877,558Furniture and fittings 190,774 256,785Office equipment 39,993 37,969Renovation 850,543 1,209,415Machinery and equipment 3,703,072 1,966,391Motor vehicles 273,301 455,522Testing equipment 48,207 60,882Computers 271,927 265,208Construction in progress 453,477 –

12,469,865 10,954,415

COST AT WRITTEN AT 01.01.11 ADDITIONS DISPOSALS OFF 31.12.11 COMPANY RM RM RM RM RM

2011Freehold land 700,000 – – – 700,000Office buildings 1,489,365 – – – 1,489,365Air conditioners 22,213 1,200 – – 23,413Furniture and fittings 52,571 – – – 52,571Office equipment 60,068 4,844 – – 64,912Renovation 1,278,918 – – – 1,278,918Machineries 34,676 – – – 34,676Motor vehicles 143,000 – – – 143,000Testing equipment 165,117 960 – – 166,077Computers 672,221 18,955 – – 691,176

4,618,149 25,959 – – 4,644,108

COST AT WRITTEN AT 01.01.10 ADDITIONS DISPOSALS OFF 31.12.10 COMPANY RM RM RM RM RM

2010Freehold land 700,000 – – – 700,000Office buildings 1,489,365 – – – 1,489,365Air conditioners 21,413 800 – – 22,213Furniture and fittings 52,571 – – – 52,571Office equipment 60,068 – – – 60,068Renovation 1,278,918 – – – 1,278,918Machineries 34,676 – – – 34,676Motor vehicles 143,000 – – – 143,000Testing equipment 134,515 30,602 – – 165,117Computers 657,801 14,420 – – 672,221

4,572,327 45,822 – – 4,618,149




ACCUMULATED DEPRECIATION DEPRECIATION AT CHARGE FOR WRITTEN AT 01.01.11 THE YEAR DISPOSALS OFF 31.12.11 COMPANY RM RM RM RM RM

2011Freehold land – – – – –Office buildings 134,043 29,787 – – 163,830Air conditioners 21,463 300 – – 21,763Furniture and fittings 45,895 2,463 – – 48,358Office equipment 40,980 6,518 – – 47,498Renovation 759,135 184,583 – – 943,718Machineries 30,641 2,305 – – 32,946Motor vehicles 128,700 14,299 – – 142,999Testing equipment 112,522 20,987 – – 133,509Computers 624,559 28,632 – – 653,191

1,897,938 289,874 – – 2,187,812

ACCUMULATED DEPRECIATION DEPRECIATION AT CHARGE FOR WRITTEN AT 01.01.11 THE YEAR DISPOSALS OFF 31.12.11 COMPANY RM RM RM RM RM

2010Freehold land – – – – –Office buildings 104,256 29,787 – – 134,043Air conditioners 21,413 50 – – 21,463Furniture and fittings 41,975 3,920 – – 45,895Office equipment 33,576 7,404 – – 40,980Renovation 572,305 186,830 – – 759,135Machineries 28,336 2,305 – – 30,641Motor vehicles 100,100 28,600 – – 128,700Testing equipment 89,659 22,863 – – 112,522Computers 598,035 26,524 – – 624,559

1,589,655 308,283 – – 1,897,938



NET CARRYING AMOUNT AT AT 2011 2010 COMPANY RM RM

Freehold land 700,000 700,000Office buildings 1,325,535 1,355,322Air conditioners 1,650 750Furniture and fittings 4,213 6,676Office equipment 17,414 19,088Renovation 335,200 519,783Machineries 1,730 4,035Motor vehicles 1 14,300Testing equipment 32,568 52,595Computers 37,985 47,662

2,456,296 2,720,211

Details of assets under hire purchase financing:


Motor vehicles – cost 697,948 1,002,356 – 143,000 – net carrying amount at year end 267,547 445,168 – 14,300

Machinery and equipment – cost 635,662 635,662 – – – net carrying amount at year end 357,399 484,531 – –

The freehold land and office buildings of the Company are charged to a financial institution for various credit facilities granted to the Group. (Note 15 and Note 18)

The net carrying amount of assets pledged as security for bank borrowings are as follows:


Freehold land 1,166,667 1,166,667 700,000 700,000Office buildings 4,086,598 4,146,075 1,325,535 1,355,322

5,253,265 5,312,742 2,025,535 2,055,322



7. PREPAID LAND LEASES

GROUP 2011 2010 RM RM

At costAt beginning/end of the year 900,000 900,000

Accumulated amortisationAt beginning of the year 71,052 47,368Charge for the financial year 23,684 23,684

At end of the year 94,736 71,052

Net carrying amount 805,264 828,948

Analysed as: Short term leasehold land 805,264 828,948

The prepaid land leases has been charged to licensed commercial banks for various credit facilities granted to the Group. (Note 15 and Note 18)

8. INTANGIBLE ASSETS


Computer software

CostAt beginning of the year 1,289,992 1,289,951 1,176,537 1,176,537Addition during the year 81,535 – 37,200 –Written off during the year (1,573) – – –Exchange differences 14 41 – –

At end of the year 1,369,968 1,289,992 1,213,737 1,176,537

Accumulated amortisationAt beginning of the year 468,573 387,330 383,144 322,609Addition during the year 80,757 81,218 61,089 60,535Written off during the year (829) – – –Exchange differences 4 25 – –

At end of the year 548,505 468,573 444,233 383,144

Net carrying amount 821,463 821,419 769,504 793,393

The computer software is amortised over its useful life of 5 years.


9. INvESTMENT IN SUBSIDIARY COMPANIES

COMPANY 2011 2010 RM RM

Unquoted shares, at costIn Malaysia 9,554,844 7,354,844Outside Malaysia 161,775 164,125

9,716,619 7,518,969Less: Impairment loss (491,774) (491,774)

Written off during the year – (2,350)

9,224,845 7,024,845

The principal activities of the subsidiary companies are as follows:

COUNTRY OF EFFECTIvE INTERESTNAME INCORPORATION 2011 2010 PRINCIPAL ACTIvITIES

EMB Technology Sdn. Bhd. Malaysia 100% 100% Investment holding

BIG’ant (M) Sdn. Bhd. Malaysia 55% 55% End-to-end solution provider of digital pen and paper (DPP) technology

K-One Electronics Sdn. Bhd. (Formerly known as Syslink Sdn. Bhd.)

Malaysia 100% 100% Development and manufacture of wire harness and electronic related accessories

K-One Resources Sdn. Bhd. Malaysia 100% 100% Manufacturing of electronic products

K-One Systems Sdn. Bhd. Malaysia 100% 100% Dormant

K-One Technology (Korea) Corporation* Korea 100% 100% Development and manufacturing of electronic products

K-One International Limited* Hong Kong 100% 100% Procurement, sourcing and outsourcing

Subsidiary company of BIG’ant (M) Sdn. Bhd.:

BIG’ant (Aus) Pty. Ltd.* Australia 100%** 100%** End-to-end solution provider of digital pen and paper (DPP) technology

Subsidiary company of EMB Technology Sdn. Bhd.:

K-One Industry Sdn. Bhd. Malaysia 100%*** 100%*** Design and development of manufacturing process/tools and manufacturing of electronic end-products and sub-systems

Subsidiary company of K-One Industry Sdn. Bhd.:

K-One Manufacturing Sdn. Bhd. Malaysia 100%**** 100%**** Development and manufacturing of electronic products and sub-systems

* Subsidiaries not audited by Hasnan THL Wong & Partners.** Direct interest by BIG’ant (M) Sdn. Bhd.*** Direct interest by EMB Technology Sdn. Bhd.**** Direct interest by K-One Industry Sdn. Bhd.



10. GOODWILL ON CONSOLIDATION


At cost:Goodwill on acquisition of subsidiaries:

At beginning/end of the year 5,545,761 5,545,761

a) Goodwill is stated at cost and reviewed for impairment annually.

Goodwill from the acquisition of subsidiary companies have been allocated to the Group’s cash-generating unit (“CGU”) according to the principal activities as follows:

2011 2010 RM RM

Sales of digital pens and paper 22,543 22,543Development and manufacturing of wire harness and electronic related accessories 5,523,218 5,523,218

5,545,761 5,545,761

During the financial year, the Group assessed the recoverable amount of the goodwill and determined that the goodwill is not impaired.

b) Key assumptions used in value-in-use calculations:

The Group undertakes an annual test for impairment of its cash-generating unit (“CGU”). Based on the impairment test, no impairment loss was recognised for the carrying amount of goodwill during the period as its recoverable amount was in excess of its carrying amount.

