F O C U S
ANNUAL REPORT 2004 Contents
2 Notice of Annual General Meeting 4 Statement Accompanying Notice of AGM 6 Corporate Information 7 Corporate Structure 8 Profile of Directors 12 Environmental Policy 13 Financial Highlights 14 Chairman's Statement 17 Corporate Governance 20 Statement on Internal Control 22 Report of the Audit Committee 26 Financial Statements for Year Ended 31 December 2004 57 List Of Properties 58 Statistic Of Shareholdings 60 Warrant Statistics 63 Proxy Form Enclosed Calligraphy is a beautiful art form with rich history background. Through the medium of form, way of handling the brush, presentation, and style, calligraphy shares the same 'focus' with business, where it conveys the moral integrity, character, relentless growth, and the ultimate goal for the optimum results.
Calligraphy is a pervasive art of expression and a branch of learning, which is applicable to the competitive world of business regardless of race, background or religion. It is rich in content, including the evolution of writing styles, development and rules of technique, history, etc, the same traits and attribution being practised by the establishment.
Inspired by this art form, the Company strives to achieve greater excellence in their endeavours, and focuses intelligently on boosting the momentum of growth uncompromisingly Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Fourteenth Annual General Meeting of MINHO (M) BERHAD will be held at Bilik Klang, Kelab Shah Alam Selangor, Jalan Istana Kayangan, 40704 Shah Alam, Selangor Darul Ehsan at 10.00 a.m on 29 June 2005 to transact the following business :
AGENDA
1. To receive and adopt the Audited Financial Statements for the year ended 31 December 2004 and the reports of Directors and Auditors thereon. Resolution 1
2. To re-elect the following Directors in accordance with articles 83 of the Company’s Articles of Association.
i) Christopher Wan Tiong Seah Resolution 2 ii) Ng Hoe Chang Resolution 3 iii) Khibir Bin Razali Resolution 4
3. To approve the payment of Directors’ fees. Resolution 5
4. To re-appoint Messrs A. Razak & Co. as auditors for the ensuing year and to authorize the Directors to fix their remuneration. Resolution 6
As Special Business To consider and, if thought fit, pass the following Resolution as Ordinary Resolution:
5. P roposed Authority to Allot Shares Pursuant to Section 132D of the Companies Act, 1965 “That, in pursuant of the Section 132D of the Companies Act, 1965 and the Articles of Association of the Company, the Directors be and hereby authorized to allot and issue shares in the Company at any time until the conclusion of the next Annual General Meeting and upon such terms and conditions and such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued does not exceed ten percentum (10%) of the issued and paid-up share capital of the Company for the time being and that the Directors be and are also empowered to obtain the approval for the listing and quotation for the additional shares so issued in the Bursa Malaysia.” Resolution 7
6. P roposed Renewal of Shareholders’ Mandate and New Share h o l d e r s ’ Mandate for Recurrent Related Party Transaction “ RRPT” of a Revenue or Trading Nature to enter into and to give effect to the specified RRPT with the specified Related Parties as stated in Section 2.3 of the circular to shareholders to dated 7 June 2005
“THAT approval be and hereby given to he Company and its subsidiary companies to the Proposed Renewal of Shareholders’ Mandate and New Shareholders’ Mandate for RRPT of a Revenue or Trading Nature to enter into and to give effect to the specified RRPT with the specified Related Parties as stated in Section 2.3 of the Circular to Shareholders dated 7 June 2005 which are necessary for the Group’s day to day operations subject to the following:-
THAT the approval shall continue to be in force until:
a) the conclusion of the next Annual General Meeting (“AGM”) of the Company at which time it will lapse, unless by a resolution passed at the general 2 meeting whereby the authority is renewed; or
b) 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 Companies Act, 1965 (“the ACT”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the ACT); or
M I N H O ( M ) B E R H A D Notice of Annual General Meeting
c) revoked or varied by resolution passed by the Shareholders in a general meeting,
whichever is earlier;
AND THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things as they may consider expedient or necessary to give effect to the proposed PPRT with the abovenamed Related Parties.” Resolution 8
7. To transact any other business for which due notice shall be given in accordance with the Company’s Articles of Association and the Companies Act, 1965.
By order of the Board,
Tan Choon Hian (2851 MIA)
Monalisa binti Ali (LS 0008542) Klang
Company Secretaries 7 June 2005
Notes on appointment of proxy:
1. A member of the Company entitled to attend and vote at the abovementioned general meeting may appoint a proxy to attend and vote in his stead. A proxy may but need not be a member of the Company.
2. Where a member appoints two (2) proxies, the appointment shall be invalid unless he specifies the proportion of his shareholding to be represented by each proxy.
3. The proxy Form must be deposited at the Company’s Registers Office not less than 48 hours before the time appointed for holding the meeting.
Explanatory notes on special business:
4. Resolution Pursuant to Section 132D of the Companies Act, 1965. The ordinary resolution proposed under Resolution 7, if passed, will renew the powers given to the Directors at the last Annual General Meeting authority to issue up to ten percentum (10%) of the issued share capital of the Company for the time being for such purposes as the Directors consider would be in the interests of the Company. This authority will, unless revoked or varied by the Company in general meeting, expires at the next Annual General Meeting. 5. Resolution Pursuant to Renewal of Shareholders’ Mandate and New Shareholders’ Mandate for Recurrent Related 3 Party Transactions of a Revenue or Trading Nature. The proposed Ordinary Resolution 8, if passed, will empower the Company and it’s subsidiaries to conduct recurrent related party transaction of a revenue in nature which are necessary for the Company and it’s subsidiaries day-to-day operation, and will eliminate the need to convene separate general meetings from time to time to seek shareholders’ approval. This will substantially reduce the expenses associated with the convening of general meetings on a adhoc basis, improve administrative efficiency and allow manpower resources and time channeled towards attaining other corporate objectives.
The detailed information on Recurrent Related Party Transactions is set out in the Circular to Shareholders dated 7 June 2005, which was dispatched together with this Annual Report.
A N N U A L R E P O R T 2 0 0 4 Statement Accompanying Notice of AGM
Pursuant to paragraph 8.28 (2) of the Bursa Malaysia Securities Berhad Listing Requirements appended are:
During the financial year ended 31 Dec 2004, four board meetings were held.
Date of Meeting Time Place
27 February 2004 11.00a.m Minho (M) Berhad, Klang
26 May 2004 11.00a.m Minho (M) Berhad, Klang
27 August 2004 11.00a.m Minho (M) Berhad, Klang
29 November 2004 11.00a.m Minho (M) Berhad, Klang
Details of attendance at the meeting by directors held in the financial year ended 31 December 2004 are as follows:-
Name of Directors Date of Appointment No of Meetings Attended
Y.A.M Tunku Tan Sri Imran 14 February 1992 1/2 ibni Tuanku Ja’afar ( Resigned on 28 June 2004)
Dato’ Ismail bin Yusof 28July 1994 2/4
Dato’ Dr. Salleh Mohd Nor 4 December 1995 4/4
Dato’ Loo Keng An @ Lee Kim An 16 July 1990 4/4
Yap Leong Seng 13 January 1993 4/4
Loo Say Leng 13 January 1993 4/4
Ng Hoe Chang 17 September 1999 4/4
Christopher Wan Tiong Seah 5 April 1999 4/4
Khibir bin Razali 28 June 2002 4/4
Name of Directors who are standing for re-election as in Agenda 2 of the Notice of the AGM are as follows:-
Name of Directors
(i) Christopher Wan Tiong Seah (ii) Ng Hoe Chang (iii) Khibir Bin Razali
Details of Directors standing for re-election are as set out in pages 8 to 10.
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M I N H O ( M ) B E R H A D Calligraphy is the highest form of art, and selecting the appropriate brush is very crucial; business, a competitive art form, also requires careful utilizations of the right tools to succeed. Each stroke emphasizes on the importance of precision, this is the same attitude adopted by the company to ‘focus’ on the matter at hand and in choosing the right tools/ strategies to solve any problems, achieving greater potential, efficiency and productivity. Corporate Information
BOARD OF DIRECTORS
Y.A.M. Tunku Tan Sri Imran Ibni Tuanku Ja'afar Christopher Wan Tiong Seah (resigned on 28/06/04) Independent Non - Executive Director Chairman/ Independent Non - Executive Director Loo Say Leng Dato' Loo Keng An @ Lee Kim An Executive Director Managing Director Ng Hoe Chang Dato' Ismail bin Yusof Executive Director Independent Non - Executive Director Encik Khibir bin Razali Dato' Dr. Salleh Bin Mohd Nor Executive Director Independent Non - Executive Director Encik Faizal bin Abd Majid Yap Leong Seng (Alternate Director to Khibir Bin Razali) Executive Director
SECRETARY :Tan Choon Hian (MIA 2851) Monalisa binti Ali (LS 0008542)
AUDITORS : A. Razak & Co. 51-2D, 2nd Floor, Jalan Pandan 3/10, Pandan Jaya, 55100 Kuala Lumpur. Tel : 03-9282 9032 Fax : 03-9285 3870
REGISTERED : 31A, Jalan Satu, Kawasan 16 OFFICE Berkeley Town Centre 41300 Klang Selangor Darul Ehsan Tel : 03-3342 8602 Fax : 03-3341 9162
REGISTRARS : Symphony Share Registrars Sdn. Bhd. Level 26, Menara Multi Purpose No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel : 03-2721 2222 Fax : 03-2721 2530
BANKERS : Alliance Bank Malaysia Berhad HSBC Bank Malaysia Berhad 6 LISTING : Bursa Malaysia Securities Berhad (BMSB), Main Board
M I N H O ( M ) B E R H A D Corporate Structure
MINHO (M) BERHAD
SYKT MINHO KILNING VICTORY ENTERPRISE SDN BHD SDN BHD Kiln drying processing (100%) Moulding activities (100%) INDAH PAPER INDS. SDN BHD Industrial paper bags (100%)
SYKT VINCO TIMBER INDS. SDN BHD LIONVEST CORP (P) SDN BHD Kiln drying and Chemical Logging activities and integrated Preservatives Treatment (100%) timber complex (100%)
WOODVATION SDN BHD LIONVEST TIMBER INDS. Dealing in timber supplies (100%) SDN BHD Sawmill (51%) COSTRACO SDN BHD Export of processed timber products LIONVEST TRADING (51%) (UK) LTD Trading of processed timber products (100%) INDAH WOOD PRODUCT SDN BHD 7 Export of processed timber products (100%)
A N N U A L R E P O R T 2 0 0 4 Profile of Directors
Y.A.M. TUNKU TAN SRI IMRAN IBNI TUANKU JA’AFAR, aged 57 Non-Executive Director, Chairman and Chairman to the Audit Committee and Nomination Committee until 28 June 2004. He graduated with a Bachelor of Law Degree (Honour) from Nottingham University and was called to the Bar at Gray’s Inn in 1971. He was later appointed to the Board of Minho on 14th February 1992. He has held senior management position with companies including Perbadanan Nasional Berhad from 1971 to 1972 and Haw Par (Malaysia) Sdn. Bhd. from 1973 to 1975. He was the Managing Director and Group Chief Executive of Antah Holding Berhad from 1977 to February 2001, and he sits on the Board of several other public listed companies including Aluminium Company if Malaysia Berhad, Malayan Cement Berhad, Island and Peninsular Berhad and Austral Enterprise Berhad, all of which are listed on the Bursa Malaysia. He has no family relationship with other Directors or major shareholders of Minho, has no conflict of interest with Minho and has no convictions for offences within the past ten years.
DATO’ LOO KENG AN @ LEE KIM AN, aged 59 Managing Director. He was appointed to the Board of Minho on 16 July 1990. Dato’ Loo has more than 20 years of experience in the timber business. In 1970, he was contractor providing lighterage service to the timber companies for Mahawangsa Jetty Sdn. Bhd. in Port Klang. Over the years, he had built up extensive experience on kiln drying, sawmilling, export of sawn timber and logging. In 1977, together with Ng Kim Kee, they founded Minho kilning to provide timber kiln drying services and he has been the key to success of Minho. He has no conflict of interest with the company other than the recurrent related party transactions as disclosure at the company AGM and has no convictions for offences within the past ten years.
DATO’ ISMAIL BIN YUSOF, aged 61 was appointed to the Board of Minho on 28 July 1994. Independent Non-Executive Director and member of the Audit Committee, Remuneration Committee and Nomination Committee. He was appointed to replace Y.A.M. Tunku Tan Sri Imran as Chairman and Chairman to the Audit Committee on 28 June 2004 and 27 August 2004 respectively. He graduated from the University of Malaya in 1967 with a Bachelor of Arts (Honours) degree. After which, he joined the foreign services and held various positions in the Foreign Office and the Malaysian Embassies in Bangkok and Rome up to March 1973. After that, he served the Government on various capacities in the Ministry of Home Affairs, Ministry of Defence, Ministry of Transport and finally Deputy Secretary General, General Ministry of Federal Territory and Undersecretary, Federal Territory Development Division of the Prime Minister Department. Currently, Dato’ Ismail bin Yusof sits on the Board of South Malaysia Industrial Berhad. He has no family relationship with other Directors or major shareholders of Minho, has no conflict of interest with Minho and has no convictions for offences within the past ten years.
