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Annual R

eport 2012IFCA MSC Berhad (Co. No.453392-T)

Annual Report2012

(Co. No.453392-T)

IFCA MSC Berhad

TM

Wisma IFCA, No 19, Jalan PJU 1/42A, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia

Tel: +603 7805 3838 Fax: +603 7804 0206 Email: [email protected] URL: www.ifca.com.my

Africa | Australia | China | Indochina | Middle East | Maldives | South East Asia

Contents

Page Corporate Profile

2

Corporate Information

3

Chairman’s Statement

4 - 6

Financial Highlights

7

Directors’ Profile

8 – 9

Corporate Structure

10

Notice of Annual General Meeting

11 – 12

Statement Accompanying Notice of Annual General Meeting

12

Corporate Governance Statement

13 – 16

Additional Compliance Information

17 – 18

Audit Committee Report

19 – 22

Statement of Risk Management & Internal Control

23 – 24

Corporate Social Responsibility Disclosure

25

Audited Financial Statements

26 - 128

List of Properties

129

Shareholding Statistics

130 – 133

Proxy Form

Annual Report 2012

Corporate Profile

About IFCA MSC Berhad IFCA MSC Berhad, a company listed on the ACE Market of Bursa Malaysia Securities Berhad, is in the business of providing enterprise-wide integrated business solutions with a broad clientele base in three continents, namely Asia, Africa and Australia. Established in 1987, the Group is a leading integrated software provider in the region, fully committed to developing, innovating integrating and converging new technologies in communications and multimedia as part of the provision of business solutions while continuously enhancing our business applications to increase efficiency and customer satisfaction. The Group is one of the earliest Microsoft Independent Software Vendor (ISV) partners in Malaysia and a Microsoft Certified Partner (MCP). To date, the Group’s business solutions cater to a wide range of industries, namely in contract accounting; property development & management; hotel, club & resort; manufacturing & distribution; finance/leasing; customized IT projects; e-Business; and hardware & networking. Vision To be a global world-class ICT organization

Mission To deliver world-class products and services

To exceed expectation on customer service and satisfaction

To empower, retain and reward competent employees

To enhance shareholders’ value

IFCA MSC BERHAD (Co. No. 453392-T)

2

Annual Report 2012

Corporate Information BOARD OF DIRECTORS YONG KOK LEONG, Independent, Non-Executive Chairman (appointed 31 Dec 2012) YONG KEANG CHEUN, Executive Deputy Chairman YONG KIAN KEONG, Group Managing Director CHEW SEE CHIEW, Independent, Non-Executive HOE KAH SOON, Independent, Non-Executive OOI BEE BEE, Independent, Non-Executive Company Secretary Share Registrar Yap Kim Sing (LS001376) Insurban Corporate Services Sdn Bhd Wong Kam Khan (MIA No.3153) 149 Jalan Aminuddin Baki Taman Tun Sr. Ismail 60000 Kuala Lumpur Audit Committee Tel: 603-7727 5573 Chew See Chiew (Chairman) Fax: 603-7728 5948 Hoe Kah Soon Ooi Bee Bee Registered Office 24B, Persiaran Zaaba Auditors Taman Tun Dr. Ismail UHY, Kuala Lumpur Office 60000 Kuala Lumpur Suite 11.05, Level 11, Tel: 603-7727 0321 The Gardens South Tower, Fax: 603-7728 0326 Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur. Corporate Office Wisma IFCA, 19 Jalan PJU 1/42A Principal Banker Dataran Prima, Hong Leong Bank Berhad 47301 Petaling Jaya Selangor Darul Ehsan Tel: 603-7805 3838 Legal Advisors Fax: 603-7804 0206 Bodipalar Ponnudurai Nathan Email: [email protected] Suite 1.02, 1st Floor, Wisma E& Website: www.ifca.com.my No. 2, Lorong Dungun Kiri Damansara Heights, 50490 Kuala Lumpur Stock Exchange Listing Bursa Malaysia Securities Bhd – ACE Market Foong & Partners Suite21.08, Level 21 Plaza 138 Stock Codes 138 Jalan Ampang Bursa Malaysia: 0023 50450 Kuala Lumpur Reuters: IFCA KL Bloomberg: IFCA MK

3


4

CHAIRMAN’S STATEMENT Dear Shareholders, On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of IFCA MSC Berhad (“Company”) and its group of companies (“Group”)for the financial year ended 31 December 2012 (“FY2012”).

Financial Performance Highlights During FY2012, the Group recorded a RM45.93 million turnover, a 21.9% growth over last year. Gross profit increased 25.8% to RM41.92 million when compared to previous yearof RM33.33 million. In terms of product mixed, the software applications and royalty income registered growth of 23.5% in FY2012 while revenue from the maintenance, support system, training and implementation section recorded a 29.8% improvement over previous year. Due to the challenging business environment and stiff price competition, the hardware, networking and operating system segment registered a 0.4% decline in revenue this year. Consequently, the Group recorded profit after taxand non-controlling interest of RM3.48 millioncompared to a loss after tax and non-controlling interest of RM2.68 million in the preceding year. The good financial figures had strengthened the Balance Sheet of the Group. At the end of the financial year, the Group’s cash reserve stood at RM32.37 million. Business & Operations Review In Malaysia, the Group achieved revenue of RM34.25 million, an increase of 19.0% over the previous year. This was mainly due to sales of the integrated eBusiness Solution. Indeed, the demand of IFCA’s suite of software solutions has grown and gained recognition in the local market. On the international market, our subsidiaries continued to deliver improved performance year-on-year. Turnover from overseas segmentwas RM11.68 million representing a growth of 31.6% over the previous year. During the year, the Group has secured several projects from leading players in the property development and hospitality sector like the I&P Group, IJM Land, Hua Yang (Malaysia)and Dalian Wanda Group (China), to name a few.

Corporate Development

(i) On 17 May 2012, the Company had received a Notice of Nomination from IFCA Software (Asia) Sdn. Bhd., a substantial shareholder of the Company for the nomination of Messrs UHY as auditors of the Company for the financial year ending 31 December 2012 in place of the Messrs Ernst & Young who had retired. At the Annual General Meeting held on 21 June 2012, the resolution to appoint Messrs UHY was approved by the shareholders.

(ii) On 15 June 2012, a company named Guangzhou Jingyou Management Consulting Co. Ltd. (“GJMC”) incorporated in the People’s Republic of China (“PRC”), which is held through IFCA (Guangzhou) Technology Co., Ltd (“IFCA GZ”), a wholly owned subsidiary of the Company had been voluntarily deregistered from the State Administration of Industry and Commerce of China. The voluntary deregistration of GJMC is part of IFCA Group's rationalization and streamlining exercise and have no material effect on the earnings or net assets of the IFCA Group for the financial year ending 31 December 2012.

Corporate Exercise On 26 March 2012, the Company proposed to undertake a private placement of up to 10% of the issued and paid-up share capital of the Company of RM43,005,300 comprising 430,053,000 ordinary shares of RM0.10 each at an issue price to be fixed by the Board and shall be determined after obtaining the approval from Bursa Malaysia Securities Berhad. The objective of this exercise is to raise funds for future acquisition and business expansion opportunities. On 15 May 2012, the Company received the approval letter.

Annual Report 2012

5

CHAIRMAN’S STATEMENT (cont’d) Corporate Exercise (Cont’d) On 14 September 2012, the Board of Directors of the Company had fixed the issue price for the first tranche of the Private Placement, comprising 20,000,000 new ordinary shares of RM0.10 each in IFCA ("IFCA Share (s)") ("Placement Share(s)") at RM0.10 per Placement Share. The issue price of RM0.10 per Placement Share represents the par value of IFCA Shares and is a premium of 2.67% to the five (5)-day Weighted Average Market Price of and up to and including 13 September 2012 of RM0.0974. As of reporting date, the Board has not identified suitable placees for the remaining Placement Shares of up to 23,005,300 IFCA Shares. Research and Development (“R&D”) The Group believes that R&D is a key factor in ensuring its competitiveness in the industry. We are pleased to reap the benefits of the strategic decision 8 years ago to establish a R&D facility specifically for the development of web based e-business solutions with industry-specific functionalities and enterprise group services application. For FY2012, the Group has invested approximately RM1.6 million in R&D activities for the development and enhancement of our eBusiness Solution integrated platform for a cloud based computing environment. The Board is of the view that the Group’s R&D future expenditure and allocations will contribute positively to the Group’s earnings and financial position in the long run.

Industrial Trend and Business Opportunities According to the Malaysian Information Technology Report Q1 2013, the IT spending for year 2013 is forecasted to reach US$5.6 billion, a 7% growth over previous year. The same report forecasted software sales to increase by 9% to US$952 million, boosted by demand for e-business applications such as enterprise resource planning (ERP) and customer relationship management (CRM). The overall demand for IT products and services are forecast to stay resilient overall, even as economic growth moderates. Spending on IT products and services should be boosted by growing enterprise and government interest in cloud computing. In 2012, the government announced its latest Digital Malaysia Masterplan to drive the next stage of development of Malaysia’s ICT sector. A number of measures to strengthen the Malaysia’s ICT ecosystem was proposed, including talent development, as well as stimulating demand by consumers and business for ICT product and services. Encouraging the creation of more local application for cloud computing is expected to be one focus of the Digital Malaysia plan. The government’s plan to develop a national cloud computing programme should also drive opportunities in this key emerging area for vendors. The Multimedia Super Corridor Malaysia has named cloud computing as a strategic priority and has said that it will develop a national cloud computing platform. Cloud computing software delivery model is seen as having great potential to help more SMEs to access technology and gain competitiveness. The Group is confident that it would be able to tap on the opportunity presented in cloud computing. Future Prospects While the Group anticipates continuing recovery of it’s financials with better performance in FY2013, IFCA is looking at opportunities regionally to achieve sustainable profitability growth in the future. The Group will expand geographically and grow faster on our overseas markets with investment in new regional offices in China. The Group is confident that, with more presence in major cities in China, they will contribute positively to the growth of IFCA’s financial performance in the long run. The landmark deal with Dalian Wanda Group is a major win forIFCA’s business in China. Our performance in FY2012 demonstrates that we have been able to show to the market the trend of embracing our solutions and services, and this assured that we are on the right track and remained focus on our long-terms objectives. Accordingly, the Group will strive to protect our market share won while broadened our development efforts for a sustainable high and inclusive growth.


6

CHAIRMAN’S STATEMENT (cont’d)

Corporate Governance The Board strongly upholds to the highest standards of corporate governance practices in our day to day operations and management of the Group. The Board is fully committed in ensuring maximum shareholder’s value and long-term sustainability of the Group. The measures implemented during the year under review are highlighted in the Corporate Governance Report in this Annual Report.

Appreciation On behalf of the Board, I would like to take this opportunity to extend our appreciation to the entire management and staff of IFCA. Theirsplendid efforts and contributions throughout the year, has contributed to the significant turnaround for the Group. A sincere thank you also goes out to our valued shareholdersfor their continued trust and confidence in us. Last but not least, our highest appreciation to all our business partners and cherished customers,for extending your invaluable support to us as your trusted solution provider. Yong Kok Leong Chairman 15 April 2013

FINANCIAL HIGHLIGHTS

Summarised Statement of Comprehensive Income ~ Year Ended 31 December (RM'000) 2008 2009 2010 2011 2012Revenue 30,763 29,913 37,436 37,665 45,931

Profit/(Loss) Before Tax (6,108) (6,523) (283) (2,345) 3,527

Profit/(Loss) After Tax & Non-Controlling Interest (6,104) (5,774) (447) (2,676) 3,479

Summarised Statement of Financial Position As at 31 December (RM'000) 2008 2009 2010 2011 2012

Property, Plant & Equipment 8,403 8,122 8,531 8,391 9,061 Investment Properties 752 740 265 430 434 Deferred Development Costs 10,311 7,502 5,983 4,488 3,967 Other Non-Current Assets 103 173 128 1,279 427 Total Non-Current Assets 19,569 16,537 14,907 14,588 13,889

Current Assets 19,491 20,623 20,442 42,812 44,395

TOTAL ASSETS 39,060 37,160 35,349 57,400 58,284

Shareholders' Equipty 29,726 24,538 23,857 40,634 46,659 Minority Interest 326 357 139 (41) (276) Total Equity 30,052 24,895 23,996 40,593 46,383

Non-Current Liabilities 872 490 1,162 942 625 Current Liabilities 8,136 11,775 10,191 15,865 11,276 Total Liabilities 9,008 12,265 11,353 16,807 11,901

TOTAL EQUITY AND LIABILITIES 39,060 37,160 35,349 57,400 58,284

- 10,000 20,000 30,000 40,000 50,000

2008

2009

2010

2011

2012

30,763

29,913

37,436

37,665

45,931

Total Revenue (RM'000)

(7,000)

(6,000)

(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

-

1,000

2,000

3,000

4,000

2008 2009 2010 2011 2012

(6,104)(5,774)

(447)

(2,676)

3,479

Profit/(Loss) After Tax &

Non-Controlling Interest (RM'000)

- 10,000 20,000 30,000 40,000 50,000

2008

2009

2010

2011

2012

29,726

24,538

23,857

40,634

46,659

Shareholders' Equity (RM'000)

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2008 2009 2010 2011 2012

9,889 8,275

5,047

25,870

32,368

Cash & Bank Balance (RM'000)

- 10,000 20,000 30,000 40,000 50,000 60,000

2008

2009

2010

2011

2012

39,060

37,160

35,349

57,400

58,284

Total Assets (RM'000)

Annual Report 2012

7

Directors’ Profile YONG KOK LEONG, 56, Malaysian Independent Non-Executive Chairman Mr. Yong Kok Leong was appointed to the Board on 31 December 2012. He holds the position of Independent Non-Executive Chairman. He graduated from the University of Warwick, United Kingdom with a Bachelor of Science degree (honours) Science. Mr. Yong Kok Leong has over 30 year experience in the Information, Communications, Technology (ICT) industry in senior management positions notably with Hewlett Packard Sales Malaysia Sdn Bhd as sales and marketing country manager for Malaysia, Fuji Xerox Asia Pacific Pte Ltd as VP/ General Manager covering 10 countries in Asia Pacific. He was the Chief Executive Officer of and Redtone International Berhad until 2007. Over the years, he has developed broad skills in leading and managing multi-cultural, multi-national teams in the sales & marketing, technical support and product development areas. He has experience selling business commercial and technical application solutions to a broad range of industries. He was a member of the pioneering entrepreneurial team that built Redtone from start-up, winning multi-year industry awards like 'APMITTA Best of the Best Prime Minister's Award' (1999), 'Enterprise 50 Award' (2000, 2002, 2003), 'Asia Pacific ICT Award (2001) Best of Communications Applications to name a few. Through his effort, Redtone International Bhd was successfully listed in 2004 on the Mesdaq market (now known as Ace Market). He has no family relationship with any other Directors or major shareholders of the Company and has no conflict of interest with the Group. He does not hold any other directorship in any public listed company. Within the last 10 years, he has not been convicted for any offences other than traffic offences, if any. YONG KEANG CHEUN, 54, Malaysian Non Independent Executive Deputy Chairman Appointed to the Board on 20 November 1997, Yong Keang Cheun is the founder of the IFCA Group. He was re-designated to his present position on 31 December 2012. He also co-founded of the Group’s holding company - IFCA Software (Asia) Sdn Bhd (“IFCA Software”) in 1987. He obtained his Master Degree in Computer Science from the University of Manitoba, Canada, and started his career as an IT consultant with Arthur Anderson in Malaysia. With more than 25 years of experience in the ICT industry, he has been involved in many aspects of the software business, including product development, business development and project implementation. He is responsible for developing the overall strategies and policies for the IFCA Group, and has been involved in the research and development of the Group's products. He assumed his current position in 1997, following an internal restructuring exercise that resulted in the transfer of IFCA Software's business operations to the Company. His visionary and entrepreneurial acumen has won him a series of personal and corporate accolades, including PIKOM’s “Technopreneur of the Year” and “Key Industry Leader”, Ernst & Young’s “Entrepreneur of the Year”, and Deloitte’s “Technology Fast Track 500”. He is the brother of Mr. Yong Kian Keong, an Executive Deputy Chairman and a substantial shareholder of the Company. He does not hold any other directorship in any public listed company. Within the last 10 years, he has not been convicted for any offences other than traffic offences, if any. YONG KIAN KEONG , 52, Malaysian Group Managing Director Appointed to the Board on 20 November 1997, Yong Kian Keong is the Group Managing Director of the IFCA Group. He is responsible for the overall day-to-day management of the Group's business operations, particularly in the sales and marketing areas. He joined IFCA Software (Asia) Sdn Bhd (“IFCA Software”), the current major shareholder of the Company, in 1990 and was involved in its business operations. In 1997, he assumed his present position following an internal restructuring exercise, which resulted in the transfer of IFCA Software's business operations to the Company. He was instrumental in assisting the Group in achieving its current customer base and market share. He also played a major role in developing the Group’s expansion in the overseas markets and its international business partnership program.


8

Directors’ Profile (cont’d) YONG KIAN KEONG (cont’d) He is the brother of Mr. Yong Kian Cheun, the Executive Chairman of the Company and a substantial shareholder of the Company. He does not hold any other directorship in any public listed company. Within the last 10 years, he has not been convicted for any offences other than traffic offences, if any. CHEW SEE CHIEW, 60, Malaysian Independent Non-Executive Director Mr. Chew See Chiew was appointed to the Board on 3 February 2010. He also serves as Chairman of the Audit Committee and as a member of the Remuneration Committee of the Company. He holds a Bachelor Degree in Accountancy from the University of Technology, Australia and is a Chartered Accountant. He obtained his professional CPA accreditation in Australia. He has extensive experience in finance, accountancy, corporate planning and the property development industry in private companies as well as public listed companies. He has no family relationship with any other Directors or major shareholders of the Company and has no conflict of interest with the Group. He does not hold any other directorship in any public listed company. Within the last 10 years, he has not been convicted for any offences other than traffic offences, if any. HOE KAH SOON , 54, Malaysian Independent Non-Executive Director Mr. Hoe Kah Soon was appointed to the Board on 22 January 2009. He also sits on the Audit Committee of the Company. He holds a Bachelor of Accounting Degree from University Malaya, with a first class honours. After graduation in 1982, he joined Arthur Anderson (Audit Division) where he successfully completed his MACPA examinations. In 1984, he transferred to its Consulting Division (which eventually became Accenture) and was admitted to global partnership in 1995. At Accenture (until 2005), he specializes in program managing large scale business systems integration projects. He also assumed several leadership positions including Country Managing Partner Taiwan, Accenture Global People Matters (HR) advisory committee and Head of Malaysia Resources Operating Group. He is currently a free-lance business advisor. Currently he also serves as an independent non-executive director of Diversified Gateway Solutions Berhad. He has no family relationship with any other Directors or major shareholders of the Company and has no conflict of interest with the Group. Within the last 10 years, he has not been convicted for any offences other than traffic offences, if any. OOI BEE BEE , 53, Malaysian Independent Non-Executive Director Ms. Ooi Bee Bee was appointed to the Board on 3 February 2010. She also sits on the Audit Committee of the Company and is a member of the Remuneration Committee of the Company. She holds a Bachelor of Arts Degree and Postgraduate Diploma in Computer Science from University of Malaya. She also has The London Chamber of Commerce and Industry Intermediate Stage Certificate for book-keeping. She served in IFCA Group from 1987 to 2007. During her tenure in IFCA, she was involved in research and development, customer services, project management and overseas offices operations in Thailand, Indonesia, Philippines and China, She has no family relationship with any other Directors or major shareholders of the Company and has no conflict of interest with the Group. She does not hold any other directorship in any public listed company. Within the last 10 years, she has not been convicted for any offences other than traffic offences, if any.

