CONTENTS
Corporate Information 02
Board of Directors’ Profile 03
Corporate Structure 05
Audit Committee 06
Corporate Governance Statement 09
Statement on Internal Control 13
Other Compliance Statements 15
Chairman’s Statement 16
Directors’ Report 22
Statement by Directors 26
Independent Auditors’ Report 27
Statements of Financial Position 29
Statements of Comprehensive Income 31
Statements of Changes in Equity 32
Statements of Cash Flows 35
Notes to the Financial Statements 38
Analysis of Shareholdings 110
List of Properties 114
Notice of Annual General Meeting 115
Proxy Form
01 ANNUAL REPORT 2012 CORPORATE INFORMATION
DIRECTORS LIM TEIK HIAN I EXECUTIVE CHAIRMAN I JIMMY ONG CHIN KENG I MANAGING DIRECTOR I LIM TECK CHYE I EXECUTIVE DIRECTOR I WONG SEW YUN I NON EXECUTIVE DIRECTOR I NG CHEE KONG I NON EXECUTIVE DIRECTOR I WONG THAI SUN I NON EXECUTIVE DIRECTOR I
SECRETARIES LEE PENG LOON P’NG CHIEW KEEM
REGISTERED OFFICE 51-21-A MENARA BHL BANK JALAN SULTAN AHMAD SHAH 10050 PENANG TEL : (60) 4 210 8833 FAX : (60) 4 210 8831
SHARE REGISTRAR TRICOR INVESTOR SERVICES SDN BHD (118401-V) LEVEL 17, THE GARDENS NORTH TOWER MID VALLEY CITY, LINGKARAN SYED PUTRA 59200 KUALA LUMPUR, MALAYSIA TEL: (60) 3 2264 3883 FAX: (60) 3 2282 1886
AUDIT COMMITTEE WONG THAI SUN I CHAIRMAN AND INDEPENDENT NON EXECUTIVE DIRECTOR I NG CHEE KONG I INDEPENDENT NON EXECUTIVE DIRECTOR I WONG SEW YUN I INDEPENDENT NON EXECUTIVE DIRECTOR I
PRINCIPAL BANKERS CIMB BANK BERHAD (13491-P) HSBC BANK MALAYSIA BERHAD (127776-V) MALAYAN BANKING BERHAD (3813-K)
AUDITORS BDO CHARTERED ACCOUNTANTS 51-21-F MENARA BHL BANK JALAN SULTAN AHMAD SHAH 10050 PENANG
STOCK EXCHANGE LISTING BURSA MALAYSIA MAIN MARKET
STOCK NAME EMICO
STOCK CODE 9091
SECTOR CONSUMER PRODUCTS
02 ANNUAL REPORT 2012 BOARD OF DIRECTORS’ PROFILE
from right to left : Mr Lim Teck Chye, Mr Ng Chee Kong, Mr Jimmy Ong Chin Keng, Mr Lim Teik Hian, Mr Wong Sew Yun, Mr Wong Thai Sun
LIM TEIK HIAN I Executive Chairman
Mr Lim Teik Hian, a Malaysian aged 45 was appointed to the Board on 16 February 1996. He has a Diploma in Business Administration from Australia Business College, Melbourne, Australia. Upon graduation, he joined the Company in 1989 as the Marketing Manager and was responsible for the development of domestic market for Emico. At a later stage, he was involved in the general management of the manufacturing concern and was instrumental in the commissioning of modern manufacturing facilities for Emico Group. He was re-designated as Executive Chairman on 24 March 2009. He and his younger brother, Mr Lim Teck Chye sits on the Board of the Company as Executive Director. He is a member of Emico’s Nominating Committee. Other than as disclosed in the related party transactions in Note 36 of the Financial Statements, he has no other conflict of interest.
Mr Lim has not been convicted of any offence in the past 10 years and has attended all Board meetings held during the financial period.
JIMMY ONG CHIN KENG I Managing Director
Mr Jimmy Ong Chin Keng, a Malaysian aged 49 was appointed to the Board on 16 February 1996. He is a Chartered Accountant and holds a professional qualification from the Malaysian Institute of Certified Public Accountants and is a member of Malaysian Institute of Accountants. He joined Emico Group in February 1993 as the Financial Controller and rose to the rank of Finance Director in 1996 and re-designated as Managing Director on 23 January 2009. Mr Ong has an extensive experience and knowledge in the field of accounting, finance, corporate finance, manufacturing and property development. Prior to his engagement in Emico, he served in two international accounting firms namely PriceWaterhouseCoopers and KPMG for a total of 8 years. Mr Ong has no family relationship with any Director/Substantial shareholders. He is a member of Emico’s Remuneration Committee and sits on the Board of several private limited companies. Other than as disclosed in the related party transactions in Note 36 of the Financial Statements, he has no other conflict of interest.
Mr Ong has not been convicted of any offence in the past 10 years and has attended all Board meetings held during the financial period. 03 ANNUAL REPORT 2012 BOARD OF DIRECTORS’ PROFILE
LIM TECK CHYE I Executive Director
Mr Lim Teck Chye, a Malaysian aged 38, was appointed to the Board on 11 May 2004. He graduated from University of Toledo, Ohio, USA in Bachelor of Science in Engineering and Master of Science in Industrial Engineering. Upon graduation, he joined Fuji Lift & Escalator Manufacturing Sdn. Bhd. (formerly known as Northern Elevator Manufacturing Sdn Bhd) as its Marketing Manager in July 1997. In mid 1998, he was transferred abroad to set up an elevator manufacturing plant in Fujian province, China. The China factory is in full operation since July 1999 and has obtained ISO 9001:2000 quality certification. He was appointed to the Board of NEB Development Berhad formerly known as Northern Elevator Berhad as the Executive Director in October 1999 and has held the position since then. He and his brother, Mr Lim Teik Hian sits on Board of the Company as Executive Director and Executive Chairman respectively. Other than as disclosed in the related party transactions in Note 36 of the Financial Statements, he has no other conflict of interest.
Mr Lim has not been convicted of any offence in the past 10 years and has attended 5 out of 6 Board meetings held during the financial period.
NG CHEE KONG I Independent and Non-Executive Director
Mr Ng Chee Kong, a Malaysian aged 69 is an Independent Non-Executive Director of the Company. He was appointed to the Board on 24 May 1999 and is a member of the Audit and the Remuneration Committee. He also sits as the Chairman of the Nominating Committee. He received his early education in Penang and joined the banking profession with a major local bank until his retirement 36 years later. During his tenure with the bank, he obtained a Diploma in Marketing & Selling Bank Services conferred by The International Management Centres, Buckingham, England.
Mr Ng has not been convicted of any offence in the past 10 years and has attended all Board meetings held during the financial period.
WONG SEW YUN I Independent and Non-Executive Director
Mr Wong Sew Yun, a Malaysian aged 56 was appointed to the Board on 14 January 1995. He has been involved in business for more than 28 years. He has his own business operating a transportation company plying East, West Malaysia and Indonesia. He is also involved in ceramic wares business and sits on the Board of several private limited companies.
Mr Wong has not been convicted of any offence in the past 10 years and has attended all Board meetings held during the financial period.
WONG THAI SUN I Independent and Non-Executive Director
Mr Wong Thai Sun, a Malaysian aged 57 was appointed to the Board on 26 December 2008. He holds a Bachelor of Economics and Accountancy from Australia National University. He is a member of the Malaysian Institute of Accountants and the Certified Public Accountants, Australia. He has public practice experience in accountancy for over 20 years in Malaysia and in overseas and is currently having his own public practice firm, which is Wong Thai Sun & Associates. He is also a director of D’Nounce Technology Bhd and Suiwah Corporation Bhd.
Mr Wong has not been convicted of any offence in the past 10 years and has attended all Board meetings held during the financial period.
04 ANNUAL REPORT 2012 CORPORATE STRUCTURE AS AT 31 MARCH 2012
PROPERTY DEVELOPMENT & INVESTMENT 100% Emico Development Sdn Bhd 100% Emico Capital Sdn Bhd 71% Mercu Tanah Langkawi Sdn Bhd 60% NEB Development Berhad 49.7% Operasi Tembaga Sdn Bhd 39.8% PKB - Operasi Tembaga Sdn Bhd 60%** NEB Pacific Sdn Bhd 60% ** Unic Builders Sdn Bhd 50% ** Panashiba Industries (M) Sdn Bhd EMICO HOLDINGS B E R H A D TRADING 100% Emico Asia Sdn Bhd 51% Emico Melaka Sdn Bhd 100% ** Emico Newk Sdn Bhd
MANUFACTURING Consumer Products 100% Emico Penang Sdn Bhd 100% Emico Marketing Sdn Bhd 100% Emico Metalizing Sdn Bhd 100%** Emico Creative Design Sdn Bhd 100%** Emico Tools Sdn Bhd 53.3%** Standard Trend Apparel Industries Sdn Bhd 24.5%** PT Panashiba Industries, Indonesia
Lifts and Escalators 24%** Asian Elevator (M) Sdn Bhd 18%** Jiangnan Escalator (M) Sdn Bhd
Subsidiary Companies Associated Companies ** Dormant / Inactive
05 ANNUAL REPORT 2012 AUDIT COMMITTEE
The Board has appointed the Audit Committee to assist the Board in discharging its duties of maintaining a sound system of internal controls to safeguard shareholders’ investment and the Group’s assets.
TERMS OF REFERENCE
• Purpose The primary objective of the Audit Committee (as a sub-committee of the Board) is to assist the Board in the effective discharge of its fiduciary responsibilities for corporate governance, financial reporting and internal control.
• Reporting Responsibilities The Audit Committee will report to the Board on the nature and extent of the functions performed by it and may make such recommendations to the Board on any audit and financial reporting matters as it may think fit.
• Attendance at Meeting The head of finance, the head of internal audit and a representative of external audit shall normally attend meetings. The Company Secretary shall be the Secretary of the Audit Committee. Other board members or employees may be invited to brief the Audit Committee on issues that are incorporated into the agenda.
• Frequency of Meeting The Committee will meet as frequently as the Chairman shall decide, with due notice of issues to be discussed and shall record its conclusions whilst discharging its duties and responsibilities.
The Audit Committee should meet with the external auditors without executive board members present at least twice a year.
The Chairman of the Audit Committee should engage on a continuous basis with senior management, such as the chairman, chief executive officer, the finance director, the head of the internal audit and the external auditors in order to be kept informed of matters affecting the Company.
• Quorum The quorum for a meeting shall be 2 (two) members, the majority of whom shall be independent directors.
• Authority The Audit Committee is authorised by the Board to investigate any activity within its terms of reference. The Audit Committee shall have unrestricted access to both the internal and external auditors and to all employees of the Group. The internal audit function reports directly to the Audit Committee. The Audit Committee may, with the approval of the Board, consult legal or other professionals where they consider it necessary to discharge their duties.
06 ANNUAL REPORT 2012 AUDIT COMMITTEE
MEMBERSHIP AND MEETINGS The composition of the Company’s Audit Committee, appointed by the Board from amongst its members, comprises of 3 (three) members of which all are Non-Executive Directors.
Membership
• The members of the Audit Committee shall be appointed by the Board. • The Audit Committee shall consist of not less than three (3) members of whom: a) all members of the Audit Committee must be non-executive directors with a majority of them being independent directors; b) at least one (1) member of the Audit Committee: i) must be a member of the Malaysian Institute of Accountants; or ii) if he or she is not a member of the Malaysian Institute of Accountants, a) he or she must have at least three (3) years’ working experience; and • he or she must have passed the examinations specified in Part I of the First Schedule of the Accountants Act, 1967; or • he or she must be a member of one (1) of the associations of accountants specified in Part Il of the First Schedule of the Accountants Act, 1967; or iii) he or she fulfils such other requirements as prescribed or approved by Bursa Securities. c) all members of the Audit Committee should be financially literate. • No alternate director shall be appointed as a member of the Audit Committee. • The Chairman of the Audit Committee shall be appointed by the members of the Audit Committee among their member who is an independent director. • The Board must review the term of office and performance of the Audit Committee and each of its members at least once every three (3) years to determine whether such Committee and members have carried out their duties in accordance with their terms of reference. • The Board shall, within three (3) months of a vacancy occurring in the Audit Committee which result in the number of members reduced to below three (3), appoint such number of new members as may be required to make up the minimum number of three (3) members.
Meetings
During the financial period from 1 January 2011 to 31 March 2012, the Committee held meetings on 28 February, 15 April, 30 May, 26 August, 25 November 2011 and 28 February 2012 respectively, making a total of 6 (six) meetings.
No. Name Status of Independence Attendance directorship Status of meetings
(i) Wong Thai Sun Non-Executive Independent 6/6 (Chairman)
(ii) Ng Chee Kong Non-Executive Independent 6/6 (Member)
(iii) Wong Sew Yun Non-Executive Independent 6/6 (Member)
07 ANNUAL REPORT 2012 AUDIT COMMITTEE
DUTIES AND RESPONSIBILITIES The primary goal of the Committee is to review the financial condition of the Group, its internal controls, performance and findings of the internal auditors and to recommend appropriate remedial action. The primary duties and responsibilities of the Committee are as follows: • to review both the internal and external auditor’s scope of audit plan, their evaluation of the system of internal controls and audit reports. • to review and evaluate the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work. • to consider the appointment and/or reappointment of external and internal auditors, their fees and any question of their resignation or dismissal and to recommend to the Board. • to nominate, for the approval of the Board of Directors, a person or persons as auditor(s). • to review the assistance and co-operation given by the Company’s officers to the external and internal auditors. • to review the quarterly and year end financial statements before submission to the Board of Directors, focusing particularly on: a) changes in or implementation of major accounting policy changes b) significant and unusual events; and c) compliance with accounting standards and other legal requirements. • to review any related party transactions that may arise within the Company or the Group. • to consider adequacy of Management’s actions taken on internal and external audit reports. • to review the allocation of shares to employees under the Employees’s Share Option Scheme. SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE During the financial period from 1 January 2011 to 31 March 2012, the Committee held meetings on 28 February, 15 April, 30 May, 26 August, 25 November 2011 and 28 February 2012 respectively, making a total of 6 (six) meetings. The committee also appraised the adequacy of actions taken by the Management in resolving the reported audit issues and in implementing suggested improvement measures. On quarterly basis and financial year end, the Committee reviewed the financial statements prepared by the Management for proper approval by the Board on its announcements. Any significant issues resulting from the audit of the financial statements by the External Auditors were noted by the Committee. The Committee, at the conclusion of each meeting, recommended the Management to improve on internal controls, procedures and systems of the Company, where deemed appropriate. Reviewed and considered the disclosure of Related Party Transactions in the Financial Statements and the Recurrent Related Party Transactions Circular to shareholders. Reviewed the Statement of Corporate Governance and Statement on Internal Controls. ACTIVITIES OF INTERNAL AUDIT The role of the Internal Auditors is to examine, evaluate and ensure compliance with the Group’s policies, procedures and system of internal controls so as to provide reasonable assurance that such system continue to operate effectively in the Emico Group of Companies. The Internal Auditors work focuses on areas of priority as identified in accordance with the annual audit plan approved each year by the Audit Committee. For the financial period from 1 January 2011 to 31 March 2012, audit visits were conducted in all active subsidiaries of the Group. The audit activities were as follows: a. ascertaining the extent of compliance with the established policies, procedures and statutory requirements; b. reviewing of new systems and modified systems to ensure that proper controls exist in the systems or where certain necessary controls were absent, to prescribe controls before implementation; and c. identifying opportunities to improve the operations and the processes in the Company and the Group. The Internal Auditors reports their audit findings to the Audit Committee and the Management of the respective subsidiaries. 08 ANNUAL REPORT 2012 CORPORATE GOVERNANCE STATEMENT
The Board of Directors of Emico Holdings Berhad is committed to ensuring that the Group is moving towards the highest standards of Corporate Governance in discharging its responsibilities to protect and enhance shareholders value and the Group’s financial performance.
Currently, the Board is moving towards full compliance with all the principles in Part 1 of the Malaysian Code on Corporate Governance and is also committed to ensuring adoption of the Best Practice as recommended in Part 2 of the Code.
The Board The Board consists of the following members: > one executive chairman > two executive directors > three independent non-executive directors
The Board of Directors is leading and controlling the Group while the Company’s Executive Chairman and Managing Director has the responsibility for the running of the Group’s businesses.
Board Meeting There were six Board Meetings held during the financial period from 1 January 2011 to 31 March 2012 and the attendance of the Directors were as follows:
Name of Director Directorship Attendance Lim Teik Hian Executive Chairman 6/6 Jimmy Ong Chin Keng Managing Director 6/6 Lim Teck Chye Executive Director 5/6 Wong Sew Yun Independent Non-Executive Director 6/6 Ng Chee Kong Independent Non-Executive Director 6/6 Wong Thai Sun Independent Non-Executive Director 6/6
Supply Of Information The Board is able to access a complete information in a timely basis in form and of a quality necessary for the discharge of their duties and responsibilities. Where required, the Board has the authority to source for independent or expert advice and views from outside the Group.
Appointment and Re-election of The Board All Directors are required to submit themselves for re-election at least every three years.
The Board is responsible for the appointments of Directors and determining the remuneration package of each Director. In order to improve its effectiveness, the Board had set up a Nominating and a Remuneration Committee which consist of the following:
09 ANNUAL REPORT 2012 CORPORATE GOVERNANCE STATEMENT
Nominating Committee Chairman Mr Ng Chee Kong I Independent and Non-Executive Director
Member Mr Lim Teik Hian I Executive Chairman Mr Wong Thai Sun I Independent and Non-Executive Director
The principal objectives of the Nomination Committee are as follows: (a) to assess and recommend suitable candidates for appointment to the Board, Board Committees and Board of subsidiary companies. (b) to review the qualities (including skills and experience) of the Non-Executive Directors of the Company. (c) to assess the effectiveness of the Board of Directors of the company as a whole, its committees and the contributions of each individual director.
Remuneration Committee Chairman Mr Ng Chee Kong I Independent and Non-Executive Director
Member Mr Wong Thai Sun I Independent and Non-Executive Director Mr Jimmy Ong Chin Keng I Managing Director
The objective of the Remuneration Committee is to recommend to the Board, the remuneration package of the Executive Directors are fairy rewarded for their contribution to overall performance of the Group.
DIRECTORS’ REMUNERATION
Directors do not participate in decisions regarding their own remuneration. Directors’ fee and emoluments are endorsed by the Board and approved by shareholders of the Company at Annual General Meeting.
The remuneration of the Directors for the financial period from 1 January 2011 to 31 March 2012 is as follows. Fee Salaries and other Benefits-in-kind emoluments RM RM RM Executive Directors 37,500 928,290 17,400 Non- Executive Directors 37,500 14,250 - Total 75,000 942,540 17,400
The number of Directors whose remuneration fall into the respective bands are as follows: Range of Remuneration (RM) Executive Non-Executive 25,000 & below 1 3 300,001 - 350,000 1 - 450,001 - 500,000 1 -
10 ANNUAL REPORT 2012 CORPORATE GOVERNANCE STATEMENT
DIRECTORS’ TRAINING AND EDUCATION
On joining, all new directors are given background information describing the Company and its activities. Site visits are arranged whenever necessary. All the Directors holding office have completed the Mandatory Accreditation Programme as specified by Bursa Securities. The Directors are also encouraged to attend various external professional programmes on a continuous basis to enable them to discharge their duties and to ensure that they are kept abreast on various issues facing the changing business environment within which the Group operates.
The Directors have during the financial period from 1 January 2011 to 31 March 2012, evaluated their own training needs on a continuous basis and attended the following programmes:
Director’s name Training Programme Jimmy Ong Chin Keng Strategy Day Planning Retreat - Federation of Malaysian Manufacturers, Penang Strategic Trade Act 2010 by MITI Matrade Seminar on “12 Steps to Successful Exporting” NCIA Economic Transformation Programme NCER Lab workshop Tax Seminar “Shaping Sustainable Growth” Invest Penang Talk on SME Centre SME Financing Course by UPEN (State Economic Planning unit) & FMM Industry Briefing on Penang SME Centre Netherlands Your Gateway to Europe by Netherland Embassy Lim Teck Chye Sales workshop for Lift Modernization and Upgrading Business Sales and Negotiation Skills Workshop for Lift Service, Maintenance and Small Repairs Leadership Skills Training Customer Relationship Management Skills Training Ng Chee Kong Strategy Day Planning Retreat - Federation of Malaysian Manufacturers, Penang Anti-Competition Act Bank Negara Renminbi Trade Settlement Talk Strategic Trade Act 2010 by MITI Matrade Seminar on “12 Steps to Successful Exporting” SME Financing Course by UPEN (State Economic Planning unit) & FMM Bank of Tokyo Mitsubishi UFJ Forex & Economic Seminar Wong Thai Sun New Public Rulings Issued in 2009 & 2010 Tax Planning for Employers and HR Managers Sales Tax & Service Tax and Its Implication on the Introduction of Goods & Service Tax (GST) Lim Teik Hian In-house Program Wong Sew Yun In-house Program
SHAREHOLDERS The Group has always placed high emphasis on communication with its shareholders on any major developments of the Group on a timely basis. This is achieved through regular quarterly and annual reports, and announcements.
The principal forum for dialogue with shareholders is at General Meeting, where investors are also encouraged to participate and pose questions to the Board on matters relating to operational and financial information. 11 ANNUAL REPORT 2012 CORPORATE GOVERNANCE STATEMENT
ACCOUNTABILITY AND AUDIT
In presenting and reporting the annual reports and the quarterly announcement to shareholders, the Board has presented a balanced and understandable assessment of the Group’s position and prospects.
The Board acknowledges its duty and responsibility for maintaining a sound system of internal control to safeguard shareholders’ investment and the Group’s assets. It has established an Audit Committee comprising three (3) directors, the majority of whom are independent, to perform internal control covering financial, operational and compliance control and risk management necessary for the Group to achieve its objectives within acceptable risk profile. These controls can only provide reasonable but not absolute assurance against material misstatement or loss.
The Board has established formal and transparent relationship with the external auditors. The appointment of the auditors is recommended by Audit Committee and subject to the approval of the shareholders in Annual General Meeting. The auditors remuneration is determined by the Board but is recommended by the Audit Committee.
STATEMENT OF DIRECTORS’ RESPONSIBILITY
The Directors are required by the Companies Act, 1965 (”the Act”) to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and the Company at the end of the financial year and the profit or loss of the Group and the Company for the financial year. As required by the Act and the Listing Requirements of Bursa Malaysia Securities Berhad, the financial statements have been prepared in accordance with the applicable approved accounting standards in Malaysia and the provisions of the Act.
The Directors consider that in preparing the financial statements for the period from 1 January 2011 to 31 March 2012 set out on pages 29 to 109, the Group has used the appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates. The Directors have responsibility for ensuring that the Group and the Company keep accounting records which disclose with reasonable accuracy the financial position of the Group and the Company which enable them to ensure that the financial statements comply with the Act. The Directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
12 ANNUAL REPORT 2012 STATEMENT ON INTERNAL CONTROL
INTRODUCTION
Pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), the Board of Directors of Emico Holdings Berhad is pleased to provide the following statement on the state of internal control of the Group, which outlines the nature and scope of internal control of the Group during the financial period 1 January 2011 to 31 March 2012.
RESPONSIBILITY FOR RISK AND INTERNAL CONTROL
The Board recognises the importance of a sound system of internal control and a structured risk management framework to good corporate governance. The Board affirms its overall responsibility for the Group’s system of internal control and for reviewing the adequacy and integrity of those systems. Because of the limitations that are inherent in any systems of internal control, those systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.
Following the publication of The Statement on internal control: Guidance for Directors of public listed companies (the “Internal Control Guidance”), the Board affirms that there is an established ongoing process for identifying, evaluating and managing the significant risks faced, or potentially exposed to, by the Group in pursuing its business objectives. This process has been in place throughout the financial year and up to the date of approval of the annual report. The adequacy and effectiveness of this process have been continually reviewed by the Board.