YAP LEONG SENG, aged 52. Executive Director. Mr. Yap was appointed to the Board of Minho on 13 January 1993. He joined Minho Kilning in 1977 as Operations Manager. He has been involved in the timber business for more than 20 years and is familiar with the timber and forestry industries in Malaysia. He has been the Chairman of the Timber Kilning Asscociation of Selangor since 1990 and currently is currently the managing director of Victory Enterprise Sdn. Bhd. Mr. Yap is the brother-in-law of Dato’ Loo Keng An @ Lee Lim An, Managing Director of the Group. He has no conflict of interest with the company other than the recurrent related party transactions as disclosure at the company AGM and has no 8 convictions for offences within the past ten years.
M I N H O ( M ) B E R H A D Profile of Directors
LOO SAY LENG, aged 37, was appointed to the Board on Minho on 13 January 1993. He is the member of the Audit Committee, Remuneration Committee and Nomination Committee. He graduated with a Bachelor of Science degree majoring in Finance from the California State University, Fresno, United States of America. He is the marketing manager responsible for the setting up and control of the overseas marketing company, Lionvest UK, based in UK. He is the son of the Dato’ Loo Keng An. He has no conflict of interest with the company other than the recurrent related party transactions as disclosure at the company AGM and has no convictions for offences within the past ten years.
NG HOE CHANG, aged 43, was appointed to the Board of Minho on 17 September 1999. He joined Minho Group in 1984 as Accounts Supervisor, responsible for the implementation of computer systems for the Minho Group. He is currently the Managing Director of Indah Paper Industries Sdn. Bhd. overseeing the production, administration and finance. He has a total of about 15 years experience in this line of business. He also sits on the Board of several private limited companies. He has no conflict of interest with the company other than the recurrent related party transactions as disclosure at the company AGM and has no convictions for offences within the past ten years.
DATO’ DR. SALLEH BIN MOHD NOR, aged 65, was appointed to the Board of Directors of Minho on 4 December 1995. Independent Non-Executive Director and member of the Nomination Committee. During the year, he was appointed as new members of the Audit Committee. He was the Director of the Forest Research Institute in Kepong since 1977 and was later appointed the First Director-General of Forest Research Institute of Malaysia (FRIM). In 1985, he was President of the International Union of Forestry Research Organisations (IUFRO), the first President from a developing country in the 100 years history of this organisation. His other International commitments include being a member of the Technical Advisory Committee of the Consultative Group on International Agriculture Research (CGIAR), member of a three main review mission of the Tropical Forestry Action Plan, member of the Scientific and Technical Advisory Panel (STAP) of the Global Environment Facility (GEF), Co-Chairperson of the International Network on Bamboo and Rattan (INBAR) and Chairman of the World Conservation Union (formerly IUCM) Sustainable Use Initiative for the East Asia Region. He has no family relationship with other Directors or major shareholders of Minho, has no conflict of interest with Minho and has no convictions for offences within the past ten years.
CHRISTOPHER WAN TIONG SEAH, aged 56, was appointed to the Board of Directors of Minho at 5 April 1999. Independent Non-Executive Director and Chairman of the Remuneration Committee and member of the Audit Committee and Nomination Committee. He was a Standard Chartered Bank Scholarship Holder and has extensive working experience in the Banking & Finance industry. He has held numerous senior management positions in International banks in Malaysia, Europe and Australia. He holds an MBA degree from RMIT University, Australia. More recently, he tutored Finance at Curtin University, Australia and was involved as course leader in a series of ‘Credit Training for Officers’ seminars and workshops for a Malaysian banking group. He has no family relationship with other Directors or major shareholders of Minho, has no conflict of interest with Minho and has no convictions for offences within the past ten years. 9
A N N U A L R E P O R T 2 0 0 4 Profile of Directors
KHIBIR BIN RAZALI, aged 43, was appointed to the Board of Minho on 28 June 2002. During the year, he was appointed as a new member of the Remuneration Committee. He is the Finance Director of the Company and member of the Audit Committee. He graduated from MARA University of Technology in 1990 with an Advance Diploma in Accountancy. He is a Charted Accountant registered with Malaysia Institute of Accountants. He has held various senior management positions with companies in various industries. He was the Corporate Planning Manager with a stainless steel cutlery manufacturer, Managing Director of a Class C construction company and also a Finance Manager of a Class A construction company. He was with the Internal Audit Department of Amanah Saham Pahang Berhad, the biggest forest concessionaires in Pahang. He later joined Lionvest Corporation (Pahang) Sdn. Bhd. as Senior Accounts Executive in 1994 and was promoted as the Group Accontant for Minho (M) Berhad in September 2001. He has no family relationship with other Directors or major shareholders of Minho, has no conflict of interest with Minho and has no convictions for offences within the past ten years.
MOHD FAIZAL BIN ABDUL MAJID, aged 37, was appointed to the Board on Minho on 28 August 2003 as an Alternate Director to Khibir Bin Razali. He has been working with Minho for nearly 10 years in various senior management positions. He graduated with a Bachelor of Arts (Honours) degree majoring in Accounting and Finance from the University of Glamorgan, Wales , The United Kingdom. Prior to joining Minho, he was engaged as an Semi-Senior Auditor by one of the local audit firms. He later joined Lionvest Corporation (Pahang) Sdn Bhd as Senior Accounts Executive in 1994 and was later promoted as the Senior Manager-Corporate Finance at the Minho Group level. He has no family relationship with other Directors or major shareholders of Minho, has no conflict of interest with Minho and has no convictions for offences within the past ten years.
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M I N H O ( M ) B E R H A D A successful business enterprise is one that is clear and focused in achieving its short- t e r m and long-term goals. A great calligrapher requires u n y i e l d i n g dedication in order to execute the p e rfect strokes with the p e rfect rhythm, line and structure; a successful business too, is able to attain great triumphs with the same principle if not more. Environmental Policy
The activities in which the Group is currently involved have all been concerning timber and its related
activities. All of the logging, manufacturing and leading activities of the Minho Group are confined to
the timber and related wood-based industries. To ensure that the Group is committed to responsible
stewardship of the environment throughout all operations, the following environment policies have
been adopted.
• Practice forest management that recognizes ecological processes and diversity and supports
integrated use of the forest.
• Promote environmental awareness throughout our operations.
• Comply with or surpass legal requirements.
• Comply with other environmental requirements to which the company is committed.
• Create opportunities for interested parties to have input to our forest planning activities.
• Communicate our environmental performance to our Board of Directors, shareholders,
employees, customers and other interested parties.
• Set and review environmental objectives and targets to prevent pollution and to achieve
continual improvement in our environmental performance.
• Conduct regular audits to our environmental management system.
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M I N H O ( M ) B E R H A D Financial Highlights
294,433 00’ 232,068 01’ 281,567 02’ 301,978 03’ 312,118 04’
Revenue (RM’000)
13,556 00’ 18,251 01’ 7,712 02’ 24,164 03’ 14,641 04’
Profit/ Loss Before Taxation (RM’000)
271,407 00’ 237,072 01’ 275,631 02’ 245,562 03’ 243,185 04’
Total Net Assets (RM’000)
1.39 00’ 1.32 01’ 1.11 02’ 1.09 03’ 13 1.14 04’
Net Tangible Assets Per Share (RM)
A N N U A L R E P O R T 2 0 0 4 Chairman’s Statement
PERFORMANCE REVIEW
First and foremost, I would like to thank my fellow members of the Board for entrusting me as the Chairman of the Company. On behalf of the Board of Directors, I would also like to take this opportunity to express our sincerest thanks and appreciation to my predecessor Y.A.M Tunku Tan Sri Imran Ibni Tuanku Ja'afar for his contribution and guidance given to the Company during the last ten years.
For the year under review, the timber industry in general experienced a turnaround as timber prices improved. However, having said that, the prices of other materials (especially steel and fuel oil) were also at their highest. Despite operating under these contradicting conditions, the Group managed to record the highest On behalf of the Board revenue seen in the last five years. The total turnover of RM312.1 million was a 3.3% increase (RM10 million) over last year's figures. The elimination of amortization, coupled of Directors, it is my with, the Group's focus on revenue maximization while ensuring good cost control practices across all the Minho's pleasure to present to you operating entities, the Group managed to achieve a profit before tax of RM14.6 million. Profit after tax and minority the Audited Financial interest stood at RM5.5 million. Statements of the Group OPERATIONS REVIEW and the company for the TIMBER EXTRACTION financial year ended In line with our environmental policy to comply with and even surpass legal requirements and the other more 31 December 2004. stringent procedures imposed by the State Forestry Department, the timber extraction division experienced a slowdown in productivity. For instance, we allowed for more than the specified number of buffers to be left untouched. As a result, the logging division reported a slight drop in yield. Total tonnage extracted from 1,436 acres of concession was only 17,047 tons compared to 20,461 tons p roduced by the 1,166 acres logged in Y2003. Notwithstanding this drop in tonnage, the division managed to achieve a higher margin fueled by improved timber prices. Total revenue rose 10% i.e from RM12.2 million (Y2003) to RM13.4 million. The profit level achieved previously was maintained.
KILN DRYING AND CHEMICAL PRESERVAT I V E TREATMENT
With the increase in steel and fuel oil prices, this division faced many challenges especially in the cost of transportation, packaging materials and purchasing of 14
M I N H O ( M ) B E R H A D Chairman’s Statement
chemicals. However, by focusing on improving the cost control measures to ensure better productivity and efficiency, this division managed to maintain its cost of sales and recorded a revenue of RM34.6 million.
MANUFACTURING DIVISION
The whole of our manufacturing arm recorded an increase in revenue by 55% i.e from RM42.7 million to RM66.2 million with the timber moulding division taking the lead. The sales of moulded timber backed by strong market demand increased from RM11.6 million to RM26.4 million. Sawmilling also saw an increase in activity and recorded an increase from RM17.6 million to RM24.3 million. Efforts undertaken in strategic marketing campaigns also benefited the industrial packaging division which reported an increase in turnover from RM13.5 million to RM15.5 million.
TIMBER TRADING
The Group's trading division reported a reduction in revenue from RM249.0 million to RM224.0 million. This was mainly due to the drop in demand for imported timber which fell from RM33.4 million to RM19.2 million. The aggregate turnover from exports of timber products which mainly constitute of kiln dried sawn timber also saw a reduction from RM215.6 million to RM204.8 million. However, profitability increased by 153% i.e from RM3.8 million to RM9.6 million attributed mainly to better margin following the improved timber prices.
FUTURE PROSPECTS
A further surge in fuel oil and steel prices is to be expected to have an undesirable effect on the overall cost of sales. On a more positive note however, timber prices is also expected to remain attractive. The more stringent enforcement of logging regulations and the better prevention of illegal logging in the region should ensure healthy demand. In order to capitalize on the favorable timber market environment, the Group will focus on its campaign to increase its forest concession bank, where, in fact the Group has recently managed to secure another 1,000 acres of logging area located in Pahang. With this, the Group expects growth prospects to remain positive.
APPRECIATION
On behalf of the Board of Directors, I would like to express our thanks and appreciation to our shareholders, customers and partners for their continued support and confidence over all of our endeavors in 2004. I would also like to acknowledge and thank the management and staff for their ongoing dedication, commitment and invaluable contribution to the Group.
Dato' Ismail Bin Yusof Chairman
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A N N U A L R E P O R T 2 0 0 4 The role of seals in history is highly significant; for the last 3,000 years, they have been used in official and private matters. Commonly made of jade, ivory or soft precious stones, the making of a seal is a journey of personal growth and distinction; similar to the business arena, where often enough, the journey to success is as important if not more the destination.
This simple image is able to portray the unique distinctiveness of the company in mastering a journey towards a brighter future. Corporate Governance
The Board has begun the process of compliance with the Bursa Malaysia Securities Berhad (BMSB) Revamped Listing Requirements and with the Malaysian Code on Corporate Government (“Code”). The Board is committed to ensure that the highest standards of corporate governance are practiced throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholders value and the financial performance of Minho (M) Berhad.
The Board is pleased to provide the following statement, which to the best of their knowledge, confirms that the Group has complied with the best practices of the Code throughout the year under review ended 31 December 2004.
BOARD MEETING
The composition of the Board, and the individual Directors’ attendance of meetings during the financial year ended 31 December 2004 were as follows:- Directors 27 Feb 26 May 27 Aug 29 Nov
Y.A.M Tunku Tan Sri Imran ibni Tuanku Ja’afar - ✓ - -
Dato’ Ismail Bin Yusof ✓ ✓ - ✓
Dato’ Dr. Salleh Bin Mohd Nor ✓ ✓ ✓ ✓
Dato’ Loo Keng An @ Lee Kim An ✓ ✓ ✓ ✓
Yap Leong Seng ✓ ✓ ✓ ✓
Loo Say Leng ✓ ✓ ✓ ✓
Ng Hoe Chang ✓ ✓ ✓ ✓
Christopher Wan Tiong Seah ✓ ✓ ✓ ✓
Khibir Bin Razali ✓ ✓ ✓ ✓
Notes: All the Board of Directors’ meetings during the financial year 2004 were held at the Board Meeting Room of Minho (M) Berhad.
BOARD BALANCE
The Board is a synergy of dynamic and experienced individuals from various sectors which reflects many years’ experience in logging, manufacturing, services, financial, legal and corporate affairs. The profiles of Directors are set out in pages 8 & 10 of the Annual Report. There are three independent non-executive directors forming one-third of the Board thus ensuring that minority shareholders’ interests are adequately represented.