Annual Report 2012

9

Corporate Structure

IFCA MSC BERHAD

Push Technology Sdn Bhd

100%

IFCA Systems (Penang) Sdn Bhd

99.99%

IFCA Systems (JB) Sdn Bhd

99.99%

IFCA Consulting (Sarawak) Sdn Bhd

99.99%

IFCA Solutions Sdn Bhd

85.71%

IFCA Web Sdn Bhd

85.71%

Network Online Sdn Bhd

85.71%

IFCA Consulting (Sabah) Sdn Bhd

60%

IFCA (Guangzhou) Technology Co Ltd

100%

Jingyou Information Technology

(Shanghai) Co Ltd

100%

IFCA International Limited

100%

EFFICA Technology (Pty) Ltd

100%

IFCA (Wuhan) Technology Co Ltd

100%

Guangzhou Jingyou Computer

Technology Co Ltd

80%

MALAYSIA

CHINA

SEYCHELLES

SOUTH AFRICA


10

Notice of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the Fifteenth Annual General Meeting of IFCA MSC Berhad (“the Company”) will be held at the Dewan Perdana, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000 Kuala Lumpur on Friday, 21 June 2013 at 10.00 a.m. to transact the following business:-

As Ordinary Business 1. To receive the Audited Financial Statements for the financial year ended 31

December 2012 together with the Reports of the Directors and Auditors thereon. 2. To approve the payment of Directors’ fees of RM89,000.00 for the financial year

ended 31 December 2012. 3. To re-elect Mr. Yong Kian Keong who retires as a Director of the Company pursuant

to Article 85 of the Company’s Articles of Association. 4. To re-elect Mr. Chew See Chiew who retires as a Director of the Company pursuant

to Article 85 of the Company’s Articles of Association. 5. To re-elect Madam Ooi Bee Bee who retires as a Director of the Company pursuant

to Article 85 of the Company’s Articles of Association. 6. To re-elect Mr. Yong Kok Leong who retires as a Director of the Company pursuant

to Article 90 of the Company’s Articles of Association. 7. To re-appoint Messrs UHY as the Auditors of the Company for the financial year

ending 31 December 2013 and to authorise the Directors to fix their remuneration.

8. To transact any other ordinary business of which due notice has been duly given in accordance with the Companies Act, 1965.

By Order Of The Board Wong Kam Khan (MIA 3153) Yap Kim Sing (LS 01376) Company Secretaries Kuala Lumpur 30 MAY 2013. Notes: A. Agenda item no. 1 is meant for discussion only as the provision of Section 169(1) of the Companies Acts 1965

does not require a formal approval of shareholders for the Audited Financial Statements. Hence, this item on the Agenda is not put forward for voting.

1. A member of the Company entitled to attend and vote at this meeting is entitled to appoint a proxy or proxies to

attend and vote on his stead. A proxy need not be a member of the Company. There shall be no restriction as to the qualification of a proxy and the provisions of Section 149(1) (b) of the Companies Act, 1965 shall not apply to the Company.

2. Where a member of the Company is an authorised nominee, it may appoint at least one proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

Please refer to Note A Resolution 1 Resolution 2 Resolution 3 Resolution 4 Resolution 5 Resolution 6

Annual Report 2012

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Notice of Annual General Meeting (cont’d) Notes : (cont’d) 3. In the case of a corporate member, the instrument appointing a proxy or proxies shall be under its Common

Seal or under the hand of its attorney duly authorised in writing. 4. Where a member appoints more than one proxy, he shall specify the proportions of his holdings to be

represented by each proxy. 5. The instrument appointing a proxy or proxies duly completed must be deposited at the Registered Office of

the Company situated at 24B, Persiaran Zaaba, Taman Tun Dr. Ismail, 60000 Kuala Lumpur not less than forty-eight (48) hours before the time set for the Annual General Meeting or adjourned meeting.

6. A depositor whose name appears in the Record of Depositors as at 12 June 2013 shall be regarded as a

Member of the Company entitled to attend this Annual General Meeting or appoint a proxy to attend and vote on his behalf.

Statement Accompanying Notice of Annual General Meeting 1. Directors who are standing for re-election at the Fifteenth Annual General Meeting of the

Company.

i. The Directors retiring by rotation pursuant to Article 85 of the Company’s Articles of Assciation and seeking re-election are :-

~ Mr. Yong Kian Keong (Resolution 2) ~ Mr. Chew See Chiew (Resolution 3) ~ Ms. Ooi Bee Bee (Resolution 4)

ii. The Director retiring by rotation pursuant to Article 90 of the Company’s Articles of Association and seeking re-election is :- ~ Mr. Yong Kok Leong (Resolution 5)

2. Further details of Directors who are standing for re-election are set out in the Directors’ Profile appearing on pages 8 to 9 of the Annual Report.


12

Corporate Governance Statement The Board of Directors of IFCA MSC Bhd (“the Board”) is pleased to report on the manner the Group has applied the Principles of Good Governance (‘Principles’) and the extent of compliance with the Code of Best Practices (‘Code’) set out in the Malaysian Code on Corporate Governance.

THE BOARD OF DIRECTORS

The Company is led by a Board comprising members with a wide range of business, financial, technical and consulting experience. This depth and diversity in expertise and perspectives as reflected in the Directors’ Profile on pages 8 to 9 of this Annual Report bring vital ingredients necessary for the Company’s strategic direction and guidance in the Management of the various business activities undertaken by the Group. The Board shares a common goal of providing the best total integrated software solutions for our clients in various industries. With the overall responsibility for the Company’s strategic direction, the Board always strives to give due attention to matters pertaining to corporate strategy development and alignment, business operational execution and performance monitoring within the context of both internal and external factors in the marketplace. At present there are six (6) members of the Board comprising two (2) Executive and four (4) Non-Executive Directors. The Board is led by an Independent Non-Executive Chairman who was appointed to the Board on 31 December 2012. The ratio of Independent Directors to Non-Independent Directors is 4:2. There is a balance in the Board with the presence of four (4) Independent Directors in the six (6) member Board with the necessary skills and experience. All the Independent Directors have neither business nor other relationships that could significantly interfere with the exercise of their independent judgments and views and the appropriate check and balance in particular to ensure decisions taken are in the best interest of all shareholders. The Board will review its composition and size from time to time to ensure its continued effectiveness and the process of assessing the performance of directors is an on-going responsibility of the entire Board. The Chairman of the Audit Committee is Mr. Chew See Chiew, a senior Independent Non-Executive Director to whom concerns may be conveyed. Appointments to the Board and Re-election The Company does not have a Nomination Committee, as all new nominations received shall be assessed and approved by the entire Board in accordance with its policy of ensuring nominees are persons of calibre, credibility, necessary skill and experience to complement the diverse background and experience of the existing Board. Under the Company’s Articles of Association, an election of Directors shall take place each year during the Annual General Meeting and all Directors are subject to retirement and re-election at least once every three (3) years. The Articles also provide that any director who is appointed by the Board to fill a vacancy shall hold office only until the next Annual General Meeting and shall then be eligible for re-election. Board Meetings The Board meets on a quarterly interval, at least four (4) times a year with additional meetings convened as and when required. During the financial year ended 31 December 2012, five (5) Board meetings were held and the attendance of Board members is as follows:-

Directors Number of Meetings Attended

Percentage of Attendance

Yong Keang Cheun 5/5 100% Yong Kian Keong 5/5 100% Chew See Chiew 5/5 100% Hoe Kah Soon 5/5 100% Ooi Bee Bee 5/5 100% Yong Kok Leong (appointed 31.12.2012) 0/0 n/a

Annual Report 2012

13

Corporate Governance Statement (cont’d)

Board Meetings (cont’d)

Prior to each Board meeting, an agenda and accompanying Board papers for items to be discussed at the meeting are distributed to all Directors. The Executive Directors, Company Secretary and/or invited members of the management team present the relevant Board papers during the meeting. The issues are discussed thoroughly by the Board prior to decision-making.

The Company Secretary provides guidance to the Board on Directors’ obligations arising from the Malaysian Code on Corporate Governance, the Listing Requirements of Bursa Malaysia Securities Berhad, the Companies Act and other relevant rules and regulations.

The Board members have access to the advice and services of the Company Secretary and all information in relation to the Group whether as a full Board or in their individual capacity to assist them in carrying out their duties. Where necessary, the Directors may engage independent professionals at the Group’s expense on specialized issues to enable the Board to discharge their duties with adequate knowledge on the matters being deliberated.

Directors’ Training and Continuing Education All the directors of the Company have completed the Mandatory Accreditation Programme and are supportive of the need for continuous education to enable them to discharge their responsibilities effectively. There has been greater awareness of the importance and benefits of attending and participating in the training and continuing training programmes that will enhance the Directors’ knowledge and skill so as to effectively discharge their duties as Directors. The Directors will continue to attend relevant training programmes to keep abreast with developments on a continuous basis in compliance with the ACE Market Listing Requirements of Bursa Securities. The Directors were not able to attend any Directors’ training during the financial year under review due to overseas travelling and busy schedule. However, they have kept themselves abreast on the financial and business matters through readings to enable them to contribute to the Board

The Company does not have a formal training programme for new directors. However familiarization programme with the operations of the Group shall be arranged for any new appointee to the Board.

Board Committees The Board has established the following committees:- i) The Audit Committee

Terms and reference as well as further information on the Audit Committee are set out on pages 19 to 22 of this Annual Report. The Board has adopted the recommendations of the Code for its Audit Committee to comprise only of non-executive directors.

ii) The Remuneration Committee The Remuneration Committee is responsible for recommending to the Board the remuneration framework and package of the Executive Directors. As at the date of this report, the members of the Remuneration Committee comprises of: Chairman : Chew See Chiew (Independent Non-Executive Director) Member : Ooi Bee Bee (Independent Non-Executive Director)

Yong Keang Cheun (Executive Director) The Executive Director does not participate in any deliberation and decision of the Committee regarding his own remuneration.


14

Annual Report 2012

15

Corporat e Governance St atement (con t’d) Board Committees(cont’d) ii) The Remuneration Committee (cont’d) The details of the remuneration for Directors during the financial year ended 31 December 2012 are as below:-

Executive Directors Non-Executive Directors Total

Fees (RM) 26,000 63,000 89,000 Salaries & other emoluments (RM) 1,644,760 - 1,644,760 Total (RM) 1,670,760 63,000 1,733,760

The six (6) Directors’ total remuneration fall within the following bands:-

Remuneration Band (RM) Executive Directors Non-Executive Directors

0 - 50,000 - 4 500,001 - 600,000 1 - 600,001 and above 1 -

ACCOUNTABILITY AND AUDIT Internal Control

The Board acknowledges its responsibility to ensure an effective system of internal controls is in place within the Group safeguard shareholders’ investment and the Company’s assets. As at to-date, the Board is comfortable with the current internal controls and will improve the system of internal controls should the Board become aware of any weaknesses. A Statement of Risk Management & Internal Control of the Group is set out on page 23-24 of this Annual Report.

Financial Reporting

Through the issuance of audited annual financial statements, quarterly announcements and corporate announcements on significant developments to shareholders, the Board aims to provide and present a balanced and meaningful assessment of the Group’s financial performance and prospects. In this respect, the Board is assisted by the Audit Committee to oversee the Group’s financial reporting process and the quality of its financial reporting.

Directors’ Responsibility Statement The Board is responsible for ensuring that the financial statements of the Company and the Group are in accordance with the applicable Financial Reporting Standards in Malaysia and the provisions of the Companies Act, 1965 to present a true and fair view of the state of affairs of the Company and the Group.

The Directors are satisfied that in preparing the financial statements of the Group for year ended 31 December 2012, the Group has adopted suitable accounting policies and applied them consistently, prudently and reasonably, and that all accounting standards, which it considers applicable, have been followed in the preparation of the financial statements.

Relationship with External Auditors

The Board through the establishment of an Audit Committee maintains an active, transparent and professional relationship with the External Auditors in seeking professional advice and ensuring compliance with the relevant accounting standards and other related regulatory requirement. The role of the Audit Committee in relation to the external auditors is described in the Audit Committee Report on pages 19 to 22 in this Annual Report.

Corporate Governance Statement (cont’d) RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS Investors’ Relations and Shareholders’ Communication The Board recognizes the importance of to have timely dissemination of information on the Group’s performance and other developments. Shareholders, investors and analysts are kept abreast of all major developments concerning the Group through the quarterly financial statements, annual report, announcements on major developments via the Bursa Malaysia website (www.bursamalaysia.com), the Company’s corporate website (www.ifca.com.my) and Company’s general meetings. As part of the Company’s continuing disclosure obligation under the Listing Requirements of Bursa Malaysia Securities Berhad, the Company aims to ensure timely announcements are made through the Bursa Malaysia website and the Company’s corporate website to enable investors to make informed investment decisions. The Annual General Meeting The Annual General Meeting, usually in June each year, is the principal forum for dialogue with shareholders. The Board encourages shareholders to attend and participate in the Annual General Meeting. At each Annual General Meeting shareholders are given the opportunity to ask questions, seek clarifications and comment on the Group’s businesses and financial performance and the resolutions being proposed at the meeting.


16

Additional Compliance Information (Pursuant to Bursa Malaysia ACE Market Listing Requirements)

1. Share Buy-Back There were no share buy-back exercises undertaken by the Company during the financial year.

2. Options, Warrants or Convertible Securities The Company has issued 143,351,000 free detachable warrants for every two existing ordinary shares of RM0.10 each held in the Company on 13 January 2011, details of which are set out in note 16 to the Financial Statements on page 91 of this Annual Report.

3. Depository Receipt Programme

There were no Depository Receipt Programme sponsored by the Company during the financial year.

4. Imposition of Sanctions and/or Penalties There were no sanctions and/or penalties imposed on the Company and/or its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year.

5. Non-Audit Fee There was no non-audit fees paid to the External Auditors, Messrs UHY during the financial year ended 31 December 2012.

6. Variation in Results

There were no variances of 10% or more between the audited results for the financial year and the unaudited results announced.

7. Profit Guarantee

There was no profit guarantee given by the Company during the financial year.

8. Material Contract During the financial year under review, there was no material contract other than those in the ordinary course of business entered into by the Company and/or its subsidiaries involving Directors and/or major shareholders’ interest.

9. Revaluation Policy of Landed Properties The revaluation policy in relation to landed and investment properties is set out in Note 3(e) and 3(h) of the notes to the Financial Statements on page 64 to 68 of this Annual Report.

10. Recurrent Related Party Disclosures (“RRPTS”) of a Revenue or Trading Nature Disclosure to this effect was set out in Note 33 of the Financial Statements on Page 105 to 106 of this Annual Report.

11. Share Options Offered To Non-executive Directors There were no share options granted to non-executive directors during the year ended 31 December 2012.

Annual Report 2012

17

Additional Compliance Information (cont’d) (Pursuant to Bursa Malaysia ACE Market Listing Requirements)

12. Corporate Social Responsibility (“CSR”)

The CSR Disclosure statement was set out on Page 25 of this Annual Report.

13. Utilisation of Rights Issue Proceeds As at 31 March 2013, the Company has utilized approximately 86% of the proceeds raised from its Rights Issues in February 2011. The breakdown is as follows;

Proposed

Amount

RM '000 RM '000 % RM '000 %

i. Working Capital and

Business expansion6,208 4,242 68% 1,966 32%

ii. Research and

Development4,088 4,088 100% - -

iii. Sales and Marketing 3,406 3,406 100% - -

iv. Expenses related to the

Rights Issues633 633 100% - -

Total 14,335 12,369 86% 1,966 14%

Nature of ExpensesActual Utilisation Unutilised Amount

On 20 February 2013, the Board of Directors of IFCA MSC Berhad resolved to extend the timeframe for the utilisation of the remaining proceeds from the Rights Issue Exercise allocated for working capital and business expansion for a further period of twelve (12) months until 21 February 2014


18

AUDIT COMMITTEE REPORT 1. Membership and Attendance

During the financial year ended 31 December 2012, the Audit Committee met five (5) times and the details of attendance of each member are as follows:-

Name of Director No. of Meetings Attended

Chew See Chiew (Chairman / Independent Non-Executive Director) 5/5 Hoe Kah Soon (Member / Independent Non-Executive Director) 5/5 Ooi Bee Bee (Member / Independent Non-Executive Director) 5/5

2. Summary of Activities

The Audit Committee carried out its duties as set out in the terms of reference below for the year 2012.

3. Internal Audit Function The Group’s internal audit function are outsourced to an independent professional firm, Crowe Horwath Governance Sdn Bhd, which reports to the Audit Committee and assists the Audit Committee in discharging its duties and functions by providing an independent and objective assessment on the organisation’s management, operations records, accounting policies and internal controls. The Audit Committee adopted a risk based approach to identify any major deficiency in the internal controls and aligned the year’s Internal Audit Plan to this approach. During the year under review, the Internal auditor had had : I. Reviewed the adequacy and effectiveness of internal controls over the business operations of the

subsidiaries located in the state of Sabah and Sarawak. II. Review the adequacy and effectiveness of internal controls over the Project Management function and

supporting project management documentations at the Head Office.

III. Followed up on findings and ensure that management action plans from previous reviews are carried out.

The costs incurred on the outsourced internal audit function for the financial year ended 31 December 2012 was RM30,000.00.

TERMS OF REFERENCE 1. Objective

The principal objective of the Committee (as a committee of the Board) is to assist the Board in the effective discharge of its fiduciary responsibilities for corporate governance, financial reporting and internal control.

2. Reporting Responsibility The Committee will report to the Board on the nature and extent of the functions performed by it and may make such recommendations to the Board on any audit and financial reporting matters as it may think fit.

3. Composition of Audit Committee The Audit Committee (“Committee”) shall be appointed by the Board of Directors (“Board”), and shall fulfill the following requirements:

I. The Committee shall consist of no fewer than three (3) members;

II. All members of the Committee shall be non-executive director, with a majority of them being

independent directors; III. All members of the Committee should be financially literate; IV. No alternate director shall be appointed as a member of the Committee;

Annual Report 2012

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AUDIT COMMITTEE REPORT (Cont’d) 3. Composition of Audit Committee (cont’d)

V. The appointment of a Committee member terminates when the member ceases to be a Director; VI. In the event that a member of the Committee resigns, dies or for any other reason ceases to be a

member with the result that the number of members is reduced below three (3), the Board shall, within three (3) months of that event, appoint such number of new members as may be required to make up the minimum of three (3) members;

VII. The Chairman of the Committee shall be an Independent Non-Executive Director appointed by the

Board and shall report on each meeting of the Committee to the Board; VIII. The Board shall review the term of office and performance of the Audit Committee and each of its

members at least once every three (3) years to determine whether such Audit Committee and members have carried out their duties in accordance with their terms of reference.

4. Authority of the Committee The Committee in the course of discharging its duties, is authorized to:

I. investigate any matter within its terms of reference; II. have the Internal Audit Function report directly to the Committee; III. have the resources which are required, at the Company’s expense to perform its duties including

appointing an internal audit outsourcing party;

IV. have full and unrestricted access to any information pertaining to the Company and its subsidiary companies for the purpose of discharging its functions and responsibilities;

V. have direct communication channels with the external auditors, person(s) carrying out the internal audit

function of activity and any employee(s) of the Group;

VI. obtain outside legal or other independent professional advice it considers necessary and reasonable for the performance of its duties;

VII. convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary;

VIII. have the right to pass resolutions by a simple majority of vote from the Committee and that the

Chairman shall have the casting vote should a tie arise;

IX. The Chairman of the Audit Committee shall have access on a continuous basis to senior management, such as the Chairman, the Chief Executive Officer, the Head of Finance, the Head of Internal Audit and the external auditors in order to be keep informed of matters affecting the Company.

5. Duties and Responsibilities The duties and responsibilities of the Committee shall be:

I. To consider the nomination or appointment of the external auditors, the terms of engagement, the audit fee and any questions of resignation or dismissal;

II. To review the external auditors’ audit plan and scope of the annual audit or other examinations for the

Company and the Group; III. To review the external auditors and/or internal auditors’ audit report, management letter and

management’s response; IV. To review with the external auditors with regard to problems and reservations arising from interim and

final audits and any matter the external auditors may wish to discuss (in the absence of management where necessary);


20

AUDIT COMMITTEE REPORT (Cont’d) 5. Duties and Responsibilities (cont’d)

V. To determine the extent of cooperation and assistance given by the employees to the external auditors; VI. To review any financial information for publication, including the quarterly and annual financial statement

before submission to the Board, focusing on:

a. Any changes in or implementation of major accounting policies changes and practices

b. Significant and unusual events

c. Significant adjustments and issues arising from the audit

d. The going concern assumption

e. Compliance with approved accounting standards and other legal requirements

VII. To review the adequacy of independence, competency, scope, functions and resources of the internal audit function and that it has the necessary authority to carry out its work;

VIII. To review the internal audit programme, processes, scope, and results of the audit programme, processes or investigation undertaken and ensure that appropriate action is taken on the recommendations of the internal audit function;

IX. To review the assessment of the performance of members of the internal audit function, approve the appointment or termination of Head of the internal audit function and provide resigning member an opportunity to submit his/her reasons for doing so and /or the performance of the outsource internal audit service provider;

X. To review any related party transaction entered by the Group to ensure it is within normal commercial terms and any potential conflict of interest situations that may arise within the Company or Group including any transactions, procedure or course of conduct that raises questions of Management integrity;

XI. To consider the major findings of internal investigations authorised by the Board and Management’s response;

XII. To report to the Bursa Malaysia Securities Berhad where the Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the Listing Requirements;

XIII. To review the adequacy of the Risk Management policies and procedures;

XIV. To undertake any other activities as may be agreed to by the Committee and the Board.

6. Meetings and Quorum

The Committee shall meet at least four (4) times a year or more frequently as circumstances dictate.

