1. INTRODUCTION

• On behalf of the Board of Directors of Linear (“Board”), Kenanga Investment Bank Berhad (“KIBB”) is pleased to announce that the Company had on 14 July 2008 entered into a conditional shares sale and purchase agreement (“SSA”) with Ooi Ling See, Ng It Seng, Brian Andrew Fernandes and Lee Saw Im (collectively, the “Vendors”) to acquire an aggregate of 2,000,000 ordinary shares of RM1.00 each in Lis-Tec (“Sale Shares”), representing the entire issued and paid-up share capital of Lis-Tec (“Proposed Acquisition”).
  
  Upon completion of the Proposed Acquisition, Lis-Tec will be a wholly-owned subsidiary of Linear. Set out in the ensuring paragraphs are detailed information in respect of the Proposed Acquisition.

• 2.1 Details of the Proposed Acquisition

• • • Pursuant to the Proposed Acquisition, the Company is desirous to purchase and the Vendors are desirous to sell the Sale Shares for a total consideration of up to RM32,000,000 (“Purchase Price”) to be satisfied by the issue and allotment of up to 32,000,000 new ordinary shares of RM1.00 each in Linear at an issue price of RM1.00 each to the Vendors (“Consideration Shares”).
      
      Pursuant to the terms of the SSA, the details of the Sale Shares held by the Vendors and the proportion of the Purchase Price to the Vendors under the Proposed Acquisition are as follows:-
      
      

      Vendors	No. of Sale Shares held	% equity interest in Lis-Tec	Purchase Price (RM’000)	No. of Consideration Shares to be issued (‘000)
      Ooi Ling See *	500,000	25.0	8,000	8,000
      Ng It Seng *	500,000	25.0	8,000	8,000
      Brian Andrew Fernandes	500,000	25.0	8,000	8,000
      Lee Saw Im	500,000	25.0	8,000	8,000
      Total	2,000,000	100.0	32,000	32,000

      
      Note:
      
      * Ooi Ling See is the spouse of Ng It Seng.

• 2.2 Basis of arriving at the Purchase Price

• • • The Purchase Price was arrived at on a willing buyer-willing seller basis, after taking into consideration the following:-

• • • (i) The Guaranteed Profit (as defined in Section 3.2 below) whereby the profit after taxation (“PAT”) of Lis-Tec for the financial years ending (as the case may be) 31 December (“FYE”) 2008 and 2009 (“Profit Guarantee Period”) will be no less than the following:-

• • • (ii) The aggregate Guaranteed Profit of RM8.00 million for the FYE 2008 to 2009 which is an average of RM4.00 million for each financial year translates to a price earnings multiple (after tax) (“PE Multiple”) of approximately 8 times of the Purchase Price. It should be noted that in the event that the Guaranteed Profit is not met, the Purchase Price will be reduced accordingly as described in Section 3.2 below; and

• • • (iii) The prospects of Lis-Tec and its business.

• 2.3 Basis of arriving at the Issue Price

• • • The issue price of RM1.00 per Consideration Share (“Issue Price”) was determined on a willing buyer-willing seller basis after taking into account the following:-
      
      (i) The 5-Market Day volume weighted average market price of ordinary shares in the Company (“Linear Shares”) of RM0.43 from 7 July 2008 up to 11 July 2008, being the last Market Day prior to the date of this announcement;
      
      (ii) The closing market price of Linear Shares of RM0.47 on 11 July 2008, being the last Market Day prior to the date of this announcement; and

• • • (iii) The par value of each Linear Share of RM1.00 each, being the Linear Shares’ minimum issue price.

• 3.1 The Proposed Acquisition

• • • Pursuant to the terms of the SSA, the Company agrees to procure the Sale Shares from the Vendors for a total purchase price of up to RM32,000,000 which equates to RM16.00 per Sale Share via the issue and allotment of the Consideration Shares to the Vendors.
    • The Sale Shares shall be acquired free from all claims, charges, liens, encumbrances and equities together with all rights attaching thereto and all dividends and distributions declared paid or made in respect thereof after the Completion Date (as defined in Section 3.6 below).
      
      
    • Under the terms of the SSA, the Vendors has procured that Lis-Tec shall not declare, make or pay any dividends and distributions after the date of the SSA and any such, payments or distributions made between the date of the SSA and the Completion Date shall result in the deduction in the Purchase Price of the same amount.
      
      The Purchase Price shall be payable by the Company to the Vendors by the issuance of the Consideration Shares in the manner as set out in Section 2.1 above.
      