EXECUTIVE COMMITTEE
The Managing Directors is duly entrusted with day-to-day management of the Group’s affairs. The Managing Director is assisted by an Executive Directors, Managers and Senior Executives.
SUPPLY OF INFORMATION
All directors receive relevant board papers priors to board meetings, and these include minutes of the last board meeting, minutes of EXCO meeting held between the board meetings, agenda for the current meeting, quarterly performance report of the Group and other relevant documents pertaining to Issues to be discussed at the meeting. Board members either as a full board or in their respective individual capacity may take independent advice, in the furtherance of their duties at the Group’s expense. 17 Furthermore, all Directors have access to the advice and services of the Company Secretary.
A N N U A L R E P O R T 2 0 0 4 Corporate Governance
APPOINTMENT OF THE BOARD
The Nomination Committee established by the Board will oversee the selection process and to consider the appointment of new directors. Before seeking the final approval from the Board. The Nomination Committee will also carry out a review and assessment on the effectiveness of the Board as a whole and on the contribution from individual directors.
DIRECTOR’S TRAINING
Directors also receive further training from time to time, particularly on relevant new laws and regulations. All board members have attended the Mandatory Accreditation Programme as required by the BMSB.
RE-ELECTION
In accordance with the Company’s Articles of Association, all directors appointed by the Board are subject to election by the shareholders upon their appointment. The Articles also provide that at least one third of the remaining Directors by subjected to re-election by rotation at each Annual General Meeting.
DIRECTORS’ REMUNERATION
Directors’ remuneration is presented in full compliance with the listing Requirements of the BSMB in preference to the best practices of the Code as follows:-
A. Aggregate Remuneration of Directors are as follows:-
Salaries & Other Benefits Fees Emoluments in Kind Total Category (RM’000) (RM’000) (RM’000) (RM’000)
Executive Directors - 20 - 20
Non Executive Directors 137 12 - 149
Total 137 32 - 169
B. Details of the number of Directors whose remuneration falls into each successive band of RM50,000 are as follows:-
Band Executive Directors Non Executive Directors To t a l
Less than RM50,000 0 2 2
RM50,001 to RM 100,000 1 1 2
RM100,001 to RM 150,000 1 1 2
RM150,001 to RM 200,000 1 0 1
RM200,001 to RM 250,000 0 0 0
RM250,001 to RM 300,000 1 0 1
RM300,001 to RM 350,000 1 0 1 18 RM350,001 to RM 400,000 0 0 0 RM400,001 to RM 450,000 1 0 1
M I N H O ( M ) B E R H A D Corporate Governance
DIRECTORS’ REMUNERATION (cont’d)
A remuneration committee represented by Dato’ Ismail Bin Yusof, Loo Say Leng and Christopher Wan Tiong Seah was set up and is primarily responsible for the establishment of a formal and transparent procedure for developing policies on executive remuneration and for determining the remuneration packages of Directors. During the year, Khibir Bin Razali was appointed as a new member of the committee.
RELATIONSHIP WITH SHAREHOLDERS
The Board recognizes the value of good investor relations and the importance of disseminating information in a fair and equitable manner. Thus the Board stresses on maintaining good relationship with shareholders through good communication. The Group reaches out to its shareholders through distribution of annual reports, holding Annual General Meetings which provides excellent opportunities for shareholders to raise questions and give comments pertaining to the business activities of the Group announcements made to the BMSB and quarterly results announcements.
FINANCIAL REPORTING
In presenting the annual financial statements and quarterly announcement to shareholders, the Directors aim to present a balanced and understandable assessment of the Group’s position and prospects. The audit Committee assists the Board in overseeing the Group’s financial reporting process and the quality of the reporting.
STATEMENT OF DIRECTORS’ RESPONSIBILITY FOR PREPARING THE FINANCIAL STATEMENTS
Preparations of financial statements are done in accordance with the requirements of Companies Act 1965 and applicable approved accounting standards in Malaysia.
In preparing the financial statements, the Directors have:- - selected suitable accounting policies and applied them consistently; - made judgments and estimates that are reasonable and prudent; - ensure that all applicable accounting standards have been followed; and - prepared financial statements on the going concern basis as the Directors have a reasonable expectation, having made inquiries, that the Group and Company have adequate resources to continue in operational existence for the foreseeable future.
Directors ensure that proper accounting records are kept to disclose with reasonable accuracy at any time the financial position of the Company and Group. The Directors also have overall responsibilities for taking such measures to safeguard the assets of the Group in preventing and to detect fraud and other irregularities.
RELATIONSHIP WITH AUDITORS
The board through the audit committee has maintained an appropriate relationship with the external auditors and there are formal and transparent arrangements in reviewing of the external auditor’s audit plan, report, internal control issues and procedures. The key features and the role of the Audit Committee in relation to the external auditors are included in the Audit Committee’s term of reference. 19
A N N U A L R E P O R T 2 0 0 4 Statement on Internal Control (Pursuant to para 15.27(b) of the BMSB Revamped Listing Requirem e n t )
RESPONSIBILITY
The Board acknowledges its responsibility for the Minho (M) Berhad Group’s (‘Minho Group’ or ‘the Group’) system of internal control as well as for reviewing its adequacy and integrity.
The Group’s system of internal control is designed to manage the principal business risks that may impede the Group from achieving its business objectives. Notwithstanding, due to the limitations that are inherent in any system of internal control, the Group’s internal control system cannot completely eliminate the risk of failure to achieve business objectives. As such, the system can only provide reasonable but not absolute assurance against material misstatement or loss.
MANAGEMENT STYLE AND CONTROL CONSCIOUSNESS
The internal control system within Minho Group is supported by an appropriate Group structure with clear reporting lines from the respective business units up to Board level. Scheduled, as well as ad-hoc, management and operational meetings are held at various business units to deliberate and resolve operational and business matters.
The Board entrusts the Executive Committee (‘EXCO’), which comprises the Executive Directors and senior management of the Group, with the responsibility of monitoring and reviewing strategic, financial and significant operational matters of the Group. In steering the Group towards the growth of its business, the EXCO prepares and monitors Minho Group’s three-year business plan as well as the Group’s operational efficiency and profitability, and reports to the Board.
Financial reports are prepared at the respective subsidiary levels and escalated to the holding company of the Group on a monthly basis. These reports are then used for the preparation of the Group Management Report, which is reviewed and deliberated on by the EXCO and provided for the Board’s review on a quarterly basis. This report provides information on the Group and respective division’s quarterly performance reviews, including ratio analysis and variances between actual performances and budgets. The annual budget of the Group is also prepared and escalated to the Board for its review and approval. Variances between actual performances and budgets would be identified at Board meetings on a quarterly basis for appropriate corrective measures to be put in place, if they are deemed necessary.
ASSURANCE MECHANISM
The Board empowers its Audit Committee to review all internal control matters and update the Board on matters which are considered to be pertinent and significant. Remedial action plans that are designed to improve the internal control system of the Group will be highlighted to the Board.
The Group’s Internal Audit function is outsourced to a professional services firm, whose remit is to the Audit Committee, to provide assurance on the effectiveness of the Group’s system of internal control. The Audit Committee reviews and approves the Group’s annual Internal Audit Plan, which is co-developed together with the Internal Audit function. Based on the Internal Audit Plan, periodic internal audit visits are carried out during the financial year with reports from these visits presented to the Audit Committee. 20
M I N H O ( M ) B E R H A D Statement on Internal Control (Pursuant to para 15.27(b) of the BMSB Revamped Listing Requirem e n t )
In 2002, the Board also engaged a professional accounting firm to perform a high-level review of the Group’s current state of internal control system vis-à-vis the requirements outlined in the Statement of Internal Control: Guidance for Directors of Public Listed Companies issued by the BMSB’s Task Force on Internal Control. The Board has reviewed the findings of the report, and where required, has commissioned a programme of action plans to enhance the Group’s system of internal control. To further expedite the implementation of internal control based on risk management approach, the management has purchased a Risk Management Software (RMS) in 2003. The RMS is is at the final stage of the trial run and is expected to be fully operational by the end of 2005.
The Board is cognizant of the values a sound internal control system generates and has put in place plans to continuously improve its system of internal control. By striving to maintain a sound internal control system, the Board believes that a balanced outcome of its business objectives and operational efficiency can be attained.
This statement was made in accordance with the resolutions of the Board of Directors dated 25 May 2005.
The Board of Directors Minho (M) Berhad
21
A N N U A L R E P O R T 2 0 0 4 Report of the Audit Committee
MEMBERS OF THE COMMITTEE
Y.A.M. Tunku Tan Sri Imran Ibni Tuanku Ja’afar (Chairman, Independent Non-Executive Director) Appointed on 16 August 1993 (Resigned on 28 June 2004)
Dato’ Ismail Bin Yusof (Independent Non-Executive Director) Appointed on 26 July 1994 as member (Appointed on 27 August 2004 as Chairman)
Loo Say Leng (Executive Director) Appointed on 16 August 1993
Christopher Wan Tiong Seah (Independent Non-Executive Director) Appointed on 22 February 2001
Khibir Bin Razali (Executive Director) Appointed on 28 June 2002
Dato’ Dr. Salleh Bin Mohd Nor (Independent Non-Executive Director) Appointed on 27 August 2004
COMPOSITION OF AUDIT COMMITTEE
1. The Committee shall be appointed by the Board among the Directors of the Company which fulfill the requirements of Bursa Malaysia Securities Berhad (BMSB) and shall consist of not less than three (3) members of whom the majority shall be independent directors of the Company.
2. The members of the Committee shall elect a Chairman from among their number who shall be an independent director.
3. The Company Secretary shall be Secretary of the Committee.
4. In the event of any vacancy in the committee resulting in non-compliance with the Listing Requirements of BMSB, the Board shall within three (3) months from the date of that event fill the vacancy.
MEETINGS OF THE COMMITTEE
1. Meetings shall be held as many times as necessary to enhance the effectiveness of the group internal control system.
2. The external auditors may request a meeting if they consider that one is necessary.
3. The quorum for the meetings is three (3), the majority of whom shall be independent directors and any decision shall be by a simple majority. The Chairman of the Committee shall not have a second or casting vote.
4. The Secretary of the Committee shall give notice of the meeting including the agenda together with the minutes of the last preceding meeting and all relevant documents there under to all members of the 22 Committee no less than twenty-four (24) hours before the relevant meeting. The Secretary shall further record minutes of all meetings and maintain a record of all meetings held by the Committee. The Secretary shall circulate minutes of meeting of the Committee to all members of the Committee as soon as the same is available.
M I N H O ( M ) B E R H A D Report of the Audit Committee
AUTHORITY AND RIGHTS OF THE COMMITTEE
1. Authority to investigate any activity within its terms of reference and all employees shall be directed to co-operate as requested by the Committee, and at the cost of the Company:-
i) have the resources which are required to perform its duties;
ii) be able to obtain independent professional or other advise if it considers necessary;
iii) have full and unrestricted access to any information pertaining to the Company and/or Group;
iv) have direct communication channels with external auditors and person(s) carrying out the internal audit function or activity; and
v) be able to convene meeting(s) with external auditors, excluding the attendance of executive members of the Committee whenever deemed necessary.
2. Such other authority as may be delegated by the Board from time to time.
FUNCTIONS OF THE COMMITTEE
The functions of the Audit Committee shall be:-
1. To review the following and report the same to the Board of Directors of the Company:
a) with the external auditor, the audit plan;
b) with the external auditor, his evaluation of the system of internal accounting controls;
c) with the external auditor, his audit report;
d) the assistance given by the Company’s employees to the external auditors;
e) the adequacy of the scope, functions and that it has the necessary authority to carry out its work;
f) the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action undertaken and whether or not appropriate action is taken on the recommendation of the internal audit functions;
g) the quarterly results and year end financial statements, prior to the approval by the Board of Directors, focusing particularly on:
i) changes in or implementation of major accounting policy changes;
ii) significant and unusual events; and
iii) compliance with accounting standards and other legal requirements; 23
A N N U A L R E P O R T 2 0 0 4 Report of the Audit Committee
FUNCTIONS OF THE COMMITTEE (cont’d)
h) any related party transaction and conflict of interest situation that may arise within the Company or Group including any transaction procedure or course of conduct that raises question of management integrity;
i) any letter of resignation from the external auditors of the Company; and
j) whether there is reason (supported by ground) to believe that the Company’s external auditor is not suitable for re-appointment;
2) To recommend the nomination of a person or persons as external auditors; and
3) Such other responsibilities as may be delegated by the Board from time to time.
During the year, Y.A.M Tunku Tan Sri Imran Ibni Tuanku Ja’afar resigned as a chairman. Dato’ Ismail Bin Yusof was appointed as the New Chairman and Dato’ Dr Salleh Bin Mohd Nor was appointed as a new member.
Activities of the Committee during the year include but not limited to:
- Review of the quarterly unaudited consolidated financial statement during the year. - Review of the audited financial statements for the financial year ended 31 December 2004 and to discuss audit issues with the external auditors. - Review and discuss related transactions of the Company and subsidiaries with the interested party(s) abstaining from deliberation and voting.
