annual report 2011perodua are the market leaders. given our young demographic proﬁle, the demand...

EP MANUFACTURING BHD Company No. 390116-TNo. 8 & 10, Jalan Jurutera U1/23, Seksyen U1Kawasan Perindustrian Hicom Glenmarie 40150 Shah Alam, Selangor Darul EhsanTel 03 7803 6663 Fax 03 7804 9761

www.epmb.com.my

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ANNUAL REPORT 2011

Chairman’s Statement5-Year Group Financial HighlightsCorporate InformationCorporate StructureBoard of DirectorsDirectors’ ProfileManagement TeamStatement on Corporate GovernanceAudit Committee ReportStatement on Internal ControlFinancial StatementsAnalysis of ShareholdingsList of PropertiesNotice of Annual General MeetingStatement Accompanying

Notice of Annual General MeetingProxy Form

0205060708091213202325949697

101

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As you know, on 16 March 2012, EPMB has proposed a takeoverof the Maju Expressway Sdn Bhd ("MEX"). This marks anothersignificant milestone being etched in EPMB's corporate journey.The acquisition is in line with our policy of expanding EPMB’sportfolio of businesses. It generates a stable recurring income forthe Group and gives us the opportunity to expand into theinfrastructure sector. We view the acquisition as complementaryto our core business of manufacturing automotive parts andcomponents as both businesses benefit from the growingdemand for vehicles locally.

Our automotive business will continue to remain as our corebusiness. More efforts and investment are under considerationsto expand this division locally and overseas.

We believe that the ASEAN liberalisation will be very positive forus. This is because the growth prospect for vehicle consumptionoutside of Malaysia is higher due to the low level of car densitycompared to Malaysia and with higher growth potential (from ademographic angle). In fact, some analysts considered ASEANregion as a major market in the automotive industry on par toIndia and better than Europe.

Although we are currently dependent on the Malaysian marketvia Proton and Perodua, our technology partnership with RobertBosch has been very rewarding and will give us an advantageand a competitive edge as we look to regional markets.

On behalf of the Board ofDirectors, I take pleasure inpresenting the Annual Report andAudited Financial Statements of EPManufacturing Bhd ("EPMB" or"the Group") for the financial yearended 31 December 2011.

EPMB-AR2012-SHARON1:EPMB-AR2011 21/06/12 10:43 AM Page 2

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FINANCIAL PERFORMANCE

Our Group’s net profit has soared to RM38.4 million from RM26.1million, which represented an increase of 47.1% while revenuestood at RM578.3 million.

Earnings per share for 2011 has increased 50.3% to 23.90 senwhile net assets per share improved to RM1.71 as compared toRM1.47 in the previous financial year.

DIVIDENDS

In line with the strong performance in 2011, the Board isproposing a final tax exempt dividend of 2.0 sen per sharesubject to the shareholders’ approval at the forthcoming AnnualGeneral Meeting.

EPMB has paid a total interim tax exempt dividend of 2.0 sen pershare for its financial year ended 31 December 2011 on 18November 2011 and 20 February 2012 respectively.

PROSPECTS

The Malaysian Automotive Association (MAA) has forecasted thetotal industry volume growth of 2.5% to 615,000 units for year2012 from 600,123 units for year 2011.

The new regulation on car financing eligibility has been viewedwith caution by the industry. We, however are confident that thereasonable economic growth prospects will continue to sustaindemand for affordable cars of which our major OEMs, Proton andPerodua are the market leaders.

Given our young demographic profile, the demand for newvehicles will continue to remain strong. Further, the localmarques are also becoming increasingly aggressive in rising tothe challenge of international automakers. For example, the newProton Preve which was launched in April 2012 is expected to bewell received by the market.

The government is expected to announce the new NationalAutomotive Policy (NAP) this year. We believe that a movetowards making Malaysia a regional hub for hybrid, electricvehicles and environmentally friendly vehicles would be anexciting prospect for EPMB.

Our water division business is focusing on promoting the use ofsmart water meters. In the long run, with water becoming a moreprecious resource and its cost of recovery rising, the advantagesof smart water meter will become more compelling andapparent.

Our long term earnings profile will be significantly improved withthe inclusion of MEX into the Group. The growth prospects ofMEX are highly promising. As MEX cuts through highly populatedtownships and fast developing areas, we are confident that trafficvolume will continually grow. Cyberjaya is emerging as the nexthotspot as we are seeing a huge rise in the roll-out of residentialand commercial property projects in that area. As more peoplelive and work in Cyberjaya, traffic volume along MEX will increase.Furthermore, the increasing popularity of MEX as a route to KLIAand LCCT is very encouraging.

(cont’d)

4

(cont’d)

CORPORATE DEVELOPMENT

16 March 2012Proposed Acquisition of Maju Expressway Sdn Bhd ("MESB")

Proposed acquisition by a wholly-owned subsidiary of EPMB ofthe business of MESB and entire equity interest in MESB fromBright Focus Berhad and Ulimas Sdn Bhd for a purchaseconsideration of RM1.15 billion together with the redemption ofIslamic Medium Term Notes (IMTN) of RM550 million.

3 April 2012Incorporation of EPMEX Sdn Bhd (“EPMEX”) on 2 April 2012

EPMEX, a wholly-owned subsidiary of EPMB with authorisedshare capital of RM100,000 comprising 100,000 ordinary sharesof RM1.00 each and an issued and paid-up share capital ofRM2.00, was incorporated to undertake the Proposed Acquisitionof the business and entire equity interest in Maju Expressway SdnBhd.

APPRECIATION

On behalf of the Board of Directors, I wish to extend my heartfeltgratitude to all of our shareholders for their steadfast supportand confidence to the Group.

My sincere appreciation also goes to the various governmentauthorities, business associates, financiers, media and partnersfor their continued support.

To our management and employees, thank you for yourunwavering commitment and dedication to the ongoingdevelopment of EPMB.

Moving forward, we will continue to nurture and enhance thepartnerships we have fortified and aspire to create newbenchmark for EPMB.

HAMIDON BIN ABDULLAHExecutive Chairman

5

Year ended31.12.2007 31.12.2008 31.12.2009 31.12.2010 31.12.2011

RM'000 RM'000 RM'000 RM'000 RM'000

Revenue 303,034 483,733 468,046 587,519 578,309Earnings Before Interest and Tax (EBIT) 13,615 18,435 14,071 43,331 41,968Profit After Taxation 762 8,325 7,871 26,106 38,377Total Assets 625,704 633,751 572,723 565,820 547,455Shareholders' Funds 200,658 214,548 220,892 243,481 274,213Basic Earnings/(Loss) Per Share (sen) (0.40) 4.68 4.51 15.90 23.90Net Assets Per Share (RM) 1.61 1.33 1.37 1.47 1.71

REVENUE (RM’000)

07 08 09 10 11

07 08 09 10 11 07 08 09 10 11

PROFIT AFTER TAXATION (RM’000)

SHAREHOLDERS’ FUNDS (RM’000) NET ASSETS PER SHARE (RM)

07 08 09 10 11

303

,034

48

3,73

3

468

,046

587

,519

5

78,3

09

200

,658

2

14,5

48

220,

892

243,

481

2

74,2

13

1

.61

1.3

3

1.3

7

1.47

1.7

1

762

8,32

5

7,87

1

26,

106

3

8,37

7

6

Board of DirectorsHamidon Bin Abdullah (Executive Chairman)Shaari Bin Haron (Independent Non-Executive Director)Dato’ Seri Ismail Bin Shahudin (Independent Non-Executive Director)Dato’ Ikmal Hijaz Bin Hashim (Independent Non-Executive Director)Dr Linden Hamidon (Non-Independent Non-Executive Director)Hew Voon Foo (Non-Independent Non-Executive Director)

Audit CommitteeShaari Bin Haron (Chairman)Dato’ Seri Ismail Bin ShahudinDato’ Ikmal Hijaz Bin HashimHew Voon Foo

Company SecretaryTay Li Li (MAICSA 7007996)

Share RegistrarMega Corporate Services Sdn BhdLevel 15-2, Sheraton Imperial CourtJalan Sultan Ismail50250 Kuala LumpurTel : 603-2692 4271Fax : 603-2732 5388

Registered Office andPrincipal Place of BusinessNo. 8 & 10, Jalan Jurutera U1/23Seksyen U1, Kawasan PerindustrianHicom Glenmarie, 40150 Shah AlamSelangor Darul EhsanTel : 603-7803 6663Fax : 603-7804 9761

Manufacturing Plant 1Lot 1403, 1406 & 1409, Batu 29Jalan Ipoh, 44300 Batang KaliSelangor Darul Ehsan

Manufacturing Plant 2No. 8 & 10Jalan Jurutera U1/23Seksyen U1Kawasan PerindustrianHicom Glenmarie40150 Shah AlamSelangor Darul Ehsan

AuditorsKPMGChartered AccountantsLevel 10, KPMG Tower8, First Avenue, Bandar Utama47800 Petaling JayaSelangor Darul EhsanTel : 603-7721 3388Fax : 603-7721 3399

Principal BankersBank Muamalat Malaysia BerhadHSBC Bank Malaysia BerhadCIMB Bank BerhadMalayan Banking BerhadAffin Islamic Bank BerhadMalaysian Industrial DevelopmentFinance Berhad

Stock Exchange ListingMain MarketBursa Malaysia Securities BerhadStock Name • EPMBStock Code • 7773

7

PEPS-JV (M) SDN BHD

EP MANUFACTURING BHD

EP POLYMERS (M) SDN BHD

EPTS Manufacturing Sdn Bhd

FUNDWIN SDN BHD

ADVANCE PRODUCT SYSTEMS SDN BHD

EP MOULDS & DIES (M) SDN BHD

EPMB (AUSTRALIA) PTY LTD

EP METERING SERVICES SDN BHD

PT EP Metering & Services

PT Tirta Serang Madani

CIRCLE RING NETWORK SDN BHD

100%

100%

50%

100%

100%

100%

100%

100%

100%

90%

90%

EPMEX SDN BHD100%

8

From left to right:-(Sitting)Shaari Bin HaronDato’ Seri Ismail Bin ShahudinHamidon Bin Abdullah

(Standing)Hew Voon FooDato’ Ikmal Hijaz Bin HashimDr Linden Hamidon

9

HAMIDON BIN ABDULLAHEncik Hamidon Bin Abdullah is the controlling shareholder and the Executive Chairmanof the Company. He was appointed to the Board on 20 January 1997. Encik Hamidon isthe founding member of the EPMB Group which he started in 1988. He is also a directorof Atis Corporation Berhad and the Executive Chairman of Nadayu Properties Berhad.

Encik Hamidon obtained his Bachelor’s Degree in Applied Mathematics & ComputerScience in 1974 and a Master’s Degree in Urban Planning in 1975 from the Universityof Adelaide, Australia. Upon graduation in 1975, he started his career as a SystemAnalyst with the South Australia Highway Department. After 4 years, he was engagedas an Urban Planning Consultant with P.G. PakPoys & Associates (KL). In 1983, he joinedan architect firm, Hijjas Kasturi & Associates.

He has no family relationship with any other director or major shareholder of EPMBexcept for Dr Linden Hamidon who is his spouse and has no conflict of interest withEPMB. He has not been convicted for any offences within the past 10 years.

DATO’ SERI ISMAIL BIN SHAHUDIN Dato’ Seri Ismail Bin Shahudin was appointed to the Board on 28 November 2008. Heholds a Bachelor of Economics (Honours) degree from University Malaya, majoring inBusiness Administration.

Upon Dato’ Seri Ismail’s graduation in 1974, he joined ESSO Malaysia Berhad and servedfor 5 years in its Finance Division. He then joined Citibank Malaysia in 1979 and servedat the bank’s headquarters in New York in 1984 as part of the team in Asia Pacificdivision. Upon his return to Malaysia in 1986, he was promoted to the position of VicePresident & Group Head of the Public Sector and Financial Institutions Group inMalaysia. In 1988, he served United Asian Bank Berhad as Deputy General Manager until1992. Subsequently, he joined Maybank as General Manager of Corporate Banking andin 1997, he was appointed as Executive Director of Maybank. He left Maybank in July2002 to assume the position of Group Chief Executive Officer of MMC CorporationBerhad.

Currently, he also served on the Board of SMPC Corporation Berhad, Nadayu PropertiesBerhad, Malayan Banking Berhad, UEM Group Berhad, Aseana Properties Limited (listedon London Stock Exchange), Opus International Consultants Ltd (listed on New ZealandStock Exchange) and MCB Bank Limited, Pakistan which is listed on the Karachi StockExchange.

Dato’ Seri Ismail is also a member of the Audit Committee, Nomination Committee andRemuneration Committee.

He has no family relationship with any other director or major shareholder of EPMB andhas no conflict of interest with EPMB. He has not been convicted for any offences withinthe past 10 years.

Aged 59, Malaysian Executive Chairman

Aged 61, MalaysianIndependent Non-Executive Director

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DATO’ IKMAL HIJAZ BIN HASHIMDato’ Ikmal Hijaz Bin Hashim was appointed to the Board on 5 May 2009. He holds aMaster of Philosophy (Land Management) from University of Reading, U.K., andBachelor of Arts (Honours) from Universiti Malaya.

He has served as the Chief Executive Officer of Iskandar Regional DevelopmentAuthority (IRDA) from February 2007 until end of February 2009. Prior to that, from 2003to 2007, he was the CEO of Pos Malaysia Berhad and his last position was the GroupManaging Director/Chief Executive Officer of Pos Malaysia & Services Holdings Bhd. Hebegan his career by serving in the Administrative and Diplomatic Service of theGovernment from 1976 to 1990. He then joined United Engineers (Malaysia) Berhad asthe General Manager of the Malaysian-Singapore Second Crossing Project. On 1 January1993, he became the Chief Operating Officer of Projek Lebuhraya Utara-Selatan Berhadand subsequently as its Managing Director from January 1995 to June 1999 andremained as a Director until November 2001. He was appointed as the ManagingDirector of Prolink Development Sdn Bhd (“Prolink”) in July 1999. In February 2000, hewas appointed President of the Property Division of the Renong Group whilemaintaining his position as Managing Director of Prolink. He held the position ofManaging Director at Renong Berhad from 2002 until October 2003.

His directorships in other public companies include Faber Group Berhad and NadayuProperties Berhad.

Dato’ Ikmal is also a member of the Audit Committee. He has no family relationship withany other director or major shareholder of EPMB and has no conflict of interest withEPMB. He has not been convicted for any offences within the past 10 years.

SHAARI BIN HARONEncik Shaari Bin Haron was appointed to the Board on 20 January 1997. He obtainedhis Bachelor of Law (Honours) degree from the International Islamic University in 1991.He was admitted to the Bar in May 1993 and thereafter commenced his law practice inKuala Lumpur. He is currently the Managing Partner of Messrs Abu Bakar & Yong. Healso sits on the board of Voir Holdings Berhad.

Encik Shaari is also the Chairman of the Audit Committee, Nomination Committee andRemuneration Committee.


(cont’d)



11

HEW VOON FOOMr Hew Voon Foo was appointed to the Board on 17 April 2002. He is a member of theChartered Institute of Management Accountants (“CIMA”) and the Malaysian Instituteof Accountants (“MIA”).

He has extensive experience in financial management gained over the years in an auditfirm and as financial controller in a local manufacturing company. Currently, he alsoserved on the board of Genetec Technology Berhad and Atis Corporation Berhad.

Mr Hew is also a member of the Audit Committee, Nomination Committee andRemuneration Committee.


DR LINDEN HAMIDON Dr Linden Hamidon was appointed to the Board on 20 January 1997. Dr Linden holdsa Bachelor of Dental Surgery from the University of Adelaide, Australia, which sheobtained in 1978. She is also a practicing Dentist since 1980.

She has no family relationship with any other director or major shareholder of EPMBexcept for Encik Hamidon Bin Abdullah who is her spouse and has no conflict of interestwith EPMB. She has not been convicted for any offences within the past 10 years.

(cont’d)

Aged 51, MalaysianNon-Independent Non-Executive Director

Aged 58, Australian/Malaysian PRNon-Independent Non-Executive Director

12

From left to right:-(Sitting)Chong Poh Leng (Director - Finance)Ong Tsuey Yun (Director - Finance & Special Project)Zulkefly Baharuddin (Director - Bussiness & Development)

(Standing)Mohd Nizam Bin Mohamed (Director- Manufacturing)Tay Li Li (Company Secretary)Johan Hamidon (General Manager)

13

Recognizing the Company’s responsibility towards its shareholders, customers, employees, the community and regulatory bodies,the Board of Directors will continue to ensure and uphold good corporate governance and social ethics in conducting the businessand affairs of the Group to achieve its corporate mission and enhance shareholders’ value.

Sets out below are the manner in which the Company has applied the principles and practices of the Malaysian Code on CorporateGovernance within the Group.

1. BOARD OF DIRECTORS

1.1 Composition of the Board

The Board currently consists of six (6) directors, i.e. an Executive Chairman and five non-executive directors, three ofwhom are independent. A brief write-up on each Director is set out under the Directors’ Profile.

