www.talam.com.my ANNUAL REPORT 2006 Contents
2 Corporate Structure 30 Statement on Internal Control 153 Analysis of Irredeemable Convertible Preference 4 Corporate Information 32 Audit Committee Report Shareholdings
5 Financial Highlights 36 Statement of Directors’ 155 Notice of Annual General Responsibility in relation to Meeting 6 Profile of Board of Directors the Financial Statements 160 Statement Accompanying 12 Chairman’s Statement 37 Financial Statements Notice of Annual General Meeting 14 Review of Operations 139 List of Properties 161 Notice of Nomination 20 Statement on Corporate 149 Statement on Directors’ Governance Interests Proxy Form
24 Additional Compliance 150 Analysis of Shareholdings Information ANNUAL REPORT 2006
CORPORATE STRUCTURE
97.44%
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as at 13 September 2006
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CORPORATE INFORMATION
BOARD OF DIRECTORS COMPANY SECRETARY
Tan Sri Dato’ (Dr) Ir Chan Ah Chye @ Chan Chong Yoon Leow Chi Lih Executive Chairman (MIA 11371)
Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj PRINCIPAL BANKERS Deputy Chairman Independent Non-Executive Director Malayan Banking Berhad EON Bank Berhad Datuk Ab Rauf Bin Yusoh Non-Independent Non-Executive Director REGISTERED OFFICE Lai Moo Chan Independent Non-Executive Director Suite 2.05, Level 2 Menara Maxisegar Jalan Pandan Indah 4/2 Sulaiman Hew Bin Abdullah Pandan Indah Independent Non-Executive Director 55100 Kuala Lumpur Tel no.: 03-42962000 Tsen Keng Yam Fax no.: 03-42977220 Independent Non-Executive Director Website: www.talam.com.my
Customer Service Action Centre AUDIT COMMITTEE Tel: 03-42943388 Fax: 03-42805035 Lai Moo Chan Chairman SHARE REGISTRAR Tsen Keng Yam Member Securities Services (Holdings) Sdn Bhd Level 7, Menara Milenium Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Jalan Damanlela Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj Pusat Bandar Damansara Member Damansara Heights 50490 Kuala Lumpur Tel no: 03-20849000 NOMINATION COMMITTEE Fax no: 03-20949940/03-20950292
Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj AUDITORS Chairman Ernst & Young Lai Moo Chan Member STOCK EXCHANGE LISTING Sulaiman Hew Bin Abdullah Member Listed on Main Board of Bursa Malaysia Securities Berhad
REMUNERATION COMMITTEE
Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj Chairman
Lai Moo Chan Member
Tsen Keng Yam Member
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FINANCIAL HIGHLIGHTS
2006 2005 2004 2003 2002 RM’000 RM’000 RM’000 RM’000 RM’000
GROUP
Property, plant and equipment 221,819 252,852 275,225 287,439 292,571 Shareholders’ Fund 323,588 1,071,615 1,006,018 575,137 545,414 Revenue 599,814 1,006,032 911,985 897,003 772,529 (Loss)/Profit before taxation (780,290) 130,746 71,099 58,333 45,891 (Loss)/Earnings per share (sen) (125.76) 15.83 18.29 16.02 12.05
COMPANY
Property, plant and equipment 2,392 2,937 2,733 2,685 6,644 Shareholders’ Fund 333,407 798,104 805,857 401,007 396,844 Revenue 2,199 12,626 66,384 55,774 53,128 (Loss)/Profit before taxation (466,782) 12,033 35,609 15,804 11,184
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PROFILE OF BOARD OF DIRECTORS
Tan Sri Dato’ (Dr) Ir Chan Ah Chye @ Chan Chong Yoon
Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj
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PROFILE OF BOARD OF DIRECTORS (Contd.)
TAN SRI DATO’ (DR) IR CHAN AH CHYE @ CHAN CHONG YOON
Malaysian, aged 60, Executive Chairman since 27 March 2002 joined the Board of Talam Corporation Berhad (“Talam”) on 6 November 1990. He is also currently an Executive Director (President/Chief Executive) of Kumpulan Europlus Berhad and a Director of Kumpulan Hartanah Selangor Berhad.
He graduated with a Bachelors Degree in Civil Engineering from the University of Malaya in 1970 and is a member of the Institution of Engineers, Malaysia since 1974 and was subsequently made a Fellow in 1984. He has over 34 years of experience in the property and construction industry since he started his career with Messrs Binnie & Partners (M) Sdn Bhd and later joined Perbadanan Kemajuan Negeri Selangor in 1971 as a Project Manager handling project designs, management and property development. Tan Sri was awarded the prestigious “Property Man of the Year 1998” by Federation Internationale Des Professions Immobilieres (“FIABCI”) in recognition of his achievements in property development.Tan Sri was conferred the Honorary Doctorate of Science (Engineering) by the University Malaya on 11 August 2003.
Tan Sri is the spouse of Puan Sri Datin Thong Nyok Choo, the President/Chief Executive and a major shareholder of Talam. He has direct and deemed interest in Kumpulan Europlus Berhad, a major shareholder of Talam. There is no conflict of interest with the Company except for those transactions disclosed in item 2, pages 24 to 27 of the Additional Compliance Information and Note 44 to the Financial Statements of this Annual Report. Within the last 10 years, he has no convictions for offences.
He has attended all the eight (8) Board of Directors’ meetings held during the financial year ended 31 January 2006.
Y.A.M. TENGKU SULAIMAN SHAH AL-HAJ IBNI AL-MARHUM SULTAN SALAHUDDIN ABDUL AZIZ SHAH AL-HAJ
Malaysian, aged 56, Independent Non Executive Director joined the Board of Talam as Deputy Chairman on 22 December 2000. He also serves Talam as Chairman of the Remuneration Committee and Nomination Committee and a member of the Audit Committee. He is currently a director of Cosway Corporation Berhad.
Since 1970, Y.A.M. Tengku Sulaiman Shah became actively involved in business particularly in building construction and housing development. Y.A.M. Tengku Sulaiman Shah with his other partners formed Syarikat Pembinaan Setia Sdn Bhd (now known as SP Setia Berhad) and in 1997, he relinquished his position and sold off all his shares in SP Setia Berhad. In 1970 Y.A.M. Tengku Sulaiman Shah was appointed as the State Palace’s Officer which carries the title “Tengku Panglima Besar of Selangor” by His Royal Highness, the Sultan of Selangor Sultan Salahuddin Abdul Aziz Shah. In 1978 Y.A.M. Tengku Sulaiman Shah was then promoted as the Chief of Ceremony for the State of Selangor which carries the title “Tengku Panglima DiRaja Selangor” until today.
He has no family relationship with any other directors or major shareholders of the Company. There is no conflict of interest with the Company. Within the last 10 years, he has no convictions for offences.
He has attended five (5) out of eight (8) Board of Directors’ meetings held during the financial year ended 31 January 2006.
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PROFILE OF BOARD OF DIRECTORS (Contd.)
Lai Moo Chan
Datuk Ab Rauf Bin Yusoh
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PROFILE OF BOARD OF DIRECTORS (Contd.)
LAI MOO CHAN
Malaysian, aged 62, Independent Non Executive Director, joined the Board of Talam on 21 November 1998. He also serves Talam as the Chairman of the Audit Committee and a member of the Remuneration Committee and Nomination Committee. On 31 December 2002, he was redesignated and is currently an Independent Non Executive Director of Ho Hup Construction Company Berhad (“Ho Hup”).
He has more than 42 years of experience in the construction industry since joining Ho Hup in 1964 where he was involved in the management, development, growth, expansion, planning, operation and financial aspects of Ho Hup. He has also held various positions in Master Builders Association Malaysia (MBAM) since 1986 and is the Past President of MBAM.
He has no family relationship with any other directors or major shareholders of the Company. There is no conflict of interest with the Company. Within the last 10 years, he has no convictions for offences.
He has attended all the eight (8) Board of Directors’ meetings held during the financial year ended 31 January 2006.
DATUK AB RAUF BIN YUSOH
Malaysian, aged 44, Non Independent Non Executive Director joined the Board of Talam on 28 February 2002.
He was formerly a Director of Europlus Berhad (“Europlus”) from October 1998 until 28 February 2002 and Senior Vice President of Europlus until 1 January 2004. He was appointed as a Senior Vice President of Kumpulan Europlus Berhad on 1 January 2004. He was a founder Director of Asia Lab Sdn Bhd.
He has no family relationship with any other directors or major shareholders of the Company. There is no conflict of interest with the Company. Within the last 10 years, he has no convictions for offences.
He has attended six (6) out of eight (8) Board of Directors’ meetings held during the financial year ended 31 January 2006.
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PROFILE OF BOARD OF DIRECTORS (Contd.)
Sulaiman Hew Bin Abdullah
Tsen Keng Yam
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PROFILE OF BOARD OF DIRECTORS (Contd.)
SULAIMAN HEW BIN ABDULLAH
Malaysian, aged 56, Independent Non Executive Director joined the Board of Talam on 8 February 2002. He also serves Talam as a member of the Nomination Committee.
He was a Director of Europlus Berhad from 14 November 1989 until 8 February 2002. He is presently the managing partner in the legal firm of Messrs Hamzah Sulaiman & Partners. He was called to the Malaysian Bar in 1975 and has been in legal practice since then.
He has no family relationship with any other directors or major shareholders of the Company. There is no conflict of interest with the Company. Within the last 10 years, he has not been convicted for any offence.
He has attended seven (7) out of eight (8) Board of Directors’ meetings held during the financial year ended 31 January 2006.
TSEN KENG YAM
Malaysian, aged 56, Independent Non Executive Director, joined the Board of Talam on 30 April 2004 and is a member of the Audit Committee. He is currently an Alternate Director of Riverview Rubber Estates Berhad and Narlborough Plantations Plc.
He is a Fellow of the Institute of Chartered Accountants (England and Wales) and a member of Malaysian Institute of Accountants and Malaysian Institute of Certified Public Accountants.
In 1978, he joined Hanafiah Raslan & Mohamed as a consultant and was subsequently promoted to Senior Consultant in 1980. He was a principal of Hanafiah Raslan & Mohamed from 1984 to 1987 and was a partner of Arthur Andersen & Co. for more than 14 years from 1988 to 2003.
He has no family relationship with any other directors or major shareholders of the Company. There is no conflict of interest with the Company. Within the last 10 years, he has not been convicted for any offences.
He has attended seven (7) out of eight (8) Board of Directors’ meetings held during the financial year ended 31 January 2006.
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CHAIRMAN’S STATEMENT FOR THE FINANCIAL YEAR 2006
On behalf of the Board of Directors of Talam Corporation Berhad, I would like to present the Annual Report, incorporating the Financial Statements of the Group and of the Company for the financial year ended January 31, 2006.
FINANCIAL HIGHLIGHTS
For the financial year ended January 31, 2006, the Group achieved a lower revenue of RM599 million, compared with RM1,006 million in the previous financial year. The decline was mainly due to the slowdown in construction works and lower locked-in sales and the soft sentiment in the prevailing property market. As a consequence, the Group’s earnings were insufficient to cover fixed costs, provisions for doubtful debts and contingencies and impairment in the value of existing properties, thus resulting in a pre-tax loss of RM775 million.
A large proportion of the losses incurred for the financial year under review was mainly due to the recognition of substantial development costs in the current income statement, arising from the sale of several pieces of lands from the remaining land bank held for development of certain projects. Such development costs were required to be apportioned to the said lands in accordance with their original development values (as per the accounting standard MASB32), which were much higher than the land sale values, thus resulting in the under recognition of development costs in prior years, amounting to approximately RM180.8 million. The adverse results were also affected by provisions of RM28 million for slow moving building stocks, impairment in the value of certain complexes and land held for development for an amount of RM123 million, late liquidated damages of RM79.5 million and doubtful debts and provisions of RM230 million for contingent liabilities.
MAJOR CORPORATE DEVELOPMENTS
On April 8, 2005, a Memorandum of Agreement was signed between IJM Properties Sdn Bhd (IJMP), Terang Tanah Sdn Bhd (TT) and Star Base Sdn Bhd (SBSB) to jointly develop a parcel of land, measuring approximately 90 acres, into a mixed project over a period of 5 years with an estimated Gross Development Value of RM408 million. SBSB is the registered owner of the development land.
IJMP and TTSB would enter into a 50:50 joint venture agreement to jointly develop the project land with SBSB. IJMP and TT have paid a total deposit of RM16 million, in equal proportion, to SBSB and would contribute up to a total of RM80 million for the project land during the course of its development.
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CHAIRMAN’S STATEMENT (Contd.) FOR THE FINANCIAL YEAR 2006
On the same date, another agreement was concluded between IJMP and Expand Factor Sdn Bhd (EFSB), whereby the former company would acquire three parcels of land, measuring approximately 43 acres, for a consideration of RM33 million. In addition, EFSB would be entitled to 30% of the profit from the development of the land, based on an agreed formula. IJMP has indicated its intention to develop the land into a residential development over a period of 3 years with an estimated Gross Development Value of RM193 million.
TTSB and EFSB are 99.999% and 100% owned subsidiaries and SBSB, a 90% owned subsidiary of Talam Corporation Berhad. IJMP is a 100% owned subsidiary of IJM Corporation Berhad (IJM).
PROPOSED FINANCIAL RESTRUCTURING
The Group is presently finalising with its lenders to formulate a Proposed Debt Restructuring Scheme (PRS).
To date, the lenders have agreed to our proposal on the restructuring of the Ambang Sentosa Sdn Bhd outstanding Al-Bai Bithaman Ajil Islamic Debt Securities amounting to RM498 million and the Europlus Corporation Sdn Bhd Murabahah Underwritten Notes Issuance Facility amounting to RM196 million. As for the balance amounting to approximately RM226 million, we are waiting for the lenders to revert back to us on our proposal.
I am confident that the Group, given the opportunity to amicably resolve the debt restructuring issue with its lenders, would be able to submit a comprehensive restructuring plan to the relevant authorities and that the PRS would be successfully implemented, within the shortest time possible as to date up to 75% of the PRS has been agreed to by the lenders.
In view of the recent developments, your Board of Directors is of the opinion that it is appropriate for the financial statements of the Group and the Company to be prepared on a going concern basis at this juncture.
PROSPECTS
The Group has been actively negotiating with its various reputable contractors to resume work before the end of the year. With the locked-in sales and outstanding progressive billings of RM1 billion, I am confident that given time, the houses would be completed and handed over to the respective purchasers within one to two years. In addition, the remaining land bank includes parcels of land in the Klang Valley. The Group, therefore, plans to shift from mass-housing projects to medium-to-higher niche development to keep abreast with market demand. The plan is to undertake joint venture projects with reputable developers, such as IJM, to leverage on the latter’s brand.
APPRECIATION
On behalf of the Board of Directors, I wish to thank our valued customers and shareholders for their continued support. I would also like to express my heartfelt appreciation to the management team and employees of the Group for their commitment, dedication and hard work during the financial year.
The Board of Directors would also like to extend its sincere thanks and gratitude to all our business partners, in particular IJM, and all regulatory authorities for their cooperation throughout the year.
TAN SRI DATO’ (DR) IR. CHAN AH CHYE @ CHAN CHONG YOON Executive Chairman
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REVIEW OF OPERATIONS
PROPERTY DEVELOPMENT
Property development is the core business of Talam Corporation Berhad (“Talam”) which has contributed 97% of its turnover. Talam and its subsidiaries have a total balance land bank of approximately 6,254 acres comprising a mixed portfolio of commercial, residential and industrial properties at various strategic locations in Kuala Lumpur, Ampang, Sepang, Puchong, Bukit Jalil and Rawang.
Information of the housing development projects currently being undertaken and to be undertaken by the Talam Group of Companies are detailed as follows:-
(1) Existing Projects
a. Taman Puncak Jalil (Formerly known as Bandar Seri Bukit Jalil)
Taman Puncak Jalil, a 801 acres leasehold land, is located next to Technology Park along Sungai Besi, Puchong road. Adjacent developments are Lestari Perdana on the southest, Taman Equine on the south, Bandar Kinrara on the northwest and Bukit Jalil Sports Complex on the north. The development, which is undertaken by Maxisegar Sdn Bhd, a wholly-owned subsidiary of Talam, is an integrated and self-contained township comprising 13,675 units of residential and commercial properties. This strategically located project has attracted strong interest from the public. The Gross Development Value of Taman Puncak Jalil is estimated to be about RM2.20 billion with an expected development period of eight (8) years. The project was first launched in June 2001 and as at 31 January 2006, the project has recorded sales of 9,309 units valued at RM1.64 billion.
b. Ukay Perdana
Ukay Perdana is a mixed development project located at 7th mile off Jalan Ulu Klang in the vicinity of Bukit Antarabangsa and Taman Ukay undertaken by Ukay Land Sdn Bhd. It is approximately 14.4 km north-east of Kuala Lumpur City Centre, which is about 15 minutes drive north-east of Kuala Lumpur City Centre via elevated highway. The project is situated on 345 acres of converted leasehold land which is being developed by Ukay Land Sdn Bhd, a 99.999%-owned subsidiary of Talam.
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REVIEW OF OPERATIONS (Contd.)
The Development consist of 6,518 units of residential and commercial properties with an expected Gross Development Value of RM950.0 million. As at 31 January 2006, a total of 6,199 units of properties valued at RM873.8 million were sold. c. Lestari Puchong
Lestari Puchong is a project undertaken by Lestari Puchong Sdn Bhd, a 99.999%-owned subsidiary of Talam. The proposed site is located off Jalan Akademi Putra, approximately 1.2 kilometers from Persimpangan Serdang Exit No. 1123, in the vicinity of Seri Kembangan, Selangor. The site is easily accessible from Kuala Lumpur- Seremban Highway via Jalan Sungai Besi and strategically located to the north of University Putra Malaysia research centre.
Lestari Puchong is a mixed development comprising 8,256 units of residential properties, and 327 units of commercial properties. With an estimated Gross Development Value of RM1.06 billion, Lestari Puchong is expected to span over a development period of eight (8) years. Launched in March 2001, Lestari Puchong has achieved sales of 4,675 units valued at RM706.7 million as at 31 January 2006. d. Kinrara Section 3
Kinrara Section 3 is a project undertaken by Sentosa Restu (M) Sdn Bhd, a 99.999%-owned subsidiary of Talam. The project is located on 43 acres of land in the Daerah of Petaling, opposite of the Kinrara Army Camp. The proposed development, consists of 3,296 units of residential and commercial properties. It was first launched in 1999 with an estimated Gross Development Value of RM427.3 million. As at 31 January 2006, Kinrara Section 3 has achieved a sales of RM 417.8 million representing 3,198 units sold. e. Jalil Heights
Jalil Heights is located on a 31.4 acres leasehold land in Mukim of Petaling, Petaling District within the development known as Lestari Perdana. It is earmarked for the development of 284 units semi-detached houses undertaken by Abra Development Sdn Bhd, a wholly- owned subsidiary of Talam. The project will generate a Gross Development Value of RM101.0 million. Since its first launch in September 2001, Jalil Heights has recorded sales of RM95.4 million (representing 263 units sold) as at 31 January 2006.
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REVIEW OF OPERATIONS (Contd.)
f. Saujana Puchong
Saujana Puchong is a development undertaken by Expand Factor Sdn Bhd, a wholly-owned subsidiary of Talam, on approximately 423 acres of 99 years leasehold land in the Petaling District. The project site is located in the growth area of Puchong and is easily accessible via Lebuhraya Damansara Puchong and the Kuala Lumpur-Seremban Highway through the Serdang-Puchong dual carriageway that links Jalan Puchong to Serdang.
The entire development comprises 9,193 units of terrace houses, apartments and shop lots, which upon completion, are expected to generate a Gross Development Value of RM646.7 million. As at 31 January 2006, the project has recorded sales of 4,701 units valued at RM605.8 million. g. Danau Putra
Danau Putra is a mixed development undertaken by Cekap Mesra Development Sdn Bhd, a subsidiary of Talam, on approximately 417.34 acres of 99 years leasehold land in the Mukim of Dengkil, District of Sepang, within the Multimedia Super Corridor.
Danau Putra is planned for mixed development of medium low cost apartment, cluster bungalows and shop/ apartments with a Gross Development value of RM630.0 million. Launched in August 1998, Danau Putra has achieved sales 3,878 units at RM361.0 million as at 31 January 2006. h. Putra Perdana
Putra Perdana is a project undertaken by Kenshine Corporation Sdn Bhd, a 99.999%-owned subsidiary of Talam, situated on 600 acres of converted leasehold land, the project is located on the southern side of Puchong-Kajang trunk road, 5 km from Batu 14 Puchong, within Cyberjaya and adjacent to the Multimedia Super Corridor, 5 km west of Putrajaya and 13 km north of the Kuala Lumpur International Airport.
With an expected Gross Development Value of RM1.16 billion, Putra Perdana will consist of residential houses, apartments, shop offices, commercial complex, exhibition center, theme garden, hotel and service apartments. As at 31 January 2006, the project has recorded sales of 7,835 units valued at RM836.6 million. i. Saujana Selayang
Saujana Selayang is a project undertaken by Abra Development Sdn Bhd covers an area of approximately 25 acres of 99 years leasehold land in the Mukim of Rawang. It offers affordable bungalow, semi-detached and terrace houses located within an exclusive residential precinct which is easily accessible via Middle Ring Road II and the Jalan Ipoh-Rawang trunk road. The project is expected to generate a Gross Development Value of RM45.2 million. Launched in November 2000, Saujana Selayang has recorded locked in sales of RM45.2 million as at 31 January 2006.
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REVIEW OF OPERATIONS (Contd.)
j. Saujana Putra
Saujana Putra is a project undertaken by Galian Juta Sdn Bhd, a wholly-owned subsidiary of Talam measuring about 200 acres in size, is located opposite Putra Heights in Mukim Tanjung Duabelas, Kuala Langat District. With a proposed development comprising low to medium cost apartments and medium cost terrace house, it will generate a Gross Development Value of RM351.2 million over a development life span of six (6) to seven (7) years. Launched in March 2003, Suajana Putra has achieved sales of 534 units valued at RM 75.6 million as at 31 January 2006. k. Lestari Permai
Lestari Permai is situated on approximately 76.01 acres of 99 years leasehold land and located opposite the Putrajaya Gate 2 entrance. Undertaken by Europlus Construction Sdn Bhd, a 99.999%-owned subsidiary of Talam. The project will be accessible via Lebuhraya Damansara Puchong, Puchong-Serdang bypass, and Jalan Puchong. The proposed development comprises 1,004 units of residential houses and 24 units of double storey shop and 7 units of low cost shop.
With Gross Development Value of RM116.0 million, Lestari Permai was launched in March 2003 and has achieved sales of 564 units valued at RM80.0 million as at 31 January 2006. l. Bukit Sentosa
Bukit Sentosa I, II & III form an integrated township covering approximately 2,411 acres of freehold land in the Mukim of Serendah, approximately 47 km north of Kuala Lumpur. It is easily accessible through the North- South Expressway and exit at Bukit Beruntung Interchange. The comprehensive new township comprises a mixed development of residential, commercial and industrial properties.
Bukit Sentosa I, which is being developed by Talam Industries Sdn Bhd, is planned for mixed development comprising 9,573 units of terrace house, apartments and shoplots. Launched in September 1999, the project has generated total sales of RM712.4 million as at 31 January 2006.
The development of Bukit Sentosa II is being undertaken by Noble Rights Sdn Bhd, a 60% subsidiary of Talam. Bukit Sentosa II is planned for mixed development comprising 6,919 units of terrace house, apartments and shoplots. Launched in April 2001, Bukit Sentosa II has generated total sales of RM521.0 million as at 31 January 2006.
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REVIEW OF OPERATIONS (Contd.)
Bukit Sentosa III, covering 1,010 acres of freehold land, is developed by Maxisegar Sdn Bhd. It is planned for a mixed development of 17,528 units of terrace houses, apartments and shoplots, with a Gross Development Value of RM1.0 billion. Launched in March 1997, Bukit Sentosa III has achieved a total sales of RM577.8 million (or 7,191 units sold) as at 31 January 2006.
m. Bandar Bukit Beruntung
Bandar Bukit Beruntung, a converted 5,500 acres of freehold land is located north-west of Rawang, approximately 40 km from Kuala Lumpur. It is undertaken by Europlus Corporation Sdn Bhd, a 99.999%-owned subsidiary of Talam. The mega township which is marketed as the “2nd Petaling Jaya” has a golf resort, country homes, campus, industrial, commercial and housing units with an expected Gross Development Value of RM5.2 billion. The development of the entire township is expected to span another 13 years to the year 2015. The proposed development involves the construction of 27,000 units of residential, 2,400 units of industrial lots/ factories and 3,900 units of shop office/apartments.
Launched in late 1991, this project has achieved a total sale value of RM1.51 billion representing 13,231 units as at 31 January 2006.
n. Prima Beruntung
Prima Beruntung is a converted 250 acres of freehold land planned for with mixed development. A project launched by Europlus Berhad since 1996, Prima Beruntung is seen as an extension of the Bandar Bukit Beruntung project due to its proximity to Europlus Berhad. With an estimated Gross Development Value of RM257.8 million, Prima Beruntung has achieved a total sales of RM180.8 million (representing 1,863 units sold) as at 31 January 2006.
(2) Future Projects
a. Shah Alam 2 (Berjuntai Bistari Land)
The proposed Shah Alam 2 covering 3,000 acres is located adjacent to the Universiti Industri Selangor (“UNISEL”) campus about 44 km from the towns of Batang Kali and Kuala Selangor, 30 km from Rawang and 20 km from Bukit Beruntung. While the current access to the site is by the coastal road passing by Kuala Selangor or the trunk road from Rawang, Shah Alam 2 will eventually be reached by a 10 km proposed road from the Bukit Beruntung Interchange off the North-South Highway, to be constructed by Maxisegar Sdn Bhd.
Berjuntai Bistari is to be developed over 15 years and will comprise approximately 37,000 units of residential and commercial properties with an estimated Gross Development Value of RM3.9 billion.
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REVIEW OF OPERATIONS (Contd.)
b. Sepang Land
The Sepang Land measuring 800 acres is located in Brookland Estate, Sepang and it is approximately 10 km from the site of the Kuala Lumpur International Airport at Sepang. Talam intends to develop the said land into 15,448 units of mixed development of which 80% are low, low medium and medium cost houses. The entire development is expected to generate total sales value of RM910.0 million.
c. Sierra Ukay
Sierra Ukay is a 50 : 50 joint-venture project undertaken by Sierra Ukay Sdn Bhd. The project measures 90 acres and is located in Mukim Ulu Kelang adjacent to the existing Ukay Perdana. The Gross Development Value of Sierra Ukay estimated to be RM427 million and is expected to implement over a period of 5 years.
OTHER BUSINESSES
The Group’s other businesses in complexes, hotel and recreation and education contributed approximately 3% of its turnover in financial year 2006.
The Group’s overseas hotel development, Maxcourt Hotel has contributed a turnover of RM19 million to the Group with the occupancy rate of 74% for the financial year under review.
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STATEMENT ON CORPORATE GOVERNANCE
INTRODUCTION
The Board of Directors (“Board”) of Talam Corporation Berhad (“Talam” or “the Company”) recognizes the importance of achieving best practices in its standards of business integrity and corporate accountability and is committed to subscribing to the recommendations of the Malaysian Code on Corporate Governance (“Code”).
The Board has considered the manner in which it has applied the Principles of the Code and to the best of its ability complied with the Best Practices of the Code as required under the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”). It also enhances shareholders’ participation and value and safeguards the interest of other stakeholders.
THE BOARD OF DIRECTORS
Talam is led by a Board comprising members with extensive experience in the property, construction and various business sectors supported by a wide range of other professionals in the legal and financial sectors. This wide spectrum of skills and experience provides the strength that is needed to lead the Company in meeting its objectives and enables the Company to rest in the firm control of an accountable and competent Board of Directors.
Board Composition
The Board of Talam currently has six (6) members comprising an Executive Chairman and five (5) non-executive directors, of whom four (4) are independent. The Company considers that its complement of Non-Executive Directors provides an effective Board with a mix of industry-specific knowledge and broad business and commercial experience. They ensure that all proposals by management are fully deliberated and examined, taking into account the interest of shareholders and stakeholders. The role of the Independent Non-Executive Directors is particularly important as they provide unbiased and independent views, advice and judgement to safeguard the interest of minority shareholders. The profiles of the Directors are set out on pages 6 to 11 of this Annual Report.
Tan Sri Dato’ (Dr) Ir Chan Ah Chye @ Chan Chong Yoon is the Executive Chairman of the Board and Puan Sri Datin Thong Nyok Choo is the President/Chief Executive. There is a clear division of duties and responsibilities between these two roles.
The Board has identified Mr Lai Moo Chan as the Senior Independent Non-Executive Director to whom concerns may be conveyed, and to deal with issues regarding the Company where it would be inappropriate for these to be dealt with by the Executive Chairman or the President/Chief Executive.
Board Meetings
The Board meets quarterly to review its quarterly performances and discuss new policies and strategies. Additional meetings will be called as and when necessary. During the year ended 31 January 2006, eight (8) Board Meetings were held and the attendance of the Board members are as follows:-
Directors Number of meetings attended by Directors
Tan Sri Dato’ (Dr) Ir Chan Ah Chye @ Chan Chong Yoon 8/8 Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum 5/8 Sultan Salahuddin Abdul Aziz Shah Al-Haj Datuk Ab Rauf Bin Yusoh 6/8 Lai Moo Chan 8/8 Sulaiman Hew Bin Abdullah 7/8 Tsen Keng Yam 7/8
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STATEMENT ON CORPORATE GOVERNANCE (Contd.)
Supply of Information to the Board
All the Directors are notified about the Board meetings scheduled by the Company Secretary before the meetings. Board papers together with the agenda are circulated to all the Directors prior to the scheduled meetings to enable the Directors to review and consider the agenda items to be discussed at the meeting and where necessary, to obtain further explanations so they can be fully briefed before the meeting. The Board is kept updated on the Company’s financial activities and operations on a regular basis.
All the Directors have direct access to the Senior Management and the services of the Company Secretary. In addition, the directors may seek independent professional advice as and when necessary in discharging their responsibilities.
Directors’ Training
All the Directors have attended the Mandatory Accreditation Programme conducted by Bursatra Sdn Bhd (formerly known as Bursa Malaysia Training Sdn Bhd). The Directors have also attended various training programmes pursuant to the requirements of Bursa Securities to keep abreast with developments in the market place and relevant new regulatory requirements on a continuous basis.
Re-election of Directors
In accordance with the Articles of Association of the Company (“Articles”), all Directors shall retire from office at least once in three years but shall be eligible for re-election. The Articles also provide that one-third of the Board shall retire from office and be eligible for re-election at every Annual General Meeting. Directors who are appointed by the Board are subject to re-election by shareholders at the next Annual General Meeting following their appointment.
The Directors standing for re-election at the 81st Annual General Meeting of the Company to be held are Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj and Sulaiman Hew Bin Abdullah.
BOARD COMMITTEES
The Board has delegated certain responsibilities to several Board Committees which operate within clearly defined terms of reference. The Chairman of the various Committees will report to the Board the outcome of the Committee meetings and such reports are incorporated in the minutes of the Board meetings. The various Committees are:- i) Audit Committee
The terms of reference and activities during the financial year of the Audit Committee are set out under the Audit Committee Report on pages 32 to 35 of this Annual Report. ii) Nomination Committee
The Nomination Committee was established on 27 September 2001. As at the date of this statement, the Nomination Committee comprises three members, all of whom are Independent Non-Executive Directors. The members are:-
1. Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj – Chairman 2. Lai Moo Chan 3. Sulaiman Hew Bin Abdullah
21 ANNUAL REPORT 2006
STATEMENT ON CORPORATE GOVERNANCE (Contd.)
The Nomination Committee is empowered to make recommendations to the Board on all new Board and Board Committees’ appointment; however the main decision lies with the Board after taking into consideration the nomination by the Nomination Committee. The Nomination Committee is also empowered to evaluate the effectiveness of the Board and Board Committees through an assessment on skills mix and experience of its Board and Committee members.
The Nomination Committee had a meeting on 24 January 2006, which was attended by all members, to review the mix of skills, experience and competence of the Board and Board Committees. iii) Remuneration Committee
The Remuneration Committee was established on 22 December 2000. As at the date of this statement, the Remuneration Committee comprises three members, all of whom are Independent Non-Executive Directors. The members are :-
1. Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj – Chairman 2. Lai Moo Chan 3. Tsen Keng Yam
The Remuneration Committee’s primary role is to review and recommend to the Board the remuneration framework and remuneration for the Executive Chairman and President/Chief Executive. The Executive Chairman shall abstain from participating in the discussions with respect to his remuneration package at the Board of Directors’ Meeting. The Remuneration Committee had a meeting on 24 January 2006, which was attended by all members.
DIRECTORS’ REMUNERATION
The Executive Chairman’s remuneration comprises director’s fees and allowance while the remuneration of the President/ Chief Executive comprises salary and allowance. Other customary benefits are made available as appropriate. Any salary review will take into account market rates and the performance of the individual and the Group.
The determination of remuneration of Non-Executive Directors is a matter for the Board as a whole. The Non-Executive Directors will abstain from discussion on their respective remuneration.
