WAH SEONG CORPORATION BERHAD WAH SEONG CORPORATION BERHAD (495846-A) (495846-A)
WAH SEONG CORPORATION BERHAD (495846-A) 59-2, The Boulevard Mid Valley City Lingkaran Syed Putra 59200 Kuala Lumpur Malaysia
Tel : (603) 2288 1212 Fax : (603) 2288 1272 Website : www.wahseong.com t r o p e r l a u n n a
2007 20 07laporan tahunan • annual report
Wah Seong Corporation Berhad Annual Report 2007 Corporate Culture
MPT • Meritocracy With Humanity • Professionalism And Transparency • Teamwork Minus Politics
WAH SEONG CORPORATION Wah Seong Corporation Berhad Annual Report 2007 Our Commitment To Quality, Health, Safety And Environment (QHSE)
In Wah Seong Corporation Berhad, we are fully committed to the pursuit of high product and service quality while ensuring no harm to people and no damage to the environment.
We will endeavour to provide quality products and services while at the same time, prevent all accidents and to continuously improve our QHSE performance through the active participation of all of our stakeholders.
The successful management of QHSE is an essential part of our business and corporate culture and accordingly, to meet our objectives, we will;
• Ensure visible and supportive management involvement in all QHSE matters.
• Comply with applicable QHSE legislation and regulations and apply responsible standards where these do not exist.
• Develop measurable QHSE objectives and targets and appraise and report our performance as a mean of ensuring continuous improvement.
• Identify QHSE risks arising from our activities and reduce them to the lowest practicable levels.
• Provide a safe working environment for all our employees and ensure personnel are trained to carry out their work safely.
• Take a systematic and structural approach to the management of quality, health, safety, and the environment based upon suitable management systems.
• Conduct audits, and take corrective action where appropriate, to ensure the effective implementation of this policy.
We kindly request that our suppliers, customers and visitors adhere to this policy at all times. Wah Seong Corporation Berhad Annual Report 2007 Contents
Corporate Information 5 Chairman’s Message 6 Managing Director/Group Chief Executive Officer’s Statement 7 Board of Directors 11 Profile of the Board of Directors 12 Group Management Team 15 Corporate Business Structure 17 Worldwide Operations 18 Audit Committee 19 Remuneration Committee 23 Nomination Committee 26 Option Committee 29 Statement on Corporate Governance 31 Additional Compliance Information 43 Statement on Internal Control 45 Statement of Directors’ Responsibilities 47 Financial Highlights 48 Financial Review 49 Financial Statements 50 a. Directors’ Report 51 b. Statement by Directors and Statutory Declaration 57 c. Report of the Auditors to Members of 58 Wah Seong Corporation Berhad d. Balance Sheets 59 e. Income Statements 61 f. Consolidated Statement of Changes in Equity 62 g. Statement of Changes in Equity 64 h. Cash Flow Statements 65 i. Notes to the Financial Statements 68 Summary of Recurrent Related Party Transactions 157 Summary of Landed Properties on Hand 158 Analysis of Shareholdings, ICULS and Warrants Holdings 161 Notice of Eighth Annual General Meeting 168 Statement Accompanying Notice of Eighth Annual General Meeting 172 Proxy Form 174 Wah Seong Corporation Berhad Annual Report 2007 Corporate Information
Directors
1. Robert Tan Chung Meng 5. Tan Sri Ab Rahman Bin Omar Non-Executive Chairman Independent Non-Executive Director
2. Chan Cheu Leong 6. Tan Sri Dato’ Dr Lin See Yan Managing Director/Group Chief Executive Officer Independent Non-Executive Director
3. Giancarlo Maccagno 7. Jen (B) Tan Sri Dato’ Seri Mohd Zahidi Bin Deputy Managing Director Haji Zainuddin Non-Executive Director 4. Halim Bin Haji Din Independent Non-Executive Director 8. Pauline Tan Suat Ming Non-Executive Director
Committees Audit Nomination Remuneration Option Committee Committee Committee Committee Robert Chairman Halim Bin Hj Din Halim Bin Hj Din Halim Bin Hj Din Tan Chung Meng Tan Sri Ab Rahman Tan Sri Ab Rahman Tan Sri Ab Rahman Pauline Member Bin Omar Bin Omar Bin Omar Tan Suat Ming Tan Sri Dato’ Member Halim Bin Hj Din Chan Cheu Leong Chan Cheu Leong Dr Lin See Yan Chan Cheu Leong Member (Resigned on 26 February – – – 2007)
Secretaries Registered Office 1. Lam Voon Kean (MIA 4793) Suite 2-1, 2nd Floor, Menara Penang Garden 2. Lau Bee Gee (MAICSA 0817743) 42A Jalan Sultan Ahmad Shah, 10050 Penang Tel: 04-2294390 Fax: 04-2265860 Auditors Email: [email protected] PricewaterhouseCoopers (AF 1146) Stock Exchange Listing Solicitors Main Board of Bursa Securities Jeyaratnam & Chong Date of Listing Principal Bankers 9 July 2002 1. Citibank Berhad 2. OCBC Bank (M) Berhad Category 3. RHB Bank Berhad Industrial Products
Principal Advisers Stock Code No. CIMB Investment Bank Berhad 5142
Share Registrar Stock Name Agriteum Share Registration Services Sdn Bhd WASEONG 2nd Floor, Wisma Penang Garden 42 Jalan Sultan Ahmad Shah, 10050 Penang Tel: 04-2282321 Fax: 04-2272391 Email: [email protected] Wah Seong Corporation Berhad Annual Report 2007 Chairman’s Message
On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of Wah Seong Corporation Berhad (“WSC”) for the financial year ended 31 December 2007.
Performance for the Year 2007 The Group registered a commendable 20.1% revenue growth to a record level of RM1.95 billion for the financial year ended 31 December 2007 as compared to RM1.62 billion recorded in 2006. The Group’s net profit rose 130.0% to RM86.0 million against RM37.4 million earned in 2006. However, it is appropriate to note that the Group’s net profit of RM37.4 million for the financial year 2006 included an impairment of goodwill and other assets totaling RM29.4 million in line with the adoption of the new Financial Reporting Standards effective from 1 January 2006. Thus, on a comparable basis, the Group’s net profit actually grew by 28.7% in 2007, which is still higher than the Compound Annual Growth Rate (CAGR) of 25.0% per annum set in the Group’s Growth Strategy to transform itself into a Global Oil and Gas / Energy Group by 2012. Ongoing consolidation, rationalization and near completion of internal restructuring of the Group’s companies, as highlighted in my 2006 Report, have started to bear positive operating results in 2007 and beyond. Improvement in operating margin in the EPC, Fabrication and Rental of Gas Compressors and Process Equipment Business Unit, as well as higher regional demand for infrastructural products, also contributed to the higher level of profitability in 2007. To meet the insatiable global demand for energy, WSC Group’s Oil & Gas Division had increased its capital expenditure and strengthened its investment in human capital, both locally and abroad. New production lines and plants are being constructed or will be acquired / constructed in order to prepare for the Group’s involvement in deepwater pipe coating technology too. As for the Group’s Industrial Services Division, its Infrastructure Business Unit, led by PPI Industries Sdn Bhd has made inroads abroad and has applied the “polyurethane” lining for its water pipes manufactured in Penang and destined for use in Singapore and other overseas markets. WSC has and will continually explore business opportunities and avenues for sustainable growth in order to enhance its shareholders’ value at all times. WSC Group shall continue to evolve and transform itself into a leading global energy player. Operational and strategic measures are constantly taken to ensure that WSC Group’s finances are kept fundamentally strong and prepared for the changes and challenges that each year may hold. The Board and Management of WSC Group is continually guided by the best practices of integrity management and imparting good corporate governance values as its foremost corporate culture and belief.
Outlook for the Year 2008 Market outlook for the year 2008 continues to look bright and promising as global demand for energy and oil services remain robust. However, the current “sub-prime” credit crunch affecting the financial sector and the escalating global inflation resulted from unprecedented high energy and commodity prices, may precipitate a major global economic slowdown or in a worst scenario “stagflation” in the future. However, with the successful completion of WSC’s rights issue, disposal of non-core and loss-making assets/businesses, on-going consolidation and rationalization, and the various pre-emptive measures in place, I am confident that the Group will be well-positioned to meet the challenges ahead.
Dividend
In line with the aim of rewarding its shareholders the Board paid out a cumulative gross dividend of 12% comprising 4% gross less 27% Malaysian Income Tax on 10 October 2007 and 8% gross less 26% Malaysian Income Tax on 23 April 2008.
Acknowledgement On behalf of the Board of Directors, I extend my deep appreciation to all staff and the Management team for their continued drive, hard work, dedication and commitment. My heartfelt and sincere thanks to all our shareholders, clients, business associates, suppliers, financiers, consultants and government authorities and agencies for their continued support and confidence shown towards us throughout these years.
Robert Tan Chung Meng Non-Executive Chairman Wah Seong Corporation Berhad Annual Report 2007 Managing Director/ Group Chief Executive Officer’s Statement
Dear Shareholders and Associates,
Wah Seong Corporation Berhad (WSC) had another successful year in 2007. Overall, the Group achieved commendable profits growth and results consequent to favourable performances by both the Group’s Oil & Gas Division (O&GD) and the Industrial Services Division (ISD). I am honored to once again, present my yearly review of the operations of WSC for the financial year ended 31 December 2007.
In line with our overall objective of continually improving our financial performance and operational efficiency, as well as enhancing our shareholders’ value, I would like to highlight some key programs and measures undertaken during the year:-
(a) Near completion of the Group’s internal restructuring, which involved the formation of Wasco Energy Ltd (WascoE) to hold and spearhead the growth of the entire Group’s oil and gas investment and business operations in the O&GD, whilst the non-oil and gas businesses comprising Infrastructure / Building Materials and Agro-based Engineering are grouped under the renamed ISD.
(b) On-going consolidation, rationalization and integration (including cultural integration) of all businesses following the substantial number of mergers and acquisitions undertaken in year 2004 / 2005 and culminating from the above internal restructuring exercises. In this regard, non-core and / or loss making assets / businesses will (if any) be constantly reviewed on its performance sustainability and to be disposed of to improve the Group’s return on assets and performance. Additional resources are being allocated to key high-growth core business units centered mainly upon our engineering fabrication and rental of gas compression as well as our pipe coating and corrosion protection businesses.
(c) Strengthening of Financial Position
- Effective cost control at all fronts continues to be applied especially in the context of fast escalating costs which are affecting the entire oil and gas industry. It is the Group’s policy to hedge, wherever possible, all procurement and material costs associated with all contracts / projects awarded.
- Optimizing our global financial operations to minimize the Group’s financing cost and maximize return on surplus funds. More importantly, a prudent and effective Foreign Currency Exposure Management System has been established to manage the Group’s exposure against major foreign currency volatility arising from our global operations.
- The Group has successfully raised about RM202.1 million from its recently concluded capital fund raising exercise. A total of 90.6 million rights issue @ RM2.23 per share together with 136.0 million new free detachable five-year warrants were issued and allotted. The overall capitalization exercise together with the disposal of an industrial property, completed and raised a total cash injection of RM261.1 million in end of March 2008, has significantly strengthened the Group’s balance sheet and provides the necessary funds to further expand the Group’s fast growing gas compression, pipe coating / corrosion protection businesses as well as the establishment of a new steel pipe mill in Sabah for the Kimanis / Bintulu Pipeline Project while keeping our overall gearing at a comfortable level.
Having established the above programs and measures, the Group will be better positioned to face future challenges, including the imminent major global economic slowdown. At the same time, the Group is also poised to undertake any viable or major mergers and acquisitions in the near future with its ready war chest.
I would also like to extend a warm welcome to the four new members of the WSC family, namely:- (1) Turn Key Pipeline Services BV (TKPS) – an engineering and machinery company providing pipe coating services to the Oil & Gas industry based in Netherlands; (2) Wasco Coatings Denmark ApS (WCD) – a specialist in pipe coating facilities and related services to the Oil & Gas industry based in Denmark; (3) Petro-Pipe Sabah Sdn Bhd (PPS) – a manufacturer and supplier / provider of steel pipes and coatings thereto based in Sabah; and (4) PT MPE Deepwater – an extension of our Material Performance Engineering Group based in Indonesia to manufacture offshore aluminium and zinc anodes and provide corrosion control materials and services. We are confident that they will contribute positively towards the future growth of the Group. Wah Seong Corporation Berhad Annual Report 2007 Managing Director/ Group Chief Executive Officer’s Statement (Cont’d)
Overall Financial Review
The Group registered revenue of RM1,950.1 million for the financial year ended 31 December 2007, representing an increase of 20.1% compared with RM1,624.3 million recorded in 2006. The increase is attributed to higher performance in the EPC, Fabrication and Rental of Gas Compressors and Process Equipment business unit as well as in the Infrastructure and Agro-based Engineering business units of the ISD. Corresponding to the increase in revenue, the Group also registered a 42.2% improvement in Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) to RM184.7 million from RM129.9 million achieved in 2006.
The Group’s pre-tax profit registered an increase of 60.8% to RM115.1 million compared to RM71.6 million recorded in 2006 mainly due to internal growth derived from new and existing subsidiaries, which generally reflect the positive benefits from synergistic mergers and acquisitions made in year 2004 / 2005.
The Group’s net profit attributable to the WSC shareholders rose 130.0% to RM86.0 million against RM37.4 million earned in 2006. However, it should be noted that the Group’s net profit of RM37.4 million for the financial year 2006 included an impairment of goodwill and other assets totaling RM29.4 million in line with the adoption of the new Financial Reporting Standards which came into effect on 1 January 2006. Thus, on a comparable basis, the Group’s net profit grew by 28.7% in 2007, which is higher than the Compound Annual Growth Rate (CAGR) of 25% per annum set in the Group’s Growth Strategy to transform itself into a Global Oil & Gas / Energy Group by 2012.
Oil & Gas Division (“O&GD”)
The Revenue achieved by this O&GD for year 2007 was RM1.22 billion. This represents an increase of 20.5% over that in 2006 and accounted for about 63.0% of the Group’s total Turnover in 2007.
The Group’s specialized pipe coating and corrosion protection business unit performed satisfactorily during the year. The plans to expand geographically, in particular Europe, especially for the pipe coating business are taking shape with the acquisition of pipe coating and engineering machinery companies e.g. TKPS and WCD. PPS had recently secured a RM390 million contract for the manufacturing, coating, delivery and storage of pipes for the Sabah-Sarawak Gas Pipeline Project (SSGP) with Petronas Carigali Sdn Bhd. The Group is further negotiating to form a strategic alliance with Sabah state agencies to undertake pipe manufacturing and pipe coating of the SSGP.
As new areas of exploration are discovered and the need to meet surging demand for deepwater pipe coating increases, the Group has readily invested with its state-of-the-art deepwater flow assurance coating facility as located in Kuantan, Malaysia to take on these challenges and new opportunities created. Works on the facility costing RM75.0 million, is expected to be operational by 3rd Quarter 2008. This investment will allow the Group to play a bigger role in the pipe coating market which is one of the Group’s largest revenue earners. With over 60% of the Group’s businesses being derived overseas, WSC also plans to tap into the Malaysian market for pipe coating and gas compression opportunities. Currently, in Malaysia alone, nine deepwater fields have been identified for commercial operations from the present time to 2013. Further studies reveal that there are 10 new “open” deepwater blocks in Malaysia, which presents a potential for deepwater pipe coating market requirements.
The Group’s engineering business unit proves to be a star performer for the year 2007. The Group plans to further grow its rental operation and maintenance business, by adding rental capacity of between 10,000 – 15,000 horsepower per annum over the next five years. Of the total RM261.1 million raised from the rights issue, Employees Share Option Scheme and disposal of industrial property, approximately RM85.0 million will be allocated for the purchase of a rental fleet of gas compressors by June 2008. This will be in addition to the annual planned increase in rental capacity of some 10,000 - 15,000 horsepower. Importance has also been placed especially on design, engineering along with operations and maintenance (O&M) capabilities for the business.
The Group’s pipeline contracting business has taken a positive turn with the recent award of a RM147.0 million pipeline contract in Australia. Although it had incurred a loss in 2007, the Group anticipates this business to turn around and to return to profitability in the coming year.
Whilst Asia continues to provide excellent growth opportunities for the Group due to increasing energy demand in the future, greater focus will be placed to develop new markets in Central Asia, Middle East and Europe including Russia.
Industrial Services Division (“ISD”)
Revenue from the ISD grew 19.2% to RM715.6 million versus RM600.2 million in 2006. EBITDA showed an increase of 26.8% to RM45.0 million during the same period compared to RM35.5 million in 2006. Consequently, the ISD recorded a 41.8% higher in profit before tax to RM37.3 million from RM26.3 million achieved in 2006. Wah Seong Corporation Berhad Annual Report 2007 Managing Director/ Group Chief Executive Officer’s Statement (Cont’d)
Our pipe manufacturing business has been growing in tandem with the increase of infrastructure projects being built in the region. This bodes well for the Group and will be upgrading and increasing our capacities to meet our customers’ needs. To enhance our competitive advantage, the Group has also ventured into new and innovative products such as polyurethane lining for water pipes which are far superior to traditional cement lined pipes. The Group also plans to seek new regional markets and embark on geographical expansion for our spiral welded steel pipes.
The building materials business also did well in 2007, riding on the upturn in the building and construction sectors during the year. Efforts to focus on marketing new and innovative products over the previous years have started paying off, as our product mix improves over the same period.
It was a good year for the agro-based business as palm oil prices continue to strengthen. To further broaden our earnings base in this sector, the Group will leverage on our strengths to tap on the potential business opportunities the industry has to offer, which includes environmental engineering. In this regard, a new growth strategy has been formulated to broaden this scope of business in the palm oil industry.
Health, Safety and Environment (HSE)
The Group is committed to the health, safety and welfare of all our employees, contractors, suppliers and visitors and to the protection of the environment. This commitment is espoused through our HSE policy statement, a copy of which can be found on page 3 of this Annual Report. Stated simply, our target is to provide an accident- free workplace delivered through HSE Management systems which are centred on robust risk identification, assessment and control processes and that are regularly reviewed, continually improved and which integrate the highest international standards including OSHAS 18001 and ISO 14001. The group achieved another zero fatality year in 2007 and our successful HSE performance was recognized through awards garnered from several major customers.
Human Resource
In 2007, WSC made good progress in making further inroads with our new performance development programme (PDP). The Group had successfully implemented the system deeper into the overall organization and targets to get to a point where performance is planned, managed and evaluated on a consistent basis across all our businesses. We acknowledge that performance management would be a long term and continuous process and is committed to ensuring that sufficient priority is committed to set up and maintain the process. This shall be its springboard to driving performance from enterprise to individual level and will help to provide the focus required to spearhead other talent management initiatives.
In recognition that what defines the Group is its culture, we strive to permeate its corporate values of“MPT” (Meritocracy with humanity, Professionalism and transparency, Teamwork minus politics) across its businesses and geographical boundaries. The Group continues to invest in building a conducive work environment and a workforce that holds itself to high standards and treats individuals with respect.
Recruitment and learning remain important areas of focus for the Group. We believe that bringing in the right level of competencies and skills, and continuously training and investing in the career development of current employees will underlie and drive its strategy of long term growth.
Corporate Social Responsibility (CSR)
WSC attempts to contribute to the definition of our society by aligning a balance between profitability and contribution to our community.
Community, environment and workplace are important pillars to the WSC CSR program. Under the CSR program, WSC takes part in activities that involve the youth and the public as a whole under the auspices of Yayasan Wah Seong (YWS), the charitable arm of WSC.
Through a charitable organization, YWS contributed towards the construction of a community centre for rest, recreation, continuing educational and healthcare activities for senior citizens and their contemporaries to fulfill their social needs and to provide support infrastructure. WSC aims to give and continue giving our strong and best support to build bridges of love between the very young and the aged / senior citizens; and between the orphans/ underprivileged and the infirmed; that cuts across all class, creed and community.
YWS Scholarship Awards which commenced in 2008, is intended to be a continuous and long-term CSR program. The program not only serves as a platform to foster, develop and improve the education sector but to render Wah Seong Corporation Berhad Annual Report 2007 10 Managing Director/ Group Chief Executive Officer’s Statement (Cont’d)
financial assistance to deserving young individuals. YWS has also committed to channel a percentage of their donations received in upgrading and building a home for children transmitted with HIV/AIDS.
YWS has also recently contributed to victims of the recent cyclone disaster in Yangon, Myanmar and earthquake disaster in Sichuan, China.
The major thrust under these social responsibility programs is to bring a value proposition to the lives of those in the community and the nation in general. Here, the Group seeks to alleviate the hardship faced by the less fortunate, the needy and the marginalized. More CSR initiatives undertaken by the Group can be further viewed under the Corporate Social Responsibility Statement on page 41 of this Annual Report.
Outlook for the Year 2008
The outlook for the year 2008 appears promising especially for the global oil and gas industry. Industry studies on the fundamentals of supply and demand for oil and gas suggest that crude oil prices are likely to remain high over the next few years. Whilst the industry remains under invested, the unprecedented high oil prices will add further impetus in the oil and gas exploration and production expenditure. We expect increasing and accelerating activities in deepwater exploration in Malaysia and worldwide. A significant number of new and replacement pipelines are coming on-stream for development and construction in Malaysia, Asia, Central Asia and Europe over the next five years which augurs well for WSC’s pipe coating and other related businesses. Upon completion, our new deepwater pipe coating facility in Kuantan and pipe mill in Kota Kinabalu, Sabah will be well positioned to benefit from these favourable developments.
The future for natural gas is tremendous for a number of reasons. In the first place, the global reserve of natural gas far exceeds that of crude oil. Natural gas is also a cleaner and cheaper option in terms of thermal energy equivalent of oil. It is in this context that our gas compression business, spearheaded by GSI, has a tremendous future, especially in Asia. In order to create a stable and recurring income base for the Group, WSC will invest more than RM140.0 million in 2008 / 2009 to expand GSI’s rental fleet and capacity of gas compressors and its O&M business to meet the anticipated increase in the industry demand.
The Industrial Services Division is expected to perform satisfactorily in FY2008, benefiting from new regional infrastructure projects and the robust palm oil prices. The local building and construction sectors however, will be under pressure because of rising costs of raw materials. This may dampen our building material business in the event of any slowdown in this sector.
With the ongoing internal group restructuring, consolidation and rationalization exercises that were carried out over the last two years, and more importantly, with a stronger financial base, the Group is now well-positioned to undertake some major mergers and acquisitions in 2008 and beyond. Mergers and Acquisitions remain central to our “Growth Strategy” which is based on CAGR of 25% per annum.
Recent economic indicators suggest that the global economy may be adversely affected by the prevailing sub- prime credit crunch and escalating inflation by continuing high energy and commodity prices. Whilst a global economic slowdown is generally expected, the risk of the world economy heading for “stagflation“ cannot be ruled out. However, with all the pre-emptive measures being undertaken, we are confident that WSC will be well- positioned to meet these challenges ahead and realize its vision of transforming itself into a Global Oil & Gas / Energy Group by 2012.
Barring unforeseen circumstances, the Group can look forward to another successful year ahead driven by positive sentiments in the industry and improvements in the Company’s fundamentals.
Acknowledgment
The continued success enjoyed by WSC would not have been achievable without the tremendous efforts, commitment and contributions at all times throughout the year from the management and staff of the Group. My heartfelt gratitude and appreciation must be extended to my esteemed board of Directors for their generous counsel and dedication through the years. Last but not least, my sincere thanks also reach out to all shareholders, client, suppliers, bankers, business associates, the investment community and regulatory authorities for their excellent support and cooperation.
Chan Cheu Leong Managing Director / Group Chief Executive Officer 11 Wah Seong Corporation Berhad Annual Report 2007 Board of Directors
From Left To Right
First Row Second Row
TAN SRI AB RAHMAN BIN OMAR TAN SRI DATO’ DR LIN SEE YAN Independent Non-Executive Director Independent Non-Executive Director
HALIM BIN HAJI DIN ROBERT TAN CHUNG MENG Independent Non-Executive Director Non-Executive Chairman
GIANCARLO MACCAGNO CHAN CHEU LEONG Deputy Managing Director Managing Director / Group Chief Executive Officer
JEN (B) TAN SRI DATO’ SERI PAULINE TAN SUAT MING MOHD ZAHlDI BIN HAJI ZAINUDDIN Non-Executive Director Non-Executive Director Wah Seong Corporation Berhad Annual Report 2007 12 Profile of the Board of Directors
ROBERT TAN CHUNG MENG, a Malaysian aged 56, was appointed Chairman of Wah Seong Corporation Berhad (“WSC”) on 22 May 2002.
He has vast experience in the property and hotel industry. After studying Business Administration in the United Kingdom, he was attached to a Chartered Surveyor’s firm for one year. He has also developed a housing project in Central London before returning to Malaysia. He has been involved in various development projects carried out by IGB and Tan & Tan Developments Berhad, in particular the Mid Valley Project.
Currently, he is the Managing Director of IGB Corporation Berhad, the Group Managing Director of KrisAssets Holdings Berhad and a director of Tan & Tan Developments Berhad.
Robert Tan Chung Meng is the brother of Pauline Tan Suat Ming. He has no conflict of interest with the Company and has not been convicted of any offences in the past ten (10) years.
CHAN CHEU LEONG, a Malaysian aged 58, is the Managing Director/ Group Chief Executive Officer of WSC. He was appointed to the Board of WSC on 22 May 2002.
He attained a Bachelor of Science (Hon) degree in Engineering Production in 1974 from the University of Birmingham under a Colombo Plan Award and began his career by joining the Singapore Administrative Service. He left the Ministry of Finance, Singapore in 1976 to pursue his Master in Business Administration from the London Business School. Upon successful completion of the same, he joined ESSO Production Malaysia Incorporated as their Senior Financial Analyst before joining Tractors Malaysia Berhad as their Group Treasurer in 1981. Thereafter, he left to become the Group Executive Director for General Corporation Berhad from 1984 to 1990 before assuming the position of Managing Director of Tan & Tan Developments Berhad from 1990 to 1995. In 1994, he established Wah Seong Industrial Holdings Sdn Bhd and subsequently formed Wah Seong Corporation Berhad, which assumed the listing status of Perdana Industri Holdings Berhad on 9 July 2002. He has extensive experience in the property, manufacturing and financial fields. Currently, he is a Trustee of Yayasan Wah Seong and sits on the Board of several other private limited companies as well.
Mr Chan does not have any family relationship with any director and/or substantial shareholder of the Company and has no conflict of interest with the Company. He has not been convicted of any offences in the past ten (10) years.
TAN SRI AB RAHMAN BIN OMAR, a Malaysian aged 62, is an Independent and Non-Executive Director of the Company. He was appointed to the Board of WSC on 1 October 2003.
He holds an honours degree in economics from the University of Malaya. From 1970 to 1973, Tan Sri Ab Rahman served in the Administration & Diplomatic Service of the various Government Departments i.e. the Statistics Department, the Ministry of Commerce & Industry and the Ministry of Primary Industry before opting out of civil service in 1978. He was seconded to Pineapple Cannery Malaysia Sdn Bhd as its Finance & Administrative Manager in late 1973 and was subsequently promoted as General Manager before becoming a Director for the period 1980 to 1993. He was the Managing Director of Perusahaan Otomobil Kedua Sdn Bhd from May 1996 to 1 May 2004.
Tan Sri Ab Rahman is also the Chairman of Perusahaan Sadur Timah Malaysia (Perstima) Berhad and Edaran Otomobil Nasional Berhad as well as a Director of Chemical Company of Malaysia Berhad and DRB-Hicom Berhad. He is also a director of several other private limited companies.
Tan Sri Ab Rahman does not have any family relationship with any director and/or substantial shareholder of the Company and has no conflict of interest with the Company. He has not been convicted of any offences in the past ten (10) years. 13 Wah Seong Corporation Berhad Annual Report 2007 Profile of theBoard of Directors (Cont’d)
HALIM BIN HAJI DIN, a Malaysian aged 62, was appointed an Independent and Non-Executive Director on 22 May 2002.
En Halim is a Chartered Accountant who spent more than 30 years working for multinational corporations and international consulting firms. He accumulated 18 years of experience working in the Oil and Gas Industry – 6 years of which as a Board member of Caltex/Chevron responsible for financial management before engaging in the consulting business. He was the Managing Partner of the Consulting Division of Ernst & Young Malaysia. He later became the Vice President of Cap Gemini Ernst & Young Consulting when Cap Gemini of France merged with Ernst & Young Consulting. In 2003, he with two partners took over the consulting business of Cap Gemini Ernst & Young Malaysia and rebranded it as Innovation Associates where he is currently the Group Managing Director.
En Halim is also an independent member of the Board for the following companies i.e. Boustead Properties Berhad, MMC Corporation Berhad, KrisAssets Holdings Berhad and Takaful Ikhlas Sdn Bhd.
En Halim does not have any family relationship with any director and/or substantial shareholder of the Company and has no conflict of interest with the Company. He has not been convicted of any offences in the past ten (10) years.
GIANCARLO MACCAGNO, an Italian aged 45, was first appointed as an Executive Director on 1 June 2004 and subsequently redesignated as Deputy Managing Director upon his promotion on 1 January 2007.
Presently, he is the Managing Director and Chief Executive Officer of PPSC Industrial Holdings Sdn Bhd (“PPSCIH”), which oversees the Oil and Gas Division of Wah Seong Corporation Berhad Group. Having attained his Bachelor in Business Administration from Tecnico Commerciale Maddalena Adria (RO) Italy in 1982, he worked with Socotherm S.R.L, Italy from 1984 to 1987 as a Trainee in Production and Project Management. He was appointed as Project Manager for Socotherm S.R.L in Nigeria from 1987 to 1990 and was briefly seconded to Petro-Pipe Industries (M) Sdn Bhd (“PPI”) in 1990 to assist in the setting up of PPI’s coating plant in Kuantan, Malaysia. After serving as Country Manager for Socotherm S.R.L in Taiwan from 1991 to 1992, he returned to Malaysia in 1993 to be the General Manager of PPSC Industries Sdn Bhd in Kuantan, Malaysia. He has vast experience in the global pipe coating business and oil and gas business in general.
He also sits on the Board of several other private companies within WSC group of companies and in Hicom Petro- Pipes Sdn Bhd.
Mr Maccagno does not have any family relationship with any director and/or substantial shareholder of the Company and has no conflict of interest with the Company. He has not been convicted of any offences in the past ten (10) years.
PAULINE TAN SUAT MING, a Malaysian aged 63, is a Non-Executive Director. She was appointed to the Board of WSC on 22 May 2002.
She is a holder of Bachelor of Science (Honours) in Biochemistry from University of Sussex, England and she has attained her Fellowship status in March 2005 with The Malaysian Institute of Chartered Secretaries and Administrators. She started her career as a chemist with Malayan Sugar Manufacturing Company Bhd from 1969 to 1972. She then joined Tan Kim Yeow Sdn Bhd as an Executive Director in 1976 and joined Wah Seong (Malaya) Trading Co. Sdn Bhd in 1983 and was made an Executive Director in 1994. Currently, she is a Director of IGB Corporation Berhad and Goldis Berhad, a Trustee of Yayasan Wah Seong and also sits on the Board of several other private limited companies.
Pauline Tan Suat Ming is the sister of Robert Tan Chung Meng. She has no conflict of interest with the Company and has not been convicted of any offences in the past ten (10) years. Wah Seong Corporation Berhad Annual Report 2007 14 Profile of the Board of Directors (Cont’d)
TAN SRI DATO’ DR LIN SEE YAN, a Malaysian aged 69, was appointed an Independent and Non-Executive Director on 20 July 2004.
He is an independent strategic and financial Consultant. Qualified as a Chartered Statistician, he graduated from the University of Malaya in Singapore and Harvard University (where he received 3 degrees, including a PhD in economics). He is Pro-Chancellor, Universiti Sains Malaysia and also Adjunct Professor of Economics at the Universiti Utara Malaysia.
Prior to 1998, he was Chairman/President and CEO of the Pacific Bank Group and for 14 years previously, Deputy Governor of Bank Negara Malaysia, having been a central banker for 34 years. He is Chairman Emeritus of Harvard University’s Graduate School of Arts & Sciences Alumni Council and the Regional Director for Asia, Harvard Alumni Association. He continues to serve actively in a diversified range of public, charitable, educational, financial, industrial and commercial institutions both locally and abroad. Some current appointments include: Trustee, MAKNA (National Cancer Council); Governor, Asian Institute of Management, Manila; Trustee, Malaysia University for Science & Technology and Monash University (Sunway Campus); Senior Advisor, Public-Private Partnership Centre at PM’s EPU; and Member, Asian Shadow Financial Regulatory Committee.
He advises and sits on the Board of several publicly listed and private businesses in Malaysia, Singapore and Indonesia, including Chairman of Cabot (Malaysia) Sdn Bhd and KrisAssets Holdings Berhad as well as being a Director of F&N Holdings Berhad, Ancom Berhad, Genting Berhad, Resorts World Berhad and JobStreet Corporation Berhad.
Tan Sri Dato’ Dr Lin does not have any family relationship with any director and/or substantial shareholder of the Company and has no conflict of interest with the Company. He has not been convicted of any offences in the past ten (10) years.
JEN (B) TAN SRI DATO’ SERI MOHD ZAHIDI BIN HAJI ZAINUDDIN, a Malaysian aged 60, was appointed to the Board of Wah Seong Corporation Berhad on 29 November 2005 as a Non-Executive Director of the Company.
Jen (B) Tan Sri Dato’ Seri Mohd Zahidi served the Malaysian Armed Forces for 39 years, holding many key appointments at field and ministerial level. He was the Chief of the Malaysian Defence Forces with the rank of General from 1 January 1999 until his retirement on 30 April 2005. Prior to this appointment, he was the Malaysian Chief of Army from 1 January 1998 for one year.
Jen (B) Tan Sri Dato’ Seri Mohd Zahidi is a graduate of the Senior Executive Program in National and International Security Harvard University USA, Command and General Staff College Philippines, Joint Services Staff College Australia and National Defence College Pakistan. He also holds a Master of Science Degree (Defence and Strategic Studies) from the Quaid-i-Azam University, Islamabad, Pakistan.
He was appointed the Deputy Chairman of Bandar Raya Developments Berhad in May 2005. His current directorships in other public companies include Cahya Mata Sarawak Berhad, Resorts World Bhd, Bintulu Port Holdings Berhad and Asiatic Development Berhad. He is currently the Chairman of Affin Holdings Berhad, a subsidiary of the Armed Forces Trust Fund (“Lembaga Tabung Angkatan Tentera”) since 17 October 2005. He was elected and made a Member of Dewan Negara Perak by DYMM Paduka Seri Sultan Perak on 25 November 2006. He is also a director of Yayasan Sultan Azlan Shah.