The Executive Chairman is responsible for the orderly conduct of the Board and the making and implementation ofstrategy and operational decisions. The Non-Executive Directors are independent of management, bringing with thema wide spectrum of knowledge and experience in various business sectors of commercial, financial, legal and accounting.They provide independent views to the formulation of strategies and policies to safeguard the interest of parties such asminority shareholders. No individual or group of individuals dominate the Board’s decision making.

Shaari Bin Haron is the Senior Independent Non-Executive Director to whom concerns may be conveyed.

In accordance with the Company’s Articles of Association, all Directors shall retire from office at least once in every threeyears but shall be eligible for re-election.

1.2 Board Meetings

The Board scheduled to meet quarterly. Additional meetings may be convened when necessary. During the financialyear ended 31 December 2011, four (4) meetings were held and the record of Directors’ attendance is as follows:-

Executive Director Attendance %

Hamidon Bin Abdullah 4/4 100

Non-Executive Directors

Dato’ Seri Ismail Bin Shahudin 4/4 100Dato’ Ikmal Hijaz Bin Hashim 3/4 75Shaari Bin Haron 4/4 100Dr Linden Hamidon 3/4 75Hew Voon Foo 4/4 100

1.3 Responsibilities and Supply of Information

The principal responsibilities of the Board include:-

• setting and reviewing the Group’s strategic direction, goals and business plans.• overseeing and monitoring the conduct of business and financial performance of the Group and evaluate the

performance against the strategies. • identifying principal risks and ensuring implementation of appropriate internal control systems and reporting

framework for the management of these risks.• reviewing the adequacy and integrity of the Group’s internal control and management information systems.• succession planning of senior management.• developing and implementing an investor relations programme or shareholders communications policy for the

Group.

14

1. BOARD OF DIRECTORS (cont’d)

1.3 Responsibilities and Supply of Information (cont’d)

The Board reserved to itself a schedule of matters for decision including strategy and policy issues, major capitalinvestment, financial decision, approval of corporate plans and changes in major activities of the Group.

Prior to Board meeting, board members are furnished with the agenda of the meeting and relevant board papers tofacilitate decision-making and sound judgement during the meeting.

To assist in the effective discharge of their duties, all Directors have full access to information pertaining to all mattersand may seek independent professional advice in furtherance of their duties and have access to the advice and servicesof the Company Secretary and senior management staff of the Group.

1.4 Directors’ Remuneration

1.4.1 Remuneration procedure

The remuneration of each Director is determined by the Board as a whole. The Directors do not participate in thediscussion and decision of their own remuneration.

1.4.2 Remuneration Package

All Directors are provided with Directors’ fees, which are approved by the shareholders at the Annual GeneralMeeting, based on the recommendation of the Board. The details of the remuneration of the Directors of theCompany on Group basis for the financial year ended 31 December 2011 are as follows:-

Benefits-in-kind

Salary Fees Bonus & others TotalRM RM RM RM RM

Executive 804,000 30,000 268,000 149,860 1,251,860Non-Executive Directors - 312,000 10,000 39,444 361,444

The number of Directors whose remuneration falls into the following bands are as follows:

Executive Non-Executive

RM50,000 and below - 3RM50,001 – RM100,000 - 1RM150,001 – RM200,000 - 1RM1,250,001 – RM1,300,000 1 -

1.5 Directors’ Training

All Directors have attended the Mandatory Accreditation Programme (MAP) prescribed by Bursa Malaysia SecuritiesBerhad. The Directors will continue to attend appropriate trainings to equip themselves with knowledge and skill todischarge their duties effectively. Seminars and training programs attended by the Directors during the financial yearare:-

• Strategic and Leadership Excellence • 8th Kuala Lumpur Islamic Finance Forum• Sustainability Program for Directors • Chairman’s Forum• FRS Impact on Company Tax • BNM’s Islamic Finance Master Class :• MINDA breakfast talk on ‘War of Talent: Competitive Strategies for Islamic Finance

A Battle Malaysia Cannot Afford to Lose”• Bursa Malaysia Launch of Corporate Integrity Pledge

The Board was updated by the management on operational and business development and new projects at its quarterlymeetings. The Board was also updated with latest changes and new regulatory and statutory requirements and corporategovernance matters where applicable.

(cont’d)

15

2. THE BOARD COMMITTEES

The Board has three formally constituted committees which operated within defined terms and reference to assist it indischarging its duties and responsibilities.

2.1 Audit Committee

The details are set out in the Audit Committee Report of this Annual Report.

2.2 Nomination Committee

The Nomination Committee’s primary function is to recommend to the Board, candidates for all directorships to be filledby the shareholders or the Board taking consideration of the candidates’ skill, knowledge, expertise and experience,professionalism, integrity and for independent non-executive director, his ability to discharge such responsibilities orfunctions as expected from an independent non-executive director. The actual decision as to who shall be appointed isthe responsibility of the full Board after considering the recommendations of the Nomination Committee. The NominationCommittee also has the authority to assess the Board as a whole and examine a particular issue and reports back to theBoard its recommendations.

Composition

The present members of the Nomination Committee of the Company are:-

Member

Shaari Bin Haron (Chairman)Dato’ Seri Ismail Bin ShahudinHew Voon Foo

The Chairman of the Nomination Committee is an Independent Non-Executive Director. The Chairman shall attend allmeetings of the committee other than when matters concerning himself are discussed.

The Company Secretary is the secretary of the Nomination Committee. The Secretary shall maintain minutes of theproceedings of the Committee and circulate such minutes to all members of the Board.

Meetings

Meetings of the Nomination Committee will be held from time to time as determined by the members of the Committee.Written notice of the meeting together with an agenda will be given to the members of the Committee.

2.3 Remuneration Committee

The Remuneration Committee’s primary function is to set the policy framework and recommend to the Board on theremuneration packages of the Executive Directors in all its forms, drawing from outside advice as necessary. ExecutiveDirectors shall play no part in decisions on their own remuneration. The determination of the remuneration package forNon-Executive Directors shall be a matter for the Board as a whole. The Director concerned shall abstain from deliberationsand voting on decisions in respect of his individual remuneration package.

The Remuneration Committee also has the authority to examine a particular issue and reports back to the Board itsrecommendations.

Composition

The present members of the Remuneration Committee of the Company are as follows:-

Member

Shaari Bin Haron (Chairman)Dato’ Seri Ismail Bin ShahudinHew Voon Foo

(cont’d)

16

2. THE BOARD COMMITTEES (cont’d)

2.3 Remuneration Committee (cont’d)

The Chairman of the Remuneration Committee is elected amongst Non-Executive Directors. The Chairman shall attendall meetings of the Committee other than when matters concerning himself are discussed.

The Company Secretary is the secretary of the Remuneration Committee. The Secretary shall maintain minutes of theproceedings of the Committee and circulate such minutes to all members of the Board.

Meetings

Meetings of the Remuneration Committee shall be held from time to time as determined by the members of theCommittee. Written notice of the meeting together with an agenda shall be given to the members of the Committee.

Remuneration Policy

The Remuneration Committee shall aim to ensure the remuneration is sufficient to attract and retain the Directors neededto run the Company successfully.

The remuneration package comprises of a number of separate elements such as basic salary, allowance, fee, bonus andother non-cash benefits.

In the case of Executive Directors, the component parts of remuneration shall be structured so as to link rewards tocorporate and individual performance. In the case of Non-Executive Directors, the level of remuneration shall be linkedto their experience and the level of responsibilities undertaken.

3. RELATIONSHIP WITH SHAREHOLDERS

The Company recognizes the importance of effective communications and timely dissemination of information to itsshareholders, stakeholders and public at large.

Annual report, financial statements, analyst reports, circular to shareholders and announcements are some of the modes ofreporting to the shareholders, stakeholders and the public on the business activities, financial performance and majordevelopment of the Group to enable the shareholders to have an overview of the Group’s performance and operations.

General Meetings provide an opportunity for shareholders to access their Board for clarification of issues related to the Group.Shareholders are encouraged to participate and communicate at the general meetings and to vote on the resolutions. Externalauditors are present to provide their professional and independent advice on relevant issues raised.

The Company maintains a website at www.epmb.com.my for which the shareholders can access to information of the Group.

The Company also participated in the Bursa Research Scheme (CBRS). Under this scheme, investors could access to the reviewreports of the Company by professional analysts to make better informed investment decisions. Dialogues were also held withfinancial analysts and fund managers to keep them updated with the business development and financial performance of theGroup.

4. ACCOUNTABILITY AND AUDIT

4.1 Financial Reporting

In presenting the annual report and quarterly financial statements to shareholders, the Board aims to provide a balancedand comprehensive assessment of the Group’s financial performance and prospect.

The Directors are responsible for ensuring the annual financial statements are prepared in accordance with the provisionsof the Companies Act, 1965 and the applicable approved accounting standards in Malaysia.

(cont’d)

17

4. ACCOUNTABILITY AND AUDIT (cont’d)

4.2 Internal Control

The Board acknowledges their responsibility for the maintenance of a sound system of internal control, including riskassessment and reviewing its effectiveness to safeguard shareholders’ investment and Group assets. As with any suchsystem, controls can only provide reasonable but not absolute assurance against material misstatement or loss. TheGroup is continuously looking into the adequacy and integrity of its system of internal control.

A Statement on Internal Control of the Group is set out in this Annual Report.

4.3 Relationship with Auditors

The company has always maintained a formal and transparent relationship with the Auditors, both internal and external,in seeking professional advice and ensuring compliance in matters pertaining to risk management and internal controland accounting standards.

5. DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors are responsible to prepare financial statements for each financial year which give a true and fair view of thefinancial position of the Company and the Group and of the financial performance and cash flows of the Company and theGroup, in accordance with the Financial Reporting Standards (“FRS”), accounting principles generally accepted and theCompanies Act, 1965 in Malaysia. These financial statements also complied with the applicable disclosure provisions of theListing Requirements of Bursa Malaysia Securities Berhad.

In ensuring the preparation of these financial statements, the Directors have:-

• adopted suitable accounting policies and applied them consistently;• made judgement and estimates that are reasonable and prudent; • ensured that applicable approved accounting standards have been complied with; and• ensured that proper accounting and other records which disclose with reasonable accuracy the financial position of the

Company and the Group are kept.

CORPORATE SOCIAL RESPONSIBILITY

The Group sees corporate social responsibility as an integral aspect of our business principles as our business activities will have animpact on the workplace, communities and environment.

To ensure a safe, secured and healthy working environment, the Group continues to enforce and adhere to the health and safetymeasures of the Occupational Safety and Health Act. The Safety and Health Committee conducted relevant trainings and tests onwork space and environmental safety to instill safety consciousness at all levels.

Recognising its employees as principal assets and foundation for business operations, the Group continues to provide them with onjob training and external training programs to develop and upgrade their skills, knowledge and competencies with the aim to embedhigh standard of work quality as well as management skill. In 2011, the Group sets up an in-house training center to cater for varioustraining needs. The Group also has an internship programme where interns from various local institutes and universities receivedon-job trainings.

Environmental protection is also an area of concern of the Group. We strived to ensure compliance of our production processes andproducts with applicable environmental laws and regulations. The Group has in place an Environmental Management Systems withthe aims to control and reduce its environmental impact, increase its operating efficiency and improve the health and safety practicesof its employees and the public. The factory was equipped with a waste water treatment system which consists of chemical treatmentplant, biological treatment plant and de-watering equipment where waste water from production processes is treated beforedischarge.

(cont’d)

18

ADDITIONAL INFORMATION

1. Share Buyback

During the financial year, the Company bought back a total of 2,079,800 of its ordinary shares in open market, the details ofwhich are as follows:-

No of shares Minimum Maximum Average TotalMonth purchased price price price Consideration

(RM) (RM) (RM) (RM)

Jan 2011 535,400 0.560 0.610 0.590 315,624.00May 2011 777,700 0.760 1.040 0.879 683,577.59June 2011 190,000 0.925 1.030 0.983 186,814.00July 2011 221,700 0.885 0.915 0.901 199,785.66Aug 2011 115,000 0.755 0.800 0.777 89,321.00Sept 2011 131,700 0.660 0.810 0.763 100,471.80Oct 2011 20,000 0.700 0.700 0.700 14,000.00Nov 2011 5,000 0.805 0.805 0.805 4,025.00Dec 2011 83,300 0.750 0.780 0.765 63,717.00

As at 31 December 2011, a total of 6,460,700 ordinary shares were bought back and all the shares purchased were retained astreasury shares in accordance with Section 67A of the Companies Act, 1965. None of the treasury shares were resold or cancelledduring the financial year.

2. Options, Warrants or Convertible Securities

The Company did not issue any options, warrants or convertible securities during the financial year.

3. American Depository Receipt (ADR) or Global Depository Receipt (GDR)

The Company did not sponsor any ADR or GDR programme during the financial year.

4. Non-audit Fees

The non-audit fees paid or payable to the external auditors by the Group for the financial year ended 31 December 2011amounted to RM15,000.

5. Imposition of Sanctions and/or Penalties

There were no sanctions or penalties imposed on the Company and its subsidiaries, directors or management by the relevantregulatory bodies during the financial year.

6. Profit Estimates, Forecast or Projections

The Company did not release any profit estimates, forecasts or projections for the financial year.

7. Profit Guarantee

There were no profit guarantees given by the Company during the financial year.

8. Revaluation Policy on Landed Properties

The Group does not have a revaluation policy for its landed properties.

(cont’d)

ADDITIONAL INFORMATION (cont’d)

9. Material Contracts

There were no material contracts (not being contracts entered into in the ordinary course of business) entered into by theCompany and/or its subsidiaries, involving Directors and Major Shareholders interests during the financial year.

10. Recurrent Related Party Transactions

The details of recurrent related party transactions conducted by the Group during the financial year ended 31 December 2011are as follows:-

Related Parties EP Manufacturing Bhd Nature of transactions Aggregate value ofand/or its subsidiaries with related parties transactions

(RM’000)

Companies in which the substantial shareholder and Directors of EP Manufacturing Bhd Group, Hamidon Bin Abdullah and/or Dr Linden Hamidon are deemed to have interests:-

1) EP Properties (M) Sdn Bhd Peps-JV (M) Sdn Bhd Rental payables 40(“Peps-JV”)

2) KB Teknik Sdn Bhd EP Polymers (M) Sdn Bhd Purchases of 2,152(“EP Polymers”) automotive parts

Fundwin Sdn Bhd (“Fundwin”)

3) Pesaka Nuri (M) Sdn Bhd Peps-JV Purchases of 57,249automotive parts

EP Manufacturing Bhd (“EPMB”) Rental receivables 432

Fundwin

4) KVC Industrial Supplies Sdn Bhd Peps-JV Purchases of 437consumable andmaintenance items

5) TSA Industries Sdn Bhd Peps-JV Purchases of automotive 1,234parts, consumableand maintenance items

6) GEIC Technology Sdn Bhd Circle Ring Network Purchases of parts 1,657Sdn Bhd (“CRN”)

7) Serai Saujana Fundwin Sale of parts 7,881Development Sdn Bhd

Company in which Kamludin Bin Abu, a director of Peps-JV, is deemed to have an interest:-

1) Inteledge Manufacturing Peps-JV Purchases of 2,761Sdn Bhd automotive parts

EP MANUFACTURING BHD 390116-T19

(cont’d)

20

MEMBERSHIP

The present members of the Audit Committee are as follows:-

Chairman

Shaari Bin Haron (Senior Independent Non-Executive Director)

Members

Dato’ Seri Ismail Bin Shahudin (Independent Non-Executive Director)

Dato’ Ikmal Hijaz Bin Hashim(Independent Non-Executive Director)

Hew Voon Foo (Non-Independent Non-Executive Director)

TERMS OF REFERENCE

COMPOSITION

The Audit Committee shall be appointed by the Board of Directors from amongst their number and shall compose of not fewer thanthree (3) members. All members must be non-executive directors, with a majority of them being independent directors.

At least one member of the Audit Committee:-i) must be a member of the Malaysian Institute of Accountants (MIA); or ii) if he is not a member of the MIA, he must have at least 3 years' working experience and:-

(a) have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act, 1967; or(b) must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants

Act 1967; oriii) fulfils such other requirements as prescribed or approved by the Exchange.

In the event of any vacancy in the Audit Committee resulting in the non-compliance with Paragraph 15.09(1) of the ListingRequirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), the Board shall appoint a new member within three (3) months.

The Board of Directors shall review the term of office and the performance of an Audit Committee and each of its members at leastonce in every three (3) years.

No alternate Director shall be appointed as a member of the Audit Committee.

MEETINGS AND REPORTING PROCEDURES

The Audit Committee shall meet at least four (4) times a year and the quorum shall be at least three (3) persons with majority beingIndependent Directors.

The Audit Committee may require the attendance of management staff from any department of the Group deemed necessary andrepresentatives from the external auditors.