Although the Board is the ultimate owner of risk assessment and internal control systems of the Group, Management has been tasked with the implementation of risk management and internal control systems, within the framework adopted by the Board.
RISK MANAGEMENT
The Board and management practice proactive significant risks identification on a quarterly basis or earlier as appropriate, particularly any major proposed transactions, changes in nature of activities and/or operating environment, or venturing into new operating environment which may entail different risks, and put in place the appropriate risk response strategies and controls until those risks are managed to, and maintained at, a level acceptable to the Board.
INTERNAL AUDIT FUNCTION
The Board acknowledges the importance of internal audit function and has engaged the services of an independent professional accounting and consulting firm, internal auditor : Q-West Corporate Consultants Sdn. Bhd. to provide much of the assurance it requires regarding the effectiveness as well as the adequacy and integrity of the Group’s systems of internal control.
The internal audit adopts a risk-based approach in developing its audit plan which addresses all the core auditable areas of the Group based on their risk profile. Scheduled internal audits are carried out by the Internal Auditors based on the audit plan presented to and approved by the Audit Committee. The audit focuses on areas with high risk and inadequate controls to ensure that an adequate action plan has in place to improve the controls. For those areas with high risk and adequate controls, the audit ascertains that the risks are effectively mitigated by the controls. On a quarterly basis or earlier as appropriate, the internal auditors report to the Audit Committee on areas for improvement and will subsequently follow up to determine the extent of their recommendations that have been implemented. 13 ANNUAL REPORT 2012 STATEMENT ON INTERNAL CONTROL
INTERNAL CONTROL
Apart from risk management and internal audit, the Group has put in place the following key elements of internal control: • An organisation structure with well-defined scopes of responsibility, clear lines of accountability, and appropriate levels of delegated authority; • A process of hierarchical reporting which provides for a documented and auditable trail of accountability; • A set of documented internal policies and procedures for operational, financial and human resource management, which is subject to regular review and improvement; • Regular and comprehensive information provided to management, covering financial and operational performance and key business indicators, for effective monitoring and decision making; • A comprehensive business planning and detailed budgeting process where operating units prepare budgets for the coming year which are approved both at operating unit level and by the Board; • Monthly monitoring of results against budget, with major variances being followed up and management action taken, where necessary; and • Regular visits to operating units by members of the Board and senior management.
Based on the internal auditors’ report for the financial period from 1 January 2011 to 31 March 2012, there is a reasonable assurance that the Group’s systems of internal control are generally adequate and appear to be working satisfactorily. A number of minor internal control weaknesses were identified during the financial period, all of which have been, or are being, addressed. None of the weaknesses have resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group’s annual report.
The Board continues to review and implement measures to strengthen the internal control environment of the Group.
This statement has been reviewed by the external auditors in compliance with Paragraph 15.23 of Main Market Listing Requirements of Bursa Securities.
This statement is issued in accordance with a resolution of the Directors dated 20 July 2012.
14 ANNUAL REPORT 2012 OTHER COMPLIANCE STATEMENTS
1. Utilisation of Proceeds There was no capital raising exercise carried out by the Company during the financial period.
2. Share Buy-Backs The Company has not purchased any of its own shares and as such, there is no treasury shares maintained by the Company for share buy-backs.
3. Options, Warrants or Convertible Securities During the financial period from 1 January 2011 to 31 March 2012, there were no options, or convertibles securities exercised by the Company.
4. Depository Receipts Programme During the financial period from 1 January 2011 to 31 March 2012, the Company did not sponsor any depository receipts programme.
5. 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 The non-audit fee paid/payable to external auditors for the financial period from 1 January 2011 to 31 March 2012 was RM2,000.
7. Variation in Results There were no variations of 10% or more between the audited results for the financial period from 1 January 2011 to 31 March 2012 and the unaudited results announced on 30 May 2012.
8. Profit Guarantee During the financial period from 1 January 2011 to 31 March 2012, there was no profit guarantee given by the Company.
9. Material Contracts There were no material contracts entered by the Company and its subsidiaries involving Director's and major shareholder's interest other than those disclosed in the financial statements.
10. Recurrent Related Party Transactions of a Revenue Nature There were no material recurrent related party transactions of a revenue nature during the financial period from 1 January 2011 to 31 March 2012 other than those disclosed in the financial statements.
11. Corporate Social Responsibility (CSR) The Group acknowledges that in pursuit of any business objective, there is a need to find a balance between profitability and contributions towards being a socially responsible corporate citizen. With such belief, the Group is committed and uses its best endeavour, on ongoing basis, to integrate CSR practices into its day to day business operations i.e. constantly review of the staff benefits to enhance the quality of the life of its employees and adopting eco-friendly practices such as recycling to protect the environment.
15 ANNUAL REPORT 2012 CHAIRMAN’S STATEMENT
On behalf of the Board of Directors of Emico Holdings Berhad, I am pleased to present herewith the Annual Report and Accounts of the Group and the Company for the 15 months ended 31 March 2012.
REVIEW OF RESULTS
15 months 12 months Average Average Increase/ Ended 31 Ended 31 Per Per (Decrease) March December quarter quarter Per 2012 2010 2012 2010 quarter RM'000 RM'000 RM'000 RM'000 RM'000 % Turnover by division Manufacturing division 50,286 34,838 10,057 8,710 1,347 15.5 Trading division 23,729 18,373 4,746 4,593 153 3.3 Property Development division 13,488 11,519 2,698 2,880 (182) (6.3) Group Turnover 87,503 64,730 17,501 16,183 1,318 8.1 Profit/(Loss) before tax by division Manufacturing division 4,481 2,852 896 713 183 25.7 Trading division 450 274 90 69 21 30.4 Property Development division (255) 344 (51) 86 (137) (159.3) Investment division (6,210) (2,142) (1,242) (536) (706) (131.7) Group Profit/(Loss) before tax (1,534) 1,328 (307) 332 (639) (192.5)
The Group recorded a turnover of RM87.5 million and loss before tax of RM1.5 million for 15 months ended 31 March 2012 as compared to RM64.7 million for turnover and profit before tax of RM1.3 million for the 12 months ended 31 December 2010. The 8.1% increase in average turnover per quarter was primarily attributed to the higher turnover from manufacturing and trading divisions. Even though with these divisions achieving a higher turnover, the Group posted a loss before tax for the current period which was attributable to the following reasons:-
(i) Gain on disposal of investment property and leasehold land amounted to RM2.8 million was included in the results for the 12 months ended 31 December 2010 whilst the gain on disposal of subsidiary company amounted to only RM1.0 million was included in the results for the 15 months ended 31 March 2012. Therefore, the gain on disposal of investments for the current period decreased by RM1.8 million as compared to previous year. (ii) Impairment loss on trade receivables, investment properties and developed properties amounted to RM1.8 million during the current period as compared to RM0.4 million impairment for previous year. (iii) The interest rate on Redeemable Secured Loan Stocks (RSLS) was increased from 4% per annum to 6% per annum with effect from 1 January 2011 which cause an incremental sum of approximately RM0.7 million per annum on interest cost for the current period.
DIVIDEND
The Board of Directors is not recommending any payment of dividend for the 15 months ended 31 March 2012.
REVIEW OF OPERATIONS
The Group's operation is organized into the following divisions:
(i) Manufacturing - consumer products (ii) Trading - household products (iii) Property Development 16 ANNUAL REPORT 2012 CHAIRMAN’S STATEMENT
MANUFACTURING - CONSUMER PRODUCTS
Manufacturing of consumer products which consist of Trophy & OEM division posted a higher turnover of RM50.3 million for 15 months ended 31 March 2012 as compared to RM34.8 million for 12 months ended 31 December 2010. On the average per quarter basis, the turnover increased by RM1.3 million (15.5%) per quarter for 2012 as compared to 2010.
TROPHY DIVISION The trophy division posted a substantial increased in turnover to RM28.8 million for 15 months ended 31 March 2012 as compared to RM18.8 million for 12 months ended 31 December 2010, an increase of RM1.1 million per quarter or 22.6%.
The export of trophy continued its strong growth which started in the second half of year 2010. The consolidation of trophy industry in Europe with the exit of one of the big player has created a huge vacuum and a great opportunity for Emico. The continuous effort and dedication to meet customers' requirement of service and quality has enabled Emico to build a large base of distributors in almost all major European countries. As at to-date, we have supplied to more than 35 countries covering Asia, Europe, North and South America. Our production capacity has been operating to its maximum capacity and we are planning for another plant which will take about two years to be in operation.
The local trophy business also recorded a higher sales turnover of RM9.5 million for 15 months ended 31 March 2012 as compared to RM7.3 million for 12 months ended 31 December 2010. Due to the constraint of production capacity, the increased in export have adversely affect the supply for local trophy. Hence, our local marketing team has made changes to their sales mix with main concentration on more value added products and fully assembled trophy. These have resulted in a higher turnover despite a lower quantity of trophy sold.
OEM DIVISION The manufacturing of OEM division posted a turnover of RM21.5 million for 15 months ended 31 March 2012 as compared to RM16.0 million for 12 months ended 31 December 2010, an increase of RM0.3 million or 7.5% comparing the average per quarter.
With the signing of new agreement where the customer will absorb the exchange gain or loss arising from the sales transaction and the stable raw material prices during the 15 months period to 31 March 2012, OEM business posted better result for the current period as compared to previous year.
Emico Vietnam posted a lower turnover of RM3.3 million for 15 months ended 31 March 2012 as compared to RM3.5 million for 12 months ended 31 December 2010, a decrease of RM0.2 million per quarter or 26.7%. The operation in Vietnam posted a net loss of RM1.3 million for 15 months ended 31 March 2012 as compared to the same amount of RM1.3 million net loss in 2010. Due to the continued losses which adversely affect the overall Emico Group's results, the Board had decided to dispose off Emico Vietnam for a cash consideration of RM800,000. The transaction was completed on 30 March 2012, therefore, we are expected to achieve a better Group results in 2013.
TRADING - HOUSEHOLD PRODUCTS
Trading of household products posted a higher turnover of RM23.7 million for 15 months ended 31 March 2012 and profit before tax of RM0.5 million as compared to RM18.4 million in turnover and profit before tax of RM0.3 million for the 12 months ended 31 December 2010.
The increase in turnover by RM0.2 million per average quarter or 3.3% for current period as compared to previous year is mainly attributable to increase in the number of new customers. With the 3 additional customers in United Kingdom as well as Sweden, Emico Asia is able to diversify its customer risk profile as well as secured better prices for its customer with bigger quantity purchased. 17 ANNUAL REPORT 2012 CHAIRMAN’S STATEMENT
PROPERTY DEVELOPMENT
The average quarterly turnover from the property development division for current 15 months ended 31 March 2012 posted a slight decrease of RM0.2 million or 6.3% on an average per quarter basis as compared with the 12 months ended 31 December 2010. The decline in turnover was mainly attributed to the slower economy in general and the tighter banking guidelines imposed on housing loans especially the financing for purchase of second house which has been reduced to 70%.
The property development division recorded a loss before tax of RM0.2 million for the 15 months ended 31 March 2012 as compared with a profit before tax of RM0.3 million for the 12 months ended 31 December 2010. The loss for current period is attributable to the provision of impairment loss on certain property development cost.
The Status of remaining development projects in Sungai Petani & Melaka is tabulated below:-
Taman Batik, Sungai Petani Status of completion Sales Phase 1 116 units double-storey terrace house Completed 99.5% 60 units double-storey semi-detached in 2002 house 99.5% 12 units factory lots 99.5% 26 units double-storey shop lots 75% completed 30.7% 34 units double-storey shop lots 25% completed - Phase 2 185 units double-storey terrace house Completed 94.0% 82 units double-storey semi-detached in 2002 & 2004 house 100.0% Phase 3 46 units double-storey shop lots 25% completed 8.7% 32 units double-storey shop lots 100% completed 56.2% 16 units double-storey shop lots 85% completed 6.2% Bandar Mutiara, Sungai Petani Status of completion Sales Phase 1 249 units single-storey terrace house 100% 100.0% 136 units single-storey semi-detached Completed house 100.0% Phase 2 109 units single-storey terrace house 100.0% (Villa Mas & Mutiara) 50 units single-storey terrace house 100% 94.0% 92 units single-storey semi-detached Completed house 100.0% 80 units double-storey semi-detached house Earthworks only - Phase 3 (Jade Ridge) 174 units single-storey terrace house 100% 94.2% Phase 3A Completed (Ruby Mill) 21 units single-storey terrace house 100.0% Phase 3A 61 units double-storey terrace house 100.0% (Ametis Valley) 14 units double-storey terrace house 55% completed 85.7% 56 units double-storey terrace house 0-35% completed 35.7% Taman Seri Pertam, Melaka Status of completion Sales Phase 3 - Emas 68 units single-storey terrace house 100.0% Intan Mutiara 38 units single-storey terrace house 100% 100.0% 42 units 1 1/2 storey terrace house Completed 76.2%
18 ANNUAL REPORT 2012 CHAIRMAN’S STATEMENT
We foresee that the property development division will remain moderate in 2013 in view of the tightening of credit by the banks and imposition of additional borrowing rules by Bank Negara Malaysia. However, we are still optimistic in selling the remaining completed unsold units and vacant development land.
CORPORATE DEVELOPMENT
Emico Group will continue to sell its land bank identified for disposal with market value of approximately RM36 million to repay its outstanding loan stocks which stand at RM33 million as at 31 March 2012. As at the date of this report, the following disposals are signed and pending completion date:-
(i) Disposal of 80% shares in PKB-Operasi Tembaga Sdn Bhd which owned a piece of land in Langkawi for a cash consideration of RM10.0 million. Pending fulfilment of all conditions precedent, the sale and purchase agreement is expected to be completed before end of 2012. (ii) Disposal of 2 pieces of freehold land meant for building of petrol station in Sungai Petani for a cash consideration of RM2.3 million. The sale is expected to be completed by 30 October 2012. (iii) Disposal of 455 units of freehold titles of land bank meant for building of single storey terrace and semi detached houses in Sungai Petani for a cash consideration of RM8.6 million. The sale is expected to be completed on or before 30 November 2012.
PROSPECTS
The management will concentrate its resources to strengthen its core business as explained below:-
(1) Manufacturing - consumer products division.
The trophy division will continue with its expansion plan to cater for its growing export business. We are also mindful that export market is very demanding and competitive in term of pricing, quality and delivery. Therefore, efforts are been made to continuously improve on quality and delivery system. However, it will be very challenging in view of the ever increasing manufacturing costs such as raw materials and labour cost. We are always on the lookout for innovative ways to lower the cost including sourcing from overseas countries for certain materials and outsourcing certain production processes. Efforts are also made to automate certain production processes. The coming into effect the Minimum Wages Order 2012 on 1st Jan 2013 of RM900 per month will create addition pressure for salary increment not only for the lower rank employees but also for all levels of workers throughout the company. Even though we expect the turnover for trophy to continue to increase for next year but the profit margin will be affected.
The OEM business especially for Etac, Sweden will continue to grow at a steady pace of 10-15% increment every year. Our joint cooperation with Etac requires both parties to constantly look into ways for cost saving, improve production efficiency and better management of raw material prices.
19 ANNUAL REPORT 2012 CHAIRMAN’S STATEMENT
(2) Trading - household products
With the additional new customers in United Kingdom and Sweden, the trading of household products is expected to increase this year. The challenge for trading business is to continue to source for good quality products at a lower competitive price. However, meeting delivery deadline is also very important as certain products are seasonal and any delay can be very costly to all parties.
Recently, HSBC bank has given a RM2.0 million Account Receivable (AR) financing facilities which provides drawdown on 85% of the invoice value. This facility has enabled the subsidiary company, Emico Asia to expand its business by providing credit term to existing oversea customers as well as securing potential new customers.
(3) Property development
For Sungai Petani project, the management will continue to market the existing completed units while embarking on new phases with limited units. We will continue to increase our marketing effort whilst managing our cash flow during this period.
For the remaining land banks, the management will continue to look for potential buyers through the agents and advertisement to dispose of its remaining land bank with the expected sale proceeds to be used to repay the remaining RSLS loan stocks due on 31 December 2012.
ACKNOWLEDGEMENT
On behalf of the Board, I wish to thank all bankers, suppliers, customers, business associates and most important of all the management and staff of Emico for the dedication and professionalism that underpins everything we do, and for their part in further developing Emico business. We are also grateful to all our shareholders of the Company and relevant authorities for their continued invaluable support and confidence in the Group.
Lim Teik Hian Executive Chairman
20 ANNUAL REPORT 2012 FINANCIAL I STATEMENTS
21 ANNUAL REPORT 2012 DIRECTORS’ REPORT
The Directors hereby submit their report together with the audited financial statements of the Group and of the Company for the financial period.
PRINCIPAL ACTIVITIES The Company is principally involved in investment holding.
The principal activities of the subsidiaries and associates are stated in Note 10 and Note 11 to the financial statements respectively. There have been no significant changes in the nature of the activities of the Group and of the Company during the financial period.
CHANGE IN REPORTING PERIOD The financial year end of the Company was changed from 31 December to 31 March for management planning purposes.
RESULTS Group Company RM RM
Loss for the financial period (1,751,241) (5,903,504)
(Loss)/Profit attributable to: Owners of the parent (1,970,146) (5,903,504) Non-controlling interests 218,905 0 (1,751,241) (5,903,504)
DIVIDEND
No dividend has been paid or declared by the Company since the end of the previous financial year. The Directors do not recommend any payment of dividend for the current financial period.
RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial period.
ISSUE OF SHARES AND DEBENTURES The Company did not issue any new shares or debentures during the financial period.
OPTIONS GRANTED OVER UNISSUED SHARES No options were granted to any person to take up unissued ordinary shares of the Company during the financial period.
22 ANNUAL REPORT 2012 DIRECTORS’ REPORT
WARRANTS On 1 December 2003, 11,130,000 detachable warrants were granted by the Company to the subscribers of the rights shares. The warrants may be exercised at any time after the issue date but not later than 5.00 p.m. on 1 December 2013. Each warrant entitles its registered holder, at any time during the exercise period of the warrants, to subscribe for one new ordinary share. The exercise price of each warrant is fixed at RM1 payable in cash for each new ordinary share of RM1 each in the Company. As at 31 March 2012, none of the 11,130,000 warrants were exercised to subscribe for new ordinary shares.
DIRECTORS The Directors who have held office since the date of the last report are:
Lim Teik Hian Jimmy Ong Chin Keng Lim Teck Chye Wong Sew Yun Ng Chee Kong Wong Thai Sun
DIRECTORS’ INTERESTS The Directors holding office at the end of the financial period and their beneficial interests in ordinary shares and warrants in the Company during the financial period from 1 January 2011 to 31 March 2012 as recorded in the Register of Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965 were as follows:
Number of ordinary shares of RM1 each Balance as at Balance as at 1-1-2011 Bought Sold 31-3-2012 Shares in the Company Direct interests: Lim Teik Hian 52,000 0 0 52,000 Wong Sew Yun 895,859 0 0 895,859 Lim Teck Chye 1,211,630 0 0 1,211,630
Indirect interests: Lim Teik Hian 18,665,759 1,979,483 0 20,645,242 Lim Teck Chye 17,506,129 1,979,483 0 19,485,612
Number of warrants of RM1 each Balance as at Balance as at 1-1-2011 Bought Sold 31-3-2012 Warrants in the Company Direct interests: Lim Teik Hian 13,000 0 0 13,000 Wong Sew Yun 263,488 0 0 263,488 Lim Teck Chye 7 0 0 7
23 ANNUAL REPORT 2012 DIRECTORS’ REPORT
By virtue of their interests in the ordinary shares of the Company, Lim Teik Hian and Lim Teck Chye are deemed to be interested in the ordinary shares of all the subsidiaries to the extent the Company has an interest.
None of the other Directors holding office at the end of the financial period held any interests in ordinary shares in the Company and its related corporations during the financial period.
DIRECTORS’ BENEFITS Since the end of the previous financial year, none of the Directors have received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the Directors as shown in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest other than the following:
(a) remuneration received by certain Directors as directors/executives of the subsidiaries;
(b) warrants granted by the Company to eligible employees including Directors of the Company to subscribe for shares in the Company; and
(c) any benefit which may be deemed to have arisen by virtue of transactions as disclosed in Note 36 to the financial statements.
There were no arrangements during and at the end of the financial period to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
OTHER STATUTORY INFORMATION REGARDING THE GROUP AND THE COMPANY (I) AS AT THE END OF THE FINANCIAL PERIOD (a) Before the statements of comprehensive income and statements of financial position 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 have satisfied themselves that there are no known bad debts and that adequate provision have been made for doubtful debts; and (ii) to ensure that any current assets other than debts, which were unlikely to realise their book values in the ordinary course of business had been written down to their estimated realisable values. (b) In the opinion of the Directors, except for the gain on disposal of investment in a subsidiary and impairment losses as disclosed in Note 30 and Note 33 to the financial statements respectively, the results of the operations of the Group and of the Company during the financial period have not been substantially affected by any item, transaction or event of a material and unusual nature.
24 ANNUAL REPORT 2012 DIRECTORS’ REPORT
(II) FROM THE END OF THE FINANCIAL PERIOD TO THE DATE OF THIS REPORT (c) The Directors are not aware of any circumstances: (i) which would necessitate the writing off of bad debts or render the amount of the provision for doubtful debts inadequate to any material extent; and (ii) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; and (iii) 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) In the opinion of the Directors: (i) there has not arisen any item, transaction or event of a material and unusual nature which is likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made; and (ii) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve (12) months after the end of the financial period which will or may affect the ability of the Group or of the Company to meet their obligations as and when they fall due.
(III) AS AT THE DATE OF THIS REPORT (e) There are no charges on the assets of the Group and of the Company which have arisen since the end of the financial year to secure the liabilities of any other person. (f) There are no contingent liabilities of the Group and of the Company which have arisen since the end of the financial period. (g) The Directors are not aware of any circumstances not otherwise dealt with in the report or financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading.
SIGNIFICANT EVENTS DURING THE FINANCIAL PERIOD Details of significant events during the financial period are disclosed in Note 41 to the financial statements.
AUDITORS The auditors, BDO, have expressed their willingness to continue in office.
Signed on behalf of the Board in accordance with a resolution of the Directors.
Lim Teik Hian Jimmy Ong Chin Keng Director Director
Dated: 20 July 2012
25 ANNUAL REPORT 2012 STATEMENT BY DIRECTORS
In the opinion of the Directors, the financial statements set out on pages 29 to 109 have been drawn up in accordance with applicable approved Financial Reporting Standards and the provisions of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 March 2012 and of their financial performance and cash flows of the Group and of the Company for the financial period from 1 January 2011 to 31 March 2012.
On behalf of the Board,
Lim Teik Hian Jimmy Ong Chin Keng Director Director
Dated: 20 July 2012
STATUTORY DECLARATION
I, Jimmy Ong Chin Keng, being the Director primarily responsible for the financial management of Emico Holdings Berhad, do solemnly and sincerely declare that the financial statements set out on pages 29 to 109 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared by the abovenamed at Georgetown in the State of Penang this 20 July 2012 Jimmy Ong Chin Keng
Before me,
Commissioner for Oaths
Quah Keat Jin, PJM Pesuruhjaya Sumpah Malayisa No. 53-3-05, Jalan Sultan Ahmad Shah MBF Tower, 10050 Pulau Pinang
26 ANNUAL REPORT 2012 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EMICO HOLDINGS BERHAD (Incorporated in Malaysia) Report on the Financial Statements We have audited the financial statements of Emico Holdings Berhad, which comprise the statements of financial position as at 31 March 2012 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial period from 1 January 2011 to 31 March 2012, and a summary of significant accounting policies and other explanatory information, as set out on pages 29 to 109.