The Committee met a total of three times for the financial year ended 31 December 2004. The attendance records are as follows:
Designation of the Members on the Board No of meetings Name of Members of Minho (M) Berhad Attended Percentage
Y.A.M. Tunku Tan Sri Chairman/ 1/2 50% Imran Ibni Tuanku Ja’afar Independent Director
Dato’ Ismail Bin Yusof Independent Director 3/3 100%
Loo Say Leng Executive Director 3/3 100%
Christopher Wan Tiong Seah Independent Director 3/3 100%
Khibir Bin Razali Executive Director 3/3 100%
Dato’ Dr. Salleh Bin Mohd Nor Independent Director 1/1 100%
24
M I N H O ( M ) B E R H A D Financial Statements
26-28 Directors’ Report 29 Income Statements 30 Balance Sheets 31 Statements of Changes in Equity 32-33 Cash Flow Statements 34-54 Notes to the Financial Statements 55 Statement by Directors 55 Statutory Declaration 56 Report of the Auditors Directors’ Report
The Directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2004.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investment holding.
The principal activities of the subsidiary companies consist of the following :- (i) Kiln drying and chemical preservative treatment; (iv) Manufacturing and distribution of industrial paper bags; (ii) Manufacturing, exporting and dealing in moulded (v) Trading in log supply and its related products; timber and its related products; (vi) Exploitation of timber concessions (iii) Export of processed timber products; There have been no significant changes in the nature of these activities during the year.
FINANCIAL RESULTS
GROUP COMPANY RM’000 RM’000
Profit/(Loss) after taxation 7,906 (16,445) Minority interest (2,433) -
Net profit/(loss) for the year 5,473 (16,445)
There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the statements of changes in equity.
In the opinion of the Directors, the results of the operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction, or event of a material and unusual nature.
DIVIDEND
No dividend has been paid or declared by the Company since the end of the previous financial year and the Directors do not propose any dividend in respect of the current financial year.
DIRECTORS
The names of the Directors of the Company in office since the date of the last report and at the date of this report are:-
Y.A.M. Tunku Tan Sri Imran Ibni Tuanku Ja'afar (Resigned w.e.f. 28/6/04) Dato' Loo Keng An @ Lee Kim An Dato' Ismail bin Yusof Dato' Dr Salleh bin Mohd Nor Yap Leong Seng Christopher Wan Tiong Seah Loo Say Leng Ng Hoe Chang Khibir Bin Razali Mohd Faizal bin Abd Majid (Alternate Director to Khibir bin Razali)
DIRECTORS BENEFIT
Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby Directors might acquire benefits by means of the acquisition of shares in or debentures 26 of the Company or any other body corporate other than those pursuant to the Minho's warrants.
M I N H O ( M ) B E R H A D Directors’ Report
DIRECTORS INTEREST
The following Directors who held office at the end of the financial year had, according to the register required to be kept under Section 134 of the Companies Act 1965, an interest in shares and warrants of the Company as stated below :-
Ordinary Shares of RM1 each As at Bought Sold As at 1.1.2004 During the year 31.12.2004
Interest in shares of the Company
Direct interest: Y.A.M. Tunku Tan Sri Imran Ibni Tuanku Ja’afar 610,000 - - 610,000 Ng Hoe Chang 10,000 - - 10,000 Mohd Faizal bin Abd Majid 1,000 - - 1,000
Indirect interest: Dato’ Loo Keng Ang @ Lee Kim An 380,000 - - 380,000 Ng Hoe Chang 168,600 - - 168,600 Loo Say Leng 1,100,002 - - 1,100,002 Yap Leong Seng 245,865 - - 245,865
Interest in warrants of the Company
Number of Units As at Bought Sold As at 1.1.2004 During the year 31.12.2004
Y.A.M. Tunku Tan Sri Imran Ibni Tuanku Ja’afar 535,000 - - 535,000 Ng Hoe Chang 10,000 - - 10,000
None of the other directors of the Company at the end of the year held any interest in shares and warrants of the Company or its related corporations.
Since the end of the previous financial year, no Director has received or become entitled to receive any benefits (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the Directors as shown in the Group financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with any Director or with a firm of which the Director is a member or with a company in which the Director has a substantial financial interest other than the following transactions, as disclosed in Note 10 to the financial statements, between the Group and companies in which the Directors are deemed interested :-
Name of Directors Nature of Benefits
Dato' Loo Keng An @ Lee Kim An ) Sale and purchase of timbers, logging Loo Say Leng ) contracts, kiln drying and preservative Ng Hoe Chang ) treatments
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 that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and
(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. 27 (b) At the date of this report, the Directors are not aware of any circumstances which would render :-
(i) the amount written off for bad debts or the amount of the provision for doubtful debts in the Group and in the Company inadequate to any substantial extent; and
(ii) the values attributed to current assets in the financial statements of the Group and of the Company misleading.
A N N U A L R E P O R T 2 0 0 4 Directors’ Report
OTHER STATUTORY INFORMATION (cont’d)
(c) At the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
(d) At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements and consolidated financial statements misleading.
(e) As at the date of this report, there does not exist :-
(i) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or
(ii) any contingent liabilities in respect of the Group and of the Company which have arisen since the end of the financial year other than those disclosed in the financial statements.
(f) In the opinion of the Directors :-
(i) no contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due; and
(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made.
OTHER SIGNIFICANT EVENTS
(a) The wholly owned subsidiary, Syarikat Vinco Timber Industries Sdn. Bhd. entered into a sale and purchase agreement on 22 July 2004 for the disposal of 700,000 ordinary shares of RM1.00 each in PPP Services Sdn. Bhd. ("PPP") for a cash consideration of RM1.00. The disposal was completed on 22 July 2004. PPP was operating a jetty in Port Klang, Selangor.
(b) The Group through its wholly owned subsidiary company, Victory Enterprise Sdn. Bhd. has acquired Two (2) ordinary shares of RM1.00 each, representing the entire and paid-up capital of a dormant company, Solivance Industry Sdn. Bhd. for a cash consideration of Ringgit Malaysia Two (RM2.00) only on the 8 July 2004.
AUDITORS
The auditors, A. Razak & Co., have expressed their willingness to continue in office.
Signed on behalf of the Board in accordance with a resolution of the Directors
DATO’ ISMAIL BIN YUSOF
DATO’ LOO KENG AN @ LEE KIM AN
28 Klang, Malaysia
M I N H O ( M ) B E R H A D Income Statements for the year ended 31December 2004
Group Company 2004 2003 2004 2003 Note RM’000 RM’000 RM’000 RM’000
Revenue 3 312,118 301,978 6,258 7,819
Cost of sales (259,771) (255,799) - -
Gross profit 52,347 46,179 6,258 7,819 Other operating income 6,915 4,038 679 758 Selling and marketing expenses (15,568) (15,434) - - Administrative expenses (20,792) (17,933) (583) (2,548) Other operating expenses (889) (32,258) (16,129) (32,258)
Gain on disposal of discontinuing operating 4 957 - - -
Profit/(Loss) from operations 5 22,970 (15,408) (9,775) (26,229)
Finance costs 6 (8,329) (8,756) (6,287) (6,695)
Profit/(Loss) before taxation 14,641 (24,164) (16,062) (32,924)
Taxation 7 (6,735) (7,645) (383) (124)
Profit/(Loss) after taxation 7,906 (31,809) (16,445) (33,048)
Minority interests (2,433) (1,860) - -
Net profit/(loss) for the year 5,473 (33,669) (16,445) (33,048)
Loss per share (sen) - Basic 8 5.0 (30.6)
- Diluted 8 5.0 (30.6)
29
The accompanying notes form an integral part of the financial statements.
A N N U A L R E P O R T 2 0 0 4 Balance Sheets as at 31December 2004
Group Company 2004 2003 2004 2003 Note RM’000 RM’000 RM’000 RM’000
NON-CURRENT ASSETS
Property, plant and equipment 9 178,040 180,914 1,635 1,682 Investments in subsidiaries 10 - - 226,042 242,171 Other investments 11 750 750 500 500 Goodwill on consolidation 12 9 9 - -
CURRENT ASSETS
Inventories 13 96,605 77,159 - - Trade receivables 14 40,528 39,678 - - Other receivables 15 26,160 20,434 11 11 Tax recoverable 2,590 1,424 2,590 1,221 Amount due from an affiliated company 16 323 323 - - Amount due from subsidiary companies 10 - - 12,622 15,269 Deposits with licensed banks 17 1,962 6,063 700 2,232 Cash and bank balances 7,522 9,302 630 3,664
175,690 154,383 16,553 22,397
CURRENT LIABILITIES
Trade payables 18 12,148 8,310 - - Other payables 19 25,818 19,434 1,014 1,027 Amount due to subsidiary companies 10 - - 16,243 13,853 Hire purchase obligations 20 1,041 591 - - Borrowings 21 40,836 33,283 - - Bank overdrafts 2,025 2,679 - - Tax payable 29,436 26,197 - -
111,304 90,494 17,257 14,880
NET CURRENT ASSETS/(LIABILITIES) 64,386 63,889 (704) 7,517
243,185 245,562 227,473 251,870
FINANCED BY :
Share capital 22 109,851 109,851 109,851 109,851 Reserves 23 15,575 10,217 43,385 59,830
Shareholders’ equity 125,426 120,068 153,236 169,681 Minority interests 12,430 11,779 - -
137,856 131,847 153,236 169,681
Deferred taxation 24 29,717 30,961 - - Hire purchase obligations 20 1,375 565 - - Borrowings 21 74,237 82,189 74,237 82,189
Non-current liabilities 105,329 113,715 74,237 82,189
243,185 245,562 227,473 251,870 30
The accompanying notes form an integral part of the financial statements.
M I N H O ( M ) B E R H A D Statement of Changes in Equity for the year ended 31December 2004
Share Share Reserve on Capital Accumulated Note capital premium consolidation reserve losses Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
At 1 January 2003 As previously stated 109,851 92,431 14,065 3,387 (40,794) 178,940 Prior year adjustments 25 ---- (25,203) (25,203)
At 1 January 2003 (restated) 109,851 92,431 14,065 3,387 (65,997) 153,737 Loss for the year ---- (33,669) (33,669)
At 31 December 2003 109,851 92,431 14,065 3,387 (99,666) 120,068
At 1 January 2004 109,851 92,431 14,065 3,387 (99,666) 120,068
Foreign exchange difference -- (115) -- (115) Profit for the year ---- 5,473 5,473
At 31 December 2004 109,851 92,431 13,950 3,387 (94,193) 125,426
Company
At 1 January 2003 109,851 92,431 - 1,498 (1,051) 202,729 Loss for the year ---- (33,048) (33,048)
At 31 December 2003 109,851 92,431 - 1,498 (34,099) 169,681
At 1 January 2004 109,851 92,431 - 1,498 (34,099) 169,681 Loss for the year ---- (16,445) (16,445)
At 31 December 2004 109,851 92,431 - 1,498 (50,544) 153,236
31
The accompanying notes form an integral part of the financial statements.
A N N U A L R E P O R T 2 0 0 4 Consolidated Cash Flow Statement for the year ended 31December 2004
GROUP 2004 2003 RM’000 RM’000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(Loss) before taxation 14,641 (24,164)
Adjustments for:-
Amortisation of goodwill 16,129 32,258 Bad debt written off 42 - Depreciation of property, plant and equipment 8,042 8,969 Foreign exchange loss 120 132 Foreign exchange gain (433) (84) Gain on disposal of property, plant and equipment (329) (177) Interest income (244) (215) Interest expense 8,329 8,756 Provision for doubtful debts 920 3,214 Write down of inventories 743 108
Operating profit before working capital changes 47,960 28,797
Inventories (19,446) (18,278) Receivables (6,566) 6,873 Payables (4,282) (5,625)
Cash generated from operations 17,666 11,767
Interest received 244 215 Interest paid (8,329) (8,756) Income tax paid (8,690) (6,261)
Net cash generated from/(used in) operating activities 891 (3,035)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (4,574) (1,487) Proceeds from disposal of property, plant and equipment 594 314 Decrease in deposits with licensed banks 4,101 635
Net cash generated from/(used in) investing activities 121 (538)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend paid to minority shareholders by subsidiary company (494) (1,158) Repayment of hire purchase obligations (1,245) (1,586) Repayment of term loans (7,952) - Proceeds received from replacement warrants issued
Net cash used in financing activities (9,691) (2,744)
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,679) (6,317) CASH AND CASH EQUIVALENTS AT 1 JANUARY (26,660) (20,343)
CASH AND CASH EQUIVALENTS AT 31 DECEMBER (35,339) (26,660)
Cash and cash equivalents comprise the following :-
Cash and bank balances 7,522 9,302 Bank overdraft (2,025) (2,679) 32 Bank borrowings
- Bankers’ acceptance (29,103) (27,692) - Trust receipt (11,733) (5,591)
(35,339) (26,660)
The accompanying notes form an integral part of the financial statements.
M I N H O ( M ) B E R H A D Cash Flow Statement for the year ended 31December 2004
Company 2004 2003 RM’000 RM’000
CASH FLOWS FROM OPERATING ACTIVITIES Loss before taxation (16,062) (32,924)
Adjustments for:- Depreciation of property, plant and equipment 47 48 Interest expense 6,287 6,695 Interest income (166) (242) Impairment loss on investment in subsidiary company 16,129 32,258
Operating profit before working capital changes 6,235 5,835
Receivables - (120) Payables (13) (337) Subsidiary companies 5,037 3,718
Cash generated from operations 11,259 9,096
Interest received 166 242 Interest paid (6,287) (6,695) Tax paid (1,752) -
Net cash generated from operating activities 3,386 2,643
CASH FLOW FROM INVESTING ACTIVITY
Purchase of property, plant and equipment - (44) Decrease/(Increase) in fixed deposits with licensed banks 1,532 (1,065)
Net cash generated from/(used in)investing activity 1,532 (1,109)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of term loans (7,952) -
Net cash used in financing activities (7,952) -
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (3,034) 1,534 CASH AND CASH EQUIVALENTS AT 1 JANUARY 3,664 2,130
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 630 3,664
33
The accompanying notes form an integral part of the financial statements.
