TECHNOLOGY OF THE FUTURE - MalaysiaStock.Biz

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1 VISION AND MISSION STATEMENT 2 CORPORATE INFORMATION

3 CORPORATE STRUCTURE 4 - 5 CHAIRMAN’S STATEMENT 6 - 7 PROFILE OF DIRECTORS

8 CORPORATE SOCIAL RESPONSIBILITY STATEMENT 9 FINANCIAL HIGHLIGHTS

10 - 14 CORPORATE GOVERNANCE STATEMENT 15 - 16 STATEMENT ON INTERNAL CONTROL

17 - 19 AUDIT COMMITTEE REPORT 20 OTHER INFORMATION 21 - 89 FINANCIAL STATEMENTS

90 LIST OF LANDED PROPERTIES 91 - 92 ANALYSIS OF SHAREHOLDINGS

93 - 94 NOTICE OF ANNUAL GENERAL MEETING 95 PROXY FORM

IDENTITYAn integrated consulting and automation engineering technology solutions provider.

VISIONTo provide world-class automation solutions to companies in the manufacturing, electrical and electronics industries worldwide.

MISSIONWe are dedicated to delivering high quality and cost effective products with value-added services. In our effort to meet our mission, we strive to provide benefits and satisfaction to our customers, vendors, employees and the community as a whole.

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www.pentamaster.com annual report 2008

CORPORATE INFORMATION

BOARD OF DIRECTORSCHUAH CHOON BINExecutive Chairman

TAN BOON TEIKChief Executive Officer

DR OOI HUN PINNon-Executive Independent Director

LOH NAM HOOINon-Executive Independent Director

DATO’ DR ZAINUDDIN BIN MD. WAZIRNon-Executive Independent Director

DATO’ SERI KIEW KWONG SENNon-Executive Independent Director

AUDIT COMMITTEEChairman

DR. OOI HUN PINNon-Executive Independent Director

Members

LOH NAM HOOINon-Executive Independent Director

DATO’ SERI KIEW KWONG SENNon-Executive Independent Director

COMPANY SECRETARIESLIM KIM TECK (MAICSA 7010844)

TEH AI GEIK @ TEH AI GEK (MAICSA 7033180)

AUDITORSFOLKS DFK & CO12TH FLOOR, WISMA TUN SAMBANTHANNO 2 JALAN SULTAN SULAIMAN50000 KUALA LUMPUR

HEAD OFFICEPLOT 18 & 19, TECHNOPLEX MEDAN BAYAN LEPASTAMAN PERINDUSTRIAN BAYAN LEPAS, PHASE IV11900 PENANGTel: 04-646 9212Fax: 04-641 5600Website: www.pentamaster.com

REGISTERED OFFICE35, 1ST FLOOR, JALAN KELISA EMAS 1TAMAN KELISA EMAS13700 SEBERANG JAYA, PENANGTel: 04-397 6672Fax: 04-397 6675

SHARE REGISTRARSECURITIES SERVICES (HOLDINGS) SDN. BHD.SUITE 18.05, MWE PLAZANO. 8, LEBUH FARQUHAR10200 PENANGTel: 04-263 1966Fax: 04-262 8544

BANKERSUNITED OVERSEAS BANK (MALAYSIA) BHDRHB BANK BERHADHSBC BANK MALAYSIA BERHAD

STOCK EXCHANGE LISTINGMAIN BOARD OF BURSA MALAYSIA SECURITIES BERHADSector: TechnologyStock Name: PentaStock Code: 7160

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PENTAMASTERTECHNOLOGY (M) SDN. BHD.(336488-H)

PENTAMASTERENGINEERING (M) SDN. BHD.(460116-T)

PENTAMASTERPRECISION (M) SDN. BHD.(531995-W)

PENTAMASTERINFORMATION TECHNOLOGY BERHAD(625497-H)

PENTAMASTERAUTOMATION ENGINEERING (SHANGHAI) CO. LTD.

PENTAMASTERCONTRACT MANUFACTURING SDN. BHD.(621047-X)

PENTAMASTERSOLUTIONS SDN. BHD.(659962-W)

PENTAMASTER EQUIPMENT MANUFACTURING SDN. BHD.(749166-A) 10

0%

PENTAMASTERINSTRUMENTATION SDN. BHD.(637373-M) 60

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CHAIRMAN’S STATEMENT

Dear Shareholders

The year 2008 has been an eventful and heart-stopping year of epic proportions for the all the wrong reasons where economies around the world have been seriously affected by the financial crisis and slump in activity. The collapse of the US financial markets caused the global economy went into a tailspin with contagion effects spreading rapidly across the continent to Europe and Asian countries. The damage is being inflicted through both financial and trade channels, particularly to countries that rely heavily on manufacturing exports. Pentamaster Corporation Berhad (“PMCB or the Group”), being an export oriented company to global multinational companies was not spared from the adverse macro economic environment.

Nevertheless, despite the difficult and uncertain economic outlook, the Group remains optimistic that it is now on a stronger footing to withstand any negative effects as we continue to build on our strengths and re-strategize towards the path of profitability.

Against these backdrops, on behalf of the Board of Directors, I am pleased to furnish you the financial performance of the Group during the year under review.

FINANCIAL RESULTS

In financial year 2008, the Group revenue was impacted by the cancellation and deferment of planned customers’ projects, which had resulted in revenue to decline by 27.9% from RM144.1 million in the preceding year to RM103.9 million. Consequently, the Group recorded a loss before taxation of RM26.6 million as opposed to a profit before taxation of RM0.9 million attained in 2007, while the loss after tax amounted to RM27.3 million when compared to profit after tax amounted to RM3.6 million achieved in the previous year.

Notwithstanding our first financial loss results, the Group balance sheet remains strong and with positive cash flow being generated from operations.

DIVIDEND

As 2008 is not a profitable year for PMCB, the Board is not recommending any dividend payment to shareholders.

BUSINESS PROSPECTS AND CHALLENGES

The World Economic Outlook projections from the International Monetary Fund issued in April 2009, assumed that the financial market stabilization will take longer than previously envisaged, even with strong efforts by policy makers. Thus, financial strains in the mature markets are projected to remain heavy until well into 2010, improving only slowly as greater clarity over losses on bad assets and injections of public capital reduce insolvency concerns, lower counter party risks and market volatility, and restore more liquid market conditions. Overall credit to the private sector in the advanced economies is expected to decline in both 2009 and 2010. Meanwhile, emerging and developing economies are expected to face greatly curtailed access to external financing in both years. Hence, to thrive and remain relevant, the Group continuously reinvents itself to face the changing environment, challenges and demands. The Group has initiated aggressive cost rationalization and cost reduction measures to contain its operating expenses as well as striving for operational excellence which will lower its cost of production of quality equipment. Through these exercises,I am delighted to report that we are much leaner and efficient today in terms of human resources and manufacturing processes. The ability to deliver quality products at competitive prices is a very key consideration to survive and capture shrinking market share in current turbulent and uncertain business climate. Hence, we are confident of our ability to keep and continue supporting our existing multinational customers in meeting their automation requirements as well as aggressively work hard to secure new customers which we have achieved some level of success since the beginning of this year.

Apart from focusing on existing products, the Group has successfully developed new range of products catering to niche market applications which we expect to see strong growth in the medium term. One such product is the LED (Light Emitting Diodes) Tester and LED Automated Test Handler. LED lighting is becoming more and more pervasive in the lighting market thanks to their longevity and efficiency. For the past years, there has been significant growth in mobile device LED market and the display backlighting market. LED lighting application will increase and grow and expand into other market not yet even tapped. In this regard, demand for LED Tester and LED Automated Test Handler should be trending upwards and PMCB is well positioned to take advantage of an upswing in demand. Another innovative product for 2009 is the Glove Reprocessing Machine which caters for customers in the healthcare industry. All these new developments augers well for the Group as we continue to chart new business model and direction.

In conclusion, barring any unforeseen circumstances, the Group expects to achieve better results in 2009.

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5www.pentamaster.com annual report 2008

CHAIRMAN’S STATEMENT (cont’d)

APPRECIATION

On behalf of my colleagues on the Board, I would like to extend our gratitude to the past director, Tuan Haji Zainal Abidin Bin Abas, who had resigned for his invaluable contributions to the success of the Group.

On behalf of the Board, I would like to extend our sincere appreciation to the management and staff for their unwavering efforts, support and commitment in discharging their duties. I believe that our teamwork spirit will help to propel the Group forward confidently and enthusiastically through this difficult period.

I would also like to convey our gratitude and thanks to our customers, business partners, government agencies and authorities, and the investing community including our shareholders for their continued support and confidence in the Group.

Finally, I take this opportunity to thank our Board members for their valuable advice and support.

CHUAH CHOON BINExecutive Chairman

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PROFILE OF DIRECTORS

Chuah Choon Bin, aged 48, a Malaysian citizen, was appointed to the Board of the Company on 30 November 2002 and is currently the Executive Chairman.

He is a professional engineer and co-founder of Pentamaster Group. He graduated with a Bachelor Degree (Hons.) and a Master Degree majoring in Electronics and Electrical from University of Auckland, New Zealand. Prior to the setting up of the Group, he served as an Automation Engineer for National Semiconductor and Intel Technology Malaysia. With his vast experience in the design and manufacturing of automation equipment and vision inspection system, he has developed the Group to its present level of success, from a simple automation house to a high technology Group specialising in providing factory automation equipment and systems and information communication technology solutions to industrial and commercial customers. He is an entrepreneur of remarkable accomplishment and has successfully built strong, sustainable, innovative and dynamic businesses and to continue growing these businesses. His excellence in entrepreneurship has steered the Group to bag numerous prestigious domestic and international awards. Among the notable ones are winner for the Enterprise 50 Award 2002 organised by Accenture and SMIDEC, and Quality Management Excellence Award 2003 for the category of local company with annual sales turnover exceeding RM25 million to RM200 million at the Industry Excellence Award 2003 organised by Ministry of International Trade and Industry. For his personal recognition, he won the First Malaysian Ernst & Young Emerging Entrepreneur of the Year Award Malaysia 2002.

He was also appointed as a Chairman for the Penang Automation Cluster, a Penang state government initiative under the umbrella of invest Penang, which is dedicated to improve the competitiveness of Penang’s manufacturing sector through innovative and effective application of automation technology. He is now the council member of Penang Skills Development Centre and a member of the advisory committee for Politeknik Sultan Abdul Halim Mu’adzam Shah (POLIMAS).

He also holds directorships in all the subsidiary companies and an associate company of the Company.

Mr. Chuah is the brother-in-law of Mr. Tan Boon Teik. He has no conflict of interest with the Company and he has not been convicted of any offences in the past ten (10) years.

Tan Boon Teik, aged 45, a Malaysian citizen, was appointed to the Board of the Company on 30 November 2002 and is currently the Chief Executive Officer and a member of the Remuneration Committee.

He is professional engineer and co-founder of Pentamaster Group. He graduated with a Certificate in Electrical Engineering and later obtained Master in Business Administration from Southern Pacific University, USA. Prior to setting up of the Group, he has many years of working experience in Intel Technology Malaysia and specialises in controls of automation. With his technical skills, he has developed the Group into an integrated automation group equipped with up-to-date technology and applications. He has also built a strong team of in-house research and development team as well as technical support personnel to enable the Group to compete competitively in the global market.

He also holds directorships in all the subsidiary companies and an associate company of the Company.

Mr. Tan is the brother-in-law of Mr. Chuah Choon Bin. He has no conflict of interest with the Company and he has not been convicted of any offences in the past ten (10) years.

Dr. Ooi Hun Pin, aged 47, a Malaysian citizen was appointed to the Board of the Company on 30 November 2002 and is currently the Chairman of the Audit Committee and a member of the Remuneration Committee and Nomination Committee.

He has a Doctorate in Business Administration as well as a MBA. He has been a member of the Malaysian Institute of Certified Public Accountants and the Malaysian Institute of Accountants since 1988.

He started his career as auditor in Price Waterhouse from 1983 to early 1988 before joining Datuk Keramat Holdings Berhad as its Accountant. After a stint as Internal Audit Executive in Universal Furniture Limited, he embarked on a career in stockbroking, where he has more than a decade of management experience in the industry. Since early 1990, he held various positions, from Assistant Finance Manager in CIMB Securities Sdn. Bhd., to General Manager in SJ Securities Sdn. Bhd. to Deputy CEO in Avenue Securities Sdn. Bhd.

He does not have any family relationship with any directors and/or major shareholder of the Company and has no conflict of interest with the Company. He has not been convicted of any offences in the past ten (10) years.

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PROFILE OF DIRECTORS (cont’d)

Loh Nam Hooi, aged 48 a Malaysian citizen, was appointed to the Board of the Company on 30 November 2002 and is currently the Chairman of the Remuneration Committee and the Nomination Committee. He is also a member of the Audit Committee.

He holds a Bachelor of Commerce (Honour) Degree from Carleton University, Ottawa, Canada. Upon his graduation in 1984, he has since been working in a property development company as a Manager. He was a board member of the Penang Water Authority from 1997 to 1999. In 1996, he was appointed as a Director in Kwong Wah Yit Poh Press Bhd. He also sits on the board of several private companies.


Dato’ Dr Zainuddin Bin Md. Wazir, aged 51, a Malaysian citizen, was appointed to the Board of the Company on 22 February 2006 and is currently a member of the Nomination Committee.

He obtained his Master of Surgery from University Kebangsaan Malaysia. He went to further his specialist training at the Monash Medical Center, Australia and at the Alfred Hospital, Australia in 1992-1994. He became the Head of Department of Cardiac Surgery at the Penang General Hospital in 1995 and later became a Consultant Cardiothoracic Surgeon at Island Hospital, Penang.

He is now the Executive Chairman of The Synergy Group. His brainchild, Synergy Healthcare Sdn Bhd is involved in medical tourism that provides a full range of medical services to Medan, Indonesia via Island Hospital. Another related company, Synergy Farm (M) Sdn Bhd has successfully cultivates and produces Cavendish Banana for local and overseas market. He has also established Benih Tulin Sdn Bhd which is responsible for setting up the WorldLab Tissue Culture Centre, a Research & Development centre for mass production of tissue culture.

He also manages the Allianze College Of Medical Sciences (ACMS). The college offers Pre-Medical, Diploma programmes in Allied Health Sciences, Pharmacy and Health Science Degree in collaboration with Universiti Kebangsaan Malaysia, Universiti Teknologi Mara, National University Of Ireland, Galway and University College Cork.

He is an active committee member of the Penang Malay Chamber Of Commerce and the Treasurer of Malaysian Islamic Chambers Of Commerce. He is also a Director of Lipo Corporation Berhad.


Dato’ Seri Kiew Kwong Sen, aged 61, a Malaysian citizen, was appointed to the Board of the Company on 31 March 2006 and is currently a member of the Audit Committee.

He graduated from National Taiwan University with Bachelor of Science in Mechanical Engineering Degree in 1972 and later received his Master of Science in Industrial Engineering Degree from UC Berkeley. After graduation, he worked in various technical and management positions at Advanced Micro Devices, Hewlett Packard Malaysia, and Hewlett Packard California.

He is now the Chairman and President of Mini-Circuits Technologies Malaysia, President of Gibraltar Semiconductor, San Jose, California, President of Blue Cell Technologies, Sacramento, California, Executive President of Mini-Circuits New York, and Chairman of Mini-Circuits Taiwan Ltd. He is also the Chairman of Vitrox Corporation Berhad and ACX Ceramic Taiwan.

He is very active in community services including sponsors of various charitable and educational projects. He is the founder and Chairman of the Mini-Circuits Scholarship Foundation. This Foundation has been awarding two full scholarships a year for deserving University students for a full 4-year degree programme at local Universities.

He has been serving as a member of Penang Competitiveness Committee since 2003. He is now the Co-Chairman of the Industrial Advisory Panel for Penang. He is also the Advisor for the Young Entrepreneurs’ Association of Malaysia, Penang Alumni Association of Taiwan, Software Consortium of Penang, Penang RF Cluster and Penang Automation Cluster. He is also a popular speaker at seminars and conferences both in Malaysia and overseas.


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CORPORATE SOCIAL RESPONSIBILITY STATEMENT

At Pentamaster, the Company is mindful of its responsibility to the communities in which it operates and is committed to progressively embedding Corporate Social Responsibility best practise into every aspect of the Company’s operation.

Since 2005, the Company has provided educational scholarship to deserving employees in accomplishing their dreams for pursuing higher education opportunities in part-time post graduate courses of Master in Business Administration (MBA).

The welfare of the employees is also of paramount important to the Company. In this aspect, the Company has constructed an in-house child care centre to provide free child care services for all employees. This nursery sanctuary is aimed to provide conducive and convenience working environment to the working parents and to promote employee’s engagement.

The Company also held the Pentamaster internal badminton tournament to further foster recreational fellowship and sportsmanship amongst the employees and the management.

The Company is committed to providing and maintaining a healthy and safe work environment for its employees. Occupational Safety and Health committees organized quarterly safety audit and ensure continuous health and safety improvements in all of the Company’s business operations. Trainings sessions including emergency first-aid and fire drill are provided to Emergency Response Team (ERT) and Employee Safety and Health (ESH) Committee.

