Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
REPORTS AND FINANCIAL STATEMENTS
31 DECEMBER 2002
0176A3/nm
Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
DIRECTORS' REPORT
The Directors have pleasure in submitting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2002.
PRINCIPAL ACTIVITIES
The Company is principally engaged in the marketing of Proton motor vehicles and related spare parts and servicing of vehicles.
The principal activities of the subsidiaries and associates are described in Note 21 and 22 to the financial statements respectively.
There have been no significant changes in the activities of the Group and the Company during the financial year except for those disclosed in Note 39 to the financial statements.
FINANCIAL RESULTS Group Company RM'000 RM'000
Profit after tax 595,202 374,584 Minority interests (118,579) 0 ──────── ──────── Net profit attributable to shareholders 476,623 374,584 ════════ ════════
DIVIDENDS
The amount of dividends paid or declared by the Company since 31 December 2001 were as follows:
RM'000 In respect of the financial year ended 31 December 2001 as proposed in the Directors' Report of that year:
Final gross dividend of 40 sen per share, less income tax at 28%, paid on 11 June 2002 65,834
Final gross dividend of 40 sen per share, less income tax at 28%, paid on 11 June 2002, in respect of ordinary shares issued after 31 December 2001 but before book closure date for dividend entitlement. 220 ────── 66,054 ══════
1 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
DIRECTORS' REPORT (CONTINUED)
DIVIDENDS (CONTINUED) RM'000 In respect of the financial year ended 31 December 2002:
Interim gross dividend of 25 sen per share, less income tax at 28%, paid on 11 October 2002 41,320 ══════
Special interim gross dividend of 425 sen per share, less income tax at 28%, paid on 30 December 2002 708,154 ══════
The Directors now recommend the payment of a final gross dividend of 40 sen per share, less income tax at 28%, amounting to RM66,650,000 for the financial year ended 31 December 2002, subject to shareholders’ approval at the forthcoming Annual General Meeting of the Company.
RESERVES AND PROVISIONS
All material transfers to or from reserves and provisions during the financial year are shown in the financial statements.
ISSUE OF SHARES
During the financial year, 2,833,000 new ordinary shares of RM1.00 each were issued by the Company for cash by virtue of the exercise of options pursuant to the Company’s Employees’ Share Option Scheme at an average exercise price of RM10.14 per share.
The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company.
DIRECTORS
The Directors who have held office during the period since the date of the last report are:
Y Bhg Tan Sri Dato’ Seri Mohd Saleh bin Sulong Mr Rin Kei Mei Y Bhg Datuk Adzmi bin Abdul Wahab Y Bhg Dato’ Maznah bte Abdul Jalil Y Bhg Datuk Haji Faisal bin Siraj Mr Anthony Nightingale Mr Choo Keng Kit Ms Vimala a/p V.R. Menon Tuan Haji Ithnin bin Haji Hassan Y Bhg Dato’ Dr M. Shanmughalingam Y Bhg Datuk Wan Awang bin Wan Yaacob Y Bhg Tan Sri Saw Huat Lye Y Bhg Datuk Ir. (Dr) Ahmad Zaidee bin Laidin Encik Wan Mat bin Wan Sulaiman Y Bhg Dato’ Khalid bin Haji Ismail Y Bhg Dato’ Haji Shaharuddin bin Haji Haron
2 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
DIRECTORS' REPORT (CONTINUED)
DIRECTORS (CONTINUED)
Encik Ahmad Othman bin Yahaya (Resigned as Alternate Director to Y Bhg Dato’ Yatina bte Yahaya and appointed as Director on 18.10.2002) Y Bhg Dato’ Yatina bte Yahaya (Resigned on 17.10.2002) Y Bhg Datuk Abu Samah bin Bachik (Alternate Director to Y Bhg Tan Sri Dato’ Seri Mohd Saleh bin Sulong) Mr Masaharu Iwata (Alternate Director to Mr Rin Kei Mei) Mr Adam Keswick (Appointed on 4.2.2003) (Alternate Director to Mr Anthony Nightingale)
In accordance with Article 103 of the Company’s Articles of Association, Y Bhg Tan Sri Dato’ Seri Mohd Saleh bin Sulong, Mr Rin Kei Mei, Y Bhg Datuk Haji Faisal bin Siraj, Mr Choo Keng Kit and Ms Vimala a/p V.R. Menon retire by rotation at the forthcoming Annual General Meeting, and being eligible, offer themselves for re-election.
In accordance with Article 110 of the Company’s Articles of Association, Encik Ahmad Othman bin Yahaya retires at the forthcoming Annual General Meeting and, being eligible, offer himself for re- election.
DIRECTORS' BENEFITS
During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares of the Company or any other body corporate except for the options in respect of shares granted by the Company to eligible employees including certain Directors of the Company, pursuant to the Edaran Otomobil Nasional Berhad Employees’ Share Option Scheme.
Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefits disclosed as Directors’ remuneration and benefits-in-kind in Note 5 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest other than as disclosed below and in Note 34 to the financial statements.
Y Bhg Tan Sri Dato’ Seri Mohd Saleh bin Sulong and Mr Rin Kei Mei may be deemed to derive a benefit by virtue of credit facilities granted by the banking subsidiary in the ordinary course of its business, to companies in which they are deemed to have an interest.
3 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
DIRECTORS' REPORT (CONTINUED)
DIRECTORS' INTERESTS IN SHARES
According to the Register of Directors' shareholdings, the interests of Directors in office at the end of the financial year in shares in the Company and its related corporations were as follows:
Number of ordinary shares of RM1 each As at As at The Company 1.1.2002 Acquired Disposed 31.12.2002
Y Bhg Tan Sri Dato’ Seri Mohd Saleh bin Sulong - indirect * 72,967,000 1,000 0 72,968,000 Mr Rin Kei Mei - direct 1,728,000 801,000 1,000,000 1,529,000 - indirect * 21,900,000 1,848,000 0 23,748,000 Y Bhg Datuk Adzmi bin Abdul Wahab - direct 0 180,000 0 180,000 Y Bhg Dato’ Maznah bte Abdul Jalil - direct 0 169,000 0 169,000 Mr Choo Keng Kit - direct 43,000 130,000 83,000 90,000 Ms Vimala a/p V.R. Menon - direct 0 90,000 0 90,000 Y Bhg Dato’ Khalid bin Haji Ismail - direct 0 5,000 0 5,000 En Ahmad Othman bin Yahaya - indirect* 72,967,000 1,000 0 72,968,000
Subsidiary company - EON Capital Berhad
Mr Rin Kei Mei - direct 0 39,550 0 39,550 - indirect * 0 2,073,817 0 2,073,817 Y Bhg Dato’ Maznah bte Abdul Jalil - direct 0 60,000 0 60,000 Mr Choo Keng Kit - direct 0 30,737 0 30,737
* Indirect interest represents shares held by companies in which the Directors are deemed to have an interest.
By virtue of their interests in shares in the Company, Y Bhg Tan Sri Dato’ Seri Mohd Saleh bin Sulong, En Ahmad Othman bin Yahaya and Mr Rin Kei Mei are also deemed to have a substantial interest in the shares of the subsidiaries of the Company to the extent the Company has an interest.
No Director in office (other than those disclosed in the table above) held any interest in shares in the Company and its related corporations at the end of the financial year.
4 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
DIRECTORS' REPORT (CONTINUED)
DIRECTORS’ INTERESTS IN OPTIONS
According to the Register of Directors’ shareholdings, the interests of Directors in office at the end of the financial year in the Employees’ Share Option Scheme of the Company were as follows:
Number of Share Options As at As at 1.1.2002 Granted Exercised 31.12.2002
Y Bhg Datuk Adzmi bin Abdul Wahab 225,000 0 180,000 45,000 Y Bhg Dato’ Maznah bte Abdul Jalil 201,000 3,000 169,000 35,000 Mr Choo Keng Kit 174,000 0 130,000 44,000 Ms Vimala a/p V.R. Menon 217,000 0 90,000 127,000
EMPLOYEES’ SHARE OPTION SCHEME
The Edaran Otomobil Nasional Berhad Employees’ Share Option Scheme ("the Scheme") came into effect on 6 October 1999 and is in force for a period of five years to 5 October 2004.
The total number of ordinary shares to be issued by the Company under the Scheme as approved by the Securities Commission shall not exceed ten per centum (10%) of the total issued and paid- up share capital of the Company at any one time during the existence of the Scheme.
The main features of the Scheme are:
(a) Eligible employees are those who have been confirmed with at least five years of continuous service in the Group or a Director of the Company holding executive position, whose specific entitlement under the Scheme has been approved by the shareholders in a General Meeting.
(b) The options offered may be exercised at anytime within the option period.
(c) The option price at which the employees are offered to take up shares under the Scheme is the average of the mean market quotation (calculated as the average of the highest and lowest prices as traded on the Kuala Lumpur Stock Exchange for the day) of the shares of the Company as quoted in the Daily Official List issued by the Kuala Lumpur Stock Exchange for the five market days preceding the offer date, or the par value of the shares of the Company of RM1.00, whichever is higher.
(d) The basis on which the options may be exercised by virtue of the Bye-Laws 10.2 (a) of the Scheme is as follows:
Options Granted Percentage of Options Exercisable in the Years of the Option Period (Year) 1 2 3 4 5
Below 20,000 100% 20,000 to less than 100,000 *40% 30% **30% 100,000 and above 20% 20% 20% 20% 20%
* 40% or 20,000 options whichever is the higher ** 30% or the remaining number of options
5 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
DIRECTORS' REPORT (CONTINUED)
EMPLOYEES’ SHARE OPTION SCHEME (CONTINUED)
(e) The grantees have no right to participate, by virtue of these options, in any share options of any other company within the Group.
Details of the share options granted and exercised under the Scheme during the financial year are as follows:
Number of Share Options Option price Balance at Balance at (RM) 1.1.2002 Granted Lapsed* Exercised 31.12.2002
12.29 11,173,000 0 (104,000) (1,430,000) 9,639,000 12.46 411,000 0 0 (164,000) 247,000 15.88 153,000 0 (2,000) 0 151,000 14.17 414,000 0 (10,000) 0 404,000 14.21 328,000 0 (10,000) 0 318,000 11.90 515,000 0 (8,000) (50,000) 457,000 6.69 445,000 0 (9,000) (403,000) 33,000 7.17 369,000 0 (7,000) (330,000) 32,000 6.88 151,000 0 (6,000) (127,000) 18,000 7.03 118,000 0 (1,000) (107,000) 10,000 7.80 203,000 0 (2,000) (198,000) 3,000 11.67 0 140,000 0 (24,000) 116,000 ──────── ──────── ──────── ──────── ──────── 14,280,000 140,000 (159,000) (2,833,000) 11,428,000 ════════ ════════ ════════ ════════ ════════
* Options lapsed due to resignations
The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the list of option holders and their holdings, except for eligible employees with share allocation of 100,000 shares and above. None of the eligible employees were allocated share options of 100,000 and above during the financial year.
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS
Before the income statements and balance sheets of the Group and of the Company were made out, the Directors took reasonable steps:
(a) to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and
(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and of the Company had been written down to an amount which they might be expected so to realise.
6 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
DIRECTORS' REPORT (CONTINUED)
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (CONTINUED)
At the date of this report, the Directors are not aware of any circumstances:
(a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts, in the financial statements of the Group and of the Company inadequate to any substantial extent; or
(b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or
(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.
At the date of this report, there does not exist:
(a) any charge on the assets of the Group or the Company which has arisen since the end of the financial year which secures the liability of any other person; or
(b) any contingent liability of the Group or the Company which has arisen since the end of the financial year.
OTHER STATUTORY INFORMATION
At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements that would render any amount stated in the financial statements misleading.
In the opinion of the Directors,
(a) except for the corporate exercise involving the listing of EON Bank Berhad as disclosed in Note 39 to the financial statements, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and
(b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group or the Company for the financial year in which this report is made.
7 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
DIRECTORS' REPORT (CONTINUED)
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
Signed on behalf of the Board of Directors in accordance with a resolution dated 10 March 2003.
TAN SRI DATO’ SERI MOHD SALEH BIN SULONG DATUK ADZMI BIN ABDUL WAHAB CHAIRMAN MANAGING DIRECTOR
Shah Alam
8 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965
We, Tan Sri Dato’ Seri Mohd Saleh bin Sulong and Datuk Adzmi bin Abdul Wahab, being two of the Directors of Edaran Otomobil Nasional Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 12 to 77 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2002 and of the results of the Group and of the Company and the cash flows of the Group and of the Company for the financial year ended on that date and in accordance with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965.
Signed on behalf of the Board of Directors in accordance with a resolution dated 10 March 2003.
TAN SRI DATO’ SERI MOHD SALEH BIN SULONG DATUK ADZMI BIN ABDUL WAHAB CHAIRMAN MANAGING DIRECTOR
Shah Alam
STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965
I, Vimala a/p V.R. Menon, the Director primarily responsible for the financial management of Edaran Otomobil Nasional Berhad, do solemnly and sincerely declare that the financial statements set out on pages 12 to 77 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.
VIMALA A/P V.R. MENON
Subscribed and solemnly declared by the abovenamed Vimala a/p V.R. Menon at Kuala Lumpur in Malaysia on 10 March 2003, before me.
COMMISSIONER FOR OATHS
9
REPORT OF THE AUDITORS TO THE SHAREHOLDERS OF EDARAN OTOMOBIL NASIONAL BERHAD (Company No. 119767 X)
We have audited the financial statements set out on pages 12 to 77. These financial statements are the responsibility of the Company’s Directors. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion:
(a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to give a true and fair view of:
(i) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and
(ii) the state of affairs of the Group and Company as at 31 December 2002 and of the results and cash flows of the Group and Company for the financial year ended on that date; and
(b) the accounting and other records and the registers required by the Act to be kept by the Company and the subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company's financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.
10
REPORT OF THE AUDITORS TO THE SHAREHOLDERS OF EDARAN OTOMOBIL NASIONAL BERHAD (CONTINUED) (Company No. 119767 X)
The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment made under subsection (3) of Section 174 of the Act.
PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants
MOHAMMAD FAIZ BIN MOHAMMAD AZMI (No. 2025/03/04 (J)) Partner of the firm
Kuala Lumpur 10 March 2003
11 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
INCOME STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2002
Group Company Note 2002 2001 2002 2001 RM'000 RM'000 RM'000 RM'000
Revenue 4 7,427,704 7,548,331 5,682,339 5,967,202 Cost of sales (5,939,910) (6,063,435) (5,204,307) (5,417,367) ──────── ──────── ──────── ──────── Gross profit 1,487,794 1,484,896 478,032 549,835 Other operating income 55,862 81,347 92,845 48,945 Selling and distribution expenses (190,455) (192,494) (129,869) (128,613) Administrative expenses (470,114) (424,160) (100,399) (94,468) Loan loss and provisions (171,953) (220,711) 0 0 Other operating expenses (9,099) (11,448) (4,060) (3,423) ──────── ──────── ──────── ──────── Profit from operations 5 702,035 717,430 336,549 372,276 Finance cost 6 (1,408) (403) (327) (403) Share of results of associates 7 193,946 103,518 0 0 Net gain/(loss) on divestment of interest in subsidiaries and an associate 8 11,353 (203) 132,613 0 ──────── ──────── ──────── ──────── Profit before tax 905,926 820,342 468,835 371,873 Tax - Company and subsidiaries (226,209) (236,339) (94,251) (101,855) - Share of taxes in associates (84,515) (43,359) 0 0
9 (310,724) (279,698) (94,251) (101,855) ──────── ──────── ──────── ──────── Profit after tax 595,202 540,644 374,584 270,018
Minority interests (118,579) (90,686) 0 0 ──────── ──────── ──────── ──────── Net profit attributable to shareholders 476,623 449,958 374,584 270,018 ════════ ════════ ════════ ════════
Gross Dividends per share 10 490 sen 65 sen 490 sen 65 sen ════════ ════════ ════════ ════════
Earnings per share - basic 11 208 sen 197 sen - diluted 11 205 sen 196 sen ════════ ════════
12 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2002
Note 2002 2001 RM'000 RM'000 ASSETS
Cash and bank balances and deposits with financial institutions 12 2,838,259 2,790,057 Dealing securities 14 954,842 664,517 Investments 15 4,654,895 2,215,876 Loans, advances and financing 16 20,573,665 17,387,782 Inventories 17 534,070 603,775 Receivables 18 1,175,591 1,102,206 Statutory deposits with Bank Negara Malaysia 19 865,213 697,919 Associates 22 137,933 453,265 Property, plant and equipment 23 458,016 435,188 ───────── ───────── 32,192,484 26,350,585 ═════════ ═════════ LIABILITIES
Deposits from customers 24 18,219,354 17,042,601 Deposits and placements of banks and other financial institutions 25 7,262,140 2,713,023 Obligations on securities sold under repurchase agreements 1,168,396 24,002 Bills and acceptances payable 155,565 920,624 Taxation 121,798 253,085 Payables 26 1,613,755 1,940,423 Amounts due to associates 20 9,807 11,627 Borrowings 27 419,478 0 Provisions for liabilities and charges 28 25,309 34,899 Deferred taxation 29 3,220 5,744 ───────── ───────── 28,998,822 22,946,028 ───────── ─────────
SHARE CAPITAL 31 231,423 228,590 RESERVES 1,974,393 2,258,283 ───────── ───────── SHAREHOLDERS’ FUNDS 2,205,816 2,486,873 ───────── ─────────
LIFE ASSURANCE FUND 0 130,265 MINORITY INTERESTS 987,846 787,419 ───────── ───────── 987,846 917,684 ───────── ─────────
TOTAL LIABILITIES AND SHAREHOLDERS’ FUNDS 32,192,484 26,350,585 ═════════ ═════════
COMMITMENTS AND CONTINGENT LIABILITIES 37 9,274,872 9,058,671 ═════════ ═════════
13 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
BALANCE SHEET AS AT 31 DECEMBER 2002
Note 2002 2001 RM'000 RM'000 NON CURRENT ASSETS
Property, plant and equipment 23 38,346 43,167 Investments 15 15,500 18,479 Subsidiaries 21 783,544 947,493 Associates 22 43,995 537,117 Amounts due from a subsidiary 20 0 174,955
CURRENT ASSETS
Inventories 17 531,279 598,776 Receivables 18 127,449 191,358 Amounts due from subsidiaries 20 201,957 234 Investments 15 321,288 0 Cash and bank balances and deposits with financial institutions 12 421,510 435,177 Cash held in escrow 13 85,400 0 ──────── ──────── 1,688,883 1,225,545 ──────── ──────── CURRENT LIABILITIES
Payables 26 383,552 395,076 Amounts due to subsidiaries 20 3,982 58 Amounts due to associates 20 9,807 11,627 Borrowings 27 130,997 0 Taxation 26,330 102,020 Provisions for liabilities and charges 28 10,562 21,822 ──────── ──────── 565,230 530,603 ──────── ────────
NET CURRENT ASSETS 1,123,653 694,942
LONG TERM AND DEFERRED LIABILITIES
Provisions for liabilities and charges 28 (10,044) (8,654) Long term lease payables 30 (639) (926) ──────── ──────── (10,683) (9,580) ──────── ──────── 1,994,355 2,406,573 ════════ ════════ CAPITAL AND RESERVES
Share capital 31 231,423 228,590 Reserves 1,762,932 2,177,983 ──────── ──────── SHAREHOLDERS’ FUNDS 1,994,355 2,406,573 ════════ ════════
14 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2002
Issued and fully paid ordinary shares Non-distributable Distributable Nominal Currency value of Share Statutory translation Other Retained Note RM1 each premium reserve differences reserves earnings Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2001 (as previously reported) 228,453 361,253 179,428 76,479 67,018 1,268,727 2,181,358
Prior year adjustment 42 0 0 0 0 0 65,795 65,795 ─────── ─────── ─────── ─────── ─────── ─────── ─────── 228,453 361,253 179,428 76,479 67,018 1,334,522 2,247,153
Share of associates’ reserves 0 0 0 5,886 (379) 0 5,507 Share of associates’ goodwill written off 0 0 0 0 0 (2,616) (2,616) Goodwill on consolidation written off 0 0 0 0 0 (84,742) (84,742) Currency translation differences 0 0 0 (22,388) 0 0 (22,388)
Net losses not recognised in income statement 0 0 0 (16,502) (379) (87,358) (104,239)
Net profit for the financial year 0 0 0 0 0 449,958 449,958
Transfer to statutory reserve 0 0 34,771 0 0 (34,771) 0
Dividends in respect of the financial year ended - 31 December 2000 0 0 0 0 0 (65,797) (65,797) - 31 December 2001 10 0 0 0 0 0 (41,132) (41,132)
Issue of shares - exercise of share options 31 137 793 0 0 0 0 930 ─────── ─────── ─────── ─────── ─────── ─────── ─────── At 31 December 2001 228,590 362,046 214,199 59,977 66,639 1,555,422 2,486,873 ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════
15 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2002 (CONTINUED)
Issued and fully paid ordinary shares Non-distributable Distributable Nominal Currency value of Share Statutory translation Other Retained Note RM1 each premium reserve differences reserves earnings Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2002 (as previously reported) 228,590 362,046 214,199 59,977 66,639 1,489,588 2,421,039
Prior year adjustment 42 0 0 0 0 0 65,834 65,834 ─────── ─────── ─────── ─────── ─────── ─────── ─────── 228,590 362,046 214,199 59,977 66,639 1,555,422 2,486,873
Share of associates’ reserves 0 0 0 8,284 3,220 0 11,504 Share of associates’ goodwill written off 0 0 0 0 0 1,499 1,499 Goodwill written off 0 0 0 0 0 (975) (975) Currency translation differences 0 0 0 17,094 0 0 17,094 Reserves realised on partial divestment of interest in an associate 0 0 0 (30,901) (26,194) 57,095 0 Reserve realised on dilution of interest in a subsidiary 0 0 (29,290) 0 0 29,290 0
Net (losses)/ gains not recognised in income statement 0 0 (29,290) (5,523) (22,974) 86,909 29,122
Net profit for the financial year 0 0 0 0 0 476,623 476,623
Transfer to statutory reserve 0 0 38,334 0 0 (38,334) 0
Dividends in respect of the financial year ended - 31 December 2001 10 0 0 0 0 0 (66,054) (66,054) - 31 December 2002 10 0 0 0 0 0 (749,474) (749,474)
Issue of shares - exercise of share options 31 2,833 25,893 0 0 0 0 28,726 ─────── ─────── ─────── ─────── ─────── ─────── ─────── At 31 December 2002 231,423 387,939 223,243 54,454 43,665 1,265,092 2,205,816 ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ 16 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2002 (CONTINUED)
The Statutory Reserve is maintained by the banking group in compliance with Section 36 of the Banking and Financial Institutions Act, 1989.
The Other Reserves comprised the Group’s share of Cycle & Carriage Ltd’s revaluation reserves, share premium reserves and other revenue reserves. These reserves are in respect of the 13.1% equity interest retained by the Group after the completion of the partial divestment as outlined in Note 39 to the financial statements.
During the previous financial year, the Group’s share of additional goodwill of RM87,358,000 was written off to Retained Earnings in line with the Group’s accounting policy. The goodwill written off arose mainly from the Group’s share of ex-gratia payment to the minority shareholders of ex-Oriental Bank Berhad (“OBB”) amounting to RM16,650,000 consequent to the vesting of the banking business of ex-OBB to EON Bank Berhad on 1 January 2001 and, RM68,674,000 resulting from an adjustment on the initial fair values assigned to the net assets acquired from Malaysian International Merchant Bankers Berhad in December 2000.
17 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2002
Issued and fully paid ordinary Non- shares distributable Distributable Nominal value of Share Retained Note RM1 each premium earnings Total RM’000 RM’000 RM’000 RM’000 At 1 January 2001 (as previously reported) 228,453 361,253 1,587,053 2,176,759
Prior year adjustment 42 0 0 65,795 65,795 ──────── ──────── ──────── ──────── 228,453 361,253 1,652,848 2,242,554
Net profit for the financial year 0 0 270,018 270,018
Dividends in respect of the financial year ended - 31 December 2000 0 0 (65,797) (65,797) - 31 December 2001 10 0 0 (41,132) (41,132)
Issue of shares - exercise of share options 31 137 793 0 930 ──────── ──────── ──────── ──────── At 31 December 2001 228,590 362,046 1,815,937 2,406,573 ════════ ════════ ════════ ════════ At 1 January 2002 (as previously reported) 228,590 362,046 1,750,103 2,340,739
Prior year adjustment 42 0 0 65,834 65,834 ──────── ──────── ──────── ──────── 228,590 362,046 1,815,937 2,406,573
Net profit for the financial year 0 0 374,584 374,584
Dividends in respect of the financial year ended - 31 December 2001 10 0 0 (66,054) (66,054) - 31 December 2002 10 0 0 (749,474) (749,474)
Issue of shares - exercise of share options 31 2,833 25,893 0 28,726 ──────── ──────── ──────── ──────── At 31 December 2002 231,423 387,939 1,374,993 1,994,355 ════════ ════════ ════════ ════════
Retained earnings
The Company has sufficient tax credits under Section 108 of the Income Tax Act, 1967 and tax exempt income under Section 12 of the Income Tax (Amendment) Act, 1999 to frank all of its retained earnings as dividends.
18 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2002
Group Company Note 2002 2001 2002 2001 RM'000 RM'000 RM'000 RM'000 CASH FLOWS FROM OPERATING ACTIVITIES
Net profit attributable to shareholders 476,623 449,958 374,584 270,018
Adjustments for investing and financing items and non-cash items
Tax 310,724 279,698 94,251 101,855 Minority interests 118,579 90,686 0 0 Profit retained in associates (193,946) (103,518) 0 0 Depreciation of property, plant and equipment 54,178 57,905 17,980 17,242 Loan loss and provisions 171,953 220,711 0 0 Interest expense 1,408 403 327 403 Net interest suspended 147,296 144,903 0 0 Retirement benefits 1,922 1,837 1,502 1,287 Property, plant and equipment written off 2,051 1,286 9 5 Loss/(gain) on dilution of interest in a subsidiary 24,311 203 (137,883) 0 (Gain)/loss on partial divestment of interest in an associate (20,246) 0 4,052 0 (Gain)/loss on disposal of a subsidiary (15,418) 0 1,218 0 Net gain on sale of dealing and investment securities (47,251) (63,855) 0 0 Net gain on sale of property, plant and equipment (5,236) (835) (2,759) (782) Interest income (8,888) (6,270) (20,356) (27,328) Dividend income (880) (1,113) (57,951) (13,149) Income from investment securities (145,906) (69,721) 0 0 Amortisation of premium less accretion of discounts of investments 2,052 (33,235) (39) 0 Unrealised gain on foreign exchange of the banking group (396) (260) 0 0 Provisions for/(writeback of) liabilities and charges 6,757 (9,217) 6,677 (8,905) Allowance for diminution in value of investment securities 58,240 6,537 0 0 (Writeback)/allowance for diminution in value of investment in associates (4,286) 0 (4,286) 379 Writeback of allowances for doubtful amounts due from subsidiaries 0 0 (12) (31) ──────── ──────── ──────── ──────── Operating profit before working capital changes 933,641 966,103 277,314 340,994
19 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2002 (CONTINUED)
Group Company Note 2002 2001 2002 2001 RM'000 RM'000 RM'000 RM'000
Increase in dealing securities (259,715) (27,079) 0 0 Increase in loans, advances and financing (3,502,059) (1,863,375) 0 0 Decrease/(increase) in inventories 69,705 (385,919) 67,497 (384,942) Increase in receivables (72,626) (26,181) (20,166) (44,660) Increase in statutory deposits with Bank Negara Malaysia (167,294) (42,024) 0 0 Increase in deposits from customers 1,176,753 1,008,195 0 0 Increase/(decrease) in deposits and placements of banks and other financial institutions 4,549,117 (1,553,649) 0 0 Increase/(decrease) in obligations on securities sold under repurchase agreements 1,144,394 (44,614) 0 0 (Decrease)/increase in bills and acceptances payable (765,059) 62,399 0 0 Decrease in provisions for liabilities and charges (18,087) (16,431) (17,991) (16,048) (Decrease)/increase in payables (314,681) 718,356 (7,471) 15,339 (Decrease)/increase in associates’ balances (1,820) 7,318 (1,820) 6,992 (Increase)/decrease in subsidiaries’ balances 0 0 (22,832) 6,140 Increase in life assurance funds 13,051 26,384 0 0 ──────── ──────── ──────── ──────── Cash generated from/(utilised in) operations 2,785,320 (1,170,517) 274,531 (76,185) Interest received 7,102 3,727 18,549 24,227 Interest paid (327) (403) (327) (403) Income tax paid (357,879) (142,016) (154,712) (76,757) ──────── ──────── ──────── ──────── Net cash flow from operating activities 2,434,216 (1,309,209) 138,041 (129,118) ════════ ════════ ════════ ════════
20 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2002 (CONTINUED)
Group Company Note 2002 2001 2002 2001 RM'000 RM'000 RM'000 RM'000 CASH FLOWS FROM INVESTING ACTIVITIES
Interest received from investment securities` 125,364 71,386 0 0 Dividends received from investment securities 880 1,113 129 87 Dividends received from associates 15,614 11,134 15,614 11,134 Dividends received from subsidiaries 0 0 17,032 14,715 Proceeds from sale of property, plant and equipment 10,893 4,217 4,295 2,545 Net cash from disposal of a subsidiary 32 (42,617) 0 48,805 0 Net proceeds from dilution of interest in a subsidiary 0 0 251,808 0 Net proceeds from partial divestment of interest in an associate 188,691 0 188,691 0 Purchase of property, plant and equipment (88,860) (54,469) (14,703) (17,030) Purchase, net of proceeds from sale, of investment securities (2,297,555) 1,057,248 3,500 12,000 Additional investment in an associate (10,961) (5,237) (10,961) (5,237) Additional investment in subsidiaries 0 0 0 (65,440) Vesting of banking business to a subsidiary 33 0 575,231 0 0 Ex-gratia payment to shareholders of the banking business vested over 0 (29,422) 0 0 Issue of shares by a subsidiary to its minority shareholders 295,085 46,241 0 0 Payment to minority shareholders of a subsidiary in connection with its listing (215,006) 0 0 0 ──────── ──────── ──────── ──────── Net cash flow from investing activities (2,018,472) 1,677,442 504,210 (47,226) ════════ ════════ ════════ ════════ CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares 28,726 930 28,726 930 Net proceeds from borrowings 419,373 0 130,997 0 Payment of finance lease (113) (1,678) (113) (1,678) Payment of cash dividends (815,528) (106,929) (815,528) (106,929) ──────── ──────── ──────── ──────── Net cash flow from financing activities (367,542) (107,677) (655,918) (107,677) ════════ ════════ ════════ ════════
21 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2002 (CONTINUED)
Group Company Note 2002 2001 2002 2001 RM'000 RM'000 RM'000 RM'000
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 48,202 260,556 (13,667) (284,021)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 2,790,057 2,529,501 435,177 719,198 ──────── ──────── ──────── ──────── CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 12 2,838,259 2,790,057 421,510 435,177 ════════ ════════ ════════ ════════
22 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002
1 GENERAL INFORMATION
The Company is principally engaged in the marketing of Proton motor vehicles and related spare parts and servicing of vehicles.
