group operations (cont’d) - malaysiastock.biz 2013. 4. 12. · 44 • kkb engineering berhad lpg...

44 • KKB Engineering Berhad Hot-Dip Glavanising Steel Pipes ManufacturingLPG Cylinders Manufacturing

GROUP OPERATIONS (CONT’D)

Supply, Fabrication, Delivery and Erection of Structural Steel Works for Corridor Roof Structure for the Proposed University College of Technology Sarawak & Technology Park at Sungai Merah Land Distrcit, Sibu

Proposed Integrated Ferro-Alloy Complex Project in Samalaju Industrial Park, Bintulu, Sarawak (Steel Structure Works – Zone 1, 2, 3 & 4)

Loading activity of 60M long steel pipe pile from own factory on to private jetty at Lot 777, MTLD

44 • KKB Engineering Berhad

Annual Report 2012 • 45

Cheque presentation for Yayasan Haji Suadi & Hajijah Halimah on 17 April 2012

A courtesy visit to Petronas From left to right: Dato Kho Kak Beng, Tan Sri Dato’ Shamsul Azhar Abbas and Dato’

Anwarrudin

Dato Kho Kak Beng appointed as patron for MRCS 2012

SOCIAL ACTIVITIES & EVENTS

PERKATA Charity Sales on 29 April 2012

Malaysian Red Cresent Society Charity Joggathon on 28 October 2012

Staff Christmas Gifts Exchange on 20 December 2012


SOCIAL ACTIVITIES & EVENTS (CONT’D)

CMS Friendly Games 2012

Blood Donation Campaign on 25 April 2012

CMS Health Run on 10 November 2012

Blood Donation Campaign on 27 November 2012

CMS Bowling Tournament on 24 November 2012


SOCIAL ACTIVITIES & EVENTS (CONT’D)

KKB’s 50th Anniversary Celebration (Long Service Award) at BCCK on 18 July 2012

KKB’s 50th Anniversary Staff Appreciation Dinner at Crown Square on 14 July 2012


KKB GROUP IN THE NEWS

Gross Dividend per Share (sen) *

Dividend Yield(%) *

Return On Equity(%)

Return on Assets(%)

5.00

15.0

0

17.5

0

10.0

0

5.00

2008

2009

2010

2011

2012

2.80

5.00

9.20

5.90

3.50

2008

2009

2010

2011

2012

7.50

20.4

0

32.7

0

18.8

0

7.90

2008

2009

2010

2011

2012

5.70

16.6

0

27.2

0

15.1

0

6.80

2008

2009

2010

2011

2012

76,8

96,5

61

Revenue (RM)

121,

406,

839 17

6,51

6,37

9

268,

637,

323

166,

709,

124

234,

484,

062

2008

2009

2010

2011

2012

Profit BeforeInterest, Tax, Depreciation

and Amortisation (RM)

21,5

83,9

57

57,3

38,8

70

109,

925,

806

67,7

69,9

67

32,1

23,1

20

2008

2009

2010

2011

2012

Profit Before Taxation(RM)

16,1

01,6

61

51,8

23,5

60

104,

354,

409

62,4

00,1

33

26,9

16,6

36

2008

2009

2010

2011

2012

Profit Attributable to Ownersof the Parent (RM)

10,8

89,0

58

36,4

34,1

94 46,6

07,2

21

20,4

93,5

87

2008

2009

2010

2011

2012

Total Assets(RM)

190,

236,

248

218,

858,

157 2

83,2

16,5

86

308,

529,

489

299,

427,

361

2008

2009

2010

2011

2012

Shareholders’ Equity(RM)

145,

076,

963

178,

490,

159

235,

321,

460

248,

092,

566

258,

919,

146

2008

2009

2010

2011

2012

Net Assets per Share(RM)

1.80

2.22

0.91

0.96

1.00

2008

2009

2010

2011

2012

Earnings per Share(sen)

14.5

9

45.2

3

29.8

3

18.0

8

7.95

2008

2009

2010

2011

2012

* Dividend for FYE 2012 is based on assumption that Company will pay a First and Final Dividend of 10% (5 sen or RM0.05 per share), upon obtaining Shareholders’ approval at the forthcoming AGM.

GROUP PERFORMANCEFOR FINANCIAL YEAR ENDED 31 DECEMBER


DIRECTORS’ REPORT AND AUDITED FINANCIAL STATEMENTS For The Financial Year Ended 31 December 2012

KKB ENGINEERING BERHAD

(INCORPORATED IN MALAYSIA)

(26495-D)


The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2012.

Principal activities

The principal activities of the Company consist of steel fabrication, civil construction, hot dip galvanising and the manufacture of LPG cylinders. The principal activities of the subsidiaries are set out in Note 13 of the financial statements.

There have been no significant changes in the nature of the principal activities during the financial year.

Results Group Company RM RM

Profit net of tax 21,869,386 9,522,072 ======== ========

Profit attributable to:

Owners of the parent 20,493,587 9,522,072Non-controlling interests 1,375,799 - –––––––––– ––––––––– 21,869,386 9,522,072 ========= ========

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

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.

Dividends

The amounts of dividends paid by the Company since 31 December 2011 were as follows:

RMIn respect of the financial year ended 31 December 2011 as reported in the directors’ report of that year:

Final dividend of 10.0% less 25% taxation on 257,792,000 ordinary shares of RM0.50 each declared on 20 February 2012 and paid on 5 June 2012 9,667,200 ========

At the forthcoming Annual General Meeting, a first and final dividend in respect of the financial year ended 31 December 2012, of 10.0% less 25% taxation on 257,792,000 ordinary shares of RM0.50 each, amounting to a dividend payable of RM9,667,200 (net 3.75 sen per ordinary share) will be proposed for shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December 2013.