The details of the remuneration of directors during the financial year for the Company is disclosed in Note 34 to the Financial Statement of this Annual Report.
RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS
The Group recognizes the need to inform shareholders of all major developments concerning the Group on a timely basis. In accordance with the Listing Requirements of Bursa Securities, various announcements are made during the year such as quarterly reports, related party transactions and corporate proposals, if any, which provide shareholders and the investing public with an overview of the Group’s performance and operations. During the year, the Executive Chairman and senior management had regular dialogues and meetings with institutional investors, fund managers, analysts, research houses and members of the press to brief and update them on the various announcements relating to the Company’s financial performance, major corporate proposals and pertinent issues within the disclosure requirements of Bursa Securities.
22 ANNUAL REPORT 2006
STATEMENT ON CORPORATE GOVERNANCE (Contd.)
In addition, the Company has been using the Annual General Meetings (“AGM”) and Extraordinary General Meetings (“EGM”) to communicate with shareholders and opportunities are given to them to raise questions or seek clarifications pertaining to the operation and financial performance of the Group. The external auditors are also present to provide their professional and independent clarification on issues and concerns raised by shareholders. Status of all resolutions proposed at the AGM or EGM are submitted to Bursa Securities at the end of the meeting day.
ACCOUNTABILITY AND AUDIT
Financial Reporting
The Board is responsible for ensuring that the quarterly and annual financial statements of the Group present a fair and balanced view and assessment of the Group’s financial position, performance and prospects. Such financial statements are announced quarterly whilst the final annual audited financial statements are submitted to Bursa Securities after they are approved by the Board and will be received by shareholders at the Company’s Annual General Meeting. The Audit Committee assists the Board in reviewing and scrutinizing the information for disclosure to ensure accuracy and completeness with particular emphasis on the application of accounting standards and policies and the making of reasonable and prudent estimates and assumptions.
Internal Control
The Board acknowledges that it is responsible for maintaining a system of internal controls which provides reasonable assessment of effective and efficient operations, internal financial controls, and compliance with laws and regulations as well as with internal procedures and guidelines. The internal control system also aims at identifying and managing any risks that the Company may encounter in pursuit of its business objectives. A Statement on Internal Control of the Company is set out on pages 30 to 31 of this Annual Report.
Relationship with the External Auditors
The external auditor, Messrs Ernst & Young has continued to report to members of the Company on its findings which are included as part of the Company’s statutory financial statements. The Company has thus established a transparent arrangement with the auditors to meet the auditors’ professional requirements. From time to time, the auditors will highlight to the Audit Committee and Board of Directors matters that require the Board’s attention through the issuance of management letters.
Statement made in accordance with the resolution approved by the Board of Directors on 29 August 2006.
23 ANNUAL REPORT 2006
ADDITIONAL COMPLIANCE INFORMATION AS AT 31 JANUARY 2006
1. Utilisation of Proceeds
The Company did not raise funds through any corporate proposal during the financial year ended 31 January 2006.
2. Recurrent Related Party Transactions of a Revenue or Trading Nature (“RRPT”)
Details of recurrent related party transactions made during the financial year ended 31 January 2006 pursuant to the shareholders’ mandate obtained by the Company at the Annual General Meeting held on 29 July 2005 are as follows:-
Name of Value of Name of Company/Group Transactions Class of Related Party involved (RM) Related Party
A) Construction Contract
Dirga Niaga (Selangor) Maxisegar Sdn Bhd 4,459,822.64 TSDCAC, PSDTNC & KEURO Sdn Bhd (“Dirga Niaga”) (“Maxisegar”) (Notes 1 and 4)
Dirga Niaga Lestari Puchong 18,096,445.21 TSDCAC, PSDTNC & KEURO Sdn Bhd (Notes 1 and 4)
Dirga Niaga Pulau Kembar 446,800 TSDCAC, PSDTNC, KEURO Sdn Bhd & Yue Keng Nam (Notes 1, 4 and 7)
Dirga Niaga Ukay Land Sdn Bhd 10,289,442.66 TSDCAC, PSDTNC & KEURO (Notes 1 and 4)
Dirga Niaga Europlus Corporation 114,377.42 TSDCAC, PSDTNC & KEURO Sdn Bhd (Notes 1 and 4)
Dirga Niaga Sentosa Restu (M) 2,803,291.94 TSDCAC, PSDTNC & KEURO Sdn Bhd (Notes 1 and 4)
KEB Builders Sdn Bhd Maxisegar 2,672,190.71 TSDCAC, PSDTNC & KEURO (“KEB Builders”) (Notes 1 and 4)
KEB Builders Expand Factor Sdn Bhd 290,312.07 TSDCAC, PSDTNC & KEURO (Notes 1 and 4)
KEB Builders Mudi Angkasa 5,204,019.84 TSDCAC, PSDTNC, KEURO Development Sdn Bhd & PPBSB (“Mudi Angkasa”) (Notes 1, 4, 5 and 6)
KEB Builders Galian Juta Sdn Bhd 846,189.31 TSDCAC, PSDTNC & KEURO (Notes 1 and 4)
24 ANNUAL REPORT 2006
ADDITIONAL COMPLIANCE INFORMATION (Contd.) AS AT 31 JANUARY 2006
Name of Value of Name of Company/Group Transactions Class of Related Party involved (RM) Related Party
B) Procurement of project management services
Abra Development L.C.B. Management 460,097.37 TSDCAC & PSDTNC Sdn Bhd (“Abra”) Sdn Bhd (“LCBM”) (Notes 1 and 2)
C) Rental of Office Premises at Menara Maxisegar, Jalan Pandan Indah 4/2, Pandan Indah, 55100 Kuala Lumpur
Agrocon (M) Sdn Bhd Abra 79,207.24 TSDCAC & PSDTNC (Notes 1, 2 and 3)
Abra LCBM 3,698,137.80 TSDCAC & PSDTNC (Notes 1 and 2)
KEB Builders Abra 621,624.00 TSDCAC, PSDTNC & KEURO (Notes 1, 2 and 4)
D) Rental of factory premises at No. 2, Jalan Purnam 2/3, Kangkar Tebrau, Johor
Ice Masters Sdn Bhd Europlus Berhad 60,000.00 TSDCAC, PSDTNC & KEURO (Notes 1 and 4)
E) Purchase of building and construction materials including ready mixed concrete
KEURO Trading Sdn Bhd Cekap Mesra 800.03 TSDCAC, PSDTNC, KEURO (“KEURO Trading”) Development Sdn Bhd & Chee Heng Tong (“Cekap Mesra”) (Notes 1, 4 and 8)
KEURO Trading Expand Factor Sdn Bhd 1,633.65 TSDCAC, PSDTNC & KEURO (“Expand Factor”) (Notes 1 and 4)
KEURO Trading Mudi Angkasa 37,617.14 TSDCAC, PSDTNC, KEURO & PPBSB (Notes 1, 4, 5 and 6)
25 ANNUAL REPORT 2006
ADDITIONAL COMPLIANCE INFORMATION (Contd.) AS AT 31 JANUARY 2006
Name of Value of Name of Company/Group Transactions Class of Related Party involved (RM) Related Party
F) Provision of Leasing Facilities by KEURO Leasing Sdn Bhd
KEURO Leasing Sdn Bhd Abra 2,060.00 TSDCAC, PSDTNC & KEURO (“KEURO Leasing”) (Notes 1, 2 and 4)
KEURO Leasing Cekap Mesra 6,430.50 TSDCAC, PSDTNC & Chee Heng Tong (Notes 1, 4 and 8)
KEURO Leasing Expand Factor 21,082.26 TSDCAC, PSDTNC & KEURO (Notes 1 and 4)
KEURO Leasing Mudi Angkasa 1,430.00 TSDCAC, PSDTNC, KEURO & PPBSB (Notes 1, 4, 5 and 6)
KEURO Leasing Juara Tiasa Sdn Bhd 4,530.00 TSDCAC, PSDTNC & KEURO (Notes 1 and 4)
KEURO Leasing LCBM 8,739,879.40 TSDCAC, PSDTNC & KEURO (Notes 1 and 4)
KEURO Leasing Lestari Puchong 53,385.96 TSDCAC, PSDTNC & KEURO Sdn Bhd (Notes 1 and 4)
KEURO Leasing Maxisegar 68,540.00 TSDCAC, PSDTNC & KEURO (Notes 1 and 4)
KEURO Leasing Maxisegar Construction 12,930.00 TSDCAC, PSDTNC & KEURO (Notes 1 and 4)
KEURO Leasing Melombong & 6,226.50 TSDCAC, PSDTNC & KEURO Perumahan Sdn Bhd (Notes 1, 2 and 4)
KEURO Leasing Talam Corporation 2,005.81 TSDCAC, PSDTNC & KEURO Berhad (Notes 1 and 4)
26 ANNUAL REPORT 2006
ADDITIONAL COMPLIANCE INFORMATION (Contd.) AS AT 31 JANUARY 2006
Name of Value of Name of Company/Group Transactions Class of Related Party involved (RM) Related Party
F) Provision of Leasing Facilities by KEURO Leasing Sdn Bhd (Contd.)
KEURO Leasing TCB Resources Sdn Bhd 122,637.53 TSDCAC, PSDTNC & KEURO (Notes 1 and 4)
KEURO Leasing Ukay Land Sdn Bhd 1,352,978.68 TSDCAC, PSDTNC & KEURO (Notes 1 and 4)
KEURO Leasing Zillion Development 179.38 TSDCAC, PSDTNC & KEURO Sdn Bhd (Notes 1 and 4)
KEURO Leasing Perwira Indra Sakti 2,785.00 TSDCAC, PSDTNC & KEURO Sdn Bhd (Notes 1 and 4)
NOTES:
1. Tan Sri Dato’ (Dr) Ir Chan Ah Chye @ Chan Chong Yoon (“TSDCAC”) is a Director of Talam. TSDCAC and Puan Sri Datin Thong Nyok Choo (“PSDTNC”), the spouse of TSDCAC are the Major Shareholders of Talam. As at 31 January 2006, TSDCAC and PSDTNC have direct and deemed equity interest of 54.78% in Talam. TSDCAC and PSDTNC are deemed interested in the shares of all the subsidiary companies of Talam to the extent Talam has an interest.
2. TSDCAC and PSDTNC hold 100.00% of the equity interest of Sze Choon Holdings Sdn Bhd which wholly- owns Bumi Dua Corporation Sdn Bhd (“Bumi Dua”). Bumi Dua in turn has 12.00% equity interest in Abra for the past 12 months.
3. TSDCAC is the brother of Chan Keat Wan, a Major Shareholder and Director of Agrocon (M) Sdn Bhd.
4. TSDCAC and PSDTNC are Directors and Major Shareholders of Kumpulan Europlus Berhad which owns 45.16% equity interest in Talam as at 31 January 2006.
5. PPBSB is a Major Shareholder of KEURO.
6. TSDCAC and PSDTNC are Major Shareholders of Mudi Angkasa by virtue of their direct and deemed equity interest of 54.78% in Talam and 100% equity interest in PPBSB which in turn holds an effective equity interest of 51% and 49% respectively in Mudi Angkasa.
7. Mr Yue Keng Nam was a Director and Shareholder of Pulau Kembar Sdn Bhd and is also a Major Shareholder of KEURO pursuant to Section 6A of the Companies Act, 1965.
8. Mr Chee Heng Tong was a director of Cekap Mesra. He is also a Director of KEURO and a Major Shareholder of Cekap Mesra.
27 ANNUAL REPORT 2006
ADDITIONAL COMPLIANCE INFORMATION (Contd.) AS AT 31 JANUARY 2006
3. Shares Buy-Back
The following are the details of the purchase and disposal of the Company’s shares:-
No. of share Highest Lowest Average *Total Amount No. of shares purchased/ Price Price Price (Paid)/Received held as Date (disposed) (RM) (RM) (RM) (RM) treasury shares
4 February 2005 1,000 1.140 1.140 1.140 1,154.46 1,000 29 March 2005 366,600 1.050 1.020 1.038 382,179.10 366,600 1 April 2005 44,200 0.990 0.980 0.986 43,897.45 44,200 4 April 2005 127,500 0.975 0.890 0.908 116,307.76 127,500 5 April 2005 324,800 0.900 0.875 0.886 289,035.96 324,800 6 April 2005 12,500 0.880 0.820 0.873 10,997.37 12,500 1 July 2005 1,000 0.490 0.490 0.490 503.20 1,000 26 January 2006 1,000 0.200 0.200 0.200 213.08 1,000
Total 878,600 844,288.38 878,600
* note: including brokerage, stamp duty and clearing fee
4. American Depository Receipt (ADR) or Global Depository Receipt (GDR) Programmes
During the financial year, the Company did not sponsor any ADR or GDR programmes.
5. Imposition of Sanctions And/Or Penalties
There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies.
6. Non-Audit Fees
During the financial year end, the Company did not pay any non-audit fees to the Auditors of the Company.
7. Variation In Results
The variance between the loss attributable to shareholders for the unaudited financial results and the Audited Financial Statements for the year ended 31 January 2006 is 50.3%.
8. Profit Guarantees
During the financial year, there were no profit guarantees given by the Company.
9. Material Contracts
There were no material contracts entered into by the Company and its subsidiaries involving Directors’ and major shareholders’ interests of the Company which were still subsisting as at the end of the financial year.
28 ANNUAL REPORT 2006
ADDITIONAL COMPLIANCE INFORMATION (Contd.) AS AT 31 JANUARY 2006
10. Contracts Relating To Loans
There was no material contracts relating to loans entered into by the Company involving Directors and major shareholders.
11. Options, Warrants or Convertible Securities
During the financial year, the following securities were converted into Ordinary Shares:-
(a) RM18,496,551 7% Irredeemable Convertible Unsecured Loan Stock 2003/2005 have been converted into 18,496,551 Ordinary Shares.
(b) 111,570,470 five (5)-year 5% Irredeemable Convertible Preference Shares of RM0.10 each have been converted into 11,157,045 Ordinary Shares.
12. Revaluation of Landed Properties
During the financial year ended 31 January 2006, the Company did not have a revaluation policy on landed properties.
29 ANNUAL REPORT 2006
STATEMENT ON INTERNAL CONTROL
The Board of Directors hereby provides the following statement which outlines the key elements and processes of the internal control system within the Group for the current financial year.
RESPONSIBILITY
The Board of Directors recognises its responsibility for the Group’s systems of internal control and for reviewing its adequacy and integrity. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve the business objectives of the Group. In pursuing these objectives, internal controls can only provide reasonable and not absolute assurance against material misstatement or loss. The system of internal control incorporates inter alia, risk management, financial, operational and compliance controls as well as the governance process.
RISK MANAGEMENT FRAMEWORK
During the current financial year, the management continued to review and update the enterprise-wide key risk profile prepared by the external consultants. The review was conducted to further update and identify the significant risks and corresponding controls, and develop the enterprise-wide risk profile. In assessing priority for the risks identified, the process takes in account the possibility of the risk occurring and its impact to the Group in the event the risk takes place. The risk profile is being reviewed regularly by the management and serves as an on going process used to identify, evaluate and manage significant risks.
INTERNAL AUDIT FUNCTION
The Group’s Internal Audit Department reports independently to the Audit Committee. The Audit Committee reviews and approves the internal audit plan, which was developed based on the finalised key risk profile of the Group, on an annual basis. The Internal Audit Department provided reports on key findings and progress of areas audited to the Audit Committee on a bi-monthly basis.
Based on the review of the internal auditors to-date, there were certain weaknesses noted in the areas audited. All material recommendations proposed in improving the internal controls were considered and appropriate corrective measures have been implemented by the management to rectify the shortcomings and prevent further recurrence of issues and findings highlighted.
All the internal controls instituted were applicable and intact. However, due to the cut down and high turnover of staff in the Group, especially in the audit and accounts departments, there were weaknesses of enforcement in the implementation of the existing internal controls which resulted in certain operational weaknesses in the Group and delays in finalisation of the Audited Financial Statements. However these operational weaknesses are in the process of being rectified and new controls which were recommended were implemented through recruitment of additional manpower. This will help to mitigate risks of operational weaknesses in the Group.
30 ANNUAL REPORT 2006
STATEMENT ON INTERNAL CONTROL (Contd.)
OTHER KEY ELEMENTS AND PROCESSES OF INTERNAL CONTROLS
Other key elements and processes of the Group’s system of internal control are:
• the Group’s Internal Audit Department, which reports to the Audit Committee performed regular reviews of business processes to assess the effectiveness of internal controls.
• operational structure with defined lines of responsibilities and delegation of authority. A process of hierarchical reporting has been established which provides for a documented and auditable trail of accountability.
• management reports which are presented by the respective division heads to the Board each quarter providing financial information on key performance indicators.
• defined lines of responsibilities for approving authority of various transactions. The internal control function acts as a check and balance.
• the Standing Instructions and Standard Operating Procedures of all departments are regularly reviewed and updated to ensure effective management of the Group’s operations.
• Quarterly monitoring of financial results had been reviewed in Audit Committee meetings.
The Board of Directors and the management continued to take measures to strengthen the internal control environment to safeguard the shareholders investment and the Group’s assets.
Statement made in accordance with the resolution approved by the Board of Directors on 26 September 2006.
31 ANNUAL REPORT 2006
AUDIT COMMITTEE REPORT
COMPOSITION
Members of the Committee Designation
1. Lai Moo Chan (Chairman) Independent Non-Executive Director
2. Tsen Keng Yam Independent Non-Executive Director (Member of the Malaysian Institute of Accountants)
3. Y.A.M. Tengku Sulaiman Shah Al-Haj Independent Non-Executive Director Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj
TERMS OF REFERENCE
The following terms of reference of the Audit Committee have been adopted:
Constitution
The Audit Committee was established by the Board of Directors on 24 February 1994.
Membership
The Committee shall be appointed by the Board of Directors from amongst their number and shall consist of not less than 3 members of whom a majority shall be independent directors. The members of the Audit Committee are elected in accordance to the Bursa Malaysia Securities Berhad Listing Requirements. At least one member of the Audit Committee must be either :- i) a member of the Malaysian Institute of Accountants; or ii) as at least 3 years’ working experience and passed the examinations specified in Part I of the 1st Schedule of the Accountants Act, 1967; or iii) has at least 3 years’ working experience and is a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967; or iv) has a degree / masters / doctorate in accounting or finance and at least 3 years’ post qualification experience in accounting or finance; or v) has at least 7 years’ experience being a chief financial officer of a corporation or having the function of being primarily responsible for the management of the financial affairs of a corporation.
The members of the Audit Committee shall elect a Chairman from amongst their number who shall be an independent director. If a member of the Audit Committee resigns, dies or for any other reason ceases to be a member with the result that the number of members is reduced to below 3, the Board of Directors shall within 3 months of that event, appoint such number of new members as may be required to make up the minimum number of 3 members.
No alternate director can be appointed as a member of the Audit Committee.
32 ANNUAL REPORT 2006
AUDIT COMMITTEE REPORT (Contd.)
Authority
The Audit Committee is granted the authority to investigate any activity of its Company and its subsidiaries within its terms of reference. In particular, the Audit Committee has the authority to :- i) have resources which are required to perform its duties; ii) have full and unrestricted access to any information including any information it requires from any employee and all employees are directed to co-operate with any request made by the Audit Committee; iii) be able to obtain independent professional or other advice; and iv) have direct communication channels with the external and internal auditors.
Meetings and Reporting Procedures
The Audit Committee will meet at least four (4) times a year. A quorum for a meeting shall be two members, both being independent directors. At least once a year, the Audit Committee shall meet with the external auditors without any executive directors being present. The external auditor may request for a meeting, if they consider necessary.
The directors and employees will attend any particular Audit Committee meeting only at the Audit Committee’s invitation, specific to the relevant meeting.
The Company Secretary shall be the secretary of the Audit Committee. Minutes of the meeting shall be duly entered in the books provided there from. The minutes will be circulated to all members of the Board of Directors and shall be presented at the Board of Directors’ meeting.
Duties and Functions
The duties and functions of the Audit Committee shall be :- i) To consider the appointment of the external auditor, the audit fee and any questions of the resignation or dismissal of the external auditor before making recommendation to the Board of Directors; ii) To discuss with external auditors before the audit commences, the audit plan, the nature and scope of the audit and ensure co-ordination where more than one audit firm is involved; iii) To review the monthly management accounts; iv) To review the quarterly results and year-end financial statements prior to the approval by the Board of Directors, focusing particularly on :
a) Any changes in the accounting policies and practices
b) Significant and unusual events
c) The going concern assumption
d) Compliance with accounting standards, stock exchange and legal requirements
33 ANNUAL REPORT 2006
AUDIT COMMITTEE REPORT (Contd.)
v) To review any related party transaction and conflict of interest situation that may arise in the Company including any transaction, procedure or course of conduct that raises question of management integrity; vi) To discuss problems and reservations arising from the interim and final audits, and matters the auditor may wish to discuss (in the absence of management where necessary); vii) Internal Audit Function :
a) To review the adequacy of the scope, function and resources of the internal audit function that it has the necessary authority to carry out its work;
b) To review the internal audit programme, consider the major findings of internal audits and investigation undertaken and management’s response, and ensure coordination between the internal and external auditors; viii) To keep under review the effectiveness of the internal control system and in particular review the external auditor’s management letter and management’s response; ix) To review the audit reports x) To prepare periodic report to the Board of Directors summarising the work performed in fulfilling the Audit Committee’s primary responsibilities; and xi) To consider other topics, as defined by the Board of Directors.
ATTENDANCE AT AUDIT COMMITTEE MEETINGS
During the financial year ended 31 January 2006, the number of Audit Committee Meetings held and the number of meetings attended by each Audit Committee member is as follows:
Audit Committee Member Number of Meetings attended by Audit Committee Member
1. Lai Moo Chan 9/9 2. Mohd Alkaf Bin Mohd Kahar (resigned on 15 April 2005) 2/9 3. Tsen Keng Yam 9/9 4. Y.A.M Tengku Sulaiman Shah Al-Haj 6/9 Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj
The Senior Vice President I of Finance and the Head of Internal Audit would normally attend all Audit Committee meetings at the invitation of the Audit Committee.
SUMMARY OF AUDIT COMMITTEE ACTIVITIES
During the year, the Audit Committee carried out its duties as set out in the terms of reference and made various recommendations to the Board of Directors.
34 ANNUAL REPORT 2006
AUDIT COMMITTEE REPORT (Contd.)
INTERNAL AUDIT FUNCTION
The Audit Committee is supported in its duties by the internal audit function. The Audit Committee is aware of the fact that the internal audit function is essential to assist in obtaining the assurance and consulting services it requires regarding the effectiveness of the system of internal control in the Group.
The primary objective of the internal audit function is to review the effectiveness of the system of the internal control and this is performed with impartiality, proficiency and due professional care. The Internal Audit Department assisted the Audit Committee in the discharge of its duties by undertaking independent regular and systematic reviews of the system of internal control so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively.
However, due to the downturn of the industry and the consequent reduction of overall staff position, the internal audit function activities were also scaled down accordingly.
In attaining the above objective, the following activities were carried out by the Internal Audit Department on the adequacy of risk management, operational controls, compliance controls and statutory requirements : i) Executed internal audits in accordance to the risk based / driven internal audit plan. A total of 4 routine audits and 2 follow up audits were carried out during the year; ii) Compliance reviews of the internal control procedures as stipulated in the Group’s Standing Instructions and Standard of Operating Procedures. During the same period, Standing Instructions and Standard of Operating Procedures of all departments in the Group were jointly reviewed and updated and additional practical internal controls were incorporated; iii) Carried out 2 investigations and special reviews as requested by Management and / or Audit Committee; iv) Carried out periodic review on the risk management process within the Group and ensured continuous monitoring, assessment and mitigation of risks. The Internal Audit Department highlighted all the audit risks by departments during the Routine and Follow-up Audits and this has been correspondingly updated into the Risk Profiling of Departments. Meetings were held with all Head of Departments on their risks and actions taken to mitigate the risks. This was then executed by way of Management Response on Audit Findings. v) Reviewed the recurrent related party transactions (RRPT) quarterly and made the necessary recommendations.
The register at the Secretarial Department was also reviewed to ensure that all recurrent related party transactions have been duly updated in the register; vi) Reviewed the Group’s information technology infrastructure, operations and governance process and made recommendations thereof.
In collaboration with the Information Technology Department, the computerisation of various operations of departments which have been audited are being implemented.
All Internal Audit Department’s reports were deliberated by the Audit Committee and recommendations made to the Board of Directors and / or the Management were acted upon.
35 ANNUAL REPORT 2006
STATEMENT OF DIRECTORS’ RESPONSIBILITY IN RELATION TO THE FINANCIAL STATEMENTS
This statement is prepared as required by the Listing Requirements of the Bursa Malaysia Securities Berhad.
The Directors are required to prepare financial statements which give a true and fair view of the state of affairs of the Group and the Company as at the end of each financial year and of their results and their cash flows for that year then ended.
In preparing the financial statements, the Directors consider that,
• the Group and the Company have used appropriate accounting policies and are consistently applied;
• reasonable and prudent judgments and estimates were made; and
• all applicable approved accounting standards in Malaysia have been followed.
The Directors are responsible for ensuring that the Group and the Company maintain accounting records that disclose with reasonable accuracy the financial position of the Group and the Company, and which enable them to ensure that the financial statements comply with the Companies Act, 1965.
The Directors are responsible to safeguard the assets of the Group, and have taken the necessary steps for the prevention and detection of fraud and other irregularities.
This statement is made in accordance with the resolution approved by the Board of Directors on 29 August 2006.
36 Financial Statements
38 Directors’ Report 49 Balance Sheets 55 Consolidated Cash Flow Statement 45 Statement by Directors 51 Income Statements 57 Company Cash Flow 45 Statutory Declaration 52 Consolidated Statement of Statement Changes in Equity 46 Report of the Auditors 59 Notes to the 54 Company Statement of Financial Statements Changes in Equity ANNUAL REPORT 2006
DIRECTORS’ REPORT
The directors hereby present their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 January 2006.
PRINCIPAL ACTIVITIES
The principal activities of the Company are provision of management services, investment holding and property development.
The principal activities of the subsidiaries are described in Note 51 to the financial statements.
There have been no significant changes in the nature of the principal activities during the financial year other than those activities that ceased consequent to the disposal and deregistration of subsidiaries as disclosed in Note 51 to the financial statements.
RESULTS
Group Company RM’000 RM’000
Loss after taxation (771,923) (466,782) Minority interests 127 –
Net loss attributable to shareholders (771,796) (466,782)
There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the statement of changes in equity.
In the opinion of the directors, 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 as disclosed in the financial statements:
Group Company RM’000 RM’000
(a) Losses arising from a litigation: - Provision for doubtful debts as disclosed in Note 15(i) to the financial statements 42,071 – - Provision for compensation as disclosed in Note 17 to the financial statements 38,325 –
(b) Impairment losses of: - Investment property as disclosed in Note 5 to the financial statements 17,000 – - Land held for development as disclosed in Note 4(a) to the financial statements 78,155 – - Investment in subsidiaries as disclosed in Note 6 to the financial statements – 154,437
(c) Provision for doubtful debts 57,564 310,957
(d) Provision for liabilities 78,326 –
38 ANNUAL REPORT 2006
DIRECTORS’ REPORT (Contd.)
DIVIDENDS
At the Annual General Meeting held on 29 July 2005, the proposed final dividend in respect of the financial year ended 31 January 2005 of 4% less taxation based on the issued and paid-up capital as at 31 January 2005 of 598,844,934 ordinary shares of RM1.00 each amounting to RM17,246,734 was rejected by the shareholders.
DIRECTORS
The names of the directors of the Company in office since the date of the last report and at the date of this report are:
Tan Sri Dato’ (Dr.) Ir. Chan Ah Chye @ Chan Chong Yoon YAM Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj Datuk Ab Rauf bin Yusoh Lai Moo Chan Sulaiman Hew bin Abdullah Tsen Keng Yam
DIRECTORS’ BENEFITS
Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate.
Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by directors as shown in Note 34 to the financial statements or the fixed salary of a full time employee of the Company) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member or with a company in which he has a substantial financial interest, other than those benefits which may deemed to have arisen by virtue of those contracts, agreements and transactions entered into in the ordinary course of business between the Company and its subsidiaries and companies in which the directors are deemed to have substantial financial interest and as disclosed in Note 44 to the financial statements.
39 ANNUAL REPORT 2006
DIRECTORS’ REPORT (Contd.)
DIRECTORS’ INTERESTS
According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in ordinary shares, warrants and irredeemable convertible preference shares in the Company and its related corporations during the financial year were as follows:
<——————— Number of Ordinary Shares of RM1.00 Each ———————> 1 February 31 January 2005 Bought Conversion Sold 2006
The Company
Direct Interest
Tan Sri Dato’ (Dr.) Ir Chan Ah Chye @ Chan Chong Yoon 36,993,368 2,148,650 7,364,821 (5,160,100) 41,346,739
YAM Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj 500 – – – 500 Lai Moo Chan 46,641 – – – 46,641 Sulaiman Hew bin Abdullah 42,906 – – – 42,906
Indirect Interest
Tan Sri Dato’ (Dr.) Ir Chan Ah Chye @ Chan Chong Yoon 301,703,277 5,622,325 3,252,779 (8,131,504) 302,446,877(1)
(1) Deemed interested through his spouse, Puan Sri Datin Thong Nyok Choo and his daughter, Chan Siu Wei and by virtue of his direct and indirect interest in Kumpulan Europlus Berhad, Pengurusan Projek Bersistem Sdn. Bhd., Sze Choon Holdings Sdn Bhd and Prosperous Inn Sdn. Bhd. pursuant to Section 6A of the Companies Act, 1965.
40 ANNUAL REPORT 2006
DIRECTORS’ REPORT (Contd.)
DIRECTORS’ INTERESTS (CONTD.)
<———————— Number of 5% Irredeemable Convertible ————————> Preference Shares (“ICPS”) of RM0.10 Each 1 February 31 January 2005 Bought Conversion Sold 2006
The Company
Direct Interest
Tan Sri Dato’ (Dr.) Ir. Chan Ah Chye @ Chan Chong Yoon 85,879,462 – (73,648,212) – 12,231,250 Lai Moo Chan 110,307 – – – 110,307
Indirect Interest
Tan Sri Dato’ (Dr.) Ir. Chan Ah Chye @ Chan Chong Yoon 37,931,736 4,671,920 (32,527,799) (10,075,820) 37(2)
(2) Deemed interested through his interest in Sze Choon Holdings Sdn. Bhd. pursuant to Section 6A of the Companies Act, 1965.
Tan Sri Dato’ (Dr.) Ir. Chan Ah Chye @ Chan Chong Yoon, by virtue of his interest in shares of the Company is also deemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest.
None of the other directors in office at the end of the financial year had any interest in shares and ICPS in the Company or its related corporations during the financial year.
ISSUE OF SHARES
During the financial year, the Company increased its issued and paid-up share capital from RM624,398,262 to RM642,894,812 by way of issuance of 18,496,550 ordinary shares of RM1.00 each amounting to RM18,496,550 pursuant to the conversion of 7% Irredeemable Convertible Unsecured Loan Stocks ("ICULS") 2003/2005 as disclosed in Note 26 to the financial statements.
The new ordinary shares rank pari passu in all respects with the existing ordinary shares of the Company except that they are not entitled to any dividends, allotments and/or other distributions unless the allotment of the new ordinary shares is made on or prior to the entitlement date of such dividends, rights, allotments and/or other distributions.
SHARE BUY BACK
During the financial year, the Company repurchased its issued ordinary shares from the open market which were financed by internally generated funds. The number of ordinary shares repurchased during the financial year was 878,600 ordinary shares at prices ranging from RM0.20 to RM1.14 per share. The total consideration for the shares repurchased during the period including transaction costs was RM844,288. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.
41 ANNUAL REPORT 2006
DIRECTORS’ REPORT (Contd.)
SHARE BUY BACK (CONTD.)
The details of the Share Buy Back are as follows:
Number of Ordinary Shares of RM1.00 Each Amount ‘000 RM’000
At 1 February 2005 –– Repurchased during the period 879 844 Less : Sold during the period – –
At 31 January 2006 879 844
EMPLOYEES’ SHARE OPTION SCHEME
The main features of the Employees’ Share Option Scheme are as disclosed in Note 48 to the financial statements.
WARRANTS
The main features of Warrants 2000/2005 are as disclosed in Note 49 to the financial statements.
5-YEAR 5% ICPS
The main features of the ICPS are as disclosed in Note 50 to the financial statements.
ICULS
The main features of the ICULS are as disclosed in Note 26 to the financial statements.
OTHER STATUTORY INFORMATION
(a) Before the balance sheets and income statements of the Group and of the Company were made out, the directors took reasonable steps:
(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and
(ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.
42 ANNUAL REPORT 2006
DIRECTORS’ REPORT (Contd.)
OTHER STATUTORY INFORMATION (CONTD.)
(b) At the date of this report, the directors are not aware of any circumstances which would render:
(i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and
(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.
(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.
(e) As at the date of this report, there does not exist:
(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or
(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.
