Annual Report | 2014 Contents Page

Annual Report | 2014 ContentS Page

Notice of Thirty-THIRD Annual 1 - 2 General Meeting

Statement Accompanying Notice 3 - 6 of the Thirty-THIRD Annual General Meeting

CORPORATE INFORMATION 7

CORPORATE STRUCTURE 8

FINANCIAL HIGHLIGHTS 9

BOARD OF DIRECTORS 10

EXECUTIVE COMMITTEE 11

AUDIT COMMITTEE 12

MANAGEMENT COMMITTEE 13

PROFILE OF DIRECTORS 14 - 20

CHAIRMAN’S STATEMENT 21 - 24

AUDIT COMMITTEE REPORT 25 - 27

CORPORATE GOVERNANCE STATEMENT 28 - 31

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL 32 - 33

DISCLOSURE STATEMENTS 34 - 35

CORPORATE SOCIAL RESPONSIBILITY 36

FINANCIAL STATEMENTS 37 - 101

STATISTICS OF SHAREHOLDINGS 102 - 104

LIST OF PROPERTIES 105 - 106

LOCATION MAP 107

FORM OF PROXY Enclosed FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 1 Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Thirty-Third Annual General Meeting of the Company will be held at Holiday Villa, Ivory 10, No. 9, Jalan SS12/1, Subang Jaya, 47500 Petaling Jaya, Selangor Darul Ehsan on Thursday, 25 June 2015 at 10.00 a.m. for the following purposes:-

1. To receive the Audited Financial Statements for the year ended 31 December 2014 and the RESOLUTION 1 Reports of the Directors and the Auditors thereon.

2. To approve the declaration of a first & final single tier dividend for the financial year ended 31 RESOLUTION 2 December 2014.

3. To approve the payment of Directors’ Fees for the year ended 31 December 2014. RESOLUTION 3

4. To re-elect the following Directors who retire : -

4.1 pursuant to Article 104 of the Company’s Articles of Association

Mr. Yong Yew Wei RESOLUTION 4

4.2 pursuant to Article 87 of the Company’s Articles of Association

Miss Adlina Hasni Binti Zainol Abidin RESOLUTION 5

5. To consider and, if thought fit, pass with or without modifications the following resolutions as Resolutions pursuant to Section 129(6) of the Companies Act, 1965:-

5.1 “THAT Tan Sri Dato’ Seri Lim Gait Tong, a Director who retires pursuant to Section 129(2) of RESOLUTION 6 the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until the next Annual General Meeting.”

5.2 “THAT Datuk Seri Haji Mohamed Iqbal Bin Kuppa Pitchai Rawther, a Director who retires RESOLUTION 7 pursuant to Section 129(2) of the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until the next Annual General Meeting.”

6. To re-appoint Baker Tilly Monteiro Heng as Auditors and to authorise the Directors to fix their RESOLUTION 8 remuneration.

7. As special business, to consider and, if thought fit, pass with or without modifications the following resolution as an Ordinary Resolution:-

“THAT, subject always to the Companies Act, 1965, the Articles of Association of the Company RESOLUTION 9 and approvals of the relevant governmental and/or regulatory authorities, approval be and is hereby given for the Directors to exercise, pursuant to Section 132D of the Companies Act, 1965, the power to issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed ten per centum (10%) of the total issued capital of the Company and that such approval shall continue in force until the conclusion of the next Annual General Meeting of the Company. ”

8. To transact any other business for which due notice shall have been given in accordance with the Company’s Articles of Association and the Companies Act, 1965.

NOTICE IS ALSO HEREBY GIVEN that a first and final single tier dividend of 5 sen per share in respect of the financial year ended 31 December 2014, if approved by the shareholders of the Company, will be paid on 28 July 2015. The entitlement date for the dividend payment is 8 July 2015.

A Depositor shall qualify for entitlement only in respect of:-

(a) Shares transferred into the Depositor’s Securities Account before 4.00p.m. on 8 July 2015 in respect of ordinary transfers; and

(b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad 2 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

By Order of the Board

Kwong Yook Faan (MAICSA 7031263) Margaret Pelly (LS 04402) Sin May Peng (MAICSA 7018354) Company Secretaries

22 May 2015

Notes

A member entitled to attend and vote at this Meeting is entitled to appoint any person as his/her proxy to attend and vote instead of the member at the Meeting. A proxy need not be a member of the Company. There is no restriction as to the qualification of the proxy.

A proxy appointed to attend and vote at this Meeting shall have the same rights as the member to speak at the Meeting.

If the member is a corporation, the proxy form must be executed either under its common seal or under the hand of an officer or attorney duly authorised in writing.

To be valid, the proxy form must be completed, signed and deposited at the Company’s Registered Office situated at No. 2-8, Bangunan Farlim, Jalan PJS 10/32, Taman Sri Subang, 46150 Petaling Jaya, Selangor Darul Ehsan, Malaysia not less than forty-eight (48) hours before the time appointed for holding the Meeting or any adjournment thereof.

For the purposes of determining whether a depositor shall be regarded as a member entitled to attend, speak and vote at this Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn. Bhd. to issue pursuant to Paragraph 7.16(2) of the Listing Requirements of Bursa Malaysia Securities Berhad a Record of Depositors as at 12 June, 2015 and a depositor shall not be regarded as a member entitled to attend this Meeting and to speak and vote thereat unless his/ her name appears in the said Record of Depositors.

Ordinary Resolution 9 – Resolution pursuant to Section 132D of the Companies Act, 1965

The Ordinary Resolution 9 proposed under item 7 of the agenda is a renewal of the general mandate given to the Directors of the Company by the shareholders at the Thirty-Second Annual General Meeting to allot and issue shares. As at the date of this Notice, no new shares in the Company were issued pursuant to the said general mandate which will lapse at the conclusion of the forthcoming Thirty-Third Annual General Meeting.

The said proposed Ordinary Resolution 9, if passed, will give the Directors of the Company, from the date of the above General Meeting, power to allot and issue shares from the unissued capital of the Company for such purposes as the Directors consider would be in the interest of the Company. This approval will, unless revoked or varied by the Company at a General Meeting, expire at the next Annual General Meeting, and is in addition to the power given to the Directors to issue shares under Section 132D (6A) of the Companies Act, 1965.

The purpose of seeking the said general mandate is to dispense with the need from the date of this Annual General Meeting to the next Annual General Meeting to seek shareholders’ approval for allotment and issuance of shares as working capital and/or otherwise as and when such need arises. Such general mandate, if given, will save the Company from any delay and cost in convening further general meetings for such purpose. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 3 Statement Accompanying Notice of the Thirty-Third Annual General Meeting 1.0 Directors seeking re-election/re-appointment at the Thirty-Third Annual General Meeting pursuant to:-

1.1 Article 104 of the Company’s Articles of Association

Mr. Yong Yew Wei

1.2 Article 87 of the Company’s Articles of Association

Miss Adlina Hasni Binti Zainol Abidin

1.3 Section 129(2) of the Companies Act, 1965

Tan Sri Dato’ Seri Lim Gait Tong Datuk Seri Haji Mohamed Iqbal Bin Kuppa Pitchai Rawther

2.0 Details of attendance of Directors at Board Meetings held during the financial year ended 31 December 2014

Names of Directors No. of Meetings Attended/ Held Meetings applicable 1. Tan Sri Dato’ Seri Lim Gait Tong 6 6/6 2. Datuk Seri Haji Mohamed Iqbal Bin Kuppa Pitchai Rawther 6 6/6 3. Mr Lim Chu Dick 6 6/6 4. Mr Koay Say Loke Andrew 6 6/6 5. Mr Yong Yew Wei 6 6/6 6. Encik Khairilanuar Bin Abdul Rahman 6 6/6

Miss Adlina Hasni Binti Zainol Abidin was appointed to the Board of Directors on 23 April 2015 and as such, she did not attend any Board Meeting held in the year 2014.

3.0 The venue, date and time of the Thirty-Third Annual General Meeting

Holiday Villa, Ivory 10, No. 9, Jalan SS12/1, Subang Jaya, 47500 Petaling Jaya, Selangor Darul Ehsan on Thursday, 25 June 2015 at 10.00 a.m. 4 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 Statement Accompanying Notice of the Thirty-Third Annual General Meeting (cont’d) 4.0 Further details of Directors who are standing for re-election/re-appointment: -

4.1 YONG YEW WEI - Aged 62, Malaysian Executive and Non-Independent

He is a professional engineer by profession. He obtained a New Zealand Certificate in Mechanical Engineering from Wellington Polytechnics in 1974, and a New Zealand Certificate in Production (Industrial) Engineering in 1975. Subsequently, he graduated from The University of Auckland, New Zealand, with a Bachelor Degree in Mechanical Engineering in early 1978. He had attended and completed course requirements of a local MBA programme.

Upon graduation, he worked in Auckland as design engineer in the field of Air-Conditioning and Refrigeration over a year, before his return to Malaysia in late 1979. Having qualified with adequate working experience and compliance with the requirements of The Board of Engineers Malaysia, BEM (Lembaga Jurutera Malaysia), he became a member of BEM in 1984.

He established Ismail Dan Rakan-Rakan, an engineering consultancy firm in Kuala Lumpur with partners in 1985, and has been practising as a consulting engineer for 26 years. As the principal partner, he has been active in the design and management of building services installation for numerous modern high-rise commercial and government buildings in Malaysia. He specialized in installation of facilities of advanced technology, and of intensive information technology facilities for intelligent office buildings. He has been involved in many prestigious buildings such as the RHB Head-Quarter building in 1996, the Bunga-Raya Reception Building for VVIP in KLIA, the Flight Crew Briefing and Management Control Centre in KLIA in 1998. He was responsible for the design of the advanced building internal services installation for the new government buildings in Putrajaya, namely the office premises for The Ministry of Domestic Trade and Consumer Affairs, and for The Ministry of Entrepreneur Development and Immigration in Putrajaya that were completed in 2005. He has also been involved in the construction of the latest three parcels of government office buildings in Putrajaya, one for The Women, Family and Community, which is the tallest building of the Putrajaya administration, one for The Ministry of Tourism Malaysia, and lastly for the Ministry of Higher Education. These latest additions to the Putrajaya Government building cluster, which are all incorporated with high-tech internal services, are presently either close to completion, or completed and occupied.

Besides his practice as consulting engineer in the past, he has participated in housing developments as landowner.

He was appointed to the Board of Directors of Farlim Group (Malaysia) Bhd. on 18 August 2011. He is an Executive Director of Farlim Group (Malaysia) Bhd. He does not hold any Directorship in other public companies. He does not have any family relationship with any Director and major/substantial shareholders of Farlim Group (Malaysia) Bhd.

He does not have any conflict of interest with the Company. He has no convictions for offences within the past ten years other than traffic offences, if any.

4.2 ADLINA HASNI BINTI ZAINOL ABIDIN – Aged 49, Malaysian Non-Executive and Independent

She is an Advocate and Solicitor. She obtained her Bachelor of Science in Business Administration degree in 1987 from the University of Denver, Colorado, United States of America. She started her career as a Corporate Banking Officer in 1988 with Ban Hin Lee Bank, (now known as CIMB Bank Berhad), Penang. Thereafter, in 1991 she pursued her law degree at the University of Wales, Aberystwyth, United Kingdom and obtained her LLB (Hons) in 1993. She was subsequently admitted as a Barrister-at-Law of the Honourable Society of Gray’s Inn, London in 1994.

Upon being admitted and enrolled as an advocate and solicitor of the High Court of Malaya in 1995, she served as a Legal Assistant with Messrs Chin Eng & Co. She has been a Partner with the legal firm of Messrs Chin Eng Adlina since 1997 until present. She is currently registered with the Malaysia Mediation Centre as one of the Panel of Mediators.

She was appointed to the Board of Directors of Farlim Group (Malaysia) Bhd. on 23 April 2015. She does not hold any Directorship in other public companies. She does not have any family relationship with any Director and major/substantial shareholders of Farlim Group (Malaysia) Bhd.

She does not have any conflict of interest with the Company. She has no convictions for offences within the past ten years other than traffic offences, if any. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 5 Statement Accompanying Notice of the Thirty-Third Annual General Meeting (cont’d) 4.0 Further details of Directors who are standing for re-election/re-appointment: - (Cont’d)

4.3 TAN SRI DATO’ SERI LIM GAIT TONG – Aged 72, Malaysian Executive and Non-Independent

He started his business career as a contractor with his father’s construction business at the age of 15 and subsequently commenced his own construction company, Lim Gait Tong Construction, as a sole proprietorship in 1959. In 1962, he was awarded the Society Anonyme Des Etains De Kinta (“SEK”) Mining Relocation Contract for 200 units of houses, the Kampar railway station and the Kampar market. In 1964, following a massive landslide, he rebuilt a sizable portion of the Ringlet and Brinchang townships in Cameron Highlands. In the same year, he obtained his JKR Class C Status which permitted him to tender for jobs throughout the Federation.

From 1964 to 1968, he undertook various projects under Lim Gait Tong Construction and his family’s development company. He was involved extensively in meeting the construction requirements of Island and Peninsular Group of Companies in Penang. He was the main contractor for the Island Park and Jesselton Heights housing projects, which were then among the biggest private sector efforts in Penang.

He joined Farlim Group (Malaysia) Bhd. as a first Director on 12 March 1982. He is the Chairman of the Executive Committee comprising Members of the Board. He holds 10,000 shares and has deemed interest in 60,571,234 shares through Farlim Holding Sdn. Bhd., the holding company, in Farlim Group (Malaysia) Bhd. He does not hold any shares in the subsidiaries of Farlim Group (Malaysia) Bhd. except the following:-

1. Baka Suci Sdn. Bhd. - 10,002 shares 2. Victory Ace Sdn. Bhd. - 2 shares

He is the father of Mr. Lim Chu Dick, Director of Farlim Group (Malaysia) Bhd. and Director and Shareholder of its holding company Farlim Holding Sdn. Bhd. and spouse of Puan Sri Datin Seri Chin Chew Lin, Director and Shareholder of the said holding company, and he and Puan Sri Datin Seri Chin Chew Lin are Directors and Shareholders of a corporate shareholder of the said holding company. Save as above, he has no family relationship with Directors and major/substantial shareholders of Farlim Group (Malaysia) Bhd.

He does not have any conflict of interest with the Company. He has no convictions for offences within the past ten years other than traffic offences, if any. 6 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 Statement Accompanying Notice of the Thirty-Third Annual General Meeting (cont’d) 4.0 Further details of Directors who are standing for re-election/re-appointment: - (Cont’d)

4.4 DATUK SERI HAJI MOHAMED IQBAL BIN KUPPA PITCHAI RAWTHER – Aged 71, Malaysian Executive and Non-Independent

He obtained a Certificate in Education from the University of Birmingham in 1964. Subsequently, he obtained his Bachelor of Economics Degree (Honours) and a Masters Degree in Business Administration in 1971 and 1973 respectively, both from the University of Malaya. He then furthered his studies and obtained the International Management Teacher’s Programme certificate from the joint programme organised by the Harvard Graduate School of Business Administration and the Centre D’ Enseignment Superior Des Affairs, Paris, France in 1978.

Currently, he is a Fellow of the Chartered Institute of Bankers, London, and a Fellow of the Malaysian Institute of Management.

He started his career with the Ministry of Education from 1965 to 1969. During this period, he also served as the National Education Officer of the National Union of Teaching Professionals. In 1971, he joined Malaysian International Merchant Bank Berhad as Corporate Finance Officer during which he pioneered leasing and produced a research volume on “Leasing in Malaysia” before leaving in 1974. In 1974 when the University of Malaya implemented the policy of using Bahasa Malaysia for tertiary education, he responded to a call from the University and joined the Faculty of Economics and Administration as a lecturer. Among his many achievements include being awarded the Sir Frederick Gallahan Memorial Award by the Australian-Malaysian Association of Australia in 1976 in recognition of his entrepreneurial management in Malaysia. Also, a team led by him to promote entrepreneurial management in Malaysia won the Malaysian Young Managers Competition in 1997 and subsequently, the Asian Young Managers Competition in the same year. When Bank Negara Malaysia set up the Institute of Bankers in 1979, he took up the appointment as Executive Director. He relinquished the position in 1985 and has since been involved in the private sector, including his current commitments to Farlim Group (Malaysia) Bhd. He also served on the Council of the Malaysian Institute of Management (“MIM”) from 1984 to 1991 and concurrently held the positions of MIM’s Vice-Chairman and Chairman of its Management Committee from 1989 to 1991. He has also served as an Adviser to the Peace and Happiness through Prosperity Institute in Japan from 1984 to 1990 and Japan’s Foundation for Asian Management Development from 1989 to 1992.

He joined Farlim Group (Malaysia) Bhd. as a Director on 4 May 1982. Currently, he is Deputy Chairman and an Executive Director of Farlim Group (Malaysia) Bhd. He does not hold any Directorship in other public companies. He holds 10,000 shares in Farlim Group (Malaysia) Bhd. He does not hold any shares in the subsidiaries of Farlim Group (Malaysia) Bhd.

He does not have any family relationship with any Director and major/substantial shareholder of Farlim Group (Malaysia) Bhd. He does not have any conflict of interest with the Company. He has no convictions for offences within the past ten years other than traffic offences, if any. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 7 CORPORATE INFORMATION

BOARD OF DIRECTORS

SECRETARIES

Kwong Yook Faan Margaret Pelly Sin May Peng

REGISTERED OFFICE

No. 2-8 Bangunan Farlim Jalan PJS 10/32 Taman Sri Subang 46150 Petaling Jaya Selangor Darul Ehsan T: (03) 5635 5533 F: (03) 5635 0301

SHARE REGISTRARS

Symphony Share Registrars Sdn Bhd Level 6, Symphony House Block D13, Pusat Dagangan Dana 1 Jalan PJU 1A/46 47301 Petaling Jaya Selangor Darul Ehsan T: (03) 7841 8000 F: (03) 7841 8008

AUDITORS

Baker Tilly Monteiro Heng Chartered Accountants

PRINCIPAL BANKERS

Bank Kerjasama Rakyat Malaysia Public Bank Berhad RHB Bank Berhad Standard Chartered Bank (Malaysia) Berhad Bank of China (Malaysia) Berhad

STOCK EXCHANGE LISTING

Main Market of Bursa Malaysia Securities Berhad 8 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 CORPORATE STRUCTURE as at 24 April 2015

Kertih Paka Country & Golf Resorts Sdn. Bhd. Bandar Subang 100% Sdn. Bhd. Angkatan Wawasan Saga Realty & Development 100% Sdn. Bhd. Sdn. Bhd. 100% 100%

Kaplands Kanchil Jaya Sdn. Bhd. Sdn. Bhd. 100% 100% L J Harta Sdn. Bhd. 80%

Farlim Jaya Sdn. Bhd. 100%

Farlim Marketing Sdn. Bhd. 51%

Farlim Maju Sdn. Bhd. 70%

Baka Suci Sdn. Bhd. 80%

Victory Ace Sdn. Bhd. 82%

Ria Bahagia Sdn. Bhd. 100% FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 9 FINANCIAL HIGHLIGHTS

REVENUE

2014 2013 2012 2011 2010 RM’000 RM’000 RM’000 RM’000 RM’000

Turnover 24,914 22,040 31,126 33,978 63,864

Profit/(Loss) Before Tax 56,409 (11,484) (4,354) 6,072 6,621

Profit/(Loss) After MI 47,157 (11,514) (4,631) 4,556 4,607

Weighted Average Number of Shares In Issue (‘000 shares) 140,326 140,326 140,326 136,856 124,863

Gross Earnings/(Loss) Per Share (sen) 40.20 (8.18) (3.10) 4.44 5.30

Net Earnings/(Loss) Before MI Per Share (sen) 33.56 (8.23) (3.38) 3.33 3.73

BALANCE SHEETS

2014 2013 2012 2011 2010 RM’000 RM’000 RM’000 RM’000 RM’000

Paid-up Capital 140,326 140,326 140,326 140,326 124,863

Shareholders’ Funds 151,457 104,359 115,902 120,642 116,076

Net Tangible Assets 148,487 96,827 101,885 104,966 100,400

Net Tangible Assets Per Share (RM) 1.06 0.69 0.73 0.75 0.80

Net Assets Per Share (RM) 1.08 0.74 0.83 0.86 0.93 10 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 BOARD OF DIRECTORS

Encik Khairilanuar Mr. Koay Say Loke Bin Abdul Rahman Andrew

Miss Adlina Hasni Mr. Yong Yew Wei Mr. Lim Chu Dick Binti Zainol Abidin

Datuk Seri Haji Mohamed Iqbal Tan Sri Dato’ Seri Lim Gait Tong Bin Kuppa Pitchai Rawther Chairman Deputy Chairman FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 11 EXECUTIVE COMMITTEE

Datuk Seri Haji Mohamed Iqbal Tan Sri Dato’ Seri Lim Gait Tong Bin Kuppa Pitchai Rawther Chairman 12 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 AUDIT COMMITTEE

Mr. Koay Say Loke Encik Khairilanuar Andrew Miss Adlina Hasni Bin Abdul Rahman Chairman Binti Zainol Abidin FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 13 MANAGEMENT COMMITTEE

Mr. Cheng Cheang Teck Mdm Ooi Poh Tin Mr. Kwong Yook Faan

Mr. Ng Hong Kiat Mr. Lim Hock Eng Chairman Mr. Lim Cheng Kee 14 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 Profile of Directors

Thereafter, from 1969 to 1975, he completed the Taman Evergreen and Taman Goodwood projects in Old Klang Road, Kuala Lumpur. He was instrumental to the development of Taman Cheras Utama project in Cheras, Kuala Lumpur and Taman KKB Utama project in Kuala Kubu Bahru through an affiliated company, TAN SRI DATO’ SERI Perumahan Farlim Sdn Bhd. He initiated the development of Bandar Baru Ayer Itam, which is the biggest private sector development in Penang. In recognition LIM GAIT TONG of his achievement in the construction/property sectors and contribution to the Aged 72, Malaysian society, he was conferred the Grand Fellowship Award by the British Graduates Association Malaysia. Currently, he is the Chairman, Chief Executive and Managing Executive and Non-Independent Director of Farlim Group (Malaysia) Bhd. Also as Chief Executive He joined Farlim Group (Malaysia) Bhd. as a first Director on 12 March 1982. He is the Chairman of the Executive Committee comprising Members of the Board. He holds 10,000 shares and has deemed interest in 60,571,234 shares through Farlim Holding Sdn. Bhd., the holding company, in Farlim Group (Malaysia) Bhd. He does not hold any shares in the subsidiaries of Farlim Group (Malaysia) Bhd. except the following:-

1. Baka Suci Sdn. Bhd. - 10,002 shares 2. Victory Ace Sdn. Bhd. - 2 shares

He does not hold any Directorship in other public companies.

He does not have any conflict of interest with the Company other than that, if any, set out in the Disclosure Statements and/or the Financial Statements for the year ended 31 December 2014. He has no convictions for offences within the past ten years other than traffic offences, if any. He attended all of the six Board Meetings held during the financial year ended 31 December 2014. He is not among the Independent Directors who make up one-third of the total number of Directors. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 15 Profile of Directors(cont’d)

Currently, he is a Fellow of the Chartered Institute of Bankers, London, and a Fellow Executive of the Malaysian Institute of Management.