The principal activities of the subsidiaries and associates are described in Note 21 and 22 to the financial statements respectively.
There have been no significant changes in the activities of the Group and the Company during the financial year except for those disclosed in Note 39 to the financial statements.
The number of employees in the Group and in the Company at the end of the financial year were 7,942 (2001: 7,857) and 3,051 (2001: 3,100) respectively.
The Company is a public limited liability company, incorporated and domiciled in Malaysia, and listed on the Main Board of the Kuala Lumpur Stock Exchange.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The financial statements of the Group and Company have been prepared under the historical cost convention except as disclosed in this summary of significant accounting policies.
The financial statements comply with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act 1965.
(b) Basis of consolidation
The consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to the end of the financial year. Subsidiaries are those companies in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities.
Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. Subsidiaries are consolidated using the acquisition method of accounting.
Under the acquisition method of accounting, the results of subsidiaries acquired or disposed of during the financial year are included in the consolidated income statement from the date of acquisition up to the date of disposal. At the date of acquisition, the fair values of the subsidiaries’ net assets are determined and these values are reflected in the consolidated financial statements. The difference between the cost of acquisition over the fair value of the Group’s share of the subsidiaries’ identifiable net assets at the date of acquisition is reflected as goodwill or reserve arising on consolidation.
23 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Basis of consolidation (Continued)
All intercompany transactions, balances and unrealised profits or losses on transactions between group companies are eliminated on consolidation and the consolidated financial statements reflect external transactions only. Unrealised losses are not eliminated if the costs cannot be recovered. Where significant accounting policies of subsidiaries are different from the Group, adjustments are made to the consolidated financial statements of the Group to ensure consistency with the accounting policies adopted by the Group.
Minority interest is measured at the minorities’ share of the post acquisition fair values of the identifiable assets and liabilities of the acquiree. Separate disclosure is made of minority interests.
(c) Goodwill or reserve arising on consolidation
Goodwill or reserve arising on consolidation represents the difference between the cost of acquisition of subsidiaries and associates over the fair value of the Group’s share of their identifiable net assets at the date of acquisition. Goodwill or reserve arising on consolidation is written off against reserves in the year of acquisition.
(d) Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Freehold land and construction-in-progress are not depreciated. Other property, plant and equipment are depreciated on a straight line basis over their estimated useful lives at the following annual depreciation rates:
Leasehold land Over the period of the lease Freehold buildings and long term leasehold buildings 2% Short term leasehold buildings Over the period of the lease Leasehold improvements Over 2 to 5 years Renovations 10% to 33 1/3% Plant and machinery 20% Furniture, fixtures, fittings and office equipment 10% to 33 1/3% Motor vehicles 20%
Where an indication of impairment exists, the carrying amount of the property, plant and equipment is assessed and written down immediately to its recoverable amount.
(e) Subsidiaries
Investment in subsidiaries are stated at cost, less allowance for any diminution in value of investment which is included in the income statement in the period in which the diminution is identified.
24 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Associates
An associate is a company other than a subsidiary in which the Group has a long term equity investment of between 20% to 50% and where the Group has representation on the board and is in a position to exercise significant influence over its financial and operating policy decisions but not control over those policies.
Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Equity accounting involves recognising in the income statement the Group’s share of the results of associates for the financial year based on the latest available audited or management financial statements of the associates concerned. The Group’s investment in associates is carried in the balance sheet at an amount that reflects its share of the net assets of the associates. Where necessary, in applying the equity method, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group.
Investments in associates are stated at cost, less allowance for any diminution in value of investment which is included in the income statement in the period in which the diminution is identified.
(g) Revenue recognition on motor business
Revenue on motor business, net of taxes and discounts is recognised upon delivery of goods and services and customer acceptance.
(h) Revenue and other income recognition on banking and related financial services business
(i) Recognition of interest income
Interest income is recognised on an accrual basis using the effective yield method. Interest income includes coupons earned on fixed income investment and trading securities and accrued discount and premium on discounted instruments. Interest income on housing and term loans is recognised by reference to monthly rest periods. Interest income on hire purchase, lease receivables and block discounting is recognised using the "sum-of-digits" method so as to produce a constant periodic rate of interest.
Where a loan account becomes non-performing, interest is suspended until it is realised on a cash basis. Customers’ accounts are classified as non-performing where repayments are in arrears for six months or more from first day of default for loans and overdrafts, and after three months from maturity date for trade bills, bankers' acceptances and trust receipts. The banking group’s policy on suspension of interest is in conformity with Bank Negara Malaysia’s ('BNM') "Guidelines on the classification of Non-performing Loans and Provision for substandard, bad and doubtful debts".
25 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Revenue and other income recognition on banking and related financial services business (Continued)
(ii) Recognition of fees and other income
Loan arrangement fees and commissions are recognised as income when all conditions precedent are fulfilled.
Commitment fees and guarantee fees which are material are recognised as income based on time apportionment.
Fees from advisory and corporate finance activities are recognised as income on completion of each stage of the assignment.
Income from Islamic banking is recognised on an accrual basis in accordance with the principles of Syariah and the BNM/GP8.
Dividends from dealing securities and investment securities are recognised when received.
(i) Other income recognition on motor business
(i) Interest income is recognised on an accrual basis unless collectibility is in doubt.
(ii) Dividend income is recognised when the shareholders’ right to receive is established.
(j) Repurchase agreements
Securities purchased under resale agreements are securities which the banking group had purchased with a commitment to resell at future dates. The commitment to resell the securities are reflected as assets on the balance sheet. Securities purchased are not recognised in the financial statements.
Conversely, obligation on securities sold under repurchase agreements are securities which the banking group had sold from its portfolio, with a commitment to repurchase at future dates. Such financing transactions and obligation to repurchase the securities are reflected as liabilities on the balance sheet. Securities sold are retained in the financial statement.
The difference between sale and repurchase price as well as purchase and resell price is treated as interest and accrued over the life of the repurchase agreement using effective yield method.
26 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Dealing securities
Dealing securities are marketable securities that are acquired and held with the intention of resale in the short term and are stated at the lower of cost and market value, determined on an aggregate portfolio basis. Increases and decreases in carrying amount of dealing securities are credited or charged to the income statement.
Transfers, if any, between dealing and investment securities are made at the lower of cost and market value. On disposal, the difference between the net disposal proceeds and its carrying amount is credited or charged to the income statement.
(l) Investments
Investment securities are securities that are acquired and held for yield or capital growth or to meet minimum liquid assets requirement pursuant to Section 38 of the Banking and Financial Institutions Act, 1989 and are usually held to maturity.
Malaysian Government Securities, Bank Negara Malaysia bills, Cagamas bonds, Malaysian Government investment issues, other Government securities and Bank Guaranteed Private Debt Securities held for investment are stated at cost adjusted for amortisation of premium or accretion of discount to maturity date. Other Private Debt Securities are valued at lower of cost and market value determined on an aggregate portfolio basis. Other investment securities are stated at cost and allowance is made in the event of any permanent diminution in value. Investments which are classified as current assets are carried at the lower of cost or market value.
Amortisation of premium or accretion of discount is recognised using effective yield method. Interest earned while holding the investment securities and dividends received are recognised as interest income and dividend income respectively.
Permanent diminution in the value of investment securities is recognised as an expense in the period in which the diminution is identified. The allowance for diminution in value of securities is determined on an aggregate portfolio basis.
Transfers, if any, between investment and dealing securities are made at the lower of carrying value and market value. On disposal, the difference between the net disposal proceeds and its carrying amount is credited or charged to the income statement.
(m) Bills and acceptances payable
Bills and acceptances payable represent bills and acceptances rediscounted and outstanding in the market.
(n) Trade receivables
Trade receivables are carried at invoiced amount less an estimate made for doubtful debts.
27 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) Allowance for bad and doubtful debts
Specific allowances are made for doubtful debts which have been individually reviewed and specifically identified as bad or doubtful.
A general allowance based on a percentage of loan portfolio is also made to cover possible losses that are judged to be present in the lending portfolio at balance sheet date, but which have not been specifically identified as such.
(p) Forward foreign exchange contracts
Open forward exchange contracts are valued at forward rates as at balance sheet date, applicable to their respective dates of maturity and unrealised gains and losses are recognised in the income statement of the financial year.
(q) Provisions
(i) Retirement benefits
The Company and a subsidiary of the banking group operate unfunded defined benefit schemes for all eligible employees. The Company’s eligible employees are stipulated in the Collective Agreement with its union employees while the subsidiary’s scheme includes all its employees.
The retirement benefits provided in the financial statements of the Company and the subsidiary have been calculated by reference to an actuarial valuation using the Projected Benefit Valuation method. The last actuarial valuation of the Company and the subsidiary were done on 22 December 2000 and 31 December 2000 respectively.
(ii) Warranty and free service provisions
Provisions are based on expected levels of claims arising during the warranty and free service period.
(r) Deferred taxation
Provision for deferred taxation is made using the liability method for taxation deferred by timing differences between taxable income and accounting income.
Deferred tax assets are not recognised unless there is a reasonable expectation of realisation.
(s) Borrowings
Borrowings are recognised initially at cost, being the proceeds received, net of transaction cost incurred. In subsequent periods, bonds are stated at amortised cost and any difference between net proceeds and the redemption value is recognised in the income statements over the period of the borrowing using the effective yield method.
28 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(t) Foreign currencies
Foreign currency transactions in Group companies are accounted for at exchange rates prevailing at the transaction dates. Exchange differences arising from the settlement of foreign currency transactions are included in the income statement.
The principal closing rates used in translation of foreign currency amounts were as follows:
Foreign currency 31.12.2002 31.12.2001 RM RM 1 United States Dollar 3.800 3.800 1 Euro Dollar 3.981 3.363 1 Singapore Dollar 2.189 2.025 1 Sterling Pound 6.092 5.510 1 Australian Dollar 2.116 1.942 100 Japanese Yen 3.200 2.921
(u) Cash and cash equivalents
Cash and cash equivalents consist of cash in hand, bank balances and deposits with financial institutions that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(v) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost of vehicles and accessories are stated at purchase cost determined on the first-in, first-out basis. Cost comprises where appropriate, materials, labour and the appropriate proportion of overhead costs. Cost of spare parts is determined on the weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.
(w) Loans, advances and financing
Loans and advances include overdrafts, term loans, hire purchase financing, acceptances credit and staff loans. They are carried at recoverable amount represented by the gross value of the outstanding balance adjusted for allowance for bad and doubtful debts, unearned income and interest-in-suspense.
29 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
3 USE OF FINANCIAL INSTRUMENTS
(a) Financial risk management objectives and policies
• Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.
The Company’s interest rate risk exposure is limited to the impact of rate changes on its interest bearing liabilities and assets such as its borrowings, cash and bank balances and deposits with financial institutions.
The Group may be exposed to a loss in earnings due to the interest rates structure of the balance sheet arising from interest rates and yield curves changes. The sensitivity to interest rates arises from the mismatches in the repricing dates, cash flows and other characteristics of the assets and their corresponding liability funding. Interest rate risk is monitored through interest rate sensitivity gap limits.
• Market risk
Market risk is the potential loss which can arise for positions held by the Group due to adverse changes in the level of market prices or price-influencing parameters in the financial markets. The adverse changes can occur in interest rate, foreign exchange and equity markets.
Other than investments, the Company does not have any significant exposure to market risk.
Market risks for the Group are monitored by way of net open position limits, portfolio limits, diversification limits, holding limits, concentration limits by sectors and stop loss limits.
• Credit risk
Credit risk is the potential loss arising from customers or counterparties failing to meet their financial contractual obligations.