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FINANCIAL HIGHLIGHTS

Group 2008

RM’000

Group 2007

RM’000

Group 2006

RM’000

Revenue 104,445 144,248 120,718(Loss)/Profit Before Taxation (26,619) 987 12,659(Loss)/Profit After Taxation (27,390) 3,596 10,567Number of Shares in Issue 133,243 133,243 133,243Shareholders’ Funds 85,422 118,014 119,749(Loss)/Earnings per Share - basic (sen) (21.43) 2.70 7.93Net Tangible Assets per Share (RM) 0.64 0.89 0.90

150,000

100,000

2008

2008

104,445

85,422

2007

2007

144,248

118,014

2006

2006

120,718

119,749

120,000

80,000

REVENUE

200820072006

(LOSS)/EARNINGS PER SHARE - BASIC (SEN)SHAREHOLDERS’ FUNDS

90,000

60,000

60,000

40,000

30,000

20,000

0

0

120,000

6

(21.43)

2.70

7.93

9

9

6

20

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(LOSS)/PROFIT AFTER TAXATION

200820072006

(26,619)

987

12,659

20,000

10,000

10,000

5,000

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The Board of Directors recognises the importance of good corporate governance and the need to ensure that the principles and best practices on corporate governance are observed and practised throughout the Group. It strives to continually improve and comply with the processes and structure as articulated in the Principles and Best Practices set out in the Malaysian Code on Corporate Governance (“MCCG”).

Set out below are the details on how the Group has applied the Principles and Best Practices mentioned above.

BOARD OF DIRECTORS

Composition of the Board

The Board presently has six (6) members which comprises of two (2) Executive Directors and four (4) Independent Non-Executive Directors. No individual or group of individuals dominates the Board’s decision making and the number of directors reflects fairly the investment of the shareholders.

Given the nature and scope of the Group’s operations, the Board considers that the current composition of the Board is of the appropriate size and with the right mix of skills and experience in meeting the Group’s current needs and requirements. A profile of each Director is presented on pages 6 to 7.

Board responsibilities

There is a clear division of responsibility between the Executive Chairman and the Chief Executive Officer to ensure the balance of power and authority. The Executive Chairman is responsible for the conduct of the Board and ensures the Board’s discussions are conducted in a manner that all views are taken into account before a decision is made. The Chief Executive Officer has the general responsibility for day-to-day running of the Group’s business, implementation of Board policies and making of operational decisions duly assisted by the Management team. The presence of Independent Non-Executive Directors on the Board provides a balanced and independent view and judgement on corporate issues dealt with at the Board level to safeguard the interest of public shareholders.

Attendance of meetings

During the financial year ended 31 December 2008, there were five (5) meetings held. The details of attendance of each member are as follows:

Name of Director Designation AttendanceChuah Choon Bin Executive Chairman 5/5Tan Boon Teik Chief Executive Officer 5/5Dato’ Dr. Zainuddin Bin Md Wazir Independent Non-Executive Director 3/5Dato’ Seri Kiew Kwong Sen Independent Non-Executive Director 5/5Dr. Ooi Hun Pin Independent Non-Executive Director 5/5Loh Nam Hooi Independent Non-Executive Director 5/5Haji Zainal Abidin Bin Abas(resigned on 17 February 2009)

Non-Executive Director 5/5

The Board meets at least once a quarter to review and approve the quarterly financial results. Additional meetings will be convened as necessary, when there are urgent and important matters that require the Board’s deliberation.

Appointments to the Board

The MCCG endorses as good practice, a formal procedure for appointments to the Board, with a Nomination Committee making recommendations to the Board. The Board through the Nomination Committee’s annual review, is satisfied that the current composition of the Board brings the required mix of skills and core competencies required to discharge its duties effectively.

CORPORATE GOVERNANCE STATEMENT

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Board Committees

The Board has delegated certain responsibilities to other Board Committees, which operate within approved Terms of Reference. These committees are the Audit Committee, Nomination Committee, and Remuneration Committee.

a) Nomination Committee

The Nomination Committee comprises wholly of Non-Executive Directors, a majority of whom are independent. This Committee is empowered to bring to the Board recommendations as to the appointment of any new executive or non-executive director and the Directors to fill the seats on Board Committees. The Nomination Committee will assess the effectiveness of the Board of Directors as a whole, the Board Committees and contribution of each individual Director on an annual basis. In developing such recommendations, the Nomination Committee will consult all Directors and reflects that consultation in any recommendation of the Nomination Committee brought forward to the Board.

Currently, the members of the Nomination Committee are Loh Nam Hooi (Chairman), Dr. Ooi Hun Pin and Dato’ Dr. Zainuddin Bin Md. Wazir.

The Nomination Committee has met once during the financial year, in carrying out an annual review of the Board, its Committees and the contribution of individual Director to the Company.

b) Remuneration Committee

The Remuneration Committee which comprises mainly of Non-Executive Directors recommends the remuneration for the Executive Directors. The determination of the remuneration of the Non-Executive Directors is a matter for the Board as a whole. The individual Director concerned should abstain from deliberations and voting on the decision in respect of his own remuneration. The remuneration of Directors is generally based on market conditions, responsibilities held and the Group’s overall financial performance. The remuneration package should be sufficient to attract, retain and motivate Directors of calibre needed to run the Group successfully. Decisions and recommendations of the Committee shall be reported back to the Board for approval and where required by the rules and regulations governing the Company, for approval of shareholders at the Annual General Meeting.

Currently, the Remuneration Committee members are Loh Nam Hooi (Chairman), Dr. Ooi Hun Pin and Tan Boon Teik.

The Remuneration Committee has met once during the financial year.

c) Audit Committee

The composition and functions of the Audit Committee are detailed in the Audit Committee Report on pages 17 to 19.

Re-election of Directors

In accordance with the Company’s Articles of Association, at least one-third of the Directors are subject to retirement by rotation at each Annual General Meeting and all Directors shall retire from office at least once in every three (3) years but shall be eligible for re-election. The Articles of Association also provides that all Directors appointed by the Board are subject to election by the shareholders at the next Annual General Meeting after their appointment.

CORPORATE GOVERNANCE STATEMENT (cont’d)

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Directors’ Training

All Directors have completed the Mandatory Accreditation Programme prescribed by the Bursa Malaysia Securities Berhad (“Bursa Malaysia”). The Group maintains an orientation programme with the aim of providing an overview of the Group’s business operations and its direction for new Board members. The Directors will continue to undergo relevant training programmes to further enhance their skills and knowledge where relevant.

The Directors of the Company attended the following training during the financial year ended 31 December 2008:

Name of Directors Name of CourseMode of training

Number ofday(s) spent

Tan Boon Teik • Key To Malaysia’s Competitive Advantage- Prime For CEO

Seminar 0.5

• Managing Business Cash Seminar 2

Haji Zainal Abidin Bin Abas • 4th Asia Pacific Audit & Governance Summit 2008 Conference 2 Dr. Ooi Hun Pin • National Achievers Congress 2008 (Singapore)

- The Evolution of SuccessCongress 2

• Wealth Expo Seminar Seminar 1• Millionaire Mind Intensive Seminar 3

Loh Nam Hooi • 4th Asia-Pacific Audit & Governance Summit 2008 Conference 2

Save as disclosed above, the other Directors have not attended any trainings during the financial year, due to their tight work schedules.

Supply of Information

All Directors have full and timely access to information with Board papers distributed in advance of meetings. Agenda and discussion papers, including quarterly and annual financial statements, minutes of meetings and board papers which include reports relevant to the issues of the meetings covering the areas of strategic, financial and operational matters are circulated prior to Board Meetings to allow the Directors to study and evaluate the matters to be discussed. In addition, there is a schedule of matters reserved specifically for the Board’s decision.

The Directors have direct access to the advice and the services of the Group’s Company Secretaries for ensuring that Board procedures are followed. If required, the Directors may take independent professional advice in the furtherance of their duties at the Company’s expense. Before incurring the professional fee, the Director concerned must seek the approval of the Board. The Directors may access all information within the Group in furtherance of their duties.


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DIRECTORS’ REMUNERATION

The details of the Directors’ remuneration for the financial year ended 31 December 2008 are as follows:

Type of remuneration Aggregate remuneration(in RM) paid/payable toExecutive Directors

Non-Executive Directors

Directors’ Fees 24,000 180,000Other Emoluments:

- Salaries, bonus, allowances & perquisite 986,667 –- Contribution by employer to Provident Fund 108,548 –- Benefits-in-kind (based on estimated money value) 250,000 –

Total 1,369,215 180,000

The analysis on Directors’ remuneration by remuneration band is as follows:

Remuneration Band (in RM)

No. of Recipient/sExecutive Directors

Non-Executive Directors

50,000 and below – 5650,001 to 700,000 2 –Total 2 5

SHAREHOLDERS

Dialogue Between the Company and Investors

Shareholders and investors are kept informed of all major development within the Group by way of announcements via the BURSA LINK, the Company’s Annual Reports and other circulars to shareholders, where applicable. Shareholders can also access the Company’s website, www.pentamaster.com for up to date information about the Company.

The Annual General Meeting (“AGM”) is the principal forum for dialogue with shareholders. Notice of AGM and Annual Reports are sent to shareholders at least 21 days before the meeting.

During the AGM, shareholders are given opportunities to enquire and comment on matters relating to the Group’s business. The shareholders are encouraged to participate in the open question and answer session in the AGM pertaining to the resolutions being proposed at the meeting and the financial performance and business operation in general. The Directors are available to provide responses to questions from the shareholders during the meeting. In addition, Extraordinary General Meetings are held as and when needed.

In compliance with MCCG recommendations, Dr. Ooi Hun Pin has been appointed as the Senior Independent Non-Executive Director to whom concerns may be conveyed. Any matters of concern may be raised to the Senior Independent Non-Executive Director through regular mail to the Company’s registered address.

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ACCOUNTABILITY AND AUDIT

Financial Reporting

The Directors aim to present a fair assessment of the Group’s financial performance, position and prospects primarily through the quarterly reports to Bursa Malaysia as well as the Annual Report to shareholders. The Board is also assisted by the Audit Committee to oversee the Group’s financial reporting process and the quality of its financial reporting.

Internal Control

The Board acknowledges that they are responsible for maintaining a sound system of internal controls to safeguard shareholders’ investment and the Company’s assets as required by the MCCG. The Statement on Internal Control set out on pages 15 to 16 of this Annual Report, provides an overview of the state of internal control within the Group.

Relationship with External Auditors

The external auditors fulfil an essential role in giving assurance to the shareholders and other parties of the reliability of the financial statements of the Company. The Company has always maintained a formal and transparent relationship with the external auditors in ensuring the Company’s compliance with applicable approved accounting standards and statutory requirements.

The role of the Audit Committee in relation to the external auditors is described in the Audit Committee’s terms of reference as detailed on pages 17 to 19 of the Annual Report.

Directors’ Responsibilities in Respect of Audited Financial Statements

Pursuant to the Companies Act, 1965, the Directors are required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of the results and cash flows of the Group and of the Company for the financial year then ended.

The Directors consider that, in preparing the financial statements, the Group has adopted appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates. The Directors also consider that all applicable approved accounting standards have been complied with and confirm that the financial statements have been prepared on a going concern basis.

The Directors are responsible for ensuring that the Group and the Company keep accounting records which disclose with reasonable accuracy at any time the financial position of the Group and of the Company and which enable them to ensure that the financial statements comply with the Companies Act, 1965 and applicable approved accounting standards.

The Directors have a general responsibility for taking reasonable steps to safeguard the assets of the Group and of the Company and to prevent and detect fraud and other irregularities.

Compliance Statement

Save as disclosed, throughout the financial year ended 31 December 2008, the Group has complied with all the Best Practices of Corporate Governance set out in Part 2 of the Malaysian Code on Corporate Governance.

This statement was made in accordance with a Board of Directors’ resolution dated 27 April 2009.

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Pursuant to Paragraph 15.27(b) of the Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”), the Board of Directors is pleased to provide the following statement on the state of internal control of the Group, which had been prepared in accordance with the “Statement of Internal Control: Guidance for Directors of Public Listed Companies” (the “Internal Control Guidance”).

Responsibility

The Board of Directors recognises the importance of maintaining a sound internal control system covering risk management and the financial, operational and compliance controls to safeguard shareholders’ investments and the Group’s assets. The Board acknowledges that it is responsible for the Group’s system of internal controls to safeguard shareholders’ investments and the Group’s assets and for the continuing review of its adequacy and integrity. Due to the limitations that are inherent in any system of internal controls, those systems are designed to manage, rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Group has put in place an ongoing process to review the effectiveness, adequacy and integrity of the system of internal controls.

Key Elements of Internal Control

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

(a) An organisation structure with clearly defined lines of responsibility, authority and accountability;

(b) Documented internal policies, guidelines, procedures and manuals, which are updated from time to time;

(c) Regular Board and management meetings where information is provided to the Board and management covering financial performance and operation;

(d) Quarterly review of financial results by the Board and Audit Committee;

(e) Regular training and development programs attended by employees with the objective of enhancing their knowledge and competency;

(f) Existence of risk management team to enhance its risk management practice; and

(g) Ongoing reviews on the system of internal controls by an independent internal audit function. Results of such reviews are reported to the Audit Committee, which in turn reports to the Board.

In addition, the Executive Directors have day to day involvement with the business and are responsible for monitoring risks affecting the business and control activities.

The Group’s associated company, Komax Systems Penta Sdn Bhd (Komax) has not been dealt with as part of the Group for the purpose of applying the Internal Control Guidance. However the Group is represented on the Board of Komax to exercise close supervision on the operations and controls of Komax and to safeguard the Group’s interest. The Board is of the opinion that the internal controls of Komax is adequate. The associated company has been disposed of during the year on 30 September 2008.

STATEMENT ON INTERNAL CONTROL

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STATEMENT ON INTERNAL CONTROL (cont’d)

Internal Audit Function

The Board outsourced its internal audit function to a professional firm of consultants to support its internal audit function to provide much of the assurance required regarding the effectiveness as well as the adequacy and integrity of the Group’s system of internal controls. Internal audit function adopts a risk-based approach in developing its audit plan which addresses all the core auditable areas of the Group. The internal audit plan was presented to and approved by Audit Committee. Periodic internal audit review is carried out and the audit findings are presented to the Audit Committee via internal audit reports whilst Management formulates action plans to address issues noted from internal audit to improve the system of internal controls.

Based on the internal auditors’ report for the financial year ended 31 December 2008, there is a reasonable assurance that the Group’s system of internal controls is generally adequate. Nevertheless, the internal control systems will continue to be reviewed, added on or updated in line with changes in the operating environment.

Review of The Statement By External Auditors

Pursuant to paragraph 15.24 of the Listing Requirements, the External Auditors have reviewed this Statement for inclusion in the Annual Report for the Financial Year ended 31 December 2008 and reported to the Board that nothing has come to their attention that causes them to believe that this Statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls.

Conclusion

The Board having considered all audit findings is of the opinion that the Group’s system of internal controls is adequate and accords with the guidance provided by the “Internal Control Guidance”.

This statement was made in accordance with a Board of Directors’ resolution dated 27 April 2009.

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AUDIT COMMITTEE REPORT

MEMBERS OF THE AUDIT COMMITTEE

Members of the Audit Committee are as follows:

Chairman Dr. Ooi Hun Pin Independent Non-Executive DirectorMembers Loh Nam Hooi Independent Non-Executive Director

Dato’ Seri Kiew Kwong Sen Independent Non-Executive Director(appointed on 24 November 2008)

Chuah Choon Bin Executive Chairman(resigned on 24 November 2008)

TERMS OF REFERENCE

The Directors have approved and adopted the following Terms of Reference, which set out the roles and responsibilities of the Audit Committee.

OBJECTIVES

• To assist in discharging the Board of Directors’ responsibilities as they relate to the Group’s management including risk management, internal control, financial reporting and compliance with statutory and legal requirements;

• To provide, by way of regular meetings, a direct line of communication between the Board of Directors, senior management, external and internal auditors;

• To oversee and review the quality of the audits conducted by the external and internal auditors; and

• To enhance the perceptions held by interested parties, such as shareholders, regulators, creditors and employees, of the credibility and objectivity of the financial reports.

COMPOSITION

• The Audit Committee shall be appointed by the Board of Directors from amongst the Directors of the Company and must consist of not less than three (3) members. All the Audit Committee members must be Non-Executive Directors with majority of them being Independent Non-Executive Directors. No Alternate Directors shall be appointed a member of the Audit Committee.

• At least one member of the Audit Committee:(i) Must be a member of the Malaysian Institute of Accountants; or(ii) If he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years working experience;

and - he must have passed the examination specified in Part I of the 1st Schedule of the Accountants Act, 1967; or

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

Chairman

• The Chairman shall be an independent director elected by the members of the Audit Committee.

Secretary

• One of the Company Secretaries shall be the Secretary of the Audit Committee.

Quorum

• A quorum shall be two (2) members and a majority of the members must be independent directors. In the absence of the Chairman, the members present shall elect a chairman for the meeting from amongst the members present.

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AUDIT COMMITTEE REPORT (cont’d)

COMPOSITION (cont’d)

Meetings

• The Audit Committee shall regulate its own proceedings. The Committee shall meet at least four (4) times a year. The Audit Committee has the discretion to invite relevant personnel to its meeting. The presence of senior management, external and internal auditors may be requested, if required. Other members of the Board of Directors may attend meetings upon the invitation of the Audit Committee.

• The Committee is able to convene meetings with external auditors, without executive Board members being present at least twice a year. The external and internal auditors may request a meeting by notifying the Chairman of the Audit Committee if they consider it necessary.

Authority

• The Audit Committee is authorised by the Board of Directors to investigate any matter within its terms of reference. The Committee shall have the resources which are required to perform its duties and have full and unrestricted access to any information and personnel pertaining to the Group. The Committee has direct communication channels with the external and internal auditors and may obtain independent professional advice as and when necessary to discharge its duties subject to the prior approval of the Board of Directors.

Term of Office

• If a member of the Committee for any reason ceases to be a member of the Committee with the result that the number of members is reduced to below three (3), the Board of Directors shall within three (3) months of that event, appoint such number of new members as may be required to make up the minimum number of three (3) members.

Functions

The functions of the Audit Committee shall be:

• To review and discuss with the external auditors the following:

(i) the external audit plan (including the nature and scope of audit);(ii) their audit reports;(iii) their evaluation of the system of internal controls;(iv) problems and reservations arising from their external audits, and any matters the external auditors may wish to discuss

(in the absence of management, where necessary); and(v) their management letter and management’s response.