      Furthermore, under the SSA, two (2) of the Vendors, namely, Ooi Ling See and Ng It Seng (hereafter to be defined as the “First Vendor” and “Second Vendor”, respectively) have jointly and severally covenants the following terms with the Company:-
      
      (i) that the audited PAT of Lis-Tec for the FYE 2008 shall not be less than RM3,000,000 (the “First Guaranteed Amount”);
      
      (ii) that the audited PAT of Lis-Tec for the FYE 2009 shall not be less than RM5,000,000 (the “Second Guaranteed Amount”); and
  3.2 Payment of the Purchase Price
  

• • • (iii) that in the event that Lis-Tec’s audited aggregated PAT for the FYE 2008 and FYE 2009 is less than the aggregated First Guaranteed Amount and the Second Guaranteed Amount (collectively to be defined as the “Guaranteed Profit”) the First Vendor and Second Vendor shall compensate in full the Company in cash for the shortfall or deficiency, being the difference between the aggregated audited PAT for the Profit Guarantee Period and the Guaranteed Profit (“Shortfall Amount”), subject to a maximum compensation not exceeding the First Guaranteed Amount or the Second Guaranteed Amount, as the case may be, for each of the respective Profit Guarantee Period.

• • • For the purpose for computing the audited PAT for the FYE 2008 and FYE 2009, any PAT over and above the First Guaranteed Amount shall be carried forward to the FYE 2009 and shall form part of the audited PAT for FYE 2009. Likewise, any PAT over and above the Second Guaranteed Amount can be brought backward and added to the PAT for the FYE 2008.
      
      In determining the audited PAT, the Company shall forward to the First Vendor and Second Vendor a copy of the audited annual accounts of Lis-Tec with Lis-Tec auditor’s certificate as to the amount of the audited profit or loss after taxation within three (3) months after the relevant audited annual accounts becomes available or the date of tabling of the relevant audited annual accounts at a general meeting of the Company, whichever is the earlier (the “Relevant Date”) together with a notice of any shortfall, if any.
      
      Following from the above and pursuant to the terms of the SSA, the First Vendor and Second Vendor has guaranteed that within fourteen (14) days from the Relevant Date of the FYE 2009 or on the receipt of notice from the Company claiming a shortfall, whichever is the later, the First Vendor and Second Vendor will pay to the Company in cash and in full the Shortfall Amount.
      
    • 
      As security for the obligations of the First Vendor and Second Vendor, as described above, all the Vendors shall deposit with a stakeholder, being a person or entity to be mutually appointed by the Company and the Vendors (the “Parties”) prior to the Completion Date (as defined in Section 3.4 below) (hereinafter referred to as the “Stakeholder”), all the Consideration Shares (hereinafter referred to as the “Security Shares”). In the event that the First Vendor and Second Vendor fail to pay to the Company the Shortfall Amount, in the manner and in the time as stipulated in Section 3.2 above, and upon receipt of a written notice from the Company of the foregoing default of the First Vendor and Second Vendor, the Stakeholder shall be expressly, irrevocably and unconditionally authorized and empowered to sell the Security Shares or such part thereof in any manner and on any terms the Stakeholder deems appropriate, after ten (10) business days of receiving the Company’s written notification of non payment on the part of the First Vendor and Second Vendor and shall apply the proceeds of such sale as follows:-
  3.3 Stakeholders

• • • (i) First, payment of all costs, expenses and fees arising from the sale or sales or disposal of the Security Shares;
  • • (ii) Secondly, payment of all monies due to the Stakeholder;
      
      (iii) Thirdly, payment to make up the deficiency or shortfall in respect of the Shortfall Amount, as the case may be, as remains unpaid by the First Vendor and Second Vendor; and
      
      (iv) Fourthly, the balance remaining thereafter (if any) shall be paid to the Vendors.
      
      
    • • • (i) Approval from the Securities Commission (“SC”) for the sale and purchase of the Sale Shares and issuance of the Consideration Shares to the Vendors;(ii) Approval from Bursa Malaysia Securities Berhad (“Bursa Securities”) for the listing and quotation of the Consideration Shares on the Main Board of Bursa Securities;(iii) Approval from the SC (under the Foreign Investment Committee’s Guidelines on Acquisition on Interest, Mergers and Take-overs by Local and Foreign Interest) (“FIC Guidelines”);(iv) Approval from the shareholders of Linear; and(v) Approvals or consent of any other relevant authorities/parties, if necessary.
      The completion of the SSA is conditional upon the following conditions being fulfilled or satisfied or waived on or before the last day of the period of three (3) months from the date of the SSA or such other date as may be mutually agreed by the Parties in writing (the “Approvals Date”) (the following shall be hereinafter referred to as the “Conditions Precedent”):-
      
      (a) the approval of all relevant authorities if such approvals are required by law including but not limited to the following, which approval shall be applied for and procured by the Company at the Company’s own costs and expense:-
  3.4 Conditions Precedent to the Proposed Acquisition
  

• • • (b) the completion of a financial and legal due diligence on Lis-Tec by the Company or its agents, within two (2) months from the date of the SSA (the “Due Diligence Period”), which the due diligence does not disclose any matter that may materially adversely affect the financial, business, trading position and prospects of Lis-Tec and the results of which are satisfactory to the Company in its sole and absolute discretion; and
      
      (c) the delivery of certified true copies of Lis-Tec’s audited accounts for the FYE 2007 by the Vendors to the Company in form and substance in accordance with generally accepted accounting practices in Malaysia and copies of Lis-Tec’s latest unaudited management accounts for the financial period ended 31 May 2008 within ten (10) days from the execution of the SSA.
      
