annual report 2010 - smishsbc bank malaysia berhad (127776-v) 2, leboh ampang, 50100 kuala lumpur,...

A N N U A L R E P O R T 2 0 1 0

SMIS Corporation Berhad | Annual Report 2010 1

Contents2 GroupStructure

3 CorporateInformation

4 SummaryofFinancialHighlights

6 Directors’Profile

10 Chairman’sStatement

13 CorporateGovernanceStatement

21 AuditCommitteeReport

27 StatementonInternalControl

29 Directors’ResponsibilityStatement

30 FinancialStatements

93 StatementofShareholdings

96 ParticularsofProperties

97 NoticeofAnnualGeneralMeeting

FormofProxy(Enclosed)

CONTENTS

SMIS Corporation Berhad | Annual Report 20102

Group Structure

SANYCOGRANDINDUSTRIESSDN.BHD.

SUGIHARAGRANDINDUSTRIESSDN.BHD.

MACHINERY&INDUSTRIALSUPPLIESSDN.BHD.

CLEONTECHNOLOGYSDN.BHD.

EXSILIOPTE.LTD.

GRANDCARPETINDUSTRIESSDN.BHD.100%

100%

60%

66.25%

100%

100%


Board of Directors

MohamedGhazalibinKamalBaharein (IndependentNon-ExecutiveDirector) (Chairman)

MohdRianibinOsman(ExecutiveDirector)

NgWaiKee(ExecutiveDirector)

YapSiewFoong(ExecutiveDirector)

ChamBeeSim(ExecutiveDirector)

DannyNgSiewL’Leong (SeniorIndependentNon-ExecutiveDirector)

PaulineTeh@PaulineTehAbdullah (IndependentNon-ExecutiveDirector)

FooLeeKhean (IndependentNon-ExecutiveDirector)

Audit Committee

DannyNgSiewL’Leong (SeniorIndependentNon-ExecutiveDirector) (Chairman)

PaulineTeh@PaulineTehAbdullah (IndependentNon-ExecutiveDirector)

FooLeeKhean (IndependentNon-ExecutiveDirector)

Nomination Committee

DannyNgSiewL’Leong(Chairman)

PaulineTeh@PaulineTehAbdullah

MohamedGhazalibinKamalBaharein

Remuneration Committee

MohamedGhazalibinKamalBaharein (Chairman)

DannyNgSiewL’Leong

PaulineTeh@PaulineTehAbdullah

NgWaiKee

Company Secretaries

LiewIrene(MAICSA7022609)

ChoongLeeWah(MAICSA7019418)

Registered Office

Lot6.05,Level6, KPMGTower,8FirstAvenue, BandarUtama,47800PetalingJaya, SelangorDarulEhsan. Tel:03-77201188 Fax:03-77201111

Auditors

KPMG(FirmNo:AF0758)CharteredAccountants Level10,KPMGTower,8FirstAvenue, BandarUtama,47800PetalingJaya, SelangorDarulEhsan.

Principal Bankers

EONBankBerhad(92351-V) WismaCyclecarri, 288,JalanRajaLaut,50350KualaLumpur, WilayahPersekutuan.

UnitedOverseasBankMalaysiaBerhad(271809-K) Level7,MenaraUOB,JalanRajaLaut, 50050KualaLumpur,WilayahPersekutuan.

HSBCBankMalaysiaBerhad(127776-V) 2,LebohAmpang,50100KualaLumpur, WilayahPersekutuan.

Registrars

BoardroomCorporateServices(KL)SdnBhd Lot6.05,Level6,KPMGTower, 8FirstAvenue,BandarUtama, 47800PetalingJaya, SelangorDarulEhsan. Tel:03-77201188 Fax:03-77201111

Stock Exchange Listing

BursaMalaysiaSecuritiesBerhad(MainMarket)

Website

http://www.smis.com.my

Corporate Information


Summary of Financial Highlights

2010 2009 2008 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000Statement of financial position restated restated restated restated

Issuecapital 44,800 44,800 44,800 44,800 44,800Sharepremium 4,891 4,891 4,891 4,891 4,891- Treasuryshares (1,136) (1,023) (967) (579) (246)Retainedprofits 25,158 19,045 15,138 14,353 15,251Translationreserve - - (43) 4 -Fairvaluereserve 169 - - - -Minorityshareholders’interests 2,618 259 - - -

Fundsemployed 76,500 67,972 63,819 63,469 64,696Negativegoodwill - - - - -

76,500 67,972 63,819 63,469 64,696

Property,plantandequipment 22,124 22,875 25,770 26,972 28,792Goodwill 710 710 710 1,499 710Investmentproperties 1,308 1,350 1,391 1,432 1,740Otherinvestments 11,869 11,744 11,823 11,759 -Deferredtaxassets 1,776 819 718 733 760Currentassets 58,912 48,177 42,689 39,346 45,632

Totalassets 96,699 85,675 83,101 81,741 77,634Totalliabilities (20,199) (17,703) (19,282) (18,272) (12,938)

76,500 67,972 63,819 63,469 64,696

Statement of comprehensive incomeRevenue 97,487 67,803 81,257 70,818 77,144Otheroperatingincome 1,105 256 329 759 458Otheroperatingexpenses (88,703) (64,251) (78,084) (71,572) (77,088)

Operatingprofit 9,889 3,808 3,502 5 514Financingcosts (71) (53) (112) (140) (144)Interestincome 40 68 - 42 285

Profit/(Loss)beforetaxation 9,858 3,823 3,390 (93) 655Taxexpense (1,386) (593) (1,116) (273) (1,137)

Profit/(Loss)fortheyearfrom continuingoperation 8,472 3,230 2,274 (366) (482)


Summary of Financial Highlights (continued)

2010 2009 2008 2007 2006Statement of comprehensive RM’000 RM’000 RM’000 RM’000 RM’000 income (continued) restated restated restated restated

Discontinued operationLossfromdiscontinuedoperation - 1,487 (1,489) (678) -

Profit/(Loss)fortheyear 8,472 4,717 785 (1,044) (482)Othercomprehensiveincome, netoftaxFairvalueofavailable-for-sale financialassets 99 - - - -

Totalcomprehensiveincome/ (expense)fortheyear 8,571 4,717 785 (1,044) (482)

Profitattributableto:Shareholdersofthecompany 6,113 4,605 785 (898) 510Minorityinterests 2,359 112 - (146) (992)

Profit/(Loss)fortheyear 8,472 4,717 785 (1,044) (482)

Totalcomprehensiveincome attributableto:OwnersoftheCompany 6,212 4,605 785 (898) 510Minorityinterest 2,359 112 - (146) (992)

Totalcomprehensiveincome fortheyear 8,571 4,717 785 (1,044) (482)

NoteListing: MainMarketDateofListing: 16April2002

Directors’ Profile


Mohamed Ghazali bin Kamal BahareinChairman,IndependentNon-ExecutiveDirector

MohamedGhazalibinKamalBaharein,aMalaysian,aged65,wasappointedtotheBoardofDirectorsofSMISon2February2002asanIndependentNon-ExecutiveDirector.HewasappointedasChairman,IndependentNon-ExecutiveDirectoron27February2007.

HeholdsaBachelorofArtsfromUniversityMalayaandapostgraduateDiplomainDevelopmentEconomicsfromUniversityCambridge,UnitedKingdomin1972.HeattendedtheProgramManagementDevelopmentinHarvardBusinessSchoolin1979.HestartedhiscareerasanAssistantDistrictOfficerinthegovernmentserviceandlaterinvariouscapacitieswithintheFELDAgroupofcompanieswherehislastappointmentwasSenior General Manager of Felda Palm Industries Sdn Bhd. He is now a businessman and in consultancyservices.

HeisalsotheChairmanoftheRemunerationCommitteeandisamemberoftheNominationCommittee.

Hedoesnotholdanyotherdirectorshipofpubliccompanies.Hehasnofamilyrelationshipwithanydirectorand/ormajorshareholdersoftheCompany.HedoesnothaveanyconflictofinterestwiththeCompanyandhasnotbeenconvictedforanyoffenceswithinthepast10years.

Mohd Riani bin OsmanExecutiveDirector

MohdRianibinOsman,aMalaysian,aged59,wasappointedasanExecutiveDirectorofSMISon2February2002.

He is an entrepreneur with more than twenty-eight years experience in business, especially in the field oftradingandmanufacturingofOEMautomotivepartsandcomponents.Hehasextensiveworkingknowledgeandexperienceintheautomotivepartsandcomponentsindustry.Heisresponsiblefortheoperationsoftheautomotivedivision.

HealsoservesasaDirectorofLysaghtGalvanisedSteelBerhad.

Hehasnofamilyrelationshipwithanydirectorand/ormajorshareholdersoftheCompany.HedoesnothaveanyconflictofinterestwiththeCompanyandhasnotbeenconvictedforanyoffenceswithinthepast10years.

Ng Wai KeeExecutiveDirector

NgWaiKee,aMalaysian,aged40,wasappointedasanExecutiveDirectorofSMISon2February2002.

HeholdsaBachelorofAccountingfromtheUniversityofTechnology,Sydney,AustraliaandisanAssociatememberoftheInstituteofCharteredAccountants,Australia.HehasworkedasprojectconsultantinWestpacBankingCorporation,Sydneyin1992andwithDeloitteToucheTohmatsu,Sydneyin1993.HeleftthefirmasaSeniorAnalystin1996.HeisresponsiblefortheoperationsandfinanceoftheGroup.

HeisalsoamemberoftheRemunerationCommittee.

Hedoesnotholdanyotherdirectorshipofpubliccompanies.HeissonofYapSiewFoong,aDirectorandmajorshareholderoftheCompany.Saveasdisclosedonpage95oftheannualreport,hedoesnothaveanyotherconflictofinterestwiththeCompanyandhasnotbeenconvictedofanyoffenceswithinthepast10years.

Director Profile


Yap Siew FoongExecutiveDirector

YapSiewFoong,aMalaysian,aged67,wasappointedasanExecutiveDirectorofSMISon2February2002.

Sheisoneoftheco-foundersofSMISGroup.Sheisresponsibleforthefinanceandoperationsofthetradingdivision.

Shedoesnotholdanyotherdirectorshipofpubliccompanies.SheisthemotherofNgWaiKeeandsister-in-lawofChamBeeSim.Saveasdisclosedonpage95oftheannualreport,shedoesnothaveanyotherconflictofinterestwiththeCompanyandhasnotbeenconvictedofanyoffenceswithinthepast10years.

Cham Bee SimExecutiveDirector

ChamBeeSim,aMalaysian,aged63,wasappointedasanExecutiveDirectorofSMISon2February2002.

Hehasvastexperienceinthemanufacturingandtradingofautomotivepartsandcomponents.Heisresponsiblefortheoperationsoftheautomotivedivision.

Hedoesnotholdanyotherdirectorshipofpubliccompanies.Heisthebrother-in-lawofYapSiewFoong,aDirectorandamajorshareholderofSMIS.Saveasdisclosedonpage95oftheannualreport,hedoesnothaveanyotherconflictofinterestwiththeCompanyandhasnotbeenconvictedofanyoffenceswithinthepast10years.

Danny Ng Siew L’LeongSeniorIndependentNon-ExecutiveDirector

DannyNgSiewL’Leong,aMalaysian,aged53,wasappointedtotheBoardofDirectorsofSMISon2February2002asanIndependentNon-ExecutiveDirector.

HegraduatedwithaBachelordegree inAgribusiness(Honours) fromUniversityPertanianMalaysia,withmajor in Financial Management in 1982. He was attached to United Malayan Banking Corporation (nowknownasRHBBankBerhad)asCreditAnalystforthecentralregionfrom1982to1986andsubsequently,theAccountsManageroftheCorporateBankingDepartmentfrom1986to1990.From1990to1991,hewasappointedtheUnitHeadoftheNorthernRegionoftheCorporateBankingDepartmentandHeadofCreditandMarketingforitsCorporateBankingDepartmentfrom1991to1994.

HealsoservesasDirectorofNewHoongFattHoldingsBerhadandAHBHoldingsBerhad.HeistheChairmanoftheAuditandNominationCommitteesandalsoamemberoftheRemunerationCommittee.


Director Profile (continued)


Pauline Teh @ Pauline Teh AbdullahIndependentNon-ExecutiveDirector

PaulineTeh@PaulineTehAbdullah,aMalaysian,aged41,wasappointedtotheBoardofDirectorsofSMISon2February2002,asanIndependentNon-ExecutiveDirector.

SheobtainedaBachelorofCommerce(Accounting)fromSaintMary’sUniversity,Halifax,Canadain1993andaMastersinFinancefromUniversityofHull,UnitedKingdomin1994.ShewasaSeniorOperationsOfficerinPublicBankBerhadfrom1993to1995andjoinedPerdanaMerchantBankersin1995andleftasAssistantVice-Presidentin1997totakeupthepostofAssistantManagerwithProjectLebuhrayaUtaraSelatanBerhadfrom1997to1998.In1998,shejoinedHanifahTeo&AssociatesasaManagementConsultant.SheleftBDOCapitalConsultantsSdnBhdinMay2008asExecutiveDirectorandiscurrentlyExecutiveDirectorofCroweHorwathAdvisorySdnBhd.

SheisamemberoftheAudit,NominationandRemunerationCommittees.

Shedoesnotholdanyotherdirectorshipofpubliccompanies.Shehasnofamilyrelationshipwithanydirectorand/ormajorshareholdersoftheCompany.ShedoesnothaveanyconflictofinterestwiththeCompanyandhasnotbeenconvictedforanyoffenceswithinthepast10years.

Foo Lee KheanIndependentNon-ExecutiveDirector

FooLeeKhean,aMalaysian,aged48,wasappointedtotheBoardofDirectorsofSMISon26November,2007,asanIndependentNon-ExecutiveDirector.

He is a Fellow Member of the Chartered Institute of Management Accountants, United Kingdom andMalaysianInstituteofAccountants.HestartedhiscareerwithCoopers&LybrandMalaysiain1987intherestructuringandrecoverydepartmentbeforeleavingasaSeniorAssociatein1989tojoinPriceWaterhouse(“PwC”),Singapore,alsointherestructuringandrecoverydepartment.HeleftPwCin1990tojoinArthurAndersen,SingaporebeforebeingtransferredtoArthurAndersen,Malaysiain1992inthecorporaterecoveryandcorporatefinancedivision.

Hisresponsibility includeshandlingforensicaudit,generalreceivership,mergerandacquisitionsaswellascorporatefinanceactivitiessuchasIPOs,fundraisingexerciseanddebtrestructuring.HewastheDirector-CorporateFinanceofErnst&Youngin2002followingthemergerofArthurAndersenwithErnst&Younginthesameyearbeforeleavingin2005tojoinasapartnerofStrategicCapitalAdvisory.

HealsoservesasDirectorofSYFResourcesBerhadandKumpulanJetsonBerhad.HeisamemberoftheAuditCommittee.


Details of attendance of Board MeetingsThedetailsofattendanceofeachDirectoratBoardMeetingsaresetoutonpage14oftheAnnualReport.

Director Profile (continued)


Chairman’sStatements


OnbehalfoftheBoardofSMISCorporationBerhad(“SMIS”or“theCompany”),itgivesmegreatpleasuretopresenttheAnnualReportandAuditedFinancialStatementsofSMISanditssubsidiarycompanies(“SMISGroup”or“Group”)forthefinancialyearended31December2010.

INDUSTRY OVERVIEW

TheTotalIndustryVolume(TIV)ofnewmotorvehiclesregisteredinMalaysiafor2010surpassedallpreviouslyrecordedvolume,growingby12.7%ascompared to2009.Thegrowthwas fuelledby improvedconsumersentimentasaresultofarecoveringeconomyandpent-updemandfromthe2009downturn.IntroductionofnewmodelsatcompetitivepricesalsohelpedpushtheTIVfurther.

TheMalaysianAutomotiveAssociation(“MAA”)forecastamarginalgrowthof2.1%for2011.

FINANCIAL HIGHLIGHTS

Thegrouprevenuefor2010wasRM97.5millionwhichrepresentanincreaseof44%fromthepreviousyearofRM67.8million.Boththeautomotiveandmachinerypartsdivisionsrecordedincreasedrevenuefortheyearunderreview.Thegroupprofitbeforetaxfor2010wasRM9.9millioncomparedtoRM3.8millionin2009.Whilstbenefitingfromincreasedvolumeintheautomotivesector,continuousimprovementsinefficiencyandcostmanagementinitiativealsohelpedtheCompanyregisterasignificantincreaseinprofits.

PROSPECTS

Positive consumer sentiment is still evident as we enter into 2011 and should remain strong with variouseconomic stimulus packages and transformation programs announced by the government. SMIS foreseesitsrevenuetoincreasemarginallyinlinewiththemarginalgrowthintheautomotiveindustryasperMAAforecast.

ACKNOWLEDGEMENT

OnbehalfoftheBoard,Iextendmysincereappreciationtoeveryemployeefortheirloyalty,conscientiouseffortsandcommitment.Throughtheirdedicationovertheyearsthegroupwasabletobenefitastheeconomyrecovered.

Chairman’s Statements


I would also like to thank our valued shareholders, business associates, suppliers, and financiers for theircontinuedsupportandfaithinSMIS.

Last but not least, my heartfelt appreciation goes to my fellow directors for their invaluable guidance andcommitmenttowardstheCompany.

Thankyou.

Mohamed Ghazali bin Kamal BahareinChairman

Chairman’s Statements (continued)


TheBoardofDirectors(“theBoard”)ofSMISCorporationBerhadiscommittedtoensuringthatgoodcorporategovernancepracticesareappliedthroughouttheGroupasafundamentalpartofdischargingitsresponsibilitiestoprotectandenhanceshareholders’valueandtoimproveitsfinancialperformance.TheBoardispleasedtoprovideastatementonthemannerinwhichtheCompanyhasappliedtheprincipleslaiddowninPart1oftheMalaysianCodeonCorporateGovernance(“Code”)andtheextentofcompliancewiththebestpracticessetoutinPart2oftheCodeduringthefinancialyearsavewhereotherwiseidentifiedandhasbeenapprovedbytheBoardofDirectorson13April2011.

BOARD OF DIRECTORS

(a) Board Composition and Balance

TheBoardhaseight(8)memberswhichcomprisesoffour(4)ExecutiveDirectorsandfour(4)IndependentNon-Executive Directors. This composition complies with the Main Market Listing Requirements ofBursaMalaysiaSecuritiesBerhad(“BursaSecurities”)thatrequiresatleasttwo(2)directorsorone-third(1/3)oftheBoard,whicheveristhehigher,tobeindependent.AbriefprofileofeachDirectorispresentedonpages6to9oftheAnnualReport.

TheExecutiveDirectorsareprimarilyresponsiblefortheimplementationofpoliciesanddecisionsoftheBoard,overseeingtheGroup’soperationsanddevelopmentoftheGroup’sbusinessstrategies.

TheIndependentNon-ExecutiveDirectorsprovideabroaderviewandindependentassessmenttotheBoard’sdecisionmakingprocessbyactingasaneffectivecheckandbalance.

TheBoardissatisfiedthatthecurrentBoardcompositionfairlyreflectstheinvestmentoftheminorityshareholdersandrepresentsabalancedmixedofskillsandexperiencetodischargetheBoard’sdutiesandresponsibilities.

TheBoardhasappointedMrDannyNgSiewL’LeongastheSeniorIndependentNon-ExecutiveDirectortowhomconcernsmaybeconveyed.

(b) Duties and Responsibilities

TheBoardassumesfullresponsibilityovertheoverallperformanceoftheCompanyandtheGroupbydischargingitsstewardshipresponsibilitiesthroughprovidingstrategicleadership,overseeingtheconductoftheGroup’sbusiness,identificationandmanagementofprincipalrisks,reviewingtheadequacyandintegrityoftheGroup’sinternalcontrolsystemsanddevelopinganinvestorrelationsprogram.TheBoardhasalsodelegatedspecificresponsibilitiestotheBoardCommittees,allofwhichdischargethedutiesandresponsibilitieswithintheirspecifictermsofreference.

The roles of the Chairman and Executive Directors are clearly distinct for effective balance of powerand authority. The Chairman is primarily responsible for the Board’s effectiveness and conduct andensuring timelyandnecessary information isprovided to itsmemberswhilst theExecutiveDirectorsareresponsibleforthedailymanagementoftheGroup’soperationsandimplementationofpoliciesandstrategiesadoptedbytheBoard.

Corporate Governance Statements


(c) Board Meetings

Duringthefinancialyearended31December2010, theBoardmet5timestodeliberateandconsidermatterspertainingtotheGroup’sfinancialperformance,significantinvestments,corporatedevelopment,strategicissuesandbusinessplans.TheattendancerecordsoftheDirectorswhoheldofficeareasfollows:-

No. of Meetings Name of Director Designation Attended

MohamedGhazalibin IndependentNon-ExecutiveDirector, 5/5 KamalBaharein Chairman DannyNgSiewL’Leong SeniorIndependentNon-ExecutiveDirector 4/5 PaulineTeh@Pauline IndependentNon-ExecutiveDirector 4/5 TehAbdullah FooLeeKhean IndependentNon-ExecutiveDirector 5/5 MohdRianibinOsman ExecutiveDirector 5/5 NgWaiKee ExecutiveDirector 5/5 YapSiewFoong ExecutiveDirector 5/5 ChamBeeSim ExecutiveDirector 5/5

(d) Supply of Information

AllBoardmembersaresuppliedwithinformationonatimelymanner.TheBoardmeetingsarestructuredwith a preset agenda which encompasses all aspects of matters under discussion. Board reports arecirculatedwellinadvanceoftheBoardmeetingsfortheirdeliberation.