The recoverable amount of CGU is determined based on the value-in-use calculations derived from after-tax cash flow projections which were based on financial budgets approved by the management covering a five year period. The Company prepares cash flow forecasts derived from the most recent financial budget and extrapolates it into the next five years. These computations were derived from the assumptions that the CGU will have a significant increase in business and profitability. The business growth is expected to derive from the penetration of new markets, expansion of customer base and increased competencies in manufacturing capabilities. The discount rate used was 7%, average gross margin was 24% and revenue growth rate that are consistent within the industry.

11. INvENTORIES

Inventories comprise of the following:


At costDigital pens 162,442 185,917 – –Electronic components and accessories 45,441,264 45,900,182 – 123,736GPS – 6,793,014 – 6,793,014

45,603,706 52,879,113 – 6,916,750At net realisable valueTools and moulds 2,248,132 3,424,358 2,248,132 3,424,358GPS 3,083,286 – 3,083,286 –

50,935,124 56,303,471 5,331,418 10,341,108


12. TRADE RECEIvABLES


Trade receivables 24,438,516 31,577,208 1,104,987 1,242,034Less: Allowance for impairment (291,895) (291,895) – –

24,146,621 31,285,313 1,104,987 1,242,034

Trade receivables are non-interest bearing and are generally on 30 to 90 days (2010: 30 to 90 days) terms. They are recognised at their original invoice amounts which represent their fair value on initial recognition.

Aging analysis of trade receivables

The aging analysis of the Group’s trade receivables is as follows:


Neither past due nor impaired 19,907,925 29,951,324 929,133 885,173Past due not impaired:

1 to 30 days 1,707,289 389,839 28,583 21,425 31 to 60 days 1,609,573 362,523 – 15,490 61 to 90 days 617,713 345,426 – 310,181 91 to 120 days 23,784 113,245 – 2,910 More than 121 days 280,337 122,956 147,271 6,855

24,146,621 31,285,313 1,104,987 1,242,034Impaired 291,895 291,895 – –

24,438,516 31,577,208 1,104,987 1,242,034

Trade receivables that are neither past due nor impaired

Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. More than 82% (2010: 96%) of the Group’s trade receivables arise from customers with a few years of experience with the Group and losses have rarely occurred.

Trade receivables that are past due but not impaired

The Group and the Company have trade receivables amounting to RM4,238,696 (2010: RM1,333,989) and RM175,854 (2010: RM356,861) respectively that are past due at the end of the financial year but not impaired.

The trade receivables that are past due but not impaired are unsecured in nature. The management is confident that the amounts are recoverable as these accounts are still active.

Trade receivables that are impaired

The Group’s trade receivables that are impaired at the end of the financial year and the movement of the allowance accounts used to record the impairment are as follows:


Individually impaired: Trade receivables – nominal amounts 352,024 352,024 Less: Allowance for impairment (291,895) (291,895)

60,129 60,129



12. TRADE RECEIvABLES (CONT’D)

Movement in allowance accounts:


At 1 January 291,895 –Charge for the year (Note 24) – 291,895

At 31 December 291,895 291,895

Trade receivables that are individually determined to be impaired at the end of the financial year relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.

13. OTHER RECEIvABLES


Analysed to: Non-trade receivables 2,113,139 1,667,090 1,978,501 1,573,674 Deposits 134,200 119,988 28,538 24,658 Prepayments 1,072,294 914,741 111,347 145,080

3,319,633 2,701,819 2,118,386 1,743,412Less: Allowance for impairment (796,774) (796,774) (796,774) (796,774)

2,522,859 1,905,045 1,321,612 946,638

Movement in allowance accounts:

GROUP/COMPANY 2011 2010 RM RM

At 1 January 796,774 –Charge for the year (Note 24) – 796,774

At 31 December 796,774 796,774

Non-trade receivables that are individually determined to be impaired at the end of the financial year relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.

14. AMOUNT DUE FROM/(TO) SUBSIDIARY COMPANIES

Company

Amount due from/(to) subsidiary companies arose mainly from inter-company advances which bear no interest, unsecured, repayable on demand and are to be settled in cash.


15. CASH AND CASH EQUIvALENTS

Cash and cash equivalents included in the statements of cash flows comprise the following amounts:


Fixed deposits 503,740 – – –Cash and bank balances 12,776,061 7,473,873 2,496,741 105,900Bank overdraft – secured (6,854,875) (1,963,071) – –

6,424,926 5,510,802 2,496,741 105,900Less: Fixed deposits pledged (503,740) – – –

5,921,186 5,510,802 2,496,741 105,900

Group

The bank overdraft is secured by way of:

a) first legal charge over the Group’s freehold land, buildings and prepaid land leases;

b) a corporate guarantee by K-One Technology Berhad; and

c) pledge of fixed deposit of RM503,740, interest earned is to be capitalised.

The weighted average effective interest rates are as disclosed in Note 5 of the Notes to the Financial Statements.

16. OTHER PAYABLES


Analysed to: Non-trade payables 544,461 788,097 184,873 208,406 Accruals 817,443 767,952 103,962 106,253 Deposit received 8,860 8,860 8,860 8,860

1,370,764 1,564,909 297,695 323,519

17. AMOUNT DUE TO A DIRECTOR

Group and Company

The amount due to a Director bears no interest, unsecured and no scheme of repayment has been arranged. The amount due is to be settled in cash.



18. BORROWINGS


Current Secured Banker acceptance 18,684,426 19,894,000 – – Export credit refinancing – 249,358 – – Hire purchase creditors 252,415 299,808 – 14,389 Revolving credit 1,000,000 1,000,000 – – Term loans 528,111 499,569 – – Foreign currency trust receipts 4,247,031 – – –

24,711,983 21,942,735 – 14,389

Non-current Secured Hire purchase creditors 324,615 580,636 – – Term loans 2,168,746 2,726,079 – –

2,493,361 3,306,715 – –

27,205,344 25,249,450 – 14,389

The short term borrowings (banker acceptance, export credit refinancing, letter of credit, revolving credit, and foreign currency trust receipts) of RM23,931,457 (2010: RM21,143,358) are secured by way of:

a) first legal charge over the Group’s freehold land, buildings and prepaid land leases;

b) a corporate guarantee by K-One Technology Berhad; and

c) pledge of fixed deposit of RM503,740, interest earned is to be capitalised.

The term loans amounting to RM2,696,857 (2010: RM3,225,648) is secured by way of:

a) first legal charge over the Group’s freehold land, buildings and prepaid land leases; and

b) a corporate guarantee by K-One Technology Berhad.

The weighted average effective interest rates are as disclosed in Note 5 of the Notes to the Financial Statements.


18. BORROWINGS (CONT’D)


Repayment terms

Bank borrowings (excluding hire purchase) – not later than 1 year 24,459,568 21,642,927 – – – later than 1 year and not later than 2 years 566,028 533,816 – – – later than 2 years and not later than 5 years 1,406,504 1,487,394 – – – later than 5 years 196,214 704,869 – –

26,628,314 24,369,006 – –

Hire purchase creditorsMinimum instalment payments:

– not later than 1 year 281,183 347,510 – 14,593 – later than 1 year and not later than 5 years 341,453 626,269 – –

622,636 973,779 – 14,593 Future finance charges on hire purchase creditors (45,606) (93,335) – (204)

Present value of hire purchase creditors 577,030 880,444 – 14,389

Present value of hire purchase creditors – not later than 1 year 252,415 299,808 – 14,389 – later than 1 year and not later than 5 years 324,615 580,636 – –

577,030 880,444 – 14,389

19. DEFERRED TAx LIABILITY/(ASSET)


At beginning of the year 76,771 76,441 – –Exchange differences 1,229 7,130 – –

78,000 83,571 – –

Recognised in statements of comprehensive income (Note 25)– current year relating to temporary differences (43,900) 13,700 – –– current year relating to unrealised

foreign currency exchange loss (34,100) (4,100) – –– over provision in prior year relating to

temporary differences – (46,241) – –– under provision in prior year relating to

unrealised foreign currency exchange gain – 29,841 – –

(78,000) (6,800) – –

At end of the year – 76,771 – –



19. DEFERRED TAx LIABILITY/(ASSET) (CONT’D)

As at the end of the financial year, the amount of deferred tax liability in respect of subsidiary companies that has been recognised in the statements of financial position is as follows:


Tax effect of the excess of property, plant and equipment’s net carrying amount over its tax written down value – 43,900

Tax effect of unrealised foreign currency exchange loss – 32,871

Deferred tax liability – 76,771

Deferred tax liability in respect of subsidiary companies has been recognised as the subsidiary companies do not have any tax exemption granted.