      The Company may in its sole and absolute discretion waive any of the Conditions Precedent, capable of being waived, by notice in writing to the Vendors prior to the Completion Date (as defined below in Section 3.6).
      
      In the event of the abovementioned approvals are not obtained, fulfilled or waived by the Approvals Date despite all reasonable efforts by the Parties hereto, then the SSA shall lapse and be of no further effect and thereafter the Parties shall be released from all further obligations to each other save for any antecedent breaches.
      
      
    • 
      Upon the last day of the Due Diligence Period, the Company shall deliver to the Vendors either:-
  3.5 Due Diligence

• • • (a) a written report (hereinafter referred to as the “Due Diligence Report”) detailing breaches of the warranties (or any event, fact or circumstance which, if not cured, would constitute a breach of the warranties on the Completion Date (as defined below in Section 3.4) of which the Company has become aware during the Due Diligence Period; or
      
      (b) a certificate (hereinafter referred to as the “Completion Certificate”) stating that there are no such breaches, events, facts or circumstances and that the Company is satisfied with the results of the financial and legal due diligence on Lis-Tec;

• • • and in the event neither the Due Diligence Report nor the Completion Certificate is delivered to the Vendors on or before the expiry of the Due Diligence Period, the condition in Section 3.4 (b) above shall be deemed satisfied or complied with.

• • • Where the Company delivers the Due Diligence Report, the Vendors shall within thirty (30) days from the date of receipt (the “Cure Period”) exercise their reasonable efforts to cure all of the breaches stipulated in the Due Diligence Report.
      
      If the Vendors are unable to cure all of the aforesaid breaches within the Cure Period, the Vendors shall negotiate in good faith with the Company the amount to be deducted from the Purchase Price due to the aforesaid breaches (“Adjustment Amount”). If the Vendors and the Company are unable to agree on the Adjustment Amount within thirty (30) days of the expiry of the Cure Period, the SSA shall lapse and be of no further effect and thereafter, all parties shall be released from all further obligations to each other.

• 3.6 Completion of the Proposed Acquisition

• • • Completion of the SSA shall take place at the office of the Vendors’ solicitors on the business day falling thirty (30) days from the date when the Parties have procured the compliance of the last of the Conditions Precedent (“Completion Date”) when the following actions shall be taken by the Parties hereto:-
    • (a) The Vendors shall deliver the following documents to the Vendors’ solicitors to be held as stakeholders and to be released forthwith to the Company in exchange for the documents stated in item (b) below:

• • • • • • • Instruments of Transfer
              Valid and registrable instruments of transfer of securities (Form 32A) duly executed in favour of the Company in respect of all of the Sale Shares accompanied by the relevant share certificates together with the signed stamp proforma;
          • • Pre-emption rights
              Letter of declaration signed by each of the Vendors waiving any pre-emption rights in respect of the Sale Shares whether under the Articles of Lis-Tec or under any other agreement;
            • Disclosure Letter
              Letters of Disclosure signed by each of the Vendors setting out any event or circumstance which is or has become known to the Vendor before and after 31/5/2008 which may have material effect on the decision of the Company to complete the SSA, if any;
    • • • • • Directors’ Letter of Resignation and Confirmation
              Letters of resignation from all directors of Lis-Tec which in addition shall confirm that each of the said directors have no outstanding claim against Lis-Tec or any of its subsidiaries (if any) for compensation or damages or any other sum for breach of contract, compensation for loss of office, redundancy, unfair dismissal or on any grounds whatsoever;
    • • • • • Lis-Tec’s Board Resolution
              A resolution from the board of directors of Lis-Tec confirming the said board’s approval of the transfer of the Sale Shares to the Company;
            • Auditors’ Letter of Resignation
              The resignation of the existing auditors of Lis-Tec confirming that they have no outstanding claims of any kind;

• • • • • • • Statutory Books
              The statutory books of Lis-Tec and its certificate of incorporation and common seal; and

• • • • • • • Security Shares
              The agreement to be entered into between the Stakeholder and the Vendors in relation to the Securities Shares.
    • • • • • a copy of the letter of approval from the SC and public announcement regarding the purchase of the Sale Shares and the issuance of the Consideration Shares to the Vendors;
        • • • a letter from the Stakeholder confirming that the Consideration Shares have been allotted and registered in the names of the Stakeholder; and
      (b) The Company shall have delivered the following documents to the Company’s solicitors to be held as stakeholders and to be released forthwith to the Vendors in exchange for the documents stated in item (a) above:
      

• • • • • • • Deeds of release and discharge from Lis-Tec’s bankers and creditors releasing and discharging the Vendors from all guarantees and indemnities issued, given or executed by the Vendors in respect of all loans, credit facilities or accommodations given to Lis-Tec, such documents to be in such form and substance acceptable to the Vendors.