He started his career with the Ministry of Education from 1965 to 1969. During this period, he also served as the National Education Officer of the National Union of Teaching Professionals. In 1971, he joined Malaysian International Merchant Bank Berhad as Corporate Finance Officer during which he pioneered leasing and produced a research volume on “Leasing in Malaysia” before leaving in 1974. In 1974 when the University of Malaya implemented the policy of using Bahasa Malaysia for tertiary education, he responded to a call from the University and joined the Faculty of Economics and Administration as a lecturer. Among his many achievements include being awarded the Sir Frederick Gallahan Memorial Award by the Australian-Malaysian Association of Australia in 1976 in recognition of his DATUK SERI HAJI entrepreneurial management in Malaysia. Also, a team led by him to promote entrepreneurial management in Malaysia won the Malaysian Young Managers MOHAMED IQBAL BIN Competition in 1997 and subsequently, the Asian Young Managers Competition KUPPA PITCHAI RAWTHER in the same year. When Bank Negara Malaysia set up the Institute of Bankers Aged 71, Malaysian in 1979, he took up the appointment as Executive Director. He relinquished the position in 1985 and has since been involved in the private sector, including his current commitments to Farlim Group (Malaysia) Bhd. He also served on the Executive and Non-Independent Council of the Malaysian Institute of Management (“MIM”) from 1984 to 1991 and concurrently held the positions of MIM’s Vice-Chairman and Chairman of its Management Committee from 1989 to 1991. He has also served as an Adviser to the Peace and Happiness through Prosperity Institute in Japan from 1984 to 1990 and Japan’s Foundation for Asian Management Development from 1989 to 1992. Currently, he is the Deputy Chairman and Group Executive Director of Farlim Group (Malaysia) Bhd.

He joined Farlim Group (Malaysia) Bhd. as a Director on 4 May 1982. He sits on the Executive Committee comprising Members of the Board and is the Chairman of Employees’ Share Option Scheme Committee of the Company. He does not hold any Directorship in other public companies. He does not have any family relationship with any Director and major/substantial shareholder of Farlim Group (Malaysia) Bhd.

He does not have any conflict of interest with the Company other than that, if any, set out in the Disclosure Statements and/or the Financial Statements for the year ended 31 December 2014. He has no convictions for offences within the past ten years other than traffic offences, if any. He attended all of the six Board Meetings held during the financial year ended 31 December 2014. He is not among the Independent Directors who make up one-third of the total number of Directors. 16 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 Profile of Directors(cont’d)

He was appointed as a Director of Saga Realty & Development Sdn Bhd, an indirect subsidiary of Farlim Group (Malaysia) Bhd. on 29 September 2009 and as an assistant to the Chairman & Chief Executive of Farlim Group (Malaysia) Bhd.

He was appointed to the Board of Directors of Farlim Group (Malaysia) Bhd. on 22 June 2010. He sits on the Employees’ Share Option Scheme Committee of the Company. He does not hold any Directorship in other public companies.

He represented Malaysia as a panelist at the 1st “Young Observers Roundtable discussion” at the BOAO FORUM FOR ASIA 2014.

He is the National Committee Member of Malaysia-China Chamber of Commerce (MCCC) and Vice-President of Malaysia-China Chamber of Commerce, Penang. Malaysia-China Chamber of Commerce (MCCC) is a non-government, non-profit, multi-ethnic business association. The association aims at promoting interaction, cooperation and development in trade and investment. The association achieved its mission thru having close ties with local relevant government agencies and commercial organization, such as, Malaysia Ministry of International Trade and Industry (MITI), Chinese Embassy in Malaysia, All-China Federation of Industry and Commerce and others. The association has organized, co-organized or participated in Trade exhibitions, such as the Canton Fair, China-ASEAN Expo, Central China LIM CHU DICK Expo and others. Aged 31, Malaysian He is the son of Tan Sri Dato’ Seri Lim Gait Tong, Chairman, Chief Executive and Managing Director of Farlim Group (Malaysia) Bhd. who is also Director/Shareholder Executive and Non-Independent of its holding company Farlim Holding Sdn. Bhd and Director/Shareholder of a corporate shareholder of the said holding company, and son of Puan Sri Datin Seri Chin Chew Lin, Director and Shareholder of Farlim Holding Sdn Bhd and Director/ Shareholder of a corporate shareholder of the said holding company. Save as above, he has no family relationship with Directors and major/substantial shareholders of Farlim Group (Malaysia) Bhd.

Upon graduation, he worked in Auckland as design engineer in the field of Air- Conditioning and Refrigeration over a year, before his return to Malaysia in late 1979. Having qualified with adequate working experience and compliance with the requirements of The Board of Engineers Malaysia, BEM (Lembaga Jurutera Malaysia), he became a member of BEM in 1984.

He established Ismail Dan Rakan-Rakan, an engineering consultancy firm in Kuala Lumpur with partners in 1985, and has been practising as a consulting engineer for 26 years. As the principal partner, he has been active in the design and management of building services installation for numerous modern high-rise commercial and government buildings in Malaysia. He specialized in installation of facilities of advanced technology, and of intensive information technology facilities for intelligent office buildings. He has been involved in many prestigious buildings such as the RHB Head-Quarter building in 1996, the Bunga-Raya Reception Building YONG YEW WEI for VVIP in KLIA, the Flight Crew Briefing and Management Control Centre in Aged 62, Malaysian KLIA in 1998. He was responsible for the design of the advanced building internal services installation for the new government buildings in Putrajaya, namely the office premises for The Ministry of Domestic Trade and Consumer Affairs, and for Executive and Non-Independent The Ministry of Entrepreneur Development and Immigration in Putrajaya that were completed in 2005. He has also been involved in the construction of the latest three parcels of government office buildings in Putrajaya, one for The Women, Family and Community, which is the tallest building of the Putrajaya administration, one for The Ministry of Tourism Malaysia, and lastly for the Ministry of Higher Education. These latest additions to the Putrajaya Government building cluster, which are all incorporated with high-tech internal services, are presently either close to completion, or completed and occupied.

Besides his practice as consulting engineer in the past, he has participated in housing developments as landowner.

He was appointed to the Board of Directors of Farlim Group (Malaysia) Bhd. on 18 August 2011. He is an Executive Director of Farlim Group (Malaysia) Bhd. He sits on the Executive Committee and Employees’ Share Option Scheme Committee of the Company. He does not hold any Directorship in other public companies. He does not have any family relationship with any Director and major/substantial shareholders of Farlim Group (Malaysia) Bhd.

He does not have any conflict of interest with the Company. He has no convictions for offences within the past ten years other than traffic offences, if any. He attended all of the six Board Meetings held during the financial year ended 31 December 2014. He is not among the Independent Directors who make up one-third of the total number of Directors. 18 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 Profile of Directors(cont’d)

He is an advocate and solicitor by profession. He graduated from Monash University, Australia with a Bachelor of Economics Degree, majoring in Accounting and a Bachelor of Law Degree in 1987.

He subsequently obtained a Master in Law Degree from Monash University in 1994. Upon obtaining his Bachelor Degree, he worked with an accounting firm, Nelson Parkhill BDO in Australia and became an Associate Member of the Institute of Chartered Accountants, Australia in 1991.

He advanced to become a Fellow Member of the Institute of Chartered Accountants, Australia in 2002. He was enrolled as a Barrister and Solicitor of the Supreme Court of Victoria, Australia and the Federal Court of Australia in 1988 and has been a member of the Law Institute of Victoria, Australia since 1991.

Upon his return to Malaysia, he was enrolled as an Advocate and Solicitor of the High Court of Malaya in 1995. He is now practising as a partner of Koay & Co. in Penang.

He was appointed as a Director of Penang Commercial & Industrial Development Berhad, a public company, on 16 August 2000. He was appointed to the Board of Directors of Farlim Group (Malaysia) Bhd. on 22 June 2010. He is the Chairman KOAY SAY LOKE ANDREW of Audit Committee. He sits on the Nomination Committee of Directors, Aged 49, Malaysian Remuneration Committee of Directors and Employees’ Share Option Scheme Committee of the Company. He does not hold any Directorship in other public companies. He does not have any family relationship with any Director and major/ Non-Executive and Independent substantial shareholders of Farlim Group (Malaysia) Bhd.

He does not have any conflict of interest with the Company. He has no convictions for offences within the past ten years other than traffic offences, if any. He attended all of the six Board Meetings held during the financial year ended 31 December 2014. He is among the Independent Directors who make up one-third of the total number of Directors. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 19 Profile of Directors(cont’d)

He graduated from the Institute of Technology Mara in 1988. He started his career by managing a petrol kiosk from 1989 to 1993.

He has been an Executive Chairman of Infinity Prospect Sdn Bhd since 1993 and was also an Independent and Non-Executive Director of Pensonic Holdings Berhad from February 2002 to September 19, 2011.

He has been an Independent and Non-Executive Director of Muar Ban Lee Group Berhad since 30 June 2009 and an Independent and Non-Executive Director and Audit Committee Member of Unimech Group Berhad since 1 October 2013.

He served as an Independent and Non-Executive Director of UDS Capital Bhd from November 30, 2003 to February 16, 2009. He also served as an Independent and Non-Executive Director of Denko Industrial Corp. Bhd. from June 11, 2004 to October 1, 2005.

He was a Committee Member of UMNO Youth, Kepala Batas Division since 2001 to 2008.

He was appointed to the Board of Directors of Farlim Group (Malaysia) Bhd. on 18 August 2011. He is the Chairman of Nomination Committee of Directors. He sits on the Audit Committee, Remuneration Committee of Directors and KHAIRILANUAR BIN Employees’ Share Option Scheme Committee of the Company. He does not hold ABDUL RAHMAN any Directorship in other public companies other than that disclosed above. He Aged 49, Malaysian does not have any family relationship with any Director and major/substantial shareholders of Farlim Group (Malaysia) Bhd.

Non-Executive and Independent He does not have any conflict of interest with the Company. He has no convictions for offences within the past ten years other than traffic offences, if any. He attended all of the six Board Meetings held during the financial year ended 31 December 2014. He is among the Independent Directors who make up one-third of the total number of Directors. 20 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 Profile of Directors(cont’d)

She was appointed to the Board of Directors of Farlim Group (Malaysia) Bhd. on 23 April 2015. She is the Chairperson of Remuneration Committee of Directors. She sits on the Audit Committee, Nomination Committee of Directors and Employees’ Share Option Scheme Committee of the Company. She does not hold any Directorship in other public companies. She does not have any family relationship with any Director and major/substantial shareholders of Farlim Group (Malaysia) Bhd.

ADLINA HASNI BINTI She does not have any conflict of interest with the Company. She has no ZAINOL ABIDIN convictions for offences within the past ten years other than traffic offences, if Aged 49, Malaysian any. She attended one Board Meeting held after her appointment as a Director in April 2015. She is among the Independent Directors who make up one-third of the Non-Executive and Independent total number of Directors. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 21 CHAIRMAN’S STATEMENT

I am pleased to present herewith, on behalf of the Board of Directors, the Annual Report and Financial Statements of Farlim Group (Malaysia) Bhd. and its group of companies for the financial year ended 31 December 2014. 22 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 CHAIRMAN’S STATEMENT (cont’d)

On the global economy, 2014 was another year of slow and weak recovery notwithstanding that there was a positive economic growth. While certain economies had recorded significant pick-ups in economic growth, others including the euro zone had been struggling to strengthen their economies. The effects of 2008 financial crises and ensuing recession had not been fully cushioned for significant economic recovery. The falling oil price had brought about adoption of a new wave of stimulus measures by affected economies. In Malaysia, the strength of economic measures being implemented by the government had been encouraging in securing a significant GDP growth of 6% in the year 2014 from 4.7% in 2013.

However, the property market outlook in Malaysia may, with the weakening of the Ringgit and introduction of Goods & Service Tax, be generally affected but to what extent is a matter of uncertainty.

Financial Performance

In the year under review, the Group registered a profit before tax of RM56 million against loss before tax of RM11 million for the financial year ended 31 December 2013 with a turnover of RM25 million for the year 2014 compared to RM22 million in the previous year.

Dividend

The Board of Directors recommends a first and final single tier divident of 5 sen per ordinary share in respect of financial year ended 31 December 2014. The proposed dividend will be subject to shareholders’ approval at the forthcoming Thirty-Third Annual General Meeting.

Overview of the Group’s Operations

The Group had in the year under review continued its plan for development of medium cost residential units to cater for the needs of the middle income group in line with its efforts for development of affordable and quality homes other than provision of amenities and commercial or other products to serve the community in development projects.

In the year 2014, the Group had acquired new lands and continued its sourcing further land bank and new projects as a strategy for enhancement of profitability of the Group’s operations.

Prospects

The significant improvement of the Malaysian economy in the year 2014 has reinforced the confidence in economic growth in the year ahead. However, the impact of weakening of the Ringgit arising from decline in oil price and introduction of Goods & Services Tax may constitute a negative catalyst for achievement in further economic growth.

However, there can still be optimistic sentiment of a good year for the domestic property market notwithstanding the less favourable micro environment.

Acknowledgements

I wish, on behalf of the Board of Directors, to thank the management and staff of Farlim Group (Malaysia) Bhd. and its group of companies for their hard work and services to the Group in the year 2014.

My gratitude is also accorded to my fellow Directors for their commitment during the year towards achievement of our corporate objectives.

Finally, I would like, on behalf of the Group, to express our appreciation to our valued shareholders, customers and business associates and the authorities for their support rendered to the Group during the year under review.

Tan Sri Dato’ Seri Lim Gait Tong Chairman FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 23 PENYATA PENGERUSI

Saya, bagi pihak Lembaga Pengarah, dengan sukacita mempersembahkan Laporan Tahunan dan Penyata Kewangan bagi Farlim Group (Malaysia) Bhd. serta kumpulan syarikat-syarikat bagi tahun kewangan berakhir 31 Disember 2014.

Kadar pemulihan ekonomi antarabangsa masih lembap pada tahun yang ditinjau. Walaupun terdapat perkembangan ekonomi yang positif dan beberapa kawasan ekonomi telah merekodkan penambahbaikan yang signifikan, namun, terdapat juga kawasan ekonomi seperti zon euro yang masih tidak berdaya untuk memperkukuhkan kedudukan ekonomi masing-masing. Kesan daripada krisis-krisis kewangan 2008 dan pengangguran yang berikutan masih tidak dapat diatasi sepenuh. Kemerosotan harga minyak telah membawa kepada pengenalan langkah-langkah perangsang baru di kalangan ekonomi-ekonomi yang terlibat. Di Malaysia, langkah-langkah yang diimplimentasikan oleh pihak kerajaan telah berjaya mencatatkan perkembangan KDNK yang signifikan, yakni sebanyak 6% berbanding dengan 4.7% pada tahun 2013.

Walau bagaimanapun, kelemahan nilai Ringgit serta pengenalan Cukai Barangan & Perkhidmatan mungkin akan menjejaskan pasaran hartanah di Malaysia.

Prestasi Kewangan

Pada tahun yang ditinjau, Kumpulan telah mencatatkan keuntungan sebelum cukai sebanyak RM56 juta berbanding dengan kerugian sebelum cukai sebanyak RM11 juta pada tahun kewangan berakhir 31 Disember 2013. Seterusnya, Kumpulan mencapai perolehan sebanyak RM25 juta bagi tahun 2014 berbanding dengan RM22 juta pada tahun sebelumnya.

Dividen

Lembaga Pengarah mengesyorkan dividen satu peringkat pertama dan akhir sebanyak 5 sen per saham biasa bagi tahun kewangan berakhir 31 Disember 2014. Dividen yang disyorkan ini akan dibentangkan untuk kelulusan pemegang-pemegang saham semasa Mesyuarat Agung Tahunan ke-33 yang akan datang.

Tinjauan Operasi Kumpulan

Semasa tahun yang ditinjau, Kumpulan telah meneruskan pelan pembangunan unit kediaman kos sederhana untuk memenuhi keperluan golongan berpendapatan sederhana. Ini selaras dengan usaha-usaha Kumpulan untuk membangunkan kediaman mampu-milik yang berkualiti serta menawarkan kemudahan dan komersial atau produk lain yang dapat memanfaatkan komuniti dalam projek-projek pembangunan.

Pada tahun 2014, Kumpulan telah memperolehi sumber tanah yang baru dan memperluaskan lagi sumber bank tanah serta memperkenalkan projek-projek baru sebagai strategi untuk menjana keuntungan bagi operasi Kumpulan.

Prospek-prospek

Keadaan ekonomi Malaysia yang kian bertambah baik pada tahun 2014 telah memperkukuhkan keyakinan dalam pertumbuhan ekonomi bagi tahun akan datang. Namun demikian, impak penurunan nilai Ringgit yang diakibatkan oleh kemerosotan harga minyak serta pengenalan Cukai Barangan & Perkhidmatan mungkin akan menjadi halangan bagi pertumbuhan ekonomi seterusnya.

Walau bagaimanapun, masih terdapat sentimen optimistik bahawa pasaran hartanah domestik akan mengalami tahun yang baik, walaupun dengan persekitaran mikro yang kurang memuaskan.

Penghargaan

Saya, bagi pihak Lembaga Pengarah, mengambil kesempatan ini untuk melafazkan penghargaan kepada pihak pengurusan dan kakitangan Farlim Group (Malaysia) Bhd. serta kumpulan syarikat-syarikat atas sumbangan mereka pada tahun 2014.

Saya juga amat berterima kasih kepada para Pengarah atas usaha-usaha mereka sepanjang tahun ke arah mencapai objektif- objektif korporat.

Akhir sekali, saya, bagi pihak Kumpulan, turut mengucapkan terima kasih kepada para pemegang syer, pelanggan dan rakan perniagaan serta pihak-pihak berkuasa yang berkenaan bagi sokongan mereka semasa tahun yang ditinjau.

Tan Sri Dato’ Seri Lim Gait Tong Pengerusi 24 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 主席献词

本人很高兴代表董事会提呈发林集团(马)有限公司及属下公司截至2014年12月31日之常年报告和财务结册。

虽然经济成长显现正面，2014乃是全球经济处于疲弱和复苏缓慢的另一年。当一些国家已在经济成长中获得可喜表现之际，其他国家包括欧元区却在为其经济振兴挣扎中。2008年的财务危机和随后经济衰退之冲击并未完全获得缓和，以取得重大经济复苏。油价下滑已使受影响国家采取了新一轮经济刺激骤施。在马来西亚，政府实行经济措施已取得令人鼓舞的经济成长，其于2014年的国民生产总值成长率达6%之高，而在2013年则为4.7%。

然而，马来西亚的产业市场展望，随着马币疲弱和消费服务税之实行，已大致上受到影响，惟受影响程度则不明确。

财务表现

本集团在过去一年转亏为盈取得税前盈利达五千六百万令吉，而截至2013年12月31日的财政年度之税前亏损为一千一百万令吉。集团于2014年之营业额达两千五百万令吉。较早一年取得两千两百万令吉之营业额。

股息

董事会建议在2014年12月31日的财政年度派发每普通股五仙之首期兼终期单层股息。这建议中的股息将呈予即将来临的第三十三届常年股东大会通过。

集团营运总观

本集团在过去一年继续拟定其发展中价住宅单位之计划，以迎合中层收入人士的需求。这乃配合其除了在发展计划下提供各项设施以及商业和其他单位外发展可负担和优质房屋的努力。

本集团于2014年购置了新地段，并继续为集团营运盈利之提升寻购更多土地库和获取新计划。

前景

马来西亚经济于2014年取得重大改善已巩固了我们对今年经济成长的信心。然而，马币因油价下滑而疲弱以及消费服务税之实行可能成为获取进一步经济成长的负面催化剂。

虽然国内因素有些不利，我们仍可持有对国内产业市场享有另一好年的乐观态度。

鸣谢

我代表董事会向发林集团（马）有限公司的管理层和员工在2014年努力奉献致谢。

我亦对各董事这一年来作出承担以实现我们的企业目标表示感激。

最后，我代表本集团向我们的股东，客户，业务伙伴和有关当局在过去一年给予本集团支持谨表谢意。

丹斯里拿督斯里林玉唐董事主席兼总裁 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 25 Audit Committee Report

1. THE AUDIT COMMITTEE

The Audit Committee comprises three (3) members of the Board, all of whom are Non-Executive Independent Directors.

The members during the financial year ended 31 December 2014 and as at the date of this Annual Report are as follows:-

Mr. Koay Say Loke Andrew - Chairman Non-Executive Independent Director

Mr. Yong Yew Wei – resigned on 23 April 2015 Executive Non-Independent Director

Encik Khairilanuar Bin Abdul Rahman Non-Executive Independent Director

Miss Adlina Hasni Binti Zainol Abidin – appointed on 23 April 2015 Non-Executive Independent Director

The Secretary to the committee is as follows:

Mr. Kwong Yook Faan Company Secretary

2. SUMMARY OF THE TERMS OF REFERENCE, ROLES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE

2.1 TERMS OF REFERENCE

2.1.1 Purpose

The purpose of the Audit Committee is to assist the Board of Directors in fulfilling its responsibilities for the financial reporting process, system of internal control and audit process.

2.1.2 Composition

The Audit Committee consists of three (3) members appointed from among the members of the Board, all of whom are non-executive and independent. The chairman of the Audit Committee is appointed from among its members.

2.1.3 Authority

The Audit Committee is empowered to, in accordance with the procedures determined by the Board of Directors and at the cost of the Company :-

• investigate any matters within its terms of reference;

• have full and unrestricted access to all information in relation to the Company and its subsidiaries (“the Group”);

• have direct communication channels with the External Auditors and Internal Auditors;

• obtain external independent professional advice or assistance; and

• convene closed meetings with the External Auditors, the Internal Auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary. 26 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

Audit Committee Report (cont’d)

2. SUMMARY OF THE TERMS OF REFERENCE, ROLES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE (CONT’D)

2.1 TERMS OF REFERENCE (cont’d)

2.1.4 Meetings and Attendance

The Audit Committee shall meet at least four (4) times a year or as and when the need arises.

The quorum for a meeting shall be two. Directors, employees, auditors or others may attend meetings upon the invitation of the Audit Committee.

2.2 ROLES AND RESPONSIBILITIES

The Audit Committee shall play its roles and discharge, amongst others, the following responsibilities:-

• Review with the Internal Auditors, the scope, functions, competency and adequacy of resources, authority, internal audit programmes and results, processes or investigations undertaken and the action taken on their recommendations;

• Review the quarterly results and annual financial statements of the Group prior to the approval by the Board of Directors;

• Review any related party transaction and conflict of interests situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity;

• Review with the External and Internal Auditors, the effectiveness of the Group’s system of internal controls, including information technology security and control;

• Review the effectiveness of the External Auditors, including their appointment, audit fees and any related issues;

• Review the effectiveness of the Internal Auditors’ functions, including the appointment or termination of senior internal audit staff, and the assessment and resignation of internal audit staff;

• Consider other issues assigned by the Board of Directors;

• Report its activities, issues and related recommendations to the Board of Directors; and

• Review and verify all documents if so required pursuant to Listing Requirements of Bursa Malaysia Securities Berhad.

3. MEETINGS AND ATTENDANCE

The Audit Committee meets periodically to carry out its functions and duties in accordance with its terms of reference. The Audit Committee held a total of five (5) meetings during the financial year ended 31 December 2014, with details of attendance at each meeting as follows:

No. of Meetings Names of Committee Members Held* Attended Mr. Koay Say Loke Andrew 5 5 Mr. Yong Yew Wei 5 5 Encik Khairilanuar Bin Abdul Rahman 5 4

Miss Adlina Hasni Binti Zainol Abidin was appointed to the Audit Committee on 23 April 2015 and as such, she did not attend any Audit Committee Meeting held in the year 2014.

* On 27 February 2014, 24 April 2014, 22 May 2014, 28 August 2014 and 18 November 2014 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 27

Audit Committee Report (cont’d)

4. SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

For the financial year ended 31 December 2014, the Audit Committee discharged its duties and responsibilities in accordance with its terms of reference. The main areas of activities undertaken by the Audit Committee were as follows:-

(a) Reviewed the quarterly financial results of the Company and made recommendations to the Board of Directors for approval prior to release of the results to Bursa Malaysia Securities Berhad;

(b) Reviewed the annual audited financial statements of the Group/Company and made relevant recommendations to the Board of Directors for approval;

(d) Reviewed with the External Auditors their audit plan; and

(e) Reviewed the Audit Committee Report and such other documents required pursuant to Listing Requirements of Bursa Malaysia Securities Berhad.