(f) For the year ended 31 January 2006, the Group and the Company incurred net losses of RM771,796,000 and RM466,782,000 respectively and as at that date, the current liabilities of the Group and the Company exceeded their current assets by RM952,448,000 and RM29,733,000 respectively. The Group and the Company have not met its obligation in certain loan repayment and interest payment and have breached their borrowing facilities agreement as stated in Note 18 to the financial statements. However, the financial statements of the Group and the Company have been prepared on a going concern basis. The validity of the going concern assumption is dependent on the successful implementation of the proposed debts restructuring scheme as disclosed in Note 41 to the financial statements.
(g) In the opinion of the directors:
(i) subject to successful completion of the intended restructuring exercise as disclosed in Note 41 to the financial statements, no contingent or other liability has become enforceable or is that disclosed likely to become enforceable within the next twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and
(ii) save as disclosed in Notes 41 and 43(b), no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.
43 ANNUAL REPORT 2006
DIRECTORS’ REPORT (Contd.)
OTHER STATUTORY INFORMATION (CONTD.)
(h) In regards to the Auditors' Report on pages 46 to 48, the directors wish to highlight the matters reported shall be addressed as follows:
1(i), (ii) & (iii) As disclosed in Note 2(a) and Note 41 to the financial statements, the Group is working with its advisers to formulate a Group wide debt restructuring exercise ("PDRS"). The directors are of the opinion that the PDRS will be successfully implemented and the Group will achieve future profitable operations.
2 & 3 Independent professional valuations shall be obtained as the valuation exercise is on-going and the directors reckon that it will take approximately three to six months for the issuance of the said reports. Necessary adjustments, if any, will be recorded in accordance to the valuation reports.
4 The prior year adjustments are explained in Note 45 to the financial statements.
5 The directors will seek legal opinion to substantiate its view on the recoverability of the said receivables.
6 The directors will appoint an independent project consultant to ascertain and advise on the matter accordingly. Necessary adjustments, if any, will be recorded in accordance with the requirements of FRS 201: Property Development Activities.
7 As disclosed in Note 41 to the financial statements, upon the successful implementation of the PDRS, the directors will make the necessary adjustments, if any.
SIGNIFICANT EVENTS
The significant events during the financial year are as disclosed in Note 42 to the financial statements.
SUBSEQUENT EVENTS
The subsequent events are as disclosed in Note 43 to the financial statements.
PROPOSED DEBT RESTRUCTURING SCHEME (“PDRS”)
The details of PDRS of the Group and the Company are as disclosed in Note 41 to the financial statements.
Signed on behalf of the Board in accordance with a resolution of the directors
Tan Sri Dato’ (Dr.) Ir. Chan Ah Chye Lai Moo Chan @ Chan Chong Yoon
Kuala Lumpur, Malaysia 29 August 2006
44 ANNUAL REPORT 2006
STATEMENT BY DIRECTORS PURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965
We, Tan Sri Dato’ (Dr.) Ir. Chan Ah Chye @ Chan Chong Yoon and Lai Moo Chan, being two of the directors of Talam Corporation Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 49 to 138 are drawn up in accordance with applicable Malaysian Accounting Standards Board Approved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as at 31 January 2006 and of their results and their cash flows for the year then ended.
Signed on behalf of the Board in accordance with a resolution of the directors
Tan Sri Dato’ (Dr.) Ir. Chan Ah Chye Lai Moo Chan @ Chan Chong Yoon
Kuala Lumpur, Malaysia 29 August 2006
STATUTORY DECLARATION PURSUANT TO SECTION 169 (16) OF THE COMPANIES ACT, 1965
I, Leow Chi Lih, being the officer primarily responsible for the financial management of Talam Corporation Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 49 to 138 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.
Subscribed and solemnly declared by the abovenamed Leow Chi Lih at Kuala Lumpur in the Federal Territory on 29 August 2006 Leow Chi Lih
Before me,
Zainal Abidin Bin Nan (W316) Commissioner for Oaths
45 ANNUAL REPORT 2006
REPORT OF THE AUDITORS TO THE MEMBERS OF TALAM CORPORATION BERHAD (INCORPORATED IN MALAYSIA)
We were engaged to audit the accompanying financial statements of Talam Corporation Berhad (“the Company”) and the consolidated financial statements of the Company and its subsidiaries (“the Group”) as set out on pages 49 to 138. These financial statements are the responsibility of the Company's directors.
It is our responsibility to report to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report.
Except as disclosed in the paragraphs below, we conducted our audit in accordance with applicable Approved Standards on Auditing 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 the directors, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our report.
We report as follows:
1. (i) As disclosed in Note 2(a) to the financial statements, for the year ended 31 January 2006, the Group and the Company incurred net losses of RM771,796,000 and RM466,782,000 respectively and, as of that date, the Group's and Company's current liabilities exceeded their current assets by RM952,448,000 and RM29,733,000 respectively.
(ii) As disclosed in Note 18(h) to the financial statements, the Group and the Company have defaulted on the repayment of various financing obligations as described in the said notes to the financial statements. Note 41 to the financial statements further discloses that the management together with their consultants are currently formulating restructuring schemes to restructure the said financing obligations. The outcome of the restructuring exercise may result in adjustments being made to certain amounts and reclassification of assets and liabilities of the Group and of the Company, the final outcome of which is uncertain as at the date of this report.
(iii) As stated in Note 43(b) to the financial statements, on 28 March 2006, the Kuala Lumpur High Court granted a Restraining Order pursuant to Section 176 of the Companies Act, 1965 to a subsidiary, Maxisegar Sdn. Bhd. (“MSSB”). The directors of MSSB together with their consultants are currently working on a debt restructuring scheme as elaborated in Note 41 to the financial statements, which is conditional upon the approval of the relevant regulatory authorities. The nature and the outcome of the debt restructuring scheme may result in adjustments being made to certain amounts and classification of assets and liabilities of the Group and MSSB, the final outcome of which is uncertain as at the date of this report. As a result, there are significant uncertainties regarding the future operations of the Group and MSSB, the recoverability of their assets and their ability to repay debts. The financial statements of the Group and MSSB do not include any adjustments that might result from these uncertainties.
The above factors raised substantial doubt that the Group and the Company will be able to continue as a going concern. The ability of the Group and of the Company to continue as a going concern is dependent upon the successful implementation of the restructuring exercise elaborated in Note 41 to the financial statements and resumption of normal operations and return to profitability of the Group and of the Company. The financial statements of the Group and of the Company do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Group and the Company be unable to continue as a going concern.
46 ANNUAL REPORT 2006
REPORT OF THE AUDITORS (Contd.) TO THE MEMBERS OF TALAM CORPORATION BERHAD (INCORPORATED IN MALAYSIA)
2. As disclosed in Note 8 to the financial statements, investment in Irredeemable Convertible Unsecured Loan Stocks of Venue Venture Sdn. Bhd. (“VVSB”) is carried at cost of RM76,332,000. Note 15(iii) further discloses that the amount due from VVSB stood at RM65,542,000 as at 31 January 2006 (collectively referred to as “total investments in VVSB”). The management has represented to us that the total investments in VVSB are supported by the assets held by VVSB and thus are recoverable. However, as no recent independent professional valuations were conducted on the underlying assets, we are unable to ascertain as to whether the carrying amount of the total investments in VVSB is fairly stated.
3. As disclosed in Note 4(h) to the financial statements, the net realisable value of certain development properties and land held for development with carrying value of RM373,189,000 have not been ascertained as no recent independent professional valuations were conducted. Accordingly, we are unable to ascertain as to whether the carrying amounts of the said development properties and land held for development are fairly stated.
4. As disclosed in Note 45 to the financial statements, certain transactions were omitted from the financial statements of the Group and MSSB in the prior years. We are unable to obtain sufficient appropriate audit evidence to satisfy ourselves as to the amounts and disclosures made in Notes 45(a)(ii)(a), 45(a)(ii)(b), 45(a)(ii)(c), 45(a)(ii)(d) and 45(a)(iii) to the financial statements.
5. As disclosed in Note 14(c) to the financial statements, included in trade receivables are amounts of RM56,169,000 due from certain contractors of the Group. The management is of the opinion that these receivables are fully recoverable. We are unable to obtain sufficient appropriate audit evidence to satisfy ourselves that the said amounts are fully recoverable.
6. As at 31 January 2006, land held for development and property development costs of the Group amounted to RM1,087,510,000 and RM1,204,668,000 respectively and for the year ended 31 January 2006, revenue from development properties and cost of development properties recognised in the Group’s consolidated income statement amounted to RM577,036,000 and RM740,346,000 respectively. During the year, the Group’s review of the estimates of costs attributable to certain property development projects (“project costings”) indicates that the estimated financial outcome of the said property development projects could have been varied if compared to the prior estimates. However, the project costings have not been updated accordingly. As the financial outcome of the said property development projects have not been fully estimated, we are unable to satisfy ourselves as to whether the Group’s land held for development, property development costs, revenue from development properties and cost of development properties sold for the year then ended have been stated in accordance with the requirements of FRS 201: Property Development Activities.
7. As disclosed in Note 39 to the financial statements, no provision for liabilities in respect of the corporate guarantees has been made in the Company’s financial statements as the quantum of the shortfall of which the Company is liable to make good cannot be presently determined pending the resolution of the uncertainties referred to in paragraph 1 above. These corporate guarantees have been disclosed as contingent liabilities in Note 39(a) to the financial statements. As at 31 January 2006, the corporate guarantees to financial institutions and non-financial institutions amount to approximately RM202,539,000 and RM539,206,000 respectively.
Because of the significance of the matters described in the paragraphs above, we do not express an opinion on the financial statements of the Group and the Company for the year ended 31 January 2006.
47 ANNUAL REPORT 2006
REPORT OF THE AUDITORS (Contd.) TO THE MEMBERS OF TALAM CORPORATION BERHAD (INCORPORATED IN MALAYSIA)
However, in our opinion,
(a) the accounting and other records required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act;
(b) the accounting and other records required by the Act to be kept by the subsidiaries of the Company of which we have acted as auditors have been properly kept in accordance with the provisions of the Act except for MSSB; and
(c) the registers required by the Act to be kept by the Company and by its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
We have considered the financial statements and the auditors’ reports thereon of the subsidiaries of which we have not acted as auditors, as indicated in Note 51, being financial statements that have been included in the consolidated financial statements.
Except for the financial statements of the subsidiaries as highlighted in Note 52 to the financial statements, we are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company 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.
The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification material to the consolidated financial statements and did not include any comment required to be made under Section 174(3) of the Act other than those indicated in Note 52 to the financial statements.
Ernst & Young Wong Kang Hwee AF: 0039 No. 1116/01/08(J) Chartered Accountants Partner
Kuala Lumpur, Malaysia 29 August 2006
48 ANNUAL REPORT 2006
BALANCE SHEETS AS AT 31 JANUARY 2006
Group Company Note 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
NON-CURRENT ASSETS
Property, plant and equipment 3 221,819 252,852 2,392 2,937 Land held for property development 4 1,087,510 971,596 18,126 18,126 Investment properties 5 123,408 162,454 – – Subsidiaries 6 – – 344,801 499,238 Associates 7 9,988 – – – Other investment 8 76,332 76,332 – – Sinking funds held by trustees 9 16,298 21,833 – – Deferred tax assets 29 – 5,801 – – Goodwill 10 – 819 – –
1,535,355 1,491,687 365,319 520,301
CURRENT ASSETS
Property development costs 4 1,204,668 1,964,123 73,585 47,713 Inventories 11 73,817 80,163 273 – Due from subsidiaries 12 – – 283,715 439,020 Due from associates 13 7,023 – 507 – Trade receivables 14 106,994 80,516 – – Other receivables 15 232,486 196,713 7,834 94,327 Cash and bank balances 16 74,515 112,615 257 1,481
1,699,503 2,434,130 366,171 582,541
CURRENT LIABILITIES
Provision for liabilities 17 136,067 99,930 – – Short term borrowings 18 705,340 325,950 56,325 56,549 Due to subsidiaries 20 – – 305,100 228,649 Trade payables 21 147,771 349,055 – – Other payables 22 994,792 512,065 33,269 12,500 Deferred progress billings 27 487,110 349,231 – – Taxation 180,871 214,808 1,210 1,210
2,651,951 1,851,039 395,904 298,908
NET CURRENT (LIABILITIES)/ASSETS (952,448) 583,091 (29,733) 283,633
582,907 2,074,778 335,586 803,934
49 ANNUAL REPORT 2006
BALANCE SHEETS (Contd.) AS AT 31 JANUARY 2006
Group Company Note 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
FINANCED BY:
Share capital 23 641,028 619,868 641,028 619,868 Treasury shares 24 (844) – (844) – Reserves (316,596) 451,747 (306,777) 178,236
Shareholders’ equity 323,588 1,071,615 333,407 798,104 Minority interests 19,749 2,575 – –
343,337 1,074,190 333,407 798,104
Irredeemable Convertible Unsecured Loan Stocks 26 33 1,020 33 1,020 Long term borrowings 18 149,904 548,364 1,867 4,531 Deferred progress billings 27 – 137,599 – – Other long term payables 28 77,268 302,012 – – Deferred tax liabilities 29 12,365 11,593 279 279
Non-current liabilities 239,570 1,000,588 2,179 5,830
582,907 2,074,778 335,586 803,934
The accompanying notes form an integral part of the financial statements.
50 ANNUAL REPORT 2006
INCOME STATEMENTS FOR THE YEAR ENDED 31 JANUARY 2006
Group Company Note 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Revenue 30 599,814 1,006,032 2,199 12,626 Cost of sales 31 (796,113) (739,457) (2,128) (606)
Gross (loss)/profit (196,299) 266,575 71 12,020 Other operating income 18,995 36,188 139 2,592 Administration and operating expenses (576,230) (156,608) (456,194) (8,243) Gain/(loss) on disposal of subsidiaries 4,766 (921) – 11,800
(Loss)/profit from operations 32 (748,768) 145,234 (455,984) 18,169 Finance costs, net 35 (31,522) (14,488) (10,798) (6,136)
(Loss)/profit before taxation (780,290) 130,746 (466,782) 12,033 Taxation: Company and subsidiaries 36 8,367 (47,101) – (3,360)
(Loss)/profit after taxation (771,923) 83,645 (466,782) 8,673 Minority interests 127 8,376 – –
Net (loss)/profit attributable to shareholders (771,796) 92,021 (466,782) 8,673
(Loss)/earnings per share (sen) Basic 37 (125.76) 15.83 Diluted 37 Not applicable 14.86
The accompanying notes form an integral part of the financial statements.
51 ANNUAL REPORT 2006
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JANUARY 2006
<———Non-Distributable Reserves———> Distributable Foreign Equity Reserve Share Treasury Capital Share Exchange Component Retained Capital Shares Reserve Premium Reserve of ICULS Profits Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 (Note 23) (Note 24) (Note 25) (Note 26)
At 1 February 2004 As previously stated 600,290 (23) 11,201 124,551 11,773 31,816 226,410 1,006,018 Prior year adjustments: Note 45(a)(iii) – – – – – – (9,959) (9,959)
As restated 600,290 (23) 11,201 124,551 11,773 31,816 216,451 996,059 Conversion of 7% ICULS 2003/2005 16,479 – – – – – – 16,479 Conversion of 7% ICULS 2003/2006 6 – – – – – – 6 Liability component of ICPS 3,093 – – – – – – 3,093 Shares repurchased held as treasury shares, at cost – (5,701) – – – – – (5,701) Treasury shares sold – 5,724 – – – – – 5,724 Gain on disposal of treasury shares – – – – – – 138 138 Conversion of ICULS – – – – – (13,655) – (13,655) Currency translation differences, representing net loss not recognised in the income statement – – – – (39) – – (39) Net profit for the year – – – – – – 92,021 92,021 Dividends (Note 38) – – – – – – (22,510) (22,510)
At 31 January 2005 619,868 – 11,201 124,551 11,734 18,161 286,100 1,071,615
52 ANNUAL REPORT 2006
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Contd.) FOR THE YEAR ENDED 31 JANUARY 2006
<———Non-Distributable Reserves———> Retained Foreign Equity Profit/ Share Treasury Capital Share Exchange Component (Accumulated Capital Shares Reserve Premium Reserve of ICULS Losses) Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 (Note 23) (Note 24) (Note 25) (Note 26)
At 1 February 2005 As previously stated 619,868 – 11,201 124,551 11,734 18,161 296,059 1,081,574 Prior year adjustments: Note 45(a)(iii) – – – – – – (9,959) (9,959)
As restated 619,868 – 11,201 124,551 11,734 18,161 286,100 1,071,615 Conversion of 7% ICULS 2003/2005 18,496 – – – – (18,496) – – Equity component of 7% ICULS 2003/2006 – – – – – 987 – 987 Liability component of ICPS 2,664 – – – – – – 2,664 Shares repurchased held as treasury shares, at cost – (844) – – – – – (844) Currency translation differences, representing net gain not recognised in the income statement – – – – 21,684 – – 21,684 Net loss for the year – – – – – – (771,796) (771,796) Dividends (Note 38) – – – – – – (722) (722)
At 31 January 2006 641,028 (844) 11,201 124,551 33,418 652 (486,418) 323,588
The accompanying notes form an integral part of the financial statements.
53 ANNUAL REPORT 2006
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JANUARY 2006
Non-Distributable Reserves Distributable Equity Reserve Share Treasury Share Component Retained Capital Shares Premium of ICULS Profits Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 (Note 23) (Note 24) (Note 26)
At 1 February 2004 600,290 (23) 124,551 31,816 49,223 805,857 Conversion of 7% ICULS 2003/2005 16,479 – – – – 16,479 Conversion of 7% ICULS 2003/2006 6 – – – – 6 Liability component of ICPS 3,093 – – – – 3,093 Shares repurchased held as treasury shares, at cost – (5,701) – – – (5,701) Treasury shares sold – 5,724 – – – 5,724 Gain on disposal of treasury shares – – – – 138 138 Equity components of ICULS – – – (13,655) – (13,655) Net profit for the year – – – – 8,673 8,673 Dividends (Note 38) – – – – (22,510) (22,510)
At 31 January 2005 619,868 – 124,551 18,161 35,524 798,104
At 1 February 2005 619,868 – 124,551 18,161 35,524 798,104 Conversion of 7% ICULS 2003/2005 18,496 – – (18,496) – – Equity component of 7% ICULS 2003/2006 – – – 987 – 987 Liability component of ICPS 2,664 – – – – 2,664 Shares repurchased held as treasury shares, at cost – (844) – – – (844) Net loss for the year – – – – (466,782) (466,782) Dividends (Note 38) – – – – (722) (722)
At 31 January 2006 641,028 (844) 124,551 652 (431,980) 333,407
The accompanying notes form an integral part of the financial statements.
54 ANNUAL REPORT 2006
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 JANUARY 2006
2006 2005 RM’000 RM’000
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/profit before taxation (780,290) 130,746 Adjustments for: Amortisation of discount on deferred progress billing 39,194 43,544 Amortisation of goodwill – 68 Bad debts written off 14,473 7 Depreciation 7,699 9,916 Development costs written off 4,000 – Gain on disposal of property, plant and equipment (2,367) (63) Goodwill written off 1,369 2,291 Interest expenses 35,150 22,992 Interest income (3,628) (8,504) (Gain)/loss on disposal of subsidiaries (4,766) 921 Loss on disposal of investment properties 12,107 – Property, plant and equipment written off 10,936 69 Provision for doubtful debts 99,635 9,020 Reversal of provision for doubtful debts – (17) Reversal of waiver of debts 2,339 – Provision for writedown in value of inventory 23,888 – Provision for impairment loss in investment property 17,000 – Provision for impairment loss in land held for development 78,155 – Provision for liabilities 116,651 2,350
Operating (loss)/profit before working capital changes (328,455) 213,340 Decrease in property development costs 439,222 268,660 Increase in inventories (84,230) (24,505) (Increase)/decrease in receivables (149,188) 21,656 Increase/(decrease) in payables 206,448 (398,525)
Cash generated from operations 83,797 80,626 Income taxes paid (1,592) (5,222) Interest paid (41,936) (67,398) Interest received 3,628 8,504 Payment for liquidated ascertained damages (2,803) (12,222)
Net cash generated from operating activities 41,094 4,288
55 ANNUAL REPORT 2006
CONSOLIDATED CASH FLOW STATEMENT (Contd.) FOR THE YEAR ENDED 31 JANUARY 2006
2006 2005 RM’000 RM’000
CASH FLOWS FROM INVESTING ACTIVITIES
Amount paid to land vendors (39,000) (156,800) Proceeds from disposal of investment properties – 5,849 Development expenditure on land held for property development – (33,795) Purchases of property, plant and equipment (1,000) (9,836) Investment in associates (9,988) – Proceeds from disposal of property, plant and equipment 943 2,306 Net cash outflow arising on disposal, representing cash and cash equivalents of subsidiaries disposed (226) – (Acquisition)/disposal of subsidiaries (899) 16,231
Net cash used in investing activities (50,170) (176,045)
CASH FLOWS FROM FINANCING ACTIVITIES
Net withdrawal from sinking funds held by trustees 5,535 48,736 Net repayment of term loans and bridging loans – (15) Net (repayment)/drawdown of hire purchase and lease financing (334) 1,320 Net drawdown of block discounting – 1,131 Withdrawal with an Escrow account 35,995 73,505 Redemption of bonds – (110,000) Repurchase of treasury shares (844) (5,701) Proceeds from disposal of treasury shares – 5,862 (Redemption)/issuance of BaIDs (10,000) 140,000 Net (repayment)/drawdown of Islamic financing facilities (7,529) 71,172 Net (repayment)/drawdown of short term borrowings (1,140) 124,166 Repayment of deferred progress billings (38,914) (251,938) Dividends paid (722) (22,510)
Net cash (used in)/generated from financing activities (17,953) 75,728
NET DECREASE IN CASH AND CASH EQUIVALENTS (27,029) (96,029) EFFECTS OF EXCHANGE RATE CHANGES 21,684 (39) CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR 6,065 102,133
CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR (NOTE 16) 720 6,065
The accompanying notes form an integral part of the financial statements.
56 ANNUAL REPORT 2006
COMPANY CASH FLOW STATEMENT FOR THE YEAR ENDED 31 JANUARY 2006
2006 2005 RM’000 RM’000
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/profit before taxation (466,782) 12,033 Adjustments for: Depreciation 568 536 Gain on disposal of investment in subsidiaries – (11,800) Property, plant and equipment written off – 174 Provision for writedown in value of inventory 144 – Provision for diminution in value of investment in subsidiaries 154,437 – Bad debts written off 334 – Provision for doubtful debts - Intercompany balances 309,315 – - Others 1,642 – Reversal of provision for doubtful debts (12,697) – Interest expenses 10,813 7,112 Interest income (15) (976) Dividend income – (12,000)
Operating loss before working capital changes (2,241) (4,921) Increase in property development costs (25,871) (17) Increase in inventories (417) – Decrease in receivables 3,116 1,366 Net changes in related companies balances 16,031 84,006 Increase/(decrease) in payables 18,741 (3,941)
Cash generated from operations 9,359 76,493 Interest paid (8,785) (6,089) Interest received 15 976
Net cash generated from operating activities 589 71,380
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of subsidiaries – 27,408 Dividend received – 8,640 Purchases of property, plant and equipment (23) (914) Additional investment in a subsidiary – (64)
Net cash (used in)/generated from investing activities (23) 35,070
57 ANNUAL REPORT 2006
COMPANY CASH FLOW STATEMENT (Contd.) FOR THE YEAR ENDED 31 JANUARY 2006
2006 2005 RM’000 RM’000
CASH FLOWS FROM FINANCING ACTIVITIES
Net withdrawal from sinking funds held by trustees – 29,962 Net repayment of term loans – (2,324) Net repayment of hire purchase and lease payables (60) (978) Net repayment of short term borrowings (549) (1,125) Redemption of bonds – (110,000) Repurchase of treasury shares (844) (5,701) Proceeds from disposal of treasury shares – 5,862 Dividends paid (722) (22,510)
Net cash used in financing activities (2,175) (106,814)
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,609) (364) CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR (8,406) (8,042)
CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR (NOTE 16) (10,015) (8,406)
The accompanying notes form an integral part of the financial statements.
58 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS 31 JANUARY 2006
1. CORPORATE INFORMATION
The principal activities of the Company are provision of management services, investment holding and property development.
The principal activities of the subsidiaries are described in Note 51 to the financial statements.
There have been no significant changes in the nature of the principal activities during the financial year other than those activities that ceased consequent to the deregistration of subsidiaries as disclosed in Note 51 to the financial statements.
The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Board of Bursa Malaysia Securities Berhad ("Bursa Securities"). The registered office of the Company is located at Suite 2.05, Level 2, Menara Maxisegar, Jalan Pandan Indah 4/2, Pandan Indah, 55100 Kuala Lumpur.
The number of employees in the Group and the Company at the end of the financial year were 759 (2005: 1,016) and 6 (2005: 7) respectively.
The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 29 August 2006.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
The financial statements of the Group and of the Company have been prepared under the historical cost convention and comply with the provisions of the Companies Act, 1965 and applicable Malaysian Accounting Standards Board ("MASB") Approved Accounting Standards in Malaysia.
The financial statements of the Group and the Company have been prepared on a going concern basis. During the financial year, the Group and the Company incurred net losses of RM771,796,000 and RM466,782,000 respectively and, as of that date, the current liabilities of the Group and the Company exceeded their current assets by RM952,448,000 and RM29,733,000 respectively. The Group and the Company have not met its obligation in certain loan repayments and interest payments and have breached their borrowing facilities agreements as stated in Note 18.
The Group and the Company are presently working with their financial advisers to formulate a proposed debt restructuring scheme ("PDRS"), which salient points are as disclosed in Note 41, and have been having on- going negotiations and discussions with its lenders for the adoption and implementation of the PDRS.
The directors are confident that the Group, being given the opportunity to amicably resolve the debts restructuring matters with its lenders, will be able to submit a comprehensive restructuring plan to the relevant authorities and the PDRS would be successfully implemented.
The financial statements of the Group and the Company do not include any adjustments relating to the amounts and classification of assets and liabilities that might be necessary should the Group and the Company be unsuccessful in restructuring its debts.
59 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
(b) Basis of Consolidation
(i) Subsidiaries
The consolidated financial statements include the financial statements of the Company and all its subsidiaries. Subsidiaries are those entities 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 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 effective date of acquisition or up to the effective date of disposal as appropriate. The assets and liabilities of the subsidiaries are measured at their fair values at the date of acquisition. The difference between the cost of an acquisition and the fair value of the Group’s share of the net assets of the acquired subsidiary at the date of acquisition is included in the consolidated balance sheet as goodwill or negative goodwill arising on consolidation.
Intra-group transactions, balances and resulting unrealised gains are eliminated on consolidation and the consolidated financial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costs cannot be recovered.
The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group’s share of its net assets together with any unamortised balance of goodwill and exchange differences.
Minority interests in the consolidated balance sheet consist of the minorities’ share of the fair value of the identifiable assets and liabilities of the acquiree as at acquisition date and the minorities’ share of movements in the acquiree’s equity since then.
(ii) Associates
Associates are those entities in which the Group exercises significant influence but not control, through participation in the financial and operating policy decisions of the entities.
Investments in associates are accounted for in the consolidated financial statements by the equity method of accounting based on the audited or management financial statements of the associates. Under the equity method of accounting, the Group’s share of profits less losses of associates during the financial year is included in the consolidated income statement. The Group’s interest in the associates is carried in the consolidated balance sheet at cost plus the Group’s share of post-acquisition retained profits or accumulated losses and other reserves.
Unrealised gains on transactions between the Group and the associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are eliminated unless cost cannot be recovered.
60 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
(b) Basis of Consolidation (Contd.)
(iii) Jointly Controlled Entities
A jointly controlled entity is an entity in which the Group has joint control over its economic activity established under a contractual arrangement.
Investments in jointly controlled entities are accounted for in the consolidated financial statements by the equity method of accounting based on the audited or management financial statements of the jointly controlled entities. Under the equity method of accounting, the Group’s share of profits less losses of jointly controlled entities during the financial year is included in the consolidated income statement. The Group’s interest in jointly controlled entities is carried in the consolidated balance sheet at cost plus the Group’s share of post-acquisition retained profits or accumulated losses and other reserves.
Unrealised gains on transactions between the Group and its jointly controlled entities are eliminated to the extent of the Group’s interest in the jointly controlled entities. Unrealised losses are eliminated unless cost cannot be recovered.
(c) Goodwill
Goodwill represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition.
Goodwill is stated at cost less accumulated amortisation and impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p). Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet while goodwill arising on the acquisition of associates and jointly controlled entities is included within the carrying amount of investment in associates and jointly controlled entities.
Goodwill is amortised on a straight-line basis over the shorter of its estimated useful life or 20 years.
Negative goodwill represents the excess of the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition over the cost of acquisition.
Negative goodwill, not exceeding the fair values of the non-monetary assets acquired, is recognised in the income statement over the weighted average useful life of those assets. Negative goodwill in excess of the fair values of the non-monetary assets acquired is recognised immediately in the income statement.
To the extent that negative goodwill relates to expectation of future losses and expenses that are identified in the plan of acquisition and can be measured reliably, but which are not identifiable liabilities at the date of acquisition, that portion of negative goodwill is recognised in the income statement when the future losses and expenses are recognised.
61 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
(d) Revenue Recognition
Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably.
(i) Sale of properties
Revenue from sale of properties is accounted for by the stage of completion method as described in Note 2(h) and is recognised net of discount.
(ii) Sale of goods
Revenue relating to sale of goods is recognised net of sales taxes and discounts upon the transfer of risks and rewards.
(iii) Management fees
Management fees are net of service taxes and are recognised on accrual basis.
(iv) Tuition fees
Tuition fees are recognised on accrual basis whereas non-refundable registration and enrolment fees are recognised on receipt basis.
(v) Interest income
Interest income is recognised on a time proportion basis that reflects the effective yield on the asset.
(vi) Dividend income
Dividend income is recognised when the right to receive payment is established.
(vii) Revenue from hotel operations
Revenue from rental of hotel rooms, sale of food and beverage and other related income are recognised on accrual basis.
(viii) Rental income
Rental income are recognised on accrual basis.
62 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
(e) Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p).
Hotel building is not depreciated. It is the Group's practice to maintain the building at a high standard and condition such that residual values are at least equal to its book value and consequently, depreciation would be insignificant. Accordingly, no depreciation is provided on the hotel building.
Leasehold land is depreciated over the period of the respective leases which ranges from 25 years to 99 years.
Depreciation of other property, plant and equipment is provided for on a straight line basis to write off the cost of each asset to its residual value over the estimated useful life at the following annual rates:
Buildings 1% - 2% Renovation 10% Plant and machinery, tools and equipment, crockery and kitchenware 10% - 33.33% Office equipment, furniture and fittings 10% - 50% Motor vehicles 20% - 25%
Upon the disposal of an item of property, plant or equipment, the difference between the net disposal proceeds and the carrying amount is recognised in the income statement.
(f) Investments in Subsidiaries and Associates
The investments in subsidiaries, associates, jointly controlled entities and unquoted loan stocks are stated at cost less impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p).
On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is recognised in the income statement.
(g) Investment Properties
Investment properties consist of investments in land and buildings that are not substantially occupied for use by, or in the operations, of the Group. Investment properties are stated at cost less impairment losses which include cost of land, all direct building costs and other related construction costs including borrowing costs incurred during the period of construction. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p).
Upon the disposal of an investment property, the difference between the net disposal proceeds and the carrying amount is recognised in the income statement.
63 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
(h) Land Held for Property Development and Property Development Costs
(i) Land held for property development
Land held for property development consists of land where no development activities have been carried out or where development activities are not expected to be completed within the normal operating cycle. Such land is classified within non-current assets and is stated at cost less any accumulated impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p).
Land held for property development is reclassified as property development costs at the point when development activities have commenced and where it can be demonstrated that the development activities can be completed within the normal operating cycle.
(ii) Property development costs
Property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities.
When the financial outcome of a development activity can be reliably estimated, property development revenue and expenses are recognised in the income statement by using the stage of completion method. The stage of completion is determined by the proportion that property development costs incurred for work performed to date bear to the estimated total property development costs.
Where the financial outcome of a development activity cannot be reliably estimated, property development revenue is recognised only to the extent of property development costs incurred that is probable will be recoverable, and property development costs on properties sold are recognised as an expense in the period in which they are incurred.
Any expected loss on a development project, including costs to be incurred over the defects liability period, is recognised as an expense immediately.
Property development costs not recognised as an expense are recognised as an asset, which is measured at the lower of cost and net realisable value.
(i) Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution. Cost of inventories are determined as follows:
Finished goods and consumables - weighted average basis Properties held for sale - specific identification basis
The cost of raw materials consists of the cost of purchase plus the cost of bringing the inventories to the present location. Cost of finished goods and work-in-progress includes cost of raw materials used, direct labour, other direct costs and appropriate production overheads. The cost of unsold properties comprises cost associated with the acquisition of land, direct costs and appropriate proportions of common costs.
64 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
(j) Foreign Currencies
(i) Foreign currency transactions
Transactions in foreign currencies are initially recorded in Ringgit Malaysia at rates of exchange ruling at the date of the transaction. At each balance sheet date, foreign currency monetary items are translated into Ringgit Malaysia at exchange rates ruling at that date. Non-monetary items initially denominated in foreign currencies, which are carried at historical cost are translated using the historical rate as of the date of acquisition and non-monetary items which are carried at fair value are translated using the exchange rate that existed when the values were determined.