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:

Dato Kho Kak BengAllahyarham Raja Dato’ Seri Ashman Shah Ibni Sultan Azlan Shah (Deceased on 30 March 2012) Dato’ Anwarrudin Bin Ahamad OsmanDr. Arjunan SubramaniamChai Woon ChewLau Nai Pek

DIRECTORS’ REPORT


DIRECTORS’ REPORT (CONT’D)

Directors (cont’d)

Datin Mary Sa’diah Binti Zainuddin (Appointed on 3 September 2012)Kho Pok TongKho Poh LinDatuk Syed Ahmad Alwee Alsree Syed Hizam Bin Syed Mahmood Ezzularab Abdul-Moez Alsagoff

Directors’ benefits

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Note 9 to the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 29 to the financial statements.

Remuneration committee

The remuneration committee recommends to the Board of Directors, the framework of the Executive Directors’ remuneration and the remuneration package for each Executive Director, drawing from outside advice as necessary and to review Executive Directors’ scope of service contracts. Executive Directors shall include Group Managing Director and/or Group Executive Director.

The remuneration committee’s members comprising the following Non-Executive Directors:-

Dato’ Anwarrudin Bin Ahamad Osman Dr. Arjunan SubramaniamDatin Mary Sa’diah Binti Zainuddin

Directors’ interests

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows:

Number of ordinary shares of RM0.50 each As at As at 01.01.2012 Bought Sold 31.12.2012The Company Direct interest Dato Kho Kak Beng 4,742,480 - - 4,742,480Dato’ Anwarrudin Bin Ahamad Osman 20,000 - - 20,000Chai Woon Chew 435,720 - - 435,720Kho Pok Tong 526,600 52,000 - 578,600Kho Poh Lin 419,500 30,000 - 449,500Dr. Arjunan Subramaniam 155,000 - - 155,000 Indirect interest Dato Kho Kak Beng 103,193,700 492,000 - 103,685,700Chai Woon Chew 14,400,000 - - 14,400,000Kho Pok Tong 102,733,720 482,000 - 103,215,720Kho Poh Lin 102,733,720 482,000 - 103,215,720Lau Nai Pek 12,000 - - 12,000


Directors’ interests (cont’d)

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows: (cont’d)

Number of ordinary shares of RM1.00 each Shareholdings registered in the names of directors 01.01.2012 and 31.12.2012Holding company

Kho Kak Beng Holding Company Sdn. Bhd.

Dato Kho Kak Beng 234,091 Kho Pok Tong 36,720Kho Poh Lin 36,720

Dato Kho Kak Beng, Kho Pok Tong and Kho Poh Lin by virtue of their interest in shares of KKB Engineering Berhad are also deemed interested in the shares of the subsidiaries to the extent of the Company’s interest in these companies.

None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year.

Other statutory information

(a) Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the directors are not aware of any circumstances which would render:

(i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and

(ii) the values attributed to current assets in the financial statements of the Group and of the Company misleading.

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

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

(e) As at the date of this report, there does not exist:

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

(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.

(f) In the opinion of the directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet its obligations when they fall due; and



Other statutory information (cont’d)

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.

Holding company

The holding company is Kho Kak Beng Holding Company Sdn. Bhd., a company incorporated and domiciled in Malaysia, with its registered office located at No. 22, 4th Floor, Jalan Tunku Abdul Rahman, 93100 Kuching, Sarawak.

Auditors

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors dated 22 February 2013.

(signed) (signed)

Dato Kho Kak Beng Dr. Arjunan Subramaniam



We, Dato Kho Kak Beng and Dr. Arjunan Subramaniam, being two of the directors of KKB Engineering Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 59 to 113 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2012 and of their financial performance and cash flows for the year then ended.

The information set out in Note 37 to the financial statements have been prepared 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.

Signed on behalf of the Board in accordance with a resolution of the directors dated 22 February 2013.

(signed) (signed)

Dato Kho Kak Beng Dr. Arjunan Subramaniam

I, Diwek ak Dayus, being the officer primarily responsible for the financial management of KKB Engineering Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 59 to 113 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed Diwek ak Dayus (signed)at Kuching in the State of Sarawak on 22 February 2013. Diwek ak Dayus

Before me,

Ling Kuok Hin Commissioner For Oaths

STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965

STATUTORY DECLARATION PURSUANT TOSECTION 169(16) OF THE COMPANIES ACT, 1965


Report on the financial statements

We have audited the financial statements of KKB Engineering Berhad, which comprise statements of financial position as at 31 December 2012 of the Group and of the Company and statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 59 to 113.

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 Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is 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 judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2012 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International 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 Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act.

(b) We have considered the financial statements and the auditors’ report of the subsidiary of which we have not acted as auditors, which is indicated in Note 13 to the financial statements, being financial statements that have been included in the consolidated financial statements.

(c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.

(d) The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF KKB ENGINEERING BERHAD (INCORPORATED IN MALAYSIA)


Other reporting responsibilities

The supplementary information set out in Note 37 on page 113 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Lossess 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

(1) As stated in Note 2.1 to the financial statements, KKB Engineering Berhad adopted Malaysian Financial Reporting Standards on 1 January 2012 with a transition date of 1 January 2011. These standards were applied retrospectively by directors to the comparative information in these financial statements, including the statements of financial position as at 31 December 2011 and 1 January 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended 31 December 2011 and related disclosures. We were not engaged to report on the comparative information and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Group and of the Company for the year ended 31 December 2012 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 January 2012 do not contain misstatements that materially affect the financial position as of 31 December 2012 and financial performance and cash flows for the year then ended.