• Recommend the nomination, appointment and suitability of re-appointment of external auditors, their fees and any questions on resignation and dismissal.

• Review the quarterly results and year end financial statements, prior to submission to the Board of Directors for approval, focusing particularly on:

(i) changes in major accounting policies and practices;(ii) major judgemental areas, significant and unusual events;(iii) significant adjustments arising from the audit; and (iv) compliance with accounting standards, regulatory and other legal requirements.

• Review any related party transaction and 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, and to ensure that the Directors report such transactions annually to the shareholders vide the Annual Report.

• Review and approve the draft Annual Report prior to presentation to the Board of Directors for approval.

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AUDIT COMMITTEE REPORT (cont’d)

COMPOSITION (cont’d)

Functions (cont’d)• Review the following in respect of the internal audit functions:

(i) internal audit plan including the nature and scope of audit;(ii) adequacy of the scope and resources of the internal audit function and whether it has the necessary authority to carry

out its work;(iii) the results of the internal audit findings, and the adequacy of management’s response and corrective actions to be

taken;(iv) effectiveness of the internal audit function; and(v) appointment or termination of senior staff member of the internal audit function and to provide the resigning staff an

opportunity to submit his reasons for resigning.

• Prepare reports, if the circumstances arise or at least once a year, to the Board of Directors summarising the work performed in fulfilling the Audit Committee’s primary responsibilities.

• Act on any matters as may be assigned by the Board of Directors.

Summary of Activities During the Financial Year

The Audit Committee met five (5) times during the financial year ended 31 December 2008 and details of attendance are as follows:

Name of Director Designation AttendanceDr. Ooi Hun Pin Independent Non-Executive Director 5/5Loh Nam Hooi Independent Non-Executive Director 5/5Chuah Choon Bin Executive Chairman 5/5Dato’ Seri Kiew Kwong Sen Independent Non-Executive Director N/A

(appointed on 24 November 2008)

The main activities undertaken by the Audit Committee for the financial year ended 31 December 2008 were as follows:

• Reviewed the adequacy of the Company’s risk management system for identifying and managing the risk.• Reviewed the external auditors’ scope of work and audit plans for the year.• Recommended to the Board of Directors the appointment and remuneration of the external auditors.• Met with the external auditors without the presence of Management to discuss any matters that they may wish to present.• Reviewed the quarterly results, annual audited financial statements of the Company and Group including announcements and

made relevant recommendations to the Board for approval prior to their release to the Bursa Securities.• Reviewed the internal auditors’ scope of work and audit plans for the year.• Reviewed internal audit reports, which highlighted audit issues and findings, recommendations and Management’s response.

Discussed with Management on the corrective actions taken to improve the system of internal controls based on improvement opportunities identified in the internal audit reports.

INTERNAL AUDIT FUNCTION

The Board has outsourced its internal audit activities to a professional service firm to support the internal audit function. The internal auditors report functionally to the Audit Committee, assisting it in discharging its duties and responsibilities. Its key role is to provide an independent and objective assurance of the adequacy and integrity of the system of internal controls.

During the financial year ended 31 December 2008, internal audit reviews have been carried out according to the internal audit plan, which has been approved by the Audit Committee, in the areas of accounts receivable, payroll, project management, travelling claims, inventory management, warranty claims, purchasing, accounts payable and intellectual property. The findings and recommendations were highlighted to the Management for their comments and further action. Internal audit reports are presented to the Audit Committee, which in turn reports to the Board.

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OTHER INFORMATION

MATERIAL CONTRACTSThe Company and its subsidiaries do not have any material contracts involving the interest of its Directors and major shareholders.

MATERIAL CONTRACTS RELATING TO LOANSThe Company and its subsidiaries do not have any material contracts relating to loan involving the interest of its Directors and major shareholders.

UTILISATION OF PROCEEDSThere were no proceeds raised during the financial year.

SHARE BUY-BACKThere was no share buy-back exercise carried out by the Company for the financial year ended 31 December 2008.

OPTIONS, WARRANTS OR CONVERTIBLE SECURITIESThe amount of share options granted over unissued shares to Directors and employees are disclosed in the Directors’ Report. There were no options granted under the Company’s Employee Share Option Scheme (“ESOS”) during the financial year. There were also no other options, warrants or convertible securities issued during the financial year.

AMERICAN DEPOSITORY RECEIPT (“ADR”) OR GLOBAL DEPOSITORY RECEIPT (“GDR”) PROGRAMMEDuring the financial year, the Company did not sponsor any ADR or GDR programme.

IMPOSITION OF SANCTION/PENALTIESThere was no sanction and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year.

NON-AUDIT FEESThe amount of non-audit fees paid and payable to the external auditors for the financial year is RM37,000.

VARIATION IN RESULTSThere was no variation of more than 10% between the results of the financial year and the audited results.

PROFIT GUARANTEEThe Company did not give any profit guarantee during the financial year.

REVALUATION OF LANDED PROPERTIESThere was no revaluation of landed properties during the financial year.

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22 - 27 DIRECTORS’ REPORT

28 CONSOLIDATED BALANCE SHEET 29 CONSOLIDATED INCOME STATEMENT

30 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

31 - 32 CONSOLIDATED CASH FLOW STATEMENT 33 BALANCE SHEET

34 INCOME STATEMENT 35 STATEMENT OF CHANGES IN EQUITY

36 CASH FLOW STATEMENT 37 - 85 NOTES TO THE FINANCIAL STATEMENTS

86 STATEMENT BY DIRECTORS 87 STATUTORY DECLARATION 88 - 89 AUDITORS’ REPORT

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DIRECTORS’ REPORT

The Directors hereby submit their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2008.

PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and provision of management services. The principal activities of the subsidiary companies are set out in Note 6(b) to the financial statements.

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

RESULTSGroup Company

RM RM

(Loss)/Gain for the year attributable to:Equity holders of the Company (28,549,361) (6,365,798)Minority interest 1,159,036 –

(27,390,325) (6,365,798)

DIVIDENDS

Since the end of the previous financial year, a first and final tax exempt dividend of 8% amounting to RM5,329,722 was paid on 31 July 2008 in respect of the financial year ended 31 December 2007 and which has been dealt with in the directors’ report for that financial year.

No final dividend has been proposed by the Directors in respect of the financial year ended 31 December 2008.

RESERVES AND PROVISIONS

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

SHARE CAPITAL

There were no issue of shares or debentures by the Company during the financial year.

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EMPLOYEES’ SHARE OPTION SCHEME

Pentamaster Corporation Berhad’s Employees’ Share Option Scheme (“ESOS”) was approved by the Securities Commission on 6 November 2002, the shareholders on 15 April 2003 and the Bursa Malaysia Securities Berhad (“BMSB”) on 15 July 2003. This ESOS was implemented on 21 July 2003 and expired on 20 July 2008. The movements of options over unissued ordinary shares granted to eligible directors and employees of the Group during the financial year were as follows:

Options over number of ordinary shares of RM0.50 each

Exerciseprice

RMBalance at1.1.2008 Granted Exercised Forfeited

Balance at31.12.2008Date granted

31 July 2003 1.32* 1,450,100 – – (1,450,100) –26 August 2004 1.97 2,199,900 – – (2,199,900) –

3,650,000 – – (3,650,000) –

Note:

* Adjustment of option price from RM1.98 to RM1.32 arising from the bonus issue on 3 September 2004.

The expiry date of all options granted was 20 July 2008.

The salient features of the ESOS are as follows:

(i) The scheme is set up for participation in the ordinary share capital of the Company and the total number of shares to be offered shall be subject to a maximum of 10% of the issued and paid up share capital of the Company at any time during the duration of the ESOS which shall be in force for a period of five years from the date of commencement.

(ii) The ESOS scheme shall be administered by the ESOS Committee which shall comprise senior management staff to be appointed by the Board of Directors.

(iii) Eligible persons are employees and full time executive directors of the Group who have been employed for a continuous period of at least six months in the Group and his employment must have been confirmed on the date of offer. The offer of the ESOS shall be at the discretion of the ESOS Committee administering the ESOS.

(iv) The option price shall be determined in the following manner:

(a) Where the Option is granted before the Company is listed on the BMSB then the price at which the Option Holder is entitled to subscribe for the shares of the Company shall not be less than the price of the shares set for the offer for sale of the shares for the purpose of listing of the Company on the BMSB.

(b) Where the Option is granted on or after the Company is listed on the BMSB, the price at which the Option Holder is entitled to subscribe for the shares of the Company shall be the higher of a price to be determined by the Board upon the recommendation of the ESOS Committee which is at a discount of not more than 10% from the weighted average market price of the shares as shown in the daily official list issued by the BMSB for the five market days immediately preceding the date of offer and the par value of the shares.

(v) The ordinary shares to be allotted upon any exercise of the Option will upon allotment and issue rank pari passu in all respects with the then existing issued and paid up ordinary shares of the Company except that the shares so issued will not be entitled to any dividends, rights, allotments or other distributions declared, made or paid to shareholders unless the shares so allocated have been credited into the relevant securities accounts of the shareholders maintained by Bursa Malaysia Depository Sdn. Bhd. before the entitlement date and will be subject to all provisions of the Articles of Association of the Company relating to transfer, transmission and otherwise.

DIRECTORS’ REPORT (cont’d)

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EMPLOYEES’ SHARE OPTION SCHEME (cont’d)

(vi) The Option which has not been exercised by the grantee shall be automatically terminated in the following circumstances:

(a) Where the grantee ceases employment with the Group for any reason whatsoever. Exceptions are given under certain conditions provided for in the bye-laws at the discretion of the ESOS Committee.

(b) Where the grantee is declared a bankrupt.

(c) Upon winding up or liquidation of the Company.

(d) Upon termination of the Scheme pursuant to the conditions in the bye-laws.

There was no option granted under the ESOS during the financial year ended 31 December 2008.

DIRECTORS OF THE COMPANY

The directors who served since the date of the last directors’ report are:

Chuah Choon BinTan Boon TeikHaji Zainal Abidin Bin AbasLoh Nam HooiDr Ooi Hun PinDato’ Dr Zainuddin Bin Md WazirDato’ Seri Kiew Kwong Sen

In accordance with Article 95 of the Company’s Articles of Association, Dr Ooi Hun Pin, Dato’ Seri Kiew Kwong Sen and Dato’ Dr Zainuddin Bin Md Wazir shall retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-election.

Particulars of directors’ interests in the ordinary shares and options to subscribe for ordinary shares under ESOS in the Company during the financial year in respect of directors who held office at the end of the financial year (including the interests of the spouses or children of the directors who themselves are not directors of the Company) and in accordance with the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM0.50 each

Balance at Balance atName of Director 1.1.2008 Bought Sold 31.12.2008

Chuah Choon Bin- Direct interest 30,642,000 – – 30,642,000 - Indirect interest 28,500* – – 28,500 Tan Boon Teik- Direct interest 32,349,942 – – 32,349,942 - Indirect interest 44,250* 44,250 Haji Zainal Abidin Bin Abas- Direct interest 10,174,264 – – 10,174,264 Loh Nam Hooi- Direct interest 90,000 – – 90,000 Dato’ Seri Kiew Kwong Sen - Direct interest 301,000 – – 301,000 - Indirect interest 110,000* – – 110,000


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DIRECTORS OF THE COMPANY (cont’d)

Option over number of ordinary shares of RM0.50 each

As at Balance atName of Director 1.1.2008 Granted Exercised Forfeited 31.12.2008

Chuah Choon Bin- Direct interestOption price:RM1.32 ** 75,000 – – (75,000) –RM1.97 100,000 – – (100,000) –- Indirect interestOption price:RM1.32 ** 6,300* – – (6,300) –RM1.97 10,000* – – (10,000) –

Tan Boon Teik- Direct interestOption price:RM1.32 ** 150,000 – – (150,000) –RM1.97 100,000 – – (100,000) –- Indirect interestOption price:RM1.32 ** 8,250* – – (8,250) –RM1.97 10,000* – – (10,000) –

Notes:

* Interest held by spouses treated as interest of the directors in accordance with Section 134(12)(c) of the Companies Act 1965.

** Adjustment of the option price from RM1.98 to RM1.32 arising from the bonus issue on 3 September 2004.

The expiry date of all options granted was 20 July 2008.

By virtue of their shareholdings in the Company, Chuah Choon Bin and Tan Boon Teik are deemed to be interested in the shares of all the subsidiary companies held by the Company.

None of the other directors in office at the end of the financial year held any interest in shares or options over shares in the Company and in the subsidiary companies.

DIRECTORS’ BENEFITS

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

As at the end of the financial year and during the year, there did not subsist any arrangement to which the Company was a party whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.


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BAD AND DOUBTFUL DEBTS

Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and are of the opinion that all known bad debts had been written off and adequate allowance had been made for doubtful debts.

At the date of this report, the directors are not aware of any circumstances that would render the amount written off for bad debts or the amount of the allowance made for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent.

CURRENT ASSETS

Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps to ascertain whether any current assets were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and of the Company and to the extent so ascertained were written down to an amount that they might be expected to realise.

At the date of this report, the directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

VALUATION METHODS

At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

CONTINGENT AND OTHER LIABILITIES

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

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

(ii) any contingent liability in respect of the Group and of the Company that has arisen since the end of the financial year.

No contingent or other liability of the Group and of the Company 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 of the Company to meet their obligations as and when they fall due.

ITEMS OF AN UNUSUAL NATURE

The results of the operations of the Group and of the Company for the financial year were not, in the opinion of the directors, substantially affected by any item, transaction or event of a material and unusual nature.

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, in the opinion of the directors, to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made.

CHANGE OF CIRCUMSTANCES

At the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this report or in the financial statements of the Group and of the Company that would render any amount stated in the financial statements misleading.


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AUDITORS

The auditors, Messrs. Folks DFK & Co, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors.

––––––––––––––––––––––––––––––CHUAH CHOON BINDIRECTOR

––––––––––––––––––––––––––––––TAN BOON TEIKDIRECTOR

Penang,

Date: 27 April 2009


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2008 2007 Note RM RM

ASSETS

NON-CURRENT ASSETSProperty, plant and equipment 4 113,762,535 123,530,889 Prepaid lease payments 5 7,496,344 7,634,076 Investment in an associate 7 – 2,241,944 Other investments 8 4,859,900 4,859,900 Intangible assets 9 15,349,039 7,688,416

141,467,818 145,955,225

CURRENT ASSETSInventories 10 27,871,220 27,988,868 Trade receivables 11 17,688,413 40,184,078 Other receivables, deposits and prepayments 12 6,440,288 9,188,069 Tax recoverable 605,639 2,776,450 Cash and bank balances 14 4,649,079 1,894,248

57,254,639 82,031,713

TOTAL ASSETS 198,722,457 227,986,938

EQUITY AND LIABILITIES

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

Share capital 15 66,621,525 66,621,525 Reserves 16 17,641,438 51,392,088

84,262,963 118,013,613 MINORITY INTEREST 17 1,159,036 –

TOTAL EQUITY 85,421,999 118,013,613

NON-CURRENT LIABILITIESTerm loans 18 48,894,414 51,838,406 Hire-purchase payables 19 – 76,347 Deferred income 20 8,820,897 318,988 Deferred tax liabilities 21 2,495,000 2,372,000

60,210,311 54,605,741

CURRENT LIABILITIESTrade payables 22 17,169,919 21,900,070 Other payables and accrued liabilities 23 7,522,224 6,945,832 Provision for warranty costs 24 328,805 360,200 Hire-purchase payables 19 76,347 295,415 Short term borrowings - overdrafts 25 1,341,805 2,609,768 - other borrowings 25 26,651,047 23,253,273 Tax payable – 3,026

53,090,147 55,367,584

TOTAL LIABILITIES 113,300,458 109,973,325

TOTAL EQUITY AND LIABILITIES 198,722,457 227,986,938

CONSOLIDATED BALANCE SHEETas at 31 December 2008

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

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Revenue - Sale of goods 103,887,836 144,133,181 - Dividend received 556,752 115,329

104,444,588 144,248,510

Cost of goods sold (97,134,064) (117,627,300)

Gross profit 7,310,524 26,621,210 Other income 5,296,059 1,828,558 Distribution costs (6,304,915) (4,239,371)Administrative expenses (27,479,213) (18,915,200)Other operating expenses (637,232) (311,094)

Operating (loss)/profit (21,814,777) 4,984,103

Finance costs (4,938,067) (4,668,943)Share of results of an associate 133,724 672,257

(Loss)/Profit before taxation 26 (26,619,120) 987,417

Taxation 27 (771,205) 2,608,964

(Loss)/Profit for the year (27,390,325) 3,596,381

Attributable to:Equity holders of the Company (28,549,361) 3,596,381 Minority interest 1,159,036 –

(27,390,325) 3,596,381

(Loss)/Earnings per share attributable to equity holders of the Company (Sen):- Basic 28 (a) (21.43) 2.70 - Diluted 28 (b) N/A N/A

CONSOLIDATED INCOME STATEMENTfor the year ended 31 December 2008


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Attr

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2008

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CASH FLOWS FROM OPERATING ACTIVITIES

(Loss)/Profit before taxation (26,619,120) 987,417

Adjustments for:Allowance for doubtful debts 462,337 1,139,439 Amortisation of intangible assets 985,881 190,078 Amortisation of prepaid lease payments 137,732 137,731 Bad debts written off 61,505 661,208 Deferred income released (683,476) –Depreciation 4(c) 6,417,814 6,378,288 Development expenditure written off 243,384 80,040 Dividend income (556,752) (115,329)Gain on disposal of intangible asset (125) –Gain on disposal of property, plant and equipment (50,662) (82,700)Gain on disposal of shares in an associate (1,424,332) –Impairment loss of property, plant and equipment 2,850,000 –Interest expense 4,792,488 4,562,509 Interest income (53,583) (420,496)Inventories written off – 2,283,922 Inventories written down 5,908,736 230,845 Property, plant and equipment written off 394,961 –Provision for employees’ benefits (97,015) (4,147)(Reversal of)/Additional provision for warranty costs (31,395) 187,726 Share of results of an associate (133,724) (672,257)Unrealised (gain)/loss on foreign exchange (374,392) 60,004