The Company has no significant concentrations of credit risks except for trade receivables which are mainly limited to receivables due from financial institutions. Allowances are made for bad and doubtful debts where necessary. The Company’s historical experience in collection of accounts receivable falls within the recorded allowances.
The Group’s ownership of financial assets involves the risk that customers or counterparties may be unable to meet their financial contractual obligations. Management of the Group’s credit risk is principally through lending directions and policies, which are instituted based on prevailing business and economic conditions. Credit processes are also structured to ensure adherence of credit principles and to establish impartiality in loan origination, approval, documentation, disbursement and settlement. Industry sectors concentration, exposure to various product segments and internal single customer limit are regularly monitored to minimise the risk of over-concentration. The overall credit risk management is subject to an ongoing process for reviewing and enhancement.
30 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002
3 USE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Financial risk management objectives and policies (Continued)
• Credit risk (Continued)
The internal credit risk rating system is being developed to better measure the credit worthiness of each customer. This rating system will also link credit risk grading to default probabilities and enable risk-based assessment of loan portfolio.
Credit reviews on loan applications before being approved by higher approving authorities are conducted independently from business units involved in the loan origination. Approval of loans with unacceptable credit risks or large exposures exceeding the internal single customer limits will be reported to the Banking and Finance Group’s Risk Management Committee and its Board of Directors.
• Liquidity risk
Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet its current and future payment obligations associated with financial obligations when they fall due.
Prudent liquidity risk management implies maintaining sufficient cash, highly liquid investments and the availability of funding through an adequate amount of committed credit facilities. The Company monitors its liquidity position on a daily basis.
Principally, the Group’s banking operation uses the New Liquidity Framework approved by Bank Negara Malaysia to manage its liquidity. It focuses on avoiding dependence on volatile sources of funding, diversification of funding maturity structure and sources of funds as well as maintenance of sufficient liquid assets. Contingency funding plans have been developed to ensure alternative funding strategies are in place in order to minimise the liquidity risk during liquidity crisis situation. Various “Management Action Triggers” are established to prompt the Management for taking any necessary actions to meet the liquidity crisis.
31 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002
3 USE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Financial risk management objectives and policies (Continued)
• Operational risk
Operational risk, which is inherent in all business activities, is the risk of loss resulting from inadequate or failed internal processes or systems, human factors or external events. Such risk manifests itself in various breakdowns, errors and business interruptions and can potentially result in financial losses.
The operational risks within the Company are fairly limited and managing these risks are primarily the responsibility of each business unit. Each level of management is responsible for the appropriateness and effectiveness of policies, processes, procedures and controls. The Company has established clear lines of authority, responsibility and reporting to maintain accountability and ensure that the necessary resources are available to manage the operational risks. A risk management framework has been established within the Company and this will further assist the business units in the management of the operational risks.
The Group’s operational risks lie substantially with its banking and finance operations. The Group’s banking and finance Operational Risk Management (“ORM”) takes place at each business unit level. These units are responsible for establishing and maintaining control and procedures that are appropriate for their operating environment. Integral elements such as sound banking processes, internal control, and independent audit groups are used to manage these risks. Additional support comes from group-wide functions such as internal audit, banking operations (including system and methods), compliance and financial control.
The activities of ORM include risk identification, assessment, monitoring and reporting and these are manifested in the following manners:
• Manuals and policies that incorporate internal control processes • Human resources development and training programmes • System controls and procedures governing IT usage in all banking products • Establishment of specific policies and standards across all product lines • Group’s Business Continuity Plan that looks into its business resumption in an organised and timely manner in time of disaster • Group's New Product Process to ensure that before new products and activities are being introduced, they are subject to proper risk assessments and possess adequate procedures and controls
32 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
3 USE OF FINANCIAL INSTRUMENTS (CONTINUED)
(b) Interest rate risk
The table below summarises the Group’s exposure to interest rate risks. Included in the table are the Group’s assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates. As interest rates and yield curves change over time, the Group may be exposed to a loss in earnings due to the effects of interest rates on the structure of the balance sheet. Sensitivity to interest rates arises from mismatches in the repricing dates, cash flows and other characteristics of the assets and their corresponding liability funding.
Later than 1 year and Not later not later than 1 than 5 Over 5 Islamic year years years Others* banking Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
Assets
Cash and bank balances and deposits with financial institutions 2,674,069 0 0 158,359 5,831 2,838,259 Dealing securities 132,289 214,816 250,131 4,432 353,174 954,842 Investments 793,952 1,668,545 1,306,451 338,272 547,675 4,654,895 Loans, advances and financing 12,315,682 3,833,426 3,938,242 (1,402,863)# 1,889,178 20,573,665 Statutory deposits with Bank Negara Malaysia 0 0 0 822,082 43,131 865,213 Other assets+ 0 0 0 2,277,529 28,081 2,305,610 ──────── ──────── ──────── ──────── ──────── ──────── Total assets 15,915,992 5,716,787 5,494,824 2,197,811 2,867,070 32,192,484 ════════ ════════ ════════ ════════ ════════ ════════
33 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
3 USE OF FINANCIAL INSTRUMENTS (CONTINUED)
(b) Interest rate risk (Continued)
Later than 1 year and Not later not later than 1 than 5 Over 5 Islamic year years years Others* banking Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group
Liabilities
Deposits from customers 14,113,084 1,044,817 0 1,384,777 1,676,676 18,219,354 Deposits and placements of banks and other financial institutions 4,421,872 173,961 1,400,000 393,458 872,849 7,262,140 Obligations on securities sold under repurchase agreements 1,168,396 0 0 0 0 1,168,396 Bills and acceptances payables 0 0 0 154,322 1,243 155,565 Borrowings 130,997 150,000 150,000 (11,519)^ 0 419,478 Other liabilities+ 89,373 691,048 0 953,291 40,177 1,773,889 ──────── ──────── ──────── ──────── ──────── ──────── Total liabilities 19,923,722 2,059,826 1,550,000 2,874,329 2,590,945 28,998,822 ──────── ──────── ──────── ──────── ──────── ──────── On balance sheet - interest rate gap (4,007,730) 3,656,961 3,944,824 Off balance sheet - interest rate gap 0 0 0 ──────── ──────── ──────── Net interest rate gap (4,007,730) 3,656,961 3,944,824 ──────── ──────── ────────
# The negative balance represent specific allowances, interest-in-suspense and general allowances for loans and advances made in accordance with the Group’s accounting policy on allowance for bad and doubtful debts, net of interest-free staff motor vehicles loans.
^ The negative balance represents unamortised discount for long term secured fixed rate bonds calculated in accordance with the Group’s accounting policy on borrowings.
* Others comprise non-interest bearing financial instruments of the Group.
34 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
3 USE OF FINANCIAL INSTRUMENTS (CONTINUED)
(b) Interest rate risk (Continued)
+ Other assets and other liabilities comprise assets and liabilities which are not financial assets and financial liabilities as defined under MASB 24: Financial Instruments: Disclosure and Presentation and other financial assets and liabilities which are not interest bearing.
The table below summarises the effective average interest rate for each class of financial assets and financial liabilities not disclosed elsewhere in the financial statements:
Group 31.12.2002 % Financial assets
Dealing securities 3.4 Investment securities 3.6 Loans, advances and financing 7.7
Financial liabilities
Deposits from customers 2.8 Deposits and placements of banks and other financial institutions 1.3 Obligations on securities sold under repurchase agreements 2.8 Amount due to Cagamas Berhad 4.4
35 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
3 USE OF FINANCIAL INSTRUMENTS (CONTINUED)
(c) Credit risk
The Company‘s credit risks are mainly limited to receivables due from financial institutions.
The credit risks of the Group are mainly attributable to its banking operations. The following table sets out the credit risk concentrations of the Group’s banking operation.
* Cash Dealing Loans, Other and bank and advances receivables, #Commitments balances and investment and deposits and On-balance and placements securities financing prepayments sheet total contingencies
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
Agricultural 0 50,000 169,475 1,172 220,647 67,265 Mining and quarrying 0 67,772 50,508 426 118,706 1,808 Manufacturing 0 68,050 2,156,464 4,805 2,229,319 295,692 Infrastructure and utilities 0 548,621 52,490 5,491 606,602 35,961 Construction 0 61,233 1,433,594 1,436 1,496,263 587,521 Real estate 0 129,771 631,494 303 761,568 60,752 General commerce 0 197,619 1,393,462 2,451 1,593,532 181,496 Transport, storage and communication 0 117,200 594,405 2,284 713,889 158,475 Finance, insurance and business services 1,737,320 585,500 300,953 73,258 2,697,031 199,478 Government and government agencies 1,640,451 3,432,106 0 20,606 5,093,163 0 Purchase of landed property 0 0 4,911,937 0 4,911,937 0 Purchase of securities 0 0 788,955 0 788,955 28 Purchase of transport vehicles 0 0 7,048,560 11 7,048,571 118,255 Others 0 0 1,418,428 2,862 1,421,290 110,202 ──────── ──────── ──────── ──────── ──────── ──────── 3,377,771 5,257,872 20,950,725 ^ 115,105 29,701,473 1,816,933 ════════ ════════ ════════ ════════ ════════ ════════
* Include cash and bank balances, deposits with financial institutions and statutory deposit with Bank Negara Malaysia.
^ Excludes general allowance for doubtful debts amounting to RM377,060,000.
# Risk concentrations for commitments and contingencies are based on the credit equivalents balances in Note 37 to the financial statements.
Comparatives are not disclosed upon first application of MASB Standard 24: “Financial Instruments: Disclosure and Presentation” as permitted by the Standard.
36 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
4 REVENUE
Revenue for the Group comprises sales of goods and services net of discounts, returns and government duties and taxes, net commission earned, rental income and interest income, fee income and Islamic Banking income of the banking group.
Revenue for the Company comprises sales of vehicles, accessories and spare parts net of discounts, returns and government duties and taxes, net commission earned and revenue from after sales services.
Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000 Analysis of revenue:
Vehicles and accessories 5,396,106 5,719,723 5,417,144 5,742,710 Parts, after sales services and others 264,239 223,356 265,195 224,492 Interest income of the banking group 1,572,756 1,482,986 0 0 Fee and Islamic Banking income of the banking group 194,603 122,266 0 0 ──────── ──────── ──────── ──────── 7,427,704 7,548,331 5,682,339 5,967,202 ════════ ════════ ════════ ════════
37 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
5 PROFIT FROM OPERATIONS Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000 The profit from operations is arrived at: After charging/(crediting):
Auditors’ remuneration 548 549 124 120 Staff costs 335,276 304,038 107,522 102,621 Directors’ remuneration: - fees 1,367 998 612 389 - other emoluments 2,803 2,427 2,722 2,371 Depreciation of property, plant and equipment 54,178 57,905 17,980 17,242 Retirement benefits 1,922 1,837 1,502 1,287 Rental of premises from: - a subsidiary 0 0 15,452 14,749 - others 32,881 31,978 6,065 4,833 Property, plant and equipment written off 2,051 1,286 9 5 Rental of equipment 6,474 4,152 314 465 Amortisation of premium less accretion of discounts of investments 2,052 (33,235) (39) 0 Allowance/(writeback) for diminution in value of: - investment securities 58,240 6,537 0 0 - investment in associates (4,286) 0 (4,286) 379 Writeback of allowances for bad and doubtful debts (127) (188) (127) (188) Writeback of allowances for doubtful amounts due from subsidiaries 0 0 (12) (31) Provisions for/(writeback of) liabilities and charges 6,757 (9,217) 6,677 (8,905) Gross dividends from investments in: - quoted associate 0 0 (16,012) (2,629) - unquoted associates 0 0 (18,155) (10,434) - unquoted subsidiaries 0 0 (23,655) 0 - quoted investments (880) (1,113) (129) (86) Rental income (404) (2,200) 0 (605) Interest income from: - subsidiaries 0 0 (11,603) (22,310) - others (8,888) (6,270) (8,753) (5,018) Net gain on sale of property, plant and equipment (5,236) (835) (2,759) (782) Net gain on sale of dealing and investment securities (47,251) (63,855) 0 0 Net gain on foreign exchange of the banking group - realised (6,705) (5,209) 0 0 - unrealised (396) (260) 0 0 ══════ ══════ ══════ ══════
The estimated monetary value of other benefits not included in the above received by Directors of the Company is RM248,000 (2001: RM203,000) for the Group and RM237,000 (2001: RM198,000) for the Company.
38 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
6 FINANCE COST Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000 Interest expense from: - borrowings 1,376 29 295 29 - finance lease liabilities 32 374 32 374 ──────── ──────── ──────── ──────── 1,408 403 327 403 ════════ ════════ ════════ ════════
7 SHARE OF RESULTS OF ASSOCIATES
Included in the Group’s share of results of associates in the current financial year was the Group’s share of unrealised foreign exchange gains amounting to RM16,940,000 (2001: unrealised foreign exchange losses of RM16,822,000).
8 NET GAIN/(LOSS) ON DIVESTMENT OF INTEREST IN SUBSIDIARIES AND AN ASSOCIATE
Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000
Gain/(loss) on disposal of a subsidiary 15,418 0 (1,218) 0 (Loss)/gain on dilution of interest in a subsidiary: - in connection with its listing (15,985) 0 137,883 0 - arising from the issue of shares under its Employees’ Share Option Scheme (8,326) (203) 0 0 Gain/(loss) on partial divestment of interest in an associate 20,246 0 (4,052) 0 ──────── ──────── ──────── ──────── 11,353 (203) 132,613 0 ════════ ════════ ════════ ════════
9 TAX
In Malaysia Current tax: - Company and subsidiaries 216,245 243,526 89,512 101,855 - Associates 11,296 10,437 0 0 Under provision in prior years 11,267 1,466 4,739 0 Transferred from deferred tax (Note 29) (1,303) (8,653) 0 0 ──────── ──────── ──────── ──────── 237,505 246,776 94,251 101,855 Outside Malaysia Current tax: - Associate 73,219 32,922 0 0 ──────── ──────── ──────── ──────── 310,724 279,698 94,251 101,855 ════════ ════════ ════════ ════════
39 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
9 TAX (CONTINUED)
The effective tax rate for the Group for the financial year ended 31 December 2002 was higher than the statutory tax rate in Malaysia due to certain charges and provisions not allowable for tax purposes.
The effective tax rate for the Company for the financial year ended 31 December 2002 was lower than the statutory tax rate in Malaysia as certain capital gains are not taxable.