(2) This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

ERNST & YOUNG YONG CHUNG SINGAF: 0039 1052/09/14 (J)Chartered Accountants Chartered Accountant

Kuching, MalaysiaDate: 22 February 2013

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF KKB ENGINEERING BERHAD (INCORPORATED IN MALAYSIA) (CONT’D)


Group Company Note 2012 2011 2012 2011 RM RM RM RM

Revenue 4 166,709,124 234,484,062 80,197,782 145,379,969

Cost of sales (126,357,017) (158,897,274) (59,600,295) (87,875,791) –––––––––––– –––––––––––– –––––––––––– ––––––––––––Gross profit 40,352,107 75,586,788 20,597,487 57,504,178

Other items of income

Interest income 5 689,860 702,093 1,149,890 1,287,832 Other income 6 3,632,151 4,166,693 3,013,966 7,199,841

Other items of expense

Administrative expenses (14,121,846) (14,318,285) (11,161,680) (11,547,590) Distribution expenses (981,490) (1,511,444) (943,853) (1,313,070) Other expenses (2,415,199) (1,911,014) (1,657,412) (1,439,502) Finance costs 7 (293,660) (447,591) (559,711) (410,411)

Share of results of associates 54,713 132,893 - - –––––––––––– –––––––––––– –––––––––––– ––––––––––––Profit before tax 8 26,916,636 62,400,133 10,438,687 51,281,278

Income tax expense 10 (5,047,250) (15,283,577) (916,615) (11,654,908) –––––––––––– –––––––––––– –––––––––––– ––––––––––––Profit for the year, net of tax 21,869,386 47,116,556 9,522,072 39,626,370 –––––––––––– –––––––––––– –––––––––––– ––––––––––––Other comprehensive income

Foreign currency translation 193 (916) - - –––––––––––– –––––––––––– –––––––––––– ––––––––––––Total comprehensive income for the year 21,869,579 47,115,640 9,522,072 39,626,370 ========== ========== ========== ==========

Profit attributable to:Owners of the parent 20,493,587 46,607,221 9,522,072 39,626,370 Non-controlling interests 1,375,799 509,335 - - –––––––––––– –––––––––––– –––––––––––– –––––––––––– 21,869,386 47,116,556 9,522,072 39,626,370 ========== ========== ========== ==========

Total comprehensive income attributable to:Owners of the parent 20,493,780 46,606,305 9,522,072 39,626,370 Non-controlling interests 1,375,799 509,335 - - –––––––––––– –––––––––––– –––––––––––– –––––––––––– 21,869,579 47,115,640 9,522,072 39,626,370 ========== ========== ========== ==========

Group Note 2012 2011 sen senEarnings per share attributable to owners of the parent

Basic 11 7.95 18.08 ==== ====

STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.


STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2012

G

roup

C

ompa

ny

31

Dec

embe

r

31 D

ecem

ber

1 Ja

nuar

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Dec

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201

2 20

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201

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2011

20

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12

2,66

8,69

0 99

,360

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94

,895

,160

96

,177

,409

73

,379

,563

67

,390

,635

Inve

stm

ent i

n su

bsid

iari

es

13

-

- -

21,8

26,5

38

21,8

26,5

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20,9

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vest

men

t in

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es

14

1,24

6,74

9 1,

212,

037

1,

139,

144

140

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10

0,00

0 10

0,00

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red

tax

asse

ts

23

1,37

1,92

7 -

- 60

0,33

8 -

-

––

––––

––––

– ––

––––

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– ––

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– ––

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– ––

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12

5,28

7,36

6 10

0,57

2,62

7

96,0

34,3

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118,

744,

285

95,3

06,1

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88

,417

,175

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

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–––

Cur

rent

ass

ets

Inve

ntor

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15

47,9

47,2

24

67,7

06,5

52

38,6

74,2

88

26,8

31,4

77

24,2

90,9

21

19

,382

,536

Trad

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her

rece

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16

53

,576

,833

64

,128

,896

44

,971

,301

57

,376

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5

6,04

7,42

8

59,6

23,6

70O

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cur

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ass

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17

3,32

5,22

4 78

8,85

7

27,8

80

2,94

5,00

0 77

7,78

8 -

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stm

ent s

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ities

18

5

3,87

0,51

9 71

,126

,824

87

,908

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32

,485

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52

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,484

62

,746

,246

Cas

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19

15,4

20,1

95

4,20

5,73

3 15

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,236

1,

536,

690

1,26

7,44

1

13

,967

,950

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

174,

139,

995

207,

956,

862

18

7,18

2,28

2 12

1,17

4,34

3 13

4,96

6,06

2 1

55,7

20,4

02

––

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–TO

TAL

ASS

ETS

29

9,42

7,36

1 30

8,52

9,48

9

283,

216,

586

239,

918,

628

230,

272,

165

2

44,1

37,5

77

==

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29

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37

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31

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22

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––––

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––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

Net

cur

rent

ass

ets

144,

709,

747

156,

082,

558

14

9,45

3,08

5 90

,120

,647

11

2,40

6,83

5 11

4,57

2,53

1

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

–


STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2012 (CONT’D)