Operating profit before working capital changes (7,769,738) 15,604,278

Increase in inventories (5,791,088) (3,339,023)Decrease/(Increase) in receivables 25,093,726 (5,747,040)(Decrease)/Increase in payables (4,054,157) 14,577,273

15,248,481 5,491,210

Cash generated from operations 7,478,743 21,095,488

Grant received 9,185,385 318,988 Interest paid (4,794,807) (4,667,928)Tax refund 1,858,517 294,990 Tax paid (338,938) (992,222)Warranty costs paid – (57,126)

Net cash from operating activities 13,388,900 15,992,190

CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 December 2008


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CASH FLOWS FROM INVESTING ACTIVITIES Dividend income 556,752 115,329 Interest received 53,583 420,496 Development expenditure paid 30 (a) (7,320,980) (3,018,153)Proceeds from disposal of an associate 3,800,000 –Proceeds from disposal of intangible assets 2,300 –Proceeds from disposal of property, plant and equipment 1,181,187 122,199 Purchase of computer software (518,954) (1,728,907)Purchase of property, plant and equipment (2,075,091) (19,412,977)

Net cash used in investing activities (4,321,203) (23,502,013)

CASH FLOWS FROM FINANCING ACTIVITIES Dividend paid (5,329,722) (5,329,722)Increase in short term borrowings 4,808,000 12,115,000 Repayment of hire-purchase liabilities (295,414) (303,426)Repayment of term loans (4,354,218) (4,149,072)

Net cash (used in)/from financing activities (5,171,354) 2,332,780

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 3,896,343 (5,177,043)

CASH AND CASH EQUIVALENTS BROUGHT FORWARD (715,520) 4,457,645

FOREIGN CURRENCY EXCHANGE DIFFERENCES ON OPENING BALANCE 126,451 3,878

CASH AND CASH EQUIVALENTS CARRIED FORWARD 30(b) 3,307,274 (715,520)

CONSOLIDATED CASH FLOW STATEMENT (cont’d)for the year ended 31 December 2008


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2008 2007Note RM RM

ASSETS

NON-CURRENT ASSETSPlant and equipment 4 313,995 –Investment in subsidiary companies 6 23,532,683 29,729,682 Investment in an associate 7 – 1,470,000 Other investments 8 4,859,900 4,859,900

28,706,578 36,059,582

CURRENT ASSETSOther receivables, deposits and prepayments 12 368,696 460,375 Amount owing by subsidiary companies 13 72,894,666 77,513,485 Tax recoverable 6,327 6,664 Cash and bank balances 14 23,580 41,862

73,293,269 78,022,386

TOTAL ASSETS 101,999,847 114,081,968

EQUITY AND LIABILITIES

EQUITY Share capital 15 66,621,525 66,621,525 (Accumulated losses)/Reserves 16 (449,574) 11,245,946

TOTAL EQUITY 66,171,951 77,867,471

NON-CURRENT LIABILITYTerm loan 18 35,000,000 35,000,000

CURRENT LIABILITIESOther payables and accrued liabilities 23 827,896 623,936 Amount owing to a subsidiary company 13 – 590,561

827,896 1,214,497

TOTAL LIABILITIES 35,827,896 36,214,497

TOTAL EQUITY AND LIABILITIES 101,999,847 114,081,968

BALANCE SHEETas at 31 December 2008


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2008 2007Note RM RM

Revenue - Management fee 2,971,800 2,201,460 - Dividend received 556,752 7,615,329

3,528,552 9,816,789 Other income 2,454,254 254,490 Administrative expenses (5,580,781) (3,219,328)Other operating expenses (6,206,565) (17,750)

Operating profit (5,804,540) 6,834,201

Finance costs (492,546) (493,303)

(Loss)/Profit before taxation 26 (6,297,086) 6,340,898

Taxation 27 (68,712) –

(Loss)/Profit for the year (6,365,798) 6,340,898

INCOME STATEMENTfor the year ended 31 December 2008


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Non-Distributable Distributable

Retained

Total

Profit/Share Share (Accumulated

Capital Premium Losses)Note RM RM RM RM

Balance at 1 January 2007 66,621,525 4,865,159 5,369,611 76,856,295 Total recognised income and

expense for the year -Profit for the year – – 6,340,898 6,340,898

Dividend 29 – – (5,329,722) (5,329,722)

Balance at 31 December 2007 66,621,525 4,865,159 6,380,787 77,867,471

Total recognised income andexpense for the year -Loss for the year – – (6,365,798) (6,365,798)

Dividend 29 – – (5,329,722) (5,329,722)

Balance at 31 December 2008 66,621,525 4,865,159 (5,314,733) 66,171,951

STATEMENT OF CHANGES IN EQUITYfor the year ended 31 december 2008


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2008 2007Note RM RM

CASH FLOWS FROM OPERATING ACTIVITIES

(Loss)/Profit before taxation (6,297,086) 6,340,898

Adjustments for:Allowance for doubtful debts 289,168 –Allowance for impairment in value of subsidiary companies 6,196,999 –Depreciation 154,296 –Dividend income (556,752) (7,615,329)Gain on disposal of shares in an associate (2,330,000) –Interest income – (254,490)Interest expense 488,827 487,560

Operating loss before working capital changes (2,054,548) (1,041,361)

Increase in receivables 4,421,330 (883,352)Increase in payables (386,601) 949,552

4,034,729 66,200

Cash generated from/(used in) operations 1,980,181 (975,161)Interest paid (488,827) (536,739)Tax paid (68,375) (2,664)Tax refund – 4,000

Net cash from/(used in) operating activities 1,422,979 (1,510,564)

CASH FLOWS FROM INVESTING ACTIVITIESDividend received 556,752 7,615,329 Interest received – 254,490 Proceeds from disposal of shares in an associate 3,800,000 –Purchase of plant and equipment (468,291) –Subscription of shares in subsidiary companies – (999,996)

Net cash from investing activities 3,888,461 6,869,823

CASH FLOWS FROM FINANCING ACTIVITYNet cash from financing activity:

Dividend paid (5,329,722) (5,329,722)

NET (DECREASE)/INCREASE IN CASH ANDCASH EQUIVALENTS (18,282) 29,537

CASH AND CASH EQUIVALENTSBROUGHT FORWARD 41,862 12,325

CASH AND CASH EQUIVALENTSCARRIED FORWARD 30(b) 23,580 41,862

CASH FLOW STATEMENTfor the year ended 31 December 2008


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1. GENERAL INFORMATION

1.1 Domicile and Legal Form

Pentamaster Corporation Berhad is a public company limited by shares, incorporated and domiciled in Malaysia. The Company is listed on the Main Board of the Bursa Malaysia Securities Berhad.

1.2 Registered Office and Principal Place of Business

Its registered office is located at 35, 1st Floor, Jalan Kelisa Emas 1, Taman Kelisa Emas, 13700 Seberang Jaya, Penang.

Its principal place of business is located at Plot 18 & 19, Technoplex, Medan Bayan Lepas, Taman Perindustrian Bayan Lepas, Phase IV, 11900 Penang.

1.3 Principal Activities

The principal activities of the Company are investment holding and provision of management services.

The principal activities of the subsidiary companies are set out in Note 6(b) to the financial statements.

1.4 Authorisation and Date of Issue of Financial Statements

The financial statements of the Group and of the Company for the year ended 31 December 2008 were authorised for issue by the Board of Directors on 27 April 2009.

1.5 Presentation Currency

The financial statements of the Group and the Company are presented in Ringgit Malaysia (RM).

2. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

2.1 A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.

Financial assets of the Group and the Company include cash and bank balances, trade and other receivables, investments, fixed deposits and short term fund.

Financial liabilities of the Group and the Company include trade and other payables and borrowings.

In respect of the Company, financial assets and liabilities also include amount owing by and owing to subsidiary companies respectively.

2.2 The Group’s financial instruments are subject to a variety of financial risks including currency risk, interest rate risk, credit risk, market risk, liquidity and cash flow risks.

The Group’s overall financial risk management objective is to seek to address and control the risks to which the Group is exposed and to minimise or avoid the incidence of loss that may result from its exposure to such risks and to enhance returns where appropriate.

The Board is primarily responsible for the management of these risks and to formulate policies and procedures for the management thereof. The risks are managed by regular risk reviews, internal control systems, ongoing formulation and adherence to financial risk policies and mitigated by insurance coverage where appropriate.

(a) Currency Risk

The Group is exposed to currency risk mainly due to its export sales and imported purchases. The majority of foreign currency transactions are denominated in Euro and United States Dollar.

NOTES TO THE FINANCIAL STATEMENTS31 December 2008

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2. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (cont’d)

(a) Currency Risk (cont’d)

The Group monitors the foreign exchange rate movements and whenever feasible, will hedge the exposure in Euro and United States Dollar by entering into forward currency contracts.

The Group does not speculate in foreign currency derivatives.

(b) Interest Rate Risk

The Group has interest rate risks in respect of its borrowings, deposits and short-term fund.

The Group’s bank borrowings are subject to interest based on floating rates while hire-purchase financing and interest bearing deposits are based on fixed rates.

Market interest rates movements are monitored with a view to ensuring that the most competitive rates are secured and where appropriate borrowing arrangements and interest bearing instruments are restructured or reduced.

(c) Credit Risk

Credit risk is the risk of financial loss attributable to default on obligations by parties contracting with the Group. The Group’s main exposure to credit risk is in respect of its trade receivables.

Credit risk is addressed by a credit committee that sets policies, carries out evaluation and institutes mitigating actions.

New customers are subject to a credit evaluation process and existing customers’ risk profiles are reviewed regularly with a view to setting appropriate terms of trade and credit limits. Where appropriate, further sales are suspended and legal actions are taken to attempt recoveries and mitigate losses.

It is inherent in the Group’s business to make individually large sales to its customers that may lead to a significant concentration of credit risks. Such risks are managed by ensuring that transactions are only carried out with customers with a reliable financial profile.

(d) Market Risk

Market risk is the risk that the value of the financial instrument will fluctuate due to changes in market prices.

The Group’s main market risk exposure are in respect of currency and interest rate fluctuations and which are discussed under the respective risk headings.

(e) Liquidity and Cash Flow Risks

Liquidity or funding risk is the risk of the inability to meet commitments associated with financial instruments while cash flow risk is the risk of uncertainty of future cash flow amount associated with a monetary financial instrument.

Liquidity and cash flow risks are addressed by annual and continuous review and forward planning of cash flow in relation to business plans to ensure a balanced and prudent portfolio of cash and other liquid assets and credit facilities is maintained. The proper management of currency, interest rate and credit risks have the effect of further minimising the incidence and effects of liquidity and cash flow risks.

NOTES TO THE FINANCIAL STATEMENTS (cont’d)31 December 2008

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3. SIGNIFICANT ACCOUNTING POLICIES

3.1 General

All significant accounting policies set out below are consistent with those applied in the previous financial year other than the adoption of the new and revised Financial Reporting Standards (“FRSs”) and the Issues Committee (“IC”) Interpretations issued by the Malaysian Accounting Standards Board (“MASB”) as described hereunder:

ADOPTION OF NEW AND REVISED FRSS AND IC INTERPRETATIONS

(a) FRSs and IC Interpretations That Are Effective

During the financial year, the Group has adopted the following revised FRSs and IC Interpretation that are relevant to its operations and which are mandatory for the stated financial periods:

Effective for financialperiod beginning

on or after

FRS 107: Cash Flow Statements 1 July 2007FRS 112: Income Taxes 1 July 2007FRS 118: Revenue 1 July 2007FRS 120: Accounting for Government Grants and Disclosure of

Government Assistance1 July 2007

FRS 134: Interim Financial Reporting 1 July 2007FRS 137: Provisions, Contingent Liabilities and Contingent Assets 1 July 2007Amendment to FRS 121: The Effects of Changes in Foreign Exchange Rates

- Net Investment in a Foreign Operation1 July 2007

IC Interpretation 8: Scope of FRS 2 1 July 2007

The other new and revised FRSs and IC Interpretations issued by the MASB that are effective from the beginning of the stated financial periods but which are not applicable to the Group’s operations are as follows:


on or after

FRS 111: Construction Contracts 1 July 2007IC Interpretation 1: Changes in Existing Decommissioning, Restoration and Similar

Liabilities1 July 2007

IC Interpretation 2: Members’ Shares in Co-operative Entities andSimilar Instruments

1 July 2007

IC Interpretation 5: Rights to Interests arising from Decommissioning, Restorationand Environmental Rehabilitation Funds

1 July 2007

IC Interpretation 6: Liabilities arising from Participating in a Specific Market- Waste Electrical and Electronic Equipment

1 July 2007

IC Interpretation 7: Applying the Restatement Approach under the FRS 1292004Financial Reporting in Hyperinflationary Economies

1 July 2007

The FRS 107, 112, 118, 120, 134 and 137 were revised to remove local guidance and editorial matters to be identical to the International Financial Reporting Standards. The adoption of these standards and Interpretations did not result in any significant changes to the Group accounting policies and did not have any significant impact on the amounts reported in the financial statements.


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3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

3.1 General (cont’d)

(b) FRSs and IC Interpretations That Are Not Yet Effective and Have Not Been Early Adopted

The Group has not early adopted the following new FRSs and IC Interpretations which have been issued by the MASB but are not yet effective:


on or afterFRS 4: Insurance Contracts 1 January 2010FRS 7: Financial Instruments : Disclosure 1 January 2010FRS 8: Operating Segments 1 July 2009FRS 139: Financial Instruments : Recognition and Measurement 1 January 2010IC Interpretation 9: Reassessment of Embedded Derivatives 1 January 2010IC Interpretation 10: Interim Financial Reporting and Impairment 1 January 2010

FRS 4: Insurance Contracts

FRS 4 specifies the financial reporting for insurance contracts by any entity that issues such contracts (“insurers”). In particular, this standard requires disclosure that identifies and explains the amounts in an insurer’s financial statements arising from insurance contracts and helps users of those financial statements to understand the amounts, timing and uncertainty of future cash flows from insurance contracts. FRS 4 is not relevant to the Group operations.

FRS 7: Financial Instruments - Disclosure

FRS 7 requires disclosures of information relating to the significance of financial instruments on an entity’s financial position and performance and the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the reporting date and how the entity manages those risks. The impact of applying FRS 7 on these financial statements upon its first adoption is not disclosed by virtue of exemption provided under paragraph 44AB of this standard.

FRS 8: Operating Segments

FRS 8 requires an entity to report financial and descriptive information about its operating segments on the same basis as those used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. The adoption of this standard will only affect the disclosure of operating segments and will not result in any financial impact to the financial statements of the Group.

FRS 139: Financial Instruments - Recognition and Measurement

FRS 139 establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. Hedge accounting is permitted only under strict circumstances. The impact of applying FRS 139 on these financial statements upon first adoption of the standard is not disclosed by virtue of the exemption provided under paragraph 103A of FRS 139.

IC Interpretation 9: Reassessment of Embedded Derivatives

IC Interpretation 9 requires an entity to assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract in which case reassessment is required. The adoption of this interpretation will not have any significant financial impact on the financial statements of the Group.


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3.1 General (cont’d)

(b) FRSs and IC Interpretations That Are Not Yet Effective and Have Not Been Early Adopted (cont’d)

IC Interpretation 10: Interim Financial Reporting and Impairment

IC Interpretation 10 does not allow an impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost to be reversed at a subsequent balance sheet date. The adoption of this interpretation will not result in any financial impact on the financial statements of the Group.

3.2 Basis of Preparation

The financial statements of the Group and of the Company have been prepared under the historical cost convention unless otherwise indicated in this summary of significant accounting policies. The financial statements comply with applicable Financial Reporting Standards issued by MASB and the provisions of the Companies Act, 1965.

The preparation of financial statements in conformity with applicable Financial Reporting Standards requires Directors to exercise their judgement in the process of applying the Group’s accounting policies and which may have significant effects on the amounts recognised in the financial statements. It also requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the results reported for the reporting period and that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Although these judgements and estimates are based on the Directors’ best knowledge of current events and actions, actual results may differ.

(a) Judgements in applying accounting policies

In the process of applying the Group’s accounting policies, the Directors are of the opinion that any instances of application of judgement are not expected to have a significant effect on the amounts recognised in the financial statements, apart from those which are dealt with below.

(i) Government grants

The Group has been awarded Government grants amounting to RM32.1 million which is to be drawn down over five years commencing from 2006. The accounting policy for grants is included as Note 3.25 and the recognition of the grants is on the basis that all conditions attaching to the grants will be complied with and the grants will be receivable. The directors have taken the view that recognition shall be on the date when the last of all approvals are received and the amount claimed will be reimbursed without further adjustments. This judgement has significant effect on the amounts of grant deferred income and grant income in the financial statements.

(ii) Unquoted bonds

Included in Other Investments as shown in Note 8 to the financial statements is an amount of RM3,500,000 representing investment in unquoted bonds. The directors have taken the position that this investment shall be held as long term investment and accordingly is disclosed as non current asset in the balance sheets instead of short term investments which would have caused it to be disclosed as current assets.

(b) Key sources of estimation uncertainty

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


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3.2 Basis of Preparation (cont’d)

(b) Key sources of estimation uncertainty (cont’d)

(i) Estimated useful lives of property, plant and equipment

The Group’s property, plant and equipment as at 31 December 2008 at cost amounts to RM142,756,575 as disclosed in Note 4 to the financial statements. The Group reviews annually the estimated useful lives of these assets based on various factors such as obsolescence, level of usage and business plans. The estimated useful lives are as disclosed in Note 3.7. Future results of operations could be materially affected by changes in these estimates.A 1% increase or decrease in the rate of depreciation will have an effect of RM1,427,566 on the carrying value of property, plant and equipment of the Group.