AllmeetingsoftheBoardaredulyrecordedintheBoardminutesbytheCompanySecretary.TheCompanySecretaryalsoattendedall theBoardMeetingsoftheCompany.Whererequired,SeniorManagementmaybeinvitedtoattendthesemeetingstoexplainandclarifyonthematterstabled.

Inexercisingtheirduties,theBoardhasunfetteredaccesstoallinformationwithintheGroup,theadviceand services of the Company Secretary and independent professional advice where necessary, at theCompany’sexpense.

ThetermsofappointmentoftheCompanySecretarypermittheirremovalandappointmentofasuccessorisamatterfortheBoardasawholetodecide.TheCompanySecretaryensuresthatallBoardmeetingsareproperlyconvenedandthataccurateandproperrecordsofthedeliberations,proceedingsandresolutionspassedarerecordedandmaintainedinthestatutoryregisterattheregisteredofficeoftheCompany.

(e) Directors’ Training

All theDirectorshaveattendedandsuccessfullycompleted theMandatoryAccreditationProgrammeasprescribedbyBursaSecurities.Inaddition,anynewlyappointeddirectorswillbegivenbriefingsandorientationbytheexecutivedirectorsandtopmanagementoftheCompanyonthebusinessactivitiesoftheGroupanditsstrategicdirections,aswellastheirdutiesandresponsibilitiesasdirectors.

Corporate Governance Statements (continued)


Duringthefinancialyear,theDirectorshaveattendedthefollowingtraining:

Name of Director No. Programme Date DannyNgSiewL’Leong 1 RecentTrendsinValuation,heldby 7thJuly2010 KPMGMalaysia 2 AuditCommitteeInstituteRoundtable 13thJuly2010 discussiontitledGoingForward:Risk& Reform–ImplicationsforAuditCommittee OversightheldbyKPMGMalaysia FooLeeKhean 1 EconomicsandCapitalMarketII: 13thMarch2010 MacroeconomicAnalytics-Cluestothe FutureheldbySecuritiesIndustry DevelopmentCorporation 2 EconomicsandCapitalMarketI:Forces 2ndOctober2010 ShapingGlobalCapitalMarketsheldby SecuritiesIndustryDevelopmentCorporation 3 GoodsandServicesTax:AreyouGetting 14thJuly2010 ReadyforGSTinMalaysiaheldbyTricor TaxServicesSdnBhd However,MrMohamedGhazalibinKamalBaharein,MrMohdRianibinOsman,MsPaulineTeh@

PaulineTehAbdullah,MrNgWaiKee,MsYapSiewFoongandMrChamBeeSimdidnotattendanytrainingforthefinancialyearended31December2010duetotheirhecticschedule.

GiventhefactthatDirectorsrolesareincreasinglydemandinginanorganisation,theBoardwillensurethat all its members continue to keep abreast with the relevant developments in industry changes,laws,regulationsandbusinessmanagement.TheDirectorsarecommittedtothecontinuouseducationprogramme and will endeavor to fulfill their training requirement for the financial year ending 31December2011.

(f) Appointment and Re-election of Directors

The Nomination Committee, which comprises entirely of Independent Non-Executive Directors isresponsibleformakingrecommendationsforanynewappointmentstotheBoard.

In making these recommendations, the Nomination Committee considers the required mix of skills,knowledge, expertise and experience, professionalism, integrity as well as the candidates’ ability todischargeresponsibilities/functionsasexpectedfromtheBoard.

AnynewnominationreceivedisputtothefullBoardforassessmentandendorsement.

BoardmemberswhoarenewlyappointedbytheBoardaresubjecttoretirementattheAnnualGeneralMeeting(“AGM”)oftheCompany.Article103oftheCompany’sArticlesofAssociationprovidethatatleastone-third(1/3)oftheDirectorsshallretirebyrotationateachAGMandallDirectorsshallretirefromofficeatleastonceineverythree(3)years,butshallbeeligibleforre-election.

Directorsoverseventy(70)yearsofagearerequiredtosubmitthemselvesforre-appointmentannuallyinaccordancewithSection129(6)oftheCompaniesAct,1965.



(g) Board Committees

TheBoardCommitteeswereestablishedtoassisttheBoardindischargingitsresponsibilitiesassetoutbelowwiththeirtermsofreferenceapprovedbytheBoard.Theyareasfollows:

AuditCommittee

Thetermsofreference,thenumberofmeetingsheldduringthefinancialyearandtheattendanceofeachmembercanbefoundonpages21to26oftheAuditCommitteeReport.

NominationCommittee

The Nomination Committee has three (3) members, all of whom are Independent Non-ExecutiveDirectors. They are tasked with the responsibility of proposing new nominees to the Board and forassessingeachdirectoronanongoingbasis.

TheBoard,throughtheNominationCommitteecontinuouslyreviewsandassessesitsrequiredmixofskillsandexperienceandotherqualities, includingcorecompetencieswhichNon-ExecutiveDirectorsshouldbringtotheBoard,andthesizeandcompositionoftheBoardtoensurethatithastheappropriatemixofskillsandcompetenciestoleadtheGroupeffectively.

For the financial year ended 31 December 2010, the Nomination Committee has met once and themeetingwasattendedbymajorityofitsmembers.ItperformedassessmentsontheeffectivenessoftheBoardasawhole,thecommitteesoftheBoardandthecontributionofeachindividualdirector,includingtheIndependentNon-ExecutiveDirectorsandtheseassessmentsweredocumented.

RemunerationCommittee

The Remuneration Committee comprises of four (4) members, with the majority being IndependentNon-ExecutiveDirectors.Theyrecommend to theBoard the remunerationpackagesof theExecutiveDirectors.Suchpackagesaredesignedtoattract,retainandmotivatetheDirectors,andarereflectiveoftheirexperienceandlevelofresponsibilities.TheremunerationoftheExecutiveDirectorsarereviewedannually.

TheBoardasawholedeterminestheDirectors’feesoftheNon-ExecutiveDirectors.

NoneoftheindividualExecutiveandNon-ExecutiveDirectorsparticipatesindeterminingtheirindividualremuneration/fees.

TheRemunerationCommitteemetonceduringtheyearunderreviewandthemeetingwasattendedbymajorityofitsmembers.



DIRECTORS’ REMUNERATION

DetailsoftheremunerationofDirectorsoftheCompanyduringthefinancialyearended31December2010areasfollows:

Aggregate remuneration:

Category of Executive Non-Executive Remuneration Directors Directors Total (RM) (RM) (RM)

BasicSalary 669,600 - 669,600Bonuses 181,699 - 181,699Fees 48,000 96,000 144,000AttendanceFee - 17,500 17,500Others 127,756 - 127,756Total 1,027,055 113,500 1,140,555

Number of Directors whose remuneration fall into the following bands:

Remuneration Band Number of Director Executive Non-Executive Total

BelowRM50,000 - 4 4RM150,001toRM200,000 1 - 1RM200,001toRM250,000 1 - 1RM250,001toRM300,000 1 - 1RM300,001toRM350,000 1 - 1Total 4 4 8

TheBoardhaschosentodisclosetheremunerationinbandspursuanttotheListingRequirementsandareoftheopinionthatdetaileddisclosureofindividualdirector’sremunerationwillnotaddsignificantlytotheunderstandingandevaluationoftheCompany’sgovernance.

SHAREHOLDERS

(a) Shareholders and Investor Relations

TheCompanyacknowledgesthataneffectiveinvestorrelationshipisessentialinenhancingvaluetoitsshareholders.

Tothatend,theBoardprovidestheCompany’sshareholderswithtimelyreleasesofthefinancialresultsonaquarterlybasis,pressreleasesandannouncementsontheGroup’sperformance.WhilsttheCompanyendeavorstoprovideasmuchinformationaspossible,itisawareofthelegalandregulatoryframeworkgoverningthereleaseofmaterialandpricesensitiveinformation.

CorporateandfinancialinformationoftheGrouparealsomadeavailabletoshareholdersandthepublicthroughtheGroup’swebsiteatwww.smis.com.my.



(b) AGM

TheAGMistheprincipalforumfordialoguewiththeshareholders.Theshareholderswouldhavedirectaccess to the Directors and are provided with sufficient opportunity and time to participate throughquestionsontheprospects,performanceof theGroupandothermattersofconcern.Membersof theBoardaswellastheexternalauditorswillbepresenttoanswerandprovidetheappropriateclarificationsatthemeeting.

ACCOUNTABILITY AND AUDIT

(a) Financial Reporting

The Board is committed to provide a balanced, clear and comprehensive assessment of the Group’sfinancialpositionandprospectsbymakingsurethefinancialstatementsandquarterlyannouncementsare prepared in accordance to the provisions of the Companies Act, 1965 and applicable approvedaccountingstandards.

The Statement of Responsibility by the Directors in respect of the preparation of the annual auditedaccountscanbefoundonpage29ofthisAnnualReport.

(b) Internal Control

The Board acknowledges its responsibility for maintaining a sound system of internal controls in theGroupandtheCompany.However,thesecontrolscanonlyprovidereasonablebutnotabsoluteassuranceagainstmaterialmisstatement,lossorfraud.InformationontheGroup’sinternalcontrolisdisclosedintheStatementonInternalControlsetoutonpages27to28intheAnnualReport.

(c) Relationship with Auditors

TheBoardmaintainsatransparentandprofessionalrelationshipwiththeGroup’sexternalandinternalauditors.TherolesoftheAuditCommitteeinrelationtotheexternalandinternalauditorsareexplainedintheAuditCommitteeReportonpages21to26oftheAnnualReport.

OTHER INFORMATION

(a) Corporate Social Responsibility (CSR)

SMIScontinuestorecognisetheacademicachievementsofheremployees’children.CashawardsrangingfromRM300toRM1,000wereawardedtochildrenofemployeeswhoexcelledinpublicexaminationsaswellasthosewhoachievedthetopthreepositionsintheirclass.Employees’childrenwhowerepursuingtertiaryeducationinlocalinstitutionsofhigherlearningwerealsogivencashsponsorship.Thewelfareofemployees’childrenwillcontinuetobeakeyfocusofSMIS’CSRactivities.



(b) Share Buy-Back

The details of shares bought back and retained as treasury shares during the financial year ended 31December2010aresetoutasbelow:-

Number of SMIS Highest Lowest Average Total Shares Price Price Price Amount Paid Purchased RM RM RM RM

Jan-10 - - - - - Feb-10 5,000 0.46 0.46 0.46 2,344 Mar-10 61,000 0.46 0.42 0.44 27,460 Apr-10 48,800 0.46 0.45 0.45 22,482 May-10 48,800 0.45 0.44 0.44 21,857 Jun-10 24,000 0.50 0.46 0.48 11,957 Jul-10 33,000 0.45 0.45 0.45 15,171 Aug-10 20,000 0.56 0.55 0.55 11,182 Sep-10 - - - - - Oct-10 - - - - - Nov-10 - - - - - Dec-10 - - - - -

Total 240,600 112,453

(c) Options, Warrants or Convertible Securities

Therewerenooption,warrantsorconvertiblesecuritiesexercisedduringthefinancialyearunderreview.

(d) Material Contracts involving Directors’ and Major Shareholders’ Interests

There were no contracts involving Directors’ and Major Shareholders’ interests which are or may bematerial,notbeingcontractsenteredintointheordinarycourseofbusiness,whichhavebeenenteredintobytheCompanyanditssubsidiarycompaniessincetheendofthepreviousfinancialyear.

(e) Recurrent Related Party Transactions

ThedetailsofthetransactionswithrelatedpartiesundertakenbytheCompanyduringthefinancialperiodaredisclosedinNote25onpages87to89ofthenotestothefinancialstatementsandintheCirculartoShareholders,dated5May2011.

(f) Non-Audit Fees

Therewasnonon-auditfeespaidtoexternalauditorsforthefinancialyearunderreview.



(g) Sanctions and/or Penalties Imposed

Therewerenosanctionsand/orpenaltiesimposedontheCompany,DirectorsorManagementbytherelevantregulatoryauthoritiesduringthefinancialyear.

(h) Depository Receipt Programme

TherewasnoDepositoryReceiptProgrammesponsoredbytheCompanyduringthefinancialyear.

(i) Variance of Actual Profit from the Forecast Profit

There was no profit estimation, forecast or projection made or released by the Company during thefinancialyearunderreview.

Therewasnovarianceof10%ormorebetweentheauditedresultsandtheunauditedresultsannouncedpertainingtothefinancialyear.

(j) Profit Guarantee

TherewasnoprofitguaranteegivenbytheCompanyduringthefinancialyearunderreview.

(k) Revaluation Policy

TheCompanyhasnotmadeanyrevaluationpolicyorrevaluationonits landedpropertiesduringthefinancialyear.

(l) Utilisation of Proceeds

Therewerenoproceedsraisedfromanyproposalduringthefinancialyear.



TheBoardispleasedtopresenttheAuditCommitteeReportforthefinancialyearended31December2010.

ATTENDANCE AT MEETINGS

ThemembersoftheAuditCommitteeanddetailsoftheirattendanceofthemeetingsduringthefinancialyearended31December2010areasfollows: No. of Meetings Attended Chairman: DannyNgSiewL’Leong 4/5 (SeniorIndependentNon-ExecutiveDirector)Members: PaulineTeh@PaulineTehAbdullah 4/5 (IndependentNon-ExecutiveDirector) FooLeeKhean 5/5 (IndependentNon-ExecutiveDirector)TERMS OF REFERENCE OF AUDIT COMMITTEE

1. OBJECTIVES

TheobjectivesoftheAuditCommitteeistoassisttheBoardofDirectorsinmeetingitsresponsibilitiesrelatingtoaccountingandreportingpracticesoftheCompanyanditssubsidiarycompanies.

Inaddition,theAuditCommitteeshall:-

(a) Oversee and appraise the quality of the audits conducted both by the Company’s internal andexternalauditors;

(b) MaintainopenlinesofcommunicationbetweentheBoardofDirectors,theinternalauditorsandtheexternalauditorsfortheexchangeofviewsandinformation,aswellastoconfirmtheirrespectiveauthorityandresponsibilities;and

(c) DeterminetheadequacyoftheGroup’sadministrative,operatingandaccountingcontrols.

2. COMPOSITION

The Audit Committee shall be appointed by the Directors from among their number (pursuant to aresolutionoftheBoardofDirectors)whichfulfilsthefollowingrequirements:-

(a) theauditcommitteemustbecomposedofnofewerthan3members;

(b) allmembersoftheauditcommitteeshouldbenon-executivedirectors;

(c) amajorityoftheauditcommitteemustbeindependentdirectors;and

(d) allmembersoftheauditcommitteeshouldbefinancially literateandat leastonememberoftheauditcommittee:

Audit Committee Report


2. COMPOSITION (continued)

i) mustbeamemberoftheMalaysianInstituteofAccountants;or

ii) ifheisnotamemberoftheMalaysianInstituteofAccountants,hemusthaveatleast3years’workingexperienceand:-

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

• hemustbeamemberofoneoftheassociationsofaccountantsspecifiedinPartIIofthe1stScheduleoftheAccountantsAct,1967,or

iii) hemustbeapersonwhofulfills therequirementsasmaybeprescribedorapprovedbytheBursaMalaysiaSecuritiesBerhadand/orotherrelevantauthoritiesfromtimetotime.

(e) noalternateDirectoroftheBoardshallbeappointedasamemberoftheCommittee.

ThemembersoftheAuditCommitteeshallelectaChairmanfromamongtheirmemberswhoshallbeanindependentdirector.

IntheeventofanyvacancyintheAuditCommitteeresultinginthenon-complianceofitem2(a)to(c)above,thevacancymustbefilledwithin3monthsofthatevent.

TheBoardofDirectorsmustreviewthetermofofficeandperformanceoftheAuditCommitteeandeachofitsmembersatleastonceevery3yearstodeterminewhethertheAuditCommitteeandmembershavecarriedouttheirdutiesinaccordancewiththetermsofreference.

3. FUNCTIONS

ThefunctionsoftheAuditCommitteeareasfollows:-

(a) ToreviewthefollowingandreportthesametotheBoardofDirectors:-

i. withtheexternalauditors,theauditplan;ii. withtheexternalauditors,hisevaluationofthesystemofinternalcontrols;iii. withtheexternalauditor,hisauditreport;iv. theassistancegivenbytheCompany’semployeestotheexternalauditors;andv. anyrelatedpartytransactionandconflictofinterestsituationthatmayarisewithintheCompany

orGroupincludinganytransaction,procedureorcourseofconductthatraisesquestionsofmanagementintegrity;

(b) Toconsidertheappointmentoftheexternalauditor,theauditfeesandanyquestionsofresignationordismissalandtheletterofresignationfromtheexternalauditor,ifapplicable;

(c) Todiscusswiththeexternalauditorbeforetheauditcommences,thenatureandscopeoftheaudit,andensureco-ordinationwheremorethanoneauditfirmisinvolved;

Audit Committee Report (continued)


3. FUNCTIONS (continued)

(d) Toreviewthequarterlyandyear-endfinancialstatementsof theCompany, focusingparticularlyon:-

• Anychangesinaccountingpoliciesandpractices;• Significantadjustmentsarisingfromtheaudit;• Thegoingconcernassumption;• Compliancewithaccountingstandardsandotherlegalrequirements;

(e) Todiscussproblemsandreservationsarisingfromtheinterimandfinalaudits,andanymattertheauditormaywishtodiscuss(intheabsenceofmanagementwherenecessary);

(f) Toreviewtheexternalauditor’smanagementletterandmanagement’sresponse;

(g) Todothefollowing,inrelationtotheinternalauditfunction:-

• Reviewtheadequacyofthescope,functions,competencyandresourcesoftheinternalauditfunction,andthatithasthenecessaryauthoritytocarryoutitswork;

• Review the internal audit program and results of the internal audit process and wherenecessary,ensurethatappropriateactionsaretakenontherecommendationsoftheinternalauditfunction;

• Review any appraisal or assessment of the performance of members of the internal auditfunction;

• Approve any appointments or termination of senior staff members of the internal auditfunction;

• Takecognisanceofresignationsofinternalauditstaffmembersandprovidetheresigningstaffmemberanopportunitytosubmithisreasonsforresigning;

(h) Toconsiderthemajorfindingsofinternalinvestigationsandmanagement’sresponse;

(i) ToensuretheinternalauditfunctionisindependentoftheactivitiesitauditsandtheheadofinternalauditreportsdirectlytotheAuditCommittee.Theheadofinternalauditwillberesponsiblefortheregularreviewand/orappraisalof theeffectivenessof theriskmanagement, internalcontrolandgovernanceprocesseswithintheCompany;and

(j) ToconsiderotherareasasdefinedbytheboardorasmaybeprescribedbyBursaMalaysiaSecuritiesBerhadoranyotherrelevantauthorityfromtimetotime.

4. RIGHTS OF THE AUDIT COMMITTEE

The Audit Committee shall, wherever necessary and reasonable for the Company to perform of itsduties,inaccordancewithaproceduretobedeterminedbytheBoardofDirectorsandatthecostoftheCompany:-

(a) haveauthoritytoinvestigateanymatterwithinitstermsofreference;



4. RIGHTS OF THE AUDIT COMMITTEE (Continued)

(b) havetheresourceswhicharerequiredtoperformitsduties;

(c) havefullandunrestrictedaccesstoanyinformationpertainingtotheCompanyandGroup;

(d) have direct communication channels with the external auditors and person(s) carrying out theinternalauditfunctionoractivity;

(e) beabletoobtainindependentprofessionalorotheradvice;and

(f) beabletoconvenemeetingswiththeexternalauditors,theinternalauditorsorboth,excludingtheattendanceofotherDirectorsandemployeesoftheGroup,wheneverdeemednecessary.

TheChairmanoftheauditcommitteeshallengageonacontinuousbasiswithseniormanagement,suchas the chairman, the chief executive officer, the financial director, the head of internal audit and theexternalauditorsinordertobekeptinformedofmattersaffectingtheGroup.

5. MEETINGS

The Audit Committee shall meet at least four (4) times a year and such additional meetings as theChairmanshalldecideinordertofulfilitsduties.However,atleasttwiceayeartheAuditCommitteeshallmeetwiththeexternalauditorswithoutexecutiveBoardmemberspresent.

In addition, the Chairman may call a meeting of the Audit Committee if a request is made by anycommitteemember,theCompany’sChiefExecutive,ortheinternalorexternalauditors.

TheCompanySecretaryorotherappropriateseniorofficialshallactassecretaryoftheAuditCommitteeandshallberesponsible,inconjunctionwiththeChairman,fordrawinguptheagendaandcirculatingit,supportedbyexplanatorydocumentationtocommitteememberspriortoeachmeeting.