Gro

up

Com

pany

31 D

ecem

ber

31

Dec

embe

r 1

Janu

ary

31 D

ecem

ber

31 D

ecem

ber

1 Ja

nuar

y

Not

e 2

012

2011

2

011

2012

20

11

2011

RM

R

M

RM

R

M

RM

R

M

Non

-cur

rent

liab

iliti

es

Loan

s an

d bo

rrow

ings

21

2,

205,

204

1,56

4,68

6

2,86

8,06

4 2,

016,

556

1,40

7,63

0

2,25

6,70

4D

efer

red

tax

liabi

litie

s 23

2,

738,

392

2,23

9,36

1

2,64

8,62

8 1,

850,

614

1,16

2,41

8

1,38

1,28

3

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

–

4,

943,

596

3,80

4,04

7

5,51

6,69

2 3,

867,

170

2,57

0,04

8

3,63

7,98

7

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

–To

tal l

iabi

litie

s

34,3

73,8

44

55,6

78,3

51

43,2

45,8

89

34,9

20,8

66

25,1

29,2

75

44,7

85,8

58

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

–N

et a

sset

s

26

5,05

3,51

7 25

2,85

1,13

8

239,

970,

697

204,

997,

762

205,

142,

890

19

9,35

1,71

9

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

–Eq

uity

att

ribu

tabl

e to

ow

ners

of t

he p

aren

t

Shar

e ca

pita

l 24

12

8,89

6,00

0 12

8,89

6,00

0

128,

896,

000

128,

896,

000

128,

896,

000

12

8,89

6,00

0O

ther

res

erve

s 2

5 -

(193

) 72

3 -

-

-R

etai

ned

earn

ings

26

13

0,02

3,14

6 11

9,19

6,75

9

106,

424,

737

76,1

01,7

62

76,2

46,8

90

70,4

55,7

19

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

––––

–

25

8,91

9,14

6 24

8,09

2,56

6

235,

321,

460

204,

997,

762

205,

142,

890

199,

351,

719

Non

-con

trol

ling

inte

rest

s

6,13

4,37

1 4,

758,

572

4,

649,

237

-

- -

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

Tota

l equ

ity

26

5,05

3,51

7 25

2,85

1,13

8

239,

970,

697

204,

997,

762

205,

142,

890

199

,351

,719

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

––––

––––

–––

TOTA

L EQ

UIT

Y A

ND

LIA

BIL

ITIE

S

299,

427,

361

308,

529,

489

28

3,21

6,58

6 23

9,91

8,62

8 23

0,27

2,16

5

244,

137,

577

====

====

==

====

====

==

====

====

==

====

====

==

====

====

==

====

====

==

The

acco

mpa

nyin

g ac

coun

ting

polic

ies

and

expl

anat

ory

note

s fo

rm a

n in

tegr

al p

art o

f the

fina

ncia

l sta

tem

ents

.


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012

Eq

uity

att

ribu

tabl

e to

ow

ners

of t

he p

aren

t N

on-c

ontr

ollin

g To

tal

N

on-d

istr

ibut

able

D

istr

ibut

able

In

tere

sts

Equi

ty

Sh

are

Shar

e O

ther

R

etai

ned

N

ote

Cap

ital

Pr

emiu

m

Res

erve

s Ea

rnin

gs

Tota

l

(N

ote

24)

(Not

e 24

) (N

ote

25)

(Not

e 26

)

R

M

RM

R

M

RM

R

M

RM

R

M

Ope

ning

bal

ance

at

1 Ja

nuar

y 20

12

12

8,89

6,00

0

- (1

93)

119,

196,

759

248,

092,

566

4,75

8,57

2 25

2,85

1,13

8

Profi

t for

the

year

- -

- 20

,493

,587

20

,493

,587

1,

375,

799

21,8

69,3

86O

ther

com

preh

ensi

ve in

com

e

-

- 19

3 -

193

- 19

3

Tota

l com

preh

ensi

ve in

com

e

-

- 19

3 20

,493

,587

20

,493

,780

1,

375,

799

21,8

69,5

79

Tran

sact

ions

wit

h ow

ners

D

ivid

ends

on

ordi

nary

sha

res

30

- -

- (9

,667

,200

) (9

,667

,200

) -

(9,6

67,2

00)

––––

––––

–––

––––

––––

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

–––

––––

––––

–––

Tota

l tra

nsac

tions

with

ow

ners

- -

- (9

,667

,200

) (9

,667

,200

) -

(9,6

67,2

00)

––––

––––

–––

––––

––––

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

–––

––––

––––

–––

Clo

sing

bal

ance

at

31 D

ecem

ber

2012

128,

896,

000

- -

130,

023,

146

258,

919,

146

6,13

4,37

1 26

5,05

3,51

7

=

==

==

==

==

=

==

==

==

=

==

==

==

=

==

==

==

==

=

==

==

==

==

=

==

==

==

=

==

==

==

==

=

Ope

ning

bal

ance

at

1 Ja

nuar

y 20

11

12

8,89

6,00

0

- 6,

985,

832

99,4

39,6

28

235,

321,

460

4,64

9,23

7 23

9,97

0,69

7Ef

fect

of t

rans

ition

to M

FRS

2.2

- -

(6,9

85,1

09)

6,98

5,10

9 -

- -

––––

––––

–––

––––

––––

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

–––

––––

––––

–––

Ope

ning

bal

ance

at

1 Ja

nuar

y 20

11

12

8,89

6,00

0

- 72

3 10

6,42

4,73

7 23

5,32

1,46

0 4,

649,

237

239,

970,

697

Profi

t for

the

year

- -

- 46

,607

,221

46

,607

,221

50

9,33

5 47

,116

,556

Oth

er c

ompr

ehen

sive

inco

me

-

- (9

16)

- (9

16)

- (9

16)

Tota

l com

preh

ensi

ve in

com

e

- -

(916

) 46

,607

,221

46

,606

,305

50

9,33

5 47

,115

,640

Tran

sact

ions

wit

h ow

ners

D

ivid

ends

on

ordi

nary

sha

res

30

- -

- (3

3,83

5,19

9)

(33,

835,

199)

(4

00,0

00)

(34,

235,

199)