5. SUMMARY OF THE ACTIVITIES OF INTERNAL AUDIT

The Audit Committee was assisted by the Internal Auditors who undertook the audit and compliance functions of the Group in line with the Internal Audit Plan.

Internal Audit focused on determining whether the controls provided reasonable assurance of effective and efficient operations, as to reliability and integrity of financial data and reports, and compliance with laws, regulations and contracts.

The Internal Audit Plan covered the examination and evaluation of the adequacy and effectiveness of internal control systems and the quality of compliance with the internal control systems which comprised key components of control environment, risk management and assessment process, operational control activities, information and communication systems and monitoring practices. 28 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 CORPORATE GOVERNANCE STATEMENT

The Board of Directors of the Company, in protecting and enhancing shareholders’ value and financial performance of the Group, gives due recognition to the need of adopting high standards of corporate governance as a fundamental part of its responsibility. The Board is pleased to set out hereunder the manner in which the Group has applied the principles, and the extent of compliance with the best practices in corporate governance as prescribed in the Malaysian Code on Corporate Governance 2013 in the financial year ended 31 December 2014.

Statement on how the Company has applied the principles of Corporate Governance

A Board of Directors

(i) Role and Responsibilities of the Board

(a) The Board charts the course and direction of the Group and all members of the Board participate in decisions on vital issues affecting the Group. The Executive Directors are responsible for implementation of the policies and decisions of the Board, overseeing the operations as well as coordinating the development and implementation of business and corporate strategies while the Independent Non-Executive Directors play a key role in providing unbiased and independent views, advice and contributing their knowledge and experience towards formulation of policies and in the decision-making process.

(b) The Board composition is provided in the Corporate Information section and the profiles of the members of the Board are set out in the Profile of Directors section of this Annual Report. The Board’s composition represents a mix of knowledge, skills and expertise from varied business backgrounds vital to effective stewardship of the Group.

(c) The Chairman & Chief Executive and Executive Director are having their respective roles to play. The Chairman heads the Board and chairs meetings at Board level. The Chief Executive is responsible for implementing the Group’s policies and business plans and executes decisions accordingly. The Executive Director assists in carrying out decisions of the Board.

(ii) Board Balance

The Board of Directors of the Company comprises seven members, of whom four are Executive and Non-Independent Directors.

The Board members who are from varied background are equipped with relevant knowledge and/or experience for proper running of the management machinery towards achievement of objectives of the Company. The Board is headed by the Chairman who is also the Managing Director and Chief Executive for implementation of decisions of the Board. To alleviate the risk where the roles of Chairman, Managing Director and Chief Executive are combined, sufficient number of Independent Directors has been maintained to meet the requirements of Bursa Malaysia Securities Berhad in relation to one-third Independent Directors unless otherwise approved by Bursa Malaysia Securities Berhad.

(iii) Board Committees

The Board has appointed the following Committees to carry out specific duties:-

• Audit Committee • Executive Committee • Remuneration Committee • Nomination Committee • Employees’ Share Option Scheme Committee

The respective terms of reference of Executive Committee and Employees’ Share Option Scheme Committee are set out hereunder while that of the other Committees are furnished in sections in relation to the respective Committees in this Statement or Annual Report.

Executive Committee

The Executive Committee is to carry out and execute decisions made and/or delegated by the Board of Directors and responsible for overseeing the operations of the Group for achievement of corporate objectives.

Employees’ Share Option Scheme Committee

The function of Employees’ Share Option Scheme Committee is to administer and attend to all matters in relation to offer and issuance to eligible employees of shares pursuant to Employees’ Share Option Scheme of the Company. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 29

CORPORATE GOVERNANCE STATEMENT (cont’d)

Statement on how the Company has applied the principles of Corporate Governance (cont’d)

A Board of Directors (cont’d)

(iv) Board Meetings and Supply of Information to the Board

Six Board Meetings were held during the financial year ended 31 December 2014. Details of attendance of each Director in respect of the meetings held is set out in the “Statement accompanying notice of annual general meeting” of this Annual Report. Additional Board Meetings will be convened as and when the need arises to consider and deal with issues requiring decision of the Board. All of the Directors have complied with the minimum 50% attendance requirement in respect of Board Meetings pursuant to the Listing Requirements of Bursa Malaysia Securities Berhad.

Reports containing notices of meetings with structured pre-set agenda and relevant papers and information, be they in relation to finance, operation, corporate issues or otherwise, requiring decisions at Board Meetings are circulated in advance for proper conduct of such meetings to ensure adequate time being accorded to members of the Board prior to decision-making. The Chairman chairs the Board Meetings and conducts such meetings with presentation and explanations by the personnel concerned on the respective papers in the Board Reports.

Members of the Board have unrestricted access to the advice and services of the Company Secretary who organises and attends all Board Meetings to enable compliance with proper procedures at Board Meetings and applicable rules and regulations. The proceedings, resolutions and decisions at Board Meetings are properly minuted by the Company Secretary for confirmation at subsequent meetings and signing by the Chairman as correct records.

The services of external independent professional advisers are, as and when the need arises, sought by the Board at the Company’s expenses.

(v) Appointment of Board Members

The Nomination Committee which was set-up on 18 May 2002 is responsible for carrying out review and making recommendations on appropriate mix of expertise and experience as well as the appropriate balance of Executive and Non-Executive Directors (including Independent Non-Executives).

The Nomination Committee is to, inter alia,:-

(a) recommend to the Board candidates for directorships to be filled by the shareholders or the Board;

(b) consider candidates for directorships proposed by the Chief Executive and/or by any other senior executive or any Director or shareholder;

(d) assess the effectiveness of the Board and Board Committees including their size and composition, and contributions of each individual Director; and

(e) review and recommend to the Board the required mix of skills, experience and other qualities, including core competencies which Non-Executive Directors should bring to the Board.

(vi) Directors’ Training

Orientation and relevant education programmes are arranged for new recruits to the Board as an integral element of the process of appointing new Directors.

Attendance at further training is determined on a need basis from time to time.

(vii) Re-election of Directors

Directors who are appointed by the Board are, pursuant to the Articles of Association of the Company, be subject to retirement and re-election at the next Annual General Meeting held following their appointments. One-third in number of the Directors shall retire from office at each Annual General Meeting in accordance with the Articles of Association provided always that all the Directors including the Managing Director shall retire from office at least once every three years but shall be eligible for re-election. Directors of seventy years of age shall also retire pursuant to Section 129(2) of the Companies Act, 1965 subject to re-appointment at the Annual General Meeting. 30 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

CORPORATE GOVERNANCE STATEMENT (cont’d)

Statement on how the Company has applied the principles of Corporate Governance (cont’d)

B Directors’ Remuneration

(i) The level and make-up of remuneration

The primary function of the Remuneration Committee is to assist in assessing the remuneration of the Executive Directors to commensurate with their responsibility and commitment for proper carrying out of their duties and continuance of their services required by the Group.

The component parts of their remuneration are structured so that the rewards are based on corporate and individual performance in the case of Executive Directors. For Non-Executive Directors, the level of remuneration corresponds to the experience and degree of responsibilities of the individual Non-Executive Director concerned.

(ii) Procedure

The Remuneration Committee appointed on 18 May 2002 is responsible for:-

(a) determining and developing the remuneration policy for Executive Directors;

(b) recommending to the Board the remuneration of Executive Directors in all its forms, drawing from outside advice where necessary;

(c) assisting the Board in ensuring that the remuneration of Directors reflects the responsibility and commitment of the Directors concerned and determining the policy for and scope of service agreements for Executive Directors, termination payments and compensation commitments; and

(d) recommending to the Board the seeking of services of such advisers or consultants as is necessary to fulfil its responsibilities.

Directors do not participate in decisions on their own remuneration packages.

(iii) Disclosure

Details of aggregate remuneration of Directors on Group basis for the financial year ended 31 December 2014 are as set out in this Annual Report. Standards will be set to provide a rationale and objective remuneration policy.

C Communication with Shareholders

(i) Company annual publication

Communication with the shareholders is, among others, via issuance of Annual Report.

(ii) Announcements to Bursa Malaysia Securities Berhad

Announcements to Bursa Malaysia Securities Berhad during the year on quarterly financial results, annual audited financial statements and corporate proposals and developments serve as good communications with shareholders on update and overview of the Group’s performance and operations.

(iii) Company Website

The Company website at www.farlim.com.my affords the shareholders ease of access to relevant information on the Group.

(iv) General Meetings

Direct interaction between the Board of Directors and shareholders of the Company is effected via Annual General Meeting and Extraordinary General Meeting, if any.

Shareholders are given an opportunity to attend the general meetings and participate in the proceedings where they are able to seek direct response to their questions. The Directors and Senior Management present are available to provide explanations to shareholders on their queries. Shareholders who are unable to make their presence at general meetings are allowed to appoint proxies to attend, vote and speak on their behalf.

Shareholders may submit suggestions and comments for consideration by the Company. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 31

CORPORATE GOVERNANCE STATEMENT (cont’d)

Statement on how the Company has applied the principles of Corporate Governance (cont’d)

C Communication with Shareholders (cont’d)

(v) Investor Relations

The Company is ready for entering into dialogue with institutional shareholders on the basis of mutual understanding of objectives and is prepared to meet investors.

D Accountability and Audit

(i) Financial reporting and disclosure

Full disclosure of the requisite financial results and performance of the Company and Group is achieved via quarterly announcements and issuance of the Annual Report.

(ii) Internal control

Information on the Group’s internal control is set out in the Statement on Risk Management and Internal Control contained in this Annual Report.

(iii) Relationship with External Auditors

Formal and transparent relationship has been established with the External Auditors who attend Audit Committee Meetings for review of the annual financial statements, the Group’s accounting policies, audit findings and weaknesses, if any, on existing internal control.

(iv) Statement of Directors’ responsibility for preparing the annual audited financial statements for the financial year ended 31 December 2014

The Directors are responsible for ensuring that the financial statements of the Group 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 state of affairs of the Group and the Company as at 31 December 2014 and of the results and cash flows of the Group and the Company for the financial year ended on that date.

In preparing the financial statements, the Directors have:-

• adopted appropriate accounting policies and have applied them consistently; • made judgements and estimates that are reasonable and prudent; • ensured adherence to all applicable approved accounting standards; and • used the going concern basis for the preparation of the financial statements.

The Directors are also responsible for ensuring that the Company and Group maintain accounting records that disclose with reasonable accuracy the financial position of the Company and Group, and which enable them to ensure that the financial statements comply with the Companies Act.

In addition, the Directors have the general responsibility of taking such steps necessary to safeguard the assets of the Company and Group and to prevent and detect fraud and other irregularities.

This statement is made in accordance with a resolution of the Board of Directors passed on 23 April 2015.

Statement explaining the Board of Directors’ responsibility for preparing the Annual Audited Financial Statements

Board of Directors’ confirms its responsibility for preparation of the Annual Audited Financial Statements.

Statement about the state of risk management and internal control of the Company as a group

Statement about the state of risk management and internal control of the Company as a group is set out in the Statement on Risk Management and Internal Control contained in this Annual Report.

Date: 23 April 2015 32 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL INTRODUCTION

The Malaysian Code on Corporate Governance 2012 requires listed companies to maintain a sound system of risk management and internal controls to safeguard shareholders’ investments and the Group’s assets.

Pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), the Board of Directors (Board) of Farlim Group (Malaysia) Bhd. is pleased to provide a statement on the state of risk management framework and internal control system.

Sets out below is the Board’s statement which has been prepared in accordance with the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers.

BOARD RESPONSIBILITY

The Board recognizes the importance of a sound internal control system and effective risk management framework to good corporate governance.

The Board is responsible for the continual improvement of internal control and risk management practices within the Group to meet its business objectives.

The Board further affirms its overall responsibility for the effectiveness of the Group’s systems of internal controls and risk management, and to ensure the effectiveness, adequacy and integrity of those systems.

In view of the limitations which are inherent in any systems of internal control, the systems of internal control are designed to manage and mitigate the risk within the tolerable levels rather than eliminate those possible risks of failure to achieve Group’s business objectives. Thus, the system of internal control by its nature can only reduce and provide reasonable and not absolute assurance against the possibility of occurrence of any material error, misstatement, fraud or loss.

RISK MANAGEMENT FRAMEWORK

Risk Management is regarded by the Board as an integral part of the Group’s business operations. The Senior Management of the Operating Units is delegated the responsibility to regularly identify, assess and review the significant risks and implement and monitor the policies, procedures, guidelines and internal control systems.

The Board acknowledges that risk management assessment involves an ongoing process for effectively identifying, evaluating, monitoring and managing the significant risks that may affect the Group in pursuing its business objectives during the financial year under review. The Board through the Audit Committee is to obtain reasonable assurance on the adequacy and effectiveness of the Group’s risk management and internal control system. This process has been carried out and reviewed independently by the internal audit function.

SYSTEM OF INTERNAL CONTROL

Other key elements of the internal control system are described as follows:

i) There is an organizational structure designed with well defined lines of responsibility, process of hierarchical reporting, delegation of authorities and accountability within the head of operational units, senior management and Board;

ii) Financial and operation authority limits are defined to assign to the appropriate levels for approving all aspects of operating units to minimize risks of unauthorized transactions;

iii) Documented internal operating guidelines, policies and procedures of the relevant operation departments which is subject to regular review and enhance by the management;

iv) Scheduled monthly management meetings are held between the senior management and head of operational units on the progress of operational, financial performance and legal matters, which are monitored on a monthly basis;

v) The audit committee reviews the Group’s quarterly unaudited financial results and year-end financial statements which are then presented to the Board for approval;

vi) Management reports are made available to the executive committee covering financial performance and key business operations of the Group, where actual performance is closely monitored against budget and plans to identify and address significant variances; and FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 33 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont’d) SYSTEM OF INTERNAL CONTROL (cont’d) vii) The Group has centralized personnel & administration unit which plays the role of recruitment, termination, promotion, training and appraisal of the employees as well as administrative function such as purchasing and acquisition of assets within the Group.

INTERNAL AUDIT FUNCTION

The Group had established an internal audit department which reports directly to the Audit Committee Chairman carries out the internal audit reviews on the operating departments within the Group based on the annual audit plan that has been approved by the Audit Committee. The department undertakes to carry out regular review of the adequacy and integrity of internal control systems and procedures and checks for compliances with policies and procedures in order to provide reasonable assurance on the efficiency and effectiveness of the system.

The internal audit reports are issued to highlight significant findings or deficiency requiring management’s attention and provide recommendations of areas for improvement. Follow-up review would subsequently be conducted to ensure that appropriate corrective action plan has been implemented to address control weaknesses highlighted. The cost incurred for the internal audit function for the financial year ended 31 December 2014 was approximately RM 71,265.05 (2013: RM 61,046.20).

REVIEW OF THIS STATEMENT BY EXTERNAL AUDITORS

Pursuant to paragraph 15.23 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the external auditors have reviewed this Statement on Risk Management and Internal Control. Their review was performed in accordance with Recommended Practice guide (“RPG”) 5 issued by the Malaysian Institute of Accountants. RPG 5 does not require the external auditors to form an opinion on the adequacy and effectiveness of the risk management and internal control systems of the Group.

CONCLUSION

The Board is of the view that the current system of risk management and internal control is in place and operated adequately and satisfactorily. There are no significant weaknesses in the system of internal control that would have material financial impact on the operations of the Group for the financial year under review. The Board and the management will continue to take necessary measures and ongoing commitment to strengthen and improve its internal control environment and risk management. 34 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 DISCLOSURE STATEMENTS as at 24 April 2015

1.0 Directors’ Remuneration for the financial year ended 31 December 2014

1.1 Aggregate remuneration of Directors with categorisation into appropriate components : -

Salaries, Bonuses, Allowances, Other Provision for Emoluments &/or Retirement Fees Benefits in Kind Benefits RM RM RM

Executive – 546,366 50,000 Non-Executive 108,000 12,750 –

1.2 Number of Directors whose remuneration falls in the following bands : -

Number of Directors Remuneration Band Executive Non-Executive Below RM50,000 1 3 RM100,001 to RM150,000 – – RM150,001 to RM200,000 1 – RM200,001 to RM250,000 – – RM250,001 to RM300,000 1 –

2.0 Board of Directors’ Meetings

A total of six Board Meetings were held during the financial year ended 31 December 2014.

3.0 Sanctions and/or Penalties

RM Tax penalties under - Section 113(2) of the Income Tax Act, 1963 31,647.00 - Section 107(C)(10) of the Income Tax Act, 1963 4,022.53 35,669.53

4.0 The amount of non-audit fees incurred for services rendered to the Company or its subsidiaries for the financial year by the Company’s auditors, or a firm or company affiliated to the auditors’ firm:-

RM Taxation fees 17,850.00 Review of Statement on Risk Management and Internal Control 4,500.00 Review of Realised and Unrealised Losses 3,500.00 Goods & Services Tax (GST) consultancy services 30,000.00 55,850.00

5.0 Material Contracts

There are no material contracts subsisting since the end of the previous financial year ended 31 December 2013 and as at end of current financial year on 31 December 2014 involving Directors and Major Shareholders’ interests except that the Group had in its ordinary course of business entered into a Related Party Transaction via a Sale & Purchase Agreement to dispose of a three-storey shop-office at a consideration of RM2,232,500.00 to a company in which a Director has an interest. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 35

DISCLOSURE STATEMENTS (cont’d) as at 24 April 2015

6.0 Revaluation Policy

The Group’s landed and investment properties are stated at cost less accumulated depreciation and impairment losses if any.

The Group reviews the market value of these properties on an annual basis to ascertain whether any impairment is necessary.

7.0 Continuing Education Programme (‘CEP’)

The Board of Directors had resolved that it, having evaluated and determined the training needs of its members in accordance with Listing Requirements of Bursa Malaysia Securities Berhad, was of the view that its members had satisfied such training needs and would, as and when deemed appropriate, attend further training to be determined from time to time. 36 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 Corporate Social Responsibility (CSR)

Farlim Group (Malaysia) Bhd and its subsidiaries (Farlim or the Group) have played its role in discharging CSR towards meeting the needs of the community in development of residential and commercial properties.

Both the employees and shareholders as well as the stakeholders, customers and communities are those who have benefitted from such contribution made by the Group.

HOUSING

Farlim in discharging its CSR has, in line with its plan, carried out development of low and low-medium cost housing and medium cost residential units to serve the needs of the lower income group and development of commercial units in its various schemes.

The development by Farlim of affordable housing to the community under the house ownership programme is another commitment to discharge its CSR.

ENVIRONMENT

The adoption of appropriate measures to meet the required standards and practices of being environmental-friendly is an effort made by the Group to contribute towards preservation of a conducive environment.

At the same time, Farlim has also committed to preservation of natural environmental attributes within its means.

INFRASTRUCTURE AND FACILITIES

Development by the Group of projects includes incorporation of a good network of infrastructure with adequate facilities and amenities to cater for the needs of purchasers of residential and commercial units.

Among such facilities and amenities provided are schools, market, hawker centres, government polyclinic, community hall, petrol service stations and police station, the provision of which is by Farlim jointly with the relevant authorities and/or organisations to serve the needs of the community in discharging part of its CSR.

It is Farlim’s corporate culture to contribute to the community via relevant services and facilities.

FINANCIAL CONTRIBUTION

In addition to construction of good network of infrastructure and facilities, Farlim is also committed to the community in provision of financial assistance to schools, in particular SJKC Qiao Nan School Penang, for building construction and education and to spastics centres, orphanage, hospice and other charitable bodies for the benefit of the under-privileged group.

Farlim had also been instrumental in co-ordination of complimentary re-painting works for its low cost flats at Bandar Baru Ayer Itam Penang for the benefit of the residents.

EMPLOYEE DEVELOPMENT

Farlim staff has been accorded appropriate development programmes for enhancement of technical competencies and supervisory skills for continual maintenance of a competent work force.

Regular staff gathering has also been organized for reinforcement of relationship among employees and creation of closer rapport between them.

STAKEHOLDERS

Farlim has, as and when the need arises, effected release of relevant information via announcements on the Group’s business activities and performance to the stakeholders for effective and timely communication with the stakeholders.

AFTER-SALES SERVICE

Owners of properties developed by Farlim have been offered as after-sales service assistance in sale or letting of their properties and refinancing. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 37

ContentS

Page

DIRECTORS’ REPORT 38 - 41

FINANCIAL STATEMENTS: 42 STATEMENTS OF FINANCIAL POSITION

STATEMENTS OF PROFIT OR LOSS AND OTHER 43 COMPREHENSIVE INCOME

STATEMENTS OF CHANGES IN EQUITY 44

STATEMENTS OF CASH FLOWS 45 - 46

NOTES TO THE FINANCIAL STATEMENTS 47 - 96

SUPPLEMENTARY INFORMATION ON THE 97 DISCLOSURE OF REALISED AND UNREALISED LOSSES

STATEMENT BY DIRECTORS 98

STATUTORY DECLARATION 99

INDEPENDENT AUDITOR’S REPORT 100 - 101 38 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 DIRECTORS’ REPORT

The directors hereby submit their report together with the audited financial statements of Farlim Group (Malaysia) Bhd. (“the Company”) and its subsidiaries (“the Group”) for the financial year ended 31st December 2014.

PRINCIPAL ACTIVITIES

The principal activities of the Company are that of property development and investment holding. The principal activities of the subsidiaries are set out in Note 30 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year.

RESULTS

Group Company RM RM Profit for the financial year 47,156,962 38,599,186 Attributable to: Owners of the Company 47,096,793 38,599,186 Non-controlling interests 60,169 – 47,156,962 38,599,186

DIVIDEND

No dividend was paid or declared by the Company since the end of the previous financial year.

The Board of Directors recommends a first and final single tier dividend of 5 sen per ordinary share of RM1/- each in respect of financial year ended 31st December 2014. The proposed dividend will be subject to shareholders’ approval at the forthcoming Thirty-Third Annual General Meeting.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves and provisions during the financial year other than as disclosed in the financial statements.

BAD AND DOUBTFUL DEBTS

Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and had satisfied themselves that all known bad debts had been written off and adequate allowance had been made for doubtful debts.

At the date of this report, the Directors are not aware of any circumstances that would render the amount written off for bad debts, or the amount of the allowance for doubtful debts, in the financial statements of the Group and of the Company inadequate to any substantial extent.

CURRENT ASSETS

Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps to ensure that any current assets, other than debts, which were unlikely to be realised in the ordinary course of business, their values as shown in the accounting records of the Group and of the Company had been written down to an amount that they might be expected to be realised.

At the date of this report, the Directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 39

DIRECTORS’ REPORT (cont’d)

VALUATION METHODS

At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

CONTINGENT AND OTHER LIABILITIES

At the date of this report, there does not exist:-

(i) any charge on the assets of the Group and of the Company that has arisen since the end of the financial year which secures the liabilities of any other person, or

(ii) any contingent liability in respect of the Group and of the Company that has arisen since the end of the financial year, other than as disclosed in Note 27 to the financial statements.

In the opinion of the directors, no contingent liabilities or other liabilities of the Group and of the Company have 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 substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

CHANGE OF CIRCUMSTANCES

At the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and of the Company that would render any amount stated in the financial statements misleading.

ITEMS OF AN UNUSUAL NATURE

The results of the operations of the Group and of the Company for the financial year were not, in the opinion ofthe directors, substantially affected by any item, transaction or event of a material and unusual nature.

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.