The financial statements of the Group and of the Company for the financial year ended 31 December 2010 were audited by another firm of chartered accountants whose report dated 15 April 2011 expressed an unqualified opinion on those statements.
Directors' Responsibility for the Financial Statements
The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with applicable approved Financial Reporting Standards and the provisions of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 March 2012 and of their financial performance and cash flows of the Group and of the Company for the financial period from 1 January 2011 to 31 March 2012.
27 ANNUAL REPORT 2012 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EMICO HOLDINGS BERHAD (Incorporated in Malaysia) Report on Other Legal and Regulatory Requirements
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. b) We have considered the financial statements and the auditors’ report of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 10 to the financial statements. c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. d) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.
Other Reporting Responsibilities The supplementary information set out in Note 43 to the financial statements is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (”MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.
Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
BDO Koay Theam Hock AF: 0206 2141/04/13 (J) Chartered Accountants Chartered Accountant
Penang
Dated : 20 July 2012
28 ANNUAL REPORT 2012 STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH 2012
Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 Note RM RM RM RM ASSETS
Non-Current Assets Property, plant and equipment 7 20,622,984 12,118,245 0 0 Investment properties 8 210,167 4,405,853 0 2,800,000 Goodwill 9 551,552 551,552 0 0 Investment in subsidiaries 10 0 0 25,438,248 28,116,497 Investment in associates 11 0 1,684,550 0 0 Property development projects 13 2,742,717 28,766,166 0 0 Deferred tax assets 14 127,539 215,600 0 0 24,254,959 47,741,966 25,438,248 30,916,497
Current Assets
Property development projects 13 12,434,654 16,764,049 0 0 Inventories 15 12,397,212 17,261,299 0 0 Trade and other receivables 16 14,323,112 12,547,163 39,440,169 41,474,354 Current tax assets 12,660 55,579 0 0 Cash and cash equivalents 17 4,568,574 5,738,937 682,757 32,544 43,736,212 52,367,027 40,122,926 41,506,898 Assets of disposal group classified as held for sale 18 31,680,626 0 2,313,333 0
TOTAL ASSETS 99,671,797 100,108,993 67,874,507 72,423,395
The accompanying notes form an integral part of the financial statements. 29 ANNUAL REPORT 2012 STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH 2012
Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 Note RM RM RM RM
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 19 95,926,521 95,926,521 95,926,521 95,926,521 Reserves 20 16,010,908 6,561,646 7,736,782 7,736,782 Accumulated losses (77,637,504) (75,667,358) (82,201,208) (76,297,704) 34,299,925 26,820,809 21,462,095 27,365,599
Non-controlling interests 8,524,556 8,305,651 0 0 TOTAL EQUITY 42,824,481 35,126,460 21,462,095 27,365,599
LIABILITIES
Non-Current Liabilities Borrowings 22 272,254 176,800 0 0 Deferred tax liabilities 14 3,207,087 455,881 0 0 3,479,341 632,681 0 0 Current Liabilities
Trade and other payables 27 17,922,813 28,080,706 13,139,712 11,785,096 Redeemable secured loan stocks 21 33,146,600 33,146,600 33,146,600 33,146,600 Borrowings 22 1,113,956 2,007,085 0 0 Current tax liabilities 884,872 1,115,461 126,100 126,100 53,068,241 64,349,852 46,412,412 45,057,796 Liabilities of disposal group classified as held for sale 18 299,734 0 0 0
TOTAL LIABILITIES 56,847,316 64,982,533 46,412,412 45,057,796
TOTAL EQUITY AND LIABILITIES 99,671,797 100,108,993 67,874,507 72,423,395
The accompanying notes form an integral part of the financial statements. 30 ANNUAL REPORT 2012 STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2011 TO 31 MARCH 2012
Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 Note RM RM RM RM
Revenue 29 87,502,666 64,729,801 300,000 240,000 Other income 30 2,795,726 3,870,091 414,899 17,000,276 Share of profit of associates 422,384 180,123 0 0 Property development expenditure recognised (11,241,739) (9,358,779) 0 0 Changes in inventories of finished goods and work-in-progress (262,156) 1,115,863 0 0 Purchase of finished goods (37,585,149) (26,318,990) 0 0 Raw materials and consumables used (11,094,283) (11,460,773) 0 0 Employee benefits expense 31 (9,471,097) (6,860,555) (451,668) (261,788) Depreciation and amortisation (2,648,682) (2,176,004) 0 0 Finance costs 32 (3,085,942) (1,868,387) (2,451,334) (1,598,194) Other expenses (16,866,127) (10,524,496) (3,715,401) (525,606) (Loss)/Profit before tax 33 (1,534,399) 1,327,894 (5,903,504) 14,854,688 Tax expense 34 (216,842) (123,063) 0 0
(Loss)/Profit after tax for the financial period/year (1,751,241) 1,204,831 (5,903,504) 14,854,688
Other comprehensive income/(loss):
Revaluation reserve on leasehold land and building, net of tax 8,274,126 0 0 0 Foreign currency translation differences for foreign operations 1,175,136 (441,393) 0 0 Other comprehensive income/(loss), net of tax 9,449,262 (441,393) 0 0 Total comprehensive income/(loss) 7,698,021 763,438 (5,903,504) 14,854,688
(Loss)/Profit attributable to: Owners of the parent (1,970,146) 1,053,856 (5,903,504) 14,854,688 Non-controlling interests 218,905 150,975 0 0 (1,751,241) 1,204,831 (5,903,504) 14,854,688
Total comprehensive income/(loss) attributable to: Owners of the parent 7,479,116 612,463 (5,903,504) 14,854,688 Non-controlling interests 218,905 150,975 0 0 7,698,021 763,438 (5,903,504) 14,854,688 (Loss)/Earnings per ordinary share attributable to equity holders of the Company (sen):
Basic and diluted 35 (2.05) 1.10
The accompanying notes form an integral part of the financial statements. 31 ANNUAL REPORT 2012 STATEMENTS OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2011 TO 31 MARCH 2012
Total attributable Non Share Share Exchange Accumulated to owners of controlling Total capital premium reserve losses the parent interests equity RM RM RM RM RM RM RM
Group
Balance at 1 January 2010 95,926,521 7,736,782 (733,743) (76,721,214) 26,208,346 8,154,676 34,363,022
Profit for the financial year 0 0 0 1,053,856 1,053,856 150,975 1,204,831
Foreign currency translation 0 0 (441,393) 0 (441,393) 0 (441,393)
Total comprehensive income 0 0 (441,393) 1,053,856 612,463 150,975 763,438
Balance at 31 December 2010 95,926,521 7,736,782 (1,175,136) (75,667,358) 26,820,809 8,305,651 35,126,460
The accompanying notes form an integral part of the financial statements. 32 ANNUAL REPORT 2012 STATEMENTS OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2011 TO 31 MARCH 2012
Total attributable Non- Share Share Revaluation Exchange Accumulated to owners of controlling Total capital premium reserve reserve losses the parent interests equity RM RM RM RM RM RM RM RM Group
Balance at 1 January 2011 95,926,521 7,736,782 0 (1,175,136) (75,667,358) 26,820,809 8,305,651 35,126,460
Loss for the financial period 0 0 0 0 (1,970,146) (1,970,146) 218,905 (1,751,241) Revaluation reserve on leasehold land and building 0 0 8,274,126 0 0 8,274,126 0 8,274,126 Foreign currency translation 0 0 0 1,175,136 0 1,175,136 0 1,175,136 Total comprehensive income 0 0 8,274,126 1,175,136 (1,970,146) 7,479,116 218,905 7,698,021
Balance at 31 March 2012 95,926,521 7,736,782 8,274,126 0 (77,637,504) 34,299,925 8,524,556 42,824,481
The accompanying notes form an integral part of the financial statements. 33 ANNUAL REPORT 2012 STATEMENTS OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2011 TO 31 MARCH 2012
Share Share Accumulated Total capital premium losses equity RM RM RM RM Company
Balance at 1 January 2010 95,926,521 7,736,782 (91,152,392) 12,510,911
Profit for the financial year 0 0 14,854,688 14,854,688
Total comprehensive income 0 0 14,854,688 14,854,688
Balance at 31 December 2010 95,926,521 7,736,782 (76,297,704) 27,365,599
Balance at 1 January 2011 95,926,521 7,736,782 (76,297,704) 27,365,599
Loss for the financial period 0 0 (5,903,504) (5,903,504)
Total comprehensive loss 0 0 (5,903,504) (5,903,504)
Balance at 31 March 2012 95,926,521 7,736,782 (82,201,208) 21,462,095
The accompanying notes form an integral part of the financial statements. 34 ANNUAL REPORT 2012 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2011 TO 31 MARCH 2012
Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 Note RM RM RM RM CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/Profit before tax (1,534,399) 1,327,894 (5,903,504) 14,854,688
Adjustments for: Finance costs 32 3,085,942 1,868,387 2,451,334 1,598,194 Depreciation of property, plant and equipment 7 2,640,557 2,147,852 0 0 Amortisation of investment properties 8 8,125 28,152 0 0 Unrealised loss on foreign exchange 57,124 174,076 0 0 Unrealised gain on foreign exchange (234,086) 0 0 0 Share of profit of associates (422,384) (180,123) 0 0 Reversal of allowance for slow moving inventories 0 (5,572) 0 0 Property, plant and equipment written off 7 6,425 3,741 0 0 Impairment losses on: - Trade and other receivables 16 75,758 409,094 0 0 - Investment properties 486,667 0 486,667 0 - Investment in subsidiaries 0 0 1,600,485 0 - Land held for property development 13 742,555 0 0 0 Developed properties written down 1,001,526 0 0 0 Reversal of impairment loss on trade and other receivables 16 (546,998) (1,140) (413,970) (17,000,000) (Gain)/Loss on disposal of investment in a subsidiary 10 (1,006,872) 0 1,227,764 0 Net (gain)/loss on disposal of property, plant and equipment (269,993) 53,949 0 0 Gain on disposal of investment property and prepaid leasehold land 0 (2,816,173) 0 0 Loss on disposal of investment in an associate 306,934 0 0 0 Interest income (120,064) (218,938) (129) (276) Operating profit/(loss) before changes in working capital 4,276,817 2,791,199 (551,353) (547,394)
The accompanying notes form an integral part of the financial statements. 35 ANNUAL REPORT 2012 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2011 TO 31 MARCH 2012
Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 Note RM RM RM RM CASH FLOWS FROM OPERATING ACTIVITIES
Increase in property development projects 1,564,755 4,942,273 0 0 Decrease/(Increase) in inventories 3,426,680 (4,006,694) 0 0 (Increase)/Decrease in trade and other receivables (2,473,625) 1,910,741 2,448,155 16,854,200 (Decrease)/Increase in trade and other payables (6,633,073) (433,862) 1,404,616 (128,881) 161,554 5,203,657 3,301,418 16,177,925 Interest received 120,064 218,938 129 276 Interest paid (17,770) 0 0 0 Tax refunded 202,348 10,320 0 0 Tax paid (524,433) (107,805) 0 0 Net cash (used in)/from operating activities (58,237) 5,325,110 3,301,547 16,178,201
CASH FLOWS FROM INVESTING ACTIVITIES
Additional investment in a subsidiary 0 0 (1,000,000) (12,000,000) Proceeds from disposal of property, plant and equipment 1,814,133 74,239 0 0 Proceeds from disposal of investment property 0 3,900,000 0 0 Proceeds from disposal of investment in a subsidiary 0 0 800,000 0 Proceeds from disposal of an associate 1,800,000 0 0 0 Purchase of property, plant and equipment 7(b) (2,336,332) (2,523,250) 0 0 Net cash inflow from disposal of subsidiaries 10 725,402 0 Net cash from/(used in) investing activities 2,003,203 1,450,989 (200,000) (12,000,000)
The accompanying notes form an integral part of the financial statements. 36 ANNUAL REPORT 2012 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2011 TO 31 MARCH 2012
Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 Note RM RM RM RM CASH FLOWS FROM FINANCING ACTIVITIES
Changes in fixed deposits with a licensed bank 102,075 (51,034) 0 0 Redemption of redeemable secured loan stocks 0 (2,565,000) 0 (2,565,000) Interest paid (3,084,198) (1,868,387) (2,451,334) (1,598,194) Repayment of term loans 0 (255,015) 0 0 Decrease in bank borrowings (429,090) (165,119) 0 0 Repayment of hire purchase payables (35,162) (153,706) 0 0 Net cash used in financing activities (3,446,375) (5,058,261) (2,451,334) (4,163,194)
Net (decrease)/increase in cash and cash equivalents (1,501,409) 1,717,838 650,213 15,007 Effects of exchange rate changes on cash and cash equivalents 453,610 (80,124) 0 0 Cash and cash equivalents at beginning of financial period/year 5,150,966 3,513,252 32,544 17,537
Cash and cash equivalents at end of financial period/year 17(e) 4,103,167 5,150,966 682,757 32,544
The accompanying notes form an integral part of the financial statements. 37 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012
1. CORPORATE INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Board.
The registered office of the Company is located at 51-21-A, Menara BHL Bank, Jalan Sultan Ahmad Shah, 10050 Penang.
The principal place of business of the Company is located at 18, Lebuhraya Kampung Jawa, 11900 Bayan Lepas, Penang.
The financial statements are presented in Ringgit Malaysia ('RM'), which is also the Company's functional currency.
The financial year end of the Company was changed from 31 December to 31 March for management planning purposes. Accordingly, comparative amounts for the statements of comprehensive income, statements of changes in equity, statements of cash flows and related notes are not comparable.
The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 20 July 2012.
2. PRINCIPAL ACTIVITIES The Company is a principally involved in investment holding.
The principal activities of the subsidiaries and associates are stated in Note 10 and Note 11 to the financial statements respectively. There have been no significant changes in the nature of the activities of the Group and of the Company during the financial period.
3. BASIS OF PREPARATION The financial statements of the Group and of the Company as set out on pages 29 to 109 have been prepared in accordance with applicable approved Financial Reporting Standards (‘FRSs’) and the provisions of the Companies Act, 1965 in Malaysia. However, Note 43 to the financial statements has been prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (‘MIA Guidance’) and the directive of Bursa Malaysia Securities Berhad.
4. SIGNIFICANT ACCOUNTING POLICIES 4.1 Basis of accounting The financial statements of the Group and of the Company have been prepared under the historical cost convention except as otherwise stated in the financial statements. The preparation of financial statements requires the Directors to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and contingent liabilities. In addition, the Directors are also required to exercise their judgment in the process of applying the accounting policies. The areas involving such judgments, estimates and assumptions are disclosed in Note 6 to the financial statements. Although these estimates and assumptions are based on the Directors’ best knowledge of events and actions, actual results could differ from those estimates. 38 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.2 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries. Subsidiaries are entities over which the Company has the power to govern the financial operating policies, generally accompanied by a shareholding giving rise to the majority of the voting rights, as to obtain benefits from their activities.
Subsidiaries are consolidated from the date on which control is transferred to the Group up to the effective date on which control ceases, as appropriate.
Intragroup balances, transactions, income and expenses are eliminated on consolidation. Unrealised gains arising from transactions with associates and joint ventures are eliminated against the investment to the extent of the Group's interest in the invested. Established losses are eliminated in the same way as unrealized gains, but only to the extent that there is no impairment.
The financial statements of the subsidiaries are prepared for the same reporting period as that of the Company, using consistent accounting policies. Where necessary, accounting policies of subsidiaries are changed to ensure consistency with the policies adopted by the other entities in the Group.
Non-controlling interests represents the equity in subsidiaries that are not attributable, directly or indirectly, to owners of the Company, and is presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to owners of the Company. Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Components of non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured at either fair value or at the present ownership instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. All other components of non-controlling interests shall be measured at their acquisition-date fair values, unless another measurement basis is required by FRSs. The choice of measurement basis is made on an combination-by-combination basis. Subsequent to initial recognition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ hare of subsequent changes in equity.
The Group has applied the revised FRS 3 Business Combinations in accounting for business combinations from 1 January 2011 onwards. The change in accounting policy has been applied prospectively in accordance with the transitional provisions provided by the Standard.
Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of consideration paid or received is recognised directly in equity and attributed to owners of the parent. 39 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.2 Basis of consolidation (cont’d) When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between: (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest; and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under FRS 139 Financial Instruments: Recognition and Measurement or, where applicable, the cost on initial recognition of an investment in associate or jointly controlled entity. 4.3 Business combinations Business combinations from 1 January 2011 onwards
Business combinations are accounted for by applying the acquisition method of accounting. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured at their fair value at the acquisition date, except that: (a) deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with FRS 112 Income Taxes and FRS 119 Employee Benefits respectively; (b) liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement by the Group of an acquiree’s share-based payment transactions are measured in accordance with FRS 2 Share-based Payment at the acquisition date; and (c) assets (or disposal groups) that are classified as held for sale in accordance with FRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the service are received. Any contingent consideration payable is recognised at fair value at the acquisition date. Measurement period adjustments to contingent consideration are dealt with as follows: (a) If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. (b) Subsequent changes to contingent consideration classified as an asset or liability that is a financial instrument within the scope of FRS 139 are recognised either in profit or loss or in other comprehensive income in accordance with FRS 139. All other subsequent changes are recognised in profit or loss. 40 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.3 Business combinations (cont’d) In a business combination achieved in stages, previously held equity interests in the acquiree are re-measured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.
The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the non- controlling interest’s proportionate share of the acquiree net identifiable assets.
Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill in the statement of financial position. The accounting policy for goodwill is set out in Note 4.8. In instances where the latter amount exceeds the former, the excess is recognised as a gain on bargain purchase in profit or loss on the acquisition date. Business combinations before 1 January 2011 Under the purchase method of accounting, the cost of business combination is measured at the aggregate of fair values at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued plus any costs directly attributable to the business combination. At the acquisition date, the cost of business combination is allocated to identifiable assets acquired, liabilities assumed and contingent liabilities in the business combination which are measured initially at their fair values at the acquisition date. The excess of the cost of business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill (see Note 4.8) to the financial statements on goodwill. If the cost of business combination is less than the interest in the net fair value of the identifiable assets, liabilities and contingent liabilities, the Group will:
(a) reassess the identification and measurement of the acquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the business combination; and (b) recognise immediately in profit or loss any excess remaining after that reassessment.
When a business combination includes more than one exchange transaction, any adjustment to the fair values of the subsidiary’s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation. 4.4 Property, plant and equipment and depreciation All items of property, plant and equipment are initially measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when the cost is incurred and it is probable that the future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Cost also comprises the initial estimate of dismantling and removing the asset and restoring the site on which it is located for which the Group is obligated to incur when the asset is acquired, if applicable. 41 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.4 Property, plant and equipment and depreciation (cont’d) Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the asset and which has different useful life, is depreciated separately. After initial recognition, property, plant and equipment except for long term leasehold and buildings are stated at cost less any accumulated depreciation and any accumulated impairment losses. The leasehold land and buildings are revalued with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. The surplus arising from such revaluations is credited to shareholders’ equity as a revaluation reserve, net of deferred tax, if any, and any subsequent deficit is offset against such surplus to the extent of a previous increase for the same property. In all other cases, the deficit will be charged to profit or loss. For a revaluation increase subsequent to a revaluation deficit of the same asset, the surplus is recognised as income to the extent that it reverses the deficit previously recognised as an expense with the balance of increase credited to revaluation reserve. Depreciation is calculated to write off the cost of the assets to their residual values on a straight line basis over their estimated useful lives. The principal annual depreciation period and rates are as follows: Buildings 2% - 10% Long term leasehold land 55 years Plant and machinery 10% - 20% Moulds 10% & 20% Motor vehicles 10% - 33% Office equipment, furniture and fittings 8% - 20% Tools, implements and equipment 10% & 20% Electrical installation and renovation 10% & 20% At the end of each reporting period, the carrying amount of an item of property, plant and equipment is assessed for impairment when events or changes in circumstances indicate that its carrying amount may not be recoverable. A write down is made if the carrying amount exceeds the recoverable amount (see Note 4.11 to the financial statements on impairment of non-financial assets). The residual values, useful lives and depreciation method are reviewed at the end of each reporting period to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. If expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate. The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the carrying amount is included in profit or loss and the revaluation surplus related to those assets, if any, is transferred directly to retained profits. 4.5 Investment properties Investment properties are properties which are owned to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. These include land held for a currently undetermined future use, if any. 42 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.5 Investment properties (cont’d) Investment properties are stated at cost less any accumulated depreciation and any accumulated impairment losses, consistent with the accounting policy for property, plant and equipment as stated in accounting policy Note 4.4.
Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of 50 years for buildings. Freehold land is not depreciated.
Transfers between investment property, property, plant and equipment and inventories do not change the carrying amount and the cost of the property transferred
An investment property is derecognised on its disposal, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period in which the item is derecognised.
4.6 Hire purchase (a) Hire purchase Assets acquired under hire purchase which transfer substantially all the risks and rewards of ownership to the Group are recognised initially at amounts equal to the fair value of the hire purchased assets or, if lower, the present value of minimum hire purchase payments, each determined at the inception of the hire purchase. The discount rate used in calculating the present value of the minimum hire purchase payments is the interest rate implicit in the hire purchase, if this is practicable to determine; if not, the Group’s incremental borrowing rate is used. Any initial direct costs incurred by the Group are added to the amount recognised as an asset. The assets are capitalised as property, plant and equipment and the corresponding obligations are treated as liabilities. The property, plant and equipment capitalised are depreciated on the same basis as owned assets. The minimum hire purchase payments are apportioned between the finance charges and the reduction of the outstanding liability. The finance charges are recognised in profit or loss over the period of the hire purchase term so as to produce a constant periodic rate of interest on the remaining hire purchase liabilities.
(b) Operating leases A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. Lease payments under operating leases are recognised as an expense on a straight-line basis over the lease term.
4.7 Investments (a) Subsidiaries A subsidiary is an entity in which the Group and the Company have power to control the financial and operating policies so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity. 43 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.7 Investments (cont’d) An investment in subsidiary, which is eliminated on consolidation, is stated in the Company’s separate financial statements at cost. Investments accounted for at cost shall be accounted for in accordance with FRS 5 Non-current Assets Held for Sale and Discontinued Operations when they are classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with FRS 5.
When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the Group would derecognise all assets, liabilities and non-controlling interests at their carrying amount and to recognise the fair value of the consideration received. Any retained interest in the former subsidiary is recognised at its fair value at the date control is lost. The resulting difference is recognised as a gain or loss in profit or loss.
(b) Associates An associate is an entity over which the Group and the Company have significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
In the Company’s separate financial statements, an investment in associate is stated at cost less impairment losses.
An investment in associate is accounted for in the consolidated financial statements using the equity method of accounting. The investment in associate in the consolidated statement of financial position is initially recognised at cost and adjusted thereafter for the post acquisition change in the Group’s share of net assets of the investments.
The interest in the associate is the carrying amount of the investment in the associate under the equity method together with any long term interest that, in substance, form part of the Group’s net investment in the associate.
The Group’s share of the profit or loss of the associate during the financial year is included in the consolidated financial statements, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. Distributions received from the associate reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the Group’s proportionate interest in the associate arising from changes in the associate’s equity that have not been recognised in the associate’s profit or loss. Such changes include those arising from the revaluation of property, plant and equipment and from foreign exchange translation differences. The Group’s share of those changes is recognised directly in equity of the Group.
Unrealised gains and losses on transactions between the Group and the associate are eliminated to the extent of the Group’s interest in the associate.
44 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.7 Investments (cont’d) When the Group’s share of losses in the associate equals to or exceeds its interest in the associate, the carrying amount of that interest is reduced to nil and the Group does not recognise further losses unless it has incurred legal or constructive obligations or made payments on its behalf.
The most recent available financial statements of the associate are used by the Group in applying the equity method. When the end of the reporting periods of the financial statements are not coterminous, the share of results is arrived at using the latest audited financial statements for which the difference at the end of the reporting periods is no more than three (3) months. Adjustments are made for the effects of any significant transactions or events that occur between the intervening periods.