The Committee shall convene a meeting if requested to do so by any member, the Board or the internal or external auditors to consider any matter within the scope and responsibilities of the Committee.

The members of the Committee may participate in a meeting by means of conference telephone, conference videophone or any similar or other communications equipment by means of which all persons participating in the meeting can hear each other. Such participation in a meeting shall constitute presence in person at such meeting.

All decisions shall be decided on a show of hands by a majority of votes.

A resolution in writing signed and approved by a majority of the Committee and who are sufficient to form a quorum shall be valid and effective as if it had been passed at a meeting of the Committee duly called and constituted.

Annual Report 2012

21

AUDIT COMMITTEE REPORT (Cont’d)

6. Meetings and Quorum (cont’d)

The Head of Finance and Head of Internal Audit Function and representatives of the external auditors shall normally be invited to attend the meetings. The Committee may also invite non-member directors and employees to attend any of its’ meeting to assist in resolving and clarifying matters, where necessary.

The Committee shall meet with the external auditors at least twice a year, without executive board members present.

The majority of members present must be independent non-executive directors to form a Quorum and the number of independent non-executive directors shall not be less than two (2).


22

Statement of Risk Management & Internal Control INTRODUCTION The Malaysian Code of Corporate Governance stipulates that the Board of Directors of public listed companies should maintain a sound system of internal control in order to enhance the value of shareholders’ investment and to safeguard the company’s assets. The Board of Directors is pleased to provide the following Statement On Internal Control made in compliance with paragraph 15.26 of the BMSB’s (“Bursa Malaysia Securities Berhad”) Listing Requirements and the Statement On Internal Control - Guidance for Directors of Public Listed Companies. RESPONSIBILITY The Board places importance on, and is committed to maintaining a sound system of internal control and effective risk management practices in the Group to ensure good corporate governance. The Board affirms its responsibility for reviewing the adequacy and integrity of the Group’s internal control and management information systems, and compliance with applicable laws, regulations, rules, directives and guidelines. The Group’s system of internal control covers, inter alia, risk management as well as financial, organisational, operational and compliance controls. Due to limitations that are inherent in any system of internal control, the system adopted by the Group is designed to manage rather than to eliminate the risk of failure to achieve business objectives. The system of internal control can only provide reasonable but not absolute assurance against any material misstatement or losses. RISK MANAGEMENT The Board recognizes that effective risk management framework is an essential and indispensable part of the corporate management. The Board, after a thorough review of the existing risk management policies and practices and weighing the independent third party service providers, concluded that management’s existing risk management policies and practices are adequate to support the Group’s existing size and nature of operations. MANAGEMENT PROCESS The Board is committed to maintaining a strong control structure and environment for the proper conduct of the Group’s business operations. The Board has the following control processes in place:

• A formal organisational structure with delineated lines of authority, responsibility and accountability within the Group. A process of hierarchical reporting has been established which provides for a documented and auditable trail of accountability.

• There are policies and procedures for recruitment, performance appraisal and promotion to ensure that suitably qualified and competent personnel are hired and retained. The Human Resource Department assumes the responsibility for developing the employees with the relevant and appropriate skills.

• A clear Group vision, mission and strategic direction is communicated to employees at all levels. The in-house Knowledge Management (KM+) software is used as an effective means of communication and knowledge sharing at all levels.

• In most of the Group’s business operations, periodic meetings are held to ensure that progress, exceptions and variations are fully discussed and appropriate actions are taken. This ensures that business objectives are met. Again, the in-house KM+ software provided adequate on-line reports for reviews on various business / operating units of the Group.

•The Board oversees the conduct of the Group’s operations through various management reporting mechanisms. Through these mechanisms, the Board is informed of all major issues pertaining to internal control, regulatory compliance and risk-taking to ensure that it maintains full and effective supervision.

• The Group performs a comprehensive annual budgeting and forecasting exercise at the beginning of the financial year. Management accounts and various reports are prepared on a monthly basis for review by the senior management for effective monitoring and decision-making. The Group also operates a comprehensive automated information system via the in-house KM+ software that provides for transactions to be captured, compiled and reported and the data and analysis provided by this software to monitor their performance.

Annual Report 2012

23

Statement of Risk Management & Internal Control (cont’d) MONITORING AND REVIEW The Board has delegated the day-to-day functions to the CEO, who is aided by the COO and a team of corporate officers to assist in the carrying out of his duties. Part of his role is to drive each of the business operations in a manner that ensures the integrity of the internal control system and effective risk management practices are in place throughout the year. From a process viewpoint, the COO presides over regular management meetings in each of the business operations. These meetings review financial performance, business issues and other related matters including internal control matters and risk management. The Group outsourced the internal audit function whose primary responsibility is to assure the Board, through the Audit Committee, that the internal control system is functioning as intended. In providing this assurance, the Internal Auditor carries out regular audits to review the adequacy and integrity of the internal control system and reports of deficiencies together with recommendations as appropriate are tabled at Audit Committee meetings which are held at least once in every quarter. These, together with the external auditors’ findings arising from the audit of the statutory financial statements, provide further assurance of the soundness and effectiveness of the internal control system. Results of audits are reported to the Audit Committee. Control deficiencies and issues highlighted are addressed or rectified by management. There were no control deficiencies noted during the financial year under review with material impact on the Group’s financial performance or operations CONCLUSION The systems of internal control described in this statement are considered appropriate to the business operations. Also, the risks taken are at an acceptable level within the context of the business environment throughout the Group. It should be noted that such arrangements do not eliminate the possibility of collusion or deliberate circumvention of procedures by employees. Human error and / or other unforeseen circumstances can result in poor judgment. However, the system of internal control that existed throughout the year provides a level of confidence on which the Board relies for assurance. This statement is made in accordance with the minutes of the Board of Directors dated 15 April 2013 and has been duly reviewed by the external auditors, pursuant to paragraph 15.23 of the Bursa Malaysia Securities Berhad Main Market Listing Requirements. .


24

Corporate Social Responsibility Disclosure IFCA Group believes that effective corporate social responsibility can deliver benefits to its business and, in turn, to its shareholders, by enhancing reputation and business trust, relationship with regulators, staff motivation and attraction to talent, customer preference and loyalty, the goodwill of local communities and long term shareholder value. The Group will always endeavor to discharge its corporate social responsibility diligently to the environment, the marketplace, its employees, the shareholders, the community and other stakeholders alike. ENVIRONMENT Although the Group does not operate in an environmentally sensitive business, we recognize its duty to minimize its impact on the environment. The Group has identified opportunities to reuse and recycle or minimize the resources it consumes as the Group believes in caring for the environment through efficient utilization and recycling of resources. During the financial year, the management encourages staff to recycle paper and reduce the storage of paper and documents. We also encourage paperless meetings. We educated the staff on the importance of energy conservation such as instilling good habits of switching off lights and air-conditioning during lunch time or when they are out from office. To maximize the benefits of ICT and to reduce papers consumption, the Group had been practicing e-leave and e-claims in its human resources administration . MARKETPLACE IFCA Group employees is expected to maintain the highest standards of proprietry, integrity and conduct in all their business relationships and the Group is held to the same standard in its compliance with all applicable legal and regulatory requirements. We ensure that stakeholders are kept informed of the Group’s performance and have open channels for dialogues during our annual general meetings and feedback on our corporate website. The Group will also support the market with good products, engaging in ethical procurement practices, and maintaining quality of its service and business offerings. WORKPLACE The Group considers its dedicate and hardworking employees as the most valuable asset. We believe training and development is important in developing and upgrading skills, knowledge and attitudes to ensure optimal performance. We constantly provide in-house and external training programmes to enhance and increase employees’ job-related skills, knowledge and experience. The Group offer its staff an attractive benefits package, including Personal Accident Insurance and Medical & Hospitalisation Plan. Each department head would organize departmental staff lunch monthly as social gathering to maintain harmony and build better rapport between employees. We also continually reward and recognize employees for their outstanding efforts and performance during the year. We strive to maintain a safe and healthy working environment for all the employees. Preventive actions are taken to mitigate risks such as allocating First Aid Kit boxes in office premises and employing security guards in selected offices. COMMUNITY The Group recognizes its responsibility to contribute to the capabilities of tomorrow’s workforce. We provide industrial training opportunities to students from various colleges and universities. We also strive to be involved in giving back to society by supporting the local charities with donations during the financial year.

Annual Report 2012

25


26

Financial Statements

Page

Direct or ’s Report

27 - 32

Statement by Direc tors

33

Statutory Declarat ion

34

Indepen dent Audit ors’ R eport to the Members

35 – 37

Statements of Financial Po sit ion

38 – 40

Statements of Comprehens ive Income

41 – 42

Statements of Changes in E quit y

43 – 46

Statements of Cash Flow s

47 – 49

Notes to the Financ ial St atement s

50 – 127

Supplem entary Informat ion – Breakdo wn of Retained Prof its int o Realised and Unrealis ed

128

IFCA MSC BERHAD (Incorporated in Malaysia)

DIRECTORS’ REPORT

The Directors have pleasure in submitting 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 Company principal activities of the Company are the research and development of enterprise-wide business solutions. The principal activities of the subsidiaries are disclosed in Note 7 to the financial statements. There have been no significant change in the nature of these principal activities during the financial year. Financial Results

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. Dividends No dividend has been paid or declared by the Company since the end of the previous financial year. The Board of Directors does not recommend any dividend in respect of the financial year. Reserves and Provisions There were no material transfers to or from reserves or provision during the financial year other than those disclosed in the financial statements.

Group CompanyRM RM

Net profit/(loss) for the financial year 3,278,850 (334,870)

Profit/(Loss) attributable to:Owners of the parent 3,479,046 (334,870) Non-controlling interests (200,196) -

3,278,850 (334,870)

Annual Report 2012

27

Issue of Shares and Debentures During the financial year, the Company increased its issued and paid-up share capital from RM43,005,300 to RM45,005,300 through private placement of 20,000,000 new ordinary shares of RM0.10 per share at an issue price of RM0.10 per share for working capital purposes. The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company. There were no issues of debentures during the financial year. Options Granted Over Unissued Shares No options were granted to any person to take up unissued shares of the Company during the financial year. Warrant Reserves During the previous financial year, the Company issued 143,351,000 free detachable warrants for every two existing ordinary shares of RM0.10 each held in the Company in conjunction with the rights issue mentioned above. The warrants entitle the registered holder, at any time within a period of 5 years commencing on and including the issue date and expiring on 15 February 2016 to subscribe for one new ordinary share of RM0.10 each in the Company at the exercise price of RM0.10 per ordinary share for every warrant held. No warrant was exercised during the financial year. Directors The Directors who served since the date of last report are as follows: Yong Keang Cheun Yong Kian Keong Hoe Kah Soon Chew See Chiew Ooi Bee Bee Yong Kok Leong (appointed on 31.12.2012)


28

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 subsidiaries during the financial year were as follows:

At 1.1.2012 Addition Disposed At 31.12.2012

IFCA MSC BerhadDirect InterestYong Keang Cheun 45 - - 45 Yong Kian Keong 2,179,365 - - 2,179,365 Ooi Bee Bee 4,998,648 - - 4,998,648

Indirect InterestYong Keang Cheun (a) 202,084,008 - - 202,084,008 Yong Kian Keong (b) 199,904,688 - - 199,904,688

Subsidiaries:-


IFAC Web Sdn BhdDirect InterestYong Keang Cheun 70,000 - - 70,000 Yong Kian Kheong 30,000 - - 30,000

IFCA Solutions Sdn BhdDirect InterestYong Keang Cheun 70,000 - - 70,000 Yong Kian Keong 30,000 - - 30,000

IFCA Systems (JB) Sdn BhdDirect InterestYong Keang Cheun 1 - - 1 Yong Kian Keong 1 - - 1

IFCA Consulting Sarawak Sdn BhdDirect InterestYong Keang Cheun 8 - - 8 Yong Kian Keong 2 - - 2

IFCA Systems (Penang) Sdn BhdDirect InterestYong Keang Cheun 8 - - 8 Yong Kian Kheong 2 - - 2

Number of Ordinary Shares of RM 0.10 each

Number of Ordinary Shares of RM 1.00 each

Annual Report 2012

29

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 subsidiaries during the financial year were as follows: (Cont’d)

(a) By virtue of his substantial shareholdings in IFCA Software (Asia) Sdn Bhd and the shareholdings of his brother, Yong Kian Keong, Yong Keang Cheun is deemed to have an interest in the shares in the Company to the extent that IFCA Software (Asia) Sdn Bhd and Yong Kian Keong have an interest.

(b) By virtue of his substantial shareholdings in IFCA Software (Asia) Sdn Bhd and the

shareholdings of his brother, Yong Keang Cheun, Yong Kian Keong is deemed to have an interest in the shares in the Company to the extent that IFCA Software (Asia) Sdn Bhd and Yong Keang Cheun have an interest.

By virtue of their interests in shares in the Company and IFCA Software (Asia) Sdn Bhd, Yong Keang Cheun and Yong Kian Keong are also deemed interested in shares in all the subsidiaries to the extent of the Company's interests in the respective subsidiary. 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.

Subsidiaries:-

At 1.1.2012 Addition Disposed At 31.12.2012Number of Ordinary Shares of RM 1.00 each

Network Online Sdn BhdDirect InterestYong Keang Cheun 70,000 - - 70,000 Yong Kian Keong 30,000 - - 30,000

The Company


Direct InterestYong Keang Cheun 15 - - 15 Yong Kian Keong 726,455 - - 726,455 Ooi Bee Bee 1,666,050 - - 1,666,050

Indirect InterestYong Keang Cheun 67,361,336 - (49,806,900) 17,554,436 Yong Kian Keong 66,634,896 - (49,806,900) 16,827,996

Number of Warrants of RM 0.10 each


30

Directors’ Benefits Since the end of the previous financial year, no Director of the Company has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements) by reason of a contract made by the Company or a related corporations 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 a party to any arrangement the object of which is to enable the Directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Other 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 action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written-off and that adequate allowance had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their values 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 allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or

(ii) the values attributed to the 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.

Annual Report 2012

31


32

32

Other Statutory Information (Cont’d) (e) At the date of this report, there does not exist:

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

(ii) any contingent liability in respect of the Group and 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 liabilities of the Group and of the Company have become enforceable or are likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due; and

(ii) there has not arisen in the interval between the end of the financial year and the date of

this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made.

Significant Events The significant events are disclosed in Note 37 to the financial statements. Subsequent Event The subsequent event is disclosed in Note 38 to the financial statements. Auditors The auditors, Messrs UHY, have expressed their willingness to accept re-appointment. Signed on behalf of the Board of Directors in accordance with their resolution dated 15 Apr 2013.

YONG KEANG CHEUN YONG KIAN KEONG

Annual Report 2012

33


STATEMENT BY DIRECTORS

Pursuant to Section 169(15) of the Companies Act, 1965 We, YONG KEANG CHEUN and YONG KIAN KEONG, being two of the Directors of IFCA MSC BERHAD, do hereby state that, in the opinion of the Directors, the financial statements set out on pages 38 to 127 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 of 31 December 2012 and of their financial performance and the cash flows for the financial year then ended. The supplementary information set out in page 128 have been compiled in accordance with Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad. Signed on behalf of the Board of Directors in accordance with their resolution dated 15 Apr 2013.

YONG KEANG CHEUN YONG KIAN KEONG


34


STATUTORY DECLARATION

Pursuant To Section 169(16) Of The Companies Act, 1965 I, CHOW CHEE KENG, being the Officer primarily responsible for the financial management of IFCA MSC BERHAD, do solemnly and sincerely declare that the financial statements set out on pages 38 to 127 are to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by the abovenamed CHOW CHEE KENG at KUALA LUMPUR in the Federal Territory this 15 Apr 2013

) ) ) )

CHOW CHEE KENG Before me,

COMMISSIONER FOR OATHS

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF IFCA MSC BERHAD (Company No.: 453392-T) (Incorporated in Malaysia) Report on the Financial Statements We have audited the financial statements of IFCA MSC BERHAD, which comprise the statements of financial position as at 31 December 2012 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 38 to 127. Directors’ Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia, and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Annual Report 2012

35

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF IFCA MSC BERHAD (CONT’D) (Company No.: 453392-T) (Incorporated in Malaysia) 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 of 31 December 2012 and of their financial performance and cash flows for the financial 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 followings: (a) In our opinion, the accounting and other records and the registers required by the Act to be

kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We have considered the accounts and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 7 to the financial statements.

(c) We are satisfied that the accounts of the subsidiaries that have been consolidated with the

Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(d) The audit reports on the accounts of the subsidiaries did not contain any qualification or any

adverse comment made under Section 174(3) of the Act. Other Reporting Responsibilities The supplementary information set out on page 128 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad (“Bursa Securities”) and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ("MIA Guidance") and the directive of Bursa Securities. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Securities.


36

Annual Report 2012

37

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF IFCA MSC BERHAD (CONT’D) (Company No.: 453392-T) (Incorporated in Malaysia) Other Matters 1. As stated in Note 2(a) to the financial statements, IFCA MSC 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 restated 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 financial 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 financial 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.

UHY Firm Number: AF 1411 Chartered Accountants LO KUAN CHE Approved Number: 3016/11/14 (J) Chartered Accountant KUALA LUMPUR 15 Apr 2013

IFC

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38

IF

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Annual Report 2012

39

IFC

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(

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Mal

ays

ia)

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31

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97


40


STATEMENTS OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012

2012 2011 2012 2011Note RM RM RM RM

Revenue 24 45,930,879 37,665,328 5,490,460 5,279,778 Other income 25 1,735,677 2,819,580 1,123,970 2,154,261 Employee benefits expense 26 (20,473,778) (17,989,447) (3,444,417) (2,186,084) Changes in inventories (4,011,482) (4,331,740) (207,819) (210,449) Depreciation of property, plant and equipment (951,385) (1,042,001) (390,850) (425,626) Amortisation of development costs (2,848,949) (2,740,062) - - Other expenses (15,806,796) (16,557,683) (2,754,677) (2,614,531) Profit/(Loss) from operations 3,574,166 (2,176,025) (183,333) 1,997,349 Finance costs 28 (46,922) (168,930) (9,208) (54,424) Profit/(Loss) before tax 29 3,527,244 (2,344,955) (192,541) 1,942,925 Income tax expense 30 (248,394) (509,762) (142,329) (245,854) Profit/(Loss) for the year,

net of tax

Profit/(Loss) attributable to:Owners of the parent 3,479,046 (2,676,459) (334,870) 1,697,071 Non-controlling interests (200,196) (178,258) - -

3,278,850 (2,854,717) (334,870) 1,697,071

Group Company

3,278,850 (2,854,717) (334,870) 1,697,071

Annual Report 2012

41


STATEMENTS OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 (CONT’D)

The accompanying notes form an integral part of the financial statements.