––––

––––

–––

––––

––––

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

–––

––––

––––

–––

Tota

l tra

nsac

tions

with

ow

ners

- -

- (3

3,83

5,19

9)

(33,

835,

199)

(4

00,0

00)

(34,

235,

199)

––––

––––

–––

––––

––––

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– ––

––––

–––

––––

––––

–––

Clo

sing

bal

ance

at

31 D

ecem

ber

2011

128,

896,

000

-

(193

) 11

9,19

6,75

9 24

8,09

2,56

6 4,

758,

572

252,

851,

138

==

==

==

==

=

==

==

==

==

=

==

==

==

=

==

==

==

==

=

==

==

==

==

=

==

==

==

=

==

==

==

==

=

The

acco

mpa

nyin

g ac

coun

ting

polic

ies

and

expl

anat

ory

note

s fo

rm a

n in

tegr

al p

art o

f the

fina

ncia

l sta

tem

ents

.


COMPANY STATEMENT OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012

N

on-d

istr

ibut

able

D

istr

ibut

able

Shar

e Sh

are

Oth

er

Ret

aine

d

Not

e C

apit

al

Prem

ium

R

eser

ves

Earn

ings

To

tal

(Not

e 24

) (N

ote

24)

(Not

e 25

) (N

ote

26)

RM

R

M

RM

R

M

RM

Ope

ning

bal

ance

at

1 Ja

nuar

y 20

12

12

8,89

6,00

0

- -

76,2

46,8

90

205,

142,

890

Profi

t for

the

year

- -

- 9,

522,

072

9,52

2,07

2 O

ther

com

preh

ensi

ve in

com

e

-

- -

- -

Tota

l com

preh

ensi

ve in

com

e

- -

- 9,

522,

072

9,52

2,07

2

Tran

sact

ions

wit

h ow

ners

Div

iden

ds o

n or

dina

ry s

hare

s 30

-

- -

(9,6

67,2

00)

(9,6

67,2

00)

––––

––––

–––

––––

––––

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– To

tal t

rans

actio

ns w

ith o

wne

rs

-

- -

(9

,667

,200

) (9

,667

,200

)

––

––––

––––

– ––

––––

––––

––

––––

–––

––––

––––

–––

––––

––––

–––

C

losi

ng b

alan

ce a

t 31

Dec

embe

r 20

12

12

8,89

6,00

0 -

- 7

6,10

1,76

2 20

4,99

7,76

2

=

==

==

==

==

=

==

==

==

=

==

==

==

=

====

====

= =

==

==

==

==

Ope

ning

bal

ance

at

1 Ja

nuar

y 20

11

12

8,89

6,00

0

- 5,

284,

150

65,1

71,5

69

199,

351,

719

Effe

ct o

f tra

nsiti

on to

MFR

S 2.

2 -

- (5

,284

,150

) 5,

284,

150

-

––

––––

––––

– ––

––––

––––

––

––––

–––

––––

––––

–––

––––

––––

–––

Ope

ning

bal

ance

at

1 Ja

nuar

y 20

11

12

8,89

6,00

0

- -

70,4

55,7

19

199,

351,

719

Profi

t for

the

year

- -

- 39

,626

,370

39

,626

,370

Oth

er c

ompr

ehen

sive

inco

me

-

-

- -

-

Tota

l com

preh

ensi

ve in

com

e

- -

- 39

,626

,370

39

,626

,370

Tran

sact

ions

wit

h ow

ners

Div

iden

ds o

n or

dina

ry s

hare

s 30

-

- -

(33,

835,

199)

(3

3,83

5,19

9)

––––

––––

–––

––––

––––

––

––––

––––

– ––

––––

––––

– ––

––––

––––

– To

tal t

rans

actio

ns w

ith o

wne

rs

-

- -

(33,

835,

199)

(3

3,83

5,19

9)

––––

––––

–––

––––

––––

––

––––

––––

– ––

––––

––––

– ––

––––

––––

–

Clo

sing

bal

ance

at

31 D

ecem

ber

2011

128,

896,

000

-

- 76

,246

,890

20

5,14

2,89

0

=

==

==

==

==

=

==

==

==

=

====

====

==

====

===

==

==

==

==

= T

he a

ccom

pany

ing

acco

untin

g po

licie

s an

d ex

plan

ator

y no

tes

form

an

inte

gral

par

t of t

he fi

nanc

ial s

tate

men

ts.


STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012

Group Company Note 2012 2011 2012 2011 RM RM RM RMOperating activities

Profit before tax 26,916,636 62,400,133 10,438,687 51,281,278

Adjustments for: Depreciation of property, plant and equipment 8 4,912,824 4,922,244 2,847,390 3,160,996 Interest expense 7 293,660 447,591 559,711 410,411 Property, plant and equipment written-off 8 1,505 973 1,503 973 Gain on disposal of property, plant and equipment 6 - (52,521) - (52,521) Investment written off 8 - - 2 - Dividend income 6 - - (150,000) (3,680,000) Fair value changes in investment securities 6 (2,034,891) (2,268,426) (1,390,186) (1,735,851) Interest income 5 (689,860) (702,093) (1,149,890) (1,287,832) Impairment loss on trade receivables 8 618,552 188,718 410,559 101,146 Share of results of associates (54,713) (132,893) - - Provision for doubtful debts 8 - 99,553 - 99,553 Reversal of provision for doubtful debts 6 (129,780) - (129,780) - Inventories written off 8 - 1,134 - - Bad debts written off 8 15,083 - 15,083 22,851 –––––––––– –––––––––– –––––––––– ––––––––––Total adjustments 2,932,380 2,504,280 1,014,392 (2,960,274)

Operating cash flows before changes in working capital 29,849,016 64,904,413 11,453,079 48,321,004