(ii) Impairment of property, plant and equipment, intangible assets, development expenditure and investments

The Group assesses impairment of the above-captioned assets whenever there are indications of impairment and on an annual basis, where applicable. For the year ended 31 December 2008, an impairment loss amounting to RM2,850,000 has been recognised in respect of Property, Plant and Equipment based on estimated net recoverable amounts.

(iii) Deferred tax assets

Deferred tax assets are recognised for unabsorbed tax losses, untilised capital allowances and other deductible temporary differences to the extent that it is probable that taxable profit will be available against which the tax losses, capital allowances and other deductible temporary differences can be utilised. Management judgement is required to determine the amount of deferred tax assets that can be recognised , based on the assessment on the probability of the availability of future taxable profit. The total carrying amount of deferred tax assets recognised on unabsorbed tax losses, unutilised capital allowances and other deductible temporary differences of the Group as at balance sheet date is RM4,935,000 (2007: RM5,232,000).

The unrecognised unabsorbed tax losses, unutilised capital allowances and other deductible temporary differences are disclosed under Note 21(b) and the unrecognised deferred tax assets in connection thereto at balance sheet date is estimated at RM7,220,000 (2007: RM3,809,780).

3.3 Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the Company.

Subsidiaries are those entities in which the Group has the power to exercise control over the financial and operating policies so as to obtain benefits from their activities. In assessing control, the existence and effect of potential voting rights that are currently exercisable or convertible are taken into account. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control and continue to be consolidated until the date that such control ceases.

Acquisition of subsidiaries are accounted for using the purchase method of accounting. Under the purchase method, the cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, except for non-current assets that are classified as held for sale which shall be recognised at fair value less costs to sell. The excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. The excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in the income statement.

Minority interest represents that portion of profit or loss and net assets of a subsidiary attributable to equity interest that are not held by the Group. Minority interest is measured at the minority’s share of the fair value of the identifiable assets and liabilities of the subsidiary at the acquisition date and the minority’s share of changes in the subsidiary’s equity since then.


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3.3 Basis of Consolidation (cont’d)

Where losses applicable to the minority exceed the minority’s interest in the equity of a subsidiary company, the excess and any further losses applicable to the minority are charged against the Group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary company subsequently reports profits, the Group’s interest is allocated all such profit until the minority’s share of losses previously absorbed by the Group has been recovered.

Intra-group balances and transactions and the resulting unrealised profits are eliminated on consolidation. Unrealised losses are eliminated on consolidation and the relevant assets are assessed for impairment. The consolidated statements reflect external transactions and balances only.

3.4 Goodwill on Consolidation

Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of acquisition. Goodwill is recognised as an asset and is measured at cost less accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill from acquisition date is allocated to each of the Group’s cash-generating unit (CGU) or groups of CGUs that are expected to benefit from the synergies of the combination in which the goodwill arose. The test for impairment of goodwill on consolidation is in accordance with the Group’s accounting policy for impairment of assets.

Where goodwill forms part of a CGU or groups of CGUs and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation and the portion of the CGU retained.

3.5 Investments in Associates

An associate is an entity, including an unincorporated entity, in which the Group has significant influence but not control or joint control over the financial and operating policies of such an entity.

Investments in associates are accounted for in the consolidated financial statements by using the equity method of accounting. Under the equity method of accounting, the Group’s share of profit or loss of the associate is included in the consolidated income statement and the Group’s share of post-acquisition reserves is added to the cost of investment in the consolidated balance sheet. Equity accounting is discontinued when a nil carrying value of the investment in an associate is reached unless the Group has incurred obligations or guaranteed obligations in respect of the associate.

Unrealised gain on transactions between the Group and the associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are eliminated and the relevant assets are assessed for impairment.

Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s profit or loss in the period in which the investment is acquired.

After the application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associate.

In applying the equity method of accounting, the latest audited financial statements of the associate are used. Where the reporting dates of the Group and the associate are not coterminous, equity accounting is applied on the management accounts made to the financial year end of the Group. Uniform accounting policies are adopted for like transactions and events in similar circumstances.


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3.6 Investments

(a) Investments in Subsidiaries and Associates

Investments in subsidiaries and associates are stated at cost less impairment losses. The investments are reviewed for impairment in accordance with the Group’s accounting policy for impairment of assets.

(b) Other Investments

Other investments held for long term are stated at cost and an allowance for diminution in value is made where, in the opinion of the Directors, there is a decline other than temporary in the value of such investments. Such a decline is recognised as an expense in the income statement.

On disposal of an investment, the difference between net disposal proceeds and its carrying amount is charged or credited to the income statement.

3.7 Property, Plant and Equipment and Depreciation

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item 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 carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Building on leasehold land is amortised over the lease period of 60 years. Depreciation on other property, plant and equipment is calculated to write off the cost of the assets to their residual values over the estimated useful lives of the assets concerned at the following annual rates:

%

Motor vehicles 18 - 20 Machineries & equipment 10 - 18 Furniture, fittings & office equipment 10 - 18 Computers 20 - 50 Electrical installation 10 Renovation 20

Depreciation of capital work in progress commences when the assets are ready for their intended use.

The residual values and useful lives of assets are reviewed at each financial year end and adjusted if appropriate where expectations differ from previous estimates. Property, plant and equipment are reviewed for impairment in accordance with the Group’s accounting policy for impairment of assets.

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 income statement and the unutilised portion of the revaluation surplus on that item is taken directly to retained profits.


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3.8 Hire-Purchase and Finance Lease Arrangements and Operating Leases

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incident to ownership of the leased assets. All other leases are classified as operating leases.

Assets acquired under hire-purchase arrangements are recognised and measured in a similar manner as finance leases.

(a) Assets Acquired Under Hire-Purchase and Finance Lease Arrangements

Assets acquired under hire-purchase and finance lease arrangements are stated at amounts equal at the inception of the arrangement to the lower of the fair values and the present values of the minimum hire-purchase or lease payments.

The corresponding obligations are taken up as hire-purchase or finance lease liabilities. Hire-purchase or lease payments are apportioned between the outstanding liabilities and finance charges which are charged to income statement over the period of the hire-purchase/lease term so as to produce a constant periodic rate of interest on the remaining balances of the liabilities for each period.

The depreciation policy of property, plant and equipment acquired under hire-purchase and finance lease arrangements are consistent with the Group’s depreciation policy as set out in Note 3.7 above.

(b) Operating Leases

Operating lease payments are recognised as expenses in the income statement on a straight line basis over the period of the relevant leases.

Land that normally has an indefinite economic life and where title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on acquiring leasehold land is accounted for as prepaid lease payments and is amortised over the lease term in accordance with the pattern of benefits derived from its use.

3.9 Impairment of Assets

The carrying amounts of non-financial assets (other than inventories and deferred tax assets) are reviewed for impairment at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss. For goodwill, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date or more frequently when indicators of impairment are identified.

An impairment loss is recognised if the carrying amount of an asset or a cash generating unit (CGU) exceeds its recoverable amount. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment losses recognised in respect of CGUs (or groups of CGUs) are allocated first to reduce the carrying amount of any goodwill allocated to the units (or groups of units) and then to reduce the carrying amount of the other assets in the units (or groups of units) on a pro rata basis.

The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is charged to the income statement in the period in which it arises, unless the asset is carried at revalued amount. Any impairment loss of a revalued asset is recognised directly against the revaluation surplus account for that asset to the extent that the impairment loss does not exceed the amount held in the revaluation surplus account.

Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised to the income statement unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.


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57

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3.10 Intangible Assets

(a) Research and Development

Research expenditure on internal project is recognised as an expense when it is incurred.

Development expenditure on internal projects that can be measured reliably shall be recognised as an intangible asset where it can be demonstrated that it is technically feasible and there is intention, and technical, financial and other resources are available, to complete and to use or sell the intangible asset or its output and probable future economic benefits will be generated from the sale or use thereof. Development expenditure that do not meet any of the criteria for recognition as an asset shall be recognised as an expense when it is incurred.

Development expenditure recognised as an asset is carried at cost less any accumulated amortisation and any accumulated impairment loss.

Development expenditure is amortised, when the asset is available for use, using the straight line method over the period the asset is expected to generate economic benefits.

(b) Computer Software

The costs of computer software licences acquired are capitalised as an intangible asset. Costs include their purchase prices and any directly attributable costs of preparing the assets for their intended use. These costs are amortised on the straight line basis over period the assets are expected to generate economic benefits.

Costs associated with developing computer software programs that will generate probable future economic benefits from the use thereof are recognised as intangible assets. Costs comprised all directly attributable development costs including an appropriate portion of relevant overheads. Computer software development cost is amortised when the asset is available for use over the period the assets are expected to generate economic benefits.

3.11 Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs of raw materials is determined on the “first-in-first-out” basis and comprise purchase price and other costs directly attributable to the acquisition of the raw materials.

Cost of work-in-progress and finished goods consist of direct materials, direct labour and attributable production overheads.

Net realisable value represents the estimated selling price in the ordinary course of business less selling and distribution costs and all other estimated costs to completion.

3.12 Trade and Other Receivables

Trade and other receivables are carried at anticipated realisable value. Bad debts are written off as and when ascertained and allowance is made for any debts considered to be doubtful of collection.

3.13 Trade and Other Payables

Trade and other payables are stated at cost.


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3.14 Provision for Liabilities and Warranty Costs

Provision for liabilities are recognised when the Group has a present legal and constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settled the obligation and a reliable estimate can be made of the amount of the obligation. Where the effect of time value of money is material, the amount of provision is measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the amount of a provision due to passage of time is recognised as finance cost.

Provision for warranty costs is made in respect of goods sold and still under warranty at the balance sheet date based on the terms of warranty and historical claim experience.

3.15 Share Capital

Ordinary shares are classified as equity. Distributions to holders of ordinary shares are debited directly to equity and dividends declared on or before the balance sheet date are recognised as liabilities. Costs directly attributable to equity transactions are accounted for as a deduction, net of tax, from equity.

3.16 Income Tax

Tax expense/(income) is the aggregate amount of current and deferred tax included in the determination of net profit or loss for the year.

Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax is provided by using the liability method on temporary differences at the balance sheet date between the carrying amounts of assets and liabilities and the amounts used for taxation purposes.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences and unabsorbed tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the assets can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that the related tax benefits will be realised.

Tax rates enacted or substantively enacted at the balance sheet date are used to determine deferred tax.

3.17 Foreign Currencies

(a) Functional and Presentation Currency

The individual financial statements of each entity in the Group are presented in the currency of the primary economic environment in which the entity operates (‘the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.


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3.17 Foreign Currencies (cont’d)

(b) Foreign Currency Transactions and Balances

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each balance sheet date, foreign currency monetary assets and liabilities are translated at exchange rates prevailing at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the date of the transactions. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising from the settlement of foreign currency transactions and from the translation of foreign currency monetary assets and liabilities are recognised in the income statement.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period. In respect of non-monetary item where gains or losses are recognised directly in equity, exchange differences arising are similarly recognised directly to equity.

(c) Foreign Operations

The results and financial position of foreign operations that have a functional currency different from the presentation currency (RM) of the consolidated financial statements are translated into RM as follows:

(i) Assets and liabilities for each balance sheet date presented are translated at the closing rate prevailing at the balance sheet date;

(ii) Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions; and

(iii) All resulting exchange differences are taken to the foreign currency translation reserve within equity.

Exchange differences arising from monetary items that form part of the Company’s net investment in a foreign operation and that are denominated in the functional currency of the Company or the foreign operation are recognised in the income statement of the Company or of the foreign operation, as appropriate. In the Group financial statements, such exchange differences are recognised initially in equity and will be recognised in the income statement only upon disposal of the net investment.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the balance sheet date.

3.18 Statement of Cash Flows

Cash and cash equivalents in the cash flow statement of the Group and of the Company comprise cash and bank balances and deposits which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value, reduced by bank overdrafts. The statement of cash flows is prepared using the indirect method.

3.19 Interest Bearing Loans and Borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.


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3.20 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction, production or preparation of assets until they are ready for their intended use or sale are capitalised as part of the cost of those assets. Other borrowing costs are recognised as expenses in the period in which they are incurred.

3.21 Employee Benefits

(a) Short-Term Benefits

Wages, salaries and social security contributions, paid annual and sick leave, bonuses and non-monetary benefits are recognised as an expense or included in the costs of assets, where applicable, in the period in which the associated services are rendered by the employees of the Group.

(b) Post-Employment Benefits - Defined Contribution Plan

The Group provides post-employment benefits by way of contribution to defined contribution plans operated by the relevant authorities at the prescribed rates.

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into a separate fund and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

The Group’s contributions to defined contribution plans are recognised as an expense in the income statement in the period to which the contributions relate or included in the costs of assets, where applicable.

(c) Share-based Compensation

The Group operates an equity-settled, share-based compensation plan for eligible employees of the Group. The fair value of the employee services received in exchange for the grant of the share options is recognised as an expense in the income statement over the vesting periods of the grant with a corresponding increase in equity.

The total amount to be expensed over the vesting period is determined by reference to the fair value of the share options granted. The fair value of the share options is measured at grant date, taking into account, if any, the market vesting conditions upon which the options were granted but excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable on vesting date.

At each balance sheet date, the Group revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to the original estimates, if any, in the profit or loss, and a corresponding adjustment to equity. The equity amount is recognised in the share option reserve until the option is exercised, upon which it will be transferred to share premium, or until the option expires, upon which it will be transferred directly to retained profits.

The proceeds of share options exercised are credited to share capital and share premium where applicable.


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3.22 Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or rendering of services in the ordinary course of the Group’s activities. Revenue is recognised when it can be measured reliably and to the extent that it is probable that the economic benefits associated with the transactions will flow to the Group. The following specific recognition criteria must also be met before revenue is recognised:

(a) Sales of Goods

Revenue from sales of goods is recognised upon the transfer of risks and rewards of ownership to the buyer of the goods, based on invoiced value, net of discounts and returns.

(b) Revenue from Services

Revenue from services is recognised upon rendering of services.

(c) Investment Income

Revenue from investments is recognised when the right to receive payment has been established.

(d) Interest Income

Interest income is recognised on an accrual basis. Group revenue is stated net of all intra-group transactions which are eliminated on consolidation.

3.23 Financial Instruments

Financial instruments are recognised when a contractual relationship has been established.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as liability are reported as expense or income and distributions in respect of financial instruments classified as equity are charged to equity.

Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

The Group’s accounting policies and methods adopted in respect of each class of financial instruments and further information thereof are disclosed in the individual accounting policy statements or notes to the financial statements associated with those financial instruments.

3.24 Forward Foreign Exchange Contracts

Forward foreign exchange contracts are not recognised in the financial statements.

The underlying foreign currency assets and liabilities are translated at their respective hedged exchange rates and all exchange gains or losses are recognised as income or expense in the income statement in the same period as the exchange differences on the underlying hedged items.

Exchange gains or losses on contracts entered into as hedge of anticipated future transactions are deferred until the date of such transactions at which time they are included in the measurement of such transactions.

3.25 Government Grants

Government grants, including non-monetary grants, shall not be recognised until there is reasonable assurance that all conditions attaching to the grants will be complied with and the grants will be received.

Grants related to assets are set up as deferred income and recognised as income on a systematic basis over the estimated useful lives of the assets. Grants related to expenses are recognised as income in the period the grants become receivable. Grants related to future costs are deferred and recognised in the income statement in the same period as the related costs.


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4. PROPERTY, PLANT AND EQUIPMENT (cont’d)

Company Motorvehicles

RM2008

Cost:At 1 January 2008 –Additions 468,291

At 31 December 2008 468,291

Accumulated depreciation:At 1 January 2008 –Charge for the year 154,296

At 31 December 2008 154,296

Net book value:

At 31 December 2008 313,995

2007: NIL

(b) Included in property, plant and equipment of the Group are assets acquired under hire-purchase arrangements as follows:

2008 At costRM

Accumulateddepreciation

RM

Net bookvalue

RM

Depreciationcharge

RM

Motor vehicles 563,606 309,983 253,623 112,721

2007

Motor vehicles 1,245,849 437,986 807,863 249,170

(c) Depreciation charge for the year has been deferred/charged out as follows:

Group Company2008 2007 2008 2007

RM RM RM RM

Included in developmentexpenditure 1,052,129 558,763 – –

Charged out toincome statements 6,417,814 6,378,288 154,296 –

7,469,943 6,937,051 154,296 –


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5. PREPAID LEASE PAYMENTSGroup only

Long-term leasehold land2008 2007

RM RM

(a) Cost

Balance at 1 January/31 December 8,263,850 8,263,850

Accumulated amortisationBalance at 1 January 629,774 492,043 Amortisation for the financial year 137,732 137,731

Balance at 31 December 767,506 629,774

Net carrying amount at 31 December 7,496,344 7,634,076

(b) The leasehold land is amortised on a straight line basis over the period of lease term of 60 years (2007: 60 years).

(c) The leasehold land of a subsidiary company with net carrying amount of RM2,550,775 (2007: RM2,596,256) is pledged as a security for banking facilities granted to the subsidiary company.

(d) The title in respect of certain leasehold land of a subsidiary company at cost of RM1,844,979 (2007: RM4,573,891) has yet to be issued by the relevant authority.

6. INVESTMENT IN SUBSIDIARY COMPANIESCompany only

2008 2007RM RM

(a) Unquoted shares, at cost 30,729,681 30,729,681 Less: Accumulated impairment losses (7,196,998) (999,999)

23,532,683 29,729,682


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6. INVESTMENT IN SUBSIDIARY COMPANIES (cont’d)Company only

(b) The subsidiary companies all of which are directly held are:

Name of CompanyPlace of

IncorporationEffective Equity

Interest (%) Principal Activities2008 2007

Pentamaster Technology (M) Sdn. Bhd. (336488-H)

Malaysia 100 100 Design, assembly, installation of computerised automation systems and equipment.