2012 2011 2012 2011Note RM RM RM RM

Group Company

Other comprehensive income:Profit/(Loss) for the year,

net of tax 3,278,850 (2,854,717) (334,870) 1,697,071 Foreign currency translation 641,454 8,197 - - Fair value adjustment on

available-for-sale investment (130,757) 130,757 (130,757) 130,757 Total comprehensive income for the year, net of tax

Total comprehensive income attributable to:Owners of the parent 4,025,036 (2,535,916) (465,627) 1,827,828 Non-controlling interests (235,489) (179,847) - -

3,789,547 (2,715,763) (465,627) 1,827,828

Earnings/(Loss) per share attributable to owners of the parent (sen per share) 31 - Basic 0.80 sen (0.66) sen - Diluted 0.60 sen (0.48) sen

3,789,547 (2,715,763) (465,627) 1,827,828


42

IFC

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-

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140,5

43

(2,6

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(2,5

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16)

Annual Report 2012

43

IFC

A M

SC

BE

RH

AD

(

Inco

rpo

rate

d in

Mal

ays

ia)

S

TA

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Annual Report 2012

45

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46


STATEMENTS OF CASH FLOWS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012

2012 2011 2012 2011RM RM RM RM

Cash flows from operating activities

Profit/(Loss) before tax 3,527,244 (2,344,955) (192,541) 1,942,925

Adjustments for:Depreciation of property,

plant and equipment 951,385 1,042,001 390,850 425,626 Amortisation of development

costs 2,848,949 2,740,062 - - Net loss/(gain) on disposal

of property, plant and equipment 25,416 78,796 - (4,500)

Fair value of investment in a former associate

derecognised duringthe year - - - (945,465)

Loss/(gain) on disposalof interest in an associate - 2,174,405 - (195,994)

Loss on derecognition of an associate - 1,661,636 - - (Gain)/loss from fair value adjustment of investment

properties (4,000) (165,000) 6,000 (125,000) Impairment loss on trade and other receivables 700,071 767,272 - 10,645

Reversal of impairment

loss on trade and other

receivables (368,771) (816,847) - (32,375)

Property, plant and

equipment written off 9,916 44,402 1,210 2,068

Net unrealised loss

on foreign exchange 527,883 66,704 11,015 -

CompanyGroup

Annual Report 2012

47




2012 2011 2012 2011RM RM RM RM

CompanyGroup

Cash flows from operating activities (cont'd)

Impairment loss on

other investment 720,729 - 720,729 -

Interest expense 46,922 168,930 9,208 54,424

Interest income (558,393) (276,505) (1,084,104) (831,494)

Operating profit/(loss) before working capital changes 8,427,351 5,140,901 (137,633) 300,860

Changes in working capital: Receivables 4,815,937 (1,250,126) (388,246) 1,212,124 Payables (4,112,050) 5,293,849 32,536 (898,983) Subsidiaries - - 1,938,467 (1,925,086) Net cash generated from/(used in) operations 9,131,238 9,184,624 1,445,124 (1,311,085) Income taxes paid (486,957) (538,327) (320,051) (32,087) Net cash generated from/(used in) operating activities 8,644,281 8,646,297 1,125,073 (1,343,172)

Cash flows from investing activities Interest received 558,393 276,505 456,301 236,701 Investment in a subsidiary - - - (5,400) Purchase of property, plant and equipment (note 4c) (1,764,400) (884,862) (22,021) (271,685) Purchase of other investment - (73,500) - - Proceeds from disposal of

interest in an associate - 195,994 - 195,994 Proceeds from disposal of property, plant and equipment 538 205,000 - 54,500 Compensation from insurance claim 50,000 - - - Development costs incurred (2,428,822) (952,982) - - Net cash (used in)/generated from investing activities (3,584,291) (1,233,845) 434,280 210,110


48




The accompanying notes form an integral part of the financial statements.

2012 2011 2012 2011RM RM RM RM

CompanyGroup

Cash flows from financing activities

Interest paid (46,922) (168,930) (9,208) (54,424) Proceeds from issuance of shares 2,000,000 - 2,000,000 - Proceeds from issuance of right issue - 14,335,100 - 14,335,100 Payments to hire purchase and finance lease payables (316,838) (443,313) (83,564) (100,430) Net cash generated from financing activities 1,636,240 13,722,857 1,907,228 14,180,246

Net increase in cash and cash equivalents 6,696,230 21,135,309 3,466,581 13,047,184 Effects on foreign exchange rate changes (197,890) (312,545) - - Cash and cash equivalents at beginning of year 25,869,819 5,047,055 13,841,573 794,389 Cash and cash equivalents at end of year 32,368,159 25,869,819 17,308,154 13,841,573

Cash and cash equivalents comprises the following:

Fixed deposits with licensed banks 12,584,571 12,241,616 12,562,621 12,241,616 Cash and bank balances 19,783,588 13,628,203 4,745,533 1,599,957

32,368,159 25,869,819 17,308,154 13,841,573

Annual Report 2012

49


NOTES TO THE FINANCIAL STATEMENTS

1. Corporate Information

The Company is a public limited liability company, incorporated and domiciled in Malaysia whose shares are listed on the ACE Market of Bursa Malaysia Securities Berhad ("Bursa Malaysia"). The Company's principal place of business is located at Wisma IFCA, 19, Jalan PJU 1/42A, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan whilst its registered office is located at 24B, Persiaran Zaaba, Taman Tun Dr. Ismail, 60000 Kuala Lumpur. The principal activities of the Company are the research and development of enterprise-wide business solutions. The principal activities of its subsidiaries are described in Note 7. There have been no significant changes in the nature of these principal activities during the financial year.

2. Basis of Preparation

(a) Statement of Compliance

The financial statements of the Group and of the Company have been prepared on the historical cost convention except as disclosed in the notes to the financial statements and in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the Companies Act 1965 in Malaysia. In the previous years, the financial statements of the Group and of the Company were prepared in accordance with Financial Reporting Standards (“FRSs”). These are the Group’s and the Company’s first financial statements prepared in accordance with MFRSs and MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards has been applied. The transition to MFRSs does not have financial impact to the financial statements of the Group and of the Company. The Group and the Company have not applied the following MFRSs that have been issued by the Malaysian Accounting Standards Board (“MASB”) but are not yet effective for the Group and the Company:


50

2. Basis of Preparation (Cont’d)

(a) Statement of Compliance (Cont’d)

Effective date for financial periods

beginning on or after Amendments to MFRS 101

Presentation of Items of Other Comprehensive Income

1 July 2012

MFRS 10 Consolidated Financial Statements 1 January 2013 MFRS 11 Joint Arrangements 1 January 2013 MFRS 12 Disclosure of Interests in Other

Entities 1 January 2013

MFRS 13 Fair Value Measurement 1 January 2013 MFRS 119 (2011) Employee Benefits 1 January 2013 MFRS 127 (2011) Separate Financial Statements 1 January 2013 MFRS 128 (2011) Investments in Associates and Joint

Ventures 1 January 2013

MFRS 3 Business Combinations (IFRS 3 issued by IASB in March 2004)

1 January 2013

MFRS 127 Consolidated and Separate Financial Statements (IAS 27 revised by IASB in December 2003)

1 January 2013

IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine

1 January 2013

Amendments to MFRS 1

Government Loans 1 January 2013


Disclosures - Offsetting Financial Assets and Financial Liabilities

1 January 2013

Amendments to MFRS 10, MFRS 11 and MFRS 12

Consolidated Financial Statements, Joint Arrangement and Disclosure of Interests in Other Entities: Transition Guidance

1 January 2013

Amendments to MFRSs contained in the document entitled “Annual Improvements 2009 – 2011 Cycle”

1 January 2013


Offsetting Financial Assets and Financial Liabilities

1 January 2014

Amendment to MFRS 10

Investment Entity 1 January 2014

MFRS 9 (IFRS 9 (2009))

Financial Instruments (IFRS 9 issued by IASB in November 2009)

1 January 2015

MFRS 9 (IFRS 9 (2010))

Financial Instruments (IFRS 9 issued by IASB in October 2010)

1 January 2015

Annual Report 2012

51


(a) Statement of Compliance (Cont’d) The Group and the Company intend to adopt the above MFRSs when they become effective. The initial application of the standards which will be applied prospectively or which requires extended disclosures, is not expected to have any financial impacts to the current and prior period’s financial statements upon the first adoption. The possible financial impacts of initial application of MFRSs, which will be applied retrospectively is as follows: MFRS 9 Financial Instruments MFRS 9 (IFRS 9 (2009)) replaces the guidance in MFRS 139 Financial Instruments: Recognition and Measurement on classification and measurement of financial asset. MFRS 9 requires financial asset to be measured at fair value or amortised cost. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. MFRS 9 (IFRS 9 (2010)) includes the requirements for the classification and measurement of financial liabilities and for derecognition. Measurement for financial liability designated as at fair value through profit or loss, requires the amount of change in the fair value of the financial liability, that is attributable to the change of credit risk of that liability, is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Under MFRS 139, the entire amount of the change in fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss. The adoption of MFRS 9 will result in a change in accounting policy. The Group is currently examining the financial impact of adopting MFRS 9. MFRS 10 Consolidated Financial Statements MFRS 10 replaces all the guidance on control and consolidation in MFRS 127 Consolidated and Separate Financial Statements and IC Interpretation 112 Consolidation – Special Purpose Entities. MFRS 10 changes the definition of control. An investor controls an investee when it 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. It establishes control as the basis for determining which entities are consolidated in the consolidated financial statements and sets out the accounting requirements for the preparation of consolidated financial statements.


52


(a) Statement of Compliance (Cont’d) MFRS 10 Consolidated Financial Statements (cont’d) The adoption of MFRS 10 may lead to consolidation of entities that were previously not included in the Group. The Group is currently examining the financial impact of application of MFRS 10. MFRS 13 Fair Value Measurement MFRS 13 defines fair value and sets out a framework for measuring fair value, and the disclosure requirements about fair value. This standard is intended to address the inconsistencies in the requirements for measuring fair value across different accounting standards. The definition of fair value under this standard emphasises the principle that fair value is a market-based measurement, not an entity specific measurement. The adoption of MFRS 13 will result in a change in accounting policy. The Group is currently examining the financial impact of adopting MFRS 13. MFRS 127 Separate Financial Statements (2011) Upon the adoption of MFRS 10, the accounting requirements relating to the preparation of consolidated financial statements are no longer covered under MFRS 127. This revised MFRS 127 only cover the requirements relating to the accounting for investments in subsidiary companies, associated companies and joint ventures in the separate financial statements of the entity. In such cases, the entity should account for such investments either at cost, or in accordance with MFRS 9. The adoption of MFRS 127 (2011) will result in a change in accounting policy. The Group is currently examining the financial impact of adopting MFRS 127 (2011). MFRS 128 Investments in Associates and Joint Ventures (2011) This revised MFRS 128 incorporates the requirements for accounting for joint ventures, as well as associates, to be equity accounted following the issue of MFRS 11. However, the revised MFRS 128 exempts the investor from applying equity accounting in certain circumstances, i.e. where the investment in the associated company or joint venture is held indirectly via venture capital organisations or mutual funds and similar entities. In such cases, the entity shall measure the investment at fair value through profit or loss, in accordance with MFRS 9. The adoption of MFRS 128 (2011) will result in a change in accounting policy. The Group is currently examining the financial impact of adopting MFRS 128 (2011). The initial applications of other MFRSs are not expected to have any material financial impacts on the financial statements of the Group and of the Company.

Annual Report 2012

53


(b) Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (RM), which is the Group’s and the Company’s functional currency.

(c) Significant accounting estimates and judgements

The summary of accounting policies as described in Note 3 are essential to understand the Group’s and the Company’s results of operations, financial position, cash flows and other disclosures. Certain of these accounting policies require critical accounting estimates that involve complex and subjective judgements and the use of assumptions, some of which may be for matters that are inherently uncertain and susceptible to change. Directors exercise their judgement in the process of applying the Group’s accounting policies. Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Group's accounting policies and reported amounts of assets, liabilities, income and expenses, and disclosures made. Estimates and underlying assumptions are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results. The key assumptions concerning the future and other key sources of estimation or uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below. Capitalisation and amortisation of deferred development costs The Group capitalised costs relating to the development and enhancement of its new and existing products respectively, upon meeting all the criteria for capitalisation as described in Note 3(g). Amortisation, which commences upon commercialisation or sale of products, is recognised in the profit or loss based on a straight-line basis over the products' estimated economic lives of 5 years. The Group review the amortisation period and amortisation method at least once a year. However, if there are indications that the products are unable to meet expected future cash flow, immediate impairment loss would be recognised. Details of deferred development costs are disclosed in Note 6.

Impairment of receivables The Group and the Company assess 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 and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.


54


(c) Significant accounting estimates and judgements (cont’d)

Impairment of 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 and the Company's receivables at the reporting date is disclosed in Notes 11 and 12.

Income taxes Significant estimation is involved in determining the provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group and the Company recognises liabilities for expected tax issues based on estimates or whether additional taxes will be due. Where the final outcome of these matters are different from the amounts initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Details of income tax expenses are disclosed in Note 30. Deferred tax assets Deferred tax assets are recognised for all unabsorbed capital allowances and reinvestment allowances to the extent that it is probable that taxable profit will be available against which the capital allowances 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. As at 31 December 2012, the deferred tax assets not recognised are disclosed in Note 21. Depreciation of plant and equipment The useful lives and residual values of plant and equipment including motor vehicles are estimated based on common life expectancies and commercial factors applied in the industry. The residual values of the plant and equipment including motor vehicles were revised by the Group as if the assets were already of the age and in the condition expected of them at the end of their useful lives. The estimated useful lives of plant and equipment are reviewed periodically and changes in expected level of usage, technological improvements and economic situation could impact the economic useful lives and the residual values of these assets, and hence future depreciation charges on such assets could be revised. Details of property, plant and equipment are disclosed in Note 4.

Annual Report 2012

55


(c) Significant accounting estimates and judgements (cont’d)

Impairment of investment in subsidiaries (Note 7) The carrying values of investment in subsidiaries and the related goodwill are reviewed for impairment. In the determination of the value in use of the investment, the Company is required to estimate the expected cash flows to be generated by the subsidiary companies and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

Revenue recognition (Note 24) Revenue from contract work/sale of software applications is recognised on the percentage of completion method determined on the proportion of cost incurred to date against total estimated cost. Significant judgement is required to determine the stage of completion. In all cases, anticipated losses are provided in full. Fair value of financial instruments Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the notes regarding financial assets and liabilities. In applying the valuation techniques management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm's length transaction at the end of the reporting period. Impairment of non-financial assets An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows management makes assumptions about future operating results. The actual results may vary, and may cause significant adjustments to the Group's assets within the next financial year. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.


56

3. Significant Accounting Policies

(a) 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.

Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as 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 interests in the acquire; plus • if the business combination is achieved in stages, the fair value of the existing equity interest in the acquire; 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 interests 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 MFRSs, i.e. 1 January 2011. Goodwill arising from acquisitions before 1 January 2011 has been carried forward from the previous FRS framework as at the date of transition.

Annual Report 2012

57

3. Significant Accounting Policies (Cont’d)

(a) Basis of consolidation (cont’d)

(iii) Associate

Associate company is entity in which the Group has significant influence, but no control, over their financial and operating policies. Investments in associate company is accounted for using the equity method of accounting. Investments in associate company include goodwill identified on acquisition, net of any accumulated impairment loss in accordance with Note 3(j)(i). Equity accounting involves recording investments in associate company initially at cost, and recognising the Group’s share of its associate companies’ post-acquisition results and its share of post-acquisition net results and other changes to comprehensive income against the carrying amount of the investments. When the Group’s share of losses in an associate company equals or exceeds its interest in the associate company, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate company. When the Group ceases to have significant influence over an associate company, it is accounted for as a disposal of the entire interest in that associate company, with a resulting gain or loss being recognised in profit or loss. Any retaining investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. Any difference between the carrying amount of the associate company upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognised in profit or loss. When the Group’s interest in an associate company reduces but does not result in a loss of significant influence, any retained interest is not re-measured. Any gain or loss arising from the decrease in interest is recognised in profit or loss. Any gains or losses previously recognised in other comprehensive income are also reclassified proportionately to the profit or loss. Unrealised gains and losses resulting from transactions between the Group and the associate company are eliminated to the extent of the interest in the associate. In the Company’s separate financial statements, investments in associates are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.


58


(a) Basis of consolidation (cont’d)

(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) 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.

(vi) 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 Company. 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 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.

(vii) 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.

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(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments or a financial instrument designated as a hedge of currency risk, which are recognised in other comprehensive income.

(ii) Operations denominated in functional currencies other than Ringgit Malaysia

The assets and liabilities of operations denominated in functional currencies other

than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period, except for goodwill and fair value adjustments arising from business combinations before 1 January 2011 which are treated as assets and liabilities of the Company. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to RM at exchange rates at the dates of the transactions.

The income and expenses of foreign operations in hyperinflationary economies

are translated to RM at the exchange rate at the end of the reporting period. Prior to translating the financial statements of foreign operations in hyperinflationary economies, their financial statements for the current period are restated to account for changes in the general purchasing power of the local currency. The restatement is based on relevant price indices at the end of the reporting period.

Foreign currency differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve (FCTR) in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the profit or loss on disposal.


60


(b) Foreign currency (cont’d)

(ii) Operations denominated in functional currencies other than Ringgit Malaysia (cont’d)

When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss. In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the FCTR in equity.

(c) Financial assets

Financial assets are recognised on the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value. Transaction costs for financial assets at fair value through profit or loss are recognised immediately in profit or loss. The Group and the Company classifies its financial assets depending on the purpose for which it was acquired at initial recognition, into the following categories:

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(c) Financial assets (cont’d) (i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than 12 months after the end of the reporting period which are presented as non-current assets. After initial recognition, financial assets categorised as loans and receivables are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

(ii) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are presented as non-current assets unless management intends to dispose of the assets within 12 months after the end of the reporting period. After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised in other comprehensive income, except that 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. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group’s and the Company's right to receive payment is established.

(iii) Available-for-sale financial assets

Investment in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment loss

Regular way purchase or sale of financial assets

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset.


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(c) Financial assets (cont’d) Derecognition Financial assets are derecognised when the contractual rights to receive cash flows from the financial assets have expired or have been transferred and the Group and the Company have transferred substantially all risks and rewards of ownership. On derecognition of a financial asset, the difference between the carrying amount and the sum of consideration received and any cumulative gains or loss that had been recognised in equity is recognised in the profit or loss.

(d) Financial Liabilities Financial liabilities are recognised on the statements of financial position when, and only when the Group and the Company become a party to the contractual provisions of the financial instrument. All financial liabilities are initially recognised at fair value plus transaction cost and subsequently carried at amortised cost using the effective interest method, other than those categorised as fair value through profit or loss. Changes in the carrying value of these liabilities are recognised in the profit or loss. The Group and the Company classify their financial liabilities at initial recognition, into the following:

Other liabilities measured at amortised cost Other financial liabilities are non-derivatives financial liabilities. The Group’s and the Company’s other financial liabilities comprise trade and other payables and borrowings. Other financial liabilities are classified as current liabilities; except for maturities more than 12 months after the end of the reporting period, in which case they are classified as non-current liabilities. Other liabilities are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the profit or loss when the liabilities are derecognised as well as through the effective interest rate method amortisation process. Derecognition A financial liability or a part of it is derecognised when, and only 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 of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

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(d) Financial Liabilities (cont’d) Offsetting of Financial Instruments A financial asset and financial liability are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

(e) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The policy of recognition and measurement of impairment losses is in accordance with Note 3(j)(i).

(i) Recognition and measurement

Cost includes expenditures that are directly attributable to the acquisition of the assets and any other costs directly attributable to bringing the asset to working condition for its intended use, cost of replacing component parts of the assets, and the present value of the expected cost for the decommissioning of the assets after their use. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. All other repair and maintenance costs are recognised in profit or loss as incurred.

The cost of property, plant and equipment recognised as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of other items of plant and equipment is based on the quoted market prices for similar items.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount.


64

3. Significant Accounting Policies (Cont’d) (e) Property, plant and equipment (cont’d)

(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the statements of comprehensive income as incurred.

(iii) Depreciation Depreciation is recognised in the profit or loss on straight line basis to write off the cost of each asset to its residual value over its estimated useful life. Freehold land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives for the current and comparative periods are as follows:

Buildings 1-2% Motor vehicles 20% Office and computer equipment 10-20% Renovations, furniture and fittings 10-20%

The residual values, useful lives and depreciation method are reviewed at each financial period end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the motor vehicle and other property, plant and equipment.

(f) Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or asset or the arrangement conveys a right to use the asset, even if that right is not explicitly specific in an arrangement. For arrangements entered into prior to 1 January 2010, the date of inception is deemed to be 1 January 2010 in accordance with the MFRS 1.