TheSecretaryshallalsoberesponsibleforkeepingtheminutesofmeetingsoftheAuditCommitteeandcirculatingthemtocommitteemembersandtotheothermembersoftheBoardofDirectors.

Aquorumshallconsistofamajorityofindependentdirectors.

By invitationof theAuditCommittee, theCompanymustensure thatotherdirectorsandemployeesattendanyparticularauditcommitteemeetingspecifictotherelevantmeeting.

Summary of Activities of the Audit Committee

InaccordancewiththetermsofreferenceoftheAuditCommittee,thefollowingactivitieswereundertakenbytheAuditCommitteeduringthefinancialyearended31December2010:

(a) ReviewedtheAuditPlanningMemorandumoftheexternalauditorsandthescopeoftheiraudits,includinganychangestothescopeoftheauditplan.MetwiththeexternalauditorstwicewithoutthepresenceofExecutiveDirectorsandManagement.



5. MEETINGS (Continued)

(b) Reviewed the quarterly and half-yearly unaudited financial results of the Group prior torecommendingthemforapprovalbytheBoard.

(c) ReviewedtheannualauditedfinancialstatementsoftheGroupwiththeexternalauditorspriortotablingtotheBoardfortheirconsiderationandapproval.

(d) Reviewedtheadequacyofthescope,function,competencyandresourcesoftheInternalAuditorsfunction.

(e) Reviewedtheperformanceof theexternalauditorsandmaderecommendations to theBoardontheirappointmentandremuneration.

(f) ReviewedandapprovedtheinternalauditplanpreparedbytheInternalAuditors.

(g) Reviewed internal audit reports which outlined recommendations towards correcting areas ofweaknessesandensuredthattherearemanagementactionplansestablishedfortheimplementationoftheinternalauditors’recommendations.

(h) ReviewedtherelatedpartytransactionsenteredintobytheCompanyandtheGroup,takingintoconsiderationconflictofinterestsituationsthatmayarise.

(i) ReviewedtheinternalcontrolstatementtobepublishedintheAnnualReport.

SUMMARY OF ACTIVITIES OF THE INTERNAL AUDIT FUNCTION

TheactivitiesoftheInternalAuditFunctionduringthefinancialyearended31December2010wereasfollows:

(a) Regularreviewofbusinessprocessesinaccordancewiththeapprovedinternalauditplan.

(b) PeriodicallypresentedtheresultsoftheinternalauditreviewstotheAuditCommittee.

(c) Follow up reviews were carried out to ascertain the status of implementation of agreed managementactionplans.TheresultsofthefollowupreviewswerereportedtotheAuditCommittee.



TRAINING

Duringthefinancialyearended31December2010,theAuditCommitteemembersattendedthefollowingtraining:

Name of Director No. Programme DateDannyNgSiewL’Leong 1 RecentTrendsinValuation,heldby 7thJuly2010 KPMGMalaysia 2 AuditCommitteeInstituteRoundtable 13thJuly2010 discussiontitledGoingForward:Risk& Reform–ImplicationsforAuditCommittee OversightheldbyKPMGMalaysia

FooLeeKhean 1 EconomicsandCapitalMarketII: 13thMarch2010 MacroeconomicAnalytics-Cluestothe FutureheldbySecuritiesIndustry DevelopmentCorporation 2 EconomicsandCapitalMarketI:Forces 2ndOctober2010 ShapingGlobalCapitalMarketsheldby SecuritiesIndustryDevelopmentCorporation 3 GoodsandServicesTax:AreyouGetting 14thJuly2010 ReadyforGSTinMalaysiaheldbyTricor TaxServicesSdnBhd

However,MsPaulineTeh@PaulineTehAbdullahdidnotattendanytrainingforthefinancialyearended31December2010duetoherhecticschedule.ThisreportismadeinaccordancewiththeapprovaloftheBoardofDirectorsdated13April2011.



INTRODUCTION

The Board of Directors (“the Board”) of SMIS Corporation Berhad is pleased to present its Statement onInternalControlforfinancialyearended31December2010,whichhasbeenpreparedpursuanttoparagraph15.27(b)ofBursaMalaysiaSecuritiesBerhad(“BursaSecurities”)MAINMarketListingRequirementsandas guided by the Statement on Internal Control: Guidance for Directors of Public Listed Companies (“theGuidance”).ThisstatementoutlinesthenatureandstateoftheinternalcontrolsoftheGroup.

BOARD RESPONSIBILITY

The Board acknowledges their responsibility for the Group’s system of internal controls, which includesthe establishment of an appropriate internal control environment and framework, reviewing the integrity,effectivenessandadequacyofthesesystemstoensurethattheGroup’sassetsandtheshareholders’interestsaresafeguarded.

Duetotheinherentlimitationsinanysystemofinternalcontrol,thesystemputinplacebymanagementcanonlyreduceratherthaneliminateallrisksoffailuretoachievetheGroup’sbusinessobjectives.Consequently,thesystemcanonlyprovidereasonablebutnotabsoluteassuranceagainstmaterialmisstatementorloss.

RISK MANAGEMENT FRAMEWORK

RiskManagementisregardedbytheBoardtobeanintegralpartoftheGroup’sbusinessoperations.BoardofDirectorsappointed theexternalconsultant toevaluate theGroup’s riskmanagement frameworkonanannualbasis.KeymanagementstaffandHeadsofDepartmentaredelegatedwiththeresponsibilitytomanageidentifiedriskswithindefinedparametersandstandards.Intheperiodicmanagementmeetings,keyrisksandmitigatingcontrolsaredeliberatedtoensurethatthecurrentriskmanagementframeworkandpracticesareadequateandeffectiveinmanagingtherisks.SignificantrisksaffectingtheGroup’sstrategicandbusinessplansareescalatedtotheBoardattheirscheduledmeetings.

TheabovementionedriskmanagementpracticesoftheGroupserveastheon-goingprocessusedtoidentify,evaluateandmanagesignificantrisks.

INTERNAL AUDIT

TheGroup’sinternalauditfunctionisoutsourcedtoexternalconsultantstoassisttheBoardandtheAuditCommitteeinprovidingindependentassessmentontheadequacy,efficiencyandeffectivenessoftheGroup’sinternalcontrolsystem.Theinternalauditors’reportswerepresenteddirectlytotheAuditCommittee.ThescopeofreviewoftheoutsourcedinternalauditfunctionisdeterminedandapprovedbytheAuditCommittee.

During the financial year ended 31 December 2010, internal audits were carried out in accordance withtheinternalauditplanapprovedbytheAuditCommittee.Theresultsoftheinternalauditreviewsandtherecommendations for improvement were presented to the Audit Committee at their quarterly meetings.Theexternalconsultantshad followeduppreviously reportedcontroldeficiency toensure that ithasbeenappropriatelyaddressedbyManagement.TheresultsofimprovementareperiodicallyreportedtotheAuditCommittee.Basedontheresultsoftheinternalauditreviews,identifiedweaknessesininternalcontrolhavebeen appropriately addressed and Heads of Department will continue to ensure that appropriate action istakentoenhanceandstrengthentheinternalcontrolenvironment.

The total professional fee paid for the internal audit function for the year ended 31 December 2010 wasRM60,000.

Statement on Internal Control


OTHER KEY ELEMENTS OF INTERNAL CONTROL

TheotherkeyelementsoftheCompany’sinternalcontrolsystemsareasfollows:

• Anorganisationalstructure,whichclearlydefinesthelinesofresponsibility,propersegregationofdutiesanddelegationofauthority.

• Rigorousreviewofkeyinformationsuchasfinancialperformance,keybusinessindicators,managementaccountsanddetailedbudgetsbytheBoardandtheAuditCommittee.

• TheExecutiveDirectorsarecloselyinvolvedintherunningofbusinessandoperationsoftheGroup.TheyreporttotheBoardonsignificantchangesinthebusinessandexternalenvironment,whichmayaffecttheoperationsoftheGroupatlarge.

• Operationsreviewmeetingsareheldbythemanagementonamonthlybasistomonitortheprogressofthebusinessoperations,deliberatesignificantissuesandformulateappropriatemeasures.

• Certainof theGroup’soperationsarecertifiedbyISO9001:2008, ISO/TS16949andISO14001:2004.Withsuchcertifications,reviewsareconductedbyexternalpartiesparticularlytoensurecompliancewiththetermsandconditionsoftherespectivecertifications.

• Machinery segment and Automotive segment are reviewed and certified by ISO 9001:2008 and ISO/TS 16949 respectively where they meet specific requirement for a quality management system anddemonstrateitsabilitytoconsistentlyprovideproductthatmeetscustomersandapplicableregulatoryrequirements. These would enhance customers’ satisfaction through the effective application of thesystem,includingprocessesforcontinualimprovementofthesystemandtheassuranceofconformitytocustomersandapplicableregulatoryrequirements.

• AutomotivesegmentisreviewedandcertifiedbyISO14001:2004wheretheymeetspecificrequirementforenvironmentalmanagementstandardsanddemonstrateitsabilitytoestablish,implement,maintainandimproveitsenvironmentalmanagementsystemtoconformwithitsstatedenvironmentalpolicy.

CONCLUSION

Duringtheyearunderreview,theBoardisoftheviewthattheGroup’ssystemofinternalcontrolisadequatetosafeguardshareholders’interestsandtheGroup’sassets.TheBoardisalsoawarethattheinternalcontrolsystemsandriskmanagementpracticesmustbeevaluatedperiodicallyandcontinuouslyevolvestoensureitscontinuedeffectivenesstomeetthedynamicchangesinthebusinessenvironment.Therefore,theBoardwill,whennecessary,putinplaceappropriateactionplanstofurtherenhancethesystemofinternalcontrols.

ThisstatementwasapprovedbytheBoardofDirectorson13April2011.

Statement on Internal Control (continued)


TheBoardisfullyaccountabletoensurethatthefinancialstatementsaredrawnupinaccordancewithCompaniesAct,1965(“theAct”)andtheapplicableapprovedaccountingstandardssetbyMalaysianAccountingStandardsBoardsoastogiveatrueandfairviewofthestateofaffairsoftheGroupandtheCompanyasat31December2010andoftheresultsandcashflowsoftheGroupandCompanyforthefinancialyearendedonthatdate.

Inthepreparationofthefinancialstatements,theDirectorshave:

a) applied relevant and appropriate accounting policies consistently and in accordance with applicableapprovedaccountingstandards;

b) madejudgementandestimatesthatareprudentandreasonable;and

c) usedthegoingconcernbasisforthepreparationofthefinancialstatements.

TheDirectorsareresponsibleforensuringthatproperaccountingrecordsarekeptinaccordancewiththeAct.TheDirectorsalsohaveoverallresponsibilityintakingsuchstepsasarereasonablyopentothemtosafeguardtheassetsoftheGroupandtopreventanddetectfraudandotherirregularities.

Directors’ Responsibility Statement


FinancialStatements

Contents31 Directors’Report fortheyearended31December2009

35 StatementbyDirectorsPursuantto Section169(15)oftheCompaniesAct,1965

36 StatutoryDeclarationPursuantto Section169(16)oftheCompaniesAct,1965

37 IndependentAuditors’Report totheMembersofSMISCorporationBerhad

39 StatementsofFinancialPosition asat31December2010

40 StatementsofComprehensiveIncome fortheyearended31December2010

41 ConsolidatedStatementofChangesinEquity fortheyearended31December2010

42 StatementofChangesinEquity fortheyearended31December2010

43 StatementsofCashFlows fortheyearended31December2010

45 NotestotheFinancialStatements

FINANCIAL STATEMENTS



TheDirectorshavepleasureinsubmittingtheirreportandtheauditedfinancialstatementsoftheGroupandoftheCompanyfortheyearended31December2010.

Principal activities

TheCompanyisprincipallyengagedininvestmentholding,whilsttheprincipalactivitiesofthesubsidiariesareasstatedinNote6tothefinancialstatements.Therehasbeennosignificantchangeinthenatureoftheseactivitiesduringthefinancialyear.

Results

Group Company RM’000 RM’000

Profitfortheyearattributableto: OwnersoftheCompany 6,113 1,739 Minorityinterests 2,359 -

8,472 1,739

Reserves and provisions

Therewerenomaterialtransferstoorfromreservesandprovisionsduringthefinancialyearunderreviewexceptasdisclosedinthefinancialstatements.

Dividends

NodividendwaspaidduringtheyearandtheDirectorsdonotrecommendanydividendtobepaidforthefinancialyearunderreview.

Directors of the Company

Directorswhoservedsincethedateofthelastreportare:

MohdRianibinOsman NgWaiKee YapSiewFoong ChamBeeSim DannyNgSiewL’Leong PaulineTeh@PaulineTehAbdullah MohamedGhazalibinKamalBaharein FooLeeKhean

Directors’ Report fortheyearended31December2010


Directors’ interests

The interests and deemed interests in the ordinary shares of the Company and of its related corporations(otherthanwholly-ownedsubsidiaries)ofthosewhowereDirectorsatyearendasrecordedintheRegisterofDirectors’Shareholdingsareasfollows:

Number of ordinary shares of RM1.00 each At At 1.1.2010 Bought Sold 31.12.2010

Direct interest in the Company

MohdRianibinOsman 2,389,336 - - 2,389,336 NgWaiKee 700,900 - - 700,900 YapSiewFoong 1,263,730 - - 1,263,730 ChamBeeSim 249,572 - - 249,572 Indirect interest in the Company

NgWaiKee 15,680,000 - - 15,680,000 YapSiewFoong 15,680,000 - - 15,680,000 ChamBeeSim 15,680,000 - - 15,680,000

ByvirtueoftheirinterestintheordinarysharesoftheCompany,MohdRianibinOsman,NgWaiKee,YapSiewFoongandChamBeeSimarealsodeemedinterestedintheordinarysharesofthesubsidiariesduringthefinancialyeartotheextentthattheCompanyhasaninterest.

NoneoftheotherDirectorsholdingofficeat31December2010hadanyinterestintheordinarysharesoftheCompanyandofitsrelatedcorporationsduringthefinancialyear.

Directors’ benefits

Sincetheendofthepreviousfinancialyear,noDirectoroftheCompanyhasreceivednorbecomeentitledtoreceiveanybenefit(otherthanabenefitincludedintheaggregateamountofemolumentsreceivedordueandreceivablebyDirectorsasshowninthefinancialstatements)byreasonofacontractmadebytheCompanyorarelatedcorporationwiththeDirectororwithafirmofwhichtheDirectorisamember,orwithacompanyinwhichtheDirectorhasasubstantialfinancial interest,other thancertainDirectorswhohavesignificantfinancialinterestsincompanieswhichtradedwithcertaincompaniesintheGroupintheordinarycourseofbusinessasdisclosedinNote25tothefinancialstatements.

There were no arrangements during and at the end of the financial year which had the object of enablingDirectorsoftheCompanytoacquirebenefitsbymeansoftheacquisitionofsharesinordebenturesoftheCompanyoranyotherbodycorporate.

Directors’ Report (continued)fortheyearended31December2010


Issue of shares and debentures

Therewerenochangesintheauthorised,issuedandpaid-upcapitaloftheCompanyduringthefinancialyear.Therewerenodebenturesissuedduringthefinancialyear.

Treasury shares

During the financial year, the Company repurchased 240,600 of its issued ordinary shares from the openmarketatanaveragepriceofRM0.46pershare.ThetotalconsiderationpaidwasapproximatelyRM112,500including transaction cost of RM1,100. The repurchase transactions were financed by internally generatedfunds.Thesharesrepurchasedwereretainedastreasuryshares.

At31December2010,theGroupheld2,546,100(2009-2,305,500)oftheCompany’sshares.ThenumberofoutstandingordinarysharesofRM1.00eachinissueafterthesetoffis42,253,900(2009-42,494,500).

Options granted over unissued shares

NooptionsweregrantedtoanypersontotakeupunissuedsharesoftheCompanyduringthefinancialyear.

Other statutory information

BeforethestatementsofcomprehensiveincomeandstatementsoffinancialpositionoftheGroupandoftheCompanyweremadeout,theDirectorstookreasonablestepstoascertainthat:

i) allknownbaddebtshavebeenwrittenoffandadequateprovisionmadefordoubtfuldebts,andii) anycurrentassetswhichwereunlikelytoberealisedintheordinarycourseofbusinesshavebeenwritten

downtoanamountwhichtheymightbeexpectedsotorealise.

Atthedateofthisreport,theDirectorsarenotawareofanycircumstances:

i) thatwouldrendertheamountwrittenoffforbaddebts,ortheamountoftheprovisionfordoubtfuldebts,intheGroupandintheCompanyinadequatetoanysubstantialextent,or

ii) thatwouldrenderthevalueattributedtothecurrentassetsinthefinancialstatementsoftheGroupandintheCompanyfinancialstatementsmisleading,or

iii) whichhavearisenwhichrenderadherencetotheexistingmethodofvaluationofassetsorliabilitiesoftheGroupandoftheCompanymisleadingorinappropriate,or

iv) nototherwisedealtwithinthisreportorthefinancialstatements,thatwouldrenderanyamountstatedinthefinancialstatementsoftheGroupandoftheCompanymisleading.



Other statutory information (continued)

Atthedateofthisreport,theredoesnotexist:

i) anychargeontheassetsoftheGrouporoftheCompanythathasarisensincetheendofthefinancialyearandwhichsecurestheliabilitiesofanyotherperson,or

ii) anycontingentliabilityinrespectoftheGrouporoftheCompanythathasarisensincetheendofthefinancialyear.

NocontingentliabilityorotherliabilityofanycompanyintheGrouphasbecomeenforceable,orislikelytobecomeenforceablewithintheperiodoftwelvemonthsaftertheendofthefinancialyearwhich,intheopinionoftheDirectors,willormaysubstantiallyaffecttheabilityoftheGroupandoftheCompanytomeettheirobligationsasandwhentheyfalldue.

IntheopinionoftheDirectors,thefinancialperformanceoftheGroupandoftheCompanyforthefinancialyear ended 31 December 2010 have not been substantially affected by any item, transaction or event of amaterialandunusualnaturenorhasanysuchitem,transactionoreventoccurredintheintervalbetweentheendofthatfinancialyearandthedateofthisreport.

Auditors

Theauditors,MessrsKPMG,haveindicatedtheirwillingnesstoacceptre-appointment.

SignedonbehalfoftheBoardofDirectorsinaccordancewitharesolutionoftheDirectors:

…………………………………………………………Mohd Riani bin Osman

…………………………………………………………Ng Wai Kee

KualaLumpur,Malaysia

Date:18April2011



IntheopinionoftheDirectors,thefinancialstatementssetoutonpages39to92aredrawnupinaccordancewithFinancialReportingStandardsand theCompaniesAct,1965 inMalaysiasoas togivea trueand fairviewofthefinancialpositionoftheGroupandoftheCompanyat31December2010andoftheirfinancialperformanceandcashflowsfortheyearthenended.

IntheopinionoftheDirectors,theinformationsetoutinNote29tothefinancialstatementshasbeencompiledinaccordancewiththeGuidanceonSpecialMatterNo.1,DeterminationofRealisedandUnrealisedProfitsorLossesintheContextofDisclosuresPursuanttoBursaMalaysiaSecuritiesBerhadListingRequirements,issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by BursaMalaysiaSecuritiesBerhad.

SignedonbehalfoftheBoardofDirectorsinaccordancewitharesolutionoftheDirectors:

………………………………………………………………………………Mohd Riani bin Osman

………………………………………………………………………………Ng Wai Kee

KualaLumpur,Malaysia

Date:18April2011

Statement by DirectorspursuanttoSection169(15)oftheCompaniesAct,1965


I,Ng Wai Kee,theDirectorprimarilyresponsibleforthefinancialmanagementofSMISCorporationBerhad,dosolemnlyandsincerelydeclarethatthefinancialstatementssetoutonpages39to92are,tothebestofmyknowledgeandbelief,correctandImakethissolemndeclarationconscientiouslybelievingthesametobetrue,andbyvirtueoftheprovisionsoftheStatutoryDeclarationsAct,1960.

SubscribedandsolemnlydeclaredbytheabovenamedinKualaLumpurintheFederalTerritoryon18April2011.

……………………………………………….Ng Wai Kee

Beforeme:

Statutory DeclarationpursuanttoSection169(16)oftheCompaniesAct,1965


Report on the Financial Statements

We have audited the financial statements of SMIS Corporation Berhad, which comprise the statements offinancialpositionasat31December2010oftheGroupandoftheCompany,andstatementsofcomprehensiveincome,changesinequityandcashflowsoftheGroupandoftheCompanyfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation,assetoutonpages39to91.