The Audit Committee shall meet with the external auditors without executive Board members present at least twice a year. Uponthe request of the external auditor, the Chairman of the Audit Committee shall convene a meeting of the committee to consider anymatter the external auditors may bring to the attention of the Directors or shareholders.

The Company Secretary shall act as secretary of the Audit Committee and shall keep the minutes of each Audit Committee meeting.

21

(cont’d)

DUTIES AND FUNCTIONS

The functions and duties of the Audit Committee include the following:-

(i) To consider the appointment of the external auditor, the audit fee and any questions of resignation or dismissal;

(ii) To discuss with the external auditor before the audit commences, the nature and scope of the audit, and ensure co-ordinationwhere more than one audit firm is involved;

(iii) To discuss with the external auditor on the evaluation of the system of internal controls and the assistance given by theemployees to the external auditors;

(iv) To review and report to the Board if there is reason (supported by grounds) to believe that the external auditor is not suitablefor reappointment;

(v) To review the quarterly and annual financial statements of the Company, focusing particularly on:

• any changes in the accounting policies and practices;• significant adjustments arising from the audit;• the going concern assumption; and• compliance with accounting standards and other legal requirements;

(vi) To discuss problems and reservations arising from the interim and final audits, and any matter the auditors may wish to discuss(in the absence of the management where necessary);

(vii) To review the external auditor’s management letter and the management’s response;

(viii) To do the following where there is an internal audit function:-

• review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it hasthe necessary authority to carry out its work;

• review the internal audit programme and results of the internal audit process and where necessary ensure thatappropriate action is taken on the recommendations of the internal audit function;

• review any appraisal or assessment of the performance of members of the internal audit function;• approve any appointment or termination of internal auditors or outsourced internal auditors; and• take cognisance of resignations of internal auditors and provide the resigning internal auditors an opportunity to submit

his reasons for resigning;

(ix) To consider any related party transactions that may arise within the Company or the Group.

(x) To consider the major findings of internal investigations and the management’s response; and

(xi) To consider other topics as defined by the Board.

22

(cont’d)

AUTHORITY

The Committee is authorised by the Board to:-

(i) have authority to investigate any matter within its terms of reference;

(ii) have the resources and unrestricted access to information which are required to perform its duties;

(iii) have direct communication channels with the external auditors and persons carrying out the internal audit function;

(iv) be able to obtain independent professional or other advice; and

(v) be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of otherdirectors or employees, whenever deemed necessary.

MEETINGS AND SUMMARY OF ACTIVITIES

The Audit Committee met four times during the financial year ended 31 December 2011. All members attended the said meetingsexcept for Dato’ Ikmal Hijaz Bin Hashim who was absent for one meeting. The Audit Committee and representatives of externalauditors met two times without the presence of executive board members.

During the financial year, the Audit Committee carried out the following activities in accordance with its terms of reference:-

• Reviewed the quarterly financial results and annual audited financial statements before recommended to the Board forapproval.

• Reviewed scope and approach of audit planning prepared by the external auditors.• Reviewed with the external auditors, the results and issues arising from their audit, audit report, areas of concern and

management letter.• Reviewed internal audit reports, which reported the audit areas, audit findings and their recommendations and improvement

actions taken by management.• Reviewed internal control statement, corporate governance statement and audit committee report for inclusion in the Annual

Report.• Reviewed recurrent related party transactions to ensure adherence and adequacy of review procedures for recurrent related

party transactions.• Reviewed risk register which sets out the risk areas identified and evaluated by the management and relevant department

heads.

INTERNAL AUDIT FUNCTION

The Company outsourced its internal audit function to an independent consulting firm which reports directly to the Audit Committee.The internal auditors carried out regular and systematic reviews so as to provide assurance on the adequacy and effectiveness ofthe system of internal control. The internal auditors adopt a risk-based audit approach, focusing its work mainly on key processesand principal risk areas of the operating units.

During the financial year, the internal auditors reviewed and evaluated the control environment within the Group. Summary ofactivities of the internal audit function are set out in the internal control statement. Total cost incurred for the internal audit functionduring the financial year is RM35,081.80.

23

INTRODUCTION

The Board is pleased to present the Statement on Internal Control which outlines the nature and scope of internal control of theGroup during the financial year pursuant to the Listing Requirements of Bursa Malaysia Securities Berhad.

BOARD RESPONSIBILITY

The Board of Directors acknowledges its responsibility to maintain a sound system of internal control and risk management practiceswithin the Group in accordance with the Malaysian Code on Corporate Governance. The Board’s responsibility includes theestablishment of appropriate control and framework as well as reviewing the adequacy and integrity of the system in managing theGroup’s business risks. A sound system of internal control is important to safeguard the shareholders’ investment and the Group’sassets. The system of internal control, due to its inherent limitations, is designed to manage and control risk rather than eliminatethe risk of failure to achieve business objectives. Accordingly, the system can only provide reasonable and not absolute assuranceagainst material misstatement or loss or the occurrence of unforeseeable circumstances.

KEY ELEMENTS OF INTERNAL CONTROL

The key elements of the Group’s system of internal control include:

• A functional organizational structure with clearly defined lines of responsibility and level of authority to implement the Group’sstrategies and business operations.

• Documented internal policies and procedures as the Group’s major business units are accredited with quality standards andaudit such as ISO/TS 16949 and ISO 9001:2008 which requires high standard of operations (“SOPs”) in producing qualityproducts.

• The Group has in place a monthly management reporting mechanism whereby management reviews the financialperformance, business development, operational efficiency and risk assessment. Performance of the Group was reviewed andmonitored against budget and improvement or corrective actions were proposed and discussed.

• An internal audit function carries out quarterly risk based internal audit to ascertain the adequacy of and to monitor theeffectiveness of operational and financial procedures. The internal audit also reviews and assesses risks faced by the Groupand reports directly to the Audit Committee on a quarterly basis.

• Annual budgets for operating subsidiaries of the Group are prepared to be aligned with the Group’s business direction. Reviewand analysis of variances are presented and monitored by the management in the management meetings and improvementactions taken thereon.

• Audit Committee and Board meetings to review quarterly results, annual financial statements, related party transactions andupdates on business development and to deliberate major risks highlighted by the management.

RISK MANAGEMENT

Risk management forms an integral part of the Group’s business operations. The Board continuously ensures that there is an on-ongoing process of identifying, evaluating, monitoring and managing significant risks. The Management and the Heads ofDepartment identify potential risk areas, evaluate impact on the Group businesses and determine actions to manage and controlthese risks. The risk management process is documented in the risk register which was tabled for review by the Audit Committee.The review and assessment of the risks are also assisted by the Internal Auditors.

24

(cont’d)

INTERNAL AUDIT FUNCTION

The Group in its efforts to provide adequate and effective internal control system had appointed an independent consulting firm toundertake its internal audit function. The independent consulting firm acts as internal auditor and reports directly to the AuditCommittee. During the financial year, the internal auditor reviewed critical business processes, identified risks and internal controlgaps, assessed the effectiveness and adequacy of the existing state of internal control of the major subsidiaries and recommendedpossible improvements to the internal control process. This is to provide reasonable assurance that such system continue to operatesatisfactorily and effectively within the Group.

Follow-up visits were also carried out to ensure weaknesses identified have been or are being addressed. Periodic audit reports andstatus report on follow up actions were tabled to the Audit Committee and Board during its quarterly meetings.

CONCLUSION

The Board is satisfied that, the existing system of internal control is adequate and properly implemented and there are no majorweaknesses at the existing level of operations of the Group. Recognising that the internal control system must continuously beimproved to meet the challenging business environment, the Board will continue to take appropriate action plans to strengthenthe Group’s internal control system.

26313233343538919192for the year ended 31 December 2011

Directors’ ReportStatements of Financial PositionStatements of Comprehensive IncomeConsolidated Statement of Changes in EquityStatement of Changes in EquityStatements of Cash FlowsNotes to the Financial StatementsStatement by DirectorsStatutory DeclarationIndependent Auditors’ Report

Annual Report 201126

for the year ended 31 December 2011

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company forthe year ended 31 December 2011.

PRINCIPAl ACtIvItIES

The principal activity of the Company is that of investment holding whilst the principal activities of the subsidiaries are as stated inNote 5 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

RESultS

Group CompanyRM’000 RM’000

Profit for the year attributable to:Owners of the Company 38,377 4,692

RESERvES AND PRovISIoNS

There were no material transfers to or from reserves and provisions during the financial year except as disclosed in the financialstatements.

DIvIDENDS

Since the end of the previous financial year, the Company paid:

i) a final dividend of 1.00 sen per ordinary share less tax at 25% totalling approximately RM1,199,000 (0.75 sen net per ordinaryshare) and 1.00 sen tax exempt final dividend totalling approximately RM1,598,000 in respect of the year ended 31 December2010 on 25 August 2011; and

ii) a first tax exempt interim dividend of 1.00 sen per ordinary share totalling approximately RM1,596,000 in respect of the yearended 31 December 2011 on 18 November 2011.

For (i) above, the dividends paid out were based on the issued and paid up capital (excluding treasury shares) of 159,854,300 ordinaryshares of RM1.00 each.

For (ii) above, the dividends paid out were based on the issued and paid up capital (excluding treasury shares) of 159,587,000 ordinaryshares of RM1.00 each.

The Directors recommend a second tax exempt interim dividend for the financial year ended 31 December 2011 of which an amounttotalling approximately RM1,594,000 representing 1.00 sen per ordinary share was paid subsequent to year-end based on the issuedand paid up capital (excluding treasury shares) of 159,424,400 ordinary shares of RM1.00 each.

The Directors recommend a final tax exempt dividend of 2.00 sen per ordinary share totalling approximately RM3,187,000 for thefinancial year ended 31 December 2011 subject to the approval by the owners at the forthcoming Annual General Meeting basedon the issued and paid up capital (excluding treasury shares) at the date of this report.

EP MANUFACTURING BHD 390116-TEP MANUFACTURING BHD 390116-T27

for the year ended 31 December 2011 (cont’d)

DIRECtoRS oF thE CoMPANy

Directors who served since the date of the last report are:

Hamidon Bin AbdullahShaari Bin HaronDr. Linden Hamidon Hew Voon Foo Y.B. Dato’ Seri Ismail Bin Shahudin Y.B. Dato’ Ikmal Hijaz Bin Hashim

DIRECtoRS’ INtEREStS IN ShARES

The interests and deemed interests in the ordinary shares of the Company and of its related corporations (other than wholly-ownedsubsidiaries) of those who were Directors at year end (including the interests of the spouses or children of the Directors whothemselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM1.00 each At At

1.1.2011 Bought Sold 31.12.2011

Shareholdings in which Directors have direct interests

Interest in EP Manufacturing Bhd.(“EPMB”):

Hamidon Bin Abdullah 8,447,133 - - 8,447,133Dr. Linden Hamidon 1,329,384 - - 1,329,384Y.B. Dato’ Seri Ismail Bin Shahudin 372,000 - - 372,000Shaari Bin Haron 20,000 - - 20,000

Number of ordinary shares of RM1.00 each At At

1.1.2011 Bought Sold 31.12.2011

Shareholdings in which Directors have deemed interest

Hamidon Bin Abdullah- deemed interest* 65,218,833 - - 65,218,833- deemed interest** 1,329,384 - - 1,329,384

Dr. Linden Hamidon - deemed interest** 73,665,966 - - 73,665,966



DIRECtoRS’ INtEREStS IN ShARES (cont’d)

Number of ordinary shares of uSD1.00 each At At

1.1.2011 Bought Sold 31.12.2011

Deemed interest in subsidiariesPT EP Metering & Services

Hamidon Bin Abdullah- deemed interest 315,000 - - 315,000

Dr. Linden Hamidon - deemed interest 315,000 - - 315,000

Number of ordinary shares of Rp1,000,000 each At At

1.1.2011 Bought Sold 31.12.2011

PT Tirta Serang Madani

Hamidon Bin Abdullah- deemed interest 900 - - 900

Dr. Linden Hamidon - deemed interest 900 - - 900

* Deemed interested by virtue of his substantial shareholdings in EP Properties (M) Sdn. Bhd. and Mutual Concept Sdn. Bhd., the registered owner of the shares in the Company.

** Deemed interest in each others’ shareholdings by virtue of their spousal relationship.

By virtue of their interests in the shares of the Company, Hamidon Bin Abdullah and Dr. Linden Hamidon are also deemed interestedin the shares of the subsidiaries during the financial year to the extent that EPMB has an interest.

None of the other Directors holding office at 31 December 2011 had any interest in the ordinary shares of the Company and itsrelated corporations during the financial year.

DIRECtoRS’ BENEFItS

Since the end of the previous financial year, no Director of the Company has received nor 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 thefinancial statements or the fixed salary of a full time employee of the Company or of related companies) by reason of a contractmade by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a companyin which the Director has a substantial financial interest, other than certain Directors who have significant financial interests incompanies which traded with certain companies in the Group in the ordinary course of business as disclosed in Note 26 to thefinancial statements.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Companyto acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.



ISSuE oF ShARES

There were no changes in the authorised, issued and paid-up capital of the Company 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.

othER StAtutoRy INFoRMAtIoN

Before the statements of financial position and statements of comprehensive income of the Group and of the Company were made out,

the Directors took reasonable steps to ascertain that:

i) all known bad debts have been written off and adequate provision made for doubtful debts, and

ii) any current assets which are unlikely to be realised in the ordinary course of business have been written down to an amountwhich they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:

i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts, in the Group andin the Company inadequate to any substantial extent, or

ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Companymisleading, or

iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of theCompany misleading or inappropriate, or

iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financialstatements of the Group and of the Company misleading.

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

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

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceablewithin the period of twelve (12) months after the end of the financial year which, in the opinion of the Directors, will or maysubstantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended 31 December2011 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item,transaction or event occurred in the interval between the end of that financial year and the date of this report.



AuDItoRS

The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

…………………………………………………………hamidon Bin Abdullah

…………………………………………………………hew voon Foo

Shah Alam, Malaysia

Date: 26 April 2012


as at 31 December 2011

Group Company2011 2010 2011 2010

Note RM’000 RM’000 RM’000 RM’000

Assets

Property, plant and equipment 3 251,920 288,960 273 35Investment properties 4 - - 31,106 31,543Investments in subsidiaries 5 - - 245,542 245,542Investment in an associate 6 - - - - Intangible assets 7 98,240 111,129 47 - Deferred tax assets 8 5,788 5,478 - - Trade and other receivables 9 - - - 51,915

total non-current assets 355,948 405,567 276,968 329,035

Inventories 10 40,676 36,689 - - Trade and other receivables 9 71,813 82,277 11,466 4,952Prepayments and other assets 6,696 2,785 18 - Current tax assets 67 311 34 69Cash and cash equivalents 11 72,255 38,191 4,433 7,495

total current assets 191,507 160,253 15,951 12,516

total assets 547,455 565,820 292,919 341,551

Equity

Share capital 12 165,960 165,960 165,960 165,960Reserves 12 108,253 77,521 14,374 17,326

total equity attributable to owners of the Company 274,213 243,481 180,334 183,286

total equity 274,213 243,481 180,334 183,286

liabilities

Loans and borrowings 13 63,211 70,265 - 10,000Deferred tax liabilities 8 1,070 10,234 1,632 1,332

total non-current liabilities 64,281 80,499 1,632 11,332

Loans and borrowings 13 98,442 124,446 10,000 48,000Current tax liabilities 156 136 - - Provision for warranties 14 5,390 4,743 - - Trade and other payables 15 103,379 112,515 99,359 98,933Dividend payable 21 1,594 - 1,594 -

total current liabilities 208,961 241,840 110,953 146,933

total liabilities 273,242 322,339 112,585 158,265

total equity and liabilities 547,455 565,820 292,919 341,551

The notes on pages 38 to 90 are an integral part of these financial statements.