Jen (B) Tan Sri Dato’ Seri Mohd Zahidi does not have any family relationship with any director and/or substantial shareholder of the Company and has no conflict of interest with the Company. He has not been convicted of any offences in the past ten (10) years. 15 Wah Seong Corporation Berhad Annual Report 2007 Group Management Team
B G Lau Group Company Secretary / Bernard Pe-Win Corporate Lawyer, WSC Group CEO, Wah Seong Boustead (Myanmar) Bernard Yeap Group Financial Controller / Director of Corporate Governance & Compliance, WSC Group
Chan Cheu Leong Group Chief Executive Officer / Chin Phoy Hoy Managing Director, WSC Group MD / CEO, Jutasama Group
Chia Kim Har Director, PMT Industries Group
Chin Yoong Ngok Dato’ Mohamed Nizam Bin CEO, Industrial Services Division Abdul Razak Datuk Mohd Saufi Chairman, Botco Group bin Haji Abdullah Chairman, Petro-Pipe Sabah
Don Qian CEO, Wah Seong China & Ashburn International (China) Edgar Lewis Frank Twynam CEO, Material Performance CEO, Wasco Coatings Group Engineering Group
Gary Mackenzie CEO, Mackenzie Hydrocarbons (Australia)
Giancarlo Maccagno Deputy Group Managing Director
Giancario Tocchio Gnanasekaran Murugaiah Head, Country (Europe) Head, Country (India)
Hong Ching Kiang ED. PMT Industries Group
Jenny Chok Head, Legal Services Wosco Energy Group Jim Britton Kevin Revere CEO, Deepwater Corrosion General Manager (Operations), Services Group PPSC Group Wah Seong Corporation Berhad Annual Report 2007 16 Group Management Team (Cont’d)
Lee Turnbull CEO, Wasco Engineering Group
Lim Kho Khoon Lee Ean Lean CEO, Mackenzie Industries Sdn Bhd Director of Finance and Corporate Services Wosco Energy Group
Mel Whyte CEO, Delco Australia
Martyn Wilmott Director of Technology, PPSC Group Mohd. Azlan bin Mohamed Managing Director, Botco Group
Nge Kwan Min CEO, PPI Industries Mohamed Siraj Bin Abdul Razack CEO, Total Oil Technologies Oh Teik Tatt & Botco Group Chairman, Gas Services International Group
Ramanathan A/L Rajan Abraham PR Singaram Head, Group Internal Audit CEO, Drilbits International (India) WSC Group & Driltools International (Dubai) Ruben Ang CEO, Wasco Technologies (Singapore)
Selina Chean Head, Group Human Resource WSC Group Soh Chee Gee ED, Syn Tai Hung Trading Steve Lewis General Manager, Wasco Coatings Group
Thomas Phan Van Truong Head, Country (Vietnam)
Yap Chin Gak ED, Phoenix Industries
Yap Mun Thoe General Manager, Kanssen Group
Yap Wing Chun Chairman, PPI Industries & Syn Tai Hung Trading Group 17 Wah Seong Corporation Berhad Annual Report 2007 Corporate Business Structure
Wasco Coatings Limited SPECIALIZED PIPE COATING AND CORROSION PPSC Group PROTECTION SERVICES Kanssen (Yadong) Pipe Coating Services Limited
Deepwater Corrosion Services Inc
Material Performance Engineering Sdn Bhd
Turn Key Pipeline Services BV
Gas Services International Group
Jutasama Sdn Bhd EPC, FABRICATION WASCO AND RENTAL OF GAS ENERGY LTD Mackenzie Industries Sdn Bhd (OIL & GAS COMPRESSORS AND DIVISION) PROCESS EQUIPMENT Mackenzie Hydrocarbons (Australia) Pty Ltd
Wasco Technologies Pte Ltd
Delco Australia Pty Ltd
Total Oil Technologies Sdn Bhd
Botco Sdn Bhd
TOT Inspection Sdn Bhd WAH SEONG CORPORATION E & P PRODUCTS Driltools International FZCO BERHAD AND SERVICES (HOLDING COMPANY) Drilbits International Private Limited
Wah Seong China Limited
Ashburn International Inc
LTT Oil & Gas Nigeria Limited
PMT Industries Sdn Bhd AGRO-BASED WAH SEONG ENGINEERING Phoenix Industries Sdn Bhd INDUSTRIAL HOLDINGS SDN BHD (INDUSTRIAL SERVICES Syn Tai Hung Trading Sdn Bhd DIVISION) INFRASTRUCTURE / BUILDING MATERIALS Petro-Pipe Industries (M) Sdn Bhd Wah Seong Corporation Berhad Annual Report 2007 18 Worldwide Operations 19 Wah Seong Corporation Berhad Annual Report 2007 Audit Committee
1. MEMBERS
Members and details of attendance of Directors at the Audit Committee Meetings of Wah Seong Corporation Berhad for the financial year ended 31 December 2007 are as follows:-.
Date of No. of Meetings Name of Directors Appointment Attended
Halim Bin Haji Din (Chairman) 22 May 2002 5/5
Tan Sri Ab Rahman Bin Omar (Member) 1 October 2003 4/5
Tan Sri Dato’ Dr Lin See Yan (Member) 20 July 2004 5/5
Chan Cheu Leong (Member) 22 May 2002 1/5 (Resigned on 26 February 2007)
2. ROLE OF THE AUDIT COMMITTEE The primary function of the Audit Committee is to assist the Board of Directors (‘the Board’) in fulfilling the following oversight objectives on the Group’s activities: • assess the Group’s processes relating to its risks and control environment; • oversee financial reporting; and • evaluate the internal and external audit processes.
3. TERMS OF REFERENCE i. Composition The Board shall elect and appoint Committee members from amongst their numbers, comprising no fewer than three (3) Directors, all of whom must be non-executive directors, with a majority of them being independent non-executive Directors of the Company. The Board shall at all times ensure that the Audit Committee should be financially literate and at least one (1) member of the Committee shall be: • a member of the Malaysian Institute of Accountants (“MIA”); or • if he or she is not a member of MIA, he or she must have at least three (3) years of working experience and:- − he or she must have passed the examinations specified in Part I of st the1 Schedule of the Accountants Act 1967; or − he or she must be a member of the associations of accountants specified in Part II of the Accountants Act 1967. • fulfils such other requirements as may be prescribed or approved by Bursa Malaysia Securities Berhad from time to time. If a member of the Committee resigns, dies or for any reason ceases to be a member with the result that the number of members is reduced below three (3), the Board shall within three (3) months of the event appoint such number of new members as may be required to fill the vacancy. The Chairman of the Committee shall be an independent non-executive Director. No alternate Director of the Board shall be appointed as a member of the Committee. The Board shall review the terms of each of its members at least once (1) every three (3) years. Wah Seong Corporation Berhad Annual Report 2007 20 Audit Committee (Cont’d)
ii. Quorum and Committee’s procedures Meetings shall be conducted at least four (4) times annually, or more frequently as circumstances dictate. In order to form a quorum for the meeting, the majority of the members present must be independent non-executive Directors. In the absence of the Chairman, the members present shall elect a Chairman for the meeting from amongst the members present. The Company Secretary shall be appointed Secretary of the Committee (“the Secretary”). The Secretary, in conjunction with the Chairman, shall draw up an agenda, which shall be circulated together with the relevant support papers, at least one (1) week prior to each meeting to the members of the Committee. The minutes shall be circulated to members of the Board. The Committee may, as and when deemed necessary, invite other Board members and senior management members to attend the meetings. The Chairman shall submit an annual report to the Board summarising the Committee’s activities during the year and the related significant results and findings. The Committee shall meet at least twice a year with the Management, the Head of Internal Audit and external auditors in separate sessions to discuss any matters without the presence of any executive member. The Committee shall regulate the manner of proceedings of its meetings, having regard to normal conventions on such matter. iii. Authority The Committee is authorised to investigate any activity within its terms of reference and shall have unrestricted access to both the internal and external auditors and to all employees of the Group. The Committee shall have full and unlimited access to any information pertaining to the Group. The Committee shall have direct communication channels with the internal and external auditors and with senior management of the Group and shall be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of the other directors and employees of the Company, whenever deemed necessary. The Committee shall have the resources that it requires to perform its duties. The Committee can obtain, at the expense of the Company, outside legal or other independent professional advice that it considers necessary. Where the Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the Bursa Securities Listing Requirements, the Committee shall promptly report such matter to the Bursa Securities. iv. Responsibilities and duties In fulfilling its primary objectives, the Committee shall undertake the following responsibilities and duties: • Review the appointment and performance of external auditors, the audit fee and any question of resignation or dismissal before making recommendations to the Board. • Review with the external auditor, the audit scope and plan, including any subsequent changes to the audit scope and plan. • Review the quarterly results and the year end financial statements, prior to the approval by the Board focusing particularly on: − changes in or implementation of major accounting policy changes; − significant or unusual events; and − compliance with accounting standards and other legal requirements; • Review the Internal Audit Charter and the adequacy of the internal audit scope and plan, as well as the functions, competency and resources of the Group Internal Audit Department and whether it has the necessary authority to carry out its work. • Review the internal and external audit reports to ensure that appropriate and prompt remedial action is taken by management on major deficiencies in controls or procedures that are identified. 21 Wah Seong Corporation Berhad Annual Report 2007 Audit Committee (Cont’d)
• Review major audit findings and the management’s response during the year with management, internal and external auditors, including the status of previous audit recommendations. • Review the assistance given by the Group’s officers to both the internal and external auditors, and any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information. • Review the independence and objectivity of the external auditors and their services, including non- audit services and the professional fees, so as to ensure a proper balance between objectivity and value for money. • Approve all decisions regarding the appointment or removal of the Head, Group Internal Audit. • Review the adequacy and integrity of internal control systems, including risk management, management information system, and the internal auditors’ and/or external auditors’ evaluation of the said systems. • Direct and where appropriate supervise any special projects or investigation considered necessary, and review investigation reports on any major defalcations, frauds and thefts. • Review procedures in place to ensure that the Group is in compliance with the Companies Act 1965, Bursa Securities Listing Requirements and other legislative and reporting requirements. • Review any related party transaction and conflict of interest situation that may arise within the Company or the Group, including any transaction, procedure or course of conduct that raises question on management integrity. • Prepare reports, if the circumstances arise or at least once (1) a year, to the Board summarizing the work performed in fulfilling the Committee’s primary responsibilities. • Review the allocation of options pursuant to WSC Group’s Employees Share Option Scheme (“WSC Group ESOS”). • Any other activities, as authorized by the Board.
4. SUMMARY OF ACTIVITIES During the financial period under review, the Audit Committee conducted its activities in line with the terms of reference, e.g.:
• Reviewed quarterly and annual reports of the Group and the Company before submission to the Board for consideration and approval.
• Reviewed the annual audit plan and the scope for the year prepared by internal and external auditors.
• Reviewed the fee for external auditors.
• Discussed with the external auditors their report on the financial statements and management letters relating to the audit.
• Met the external auditors without any executive present except the Secretary.
• Reviewed the recurrent related party transactions of a revenue or trading nature within the Group for inclusion in the circular to the shareholders in relation to the proposed renewal of the shareholders’ mandate for recurrent transactions pursuant to Bursa Securities Listing Requirements for the Board’s approval.
• Reviewed all related party transactions and recurrent related party transactions to ensure that they are within the mandate obtained;
• Reviewed the reports prepared by Group Internal Audit and discussed the major findings and recommendation made by the Internal Auditors and management response to the findings. Wah Seong Corporation Berhad Annual Report 2007 22 Audit Committee (Cont’d)
5. STATEMENT BY AUDIT COMMITTEE ON WSC GROUP ESOS
Appendix 9C Part A Item No. 25 of Bursa Securities Listing Requirements requires a statement by the audit committee in relation to the allocation of options pursuant to any share scheme for employees as required under paragraph 8.21A. There were no options granted during the year under review.
6. INTERNAL AUDIT FUNCTION
The Audit Committee is assisted by the Group Internal Audit Department in reviewing the adequacy of operational controls and in monitoring and managing risks so as to provide reasonable assurance that such system continues to operate satisfactorily and effectively in the Group and to add value and improve the Group’s operations by providing independent and objective assurance.
The Group Internal Audit Department is independent from the activities or operations of other operating units of the WSC Group. Its principal responsibility is to conduct periodic reviews on the Group’s key operations and to ensure adequacy in operational controls, consistency in application of policies and procedures and compliance with statutory requirements.
During the year, the internal audit function focused on:- a. reviewing the adequacy and effectiveness of key controls b. compliance to established policies and procedures as well as relevant statutory requirements c. recommending improvements to existing procedures and policies in order to improve efficiency and effectiveness within the Group and the Company. d. performing special reviews requested by management and/or the Audit Committee.
After each audit, the findings and recommendations for improvement were communicated to the respective management for their response and corrective actions, if necessary. Quarterly, the internal audit reports with the management responses were submitted to the Audit Committee for their review and consideration. 23 Wah Seong Corporation Berhad Annual Report 2007 Remuneration Committee
1. MEMBERS
Members and details of attendance of Directors at the Remuneration Committee Meetings of Wah Seong Corporation Berhad for the financial year ended 31 December 2007 are as follows:-.
Date of No. of Meetings Name of Directors Appointment Attended
Halim Bin Haji Din (Chairman) 22 May 2002 1/1
Tan Sri Ab Rahman Bin Omar (Member) 1 October 2003 1/1
Chan Cheu Leong (Member) 22 May 2002 1/1
2. ROLE OF THE REMUNERATION COMMITTEE (“RC”)
In compliance with The Malaysian Code on Corporate Governance (Revised 2007) (Part 1 – B and Part 2 – AA XXIV) (“the Malaysian Code”), the RC shall set the policy framework and recommend to the Board, the remuneration of the Executive Directors in all its forms, drawing from outside advice as necessary with the objective of ensuring:- a. that the Company’s Executive Directors are fairly rewarded for their individual contributions to the Company’s overall performance; and b. that the levels of remuneration are sufficient to attract and retain the directors needed to run the Company successfully.
The determination of remuneration packages of Non-Executive Directors, including Non-Executive Chairman is a matter for the Board as a whole.
The individuals concerned shall abstain from discussion of their own remuneration.
3. TERMS OF REFERENCE
i. Composition The RC shall be headed by a non-executive Chairman and its members shall comprise wholly or mainly of non-executive directors. ii. Quorum of Meetings A minimum of two (2) RC Members present in person shall constitute the quorum. iii. RC Members The RC Members shall comprise the following persons :- Name of Directors Designation Directorship • Halim Bin Haji Din Chairman Independent Non-Executive Director • Tan Sri Ab Rahman Bin Omar Member Independent Non-Executive Director • Chan Cheu Leong Member Managing Director/Group Chief Executive Officer
and any other person(s) may be invited or determined by the RC and/or the RC Chairman from time to time. Wah Seong Corporation Berhad Annual Report 2007 24 Remuneration Committee(Cont’d)
iv. Majority Decision All decisions of the RC shall be decided on the votes of the simple majority of those Members present. However, no Executive Director shall participate in the discussion of his own remuneration. Any decision or recommendation made at the RC shall be subject to the review and ultimate approval of the Company’s Board of Directors. v. Casting Vote In the event there be an equality of votes, then the Chairman of the meeting shall have a casting vote. vi. Frequency of Meetings The Committee shall meet at least annually or at such other frequency as the Chairman may determine. vii. Notice of Meetings Minimum seven (7) days or such shorter notice as the RC may deem fit depending on the nature and prevailing circumstances at hand. viii. Secretary The Company’s Company Secretary(s) shall be the Secretary(s) for the RC. In the event any of the Company Secretary(s) is unable to attend, an assistant or deputy Secretary(s) may be appointed for that specific meeting. ix. Minutes of Meetings The Secretary (which expression shall include the assistant or deputy Secretary appointed under item (viii)) shall table the minutes of each RC Meeting and shall circulate the same for each Member’s record. The Chairman’s confirmation of the Minutes shall be taken as a correct proceedings thereat. The Chairman shall report on each meeting to the Board. x. Functions of the RC Without prejudice to the generality of the foregoing, the RC shall:-
a. Review, recommend and advise on all forms of directors’ remuneration e.g. • Basic Salary • Profit-sharing schemes (if any) • Share options • Any other benefits;
b. Establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of individual directors;
c. To structure the component parts of the Executive Directors’ remuneration so as to link rewards to corporate and individual performance; whereas, in the case of Non-Executive Directors, the level of remuneration should reflect the experience and level of responsibilities undertaken by the particular Non-Executive Director concerned;
d. Conduct continued assessment of individual Executive Directors to ensure that remuneration is directly related to performance over time. In this regard, the review of Non-Executive Directors’ fees may take place at a different time of the year from the review of Executive Directors’ salaries;
e. To monitor and assess the suitability of such proposed performance related formula (e.g. whether the formula is based on individual performance, company profit performance, earnings per share, etc.) and to see that awards under the Company’s share option schemes are consistent with the Company’s overall performance and provide an additional incentive to management;
f. To provide an objective and independent assessment of the benefits granted to Executive Directors; 25 Wah Seong Corporation Berhad Annual Report 2007 Remuneration Committee(Cont’d)
g. To ensure that there are adequate pension arrangements for the Executive Directors;
h. To consider what other details of Executive Directors’ remuneration to be reported in addition to the existing legal requirements, and how these details should be presented in the Annual Report;
i. Introduce any regulation which would enable the smooth administration and effective discharge of the Committee’s duties and responsibilities;
j. To furnish a report to the Board of any findings of the Committee.
k. Engage or appoint such other competent and professional advisers/consultants as may be deemed fit to assist the RC in the smooth discharge of its duties herein; and
l. Generally, to decide and implement such other matters as may be delegated by the Company’s Board of Directors from time to time. xi. Variation The above Terms of Reference may be determined and/or varied by the Company’s Board of Directors at any time and from time to time. Wah Seong Corporation Berhad Annual Report 2007 26 Nomination Committee
1. MEMBERS
Members and details of attendance of Directors at the Nomination Committee Meetings of Wah Seong Corporation Berhad for the financial year ended 31 December 2007 are as follows :-
Date of No. of Meetings Name of Directors Appointment Attended
Robert Tan Chung Meng (Chairman) 22 May 2002 1/1
Tan Sri Ab Rahman Bin Omar (Member) 1 October 2003 1/1
Halim Bin Haji Din (Member) 22 May 2002 1/1
2. ROLE OF THE NOMINATION COMMITTEE (“NC”)
In compliance with The Malaysian Code on Corporate Governance (Revised 2007) (Part 1 – A and Part 2 – AA VIII) (“the Malaysian Code”), the NC shall set the policy framework and:- a. Recommend to the Board, candidates for all directorships to be filled by the shareholders or the Board after considering the candidates’ – - skills, knowledge, expertise and experience; - professionalism; - integrity; and - in the case of candidates for the position of independent non-executive directors, to evaluate the candidates’ ability to discharge such responsibilities/functions as expected from independent non-executive directors; b. Consider, in making its recommendations, candidates for directorships proposed by the Chief Executive Officer and within the bounds of practicability, by any other senior executive or any director or shareholder; c. Recommend to the Board, directors to fill the seats on Board Committees.
The actual decision as to who shall be nominated shall be the responsibility of the full Board after considering the NC’s recommendations.
The individuals concerned shall abstain from discussion of their own nomination.
3. TERMS OF REFERENCE
i. Composition The NC shall be headed by a non-executive Chairman and its members shall comprise exclusively of non-executive directors, a majority of whom are independent. ii. Quorum of Meetings A minimum of two (2) NC Members present in person shall constitute the quorum. iii. NC Members The NC Members shall comprise the following persons :-
Name of Directors Designation Directorship • Robert Tan Chung Meng Chairman Chairman • Tan Sri Ab Rahman Bin Omar Member Independent Non-Executive Director • Halim Bin Haji Din Member Independent Non-Executive Director
and any other person(s) may be invited or determined by the NC and/or the NC Chairman from time to time. 27 Wah Seong Corporation Berhad Annual Report 2007 Nomination Committee (Cont’d)
iv. Majority Decision All decisions of the NC shall be decided on the votes of the simple majority of those Members present. Any decision or recommendation made at the NC shall be subject to the review and ultimate approval of the Company’s Board of Directors. v. Casting Vote In the event there be an equality of votes, then the Chairman of the meeting shall have a casting vote.
vi. Frequency of Meetings The Committee shall meet at least annually or at such other frequency as the Chairman may determine. vii. Notice of Meetings Minimum seven (7) days or such shorter notice as the NC may deem fit depending on the nature and prevailing circumstances at hand. viii. Secretary The Company’s Company Secretary(s) shall be the Secretary(s) for the NC. In the event any of the Company Secretary(s) is unable to attend, an assistant or deputy Secretary(s) may be appointed for that specific meeting. ix. Minutes of Meetings The Secretary (which expression shall include the assistant or deputy Secretary appointed under item (viii)) shall table the minutes of each NC Meeting and shall circulate the same for each Member’s record. The Chairman’s confirmation of the Minutes shall be taken as a correct proceedings thereat.
The Chairman shall report on each meeting to the Board. x. Functions of the NC Without prejudice to the generality of the foregoing, the NC shall:-
a. Determine the core competencies and skills required of board members to best serve the business and operations of the Group as a whole and the optimum size of the Board to reflect the desired skills and competencies;
b. Review the size of Non-Executive participation, Board balance and determine if additional Board members are required and also to ensure that at least 1/3 of the Board is independent;
c. Recommend to the Board on the appropriate number of Directors to compose the Board which should fairly reflect the investments of the minority shareholders in the Company, and whether the current Board representation satisfies this requirement;
d. Recommend to the Board, candidates for directorships to be filled by the shareholders or the Board;
e. Consider in making its recommendations, candidates for directorships proposed by the Chief Executive Officer and, within the bounds of practicability, by any other senior executive or any Director or shareholder;
f. Recommend to the Board, Directors to fill the seats on Board Committees;
g. Undertake an annual review of the required mix of skills and experience and other qualities of Directors, including core competencies which Non-Executive Directors should bring to the Board and to disclose this forthwith in every Annual Report; Wah Seong Corporation Berhad Annual Report 2007 28 Nomination Committee (Cont’d)
h. Assist the Board to introduce a criteria and to formulate and implement a procedure to be carried out by the NC annually for assessing the effectiveness of the Board as a whole, the Board Committees and for assessing the contributions of each individual Director;
i. Introduce any regulation which would enable the smooth administration and effective discharge of the Committee’s duties and responsibilities;
j. To furnish a report to the Board of any findings of the Committee;
k. To recommend to the Board for continuation or discontinuation in service of directors as an Executive Director or Non-Executive Director;
l. To recommend Directors who are retiring by rotation to be put forward for re-election;
m. To recommend to the Board the employment of the services of such advisers as it deems necessary to fulfill the Board’s responsibilities; and
n. Generally, to decide and implement such other matters as may be delegated by the Company’s Board of Directors from time to time. xi. Variation The above Terms of Reference may be determined and/or varied by the Company’s Board of Directors at any time and from time to time. 29 Wah Seong Corporation Berhad Annual Report 2007 Option Committee
1. LAUNCH OF SCHEME
WSC Group’s Employees Share Option Scheme (“ESOS”) was successfully launched on 28 November 2003 for a period of five (5) years (unless renewed or terminated earlier).
2. MEMBERS
Members and details of attendance of Directors at the Option Committee Meetings of Wah Seong Corporation Berhad for the financial year ended 31 December 2007 are as follows:-
Date of No. of Meetings Name of Directors Appointment Attended
Halim Bin Haji Din (Chairman) 27 August 2003 1/1
Pauline Tan Suat Ming (Member) 27 August 2003 1/1
Chan Cheu Leong (Member) 27 August 2003 1/1
3. ROLE OF THE OPTION COMMITTEE (“OC”)
Subject to the Company’s Memorandum and Articles of Association, the Bye-Laws of the WSC Group’s ESOS and WSC’s Policy Guidelines, the OC shall inter alia :-
a. Recommend to the Board, the Options to be granted to the Executive Directors; b. See to the fairness of the Options allocated; and c. Consider and set the internal procedural policies, guidelines and framework to administer the ESOS Scheme justly and orderly.
The actual decision as to the granting of Options to the Executive Directors is the responsibility of the full Board after considering the OC’s recommendations.
The individuals concerned shall abstain from discussion of their own allocations.
4. TERMS OF REFERENCE
i. Composition The Option Committee (“OC”) shall be headed by a non-executive Chairman and its members shall comprise wholly or mainly of non-executive directors. ii. Quorum of Meetings A minimum of two (2) OC Members present in person shall constitute the quorum. iii. OC Members The first OC Members shall comprise the following persons :-
Name of Directors Designation Directorship Halim Bin Haji Din Chairman Independent Non-Executive Director Pauline Tan Suat Ming Member Non-Executive Director Chan Cheu Leong Member Managing Director/Group Chief Executive Officer
and any other person(s) may be invited or determined by the OC and/or the OC Chairman from time to time.
The Board of Directors of WSC (“the Board”) shall have the discretion as it deems fit to approve, rescind and/or revoke the appointment of any person in the OC. Wah Seong Corporation Berhad Annual Report 2007 30 Option Committee (Cont’d)
iv. Majority Decision All decisions of the OC shall be decided on the votes of the simple majority of those Members present. However, no Executive Director shall participate in the discussion of his own option as the determination and granting of options to the Executive Directors should be a matter for the Board as a whole. Any decision or recommendation made at the OC shall be final and binding unless otherwise resolved by the Board. v. Casting Vote In the event there be an equality of votes, then the Chairman of the meeting shall have a casting vote. vi. Frequency of Meetings The Committee shall meet at least annually or at such other frequency as the Chairman may determine. vii. Notice of Meetings Minimum seven (7) days or such shorter notice as the OC may deem fit depending on the nature and prevailing circumstances at hand. viii. Secretary The Company Secretary(s) shall be the Secretary(s) for the OC. In the event any of the Company Secretary(s) is unable to attend, an assistant or deputy Secretary(s) may be appointed for that specific meeting. ix. Minutes of Meetings The Secretary (which expression shall include the assistant or deputy Secretary appointed under item (viii)) shall table the minutes of each OC Meeting and shall circulate the same for each Member’s record. The Chairman’s confirmation of the Minutes shall be taken as a correct proceedings thereat. The Chairman shall report on each meeting to the Board. x. Roles/Powers The OC shall have the powers of the Board that are required and necessary for the purpose of carrying out its obligations and duties in accordance with this Terms of Reference, subject to the Bye-Laws and Articles of Association of WSC and to any regulations or restrictions that may be imposed upon the OC by the Board from time to time. Nevertheless, the OC shall, inter alia, have the following roles/powers:- a) to determine the Eligible Employees; b) to determine the criteria to be applied in determining the actual entitlement of an Eligible Employee; c) to determine and grant options to Eligible Employees except for allocations to Executive Directors which allocation shall be approved by the Board; and d) to do all acts and things and enter into any transactions, agreements, deeds, documents or arrangements, and make rules, regulations or impose terms and conditions or delegate part of its power relating to the Scheme which the OC may in its discretion consider to be necessary or desirable for giving full effect to the Scheme. The OC shall be vested with such powers and duties as are conferred upon it by the Board to administer the Scheme in such manner as it deems fit. The determination and granting of options to the Executive Directors shall be a matter of the Board as a whole. The Executive Directors concerned shall abstain from discussion of their own options. xi. Variation The above Terms of Reference may be determined and/or varied by the Board at any time and from time to time. 31 Wah Seong Corporation Berhad Annual Report 2007 Statement On Corporate Governance
The Board of Directors of Wah Seong Corporation Berhad recognizes the importance of upholding good corporate governance in the discharge of its duties and responsibilities to protect its shareholders’ interest and to reflect the status of the Group in the eyes of the public investors.
Principles of Corporate Governance
A. DIRECTORS i. Board of Directors The Company is headed by the Board of Directors (“the Board”) who leads and controls the Company.
ii. Board Balance The Board is led by a Non-Executive Chairman and altogether, comprises eight members, which includes two Executive Directors, three Non-Executive Directors (including the Non-Executive Chairman) and three Independent Non-Executive Directors.
Composition of the Board members reveals their varied background as outlined on pages 12 to 14 of this Annual Report. The Board members are experienced and equipped with the relevant skills, knowledge and expertise required for the proper running of the Company’s affairs.
Generally, the Executive Directors along with the Management Team are responsible for making and implementing operational decisions. Non- Executive Directors play a key supporting role, contributing their skills, expertise and knowledge towards the formulation of the Group’s strategic and corporate objectives, policies and decisions.
iii. Supply of Information The Board is briefed in timely manner on all major financial, operational and corporate matters.
All Directors are provided with written reports and supporting documents and they have full access to all staff for any information pertaining to the Group’s affairs.
Directors also have access to the advice and services of its company secretaries and may seek independent professional advice whenever required.
iv. Appointments to the The Nomination Committee is responsible for assessing and making Board recommendations on any new appointments to the Board and its various Committees.
In making these recommendations, due consideration is given to the required mix of skills, expertise, knowledge, experience, professionalism and integrity that the proposed Directors shall bring to complement the Board.
v. Re-election The Company’s Articles of Association provides that all the Directors shall retire at least once in every three years and are eligible for re-election at each Annual General Meeting in compliance with the Listing Requirements of the Bursa Malaysia Securities Berhad (“Bursa Securities Listing Requirements”). Wah Seong Corporation Berhad Annual Report 2007 32 Statement On Corporate Governance (Cont’d)
B. DIRECTORS’ REMUNERATION
i. Level and Make-Up of The remuneration of the Board Members is broadly categorized into those Remuneration paid to Executive Directors and Non-Executive Directors.
The Executive Directors are remunerated in cash and in kind by way of salary, performance bonus, share options pursuant to WSC Group’s Employees Share Option Scheme (“ESOS”) and other benefits and entitlements; taking into consideration their experience, responsibilities, length of service, their individual performance and contribution as well as the overall performance of the Company too.
Non-Executive Directors are paid fees based on their experience and level of responsibilities.
ii. Procedure The Remuneration Committee is responsible to make any recommendation to the Board on the remuneration package and benefits extended to the Executive Directors; whereas, Non-Executive Directors’ remuneration is a matter to be decided by the Board as a whole.
The individual concerned must abstain from deliberations and voting on decisions in respect of his individual remuneration.
iii. Disclosure For purposes of security, instead of presenting the remuneration details of each Director individually, the Board is of the opinion that the same can be disclosed as follows:-
The details of the remuneration for the Directors of the Company during the financial year ended 31 December 2007 are as follows:-
Executive Directors Non-Executive Directors Total (RM’000) (RM’000) (RM’000) Salaries and Other Emoluments 1,771 56 1,827 Bonus 1,484 - 1,484 Directors’ Fees 60 255 315 Gratuity 425 - 425 Benefits-in-kind * - Leave Passage 42 - 42 - Others 81 13 94 Total 3,863 324 4,187 * Benefits-in-kind include motor vehicles, leave passage and etc.
The number of Directors whose total remuneration falls within the following bands:- No. of Executive No. of Non- Executive Total Directors Directors Less than RM50,000 - 2 2 RM 50,001 to RM100,000 - 4 4 RM100,001 to RM500,000 - - - RM500,001 to RM800,000 - - - RM800,001 to RM1,200,000 - - - RM1,200,001 to RM1,500,000 - - - RM1,500,001 to RM1,800,000 - - - RM1,800,001 to RM1,850,000 1 - 1 RM1,850,001 to RM2,000,000 - - - RM2,000,001 to RM2,050,000 1 - 1 Total 2 6 8 33 Wah Seong Corporation Berhad Annual Report 2007 Statement On Corporate Governance (Cont’d)
SHAREHOLDERS AND C. INVESTORS
i. Dialogue Between The Board values feedback and dialogues with its Investors. The Company Company and Investors will hold open discussions with Investors upon written request. Analyst Briefings are periodically held to introduce and update the investors on the Company’s/the Group’s undertakings and financial performance from time to time.
In this respect, the Board and the Company shall ensure that any information sought is disseminated in strict adherence to the disclosure requirements under Bursa Securities Listing Requirements.
All Investors are encouraged at all times to log on and visit the Company’s website at www.wahseong.com to be informed of the latest happenings and detailed information of the Group.
ii. Annual General Meeting The Annual General Meeting is one of the platforms for the Company’s shareholders to meet and exchange views with the Board.
An open Question and Answer Session will be held whereby any shareholder may seek further details and clarification regarding any proposed resolutions as well as matters relating to the Group’s businesses and affairs.
The Chairman and the other members of the Board together with the Company’s auditors will be in attendance to provide explanations to all shareholders’ queries.
ACCOUNTABILITY AND D. AUDIT FUNCTION i. Financial Reporting Fair assessments are always given by the Directors of the Group’s financial performance and prospects in respect of all quarterly results, annual financial statements and announcements issued by the Company.
The Board is assisted by the Audit Committee to scrutinize information for disclosure to ensure its timeliness, accuracy and adequacy.
Page 47 of this Annual Report sets out the Statement by the Board in compliance with paragraph 15.27(a) of Bursa Securities Listing Requirements.
ii. Internal Control The Board has overall responsibility for maintaining a sound system of internal control, which encompasses risk management, financial, organizational, operational and compliance controls necessary for the Group to achieve its objectives within an acceptable risk profile.
These controls can only provide reasonable but not absolute assurance against material misstatement, errors of judgment, loss or fraud.
The Group’s Statement on Internal Control is as set out on pages 45 and 46 of this Annual Report.
The creation of an Internal Audit Department since the Group first commenced operations is further proof of the dedication and commitment that the Board and the Company have in identifying and minimizing such potentially harmful risks from occurring. Wah Seong Corporation Berhad Annual Report 2007 34 Statement On Corporate Governance (Cont’d)
iii. Relationship with The Board has established a formal and transparent relationship with all the External Auditors External Auditors appointed by the Company and its subsidiaries within its fold.
The External Auditors are invited to attend the Audit Committee Meeting where the Group’s annual financial results are considered, as well as at meetings to review and discuss the Group’s audit findings, internal controls and accounting policies, whenever the need arises.
The amount of non-audit fees paid and payable to the External Auditors and its affiliated companies for the financial year ended 31 December 2007 was RM3,190,069.00.
Statement on the Extent of Compliance with the Best Practices in Corporate Governance BOARD OF AA. DIRECTORS
i. Principal responsibilities The Board is responsible towards the strategic planning, overseeing of the Board the resources and operational conduct, identifying and implementing appropriate systems to manage principal risks, reviewing the adequacy and integrity of its internal control and management information systems, ensuring a management succession plan as well as having a dedicated investor relation and shareholders’ communication policy in place.
Where appropriate, the Board has delegated certain responsibilities to the various Board Committees with clearly defined terms of reference to assist the Board in discharging its responsibilities.
ii. Non-Executive Chairman The Board is led by Mr Robert Tan Chung Meng as the Non-Executive Chairman and Mr Chan Cheu Leong as the Executive Managing Director and Group Chief Executive Officer.
There is a separation of the Chairman’s role to ensure a division of responsibilities and a balance of control, power and authority.
iii. Board Balance The Board is led by a Non-Executive Chairman and altogether, comprises eight members, which includes two Executive Directors, three Non-Executive Directors (including the Non-Executive Chairman) and three Independent Non-Executive Directors.
Composition of the Board members reveals their varied background as outlined on pages 12 to 14 of this Annual Report. The Board members are equipped with the relevant skills, knowledge and expertise towards the proper running of the Company’s affairs.
Generally, the Executive Directors along with the Management Team are responsible for making and implementing operational decisions. Non- Executive Directors play a key supporting role, contributing their skills, expertise and knowledge towards the formulation of the Group’s strategic and corporate objectives, policies and decisions.
iv. Directors Representing The Board may consider the appointment of additional Directors who fairly Minority Shareholders reflects the level of investment by minority shareholders in the Company.
v. Largest Shareholder The Board may exercise judgment in determining the appropriate number Other Than the Majority of Directors, which fairly reflects the level of investment by the other Shareholder shareholders in the Company. 35 Wah Seong Corporation Berhad Annual Report 2007 Statement On Corporate Governance (Cont’d)
vi. One Third Independent The Board currently comprises one third Independent Directors. Directors
vii. Senior Independent There is no combination or overlapping of roles between the current Non-Executive Director Chairman (who is a Non-Executive Director) and the Managing Director/ Group Chief Executive Officer of the Company since these two positions are held by separate individuals.
As such, the Board is of the view that there is no necessity to appoint a Senior Independent Non-Executive Director of the Board to whom concerns may be conveyed.
viii. Appointments to the A Nomination Committee comprising majority Independent Directors has Board been set up. Its details are set out on pages 26 to 28 of this Annual Report.
ix. Review of Quality Mix of The Nomination Committee will meet at least once every year to review the Board Members optimum mix of the Board members after considering the skills, experience and other qualities including core competencies which Non-Executive Directors will bring to the Board.
x. Annual Assessment The Nomination Committee will meet at least once every year to assess Of The Board’s the effectiveness of the Board and Committees as a whole as well as the Performance contribution of each individual Director.
xi. Services of Company The Board has full access to the services of the Company Secretaries. Secretary Currently, the Group’s in-house Company Secretary is assisted by the external Company Secretary to assist and effect all proper documentation and meeting all statutory obligations and compliances.
xii. Size of Board The Board will, from time to time, examine its size to determine the optimum mix of skills and its effectiveness.
xiii. Directors’ Training All the current Directors of the Company have attended and completed the Mandatory Accreditation Program (“MAP”) as well as the Continuing Education Program (“CEP”), having accumulated the requisite minimum CEP Points within the period 2004 - 2005 as formerly required under the previous Practice Note 15/2003 which has since been repealed.
The Directors do and will undergo such similar or continuing training and education programs from time to time to equip and keep themselves abreast of the latest developments in order to discharge their duties and responsibilities more effectively.
Subject to Bursa Securities’ Practice Note 5/2001 and in compliance with paragraph 15.09 of Bursa Securities Listing Requirements, the Board shall on a continuous basis, evaluate and determine the training needs of its directors, which subject matter of training shall be one that aids the director in the discharge of his/her duties as a director.