A N N U A L R E P O R T 2 0 0 4 Notes to the Financial Statement 31December 2004
1. CORPORATE INFORMATION The registered office is located at 31A, Jalan Satu Kawasan 16, Berkeley Town Centre, 41300 Klang, Selangor Darul Ehsan, Malaysia. The principal place of business is located at Lot 6476, Lorong Sg. Puluh, Batu 6, Off Jalan Kapar, 42100 Klang, Selangor Darul Ehsan, Malaysia. The principal activity of the Company is investment holding. The principal activities of the subsidiary companies consist of the following :- (i) Kiln drying and chemical preservative treatment; (iv) Manufacturing and distribution of industrial paper bags; (ii) Manufacturing, exporting and dealing in (v) Trading in log supply and its related products; moulded timber and its related products; (vi) Exploitation of timber concessions; and (iii) Export of processed timber products; (vii) The operation of a fully integrated timber complex. The financial statements are expressed in Ringgit Malaysia.
The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 25 April 2005.
2. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Preparation The financial statements of the Group and the Company have been prepared under the historical cost convention except as disclosed in this summary of significant accounting policies. The financial statements comply with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia. (b) Basis of Consolidation Subsidiaries The consolidated financial statements include the financial statements of the Company and all its subsidiaries. Subsidiaries are those companies in which the Group has a long term equity interest and where it has power to exercise control over the financial and operating policies so as to obtain benefits thereform. Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting, the results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. The assets and liabilities of a subsidiary are measured at their fair values at the date of acquisition and these values are reflected in the consolidated balance sheet. The difference between the cost of an acquisition and the fair value of the Group's share of the net assets of the acquired subsidiary at the date of acquisition is included in the consolidated balance sheet as goodwill or negative goodwill arising on consolidation. Intragroup transactions, balances and resulting unrealised gains are eliminated on consolidation and the consolidated financial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costs cannot be recovered. The gain or loss on disposal of a subsidiary company is the difference between net disposal proceeds and the Group's share of its net assets together with any unamortised balance of goodwill and exchange differences which were not previously recognised in the consolidated income statement. Minority interest is measured at the minorities' share of the post acquisition fair values of the identifiable assets and liabilities of the acquiree. (c) Goodwill Goodwill represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill is stated at cost less accumulated amortisation and impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p). Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet. Goodwill is amortised over a period of 10 years from the date the subsidiary companies are acquired. 34 The balance of goodwill was fully amortised in 2003. (d) Investments in Subsidiaries The Company's investments in subsidiaries are stated at cost less impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p). On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is charged or credited to the income statement.
M I N H O ( M ) B E R H A D Notes to the Financial Statement 31December 2004
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(e) Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(p).
Certain freehold, long leasehold land and buildings are stated at valuation less any identified impairment losses. Certain freehold, long leasehold land and buildings of the Company have not been revalued since they were first revalued in 1993 and 1994 respectively. The Directors have not adopted a policy of regular revaluations of such assets. As permitted under the transitional provision of IAS 16(Revised): Property, Plant and Equipment, these assets continue to be stated at their previous valuation less accumulated depreciation.
Freehold land and capital work-in-progress are not depreciated. Leasehold land is amortised over the lease period of 56 years. Depreciation of other property, plant and equipment is provided for on a straight line basis to write off the cost of each asset to its residual value over the estimated useful life at the following annual rates :-
Buildings 2% Plant and machinery 5%-20% Forklifts, trucks and motor vehicles 16%-25% Furniture, fittings and office equipment 10%-33 1/3% Other property, plant and equipment 8%-20%
Upon the disposal of an item of property, plant or equipment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the income statement and the attributable portion of the revaluation surplus is taken directly to retained profit.
(f) Other Investment
Other investment is stated at cost less provision for any permanent diminution in value. Such provision is made when there is a decline other than temporary in the value of investments and is recognised as an expense in the period in which the decline occurred.
On disposal of an investment, the difference between net disposal proceeds and its carrying amount is charged or credited to the income statement.
(g) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost of finished goods and work- in-progress includes direct materials, direct labour, other direct costs and appropriate production overheads. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.
(h) Trade and Other Receivables
Trade and other receivables are carried at anticipated realisable value. Bad debts are written off in the year in which they are identified. Specific provisions are made for debts which have been identified as bad or doubtful based on review of all specific outstanding amounts at the year end. In addition, general provisions are made to cover possible losses which are not specifically identified.
(i) Trade and Other Payables
Trade and other payables are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group or Company.
(j) Leases
A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incident to ownership.
Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Company's incremental borrowing rate is used. 35
Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are charged to the income statement over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.
The depreciation policy for leased assets is consistent with that for depreciable property, plant and equipment as described in Note 2(e).
A N N U A L R E P O R T 2 0 0 4 Notes to the Financial Statement 31December 2004
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(k) Income Tax
Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date.
Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from 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 measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill.
(l) Provisions for Liabilities
Provisions for liabilities are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation.
(m) Borrowings
Interest-bearing bank loans and overdrafts are recorded at the amount of proceeds received. The borrowing costs are charged to the income statement as an expense in the period in which they are incurred.
(n) Revenue Recognition
Revenue from sale of goods is recognised when the goods are delivered.
Revenue in respect of services rendered is recognised upon the performance of services.
Interest income is included in the income statement based on a time apportioned basis.
Dividend income from subsidiary companies is included in the income statement of the Company when declared or proposed.
Sales between Group companies are excluded from revenue of the Group.
(o) Foreign Currencies
Foreign currency monetary items at balance sheet date are translated at the rate ruling at the date of the balance sheet and transactions in foreign currencies are recorded in Malaysian Ringgit at the rates of exchange ruling at the date of the transactions. Exchange differences arising there from are charged or credited to the income statement.
For consolidation purposes, the assets and liabilities of the foreign entity are translated into Ringgit Malaysia at rates of exchange ruling at balance sheet date. Income statement items are translated at average exchange rates for the financial year. Exchange differences arising from the restatement at year end rates of the opening 36 net investment are dealt with through reserves. The principal closing rates used in the translation of foreign currency amounts are as follows:
2004 2003 RM RM
1 United States Dollar 3.80 3.80 1 Sterling Pound 7.32 6.77
M I N H O ( M ) B E R H A D Notes to the Financial Statement 31December 2004
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(p) Impairment of Assets
At each balance sheet date, the Group reviews the carrying amounts of its assets, other than inventories to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, impairment is measured by comparing the carrying values of the assets with their recoverable amounts. Recoverable amount is the higher of net selling price and value in use, which is measured by reference to discounted future cash flows. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to which the asset belongs.
An impairment loss is charged to the income statement immediately, unless the asset is carried at revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of any available previously recognised revaluation surplus for the same asset.
Reversal of impairment losses recognised in prior years is recorded when there is an indication that the impairment losses recognised for the asset no longer exist or have decreased. The reversal is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately.
(q) Financial Instruments
Financial instruments carried on the balance sheet include cash and bank balances, investments, receivables, payables, and borrowings. The particular recognition methods adopted are disclosed in the individual accounting policy statements associated with each item.
Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains, and losses relating to a financial instrument classified as liability are reported as expense or income. Financial instruments are offset when the Group has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
(r) Cash and Cash Equivalents
For the purposes of the Consolidated Cash Flow Statement and Cash Flow Statement , cash and cash equivalents include cash and bank balances, export credit refinancing, bankers’ acceptance, bank overdrafts, letter of credit and trust receipt.
Cash equivalents are short term, highly liquid investments with maturity of three months or less from the date of acquisition and are readily convertible to cash with insignificant risk of changes in value.
3. REVENUE
Revenue of the Company represents dividends received and receivable.
Revenue of the Group represents kiln drying, chemical preservative treatment, manufacturing, exporting and dealing in moulded timber and industrial paper bags, export of processed timber products, trading in log supply and its related products.
The breakdown of revenue of the Group and the Company are as follows :-
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Sale of timber logs 46,688 63,804 - - Sale of moulded timber 20,937 11,612 - - Sale of processed timber products 200,751 184,207 - - Sale on industrial paper bags 15,473 13,489 - - 37 Kiln dry services 26,997 26,595 - - Preservative treatment services 1,272 1,479 - - Jetty services - 792 - - Dividend income from a subsidiary company - - 6,258 7,819
312,118 301,978 6,258 7,819
A N N U A L R E P O R T 2 0 0 4 Notes to the Financial Statement 31December 2004
4. DISCONTINUING OPERATIONS
The wholly owned subsidiary, Syarikat Vinco Timber Industries Sdn. Bhd. entered into a sale and purchase agreement on 22 July 2004 for the disposal of 700,000 ordinary shares of RM1.00 each in PPP Services Sdn. Bhd. ("PPP") for a cash consideration of RM1.00. The disposal was completed on 22 July 2004. PPP Services Sdn. Bhd. was operating a jetty in Port Klang, Selangor.
The revenue, results and cash flows of the subsidiary was as follows:
Financial Financial period ended year ended 22.7.2004 31.12.2003 RM’000 RM’000
Revenue 147 792 Operating expenses (422) (1,103)
Loss from operations (275) (311) Finance costs - -
Loss before taxation (275) (311) Taxation - -
Net loss for the year (275) (311)
Cash flows from operating activities (56) (32) Cash flows from investing activities - - Cash flows from financing activities - -
Total cash flows (56) (32)
The net assets of the subsidiary was as follows:-
Property, plant and equipment 1,615 1,675 Trade and other receivables 55 117 Cash and bank balances 6 51 Trade and other payables (2,633) (2,527)
Net liabilities disposed (957) (684)
Attributable unamortised goodwill - (957)
Total disposal proceeds - Gain on disposal to the Group (957)
Disposal proceeds settled by: Cash - - Deferred payment - -
- -
Cash inflow arising on disposal: Cash consideration, representing cash inflow of the Company - - Cash and cash equivalents of subsidiaries disposed 6 -
Net cash inflow of the Group 6 -
There was no tax charge or credit arising from the loss on disposal. 38
M I N H O ( M ) B E R H A D Notes to the Financial Statement 31December 2004
5. PROFIT/(LOSS) FROM OPERATIONS
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
(a) This is arrived at after charging:-
Auditors’ remuneration - current year 148 147 17 17 - under provision in prior year (1) - 3 - Bad debts written off 42 87 47 - Depreciation of property, plant and equipment 8,042 8,969 - 48 Executive Directors of the Company - fees - 114 - 114 - other emoluments 20 1,039 20 77 Non-executive Directors of the Company - fees 137 62 137 62 - other emoluments 12 55 12 55 Executive directors of subsidiary companies - fees 406 143 - - - other emoluments 2,342 1,118 - - Provision for doubtful debts 920 3,214 - 2,000 Writedown of inventories 743 108 - - Rental of buildings
- related party 108 1,824 - - - others 95 702 - - Hire of machinery - others - 36 - - Amortisation of goodwill - 32,258 - - Realised foreign exchange loss 120 132 - - Impairment loss on investment in subsidiary company - - 16,129 32,258
(b) And crediting :-
Interest income - subsidiary company 132 - 132 179 - fixed deposits 112 215 34 63 Income from rental of land and buildings - related party 240 240 - - - others 2,278 1,854 243 246 Gain on disposal of property, plant and equipment 329 177 - - Realised foreign exchange gain 433 84 - -
(c) Employee Information (excluding directors)
Staff cost 13,936 15,003 - -
Number of employees 648 618 - -
The number of Directors of the Company whose total remuneration for the year ended 31 December 2004 fell within the following bands is analysed as follows :-
Executive Directors Non-executive Directors
Range of remuneration : Below RM50,000 - 2 39 RM50,001 to RM100,000 1 1 RM100,001 to RM150,000 1 1 RM150,001 to RM200,000 1 - RM200,001 to RM250,000 - - RM250,001 to RM300,000 1 - RM300,001 to RM350,000 1 - RM350,001 to RM400,000 - - RM400,001 to RM450,000 1 -
A N N U A L R E P O R T 2 0 0 4 Notes to the Financial Statement 31December 2004
6. FINANCE COSTS
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Interest expense on : - bank overdraft 85 142 - - - bankers’ acceptance, trust receipt and letter of credit 1,138 1,164 - - - term loan 6,287 6,694 6,287 6,695 - export credit refinancing 1 12 - - - lease and hire purchase 127 81 - - - others 691 663 - -
8,329 8,756 6,287 6,695
7. TAXATION
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Income tax:
- Malaysian income tax 6,719 5,743 1,752 124 - Foreign tax 262 31 - -
6,981 5,774 1,752 124
Transfer (from)/to deferred taxation (Note 24) (1,222) 1,847 - -
5,759 7,621 1,752 124
Underprovided in prior years - Malaysian income tax 976 24 (1,369) -
6,735 7,645 383 124
The tax charge of the Group is attributable to the tax charges in respect of profits of subsidiaries and the non-availability of group relief.
The tax charge of the Company arise mainly from dividend income received.
Domestic income tax is calculated at the Malaysian statutory tax rate of 28% (2003 : 28%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the tax rates prevailing in the respective jurisdiction.