• • • If prior to the Completion Date it shall be found that any of the warranties or undertakings on the part of the Vendors or the Company have not in all material respects been carried out or complied with or are otherwise untrue or incorrect in any material respect, the Company or the Vendors, as the case may be, shall be entitled, by notice in writing to the Vendors or the Company, as the case may be, to rescind the SSA, but failure to exercise this right shall not constitute a waiver of any other rights of the Company or the Vendors, as the case may be, or their respective legal representatives, heirs or successors in title arising out of any breach of warranty or undertaking.
      
      Rescission of the SSA shall not extinguish any right to damages to which the Company or Vendors, as the case may be, or their respective successors in title may be entitled in respect of the breach of this SSA.
      
      In the event that any of the Parties hereto shall make default in the performance of its obligations and covenants herein, the other Parties shall be entitled to the remedy of specific performance against the defaulting party and it is expressly agreed between the Parties that an alternative remedy of monetary compensation shall not be regarded as compensation or sufficient compensation for any Party’s default in the performance of the terms and conditions herein.
  3.7 Rescission of the SSA
  

• • • The Vendors irrevocably and unconditionally agrees, covenants and undertakes to and with Lis-Tec that they will not during the Prescribed Period (as defined below):-(a) be engaged, engaged or interested in any business that is in competition directly with the manufacturing business currently carried on by Lis-Tec in respect of products currently manufactured by Lis-Tec. For the avoidance of doubt, it is hereby expressly agreed that the Vendors shall be entitled to carry on any other business;
      
      (b) carry on for their own account, either alone or in partnership (or be concerned as a director in any company engaged in) any such business;
    • (c) solicit or entice away or attempt to solicit or entice away from Lis-Tec any person, firm or company who is a customer of Lis-Tec;
      
      (d) solicit or entice away, or attempt to solicit or entice away, from Lis-Tec any person who is an officer, manager, director or employee of Lis-Tec; and/or
      
      (e) in relation to any trade, business or company, use any name in such a way as to be capable of or likely to be confused with the name of Lis-Tec.
    • Whilst the abovementioned covenants are considered by the Parties to be reasonable in all the circumstances, if one or more should be held invalid as a restraint of trade or for any other reason whatsoever but would have been held valid if part of the wording thereof had been deleted or the period thereof reduced or the range of activities or area dealt with thereby reduced in scope, the said covenants will apply with such modifications as may be necessary to make them valid and effective.
      
      For the purposes of the abovementioned clauses, the “Prescribed Period” will commence from the date of the SSA and expire:-
      
      (a) Upon the termination of the SSA; or
      
      (b) Twenty-four (24) months after the date of the Second Vendor’s resignation as an employee of Lis-Tec.
      
  3.8 Non-Competition
  

• • • The Vendors shall procure that the Second Vendor enter into a service agreement with Lis-Tec (“Service Agreement”) where the material terms of which have been summarized as follows:-
      
      (i) Lis-Tec will employ the Second Vendor and the Second Vendor hereby agrees to serve as its Managing Director, commencing from the date of the Service Agreement and expiring on 31 December 2009;
      
      (ii) During the subsistence of the Service Agreement, the Second Vendor, unless otherwise instructed by the board of directors of Lis-Tec (“Lis-Tec’s Board”), shall undertake the following task, duties, responsibilities and scope of work:-
  3.9 Service Agreement
  

• • • • • • • to undertake such duties as necessary to meet the needs of Lis-Tec’s business;
            • to act in all respects according to the instructions and directions given by the Lis-Tec Board and such person(s) designated by the Lis-Tec Board; and
            • to adhere to certain scope-of-works as set out in the Service Agreement.

• 3.10 Liabilities to be assumed

• • • Save for those liabilities arising from the ordinary course of business of Lis-Tec, there will be no other liability (including contingent liabilities and guarantees) to be assumed by Linear arising from the Proposed Acquisition.

• 3.11 Additional financial commitment

• • • The Board does not foresee any other immediate requirements for any additional financial commitment or cost required in the continuation of the Lis-Tec’s operations.

• 3.12 Ranking of the Consideration Shares

• • • The Consideration Shares shall upon issue and allotment, rank pari passu with the existing Linear Shares, save and except that they will not be entitled to any dividends, rights, allotment and/or other terms of distribution that may be declared by the Purchaser, the entitlement date of which is prior to the date of allotment of the Consideration Shares.

• 3.13 Listing of the Consideration Shares

• • • Listing on Main Board of Bursa Securities will be sought for the Consideration Shares to be issued pursuant to the Proposed Acquisition.
      

• Lis-Tec was incorporated in Malaysia under the Companies Act, 1965 on 15 November 1993 as a private limited company under its present name. Lis-Tec is principally engaged in the business of designing, fabrication and manufacturing of all types of high precision tooling and assembly of automated machines.