Changes in working capital:Decrease/(increase) in inventories 19,759,328 (29,033,398) (2,540,556) (4,908,385)(Decrease)/increase in amount due to customers for contract work (758,490) (2,686,095) 659,873 (4,193,674)Decrease/(increase) in receivables 10,609,214 (19,157,435) (1,238,544) 3,635,669(Decrease)/increase in payables (5,435,550) (2,902,626) 2,451,569 (12,008,633)Decrease in other current assets 1,615 16,851 - - –––––––––– –––––––––– –––––––––– ––––––––––Total changes in working capital 24,176,117 (53,762,703) (667,658) (17,475,023)

Cash flows from operations 54,025,133 11,141,710 10,785,421 30,845,981


STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 (CONT’D)

Group Company Note 2012 2011 2012 2011 RM RM RM RM

Interest paid (293,660) (447,591) (559,711) (410,411)Taxes paid, net of refund (8,287,950) (20,214,001) (2,975,969) (16,845,699) –––––––––– –––––––––– –––––––––– ––––––––––Net cash flows from/(used in) operating activities 45,443,523 (9,519,882) 7,249,741 13,589,871 –––––––––– –––––––––– –––––––––– ––––––––––

Investing activities

Proceeds from disposal of property, plant and equipment - 85,500 - 85,500 Purchase of property, plant and equipment (25,696,367) (9,421,626) (23,620,677) (9,183,876)Investment in an associate company (40,000) - (40,000) -Dividend received from an associate 60,000 60,000 60,000 60,000Dividend received from a subsidiary - - 70,000 3,600,000Net proceeds from investment securities 19,291,196 19,050,179 21,487,522 11,899,613Interest received 128,854 413,662 763,972 1,004,855Acquisition of additional shares in subsidiary company - - - (900,000) –––––––––– –––––––––– –––––––––– ––––––––––Net cash flows (used in)/from investing activities (6,256,317) 10,187,715 (1,279,183) 6,566,092 –––––––––– –––––––––– –––––––––– ––––––––––Financing activities

Dividend paid to shareholders of the Company 30 (9,667,200) (33,835,199) (9,667,200) (33,835,199) Dividend paid to non-controlling interest - (400,000) - -Net (repayment of)/proceeds from bankers’ acceptances (16,672,000) 23,672,000 5,000,000 2,000,000Repayment of lease instalments (1,633,737) (1,498,221) (1,034,109) (1,021,273) –––––––––– –––––––––– –––––––––– ––––––––––Net cash flows used in financing activities (27,972,937) (12,061,420) (5,701,309) (32,856,472) –––––––––– –––––––––– –––––––––– ––––––––––Net increase/(decrease) in cash and cash equivalents 11,214,269 (11,393,587) 269,249 (12,700,509)

Effect of exchange rate changes on cash and cash equivalents 193 (916) - - Cash and cash equivalents at 1 January 4,205,733 15,600,236 1,267,441 13,967,950 –––––––––– –––––––––– –––––––––– ––––––––––Cash and cash equivalents at 31 December 19 15,420,195 4,205,733 1,536,690 1,267,441 –––––––––– –––––––––– –––––––––– ––––––––––

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.


NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2012

1. CORPORATE INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Lot 865, Section 66, Jalan Kilang, Bintawa Industrial Estate, 93450 Kuching, Sarawak.

The holding company is Kho Kak Beng Holding Company Sdn. Bhd., a company incorporated and domiciled in Malaysia with its registered office located at No. 22, 4th Floor, Jalan Tunku Abdul Rahman, 93100 Kuching, Sarawak.

The principal activities of the Company are steel fabrication, civil construction, hot dip galvanising and the manufacture of LPG cylinders. The principal activities of the subsidiaries are engaged in the manufacture and trading of uPVC roofing sheets and pipes, steel pipes and related products, steel fabrication, hot dip galvanising, property holding, contractor for building works, civil engineering, earthworks, water engineering works, mechanical and electrical works, and other contracting services. There have been no significant changes in the nature of the principal activities during the financial year.

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 Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. These are the Group and the Company’s first financial statements prepared in accordance with MFRS and MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards, has been applied. In the previous years, the financial statements of the Group and the Company were prepared in accordance with Financial Reporting Standards (“FRS”).

The financial statements of the Group and of the Company for the year ended 31 December 2011 which were prepared under FRS are available upon request from the Company’s registered office.

In preparing its opening MFRS Statements of Financial Position as at 1 January 2011 (which is also the date of transition), the Group and the Company have adjusted the amounts previously reported in financial statements prepared in accordance with FRS. An explanation of how the transition from FRS to MFRS has affected the Group’s and the Company’s financial position, financial performance and cash flows is set out in Note 2.2 below.

The financial statements of the Group and of the Company have also been prepared on the historical cost basis except as disclosed in the accounting policies below.

The financial statements of the Group and of the Company are presented in Ringgit Malaysia (“RM”). 2.2 Changes in accounting policies

Except for certain differences, the requirements under FRS and MFRS are similar. The significant accounting policies adopted in preparing the financial statements are consistent with those of the audited financial statements for the year ended 31 December 2011 except as discussed below:

(a) Business combinations

MFRS 1 provides the option to apply MFRS 3, Business Combinations, prospectively from 1 January 2011. This provides relief from full retrospective application of MFRS 3 which would require restatement of all business combinations prior to the date of transition.

Acquisitions before date of transition

The Group has elected to apply MFRS 3 prospectively from 1 January 2011. In respect of acquisitions prior to the date of transition,

(i) The classification of former business combinations under FRS is maintained; (ii) There is no re-measurement of original fair values determined at the time of business combination

(date of acquisition); and (iii) The carrying amount of goodwill recognised under FRS is not adjusted.


NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2012 (CONT’D)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

2.2 Changes in accounting policies (cont’d)

(b) Property, plant and equipment

The Group and the Company have previously adopted the transitional provisions available on the first application of the MASB Approved Accounting Standard IAS 16 (Revised) Property, Plant and Equipment which was effective for periods ending on or after 1 September 1998. By virtue of this transitional provision, the Group and the Company had recorded leasehold land and certain buildings at revalued amounts but had not adopted a policy of revaluation and continued to carry those land and buildings on the basis of their previous revaluations subject to continuity in its depreciation policy and requirement to write down the assets to their recoverable amounts for impairment adjustments.

Upon transition to MFRS, the Group and the Company have elected to measure all its property, plant and equipment using the cost model under MFRS 116 Property, Plant and Equipment. At the date of transition to MFRS, the Group and the Company elected to regard the revalued amounts of land and buildings during the year 1999 as deemed cost at the date of the revaluation as these amounts were broadly comparable to fair value at that date. The revaluation surplus for the Group of RM6,985,109 (1 January 2011: RM6,985,109; 31 December 2011: RM6,985,109) and the Company of RM5,284,150 (1 January 2011: RM5,284,150; 31 December 2011: RM5,284,150) was transferred to retained earnings on date of transition.

There are no adjustments arising from the transition to MFRS except for those discussed in Note 2.2(b) above.

Accordingly, notes related to the statements of financial position as at date of transition to MFRS are only presented for those items. The transition from FRS to MFRS did not have any impact on the statements of comprehensive income and the statements of cash flows while the impact on the statements of financial position are as follows:

Increase/(decrease) RM Group

Asset revaluation reserve (6,985,109) Retained earnings 6,985,109

Company

Asset revaluation reserve (5,284,150) Retained earnings 5,284,150

The following comparative amounts have also been adjusted as a result of the changes in accounting policies:

(Decrease)/ increase MFRS FRS Note 2.2(b) MFRS RM RM RM Group

Statement of Financial Position

At 1 January 2011

Asset revaluation reserve 6,985,109 (6,985,109) - Retained earnings 99,439,628 6,985,109 106,424,737 ========= ========= =========



2.2 Changes in accounting policies (cont’d)

The following comparative amounts have also been adjusted as a result of the changes in accounting policies (cont’d):

(Decrease)/ increase MFRS FRS Note 2.2(b) MFRS RM RM RM Group


At 31 December 2011


Company


At 1 January 2011


At 31 December 2011


2.3 Amendments/standards issued but not yet effective

The amendments/standards issued but not yet effective up to the date of issuance of the Group’s and the Company’s financial statements are listed below. The Group and the Company intend to adopt these amendments/standards, if applicable, when they become effective.

MFRS effective for annual periods beginning on or after 1 July 2012

• Amendments to MFRS 101, Presentation of items of Other Comprehensive Income • Amendments to MFRS 1, Government Loans • Amendments to MFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial

Liabilities • MFRS 3, Business Combinations (IFRS 3 Business Combinations issued by IASB in March 2004) • MFRS 10, Consolidated Financial Statements • MFRS 11, Joint Arrangements • MFRS 12, Disclosure of Interests in Other Entities • Amendments to MFRS 10, MFRS 11 and MFRS 12, Consolidated Financial Statements, Joint Arrangements

and Disclosure of Interests in Other Entities: Transition Guidance • MFRS 13, Fair Value Measurement • MFRS 119, Employee Benefits • MFRS 127, Separate Financial Statements • MFRS 127, Consolidated and Separate Financial Statements (IAS 27 as revised by IASB in December

2003) • MFRS 128, Investments in Associates and Joint Ventures (IAS 28 as amended by IASB in May 2011) • Amendments to MFRS 1, MFRS 101, MFRS 116, MFRS 132 and MFRS 134, Annual Improvements 2009-

2011 Cycle • Amendment to IC Interpretation 2, Annual Improvements 2009-2011 Cycle • IC Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine

MFRS effective for annual periods beginning on or after 1 January 2014

• Amendments to MFRS 132, Offsetting Financial Assets and Financial Liabilities




2.3 Amendments/standards issued but not yet effective (cont’d)

MFRS effective for annual periods beginning on or after 1 January 2015

• MFRS 9, Financial Instruments (IFRS 9 issued by IASB in November 2009) • MFRS 9, Financial Instruments (IFRS 9 issued by IASB in October 2010)

The directors expect that the adoption of the amendments/standards above will have no material impact on the financial statements of the Group and of the Company in the period of initial application. The nature of the impending changes in accounting policies on adoption of applicable amendments/standards are described below:

• Amendments to MFRS 101, Presentation of items of Other Comprehensive Income

The amendments to MFRS 101 require changes to the presentation of other comprehensive income. Items that could be reclassified to profit or loss at a future point in time would be presented separately from items which will never be reclassified. The effective date of the standard is 1 July 2012. The Group and the Company have decided not to early adopt the amendments and expect that the adoption will only affect the presentation of the statements of comprehensive income.

Annual periods beginning on or after 1 January 2013

• Amendments to MFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities

The amendments to MFRS 7 require an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32. These disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or ‘similar agreement’, irrespective of whether they are set-off in accordance with IAS 32. The amendments to MFRS 7 are to be retrospectively applied for annual periods beginning on or after 1 January 2013. The amendments affect disclosures only and have no impact on the Group and the Company’s financial position or performance.

• MFRS 10, Consolidated Financial Statements

MFRS 10 replaces part of MFRS 127 Consolidated and Separate Financial Statements that deals with consolidated financial statements and IC Interpretation 112 Consolidation - Special Purpose Entities.