Directors’ Responsibility for the Financial Statements

TheDirectorsoftheCompanyareresponsibleforthepreparationoffinancialstatementsthatgiveatrueandfairviewinaccordancewithFinancialReportingStandardsandtheCompaniesAct,1965inMalaysia,andforsuchinternalcontrolastheDirectorsdeterminearenecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditors’ Responsibility

Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithapprovedstandardsonauditinginMalaysia.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancial statements. The procedures selected depend on our judgement, including the assessment of risksof material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments,weconsiderinternalcontrolrelevanttotheentity’spreparationoffinancialstatementsthatgiveatrueandfairviewinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluating the appropriateness of accounting policies used and the reasonableness of accounting estimatesmadebytheDirectors,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

Opinion

Inouropinion,thefinancialstatementshavebeenproperlydrawnupinaccordancewithFinancialReportingStandardsandtheCompaniesAct,1965inMalaysiasoastogiveatrueandfairviewofthefinancialpositionoftheGroupandoftheCompanyasof31December2010andoftheirfinancialperformanceandcashflowsfortheyearthenended.

Independent Auditors’ ReporttothemembersofSMISCorporationBerhad


Report on Other Legal and Regulatory Requirements

InaccordancewiththerequirementsoftheCompaniesAct,1965inMalaysia,wealsoreportthefollowing:

a) Inouropinion,theaccountingandotherrecordsandtheregistersrequiredbytheActtobekeptbytheCompanyanditssubsidiarieshavebeenproperlykeptinaccordancewiththeprovisionsoftheAct.

b) WearesatisfiedthattheaccountsofthesubsidiariesthathavebeenconsolidatedwiththeCompany’sfinancialstatementsareinformandcontentappropriateandproperforthepurposesofthepreparationofthefinancialstatementsoftheGroupandwehavereceivedsatisfactoryinformationandexplanationsrequiredbyusforthosepurposes.

c) OurauditreportsontheaccountsofthesubsidiariesdidnotcontainanyqualificationoranyadversecommentmadeunderSection174(3)oftheAct.

Other Reporting Responsibilities

Ourauditwasmadeforthepurposeofforminganopiniononthefinancialstatementstakenasawhole.TheinformationsetoutinNote29tothefinancialstatementshasbeencompiledbytheCompanyasrequiredbytheBursaMalaysiaSecuritiesBerhadListingRequirementsand isnot requiredby theFinancialReportingStandards.Wehaveextendedourauditprocedurestoreportontheprocessofcompilationofsuchinformation.Inouropinion,theinformationhasbeenproperlycompiled,inallmaterialrespects,inaccordancewiththeGuidanceonSpecialMatterNo.1,Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the MalaysianInstituteofAccountantsandpresentedbasedontheformatprescribedbyBursaMalaysiaSecuritiesBerhad.

Other Matters

ThisreportismadesolelytothemembersoftheCompany,asabody,inaccordancewithSection174oftheCompaniesAct,1965inMalaysiaandfornootherpurpose.Wedonotassumeresponsibilitytoanyotherpersonforthecontentofthisreport.

KPMG Chew Beng HongFirmNumber:AF0758 ApprovalNumber:2920/02/12(J)CharteredAccountants CharteredAccountantDate:18April2011PetalingJaya.

Independent Auditors’ Report (continued)tothemembersofSMISCorporationBerhad


Thenotesonpages45to92areanintegralpartofthesefinancialstatements.

Group Company Note 31.12.2010 31.12.2009 1.1.2009 31.12.2010 31.12.2009 RM’000 RM’000 RM’000 RM’000 RM’000 restated restated

Assets Property,plantand equipment 3 22,124 22,875 25,770 1 2 Investmentproperties 4 1,308 1,350 1,391 - - Goodwillonconsolidation 5 710 710 710 - - Investmentinsubsidiaries 6 - - - 55,688 53,323 Otherinvestments 7 11,869 11,744 11,823 1,509 - Deferredtaxassets 8 1,776 819 718 - -

Total non-current assets 37,787 37,498 40,412 57,198 53,325

Tradeandotherreceivables 9 23,296 18,631 19,949 26 - Prepayments 2,289 369 540 - - Inventories 10 12,157 13,408 15,315 - - Currenttaxassets 561 236 53 - - Assetsclassifiedasheldforsale - - 1,219 - - Cashandcashequivalents 20,609 15,533 5,613 534 2,787

Total current assets 58,912 48,177 42,689 560 2,787

Total assets 96,699 85,675 83,101 57,758 56,112

Equity Sharecapital 11 44,800 44,800 44,800 44,800 44,800 Sharepremium 4,891 4,891 4,891 4,891 4,891 Reserves 11 24,191 18,022 14,128 2,735 1,100

Total equity attributable to theowners of the Company 73,882 67,713 63,819 52,426 50,791Minority interests 2,618 259 - - -

Total equity 76,500 67,972 63,819 52,426 50,791

Liabilities Deferredtaxliabilities 8 1,931 869 1,039 - -

Total non-current liabilities 1,931 869 1,039 - -

Tradeandotherpayables 12 17,626 16,112 16,488 5,332 5,321 Provisionforwarranties 13 524 450 589 - - Liabilitiesclassifiedas heldforsale - - 774 - - Currenttaxliabilities 118 272 392 - -

Total current liabilities 18,268 16,834 18,243 5,332 5,321

Total liabilities 20,199 17,703 19,282 5,332 5,321

Total equity and liabilities 96,699 85,675 83,101 57,758 56,112

Statements of Financial Position asat31December2010



Group Company Note 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

Continuing operationsRevenue 97,487 67,803 - 250Costofsales (76,278) (54,039) - -

Gross profit 21,209 13,764 - 250Otheroperatingincome 1,105 256 2,375 -Distributionexpenses (1,293) (959) - -Administrativeexpenses (8,511) (7,386) (636) (398)Otheroperatingexpenses (2,621) (1,867) - (10)

Results from operating activities 9,889 3,808 1,739 (158)Financeincome 40 68 - 37Financecosts 16 (71) (53) - -

Profit/(Loss) before tax 9,858 3,823 1,739 (121)Incometaxexpense 17 (1,386) (593) - -

Profit/(Loss) from continuing operations 8,472 3,230 1,739 (121)Discontinued operationGainfromsaleof discontinuedoperation 18 - 1,487 - -

Profit/(Loss) for the year 14 8,472 4,717 1,739 (121)Other comprehensive income, net of taxFairvalueofavailable-for-sale financialassets 19 99 - 9 -

Total comprehensive income/ (expense)for the year 8,571 4,717 1,748 (121)

Profit attributable to: OwnersoftheCompany 6,113 4,605 1,739 (121) Minorityinterests 2,359 112 - -

Profit/(Loss) for the year 8,472 4,717 1,739 (121)

Total comprehensive income attributable to: OwnersoftheCompany 6,212 4,605 1,748 (121) Minorityinterests 2,359 112 - -

Total comprehensive income for the year 8,571 4,717 1,748 (121)

Basic earnings per ordinary share (sen): 20 fromcontinuingoperations 14.44 7.32 fromdiscontinuedoperation - 3.49

14.44 10.81

Statements of Comprehensive Income fortheyearended31December2010

Consolidated Statement of Changes in Equityfortheyearended31December2010


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Non-distributable Distributable Share Share Treasury Fair value Retained Total capital premium shares reserve earnings equityCompany RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2009 44,800 4,891 (967) - 2,244 50,968

Purchaseoftreasury shareatcost - - (56) - - (56)

Totalcomprehensiveexpense fortheyear - - - - (121) (121)

At 31 December 2009/ 1 January 2010 44,800 4,891 (1,023) - 2,123 50,791

Purchaseoftreasury shareatcost - - (113) - - (113)

Totalcomprehensive incomefortheyear - - - 9 1,739 1,748

At 31 December 2010 44,800 4,891 (1,136) 9 3,862 52,426

Note11 Note11 Note11

Statement of Changes in Equity (continued)fortheyearended31December2010


Group Company 2010 2009 2010 2009 Note RM’000 RM’000 RM’000 RM’000 restated

Cash flows from operating activities Profit/(Loss)beforetaxfrom - Continuingoperations 9,858 3,823 1,739 (121) - Discontinuedoperation 18 - 1,487 - -

9,858 5,310 1,739 (121) Adjustmentsfor: Impairmentlossontrade receivables 215 120 - - Allowanceforslowmoving inventories 262 - - - Impairmentlossontrade receivableswrittenoff 17 15 - - Inventorieswrittenoff 550 - - - Depreciationofinvestment properties 42 41 - - Depreciationofplantand equipment 3 3,726 3,617 1 - Gainondisposalofplantand equipment (109) (25) - - Gainondisposalofother investments (389) - (10) - Financeincome (40) (68) - (37) Interestpaid 16 32 17 - - Plantandequipmentwrittenoff - 247 - - Reversalofimpairmentlosson tradereceivables (103) (5) - - Reversalofimpairmentlosson investmentinsubsidiaries 6 - - (2,365) - Unrealisedforeignexchangegain (23) (8) - - Unrealisedforeignexchangeloss 79 - - -

Operatingprofit/(loss)before changesinworkingcapital 14,117 9,261 (635) (158) Changeininventories 439 1,907 - - Changeintradeandotherpayables 1,204 (1,985) 11 (210) Changeintradeandotherreceivables (6,712) 1,358 (26) -

Cashgeneratedfrom/(usedin)operations 9,048 10,541 (650) (368) Interestpaid (32) (17) - - Incometaxpaid (1,760) (1,168) - -

Net cash from/(used in) operating activities 7,256 9,356 (650) (368)

Statements of Cash Flowsfortheyearended31December2010



Cash flows from investing activities Acquisitionofotherinvestments - (2,700) - - Acquisitionofplantandequipment (i) (2,682) (849) - - Acquisitionofotherinvestments (26,000) - (3,500) - Interestreceived 40 68 - 37 Investmentinanexistingsubsidiary - - - (221) Proceedsfromdisposalofother investments 26,433 2,779 2,010 2,779 Proceedsfromdisposalof discontinuedoperation - 379 - 379 Proceedsfromdisposalof plantandequipment 142 26 - -

Net cash (used in)/from investing activities (2,067) (297) (1,490) 2,974

Cash flows from financing activity Purchaseoftreasurysharesatcost (113) (56) (113) (56)

Net cash used in financing activity (113) (56) (113) (56)

Net increase/(decrease) in cash and cash equivalents 5,076 9,003 (2,253) 2,550

Cash and cash equivalents at 1 January 15,533 6,530 2,787 237

Cash and cash equivalents at 31 December 20,609 15,533 534 2,787

(i) Acquisition of property, plant and equipment

Duringthefinancialyear,theGroupacquiredplantandequipmentwithanaggregatecostofRM3,009,000(2009:RM969,000)ofwhichRM327,000(2009:RM120,000)wasaccruedfor.


Statements of Cash Flows (continued)fortheyearended31December2010


SMISCorporationBerhadisapubliclimitedliabilitycompany,incorporatedanddomiciledinMalaysiaandis listedontheMainMarketofBursaMalaysiaSecuritiesBerhad.Theaddressesof itsregisteredofficeandprincipalplaceofbusinessareasfollows:

Registered officeLot6.05,Level6KPMGTower,8FirstAvenueBandarUtama47800PetalingJayaSelangorDarulEhsan

Principal place of businessNo19,JalanDuaOffJalanChanSowLin55200KualaLumpur

TheconsolidatedfinancialstatementsoftheCompanyasatandfortheyearended31December2010comprisetheCompanyanditssubsidiaries(togetherreferredtoasthe“Group”andindividuallyreferredtoas“Groupentities”).ThefinancialstatementsoftheCompanyasatandfortheyearended31December2010donotincludeotherentities.TheCompanyisprincipallyengagedininvestmentholdingwhilsttheprincipalactivitiesofthesubsidiariesareasstatedinNote6tothefinancialstatements.

ThesefinancialstatementswereapprovedbytheBoardofDirectorson18April2011.1. Basis of preparation

(a) Statement of compliance

ThesefinancialstatementsoftheGroupandoftheCompanyhavebeenpreparedinaccordancewithFinancialReportingStandards(FRSs),generallyacceptedaccountingprinciplesandtheCompaniesAct,1965inMalaysia.

TheGroupandtheCompanyhavenotappliedthefollowingaccountingstandards,amendmentsandinterpretationsthathavebeenissuedbytheMalaysianAccountingStandardsBoard(MASB)butarenotyeteffectivefortheGroupandtheCompany:

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 March 2010

• AmendmentstoFRS132,Financial Instruments: Presentation – Classification of Rights Issues

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2010• FRS1,First-time Adoption of Financial Reporting Standards (revised)• FRS3,Business Combinations (revised)• FRS127,Consolidated and Separate Financial Statements (revised)• AmendmentstoFRS2,Share-based Payment• AmendmentstoFRS5,Non-current Assets Held for Sale and Discontinued Operations• AmendmentstoFRS138,Intangible Assets

Notes to the Financial Statements


Notes to the Financial Statements (continued)

1. Basis of preparation (continued)

(a) Statement of compliance (continued)

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2010 (continued)• ICInterpretation12,Service Concession Agreements• ICInterpretation16,Hedges of a Net Investment in a Foreign Operation• ICInterpretation17,Distributions of Non-cash Assets to Owners• AmendmentstoICInterpretation9,Reassessment of Embedded Derivatives

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2011• AmendmentstoFRS1,First-time Adoption of Financial Reporting Standards – Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters – Additional Exemptions for First-time Adopters• AmendmentstoFRS2,Group Cash-settled Share Based Payment Transactions• Amendments to FRS 7, Financial Instruments: Disclosures – Improving Disclosures about

Financial Instruments• ICInterpretation4,Determining whether an Arrangement contains a Lease• ICInterpretation18,Transfers of Assets from Customers• ImprovementstoFRSs(2010)

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2011

• ICInterpretation19,Extinguishing Financial Liabilities with Equity Instruments • AmendmentstoICInterpretation14,Prepayments of a Minimum Funding Requirement

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2012• FRS124,Related Party Disclosures (revised)• ICInterpretation15,Agreements for the Construction of Real Estate

TheCompanyplanstoapplytheabovementionedstandards,amendmentsandinterpretations:

- from the annual period beginning 1 January 2011 for those standards, amendments orinterpretationsthatwillbeeffectiveforannualperiodsbeginningonorafter1March2010,1July2010or1January2011,exceptfor:- Amendments to FRS 132, Financial Instruments: Presentation – Classification of Right

Issues- AmendmentstoFRS2,Share-based Payment- AmendmentstoFRS5,Non-current Assets Held for Sale and Discontinued Operations- AmendmentstoFRS138,Intangible Assets- ICInterpretation12,Service Concession Agreements- ICInterpretation16,Hedges of a Net Investment in a Foreign Operation- ICInterpretation17,Distributions of Non-cash Assets to Owners- AmendmentstoICInterpretation9,Reassessment of Embedded Derivatives- AmendmentstoFRS2,Group Cash-settled Share Based Payment Transactions- ICInterpretation4,Determining whether an Arrangement contains a Lease- ICInterpretation18,Transfers of Assets from CustomerswhicharenotapplicabletotheCompany;and





The Company plans to apply the abovementioned standards, amendments and interpretations:(continued)

- from the annual period beginning 1 January 2012 for those standards, amendments orinterpretationsthatwillbeeffectiveforannualperiodsbeginningonorafter1July2011or1January2012,exceptfor:- ICInterpretation19,Extinguishing Financial Liabilities with Equity Instruments- AmendmentstoICInterpretation14,Prepayments of a Minimum Funding Requirement- ICInterpretation15,Agreements for the Construction of Real Estate

whicharenotapplicabletotheCompany.

The initial application of a standard, an amendment or an interpretation, which will be appliedprospectivelyorwhichrequiresextendeddisclosures,isnotexpectedtohaveanyfinancialimpactstothecurrentandpriorperiodsfinancialstatementsupontheirfirstadoption.

Theexpectedchangesinaccountingpoliciesareasfollows:

FRS 3 (revised), Business Combinations

FRS 3 (revised) incorporates the following changes that are likely to be relevant to the Group’soperations:• Thedefinitionofabusinesshasbeenbroadened,whichislikelytoresultinmoreacquisitions

beingtreatedasbusinesscombinations.• Contingent consideration will be measured at fair value, with subsequent changes therein

recognisedinprofitorloss.• Transactioncosts,otherthanshareanddebtissuecosts,willbeexpensedasincurred.• Anypre-existinginterestintheacquireewillbemeasuredatfairvaluewiththegainorloss

recognisedinprofitorloss.• Anyminority(willbeknownasnon-controlling)interestwillbemeasuredateitherfairvalue,

or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on atransaction-by-transactionbasis.

FRS3(revised),whichbecomesmandatoryfortheGroup’s2011consolidatedfinancialstatements,willbeappliedprospectivelyandthereforetherewillbenoimpactonpriorperiodsintheGroup’s2011consolidatedfinancialstatements.

FRS 127 (2010), Consolidated and Separate Financial Statements

• The amendments to FRS 127 require changes in group composition to be accounted for asequity transactions between the group and its minority (will be known as non-controlling)interestholders.





FRS 127 (2010), Consolidated and Separate Financial Statements (continued)

• TheamendmentstoFRS127requirealllossesattributabletominorityinteresttobeabsorbedbyminorityinteresti.e.,theexcessandanyfurtherlossesexceedingtheminorityinterestintheequityofasubsidiaryarenolongerchargedagainsttheGroup’sinterest.Currently,suchlossesareaccountedforinaccordancewiththeaccountingpoliciesasdescribedinnote2(a)(ii).

TheabovechangesinaccountingpoliciesarenotexpectedtohavematerialimpactsontheGroup.

FollowingtheannouncementbytheMASBon1August2008,theGroup’sfinancialstatementswillbepreparedinaccordancewiththeInternationalFinancialReportingStandards(“IFRS”)frameworkforannualperiodsbeginningon1January2012.

(b) Basis of measurement

ThesefinancialstatementshavebeenpreparedonthehistoricalcostbasisotherthanasdisclosedinNote2.

(c) Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (RM), which is the Company’sfunctionalcurrency.AllfinancialinformationarepresentedinRMandhavebeenroundedtothenearestthousand,unlessotherwisestated.

(d) Use of estimates and judgements

ThepreparationofthefinancialstatementsinconformitywithFRSsrequiresmanagementtomakejudgements,estimatesandassumptions thataffect theapplicationofaccountingpoliciesand thereportedamountsofassets, liabilities, incomeandexpenses.Actualresultsmaydifferfromtheseestimates.

Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedintheperiodinwhichtheestimate isrevisedandinanyfutureperiodsaffected.

There are no significant areas of estimation uncertainty and critical judgements in applyingaccountingpoliciesthathavesignificanteffectontheamountsrecognisedinthefinancialstatementsotherthanthosedisclosedinthefollowingnotes:

• Note4-valuationofinvestmentproperties • Note8-recognitionofcapitalallowancescarry-forwards • Note13-provisionforwarranties



2. Significant accounting policies Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytotheperiodspresentedinthese

financialstatements,andhavebeenappliedconsistentlybyGroupentities,otherthanthosedisclosedinthefollowingnotes:

• Note2(c)-Financialinstruments• Note2(e)-Leasedassets• Note2(i)-Receivables• Note2(s)-Operatingsegments

(a) Basis of consolidation

(i) Subsidiaries

Subsidiariesareentities,includingunincorporatedentities,controlledbytheGroup.ControlexistswhentheGrouphastheabilitytoexerciseitspowertogovernthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.Inassessingcontrol,potentialvotingrightsthatpresentlyareexercisablearetakenintoaccount.Subsidiariesareconsolidatedusingthepurchasemethodofaccounting.

Underthepurchasemethodofaccounting,thefinancialstatementsofsubsidiariesareincludedintheconsolidatedfinancialstatementsfromthedatethatcontrolcommencesuntilthedatethatcontrolceases.

InvestmentsinsubsidiariesarestatedintheCompany’sstatementoffinancialpositionatcostlessanyimpairmentlosses,unlesstheinvestmentisclassifiedasheldforsale.

(ii) Minority interest

Minorityinterestattheendofthereportingperiod,beingtheportionofthenetidentifiableassets of subsidiaries attributable to equity interests that are not owned by the Company,whetherdirectlyorindirectlythroughsubsidiaries,arepresentedintheconsolidatedstatementoffinancialpositionandstatementofchangesinequitywithinequity,separatelyfromequityattributabletotheownersoftheCompany.Minorityinterests intheresultsoftheGroupispresented in the consolidated statement of comprehensive income as an allocation of thecomprehensiveincomefortheyearbetweenminorityinterestsandtheownersoftheCompany.

Where losses applicable to the minority exceed the minority’s interest in the equity of asubsidiary,theexcess,andanyfurther lossesapplicabletotheminority,arechargedagainsttheGroup’sinterestexcepttotheextentthattheminorityhasabindingobligationto,andisableto,makeadditionalinvestmenttocoverthelosses.Ifthesubsidiarysubsequentlyreportsprofits,theGroup’sinterestisallocatedwithallsuchprofitsuntiltheminority’sshareofthelossespreviouslyabsorbedbytheGrouphasbeenrecovered.



2. Significant accounting policies (continued)

(a) Basis of consolidation (continued)

(iii) Transactions eliminated on consolidation

Intra-groupbalancesandtransactions,andanyunrealisedincomeandexpensesarisingfromintra-grouptransactions,areeliminatedinpreparingtheconsolidatedfinancialstatements.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies ofGroupentitiesatexchangeratesatthedatesofthetransactions.

Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesattheendofthereportingperiodareretranslatedtothefunctionalcurrencyattheexchangerateatthatdate.

Non-monetaryassetsandliabilitiesdenominatedinforeigncurrenciesarenotretranslatedattheendofthereportingdateexceptforthosethataremeasuredatfairvalueareretranslatedtothefunctionalcurrencyattheexchangerateatthedatethatthefairvaluewasdetermined.

Foreigncurrencydifferencesarisingonretranslationarerecognisedinprofitorloss.

(ii) Operations denominated in functional currencies other than Ringgit Malaysia

TheassetsandliabilitiesofoperationsdenominatedinfunctionalcurrenciesotherthanRMaretranslatedtoRMatexchangeratesattheendofthereportingperiod.TheincomeandexpensesofforeignoperationsaretranslatedtoRMatexchangeratesatthedatesofthetransactions.

Foreigncurrencydifferencesarerecognisedinothercomprehensiveincomeandaccumulatedintheforeigncurrencytranslationreserve(FCTR).Whenaforeignoperationisdisposedof,inpartorinfull,therelevantamountintheFCTRistransferredtoprofitorlossaspartoftheprofitorlossondisposal.

(c) Financial instruments ArisingfromtheadoptionofFRS139,Financial Instruments: Recognition and Measurement,with

effectfrom1January2010,financialinstrumentsarecategorisedandmeasuredusingaccountingpolicies as mentioned below. Before 1 January 2010, different accounting policies were applied.SignificantchangestotheaccountingpoliciesarediscussedinNote27.




(c) Financial instruments (continued)

(i) Initial recognition and measurement A financial asset or financial liability is recognised in the financial statements when, and

onlywhen,theGrouportheCompanybecomesapartytothecontractualprovisionsoftheinstrument.

Afinancial instrument is recognised initially,at its fairvalueplus, in thecaseofafinancial

instrumentnotatfairvaluethroughprofitorloss,transactioncoststhataredirectlyattributabletotheacquisitionorissueofthefinancialinstrument.

(ii) Financial instrument categories and subsequent measurement TheGroupandtheCompanycategorisefinancialinstrumentsasfollows:

Financial assets

(a) Loans and receivables

Loansandreceivablescategorycomprisestradeandotherreceivablesandcashandcashequivalents.

Financial assets categorised as loans and receivables are subsequently measured atamortisedcostusingtheeffectiveinterestmethod.

(b) Available-for-sale financial assets

Available-for-salecategorycomprisesinvestmentinequityinstrumentsthatarenotheldfortrading.

Investments inequityinstrumentsthatdonothaveaquotedmarketpriceinanactivemarket and whose fair value cannot be reliably measured are measured at cost. Otherfinancial assets categorised as available-for-sale are subsequently measured at theirfair value with the gain or loss recognised in other comprehensive income, except forimpairmentlosseswhichisrecognisedinprofitorloss.Onderecognition,thecumulativegainor lossrecognised inothercomprehensive income is reclassified fromequity intoprofitorloss.

Allfinancialassetsaresubjecttoreviewforimpairment(seeNote2(k)(i)).




(c) Financial instruments (continued)

(ii) Financial instrument categories and subsequent measurement (continued)

Financial liabilities

Allfinancialliabilitiesaremeasuredatamortisedcostusingtheeffectiveinterestmethod.

(iii) Derecognition Afinancialassetorpartofitisderecognisedwhen,andonlywhenthecontractualrightstothe

cashflowsfromthefinancialassetexpireorthefinancialassetistransferredtoanotherpartywithoutretainingcontrolorsubstantiallyallrisksandrewardsoftheasset.Onderecognitionofafinancialasset,thedifferencebetweenthecarryingamountandthesumoftheconsiderationreceived(includinganynewassetobtainedlessanynewliabilityassumed)andanycumulativegainorlossthathadbeenrecognisedinequityisrecognisedintransferredprofitorloss.

Afinancialliabilityorapartofitisderecognisedwhen,andonlywhen,theobligationspecifiedinthecontractisdischargedorcancelledorexpires.Onderecognitionofafinancialliability,thedifferencebetweenthecarryingamountofthefinancialliabilityextinguishedortransferredto another party and the consideration paid, including any non-cash assets transferred orliabilitiesassumed,isrecognisedinprofitorloss.

(d) Property, plant and equipment

(i) Recognition and measurement

Itemsofproperty,plantandequipmentarestatedatcostlessanyaccumulateddepreciationandanyaccumulatedimpairmentlosses.

Costincludesexpendituresthataredirectlyattributabletotheacquisitionoftheassetandany

othercostsdirectlyattributabletobringingtheassettoworkingconditionforitsintendeduse,andthecostsofdismantlingandremovingtheitemsandrestoringthesiteonwhichtheyarelocated.Thecostofself-constructedassetsalsoincludesthecostofmaterialsanddirectlabour.Purchasedsoftwarethatisintegraltothefunctionalityoftherelatedequipmentiscapitalisedaspartofthatequipment.

Thecostofproperty,plantandequipmentrecognisedasaresultofabusinesscombinationisbasedonfairvalueatacquisitiondate.Thefairvalueofpropertyistheestimatedamountfor which a property could be exchanged on the date of valuation between knowledgeablewillingpartiesinanarm’slengthtransactionafterpropermarketingwhereinthepartieshadeachactedknowledgeably,prudentlyandwithoutcompulsion.Thefairvalueofotheritemsofplantandequipmentisbasedonthequotedmarketpricesforsimilaritemswhenavailableandreplacementcostwhenappropriate.




(d) Property, plant and equipment (continued)

(i) Recognition and measurement (continued)

Whensignificantpartsofanitemofproperty,plantandequipmenthavedifferentusefullives,theyareaccountedforasseparateitems(majorcomponents)ofproperty,plantandequipment.

Gains and losses on disposal of an item of property, plant and equipment are determined

by comparing the proceeds from disposal with the carrying amount of property, plant andequipment and are recognised net within “other operating income” or “other operatingexpenses”respectivelyinprofitorloss.

(ii) Subsequent costs Thecostof replacingpartofan itemofproperty,plantandequipment is recognised in the

carryingamountoftheitemifitisprobablethatthefutureeconomicbenefitsembodiedwithinthepartwillflowtotheGroupor theCompany,anditscostcanbemeasuredreliably.Thecarryingamountofreplacedpartisderecognisedtoprofitorloss.Thecostsoftheday-to-dayservicingofproperty,plantandequipmentarerecognisedinprofitorlossasincurred.

(iii) Depreciation

Depreciationiscalculatedoverthedepreciableamount,whichisthecostofanasset,orotheramountsubstitutedforcost,lessitsresidualvalue.

Depreciationisrecognisedinprofitorlossonastraight-linebasisovertheestimatedusefullivesofeachpartofanitemofproperty,plantandequipment.LeasedassetsaredepreciatedovertheshorteroftheleasetermandtheirusefullivesunlessitisreasonablycertainthattheGroupwillobtainownershipbytheendoftheleaseterm.Freeholdlandisnotdepreciated.Capitalwork-in-progressisnotdepreciateduntiltheassetsarereadyfortheirintendeduse.

Theestimatedusefullivesforthecurrentandcomparativeperiodsareasfollows:

• Longtermleaseholdland 55-91years • Buildings 50years • Plantandmachinery 5-10years • Officeequipment,furnitureandfittingsandrenovation 3-50years • Motorvehicles 3-10years • Mouldsandjigs 3-10years

Depreciationmethods,usefullivesandresidualvaluesarereviewed,andadjustedasappropriateattheendofthereportingperiod.




(e) Leased assets

(i) Finance lease

Leases intermsofwhichtheGrouportheCompanyassumessubstantiallyall therisksandrewardsofownershipareclassifiedasfinanceleases.Oninitialrecognitionoftheleasedassetismeasuredatanamountequaltothelowerofitsfairvalueandthepresentvalueoftheminimumleasepayments.Subsequenttoinitialrecognition,theassetisaccountedforinaccordancewiththeaccountingpolicyapplicabletothatasset.

Minimum lease payments made under finance leases are apportioned between the financeexpense and the reduction of the outstanding liability. The finance expense is allocated toeachperiodduringtheleasetermsoastoproduceaconstantperiodicrateofinterestontheremainingbalanceoftheliability.Contingentleasepaymentsareaccountedforbyrevisingtheminimumleasepaymentsovertheremainingtermoftheleasewhentheleaseadjustmentisconfirmed.

(ii) Operating lease

Leases,wheretheGroupdoesnotassumesubstantiallyalltherisksandrewardsofownershipareclassifiedasoperatingleasesand,exceptforpropertyinterestheldunderoperatinglease,theleasedassetsarenotrecognisedontheGroup’sstatementoffinancialposition.Propertyinterest held under an operating lease, which is held to earn rental income or for capitalappreciationorboth,isclassifiedasinvestmentproperty.

Inthepreviousyear,aleaseholdlandthatnormallyhasanindefiniteeconomiclifeandtitle

wasnotexpectedtopasstothelesseebytheendoftheleasetermwastreatedasanoperatinglease.Thepaymentmadeonenteringintooracquiringaleaseholdlandthatwasaccountedforasanoperatingleaserepresentsprepaidleasepayments,exceptforleaseholdlandclassifiedasinvestmentproperty.

TheGrouphasadoptedtheamendmentmadetoFRS117,Leases in2010 inrelationto theclassificationof leaseof land.Leasehold landwhich insubstance isafinance leasehasbeenreclassifiedandmeasuredassuchretrospectively.

Paymentsmadeunderoperatingleasesarerecognisedinprofitorlossonastraight-linebasisoverthetermoftheleaseunlessanothersystematicbasisismorerepresentativeofthetimepattern in which economic benefits from the leased asset are consumed. Lease incentivesreceivedarerecognisedinprofitorlossasanintegralpartofthetotalleaseexpense,overthetermofthe lease.Contingentrentalsarechargedtoprofitor loss inthereportingperiodinwhichtheyareincurred.




(f) Intangible assets

(i) Goodwill

Goodwillarisesonbusinesscombinationsismeasuredatcostlessanyaccumulatedimpairmentlosses.

For acquisitions prior to 1 January 2006, goodwill represents the excess of the cost of theacquisitionovertheGroup’sinterestinthefairvaluesofthenetidentifiableassetsandliabilities.

Forbusinessacquisitionbeginningfrom1January2006,goodwillrepresentstheexcessofthecostoftheacquisitionovertheGroup’sinterestinthenetfairvalueoftheidentifiableassets,liabilitiesandcontingentliabilitiesoftheacquiree.

Any excess of the Group’s interest in the net fair value of the acquiree’s identifiable assets,liabilitiesandcontingent liabilitiesover thecostofacquisition isrecognised immediately inprofitorloss.

(ii) Amortisation

Goodwillwithindefiniteusefullivesisnotamortisedbutistestedforimpairmentannuallyandwheneverthereisanindicationthatitmaybeimpaired.

(g) Investment properties

(i) Investment properties carried at cost

Investment properties are properties which are owned to earn rental income or for capitalappreciationorforboth.PropertiesthatareoccupiedbytheCompanyareaccountedforasowner-occupiedratherthanasinvestmentproperties.

Investmentpropertiesarestatedatcostlessanyaccumulateddepreciationandanyaccumulatedimpairmentlosses,consistentwiththeaccountingpolicyforproperty,plantandequipmentasstatedinaccountingpolicyNote2(d).

Depreciationischargedtoprofitorlossonastraight-linebasisovertheestimatedusefullivesof50years.

(ii) Determination of fair value

The fair value on the investment properties are determined based on Directors’ informalenquiresmadewithregisteredvaluers.




(h) Inventories

Inventoriesaremeasuredatthelowerofcostandnetrealisablevaluewithfirst-infirst-outbeingthemainbasisforcost.Inthecaseofwork-in-progressandfinishedgoods,costincludesanappropriateshareofproductionoverheadsbasedonnormaloperatingcapacity.Inthecaseoftradinggoods,costisdeterminedonaweightedaveragebasisandincludesexpenditureincurredinacquiringtheinventoriesandbringingthemtotheirexistinglocationandcondition.

Netrealisablevalueistheestimatedsellingpriceintheordinarycourseofbusiness,lesstheestimatedcostsofcompletionandtheestimatedcostsnecessarytomakethesale.

(i) Receivables

Priorto1January2010,receivableswereinitiallyrecognisedattheircostsandsubsequentlymeasuredatcostlessallowancefordoubtfuldebts.

Following theadoptionofFRS139, tradeandotherreceivablesarecategorisedandmeasuredasloansandreceivablesinaccordancewithNote2(c).

(j) Cash and cash equivalents Cashandcashequivalentsconsistofcashinhand,balancesanddepositswithbanks.

CashandcashequivalentsarecategorisedandmeasuredasloansandreceivablesinaccordancewithpolicyNote2(c).

(k) Impairment

(i) Financial assets

Allfinancialassets(exceptforinvestmentsinsubsidiaries)areassessedateachreportingdatewhetherthereisanyobjectiveevidenceofimpairmentasaresultofoneormoreeventshavinganimpactontheestimatedfuturecashflowsoftheasset.Lossesexpectedasaresultoffutureevents, no matter how likely, are not recognised. For an equity instrument, a significant orprolongeddeclineinthefairvaluebelowitscostisanobjectiveevidenceofimpairment.

An impairment loss in respect of loans and receivables is recognised in profit or loss andis measured as the difference between the asset’s carrying amount and the present value ofestimatedfuturecashflowsdiscountedattheasset’soriginaleffectiveinterestrate.Thecarryingamountoftheassetisreducedthroughtheuseofanallowanceaccount.

Animpairment loss inrespectofavailable-for-salefinancialassets isrecognisedinprofitorlossandismeasuredasthedifferencebetweentheasset’sacquisitioncost(netofanyprincipalrepayment and amortisation) and the asset’s current fair value, less any impairment losspreviously recognised. Where a decline in the fair value of an available-for-sale financialassethasbeen recognised in theother comprehensive income, the cumulative loss inothercomprehensiveincomeisreclassifiedfromequityandrecognisedtoprofitorloss.




(k) Impairment (continued)

(i) Financial assets (continued)

Animpairmentlossinrespectofunquotedequityinstrumentthatiscarriedatcostisrecognisedinprofitorlossandismeasuredasthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflowsdiscountedatthecurrentmarketrateofreturnforasimilarfinancialasset.

Impairmentlossesrecognisedinprofitorlossforaninvestmentinanequityinstrumentisnotreversedthroughprofitorloss.

(ii) Non-financial assets

Thecarryingamountsofnon-financialassets(exceptforinventoriesanddeferredtaxasset)arereviewedattheendofeachreportingperiodtodeterminewhetherthereisanyindicationofimpairment.

Ifanysuchindicationexists,thentheasset’srecoverableamountisestimated.Forthepurposeofimpairmenttesting,assetsaregroupedtogetherintothesmallestgroupofassetsthatgeneratescash inflows from continuing use that are largely independent of the cash inflows of otherassets or groups of assets (the “cash-generating unit”). The goodwill acquired in a businesscombination,forthepurposeofimpairmenttesting,isallocatedtocash-generatingunitsthatareexpectedtobenefitfromthesynergiesofthecombination.

Therecoverableamountofanassetorcash-generatingunit is thegreaterof itsvalueinuseand its fairvalue lesscosts tosell. Inassessingvalue inuse, theestimated futurecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.

Animpairmentlossisrecognisedifthecarryingamountofanassetoritscash-generatingunitexceedsitsrecoverableamount.

Impairmentlossesarerecognisedinprofitorloss.Impairmentlossesrecognisedinrespectofcash-generatingunitsareallocatedfirsttoreducethecarryingamountofanygoodwillallocatedtotheunitsandthentoreducethecarryingamountoftheotherassetsintheunit(groupsofunits)onapro rata basis.

Animpairmentlossinrespectofgoodwillisnotreversed.Inrespectofotherassets,impairmentlosses recognised in prior periods are assessed at the end of each reporting period for anyindications that the loss has decreased or no longer exists. An impairment loss is reversedif therehasbeenachange in theestimatesusedtodeterminetherecoverableamountsincethe last impairment loss was recognised. An impairment loss is reversed only to the extentthattheasset’scarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendetermined,netofdepreciationoramortisation,ifnoimpairmentlosshadbeenrecognised.Reversalsofimpairmentlossesarecreditedtoprofitorlossintheyearinwhichthereversalsarerecognised.




(l) Equity instrument

Instrumentsclassifiedasequityaremeasuredatcostoninitialrecognitionandarenotremeasuredsubsequently.

Repurchase of share capital

When share capital recognised as equity is repurchased, the amount of the consideration paid,includingdirectlyattributablecosts,isrecognisedasadeductionfromequity.Repurchasedsharesthatarenotsubsequentlycancelledareclassifiedastreasurysharesandarepresentedasadeductionfromtotalequity.

(m) Employee benefits

Short term employee benefits

Shorttermemployeebenefitobligationsinrespectofsalaries,annualbonuses,paidannualleaveandsickleavearemeasuredonanundiscountedbasisandareexpensedastherelatedserviceisprovided.

TheGroup’scontributionstostatutorypensionfundsarechargedtoprofitorlossintheyeartowhichtheyrelate.Oncethecontributionshavebeenpaid,theGrouphasnofurtherpaymentobligations.

(n) Provisions

Aprovisionisrecognisedif,asaresultofapastevent,theGrouphasapresentlegalorconstructiveobligationthatcanbeestimatedreliably,anditisprobablethatanoutflowofeconomicbenefitswillberequiredtosettletheobligation.

Warranties

A provision for warranties is recognised when the underlying products or services are sold. Theprovisionisbasedonhistoricalwarrantydataandaweightingofallpossibleoutcomesagainsttheirassociatedprobabilities.

(o) Revenue and other income

(i) Goods sold

Revenue from the sale of goods is measured at fair value of the consideration received orreceivable, net of returns and allowances, trade discounts and volume rebates. Revenue isrecognisedwhenthesignificantrisksandrewardsofownershiphavebeentransferredtothebuyer,recoveryoftheconsiderationisprobable,theassociatedcostsandpossiblereturnofgoodscanbeestimatedreliably,andthereisnocontinuingmanagementinvolvementwiththegoods.




(o) Revenue and other income (continued)

(ii) Rental income

Rentalincomeisrecognisedinprofitorlossonastraight-linebasisoverthetermofthelease.

(iii) Dividend income

DividendincomeisrecognisedinprofitorlossonthedatethattheCompany’srighttoreceivepaymentisestablished.

(iv) Interest income

Interestincomeisrecognisedasitaccruesusingtheeffectiveinterestmethodinprofitorloss.

(p) Income tax

Incometaxexpensecomprisescurrentanddeferredtax.Incometaxexpenseisrecognisedinprofitorlossexcepttotheextentthatitrelatestoabusinesscombinationoritemsrecogniseddirectlyinequityorothercomprehensiveincome.

Currenttaxistheexpectedtaxpayableonthetaxableincomefortheyear,usingtaxratesenactedorsubstantivelyenactedbytheendofthereportingperiod,andanyadjustmenttotaxpayableinrespectofpreviousyears.

Deferredtaxisrecognisedusingtheliabilitymethod,providingfortemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesinthestatementoffinancialpositionandtheirtaxbases.Deferred tax ismeasuredat the taxrates thatareexpected toapply to the temporarydifferenceswhentheyreverse,basedonthelawsthathavebeenenactedorsubstantivelyenactedbytheendofthereportingperiod.

Adeferredtaxassetisrecognisedtotheextentthatitisprobablethatfuturetaxableprofitswillbeavailable against which temporary difference can be utilised. Deferred tax assets are reviewed attheendofeachreportingperiodandarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealised.

Unutilisedreinvestmentallowanceistreatedastaxbaseofassetsandisrecognisedasareductionoftaxexpenseasandwhenitisutilised.




(q) Discontinued operation

AdiscontinuedoperationisacomponentoftheGroup’sbusinessthatrepresentsaseparatemajorlineofbusinessorgeographicalareaofoperationsthathasbeendisposedoforisheldforsale,orisasubsidiaryacquiredexclusivelywithaviewtoresale.Classificationasadiscontinuedoperationoccursupondisposalorwhen theoperationmeets thecriteria tobeclassifiedasheld for sale, ifearlier.Whenanoperationisclassifiedasadiscontinuedoperation,thecomparativestatementofcomprehensiveincomeisrestatedasiftheoperationhadbeendiscontinuedfromthestartofthecomparativeperiod.

(r) Earning per ordinary share

TheGrouppresentsbasicearningspershare(“EPS”)dataforitsordinaryshares(EPS).

BasicEPS is calculatedbydividing theprofitor lossattributable toordinary shareholdersof theCompanybytheweightedaveragenumberofordinarysharesoutstandingduringtheperiod.

(s) Operating segments

Inthepreviousyears,asegmentwasadistinguishablecomponentoftheGroupthatwasengagedeither inprovidingproductsorservices(businesssegment),or inprovidingproductsorserviceswithinaparticulareconomicenvironment(geographicalsegment)whichwassubjecttorisksandrewardsthatweredifferentfromthoseofothersegments.