Subject to agreement by the tax authorities, the amount of unutilised tax losses and capital allowances of subsidiaries available for which the related tax effects have not been included in the net income amounted to approximately RM132,713,000 (2001: RM171,330,000) and RM2,715,000 (2001: RM2,715,000) respectively as at 31 December 2002.
10 DIVIDENDS
Dividends paid or proposed in respect of the financial years are as follows:
2002 2001 Amount of Amount of Gross dividend Gross dividend per share net of tax per share net of tax Group and Company Sen RM’000 Sen RM’000
Interim dividend paid 25 41,320 25 41,132 Special interim dividend 425 708,154 0 0 Proposed final dividend 40 66,650 40 65,834 Additional final dividend paid in respect of ordinary shares issued after 31 December 2001 0 220 ────── ────── ────── ────── 490 816,124 65 107,186 ══════ ══════ ══════ ══════
At the forthcoming Annual General Meeting of the Company, a final gross dividend in respect of the financial year ended 31 December 2002 of 40 sen per share, less income tax at 28% (2001: 40 sen per share, less income tax at 28%), amounting to RM66,650,000 (2001: RM65,834,000) will be proposed for shareholders’ approval.
11 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the financial year.
Group 2002 2001
Net profit attributable to shareholders (RM’000) 476,623 449,958 Weighted average number of ordinary shares in issue (‘000) 229,441 228,492
Basic earnings per share 208 sen 197 sen ══════ ══════
40 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
11 EARNINGS PER SHARE (CONTINUED)
For the diluted earnings per share, the weighted average number of ordinary shares in issue is not adjusted as the conversion of share options under the Employees’ Share Option Scheme ("ESOS") of the Company would be anti-dilutive.
Diluted net profit attributable to shareholders has been adjusted for the increase in minority interests’ percentage share of a subsidiary’s net profits for the year assuming full conversion of share options under the subsidiary’s ESOS at the beginning of the financial year.
Group 2002 2001 RM’000 RM’000
Net profit attributable to shareholders 476,623 449,958 Minority interests’ share of net profits of the subsidiary (5,618) (2,253) ─────── ─────── Diluted net profit attributable to shareholders 471,005 447,705 ─────── ───────
Weighted average number of ordinary shares in issue (‘000) 229,441 228,492
Diluted earnings per share 205 sen 196 sen ═══════ ═══════
12 CASH AND BANK BALANCES AND DEPOSITS WITH FINANCIAL INSTITUTIONS
Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000
Cash and bank balances 2,289,246 2,339,225 68,200 63,207 Deposits with licensed banks 186,753 251,514 76,780 296,500 Deposits with licensed finance companies 0 20,551 169,600 2,500 Deposits with other licensed financial institutions 362,260 178,767 106,930 72,970 ─────── ─────── ─────── ─────── 2,838,259 2,790,057 421,510 435,177 ═══════ ═══════ ═══════ ═══════
The interest rates of deposits with licensed banks and financial institutions that were applicable as at the end of the financial year ranged from 2.4% to 4.6% for the Group and the Company.
Deposits with financial institutions of the Company have a maturity of less than 30 days. Bank balances are deposits held at call with licensed banks.
Deposits pledged with a licensed bank to secure bank guarantee facilities of a subsidiary amounted to RM270,000 (2001: RM368,000).
41 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
13 CASH HELD IN ESCROW
Cash held in escrow is in respect of the amount received by the Company in connection with the call and put option agreements for the purpose of the conditional mandatory offer to acquire the EON Capital Berhad’s shares held by the minority shareholders of Kedah Cement Holdings Berhad as outlined in Note 40 to the financial statements. This was placed in an escrow account.
14 DEALING SECURITIES Group 2002 2001 RM’000 RM’000
Money market instruments: Danamodal Bonds 87,740 46,955 Danaharta Bonds 23,940 0 Malaysian Government securities 183,604 229,627 Malaysian Government investment issues 45,663 0 Bankers’ acceptances and Islamic accepted bills 14,842 31,075 Green bankers’ acceptances 0 15,901 Negotiable instruments of deposits 23,495 22,498 Cagamas bonds 35,396 0 Khazanah Bonds 9,068 0 ─────── ─────── 423,748 346,056 Quoted securities: Shares quoted in Malaysia 4,432 2,976
Unquoted securities: Commercial papers 0 49,000 Islamic commercial papers (Murabahah Notes Issuance Facility) 58,707 19,722 Private and Islamic debt securities 467,955 246,763 ─────── ─────── 954,842 664,517 ═══════ ═══════
Market value of money market instruments and quoted securities: Danamodal Bonds 87,903 47,360 Danaharta Bonds 24,050 0 Malaysian Government Securities 183,718 230,558 Malaysian Government investment issues 45,825 0 Cagamas bonds 35,432 0 Khazanah Bonds 9,068 0 Shares quoted in Malaysia 5,827 2,996 ═══════ ═══════
42 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
15 INVESTMENTS Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000 Investment securities
Money market instruments: Malaysian Government Securities 1,777,131 350,905 0 0 Malaysian Government Treasury bills 383,731 376,435 0 0 Bank Negara Malaysia bills 94,479 59,880 0 0 Negotiable instruments of deposits 50,000 105,000 0 0 Bankers’ acceptances and Islamic accepted bills 0 6,368 0 0 Cagamas bonds 470,845 87,710 0 0 Cagamas Mudharabah bonds 40,380 5,000 0 0 Cagamas notes 134,750 0 0 0 Danamodal bonds 58,501 0 0 0 Green bankers’ acceptances 1,088 41,212 0 0 Khazanah bonds 96,807 49,930 0 0 ──────── ──────── ──────── ──────── Sub-total 3,107,712 1,082,440 0 0 ──────── ──────── ──────── ────────
Quoted securities: In Malaysia Shares 127,092 136,182 7,257 7,257 Loan stocks 0 2,979 0 2,979 Private debt securities 21,010 16,336 0 0 Bonds 0 257 0 0 Outside Malaysia Shares 282,036 1,249 321,288 0 ──────── ──────── ──────── ──────── Sub-total 430,138 157,003 328,545 10,236 ──────── ──────── ──────── ────────
Unquoted securities: Shares 28,579 30,366 8,243 8,243 Bonds of corporations 0 100 0 0 Commercial papers 15,000 27,000 0 0 Islamic commercial papers (Murabahah Notes Issuance Facility) 109,476 97,921 0 0 Private and Islamic debt securities 1,090,306 794,748 0 0 ──────── ──────── ──────── ──────── Sub-total 1,243,361 950,135 8,243 8,243 ──────── ──────── ──────── ────────
Total 4,781,211 2,189,578 336,788 18,479 Add/(Less): Accretion of discounts less amortisation of premium (8,965) 57,102 0 0 Allowance for diminution in value of investment securities (117,351) (52,580) 0 0 ──────── ──────── ──────── ──────── 4,654,895 2,194,100 336,788 18,479 ════════ ════════ ════════ ════════
43 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
15 INVESTMENTS (CONTINUED) Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000
Investment properties
Freehold land and buildings At valuation 0 11,900 0 0 At cost 0 3 0 0 ──────── ──────── ──────── ──────── 0 11,903 0 0 ──────── ──────── ──────── ──────── Leasehold land and buildings At valuation 0 9,650 0 0 At cost 0 223 0 0 ──────── ──────── ──────── ──────── 0 9,873 0 0 ──────── ──────── ──────── ──────── 0 21,776 0 0 ════════ ════════ ════════ ════════
Total investments 4,654,895 2,215,876 336,788 18,479 ════════ ════════ ════════ ════════
Company 2002 2001 RM’000 RM’000
Current 321,288 0 Non current 15,500 18,479 ──────── ──────── 336,788 18,479 ════════ ════════
Market value of money market instruments and quoted securities: Malaysian Government Securities 1,772,309 350,979 0 0 Malaysian Government Treasury Bills 385,469 377,190 0 0 Bank Negara Malaysia bills 94,506 59,880 0 0 Cagamas bonds 470,428 88,052 0 0 Cagamas Mudharabah bonds 40,380 5,000 0 0 Cagamas Notes 134,788 0 0 0 Danamodal bonds 58,602 0 0 0 Khazanah bonds 99,299 33,183 0 0 Shares quoted in Malaysia 31,545 61,483 7,540 6,900 Shares quoted outside Malaysia 235,848 948 234,955 0 Quoted loan stocks 0 3,490 0 3,490 Quoted private debt securities 5,042 8,572 0 0 Quoted bonds 0 316 0 0 ════════ ════════ ════════ ════════
44 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
15 INVESTMENTS (CONTINUED)
Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000
The maturity structure of the money market instruments are as follows: Maturity within one year 866,531 935,901 0 0 Maturity between one to three years 1,416,137 144,341 0 0 Maturity between three to five years 824,812 684 0 0 Maturity more than five years 232 1,514 0 0 ──────── ──────── ──────── ──────── 3,107,712 1,082,440 0 0 ════════ ════════ ════════ ════════
The aggregate carrying amounts of investment securities that have been mortgaged or pledged in the normal course of business to secure the liabilities of the banking group arising from obligations on securities sold under repurchase agreements amounted to approximately RM1,173,497,000 (2001: RM24,240,000).
Investment in Cycle & Carriage Limited (“CCL”) was previously treated as an associate. As a result of the partial divestment of the Group’s interest in CCL, the Group’s equity interest in CCL was reduced to 13.1%. Accordingly, the investment has been classified as an ordinary investment.
In the light of the proposed payment of dividends in specie of CCL shares as outlined in Note 40 to the financial statements, the investment has been classified as a short term investment and the Directors believe that the appropriate carrying value for the investment is its cost.
45 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
16 LOANS, ADVANCES AND FINANCING Group 2002 2001 RM’000 RM’000
Overdrafts 2,676,976 2,620,024 Term loans 10,000,669 8,501,540 Hire purchase 9,413,100 7,561,469 Bills and lease receivable 18,377 19,036 Trust receipts 82,539 76,605 Claims on customers under acceptance credits 1,176,964 931,180 Staff loans 193,447 158,444 Other loans 861,240 897,550 ───────── ───────── 24,423,312 20,765,848
Less: Unearned interest and income (2,362,017) (1,753,226) ───────── ───────── Gross loans, advances and financing 22,061,295 19,012,622
Less: Allowance for bad and doubtful debts and financing - Specific (744,687) (853,204) - General (377,060) (356,709)
Interest in suspense (365,883) (414,927) ───────── ───────── Net loans, advances and financing 20,573,665 17,387,782 ═════════ ═════════
The maturity structure of loans, advances and financing are as follows:
Maturity within one year 6,692,893 6,271,871 Maturity between one to three years 2,219,180 1,967,987 Maturity between three to five years 3,785,126 2,965,638 Maturity more than five years 9,364,096 7,807,126 ───────── ───────── 22,061,295 19,012,622 ═════════ ═════════
17 INVENTORIES Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000 At cost: Raw materials 302 322 0 0 Work-in-progress 145 152 0 0 Finished goods - vehicles 505,317 568,351 505,317 568,351 - spare parts, accessories and others 28,306 34,950 25,962 30,425 ───────── ───────── ───────── ───────── 534,070 603,775 531,279 598,776 ═════════ ═════════ ═════════ ═════════
46 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
18 RECEIVABLES Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000
Trade receivables 107,078 151,356 106,261 151,035 Less: Allowance for bad and doubtful debts (254) (381) (75) (202) ─────── ─────── ─────── ─────── 106,824 150,975 106,186 150,833 Other receivables, deposits and prepayments: - non-banking group 21,503 57,815 21,263 40,525 - banking group 413,041 277,967 0 0 Deferred asset 634,223 615,449 0 0 ─────── ─────── ─────── ─────── 1,175,591 1,102,206 127,449 191,358 ═══════ ═══════ ═══════ ═══════
Credit terms of trade receivables for the Group and Company range from 10 to 60 days.
The deferred asset is in respect of the net asset deficiency representing the excess of liabilities over the assets transferred arising from EON Bank's acquisition of the assets and liabilities of Oriental Bank Berhad and is reduced progressively by an arrangement with Bank Negara Malaysia.
19 STATUTORY DEPOSITS WITH BANK NEGARA MALAYSIA
The non-interest bearing statutory deposits are maintained with Bank Negara Malaysia in compliance with Section 37(1)(c) of the Central Bank of Malaysia Ordinance 1958 (Revised– 1994). The amounts are determined as set percentages of total eligible liabilities.
20 AMOUNTS DUE FROM/TO SUBSIDIARIES AND ASSOCIATES
Amounts due from subsidiaries are net of allowances for doubtful amounts amounting to RM28,832,000 (2001 : RM28,843,000).
The amounts due from/to subsidiaries and associates are unsecured, interest free and payable at call, except for the amounts due from a wholly owned subsidiary which are charged interest at rates ranging from 2.89% to 3.28% (2001: 2.97% to 3.46%) per annum.
47 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
21 SUBSIDIARIES Company 2002 2001 RM’000 RM’000
Quoted shares at cost 719,212 0 ────── ──────
Unquoted shares at cost 74,434 989,343 Less: Allowance for diminution in value of investment (10,102) (41,850) ────── ────── 64,332 947,493 ────── ────── 783,544 947,493 ══════ ══════ Market value of quoted shares 842,885 0 ══════ ══════
The subsidiaries, all of which are incorporated in Malaysia, are as follows:
Effective Name of subsidiary equity interest Principal activities 2002 2001 % % Held by the Company:
EON Trading Sdn Bhd 100.0 100.0 Marketing and trading of car accessories and car care products, selling of innovative merchandise and general trading
Liku Nostalgia Sdn Bhd 100.0 100.0 Dormant
EON Properties Sdn Bhd 100.0 100.0 Investment in and management of properties
Automotive Conversion 100.0 100.0 Conversion and modification of Engineering Sdn Bhd motor vehicles and marketing and distribution of car accessories
EON Capital Berhad 46.6 # 56.6 # Investment holding company
EON CMG Life Assurance Berhad 0 60.0 Underwriting of life insurance business.