Group Company2011 2010 2011 2010

Note RM’000 RM’000 RM’000 RM’000

Revenue - sales 578,165 587,375 - - - dividend income - - 6,500 7,245- rental income 144 144 1,892 1,642- management fees - - 679 741

578,309 587,519 9,071 9,628Cost of sales (482,970) (489,351) - -

Gross profit 95,339 98,168 9,071 9,628Other income 5,430 13,609 - 831Distribution expenses (12,339) (12,682) - - Administrative expenses (42,287) (44,941) (2,624) (4,302)Other expenses (5,060) (11,128) - -

Results from operating activities 41,083 43,026 6,447 6,157Finance costs 18 (11,994) (10,862) (334) (507)Interest income 885 305 537 32Net finance costs (11,109) (10,557) 203 (475)

Profit before income tax 16 29,974 32,469 6,650 5,682Income tax expense 19 8,403 (6,363) (1,958) -

Profit for the year 38,377 26,106 4,692 5,682

other comprehensive expense, net of taxForeign currency translation differences for foreign operations (1) (1) - -

other comprehensive expense for the year, net of tax (1) (1) - -

total comprehensive income for the year 38,376 26,105 4,692 5,682

Profit attributable to:Owners of the Company 38,377 25,686 4,692 5,682Non-controlling interests - 420 - -

Profit for the year 38,377 26,106 4,692 5,682

total comprehensive income attributable to:Owners of the Company 38,376 25,685 4,692 5,682Non-controlling interests - 420 - -

total comprehensive income for the year 38,376 26,105 4,692 5,682

Basic earnings per ordinary share (sen) 20 23.9 15.9



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Non distributable DistributableShare Share treasury Retained

capital premium shares earnings totalCompany Note RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2010 165,960 14,069 (2,647) 2,688 180,070Total comprehensive income for the year - - - 5,682 5,682Dividends to shareholders of the Company 21 - - - (2,424) (2,424)Repurchase of own shares 12 - - (42) - (42)

At 31 December 2010/1 January 2011 165,960 14,069 (2,689) 5,946 183,286

Total comprehensive income for the year - - - 4,692 4,692Dividends to shareholders of the Company 21 - - - (5,987) (5,987)Repurchase of own shares 12 - - (1,657) - (1,657)

At 31 December 2011 165,960 14,069 (4,346) 4,651 180,334

Note 12




Group Company2011 2010 2011 2010

RM’000 RM’000 RM’000 RM’000

Cash flows from operating activitiesProfit before taxation 29,974 32,469 6,650 5,682Adjustments for:Amortisation of intangible assets 9,283 6,817 - -Depreciation of property, plant and equipment 68,980 74,894 10 8Depreciation of investment properties - - 527 526Dividend income - - (6,500) (7,245)Finance costs 11,994 10,862 334 507Fair value loss on derivatives 863 - - -Gain on disposal of other investments - (52) - -Impairment loss on investment in subsidiaries - - - 2,310Impairment loss on property, plant and equipment 42 - - -Impairment loss of intangible assets 6,397 - - -Intangible assets written off 215 - - -Interest income (885) (305) (537) (32)Loss on disposal of property, plant and equipment 10 1,772 - -Net unrealised foreign exchange loss 208 162 - -Property, plant and equipment written off 4 4,884 - -Reversal of impairment loss on intangible assets - (5,133) - -Waiver of debt by a vendor - (829) - (829)Provision for warranties 2,632 6,428 - -

Operating profit before working capital changes 129,717 131,969 484 927 Changes in working capital:Inventories (3,987) (8,154) - -Trade and other receivables, prepayments and other assets 6,344 (3,534) 45,383 12,958Trade and other payables (9,999) 6,041 426 40,012Provision for warranties (1,985) (3,827) - -

Cash generated from operations 120,090 122,495 46,293 53,897Income taxes (paid)/refunded (807) (1,544) 2 (8)Dividends received - - 4,875 7,245

Net cash generated from operating activities 119,283 120,951 51,170 61,134



Group Company2011 2010 2011 2010

Note RM’000 RM’000 RM’000 RM’000

Cash flows from investing activities

Acquisition of non-controlling interests - (7,000) - -Interest received 885 305 537 32(Increase)/decrease in pledged deposits with licensed banks (7,116) (7,232) 1,288 (26)Increase in development costs (3,006) (215) (47) -Net (increase)/decrease in investments in subsidiaries - - - (7,000)Proceeds from disposal of property, plant and equipment 38 5,135 - -Purchase of property, plant and equipment (ii) (31,881) (48,072) (248) (38)Proceeds from disposal of other investments - 90 - -Additions to investment properties - - (90) -

Net cash (used in)/generated from investing activities (41,080) (56,989) 1,440 (7,032)

Cash flows from financing activities

Dividends paid to owners of the Company (4,393) (2,424) (4,393) (2,424)Dividend paid to non-controlling interest - (55) - -Finance costs paid (11,994) (10,862) (334) (507)Repayment of finance lease liabilities (6,811) (10,942) - -Repayment of loans and borrowings (26,400) (18,056) (48,000) (45,000)Purchase of treasury shares (1,657) (42) (1,657) (42)

Net cash used in financing activities (51,255) (42,381) (54,384) (47,973)

Net increase/(decrease) in cash and cash equivalents 26,948 21,581 (1,774) 6,129

Cash and cash equivalents at 1 January (i) 26,369 4,788 6,207 78

Cash and cash equivalents at 31 December (i) 53,317 26,369 4,433 6,207



(i) Cash and cash equivalents

Cash and cash equivalents included in the statements of cash flows comprise the following statements of financial positionamounts:

Group Company2011 2010 2011 2010

RM’000 RM’000 RM’000 RM’000

Deposits 28,259 12,055 4,088 7,288Cash and bank balances 43,996 26,136 345 207

72,255 38,191 4,433 7,495Less: Pledged deposits (18,938) (11,822) - (1,288)

53,317 26,369 4,433 6,207

(ii) Purchase of property, plant and equipment

During the year, the Group acquired property, plant and equipment with an aggregate cost of RM32,034,000 (2010:RM48,253,000), of which RM153,000 (2010: RM180,900) were acquired by means of finance lease arrangements.



EP Manufacturing Bhd. is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Marketof Bursa Malaysia Securities Berhad. The address of its registered office and principal place of business is as follows:

Registered office/Principal place of businessNo. 8 & 10, Jalan Jurutera U1/23,Seksyen U1,Kawasan Perindustrian Hicom Glenmarie,40150 Shah Alam,Selangor Darul Ehsan.

The consolidated financial statements as at and for the year ended 31 December 2011 comprise the Company and its subsidiaries(together referred to as the “Group” and individually referred to as “Group entities”). The financial statements of the Company as atand for the year ended 31 December 2011 do not include other entities.

The principal activity of the Company is that of investment holding whilst the principal activities of the Group entities are as statedin Note 5 to the financial statements.

The financial statements were authorised for issue by the Board of Directors on 26 April 2012.

1. BASIS oF PREPARAtIoN

(a) Statement of compliance

The financial statements of the Group and the Company have been prepared in accordance with Financial ReportingStandards (FRS), generally accepted accounting principles and the Companies Act, 1965 in Malaysia.

The Group and the Company has not applied the following new/revised accounting standards (including theconsequential amendments) and interpretations that have been issued by the Malaysian Accounting Standards Board(MASB) but not yet effective for the Group and the Company:

FRS/Interpretations Effective for annual periods beginning on or after

• Amendments to IC Interpretation 14, Prepayments of a 1 July 2011Minimum Funding Requirement

• IC Interpretation 19, Extinguishing Financial Liabilities 1 July 2011with Equity Instruments

• FRS 124, Related Party Disclosures (revised) 1 January 2012• Amendments to FRS 1, First-time Adoption of Financial 1 January 2012

Reporting Standards - Severe Hyperinflation andRemoval of Fixed Dates for First-time Adopters

• Amendments to FRS 7, Financial Instruments: 1 January 2012Disclosures - Transfers of Financial Assets

• Amendments to FRS 112, Income Taxes - Deferred Tax: 1 January 2012Recovery of Underlying Assets

• Amendments to FRS 101, Presentation of Financial 1 July 2012Statements - Presentation of Items of Other Comprehensive Income


(cont’d)

1. BASIS oF PREPARAtIoN (cont’d)

(a) Statement of compliance (cont’d)

FRS/Interpretations (cont’d) Effective for annual periods beginning on or after

• FRS 10, Consolidated Financial Statements 1 January 2013• FRS 11, Joint Arrangements 1 January 2013• FRS 12, Disclosure of Interests in Other Entities 1 January 2013• FRS 13, Fair Value Measurement 1 January 2013• FRS 119, Employee Benefits (2011) 1 January 2013• FRS 127, Separate Financial Statements (2011) 1 January 2013• FRS 128, Investments in Associates and Joint Ventures (2011) 1 January 2013• IC Interpretation 20, Stripping Costs in the Production 1 January 2013

Phase of a Surface Mine• Amendments to FRS 7, Financial Instruments: 1 January 2013

Disclosures - Offsetting Financial Assets and Financial Liabilities

• Amendments to FRS 132, Financial Instruments: 1 January 2014Presentation - Offsetting Financial Assets and Financial Liabilities

• FRS 9, Financial Instruments (2009) 1 January 2015• FRS 9, Financial Instruments (2010) 1 January 2015• Amendments to FRS 7, Financial Instruments 1 January 2015

Disclosures - Mandatory Date of FRS 9 and Transition Disclosures

On 19 November 2011, the MASB announced the adoption of the Malaysian Financial Reporting Standards (MFRSFramework). The MFRS framework is effective from 1 January 2012 and is to facilitate convergence with the InternationalFinancial Reporting Standards (IFRS). Following the announcement, the Group’s and the Company’s next set of financialstatements for annual period beginning on 1 January 2012 will be prepared in accordance with the MFRS frameworkissued by MASB and IFRS. As a result of the Group’s and the Company’s adoption of the MFRS framework, the Group andthe Company will not be adopting the above FRSs, Interpretations and Amendments.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis other than as disclosed in Note 2.

(c) Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional currency. Allfinancial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.


(cont’d)

1. BASIS oF PREPARAtIoN (cont’d)

(d) use of estimates and judgements

The preparation of the financial statements in conformity with FRSs requires management to make judgements, estimatesand assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, incomeand expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognised in the period in which the estimates are revised and in any future periods affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that havesignificant effect on the amounts recognised in the financial statements other than those disclosed in the followingnotes:

Note 7 - measurement of the recoverable amounts of cash-generating unitsNote 8 - recognition of deferred tax assets and liabilitiesNote 14 - provision for warranties

2. SIGNIFICANt ACCouNtING PolICIES

The accounting policies set out below have been applied consistently to the periods presented in these financial statements,and have been applied consistently by Group entities, unless otherwise stated:

(a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities, including unincorporated entities, controlled by the Group. Control exists when the Grouphas the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefitsfrom 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 anyimpairment losses, unless the investment is classified as held for sale or distribution. The cost of investmentsincludes transaction costs.

The accounting policies of subsidiaries are changed when necessary to align them with the policies adopted bythe Group.

(ii) Accounting for business combinations

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

The Group has changed its accounting policy with respect to accounting for business combinations.

From 1 January 2011 the Group has applied FRS 3, Business Combinations (revised) in accounting for businesscombinations. The change in accounting policy has been applied prospectively in accordance with the transitionalprovisions provided by the standard and does not have impact on earnings per share.


(cont’d)

2. SIGNIFICANt ACCouNtING PolICIES (cont’d)

(a) Basis of consolidation (cont’d)

(ii) Accounting for business combinations (cont’d)

Acquisitions on or after 1 January 2011

For acquisitions on or after 1 January 2011, the Group measures goodwill at the acquisition date as:• the fair value of the consideration transferred; plus• the recognised amount of any non-controlling interests in the acquiree; plus• if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree;

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

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

The consideration transferred does not include amounts related to the settlement of pre-existing relationships.Such amounts are generally recognised in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that theGroup incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingentconsideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise,subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

When share-based payment awards (replacement awards) are required to be exchanged for awards held by theacquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of theacquirer’s replacement awards is included in measuring the consideration transferred in the business combination.This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or futureservice.

Acquisitions between 1 January 2006 and 1 January 2011

For acquisitions between 1 January 2006 and 1 January 2011, goodwill represents the excess of the cost of theacquisition over the Group’s interest in the recognised amount (generally fair value) of the identifiable assets,liabilities and contingent liabilities of the acquiree. When the excess was negative, a bargain purchase gain wasrecognised immediately in profit or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurredin connection with business combinations were capitalised as part of the cost of the acquisition.

Acquisitions prior to 1 January 2006

For acquisitions prior to 1 January 2006, goodwill represents the excess of the cost of the acquisition over theGroup’s interest in the fair values of the net identifiable assets and liabilities.


(cont’d)



(iii) Associates

Associates are entities, including unincorporated entities, in which the Group has significant influence, but notcontrol, over the financial and operating policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method lessany impairment losses, unless it is classified as held for sale or distribution (or included in a disposal group that isclassified as held for sale or distribution). The cost of the investment includes transaction costs. The consolidatedfinancial statements include the Group’s share of the profit or loss and other comprehensive income of the equity-accounted associates, after adjustments if any, to align the accounting policies with those of the Group, from thedate that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest includingany long-term investments is reduced to zero, and the recognition of further losses is discontinued except to theextent that the Group has an obligation or has made payments on behalf of the investee.

Investments in associates are measured in the Company’s statement of financial position at cost less any impairmentlosses, unless the investment is classified as held for sale or distribution. The cost of the investment includestransaction costs.

(iv) Non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directlyor indirectly to the equity holders of the Company, are presented in the consolidated statement of financial positionand 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 comprehensiveincome as an allocation of the profit or loss and the comprehensive income for the year between non-controllinginterests and the owners of the Company.

Since the beginning of the reporting period, the Group has applied FRS 127, Consolidated and Separate FinancialStatements (revised) where losses applicable to the non-controlling interests in a subsidiary are allocated to thenon-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. This changein accounting policy is applied prospectively in accordance with the transitional provisions of the standard anddoes not have impact on earnings per share.

In the previous financial years, where losses applicable to the non-controlling interests exceed their interests in theequity of a subsidiary, the excess, and any further losses applicable to the non-controlling interests, were chargedagainst the Group’s interest except to the extent that the non-controlling interests had a binding obligation to, andwas able to, make additional investment to cover the losses. If the subsidiary subsequently reported profits, theGroup’s interest was allocated with all such profits until the non-controlling interests’ share of losses previouslyabsorbed by the Group had been recovered.


(cont’d)



(v) transactions eliminated on consolidation

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

Unrealised gains arising from transactions with equity accounted investee are eliminated against the investmentto the extent of the Group’s interests in the investee. Unrealised losses are eliminated in the same way as unrealisedgains, but only to the extent that there is no evidence of impairment.

(b) Affiliated companies

Affiliated companies are companies in which certain Directors have interests or are also Directors of those companies.

(c) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities atexchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting period are retranslated to thefunctional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of thereporting date except for those that are measured at fair value are retranslated to the functional currency at theexchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised in profit or loss.

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

The assets and liabilities of operations denominated in functional currencies other than RM, including goodwilland fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reportingperiod, except for goodwill and fair value adjustments arising from business combinations before 1 January 2006which are reported using the exchange rates at the dates of the acquisitions. The income and expenses of foreignoperations are translated to RM at exchange rates at the dates of the transactions.

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

In the consolidated financial statements, when settlement of a monetary item receivable from or payable to aforeign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arisingfrom such a monetary item are considered to form part of a net investment in a foreign operation and arerecognised in other comprehensive income, and are presented in the FCTR within equity.


(cont’d)


(d) Financial instruments

(i) Initial recognition and measurement

A financial asset or a financial liability is recognised in the statement of financial position when, and only when,the Group or the Company becomes a party to the contractual provisions of the instrument.

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

(ii) Financial instrument categories and subsequent measurement

The Group and the Company categorise financial instruments as follows:

Financial assets

(a) Financial assets at fair value through profit or loss

Fair value through profit or loss category comprises financial assets that are held for trading, includingderivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedginginstrument) or financial assets that are specifically designated into this category upon initial recognition.

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

(b) Loans and receivables

Loans and receivables category comprises trade and other receivables and cash and cash equivalents.

Financial assets categorised as loans and receivables are subsequently measured at amortised cost using theeffective interest method.

All financial assets except for those measure at fair value through profit or lose, are subject to review forimpairment (see note 2(k)(i)).

(c) Financial liabilities

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

Fair value through profit or loss category comprises financial liabilities that are held for trading, includingderivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedginginstrument) or financial liabilities that are specifically designated into this category upon initial recognition.

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


(cont’d)


(d) Financial instruments (cont’d)

(iii) Derecognition

A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows fromthe financial asset expire or the financial asset is transferred to another party without retaining control orsubstantially transferring all risks and rewards of the asset. On derecognition of a financial asset, the differencebetween the carrying amount and the sum of the consideration received (including any new asset obtained lessany new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised inprofit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract isdischarged or cancelled or expires. On derecognition of a financial liability, the difference between the carryingamount of the financial liability extinguished or transferred to another party and the consideration paid, includingany non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

(e) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulatedimpairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directlyattributable to bringing the asset to working condition for its intended use, and the costs of dismantling andremoving the items and restoring the site on which they are located. The cost of self-constructed assets also includesthe cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance withthe accounting policy on borrowing costs.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of thatequipment.

The cost of property, plant and equipment recognised as a result of a business combination is based on fair valueat acquisition date. The fair value of property is the estimated amount for which a property could be exchangedbetween knowledgeable willing parties in an arm’s length transaction after proper marketing wherein the partieshad each acted knowledgeably, prudently and without compulsion. The fair value of other items of plant andequipment is based on the quoted market prices for similar items when available and replacement cost whenappropriate.

When significant parts of an item of property, plant and equipment have different useful lives, they are accountedfor as separate items (major components) of property, plant and equipment.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceedsfrom disposal with the carrying amount of property, plant and equipment and is recognised net within “otherincome” or “other expenses” respectively in profit or loss.