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(f) Leases (cont’d)

(i) Finance Lease

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the profit or loss. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

Leasehold land which in substance is a finance lease is classified as a property, plant and equipment.

(ii) Operating Lease

Leases, where the Group does not assume substantially all the risks and rewards of ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred. Leasehold land which in substance is an operating lease is classified as prepaid land lease payments.


66


(g) Internally-generated intangible assets - research and development costs

Research costs are expensed as incurred Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred. Development costs, on an individual project are recognised when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditures during development. The capitalised development costs is measured at cost less any accumulated amortisation and impairment losses. Subsequent expenditure is capitalised when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred. Amortisation of the capitalised development costs is recognised in profit or loss, begins when development is complete and the specific asset is available for use. It is amortised over the 5 years period of expected future benefit on a straight-line basis. The residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each reporting date. Gain or losses arising from derecognition of the capitalised development costs is measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit or loss when the asset is derecognised.

(h) Investment property

Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value. Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss in the year in which they arise. The fair values are determined by external professional valuers with sufficient experience with respect to both the location and the nature of the investment property and supported by market evidence. Investment properties are derecognised when either they are disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from the disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in the profit or loss in the year of retirement or disposal.

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(h) Investment property (cont’d)

When an item of property, plant and equipment is transferred to investment property following a change in its use, any difference arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognised directly in equity as a revaluation of property, plant and equipment. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in profit or loss. Upon disposal of an investment property, any surplus previously recorded in equity is transferred to retained earnings, the transfer is not made through profit or loss.

(i) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in fair value with original maturities of three months or less, and are used by the Group and the Company in the management of their short term commitments. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.

(j) Impairment of Assets

(i) Non-financial assets

The carrying amounts of non-financial assets are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets with indefinite useful lives, they are tested for impairment annually as at the end of each reporting period, either individually or at the cash-generating unit level, as appropriate and when circumstances indicate that the carrying value may be impaired.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses is recognised immediately in profit or loss. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. The recoverable amount of an asset or cash-generating units is the greater of its value in use and its fair value less costs to sell. 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 risks specific to the asset.


68


(j) Impairment of Assets (cont’d)

(i) Non-financial assets (cont’d) Previously recognised impairment losses are assessed at the end of each reporting period whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for asset in prior years. Such reversal is recognised in the profit or loss.

(ii) Financial assets

All financial assets, other than those at fair value through profit or loss, investment in subsidiary company and investment on associate company, 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. Loans and Receivables

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the receivable and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics.

Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with defaults on receivables. If any such evidence exists, the amount of impairment loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of impairment loss is recognised in the profit or loss.

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69


70


(j) Impairment of Assets (cont’d)

(ii) Financial assets (cont’d)

Loans and Receivables (cont’d) If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss. Available-for-sale financial assets Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired. If an available-for-sale financial asset is impaired, the amount of impairment loss is recognised in profit or loss and is measured as the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously. When a decline of fair value of an available-for-sale financial asset has been recognised in other comprehensive income, the cumulative loss is reclassified from equity to profit or loss. Impairment losses on available-for-sale equity investment that is carried at cost are not reversed in profit or loss in the subsequent periods. For available-for-sale debt investments, impairment losses are subsequently reversed in profit or loss, if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss.

(k) Share capital

(i) Ordinary shares

An equity instrument is any contract that evidences a residual interest in the assets of the Group and of the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Ordinary shares are recorded at the nominal value of shares issued. Ordinary shares are classified as equity. Dividends on ordinary shares are accounted for in equity as appropriation of retained earnings and recognised as a liability in the period in which they are declared.


(k) Share capital (cont’d)

(ii) Distribution of non-cash assets to owners of the Company

The distribution of non-cash assets to owners is recognised as dividend payable when the dividend was approved by shareholders. The dividend payable is measured at the fair value of the shares to be distributed. At the end of the financial year and on the settlement date, the Group reviews the carrying amount of the dividend payable, with any changes in the fair value of the dividend payable recognised in equity. When the Group settles the dividend payable, the difference between the carrying amount of the dividend distributed and the carrying amount of the dividend payable is recognised as a separate line item in profit or loss.

(l) Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and the Company and when the revenue can be measured reliably, on the following bases:

(i) Sale of goods

Revenue from sale of goods is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer. Revenue of project works is recognised based on the stage of completion.

(ii) Rendering of services

Revenue from rendering of services is recognised in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to the proportion that costs incurred to date that reflect services performed bear to the total estimated costs of the transaction. Where the outcome of the transaction cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

(iii) Deposit and maintenance fees

Deposits and maintenance fees received in advance from customers are recognised over the respective periods to correlate with the delivery of goods or service obligations, as applicable.

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(l) Revenue rcognition (cont’d)

(iv) Interest income

Interest income is recognised on accruals basis using the effective interest method.

(v) Rental income

Rental income is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.

(vi) Royalty income

Royalty income is recognised on an accrual basis in accordance with the licensing agreements.

(m) Employee benefits

(i) Short term Employee Benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group. 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 such as sick and medical leave are recognised when the absences occur. The expected cost of accumulating compensated absences is measured as additional amount expected to be paid as a result of the unused entitlement that has accumulated at the end of the reporting period.

(ii) Defined contribution plans

As required by law, companies in Malaysia and The People’s Republic of China make contributions to the state pension scheme. Such contributions are recognised as an expense in the profit or loss as incurred. Once the contributions have been paid, the Group has no further payment obligations.


72


(n) Income tax

Tax expense in profit or loss comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the liability method for all temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the temporary differences arising from the initial recognition of goodwill, the initial recognition of assets and liabilities in a transaction which is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax is based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, at the end of the reporting period, except for investment properties carried at fair value model. Where investment properties measured using fair value model, the amount of deferred tax recognised is measured using the tax rates that would apply on sale of those assets at their carrying amounts at the reporting date unless the property is depreciable and is held with the objective to consume substantially all of the economic benefits embodied in the property over time, rather than through sale. Deferred tax assets and liabilities are not discounted. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

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73


(o) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-makers are responsible for allocating resources and assessing performance of the operating segments and make overall strategic decisions. The Group’s operating segments are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

(p) Contingencies

Where it is not probable that an inflow or an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the asset or the obligation is disclosed as a contingent asset or contingent liability, unless the probability of inflow or outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent assets or contingent liabilities unless the probability of inflow or outflow of economic benefits is remote.

(q) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the assets, which are assets that necessarily take a substantial period of time to get ready for theirs intended use or sale, are capitalised as part of the cost of those assets. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds. The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.


74

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Annual Report 2012

75

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Annual Report 2012

77

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78

4. Property, Plant and Equipment (Cont’d)

(a) The carrying amounts of property, plant and equipment of the Group and of the Company acquired under hire purchase are as follow:

(b) Included in property, plant and equipment of the Group and of the Company are fully depreciated assets which are still in use costing RM 1,230,967 (31.12.2011: RM 995,144, 1.1.2011: RM252,598) and RM 737,568 (31.12.2011: RM 624,143, 1.1.2011: RM56,275) respectively.

(c) The aggregate additional cost for the property, plant and equipment of the Group under

hire purchase financing and cash payments are as follows:

(d) The strata titles of certain property of the Group and of the Company with net carrying amounts of RM42,876 (31.12.2011: RM44,657, 1.1.2011: RM46,438) have yet to be issued by the relevant authorities.

31.12.2012 31.12.2011 1.1.2011RM RM RM

Motor vehicles 1,241,268 1,485,316 1,851,289 Office equipment 36,590 42,900 63,359

1,277,858 1,528,216 1,914,648

31.12.2012 31.12.2011 1.1.2011RM RM RM

Motor vehicles 112,749 199,454 273,637 Office equipment 11,250 15,750 21,566

123,999 215,204 295,203

Group

Company

31.12.2012 31.12.2011RM RM

Aggregate costs 1,814,400 1,202,762 Less: Hire purchase and finance lease financing (50,000) (317,900)

Cash payments 1,764,400 884,862

31.12.2012 31.12.2011RM RM

Aggregate costs 22,021 323,585 Less: Hire purchase and finance lease financing - (51,900)

Cash payments 22,021 271,685

Company

Group

Annual Report 2012

79

5. Investment Properties

Investment properties comprise a number of commercial properties available for leasing. The fair value of the investment properties was valued by an independent valuer, IM Global Property Consultants Sdn. Bhd. based on comparable available market data. The strata title of an investment property of the Company with carrying amount RM174,000 (31,.12.2011: RM180,000, 1.1.2011: RM55,000) has yet to be issued by the relevant authority. The land title of an investment property of the Group with carrying amount of RM260,000 (31.12.2011: RM250,000, 1.1.2011: RM210,000) has yet to be transferred by the vendor.

6. Deferred Development Costs

31.12.2012 31.12.2011 31.12.2012 31.12.2011RM RM RM RM

At fair valueAt 1 January 430,000 265,000 180,000 55,000 Fair value adjustment 4,000 165,000 (6,000) 125,000

At 31 December 434,000 430,000 174,000 180,000

Group Company

31.12.2012 31.12.2011RM RM

Cost:At 1 January 15,596,672 13,770,489 Additions for the year 2,428,822 952,982 Exchange differences (307,951) 873,201 At 31 December 17,717,543 15,596,672

Amortisation and impairment:At 1 January 11,108,182 7,787,328

Amortisation 2,848,949 2,740,062 Exchange differences (206,945) 580,792 At 31 December 13,750,186 11,108,182

Net carrying amountAt 31 December 3,967,357 4,488,490

At 1 January 4,488,490 5,983,161

Group


80

6. Deferred Development Costs (Cont’d)

The Group capitalises costs on development work on enhancement of existing as well as development of new softwares. These products are assessed to have a finite life of 5 years upon commercialisation. The amortisation period and amortisation method are reviewed at least annually for appropriateness. The recoverable amount for the above was based on its value-in-use and was determined by discounting pre-tax cash flows based on the following key assumptions:

(i) Cash flows were projected based on actual operating results and 5-year business plans; (ii) Revenue was projected at anticipated annual average revenue growth rate of 10% (2011:

10%) per annum; (iii) Expenses were projected at annual increase of approximately 10% (2011: 10%) per

annum; and (iv) A pre-tax discount rate of 6.3% (2011: 6.3%) per annum was applied in determining the

recoverable amount of the unit. The discount rate was estimated based on the average cost of borrowing available in the market.

The directors have forecasted the cash flows based on past performance and its expectations of market development. There are no reasonably possible changes in key assumptions that may have any significant effect to the recoverable amount.

31.12.2012 31.12.2011RM RM

Additions for the year include the following:

Employee benefits expense (Note 26) 1,579,483 884,818

Group

Annual Report 2012

81

7. Investment in Subsidiaries

Details of the subsidiaries are as follows:

31.12.2012 31.12.2011 1.1.2011

RM RM RM

Unquoted shares, at cost- Malaysia 5,249,978 5,249,978 5,249,978 - Foreign 8,679,327 8,679,327 8,673,927

13,929,305 13,929,305 13,923,905 Less: Accumulated impairment losses (9,273,923) (9,273,923) (9,273,923)

4,655,382 4,655,382 4,649,982 Discount on amounts due from subsidiaries 3,749,907 3,749,907 3,749,907

8,405,289 8,405,289 8,399,889

Company

Name of subsidiaries Principal activities31.12.2012 31.12.2011 1.1.2011

% % %

IFCA Solutions Sdn Bhd 85.71 85.71 85.71 Turnkey solutions providerIFCA Systems (JB) Sdn Bhd 99.99 99.99 99.99 Turnkey solutions providerIFCA Systems (Penang) Sdn Bhd 99.99 99.99 99.99 Turnkey solutions provider

IFCA Consulting (Sarawak) Sdn Bhd 99.99 99.99 99.99 Turnkey solutions provider

IFCA Web Sdn Bhd 85.71 85.71 85.71 Turnkey solutions provider, but currently dormant

Network Online Sdn Bhd 85.71 85.71 85.71 Installation and servicing of computer hardware

and networks

IFCA Consulting (Sabah) Sdn Bhd 60.00 60.00 60.00 Turnkey solutions provider

Push Technology Sdn Bhd 100.00 100.00 100.00 Turnkey solutions provider, and research and

development

Effective equity interest


82

7. Investment in Subsidiaries (Cont’d)

Details of the subsidiaries are as follows: (cont’d)

* Audited by firms of auditors other than UHY.

Except for Jingyou Information Technology (Shanghai) Co. Ltd., and IFCA (Guangzhou) Technology Company Limited and its subsidiaries, which are incorporated in the People's Republic of China, IFCA International Limited which is incorporated in the Seychelles and EFFICA Technology (Pty) Ltd, which is incorporated in the South Africa, all other subsidiaries are incorporated in Malaysia. On 18 October 2012 the Company received notification that its subsidiary company, Guangzhou Jingyou Management Consulting Co. Ltd (“GJMC”) incorporated in the People’s Republic of China (“PRC’’), which is held through IFCA (Guangzhou) Technology Company Ltd, had been voluntarily deregistered on 15 June 2012 from the State Administration of Industry and Commerce of China. The voluntary deregistration of GJMC has no material impact to the financial statements.

Name of subsidiaries Principal activities31.12.2012 31.12.2011 1.1.2011

% % %

Effective equity interest

Jingyou Information Technology (Shanghai) Co. Ltd * 100.00 100.00 100.00 Turnkey solutions provider

IFCA (Guangzhou) Technology Company Limited * 100.00 100.00 100.00 Research and developmentIFCA International Limited 100.00 100.00 100.00 Turnkey solutions providerEFFICA Technology (Pty) Ltd * 100.00 100.00 100.00 Turnkey solutions provider

Subsidiaries of IFCA (Guangzhou) Technology

Company Limited

Guangzhou Jingyou Management Consulting Co. Ltd * - 51.00 51.00 Turnkey solutions providerGuangzhou Jingyou Computer Technology Co. Ltd * 80.00 80.00 80.00 Research and development

IFCA (Wuhan) Technology Company Limited * 100.00 100.00 100.00Research and development

Annual Report 2012

83

8. Investment in Associate

Details of the associate are as follows:

In previous year, the Company disposed 12,939,000 shares out of 44,161,000 shares that it held in IFCA Tech. Subsequent to the disposal, the Company's equity interest in IFCA Tech was reduced to 10.34% following the increase in the issued and paid-up capital of IFCA Tech. The Company no longer exercises significant influence over the financial and operating policies of IFCA Tech and hence derecognised IFCA Tech as an associate.

31.12.2012 31.12.2011 1.1.2011RM RM RM

Foreign investment:Quoted shares at cost - - 9,019,176

Share of post acquisition reserve - - (4,041,676)

- - 4,977,500

Less: Exchange differences - - (4,977,500)

- - -

Market value of quoted shares

- as at reporting date - - 2,778,831

- as at 20 April 2011 - - 1,296,788

Group

31.12.2012 31.12.2011 1.1.2011RM RM RM

Foreign investment:

Quoted shares at cost - - 13,339,495

Less: Accumulated impairment losses - - (13,339,495)

- - -

Market value of quoted shares

- as at reporting date - - 2,778,831

- as at 20 April 2011 - - 1,296,788

Company

Name of associate Country of Principal 31.12.2012 31.12.2011 1.1.2011incorporation activity % % %

Sherbourne CapitalLimited (f.k.a IFCA Technologies Limited Republic of Investment

("IFCA Tech")) South Africa holding - - 38.40

Effective Control


84

Annual Report 2012

85

8. Investment in Associate (Cont’d)

Details of the effect of the disposal and dilution in Sherbourne Capital Limited (f.k.a IFCA Tech) are as follows:

9. Other Investments

The investment in club memberships is unquoted and the management are of the view that under such circumstances, it is not possible to disclose the range estimates within which a fair value is likely to lie.

Group Company31.12.2011 31.12.2011

Proceed from disposal of shares 195,994 195,994 Less: Carrying amount of investment - -

Foreign exchange reserve realised on disposal (2,370,399) - Net (loss)/gain on disposal (2,174,405) 195,994

Recognition of investment at fair value upon derecognition as an associate 945,465 945,465

Less: Foreign exchange reserve realised upon derecognition (2,607,101) - (Loss)/gain on derecognition of associate (1,661,636) 945,465

31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011RM RM RM RM RM RM

Available-for- sale

Investment in

foreign

quoted shares 1,076,222 1,076,222 - 1,076,222 1,076,222 -

Less:

Impairment loss (851,486) - - (851,486) - -

224,736 1,076,222 - 224,736 1,076,222 -

Other investmentInvestment

in club

memberships,

at cost 201,674 201,674 128,174 91,000 91,000 91,000

426,410 1,277,896 128,174 315,736 1,167,222 91,000

Market value of

quoted shares 224,736 1,076,222 - 224,736 1,076,222 -

Group Company

10. Amounts due from Subsidiaries

Amounts due from subsidiaries are unsecured, interest-free and repayable on demand, except for the non-current portion which are not expected to be recovered in the foreseeable future.

11. Trade Receivables

The Group’s and the Company’s normal trade credit terms range from 30 to 90 (31.12.2011: 30 to 90, 1.1.2011: 30 to 90 ) days. Other credit terms are assessed and approved on a case by case basis. Trade receivables are recognised at their original invoice amounts which represent their fair value on initial recognition.

31.12.2012 31.12.2011 1.1.2011RM RM RM

CurrentAmounts due from subsidiaries (trade) 4,420,231 7,483,773 5,663,741 Less: Allowance for impairment (1,283,627) (1,283,627) (1,283,627)

3,136,604 6,200,146 4,380,114 Amounts due from subsidiaries (non-trade) 2,244,296 1,197,628 1,331,636

5,380,900 7,397,774 5,711,750

Non-currentAmounts due from subsidiaries (trade) 1,133,746 1,074,132 1,017,652 Amounts due from subsidiaries (non trade) 10,805,827 10,237,638 9,699,325

11,939,573 11,311,770 10,716,977

Company

31.12.2012 31.12.2011 1.1.2011RM RM RM

Third parties 12,194,542 17,163,823 16,300,042 Less: Allowance for impairment (3,249,860) (3,074,765) (3,404,545) Trade receivables, net 8,944,682 14,089,058 12,895,497

31.12.2012 31.12.2011 1.1.2011RM RM RM

Third parties 1,964,656 1,670,819 2,319,670 Less: Allowance for impairment (420,605) (420,605) (604,210) Trade receivables, net 1,544,051 1,250,214 1,715,460

Group

Company


86

11. Trade Receivables (Cont’d)

Analysis of the trade receivables ageing is as follows:

Receivables that are neither past due nor impaired Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. More than 61% (31.12.2011: 61%, 1.1.2011: 53%) of the Group's trade receivables arises from customers with more than 5 years of experience with the Group and losses have occurred infrequently. None of the Group's trade receivables that are neither past due nor impaired have been renegotiated during the financial year.

31.12.2012 31.12.2011 1.1.2011RM RM RM

Neither past due nor impaired 2,230,228 3,625,294 4,599,911

1 to 30 days past due not impaired 929,589 1,420,904 1,214,517 31 to 60 days past due not impaired 659,745 2,242,397 1,160,907 61 to 90 days past due not impaired 721,961 1,055,909 1,717,803 91 to 120 days past due not impaired 603,990 1,582,249 1,151,662 More than 120 days not impaired 3,799,169 4,162,305 3,050,697 Total past due not impaired 6,714,454 10,463,764 8,295,586 Impaired 3,249,860 3,074,765 3,404,545

Trade receivables, gross 12,194,542 17,163,823 16,300,042

31.12.2012 31.12.2011 1.1.2011RM RM RM

Neither past due nor impaired 171,768 - 235,002

1 to 30 days past due not impaired 140,559 65,388 129,413 31 to 60 days past due not impaired 88,332 65,388 157,763 61 to 90 days past due not impaired 217,639 142,037 186,566 91 to 120 days past due not impaired 132,804 138,841 281,281 More than 120 days not impaired 792,949 838,560 725,435 Total past due not impaired 1,372,283 1,250,214 1,480,458 Impaired 420,605 420,605 604,210

Trade receivables, gross 1,964,656 1,670,819 2,319,670

Group

Company

Annual Report 2012

87


Receivables that are past due but not impaired The Group and the Company have trade receivables amounting to RM6,714,454 and RM1,372,283 (31.12.2011: RM10,463,764 and RM1,250,214, 1.1.2011: RM8,295,586 and RM1,480,458) respectively that are past due at the reporting date but not impaired. The total amount that are past due but not impaired are unsecured in nature. The Group has not recognised any impairment loss on certain receivables that are past due at the end of financial year, as there has not been significant change in credit quality and these amounts are still considered receivable. Although these receivables have exceeded the credit terms granted to them, the directors are reasonably confident that all debts can be recovered within the next 12 months.