A brief description of the type of training/courses attended by the directors for the financial year under review are as set out on pages 36 and 37. Wah Seong Corporation Berhad Annual Report 2007 36 Statement On Corporate Governance (Cont’d)
Details of Director’s Training
Directors Date of Course Type of Training/Courses Attended
Robert Tan Chung Meng 30 August 2007 The D&O Liability Insurance and its applications by Ace Insurance
27 November 2007 Update on regulatory developments in the Malaysian Capital Market by PricewaterhouseCoopers
Pauline Tan Suat Ming 30 August 2007 The D&O Liability Insurance and its applications by Ace Insurance
27 November 2007 Update on regulatory developments in the Malaysian Capital Market by PricewaterhouseCoopers
Tan Sri Ab Rahman Bin Omar 7 & 8 March 2007 DRB-HICOM CEO’s Business Forum 2007
18 May 2007 The Radical Transformation of Company Law – Global Trends and Local Initiatives by Permodalan Nasional Berhad & Yayasan Tun Ismail Mohamed Ali Berdaftar
15 June 2007 Directors As Change Agents for Board High Performance by the Malaysian Directors Academy – MINDA
30 August 2007 The D&O Liability Insurance and its applications by Ace Insurance
Tan Sri Dato’ Dr Lin See Yan 9 July 2007 Key Performance Indicators (KPI), Balanced Scorecard (BSC) and Goal Alignment by Charles River Centre
17 July 2007 Appraising Board Performance by Charles River Centre
30 August 2007 The D&O Liability Insurance and its applications by Ace Insurance
6 & 7 September 2007 Great Eastern Life Workshop (Board Retreat), Singapore
Giancarlo Maccagno 30 April – 3 May 2007 Offshore Technology Conference in Houston, Texas, USA
30 August 2007 The D&O Liability Insurance and its applications by Ace Insurance 37 Wah Seong Corporation Berhad Annual Report 2007 Statement On Corporate Governance (Cont’d)
Directors Date of Course Type of Training / Courses Attended
Jen (B) Tan Sri Dato’ Seri 6 February 2007 Training on BASEL II Mohd Zahidi Bin Haji by KPMG / Columbus Circle Zainuddin 14 & 15 March 2007 How to Find Land Mines in Financial Accounts & Audit Committee Crucial – update 2007 by Columbus Circle
30 August 2007 The D&O Liability Insurance and its applications by Ace Insurance
Chan Cheu Leong 30 April – 3 May 2007 Offshore Technology Conference in Houston, Texas, USA
30 August 2007 The D&O Liability Insurance and its applications by Ace Insurance
27 November 2007 Update on regulatory developments in the Malaysian Capital Market by PricewaterhouseCoopers
Halim Bin Haji Din 19 July 2007 Strategic Brand Management by the Harvard Club of Malaysia
30 August 2007 The D&O Liability Insurance and its applications by Ace Insurance
xiv. Board Meetings The Board meets on a schedular basis of at least four (4) times a year. Additional board meetings can be convened as and when necessary.
During the financial year ended 31 December 2007, the Board met on six (6) occasions. The meeting attendance of each individual Director is set out on page 172 of this Annual Report (see Statement Accompanying Notice of Annual General Meeting).
xv. Formal Schedule of Matters There are formal schedule of matters specifically reserved for the Board to decide to ensure that the direction and control of the Company firmly rests in its hands, for example strategic financial and investment decisions.
Position Descriptions and The Board together with the Managing Director/Group Chief xvi. Corporate Objectives Executive Officer and the respective management team(s), where applicable, develop the Group’s corporate objectives, policies and positions descriptions and setting out the limits of empowerment of its respective management/committees’ authority, duties and responsibilities. Wah Seong Corporation Berhad Annual Report 2007 38 Statement OnCorporate Governance (Cont’d)
xvii. Quality of Information The Board stresses on having timely reports and has full access to quality information which is not just historical or bottom line and financial oriented but information that goes beyond assessing the quantitative performance of the Group and looks at other performance factors e.g. customer satisfaction, product and service quality, market share, market reaction, environmental performance, etc. xviii. Information Organizing The Non-Executive Chairman of the Board, as assisted by the Managing Director/Group Chief Executive Officer and the Company Secretaries, undertake primary responsibility for organizing information necessary for the Board to deal with the agenda at Board Meetings and for circulating this information to the Directors on a timely basis. xix. Access to Information The Directors have access to all information within the Company whether as a full board or in their individual capacity, in furtherance of their duties. xx. Access to Advice The Directors, whether as a full board or in their individual capacities, in furtherance of their duties may take such independent professional advice at the expenses, if any, of the Company on a case to case basis and depending on the complexities involved. xxi. Company Secretary The Directors have access to the advice and services of both its in- house and external Company Secretaries. xxii. Appointment of Company Both the in-house and externally appointed Company Secretaries Secretary meet the requirements for the discharge of their duties and termination of his/her services is a matter for the Board as a whole. xxiii. Use of Board Committees The authority of such Committees appointed by the Board is governed by their respective Terms of Reference. An extension of such authority may be expressly given for a specific purpose and the Board may delegate such Committees to act on its behalf.
XXIV. Remuneration Committee The Board has set up a Remuneration Committee consisting mainly of Independent Non-Executive Directors to recommend to the Board the remuneration of Executive Directors in all its forms, drawing from outside advice as necessary. The Executive Directors play no part in decisions on their own remuneration.
Members of the Remuneration Committee appear on page 23 of this Annual Report.
Determination of remuneration packages of Non-Executive Directors, including the Non-Executive Chairman is a matter for the Board as a whole. The individuals concerned will abstain from discussion of their own remuneration. 39 Wah Seong Corporation Berhad Annual Report 2007 Statement On Corporate Governance (Cont’d)
BB. ACCOUNTABILITY AND AUDIT
I. The Audit Committee The resignation of Mr Chan Cheu Leong, being an Executive Director, as a member of the Audit Committee on 26 February 2007 i.e. even before the revision of the Malaysian Code of Corporate Governance came into play, reflects the overall commitment and continuous pursuit by the Group towards enhancing better Corporate Governance by ensuring that all its present Audit Committee members comprises totally of Independent Directors.
The Terms of Reference of the Audit Committee, which deals clearly with its authority and duties, is as detailed and set out on pages 19 to 22 of this Annual Report.
The Audit Committee is chaired by an Independent Non-Executive Director.
II. Duties of the Audit Committee Please refer to pages 20 and 21 of this Annual Report.
III. Audit Committee Meetings The Group Financial Controller and the Head, Group Internal Audit attend such Audit Committee Meetings and the representative of the external auditor is encouraged to attend whenever possible. Other Directors may be invited to attend such Audit Committee Meetings when necessary. The Audit Committee will meet the external auditors at least twice a year without the presence of any executive member.
IV. Authority of the Audit The Audit Committee has explicit authority to investigate any matter Committee within its terms of reference and shall have the resources which it needs to do so as well as full access to all information it needs. The Audit Committee can obtain, at the expense of the Company, outside legal or other independent professional advice that it considers necessary.
V. Frequency of Audit Committee The Audit Committee meets regularly at least four (4) times annually, Meetings with due notice of issues to be discussed and its conclusions are duly recorded and minuted by the Company Secretary in attendance towards its discharge of duties and responsibilities. Additional meetings may be held at the request of the Board, the Committee, the Management, the External and Internal Auditors.
Nonetheless, the Chairman and the Audit Committee members have free and direct access to consult, communicate and enquire with any senior management of the company as well as the external auditors at any time.
VI. Disclosure of the Audit The Board will disclose in an informative way, details of the Audit Committee’s activities Committee’s activities, the number of audit committee meetings held annually and the details of attendance of each individual director in respect of such meetings. Wah Seong Corporation Berhad Annual Report 2007 40 Statement OnCorporate Governance (Cont’d)
VII. Internal Audit Function The Board has established an internal audit function for the Group to review the adequacy of operational controls and in monitoring and managing risks so as to provide reasonable assurance that such system continues to operate satisfactorily and effectively in the Group and to add value and improve the Group’s operations by providing independent and objective assurance.
The internal audit function of the Group is currently performed in- house.
VIII. Independence of the Internal The Head, Group Internal Audit reports directly to the Audit Audit function Committee. The Internal Audit function of the Group is independent of the activities they audit and the audit review are performed with impartiality, proficiency and due professional care.
The Board and/or the Audit Committee determines the general direction or remit of the internal audit function, which encompass its main role, that is to evaluate risk and monitor the effectiveness of the Group’s system of internal controls, consistent with the standards developed by the internal audit profession.
The Internal Audit function is competently and adequately resourced and independently positioned to assist the Board and the Audit Committee in obtaining the assurance it requires regarding the effectiveness of the Group’s system of internal controls.
CC. SHAREHOLDERS
I. Effective Communications Besides the various announcements and disclosures including Policy information on the quarterly and annual results to Bursa Securities, the Board maintains an effective communications policy that enables both the Board and the Group Management to communicate effectively with its shareholders, stakeholders and the public generally.
As part of the Group’s commitment towards having an effective investor relations and shareholders’ communication policy, the following have been established:- a. an interactive and dedicated website for the Group which can be accessed by the public at large at www.wahseong.com. b. The Company’s Investor Relations and Communications Department attends to the Group’s communication needs and whenever required, the services of an external public relations firm to promote the Group’s image and to create greater public awareness of the Group’s products and services aside from fostering and maintaining closer relations with the press and other members of the media, will be engaged. c. Internally, the Corporate Affairs Department headed by the Group’s in-house Company Secretary maintains most of the official correspondences with the various authorities. d. The Annual General Meeting provides an additional forum for shareholders’ interaction and feedback with the Company. e. Media and Analyst Briefings are held by the Company to explain any major corporate exercises and/or to discuss the financial performance of WSC Group from time to time. 41 Wah Seong Corporation Berhad Annual Report 2007 Statement On Corporate Governance (Cont’d)
Additional Statement on the Practice & Adoption of other Best Practices in Corporate Governance
DD. PUBLIC SOCIETY
I. Corporate Social Responsibility WSC and its group of companies are committed to observing and (“CSR”) carrying out their corporate social responsibilities (“CSR”) in any manner possible to promote the general good of mankind, the public and society at large as well as the environment.
Adhering to the above commitment, Yayasan Wah Seong (“Wah Seong Foundation”), was duly set up in year 2004 and is now an approved tax exempt charitable foundation, formed in pursuit of the following objectives:- i. to receive and administer funds for educational and other charitable purposes. ii. to render financial assistance and scholarship to the needy and most deserving persons. iii. to promote any other social welfare or charitable causes.
As strong believers and advocates of the above, WSC and its group of companies have involved themselves in various CSR activities, such as:- a. initiating Health, Safety and Environment (“HSE”) programs aimed at heightening awareness, setting policies and standards for the Group as well as enrolling selected staffs to undergo training as Safety Officers. b. contributing towards the advancement of education through the granting of scholarships to financially needy and academically deserving candidates; whereby applicants can easily access and download from the company’s website at www.wahseong.com and send/ submit their applications either by post, fax or e-mail online to [email protected]. c. reaching out to the needy and the less fortunate children at the Ti-Ratana Shelter Home. d. donating to the Olympic Council of Malaysia towards funding and developing the Wushu Federation of Malaysia. e. undertaking “e-disposal” and “e-recycling” activities through the refurbishment of used computers, the extraction of certain metals from selected and e-recyclable wastes or rejects via the Group’s subsidiary company, E-Green Technology Sdn Bhd. f. donating and contributing to: i. Autorr Foundation for the construction of a centre for senior citizens to have educational facilities and conduct healthcare activities. ii. Yayasan Harapan Kanak-Kanak Malaysia (YHKM) for the building of a home called ‘Miracle of Hope Home’ for orphans infected with HIV / AIDS disease. Wah Seong Corporation Berhad Annual Report 2007 42 Statement On Corporate Governance (Cont’d)
II. Health, Safety & Environment In the review period, the Group has remained focused on its drive (“HSE”) to continuously improve HSE performance. In line with the Group’s commitment to the safety of its employees, contractors, suppliers and visitors, the Group has met its target of delivering another fatality-free year.
In 2007, steps were taken to further strengthen the safety culture across the Group. These steps were exemplified through promoting safety awareness days, safe driving campaigns and the launching of a group-wide OSHAS 18001 Safety Management System Auditor Training Course.
The Group also received recognition for its HSE performance with one of its core companies, PPSC Industries Sdn Bhd, receiving several awards from both domestic and international clients.
For 2008, the Group will be implementing an internal audit program and will be launching an OSHAS 18001 accreditation plan for its operating companies. Several other initiatives aimed at strengthening the Group’s HSE culture will also be implemented including a quarterly newsletter and the introduction of an annual award for exceptional HSE performance. 43 Wah Seong Corporation Berhad Annual Report 2007 Additional Compliance Information
1. APPROVED UTILIZATION OF FUNDS
On 22 May 2004, WSC has obtained the necessary approval from the Securities Commission for the issuance of up to RM200,000,000 nominal value Commercial Papers (“CPs”) and Medium-Term Notes (“MTNs”) under the Islamic financing concepts of Murabahah and Ijarah. During the financial year under review, no new issues were drawn.
However, proceeds raised from the exercise of WSC Group’s Employees Share Option Scheme (“ESOS”) and its due utilization thereof are as follows:-
Utilization of ESOS Proceeds RM’000 Total ESOS proceeds 28,233
Group working capital purposes 28,233
2. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES EXERCISED
WSC Group’s Employees Share Option Scheme (“ESOS”) was successfully launched on 28 November 2003. (Please refer to pages 119 to 122 of the Annual Report for more details). However, no options were granted for the year under review.
On 9 July 2002, the Company has issued RM89,499,999.00 nominal value of 3% Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) at RM1.00 per ICULS and as at 15 May 2008, the balance of ICULS remaining is RM 54,025,477.00 (Please refer to page 164 of the Annual Report for more details).
No warrants have been issued as at 31 December 2007.
3. AMERICAN DEPOSITORY RECEIPT (“ADR”) OR GLOBAL DEPOSITORY RECEIPT (“GDR”)
The Company has not sponsored any ADR or GDR programme in the financial year ended 31 December 2007.
4. VARIATION IN RESULTS
There is no significant variance in WSC’s audited financial results for the financial year ended 31 December 2007 from the unaudited results as previously announced. The Company has not released or announced any estimated profit, financial forecast and projection in the financial year ended 31 December 2007.
5. PROFIT GUARANTEE
No profit guarantees were given by the Company for the financial year ended 31 December 2007.
6. RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE AND PROVISION OF FINANCIAL ASSISTANCE
Pursuant to paragraph 10.09 of the Bursa Securities Listing Requirements (“Listing Requirements”), the Company will be seeking the mandate from its shareholders for recurrent related party transactions of a revenue or trading nature and provision of financial assistance, entered into or to be entered into between the Company or its subsidiary companies and related parties, at the forthcoming Annual General Meeting of the Company. Wah Seong Corporation Berhad Annual Report 2007 44 Additional Compliance Information (Cont’d)
7. MATERIAL CONTRACTS
There was no other material contract(s) entered into by the Company or its subsidiaries involving directors’ and/or major shareholders’ interests during the financial year ended 31 December 2007 save for the conditional Settlement Agreement that the Company had entered into with its Deputy Managing Director, Mr Giancarlo Maccagno (“GM”), on 9 October 2007 which would enable the Company to settle the balance amount of RM6,959,425.00 (“Outstanding Amount”) owing to GM by way of issuance of new WSC Shares.
The Outstanding Amount arose pursuant to the Shares Sale Agreement which was duly executed and announced on 25 September 2006, in respect of the Company’s acquisition of 405,000 ordinary shares (representing about 3% equity stake) held by GM in PPSC Industrial Holdings Sdn Bhd (which is now a 67.48% owned subsidiary of the Company) for a total cash consideration of RM13,918,850.00 only. The Outstanding Amount is unsecured and interest-free.
8. SHARE BUY-BACKS
The Company has purchased 1,125,300 of its own shares during the financial year ended 31 December 2007, all of which are held as treasury shares and maintained by the Company. Details are as follows:-
Treasury Shares
Total No of Lowest Highest Average Consideration Shares Par Value Price paid Price paid Price per Paid (including Month of Bought- per share for each for each Share transaction costs) Buy-Back Back (RM) share (RM) Share (RM) (RM) (RM) January 2007 185,100 0.50 2.14 2.28 2.22 411,086.90 February 2007 176,400 0.50 2.30 2.53 2.38 419,293.28 March 2007 403,000 0.50 2.10 2.45 2.33 937,940.92 April 2007 31,500 0.50 3.12 3.16 3.16 99,398.23 May 2007 55,000 0.50 3.34 3.52 3.43 188,737.38 June 2007 100,000 0.50 3.54 3.66 3.62 362,198.91 July 2007 ------August 2007 173,000 0.50 3.10 3.62 3.36 580,688.00 September 2007 ------October 2007 ------November 2007 ------December 2007 1,300 0.50 3.86 3.86 3.89 5,056.12
TOTAL 1,125,300 3,004,399.74
9. PENALTY
There was no significant penalty imposed by any regulatory authority on any of the companies in Wah Seong Corporation Berhad Group.
10. STATEMENT ON REVALUATION POLICY
The Group does not have any revaluation policy. 45 Wah Seong Corporation Berhad Annual Report 2007 Statement on Internal Control
Board Responsibility
The Board of Directors acknowledge its responsibility for maintaining a system of internal control of which includes the establishment of an appropriate control environment and framework as well as reviewing its adequacy and integrity. This system is designed to manage within an acceptable risk profile rather than eliminate the risk of failure to achieve corporate objectives. Accordingly, it can only provide reasonable and not absolute assurance against material misstatement, financial loss or fraud.
The Board has established an ongoing process for identifying, evaluating and managing significant risks faced by the Group. There is regularly review in place to continuously ensure the effectiveness, adequacy and integrity of internal controls in safeguarding the Group’s assets. The Board is of the view that the system of internal controls in place for the year under review and up to the date of issuance of the annual report and financial statements is sound and sufficient to safeguard the shareholders’ investment, the interests of customers, regulators and employees, and the Group’s assets.
Risk Management
The Board fully supports the guidelines as spelt out in the Statement on Internal Control : Guidance for Directors of Public Listed Companies and through the Audit Committee and Group Management Committee, continually reviews the adequacy and effectiveness of the risk management processes in place within the Group.
The Group Management Committee is responsible for the management of risk, for developing, operating and monitoring the system of internal control and for providing assurance to the Board that it has done so in accordance with the policies or guidelines adopted by the Board. Further independent assurance is provided by the Group Internal Audit function, which operates across the Group.
The Board believes that the function of sound system of internal control is built on a clear understanding and appreciation of the Group’s risk management framework and the key principles are:
• Effective risk management contributes to effective governance and is integral to the achievement of business objectives.
• It is the responsibility of every employee of the Group to manage risks within their areas of responsibility.
• Risk Management should be embedded into the day-to-day management processes and is explicitly applied in decision-making and strategic planning.
• The risk management processes applied should aim to take advantage of opportunities, manage uncertainties and minimize threats.
• Regular reporting and monitor activities emphasise the accountability and responsibility for managing risks.
To address the operational and strategic needs and requirements of the Group, the following have been established:-
• Finance and Treasury Committee has also been established with appropriate empowerment to ensure effective financial management and supervision of the Group’s financial position covering funding and working capital, hedging strategy and use of financial instruments to preserve the Group’s net assets and mitigate foreign exchange exposure.
• Investment Committee to evaluate mergers and acquisitions and/or divestment of material assets and investments by the Group; Wah Seong Corporation Berhad Annual Report 2007 46 Statement on Internal Control (Cont’d)
Internal Audit
The Group has an internal audit department which reports to the Audit Committee of the Company. Its role is to provide the Board with regular assurance on the continuity, integrity and effectiveness of the internal control system through monitoring and review of the internal control processes with the Group.
For each financial year, the internal audit department prepares an Annual Audit Plan, which is presented and approved by the Audit Committee. The scope of work in the Audit Plan encompasses review of operations and procedures of operating units within the Group.
The internal audit department has conducted various audit assignments to evaluate the adequacy and effectiveness of the internal control systems and made recommendations and improvements to the system of internal controls. Besides assessing the efficiency of the business operation, the internal audit department also ascertains the compliance of statutory regulation and Bursa Listing Requirements. The Audit Committee reviews the internal audit reports on a regular basis and keeps the Board informed of key audit findings.
Other Key Element of Internal Control Processes
The other key element of the Group’s Internal Control Systems are described below:-
• Having clearly defined delegation of responsibilities to the respective committees of the Board and to the Management of each operating units, including the establishment of various authorization limits imposed on the management of the business;
• Establishment of a Group Management Committee whose terms of reference are inter alia as follows:-
* To conduct regular meetings to examine all matters within the committee members’ scope of responsibility including the deliberation of divisional operating performance with comparison to the annual budget and KPI for periodic reporting to the Board with its recommendations for the Board's decision;
* To determine and assess whether the Group’s resources are used in an efficient manner for conduct of its businesses;
* To oversee and monitor the extent and nature of any related party transactions within the Group;
* To engage or appoint solicitors, financial advisers or consultants and other competent professionals as may be required in respect of any corporate exercise undertaken by the Group;
* To formalize human resources policies covering amongst others management of resources, formal training and annual performance appraisals within the Group;
* To disseminate changes to the statutory duties, obligations and requirements as may be imposed by law or by governing body or authority in respect of the Group's businesses; and
* Decide and implement such other matters as may be delegated by the Board of Directors from time to time.
• Periodic visits to operating units by the management team and/or the members of the Board are conducted from time to time whenever deemed appropriate; and
• Board and Management Meetings are periodically held for the major subsidiaries and associated companies to inter alia, ensure that all decisions and policies formulated by the Group are met and adhered to.
The Group’s system of internal control applies principally to Wah Seong Corporation Berhad and its subsidiaries. Associated companies and joint ventures have been excluded because the Group does not have full management control over them. 47 Wah Seong Corporation Berhad Annual Report 2007 Statement of Directors’ Responsibilities
The Directors are required by law to prepare financial statements for each financial year which gives a true and fair view of the state of affairs of the Group and of the Company at the end of the financial year and of the results and cash flows of the Group and of the Company for the financial year then ended.
The Directors consider that, in preparing the financial statements for the financial year ended 31 December 2007, the Group has used appropriate accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent. The Directors also consider that all applicable approved accounting standards have been followed and confirm that the financial statements have been prepared on a going concern basis.
The Directors are responsible for ensuring that the Group and the Company keep accounting records which disclose with reasonable accuracy at any time the financial position of the Group and of the Company and which enables them to ensure that the financial statements comply with the provisions of the Companies Act, 1965 and the applicable approved accounting standards of Malaysia. Wah Seong Corporation Berhad Annual Report 2007 48 Financial Highlights
Six-Years Financial Highlights 2002 2003 2004 2005 2006 2007
OPERATING RESULTS Revenue RM’000 643,705 691,034 757,773 1,285,663 1,624,348 1,950,112 EBITDA RM’000 89,791 89,209 82,812 120,117 129,945 184,696 EBIT RM’000 65,779 67,054 68,067 117,820 97,309 140,718 Profit Before Tax RM’000 58,658 59,125 56,880 97,959 71,604 115,121 Net Profit RM’000 51,463 53,038 47,692 85,207 50,189 97,231 Net Profit Attributable to Equity RM’000 11,762 22,454 25,764 54,845 37,414 86,039 Holders of the Company
KEY BALANCE SHEET DATA Total Assets RM’000 649,164 733,078 762,952 1,348,035 1,384,419 1,560,146 Paid-up capital RM’000 158,205 170,233 172,523 189,775 197,780 214,618 Shareholders' Fund Attributable RM’000 169,934 200,859 223,017 335,597 371,984 470,001 to Equity Holders of the Company
VALUATION Per share of RM0.50 each Basic Earnings sen 2.60 3.80 4.36 9.06 5.98 13.58 Gross Dividend sen 1.25 1.50 2.75 4.50 5.00 6.00 Net assets RM 0.54 0.59 0.65 0.88 0.94 1.09
FINANCIAL RATIOS Profitability Ratios Return on Total Assets % 10 9 9 9 7 9 Return on Capital Employed % 16 15 13 16 12 17
Gearng Ratio Net Debt to Equity Times 0.83 0.77 1.06 0.98 1.02 0.75 49 Wah Seong Corporation Berhad Annual Report 2007 Financial Review
REVENUE PBT RM’MIL RM’MIL
1,950 RM’MIL 130 RM’MIL 115 2,000 1,624 98 110 1,800 72 90 1,600 1,286
1,400 70 59 59 57 92 1,200 50 113 89 48 50 59 758 1,000 644 691 1,230 30 34 800 1,020 819 10 10 10 13 11 7 600 285 288 333 (2) (2) 716 (9) (10) (11) 400 600 398 421 463 (25) (27) 200 355 (30) YEAR 4 5 4 4 4 4 2002 2003 2004 2005 2006 2007 - YEAR 2002 2003 2004 2005 2006 2007
EBITDA NET PROFIT ATTRIBUTABLE TO EQUITY RM’MIL HOLDERS OF THE COMPANY RM’MIL
RM’MIL 185 200 RM’MIL 130 90 120 86 150 55 70
90 89 37 83 100 50 64
26 141 30 50 67 23 68 12 69 113 126 70 58 30 10 12 42 7 32 6 8 - 22 19 20 13 3 15 18 (1) 1 2 4 (1) 2 (10) (2) (8) (13) (14) (10) (23) (24) (50) YEAR (30) YEAR 2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007
Oil and Gas Industrial Services Others Wah Seong Corporation Berhad Annual Report 2007 50 Financial Statements
DIRECTORS’ REPORT 51 STATEMENT BY DIRECTORS 57 STATUTORY DECLARATION 57 REPORT OF THE AUDITORS 58 BALANCE SHEETS 59 INCOME STATEMENTS 61 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 62 STATEMENT OF CHANGES IN EQUITY 64 CASH FLOW STATEMENTS 65 NOTES TO THE FINANCIAL STATEMENTS 68 51 Wah Seong Corporation Berhad Annual Report 2007 Directors’ Report
The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2007.
PRINCIPAL ACTIVITIES
The principal activities of the Company are investment holding and the provision of management services to subsidiaries.
The principal activities of the Group consist of Specialised Pipe Coating and Corrosion Protection Services; EPC, Fabrication and Rental of Gas Compressors and Process Equipment; E&P Products and Services; Infrastructure and Building Materials and Agro Based Engineering.
The principal activities of the subsidiaries are disclosed in Note 7 to the financial statements.
There have been no significant changes in the nature of these activities during the financial year.
FINANCIAL RESULTS
Group Company RM’000 RM’000
Net profit for the financial year attributable to: - Equity holders of the Company 86,039 121,967 - Minority interests 11,192 –
Net profit for the financial year 97,231 121,967
DIVIDENDS
The dividends paid or declared since the end of the previous financial year are as follows:
(a) A final dividend of 7%, less 27% income tax, amounting to RM10,736,895 in respect of the financial year ended 31 December 2006 which was paid on 27 July 2007;
(b) 1st interim dividend of 4%, less 27% income tax, amounting to RM6,242,165 in respect of the financial year ended 31 December 2007 which was paid on 10 October 2007; and
(c) 2nd interim dividend of 8% less 26% income tax, amounting to RM16,106,471 in respect of the financial year ended 31 December 2007 which was paid on 23 April 2008.
The Directors do not recommend the payment of any final dividend in respect of the financial year ended31 December 2007.
RESERVES AND PROVISIONS
All material transfers to or from reserves and provisions during the financial year are shown in the financial statements. Wah Seong Corporation Berhad Annual Report 2007 52 Directors’ Report (Cont’d)
ISSUE OF SHARES AND DEBENTURES
During the financial year, the issued and paid-up share capital of the Company was increased from RM197,780,085 to RM214,617,942 by way of:
(a) The issuance of 20,040,762 new ordinary shares of RM0.50 each resulting from the conversion of 3% Irredeemable Convertible Unsecured Loan Stocks 2002/2012 (“ICULS”) at the rate of RM1.00 nominal amount of ICULS for two fully paid ordinary shares of RM0.50 each in the Company, details of which are disclosed in Note 26 to the financial statements; and
(b) The issuance of 13,634,951 new ordinary shares of RM0.50 each at prices ranging from RM2.07 to RM2.08 per share pursuant to the Company’s Employees’ Share Option Scheme (“the ESOS”), details of which are disclosed in Note 23 to the financial statements.
The new ordinary shares rank pari passu in all respects with the existing ordinary shares of the Company.
The Company did not issue any debentures during the financial year.
TREASURY SHARES
Details of the treasury shares are set out in Note 25 to the financial statements.
During the financial year, the treasury shares of the Company were increased from 394,300 to 1,519,600. The Company repurchased 1,125,300 of its issued share capital from the open market on Bursa Malaysia for RM 3,004,400. The average price paid for the shares repurchased during the financial year was approximately RM2.67 per share.
EMPLOYEES’ SHARE OPTION SCHEME (“ESOS”)
Details of the ESOS are set out in Note 23 to the financial statements. There were no offers of options under the ESOS during the financial year.
DIRECTORS
The Directors in office since the date of the last report are:
Robert Tan Chung Meng Halim Bin Haji Din Chan Cheu Leong Pauline Tan Suat Ming Tan Sri Ab Rahman Bin Omar Giancarlo Maccagno Tan Sri Dato’ Dr Lin See Yan Jen (B) Tan Sri Dato’ Seri Mohd Zahidi Bin Haji Zainuddin
In accordance with the Company’s Articles of Association, Robert Tan Chung Meng, Halim Bin Haji Din and Jen (B) Tan Sri Dato’ Seri Mohd Zahidi Bin Haji Zainuddin shall retire by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election. 53 Wah Seong Corporation Berhad Annual Report 2007 Directors’ Report (Cont’d)
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES
According to the Register of Directors’ Shareholdings required to be kept under Section 134 of the Companies Act, 1965, none of the Directors who held office at the end of the financial year held any shares or had any interests in shares in the Company and its related corporations during the financial year except as follows:
Number of ordinary shares of RM0.50 each As at Acquired/ As at 1.1.2007 Converted Disposed 31.12.2007
The Company
Robert Tan Chung Meng - direct interest 4,914,263 – – 4,914,263 - deemed interest 96,050,158 11,736,116 – 107,786,274
Chan Cheu Leong - direct interest 6,409,963 4,127,504 – 10,537,467 - deemed interest 42,880,768 1,800,000 (14,131,000) 30,549,768
Pauline Tan Suat Ming - direct interest 1,392,092 – – 1,392,092 - deemed interest 96,050,158 11,736,116 – 107,786,274
Tan Sri Ab Rahman Bin Omar - direct interest 250,000 – – 250,000
Giancarlo Maccagno - direct interest 5,915,706 3,112,282 – 9,027,988
Number of ordinary shares of HK 1.00 each As at Acquired/ As at 1.1.2007 Converted Disposed 31.12.2007
Subsidiary
PPSC (HK) Limited Chan Cheu Leong - direct interest 1^ – (1) –^
Number of ordinary shares of Baht 100 each As at As at 1.1.2007 Acquired Disposed 31.12.2007
Subsidiary
PPSC (Thailand) Limited Chan Cheu Leong - direct interest 1^^ – – 1^^
Giancarlo Maccagno - direct interest 1^^ – – 1^^ Wah Seong Corporation Berhad Annual Report 2007 54 Directors’ Report (Cont’d)
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (CONT’D)
Number of ICULS of RM1.00 each As at Disposed/ As at 1.1.2007 Acquired Converted 31.12.2007
The Company
Robert Tan Chung Meng - direct interest 1,300,352 – – 1,300,352 - deemed interest 48,867,706 – (5,868,058) 42,999,648
Chan Cheu Leong - direct interest 1,313,752 – (1,313,752) – - deemed interest 1,300,000 – (1,300,000) –
Pauline Tan Suat Ming - deemed interest 48,867,706 – (5,868,058) 42,999,648
Giancarlo Maccagno - direct interest 681,141 – (681,141) –
Number of options over ordinary shares of RM0.50 each As at As at 1.1.2007 Granted Exercised 31.12.2007
The Company
Chan Cheu Leong 3,500,000 – (1,500,000) 2,000,000 Giancarlo Maccagno 1,750,000 – (1,750,000) –
By virtue of their interests of more than 15% in the shares of the Company, Robert Tan Chung Meng and Pauline Tan Suat Ming are deemed to be interested in the shares in all the subsidiaries to the extent that the Company has an interest.
^ Held in trust for PPSC Industrial Holdings Sdn Bhd, which was revoked during the financial year ^^ Held in trust for PPSC (HK) Limited
DIRECTORS’ BENEFITS
Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors shown in the financial statements or the fixed salary of a full-time employee of the Company and its subsidiaries) by reason of a contract made by the Company or by 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.
Neither during nor at the end of the financial year was the Company or any of its subsidiaries a party to any arrangements whose object was to enable the Directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, other than the Company’s Employees’ Share Option Scheme. 55 Wah Seong Corporation Berhad Annual Report 2007 Directors’ Report (Cont’d)
OTHER STATUTORY INFORMATION
(a) Before the income statements and balance sheets of the Group and of the Company were made out, the Directors took reasonable steps:
(i) to ascertain the action taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and
(ii) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and of the Company had been written down to an amount which they might be expected so to realise.
(b) At the date of this report, the Directors are not aware of any circumstances:
(i) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or
(ii) which would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading; or
(iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
(c) At the date of this report, there does not exist:
(i) any charge on the assets of the Company or its subsidiaries which has arisen since the end of the financial year which secures the liabilities of any other person; or
(ii) any contingent liability of the Company or its subsidiaries which has arisen since the end of the financial year other than those disclosed in the Note 48 to the financial statements.
(d) No contingent or other liability of the Company or its subsidiaries has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Company or its subsidiaries to meet their obligations as and when they fall due.
(e) At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the respective financial statements misleading.
(f) In the opinion of the Directors:
(i) other than those disclosed in the financial statements, the results of the operations of the Group and of the Company for the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and
(ii) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made. Wah Seong Corporation Berhad Annual Report 2007 56 Directors’ Report (Cont’d)
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
Signed on behalf of the Board of Directors in accordance with their resolution dated 29 April 2008.
CHAN CHEU LEONG HALIM BIN HAJI DIN DIRECTOR DIRECTOR
Kuala Lumpur
57 Wah Seong Corporation Berhad Annual Report 2007 Statement By Directors PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965
We, Chan Cheu Leong and Halim Bin Haji Din, two of the Directors of Wah Seong Corporation Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 59 to 156 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2007 and of the results and cash flows of the Group and of the Company for the financial year ended on that date in accordance with the provisions of the Companies Act, 1965 and the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities.
Signed on behalf of the Board of Directors in accordance with a resolution of the Directors dated 29 April 2008.
CHAN CHEU LEONG HALIM BIN HAJI DIN DIRECTOR DIRECTOR
Kuala Lumpur
Statutory Declaration PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965
I, Yeap Chew Soon, the officer primarily responsible for the financial management of Wah Seong Corporation Berhad, do solemnly and sincerely declare that the financial statements set out on pages 59 to 156 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.
YEAP CHEW SOON
Subscribed and solemnly declared by the abovenamed at Kuala Lumpur in the Federal Territory on 29 April 2008.
Before me:
Commissioner for Oaths Soh Ah Kau (No. W 315)
Wah Seong Corporation Berhad Annual Report 2007 58 Report of the Auditors TO THE MEMBERS OF WAH SEONG CORPORATION BERHAD
We have audited the financial statements set out on pages 59 to 156. These financial statements are the responsibility of the Company’s Directors. It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purposes. We do not assume responsibility to any other person for the content of this report.
We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Directors, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion.
In our opinion:
(a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities so as to give a true and fair view of:
(i) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and
(ii) the state of affairs of the Group and of the Company as at 31 December 2007 and of the results and cash flows of the Group and of the Company for the financial year ended on that date; and
(b) the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries, which we have acted as auditors, have been properly kept in accordance with the provisions of the Act.
We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.
The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment made under subsection (3) of Section 174 of the Act.