Euromobil Sdn Bhd 100.0 * 0 Dormant
EON Motor Ria Sdn Bhd 100.0 100.0 Dormant
EON Technologies Sdn Bhd 100.0 100.0 Dormant
EON Resorts Sdn Bhd 100.0 100.0 Dormant
Corporate Galaxy Sdn Bhd 100.0 100.0 Dormant
48 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
21 SUBSIDIARIES (CONTINUED) Effective Name of subsidiary equity interest Principal activities 2002 2001 % % Held by EON Capital Berhad:
EON Bank Berhad 46.6 0 # Commercial banking
Held by EON Trading Sdn Bhd:
EON Inovasi Sdn Bhd 100.0 100.0 Dormant
Held by EON Technologies Sdn Bhd:
EON Network Systems Sdn Bhd 100.0 100.0 Dormant
Held by EON Bank Berhad:
EON Finance Berhad 46.6 56.6 Finance company Malaysian International Merchant Bankers Berhad 46.6 56.6 Merchant banking EB Nominees (Tempatan) Sdn Bhd 46.6 56.6 Nominees services EB Nominees (Asing) Sdn Bhd 46.6 56.6 Nominees services EB Realty Sdn Bhd 46.6 56.6 Property investment OBB Realty Sdn Bhd 46.6 56.6 Property investment Oriental Nominee (Tempatan) Sdn Bhd 46.6 56.6 Nominees services OFB Berhad 46.6 56.6 Dormant
Held by EON Finance Berhad:
CFB Asa Berhad (formerly known as City Finance Berhad) 46.6 56.6 Dormant CFB Nominees (Tempatan) Sdn Bhd 46.6 56.6 Dormant PFB Asa Berhad (formerly known as Perkasa Finance Berhad) 46.6 56.6 Dormant Perkasa Nominees (Tempatan) Sdn Bhd 46.6 56.6 Dormant
Held by Malaysian International Merchant Bankers Berhad:
MIMB Nominees (Tempatan) Sdn Bhd 46.6 56.6 Nominees services MIMB Nominees (Asing) Sdn Bhd 46.6 56.6 Nominees services
# The Group’s equity interest in EON Bank Berhad (“EBB”) was diluted to 46.6% following the listing of EBB under EON Capital Berhad (“ECB”) as outlined in Note 39 to the financial statements. Subsequent to the balance sheet date, the Group’s equity interest was increased to 50.1% upon the completion of the conditional mandatory offer made by the Company to acquire the ECB shares held by the minority shareholders of Kedah Cement Holdings Berhad and the exercise of the call and put option agreements with RH Development Corporation Sdn Bhd and Ceria Alam Sdn Bhd.
* On 23 October 2002, the Company paid RM2 in cash to acquire 100% equity interest in Euromobil Sdn Bhd, a newly incorporated company.
49 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
22 ASSOCIATES Group 2002 2001 RM’000 RM’000 Quoted shares:
Investment at cost 0 504,083 Goodwill written off 0 (235,325) ─────── ─────── Share of net tangible assets at acquisition 0 268,758 Share of post acquisition profits and reserves less losses 0 66,072 ─────── ─────── 0 334,830 ═══════ ═══════ Unquoted shares:
Investment at cost 60,229 53,609 Goodwill written off (8,488) (8,488) ─────── ─────── Share of net tangible assets at acquisition 51,741 45,121 Advance subscription monies 6,284 6,229 Share of post acquisition profits and reserves less losses 102,047 93,510 ─────── ─────── 160,072 144,860 Less : Allowance for diminution in value of investment (22,139) (26,425) ─────── ─────── 137,933 118,435 ═══════ ═══════ Total 137,933 453,265 ═══════ ═══════
Total interest in associates is represented by: Share of net assets of associates 153,788 473,461 Add : Advance subscription monies 6,284 6,229 Less : Allowance for diminution in value of unquoted investment (22,139) (26,425) ─────── ─────── 137,933 453,265 ═══════ ═══════
Market value of quoted shares 0 312,640 ═══════ ═══════
50 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
22 ASSOCIATES (CONTINUED)
Company 2002 2001 RM’000 RM’000
Quoted shares at cost 0 504,083 ────── ──────
Unquoted shares at cost 60,229 53,609 Advance subscription monies 6,284 6,229 ────── ────── 66,513 59,838 Less: Allowance for diminution in value of investment (22,518) (26,804) ────── ────── 43,995 33,034 ────── ────── Total 43,995 537,117 ══════ ══════
Market value of quoted shares 0 312,640 ══════ ══════
51 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
22 ASSOCIATES (CONTINUED)
The associates are as follows: Effective Name of associate equity interest Principal activities 2002 2001 % % Incorporated in Malaysia:
Proton Parts Centre Sdn Bhd 40.0 40.0 Warehousing and distributing of motor vehicle spare parts and accessories
SRT-EON Security Services Sdn Bhd + 40.0 40.0 Provision of security services
HICOM Megah Sdn Bhd 36.0 36.0 Property development and investment holding
Leong & Company Sdn Bhd + 30.0 30.0 Stockbroking
Ikeda IOM Holdings (M) Sdn Bhd 30.0 30.0 Manufacturing of car seats, seat paddings, steering wheels, and other car interior parts for the group and investment holding and property letting for the company
Incorporated in Singapore:
Cycle & Carriage Limited * 13.1@ 21.0 Distributing and retailing of motor vehicles, property development and property investment for the group and investment holding, and provider of management services for the company
Incorporated in the United Kingdom:
Proton Cars (Europe) Limited * 44.4 44.4 Dormant
* Associates audited by PricewaterhouseCoopers associates
+ Associates not audited by PricewaterhouseCoopers
@ During the financial year, the Group disposed of 7.9% of its 21.0% equity interest in Cycle & Carriage Limited (“CCL”). As a result of the partial divestment of interest, the Group’s equity interest in CCL has been reduced to 13.1%. Accordingly, the investment in CCL (previously classified as associate) is classified to investments (Note 15).
52 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
23 PROPERTY, PLANT AND EQUIPMENT
Land Buildings Machinery, Construc- Long-term Short-term and equipment tion in Freehold Leasehold Leasehold renovations and vehicles progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2002
Cost
At 1 January 95,306 15,827 13,720 318,101 356,911 728 800,593 Additions 27,831 9 0 14,141 45,830 1,049 88,860 Disposals and write-offs 0 0 0 (17,582) (47,247) 0 (64,829) Disposal of subsidiary 0 0 0 (1,375) (8,459) 0 (9,834) Reclassifications 547 0 0 933 0 (1,480) 0 ────── ────── ────── ────── ────── ────── ────── At 31 December 123,684 15,836 13,720 314,218 347,035 297 814,790 ══════ ══════ ══════ ══════ ══════ ══════ ══════
Accumulated depreciation
At 1 January 0 731 2,759 109,152* 252,763 0 365,405 Charge for the year 0 91 384 13,140 41,579 0 55,194 Disposals and write-offs 0 0 0 (17,006) (40,115) 0 (57,121) Disposal of subsidiary 0 0 0 (30) (6,674) 0 (6,704) ────── ────── ────── ────── ────── ────── ────── At 31 December 0 822 3,143 105,256* 247,553 0 356,774 ══════ ══════ ══════ ══════ ══════ ══════ ══════
Net Book Value At 31 December 123,684 15,014 10,577 208,962 99,482 297 458,016 ══════ ══════ ══════ ══════ ══════ ══════ ══════
53 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
23 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Land Buildings Machinery, Construc- Long-term Short-term and equipment tion in Freehold Leasehold Leasehold renovations and vehicles progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group
2001
Cost
At 1 January 92,682 15,827 13,528 226,202 270,664 1,506 620,409 Additions 89 0 41 14,367 39,202 1,914 55,613 Vesting of a banking business 1,330 0 0 82,267 65,349 0 148,946 Disposals and write-offs 0 0 0 (2,524) (21,807) (44) (24,375) Reclassifications 1,205 0 151 (2,211) 3,503 (2,648) 0 ────── ────── ────── ────── ────── ────── ────── At 31 December 95,306 15,827 13,720 318,101 356,911 728 800,593 ══════ ══════ ══════ ══════ ══════ ══════ ══════
Accumulated depreciation
At 1 January 0 640 2,357 64,540* 180,904 0 248,441 Charge for the year 0 91 402 12,411 46,393 0 59,297 Vesting of a banking business 0 0 0 33,628 43,746 0 77,374 Disposals and write-offs 0 0 0 (1,427) (18,280) 0 (19,707) ────── ────── ────── ────── ────── ────── ────── At 31 December 0 731 2,759 109,152* 252,763 0 365,405 ══════ ══════ ══════ ══════ ══════ ══════ ══════
Net Book Value At 31 December 95,306 15,096 10,961 208,949 104,148 728 435,188 ══════ ══════ ══════ ══════ ══════ ══════ ══════
* Included in the accumulated depreciation is the accumulated impairment losses amounting to RM3,885,000 (2001: RM7,555,000).
54 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
23 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Long-term Buildings Machinery, leasehold and equipment land renovations and vehicles Total RM’000 RM’000 RM’000 RM’000 Company
2002
Cost
At 1 January 1,850 13,983 123,047 138,880 Additions 0 1,587 13,116 14,703 Disposals and write-offs 0 (24) (13,225) (13,249) ────── ────── ────── ────── At 31 December 1,850 15,546 122,938 140,334 ══════ ══════ ══════ ══════ Accumulated depreciation
At 1 January 153 8,644 86,916 95,713 Charge for the year 19 1,274 16,687 17,980 Disposals and write-offs 0 (23) (11,682) (11,705) ────── ────── ────── ────── At 31 December 172 9,895 91,921 101,988 ══════ ══════ ══════ ══════ Net Book Value At 31 December 1,678 5,651 31,017 38,346 ══════ ══════ ══════ ══════
2001
Cost
At 1 January 1,850 12,635 119,404 133,889 Additions 0 1,351 16,823 18,174 Disposals and write-offs 0 (3) (13,180) (13,183) ────── ────── ────── ────── At 31 December 1,850 13,983 123,047 138,880 ══════ ══════ ══════ ══════ Accumulated depreciation
At 1 January 134 7,629 82,123 89,886 Charge for the year 19 1,018 16,205 17,242 Disposals and write-offs 0 (3) (11,412) (11,415) ────── ────── ────── ────── At 31 December 153 8,644 86,916 95,713 ══════ ══════ ══════ ══════ Net Book Value At 31 December 1,697 5,339 36,131 43,167 ══════ ══════ ══════ ══════
55 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
23 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Net book value of property, plant and equipment for the Group and Company purchased under finance lease arrangement is as follows:
Group and Company 2002 2001 RM’000 RM’000
Equipment 963 2,230 ════════ ════════
24 DEPOSITS FROM CUSTOMERS Group 2002 2001 RM’000 RM’000
Demand deposits 2,382,738 1,902,906 Savings deposits 1,110,790 984,157 Fixed deposits 14,725,826 14,155,538 ──────── ──────── 18,219,354 17,042,601 ════════ ════════
Maturity structure of fixed deposits are as follows:
Maturity within six months 10,076,682 9,625,832 Maturity between six months to one year 3,497,596 2,174,094 Maturity between one to three years 1,134,307 2,331,746 Maturity between three to five years 17,241 23,866 ──────── ──────── 14,725,826 14,155,538 ════════ ════════
The deposits are sourced from the following customers:
Business enterprises 5,394,124 5,281,568 Individuals 9,849,086 9,486,441 Others 2,976,144 2,274,592 ──────── ──────── 18,219,354 17,042,601 ════════ ════════
56 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
25 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS
Group 2002 2001 RM’000 RM’000
Licensed banks 1,734,285 984,605 Licensed finance companies 287,983 202,110 Other licensed financial institutions 5,239,872 1,526,308 ─────── ─────── 7,262,140 2,713,023 ═══════ ═══════
26 PAYABLES Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000
Trade payables 187,729 229,611 182,079 220,589 Other payables - non-banking group 200,962 179,309 201,473 174,487 - banking group 383,083 331,100 0 0 Amount due to Cagamas Berhad 841,981 1,200,403 0 0 ─────── ─────── ─────── ─────── 1,613,755 1,940,423 383,552 395,076 ═══════ ═══════ ═══════ ═══════
Credit terms of the trade payables of the Group and Company range from 14 to 60 days.
Amount due to Cagamas Berhad (“Cagamas”) relates to outstanding loan amount sold to Cagamas with recourse. In the normal course of the banking group operations, the banking group sells loans to Cagamas. The banking group is liable in respect of the loans sold directly to Cagamas under the condition that the banking group undertakes to administer the loans on behalf of Cagamas and to buy back any loans which are regarded as defective based on prudence. Such financing transactions and the obligation to buy back the loans are reflected as a liability on the balance sheet.
57 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
27 BORROWINGS Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000
Bankers’ acceptances (unsecured) 130,997 0 130,997 0 Bonds (secured) 288,481 0 0 0 ─────── ─────── ─────── ─────── 419,478 0 130,997 0 ═══════ ═══════ ═══════ ═══════
The bankers’ acceptances are charged interest at rates ranging from 2.98% to 3.41% per annum and have maturity periods of less than 150 days.
On 12 December 2002, a subsidiary issued RM300 million nominal amount of secured fixed rate bonds, which were rated at A2 by Rating Agency Malaysia Berhad (“RAM”), in three tranches as follows:
Tranche 1
5.25% RM50 million nominal value secured fixed rate 3 year bonds, maturing on 12 December 2005; and
Tranche 2
6.00% RM100 million nominal value secured fixed rate 5 year bonds, maturing on 12 December 2007; and
Tranche 3
6.75% RM150 million nominal value secured fixed rate 7 year bonds, maturing on 12 December 2009.
The main features of the bonds are as follows:
(i) Each tranche of the bonds is represented by a Global Certificate to be deposited with Bank Negara Malaysia (“BNM”) and will be traded under the Scripless Securities Trading System maintained by BNM;
(ii) The bonds are in the denominations of RM1 million each and in integral multiples of RM1 million;
(iii) The bonds bear interest at 5.25% (Tranche 1), 6.00% (Tranche 2) and 6.75% (Tranche 3) on the nominal value of the outstanding bonds, payable semi annually;
(iv) The bonds are constituted by a Trust Deed dated 25 November 2002 made between the subsidiary and the Trustees, which are entrusted to act for the benefit of the bondholders;
(v) The bonds are secured against the Sinking Fund Accounts, solely operated and maintained by the Trustees;
(vi) The bonds will be redeemed by the subsidiary at their nominal value on the maturity date of each tranche or purchase the bonds by tender or private treaty for cancellation; and
58 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
27 BORROWINGS (CONTINUED)
(vii) The bonds shall constitute direct, secured and unconditional obligations of the subsidiary, ranking pari passu without any preference or priority amongst themselves and with all other present and future secured and unsubordinated obligations.