Upon disposal of an investment in associate, the difference between the net disposal proceeds and its carrying amount is included in profit or loss.
4.8 Goodwill Goodwill recognised in a business combination is an asset at the acquisition date and is initially measured at cost being the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
After initial recognition, goodwill is measured at cost less accumulated impairment losses, if any. Goodwill is not amortised but instead tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
4.9 Property development activities
(a) Land held for property development Land held for property development is stated at cost less impairment losses, if any. Such land is classified as non-current asset when no significant development work has been carried out or where development activities are not expected to be completed within the normal operating cycle.
Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties, commissions, conversion fees and other relevant levies
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. 45 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.9 Property development activities (cont’d)
(b) Property development costs
Property development costs comprise all cost that are directly attributable to the development activities or that can be allocated on a reasonable basis to such activities. They comprise the cost of land under development, construction costs and other related development costs common to the whole project including professional fees, stamp duties, commissions, conversion fees and other relevant levies as well as borrowing costs.
Property development costs not recognised as an expense are recognised as an asset measured at the lower of cost and net realisable value.
When revenue recognised in profit or loss exceeds progress billings to purchasers, the balance is classified as accrued billings under current assets. When progress billings exceed revenue recognised in profit or loss, the balance is classified as progress billings under current liabilities.
4.10 Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is determined using the first-in, first-out formula. The cost of raw materials comprises all costs of purchase plus the cost of bringing the inventories to their present location and condition. The cost of work-in-progress and finished goods includes the cost of raw materials, direct labour, other direct cost and a proportion of production overheads based on normal operating capacity of the production facilities. The cost of completed properties held for sale comprises cost associated with the acquisition of land, direct costs and appropriate proportions of common costs.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
4.11 Impairment of non-financial assets The carrying amount of assets, except for financial assets (excluding investments in subsidiaries and associates), inventories, property development costs, deferred tax assets and non-current assets (or disposal groups) held for sale, are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Goodwill and intangible assets that have an indefinite useful life are tested annually for impairment or more frequently if events or changes in circumstances indicate that the goodwill or intangible asset might be impaired. The recoverable amount of an asset is estimated for an individual asset. Where it is not possible to estimate the recoverable amount of the individual asset, the impairment test is carried out on the cash generating unit (”CGU”) to which the asset belongs. Goodwill acquired in a business combination is from the acquisition date, allocated to each of the Group’s CGU or groups of CGU that are expected to benefit from the synergies of the combination giving rise to the goodwill irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units. 46 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.11 Impairment of non-financial assets (cont’d)
Goodwill acquired in a business combination shall be tested for impairment as part of the impairment testing of CGU to which it relates. The CGU to which goodwill is allocated shall represent the lowest level within the Group at which the goodwill is monitored for internal management purposes and not larger than an operating segment determined in accordance with FRS 8.
The recoverable amount of an asset or CGU is the higher of its fair value less cost to sell and its value in use.
In estimating the value in use, the estimated future cash inflows and outflows to be derived from continuing use of the asset and from its ultimate disposal are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted. An impairment loss is recognised in profit or loss when the carrying amount of the asset or the CGU, including the goodwill or intangible asset, exceeds the recoverable amount of the asset or the CGU. The total impairment loss is allocated, first, to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the CGU on a pro-rata basis of the carrying amount of each asset in the CGU.
The impairment loss is recognised in profit or loss immediately except for the impairment on a revalued asset where the impairment loss is recognised directly against the revaluation reserve to the extent of the surplus credited from the previous revaluation for the same asset with the excess of the impairment loss charged to profit or loss.
An impairment loss on goodwill is not reversed in subsequent periods. An impairment loss for other assets is reversed if, and only if, there has been a change in the estimates used to determine the assets’ recoverable amount since the last impairment loss was recognised.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Such reversals are recognised as income immediately in profit or loss except for the reversal of an impairment loss on a revalued asset where the reversal of the impairment loss is treated as a revaluation increase and credited to the revaluation reserve account of the same asset. However, to the extent that an impairment loss in the same revalued asset was previously recognised in profit or loss, a reversal of that impairment loss is also recognised in profit or loss.
4.12 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.
A financial asset is any asset that is cash, an equity instrument of another enterprise, a contractual right to receive cash or another financial asset from another enterprise, or a contractual right to exchange financial assets or financial liabilities with another enterprise under conditions that are potentially favourable to the Group. 47 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.12 Financial instruments (cont’d)
A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or a contractual obligation to exchange financial assets or financial liabilities with another enterprise under conditions that are potentially unfavourable to the Group.
Financial instruments are recognised on the statement of financial position when the Group has become a party to the contractual provisions of the instrument. At initial recognition, a financial instrument is recognised at fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issuance of the financial instrument.
An embedded derivative is separated from the host contract and accounted for as a derivative if, and only if the economic characteristics and risks of the embedded derivative is not closely related to the economic characteristics and risks of the host contract, a separate instrument with the same terms as the embedded derivative meets the definition of a derivative, and the hybrid instrument is not measured at fair value through profit or loss.
(a) Financial assets A financial asset is classified into the following four categories after initial recognition for the purpose of subsequent measurement: (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss comprise financial assets that are held for trading (i.e. financial assets acquired principally for the purpose of resale in the near term), derivatives (both, freestanding and embedded) and financial assets that were specifically designated into this classification upon initial recognition. Subsequent to initial recognition, financial assets classified as at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in the fair value of financial assets classified as at fair value through profit or loss are recognised in profit or loss. Net gains or losses on financial assets classified as at fair value through profit or loss exclude foreign exchange gains and losses, interest and dividend income. Such income is recognised separately in profit or loss as components of other income or other operating losses. However, derivatives that is linked to and must be settled by delivery of unquoted equity instruments that do not have a quoted market price in an active market are recognised at cost. (ii) Held-to-maturity investments Financial assets classified as held-to-maturity comprise non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity. Subsequent to initial recognition, financial assets classified as held-to-maturity are measured at amortised cost using the effective interest method. Gains or losses on financial assets classified as held-to-maturity are recognised in profit or loss when the financial assets are derecognised or impaired, and through the amortisation process. 48 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.12 Financial instruments (cont’d) (iii) Loans and receivables
Financial assets classified as loans and receivables comprise non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Subsequent to initial recognition, financial assets classified as loans and receivables are measured at amortised cost using the effective interest method. Gains or losses on financial assets classified as loans and receivables are recognised in profit or loss when the financial assets are derecognised or impaired, and through the amortisation process.
(iv) Available-for-sale financial assets
Financial assets classified as available-for-sale comprise non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.
Subsequent to initial recognition, financial assets classified as available-for-sale are measured at fair value. Any gains or losses arising from changes in the fair value of financial assets classified as available-for-sale are recognised directly in other comprehensive income, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognised, at which time the cumulative gains or losses previously recognised in other comprehensive income are recognised in profit or loss. However, interest calculated using the effective interest method is recognised in profit or loss whilst dividends on available-for-sale equity instruments are recognised in profit or loss when the Group’s right to receive payment is established.
Cash and cash equivalents include cash and bank balances, bank overdrafts, deposits and other short term, highly liquid investments with original maturities of three (3) months or less, which are readily convertible to cash and are subject to insignificant risk of changes in value.
A financial asset is derecognised when the contractual right to receive cash flows from the financial asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised directly in other comprehensive income shall be recognised in profit or loss.
A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or marketplace convention. A regular way purchase or sale of financial assets shall be recognised and derecognised, as applicable, using trade date accounting.
49 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.12 Financial instruments (cont’d)
(b) Financial liabilities
Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. A financial liability is classified into the following two categories after initial recognition for the purpose of subsequent measurement:
(i) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss comprise financial liabilities that are held for trading, derivatives (both, freestanding and embedded) and financial liabilities that were specifically designated into this classification upon initial recognition.
Subsequent to initial recognition, financial liabilities classified as at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in the fair value of financial liabilities classified as at fair value through profit or loss are recognised in profit or loss. Net gains or losses on financial liabilities classified as at fair value through profit or loss exclude foreign exchange gains and losses, interest and dividend income. Such income is recognised separately in profit or loss as components of other income or other operating losses.
(ii) Other financial liabilities
Financial liabilities classified as other financial liabilities comprise non-derivative financial liabilities that are neither held for trading nor initially designated as at fair value through profit or loss.
Subsequent to initial recognition, other financial liabilities are measured at amortised cost using the effective interest method. Gains or losses on other financial liabilities are recognised in profit or loss when the financial liabilities are derecognised and through the amortisation process.
A financial liability is derecognised when, and only when, it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expires. An exchange between an existing borrower and lender of debt instruments with substantially different terms are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
The difference between the carrying amount of a financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. 50 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
4.12 Financial instruments (cont’d)
The Group designates corporate guarantees given to banks for credit facilities granted to subsidiaries as insurance contracts as defined in FRS 4 Insurance Contracts. The Group recognises these insurance contracts as recognised insurance liabilities when there is a present obligation, legal or constructive, as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
At the end of every reporting period, the Group shall assess whether its recognised insurance liabilities are adequate, using current estimates of future cash flows under its insurance contracts. If this assessment shows that the carrying amount of the insurance liabilities is inadequate, the entire deficiency shall be recognised in profit or loss.
Recognised insurance liabilities are only removed from the statement of financial position when, and only when, it is extinguished via a discharge, cancellation or expiration.
(c) Equity An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are classified as equity instruments.
Ordinary shares are recorded at the nominal value and proceeds in excess of the nominal value of shares issued, if any, are accounted for as share premium. Both ordinary shares and share premium are classified as equity. Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit. Otherwise, they are charged to profit or loss.
Interim dividends to shareholders are recognised in equity in the period in which they are declared. Final dividends are recognised upon the approval of shareholders in a general meeting.
The Group measures a liability to distribute non-cash assets as a dividend to the owners of the Company at the fair value of the assets to be distributed. The carrying amount of the dividend is remeasured at each reporting date and at the settlement date, with any changes recognised directly in equity as adjustments to the amount of the distribution. On settlement of the transaction, the Group recognises the difference, if any, between the carrying amount of the assets distributed and the carrying amount of the liability in profit or loss.
If the Company reacquires its own equity instruments, the consideration paid, including any attributable transaction costs is deducted from equity as treasury shares until they are cancelled. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. Where such shares are issued by resale, the difference between the sales consideration and the carrying amount is shown as a movement in equity.
51 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.13 Impairment of financial assets
The Group assesses whether there is any objective evidence that a financial asset is impaired at the end of each reporting period.
Loans and receivables
The Group collectively considers factors such as the probability of bankruptcy or significant financial difficulties of the receivable and default or significant delay in payments to determine whether there is objective evidence that an impairment loss on loans and receivables has occurred. Other objective evidence of impairment include historical collection rates determined on an individual basis and observable changes in national or local economic conditions that are directly correlated with the historical default rates of receivables.
If any such objective evidence exists, the amount of impairment loss is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
The carrying amount of loans and receivables is reduced through the use of an allowance account.
If in a subsequent period, the amount of the impairment loss decreases and it objectively relates to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of impairment reversed is recognised in profit or loss.
4.14 Borrowing costs
All borrowing cost is recognised in profit or loss in the period in which they are incurred.
4.15 Provisions
Provisions are recognised when there is a present obligation, legal or constructive, as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
When the effect of the time value of money is material, the amount of a provision will be discounted to its present value at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision will be reversed.
Provisions are not recognised for future operating losses. If the Group has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision. 52 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
4.16 Income taxes
Taxes in the income statement comprise current tax and deferred tax.
(a) Current tax Current tax is the amount of income taxes payable or receivable in respect of the taxable profit or loss for a period.
Current tax for the current and prior periods is measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that have been enacted or substantively enacted by the end of the reporting period.
(b) Deferred tax Deferred tax is recognised in full using the liability method on temporary differences arising between the carrying amount of an asset or liability in the statement of financial position and its tax base.
Deferred tax is recognised for all temporary differences, unless the deferred tax arises from goodwill or the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of transaction, affects neither accounting profit nor taxable profit.
A deferred tax asset is recognised only to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. The carrying amount of a deferred tax asset is reviewed at the end of each reporting period. If it is no longer probable that sufficient taxable profits will be available to allow the benefit of part or all of that deferred tax asset to be utilised, the carrying amount of the deferred tax asset will be reduced accordingly. When it becomes probable that sufficient taxable profits will be available, such reductions will be reversed to the extent of the taxable profits.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same taxation authority on either:
(i) either the same taxable entity; or
(ii) different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Deferred tax will be recognised as income or expense and included in the profit or loss for the period unless the tax relates to items that are credited or charged, in the same or a different period, directly to equity, in which case the deferred tax will be charged or credited directly to equity.
53 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
4.16 Income taxes (cont’d)
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the reporting period.
4.17 Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Group does not recognise a contingent liability but discloses its existence in the financial statements.
A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but disclose its existence where inflows of economic benefits are probable, but not virtually certain.
In the acquisition of subsidiaries by the Group under business combinations, contingent liabilities assumed are measured initially at their fair value at the acquisition date, irrespective of the extent of any non-controlling interest.
4.18 Employee benefits
(a) Short term employee benefits
Wages, salaries, social security contributions, paid annual leave, paid sick leave, bonuses and non-monetary benefits are recognised as an expense in the financial year when employees have rendered their services to the Group.
Short term accumulating compensated absences such as paid annual leave are recognised as an expense when employees render services that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.
Bonuses are recognised as an expense when there is a present, legal or constructive obligation to make such payments, as a result of past events and when a reliable estimate can be made of the amount of the obligation.
(b) Defined contribution plans
The Company and its subsidiaries make contributions to a statutory provident fund. The contributions are recognised as a liability after deducting any contribution already paid and as an expense in the period in which the employees render their services.
54 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
4.19 Foreign currencies
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (’the functional currency’). The consolidated financial statements are presented in Ringgit Malaysia, which is the Company’s functional and presentation currency.
(b) Foreign currency translations and balances
Transactions in foreign currencies are converted into Ringgit Malaysia at rates of exchange ruling at the transaction dates. Monetary assets and liabilities in foreign currencies at the end of the reporting period are translated into Ringgit Malaysia at rates of exchange ruling at that date. All exchange differences arising from the settlement of foreign currency transactions and from the translation of foreign currency monetary assets and liabilities are included in profit or loss in the period in which they arise. 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 for presentation currency purposes.
(c) Foreign operations
Financial statements of foreign operations are translated at end of the reporting period exchange rates with respect to their assets and liabilities, and at exchange rates at the dates of the transactions with respect to the statement of comprehensive income. All resulting translation differences are recognised as a separate component of equity
In the consolidated financial statements, exchange differences arising from the translation of net investment in foreign operations are taken to equity. When a foreign operation is partially disposed off or sold, exchange differences that were recorded in equity are recognised in profit or loss as part of the gain or loss on disposal.
Exchange differences arising on a monetary item that forms part of the net investment of the Company in a foreign operation shall be recognised in profit or loss in the separate financial statements of the Company or the foreign operation, as appropriate. In the consolidated financial statements, such exchange differences shall be recognised initially as a separate component of equity and recognised in profit or loss upon disposal of the net investment
Goodwill and fair value adjustments to the assets and liabilities arising from the acquisition of a foreign operation are treated as assets and liabilities of the acquired entity and translated at the exchange rate ruling at the end of the reporting period.
55 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
4.20 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable net of discounts and rebates.
Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group, and the amount of revenue and the cost incurred or to be incurred in respect of the transaction can be reliably measured and specific recognition criteria have been met for each of the Group’s activities as follows:
(a) Sale of goods
Revenue from sale of goods is recognised when significant risk and rewards of ownership of the goods has been transferred to the customer and where the Group retains neither continuing managerial involvement over the goods, which coincides with the delivery of goods and acceptance by customers.
(b) Services
Revenue in respect of the rendering of services is recognised when the stage of completion at the end of the reporting period and the cost incurred can be reliably measured. The stage of completion is determined by the services performed to date as a percentage of total services to be performed.
(c) Property development
Property development revenue is recognised in respect of all development units that have been sold. Revenue recognition commences when the sale of the development unit is effected, upon the commencement of development and construction activities and when the financial outcome can be reliably estimated. The attributable portion of property development cost is recognised as an expense in the period in which the related revenue is recognised. The amount of such revenue and expenses recognised is determined by reference to the stage of completion of development activity at the end of the reporting period. The stage of completion is measured by reference to the proportion that property development costs incurred for work performed to date bear to the estimated total property development cost.
When the financial outcome of a development activity cannot be reliably estimated, the property development revenue is recognised only to the extent of property development costs incurred that is probable to be recoverable and the property development costs on the development units sold are recognised as an expense in the period in which they are incurred.
Any expected loss on a development project is recognised as an expense immediately, including costs to be incurred over the defects liability period.
(d) Interest income
Interest income is recognised as it accrues, using the effective interest method. 56 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.20 Revenue recognition (cont’d)
(e) Rental income
Rental income is accounted for on a straight line basis over the lease term of an ongoing lease. The aggregate cost of incentives provided to the lessee is recognised as reduction of rental income over the lease term on a straight line basis.
(f) Management fee and other operating income
Management fee and other operating income are recognised on an accrual basis.
4.21 Operating segments
Operating segments are defined as components of the Group that:
(a) engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group);
(b) whose operating results are regularly reviewed by the Group’s chief operating decision maker (i.e. the Managing Director) in making decisions about resources to be allocated to the segment and assessing its performance; and
(c) for which discrete financial information is available.
An operating segment may engage in business activities for which it has yet to earn revenues
The Group reports separately information about each operating segment that meets any of the following quantitative thresholds:
(a) Its reported revenue, including both sales to external customers and intersegment sales or transfers, is ten (10) per cent or more of the combined revenue, internal and external, of all operating segments.
(b) The absolute amount of its reported profit or loss is ten (10) per cent or more of the greater, in absolute amount of:
(i) the combined reported profit of all operating segments that did not report a loss; and
(ii) the combined reported loss of all operating segments that reported a loss.
(c) Its assets are ten (10) per cent or more of the combined assets of all operating segments
Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and separately disclosed, if the management believes that information about the segment would be useful to users of the financial statements.
57 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.21 Operating segments (cont’d)
Total external revenue reported by operating segments shall constitute at least seventy five (75) percent of the Group’s revenue. Operating segments identified as reportable segments in the current financial year in accordance with the quantitative thresholds would result in a restatement of prior period segment data for comparative purposes.
4.22 Earnings per share
(a) Basic
Basic earnings per ordinary share for the financial year is calculated by dividing the profit for the financial year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the financial year.
(b) Diluted
Diluted earnings per ordinary share for the financial year is calculated by dividing the profit for the financial year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the financial year adjusted for the effects of dilutive potential ordinary shares.
5. ACCOUNTING STANDARDS
5.1 New Financial Reporting Standards (’FRSs’) and Amendments to FRSs adopted during the financial period
During the current financial year, the Company adopted the following new FRSs and Amendments to FRSs:
Title Effective Date Amendments to FRS 132 Financial Instruments: Presentation 1 March 2010 IC Interpretation 12 Service Concession Arrangements 1 July 2010 FRS 1 First-time Adoption of Financial Reporting Standards 1 July 2010 FRS 3 Business Combinations 1 July 2010 FRS 127 Consolidated and Separate Financial Statements 1 July 2010 Amendments to FRS 2 Share-based Payment 1 July 2010 Amendments to FRS 5 Non-Current Assets Held for Sale and Discontinued 1 July 2010 Operations Amendments to FRS 138 Intangible Assets 1 July 2010 IC Interpretation 16 Hedges of a Net Investment in a Foreign Operation 1 July 2010 IC Interpretation 17 Distributions of Non-cash Assets to Owners 1 July 2010 Amendments to IC Interpretation 9 Reassessment of Embedded Derivatives 1 July 2010 Limited Exemption from Comparative FRS 7 Disclosures for First-time 1 January 2011 Adopters (Amendment to FRS 1) Additional Exemptions for First-time Adopters (Amendments to FRS 1) 1 January 2011 Group Cash-settled Share-based Payment Transactions 1 January 2011 (Amendments to FRS 2) Improving Disclosures about Financial Instruments 1 January 2011 (Amendments to FRS 7) 58 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
5. ACCOUNTING STANDARDS (cont’d)
IC Interpretation 4 Determining Whether an Arrangement contains a Lease 1 January 2011 IC Interpretation 18 Transfers of Assets from Customers 1 January 2011 Improvements to FRSs (2010) 1 January 2011 Mandatory Effective Date of MFRS 9 and Transition Disclosures Immediately (Amendments to FRS 7) There is no material impact upon adoption of the new FRSs and Amendments to FRSs during the current financial period. 5.2 New Malaysian Financial Reporting Standards (’MFRS’) that have been issued, but not yet effective and not yet adopted, for annual periods beginning on or after 1 January 2012 On 19 November 2011, the Malaysian Accounting Standards Board (’MASB’) announced the issuance of the new MFRS framework that is applicable to entities other than private entities. The Group is expected to apply the MFRS framework for the financial year ending 31 March 2013. This would result in the Group preparing an opening MFRS statement of financial position as at 1 January 2011 which adjusts for differences between the classification and measurement bases in the existing FRS framework versus that in the new MFRS framework. This would also result in a restatement of the annual and quarterly financial performance for the financial period from 1 January 2011 to 31 March 2012 in accordance with MFRS which would form the MFRS comparatives for the annual and quarterly financial performance for the financial year ending 31 March 2013.