No deferred tax liability for the Company is recognised as it was awarded with Pioneer Status, which grants tax exemption for a period of five years, with effect from financial year 2007.

As at the end of the financial year, the amount of deferred tax (asset)/liability in respect of the Group and the Company that has not been recognised in the statement of financial position is as follows:


Tax effect of the excess of property, plant and equipment’s net carrying amount over its tax written down value 814,900 631,900 193,400 215,600

Tax effect of unrealised foreign currency exchange loss (16,200) (42,300) 4,000 (2,900)Tax effect of unutilised capital allowances (148,600) (8,700) (34,000) –Tax effect of unutilised re-investment allowances (24,600) – – –Tax effect of unabsorbed tax losses (4,203,800) (1,572,900) (144,700) –

Deferred tax (asset)/liability (3,578,300) (992,000) 18,700 212,700

Deferred tax asset has not been recognised in respect of the above items as it is not probable that sufficient taxable profits will be available against which the items can be utilised.

20. SHARE CAPITAL

NUMBER OF ORDINARY SHARES OF RM0.10 EACH GROUP AND COMPANY 2011 2010 2011 2010 GROUP AND COMPANY RM RM RM RM

Authorised: At beginning of the year 250,000,000 250,000,000 25,000,000 25,000,000 Created during the year 1,250,000,000 – 125,000,000 –

At end of the year 1,500,000,000 250,000,000 150,000,000 25,000,000

Issued and fully paid: At beginning of the year 113,953,000 112,711,000 11,395,300 11,271,100Issued during the year:

Bonus issue 227,906,000 – 22,790,600 – Pursuant to ESOS – 1,242,000 – 124,200

At end of the year 341,859,000 113,953,000 34,185,900 11,395,300

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


21. RESERvES


Non-distributable

Share premiumAt beginning of the year 15,116,780 14,893,220 15,116,780 14,893,220

Pursuant to ESOS of 1,242,000 ordinary shares at a premium of RM0.18 per share – 223,560 – 223,560

Bonus issue (15,116,780) – (15,116,780) –

– 15,116,780 – 15,116,780

Foreign exchange reserveExchange differences of translation of

overseas subsidiary companies (36,382) (75,286) – –

Distributable: Unappropriated profits 9,700,536 29,600,268 2,050,384 11,003,939

9,664,154 44,641,762 2,050,384 26,120,719

22. REvENUE


Research, design and development of electronic end-products and sub-systems 5,721,399 4,713,386 6,217,008 4,922,826

Manufacturing of electronic end-products and sub-systems 107,609,799 111,001,815 – –

Sale of consumer electronic products 233,222 705,640 233,222 705,640Sale of digital pens and paper 1,177,074 2,049,596 – –Development and manufacturing of

wire harness and electronic related accessories 22,514,571 14,328,444 – –

137,256,065 132,798,881 6,450,230 5,628,466

23. FINANCE COSTS


Banker acceptance interest 1,062,582 649,137 – –Bank overdraft interest 319,841 238,784 – –Export credit refinancing interest 1,607 26,762 – –Hire purchase interest 47,903 37,973 204 1,456Receivable financing interest 134,895 – – –Revolving interest 44,140 34,689 – –Term loan interest 189,990 225,478 – –Trust receipt interest 11,641 – – –

1,812,599 1,212,823 204 1,456



24. (LOSS)/PROFIT BEFORE TAxATION

(Loss)/profit before taxation has been determined after charging/(crediting) amongst other items the following:


Amortisation of computer software 80,757 81,218 61,089 60,535Amortisation of prepaid land lease premium 23,684 23,684 – –Auditors remuneration:

– statutory audits – current year 118,320 103,910 27,000 22,000 – under provision in prior year – 600 – –

– other services – 50,000 – 50,000Bad debts written off 92,470 – – –Depreciation of property, plant and equipment 1,939,870 1,676,926 289,874 308,283Directors’ fees 48,000 68,000 48,000 68,000Directors’ other emoluments 1,083,790 971,332 – –Foreign currency exchange (gain)/loss

– realised (856,542) 1,652,966 (195,722) 131,951 – unrealised 64,208 (276,967) (16,182) 11,834

Impairment of investment in subsidiary companies – – – 491,774Impairment loss on receivables

– trade – 291,895 – – – non-trade – 796,774 – 796,774

Intangible asset written off 744 – – –Inventories written down 3,250,347 – 3,250,347 –Inventories written off 7,379,116 – – –Investment in subsidiary company written off – (6,447) – 2,350Property, plant and equipment written off 793 – – –Rental of booth 880 50 880 50Rental of equipment 6,050 32,669 6,050 12,755Rental of generator – 1,000 – –Rental of photocopier machine 4,420 6,800 – –Rental of server 1,950 – – –Staff premises rental 53,500 47,100 – –Terminal rental 3,680 2,520 3,680 2,520Factory/office rental 118,474 177,186 46,853 43,584Withholding tax 37,341 – – –Dividend income – – – (7,690,600) Insurance claim (13,600) (999) (13,600) (999)Interest income (4,480) (65,093) – (44) Gain on disposal of property,

plant and equipment (56,550) (30,212) – –Rental income (29,040) (29,040) (29,040) (29,040)

The estimated monetary value of benefits provided to the Directors of the Group during the financial year are as disclosed in Note 31 of the Notes to the Financial Statements.


25. TAxATION


Malaysian taxation: Current year tax expenses – 120,900 – – Deferred tax (Note 19) (42,300) 9,600 – –

(42,300) 130,500 – –

(Over)/under provision in prior years: Tax expenses (1,567) 11,984 11 16,761 Deferred tax (Note 19) – (16,400) – –

(1,567) (4,416) 11 16,761

Australian taxation: Current year tax expenses 43 – – – Deferred tax (Note 19) (35,700) – – –

(35,657) – – –

(79,524) 126,084 11 16,761

Group

There is no current year tax expense for the Hong Kong and Korea operations as these operations have no chargeable income.

The Australian income tax has been provided in the financial statements at 30% on the profit for the financial year.

Income tax of the Malaysian subsidiary companies is calculated at the rate of 25% on the estimated taxable profit. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

Company

Current year tax expense is in respect of the interest income earned during the financial year. There is no other tax expense during the financial year as the Company is awarded with Pioneer Status, which grants tax exemption for a period of five years, with effect from the financial year 2007 which resulted in tax savings of approximately RMNil (2010: RM20,300).

Effective 1 January 2008, the Company is given an irrevocable option to elect for the single tier system or continue to use its tax credit under Section 108 of Income Tax Act, 1967 for the purpose of dividend distribution until the tax credit is fully utilised or latest by 31 December 2013. The Company has elected to continue to use its tax credit under Section 108 of the Income Tax Act, 1967.

Accordingly, during the transitional period, the Company may utilise the tax credit in the Section 108 balance as at 31 December 2007 to distribute cash dividend payments to ordinary shareholders as defined under the Finance Act, 2007.

At the end of the financial year, subject to the agreement of the Inland Revenue Board, the Company has sufficient tax credit under Section 108 of the Income Tax Act, 1967 to frank the payment of net dividends of approximately RM752,000 (2010: RM752,000) out of its unappropriated profits as at 31 December 2011 without incurring any additional tax liability.

The Company has a tax exempt account of approximately RM7,061,100 (2010: RM7,061,100) available to frank the payment of tax exempt dividends, which are subject to the agreement of the Inland Revenue Board.