PRICEWATERHOUSECOOPERS SHIRLEY GOH (No. AF: 1146) (No. 1778/08/08 (J)) Chartered Accountants Partner of the firm
Kuala Lumpur 29 April 2008
59 Wah Seong Corporation Berhad Annual Report 2007 Balance Sheets AS AT 31 DECEMBER 2007
Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
NON-CURRENT ASSETS
Property, plant and equipment 4 315,792 329,271 531 536 Prepaid lease payment 5 47,695 47,294 – – Investment properties 6 5,150 2,136 – – Investment in subsidiaries 7 – – 376,934 279,467 Investment in associates 8 21,592 17,734 – 40 Investment in jointly controlled entities 9 34,918 41,855 – – Other investments 10 1,503 2,767 – – Goodwill 11 114,002 120,872 – – Intangible assets 12 6,004 3,706 – – Deferred tax assets 13 7,463 5,529 529 405
554,119 571,164 377,994 280,448
CURRENT ASSETS
Inventories 14 195,930 226,759 – – Amounts due from customers on contracts 15 60,073 32,421 – – Trade and other receivables 16 553,212 439,383 626 189 Amounts owing by subsidiaries 17 – – 227,884 201,413 Amounts owing by associates 18 39,172 2,927 – 3 Amounts owing by jointly controlled entities 19 5,762 3,010 – – Tax recoverable 10,168 9,198 6,222 6,210 Time deposits 20 27,730 19,122 14,947 3,275 Cash and bank balances 21 89,579 69,607 8,715 212
981,626 802,427 258,394 211,302
Non-current assets classified as held for sale 22 24,401 10,828 – –
TOTAL ASSETS 1,560,146 1,384,419 636,388 491,750
EQUITY AND LIABILITIES
EQUITY
Share capital 23 214,618 197,780 214,618 197,780 Share premium 24 79,417 58,002 79,417 58,002 Share option reserve 980 297 980 297 Exchange translation reserves (12,850) (5,856) – – Capital reserves 85 65 – – Treasury shares 25 (3,847) (842) (3,847) (842) Retained profits 191,598 122,538 128,958 23,970
470,001 371,984 420,126 279,207 Minority interests 131,511 122,680 – –
TOTAL EQUITY 601,512 494,664 420,126 279,207
Wah Seong Corporation Berhad Annual Report 2007 60 Balance Sheets (Cont’d) AS AT 31 DECEMBER 2007
Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
NON-CURRENT AND DEFERRED LIABILITIES
Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) 26 54,041 64,061 54,041 64,061 Islamic notes 28 99,784 99,666 99,784 99,666 Term loans 29 67,922 90,864 – – Hire purchase liabilities 30 460 749 – – Deferred tax liabilities 31 8,696 11,925 – – Purchase consideration payable 32 – 19,318 – 6,959 Provision for warranties 33 1,261 317 – – Other liabilities 1,838 276 – –
234,002 287,176 153,825 170,686
CURRENT LIABILITIES
Amounts due to customers on contracts 15 100,656 79,227 – – Trade and other payables 34 338,940 271,136 14,763 11,398 Provision for warranties 33 13,945 5,687 – – Redeemable preference shares 27 – 1,792 – - Amounts owing to subsidiaries 17 – – 17,674 30,459 Amounts owing to associates 18 20 445 – – Amounts owing to jointly controlled entities 19 444 14,098 – – Hire purchase liabilities 30 380 1,044 – – Bank borrowings 35 247,934 208,170 30,000 – Current tax liabilities 22,313 20,980 – –
724,632 602,579 62,437 41,857
TOTAL LIABILITIES 958,634 889,755 216,262 212,543
TOTAL EQUITY AND LIABILITIES 1,560,146 1,384,419 636,388 491,750 61 Wah Seong Corporation Berhad Annual Report 2007 Income Statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Gross revenue 36 1,950,112 1,624,348 45,747 94,947 Cost of sales 37 (1,624,044) (1,334,050) – –
Gross profit 326,068 290,298 45,747 94,947
Other operating income 41,336 14,786 174,554 350 Selling and distribution expenses (34,223) (32,871) – – Administrative and general expenses (178,276) (158,557) (8,871) (5,953) Other operating expenses (8,471) (17,805) (79,043) (43,427)
Profit from operations 38 146,434 95,851 132,387 45,917
Finance costs 39 (25,597) (25,705) (9,440) (8,530) Share of results of associates 583 (359) – – Share of results of jointly controlled entities (6,299) 1,817 – –
Profit before tax 115,121 71,604 122,947 37,387
Tax expense 40 (17,890) (21,415) (980) (20,587)
Net profit for the financial year 97,231 50,189 121,967 16,800
Attributable to:
Equity holders of the Company 86,039 37,414 121,967 16,800 Minority interests 11,192 12,775 – –
Net profit for the financial year 97,231 50,189 121,967 16,800
Earnings per share attributable to equity holders of the Company: 41
- basic (sen) 13.58 5.98
- fully diluted (sen) 13.51 5.97
Dividends per share (gross) (sen): 42
- Interim 6.0 1.5 6.0 1.5 - Final – 3.5 – 3.5
6.0 5.0 6.0 5.0
Wah Seong Corporation Berhad Annual Report 2007 62 Consolidated Statement of Changes in Equity FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
Attributable to equity holders of the Company Share Exchange Share Share option translation Capital Treasury Retained Minority Total Note capital premium reserve reserves reserves shares profits Total interest equity RM‘000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 January 2006 (Audited) 189,775 47,477 – 409 38 – 97,898 335,597 152,694 488,291 Reclassification 52 – – – – – – – – (28,248) (28,248)
At 1 January 2006 (Restated) 189,775 47,477 – 409 38 – 97,898 335,597 124,446 460,043 Issue of shares: - conversion of ICULS 26 4,648 – – – – – – 4,648 – 4,648 - exercise of ESOS 23 3,357 10,544 – – – – – 13,901 – 13,901 Share issue expenses – (19) – – – – – (19) – (19) Exchange translation differences – – – (6,265) – – – (6,265) (480) (6,745) Gain on deemed disposal of interest in a subsidiary – – – – 27 – – 27 – 27
Income and expense recognised directly in equity – – – (6,265) 27 – – (6,238) (480) (6,718)
Net profit for the financial year – – – – – – 37,414 37,414 12,775 50,189
Total recognised income and expense for the financial year – – – (6,265) 27 – 37,414 31,176 12,295 43,471 Acquisition of shares in new subsidiaries – – – – – – – – 192 192 Acquisition of shares in an existing subsidiary by the Group from minority interests – – – – – – – – (7,931) (7,931) Consideration adjustment on acquisition of a subsidiary – – – – – – – – 8,905 8,905 Issue of shares to minority interests – – – – – – – – 14,365 14,365 Dividends paid to equity holders of the Company – – – – – – (12,774) (12,774) – (12,774) Dividends paid to minority shareholders of subsidiaries – – – – – – – – (29,592) (29,592) Share buy back (including transaction costs) – – – – – (842) – (842) – (842) Share options granted under the ESOS – – 297 – – – – 297 – 297
At 31 December 2006 (Restated) 197,780 58,002 297 (5,856) 65 (842) 122,538 371,984 122,680 494,664
63 Wah Seong Corporation Berhad Annual Report 2007 Consolidated Statement of Changes in Equity (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
Attributable to equity holders of the Company Share Exchange Share Share option translation Capital Treasury Retained Minority Total Note capital premium reserve reserves reserves shares profits Total interest equity RM‘000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 January 2007 (Restated) 197,780 58,002 297 (5,856) 65 (842) 122,538 371,984 122,680 494,664 Issue of shares - conversion of ICULS 26 10,020 – – – – – – 10,020 – 10,020 - exercise of ESOS 23 6,818 21,415 – – – – – 28,233 – 28,233 - other issue of shares – – – – – – – – 362 362
Exchange translation differences – – – (6,994) – – – (6,994) 699 (6,295)
Income and expense recognised directly in equity – – – (6,994) – – – (6,994) 699 (6,295)
Net profit for the financial year – – – – – – 86,039 86,039 11,192 97,231
Total income and expense recognised for the financial year – – – (6,994) – – 86,039 79,045 11,891 90,936 Acquisition of shares in new subsidiaries – – – – – – – – 67 67 Acquisition of shares in existing subsidiaries by the Group from minority interests – – – – – – – – (14) (14) Dividends paid to equity holders of the Company – – – – – – (16,979) (16,979) – (16,979) Dividends paid to minority shareholders of subsidiaries – – – – – – – – (3,590) (3,590) Share buy back (including transaction costs) – – – – – (3,005) – (3,005) – (3,005) Share options granted under the ESOS – – 683 – – – – 683 – 683 Realisation of capital reserve – – – – 20 – – 20 132 152 Effect of disposal of a subsidiary – – – – – – – – (17) (17)
At 31 December 2007 214,618 79,417 980 (12,850) 85 (3,847) 191,598 470,001 131,511 601,512
Wah Seong Corporation Berhad Annual Report 2007 64 Statement of Changes in Equity FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
Share Share Share option Treasury Retained Total capital premium reserve shares profits equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 January 2006 189,775 47,477 – – 19,944 257,196 Issue of shares: - conversion of ICULS 4,648 – – – – 4,648 - exercise of ESOS 3,357 10,544 – – – 13,901 Share issue expenses – (19) – – – (19) Share buy back (including transaction costs) – – – (842) – (842) Share options granted under ESOS – – 297 – – 297 Net profit for the financial year – – – – 16,800 16,800 Dividends paid to equity holders of the Company – – – – (12,774) (12,774)
At 31 December 2006 197,780 58,002 297 (842) 23,970 279,207
Issue of shares: - conversion of ICULS 10,020 – – – – 10,020 - exercise of ESOS 6,818 21,415 – – – 28,233 Share buy back (including transaction costs) – – – (3,005) – (3,005) Share options granted under ESOS – – 683 – – 683 Net profit for the financial year – – – – 121,967 121,967 Dividends paid to equity holders of the Company – – – – (16,979) (16,979)
At 31 December 2007 214,618 79,417 980 (3,847) 128,958 420,126 65 Wah Seong Corporation Berhad Annual Report 2007 Cash Flow Statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 115,121 71,604 122,947 37,387
Adjustments for: Amortisation of intangible assets 576 428 – – Amortisation of prepaid lease payments 750 429 – – Bad debts written off 4,761 492 – – Depreciation of property, plant and equipment 36,715 33,082 207 193 Depreciation of investment properties 103 45 – – Net loss / (gain) on disposal of property, plant and equipment 2,921 (1,300) – (1) Impairment loss on property, plant and equipment – 4,455 – – Property, plant and equipment written off 318 5,272 5 1 Impairment of goodwill on acquisition (Note 11) 468 13,981 – – Net impairment (gain) / loss on investment properties (285) 378 – – Impairment loss on investment in subsidiaries – – 78,816 – Recognition of discount on acquisition – (46) – – Gain on partial disposal of subsidiaries (7) – – – Gain on disposal of subsidiaries from the internal restructuring – – (172,546) – Gain on disposal of jointly controlled entity (17) – – – Gain on disposal of quoted investments (456) – – – Net diminution in value of other investments 751 191 – – Investments written off 88 – – – Share of loss / (profit) of jointly controlled entities 6,299 (1,817) – – Share of (profit) / loss of associates (583) 359 – – Write down of inventories 1,504 223 – – Inventories written off 5,616 2,736 – – Net allowance for doubtful debts 2,136 9,619 293 43,427 Waiver of amounts due from jointly controlled entities (net) (10,805) – – – Net provision for warranties/(written back) 10,411 (247) – – Provision for gratuity 425 220 425 220 Net unrealised loss/(gain) on foreign exchange 966 4,097 388 (109) Dividend income (52) (91) (39,875) (88,694) Interest income (3,710) (2,769) (4,114) (4,469) Interest expense 25,597 25,705 9,440 8,530 Amortisation of Islamic Notes issuance cost 118 118 118 118
199,729 167,164 (3,896) (3,397)
Wah Seong Corporation Berhad Annual Report 2007 66 Cash Flow Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
(continued) 199,729 167,164 (3,896) (3,397) Changes in working capital: Inventories 18,481 (53,272) – – Receivables (188,812) (32,406) (1,118) (28) Payables 103,368 12,299 2,421 504
Cash generated from/(used in) operations 132,766 93,785 (2,593) (2,921) Interest received 3,710 2,769 4,114 4,469 Interest paid (25,597) (25,705) (9,440) (8,530) Tax (paid)/refunded (22,556) (15,345) 2,903 177
Net cash generated from/(used in) operating activities 88,323 55,504 (5,016) (6,805)
CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (Note 4) (69,356) (91,560) (207) (158) Purchase of investment properties (113) – – – Additional prepaid lease payment (Note 5) (1,151) – – – Purchase of new subsidiaries and business (Note 44) (298) (33) – (350) Acquisition of additional shares in existing subsidiaries (851) (1,524) – (39,135) Acquisition of associate – (40) – (40) Subscription of redeemable preference shares in associate (1,344) – – – Acquisition of jointly-controlled entity (172) (357) – – Purchase of other investments (897) (165) – – Proceeds from disposal of property, plant and equipment 22,013 6,990 – 2 Proceeds from disposal of subsidiaries 61 – – – Proceeds from disposal of a jointly controlled entity 35 11 – – Proceeds from disposal of associates – 258 40 – Proceeds from disposal of other investments 1,778 666 – – Dividends received from: - subsidiaries – – 10,869 47,461 - associates 1,220 125 – – - other investments 35 66 – – Advances to subsidiaries – – (5,122) (40,946) Withdrawal of fixed deposits 86 1,028 – – Repayment of advances from associates 470 971 3 – Advances to asscoiates (164) – – (3) Advances to jointly control entities (477) (1,450) – – Purchase of intellectual property (2,792) – – – Purchase of preference shares in existing subsidiary – – (100) – Balance consideration paid to vendor of subsidiary upon achievement of profit guarantee (564) – – – Instalment payment for subsidiaries acquired In the previous years (27,974) (12,559) (5,568) –
Net cash used in investing activities (80,455) (97,573) (85) (33,169)
67 Wah Seong Corporation Berhad Annual Report 2007 Cash Flow Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury shares (3,192) (655) (3,192) (655) Proceeds from issue of shares upon exercise of ESOS 28,232 13,901 28,232 13,901 Payment of share issue expenses – (12) – (12) Proceeds from issue of shares to minority shareholders of subsidiaries 362 550 – – Net proceeds from bank borrowings 26,827 26,656 30,000 – Payment of hire purchase instalments (953) (557) – – Dividends paid to equity holders of the Company (16,979) (12,774) (16,979) (12,774) Dividends paid to minority shareholders of subsidiaries (3,590) (4,142) – – (Repayment to)/Advances from subsidiaries – – (12,785) 30,181 Advances from associates – 15 – – Repayment of advances from associates (424) – – –
Net cash generated from financing activities 30,283 22,982 25,276 30,641
NET CHANGES IN CASH AND CASH EQUIVALENTS 38,151 (19,087) 20,175 (9,333)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 77,334 101,859 3,487 12,820
EFFECTS OF EXCHANGE RATE CHANGES (3,537) (5,438) – –
CASH AND CASH EQUIVALENTS AT END OF THE FINANNCIAL YEAR 111,948 77,334 23,662 3,487
Represented by:
TIME DEPOSITS 27,730 19,122 14,947 3,275 LESS: PLEDGED DEPOSITS (3,756) (3,842) – –
23,974 15,280 14,947 3,275 CASH AND BANK BALANCES 89,579 69,607 8,715 212 BANK OVERDRAFTS (1,605) (7,553) – –
111,948 77,334 23,662 3,487
Wah Seong Corporation Berhad Annual Report 2007 68 Notes to the Financial Statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
1. GENERAL INFORMATION
The Company is a public limited liability company, incorporated and domiciled in Malaysia, and listed on the Main Board of Bursa Malaysia Securities Berhad. The address of its registered office and principal place of business are as follows:
Registered office: Suite 2-1, 2nd Floor Menara Penang Garden 42A, Jalan Sultan Ahmad Shah 10050 Penang
Principal place of business: 59-2, The Boulevard Mid Valley City Lingkaran Syed Putra 59200 Kuala Lumpur
The principal activities of the Company are investment holding and the provision of management services to subsidiaries.
The principal activities of the Group consist of Specialised Pipe Coating and Corrosion Protection Services; EPC, Fabrication and Rental of Gas Compressors and Process Equipment; E&P Products and Services; Infrastructure and Building Materials and Agro Based Engineering.
The principal activities of the subsidiaries are disclosed in Note 7 to the financial statements.
There have been no significant changes in the nature of these activities during the financial year.
The financial statements are presented in Ringgit Malaysia (“RM”), which is also the Company’s functional currency. Unless otherwise indicated, the amounts in these financial statements have been rounded to the nearest thousand.
2. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied consistently to all the years presented in dealing with items which are considered material in relation to the financial statements, unless otherwise stated.
2.1 Basis of preparation
The financial statements of the Group and of the Company have been prepared in accordance with the provisions of the Companies Act, 1965 and Financial Reporting Standards, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities.
The financial statements have been prepared under the historical cost convention unless otherwise indicated in this summary of significant accounting policies.
The preparation of financial statements in conformity with the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the Company’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ from those estimates.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3 to the financial statements. 69 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.2 Adoption and changes in accounting policies
The significant accounting policies adopted are consistent with those of the previous financial year except for the following changes in accounting policies:
(a) The new standards and amendments to published standards that are effective for the Group’s and the Company’s financial year beginning on or after 1 January 2007 are as follows:
• FRS 6 “ Exploration for and Evaluation of Mineral Resources”
• FRS 117 “Leases”
• FRS 124 “Related Party Disclosures”
• Amendments to FRS 1192004 Employee Benefits – Actuarial Gains and Losses, Group Plans and Disclosures
FRS 6 is not relevent to the Group’s and the Company’s operations as the Group and the Company do not carry out exploration for and evaluation of mineral resources business.
All changes in accounting policies have been made in accordance with the transition provisions in the respective standards and amendments to published standards. The application of the transition provision of FRS 117 is disclosed in Note 2.10.
The amendment to FRS 1192004 is not relevant to the Group and the Company as the Group and the Company do not have any defined benefit plan.
A summary of the impact of the adoption of FRS 117 on the financial statements of the Group and of the Company is set out in Note 52 to the financial statements.
The adoption of FRS 124 has no significant impact on the financial statements of the Group and of the Company, other than the identification of related parties and some related party disclosures. The related party disclosures are set out in Note 45 to the financial statements.
(b) Standards, amendments to published standards and IC Interpretations to existing standards that are not yet effective and have not been early adopted are as follows:
The new standards and amendments to published standards and IC Interpretations that are mandatory for the Group’s financial year beginning on or after 1 January 2007 or later periods, and the Group and the Company have not early adopted, are as follows:
• FRS 112 “Income Taxes” (effective for accounting periods beginning on or after 1 July 2007). This revised standard removes the requirements that prohibit recognition of deferred tax on unutilised reinvestment allowances or other allowances in excess of capital allowances. The Group and the Company will apply this standard from financial periods beginning on 1 January 2008.
• Other revised standards (effective for accounting periods beginning on or after 1 July 2007) that have no significant changes compared to the original standards:
• FRS 107 “Cash Flow Statements” • FRS 111 “Construction Contracts” • FRS 118 “Revenue” • FRS 137 “Provisions, Contingent Liabilities and Contingent Assets”
The Group and the Company will apply these standards from financial periods beginning on 1 January 2008. Wah Seong Corporation Berhad Annual Report 2007 70 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.2 Adoption and changes in accounting policies (Cont’d)
(b) Standards, amendments to published standards and IC Interpretations to existing standards that are not yet effective and have not been early adopted are as follows: (Cont’d)
• Amendment to FRS 121 “The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operations” (effective for accounting periods beginning on or after 1 July 2007). This amendment requires exchange differences on monetary items that form part of the net investment in a foreign operation to be recognised in equity instead of in profit or loss regardless of the currency in which these items are denominated in. The Group and the Company will apply this amendment from the financial periods beginning on 1 January 2008.
• FRS 134 “Interim Financial Reporting” (effective for accounting periods beginning on or after 1 July 2007). The Group will apply this standard from financial periods beginning on 1 January 2008.
• FRS 139 “Financial Instruments: Recognition and Measurement” (effective date yet to be determined by Malaysian Accounting Standards Board). This new standard establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Hedge accounting is permitted only under strict circumstances. The Group and the Company will apply this standard when it becomes effective.
• IC Interpretation 1 “Changes in Existing Decommissioning, Restoration and Similar Liabilities” (effective for accounting periods beginning on or after 1 July 2007). This interpretation deals with changes in the estimated timing or amount of the outflow of resources required to settle the obligation, or a change in the discount rate. IC 1 is not relevant to the Group’s and the Company’s operations as the Group and the Company do not have any changes in existing decommissioning, restoration and related liabilities. The Group and the Company will apply this IC Interpretation from financial periods beginning on 1 January 2008.
• IC Interpretation 8 “Scope of FRS 2” (effective for accounting periods beginning on or after 1 July 2007). This interpretation clarifies that FRS 2 “Share-based Payment” applies even in the absence of specifically identifiable goods and services. The Group and the Company will apply this IC Interpretation from financial periods beginning on 1 January 2008.
With the exception of FRS 139, the above standards, amendments to published standards and interpretations of existing standards are not anticipated to have any significant impact on the financial position of the Group and the Company in the financial year of initial application. As allowed under the transitional provision of FRS 139, the Group and the Company are exempted from having to disclose the possible impact of the application of this standard on the financial statements of the Group and the Company in the financial year of initial application.
(c) Standard, amendment to published standards and IC Interpretations to existing standards that are not yet effective and are not relevant for the Group’s and the Company’s operations:
• FRS 120 “Accounting for Government Grants and Disclosure of Government Assistance” (effective for accounting periods beginning on or after 1 July 2007). This revised standard allows the alternative treatment of recording non-monetary government grant at nominal amount on initial recognition. FRS 120 is not relevant to the Group’s and to the Company’s operations as the Group and the Company do not have government grants or assistance. 71 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.2 Adoption and changes in accounting policies (Cont’d)
(c) Standard, amendment to published standards and IC Interpretations to existing standards that are not yet effective and are not relevant for the Group’s and the Company’s operations: (Cont’d)
• IC Interpretation 2 “Members’ Shares in Co-operative Entities and Similar Instruments” (effective for accounting periods beginning on or after 1 July 2007). This interpretation deals with liability or equity classification of financial instruments which give the holder the right to request redemption, but subject to limits on whether it will be redeemed. IC 2 is not relevant to the Group’s and to the Company’s operations as the Group and the Company do not have co-operative entities and related instruments.
• IC Interpretation 5 “Rights to Interests arising from Decommission, Restoration and Environmental Rehabilitation Funds” (effective for accounting periods beginning on or after 1 July 2007). This interpretation deals with accounting by a contributor for its interests arising from decommissioning funds. IC 5 is not relevant to the Group’s and the Company’s operations as the Group and the Company do not have rehabilitation funds.
• IC Interpretation 6 “Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment” (effective for accounting periods beginning on or after 1 July 2007). This interpretation provides guidance on the recognition, in the financial statements of the producers, of liabilities for waste management under the European Union Directive in respect of sales of historical household equipment. IC 6 is not relevant to the Group’s and to the Company’s operations as the Group and the Company are not involved in waste management operations.
• IC Interpretation 7 “Applying the Restatement Approach under FRS 129 “Financial Reporting in Hyperinflationary Economies” (effective for accounting periods beginning on or after 1 July 2007). This interpretation provides guidance on how to apply the requirements of FRS 129 in a reporting period in which an entity identifies the existence of hyperinflation in the economy of its functional currency, when that economy was not hyperinflationary in the prior period.
2.3 Subsidiaries
Subsidiaries are those corporations, partnerships or other entities (including special purpose entities) in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Investments in subsidiaries are stated at cost less accumulated impairment losses. Where an indication of impairment exist, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy 2.20 on impairment of assets.
Subsidiaries are consolidated using the purchase method of accounting. Under the purchase method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the date of acquisition, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired at the date of acquisition is reflected as goodwill – See accounting policy 2.13 (b) on goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.
Wah Seong Corporation Berhad Annual Report 2007 72 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.3 Subsidiaries (Cont’d)
Where more than one exchange transaction is involved, 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.
Minority interest represent that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the Company. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the date of acquisition and the minorities’ share of changes in the subsidiaries’ equity since that date.
All inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.
The gain or loss on disposal of a subsidiary, which is the difference between net disposal proceeds and the Group’s share of its net assets as of the date of disposal, including the cumulative amount of any exchange differences that relate to the subsidiary, is recognised in the consolidated income statement.
2.4 Transactions with minority interests
The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired.
2.5 Associates
An associate is an entity in which the Group has 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.
Investments in associates are stated at cost less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy 2.20 on impairment of assets.
On disposal, the difference between the net disposal proceeds and the net carrying amount of the associate disposed of is taken to the income statement.
Investment in associates is accounted for in the consolidated financial statements by the equity method of accounting. Under the equity method, the investment in associates are initially recognised at cost and adjusted thereafter for post-acquisition changes in the Group’s share of net assets of the associates.
The Group’s share of the net profits or losses and changes directly in the equity of the associates are recognised in the consolidated income statement and consolidated statement of changes in equity respectively.
An investment in an associate is accounted for using the equity method from the date on which the Group obtains significant influence until the date the Group ceases to have significant influence over the associate. 73 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.5 Associates (Cont’d)
Goodwill relating to an associate is included in the carrying value of the investment and is not tested for impairment separately. Instead, the entire carrying amount of the investment is tested for impairment in accordance with accounting policy s in Note 2.20 below.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Where necessary, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group.
Equity accounting is discontinued when the carrying amount of the investment in an associate diminishes by virtue of losses to zero, unless the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
For incremental interest in an associate, the date of acquisition is the purchase date at each stage and goodwill is calculated at each purchase date based on the fair value of assets and liabilities identified. There is no “step up to fair value” of net assets of the previously acquired stake and the share of profits and equity movements for the previously acquired stake is recorded directly through equity.
2.6 Joint ventures
(a) Jointly controlled entities
Jointly controlled entities are those corporations, partnerships or other entities over which there is contractually agreed sharing of control by the Group with one or more parties where the strategic financial and operating decisions relating to the entities require unanimous consent of the parties sharing control.
The Group has interests in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.
Investments in jointly controlled entitles are accounted for in the consolidated financial statements by the equity method of accounting. Under the equity method, the investment in jointly controlled entities are initially recognised at cost and adjusted thereafter for post-acquisition changes in the Group’s share of net assets of the jointly controlled entities.
Unrealised gains on transactions between the Group and its jointly controlled entities are eliminated to the extent of the Group’s interest in the jointly controlled entities. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred.
Where necessary, adjustments have been made to the financial statements of jointly controlled entities to ensure consistency of accounting policies with those of the Group.
Investments in jointly controlled entities are stated at cost less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy 2.20 on impairment of assets.
On disposal, the difference between the net disposal proceeds and the carrying amount of the jointly controlled entity disposed of is taken to the income statement. Wah Seong Corporation Berhad Annual Report 2007 74 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.6 Joint ventures (Cont’d)
(b) Jointly controlled operations
A jointly controlled operation is a contractual agreement whereby the Group and other parties have joint control over an economic activity.
In respect of its interest in jointly controlled operations, the Group recognises in its financial statements the assets that it controls and the liabilities that it incurs as well as the expenses that it incurs and its share of the income and expenses that it earns from the sale of goods or services by the joint venture.
2.7 Property, plant and equipment
(a) Measurement basis
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the assets. Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset.
Subsequent costs are included in the asset’s carrying amount when it is probable that future economic benefits associated with the asset will flow to the Group and the Company and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial year in which they are incurred.
At each balance sheet date, the Group assesses whether there is any indication of impairment. Where an indication of impairment exists, the carrying value of the asset is assessed and written down immediately to its recoverable amount. See Note 2.20 on impairment of assets.
Property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected from their use. Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are included in the income statement.
(b) Depreciation
Freehold land and capital work-in-progress are not depreciated.
Depreciation is calculated to write off the depreciable amount of other property, plant and equipment on a straight line basis over their estimated useful lives. The depreciable amount is determined after deducting residual value from cost.
The principal annual rates used for this purpose are:
Buildings 2% - 10% Plant and machinery, tools and equipment 6.67% - 50% Electrical installations, office equipment and furniture and fittings 10% - 20% Computer and software 10% - 20% Renovation and store extension 2% - 50% Motor vehicles 20% - 33%
The residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each balance sheet date.
75 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.8 Accounting as Lessee
Finance leases
Leases of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases.
Finance leases are capitalised at the lower of the fair value of the leased assets or the estimated present value of the underlying lease payments at the date of inception. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the lease principal outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Property, plant and equipment acquired under finance lease contracts is depreciated over the useful life of the asset. If there is no reasonable certainty that the ownership will be transferred to the Group, the asset is depreciated over the shorter of the lease term and its useful life.
Operating leases
Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement over the lease period.
2.9 Other investments
Other investments are stated at cost. An allowance for diminution in value is made if the Directors are of the opinion that there is a decline in the value of such investments which is other than temporary. The diminution in value is charged to the income statement.
On disposal, the difference between the net disposal proceeds and the carrying amount of the investment disposed of is taken to the income statement.
2.10 Prepaid lease payments
The Directors have applied the transitional provisions of FRS 117 “Leases” for the lease of land previously recognised as property, plant and equipment.
Where the Group and the Company had previously classified a lease of land as finance lease and had recognised the amount of the prepaid lease rental as property within property, plant and equipment, the Group and the Company will treat the lease as an operating lease with the unamortised carrying amount being classified as prepaid lease rental.
Leasehold land is amortised over the remaining period of the respective leases ranging from 3 to 99 years.
Wah Seong Corporation Berhad Annual Report 2007 76 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.11 Investment properties
Investment properties are properties held to earn rental income or for capital appreciation or both rather than for use in the production or supply of goods and services or for administrative purposes, or sale in the ordinary course of business.
(a) Measurement basis
Investment properties are stated at cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of investment properties includes expenditure that is directly attributable to the acquisition of the asset.
Subsequent costs are included in the asset’s carrying amount when it is probable that future economic benefits associated with the asset will flow to the Group and the Company and the cost of the asset can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial year in which they are incurred.
Investment properties are derecognised upon disposal or when they are permanently withdrawn from use and no future economic benefits are expected from their disposal. On disposal, the difference between the net disposal proceeds and the carrying amount is recognised in the income statement.
(b) Depreciation
Freehold land is not depreciated.
Depreciation is calculated to write off the depreciable amount of other investment properties on a straight-line basis over their estimated useful lives. Depreciation amount is determined after deducting the residual value from the cost of the investment property.
The principal annual rates used for this purpose are:
Freehold buildings 2%
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date.
2.12 Non-current asset held for sale
Non-current assets are classified as held for sale if the carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the assets (or disposal group) are available for immediate sale in its present condition and the sale is highly probable subject only to terms that are usual and customary.
On initial classification as held for sale, non-currents assets are measured at the lower of its carrying amount and fair value less costs to sell. Immediately before the initial classification of the assets as held for sale, the carrying amount of the assets (all the assets and liabilities of the disposal group) are measured in accordance with applicable FRSs.
An impairment loss is recognised for any initial or subsequent write-down of the disposal group to fair value less costs to sell. Subsequent increase in fair value less costs to sell is recognised as a gain in the income to the extent of the cumulative impairment loss that has been recognised previously. 77 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.13 Intangible assets
(a) Technical knowhow
Technical knowhow, are stated at cost less any accumulated amortisation and accumulated impairment losses.
The technical knowhow with finite lives are amortised on a straight line basis over their estimated useful life not exceeding 10 years whereas technical knowhow with indefinite lives are assessed for impairment annually. See Note 2.20 on impairment of assets.
(b) Goodwill
Goodwill represents the excess of the cost of acquisition of subsidiaries, jointly controlled entities and associates over the fair value of the Group’s share of the identifiable net assets at the date of acquisition. See Note 2.20 on impairment of assets.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose. See Note 2.20 on impairment of assets.
Goodwill on acquisitions of jointly controlled entities and associates is included in investments in jointly controlled entities and associates respectively. Such goodwill is tested for impairment as part of the overall balance.
(c) Intellectual property
Expenditure on acquired intellectual property is capitalised and amortised using the straight line method over their estimated useful life, not exceeding a period of 20 years.
2.14 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in first-out basis. In the case of finished goods and work-in-progress, cost comprises materials, direct labour, other direct charges and an appropriate proportion of factory overheads.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses.
2.15 Receivables
Receivables are initially recognised at their costs when the contractual right to receive cash or another financial asset from another entity is established. Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts.
Known bad debts are written off and an allowance is made for any receivables considered to be doubtful of collection. Wah Seong Corporation Berhad Annual Report 2007 78 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.16 Payables
Payables are measured initially and subsequently at cost. Payables are recognised when there is a contractual obligation to deliver cash or another financial asset to another entity.
2.17 Provision
(a) Warranties
The Group recognises the estimated liability to repair or replace products when the underlying products or services are sold. The provision is calculated based on historical warranty data and weighting of all possible outcome against their associated probabilities.
(b) Restructuring
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.
2.18 Share capital
Ordinary shares are recorded at nominal value and proceeds received 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. Costs incurred directly attributable to the issuance of the shares are accounted for as a deduction from share premium, if any, otherwise it is charged to the income statement. Other shares are classified as equity and/or liability according to the economic substance of the particular instruments.
Dividends to shareholders are recognised in equity in the period in which they are declared.
Purchase of own shares
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Repurchased shares that are not subsequently cancelled are classified as treasury shares and are presented as a deduction from total equity.
2.19 Borrowings
Borrowings are initially recognised based on the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortised cost using the straight line method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings.
Borrowings are classified as current liabilities unless the Group has an unconditional right todefer settlement of the liability for at least 12 months at the balance sheet date. 79 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.20 Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment loss is recognised for the amount by which the carrying value of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash-generating units). Non-financial assets, other than goodwill, that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
The impairment loss is charged to the income statement unless it reverses a previous revaluation, in which case it is charged to the revaluation surplus. Impairment losses on goodwill are not reversed. In respect of other assets, any subsequent increase in recoverable amount is recognised in the income statement unless it reverses an impairment loss on a revalued asset, in which case it is taken to revaluation surplus.
2.21 Foreign currencies
(a) Functional currency
Functional currency is the currency of the primary economic environment in which an entity operates.
The financial statements of each entity within the Group are measured using their respective functional currency.
(b) Transactions and balances in foreign currencies
Transactions in foreign currencies other than the functional currency (“Foreign currencies”) are translated to the functional currency at the rate of exchange ruling at the date of the transaction.
Monetary items denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rates ruling at that date.
Non-monetary items which are measured in terms of historical costs denominated in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Exchange differences arising on the settlement of monetary items and the translation of monetary items are included in the income statement for the period.
When a gain or loss on a non-monetary item is recognised directly in equity, any corresponding exchange gain or loss is recognised directly in equity. When a gain or loss on a non-monetary item is recognised in the income statement, any corresponding exchange gain or loss is recognised in income statement. Wah Seong Corporation Berhad Annual Report 2007 80 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.22 Foreign currencies translation
(a) Translation of foreign operations
On consolidation, all assets and liabilities of foreign operations that have a functional currency other than RM are translated at the exchange rates ruling at the balance sheet date.
Income and expense items are translated at exchange rates approximating those ruling on transactions dates.
All exchange differences arising from the translation of the financial statements of foreign operations are dealt with through the exchange translation reserve account within equity. On the disposal of a foreign operation, the exchange translation differences relating to that foreign operations are recognised in the income statement as part of the gain or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign entity and translated at the closing rate.
(b) Closing exchange rates
The principal closing rate used in translation is as follows:
2007 2006 RM RM
One United Stated Dollar (“USD”) 3.32 3.53
2.23 Revenue recognition
Revenue is recognised when it is probable that economic benefits will flow to the Group and the Company and when they can be measured reliably, on the following bases:
(a) Construction Contracts
A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate purpose or use.
When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date. The stage of completion of a construction contract is determined based on the proportion that the contract costs incurred for work performed to-date bear to the estimated total costs for the contract. Costs incurred during the financial year in connection with future activity on a contract are excluded from costs incurred to-date when determining the stage of completion of a contract. Such costs are shown as amounts due from/(to) customers on construction contracts on the balance sheet unless it is not probable that such contract costs are recoverable from the customers, in which case such costs are recognised as an expense immediately.
81 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.23 Revenue recognition (Cont’d)
(a) Construction Contracts (Cont’d)
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contract work and claims that can be measured reliably. A variation or a claim is only included in contract revenue when it is probable that the customer will approve the variation or negotiations have reached an advanced stage such that it is probable that the customer will accept the claim.
(b) Sale of goods
Revenue from sale of goods is measured at the fair value of the consideration receivable and is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer.
(c) Service income
Service income is recognised on an accrual basis when services have been rendered.
(d) Dividend income
Dividend income is recognised when the Group’s right to receive payment is established.
(e) Rental income
Rental income is recognised on a time proportion basis over the lease term. The aggregate cost of incentives provided to lessees is recognised as a reduction of rental income over the lease term on a straight-line basis.
(f) Interest income
Interest income is recognised on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable.
(g) Management fee
Management fee is recognised on an accrual basis when service is rendered.
(h) Hire of machinery and equipment
Income from hire of machinery and equipment is recognised on a time proportion basis over the term of hire.
(i) Commission income
Commission income is recognised on an accrual basis when service is rendered. Wah Seong Corporation Berhad Annual Report 2007 82 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.24 Income taxes
Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and includes all taxes based upon the taxable profits, including withholding taxes payable by a foreign subsidiary, associate or jointly controlled entity on distributions of retained earnings to companies in the Group.
Deferred tax is recognised in full, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary differences or unused tax losses can be utilised.
Deferred tax is not recognised if the temporary difference arises from goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit.
Deferred tax is recognised on temporary differences arising on investments in subsidiaries, associates and jointly controlled entities, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.
Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly to equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill.
Deferred tax assets and liabilities are offset when the enterprise has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.
2.25 Employee benefits
(a) Short term benefits
Salaries, wages, bonuses and social security contributions are recognised as an expense in the financial year in which the services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlements to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. Non-monetary benefits such as medical care, housing and other staff related expenses are charged to the income statements as and when incurred.
(b) Post-employment benefits
The Group has post-employment benefit schemes in accordance with local conditions and practices in the countries in which it operates. These post-employment benefit schemes are defined contribution plans.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee services in the current and prior periods. 83 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.25 Employee benefits (Cont’d)
(b) Post-employment benefits (Cont’d)
As required by law, the Company and its subsidiaries in Malaysia make contributions to the Employees Provident Fund (“EPF”) which is a defined contribution plan, whereas companies in other countries make their respective local contributions, if require by law.
Such contributions are recognised as an expense in the income statement in the financial year to which they relate.
(c) Share-based compensation
The Group operates an equity settled, share based compensation for its employees. The share option programme allows the Group employees to acquire shares of the Company. The fair values of share options granted to employees is recognised as employee expenses with a corresponding increase in equity, over the period in which the employee becomes unconditionally entitled to the options.
The fair value of employee share options is measured using the Black Scholes model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on the historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on the government bond). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
The Group has taken advantage of the transitional provisions of FRS 2 “Share-based Payment” in respect of equity instruments granted after 31 December 2004 and not vested as at 1 January 2006, and not recognised any expense in respect of these instruments.
2.26 Segment reporting
Segment reporting is presented for enhanced assessment of the Group’s risks and returns. A business segment is a group of assets and operations engaged in providing products or services that subject to risk and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those operating in other economic environments.