The MFRSs and IC Interpretations expected to be adopted are as follows:
Effective Date MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards 1 January 2012 MFRS 2 Share-based Payment 1 January 2012 MFRS 3 Business Combinations 1 January 2012 MFRS 4 Insurance Contracts 1 January 2012 MFRS 5 Non-current Assets Held for Sale and Discontinued Operations 1 January 2012 MFRS 6 Exploration for and Evaluation of Mineral Resources 1 January 2012 MFRS 7 Financial Instruments: Disclosures 1 January 2012 MFRS 8 Operating Segments 1 January 2012 MFRS 9 Financial Instruments 1 January 2015 MFRS 10 Consolidated Financial Statements 1 January 2013 MFRS 11 Joint Arrangements 1 January 2013 MFRS 12 Disclosure of Interests in Other Entities 1 January 2013 MFRS 13 Fair Value Measurement 1 January 2013 MFRS 101 Presentation of Financial Statements 1 January 2012 Amendments to MFRS 101 Presentation of Items of Other 1 July 2012 Comprehensive Income MFRS 102 Inventories 1 January 2012 MFRS 107 Statement of Cash Flows 1 January 2012 MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors 1 January 2012 59 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
5. ACCOUNTING STANDARDS (cont’d) 5.2 New Malaysian Financial Reporting Standards (’MFRS’) that have been issued, but not yet effective and not yet adopted, for annual periods beginning on or after 1 January 2012 (cont’d)
MFRS 110 Events After the Reporting Period 1 January 2012 MFRS 111 Construction Contracts 1 January 2012 MFRS 112 Income Taxes 1 January 2012 MFRS 116 Property, Plant and Equipment 1 January 2012 MFRS 117 Leases 1 January 2012 MFRS 118 Revenue 1 January 2012 MFRS 119 Employee Benefits 1 January 2012 MFRS 119 Employee Benefits (revised) 1 January 2013 MFRS 120 Accounting for Government Grants and Disclosure of Government 1 January 2012 Assistance MFRS 121 The Effects of Changes in Foreign Exchange Rates 1 January 2012 MFRS 123 Borrowing Costs 1 January 2012 MFRS 124 Related Party Disclosures 1 January 2012 MFRS 126 Accounting and Reporting by Retirement Benefit Plans 1 January 2012 MFRS 127 Consolidated and Separate Financial Statements 1 January 2012 MFRS 127 Separate Financial Statements 1 January 2013 MFRS 128 Investments in Associates 1 January 2012 MFRS 128 Investments in Associates and Joint Ventures 1 January 2013 MFRS 129 Financial Reporting in Hyperinflationary Economies 1 January 2012 MFRS 131 Interests in Joint Ventures 1 January 2012 MFRS 132 Financial Instruments: Presentation 1 January 2012 MFRS 133 Earnings Per Share 1 January 2012 MFRS 134 Interim Financial Reporting 1 January 2012 MFRS 136 Impairment of Assets 1 January 2012 MFRS 137 Provisions, Contingent Liabilities and Contingent Assets 1 January 2012 MFRS 138 Intangible Assets 1 January 2012 MFRS 139 Financial Instruments: Recognition and Measurement 1 January 2012 MFRS 140 Investment Property 1 January 2012 MFRS 141 Agriculture 1 January 2012 Improvements to MFRSs (2008) 1 January 2012 Improvements to MFRSs (2009) 1 January 2012 Improvements to MFRSs (2010) 1 January 2012 Amendments to MFRS 1 Government Loans 1 January 2013 Amendments to MFRS 7 Disclosures - Offsetting Financial Assets and 1 January 2013 Financial Liabilities Amendments to MFRS 132 Offsetting Financial Assets and 1 January 2014 Financial Liabilities Mandatory Effective Date of MFRS 9 and Transition Disclosures 1 January 2015 60 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
5. ACCOUNTING STANDARDS (cont’d) 5.2 New Malaysian Financial Reporting Standards (’MFRS’) that have been issued, but not yet effective and not yet adopted, for annual periods beginning on or after 1 January 2012 (cont’d)
IC Interpretation 1 Changes in Existing Decommissioning, Restoration 1 January2012 dan Similar Liabilities IC Interpretation 2 Members’ Shares in Co-operative Entities 1 January 2012 and Similar Instruments IC Interpretation 4 Determining Whether an Arrangement Contains a Lease 1 January 2012 IC Interpretation 5 Rights to Interests Arising from Decommissioning, 1 January 2012 Restoration and Environmental Rehabilitation Funds IC Interpretation 6 Liabilities Arising from Participating in a Specific Market 1 January 2012 Waste Electrical and Electronic Equipment IC Interpretation 7 Applying the Restatement Approach under MFRS 129 1 January 2012 Financial Reporting in Hyperinflationary Economies IC Interpretation 9 Reassessment of Embedded Derivatives 1 January 2012 IC Interpretation 10 Interim Financial Reporting and Impairment 1 January 2012 IC Interpretation 12 Service Concession Arrangements 1 January 2012 IC Interpretation 13 Customer Loyalty Programmes 1 January 2012 IC Interpretation 14 MFRS 119 - The Limit on a Defined Benefit Asset, 1 January 2012 Minimum Funding Requirements and their Interaction IC Interpretation 15 Agreements for the Construction of Real Estate 1 January 2012 IC Interpretation 16 Hedges of a Net Investment in a Foreign Operation 1 January 2012 IC Interpretation 17 Distributions of Non-cash Assets to Owners 1 January 2012 IC Interpretation 18 Transfers of Assets from Customers 1 January 2012 IC Interpretation 19 Extinguishing Financial Liabilities with 1 January 2012 Equity Instruments IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2013 IC Interpretation 107 Introduction of the Euro 1 January 2012 IC Interpretation 110 Government Assistance - No Specific Relation to 1 January 2012 Operating Activities IC Interpretation 112 Consolidation - Special Purpose Entities 1 January 2012 IC Interpretation 113 Jointly Controlled Entities - Non-Monetary 1 January 2012 Contributions by Venturers IC Interpretation 115 Operating Leases - Incentives 1 January 2012 IC Interpretation 125 Income Taxes - Changes in the Tax Status of an Entity 1 January 2012 or its Shareholders IC Interpretation 127 Evaluating the Substance of Transactions Involving the 1 January 2012 Legal Form of a Lease IC Interpretation 129 Service Concession Arrangements: Disclosures 1 January 2012 IC Interpretation 131 Revenue - Barter Transactions Involving 1 January 2012 Advertising Services IC Interpretation 132 Intangible Assets - Web Site Costs 1 January 2012
The Group is in the process of assessing the impact of implementing the MFRS framework since the effects would only be observable for the financial year ending 31 March 2013. 61 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
6. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
6.1 Changes in estimates
There are no significant changes in accounting estimates during the financial period.
6.2 Critical judgement
The following are judgements made by management in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial statements.
(a) Non-current assets and disposal group held for sale
Certain non-current assets, current assets and current liabilities have been classified as non-current assets and disposal group held for sale as the management has committed to a plan to sell the assets and liabilities as at the end of the reporting period. Barring any unforeseen circumstances, the Group expects that the sale of the assets and liabilities to be completed within the next twelve (12) months.
(b) Contingent liabilities
The determination of treatment of contingent liabilities is based on management's view of the expected outcome of the contingencies for matters in the ordinary course of the business.
6.3 Key sources of estimation uncertainty
The following are key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
(a) Depreciation of plant and machinery
The cost of plant and machinery is depreciated on a straight-line basis over the assets' useful lives. The estimated useful lives applied by the Group as disclosed in Note 4.4 to the financial statements reflects the Directors' estimate of the period that the Group expects to derive future economic benefits from the use of the Group's plant and machinery. These are common life expectancies applied in various business segments of the Group. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, and therefore future depreciation charges could be revised.
(b) Deferred tax assets
Deferred tax assets are recognised for all deductible temporary timing differences to the extent that it is probable that taxable profits will be available against which the deductible temporary timing differences can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
62 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
6. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d) 6.3 Key sources of estimation uncertainty (cont’d)
(c) Impairment of receivables
The Group makes impairment of receivables based on an assessment of the recoverability of receivables. Impairment is applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. The management specifically analyses historical bad debt, customer concentration, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of impairment of receivables. Where expectations differ from the original estimates, the differences will impact the carrying amount of receivables.
(d) Property development
The Company recognises property development revenue and expenses in profit or loss by using the stage of completion method. The stage of completion is determined by the proportion that the property development costs incurred for work performed to date bear to the estimated total property development costs.
Significant judgement is required in determining the stage of completion, the extent of total property development costs incurred, the estimated total property development revenue and costs, as well as the recoverability of the development projects. In making the judgement, the Company evaluated based on the past experience and by relying on the work of specialists.
(e) Fair values of borrowings
The fair values of borrowings are estimated by discounting future contractual cash flows at the current market interest rates available to the Group for similar financial instruments. It is assumed that the effective interest rates approximate the current market interest rates available to the Group based on its size and its business risk.
(f) Impairment of goodwill on consolidation and investments in subsidiaries
The Group determines whether goodwill on consolidation is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the subsidiaries to which goodwill is allocated.
The Company has also reviewed the carrying amounts of its investments in subsidiaries and when there are any indications of impairment, a similar impairment test has been performed, based on the expected discounted cash flow of these subsidiaries. The carrying amount of the investments in subsidiaries of the Company are as stated on the statement of financial position.
Further details are disclosed in Notes 9 and 10 to the financial statements respectively.
63 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d) RM RM Balance as Balance at 31.3.2012 at 0 72,073 00 10,650,000 5,150,000 0 20,622,984 0 15,425 0 1,079,467 0 5,150,000 0 45,114 0 10,650,000 0 846,375 RM RM Accumulated Carrying Reclassification 0 68,62500 1,022,7840 846,375 3,068,6360 1,624,2280 689,182 2,075,348 1,013,3000 45,114 1,079,467 6,789 53,434 15,425 72,073 0 0 0 0 (2,092,108) 2,075,348 0 RM RM 00 10,650,000 5,150,000 RM RM Cost Valuation depreciation amount 22,214 915,000 125,507 1,711,966 5,143,984 1,669,342 2,092,767 11,680,780 15,800,000 6,857,796 20,622,984 [------At 31.3.2012------] [------At 0 (19,222) 0 (4,162) 000 (25,478) 0 (816,030) (970,763) (223,367) (16,537) 2,092,108 (1,002) 689,182 0 (162,036) 0 (163,247) (2,817) RM for salefor the financial Translation Transfer toTransfer Depreciation assets held for charges 0 0 0 0 0 0 RM 0 0 0 (367) (342) (256,252) (137) 0 0 0 RM 0 0 0 RM Disposal of a 0 0 RM 0 63,858 15,827 0 11,120 00 931,4350 (2,651,270) 138,875 170,491 (716,608) (190,346) (23,821) (2,542) (11,579) 0 1,278,616 2,192,243 (815,953) (3,516) 0 53,566 (306,066) RM RM 8,467 11,610 332,533 774,485 4,400,993 1,868,626 2,486,829 4,180,861 6,631,175 1,264,939 12,118,245 11,032,168 2,647,961 (963,433) (1,544,140) (6,425) (342) (2,640,557) (20,493) Balance as Balance at 1.1.2011at Revaluation Additions subsidiary Disposals off Written 18) (Note period adjustment PROPERTY, PLANT AND EQUIPMENT PROPERTY, - at 2012 valuation - at 2012 valuation leasehold land at term Long and machineryPlant Moulds Motor vehicles and fittings Office furniture equipment, and equipment implements Tools, Electrical and renovation installation Buildings cost - at at 2012 valuation at
Electrical and renovation installation Tools, implements and equipment implements Tools, Plant and machineryPlant Motor vehicles and fittingsOffice furniture equipment, 1,189,895 Moulds Long term leasehold land term Long - at 2012 valuation - at Carrying amount Buildings cost - at Group 64 7. ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d) RM RM 8,467 8,467 11,610 11,610 332,533 774,485 332,533 774,485 amount Carrying 1,189,895 1,334,453 4,111,347 1,868,626 1,868,626 2,486,829 2,486,829 1,189,895 1,334,453 4,111,347 0 0 0 0 0 RM RM 2,627 29,027 (3,506) 346,515 796,469 (55,352) (20,754) (281,657) (361,269) 12,118,245 1,778,644 2,005,693 6,516,911 8,754,029 2,243,653 Accumulated 0 0 0 0 0 0 0 0 RM RM (881) (7,044) (28,032) (129,769) (127,100) (575,245) (852,621) (250,334) (176,826) 6,355,000 22,473,568 12,118,245 6,355,000 Depreciation charges for the for charges Translation as Balance 0 0 0 0 0 0 0 0 (3) RM RM Cost Valuation depreciation 40,637 11,094 (3,738) (3,741) (2,147,852) 2,968,539 2,338,226 8,385,537 1,121,000 2,130,922 28,236,813 11,240,858 0 0 0 0 0 0 [------At 31.12.2010------] [------At (1) RM (128,187) (317,814) (446,002) Disposals off Written financial period adjustment 31.12.2010 at 0 0 0 RM 8,419 10,000 11,191 838,819 973,072 681,749 2,523,250 RM 929 7,463 692,216 593,622 1,519,574 4,238,447 2,014,899 1,120,331 2,366,378 12,553,859 Balance as Balance at 1.1.2010at Additions , d) (cont PLANT AND EQUIPMENT PROPERTY, Electrical and renovation installation Tools, implements and equipment implements Tools, Group Carrying amount Buildings cost - at 1994 valuation - at Office equipment, furniture and fittings Office furniture equipment, Plant and machinery Plant Long term leasehold land term Long Moulds Office equipment, furniture and fittings Office furniture equipment, Moulds Motor vehicles Motor vehicles Plant and machinery Plant Tools, implements and equipment implements Tools, - 1994 valuation at leasehold land term Long Electrical and renovation installation Buildings - cost at 7. 65 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
7. PROPERTY, PLANT AND EQUIPMENT (cont’d)
[------At 31.3.2012------] Accumulated Carrying Company Cost depreciation amount RM RM RM
Office equipment, furniture and fittings 10,450 10,450 0
[------At 31.12.2010------] Accumulated Carrying Company Cost depreciation amount RM RM RM
Office equipment, furniture and fittings 10,450 10,450 0
(a) The leasehold land and building of a subsidiary was revalued on 31 March 2012 by the Directors based on a valuation exercise carried out in March 2012 by an independent professional valuer using the open market value basis.
Had the revalued assets been carried at cost less accumulated depreciation, the carrying amount would have been RM3,555,084 (2010: RM2,924,935).
(b) During the financial period, the Group made the following cash payments to purchase property, plant and equipment:
Group 31.3.2012 31.12.2010 RM RM
Purchase of property, plant and equipment 2,647,961 2,523,250 Financed by hire purchase arrangements (311,629) 0 Cash payment on purchase of property, plant and equipment 2,336,332 2,523,250
66 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
7. PROPERTY, PLANT AND EQUIPMENT (cont’d)
(c) As at 31 March 2012, the carrying amount of the property, plant and equipment of the Group under hire purchase are as follows:
Group 31.3.2012 31.12.2010 RM RM
Motor vehicles 25,827 159,092
Details of the terms and conditions of the hire purchase arrangements are disclosed in Notes 26 to the financial statements.
(d) As at 31 March 2012, the unexpired lease periods of the short term leasehold land is 36 years (2010: 36 to 37 years). The short term leasehold land is charged as security for the banking facilities (Note 24) and for the redeemable secured loan stocks issued by the Company (Note 21).
(e) As at 31 March 2012, certain property, plant and equipment of the Group with carrying amount of RM15,800,001 (2010: RM7,278,565) are charged to local banks as securities for banking facilities as disclosed in Notes 23 and 24 to the financial statements.
(f) As at 31 March 2012, certain property, plant and equipment of the Group with carrying amount of RM15,800,001 (2010: RM4,955,347) are charged as securities for the redeemable convertible secured loan stocks issued by the Company as disclosed in Note 21 to the financial statements.
(g) As at 31 March 2012, certain motor vehicles of the Group with carrying amount of RM5 (2010: RM5) are registered in the names of certain Directors of the Group and third parties who hold them in trust for the subsidiaries.
67 ANNUAL REPORT 2012 68 ANNUAL 2012 REPORT
8. INVESTMENT PROPERTIES Transfer to 2011TO 31MARCH 2012(cont’d) 1 JANUARY NOTES TO THE FINANCIALSTATEMENTS Depreciation Impairment assets held Balance as charges for the loss for the for sale Balance as at 1.1.2011 financial period financial period (Note 18) at 31.3.2012 Group RM RM RM RM RM Carrying amount Freehold land, at cost 4,187,561 0 (486,667) (3,700,894) 0 Buildings 218,292 (8,125) 0 0 210,167 4,405,853 (8,125) (486,667) (3,700,894) 210,167
[------At 31.3.2012------] Accumulated depreciation Carrying Cost and impairment amount RM RM RM
Buildings 325,000 114,833 210,167
Depreciation Impairment Balance as charges for the loss for the Balance as at 1.1.2010 Disposals financial year financial year at 31.12.2010 Group RM RM RM RM RM Carrying amount Freehold land, at cost 4,187,561 0 0 0 4,187,561 Buildings 1,012,457 (766,013) (28,152) 0 218,292 5,200,018 (766,013) (28,152) 0 4,405,853
[------At 31.12.2010------] Accumulated depreciation Carrying Cost and impairment amount RM RM RM Freehold land, at cost 4,187,561 0 4,187,561 Buildings 325,000 106,708 218,292 4,512,561 106,708 4,405,853 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d) 0 RM RM RM amount 2,800,000 2,800,000 Carrying Balance as Balance Balance as Balance at 31.3.2012 at at 31.12.2010 at 0 0 RM RM RM for sale for (Note 18) (Note (2,313,333) Transfer to Transfer loss for the loss for assets held Impairment depreciation Accumulated and impairment 0 RM RM RM Cost (486,667) 2,800,000 loss for the loss for Impairment Depreciation financial year financial year charges for the for charges financial period [------At 31.12.2010------] [------At 0 RM RM 2,800,000 Balance as Balance at 1.1.2011 at 0 RM Additions Disposals RM 2,800,000 Balance as Balance at 1.1.2010 at , d) (cont PROPERTIES INVESTMENT Freehold land, at cost at land, Freehold Carrying amount cost at land, Freehold Company 8. Carrying amount cost at land, Freehold Company 69 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d) , 8. INVESTMENT PROPERTIES (cont d)
(a) The fair value of certain properties are based on Directors' estimation by reference to market evidence of transaction prices for similar properties and recent experience in the location and category of the properties being valued whilst the rest of properties in the Group are based on valuation by an independent professional valuer.
The fair values of investment properties at the reporting date are as follows:
Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Freehold land 0 5,817,000 0 2,800,000 Buildings 270,000 250,000 0 0 270,000 6,067,000 0 2,800,000
(b) The buildings which are leased out under operating leases amounted to RMNil (2010: RM218,292). The rental income earned by the Group from its investment properties during the financial period amounted to RMNil (2010: RM191,936).
(c) The title deed of a parcel of freehold land of the Company with carrying amount of RMNil (2010: RM2,800,000) is registered in the name of a subsidiary.
9. GOODWILL Group 31.3.2012 31.12.2010 RM RM
At 1 January 2011/31 March 2012 551,552 551,552
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating unit ("CGU") that is expected to benefit from that business combination. Before recognition of any impairment losses, the carrying amount of goodwill had been allocated to the following business segments as independent CGUs: Group 31.3.2012 31.12.2010 RM RM
Property development 551,552 551,552
70 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
9. GOODWILL (cont’d)
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.
(a) Key assumptions used
The recoverable amount of a cash generating unit ("CGU") is determined based on fair value less costs to sell. The fair value is based on the consideration to be received by the CGU upon the completion of disposal of an indirect subsidiary.
(b) Sensitivity analysis
With regard to the assessment of fair value less cost to sell, management believes that no reasonably possible change in any of the above key assumptions would cause the recoverable amounts of the units to be materially below their carrying amounts.
10. INVESTMENT IN SUBSIDIARIES Company 31.3.2012 31.12.2010 RM RM Unquoted shares At cost 40,941,162 49,982,791 Less: Impairment losses (15,502,914) (21,866,294) 25,438,248 28,116,497
Details of the subsidiaries are as follows:
Country of Interest in equity Name of company incorporation 31.3.2012 31.12.2010 Principal activities
Emico Penang Sdn. Bhd. Malaysia 100% 100% Manufacturing of original equipment manufacturer products, awards, trophy components, medallions, souvenir, gift items, furniture products and general trading
Emico Tools Sdn. Bhd. Malaysia 100% 100% Inactive
Emico Capital Sdn. Bhd. Malaysia 100% 100% Inactive
Emico Marketing Sdn. Malaysia 100% 100% Manufacturing and Bhd. marketing of awards, trophy components, souvenir items and general trading
Emico Development Malaysia 100% 100% Investment holding and Sdn. Bhd. property development
Emico Newk Sdn. Bhd. * Malaysia 100% 100% Inactive 71 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
10. INVESTMENT IN SUBSIDIARIES (cont’d)
Country of Interest in equity Name of company incorporation 31.3.2012 31.12.2010 Principal activities
Mercu Tanah Langkawi Malaysia 71% 71% Investment holding Sdn. Bhd.
NEB Development Berhad Malaysia 60% 60% Investment holding, property development and provision of management services
Emico Creative Design Malaysia 100% 100% Dormant Sdn. Bhd.
Emico (Vietnam) Co. Ltd.* Vietnam 0% 100% Manufacturing of plastic products from plastic particles, plastic and metal souvenirs and household utensils Subsidiaries of Emico Marketing Sdn. Bhd.
Emico Melaka Sdn. Bhd. Malaysia 51% 51% Inactive
Emico Metalizing Sdn. Malaysia 100% 100% Offering chroming services Bhd.
Subsidiaries of NEB Development Berhad
NEB Pacific Sdn. Bhd. Malaysia 60% 60% Dormant
Unic Builders Sdn. Bhd. Malaysia 60% 60% Dormant
Subsidiaries of Emico Penang Sdn. Bhd.
Standard Trend Apparel Malaysia 53.3% 53.3% Inactive Industries Sdn. Bhd.
Emico Asia Sdn. Bhd. Malaysia 100% 100% Trading of houseware and furniture
Subsidiary of Mercu Tanah Langkawi Sdn. Bhd.
Operasi Tembaga Sdn. Bhd. Malaysia 49.7% 49.7% Investment holding
Subsidiary of Operasi Tembaga Sdn. Bhd.
PKB-Operasi Tembaga Malaysia 39.8% 39.8% Property development Sdn. Bhd.
* The financial statements of these companies are not audited by BDO, Malaysia.
72 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
10. INVESTMENT IN SUBSIDIARIES (cont’d)
(a) As at 31 March 2012, all the shares held by the Company in NEB Development Berhad and Mercu Tanah Langkawi Sdn. Bhd. are charged as securities for the redeemable secured loan stocks (Note 21).
(b) On 6 March 2012, the Company had disposed of its wholly owned subsidiary, Emico (Vietnam) Co. Ltd., for a cash consideration of RM800,000.
(c) Impairment losses on investments in subsidiaries amounting to RM1,600,485 have been recognised during the financial period in order to write down the investments in subdiaries to their recoverable amounts. The recoverable amounts were determined based on a value- in-use calculation using cash flow projections based on financial budgets approved by the management covering a five (5)-year period. The discount rate applied to the cash flow projections were 9.9% based on the weighted average cost of capital of the Company.
(d) A reversal of impairment loss on investment in subsidiaries amounting to RM7,963,865, relating to a subsidiary, Emico Vietnam Co. Ltd., has been recognised during the financial period due to disposal of the subsidiary during the financial period.
The disposal and deconsolidation of the subsidiary had the following effects on the financial position of the Group as at the end of the financial period:
Group 31.3.2012 RM
Property, plant and equipment (Note 7) 963,433 Inventories 610,757 Trade and other receivables 1,037,504 Cash and cash equivalents 74,598 Trade and other payables (3,188,624) Bank borrowings (631,597) Net liabilities disposed and deconsolidated (1,133,929) Transfer from foreign currency translation reserve 977,057 (156,872) Waiver of debts (50,000) Total proceeds from disposal and deconsolidation (800,000) Gain on disposal and deconsolidation to the Group (1,006,872)
Disposal and deconsolidation settled by: Cash (800,000)
Cash flow arising on disposal and deconsolidation: Cash consideration 800,000 Cash and cash equivalents of subsidiary disposed and deconsolidated (74,598) Net cash inflow on disposal and deconsolidation 725,402
73 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
11. INVESTMENT IN ASSOCIATES
Group 31.3.2012 31.12.2010 RM RM Unquoted equity shares, at cost 1,024,800 2,887,273 Share of post-acquisition results and reserves, net of dividend received (1,020,000) (1,197,923) Less: Impairment losses (4,800) (4,800) 0 1,684,550
The Group's interest in the associates is analysed as follows:
Group 31.3.2012 31.12.2010 RM RM Share of net assets 0 1,678,752 Premium on acquisition 0 5,798 0 1,684,550
The details of the associates are as follows:
Country of Interest in equity Name of company incorporation 31.3.2012 31.12.2010 Principal activities
Panashiba Industries (M) Malaysia 50% 50% Investment holding Sdn. Bhd.
PT Panashiba Industries Republic of 24.5% 24.5% Inactive Indonesia*@ Indonesia
Quanzhou Fuji-Sino People's 0% 20.9% Manufacturing, installing Elevators Co. Ltd.* Republic of maintaining lifts and China escalators
Asian Elevator (M) Malaysia 24% 24% Dormant Sdn. Bhd.*
Jiangnan Escalator (M) Malaysia 18% 18% Dormant Sdn. Bhd.*
* The financial statements of these associates are not audited by BDO, Malaysia. @ PT Panashiba Industries Indonesia is formed as a joint venture company on 1 April 1997 in Indonesia. The result of the operations of this associate have not been equity accounted for in the consolidated financial statements as it had ceased operations and has not recommenced operations.