25. TAxATION (CONT’D)

As mentioned in the preceding paragraphs, the Company’s business income is exempted from tax in accordance to its Pioneer Status. However, non-business income is chargeable to tax and income tax is calculated at the rate of 25% on the estimated taxable profit. A reconciliation of average effective tax rate applicable to (loss)/profit before taxation to effective statutory tax rate is as follows:


(Loss)/profit before taxation (12,305,436) 7,992,986 (1,279,724) 6,735,407

% % % %

Average effective tax rate for the year 0.6 1.6 0.0 0.2Deferred tax asset/liability not recognised during the year 21.0 (0.1) 15.2 0.1Effect of different tax rate in foreign subsidiary companies 0.0 (0.1) – –Over/(under) provision in prior year 0.0 0.1 – (0.2)Tax effect of expense allowed for double deduction – 0.6 – –Tax effect of expenses not deductible for tax purpose 3.7 (9.3) 10.1 (1.7) Tax effect of income exempted from income tax (0.1) 26.7 (0.3) 26.6Tax effect of reinvestment allowance (0.2) 0.2 – –Utilisation of deferred tax asset not recognised in prior year – 5.3 – –

Effective statutory tax rate for the year 25.0 25.0 25.0 25.0

26. (LOSS)/EARNINGS PER SHARE

The basic earnings per share for the financial year is based on profit attributable to equity holders of the Company divided by the weighted average number of ordinary shares in issue during the financial year.


(Loss)/profit attributable to equity holders of the Company (12,225,912) 8,043,515

Weighted average number of ordinary shares of RM0.10 each 309,390,200 113,269,049

Basic (loss)/earnings per share (sen) (3.95) 7.10

The diluted earnings per share for the financial year is based on the profit attributable to the equity holders of the Company divided by the weighted average number of ordinary shares in issue during the financial year adjusted for the dilutive effects of all potential ordinary shares i.e. share options and warrants granted to employees.


(Loss)/profit attributable to equity holders of the Company (12,225,912) 8,043,515

Weighted average number of ordinary shares in issue 309,390,200 113,269,049Effects of dilution from share options and warrants 61,835,685 22,775,000

Adjusted weighted average number of ordinary shares in issue and issuable 371,225,885 136,044,049

Diluted (loss)/earnings per shares (sen) (3.29) 5.91

It is assumed that the exercise of share options and warrants which give effect to the dilution does not generate any yield.


27. ISSUANCE OF SHARES

GROUP AND COMPANY 2011 2010 RM RM

Issuance of 1,242,000 ordinary shares of RM0.10 each at RM0.28 per share pursuant to ESOS – 347,760

On 21 February 2011, the Company increased its share capital from RM11,395,300 to RM34,185,900 by issuance of 227,906,000 ordinary shares of RM0.10 each at par value by the capitalisation of RM22,790,600 of reserves as at 31 December 2010 by way of an issue of bonus shares of 2 for 1 ordinary share held. Such new ordinary shares have been allotted and credited as fully paid-up and rank pari passu with the existing ordinary shares.

28. PURCHASE OF INTANGIBLE ASSETS

During the financial year, the Group and the Company acquired intangible assets with an aggregate cost of RM81,535 (2010: RMNil) and RM37,200 (2010: RMNil) respectively by cash consideration.

29. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

During the financial year, the Group and the Company acquired property, plant and equipment as follows:


Cash payment 3,465,558 1,305,415 25,959 45,822Hire purchase financing – 439,239 – –

3,465,558 1,744,654 25,959 45,822

30. WARRANTS AND EMPLOYEE SHARE OPTION SCHEME

i) The warrants were constituted under the Deed Poll dated 7 June 2007.

Each of the warrant entitles the holder to the right of allotment of one ordinary share in the Company. The exercise price of the warrants will be fixed at a price to be decided upon by the Board based on market-based principles on the Price-Fixing Date. The exercise price will be fixed at a premium to be determined by the Board after taking into account the weighted average market price of K-One Tech Shares for the five (5) days preceding the price-fixing date. The subscription price and number of warrants are subject to adjustments under certain circumstances in accordance with the provisions of the Deed Poll.

The close of business on the warrants is five (5) years from the date of issuance of the warrants; thereafter the outstanding warrants will cease to be valid for any purpose.

The new ordinary shares allotted and issued upon exercise of the warrants shall be fully paid and rank pari passu with the then existing ordinary shares of the Company. The warrant holders will not have any voting rights in any general meeting of the Company unless the warrants are exercised into new ordinary shares and registered prior to the date of the general meeting of the Company.

The warrants are quoted on the ACE Market of Bursa Malaysia Securities Berhad.

As at 31 December 2011, the total number of warrants that remain unexercised are 61,236,000 (2010: 20,412,000). The total number of warrants addition during the financial year was due to the bonus issue entitlement of 2 bonus shares for every 1 ordinary share held.

ii) The Company implemented an Employee Share Option Scheme (“ESOS”) which came into effect on 30 December 2005 for a period of five (5) years. The ESOS is governed by the by-laws which were approved by the shareholders on 30 November 2005.

The Employees’ Share Option Scheme (“ESOS”) has expired on 30 December 2011. However, the ESOS Committee has reviewed, discussed and approved that the ESOS be extended for a further period of five (5) years from the date of expiry.



30. WARRANTS AND EMPLOYEE SHARE OPTION SCHEME (CONT’D)

The main features of the ESOS are as follows:

a) The eligibility for participation in the ESOS is at the discretion of the ESOS Committee. It is open to any eligible confirmed employee in the Company and certain of its subsidiary companies.

b) The total number of shares to be offered under the ESOS and in respect of which options may be granted shall not exceed 10% of the total issued and paid-up share capital of the Company at any point in time during the duration of the ESOS, such that not more than 50% of the shares available under the ESOS is allocated in aggregate to Directors and senior management.

c) The number of shares that may be offered and allotted to eligible employees under the ESOS is determined at the discretion of the ESOS Committee subject to no individual eligible employee receiving more than 10% of the shares available under the ESOS.

d) The option exercise price for each ordinary share of RM0.10 each shall be at a discount of not more than ten percent of the five (5)-day weighted average market price of the shares shown in the daily official list issued by Bursa Malaysia Securities Berhad at the time the option is granted or the par value of the shares of RM0.10, whichever is the higher. In the event the ESOS is made to the eligible employees prior to the admission of the Company on the ACE market of Bursa Malaysia Securities Berhad (“Bursa Securities”), the option price shall be the higher of the theoretical ex-bonus price after the public issue and bonus issue of RM0.10 (2010: RM0.28) or the par value of the shares.

e) The new shares to be allotted upon the exercise of any options will, upon allotment and issue, rank pari passu in all respects with the existing issued and paid-up shares of the Company, except that the new shares will not be entitled to any dividends, rights, allotments or other distributions, the Entitlement Date of which is prior to the date of allotment of the said shares.

Movement in the number of share options outstanding and their related weighted average exercise prices (“WAEP”) are as follows:

NUMBER OF SHARE OPTIONS AT BONUS ISSUE AT ExERCISABLE AT 1 jANUARY ENTITLEMENT GRANTED ExERCISED LAPSED 31 DECEMBER 31 DECEMBER

2011First Grant 2,363,000 4,726,000 – – – 7,089,000 7,089,000

Total 2,363,000 4,726,000 – – – 7,089,000 7,089,000

WAEP 0.28 0.10* – – – 0.10* 0.10*

2010First Grant 3,605,000 – – (1,242,000) – 2,363,000 2,363,000

Total 3,605,000 – – (1,242,000) – 2,363,000 2,363,000

WAEP 0.28 – – 0.28 – 0.28 0.28

ExERCISE PRICE ExERCISE SHARE OPTIONS RM PERIOD

2011First Grant 0.10* 30.12.2005 – 30.12.2015

2010First Grant 0.28 30.12.2005 – 30.12.2015

* Price adjusted after bonus issue entitlement

Fair value of share options granted during the financial year

As allowed by the transitional provisions in FRS 2 “Share-based payment”, the recognition and measurement principles have not been applied to these grants.