(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 theitem if it is probable that the future economic benefits embodied within the part will flow to the Group, and itscost can be measured reliably. The carrying amount of the replaced part is derecognised to profit or loss. The costsof the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

(iii) Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substitutedfor cost, less its residual value.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of anitem of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and theiruseful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.Freehold land is not depreciated. Property, plant and equipment under construction (capital work-in-progress) arenot depreciated until the assets are ready for their intended use.

The estimated useful lives for the current and comparative periods are at principal annual rates as follows:

Buildings 2%Renovation 15%Equipment, furniture and fittings 8% - 33.3%Plant and machineries 5% - 40%Motor vehicles 16%

Depreciation methods and useful lives are reviewed, and adjusted as appropriate at the end of the reporting period.

(f) leased assets

(i) Finance lease

Leases in terms of which the Group or the Company assumes substantially all the risks and rewards of ownershipare classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lowerof its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assetis accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between the finance expense and thereduction of the outstanding liability. The finance expense is allocated to each period during the lease term so asto produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease paymentsare accounted for by revising the minimum lease payments over the remaining term of the lease when the leaseadjustment is confirmed.


(cont’d)


(f) leased assets (cont’d)

(ii) operating lease

Leases, where the Group does not assume substantially all the risks and rewards of the ownership are classified asoperating leases and the leased assets are not recognised in the statement of financial position.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of thelease unless another systematic basis is more representative of the time pattern in which economic benefits fromthe leased asset are consumed. Lease incentives received are recognised in profit or loss as an integral part of thetotal lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reportingperiod in which they are incurred.

(g) Intangible assets

(i) Goodwill

Goodwill arising on business combinations is measured at cost less any accumulated impairment losses. In respectof equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investmentand an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part ofthe carrying amount of the equity accounted investees.

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledgeand understanding, is recognised in profit or loss when incurred.

Expenditure on development activities, whereby the application of research findings are applied to a plan or designfor the production of new or substantially improved products and processes, is capitalised only if developmentcosts can be measured reliably, the product or process is technically and commercially feasible, future economicbenefits are probable and the Group intends to and has sufficient resources to complete development and to useor sell the asset.

The expenditure capitalised includes the cost of materials, direct labour and overheads costs that are directlyattributable to preparing the asset for its intended use. For qualifying assets, borrowing costs are capitalised inaccordance with the accounting policy on borrowing costs. Other development expenditure is recognised in profitor loss as incurred.

Capitalised development expenditure is measured at cost less accumulated amortisation and any accumulatedimpairment losses.

(iii) other intangible assets

Intangible assets, other than goodwill, that are acquired by the Group, which have finite useful lives, are measuredat cost less any accumulated amortisation and any accumulated impairment losses.

The fair value of manufacturing and distribution rights acquired in a business combination is based on thediscounted cash flows expected to be derived from the use and eventual sale of the assets for the period as specifiedin the initial manufacturing and distribution agreement.


(cont’d)


(g) Intangible assets (cont’d)

(iv) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specificasset to which it relates. All other expenditure, including expenditure on internally generated goodwill is recognisedin profit or loss as incurred.

(v) Amortisation

Amortisation is based on the cost of an asset less its residual value.

Goodwill and intangible assets with indefinite useful lives are not amortised but are tested for impairment annuallyand whenever there is an indication that they may be impaired.

Other intangible assets are amortised from the date they are available for use.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangibleassets.

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

• development costs 3 - 5 years• manufacturing and distribution rights 9 years

Amortisation methods and useful lives are reviewed at the end of each reporting period and adjusted, if appropriate.

(h) Investment properties

(i) Investment properties carried at cost

Investment properties are properties which are owned to earn rental income or for capital appreciation or for both,but not for sale in the ordinary course of business, use in the production or supply of goods or services or foradministrative purposes. Properties that are occupied by the companies in the Group are accounted for as owner-occupied rather than investment properties.

Investment properties are measured at cost less any accumulated depreciation and any accumulated impairmentlosses, consistent with the accounting policy for property, plant and equipment as stated in accounting policy note 2(e).

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost ofself-constructed investment property includes the cost of materials and direct labour, any other costs directlyattributable to bringing the investment property to a working condition for their intended use and capitalisedborrowing costs.

Depreciation is charged to the income statements on a straight-line basis over the estimated useful life of 50 yearsfor buildings. Freehold land is not depreciated.

An investment property is derecognised on its disposal, or when it is permanently withdrawn from use and nofuture economic benefits are expected from its disposal. The difference between the net disposal proceeds andthe carrying amount is recognised in profit or loss in the period in which the item is derecognised.


(cont’d)


(h) Investment properties (cont’d)

(ii) Determination of fair value

The Directors estimate the fair values of the Company’s investment properties without involvement of independentvaluers. The fair values are based on best available market values, being the estimated amount for which a propertycould be exchanged between a willing buyer and a willing seller in an arm’s length transaction after propermarketing wherein the parties had each acted knowledgeably.

(i) Inventories

Inventories are measured at the lower of cost and net realisable value.

The cost of inventories is measured based on the first-in first-out principle and includes expenditure incurred in acquiringthe inventories, production or conversion costs and other costs incurred in bringing them to their existing location andcondition. In the case of work-in-progress and manufactured inventories, cost includes an appropriate share of productionoverheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completionand the estimated costs necessary to make the sale.

(j) Cash and cash equivalents

Cash and cash equivalents consist of cash in hand, balances and deposits with banks. For the purpose of the statementof cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.

(k) Impairment

(i) Financial assets

All financial assets (except for investments in subsidiaries and investment in an associate) are assessed at eachreporting date whether there is any objective evidence of impairment as a result of one or more events having animpact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter howlikely, are not recognised. For an equity instrument, a significant or prolonged decline in the fair value below itscost is an objective evidence of impairment.

An impairment loss in respect of loans and receivables is recognised in profit or loss and is measured as thedifference between the asset’s carrying amount and the present value of estimated future cash flows discountedat the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of anallowance account.

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


(cont’d)


(k) Impairment (cont’d)

(ii) other assets

The carrying amounts of other assets (except for inventories and deferred tax asset) are reviewed at the end ofeach 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 the purpose of impairment testing, assets are grouped together into the smallest group of assets that generatescash inflows from continuing use that are largely independent of the cash inflows of other assets (known as cash-generating unit). The goodwill acquired in a business combination, for the purpose of impairment testing, isallocated to a cash-generating unit or a group of cash-generating units that are expected to benefit from thesynergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value lesscosts to sell. In assessing value in use, the estimated future cash flows are discounted to their present value usinga pre-tax discount rate that reflects current market assessments of the time value of money and the risks specificto the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds itsestimated recoverable amount.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating unitsare allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit or the groupof cash-generating units and then to reduce the carrying amount of the other assets in the cash-generating unit(or a group of cash-generating units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognisedin prior periods are assessed at the end of each reporting period for any indications that the loss has decreased orno longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine therecoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to theextent that the asset’s carrying amount does not exceed the carrying amount that would have been determined,net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses arecredited to profit or loss in the year in which the reversals are recognised.

(l) Equity instruments

Instruments classified as equity are stated at cost on initial recognition and are not remeasured subsequently.

(i) Issue expenses

Costs directly attributable to issue of instruments classified as equity are recognised as a deduction from equity.

(ii) Repurchase, disposal and reissue of share capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directlyattributable costs, is recognised as a deduction from equity. Repurchased shares that are not subsequently cancelledare classified as treasury shares in the statement of changes in equity.


(cont’d)


(l) Equity instruments (cont’d)

(ii) Repurchase, disposal and reissue of share capital (cont’d)

When treasury shares are distributed as share dividends, the cost of the treasury shares is applied in the reductionof the share premium account or distributable reserves, or both.

Where treasury shares are sold or reissued subsequently, the difference between the sales consideration net ofdirectly attributable costs and the carrying amount of the treasury shares is recognised in equity, and the resultingsurplus or deficit on the transaction is presented in share premium.

(m) Employee benefits

(i) Short-term employee benefits

Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leaveare measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans ifthe Group has a present legal or constructive obligation to pay this amount as a result of past service provided bythe employee and the obligation can be estimated reliably.

(ii) State plans

The Group’s contributions to statutory pension funds are charged to profit or loss in the year to which they relate.Once the contributions have been paid, the Group has no further payment obligations.

(n) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that canbe estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current marketassessments of the time value of money and the risks specific to the liability.

(i) Warranties

A provision for warranties is recognised when the underlying products or services are sold. The provision is basedon historical warranty data and a weighting of all possible outcomes against their associated probabilities.

(ii) Contingent liabilities

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


(cont’d)


(o) Revenue and other income

(i) Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at fair value of the considerationreceived or receivable, net of returns and allowances, trade discount and volume rebates. Revenue is recognisedwhen persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks andrewards of ownership have been transferred to the customer, recovery of the consideration is probable, theassociated costs and possible return of goods can be estimated reliably, and there is no continuing managementinvolvement with the goods, and the amount of revenue can be measured reliably.

If it is probable that discounts will be granted and the amount can be measured reliably, then the discount isrecognised as a reduction of revenue as the sales are recognised.

(ii) Rental income

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of thelease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.

(iii) Dividend income

Dividend income is recognised in profit or loss on the date that the Group’s or the Company’s right to receivepayment is established, which in the case of quoted securities is the ex-dividend date.

(iv) Interest income

Interest income is recognised as it accrues using the effective interest method in profit or loss except for interestincome arising from temporary investment of borrowings taken specifically for the purpose of obtaining a qualifyingasset which is accounted for in accordance with the accounting policy on borrowing costs.

(p) Borrowing costs

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset arerecognised in profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assetsthat necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of thecost of those assets.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the assetis being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intendeduse or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activitiesnecessary 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 qualifyingassets is deducted from the borrowing costs eligible for capitalisation.


(cont’d)


(q) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or lossexcept to the extent that it relates to a business combination or items recognised directly in equity or othercomprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enactedor substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previousyears.

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amountsof assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for thefollowing temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in atransaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferredtax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, basedon the laws that have been enacted or substantively enacted by the end of the reporting period.

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 realisedsimultaneously.

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

A tax incentive that is not a tax base of an asset is recognised as a reduction of tax expense in profit or loss as and whenit is granted and claimed. Any unutilised portion of the tax incentive is recognised as a deferred tax asset to the extentthat it is probable that future taxable profits will be available against which the unutilised tax incentive can be utilised.

(r) Earnings per share

The Group presents basic earnings per share data for its ordinary shares (EPS).

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weightedaverage number of ordinary shares outstanding during the period, adjusted for own shares held.

(s) operating segments

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


(cont’d)

3.PR

oPE

Rty,

PlA

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23,4

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1,96

57,

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312,

611

2,38

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277

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74,9

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At 3

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201

123

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112,

292

8,75

739

3,63

12,

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245

540,

645


(cont’d)3.

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283,

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874,

885

129,

131

858

245

251,

920


(cont’d)

3. PRoPERty, PlANt AND EquIPMENt (cont’d)

CompanyCapital Equipment,

work-in- furnitureprogress and fittings total

RM’000 RM’000 RM’000

CostAt 1 January 2010 - 12 12Additions - 38 38

At 31 December 2010/1 January 2011 - 50 50Additions 248 - 248

At 31 December 2011 248 50 298

Accumulated depreciationAt 1 January 2010 - 7 7Charge for the year - 8 8

At 31 December 2010/1 January 2011 - 15 15Charge for the year - 10 10

At 31 December 2011 - 25 25

Carrying amountsAt 1 January 2010 - 5 5

At 31 December 2010/1 January 2011 - 35 35

At 31 December 2011 248 25 273

3.1 Impairment loss

During the year, the Group assessed the recoverable amount of all the property, plant and equipment and wrote downthe carrying amount with respect of its plant and machineries by RM42,000 (2010: Nil) based on their recoverable scrapvalue.

3.2 Capitalisation of borrowing costs

Included in the Group’s additions of property, plant and equipment during the year is borrowing costs capitalised ofRM1,056,000 (2010: RM1,316,000).

3.3 Security

The Group’s freehold land, buildings and plant and machineries with net carrying amount of RM125,812,000 (2010: RM134,206,000) have been pledged for banking facilities granted to the Group (see Note 13).

3.4 Assets under finance lease liabilities

Included in the Group’s property, plant and equipment are certain assets acquired under finance lease arrangementswith net carrying amount of RM13,842,000 (2010: RM15,834,000).


(cont’d)

4. INvEStMENt PRoPERtIES

CompanyFreehold

land Buildings totalRM’000 RM’000 RM’000

CostAt 31 December 2010/ 1 January 2011 12,560 26,292 38,852Additions - 90 90

At 31 December 2011 12,560 26,382 38,942

Accumulated depreciationAt 31 December 2010/ 1 January 2011 - 7,309 7,309Charge for the year - 527 527

At 31 December 2011 - 7,836 7,836

Carrying amountsAt 31 December 2010/1 January 2011 12,560 18,983 31,543

At 31 December 2011 12,560 18,546 31,106

Fair valueAt 31 December 2010 48,100

At 31 December 2011 51,900

The following are recognised in profit or loss in respect of investment properties:

Company2011 2010

RM’000 RM’000

Rental income 1,892 1,642Direct operating expenses

- Income generating investment properties 169 134


(cont’d)

5. INvEStMENtS IN SuBSIDIARIES

Cost of CapitalCompany investment contribution total

Note RM’000 RM’000 RM’000

At 1 January 2010 206,531 - 206,531Additions 5.1 10,850 30,471 41,321Less: Impairment loss 5.3 (2,310) - (2,310)

At 31 December 2010/1 January 2011/At 31 December 2011 215,071 30,471 245,542

Note 5.2

Details of the subsidiaries are as follows:

EffectiveCountry of equity interest

Name of subsidiary incorporation 2011 2010 Principal activities

PEPS - JV (M) Sdn. Bhd. Malaysia 100% 100% Manufacture and sales of automotivemodular components

EP Polymers (M) Sdn. Bhd. Malaysia 100% 100% Manufacture, fabrication, production and sales of engineering plastic components and Integrated Air Fuel Module automotive engines

Fundwin Sdn. Bhd. Malaysia 100% 100% Manufacture, assembly and sales of automotive parts

Circle Ring Network Sdn. Bhd. Malaysia 100% 100% Manufacture, assembly and distribution of water meters

EP Metering Services Sdn. Bhd. Malaysia 100% 100% Management of water treatment facilities, water meter installation and its related consultancy work

Advance Product Systems Malaysia 100% 100% Dormant Sdn. Bhd.

EP Moulds & Dies (M) Sdn. Bhd. Malaysia 100% 100% Dormant

EPMB (Australia) Pte Ltd (1) Australia 100% 100% Dormant


(cont’d)

5. INvEStMENtS IN SuBSIDIARIES (cont’d)

EffectiveCountry of equity interest

Name of subsidiary incorporation 2011 2010 Principal activities

held by EP Metering Services Sdn. Bhd.

PT EP Metering & Services (1) Indonesia 90% 90% Construction of water treatment and and its subsidiary waste water facilities

PT Tirta Serang Madani (1) Indonesia 81% 81% Build, develop and to manage drinkingwater supply system and permanentwater treatment plant

(1) Not audited by member firms of KPMG International

5.1 Additions to cost of investment relate to the acquisition of the remaining 4.2% of equity interest in PEPS-JV (M) Sdn. Bhd.from the non-controlling interest for a consideration of RM7,000,000 and the reversal of purchase consideration payableof RM3,850,000 to the previous owner (vendor) following the recomputation of the profit guarantee of Circle RingNetwork Sdn. Bhd.

5.2 Capital contribution relates to advances to its subsidiaries as repayments of these amounts are neither fixed nor expectedin the short term.

5.3 Investments in Advance Product Systems Sdn. Bhd. and EP Moulds & Dies (M) Sdn. Bhd. have been impaired byRM1,607,000 and RM703,000 respectively. The impairment was made to adjust the carrying amount of the investmentsin these two subsidiaries to their estimated recoverable amount.

6. INvEStMENt IN AN ASSoCIAtE

Group2011 2010

RM’000 RM’000At cost:Unquoted shares * *

* Denotes RM1.00

The Group has a 50% (2010: 50%) effective ownership interest in an associate, EPTS Manufacturing Sdn. Bhd., a companyincorporated in Malaysia. The associate is dormant since its incorporation and recorded a loss for the year of RM1,288 (2010:RM385). The Group has not recognised its share of the losses as the Group has no obligation in respect of these losses.