Segment revenue, expense, assets and liabilities are those amounts resulting from operating activities of a segment that are directly attributable to the segment and a relevant portion that can be allocated on a reasonable basis to the segment.
Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra- group transactions are eliminated as part of the consolidation process, except to the extent that such intra group balances and transactions are between group enterprises within a single segment. Wah Seong Corporation Berhad Annual Report 2007 84 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.27 Cash and cash equivalents
Cash and cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value. For the purpose of the cash flow statements, cash and cash equivalents are presented net of bank overdrafts and exclude fixed deposits pledged to secure banking facilities.
2.28 Financial instruments
A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.
(a) Financial instruments recognised in the balance sheets
The recognised financial instruments of the Group comprise cash and cash equivalents, receivables, payables, equity investments, borrowings, hire purchase liabilities, ICULS and redeemable preference shares as well as ordinary share capital. These financial instruments are recognised when a contractual relationship has been established. The accounting policies and methods adopted, including the criteria for recognition and the basis of measurement applied, are disclosed in relevant accounting policy notes. The information on the extent and nature of these recognised financial instruments, including significant terms and conditions that may affect the amount, timing and certainty of future cash flows are disclosed in the respective notes to the financial statements.
(b) Financial instruments not recognised in the balance sheets
Foreign currency forward contracts
The Group enters into foreign currency forward contracts to protect the Group from movements in exchange rates by establishing the rate at which a foreign currency asset or liability will be settled.
Exchange gain and losses on contracts are recognised in the income statement when settled at which time they are included in the measurement of the transaction hedged.
(c) Fair value estimation for disclosure purposes
The fair value of publicly traded securities is based on quoted market prices at the balance sheet date.
The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date.
In assessing the fair value of financial instruments, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for the specific or similar instruments are used for long term debt. Other techniques and bases, such as discounted value of future cash flows and the underlying net asset base of the instrument, are used to determine fair value for the remaining financial instruments. In particular, the fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group for similar financial instruments.
The carrying values of financial assets and financial liabilities with a maturity period of less than one year are assumed to approximate their fair values. 85 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.29 Contingent liabilities
The Group does not recognise a contingent liability but discloses its existence in the financial statements. 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 the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.
(a) Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.
(b) Deferred tax assets
Deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. This involves judgment regarding the future financial performance of the particular entity in which the deferred tax asset has been recognised.
(c) Results of jointly controlled operation
There was a change of ownership of the Nigerian joint venture in the Group’s jointly controlled operation in Nigeria. Following this change, the Group and the current Nigerian joint venture partner have been experiencing difficulties in accessing financial information on this jointly controlled operation for the financial years ended 2006 and 2007. Due to the above and based on the latest available unaudited financial information of the jointly controlled operation which showed a loss, the Group has made provision for its potential share of loss estimated at RM1.87 million (USD0.5 million) as at 31 December 2007. Based on communication with the current joint venture partner, the Group does not anticipate incurring losses in excess of the recognised provision. Wah Seong Corporation Berhad Annual Report 2007 86 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
4. PROPERTY, PLANT AND EQUIPMENT
Electrical installations, office equipment, computer software, furniture, fittings, motor Plant, vehicles, Freehold Long term Short term machinery, renovation Capital land and leasehold leasehold tools and and store work-in- Note buildings buildings buildings equipment extension progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2007
Cost
At 1 January (Restated) 29,335 84,999 10,840 327,440 48,138 43,698 544,450 Disposal of subsidiary – – – (2,454) (71) – (2,525) Additions 914 38 63 16,511 9,779 42,051 69,356 Disposals (590) – – (19,160) (6,010) – (25,760) Write-offs – – – (1,063) (2,387) – (3,450) Reclassification 1,445 3,945 – 26,713 1,804 (33,907) – Transfer to investment properties 6 (83) (2,632) – – – (1,144) (3,859) Transfer to non-current assets held for sale 22 – (25,670) – – – – (25,670) Effect of exchange rate changes 60 (123) 88 (2,507) 225 (1,170) (3,427)
At 31 December 31,081 60,557 10,991 345,480 51,478 49,528 549,115
Group
2007
Accumulated depreciation
At 1 January (Restated) 1,605 15,362 4,806 160,505 26,917 – 209,195 Charge for the year 481 3,895 249 23,513 8,577 – 36,715 Disposal of subsidiary – – – (297) (223) – (520) Disposals (379) – – (8,901) (2,389) – (11,669) Write-offs – – – (1,038) (2,094) – (3,132) Transfer to investment properties 6 – (688) – – – – (688) Transfer to non-current assets held for sale 22 – (1,269) – – – – (1,269) Effect of exchange rate changes 3 (183) 5 (818) 483 – (510)
At 31 December 1,710 17,117 5,060 172,964 31,271 – 228,122 87 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
4. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Electrical installations, office equipment, computer software, furniture, fittings, motor Plant, vehicles, Freehold Long term Short term machinery, renovation Capital land and leasehold leasehold tools and and store work-in- Note buildings buildings buildings equipment extension progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2007
Accumulated impairment loss
At 1 January – – – 5,532 – 452 5,984 Transfer to investment properties 6 – – – – – (452) (452) Effect of exchange rate changes – – – (331) – – (331)
At 31 December – – – 5,201 – – 5,201
Net book value at 31 December 29,371 43,440 5,931 167,315 20,207 49,528 315,792
Group
2006
Cost
At 1 January (Audited) 24,415 119,848 48,369 294,855 32,287 37,218 556,992 - Effect on FRS 117 52 – (32,814) (17,741) - - - (50,555) - Reclassification 52 401 8,601 (19,700) 28,914 9,055 (15,077) 12,194
At 1 January (Restated) 24,816 95,635 10,928 323,769 41,342 22,141 518,631 Increase through acquisition of subsidiaries – – – 2,246 58 – 2,304 Additions 19 833 – 16,310 11,848 62,550 91,560 Disposals – (454) – (5,636) (4,446) – (10,536) Write-offs – (634) – (20,427) (651) – (21,712) Reclassification 7,351 1,225 – 30,350 493 (39,419) – Transfer to investment properties 6 (285) – – – – – (285) Transfer to non-current assets held for sale 22 (2,500) (11,232) – (12,017) (139) – (25,888) Effect of exchange rate changes (66) (374) (88) (7,155) (367) (1,574) (9,624)
At 31 December 29,335 84,999 10,840 327,440 48,138 43,698 544,450
Wah Seong Corporation Berhad Annual Report 2007 88 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
4. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Electrical installations, office equipment, computer software, furniture, fittings, motor Plant, vehicles, Freehold Long term Short term machinery, renovation Capital land and leasehold leasehold tools and and store work-in- Note buildings buildings buildings equipment extension progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2006
Accumulated depreciation
At 1 January (Audited) 1,333 8,132 9,437 121,177 14,060 – 154,139 - Effect on FRS 117 52 – (927) (1,905) – – – (2,832) Reclassification 52 223 6,508 (3,011) 44,292 10,090 – 58,102
At 1 January (Restated) 1,556 13,713 4,521 165,469 24,150 – 209,409 Charge for the financial year 229 3,677 287 22,621 6,268 – 33,082 Disposals – (126) – (1,793) (2,918) – (4,837) Write-offs – (101) – (15,813) (525) – (16,439) Reclassification – – – (146) 146 – – Transfer to investment properties 6 (39) – – – – – (39) Transfer to non-current assets held for sales 22 (140) (1,778) – (9,000) (139) – (11,057) Effect of exchange rate changes (1) (23) (2) (833) (65) – (924)
At 31 December 1,605 15,362 4,806 160,505 26,917 – 209,195
Group
2006
Accumulated impairment losses
At 1 January (Audited) – 44 – 6,477 35 – 6,556 Reclassification 52 – (44) – (552) (35) – (631)
At 1 January (Restated) – – – 5,925 – – 5,925 Impairment loss recognised for the financial year – 4,003 – – – 452 4,455 Transfer to non-current asset held for sale 22 – (4,003) – – – – (4,003) Effect of exchange rate changes – – – (393) – – (393)
At 31 December – – – 5,532 – 452 5,984
Net book value at 31 December 27,730 69,637 6,034 161,403 21,221 43,246 329,271 89 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
4. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Office Computer equipment, and furniture and Motor software fittings vehicle Total RM’000 RM’000 RM’000 RM’000
Company 2007 Cost At 1 January 394 370 207 971 Additions 45 47 115 207 Write-offs (2) (17) – (19)
At 31 December 437 400 322 1,159
Accumulated depreciation At 1 January 285 44 106 435 Charge for the financial year 74 69 64 207 Write-offs (1) (13) – (14)
At 31 December 358 100 170 628
Net book value at 31 December 79 300 152 531
Company 2006 Cost At 1 January 332 11 207 550 Additions 68 384 – 452 Disposal – (5) – (5) Write-offs (6) (20) – (26)
At 31 December 394 370 207 971
Accumulated depreciation At 1 January 204 2 65 271 Charge for the financial year 86 66 41 193 Disposal – (4) – (4) Write-offs (5) (20) – (25)
At 31 December 285 44 106 435
Net book value at 31 December 109 326 101 536
Certain freehold properties and leasehold buildings with a total net book value of RM868,000 (2006: RM3,195,000) have been pledged to financial institutions to secure loan facilities granted to the Group.
Included in the property, plant and equipment of the Group are motor vehicles with a total net book value of RM1,009,000 (2006: RM717,000) which are acquired under unexpired hire purchase arrangements.
Wah Seong Corporation Berhad Annual Report 2007 90 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
5. PREPAID LEASE PAYMENTS
Unexpired Unexpired period less period more than than Note 50 years 50 years Total RM’000 RM’000 RM’000
Cost
At 1 January 2006 – – – Effect of adopting FRS 117 52 17,741 32,814 50,555
At 1 January 2006 (restated) 17,741 32,814 50,555 Additions – – –
31 December 2006 / 1 January 2007 17,741 32,814 50,555 Additions – 1,151 1,151
At 31 December 2007 17,741 33,965 51,706
Accumulated amortisation
At 1 January 2006 – – – Effect of adopting FRS 117 52 1,905 927 2,832
At 1 January 2006 (restated) 1,905 927 2,832 Amortisation for the financial year 97 332 429
At 31 December 2006/1 January 2007 2,002 1,259 3,261 Amortisation for the financial year 412 338 750
At 31 December 2007 2,414 1,597 4,011
Carrying amounts
At 31 December 2006/1 January 2007 15,739 31,555 47,294
At 31 December 2007 15,327 32,368 47,695
The title deeds to certain leasehold land stated at a total net book value of RM31,217,000 (2006: RM31,555,000) have yet to be issued by the relevant authorities.
91 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
6. INVESTMENT PROPERTIES
Group Note 2007 2006 RM’000 RM’000
At 1 January 2,899 3,045 Additions 113 – Transfer from property, plant and equipment 4 3,859 285 Disposals – (431)
At 31 December 6,871 2,899
Accumulated depreciation
At 1 January 385 341 Transfer from property, plant and equipment 4 688 39 Charge for the financial year 103 45 Disposals – (40)
At 31 December 1,176 385
Accumulated impairment losses
At 1 January 378 – Charge for the financial year 38 134 378 Reversal during the year 38 (419) – Transfer from property, plant and equipment 4 452 –
At 31 December 545 378
Net book value at 31 December 5,150 2,136
Fair value at 31 December 6,427 2,140
Valuations were based on current prices in an active market for all properties except for certain properties where this information is not available. For these properties, the fair value was estimated by reference to open market value of properties in the vicinity. Wah Seong Corporation Berhad Annual Report 2007 92 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
7. INVESTMENT IN SUBSIDIARIES
Company 2007 2006 RM’000 RM’000
Unquoted shares, at cost 455,750 279,467 Accumulated impairment losses (78,816) –
376,934 279,467
As at 31 December 2007, the Company recognised an impairment loss of RM78,816,000 on the Company’s investment in subsidiaries where the carrying values are lower than the recoverable values.
Details of the subsidiaries are as follows:
Group’s effective interest 2007 2006 Country of % % incorporation Principal activities
Subsidiaries in Oil and Gas segment
Wasco Energy Limited 100 100 Bermuda Investment holding
PPSC Capital (Labuan) Limited 67 67 Federal Investment holding Territory of Labuan, Malaysia
# Wasco Singapore Pte Ltd 100 – Singapore Investment holding and investment in pipeline infrastructure projects/services for the oil and gas industry
WSC Capital (Labuan) Ltd 100 100 Federal Investment holding Territory of Labuan, Malaysia
Wasco Management Services 100 100 Malaysia Provide management support Sdn Bhd services 93 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
7. INVESTMENT IN SUBSIDIARIES (CONT’D)
Group’s effective interest 2007 2006 Country of % % incorporation Principal activities
Subsidiaries in Oil and Gas segment (Cont’d)
Specialised Pipe Coating & Corrosion Protection Services
# Wasco Coatings Limited 100 100 Hong Kong, Investment holding SAR
# Wasco Coatings Denmark ApS 100 – Denmark Undertaking specialized pipe coating and related services
PPSC Industrial Holdings Sdn Bhd 67 67 Malaysia Investment holding and provision of management services
PPSC Industries Sdn Bhd 53 53 Malaysia Provision of pipe coating services
# PPSC (HK) Limited 67 67 Hong Kong, General trading and marketing of SAR coated pipes for oil and gas industry
^ PPSC (Thailand) Limited 67 67 Thailand Dormant
PPSC (Malaysia) Sdn Bhd 67 67 Malaysia Investment holding
PPSC Resources Sdn Bhd 67 67 Malaysia Property holding
PPSC Property Sdn Bhd 77 77 Malaysia Property holding
# Kanssen (Yadong) Pipe Coating 55 55 British Virgin Investment holding and provision Services Limited Islands of pipe coating services
# Camark International Limited 55 55 British Virgin Provision of procurement services Islands
# Good Glory Investments Limited 55 55 British Virgin Dormant Islands
# Ao Jie International Limited 55 55 British Virgin Investment holdings Islands Wah Seong Corporation Berhad Annual Report 2007 94 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
7. INVESTMENT IN SUBSIDIARIES (CONT’D)
Group’s effective interest 2007 2006 Country of % % incorporation Principal activities
Subsidiaries in Oil and Gas segment (Cont’d)
Specialised Pipe Coating & Corrosion Protection Services (Cont’d)
# Kanssen (Yadong) International 55 55 British Virgin Provision of overseas pipe coating Pipe Coating Services Limited Islands services
# Asian Dragon Services Limited 55 55 British Virgin Provision of centralised cash/ Islands banking management to related companies
# China Mine Investments Limited 55 55 British Virgin Investment holding Islands
# Yadong Anti-Corrosion (Int) 55 55 British Virgin Investment holding Company Limited Islands
# Blue Water Overseas 55 55 British Virgin Investment holding Corporation Inc Islands
# Silver Fortune Investments Limited 55 55 British Virgin Investment holding Islands
# Wise Forward Investments Limited 55 55 British Virgin Investment holding Islands
# Equity Empire Investments Limited 55 55 British Virgin Investment holding Islands
# Good Advance International Limited 55 55 British Virgin Investment holding Islands
# Jingzhou Kanssen Yadong 55 55 People’s Provision of pipe coating services Offshore Pipe Coating Republic of Engineering Company Limited China
# P.T. Kanssen Indonesia 55 55 Indonesia General trade and services
# Cangzhou Kanssen Coating 55 55 People’s Provision of pipe coating services Services Company Limited Republic of China 95 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
7. INVESTMENT IN SUBSIDIARIES (CONT’D)
Group’s effective interest 2007 2006 Country of % % incorporation Principal activities
Subsidiaries in Oil and Gas segment (Cont’d)
Specialised Pipe Coating & Corrosion Protection Services (Cont’d)
# Shashi Kanssen (Yadong) 55 55 People’s Provision of pipe coating services Coating Services Company Limited Republic of China
# Kanssen (Yadong) Coating 55 55 People’s Provision of pipe coating services Services (Jingzhou) Company Republic of Limited China
# Sichuan Kanssen (Yadong) 55 55 People’s Provision of pipe coating services Coating Services Company Limited Republic of China
# Kanswin Limited 55 55 British Virgin Dormant Islands
# Jingzhou Kanssen 55 55 People’s Provision of pipe coating services Coating Services Limited Republic of China
* Deepwater Corrosion Services, Inc 51 51 United States Provision of corrosion control of America products and services to the offshore oil and gas industry
* Inter Resources, Inc 51 51 United States Manufacturing cathodic protection of America retrofit systems and vessel cathodic protection systems
* InterResources Europe Limited 51 – United Manufacturing and selling Kingdom corrosion control products and services to the European market
Asiana Emas Sdn Bhd 100 – Malaysia Investment holding Wah Seong Corporation Berhad Annual Report 2007 96 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
7. INVESTMENT IN SUBSIDIARIES (CONT’D)
Group’s effective interest 2007 2006 Country of % % incorporation Principal activities
Subsidiaries in Oil and Gas segment (Cont’d)
Specialised Pipe Coating & Corrosion Protection Services (Cont’d)
Material Performance 72 72 Malaysia Manufacturing, supply and Engineering Sdn Bhd installation of sacrificial anodes, provision of cathodic protection services and equipment, corrosion protection services, special paint coating services and provision of technical training services
MPE Lindung Sdn Bhd 61 61 Malaysia Manufacturing, supply and installation of sacrificial anodes, provision of cathodic protection services and equipment, corrosion protection services and special paint coating
* PT MPE Deepwater 58 – Indonesia Manufacture of sacrificial aluminium and zinc anodes, cathodic protection retrofit systems, pipe support systems and the provision of such related products and services
* PPSC China Ltd (formerly known as PPI International Ltd) 100 100 Hong Kong, Investment holding SAR
* Petro-Pipe Engineering 100 100 Malaysia Provision of technical services Services Sdn Bhd (formerly known as Petro-Pipe Concrete Piles Sdn Bhd)
# Jutasama International Limited 100 100 Hong Kong, Trading and marketing of SAR machineries, equipments and other related products for the oil & gas industry 97 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
7. INVESTMENT IN SUBSIDIARIES (CONT’D)
Group’s effective interest 2007 2006 Country of % % incorporation Principal activities
Subsidiaries in Oil and Gas segment (Cont’d)
EPC, Fabrication and Rental of Gas Compressors and Process Equipments
Wasco Engineering Group Limited 100 100 British Virgin Investment holding Islands
# Gas Services International Limited 100 100 British Virgin Leasing compressors and Islands designing, engineering and fabrication of oil and gas processing and compression systems and equipment
* PT Gas Services Indonesia 100 100 Indonesia Consulting services, rental, repair and maintenance of natural gas industry equipment
# Gas Services International 100 100 Singapore Design, engineering and (S) Pte Ltd fabrication of oil and gas processing and compression systems and equipment
# Gas Services International (Aust) Pty Limited 100 100 Australia Servicing of gas compression plant and machinery and sales of general spare parts
* Mackenzie Hydrocarbons 100 100 Australia Provision of engineering (Australia) Pty Ltd consultancy and fabrication services
** Excel Tradition Limited 100 100 British Virgin Dormant Islands
# Wasco Technologies Pte Ltd 100 100 Singapore Engineering and fabrication of oil and gas system and equipment
Jutasama Sdn Bhd 100 100 Malaysia Contracting of industrial engineering projects Wah Seong Corporation Berhad Annual Report 2007 98 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
7. INVESTMENT IN SUBSIDIARIES (CONT’D)
Group’s effective interest 2007 2006 Country of % % incorporation Principal activities
Subsidiaries in Oil and Gas segment (Cont’d)
EPC, Fabrication and Rental of Gas Compressors and Process Equipments
Jutasama Jaya Sdn Bhd 60 60 Malaysia Trading of materials, labour painting and delivery steel structures
Mackenzie Industries Sdn Bhd 60 60 Malaysia Undertaking of steam boilers and energy system projects
Peakvest Sdn Bhd 100 100 Malaysia Property holding
# Wasco (Australia) Pty Ltd 100 100 Australia Dormant
# Delco Australia Pty Ltd 70 70 Australia Providing turnkey solutions for pipeline and plant projects
*** Thistle Welding Services Pty Ltd 70 70 Australia Dormant
* Delco PNG Ltd 70 70 Australia Dormant
E&P Products and Services
Total Oil Technologies Sdn Bhd 100 100 Malaysia Investment holding and provision of management services
Botco Sdn Bhd 65 65 Malaysia Agent and representative for the supply of equipment and the provision of related technical services to the oil drilling and production industry 99 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
7. INVESTMENT IN SUBSIDIARIES (CONT’D)
Group’s effective interest 2007 2006 Country of % % incorporation Principal activities
Subsidiaries in Oil and Gas segment (Cont’d)
E&P Products and Services (Cont’d)
# WSM Oil & Gas Services Limited 80 80 Hong Kong, Investment holding and provision SAR of management consultancy services including all kinds of products and services related to the infrastructure, oil and gas, water, power and energy related industries
# WSN Investment Limited 100 100 Hong Kong, Provision of engineering SAR consultancy, product and related services to the oil and gas industry
* LTT Oil & Gas Nigeria Limited 100 100 Nigeria Provision of engineering consultancy, product and related services to the oil and gas industry
* Driltools International FZCO 60 60 United Arab Marketing and provision of oil field Emirates and water well supplies and services related to the oil and gas industry
* Driltools Equipment Trading LLC 60 60 United Arab Trading of agricultural and Emirates workshop equipments, accessories and spare parts
* Drilbits International Private Limited 60 60 India Manufacturing and trading of oilfield tools and equipments
# Wah Seong China Limited 80 80 Hong Kong, Investment holding, marketing SAR and provision of all types of services related to the oil and gas industry Wah Seong Corporation Berhad Annual Report 2007 100 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
7. INVESTMENT IN SUBSIDIARIES (CONT’D)
Group’s effective interest 2007 2006 Country of % % incorporation Principal activities
Subsidiaries in Oil and Gas segment (Cont’d)
E&P Products and Services (Cont’d)
* Ashburn International, Inc. 80 80 United States International consulting and of America trading business
* Ashburn International Trade 52 52 People’s International trade, processing (Tianjin) Co. Ltd. Republic of and assembling, storage and China bonded goods and development of high technological products and consultancy services
Subsidiaries in Industrial Services segment
Agro-based Engineering
* PMT Industries Sdn Bhd 100 100 Malaysia Manufacturing and supply of spare parts, equipment and provision of maintenance services for palm oil and other agricultural industries
* Palmillvest Sdn Bhd 100 100 Malaysia Inactive
* PMT Industries (HK) Limited 100 100 Hong Kong, Supply of equipment for power, SAR palm oil and other agricultural industries
* Palmilltech (M) Sdn Bhd 100 100 Malaysia Investment holding
* PMT Agri-Technologies Sdn Bhd – 100 Malaysia Dormant
* PT PMT Industri 80 80 Indonesia Provision of maintenance services to palm oil and other agricultural industries 101 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
7. INVESTMENT IN SUBSIDIARIES (CONT’D)
Group’s effective interest 2007 2006 Country of % % incorporation Principal activities
Subsidiaries in Industrial Services segment (Cont’d)
Agro-based Engineering (Cont’d)
* Phoenix Industries Sdn Bhd 83 83 Malaysia Manufacturing and supply of industrial fans and component parts and provision of other related services Infrastructure / Building Materials
* Petro-Pipe Industries (M) Sdn Bhd 100 100 Malaysia Manufacturing and sales of welded steel pipes and related products
* PPI Industries Sdn Bhd 100 100 Malaysia Manufacturing and sales of welded steel pipes and related products
* Syn Tai Hung Corporation Sdn Bhd 100 100 Malaysia Investment holding and provision of management services
* Syn Tai Hung Trading Sdn Bhd 100 100 Malaysia Trading and distribution of building materials
* STH Sri Bulatan Sdn Bhd 100 100 Malaysia Trading and distribution of building materials
* Fuvi Form Sdn Bhd 100 100 Malaysia Trading and distribution of building materials
Subsidiaries in other segments
* E-Green Technology Sdn Bhd 92 70 Malaysia Undertaking of e-disposal and extraction of precious metals, recycling wastes and providing solution in processing of electronic waste. Wah Seong Corporation Berhad Annual Report 2007 102 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
7. INVESTMENT IN SUBSIDIARIES (CONT’D)
Group’s effective interest 2007 2006 Country of % % incorporation Principal activities
Subsidiaries in other segments (continued)
* Wah Seong Industrial Holdings 100 100 Malaysia Investment and property holding Sdn Bhd and provision of management services
* Sunrise Green Sdn Bhd 100 100 Malaysia Property holding
* Wah Seong Ventures Sdn Bhd 100 100 Malaysia Investment holding
* Perdana Industri Holdings Berhad 100 100 Malaysia Investment holding
* Esteem Chapter Sdn Bhd 100 – Malaysia Investment holding
# Wah Seong International Pte Limited 100 100 Hong Kong, Investment holding SAR
* Audited by a firm other than member firm of PricewaterhouseCoopers International Limited and PricewaterhouseCoopers Malaysia # Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers ** No requirement for statutory audit *** In voluntary liquidation process ^ Dormant subsidiary not audited 103 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
8. INVESTMENT IN ASSOCIATES
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Unquoted shares at cost 18,864 14,041 – 40 Share of post-acquisition results and reserves 2,728 3,693 – –
21,592 17,734 – 40
Group 2007 2006 RM’000 RM’000 (Restated)
Share of net assets of associates 21,592 17,734
The summarised financial information of the associates as at 31 December are as follows:
2007 2006 RM’000 RM’000
Assets and liabilities
Total assets 140,570 44,374
Total liabilities 97,452 5,196
Results
Revenue 31,658 28,479
Profit / (loss) for the financial year 721 (2,129)
Wah Seong Corporation Berhad Annual Report 2007 104 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
8. INVESTMENT IN ASSOCIATES (CONT’D)
Details of the associates are as follows:
Group’s effective Place of interest incorporation 2007 2006 Principal activities % %
Oil and Gas Segment
Hicom Petro-Pipes Sdn Bhd Malaysia 49 49 Manufacturing and distributions of products for the oil and gas and related industries
NC41-LCS Limited Northern – 34 Deregistered Ireland
Flexsteel Pipeline Pty Ltd Australia – 35 Deregistered
TOT Inspection Sdn Bhd Malaysia 45 70 Provision of non-destructive testing, general inspection and site supervision services
Petro Pipe (Sabah) Sdn Bhd Malaysia 40 40 Manufacture and supply of spiral welded pipes for the oil and gas industry
Industrial Services Segment
Spirolite (M) Sdn Bhd Malaysia 49 49 Manufacturing and trading of spiral pipes, straight pipes, tubes, tanks and containers
Advanced Piping Systems Malaysia 49 49 Manufacturing and trading of Sdn Bhd straight pipes and fittings
Spirolite Marketing Sdn Bhd Malaysia 49 49 Trading of spiral pipes, straight pipes, tubes, tanks and containers
Syarikat Beka Sdn Bhd Malaysia 48 48 Sales of hardware products
Vintage Consolidated Sdn Bhd Malaysia 25 25 Trading in steel bars and other building materials
Other Segment
Wah Seong Boustead Co. Ltd Myanmar 50 50 Property development, trading and provision of auxiliary services
105 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
9. INVESTMENT IN JOINTLY CONTROLLED ENTITIES
Group 2007 2006 RM’000 RM’000 (Restated)
Share of net assets of jointly controlled entities 34,918 41,855
The summarised financial information of the jointly controlled entities as at 31 December are as follows:
2007 2006 RM’000 RM’000
Assets and liabilities
Total assets 99,515 102,616
Total liabilities 35,273 22,328
Results
Revenue 70,341 37,312
(Loss)/Profit for the financial year (15,195) 3,100 Wah Seong Corporation Berhad Annual Report 2007 106 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
9. INVESTMENT IN JOINTLY CONTROLLED ENTITIES (Contd’)
The details of the jointly controlled entities are as follows:
Group’s effective Place of interest incorporation 2007 2006 Principal activities % %
Nacap Drilling (China) Hong Kong, 40 40 Dormant Co. Limited SAR
Simfoni Temasek Sdn Bhd Malaysia – 35 Investment holding and provision of management and technical expertise in servicing the oil and gas infrastructure industry
Ashburn (Huanghua) People’s Republic 33 33 Dormant Hardware Products Co Ltd of China
Socotherm PPSC Ningbo People’s Republic 34 34 Marketing and provision of pipe (Daxie) Pipe Coating of China coating services to the oil and Company Limited gas industry
Socotherm (Shashi) People’s Republic 34 34 Provision of pipe coating services Pipe Coating Co. Ltd of China and overseas investment holding
PetroChina Socotherm People’s Republic 25 25 Provision of pipe coating services Jingzhou Coating Technology of China Co. Ltd
Sichuan Chuanshi Kanssen People’s Republic 28 28 Provision of pipe coating services (Yadong) Coating Services of China Company Limited
Shaanxi Yadong Anti-Corrosion People’s Republic 30 30 Provision of pipe coating Company Limited of China services
Pesanan Dinamik Sdn Bhd Malaysia 51 51 Mining of iron ore
Arabian Yadong Coating Saudi Arabia 27 27 Marketing and provision of pipe Company Limited coating services
WD International Limited Hong Kong, 50 – Dormant SAR
107 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
10. OTHER INVESTMENTS
Group Note 2007 2006 RM’000 RM’000
Shares quoted in Malaysia, at cost 1,574 2,139 Allowance for diminution in value (1,121) (493)
51 453 1,646 ICULS quoted in Malaysia, at cost – 9 Allowance for diminution in value – (5)
51 – 4
Unquoted shares, at cost 1,056 1,123 Allowance for diminution in value (6) (6)
1,050 1,117
51 1,503 2,767
Market value: - quoted shares 51 534 1,868 - quoted ICULS 51 – 4
11. GOODWILL
Group 2007 2006 RM’000 RM’000 (Restated)
Cost
At 1 January 181,559 183,273 Reclassification – 15,096
At 1 January (Restated) 181,559 198,369 Acquisition of new subsidiaries 285 815 Acquisition of additional shares in existing subsidiaries 837 16,281 Disposal of shares in an existing subsidiary (815) – Cost reversal arising from realisation of profit guarantee given by vendors of subsidiaries acquired in previous financial years – (25,215) Balance consideration paid to vendor of subsidiary upon achievement of profit guarantee 564 – Effect of exchange rate changes (7,273) (8,691)
At 31 December 175,157 181,559
Wah Seong Corporation Berhad Annual Report 2007 108 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
11. GOODWILL (CONT’D)
Group 2007 2006 RM’000 RM’000 (Restated)
Accumulated impairment loss
At 1 January 60,687 46,706 Impairment loss recognised for the financial year 468 13,981
At 31 December 61,155 60,687
Net book value at 31 December 114,002 120,872
Impairment testing of goodwill
Goodwill acquired in business combinations have been allocated to the Group’s cash generating units (“CGU”) identified according to business segments as follows:
2007 2006 RM’000 RM’000
Oil and gas segment - Specialised Pipe Coating and Corrosion Protection Services (“CGU A”) 59,416 60,848 - EPC, Fabrication and Rental of Gas Compressors and Process Equipment (“CGU B”) 43,302 45,847 - E&P Products and Services (“CGU C”) 8,348 9,272 Others (individually not material) 2,936 4,905
114,002 120,872
The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use pre–tax cash flow projections based on financial budgets approved by management covering a three years period.
Value in use was determined by discounting the future cash flows generated from the cash-generating units and was based on the following key assumptions:
CGU A CGU B CGU C
Growth rate 5% - 18.2% 12% - 16% 9.5% - 15% Discount rate 10% - 13.4% 10.6% 6% - 10%
The following describes each key assumption on which the management has based its cash flow projections to undertake impairment testing for goodwill:
(i) Overall assumption
There will be no material changes in the principals activities of the Group.
(ii) Growth rate
The growth rate used to extrapolate the cash flows is based on the respective business plans.
(iii) Discount rate
The discount rate used reflect the specific risks relating to the relevant CGU as shown above.
109 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
12. INTANGIBLE ASSETS
Technical Intellectual Group Knowhow property 2007 RM’000 RM’000 RM’000
2007
Cost
At 1 January 4,377 – 4,377 Addition during the financial year – 2,792 2,792 Effect of exchange rate changes 111 – 111
At 31 December 4,488 2,792 7,280
Accumulated amortisation
At 1 January 671 – 671 Amortisation for the financial year 436 140 576 Effect of exchange rate changes 29 – 29
At 31 December 1,136 140 1,276
Net book value at 31 December 3,352 2,652 6,004
2006 (Restated)
Cost
At 1 January 4,537 – 4,537 Effect of exchange rate changes (160) – (160)
At 31 December 4,377 – 4,377
Accumulated amortisation
At 1 January 249 – 249 Amortisation for the financial year 428 – 428 Effect of exchange rate changes (6) – (6)
At 31 December 671 – 671
Net book value at 31 December 3,706 – 3,706
Wah Seong Corporation Berhad Annual Report 2007 110 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
13. DEFERRED TAX ASSETS
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
At 1 January 5,529 4,759 405 266
Originating/(reversal) during the financial year: - Unused tax losses 289 (15) – – - Unabsorbed capital allowance (3,652) – – – - Property, plant and equipment 3,708 (379) (46) (9) - Inventory allowance 221 42 – - Provisions and accruals 1,418 1,125 170 148 1,984 773 124 139 Transfer from deferred taxation liabilities (41) – – – Effect of exchange rate changes (9) (3) – –
At 31 December 7,463 5,529 529 405
The deferred tax assets recognised in the financial statements are as follows:
Tax effects of deductible/(taxable) temporary differences: - Unused tax losses 3,311 2,918 – – - Unabsorbed capital allowances – 3,848 – – - Allowance for doubtful debts 700 964 – – - Property, plant and equipment (863) (3,877) (76) (30) - Inventory allowance 142 – – – - Provisions and accruals 4,173 1,676 605 435
7,463 5,529 529 405
At 31 December 2007, the Group did not recognise deferred tax assets arising from the following temporary differences of certain subsidiaries as it is not probable that future taxable profit will be available against which the deferred tax assets can be utilised.
Group 2007 2006 RM’000 RM’000
Deductible/(Taxable) temporary differences on - Unused tax losses 28,246 42,063 - Unabsorbed capital allowances 483 6,107 - Others – 498
28,729 48,668
111 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
14. INVENTORIES
Group 2007 2006 RM’000 RM’000 (Restated)
At cost:
Raw materials 63,606 80,245 Work-in-progress 37,533 29,580 Manufactured goods/trading goods 63,077 80,195 Consumables 9,931 11,629 Goods-in-transit 18,778 20,142
192,925 221,791
At net realisable value:
Raw materials 945 1,704 Manufactured goods 209 966 Building materials 1,851 2,149 Consumables – 149
3,005 4,968
195,930 226,759
15. AMOUNTS DUE FROM/TO CUSTOMERS ON CONTRACTS
Group 2007 2006 RM’000 RM’000 (Restated)
Cost of contracts 484,545 447,934 Attributable profits recognised to date 90,725 56,240
575,270 504,174 Less: Progress billings (615,853) (550,980)
(40,583) (46,806)
Represented by:
Amounts due from customers 60,073 32,421 Amounts due to customers (100,656) (79,227)
(40,583) (46,806)
Wah Seong Corporation Berhad Annual Report 2007 112 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
16. TRADE AND OTHER RECEIVABLES
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Gross trade receivables 452,107 397,726 – – Less: Allowance for doubtful debts (24,404) (28,882) – –
427,703 368,844 – –
Other receivables, deposits and prepayments 126,130 70,589 919 189 Less: Allowance for doubtful debts (621) (50) (293) –
125,509 70,539 626 189
Total net receivables 553,212 439,383 626 189
The currency exposure profile of the trade and other receivables, deposits and prepayments is as follows:
Gross trade receivables
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
- RM 215,272 157,470 – – - USD 186,073 177,812 – – - Dirham (“AED”) 477 697 – – - China Renminbi (“RMB”) 28,682 38,285 – – - Japanese Yen (“JPY”) 4,275 1,615 – – - Singapore Dollar (“SGD”) 10,805 5,202 – – - Euro (“EURO”) – 149 – – - Australian Dollar (“AUD”) 2,555 13,416 – – - Indian Rupee (“INR”) 3,968 3,080 – –
452,107 397,726 – – 113 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
16. TRADE AND OTHER RECEIVABLES (CON’D)
The currency exposure profile of the trade and other receivables, deposits and prepayments is as follows: (Cont’d)
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Other receivables, deposits and prepayments
- RM 77,656 28,852 919 189 - USD 26,551 17,067 – – - EURO 50 – – – - RMB 7,406 5,686 – – - HKD (“ Hong Kong Dollar”) 103 4,440 – – - AED 215 2,067 – – - JPY 2,333 7 – – - IDR (“Indonesian Rupiah”) 56 21 – – - INR 5,699 5,819 – – - SGD 1,008 1,892 – – - AUD 5,053 4,738 – –
126,130 70,589 919 189
Credit terms of trade receivables range from 30 to 90 days (2006: 30 to 90 days).