Pentamaster Engineering (M) Sdn. Bhd. (460116-T)

Malaysia 100 100 Manufacture of automated, semi-automated machine and equipment for the semiconductor and computer industry.

Pentamaster Precision (M) Sdn. Bhd. (531995-W)

Malaysia 100 100 Designing and manufacturing of precision machinery components. The company had ceased operation in the previous financial year.

Pentamaster Information Technology Berhad (625497-H)

Malaysia 100 100 Development, implementation, maintenance, support and providing training of information technology system to manufacturing industry.

Pentamaster Automation Engineering (Shanghai) Co. Ltd *

People’s Republic of China

100 100 Design, manufacture and sales of Pentamaster Group’s range of standard products and equipment, automated conveyor lines and systems and the production of jigs, fixture, structure and parts for the automotive industry.

Pentamaster Solutions Sdn. Bhd. (659962-W)

Malaysia 100 100 Manufacture of intelligent sortation system, components and parts thereof.

Pentamaster Instrumentation Sdn. Bhd. (637373-M)

Malaysia 60 60 Designing and manufacturing of automated testing equipment and test & measurement system.

Pentamaster Contract Manufacturing Sdn. Bhd. (621047-X)

Malaysia 100 100 Equipment design and manufacturing services and manufacturing of high precision machined parts.

Pentamaster Equipment Manufacturing Sdn. Bhd. (749166-A)

Malaysia 100 100 Equipment design and manufacturing services and manufacturing of high precision machined parts.

* Not audited by Folks DFK & Co.


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7. INVESTMENT IN AN ASSOCIATE

(a) Interest in an associate is as follows:

Group Company2008 2007 2008 2007

RM RM RM RM

Unquoted shares, at cost – 1,470,000 – 1,470,000 Share of post-acquisition results – 771,944 – –

– 2,241,944 – 1,470,000

During the financial year, the Company had disposed off its entire investment in the associate for a total consideration of RM3,800,000. The gain on disposal to the Company and Group is disclosed in Note 26.

The summarised financial information of the associate in the previous financial year was as follows:

2007RM

ResultsRevenue 25,583,198

Profit for the year 1,371,953

Assets and liabilitiesTotal assets 14,554,642

Total liabilities 10,040,172

(b) The associated company was:

Name of CompanyPlace of

IncorporationEffective Equity

Interest (%) Principal Activities2008 2007

Komax Systems Penta Sdn. Bhd. (745988-A)

Malaysia – 49 Manufacture of automation equipment for pharmamedical, electro-mechanical and computer industries.

8. OTHER INVESTMENTSGroup and Company

2008 2007RM RM

At cost:Unquoted shares 1,359,900 1,359,900 Unquoted bonds 3,500,000 3,500,000

4,859,900 4,859,900

Unquoted bonds comprise subordinated bonds with variable coupon rates and a tenor of five years. Interest is payable every six months and the average yield for the period is NIL (2007: 9.26%)


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9. INTANGIBLE ASSETSGroup only

These comprised:

2008 2007RM RM

Development expenditure (Note 9(a)) 13,785,834 6,193,501 Computer software (Note 9(b)) 1,563,205 1,494,915

15,349,039 7,688,416

(a) Development expenditure

2008 2007RM RM

At 1 January 6,193,501 2,652,711 Addition during the year 8,471,395 3,620,830 Development expenditure written off (243,384) (80,040)Amortisation during the year (635,678) –

At 31 December 13,785,834 6,193,501

Included in development expenditure for the financial year are the following expenses:

2008 2007RM RM

Amortisation of computer software 98,286 43,914 Depreciation 1,052,129 558,763 Rental of premises – 4,950 Employees’ compensation:

Salaries, bonus, allowances and overtime 1,831,296 1,887,096 Amount contributed under defined contribution plan

- Employees Provident Fund (EPF) 209,171 216,893Others 19,638 32,695

Development expenditure are incurred for the development internally of test and measurement instruments and will be amortised on the straight line method over the estimated finite useful lives of 5 years to cost of goods sold upon commencement of commercialisation of the respective products developed.

(a) Computer software

2008 2007RM RM

At 1 January 1,494,915 –Addition during the year 518,954 1,728,907 Less: Disposal during the year (2,175) –Less: Amortisation during the year (448,489) (233,992)

At 31 December 1,563,205 1,494,915


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9. INTANGIBLE ASSETS (cont’d)Group only

(a) Computer software (cont’d)

The computer software represents the costs of software acquired. The costs of software acquired, including all directly attributable costs of preparing the assets for their intended use are amortised on the straight line basis over the estimated life of 5 years. Amortisation during the financial year has been capitalised/charged out as follows:

2008 2007RM RM

Consolidated balance sheet Development expenditure 98,286 43,914

Consolidated income statement Administrative expenses 350,203 190,078

448,489 233,992

10. INVENTORIESGroup only

2008 2007RM RM

At cost:Raw materials 9,582,030 16,045,754 Work-in-progress 5,461,549 11,288,033 Consumables – 12,619

15,043,579 27,346,406 At net realisable value:Raw materials 10,406,682 228,295 Work-in-progress 2,420,959 414,167

27,871,220 27,988,868

11. TRADE RECEIVABLESGroup only

2008 2007RM RM

(a) Trade receivables 19,210,189 41,323,517 Less: Allowance for doubtful debts (1,521,776) (1,139,439)

17,688,413 40,184,078


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11. TRADE RECEIVABLES (cont’d)Group only

Movements: Allowance for doubtful debts

Balance brought forward 1,139,439 909,123 Bad debts written off – (863,220)Allowance for doubtful debts no longer required (80,000) (45,903)Additional allowance for doubtful debts 462,337 1,139,439

Balance carried forward 1,521,776 1,139,439

(b) The normal credit period of trade receivables range from 30 days to 90 days. Other credit periods are assessed and approved on a case by case basis.

(c) Included in trade receivables in the previous financial year was an amount of RM140,325 due from an associated company, Komax Systems Penta Sdn. Bhd.

(d) The currency exposure profile of trade receivables is as follows:

2008 2007RM RM

Ringgit Malaysia 10,366,094 12,269,795 Singapore Dollar 482 –Chinese Renminbi 676,697 662,191 Euro 2,012,367 10,828,755 United States Dollar 4,632,773 16,423,337

17,688,413 40,184,078

(e) The following provides an analysis of the concentration of risk in trade receivables:

Number ValueRM

Customers with debts of RM1,000,000 and above 2 5,042,089 Customers with debts of less than RM1,000,000 each 94 12,646,324

96 40,184,078

The concentration of a significant portion of trade receivables on a small number of customers is managed by ensuring that transactions are only carried out with customers with a reliable financial profile.


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12. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Group Company2008

RM2007

RM2008

RM2007

RM

(a) Other receivables 4,111,068 7,541,219 12,700 –Deposits 1,662,944 824,751 1,956 1,000 Prepayments 666,276 822,099 354,040 459,375

6,440,288 9,188,069 368,696 460,375

(b) Included in other receivables in the previous financial year was an amount of RM52,972 due from an associated company, Komax Systems Penta Sdn. Bhd.

(c) In the previous financial year, bad debts of RM22,975 was written off against allowance for doubtful debts account.

13. AMOUNT OWING BY/TO SUBSIDIARY COMPANIESCompany only

The amount owing by subsidiary companies as at 31 December 2008 is stated after deducting for allowance for doubtful debts amounting to RM289,168 (2007: NIL). The amount owing by/to subsidiary companies is non-trade in nature and is unsecured, has no fixed terms of repayment and interest free except for an advance of RM27,830,000 (2007: RM27,830,000) to a subsidiary company for which interest is charged at 6.8% (2007: 6.8%) per annum.

14. CASH AND BANK BALANCES

The currency profile of cash and bank balances is as follows:

Group Company2008 2007 2008 2007

RM RM RM RM

Ringgit Malaysia 1,609,490 890,875 23,580 41,862 Chinese Renminbi 543,343 524,112 – –Euro 883,493 33,265 – –Singapore Dollar 1,262 474 – –United States Dollar 1,609,296 443,328 – –New Taiwan Dollar 2,195 2,194 – –

4,649,079 1,894,248 23,580 41,862


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15. SHARE CAPITALGroup and Company

2008 2007RM RM

(a) Share capitalAuthorised:As at 1 January/31 December- 200,000,000 (2007: 200,000,000) ordinary shares of RM0.50 each 100,000,000 100,000,000

Issued and fully-paid:As at 1 January/31 December- 133,243,050 (2007: 133,243,050) ordinary shares of RM0.50 each 66,621,525 66,621,525

(b) Employees’ Share Option Scheme (ESOS)

Pentamaster Corporation Berhad’s ESOS was approved by the Securities Commission on 6 November 2002, the shareholders on 15 April 2003 and the Bursa Malaysia Securities Berhad (“BMSB”) on 15 July 2003. This ESOS was implemented on 21 July 2003 and expired on 20 July 2008.

The salient features of the ESOS are as follows:

(i) The scheme is set up for participation in the ordinary share capital of the Company and the total number of shares to be offered shall be subject to a maximum of 10% of the issued and paid up share capital of the Company at any time during the duration of the ESOS which shall be in force for a period of five years from the date of commencement.

(ii) The ESOS scheme shall be administered by the ESOS Committee which shall comprise senior management staff to be appointed by the Board of Directors.

(iii) Eligible persons are employees and full time executive directors of the Group who have been employed for a continuous period of at least six months in the Group and his employment must have been confirmed on the date of offer. The offer of the ESOS shall be at the discretion of the ESOS Committee administering the ESOS.

(iv) The option price shall be determined in the following manner:

(a) Where the Option is granted before the Company is listed on the BMSB then the price at which the Option Holder is entitled to subscribe for the shares of the Company shall not be less than the price of the shares set for the offer for sale of the shares for the purpose of listing of the Company on the BMSB.

(b) Where the Option is granted on or after the Company is listed on the BMSB, the price at which the Option Holder is entitled to subscribe for the shares of the Company shall be the higher of a price to be determined by the Board upon the recommendation of the ESOS Committee which is at a discount of not more than 10% from the weighted average market price of the shares as shown in the daily official list issued by the BMSB for the five market days immediately preceding the date of offer and the par value of the shares.

(v) The ordinary shares to be allotted upon any exercise of the Option will upon allotment and issue rank pari passu in all respects with the then existing issued and paid up ordinary shares of the Company except that the shares so issued will not be entitled to any dividends, rights, allotments or other distributions declared, made or paid to shareholders unless the shares so allocated have been credited into the relevant securities accounts of the shareholders maintained by Bursa Malaysia Depository Sdn. Bhd. before the entitlement date and will be subject to all provisions of the Articles of Association of the Company relating to transfer, transmission and otherwise.


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15. SHARE CAPITAL (cont’d)Group and Company

(vi) The option which has not been exercised by the grantee shall be automatically terminated in the following circumstances:

(a) Where the grantee ceases employment with the Group for any reason whatsoever. Exceptions are given under certain conditions provided for in the bye-laws at the discretion of the ESOS committee.

(b) Where the grantee is declared a bankrupt.

(c) Upon winding up or liquidation of the Company.

(d) Upon termination of the Scheme pursuant to the conditions in the bye-laws.

(vii) The movements and details of options over unissued ordinary shares granted to eligible directors and employees of the Group and the weighted average exercise prices are as follows:

2008 Options over number of ordinary shares of RM0.50 each

Date granted

Exerciseprice

RM

Outstanding at

1.1.2008 Granted Exercised Forfeited

Outstanding at

31.12.2008

31 July 2003 1.32* 1,450,100 – – (1,450,100) –26 August 2004 1.97 2,199,900 – – (2,199,900) –

3,650,000 – – (3,650,000) –

Weighted average exercise price 1.71 – – 1.71 –

2007 Options over number of ordinary shares of RM0.50 each

Date granted

Exerciseprice

RM

Outstanding at

1.1.2007 Granted Exercised Forfeited

Outstanding at

31.12.2007

31 July 2003 1.32* 1,573,400 – – (123,300) 1,450,100 26 August 2004 1.97 2,433,300 – – (233,400) 2,199,900

4,006,700 – – (356,700) 3,650,000

Weighted average exercise price 1.72 – – 1.75 1.71

Note:

* Adjustment of option price from RM1.98 to RM1.32 arising from the bonus issue on 3 September 2004.

Group and Company2008 2007

Number of share options vested at balance sheet dateOption price:RM1.32 – 1,450,100 RM1.97 – 2,199,900

– 3,650,000


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15. SHARE CAPITAL (cont’d)Group and Company

(b) Employees’ Share Option Scheme (ESOS) (cont’d)

The ESOS had expired on 20 July 2008. The weighted average remaining contracted life of the options outstanding as at the end of the previous financial year was 0.55 years.

(ii) Share options exercised during the year

There were no options exercised during the year.

(iii) Share options granted during the year

No share options were granted during the year or in the previous year.

16. RESERVES/(ACCUMULATED LOSSES)

Group Company2008 2007 2008 2007

RM RM RM RM(a) Non-distributable:

Share premiumAs at 1 January

4,865,159 4,865,159 4,865,159 4,865,159

Exchange fluctuation reserve 131,091 2,658 – –Distributable:

Retained profit/(Accumulated losses) 12,645,188 46,524,271 (5,314,733) 6,380,787

17,641,438 51,392,088 (449,574) 11,245,946

(b) As at 31 December 2008, subject to the agreement by the Inland Revenue Board, the Company has tax credit under section 108 of the Income Tax Act, 1967 amounting to RM34,000 which can be used to frank the payment of net dividend out of its future profits, if any. In addition, the Company has an estimated tax exempt income of RM9,923,000 (2007: RM14,696,000) which is distributable by way of tax exempt dividends subject to availability of distributable reserves.

The Finance Act 2007 has introduced a single tier company income tax system with effect for the year of assessment 2008. Under the single tier tax system, tax on a company’s profits is a final tax and dividends distributed to shareholders will be exempted from tax. Notwithstanding, the Section 108 tax credit balance above will be available to the Company until such time the credit is fully utilised or upon expiry of the six years transitional period on 31 December 2013, whichever is earlier.

17. MINORITY INTERESTGroup only

2008 2007RM RM

Minority interest in equity of a subsidiary company 120,000 120,000 Share of resultsAs at 1 January (120,000) (120,000)Share of profit during the year 1,159,036 –

1,039,036 (120,000)

1,159,036 –


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18. TERM LOANS

(a) Term loans comprise:

Group Company2008 2007 2008 2007

RM RM RM RM

SecuredTerm loan I 15,425,225 17,260,987 – –

Unsecured

Term loan II 275,836 1,951,592 – –Term loan III 125,506 471,440 – –Term loan IV 487,894 984,660 – –Term loan V 35,000,000 35,000,000 35,000,000 35,000,000

35,889,236 38,407,692 35,000,000 35,000,000

51,314,461 55,668,679 35,000,000 35,000,000

Less: Portion repayable within the next 12 months (included under current liabilities) (Note 25) (2,420,047) (3,830,273) – –

48,894,414 51,838,406 35,000,000 35,000,000

Group Company2008 2007 2008 2007

RM RM RM RMPayable:Payable within 1 year 2,420,047 3,830,273 – –

Payable within 2 to 5 years 42,842,858 42,967,892 35,000,000 35,000,000 Payable after 5 years 6,051,556 8,870,514 – –

48,894,414 51,838,406 35,000,000 35,000,000

51,314,461 55,668,679 35,000,000 35,000,000

(b) Term loan I is secured by way of a fixed charge over a piece of leasehold land of a subsidiary company and is guaranteed by Company.

Term loans II, III, and IV are guaranteed by the Company.

(c) Term loans are repayable as follows:

Loan I - One hundred and twenty monthly instalments commencing from March 2007 upon full draw down of loan.

Loan II - Thirty six equal monthly instalments commencing from March 2007.Loan III - Thirty six equal monthly instalments commencing from May 2007.Loan IV - Thirty six equal monthly instalments commencing from December 2007.Loan V - A full settlement by way of a single payment made five years after draw down in October 2006.

(d) The interests charged on the term loans during the year were calculated at rates ranging from 5.22% to 7.75% (2007: 5.22% to 7.75%) per annum.


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19. HIRE-PURCHASE PAYABLESGroup only

2008 2007RM RM

(a) Future minimum payments:Payable within 1 year 98,616 308,160 Payable between 2 to 5 years (21,598) 77,018

77,018 385,178 Less: Future finance charges (671) (13,416)

Present value 76,347 371,762

Payable:Payable within 1 year (included in current liabilities) 76,347 295,415 Payable between 2 to 5 years – 76,347

76,347 371,762

(b) The effective interest rates during the financial year range from 5.00% to 5.59% (2007: 5.00% to 6.24%) per annum.

(c) The fair value of the hire-purchase payables is RM76,283 (2007: RM370,389).

20. DEFERRED INCOME Group only

2008 2007RM RM

(a) At 1 January 318,988 –Received during the financial year 9,185,385 318,988 Released to income statement (683,476) –

At 31 December 8,820,897 318,988

(b) Deferred income represents government grants received which are related to development expenditure and are recognised as income over the periods to match the related cost which the grants are intended to compensate, on a systematic basis.