74 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
12. OTHER INVESTMENTS
Group 31.3.2012 31.12.2010 RM RM
Unquoted shares in Malaysia, at cost 57,500 57,500 Less: Impairment losses (57,500) (57,500) 0 0
13. PROPERTY DEVELOPMENT PROJECTS Group 31.3.2012 31.12.2010 Non-current Current Non-current Current assets assets assets assets RM RM RM RM At 1 January 2011/1 January 2010 - Freehold land 9,870,321 2,923,847 10,024,399 3,313,515 - Development costs 18,895,845 19,235,202 18,974,267 28,048,305 28,766,166 22,159,049 28,998,666 31,361,820
Cost incurred/(reversed) during the financial period/year: - Development costs 194,013 5,265,662 89,573 6,828,587 - Eliminated due to completion of project 0 (4,222,610) 0 (8,219,242) - Transfer to inventories 0 (174,876) 0 (5,928,189) - Reversal of development cost upon disposal of projects 0 (3,815,820) 0 0 194,013 (2,947,644) 89,573 (7,318,844)
Costs recognised in profit or loss: At 1 January 2011/1 January 2010 0 (4,609,000) 0 (9,101,999) Recognised during the financial period/year: 0 (2,719,000) 0 (5,932,001) Eliminated due to completion of project 0 4,222,000 0 8,219,000 Impairment loss on freehold land (742,555) 0 0 0 31 March 2012/31 December 2010 (742,555) (3,106,000) 0 (6,815,000)
Foreseeable loss 0 (1,275,000) 0 (786,000)
Transfer of non-current assets (to) / from current assets of property development costs: - Freehold land (264,783) 264,783 (154,078) 154,078 - Development costs 60,380 (60,380) (167,995) 167,995 (204,403) 204,403 (322,073) 322,073 Transfer to assets held for sale (Note 18) (25,270,504) (2,600,154) 0 0
31 March 2012/31 December 2010 2,742,717 12,434,654 28,766,166 16,764,049 75 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
13. PROPERTY DEVELOPMENT PROJECTS (cont’d)
The property development costs at end of the financial period/year are analysed as follows:
Group 31.3.2012 31.12.2010 Non-current Current Non-current Current assets assets assets assets RM RM RM RM
Freehold land, at cost 733,109 768,244 9,870,321 3,467,593 Development costs 2,009,608 11,666,410 18,895,845 13,296,456 2,742,717 12,434,654 28,766,166 16,764,049
The freehold land of a subsidiary with a total carrying value of RMNil (2010: RM11,133,013) is charged as security for the redeemable secured loan stocks issued by the Company as mentioned in Note 21 to the financial statements.
14. DEFERRED TAX
(a) The deferred tax assets and liabilities are made up of the following:
Group 31.3.2012 31.12.2010 RM RM
Balance as at 1 January (240,281) (301,669) Recognised in profit or loss (Note 34) (81,226) 61,388 Recognised in other comprehensive income (2,758,041) 0 Balance as at 31 March 2012/31 December 2010 (3,079,548) (240,281)
Presented after appropriate offsetting:
Deferred tax assets, net 127,539 215,600 Deferred tax liabilities, net (3,207,087) (455,881) (3,079,548) (240,281)
76 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
14. DEFERRED TAX (cont’d)
(b) The components and movements of deferred tax liabilities and assets during the financial period/year prior to offsetting are as follows:
Deferred tax liabilities of the Group Revaluation surplus Property, plant of revalued and equipment properties Total RM RM RM
At 1 January 2011 455,881 0 455,881 Recognised in profit or loss (6,836) 0 (6,836) Recognised in other comprehensive income 0 2,758,042 2,758,042 At 31 March 2012 449,045 2,758,042 3,207,087
At 1 January 2010 91,200 0 91,200 Recognised in profit or loss 0 364,681 364,681 At 31 December 2010 91,200 364,681 455,881
Deferred tax assets of the Group
Unused tax losses and unabsorbed capital allowances Total RM RM
At 1 January 2011 215,600 215,600 Recognised in profit or loss (88,061) (88,061) At 31 March 2012 127,539 127,539
At 1 January 2010 278,400 278,400 Recognised in profit or loss (62,800) (62,800) At 31 December 2010 215,600 215,600
77 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
14. DEFERRED TAX (cont’d)
(c) The amounts of temporary differences for which no deferred tax asset has been recognised in the statement of financial position are as follows:
Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM
Property, plant and equipment (559,200) (380,000) 0 0 Others 305,200 265,600 0 0 Unused tax losses 17,812,400 20,165,200 4,066,800 3,802,000 17,558,400 20,050,800 4,066,800 3,802,000
Deferred tax assets of certain subsidiaries have not been recognised in respect of these items as it is not probable that taxable profits of the subsidiaries will be available against which the deductible temporary differences can be utilised.
The deductible temporary differences do not expire under the current tax legislation.
15. INVENTORIES Group 31.3.2012 31.12.2010 RM RM At cost Raw materials 1,515,821 1,516,282 Work-in-progress 1,221,771 1,156,692 Finished goods 4,133,963 4,986,165 Developed properties 3,190,657 9,602,160 10,062,212 17,261,299
At net realisable value Developed properties 2,335,000 0 12,397,212 17,261,299
The write-down of inventories to net realisable value amounted to RM1,001,526 (2010: RMNil) and was included in cost of sales.
78 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
16. TRADE AND OTHER RECEIVABLES
Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Trade receivables
Third parties 10,264,743 10,950,256 0 0 Accrued billing in respect of property development costs 43,084 0 0 0 Amount owing by related parties 907,142 483,953 0 0 11,214,969 11,434,209 0 0 Less: Impairment loss - Third parties (678,336) (1,986,204) 0 0 10,536,633 9,448,005 0 0
Other receivables
Other receivables 2,813,397 2,302,346 0 0 Amount owing by subsidiaries 0 0 55,764,073 58,242,228 Amount owing by associates 127,607 127,607 0 0 2,941,004 2,429,953 55,764,073 58,242,228 Less: Impairment loss - Other receivables (12,852) (12,852) 0 0 - Amount owing by subsidiaries 0 0 (16,354,904) (16,768,874) - Amount owing by associates (127,607) (127,607) 0 0 2,800,545 2,289,494 39,409,169 41,473,354
Loans and receivables 13,337,178 11,737,499 39,409,169 41,473,354
Deposits and prepayments
Deposits 612,473 683,958 1,000 1,000 Prepayments 373,461 125,706 30,000 0 985,934 809,664 31,000 1,000
14,323,112 12,547,163 39,440,169 41,474,354
(a) Trade receivables are non-interest bearing and the normal trade credit terms granted by the Group on sale of goods and services rendered ranges from 21 to 120 days (2010: 30 to 120 days) while the credit term for sales of properties ranges from 21 to 90 days (2010: 21 to 90 days). They are recognised at their original invoice amounts which represent their fair values on initial recognition.
(b) Amount owing by related parties are trade in nature, unsecured, interest-free and are repayable upon demand in cash and cash equivalents. The related parties are companies in which certain Directors and shareholders are connected to certain Directors of the Company. 79 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
16. TRADE AND OTHER RECEIVABLES (cont’d)
(c) Amount owing by subsidiaries arose mainly from transfer of bank borrowings from subsidiaries pursuant to the debt restructuring scheme of the Group implemented in 2004 and unsecured advances which are interest-free and payable upon demand in cash and cash equivalents.
(d) The amount owing by associates arose mainly from advances which are unsecured, interest- free and payable upon demand in cash and cash equivalents.
(e) The currency exposure profile of receivables are as follows:
Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM
Ringgit Malaysia 9,514,593 8,533,976 39,440,169 41,474,354 United States Dollar 4,681,595 3,115,842 0 0 Chinese Renminbi 27,645 39,116 0 0 Singapore Dollar 0 4,450 0 0 Euro 99,279 461 0 0 Vietnamese Dong 0 853,318 0 0 14,323,112 12,547,163 39,440,169 41,474,354
(f) The ageing analysis of trade receivables of the Group is as follows: Group 31.3.2012 31.12.2010 RM RM
Neither past due nor impaired 8,725,652 7,866,414 Past due, not impaired 1 to 30 days 414,210 462,770 31 to 60 days 760,026 655,218 61 to 90 days 36,521 413,888 More than 90 days 600,224 49,715 1,810,981 1,581,591 Past due and impaired 678,336 1,986,204 11,214,969 11,434,209
Receivables that are neither past due nor impaired Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group.
None of the Group's trade receivables that are neither past due nor impaired have been renegotiated during the financial period/year.
Receivables that are past due but not impaired The Group has trade receivables amounting to RM1,810,981 (2010: RM1,581,591) respectively that are past due at the reporting date but not impaired.
The management had assessed and concluded that those receivables are recoverable as these accounts are still active. 80 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
16. TRADE AND OTHER RECEIVABLES (cont’d)
Receivables that are past due and impaired Receivables of the Company that are past due and impaired at the end of the reporting period are as follows:
Individually Impaired Group Company Trade receivables 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM
Trade receivables, gross 678,336 1,986,204 0 0 Less: Impairment loss (678,336) (1,986,204) 0 0 0 0 0 0
Individually Impaired Group Company Others receivables 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM
Trade receivables, gross 140,459 140,459 16,354,904 16,768,874 Less: Impairment loss (140,459) (140,459) (16,354,904) (16,768,874) 0 0 0 0
The reconciliation of movement in impairment losses are as follows:
Group Company Trade receivables 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM
At 1 January 2011/ 1 January 2010 1,986,204 5,197,831 0 0 Charge for the financial period/year 75,758 396,242 0 0 Written off (713,707) (3,626,444) 0 0 Reversal of impairment loss (546,998) (1,140) 0 0 Disposal of a subsidiary (122,921) 0 0 0 Effect of exchange difference 0 19,715 0 0 At 31 March 2012/ 31 December 2010 678,336 1,986,204 0 0
81 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
16. TRADE AND OTHER RECEIVABLES (cont’d) Group Company Others receivables 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM
At 1 January 2011/1 January 2010 140,459 1,346,315 16,768,874 33,768,874 Charge for the financial period/year 0 12,852 0 0 Written off 0 (1,218,708) 0 0 Reversal of impairment loss 0 0 (413,970) (17,000,000) At 31 March 2012/ 31 December 2010 140,459 140,459 16,354,904 16,768,874
Trade and other receivables that are individually determined to be impaired at the end of the reporting period relate to those debtors that exhibit significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.
17. CASH AND CASH EQUIVALENTS Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM
Cash and bank balances 3,099,459 4,917,747 32,757 32,544 Deposits with licensed banks 1,469,115 821,190 650,000 0 4,568,574 5,738,937 682,757 32,544
(a) Included in the Group's cash and bank balances is an amount of RM1,149,160 (2010: RM2,935,529) held under the Housing Development Account pursuant to Section 7A of the Housing Development (Control and Licensing) Act, 1966, as amended by the Housing Developers (Housing Development Account) (Amendment) Regulations, 2002. (b) Information on financial risk of cash and cash equivalents are disclosed in Note 40 to the financial statements. (c) Included in the deposits with licensed banks is an amount of RM419,115 (2010: RM521,190) pledged as securities for banking facilities granted to a subsidiary. (d) The currency exposure profile of cash and cash equivalents are as follows: Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Ringgit Malaysia 4,074,651 4,708,672 682,757 32,544 United States Dollar 488,013 693,672 0 0 Euro 2,473 282,064 0 0 Hong Kong Dollar 2,289 1,517 0 0 British Pound Sterling 315 356 0 0 Chinese Renminbi 222 1,320 0 0 Thai Baht 508 48 0 0 Vietnamese Dong 103 51,196 0 0 Singapore Dollar 0 92 0 0 4,568,574 5,738,937 682,757 32,544 82 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
17. CASH AND CASH EQUIVALENTS (cont’d)
(e) For the purpose of the statements of cash flows, cash and cash equivalents comprise the following as at the end of the reporting period:
Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Cash and bank balances 3,099,459 4,917,747 32,757 32,544 Deposits with licensed banks 1,469,115 821,190 650,000 0 Bank overdrafts included in borrowings (Note 22) (53,326) (66,781) 0 0 4,515,248 5,672,156 682,757 32,544 Cash and cash equivalents for disposal group classified as held for sale (Note 18) 7,034 0 0 0 Less: Deposits pledged to licensed banks (419,115) (521,190) 0 0 4,103,167 5,150,966 682,757 32,544
18. DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE
(a) Certain properties of the Company, Emico Development Sdn. Bhd. ("EDSB") and Emico Asia Sdn. Bhd. ("EASB") are presented as non-current assets held for sale following the Group's commitment to a plan on 8 February 2011 to dispose these assets and utilise the proceeds to redeem the outstanding RSLS. Efforts to sell the non-current assets have commenced and sales are expected by December 2012. (b) Operasi Tembaga Sdn. Bhd., a 49.7% owned indirect subsidiary of the Company, had on 30 May 2011 entered into a Conditional Sale of Shares Agreement with Langkawi Cemerlang Resort Sdn. Bhd. for the disposal of its 80% equity interest in PKB-Operasi Tembaga Sdn. Bhd. ("PKB") for a total cash consideration of RM10million. (c) As at 31 March 2012, the assets and liabilities classified as held for sale are as below: Group Company RM RM Assets of the Company classified as held for sale Investment property (Note 8) 2,313,333 2,313,333 Assets of EASB classified as held for sale Investment properties (Note 8) 1,387,561 0 3,700,894 2,313,333 Assets of EDSB classified as held for sale Property development projects - non-current assets (Note 13) 25,270,504 0 Assets of PKB classified as held for sale Property, plant and equipment (Note 7) 342 0 Property development costs - current assets (Note 13) 2,600,154 0 Other receivables 101,698 0 Cash and cash equivalents 7,034 0 2,709,228 0 Tota assets of disposal group classified as held for sale 31,680,626 2,313,333 83 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
18. DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE (cont’d)
Group Company RM RM Liabilities of PKB classified as held for sale Trade and other payables 298,534 0 Current tax liabilities 1,200 0 299,734 0
Total liabilities of disposal group classified as held for sale 299,734 0
19. SHARE CAPITAL Group/Company 31.3.2012 31.12.2010 RM RM Authorised Ordinary shares of RM1 each 150,000,000 150,000,000
Issued and fully paid Ordinary shares of RM1 each 95,926,521 95,926,521
On 1 December 2003, 11,130,000 detachable warrants were granted by the Company to the subscribers of the rights shares. The warrants may be exercised at any time after the issue date but not later than 5.00 p.m. on 1 December 2013. Each warrant entitles its registered holder, at any time during the exercise period of the warrants, to subscribe for one new ordinary share. The exercise price of each warrant is fixed at RM1 payable in cash for each new ordinary share of RM1 each in the Company. As at 31 March 2012, none of the 11,130,000 warrants were exercised to subscribe for new ordinary shares.
The owners of the parent are entitled to receive dividends as and when declared by the Company and are entitled to one vote per ordinary share at meetings of the Company. All ordinary shares rank pari passu with regard to the Company’s residual assets.
20. RESERVES Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Non-distributable as cash dividends: Share premium 7,736,782 7,736,782 7,736,782 7,736,782 Revaluation reserve 8,274,126 0 0 0 Exchange translation reserve 0 (1,175,136) 0 0 16,010,908 6,561,646 7,736,782 7,736,782
(a) Revaluation reserve
Revaluation reserve represents the surplus arising on the revaluation of the Company's leasehold land and building.
84 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
20. RESERVES (cont’d)
(b) Exchange translation reserve
The exchange translation reserve is used to record foreign currency exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Group’s net investment in foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation.
21. REDEEMABLE SECURED LOAN STOCKS ("RSLS")
On 24 May 2004, the Company issued 840,001 units of 4% 5 year RSLS at nominal value of RM100 per 4% RSLS at an issue price of RM81.31 to its Scheme Lenders pursuant to the Debt Restructuring Scheme implemented. The principal terms of the RSLS are as follows: (i) Convertibility - the RSLS would be fully redeemed and not convertible into new shares of the Company; (ii) The RSLS bear a fixed coupon rate of 6% (2010: 4%) per annum and is payable annually in arrears; and (iii) The RSLS may be redeemable in part or in full at the option of the Company from the date of issuance. Any RSLS not redeemed within one year from the date of issuance will be redeemed by the Company pro-rated among the holders of the RSLS as follows: Redemption Redemption Anniversary date Nominal value value price RM RM RM per 4% RSLS First 0 0 83.81 Second 13,870,000 12,000,000 86.52 Third 22,362,000 20,000,000 89.44 Fourth 21,600,000 20,000,000 92.59 Fifth 26,168,000 26,168,000 100.00 84,000,000 78,168,000
The RSLS is secured by certain property, plant and equipment and properties of subsidiaries (as disclosed in Note 18) and all the shares held by the Company in NEB Development Berhad and Mercu Tanah Langkawi Sdn. Bhd (Note 10).
The movements of the RSLS during the financial period/ year are as follows:
Group/Company 31.3.2012 31.12.2010 RM RM Balance as at 1 January 2011/1 January 2010 33,146,600 35,711,600 Redemption during the financial period/year 0 (2,565,000) Balance as at 31 March 2012/31 December 2010 33,146,600 33,146,600 85 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
21. REDEEMABLE SECURED LOAN STOCKS ("RSLS")(cont’d)
The holders of the RSLS have agreed to extend the maturity dates of the RSLS as follows:
RM By 31 July 2012 8,500,000 By 31 December 2012 24,646,600
The Company will be seeking the approval of the holders of the RSLS to extend the maturity date of the tranche due on 31 July 2012 for a further extension to 30 November 2012.
22. BORROWINGS Group 31.3.2012 31.12.2010 RM RM Current liabilities Secured: Bank overdrafts (Note 23) 53,326 66,781 Trust receipts (Note 24) 914,198 919,612 Hire purchase payables (Note 26) 146,432 134,156 Term loans (Note 25) 0 206,050 Other borrowings 0 680,486 1,113,956 2,007,085 Non-current liabilities Secured: Hire purchase payables (Note 26) 272,254 142,507 Term loans (Note 25) 0 34,293 272,254 176,800 Total borrowings Bank overdrafts (Note 23) 53,326 66,781 Trust receipts (Note 24) 914,198 919,612 Hire purchase payables (Note 26) 418,686 276,663 Term loans (Note 25) 0 240,343 Other borrowings 0 680,486 1,386,210 2,183,885
(a) The currency exposure profile of borrowings is as follows: Group 31.3.2012 31.12.2010 RM RM
Ringgit Malaysia 1,386,210 1,263,056 Vietnamese Dong 0 920,829 1,386,210 2,183,885
86 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
23. BANK OVERDRAFTS The bank overdrafts of the Group are secured over by: (a) a charge on the fixed deposits of RM312,630 (2010: RM284,485); and (b) a corporate guarantee by the Company. Information on financial risks of borrowings is disclosed in Note 40 to the financial statements. 24. TRUST RECEIPTS The trust receipts of the Group are secured over by: (a) a charge on the fixed deposits of RM312,630 (2010: RM284,485); and (b) charges over certain or entire assets of the subsidiaries (Note 7); and (c) corporate guarantee by the Company. Information on financial risks of borrowings is disclosed in Note 40 to the financial statements.
25. TERM LOANS The term loans of the Group are secured over by a charge on the assets of a subsidiary. Information on financial risks of borrowings and its remaining maturity is disclosed in Note 40 to the financial statements.
26. HIRE PURCHASE PAYABLES Group 31.3.2012 31.12.2010 RM RM
Minimum hire purchase payments: - not later than one (1) year 171,456 143,951 - later than one (1) year but not later than five (5) years 301,792 149,039 Total minimum hire purchase payments 473,248 292,990 Less: Future interest charges (54,562) (16,327) Present value of hire purchase payments 418,686 276,663
Repayable as follows:
Current liabilities: - not later than one (1) year 146,432 134,156
Non-current liabilities: - later than one (1) year and not later than five (5) years 272,254 142,507
418,686 276,663
Information on financial risks of hire purchase is disclosed in Note 40 to the financial statements.
87 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
27. TRADE AND OTHER PAYABLES Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Current
Trade payables Third parties 8,502,624 11,007,619 0 0 Progress billing in respect of property development costs 0 278,516 0 0 8,502,624 11,286,135 0 0
Other payables Amount owing to subsidiary companies 0 0 11,088,430 9,568,012 Amount owing to Directors 0 222,100 0 0 Amount owing to related parties 337,314 5,323,231 0 207,879 Other payables 3,149,724 5,008,504 6,715 614,118 Deposit received 997,133 32,420 0 0 Accruals 4,936,018 6,208,316 2,044,567 1,395,087 9,420,189 16,794,571 13,139,712 11,785,096 17,922,813 28,080,706 13,139,712 11,785,096
(a) Trade payables comprise amounts outstanding for trade purchases and construction related costs. The amount is non-interest bearing and normal trade credit terms granted to the Group ranges from 30 to 150 days (2010: 30 to 150 days). (b) Amount owing to subsidiaries and related parties are unsecured, interest-free and are payable upon demand in cash and cash equivalents. The related parties are companies in which certain Directors of the Group and their family members have significant financial and controlling interests. (c) The amount owing to Directors is in respect of advances received , which are unsecured, interest-free and is payable upon demand in cash and cash equivalents. (d) Information on financial risks of trade and other payables are disclosed in Note 40 to the financial statements
(e) The currency exposure profile of payables is as follows: Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Ringgit Malaysia 17,364,897 25,274,809 13,139,712 11,785,096 United States Dollar 477,334 172,040 0 0 Chinese Renminbi 66,474 5,122 0 0 British Pound Sterling 182 0 0 0 Vietnamese Dong 0 2,496,661 0 0 Euro 0 75 0 0 Japanese Yen 0 7,701 0 0 Hong Kong Dollar 13,926 124,298 0 0 17,922,813 28,080,706 13,139,712 11,785,096 88 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
28. CONTINGENT LIABILITY Company 31.3.2012 31.12.2010 RM RM Corporate guarantee extended to local banks and creditors for credit facility granted to and utilised by the subsidiaries 1,416,498 1,608,000
The Directors are of the view that the chances of the financial institutions to call upon the corporate guarantees are remote.