A2 rating is defined by RAM as being able to offer adequate degree of safety for timely repayment of interest and principal and more susceptible to changes in circumstances and economic conditions than debts in higher-rated categories.
28 PROVISIONS FOR LIABILITIES AND CHARGES
Free Retirement Warranty service benefits Total RM’000 RM’000 RM’000 RM’000 Group
At 1 January 2002 13,187 8,928 12,784 34,899 Charged to income statement 181 18,311 1,922 20,414 Utilised during the financial year (1,356) (16,731) (182) (18,269) Unused amount reversed (11,735) 0 0 (11,735) ─────── ─────── ─────── ─────── At 31 December 2002 277 10,508 14,524 25,309 ═══════ ═══════ ═══════ ═══════
Not later than 1 year 277 10,508 562 11,347 Later than 1 year and not later than 2 years 0 0 410 410 Later than 2 years and not later than 5 years 0 0 1,343 1,343 Later than 5 years 0 0 12,209 12,209 ─────── ─────── ─────── ─────── 277 10,508 14,524 25,309 ═══════ ═══════ ═══════ ═══════
Company
At 1 January 2002 12,894 8,928 8,654 30,476 Charged to income statement 0 18,311 1,502 19,813 Utilised during the financial year (1,260) (16,731) (58) (18,049) Unused amount reversed (11,634) 0 0 (11,634) ─────── ─────── ─────── ─────── At 31 December 2002 0 10,508 10,098 20,606 ═══════ ═══════ ═══════ ═══════
Not later than 1 year 0 10,508 54 10,562 Later than 1 year and not later than 2 years 0 0 77 77 Later than 2 years and not later than 5 years 0 0 292 292 Later than 5 years 0 0 9,675 9,675 ─────── ─────── ─────── ─────── 0 10,508 10,098 20,606 ═══════ ═══════ ═══════ ═══════
59 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
29 DEFERRED TAXATION Group 2002 2001 RM’000 RM’000
At the beginning of the financial year 5,744 14,397 Transferred to income statement (Note 9) (1,303) (8,653) Disposal of a subsidiary (1,221) 0 ─────── ─────── At the end of the financial year 3,220 5,744 ═══════ ═══════
The deferred taxation is in respect of the following timing differences: - between depreciation and corresponding capital allowances on property, plant and equipment 37,986 4,943 - other timing differences (26,486) 15,571 ─────── ─────── 11,500 20,514 ═══════ ═══════
Deferred tax liability at 28% (2001 : 28%) 3,220 5,744 ═══════ ═══════
Timing differences and unutilised tax losses for which deferred tax benefit not accounted for in the financial statements are as follows:
Group 2002 2001 RM'000 RM'000
Net tax effects of these timing differences and unutilised tax losses: Current year - net debit 1,798 30,826 At year end - net debit 134,878 133,080 ═══════ ═══════
30 LONG TERM LEASE PAYABLES Company 2002 2001 RM’000 RM’000 Finance lease liabilities are repayable in the following periods: Within one year 342 146 Between one and two years 342 342 Between two to five years 342 684 ─────── ─────── 1,026 1,172 Less: Finance charges (100) (133) ─────── ─────── Present value of finance lease liabilities 926 1,039 ═══════ ═══════
60 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
30 LONG TERM LEASE PAYABLES (CONTINUED) Company 2002 2001 RM’000 RM’000 Representing lease liabilities: Within one year 287 113 ────── ────── Between one and two years 309 287 Between two to five years 330 639 ────── ────── 639 926 ────── ────── 926 1,039 ══════ ══════
31 SHARE CAPITAL Group and Company 2002 2001 RM’000 RM’000 Authorised: Ordinary shares of RM1.00 each 500,000 500,000 ══════ ══════ Issued and fully paid: Ordinary shares of RM1.00 each
At the beginning of the financial year 228,590 228,453 Issued during the year pursuant to the Edaran Otomobil Nasional Berhad Employees’ Share Option Scheme 2,833 137 ────── ────── At the end of the financial year 231,423 228,590 ══════ ══════
The Edaran Otomobil Nasional Berhad Employees’ Share Option Scheme ("the Scheme") came into effect on 6 October 1999 and is in force for a period of five years to 5 October 2004.
The total number of ordinary shares to be issued by the Company under the Scheme as approved by the Securities Commission shall not exceed ten per centum (10%) of the total issued and paid- up share capital of the Company at any one time during the existence of the Scheme.
The main features of the Scheme are:
(a) Eligible employees are those who have been confirmed with at least five years of continuous service in the Group or a Director of the Company holding executive position, whose specific entitlement under the Scheme has been approved by the shareholders in a General Meeting.
(b) The options offered may be exercised at anytime within the option period.
(c) The option price at which the employees are offered to take up shares under the Scheme is the average of the mean market quotation (calculated as the average of the highest and lowest prices as traded on the Kuala Lumpur Stock Exchange for the day) of the shares of the Company as quoted in the Daily Official List issued by the Kuala Lumpur Stock Exchange for the five market days preceding the offer date, or the par value of the shares of the Company of RM1.00, whichever is higher.
61 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
31 SHARE CAPITAL (CONTINUED)
During the financial year, 2,833,000 new ordinary shares of RM1.00 each were issued by the Company for cash by virtue of the exercise of options pursuant to the Scheme at the following issue prices:
Number of ordinary shares of RM1.00 each Issue price Proceeds RM RM
1,430,000 12.29 17,574,700 164,000 12.46 2,043,440 50,000 11.90 595,000 403,000 6.69 2,696,070 330,000 7.17 2,366,100 127,000 6.88 873,760 107,000 7.03 752,210 198,000 7.80 1,544,400 24,000 11.67 280,080 ──────── ──────── 2,833,000 28,725,760 ════════ ════════
The movement during the financial year in the number of options over the shares of the Company is as follows: 2002 2001
At 1 January 14,280,000 14,218,000 Granted 140,000 513,000 Lapsed (159,000) (314,000) Exercised (2,833,000) (137,000) ──────── ──────── At 31 December 11,428,000 14,280,000 ════════ ════════
62 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
32 DISPOSAL OF A SUBSIDIARY
The effect of the disposal of a subsidiary, EON CMG Life Assurance Berhad on the financial position of the Group was as follows:
At date of disposal RM'000
Property, plant and equipment (Note 23) 3,130 Investments 96,154 Receivables 18,412 Cash and bank balances 91,422 Payables (9,032) Taxation (2,565) Life assurance fund (141,876) ─────── 55,645 Minority interest (22,258) ─────── Net assets disposed 33,387 Disposal proceeds 48,805 ─────── Gain on disposal 15,418 ═══════
Disposal proceeds 48,805 Cash and cash equivalents disposed (91,422) ─────── Net cash outflow on disposal (42,617) ═══════
There were no disposals in the prior year.
63 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
33 ACQUISITION OF ASSETS AND LIABILITIES OF ORIENTAL BANK BERHAD (“OBB”)
On 1 January 2001, EON Bank acquired the assets and liabilities of OBB, a licensed commercial bank incorporated in Malaysia for a nominal consideration of RM1.00, pursuant to a vesting order under Section 50(1) of the Banking and Financial Institutions Act, 1989.
Details of assets and liabilities transferred and cash flow arising from the vesting of the banking business of OBB into EON Bank are as follows:
2001 RM'000 Assets transferred Cash and bank balances and deposits with financial institutions 1,405,231 Investments 725,464 Loans, advances and financing 4,466,875 Receivables 31,253 Statutory deposits with Bank Negara Malaysia 180,233 Subsidiaries 340 Property, plant and equipment 81,833 ─────── 6,891,229 ─────── Liabilities transferred Deposits from customers 4,655,379 Deposits and placements of banks and other financial institutions 1,243,204 Obligation on securities sold under repurchase agreement 18,556 Bills and acceptance payable 528,505 Payables 123,523 Subordinated loans 830,000 ─────── 7,399,167 ───────
Net liabilities transferred 507,938 Add : Adjustments to net book value of property, plant and equipment transferred 10,261 ─────── Adjusted net liabilities transferred 518,199 Adjusted net liabilities transferred offset to deferred asset account (518,199) ─────── 0 Less : Cash and bank balances and deposits with financial institutions of OBB vested over (1,405,231) Add : Subordinated loans of OBB paid 830,000 ─────── Net cash inflow on banking business of OBB vested to EON Bank (575,231) ═══════
64 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
34 SIGNIFICANT RELATED PARTY TRANSACTIONS
In addition to other related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions. These related party transactions were carried out on terms and conditions similar to those obtainable in other transactions with unrelated parties. All the related party transactions required by the Kuala Lumpur Stock Exchange Listing Requirements to be mandated by shareholders were conducted in accordance with the general mandate obtained from shareholders.
The Company, Edaran Otomobil Nasional Berhad is controlled by Y Bhg Tan Sri Dato’ Seri Mohd Saleh bin Sulong. The Company is also an associate of HICOM Holdings Berhad (“HICOM”), which is effectively a wholly-owned subsidiary of DRB-HICOM Berhad (“DRB-HICOM”).
Group 2002 2001 RM’000 RM’000 (a) Sales of goods and services:
(i) Sales of motor vehicles, accessories, related spare parts / servicing of vehicles to:
Cycle & Carriage (Malaysia) Sdn Bhd (a subsidiary of Cycle & Carriage Ltd) 62,706 46,625 Auto Prominence (M) Sdn Bhd (a subsidiary of HICOM) 19,966 26,251 Auto-Elegance Car Centre Sdn Bhd (a company in which certain Directors have significant interests) 15,931 23,610 Mega Komposit Auto Sdn Bhd (a subsidiary of DRB-HICOM group) 18,985 23,818 EON Bank group (a subsidiary in which a Director is deemed to have an interest other than via the Company) 1,073 3,319 Pantas Rent-a-Car Sdn Bhd (a company in which a Director has significant interest) 0 2,975 DRB-HICOM 265 1,205
(ii) Insurance commission and claims received/receivable from:
South East Asia Insurance Berhad (a subsidiary of DRB-HICOM group) 11,246 9,274
65 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
34 SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED)
Group 2002 2001 RM’000 RM’000 (b) Purchases of goods and services:
(i) Purchases of motor vehicles / related spare parts / commercial vehicles from:
Perusahaan Otomobil Nasional Berhad 4,525,785 5,155,237 (a company in which certain deemed Major Shareholders have significant interest) Proton Parts Centre Sdn Bhd 135,298 116,899 (an associate) Malaysian Truck & Bus Sdn Bhd (a subsidiary of DRB-HICOM) 9,084 16,259
(ii) Installation of accessories and staging of vehicles
Automotive Services (M) Sdn Bhd 3,428 0 (a company in which certain Directors have significant interests)
(iii) Rental of office space paid/payable to:
CCL (Cyclecarri) Properties Sdn Bhd (a subsidiary of Cycle & Carriage Ltd group) 11,045 8,753
(iv) Purchases of general / life insurance from:
South East Asia Insurance Berhad 6,903 6,166 EON CMG Life Assurance Berhad 1,962 1,474 (a subsidiary of DRB-HICOM group)
(v) Transportation services paid/payable to:
Master-Freighters (M) Sdn Bhd (a company in which certain Directors have significant interests) 321 1,603
(vi) Security services paid/payable to:
SRT-EON Security Services Sdn Bhd (an associate) 1,869 1,459
(vii) Purchases of car seats from:
Car Seats (Malaysia) Sdn Bhd (a subsidiary of Ikeda I.O.M. Holdings (Malaysia) Sdn Bhd) 3,115 1,125 ═══════ ═══════
66 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
34 SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED)
Group 2002 2001 RM’000 RM’000
(c) In the normal course of the Group’s banking and finance business, a number of banking and financing transactions are entered into with related parties. These include loans, advances and deposits. These significant related party transactions were carried out on commercial terms and at market rates obtainable on transactions with unrelated parties.
(i) Interest income received / receivable from related parties 6,390 6,427 ═══════ ═══════
(ii) Interest expense on deposits and placements paid/ payable to related parties 15,127 4,856 ═══════ ═══════
35 CAPITAL AND OTHER COMMITMENTS
Group Company 2002 2001 2002 2001 RM’000 RM’000 RM’000 RM’000 Capital expenditure for property, plant and equipment: Approved and contracted for 28,601 23,132 0 0 Approved but not contracted for 76,721 113,995 34,571 66,195 ─────── ─────── ─────── ─────── 105,322 137,127 34,571 66,195
Approved but not contracted for: Equity participation in subsidiaries 0 0 100 11,700 Equity participation in an associate 1,457 12,989 1,457 12,989 ─────── ─────── ─────── ─────── 106,779 150,116 36,128 90,884 ═══════ ═══════ ═══════ ═══════
67 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
36 SEGMENT REPORTING
The Group is organised into two main business segments which are marketing of motor vehicles and commercial banking and financial services.
Intersegment revenue comprise hire purchase commission established on an arms length basis.