A reconciliation of income tax expense applicable to loss before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is follows :-
2004 2003 RM’000 RM’000
Group Profit/(Loss) before taxation 14,641 (24,164)
Taxation at Malaysian statutory tax rate of 28% (2003 : 28%) 4,099 (6,766) Effect of different tax rates in other countries 377 11 Income not subject to tax (20,755) (11,952) Expenses not deductible for tax purposes 9,905 13,901 Utilisation of current year’s tax losses (115) (1,106) 40 Utilisation of previously unrecognised tax losses and unabsorbed capital allowances (246) (1,733) Tax expense for the year (6,735) (7,645)
M I N H O ( M ) B E R H A D Notes to the Financial Statement 31December 2004
7. TAXATION (cont’d) 2004 2003 RM’000 RM’000
Company Loss before taxation (16,062) (32,924)
Taxation at Malaysian statutory tax rate of 28% (2003 : 28%) (4,497) (9,219) Income not subject to tax - (32,177) Expenses not deductible for tax purposes 4,114 41,272 Tax expense for the year (383) (124)
Tax losses are analysed as follow :
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Tax savings recognised during the year arising from :
Utilisation of current year ‘s tax losses - 1,106 - - Utilisation of tax losses brought forward from previous years - 56 - - Unutilised tax losses carried forward 108 2,904 - -
8. LOSS PER SHARE
The basic profit/(loss) per share is based on the Group's profit/(loss) after taxation and minority interests of RM5,473,000 (2003: RM33,669,000) divided by the weighted average number of 109,851,000 ordinary shares (2003: 109,851,000 ordinary shares) of RM1.00 each in issue during the year.
The assumed conversion from the exercise of the warrants during the year would have an anti-dilutive effect on the loss per share of the Group and of the Company in the current and previous financial years.
41
A N N U A L R E P O R T 2 0 0 4 Notes to the Financial Statement 31December 2004
42
M I N H O ( M ) B E R H A D Notes to the Financial Statement 31December 2004
9. PROPERTY, PLANT AND EQUIPMENT (CONTD.)
During the year, the Group acquired property, plant and equipment with the aggregate cost of RM6,999,000 (2003 : RM3,702,000) of which RM2,425,000 (2003 : RM2,215,000) was acquired by means of hire purchase and finance lease. Cash payments of RM4,574,000 (2003: RM1,487,000) were made to purchase these assets.
A subsidiary company entered into an agreement with a developer to develop its freehold land into residential units. The developer is still in the process of obtaining approvals from the relevant authorities for the proposed development.
Office Office Total premises Equipment Company RM’000 RM’000 RM’000
2004
Cost
At 1 January 2004 1,915 44 1,959 Addition - - -
At 31 December 2004 1,915 44 1,959
Accumulated Depreciation
At 1 January 2004 268 9 277 Depreciation charge for the year 38 9 47
At 31 December 2004 306 18 324
Net Book Value
At 31 December 2004 1,609 26 1,635
At 31 December 2003 1,647 35 1,682
Depreciation charge for 2003 38 9 47
The strata titles in respect of the above office premises has yet to be registered in the name of the Company.
The property, plant and equipment of the Group are stated at cost except for certain freehold and long leasehold land and buildings. The analysis of the freehold and long leasehold land and buildings are as follows :-
Freehold land and Long buildings, leasehold and office land and premises buildings Total Group RM’000 RM’000 RM’000
At valuation in
1993 134,522 - 134,522 1994 - 16,068 16,068
At cost 17,252 16,755 34,007
At 31 December 2004 151,774 32,823 184,597 At 31 December 2003 151,586 32,823 184,321 43 Freehold and long leasehold land and buildings of the Group were revalued by the Directors based on independent valuations carried out on an open market for existing use basis. As allowed by the accounting standard on property, plant and equipment, these properties have continued to be stated on the basis of their previous valuations.
A N N U A L R E P O R T 2 0 0 4 Notes to the Financial Statement 31December 2004
9. PROPERTY, PLANT AND EQUIPMENT (CONTD.)
The net book values of revalued properties of the Group that would have been included in the financial statements, had these properties been carried at cost less depreciation, are as follows:-
Group 2004 2003 RM’000 RM’000
Freehold land and buildings 37,520 38,161 Long leasehold land and buildings 10,985 11,253
48,505 49,414
Land and buildings of subsidiary companies with net book value of RM143,155,087 (2003: RM143,155,087) are charged to financial institutions for banking facilities granted to the Group and the Company.
10. SUBSIDIARY COMPANIES
Company 2004 2003 RM’000 RM’000
Unquoted shares:- At cost 290,559 290,559 Impairment loss (64,517) (48,388)
226,042 242,171
During the year, the Directors made an assessment to determine the recoverable amount of the Company's investment in subsidiary companies. Arising from this assessment, the Company recognised an impairment loss of RM16,129,000, representing the difference between the carrying value of its investment amount in Lionvest Corporation (Pahang) Sdn Bhd and the Directors' estimate of the recoverable amount of this investment based on a valuation carried out by independent professional valuers.
Details of the subsidiary companies are as follows :-
Equity Country of Interest
Name of Company Incorporation 2004 2003 Principal Activities %%
Syarikat Minho Kilning Sdn Bhd Malaysia 100 100 Timber kiln drying and its related activities
Syarikat Vinco Timber Industries Malaysia 100 100 Timber kiln drying Sdn Bhd preserving treatment and its related activities
* Woodvation Sdn Bhd Malaysia 100 100 Dealing in sawn timber
Costraco Sdn Bhd Malaysia 51 51 Export of processed timber products
Indah Wood Products Sdn Bhd Malaysia 51 51 Export of processed timber products
Victory Enterprise Sdn Bhd Malaysia 100 100 Manufacturing, exporting and dealing in moulded 44 timber and its related products
* Haitien Sdn Bhd Malaysia 100 100 Dormant
Indah Paper Industries Sdn Bhd Malaysia 100 100 Manufacturing and distribution of industrial paper bags
M I N H O ( M ) B E R H A D Notes to the Financial Statement 31December 2004
10. SUBSIDIARY COMPANIES (cont’d)
Equity Country of Interest
Name of Company Incorporation 2004 2003 Principal Activities %%
Lionvest Corporation (Pahang) Sdn Bhd Malaysia 100 100 Exploitation of timber concessions, trading in timber logs and operation of an integrated timber complex
* Lionvest Trading (UK) Limited United Kingdom 100 100 Dealing in wholesale supply of wood
* Lionvest Marketing Sdn Bhd Malaysia 100 100 Dealing in timber and its related products
* Lionvest Timber Industries Sdn Bhd Malaysia 51 51 Sawmilling, dealing in timber and its related products
* Abadi Canggih Sdn Bhd Malaysia 51 51 Exploitation of timber concessions and trading in timber logs
* Idaman Heights Sdn Bhd Malaysia 100 100 Dealing in logs, sawn timber and its related products
* Magnetic Potentials Sdn Bhd Malaysia 100 100 Dormant
* PPP Services Sdn Bhd Malaysia - 70 Operations of jetty services
* Solivance Industry Sdn. Bhd. Malaysia 100 - Dormant
* Not audited by A. Razak & Co.
(a) Acquisition of subsidiary
The Group through its wholly owned subsidiary company, Victory Enterprise Sdn. Bhd. has acquired Two (2) ordinary shares of RM1.00 each, representing the entire and paid-up capital of a dormant company, Solivance Industry Sdn. Bhd. for a cash consideration of Ringgit Malaysia Two (RM2.00) only on the 8 July 2004.
There were no acquisition in the financial year ended 31 December 2003.
(b) Disposal of a subsidiary
Information relating to the disposal of PPP Service Sdn Bhd is set out in Note 4 to the financing statements.
Amounts due to/from subsidiary companies represent interest free unsecured advances with no fixed terms of repayment except for an advance of RM2,000,000 (2003: RM2,000,000) to a subsidiary which bears interest at 10% per annum.
11. OTHER INVESTMENTS
This represents investments in unquoted debentures at cost. 45
A N N U A L R E P O R T 2 0 0 4 Notes to the Financial Statement 31December 2004
12. GOODWILL ON CONSOLIDATION
Group 2004 2003 RM’000 RM’000
At 1 January 9 32,266 Amortisation of goodwill for the year - (32,257)
At 31 December 9 9
13. INVENTORIES
2004 2003 RM’000 RM’000
At cost: Raw materials 3,396 3,426 Work- in-progress 2,011 1,226 Finished goods 61,173 50,546 Consumable inventories 356 370
66,936 55,568 At net realisable value: Raw materials 29,669 21,591
96,605 77,159
14. TRADE RECEIVABLES
Group 2004 2003 RM’000 RM’000
Trade receivables 45,170 43,996 Provision for doubtful debts (4,642) (4,318)
40,528 39,678
The Group's normal trade credit term ranges from 30 to 120 days. Other credit terms are assessed and approved on a case-by-case basis.
The Group has no significant concentration of credit risk that may arise from exposures to a single debtor or to groups of debtors.
15. OTHER RECEIVABLES
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Deposits 5,446 4,328 11 11 Prepayments 6,954 9,676 - -
Other debtors 16,337 9,552 - - 46 Provision for doubtful debts (2,577) (3,122) - - 13,760 6,430 - -
26,160 20,434 11 11
M I N H O ( M ) B E R H A D Notes to the Financial Statement 31December 2004
16. AMOUNT DUE FROM AN AFFILIATED COMPANY
The amount due from an affiliated company, Minho Holdings Sdn Bhd, a company incorporated in Malaysia, is unsecured, interest free and with no fixed terms of repayment.
17. DEPOSITS WITH LICENSED BANKS
Fixed deposits held by the Group include an amount of RM831,827 (2003: RM831,827) pledged for bank facilities granted to the Group.
The weighted average interest rates during the financial year and the average maturities of deposits as at 31 December 2004 were 3.5% (2003:3.1%) and 30 days respectively.
18. TRADE PAYABLES
The normal trade credit term granted to the Group ranges from 30 to 120 days.
19. OTHER PAYABLES
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Accruals 14,858 11,629 154 186 Provision for damage claims 1,997 2,497 - - Provision for transportation charges - 417 - - Sundry payables 6,597 4,340 707 688 Deposits received 2,213 551 - - Dividend payable 153 - 153 153
25,818 19,434 1,014 1,027
20. HIRE PURCHASE OBLIGATIONS
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Minimum lease payments:
Not later than 1 year 1,274 702 - - Later than 1 year and not later than 2 years 1,488 543 - -
Later than 2 years and not later than 5 years 143 - - -
2,905 1,245 - - Less : Future finance charges (489) (89) - -
Present value of finance lease liabilities 2,416 1,156 - -
Present value of finance lease liabilities :
Not later than 1 year 1,041 591 - - Later than 1 year and not later than 2 years 1,144 565 - - Later than 2 years and not later than 5 years 231 - - -
2,416 1,156 - -
Analysed as: 47
Due within 12 months 1,041 591 - - Due after 12 months 1,375 565 - -
2,416 1,156 - -
The hire purchase bore interest during the year between 3.9% to 10% (2003: 3.9% to 10%) per annum.
A N N U A L R E P O R T 2 0 0 4 Notes to the Financial Statement 31December 2004
21. BORROWINGS - SECURED
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Short Term Borrowings
Secured: Bankers’ acceptance 29,103 27,692 - - Trust receipt 11,733 5,591 - -
40,836 33,283 - -
Long Term Borrowings
Secured: Term loans 74,237 82,189 74,237 82,189
Total Borrowings
Bankers’ acceptance 29,103 27,692 - - Trust receipt 11,733 5,591 - - Term loans 74,237 82,189 74,237 82,189
115,073 115,472 74,237 82,189
Maturity of borrowings: Within one year 40,836 33,283 - - More than 1 year and less than 2 years 50,500 7,500 50,500 50,500 More than 2 years and less than 5 years 23,737 73,500 23,737 31,689 5 years or more - 1,189 - -
115,073 115,472 74,237 82,189
Borrowings other than term loan bear interest at weighted rate of 5.76% (2003: 5.76%) per annum. Term loan bear interest at BLR + 2% per annum.
The borrowings are secured by the following:
(a) First legal charge over the freehold land and buildings of certain subsidiary companies;
(b) Fixed and floating charges over assets of the Company's wholly owned subsidiaries, Lionvest Corporation (Pahang) Sdn Bhd and Syarikat Minho Kilning Sdn Bhd; and
(c) Corporate guarantees by certain subsidiaries.
In connection with the term loan agreement dated 23 August 2003, the Company has agreed with the bank not to incur any indebtedness in excess of a debt equity ratio of 1 to 1.
22. SHARE CAPITAL
Group/Company 2004 2003 RM’000 RM’000
Authorised: 500,000,000 ordinary shares of RM1 each 500,000 500,000
Issued and fully paid: 48 109,851,000 ordinary shares of RM1 each 109,851 109,851
On 22 November 2002, the shareholders of the Company approved the issue of up to 48,000,000 Replacement Warrants on the basis of one (1) Replacement Warrant to be offered for RM0.05 each in substitution and cancellation of one (1) existing warrant held.
The exercise price of Replacement Warrants was set at RM1.00. The exercise period for the Replacement Warrants is from the date of issue to 4 September 2005.