All exchange rate differences are taken to the income statement.
(ii) Foreign entities
Financial statements of foreign consolidated subsidiaries are translated at year-end exchange rates with respect to the assets and liabilities, and at exchange rates at the dates of the transactions with respect to the income statement. All resulting translation differences are included in the foreign exchange reserve in shareholders’ equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the reporting entity and translated at the exchange rate ruling at the date of transaction.
The principal exchange rates used for every unit of foreign currency ruling at balance sheet date are as follows:
31.01.2006 31.01.2005
United States Dollar 3.75 3.80 Chinese Renminbi 0.46 0.46 Hong Kong Dollar 0.48 0.49 Singapore Dollar 2.31 2.22
(k) Income Tax
Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date.
Deferred taxation is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statement. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.
65 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
(k) Income Tax (Contd.)
Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill.
Tax penalties have been provided based on assessments received. No provision has been made for potential tax penalties until they crystallise.
(l) Leases
A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incident to ownership. All other leases are classified as operating leases.
(i) Finance leases
Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Company's incremental borrowing rate is used.
Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised as an expense in the income statement over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.
The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 2(e).
(ii) Operating leases
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the term of the relevant lease.
(m) Provisions for Liabilities
Provisions for liabilities are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation.
66 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
(n) Cash and Cash Equivalents
For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at banks and deposits at call, (excluding sinking funds held by trustees for the redemption of financing facilities) net of outstanding bank overdrafts.
(o) Employee Benefits
(i) Short term benefits
Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.
(ii) Defined contribution plans
As required by law, companies in Malaysia make contributions to the Employees Provident Fund ("EPF"). Some of the Group’s foreign subsidiaries make contributions to their respective countries’ statutory pension schemes. Such contributions are recognised as an expense in the income statement as incurred.
(p) Impairment of Assets
At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication of impairment. If any such indication exists, impairment is measured by comparing the carrying values of the assets with their recoverable amounts. Recoverable amount is the higher of net selling price and value in use, which is measured by reference to discounted future cash flows.
An impairment loss is recognised as an expense in the income statement immediately. Reversal of impairment losses recognised in prior years is recorded when the impairment losses recognised for the asset no longer exist or have decreased.
(q) Financial Instruments
Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instrument.
Financial instruments are classified as liabilities or equity in accordance with the substance and intention of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.
(i) Other non-current investments
Non-current investments other than investments in subsidiaries, associates, jointly controlled entities and investment properties are stated at cost less impairment losses. On disposal of an investment, the difference between net disposal proceeds and its carrying amount is recognised in the income statement.
67 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
(q) Financial Instruments (Contd.)
(ii) Receivables
Receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.
(iii) Payables
Payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.
(iv) Interest-bearing borrowings
Interest-bearing bank loans and overdrafts are recorded at the amount of proceeds received, net of transaction costs.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. The amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate which is the weighted average of the borrowing costs applicable to the Group’s borrowings that are outstanding during the financial year, other than borrowings made specifically for the purpose of acquiring another qualifying asset. For borrowings made specifically for the purpose of acquiring a qualifying asset, the amount of borrowing costs eligible for capitalisation is the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of funds drawndown from that borrowing facility.
All other borrowing costs are recognised as an expense in the income statement in the period in which they are incurred.
(v) Deferred progress billings
Deferred progress billings are stated at cost, which is the fair value of the consideration to be paid in the future for the contractual obligations entered into under the Islamic Assets Backed Securitisation arrangement.
(vi) Ordinary shares
Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.
The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided.
68 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
(q) Financial Instruments (Contd.)
(vi) Ordinary shares (Contd.)
The consideration paid, including attributable transaction costs on repurchased ordinary shares of the Company that have not been cancelled, are classified as treasury shares and presented as a deduction from equity. Shares repurchased are held as treasury shares and are accounted for using the treasury stock method. Under the treasury stock method, the shares repurchased are not cancelled but are held as treasury shares. The treasury shares are carried at cost.
Where treasury shares are distributed as share dividends, the cost of the treasury shares will be applied in the reduction of the share premium account or the distributable reserves, or both, where appropriate.
Where treasury shares are reissued by re-sale in the open market, the difference between the sales consideration and the carrying amount of the treasury shares will be shown as a movement in equity.
(vii) Warrants
Warrants issued pursuant to the issuance of Bonds in financial year ended 31 January 2000 are not recognised on the date of issue. The issue of ordinary shares upon exercise of the warrants are treated as new subscription of ordinary shares for the consideration equivalent to the exercise price of the warrants.
(viii) Convertible Instruments
Convertible instruments are regarded as compound instruments, consisting of a liability component and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. The difference between the proceeds of issue of the convertible instruments and the fair value assigned to the liability component, representing the conversion option is included in shareholders’ equity. The liability component is subsequently stated at amortised cost using the effective interest rate method until extinguished on conversion or redemption whilst the value of the equity component is not adjusted in subsequent periods. Attributable transaction costs are apportioned and deducted directly from the liability and equity component based on their carrying amounts at the date of issue.
Under the effective interest rate method, the interest expense on the liability component is calculated by applying the prevailing market interest rate for a similar non-convertible instrument. The difference between this amount and the interest paid is added to the carrying value of the convertible instrument.
69 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
3. PROPERTY, PLANT AND EQUIPMENT
Plant and Machinery, Tools and Office Equipment, Equipment, *Land and Crockery and Furniture Motor Buildings Kitchenware and Fittings Vehicles Total RM’000 RM’000 RM’000 RM’000 RM’000
Group
Cost
At 1 February 2005 250,597 34,512 21,779 11,742 318,630 Additions 109 532 40 319 1,000 Disposals (14,815) (286) (658) (1,614) (17,373) Write-offs (17,479) (43) (2,051) – (19,573) Disposal of subsidiaries – (1,926) – (3) (1,929) Transfers – (269) – – (269)
At 31 January 2006 218,412 32,520 19,110 10,444 280,486
Accumulated Depreciation
At 1 February 2005 20,414 18,131 16,253 10,980 65,778 Charge for the year 2,370 3,128 1,625 576 7,699 Disposals (2,471) (161) (537) (1,136) (4,305) Write-offs (6,940) (43) (1,654) – (8,637) Disposal of subsidiaries – (1,865) – (3) (1,868)
At 31 January 2006 13,373 19,190 15,687 10,417 58,667
Net Book Value
At 31 January 2006 205,039 13,330 3,423 27 221,819
At 31 January 2005 230,183 16,381 5,526 762 252,852
Depreciation charge for 2005 2,524 4,339 1,900 1,153 9,916
70 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
3. PROPERTY, PLANT AND EQUIPMENT (CONTD.)
*Land and Buildings
Long Short Term Term Hotel and Freehold Leasehold Leasehold Other Group Land Land Land Buildings Renovation Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Cost
At 1 February 2005 1,425 17,058 17,141 199,562 15,411 250,597 Additions – 16 – – 93 109 Disposals – (14,502) – – (313) (14,815) Write-offs – – – (9,596) (7,883) (17,479)
At 31 January 2006 1,425 2,572 17,141 189,966 7,308 218,412
Accumulated Depreciation
At 1 February 2005 172 2,507 686 7,547 9,502 20,414 Charge for the year – 268 – 707 1,395 2,370 Disposals – (2,290) – – (181) (2,471) Write-offs – – – (316) (6,624) (6,940)
At 31 January 2006 172 485 686 7,938 4,092 13,373
Net Book Value
At 31 January 2006 1,253 2,087 16,455 182,028 3,216 205,039
At 31 January 2005 1,253 14,551 16,455 192,015 5,909 230,183
Depreciation charge for 2005 35 381 – 921 1,187 2,524
71 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
3. PROPERTY, PLANT AND EQUIPMENT (CONTD.)
Office Long Equipment Term and Leasehold Furniture Motor Land and Fittings Renovation Vehicles Total RM’000 RM’000 RM’000 RM’000 RM’000
Company
Cost
At 1 February 2005 1,107 411 4,827 646 6,991 Additions – – 23 – 23
At 31 January 2006 1,107 411 4,850 646 7,014
Accumulated Depreciation
At 1 February 2005 361 246 2,801 646 4,054 Charge for the year 31 82 455 – 568
At 31 January 2006 392 328 3,256 646 4,622
Net Book Value
At 31 January 2006 715 83 1,594 – 2,392
At 31 January 2005 746 165 2,026 – 2,937
Depreciation charge for 2005 28 82 426 – 536
(a) Net book values of property, plant and equipment held under hire purchase and finance lease arrangements are as follows:
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Plant, machinery, tools and equipment 62 72 – – Office equipment and furniture and fittings 362 434 82 164 Motor vehicles 533 1,817 – –
957 2,323 82 164
72 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
3. PROPERTY, PLANT AND EQUIPMENT (CONTD.)
(b) The net book values of property, plant and equipment pledged to financial institutions for borrowings as disclosed in Note 18 are as follows:
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Freehold land 1,253 – – – Short term leasehold land 16,455 16,455 – – Long term leasehold land 795 826 715 746 Buildings 182,029 184,679 – –
200,532 201,960 715 746
4. LAND HELD FOR PROPERTY DEVELOPMENT AND PROPERTY DEVELOPMENT COSTS
(a) Land Held for Property Development
Freehold Leasehold Development Land Land Costs Total RM‘000 RM‘000 RM‘000 RM‘000
Group
At 31 January 2006
Cost At 1 February 2005 229,216 142,566 599,814 971,596 Additions – – 186,267 186,267 Written off during the year – – (19,107) (19,107) Disposal of subsidiaries during the year – (1,691) (190,177) (191,868) Rescindment of joint venture (Note 42(c)) – (39,000) – (39,000) Disposals (158,036) – (37,143) (195,179) Impairment loss – – (78,155) (78,155) Transfer from property development costs 290,357 – 162,599 452,956
Carrying amount at 31 January 2006 361,537 101,875 624,098 1,087,510
73 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
4. LAND HELD FOR PROPERTY DEVELOPMENT AND PROPERTY DEVELOPMENT COSTS (CONTD.)
(a) Land Held for Property Development (Contd.)
Freehold Leasehold Development Land Land Costs Total RM‘000 RM‘000 RM‘000 RM‘000
At 31 January 2005
Cost At 1 February 2004 211,290 137,066 410,184 758,540 Additions – 5,500 28,295 33,795 Transfer from property development costs 17,926 – 161,335 179,261
Carrying amount at 31 January 2005 229,216 142,566 599,814 971,596
Company
At 31 January 2006/2005
Cost Carrying amount at 31 January 2006/2005 17,987 – 139 18,126
(b) Property Development Costs
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Property developments costs at 1 February 2005/2004: - Freehold land 274,113 321,253 82,844 82,844 - Leasehold land 1,086,089 1,086,089 – – - Development costs
- As previously stated 6,034,847 5,903,143 35,250 35,253 - PYA (Note 45(b)) – 56,800 – –
- As restated 6,034,847 5,959,943 35,250 35,253
7,395,049 7,367,285 118,094 118,097
74 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
4. LAND HELD FOR PROPERTY DEVELOPMENT AND PROPERTY DEVELOPMENT COSTS (CONTD.)
(b) Property Development Costs (Contd.)
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Acquisition of subsidiaries during the year: - Leasehold land 22,700 – – – - Development costs 1,576 – – –
24,276 – – –
Disposal of subsidiaries during the year: - Freehold land – (45,870) – – - Leasehold land (2,464) – – – - Development costs (601,963) (27,823) – –
(604,427) (73,693) – –
Reversal in development costs of completed projects during the year: - Freehold land – (1,897) – – - Leasehold land (143,019) – – – - Development costs (680,570) (3,306) – –
(823,589) (5,203) – –
Costs incurred during the year: - Freehold land – 627 – – - Leasehold land 83 – – – - Development costs 275,488 275,445 28,000 (3)
275,571 276,072 28,000 (3)
Disposal during the year: - Leasehold land (8,283) – – – - Development costs (3,666) – – –
(11,949) – – –
75 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
4. LAND HELD FOR PROPERTY DEVELOPMENT AND PROPERTY DEVELOPMENT COSTS (CONTD.)
(b) Property Development Costs (Contd.)
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Costs recognised in income statement: - At 1 February 2005/2004 (5,430,085) (4,956,109) (70,381) (69,775) - Disposal of subsidiaries during the year 579,582 – – – - Adjustments to completed projects during the year 823,588 166,417 – – - Recognised during the year (530,207) (640,393) (2,128) (606)
- At 31 January (4,557,122) (5,430,085) (72,509) (70,381)
Transfers: - To land held for property development (452,956) (179,261) – – - From property, plant and equipment 269 10,210 – – - To inventories (24,653) (361) – –
(477,340) (169,412) – –
Foreseeable losses: - At 1 February 2005/2004 (841) (844) – – - (Recognised)/reversed during the year (14,960) 3 – –
At 31 January (15,801) (841) – –
Property development costs at 31 January 1,204,668 1,964,123 73,585 47,713
(c) The following are pledged as security for borrowings of the Group as disclosed in Note 18.
Group 2006 2005 RM’000 RM’000
Freehold land 464,434 464,508 Leasehold land 1,045,443 1,169,835 Development expenditure 214,873 1,010,841
1,724,750 2,645,184
76 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
4. LAND HELD FOR PROPERTY DEVELOPMENT AND PROPERTY DEVELOPMENT COSTS (CONTD.)
(d) Certain proceeds from sales of development properties of a subsidiary of the Group has been sold to a third party under the Islamic Assets Backed Securitisation ("ABS") arrangement as disclosed in Note 27.
(e) Certain proceeds from sales of development properties of a subsidiary of the Group has been assigned to a third party under the Bai Bithaman Ajil Islamic Debt Securities ("BaIDS") as disclosed in Note 18.
(f) Certain title deeds in respect of the land are not registered under the subsidiaries' names as these title deeds will be transferred directly to house buyers upon sale of the properties.
(g) Included in the development costs for the year are:
(i) construction costs charged by the following related parties:
Group 2006 2005 RM’000 RM’000
Project 33 Construction Sdn. Bhd. – 12,203 Agrocon (M) Sdn. Bhd. 12,949 16,721 Kumpulan Europlus Bhd (“KEB”) and its subsidiaries (“KEB Group”) 69,072 131,826
The nature of the relationship with the related parties are disclosed in Note 44.
(ii) interest capitalised during the financial year for the Group amounting to approximately RM39,746,000 (2005: RM44,406,000) (Note 35).
(iii) ABS discount on deferred progress billings capitalised during the financial year for the Group amounting to approximately RM3,922,000 (2005: RM7,843,000).
(h) The net realisable value of certain development properties and land held for development with carrying value of RM373,189,000 have not been ascertained as no recent independent professional valuations were conducted.
5. INVESTMENT PROPERTIES
Group 2006 2005 RM’000 RM’000
At cost:
Freehold land 4,900 4,900 Leasehold land 1,449 1,449 Buildings 134,059 156,105
140,408 162,454 Accumulated impairment losses (17,000) –
123,408 162,454
Investment properties have been pledged for borrowings as disclosed in Note 18.
77 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
6. SUBSIDIARIES
Company 2006 2005 RM’000 RM’000
Unquoted shares, at cost 502,012 502,012 Accumulated impairment losses (157,211) (2,774)
344,801 499,238
(a) Details of the subsidiaries are disclosed in Note 51.
(b) Acquisition of subsidiary during the year
During the year, Starbase Sdn. Bhd. and Izin Saga Sdn. Bhd. became subsidiaries.
The effect of the acquisition on the financial results of the Group from the date of acquisition to 31 January 2006 are as follows:
2006 RM’000
Loss before taxation (1,012) Taxation –
Net loss after taxation (1,012)
The effect of the acquisition on the financial position of the Group as at 31 January 2006 are as follows:
2006 RM’000
Property development costs 24,276 Sundry receivables 6 Cash and bank balances 44 Sundry payables (77,910)
Net liabilities assumed (53,584)
78 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
6. SUBSIDIARIES (CONTD.)
(b) Acquisition of subsidiary during the year (Contd.)
The fair value of the assets acquired and liabilities assumed from the acquisition of the subsidiaries are as follows:
At acquisition date RM’000
Net assets acquired: Property development costs 25,056 Sundry receivables 15,573 Cash and bank balances 1 Sundry payables (39,730)
Total consideration 900
Net cash outflow from acquisition: Cash consideration of subsidiaries acquired 900 Less: Cash and bank balances of subsidiaries (1)
899
79 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
6. SUBSIDIARIES (CONTD.)
(c) Disposal and deconsolidation of subsidiaries during the year
During the year, the Company completed the disposal of Perwira Indera Sakti Sdn. Bhd. and its subsidiaries, Tenaga Gagah Sdn. Bhd. and Melombong & Perumahan Sdn. Bhd.
The effect of the disposals and deconsolidation of the said subsidiaries of the Group for the financial period up to the date of disposals and deconsolidation were as follows:
(i) On the results of the Group
Financial period up to date of disposals/ deconsolidation RM’000
Loss before taxation (118,413) Taxation 632
Loss after taxation (117,781)
(ii) On the financial position of the Group
At disposals/ deconsolidation date RM’000
Property, plant and equipment (Note 3) 61 Property development costs 216,713 Inventories 67,590 Trade and other receivables 6,173 Cash and bank balances (“Cash and cash equivalents”) 376 Trade and other payables (200,866) Borrowings (643) Provision for liabilities (77,710) Minority interests (421) Taxation (15,889)
Fair value of total net assets (4,616) Gain on disposal to the Group 4,766 Less: Cash and cash equivalents of subsidiaries disposed and deconsolidated (376)
Net cash outflow arising on disposal, representing cash and cash equivalents of subsidiaries disposed (226)
80 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
6. SUBSIDIARIES (CONTD.)
(d) Acquisition of subsidiaries in the previous year
In the previous year, Ample Zone Berhad (formerly known as Ample Zone Sdn. Bhd.) and Wira Profit Sdn. Bhd. became subsidiaries.
The effect of the acquisition on the financial results of the Group from the date of acquisition to 31 January 2005 are as follows:
2005 RM’000
Loss before taxation (41) Taxation –
Net loss after taxation (41)
The effect of the acquisition on the financial position of the Group as at 31 January 2005 are as follows:
2005 RM’000
Deposit held by trustee 12,167 Sundry receivables 30,411 Cash and bank balances 1 Sundry payables (42) Borrowings (150,000)
Net liabilities assumed (107,463)
The fair value of the assets acquired and liabilities assumed from the acquisition of the subsidiaries are as follows:
At acquisition date RM’000
Net assets acquired: Sundry receivables *
Total consideration *
Net cash outflow from acquisition: Cash consideration of subsidiaries acquired * Less: Cash and bank balances of subsidiaries **
***
* Represents RM4 ** Represents RM1 *** Represents RM3
81 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
6. SUBSIDIARIES (CONTD.)
(e) Disposal of subsidiaries in the previous year
In the financial year ended 31 January 2005, the Company completed the disposal of Talam Trading Sdn. Bhd. and its subsidiaries, Talam Leasing Sdn. Bhd. and Ambang Vista Sdn. Bhd. and its subsidiary.
The effect of the disposals and deconsolidation of the said subsidiaries of the Group for the financial period up to the date of disposals and deconsolidation were as follows:
(i) On the results of the Group
Financial period up to date of disposals/ deconsolidation RM’000
Profit before taxation 3,802 Taxation (750)
Profit after taxation 3,052
(ii) On the financial position of the Group
At disposals/ deconsolidation date RM’000
Property, plant and equipment (Note 3) 3,754 Property development costs 73,692 Inventories 403 Trade and other receivables 149,920 Cash and bank balances 69 Trade and other payables (138,463) Borrowings (68,051) Minority interests (274) Taxation (2,278)
Fair value of total net assets 18,772 Loss on disposal to the Group (921)
17,851
Satisfied by: Cash 16,300
Net cash outflow arising on disposal, representing cash and cash equivalents of subsidiaries disposed 16,231
82 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
7. ASSOCIATES
Group 2006 2005 RM’000 RM’000
Cost 7,219 7,219 Addition 9,988 * Accumulated impairment losses (7,219) (7,219)
9,988 –
Represented by: Share of net assets 17,207 7,219 Share of post acquisition losses (7,219) (7,219)
9,988 –
* Denote RM1
Details of associates are disclosed in Note 53.
8. OTHER INVESTMENT
Group 2006 2005 RM’000 RM’000
At cost:
1% Irredeemable Convertible Unsecured Loan Stock (“ICULS”) 76,332 76,332
(i) The ICULS nominal value at RM1.00 each, are constituted by a Trust Deed dated 8 November 2003 between Venue Venture Sdn. Bhd. ("VVSB") and the trustee for the holders of ICULS.
The main features of the ICULS are as follows:
(a) The ICULS shall be for a period of five years from the date of issue.
(b) The ICULS shall not be redeemable for cash. All outstanding ICULS shall be converted into new VVSB shares on the maturity date.
(c) The ICULS may, at the holder's option, be converted into new VVSB Shares at the Conversion Price during the tenure of ICULS. Upon maturity, any ICULS not converted shall be converted automatically into new VVSB shares at the conversion price.
83 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
8. OTHER INVESTMENT (CONTD.)
(d) The new VVSB Shares to be issued pursuant to the conversion of the ICULS shall, upon allotment and issue, rank pari passu in all respects with the existing VVSB Shares except that they shall not be entitled to any dividends, rights, allotments and/or other distributions the entitlement date of which precedes the date of allotment of the new VVSB Shares.
(ii) The management is of the opinion that the investment in ICULS is supported by the assets held by VVSB.
9. SINKING FUNDS HELD BY TRUSTEES
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Murabahah Notes Issuance Facility (“MUNIF”) (Note 18) 4,342 8,793 – – BaIDS (Note 18) 427 873 – – Sukuk Al-Ijarah (Note 18) 11,529 12,167 – –
16,298 21,833 – –
The sinking funds are held by trustees for the redemption and/or servicing of financing facilities, as disclosed in Note 18.
10. GOODWILL
Group 2006 2005 RM’000 RM’000
Goodwill arising on consolidation 4,101 4,882 Goodwill arising on acquisition of business 2,250 2,250 Reserve on consolidation – (1,331)
At 1 February 2005/2004 6,351 5,801
Less: Cumulative amortisation At 1 February 2005/2004 4,982 2,623 Goodwill written off 1,369 2,291 Amortisation of goodwill – 68
6,351 4,982
At 31 January – 819
84 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
11. INVENTORIES
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
At cost:
Completed properties held for sale 96,512 78,855 417 – Finished goods and consumables 1,193 1,308 – –
97,705 80,163 417 – Accumulated impairment losses (23,888) – (144) –
73,817 80,163 273 –
(a) The cost of inventories sold and expensed during the year amounted to RM34,109,000 (2005: RM72,825,000) (Note 31).
(b) Completed properties held for sale of the Group costing approximately RMNil (2005: RM14,279,000) have been pledged for facilities taken by certain contractors as security for trade payables owing by the Group to the said contractors. The properties have been discharged during the year.
(c) Completed properties held for sale of the Group costing approximately RMNil (2005: RM11,203,000) have been pledged together with a third party's properties ("the pool properties") for financing facilities offered to the Group and the said third party which are jointly secured by the pool properties. The facilities offered to the Group amounts to RM80 million. The said completed properties held for sale have been discharged pursuant to the settlement of the financing facilities during the year.
12. DUE FROM SUBSIDIARIES
Company 2006 2005 RM’000 RM’000
Non-trade - interest free 593,194 373,864 - bearing interest of 5% per annum – 78,018
593,194 451,882 Less: Provision for doubtful debts (309,479) (12,862)
283,715 439,020
The amounts due from subsidiaries are unsecured and have no fixed terms of repayment.
85 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
13. DUE FROM ASSOCIATES
The amounts due from associates are unsecured and have no fixed terms of repayment.
14. TRADE RECEIVABLES
Group 2006 2005 RM’000 RM’000
Progress billing receivables
- As previously stated 103,159 67,137 - PYA (Note 45(a)(i)) – 11,926 - PYA (Note 45(a)(ii)) – (11,926)
- As restated 103,159 67,137
Property investments, manufacturing, education and hotel operations 8,279 15,315
Total trade receivables 111,438 82,452 Less: Provision for doubtful debts (4,444) (1,936)
106,994 80,516
(a) Included in trade receivables are amounts due from related parties as follows:
Group 2006 2005 RM’000 RM’000
Agrocon (M) Sdn. Bhd. 25,776 – KEB Group 20,121 1,060
The nature of the relationships with the above related parties are disclosed in Note 44.
(b) The Group’s normal trade credit term ranges from 14 days to 60 days. Other credit terms are assessed and approved on a case-by-case basis.
The Group has no significant concentration of credit risk that may arise from exposures to a single debtor or to groups of debtors.
(c) Included in trade receivables of the Group are amounts of RM56,169,000 (2005: RMNil) due from certain contractors of the Group. The management is of the opinion that these receivables are fully recoverable.
86 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
15. OTHER RECEIVABLES
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Deposits 28,156 41,818 69 69 Prepayments 363 784 35 35 Tax recoverable 1,901 1,901 – – Sundry receivables
- As previously stated 313,490 166,507 9,372 94,223 - PYA (Note 45(a)(i)) – 78,074 – – - PYA (Note 45(a)(ii)) – (78,074) – –
- As restated 313,490 166,507 9,372 94,223
Less: Provision for doubtful debts (111,424) (14,297) (1,642) –
232,486 196,713 7,834 94,327
Included in sundry receivables of the Group are:
(i) An amount of RM42,071,200 (2005: RM42,071,200), representing deposit and instalment paid to a third party ("land vendor") for a proposed purchase of land by Maxisegar Sdn. Bhd. ("MSSB"), a wholly-owned subsidiary of the Company. MSSB has filed a legal suit against the said land vendor to recover the amount as MSSB could not obtain a loan to complete the Sale and Purchase Agreement due to frustrating events intervening.
Judgement was delivered in favour of the third party together with interest and cost. MSSB appealed to the Court of Appeal against the said judgement and on 5 May 2005, the Court of Appeal has dismissed the Appeal.
On 24 May 2005, MSSB has instructed Messrs Shahrizat Rashid & Lee, the new solicitors, to file the motion for leave to appeal to the Federal Court. The said solicitors retained by MSSB have advised that the Company has a strong case in its appeal to the Federal Court. The said solicitors had premised their advice based upon the grounds of Judgement of the High Court as well as the evidence of the parties compiled in the Record of Appeal and lodged with the Court of Appeal. Having perused the various documents stated above, the said solicitors are of the view that both the High Court and the Court of Appeal had failed and/or ignored to address various fundamental principles of law in arriving at its decision(s), which if considered in light of the evidence before the Court may have had a bearing on the Court’s decision favourable to MSSB. In the meantime, MSSB has filed an application for a stay of execution at the Court of Appeal. On 8 August 2005, the Court of Appeal has granted the Order for stay of execution and the application for leave to appeal in the Federal Court is fixed for hearing on 3 October 2005.
The application for leave to appeal in the Federal Court has been dismissed by the Federal Court on 1 March 2006. Pursuant to the Federal Court’s decision, MSSB has provided for the amount in full.
87 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
15. OTHER RECEIVABLES (CONTD.)
(ii) Arising from termination of the relevant agreement, the deposits of RM9,937,900 (2005: RM9,951,700) paid by the Group to a land owner for a proposed acquisition of the land was written off during the financial year.
(iii) Due from VVSB of RM65,542,000 (2005: RM31,207,000). The management is of the view that the amount due from VVSB is supported by assets held by VVSB and is fully recoverable; and
(iv) Due from a third party of RM28,045,000 (2005: RM27,899,000) pursuant to the issuance of Sukuk Al-Ijarah which is secured by the third party's property.
The Group has no significant concentration of credit risk that may arise from exposures to a single debtor or to groups of debtors other than as disclosed above.
16. CASH AND CASH EQUIVALENTS
Group Company Restated 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Housing development accounts 5,235 8,220 – – Cash on hand and bank balances 7,925 6,054 257 1,081 Deposits with: licensed banks 475 1,467 – 400 licensed discount house
- As previously stated 2,263 92,262 – – - PYA (Note 45(b)) – (90,000) – –
- As restated 2,263 2,262 – –
Deposit in Escrow accounts 58,617 94,612 – –
Cash and bank balances 74,515 112,615 257 1,481 Less: Bank overdrafts (Note 18) (15,178) (11,938) (10,272) (9,887) Deposit in Escrow accounts (58,617) (94,612) – –
Cash and cash equivalents 720 6,065 (10,015) (8,406)
(a) The housing development accounts of the Group are held pursuant to Section 7A of the Housing Development (Control and Licensing) Act, 1966 and therefore restricted from use in other operations. Housing development accounts of the Group amounting to approximately RM2,355,000 (2005: RM6,231,000) have been pledged for financing facilities as disclosed in Note 18.
88 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
16. CASH AND CASH EQUIVALENTS (CONTD.)
(b) The following are pledged to financial institutions for financing facilities granted to the Group as disclosed in Note 18:
Group 2006 2005 RM’000 RM’000
Bank balances 1,263 934 Deposits with licensed bank – 492
1,263 1,426
(c) The deposit in Escrow accounts with a financial institution is restricted to finance the construction of certain development property projects of a subsidiary pursuant to the ABS arrangement as disclosed in Note 27.
17. PROVISION FOR LIABILITIES
Group 2006 2005 RM’000 RM’000
At 1 February 2005/2004 99,930 109,802 Provision during the year 116,651 2,350 Arising from disposal of subsidiaries (77,710) – Utilisation of provision during the year (2,804) (12,222)
At 31 January 136,067 99,930
Provision for liabilities comprise:
Group 2006 2005 RM’000 RM’000
Provision for liquidated ascertained damages 97,742 99,930 Provision for compensation arising from a litigation 38,325 –
136,067 99,930
The details of provision for compensation arising from a litigation is further disclosed in Note 39(d).
89 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
18. BORROWINGS
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
(a) Short term borrowings:
(i) Secured:
Revolving credits 123,906 91,678 36,400 36,400
(ii) Unsecured:
Bank overdrafts (Note 16) 15,178 11,938 10,272 9,887 Revolving credits 10,460 30,750 6,201 6,750
25,638 42,688 16,473 16,637
Included in revolving credits of the Group is an amount of RM19,999,000 (2005: RM15,000,000) facility obtained from Pengurusan Projek Bersistem Sdn. Bhd., a related party. The nature of the said related party is as disclosed in Note 44.
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
(iii) Long term liabilities due within 12 months
Secured: Revolving credits – 6,500 – – BaIDS 130,000 10,000 – – Bridging At-Tamwil Overdraft (“BIOD”) – 8,172 – – MUNIF* 196,000 – – – Term and bridging loans 226,276 166,144 3,381 3,381 Sukuk Al-Ijarah 2,500 – – –
554,776 190,816 3,381 3,381
Hire purchase and lease payables (Note 19) 1,020 768 71 131
Total 705,340 325,950 56,325 56,549
90 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
18. BORROWINGS (CONTD.)
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
(b) Long term borrowings:
(i) Secured:
BaIDS 130,000 140,000 – – Due within 12 months (130,000) (10,000) – –
– 130,000 – –
MUNIF 196,000 196,000 – – Due within 12 months (196,000) – – –
– 196,000 – –
Revolving credits – 10,500 – – Due within 12 months – (6,500) – –
– 4,000 – –
Term and bridging loans 226,276 228,853 3,381 3,381 Due within 12 months (226,276) (166,144) (3,381) (3,381)
– 62,709 – –
* The MUNIF has been restructured in the last financial year.
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Sukuk Al-Ijarah 150,000 150,000 – – Due within 12 months (2,500) – – –
147,500 150,000 – –
(ii) Unsecured
Liability component of ICPS (Note 23) 1,867 4,531 1,867 4,531
Hire purchase and lease payables due after 12 months (Note 19) 537 1,124 – –
Total 149,904 548,364 1,867 4,531
91 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
18. BORROWINGS (CONTD.)
(c) The range of effective interest rates or purchase yield during the financial year for borrowings are as follows:
Group Company 2006 2005 2006 2005 %% % %
Revolving credits 8.00 - 13.50 6.50 - 13.50 6.60 - 8.50 6.50 - 8.50 MUNIF 5.75 5.75 – – Bank overdrafts 8.00 - 9.00 7.25 - 8.00 7.75 - 8.00 7.50 - 8.00 Term and bridging loans 8.00 - 12.00 7.75 -16.00 8.00 8.00 BaIDS 7.00 - 7.50 7.00 - 7.50 – – BIOD 7.00 7.00 – – Sukuk Al-Ijarah 5.20 - 9.30 5.20 - 9.30 – –
(d) The Company has provided corporate guarantees for unsecured bank overdrafts and revolving credits of the subsidiaries.
The secured revolving credits of the Group and of the Company are secured by fixed and floating charges over certain assets of the Group and of the Company as disclosed in Notes 3 and 4.
(e) The MUNIF of the Group was originally repayable during the financial year. Pursuant to the approval from the authorities on 29 December 2004, the facility tenure of the MUNIF has been extended to 3 October 2006.