Receivables that are impaired The Group's and the Company's trade receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows:

There are no balances that are collectively determined to be impaired.

31.12.2012 31.12.2011 1.1.2011RM RM RM

Trade receivables - nominal amounts 3,249,860 3,074,765 3,404,545 Less: Allowance for impairment (3,249,860) (3,074,765) (3,404,545)

- - -

31.12.2012 31.12.2011 1.1.2011RM RM RM

Trade receivables - nominal amounts 420,605 420,605 604,210 Less: Allowance for impairment (420,605) (420,605) (604,210)

- - -

Individually impaired

GroupIndividually impaired

Company


88


Receivables that are impaired (cont’d)

Movement in allowance accounts:

Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.

12. Other Receivables

31.12.2012 31.12.2011RM RM

At 1 January 3,074,765 3,404,545 Charge for the year 700,071 697,221 Written off (156,205) (210,154) Reversal of impairment losses (368,771) (816,847) At 31 December 3,249,860 3,074,765

31.12.2012 31.12.2011RM RM

At 1 January 420,605 604,210 Charge for the year - 10,645 Written off - (161,875) Reversal of impairment losses - (32,375) At 31 December 420,605 420,605

Group

Company

31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011RM RM RM RM RM RM

Deposits 295,218 296,001 303,291 55,706 61,337 57,825 Sundry receivables 1,550,684 1,532,838 1,314,557 71,019 492 249

1,845,902 1,828,839 1,617,848 126,725 61,829 58,074 Less: Allowance for impairment (1,168,156) (1,168,156) (1,098,105) - - -

677,746 660,683 519,743 126,725 61,829 58,074

Group Company

Annual Report 2012

89

12. Other Receivables (Cont’d)

Movement in allowance accounts:

The Group has no significant concentration of credit risk that may arise from exposures to a single debtor or group of debtors.

13. Other Current Assets

14. Fixed Deposits with Licensed Banks

The weighted average effective interest rates per annum and average maturities of deposits at the reporting date were as follows:

31.12.2012 31.12.2011RM RM

At 1 January 1,168,156 1,098,105 Charge for the year - 70,051 At 31 December 1,168,156 1,168,156

Group

31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011RM RM RM RM RM RM

Prepayment 342,861 313,252 338,377 33,176 14,678 24,315 Accrued billings 1,499,933 1,216,859 1,293,238 - - 719,266

1,842,794 1,530,111 1,631,615 33,176 14,678 743,581

Group Company

31.12.2012 31.12.2011 1.1.2011

Licensed banks Weighted average effective interest rate (% per annum) 3.2 3.3 2.6 Weighted average days to maturity (days) 16 44 15

Group/Company


90

15. Share Capital

During the financial year, the Company increased its issued and paid-up share capital from RM43,005,300 to RM45,005,300 through private placement of 20,000,000 new ordinary shares of RM 0.10 per share at an issue price of RM 0.10 per share. The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company. The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company residual assets.

16. Warrant Reserves

In the previous financial year, the Company issued 143,351,000 free detachable warrants for every two existing ordinary shares of RM0.10 each held in the Company on 13 January 2011.

The main features of the warrants are as follows:

(i) Each warrant enttiles the holder to subscribe for one new ordinary share of RM0.10

each in the Company at the exercise price of RM0.10 per ordinary share;

(ii) The warrants may be exercised at any time up to 15 February 2016; and

(iii) The shares arising from the exercise of warrants shall rank pari passu in all respect with the existing ordinary shares of the Company, save and except that the new shares shall not be entitled to any dividends, rights, allotments and/or other distributions, the entitlement date of which is prior to the allotment date of the new shares.

As at the reporting date, 143,351,000 (31.12.2011: 143,351,000, 1.1.2011: Nil) warrants remain unexercised.

31.12.2012 31.12.2011 31.12.2012 31.12.2011Unit Unit RM RM

Authorised:At 1 January 750,000,000 500,000,000 75,000,000 50,000,000 Created during the year - 250,000,000 - 25,000,000 At 31 December 750,000,000 750,000,000 75,000,000 75,000,000

Issued and fully paid:At 1 January 430,053,000 286,702,000 43,005,300 28,670,200 Right issue - 143,351,000 - 14,335,100 Private placement 20,000,000 - 2,000,000 - At 31 December 450,053,000 430,053,000 45,005,300 43,005,300

Group/CompanyGroup/CompanyNumber of Ordinary

Shares of RM0.10 each Amount

Annual Report 2012

91

17. Other Reserves

The nature of reserve of the Group and of the Company is as follows:

Fair value adjustment reserve Fair value adjustment reserve represents the cumulative fair value changes in the fair value of available-for-sale financial assets until they are disposed or impaired.

Foreign exchange reserve The exchange translation reserve represents exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency.

Fair value Foreignadjustment exchangereserves reserve Total

RM RM RMGroup

At 1 January 2011 - (4,595,211) (4,595,211) Realisation on disposal and

derecognition of an associate - 4,977,500 4,977,500 Foreign currency translation - 9,786 9,786 Gain on fair value changes on

available-for-sale investment 130,757 - 130,757 At 31 December 2011 130,757 392,075 522,832

At 1 January 2012 130,757 392,075 522,832 Foreign currency translation - 676,747 676,747 Impairment loss recycled to profit or loss (130,757) - (130,757) At 31 December 2012 - 1,068,822 1,068,822

CompanyAt 1 January 2011 - - - Gain on fair value changes on

available-for-sale investment 130,757 - 130,757 At 31 December 2011 130,757 - 130,757

At 1 January 2012 130,757 - 130,757 Impairment loss recycled to profit or loss (130,757) (130,757) At 31 December 2012 - - -


92

18. Trade payables

In the previous financial year, included in the trade payables of the Group and of the Company are amounts RM135,361, (1.1.2011: RM901,092) which bear interest at 7.32%(1.1.2011: 7.32%) per annum, which is also the effective interest rate. The amount will mature within 4 months (1.1.2011: 24 months) from the reporting date.

The trade credit terms granted to the Group and to the Company vary between 30 and 60 days although in practice it is customary for certain suppliers to extend credit terms to exceed 60 days but generally not more than 120 days.

19. Other liabilities

31.12.2012 31.12.2011 1.1.2011RM RM RM

Payable within 12 months 692,662 2,409,524 1,391,094 Payable after 12 months - - 206,529

692,662 2,409,524 1,597,623

31.12.2012 31.12.2011 1.1.2011RM RM RM

Payable within 12 months - 134,078 694,563 Payable after 12 months - - 206,529

- 134,078 901,092

Group

Company

31.12.2012 31.12.2011 1.1.2011RM RM RM

CurrentDeferred revenue 3,958,968 4,804,517 1,027,970 Deposits and advance maintenance fees 917,281 3,874,167 4,001,264

4,876,249 8,678,684 5,029,234

Non-currentDeposits and advance maintenance fees 30,438 13,054 29,688

Group

Annual Report 2012

93

19. Other liabilities (Cont’d)

Deferred revenue represents software applications income received, in advance from customers. Revenue from software application is recognised in the statement of comprehensive income on a time progressive basis over the contract period.

20. Hire Purchase and finance lease payables

31.12.2012 31.12.2011 1.1.2011RM RM RM

CurrentDeferred revenue - - 21,887

Company

31.12.2012 31.12.2011 1.1.2011RM RM RM

Minimum lease payments:

Not later than 1 year 339,732 338,999 425,731 Later than 1 year but not later than 5 years 475,129 784,936 836,746

814,861 1,123,935 1,262,477 Less: Future finance charges (54,057) (96,293) (109,422) Present value of finance lease liabilities 760,804 1,027,642 1,153,055

Present value of hire purchase and finance lease liabilities:


760,804 1,027,642 1,153,055

Analysed as:Due within 12 months 309,437 293,101 377,699 Due after 12 months 451,367 734,541 775,356

760,804 1,027,642 1,153,055

Group


94

20. Hire Purchase and finance lease payables (Cont’d)

The hire purchase liabilities of the Group and of the Company bear interest at rates between 2.23% and 8.29% (31.12.2011: 2.58% and 8.29%, 1.1.2011: 4.24% and 8.29%) per annum and at an average interest rate of 5.63% (31.12.2011: 5.71%, 1.1.2011: 4.86%) per annum respectively during the financial year.

21. Deferred Tax Liabilities

31.12.2012 31.12.2011 1.1.2011RM RM RM

Minimum lease payments:


146,110 237,598 288,282 Less: Future finance charges (6,432) (14,356) (16,510) Present value of finance lease liabilities 139,678 223,242 271,772

Present value of hire purchase and finance lease liabilities:


139,678 223,242 271,772

Analysed as:Due within 12 months 87,184 83,564 95,227 Due after 12 months 52,494 139,678 176,545

139,678 223,242 271,772

Company

31.12.2012 31.12.2011RM RM

GroupAt the beginning of the financial year 194,555 150,511 Recognised in profit or loss (Note 30) (50,524) 44,044 At the end of the financial year 144,031 194,555

CompanyAt the beginning of the financial year 113,740 88,642 Recognised in profit or loss (Note 30) (32,963) 25,098 At the end of the financial year 80,777 113,740

Annual Report 2012

95

21. Deferred Tax Liabilities (Cont’d) The net deferred tax assets and liabilities shown on the statement of financial position after appropriate offsetting are as follows:

The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:

31.12.2012 31.12.2011 1.1.2011RM RM RM

Deferred tax assets (1,015,787) (1,399,310) (1,375,152) Deferred tax liabilities 1,159,818 1,593,865 1,525,663

144,031 194,555 150,511

31.12.2012 31.12.2011 1.1.2011RM RM RM

Deferred tax assets - - (115,736) Deferred tax liabilities 80,777 113,740 204,378

80,777 113,740 88,642

Group

Company

31.12.2012 31.12.2011 1.1.2011Group RM RM RM

Deferred tax assetsUnabsorbed capital allowances (22,778) (31,031) (10,722) Unutilised income tax losses (993,009) (1,368,279) (1,364,430)

(1,015,787) (1,399,310) (1,375,152)

Deferred tax liabilities

Differences between the carrying amounts of property, plant and equipment and their tax base 251,892 335,574 287,671 Deferred development costs 893,306 1,245,093 1,234,992 Investment properties 13,000 13,000 3,000 Deductible temporary differences arising from expenses 1,620 198 -

1,159,818 1,593,865 1,525,663

Company

Deferred tax assets

Unabsorbed capital allowances - - (69,766) Unutilised income tax losses - - (45,970)

- - (115,736)


96

21. Deferred Tax Liabilities (Cont’d) The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:

Timing differences of which no deferred tax assets have been recognised were in respect of the following items:

The unutilised tax losses and unabsorbed capital allowances of the Group are available for offset against future taxable profits subject to guidelines issued by the tax authority. Deferred tax assets have not been recognised in respect of the above items as it is not probable that future taxable profits will be available against which they may be utilised.

22. Other Payables

23. Amount due to subsidiaries (current)

Amounts due to subsidiaries are non-trade in nature, unsecured, non interest-bearing and payable on demand.

31.12.2012 31.12.2011 1.1.2011RM RM RM

CompanyDeferred tax liabilities

Differences between the carrying amounts of property, plant and equipment and their tax base 80,777 113,740 204,378

80,777 113,740 204,378

31.12.2012 31.12.2011 1.1.2011RM RM RM

Unabsorbed capital allowances 74,824 - - Unutilised income tax losses 7,088,884 5,427,066 3,087,362

7,163,708 5,427,066 3,087,362

Group

31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011RM RM RM RM RM RM

Accruals 4,950,104 3,956,374 2,929,861 928,186 746,145 849,185 Sundry payables 400,458 204,521 381,902 49,604 65,031 72,073

5,350,562 4,160,895 3,311,763 977,790 811,176 921,258

Group Company

Annual Report 2012

97

24. Revenue

25. Other income

2012 2011 2012 2011RM RM RM RM

Royalty income 1,710,630 1,030,113 2,277,558 1,837,990 Software applications 18,987,383 15,703,888 - - Hardware, networking and operating systems 6,315,404 6,354,120 450,800 587,066 Maintenance, support system, training and implementation 18,917,462 14,577,207 2,762,102 2,854,722

45,930,879 37,665,328 5,490,460 5,279,778

Group Company

2012 2011 2012 2011RM RM RM RM

Interest income from: - Due from subsidiaries arising from unwinding of discount - - 627,803 594,793 - Others 558,393 276,505 456,301 236,701 Rental income 19,430 17,100 16,800 15,900 Reversal of impairment loss on trade and other receivables 368,771 816,847 - 32,375 Fair value of investment in a

former associate derecognised during the year - - - 945,465

Gain from fair value adjustmentof investment properties 4,000 165,000 - 125,000

Gain on disposal of property, plant and equipment 7,500 - 4,500 Gain on disposal of interest in

an associate - - - 195,994 Realised gain on foreign

exchange - 639,328 - - Unrealised gain on foreign exchange - 106,128 - - Miscellaneous 785,083 791,172 23,066 3,533

1,735,677 2,819,580 1,123,970 2,154,261

Group Company


98

26. Employee Benefits Expense

27. Directors’ Remuneration

The details of remuneration receivable by directors of the Company during the year are as follows:

2012 2011 2012 2011RM RM RM RM

Salaries and wages 18,588,925 16,130,195 3,056,384 1,954,995 Social security contributions 1,491,888 844,003 17,599 3,145 Contributions to defined contribution plans 1,951,778 1,783,691 369,834 226,944 Other staff related expenses 20,670 116,376 600 1,000 Total employee benefits expense 22,053,261 18,874,265 3,444,417 2,186,084 Less: Amount capitalised under deferred development costs (Note 6) (1,579,483) (884,818) - - Amount expensed to the statements of comprehensive income 20,473,778 17,989,447 3,444,417 2,186,084

Group Company

2012 2011 2012 2011RM RM RM RM

Directors of the CompanyExecutive: Salaries and other emoluments1,260,500 1,160,000 1,260,500 1,196,240 Fees 26,000 20,000 26,000 20,000 Defined contribution plan 151,260 116,160 151,260 116,160 Total executive directors’ remuneration (excluding benefits-in-kind) 1,437,760 1,296,160 1,437,760 1,332,400 Estimated money value of benefits-in-kind 77,884 69,000 77,884 69,000 Total executive directors’ remuneration (including benefits-in-kind) 1,515,644 1,365,160 1,515,644 1,401,400

Non-executive: Fees 63,000 44,000 63,000 44,000 Total directors' emoluments 1,578,644 1,409,160 1,578,644 1,445,400

Group Company

Annual Report 2012

99

27. Directors’ Remuneration (Cont’d)

The number of directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below:

28. Finance Costs

2012 2011 2012 2011RM RM RM RM

Group Company

Other Directors of the Group:Executive: Salaries and other emoluments 126,900 111,600 - - Contributions to defined contribution plan 17,100 15,120 - - Benefits-in-kind 14,400 14,400 - -

158,400 141,120 - -

Total directors' remuneration 1,737,044 1,550,280 1,578,644 1,445,400 Non-monetary benefits-in-kind paid to executive directors 51,950 45,400 - - Total directors' remuneration 1,788,994 1,595,680 1,578,644 1,445,400

Represented by:Directors' remuneration 1,644,760 1,466,880 1,500,760 1,376,400 Non-monetary benefits-in-kind 144,234 128,800 77,884 69,000

1,788,994 1,595,680 1,578,644 1,445,400

2012 2011

Executive directors:RM200,000 and below 1 1 RM400,001 - RM450,000 - - RM550,001 - RM600,000 1 1 RM750,001 - RM800,000 - 1 RM900,001 - RM950,000 1 -

Non-Executive directors:Less than RM50,000 4 3

Number of directors

2012 2011 2012 2011RM RM RM RM

Hire purchase interest 45,638 124,860 7,924 10,617 Others 1,284 44,070 1,284 43,807

46,922 168,930 9,208 54,424

Group Company


100

29. Profit/(Loss) before Tax

Profit/(Loss) before tax is derived after charging:

* The Group amount is derived net of compensation from insurance claim amounted to

RM 50,000 (2011: Nil). # This amount is derived net of impairment loss recycled from other reserve amounted to

RM 130,757 (2011: Nil).

2012 2011 2012 2011RM RM RM RM

Auditors' remuneration 137,218 118,817 49,570 40,000 Property, plant and equipment written off * 9,916 44,402 1,210 2,068 Loss from fair value

adjustment on investment properties - - 6,000 - Loss on disposal of property,

plant and equipment 25,416 86,296 - - Loss on disposal of

interest in an associate - 2,174,405 - - Loss on derecogition of

an associate - 1,661,636 - - Impairment loss on : - trade receivables 700,071 697,221 - 10,645 - other receivables - 70,051 - - - other investment # 720,729 - 720,729Realised loss on foreign exchange 185,944 329 6,663 - Unrealised loss on foreign exchange 527,883 66,704 11,015 - Rental of premises 865,143 1,019,603 36,000 36,000 Employee benefits expense (Note 26) 20,473,778 17,989,447 3,444,417 2,186,084 Professional charges 108,357 360,914 101,665 323,676 Legal fee 37,673 6,404 - 162 Tax agent fee 14,474 14,034 3,074 2,438 Secretarial fee 48,900 44,238 26,444 32,280 Utility charges 341,205 309,065 40,561 45,949

Group Company

Annual Report 2012

101

30. Taxation

Malaysian income tax is calculated at the statutory tax rate of 25% (2011: 25%) of the estimated assessable profits for the financial year. A reconciliation of income tax expenses applicable to profit/ (loss) before tax at the statutory tax rate to income tax expenses at the effective income tax of the Group and of the Company are as follows:

2012 2011 2012 2011RM RM RM RM

Malaysian income tax:Current year 277,943 521,118 150,842 220,756 Under/(Over)provision in prior years 20,975 (55,400) 24,450 -

298,918 465,718 175,292 220,756

Deferred tax (Note 21):Origination and reversal of temporary differences (71,844) 36,599 (41,088) 15,373 Underprovision in prior years 21,320 7,445 8,125 9,725

(50,524) 44,044 (32,963) 25,098 248,394 509,762 142,329 245,854

Group Company

2012 2011RM RM

Profit/(Loss) before tax 3,527,244 (2,344,955)

Taxation at Malaysian statutory tax rate of 25% (2011: 25%) 881,699 (586,239) Effect of different tax rates in other countries 12,981 319,152 Effect of income not subject to tax (1,381,634) (313,615) Effect of expenses not deductible for tax purpose 642,416 530,085 Deferred tax assets not recognised 103,703 786,425 Effect of utilisation of deferred tax assets not recognised in prior year (53,066) (178,091) Under/(Over)provision of income tax expense in prior years 20,975 (55,400) Underprovision of deferred tax in prior years 21,320 7,445 Income tax expense for the year 248,394 509,762

Group


102

30. Taxation (Cont’d)

The Group has unabsorbed capital allowances and unutilised tax losses carry forward, available to off-set against future taxable profits as follows:

31. Earnings/(Loss) per Share

Basic earnings/(loss) per share amounts are calculated by dividing net profit/(loss) for the year attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings/(loss) per share amounts are calculated by dividing the net profit/(loss) attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

2012 2011RM RM

(Loss)/Profit before tax (192,541) 1,942,925

Taxation at Malaysian statutory tax rate of 25% (2011: 25%) (48,135) 485,731 Effect of income not subject to tax (156,951) (465,313) Effect of expenses not deductible for tax purpose 314,840 215,711 Underprovision of deferred tax in prior years 8,125 9,725 Underprovision of income tax expense in prior years 24,450 - Income tax expense for the year 142,329 245,854

Company

2012 2011RM RM

Group

Tax savings during the financial year arising from: - utilisation of current year tax losses - 597 - utilisation of tax losses brought forward from previous years 53,066 581,484

2012 2011RM RM

Unabsorbed capital allowances 165,936 124,123 Unutilised tax income lossess 11,060,920 10,900,183

11,226,856 11,024,306

Group

Annual Report 2012

103

31. Earnings/(Loss) per Share (Cont’d)

The following reflects the income and share data used in the basic and diluted earnings per share computations:

* The weighted average number of shares takes into account the weighted average effect

of changes in warrants shares transactions during the year.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements except as disclosed in Note 15.