• Lis-Tec commenced its operations of designing, fabrication and manufacturing of all types of high precision tooling and assembly of automated machines in November 1993. In 2001, Lis-Tec obtained the ISO 9001:2000 Certification from Moody International for consistently achieving a high standard of quality covering its design and fabrication of metal works, precision tooling, jigs and fixtures, carbide tolling, moulds and dies, automation systems and material handling integration. For the FYE 2007, Lis-Tec’s revenue is mainly derived from its customers located in Malaysia, China and Thailand.Lis-Tec specializes in systems engineering, machine design, automation and integration, and it provides custom products that are tailored to the needs of its customers. Its automation division which consist of mechanical, electrical and software engineers covers many areas in machine controlling and wiring, utilization of micro-controller or programmable logic controllers like Omron, Festo and etc. to control and automate the machines.
  
  With the capability to design and operate machinery, Lis-Tec is also capable of custom manufacture machine for certain industries, with easy to use Graphical User Interface (GUI). The automation division also develops and provides wires controllers, sensors, switches, and other electronic components.
  
  Over the years, the company has successfully developed and expanded its product offering into multiple industries, which includes semiconductor, rubber based product, food and hard disk drive industry with reputable customers from local and multinational companies.
  
  As at the Latest Practicable Date, Lis-Tec does not have any other subsidiary and/or associated companies.
  
  As at the date of this announcement, Lis-Tec’s authorized shared capital is RM5,000,000 comprising of 5,000,000 ordinary shares of RM1.00 each of which 2,000,000 are issued and fully paid-up. For the FYE 2007, being its latest available audited financial statements, Lis-Tec recorded a PAT of RM522,888 on the back of approximately RM10.66 million revenue. As at 31 December 2007, Lis-Tec’s authorized audited NA is approximately RM6.71 million whilst its net tangible assets is approximately RM0.99 million.

• Please refer to Appendix 1 for the summary of the audited financial statements for Lis-Tec for the past five (5) financial years up to the FYE 2007.

• The details of the Vendors are as follows:-

Name of Vendor	Nationality	% equity interest in Lis-Tec	Position in Lis-Tec
Ooi Ling See *	Malaysian	25.0	Executive Director
Ng It Seng *	Malaysian	25.0	Managing Director
Brian Andrew Fernandes	Malaysian	25.0	Executive Director
Lee Saw Im	Malaysian	25.0	Executive Director
		100.0

• Note:
  
  * Ooi Ling See is the spouse of Ng It Seng.

• The original cost of investment of the Vendors in Lis-Tec and the dates of such investment are set out in the tables below:-

Vendors	Date of Investment	No. of Lis-Tec shares	Cost of Investment (RM)
Ooi Ling See	15 November 1993	50,000	50,000
	5 May 1997	200,000	200,000
	10 September 2003	500,000	500,000
	28 December 2004	250,000	250,000
	1 July 2008	(500,000)	(500,000)
		500,000	500,000

Vendors	Date of Investment	No. of Lis-Tec shares	Cost of Investment (RM)
Ng It Seng	15 Nov 1993	50,000	50,000
	5 May 1997	200,000	200,000
	10 September 2003	500,000	500,000
	28 December 2004	250,000	250,000
	1 July 2008	(500,000)	(500,000)
		500,000	500,000

Vendors	Date of Investment	No. of Lis-Tec shares	Cost of Investment (RM)
Brian Andrew Fernandes	1 July 2008	500,000	500,000
		500,000	500,000

Vendors	Date of Investment	No. of Lis-Tec shares	Cost of Investment (RM)
Lee Saw Im	1 July 2008	500,000	500,000
		500,000	500,000

• • • Currently, the Group offers market expertise in the areas of manufacturing, marketing, sales and distribution of heating, ventilation and air-conditioning (“HVAC”) products, multi-disciplinary engineering services and integrated HVAC solutions - acting as a single source provider for clients who require a comprehensive range of HVAC products and the engineering expertise to develop infrastructure required to facilitate them.
      
      In the future the Board expects that, the Group’s integrated HVAC solutions will require more advanced and sophisticated automation design and mechanical engineering expertise. As such with the Proposed Acquisition, the technical capabilities of Lis-Tec in automation and precision engineering would be invaluable in strengthening the internal research and development capabilities of the Group.
    
    
    • The completion of the Proposed Acquisition will also enable the Group to divert some of its external fabrication and tooling support internally as Lis-Tec currently has in-house machining facilities that provide high precision machining services to its existing customers. The Group expects this will allow better quality control and minimize cost to its existing products and deliverables.
  The Board believes the Proposed Acquisition is expected to provide synergistic values that will bring positive impact to Linear and its subsidiary companies (the “Group”) post completion including, inter-alia , the following:-
  
  6.1 Strengthening of the Group’s in-house engineering capabilities
  6.2 Support the Group’s internal machine parts fabrication requirements and tooling support

• • • Lis-Tec’s market in the tooling and automation industry will offer the Group with a new revenue stream that will extend the Group’s current product and services offering with potential for cross-business development by tapping the existing customers of Lis-Tec.
  6.3 Expand the Group’s market into the tooling and automation industry.