Following the adoption of FRS 8, Operating Segments, an operating segment is a component oftheGroupthatengagesinbusinessactivitiesfromwhichitmayearnrevenuesandincurexpenses,including revenues and expenses that relate to transactions with any of the Group’s othercomponents.Anoperatingsegment’soperatingresultsarereviewedregularlybythechiefoperatingdecisionmaker,whichinthiscaseistheChiefExecutiveOfficeroftheGroup,tomakedecisionsaboutresourcestobeallocatedtothesegmentandassessitsperformance,andforwhichdiscretefinancialinformationisavailable.


Notes to the Financial Statements (continued)3.

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3. Property, plant and equipment (continued) Company Office equipment Cost RM’000

At1January2009/31December2010 9

Accumulated depreciation At1January2009 7 Depreciationfortheyear -

At31December2009/1January2010 7 Depreciationfortheyear 1

At31December2010 8

Carrying amounts

At1January2009 2

At31December2009/1January2010 2

At31December2010 1

3.1 Security

CertainfreeholdlandandbuildingsoftheGroupcostingRM7,088,000(2009:RM7,088,000)havebeenassigned/pledgedtofinancialinstitutionsassecurityforborrowings/bankingfacilitiesgrantedtothesubsidiaries.Asat31December2010,theGrouphasnoexposureonthebankingfacilitiesassigned.

At 31 December 2010, a long term leasehold land of the Group costing RM1,123,000 (2009:RM1,123,000)hasbeenassignedtoalicensedbankforbankingfacilitiesgrantedtothesubsidiaries.Asat31December2010,theGrouphasnoexposureonthebankingfacilitiesassigned.

3.2 Land

Includedinthecarryingamountsoflandare:

Group 2010 2009 RM’000 RM’000 restated

Freeholdland 1,555 1,555 Longtermleaseholdland 1,938 1,974

3,493 3,529



3. Property, plant and equipment (continued)

3.2 Land (continued)

Thecarryingamountsoflandat1January2009and31December2009havebeenadjustedfollowingtheadoptionoftheamendmentstoFRS117,Leases,whereleaseholdland,insubstanceisafinancelease,hasbeenreclassifiedfromprepaidleasepaymentstoproperty,plantandequipment.

4. Investment properties

Buildings 2010 2009 Group RM’000 RM’000

Cost At1January/31December 2,544 2,544 Depreciation and impairment loss At1January Accumulateddepreciation 815 774 Accumulatedimpairmentloss 379 379

1,194 1,153 Depreciationfortheyear 42 41

At31December Accumulateddepreciation 857 815 Accumulatedimpairmentloss 379 379 1,236 1,194 Carrying amounts At31December 1,308 1,350 Fair values At31December 5,680 5,680 Investmentpropertiescompriseanumberofcommercialpropertiesthatareleasedtothirdparties.The

leasesarerenewableonayearlybasis.Nocontingentrentsarecharged.

ThefairvalueontheinvestmentpropertiesaredeterminedbasedonDirectors’informalenquiresmadewithregisteredvaluers.



4. Investment properties (continued)

Thefollowingarerecognisedinprofitorlossinrespectofinvestmentproperties:

Group 2010 2009 RM’000 RM’000 Rentalincome 233 164 Directoperatingexpenses: -incomegeneratinginvestmentproperties (78) (60) -non-incomegeneratinginvestmentproperties - (12)

5. Goodwill on consolidation

2010 2009 Cost RM’000 RM’000

At1January 710 1,499 Derecognisedondisposalofasubsidiary - (789)

At31December 710 710

Impairment loss At1January - 789 Derecognisedondisposalofasubsidiary - (789)

At31December - -

Carrying amounts At31December 710 710

Impairment testing for cash-generating units containing goodwill

Goodwillarosefromtheacquisitionofthemachinerypartsdivision.Thegoodwillimpairmenttestwasbasedonvalueinuseandwasdeterminedbythemanagement.Valueinusewasdeterminedbyassessingthemachinerypartsdivision’sprojectedresultsandcashflows.

Thevaluesassignedtothekeyassumptionsusedinpreparingtheprojectionsrepresentmanagement’sassessmentoffuturetrendsinthemachinerypartsdivisionandarebasedoninternalsources(historicaldata).



6. Investment in subsidiaries Company 2010 2009 RM’000 RM’000

Atcost: Unquotedshares 59,664 59,443 Increaseininvestmentinsubsidiary -* 221 Less:Accumulatedimpairmentloss (3,976) (6,341)

At31December 55,688 53,323

*Duringtheyear,theCompanyhaspurchased2ordinarysharesofSGD1.00eachforacashconsiderationofRM5,whichrepresentstheentireequityinterestinthesharecapitalofExsilioPte.Ltd.

Detailofthesubsidiariesareasfollows:

Effective ownership interest Country of 2010 2009 Name of subsidiaries incorporation Principal activities % %

GrandCarpetIndustries Malaysia Tradingofcarpetofall 100 100 Sdn.Bhd. descriptions

SanycoGrandIndustries Malaysia Manufacturingofautomotive 100 100 Sdn.Bhd. brakingcomponentsand motorcyclecomponents

Machinery&Industrial Malaysia Tradingofmachineryand 100 100 SuppliesSdn.Bhd. industrialpartssupplies

SugiharaGrandIndustries Malaysia Manufacturingandtrading 60 60 Sdn.Bhd. ofcarpetofalldescriptions

CleonTechnology Malaysia Manufacturingandtradingof 66.25 66.25 Sdn.Bhd. rechargeablelithiumpolymer batteriesofalldescriptions. TheCompanyceasedits businessoperationsince January2007.

ExsilioPte.Ltd.# Singapore Dormant 100 -

# Company which is not required by legislation to be audited in the country of incorporation.ManagementfinancialstatementshavebeenusedforconsolidationpurposeandtheDirectorsareoftheopinionthatitsresultsareimmaterialtotheGroup.



7. Other investments

Investment in unit trust (Quoted securities in Malaysia)

Group RM’000 2010 Non-current Available-for-salefinancialassets 11,869

Fairvalueofquotedinvestments 11,869

2009 Non-current Atcost 11,744


Company 2010 Non-current Available-for-salefinancialassets 1,509


2009 Non-current Atcost -

Fairvalueofquotedinvestments -

Thecomparativefiguresasat31December2009havenotbeenpresentedbasedonthenewcategorisation

of financial assets resulting from the adoption of FRS 139 by virtue of the exemption given in FRS7.44AA.



8. Deferred tax assets/liabilities

Recognised deferred tax assets/liabilities

Deferredtaxassetsandliabilitiesareattributabletothefollowing: Assets Liabilities Net Group 2010 2009 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Property,plantandequipment - (698) (1,931) (869) (1,931) (1,567) Provisions 1,071 812 - - 1,071 812 Capitalallowancecarry-forwards 705 705 - - 705 705

Nettaxassets/(liabilities) 1,776 819 (1,931) (869) (155) (50)

Movement in temporary differences during the year Recognised Recognised in profit in profit At or loss At or loss At 1.1.2009 (Note 17) 31.12.2009 (Note 17) 31.12.2010 RM’000 RM’000 RM’000 RM’000 RM’000 Property,plantandequipment (1,818) 251 (1,567) (364) (1,931) Provisions 802 10 812 259 1,071 Capitalallowancecarry-forwards 695 10 705 - 705

(321) 271 (50) (105) (155)

Unrecognised deferred tax assets

Deferredtaxassetshavenotbeenrecognisedinrespectofthefollowingitems:

Group 2010 2009 RM’000 RM’000 Deductibletemporarydifferences 1,170 (465) Taxlosscarry-forwards 455 3,812 Reinvestmentallowance - 1,835 Capitalallowancecarry-forwards 1,254 2,973

2,879 8,155

Thedeductibletemporarydifferencesdonotexpireundercurrenttaxlegislation.DeferredtaxassetshavenotbeenrecognisedinrespectoftheseitemsbecauseitisnotprobablethatfuturetaxableprofitofthesubsidiarieswillbeavailableagainstwhichtheGroupandCompanycanutilisethebenefitstherefrom.



9. Trade and other receivables Group Company 2010 2009 2010 2009 Note RM’000 RM’000 RM’000 RM’000

Current Trade Tradereceivables a 20,911 16,477 - -

Non-trade Otherreceivables 2,136 1,977 26 - Deposits 249 177 - -

2,385 2,154 26 -

23,296 18,631 26 -

Note a Credittermsoftradereceivablesrangefrom60-180days(2009:60-180days).

10. Inventories

Group 2010 2009 RM’000 RM’000

At cost Rawmaterials 5,008 4,842 Work-in-progress 617 452 Manufacturedgoods 1,111 857 Tradinggoods 5,421 6,710

12,157 12,861 At net realisable value Tradinggoods - 547

12,157 13,408



11. Capital and reserves

Share capital Group and Company Number Number Amount of shares Amount of shares 2010 2010 2009 2009 RM’000 ’000 RM’000 ’000

Authorised: OrdinarysharesofRM1.00each 60,000 60,000 60,000 60,000

Issuedandfullypaid: OrdinarysharesofRM1.00each 44,800 44,800 44,800 44,800

Ordinary shares

Theholdersofordinarysharesareentitledtoreceivedividendsasdeclaredfromtimetotime,andareentitledtoonevotepershareatmeetingsoftheCompany.InrespectoftheCompany’streasurysharesthatareheldbytheGroup,allrightsaresuspendeduntilthosesharesarereissued.

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of thefinancialstatementsoftheGroupentitieswithfunctionalcurrenciesotherthanRM.

Fair value reserve

Thefairvaluereserverelatestothefairvaluationoffinancialassetscategorisedasavailable-for-sale.

Treasury shares

TheshareholdersoftheCompany,byanordinaryresolutionpassedintheannualgeneralmeetingheldon27May2010,approvedtheCompany’splantorepurchaseitsownshares.TheDirectorsoftheCompanyarecommittedtoenhancingthevalueoftheCompanytoitsshareholdersandbelievethattherepurchaseplancanbeappliedinthebestinterestsoftheCompanyanditsshareholders.

Duringthefinancialyear,theCompanyrepurchased240,600ofitsissuedordinarysharesfromtheopenmarketatanaveragepriceofRM0.46pershare.ThetotalconsiderationpaidwasapproximatelyRM112,500includingtransactioncostofRM1,100.Therepurchasetransactionswerefinancedbyinternallygeneratedfunds.Thesharesrepurchasedwereretainedastreasuryshares.

At31December2010,theGroupheld2,546,100(2009:2,305,500)oftheCompany’sshares.ThenumberofoutstandingordinarysharesofRM1.00eachinissueaftertheset-offis42,253,900(2009:42,494,500).



11. Capital and reserves (continued)

Detailsofthesharesbuy-backwereasfollows:

Number of shares purchase Average Highest Lowest and retained Total price price price as treasury consideration paid paid paid share paid 2010 RM RM RM units RM

January–March 0.451 0.465 0.424 66,000 29,804 April-June 0.456 0.499 0.440 121,600 56,296 July–September 0.478 0.555 0.450 53,000 26,353 October–December - - - - -

2009

January-March 0.332 0.330 0.280 58,500 19,401 April-June 0.310 0.310 0.285 37,800 11,714 July-September 0.374 0.450 0.310 6,000 2,245 October-December 0.440 0.465 0.425 51,200 22,531

Section 108 tax credit

SubjecttoagreementbytheInlandRevenueBoard,theCompanyhassufficientSection108taxcreditandtaxexemptincometofrankallofitsretainedearningsat31December2010ifpaidoutasdividends.

The Finance Act 2007 introduced a single tier company income tax system with effect from year ofassessment 2008. As such, the Section 108 tax credit as at 31 December 2007 will be available to theCompanyuntilsuchtimethecreditisfullyutilisedoruponexpiryofthesix-yeartransitionalperiodon31December2013,whicheverisearlier.

12. Trade and other payables

Group Company 2010 2009 2010 2009 Note RM’000 RM’000 RM’000 RM’000

Trade Tradepayables a 9,251 8,322 - - Non-trade Otherpayablesandaccruals b 8,375 7,790 212 201 Amountsduetosubsidiaries c - - 5,120 5,120 8,375 7,790 5,332 5,321 17,626 16,112 5,332 5,321



12. Trade and other payables (continued)

Note a

Credittermsoftradepayablesrangefrom30to120days(2009:30to120days).

Note b

(i) IncludedinotherpayablesandaccrualsoftheGroupisanamountofRM436,000(2009:RM232,000)accruedfortheacquisitionofplantandmachineries.

(ii) IncludedinotherpayablesandaccrualsoftheGroupisanamountofRM36,000(2009:RM36,000)ofdepositsreceivedfromacustomerofasubsidiary.

Note c

The amounts due to subsidiaries are non-trade in nature, unsecured, interest free and repayable ondemand.

13. Provision for warranties

2010 2009 Group RM’000 RM’000

Current At1January2010 450 589 Provisionsmadeduringtheyear 141 89 Provisionsusedduringtheyear (67) (228)

At31December2010 524 450

Warranties

Theprovisionforwarrantiesrelatesmainlytoautomotivebrakesystemsold.Theprovisionisbasedonestimatesmadefromhistoricalwarrantydataassociatedwithsimilarproductsandservices.TheGroupexpectstoincurmostoftheliabilityoverthenextyear.



14. Profit/(Loss) for the year


Profit/(Loss) for the year is arrived at after charging: Allowanceforslowmoving inventories 262 - - - Auditors’remuneration: - KPMG - Statutoryaudit 113 101 34 30 - Otherservices 20 10 20 10 Depreciationofinvestment properties 4 42 41 - - Depreciationofproperty,plant andequipment 3 3,726 3,617 - - Impairmentlossontrade receivables 215 120 - - Impairmentlossontrade receivableswrittenoff 17 15 - - Inventorieswrittenoff 550 180 - - Personnelexpenses(including keymanagementpersonnel): - ContributionstoEmployees ProvidentFund 1,023 848 - - - Wages,salariesandothers 14,452 11,276 18 16 Plantandequipmentwrittenoff - 247 - - Realisedforeignexchangeloss 23 29 - 10 Rentalexpensesforwarehouse andstaffhousingfacilities 310 49 - - Unrealisedforeignexchangeloss 79 - - -

and after crediting: Financeincome 40 68 - 37 Gainondisposalofdiscontinued operation - 1,487 - - Gainondisposalofother investments 389 - 10 - Gainondisposalofplant andequipment 109 25 - - GovernmentgrantfromSMIDEC 216 19 - - Realisedforeignexchangegain 5 - - - Rentalincomefrominvestment properties 233 164 - - Reversalofimpairmentlosson investmentinasubsidiary - - 2,365 - Reversalofimpairmentlosson tradereceivables 103 5 - - Unrealisedforeignexchangegain 23 8 - -



15. Key management personnel compensation

Thekeymanagementpersonnelcompensationisasfollows:

Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

Company’s Directors - Fees 144 136 150 136 - Remuneration 971 888 18 16 - Othershorttermemployeebenefits (includingestimatedmonetary valueofbenefits-in-kind) 25 25 - - Other Directors - Remuneration 463 401 - - - Othershorttermemployeebenefits (includingestimatedmonetary valueofbenefits-in-kind) 8 8 - - Other key management personnel: - Remuneration 741 675 - -

2,352 2,133 168 152

OtherkeymanagementpersonnelcomprisepersonsotherthantheDirectorsofGroupentities,havingauthorityandresponsibilityforplanning,directingandcontrollingtheactivitiesoftheGroupentitieseitherdirectlyorindirectly.

Inadditiontotheirsalaries,theGroupalsoprovidesnon-cashbenefitstoDirectorsandexecutiveofficersandcontributestostatutorypensionfunds.

TheestimatedmonetaryvalueofDirectors’benefits-in-kindisRM33,000(2009:RM33,000).

16. Finance costs

Group 2010 2009 RM’000 RM’000

Interestexpenseoffinancialliabilitiesthatarenotatfairvalue throughprofitorloss: - Bankoverdrafts 2 - - Bankguarantees 11 3 - Letterofcredit 19 14

32 17 Otherbankcharges 39 36

71 53



17. Income tax expense

Recognised in profit or loss

Group Company 2010 2009 2010 2009 Note RM’000 RM’000 RM’000 RM’000

Incometaxexpenseoncontinuing operations 1,386 593 - -

Majorcomponentsofincometax expenseinclude:

Current tax expense Malaysia -currentyear 1,455 840 - - -prioryears (174) 24 - - Totalcurrenttaxrecognisedin profitorloss 1,281 864 - -

Deferred tax expense Originationandreversalof temporarydifferences 106 (173) - - Overprovisioninprioryears (1) (98) - - Totaldeferredtaxrecognised inprofitorloss 8 105 (271) - -

Totalincometaxexpense 1,386 593 - -

Reconciliation of effective tax expense

Profit/(Loss)fortheyear 8,472 3,230 1,739 (121) Totalincometaxexpense 1,386 593 - -

Profitexcludingtax 9,858 3,823 1,739 (121)

TaxcalculatedusingMalaysiantax ratesof25percent 2,464 956 435 (30) Non-deductibleexpenses 416 200 - 30 Non-taxableincome - - (435) - Taxexemptincome - 62 - - Utilisationofpreviouslyunrecognised deferredtaxassets (1,319) (551) - - Overprovidedinprioryears (175) (74) - -

1,386 593 - -



18. Discontinued operation

On23January2009,theCompanyenteredintoaSaleofSharesAgreementtodisposeitsentireequityinterestofasubsidiary,KyotoEnergyPte.Ltd.ThedisposalwascompletedinMarch2009.ThedisposalofKyotoEnergyPte.Ltd.,whichrepresentedtheconsultancyserviceandenvironmentdivisionoftheGroupwasclassifiedasheldforsaleasadiscontinuedoperationat31December2008.Thecomparativeconsolidated income statements was presented to show the discontinued operation separately fromcontinuingoperations.

Lossattributabletothediscontinuedoperationwasasfollows:

Group 2009 RM’000 Results of discontinued operation

Gainfromsalefromdiscontinuedoperation 1,487

Effect of disposal on the financial position of the Group Property,plantandequipment 47 Receivables,depositsandprepayments 256 Payablesandaccruals (756) Transferfromtranslationreserve 43

Netliabilities (410) Realisationofpostacquisitionreserves (698) Gainfromsaleofdiscontinuedoperation 1,487

Netcashinflow-considerationreceived,satisfiedincash 379

19. Other comprehensive income

Group Company 2010 2010 Net of tax Net of tax Fairvalueofavailable-for-salefinancialassets - Gainsarisingduringtheyear 99 9



20. Earnings per ordinary share

Basic earnings per ordinary share

The calculation of basic earnings per ordinary share at 31 December 2010 was based on the profitattributable to ordinary shareholders and a weighted average number of ordinary shares outstandingcalculatedasfollows:

Continuing Discontinued Group operations operation Total 2010 RM’000 RM’000 RM’000 Profitattributabletoordinaryshareholders 6,113 - 6,113

2009

Profitattributabletoordinaryshareholders 3,118 1,487 4,605

Weighted average number of ordinary shares:

Group 2010 2009 ’000 ’000

Issuedordinarysharesat1January 44,800 44,800 Effectoftreasurysharesheld (2,461) (2,233)

Weightedaveragenumberofordinarysharesat31December 42,339 42,567

Basic earnings per ordinary share:

Group 2010 2009 sen sen - fromcontinuingoperations 14.44 7.32 - fromdiscontinuedoperation - 3.49

14.44 10.81



21. Operating segments

TheGrouphasthreereportablesegments,asdescribedbelow,whicharetheGroup’sstrategicbusinessunits. The strategic business units offer different products and services, and are managed separatelybecause they require different technology and marketing strategies. For each of the strategic businessunits,theGroup’sChiefExecutiveOfficerreviewsinternalmanagementreportsatleastonaquarterlybasis.ThefollowingsummarydescribestheoperationsineachoftheGroup’sreportablesegments:

Automotiveparts Manufacturingandtradingofcarpetofalldescriptionsandmanufacturingofautomotivebrakingcomponentsandmotorcyclecomponents.

Machineryparts Tradingofmachineryandindustrialpartssupplies.Others Investment holding and manufacturing and trading of rechargeable lithium

polymerbatteriesofalldescriptions.

Performanceismeasuredbasedonsegmentprofitbeforetax,interest,depreciationandamortisation,asincludedintheinternalmanagementreportsthatarereviewedbytheGroup’sChiefExecutiveOfficer.Segmentprofitisusedtomeasureperformanceasmanagementbelievesthatsuchinformationisthemostrelevantinevaluatingtheresultsofcertainsegmentsrelativetootherentitiesthatoperatewithintheseindustries.

Segment assets The total of segment assets is measured based on all assets of a segment, as included in the internal

managementreportsthatarereviewedbytheGroup’sChiefExecutiveOfficer.Segmenttotalassetisusedtomeasurethereturnofassetsofeachsegment.

Segment liabilities Segment liabilities information is neither included in the internal management reports nor provided

regularlytotheGroup’sChiefExecutiveOfficer.Hencenodisclosureismadeonsegmentliability.

Geographical segments

Inthecurrentfinancialyear,segmentreportingforgeographicalsegmentisnotpresentedastheGrouppredominantlyoperatesinMalaysia.