31. DIRECTORS’ REMUNERATION


Directors of the CompanyExecutive:

Salaries and other emoluments (Note 24 and 34) 1,083,790 724,984 – – Benefit-in-kind 28,000 28,000 – –

1,111,790 752,984 – –

Non-Executive: Fees (Note 24) 48,000 68,000 48,000 68,000

Other DirectorExecutive:

Salaries and other emoluments (Note 24 and 34) – 246,348 – –

Total 1,159,790 1,067,332 48,000 68,000


Analysis excluding benefit-in-kindTotal Executive Directors’ remuneration

excluding benefit-in-kind (Note 34) 1,083,790 971,332 – –

Total Non-Executive Directors’ remuneration 48,000 68,000 48,000 68,000

1,131,790 1,039,332 48,000 68,000

The number of Directors of the Group whose total remuneration during the financial year falling within the following bands are as follows:

NUMBER OF DIRECTORS 2011 2010

Executive Directors: Below RM50,000 – – RM50,001 – RM100,000 – – RM100,001 – RM150,000 – – RM150,001 – RM200,000 – – RM200,001 – RM250,000 – 1 RM250,001 – RM300,000 – – RM300,001 – RM350,000 – – RM350,001 – RM400,000 – 2 RM400,001 – RM450,000 – – RM450,001 – RM500,000 – – RM500,001 – RM550,000 2 –

2 3

Non-Executive Directors Below RM50,000 2 2



32. SIGNIFICANT RELATED PARTY TRANSACTIONS


Rental of factory paid to Directors 60,000 60,000 – –Sales to subsidiary companies – – 495,609 –

33. SEGMENT INFORMATION

a) The Group’s business activities can be categorised under the following business segments:

i) Research, design and development and sale of electronic end-products and sub-systems for the communication, computer and consumer electronics industries;

ii) Design and development of manufacturing process/tools and manufacturing of electronic end-products and sub-systems;

iii) Development and manufacturing of wire harness and electronic related accessories;

iv) End-to-end solution provider of digital pen and paper (DPP) technology; and

v) Investment holding.

RESEARCH, DESIGN AND DEvELOPMENT MANU- DPP INvESTMENT AND SALES FACTURING TECHNOLOGY HOLDING ELIMINATION TOTAL GROUP RM RM RM RM RM RM

2011

Revenue – External 5,954,621 130,124,370 1,177,074 – – 137,256,065 – Internal 495,609 6,254 – – (501,863) –

6,450,230 130,130,624 1,177,074 – (501,863) 137,256,065

ResultSegment results (1,279,520) (8,553,674) (334,269) (113,738) (211,636) (10,492,837)Finance costs (1,812,599)Income tax 79,524

Loss for the year (12,225,912)

Other informationSegment assets 13,480,558 96,148,750 574,772 322,678 – 110,526,758Unallocated corporate assets 311,336

Consolidated total assets 110,838,094

Segment liabilities 365,395 30,283,409 41,129 28,328 – 30,718,261Unallocated corporate liability 36,269,779

Consolidated total liabilities 66,988,040

Amortisation of computer software 61,089 14,734 4,934 – – 80,757Amortisation of prepaid

land lease premium – 23,684 – – – 23,684Bad debts written off – – 92,470 – – 92,470Capital expenditure 25,959 3,412,100 11,189 16,310 – 3,465,558Depreciation of property,

plant and equipment 289,874 1,630,992 15,100 3,904 – 1,939,870Inventories written down 3,250,347 – – – – 3,250,347Inventories written off – 7,379,116 – – – 7,379,116


33. SEGMENT INFORMATION (CONT’D)

RESEARCH, DESIGN AND DEvELOPMENT MANU- DPP INvESTMENT AND SALES FACTURING TECHNOLOGY HOLDING ELIMINATION TOTAL GROUP RM RM RM RM RM RM

2010

Revenue – External 5,419,026 125,330,259 2,049,596 – – 132,798,881 – Internal 209,440 63,707 – – (273,147) –

5,628,466 125,393,966 2,049,596 – (273,147) 132,798,881

ResultSegment results 6,736,863 18,053,740 (548,768) 8,076,200 (23,112,226) 9,205,809Finance costs (1,212,823) Income tax (126,084) Non-controlling interest 176,613

Profit for the year 8,043,515

Other informationSegment assets 16,149,284 97,537,569 974,112 457,280 – 115,118,245Unallocated corporate assets 124,498

Consolidated total assets 115,242,743

Segment liabilities 458,834 29,041,943 187,901 18,194 – 29,706,872Unallocated corporate liability 29,498,809

Consolidated total liabilities 59,205,681

Allowance for specific doubtful debts – – 291,895 796,774 – 1,088,669Amortisation of computer software 60,535 15,771 4,912 – – 81,218Amortisation of prepaid

land lease premium – 23,684 – – – 23,684Capital expenditure 45,822 1,682,137 5,797 10,898 – 1,744,654Depreciation of property,

plant and equipment 308,283 1,345,602 16,642 6,399 – 1,676,926

b) Business contribution by geography

The Group’s business is derived mainly from four geographical areas. About 91% (2010: 90%) of the business activities are derived from outside Malaysia. The Group primarily exports design and development services and finished goods of electronic end-products and sub-systems to Europe, USA and North Asia. The manufacturing activities are mainly conducted in Malaysia.

REvENUE CONTRIBUTION SEGMENT ASSETS CAPITAL ExPENDITURE 2011 2010 2011 2010 2011 2010 RM RM RM RM RM RM

Malaysia 11,917,991 13,844,220 88,093,659 86,182,768 3,465,558 1,742,256Europe 76,793,630 65,017,168 14,362,008 13,992,526 – –USA 1,999,945 6,975,692 345,550 446,389 – –Australia 37,323 34,590 235,923 265,251 – –North Asia 46,507,176 46,927,211 7,800,954 14,355,809 – 2,398

137,256,065 132,798,881 110,838,094 115,242,743 3,465,558 1,744,654



33. SEGMENT INFORMATION (CONT’D)

c) Segment reporting

Segment reporting is presented for enhanced assessment of the Group’s risks and returns. A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are peculiar within the particular business segment.

Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment. Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment. Inter-segment pricing is based on similar terms as those available to other external parties.

d) Information about major customers

The Group has 3 (2010: 4) major international customers contributing approximately RM101,175,000 (2010: RM97,449,000) of total sales revenue.

34. EMPLOYEES INFORMATION


Directors’ other emoluments (Note 31) 1,083,790 971,332 – –EPF 966,872 897,546 109,194 112,868Salaries and bonus 8,697,675 7,984,058 909,741 876,519SOCSO 100,978 87,218 7,559 7,703Other personnel costs 330,102 268,142 21,080 28,697

11,179,417 10,208,296 1,047,574 1,025,787

The total number of employees of the Company, including the Directors, as at the end of the financial year was 18 (2010: 18).

The total number of employees of the Group, including the Directors, as at the end of the financial year was 316 (2010: 321).

35. CONTINGENT LIABILITIES

COMPANY 2011 2010 RM RM

SecuredCorporate guarantee for credit facilities granted to subsidiary companies:

– K-One Industry Sdn. Bhd. 33,392,000 38,392,000 – K-One Manufacturing Sdn. Bhd. 7,000,000 – – K-One Electronics Sdn. Bhd. (Formerly known as Syslink Sdn. Bhd.) 11,660,000 6,660,000

52,052,000 45,052,000


36. FINANCIAL INSTRUMENTS

The Group’s and the Company’s financial assets and financial liabilities are measured on an ongoing basis at either fair value or at amortised cost based on their respective classification. The significant accounting policies in Note 2 describe how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the financial assets and liabilities of the Group and the Company in the statements of financial position by the class of financial instrument to which they are assigned, and therefore by the measurement basis.

FINANCIAL LOANS AND AT LIABILITIES RECEIvABLES AMORTISED COST TOTAL GROUP RM RM RM

2011

Financial assetsTrade and other receivables 25,597,186 – 25,597,186Fixed deposits 503,740 – 503,740Cash and bank balances 12,776,061 – 12,776,061

38,876,987 – 38,876,987

Financial liabilitiesTrade and other payables – 30,718,261 30,718,261Amount due to a Director – 2,209,517 2,209,517Bank overdraft – 6,854,875 6,854,875Borrowings – 27,205,344 27,205,344

– 66,987,997 66,987,997

2010

Financial assetsTrade and other receivables 32,275,617 – 32,275,617Cash and bank balances 7,473,873 – 7,473,873

39,749,490 – 39,749,490

Financial liabilitiesTrade and other payables – 29,706,872 29,706,872Amount due to a Director – 2,209,517 2,209,517Bank overdraft – 1,963,071 1,963,071Borrowings – 25,249,450 25,249,450

– 59,128,910 59,128,910



36. FINANCIAL INSTRUMENTS (CONT’D)

FINANCIAL LOANS AND AT LIABILITIES RECEIvABLES AMORTISED COST TOTAL

COMPANY RM RM RM

2011

Financial assetsTrade and other receivables 2,315,252 – 2,315,252Amount due from subsidiary companies 20,638,372 – 20,638,372Cash and bank balances 2,496,741 – 2,496,741

25,450,365 – 25,450,365

Financial liabilitiesTrade and other payables – 365,395 365,395Amount due to a Director – 2,351 2,351Amount due to subsidiary companies – 6,771,934 6,771,934

– 7,139,680 7,139,680

2010

Financial assetsTrade and other receivables 2,043,592 – 2,043,592Amount due from subsidiary companies 14,809,264 – 14,809,264Cash and bank balances 105,900 – 105,900

16,958,756 – 16,958,756

Financial liabilitiesTrade and other payables – 458,834 458,834Amount due to a Director – 2,351 2,351Amount due to subsidiary companies – 8,000 8,000Borrowings – 14,389 14,389

– 483,574 483,574


37. CAPITAL MANAGEMENT

The primary objective of the Group’s and the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group and the Company manage its capital structure and make adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group and the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2011 and 2010 respectively.