• Resulting from the abovementioned rationales, the enlarged Group after the completion of the Proposed Acquisition is expected to benefit substantially from the synergies to be derived in terms of strengthening in-house engineering capabilities, supporting the Group’s current HVAC business and expansion of the Group’s market into the tooling and automation industry.

• The Board is of the view that the prospect of Lis-Tec is favourable considering the factors set out below:-

• 7.1 Overview and Outlook of the Malaysian Economy

• • • The Malaysian economy grew 6.3% in 2007, exceeding the original forecast of 6%, despite an environment of global economic uncertainties. The fourth quarter real gross domestic product (“GDP”) was up strong at 7.3%, compared with 5.7%, in the corresponding quarter in 2006, supported by expansion in all sectors.
      
      Bank Negara Malaysia stated that the strong performance of the Malaysian economy was driven by the robust domestic demand, through strong private consumption and investment activities.
      
      Domestic demand grew 9.8% in 4^th Quarter 2007 on the back of a high 11.1% increase in private consumption, attributable to the higher disposal income, brought about by the rising commodity prices, salary increment in the public service and the stable employment situation.
      
      Gross investments in fixed assets also grew 11% due to higher private investments as well as increased Government spending on various development activities including upgrading public utilities and transportation infrastructure.
      
      (Source: Malaysian economy grew 6.3% in 2007, 27 March 2008, Malaysian Industrial Development Authority)

• • • The first half of 2008 saw the Malaysian economy performing well with GDP growth at a higher than expected pace of 7.1%. Thus far, export growth remains relatively resilient, underpinned by higher demand for non-electronic and electrical (“E&E”) products namely, crude oil, natural gas and crude palm oil which offset the decline in the exports of E&E.
      
      The outlook on the Malaysian economy for the second half of 2008 is dependent on a few factors:- (1) the effect of the recent cut in petrol subsidy on local inflation rate, (2) extend of repercussion on consumer spending and hence domestic demand, and (3) any monetary response to the expected upsurge in inflation.
      
      Based on Bank Negara Malaysia Annual Report 2007, the forecast GDP for the Malaysian economy is approximately 5.5% with the Malaysian Rating Corporation Berhad forecasting a slightly lower forecast of approximately 5.2% for the same period.
      
      (Source: Economic Research, 2H 2008 Economic Outlook: Bumpy ride ahead , Malaysian Rating Corporation Berhad, July 2008)

• 7.2 Overview and Outlook of the Manufacturing Industry

• • • The manufacturing sector grew 5.6% in 4Q as compared with 4% in the same quarter in 2006, supported by expansion in the domestic-oriented industries. Output of the domestic-oriented industries expanded 11.1% due to higher demand in the transport equipment, food and beverages and the building materials industries. There was also improvement in the production of export-oriented industries, attributable to the better performance in the electrical and electronic industry in particular computers and peripherals.
      
      (Source: Malaysian economy grew 6.3% in 2007, 27 March 2008, Malaysian Industrial Development Authority)
      
      The manufacturing sector added 6.9% in the first quarter, supported by expansion in both the export and domestic-oriented industries. The stronger performance in the manufacturing sector was driven by the increased domestic and regional demands for resource-based products, particularly petroleum and chemical products. The computer and parts segment within the E&E industry, recorded a strong 17.4% growth, led by demand from non-United States of America markets, especially Europe and Asia. Output from semiconductor products grew at a slower 0.3%.
      
      Malaysia’s manufacturing sales in April 2008 recorded a double-digit growth of 18.5% or RM7.6 billion to reach RM48.27 billion vis-à-vis the corresponding month in 2007, according to the latest release from the Department of Statistics.
      
      (Source: Malaysian economy grew 7.1% in Q1, 19 June 2008, Malaysian Industrial Development Authority)
      
      The year-on-year growth was mainly driven by significant increases in the five major industries – refined petroleum products (44.8%), computers and computer peripherals (55.7%), basic iron and steel products (44.9%), other basic industrial chemicals except fertilizers and nitrogen compounds (37.3%) and television and radio receivers, sound or video recording or reproducing apparatus, and associated goods (27.2%).
      