32. Commitments Non-cancellable operating lease commitments - Group and Company as lessors

2012 2011Earning/(Loss) RM RM

Profit/(Loss) attributable to owners of the parent for the computation of basic and diluted earnings per share 3,479,046 (2,676,459)

Number of shares

Weighted average number of ordinary shares in issue for basic earnings/(loss) per share computation * 435,462,836 405,205,493

Effect of dilutive potential ordinary shares from the exercise of warrants 143,351,000 143,351,000

Weighted average number of ordinary shares in issue fordiluted earnings/(loss) per share computation * 578,813,836 548,556,493

Earnings/(Loss) per share - Basic 0.80 sen (0.66) sen - Diluted 0.60 sen (0.48) sen

Group

2012 2011 2012 2011RM RM RM RM

Future minimum rental receivable:Not later than 1 year 12,660 12,530 13,200 13,200 Later than 1 year but not later than 3 years 10,140 19,500 2,200 15,400

22,800 32,030 15,400 28,600

Group Company


104

32. Commitments (cont’d)

The Group entered into commercial property leases on its properties portfolio consisting of commercial and office space. These leases have remaining non-cancellable lease terms of between 1 and 3 years. Non-cancellable operating lease commitments - Group and Company as lessees

Operating lease payments represent rental payable by the Group for the use of its business operations. The tenure of the lease is between 1 and 3 years and the monthly rental consideration for the lease of these properties have been pre-determined over the same period.

33. Related Parties

(a) Identity of related parties

For the purposes of these financial statements, parties are considered to be related to the Group and/or the Company if the Group and/or the Company have the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and/or the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group and/or the Company either directly or indirectly. The key management personnel include all the Directors of the Group and/or of the Company and certain members of senior management of the Group and/or of the Company. The Group and the Company have related party relationship with its subsidiary companies, key management personnel and directors’ related companies.

2012 2011 2012 2011RM RM RM RM

Future minimum rental payable:Not later than 1 year 875,156 774,676 - - Later than 1 year but not later than 3 years 796,340 1,214,614 - -

1,671,496 1,989,290 - -

Group Company

Annual Report 2012

105

33. Related Parties (cont’d)

(b) In addition to the transactions detailed elsewhere in the financial statements, the Company had the following transactions with related parties during the financial year:

The directors of the Company are of the opinion that the above transactions were entered into in the normal course of business and at terms mutually agreed between the parties.

(c) Information regarding outstanding balances arising from related party transactions as at 31 December 2012 is disclosed in Notes 10 and 23.

(d) The remuneration of key management personnel is same with the Directors’

remuneration as disclosed in Note 27. The Group and the Company have no other members of key management personnel apart from the Board of Directors.

34. Segmental Reporting

(a) Geographical segments

For the management purposes, the Group is organised into two geographical areas of the world, and has two reportable geographical segments as follows:

(i) Malaysia - the areas of operation are principally a turnkey e-business application

provider focused on customised functionality on in-house industry specific software.

(ii) Foreign - the main activities are focused on the Group’s research and

development centre, as the central domain for all customised projects and undertake marketing activities that cater for China market.

Except as indicated above, no geographical segments have been aggregated to form the above reportable geographical segments.

2012 2011RM RM

Rental receivable from a subsidiary (13,200) (13,200) Rental payable to a subsidiary 36,000 36,000 Interest receivable from subsidiaries (627,803) (594,793) Outsourced software maintenance fees charged by subsidiaries 4,096,464 3,991,865 Royalty receivable from subsidiaries (1,104,270) (1,837,990) Sales to subsidiaries (2,848,128) (3,202,797)

Company


106

34. Segmental Reporting (Cont’d)

(a) Geographical segments (cont’d)

Management monitors the operating results of its geographical segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain respects as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements.

Annual Report 2012

107

34.

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8,8

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43,0

74,6

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(3,1

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37)

(3

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59)

(2

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41)

(2

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2,6

46,4

29

2,6

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(2,8

48,9

49)

(2

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62)

D

epre

cia

tion

(714,8

14)

(8

36,5

93)

(2

36,5

71)

(2

05,4

08)

-

-

(9

51,3

85)

(1

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(2

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85)

(3,8

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-

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B

(696,0

71)

(4

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13)

F

ina

nce

costs

(46,9

22)

(101,9

78)

-

(66,9

52)

-

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(46,9

22)

(168,9

30)

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fore

ta

x3,9

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148,2

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(3

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(5

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2,6

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3,5

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rofit

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t of

tax

3,7

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(361,5

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(3

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(5

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2,6

46,4

29

2,6

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3,2

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(2,8

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se

ts:

Additions to n

on-c

urr

ent

a

sse

ts2,6

44,5

68

943,7

34

1,5

98,6

54

2,3

61,7

32

-

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22

3,3

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gm

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ts75,5

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94

80,2

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19,9

70,9

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14,8

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(37,2

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79)

(3

7,6

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58,2

84,0

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57,4

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41

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gm

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liabili

ties

31,0

63,8

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36,9

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22

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(42,4

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66)

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11,9

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36

16,8

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r co

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olid

ate

d

fin

ancia

l sta

tem

ents


108

34. Segmental Reporting (Cont’d)

(a) Geographical segments (cont'd)

A Inter-segment revenues are eliminated on consolidation B Other material non-cash expenses consist of the following items as presented in the

respective notes to financial statement:

C Additions to non-current assets consist of:

D The following item is deducted from segment assets to arrive at total assets reported in

the consolidated statement of financial position:

E The following item is deducted from segment liabilities to arrive at total liabilities

reported in the consolidated statement of financial position:

Information about a major customer Revenue from one major customer amount to RM3,513,142 (31.12.2011: RM1,461,980, 1.1.2011: RM5,108,000), arising from sales by the Foreign segment.

2012 2011RM RM

Loss on derecognition of an associate - 1,661,636Loss on disposal of interest in an associate - 2,174,405Impairment loss on trade and other

receivables 700,071 767,272Gain from fair value adjustment of

investment properties (4,000) (165,000)696,071 4,438,313

2012 2011RM RM

Property, plant and equipment 1,814,400 1,202,762 Development costs 2,428,822 952,982 Other investments - 1,149,722

4,243,222 3,305,466

2012 2011RM RM

Inter-segment assets (37,200,979) (37,653,167)

2012 2011RM RM

Inter-segment liabilities (42,416,466) (34,383,763)

Annual Report 2012

109

34.

Seg

men

tal R

epor

ting

(Con

t’d)

(b)

Bus

ine

ss

se

gm

ent

s

The

Gro

up is

als

o o

rgani

sed

on

a w

orld

wid

e b

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to thr

ee m

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r b

usin

ess

segm

ent

s:

(i)S

oftw

are

ap

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ns a

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lty in

com

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ard

ware

, ne

two

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rt s

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m,

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ment

atio

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20

12

201

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01

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12

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tem

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s


110

35. Financial Instruments

(a) Classification of financial instruments

Financial assets and financial liabilities are measured on an ongoing basis either at fair value or at amortised cost. The principal accounting policies in Note 3 describe how the classes of the financial instruments are measured and how income and expenses including fair values gain or loss are recognised. The following table analyses the financial assets and liabilities in the statements of financial position by the class of financial instruments to which they are assigned and therefore by the measurement basis:

FinancialLoans and Available- liabilities atreceivables for-sale amortised cost Total

RM RM RM RM

Group

31.12.2012Financial Assets

Other investment - 426,410 - 426,410

Trade receivables 8,944,682 - - 8,944,682

Other receivables 677,746 - - 677,746 Fixed deposits with licensed banks 12,584,571 - - 12,584,571

Cash and bank balances 19,783,588 - - 19,783,588 Total financial assets 41,990,587 426,410 - 42,416,997

Financial LiabilitiesTrade payables - - 692,662 692,662

Other payables - - 5,350,562 5,350,562

Hire purchase and

finance lease payable - - 760,804 760,804 Total financial liabilities - - 6,804,028 6,804,028

Annual Report 2012

111

35. Financial Instruments (Cont’d)

(a) Classification of financial instruments (cont’d)


RM RM RM RM

Group31.12.2011Financial Assets

Other investment - 1,277,896 - 1,277,896

Trade receivables 14,089,058 - - 14,089,058 Other receivables 660,683 - - 660,683 Fixed deposits with licensed banks 12,241,616 - - 12,241,616

Cash and bank balances 13,628,203 - 13,628,203 Total financial assets 40,619,560 1,277,896 - 41,897,456

Financial LiabilitiesTrade payables - - 2,409,524 2,409,524

Other payables - - 4,160,895 4,160,895

Hire purchase and

finance lease payable - - 1,027,642 1,027,642 Total financial liabilities - - 7,598,061 7,598,061

1.1.2011Financial AssetsOther investment - 128,174 - 128,174

Trade receivables 12,895,497 - - 12,895,497 Other receivables 519,743 - - 519,743 Fixed deposits with banks 606,454 - - 606,454

Cash and bank balances 4,440,601 - - 4,440,601 Total financial assets 18,462,295 128,174 - 18,590,469

1.1.2011Financial Liabilities

Trade payables - - 1,597,623 1,597,623

Other payables - - 3,311,763 3,311,763

Hire purchase and

finance lease payable - - 1,153,055 1,153,055 Total financial liabilities - - 6,062,441 6,062,441


112




RM RM RM RM

Company

31.12.2012Financial Assets

Other investment - 315,736 - 315,736

Trade receivables 1,544,051 - - 1,544,051 Other receivables 126,725 - - 126,725

Amount due from subsidiaries 17,320,473 - - 17,320,473

Fixed deposits with

licensed banks 12,562,621 - - 12,562,621 Cash and bank balances 4,745,533 - - 4,745,533 Total financial assets 36,299,403 315,736 - 36,615,139

Financial Liabilities

Other payables - - 977,790 977,790 Amount due to

subsidiaries - - 261,209 261,209

Hire purchase and finance lease payable - - 139,678 139,678 Total financial liabilities - - 1,378,677 1,378,677

31.12.2011

Financial Assets

Other investment - 1,167,222 - 1,167,222

Trade receivables 1,250,214 - - 1,250,214 Other receivables 61,829 - - 61,829

Amount due from

subsidiaries 18,709,544 - - 18,709,544 Fixed deposits with

licensed banks 12,241,616 - - 12,241,616 Cash and bank balances 1,599,957 - - 1,599,957 Total financial assets 33,863,160 1,167,222 - 35,030,382

Annual Report 2012

113




RM RM RM RM

Company

31.12.2011Financial Liabilities

Trade payables - - 134,078 134,078

Other payables - - 811,176 811,176

Amount due to subsidiaries - - 339,616 339,616

Hire purchase and

finance lease payable - - 223,242 223,242 Total financial liabilities - - 1,508,112 1,508,112

1.1.2011

Financial Assets

Other investment - 91,000 - 91,000 Trade receivables 1,715,460 - - 1,715,460

Other receivables 58,074 - - 58,074

Amount due from

subsidiaries 16,428,727 - - 16,428,727

Fixed deposits with licensed banks 606,454 - - 606,454

Cash and bank balances 187,935 - - 187,935 Total financial assets 18,996,650 91,000 - 19,087,650

Financial Liabilities

Trade payables - - 901,092 901,092

Other payables - - 921,258 921,258

Amount due to

subsidiaries - - 578,678 578,678

Hire purchase and finance lease payable - - 271,772 271,772 Total financial liabilities - - 2,672,800 2,672,800


114


(b) Financial risk management objectives and policies

The Group’s financial risk management policy is to ensure that adequate financial resources are available for the development of the Group’s operations whilst managing its financial risks, including credit risk, liquidity risk, interest rate risk and foreign currency exchange risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks. The Audit Committee provides independent oversight to the effectiveness of the risk management process. It is, and has been throughout the current and previous financial year, the Group's and the Company's policy that no derivatives shall be undertaken. The following sections provide details regarding the Group's and the Company's exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

(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 cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties. The Group's and the Company's objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group and the Company trade only with recognised and creditworthy third parties. In addition, receivable balances are monitored on an ongoing basis with the result that the Group's and the Company's exposure to bad debts is not significant. Investments are acquired after assessing the quality of the relevant investments. Cash and cash equivalents are placed with reliable financial institutions.

Annual Report 2012

115


(b) Financial risk management objectives and policies (cont’d)

(i) Credit risk (cont’d)

Exposure to credit risk At the reporting date, the Group's and the Company's maximum exposure to credit risk is represented by:

• The carrying amount of each class of financial assets recognised in the

statements of financial position.

Information regarding credit enhancements for trade receivables is disclosed in Note 11.

Credit risk concentration profile The Group determines concentrations of credit risk by monitoring the country profile of its trade receivables on an ongoing basis. The credit risk concentration profile of the Group's trade receivables at the reporting date are as follows:

RM % of total RM

% of total RM

% of total

By Country:Malaysia 5,791,520 65% 11,646,091 83% 10,521,499 82%People's Republic of China 982,430 11% 197,483 1% 33,045 0%Singapore 299,898 3% 95,966 1% 57,849 0%Indonesia 931,886 10% 660,941 5% 316,465 3%Philippines 499,123 6% 1,154,292 8% 1,196,603 9%South Africa 331,728 4% - 0% - 0%Other countries 108,097 1% 334,285 2% 770,036 6%

8,944,682 100% 14,089,058 100% 12,895,497 100%

RM % of total RM

% of total RM

% of total

By Country:Malaysia 612,165 40% 1,250,214 100% 1,715,460 100%Indonesia 931,886 60% - 0% - 0%

1,544,051 100% 1,250,214 100% 1,715,460 100%

31.12.2012 31.12.2011 1.1.2011

31.12.2011 1.1.201131.12.2012Group

Company


116



(i) Credit risk (cont’d) At the reporting date, approximately 61% (31.12.2011: 60%, 1.1.2011: 54%) of the Group's trade receivables were due from 32 (31.12.2011: 13, 1.1.2011: 10) major customers who are reputable and located in Malaysia. Information regarding trade and other receivables that are neither past due nor impaired and either past due or impaired, are disclosed in Notes 11 and 12.

(ii) Liquidity risk

Liquidity risk refers to the risk that the Group or the Company will encounter difficulty in meeting its financial obligations as they fall due. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities.

The Group’s and the Company’s funding requirements and liquidity risk is managed with the objective of meeting business obligations on a timely basis. The Group finances its liquidity through internally generated cash flows and minimises liquidity risk by keeping committed credit lines available.

The following table analyses the remaining contractual maturity for non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group and the Company can be required to pay.

On demandCarrying or withinamount 1 year 1 - 2 years 2 - 3 years Total

RM RM RM RM RM

Group31.12.2012Financial liabilities

Trade payables 692,662 692,662 - - 692,662 Other payables 5,350,562 5,350,562 - - 5,350,562

Other liabilities 4,906,687 4,876,249 30,438 4,906,687 Hire purchase payables 760,804 339,732 308,661 166,288 814,681 Total undiscounted financial liabilities 11,710,715 11,259,205 339,099 166,288 11,764,592

Annual Report 2012

117



(ii) Liquidity risk (cont’d)


RM RM RM RM RM

Group31.12.2011

Financial liabilities

Trade payables 2,409,524 2,409,524 - 2,409,524

Other payables 4,160,895 4,160,895 - 4,160,895

Other liabilities 8,691,738 8,678,684 13,054 8,691,738 Hire purchase payables 1,027,642 338,999 343,915 287,189 1,123,935 Total undiscounted financial liabilities 16,289,799 15,588,102 356,969 287,189 16,386,092

1.1.2011

Financial liabilities

Trade payables 1,597,623 1,391,094 206,529 - 1,597,623

Other payables 3,311,763 3,311,763 - - 3,311,763

Other liabilities 5,058,922 5,029,234 29,688 - 5,058,922 Hire purchase payables 1,153,055 425,731 492,831 343,915 1,262,477 Total undiscounted financial liabilities 11,121,363 10,157,822 729,048 343,915 11,230,785

Company31.12.2012Financial liabilitiesOther payables 977,790 977,790 - - 977,790

Amount due to

subsidiaries 261,209 261,209 - - 261,209 Hire purchase payables 139,678 91,488 54,622 - 146,110 Total undiscounted financial liabilities 1,378,677 1,330,487 54,622 - 1,385,109


118



(ii) Liquidity risk (cont’d)

(iii) Interest rate risk

The Group’s exposed to interest rate risk arises primarily from financing through interest bearing financial assets and financial liabilities. The Group’s policy is to obtain the financing with the most favourable interest rates in the market. The Group constantly monitors its interest rate risk by reviewing its debts portfolio to ensure favourable rates are obtained. The Group does not utilise interest swap contracts or other derivative instruments for trading or speculative purposes.


RM RM RM RM RM

Company31.12.2011

Financial liabilitiesTrade payables 134,078 134,078 - - 134,078

Other payables 811,176 811,176 - - 811,176

Amount due to

subsidiaries 339,616 339,616 - - 339,616 Hire purchase payables 223,242 91,488 91,488 54,622 237,598 Total undiscounted financial liabilities 1,508,112 1,376,358 91,488 54,622 1,522,468

1.1.2011

Financial liabilitiesTrade payables 901,092 694,563 206,529 - 901,092

Other payables 921,258 921,258 - - 921,258

Amount due to

subsidiaries 578,678 578,678 - - 578,678

Other liabilities 21,887 21,887 - - 21,887 Hire purchase payables 271,772 103,976 91,488 92,818 288,282 Total undiscounted financial liabilities 2,694,687 2,320,362 298,017 92,818 2,711,197

Annual Report 2012

119



(iii) Interest rate risk (cont’d) The Group is exposed to interest rate risk arising from its short and long term debts obligations, and its fixed deposits. Fixed deposits interest rate is insignificant and any fluctuations in the rate would have no material impact on the results of the Group. The carrying amounts of the Group and of the Company’s financial instruments that are exposed to interest rate risk are as follows:

An increase in market interest rates by 1% on financial assets of the Group and of the Company which have variable interest rates at the end of the reporting period would increase the profit before tax by RM125,846 (31.12.2011: RM122,416, 1.1.2011: RM6,605) and RM125,626 (31.12.2011: RM122,416, 1.1.2011: RM6,605) respectively. This analysis assumes that all other variables remain unchanged. A decrease in market interest rates by 1% on financial assets of the Group which have variable interest rates at the end of the reporting period would have had the equal but opposite effect on the amounts shown above, on the basis that all other variables remain unchanged.

31.12.2012 31.12.2011 1.1.2011RM RM RM

Financial Asset Fixed deposits with licensed banks 12,584,571 12,241,616 606,454

31.12.2012 31.12.2011 1.1.2011RM RM RM

Financial Asset Fixed deposits with licensed banks 12,562,621 12,241,616 606,454

Group

Company


120



(iv) Foreign currency exchange risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group has transactional currency exposures arising from sales that are denominated in a currency other than the respective functional currencies of the Group entities. The foreign currencies in which these transactions are denominated are mainly US Dollar ("USD") and Chinese Yuan Renminbi ("RMB").

The Group is also exposed to currency translation risk arising from its net investments in foreign operations in People's Republic of China ("PRC") and South Africa. The Group's net investments in PRC and South Africa are not hedged as currency position in RMB and Rand are considered to be long-term in nature. Foreign exchange exposures in transactional currencies, other than functional currencies of the Group are kept to an acceptable level.