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21. DEFERRED TAX LIABILITIESGroup only

2008 2007RM RM

(a) Deferred tax liabilities:As at 1 January 2,372,000 4,965,000 Recognised in the income statement 123,000 (2,593,000)

As at 31 December 2,495,000 2,372,000

The components and movements of deferred tax liabilities and assets prior to offsetting during the financial year are as follows:

2008

As at 1.1.2008

RM

Recognisedin the

incomestatement

RM

As at 31.12.2008

RMDeferred tax liabilities:

Excess of capital allowances over depreciation 7,484,000 (219,000) 7,265,000 Other taxable temporary differences 120,000 45,000 165,000

7,604,000 (174,000) 7,430,000

Deferred tax assets:

Unutilised capital allowances (3,476,000) 265,000 (3,211,000)Unabsorbed tax losses (1,558,000) (20,000) (1,578,000)Deductible temporary differences (198,000) 52,000 (146,000)

(5,232,000) 297,000 (4,935,000)

2,372,000 123,000 2,495,000

2007

As at 1.1.2007

RM

Recognisedin the

incomestatement

RM

As at 31.12.2007

RMDeferred tax liabilities:

Excess of capital allowances over depreciation 6,382,000 1,102,000 7,484,000 Other taxable temporary differences – 120,000 120,000

6,382,000 1,222,000 7,604,000

Deferred tax assets:

Unutilised capital allowances (1,248,000) (2,228,000) (3,476,000)Unabsorbed tax losses – (1,558,000) (1,558,000)Deductible temporary differences (169,000) (29,000) (198,000)

(1,417,000) (3,815,000) (5,232,000)

4,965,000 (2,593,000) 2,372,000


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(b) The amount of deductible temporary differences, unutilised capital allowances and unabsorbed tax losses for which no deferred tax asset is recognised in the financial statements is as follows:

Group Company2008 2007 2008 2007

RM RM RM RMUnabsorbed tax losses 26,932,000 8,180,000 117,000 933,000 Unutilised capital allowances 1,564,000 6,091,000 25,000 –Unabsorbed pre-pioneer losses 382,000 382,000 – –

28,878,000 14,653,000 169,000 933,000

The deductible temporary differences and unabsorbed tax losses above are available for set off against future taxable profit for an indefinite period.

22. TRADE PAYABLESGroup only

(a) The normal credit period of trade payables range from 30 days to 120 days.

(b) The currency exposure profile of trade payables is as follows:

2008 2007RM RM

Swiss Franc – 59,833 Ringgit Malaysia 14,931,229 19,311,362 Chinese Renminbi 575,735 671,949 Euro 209,360 401,725 Singapore Dollar 353,365 393,376 Taiwan Dollar 22,373 –United States Dollar 1,077,857 1,061,825

17,169,919 21,900,070

23. OTHER PAYABLES AND ACCRUED LIABILITIES

Group Company2008 2007 2008 2007

RM RM RM RM

Other payables 2,801,800 3,919,668 83,745 36,452

Accrued liabilities 4,720,424 3,026,164 744,151 587,484

7,522,224 6,945,832 827,896 623,936


21. DEFERRED TAX LIABILITIES (cont’d)Group only

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24. PROVISION FOR WARRANTY COSTSGroup only

2008 2007RM RM

As at 1 January 360,200 229,600

Amount utilised – (57,126)(Reversal of)/Additional provision for the year

(credited) charged to income statement (31,395) 187,726

(31,395) 130,600

As at 31 December 328,805 360,200

25. SHORT-TERM BORROWINGSGroup only

2008 2007RM RM

(a) Bank overdraftsUnsecured 1,341,805 2,609,768

Other borrowingsSecured

Term loans (Note 18) 1,620,267 1,443,103 Bankers’ acceptances 2,790,000 –

4,410,267 1,443,103 Unsecured

Term loans (Note 18) 799,780 2,387,170 Bankers’ acceptances and revolving credit 21,441,000 19,423,000

22,240,780 21,810,170

26,651,047 23,253,273

Total short-term borrowings 27,992,852 25,863,041

(b) The contractual terms and security arrangements of the term loans are set out in Note 18.

(c) The secured portion of the other bank borrowings is secured by way of a legal charge over a piece of leasehold land of a subsidiary company while the unsecured portion is guaranteed by the Company.

(d) The effective interest rates charged during the financial year on bank overdrafts, bankers’ acceptance and revolving credit range from 3.78% to 8.75% (2007: 2.95% to 7.25%) per annum.


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26. (LOSS)/PROFIT BEFORE TAXATIONGroup Company

2008 2007 2008 2007RM RM RM RM

(a) (Loss)/Profit before taxation includes:Allowance for doubtful debts no longer required 80,000 45,903 – –Bad debts recovered 119,000 – – –Deferred income released 683,476 – – –Dividend income received

from unquoted investment 556,762 115,329 556,752 115,329 Gain on disposal of intangible assets 125 – – –Net gain on disposal of property,

plant and equipment 50,662 82,700 – –Gain on disposal of associate 1,424,332 – 2,330,000 –Interest income 55,583 420,496 – 254,490 Net gain on foreign exchange

- Realised 1,283,643 – 124,254 –- Unrealised 374,392 –- – –-

Rental income 938,042 819,970 – –Management fee charged

to subsidiary companies – – 2,971,800 2,201,460 Tax exempt dividend from

a subsidiary company – – – 7,500,000

And is arrived at after charging:Allowance for doubtful debts 462,337 1,139,439 289,168 –Allowance for impairment

in value of subsidiary companies – – 6,196,999 –Amortisation of intangible assets:

- computer software 350,203 190,078 – –- development expenditure 635,678 – – –

Amortisation of prepaid lease payments 137,732 137,731 – –Auditors’ remuneration

- Statutory audit 84,000 73,500 20,000 4,000 - Underprovision in respect of a prior year 13,000 – 16,000 –- Others 37,000 26,000 16,000 6,000

Bad debts written off 61,505 661,208 – –Depreciation 6,417,814 6,378,288 154,296 –Development expenditure written off 243,384 80,040 – –Directors’ fee:

- Directors of the Company 204,000 204,000 204,000 204,000 Directors’ other emolument

- Directors of the Company 1,183,916 1,188,557 1,183,916 688,090 - Other Directors of subsidiary companies 477,653 673,012 – –

Impairment loss of plant and equipment 2,850,000 – – –Interest expense 4,792,488 4,562,509 488,827* 487,560*Inventories written off – 2,283,922 – –Inventories written down 5,908,736 230,845 – –Loss on foreign exchange

- Realised 489,495 678,590 – –- Unrealised – 60,004 – –


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Group Company2008 2007 2008 2007

RM RM RM RM

Property, plant and equipment written off 394,961 – – –

Provision for warranty costs- (reversal)/addition (31,395) 187,726 – –

Rental of plant and equipment 556,355 279,632 4,051 403 Rental of premises 734,828 621,167 54,000 –Estimated value of benefits-in-kind:- Directors of the Company 50,000 50,000 25,000 25,000 - Other Directors of subsidiary companies 13,666 16,250 – –

* Amount stated net of interest recovered from a subsidiary company of RM1,897,358 (2007: RM1,843,261).

(b) Analysis of Directors’ RemunerationGroup Company

2008 2007 2008 2007RM RM RM RM

Directors of the Company

Executive:Fee 24,000 24,000 24,000 24,000 Salaries, bonus, allowance and paid leave 1,044,000 1,044,625 1,044,000 598,710 Amount contributed under

defined contribution plan- Employees Provident Fund (EPF) 118,416 124,632 118,416 70,080

1,186,416 1,193,257 1,186,416 692,790

Estimated value of benefits-in-kind 50,000 50,000 25,000 25,000

Group Company2008 2007 2008 2007

RM RM RM RMNon Executive:Fee 180,000 180,000 180,000 180,000 Allowances 21,500 19,300 21,500 19,300 Amount contributed under

defined conttributed plan- Employees Provident Fund (EPF) – – – –

201,500 199,300 201,500 199,300

Other directors of subsidiary companiesExecutive:Salaries, bonus and allowances 425,949 600,750 – –Amount contributed under

defined contribution plan- Employees Provident Fund (EPF) 51,704 72,262 – –

477,653 673,012 – –

Estimated value of benefits-in-kind 13,666 16,250 – –


26. (LOSS)/PROFIT BEFORE TAXATION (cont’d)

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27. TAXATION (cont’d)

Group Company2008 2007 2008 2007

RM RM RM RM

(a) Tax expense for the year:Current Malaysian taxation (3,000) (10,000) – –Deferred tax resulting from the origination

and reversal of temporary differences (123,000) 2,593,000 – –

(126,000) 2,583,000 – –

Malaysian taxation (underprovided)/overprovided in respect of prior years (645,205) 25,964 (68,712) –

(771,205) 2,608,964 (68,712) –

(b) The general income tax rate in Malaysia for the year under review is 26% (2007: 27%) of taxable income. In respect of companies with issued capital of not exceeding RM2,500,000 the income tax rate for the first RM500,000 (2007: RM500,000) of taxable income is 20% and the rate for taxable income in excess of RM500,000 (2007: RM500,000) remains at 26% (2007: 27%). Effective from the year of assessment 2009, the statutory income tax rate would be reduced to 25%. The computation of deferred taxation as at 31 December 2008 has reflected the appropriate changes.

A reconciliation of tax (income)/expense applicable to (loss)/profit before taxation at the applicable statutory tax rate to tax expense/(income) at the effective tax rate of the Group and Company is as follows:

Group2008 2007

RM RM

(Loss)/Profit before taxation (26,619,120) 987,417

Taxation at the rate of 26% (2007: 27%) (6,920,000) 267,000 Tax savings attributable to profit taxed at the rate of 20% (2007: 20%) – (4,000)

Net taxation at applicable tax rates (6,920,000) 263,000 Difference in tax rate of a foreign subsidiary company – (48,000)Adjustment for tax on share of results of an associated company (35,000) (181,000)Income not subject to tax (471,600) (304,000)Exempt pioneer income (1,284,000) (8,138,000)Expenses not deductible for tax purposes 4,361,600 1,860,000 Tax savings arising from utilisation

of previously unrecognised deferred tax assets (542,000) (22,000)Deferred tax asset not recognised in financial statements 4,452,000 4,186,000 Effect of change in tax rate – (199,000)Underprovision of deferred tax liabilities in prior year 970,000 –Malaysian taxation underprovided/(overprovided) in prior years 645,205 (25,964)Others (405,000) –

Tax expense/(income) for the year 771,205 (2,608,964)


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Group2008 2007

RM RM

(Loss)/Profit before taxation (6,297,086) 6,340,898

Taxation at the applicable tax rate of 26% (2007: 27%) (1,637,000) 1,712,000 Income not subject to tax (276,000) (2,125,000)Expenses not deductible for tax purposes 1,905,000 193,000 Deferred tax asset not recognised in financial statements 8,000 220,000 Malaysia taxation underprovided in respect of a prior year 68,712 –

Tax expense for the year 68,712 –

(c) As at 31 December 2008, subject to agreement by the Board of Inland Revenue, the estimated unutilised reinvestment allowances, capital allowances and unabsorbed tax losses available for set-off against future taxable profits amounted to:

Group Company2008 2007 2008 2007

RM RM RM RM

Unutilised capital allowances 14,501,000 15,176,000 30,000 –Unutilised reinvestment allowances 26,412,000 39,440,000 – –Unabsorbed tax losses 34,272,000 20,015,000 117,000 117,000 Unabsorbed pre-pioneer losses 382,000 382,000 –- –

28. (LOSS)/EARNINGS PER SHAREGroup only

(a) Basic

The basic (loss)/earnings per share for the current year is calculated on the Group’s loss for the year attributable to equity holders of the Company of RM28,549,361 (2007: profit for the year of RM3,596,381) and is based on the weighted average number of ordinary shares in issue during the financial year of 133,243,050 (2007: 133,243,050).

(b) Diluted

The effect on the basic (loss)/earnings per share for the current and previous financial year arising from the assumed exercise of the employee share option is anti dilutive. Accordingly diluted earnings per share for the current and comparative year have not been presented.


27. TAXATION (cont’d)

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29. DIVIDENDSGroup and Company

2008 2007RM RM

Dividends paid:First and final tax exempt dividend of 8%

per ordinary share in respect of financialyear ended 31 December 2007(2007: 8% tax exempt for year ended 31 December 2006) 5,329,722 5,329,722

30. NOTES TO THE CASH FLOW STATEMENTS

(a) Development Expenditure

Group2008 2007

RM RM

Addition to development expenditure (Note 9 (a)) 8,471,395 3,620,830 Less: Amortisation and depreciation of assets (1,150,415) (602,677)

Development expenditure paid in cash 7,320,980 3,018,153

(b) Cash and Cash Equivalents

Cash and cash equivalents included in the cash flow statements comprise the following:

Group Company2008 2007 2008 2007

RM RM RM RM

Cash and bank balances (Note 14) 4,649,079 1,894,248 23,580 41,862 Bank overdrafts (Note 25) (1,341,805) (2,609,768) – –

3,307,274 (715,520) 23,580 41,862

31. SEGMENT INFORMATION Group only

The Group is organised into five main business segments:

• Designing and installation of automation systems and contract manufacturing.

• Manufacturing of automated and semi-automated machinery and equipment.

• Designing and manufacturing of precision machinery components.

• Development and implementation of information technology system.

• Designing and manufacturing of automated testing equipment and test & measurement system.

Intra-segment sales comprise sales of precision machinery components to other segments under negotiated terms and conditions.


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31. SEGMENT INFORMATION (cont’d)Group only

Unallocated income includes interest income and gain on disposal of an associate.

Unallocated costs represent corporate expenses.

Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, receivables and operation cash, and exclude investments and tax recoverable.

Segment liabilities comprise operating liabilities and exclude items such as taxation and borrowings.

Capital expenditure comprises additions to property, plant and equipment and intangible assets, including additions resulting from acquisitions through business combinations.

(b) Secondary Reporting Format - Geographical Segments

In determining the geographical segments, revenue is based on the countries where the customers are located and the carrying amount of segment assets and capital expenditure are based on the geographical location of assets.

(i) Revenue by geographical market

2008 2007RM RM

Malaysia 36,971,644 41,134,461 People’s Republic of China 8,199,136 8,851,756 Ireland 3,029,836 10,596,686 Singapore 9,780,393 1,655,470 United States 9,520,283 17,907,518 Germany 203,978 549,804 Switzerland 2,671,706 6,772,589 Poland 29,386,434 49,083,877 Taiwan 1,048,478 2,117,809 India 2,156,015 5,249,423 Others 919,933 213,788

103,887,836 144,133,181 Unallocated revenue 556,752 115,329

104,444,588 144,248,510


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31. SEGMENT INFORMATION (cont’d)Group only

(b) Secondary Reporting Format - Geographical Segments (cont’d)

(ii) Segment assets by geographical and location of assets

Carrying amount of segment assets

2008 2007RM RM

Malaysia 189,911,295 214,245,110 People’s Republic of China 2,626,112 3,297,962

192,537,407 217,543,072 Unallocated assets 719,511 565,572

193,256,918 218,108,644 Add: Investment in an

associate – 2,241,944 Other investment 4,859,900 4,859,900 Tax recoverable 605,639 2,776,450

198,722,457 227,986,938

Capital expenditure2008 2007

RM RM

Malaysia 11,052,758 24,749,913 People’s Republic of China 12,682 6,149

11,065,440 24,756,062 Unallocated assets – 6,652

11,065,440 24,762,714

32. EMPLOYEES’ INFORMATIONGroup Company

2008 2007 2008 2007RM RM RM RM

(a) Directors’ other emoluments 1,661,569 1,861,569 1,183,916 688,090 Salaries, bonus, allowances

and paid leave 21,084,375 20,038,827 2,828,708 1,787,602 Amount contributed under

defined contribution plan- Employees Provident Fund (EPF) 2,302,508 2,121,170 316,542 190,493

SOCSO 359,523 294,278 32,941 20,455 Others 589,573 908,886 15,697 49,301

25,997,548 25,224,730 4,377,804 2,735,941

(b) The number of persons employed by the Group and the Company at 31 December 2008 were 565 (2007: 693) and 76 (2007: 73) respectively.


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33. CONTINGENT LIABILITIES

Group Company2008 2007 2008 2007

RM RM RM RM

UnsecuredCorporate guarantee given by the Company

for banking facilities extended by financialinstitutions to subsidiary companies – – 82,655,000 89,505,000

34. CAPITAL COMMITMENT Group only

2008 2007RM RM

Acquisition of property, plant and equipment:Approved but not contracted for

- Grant assets 7,818,224 8,609,421 - Others 1,981,000 –

9,799,224 8,609,421

35. FINANCIAL INSTRUMENTS - OTHER DISCLOSURES

(a) Maturity Profile and Interest Rate RisksGroup only

The maturity profile and effective interest rates of financial instruments exposed to interest rate risk are as follows:

Maturity profile

Within 1 year

More than1 year and

less than5 years

More than5 years

Carryingamount

Effectiveinterest

ratesRM RM RM RM %

At 31 December 2008

Financial liabilitiesHire-purchase payables 76,347 – – 76,347 5.00 - 5.59 Short term borrowings 25,572,805 – – 25,572,805 3.78 - 8.75 Term loans 2,420,047 42,842,858 6,051,556 51,314,461 5.22 - 7.75

At 31 December 2007

Financial liabilitiesHire-purchase payables 295,415 76,347 – 371,762 5.00 - 6.24 Short term borrowings 22,032,768 – – 22,032,768 2.95 - 7.25 Term loans 3,830,273 42,967,892 8,870,514 55,668,679 5.22 - 7.75


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35. FINANCIAL INSTRUMENTS - OTHER DISCLOSURES (cont’d)

(b) Forward Foreign Exchange ContractsGroup only

As at balance sheet date, the Group has entered into forward foreign exchange contracts with the following notional amounts and maturities:

Maturities More than

1 year and TotalWithin less than More than notional

Currency 1 year 5 years 5 years amountRM RM RM RM

At 31 December 2008

Forward contracts used to hedgetrade receivables Euro – – – –

At 31 December 2007

Forward contractsused to hedgetrade receivables Euro 3,395,280 – – 3,395,280

(c) Fair ValuesGroup and Company

(i) The fair value of term loan of the Group at the balance sheet date approximates its carrying amount.