      
      (Source: Manufacturing sales up 18.5% in April’08, 14 July 2008, Malaysian Industrial Development Authority)

• • • Lis-Tec’s continued success will depend substantially upon the abilities and continued efforts of its existing Managing Director, Mr Ng It Seng and the other members of its management team. Lis-Tec relies substantially to a certain extent on the abovementioned personnel as they have extensive knowledge and experience in the tooling manufacturing industry and the conceptualization, design and development of automation solutions as well as marketing networks. The loss of any of the above personnel may adversely affect Lis-Tec’s performance.
    • Nevertheless, this risk is mitigated somewhat by the Service Agreement to be entered into between Mr. Ng It Seng and Lis-Tec as part of the terms of the SSA. Furthermore, the Group also takes measures and precautious to groom younger members of the management team in key management areas to ensure that they will be provided with the necessary experience and exposure to gradually assume senior positions.
    • Lis-Tec has transactions with customers operating overseas whereby foreign currencies such as United States Dollar (“USD”) and the Chinese Renminbi (“RMB”) are used and are therefore potentially exposed to foreign exchange risk. As such any unfavorable foreign currency fluctuations may adversely and materially affect Lis Tec’s profits and indirectly the enlarged Group’s consolidated profits, upon the completion of the Proposed Acquisition.
    • At the present, the Group does not use any financial instruments to hedge its exposure against transactions in foreign currencies. However, the Group will continue to assess the need to utilize financial instruments to hedge its currency exposure taking into consideration factors such as foreign currency involved, exposure period and transaction costs.
    • At the present, save for general company and contract laws, the business activities of Lis-Tec in Malaysia is not subject to any specific legislation or regulations. However, there can be no assurance that future legislative or regulatory policy changes will not affect the operations of Lis-Tec.
    • To minimize the impact of this risk, pursuant to the Proposed Acquisition, the Group will continuously monitor the regulatory environment, the tooling and automation industry for any legislative or regulatory change that may affect the business operations of Lis-Tec.
    • The tooling and automation industry in Malaysia is highly competitive, subject to rapid technological changes and new product development. While no assurance can be given that Lis-Tec is able to maintain its competitive edge over its competitors and also its ability to maintain its customer base, it is pertinent to note that Lis-Tec may be able to chart continued growth in its business by expanding its product offering to existing and new customers in the tooling and automation industry.
    • Further, as Lis-Tec’s pool of customers consist mainly of multinational companies with presence in Malaysia as well as overseas, the criteria utilized in the selection of equipment for the manufacturing process are much more stringent where the criteria include, inter-alia, high quality standard equipments, good after sales service support, competitive pricing and also dependability of the products. Thus the risk of competition from new entries is to some extent minimized.
      
      In addition, Lis-Tec has its own in-house technical development team which is another factor contributing to its competitive edge against competitors. Lis-Tec’s automation development requires advanced technology know-how and also the expertise of its design engineers. This competitive advantage serves as barriers for new prospective entrants in the business.
    • Lis-Tec is inherently subjected to this risk due to rapid technological development. The demand for Lis-Tec’s products are affected by rapid technological developments, evolving industry standards, swift changes in customer requirements, new product introduction and enhancements. Post acquisition, the Group seeks to minimize these risks by actively and continuously pursuing technology innovation and advancement, industry best practices and strategic business alliances to address the increasing sophisticated needs for Lis-Tec’s customers. In addition, the Group will also ensure that Lis-Tec provides continuous staff development to align their skills and knowledge with the requirements of the latest technology in the tooling and automation industry.
      
      Continuous efforts will be made to increase the efficiencies of the research and development team for the development of new products and to strategically develop a continuing effective and dynamic management team to ensure the continued improvement of Lis-Tec’s performance in the future.
      
      Notwithstanding, although the Group will put in place efforts to mitigate the risk, there is no assurance that Lis-Tec will be successful in developing and marketing new products or making enhancements to its existing products.
  8.1 Dependence on Key Personnel
  
  
  8.2 Foreign Exchange Risk
  
  
  8.3 Regulatory Risk
  
  
  8.4 Competitive Conditions
  
  
  8.5 Risk Relating to Technological Obsolescence.
  

• • • Upon completion of the Proposed Acquisition, Lis-Tec will become a wholly-owned subsidiary of Linear, which is expected to contribute to the future earnings of the Group. Furthermore, the enlarged Group is also expected to benefit from the synergies as mentioned in Section 6.1 above. However, there is no assurance that the anticipated benefits from the Proposed Acquisition will be realized, or that Linear will be able to generate sufficient revenue from the Proposed Acquisition to offset the associated investment costs.
      
      In taking into account this risk, certain mechanisms under the terms and conditions of the Proposed Acquisition have been agreed which would allow the Vendors to compensate the Company in the event the Guaranteed Profit is not met thus lowering the Company’s initial cost of investment. These mechanisms are set out in Section 3 of this announcement.
  8.6 Risk Relating to the Proposed Acquisition
  

• 9.1 Earnings and Earnings per Share (“EPS”)

• • • The Proposed Acquisition is expected to be completed by the fourth quarter of 2008 and as such is not expected to have a material impact on the earnings and EPS of the Group for the FYE 2008 after taking into consideration the estimated expenses of approximately RM450,000 relating to the Proposed Acquisition. However, the Proposed Acquisition is expected to have a material positive impact on the consolidated earnings and EPS of Linear for the FYE 2009 taking into consideration the First Guaranteed Amount.