The MUNIF of the Group is secured by the following:
(i) Memorandum of Charge over the operating accounts (including Housing Development Accounts) of certain subsidiaries.
(ii) Assignment of proceeds from sale of the development properties of certain subsidiaries.
(iii) Debentures creating a fixed and floating charge over assets of certain subsidiaries.
(iv) Third party first legal charge on certain subsidiaries' operating accounts (including Housing Development Accounts) as referred to in Note 16.
An amount of RM4,342,000 (2005: RM8,793,000) has been maintained in the sinking fund held by trustees in accordance with the MUNIF granted to a subsidiary as disclosed in Note 9. The amount is deposited to meet the redemption of maturing notes.
(f) The term and bridging loans are repayable as follows:
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Financial year ending 31 January
2006 226,276 166,144 – 3,381 2007 – 39,617 3,381 – 2008 – 23,092 – –
226,276 228,853 3,381 3,381
92 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
18. BORROWINGS (CONTD.)
The term and bridging loans are secured by the following:
(i) First and third legal charge over the freehold land and buildings of certain subsidiaries as disclosed in Notes 3 and 4;
(ii) Subordination deed executed by a subsidiary;
(iii) Fixed and floating charge over all the assets, revenue, rights and benefits on the property development properties of certain subsidiaries; and
(iv) Corporate guarantee by the Company and certain subsidiaries.
(g) In the previous financial year, a subsidiary, Maxisegar Sdn. Bhd. ("MSSB") issued RM140,000,0000 nominal value of BaIDS.
The BaIDS shall be payable upon maturity as follows:
Group 2006 2005 RM’000 RM’000
Financial year ending 31 January
2006 130,000 10,000 2007 – 30,000 2008 – 50,000 2009 – 50,000
130,000 140,000
The BaIDS is secured inter-alia by the following:
(i) Charges over all the operating accounts phases involved of MSSB (including Housing Development Accounts).
(ii) Assignments of sale proceeds from certain development phases of MSSB;
(iii) A charge over certain development properties of MSSB;
(iv) Specific debenture covering fixed and floating charge on all assets of MSSB related to the project; and
(v) A corporate guarantee from the Company.
An amount of RM427,000 (2005: RM873,000) has been maintained in the sinking fund held by trustees in accordance with the BaIDS granted to MSSB as disclosed in Note 9. The amount is deposited to meet the terms of redemption requirement of maturing notes.
93 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
18. BORROWINGS (CONTD.)
(h) Save for the Sukuk Al-Ijarah, the Group and the Company have not met their obligation in loan repayments and interest payments and have breached all their borrowing facilities agreements and may have crossed defaulted the entire borrowings as shown above. Accordingly, the outstanding borrowings of the Group and the Company were classified as current liabilities.
The Group and the Company are presently working with their financial advisers to formulate a PDRS and have been having on-going negotiations and discussions with their lenders.
The directors are confident that the Group and the Company, being given the opportunity to amicably resolve the debt restructuring matters with their lenders, will be able to submit a comprehensive restructuring plan to the relevant authorities and the PDRS would be successfully implemented.
(i) In the previous financial year, a subsidiary, Ample Zone Berhad ("Ample Zone") issued RM150,000,000 nominal value of Sukuk Al-Ijarah ("Sukuk").
The Sukuk shall be payable upon maturity as follows:
Group 2006 2005 RM’000 RM’000
Financial year ending 31 January
2007 2,500 2,500 2008 4,000 4,000 2009 4,500 4,500 2010 4,500 4,500 2011 4,500 4,500 2012 130,000 130,000
150,000 150,000
The Sukuk is secured inter-alia by the following:
(i) Debenture over the fixed and floating charge over all assets and properties and undertakings both present and future of Ample Zone; and
(ii) Principal charge on various designated accounts;
An amount of RM11,529,000 (2005: RM12,167,000) has been maintained in the bank account held by trustees in accordance with the requirement of Sukuk granted to Ample Zone as disclosed in Note 9. The amount is deposited for the profit servicing requirement.
94 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
19. HIRE PURCHASE AND LEASE PAYABLES
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Minimum lease payment:
Not later than 1 year 1,208 1,048 95 168 Later than 1 year and not later than 5 years 501 1,259 – –
1,709 2,307 95 168 Less: Future finance charges (152) (415) (24) (37)
Present value of finance lease liabilities 1,557 1,892 71 131
Representing hire purchase and lease payables:
Not later than 1 year (Note 18) 1,020 768 71 131 Later than 1 year and not later than 5 years (Note 18) 537 1,124 – –
1,557 1,892 71 131
The hire purchase and lease payables of the Group and of the Company bear interest of between 3.72% to 8.00% (2005: 4.20% to 9.00%) and 4.20% to 5.50% (2005: 4.20% to 8.00%) respectively per annum.
20. DUE TO SUBSIDIARIES
The amounts due to subsidiaries are unsecured, interest free, have no fixed terms of repayment and are non-trade in nature.
21. TRADE PAYABLES
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Trade payables 102,444 67,723 – – Progress billings in respect of property development costs 8,985 58,072 – – Retention sum 36,342 223,260 – –
147,771 349,055 – –
95 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
21. TRADE PAYABLES (CONTD.)
(a) Included in trade payables and retention sum are amounts due to related parties as follows:
Group 2006 2005 RM’000 RM’000
Perkhidmatan Sanjung (M) Sdn. Bhd. - Trade payables 80 80 - Retention sums 135 135
Project 33 Construction Sdn. Bhd. - Trade payables – 811 - Retention sums – 29,158
Agrocon (M) Sdn. Bhd. - Trade payables 1,542 9,660 - Retention sums 14,335 23,119
KEB Group - Trade payables 21,025 18,795 - Retention sums 19,676 25,305
The nature of the relationship with the above related parties are disclosed in Note 44.
(b) The normal trade credit terms granted to the Group ranges from 30 days to 90 days.
22. OTHER PAYABLES
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Amount payable for acquisition of land 60,652 51,840 – – Obligation arising from acquisition of land (Note 28) 147,259 132,000 – – Accruals 206,124 93,730 4,994 4,462 Sundry payables
- As previously stated 580,757 257,736 28,275 8,038 - PYA (Note 45(b)) – (23,241) – –
- As restated 580,757 234,495 28,275 8,038
994,792 512,065 33,269 12,500
96 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
22. OTHER PAYABLES (CONTD.)
(a) Included in accruals of the Group and of the Company are:
(i) Accrued interest of RM24,442,000 (2005: RM18,978,000) and RM4,075,000 (2005: RM2,047,000) respectively; and
(ii) Amount payable to authorities and utility companies in relation to development projects of RM88,054,000 (2005: RM53,564,000).
(iii) Progress billings billed in advance of RM46,474,000 (2005: RM85,113,000).
(b) Included in sundry payables of the Group are:
(i) Refundable deposits of RM13,320,000 (2005: RM30,928,000) received from purchasers of properties and tenants of complexes;
(ii) Advances from minority shareholders of subsidiaries amounting to RM1,023,000 (2005: RM1,273,000) out of which RM1,023,000 (2005: RM1,009,000) bear interest at the rate of 8% while the balance is interest free. The advances are unsecured and have no fixed terms of repayment; and
(iii) Renovation costs payable for a hotel building of approximately RM1,914,000 (2005: RM2,976,000).
23. SHARE CAPITAL
Group and Company Number of Shares Amount 2006 2005 2006 2005 ’000 ’000 RM’000 RM’000
Authorised
Ordinary shares of RM1.00 each At 1 February 2005 939,000 939,000 939,000 939,000
At 31 January 939,000 939,000 939,000 939,000
Redeemable convertible preference shares (“RCPS”) of RM0.01 each At 1 February 2005 100,000 100,000 1,000 1,000
At 31 January 100,000 100,000 1,000 1,000
5% Irredeemable convertible preference shares (“ICPS”) of RM0.10 each At 1 February 2005 600,000 600,000 60,000 60,000
At 31 January 600,000 600,000 60,000 60,000
Total 1,639,000 1,639,000 1,000,000 1,000,000
97 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
23. SHARE CAPITAL (CONTD.)
Group and Company Number of Shares Amount 2006 2005 2006 2005 ’000 ’000 RM’000 RM’000
Issued and fully paid
(a) Ordinary shares of RM1.00 each At 1 February 2005 598,845 548,747 598,845 548,747 Conversion of ICULS 2003/2005 18,496 16,479 18,496 16,479 Conversion of ICULS 2003/2006 – 6 – 6 Conversion of ICPS 11,157 33,613 11,157 33,613
At 31 January 628,498 598,845 628,498 598,845
(b) 5% Irredeemable Convertible Preference Shares (“ICPS”) of RM0.10 each At 1 February 2005 255,533 591,668 25,554 59,167 Less: Converted during the year (111,570) (336,135) (11,157) (33,613)
At 31 January 143,963 255,533 14,397 25,554
Total 772,461 854,378 642,895 624,399
Less: Liability component of ICPS (Note 18) (1,867) (4,531)
Total 641,028 619,868
(a) During the financial year, the Company increased its issued and paid-up share capital from RM624,398,262 to RM642,894,813 by way of issuance of the following:
(i) 18,496,550 ordinary shares of RM1.00 each amounting to RM18,496,550 pursuant to the conversion of 7% ICULS 2003/2005 as disclosed in Note 26;
(ii) 111,570,470 ICPS of RM0.10 each amounting to RM11,157,047 pursuant to the conversion of 5% ICPS.
The new ordinary shares rank pari passu in all respects with the existing ordinary shares of the Company except that they are not entitled to any dividends, allotments and/or other distributions unless the allotment of the new ordinary shares is made on or prior to the entitlement date of such dividends, right, allotments and/or other distributions.
(b) The ICPS have been split between the liability component and the equity component, representing the fair value of the conversion component. The main features of the ICPS are disclosed in Note 50.
98 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
24. TREASURY SHARES
During the financial year, the Company repurchased its issued ordinary shares from the open market which were financed by internally generated funds. The number of ordinary shares repurchased during the financial year was 878,600 ordinary shares at prices ranging from RM0.20 to RM1.14 per share. The total consideration for the shares repurchased during the year including transaction costs was RM844,288. The shares repurchased were held as treasury shares in accordance with Section 67A of the Companies Act, 1965.
The details of the Share Buy Back are as follows:
Group and Company Number of Ordinary Shares of RM1 Each Amount ’000 RM’000
At 1 February 2004 20 23 Repurchased during the year 5,092 5,701 Less: Sold during the year (5,112) (5,724)
At 31 January 2005 – – Repurchased during the period 879 844
At 31 January 2006 879 844
25. CAPITAL RESERVE
2006 2005 RM’000 RM’000
Capital reserve of the Group are in respect of the following:
Capitalisation of retained profits for bonus issue of ordinary shares by subsidiaries 6,392 6,392 Redemption of preference shares to ordinary shares 4,809 4,809
At 31 January 11,201 11,201
99 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
26. IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (“ICULS”)
Group and Company 2006 2005 RM’000 RM’000
7% ICULS 2003/2005 At 1 February 2005/2004 18,496 34,975 Less: Converted during the period/year (18,496) (16,479)
At 31 January – 18,496
7% ICULS 2003/2006 At 1 February 2005/2004 685 691 Less: Converted during the period/year – (6)
At 31 January 685 685
TOTAL 685 19,181 Less : Equity component of ICULS (652) (18,161)
Liability component as at 31 January 33 1,020
In the financial year ended 31 January 2004, pursuant to the Merger, the Company issued:
(i) RM44,649,336 7% Irredeemable Convertible Unsecured Loan Stock 2003/2005 ("7% ICULS 2003/2005") at nominal value for the acquisition of the Europlus Berhad's RM44,649,336 7% Irredeemable Convertible Unsecured Loan Stock 2000/2005.
The salient features of 7% ICULS 2003/2005 issued are as follows:
(a) The principal amount of the ICULS 2003/2005 which consist of unsecured notes of the Company in registered form in multiples of RM1.00 each issued pursuant to acquisition of Europlus ICULS 2000/ 2005, bearing a coupon rate of 7% per annum on the principal amount. The Loan Stock is designated as "7% ICULS 2003/2005".
(b) The 7% ICULS 2003/2005 are constituted by a Trust Deed executed by the Company and a Trustee on 3 November 2003.
(c) The 7% ICULS 2003/2005 will be irredeemable and shall be convertible into new ordinary shares, at the holder's option, at the conversion price during the tenure of the ICULS. All outstanding 7% ICULS 2003/2005 shall be automatically converted into new ordinary shares of RM1.00 each on the maturity date, 19 July 2005.
100 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
26. IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS ("ICULS") (CONTD.)
(d) The new ordinary shares of RM1.00 each to be issued pursuant to the conversion of the 7% 2003/2005 ICULS shall, upon allotment and issue, rank pari passu in all respect with existing shares in issue at the conversion date, except that they will not be entitled to any dividends, rights, allotments and/or other distributions the entitlement date of which precedes the date of allotment of the new ordinary shares.
(e) On its maturity date on 19 July 2005, all remaining outstanding 7% 2003/2005 ICULS of RM18,496,550 have been converted into fully paid ordinary shares of RM1.00 each of the Company on the basis of RM1.00 nominal value of ICULS 2003/2005 for every one (1) new ordinary share in accordance with the terms of the Trust Deed.
(ii) RM690,640 7% Irredeemable Convertible Unsecured Loan Stock 2003/2006 ("7% ICULS 2003/2006") at nominal value for the acquisition of the Europlus RM690,640 7% Irredeemable Convertible Unsecured Loan Stock 2001/2006.
The salient features of 7% ICULS 2003/2006 issued are as follows:
(a) The principal amount of the ICULS 2003/2006 which consist of unsecured notes of the Company in registered form in multiples of RM1.00 each issued pursuant to acquisition of Europlus ICULS 2001/ 2006, bearing a coupon rate of 7% per annum on the principal amount. The Loan Stock is designated as "7% ICULS 2003/2006".
(b) The 7% ICULS 2003/2006 are constituted by a Trust Deed executed by the Company and a Trustee on 3 November 2003.
(c) The 7% ICULS 2003/2006 will be irredeemable and shall be convertible into new ordinary shares, at the holder's option, at the conversion price during the tenure of the ICULS. All outstanding 7% ICULS 2003/2006 shall be automatically converted into new ordinary shares of RM1.00 each on the maturity date, 19 April 2006.
(d) The new ordinary shares of RM1.00 each to be issued pursuant to the conversion of the 7% 2003/2006 ICULS shall, upon allotment and issue, rank pari passu in all respect with existing shares in issue at the conversion date, except that they will not be entitled to any dividends, rights, allotments and/or other distributions the entitlement date of which precedes the date of allotment of the new ordinary shares.
The ICULS have been split between the liability component and the equity component, representing the fair value of the conversion option.
101 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
27. DEFERRED PROGRESS BILLINGS
Group 2006 2005 RM’000 RM’000
Deferred progress billings 1,091,692 1,073,392 Less : Billed (552,317) (509,481)
539,375 563,911
Discount of deferred progress billings 172,461 154,161 Less: Discount capitalised in property development costs (Note 4) (15,686) (11,764) Amortisation charged to income statement (104,510) (65,316)
52,265 77,081
Deferred progress billings, net of discount 487,110 486,830
Represented by: Less: Amount due in next 12 months 487,110 349,231 Less: Amount due after next 12 months – 137,599
487,110 486,830
(a) Deferred progress billings relates to an Islamic Assets Backed Securitisation ("ABS") arranged by a subsidiary. The ABS arrangement encompasses the sale of the subsidiary's right to bill under certain Sale and Purchase Agreements of certain phases of two development projects to a special purpose vehicle for a net cash purchase consideration of approximately RM919,231,000.
(b) The timing of the anticipated cash flows from the property development activities of the Group do not match the cash flows required to meet the obligations under ABS in accordance with existing terms of repayment. The Securities Commission had on 30 September 2005 approved the Group's proposal to restructure and extend the remaining tenure of the Islamic ABS by another year. Thus, the Group's repayment obligations under ABS has similarly been granted a deferment of 12 months.
(c) On 28 July 2006, the Group has defaulted on its repayment obligations under ABS due on that date amounting to RM288,185,000. Pursuant to the said default, the obligation under ABS became immediately due and payable. Accordingly, the deferred progress billings due after next 12 months (net of discount) of RM198,925,000 has been reclassified as current liabilities.
The Group is presently working with their financial advisers to formulate a PDRS and have been having on- going negotiations and discussions with their lenders as detailed in Note 41.
102 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
28. OTHER LONG TERM PAYABLES
Group 2006 2005 RM’000 RM’000
Obligation arising from acquisition of land (Note (a)) 147,259 323,531 Less: Short term portion (Note 22) (147,259) (132,000)
– 191,531 Amount payable for acquisition of land (Note (b)) 53,400 83,465 Loan from a minority shareholder of a subsidiary (Note (c)) 10,434 13,770 Amount payable for acquisition of building (Note (d)) 13,434 13,246
77,268 302,012
(a) The obligation arising from acquisition of land is in respect of obligations arising from the Universiti Industri Selangor ("UNISEL") project, whereby the Selangor State Government had alienated three parcels of land to the Group in consideration for the development of UNISEL.
Maxisegar Sdn. Bhd. ("MSSB"), a wholly owned subsidiary, entered into an agreement with the State Government of Selangor for the financing and construction of the main campus of UNISEL on 572.16 acres of land at Berjuntai Bestari, Selangor Darul Ehsan for a total value of RM750 million. In return, the State Government of Selangor had alienated 3 parcels of leasehold land to MSSB as follows:
Acres RM’000
Batang Berjuntai 3,000 345,000 Taman Puncak Jalil 801 337,500 Saujana Damansara 110 67,500
3,911 750,000
MSSB is unable to meet its financial obligation to bear the development and maintenance costs due of approximately RM134,000,000 ("obligation due") of UNISEL and as such, during the financial year, it has entered into an agreement with Kumpulan Darul Ehsan Berhad ("KDEB") and Pendidikan Industri YS Sdn Bhd ("PIYS") (both of which acted as nominees of State Government of Selangor) whereby MSSB agreed to settle obligation due by transferring 1,715.9 acres of Batang Berjuntai land which the parties have agreed shall be valued for the purpose of settlement at RM80,000 per acre to KDEB and/or PIYS. The settlement agreement is pending fulfilment of certain conditions precedent.
Pursuant to the event disclosed in Note 43(b), MSSB has defaulted on the Privatisation Agreement (UNISEL) entered into between the State Government of Selangor and MSSB dated 17 January 2001. Accordingly, the long term portion of MSSB's obligation under the said agreement has been reclassed to current liability.
(b) The amount payable for acquisition of land is payable in accordance with the terms and conditions of the Sale and Purchase Agreements. The amounts are not repayable within 12 months from the end of the financial year.
(c) Loan from a minority shareholder of a subsidiary is interest free, unsecured and has no fixed terms of repayment.
(d) The amount payable for acquisition of building is in relation to an agreement entered into with a third party in the year 1999 for sale of four floors of a building owned by a subsidiary. The agreement provides an option for the subsidiary to re-acquire those floors within ten years from the date of agreement at the market value on the date of exercise of the option. The directors have the intention to exercise the option and therefore the transaction was not recognised as a disposal.
103 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
29. DEFERRED TAXATION
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
At 1 February 2005/2004 5,792 1,018 279 279 Recognised in the income statement (Note 36) 6,573 4,967 – – Reversal on disposal of subsidiaries – (193) – –
At 31 January 12,365 5,792 279 279
Presented after appropriate offsetting as follows:
Deferred tax assets – (5,801) – – Deferred tax liabilities 12,365 11,593 279 279
12,365 5,792 279 279
The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:
Deferred Tax Liabilities of the Group:
Accelerated Capital Allowances Others Total RM’000 RM’000 RM’000
At 1 February 2005 3,033 9,363 12,396 Recognised in the income statement 1,584 (975) 609
At 31 January 2006 4,617 8,388 13,005
At 1 February 2004 3,163 8,665 11,828 Recognised in the income statement 69 698 767 Disposal of subsidiaries (199) – (199)
At 31 January 2005 3,033 9,363 12,396
104 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
29. DEFERRED TAXATION (CONTD.)
Deferred Tax Assets of the Group:
Tax Losses and Unabsorbed Capital Other Allowances Payables Others Total RM’000 RM’000 RM’000 RM’000
At 1 February 2005 (6,068) 1 (537) (6,604) Recognised in the income statement 5,965 (1) – 5,964
At 31 January 2006 (103) – (537) (640)
At 1 February 2004 (10,268) (5) (537) (10,810) Recognised in the income statement 4,200 – – 4,200 Disposal of subsidiaries – 6 – 6
At 31 January 2005 (6,068) 1 (537) (6,604)
Deferred Tax Liabilities of the Company:
Accelerated Capital Allowances RM’000
At 31 January 2006/2005 279
Deferred tax assets have not been recognised in respect of the following items:
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Unused tax losses 607,651 148,135 483 – Unabsorbed capital allowances 32,259 32,081 120 – Other deductible temporary differences 23,216 8,238 197 –
663,126 188,454 800 –
The availability of the unused tax losses and unabsorbed capital allowances for offsetting against future taxable profits of the subsidiaries in which those items arose are subject to no substantial changes in shareholdings of the subsidiaries under Section 44(5A) & (5B) of the Income Tax Act, 1967. Deferred tax assets have not been recognised in respect of these items as they may not be used to offset taxable profits of other subsidiaries in the Group and they have arisen in subsidiaries that does not have a recent history of profits.
105 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
30. REVENUE
Revenue of the Group and of the Company consist of the following:
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Revenue from development properties 577,036 889,776 2,199 626 Sales of inventories 26,000 65,797 – – Rental income 15,946 20,961 – – Management fees from third parties (40,301) 3,980 – – Maintenance charges 1,971 – – – Revenue from hotel operations 19,162 20,057 – – Interest income received from financing facilities provided – 4,760 – – Tuition and education fees – 701 – – Gross dividends from subsidiaries – – – 12,000
599,814 1,006,032 2,199 12,626
(a) Included in interest income of the Group is amount received or receivable from the following related parties:
Group 2006 2005 RM’000 RM’000
Pengurusan Projek Bersistem Sdn. Bhd. – 385 Perkhidmatan Sanjung (M) Sdn. Bhd. – 15 Project 33 Construction Sdn. Bhd. – 77
The nature of the relationship with the above related parties are disclosed in Note 44.
31. COST OF SALES
Cost of sales of the Group and of the Company consist of the following:
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Cost of development properties 740,346 640,393 2,128 606 Cost of inventories sold 34,109 72,825 – – Cost of rental 14,528 14,273 – – Cost of sales for hotel operations 7,130 7,254 – – Cost of sales for financing facilities provided – 4,712 – –
796,113 739,457 2,128 606
Cost of sales for financing facilities provided represent interest expense.
106 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
32. (LOSS)/PROFIT FROM OPERATIONS
(Loss)/profit from operations is stated after charging/(crediting):
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Amortisation of goodwill – 68 – – Amortisation of discount on deferred progress billings 39,194 43,544 – – Auditors’ remuneration: - current year provision 404 448 60 60 - under provision in prior years 26 – – – - others 250 250 250 250 Bad debts written off 14,473 7 334 – Depreciation 7,699 9,916 568 536 Development costs written off 4,000 – – – (Gain)/loss on disposal of investment in subsidiaries (4,766) 921 – (11,800) Gain on disposal of property, plant and equipment (2,367) (63) – – Goodwill written off 1,369 2,291 – – Loss on disposal of investment properties 12,107 – – – Property, plant and equipment written off 10,936 69 – 174 Provision for writedown in inventories 23,888 – 144 – Provision for diminution in investments – – 154,437 – Provision for doubtful debts 99,635 9,020 310,957 – Provision for impairment loss in investment property 17,000 – – – Provision for impairment loss in land held for development 78,155 – – – Provision for liabilities - Liquidated ascertained damages 78,326 2,350 – – - Interest and cost in relation to litigation 38,325 – – – Rental paid and payable to: - Agrocon (M) Sdn. Bhd. (Note 44) – 118 – – Rental of complex 310 2,500 – – Rental income (1,530) (2,066) – – Reversal of provision for diminution in investments (859) – – – Reversal of provision for doubtful debts – (17) (12,697) – Reversal of waiver of debts 2,339 – – – Staff costs (Note 33) 21,792 32,346 887 1,045
107 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
33. STAFF COSTS
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Wages and salaries 15,714 25,924 616 1,045 Social security costs 129 210 – – Defined contribution costs 1,501 2,664 – – Other staff related expenses 4,448 3,548 271 –
21,792 32,346 887 1,045
Included in the staff costs of the Group and of the Company are executive directors’ remuneration amounting to RM1,795,000 (2005: RM2,995,000) and RM325,000 (2005: RM305,000) respectively as further disclosed in Note 34.
34. DIRECTORS’ REMUNERATION
Included in staff costs are directors’ remuneration as follows:
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Directors of the Company
Executive: Fees 25 305 25 305 Other emoluments 300 – 300 –
325 305 325 305
Non-Executive: Fees 150 208 150 208 Salaries 290 453 – – Defined contribution 31 31 – – Benefit-in-kind – 10 – – Other emoluments 153 – 141 –
624 702 291 208
108 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
34. DIRECTORS’ REMUNERATION (CONTD.)
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Other Directors of Subsidiaries of the Company
Executive of the subsidiaries: Salaries 1,248 2,111 – – Fees – 310 – – Defined contribution costs 138 220 – – Other emoluments 84 49 – –
1,470 2,690 – –
Non-Executive of the subsidiaries: Fees – – – –
Total 2,419 3,697 616 513
Excluded from remuneration of directors of subsidiary of the Company are the following:
Benefits-in-kind Executive 38 196 – –
Total 2,457 3,893 616 513
The number of directors of the Company whose total remuneration during the financial year fall within the following bands is as follows:
Number of Directors 2006 2005
Executive directors RM300,001 - RM350,000 1 – RM350,001 - RM400,000 – 1
Non-Executive directors Below RM50,000 6 5 RM100,001 - RM150,000 – 1
77
109 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
35. FINANCE COSTS, NET
Included in finance costs, net are:
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Interest expense 74,896 67,398 10,813 7,112 Interest income (3,628) (8,504) (15) (976)
71,268 58,894 10,798 6,136 Less: Amount capitalised in - Land held for property development/ property development costs (39,746) (44,406) – –
31,522 14,488 10,798 6,136
Included in interest expense of the Group and the Company is amount paid or payable to the following related parties:
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Pengurusan Projek Bersistem Sdn. Bhd. 2,564 – – – KEB Group 160 – 4 –
The nature of the relationship with the above related parties are disclosed in Note 44.
36. TAXATION
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Tax expense for the period 8,900 41,154 – 3,360 (Over)/under provision in prior years (23,840) 980 – –
Deferred tax: Relating to origination and reversal of temporary differences (Note 29) – 4,967 – – Underprovision in prior year (Note 29) 6,573 – – –
(8,367) 47,101 – 3,360
Income tax is calculated at the Malaysian statutory tax rate of 28% (2005: 28%) of the estimated assessable profit for the year. Taxation for small and medium scale subsidiaries with paid-up capital of RM2,500,000 and below are calculated at the rate of 20% on chargeable income of up to RM500,000. For chargeable income in excess of RM500,000, the statutory tax rate of 28% is applicable.
110 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
36. TAXATION (CONTD.)
A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company are as follows:
2006 2005 RM’000 RM’000 Group
(Loss)/profit before taxation (780,290) 130,746
Taxation at Malaysian statutory tax rate of 28% (2005: 28%) (218,481) 36,609 Effect of different tax rate for small and medium scale subsidiaries of 20% for the first chargeable income of RM500,000 (326) (496) Income not subject to tax (46,878) (6,937) Expenses not deductible for tax purposes 141,677 13,744 Utilisation of previously unrecognised tax losses, unabsorbed capital allowances and unabsorbed reinvestment allowances (5,563) (2,207) Deferred tax assets not recognised during the year 138,471 5,408 Underprovision of deferred tax in prior year 6,573 – (Over)/under provision of income tax expense in prior years (23,840) 980
Tax expense for the year (8,367) 47,101
Company
(Loss)/profit before taxation (466,782) 12,033
Taxation at Malaysian statutory tax rate of 28% (2005: 28%) (130,699) 3,369 Income not subject to tax (3,560) (3,304) Expenses not deductible for tax purposes 133,395 3,295 Deferred tax assets not recognised during the year 864 –
Tax expense for the period – 3,360
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Tax savings recognised during the financial year are as follows:
Utilisation of previously unrecognised tax losses, unabsorbed capital allowances and unabsorbed reinvestment allowances 5,563 2,207 – –
111 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
37. EARNINGS PER SHARE
(a) Basic
Basic earnings per share is calculated by dividing the net profit for the year by the weighted average number of ordinary shares in issue during the financial year, excluding treasury shares held by the Company.
2006 2005
Net (loss)/profit for the year (RM’000) (771,796) 92,021 Weighted average number of shares (’000) 613,682 581,133 Basic (loss)/earnings per share (sen) (125.76) 15.83
(b) Diluted
For the purpose of calculating diluted earnings per share, the net profit for the year and the weighted average number of ordinary shares in issue during the financial year have been adjusted for the effects of dilutive potential ordinary shares from conversion of 7% ICULS 2003/2006 and 5% ICPS. The amount of net profit for the year is adjusted by the after-tax effect of interest expense recognised during the financial year which would have been saved on conversion of the outstanding ICULS into ordinary shares. The adjusted weighted average number of ordinary shares is the weighted average number of ordinary shares which would be issued on the conversion of the outstanding ICULS and ICPS into ordinary shares. The ICULS and ICPS are deemed to have been converted into ordinary shares at the date of issuance.
The effects of dilutive potential ordinary shares from assumed conversion of warrants is anti-dilutive and as such have been excluded from the computation of diluted earnings per share.
Group 2005
Net profit for the year (RM’000) 92,021 Adjustments for: After-tax effects of interest on ICULS (RM’000) 967
Adjusted net profit for the year (RM’000) 92,988
Weighted average number of ordinary shares in issue (‘000) 581,133 Adjustment for assumed conversion of ICULS (‘000) 19,181 Adjustment for assumed conversion of ICPS (‘000) 25,553
Adjusted weighted average number of ordinary shares in issue and issuable (‘000) 625,867
Diluted earnings per share (sen) 14.86
For the year ended 31 January 2006, since the conversion of ICULS and ICPS is anti-dilutive, dilutive loss per share is not disclosed.
112 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
38. DIVIDENDS
Amount Dividend per share 2006 2005 2006 2005 RM’000 RM’000 Sen Sen
Year 2005/2004 final ordinary shares dividend of 5% less taxation – 21,208 – 3.6 Year 2005/2004 ICPS dividend of 5% (net of taxation) 722 1,302 5.0 5.0
722 22,510
39. CONTINGENT LIABILITIES/LOSSES [UNSECURED]
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
(a) Guarantees
Guarantees given to financial institutions for facilities granted to subsidiaries – – 202,539 162,943
Guarantees given to non- financial institutions for: - facilities granted to subsidiaries – – 326,000 – - purchase of land by subsidiaries – – 213,206 –
The Group is presently working with its lenders to restructure its borrowings and will propose a suitable scheme for the proposed debt restructuring as disclosed in Note 41 in due course. In the event that the proposal is not accepted and implemented, a contingent liability of RM528,539,000 may become enforceable on the Company. No provision for liabilities in respect of the corporate guarantees has been made in the Company's financial statements as the quantum of the shortfall of which the Company is liable to make good cannot be presently determined.
(b) On 14 July 2003, a third party, Perspektif Perkasa Sdn. Bhd. ("PPSB") obtained Islamic financing in the form of MUNIF for a total amount of RM188 million. The MUNIF facility was arranged by Abrar Discount Berhad ("Abrar"), who also acts as the security agent. PPSB has entered into a management agreement with a subsidiary of the Company to manage the development of a piece of land owned by PPSB. In connection with the management agreement, the Company entered into an option agreement with Abrar which requires the Company, at any time during the option period, to acquire the entire issued and paid-up share capital of PPSB at an option price equivalent to the total outstanding MUNIF. As at 31 January 2006, the total outstanding MUNIF was approximately RM163 million (2005: RM158 million).
(c) Pursuant to the sales and purchase agreements entered into between the Company and Kumpulan Europlus Berhad ("KEB"), the Company gave a warranty that all trade receivables due to KEURO Trading Sdn. Bhd. (formerly known as Talam Trading Sdn. Bhd.) and KEURO Leasing Sdn. Bhd. (formerly known as Talam Leasing Sdn. Bhd.) as at the completion date ("the Guaranteed Debts") shall be recovered in full within two years from the completion date ("the Warranty Period"). In this connection, the completion date was mutually agreed as 31 January 2005. The Company undertook to pay KEB any guaranteed debts which are not recovered within 30 days of the expiry of the said warranty period. As at 31 January 2006, the guaranteed debts amounted to approximately RM22,915,000 and RM18,352,000 (2005: RM82,049,000 and RM67,646,000) respectively.