The net unhedged financial assets of the Group as at 31 December 2012 that are not denominated in their functional currencies are as follows:

Thai Brunei Australian RinggitBaht Dollar Dollar Euro Malaysia TotalRM RM RM RM RM RM

31.12.2012Ringgit MalaysiaReceivables 157,462 - - - 157,462

United States DollarCash at Bank 5,285 193,885 199,170 Receivables - 20,825 - - 20,825

31.12.2011Ringgit MalaysiaReceivables - 103,201 - - - 103,201

United States DollarCash at Bank - - - 5,431 176,490 181,921 Receivables 22,021 - 27,749 - - 49,770

Financial assets held in non-functional currencies

Annual Report 2012

121



(iv) Foreign currency exchange risk

The net unhedged financial assets of the Group as at 31 December 2012 that are not denominated in their functional currencies are as follows: (cont’d)

In the current financial year, the Group's exposure to foreign exchange risk in respect of its subsidiaries is not material. The Group will continue to monitor the risk arising from foreign currency exchange from time to time and will formulate appropriate strategies should the risks be material. The Group's profit/(loss) net of tax is not sensitive to the changes in the exchange rate against the respective functional currencies of the Group entities, with all other variables held constant.

Thai Brunei Australian RinggitBaht Dollar Dollar Euro Malaysia TotalRM RM RM RM RM RM

Financial assets held in non-functional currencies

1.1.2011Ringgit MalaysiaReceivables - 9,321 - - - 9,321

United States DollarCash at Bank - - - - 78,529 78,529 Receivables 22,514 - 149,997 - - 172,511


122


(c) Fair values of financial instruments

(i) Financial instrument at fair value The fair value measurement hierarchies used to measure financial instruments at fair value in the statements of financial position are as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or

liabilities. • Level 2: 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: Inputs for the asset or liability that are not based on observable

market data (unobservable inputs).

As at reporting date, the Group and the Company held the following financial assets that are measured at fair value:

No transfers between any levels of the fair value hierarchy took place during the year. There were also no changes in the purpose of any financial asset that subsequently resulted in a different classification of that asset. The Group does not hold credit enhancements or collateral to mitigate credit risk. The carrying amount of financial assets therefore represents the potential credit risk.

As at 31 December 2012 Level 1 TotalRM RM

Available-for-sale financial assets Equity shares 224,736 224,736

As at 31 December 2011Available-for-sale financial assets

Equity shares 1,076,222 1,076,222

As at 1 January 2011Available-for-sale financial assets

Equity shares - -

Group/Company

Annual Report 2012

123


(c) Fair values of financial instruments

(ii) Financial instrument other than those carried at fair value

Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value The carrying amounts of short term receivables and payable, cash and cash equivalents and short term borrowings approximate their fair value due to the relatively short term nature of these financial instruments and insignificant impact of discounting.

The carrying amounts of the financial assets and liabilities of the Group and of the Company at the reporting date reasonably approximate their fair values except as follows:

The following summarises the methods used in determining the fair value of financial instruments reflected in the above table:

31.12.2012 31.12.2011 1.1.2011RM RM RM

Group

Financial liabilitiesHire purchase payables (non-current)- Carrying amount 451,367 734,541 775,356 - Fair value 434,837 697,720 702,536

31.12.2012 31.12.2011 1.1.2011RM RM RM

Financial liabilitiesHire purchase payables (non-current)- Carrying amount 52,494 139,678 176,545 - Fair value 44,234 123,334 149,299

Group

Company


124


(c) Fair values of financial instruments (cont’d)

(ii) Financial instrument other than those carried at fair value (cont’d)

Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value (cont’d)

Loans and borrowings The fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period.

36. Capital management objectives and policies

The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions to ensure that the Group is able to continue as a going concern and maintains an optimal capital structure so as to maximise shareholder value. No changes were made in the objectives, policies or processes during the years ended 31 December 2012 and 31 December 2011. The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group's policy is to keep the gearing ratio below 20%. The Group includes within net debt, trade and other payables, hire purchase liabilities and finance lease payable, less cash and bank balances. Capital includes equity attributable to the owners of the parent.

Annual Report 2012

125

36. Capital management objectives and policies (cont’d) The gearing ratios are as follows:

There were no changes in the Group’s approach to capital management during the financial year.

31.12.2012 31.12.2011 1.1.2011RM RM RM

Trade payables (Note 18) 692,662 2,409,524 1,597,623 Other payables (Note 22) 5,350,562 4,160,895 3,311,763 Other liabilities (Note 19) 4,906,687 8,691,738 5,058,922 Hire purchase and finance lease payable (Note 20) 760,804 1,027,642 1,153,055 Less: Cash and cash equivalent (32,368,159) (25,869,819) (5,047,055)Aggregate indebtedness (20,657,444) (9,580,020) 6,074,308

Equity attributable to the owner of the parent, representing total capital 46,658,853 40,633,817 23,857,133

Capital and net debt 26,001,409 31,053,797 29,931,441

Gearing ratio N/A N/A 20%

31.12.2012 31.12.2011 1.1.2011RM RM RM

Trade payables (Note 18) - 134,078 901,092 Other payables (Note 22) 977,790 811,176 921,258 Other liabilities (Note 19) - - 21,887 Amounts due to subsidiaries (Note 23) 261,209 339,616 578,678 Hire purchase and finance lease payable (Note 20) 139,678 223,242 271,772 Less: Cash and cash equivalents (17,308,154) (13,841,573) (794,389)Aggregate indebtedness

(15,929,477) (12,333,461) 1,900,298

Equity attributable to the owner of the parent, representing total capital (48,922,369) 47,387,996 31,225,068

Capital and net debt (64,851,846) 35,054,535 33,125,366

Gearing ratio 25% N/A 6%

Company

Group


126

37. Significant Events

(i) Proposed Private Placements of new ordinary shares of RM0.10 each in the Company

On 26 March 2012, the Company proposed to undertake a private placement of up to 10% of the issued and paid-up share capital of the Company of RM43,005,300 comprising 430,053,000 ordinary shares of RM0.10 each at an issued price to be fixed by Board and shall be determined after obtaining the approval of the relevant authorities. The purpose of the Proposed Private Placement is to raise funds for business expansion opportunities or for general working capital requirements. The listing application to Bursa Securities has been submitted and approved by Bursa Malaysia as at the date of this report.

(ii) On 18 October 2012 the Company received notification that its subsidiary company,

Guangzhou Jingyou Management Consulting Co. Ltd (“GJMC”) incorporated in the People’s Republic of China (“PRC’’), which is held through IFCA (Guangzhou) Technology Company Ltd, had been voluntary deregistered on 15 June 2012 from the State Administration of Industry and Commerce of China. The voluntarily deregistration of GJMC has no material impact to the financial statements.

38. Subsequent Event

On 20 February 2013, the Board of Directors of the Company had resolved to extend the timeframe for the utilisation of the remaining proceeds from the Rights Issue Exercise allocated for working capital and business expansion for a further period of twelve (12) months until 21 February 2014.

39. Date of Authorisation For Issue

The financial statements of the Group and of the Company for the financial year ended 31 December 2012 were authorised for issue in accordance with a resolution of the Board of Directors on 15 April 2013.

Annual Report 2012

127

Supplementary Information on the Disclosure of Realised and Unrealised Profits or Losses

The following analysis of realised and unrealised accumulated losses of the Group and of the Company at 31 December 2012 is presented in accordance with the directive issued by Bursa Securities dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Listing Requirements, as issued by the Malaysian Institute of Accountants.

2012 2011 2012 2011RM RM RM RM

Total retained profits/ (accumulated loss) of the Company and its subsidiaries- realised (29,446,482) (23,704,478) (6,269,883) (6,098,411) - unrealised (165,584) (358,402) - 163,398

(29,612,066) (24,062,880) (6,269,883) (5,935,013) Less: Consolidation adjustments 20,009,845 10,981,613 - -

(9,602,221) (13,081,267) (6,269,883) (5,935,013)

Group Company


128

Annual Report 2012

129

List of Properties

Title / Location

Description /

Existing Use

Registered

Owner

Age of

Building

(Years)

Land /

Built-up

Area

Tenure

Carrying

Amount @

31.12.2012

(RM)

Original

Cost (RM)

Johor Property

4-storey shop office at

31, Jalan Permas 10/07,

Taman Permas Jaya,

81750 Johor Bahru, Johor

Ground Floor

& 1st - JB

Office

2nd & 3rd -

Tenanted

IFCA MSC

BHD

18

1,920

sq. feet

Freehold

600,000

750,000

Penang Property

Shop Office at 441-2-5,

Pulau Tikus Plaza,

Jalan Burmah,

10350 Penang

Penang

Office

IFCA MSC

Bhd

16

136.85 sq.

metres

Freehold

341,600

427,000

Selangor Properties

2 units of shoplots & 10

units of office lots at 17

and 19, Jalan PJU 1/42A,

Dataran Prima,

47301 Petaling Jaya,

Selangor

Head

Office

IFCA MSC

BHD

14

20,311 sq.

feet

Freehold

3,680,000

4,600,000

Apartment D-G-38

Block Rapis,

Pangsapuri Las Palmas,

Jalan Desa Ria,

Bandar Country Homes,

48000 Rawang, Selangor

Rented

Developer -

Tanco

Development

Sdn Bhd

13

755 sq.

Feet

Freehold

42,878

88,800

Unit 1-1 in a 4-storey

shop office at 2-1, Jalan

Desa 9/5

Bandar Country Homes,

48000 Rawang, Selangor

Vacant

Developer -

Tanco

Development

Sdn Bhd

11

1,629 sq.

feet

Freehold

174,000

291,800

Perak Property

Bukit Kinding Orchard

Land, held under Green

31413, Lot 127202,

Mukim of Hulu Kinta,

Perak

Vacant

Sunrise

Excelsior (M)

Sdn Bhd

-

0.4050

hectare

Freehold

260,000

198,000


130

Analysis of Shareholding & Warrantholdings

as at 30 April 2013

1. Analysis of Shareholdings

Authorised Capital : RM75,000,000

Issued And Fully Paid-up Capital : RM45,005,300

Class of Shares : Ordinary Shares of 10 sen each fully paid

Voting Rights : One vote per shareholder on a show of hands

One vote per share on a poll

Breakdown of Shareholdings

Size of Holdings No. of

Holders

% No. of

Shares

%

Less than 100 7 0.24 278 0.00

100 - 1,000 169 5.73 125,548 0.03

1,001 - 10,000 1,072 36.33 6,894,000 1.53

10,001 - 100,000 1,333 45.17 55,946,216 12.43

100,001 and below 5% 369 12.50 187,182,315 41.59

5% and above 1 0.03 199,904,643 44.42

TOTAL 2,951 100.00 450,053,000 100.00

Substantial Shareholders As At 30 April 2013

No. of Shares Held

Name of Shareholders Direct

Interest

% Indirect

Interest

%

IFCA Software (Asia) Sdn Bhd 207,904,643 46.20 - -

Yong Keang Chuen 45 - *210,084,008 46.68

Yong Kian Keong 2,179,365 0.48 #207,904,688 46.20

Directors’ Shareholdings As At 30 April 2013

No. of Shares Held

Name of Directors Direct

Interest

% Indirect

Interest

%

Yong Keang Cheun 45 - *210,084,008 46.68

Yong Kian Keong 2,179,365 0.48 #207,904,688 46.20

Ooi Bee Bee 4,998,648 1.11 - -

*Deemed interest by virtue of his interest in IFCA Software (Asia) Sdn. Bhd and being the brother of

Yong Kian Keong, a fellow director of IFCA Software (Asia) Sdn. Bhd.

#Deemed interest by virtue of his interest in IFCA Software (Asia) Sdn. Bhd and being the brother of

Yong Keang Chuen, a fellow director of IFCA Software (Asia) Sdn. Bhd.

Annual Report 2012

131

Analysis of Shareholding & Warrantholdings (cont’d)

as at 30 April 2013

1. Analysis of Shareholdings (cont’d)

List of Thirty (30) Largest Registered Shareholders As At 30 April 2013

No. Name of Shareholders No. of

Shares

%

1. RHB Nominees (Tempatan) Sdn Bhd

(OSK Capital Sdn Bhd for IFCA Software (Asia) Sdn Bhd)

199,904,643 44.42

2. Han Wang Soon 12,000,000 2.67

3. Ong Lee Veng @ Ong Chuan Heng 9,690,000 2.15

4. IFCA Software (Asia) Sdn Bhd 8,000,000 1.78

5. Yong Chin Fu 6,753,000 1.50

6. Ooi Sin Heng 4,500,000 1.00

7. DP Capital Limited 3,370,500 0.75

8. Loh Sook Mee 3,300,000 0.73

9. Yeoh Eng Chuan 3,100,000 0.69

10. Soo Kau Moi 3,038,000 0.68

11. Lee Kok Leong 2,986,500 0.66

12. Ooi Bee Bee 2,868,300 0.64

13. Citigroup Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Tan Jee Tien)

2,500,000 0.56

14. Cha Fui Yee 2,290,600 0.51

15. Goh Seng Chuan 2,265,800 0.50

16. Kevin Lim Junhao 2,212,000 0.49

17. Lai Keat Sean 2,200,000 0.49

18. Yong Kian Keong 2,179,365 0.48

19. Ooi Bee Bee 1,554,150 0.35

20. Lee Seng Kiong 1,508,100 0.34

21. Law Ah Ching 1,500,000 0.33

22. Leong Nyu Kuan 1,500,000 0.33

23. Tan Chun Ming 1,500,000 0.33

24. Tan Bee Lai 1,410,000 0.31

25. Public Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Foo Mei Fong)

1,370,000 0.30

26. Tai Ah Kau 1,363,550 0.30

27. Wong Boon Kee 1,358,000 0.30

28. Cha Fui Yee 1,331,600 0.30

29. Yong Kam Hoong 1,307,800 0.29

30. Wooi Kheng Choo 1,300,000 0.29

Total 290,161,908 64.47


132


as at 30 April 2013

2. Analysis of Warrantholdings

Warrants 2011/2016 : 143,351,000 outstanding

Breakdown of Warrantholdings

Size of Holdings No. of

Holders

% No. of

Warrants

%

Less than 100 3 0.30 150 -

100 - 1,000 39 3.93 25,914 0.02

1,001 - 10,000 304 30.61 1,810,000 1.26

10,001 - 100,000 438 44.11 22,388,350 15.62

100,001 and below 5% 208 20.95 102,298,605 71.36

5% and above 1 0.10 16,827,981 11.74

TOTAL 993 100.00 143,351,000 100.00

Substantial Warrantholders As At 30 April 2013

No. of Shares Held

Name of Warrantholders Direct

Interest

% Indirect

Interest

%

IFCA Software (Asia) Sdn Bhd 16,827,981 11.74 - -

Yong Keang Cheun 15 - *17,554,436 12.25

Yong Kian Keong 726,455 0.51 #16,827,996 11.74

Directors’ Warrantholdings As At 30 April 2013

No. of Warrants Held

Name of Directors Direct

Interest

% Indirect

Interest

%

Yong Keang Cheun 15 - *17,554,436 12.25

Yong Kian Keong 726,455 0.51 #16,827,996 11.74

Ooi Bee Bee 1,666,050 1.16 - -

*Deemed interest by virtue of his interest in IFCA Software (Asia) Sdn. Bhd and being the brother of

Yong Kian Keong, a fellow director of IFCA Software (Asia) Sdn. Bhd.

#Deemed interest by virtue of his interest in IFCA Software (Asia) Sdn. Bhd and being the brother of

Yong Keang Chuen, a fellow director of IFCA Software (Asia) Sdn. Bhd.

Annual Report 2012

133


as at 30 April 2013

2. Analysis of Warrantholdings (cont’d)

List of Thirty (30) Largest Registered Warrantholders As At 30 April 2013

No. Name of Warrantholders No. of Warrants %

1. RHB Nominees (Tempatan) Sdn Bhd

(OSK Capital Sdn Bhd for IFCA Software (Asia) Sdn Bhd)

16,827,981 11.74

2. Maybank Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Lim Shew Poh)

4,183,400 2.92

3. Maybank Securities Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Lim Chee Sing)

3,424,600 2.39

4. Lum Yin Mui 3,208,000 2.24

5. Lee Seng Piow 3,201,500 2.23

6. Su An Lee 2,814,400 1.96

7. Ang Yook Chu @ Ang Yoke Fong 2,422,100 1.69

8. Chan Tuck Hoong 2,198,600 1.53

9. Lim Shew Poh 2,072,800 1.45

10. Teo Meng Hai 1,754,900 1.22


(Pledged Securities Account for Pek Kiam Kek)

1,750,000 1.22

12. Law Ah Ching 1,696,600 1.18

13. Kan Choon Kiat 1,500,000 1.05


(Pledged Securities Account for Vincent Phua Chee Ee)

1,500,000 1.05

15. Ooi Sin Heng 1,500,000 1.05

16. Sai Chong Jin 1,500,000 1.05

17. Choo Tuck Sing 1,273,800 0.89

18. Yang Keng Boon 1,200,000 0.84

19. HLIB Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Teo Ah Seng)

1,096,700 0.77

20. Lim Chee Cheng 1,060,000 0.74

21. Lim Kam Lin 1,010,000 0.70

22. Cha Fui Yee 1,000,000 0.70

23. Cheah Ching Mooi 1,000,000 0.70

24. Ho Chew Moy 1,000,000 0.70

25. JF Apex Nominees (Tempatan) Sdn Bhd

(Huatai Financial Holdings (HK) Limited for Huatai HK SPC-Huatai

Von Malaysia Fund Segregated Portfolio)

1,000,000 0.70

26. Tam Kock Kay @ Tan Kock Kay 1,000,000 0.70

27. Cimsec Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Teo Ah Seng)

990,000 0.69

28. Ooi Bee Bee 956,100 0.67

29. Voon Sze Lin 862,900 0.60

30. RHB Capital Nominees (Tempatan) Sdn Bhd

(Pledged Securities Account for Sew Chooi Lan)

850,000 0.59

Total 65,854,381 45.94

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TM

IFCA MSC BERHAD (Company No. 453392-T)

FORM OF PROXY

No. of Shares Held

I/We ………………………………………………………………….……………… NRIC/Company No………….……........................... (Full Name in Block Letters) of………………………………………………………………………………………………………………………...................................... (Full Address) being a member of IFCA MSC BERHAD (“ the Company” ) hereby appoint ………………………………………………………….

(Full Name in Block Letters) of………………………………………………………………………………………………………………….………………………............

(Full Address) or failing *him/her the Chairman of the Meeting as *my/our proxy to vote for *me/us on *my/our behalf at the 15th Annual General Meeting of the Company to be held at Dewan Perdana, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000 Kuala Lumpur on Friday, 21 June 2013 at 10.00 a.m. and at any adjournment thereof. *My/our proxy is to vote as indicated below:-

Resolutions

For Against

Resolution 1 Approval of payment of Directors’ fees of RM89,000 for the financial year ended 31 December 2012.

Resolution 2 Re-election of Mr. Yong Kian Keong, Director retiring pursuant to Article 85 of the Company’s Articles of Association.

Resolution 3 Re-election of Mr. Chew See Chiew, Director retiring pursuant to Article 85 of the Company’s Articles of Association.

Resolution 4 Re-election of Madam Ooi Bee Bee, Director retiring pursuant to Article 85 of the Company’s Articles of Association.

Resolution 5 Re-election of Mr. Yong Kok Leong, Director retiring pursuant to Article 90 of the Company’s Articles of Association.

Resolution 6 Re-appoint Messrs UHY as Auditors of the Company and to authorise the Directors to fix their remuneration.

*Strike out whichever not applicable Date …………………………………………. Signature of Member(s)/Common Seal………………………………………………. Notes: 1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote on his stead.

A proxy need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 are not applicable to the Company.

2. Where a member of the Company is an authorised nominee, it may appoint at least one proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

3. In the case of a corporate member, the instrument appointing a proxy or proxies shall be under its Common Seal or under the hand of its attorney duly autorised in writing.

4. Where a member appoints more than one proxy, he shall specify the proportions of his holdings to be represented by each proxy. 5. The instrument appointing a proxy or proxies duly completed must be deposited at the Registered Office of the Company situated at 24B,

Persiaran Zaaba, Taman Tun Dr. Ismail, 60000 Kuala Lumpur not less than forty-eight (48) hours before the time set for the Annual General Meeting or adjourned meeting.

6. Unless voting instructions are indicated in the spaces provided above, the proxy may vote as he/she thinks fit.

AFFIXSTAMP

1st fold here

Fold this flap for sealing

Then fold here

The Company Secretary IFCA MSC BERHAD 24B, Persiaran Zaaba, Taman Tun Dr. Ismail, 60000 Kuala Lumpur

annual report 2012 - ifca msc berhad · annual report 2012 ifca msc berhad (co. no.453392-t) annual...

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