ISSUE OF SHARES AND DEBENTURES

The Company did not issue any shares or debentures during the 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:-

Tan Sri Dato’ Seri Lim Gait Tong Datuk Seri Haji Mohamed Iqbal Bin Kuppa Pitchai Rawther Lim Chu Dick Yong Yew Wei Koay Say Loke Andrew Khairilanuar Bin Abdul Rahman Adlina Hasni Binti Zainol Abidin - Appointed on 23rd April 2015 40 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

DIRECTORS’ REPORT (cont’d)

DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings kept by the Company under Section 134 of the Companies Act, 1965 in Malaysia, the interests of those directors who held office at the end of the financial year in shares in the Company, its ultimate holding company and subsidiaries during the financial year ended 31st December 2014 are as follows:-

Number of ordinary shares of RM1/- each At At 1.1.2014 Bought Sold 31.12.2014 The Company Farlim Group (Malaysia) Bhd. Direct Tan Sri Dato’ Seri Lim Gait Tong 10,000 – – 10,000 Datuk Seri Haji Mohamed Iqbal Bin Kuppa Pitchai Rawther 10,000 – – 10,000

Indirect Tan Sri Dato’ Seri Lim Gait Tong 60,571,234 – – 60,571,234 Lim Chu Dick 60,571,234 – – 60,571,234

The ultimate holding company Farlim Holding Sdn. Bhd. Direct Tan Sri Dato’ Seri Lim Gait Tong 45,773 – – 45,773 Lim Chu Dick 2,303 – – 2,303

Indirect Tan Sri Dato’ Seri Lim Gait Tong 15,355 – – 15,355

The subsidiaries Baka Suci Sdn. Bhd. Direct Tan Sri Dato’ Seri Lim Gait Tong 10,001 – – 10,001 Datuk Seri Haji Mohamed Iqbal Bin Kuppa Pitchai Rawther 1 – – 1

Victory Ace Sdn. Bhd. Direct Tan Sri Dato’ Seri Lim Gait Tong 1 – – 1 Datuk Seri Haji Mohamed Iqbal Bin Kuppa Pitchai Rawther 1 – – 1

Farlim Marketing Sdn. Bhd. Direct Lim Chu Dick 50,000 – – 50,000

By virtue of their interests in shares in the ultimate holding company, Tan Sri Dato’ Seri Lim Gait Tong and Mr. Lim Chu Dick are also deemed interested in shares in the Company and its related corporations to the extent the ultimate holding company has an interest.

Other than as disclosed above, none of the directors in office at the end of the financial year had any interest in shares in the Company and its related corporations during the financial year. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 41

DIRECTORS’ REPORT (cont’d)

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no director of the Company has received or become entitled to receive a benefit (other than the benefits included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Notes 24 and 28 to the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest.

Neither during nor at the end of the financial year was the Company or any of its related corporations a party to any arrangement whose object was to enable the directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

SIGNIFICANT AND SUBSEQUENT EVENT

Significant event during the financial year and subsequent event are disclosed in Note 34 to the financial statements.

ULTIMATE HOLDING COMPANY

The directors regard Farlim Holding Sdn. Bhd., a company incorporated and domiciled in Malaysia, as the ultimate holding company.

AUDITORS

The auditors, Messrs Baker Tilly Monteiro Heng, have expressed their willingness to continue in office.

On behalf of the Board,

TAN SRI DATO’ SERI LIM GAIT TONG Director

DATUK SERI HAJI MOHAMED IQBAL BIN KUPPA PITCHAI RAWTHER Director

Kuala Lumpur

Date: 23rd April 2015 42 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 STATEMENTS OF FINANCIAL POSITION as at 31st December 2014

Group Company 2014 2013 2014 2013 Note RM RM RM RM ASSETS NON-CURRENT ASSETS Property, plant and equipment 4 5,038,266 3,908,067 1,220,226 997,194 Investment properties 5 2,066,266 2,111,407 1,796,456 1,837,284 Leasehold land 6 170,656 172,846 71,380 72,430 Land held for property development 7(a) 351,664 350,477 – – Investment in subsidiaries 8 – – 27,231,438 43,689,298 Other investments 9 30,612,826 115,881 30,580,813 87,344 Goodwill on consolidation 10 2,970,000 7,532,189 – – 41,209,678 14,190,867 60,900,313 46,683,550

CURRENT ASSETS Inventories 11 3,154,268 3,154,268 95,411 95,411 Property development costs 7(b) 21,285,164 19,547,772 8,726,059 6,199,451 Trade and other receivables 12 9,920,383 10,323,000 11,498,871 7,087,627 Prepayments 235,384 366,627 38,699 42,088 Tax recoverable 154 528,876 – – Cash and cash equivalents 13 96,815,624 29,476,497 91,465,130 20,175,801 131,410,977 63,397,040 111,824,170 33,600,378 Non-current assets held for sale 14 – 57,617,478 – 57,617,478 TOTAL ASSETS 172,620,655 135,205,385 172,724,483 137,901,406

EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 15 140,326,100 140,326,100 140,326,100 140,326,100 Reserves 16 11,131,414 (35,967,152) 21,770,972 (16,828,214) Shareholders’ funds 151,457,514 104,358,948 162,097,072 123,497,886 Non-controlling interests 495,811 433,938 – – Total Equity 151,953,325 104,792,886 162,097,072 123,497,886

NON-CURRENT LIABILITY Loans and borrowings 17 386,527 53,979 – 52,090 Deferred tax liabilities 18 19,615 – 19,615 – 406,142 53,979 19,615 52,090

CURRENT LIABILITIES Trade and other payables 19 9,687,990 24,538,428 4,234,473 12,426,713 Provisions 20 9,723,978 5,585,756 5,690,848 1,824,569 Loans and borrowings 17 145,372 165,172 52,090 100,148 Tax payables 703,848 69,164 630,385 – 20,261,188 30,358,520 10,607,796 14,351,430 Total Liabilities 20,667,330 30,412,499 10,627,411 14,403,520 TOTAL EQUITY AND LIABILITIES 172,620,655 135,205,385 172,724,483 137,901,406

The accompanying notes form an integral part of these financial statements. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 43 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the financial year ended 31st December 2014 Group Company 2014 2013 2014 2013 Note RM RM RM RM Revenue 21 24,913,819 22,039,991 17,913,679 5,708,131 Cost of sales 22 (14,318,400) (16,313,162) (8,543,385) (3,940,586) Gross Profit 10,595,419 5,726,829 9,370,294 1,767,545

Other income 57,619,882 3,525,712 57,118,199 3,767,357 Administrative expenses (10,560,921) (15,829,304) (5,778,056) (5,232,297) Other operating expenses (4,562,189) (5,402,832) (16,465,232) (5,402,832) Finance costs (net) 23 3,317,178 495,012 3,448,098 524,275 Profit/(Loss) before taxation 24 56,409,369 (11,484,583) 47,693,303 (4,575,952)

Taxation 25 (9,252,407) (29,625) (9,094,117) – Profit/(Loss) for the financial year 47,156,962 (11,514,208) 38,599,186 (4,575,952)

Other comprehensive income Items that are or may be reclassified subsequently to profit or loss Fair value of available-for-sale financial assets 3,477 7,727 – – Other comprehensive income/(loss) for the year 3,477 7,727 – – Total comprehensive income/(loss) for the financial year 47,160,439 (11,506,481) 38,599,186 (4,575,952)

Profit/(Loss) attributable to: Owners of the Company 47,096,793 (11,546,986) 38,599,186 (4,575,952) Non-controlling interests 60,169 32,778 – – 47,156,962 (11,514,208) 38,599,186 (4,575,952)

Total comprehensive income/(loss) attributable to: Owners of the Company 47,098,566 (11,543,045) 38,599,186 (4,575,952) Non-controlling interests 61,873 36,564 – – 47,160,439 (11,506,481) 38,599,186 (4,575,952)

Earnings/(Loss) per share attributable to owners of the Company (sen) - basic 33.56 (8.23) - diluted 33.56 (8.23)

The accompanying notes form an integral part of these financial statements. 44 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

STATEMENTS OF CHANGES IN EQUITY for the financial year ended 31st December 2014

Attributable to owners of the Company

Fair Value Non- Share Share Adjustment Accumulated Controlling Capital Premium Reserve Losses Interests Total Group RM RM RM RM RM RM

Balance at 1st January 2013 140,326,100 28,715,448 2,562 (53,142,117) 397,374 116,299,367 Total comprehensive loss for the financial year – – 3,941 (11,546,986) 36,564 (11,506,481) Balance at 31st December 2013 140,326,100 28,715,448 6,503 (64,689,103) 433,938 04,792,886 Total comprehensive income for the financial year – – 1,773 47,096,793 61,873 47,160,439 Balance at 31st December 2014 140,326,100 28,715,448 8,276 (17,592,310) 495,811 151,953,325

Company

Balance at 1st January 2013 140,326,100 28,715,448 – (40,967,710) – 128,073,838 Total comprehensive loss for the financial year – – – (4,575,952) – (4,575,952) Balance at 31st December 2013 140,326,100 28,715,448 – (45,543,662) – 123,497,886 Total comprehensive income for the financial year – – – 38,599,186 – 38,599,186 Balance at 31st December 2014 140,326,100 28,715,448 – (6,944,476) – 162,097,072

The accompanying notes form an integral part of these financial statements. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 45

STATEMENTS OF CASH FLOWS for the financial year ended 31st December 2014

Group Company 2014 2013 2014 2013 RM RM RM RM CASH FLOWS FROM OPERATING ACTIVITIES:-

Profit/(Loss) before taxation 56,409,369 (11,484,583) 47,693,303 (4,575,952)

Adjustments for: Amortisation of leasehold land 2,190 2,190 1,050 1,050 Bad debts written off – 2,091 7,372 – Deposit written off – 5,000,000 – 5,000,000 Depreciation 516,249 375,783 276,499 217,204 Dividend income (247) (129) – (800,000) Fair value gain on financial assets (493,469) – (493,469) – Gain on disposal of property, plant and equipment (334) (164,917) (334) – Gain on disposal of non-current asset held for sale (54,884,248) – (54,884,248) – Impairment loss on goodwill 4,562,189 6,484,779 – – Impairment loss on investment in subsidiaries – – 16,457,860 – Impairment loss on other investment – 402,832 – 402,832 Interest expenses 13,673 17,414 5,656 11,567 Interest income (3,330,851) (512,426) (3,453,754) (535,842) Property, plant and equipment written off 965 2,576 963 2,575 Provision for director’s retirement benefits 50,000 50,000 50,000 50,000 Provision for liquidated and ascertained damages (“LAD”) 214,132 153,035 – – Reversal of director’s retirement benefits – (2,695,330) – (2,695,330) Reversal of LAD – (785,775) – – 3,059,618 (3,152,460) 5,660,898 (2,921,896)

Changes In Working Capital:- Inventories – 1,140,295 – – Receivables 533,860 6,051,386 (3,660,475) (2,343,860) Payables (14,850,439) 7,616,937 (8,173,857) 11,435,924 Property development costs 2,306,858 (1,526,495) 1,289,670 229,446 (8,950,103) 10,129,663 (4,883,764) 6,399,614 Interest received 1,959,666 507,546 2,082,570 530,963 LAD paid (171,346) (47,924) – – Tax paid (8,473,838) (176,987) (8,444,117) – Tax refund 404,452 – – – Net Operating Cash Flows (15,231,169) 10,412,298 (11,245,311) 6,930,577 46 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

STATEMENTS OF CASH FLOWS for the financial year ended 31st December 2014 (cont’d)

Group Company 2014 2013 2014 2013 Note RM RM RM RM CASH FLOWS FROM INVESTING ACTIVITIES:-

Investment income received 1,371,186 4,880 1,371,185 4,880 Dividend received 247 129 – 800,000 Amount owing by subsidiaries – – (773,136) 4,581,484 Proceeds from disposal of property, plant and equipment 340 222,001 340 – Proceeds from disposal of non-current asset held for sale 112,501,726 – 112,501,726 – Investment in long term fund investment (30,000,000) – (30,000,000) – Purchase of property, plant and equipment a) (1,102,278) (333,569) (459,671) (18,910)

Net Investing Cash Flows 82,771,221 (106,559) 82,640,444 5,367,454

CASH FLOWS FROM FINANCING ACTIVITIES:- Fixed deposits held as security value (804,418) – (804,418) – Drawdown of term loans – 826,888 – – Interest paid (13,673) (25,174) (5,656) (11,567) Repayment of bridging loans – (826,888) – – Payment to finance lease liabilities (187,252) (189,370) (100,148) (124,153) Net Financing Cash Flows (1,005,343) (214,544) (910,222) (135,720) NET CHANGES IN CASH AND CASH EQUIVALENTS 66,534,709 10,091,195 70,484,911 12,162,311 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR 29,476,497 19,385,302 20,175,801 8,013,490 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR b) 96,011,206 29,476,497 90,660,712 20,175,801

(a) During the financial year, the Group and the Company made the following cash payments to purchase property, plant and equipment:- Group Company 2014 2013 2014 2013 RM RM RM RM

Purchase of property, plant and equipment 1,602,278 333,569 459,671 18,910 Financed by finance lease arrangements 500,000 – – – Cash payments on purchase of property, plant and equipment 1,102,278 333,569 459,671 18,910

(b) Cash and cash equivalents included in the statements of cash flows comprise the following statements of financial position amounts:- Group Company 2014 2013 2014 2013 RM RM RM RM

Short-term investment 89,919,827 2,004,880 89,919,827 2,004,880 Fixed deposits placed with licensed banks 1,114,689 17,050,528 804,418 16,536,890 Cash and bank balances 5,781,108 10,421,089 740,885 1,634,031 96,815,624 29,476,497 91,465,130 20,175,801 Less : Deposit held as security value (804,418) – (804,418) – 96,011,206 29,476,497 90,660,712 20,175,801 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 47 NOTES TO THE FINANCIAL STATEMENTS

1. GENERAL INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and listed on the Main Market of Bursa Malaysia Securities Berhad.

The registered office of the Company is located at No. 2-8, Bangunan Farlim, Jalan PJS 10/32, Taman Sri Subang, 46150 Petaling Jaya, Selangor Darul Ehsan. The principal place of business of the Company is located at No. 1, Lintang Angsana, Bandar Baru Ayer Itam, 11500 Penang.

The ultimate holding company is Farlim Holding Sdn. Bhd., a company incorporated and domiciled in Malaysia with its registered office located at No. 1, Lintang Angsana, Bandar Baru Ayer Itam, 11500 Penang.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 23rd April 2015.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation

The financial statements of the Group and of the Company have been prepared in accordance with the Financial Reporting Standards (“FRSs”) and the requirements of the Companies Act, 1965 in Malaysia.

The financial statements of the Group and of the Company have been prepared under the historical cost basis, other than as disclosed in the significant accounting policies in Note 2.3 to the financial statements.

The preparation of financial statements in conformity with FRSs requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of the revenue and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the Group’s and the Company’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3 to the financial statements.

2.2 New FRSs, Amendments/Improvements to FRSs, and New IC Interpretations (“IC Int)

(a) Adoption of Amendments/Improvements to FRSs and New IC Int

The Group and the Company had adopted the following amendments/improvements to FRSs and new IC Int that are mandatory for the current financial year:-

Amendments/Improvements to FRSs FRS 10 Consolidated Financial Statements FRS 12 Disclosure of Interests in Other Entities FRS 127 Separate Financial Statements FRS 132 Financial Instruments : Presentation FRS 136 Impairment of Assets FRS 139 Financial Instruments : Recognition and Measurement

New IC Int IC Int 21 Levies 48 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.2 New FRSs, Amendments/Improvements to FRSs, and New IC Interpretations (“IC Int) (cont’d)

(a) Adoption of Amendments/Improvements to FRSs and New IC Int (cont’d)

The adoption of the above amendments/improvements to FRSs and new IC Int do not have any effect on the financial statements of the Group and of the Company except for those as discussed below:

Amendments to FRS 10 Consolidated Financial Statements, FRS 12 Disclosure of Interests in Other Entities and FRS 127 Separate Financial Statements

Amendments to FRS 10 introduces an exception to the principle that all subsidiaries shall be consolidated. The amendments define an investment entity and require a parent that is an investment entity to measure its investment in particular subsidiaries at fair value through profit or loss in accordance with FRS 139 Financial Instruments: Recognition and Measurement instead of consolidating those subsidiaries in its consolidated financial statements. Consequently, new disclosure requirements related to investment entities are introduced in amendments to FRS 12 and FRS 127.

In addition, amendments to FRS 127 also clarifies that if a parent is required, in accordance with paragraph 31 of FRS 10, to measure its investment in a subsidiary at fair value through profit or loss in accordance with FRS139, it shall also account for its investment in that subsidiary in the same way in its separate financial statements.

Amendments to FRS 132 Financial Instruments: Presentation

Amendments to FRS 132 does not change the current offsetting model in FRS 132. The amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’, that the right of set-off must be available today (not contingent on a future event) and legally enforceable for all counterparties in the normal course of business.

The amendments clarify that some gross settlement mechanisms with features that are effectively equivalent to net settlement will satisfy the FRS 132 offsetting criteria. This Amendments only impacts the presentation in the financial statements but has no impact on the financial results and positions of the Group and of the Company.

Amendments to FRS 136 Impairment of Assets

Amendments to FRS 136 clarifies that disclosure of the recoverable amount (based on fair value less costs of disposal) of an asset or cash generating unit is required to be disclosed only when an impairment loss is recognised or reversed. In addition, there are new disclosure requirements about fair value measurement when impairment or reversal of impairment is recognised.

Amendments to FRS 139 Financial Instruments: Recognition and Measurement

Amendments to FRS 139 provides relief from discontinuing hedge accounting in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met. As a result of the amendments, continuation of hedge accounting is permitted if as a consequence of laws or regulations, the parties to hedging instrument agree to have one or more clearing counterparties replace their original counterparty and the changes to the terms arising from the novation are consistent with the terms that would have existed if the novated derivative were originally cleared with the central counterparty. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 49

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.2 New FRSs, Amendments/Improvements to FRSs, and New IC Interpretations (“IC Int) (cont’d)

(a) Adoption of Amendments/Improvements to FRSs and New IC Int (cont’d)

IC Int 21 Levies

IC Int 21 addresses the accounting for a liability to pay a government levy (other than income taxes and fine or other penalties that imposed for breaches of the legislation) if that liability is within the scope of FRS 137 Provisions, Contingent Liabilities and Contingent Assets. This interpretation clarifies that an entity recognises a liability for a levy when the activity that triggers the payment of the levy, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is recognised progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be recognised before the specific minimum threshold is reached. The adoption of IC Int 21 has no significant impact to the financial statements of the Group and of the Company.

(b) New FRSs and Amendments/Improvements to FRSs that are issued, but not yet effective and have not been early adopted

The Group and the Company have not adopted the following new FRSs and amendments/improvements to FRSs that have been issued by the Malaysian Accounting Standards Board (“MASB”) as at the date of authorisation of these financial statements as those are not yet effective for the Group andthe Company:-

Effective for financial periods beginning on or after New FRSs FRS 9 Financial Instruments 1 January 2018

Amendments/Improvements to FRSs FRS 1 First-time Adoption of Financial Reporting Standards 1 July 2014 FRS 2 Share-based Payment 1 July 2014 FRS 3 Business Combinations 1 July 2014 FRS 5 Non-current Asset Held for Sale and Discontinued Operations 1 January 2016 FRS 7 Financial Instruments: Disclosures 1 January 2016 FRS 8 Operating Segments 1 July 2014 FRS 10 Consolidated Financial Statements 1 January 2016 FRS 11 Joint Arrangements 1 January 2016 FRS 12 Disclosures of Interests in Other Entities 1 January 2016 FRS 13 Fair Value Measurement 1 July 2014 FRS 101 Presentation of Financial Statements 1 January 2016 FRS 116 Property, Plant and Equipment 1 July 2014/ 1 January 2016 FRS 119 Employee Benefits 1 July 2014/ 1 January 2016 FRS 124 Related Party Disclosures 1 July 2014 FRS 127 Separate financial statements 1 January 2016 FRS 128 Investments in Associates and Joint Ventures 1 January 2016 FRS 138 Intangible Assets 1 July 2014/ 1 January 2016 FRS 140 Investment Property 1 July 2014

A brief discussion on the above significant new FRSs and amendments/improvements to FRSs are summarised below. Due to the complexity of these new standards, the financial effects of their adoption are currently still being assessed by the Group and the Company. 50 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.2 New FRSs, Amendments/Improvements to FRSs, and New IC Interpretations (“IC Int) (cont’d)

(b) New FRSs and Amendments/Improvements to FRSs that are issued, but not yet effective and have not been early adopted (cont’d)

FRS 9 Financial Instruments

FRS 9 introduces a package of improvements which includes a classification and measurement model, a single forward-looking ‘expected loss’ impairment model and a substantially-reformed approach to hedge accounting.

Classification and measurement FRS 9 introduces an approach for classification of financial assets which is driven by cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being applied to all financial instruments.

In essence, if a financial asset is a simple debt instrument and the objective of the entity’s business model within which it is held is to collect its contractual cash flows, the financial asset is measured at amortised cost. In contrast, if that asset is held in a business model the objective of which is achieved by both collecting contractual cash flows and selling financial assets, then the financial asset is measured at fair value in the statement of financial position, and amortised cost information is provided through profit or loss. If the business model is neither of these, then fair value information is increasingly important, so it is provided both in the profit or loss and in the statement of financial position.

Impairment FRS 9 introduces a new, expected-loss impairment model that will require more timely recognition of expected credit losses. Specifically, this Standard requires entities to account for expected credit losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a more timely basis. The model requires an entity to recognise expected credit losses at all times and to update the amount of expected credit losses recognised at each reporting date to reflect changes in the credit risk of financial instruments. This model eliminates the threshold for the recognition of expected credit losses, so that it is no longer necessary for a trigger event to have occurred before credit losses are recognised.

Hedge accounting FRS 9 introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities, enabling entities to better reflect these activities in their financial statements. In addition, as a result of these changes, users of the financial statements will be provided with better information about risk management and the effect of hedge accounting on the financial statements.

Amendments to FRS 1 First-time Adoption of Financial Reporting Standards

Amendments to FRS 1 relates to the IASB’s Basis for Conclusions which is not an integral part of the Standard. The Basis for Conclusions clarifies that a first-time adopter is permitted but not required to apply a new or revised Standard that is not yet mandatory but is available for early application.

Amendments to FRS 2 Share-based Payment

Amendments to FRS 2 clarifies the definition of ‘vesting conditions’ by separately defining ‘performance condition’ and ‘service condition’ to ensure consistent classification of conditions attached to a share- based payment.

Amendments to FRS 3 Business Combinations

Amendments to FRS 3 clarifies that when contingent consideration meets the definition of financial instrument, its classification as a liability or equity is determined by reference toFRS 132 Financial Instruments: Presentation. It also clarifies that contingent consideration that is classified as an asset or a liability shall be subsequently measured at fair value at each reporting date and changes in fair value shall be recognised in profit or loss. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 51

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.2 New FRSs, Amendments/Improvements to FRSs, and New IC Interpretations (“IC Int) (cont’d)

(b) New FRSs and Amendments/Improvements to FRSs that are issued, but not yet effective and have not been early adopted (cont’d)

Amendments to FRS 3 Business Combinations (cont’d)

In addition, amendments to FRS 3 clarifies that FRS 3 excludes from its scope the accounting for the formation of all types of joint arrangements (as defined in FRS 11 Joint Arrangements) in the financial statements of the joint arrangement itself.

Amendments to FRS 5 Non-current Assets Held for Sale and Discontinued Operations

Amendments to FRS 5 introduces specific guidance when an entity reclassifies an asset (or disposal group) from held-for-sale to held-for-distribution to owners (or vise versa), or when held-for-distribution is discontinued.

Amendments to FRS 7 Financial Instruments: Disclosures

Amendments to FRS 7 provides additional guidance to clarify whether servicing contracts constitute continuing involvement for the purposes of applying the disclosure requirements of FRS 7.

The Amendments also clarify the applicability of Disclosure – Offsetting Financial Assets and Financial Liabilities (Amendments to FRS 7) to condensed interim financial statements.