M I N H O ( M ) B E R H A D Notes to the Financial Statement 31December 2004
22. SHARE CAPITAL (cont’d)
Group/Company 2004 2003 RM’000 RM’000
Number of warrant as at 31 December Existing warrants 18,052,495 18,052,495 Replacement warrants 29,947,505 29,947,505
48,000,000 48,000,000
23. RESERVES
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Distributable :
Accumulated losses (94,193) (99,666) (50,544) (34,099)
Non-distributable :
Share premium 92,431 92,431 92,431 92,431 Reserve on consolidation 13,950 14,065 - - Capital reserves - revaluation 1,889 1,889 - - - arising from the replacement of existing warrants with the Replacement Warrants 1,498 1,498 1,498 1,498
15,575 10,217 43,385 59,830
Based on the estimated tax credits and tax exempt profits available, subject to confirmation by tax authorities, the entire retained profit of the Company is available for distribution by way of dividends without incurring additional tax liability.
24. DEFERRED TAXATION
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
At 1 January 30,961 29,103 - - Transfer (to)/from income statement (1,222) 1,847 - -
29,739 30,950 - - Underprovision in prior year (22) 11 - -
At 31 December 29,717 30,961 - -
Subject to the agreement of the Inland Revenue Board, the potential timing differences not recognised in the financial statements of the Group are estimated as follows :-
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Unabsorbed tax losses 1,390 678 - - Unutilised capital allowances 11 609 - - Others - 1,237 - - 1,401 2,524 - - 49 25. CAPITAL COMMITMENTS
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Authorised and contracted for 3,497 2,799 - -
A N N U A L R E P O R T 2 0 0 4 Notes to the Financial Statement 31December 2004
26. CONTINGENT LIABILITIES - UNSECURED
Group Company 2004 2003 2004 2003 RM’000 RM’000 RM’000 RM’000
Outstanding bank guarantees given in respect of: - subsidiary companies’ banking facilities - - 33,126 33,126
Tax contingencies in relation to disputes on reinvestment allowances and double deduction of freight charges claimed 2,786 2,786 - -
27. SIGNIFICANT RELATED PARTY TRANSACTIONS
Group Amount Amount outstanding outstanding as at as at 2004 31.12.2004 2003 31.12.2003 RM’000 RM’000 RM’000 RM’000
Purchase of sawn timber and its related product - D.M. Timber Sdn. Bhd. - - - - - Wangsamakmur Holdings Sdn. Bhd. - (105) - (106) Purchase of logs - Sri Temerloh Timber Industries Sdn Bhd. - - - - - D.M. Timber Sdn. Bhd. 8,038 975 5,358 (135) - Mahawangsa Timber Industries Sdn Bhd. - - 2,189 - Logging, infrastructure works and contract maintenance charged by related party - D.M. Timber Sdn. Bhd. 720 300 1,515 - - Great Basic Sdn. Bhd. - (132) 274 (132) - Mestimakmur Industries Sdn. Bhd. - (10) - (10) Sales of timber and kiln drying services to related parties - D.M. Timber Sdn. Bhd. (1,577) - (3,538) - - Excell Corporation Sdn. Bhd. (781) (110) (243) (330)
Pu r chase of sawn timber and its related prod u c t Sales of sawn timber and its related product to related parties - Excell Corporation Sdn Bhd (3,167) (53) (1,993) (348) - Mahawangsa Timber Industries Sdn. Bhd. (1 ) (5 ) (1 7 2 ) - - Euro-CGA Sdn. Bhd. - - (2,371) (921) Rental and utilities charges to related parties - LNK Computer Consultant Sdn Bhd - - - (5) Rental charged by related party - LK Timber Sdn Bhd 81 97 108 115 Rental of storage charged by related party - Minho Kilning (Klang) Sdn Bhd 774 74 1,716 576 Insurance brokerage fee charged by related party - Oak Three Printing Sdn Bhd 107 107 13 65 Purchase of stationery and printing charges from related party - LKN Computer Forms (M) Sdn. Bhd 20 (20) 7 3 50 Repair and maintenance services provided by related party - Bright Pace Sdn Bhd. - - 200 80
M I N H O ( M ) B E R H A D Notes to the Financial Statement 31December 2004
27. SIGNIFICANT RELATED PARTY TRANSACTIONS (cont’d)
The related parties relationships are as follow:-
Related Parties: Relationship:
D.M. Timber Sdn Bhd Dato' Loo Keng Ann, is the Managing Director of Minho (M) Berhad and chairman of D.M. Timber Sdn Bhd.
Ng Chee Min and Eng Kin Hong are Directors of Lionvest Timber Industries Sdn Bhd and D.M. Timber Sdn Bhd.
Wangsamakmur Holding Sdn Bhd Liew Leong Tat is a Director of Abadi Canggih Sdn Bhd and Wangsamakmur Holding Sdn Bhd.
Mestimakmur Industries Sdn Bhd Liew Leong Tat is a Director of Abadi Canggih Sdn Bhd and Mestimakmur Industries Sdn Bhd.
Alunan Pesona Sdn Bhd Ng Ho Liat is a Director of Lionvest Timber Industries Sdn Bhd and Alunan Pesona Sdn Bhd.
Excell Corporation Sdn Bhd Eng Kin Hong is a Director of Lionvest Timber Industries Sdn Bhd and Excell Corporation Sdn Bhd.
Sri Temerloh Timber Industries Sdn Bhd Loo Say Kian and Ng Ho Liat are Directors of Lionvest Timber Industries Sdn Bhd and Sri Temerloh Timber Industries Sdn Bhd.
LNK Computer Consultant Sdn Bhd Loo Say Leng is a Director of Minho (M) Berhad and LNK Computer Consultant Sdn Bhd.
MH Lumber Sdn Bhd MH Lumber Sdn Bhd is a wholly owned subsidiary of Minho Holdings Sdn Bhd, a major shareholder of Minho (M) Berhad.
LK Timber Sdn Bhd LK Timber Sdn Bhd is a wholly owned subsidiary of Minho Holdings Sdn Bhd, a major shareholder of Minho (M) Berhad.
Minho Kilning (KIang) Sdn Bhd Minho Kilning (Klang) Sdn Bhd is a wholly owned subsidiary of Minho Holdings Sdn Bhd, a major shareholder of Minho (M) Berhad.
Oak Three Printing Sdn Bhd Loo Say Leng and Ng Hoe Chang are Directors of Minho (M) Berhad and Oak Three Printing Sdn Bhd.
Bright Pace Sdn Bhd Bright Pace Sdn Bhd is a wholly owned subsidiary of Minho Holdings Sdn Bhd, a major shareholder of Minho (M) Bhd.
Mahawangsa Timber Industries Sdn Bhd Ng Chee Min and Eng Kin Hong is the director of Lionvest Timber Industries Sdn Bhd and D.M. Timber Sdn Bhd.
Company 2004 2003 RM’000 RM’000
Management fees receivable from subsidiary company 240 240 Interest receivable from subsidiary company 132 179 Dividend received from subsidiary companies 6,258 7,819
The Directors of the Group and the Company are of the opinion that the above transactions were made in the normal course of business and had been established under terms mutually agreed between the parties. 51 28. COMPARATIVES
The presentation and classification of items in the current year financial statements have been consistent with the previous financial year.
A N N U A L R E P O R T 2 0 0 4 Notes to the Financial Statement 31December 2004
29. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group's financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group's business whilst managing its risks. The main areas of financial risks face by the Group are set out as follows-
(a) Foreign Exchange Risk:
The Group is exposed to foreign currency risks as a result of its subsidiaries' normal operating activities with foreign companies being denominated mainly in Pound Sterling and United States Dollar. Despite the fact that the Malaysian Ringgit is currently pegged against the United States Dollar, foreign exchange contracts will continue to be used to hedge against any material exposure to foreign exchange risks.
(b) Interest Rate Risk:
The Group's exposure to interest rate fluctuations is mainly due to interest on borrowings being charged at the lending financial institutions' base lending rates plus a margin and is therefore dependent on the periodical resetting of the lending financial institutions' base lending rates particularly for its term loan, overdrafts and trade financing facilities.
(c) Credit Risk
The Group has a credit assessment in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount.
(d) Liquidity and Cash Flow Risk
The Group exercises prudent liquidity risk management to maintain adequate cash and short term investments and the availability of funding by way of bank credit facilities sufficient for its business needs.
(e) Fair Values
It is not practicable to determine the fair values of:
(i) balances due from and to subsidiary companies principally due to a lack of fixed repayment terms; and
(ii) contingent assets and liabilities due to the uncertainties of timing, costs and eventual outcome.
The fair values of all other financial assets and liabilities of the Group and Company as at 31 December 2004 are not materially different from their carrying values.
30. SEGMENT INFORMATION
The Group operates principally in the timber industry and within the country. The manufacturing of industrial paper bags and its related products and operations of jetty services contributed only 5% in Group Revenue and 6.6% in Group Operation Profit.
No analysis by geographical location is provided as the Group operates substantially in Malaysia, and the subsidiary company in the United Kingdom accounts for less than 10% of the Group's activities.
52
M I N H O ( M ) B E R H A D Notes to the Financial Statement 31December 2004
53
A N N U A L R E P O R T 2 0 0 4 Notes to the Financial Statement 31December 2004
54
M I N H O ( M ) B E R H A D Statement by Directors Pursuant to Section 169 (15) of The Companies Act 1965
We, DATO’ ISMAIL BIN YUSOF and DATO’ LOO KENG AN @ LEE KIM AN, being two of the Directors of MINHO (M) BERHAD, state that in the opinion of the Directors, the accompanying financial statements set out on pages 26 to 54 are drawn up in accordance with applicable Approved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2004 and of the results and the cash flows of the Group and of the Company for the year then ended.
Signed on behalf of the Board in accordance with a resolution of the Directors
DATO’ ISMAIL BIN YUSOF Director
DATO’ LOO KENG AN @ LEE KIM AN Director
Klang, Malaysia. Date
Statutory Declaration Pursuant to Section 169 (16) of The Companies Act 1965
I, KHIBIR BIN RAZALI, being the Director primarily responsible for the financial management of MINHO (M) BERHAD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 26 to 54 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared by the abovenamed KHIBIR BIN RAZALI at Klang in the State of Selangor Darul Ehsan on…………………………………
55
KHIBIR BIN RAZALI
Before me,
A N N U A L R E P O R T 2 0 0 4 Report of The Auditiors To the members of MINHO (M) BERHAD (Incorporated in Malaysia)
We have audited the accompanying financial statements set out on pages 26 to 54. These financial statements are the responsibility of the Company's Directors. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
In our opinion:-
(a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Approved Accounting Standards in Malaysia so as to give a true and fair view of:-
(i) the financial position of the Group and of the Company as at 31 December 2004 and of the results and the cash flows of the Group and of the Company for the year then ended; and
(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and
(b) the accounting and other records and the registers required by the Act to be kept by the Company and by its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
We have considered the financial statements and the auditors’ reports thereon of the subsidiaries of which we have not acted as auditors, as indicated in Note 10 to the financial statements, being financial statements that have been included in the consolidated financial statements.
We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations req u i r ed by us for those purposes.
The auditors’ report on the financial statements of the subsidiaries were not subject to any qualification material to the consolidated financial statements and did not include any comment req u i r ed to be made under Section 174 (3) of the Act.