Business segments Banking and financial Group Motor services eliminations Group RM’000 RM’000 RM’000 RM’000 2002
Revenue External revenue 5,658,945 1,768,759 0 7,427,704 Inter-segment revenue 21,497 0 (21,497) 0 ───────── ───────── ───────── ───────── Total revenue 5,680,442 1,768,759 (21,497) 7,427,704 ═════════ ═════════ ═════════ ═════════ Results: Segment results 293,969 399,178 0 693,147 Interest income 8,888 0 0 8,888 Interest expenses (327) (1,081) 0 (1,408) ───────── ───────── ───────── ───────── 302,530 398,097 0 700,627
Share of associates’ results 193,946 Net gain on divestment of interest in subsidiaries and an associate 11,353 ───────── Profit before tax 905,926 Taxation (310,724) ───────── Profit after tax 595,202 Minority interest (118,579) ───────── Profit attributable to shareholders 476,623 ═════════ Other information
Segment assets 1,785,811 30,572,802 (304,062) 32,054,551 Investment in associates 137,933 ───────── Total assets 32,192,484 ═════════
Segment liabilities 418,620 28,338,842 (304,062) 28,453,400 Unallocated liabilities 545,422 ───────── Total liabilities 28,998,822 ═════════
Capital expenditure 45,472 43,388 0 88,860 Depreciation and amortisation expenses 22,988 31,190 0 54,178 Other non-cash items 1,132 331,970 0 333,102
68 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
36 SEGMENT REPORTING (CONTINUED)
Business segments Banking and financial Group Motor services eliminations Group 2001 RM’000 RM’000 RM’000 RM’000
Revenue External revenue 5,941,634 1,606,697 0 7,548,331 Inter-segment revenue 23,323 0 (23,323) 0 ───────── ───────── ───────── ───────── Total revenue 5,964,957 1,606,697 (23,323) 7,548,331 ═════════ ═════════ ═════════ ═════════ Results: Segment results 376,187 336,091 0 712,278 Interest income 5,152 0 0 5,152 Interest expenses (403) 0 0 (403) ───────── ───────── ───────── ───────── 380,936 336,091 0 717,027
Share of associates’ results 103,518 Loss on dilution of interest in a subsidiary (203) ───────── Profit before tax 820,342 Taxation (279,698) ───────── Profit after tax 540,644 Minority interest (90,686) ───────── Profit attributable to shareholders 449,958 ═════════ Other information
Segment assets 1,560,941 24,605,261 (268,882) 25,897,320 Investment in associates 453,265 ───────── Total assets 26,350,585 ═════════
Segment liabilities 441,458 22,513,584 (268,882) 22,686,160 Unallocated liabilities 259,868 ───────── Total liabilities 22,946,028 ═════════
Capital expenditure 22,370 182,189 0 204,559 Depreciation and amortisation expenses 25,068 32,837 0 57,905 Other non-cash items (7,778) 275,853 0 268,075
The activities of the Group are substantially carried out in Malaysia except for the activities of Cycle & Carriage Limited, which are carried out mainly overseas. The Group’s share of profit before taxation in respect of the investment in Cycle & Carriage Limited amounts to RM162,497,000 (2001:RM76,480,000).
69 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
37 COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of the Group’s banking and finance business, the banking and finance subsidiaries make various commitments and incur certain contingent liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions.
Nature of commitments and contingencies
Direct credit substitutes comprise guarantees undertaken by the banking group to support the financial obligations of its customers to third parties.
Certain transactions related contingent items represent financial products whose crystallisations are dependent on specific events other than default payment by the customers. They include performance related contingencies and standby letter of credit.
Short term self liquidating trade-related contingencies relate to bills of exchange which have been endorsed by the banking group and represent liabilities in the event of default by the acceptor and the drawer of the bill.
Obligations under underwriting agreements arise from underwriting agreements relating to the issue of equity and debts securities, where the banking group is obliged to subscribe or purchase the securities in the event the securities are not taken up when issued.
Irrevocable commitments to extend credit include all obligations on the part of the banking group to provide funding facilities or the undrawn portion of an approved credit facilities to customers.
Forward foreign exchange contracts are agreements to buy or sell fixed amounts of currency at agreed rates of exchange on a specified future date.
70 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
37 COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Risk Weighted Exposures of the Group’s banking and finance subsidiaries as at 31 December 2002:
2002 2001 Credit Credit Principal equivalent Principal equivalent amount amount* amount amount* RM'000 RM'000 RM'000 RM'000
Direct credit substitutes 367,668 367,668 638,737 638,737 Certain transaction related contingent items 433,477 216,739 460,392 230,196 Short term self liquidating trade-related contingencies 145,343 29,069 147,326 29,465 Obligations under underwriting agreement 494,000 247,000 395,767 197,884 Irrevocable commitments to extend credit - maturity exceeding one year 1,873,989 936,994 1,301,216 650,608 - maturity not exceeding one year 4,055,722 0 3,619,158 0 Foreign exchange related contracts - less than one year 1,538,018 19,463 1,634,692 20,106 Miscellaneous 366,655 0 861,383 546 ──────── ──────── ──────── ──────── Total 9,274,872 1,816,933 9,058,671 1,767,542 ════════ ════════ ════════ ════════
* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Malaysia guidelines.
Foreign exchange related contracts are subject to market risk and credit risk. There are no interest rate, equity and commodity related contracts as at 31 December 2002.
Market risk
Market risk is the potential change in value caused by movement in market rates or prices. The contractual amounts stated above provide only a measure of involvement in these types of transactions and do not represent the amounts subject to market risk. Exposure to market risk may be reduced through offsetting on and off-balance sheet positions. As at 31 December 2002, the amount of contracts which were not hedged and, hence, exposed to market risk was RM4,852,080 (2001: RM6,470,615).
Credit risk
Credit risk arises from the possibility that a counterparty may be unable to meet the terms of a contract in which the banking group has a gain position. As at 31 December 2002, the amount of credit risk, measured in term of the cost to replace the profitable contracts, was RM3,218,403 (2001: RM3,252,307). This amount will increase or decrease over the life of the contracts, mainly as a function of maturity dates and market rates or prices.
71 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
38 LEASE COMMITMENTS
The banking group has lease commitments in respect of rented premises and equipment on hire, all of which are classified as operating leases. A summary of the non-cancellable long-term commitments, net of sub-leases is as follows:
Group 2002 2001 RM’000 RM’000
Not later than one year 3,370 2,146 Later than one year and not later than five years 3,072 4,395 Later than five years 28,843 29,026 ═════ ═════
39 SIGNIFICANT EVENTS
Disposal of EON CMG Life Assurance Berhad
On 17 October 2002, the Company disposed of its entire 60% equity interest in EON CMG Life Assurance Berhad to Tower ED Sdn Bhd for a cash consideration of RM48.9 million. This resulted in a loss of RM1.2 million and a gain of RM15.4 million at Company and Group level respectively.
Partial divestment of interest in Cycle & Carriage Limited (“CCL”)
On 11 November 2002, the Company disposed of 19,095,508 ordinary shares of S$1.00 each representing 7.9% equity interest in Cycle & Carriage Limited (“CCL”) to Jardine Strategic Holdings Limited for a cash consideration of RM194.8 million. This resulted in a loss of RM4.1 million and a gain of RM20.2 million at Company and Group level respectively. The Group’s equity interest in CCL was reduced to 13.1% upon the completion of the partial divestment.
Corporate exercise involving the listing of EON Bank Berhad
The Kedah Cement Holdings Berhad (“KCHB”) Scheme of Arrangement and EON Bank Berhad (“EBB”) Scheme of Arrangement, which were set out in the financial statements for financial year ended 2001 were completed on 11 December 2002 and 12 December 2002 respectively.
The EBB Scheme of Arrangement involved the Company exchanging its holding of EBB shares for 322,944,403 EON Capital Berhad (“ECB”) ordinary shares of RM1.00 each representing 46.6% of the issued and paid-up share capital of ECB and cash of RM252.1 million. This resulted in the gain of RM137.9 million and loss of RM16.0 million at Company and Group level respectively.
On 23 December 2002, ECB was listed on the Main Board of Kuala Lumpur Stock Exchange.
72 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
39 SIGNIFICANT EVENTS (CONTINUED)
VOLKSWAGEN and AUDI distribution
On 4 December 2002, EON had signed a Letter of Intent with Volkswagen AG and letter of appointment with Audi AG to appoint Euromobil Sdn Bhd (a wholly owned subsidiary of EON Bhd) as the sole importer, franchiser and distributor for Volkswagen and Audi passenger cars in Malaysia beginning 1 January 2003.
40 SUBSEQUENT EVENTS
Corporate exercise involving the listing of EON Bank Berhad
Pursuant to the Malaysian Code on Take-Overs and Mergers 1998, EON extended a conditional mandatory offer (“MO”) and acquired an additional 36,575,050 ECB shares, increasing its equity interest in ECB from 46.6% to 51.9%.
EON’s equity interest in ECB was reduced from 51.9% to 50.1% on 17 February 2003 after the implementation of the call and put option agreements entered into with RH Development Corporation Sdn Bhd and Ceria Alam Sdn Bhd. Purchase consideration and goodwill arising from the acquisition amounted to RM65.0 million and RM0.2 million respectively.
Proposed Capital Repayment and Dividends in Specie
The Company proposed to distribute its entire equity interest in ECB and the remaining shares in CCL at zero subscription cost to its shareholders.
The proposed distribution of ECB shares would be carried out via proposed capital repayment of up to 171,762,027 ordinary shares of RM1.00 each and proposed payment of dividends in specie of up to 175,508,442 ordinary shares of RM1.00 each in ECB. To implement the Proposed Capital Repayment of ECB shares, the Company proposed to undertake a bonus issue of new shares via the capitalisation of share premium. The new shares to be issued under the Proposed Bonus Issue would be cancelled as part of the Proposed Capital Repayment exercise.
For purpose of implementing the Proposed Bonus Issue, the Company proposed to increase its authorised share capital from RM500,000,000 comprising 500,000,000 ordinary shares of RM1 each to RM1,000,000,000 comprising 1,000,000,000 ordinary shares of RM1 each.
The proposed distribution of CCL shares would be carried out via payment of dividends in specie of up to 31,830,668 ordinary shares in CCL.
73 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
41 MAJOR SUPPLIER
The Company purchases PROTON passenger vehicles from the sole supplier, Perusahaan Otomobil Nasional Berhad.
42 PRIOR YEAR ADJUSTMENT
During the financial year, the Group changed its accounting policy with respect to the recognition of final dividend in compliance with the new MASB Standard 19 “Events After the Balance Sheet Date”.
In previous years, dividends were accrued as a liability when proposed by directors. The Group has now changed this accounting policy to recognise dividends in shareholders’ equity in the period in which the obligation to pay is established in accordance with MASB Standard 19. Therefore, final dividends are now accrued as a liability after approval by shareholders at the Annual General Meeting.
This change in accounting policy has been accounted for retrospectively. Comparative information has been restated to reflect the change in accounting policy.
The effects of the change on the Group’s and Company’s financial statements are as follows:
As previously As reported Adjustments restated RM'000 RM'000 RM'000 Group
Retained earnings - 31 December 2000 1,268,727 65,795 1,334,522 - 31 December 2001 1,489,588 65,834 1,555,422 ════════ ════════ ════════
Company
Retained earnings - 31 December 2000 1,587,053 65,795 1,652,848 - 31 December 2001 1,750,103 65,834 1,815,937 ════════ ════════ ════════
Group and Company
Proposed final dividend - 31 December 2000 65,795 (65,795) 0 - 31 December 2001 65,834 (65,834) 0 ════════ ════════ ════════
74 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
43 FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments comprise financial assets, financial liabilities and off-balance sheet financial instruments. Fair value is the amount at which a financial asset could be exchanged or a financial liability settled, between knowledgeable and willing parties in an arm’s length transaction. The information presented herein represents the estimates of fair values as at the balance sheet date.
Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates.
In addition, fair value information for non-financial assets and liabilities is excluded as they do not fall within the scope of MASB 24, which requires the fair value information to be disclosed.
A range of methodologies and assumptions had been used in deriving the fair values of the Group’s financial instruments at balance sheet date. The total fair value for each financial instrument is not materially different from the total carrying value, except for the following financial assets and liabilities:
Group Carrying Fair amount amount RM'000 RM'000 On-balance sheet items
Financial assets
Dealing securities 954,842 981,894 Investment securities 4,654,895 4,623,348 Loans, advances and financing 20,573,665 21,753,185 ═════════ ═════════
Financial liabilities
Deposits from customers 18,219,354 18,510,685 Deposits and placements of banks and other financial institutions 7,262,140 6,707,293 Amount due to Cagamas Berhad 841,981 887,188 ═════════ ═════════
75 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
43 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Off- balance sheet items
The derivative financial instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuation in market interest rates or foreign exchange rates relative to their terms. The extent to which instruments are favourable or unfavourable and the aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time.
The fair values of derivative financial instruments at the balance sheet date are as follows:
Group Year-end Year-end Underlying positive negative notional fair value fair value RM'000 RM'000 RM'000 Foreign exchange related contracts: - Forward contracts 1,538,018 3,218 2,659
The following methods and assumptions are used to estimate the fair value of each class of financial assets and liabilities, where applicable for which it is practicable to estimate that value.
Cash and bank balances
The fair values approximate their carrying values.
Deposits and placements with financial institutions
The carrying values for deposits and placements with a maturity of less than one year approximate their fair values.
For deposits and placements with maturities above one year, estimated fair values are based on discounted cash flows using prevailing money market interest rates at which similar deposits and placements would be made with financial institutions of similar credit risk and remaining period to maturity.
Dealing and investment securities
The estimated fair value is generally based on quoted and observable market prices. Where there is no ready market in certain securities, fair values have been assessed by reference to market indicative interest yields or net tangible asset backing of the investee.
Loans, advances and financing
For floating rate loans, the carrying value is generally a reasonable estimate of fair value.
For fixed rate loans, the fair value is estimated by discounting the estimated future cash flows using the prevailing market rates of loans with similar credit risks and maturities.
The fair values of impaired floating and fixed rate loans are represented by their carrying value, net of specific provision and interest-in-suspense, being the expected recoverable amount.
76 Company No. 119767 X
EDARAN OTOMOBIL NASIONAL BERHAD (Incorporated in Malaysia)
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2002 (CONTINUED)
43 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Deposits from customers
For deposits from customers with maturities of less than three months, the carrying amounts are a reasonable estimate of their fair value.
For deposit with maturities of three months or more, fair values are estimated using discounted cash flows based on prevailing market rates for similar deposits from customers.
Deposits and placements of banks and other financial institutions
The estimated fair values of deposits and placements of banks and other financial institutions with maturities of less than three months approximate the carrying values.
For deposits and placements with maturities three months or more, the fair values are estimated based on discounted cash flows using prevailing money market interest rates for deposits and placements with similar remaining period to maturities.
Obligations on securities sold under repurchase agreements
The fair values approximate their carrying values.
Bills and acceptances payable
The fair values approximate their carrying values.
Amount due to Cagamas Berhad
The estimated fair values for amount due to Cagamas Berhad is based on discounted cash flows using the prevailing interest rates offered by Cagamas Berhad for hire-purchase and housing loans sold to Cagamas Berhad with similar remaining period to maturities.
Borrowings
The estimated fair values are estimated based on discounted cash flows using a discounted rate based upon the borrowing rate which the Directors expect would be available to the Group at the balance sheet date.
Other receivables and payables
The carrying values less any estimated allowance for financial assets and liabilities included in ‘Other receivables and payables’ are assumed to approximate their fair values as these items are not materially sensitive to the shift in market interest rates.
Foreign exchange related contracts
The fair values of foreign exchange rate related contracts are the estimated amounts the Group would receive or pay to terminate the contracts at the balance sheet date.
77