Amendments to FRS 8 Operating Segments

Amendments to FRS 8 requires an entity to disclose the judgements made by management in applying the aggregation criteria to operating segments. This includes a brief description of the operating segments that have been aggregated and the economic indicators that have been assessed in determining that the aggregated operating segments share similar economic characteristics.

The Amendments also clarifies that an entity shall provide reconciliations of the total of the reportable segments’ assets to the entity’s assets if the segment assets are reported regularly to the chief operating decision maker.

Amendments to FRS 11 Joint Arrangements

Amendments to FRS 11 clarifies that when an entity acquires an interest in a joint operation in which the activity of the joint operation constitutes a business, as defined in FRS 3 Business Combinations, it shall apply the relevant principles on business combinations accounting in FRS 3, and other FRSs, that do not conflict with FRS 11. Some of the impact arising may be the recognition of goodwill, recognition of deferred tax assets / liabilities and recognition of acquisition-related costs as expenses. The Amendments do not apply to joint operations under common control and also clarify that previously held interests in a joint operation are not re-measured if the joint operator retains joint control.

Amendments to FRS 13 Fair Value Measurement

Amendments to FRS 13 relates to the IASB’s Basis for Conclusions which is not an integral part of the Standard. The Basis for Conclusions clarifies that when IASB issued IFRS 13, it did not remove the practical ability to measure short-term receivables and payables with no stated interest rate at invoice amounts without discounting, if the effect of discounting is immaterial.

The Amendments also clarifies that the scope of the portfolio exception of FRS 13 includes all contracts accounted for within the scope of FRS 139 Financial Instruments: Recognition and Measurement or FRS 9 Financial Instruments, regardless of whether they meet the definition of financial assets or financial liabilities as defined in FRS 132 Financial Instruments: Presentation. 52 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.2 New FRSs, Amendments/Improvements to FRSs, and New IC Interpretations (“IC Int) (cont’d)

(b) New FRSs and Amendments/Improvements to FRSs that are issued, but not yet effective and have not been early adopted (cont’d)

Amendments to FRS 101 Presentation of Financial Statements

Amendments to FRS 101 improves the effectiveness of disclosures. The Amendments clarifies guidance on materiality and aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies.

Amendments to FRS 116 Property, Plant and Equipment

Amendments to FRS 116 clarifies the accounting for the accumulated depreciation/amortisation when an asset is revalued. It clarifies that:

• the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset; and • the accumulated depreciation/amortisation is calculated as the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses.

Amendments to FRS 116 prohibits revenue-based depreciation because revenue does not reflect the way in which an item of property, plant and equipment is used or consumed.

Amendments to FRS 119 Employee Benefits

Amendments to FRS 119 provides a practical expedient in accounting for contributions from employees or third parties to defined benefit plans.

If the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the related service is rendered, instead of attributing the contributions to the periods of service.

However, if the amount of the contributions is dependent on the number of years of service, an entity is required to attribute those contributions to periods of service using the same attribution method required by FRS 119 for the gross benefit (i.e. either based on the plan’s contribution formula or on a straight-line basis).

In addition, the Amendments clarifies that the high quality corporate bonds used to estimate the discount rate for post-employment benefit obligations should be denominated in the same currency as the liability and the depth of the market for high quality corporate bonds should be assessed at a currency level.

Amendments to FRS 124 Related Party Disclosures

Amendments to FRS 124 clarifies that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity.

Amendments to FRS 127 Separate Financial Statements

Amendments to FRS 127 allows a parent and investors to use the equity method in its separate financial statements to account for investments in subsidiaries, joint ventures and associates, in addition to the existing options. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 53

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.2 New FRSs, Amendments/Improvements to FRSs, and New IC Interpretations (“IC Int) (cont’d)

(b) New FRSs and Amendments/Improvements to FRSs that are issued, but not yet effective and have not been early adopted (cont’d)

Amendments to FRS 138 Intangible Assets

Amendments to FRS 138 introduces a rebuttable presumption that the revenue-based amortisation method is inappropriate (for the same reasons as per the Amendments to FRS 116). This presumption can be overcome only in the limited circumstances:-

• in which the intangible asset is expressed as a measure of revenue, i.e. in the circumstance in which the predominant limiting factor that is inherent in an intangible asset is the achievement of a revenue threshold; or • when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated.

Amendments to FRS 140 Investment Property

Amendments to FRS 140 clarifies that the determination of whether an acquisition of investment property meets the definition of both a business combination as defined in FRS 3 and investment property as defined in FRS 140 requires the separate application of both Standards independently of each other.

Amendments to FRS 10 Consolidated Financial Statements and FRS 128 Investments in Associates and Joint Ventures

These Amendments address an acknowledged inconsistency between the requirements in FRS 10 and those in FRS 128, in dealing with the sale or contribution of assets between an investor and its associate or joint venture.

The main consequence of the Amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not), as defined in FRS 3 Business Combinations. A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.

Amendments to FRS 10 Consolidated Financial Statements, FRS 12 Disclosures of Interests in Other Entities and FRS 128 Investments in Associates and Joint Ventures

These Amendments addresses the following issues that have arisen in the application of the consolidation exception for investment entities:-

• Exemption from presenting consolidated financial statements:- the Amendments clarifies that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value. • Consolidation of intermediate investment entities:- the Amendments clarifies that only a subsidiary is not an investment entity itself and provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. • Policy choice for equity accounting for investments in associates and joint ventures:- the Amendments allows a non-investment entity that has an interest in an associate or joint venture that is an investment entity, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interest in subsidiaries, or to unwind the fair value measurement and instead perform a consolidation at the level of the investment entity associate or joint venture. 54 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.2 New FRSs, Amendments/Improvements to FRSs, and New IC Interpretations (“IC Int) (cont’d)

In conjunction with the planned convergence of FRSs with International Financial Reporting Standards as issued by the International Accounting Standards Board on 1 January 2012, the MASB had on 19 November 2011 issued a new MASB approved accounting standards, MFRSs (“MFRSs Framework”) for application in the annual periods beginning on or after 1 January 2012.

The MFRSs Framework is mandatory for adoption by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities subject to the application of MFRS 141 Agriculture and/or IC Int 15 Agreements for the Construction of Real Estate (“Transitioning Entities”). The Transitioning Entities are given an option to defer the adoption of MFRSs Framework and shall apply the MFRSs framework for annual periods beginning on or after 1 January 2017. Transitioning Entities also include those entities that consolidate or equity account or proportionately consolidate another entity that has chosen to continue to apply the FRSs framework for annual periods beginning on or after 1 January 2012.

Accordingly, the Group and the Company which are Transitioning Entities have chosen to defer the adoption of the MFRSs framework. As such, the Group and the Company will prepare their first MFRSs financial statements using the MFRSs framework for financial year ended 31 December 2017. The main effects arising from the transition to the MFRSs Framework are discussed below.

The effect is based on the Group’s and the Company’s best estimates at the reporting date. The financial effects may change or additional effects may be identified, prior to the completion of the Group’s and the Company’s first MFRSs based financial statements.

Application of MFRS 1: First-time Adoption of Malaysian Financial Reporting Standards (“MFRS 1”)

MFRS 1 requires comparative information to be restated as if the requirements of MFRSs have always been applied, except when MFRS 1 allows certain elective exemptions from such full retrospective application or prohibits retrospective application of some aspects of MFRSs.

The Group and the Company are currently assessing the impact of adoption of MFRS 1, including identification of the differences in existing accounting policies as compared to the new MFRSs and the use of optional exemptions as provided for in MFRS 1. As at the date of authorisation of issue of the financial statements, accounting policy decisions or elections have not been finalised. Thus, the impact of adoption of MFRS 1 cannot be determined and estimated reliably until the process is completed.

MFRS 15 Revenue from Contracts with Customers

The core principle of MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with the core principle by applying the following steps:

• Identify the contracts with a customer. • Identify the performance obligation in the contract. • Determine the transaction price. • Allocate the transaction price to the performance obligations in the contract. • Recognise revenue when (or as) the entity satisfies a performance obligation.

MFRS 15 also includes new disclosures that would result in an entity providing users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers.

The Group is currently assessing the impact of the adoption of this standard. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 55

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.2 New FRSs, Amendments/Improvements to FRSs, and New IC Interpretations (“IC Int) (cont’d)

Amendments to MFRS 141 Agriculture

MFRS 141 requires a biological asset shall be measured on initial recognition and at the end of each reporting period at its fair value less costs to sell, except where the fair value cannot be measured reliably. MFRS 141 also requires agricultural produce harvested from an entity’s biological assets shall be measured at its fair value less costs to sell at the point of harvest. Gains or losses arising on initial recognition of a biological asset and the agricultural produce at fair value less costs to sell and from a change in fair value less costs to sell of a biological asset shall be included in the profit or loss for the period in which it arises.

The Group does not expect any impact on the financial statements arising from the adoption of this standard.

Amendments to MFRS 116 Property, Plant and Equipment and Amendments to MFRS 141 Agriculture

With the Amendments, bearer plants would come under the scope of MFRS 116 and would be accounted for in the same way as property, plant and equipment. A bearer plant is defined as a living plant that is used in the production or supply of agricultural produce, is expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.

Nevertheless, the produce growing on the bearer plant would remain within the scope of MFRS 141. This is because the growth of the produce directly increases the expected revenue from the sale of the produce. Moreover, fair value measurement of the growing produce provides useful information to users of financial statements about future cash flows that an entity will actually realise as the produce will ultimately be detached from the bearer plants and sold separately.

The Group does not expect any impact on the financial statements arising from the adoption of this standard.

2.3 Significant Accounting Policies

(a) Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Company andits subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Acquisitions of subsidiaries are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.

In business combination achieved in stages, previously held equity interests in the acquiree are re- measured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.

The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree net identifiable assets. 56 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.3 Significant Accounting Policies (cont’d)

(a) Basis of Consolidation (cont’d)

Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of the non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill in the statement of financial position. The accounting policy for goodwill is set out in the Note 2.3(c) to the financial statements. In instances where the net fair value of the acquiree’s identifiable assets and liabilities exceeds the consideration transferred in the business combination and the amount of the non-controlling interest in the acquiree (if any), the excess is recognised a gain on bargain purchase in profit or loss on the acquisition date.

Subsidiary companies are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Transactions with non-controlling interest

Non-controlling interest represents the equity in subsidiaries not attributable directly or indirectly, to owners of the Parent, and is presented separately in the consolidated statement of profit or loss and other comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to owners of the Parent.

Changes on the Company ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent.

(b) Subsidiaries

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:-

• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); • Exposure, or rights, to variable returns from its involvement with the investee; and • The ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee; • Rights arising from other contractual arrangements; and • The Group’s voting rights and potential voting rights.

In the Company’s separate financial statements, investments in subsidiaries are stated at cost less impairment losses, if any. The policy for the recognition and the measurement of impairment losses is in accordance with Note 2.3(q). On disposal of such investments, the differences between the net disposal proceeds and the carrying amount is recognised as gain or loss in the Company’s profit or loss. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 57

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.3 Significant Accounting Policies (cont’d)

Goodwill is measured as the excess of consideration transferred, any non-controlling interest and the acquisition date fair value of any previously-held equity interest over the fair value of the Group’s share of the ide tifiable net assets acquired.

Goodwill is stated at cost less any accumulated impairment losses. For the purpose of impairment assessment, goodwill is allocated to cash-generating units (“CGU”) which are expected to benefit from the synergies of the business combination. Each CGU represents the lowest level at which the goodwill is monitored for internal management purposes and is not larger than an operating segment in accordance with FRS 8 Operating Segments. The carrying amount of goodwill is assessed annually for impairment, or more frequently if events or changes in carrying amount of its net assets, including attributable goodwill. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Where the fair value of the Group’s share of identifiable net assets acquired exceed the amount of consideration transferred, any non-controlling interest and the acquisition-date fair value of any previously- held equity interest, the entire resulting gain is recognised immediately in the statement of profit or loss.

(d) Property, Plant and Equipment and Depreciation

All property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.3(q) to the financial statements.

Cost includes expenditure that is directly attributable to the acquisition of the asset. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

The cost of replacing part of an item of property, plant and equipment is included in the assets carrying amount or recognised as separate assets, as appropriate, only when it is probable that the future economic benefits associated with the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the profit or loss as incurred.

No depreciation is provided on the freehold land as it has infinite useful life.

All other property, plant and equipment are depreciated on a straight line basis to write off the cost of each asset to its residual value over the estimated useful lives of the assets concerned. The annual rates used for this purpose are as follows:-

Buildings 2% - 4.5% Buildings improvements 10% - 15% Plant and machinery 9% - 20% Motor vehicles 18% - 20% Furniture, fittings and equipment 10% - 20%

The residual values and useful lives of property, plant and equipment are reviewed and adjusted if appropriate, at each reporting date. The effects of any revisions of the residual values and useful lives are included in profit or loss for the financial year in which the changes arise.

Fully depreciated assets are retained in the accounts until the assets are no longer in use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the profit or loss in the financial year the asset is derecognised. 58 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.3 Significant Accounting Policies (cont’d)

(e) Investment Properties

Investment properties are properties which are held either to earn rental income or for capital appreciation or for both and are not substantially occupied by the Group. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and accumulated impairment losses, if any. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.3(q) to the financial statements.

Depreciation of investment properties are provided on the straight line basis to write off the cost of investment properties to their residual value over their estimated useful lives of the investment properties. The annual rate used to depreciate the buildings is 2%.

No depreciation is provided on the freehold land as it has indefinite useful life.

Investment properties are derecognised when they have been disposed off or when the investment properties are permanently withdrawn from use and no future economic benefit is expected from their disposals. Any gains or losses on the retirement or disposal of investment properties are recognised in the profit or loss in the year in which they arise.

(f) Inventories

Inventories are stated at the lower of cost and net realisable value, cost being determined on the first-in, first-out basis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Raw materials, packing materials and consumable stores comprise purchase price and carriage costs. Cost of manufacture finished goods and work-in-progress include direct materials, direct labour and allocation of manufacturing overheads.

(g) Property Development Activities

(i) Land Held for Property Development

Land held for property development consists of land on which no significant development work has been undertaken or where development activities are not expected to be completed within the normal operating cycle. Land held for property development is classified as non-current asset and is carried at cost less any accumulated impairment losses, if any. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.3(q) to the financial statements.

Land held for property development is transferred to property development costs (under current assets) when development activities have commenced and are expected to be completed within the normal operating cycle.

(ii) Property Development Costs

Property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities.

When the financial outcome of a development activity can be reliably estimated, property development revenue and expenses are recognised in the profit or loss by using the stage of completion method. The stage of completion is determined by reference to the surveys of work performed. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 59

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.3 Significant Accounting Policies (cont’d)

(g) Property Development Activities (cont’d)

(ii) Property Development Costs (cont’d)

Where the financial outcome of a development activity cannot be reliably estimated, property development revenue is recognised only to the extent of property development costs incurred that is probable will be recoverable, and property development costs on properties sold are recognised as an expense in the period in which they are incurred.

Any foreseeable loss on a development project, including costs to be incurred over the defects liability period, is recognised as an expense immediately in the profit or loss.

Property development costs not recognised as an expense are recognised as an asset, which is measured at the lower of cost and net realisable value. Upon the completion of development, the unsold completed development properties are transferred to inventories.

The excess of revenue recognised in the profit or loss over billings to purchasers is classified as accrued billings within trade receivables and the excess of billings to purchasers over revenue recognised in the profit or loss is classified as progress billings within trade payables.

(h) Financial Instruments

Financial instruments are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contract provisions of the financial instruments.

A financial instrument is recognised initially, at its fair value, plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument.

The Group and the Company categorise the financial instruments as follows:-

(i) Financial Assets

Financial assets at fair value through profit or loss

Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading, including derivatives, or are designated as such upon initial recognition.

A financial asset is classified as held for trading if it is acquired principally for the purpose of selling in the near future or part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value with the gain or loss recognised in profit or loss. Exchange differences, interest and dividend income on financial assets at fair value through profit as part of other losses orother income.

Loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market, trade and other receivables and cash and cash equivalents are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. 60 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.3 Significant Accounting Policies (cont’d)

(h) Financial Instruments (cont’d)

(i) Financial Assets (cont’d)

Held-to-maturity investments

Financial assets with fixed or determinable payments and fixed maturity and the Group have the positive intention and ability to hold the investment to maturity is classified as held-to-maturity investments.

Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.

Available-for-sale financial assets

Available-for-sale are financial assets that are designated as available for sale or are not classified in any of the three preceding categories.

After initial recognition, available-for-sale financial assets are measured at fair value with the gain or loss recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

(ii) Financial Liabilities

All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit or loss.

Fair value through profit or loss comprises financial liabilities that are held for trading, derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities that are specifically designated as fair value through profit or loss upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.

Other financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.

(iii) Derecognition

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired or is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

A financial liability is derecognised when the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount and the consideration paid is recognised in profit or loss. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 61

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.3 Significant Accounting Policies (cont’d)

(i) Leases

(i) Finance Leases

Leases of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases.

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, if any. The corresponding liability is included in the statement of financial position 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 Group’s incremental borrowings rate is used. Any initial direct costs are also added to the carrying amount of such assets.

Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 2.3(d) to the financial statements.

(ii) Operating Leases

Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.

Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

(j) Borrowing Costs

Borrowing costs directly attributable to the acquisition and the construction of property, plant and equipment are capitalised as part of the cost of those assets, until such time as the assets are ready for their intended use. All other borrowing costs are charged to the profit or loss as an expense in the period in which they are incurred.

(k) Employee Benefits

(i) Short-term Employee Benefits

Wages, salaries, social security contribution, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by the employees. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short-term non- accumulating compensated absences sick leave, maternity and paternity leave are recognised when absences occur.

(ii) Post-employment Benefits

The Group contributes to the Employees’ Provident Fund, the national defined contribution plan. The contributions are charged to the profit or loss in the period to which they are related. Once the contributions have been paid, the Group has no further payment obligations. 62 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.3 Significant Accounting Policies (cont’d)

(k) Employee Benefits (cont’d)

(iii) Defined Benefit Plan

The Group and the Company operate an unfunded benefits scheme to the director.

The amount recognised in the statements of financial position represents the present value of the defined benefit obligation at each financial year end.

(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 not recognised for future operating losses. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

(m) Foreign Currencies

The individual financial statements of each entity in the Group are measured using the functional currency which is the currency of the primary economic environment in which the entity operates. The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.

(n) Income Tax

The tax expense in the profit or loss represents the aggregate amount of 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 reporting date.

Deferred tax is provided for, using the liability method, on temporary differences at the reporting date arising 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 credit 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 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 reporting date. Deferred tax is recognised in the profit or loss, except when it arises from transaction which is recognised in other comprehensive income or directly in equity, in which case the deferred tax is also charged or credited in other comprehensive income or 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. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 63

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.3 Significant Accounting Policies (cont’d)

(o) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:-

(i) Property Development

Revenue from sale of property development projects is recognised based on the stage of completion method as described in Note 2.3(g)(ii) to the financial statements.

(ii) Sales of Completed Properties

Revenue from sale of completed properties is recognised upon the execution of sale and purchase agreement with the purchasers.

(iii) Sales of Goods

Revenue from sale of goods is measured at the fair value of the consideration receivable and is recognised in the profit or loss when the significant risks and rewards of ownership have been transferred to the buyer.

(iv) Dividend Income

Dividend income is recognised when the right to receive payment is established.

(v) Interest Income

Interest income is recognised on accrual basis.

Interest income from late payments by house buyers is recognised on receipt basis.

(vi) Rental Income

Rental income is recognised on accrual basis.

(vii) Inter-company Sales

Inter-company sales are excluded from the revenue of the Group.

(p) Impairment of Assets

(i) Impairment of Financial Assets

All financial assets (except for financial assets categorised as fair value through profit orloss, investment in subsidiary companies) are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised. For an equity instrument, a significant or prolonged decline in the fair value below its cost is an objective evidence of impairment.

An impairment loss in respect of loans and receivables and held-to-maturity investments is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. 64 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.3 Significant Accounting Policies (cont’d)

(p) Impairment of Assets (cont’d)

(i) Impairment of Financial Assets (cont’d)

An impairment loss in respect of available-for-sale financial assets is recognised in the profit or loss and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been recognised in the other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity and recognised to profit or loss.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses recognised in profit or loss for an investment in an equity instrument isnot reversed through the profit or loss.

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in the profit or loss.

(ii) Impairment of Non-financial Assets

The Group and the Company assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group and the Company make an estimate of the asset’s recoverable amount.

For goodwill that has an indefinite useful life and are not available for use, the recoverable amount is estimated at each reporting date or more frequently when indicators of impairment are identified.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit (“CGU”)’s fair value less cost to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the asset. Where the carrying amounts of an asset exceed its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

An impairment loss is recognised in the profit or loss in the period in which it arises.

Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed its carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in the profit or loss.

FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 65

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.3 Significant Accounting Policies (cont’d)

(q) Non-current Asset Held for Sale

Asset is classified as held for sale if its carrying amount will be reversed principally through asale transaction rather than continuing use.

This condition is regarded as not only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to the terms that are usual and customary.

Immediately before reclassification as held for sale, the measurement of the asset is brought up to date in accordance with FRS 5 that is at the lower of carrying amount and fair value less costs to sell. Any differences are included in profit or loss.

(r) Cash and Cash Equivalents

For the purpose of statements of cash flows, cash and cash equivalents comprise cash in hand, bank balances, demand deposits and other short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents are stated net of bank overdrafts which are repayable on demand.

(s) Equity Instruments

Ordinary shares are recorded at the nominal value and the consideration in excess of nominal value of shares issued, if any, is accounted for as share premium. Both ordinary shares and share premium are classified as equity.

Dividends on ordinary shares are recognised as liabilities when proposed or declared before the reporting date. A dividend proposed or declared after the reporting date, but before the financial statements are authorised for issue, is not recognised as a liability at the reporting date.

Cost incurred directly attributable to the issuance of the shares are accounted for as a deduction from share premium, if any, otherwise it is charged to the profit or loss. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided.

(t) Operating Segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker, to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

(u) Fair Value Measurements

From 1 January 2013, the Group adopted FRS 13, Fair Value Measurement which prescribed that fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

In accordance with the transitional provision of FRS 13, the Group applied the new fair value measurement guidance prospectively, and has not provided any comparative fair value information for new disclosures. The adoption of FRS 13 has not significantly affected the measurements of the Group’s assets or liabilities other than the additional disclosures. 66 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

3. SUMMARY OF SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

3.1 Critical Judgements in Applying the Company’s Accounting Policies

In the process of applying the Group’s and the Company’s accounting policies, which are described in Note 2.3 above, the directors are of the opinion that there are no instances of application of judgement which are expected to have a significant effect on the amounts recognised in the financial statements except for the matter discussed below:-

(i) Classification between operating lease and finance lease for leasehold land

The Group and the Company have developed certain criteria based on FRS 117 Leases in making judgement whether a leasehold land should be classified either as operating lease or finance lease.

Finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an assets and operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership. If the leasehold land meets the criteria of the finance lease, the lease will be classified as property, plant and equipment if it is for own use or will be classified as investment property if it is to earn rentals or for capital appreciation or both. Judgements are made on the individual leasehold land to determine whether the leasehold land qualifies as operating lease or finance lease.

The Group and the Company determine that all leasehold land as disclosed in Note 6 to the financial statements that had a definite economic life and title was not expected to pass to the lessees by the end of the lease term are operating leases.

3.2 Key Sources of Estimation Uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material judgement to the carrying amounts of assets and liabilities within the next financial year are as stated below:-

(i) Useful lives of property, plant and equipment

The Group and the Company estimate the useful lives of property, plant and equipment based on period over which the assets are expected to be available for use. The estimated useful lives of property, plant and equipment are reviewed periodically and are updated if expectation differs from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition, the estimation of useful lives of property, plant and equipment are based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in estimated useful lives of the property, plant and equipment would increase the recorded expenses and decrease the non-current assets.