21. Operating segments (continued) Automotive Machinery parts parts Others Elimination Total 2010 2010 2010 2010 2010 RM’000 RM’000 RM’000 RM’000 RM’000

Segment profit 9,700 785 1,722 (2,318) 9,889

Includedinthemeasureof segmentprofitare: Revenuefromexternal customers 82,360 15,164 - (37) 97,487 Inter-segmentrevenue 37 - - (37) - Inventorieswrittenoff (550) - - - (550) Depreciationofproperty, plantandequipment (3,411) (314) (1) - (3,726) Reversalofimpairment lossoninvestmentin asubsidiary - - 2,281 (2,281) -

Notincludedinthemeasureof segmentprofitbutprovided toChiefExecutiveOfficer: Financecosts (62) (9) - - (71) Financeincome 4 26 10 - 40 Incometaxexpense (1,041) (345) - - (1,386)

Segment assets 73,502 29,124 57,779 (63,706) 96,699

Includedinthemeasureof segmentassetsare: Additionstonon-current assetsotherthanfinancial instrumentsanddeferred taxassets 2,621 388 - - 3,009



21. Operating segments (continued)

Automotive Machinery parts parts Others Elimination Total 2009 2009 2009 2009 2009 RM’000 RM’000 RM’000 RM’000 RM’000 Segment profit/(loss) 3,969 256 (167) (250) 3,808

Includedinthemeasureof segmentprofit/(loss)are: Revenuefromexternal customers 54,930 12,882 - (9) 67,803 Inter-segmentrevenue - 9 250 (259) - Inventorieswrittenoff (180) - - - (180) Plantandequipment writtenoff (247) - - - (247) Depreciationofproperty, plantandequipment (3,305) (312) - - (3,617)

Notincludedinthemeasureof segmentprofitbutprovided toChiefExecutiveOfficer: Financecosts (155) (8) - 110 (53) Financeincome 122 19 37 (110) 68 Incometaxexpense (447) (146) - - (593)

Segment assets 64,559 27,854 56,169 (62,907) 85,675

Includedinthemeasureof segmentassetsare: Additionstonon-current assetsotherthanfinancial instrumentsanddeferred taxassets 940 29 - - 969



21. Operating segments (continued)

Reconciliationsofreportablesegmentrevenuesandprofitorloss

2010 2009 RM’000 RM’000

Profit or loss Totalprofitorlossforreportablesegments 9,889 3,808 Financecosts (71) (53) Financeincome 40 68

Consolidatedprofitbeforetaxanddiscontinuedoperations 9,858 3,823 Incometaxexpense (1,386) (593)

Consolidatedprofitfromcontinuingoperations 8,472 3,230 Gainonsaleofdiscontinuedoperation - 1,487

8,472 4,717

Major customers

Thefollowingaremajorcustomerswithrevenueequalormorethan10%oftheGroup’stotalrevenue:

Revenue Segment 2010 2009 RM’000 RM’000

CustomerA 19,515 7,084 Automotiveparts CustomerB 11,630 6,797 Automotiveparts CustomerC 10,792 8,954 Automotiveparts CustomerD 10,080 7,196 Automotiveparts

22. Financial instruments

Certaincomparativefigureshavenotbeenpresentedfor31December2009byvirtueoftheexemptiongiveninparagraph44AAofFRS7.

22.1 Categories of financial instruments

Thetablebelowprovidesananalysisoffinancialinstrumentscategorisedasfollows: (a) Loansandreceivables(L&R); (b) Available-for-salefinancialassets(AFS);and (c) Otherliabilities(OL)



22. Financial instruments (continued)

22.1 Categories of financial instruments (continued)

Carrying L&R/ amount (OL) AFS 2010 RM’000 RM’000 RM’000

Financial assets Group Otherinvestments 11,869 - 11,869 Tradeandotherreceivables 23,296 23,296 - Cashandcashequivalents 20,609 20,609 -

55,774 43,905 11,869

Company Otherinvestments 1,509 - 1,509 Tradeandotherreceivables 26 26 -

1,535 26 1,509

Financial liabilities Group Tradeandotherpayables 17,626 17,626 -

Company Tradeandotherpayables 5,332 5,332 -

22.2 Financial risk management TheGrouphasexposuretothefollowingrisksfromitsuseoffinancialinstruments: • Creditrisk • Liquidityrisk • Marketrisk

22.3 Credit risk

CreditriskistheriskofafinanciallosstotheGroupifacustomerorcounterpartytoafinancialinstrument fails to meet its contractual obligations. The Group’s exposure to credit risk arisesprincipallyfromitsreceivablesfromcustomersandinvestmentsecurities.

Receivables Risk management objectives, policies and processes for managing the risk

Managementhasacreditpolicyinplaceandtheexposuretocreditriskismonitoredonanongoing

basis.Formal credit evaluationsareperformedonnewcustomerswhileperiodic informal creditevaluationsareperformedformonitoringpurposes.




22.3 Credit risk (continued)

Exposure to credit risk, credit quality and collateral

Asattheendofthereportingperiod,themaximumexposuretocreditriskarisingfromreceivablesisrepresentedbythecarryingamountinthestatementoffinancialposition.

Management has taken reasonable steps to ensure that receivables that are neither past due norimpairedarestatedattheirrealisablevalues.AsignificantportionofthesereceivablesareregularcustomersthathavebeentransactingwiththeGroup.TheGroupusesageinganalysistomonitorthecreditqualityofthereceivables.Anyreceivableshavingsignificantbalancespastduemorethan120days,whicharedeemedtohavehighercreditrisk,aremonitoredindividually.

Impairment losses Theageingofreceivablesasattheendofthereportingperiodwas:

Individual Gross impairment Net RM’000 RM’000 RM’000

2010 Notpastdue 16,429 - 16,429 Pastdue0-30days 3,206 83 3,123 Pastdue31-120days 1,299 9 1,290 Pastduemorethan120days 307 238 69

21,241 330 20,911

2009 Notpastdue 12,895 - 12,895 Pastdue0-30days 2,289 11 2,278 Pastdue31-120days 1,150 59 1,091 Pastduemorethan120days 378 165 213

16,712 235 16,477




22.3 Credit risk (continued)

Themovementintheallowanceforimpairmentlossesoftradereceivablesduringthefinancialyearwere:

2010 RM’000

At1January 235 Impairmentlossrecognised 215 Impairmentlossreversed (103) Impairmentlosswrittenoff (17)

At31December 330

Theallowanceaccountinrespectoftradereceivablesisusedtorecordimpairmentlosses.UnlesstheCompanyissatisfiedthatrecoveryoftheamountispossible,theamountconsideredirrecoverableiswrittenoffagainstthereceivabledirectly.

Other investments

Risk management objectives, policies and processes for managing the risk Investmentsareallowedonlyinliquidsecuritiesandonlywithreputablefinancialinstitutions.

Exposure to credit risk, credit quality and collateral Asattheendofthereportingperiod,theGrouphasonlyinvestedinunittrust(Note7)withreputable

financialinstitutions.ThemaximumexposuretocreditriskisrepresentedbythecarryingamountsasdisclosedinNote22.6.

Theseinvestmentsareunsecured.

Impairment losses

Asattheendofthereportingperiod,therewasnoindicationthattheinvestmentsarenotrecoverable.




22.4 Liquidity risk

LiquidityriskistheriskthattheGroupwillnotbeabletomeetitsfinancialobligationsastheyfalldue.TheGroup’sexposuretoliquidityriskarisesprincipallyfromitsvariouspayables.

TheGroupmaintainsalevelofcashandcashequivalentsdeemedadequatebythemanagementtoensure,asfaraspossible,thatitwillhavesufficientliquiditytomeetitsliabilitieswhentheyfalldue.

Maturity analysis

ThetablebelowsummarisesthematurityprofileoftheGroup’sfinancialliabilitiesasattheendofthereportingperiodbasedonundiscountedcontractualpayments:

Carrying Contractual Under 1 amount cash flows year RM’000 RM’000 RM’000

Group Tradepayables 9,251 9,251 9,251 Non-tradepayables 8,375 8,375 8,375

Company Non-tradepayables 5,332 5,332 5,332

22.5 Market risk

Marketriskistheriskthatchangesinmarketprices,suchasforeignexchangerates,interestratesandotherpriceswillaffecttheGroup’sfinancialpositionorcashflows.

22.5.1 Currency risk

TheGroup’sexposuretoforeigncurrencyriskisonpurchasesthataredenominatedincurrenciesotherthanthefunctionalcurrenciesoftheGroupentities.Thecurrenciesgivingrisetothisriskare primarily US Dollar (USD), Japanese Yen (JPY), Euro Dollar (EURO), Singapore Dollar(SGD),ThailandBaht(THB)andAustralianDollar(AUD).

Risk management objectives, policies and processes for managing the risk TheGroupdoesnotengageinforeigncurrencyhedgingonitsforeigncurrencyexposuresbutthe

managementismonitoringtheseexposuresonanongoingbasis.




22.5 Market risk (continued)

22.5.1 Currency risk (continued)

Exposure to foreign currency risk

TheGroup’sexposuretoforeigncurrency(acurrencywhichisotherthanthecurrencyof theGroupentities)risk,basedoncarryingamountsasattheendofthereportingperiodwas:

Denominated in Group USD JPY EUR SGD THB AUD RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2010 Otherreceivables 309 317 - - - - Tradepayables (1,187) (93) (272) - - (21) Otherpayables - - - (30) (28) -

Exposure in the statement of financial position (878) 224 (272) (30) (28) (21)

2009 Otherreceivables 52 - - - - - Tradepayables (1,035) (172) (579) - - (48) Otherpayables - (38) - - (27) -

Exposure in the statement of financial position (983) (210) (579) - (27) (48)

Currency risk sensitivity analysis

A10%strengtheningoftheRinggitMalaysiaagainstthefollowingcurrenciesattheendofthereportingperiodwouldhaveincreasedequityandpost-taxprofitorlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariablesremainedconstant.

Profit Equity or loss 2010 RM’000 RM’000

USD 66 66 JPY (17) (17) EUR 20 20




22.5 Market risk (continued)

22.5.1 Currency risk (continued)

A10%weakeningofRinggitMalaysiaagainsttheabovecurrenciesattheendofthereportingperiodwouldhavehadequalbutoppositeeffectontheabovecurrenciestotheamountsshownabove,onthebasisthatallothervariablesremainedconstant.

TheexposuretocurrencyriskoftheGrouponSGD,THBandAUDisnotmaterialandhence,sensitivityanalysisisnotpresented.

22.5.2 Other price risk

EquitypriceriskarisesfromtheGroup’sinvestmentsinequitysecurities.

Risk management objectives, policies and processes for managing the risk ManagementoftheGroupmonitorstheequityinvestmentsonaportfoliobasis.Allbuyandsell

decisionsareapprovedbyBoardofDirectorsoftheGroup.

22.6 Fair value of financial instruments

The carrying amounts of cash and cash equivalents, short term receivables and payablesapproximatefairvaluesduetotherelativelyshorttermnatureofthesefinancialinstruments.

Thefairvaluesofotherfinancialassets,togetherwiththecarryingamountsshowninthestatementoffinancialposition,areasfollows:

2010 2009 Carrying Fair Carrying Fair amount value amount value RM’000 RM’000 RM’000 RM’000 Group Investmentsinunittrust,quoted 11,869 11,869 11,744 11,847

Company Investmentsinunittrust,quoted 1,509 1,509 - -

Investment in equity securities

The fair values of the financial assets that are quoted in an active market are determined byreferencetotheirquotedclosingbidpriceattheendofthereportingperiod.



23. Capital management

TheGroup’sobjectiveswhenmanagingcapital is tomaintaina strongcapitalbaseand safeguard theGroup’sabilitytocontinueasagoingconcern,soastomaintaininvestor,creditorandmarketconfidenceandtosustainfuturedevelopmentofthebusiness.TheDirectorsmonitorandaredeterminedtomaintainaconsolidatedshareholders’equitythatcomplieswithregulatoryrequirements.

Under the requirement of Bursa Malaysia Practice Note No. 17/2005, the Company is required tomaintainaconsolidatedshareholders’equityequaltoornotlessthanthe25percentoftheissuedandpaid-upcapital(excludingtreasuryshares)andsuchshareholders’equityisnotlessthanRM40million.TheCompanyhascompliedwiththisrequirement.

24. Operating leases

Leases as lessor

TheGroupleasesoutitsinvestmentpropertiesunderoperatingleases(seeNote4).Thefutureminimumleasepaymentsundernon-cancellableleasesareasfollows:

2010 2009 RM’000 RM’000

Lessthanoneyear 164 136 Betweenoneandfiveyears 117 144 Morethanfiveyears - -

25. Related parties

Identity of related parties

Forthepurposesofthesefinancialstatements,partiesareconsideredtoberelatedtotheGroupiftheGrouportheCompanyhastheability,directlyorindirectly,tocontrolthepartyorexercisesignificantinfluenceoverthepartyinmakingfinancialandoperatingdecisions,orviceversa,orwheretheGrouportheCompanyandthepartyaresubjecttocommoncontrolorcommonsignificantinfluence.Relatedpartiesmaybeindividualsorotherentities.

Keymanagementpersonnelaredefinedasthosepersonshavingauthorityandresponsibilityforplanning,directingandcontrollingtheactivitiesoftheGroupeitherdirectlyorindirectly.Thekeymanagementpersonnel include all the Directors of the Group, and certain members of senior management of theGroup.



25. Related parties (continued)

Amount Allowance for transacted for Gross balance impairment Net balance the year ended outstanding at loss at outstanding at Group 31 December 31 December 31 December 31 December 2010 RM’000 RM’000 RM’000 RM’000

San Yes Automotive Technology Co. Ltd. (“San Yes”) Royalties 4 - - - Purchaseofrawmaterials 304 - - - Purchaseofconsumables 56 - - -

Sugihara Co. Ltd. (“SUGI-Japan”) Technicalassistancefees 40 (320) - (320) Royalties 461 (2,398) - (2,398) Otherexpenses 121 - - -

2009

San Yes Automotive Technology Co. Ltd. (“San Yes”) Royalties 3 - - - Purchaseofrawmaterials 145 - - - Purchaseofconsumables 17 - - -

Sugihara Co. Ltd. (“SUGI-Japan”) Technicalassistancefees 40 (296) - (296) Royalties 390 (2,886) - (2,886) Otherexpenses 56 - - -

Company 2010

Machinery and Industrial Supplies Sdn. Bhd. Advances - (5,120) - (5,120)

2009 Machinery and Industrial Supplies Sdn. Bhd. Advances - (5,120) - (5,120)



25. Related parties (continued)

SanYesisasubstantialshareholderoftheCompanythroughits interestofmorethantwentypercent(20%)inMIYESHoldingsSdn.Bhd.(“MIYES”).TheCompanyDirectorsChamBeeSim,NgWaiKeeandYapSiewFoonghaveindirectinterestinMIYES.ChamBeeSimandNgWaiKeearealsodirectorsofMIYES.

SUGI-Japanholdsdirectequityinterestofmorethantwentypercent(20%)inasubsidiaryoftheCompany,SugiharaGrandIndustriesSdn.Bhd.(“SUGI”).DirectorsofSUGI,ShigeruSugiharaandShosoSugiharaareDirectorsandsubstantialshareholdersofSUGI-Japan.

Alltheamountsoutstandingareunsecuredandexpectedtobesettledbycash.26. Capital commitments

Group 2010 2009 RM’000 RM’000

Plant and equipment Contractedbutnotprovidedforandpayable: Lessthanoneyear 748 80

27. Significant changes in accounting policies

Fair value reserve 2010 2009 RM’000 RM’000

Group At1January,aspreviouslystated - - AdjustmentsarisingfromadoptionofFRS139: - Fairvaluationofquotedsecuritiesclassifiedasavailable-for-sale 220 -

At1January,asrestated 220 -

27.1 FRS 139, Financial Instruments: Recognition and Measurement

TheadoptionofFRS139hasresultedinseveralchangestoaccountingpoliciesrelatingtorecognitionandmeasurementoffinancialinstruments.Significantchangesinaccountingpoliciesareasfollows:



27. Significant changes in accounting policies (continued)

27.1 FRS 139, Financial Instruments: Recognition and Measurement (continued)

Impairment of trade and other receivables PriortotheadoptionofFRS139,anallowancefordoubtfuldebtswasmadewhenareceivableis

consideredirrecoverablebythemanagement.WiththeadoptionofFRS139,animpairmentlossisrecognisedfortradeandotherreceivablesandismeasuredasthedifferencebetweentheasset’scarrying amount and the present value of estimated future cash flows discounted at the asset’soriginaleffectiveinterestrate.

Thesechangesinaccountingpolicieshavebeenmadeinaccordancewiththetransitionalprovisionsof FRS 139. In accordance to the transitional provisions of FRS 139 for first-time adoption,adjustmentsarisingfromremeasuringthefinancialinstrumentsatthebeginningofthefinancialyearwererecognisedasadjustmentsoftheopeningbalanceofretainedearningsoranotherappropriatereserve.Comparativesarenotadjusted.

Consequently, theadoptionofFRS139doesnotaffect thebasicearningsperordinary share forpriorperiods.ItisnotpracticabletoestimatetheimpactarisingfromtheadoptionofFRS139tothecurrentyear’sbasicearningspershare.

Investments in equity securities

PriortotheadoptionofFRS139,investmentsinnon-currentequitysecurities,otherthaninvestmentsinsubsidiariesweremeasuredatcost lessallowance fordiminution invaluewhich isother thantemporary. With the adoption of FRS 139, quoted investments in non-current equity securities,other than investments insubsidiariesarenowcategorisedandmeasuredasavailable-for-saleasdetailedinNote2(c).

27.2 FRS 8, Operating Segments

Asof1January2010,theGroupdeterminesandpresentsoperatingsegmentsbasedontheinformationthatinternallyisprovidedtotheChiefExecutiveOfficer,whoistheGroup’schiefoperatingdecisionmaker. This change in accounting policy is due to the adoption of FRS 8. Previously operatingsegmentsweredeterminedandpresentedinaccordancewithFRS1142004,SegmentReporting.

Comparative segment informationhasbeen re-presented.Since thechange inaccountingpolicyonlyimpactspresentationanddisclosureaspects,thereisnoimpactonearningspershare.

27.3 FRS 101(revised), Presentation of Financial Statements

TheGroupappliesFRS101(revised)whichbecameeffectiveasof1January2010.Asaresult,theGrouppresentsallnon-ownerchangesinequityintheconsolidatedstatementofcomprehensiveincome.

Comparativeinformationhasbeenre-presentedsothatitisinconformitywiththerevisedstandard.Sincethechangeonlyaffectspresentationaspects,thereisnoimpactonearningspershare.



27. Significant changes in accounting policies (continued)

27.4 FRS 117, Leases

The Group has adopted the amendment to FRS 117. The Group has reassessed and determinedthatallleaseholdlandoftheGroupwhichareinsubstanceisfinanceleasesandhasreclassifiedtheleaseholdlandtoproperty,plantandequipment.Thechangeinaccountingpolicyhasbeenmaderetrospectivelyinaccordancewiththetransitionalprovisionsoftheamendment.

Thereclassificationdoesnotaffectthebasicanddilutedearningsperordinaryshareforthecurrentandpriorperiods.

28. Comparative figures

28.1 FRS 101(revised), Presentation of Financial Statements

ArisingfromtheadoptionofFRS101(revised),incomestatementsfortheyearended31December2009 have been re-presented as statement of comprehensive income. All non-owner changes inequitythatwerepresentedinthestatementofchangesinequityarenowincludedinthestatementof comprehensive income as other comprehensive income. Consequently, components ofcomprehensiveincomearenotpresentedinthestatementofchangesinequity.

28.2 FRS 117, Leases

FollowingtheamendmenttoFRS117,certaincomparativeshavebeenre-presentedasfollows:

Group 31.12.2009 1.1.2009 As As As previously As previously restated stated restated stated RM’000 RM’000 RM’000 RM’000

Cost Property,plantandequipment 62,859 60,276 62,838 60,255 Prepaidleasepayments - 2,583 - 2,583

Accumulated depreciation/ amortisation Property,plantandequipment 39,984 39,375 37,068 36,495 Prepaidleasepayments - 609 - 573

Carrying amount Property,plantandequipment 22,875 20,901 25,770 23,760 Prepaidleasepayments - 1,974 - 2,010

Depreciationofproperty,plant andequipment 3,617 3,581 - -



29. Supplementary information on the breakdown of realised and unrealised profits or losses

On25March2010,BursaMalaysiaSecuritiesBerhad(“BursaMalaysia”)issuedadirectivetoalllistedissuerspursuanttoParagraphs2.06and2.23ofBursaMalaysiaMainMarketListingRequirements.Thedirectiverequiresalllistedissuerstodisclosethebreakdownoftheunappropriatedprofitsoraccumulatedlossesasattheendofthereportingperiod,intorealisedandunrealisedprofitsorlosses.