113 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
39. CONTINGENT LIABILITIES/LOSSES [UNSECURED] (CONTD.)
(d) In previous year, the Company had taken legal actions against a land vendor as disclosed in Note 15(i) for the recovery of deposit and instalments paid for a proposed acquisition of land. In the same suit, the Company was contingently liable subject to the outcome of the appeal as disclosed in Note 15(i) to the extent of approximately RM77,433,000 made up as follows:
2005 RM
Deposit and instalments 42,071,200 Interest expense 33,362,234 Cost 2,000,000
77,433,434
No provision for the above amounts was made in the previous year as the directors were confident that the Company will succeed in its appeal in the prior year.
Pursuant to the Federal Court's dismissal of the Company's application for leave to appeal in the Federal Court as disclosed in Note 42(h), the Company has made:
(i) provision for the doubtful debts on the deposit and instalment of RM42,071,200 as disclosed in Note 15(i);
(ii) provision for judgement sum of RM38,324,788, representing interest and cost as disclosed in Note 17. Interest will be charged at the rate of 8% per annum on judgement sum until the date of full settlement.
40. COMMITMENTS
Group 2006 2005 RM’000 RM’000
(a) Purchase consideration for land – 81,000
The Group has not perfected the sales and purchase agreement with the land vendor in respect of the above purchase of land. Pursuant to the vendor's forfeiture of the deposit paid, the commitment is deemed discharged.
(b) Ample Zone Berhad, a subsidiary has entered into an asset sales and lease-back transaction under the issuance of Sukuk of RM150 million. As security for the due compliance of all obligations of the issuer and the other security party under the Sukuk and the other financing documents, the Company has irrevocably and unconditionally granted to the issuer an option in respect of the assets whereby the Company will on request by the Security Trustee purchase the assets or any part thereof from the issuer at the relevant exercise price after the occurrence of an Event of Default.
114 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
41. PROPOSED DEBT RESTRUCTURING SCHEME (“PDRS”)
As the timing of the anticipated cash flow from the property development activities of the Group do not match the cash flows required to meet the obligation of the Group and the Company, the Group and the Company are unable to meet its debt obligation on certain loan principal repayments and interest payments. In addition, a subsidiary is placed under Section 176 as further disclosed in Note 43(b). The Group and the Company are currently working with its advisers to formulate a Group wide debt restructuring exercise ("PDRS") which proposed to settle the outstanding amount vide issuance of certain listed and tradable instruments. The directors are of the opinion that the PDRS will be successfully implemented.
42. SIGNIFICANT EVENTS
During the financial year,
(a) on 3 February 2005, the Company announced an early redemption of the entire outstanding balance of the RM150,000,000 nominal value of 5% Secured Serial Bonds made on 28 January 2005.
(b) on 18 February 2005, a wholly-owned subsidiary, Maxisegar Sdn. Bhd., entered into a Share Sales Agreement with Bumi Dua Corporation Sdn. Bhd. to acquire 144,000 ordinary shares of RM1.00 each representing 12% of the equity interest of Abra Development Sdn. Bhd. for a consideration of RM12,000,000.
(c) on 4 April 2005, a subsidiary, Terang Tanah Sdn. Bhd. ("Terang Tanah"), and Star Base Sdn. Bhd. ("Star Base") mutually agreed to rescind and revoke the Joint Venture Agreement entered into on 21 October 2003 at the request of Star Base. All monies paid by Terang Tanah to Star Base under the said Joint Venture Agreement have been refunded by Star Base to Terang Tanah and the parties were released of all respective obligations under the said Joint Venture Agreement.
(d) on 6 April 2005, the Company announced that a wholly-owned subsidiary, Expand Factor Sdn. Bhd., subscribed for 900,000 ordinary shares of RM1.00 each representing the 90% issued and paid-up share capital of Star Base Sdn. Bhd. for a total cash consideration of RM900,000.
(e) on 8 April 2005:
(i) two subsidiaries, Terang Tanah Sdn. Bhd. ("Terang Tanah") and Star Base Sdn. Bhd. ("Star Base") and IJM Properties Sdn. Bhd. ("IJM") entered into a Memorandum of Agreement to jointly develop a parcel of land, measuring approximately 90 acres, held under Pajakan Negeri 7358 Lot 15687, Mukim Ulu Kelang, Daerah Gombak, Selangor Darul Ehsan ("Project Land") registered in the name of Star Base.
Terang Tanah and IJM will enter into a 50:50 joint venture agreement to jointly develop the Project Land with Star Base. Terang Tanah and IJM have paid in equal share a deposit of RM16,000,000 to Star Base, and will pay up to RM80,000,000 for the Project Land in the course of its development; and
(ii) a wholly-owned subsidiary, Expand Factor Sdn. Bhd. ("Expand Factor") entered into an agreement with IJM Properties Sdn. Bhd. ("IJM") to dispose three (3) parcels of land, measuring approximately 43.03 acres, which formed part of a parcel of land held under HS(D) 143296 PT 50610, Mukim Petaling, Daerah Petaling, Selangor Darul Ehsan ("the said Land") for a total consideration of RM33,000,000.
IJM has paid a deposit of RM6,600,000 to Expand Factor, with the balance to be paid upon receipt of the approvals from the Foreign Investment Committee and the State Authority, according to the agreed schedule of payments.
Expand Factor will be entitled to a 30% profit entitlement (based on an agreed formula) from the development of the said Land.
115 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
42. SIGNIFICANT EVENTS (CONTD.)
(f) on 22 April 2005, a subsidiary, Terang Tanah Sdn. Bhd. acquired one ordinary share of RM1.00 representing 50% of the issued and paid-up share capital of Sierra Ukay Sdn. Bhd. for a cash consideration of RM1.00.
(g) on 15 August 2005, a subsidiary, Europlus Corporation Sdn. Bhd., entered into two Sale and Purchase of Shares Agreements to dispose its entire shareholding interest in Perwira Indra Sakti Sdn. Bhd. ("PIS") for a total consideration of RM50,000. With the completion of the disposal, PIS and its subsidiaries ceased to be subsidiaries of the Group.
(h) On 5 May 2005, the Court of Appeal dismissed the Company's appeal against the judgement in favour of the land vendor in relation to a proposed purchase of land as further detailed in Note 15(i). On the same day, the Company filed an application to stay of execution in the Court of Appeal and subsequently further filed to the Federal Court for leave to appeal together with stay of execution against the judgement delivered by the Court of Appeal.
On 8 August 2005, the Court of Appeal granted the order for stay of execution.
On 1 March 2006, the Company's application for leave to appeal in the Federal Court was dismissed by the Federal Court.
(i) on 19 July 2005, the Irredeemable Convertible Unsecured Loan Stocks ("ICULS") 2003/2005 expired and the remaining outstanding ICULS 2003/2005 of RM18,496,550 were converted into ordinary shares of RM1.00 each on the basis of RM1.00 nominal value of ICULS 2003/2005 for every one (1) new ordinary share in accordance with the terms of the Trust Deed.
(j) on 29 September 2005, a subsidiary, Larut Management Services Sdn. Bhd. acquired two ordinary shares of RM1.00 each representing the entire issued and paid-up share capital of Izin Saga Sdn Bhd for a cash consideration of RM2.00.
(k) on 21 October 2005, a subsidiary, Master Waves Sdn. Bhd. subscribed for additional 1,000,000 ordinary shares of RM1.00 each in Mudi Angkasa Development Sdn Bhd.
(l) on 10 November 2005, a subsidiary, Europlus Corporation Sdn. Bhd. entered into Sale and Purchase of Shares Agreements to dispose its entire shareholding interest in Tenaga Gagah Sdn. Bhd. ("TGSB") for a total consideration of RM50,000. With the completion of the transaction, TGSB ceased to be a subsidiary of the Group.
(m) on 30 December 2005, two subsidiaries, Abra Development Sdn. Bhd. and Maxisegar Sdn. Bhd. entered into Sale and Purchase of Shares Agreements to dispose its entire shareholding interests in Melombong & Perumahan Sdn. Bhd. (“MPSB”) for a total consideration of RM50,000. With the completion of the transaction, MPSB ceased to be a subsidiary of the Group.
116 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
43. SUBSEQUENT EVENTS
Subsequent to the financial year,
(a) on 8 February 2006, a subsidiary, Europlus Corporation Sdn. Bhd. acquired a total of 25,000 ordinary shares of RM1.00 representing the entire issued and paid-up share capital of Mutual Prosperous Sdn Bhd ("MPSB") for a cash consideration of RM2. MPSB has two wholly-owned subsidiaries, Zhinmun Sdn. Bhd. and Untung Utama Sdn. Bhd..
(b) on 28 March 2006, the Kuala Lumpur High Court granted a Restraining Order ("RO") pursuant to Section 176 of the Companies Act, 1965 to Maxisegar Sdn. Bhd..
The RO is valid for 90 days and effective from 28 March 2006 to facilitate the convening of creditors meeting concerning the implementation of a proposed debt restructuring scheme.
On 1 June 2006, the Kuala Lumpur High Court granted an extension to the RO for a period of 180 days effective from 27 June 2006 to 27 December 2006.
(c) on 7 April 2006, a subsidiary, Mutual Prosperous Sdn. Bhd. acquired two ordinary shares of RM1.00 representing the entire issued and paid-up share capital of Envy Vista Sdn. Bhd. for a cash consideration of RM2.
(d) on 7 April 2006, the Company and it subsidiaries entered into conditional subscription agreements ("Subscription Agreements") with Parkfair Development Sdn. Bhd. ("Parkfair") whereby the Company's subsidiaries, Envy Vista Sdn. Bhd., Untung Utama Sdn. Bhd. and Zhinmun Sdn. Bhd. ("the Subsidiary Companies") proposing to raise additional working capital by enlarging their share capitals.
The Subsidiary Companies have invited Parkfair and their existing shareholder, Mutual Prosperous Sdn. Bhd. ("Mutual Prosperous") to subscribe for new ordinary shares in their respective shareholding in the Subsidiary Companies.
The Subscription Agreements are conditional upon the conditions precedent set out in the Subscription Agreements being fulfilled within 6 months from the date of the Subscription Agreements or such other period mutually agreed by the parties. Upon completion of the Subscription Agreements, the Subsidiary Companies will cease to be subsidiaries of the Group.
On 14 July 2006, the Subscription Agreements have been terminated, rescinded and revoked vide the Deeds of Mutual Termination and all rights and obligations of the parties have lapsed and have no further effect.
(e) on 19 April 2006, the Irredeemable Convertible Unsecured Loan Stocks ("ICULS") 2003/2006 expired and the remaining outstanding ICULS 2003/2006 of RM684,640 have been converted into fully paid ordinary shares of RM1.00 each of the Company on the basis of RM1.00 nominal value of ICULS 2003/2006 for every one (1) new ordinary share in accordance with the terms of the Trust Deed.
(f) on 16 June 2006, the Company entered into Sale and Purchase of Shares Agreement to dispose of 54 ordinary shares of RM1.00 each and 427,000 5% cumulative redeemable preference shares of RM1.00 each representing 51% of the entire issued and paid-up share capital of Master Waves Sdn. Bhd. ("Master Waves") for a total consideration of RM10,200. With the completion of the transaction, Master Waves and its subsidiary ceased to be subsidiaries of the Group.
117 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
43. SUBSEQUENT EVENTS (CONTD.)
(g) on 28 June 2006, a subsidiary of the Company, Larut Overseas Ventures Sdn. Bhd. entered into Sale and Purchase of Shares Agreements to dispose its entire shareholding interest in Birchwood Enterprises Limited ("Birchwood") for a total consideration of HK2.00. With the completion of the transaction, Birchwood ceased to be a subsidiary of the Group.
(h) The Company entered into an arrangement with various trade creditors for assignment of debts amounting to RM41.3 million to KEURO Leasing Sdn. Bhd., pending finalisation of the respective deeds of assignment.
Had the assignment been finalised and executed, the amount due to KEB Group will increase by the above said amount.
44. SIGNIFICANT RELATED PARTY TRANSACTIONS
Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000
Construction costs incurred with the following companies: - Project 33 Construction Sdn. Bhd. – 12,203 – – - Agrocon (M) Sdn. Bhd. 12,949 16,721 – – - KEB Group. 69,072 131,826 – –
A financing facility obtained from Pengurusan Projek Bersistem Sdn. Bhd. 19,999 15,000 – –
Rental income received and receivable from the following companies: - Agrocon (M) Sdn. Bhd. 32 106 – –
Rental paid and payable to the following companies: - Agrocon (M) Sdn. Bhd. – 118 – –
Interest income received and receivable from the following companies: - Pengurusan Projek Bersistem Sdn. Bhd. – 385 – – - Perkhidmatan Sanjung (M) Sdn. Bhd. – 15 – – - Project 33 Construction Sdn. Bhd. – 77 – –
Interest expense paid and payable to the following company: - Pengurusan Projek Bersistem Sdn. Bhd. 16 – – –
Acquisition of unquoted shares from Bumi Dua Corporation Sdn. Bhd. 12,000 – – –
Gross dividends from subsidiaries – – – 12,000
118 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
44. SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTD.)
The nature of the relationship with the related parties is as follows:
Related Parties Nature of Relationship
Pengurusan Projek Bersistem Sdn. Bhd. (“PPBSB”) - Corporate shareholder - Tan Sri Dato’ (Dr.) Ir. Chan Ah Chye @ Chan Chong Yoon (“TSDCAC”), a director and substantial shareholder of the Company, has substantial financial interest in PPBSB.
Perkhidmatan Sanjung (M) Sdn. Bhd. (“PSMSB”) - TSDCAC has substantial financial interest in PSMSB through PPBSB.
Project 33 Construction Sdn. Bhd. (“P33”) - Chee Soo Meng and Wong Chiew Peng, major shareholders of a subsidiary of the Group are also directors and major shareholders of P33. Chee Soo Meng is also a director of a subsidiary of the Group. Chee Soo Meng resigned as director on 4 August 2003. Chee Soo Meng and Wong Chiew Peng also ceased to be the shareholders of a subsidiary of the Group on 8 July 2004.
Agrocon (M) Sdn. Bhd. (“AMSB”) - The sister of TSDCAC, a director and substantial shareholder of AMSB, has substantial financial interest in AMSB.
Kumpulan Europlus Berhad and its subsidiaries - Kumpulan Europlus Berhad is a corporate (“KEB Group”) shareholder.
- TSDCAC, a director and substantial shareholder of the Company has substantial financial interest in KEB Group.
Bumi Dua Corporation Sdn. Bhd. (“BDCSB”) - TSDCAC and Puan Sri Datin Thong Nyok Choo, the spouse of TSDCAC, holds 100% equity interest in Sze Choon Holdings Sdn Bhd which wholly owns BDCSB.
The directors are of the opinion that all the transactions above have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties.
119 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
45. COMPARATIVE FIGURES AND PRIOR YEAR ADJUSTMENTS
(a) Prior years adjustments (“PYAs”)
(i) In previous financial years, withdrawals of deposit with a licensed discount house, which are restricted to finance the construction of certain property development project of a subsidiary were erroneously credited to receivables accounts. The effects of correction of the fundamental error are as disclosed in Note 45(b).
(ii) The following transactions were omitted from the financial statements of the Group in prior years:
(a) Financial assistance amounting to RM21,300,000 obtained from a company of which a director of the Company has interest for the procurement of properties development projects in China;
(b) Payment amounting to RM8,000,000 to a foreign procurer for the procurement of property development projects in China;
(c) Financial assistance amounting to RM18,300,000 obtained from third parties for the procurement of property development projects in Malaysia;
(d) Payment amounting to RM28,000,000 for procurement of the rights over a property development project in Malaysia; and
(e) Obligation amounting to RM10,500,000 pursuant to a cost sharing agreement between MSSB and its subsidiary and companies which are related to certain key management personnel of fellow subsidiaries.
The effects of correction of the fundamental errors are as disclosed in Notes 45(a)(iii) and 45(b).
(iii) The effects of the correction of fundamental errors as elaborated in Note 45(a)(ii) retrospectively on the retained profits are as follows:
RM’000 Group As previously stated 296,059 Effect of adjustment as elaborated in Note 45(a)(ii) (9,959)
As restated 286,100
120 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
45. COMPARATIVE FIGURES AND PRIOR YEAR ADJUSTMENTS (CONTD.)
(b) Changes in comparatives
As previously PYA Restated stated Note 45(a)(i) Note 45(a)(ii) after PYA Reclassification As restated Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Assets Cash and bank balances 202,615 (90,000) – 112,615 – 112,615 Other receivables 196,713 78,074 (78,074) 196,713 – 196,713 Trade receivables 80,516 11,926 (11,926) 80,516 – 80,516 Other payables (535,306) – 23,241 (512,065) – (512,065) Property development costs 1,907,323 – 56,800 1,964,123 – 1,964,123
Retained earnings 296,059 – (9,959) 286,100 – 286,100
The following comparative amounts as at 31 January 2005 have been reclassified to conform with current year's presentation.
Liabilities Short term borrowings 333,450 – – 333,450 (7,500) 325,950 Long term borrowings 540,864 – – 540,864 7,500 548,364
Income statement Revenue 1,002,052 – – 1,002,052 3,980 1,006,032 Other operating income 40,168 – – 40,168 (3,980) 36,188
Company
Assets
Due from subsidiaries 520,616 – – 520,616 (81,596) 439,020 Other receivables 12,731 – – 12,731 81,596 94,327
121 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
46. FINANCIAL INSTRUMENTS
(a) Financial Risk Management Objectives and Policies
The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Company’s business whilst managing its interest rate, market, credit, liquidity and cash flow risks. The Company operates within clearly defined guidelines that are approved by the Board and the Company’s policy is not to engage in speculative transactions.
(b) Currency Risk
The Group operates internationally and is exposed to foreign currency transactions in Chinese Renminbi, Singapore Dollars and Hong Kong Dollars. The Group’s policy is to minimise the exposure of overseas operating subsidiaries to transaction risk by matching local currency income with local currency costs.
The net unhedged financial liabilities of the Group that are not denominated in their functional currencies are as follows:
RM’000
At 31 January 2006
Short term borrowings 10,045
At 31 January 2005
Short term borrowings 10,944
(c) Interest Rate Risk
The Group’s policy is to borrow principally on a floating rate basis but retain a proportion of fixed rate debt. The objectives for the mix between fixed and floating rate borrowings are set to reduce the impact of an upward change in interest rates while enabling benefits to be enjoyed if interest rates fall.
(d) Credit Risk
Credit risks are minimised and monitored via strictly limiting the Group’s associations to business partners with high creditworthiness. Trade receivables mainly arises from development properties projects and are supported by end-financiers.
(e) Liquidity Risk
During the year, the Group and the Company have not met their obligations in certain loan repayments and interest payments and have breached the borrowing facilities agreements as disclosed in Note 18. The Group and the Company are undertaking a debt restructuring exercise as disclosed in Note 41 to mitigate the liquidity risk.
122 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
46. FINANCIAL INSTRUMENTS (CONTD.)
(f) Fair Values
The carrying amounts of the financial assets and financial liabilities approximate their fair values due to the relatively short term maturities except for the followings:
Group Company Carrying Carrying Amount Fair Value Amount Fair Value Note RM’000 RM’000 RM’000 RM’000
At 31 January 2006
Financial Assets Other investment 8 76,332 * – –
Financial Liabilities Hire purchase and lease payables 19 1,557 1,303 71 66 ICULS 26 685 685 685 685 Other long term payables: 28 - Obligation arising from acquisition of land – δ – – - Amount payable for acquisition of land 53,400 δ – – - Amount payable for acquisition of building 13,434 δ – – - Loan from a minority shareholder of a subsidiary 10,434 ** – -
At 31 January 2005
Financial Assets Other investment 8 76,332 * – –
Financial Liabilities Hire purchase and lease payables 19 1,892 1,733 131 122 Term and bridging loans 18 166,144 227,993 3,381 3,131 Revolving credit 18 10,500 10,270 – – ICULS 26 19,181 19,136 19,181 19,136 Other long term payables: 28 - Obligation arising from acquisition of land 191,531 δ – – - Amount payable for acquisition of land 83,465 δ – – - Amount payable for acquisition of building 13,246 δ – – - Loan from a minority shareholder of a subsidiary 13,770 ** – –
123 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
46. FINANCIAL INSTRUMENTS (CONTD.)
(f) Fair Values (Contd.)
* It is not practical to estimate the fair values of the unquoted other investment because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs.
** It is not practical to estimate the fair values of loan from a minority shareholder of a subsidiary due principally to a lack of fixed repayment term entered into by the parties involved and without incurring excessive costs.
δ It is not practical to estimate the fair values of obligation arising from acquisition of land, amount payable for acquisition of land and amount payable for acquisition of building due principally to a lack of fixed payment terms (as terms of payment is subject to the timing of fulfilment of condition precedence) entered into by the parties involved and without incurring excessive costs.
€ It is not practical to estimate the fair values of amounts due from/to related companies due principally to a lack of fixed repayment terms entered into by the parties involved and without incurring excessive costs. The directors are of the opinion that the carrying amounts recorded at the balance sheet date does not differ significantly from the values that would eventually be received or settled.
∆ It is not practicable to estimate the fair value of contingent liabilities reliably due to the uncertainties of timing, costs and eventual outcome.
The following methods and assumptions are used to estimate the fair values of the following classes of financial instruments:
(i) Cash and cash equivalents, Trade and Other Receivables/Payables
The carrying amounts approximate fair values due to the relatively short term maturity of these financial instruments.
(ii) Borrowings
The fair value of borrowings is estimated by discounting the expected future cash flows using the current interest rates for liabilities with similar risk profiles.
124 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
47. SEGMENTAL INFORMATION
(a) Analysis by business segments
At 31 January 2006
Property Total Investment and Hotel & Before Development Education Recreation Elimination Elimination Consolidated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Revenue External sales 580,651 – 19,163 599,814 – 599,814 Inter-segment sales – – – – – –
Total revenue 580,651 – 19,163 599,814 – 599,814
Result (Loss)/profit before interest and tax (749,362) (1,424) 2,018 (748,768) – (748,768) Interest income 3,628 – – 3,628 – 3,628 Interest expenses (31,884) – (3,266) (35,150) – (35,150)
Segment result (777,618) (1,424) (1,248) (780,290) – (780,290) Taxation 8,367
Loss after taxation (771,923)
Other Information Segment assets 3,075,739 50 159,160 3,234,949 (91) 3,234,858 Unallocated corporate assets –
Consolidated total assets 3,234,858
Segment liabilities 2,568,301 13,042 145,756 2,727,099 (28,814) 2,698,285 Unallocated corporate liabilities 193,236
Consolidated total liabilities 2,891,521
Capital expenditure 376 – 624 1,000 – 1,000 Depreciation 4,506 – 3,193 7,699 – 7,699 Non-cash expenses other than depreciation 410,247 2,335 33 412,615 – 412,615
125 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
47. SEGMENTAL INFORMATION (CONTD.)
(a) Analysis by business segments (Contd.)
At 31 January 2005
Property Total Investment and Hotel & Before Development Credit Trading Education Recreation Elimination Elimination Consolidated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Revenue External sales 914,717 4,760 65,797 701 20,057 1,006,032 – 1,006,032 Inter-segment sales 33,582 1,302 16,147 1,054 – 52,085 (52,085) –
Total revenue 948,299 6,062 81,944 1,755 20,057 1,058,117 (52,085) 1,006,032
Result Profit/(loss) before interest and tax 100,002 671 5,519 (2,083) 2,006 106,115 39,119 145,234 Interest income 9,458 – 51 4 – 9,513 (1,009) 8,504 Interest expenses (18,978) – (2,414) (322) (3,253) (24,967) 1,975 (22,992)
Segment result 90,482 671 3,156 (2,401) (1,247) 90,661 40,085 130,746 Taxation (47,101)
Profit after taxation 83,645
Other Information Segment assets 3,722,754 – – 36,561 160,563 3,919,878 – 3,919,878 Unallocated corporate assets 5,939
Consolidated total assets 3,925,817
Segment liabilities 2,509,725 – – 6,713 108,788 2,625,226 – 2,625,226 Unallocated corporate liabilities 226,401
Consolidated total liabilities 2,851,627
Capital expenditure 6,826 3 205 84 2,718 9,836 – 9,836 Depreciation 5,420 15 832 855 2,794 9,916 – 9,916 Non-cash expenses other than depreciation 57,731 3 – 69 387 58,190 – 58,190
126 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
47. SEGMENTAL INFORMATION (CONTD.)
(b) Analysis by geographical segments
The People’s Republic of Malaysia China Total RM’000 RM’000 RM’000
Sales Revenue At 31 January 2006 580,651 19,163 599,814
At 31 January 2005 985,975 20,057 1,006,032
Carrying Amount of Segment Assets At 31 January 2006 3,075,698 159,160 3,234,858
At 31 January 2005 3,686,646 239,171 3,925,817
Additions to Property, Plant and Equipment At 31 January 2006 376 624 1,000
At 31 January 2005 7,118 2,718 9,836
The directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from that obtainable in transactions with unrelated parties.
48. EMPLOYEES’ SHARE OPTION SCHEME
The Talam Corporation Berhad Employees’ Share Option Scheme (“ESOS”) was approved by the shareholders at the Extraordinary General Meeting on 10 October 2000. The main features of the ESOS are as follows:
(a) Eligible persons are the employees of the Company and its non-listed subsidiaries (including full time executive directors) who have been confirmed in the employment and have served at least twelve (12) months before the date of offer. The eligibility of participation in the ESOS shall be at the discretion of the Option Committee appointed by the Board of Directors.
(b) The aggregate number of shares to be allotted pursuant to the ESOS shall not exceed 10% of the issued share capital of the Company at any point of time during the duration of the ESOS, which shall be in force for a period of five years from 11 May 2001 to 10 May 2006.
(c) No option shall be granted for less than 1,000 shares nor more than 500,000 shares to any eligible employee.
127 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
48. EMPLOYEES’ SHARE OPTION SCHEME (CONTD.)
(d) The Option Price for each ordinary share shall be based on the average of the mean market quotation of the shares of the Company as shown in the Daily Official List issued by Bursa Malaysia for the five (5) market days immediately preceding the respective date of offer less 10% or at par value of the shares of the Company, whichever is the higher.
(e) The new shares to be allotted upon any exercise of the option shall rank pari passu in all respects with the existing shares of the Company except that the shares so issued will not rank for any dividend or other distributions declared, made or paid to the shareholders prior to the allotment of the shares pursuant to the exercise of the option.
As at the balance sheet date, no option has been offered to eligible employees.
49. WARRANTS 2000/2005
The Warrants 2000/2005 are constituted by a Deed Poll dated 31 October 2000 and a supplemental Deed Poll dated 11 July 2003 executed by the Company. The warrants were listed on Bursa Malaysia on 13 March 2001. On 21 November 2003, an additional 7,983,512 Warrants 2000/2005 were listed on the Main Board of Bursa Malaysia due to the adjustments made to the number of Warrants pursuant to the Talam Non-Property Distribution. The main features of the Warrants 2000/2005 are as follows:
(a) Each warrant will entitle its registered holder during the exercise period to subscribe for one (1) new ordinary share at the exercise price, subject to adjustment in accordance with the provision of the Deed Poll.
(b) The exercise price of each warrant has been fixed at RM1.00, which is a premium of 7.53% over the volume weighted average market price of the Company shares for five (5) trading days prior to the price-fixing date on 9 October 2000 of RM0.93 subject to adjustments under certain circumstances in accordance with the provision of the Deed Poll.
(c) The warrants may be exercised at any time on or before the date of falling five (5) years from the date of issue of the rights to allotment of warrants of 9 November 2000. Warrants not exercised during the exercise period will thereafter lapse and cease to be valid.
(d) The new ordinary shares of RM1.00 each to be issued pursuant to the exercise of the warrants will rank pari passu in all respects with the then existing issued ordinary shares of the Company except that they shall not be entitled to any dividends, rights, allotments and/or other distributions, the record date of which is on or before the date of allotment and issue of the new Company shares pursuant to the exercise of the warrants.
For the purpose hereof, record date means the date as at the close of business on which the shareholders must be registered as members of the Company in order to participate in any dividends, rights, allotments or any other distributions.
Unexercised Warrants 2000/2005 2006 2005 ’000 ’000
As at 1 February 2005/2004 61,994 61,994 Unexercised Warrants 2000/2005 expired and lapsed on 9 November 2005 (61,994) –
Unexercised Warrants 2000/2005 as at date of report – 61,994
128 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
50. 5-YEAR 5% IRREDEEMABLE CONVERTIBLE PREFERENCE SHARES
The main features of the 5-Year 5% Irredeemable Convertible Preference Shares of RM0.10 ("ICPS") each are as follows:
(a) The ICPS shall mature upon the expiry of the five year period from the date of issue.
(b) The ICPS will not be redeemable for cash. All outstanding ICPS will be converted into new ordinary shares on the Maturity Date.
(c) The ICPS may be converted into new ordinary shares, at the holder's option, at the Conversion Price during the tenure of the ICPS. Upon maturity, any ICPS not converted shall automatically be converted into new ordinary shares at the Conversion Price of RM1.00 per Talam share.
(d) Dividends payable to holder of ICPS shall rank in priority to all dividends payable to holders of RCPS and shareholders. In the event of the winding up or liquidation of the Company, the ICPS shall rank ahead of ordinary shares but shall rank pari passu in all respects with the RCPS.
(e) The new ordinary shares to be issued pursuant to the conversion of the ICPS shall, upon allotment and issue, rank pari passu in all respects with the ordinary shares then in issue except that they shall not be entitled to any dividends, rights, allotments and/or other distributions the entitlement date of which precedes the date of allotment of the new ordinary shares.
51. DETAILS OF SUBSIDIARIES
Effective interest Name of Company 2006 2005 Principal activities %%
Incorporated in Malaysia
@ Abra Development Sdn. Bhd. 100 88 Property development and investment holding
@ Alam Johan Sdn. Bhd. 99.99 99.99 Property development and investment holding
^ Ample Zone Berhad 99.99 99.99 Investment holding and provision of asset management services
* Beautiful Peninsular Sdn. Bhd. 69.99 69.99 Property development
* Biltradex Sdn. Bhd. 99.99 99.99 Property development and investment
α Bukit Beruntung Golf & – 99.99 Dormant Academy Sdn. Bhd.
α Bukit Beruntung Golf & – 99.99 Golf resort, club management and Country Club Sdn. Bhd. investment holding
* Bukit Beruntung Nurseries 99.99 99.99 Horticulturists, agriculturists and Sdn. Bhd. landscaping designers and contractors
129 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
51. DETAILS OF SUBSIDIARIES (CONTD.)
Effective interest Name of Company 2006 2005 Principal activities %%
Incorporated in Malaysia
^ Capital Advance Corporation 99.99 99.99 Investment holding Sdn. Bhd.
@ Cekap Mesra Development 50.01 50.01 Property development Sdn. Bhd.
* Classic Fortune Sdn. Bhd. 99.99 99.99 Property development and investment holding
* Daya Kreatif Sdn. Bhd. 99.99 99.99 Property development and investment holding
α Eminent Sun Sdn. Bhd. – 99.99 Dormant
* Era-Casa Sdn. Bhd. 100 100 Investment holding
ψ@ Europlus Berhad 99.99 99.99 Property development and investment holding
^ Europlus Construction Sdn. Bhd. 99.99 99.99 Housing contractors and property development
@ Europlus Corporation Sdn. Bhd. 99.99 99.99 Property development, investment holding and construction activities
@ Expand Factor Sdn. Bhd. 100 100 Property development and investment holding
α Expand Superior Sdn. Bhd. – 98.99 Dormant
^ Galian Juta Sdn. Bhd. 100 100 Property development and investment
α Gallant Impact Sdn. Bhd. – 62 Investment holding
* Gemapantas Sdn. Bhd. 51 51 Investment holding
* G.L. Development Sdn. Bhd. 100 100 Property investment and development
α Hexacity Sdn. Bhd. – 100 Dormant
* Ideal Synergy Sdn. Bhd. 100 100 Property investment, management and property development
^ Inti Johan Sdn. Bhd. 100 100 Property investment
ϕ Izin Saga Sdn. Bhd. 99.99 – Dormant
* Juara Tiasa Sdn. Bhd. 100 100 Property investment
130 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
51. DETAILS OF SUBSIDIARIES (CONTD.)
Effective interest Name of Company 2006 2005 Principal activities %%
Incorporated in Malaysia
α Kagum Semarak Sdn. Bhd. – 99.99 Dormant
ϕ Kelina Sdn. Bhd. 59.99 59.99 Investment holding
@ Kenshine Corporation Sdn. Bhd. 99.99 99.99 Property development
* Kolej Aman Bhd. 54 54 Provision of higher educational programmes
* Lambang Wira Sdn. Bhd. 99.99 99.99 Investment holding
α Lansuniaga Sdn. Bhd. – 100 Investment holding
* Larut Leisure Enterprise Sdn. Bhd. 99.99 99.99 Investment holding
* Larut Management Services 99.99 99.99 Investment holding Sdn. Bhd.
* Larut Overseas Ventures 99.99 99.99 Investment holding Sdn. Bhd.
^@ L.C.B Management Sdn. Bhd. 100 100 Provision of management services
@ Lestari Puchong Sdn. Bhd. 99.99 99.99 Property development
* Layatama Sdn. Bhd. 100 100 Investment holding
^ Master Waves Sdn. Bhd. 51 51 Investment holding
^ Maxdale (M) Sdn. Bhd. 100 100 Investment holding
^ Maxisegar Construction Sdn. Bhd. 100 100 Property investment and development
* Maxisegar Education Sdn. Bhd. 60 60 Investment holding
* Maxisegar Realty Sdn. Bhd. 100 100 Dormant
@ Maxisegar Sdn. Bhd. 100 100 Property development and investment holding
Melombong & Perumahan – 92.20 Property development Sdn. Bhd.