(ii) Property development costs

The Group recognised property development revenue and costs in the profit or loss by using the stage of completion method. The stage of completion is determined by reference to the surveys of work performed.

Significant judgements are required in determining the stage of completion, the extent of the property development cost incurred, the estimated total property development revenue and cost, as well as recoverability of the development projects. In making the judgement, the management’s evaluation is based on past experience and by relying on the work of specialists.

(iii) Impairment of loans and receivables

The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 67

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

3. SUMMARY OF SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (Cont’d)

3.2 Key Sources of Estimation Uncertainty (cont’d)

(iii) Impairment of loans and receivables (cont’d)

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s receivable at the reporting date is disclosed in Note 12 to the financial statements.

(iv) Impairment of investment in subsidiaries

The Company tests investment in subsidiaries for impairment annually in accordance with its accounting policy. More regular reviews are performed if events indicate that impairment is necessary. The assessment of the net tangible assets of the subsidiaries affects the result of the impairment test. Costs of investments in subsidiaries which have ceased operations were impaired up to net assets of the subsidiaries. The impairment made on investment in subsidiaries entails an impairment to be made to the amount owing by these subsidiaries.

Significant judgement is required in the estimation of the present value of future cash flows generated by the subsidiaries, which involve uncertainties and are significantly affected by assumptions used and judgement made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the Company’s tests for impairment of investment in subsidiaries.

(v) Impairment of goodwill

The Group determines whether goodwill is impaired on an annual basis. This requires an estimation of the value-in-use of the CGU to which goodwill is allocated. Estimating a value-in-use amount requires the management to make an estimation of the expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of those cashflows. The carrying amount of goodwill as at 31st December 2014 was RM2,970,000/- (2013: RM7,532,189/-).

(vi) Impairment of investment property and property, plant and equipment

The Group and the Company review the carrying amount of its investment property and property, plant and equipment to determine whether there is an indication that those assets have suffered an impairment loss in accordance with relevant accounting policies on the investment property and property, plant and equipment. Independent professional valuations to determine the carrying amount of these assets will be procured when the need arise.

As at the end of the financial year under review, the directors are of the view that there is no indication of impairment to these assets. The carrying amounts of investment property and property, plant and equipment and investment properties are disclosed in Note 4 and 5 to the financial statements.

(vii) Allowance for write down in inventories

Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates can result in revisions to the valuation of inventories.

(viii) Deferred tax assets

Deferred tax assets are recognised for all deductible temporary differences and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and unused tax credits can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The total unrecognised deferred tax assets of the Group and the Company were RM7,813,224/- (2013: RM8,158,514/-) and RM Nil/- (2013: RM891,214/-) as disclosed in Note 25 to the financial statements. 68 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

3. SUMMARY OF SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (Cont’d)

3.2 Key Sources of Estimation Uncertainty (cont’d)

(ix) Provisions

The Group recognises provisions when it has a present legal or constructive obligation arising as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. The recording of provisions requires the application of judgements about the ultimate resolution of these obligations. As a result, provisions are reviewed at each reporting date and adjusted to reflect the Group’s current best estimate.

(x) Contingent liabilities

Determination of the treatment of contingent liabilities in the financial statements is based on the management’s view of the expected outcome of the applicable contingency.

(xi) Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 69

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

4. PROPERTY, PLANT AND EQUIPMENT

Furniture, Fittings Group Freehold Buildings Plant and Motor and 2014 Buildings Land Improvements Machinery Vehicles Equipment Total RM RM RM RM RM RM RM Cost At 1st January 2014 1,903,915 1,869,244 782,072 12,900 2,152,341 2,292,132 9,012,604 Additions – – 616,117 – 584,167 401,994 1,602,278 Disposals/Write-offs – – – – (181,366) (31,196) (212,562) At 31st December 2014 1,903,915 1,869,244 1,398,189 12,900 2,555,142 2,662,930 10,402,320

Accumulated Depreciation and Impairment Loss At 1st January 2014 519,426 – 782,028 12,900 1,705,141 2,085,042 5,104,537 Charge for the financial year 40,549 – 37,010 – 300,281 93,268 471,108 Disposals/Write-offs – – – – (181,365) (30,226) (211,591) At 31st December 2014 559,975 – 819,038 12,900 1,824,057 2,148,084 5,364,054

Net Book Value at 31st December 2013 1,343,940 1,869,244 579,151 – 731,085 514,846 5,038,266

Group 2013

Cost At 1st January 2013 1,979,515 1,869,244 793,968 12,900 1,892,224 2,297,853 8,845,704 Additions – – – – 260,117 73,452 333,569 Disposals/Write-offs (75,600) – (11,896) – – (79,173) (166,669) At 31st December 2013 1,903,915 1,869,244 782,072 12,900 2,152,341 2,292,132 9,012,604

Accumulated Depreciation and Impairment Loss At 1st January 2013 497,022 – 793,922 12,900 1,466,129 2,110,931 4,880,904 Charge for the financial year 40,927 – – – 239,012 50,703 330,642 Disposals/Write-offs (18,523) – (11,894) – – (76,592) (107,009) At 31st December 2013 519,426 – 782,028 12,900 1,705,141 2,085,042 5,104,537

Net Book Value at 31st December 2013 1,384,489 1,869,244 44 – 447,200 207,090 3,908,067 70 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

4. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

Furniture, Fittings Company Freehold Buildings Motor and 2014 Buildings Land Improvements Vehicles Equipment Total RM RM RM RM RM RM Cost At 1st January 2014 763,088 264,940 656,581 1,335,215 1,266,869 4,286,693 Additions – – 222,487 4,250 232,934 459,671 Disposals/Write-offs – – – – (29,121) (29,121) At 31st December 2014 763,088 264,940 879,068 1,339,465 1,470,682 4,717,243

Accumulated Depreciation and Impairment Loss At 1st January 2014 267,140 – 656,537 1,205,675 1,160,147 3,289,499 Charge for the financial year 15,940 – 22,249 130,384 67,098 235,671 Disposals/Write-offs – – – – (28,153) (28,153) At 31st December 2014 283,080 – 678,786 1,336,059 1,199,092 3,497,017

Net Book Value at 31st December 2014 480,008 264,940 200,282 3,406 271,590 1,220,226 Company 2013

Cost At 1st January 2013 763,088 264,940 656,581 1,335,215 1,276,826 4,296,650 Additions – – – – 18,910 18,910 Disposals/Write-offs – – – – (28,867) (28,867) At 31st December 2013 763,088 264,940 656,581 1,335,215 1,266,869 4,286,693

Accumulated Depreciation and Impairment Loss At 1st January 2013 251,200 – 656,537 1,076,141 1,155,537 3,139,415 Charge for the financial year 15,940 – – 129,534 30,902 176,376 Disposals/Write-offs – – – – (26,292) (26,292) At 31st December 2013 267,140 – 656,537 1,205,675 1,160,147 3,289,499

Net Book Value at 31st December 2013 495,948 264,940 44 129,540 106,722 997,194 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 71

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

4. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

The net book value of property, plant and equipment of the Group and of the Company includes the following property, plant and equipment acquired under finance lease arrangements:-

Group Company 2014 2013 2014 2013 RM RM RM RM

Motor vehicles 541,258 208,751 1 129,534

5. INVESTMENT PROPERTIES

Group Company 2014 2013 2014 2013 RM RM RM RM Land and Buildings Cost At 1st January 2,659,874 60,277,352 2,041,424 59,658,902 Addition – – – – Transfer to non-current assets held for sale (Note 14) – (57,617,478) – (57,617,478) At 31st December 2,659,874 2,659,874 2,041,424 2,041,424

Accumulated Depreciation and Impairment Loss At 1st January 548,467 503,326 204,140 163,312 Charge for the financial year 45,141 45,141 40,828 40,828 At 31 st December 593,608 548,467 244,968 204,140 Net Book Value at 31st December 2,066,266 2,111,407 1,796,456 1,837,284

Group

The fair value for the investment properties of the Group and of the Company on 31st December 2014 are RM2,800,000/- (2013: RM2,800,000/-) and RM2,500,000/- (2013: RM2,500,000/-) respectively. The fair value of the investment properties amounting to approximately RM2,500,000 are based on valuation performed by independent valuer using the Comparison Method of Valuation.

Fair value of investment properties for the Group is categorised as follows:-

Quoted prices Significant Significant in active observable unobservable markets inputs inputs Group Total Level 1 Level 2 Level 3 Asset for which fair value is disclosed Investment properties 2,800,000 – – 2,800,000

Quoted prices Significant Significant in active observable unobservable markets inputs inputs Total Level 1 Level 2 Level 3 Company Asset for which fair value is disclosed Investment properties 2,500,000 – – 2,500,000 72 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

6. LEASEHOLD LAND

Group Company 2014 2013 2014 2013 RM RM RM RM

At 1st January 172,846 175,036 72,430 73,480 Disposal – – – – Amortisation for the financial year (2,190) (2,190) (1,050) (1,050) At 31st December 170,656 172,846 71,380 72,430

7. LAND HELD FOR PROPERTY DEVELOPMENT AND PROPERTY DEVELOPMENT COSTS

(a) Land held for property development

Group Company 2014 2013 2014 2013 RM RM RM RM At 1st January - freehold land 325,530 325,530 – – - leasehold land – 4,218,300 – 4,218,300 - development costs 24,947 23,760 – – 350,477 4,567,590 – 4,218,300 Add: Costs incurred during the financial year - development costs 1,187 1,187 – – Less: Transfer to property development costs – (4,218,300) – (4,218,300) 351,664 350,477 – – At 31st December - freehold land 325,530 325,530 – – - leasehold land – – – - development costs 26,134 24,947 – – 351,664 350,477 – –

(b) Property development costs

Group Company 2014 2013 2014 2013 RM RM RM RM

At 1st January - freehold land/leasehold land 10,537,108 9,684,179 4,218,300 – - development costs 53,737,962 70,971,470 1,981,151 4,375,464 - accumulated costs charged to profit or loss (44,727,297) (62,828,826) – (2,163,521) 19,547,773 17,826,823 6,199,451 2,211,943 Add: Costs incurred during the financial year - development costs 15,206,512 14,683,271 11,069,993 3,709,795 - transfer from land held for property development – 4,218,300 – 4,218,300 15,206,512 18,901,571 11,069,993 7,928,095 Less: Costs recognised in profit or loss during the financial year (13,469,121) (17,180,622) (8,543,385) (3,940,587) 21,285,164 19,547,772 8,726,059 6,199,451 At 31st December - freehold land/leasehold land 6,940,490 8,195,207 3,601,570 4,218,300 - development costs 51,187,224 56,079,862 13,667,874 1,981,151 - accumulated costs recognised in profit or loss (36,842,550) (44,727,297) (8,543,385) – 21,285,164 19,547,772 8,726,059 6,199,451 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 73

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

7. LAND HELD FOR PROPERTY DEVELOPMENT AND PROPERTY DEVELOPMENT COSTS (Cont’d)

(a) Land held for property development (cont’d)

Included in the development costs of the Group incurred during the financial year are interest expenses of RMNil/- (2013: RM7,760/-).

The related property development costs closed out from completed phases during the financial year amounted to:-

Group Company 2014 2013 2014 2013 RM RM RM RM

Freehold land 2,979,888 5,707,272 – – Development expenditure 18,373,981 29,574,879 – 6,104,108

8. INVESTMENT IN SUBSIDIARIES

Company 2014 2013 RM RM

Unquoted shares, at cost 44,437,498 44,437,498 Less: Accumulated impairment losses (17,206,060) (748,200) 27,231,438 43,689,298

The Company’s equity interest in the subsidiaries, country of incorporation and their respective principal activities are disclosed in Note 30 to the financial statements.

9. OTHER INVESTMENTS

Group Company 2014 2013 2014 2013 RM RM RM RM

Available-for-sale financial assets:- Quoted shares in Malaysia 15,786 15,786 – – Add : Fair value gain 16,227 12,751 – – 32,013 28,537 – –

Investment in bond/cash management fund 30,493,469 – 30,493,469 – 30,493,469 – 30,493,469 –

Unquoted shares, at cost 99,183 99,183 50,000 50,000 Less: Impairment loss (49,183) (49,183) – – 50,000 50,000 50,000 50,000

Unquoted preference shares, at cost 1,793,150 1,793,150 1,793,150 1,793,150 Less: Impairment loss (1,755,806) (1,755,806) (1,755,806) (1,755,806) 37,344 37,344 37,344 37,344 30,612,826 115,881 30,580,813 87,344

The market value of the quoted shares as at 31st December 2014 is RM32,013/- (2013: RM28,537/-). 74 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

10. GOODWILL ON CONSOLIDATION

Group 2014 2013 RM RM Cost Balance as at 1st January/31st December 17,797,926 17,797,926

Accumulated impairment losses Balance as at 1st January 10,265,737 3,780,958 Impairment loss during the financial year 4,562,189 6,484,779 Balance as at 31st December 14,827,926 10,265,737 Net carrying amount at 31st December 2,970,000 7,532,189

Goodwill has been allocated for impairment testing to the Group’s cash-generating unit (“CGU”). The aggregate carrying amounts of goodwill allocated to each unit are as follows:-

Group 2014 2013 RM RM

Property 2,970,000 7,455,250 Trading – 76,939 2,970,000 7,532,189

The recoverable amounts of the investment is determined based on value in use calculations using cash flows projections on financial budgets approved by management covering a 3 years period. The cash flows were projected by the management based on past experiences, actual operating results and the 3 years business plan. A pre-tax discount rate of 6.6% (2013: 6.6%) was used in determining the value-in-used.

The key assumptions used for value-in-use calculations are:-

• The anticipated annual revenue growth included in the cash flow projections was based on the management’s estimation of the completion period of the potential future projects.

• The budgeted gross margin is assumed to be consistent.

• The discount rate used is pre-tax and reflect specific risk relating to the industry.

The value assigned to the key assumptions represents management’s assessment on the future trends in the industry and are based on both external and internal source of information.

Sensitivity to changes in assumptions

There are no reasonable possible changes in key assumptions which could cause the carrying value of goodwill on consolidation to exceed its recoverable amount.

11. INVENTORIES

Group Company 2014 2013 2014 2013 RM RM RM RM At Cost Completed units of shoplots and houses 3,154,268 3,154,268 95,411 95,411

Group

The completed units of shoplots and houses of RM95,023/- (2013: RM95,023/-) have been pledged to licensed banks to secure banking facilities granted to a subsidiary. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 75

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

12. TRADE AND OTHER RECEIVABLES

Group Company 2014 2013 2014 2013 RM RM RM RM Current Trade receivables 5,471,066 5,721,994 4,358,785 477,697

Other receivables Other receivables 402,808 2,618,732 2,168 2,271,444 Amount owing by subsidiaries – – 4,777,042 4,029,660 Deposits 4,046,509 1,982,274 2,360,876 308,826 4,449,317 4,601,006 7,140,086 6,609,930 Total receivables 9,920,383 10,323,000 11,498,871 7,087,627

(i) Trade receivables

The Group’s trade receivables normal trade credit terms ranges from 21 to 90 (2013: 21 to 90) days terms. They are recognised on their original invoice amount which represents their fair values on initial recognition.

The ageing analysis of the Group’s and the Company’s trade receivables are as follows:-

Analysis on trade receivables

Group Company 2014 2013 2014 2013 RM RM RM RM

Neither past due nor impaired 4,814,593 5,311,787 3,848,160 477,697 Past due and not impaired: Past due 1 - 30 days 510,625 – 510,625 – Past due 31 - 60 days – – – – Past due 61 - 90 days – 392,895 – – Past due more than 90 days 145,848 17,312 – – 656,473 410,207 510,625 – Impaired – – – – 5,471,066 5,721,994 4,358,785 477,697

Receivables that are neither past due nor impaired

Trade receivables that are neither past due nor impaired are creditworthy debtors as 83% are represented by amount owing by end-financiers and 17% are amount held by solicitors as stakeholder fund.

Receivables that are past due but not impaired

Included in the trade receivables that are past due but not impaired are amount owing by end-financiers pending disbursement.

At the date of this report, the amounts of RM510,625/- due from end-financiers have been fully collected. Included in the trade receivable past due more than 90 days is an amount of RM128,536 owing by purchasers pending negotiation over the revocation of units purchased due to regulatory issues. The revocation is expected to complete in year 2015. Balance of RM17,312/- is due to pending dispute over land area of the unit purchased. The Group is of the view that it will be collected upon the issuance of title to the purchasers by the authorities.

Receivables that are impaired

There is no trade receivables that are impaired at the reporting date. 76 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

12. TRADE AND OTHER RECEIVABLES (Cont’d)

(ii) Other receivables

Included in other receivables in the previous financial year was an amount of RM2,250,035/- retained by the solicitor for the disposal of 3 plots of lands as disclosed in Note 14 to the financial statements.

(iii) Amount owing by subsidiaries

The amount owing by subsidiaries represents advances and payments made on behalf, which is unsecured, repayable on demand and interest free except for an amount of RM4,774,826/- (2013: RM4,022,835/-) owing by a subsidiary which bears interest at 4.75% (2013: 4.15%) per annum. These balances are to be settled by cash.

(iv) Deposits

Included in deposits is an amount of RM1,900,000/- being deposit paid which equivalent to ten percent (10%) of purchase price consideration to the Vendor’s solicitor for acquisition of all that piece of land as disclosed in Note 34(ii) to the financial statements.

13. CASH AND CASH EQUIVALENTS

Group Company 2014 2013 2014 2013 RM RM RM RM

Short-term investment 89,919,827 2,004,880 89,919,827 2,004,880 Fixed deposits placed with licensed banks 1,114,689 17,050,528 804,418 16,536,890 Cash held under Housing Development Account 4,524,510 7,216,882 276,149 1,325,880 Cash and bank balances 1,256,598 3,204,207 464,736 308,151 96,815,624 29,476,497 91,465,130 20,175,801

(a) The interest earned from the short-term investment of the Group and of the Company range from 3.06% to 3.41% (2013:3.07%) per annum. Short-term investment relates to investment in cash management fund.

(b) Cash held under Housing Development Account represents receipts from purchasers of residential properties less payments or withdrawals pursuant to Section 7A of the Housing Development (Control and Licensing) Act, 1966 and therefore restricted from use in other operations.

(c) The interest earned from the Housing Development Account of the Group and of the Company ranges from 1.50% to 2.00% (2013: 1.50% to 2.00%) per annum.

(d) The interest earned from the fixed deposits placed with licensed banks of the Group and of the Company ranges from 3.15% to 3.75% (2013: 3.00% to 3.10%) per annum.

14. NON-CURRENT ASSETS HELD FOR SALE

Non-current assets held for sale comprised the following:-

Group and Company 2014 2013 RM RM

At 1st January 57,617,478 – Transfer from investment properties (Note 5) – 57,617,478 Disposal of investment properties (57,617,478) At 31st December – 57,617,478 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 77

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

14. NON-CURRENT ASSETS HELD FOR SALE (Cont’d)

On 23th September 2013, the Company had entered into a conditional Sale and Purchase Agreement (“SPA”) to dispose of the following plots of lands to 1MDB RE (Ayer Itam) Sdn Bhd (formerly known as Aluminium Development Company Sdn Bhd) (“1MDB RE”) for a total cash consideration of RM112,501,726/- :-

(a) ¼ undivided share of freehold land of Lot 1561, Section 3, Town of Air Itam held under No. Hakmilik GRN 43187; (b) ¼ undivided share of freehold land of Lot 1584, Mukim 13 held under No. Hakmilik GRN 53264; and (c) 11/100 undivided share of freehold land of Lot 1457, Mukim 13 held under No. Hakmilik GRN 4661.

The 3 plots of lands are within the district of Timor Laut, Penang, measuring an aggregate gross area reflecting the undivided share of the Company in and to the above lands of approximately 1,022,743 square feet. The completion of the disposal is pending the receipt of the balance 90% of the purchase consideration equivalent to RM101,251,553/-.

On 6th March 2014, the proposed disposal had been completed in accordance with the provision of the SPA and balance purchase consideration in relation to the disposal had been received by the Company on 13th March 2014.

15. SHARE CAPITAL

Group and Company Number of Shares Share Capital 2014 2013 2014 2013 Unit Unit RM RM Ordinary shares of RM1/- each Authorised At 1st January/31st December 500,000,000 500,000,000 500,000,000 500,000,000

Issued and fully paid At 1st January/31 December 140,326,100 140,326,100 140,326,100 140,326,100

16. RESERVES

Group Company 2014 2013 2014 2013 RM RM RM RM

Non-distributable Share premium 28,715,448 28,715,448 28,715,448 28,715,448 Fair value adjustment reserve 8,276 6,503 – –

Distributable Accumulated losses (17,592,310) (64,689,103) (6,944,476) (45,543,662) Total 11,131,414 (35,967,152) 21,770,972 (16,828,214)

Fair value adjustment reserve relates to fair value gain or loss on investment in quoted shares. 78 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

17. LOANS AND BORROWINGS

Group Company 2014 2013 2014 2013 RM RM RM RM

Minimum lease payments On demand and within one year 167,280 172,801 52,882 105,804 Later than one year but not later than two years 112,500 54,779 – 52,882 Later than two years but not later than five years 309,375 – – – Later than five years – – – – 589,155 227,580 52,882 158,686

Less: Amount representing finance charges (57,256) (8,429) (792) (6,448) Present value of minimum lease payment 531,899 219,151 52,090 152,238

Represented by:- Current On demand and within one year 145,372 165,172 52,090 100,148 Non-current Later than one year but not later than two years 96,312 53,979 – 52,090 Later than two years but not later than five years 290,215 – – – Later than five years – – – – 531,899 219,151 52,090 152,238

Finance lease liabilities

The effective interest rate ranges from 4.73% to 5.64% (2013: 4.18% to 7.21%) per annum. Interest rates are fixed at the inception of the finance lease arrangements.

The finance lease liabilities are effectively secured on the rights of the assets under finance lease arrangements.

18. DEFERRED TAX LIABILITIES

Group and Company 2014 2013 RM RM

At 1 January – – Transfer from to income statement 19,615 – At 31 December 19,615 –

The deferred tax liabilities on temporary differences recognised in the financial statements are as follows:

Group and Company 2014 2013 RM RM Tax effects of - excess of capital allowances claimed over accumulated depreciation on property, plant and equipment (7,354) – - other temporary differences 26,969 – At 31 December 19,615 – FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 79

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

19. TRADE AND OTHER PAYABLES

Group Company 2014 2013 2014 2013 RM RM RM RM

Current Trade payables 3,541,908 2,471,254 2,364,311 297,354

Other payables Accruals 3,476,295 2,518,241 853,069 566,224 Other payables 1,733,201 8,092,463 105,774 121,380 Deposits 177,519 11,438,911 66,500 11,317,673 Amount owing to subsidiaries – – 100,388 118,771 Amount owing to directors 23,746 17,559 9,110 5,311 5,410,761 22,067,174 1,134,841 12,129,359 Total trade and other payables 8,952,669 24,538,428 3,499,152 12,426,713

Add: Loans and borrowings (Note 17) 531,899 219,151 52,090 152,238

Add: Progress billings in respect of property development cost 735,321 – 735,321 – 10,219,889 24,757,579 4,286,563 12,578,951

(a) The trade payables are normally settled on 30 to 90 (2013: 30 to 90) days terms.

The amount owing to subsidiaries represents advances and payments made on behalf, which is unsecured, non-interest bearing, repayable on demand and to be settled by cash.

The amount owing to directors represents advances and payments made on behalf, which is unsecured, interest free, repayable on demand and to be settled by cash.

(b) Trade Payables

Included in trade payables of the Group and the Company is an amount of RM461,031/- (2013: RM914,283/-) and RM437,143/- (2013: RM215,667/-) respectively which represents retention sum payable.

Included in deposits of the Group and the Company in the previous financial year was an amount of RM11,250,172/- which represents deposit received in relation to the proposed disposal of properties as disclosed in Note 34(i) to the financial statements.