• 9.2 Net Asset (“NA”) and Gearing

• • • The proforma effects of the Proposed Acquisition on the consolidated NA, NA per share and gearing of Linear, based on the audited consolidated balance sheet of Linear and audited balance sheet of Lis-Tec as at 31 December 2007 are as follows:-

	Audited as at 31 December 2007	After theProposed Acquisition	Assuming the full exercise of the Warrants as at the Latest Practicable Date
	(RM’000)	(RM’000)	(RM’000)
Share capital	75,105	107,105 (1)	124,354 (2)
Share premium	1,439	1,439	1,439
Treasury shares	(1,999)	(1,999)	(1,999)
Other reserves	2,144	2,144	2,144
Retained (loss)/profit	(2,605)	(3,055) (3)	(3,055)
Shareholders’ Funds / NA	74,084	105,634	122,883
No. of shares in issue (‘000)	75,105	107,105	124,354
NA per Share (RM)	0.99	0.99	0.99
Total borrowings	32,588	43,982	43,892
Gearing ratio (times)	0.44	0.40	0.34

• • • Notes:-
      
      (1) After taking into account the issue and allotment of the Consideration Shares;
      
      (2) On 25 September 2003, 17,249,444 detachable warrants were granted by the Company to the subscribers of the rights shares (“Warrants”). The warrants may be exercised at any time on or after the issue date but not later than 5.00 p.m. on 24 September 2008. Each warrant entitles its registered holder, at any time during the exercise period of the warrants, to subscribe for one new ordinary share. The exercise price of each warrant is fixed at RM1.00 per share for cash subject to adjustments in accordance with the provisions of the Deed Poll. As at the Latest Practicable Date, all the 17,249,444 warrants remained unexercised;

• • • (3) After taking into account the estimated expenses in conjunction of the Proposed Acquisition of RM450,000.

• 9.3 Share Capital

• • • The proforma effects of the Proposed Acquisition on the issued and paid-up share capital of Linear are as follows:-
      
      

      	No. of Linear Shares	RM’000
      Existing as at the date of this announcement	75,105	75,105
      Issuance of the Consideration Shares	32,000	32,000
      Enlarged share capital (after the Proposed Acquisition)	107,105	107,105
      Assuming full exercise of total outstanding warrants as at the Latest Practicable Date (1)	17,249	17,249
      Enlarged share capital	124,354	124,354

      
      Note:
      
      After taking into account the exercise of the 17,249,444 outstanding Warrants;

• 9.4 Substantial Shareholders

• • • The proforma effects of the Proposed Acquisition on the substantial shareholders’ shareholding in Linear on the assumption that the Consideration Shares have been issued and allotted and assuming full exercise of total outstanding Warrants into new Linear Shares are set out in the table below:-

• All figures are rounded up to the nearest thousand ordinary shares of par value RM1.00 each in Linear.

• (1) Deemed interested by virtue of their shareholdings in Linear Holding Sdn Bhd; (2) Deemed interested by virtue of their shareholdings in Linear Holding Sdn Bhd and spouse’s shareholdings;

• (3) Assuming full exercise of 4,819,518 Warrants held;

• (4) Assuming full exercise of 743,000 Warrants held; and

• (5) Deemed interested by virtue of Ng It Seng being the spouse of Ooi Ling See and vice versa.

• The Proposed Acquisition is conditional upon the following approvals being obtained:-
  
  (i) the approval of the SC for the acquisition for the Sale Shares and the issuance of the Consideration Shares;
  (ii) the approval of the SC (under the FIC Guidelines) for the acquisition of the Sale Shares;
  (iii) the approval of Bursa Securities for the listing of and quotation for the Consideration Shares on the Main Board of Bursa Securities;
  (iv) the approval of the Company’s shareholders at an extraordinary general meeting to be convened; and
  (v) the approval or consent of any other relevant authorities/parties, if necessary.
  
  

• None of the Directors or major shareholders of Linear or persons connected to them have any interest, direct or indirect, in the Proposed Acquisition.

• The Board, after having considered all aspects of the Proposed Acquisition and its rationale, is of the opinion that the Proposed Acquisition is in the best interest of the Company.

• Applications are intended to be submitted to the relevant regulatory authorities (where relevant) within two (2) months from the date of this announcement.
  
  Barring any unforeseen circumstances, the Proposed Acquisition is estimated to be completed by the 4th quarter of 2008.

• To the best knowledge of the Board, the Proposed Acquisition has not departed from the SC Guidelines.

• KIBB has been appointed as the Adviser to Linear in respect of the Proposed Acquisition.

• The following documents will be made available for inspection at registered office of Linear at 20A, Jalan Perusahaan, Prai Industrial Estate 4, Prai, Penang between 9.00 a.m. and 5.00 p.m. on Mondays to Fridays (except on public holidays), for the time being, for a period of three (3) months from the date of this announcement:-
  
  (i) the SSA; and
  (ii) the audited financial statements for Lis-Tec for the past five (5) financial years up to the FYE 2007.