The Group and the Company monitor capital by reviewing various financial ratios to ensure they are at acceptable levels and within industry norms. Incidentally, the Group is not subject to any externally imposed capital requirements.

2011 2010 2011 2010 RM RM RM RM

Loans and borrowings 34,060,219 27,212,521 – 14,389Trade and other payables 30,718,261 29,706,872 365,395 458,834Amount due to a Director 2,209,517 2,209,517 2,351 2,351Amount due to subsidiary companies – – 6,771,934 8,000Less: Cash and bank balances (12,776,061) (7,473,873) (2,496,741) (105,900)

Net debt 54,211,936 51,655,037 4,642,939 377,674

Equity attributable to the owners of the parent, representing total equity 43,850,054 56,037,062 36,236,284 37,516,019

Capital management ratio 123.6% 92.2% 12.8% 1.0%

38. EvENT OCCURING SUBSEQUENT TO FINANCIAL YEAR

On 10 April 2012, one of the Group’s secondary factories located in Ipoh was gutted by fire. It is expected that the insurance proceeds will cover the damages to the raw materials, semi-finished goods, finished goods, machineries, equipment, renovations, fittings and etc. lost in the fire incident. The financial statements for the year ended 31 December 2011 have not taken into account the potential financial effect of this incident which has been mitigated by insurance coverage.

39. SUPPLEMENTARY INFORMATION – BREAKDOWN OF RETAINED PROFITS INTO REALISED AND UNREALISED

The breakdown of the retained profits of the Group and of the Company as at 31 December into realised and unrealised profits is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with 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.


Total retained profits/(losses) of the Company and its subsidiaries – Realised 9,686,744 27,411,767 2,066,566 10,992,105 – Unrealised 13,792 283,767 (16,182) 11,834

9,700,536 27,695,534 2,050,384 11,003,939Add: Consolidation adjustments – 1,904,734 – –

Retained profits as per financial statements 9,700,536 29,600,268 2,050,384 11,003,939



LOCATION DESCRIPTION

TENURE/ DATE OF

ExPIRY

APPROxIMATE AGE OF

BUILDINGS (YEARS)

APPROxIMATE BUILT-UP

AREA (SQ. FEET)

DATE OF ACQUISITION

NET CARRYING AMOUNT

AS AT 31/12/2011

(RM’000)

66, Jalan SS22/21 Damansara Jaya 47400 Petaling Jaya Selangor

4-Storey shoplot:

Office

Freehold 22 6,000 04.07.2006 1,013

68, Jalan SS22/21 Damansara Jaya 47400 Petaling Jaya Selangor

4-Storey shoplot:

Office

Freehold 22 6,000 04.07.2006 1,013

5, 7, 9, 11, 15 & 17 Persiaran Rishah 7 Kawasan Perindustrian Silibin 30100 Ipoh Perak

6 units of factory building

cum office

Leasehold – 60 years expiring in year 2045

22 45,000 09.08.2007 2,500

A108, A109 & A110 Jalan 2A-2 Kawasan Perindustrian MIEL Sungai Lalang 08000 Sungai Petani Kedah

3 units of factory building

cum office

Freehold 19 25,000 11.12.2007 1,533


LIST OF PROPERTIESAS AT 31 DECEMBER 2011

Authorised Share Capital : RM150,000,000.00

Issued and Fully Paid-Up Share Capital : RM37,454,820.00

Class of Shares : Ordinary shares of RM0.10 each

Voting Rights : One (1) vote per shareholder on a show of hands

One (1) vote per share on a poll

ANALYSIS BY SIZE OF SHAREHOLDINGS AS AT 9 MAY 2012

NO. OF NO. OF SIZE OF SHAREHOLDINGS SHAREHOLDERS % SHARES %

Less than 100 14 0.53 515 0.00 100 to 1,000 81 3.09 41,853 0.01 1,001 to 10,000 778 29.66 5,257,274 1.40 10,001 to 100,000 1,435 54.71 52,279,361 13.96 100,001 to less than 5% of issued shares 312 11.89 145,722,592 38.91 5% and above of issued shares 3 0.11 171,246,605 45.72

Total 2,623 100.00 374,548,200 100.00

DIRECTORS’ SHAREHOLDINGS AS AT 9 MAY 2012

(As per the Register of Directors’ Shareholdings of the Company)

DIRECT INDIRECTNAME NO. OF SHARES % NO. OF SHARES %

Lim Beng Fook 71,955,990 19.21 – –Lim Soon Seng 54,958,460 14.67 – –Bjørn Bråten 46,034,955 12.29 – –Loi Kim Fah 89,100 0.03 – –Goh Chong Chuang 528,220 0.15 – –

OPTIONS ALLOCATED TO THE DIRECTORS PURSUANT TO THE EMPLOYEES’ SHARE OPTION SCHEME AS AT 9 MAY 2012

AS AT NAMES 1 jANUARY 2011 GRANTED ExERCISED BALANCE

Lim Beng Fook 696,000 – – 696,000Lim Soon Seng 682,500 – – 682,500

SUBSTANTIAL SHAREHOLDERS’ SHAREHOLDINGS AS AT 9 MAY 2012

(As per the Register of Substantial Shareholders of the Company)

DIRECT INDIRECTNAME NO. OF SHARES % NO. OF SHARES %

Lim Beng Fook 71,955,990 19.21 – –Lim Soon Seng 54,958,460 14.67 – –Bjørn Bråten 46,034,955 12.29 – –


ANALYSIS OF SHAREHOLDINGSAS AT 9 MAY 2012

LIST OF THIRTY (30) LARGEST SHAREHOLDERS AS AT 9 MAY 2012

NO. NAMES

NO. OF SHARES OF

RM0.10 EACH

% OF ISSUED

CAPITAL

1 Lim Beng Fook 71,955,990 19.21

2 Lim Soon Seng 53,255,660 14.22

3 Bjørn Bråten 46,034,955 12.29

4 Chang Yong Kong 9,950,000 2.66

5 Lim Moi Moi 6,438,000 1.72

6 Seng Swee Kiew 5,428,500 1.45

7 ECML Nominees (Asing) Sdn. Bhd. United Forest Limited

5,000,000 1.33

8 Lars Peter Vennstrom 4,774,000 1.27

9 Lee Quee Siong 4,285,700 1.14

10 Baskaran A/L Govinda Nair 3,000,000 0.80

11 AMSEC Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account – Ambank (M) Berhad for Goh Sai Keong

2,948,531 0.79

12 Lum Choy 2,700,000 0.72

13 Lam Lai Sheung 2,655,180 0.71

14 Cheong Kong Hua 2,650,700 0.71

15 Wong Shih Chieh 2,619,000 0.70

16 AMSEC Nominees (Tempatan) Sdn. Bhd. Wong Say Fun

2,084,000 0.56

17 Lim Soon Seng 1,702,800 0.45

18 Cheong Jong Haur 1,603,200 0.43

19 Baskaran A/L Govinda Nair 1,470,000 0.39

20 Chee Moi Ing 1,181,000 0.32

21 Lai Heng Wah 1,123,300 0.30

22 Chong Yoke Keong 1,106,200 0.30

23 Lam Weng 1,100,165 0.29

24 Lee Sau Ying 1,099,500 0.29

25 Moh Siew Tong 1,080,000 0.29

26 Chee Kok Yean 1,079,900 0.29

27 Lee Chee Ming 1,050,000 0.28

28 Hans Bertil Martin Eriksson 1,008,420 0.27

29 Woo Kok Loon 1,000,000 0.27

30 Chew Boon Swee 952,300 0.25

Total 242,337,001 64.70


in the meeting of warrant holders

No. of Warrants in Issue : 61,236,000

No. of Warrant Holders : 495

Exercise Price of Warrants : RM0.61 per share

Voting Rights : One (1) vote per warrant holder on a show of hands

One (1) vote per warrant on a poll

ANALYSIS BY SIZE OF WARRANT HOLDINGS AS AT 9 MAY 2012

NO. OF NO. OF SIZE OF WARRANT HOLDINGS WARRANT HOLDERS % WARRANTS %

Less than 100 13 2.63 806 0.00 100 to 1,000 41 8.28 17,967 0.03 1,001 to 10,000 137 27.68 720,971 1.18 10,001 to 100,000 230 46.46 8,768,566 14.32 100,001 to less than 5% of issued warrants 71 14.34 27,369,660 44.70 5% and above of issued warrants 3 0.61 24,358,030 39.78 Total 495 100.00 61,236,000 100.00