(d) Included in the other payables of the Group in the previous financial year was RM6,000,000/- owing to a former contractor of a subsidiary on the arbitration as disclosedin Note 35(a) to the financial statements. The amount have been settled during the financial year. 80 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

20. PROVISIONS

Liquidated Property Directors’ and Ascertained Development Retirement Damages Expenditure Benefits Total RM RM RM RM Group At 1st January 2013 1,706,062 7,007,846 4,228,260 12,942,168 Reversal/utilisation during the financial year (680,664) (4,030,418) (2,645,330) (7,356,412) At 31st December 2013 1,025,398 2,977,428 1,582,930 5,585,756 Addition during the financial year 42,786 4,045,437 50,000 4,138,222 At 31st December 2014 1,068,184 7,022,865 1,632,930 9,723,978

2014 Current 1,068,184 7,022,865 1,632,930 9,723,978 Non-current – – – – 1,068,184 7,022,865 1,632,930 9,723,978

2013 Current 1,025,398 2,977,428 1,582,930 5,585,756 Non-current – – – – 1,025,398 2,977,428 1,582,930 5,585,756

RM RM RM Company At 1st January 2013 242,986 4,228,260 4,471,246 Utilisation/reversal during the financial year (1,347) (2,645,330) (2,646,677) At 31st December 2013 241,639 1,582,930 1,824,569 Addition during the financial year 3,816,279 50,000 3,866,279 At 31st December 2014 4,057,918 1,632,930 5,690,848

2014 Current 4,057,918 1,632,930 5,690,848 Non-current – – – 4,057,918 1,632,930 5,690,848

2013 Current 241,639 1,582,930 1,824,569 Non-current – – – 241,639 1,582,930 1,824,569

(i) Liquidated and Ascertained Damages

Provision for liquidated and ascertained damages (“LAD”) is in respect of a project undertaken by the Group. LAD is recognised for expected LAD claims based on the contract agreements.

(ii) Property Development Expenditure

Provision for property development expenditure is made in respect of probable outflow of resources related to land and development activities of the Group and of the Company.

(iii) Directors’ Retirement Benefits

Provision for directors’ retirement benefits is based on existing contractual obligations with the directors which is equivalent to two months salary of the respective directors for every year of service. The entitlement is based on the last drawn salary prior to retirement. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 81

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

21. REVENUE

Group Company 2014 2013 2014 2013 RM RM RM RM

Revenue from sales of development properties 23,465,776 21,142,677 17,913,679 5,708,131 Sales of goods net of discount 1,448,043 897,314 – – 24,913,819 22,039,991 17,913,679 5,708,131

22. COST OF SALES

Group Company 2014 2013 2014 2013 RM RM RM RM

Development properties 13,047,767 15,538,737 8,543,385 3,940,586 Purchases of goods net of discount 1,270,633 774,425 – – 14,318,400 16,313,162 8,543,385 3,940,586

23. FINANCE COSTS (net)

Group Company 2014 2013 2014 2013 RM RM RM RM Interest income - licensed banks 1,468,208 512,426 1,280,652 312,182 - subsidiaries – – 310,459 223,660 - others 1,862,643 – 1,862,643 – 3,330,851 512,426 3,453,754 535,842 Interest expenses - finance lease (13,673) (17,414) (5,656) (11,567) 3,317,178 495,012 3,448,098 524,275 82 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

24. PROFIT/(LOSS) BEFORE TAXATION

Profit/(Loss) before taxation has been arrived at:-

Group Company 2014 2013 2014 2013 RM RM RM RM After charging:- Amortisation of leasehold land 2,190 2,190 1,050 1,050 Auditors’ remuneration - current year 147,000 155,000 67,000 75,000 - over accrual in prior year (8,000) (4,600) (8,000) – Bad debts written off – 2,091 7,372 – Deposit written off – 5,000,000 – 5,000,000 Depreciation :- - investment properties 45,141 45,141 40,828 40,828 - property, plant and equipment 471,108 330,642 235,671 176,376 Directors’ remuneration - fees 108,000 108,000 108,000 108,000 - meeting allowance 12,500 15,750 12,500 15,750 - other emoluments 1,275,626 1,182,566 536,466 500,706 Impairment loss on other investment – 402,832 – 402,832 Impairment loss on investment in subsidiaries – – 16,457,860 – Impairment loss on goodwill 4,562,189 6,484,779 – – Property, plant and equipment written off 965 2,576 963 2,574 Provision for directors’ retirement benefits 50,000 50,000 50,000 50,000 Provision for liquidated and ascertained damages 214,132 153,035 – – Staff costs - Employees’ Provident Fund 501,136 405,929 316,578 245,309 - SOCSO 32,453 30,162 16,926 16,207 - salaries, bonuses and allowances 4,132,831 3,359,599 2,655,144 2,063,359 - other staff related expenses 57,575 46,980 33,516 31,472

And crediting:- Dividend income 247 129 – 800,000 Fair value gain on financial assets 493,469 – 493,469 – Gain on disposal of property, plant and equipment 334 164,917 334 – Gain on disposal of non-current asset held for sales 54,884,248 – 54,884,248 – Other investment income 1,371,185 4,880 1,371,185 4,880 Reversal of liquidated and ascertained damages – 785,775 – – Reversal of directors’ retirement benefits – 2,695,330 – 2,695,330 Rental income 476,030 436,160 222,600 164,410

Directors’ remuneration of the Group and of the Company excludes estimated monetary value of benefits in kind of RM15,500/- (2013: RM15,500/-) and RM9,900/- (2013: RM9,900/-) respectively. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 83

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

25. TAXATION

Group Company 2014 2013 2014 2013 RM RM RM RM

Income tax - current year (914,334) (28,529) (880,385) – - prior years (124,341) (1,096) – – (1,038,675) (29,625) (880,385) – Deferred taxation (19,615) – (19,615) – Real Property Gain Tax (“RPGT”) (8,194,117) – (8,194,117) (9,252,407) (29,625) (9,094,117) –

Income tax is calculated at the statutory rate of 25% (2013: 25%) of the estimated taxable profit for the year. The statutory tax rate will be reduced to 24% from the current year’s rate of 25% effective year of assessment 2016.

A reconciliation of income tax expense applicable to profit/(loss) before taxation at the statutory income tax rate to income tax expense at the average effective income tax rate of the Group and the Company are as follows:-

Group Company 2014 2013 2014 2013 RM RM RM RM

Profit/(Loss) before taxation 56,409,369 (11,484,583) 47,693,303 (4,575,952)

Taxation at applicable statutory tax rate of 25% (14,102,342) 2,871,146 (11,923,326) 1,143,988 Tax effects arising from - non-taxable income 7,417,384 994,615 7,415,541 909,556 - non-deductible expenses (1,437,918) (3,544,763) (4,356,079) (1,650,273) - reversal/(origination) of deferred tax assets not recognised in financial statements 345,290 23,580 1,089,231 (356,662) - deferred tax assets recognised at different tax rates 15,206 (373,107) 46,202 (46,609) - tax effect arising from RPGT (1,365,686) – (1,365,686) – - under provision in prior years (124,341) (1,096) – – Tax expense for the financial year (9,252,407) (29,625) (9,094,117) –

The amount of temporary differences for which no deferred tax assets have been recognised are as follows:-

Group Company 2014 2013 2014 2013 RM RM RM RM

Deductible temporary differences (69,864) 329,126 – 412,536 Unutilised tax losses 32,624,965 33,664,683 – 4,125,927 32,555,101 33,993,809 – 4,538,463

Potential unrecognised deferred tax assets at 24% (2013: 24%) 7,813,224 8,158,514 – 1,089,231 84 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

26. EARNINGS/(LOSS) PER SHARE

(a) Basic Earnings/(Loss) Per Ordinary Share

Basic earnings/(loss) per share is calculated by dividing net profit/(loss) for the financial year attributable to owners of the Company by the weighted average number of ordinary shares in issue during the financial year.

Group 2014 2013 RM RM

Profit/(Loss) attributable to owners of the Company 47,096,793 (11,546,986) Number of ordinary shares in issue 140,326,100 140,326,100 Weighted average number of ordinary shares in issue 140,326,100 140,326,100 Basic Earnings/(loss) per share - per weighted average number of share (sen) 33.56 (8.23)

(b) Diluted Loss Per Share

For the purpose of calculating diluted loss per share, the net profit/(loss) for the financial year attributable to owners of the Company and the weighted average number of ordinary shares in issue during the financial year have been adjusted for the dilutive effects of all potential ordinary shares.

The Group has no dilutive potential ordinary shares. As such, there is no dilutive effect on the earnings/(loss) per share of the Group.

27. FINANCIAL GUARANTEES

As at 31st December 2014, the financial guarantees of the Group and the Company are as follows:-

Group Company 2014 2013 2014 2013 RM RM RM RM Secured Bank guarantees and performance bonds issued in favour of various third parties 907,400 121,000 814,800 37,000

Unsecured Corporate guarantee issued in favour of a third party – 6,000,000 – 6,000,000 907,400 6,121,000 814,800 6,037,000

The bank guarantees and performance bonds of the Group are secured over by earmarking the bank balances of the subsidiaries.

28. SIGNIFICANT RELATED PARTY DISCLOSURES

(a) Identities of Related Parties

Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operational decisions, or vice versa, or where the Group and the party are subject to common control significant influence. Related parties may be individuals or other entities. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 85

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

28. SIGNIFICANT RELATED PARTY DISCLOSURES (Cont’d)

(a) Identities of Related Parties (cont’d)

Related party of the Group include:

(i) Directors:

(ii) Subsidiaries;

(iii) Ultimate Holding Company;

(iv) Person connected to director;

(v) Key management personnel which comprise persons (including the directors of the Company) have authority and responsibility for planning, directing, controlling the activities of the Group directly or indirectly.

(b) Significant Related Party Transactions

Group Company 2014 2013 2014 2013 RM RM RM RM Interest income received/receivable from Subsidiary - Bandar Subang Sdn. Bhd. – – (310,459) (223,660) Dividend income received/receivable from a subsidiary - Bandar Subang Sdn Bhd – – – (800,000) Rental income received/receivable from subsidiaries - Farlim Jaya Sdn. Bhd. – – (6,000) (6,000) - Farlim Marketing Sdn. Bhd. – – (3,600) (3,600) Accounting fee received/receivable from a subsidiary - Farlim Jaya Sdn. Bhd. – – (8,400) (8,400) Waiver/Bad debts written-off to subsidiaries - Victory Ace Sdn Bhd – – 1,517 – - Ria Bahagia Sdn Bhd – – 4,354 – - Baka Suci Sdn Bhd – – 1,501 – Disposal of motor vehicle to a director ## (1) – – – Sale of property to person connected to director ## (2,232,500) (873,101) (2,232,500) – Key management personnel expenses - short term employee benefits 2,631,595 2,268,108 1,745,635 1,457,848 - Post-employment benefits: - defined contribution plan 148,487 115,671 130,871 100,263 - provision for directors’ retirement benefits# 50,000 50,000 50,000 50,000 - reversal of directors’ retirement benefits# – (2,695,330) – (2,695,330) 86 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

28. SIGNIFICANT RELATED PARTY DISCLOSURES (Cont’d)

(b) Significant Related Party Transactions (cont’d)

Included in the total key management personnel expenses are:-

Group Company 2014 2013 2014 2013 RM RM RM RM

Directors’ fees* 108,000 108,000 108,000 108,000 Directors’ salaries, bonuses and allowances** 1,288,126 1,198,316 548,966 516,456

* Paid/Payable to Andrew Koay Say Loke, Yong Yew Wei and Khairilanuar Bin Abdul Rahman.

** Paid/payable to Tan Sri Dato’ Seri Lim Gait Tong, Datuk Seri Haji Mohamed. Iqbal Bin Kuppa Pitchai Rawther, Lim Chu Dick, Andrew Koay Say Loke, Yong Yew Wei and Khairilanuar Bin Abdul Rahman.

# Tan Sri Dato’ Seri Lim Gait Tong and Datuk Seri Haji Mohamed. Iqbal Bin Kuppa Pitchai Rawther. (2013: Tan Sri Dato’ Seri Lim Gait Tong, Datuk Seri Haji Mohamed. Iqbal Bin Kuppa Pitchai Rawther)

## Datuk Seri Haji Mohamed. Iqbal Bin Kuppa Pitchai Rawther.

29. SEGMENTAL ANALYSIS

The Group’s operating businesses are classified according to the nature of activities as follows:-

Property : Comprise mainly property related activities. Construction : Comprise mainly construction related activities. Trading : Comprise mainly trading of building materials. Investment : Comprise mainly investment holding.

Primary Reporting – Business Segments

Eliminations and Property Trading Investment adjustments Consolidated 31st December 2014 RM RM RM RM RM Revenue Sales to external customers 23,465,776 1,448,043 – – 24,913,819 Inter-segment sales – – – – – Total revenue 23,465,776 1,448,043 – – 24,913,819

Cost of Sales Sales to external customers 13,047,767 1,270,633 – – 14,318,400 Inter-segment sales – – – – – Total cost of sales 13,047,767 1,270,633 – – 14,318,400

Results Segment results (4,626,683) 102,075 (3,083) – (4,527,691) Other income 57,596,882 23,000 – – 57,619,882 Finance costs (net) 3,303,224 13,954 – – 3,317,178 Profit/(Loss) before taxation 56,273,423 139,029 (3,083) – 56,409,369 Taxation (9,243,207) (9,200) – – (9,252,407) Profit/(Loss) after taxation 47,030,216 129,829 (3,083) – 47,156,962 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 87

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

29. SEGMENTAL ANALYSIS

Primary Reporting – Business Segments (cont’d)

Eliminations and Property Trading Investment adjustments Consolidated 31st December 2014 RM RM RM RM RM OTHER INFORMATION Segment assets 171,487,789 1,125,642 7,070 154 172,620,655

Segment liabilities 19,492,814 212,492 238,561 723,463 20,667,330

Capital expenditure 1,598,030 4,248 – – 1,602,278 Depreciation and amortisation 467,900 5,398 – – 473,298 Other significant non-cash expense Impairment loss on goodwill 4,562,189 – – – 4,562,189 Property, plant and equipment written off 965 – – – 965 Provision for directors’ retirement benefits 50,000 – – – 50,000 Provision of liquidated and ascertained damages 214,132 – – – 214,132

Eliminations and Property Trading Investment adjustments Consolidated 31st December 2013 RM RM RM RM RM Revenue Sales to external customers 21,142,677 897,314 – – 22,039,991 Inter-segment sales – – – – – Total revenue 21,142,677 897,314 – – 22,039,991

Cost of Sales Sales to external customers 15,538,737 774,425 – – 16,313,162 Inter-segment sales – – – – – Total cost of sales 15,538,737 774,425 – – 16,313,162

Results Segment results (10,155,165) 54,915 (5,405,057) – (15,505,307) Other income 3,525,712 – – – 3,525,712 Finance costs (net) 479,205 15,807 – – 495,012 (Loss)/profit before taxation (6,150,248) 70,722 (5,405,057) – (11,484,583) Taxation (25,673) (3,952) – – (29,625) (Loss)/profit after taxation (6,175,921) 66,770 (5,405,057) – (11,514,208) 88 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

29. SEGMENTAL ANALYSIS

Primary Reporting – Business Segments (cont’d)

Eliminations Property Trading Investment and Consolidated adjustments 31st December 2013 RM RM RM RM RM OTHER INFORMATION Segment assets 133,641,414 1,027,599 7,496 528,876 A 135,205,385

Segment liabilities 29,859,880 247,755 235,700 69,164 B 30,412,499

Capital expenditure 329,322 4,248 – – 333,570 Depreciation and amortisation 372,862 5,111 – – 377,973 Other significant non-cash expense Bad debts written off 2,091 – – – 2,091 Impairment loss on investment – – 5,402,832 – 5,402,832 Impairment loss on goodwill 6,484,779 – – – 6,484,779 Provision for directors’ retirement benefits 50,000 – – – 50,000 Provision for liquidated and ascertained damages (“LAD”) 153,035 – – – 153,035 Property, plant and equipment written off 2,576 – – – 2,576 Reversal of LAD (785,775) – – – (785,775) Reversal of directors’ retirement benefits (2,695,330) – – – (2,695,330)

Note: Nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements.

A The following item is added into segment assets to arrive at total assets reported in the consolidated statement of financial position:

2014 2013 RM RM Tax recoverable 154 528,876

B The following item is added into segment liabilities to arrive at total liabilities reported in the consolidated statement of financial position:

2014 2013 RM RM Tax payables 723,463 69,164 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 89

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

30. SUBSIDIARIES

The Group’s equity interest in each of the subsidiaries, country of incorporation and their respective principal activities are as follows:-

Effective Country of Group Equity Name of the Company Incorporation 2014 2013 Principal Activities % % Direct Subsidiaries

Bandar Subang Sdn. Bhd. Malaysia 100 100 Property development and investment holding

Kanchil Jaya Sdn. Bhd. Malaysia 100 100 Property development and investment holding

Farlim Jaya Sdn. Bhd. Malaysia 100 100 Property development

Farlim Marketing Sdn. Bhd. Malaysia 51 51 Trading in building materials

Farlim Maju Sdn. Bhd. Malaysia 70 70 Dormant

Baka Suci Sdn. Bhd. Malaysia 80 80 Dormant

Victory Ace Sdn. Bhd. Malaysia 82 82 Not commenced business operation

Ria Bahagia Sdn. Bhd. Malaysia 100 100 Not commenced business operation

Indirect Subsidiaries

Kertih-Paka Country & Golf Resorts Sdn. Bhd.* Malaysia 100 100 Not commenced business operation

Angkatan Wawasan Sdn. Bhd.* Malaysia 100 100 Investment holding

Saga Realty & Development Sdn. Bhd.* Malaysia 100 100 Property development

LJ Harta Sdn. Bhd.** Malaysia 80 80 Property development

Kaplands Sdn. Bhd.** Malaysia 100 100 Not commenced business operation

* Held indirectly through Bandar Subang Sdn. Bhd. ** Held indirectly through Kanchil Jaya Sdn. Bhd.

The Group’s subsidiary companies which have non-controlling interest are not material individually or in aggregate to the financial position, financial performance and cash flows of the Group. 90 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

31. FAIR VALUE OF FINANCIAL INSTRUMENTS

(a) Fair value of Financial Instruments

The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value:

Note Trade and other receivables (current) 12 Trade and other payables (current) 19 Loans and borrowings 17

The carrying amounts of trade and other receivables and trade and other payables are reasonable approximation of fair values due to their short-term nature.

The carrying amounts of the current portion of loans and borrowings are reasonable approximations of fair values due to the insignificant impact of discounting.

(b) Classification of Financial Instruments

The table below provides an analysis of financial instruments categorised as follows:

(a) Loans and receivables (“L&R”); (b) Available-for-sale financial asset (“AFS”); and (c) Financial liabilities measured at amortised cost (“FL”)

Carrying Amount L&R FL AFS 2014 RM RM RM Financial assets Group Other investments 30,612,826 – – 30,612,826 Trade and other receivables 9,920,383 9,920,383 – – Cash and cash equivalents 96,815,624 96,815,624 – – 137,348,833 106,736,007 – 30,612,826

Company Other investments 30,580,813 – – 30,580,813 Trade and other receivables 11,498,871 11,498,871 – – Cash and cash equivalents 91,465,130 91,465,130 – – 133,544,814 102,964,001 – 30,580,813

Carrying Amount L&R FL AFS 2014 RM RM RM Financial liabilities Group Loan and borrowings 531,899 – 531,899 – Trade and other payables 8,952,669 – 8,952,669 – 9,484,568 – 9,484,568 –

Company Loan and borrowings 52,090 – 52,090 – Trade and other payables 4,234,473 – 4,234,473 – 4,286,563 – 4,286,563 – FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 91

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

31. FAIR VALUE OF FINANCIAL INSTRUMENTS (Cont’d)

(b) Classification of Financial Instruments (cont’d)

Carrying Amount L&R FL AFS 2013 RM RM RM Financial assets Group Other investments 115,881 – – 115,881 Trade and other receivables 10,323,000 10,323,000 – – Cash and cash equivalents 29,476,497 29,476,497 – – 39,915,378 39,799,497 – 115,881

Company Other investments 87,344 – – 87,344 Trade and other receivables 7,087,627 7,087,627 – – Cash and cash equivalents 20,175,801 20,175,801 – – 27,350,772 27,263,428 – 87,344

Financial liabilities Group Loan and borrowings 219,151 – 219,151 – Trade and other payables 24,538,428 – 24,538,428 – 24,757,579 – 24,757,579 –

Company Loan and borrowings 152,238 – 152,238 – Trade and other payables 12,426,713 – 12,426,713 – 12,578,951 – 12,578,951 –

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 fair value measurements are those derived from inputs for the asset or liability that are not based on observable market data (unobservable inputs).

As at 31st December 2014, the Group held the following financial instruments carried at fair value on the statement of financial position:

Assets measured at fair value

Total Level 1 Level 2 Level 3 RM RM RM RM

Available-for-sale financial assets - Quoted shares 32,013 32,013 – –

During the financial year ended 31st December 2014, there were no transfers between Level 1 and Level 2 fair value measurements. 92 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The operations of the Group and of the Company are subject to a variety of financial risks, including credit risk, liquidity risk, interest rate risk and foreign currency risk. The Group and the Company have formulated a financial risk management framework whose principal objective is to minimise the Group’s and the Company’s exposure to risks and/or costs associated with the financing, investing and operating activities of the Group and of the Company.

(i) Credit Risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including other investments, fixed deposits and cash and cash equivalents), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

The Group and the Company do not hold any collateral as security and other credit enhancements for the above financial assets.

The management has a credit policy in place to monitor and minimise the exposure of default. The Group trades only with recognised and credit worthy third parties. Trade receivables are monitored on an ongoing basis.

At the reporting date, there were no significant concentrations of credit risk in the Group. The maximum exposure to credit risk for the Group is represented by the carrying amount of each financial instrument.

Financial assets that are neither past due nor impaired

Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 12 to the financial statements. Fixed deposits with banks that are neither past due nor impaired are placed with reputable financial institutions with no history of default.

Financial assets that are past due or impaired

Information regarding financial assets that are past due or impaired is disclosed in Note 12 to the financial statements.

(ii) Liquidity Risk

Liquidity risk is the risk that the Group or the Company will not be able to meet its financial obligations as they fall due. The Group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 93

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont’d)

(ii) Liquidity Risk (cont’d)

Maturity analysis

The table below summarises the maturity profile of the Group’s and the Company’s liabilities at the reporting date based on contractual undiscounted repayment obligations.

On demand Carrying Contractual or within One to Over five amount cash flow one year five years years 2014 RM RM RM RM RM Group Financial liabilities Trade and other payables 9,687,990 9,687,990 9,687,990 – – Loans and borrowings 531,899 531,899 145,372 386,527 – Total undiscounted financial liabilities 10,219,889 10,219,889 9,833,362 386,527 –

Company Financial liabilities Trade and other payables 4,234,473 4,234,473 4,234,473 – – Loans and borrowings 52,090 52,090 52,090 – – Total undiscounted financial liabilities 4,286,563 4,286,563 4,286,563 – –

2013 Group Financial liabilities Trade and other payables 24,538,428 24,538,428 24,538,428 – – Loans and borrowings 219,151 227,580 172,801 54,779 – Total undiscounted financial liabilities 24,757,579 24,766,008 24,711,229 54,779 –

Company Financial liabilities Trade and other payables 12,426,713 12,426,713 12,426,713 – – Loans and borrowings 152,238 158,686 105,804 52,882 – Total undiscounted financial liabilities 12,578,951 12,585,399 12,532,517 52,882 –

(iii) Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates.

The Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and borrowings.