17. AMOUNTS OWING BY/TO SUBSIDIARIES
The amounts owing by subsidiaries are analysed as follows:
Company 2007 2006 RM’000 RM’000
Interest bearing loans (unsecured) 56,707 63,309 Interest free advances (unsecured) 235,604 202,531
292,311 265,840 Less: Allowance for doubtful debts (64,427) (64,427)
227,884 201,413
The interest bearing loans bear interest ranging from 2.42% to 7.05% (2006: 2.42% to 7.05%) per annum. The loans and advances are payable on demand. Wah Seong Corporation Berhad Annual Report 2007 114 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
17. AMOUNTS OWING BY/TO SUBSIDIARIES (CONT’D)
The currency exposure profile of the amounts owing by subsidiaries are as follows:
Company 2007 2006 RM’000 RM’000
- RM 166,889 200,446 - USD 60,995 967
227,884 201,413
The amounts owing to subsidiaries are analysed as follows:
Interest bearing loans (unsecured) 6,840 1,000 Interest-free advances (unsecured) 10,834 29,459
17,674 30,459
The interest bearing loans bear interest at between 3.14% and 4.59% (2006: 4.98%) per annum. The loans and advances are payable on demand.
The currency exposure profile of the amounts owing to subsidiaries are as follows:
Company 2007 2006 RM’000 RM’000
- RM 12,784 29,619 - USD 4,890 840
17,674 30,459
115 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
18. AMOUNTS OWING BY/TO ASSOCIATES
The amounts owing by associates are analysed as follows:
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Trade accounts 36,552 – – – Advances 2,620 2,927 – 3
39,172 2,927 – 3
The currency exposure profile of the amounts owing by associates are as follows:
- RM 36,713 3 – 3 - HKD – 426 – – - USD 2,459 2,498 – –
39,172 2,927 – 3
The trade accounts are unsecured, interest free and payable within the normal credit period. The advances are unsecured, interest free and payable on demand.
The amounts owing to associates are analysed as follows:
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Trade accounts – 430 – – Advances 20 15 – –
20 445 – –
The currency exposure profile of the amounts owing by associates are as follows:
- RM 20 429 – – - USD – 16 – –
20 445 – –
The trade accounts are unsecured, interest free and payable within the normal credit period. The advances are unsecured, interest free and payable on demand.
Wah Seong Corporation Berhad Annual Report 2007 116 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
19. AMOUNTS OWING BY JOINTLY CONTROLLED ENTITIES
The amounts owing by jointly controlled entities are analysed as follows:
Group 2007 2006 RM’000 RM’000 (Restated)
Trade account 80 276 Advances 5,682 2,734
5,762 3,010
The currency exposure profile of the amounts owing by the jointly controlled entities are as follows:
RM 136 2,196 USD 448 5 RMB 4,071 809 HKD 1,107 –
5,762 3,010
The trade account is unsecured, interest free and payable within the normal credit period. The advances are unsecured, interest-free and payable on demand.
The amounts owing to jointly controlled entities are analysed as follows:
Group 2007 2006 RM’000 RM’000 (Restated)
Trade account – 143 Advances 444 13,955
444 14,098
The currency exposure profile of the amounts owing to the jointly controlled entities are as follows:
RM – 143 RMB 444 13,955
444 14,098
The trade account is unsecured, interest free and payable within the normal credit period. The advances are unsecured, interest-free and payable on demand.
117 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
20. TIME DEPOSITS
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Time deposits placed with - licensed banks in Malaysia 23,605 14,887 14,947 3,275 - foreign banks 4,125 4,235 – –
27,730 19,122 14,947 3,275
The currency exposure profile of the time deposits is as follows:
- RM 15,197 14,276 6,538 3,275 - USD 6,251 2,805 3,839 – - EURO 4,570 – 4,570 – - HKD 1,712 2,041 – –
27,730 19,122 14,947 3,275
Included in the deposits with licensed banks in foreign entity of the Group is an amount of RM3,756,000 (2006: RM3,842,000) pledged for bank credit facilities granted to the subsidiaries (see Note 35).
The effective interest rate of time deposits range between 2.40% and 5.75% per annum (2006: 2.30% and 4.31% per annum) and the time deposits have maturity periods between 1 to 12 months.
21. CASH AND BANK BALANCES
The currency exposure profile of the cash and bank balances is as follows:
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
- RM 19,872 16,196 6,640 131 - USD 54,912 33,472 1,994 81 - HKD 116 637 – – - RMB 3,295 5,223 – – - AED 1,237 74 – – - JPY 1,142 1,500 – – - EURO 2,558 931 4 – - INR 1,081 486 – – - AUD 2,062 1,126 28 – - SGD 2,423 1,379 49 – - New Taiwan Dollar 673 8,317 – – - GBP (“Pound”) 133 – – – - IDR 75 266 – –
89,579 69,607 8,715 212
Cash and bank balances are deposits at call with banks and earn no interest.
Wah Seong Corporation Berhad Annual Report 2007 118 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
22. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
On 12 October 2007, the Company had entered into a conditional sale and purchase agreement with OSK Trustees Berhad, the Trustee for Axis Real Estate Investment Trust (“the Purchaser”), to dispose its leasehold industrial land held under PN 29932 for Lot 84 Seksyen 13 (formerly H.S.(D) 97253, P.T. 3), Bandar Petaling Jaya, Daerah Petaling, Negeri Selangor, measuring approximately 4,615 sq metres (49,675 sq. ft.) together with a five (5)-storey office cum flatted factory, with mezzanine floor and a two (2)-level basement car park erected thereon containing an approximate lettable area of 104,903 sq. ft. and total gross area of 158,635 sq. ft. including all extensions, renovations, modifications and variations in respect thereof, for a total cash consideration of RM37,000,000 (“Proposed Disposal”). The Proposed Disposal has yet to be completed at year end.
The assets held for sale comprise the following:
Group 2007 2006 RM’000 RM’000 (Restated)
At cost - Leasehold land and building 25,670 11,232 - Plant and machinery – 12,156 - Freehold land and buildings – 2,500
25,670 25,888 Less: Accumulated depreciation (1,269) (11,057) Less: Loss on measurement to fair value less cost to sell – (4,003)
Carrying value/Fair value less cost to sell 24,401 10,828
In the previous financial year, a subsidiary, Petro-Pipe Concrete Piles Sdn Bhd entered into a conditional Agreement for Sale of Assets with Concrete Engineering Products Berhad to dispose of certain property, plant and equipment for a consideration of RM9,000,000. Another subsidiary, Material Performance Engineering Sdn Bhd has entered into a sale and purchase agreement dated 14 March 2007 to dispose of its property, plant and equipment for a consideration of RM2,500,000. Both transactions are completed during the financial year.
23. SHARE CAPITAL
Group and Company 2007 2006 Number Nominal Number Nominal of shares value of shares value ’000 RM’000 ’000 RM’000
Authorised Ordinary shares of RM0.50 each 2,000,000 1,000,000 2,000,000 1,000,000 119 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
23. SHARE CAPITAL (CONT’D)
Group and Company 2007 2006 Number Nominal Number Nominal of shares value of shares value ’000 RM’000 ’000 RM’000
Issued and fully paid Ordinary shares of RM0.50 each At 1 January 395,560 197,780 379,550 189,775 Issue of shares - conversion of ICULS 20,040 10,020 9,296 4,648 - exercise of ESOS 13,636 6,818 6,714 3,357
At 31 December 429,236 214,618 395,560 197,780
The salient features of the ESOS are as follows:
(i) The maximum number of new ordinary shares that may be made available under the ESOS shall not exceed an aggregate of ten (10) percent of the issued and paid-up ordinary share capital of the Company at any point in time during the existence of the ESOS.
(ii) The ESOS shall be open for participation to eligible employees who are employed by and are on the payroll of a company other than an inactive company within the Group as at the date of offer. The selection of any employee for participation in the ESOS shall be at the discretion of the Option Committee.
(iii) No option shall be granted for less than 100 new ordinary shares. The maximum number of options granted to executive directors and senior management of the Group shall not exceed 50% of the total number of options available under the ESOS; and the number of options granted to any individual director or employee who, either singly or collectively through his/her associates (as defined in the Companies Act, 1965), holds 20% or more in the issued and paid-up share capital of the Company, shall not exceed 10% of the total number of options available under the ESOS.
(iv) The option price shall be based on the weighted average of market price (calculated as the average of the highest and lowest prices transacted on the Bursa Malaysia (“BM”) of the Company’s shares as shown on the Daily Official List issued by the BM for the five (5) market days immediately preceding the date of offer with an allowance for a discount, if any, of not more than 10% therefrom at the discretion of the Option Committee), or the par value of each ordinary share of the Company, whichever is higher.
(v) The ESOS shall continue to be in force for a duration of up to five (5) years (or such further extension as approved by authorities) commencing from the date of lodgement (28 November 2003). Upon the expiry of the ESOS period, all unexercised ESOS shall automatically lapse and have no further effect unless the same is extended for another five (5) years or such other period as the authorities may approve.
(vi) The new ordinary shares to be allotted upon any exercise of options under the ESOS shall, upon allotment and issue, rank pari passu in all respects with the existing ordinary shares. However, the new ordinary shares so issued shall not be entitled to any dividend or other distributions declared, made or paid prior to the date of allotment of such shares. Wah Seong Corporation Berhad Annual Report 2007 120 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
23. SHARE CAPITAL (CONT’D)
(vii) An offer of option (“offer”) shall be valid for a period of 14 days from the date of offer or such longer period as may be determined or extended by the Option Committee on a case to case basis at its discretion. An offer shall be accepted within the prescribed period by the eligible employee to whom the offer is made by written notice of such acceptance accompanied by the relevant payment to the Company. If the offer is not accepted in the manner aforesaid, such offer shall upon the expiry of the prescribed period automatically lapse and shall be null and void and be of no effect and such options may, at the discretion of the Option Committee, be re-offered to other eligible employees.
At the time of the acceptance of the offer, the eligible employee must elect to participate or not to participate in the arrangement under which Wah Seong Trading Sdn Bhd (“WST”) will allocate certain quantum of WST’s shares in the Company to facilitate the immediate selling by the ESOS holder who has exercised his options in accordance with the Selling Flexibility terms.
If the eligible employee had elected to participate, then all options shall be exercised in the manner prescribed in the Selling Flexibility Terms.
(viii) The ESOS shall be administered by the Option Committee in such manner as it shall in its discretion deem fit and with such powers and duties as conferred upon it by the Board of Directors.
(ix) In the event of cessation of employment with the Group prior to the full exercise of the options, the balance of the options shall cease to be valid unless written approval of the Option Committee is obtained. The Option Committee, at its discretion, may re-offer the options to other eligible employees.
The movements during the year in options granted under the ESOS were as follows:
Year ended 31.12.2007
Vested Date option Date of Exercise At Lapsed/ At as at granted expiry price 1.1.2007 Granted Rejected Exercised 31.12.2007 31.12.2007 RM
15.12.2003* 27.11.2008 2.07 17,492,400 – (64,000) (13,031,563) 4,396,837 4,396,837 07.12.2004* 27.11.2008 2.08 2,985,000 – (92,600) (860,400) 2,032,000 2,032,000 25.07.2006 27.11.2008 2.31 2,300,000 – – – 2,300,000 2,300,000
22,777,400 – (156,600) (13,891,963) 8,728,837 8,728,837
Weighted average share price for options exercised during the financial year (RM) 3.18
121 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
23. SHARE CAPITAL (CONT’D)
Year ended 31.12.2006
Vested Date option Date of Exercise At Lapsed/ At as at granted expiry price 1.1.2006 Granted Rejected Exercised 31.12.2006 31.12.2006 RM
15.12.2003* 27.11.2008 2.07 25,612,000 – (1,703,000) (6,416,600) 17,492,400 17,492,400 07.12.2004* 27.11.2008 2.08 3,516,800 – (234,000) (297,800) 2,985,000 2,985,000 25.07.2006 27.11.2008 2.31 – 2,300,000 – – 2,300,000 690,000
29,128,800 2,300,000 (1,937,000) (6,714,400) 22,777,400 21,167,400
Weighted average share price for options exercised during the financial year (RM) 2.18
31.12.2007 31.12.2006 ’000 ’000
Number of options vested during the financial year 1,610 690
* The Group has taken advantage of the transitional provisions of FRS 2 “Share-based Payment” in respect of equity instruments granted after 31 December 2004 and not vested as at 1 January 2006, and not recognised any expense in respect of these instruments.
During the previous financial year, the fair value of share options granted is estimated as at the grant date using the black-scholes model, taking into account the terms and conditions upon which the options were granted. The fair value of the share options measured at grant date and the inputs to the model used are:
11.07.2006 RM
Fair value of share option granted under ESOS (RM) 0.49
Weighted average share price (RM) RM2.32 Weighted average exercise price (RM) RM2.31 Expected volatility (%) 33.58% Expected Option life (years) 2.4 years Expected dividend yields (%) 2.59% Risk-free interest rate (based on Malaysian government bonds) (%) 4.35%
Wah Seong Corporation Berhad Annual Report 2007 122 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
23. SHARE CAPITAL (CONT’D)
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, and which may differ from the actual volatility.
There are no other features of the option grant were incorporated into the measurement of fair value.
The fair value of the options granted in the previous financial had been recognized in the income statement of RM683,000 (2006: RM297,000) when the ESOS vested.
24. SHARE PREMIUM
Group and Company 2007 2006 RM’000 RM’000
At 1 January 58,002 47,477 Arising from shares issued - exercise of ESOS 21,415 10,544 Less: Transaction costs – (19)
At 31 December 79,417 58,002
25. TREASURY SHARES
During the financial year, the Company repurchased 1,125,300 (2006: 394,300) of its issued ordinary shares from the open market at prices ranging from RM2.16 to RM3.86 (2006: RM2.11 to RM2.14) per share. The total consideration paid for the repurchased shares was RM3,004,400 (2006: RM842,300), comprising consideration paid amounting to RM2,987,300 (2006: RM837,200) and transaction costs of RM17,100 (2006: RM5,100). The repurchase shares were financed by internally generated funds. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.
Of the total 429,235,885 fully paid ordinary shares in issue as at 31 December 2007, 1,519,600 are held as treasury shares by the Company. As at 31 December 2007, the number of outstanding ordinary shares in issue net of treasury shares is 427,716,285 ordinary shares of RM0.50 each.
26. IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (“ICULS”)
Group and Company 2007 2006 RM’000 RM’000
At 1 January 64,061 68,709 Converted during the year (10,020) (4,648)
At 31 December 54,041 64,061 123 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
26. IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (“ICULS”) (CONT’D)
The ICULS represent the unconverted portion of the original RM89,499,999 nominal value issued and allotted in 2002 at 100% of the nominal value.
The ICULS are in registered form and constituted by a Trust Deed dated 9 January 2001 and a Supplemental Trust Deed dated 16 May 2002. The ICULS have a tenure of ten years from the date of issue and will not be redeemable in cash. Unless previously converted, all outstanding ICULS will be mandatorily converted by the Company into new ordinary shares at the conversion price applicable on the maturity date.
The ICULS are convertible into fully paid ordinary shares of RM0.50 each at any time during the tenure of the ICULS from 21 May 2002 to the maturity date on 20 May 2012, at the rate of RM1.00 nominal amount of ICULS for two fully paid ordinary shares of RM0.50 each in the Company.
Upon conversion of the ICULS into new ordinary shares, such shares would rank pari passu in all material respects with the existing ordinary shares of the Company in issue at the date of allotment of the new ordinary shares except that the newly converted ordinary shares shall not be entitled to any rights, allotments or dividends, if the dividend entitlement date is on or before the relevant conversion date.
The interest on the ICULS at the rate of 3% per annum is payable semi-annually in arrears on 30 June and 31 December commencing 21 May 2002.
The Company has not classified the ICULS into liability and equity components separately as permitted under the transitional provisions of FRS 132, “Financial Instruments: Disclosure and Presentation” in respect of financial instruments issued before 1 January 2003.
27. REDEEMABLE PREFERENCE SHARES
Group 2007 2006 Number Nominal Number Nominal of shares value of shares value RM’000 RM’000 RM’000 RM’000
Authorised Redeemable preference shares A of RM0.10 each (“RPS A”) 36,000 360 36,000 360
Redeemable preference shares B of RM0.10 each (“RPS B”) 143,197 1,432 143,197 1,432
179,197 1,792 179,197 1,792
Issued and fully paid RPS A – – 36,000 360 RPS B – – 143,197 1,432
– – 179,197 1,792 Wah Seong Corporation Berhad Annual Report 2007 124 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
27. REDEEMABLE PREFERENCE SHARES (CONT’D)
The RPS A and RPS B (collectively “the RPS”) were issued at par on 25 November 2002 by Perdana Industri Holdings Berhad (“PIHB”), a subsidiary, to its creditors pursuant to a restructuring scheme.
The main features of the RPS are as follows:
(i) The ultimate issue size of the RPS is 179,197,000 shares.
(ii) The purpose of the RPS is for the settlement of indebtedness to all creditors of PIHB (except for statutory creditors).
(iii) The RPS will mature on 24 November 2007.
(iv) The RPS A is redeemable on or before the maturity date at a premium of RM0.99 for each RPS A out of a RPS A redemption reserve account to be created from the recovery of a legal claim for RM36 million by PIHB against a third party. In the event that there is insufficient balance in the RPS A redemption reserve account, the unredeemed portion of the RPS A will be cancelled.
(v) The RPS B is redeemable on maturity (subject to a conditional partial redemption 3 years from its issue date) at a premium of RM0.99 for each RPS B out of a RPS B redemption reserve account to be created from the recovery of various legal claims (other than that referred to in (iv) above) totalling approximately RM97 million by PIHB against various third parties, and proceeds from the realisation of existing assets of PIHB. In the event that there is insufficient balance in the RPS B redemption reserve account, the unredeemed portion of the RPS B will be cancelled.
(vi) The RPS bears no dividend.
(vii) The registered holders of the RPS do not have the right to vote at any annual general meeting of PIHB, unless the meeting is convened for the purpose of reducing the capital, or the winding-up of PIHB, or where the proposition to be submitted to the meeting directly affects their rights and privileges.
The RPS has matured on 24 November 2007 and has been cancelled.
28. ISLAMIC NOTES
Group and Company 2007 2006 RM’000 RM’000
Unsecured
6.2% Medium Term Notes 50,000 50,000 6.9% Medium Term Notes 50,000 50,000
100,000 100,000 Unamortised issue cost: At 1 January (334) (452) Amortise during the financial year 118 118
At 31 December (216) (334)
99,784 99,666
The Medium Term Notes were issued under a Facility Agreement entered into by the Company for the issue of up to RM200 million in nominal value of Islamic Commercial Papers and Medium Term Notes (collectively known as “the Islamic Notes”) based on the financing principles of Murabahah or Ijarah.
125 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
28. ISLAMIC NOTES (CONT’D)
The main features of the Islamic Notes are as follows:
1) The 6.2% Medium Term Notes 2005 / 2009 is unsecured, carries a profit rate of 6.2% per annum payable semi annually and is repayable in full on 9 July 2009.
2) The 6.9% Medium Term Notes 2005 / 2009 is unsecured. Carries a profit rate of 6.9% per annum payable semi annually and is repayable in dull on 9 July 2011.
The Islamic Notes are all denominated in Ringgit Malaysia.
29. TERM LOANS
Group 2007 2006 RM’000 RM’000
Current: Secured 173 2,582 Unsecured 20,351 17,071
20,524 19,653
Non-current: Secured 144 339 Unsecured 67,778 90,525
67,922 90,864
88,446 110,517
Payable within 1 year 20,524 19,653
Payable between 1 and 5 years 60,164 66,076 Payable after 5 years 7,758 24,788
Payable after 1 year (included in non-current liabilities) 67,922 90,864
88,446 110,517
The currency exposure profile of term loans is as follows:
RM 1,400 7,651 USD 87,046 100,447 HKD – 2,419
88,446 110,517
The secured loans above are secured over certain property, plant and equipment of the Group as indicated in Note 4 above.
Wah Seong Corporation Berhad Annual Report 2007 126 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
29. TERM LOANS (CONTINUED)
The net exposure of term loan to interest rate cash flow risk and the periods in which the borrowings mature or reprice are as follows:
At 31 December 2007
Effective Fixed interest rate Floating interest rate interest rate Total as at carrying < 1 1-5 > 5 < 1 1-5 31.12.2007 amount year years years year years Currency % p.a RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Secured USD 8.25 317 173 144 – – –
Unsecured USD 4.90 - 6.30 86,729 16,297 59,628 7,758 3,046 –
RM 4.37 – 4.82 1,400 – – – 1,008 392
88,446 16,470 59,772 7,758 4,054 392
At 31 December 2006
Effective Fixed interest rate Floating interest rate interest rate Total as at carrying < 1 1-5 > 5 < 1 1-5 31.12.2006 amount year years years year years Currency % p.a RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Secured USD 8.25 502 163 339 – – –
HKD 7.24 2,419 2,419 – – – –
Unsecured USD 4.90 - 8.96 99,945 10,810 64,347 24,788 – –
RM 4.37 - 4.82 7,651 – – – 6,261 1,390
110,517 13,392 64,686 24,788 6,261 1,390
127 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
30. HIRE PURCHASE LIABILITIES
Group 2007 2006 RM’000 RM’000
Minimum payments: - Payable within 1 year 445 1,142 - Payable between 1 and 5 years 524 756 - Payable after 5 years – 68
969 1,966 Less: Future finance charges (129) (173)
Present value of liabilities 840 1,793
Present value of liabilities: - Payable within 1 year 380 1,044 - Payable between 1 and 5 years (included in non-current liabilities) 460 686 - Payable after 5 years – 63
840 1,793
The currency exposure profile of hire purchase liabilities is as follow:
RM 62 147 IDR 5 39 AUD 496 1,607 Nigeria Nira 277 –
840 1,793
At 31 December 2007, the effective interest rates of the hire purchase liabilities are between 2.70% and 17.00% (2006: 4.40 % and 8.30 %).
31. DEFERRED TAX LIABILITIES
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000
At 1 January 11,925 12,640 – – Disposal of subsidiaries (137) – – – (Reversal)/Originating during the year: - Unabsorbed capital allowance – (9) – – - Property, plant and equipment (1,406) (690) – – - Provisions and accruals (1,661) 284 – –
(3,067) (415) – – Transfer to deferred tax assets (41) – – – Effect of exchange rate changes 16 (300) – –
At 31 December 8,696 11,925 – –
Wah Seong Corporation Berhad Annual Report 2007 128 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
31. DEFERRED TAX LIABILITIES (CONT’D)
The deferred tax liabilities recognised in the financial statements were as follows:
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000
Tax effects of: - allowance for doubtful debts (60) (1,206) – – - surplus arising from fair value adjustment to leasehold properties of subsidiaries acquired 4,474 5,203 – – - excess of capital allowances over accumulated depreciation on property, plant and equipment 6,883 7,579 – – - accrued revenue (1,865) – – – - other temporary differences (736) 349 – –
8,696 11,925 – –
32. PURCHASE CONSIDERATION PAYABLE
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000
Outstanding purchase consideration payable in respect of acquisition of certain subsidiaries 6,959 35,479 6,959 12,527
Included under current liabilities (see Note 34) 6,959 16,161 6,959 5,568 Included under non current liabilities – 19,318 – 6,959
6,959 35,479 6,959 12,527
Included in the purchase consideration of the Group amounting to RM nil (2006: RM22,952,000) is an amount payable to the vendor of a subsidiary by way of promissory notes in three annual payments and three consecutive annual payments. The amount bears a fixed interest rate at 3.5% (2006: 3.5%) per annum. The amount has been fully settled during the financial year.
Included in the purchase consideration of the Group and the Company amounting to RM6,959,000 (2006: RM12,527,000) are amount payable to the vendor by way of four semi-annual payments commencing from March 2007 which is interest free. 129 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
33. PROVISION FOR WARRANTIES
Group 2007 2006 RM’000 RM’000
At 1 January 6,004 8,477 Additions 14,145 7,051 Utilisation (1,069) (1,918) Unused provision reversed during the year (3,734) (7,298) Effect of exchange rate changes (140) (308)
At 31 December 15,206 6,004
Included under current liabilities 13,945 5,687 Included under non current liabilities 1,261 317
15,206 6,004
The Group recognises the estimated liability to repair or replace products when the underlying products or services are sold. The provision is calculated based on historical warranty data and weighting of all possible outcome against their associated probabilities.
34. TRADE AND OTHER PAYABLES
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Trade payables 161,831 121,527 – – Purchase consideration payable (see Note 32) 6,959 16,161 6,959 5,568 Other payables and accruals 170,150 133,448 7,804 5,830
338,940 271,136 14,763 11,398
The currency exposure profile of trade and other payables is as follows:
Trade payables - RM 70,298 63,116 – – - USD 53,680 36,928 – – - RMB 6,335 1,769 – – - AED 1,714 2,562 – – - INR 2,493 2,105 – – - EURO – 10 – – - AUD 5,838 6,264 – – - SGD 19,044 5,502 – – - JPY 2,429 3,271 – –
161,831 121,527 – –
Wah Seong Corporation Berhad Annual Report 2007 130 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
34. TRADE AND OTHER PAYABLES (CONT’D)
The currency profile for purchase consideration and other payables and accruals are as follows:
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
- RM 95,279 82,243 14,763 11,398 - RMB 6,093 6,136 – – - USD 39,108 37,134 – – - EURO 7,005 – – – - HKD 1,044 2,920 – – - AED 16,468 378 – – - SGD 348 2,849 – – - INR 7,572 8,088 – – - AUD 4,024 5,255 – – - IDR 76 92 – – - TWD – 4,514 – – - JPY 92 – – –
177,109 149,609 14,763 11,398
Credit terms of trade payables range from 30 to 90 days (2006: 30 to 90 days).
35. BANK BORROWINGS
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Secured:
Bank overdrafts 263 5,436 – – Revolving credits 2,125 12,715 – – Trust receipts – 4,004 – – Term loan (Note 29) 173 2,582 – –
Unsecured:
Bank overdrafts 1,342 2,117 – – Revolving credits 106,341 15,898 30,000 – Trust receipts – 12,929 – – Bankers’ acceptances 117,339 135,418 – – Term loan (Note 29) 20,351 17,071 – –
247,934 208,170 30,000 – 131 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
35. BANK BORROWINGS (CONT’D)
At 31 December 2007, the effective interest rates of the bank borrowings are as follows:
Group Company 2007 2006 2007 2006 % % % %
Bank overdrafts 7.13 - 7.65 7.00 - 9.13 – – Revolving credits 3.85 - 6.15 4.66 - 7.45 3.85 – Bankers’ acceptances 3.74 - 5.15 3.43 - 4.80 – – Trust receipts – 7.27 - 8.28 – –
The secured bank borrowings are secured on time deposits of the Group as indicated in Note 20.
36. GROSS REVENUE
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Contract revenue, sales of goods and services 1,920,653 1,603,484 – – Rental income 25,408 18,480 – – Dividend income 4 13 39,875 88,694 Commission income 3,299 1,820 – – Interest income 748 551 4,114 4,469 Management fees – – 1,758 1,784
1,950,112 1,624,348 45,747 94,947
37. COST OF SALES
Group 2007 2006 RM’000 RM’000 (Restated)
Contract costs 531,598 426,882 Cost of goods sold and services 1,064,698 888,957 Cost of engineering services 8,187 2,719 Direct operating costs relating to rental income 19,561 15,492
1,624,044 1,334,050 Wah Seong Corporation Berhad Annual Report 2007 132 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
38. PROFIT FROM OPERATIONS
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Profit from operations is stated after charging:
Allowance for doubtful debts 7,963 10,331 293 43,427 Inventories written down 1,504 223 – – Amortisation of intangible assets 576 428 – – Amortisation of prepaid lease payments 750 429 – – Amortisation of Islamic Notes issuance costs 118 118 118 118 Auditors’ remuneration - Statutory audit - current year 2,128 2,125 100 32 - underprovision in prior year 305 58 – – Bad debts written off 4,761 492 – – Depreciation of property, plant and equipment and investment properties 36,818 33,127 207 193 Diminution in value of other investments 802 227 – – Directors’ remuneration: - Directors of the Company: - fees - current year 315 250 315 250 - overprovision in prior year (5) (23) (5) (23) - other emoluments 3,735 2,874 1,973 1,476 - Directors of subsidiaries: - fees - current year 236 146 – – - underprovision in prior year – 11 – – - other emoluments 11,616 8,937 – – Impairment of goodwill (Note 11) 468 13,981 – – Impairment of investment properties (Note 4) (included in Administrative and general expenses) 134 378 – – Impairment of property, plant and equipment – 4,455 – – Impairment of subsidiaries – – 78,816 – Inventories written off 5,616 2,736 – – Investments written off 88 – – – Loss on disposal of property, plant and equipment 4,713 341 – – Loss on foreign exchange: - realised 3,757 4,898 – – - unrealised 7,245 5,187 388 – Operating lease rental 17,459 18,700 – – Property, plant and equipment written off 318 5,272 5 1 Provision for warranties 14,145 7,051 – – Rental of equipment 8,293 17,764 – – Rental of premises 5,655 4,930 196 171 133 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
38. PROFIT FROM OPERATIONS (CONTINUED)
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
and crediting:
Allowance for doubtful debts written back 5,827 712 – – Bad debts recovered 1,357 285 – – Discount on acquisition of subsidiary (Note 44) – 46 – – Gain on disposal of property, plant and equipment 1,792 1,641 – 1 Gross dividend income from shares - quoted in Malaysia 52 81 – – - unquoted in Malaysia – 10 – – Gain on foreign exchange: - realised 3,463 3,058 2,396 240 - unrealised 6,279 1,090 – 109 Diminution in value other investments written back 51 36 – – Interest income 2,962 2,282 – – Provision for warranties written back 3,734 7,298 – – Rental income 790 848 – – Gain on disposal of subsidiaries 7 – 172,546 – Gain on disposal of jointly controlled entity 17 – – – Gain on disposal of quote investments 456 – – – Reversal of impairment on investment properties (Note 4) (included in Administrative and general expenses) 419 – – –
The estimated monetary value of benefits-in-kind received and receivable by Directors are as follows:
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Directors of the Company 136 138 43 33 Directors of the subsidiaries 283 180 – –
Wah Seong Corporation Berhad Annual Report 2007 134 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
39. FINANCE COST
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Interest on: - ICULS 1,660 1,925 1,660 1,925 - Islamic notes 6,608 6,550 6,608 6,550 - bank borrowings 16,687 15,862 – – - hire purchase liabilities 242 169 – – - others 400 1,199 1,172 55
25,597 25,705 9,440 8,530
40. TAX EXPENSE
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Tax expense based on results for the financial year:
Malaysian taxation - Current 17,959 17,971 1,248 22,306 - Deferred tax (134) 293 (124) (140) Foreign taxation - Current 12,421 5,216 – – - Deferred tax (4,917) (1,481) – –
25,329 21,999 1,124 22,166
Overprovision in previous financial year - Current (7,439) (584) (144) (1,579)
17,890 21,415 980 20,587 135 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
40. TAX EXPENSE (CONT’D)
The numerical reconciliation between the tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows:
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Profit before tax 115,121 71,604 122,947 37,387
Tax at the statutory rate 31,160 19,333 33,196 10,468 Effect of non-deductible expenses 8,669 23,809 21,988 12,448 Effect of non-taxable income (7,996) (8,089) (53,334) – Deferred tax assets not recognised 7,118 7,604 – – Effect of tax incentives (1,509) (2,942) (750) (814) Effect of different tax rates in other countries (12,234) (14,289) – – Effect of utilisation of previous years’ tax losses and unabsorbed capital allowances (2,557) – – – Unavailable group relief – 33 – – Utilisation of group relief – (413) – – Effect of different tax rate (231) (40) – 31 Others (1,519) (2,545) – – Overprovision in prior years (4,138) (652) (120) (1,546) Effect of changes in previously unrecognised Temporary difference (777) – – – Effect of share of associates and JCE results 1,825 (394) – – Reversal of previously recognised deferred tax assets 79 – – –
Tax expense 17,890 21,415 980 20,587
Under the single-tier tax system which comes into effect from the year of assessment 2008, companies are not required to have tax credits under Section 108 of the Income Tax Act, 1967 for dividend payment purposes. Dividends paid under this system are tax exempt in the hands of shareholders.
Subject to the agreement by the Inland Revenue Board, the Company has sufficient tax credit under Section 108 of the Income Tax Act, 1967 to frank the payment of net dividends out of all its retained earnings as at 31 December 2007.
Wah Seong Corporation Berhad Annual Report 2007 136 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
41. EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
(a) Basic
The basic earnings per share for the financial year has been calculated by dividing the Group’s profit attributable to equity holders of the Company for the financial year of RM86,039,000 (2006: RM37,414,000) by the weighted average number of ordinary shares in issue during the financial year, adjusted to include the potential ordinary shares that would be issued upon conversion of a mandatorily convertible instrument (ICULS) and the increase in ordinary shares as a result of the completion of the Proposed Bonus Issue as explained in Note 54 of 633,610,063 (2006: 625,586,042).
The basic earnings per share are adjusted retrospectively to take into account the potential ordinary shares that would be issued upon conversion of a mandatorily convertible instrument (ICULS) and the increase in ordinary shares as a result of the completion of the Proposals as explained in Note 54.
The weighted average number of ordinary shares is calculated as follows:
Group 2007 2006 RM’000 RM’000 (Restated)
Number of ordinary shares at beginning of the financial year 395,560 379,550 Effect of shares issued : - conversion of Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) 13,460 5,021 - exercise of Employee Share Option Scheme (“ ESOS”) 8,800 3,967 Effect of shares buy back (1,234) (16) Adjustment for weighted average number of shares assuming conversion of remaining ICULS 108,082 128,122 Effect of the potential increase in shares due to the Proposed Bonus Issue and the ‘bonus’ element of the Proposed Rights Issue 108,942 108,942
Weighted average number of ordinary shares in issue 633,610 625,586
Basic earnings per share 13.58 5.98
137 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
41 EARNINGS PER SHARE ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY (CONT’D)
(b) Fully diluted
For the diluted earnings per share calculation, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares, ESOS.
In respect of share options granted to employees, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. The difference is added to the denominator as an issue of ordinary shares for no consideration. This calculation serves to determine the ‘bonus’ element in the ordinary shares outstanding for the purpose of computing the dilution. No adjustment is made to profit for the period for the share options calculation.
Group 2007 2006 RM’000 RM’000
Profit attributable to ordinary equity holders of the Company 86,039 37,414
The weighted average number of ordinary shares is calculated as follows:
2007 2006 ’000 ’000 (Restated)
Weighted average number of ordinary shares in issue (as per above) 633,610 625,586 Adjustment for the bonus element weighted average number of shares assuming the full exercise of ESOS 3,188 1,020
Adjusted weighted average number of ordinary shares for diluted earnings per share 636,798 626,606
Diluted earnings per share 13.51 5.97
Wah Seong Corporation Berhad Annual Report 2007 138 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
42. DIVIDENDS
Group and Company 2007 2006 RM’000 RM’000
In respect of the year ended 31 December 2007 1st interim dividend of 4% less 27% income tax 6,242 – paid on 10 October 2007
In respect of the year ended 31 December 2006 Interim dividend of 3% less 28% income tax paid on 10 October 2006 – 4,271 Final dividend of 7% less 27% income tax paid on 27 July 2007 10,737 –
In respect of the year ended 31 December 2005 Final dividend of 6% less 28% income tax paid on 28 July 2006 – 8,503
16,979 12,774
The Directors declared a second interim dividend of 8% less 26% income tax, amounting to RM16,106,471 in respect of the financial year ended 31 December 2007 which was paid on 23 April 2008. The Directors do not recommend the payment of any final dividend in respect of financial year ended 31 December 2007.
43. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000
Aggregate cost of property, plant and equipment acquired 69,356 91,560 207 452
Non cash: Property, plant and equipment acquired from a subsidiary, settled by way of current account – – – (294)
Cash paid 69,356 91,560 207 158
44. ANALYSIS OF ACQUISITION OF NEW SUBSIDIARIES AND BUSINESS
Acquisition of subsidiaries during the financial year:
1) On 8 June 2007, the Group entered into a Shareholders’ Agreement with Mr Wawan Junaedi (“WJ”) whereby the Group would subscribe for an initial 80,000 ordinary shares of USD1.00 each amounting to USD80,000.00 (equivalent to RM265,000.00 based on the exchange rate of USD1.00 to RM3.3125) representing 80% of the equity stake in a company known as PT MPE Deepwater in Indonesia.
2) On 27 August 2007, the Group acquired the entire issued and paid-up share capital of RM2.00 in Esteem Chapter Sdn Bhd, a company incorporated in Malaysia, for a purchase consideration of RM2.00. 139 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
44. ANALYSIS OF ACQUISITION OF NEW SUBSIDIARIES AND BUSINESS (CONT’D)
3) On 27 August 2007, the Group incorporated a wholly owned subsidiary known as Wasco Coatings Denmark ApS in Denmark with an initial paid-up capital of Euro 16,850.00 divided into 16,850 shares of Euro 1.00 each (equivalent to RM79,000.00 based on the exchange rate of Euro 1.00 to RM4.688).