(cont’d)

7. INtANGIBlE ASSEtS

Group Manufacturingand

Goodwill on Development distribution consolidation costs rights total

RM’000 RM’000 RM’000 RM’000

CostAt 1 January 2010 84,533 34,130 53,147 171,810Additions - 215 - 215

At 31 December 2010/ 1 January 2011 84,533 34,345 53,147 172,025Additions - 3,006 - 3,006Write off - (215) - (215)

At 31 December 2011 84,533 37,136 53,147 174,816

Amortisation and impairment loss

Accumulated amortisation - 21,252 12,294 33,546Accumulated impairment loss - - 25,666 25,666At 1 January 2010 - 21,252 37,960 59,212Amortisation for the year - 4,292 2,525 6,817Reversal of impairment loss - - (5,133) (5,133)

Accumulated amortisation - 25,544 14,819 40,363Accumulated impairment loss - - 20,533 20,533At 31 December 2010/ 1 January 2011 - 25,544 35,352 60,896Amortisation for the year - 6,605 2,678 9,283Impairment loss - - 6,397 6,397

Accumulated amortisation - 32,149 17,497 49,646Accumulated impairment loss - - 26,930 26,930At 31 December 2011 - 32,149 44,427 76,576

Carrying amountsAt 1 January 2010 84,533 12,878 15,187 112,598

At 31 December 2010/ 1 January 2011 84,533 8,801 17,795 111,129

At 31 December 2011 84,533 4,987 8,720 98,240


(cont’d)

7. INtANGIBlE ASSEtS (cont’d)

CompanyDevelopment

costsRM’000

CostAt 1 January 2011 - Additions 47

At 31 December 2011 47

Carrying amountsAt 31 December 2011 47

Amortisation has not commenced as the project is still on-going as at 31 December 2011.

7.1 Manufacturing and distribution rights

Manufacturing and distribution rights of the Group are principally arising from recognition of identifiable assets fromthe acquisition of Circle Ring Network Sdn. Bhd. (“Circle Ring”).

The recoverable amount was estimated based on the value in use supported by the business plan projections of CircleRing endorsed by the Board of Directors.

In prior year, the Group reversed an impairment loss amounting to RM5,133,000 with a corresponding increase in deferredtax liabilities of RM1,283,000 at Group level following the recomputation of profit guarantee.

During the year, an impairment loss of RM6,397,000 with a corresponding reversal of deferred tax liabilities amountingto RM1,599,000 was recorded due to a shortfall in business plan projections.

7.2 Impairment testing for cash-generating units containing goodwill

For the purposes of impairment testing, goodwill is allocated to the Group’s operating divisions which represent thelowest level within the Group at which the goodwill is monitored for internal management purposes.

The aggregate carrying amounts of goodwill are allocated as follows:

Group2011 2010

RM’000 RM’000

Manufacture, assembly and sale of automotive parts 84,533 84,533


(cont’d)

7. INtANGIBlE ASSEtS (cont’d)

7.2 Impairment testing for cash-generating units containing goodwill (cont’d)

The recoverable amount has been determined based on value in use supported by business plan projections endorsedby the Board of Directors which includes new models replacements as well as project collaboration with third parties.Such business projections are based on award of contracts to manufacture several components for the new automotivemodels as well as letter of intent to develop and to supply certain modules.

Value in use of the intangible assets was determined by discounting the future cash flows generated from the automotiveunit and was based on the following key assumptions:

• Cash flows were projected based on past experience of the actual operating results and business plan.

• Projected sales revenue for the next 5 years up to 2016 were based on growth rate of 1.5% to 5% per annum.

• Projected cost of sales for the next 5 years up to 2016 were based on an expected increase of approximately 2% per annum.

• A pre-tax discount rate of 7.26% (2010: 8.0%) has been applied in determining the recoverable amount of theautomotive unit. The discount rate was estimated based on the Group’s weighted average cost of capital. TheDirectors consider this to be a prudent estimate of the cost of capital of the Group, taking into account the currentmacro-economic situation.

The values assigned to the key assumptions represent management’s assessment of future trends in the automotiveindustry and are based on both external sources and internal sources (historical data).

The recoverable amount of the unit exceeds its carrying value and the carrying value of goodwill is therefore not impaired.

8. DEFERRED tAx ASSEtS AND lIABIlItIES

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Group Assets liabilities Net2011 2010 2011 2010 2011 2010

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Property, plant and equipment 179 179 (11,176) (14,371) (10,997) (14,192)Unutilised reinvestment allowances 5,848 4,776 - - 5,848 4,776Unutilised investment tax allowances 5,158 2,679 - - 5,158 2,679Unutilised tax losses 2,508 2,049 - - 2,508 2,049Others 1,639 1,639 562 (1,707) 2,201 (68)

Tax assets/(liabilities) 15,332 11,322 (10,614) (16,078) 4,718 (4,756)Set-off of tax (9,544) (5,844) 9,544 5,844 - -

Net tax assets/(liabilities) 5,788 5,478 (1,070) (10,234) 4,718 (4,756)

CompanyProperty, plant and equipment - - (1,632) (1,332) (1,632) (1,332)


(cont’d)

8. DEFERRED tAx ASSEtS AND lIABIlItIES (cont’d)

unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items (stated at gross):

Group2011 2010

RM’000 RM’000

Property, plant and equipment (876) (111)Deductible temporary differences 3,264 2,451Unabsorbed capital allowances 5,464 4,704Unutilised investment tax allowances - 11,215Unutilised tax losses 27,079 22,405Unutilised reinvestment allowance - 1,858

34,931 42,522

Deferred tax assets have not been recognised in respect of the above items because it is not probable that future taxable profitswill be available against which certain companies in the Group can utilise the benefits thereon.

9. tRADE AND othER RECEIvABlES

Group Company2011 2010 2011 2010

Note RM’000 RM’000 RM’000 RM’000

Non-current:Non tradeLoans to subsidiaries 9.1 - - - 51,915

Current:tradeTrade receivables 9.2 69,427 73,604 - - Affiliated companies 9.3 585 805 - -

70,012 74,409 - -

Non-tradeLoans to subsidiaries 9.1 - - 6,915 - Amounts due from subsidiaries 9.3 - - 4,515 4,879Affiliated companies 9.3 343 950 12 36Other receivables 1,458 6,918 24 37

1,801 7,868 11,466 4,952

71,813 82,277 11,466 4,952


(cont’d)

9. tRADE AND othER RECEIvABlES (cont’d)

9.1 loans to subsidiaries

Loans to subsidiaries are unsecured, not repayable within the next twelve (12) months and bear interest between 5.95%to 7.9% (2010: 5.5% to 7.9%) per annum. Loans to subsidiaries are principally arising from the allocation of proceeds fromthe drawdown of Murabahah Underwritten Notes Issuance Facility/Islamic Medium Term Notes Facility (“MUNIF/IMTN”)(see Note 13).

9.2 trade receivables

Included in trade receivables at 31 December 2011 are retentions of RM514,000 (2010: RM514,000) relating to on-goingwater meter installation project, which was delayed from prior year.

9.3 Amounts due from subsidiaries and affiliated companies

The amounts due from subsidiaries and affiliated companies are unsecured, interest free and repayable on demand.

10. INvENtoRIES

Group2011 2010

RM’000 RM’000

Raw materials 28,776 24,601Work-in-progress 7,382 6,100Finished goods 4,518 5,988

40,676 36,689

Recognised in profit or loss:Inventories recognised as cost of sales 480,870 486,897Written off 2,189 735(Reversal)/Write-down to net realisable value (89) 1,719

The inventories written off, reversal and write-down are included in cost of sales.

11. CASh AND CASh EquIvAlENtS

Group Company2011 2010 2011 2010

RM’000 RM’000 RM’000 RM’000

Deposits placed with licensed banks 28,259 12,055 4,088 7,288Cash and bank balances 43,996 26,136 345 207

72,255 38,191 4,433 7,495

Included in the Group’s and Company’s deposits placed with licensed banks are RM18,938,000 (2010: RM11,822,000) and Nil(2010: RM1,288,000) respectively, pledged for certain banking facilities granted to the Group and the Company (see Note 13).


(cont’d)

12. CAPItAl AND RESERvES

12.1 Share capital

Group and CompanyNumber of Number of

Amount shares Amount shares2011 2011 2010 2010

RM’000 ’000 RM’000 ’000AuthorisedOrdinary shares of RM1.00 each 500,000 500,000 500,000 500,000

Issued and fully paidOrdinary shares of RM1.00 each 165,960 165,960 165,960 165,960

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to onevote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

12.2 translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statementsof the Group entities with functional currencies other than RM.

12.3 treasury shares

The owners of the Company, by an ordinary resolution passed in an Annual General Meeting held on 27 June 2011,approved the Company’s plan to repurchase its own shares.

During the financial year, the Company repurchased 2,079,800 (2010: 80,000) of its issued ordinary share capital of RM1.00each (“EP Shares”) from the open market at an average buy-back price of RM0.80 (2010: RM0.53) per ordinary share. The total consideration paid for the share buy-back of EP Shares by the Company during the financial year wasRM1,657,000 (2010: RM42,131). The repurchase transaction was financed by internally generated funds. The EP Sharesrepurchased were retained as treasury shares.

As at 31 December 2011, the Group held 6,460,700 (2010: 4,380,900) EP Shares as treasury shares out of its total issuedand paid-up share capital. As at 31 December 2011, the number of shares in issue and paid-up, net of treasury shares istherefore 159,499,300 (2010: 161,579,100) ordinary shares of RM1.00 each.

None of the treasury shares held were resold or cancelled during the financial year. While the shares are held as treasuryshares, the rights attached to them such as voting, dividends and participation in other distribution and otherwise aresuspended.

12.4 Section 108 tax credit

Subject to the agreement by the Inland Revenue Board, the Company has sufficient tax exempt income to frank anddistribute all of its distributable reserves as at 31 December 2011 if paid out as dividends.

The Finance Act 2007 introduced a single tier company income tax system with effect from year of assessment 2008. As such, the remaining Section 108 tax credit as at 31 December 2007 will be available to the Company until such timethe credit is fully utilised or upon expiry of the six-year transitional period on 31 December 2013, whichever is earlier.


(cont’d)

13. loANS AND BoRRoWINGS

Group Company2011 2010 2011 2010

RM’000 RM’000 RM’000 RM’000

Non-current:Finance lease liabilities - secured 408 3,950 - - MUNIF/IMTN - secured - 10,000 - 10,000Bai Bithaman Ajil facilities - secured 44,679 4,732 - - Term loans - secured 18,124 51,583 - -

63,211 70,265 - 10,000

Current:Finance lease liabilities - secured 3,684 6,800 - - Bankers’ acceptances - secured 60,414 55,631 - - MUNIF/IMTN - secured 10,000 48,000 10,000 48,000Bai Bithaman Ajil facilities - secured 10,007 2,720 - - Term loans - secured 14,337 11,295 - -

98,442 124,446 10,000 48,000

161,653 194,711 10,000 58,000

An amount of RM6,915,000 (2010: RM51,915,000) arising from the proceeds from the Murabahah Underwritten Notes IssuanceFacility/Islamic Medium Term Notes Facility (“MUNIF/IMTN”) has been on loan to the subsidiaries (see Note 9).

Security

Group

MUNIF/IMTN

Secured

The MUNIF/IMTN are secured and supported by way of:

a) fixed and floating charges over the Group’s property, plant and equipment (see Note 3);b) corporate guarantees by the Company;c) an assignment of proceeds from Perusahaan Otomobil Nasional Berhad and Perodua Manufacturing Sdn. Bhd. into

the Designated Accounts; andd) a first rank charge over all Designated Accounts.

Term loans and Bai Bithaman Ajil facilities

Secured

The term loans and Bai Bithaman Ajil facilities are secured and supported by way of:

a) corporate guarantee issued by the Company for the repayment by the subsidiaries of the loan, interest thereon and allother sums payable;

b) first fixed charge over certain Group’s machineries (see Note 3); c) advances pledged by the Company amounting to RM5,868,000; andd) pledge of fixed deposit by the subsidiaries (see Note 11).


(cont’d)

13. loANS AND BoRRoWINGS (cont’d)

Security (cont’d)

Group (cont’d)

Bank overdraft and bankers’ acceptances

Secured

The bank overdraft and bankers’ acceptances are secured and supported by way of:

a) fixed and floating charges over the Group’s property, plant and equipment (see Note 3);b) pledge of fixed deposits by the subsidiaries (see Note 11); c) corporate guarantees by the Company;d) an assignment of proceeds from sales to Perusahaan Otomobil Nasional Berhad and Perodua Manufacturing Sdn. Bhd.

into the Designated Accounts; ande) a first rank charge over all Designated Accounts.

Significant financial covenants for certain term loans granted:

• dividend shall not exceed 50% of profit after tax in any one year without prior consent from the loan provider; and• finance service cover ratio shall be less than 1.75 times before dividend payment and less than 1.50 times after

such payment.

Finance lease liabilities

Finance lease liabilities are payable as follows:

Group Present PresentFuture value of Future value of

minimum minimum minimum minimumlease lease lease lease

payments Interest payments payments Interest payments2011 2011 2011 2010 2010 2010

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Less than one year 3,787 (103) 3,684 7,282 (482) 6,800Between one and five years 463 (55) 408 4,093 (143) 3,950

4,250 (158) 4,092 11,375 (625) 10,750

14. PRovISIoN FoR WARRANtIES

Group2011 2010

RM’000 RM’000

At 1 January 4,743 2,142Provision made during the year 2,632 6,428Provision used during the year (1,985) (3,827)

At 31 December 5,390 4,743

The Company gives warranties on certain automotive parts and materials sold and undertakes to repair or replace items thatfail to perform satisfactory or meet the specification required. The provision for warranties is based on estimates made fromhistorical warranty data.


(cont’d)

15. tRADE AND othER PAyABlES

Group Company2011 2010 2011 2010

Note RM’000 RM’000 RM’000 RM’000

trade Trade payables 41,534 54,332 - - Affiliated companies 15.1 4,692 8,934 - -

46,226 63,266 - -

Non-tradeAmounts due to subsidiaries 15.1 - - 99,031 93,725Other payables 41,824 43,501 30 398Finance liabilities at fair valuethrough profit or loss :- Held for trading, including derivatives 863 - - -

Accruals 14,191 5,660 298 4,810Affiliated companies 15.1 275 88 - -

57,153 49,249 99,359 98,933

103,379 112,515 99,359 98,933

15.1 Amounts due to subsidiaries and affiliated companies

The amounts due to subsidiaries and affiliated companies are unsecured, interest free and repayable on demand.

16. PRoFIt BEFoRE INCoME tAx

Group Company2011 2010 2011 2010

Note RM’000 RM’000 RM’000 RM’000

Profit before income tax is arrived at after charging:

Amortisation of intangible assets 7 9,283 6,817 - - Auditors’ remunerationStatutory audit- KPMG 355 295 75 60- other auditors 4 3 - -

Other services - KPMG 15 13 15 13

Bad debts written off 36 69 - - Depreciation of property, plant and equipment 3 68,980 74,894 10 8Depreciation of investment properties 4 - - 527 526Fair value loss on derivatives 863 - - - Impairment loss- trade & other receivables 184 586 - - - intangible assets 7 6,397 - - - - investment in subsidiaries - - - 2,310- property, plant and equipment 42 - - -


(cont’d)

16. PRoFIt BEFoRE INCoME tAx (cont’d)

Group Company2011 2010 2011 2010

Note RM’000 RM’000 RM’000 RM’000

Profit before income tax is arrived at after charging: (cont’d)

Inventories written off 2,189 735 - - Intangibles assets written off 215 - - - Inventories write-down to net realisable value - 1,719 - - Loss on disposal of property, plant and equipment 10 1,772 - - Loss on foreign exchange - realised 1,632 2,950 - - - unrealised 236 1,267 - -

Personnel expenses (including key management personnel)- Contributions to Employees Provident Fund 2,946 2,610 75 45- Wages, salaries and others 37,730 33,062 1,075 637

Property, plant and equipment written off 4 4,884 - - Provision for warranties 14 2,632 6,428 - - Rental expense on- premises 74 138 - - - machineries and equipment 410 377 1 -

Royalties 48 61 - - Write-back of amount due to vendor - 3,850 - - Other assets written off 41 - - -

and after crediting:Dividend income from subsidiaries (unquoted) - - 6,550 7,245Gain on foreign exchange- realised 659 832 - - - unrealised 28 1,105 - -

Gain on disposal of other investments - 52 - - Rental income 432 432 1,892 1,642Reversal of impairment loss on intangible assets 7 - 5,133 - - Reversal of inventories to net realisable value 89 - - - Waiver of debts by a vendor - 829 - 829Write back of payables 93 - - -


(cont’d)

17. KEy MANAGEMENt PERSoNNEl CoMPENSAtIoN

The key management personnel compensations are as follows:

Group Company2011 2010 2011 2010

RM’000 RM’000 RM’000 RM’000

Directors:- Fees 342 342 180 180- Remuneration 1,143 1,045 - - - EPF contribution 129 121 - -

Total short term employee benefits 1,614 1,508 180 180Other key management personnel:- Wages, salaries and others 1,127 944 - - - EPF contribution 127 92 - -

2,868 2,544 180 180

Other key management personnel comprise persons other than the Directors of Group entities, having authority andresponsibility for planning, directing and controlling the activities of the Group entities directly or indirectly.