The Group and the Company manage the net exposure to interest rate risks by maintaining sufficient lines of credit to obtain acceptable lending costs and by monitoring the exposure to such risks on an ongoing basis. Management does not enter into interest rate hedging transactions since it considers that the cost of such instruments outweigh the potential risk of interest rate fluctuation.

The information on maturity dates and effective interest rate of financial assets and liabilities are disclosed in their respective notes. 94 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

33. CAPITAL MANAGEMENT

The primary objective of the Group’s capital management is to ensure that it maintains a strong capital base and safeguard the Group’s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. The directors monitor and determine to maintain an optimal debt- to-equity ratio that complies with debt covenants and regulatory requirements.

The debt-to-equity ratios at 31st December 2014 and 31st December 2013 were as follows:-

Group 2014 2013 RM RM

Total liabilities 20,667,330 30,412,499 Equity attributable to owners of Company 151,457,514 104,358,948 Debt-to-equity ratio 0.14 0.29

There were no changes in the Group’s approach to capital management during the financial year.

34. SIGNIFICANT AND SUBSEQUENT EVENTS

(i) As disclosed in Note 14 to the financial statements, on 23th September 2013, the Company had entered into a conditional Sale and Purchase Agreement (“SPA”) to dispose of the following plots of lands to 1MDB RE (Ayer Itam) Sdn Bhd (formerly known as Aluminium Development Company Sdn Bhd) (“1MDB RE”) for a total cash consideration of RM112,501,726/- :-

(ii) On 1 August 2014, the Company had made an announcement that it had entered into a Sale and Purchase Agreement (“SPA”) with High Productivity Sdn Bhd (“the Vendor”) , Tan Lian Tan and Eng Ong Thuan for the acquisition of all that piece of land situated in Pajakan Negeri No. Hakmilik 301325, Lot No. 10632, Mukim Bidor, Daerah Batang Padang, Negeri Perak and measuring a total land area of 37.53 hectares (approximately 92.74 acres) for a purchase consideration of RM19,000,000/- upon the terms and conditions as contained in the SPA.

Pursuant to the SPA, the Company has paid a cash sum of RM1,900,000/- as deposit, which is equivalent to ten percent (10%) of the purchase consideration to the Vendor’s solicitor.

On 29 October 2014, all parties had agreed to the extension of time of three (3) months up to 31 January 2015 to enable the Vendor to fulfill the conditions precedent as stipulated in the SPA.

On 14 January 2015, the Company had made an announcement that the acquisition has been completed upon payment of the first balance price of RM7.1 million to the Vendor’s Solicitors pursuant to Clause 5.2 of the SPA. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 95

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

35. MATERIAL LITIGATIONS

(a) On 20th July 1998, Sygal Berhad (“Sygal”) (formerly known as Cygal Berhad) commenced the arbitration proceedings against Bandar Subang Sdn. Bhd. (“BSSB”), a wholly-owned subsidiary of the Company, for damages amounting to RM18,653,463/- with interest, in respect of an alleged breach by BSSB of a building contract dated 8th April 1998 for the construction of condominiums and clubhouse at Lot 14252 (PT9262), Mukim Damansara, Daerah Petaling, Selangor Darul Ehsan, and a declaration that the demand by BSSB of the guarantee bonds given in relation to the Building Contracts is wrongful. BSSB had counterclaimed against Sygal for RM12,900,267/- with interest and such other cost and expenses, for the alleged wrongful termination of the Building Contracts by Sygal. The hearing of the arbitration had commenced on 16th May 2003. As at 31st December 2012, BSSB has closed the case in the arbitration proceedings.

On 8th April 2013, BSSB had received a Consent Award from the arbitrator dated on 25th March 2013, wherein BSSB shall pay to Sygal a total sum of RM9,000,000/- as the full and final settlement of the claim by Sygal amounting to RM18,653,463/- with interest, in respect of the alleged breach by BSSB. BSSB has on 31st January 2013 made the first payment of RM3,000,000/- to Sygal and Farlim Group (Malaysia) Bhd. has given a corporate guarantee to Sygal for the guaranteed principal sum of RM6,000,000/-. On 16th January 2014, BSSB has made the second payment of RM3,500,000/- to Sygal.

On 30th June 2014, BSSB had made an early settlement of RM2.413 million as full and final settlement of the final settlement sum RM2.5 million to Sygal due on 25 January 2015. All sums due to Sygal had been fully satisfied and the corporate guarantee of RM6.0 million had also been returned by Sygal on 5 September 2014.

(b) On 11th March 2005, the Kuala Lumpur High Court ruled in favour of the Company in respect of the Company’s petition for winding-up of Esphere Enterprises Sdn. Bhd. (“EESB”).

EESB is indebted to the Company for the sum of RM6,864,684/- in respect of refundable deposit and interest charged pursuant to the terms of a Letter of Intent dated 3rd May 2000, for the purchase of the entire 100% equity interest in Mahawira Sdn. Bhd. which was subsequently aborted.

Farlim Group (Malaysia) Bhd. had, before the alleged wrongful transfer of the Mahawira Shares took place, paid RM5 million to EESB as deposit from the intended purchase of the Mahawira Shares from EESB, pursuant to the Letter of Intent dated 3rd May 2000.

EESB (In-Liquidation) through its liquidators as Plaintiff had filed another legal action in High Court against Teh Li Li and two other parties (“Defendants”) for alleged wrongful and fraudulent transfer of EESB’s 10,499,967 shares in Mahawira Sdn. Bhd. (“the Mahawira Shares”) to the Defendants. EESB therefore seeks the return of the Mahawira Shares wrongfully transferred to the Defendants.

On 23rd February 2011, the Kuala Lumpur High Court had dismissed the Plaintiff’s claim against the Defendants after completion of full trial. The Plaintiff has filed on 17th March 2011 an appeal to the Court of Appeal and the Court of Appeal Registrar has fixed the hearing date of the appeal on 9th May 2012. On the hearing date, the Appeal Court Judges heard the submission and dismissed the appeal on the decision of the High Court.

The Liquidators then proceeded with the appeal to the Federal Court on the decision of the Court of Appeal. The Liquidators’ solicitors had on 8th June 2012 filed the documents for leave application at the Putrajaya Federal Court Registry. The Federal Court has subsequent to the case management date on 28th August 2012, fixed the hearing of the leave application on 5th December 2012. On the hearing date, the Federal Court dismissed the application for leave to appeal to the Federal Court. The Liquidators solicitors had on 2nd January 2013 filed an application for review at the Federal Court. The Federal Court has yet to give us the date for the hearing of the review application. 96 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

35. MATERIAL LITIGATIONS (Cont’d)

(c) A former employee (“Plaintiff”) of the Company had brought an action in the High Court, arising out of the purported termination of his services by the Company. The Plaintiff was alleging that the purported termination had defamed him, in particular in the construction industry and he was unable to secure a job in the said industry thereafter.

The Plaintiff was claiming for general damages totalling RM200,000/-, loss of earnings totalling RM336,128/-, loss of bonus totalling RM100,000/-, loss due to deduction of salary, loss of opportunity and promotion prospects, damages for defamation, legal cost and interest at the rate of 8% per annum from the date of the filing of Writ to the date of realisation.

The matter had been heard by the High Court at Shah Alam scheduled on 17th to 19th January 2011 and judgement was delivered by the Court on 31st January 2011. The Court dismissed the Plaintiff’s claims and had ordered that an agreed cost of RM30,000/- be paid by the Plaintiff to the Company. The Company’s solicitors had sent reminder letters on 3rd May 2011 and 13th May 2011 to the Plaintiff’s solicitors demanding the cost of RM30,000/- to be deposited in Court.

On 22th August 2011, the Plaintiff had filed an application for stay. On 7th August 2012, the Court has dismissed the Plaintiff’s Application For Stay and further ordered that a costs of RM1,500/- to be paid to the Defendant within 21 days from the date thereof. On 11th September 2012, the Plaintiff had paid the costs of RM1,500/- to the Company. On 26th March 2013, the Court of Appeal has dismissed the Plaintiff’s Appeal against the High Court’s decision and has further awarded the costs of RM5,000/- to be paid to the Company.

On 15th August 2013, the Plaintiff’s application for Leave to Appeal was heard by the Federal Court and the Court has dismissed the Applicant’s said application with the cost of RM5,000/- to be paid to the Company.

The recovery of the taxed cost is rather slim and the Company has decided not to pursue the case further in order not to incur additional legal costs. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 97 SUPPLEMENTARY INFORMATION ON THE DISCLOSURE OF REALISED AND UNREALISED LOSSES On 25th March 2010, Bursa Malaysia Securities Berhad (“Bursa Malaysia”) issued a directive to all listed issuers pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements. The directive requires all listed issuers to disclose the breakdown of the retained profits or accumulated losses as at the end of the reporting period, into realised and unrealised profits or losses.

On 20th December 2010, Bursa Malaysia further issued guidance on the disclosure and the format required.

Pursuant to the directive, the amounts of realised and unrealised profits or losses included in the retained profits of the Group and the Company as at 31st December 2014 are as follows:-

Group Company 2014 2013 2014 2013 RM RM RM RM

The accumulated profit/(losses) of the Company and its subsidiaries:- - realised (5,990,630) (40,519,882) (7,437,945) (45,543,662) - unrealised 493,469 – 493,469 – (5,497,161) (40,519,882) (6,944,476) (45,543,662) Consolidated adjustments (12,095,149) (24,169,221) – – Total accumulated losses (17,592,310) (64,689,103) (6,944,476) (45,543,662)

The determination of realised and unrealised profits is based on Guidance of Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20th December 2010.

The disclosure of realised and unrealised profits above is solely for complying with the disclosure requirements stipulated in the directive of Bursa Malaysia and should not be applied for any other purposes. 98 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 STATEMENT BY DIRECTORS

We, TAN SRI DATO’ SERI LIM GAIT TONG and DATUK SERI HAJI MOHAMED IQBAL BIN KUPPA PITCHAI RAWTHER, being two of the directors of Farlim Group (Malaysia) Bhd., do hereby state that in the opinion of the directors, the financial statements set out on pages 42 to 96 are properly drawn up so as to give a true and fair view of the financial position of the state of affairs of the Group and of the Company as at 31st December 2014 and of the results and cash flows of the Group and of the Company for the financial year ended on that date in accordance with the Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

The supplementary information set out in Page 97 have been compiled in accordance with the Guidance of Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants.

On behalf of the Board,

TAN SRI DATO’ SERI LIM GAIT TONG Director

DATUK SERI HAJI MOHAMED IQBAL BIN KUPPA PITCHAI RAWTHER Director

Kuala Lumpur

Date: 23rd April 2015 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 99 STATUTORY DECLARATION

I, TAN SRI DATO’ SERI LIM GAIT TONG, being the director primarily responsible for the financial management of Farlim Group (Malaysia) Bhd., do solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on pages 42 to 96 and the supplementary information set out on page 97 are 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, l960.

TAN SRI DATO’ SERI LIM GAIT TONG

Subscribed and solemnly declared by the abovenamed at Kuala Lumpur in the Federal Territory on 23rd April 2015.

Before me,

W661 Tan Kim Chooi Commissioner for Oaths 100 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FARLIM GROUP (MALAYSIA) BHD. (Incorporated in Malaysia)

Report on the Financial Statements

We have audited the financial statements of Farlim Group (Malaysia) Bhd., which comprise the statements of financial position as at 31st December 2014 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 42 to 96.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with the Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal controls as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the Company’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at 31st December 2014 and of their financial performance and cash flows for the financial year then ended in accordance with the Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:-

(a) In our opinion, the accounting and other records and the registers required by the Companies Act, 1965 in Malaysia to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Companies Act, 1965 in Malaysia.

(b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in a form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(c) The auditors’ reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comments made under Section 174 (3) of the Companies Act, 1965 in Malaysia. FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 101 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FARLIM GROUP (MALAYSIA) BHD. (Cont’d) (Incorporated in Malaysia)

Other Reporting Responsibilities

The supplementary information set out in page 97 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the contents of this report.

Baker Tilly Monteiro Heng Lock Peng Kuan No. AF 0117 No. 2819/10/16 (J) Chartered Accountants Chartered Accountant

Kuala Lumpur

Date: 23rd April 2015 102 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 STATISTICS OF SHAREHOLDINGS as at 24 April 2015

Share Capital

Authorised : RM500,000,000.00 Issued and Fully Paid-up : RM140,326,100.00

1. SUBSTANTIAL SHAREHOLDERS

Direct Indirect Name of Shareholder No. of Shares % No. of Shares % Farlim Holding Sdn. Bhd. 60,571,234 43.16 – –

2. DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings, the interest of Directors in shares in the Company, holding company and subsidiary companies are as follows : -

Ordinary Shares The Company Number % Farlim Group (Malaysia) Bhd. Tan Sri Dato’ Seri Lim Gait Tong 10,000 0.01 Datuk Seri Haji Mohamed Iqbal Bin Kuppa Pitchai Rawther 10,000 0.01

The Holding Company Farlim Holding Sdn. Bhd. Tan Sri Dato’ Seri Lim Gait Tong 45,773 68.83 Lim Chu Dick 2,303 3.46

The Subsidiary Companies Baka Suci Sdn. Bhd. Tan Sri Dato’ Seri Lim Gait Tong 10,002 20.002

Victory Ace Sdn. Bhd. Tan Sri Dato’ Seri Lim Gait Tong 2 0.02

Farlim Marketing Sdn. Bhd. Lim Chu Dick 76,250 15.25

Tan Sri Dato’ Seri Lim Gait Tong is, by virtue of his interest in a corporate shareholder, deemed interested in 15,355 (23.09%) shares in the holding company, Farlim Holding Sdn. Bhd.

By virtue of his interests in shares in the holding company as substantial shareholder, Tan Sri Dato’ Seri Lim Gait Tong is also deemed interested in shares in the Company to the extent the holding company has an interest.

Other than as disclosed above, none of the Directors in office had any interest in shares in the Company and its related corporations.

3. NUMBER AND CLASS OF SHAREHOLDERS

Class of Shares No. of Shareholders Voting Rights Ordinary Shares of RM1.00 each 5,429 One vote for each Ordinary Share FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 103

STATISTICS OF SHAREHOLDINGS (Cont’d) as at 24 April 2015

4. DISTRIBUTION SCHEDULE OF ORDINARY SHARES

Size of Holdings Shareholders Holdings Number % Number % Less than 100 7 0.13 98 0.00 100 to 1,000 1,871 34.46 1,831,480 1.31 1,001 to 10,000 2,784 51.28 12,330,817 8.79 10,001 to 100,000 687 12.65 21,609,753 15.41 100,001 to 7,016,304 79 1.46 43,962,718 31.33 7,016,305 and above 1 0.02 60,571,234 43.16

5. THIRTY LARGEST ACCOUNT HOLDERS OF ORDINARY SHARES No. Names of Shareholders Shareholdings Number % 1. Farlim Holding Sdn Bhd 60,571,234 43.16

2. RHB Nominees (Asing) Sdn. Bhd. 6,760,282 4.82 Exempt AN (BP) for RHB OSK Securities Hong Kong Limited A/C Clients (Retail)

3. Lim Su Tong @ Lim Chee Tong 4,000,000 2.85

4. Cantum Apex Sdn. Bhd. 3,655,100 2.60

5. AllianceGroup Nominees (Tempatan) Sdn. Bhd. 2,199,000 1.57 Pledged Securities Account for Ooi Phaik Sim (8124136)

6. AllianceGroup Nominees (Tempatan) Sdn. Bhd. 2,025,100 1.44 Pledged Securities Account for Abdul Fareed Bin Abdul Gafoor (6000136)

7. JF Apex Nominees (Tempatan) Sdn. Bhd. 1,715,500 1.22 Pledged Securities Account for Witpro Sdn. Bhd. (STA 2)

8. AllianceGroup Nominees (Tempatan) Sdn. Bhd. 1,645,700 1.17 Pledged Securities Account for Ooi Phaik Sim

9. Teh Eng Hin 1,406,803 1.00

10. Reson Sdn. Bhd. 1,098,000 0.78

11. PM Nominees (Asing) Sdn. Bhd. 1,000,000 0.71 VMS Securities Limited for Prime Treasure Limited

12. Su Ming Yaw 1,000,000 0.71

13. Radiance Perfect Intl. Sdn. Bhd. 820,000 0.58

14. Doitbest Holdings Sdn. Bhd. 700,200 0.50

15. HLB Nominees (Tempatan) Sdn. Bhd. 690,000 0.49 Pledged Securities Account for Choo Lai Ee

16. AllianceGroup Nominees (Tempatan) Sdn. Bhd. 635,000 0.45 Pledged Securities Account for Lim Bee Kim (8122324)

17. Lee Hong Choon & Sons Sdn. Bhd. 580,100 0.41 104 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

STATISTICS OF SHAREHOLDINGS (Cont’d) as at 24 April 2015

18. CIMSEC Nominees (Tempatan) Sdn. Bhd. 533,433 0.38 Danaharta Managers Sdn. Bhd.

19. RHB Capital Nominees (Asing) Sdn. Bhd. 510,000 0.36 Pledged Securities Account for Lim Hun Swee (CEB)

20. Maybank Nominees (Tempatan) Sdn. Bhd. 505,800 0.36 Ratana Kupsrimongkol

21. CIMSEC Nominees (Tempatan) Sdn. Bhd. 504,000 0.36 CIMB Bank for Mak Ngia Ngia @ Mak Yoke Lum (MM0749)

22. Quek Ser Hwa 500,000 0.36

23. M & A Nominee (Tempatan) Sdn. Bhd. 486,000 0.35 Pledged Securities Account for Wong Chian Yong (JB)

24. HSBC Nominees (Asing) Sdn. Bhd. 455,000 0.32 Exempt AN for Credit Suisse (SG BR-TST-Asing)

25. Joyce Yu Keng Hee 440,600 0.31

26. Yeoh Min Chee 425,500 0.30

27. Public Invest Nominees (Tempatan) Sdn. Bhd. 400,000 0.29 Pledged Securities Account for Vicfam Holding Sdn. Bhd.

28. RPG Beauty Sdn. Bhd. 328,000 0.23

29. Khor Gaik Lian 327,000 0.23

30. CitiGroup Nominees (Tempatan) Sdn. Bhd. 317,000 0.23 Pledged Securities Account for Ta Kin Yan (472435) FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 105 LIST OF PROPERTIES AS AT 31 DECEMBER 2014

Date Of Acquisition/ Net Book Description Last Expiry Value As At of Property & Revaluation Date Land Area 31-12-14 Location Tenure Existing Use (Year) (Year) (Acres/Sf) (RM)

Penang Lot 7706-7710, Leasehold Vacant Land 1998 2082 1.80 acres 3,601,570 7732-7735, 10079-10083 (Ongoing (Last Mukim 13, North East Development Revaluation) District, Penang at Area 7) (14 Lots)

No 1 & 3 Lintang Angsana, Leasehold 3/S Shophouse 1991 2082 9,183 sf 551,388 Bandar Baru Ayer Itam, (Office Penang Building) Age of building: 24 years

Level 4 of commercial Leasehold Hawker Center 2009 2082 20,665 sf 1,796,456 complex known as Komplek (Komplek Farlim at Lot 7745 held Farlim) under Grant No: 58916, Age of building: Mukim 13, North East 12 years District, Penang

No 5 Lintang Angsana, Leasehold 3/S Shophouse 2012 2082 1,549 sf 843,333 Bandar Baru Ayer Itam, (Office Penang Building) Age of building: 24 years

Prai No 22 Jalan Perai Utama 1, Freehold 3/S Shophouse 2000 – 3,689 sf 269,812 Taman Perai Utama, Age of building: 13600 Perai, Penang 15 years

Selangor Leasehold 3/S Shopoffice 1993 2093 15,864 sf 388,298 No 2, 4, & 6 Jalan PJS (Office 10/32, Bandar Sri Subang Building) Petaling Jaya, Selangor Age of building: 22 years

No 8, Jalan PJS 10/32, Leasehold 3/S Shopoffice 1995 2093 4,950 sf 206,588 Bandar Sri Subang, (Office Petaling Jaya, Selangor Building) Age of building: 22 years

Mukim Kajang, Freehold (Ongoing 2006 – 6.36 acres 2,658,599 Daerah Ulu Langat, & Future Selangor Darul Ehsan Development) 106 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014

LIST OF PROPERTIES (cont’d) AS AT 31 DECEMBER 2014

Date Of Acquisition/ Net Book Description Last Expiry Value As At of Property & Revaluation Date Land Area 31-12-14 Location Tenure Existing Use (Year) (Year) (Acres/Sf) (RM)

Trengganu Mukim of Kertih Freehold Vacant Land 1994 – 208 acres 1,604,301 Kemaman,Trengganu (Future development)

Melaka GM452-3,625 & 524 Freehold Vacant Land 1997 – 0.70 acres 325,530 Lot 4030-1, 4203 & 4102, (Future Mukim Kelamak, Alor Gajah, development) Melaka

218.14 acres 12,245,875 FARLIM GROUP (MALAYSIA) BHD (82275-A) • Annual Report 2014 107 LOCATION MAP AS AT 31 DECEMBER 2014

SSouthouth ChinaChinaSe Sea a

StStraitsraits of of MalacMalaccaca

Kajang This page is intentionally left blank FARLIM GROUP (MALAYSIA) BHD (82275-A) (Incorporated in Malaysia)

FORM OF PROXY

I/We,______of ______(Block Letters) (Full Address) ______being a member/members of FARLIM GROUP (MALAYSIA) BHD. hereby appoint ______of ______or failing him, the Chairman of the Meeting as my/our proxy to attend and vote for me/us on my/our behalf at the Thirty-Third Annual General Meeting of the Company to be held at Holiday Villa, Ivory 10, No. 9, Jalan SS12/1, Subang Jaya, 47500 Petaling Jaya, Selangor Darul Ehsan on Thursday, 25 June 2015 at 10.00 a.m. or any adjournment thereof in the manner indicated below:

No. Resolutions For Against 1. Adoption of Financial Statements and Reports (Resolution 1) 2. Approval of declaration of a first & final single tier dividend (Resolution 2) 3. Approval of Directors’ Fees (Resolution 3) 4. Re-election of Directors:- 4.1 pursuant to Article 104:- (Resolution 4) Mr. Yong Yew Wei 4.2 pursuant to Article 87:- (Resolution 5) Miss Adlina Hasni Binti Zainol Abidin 5. Re-appointment of Directors pursuant to Section 129(6) of the Companies Act, 1965:- 5.1 Tan Sri Dato’ Seri Lim Gait Tong (Resolution 6) 5.2 Datuk Seri Haji Mohamed Iqbal Bin Kuppa Pitchai Rawther (Resolution 7) 6. Re-appointment of Auditors Baker Tilly Monteiro Heng (Resolution 8) 7. Approval for Directors to allot and issue shares pursuant to Section 132D of the (Resolution 9) Companies Act, 1965

Please indicate with an “X” in the appropriate box against the resolution how you wish your proxy to vote. If no instruction is given, this form will be taken to authorise the proxy to vote at his/her discretion.

Number of Shares

Date Signature

Notes

A proxy appointed to attend and vote at this Meeting shall have the same rights as the member to speak at the Meeting.

If the member is a corporation, the proxy form must be executed either under its common seal or under the hand of an officer or attorney duly authorised in writing.

For the purposes of determining whether a depositor shall be regarded as a member entitled to attend, speak and vote at this Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn. Bhd. to issue pursuant to Paragraph 7.16(2) of the Listing Requirements of Bursa Malaysia Securities Berhad a Record of Depositors as at 12 June, 2015 and a depositor shall not be regarded as a member entitled to attend this Meeting and to speak and vote thereat unless his/her name appears in the said Record of Depositors. Please fold across the lines and close

stamp

The Company Secretary FARLIM GROUP (MALAYSIA) BHD (82275-A) No. 2-8, Bangunan Farlim Jalan PJS 10/32 Taman Sri Subang 46150 Petaling Jaya Selangor Darul Ehsan Malaysia

Please fold across the lines and close