4) On 20 November 2007, the Group completed its acquisition of the entire issued and paid-up capital of GBP125.00 divided into 125 ordinary shares of GBP1.00 each in InterResources Europe Limited (“IEL”), for a total cash consideration of GPB40,000 (equivalent to approximately RM286,000.00 on the exchange rate of GBP1.00 to RM7.15 pursuant to the Agreement for Sale of Shares dated 10 September 2007).
5) On 21 December 2007, the Group acquired the entire issued and paid-up share capital of RM2.00 in Asiana Emas Sdn Bhd, a company incorporated in Malaysia, for a purchase consideration of RM2.00.
The above acquisitions have no significant effect on the financial results of the Group in the current financial year and the financial position of the Group as at the end of the current financial year.
The acquisitions of subsidiaries in preceding year are summarized as follows:
Acquisition during the financial year ended 31.12. 2006
Number Goodwill/ Effective of ordinary (discount) date of shares Effective Purchase arising from acquisition acquired interest consideration acquisition % RM’000 RM’000
Jutasama International Ltd 3.3.2006 100 100 4 – PPI International Ltd 3.3.2006 100 100 * – Wasco Technologies Pte Ltd 31.3.2006 2 100 *** – Kanswin Limited 28.4.2006 1 55 **** – E Green Sdn Bhd 10.5.2006 350,000 70 350 – Jutasama Jaya Sdn Bhd 26.5.2006 40,000 20 40 (46) PPSC Capital (Labuan) Limited 29.5.2996 100,000 100 366 – WSC Capital (Labuan) Limited 29.5.2996 100,000 100 368 – Pesanan Dinamik Sdn Bhd 20.7.2006 255,000 51 357 985 TOT Inspections Sdn Bhd 31.7.2006 74,550 21 277 815 Wasco (Australia) Pte Ltd 13.11.2006 2 100 ** – Wasco Energy Ltd 18.11.2006 12,000 100 4 – Wasco E & P Services Limited 18.11.2006 2 100 – – Wasco Coatings Limited 18.12.2006 2 100 – –
* represent RM49 ** represent RM6 *** represent RM5 **** represent RM4
The above acquisitions have no significant effect on the financial results of the Group in the preceding year and the financial position of the Group as at the end of the preceding year. Wah Seong Corporation Berhad Annual Report 2007 140 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
45. SIGNIFICANT RELATED PARTY TRANSACTIONS
Company 2007 2006 RM’000 RM’000
Transactions with subsidiaries
Interest charged to: - Wah Seong Industrial Holdings Sdn Bhd 2,707 3,376
Management fees charged to: - Wasco Management Services Sdn Bhd 978 –
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000
Transactions with associates
Purchases of building materials from Syarikat Beka Sdn Bhd 810 1,024 – – Sales of building materials to IST Building Products Sdn Bhd 930 11,517 – – Provision of technical services to Petro Pipe Sabah Sdn Bhd 3,132 – – – Sales to Petro Pipe Sabah Sdn Bhd 33,920 – – –
Transactions with companies in which a substantial shareholder of the Company, Lembaga Tabung Angkatan Tentera, has financial interest:
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000
Purchase of building materials from: - UAC Berhad 16,117 16,747 – – - Johan Ceramic Berhad 113 1,255 – – 141 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
45. SIGNIFICANT RELATED PARTY TRANSACTIONS (CONT’D)
Outstanding balances with related parties at year end were as follows:
Company 2007 2006 RM’000 RM’000
Subsidiaries
Wah Seong Industrial Holdings Sdn Bhd 2,707 3,376 Wasco Management Services Sdn Bhd 978 –
Transactions with key management personnel are as follows:
Group 2007 2006 RM’000 RM’000
Key management personnel: - Wages, salaries and bonus 4,413 3,630 - Defined contribution plan 207 141 - Other employee benefits 60 26
Key management personnel comprises the Directors and management personnel of the Group, having authority and responsibility for planning, directing and controlling the activities of the Group entities directly or indirectly.
In addition to their salaries, the Group also provides non-cash benefits to Directors and executive officers, and contributes to a post-employment defined plan on their behalf amounting to RM154,000 (2006: RM136,000).
46. STAFF COST Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)
Salaries and bonus (including executive Directors’ remuneration) 149,978 144,721 5,350 3,306 Share based payment 683 297 – – Defined contribution plans 10,643 11,550 510 245
161,304 156,568 5,860 3,551 Wah Seong Corporation Berhad Annual Report 2007 142 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
47. COMMITMENTS
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000
Commitment to acquire new shares in new investments 1,467 882 – –
Commitment to acquire property, plant and equipment not provided for in the financial statements:
Approved and contracted 46,924 19,138 – 108
Approved but not contracted 187,000 6,770 – –
Operating lease commitments
Payable not later than one year 10,365 16,781 – – Payable later than one year but not later than five years 2,994 12,041 – – Payable later than five years – 1,826 – –
48. CONTINGENT LIABILITIES
Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000
Unsecured corporate guarantees given to secure banking facilities granted to subsidiaries – – 119,029 154,833 Performance guarantee given by a subsidiary - customers (Note A) 9,666 18,684 – – Financial guarantee – 42 – – Workcover claim (Note B) 9,312 – – –
Note A:
In previous year, a customer of a subsidiary with whom it had a contract for construction of gas pipeline, made a claim for defect liability and delay in completion of work. The subsidiary has made a counter claim for work variations and extension of time. The Directors are of the opinion that the claim has no merit and is unlikely to materialise. 143 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
48. CONTINGENT LIABILITIES (CONT’D)
Note B:
On 29 October 2007, a claim for AUD3.5 million was served by Workcover Corporation of South Australia (“Plaintiff”) on Delco Australia Pty Ltd (“Delco”), a subsidiary, for supplementary exit levy referred to as “balancing payment” under the Workers Rehabilitation and Compensation Act, 1986.
This balancing payment was imposed on grounds that Delco had “ceased to be an Employer” when Delco filed a “No Employee” return under the WorkCover Scheme notwithstanding that Delco had been paying the monthly levy payments prior to this return.
The filing of the “No Employee” return was consequent of Delco’s rationalisation of its operations in Australia by concentrating its business entirely in Brisbane, Queensland instead of previously operating in both Adelaide, South Australia and Brisbane.
The Directors’ are of the view that the Plaintiff is not empowered to impose the balancing payment and contend that the calculation in any event for the balancing payment is excessive.
49. SEGMENTAL ANALYSES
Primary reporting format - business segment
The Group’s operations comprise the following business segments:
Oil and gas - Pipe-coating services for the oil and gas industry, fabrication and rental of gas compressors and process equipment, design, installation and commissioning of special tanks, pressure vessels and piping, manufacturing, supply and installation of sacrificial anodes, provision of cathodic and corrosion protection services, marketing and provision of all kinds of services related to the oil and gas industry.
Industrial services - 1) Marketing and distribution of a wide variety of building materials, installation services of metal roofing and manufacturing of spiral welded steel pipes for civil and water works.
- 2) Specialised processing equipment, manufacturing and distribution of replacement parts for palm oil mills and refineries and the sale and services of turbines and equipment.
Others - Investment holding, property holding and environmental management.
Transactions between segments were entered into in the normal course of business and were established on terms and conditions that are not materially different from that obtainable in transactions with unrelated parties. The effects of such inter-segmental transactions are eliminated on consolidation.
Wah Seong Corporation Berhad Annual Report 2007 144 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
49. SEGMENTAL ANALYSES (CONT’D)
Year ended 31 December 2007
Industrial Oil and gas services Others Elimination Group RM’000 RM’000 RM’000 RM’000 RM’000
REVENUE
Sales 1,230,068 721,827 6,480 (8,263) 1,950,112 Inter-segment sales (587) (6,194) (1,482) 8,263 –
External sales 1,229,481 715,633 4,998 – 1,950,112
RESULTS
Segment operating profit/(loss) 107,545 41,356 (2,467) – 146,434
Profit from operations 146,434 Finance costs (25,597) Share of results of associates 295 288 – – 583 Share of results of jointly controlled entities (6,299) – – – (6,299)
Profit before tax 115,121 Tax expenses (17,890)
Net profit for the financial year 97,231 145 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
49. SEGMENTAL ANALYSES (CONT’D)
Industrial Oil and gas services Others Group RM’000 RM’000 RM’000 RM’000
At 31 December 2007
OTHER INFORMATION
Segment assets 1,081,314 334,185 70,506 1,486,005 Investment in associates 13,982 7,610 – 21,592 Investment in jointly controlled entities 34,918 – – 34,918 Unallocated assets 17,631
Consolidated total assets 1,560,146
Segment liabilities 345,221 85,677 26,206 457,104 Unallocated liabilities 501,530
Total liabilities 958,634
Purchase of: - Property, plant and equipment 63,936 4,783 637 69,356 - Investment properties – 113 – 113 - Leasehold land – – 1,151 1,151 - Intangibles assets 2,792 – – 2,792
Depreciation of: - Property, plant and equipment 32,615 3,207 893 36,715 - Investment properties 33 70 – 103
Amortisation of: - Prepaid lease payments 331 412 7 750 - Intangible assets 576 – – 576 - Islamic Notes issuance costs – – 118 118
Impairment of: - Investment properties – 134 – 134 Wah Seong Corporation Berhad Annual Report 2007 146 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
49. SEGMENTAL ANALYSES (CONT’D)
Year ended 31 December 2006
Industrial Oil and gas services Others Elimination Group RM’000 RM’000 RM’000 RM’000 RM’000 (Restated)
REVENUE
Sales 1,022,561 602,911 5,551 (6,675) 1,624,348 Inter-segment sales (2,486) (2,705) (1,484) 6,675 –
External sales 1,020,075 600,206 4,067 – 1,624,348
RESULTS
Segment operating profit/(loss) 97,636 13,565 (15,350) – 95,851
Profit from operations 95,851 Finance costs (25,705) Share of results of associates (3) (356) – – (359) Share of results of jointly controlled entities 1,817 – – – 1,817
Profit before tax 71,604 Tax expenses (21,415)
Net profit for the financial year 50,189 147 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
49. SEGMENTAL ANALYSES (CONT’D)
Industrial Oil and gas services Others Group RM’000 RM’000 RM’000 RM’000
At 31 December 2006
OTHER INFORMATION
Segment assets 915,745 295,754 98,604 1,310,103 Investment in associates 9,504 8,190 40 17,734 Investment in jointly controlled entities 41,855 – – 41,855 Unallocated assets 14,727
Consolidated total assets 1,384,419
Segment liabilities 293,576 71,273 25,655 390,504 Unallocated liabilities 499,251
Total liabilities 889,755
Purchase of: - Property, plant and equipment 73,739 5,151 12,670 91,560
Depreciation of: - Property, plant and equipment 27,452 4,767 863 33,082 - Investment properties – 45 – 45
Amortisation of: - Prepaid lease payments 332 97 – 429 - Intangible assets 428 – – 428 - Islamic Notes issuance costs – – 118 118
Impairment of: - Property, plant and equipment – 4,455 – 4,455 - Investment properties – 378 – 378
Wah Seong Corporation Berhad Annual Report 2007 148 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
49. SEGMENTAL ANALYSES (CONT’D)
Secondary reporting format – geographical segment
The Group operates mainly in Asia. In determining the geographical segments of the Group, revenue is based on the geographical location of customers. Total assets and capital expenditure are based on the geographical locations of the assets.
Capital Total Revenue expenditure assets RM’000 RM’000 RM’000
2007
Malaysia 779,964 40,024 786,668 Australia 104,567 4,175 41,206 China 231,710 910 264,055 Middle East 130,141 14,113 166,887 South East Asia 177,492 4,667 175,467 United States of America 36,146 690 20,129 Europe 97,903 7,932 7,414 Other countries of Asia 329,681 103 24,404 Others 62,508 798 17,406
1,950,112 73,412 1,503,636
Associates 21,592 Jointly controlled entities 34,918
1,560,146
2006
Malaysia 546,184 40,254 674,402 Australia 164,826 3,141 58,070 China 163,735 8,287 294,239 Middle East 165,017 15,551 109,003 South East Asia 201,159 18,628 132,286 United States of America 24,155 1,129 23,084 Europe 165,031 – – Other countries of Asia 130,107 391 21,599 Others 64,134 4,179 12,147
1,624,348 91,560 1,324,830
Associates 17,734 Jointly controlled entities 41,855
1,384,419 149 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
50. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s overall financial risk management objectives and policies are to ensure that the Group creates value and maximises returns for its shareholders. Financial risk management is carried out through risk review, internal control systems, benchmarking the industry’s best practices and adherence to the Group’s financial risk management policies.
The main risks arising from the financial instruments of the Group are credit risk, interest rate risk, market risk, foreign currency exchange risk and liquidity and cash flow risk. Management monitors the Group’s financial position closely with the objective to minimise potential adverse effects on the financial performance of the Group. Management reviews on policies for managing each of these risks and they are summarised below. These policies have remained substantially unchanged during the financial year.
Credit risk
Credit risk arises when progress billings on contract works are raised, sales are made and services rendered on deferred credit terms.
The entire financial assets of the Group are exposed to credit risk except for the cash and bank balances and time deposits which are placed with licensed financial institutions. The Group invests its cash assets safely and profitably by depositing them with licensed financial institutions.
The Group’s exposure to credit risk is monitored on an ongoing basis. The Group has credit policies in place to manage the credit risk exposure. The risk is managed through the application of the Group’s extensive credit management procedures which include the application of credit approvals whereby credit evaluations are performed on all customers requiring credit over a certain amount and period, adherence to credit limits, regular monitoring and follow up procedures. Concentration of credit risk with respect to receivables is limited due to a wide spread of customers in various industries.
The Group does not have any significant exposure with respect to non-trade receivables.
The Group does not require collateral in respect of financial assets and considers the risk of material loss from the non-performance on the part of financial counter-parties to be negligible.
Interest rate risk
The Group is exposed to interest rate risk which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates. Exposure to interest rate risk relates primarily to the Group’s time deposits and interest-bearing borrowings.
Surplus funds are placed with licensed financial institutions to earn interest income based on prevailing market rates. The Group manages its interest rate risks by placing such funds on short tenures of 12 months or less.
The Group’s policy is to borrow principally on a floating rate basis for short term borrowings and on fixed rate basis for long term borrowings. The objective of a mix of fixed and floating rate borrowings is to reduce the impact of a rise in interest rates and to enable savings to be enjoyed if interest rates fall. The Group has a policy to ensure that interest rates obtained are competitive. Wah Seong Corporation Berhad Annual Report 2007 150 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
50. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
Market risk
Market risk is the risk that a financial instrument’s value will fluctuate as a result of changes in market price.
The Group’s exposure to market risk is in respect of its quoted investments. These investments are monitored regularly and subject to periodic review. An allowance for diminution in value is made if the Directors are of the opinion that there is a decline in the value of such investments which is other than temporary.
The Group does not use derivative instruments to manage the risk as the investments are held for long term strategic purposes.
Foreign currency exchange risk
Foreign currency denominated assets and liabilities together with expected cash flows from anticipated transactions denominated in foreign currencies give rise to foreign exchange exposures.
Foreign currency forward contracts are entered into by the Group to limit their exposure on foreign currency receivables and payables, and on cash flows generated from anticipated transactions denominated in foreign currencies.
Liquidity and cash flow risk
Prudent liquidity risk management implies maintaining sufficient cash, time deposits and the availability of funding through an adequate amount of committed credit facilities. The Group’s exposure to liquidity and cash flow risk is monitored on an ongoing basis. Due to the nature of the business, the Group aims at maintaining flexibility in funding by keeping committed credit lines available.
The concentration of liquidity and cash flow risk with respect to bank borrowings, hire purchase liabilities and ICULS are minimal as the Group maintains sufficient cash to meet these commitments. 151 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
51. FINANCIAL INSTRUMENTS
(a) Off Balance Sheet
Foreign currency contracts
The foreign currency amounts to be received or paid and the contractual exchange rates of the Group’s outstanding forward contracts are as follows:
Currency Currency to be to be RM’000 Contractual Hedged item received paid equivalent rate ’000
31.12.2007
Trade receivables - USD 9,703 RM USD 32,431 3.34
Other payables - USD 11,000 SGD USD 36,392 3.31
Net investment in foreign entity - USD 1,000 RM USD 3,338 3.34
31.12.2006
Trade receivables - SGD 2,288 RM SGD 5,324 2.33 - USD 4,836 RM USD 17,536 3.63
Trade payables - Yen 179,950 RM Yen 5,518 0.03 - USD 250 RM USD 885 3.54
The net unrecognized gain as at 31 December 2007 on the forward contracts amounted to RM214,000 (2006: RM355,000) Wah Seong Corporation Berhad Annual Report 2007 152 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
51. FINANCIAL INSTRUMENTS (CONT’D)
(b) On Balance Sheet
Fair values
The carrying amounts of the financial assets and liabilities of the Group at 31 December approximated their fair values except as stated below:
Carrying Fair Note amount value RM’000 RM’000
2007
Other investments:
Shares quoted in Malaysia 10 453 534 Unquoted shares 10 1,050 *
Borrowings:
Islamic Notes 28 99,784 108,451
Term loans 29 67,922 69,529
2006
Other investments:
Shares quoted in Malaysia 10 1,646 1,868 ICULS quoted in Malaysia 10 4 4 Unquoted shares 10 1,117 *
Borrowings:
Islamic Notes 28 99,666 110,041
Term loans 29 90,864 91,367
* It is not practicable to estimate the fair value of the Group’s unquoted investments because of the lack of reference market prices and the inability to estimate fair value without incurring excessive costs. However, the carrying amounts recorded are not anticipated to differ significantly from their fair values at the balance sheet date.
153 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
52. COMPARATIVES
During the financial year, the Group adopted FRS 117 –Leases. The adoption of FRS 117 resulted in the reclassification of leasehold land as prepaid lease payments which have been accounted for retrospectively, with the comparatives restated to conform with the current period’s presentation.
The Group has reclassified the Group’s investments in Pesanan Dinamik Sdn Bhd, Socotherm PPSC Ningbo (Daxie) Pipe Coating Co. Ltd and Socotherm (Shashi) Pipe Coating Co. Ltd, Sichuan Chuanshi Kanssen (Yadong) Coating Services Company Limited and Shaanxi Yadong Anti-Corrosion Company Limited from subsidiaries to jointly-controlled entities. The Directors have made the above reclassifications to better reflect the nature of the arrangements with the joint venture partners.
The above does not have a material financial effect on the Group’s income statement for the financial year ended 31 December 2007.
The summary effects of the reclassifications and adjustments for the financial year ended 31 December 2006 is as follows:
Consolidated Balance Sheet As previously As stated FRS 117 Reclassification restated RM’000 RM’000 RM’000 RM’000
As at 31 December 2006/ 1 January 2007
Assets
Property, plant and equipment 421,528 (47,294) (44,963) 329,271 Prepaid lease payments – 47,294 – 47,294 Investment in associated companies 25,614 – (7,880) 17,734 Investment in jointly controlled entities 414 – 41,441 41,855 Goodwill 122,586 – (1,714) 120,872 Intangible assets 4,067 – (361) 3,706 Deferred tax assets 5,895 – (366) 5,529 Inventories 231,367 – (4,608) 226,759
Wah Seong Corporation Berhad Annual Report 2007 154 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
52. COMPARATIVES (CONT’D)
Consolidated Balance Sheet
As previously As stated FRS 117 Reclassification restated RM’000 RM’000 RM’000 RM’000
As at 31 December 2006/ 1 January 2007
Trade and other receivables 452,542 – (13,159) 439,383 Amount owing by jointly controlled entities 831 – 2,179 3,010 Cash and bank balances 72,603 – (2,996) 69,607
Equity
Minority interests 149,052 – (26,372) 122,680
Liabilities
Hire purchase liabilities 1,267 – (518) 749 Trade and other payables 285,681 – (14,545) 271,136 Amount owing to jointly controlled entities – – 14,098 14,098 Hire purchase liabilities 1,405 – (361) 1,044 Bank borrowings 212,771 – (4,601) 208,170 Current tax liabilities 21,108 – (128) 20,980
Consolidated Income Statement
There is no financial impact on the profit attributable to the equity holders in respect of financial year ended 31 December 2006 save for the reclassification made as follows:
As previously stated Reclassification As restated RM’000 RM’000 RM’000
For the financial year ended 31 December 2006
Gross revenue 1,642,768 (18,420) 1,624,348 Cost of sales 1,324,524 9,526 1,334,050 Other operating income 16,145 (1,359) 14,786 Selling and distribution expenses 61,837 (28,966) 32,871 Administrative and general expenses 158,551 6 158,557 Other operating expenses 18,065 (260) 17,805 Finance costs 26,024 (319) 25,705 Share of results of associates 1,688 (1,329) 359 Share of results of jointly controlled entities 120 1,697 1,817 Tax expense 21,486 (71) 21,415
155 Wah Seong Corporation Berhad Annual Report 2007 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
52. COMPARATIVES (CONT’D)
Consolidated Cash Flow Statement
As previously As stated FRS 117 Reclassification restated RM’000 RM’000 RM’000 RM’000
For the financial year ended 31 December 2006
Depreciation 35,362 – (2,235) 33,127 Amortisation of prepaid lease payment – 429 – 429 Net gain on disposal of property, plant and equipment (1,172) – (128) (1,300) Property, plant and equipment written off 5,260 – 12 5,272 Amortisation of mining development expenditure 54 – (54) – Net unrealised foreign exchange loss 3,904 – 193 4,097 Share of loss in jointly controlled entities (120) – (1,697) (1,817) Share of profit in associates (1,688) – 2,047 359 Inventories (53,939) – 667 (53,272) Receivables (36,672) – 4,266 (32,406) Payables 549 – 11,750 12,299 Purchase of property, plant and equipment (91,141) – (419) (91,560) Proceeds from disposal of property, plant and equipment 7,231 – (241) 6,990 Repayment from associates 997 – (26) 971 Advance to jointly controlled entities 45 – (1,495) (1,450)
53. SIGNIFICANT NON-CASH TRANSACTION
During the financial year, the Company has subscribed for additional shares in Wasco Energy Ltd, a wholly owned subsidiary, amounting to RM311,321,147, which was settled by way of intercompany balances. Wah Seong Corporation Berhad Annual Report 2007 156 Notes to the Financial Statements (Cont’d) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007
54. SIGNIFICANT EVENTS SUBSEQUENT TO BALANCE SHEET DATE
(A) During the financial year, the Company proposes to undertake the following proposals:
(a) Proposed bonus issue of up to 108,942,083 new ordinary shares of RM0.50 each in the Company (“Bonus Shares”) to be credited as fully paid-up on the basis of one (1) Bonus Share for every four (4) existing ordinary shares of RM0.50 each in the Company (“WSC Shares”);
(b) Proposed additional issuance of up to 27,020,238 new WSC Shares upon conversion of 3% Irredeemable Convertible Unsecured Loan Stocks 2002/2012 of the Company (“ICULS”) into WSC Shares on the basis of one (1) additional new WSC Share for the conversion of every two (2) ICULS arising from the Proposed Bonus Issue;
(c) Proposed renounceable rights issue of up to 90,641,547 new WSC Shares (“Rights Shares”) together with up to 135,962,320 free detachable five (5)-year warrants (“Warrants”) on the basis of:
(i) Two (2) Rights Shares and three (3) Warrants for every twelve (12) existing WSC Shares held before the Proposed Bonus Issue; and
(ii) Two (2) Rights Shares and three (3) Warrants for every six (6) existing ICULS held before the Proposed ICULS Adjustment,
(iii) Proposed settlement of outstanding balance owing by the Company to Mr. Giancarlo Maccagno amounting to RM6,959,425 by way of issuance of new WSC Shares (see Note 32).
(Collectively referred as “Proposals”)
The Proposals were completed on 28 March 2008.
(B) On 12 October 2007, the Group had entered into a conditional sale and purchase agreement with OSK Trustees Berhad, the Trustee for Axis Real Estate Investment Trust, to dispose its leasehold industrial land held under PN 29932 for Lot 84 Seksyen 13 (formerly H.S.(D) 97253, P.T. 3), Bandar Petaling Jaya, Daerah Petaling, Negeri Selangor, measuring approximately 4,615 sq metres (49,675 sq. ft.) together with a five (5)-storey office cum flatted factory, with mezzanine floor and a two (2)-level basement car park erected thereon containing an approximate lettable area of 104,903 sq. ft. and total gross area of 158,635 sq. ft. including all extensions, renovations, modifications and variations in respect thereof, for a total cash consideration of RM37,000,000 (“Proposed Disposal”). The Proposed Disposal was completed on 12 February 2008.
54. AUTHORISATION FOR ISSUE OF FINANCIAL STATEMENTS
These financial statements were authorised for issue by the Directors on 29 April 2008. 157 Wah Seong Corporation Berhad Annual Report 2007 Summary of Recurrent Related Party Transactions
Actual value transacted for Interested Recipient of products/ Provider of products/ the financial Nature of transaction Related Party services services year ended 31 December 2007 (RM’000) Soave Kanssen & its PPSCIH & its 11,376 Purchase of pipe coating and other services SCT subsidiaries subsidiaries PPSCIH & its Kanssen & its 6,733 Purchase of pipe coating and other services subsidiaries subsidiaries Zenone Soave (“Soave”) is a common director of Kanssen, PPSC Industrial Holdings Sdn. Bhd. (“PPSCIH”) and SCT and major shareholder by virtue of holding 60.28% shares in SCT. He has an indirect effective interest of 19.60% in PPSCIH held through SCT pursuant to Section 6A of the Companies Act, 1965. Socotherm S.p.A (“SCT”) is a major shareholder of PPSCIH by virtue of holding 32.52% shares in PPSCIH. Wah Seong Corporation Berhad Annual Report 2007 158 Summary of Landed Properties on Hand AS AT 31 DECEMBER 2007
Owner/Title/ Description / Approximate Age Approximate land/ Tenure NBV as at Location with address Existing Use of the building (built-up area) 31-Dec-07 (RM)
~ OIL & GAS ~ Block No. SD-30, The Boulevard Commercial 6 years 32,574 sq ft Leasehold 99 years 7,384,614 Mid Valley City, Kuala Lumpur Expiring on 14/12/2100
Lot A,B/D and one sub-unit of Industrial 5 - 16 years 44.73 acres Leasehold 99 years 11,692,603 Lot C Kawasan MIEL, Tanjong Gelang (leasehold title
Kuantan, Pahang not issued yet)
Lot B Kawasan MIEL, Tanjong Gelang Industrial N/A 22.26 acres Leasehold 99 years 5,829,627 Kuantan, Pahang (leasehold title
not issued yet)
Lot C Kawasan MIEL, Tanjong Gelang Industrial N/A 20 acres Leasehold 99 years 4,390,804 Kuantan, Pahang (leasehold title
not issued yet)
Pasdec Land Lot A, Tanjong Gelang Industrial N/A 40.01 acres Leasehold 99 years 9,311,261 Kuantan, Pahang (leasehold title
not issued yet)
Sub Lot 2, Kawasan Perindustrian MIEL, Industrial 5 - 16 years 35,402 sq m Leasehold 99 years 28,933,536 Gebeng, KM 25, Jalan Kuantan-Kemaman, (leasehold title
Kuantan, Pahang not issued yet)
HS(D) 36880 Commercial 9 years 186 sq ft Freehold 242,120 Lot No. PT 32007 (1 1/2 storey (279 sq m) Mukim Kajang, Darul Hulu Langat shophouse)
Geran Nos. 32544, 32546 and 32547 Industrial land with 1 - 4 years Land -12 acres 5 rods Freehold 18,956,086 Lot Nos. 1930, 1944, 1945 office and factory 45 poles Daerah & Mukim of Klang building (Built-up Office - 1,330 sq m Selangor /Factory - 15,000 sq m)
Suite 1108, Sinolife Tower Commercial 3 years 334.44 sq m 12/04/2005 to 1,818,966 No. 707, Zhang Yang Road, Pudong Office Lot 06/01/2045 200120 Shanghai, P. R. China
No. 204-16, Second Floor, Block 7, Office space 13 years 9 sq m Leasehold 6,942 Hua Xia Gong Mao Chen, Area C, 40 years Tax Free Zone, Tianjin, P. R. China
Plot No. 66, MIDC Area, Satpur, Industrial land with 23 - 36 years Land - 39,000 sq m Leasehold 95 years 6,874,417 Nashik 422007 office and factory Factory - 5,927.09 sq m from 01/05/1971 Maharashtra, India building Office Building - 607.41 sq m 159 Wah Seong Corporation Berhad Annual Report 2007 Summary of Landed Properties on Hand (Cont’d) AS AT 31 DECEMBER 2007
Owner/Title/ Description / Approximate Age Approximate land/ Tenure NBV as at Location with address Existing Use of the building (built-up area) 31-Dec-07 (RM)
~ INFRASTRUCTURE / BUILDING MATERIALS ~ HS(D) Nos. 40386, 40387 and 39789 Industrial land with 7 - 24 years 24.09279 acres Leasehold 60 years 22,113,442 PT Nos. 18,19 and 1554 respectively office and factory Lot PT Nos. 18 & 19 Mukim 1, Seberang Perai Tengah building Expiring on 31/01/2039 Pulau Pinang Lot PT Nos. 1554 Expiring on 05/06/2046
No. C-08-01 Palmville Condominium, Residential 13 years (1,415 sq ft) Freehold 21,234 Bandar Sunway (1 condominium unit) HS (D) Nos. 118319 and 118340 PT Nos. 1488 and 36 Mukim Bandar Sunway Daerah Petaling, Selangor
HS(D) No.8701, Lot 2219 Commercial 9 years 1,302 sq ft Freehold 550,000 Section 12, Bandar Georgetown (3,904.05 sq ft) District of Timor Laut, Pulau Pinang
HS(D) 9580, Lot 3318, Mukim 16 Industrial 8 years 1,952 sq ft Freehold 206,191 Daerah Seberang Perai Utara (1 1/2 storey light Pulau Pinang industrial factory)
HS(D) 1652/95 Commercial 8 years 1,200 sq ft Freehold 148,500 Lot No. 4072, Tempat Padang Serai (2 storey shophouse) (2,260 sq ft) (Taman Damai) Mukim Of Sidam Kanan Daerah Kulim, Kedah
Parcel G-53, Megamall Penang Commercial 9 years 3,210 sq ft Freehold 787,714
Parcel B3-3-7G-3A Residential 8 years 1,113 sq ft Freehold 46,329 PD Marina International Resort Phase 3 (Bay View Villas) Pork Dickson
C-08-13, Pangsapuri Vista Lavender, Residential 3 years 852 sq ft Leasehold 90,000 Persiaran Kinrara Seksyen 3 (Apartment) Expiring on 15/11/2098 47100 Puchong, Selangor
PM 1396, Lot 6311, Mukim Bukit Katil Residential 3 years 1,400 sq ft Leasehold 99 years 67,000 Daerah Melaka Tengah, Melaka (2 storey Terrace Expiring on 14/01/2104 Link House)
Parcel Lot No. L-33 Commercial 6 years 517 sq m Leasehold 99 years 140,000 Plaza Melaka Raya (Shoplot) Expiring on 19/01/2045 District of Melaka Tengah, Melaka
PT4426/4427, Taman Semarak Residential 12 years (260 sq m) Freehold 57,547 District of Seremban, Negeri Sembilan (Single Terrace house) Wah Seong Corporation Berhad Annual Report 2007 160 Summary of Landed Properties on Hand (Cont’d) AS AT 31 DECEMBER 2007
Owner/Title/ Description / Approximate Age Approximate land/ Tenure NBV as at Location with address Existing Use of the building (built-up area) 31-Dec-07 (RM)
Parcel No. 5 Storey No. 13A Residential 1 year 1,535 sq ft Freehold 360,000 Building 77 of Sri Emas Condominium (1 Condominium unit) Geran No. 5336, Lot No. 613 Seksyen 56, Mukim Kuala Lumpur District of Wilayah Persekutuan
Parcel No. 6, Storey No. 13A Residential 1 year 1,535 sq ft Freehold 384,510 Building 77 of Sri Emas Condominium (1 Condominium unit) Geran No. 5336, Lot No. 613 Seksyen 56, Mukim Kuala Lumpur District of Wilayah Persekutuan
Parcel No. 6 Storey No. 5 Residential 1 year 1,535 sq ft Freehold 350,000 Building 77 of Sri Emas Condominium (1 Condominium unit) Geran No. 5336, Lot No. 613 Seksyen 56, Mukim Kuala Lumpur District of Wilayah Persekutuan
~ AGRO-BASED ENGINEERING ~ Lot 1929, Jalan Bukit Kemuning, Industrial land with 3 years Land 18,363 sq m Freehold 9,086,298 Seksyen 32, 40460 Shah Alam, 2 1/2 strorey office and / 198,320 sq ft Selangor Darul Ehsan single storey factory (Built-up 10,627.33 sq m building / 114,342.88 sq ft)
Parcel No. G1-02-10, Strata Grant No. 39419/ Residential 14 years (94.25 sq m) Freehold 1 M5/3/310, Mukim of Damansara, District of (1 Apartment unit) Petaling (Unit No. G1-02-10, Goodyear Court 6, Jalan Kewajipan, Subang Perdana, 47600 Subang Jaya, Selangor)
~ OTHERS ~ PN 4460, Lot No. 487 Seksyen 90 Commercial 21 years 466 sq m Leasehold 99 years 537,961 Bandar Kuala Lumpur (Double storey (267.28 sq m) Expiring on 14/10/2076 (No. 2 Jalan 1/75 Off Jalan Kampong Pandan link house) 55100 Kuala Lumpur)
PN 4462, Lot No. 489 Seksyen 90 Residential 21 years 298 sq m Leasehold 99 years 508,332 Bandar Kuala Lumpur (Double storey Expiring on 14/10/2076 (No. 6 Jalan 1/75 Off Jalan Kampong Pandan link house) 55100 Kuala Lumpur)
PN 4463, Lot No. 490 Seksyen 90 Residential 21 years 372 sq m Leasehold 99 years 635,521 Bandar Kuala Lumpur (Double storey Expiring on 14/10/2076 (No. 8 Jalan 1/75 Off Jalan Kampong Pandan link house) 55100 Kuala Lumpur)
~ ASSET CLASSIFIED AS HELD FOR SALE ~ HS (D) 97253 Commercial 8 years 4,611.8 sq m Leasehold 99 years 24,401,278 PT No. 3, Town of Petaling Jaya (5 storey (14,742.97 sq m) Expiring on 21/10/2068 District of Petaling Jaya, Selangor industrial office)
161 Wah Seong Corporation Berhad Annual Report 2007 Analysis of Shareholdings, ICULS & Warrants Holdings
1. Ordinary Shares
Share Capital as at 15 May 2008 Authorized Capital : RM1,000,000,000.00 Issued and Fully Paid-up Capital : RM319,813,471.50 Nominal/Par value per share : RM0.50 per share Class of Equity Securities : Ordinary Shares Voting Rights : On a show of hands – one vote per shareholder On a poll – one vote per ordinary share held Total Shareholders : 7,584
Distribution of Shareholders as at 15 May 2008
Size of No. of % of No. of % of Issued Shareholdings Shareholders Shareholders Shares Share Capital
less than 100 453 5.9731 20,458 0.0032 100 – 1,000 2,655 35.0079 1,041,317 0.1628 1,001 – 10,000 3,392 44.7257 12,295,448 1.9223 10,001 – 100,000 809 10.6672 24,374,546 3.8107 100,001 – 31,981,346 271 3.5733 389,382,661 60.8765 31,981,347 – 639,626,943 4 0.0528 212,512,513 33.2245
7,584 100 639,626,943 100
List of Substantial Shareholders as at 15 May 20085
Name No. of Ordinary Shares of RM0.50 each Direct Interest % Deemed Interest %
1. Wah Seong (Malaya) Trading Co. Sdn Bhd 127,331,811 19.9847 2,513,371 1 0.3945 2. Midvest Holdings Sdn Bhd 43,279,326 6.7927 – – 3. Tan Kim Yeow Sdn Bhd 37,185,256 5.8362 129,845,182 2 20.3791 4. Pauline Tan Suat Ming 2,069,880 0.3249 167,030,438 3 26.2154 5. Tan Chin Nam Sdn Bhd – – 129,845,182 2 20.3791 6. Tony Tan @ Choon Keat – – 167,030,438 3 26.2154 7. Robert Tan Chung Meng 7,395,323 1.1607 167,030,438 3 26.2154 8. Chan Cheu Leong 18,045,466 2.8322 43,279,326 4 6.7927 9. Lembaga Tabung Angkatan Tentera 39,629,775 6.2199 – – 10. Employees Provident Fund Board 61,689,383 9.6821 – –
Notes: 1 Deemed interest held through Wah Seong Enterprises Sdn Bhd (“WSE”) pursuant to Section 6A of the Companies Act 1965 (“Act”). 2 Deemed interest held through WSE and Wah Seong (Malaya) Trading Co. Sdn Bhd (“WST”) pursuant to Section 6A of the Act. 3 Deemed interest held through WSE, WST and Tan Kim Yeow Sdn Bhd (“TKYSB”) pursuant to Section 6A of the Act. 4 Deemed interest held through Midvest Holdings Sdn Bhd pursuant to Section 6A of the Act. 5 Based on 637,147,443 (Issued and paid-up share capital of 639,626,943 less Treasury Shares of 2,479,500). Wah Seong Corporation Berhad Annual Report 2007 162 Analysis of Shareholdings, ICULS & Warrants Holdings (Cont’d)
Directors’ ordinary shares holdings as at 15 May 20084
Name of Director No. of Ordinary Shares of RM0.50 each Direct Interest % Deemed Interest %
1. Robert Tan Chung Meng 7,395,323 1.1607 167,030,438 1 26.2154 2. Chan Cheu Leong 18,045,466 2.8322 43,279,326 2 6.7927 3. Tan Sri Ab Rahman Bin Omar 354,167 0.0556 – – 4. Pauline Tan Suat Ming 2,069,880 0.3249 167,375,254 3 26.2695 5. Halim Bin Haji Din – – – – 6. Giancarlo Maccagno 15,257,530 2.3947 – – 7. Tan Sri Dato’ Dr Lin See Yan – – – – 8. Jen (B) Tan Sri Dato’ Seri Mohd Zahidi bin Haji Zainuddin – – – –
Notes: 1 Deemed interest held through Wah Seong (Malaya) Trading Co. Sdn Bhd (“WST”), Wah Seong Enterprises Sdn Bhd (“WSE”) and Tan Kim Yeow Sdn Bhd (“TKYSB”) pursuant to Section 6A of the Companies Act 1965 (“Act”). 2 Deemed interest held through Midvest Holdings Sdn Bhd pursuant to Section 6A of the Act. 3 Deemed interest held through WST, WSE and TKYSB pursuant to Section 6A of the Act and include interests of her children. 4 Based on 637,147,443 (Issued and paid-up share capital of 639,626,943 less Treasury Shares of 2,479,500).