A. RAZAK & CO. Firm Number : AF 0842 Ch a r t e r ed Accountants
ABD. RAZAK BIN HJ. NAZAH DIN 15 2 2 / 0 3 / 0 6 ( J / P H )
56 Da t e :
M I N H O ( M ) B E R H A D List of Properties
The Group’s landed properties are as follows:-
Location Description Land Area Tenure Age Net Book Year of Value Acquisition / Revaluation
Lot No. 6466 Kiln drying factory with 9.95 acres Freehold 16 2,208,505 1993 Mukim of Kapar parking and storage shed, District of Klang workshop and office cum store, Selangor Darul Ehsan building and worker’ quarters
Lot No. 6537 Kiln drying factory with 10.013 acres Freehold 17 4,313,052 1993 Mukim of Kapar parking and storage shed District of Klang office cum workshop building Selangor Darul Ehsan
Lot No.6475 and 6476 Kiln drying factory 9.89 acres Freehold 15 4,487,178 1993 Mukim of Kapar with storage shed District of Klang Selangor Darul Ehsan
Lot No. 6469 Kiln drying factory 9.85 acres Freehold 17 4,280,413 1993 Mukim of Kapar District of Klang Selangor Darul Ehsan
Lot No. 921 Terrace shop cum office Built up area Freehold 23 472,321 1993 Section 24 of 302.8 sq Municipality of Klang metres Selangor Darul Ehsan
Lot No. 6477 Storage shed, office blocks 9.94 acres Freehold 16 4,498,211 1993 Mukim of Kapar and store District of Klang Selangor Darul Ehsan
Lot No. 6474 Kiln drying factory with 10.43 acres Freehold 15 4,479,490 1993 Mukim of Kapar storage shed District of Klang Selangor Darul Ehsan
Lot No. 6471 Kiln drying factory with 10.18 acres Freehold 20 1993 Mukim of Kapar storage shed, office block District of Klang and workshop 9,071,135 Selangor Darul Ehsan } Lot No. 6470 Kiln drying factory with 10.18 acres Freehold 17 1993 Mukim of Kapar storage shed and office District of Klang block Selangor Darul Ehsan
Lot No. 6457 and 6458 Storage shed 10.144 acres Freehold 17 4,392,131 1993 Mukim of Kapar District of Klang Selangor Darul Ehsan Lot No. 1532 Vacant 24,610 sq Freehold 14 2,292,203 1990 Mukim of Kapar metres District of Klang Selangor Darul Ehsan
Lot No. PT 2863 Factory with storage shed, 145.41 acres Leasehold 53 27,754,465 1994 57 Mukim of Chenor office and workshop expiring on District of Maran 10-10-2045 Pahang Darul Makmur
Lot No. 879 Vacant 3.4677 acres Freehold 5 2,500,000 1999 Mukim of Klang District of Klang Selangor Darul Ehsan
A N N U A L R E P O R T 2 0 0 4 Statistics of Shareholdings As at 13 May 2005
SHARE CAPITAL
Authorised Share Capital : RM 500,000,000 Issued and Fully Paid Share Capital : 109,851,000 Class of Shares : Ordinary shares of RM1 each Voting Rights : 1 vote per ordinary share
DISTRIBUTION OF SHAREHOLDINGS
Size of Shareholdings No. of Holders % No. of Holdings %
1-999 279 3.00 60,743 0.06 1,000 – 10,000 8,217 88.46 23,106,990 21.03 10,001 – 100,000 730 7.86 19,180,275 17.46 100,001- less than 5% of the issued shares 61 0.66 29,531,982 26.88 5% of the issued shares and above 2 0.02 37,971,010 34.57
Total 9,289 100.00 109,851,000 100.00
LIST OF TOP 30 HOLDERS AS AT 13/05/2005
Name of Shareholders Holdings %
1. Minho Holdings Sdn. Bhd. 32,282,010 29.39
2. Lembaga Tabung Haji 5,689,000 5.18
3. Cerah Bestari Sdn. Bhd. 4,294,000 3.91
4. Emas Adil Sdn. Bhd. 3,846,000 3.50
5. MDB Manufacturing Sdn. Bhd. 3,594,125 3.27
6. DB (Malaysia) Nominee (Asing) Sdn. Bhd. 2,018,575 1.84 BNP Paribas Nominees Singapore Pte. Ltd. for Kenswick Investment Limited
7. Kuala Lumpur City Nominees (Tempatan) Sdn. Bhd. 1,714,000 1.56 Pledged Securities Account for Eng Kin Hong (D18)
8. Khoo Saw Choo 666,200 0.61
9. Mayban Nominees (Tempatan) Sdn. Bhd. 665,500 0.61 Pledged Securities Account for Cheah Keng Meng
10. Tan Chui Hua 656,400 0.60
11. Euginny Yap Chiew Yei 648,300 0.59
12. Tsunami Pacific Sdn. Bhd. 630,100 0.57
13. Eng Kin Hong 560,000 0.51
14. HDM Nominees (Tempatan) Sdn. Bhd. 450,000 0.41 58 DYMM Tuanku Ja’afar Ibni Almarhum Tuanku Abdul Rahman
15. Ng Chee Min 446,000 0.41
16. Lau Siew Choo 421,000 0.38
M I N H O ( M ) B E R H A D Statistics of Shareholdings As at 13 May 2005
LIST OF TOP 30 HOLDERS AS AT 13/05/2004 (cont’d)
Name of Shareholders Holdings %
17. HSBC Nominees (Tempatan) Sdn. Bhd. 400,000 0.36 Pledged Securities Account for DYMM Tunku Naquiyuddin Ibni Tuanku Jaafar
18. Cheong Sim Lam 398,750 0.36
19. HSBC Nominees (Asing) Sdn. Bhd. 362,500 0.33 HPBN for Hartlane Enterprises Inc
20. HSBC Nominees (Tempatan) Sdn. Bhd. 310,000 0.28 Pledged Securities Account for Tunku Tan Sri Imran Ibni Tuanku Jaafar
21. SJ Sec Nominees (Tempatan) Sdn. Bhd. 300,000 0.27 Pledged Securities Account for Hong Ah Kau @ Khong Heng Lim
22. Citicorp Nominees (Asing) Sdn. Bhd. 292,500 0.27 Citigroup GM Inc for Maria Sriati
23. Tan Ah Tin 270,250 0.25
24. Tan Chui Hua 269,100 0.24
25. Jeanne Lukimto 257,500 0.23
26. Cheok Wai Lin 250,000 0.23
27. Amsec Nominees (Asing) Sdn. Bhd. 249,200 0.23 Pledged Securities Account for Lim Han Leng
28. Wong Kian Teck 247,000 0.22
29. OSK Nominees (Tempatan) Sdn. Bhd. 237,000 0.22 Pledged Securities Account for Tan Gaik Suan
30. Tan Kim Wah 236,000 0.21
HOLDERS WITH HOLDINGS OF 5% AND ABOVE AS AT 13/05/2005
Name of Shareholders Holdings %
1. Minho Holdings Sdn. Bhd. 32,282,010 29.39
2. Lembaga Tabung Haji 5,689,000 5.18
59
A N N U A L R E P O R T 2 0 0 4 Warrant Statistics As at 13 May 2005
Issued : RM48,000,000 Outstanding : RM48,000,000
DISTRIBUTION OF WARRANTHOLDINGS
Size of Shareholdings No. of Holders % No. of Holdings %
1-999 118 4.88 57,495 0.32 1,000 – 10,000 2,082 86.03 6,288,900 34.84 10,001 – 100,000 200 8.26 5,056,100 28.00 100,001- less than 5% of the issued warrants 19 0.79 4,150,000 22.99 5% of the issued warrants and above 1 0.04 2,500,000 13.85
Total 2,420 100.00 18,052,495 100.00
THIRTY LARGEST WARRANTHOLDERS AS PER THE RECORD OF DEPOSITORS AS AT 13/05/2005
Name of Warrantholders No. of Warrants % of Warrants
1. Lembaga Tabung Haji 2,500,000 13.85
2. HSBC Nominees (Tempatan) Sdn. Bhd. 535,000 2.96 Pledged Securities Acccount for Tunku Tan Sri Imran Ibni Tuanku Jaafar
3. Chun Yooi Luon 518,000 2.87
4. Tan Boon Pi @ Tan Hoy 433,700 2.40
5. Lau Saw Kuen 295,500 1.64
6. HSBC Nominees (Tempatan) Sdn. Bhd. 248,500 1.38 Pledged Securities Account for DYMM Tunku Naquiyuddin Ibni Tuanku Jaafar
7. Choeng Sim Lam 244,000 1.35
8. HDM Nominees (Tempatan) Sdn. Bhd. 240,000 1.33 DYMM Tuanku Ja’afar Ibni Almarhum Tuanku Abdul Rahman
9. Mayban Nominees (Asing) Sdn. Bhd. 197,400 1.09 Pledged Securities Account for Abdul Jaffar Bin Mainar
10. Tang Boon Ping 196,000 1.09
11. TCL Nominees (Tempatan) Sdn. Bhd. 195,000 1.08 Pledged Securities Account for Chew Kim Hwa
12. Liong Vui Hyen @ James Liong 149,900 0.83
13. Gan Ah Huat 146,000 0.81 60 14. Susan Yap Chui Suan 125,000 0.69 15. Public Nominees (Tempatan) Sdn. Bhd. 123,000 0.68 Pledged Securities Account for Toh Chiong Jin (CST)
16. Wong Choon Keong 120,000 0.66
M I N H O ( M ) B E R H A D Warrant Statistics
THIRTY LARGEST WARRANTHOLDERS AS PER THE RECORD OF DEPOSITORS (cont’d)
Name of Warrantholders No. of Warrants % of Warrants
17. Chew Kim Hwa 120,000 0.66
18. Cheah Keng Toh 114,500 0.63
19. Yew Kam @ Yeow Hong Chiang 113,000 0.63
20. Public Nominees (Tempatan) Sdn. Bhd. 110,000 0.61 Pledged Securities Account for Teoh Kim Seng (E-TWU) 21. Ng Keng Leong 100,000 0.55
22. YAM Tunku Nadzaruddin Ibni Tuanku Ja’afar 100,000 0.55
23. Law Kwong Ling 99,000 0.55
24. Kueh Ooi Voon 85,000 0.47
25. Mayban Securities Nominees (Tempatan) Sdn. Bhd. 80,000 0.44 Pledged Securities Account for Lau Yin Pin @ Lau Yen Beng
26. Koh Cheng Kiat 78,100 0.43
27. Yap Fah Choy 78,100 0.43
28. Lau Siew Choo 78,000 0.43
29. Ong Kim Mee 75,800 0.42
30. Lim Yew Chai 66,000 0.37
THIRTY LARGEST WARRANT B HOLDERS AS PER THE RECORD OF DEPOSITORS AS AT 13/05/2005
Size of Shareholdings No. of Holders % No. of Holdings %
1-999 17 2.70 9,700 0.03 1,000 – 10,000 511 81.11 1,666,200 5.56 10,001 – 100,000 91 14.44 2,405,100 8.03 100,001- less than 5% of the issued warrant B 9 1.43 3,342,000 11.16 5% of the issued warrant B and above 2 0.32 22,525,505 75.22
Total 630 100.00 29,947,505 100.00
Name of Warrant B Holders Warrants Holdings %
1 Minho Holdings Sdn. Bhd. 17,812,505 59.48
2 MDB Manufacturing Sdn. Bhd. 4,713,000 15.74
3 DB (MALAYSIA) NOMINEE (ASING) SDN BHD 1,340,500 4.48 61 BNP Paribas Nominees Singapore Pte. Ltd. for Kenswick Investments Limited
4 Wong Kian Teck 604,000 2.02
A N N U A L R E P O R T 2 0 0 4 Warrant Statistics
THIRTY LARGEST WARRANT B HOLDERS AS PER THE RECORD OF DEPOSITORS (cont’d)
Name of Warrant B Holders Warrants Holdings %
5 Emas Adil Sdn. Bhd. 388,000 1.30
6 Wong Kian Hock 218,000 0.73
7 Soh Shuh Yih 200,000 0.67
8 Sow Ah Fook 179,600 0.60
9 Mayban Nominees (Tempatan) Sdn. Bhd. 174,000 0.58 Pledged Securities Account for Choo Soo Lim
10 Wong Kien Beng 135,000 0.45
11 Teo Geok Ting 102,900 0.34
12 Mayban Nominees (Tempatan) Sdn. Bhd. 92,000 0.31 Pledged Securities Account for Kong Ah Then
13 Abdul Shukor bin Abu Bakar 80,000 0.27
14 Lee Teng Seng 80,000 0.27
15 Heng Siok Moi 77,000 0.26
16 Citicorp Nominees (Asing) Sdn. Bhd. 75,000 0.25 CBHK PBGSGP for Cheong Sim Eng
17 Mayban Nominees (Tempatan) Sdn. Bhd. 52,500 0.18 Pledged Securities Account for Teo Kok Wah
18 Wong Ah Yong 50,000 0.17
19 Leong Oi Ling 50,000 0.17
20 Lee Kong Yew 47,000 0.16
21 Tan Teng Boon @ Tan Thean Boon 46,000 0.15
22 Tan Tung Hun 45,000 0.15
23 Halim Securities Sdn. Bhd. (In Creditors’ Voluntary Liquidation) 42,500 0.14
24 Tan Ah Bha @ Tan Ah Bah 41,700 0.14
25 Koo Lai Choo 40,000 0.13
26 Chew Kiau Sin 38,000 0.13
27 Pan Chin Ee 35,000 0.12
28 Public Nominees (Tempatan) Sdn. Bhd. 35,000 0.12 Pledged Securities Account for Lui Whye Kean
29 HLG Nominees (Tempatan) Sdn. Bhd. 34,000 0.11 62 Pledged Securities Account for Tan Chow Khim 30 Cha Guan Hong 33,000 0.11
M I N H O ( M ) B E R H A D MINHO (M) BERHAD (Company No. 200903-H) Proxy Form
I/We ______of ______a Member / Members of the above named Company, do hereby appoint ______
______of ______as my / our proxy to vote for me / us and on my / our behalf at the Fourteenth Annual General Meeting of the Company to be held on 29 June 2005 and at every adjournment thereof in the manner indicated below:-
No. Resolution For Against
1 Adoption of Accounts and Report Resolution 1
2 To re-elect the following Directors: i) Christopher Wan Tiong Seah Resolution 2 ii) Ng Hoe Chang Resolution 3 iii) Khibir Bin Razali Resolution 4
3 To approve the payment of Directors’ fees. Resolution 5
4 To re-appoint Messrs Razak & Co as auditors of the Company and to authorise the Directors to determine their remuneration Resolution 6
5 Pursuant of the Section 132D Companies Act, 1965 Resolution 7
6 Pursuant to Para 10.09 of the new Listing Requirements of the BMSB Resolution 8
(Please indicate with an "X" in the space provided whether you wish your votes to be cast for or against the Resolution. In the absence of specific directions, your proxy will vote or abstain as he thinks fit.)
Dated this…………………..day of ……………………, 2005
Number of Shares held
...... …………………………………………… Signature of Shareholder or Common Seal
Notes:
1. A member of the Company entitled to attend and vote at the abovementioned general meeting may appoint a proxy to attend and vote in his stead. A proxy may but need not be a member of the Company.
2. Where a member appoints two (2) proxies, the appointment shall be invalid unless he specifies the proportion of his shareholding to be represented by each proxy.
3. The proxy Form must be deposited at the Company’s Registers Office not less than 48 hours before the time appointed for holding the meeting.