The estimated monetary value of Directors’ benefit-in-kind is RM31,000 (2010: RM30,000).

18. FINANCE CoStS

Group Company2011 2010 2011 2010

RM’000 RM’000 RM’000 RM’000

Interest expense of loans and borrowings:- Loans 5,159 2,964 - - - Overdraft 200 182 - - - Bankers’ acceptances 2,807 2,696 - - - Finance lease liabilities 485 2,360 - - - MUNIF/IMTN 4,399 3,976 334 507

13,050 12,178 334 507

Recognised in profit or loss 11,994 10,862 334 507Capitalised on qualifying assets:- property, plant and equipment (Note 3) 1,056 1,316 - -

13,050 12,178 334 507


(cont’d)

19. INCoME tAx ExPENSE

Group Company2011 2010 2011 2010

RM’000 RM’000 RM’000 RM’000

Current tax expense:Malaysian - current 1,024 999 1,625 -

- prior year 47 (2,146) 33 -

Total current tax recognised in profit or loss 1,071 (1,147) 1,658 -

Deferred tax expense:Origination and reversal of temporary differences (5,936) 7,510 542 - (Over)/underprovision in prior year (3,538) - (242) -

Total deferred tax recognised in profit or loss (9,474) 7,510 300 -

Total income tax expense (8,403) 6,363 1,958 -

Reconciliation of effective tax expense

Group Company2011 2010 2011 2010

RM’000 RM’000 RM’000 RM’000

Profit for the year 38,377 26,106 4,692 5,682Total income tax expense (8,403) 6,363 1,958 -

Profit excluding tax 29,974 32,469 6,650 5,682

Income tax calculated using Malaysian tax rate of 25% (2010: 25%) 7,494 8,117 1,663 1,421Non-deductible expenses 4,251 4,919 504 390Tax exempt income (11,851) (6,986) - (1,811)Effect of unrecognised deferred tax assets (4,806) 2,459 - -

(4,912) 8,509 2,167 - Over provision in prior year- current tax 47 (2,146) 33 - - deferred tax (3,538) - (242) -

(8,403) 6,363 1,958 -


(cont’d)

20. EARNINGS PER oRDINARy ShARE - GRouP

The calculation of basic earnings per share for the year ended 31 December 2011 was based on the profit attributable to ordinaryshareholders of RM38,377,000 (2010: RM25,686,000) and a weighted average number of ordinary shares outstanding, calculatedas follows:

Weighted average number of ordinary shares

Group2011 2010’000 ’000

Issued ordinary shares at 1 January 165,960 165,960Effect of treasury shares held (5,588) (4,306)

Weighted average number of ordinary shares at 31 December 160,372 161,654

Basic earnings per ordinary share (sen) 23.9 15.9

21. DIvIDENDS

Dividends recognised in the current year by the Company are:

Sen per totalshare amount

(net of tax) RM’000 Date of payment

2011Final 2010 ordinary 1.75 2,797 25 August 2011First Interim 2011 ordinary 1.00 1,596 18 November 2011Second interim 2011 ordinary 1.00 1,594 20 February 2012

5,987

2010Final 2009 ordinary 0.75 1,212 23 August 2010Interim 2010 ordinary 0.75 1,212 23 November 2010

2,424

After the reporting period, the Directors recommend a final tax exempt dividend of 2.00 sen per ordinary share totallingapproximately RM3,187,000 for the financial year ended 31 December 2011 subject to the approval by the owners at theforthcoming Annual General Meeting based on the issued and paid up capital (excluding treasury shares) at the date of thisreport.


(cont’d)

22. oPERAtING SEGMENtS

The Group has two reportable segments, as described below, which are the Group’s strategic business units. The strategicbusiness units offer different products and services, and are managed separately because they require different technologyand marketing strategies. For each of the strategic business units, the Group’s Chairman reviews internal management reportson at least a quarterly basis. The following summary describes the operations in each of the Group’s reportable segments:

• Automotive - Manufacture, assembly and sale of automotive parts• Water division - Manufacture, assembly and sale of water meters

Other non-reportable segments comprise operations related to the rental of properties within the Group and affiliatedcompanies and sales of materials. The accounting policies of the reportable segments are the same as described in Note 2 (s).

Performance is measured based on segment profit before tax as included in the internal management reports that are reviewedby the Group’s Chairman, who is the Group’s chief operating decision maker. Segment profit is used to measure performanceas management believes that such information is the most relevant in evaluating the results of certain segments relative toother entities that operate within these industries.

Segment assets and segment liabilities

Segment assets and segment liabilities information is neither included in the internal management reports nor providedregularly to the Chairman. Hence no disclosure is made on segment assets and liabilities.

Segment capital expenditure

Segment capital expenditure is the total cost incurred during the financial year to acquire property, plant and equipment, andintangible assets other than goodwill.


(cont’d)

22.

oPE

RAt

ING

SEG

MEN

tS (c

ont’d

)

Aut

omot

ive

Wat

er d

ivis

ion

tota

l20

1120

1020

1120

1020

1120

10RM

’000

RM’0

00RM

’000

RM’0

00RM

’000

RM’0

00

Segm

ent p

rofit

/(lo

ss)

45,0

6637

,697

(6,7

23)

(2,7

87)

38,3

4334

,910

Incl

uded

in th

e m

easu

re o

f seg

men

t pro

fit/(

loss

) are

:

Reve

nue

from

ext

erna

l cus

tom

ers

554,

911

564,

479

17,9

9622

,872

572,

907

587,

351

Inte

r-se

gmen

t rev

enue

(2,5

45)

(3,6

90)

-

-

(2,5

45)

(3,6

90)

Dep

reci

atio

n an

d am

ortis

atio

n(7

4,16

4)(7

7,65

9)(3

,536

)(3

,493

)(7

7,70

0)(8

1,15

2)Fi

nanc

e co

sts

(11,

510)

(8,9

10)

(159

)(1

,425

)(1

1,66

9)(1

0,33

5)Fi

nanc

e in

com

e35

727

8-

-

35

727

8Im

pai

rmen

t of

- pro

per

ty, p

lant

and

equ

ipm

ent

-

-

(42)

-

(42)

-

- int

angi

ble

ass

ets

-

-

(6,3

97)

-

(6,3

97)

-

Reve

rsal

of i

mp

airm

ent o

n in

tang

ible

ass

ets

-

-

-

5,13

3-

5,

133

Reve

rsal

of w

rite-

dow

n of

inve

ntor

ies

-

-

222

-

222

-

Writ

e-b

ack

of a

mou

nt d

ue to

ven

dor

-

-

-

(3,8

50)

-

(3,8

50)

Writ

e-do

wn

and

writ

e-off

of i

nven

torie

s(1

32)

(661

)(2

,189

)(1

,793

)(2

,321

)(2

,454

)W

rite-

off o

f int

angi

ble

s as

sets

-

-

(215

)-

(2

15)

-


(cont’d)

22. oPERAtING SEGMENtS (cont’d)

Reconciliations of reportable segment profit or loss

Group2011 2010

RM’000 RM’000

Profit or lossTotal profit or loss for reportable segments 38,343 34,910Other non-reportable segments 7,206 7,043Elimination of inter-segment profits (15,575) (9,484)

Consolidated profit before income tax 29,974 32,469

Geographical segments

In presenting information on the basis of geographical segments, segment revenue is based on geographical location ofcustomers. The non-current assets of the Group are located in Malaysia. Capital expenditure incurred is also in Malaysia.

Group2011 2010

RM’000 RM’000

Geographical informationRevenueMalaysia 522,267 511,979United Kingdom 17,996 20,516Saudi Arabia 38,046 55,024

578,309 587,519

The two major customers of the Group have contributed 80% (2010: 79.6%) to the total revenue of the Group.

23. FINANCIAl INStRuMENtS

23.1 Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:(a) Loans and receivables (L&R);(b) Fair value through profit or loss (FVTPL):

- Held for trading (HFT), and(c) Other financial liabilities measured at amortised cost (OL).


(cont’d)

23. FINANCIAl INStRuMENtS (cont’d)

23.1 Categories of financial instruments (cont’d)

Carrying l&R/ FvtPlamount (ol) - hFt

Group RM’000 RM’000 RM’000

2011Financial assets Trade and other receivables 71,813 71,813 - Cash and cash equivalents 72,255 72,255 -

144,068 144,068 -

Financial liabilities Loans and borrowings (161,653) (161,653) - Trade and other payables (103,379) (102,516) (863)Dividend payable (1,594) (1,594) -

(266,626) (265,763) (863)

2010Financial assets Trade and other receivables 82,277 82,277 - Cash and cash equivalents 38,191 38,191 -

120,468 120,468 -

Financial liabilities Loans and borrowings (194,711) (194,711) - Trade and other payables (112,515) (58,000) -

(307,226) (252,711) -


(cont’d)


23.1 Categories of financial instruments (cont’d)

Carrying l&R/amount (ol)

Company RM’000 RM’000

2011Financial assets Trade and other receivables 11,466 11,466Cash and cash equivalents 4,433 4,433

15,899 15,899

Financial liabilities Loans and borrowings (10,000) (10,000) Trade and other payables (99,359) (99,359) Dividend payable (1,594) (1,594)

(110,953) (110,953)

2010Financial assets Trade and other receivables 56,867 56,867Cash and cash equivalents 7,495 7,495

64,362 64,362

Financial liabilities Loans and borrowings (58,000) (58,000)Trade and other payables (98,933) (98,933)

(156,933) (156,933)


(cont’d)


23.2 Net gain and losses arising from financial instruments

Group Company2011 2010 2011 2010

RM’000 RM’000 RM’000 RM’000

Net gains/(losses) arising on:Fair value through profit and loss:- Held for trading (863) - - -

Loans and receivables 95 (455) 537 (15)Financial liabilities measured at amortised cost (12,646) (10,902) (334) (507)

(13,414) (11,357) 203 (522)

23.3 Financial risk management

The Group has exposure to the following risks from its use of financial instruments:• Credit risk• Liquidity risk• Market risk

23.4 Credit risk

Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meetits contractual obligations. The Group’s exposure to credit risk arises principally from its receivables from customers. TheCompany’s exposure to credit risk arises principally from loans and advances to subsidiaries.

Receivables

Risk management objectives, policies and processes for managing the risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Creditevaluations are performed on all customers requiring credit over a certain amount.

Exposure to credit risk and credit quality

As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by thecarrying amounts in the statement of financial position.

Management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are stated attheir realisable values. A significant portion of these receivables are regular customers that have been transacting withthe Group. The Group uses ageing analysis to monitor the credit quality of the receivables. Any receivables havingsignificant balances past due more than 120 days, which are deemed to have higher credit risk, are monitored individually.


(cont’d)


23.4 Credit risk (cont’d)

Impairment losses

The ageing of trade receivables as at the end of the reporting period was:

GroupIndividual

Gross impairment NetRM’000 RM’000 RM’000

2011Not past due 26,208 - 26,208Past due 1 - 30 days 37,437 - 37,437Past due 31 - 120 days 4,662 - 4,662Past due more than 120 days 2,122 (1,002) 1,120

70,429 (1,002) 69,427

2010Not past due 65,474 - 65,474Past due 1 - 30 days 3,448 - 3,448Past due 31 - 120 days 2,317 - 2,317Past due more than 120 days 3,360 (995) 2,365

74,599 (995) 73,604

The movements in the allowance for impairment losses of trade receivables during the year were:

2011 2010RM’000 RM’000

At 1 January 995 409Impairment loss recognised 7 586

At 31 December 1,002 995

The allowance account in respect of trade receivables is used to record impairment losses. Unless the Group is satisfiedthat recovery of the amount is possible, the amount considered irrecoverable is written off against the receivable directly.

No impairment loss was provided for trade receivable which was past due for more than 120 days as it consists of retentionsums and final payments of projects of which certain amounts were recovered subsequent to year end.


(cont’d)


23.4 Credit risk (cont’d)

Financial guarantees


The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to certainsubsidiaries. The Company monitors the results of the subsidiaries and repayments made by the subsidiaries on anongoing basis.

Exposure to credit risk, credit quality and collateral

The maximum exposure to credit risk relates to the following:

Company2011 2010

RM’000 RM’000

Corporate guarantee issued to:- financial institutions for banking facilities granted to its subsidiaries 149,241 133,032

As at end of the reporting period, there was no indication that any subsidiary would default on repayment.

The financial guarantees have not been recognised since the fair value on initial recognition was not material.

Intercompany balances


The Company provides unsecured loans and advances to subsidiaries. The Company monitors the results of thesubsidiaries regularly.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts inthe statements of financial position.

Impairment losses

As at the end of the reporting period, there was no indication that the loans and advances to subsidiaries are notrecoverable. The Company does not specifically monitor the ageing of the advances to subsidiaries.

23.5 liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’sexposure to liquidity risk arises principally from its various payables, loans and borrowings.

The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management toensure, as far as possible, that it will have sufficient liquidity to meets its liabilities when they fall due.


(cont’d)23

.FI

NA

NCI

Al

INSt

RuM

ENtS

(con

t’d)

23.5

liqu

idit

y ri

sk (c

ont’d

)

Mat

urity

ana

lysi

s

The

tab

le b

elow

sum

mar

ises

the

mat

urit

y p

rofil

e of

the

Gro

up’s

and

the

Com

pan

y’s

finan

cial

liab

ilitie

s as

at

the

end

of t

he r

epor

ting

per

iod

bas

ed o

n un

disc

ount

ed c

ontr

actu

al p

aym

ents

:

Carr

ying

Cont

ract

ual

Cont

ract

ual

und

er 1

1 - 2

2 - 5

Mor

e th

anam

ount

inte

rest

rate

cash

flow

sye

arye

ars

year

s5

year

sG

roup

RM’0

00RM

’000

RM’0

00RM

’000

RM’0

00RM

’000

2011

Non

-der

ivat

ive

finan

cial

liab

ilitie

sSe

cure

d te

rm lo

ans

32,4

613.

0% -

5.6%

34,8

3215

,524

10,2

829,

026

-

Secu

red

Bai B

itham

an A

jil fa

cilit

ies

54,6

864.

0% -

8.1%

64,3

3012

,911

13,7

9835

,642

1,97

9Se

cure

d M

UN

IF/I

MTN

10,0

007.

9%10

,790

10,7

90-

-

-

Fi

nanc

e le

ase

liab

ilitie

s4,

092

2.5%

- 4.

0%4,

250

3,78

727

618

7-

Se

cure

d b

anke

rs’ a

ccep

tanc

es60

,414

3.0%

- 5.

5%60

,926

60,9

26-

-

-

Tr

ade

and

othe

r pay

able

s10

2,51

6-

102,

516

102,

516

-

-

-

Div

iden

d p

ayab

le1,

594

-1,

594

1,59

4-

-

-

265,

763

279,

238

208,

048

24,3

5644

,855

1,97

9D

eriv

ativ

e fin

anci

al li

abili

ties

Forw

ard

exch

ange

co

ntra

cts

(gro

ss s

ettl

ed)

Out

flow

863

863

863

-

-

-

266,

626

280,

101

208,

911

24,3

5644

,855

1,97

9

Com

pany

2011

Non

-der

ivat

ive

finan

cial

liab

ilitie

sSe

cure

d M

UN

IF/I

MTN

10,0

007.

9%10

,790

10,7

90-

-

-

Tr

ade

and

othe

r pay

able

s99

,359

-99

,359

99,3

59-

-

-

D

ivid

end

pay

able

1,59

4-

1,59

41,

594

-

-

-

110,

953

111,

743

111,

743

-

-

-


(cont’d)

23.

FIN

AN

CIA

l IN

StRu

MEN

tS (c

ont’d

)

23.5

liqu

idit

y ri

sk (c

ont’d

)

Mat

urity

ana

lysi

s

The

tab

le b

elow

sum

mar

ises

the

mat

urit

y p

rofil

e of

the

Gro

up’s

and

the

Com

pan

y’s

finan

cial

liab

ilitie

s as

at

the

end

of t

he r

epor

ting

per

iod

bas

ed o

n un

disc

ount

ed c

ontr

actu

al p

aym

ents

:

Carr

ying

Cont

ract

ual

Cont

ract

ual

und

er 1

1 - 2

2 - 5

Mor

e th

anam

ount

inte

rest

rate

cash

flow

sye

arye

ars

year

s5

year

sG

roup

RM’0

00RM

’000

RM’0

00RM

’000

RM’0

00RM

’000

2010

Non

-der

ivat

ive

finan

cial

liab

ilitie

sSe

cure

d te

rm lo

ans

62,8

783.

0% -

5.6%

64,6

7312

,284

23,8

8128

,508

-

Secu

red

Bai B

itham

an A

jil fa

cilit

ies

7,45

24.

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8.1%

7,93

73,

010

3,01

01,

917

-

Secu

red

MU

NIF

/IM

TN58

,000

5.95

% -

7.90

%62

,239

51,6

3210

,607

-

-

Fina

nce

leas

e lia

bili

ties

10,7

502.