29. REVENUE Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Sales of goods 76,571,624 53,054,380 0 0 Property development revenue 10,820,338 11,518,980 0 0 Chroming services rendered 110,704 156,441 0 0 Management services rendered 0 0 300,000 240,000 87,502,666 64,729,801 300,000 240,000
30. OTHER INCOME Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Interest income: - Loans and receivables 0 9,987 0 0 - House buyer 34,852 125,372 0 0 - Financial institutions 85,212 83,579 129 276 Deposits refunded 471 5,573 0 0 Compensation received 75,127 700 0 0 Forfeiture income 43,270 188,950 0 0 Gain on disposal of investment property and prepaid leasehold land 0 2,816,173 0 0 Gain on disposal of property, plant and equipment 269,993 45,997 0 0 Gain on disposal of investment in a subsidiary 1,006,872 0 0 0 Insurance claim 800 11,555 800 0 Other income 87,659 34,601 0 0 Overprovision of accrued expense 0 10,400 0 0 Realised gain on foreign exchange 140,386 122,128 0 0 Rental received from - machinery 120,000 138,000 0 0 - premises 150,000 275,936 0 0 Reversal of impairment loss on trade and other receivables (Note 16) 546,998 1,140 413,970 17,000,000 Unrealised gain on foreign exchange 234,086 0 0 0 2,795,726 3,870,091 414,899 17,000,276 89 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
31. EMPLOYEE BENEFITS EXPENSE Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Wages, salaries, overtime and bonuses 8,214,005 5,990,032 413,750 243,750 Contributions to defined provident fund 616,205 400,599 37,320 17,640 Social security contributions 76,618 48,608 598 398 Other benefits 564,269 421,316 0 0 9,471,097 6,860,555 451,668 261,788
Included in employee benefits expense are Directors' remuneration as follows:
Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Executive Directors of the Company: Fee 37,500 30,000 37,500 30,000 Contributions to employees' provident fund 97,620 58,680 37,320 17,640 Other emoluments 830,670 493,145 301,098 147,398
Non-executive Directors of the Company: Fee 37,500 27,000 37,500 27,000 Other emoluments 14,250 15,750 14,250 15,750
Executive Directors of the subsidiaries: Contributions to employees' provident fund 23,420 15,156 0 0 Other emoluments 183,922 127,097 0 0 1,224,882 766,828 427,668 237,788
32. FINANCE COSTS Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Interest expense on: - loan stock 2,483,278 1,412,160 2,483,278 1,412,160 - borrowings 105,262 69,737 0 0 - term loans 355,002 169,025 0 0 - hire purchase 17,770 18,269 0 0 - others 124,630 199,196 (31,944) 186,034 3,085,942 1,868,387 2,451,334 1,598,194 90 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
33. (LOSS)/PROFIT BEFORE TAX
Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM (Loss)/Profit before tax is arrived at after charging:
Audit fee - current year 100,400 98,336 25,000 23,000 Depreciation of property, plant and equipment (Note 7) 2,640,557 2,147,852 0 0 Amortisation of investment properties (Note 8) 8,125 28,152 0 0 Developed properties written down 1,001,526 0 0 0 Impairment losses on: - trade and other receivables (Note 16) 75,758 409,094 0 0 - investment properties (Note 8) 486,667 0 486,667 0 - investment in subsidiaries (Note 10) 0 0 1,600,485 0 - land held for property development (Note 13) 742,555 0 0 0 Loss on foreign exchange - unrealised 57,124 174,076 0 0 - realised 105,926 194,521 0 0 Loss on disposal of property, plant and equipment 0 99,946 0 0 Loss on disposal of investment in a subsidiary 0 0 1,227,764 0 Loss on disposal of investment in an associate 306,934 0 0 0 Property, plant and equipment written off (Note 7) 6,425 3,741 0 0 Rental of: - premises 483,876 340,050 0 0 - equipment 2,894 7,344 0 0 - server space 2,080 2,400 0 0 - machinery 3,690 2,760 0 0
91 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
34. TAX EXPENSE Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Current tax expense based on profit for the financial period/year 143,600 30,400 0 0 (Over)/Underprovision of tax in prior years (7,984) 154,051 0 0 135,616 184,451 0 0 Deferred tax expense (Note 14): - relating to origination and reversal of temporary differences 4,800 51,500 0 0 - under/(over)provision in prior years 91,362 (76,200) 0 0 - crystallisation of deferred tax liability on revaluation surplus (14,936) (36,688) 0 0 81,226 (61,388) 0 0 216,842 123,063 0 0 The Malaysian income tax is calculated at the statutory tax rate of 25% (2010: 25%) of the estimated taxable profits for the fiscal year. The numerical reconciliation between the tax expense and the product of accounting (loss)/profit multiplied by the applicable tax rates of the Group and of the Company are as follows: Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Reconciliation of tax expense and accounting (loss)/profit: Accounting (loss)/profit before tax (1,534,399) 1,327,894 (5,903,504) 14,854,688 Tax at the applicable tax rate of 25% (383,600) 332,000 (1,475,900) 3,713,700 Tax effect of : - expenses not deductible for tax purpose 1,378,700 5,075,600 1,513,000 555,300 - income not subject to tax (232,000) (4,970,700) (103,300) (4,250,000) - different tax rate 0 (1,200) 0 0 Permanent loss not recognised during the financial year 8,400 88,400 0 0 Utilisation of deferred tax assets not recognised in prior year (689,300) (442,200) 0 (19,000) Unused tax losses not recognised during the financial period 66,200 0 66,200 0 (Over)/Underprovision of tax in prior years (7,984) 154,051 0 0 Under/(Over)provision of deferred tax in prior years 91,362 (76,200) 0 0 Annual crystallisation of deferred tax on revaluation surplus (14,936) (36,688) 0 0 Tax expense for the financial period/year 216,842 123,063 0 0 92 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
34. TAX EXPENSE (cont’d)
Tax savings of the Group and the Company are as follows:
Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM
Arising from utilisation of previously unrecognised tax losses 654,400 468,500 0 0
35. EARNINGS PER SHARE
(a) Basic
Basic earnings per ordinary share for the financial period/year is calculated by dividing the profit for the financial period/year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the financial period/year.
Group 1.1.2011 1.1.2010 to to 31.3.2012 31.12.2010 RM RM (Loss)/Profit attributable to equity holders of the parent (1,970,146) 1,053,856
Weighted average number of ordinary shares in issue (units) 95,926,521 95,926,521
Basic (loss)/earnings per share (sen) (2.05) 1.10
(b) Diluted
Diluted earnings per ordinary share is not applicable and not presented because there are no dilutive potential ordinary shares to be issued.
36. RELATED PARTY DISCLOSURES
(a) Identities of related parties
Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other parties.
The Company has controlling related party relationship with its direct and indirect subsidiaries.
93 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
36. RELATED PARTY DISCLOSURES (cont’d)
(b) In addition to the transaction and balances detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial period/year: Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM With subsidiaries: Management fee received - Emico Development Sdn. Bhd. 0 0 150,000 120,000 - Emico Asia Sdn. Bhd. 0 0 150,000 120,000
With other related parties Purchases: - Century Plas Industries Sdn. Bhd. 11,129,086 7,043,266 0 0 - U-Can Marketing Sdn. Bhd. 0 143,860 0 0
Sales: - Century Plas Industries Sdn. Bhd. 7,412,425 4,643,014 0 0 - U-Can Marketing Sdn. Bhd. 134,887 2,223 0 0
Rental of machinery received: - Century Plas Industries Sdn. Bhd. 120,000 138,000 0 0
Rental of premises received: - Century Plas Industries Sdn. Bhd. 150,000 120,000 0 0
Rental of premises paid and payable: - Beng Choo Marketing Sdn. Bhd. 405,000 324,000 0 0
Project coordination & supervision charges paid: - Emiglow Ventures (M) Sdn. Bhd. 0 60,000 0 0
Rental paid and payable: - Mr. Tan Chin Peng, a Director of a subsidiary 0 13,316 0 0
The related party transactions described above were carried out on terms and conditions not materially different from those obtainable from transactions with unrelated parties.
The related parties are companies in which certain Directors of the Group and their family members have significant financial and controlling interests.
Information regarding outstanding balances arising from related party transactions as at 31 March 2012 are disclosed in Note 16 and 27 to the financial statements.
94 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
36. RELATED PARTY DISCLOSURES (cont’d)
(c) Compensation of key management personnel
Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the entity, directly and indirectly, including any director (whether executive or otherwise) of the Group.
Group Company 1.1.2011 1.1.2010 1.1.2011 1.1.2010 to to to to 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM
Short term employee benefits 1,103,842 692,992 390,348 220,148 Contributions to defined contribution plans 121,040 73,836 37,320 17,640 1,224,882 766,828 427,668 237,788
Estimated cash value of benefits-in-kind provided to Directors 17,400 34,525 0 0
37. OPERATING LEASE ARRANGEMENTS
The Group had entered into an operating lease agreement for the use of land and premises for a lease term of 44 years.
The future aggregate minimum lease payments under operating leases contracted for as at reporting date but not recognised as liabilities were as follows:
Group 31.12.2010 RM
Not later than 1 year 97,960 Later than 1 year but not later than 5 years 391,838 Later than 5 years 2,963,277 3,453,075
95 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
38. OPERATING SEGMENTS
Emico Holdings Berhad is principally involved in investment holding and its subsidiaries are principally engaged in manufacturing and trading of consumable products and property development.
Emico Holdings Berhad has arrived at three (3) reportable segments that are organised and managed separately according to the nature of products and services, specific expertise and technologies requirements, which requires different business and marketing strategies. The reportable segments are summarised as follows:
(i) Investment holding (ii) Consumable products - Manufacturing and trading of consumable products (iii) Property development - Development of land into residential and commercial building.
The accounting policies of operating segments are the same as those described in the summary of significant accounting policies.
Inter-segment revenue is priced along the same lines as sales to external customers and is eliminated in the consolidated financial statements. These policies have been applied consistently throughout the current and previous financial period/year.
Segment assets exclude tax assets.
Segment liabilities exclude tax liabilities and unallocated liabilities. Even though loans and borrowings arise from financing activities rather than operating activities, they are allocated to the segments based on relevant factors (e.g. funding requirements). Details are provided in the reconciliations from segment assets and liabilities to the position of the Group.
(a) Business Segments Consumable Property Investment products development holding Group RM RM RM RM 1.1.2011 to 31.3.2012 Revenue: Total revenue 88,877,799 13,488,378 300,000 102,666,177 Inter-segment revenue (14,863,511) 0 (300,000) (15,163,511) Revenue from external customers 74,014,288 13,488,378 0 87,502,666
Interest income 11,253 108,682 129 120,064 Finance costs (559,114) (11,339) (2,451,334) (3,021,787) Net finance expense (547,861) 97,343 (2,451,205) (2,901,723)
Depreciation and amortisation (2,440,514) (208,168) 0 (2,648,682)
96 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
38. OPERATING SEGMENTS (cont’d) (a) Business Segments (cont’d) Consumable Property Investment products development holding Group RM RM RM RM Segment profit/(loss) before income tax 4,930,498 (254,705) (6,210,192) (1,534,399) Share of profit of associates 0 422,384 0 422,384 Tax expense (374) (216,468) 0 (216,842) Other material non-cash items Impairment losses on: - Trade and other receivables 75,758 0 0 75,758 - Investment properties 0 0 486,667 486,667 - Land held for property development 0 742,555 0 742,555 Developed properties written down 0 1,001,526 0 1,001,526 Net loss on foreign exchange - Unrealised 57,124 0 0 57,124 Segment assets 39,432,707 56,949,934 3,289,156 99,671,797 Segment liabilities 12,552,971 7,478,854 36,815,491 56,847,316 1.1.2010 to 31.12.2010 Revenue: Total revenue 62,560,979 11,518,980 240,000 74,319,959 Inter-segment revenue (9,350,158) 0 (240,000) (9,590,158) Revenue from external customers 53,210,821 11,518,980 0 64,729,801
Interest income 20,354 198,308 276 218,938 Finance costs (253,546) (16,647) (1,598,194) (1,868,387) Net finance expense (233,192) 181,661 (1,597,918) (1,649,449)
Depreciation and amortisation (1,931,767) (242,983) (1,254) (2,176,004)
Segment profit/(loss) before income tax 3,126,014 344,007 (2,142,127) 1,327,894 Share of profit of associates 0 180,123 0 180,123 Tax expense 74,407 (197,470) 0 (123,063) Other material non-cash items Impairment losses on: - Trade receivables 396,242 0 0 396,242 - Other receivables 12,852 0 0 12,852 Gain on disposal of investment property and leasehold land 2,816,173 0 0 2,816,173 Net loss on foreign exchange - Unrealised 174,076 0 0 174,076 Segment assets 30,178,542 66,283,269 3,647,182 100,108,993 Segment liabilities 13,804,312 15,189,412 35,988,809 64,982,533 97 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
38. OPERATING SEGMENTS (cont’d)
(a) Business Segments (cont’d)
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities to the Group’s corresponding amounts are as follows: 1.1.2011 1.1.2010 to to 31.3.2012 31.12.2010 RM RM Revenue
Total revenue for reportable segments 102,666,177 74,319,959 Elimination of inter-segment revenues (15,163,511) (9,590,158) Group's revenue per consolidated statement of comprehensive income 87,502,666 64,729,801
1.1.2011 1.1.2010 to to 31.3.2012 31.12.2010 RM RM Depreciation
Total depreciation and amortisation for reportable segments 2,648,682 2,176,004 Depreciation and amortisation 2,648,682 2,176,004
1.1.2011 1.1.2010 to to 31.3.2012 31.12.2010 RM RM Gain / (Loss) for the financial period/year
Gain / (Loss) before tax (1,534,399) 1,327,894 Tax expenses (216,842) (123,063) Gain / (Loss) for the financial period/year (1,751,241) 1,204,831
98 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
38. OPERATING SEGMENTS (cont’d)
(b) Geographical Segments The Group's manufacturing facilities and sales offices are mainly based in Malaysia. In presenting information on the basis of geographical areas, segment revenue is based on the geographical location from which the sale transactions originated. Segment assets are based on the geographical location of the Group's assets. The non-current assets do not include financial instruments and deferred tax assets.
1.1.2011 1.1.2010 to to 31.3.2012 31.12.2010 RM RM Revenue from external customers
Malaysia 31,588,817 27,497,666 Europe 48,908,476 31,449,172 Other countries 7,005,373 5,782,963 87,502,666 64,729,801
31.3.2012 31.12.2010 RM RM Non-current assets
Malaysia 24,254,959 44,863,007 Other Asian countries 0 2,878,959 24,254,959 47,741,966 Major customer
Revenue from major customers in the consumable products segment amounted to RM33,265,814 (2010: RM26,491,142) with revenue more than 10% of the Group's revenue.
99 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
39. FINANCIAL INSTRUMENTS
(a) Capital management
Our objectives and policies of managing capital are to safeguard the Group's ability to continue in its operations as going concerns in order to provide fair returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain the optimal capital structure, the Group may, from time to time, adjust/vary the dividend payouts to shareholders, issue new shares, redeem debts or sell assets to reduce debts, where necessary.
For capital management purposes, the Group considers shareholders' equity and borrowings to be the key components in the Group capital structure. The Group monitors capital on the basis of gearing ratio. The Group include within net debt, borrowings less fixed deposits with a licensed bank and cash and bank balances. There were no changes in the Group's approach to capital management during the financial period. The debts-to-equity as at 31 March 2012 and 31 December 2010 were as follows:
Group 31.3.2012 31.12.2010 Note RM RM
Borrowings 22 1,386,210 2,183,885 Total liabilities 1,386,210 2,183,885 Less: Cash and bank balances (3,099,459) (4,917,747) Fixed deposits with a licensed bank (1,469,115) (821,190) Net debt (3,182,364) (3,555,052)
Total capital 34,299,925 26,820,809 Net debt (3,182,364) (3,555,052) Equity 31,117,561 23,265,757
Gearing ratio * *
* Capital gearing ratio is not presented as the Company is in net cash position as at 31 March 2012 and 31 December 2010.
100 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
39. FINANCIAL INSTRUMENTS (cont’d)
(b) Categories of financial instruments
Loan and receivables Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Financial assets Trade and other receivables (excluding deposits and prepayment) 13,337,178 11,737,499 39,409,169 41,473,354 Cash and cash equivalents 4,568,574 5,738,937 682,757 32,544 17,905,752 17,476,436 40,091,926 41,505,898
Other financial liabilities Group Company 31.3.2012 31.12.2010 31.3.2012 31.12.2010 RM RM RM RM Financial liabilities Trade and other payables 17,922,813 28,080,706 13,139,712 11,785,096 Redeemable secured loan stocks 33,146,600 33,146,600 33,146,600 33,146,600 Borrowings 1,386,210 2,183,885 0 0 52,455,623 63,411,191 46,286,312 44,931,696
(c) Fair values of financial instruments
The fair values of financial instruments that are not carried at fair value and whose carrying amounts do not approximate its fair values are as follows
Group Carrying Fair amount value 31.3.2012 RM RM Recognised Financial liabilities Hire purchase 418,686 409,078
Group Carrying Fair amount value 31.12.2010 RM RM Recognised Financial liabilities Hire purchase 276,663 270,115
101 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
39. FINANCIAL INSTRUMENTS (cont’d) (d) Methods and assumptions used to estimate fair value The fair values of financial assets and financial liabilities are determined as follows:
(i) Financial instruments that are not carried at fair value and whose carrying amounts are a reasonable approximation of fair value The carrying amounts of financial assets and liabilities, such as trade and other receivables, trade and other payables and borrowings, are reasonable approximation of fair value, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the end of the reporting period. The carrying amounts of the current position of borrowings are reasonable approximations of fair values due to the significant impact of discounting.
(ii) Hire purchase The fair value of this financial instrument is estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending, borrowings or leasing arrangements at the end of the reporting period.
40. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group’s financial risk management objective is to optimise value creation for shareholders whilst minimising the potential adverse impact arising from fluctuations in foreign currency exchange and the unpredictability of the financial markets.
The Group operates within an established risk management framework and clearly defined guidelines that are regularly reviewed by the Board of Directors and does not trade in derivative financial instruments. Financial risk management is carried out through risk review programmes, internal control systems, insurance programmes and adherence to the Group financial risk management policies. The Group is exposed mainly to foreign currency risk, interest rate risk, liquidity and cash flow risk and credit risk. Information on the management of the related exposures is detailed below.
(i) Credit risk Cash deposits and trade receivables may give rise to credit risk which requires the loss to be recognised if a counter party fails to perform as contracted. The counter parties are major international institutions and reputable multinational organisations. It is the Company’s policy to monitor the financial standing of these counter parties on an ongoing basis to ensure that the Company is exposed to minimal credit risk
The Group’s primary exposure to credit risk arises through its trade receivables. The Group’s trading terms with its customers are mainly on credit, except for new customers, where deposits in advance are normally required. The credit period is generally range from one (1) month to four (4) months for major customers. Each customer has a maximum credit limit and the Group seeks to maintain strict control over its outstanding receivables via credit control to minimise credit risk. Overdue balances are reviewed regularly by senior management.
Exposure to credit risk At the end of the reporting date, the Group's maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statement of financial position. 102 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
40. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)
(i) Credit risk (cont’d)
Credit risk concentration profile
The Group determines concentration of credit risk by monitoring the country profiles of its trade receivables on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables at the end of the reporting period is as follows:
31.3.2012 31.12.2010 RM % of total RM % of total By country: Germany 137,254 1% 0 0% Italy 156,628 1% 202,237 2% Malaysia 5,834,715 56% 6,004,394 64% Sweden 2,765,300 26% (221,967) (3%) United Kingdom 989,140 10% 2,047,150 22% United States Of America 257,524 2% 13,036 0% Vietnam 465,907 5% 1,089,608 12% Others (69,835) (1%) 313,547 3% 10,536,633 100% 9,448,005 100%
At the end of the reporting period, approximately:
32% (2010: 30%) of the Group’s trade receivables were due from major customers who are multi-industry conglomerates located in Sweden, United Kingdom and Malaysia.
9% (2010: 5%) of the Group’s trade receivables were due from related party.
Financial assets that are neither past due nor impaired
Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 16 to the financial statements. Deposits with licensed banks and other financial institutions that are neither past due nor impaired are placed with or entered into with reputable financial institutions with high credit ratings and no history of default.
Financial assets that are either past due or impaired
Information regarding financial assets that are either past due or impaired is disclosed in Note 16 to the financial statements.
(ii) Liquidity and cash flow risk
The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all operating, investing and financing needs are met. In liquidity risk management strategy, the Group measures and forecasts its cash commitments and maintains a level of cash and cash equivalents deemed adequate to finance the Group’s activities. In addition, the Group strives to maintain available banking facilities at a reasonable level to meet its business needs. 103 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
40. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)
(ii) Liquidity and cash flow risk (cont’d)
The table below summarises the maturity profile of the Group's and the Company's liabilities at the reporting date based on contractual undiscounted repayment obligations.
On demand or One to Over within one year five years five years Total RM RM RM RM As at 31 March 2012 Group Financial liabilities: Trade and other payables 17,922,813 0 0 17,922,813 Redeemable secured loan stocks 33,146,600 0 0 33,146,600 Borrowings 1,138,980 301,792 0 1,440,772 Total undiscounted financial liabilities 52,208,393 301,792 0 52,510,185 Company Financial liability: Trade and other payables 13,139,712 0 0 13,139,712 Total undiscounted financial liability 13,139,712 0 0 13,139,712
On demand or One to Over within one year five years five years Total RM RM RM RM As at 31 December 2010 Group Financial liabilities: Trade and other payables 28,080,706 0 0 28,080,706 Redeemable secured loan stocks 33,146,600 0 0 33,146,600 Borrowings 2,034,846 149,039 0 2,183,885 Total undiscounted financial liabilities 63,262,152 149,039 0 63,411,191 Company Financial liability: Trade and other payables 11,785,096 0 0 11,785,096 Total undiscounted financial liability 11,785,096 0 0 11,785,096
104 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
40. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)
(iii) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market interest rates.
The Group's income and operating cash flows are substantially independent of changes in market interest rates. Interest rate exposure arises from the Group's borrowings is managed through the use of fixed and floating rates debts. The Group monitors the interest rates on borrowings closely to ensure that the borrowings are maintained at favourable rates. The Group does not use derivative financial instruments to hedge this risk.
Sensitivity analysis for interest rate risk
As at 31 March 2012, if interest rates at the date had been 50 basis points lower with all other variables held constant, post-tax loss for the financial period would have been RM79,462 (2010: RM79,293) lower, arising mainly as a result of lower interest expense on variable borrowings. If interest rates had been 50 basis points higher, with all other variables held constant, post-tax loss would have been RM79,462 (2010: RM79,293) higher, arising mainly as a result of higher interest expense on variable borrowings. Profit is more sensitive to interest rate decreases than increases because of borrowings with capped interest rates. The sensitivity is higher in 2012 than in 2010 because of an increase in outstanding borrowings that has occurred. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.
105 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d) 0 1,469,115 0 (418,686) 0 (33,146,600) 0 (53,326) 0 (914,198) More than More 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.72 1,469,115 8.60 (53,326) 5.69 (146,432)6.00 (33,146,600) (118,159) (81,074) (45,388) (27,633) 8.60 (914,198) effective interest rate interest average Weighted 17 26 22 Note % 1 year Within 1 - 2 years 2 - 3 years 3 - 4 years 4 - 5 years 5 years Total s financial instruments that are exposed to interest rate risk: rate interest to exposed are that s financial instruments banks loan stocks 21 , Group The following tables set out the carrying amounts, the weighted average effective interest rates as at the end of reporting as at period and the remaining rates interest effective average tables set out the carrying the weighted following The amounts, maturities of the Group At 31 March 2012 31 March At rate Fixed Deposits with licensed Hire purchase Redeemable secured rates Floating Bank overdrafts receipts Trust 22 (iii) risk (cont’d) rate Interest 106 40. OBJECTIVES AND POLICIES FINANCIAL RISK MANAGEMENT (cont’d) ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d) 00 821,190 (276,663) 0 (33,146,600) 0 (66,781) 0 (919,612) 0 (240,343) More than More 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.58 821,190 8.30 (66,781) 4.00 (33,146,600) 4.97 (134,156) (134,554)8.30 (7,953) (919,612) 8.35 (206,050) (34,293) effective interest rate interest Weighted average Weighted 17 26 22 22 Note % 1 year Within 1 - 2 years 2 - 3 years 3 - 4 years 4 - 5 years 5 years Total s financial instruments that are exposed to interest rate risk (continued): rate interest to exposed are that s financial instruments banks loan stocks 21 , Group The following tables set out the carrying amounts, the weighted average effective interest rates as at the end of reporting as at period and the remaining rates interest effective average tables set out the carrying the weighted following The amounts, maturities of the Group At 31 March 2010 31 March At rate Fixed Deposits with licensed Hire purchase Redeemable secured rates Floating Bank overdrafts receipts Trust 22 Term loans Term (iii) risk (cont’d) rate Interest 40. OBJECTIVES AND POLICIES FINANCIAL RISK MANAGEMENT (cont’d) 107 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
40. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)
(iv) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
The Group also hold cash and cash equivalents denominated in foreign currencies for working capital purposes. At the end of the reporting period, such foreign currency balances (in United States Dollar, Euro, Hong Kong Dollar, Sterling Pound, Chinese Renminbi, Thai Baht, Vietnamese Dong and Singapore Dollar) amounted to RM316,067 (2010: RM67,539) for the Group.
Transactional currency exposures arise from sales and purchases that are denominated in currency other than Ringgit Malaysia. The currency giving rise to this risk is primarily United States Dollar. The Group has no hedging policy and does not make use of forward-currency contracts.
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity of the Group's (loss)/profit net of tax to reasonable possible change in the United States Dollar, Euro, Vietnamese Dong, and Hong Kong Dollar exchange rate against the respective functional currency of the Group entities, with all other variables held constant.