(ii) The fair value of non-trade amounts owing by subsidiary companies is not provided as it is not practicable to estimate reliably due to a lack of fixed repayment terms entered into by the parties involved.

(iii) The fair values of other current financial assets and liabilities of the Group at the balance sheet date approximate to their carrying amounts in the balance sheet due to the short term nature of these financial instruments.

(iv) The fair value of non-current unquoted investments is not provided as it is not practicable to estimate the fair value reliably.

(v) The fair value of hire-purchase payables is disclosed in Note 19.


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36. RELATED PARTY TRANSACTION AND BALANCES

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party or when both parties are under the common control of another party.

The transactions carried out with related parties during the financial year were as follows:

(a) Transactions and year end outstanding balances between the Company and subsidiary companiesCompany Only.

(i) The details of subsidiaries are disclosed in Note 6. Transactions between the Company and the subsidiary companies during the financial year were as follows:

2008 2007RM RM

Acquisition of plant and equipment from a subsidiary company 468,291 –Management fee charged to subsidiary companies 2,971,800 2,201,460 Rental of premises charged by a subsidiary company 54,000 –Tax exempt dividends received from a subsidiary company – 7,500,000 Interest recovered from a subsidiary company 1,897,358 1,843,261

The provision of guarantee by the Company to subsidiary companies is disclosed in Note 35.

(ii) The year end outstanding balances with subsidiary companies are as follows:

2008 2007RM RM

Amount receivable from subsidiary companies 73,183,834 77,513,485 Amount payable to a subsidiary company – 590,561

The amounts receivable from and payable to subsidiary companies are unsecured, have no fixed terms of repayment and interest free except for an advance of RM27,830,000 (2007: RM27,830,000) to a subsidiary company for which interest is charged at 6.8% (2007: 6.8%) per annum. Settlement of these indebtednesses is expected to be in cash. No expense has been recognised during the financial year in respect of bad or doubtful debts due from subsidiary companies other than an allowance amounting to RM289,168 in respect of debts due from certain subsidiary companies which are considered as doubtful in recovery.

(b) Transactions and year end outstanding balances between the Group and an associated companyGroup Only

(i) The details of an associated company are disclosed in Note 7. Transactions between the Group and the associated company during the financial year were as follows:

2008 2007RM RM

Sales from subsidiary companies 175,026 1,556,378

Rental of premises charged by a subsidiary company 252,000 336,000

Hire of equipment charged by a subsidiary company 18,000 46,000


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36. RELATED PARTY TRANSACTION AND BALANCES (cont’d)

(b) Transactions and year end outstanding balances between the Group and an associated company (cont’d)Group Only

(ii) The year end outstanding balances with an associated company are as follows:

2008 2007RM RM

Amount receivable from an associated company – 193,297

The amount receivable from an associated company was unsecured, interest free and had no fixed terms of repayment and settlement was expected to be in cash. No expense has been recognised during the financial year in respect of bad or doubtful debts due by the associated company.

(c) Key management personnel compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company either directly or indirectly. The key management personnel of the Company are Directors, General Manager and Group Financial Controller and their remuneration for the financial year are as follows:

Group Company2008 2007 2008 2007

RM RM RM RM

Short term employee benefits 2,182,496 2,389,421 1,065,500 903,610 Post employment benefits:

- Contribution to Employees Provident Fund 228,704 259,402 118,416 79,872

2,411,200 2,648,823 1,183,916 983,482 Benefits-in-kind 73,666 76,250 50,000 27,500

2,484,866 2,725,073 1,233,916 1,010,982

(d) Transactions and outstanding balances with other related parties

Group Company2008 2007 2008 2007

RM RM RM RM

Salaries and other remunerationpaid to individuals related to the Directors of the Company 184,115 185,971 184,115 41,984


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We, CHUAH CHOON BIN and TAN BOON TEIK, being two of the directors of PENTAMASTER CORPORATION BERHAD, do hereby state on behalf of the directors that in our opinion, the financial statements set out on pages 28 to 85 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 December 2008 and of the results of the operations of the Group and of the Company and of the cash flows of the Group and of the Company for the year ended on that date.

Signed on behalf of the Board in accordance with a resolution of the directors.

–––––––––––––––––––––––––––––––––CHUAH CHOON BINDIRECTOR

–––––––––––––––––––––––––––––––––TAN BOON TEIKDIRECTOR

Penang,

Date: 27 April 2009

STATEMENT BY DIRECTORS

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I, YEOH THEAM SENG, being the officer primarily responsible for the accounting records and financial management of PENTAMASTER CORPORATION BERHAD do solemnly and sincerely declare that the financial statements set out on pages 28 to 85 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 Declaration Act, 1960.

Subscribed and solemnly ) )declared by the abovenamed ) )at Perai ) )in the State of Penang ) )this 27 April 2009 ) YEOH THEAM SENG

Before me:

Premjit SinghNo: P107Pesuruhjaya Sumpah, Malaysia

STATUTORY DECLARATION

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Report on the Financial Statements

We have audited the financial statements of Pentamaster Corporation Berhad., which comprise the balance sheets as at 31 December 2008 of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 28 to 85.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of the 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 of the Company as of 31 December 2008 and of their financial performance and cash flows for the year then ended.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We have considered the financial statements and the auditors’ report of the subsidiary company of which we have not acted as auditors, which are indicated in Note 6 to the financial statements.

(c) We are satisfied that the financial statements of the subsidiaries 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 were not subject to any qualification and did not contain any adverse comment made under Section 174(3) of the Act.

AUDITORS’ REPORTto the members of Pentamaster Corporation Berhad (572307-U)

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AUDITORS’ REPORT (cont’d)to the members of Pentamaster Corporation Berhad (572307-U)

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

FOLKS DFK & CO NG ENG KIATFIRM NO: AF 0502 NO: 1064/03/09(J/PH)CHARTERED ACCOUNTANTS CHARTERED ACCOUNTANT

Kuala Lumpur,

Date: 27 April 2009

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LIST OF LANDED PROPERTIES

Location of Landed PropertiesDate of

Acquisition

Description and Existing

Use Tenure Land Area

Approximate Age of

Building

NBV as at 31 Dec 2008

(RM)

H.S. (D) 19135 & H.S. 19121,Mukim 12, South West District, Plot 18 & Plot 19, Bayan Lepas Technoplex, Penang, Malaysia

23/12/2000 and

21/3/2001 respectively

Industrial lot/factory

building and office building

Leasehold(60 years

expiring 1/7/2062

and 7/21/2062

respectively) 4.03 acres 5 years 36,222,557.47

Plot 17A, Bayan Lepas Technoplex, Mukim 12, South West District, Penang, Malaysia 26/10/2003



Leasehold (60 years) 2.02 acres 3 years 14,309,207.22

Plot 17B, Bayan Lepas Technoplex, Mukim 12, South West District, Penang, Malaysia 26/6/2004



Leasehold (60 years) 2.98 acres 3 years 35,590,558.02

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ANALYSIS OF SHAREHOLDINGSas at 30 April 2009

Authorised Capital : RM100,000,000.00Issued and Fully Paid-up Capital : RM66,621,525.00 Class of Equity Securities : Ordinary Shares of RM0.50 eachVoting Rights : One vote per share

Distribution Schedule of Shareholders

No. of Holders Size of holdingsNo. of

shareholdings %17 Less than 100 shares 729 *431 100 - 1,000 shares 249,550 0.191,701 1,001 - 10,000 shares 8,171,100 6.13668 10,001 - 100,000 shares 20,858,650 15.6692 100,001 to less than 5% of issued shares 37,642,545 28.256 5% and above of issued shares 66,320,476 49.77

2,915 Total 133,243,050 100.00

* Negligible

30 Largest Securities Account Holders(without aggregating the securities from different securities accounts belonging to the same person)

No. Name No. of Shares held %1 CHUAH CHOON BIN 16,906,750 12.69 2 TAN BOON TEIK 11,831,750 8.88 3 CHUAH CHOON BIN 9,911,750 7.44 4 TAN BOON TEIK 9,911,750 7.44 5 KENANGA NOMINEES (TEMPATAN) SDN BHD

KENANGA CAPITAL SDN BHD FOR ZAINAL ABIDIN BIN ABAS 9,063,784 6.80

6 TAN BOON TEIK 8,694,692 6.53 7 LEMBAGA TABUNG HAJI 6,600,000 4.95 8 TAN GUAT KIM 2,132,253 1.60 9 CHUAH CHOON BIN 1,911,750 1.4310 CHUAH CHOON BIN 1,911,750 1.4311 TAN BOON TEIK 1,911,750 1.4312 LIM AH OOI @ LIM AH MOI 1,251,227 0.94 13 LIM AH OOI @ LIM AH MOI 1,251,226 0.9414 PUBLIC NOMINEES (TEMPATAN) SDN BHD

PLEDGED SECURITIES ACCOUNT FOR TEH ENG HUAT 1,200,000 0.90

15 NEOH BOON YEW 936,900 0.70 16 TAN LENG ANG @ TAN TENG CHUN 834,152 0.6317 LOH SIEW HOOI 630,000 0.47 18 LIM KIM JOO 622,486 0.4719 MAYBAN NOMINEES (TEMPATAN) SDN BHD

PLEDGED SECURITIES ACCOUNT FOR GAN TEE JIN 572,800 0.43

20 CHUAH LAM SIANG 500,000 0.3821 TAN CHENG HUN 500,000 0.3822 TAN LENG ANG @ TAN TENG CHUN 470,651 0.3523 BOON JENN WOEI 436,500 0.3324 MAYBAN NOMINEES (TEMPATAN) SDN BHD

PLEDGED SECURITIES ACCOUNT FOR ZAINAL ABIDIN BIN ABAS 400,000 0.30

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ANALYSIS OF SHAREHOLDINGS (cont’d)as at 30 April 2009

30 Largest Securities Account Holders (cont’d)(without aggregating the securities from different securities accounts belonging to the same person)

No. Name No. of Shares held %25 LEE SENG WEI 362,400 0.27 26 LOH NAM SENG 352,600 0.2627 LIM CHEE KON 350,000 0.2628 TAN MAY YING @ TAN FAR 330,000 0.2529 GOH ENG HOE 326,700 0.2530 OOI YAN ENG @ OOI NEE ENG 312,000 0.23

Substantial Shareholders (excluding those who are bare trustees pursuant to Section 69 of the Companies Act 1965)

No. of ordinary shares of RM0.50 each beneficially held by the Substantial Shareholders

Name of Substantial Shareholders Direct % Indirect %Tan Boon Teik 32,349,942 24.28 *44,250 0.03Chuah Choon Bin 30,642,000 23.00 *28,500 0.02

* Interest held by spouses treated as interest of directors in accordance with Section 134(12)(c) of the Companies Act, 1965

Directors’ Shareholding (Direct & Indirect)

a) In the Company (Direct and Indirect)

No. of ordinary shares of RM0.50 each beneficially held by the DirectorsName of Directors Direct % Indirect %Chuah Choon Bin 30,642,000 23.00 *28,500 0.02Tan Boon Teik 32,349,942 24.28 *44,250 0.03Loh Nam Hooi 90,000 0.07 – –Ooi Hun Pin – – – –Dato’ Dr Zainuddin Bin Md. Wazir – – – –Dato’ Seri Kiew Kwong Sen 301,000 0.23 *110,000 0.08

* Interest held by spouses treated as interest of directors in accordance with Section 134(12)(c) of the Companies Act, 1965

b) In Related Corporation

By virtue of their interests of not less than 15% in the shares of the Company as at 30 April 2009, Chuah Choon Bin and Tan Boon Teik are deemed to have an interest in the shares of all the subsidiary companies to the extent that the Company has an interest as at that date. None of the other directors have any interest in the shares of related corporations as at 30 April 2009.

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NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Seventh Annual General Meeting of Pentamaster Corporation Berhad will be held at the Conference Room of Pentamaster Corporation Berhad at Plot 18 & 19 Technoplex, Medan Bayan Lepas, Taman Perindustrian Bayan Lepas, Phase IV, 11900 Penang on 26 June 2009 at 10.30 a.m. for the following purposes:

AS ORDINARY BUSINESSES

1. To receive and adopt the Audited Financial Statements for the financial year ended 31 December 2008 together with the Reports of the Directors and Auditors thereon. Resolution 1

2. To approve the payment of Directors’ fees of RM204,000 for the financial year ended 31 December 2008. Resolution 2

3. To re-elect the following Directors who retire in accordance with Article 95(1) of the Company’s Articles of Association and being eligible, offer themselves for re-election:

(a) Dr Ooi Hun Pin Resolution 3

(b) Dato’ Seri Kiew Kwong Sen Resolution 4

(c) Dato’ Dr Zainuddin Bin Md Wazir Resolution 5

4. To re-appoint Messrs Folks DFK & Co as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. Resolution 6

AS SPECIAL BUSINESS5. To consider and, if thought fit, to pass with or without modifications the following resolution as an

Ordinary Resolution:

Authority to Issue Shares“THAT pursuant to Section 132D of the Companies Act, 1965, and subject to the approvals of the relevant Governmental and/or regulatory authorities, the Directors be and are hereby empowered to issue shares in the Company from time to time upon such terms and conditions and for such purposes and to such person or persons as the Directors may deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the total issued share capital of the Company for the time being and that the Directors be and are also empowered to obtain the approval from Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares so issued and that such authority shall continue to be in force until the conclusion of the next Annual General Meeting of the Company or the expiration of the period within which the next Annual General Meeting is required by law to be held or revoked/varied by resolution passed by the shareholders in general meeting whichever is the earlier.” Resolution 7

6. To consider any other business for which due notice shall have been given in accordance with the Companies Act, 1965.

By order of the Board

Lim Kim Teck(MAICSA 7010844)

Teh Ai Geik @ Teh Ai Gek(MAICSA 7033180)Secretaries

Penang Date: 4 June 2009

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NOTICE OF ANNUAL GENERAL MEETING (cont’d)

NOTES

1. Appointment of Proxy

(a) A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company and Section 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company.

(b) 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.

(c) The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorized in writing or, if the appointer is a corporation, either under the corporation’s seal or under the hand of an officer or attorney duly authorised.

(d) All forms of proxy must be deposited at the Registered Office of the Company at 35, 1st Floor, Jalan Kelisa Emas 1, Taman Kelisa Emas, 13700 Seberang Jaya, Penang not less than forty-eight (48) hours before the time appointed for holding the Meeting or any adjournment thereof.

2. Explanatory Note on Special Business

Resolution No. 7

The proposed resolution in relation to the authority to allot shares pursuant to Section 132D of the Companies Act, 1965, if passed, will empower the Directors to issue and allot shares up to an aggregate amount not exceeding 10% of the issued share capital of the Company for the time being, for such purposes as the Directors consider would be in the interests of the Company. This authority unless revoked or varied at a general meeting will expire at the conclusion of the next Annual General Meeting of the Company or the period within which the next Annual General Meeting is required by law to be held whichever is the earlier.

PROXY FORMFor the 7th Annual General Meeting

No. of shares held

I/We ________________________________________________________________________________________________________(Full Name in Block Letters)

of ___________________________________________________________________________________________________________(Address)

being a member/members of the above Company appoint ____________________________________________________________(Full Name in Block Letters)

of ___________________________________________________________________________________________________________(Address)

or failing him, _________________________________________________________________________________________________(Full Name in Block Letters)

of ___________________________________________________________________________________________________________(Address)

or failing him, the Chairman of the Meeting as my/our Proxy to vote in my/our name(s) on my/our behalf at the Seventh Annual General Meeting of the Company to be held on 26 June 2009 at 10.30 a.m. and at any adjournment thereof in the manner indicated below:

Resolution For Against

To receive and adopt the Audited Financial Statements for the financial year ended 31 December 2008 together with the Reports of the Directors and Auditors thereon Resolution 1

To approve the payment of Directors’ fees of RM204,000 for the financial year ended 31 December 2008 Resolution 2

To re-elect the following Directors who retire pursuant to Article 95(1) of the Company’s Articles of Association:

(a) Dr Ooi Hun Pin Resolution 3

(b) Dato’ Seri Kiew Kwong Sen Resolution 4

(c) Dato’ Dr Zainuddin Bin Md Wazir Resolution 5

To re-appoint Messrs Folks DFK & Co as the Company’s Auditors Resolution 6

To empower the Directors to issue and allot shares up to 10% of the issued share capital of the Company Resolution 7

(Please indicate with an “X” in the appropriate box against each Resolution how you wish your proxy to vote. If no instruction isgiven, this form will be taken to authorise the proxy to vote at his/her discretion.)

Dated this _______________________ day of ________________________ 2009.

__________________________________Signature of Shareholder or Common Seal

Notes :(a) A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not

be a member of the Company and Section 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company.(b) 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.(c) The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorized in writing or,

if the appointer is a corporation, either under the corporation’s seal or under the hand of an officer or attorney duly authorised.(d) All forms of proxy must be deposited at the Registered Office of the Company at 35, 1st Floor, Jalan Kelisa Emas 1, Taman Kelisa

Emas, 13700 Seberang Jaya, Penang not less than forty-eight (48) hours before the time appointed for holding the Meeting or any adjournment thereof.

PENTAMASTER CORPORATION BERHAD (572307-U)

(INCORPORATED IN MALAYSIA)

The Company SecretaryPENTAMASTER CORPORATION BERHAD (572307-U)

35, 1st Floor, Jalan Kelisa Emas 1, Taman Kelisa Emas,

13700 Seberang Jaya, Penang, Malaysia

P lease fo ld across the l ines and c lose

P lease fo ld across the l ines and c lose

Plot 18 & 19, Technoplex, Medan Bayan LepasTaman Perindustrian Bayan Lepas, Phase IV

11900 Penang, MalaysiaTel: 04-646 9212 Fax: 04-641 5600

www.pentamaster.com

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