On 20 December 2010, Bursa Malaysia further issued another directive on the disclosure and theprescribedformatofpresentation.ThebreakdownofretainedearningsoftheGroupandoftheCompanyasat31December2010,intorealisedandunrealisedprofits,pursuanttothedirective,isasfollows:

Group Company 2010 2010 RM’000 RM’000

TotalretainedearningsoftheCompanyanditssubsidiaries: - Realised 59,325 3,862 - Unrealised (735) -

58,590 3,862 Less:Consolidationadjustments (33,432) -

Totalretainedearnings 25,158 3,862

ThedeterminationofrealisedandunrealisedprofitsisbasedontheGuidanceofSpecialMatterNo.1,Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements,issuedbytheMalaysianInstituteofAccountantson20December2010.


ANALYSIS OF SHAREHOLDINGS AuthorisedShareCapital : RM60,000,000IssuedandPaid-upShareCapital : RM44,800,000ClassofShares : OrdinarySharesofRM1.00eachVotingRights : Onevotepershare

(Against Total Issued Capital of 42,248,900) No of % of No. of % of Shareholders/ Shareholders/ Shares/ Issued Size of Holdings Depositors Depositors Securities Capital *

1- 99 9 0.71 289 0.0007 100- 1,000 314 24.80 297,075 0.7032 1,001- 10,000 695 54.90 3,320,700 7.8598 10,001- 100,000 217 17.14 6,754,500 15.9874 100,001-2,112,444 28 2.21 10,537,000 24.94032,112,445andabove 3 0.24 21,339,336 50.5086

Total 1,266 100.00 42,248,900 100.0000

TotalNo.ofShareholders/Depositors : 1,266TotalShareholdings/Securities : 42,248,900TotalPercentage(%) : 100.0000* Excludes2,551,100OrdinarySharesofRM1.00eachboughtbackby theCompanyandheldas treasury

sharesasat7April2011.

Shareholdings Statisticsasat7April2011


LIST OF TOP 30 SHAREHOLDERS / DEPOSITORS Normal HoldingNo Name Holdings Percentage %*

1 MIYESHOLDINGSSDNBHD 15,680,000 37.112 HSBCNOMINEES(ASING)SDNBHD 3,520,000 8.33 EXEMPTANFORBSISA(BSIBKSG-NR)3 MOHDRIANIBINOSMAN 2,139,336 5.064 CHANGKUN-SHENG 1,948,700 4.615 YAPSIEWFOONG 1,263,730 2.996 NGENGBEE 806,838 1.907 TEHHEANIT 767,100 1.818 NGWAIKEE 640,900 1.519 NGENGBEE 560,000 1.3210 YEOHKEANHUA 430,000 1.0111 ENGKIMLIAN 380,964 0.9012 CHONGTECKHOO@CHAMTECKHOO 362,089 0.8513 CHAMBEESENG@CHIAMBEESENG 350,089 0.8214 PUBLICNOMINEES(TEMPATAN)SDNBHD 336,200 0.79 PLEDGEDSECURITIESACCOUNTFORYEWTEKHOON(E-BMM)15 AMBANK(M)BERHAD 250,000 0.59 PLEDGEDSECURITIESACCOUNTFORMOHDRIANIBINOSMAN (SMART)16 MAYBANNOMINEES(TEMPATAN)SDNBHD 225,000 0.53 PLEDGEDSECURITIESACCOUNTFORLEEHASING17 TANKAISENG@TANGKIASENG 217,000 0.5118 CIMSECNOMINEES(TEMPATAN)SDNBHD PLEDGEDSECURITIESACCOUNTFORCHEEHIANBOON@ CHEEAHDECK(KUCHING) 189,000 0.4419 CITIGROUPNOMINEES(TEMPATAN)SDNBHD 170,000 0.40 PLEDGEDSECURITIESACCOUNTFORLIMCHAIGUAN(474333)20 CHANSENGCHEONG 157,500 0.3721 FOOTECKSENG 150,000 0.3522 HDMNOMINEES(TEMPATAN)SDNBHD 150,000 0.35 PLEDGEDSECURITIESACCOUNTFORKOAYTENGHUP(M01)23 CHAMBEESIM 149,572 0.3524 NGKWEEENG 142,018 0.3325 PUBLICINVESTNOMINEES(TEMPATAN)SDNBHD 140,000 0.33 PLEDGEDSECURITIESACCOUNTFORKOAYYANWAH(M)26 CHEAKYEWKUN 136,100 0.3227 TEOTINLUN 132,000 0.3128 LIUSIN 130,000 0.3029 LEEANGEE 129,000 0.3030 MERCSECNOMINEES(TEMPATAN)SDNBHD 118,200 0.27 PLEDGEDSECURITIESACCOUNTFORYEWTEKHOON

TOTAL 31,771,336 75.06

* Excludes2,551,100OrdinarySharesofRM1.00eachboughtbackby theCompanyandheldas treasurysharesasat7April2011.

Shareholdings Statistics (continued)asat7April2011


SUBSTANTIAL SHAREHOLDERS AS PER REGISTER OF SUBSTANTIAL SHAREHOLDERS AS AT 7 APRIL 2011 Direct Interest Indirect Interest % of Issued % of IssuedName of Substantial Shareholder No. of Shares Capital* No. of Shares Capital*MIYESHoldingsSdnBhd(“MIYES”) 15,680,000 37.11 - -UmberstonHoldingsSdnBhd(“Umberston”) - - 15,680,000(1) 37.11SanYesAutomotiveTechnologyCo.,Ltd - - 15,680,000(1) 37.11NgKweeEng 142,018 0.34 15,680,000(2) 37.11YapSiewFoong 1,263,730 2.99 15,680,000(2) 37.11MohdRianibinOsman 2,389,336 5.66 - -

* Excludes2,551,100OrdinarySharesofRM1.00eachboughtbackby theCompanyandheldas treasurysharesasat7April2011.

(1) deemedinterestedthroughMIYES(2) deemedinterestedthroughUmberstonandMIYESDIRECTORS’ SHAREHOLDING AS PER REGISTER OF DIRECTORS’ SHAREHOLDING AS AT 7 APRIL 2011 Direct Interest Indirect Interest % of Issued % of IssuedName of Director No. of Shares Capital* No. of Shares Capital*MohdRianibinOsman 2,389,336 5.66 - -YapSiewFoong 1,263,730 2.99 15,680,000(1) 37.11NgWaiKee 700,900 1.66 15,680,000(1) 37.11ChamBeeSim 249,572 0.59 15,680,000(1) 37.11DannyNgSiewL’Leong - - - -PaulineTeh@PaulineTehAbdullah - - - -MohamedGhazalibinKamalBaharein - - - -FooLeeKhean - - - -* Excludes2,551,100OrdinarySharesofRM1.00eachboughtbackby theCompanyandheldas treasury

sharesasat7April2011.(1) deemedinterestedthroughUmberstonandMIYES

Shareholdings Statistics (continued)asat7April2011


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Particulars of Properties


NOTICEISHEREBYGIVENTHATtheTwelfthAnnualGeneralMeetingoftheCompanywillbeheldatKualaLumpurGolf&CountryClub,No.10, Jalan1/70D,OffJalanBukitKiara,60000KualaLumpuronFriday,27May2011at10.00a.m.totransactthefollowingbusinesses:-

AGENDAAs Ordinary Business

1. ToreceiveandadopttheAuditedFinancialStatementsforthefinancialyearended31December2010togetherwiththeDirectors’andAuditors’Reportsthereon. Ordinary Resolution 1

2. ToapprovetheincreaseofDirectors’FeesfromRM136,000forthefinancialyearended31December2009toRM144,000forthefinancialyearended31December2010. Ordinary Resolution 2

3. Tore-electthefollowingDirectorsretiringunderArticle103oftheCompany’sArticlesofAssociation:-

i) EncikMohdRianiBinOsman Ordinary Resolution 3 ii) MsPaulineTeh@PaulineTehAbdullah Ordinary Resolution 4 iii) MrFooLeeKhean Ordinary Resolution 5

4. To re-appoint Messrs KPMG as Auditors of the Company and to authorise the Directors to fix theirremuneration. Ordinary Resolution 6

As Special Business

Toconsiderand,ifthoughtfit,topassthefollowingresolutions:-

5. Authority under Section 132D of the Companies Act, 1965 (“the Act”) for the Directors to allot and issue shares

“THATpursuanttoSection132DoftheAct,theDirectorsbeandareherebyauthorisedtoallotandissuesharesintheCompanyatanytimeandfromtimetotimeuntiltheconclusionofthenextAnnualGeneralMeeting(“AGM”)uponsuchtermsandconditionsandforsuchpurposesastheDirectorsmay,intheirabsolutediscretion,deemfitprovidedthattheaggregatenumberofsharestobeissueddoesnotexceedtenpercentum(10%)oftheissuedsharecapitaloftheCompany(excludingtreasuryshares)forthetimebeing,subjectalwaystotheapprovalofallrelevantregulatorybodiesbeingobtainedforsuchallotmentandissue.” Ordinary Resolution 7

6. Proposed Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature (“Proposed Shareholders’ Mandate”)

“THAT, pursuant to Paragraph 10.09 of the Main Market Listing Requirements (“MMLR”) of BursaMalaysiaSecuritiesBerhad(“BursaSecurities”),theCompanyanditssubsidiaries(“SMISGroup”)beandareherebyauthorisedtoenterintoanyoftherecurrenttransactionsofarevenueortradingnatureassetoutunderSection2.3ofPartAoftheCirculartoShareholdersdated5May2011withtherelatedpartiesmentionedthereinwhicharenecessaryfortheSMISGroup’sday-to-dayoperations,subjectfurthertothefollowing:-

(i) thetransactionsareintheordinarycourseofbusinessonnormalcommercialtermswhicharenotmorefavourabletotherelatedpartiesthanthosegenerallyavailabletothepublicandarenottothedetrimentoftheminorityshareholdersoftheCompany;and

(ii) disclosure of the aggregate value of the transactions of the Proposed Shareholders’ MandateconductedduringthefinancialyearwillbedisclosedintheAnnualReportforthesaidfinancialyear,

ANDTHATsuchapprovalwillcontinuetobeinforceuntil:-

(i) theconclusionof thenextAGMof theCompany following the forthcomingAGMatwhich theProposed Shareholders Mandate is approved, at which time it will lapse, unless by a resolutionpassedattheMeeting,theauthorityisrenewed;

Notice of Annual General Meeting


(ii) theexpirationof theperiodwithinwhich thenextAGMof theCompany is required tobeheldpursuanttoSection143(1)oftheAct(butmustnotextendtosuchextensionsasmaybeallowedpursuanttoSection143(2)oftheAct);or

(iii) revokedorvariedbyresolutionpassedbytheshareholdersoftheCompanyingeneralmeeting,

whicheverisearlier;

ANDTHATtheDirectorsoftheCompanybeandareherebyauthorisedtocompleteanddoallsuchactsandthingsastheymayconsiderexpedientornecessarytogiveeffecttotheProposedShareholders’Mandate.” Ordinary Resolution 8

7. Proposed Renewal of Authority for the Company to Purchase its own Ordinary Shares

“THATsubject totheAct, theMemorandumandArticlesofAssociationof theCompany, theMMLRofBursaSecuritiesandtheapprovalsofallrelevantgovernmentaland/orregulatoryauthorities(ifany),theCompanybeandisherebyauthorisedtoutiliseanamountnotexceedingtheauditedretainedprofitsand/or sharepremiumof theCompanyasat31December2010ofRM3.9millionandRM4.9millionrespectively to purchase such amount of ordinary shares of RM1.00 each in the Company (“ProposedShareBuy-Back”)asmaybedeterminedbytheDirectorsoftheCompanyfromtimetotimethroughBursaSecuritiesuponsuchtermsandconditionsas theDirectorsmaydeemfitandexpedient inthe interestof theCompanyprovidedthat theaggregatenumberofsharespurchasedand/orheldpursuant to thisresolutiondoesnotexceedtenpercentum(10%)oftheissuedandpaid-upsharecapitaloftheCompany;

THATanamountnotexceedingtheCompany’ssharepremiumaccountandretainedprofitsaccountbeallocatedbytheCompanyfortheProposedShareBuy-Back;

THAT authority be and is hereby given to the Directors of the Company to decide at their absolutediscretiontoeitherretainthesharessopurchasedastreasuryshares(asdefinedinSection67AoftheAct)and/ortocancelthesharessopurchasedandifretainedastreasuryshares,mayresellthetreasurysharesand/ortodistributethemassharedividendand/orsubsequentlycancelthem;

THATtheauthorityconferredbythisresolutionwillbeeffectiveimmediatelyuponthepassingofthisresolutionandwillexpireat:

(i) theconclusionofthenextAGMoftheCompany[beingtheThirteenth(“13th”)AGMoftheCompany],at which time the said authority will lapse unless by an ordinary resolution passed at a generalmeetingoftheCompany,theauthorityisrenewed,eitherunconditionallyorsubjecttoconditions;

(ii) theexpirationoftheperiodwithinwhichthe13thAGMoftheCompanyisrequiredbylawtobeheld;or

(iii) revokedorvariedbyanordinaryresolutionpassedbytheshareholdersinageneralmeeting;

whicheveroccursfirstbutnotsoastoprejudicethecompletionofthepurchase(s)bytheCompanybeforetheaforesaidexpirydateandinanyevent,inaccordancewiththeprovisionsoftheguidelinesissuedbyBursaSecuritiesand/oranyotherrelevantgovernmentaland/orregulatoryauthorities(ifany);

AND THAT the Directors of the Company be authorised to take all steps necessary to implement,completeanddoallsuchactsandthings(includingexecutingallsuchdocumentsasmayberequired)astheymayconsiderexpedientornecessarytogiveeffecttotheProposedShareBuy-Backasmaybeagreedorallowedbyanyrelevantgovernmentaland/orregulatoryauthority.” Ordinary Resolution 9

BYORDEROFTHEBOARDLIEWIRENE(MAICSA7022609)CHOONGLEEWAH(MAICSA7019418)Secretaries

SelangorDarulEhsanDate:5May2011

Notice of Annual General Meeting (continued)


NOTES:

1. AmemberoftheCompanyentitledtoattendandvoteatthemeetingisentitledtoappointnotmorethantwo(2)proxiestoattendandvoteinhisstead.AproxyneednotbeamemberoftheCompany,andtheprovisionsofSection149(1)(b)oftheCompaniesAct,1965shallnotapplytotheCompany.

2. Amembermayappointnotmorethantwo(2)proxiestoattendandvoteatthesamemeeting.Whereamemberappointsthemaximumoftwo(2)proxies,theappointmentsshallbeinvalidunlesshespecifiestheproportionofhisshareholdingstoberepresentedbyeachproxy.

3. Theinstrumentappointingaproxyshallbeinwritingunderthehandoftheappointerorofhisattorneydulyauthorisedinwritingor,iftheappointerisacorporation,eitherunderitsCommonSealorunderthehandoftheattorney.

4. Theinstrumentappointingaproxy,withthepowerofattorneyorotherauthority,ifany,underwhichitissignedoranotariallycertifiedorofficecopyofsuchpowerorauthority,mustbedepositedattheRegisteredOfficeof theCompanyatLot6.05,Level6,KPMGTower,8FirstAvenue,BandarUtama,47800Petaling Jaya, SelangorDarulEhsannot less than48hoursbefore the time set forholding themeetingoranyadjournmentthereof.

5. EXPLANATORY NOTES ON SPECIAL BUSINESS

(i) Ordinary Resolution No. 7 - Authority under Section 132D of the Companies Act, 1965 (“the Act”) for the Directors to allot and issue shares

TheCompanyhad,duringitsEleventhAnnualGeneralMeeting(“AGM”)heldon27May2010,obtained its shareholders’ approval for the general mandate for issuance of shares pursuant toSection132DoftheAct.Asatthedateofthisnotice,theCompanydidnotissueanysharespursuanttothismandateobtained.

OrdinaryResolution7proposedunder item5of theAgenda isarenewalof thegeneralmandatefor issuance of shares by the Company under Section 132D of the Act. The mandate, if passed,willprovideflexibility for theCompanyandempowertheDirectors toallotand issuenewsharesspeedily in theCompanyup toanamountnot exceeding in total10%of the issued sharecapital(excludingtreasuryshares)oftheCompanyforsuchpurposesastheDirectorsconsiderwouldbeinthe interestof theCompany.Thiswouldeliminateanydelayarisingfromandcost involvedinconveningageneralmeetingtoobtainapprovaloftheshareholdersforsuchissuanceofshares.Thisauthority,unlessrevokedorvariedbytheCompanyatageneralmeeting,willexpireatthenextAGM.

The authority will provide flexibility to the Company for any possible fund raising activities,includingbutnotlimitedtofurtherplacingofshares,forpurposeoffundinginvestmentproject(s),workingcapitaland/oracquisitions.

(ii) Ordinary Resolution No. 8 - Proposed Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature (“Proposed Shareholders’ Mandate”)

PleaserefertotheCirculartoShareholdersdated5May2011forfurtherinformation.

(iii) Ordinary Resolution No. 9 - Proposed Renewal of Authority for the Company to Purchase its own Ordinary Shares

PleaserefertotheShareBuy-BackStatementdated5May2011forfurtherinformation.

Notice of Annual General Meeting (continued)

Thispagehasbeenintentionallyleftblank.

PROXY FORM SMIS CORPORATION BERHAD(491857-V)(IncorporatedinMalaysia)

I/We,........................................................................................................................................................................................................of...............................................................................................................................................................................................................beingamemberofSMISCORPORATIONBERHADherebyappoint............................................................................................................................................................................................................................................................................................................of................................................................................................................................................................................................................orfailinghim/her...................................................................................................................................................................................of...............................................................................................................................................................................................................orfailinghim/her,*theChairmanoftheMeetingasmy/ourproxytovoteforme/usonmy/ourbehalfattheTwelfthAnnualGeneralMeetingoftheCompanytobeheldatKualaLumpurGolf&CountryClub,No.10,Jalan1/70D,OffJalanBukitKiara,60000KualaLumpuronFriday,27May2011at10.00a.m.andatanyadjournmentthereofinrespectofmy/ourshareholdinginthemannerindicatedbelow:

* Please delete the words “Chairman of the Meeting” if you wish to appoint some other person to be your proxy.

NoofShares

(Pleaseindicatewithan“X”inthespacesprovidedwhetheryouwishyourvotestobecastfororagainsttheresolutions.Intheabsenceofspecificdirections,yourproxywillvoteorabstainashe/shethinksfit.)

Datedthis.................dayof...............................2011

...................................................................... Signature/CommonSealofShareholder

No. Resolution For Against

OrdinaryResolution1 AdoptionoftheAuditedFinancialStatementsforthefinancialyearended31December2010andDirectors’andAuditors’Reports

OrdinaryResolution2 Approvalon the increaseandpaymentofDirectors’Fees for thefinancialyearended31October2010

OrdinaryResolution3 Re-electionofEncikMohdRianiBinOsmanasDirector(Article103)

OrdinaryResolution4 Re-electionofMsPaulineTeh@PaulineTehAbdullahasDirector(Article103)

OrdinaryResolution5 Re-electionofMr.FooLeeKheanasDirector(Article103)

OrdinaryResolution6 Re-appointmentofMessrsKPMGasAuditors

OrdinaryResolution7 AuthorityunderSection132DoftheCompaniesAct,1965fortheDirectorstoallotandissuesharess

OrdinaryResolution8 ProposedRenewalofExistingShareholders’MandateforRecurrentRelatedPartyTransactionsofaRevenueorTradingNature

OrdinaryResolution9 ProposedRenewalofAuthority fortheCompanytoPurchase itsownOrdinaryShares

NOTES:

1. AmemberoftheCompanyentitledtoattendandvoteatthemeetingisentitledtoappointnotmorethantwo(2)proxiestoattendandvoteinhisstead.AproxyneednotbeamemberoftheCompany,andtheprovisionsofSection149(1)(b)oftheCompaniesAct,1965shallnotapplytotheCompany.

2. Amembermayappointnotmorethantwo(2)proxiestoattendandvoteatthesamemeeting.Whereamemberappointsthemaximumoftwo(2)proxies,theappointmentsshallbeinvalidunlesshespecifiestheproportionofhisshareholdingstoberepresentedbyeachproxy.

3. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney dulyauthorisedinwritingor,iftheappointerisacorporation,eitherunderitsCommonSealorunderthehandoftheattorney.

4. Theinstrumentappointingaproxy,withthepowerofattorneyorotherauthority,ifany,underwhichitissignedoranotariallycertifiedorofficecopyofsuchpowerorauthority,mustbedepositedattheRegisteredOfficeoftheCompanyatLot6.05,Level6,KPMGTower,8FirstAvenue,BandarUtama,47800PetalingJaya,SelangorDarulEhsannotlessthan48hoursbeforethetimesetforholdingthemeetingoranyadjournmentthereof.

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THESECRETARYSMIS CORPORATION BERHAD

LOT6.05,LEVEL6KPMGTOWER

8FIRSTAVENUEBANDARUTAMA

47800PETALINGJAYASELANGORDARULEHSAN

MALAYSIA

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annual report 2010 - smishsbc bank malaysia berhad (127776-v) 2, leboh ampang, 50100 kuala lumpur,...

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