Group Loss/(Profit) net of tax 1.1.2011 1.1.2010 to to 31.3.2012 31.12.2010 RM RM
USD/RM - Strengthened 5% -175,960 -136,405 - Weakened 5% +175,960 +136,405
EURO/RM - Strengthened 5% -3,816 -10,592 - Weakened 5% +3,816 +10,592
Vietnamese Dong/RM - Strengthened 5% -4 +59,706 - Weakened 5% +4 -59,706
Hong Kong Dollar/RM - Strengthened 5% +436 +4,604 - Weakened 5% -436 -4,604
108 ANNUAL REPORT 2012 NOTES TO THE FINANCIAL STATEMENTS 1 JANUARY 2011 TO 31 MARCH 2012 (cont’d)
41. SIGNIFICANT EVENTS DURING THE FINANCIAL PERIOD
(a) On 22 December 2011, the NEB Development Berhad, a 60% owned subsidiary of the Company, had disposed of 34.84% equity interest of an associate, Quanzhou Fuji-Sino Elevators Co. Ltd. at a total consideration of RM1,800,000.
(b) On 6 March 2012, the Company had disposed of its wholly owned subsidiary, Emico (Vietnam) Co. Ltd., for a cash consideration of RM800,000.
(c) Operasi Tembaga Sdn. Bhd., a 49.7% owned indirect subsidiary of the Company, had on 30 May 2011 entered into a Conditional Sale of Shares Agreement with Langkawi Cemerlang Resort Sdn. Bhd. for the disposal of its 80% equity interest in PKB-Operasi Tembaga Sdn. Bhd. for a total a cash consideration of RM10 million.
42. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with current financial period's presentation.
As previously Effect of stated changes As restated RM RM RM
Statements of financial position Trade and other receivables 12,964,887 (417,724) 12,547,163 Trade and other payables 28,498,430 (417,724) 28,080,706
Statements of cash flows Decrease in trade and other receivables 1,493,017 417,724 1,910,741 Increase in trade and other payables (16,138) (417,724) (433,862)
43. SUPPLEMENTARY INFORMATION ON REALISED AND UNREALISED LOSSES
The accumulated losses as at the end of the reporting period may be analysed as follows:
31.3.2012 Group Company RM RM Total accumulated losses of Emico Holdings Berhad and its subsidiaries - Realised (90,271,245) (82,201,208) - Unrealised (3,079,548) 0 (93,350,793) (82,201,208) Total share of accumulated losses from associates - Realised (1,020,000) 0 (94,370,793) (82,201,208)
Add: Consolidation adjustments 16,733,290 0
Total group/company accumulated losses as per consolidated accounts (77,637,503) (82,201,208) 109 ANNUAL REPORT 2012 ANALYSIS OF SHAREHOLDINGS AS AT 31 JULY 2012
Authorised Share Capital : RM150,000,000 Issued and Fully Paid Up Capital : RM95,926,521 Class of Shares : Ordinary shares of RM1 each Voting Rights : One vote per share
DISTRIBUTION OF SHAREHOLDINGS No. of Shares Held No. of Shareholders Size of Holdings Quantity % Number %
1 To 99 739 - 21 0.55 100 To 1,000 750,871 0.78 824 21.75 1,001 To 10,000 8,986,033 9.37 1,790 47.24 10,001 To 100,000 37,558,477 39.15 1,043 27.53 100,001To 4,796,325 (*) 48,630,401 50.70 111 2.93 4,796,326 AND ABOVE (**) - - - - Total 95,926,521 100.00 3,789 100.00
REMARK: * Less than 5% of issued shares ** 5% or more of issued shares
SUBSTANTIAL SHAREHOLDERS No. of Shares Held Name Direct % Indirect %
1. Lim Teik Hian 52,000 0.06 21,550,642 # 22.47 2. Lim Teck Chye 1,211,630 1.27 20,391,012 # 21.26 3. Lim Poh Leng 2,027,700 2.12 19,574,942 # 20.41 4. Lim Poh Hoon 112,000 0.12 21,490,642 # 22.41
Note : # By virtue of their beneficial interest in the shares held by Mercsec Nominees (Tempatan) Sdn. Bhd., HDM Nominees (Tempatan) Sdn. Bhd., PM Nominees (Tempatan) Sdn. Bhd., Alliancegroup Nominees (Tempatan)Sdn. Bhd.,CIMSEC Nominees (Tempatan) Sdn. Bhd., AIBB Nominees (Tempatan) Sdn. Bhd.and Beng Choo Marketing Sdn. Bhd. for the substantial shareholders listed above. In addition it includes the deemed interest via their family members Lim Teik Hian (brother), Lim Poh Hoon (sister), Lim Teck Chye (brother) and Lim Poh Leng (sister).
DIRECTORS' SHAREHOLDINGS No. of Shares Held Name Direct % Indirect %
1. Lim Teik Hian 52,000 0.06 21,550,642 # 22.47 2. Lim Teck Chye 1,211,630 1.27 20,391,012 # 21.26 3. Wong Sew Yun 895,859 0.94 - -
110 ANNUAL REPORT 2012 ANALYSIS OF SHAREHOLDINGS AS AT 31 JULY 2012
DISTRIBUTION OF WARRANTS No. of Warrants Held No. of Warrantholders Size of Holdings Quantity % Number %
1 To 99 2,084 0.02 46 4.25 100 To 1,000 350,722 3.15 498 45.98 1,001 To 10,000 1,382,126 12.42 352 32.50 10,001 To 100,000 6,278,280 56.41 174 16.07 100,001To 556,499 (*) 2,116,788 19.02 12 1.11 556,499 AND ABOVE (**) 1,000,000 8.98 1 0.09 Total 11,130,000 100.00 1 ,083 100.00
REMARK: * Less than 5% of issued warrants ** 5% or more of issued warrants
SUBSTANTIAL WARRANTHOLDERS No. of Warrants Held Name Direct % 1. Seng Soon Pang 1,000,000 8.98
DIRECTORS' WARRANTHOLDINGS No. of Warrants Held Name Direct % Indirect % 1. Wong Sew Yun 263,488 2.37 - - 2. Lim Teik Hian 13,000 0.12 - -
111 ANNUAL REPORT 2012 LIST OF TOP 30 SHAREHOLDERS AS AT 31 JULY 2012
(Without Aggregating Securities from Different Securities Accounts Belonging to the Same Person)
Name No. of Shares Percentage 1. PM Nominees (Tempatan) Sdn Bhd 4,683,300 4.88 - Pledged Securities Account for Lim Teck Chye 2. AIBB Nominees (Tempatan) Sdn Bhd 4,066,800 4.24 - Pledged Securities Account for Lim Poh Leng 3. Alliancegroup Nominees (Tempatan) Sdn Bhd 2,630,000 2.74 - Pledged Securities Account for Lim Teck Chye 4. CIMSEC Nominees (Tempatan) Sdn Bhd 1,997,000 2.08 CIMB Bank for Lim Poh Leng 5. Beng Choo Marketing Sdn Bhd 1,964,212 2.05 6. Lim Poh Leng 1,955,700 2.04 7. RHB Nominees (Tempatan) Sdn Bhd 1,900,000 1.98 - Pledged Securities Account for Pang Lan Yin 8. CIMSEC Nominees (Tempatan) Sdn Bhd 1,300,000 1.36 CIMB Bank for Ng Wai Leng 9. Lim Teck Chye 1,211,630 1.26 10. TA Nominees (Tempatan) Sdn Bhd 1,120,000 1.17 - Pledged Securities Account for Lee Chee Ming 11. Wan Iskandar Bin Wan Sulaiman 900,000 0.94 12. Wong Sew Yun 895,859 0.93 13. HDM Nominees (Tempatan) Sdn Bhd 850,900 0.89 - Pledged Securities Account for Lim Poh Leng 14. Public Nominees (Asing) Sdn Bhd 800,000 0.83 - Pledged Securities Account for Ong Soom Peng 15. Mercsec Nominees (Tempatan) Sdn Bhd 692,600 0.72 - Pledged Securities Account for Beng Choo Marketing Sdn Bhd 16. HDM Nominees (Tempatan) Sdn Bhd 684,000 0.71 - Pledged Securities Account for Lim Teck Chye 17. Teoh Soon Lee 530,000 0.55 18. Mercury Industries Berhad 510,000 0.53 19. Chu Yoke Fong 500,000 0.52 20. Hupson (B'worth) Sdn Bhd 500,000 0.52 21. Maybank Securities Nominees (Asing) Sdn Bhd 500,000 0.52 Maybank Kim Eng Securities Pte Ltd for Kwek Keng Seng 22. Pang Lan Yin 500,000 0.52 23. Tan May Ching 463,100 0.48 24. Pang Khip Kwek 450,000 0.47 25. Yeo Eck Liong 450,000 0.47 26. Beng Choo Marketing Sdn Bhd 437,000 0.46 27. Neoh Gim Swee 410,000 0.43 28. Abu Hassan bin Hashim 400,000 0.42 29. Tham Ah Lan 369,700 0.39 30. Bank Perusahaan Kecil & Sederhana Malaysia Berhad 361,200 0.38
Total 34,033,001 35.48
112 ANNUAL REPORT 2012 LIST OF TOP 30 WARRANTHOLDERS AS AT 31 JULY 2012
(Without Aggregating Securities from Different Securities Accounts Belonging to the Same Person)
Name No. of Shares Percentage 1. Seng Soon Pang 1,000,000 8.98 2. Wong Sew Yun 263,488 2.37 3. Surash Kumar A/L Pursumal 254,900 2.29 4. MIDF Amanah Investment Nominees (Tempatan) Sdn Bhd 215,000 1.93 - Pledged Securities Account for AB Ghani bin Haji Mahmood 5. Surash Kumar A/L Pursumal 200,000 1.80 6. Mohandas Vikyomal Lakhiani 185,000 1.66 7. JF Apex Nominees (Tempatan) Sdn Bhd 180,000 1.62 - Pledged Securities Account for AB Ghani bin Haji Mahmood 8. Yap Poh Choon 158,000 1.42 9. Surash Kumar A/L Pursumal 150,000 1.35 10. Tan Toh Thai 150,000 1.35 11. CIMSEC Nominees (Tempatan) Sdn Bhd 145,000 1.30 CIMB Bank for Ng Wai Leng 12. Lim Chong Siang 110,000 0.99 13. Soo Lai Yin 105,400 0.95 14. Alliancegroup Nominees (Tempatan) Sdn Bhd 100,000 0.90 - Pledged Securities Account for Liau Yong Hwa 15. Bua Lee Eing 100,000 0.90 16. CIMSEC Nominees (Tempatan) Sdn Bhd 100,000 0.90 - Pledged Securities Account for Roslan bin Fadzil 17. Khor Hee Kiang 100,000 0.90 18. Yashran Rezal bin Rafeal 100,000 0.90 19. Rodzali bin Din 99,900 0.90 20. New Tee 99,500 0.89 21. SJ SEC Nominees (Tempatan) Sdn Bhd 99,000 0.89 - Pledged Securities Account for Lim Chee Keong 22. Mercsec Nominees (Tempatan) Sdn Bhd 94,000 0.84 - Pledged Securities Account for Chan Li Li 23. Chu Mun Len @ Chu Lee Sen 87,000 0.78 24. CIMSEC Nominees (Tempatan) Sdn Bhd 80,000 0.72 CIMB Bank for Aljafri bin Wan Ahmad 25. Low Teong Hwa 77,000 0.69 26. Nik Ahmad Kamil bin Nik Yaacob 76,100 0.68 27. Mercsec Nominees (Tempatan) Sdn Bhd 75,600 0.68 - Mercury Securities Sdn Bhd (IVT A) 28. Lim Mooi Ngo 75,000 0.67 29. CIMSEC Nominees (Tempatan) Sdn Bhd 70,000 0.63 - Pledged Securities Account for Tan Kok Jin 30. Goh Gim Tiong 70,000 0.63
Total 4,619,888 41.51
113 ANNUAL REPORT 2012 LIST OF PROPERTIES AS AT 31 MARCH 2012
Built-up Age of Net Book Description/ Land Area Area Building Value Acquisition/ Location Tenure Existing Use (sq ft) (sq ft) (Years) RM'000 Revaluation *
Plot 18 & 19 Kawasan 60-years Land and 81,350 116,847 20 to 27 15,800 2012* Perindustrian Bayan Lepas, Leasehold factory Mukim 12 Daerah Barat Daya, Expiring 2046 buildings, Pulau Pinang and 2047 warehouse respectively and office for industrial use
Unit 2-5-9 99-years Office unit - 2,031 17 210 1992 Harbour Trade Centre, Leasehold for rental Lebuh Macallum, Pulau Pinang Expiring 2089
Taman Batik, Sungai Petani, Freehold On-going mix 865,615 - - 2,649 1996 Daerah Kuala Muda, Kedah development project
HS(D) 773/97, PT 49753 Freehold On-going mix 2,621,798 -- 7,725 1996 Mk Sungai Petani, development Daerah Kuala Muda, Kedah project
HS(D) 1/97, PT 48979 Freehold Vacant 154,118 -- 2,313 1997 Mk Sungai Petani, commerical Daerah Kuala Muda, Kedah land for future development
PT 296 to PT 432 99 years On-going mix 858,002 -- 1,757 1996 Mukim Kuah, Leasehold development Daerah Langkawi, Kedah Expiring 2095 project
HS(D) 762/97, PT 49740 & Freehold Vacant 66,930 -- 1,388 2007 HS(D) 763/97, PT 49741 commerical Mk Sungai Petani, land for petrol Daerah Kuala Muda, Kedah station
Geran 127391 & 127392 Freehold 3 storey 2,800 7,394 4 846 2008 Bandar Sungai Petani, office building Daerah Kuala Muda, Kedah
114 ANNUAL REPORT 2012 NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Twentieth Annual General Meeting of the Company will be held at The Conference Room of Emico Holdings Berhad, 18 Lebuhraya Kampung Jawa, 11900 Bayan Lepas, Penang on Thursday, 27 September 2012 at 11.00 a.m. for the following purposes :-
AGENDA
As Ordinary Business: 1. To receive the Audited Financial Statements for the financial period from 1 January 2011 to 31 March 2012 together with the Reports of Directors and Auditors thereon. Please refer to note 7
2. To approve the payment of Directors' Fees for the financial period from 1 January 2011 to 31 March 2012. Ordinary Resolution 1
3. To re-elect the following Directors who retire by rotation in accordance with Article 80 of the Company's Articles of Association and who, being eligible, offer themselves for re-election: i. Mr. Wong Sew Yun Ordinary Resolution 2 ii. Mr. Wong Thai Sun Ordinary Resolution 3
4. To re-appoint Messrs. BDO as Auditors of the Company until the next Annual General Meeting of the Company and to authorise the Directors to fix their remuneration. Ordinary Resolution 4
As Special Business : To consider and if thought fit, to pass with or without modifications the following resolutions as Ordinary Resolutions:
5. AUTHORITY UNDER SECTION 132D OF THE COMPANIES ACT, 1965 FOR THE DIRECTORS TO ISSUE SHARES "THAT, subject always to the Companies Act, 1965, the Articles of Association of the Company and the approvals of the relevant government/regulatory authorities, the Directors be and are hereby authorised, pursuant to Section 132D of the Companies Act, 1965, to allot and 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, deemed fit, provided that the aggregate number of shares to be issued does not exceed 10% of the issued share capital of the Company for the time being and that the Directors are also empowered to obtain the approval from the Bursa Malaysia Securities Berhad for the listing and quotation for the additional shares to be issued." Ordinary Resolution 5
6. PROPOSED RENEWAL OF SHAREHOLDERS' MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE INVOLVING MADAM CHAN LAY LI "THAT, approval be given to the Company and/or its subsidiary companies to enter into recurrent transactions of a revenue or trading nature as stated in Section 2.1 of the Circular to Shareholders dated 04 September 2012 ("Circular") involving Madam Chan Lay Li with related parties which are necessary for the day-to-day operations and on normal commercial terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders as set out in the Circular ("the Mandate").
THAT the Directors be empowered to do all such acts and things (including executing all such documents as may be required) as they may be considered expedient or necessary to give full effect to the Mandate with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments (if any) as may be imposed by the relevant authorities AND THAT such Mandate shall commence upon passing of this ordinary resolution and will expire at the conclusion of the next AGM of the Company following the passing of this ordinary resolution or the expiry of the period within which the next AGM is required by law to be held but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Companies Act, 1965 (unless earlier revoked or varied by ordinary resolution of the shareholders of the Company in general meeting, whichever is earlier); 115 ANNUAL REPORT 2012 NOTICE OF ANNUAL GENERAL MEETING
THAT disclosure will be made in the Annual Report of the Company of the aggregate value of Recurrent Related Party Transactions conducted pursuant to the Mandate during the financial year based on the following information :-
(i) the type of Recurrent Related Party Transactions made; and (ii) the names of the related parties involved in each type of the Recurrent Related Party Transactions made and their relationship with the Company." Ordinary Resolution 6
7. PROPOSED RENEWAL OF SHAREHOLDERS' MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE INVOLVING MR. LIM TECK CHYE, MADAM LIM POH LENG AND MADAM CHAN LAY LI "THAT, approval be given to the Company and/or its subsidiary companies to enter into recurrent transactions of a revenue or trading nature as stated in Section 2.1 of the Circular to Shareholders dated 04 September 2012 ("Circular") involving Mr. Lim Teck Chye, Madam Lim Poh Leng and Madam Chan Lay Li with related parties which are necessary for the day-to-day operations and on normal commercial terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders as set out in the Circular ("the Mandate").
THAT the Directors be empowered to do all such acts and things (including executing all such documents as may be required) as they may be considered expedient or necessary to give full effect to the Mandate with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments (if any) as may be imposed by the relevant authorities AND THAT such Mandate shall commence upon passing of this ordinary resolution and will expire at the conclusion of the next AGM of the Company following the passing of this ordinary resolution or the expiry of the period within which the next AGM is required by law to be held but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Companies Act, 1965 (unless earlier revoked or varied by ordinary resolution of the shareholders of the Company in general meeting, whichever is earlier);
THAT disclosure will be made in the Annual Report of the Company of the aggregate value of Recurrent Related Party Transactions conducted pursuant to the Mandate during the financial year based on the following information :-
(i) the type of Recurrent Related Party Transactions made; and (ii) the names of the related parties involved in each type of the Recurrent Related Party Transactions made and their relationship with the Company." Ordinary Resolution 7
8. To transact any other business of which due notice shall have been given in accordance with the Company's Articles of Association and the Companies Act, 1965.
By Order of the Board
LEE PENG LOON (MACS 01258) P'NG CHIEW KEEM (MAICSA 7026443) Joint Secretaries
Penang 04 September 2012
116 ANNUAL REPORT 2012 NOTICE OF ANNUAL GENERAL MEETING
FURTHER NOTICE IS HEREBY GIVEN THAT for the purpose of determining a member who shall be entitled to attend the Twentieth Annual General Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn. Bhd. to issue a General Meeting Record of Depositors as at 20 September 2012. Only a depositor whose name appears on the Record of Depositors as at 20 September 2012 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf. NOTES ON APPOINTMENT OF PROXY
1. A proxy may but need not be a member of the Company and the provisions of the Section 149(1) (b) of the Companies Act, 1965 shall not apply to the Company.
2. For a proxy to be valid, the proxy form duly completed must be deposited at the Registered Office of the Company, 51-21-A Menara BHL Bank, Jalan Sultan Ahmad Shah, 10050 Penang not less than forty-eight (48) hours before the time appointed for holding the meeting.
3. A member shall be entitled to appoint more than one (1) proxy to attend and vote at the same meeting.
4. Where a member appoints more than one (1) proxy to attend and vote at the same meeting, such appointment shall be invalid unless the member specified the proportion of his shareholdings to be represented by each proxy.
5. If the appointor is a corporation, the proxy form must be executed under its Common Seal or under the hand of its attorney.
6. Where a member is an Exempt Authorised Nominee which holds ordinary shares of the Company for multiple beneficial owners in one securities account (”omnibus account”), there is no limit to the number of proxies it may appoint in respect of each omnibus account it holds. EXPLANATORY NOTE ON ORDINARY BUSINESS
7. Agenda 1 is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of the shareholders of the Company and hence, Agenda 1 is not put forward for voting. EXPLANATORY NOTES ON SPECIAL BUSINESS
8. The proposed Ordinary Resolution 5, if passed, will give the Directors of the Company authority to issue shares in the Company up to an amount not exceeding 10% of the total issued capital of the Company for the time being for such purposes as the Directors consider would be in the best interest of the Company. This authority, unless revoked or varied by the shareholders of the Company in general meeting will expire at the conclusion of the next Annual General Meeting.
The general mandate for issue of shares is a renewal. As at the date of notice of the meeting, no shares has been issued pursuant to the general mandate granted at the last Annual General Meeting of the Company and of which, it will lapse at the conclusion of the 20th Annual General Meeting of the Company to be held on 27 September 2012.
The general mandate for issue of shares will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares for the purpose of funding future investment, working capital and/or acquisition.
9. The proposed Ordinary Resolutions 6 and 7, if passed, will enable the Company and its subsidiaries to enter into recurrent transactions involving the interests of related parties, which are of a revenue or trading nature and necessary for the Group's day-to-day operations, subject to the transactions being carried out in the ordinary course of business and on terms not to the detriment of minority shareholders of the Company, particulars of which have been disclosed in the Circular to Shareholders dated 04 September 2012 which have been dispatched together with the Company's Annual Report.
10. Annual Report The Annual Report is in CD-ROM format. Printed copy of the Annual Report shall be provided to the shareholder upon request within four (4) market days from the date of receipt of the verbal or written request. The Annual Report can also be downloaded from the Company's website at www.emico.com.my.
Shareholders who wish to receive the printed Annual Report and who require assistance in viewing the CD- ROM, kindly contact Puan Nor Azimah Binti Bulat at telephone no. 03-2264 3883 or email your request to [email protected] 117 ANNUAL REPORT 2012 This page is left blank intentionally
118 ANNUAL REPORT 2012 PROXY FORM
EMICO HOLDINGS BERHAD (Company No. 230326-D) (Incorporated in Malaysia)
* I /We______(Full Name in Block Letters) of______(Address) being a * member / members of the above named Company, hereby appoint______
______(Full Name in Block Letters) of______(Address) or failing him, the Chairman of the Meeting as * my / our proxy to vote for * me / us on * my / our behalf at the Twentieth Annual General Meeting of the Company to be held at The Conference Room of Emico Holdings Berhad, 18 Lebuhraya Kampung Jawa, 11900 Bayan Lepas, Penang on Thursday, 27 September 2012 at 11.00 a.m. and at any adjournment thereof.
RESOLUTION ORDINARY RESOLUTION 1 2 3 4 5 6 7 FOR AGAINST
Please indicate with an "x" in the appropriate spaces provided above on how you wish your vote to be cast. If no specific direction as to voting is given, the proxy may vote or abstain from voting at his/her discretion.
Signed this...... day of ...... , 2012.
No. of shares held ...... Signature of Member(s)
Notes : 1. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies' Act, 1965 shall not apply to the Company. 2. For a proxy to be valid, this form duly completed must be deposited at the Registered Office of the Company, 51-21-A Menara BHL Bank, Jalan Sultan Ahmad Shah, 10050 Penang not less than forty-eight (48) hours before the time appointed for holding the meeting. 3. A member shall be entitled to appoint more than one (1) proxy to attend and vote at the same meeting. 4. Where a member appoints more than one (1) proxy to attend and vote at the same meeting, such appointment shall be invalid unless the member specified the proportion of his shareholdings to be represented by each proxy. 5. If the appointor is a corporation, this form must be executed under its Common Seal or under the hand of its attorney. 6. Where a member is an Exempt Authorised Nominee which holds ordinary shares of the Company for multiple beneficial owners in one securities account (”omnibus account”), there is no limit to the number of proxies it may appoint in respect of each omnibus account it holds.
* Strike out whichever is not desired.