Under MFRS 10, an investor controls an investee when (a) the investor has power over an investee, (b) the investor has exposure, or rights, to variable returns from its involvement with the investee, and (c) the investor has ability to use its power over the investee to affect the amount of the investor’s returns. Under MFRS 127 Consolidated and Separate Financial Statements, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

MFRS 10 includes detailed guidance to explain when an investor has control over the investee. MFRS 10 requires the investor to take into account all relevant facts and circumstances.

The adoption of MFRS 10 may change which entities are within the Group. The Group is in the process of assessing the effect of the new requirements.

• MFRS 12, Disclosure of Interests in Other Entities

MFRS 12 includes all the disclosure requirements for interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are required. This standard affects disclosure only and has no impact on the Group’s financial position or performance.





Annual periods beginning on or after 1 January 2013 (cont’d)

• MFRS 13, Fair Value Measurement

MFRS 13 provides guidance on how to measure the fair value of financial and non-financial assets and liabilities when required or permitted by MFRS. The adoption of MFRS 13 will affect some of the fair value of certain assets and liabilities and thus affecting the profit and equity of the Group and the Company.

• MFRS 127, Separate Financial Statements (IAS 27 as amended by IASB in May 2011)

As a consequence of the new MFRS 10 and MFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. The adoption of the amendments will have no impact on the Group’s financial position or performance.

• MFRS 128, Investments in Associates and Joint Ventures (IAS 28 as amended by IASB in May 2011)

As a consequence of the new MFRS 11 and MFRS 12, MFRS 28 has been renamed MFRS 28 Investments in Associates and Joint Ventures. This new standard describes the application of the equity method to investments in joint ventures in addition to associates.

• MFRS 3 Business Combinations (IFRS 3 Business Combinations issued by IASB in March 2004) and MFRS 127 Consolidated and Separate Financial Statements (IAS 27 as revised by IASB in December 2003)

An entity shall apply these earlier versions of MFRS 3 and MFRS 127 only if the entity has elected to do so as allowed in MFRS 10 Consolidated Financial Statements. The adoptions of these standards are not expected to have any significant impact to the Company.

• Annual Improvements 2009-2011 Cycle

- Amendment to MFRS 1 The amendment clarifies that, upon adoption of MFRS, an entity that capitalised borrowing costs in

accordance with its previous GAAP, may carry forward, without adjustment, the amount previously capitalised in its opening statement of financial position at the date of transition. Once an entity adopts MFRS, borrowing costs are recognised in accordance with MFRS 123, including those incurred on qualifying assets under construction.

- Amendment to MFRS 101 The amendment clarifies requirements for presenting comparative information.


• Amendments to MFRS 132, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities

These amendments clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlements mechanisms that are not simultaneous. The amendments to IAS 32 are to be retrospectively applied for annual periods beginning on or after 1 January 2014. The amendments affect disclosures only and have no impact on the Group and the Company’s financial position or performance.






• MFRS 9, Financial Instruments: Classification and Measurement

MFRS 9 reflects the first phase of the work on the replacement of MFRS 139 Financial Instruments: Recognition and Measurement and applies to classification and measurement of financial assets and financial liabilities as defined in MFRS 139 Financial Instruments: Recognition and Measurement. The adoption of the first phase of MFRS 9 will have an effect on the classification and measurement of the Group’s financial assets. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.

2.4 Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities, including unincorporated entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Control exists when the Company has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

Investment in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is held for sale or distribution. The cost of investments includes transaction costs.

(ii) Business combinations

Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group.

Acquisitions on or after 1 January 2011

For acquisitions on or after 1 January 2011, the Group measures the cost of goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interest in the acquiree; plus • if the business combination is achieved in stages, the fair value of the existing equity interest in the

acquiree; less • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities

assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Acquisitions before 1 January 2011

As part of its transition to MFRS, the Group elected not to restate those business combinations that occurred before the date of transition to MFRS, i.e. 1 January 2011. Goodwill arising from acquisition before 1 January 2011 has been carried forward from the previous FRS framework as at the date of transition.




2.4 Basis of consolidation (cont’d)

(iii) Acquisitions of non-controlling interests

The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

(iv) Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

(v) Non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the parent. Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

(vi) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group’s interest in the associates. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

2.5 Foreign currency

(a) Functional and presentation currency The individual financial statements of each entity in the Group are measured using the currency of

the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.

(b) Foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.




2.5 Foreign currency (cont’d) (b) Foreign currency transactions (cont’d)

Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

(c) Foreign operations The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling

at the end of the reporting period and income and expenses are translated at exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in other comprehensive income and accumulated in equity under foreign currency translation reserve relating to that particular foreign operation is recognised in the profit or loss.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the end of the reporting period.

2.6 Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Subsequent to recognition, plant and equipment and furniture and fixtures are measured at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:

- Leasehold land: over period of the lease - Buildings: 2% - Plant, machinery and tools: 10% - 20% - Office furniture and equipment: 10% - 20% - Motor vehicles: 20%

Work-in-progress is not depreciated as these assets are not available for use.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

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 on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.




2.7 Intangible assets

Goodwill

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination.

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the cash-generating unit retained.

Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2006 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.5.

Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2006 are deemed to be assets and liabilities of the Company and are recorded in RM at the rates prevailing at the date of acquisition.

2.8 Land use rights Land use rights were initially measured at cost. Following initial recognition, land use rights were measured

at cost less accumulated amortisation and accumulated impairment losses. The land use rights were amortised over their lease terms.

2.9 Impairment of non-financial assets

The Group assesses at the end of each reporting period 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 makes an estimate

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