@ Mudi Angkasa Development 51 51 Property development and investment holding Sdn. Bhd.
131 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
51. DETAILS OF SUBSIDIARIES (CONTD.)
Effective interest Name of Company 2006 2005 Principal activities %%
Incorporated in Malaysia
* New Court Properties Sdn. Bhd. 98.04 98.04 Dormant
^ Noblepace (M) Sdn. Bhd. 100 100 Investment holding
@ Noble Rights Sdn. Bhd. 60 60 Property investment and development
* Pandan Indah Medical 100 100 Property development and investment holding Management Sdn. Bhd.
* Peninsular Properties (M) 99.99 99.99 Property development Sdn. Bhd.
* Peninsular Properties 99.99 99.99 Provision of property management services Management Sdn. Bhd.
* Perwira Indra Sakti 99.99 99.99 Property management Management Services Sdn. Bhd.
Perwira Indra Sakti Sdn. Bhd. – 99.99 Property development and property investment
* P.I.S. Properties Management 99.99 99.99 Property management Services Sdn. Bhd.
Pulau Kembar Sdn. Bhd. – 99.99 Property development
* Regobase Sdn. Bhd. 100 100 Investment holding
* Seaview Plantations Sdn. Bhd. 99.99 99.99 Dormant
@ Sentosa Restu (M) Sdn. Bhd. 99.99 99.99 Property development
^ Starbase Sdn. Bhd. 90 – Property investment
* Talam Beverage Sdn. Bhd. 99.77 99.77 Investment holding
* Talam General Foods Sdn. Bhd. 100 100 Dormant
^@ Talam Industries Sdn. Bhd. 100 100 Property development and investment holding
* Talam Leisure Development 100 100 Property development and investment holding Sdn. Bhd.
* Talam Management Services 100 100 Dormant Sdn. Bhd.
132 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
51. DETAILS OF SUBSIDIARIES (CONTD.)
Effective interest Name of Company 2006 2005 Principal activities %%
Incorporated in Malaysia
* Talam Manufacturing Sdn. Bhd. 100 100 Investment holding and provision of management services
* Talam Medical Centre Sdn. Bhd. 100 100 Dormant
* Talam Plantations Sdn. Bhd. 100 100 Investment holding
^ Talam Properties Sdn. Bhd. 100 100 Property development
* Talam Refrigeration Sdn. Bhd. 99.77 99.77 Investment holding
* Talam Premium Development 100 100 Provision of secretarial and other Sdn. Bhd. management services
* Talam Tractors Sdn. Bhd. 100 100 Dormant
^ TCB Resources Sdn. Bhd. 100 100 Investment holding and provision of management and consultancy services
Tenaga Gagah Sdn. Bhd. – 99.99 Property development
Terang Tanah Sdn. Bhd. 99.99 99.99 Property development
* Trans Liberty Sdn. Bhd. 99.99 99.99 Property development and investment holding
^@ Ukay Land Sdn. Bhd. 99.99 99.99 Property development
* Ulu Yam Golf And Country 60 60 Dormant Club Sdn. Bhd.
@ United Axis Sdn. Bhd. 99.99 99.99 Property development and investment
α Vision Reach Sdn. Bhd. – 100 Investment holding
* Winax Engineering Sdn. Bhd. 100 100 Investment holding
α Wira Profit Sdn. Bhd. – 99.99 Dormant
* Zillion Development Sdn. Bhd. 100 100 Property investment and development
α 888 Linear Production Sdn. Bhd. – 98.99 Dormant
133 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
51. DETAILS OF SUBSIDIARIES (CONTD.)
Effective interest Name of Company 2006 2005 Principal activities %%
Incorporated in Hong Kong
* Agriresources International 64.99 64.99 Dormant (HK) Limited
#* Birchwood Enterprises 99.99 99.99 Investment holding Limited
* HPC Development (HK) 99.99 99.99 Investment holding Limited
^#* Larut Consolidated (HK) 99.99 99.99 Investment holding Limited
^#* Larut Leisure Enterprise 99.99 99.99 Investment holding (Hong Kong) Limited
* Larut Talam International 99.88 99.88 Dormant Management Services Limited
^* Malim Enterprise (HK) Limited 100 100 Investment holding
^* Noble House Investments 100 100 Investment holding Limited
^* Parkgrove Limited 100 100 Investment holding
* PPB Investment (HK) Limited 99.99 99.99 Dormant
^* Talam Corporation (HK) Limited 100 100 Investment holding
^* Talam Resources (HK) Limited 100 100 Investment holding
134 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
51. DETAILS OF SUBSIDIARIES (CONTD.)
Effective interest Name of Company 2006 2005 Principal activities %%
Incorporated in Singapore
* Crystal Ace Pte. Ltd. 100 100 Dormant
Incorporated in The People’s Republic of China
* Jilin Province Maxcourt 85 85 Operating and managing Hotel Limited a hotel
@* Jilin Dingtai Enterprise 59.99 59.99 Property development Development Co. Limited (formerly known as Jilin Larut Enterprise Development Co. Limited)
* Audited by a firm of auditors other than Ernst & Young.
# Certain shares of the companies are held in trust by certain directors for Larut Overseas Ventures Sdn. Bhd.
ψ 5,100 ordinary shares out of the 353,514,870 shares are held by individuals after the merger of Talam Corporation Berhad with Europlus Berhad.
α Company struck off during the year.
ϕ Company submitted for strike off.
^ The auditors' report of the subsidiary contain emphasis of matter as disclosed in Note 52(a)
@ The auditors' report of the subsidiary contain audit qualification as disclosed in Note 52(b)
135 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
52. AUDITORS’ REPORT OF SUBSIDIARIES: AUDIT QUALIFICATIONS
(a) Audit emphasis of matters
(i) Subsidiaries marked "^" in Note 51 contain the following audit emphasis of matter:
Appropriateness of going concern basis of accounting is dependent on continued financial support given by the ultimate holding company, Talam Corporation Berhad.
(ii) Ample Zone Berhad
The ability of the Company to meet its obligation under the Sukuk al-Ijarah is dependent on the timely rental payments by its related companies and a third party.
(b) Audit qualifications
Subsidiaries marked "@" in Note 51 contain the following audit qualification:
(i) Disclaimer
Abra Development Sdn. Bhd. ("Abra"), Cekap Mesra Development Sdn. Bhd. ("CMSB"), Europlus Berhad ("EB"), Europlus Corporation Sdn. Bhd. ("Ecorp"), Expand Factor Sdn. Bhd. ("Expand"), Kenshine Corporation Sdn. Bhd. ("Kenshine"), Lestari Puchong Sdn. Bhd. ("LPSB"), Maxisegar Sdn. Bhd. ("MSSB"), Mudi Angksasa Development Sdn. Bhd. ("Mudi"), Noble Rights Sdn. Bhd. ("Noble Rights"), Sentosa Restu Sdn. Bhd. ("SRSB"). Disclaimer of opinion based on the reasons that the respective subsidiary:
(a) Suffered significant losses during the year.
(b) Was in a capital deficiency position.
(c) Prepared the financial statements under the going concern basis of accounting despite doubt as to the company's ability to operate as a going concern.
(d) Defaulted on the repayment of loans and interests.
(e) Net realisable value of certain development properties and land held for development have not been ascertained as no recent independent professional valuations were conducted. Accordingly, the auditors are unable to ascertain as to whether the carrying amounts of the said development properties are fairly stated.
(f) Review of the estimates of costs attributable to certain property development projects (“project costings”) indicates that the estimated financial outcome of the said property development projects could have been varied if compared to the prior estimates. However, the project costings have not been updated accordingly. As the financial outcome of the said property development projects have not been fully estimated, the auditors are unable to satisfy themselves as to whether the property development costs, revenue from development properties and cost of development properties sold for the year then ended have been stated in accordance with the requirements of FRS 201: Property Development Activities.
136 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
52. AUDITORS’ REPORT OF SUBSIDIARIES: AUDIT QUALIFICATIONS (CONTD.)
(b) Audit qualifications (Contd.)
(i) Disclaimer (Contd.)
(g) Included in trade receivables are amounts due from certain contractors. The management is of the opinion that these receivables are fully recoverable. The auditors are unable to obtain sufficient appropriate audit evidence to satisfy themselves that the said amounts are fully recoverable.
(h) Certain transactions were omitted from the financial statements in the prior years. The auditors are unable to obtain sufficient appropriate audit evidence to satisfy themselves as to the amounts and disclosures made in Notes 45(a)(ii)(a), 45(a)(ii)(b), 45(a)(ii)(c), 45(a)(ii)(d) and 45(a)(iii) to the financial statements.
(i) On 28 March 2006, the Kuala Lumpur High Court granted a Restraining Order pursuant to Section 176 of the Companies Act 1965. The management together with their consultants are currently working on a debt restructuring scheme as elaborated in Note 41 to the financial statements, which is conditional upon the approval of the relevant regulatory authorities. The nature and the outcome of the debt restructuring scheme may result in adjustments being made to certain amounts and classification of assets and liabilities, the final outcome of which is uncertain as at the date of this report. As a result, there are significant uncertainties regarding the future operations, the recoverability of their assets and their ability to repay debts. The financial statements do not include any adjustments that might result from these uncertainties.
(j) Subsidiaries Reasons
Abra (a), (b), (d), (e), (f), (g) CMSB (a), (b), (f), (g) EB (a), (b), (d), (f), (g) Ecorp (a), (b), (d), (f), (g) Expand (a), (b), (c), (f), (g) Kenshine (a), (b), (e), (f), (g) LPSB (a), (b), (c), (d), (f), (g) MSSB (a), (b), (c), (d), (e), (f), (g), (h), (i) Mudi (a), (b), (c), (d), (f) Noble Rights (a), (f), (g) SRSB (a), (b), (c), (f), (g)
(ii) Except for
(a) Jilin Dingtai Enterprise Development Co. Ltd.
The auditors reported that they are unable to verify the completeness of the development costs of a development property amounting to RMB110,080,000 (equivalent to RM50,494,000) as the construction of the said development property is incomplete.
The directors based on the available market information are of the opinion that there is no diminution in the value of the above development properties.
137 ANNUAL REPORT 2006
NOTES TO THE FINANCIAL STATEMENTS (Contd.) 31 JANUARY 2006
52. AUDITORS’ REPORT OF SUBSIDIARIES: AUDIT QUALIFICATIONS (CONTD.)
(b) Audit qualifications (Contd.)
(ii) Except for (Contd.)
(b) Alam Johan Sdn. Bhd., Talam Industries Sdn. Bhd., Ukay Land Sdn. Bhd., and United Axis Sdn. Bhd.
The review of the estimates of costs attributable to certain property development projects (“project costings”) indicates that the estimated financial outcome of the said property development projects could have been varied if compared to the prior estimates. However, the project costings have not been updated accordingly. As the financial outcome of the said property development projects have not been fully estimated, the auditors are unable to satisfy themselves as to whether the property development costs, revenue from development properties and cost of development properties sold for the year then ended have been stated in accordance with the requirements of FRS 201: Property Development Activities.
(c) LCB Management Sdn. Bhd.
The amount due from Venue Venture Sdn. Bhd. ("VVSB") stood at RM65,000,000 as at 31 January 2006. The management has represented to the auditors that the amount due from VVSB is supported by the assets held by VVSB and thus is recoverable. However, as no recent independent professional valuations were conducted on the underlying assets, the auditors are unable to ascertain as to whether the amount due from VVSB is recoverable.
53. DETAILS OF ASSOCIATES
Financial Effective interest Name of Company year end 2006 2005 Principal activities %%
Incorporated in Malaysia
* Beruntung Transport City Sdn. Bhd. 31 January 30.60 30.60 Dormant
* Astaka Tegas Sdn. Bhd. 31 March 50 50 Property development
* Sierra Ukay Sdn. Bhd. 31 March 49.9995 – Property development (formerly known as Acme Pact Sdn. Bhd.)
Incorporated in Cambodia
* Cambodia Resources Import-Export 31 January 49 49 Dormant Company Limited
* Parkgrove (Cambodia) Pte. Ltd. 31 January 49 49 Dormant
* Noble House Investment 31 January 49 49 Dormant (Cambodia) Pte. Ltd.
* Audited by a firm of auditors other than Ernst & Young.
138 ANNUAL REPORT 2006
LIST OF PROPERTIES @ 31 JANUARY 2006
Net book @ Joint Venture Date of Approximate value as at + Registered Land/ Description/ Acquisition/ age of the 31 January # Beneficial Built up Remaining Title proposed Joint Venture/ building 2006 No. Owner area acreage No. development Completion Tenure Expiry (Years) (RM’000) 1 Talam Corporation + 1.635 0 Geran 23384 lot 7073; Taman Setia Land 11.12.1986 Freehold N/A N/A 18,126 Berhad acres Geran 23284 lot 7207; Bungalow lots sold Geran 23285 lot 7208; on piecemeal basis Geran 23286 lot 7209; Geran 23287 lot 7210; Geran 23288 lot 7211; Geran 23369 lot 7410; Geran 23370 lot 7424; Geran 23371 lot 7425; Geran 23372 lot 7426; Geran 23373 lot 7427 Mukim Setapak Daerah Gombak + 993.99 400 H.S.(D) 11254 P.T. 8557; Bukit Sentosa III 29.10.1994 Freehold N/A N/A 258,703 acres acres H.S.(D) 30066 to 30361 - Development of P.T. 15683 to15978; industrial, H.S.(D) 13223 to14812- residential and P.T. 12171 to 13760; commercial development H.S.(D) 33755 to 34750 P.T. 15979 to 16974; H.S.(D) 34751 to 35606 P.T. 16979 to 17834 Mukim Serendah Daerah Hulu Selangor 2 G.L. Development + 0.355 0 Geran 2522 & Geran 2523 Melaka land 9.1.1982 Freehold N/A N/A 185 Sdn Bhd acres Lot 875 & 876 Proposed development Bandar Bukit Baru of 16 units of Daerah Melaka Tengah 3-bedroom apartments 3 Maxisegar + 801 260 H.S.(D) 146408 P.T. 51440; Puncak Jalil 17.1.2001 99 years 2.7.2100 N/A 159,004 Sdn Bhd acres acres H.S.(D) 201972 to 201983 Leasehold P.T. 58673; P.T.58674; P.T. 58490; P.T.58491; P.T. 59170; P.T. 60220; P.T. 60226; P.T. 60227; P.T. 61372; P.T. 62420; P.T. 62355; P.T.62357 Mukim Petaling Daerah Petaling + 110 2 H.S.(D)146805 to 147704 Saujana Damansara 17.1.2001 99 years 16.8.2100 N/A 3,887 acres acres P.T. 42401 to 43300 Leasehold Mukim Sungai Buluh Daerah Petaling + 3,000 1,284.1 H.S.(D) 5746 P.T. 836 Batang Berjuntai 17.1.2001 99 years 21.1.2101 N/A 146,063 acres acres Mukim Ulu Tinggi Leasehold Daerah Kuala Selangor H.S.(D) 5704 P.T. 5616; H.S.(D) 5707 P.T. 5619; H.S.(D) 5709 P.T. 5621; H.S.(D) 5713 P.T. 5625 Mukim Batang Berjuntai Daerah Kuala Selangor
139 ANNUAL REPORT 2006
LIST OF PROPERTIES (Contd.) @ 31 JANUARY 2006
Net book @ Joint Venture Date of Approximate value as at + Registered Land/ Description/ Acquisition/ age of the 31 January # Beneficial Built up Remaining Title proposed Joint Venture/ building 2006 No. Owner area acreage No. development Completion Tenure Expiry (Years) (RM’000)
4 Abra Development # & @ 24.744 0 H.S.(D) 45175 to 45307 Saujana Templer 18.10.2000 99 years 18.7.2093 N/A 1,106 Sdn Bhd acres P.T.66 to 198; Leasehold H.S.(D) 49485 to 49520 P.T. 817 to 852 Pekan Templer Daerah Gombak
# & @ 398.01 3 H.S.(D) 191082 to 191365 Jalil Heights 14.4.2001 99 years 16.3.2096 N/A 3,033 acres acres P.T. 53360 to 56219 Leasehold Mukim Petaling Daerah Petaling
# & @ 9,400 2.16 H.S.(D) 251609 P.T. 20405 Larkin Centre, 30.5.1995 99 years 30.7.2095 N/A 36,907 sq m acres Bandar Johor Bahru Johor Bahru Leasehold Daerah Johor Bahru
5 Talam Industries + 807.81 67 H.S.(D)4334 to 6980 Bukit Sentosa I 20.6.1991 Freehold N/A N/A 38,654 Sdn Bhd acres acres P.T. 4453 to 7099; H.S.(D)11315 to 12694 P.T. 7173 to 8552 Mukim Serendah Daerah Hulu Selangor
6 Noble Rights + 529 58 H.S.(D) 22650 to 22654 Bukit Sentosa II 15.8.1994 Freehold N/A N/A 33,797 Sdn Bhd acres acres P.T. 1089 to 1093; H.S.(D) 22873 to 22888 P.T. 1312 to 1327; H.S.(D) 23411 to 23416 P.T. 1850 to 1855; H.S.(D) 24088 to 24092 P.T. 2484 to 2488 Mukim Serendah Daerah Hulu Selangor
7 Ulu Yam Golf and # 199.7 199.7 H.S.(D) 4103 P.T. 2730 Ulu Yam secondary 26.5.1994 99 years 1.9.2093 N/A 3,175 Country Club acres acres Mukim Ulu Yam forest Leasehold Sdn Bhd Daerah Hulu Selangor Proposed golf course and residential development
140 ANNUAL REPORT 2006
LIST OF PROPERTIES (Contd.) @ 31 JANUARY 2006
Net book @ Joint Venture Date of Approximate value as at + Registered Land/ Description/ Acquisition/ age of the 31 January # Beneficial Built up Remaining Title proposed Joint Venture/ building 2006 No. Owner area acreage No. development Completion Tenure Expiry (Years) (RM’000)
8 Zillion # 763.74 339.74 Geran 39954 lot 2324; Tanjung 12 23.12.1994 Freehold N/A N/A 43,888 Development acres acres Geran 41084 lot 8379; Future development Sdn Bhd Geran 55361 lot 12164; H.S.(D) 5379 P.T. 6341 Mukim Tanjung 12 Daerah Kuala Langat
+ 36.25 36.25 H.S.(D) 5667 P.T. 2699; Tanjung 12 23.12.1994 99 years 14.10.2095 N/A acres acres H.S.(D) 5668 P.T. 2697 Future development Leasehold Mukim Tanjung 12 Daerah Kuala Langat
9 Expand Factor + 423.27 37 H.S.(D) 143294 to143297 Saujana Puchong 12.4.1999 99 years 12.6.2091 N/A 5,115 Sdn Bhd acres acres P.T. 50608 to 50611 Leasehold Mukim Petaling Dearah Petaling
10 Mudi Angkasa + 32.16 7 H.S.(D) 66843 P.T.2924 Bukit Pandan Bistari 26.11.1999 99 years 31.5.2100 N/A 5,678 Development acres acres Bandar Ampang Leasehold Sdn Bhd Daerah Hulu Langat
11 Cekap Mesra # & @ 427.5 50 H.S.(D) 2488 P.T. 6251; Development of 24.6.1998 99 years 19.10.2093 N/A 51,301 Development acres acres H.S.(D) 2490 P.T. 6253; residential and Leasehold Sdn Bhd H.S.(D) 2492 P.T.6255 commercial buildings Mukim Dengkil - Danau Putra Daerah Sepang
12 Talam Leisure # & @ 401.01 401.01 H.S.(D) 4105 P.T. 2732 Ulu Yam land 26.5.1994 99 years 1.9.2093 N/A 25,807 Development acres acres H.S.(D) 4093 P.T. 2720 Proposed development Leasehold Sdn Bhd Mukim Ulu Yam of residential and Daerah Hulu Selangor commercial buildings
13 Galian Juta # & @ 200 120 P.N. 1211 Lot 20407 Proposed development 9.1.2001 99 years 5.2.2094 N/A 58,548 Sdn Bhd acres acres Mukim Tanjung 12 of residential and Leasehold Daerah Kuala Langat commercial buildings - Saujana Putra
14 Talam Properties # 1,494.16 0 P.M. 11566 to 11791 Pandan Indah 2.3.1992 99 years 6.9.2100 N/A 370 Sdn Bhd sq m Lot 44948 to 45174 Commercial Park Leasehold Bandar Ampang Daerah Hulu Langat
141 ANNUAL REPORT 2006
LIST OF PROPERTIES (Contd.) @ 31 JANUARY 2006
Net book @ Joint Venture Date of Approximate value as at + Registered Land/ Description/ Acquisition/ age of the 31 January # Beneficial Built up Remaining Title proposed Joint Venture/ building 2006 No. Owner area acreage No. development Completion Tenure Expiry (Years) (RM’000)
15 Europlus + 29.66 2,500 H.S.(D) 9358 P.T. 8512; Township Development 18.12.1991 Freehold N/A N/A 624,068 Corporation acres acres H.S.(D) 9376 P.T. 8530; - Bukit Beruntung Sdn Bhd H.S.(D) 9395 P.T. 8549; H.S.(D) 9437 P.T. 8591; H.S.(D) 9464 P.T. 8618; H.S.(D) 9763 P.T.8917; H.S.(D) 9764 P.T.8918; H.S.(D) 9765 P.T. 8919; H.S.(D) 10154 P.T. 9308; H.S.(D) 10155 P.T. 9309; H.S.(D) 9762 P.T. 8916; H.S.(D) 9862 P.T. 9016; H.S.(D) 9850 P.T.9006; H.S.(D) 9838 P.T. 8992; H.S.(D) 10345 P.T. 9499; H.S.(D) 9531 P.T. 8685; H.S.(D) 9555 P.T. 8709; H.S.(D) 9714 P.T. 8868; H.S.(D) 9603 P.T. 8757; H.S.(D) 9746 P.T. 8900; H.S.(D) 9671 P.T. 8825; H.S.(D) 9686 P.T. 8840; H.S.(D) 9780 P.T. 8934 H.S.(D) 9812 P.T. 8966; H.S.(D) 9930 P.T. 9084; H.S.(D) 9946 P.T. 9100; H.S.(D) 9991 P.T. 9145; H.S.(D) 10022 P.T. 9176; H.S.(D) 10049 P.T. 9203; H.S.(D) 10091 P.T. 9245; H.S.(D) 10146 P.T. 9300; H.S.(D) 10169 P.T. 9323; H.S.(D) 10194 P.T. 9348; H.S.(D) 10421 P.T. 9575; H.S.(D) 10270 P.T. 9424; H.S.(D) 10220 P.T. 9374; H.S.(D) 10294 P.T.9448; H.S.(D) 10370 P.T. 9524; H.S.(D) 9478 P.T. 8632 Mukim Serendah Daerah Hulu Selangor
142 ANNUAL REPORT 2006
LIST OF PROPERTIES (Contd.) @ 31 JANUARY 2006
Net book @ Joint Venture Date of Approximate value as at + Registered Land/ Description/ Acquisition/ age of the 31 January # Beneficial Built up Remaining Title proposed Joint Venture/ building 2006 No. Owner area acreage No. development Completion Tenure Expiry (Years) (RM’000)
Europlus + 64.90 H.S.(D) 17588 P.T. 102; Township Development 18.12.1991 Freehold N/A N/A Corporation acres H.S.(D) 17635 P.T. 149; - Bukit Beruntung Sdn Bhd H.S.(D) 17963 P.T. 477; H.S.(D) 17965 P.T. 479; H.S.(D) 17966 P.T. 480; H.S.(D) 17967 P.T. 481; H.S.(D) 17968 P.T. 482; H.S.(D) 17969 P.T. 483; H.S.(D) 18043 P.T. 557; H.S.(D) 18059 P.T. 573; H.S.(D) 18248 P.T. 762; H.S.(D) 18249 P.T. 763; H.S.(D) 18250 P.T. 764; H.S.(D) 17961 P.T. 475; H.S.(D) 17962 P.T. 476; H.S.(D) 17964 P.T. 478; H.S.(D) 18247 P.T. 761 Mukim of Serendah Tambahan
+ 5.95 H.S.(D) 8179 P.T. 7101; Township Development 18.12.1991 Freehold N/A N/A acres H.S.(D) 8189 P.T. 7111; - Bukit Beruntung H.S.(D) 8135 P.T. 7157; H.S.(D) 8144 P.T. 7166; H.S.(D) 10553 P.T. 7213; H.S.(D) 10530 P.T. 7230; H.S.(D) 10571 P.T. 7231; H.S.(D) 10573 P.T. 7233; H.S.(D) 10574 P.T. 7234; H.S.(D) 10618 P.T. 7278; H.S.(D) 10673 P.T. 7333; H.S.(D) 10691 P.T. 7352; H.S.(D) 8349 P.T. 7502; H.S.(D) 8370 P.T. 7523; H.S.(D) 8544 P.T. 7697; H.S.(D) 8854 P.T. 8007; H.S.(D) 9050 P.T. 8203; H.S.(D) 9254 P.T. 8407; H.S.(D) 9287 P.T. 8440; H.S.(D) 9329 P.T. 8483; H.S.(D) 9330 P.T. 8484; H.S.(D) 10447 P.T. 9601 Mukim of Serendah
143 ANNUAL REPORT 2006
LIST OF PROPERTIES (Contd.) @ 31 JANUARY 2006
Net book @ Joint Venture Date of Approximate value as at + Registered Land/ Description/ Acquisition/ age of the 31 January # Beneficial Built up Remaining Title proposed Joint Venture/ building 2006 No. Owner area acreage No. development Completion Tenure Expiry (Years) (RM’000)
Europlus + 525.60 H.S.(D) 31307 P.T. 61; Township Development 18.12.1991 Freehold N/A N/A Corporation acres H.S.(D) 31328 P.T. 82; - Bukit Beruntung Sdn Bhd H.S.(D) 31690 P.T. 5148; H.S.(D) 31274 P.T. 5327; H.S.(D) 31496 P.T. 5328 to H.S.(D) 31565 P.T. 5397; H.S.(D) 31640 P.T. 5453; H.S.(D) 31641 P.T. 5458; H.S.(D) 31727 P.T. 5571; H.S.(D) 31581 P.T. 5630; H.S.(D) 31582 P.T. 5673; H.S.(D) 31584 P.T. 5675; H.S.(D) 31355 P.T. 5676; H.S.(D) 31495 P.T. 5816; H.S.(D) 31728 P.T. 5913; H.S.(D) 31801 P.T. 5986; H.S.(D) 33733 P.T. 5987 to H.S.(D) 33754 P.T. 6049; H.S.(D) 7581 P.T. 2499 to H.S.(D) 7602 P.T. 2520; H.S.(D) 7573 P.T. 2491 to H.S.(D) 7579 P.T. 2497 Mukim of Serendah
+ 1,322.42 Lot 1995 CT 11502 & Lot Township Development 18.12.1991 Freehold N/A N/A acres 2018 Grant 12274 - Bukit Beruntung Mukim of Serendah Lot 2006 Grant 40124; Lot 2067 P.N. 5282; Lot 3243 H.S.(D) 8160 Mukim of Hulu Yam
+ 192.40 Lot 15070 G. 45084; Township Development 18.12.1991 Freehold N/A N/A acres Lot 15071 G. 45083; - Bukit Beruntung H.S.(D) 18256 P.T. 770; H.S.(D) 18257 P.T. 771
+ 399.89 Lot 15207 G. 54344; Township Development 18.12.1991 Freehold N/A N/A acres Lot 15754 G. 54346; - Bukit Beruntung Lot 15753 G. 54345; H.S.(D) 30363 P.T. 3917; H.S.(D) 30364 P.T. 3918
144 ANNUAL REPORT 2006
LIST OF PROPERTIES (Contd.) @ 31 JANUARY 2006
Net book @ Joint Venture Date of Approximate value as at + Registered Land/ Description/ Acquisition/ age of the 31 January # Beneficial Built up Remaining Title proposed Joint Venture/ building 2006 No. Owner area acreage No. development Completion Tenure Expiry (Years) (RM’000)
Europlus + 70 H.S.(D) 26076 P.T. 6161; Township Development 18.12.1991 Freehold N/A N/A Corporation acres H.S.(D) 26231 P.T. 6316; - Bukit Beruntung Sdn Bhd H.S.(D) 26326 P.T. 6411; H.S.(D) 26327 P.T. 6412; H.S.(D) 26537 P.T. 6622; H.S.(D) 26669 P.T. 6754; H.S.(D) 26670 P.T. 6755; H.S.(D) 26739 P.T. 6824; H.S.(D) 26859 P.T. 6944; H.S.(D) 27095 P.T. 7180; H.S.(D) 27429 P.T. 7514 to H.S.(D) 27434 P.T. 7519; H.S.(D) 27445 P.T. 7530; H.S.(D) 27483 P.T. 7560 to H.S.(D) 27475 P.T. 7568
+ 7 H.S.(D) 26272 P.T. 6357 to Township Development 18.12.1991 Freehold N/A N/A acres H.S.(D) 26273 P.T. 6358; - Bukit Beruntung H.S.(D) 26289 P.T. 6374; H.S.(D) 26291 P.T. 6376 to H.S.(D) 26293 P.T. 6378; H.S.(D) 26295 P.T. 6380 to H.S.(D) 26296 P.T. 6381; H.S.(D) 26299 P.T. 6384 to H.S.(D) 26302 P.T. 6387; H.S.(D) 26311 P.T. 6396 to H.S.(D) 26314 P.T. 6399; H.S.(D) 26320 P.T. 6405 to H.S.(D) 26323 P.T. 6408; H.S.(D) 26325 P.T. 6410; H.S.(D) 26328 P.T. 6413 to H.S.(D) 26464 P.T. 6549; H.S.(D) 26671 P.T. 6756 to H.S.(D) 26683 P.T. 6768; H.S.(D) 26689 P.T. 6774 to H.S.(D) 26738 P.T. 6823; H.S.(D) 26867 P.T. 6952; H.S.(D) 26884 P.T. 6969; H.S.(D) 26897 P.T. 6982; H.S.(D) 26943 P.T. 7028 to H.S.(D) 26999 P.T. 7084; H.S.(D) 27001 P.T. 7086; H.S.(D) 27004 P.T. 7089 to H.S.(D) 27008 P.T. 7093; H.S.(D) 27010 P.T. 7095;
145 ANNUAL REPORT 2006
LIST OF PROPERTIES (Contd.) @ 31 JANUARY 2006
Net book @ Joint Venture Date of Approximate value as at + Registered Land/ Description/ Acquisition/ age of the 31 January # Beneficial Built up Remaining Title proposed Joint Venture/ building 2006 No. Owner area acreage No. development Completion Tenure Expiry (Years) (RM’000)
H.S.(D) 27013 P.T. 7098; H.S.(D) 27016 P.T. 7101 to H.S.(D) 27017 P.T. 7102; H.S.(D) 27021 P.T. 7106 to H.S.(D) 27022 P.T. 7107; H.S.(D) 27024 P.T. 7109; H.S.(D) 27027 P.T. 7112; H.S.(D) 27029 P.T. 7114; H.S.(D) 27035 P.T. 7120; H.S.(D) 27040 P.T. 7125; H.S.(D) 27042 P.T. 7127; H.S.(D) 27047 P.T. 7132; H.S.(D) 27051 P.T. 7136; H.S.(D) 27074 P.T. 7159; H.S.(D) 27238 P.T. 7223; H.S.(D) 27110 P.T. 7295; H.S.(D) 27119 P.T. 7304
16 Europlus Berhad + 50.71 35 H.S.(D) 33034 P.T. 4912; Township Development 14.5.1996 Freehold N/A N/A 243,821 acres acres H.S.(D) 33213 P.T. 5094; - Prima Beruntung H.S.(D) 33231 P.T. 5112; H.S.(D) 33232 P.T. 5113; H.S.(D) 33233 P.T. 10034; H.S.(D) 33605 P.T. 10407; H.S.(D) 33709 P.T. 10511
17 Ukay Land + 345.0 40 H.S.(M)12050 to 12459 Township Development 17.1.1989 99 years 20.9.2100 N/A 45,785 Sdn Bhd acres acres P.T. 37 to 443; - Ukay Perdana Leasehold Bandar Ulu Kelang Daerah Gombak
18 Star Base + 90.55 90.55 P.N. 7358 Lot 15687 Development of 18.3.1991 99 years 28.12.2096 N/A 27,296 Sdn Bhd acres acres Mukim Ulu Kelang medium cost residential Leasehold Daerah Gombak and commercial units - Sierra Ukay
19 Sentosa Restu (M) + 45.25 10 H.S.(D) 137566 P.T. 440 Mix development of 3.9.1997 99 years 8.6.2099 N/A 39,104 Sdn Bhd acres acres Pekan Puchong Jaya residential, commercial Leasehold Daerah Petaling and corporate park - Kinrara 3
20 Lestari Puchong + 496.731 80 H.S.(D) 142201 to 142202 Mix development of 24.7.2000 99 years 12.6.2091 N/A 109,617 Sdn Bhd acres acres P.T. 50602 to 50603 residential, commercial Leasehold Mukim Petaling and corporate park Daerah Petaling - Lestari Puchong
146 ANNUAL REPORT 2006
LIST OF PROPERTIES (Contd.) @ 31 JANUARY 2006
Net book @ Joint Venture Date of Approximate value as at + Registered Land/ Description/ Acquisition/ age of the 31 January # Beneficial Built up Remaining Title proposed Joint Venture/ building 2006 No. Owner area acreage No. development Completion Tenure Expiry (Years) (RM’000)
21 Jilin Dingtai # 6,665 1.5 No. 19, Xian Road Development of 9.8.1994 50 years 24.2.2043 N/A 56,586 Enterprise sq m acres Changchun, Jilin Province 35 storey commercial Leasehold Development People’s Republic complex plus 2 storey Co. Ltd of China, 130061 of basement levels - Yin Hai Commercial Complex
22 Kenshine @ 600 200 H.S.(D) 2479 to 2484 Development of 28.9.1995 99 years 19.10.2093 N/A 192,451 Corporation acres acres P.T. 6256 to 6261 residential and Leasehold Sdn Bhd Mukim Dengkil commercial properties Daerah Sepang
23 Europlus # & @ 79.01 30 H.S.(D) 12517 to 12852 Development of 22.1.2001 99 years 5.3.2091 N/A 18,030 Construction acres acres P.T. 24802 to 25137 residential properties Leasehold Sdn Bhd Mukim Dengkil - Lestari Permai Daerah Sepang
# & @ 3.50 H.S.(D) 12809 P.T. 20187 Development of 26.9.2003 99 years 5.3.2091 N/A acres Mukim Dengkil residential properties Leasehold Daerah Sepang - Lestari Permai
24 Juara Tiasa + 42 Geran 44761 Lot 9012 Kolej Aman 12.4.1998 Freehold N/A 8 30,982 Sdn Bhd acres Bandar Serendah Daerah Hulu Selangor
25 Abra Development + 0.96 P.M. 3861 Lot 261 Menara Maxisegar 9.11.1987 99 years 3.4.2094 11 58,340 Sdn Bhd acres/ Bandar Ampang 24-storey commercial Leasehold 3,901.4 Daerah Hulu Langat complex sq m
26 Jilin Province + 5,995 No. 19, Xian Road A 4 star 24 storey 20.9.1993 30 years 29.12.2023 7 123,688 Maxcourt Hotel sq m Changchun, Jilin Province hotel building Leasehold Limited 41,584 People’s Republic sq m of China
27 Pandan Indah + 4.81 P.M. 1038 Lot 2374 Pandan Indah – 99 years 7.7.2092 8 40,049 Medical acres Bandar Ampang Medical Centre Leasehold Management 20,343.60 Daerah Hulu Langat 6 storey of Sdn Bhd sq m private medical centre with 3 storey medical office building annexed
147 ANNUAL REPORT 2006
LIST OF PROPERTIES (Contd.) @ 31 JANUARY 2006
Net book @ Joint Venture Date of Approximate value as at + Registered Land/ Description/ Acquisition/ age of the 31 January # Beneficial Built up Remaining Title proposed Joint Venture/ building 2006 No. Owner area acreage No. development Completion Tenure Expiry (Years) (RM’000)
28 Europlus Berhad + 7,888 H.S.(D) 102431 P.T. 26057 Semi-detached workshop 6.8.1992 Freehold N/A 15 598 sq ft Bandar Johor Bahru 7 Jalan Sri Purnama 2, Daerah Johor Bahru Kangkar Tebrau, 81100 Johor Bahru.