Note : By virtue of their interests of more than 15% in the shares of the Company, Mr. Robert Tan Chung Meng and Ms. Pauline Tan Suat Ming are also deemed to be interested in the shares of all its subsidiaries to the extent the Company has an interest. 163 Wah Seong Corporation Berhad Annual Report 2007 Analysis of Shareholdings, ICULS & Warrants Holdings (Cont’d)
List of Top Thirty (30) Shareholders as at 15 May 2008 No. of % of Issued Name shares Share Capital
1 WAH SEONG (MALAYA) TRADING CO. SDN BHD 100,034,746 15.6395 2 LEMBAGA TABUNG ANGKATAN TENTERA 39,312,208 6.1461 3 TAN KIM YEOW SENDIRIAN BERHAD 37,185,256 5.8136 4 MIDVEST HOLDINGS SDN BHD 32,148,905 5.0262 5 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 30,529,833 4.7731 CMS ASSET MANAGEMENT SDN BHD FOR EMPLOYEES PROVIDENT FUND 6 EMPLOYEES PROVIDENT FUND BOARD 27,357,117 4.2770 7 CIMSEC NOMINEES (TEMPATAN) SDN BHD 23,445,667 3.6655 WAH SEONG (MALAYA) TRADING COMPANY SDN BHD (ESOS POOL ACCOUNT) 8 HSBC NOMINEES (ASING) SDN BHD 19,137,270 2.9919 EXEMPT AN FOR CREDIT SUISSE (SG BR-TST-ASING) 9 KARYA INSAF (M) SDN BHD 15,583,333 2.4363 10 HSBC NOMINEES (ASING) SDN BHD 15,257,530 2.3854 GIANCARLO MACCAGNO 11 RANIVEST SDN BHD 11,042,737 1.7264 12 AMSEC NOMINEES (TEMPATAN) SDN BHD 8,515,400 1.3313 CMS DRESDNER ASSET MANAGEMENT SDN BHD FOR TENAGA NASIONAL BERHAD RETIREMENT BENEFIT TRUST FUND (RB-TNB-CMS) 13 HSBC NOMINEES (ASING) SDN BHD 8,270,728 1.2931 EXEMPT AN FOR HSBC PRIVATE BANK (SUISSE) S.A. (NASSAU AC CL) 14 UOBM NOMINEES (TEMPATAN) SDN BHD 8,000,000 1.2507 PLEDGED SECURITIES ACCOUNT FOR MIDVEST HOLDINGS SDN BHD (KD) 15 HSBC NOMINEES (TEMPATAN) SDN BHD 8,000,000 1.2507 HSBC (M) TRUSTEE BHD FOR CMS PREMIER FUND (4959) 16 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) 7,528,650 1.1770 17 CHAN CHEU LEONG 7,490,833 1.1711 18 ROBERT TAN CHUNG MENG 7,395,323 1.1562 19 HSBC NOMINEES (ASING) SDN BHD 6,520,350 1.0194 EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (JERSEY) 20 BBL NOMINEES (TEMPATAN) SDN BHD 6,375,000 0.9967 PLEDGED SECURITIES ACCOUNT FOR CHAN CHEU LEONG (304273) 21 HSBC NOMINEES (ASING) SDN BHD 5,656,000 0.8843 TNTC FOR FIDELITY SOUTHEAST ASIA FUND (FID INV TST) 22 HSBC NOMINEES (ASING) SDN BHD 4,634,800 0.7246 EXEMPT AN FOR HSBC PRIVATE BANK (SUISSE) S.A. (SPORE TST AC CL) 23 HSBC NOMINEES (ASING) SDN BHD 4,354,102 0.6807 EXEMPT AN FOR MORGAN STANLEY & CO. INCORPORATED 24 HSBC NOMINEES (ASING) SDN BHD 4,186,000 0.6544 BBH (LUX) SCA FOR FIDELITY FUNDS ASEAN 25 BDO CAPITAL CONSULTANTS SDN BHD 3,947,305 0.6171 26 WAH SEONG (MALAYA) TRADING CO. SDN BHD 3,831,398 0.5990 27 LEE LA KIM 3,595,000 0.5620 28 SBB NOMINEES (TEMPATAN) SDN BHD 3,552,625 0.5554 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) 29 VALUECAP SDN BHD 3,528,275 0.5516 30 CARTABAN NOMINEES (ASING) SDN BHD 3,446,250 0.5388 STATE STREET LONDON FUND NPDI FOR STRATEGIC ASIA FUND (UNIVSL INVST FD)
TOTAL: 459,862,641 71.8954 Wah Seong Corporation Berhad Annual Report 2007 164 Analysis of Shareholdings, ICULS & Warrants Holdings (Cont’d)
2. Irredeemable Convertible Unsecured Loan Stocks (“ICULS”)
ICULS as at 15 May 2008 Original ICULS issued : RM89,499,999.00 Balance ICULS remaining : RM54,025,477 Nominal/Par value per ICULS : RM1.00 per ICULS Class of ICULS : ICULS 2002/2012 Coupon Rate : 3% per annum payable semi-annually in arrears Voting Rights : None Total ICULS holders : 32
Distribution of ICULS holders as at 15 May 2008
Size of No. of % No. of % ICULS ICULS holders ICULS
Less than 100 3 9.3750 101 0.0002 100 - 1,000 19 59.3750 16,700 0.0309 1,001 - 10,000 5 15.6250 23,000 0.0426 10,001 - 100,000 – – – – 100,001 – 2,701,272 3 9.3750 2,343,887 4.3385 2,701,273 – 54,025,477 2 6.2500 51,641,789 95.5878
32 100 54,025,477 100
Directors’ ICULS holdings as at 15 May 2008
Name of Director No. of ICULS of RM1.00 each Direct Interest % Deemed Interest %
1. Robert Tan Chung Meng 1,300,352 2.4069 42,999,648 1 79.5914 2. Chan Cheu Leong – – – – 3. Tan Sri Ab Rahman Bin Omar – – – – 4. Pauline Tan Suat Ming – – 42,999,648 1 79.5914 5. Halim Bin Haji Din – – – – 6. Giancarlo Maccagno – – – – 7. Tan Sri Dato’ Dr Lin See Yan – – – – 8. Jen (B) Tan Sri Dato’ Seri Mohd Zahidi bin Haji Zainuddin – – – –
Notes: 1 Deemed interest held through Wah Seong (Malaya) Trading Co. Sdn Bhd pursuant to Section 6A of the Companies Act 1965. 165 Wah Seong Corporation Berhad Annual Report 2007 Analysis of Shareholdings, ICULS & Warrants Holdings (Cont’d)
List of Top Thirty (30) ICULS holders as at 15 May 2008 No. of % Name ICULS
1 WAH SEONG (MALAYA) TRADING CO. SDN BHD 42,999,648 79.5914 2 RANIVEST SDN BHD 8,642,141 15.9964 3 ROBERT TAN CHUNG MENG 1,300,352 2.4069 4 KOTA TANAH EQUITIES SDN BHD 600,000 1.1106 5 KOTA TANAH SDN BHD 443,535 0.8210 6 LIM BOON YET @ LIM BON LAI 8,000 0.0148 7 KOK MAY LENG 6,000 0.0111 8 LEOW BEE SUAN 3,000 0.0056 9 LEE AH CHIN 2,200 0.0041 10 WONG KAI CHEAN 2,000 0.0037 11 AW PENG SEAN 2,000 0.0037 12 YOW LAY KUN 1,000 0.0019 13 LEE LAM CHING 1,000 0.0019 14 CHUAH BAH HOCK 1,000 0.0019 15 TAN PENG SIN 1,000 0.0019 16 ONG CHEW KUAN 1,000 0.0019 17 LEE SON KWAI 1,000 0.0019 18 TAN SOK TING 1,000 0.0019 19 HIEW FOOK EIN 1,000 0.0019 20 HELMIAH BINTI HASAN 1,000 0.0019 21 LIM CHOON PENG 1,000 0.0019 22 NG CHEI HOW 1,000 0.0019 23 MUNIR KASMAN BIN ABDUL HAMID 1,000 0.0019 24 CHUA POOI SAN 1,000 0.0019 25 ONG CHEW WEE 1,000 0.0019 26 KHUZAIRI BIN ABDUL KARIM 1,000 0.0019 27 LIEW LEE LING 1,000 0.0019 28 LOH SAI ENG 400 0.0007 29 CHAN WONG LOONG 100 0.0002 30 CHUA KIM HOCK 83 0.0002
TOTAL: 54,025,459 100 Wah Seong Corporation Berhad Annual Report 2007 166 Analysis of Shareholdings, ICULS & Warrants Holdings (Cont’d)
3. Warrants
Warrants as at 15 May 2008 Original Warrants issued : 135,962,320 Exercise price of Warrant : RM3.17 per Warrant Exercise period : 5 years (Expiring 25 March 2013) Voting Rights : None Total Warrant holders : 2,197
Distribution of ICULS holders as at 15 May 2008
Size of No. of % No. of % Warrant Warrant holders Warrants
Less than 100 100 4.5517 4,535 0.0033 100 - 1,000 465 21.1652 251,941 0.1853 1,001 - 10,000 1,070 48.7028 4,246,044 3.1230 10,001 - 100,000 468 21.3018 15,845,869 11.6546 100,001 – 6,798,115 91 4.1420 61,231,573 45.0357 6,798,116 – 135,962,320 3 0.1365 54,382,358 39.9981
2,197 100 135,962,320 100
Directors’ Warrant holdings as at 15 May 2008
Name of Director No. of Warrants Direct Interest % Deemed Interest %
1. Robert Tan Chung Meng 1,878,743 1.3818 48,446,396 1 35.6322 2. Chan Cheu Leong 3,185,750 2.3431 7,638,174 2 5.6179 3. Tan Sri Ab Rahman Bin Omar 62,501 0.0460 – – 4. Pauline Tan Suat Ming 365,273 0.2687 48,507,247 3 35.6770 5. Halim Bin Haji Din – – – – 6. Giancarlo Maccagno 2,256,996 1.6600 – – 7. Tan Sri Dato’ Dr Lin See Yan – – – – 8. Jen (B) Tan Sri Dato’ Seri Mohd Zahidi bin Haji Zainuddin – – – –
Notes: 1 Deemed interest held through Wah Seong (Malaya) Trading Co. Sdn Bhd (“WST”), Wah Seong Enterprises Sdn Bhd (“WSE”) and Tan Kim Yeow Sdn Bhd (“TKYSB”) pursuant to Section 6A of the Companies Act 1965 (“Act”). 2 Deemed interest held through Midvest Holdings Sdn Bhd pursuant to Section 6A of the Act. 3 Deemed interest held through WST, WSE and TKYSB pursuant to Section 6A of the Act and include interests of her children. 167 Wah Seong Corporation Berhad Annual Report 2007 Analysis of Shareholdings, ICULS & Warrants Holdings (Cont’d)
List of Top Thirty (30) Warrant holders as at 15 May 2008 No. of % Name Warrants
1 WAH SEONG (MALAYA) TRADING CO. SDN BHD 36,623,624 26.9366 2 HSBC NOMINEES (ASING) SDN BHD 9,996,904 7.3527 EXEMPT AN FOR HSBC PRIVATE BANK (SUISSE) S.A. (NASSAU AC CL) 3 MIDVEST HOLDINGS SDN BHD 7,085,700 5.2115 4 TAN KIM YEOW SENDIRIAN BERHAD 6,562,104 4.8264 5 RANIVEST SDN BHD 5,761,428 4.2375 6 CIMSEC NOMINEES (TEMPATAN) SDN BHD 4,141,001 3.0457 WAH SEONG (MALAYA) TRADING COMPANY SDN BHD (ESOS POOL ACCOUNT) 7 KARYA INSAF (M) SDN BHD 2,750,000 2.0226 8 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 2,659,800 1.9563 CMS ASSET MANAGEMENT SDN BHD FOR EMPLOYEES PROVIDENT FUND 9 CARTABAN NOMINEES (ASING) SDN BHD 2,404,499 1.7685 EXEMPT AN FOR RBC DEXIA INVESTOR SERVICES TRUST (CLIENTS ACCOUNT) 10 HSBC NOMINEES (ASING) SDN BHD 2,256,996 1.6600 GIANCARLO MACCAGNO 11 HSBC NOMINEES (ASING) SDN BHD 2,245,200 1.6513 EXEMPT AN FOR HSBC PRIVATE BANK (SUISSE) S.A. (SPORE TST ACCL) 12 TAN YU WEI 2,130,000 1.5666 13 LIN JO-YI 2,000,000 1.4710 14 ROBERT TAN CHUNG MENG 1,878,743 1.3818 15 BHLB TRUSTEE BERHAD 1,667,150 1.2262 PACIFIC RECOVERY FUND 16 CHAN CHEU LEONG 1,322,250 0.9725 17 HSBC NOMINEES (ASING) SDN BHD 1,150,650 0.8463 EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (JERSEY) 18 BBL NOMINEES (TEMPATAN) SDN BHD 1,125,000 0.8274 PLEDGED SECURITIES ACCOUNT FOR CHAN CHEU LEONG (304273) 19 HSBC NOMINEES (ASING) SDN BHD 1,091,250 0.8026 HPBS SG FOR PARK AVENUE GROUP CORPORATION 20 KAY YEW KIANG 1,000,000 0.7355 21 TEH SAY SEONG 820,000 0.6031 22 LEMBAGA TABUNG ANGKATAN TENTERA 745,000 0.5479 23 HSBC NOMINEES (ASING) SDN BHD 703,150 0.5172 EXEMPT AN FOR CREDIT SUISSE (SG BR-TST-ASING) 24 GAN KIM LEONG 700,000 0.5148 25 CHOON SIAW KAM 690,051 0.5075 26 WAH SEONG (MALAYA) TRADING CO. SDN BHD 676,130 0.4973 27 LAU LAY SENG 611,000 0.4494 28 AFFIN INVESTMENT BANK BERHAD 600,000 0.4413 CLR (510) FOR LEMBAGA TABUNG ANGKATAN TENTERA 29 RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD 552,474 0.4063 PLEDGED SECURITIES ACCOUNT FOR MIDVEST HOLDINGS SDN BHD-1031031 30 TEH CHIN CHOR 546,400 0.4019
TOTAL: 102,496,504 75.3857 Wah Seong Corporation Berhad Annual Report 2007 168 Notice of Eighth Annual General Meeting
NOTICE IS HEREBY GIVEN that the Eighth Annual General Meeting of WAH SEONG CORPORATION BERHAD (“the Company”) will be held at Perdana I & II, Level 3, Cititel Hotel, 66 Jalan Penang, 10000 Penang, Malaysia on Tuesday, 24 June 2008 at 3.00 p.m. for the following purposes:-
1. To receive and adopt the Financial Statements of the Company and the Group for the Ordinary financial year ended 31 December 2007 and the Reports of the Directors and Auditors Resolution 1 thereon.
2. To re-elect the following Directors who retire pursuant to Article 98 of the Company’s Articles of Association: Ordinary (i) Robert Tan Chung Meng Resolution 2 (ii) Halim Bin Haji Din Resolution 3 (iii) Jen (B) Tan Sri Dato’ Seri Mohd Zahidi Bin Haji Zainuddin Resolution 4
3. To approve Directors’ Fees of RM315,000.00 for the financial year ended 31 December Ordinary 2007. Resolution 5
4. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company for the Ordinary ensuing year and to authorize the Directors to fix their remuneration. Resolution 6
5. As Special Business:
To consider, and if thought fit, to pass the following resolutions, with or without modifications thereto:-
a. Power to issue shares pursuant to Section 132D, Companies Act, Ordinary 1965 Resolution 7
“THAT subject always to the Companies Act, 1965 (“the Act”), the Articles of Association of the Company and approvals from the relevant governmental and/or regulatory bodies where such approvals shall be necessary, authority be and is hereby given to the Directors pursuant to Section 132D of the Act, from time to time to issue and allot ordinary shares from the unissued capital of the Company upon such terms and conditions and at such times as may be determined by the Directors of the Company to be in the interest of the Company provided always that the aggregate number of shares to be issued pursuant to this resolution does not exceed 10% of the issued capital of the Company for the time being AND THAT the Directors be also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on the Bursa Malaysia Securities Berhad (“Bursa Securities”) AND THAT such authority shall continue in force until the conclusion of the next Annual General Meeting (“AGM”) of the Company or the expiration of the period within which the next AGM is required by law to be held or revoked/varied by resolution passed by the shareholders in general meeting, whichever is the earlier.” 169 Wah Seong Corporation Berhad Annual Report 2007 Notice of Eighth Annual General Meeting (Cont’d)
b. PROPOSED RENEWAL OF EXISTING AUTHORITY TO BUY-BACK ITS OWN Ordinary SHARES BY THE COMPANY Resolution 8
“THAT subject to the Act, rules, regulations and orders made pursuant to the Act, provisions of the Company’s Memorandum and Articles of Association and the Listing Requirements of the Bursa Malaysia Securities Berhad (“Listing Requirements”) and any other relevant authorities, the Directors of the Company be hereby unconditionally and generally authorised to make purchases of ordinary shares of RM0.50 each in the Company’s issued and paid-up capital through the Bursa Securities at any time and upon such terms and conditions and for such purposes as the Directors may, in their discretion deem fit, subject to the following:-
i) the maximum number of ordinary shares which may be purchased and/or held by the Company shall be ten per centum (10%) of the issued and paid-up ordinary share capital of the Company for the time being (“WSC Shares”);
ii) the maximum fund to be allocated by the Company for the purpose of purchasing the WSC Shares shall not exceed the aggregate of the retained profits and share premium account of RM191.6 million and RM79.4 million respectively of the Company as at 31 December 2007;
iii) the authority conferred by this resolution will be effective immediately upon the passing of this resolution and will continue in force until:-
a) the conclusion of the next AGM of the Company, unless by ordinary resolution passed at the meeting, the authority is renewed, either unconditionally or subject to conditions;
b) the expiration of the period within which the next AGM is required by law to be held (unless earlier revoked or varied by ordinary resolution of the shareholders of the Company in general meeting) but not so as to prejudice the completion of purchase(s) by the Company made before the aforesaid expiry date and, in any event, in accordance with the Listing Requirements or any other relevant authorities;
iv) upon completion of the purchase(s) of the WSC Shares by the Company, the Directors of the Company be hereby authorised to deal with the WSC Shares in the following manner:-
a) to cancel the WSC Shares so purchased; or
b) to retain the WSC Shares so purchased as treasury shares for distribution as dividend to the shareholders and/or resale on the market of Bursa Securities and/or for cancellation subsequently; or
c) to retain part of the WSC Shares so purchased as treasury shares and cancel the remainder; or
d) in such other manner as the Bursa Securities and such other relevant authorities may allow from time to time.
AND THAT the Directors of the Company be and are hereby authorised to take all such actions and steps as are necessary or expedient to implement or to effect the purchase of WSC shares.” Wah Seong Corporation Berhad Annual Report 2007 170 Notice of Eighth Annual General Meeting (Cont’d)
c. PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE FOR EXISTING Ordinary RECURRENT RELATED PARTY TRANSACTIONS AND PROVISION Resolution 9 OF FINANCIAL ASSISTANCE BETWEEN THE COMPANY AND/OR ITS SUBSIDIARIES
“THAT, subject to the provisions of the Listing Requirements, approval be and is hereby given to the Company and/or its subsidiaries (“WSC Group”) to enter into recurrent related party transactions of a revenue or trading nature and the provision of financial assistance as specified in Section 2.5 of the Circular to Shareholders dated 2 June 2008 which transactions are necessary for the day-to-day operations in the ordinary course of business of WSC Group on 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 of the Company and that such approval shall continue to be in force until:-
i) the conclusion of the next AGM of the Company, at which time it will lapse, unless renewed by a resolution passed at that meeting;
ii) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or
iii) revoked or varied by resolution passed by the shareholders of the Company in a general meeting;
whichever is earlier.
AND THAT the Directors be and are hereby empowered to complete and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorized by this resolution.” d. PROPOSED NEW SHAREHOLDERS’ MANDATE FOR ADDITIONAL RECURRENT Ordinary RELATED PARTY TRANSACTIONS AND PROVISION OF FINANCIAL Resolution 10 ASSISTANCE BETWEEN THE COMPANY AND/OR ITS SUBSIDIARIES
“THAT, subject to the provisions of the Listing Requirements, approval be and is hereby given to the WSC Group to enter into recurrent related party transactions of a revenue or trading nature and the provision of financial assistance as specified in Section 2.5 of the Circular to Shareholders dated 2 June 2008 which transactions are necessary for the day-to-day operations in the ordinary course of business of WSC Group on 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 of the Company and that such approval shall continue to be in force until:-
i) the conclusion of the next AGM of the Company, at which time it will lapse, unless renewed by a resolution passed at that meeting;
ii) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or
iii) revoked or varied by resolution passed by the shareholders of the Company in a general meeting;
whichever is earlier. 171 Wah Seong Corporation Berhad Annual Report 2007 Notice of Eighth Annual General Meeting (Cont’d)
AND THAT the Directors be and are hereby empowered to complete and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorized by this resolution.”
6. To transact any other business of which due notice has been given.
BY ORDER OF THE BOARD
LAM VOON KEAN (MIA 4793) LAU BEE GEE (MAICSA 0817743) Joint Secretaries Penang
Dated: 2 June 2008
Notes:
1. A proxy may but need not be a Member of the Company and the provision of Section 149(1)(b) of the Act shall not apply to the Company. If a Member appoints 2 proxies, the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.
2. Where a Member of the Company is an authorized nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.
3. If the appointor is a corporation, the proxy form must be executed under the seal or under the hand of its officer or attorney duly authorized in writing.
4. To be valid, the proxy form must be deposited at the Company’s Registered Office at Suite 2-1, 2nd Floor, Menara Penang Garden, 42A Jalan Sultan Ahmad Shah, 10050 Penang, not less than forty-eight (48) hours before the time appointed for holding the meeting or at any adjournment thereof.
Explanatory Note on Special Business
1. The Ordinary Resolution No. 7 if passed, will give the Directors of the Company, from the date of the Eighth AGM authority to issue and allot ordinary shares from the unissued capital of the Company being for such purposes as the Directors consider would be in the interest of the Company. This authority shall continue to be in force until the conclusion of the next AGM or the expiration of the period within which the next AGM is required by law to be held or revoked/varied by resolution passed by the shareholders in general meeting, whichever is earlier.
2. Further details on Ordinary Resolutions No. 8, 9 and 10 are as set out in the Circular to Shareholders of the Company dated 2 June 2008, which is despatched together with the Company’s 2007 Annual Report. Wah Seong Corporation Berhad Annual Report 2007 172 Statement Accompanying Notice of Eighth Annual General Meeting (“AGM”)
1. Re-election of Directors
Names of individuals being eligible for re-election at the Eighth AGM of WSC are as follows:-
i. Robert Tan Chung Meng – retiring pursuant to Article 98 of the Company’s Articles of Association.
ii. Halim Bin Haji Din – retiring pursuant to Article 98 of the Company’s Articles of Association.
iii. Jen (B) Tan Sri’ Dato’ Seri Mohd – retiring pursuant to Article 98 of the Zahidi Bin Haji Zainuddin Company’s Articles of Association.
Further details of the individuals who are standing for re-election or re-appointment as Directors are as set out in the Profile of the Board of Directors on pages 12 to 14 of this Annual Report.
Information relating to the Directors’ interests in the Company are as stated on pages 162, 164 and 166 of this Annual Report.
2. Details of Attendance of Directors at the Board of Directors’ Meetings
Date of No. of Board Name of Directors Appointment Meetings Attended
Robert Tan Chung Meng 22 May 2002 6/6 Chan Cheu Leong 22 May 2002 6/6 Halim Bin Haji Din 22 May 2002 6/6 Pauline Tan Suat Ming 22 May 2002 6/6 Tan Sri Ab Rahman Bin Omar 1 October 2003 5/6 Giancarlo Maccagno 1 June 2004 6/6 Tan Sri Dato’ Dr Lin See Yan 20 July 2004 6/6 Jen (B) Tan Sri Dato’ Seri Mohd Zahidi Bin Haji Zainuddin 29 November 2005 6/6
3. Place, Date and Time of the Eighth AGM
Place : Perdana I & II, Level 3, Cititel Hotel, 66 Jalan Penang, 10000 Penang
Date & Time : 24 June 2008 at 3.00 p.m. ✄ 4. 3. 2. 1. Notes:- Signed this______dayof______2008 Signature ofShareholder thereof24 June2008,at3.00p.m.oranyadjournment inthemannerindicatedbelow. Meeting of the Company to be held at Perdana I & II, Level 3, Cititel Hotel, 66 Jalan Penang, 10000 Penang, Malaysia on Tuesday,or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf, at the Eighth Annual General of_ (FullNameinblockletters)(NewandOldNRICNo.) ______NRICNo._ being amember/membersofWAH SEONGCORPORATION BERHADhereby appoint_ of_ NRIC orCompanyNo.______CDSAccount______given, theproxy willvoteorabstainathis/herdiscretion.) is voting to as direction specific no If vote. your cast to wish you how above provided space the in “x” an with indicate (Please I/We_ 0 NewMandateforadditionalRRPTand provision ofFA RenewalofMandateforExistingRRPTandFA 10. RenewalofShare Buy-BackMandate 9. AuthoritytoDirectors toissueshares 8. Re-appointmentofMessrsPricewaterhouseCoopersasAuditors 7. Approval ofDirectors’ Fees 6. Re-electionofJen(B)Tan SriDato’Seri MohdZahidiBinHajiZainuddin 5. Re-electionofHalimBinHajiDin 4. Re-electionofRobertTan ChungMeng 3. AdoptionofReportsandAuditedFinancialStatements 2. 1. RESOLUTIONS NO.
______holding the meeting or at any adjournment thereof.holding themeeting oratanyadjournment for appointed time beforethe hours (48) forty-eight than less not Penang, 10050 Shah, Ahmad Sultan Jalan Garden,42A To be valid, the proxy form must be deposited at the Company’s Registered Office at Suite 2-1, 2 duly authorizedinwriting. If the appointor is a corporation, the proxy form must be executed under the seal or under the hand of its officer or attorney Company standingtothecredit ofthesaidsecuritiesaccount. the of sharesordinary with holds it account securities each of respect in proxy (1) one least at appoint may it 1991, Act, Where a Member of the Company is an authorized nominee as defined under the Securities Industry (Central Depositories) proportions ofhisholdingstoberepresented byeachproxy. shall not apply to the Company. If a Member appoints 2 proxies, the appointments shall be invalid unless he specifies the A proxy may but need not be a Member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 WAH SEONGCORPORATION BERHAD
(Company No.:495846-A) (Full Nameinblockletters) (Incorporated inMalaysia) PROXY FORM (Full Address) (Full Address) ______Shareholder isaCorporateMember Company Sealtobeaffixed here if ______Number ofOrdinary Shares held FOR nd Floor, Menara Penang AGAINST
Fold this flap for sealing
Then fold here
AFFIX STAMP
THE COMPANY SECRETARY WAH SEONG CORPORATION BERHAD Registered Office: Suite 2-1, 2nd Floor, Menara Penang Garden 42A Jalan Sultan Ahmad Shah 10050 Penang
1st fold here Corporate Directory Company & Address Name / Contact No. E-Mail & Website CORPORATE WAH SEONG CORPORATION BERHAD Chan Cheu Leong, Group Chief Executive Officer / Managing Director [email protected] No. 59-2, The Boulevard, Mid Valley City Giancarlo Maccagno, Deputy Group Managing Director www.wahseong.com Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia. Tel: +603-2288 1212 Fax: +603-2288 1272
WASCO ENERGY LTD Giancarlo Maccagno, Chief Executive Officer [email protected] No. 59-8, The Boulevard, Mid Valley City Tel: +603-2287 8660 Fax: +603-2287 8991 www.wascoenergy.com Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia. OIL AND GAS DIVISION
WASCO COATINGS LTD Frank Twynam, Group Chief Executive Officer [email protected] No. 59-8, The Boulevard, Mid Valley City Tel: +603-2287 8990 Fax: +603-2287 8991 Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia. Steve Lewis, General Manager Mobile: +1-832-677 2030
PPSC GROUP Kevin Revere, General Manager (Operations) [email protected] No. 59-9, The Boulevard, Mid Valley City Tel: +603-2287 8990 Fax: +603-2287 8991 / 8992 www.ppsc.com.my Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia.
KANSSEN (YADONG) PIPE COATING SERVICES LTD Yap Mun Thoe, General Manager [email protected] Suite B2901 Eagle Run Plaza, No 26, Xiaoyun Road, Tel: +86-10-8458 0258 Fax: +86-10-6460 5240 www.kanssen.com Chaoyang District, Beijing 100016, People’s Republic of China.
DEEPWATER CORROSION SERVICES INC. Jim Britton, Chief Executive Officer [email protected] 10851 Train Court, Houston, Texas 77041, U.S.A. Tel: +1-713-983 7117 Fax: +1-713-983 8858 www.stoprust.com
MATERIAL PERFORMANCE ENGINEERING SDN BHD Edgar Lewis, Chief Executive Officer [email protected] A-13A-1, North Point, Mid Valley City, Tel: +603-2282 6331 Fax: +603-2282 7331 www.mpe.com.my 1 Medan Syed Putra Utara, 59200 Kuala Lumpur, Malaysia.
TURN KEY PIPELINE SERVICES BV Wayne Keith Buttimore, Chief Executive Officer [email protected] Vonderweg 37A, 7468 DC Enter, The Netherlands Tel: +31-54738 6330 Fax: +31-54738 1885 www.tk-ps.com
GAS SERVICES INTERNATIONAL GROUP Lee Turnbull, Chief Executive Officer [email protected] 7, Pandan Road, Singapore 609256. Tel: +65-6898 0388 Fax: +65-6898 0830 www.gasservicesinternational.com
JUTASAMA SDN BHD Chin Phoy Hoy, Managing Director/Chief Executive Officer [email protected] Lot 1930, Batu 7, Jalan Bukit Kemuning, Seksyen 32, Lee Yee Chong, Executive Director www.jutasama.com 40460 Shah Alam, Selangor, Malaysia. Tel: +603-5123 0088 Fax: +603-5123 0077
MACKENZIE INDUSTRIES SDN BHD Lim Kho Khoon, Chief Executive Officer [email protected] Lot 1930, Batu 7, Jalan Bukit Kemuning, Tel: +603-5123 0018 Fax: +603-5123 0028 Seksyen 32, 40460 Shah Alam, Selangor, Malaysia.
MACKENZIE HYDROCARBONS (AUSTRALIA) PTY LTD Gary Mackenzie, Chief Executive Officer mackenzieprojects@ 648, Nicholson Street, North Fitzroy, Tel: +613-9482 3445 Fax: +613-9482 1195 bigpond.com.au 3068 Victoria, Australia.
WASCO TECHNOLOGIES PTE LTD Ruben Ang, Chief Executive Officer [email protected] No. 1, Jalan Samulun, Singapore 629119. Tel: +65-6266 8878 Fax: +65-6898 1348
DELCO AUSTRALIA PTY LTD Mel Whyte, Chief Executive Officer [email protected] 75 Main Street, Kangaroo Point, Queensland 4169, Australia Tel: +61-7-3456 1300 Fax: +61-7-3456 1399 www.delco.com.au GPO Box 5065, Brisbane, QLD 4001, Australia
TOTAL OIL TECHNOLOGIES SDN BHD Mohamed Siraj Bin Abdul Razack, Chief Executive Officer [email protected] No. 59-3, The Boulevard, Mid Valley City Tel: +603-2287 2990 Fax: +603-2287 2991 Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia.
BOTCO SDN BHD Mohamed Siraj Bin Abdul Razack, Chief Executive Officer [email protected] No. 59-10, The Boulevard, Mid Valley City Tel: +603-2287 8996 Fax: +603-2287 8997 www.botco.com.my Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia.
TOT INSPECTION SDN BHD Amir Hamzah bin Mohd Taha, Director [email protected] No. 59-10, The Boulevard, Mid Valley City Tel: +603-2287 8996 Fax: +603-2287 8997 Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia.
DRILTOOLS INTERNATIONAL FZCO Rajan Abraham, Chief Executive Officer [email protected] Dubai Airport Free Zone, Unit C4, Dubai, UAE. Tel: +971-4299 0038 Fax: +971-4299 0048 www.driltools.net
DRILBITS INTERNATIONAL PTE LTD Rajan Abraham, Chief Executive Officer [email protected] Plot No. 66, MIDC Estate, Satpur Tel: +91-253-235 0215 Fax: +91-253-235 2710 www.drilbits.com Nashik - 422 007, Maharashtra, India.
WAH SEONG CHINA LIMITED Don Qian, Chief Executive Officer [email protected] Suite 1108, Sino Life Tower, Tel: +86-21-5836 1700 Fax: +86-21-5836 1799 www.wahseongchina.com No. 707, Zhangyang Road, 200120 Shanghai, People’s Republic of China
ASHBURN INTERNATIONAL INC Don Qian, Chief Executive Officer [email protected] 5800 Corporate Drive, Suite B-5, Tel: +1-713-776-8282 Fax: +1-713-776 1700 Houston, Texas 77036, U.S.A.
LTT OIL & GAS NIGERIA LTD Santosh Varma, Sales Manager [email protected] Plot 113, Trans Amadi Industrial Layout, Tel: +234-84-461 211 Port Harcourt, Nigeria. INDUSTRIAL SERVICES DIVISION
SYN TAI HUNG TRADING SDN BHD Chin Yoong Ngok, Chief Executive Officer [email protected] No. 59-5, The Boulevard, Mid Valley City Soh Chee Gee, Executive Director www.stht.com.my Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia. Tel: +603-2287 9221 Fax: +603-2287 9225
PETRO-PIPE INDUSTRIES (M) SDN BHD Nge Kwan Min, Chief Executive Officer [email protected] 2431, Lorong Perusahaan 10, Prai Industrial Estate, Tel: +604-390 7960 Fax: 604-398 1741 www.ppi.com.my 13600 Prai, Penang, Malaysia.
PMT INDUSTRIES SDN BHD Hong Ching Kiang, Executive Director [email protected] Lot 1929, Batu 7, Jalan Bukit Kemuning, Seksyen 32, Chia Kim Har, Director www.pmtindustries.com 40460 Shah Alam, Selangor, Malaysia. Tel: +603-5122 5522 Fax: +603-5122 5533
PHOENIX INDUSTRIES SDN BHD Yap Chin Gak, Executive Director [email protected] Lot 1929, Batu 7, Jalan Bukit Kemuning, Seksyen 32, Tel: +603-5121 1513 Fax: +603-5121 1685 40460 Shah Alam, Selangor, Malaysia.
WAH SEONG-BOUSTEAD CO. LTD Bernard Pe-Win, Chief Executive Officer [email protected] 21-22, Bahosi Complex, Bogyoke Aung San Street, Tel: +951-211 226 / 789 Fax: +951-211 225 Lanmadaw Township, Yangon, Myanmar.
WAH SEONG CORPORATION BERHAD Thomas Phan Van Truong, Head, Country (Vietnam) [email protected] (VIETNAM REPRESENTATIVE OFFICE) Nguyen Huu Tuyen, General Representative 76, Cach Mang Thang Tam, 5th Floor, Ward 6, Tel: +84-299 2117/2118 Fax: +84-299 2117 District 3, Ho Chi Minh City, Vietnam