DIRECTORS’ WARRANT HOLDINGS AS AT 9 MAY 2012

(As per the Register of Directors’ Warrant Holdings of the Company)

DIRECT INDIRECT NO. OF NO. OF NAME WARRANTS % WARRANTS %

Lim Beng Fook 82,666 0.14 – –Lim Soon Seng 10,539,720 17.21 – –Bjørn Bråten 8,331,810 13.61 – –Goh Chong Chuang 16,200 0.03 – –Loi Kim Fah 92,040 0.14 – –


ANALYSIS OF WARRANT HOLDINGSAS AT 9 MAY 2012

LIST OF THIRTY (30) LARGEST WARRANT HOLDERS AS AT 9 MAY 2012

NO. NAMESNO. OF

WARRANTS% OF ISSUED

WARRANTS

1 Lim Soon Seng 10,410,120 17.00

2 Bjørn Bråten 8,331,810 13.61

3 Ng Swee Joo 5,616,100 9.17

4 Maybank Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Dong Su Ming

2,764,700 4.51

5 Chang Yong Kong 1,881,000 3.07

6 Yong Yoon Kong 1,849,200 3.02

7 Chia Guan Seng 1,600,000 2.61

8 Lim Moi Moi 1,140,000 1.86

9 Chow Chan Foon 900,000 1.47

10 Yong Wai Hong 820,200 1.34

11 Cheong Jong Haur 717,400 1.17

12 Liong Ah Tuck 700,000 1.14

13 ECML Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Too Hang Liong

654,000 1.07

14 Lee Mee Yoong 650,000 1.06

15 HLG Nominee (Tempatan) Sdn. Bhd. Hong Leong Bank Bhd for Kong Sook Ling

561,900 0.92

16 Chay Mok Sang 554,000 0.90

17 HDM Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Boh Chick Hint

520,000 0.85

18 Lam Lai Sheung 482,760 0.79

19 ECML Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Loh Kok Yeow

459,900 0.75

20 Sam Weng Cham 440,000 0.72

21 Ng Aik Guan 400,000 0.65

22 Ong Poh Eng 385,000 0.63

23 Leong Fong Mun 374,100 0.61

24 Boey Pei Lin 371,000 0.61

25 Ho Ah Ngau 357,800 0.58

26 Balakrisnen A/L Subban 300,000 0.49

27 Che Mokhtar Bin Shaari 300,000 0.49

28 Maybank Securities Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Ahmad Kamarulzaman Bin Ahmad Badaruddin

300,000 0.49

29 Woo Kok Loon 300,000 0.49

30 Yap Chin Fook 300,000 0.49

Total 44,440,990 72.56


NOTICE IS HEREBY GIvEN THAT the Eleventh Annual General Meeting of the Company will be held

at Greens III, Sports Wing, Tropicana Golf & Country Resort, Jalan Kelab Tropicana, 47410 Petaling

Jaya, Selangor Darul Ehsan on Tuesday, 26 June 2012 at 9.00 a.m. for the following purposes:

AGENDAORDINARY BUSINESS

1. To receive the Audited Financial Statements for the financial year ended 31 December 2011 together with the Directors’ and Auditors’ Reports attached thereon.

2. To approve the payment of Directors’ fees of RM48,000 for the financial year ended 31 December 2011. Resolution 1

3. To re-elect the following Directors who are retiring in accordance with Article 104 of the Company’s Articles of Association:

3.1 Lim Soon Seng

3.2 Goh Chong Chuang

Resolution 2

Resolution 3

4. To re-appoint Messrs. Hasnan THL Wong & Partners as the Company’s Auditors for the ensuing year and to authorise the Directors to fix their remuneration.

SPECIAL BUSINESS

To consider and, if thought fit, to pass with or without modifications, the following Resolution:

Resolution 4

5.

Ordinary Resolution

Authority to Allot Shares Pursuant to Section 132D of the Companies Act, 1965

“THAT subject always to the approvals of the relevant authorities, the Directors be and are hereby authorised pursuant to Section 132D of the Companies Act, 1965, to allot and issue shares in the Company at any time and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion, deem fit, provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed 10% of the total issued capital of the Company at the time of issue AND THAT the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares to be issued on Bursa Malaysia Securities Berhad AND FURTHER THAT such authority shall continue to be in force until the conclusion of the next Annual General Meeting of the Company.”

Resolution 5

6. Special Resolution

Proposed Amendments To The Company’s Articles Of Association

“THAT the proposed amendments to the Articles of Association of the Company as contained in Appendix I of the Annual Report 2011 (“Proposed Amendments”) be and are hereby approved and adopted.”

Resolution 6

7. To transact any other business of the Company of which due notice shall be given in accordance with the Company’s Articles of Association and the Companies Act, 1965.

BY ORDER OF THE BOARD K-ONE TECHNOLOGY BERHAD

Ng Yim Kong (LS 0009297) Company Secretary

Selangor Darul Ehsan 4 June 2012


NOTICE OF ELEvENTH ANNUAL GENERAL MEETING

STATEMENT ACCOMPANYING NOTICE OF ELEvENTH ANNUAL GENERAL MEETING

Details of Directors who are standing for re-election in Agenda 3.1 (Lim Soon Seng) and Agenda 3.2 (Goh Chong Chuang) of the Notice of the Eleventh Annual General Meeting are laid out in the Directors’ Profile appearing on pages 4 to 5 of this Annual Report.

Notes:

1. A member of the Company entitled to be present and to vote at the meeting is entitled to appoint a proxy/proxies, to attend and vote instead of him. A proxy may but need not be a member of the Company and need not be an advocate, an approved company auditor or a person appointed by the Registrar of Companies.

2. To be valid, the duly completed Form of Proxy must be deposited at the Registered Office of the Company at Unit 07-02, Level 7, Persoft Tower, 6B Persiaran Tropicana, 47410 Petaling Jaya, Selangor Darul Ehsan, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

3. A member shall be entitled to appoint more than two (2) proxies to attend and vote at the same meeting.

4. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

5. If the appointer is a corporation, the Form of Proxy must be executed under its Common Seal or under the hand of its attorney.

6. Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account.

ExPLANATORY NOTE ON SPECIAL BUSINESS OF THE AGENDA

1) Authority to Allot Shares pursuant to Section 132D of the Companies Act, 1965

The proposed Resolution 5 under item 5 above, if passed, will empower the Directors of the Company, from the date of the above Annual General Meeting, with the authority to allot and issue shares in the Company up to an amount not exceeding in total 10% of the issued capital of the Company for such purposes as the Directors consider would be in the best interest of the Company. This authority, unless revoked or varied at a general meeting, will expire at the next Annual General Meeting.

This general mandate sought to grant authority to Directors to allot and issue of shares is a renewal of the mandate that was approved by the Shareholders at the Tenth Annual General Meeting held on 27 June 2011. The renewal of this general mandate is to provide flexibility to the Company to issue new shares without the need to convene a separate general meeting to obtain shareholders’ approval so as to avoid incurring cost and time. The purpose of this general mandate is for possible fund raising exercises including but not limited to further placement of shares for the purpose of funding current and/or future investment projects, working capital and/or acquisitions.