+ 10,591 H.S.(D)102432 P.T. 26058 Semi-detached workshop 6.8.1992 Freehold N/A 15 655 sq ft Bandar Johor Bahru 2 Jalan Sri Purnama 2/3, Daerah Johor Bahru Kangkar Tebrau, 81100 Johor Bahru.
29 L.C.B. Management + 559 H.S.(D) KA 27100 1 unit shop-office 23.7.2002 99 years 14.6.2092 4 58 Sdn Bhd sq ft P.T. 123928 - Metro Ipoh Leasehold Mukim Hulu Kinta Daerah Kinta
+ 1,833 H.S.(D) KA 27103 1 unit of business lot 23.7.2002 99 years 14.6.2092 4 372 sq feet P.T. 123931 - Metro Ipoh Leasehold Mukim Hulu Kinta Daerah Kinta
30 Inti Johan # 17,739.63 H.S.(D) 68435 P.T.3515 Pandan Kapital 30.1.1999 99 years 24.3.2101 10 51,789 Sdn Bhd sq m Bandar Ampang Shopping Mall Leasehold Daerah Hulu Langat
31 Talam Corporation + 2.401 P.N. 142 Lot 174 Cameron Highland 11.12.1986 Freehold N/A 64 716 Berhad acres Mukim Tanah Rata 2-storey bungalow Daerah Cameron Highlands
148 ANNUAL REPORT 2006
STATEMENT ON DIRECTORS’ INTERESTS AS AT 13 SEPTEMBER 2006
THE COMPANY
A. ORDINARY SHARES (Based on Register of Directors’ shareholdings as at 13 September 2006)
No. of Ordinary Shares of RM1.00 each Direct %*3 Deemed %*3 Interest Interest The Company
1. Tan Sri Dato’ (Dr) Ir Chan 41,366,739 6.58 288,069,077 *1 45.85 Ah Chye @ Chan Chong Yoon
2. Y.A.M. Tengku Sulaiman 500 *2 –– Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj
3. Lai Moo Chan 46,641 0.01 – –
4. Sulaiman Hew Bin Abdullah 57,906 0.01 – –
Notes:
*1 Deemed interest through his spouse, Puan Sri Datin Thong Nyok Choo, his daughter, Chan Siu Wei and by virtue of his interest in Pengurusan Projek Bersistem Sdn Bhd, Prosperous Inn Sdn Bhd, Sze Choon Holdings Sdn Bhd and Kumpulan Europlus Berhad pursuant to Section 6A of the Companies Act, 1965.
*2 Less than 0.005%.
*3 % shareholding based on voting share capital as at 13 September 2006 of 628,304,570.
Tan Sri Dato’ (Dr) Ir Chan Ah Chye @ Chan Chong Yoon, by virtue of his interest in shares of the Company is also deemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest.
B. IRREDEEMABLE CONVERTIBLE PREFERENCE SHARES (“ICPS”) (Based on Register of Directors’ shareholdings as at 13 September 2006)
No. of ICPS of RM0.10 each Direct %*3 Deemed %*3 Interest Interest The Company
1. Tan Sri Dato’ (Dr) Ir Chan 12,231,250 8.50 37 *1 *2 Ah Chye @ Chan Chong Yoon
2. Lai Moo Chan 110,307 0.08 – –
Notes:
*1 Deemed interest by virtue of his interest in Sze Choon Holdings Sdn Bhd pursuant to Section 6A of the Companies Act, 1965.
*2 Less than 0.005%.
*3 % shareholding based on outstanding ICPS as at 13 September 2006 of 143,962,746.
Save as disclosed, none of the Directors of the Company have any interests in the shares of the Company and its related corporations as at 13 September 2006.
149 ANNUAL REPORT 2006
ANALYSIS OF SHAREHOLDINGS AS AT 13 SEPTEMBER 2006
SHARE CAPITAL
Authorised share capital : RM1,000,000,000.00 divided into 939,000,000 ordinary shares of RM1.00 each, 100,000,000 redeemable convertible preference shares of RM0.01 each and 600,000,000 irredeemable convertible preference shares of RM0.10 each.
Issued and paid-up share capital : RM643,579,453 divided into 629,183,170 ordinary shares of RM1.00 each and 143,962,746 irredeemable convertible preference shares of RM0.10 each.
Voting Rights : There is only one class of ordinary shares with voting rights in the paid-up share capital of the Company. Each share entitles the holder to one vote.
Shares Buy Back : The Company had purchased 878,600 ordinary shares and the shares purchased were retained as treasury shares.
DISTRIBUTION OF ORDINARY SHAREHOLDINGS (Based on Record of Depositors as at 13 September 2006)
No. of % of No. of % of Ordinary Ordinary Ordinary Ordinary Size of Holdings Shareholders Shareholders Shares Held Shares Held
1 - 99 794 4.73 29,822 0.00 100 - 1,000 6,975 41.55 4,455,952 0.71 1,001 - 10,000 6,701 39.92 27,087,680 4.31 10,001 - 100,000 1,971 11.74 64,742,547 10.30 100,001 - 31,415,227*1 341 2.03 290,217,969 46.19 31,415,228 and above *2 3 0.02 241,770,600 38.48
TOTAL 16,785 100.00 628,304,570 100.00
Notes:
*1 Less than 5% of the voting share capital *2 5% and above of the voting share capital
THIRTY LARGEST ORDINARY SHAREHOLDERS (Based on Record of Depositors as at 13 September 2006)
No. of Ordinary Name Shares Held %
1) EB NOMINEES (TEMPATAN) SENDIRIAN BERHAD 137,000,000 21.80 Pledged Securities Account for Kumpulan Europlus Berhad (JTR)
2) CIMSEC NOMINEES (TEMPATAN) SDN BHD 68,270,600 10.87 CIMB Bank for Kumpulan Europlus Berhad (Banking)
3) SOUTHERN NOMINEES (TEMPATAN) SDN BHD 36,500,000 5.81 Pledged Securities Account for Kumpulan Europlus Berhad
4) TASEC NOMINEES (TEMPATAN) SDN BHD 20,000,000 3.18 TA First Credit Sdn Bhd for Kumpulan Europlus Berhad
150 ANNUAL REPORT 2006
ANALYSIS OF SHAREHOLDINGS (Contd.) AS AT 13 SEPTEMBER 2006
THIRTY LARGEST ORDINARY SHAREHOLDERS (CONTD.) (Based on Record of Depositors as at 13 September 2006)
No. of Ordinary Name Shares Held %
5) ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 19,839,800 3.16 Pheim Asset Management Sdn Bhd for Employees Provident Fund
6) ONN KOK PUAY (WENG GUOPEI) 11,477,200 1.83
7) PENGURUSAN PROJEK BERSISTEM SDN BHD 8,902,468 1.42
8) TA NOMINEES (TEMPATAN) SDN BHD 8,655,277 1.38 Pledged Securities Account for Chan Ah Chye @ Chan Chong Yoon
9) M & A NOMINEE (TEMPATAN) SDN BHD 7,364,821 1.17 Insas Credit & Leasing Sdn Bhd for Chan Ah Chye @ Chan Chong Yoon
10) PUBLIC NOMINEES (TEMPATAN) SDN BHD 7,158,377 1.14 Pledged Securities Account for Chan Ah Chye @ Chan Chong Yoon (JHL)
11) CARTABAN NOMINEES (TEMPATAN) SDN BHD 7,010,000 1.12 DBS Vickers (Hong Kong) Limited for Chai Yet Lee
12) TASEC NOMINEES (TEMPATAN) SDN BHD 6,800,000 1.08 TA First Credit Sdn Bhd for Pengurusan Projek Bersistem Sdn Bhd
13) AMSEC NOMINEES (TEMPATAN) SDN BHD 6,792,500 1.08 Ambank (M) Berhad for Chan Ah Chye @ Chan Chong Yoon
14) EMPLOYEES PROVIDENT FUND BOARD 5,355,050 0.85
15) CIMSEC NOMINEES (TEMPATAN) SDN BHD 5,287,300 0.84 CIMB-Principal Asset Management Berhad for Employees Provident Fund Board
16) CITIGROUP NOMINEES (ASING) SDN BHD 5,000,000 0.80 GSI for Alcor Capital Asia Fund Ltd
17) AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 5,000,000 0.80 Skim Amanah Saham Bumiputera
18) HLB NOMINEES (TEMPATAN) SDN BHD 4,989,062 0.79 Pledged Securities Account for Tan Sri Dato’ (Dr) Ir Chan Ah Chye @ Chan Chong Yoon (HLFSMF440)
19) EB NOMINEES (TEMPATAN) SENDIRIAN BERHAD 4,339,362 0.69 Pledged Securities Account for Chan Ah Chye @ Chan Chong Yoon (BB)
20) MINISTER OF FINANCE 4,300,000 0.68 Akaun Jaminan Pinjaman Kerajaan Persekutuan
21) TASEC NOMINEES (TEMPATAN) SDN BHD 4,291,389 0.68 TA First Credit Sdn Bhd for Kumpulan Europlus Bhd (A/C No. 2)
22) CITIGROUP NOMINEES (ASING) SDN BHD 4,100,000 0.65 Mellon Bank, N.A. for Banco Di Desio E Della Brianza S.P.A.
151 ANNUAL REPORT 2006
ANALYSIS OF SHAREHOLDINGS (Contd.) AS AT 13 SEPTEMBER 2006
THIRTY LARGEST ORDINARY SHAREHOLDERS (CONTD.) (Based on Record of Depositors as at 13 September 2006)
No. of Ordinary Name Shares Held %
23) LOH KIAN CHONG 4,000,000 0.64
24) POS MALAYSIA BERHAD 3,879,000 0.62
25) CIMSEC NOMINEES (TEMPATAN) SDN BHD 3,453,471 0.55 CIMB Bank for Intelbest Corporation Sdn Bhd (Banking)
26) LEE KIM POH 3,000,000 0.48
27) KUMPULAN EUROPLUS BERHAD 2,991,600 0.48
28) JIMMY THOMAS @ JAMES ABRAHAM THOMAS 2,789,000 0.44
29) M & A NOMINEE (ASING) SDN BHD 2,700,000 0.43 CIMB-GK Securities Pte Ltd for Hi-Way Investments Limited (38/207620)
30) CIMSEC NOMINEES (ASING) SDN BHD 2,696,600 0.43 CIMB Bank for Sam San Tuan (MP0009)
413,942,877 65.88
MAJOR SHAREHOLDERS (Based on Register of Substantial Shareholders as at 13 September 2006)
Direct Interest Deemed Interest No. of No. of Name of major shareholders Shares %*3 Shares %*3
1. Tan Sri Dato’ (Dr) Ir Chan 41,366,739 6.58 288,069,077 *1 45.85 Ah Chye @ Chan Chong Yoon (“TSDCAC”)
2. Puan Sri Datin Thong Nyok 481,315 0.08 328,954,501 *2 52.35 Choo (“PSDTNC”)
3. Kumpulan Europlus Berhad 269,053,589 42.82 – –
Notes:-
*1 Deemed interest through his spouse, PSDTNC, his daughter, Chan Siu Wei and by virtue of his interest in Pengurusan Projek Bersistem Sdn Bhd, Prosperous Inn Sdn Bhd, Sze Choon Holdings Sdn Bhd and Kumpulan Europlus Berhad pursuant to Section 6A of the Companies Act, 1965 (“the Act”).
*2 Deemed interest through her spouse, TSDCAC, her daughter, Chan Siu Wei and by virtue of her interest in Pengurusan Projek Bersistem Sdn Bhd, Prosperous Inn Sdn Bhd, Sze Choon Holdings Sdn Bhd and Kumpulan Europlus Berhad pursuant to Section 6A of the Act.
*3 % shareholding based on voting share capital as at 13 September 2006 of 628,304,570.
152 ANNUAL REPORT 2006
ANALYSIS OF IRREDEEMABLE CONVERTIBLE PREFERENCE SHAREHOLDINGS AS AT 13 SEPTEMBER 2006
No. of ICPS Issued : 591,867,978
No. of ICPS Outstanding : 143,962,746
Conversion Period : 12 January 2004 to 2 January 2009
Conversion Rights : Each registered holder of Irredeemable Convertible Preference Shares (“ICPS”) shall be entitled to convert the ICPS held into new shares of RM1.00 each in the Company at the ICPS Conversion Price of RM1.00. For the avoidance of any doubt, the ICPS Conversion Price shall be deemed to be satisfied by tendering and surrendering the ICPS with an aggregate par value equivalent to the ICPS Conversion Price and no cash monies shall be payable for the ICPS conversion.
DISTRIBUTION OF ICPS HOLDINGS
Size of Holdings No. of ICPS % of ICPS No. of ICPS % of ICPS Holders Holders Held Held
1 - 99 236 3.76 10,664 0.01 100 - 1,000 476 7.57 435,425 0.30 1,001 - 10,000 4,248 67.60 17,764,471 12.34 10,001 - 100,000 1,179 18.76 34,729,542 24.12 100,001 - 7,198,136*1 142 2.26 53,056,594 36.85 7,198,137 and above*2 3 0.05 37,966,050 26.37
TOTAL 6,284 100.00 143,962,746 100.00
Notes:
*1 - Less than 5% of outstanding ICPS *2 - 5% and above of outstanding ICPS
THIRTY LARGEST ICPS HOLDERS
Name No. of ICPS %
1) ONN KOK PUAY (WENG GUOPEI) 14,984,800 10.41
2) AMSEC NOMINEES (TEMPATAN) SDN BHD 12,231,250 8.50 AMBank (M) Berhad for Chan Ah Chye @ Chan Chong Yoon
3) LEMBAGA TABUNG ANGKATAN TENTERA 10,750,000 7.47
4) EMPLOYEES PROVIDENT FUND BOARD 5,500,625 3.82
5) TA NOMINEES (TEMPATAN) SDN BHD 1,980,000 1.38 Pledged Securities Account for Intelbest Corporation Sdn Bhd
6) LIAM OOI SUAH 1,658,500 1.15
7) ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,640,000 1.14 PHEIM Asset Management Sdn Bhd for Employees Provident Fund
8) P.I.S. HOLDINGS SDN BHD 1,553,341 1.08
153 ANNUAL REPORT 2006
ANALYSIS OF IRREDEEMABLE CONVERTIBLE PREFERENCE SHAREHOLDINGS (Contd.) AS AT 13 SEPTEMBER 2006
THIRTY LARGEST ICPS HOLDERS (CONTD.)
Name No. of ICPS %
9) SIEW HOI PAT 1,509,700 1.05
10) LOW CHU MOOI 1,504,250 1.04
11) LEE KWEE CHOO 1,353,200 0.94
12) LIM KEW @ LIM KON FOONG 1,335,022 0.93
13) AMSEC NOMINEES (TEMPATAN) SDN BHD 1,004,000 0.70 Pledged Securities Account for Ho Gah
14) TAN SOON LAI 1,000,000 0.69
15) KENANGA NOMINEES (TEMPATAN) SDN BHD 714,600 0.50 Pledged Securities Account for Gan Kho @ Gan Hong Leong
16) BEY LEANG SENG 700,000 0.49
17) GOH CHIEW AI 678,900 0.47
18) WONG SIN KIEW 648,500 0.45
19) TEO LAI KIM 600,000 0.42
20) SAI YEE @ SIA SAY YEE 588,000 0.41
21) HLG NOMINEE (TEMPATAN) SDN BHD 500,000 0.35 Pledged Securities Account for Paul Lim Chee Ping
22) JF APEX NOMINEES (TEMPATAN) SDN BHD 500,000 0.35 Pledged Securities Account for Voon Sze Lin
23) KWAN KAR WAH 500,000 0.35
24) HSBC NOMINEES (ASING) SDN BHD 493,100 0.34 BBH and Co Boston for Matthew F. Dobbs
25) CHAN HING THONG 485,000 0.34
26) TAN BEE GUAN 455,000 0.32
27) GAN KIAN KEONG 444,800 0.31
28) CHIM LAN ENG 440,000 0.31
29) CITIGROUP NOMINEES (ASING) SDN BHD 437,500 0.30 CBHK PBGSGP for Annur Limited
30) CHANG CHI HSIEN @ TENG CHI HSIEN 428,200 0.30
66,618,288 46.27
154 ANNUAL REPORT 2006
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT the 81st Annual General Meeting of TALAM CORPORATION BERHAD will be held at Perdana Ballroom, Pandan Lake Club, Lot 28, Jalan Perdana 3/8, Pandan Perdana, 55300 Kuala Lumpur on Friday, 3 November 2006 at 10.30 a.m. for the following purposes:-
AGENDA
1. To receive and adopt the Audited Financial Statements of the Company for the year ended 31 (Resolution 1) January 2006 and the Reports of the Directors and Auditors thereon.
2. To approve the payment of Directors’ fees for the year ended 31 January 2006. (Resolution 2)
3. To re-elect the following Directors who retire in accordance with Article 97 of the Articles of Association of the Company:-
3.1 Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz (Resolution 3) Shah Al-Haj 3.2 Sulaiman Hew Bin Abdullah (Resolution 4)
4. To appoint Messrs Deloitte KassimChan as Auditors and to authorise the Directors to fix their (Resolution 5) remuneration.
Notice of Nomination pursuant to Section 172(11) of the Companies Act, 1965, a copy of which is annexed in the Annual Report has been received by the Company for the nomination of Messrs Deloitte KassimChan who have given their consent to act, for appointment as Auditors of the Company in place of the retiring Auditors and of the intention to propose the following ordinary resolution:
“THAT Messrs Deloitte KassimChan be and are hereby appointed Auditors of the Company in place of the retiring Auditors, Messrs Ernst & Young, and such appointment shall be until the conclusion of the next Annual General Meeting at a remuneration to be agreed between the Directors and the Auditors.”
5. AS SPECIAL BUSINESS
To consider and if thought fit to pass the following Ordinary Resolutions:-
5.1 Ordinary Resolution (Resolution 6) - Authority to allot and issue shares pursuant to Section 132D of the Companies Act, 1965
“THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and they are hereby authorised to issue shares in the Company at any time until the conclusion of the next Annual General Meeting and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit, provided that the aggregate number of shares to be issued does not exceed 10 percent of the issued share capital of the Company for the time being, subject always to the approval of all the relevant regulatory bodies being obtained for such allotments and issues.”
155 ANNUAL REPORT 2006
NOTICE OF ANNUAL GENERAL MEETING (Contd.)
5.2 Ordinary Resolution (Resolution 7) Proposed shareholders’ mandate for Talam Corporation Berhad and its subsidiaries (“Talam Group”) to enter into recurrent transactions of a revenue or trading nature with related parties (“Proposed Shareholders’ Mandate I”)
“THAT, the Talam Group be and is hereby authorised to enter into all arrangements and/or transactions with Agrocon (M) Sdn Bhd (“Related Parties”), the nature of which is set out in Section 2.2 of the Circular to Shareholders dated 12 October 2006 provided that such arrangements and/or transactions are:-
(i) recurrent transactions of a revenue or trading nature;
(ii) necessary for the day-to-day operations;
(iii) carried out in the ordinary course of business on normal commercial terms which are not more favourable to the Related Parties than those generally available to the public (where applicable); and
(iv) are not to the detriment of the minority shareholders;
AND THAT such approval shall continue to be in force until:-
(i) the conclusion of the next Annual General Meeting (“AGM”) of the Company (and will be subject to annual renewal) unless by a resolution passed at an AGM whereby the authority is renewed;
(ii) the expiration of the period within which the next AGM of the Company subsequent to the date it is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (“Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or
(iii) revoked or varied by resolution passed by the shareholders in an AGM or extraordinary general meeting;
whichever is earlier;
AND THAT the breakdown of the aggregate value of the transactions of the Proposed Shareholders’ Mandate I conducted during the financial year will be disclosed in the Annual Report of the Company on the information of the type of the recurrent related party transactions made and the names of the related parties involved in each type of the recurrent related party transactions made and their relationship with the Company for the said financial year;
AND THAT the Directors of the Company be and are hereby authorised to complete and take all such steps and do all acts and things in such manner as the Directors of the Company may deem fit or expedient or necessary to give effect to the Proposed Shareholders’ Mandate I.”
156 ANNUAL REPORT 2006
NOTICE OF ANNUAL GENERAL MEETING (Contd.)
5.3 Ordinary Resolution (Resolution 8) Proposed shareholders’ mandate for Talam Corporation Berhad and its subsidiaries (“Talam Group”) to enter into recurrent transactions of a revenue or trading nature with related parties (“Proposed Shareholders’ Mandate II”)
“THAT, the Talam Group be and is hereby authorised to enter into all arrangements and/or transactions with Ice Masters Sdn Bhd, KEB Builders Sdn Bhd, KEB Management Sdn Bhd, KEURO Leasing Sdn Bhd, KEURO Trading Sdn Bhd and Konsortium LPB Sdn Bhd (“Related Parties”), the nature of which is set out in Section 2.2 of the Circular to Shareholders dated 12 October 2006 provided that such arrangements and/or transactions are:-
(i) recurrent transactions of a revenue or trading nature;
(ii) necessary for the day-to-day operations;
(iii) carried out in the ordinary course of business on normal commercial terms which are not more favourable to the Related Parties than those generally available to the public (where applicable); and
(iv) are not to the detriment of the minority shareholders;
AND THAT such approval shall continue to be in force until:-
(i) the conclusion of the next AGM of the Company (and will be subject to annual renewal) unless by a resolution passed at an AGM whereby the authority is renewed;
(ii) the expiration of the period within which the next AGM of the Company subsequent to the date it is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (“Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or
(iii) revoked or varied by resolution passed by the shareholders in an AGM or extraordinary general meeting;
whichever is earlier;
AND THAT the breakdown of the aggregate value of the transactions of the Proposed Shareholders’ Mandate II conducted during the financial year will be disclosed in the Annual Report of the Company on the information of the type of the recurrent related party transactions made and the names of the related parties involved in each type of the recurrent related party transactions made and their relationship with the Company for the said financial year;
AND THAT the Directors of the Company be and are hereby authorised to complete and take all such steps and do all acts and things in such manner as the Directors of the Company may deem fit or expedient or necessary to give effect to the Proposed Shareholders’ Mandate II.”
157 ANNUAL REPORT 2006
NOTICE OF ANNUAL GENERAL MEETING (Contd.)
5.4 Ordinary Resolution (Resolution 9) - Authority pursuant to Section 132E of the Companies Act, 1965
“THAT pursuant to Section 132E of the Companies Act, 1965, authority be and is hereby given for the Company and each of its subsidiaries to enter into any arrangement or transaction with any Director of the Company or any person connected with such Director to acquire from or dispose to such Director or person connected with such Director any non-cash assets of requisite value that is less than 5% of the total net tangible assets of the Group at the time of such acquisition or disposal.
AND THAT such authority shall continue to be in force until:-
(i) the conclusion of the next Annual General Meeting of the Company; or
(ii) the expiration of the period within which the next Annual General Meeting of the Company is required to be tabled pursuant to Section 143(1) of the Companies Act, 1965 (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Companies Act, 1965); or
(iii) revoked or varied by resolution passed by the shareholders in a general meeting;
whichever is earlier.”
6. To transact any ordinary business which due notice shall have been given.
BY ORDER OF THE BOARD
LEOW CHI LIH Secretary
Kuala Lumpur 12 October 2006
158 ANNUAL REPORT 2006
NOTICE OF ANNUAL GENERAL MEETING (Contd.)
Notes:
1. A member of the Company entitled to attend and vote at the meeting may appoint one (1) proxy to attend and vote instead of him. A proxy need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.
2. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if the appointer is a corporation under its common seal or the hand of its attorney.
3. All proxy forms should be deposited at the Company’s Registered Office at Suite 2.05, Level 2, Menara Maxisegar, Jalan Pandan Indah 4/2, Pandan Indah, 55100 Kuala Lumpur not less than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof.
EXPLANATORY NOTES TO THE SPECIAL BUSINESSES
4. The Ordinary Resolution no. 6 if passed, will give the Directors of the Company the authority to issue shares in the Company up to an amount not exceeding in total 10% of the issued share capital of the Company for such purposes as the Directors consider would be in the interest of the Company. This would avoid any delay and costs involved in convening general meeting to specifically approve such an issue of shares. This authority, unless revoked or varied at a general meeting, will expire at the next Annual General Meeting of the Company.
5. The detailed information on the Ordinary Resolution nos. 7 and 8 pertaining to the Proposed Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature, is set out in the Circular to Shareholders dated 12 October 2006 which is enclosed together with the Company’s 2006 Annual Report.
6. Resolution pursuant to Section 132E of the Companies Act, 1965
Section 132E of the Companies Act, 1965 prohibits a company or its subsidiaries from entering into any arrangement or transaction with its directors or persons connected with such directors in respect of the acquisition from or disposal to such directors or connected persons of any non-cash assets of the requisite value without prior approval of the Company in general meeting. According to the Companies Act, 1965, a non-cash asset is considered to be of the requisite value, if at the time of arrangement or transaction, its value is greater than RM250,000.00 or 10% of the Company’s net assets, whichever is the lesser, subject to a minimum of RM10,000.00.
The proposed Ordinary Resolution no. 9, if passed, will authorise the Company and each of its subsidiaries to enter into any arrangement or transaction with a Director of the Company or with a person connected with such a Director to acquire from or dispose to such a Director or person connected with such a Director any non-cash assets of the requisite value that is less than 5% of the total net tangible assets of the Group at the time of such acquisition or disposal.
159 ANNUAL REPORT 2006
STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING
1. Directors standing for re-election at the 81st Annual General Meeting of the Company
The Directors retiring by rotation and standing for re-election pursuant to Article 97 of the Articles of Association of the Company are as follows:-
* Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj * Sulaiman Hew Bin Abdullah
The profile of each of the above-named Directors is set out in the section entitled “Profile of Directors” on pages 6 to 11 of this Annual Report.
Their securities holdings in the Company and its related corporations are set out in the section entitled “Statement on Directors’ Interests” on page 149 of this Annual Report.
2. Attendance of Board of Directors’ Meetings
There were eight (8) Board Meetings held during the financial year ended 31 January 2006. Details of attendance of the Directors are set out in the Statement on Corporate Governance appearing on page 20 of this Annual Report.
3. Place, date and time of the 81st Annual General Meeting
The place, date and time of the 81st Annual General Meeting are as follows:-
Date Time Place
Friday, 3 November 2006 10.30 a.m. Perdana Ballroom Pandan Lake Club Lot 28, Jalan Perdana 3/8 Pandan Perdana 55300 Kuala Lumpur
160 ANNUAL REPORT 2006
NOTICE OF NOMINATION
161 PROXY FORM NO. OF SHARES HELD
I/We ______(NRIC No. ______) (Name in full and in block letters)
of ______(Full address)
being a member/members of TALAM CORPORATION BERHAD (1120-H) hereby appoint ______
______(NRIC No. ______)
of ______(Full address)
or failing him, the Chairman of the Meeting as my/our proxy to vote on my/our behalf at the 81st Annual General Meeting of the Company to be held at the Perdana Ballroom, Pandan Lake Club, Lot 28, Jalan Perdana 3/8, Pandan Perdana, 55300 Kuala Lumpur on Friday, 3 November 2006 at 10.30 a.m. and at any adjournment thereof, on the following resolutions referred to in the notice of the Annual General Meeting.
My/our proxy is to vote as indicated below:
NO. RESOLUTIONS FOR AGAINST 1 To receive and adopt the Audited Financial Statements of the Company for the year ended 31 January 2006 and the Reports of the Directors and Auditors thereon. 2 To approve the payment of Directors’ Fees for the year ended 31 January 2006. 3 To re-elect the Director, Y.A.M. Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Abdul Aziz Shah Al-Haj who retire in accordance with Article 97 of the Articles of Association of the Company. 4 To re-elect the Director, Sulaiman Hew Bin Abdullah who retire in accordance with Article 97 of the Articles of Association of the Company. 5 To appoint Messrs Deloitte KassimChan as Auditors and to authorize the Directors to fix their remuneration. 6 As Special Business Ordinary Resolution Authority to allot and issue shares pursuant to Section 132D of the Companies Act, 1965. 7 As Special Business Ordinary Resolution Proposed shareholders’ mandate for Talam Corporation Berhad and its subsidiaries to enter into recurrent transactions of a revenue or trading nature with related parties (“Proposed Shareholders’ Mandate I”). 8 As Special Business Ordinary Resolution Proposed shareholders’ mandate for Talam Corporation Berhad and its subsidiaries to enter into recurrent transactions of a revenue or trading nature with related parties (“Proposed Shareholders’ Mandate II”). 9 As Special Business Ordinary Resolution Authority pursuant to Section 132E of the Companies Act, 1965.
(Please indicate with an “X” in the appropriate spaces how you wish your vote to be casted. If you do not indicate how you wish your proxy to vote on any resolution, the proxy shall vote as he thinks fit, or at his discretion, abstains from voting).
Signed this ______day of ______2006.
Signature/Common Seal of Shareholder(s)
Notes:- 1. A member of the Company entitled to attend and vote at the meeting may appoint a proxy to attend and vote instead of him. A proxy need not be a member of the Company and the provision of Section 149 (1)(b) of the Companies Act, 1965 shall not apply to the Company. 2. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if the appointer is a corporation under its common seal or the hand of its attorney. 3. All forms of proxy must be deposited at the Registered Office of the Company situated at Suite 2.05, Level 2, Menara Maxisegar, Jalan Pandan Indah 4/2, Pandan Indah, 55100 Kuala Lumpur not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. ✄ Please fold here
Stamp
The Company Secretary TALAM CORPORATION BERHAD (1120-H) Suite 2.05, Level 2, Menara Maxisegar Jalan Pandan Indah 4/2 Pandah Indah 55100 Kuala Lumpur
Please fold here