As at the date of this Notice, 32,689,200 new ordinary shares of RM0.10 representing approximately 10% of the existing issued and paid-up share capital of the Company were issued on 27 April 2012 by way of a private placement and listed on the Bursa Securities on 2 May 2012 pursuant to the last mandate obtained on 27 June 2011. The proceeds from the private placement would be utilised for working capital requirements, reduction in outstanding trade facility and upgrading/expansion of design and development and production facilities respectively.

2) Proposed Amendments to the Company’s Articles of Association

The proposed Resolution 6 under item 6 is to amend the Company’s Articles of Association to be in line with the recent amendments to the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad. The details of the Proposed Amendments are as set out in Appendix I on pages 84 to 85 of this Annual Report.

GENERAL MEETING RECORD OF DEPOSITORS

For the purpose of determining whether a member is entitled to attend this meeting, the Company shall be requesting from Bursa Malaysia Depository Sdn Bhd in accordance with Article 60(1) of the Company’s Articles of Association and Section 34(1) of the Securities Industry (Central Depositories) Act 1991, to issue a General Meeting Record of Depositors as at 21 June 2012.Only a depositor whose name appears on the Record of Depositors as at 21 June 2012 shall be entitled to attend this meeting or appoint proxy/proxies to attend and/or vote in his stead.


Special Resolution – Proposed Amendments to the Company’s Articles of Association

THAT the Articles of Association of the Company be amended in the following manner:

ARTICLE NO. ExISTING ARTICLES AMENDED ARTICLES

2

Interpretation

WORDS

—

MEANINGS

No Provision

WORDS

Exempt Authorised Nominee

MEANINGS

An authorised nominee defined under the Central Depositories Act which is exempted from compliance with provisions of subsection 25A(1) of the Central Depositories Act.

81

Instrument appointing proxy to be in writing

The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if such appointer is a corporation under its common seal or under the hand of the attorney.

The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if such appointer is a corporation under its common seal or under the hand of the attorney.

A member of a Company entitled to attend and vote at a meeting of a Company, or at a meeting of any class of members of the Company, shall be entitled to appoint any person as his proxy to attend and vote instead of the member at the meeting. There shall be no restriction as to the qualification of the proxy and the provisions of Section 149(1)(b) of the Act shall not apply to the Company.

82

Voting rights of proxy

A proxy shall be entitled to vote both on a show of hands and a poll on any question at any General Meeting. A proxy may but need not be a Member of a Company and a Member may appoint any person to be his proxy without limitation and the provisions of Section 149(1)(b) of the Act shall not apply to the Company.

A proxy shall be entitled to vote both on a show of hands and a poll on any question at any General Meeting. A proxy may but need not be a Member of a Company and a Member may appoint any person to be his proxy without limitation and the provisions of Section 149(1)(b) of the Act shall not apply to the Company.

A proxy appointed to attend and vote at a meeting of a Company shall have the same rights as the member to speak at the meeting.


APPENDIx I

ARTICLE NO. ExISTING ARTICLES AMENDED ARTICLES

83 (1)

Appointment of more than one proxy

A Member shall not be entitled to appoint more than two (2) proxies to attend and vote at the same meeting. Where a member of the Company is an authorised nominee as defined under the Central Depositories Act, it may appoint at least one (1) proxy in respect of each Securities Account its hold with ordinary shares of the Company standing to the credit of the said Securities Account.

A Member shall not be entitled to appoint more than two (2) proxies to attend and vote at the same meeting. Where a member of the Company is an authorised nominee as defined under the Central Depositories Act, it may appoint at least one (1) proxy in respect of each Securities Account its hold with ordinary shares of the Company standing to the credit of the said Securities Account.

Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

84

Instrument appointing proxy to be deposited not less than 48 hours before meeting

The instrument of a proxy and the power of attorney (if any) under which it is signed or a notarially certified copy thereof shall be deposited at the Office not less than forty-eight (48) hours before the time for the holding of the General Meeting or adjourned meeting as the case may be at which the person named in such instrument propose to vote. A Member who is not resident in Malaysia or Singapore may by cable or other telegraphic communication appoint a proxy/proxies to vote for him at a General Meeting of the Company PROVIDED:

(a) such cable or other telegraphic communication shall have been received at the Office not less than forty-eight (48) hours before the time for the holding of the general meeting or adjourned meeting as the case may be at which the person named in such cable or other telegraphic communication proposes to vote; and

(b) the Directors are satisfied as to the genuineness of such cable or other telegraphic communication.

The instrument of a proxy and the power of attorney (if any) under which it is signed or a notarially certified copy thereof shall be deposited at the Office not less than forty-eight (48) hours before the time for the holding of the General Meeting or adjourned meeting as the case may be at which the person named in such instrument proposes to vote.

The completed instrument of proxy once deposited will not preclude the member from attending and voting in person at the General Meeting should the member subsequently wish to do so. A member who is not resident in Malaysia or Singapore may by cable or other telegraphic communication appoint a proxy/proxies to vote for him at any general meeting of the Company PROVIDED:

(a) such cable or other telegraphic communication shall have been received at the Office not less than forty-eight (48) hours before the time for the holding of the general meeting or adjourned meeting as the case may be at which the person named in such cable or other telegraphic communication proposes to vote; and

(b) the Directors are satisfied as to the genuineness of such cable or other telegraphic communication.


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*I/*We,(FULL NAME IN BLOCK LETTERS)

of(FULL ADDRESS IN BLOCK LETTERS)

being a *member/*members of K-ONE TECHNOLOGY BERHAD (Company No. 539757-K), hereby appoint

(FULL NAME IN BLOCK LETTERS)


or failing whom,(FULL NAME IN BLOCK LETTERS)


or failing whom, the CHAIRMAN of the General Meeting as *my/*our Proxy(ies) to vote for *me/*us and on *my/*our behalf at the Eleventh Annual General Meeting of the Company to be held at Greens III, Sports Wing, Tropicana Golf & Country Resort, Jalan Kelab Tropicana, 47410 Petaling Jaya, Selangor Daerul Ehsan on Tuesday, 26 June 2012 at 9.00 a.m. and at any adjournment thereof *for/*against the resolution(s) to be proposed thereat.

*My/*Our proxy(ies) *is/*are to vote on the Resolutions as indicated below:

[Please indicate with (X) in the spaces provided above as to how you wish your vote to be casted. If no specific direction as to voting is given, the Proxy will vote or abstain at his(her) discretion]

Dated this _________________ day of ______________________ 2012

___________________________________Signature/Common Seal of Shareholder(s)

*Delete if not applicable

Notes:

A member of the Company entitled to be present and to vote at the meeting is entitled to appoint a proxy/proxies, to attend and vote instead of him. A proxy may but need 1. not be a member of the Company and need not be an advocate, an approved company auditor or a person appointed by the Registrar of Companies.

To be valid, the duly completed Form of Proxy must be deposited at the Registered Office of the Company at Unit 07-02, Level 7, Persoft Tower, 6B Persiaran Tropicana, 2. 47410 Petaling Jaya, Selangor Darul Ehsan, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

A member shall be entitled to appoint more than two (2) proxies to attend and vote at the same meeting. 3.

Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 4.

If the appointer is a corporation, the Form of Proxy must be executed under its Common Seal or under the hand of its attorney. 5.

Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy in respect of each 6. Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account.

NO. RESOLUTIONS FOR AGAINST

Resolution 1 Approval of the payment of Directors’ fees of RM48,000 for the financial year ended 31 December 2011.

Re-election of the following Directors who are retiring in accordance with Article 104 of the Company’s Articles of Association:

Resolution 2 Lim Soon Seng

Resolution 3 Goh Chong Chuang

Resolution 4 Re-appointment of Messrs. Hasnan THL Wong & Partners as the Company’s Auditors for the ensuing year and to authorise the Directors to fix their remuneration.

Resolution 5 Authority to Allot Shares Pursuant to Section 132D of the Companies Act, 1965.

Resolution 6 Amendment to the Company’s Articles of Association.

NUMBER OF ORDINARY SHARES HELD

NRIC No./Company No.

FORM OF PROxYK-One Technology Berhad

(539757-K)

K-One Technology Berhad (539757-K)

Unit 07-02, Level 7, Persoft Tower 6B Persiaran Tropicana 47410 Petaling Jaya Selangor Darul Ehsan Malaysia

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