5% -

4.0%

11,3

797,

264

3,80

430

47

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red

ban

kers

’ acc

epta

nces

55,6

313.

0% -

5.5%

57,9

9557

,995

-

-

-

Trad

e an

d ot

her p

ayab

les

112,

515

-11

2,51

511

2,51

5-

-

-

307,

226

316,

738

244,

700

41,3

0230

,729

7

Com

pany

2010

Non

-der

ivat

ive

finan

cial

liab

ilitie

sSe

cure

d M

UN

IF/I

MTN

58,0

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- 7.

90%

62,2

3951

,632

10,6

07-

-

Trad

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her p

ayab

les

98,9

33-

98,9

3398

,933

-

-

-

156,

933

161,

172

150,

565

10,6

07-

-


(cont’d)


23.6 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’sfinancial position or cash flows.

23.6.1 Currency risk

The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than therespective functional currencies of the Group entities. The currencies giving rise to this risk are primarily EURO, U.S. Dollar(USD) and Australian Dollar (AUD).


The Group hedges up to USD1,400,000 of its foreign currency denominated trade receivables. The Group uses forwardexchange contracts to hedge its foreign currency risk. Most of the forward exchange contracts have maturities of lessthan one year after the end of the reporting period. Where necessary, the forward exchange contracts are rolled over atmaturity.

Exposure to foreign currency risk

The Group’s exposure to foreign currency (a currency which is other than the currency of the Group entities) risk, basedon carrying amounts as at the end of the reporting period was:

Denominated inGroup EuRo uSD AuD

RM’000 RM’000 RM’000

2011Trade receivables - 9,284 - Trade payables (3,245) (6,207) (582)Foreign exchange contracts - (863) -

Exposure in the statements of financial position (3,245) 2,214 (582)

2010Trade receivables - 11,083 - Trade payables (3,014) (8,953) -

Exposure in the statements of financial position (3,014) 2,130 -


(cont’d)


23.6 Market risk (cont’d)

23.6.1 Currency risk (cont’d)

Currency risk sensitivity analysis

A 10% (2010: 10%) strengthening of the Ringgit Malaysia against the following currencies at the end of the reportingperiod would have increased (decreased) post-tax profit or loss by the amounts shown below. The analysis assumes thatall other variables, in particular interest rates, remain constant.

Group Profit or loss2011 2010

RM’000 RM’000

EURO 243 226USD (166) (160)AUD 44 -

A 10% (2010: 10%) weakening of Ringgit Malaysia against the above currencies at the end of the reporting period wouldhave had equal but opposite effect on the above currencies to the amounts shown above, on the basis that all othervariables remain constant.

23.6.2Interest rate risk

The Group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s variable rate borrowings are exposed to a risk of change in cash flow due to changes in interest rates. Shortterm receivables and payables are not significantly exposed to interest rate risk.


In managing interest rate risk, the Group and Company maintains a balanced portfolio of fixed and floating rate instruments. All interest rate exposures are monitored and managed by the Group and Company on a regular basis.

Exposure to interest rate risk

The interest rate profile of the Group’s and the Company’s significant interest-earning and interest-bearing financialinstruments, based on carrying amounts as at the end of the reporting period were:

Group Company2011 2010 2011 2010

RM’000 RM’000 RM’000 RM’000

Fixed rate instrumentsFinancial assets 28,259 12,055 11,003 59,203Financial liabilities (51,284) (131,080) (10,000) (50,000)

(23,025) (119,025) 1,003 9,203

Floating rate instrumentsFinancial liabilities (110,369) (63,631) - (8,000)


(cont’d)


23.6 Market risk (cont’d)

23.6.2Interest rate risk (cont’d)

Interest rate risk sensitivity analysis

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and theGroup does not designate derivatives as hedging instruments under a fair value hedged accounting model. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points (bp) in interest rates at the end of the reporting period would have increased (decreased)post-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreigncurrency rates, remain constant.

Group CompanyProfit or loss Profit or loss

100 bp 100 bp 100 bp 100 bp2011 increase decrease increase decreaseFloating rate instruments RM’000 RM’000 RM’000 RM’000

Cash flow sensitivity (net) (828) 828 - -

2010Cash flow sensitivity (net) (477) 477 (60) 60

23.7 Fair value of financial instruments

The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowingsapproximate fair values due to the relatively short term nature of these financial instruments.

The carrying amount of the MUNIF at reporting date approximate their fair value as this is a variable rate financialinstrument.

The fair values of other financial liabilities, together with the carrying amounts shown in the statements of financialposition, are as follows:

Group 2011 2010Carrying Fair Carrying Fairamount value amount valueRM’000 RM’000 RM’000 RM’000

Secured term loan (32,461) (33,226) (62,878) (57,055)Secured Bai Bithaman Ajil facilities (54,686) (55,288) (7,452) (7,252)Secured IMTN (10,000) (10,000) (50,000) (49,660)Finance lease liabilities (4,092) (4,218) (10,750) (10,408)Forward exchange contracts liabilities (863) (863) - -

CompanyLoan to subsidiaries 6,915 6,915 51,915 50,522Secured IMTN (10,000) (10,000) (50,000) (49,660)

The following summarises the methods used in determining the fair value of financial instruments reflected in the abovetable.


(cont’d)


23.7 Fair value of financial instruments (cont’d)

Derivatives

Fair value of forward exchange contracts are based on their quoted price, if available. If a quoted price is not available,then fair value is estimated by discounting the difference between the contractual forward price and the current forwardprice for the residual maturity of the contract using a risk-free interest rate.

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal andinterest cash flows, discounted at the market rate of interest at the end of the reporting period. For finance lease themarket rate of interest is determined by reference to similar lease agreements.

Interest rates used to determine fair value

The interest rates used to discount estimated cash flows, when applicable, are as follows:

2011 2010

Loans and borrowings 4% - 8% 4% - 8%Finance lease liabilities 4% - 7% 4% - 7%

23.8 Fair value hierarchy

Comparative figures have not been presented for 31 December 2010 by virtue of the exemption provided in paragraph44G of FRS7.

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have beendefined 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).

Group2011 level 1 level 2 level 3 total

RM’000 RM’000 RM’000 RM’000

Financial liabilitiesForward exchange contracts - 863 - 863

Company

Fair value hierarchy disclosure is not applicable for the year ended 31 December 2011 as the Company does not have anyfinancial instruments carried at fair value.


(cont’d)

24. CAPItAl MANAGEMENt

The Group’s objective when managing capital is to maintain a strong capital base and safeguard the Group’s ability to continueas a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business.The Directors monitor and determine to maintain an optimal debt-to-equity ratio that complies with debt covenants andregulatory requirements.

During 2011, the Group’s strategy, which was unchanged from 2010, was to maintain the debt-to-equity ratio below 1.5. The debt-to-equity ratios at 31 December 2011 and at 31 December 2010 were as follows:

Group2011 2010

RM’000 RM’000

Total borrowings (Note 13) 161,653 194,711Less: Cash and cash equivalents (Note 11) (72,255) (38,191)

Net debt 89,398 156,520

Total equity 274,213 243,481

Debt-to-equity ratio 0.33 0.64

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

Under the requirement of Bursa Malaysia Practice Note No. 17/2005, the Company is required to maintain a consolidatedshareholders’ equity equal to or not less than the 25% of the issued and paid-up capital (excluding treasury shares) and suchshareholders’ equity is not less than RM40 million. The Company has complied with this requirement.

25. CAPItAl CoMMItMENtS

Group2011 2010

RM’000 RM’000

Capital expenditure commitmentsPlant and equipmentAuthorised but not contracted for 12,367 34,436

Contracted but not provided for 19,124 13,800

26. RElAtED PARtIES

Identity of related parties

For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability,directly or indirectly, to control the party or exercise significant influence over the party in making financial and operatingdecisions, or vice versa, or where the Group and the party are subject to common control or common significant influence.Related parties may be individuals or other entities.

Key management personnel are defined as those persons having authority and responsibility for planning, directing andcontrolling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group, and certain members of senior management of the Group.


(cont’d)

26. RElAtED PARtIES (cont’d)

Identity of related parties (cont’d)

The significant related party transactions of the Group and the Company (other than key management personnelcompensations as disclosed in Note 17) are as follows:

Group Amount transacted for the year ended

2011 2010RM’000 RM’000

Affiliated companies in which the controllingshareholders and Directors have interests

Purchases of automotive parts (62,729) (52,162)Sales of automotive parts - 1,047Sales of materials 7,881 - Rental payable (40) (192)Rental receivable 432 432

Affiliated companies in which a Directorof a subsidiary has interest

Purchases of automotive parts (2,761) (6,957)

Company

SubsidiariesRental receivable 1,748 1,498Management fees 679 741

Affiliated companies in which the controllingshareholders and Directors have interests

Rental receivable 144 144

The net balance outstanding arising from the above transactions have been disclosed in Note 9 and Note 15 to the financialstatements. All the outstanding balances are expected to be settled in cash by the related parties.


(cont’d)

27. SuBSEquENt EvENtS

27.1 Proposed acquisition of the business of Maju Expressway Sdn. Bhd. (“MESB”) and the entire equity interest in MESB

On 16 March 2012, EP Manufacturing Bhd. (“EPMB”) entered into an Acquisition Agreement with MESB, Bright Focus Bhd.(“BFB”) and Ulimas Sdn. Bhd. (“Ulimas”) for the proposed acquisition by a wholly-owned subsidiary of EPMB to incorporatethe business of MESB and the entire equity interest in MESB from BFB and Ulimas for a purchase consideration of RM1.15billion (“Proposed Acquisition”) together with the redemption of MESB’s existing Islamic medium term notes with nominalamount of RM550 million. On 2 April 2012, EPMEX Sdn. Bhd. (“EPMEX”) was incorporated to facilitate the ProposedAcquisition.

The total consideration of the Proposed Acquisition will be satisfied by internally-generated funds, bank borrowings,issuance of 38,462,000 new EPMB shares amounting to RM50 million (issue price of RM1.30 per share), RedeemableUnsecured Loan Stocks (“RULS”) of RM100 million and the issuance of new Islamic Securities of up to nominal value ofRM1,300 million by EPMEX (“EPMEX Sukuk”). The completion of the Proposed Acquisition is subject to the fulfillment ofthe conditions precedent set out in the Acquisition Agreement.

On 24 April 2012, EPMB announced that the size of the EPMEX Sukuk has been increased to nominal value of up to RM1,350million.

EPMB will make the necessary announcements on a timely manner in relation to the Proposed Acquisition.

27.2 Purchase of treasury shares

Subsequent to year-end, the Company repurchased 157,500 of its issued ordinary share capital of RM1.00 each from theopen market for a total consideration of RM134,968 at an average buy-back price of RM0.86 per ordinary share. As of thedate of this report, the number of shares in issue and paid-up, net of treasury shares, is 159,341,800 ordinary shares ofRM1.00 each.


(cont’d)

28. DISCloSuRE oF REAlISED AND uNREAlISED PRoFIt

The breakdown of the retained earnings of the Group and of the Company as at 31 December 2011 into realised and unrealisedprofits, pursuant to Paragraph 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements are as follows:

2011 2010Group Company Group Company

RM’000 RM’000 RM’000 RM’000

Total retained earnings of the Company and its subsidiaries:- realised 147,853 6,283 112,073 4,614- unrealised (1,442) (1,632) (1,857) 1,332

146,411 4,651 110,216 5,946Less: consolidation adjustments (46,898) - (43,093) -

Total retained earnings as per statement of financial position 99,513 4,651 67,123 5,946

The determination of realised and unrealised profits is based on the Guidance of Special Matter No.1, Determination of Realisedand Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements,issued by Malaysian Institute of Accountants on 20 December 2010.


In the opinion of the Directors, the financial statements set out on pages 31 to 89 are drawn up in accordance with Financial ReportingStandards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of theCompany as at 31 December 2011 and of their financial performance and cash flows for the financial year then ended.

In the opinion of the Directors, the information set out in Note 28 to the financial statements has been compiled in accordance withGuidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant toBursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on theformat prescribed by Bursa Malaysia Securities Berhad.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

…………………………………………………………hamidon Bin Abdullah

…………………………………………………………hew voon Foo

Shah Alam, Malaysia

Date: 26 April 2012

I, hamidon Bin Abdullah, the Director primarily responsible for the financial management of EP Manufacturing Bhd., do solemnlyand sincerely declare that the accompanying financial statements set out on pages 31 to 90 are, to the best of my knowledge andbelief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions ofthe Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named in Kuala Lumpur on 26 April 2012

………………………………..hamidon Bin Abdullah

Before me:K Nermala W 378Commissioner for OathsKuala Lumpur

pursuant to Section 169(15) of the Companies Act, 1965




REPoRt oN thE FINANCIAl StAtEMENtS

We have audited the financial statements of EP Manufacturing Bhd., which comprise the statements of financial position as at 31 December 2011 of the Group and of the Company, and the statements of comprehensive income, changes in equity and cashflows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and otherexplanatory information, as set out on pages 31 to 89.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of these financial statements that give a true and fair view inaccordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the Directorsdetermine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due tofraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordancewith approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan andperform 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 the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’spreparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit alsoincludes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made bythe Directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and theCompanies 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 2011 and of their financial performance and cash flows for the year then ended.

REPoRt oN othER lEGAl AND REGulAtoRy REquIREMENtS

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and itssubsidiaries 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, whichare indicated in Note 5 to the financial statements.

c) We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial statementsare in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Groupand 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 underSection 174(3) of the Act.


to the members of EP Manufacturing Bhd. (cont’d)

othER REPoRtING RESPoNSIBIlItIES

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information set out in Note 28 to the financial statements has been compiled by the Company as required by the Bursa Malaysia Securities Berhad ListingRequirements and is not required by the Financial Reporting Standards. We have extended our audit procedures to report on theprocess of compilation of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context ofDisclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants andprepared based on format prescribed by Bursa Malaysia Securities Berhad.

othER MAttERS

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

KPMG Siew Chin Kiang @ Seow Chin KiangFirm Number: AF 0758 Approval Number: 2012/11/12(J)Chartered Accountants Chartered Accountant

Petaling Jaya, Malaysia

Date: 26 April 2012


as at 14 May 2012

oRDINARy ShARES

Authorised Share Capital : RM500,000,000.00Issued & Paid-up Capital : RM165,960,000.00 (Inclusive of 6,618,200 treasury shares)Class of Shares : Ordinary shares of RM1.00 eachVoting Rights : One vote per ordinary share

DIStRIButIoN oF ShAREholDINGS

No. oF % oF SIZE oF holDINGS No. oF % oF ShARES ShARES

holDERS holDERS hElD hElD

Less than 100 shares 13 0.48 536 0.00100 to 1,000 shares 747 27.73 711,700 0.431,001 to 10,000 shares 1,405 52.15 6,940,049 4.1810,001 to 100,000 shares 459 17.04 13,457,850 8.11100,001 to less than 5% of issued shares 67 2.49 93,442,999 56.305% and above of issued shares 3 0.11 51,406,866 30.98

TOTAL 2,694 100.00 165,960,000 100.00

30 lARGESt ShAREholDERS

No. NAMES No. oF % oF ShARES ShARES

1 MUTUAL CONCEPT SDN BHD 29,006,866 17.482 HLB NOMINEES (TEMPATAN) SDN BHD 11,400,000 6.87

PLEDGED SECURITIES ACCOUNT FOR MUTUAL CONCEPT SDN BHD3 MAYBAN NOMINEES (TEMPATAN) SDN BHD 11,000,000 6.63

PLEDGED SECURITIES ACCOUNT FOR MUTUAL CONCEPT SDN BHD4 CIMSEC NOMINEES (TEMPATAN) SDN BHD 7,650,000 4.61

CIMB BANK FOR MUTUAL CONCEPT SDN BHD5 EB NOMINEES (TEMPATAN) SENDIRIAN BERHAD 6,401,700 3.86

PLEDGED SECURITIES ACCOUNT FOR SHAHRUL AZHAN BIN SAMSUDIN @ SHAMSUDDIN6 OSK NOMINEES (TEMPATAN) SDN BHD 5,891,300 3.55

PLEDGED SECURITIES ACCOUNT FOR ATURAN OMEGA SDN BHD7 EP MANUFACTURING BHD 5,654,000 3.41

SHARE BUY BACK ACCOUNT8 DB (MALAYSIA) NOMINEE (ASING) SDN BHD 5,577,700 3.36

DEUTSCHE BANK AG SINGAPORE FOR HORIZON GROWTH FUND N.V.9 SYMPHONY VISTA SDN BHD 5,517,800 3.3210 EB NOMINEES (TEMPATAN) SENDIRIAN BERHAD 5,000,000 3.01

PLEDGED SECURITIES ACCOUNT FOR MOHAMED BIN HASHIM11 EB NOMINEES (TEMPATAN) SENDIRIAN BERHAD 4,716,600 2.84

PLEDGED SECURITIES ACCOUNT FOR MOHD NIZAM BIN MOHAMED12 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 4,580,500 2.76

PLEDGED SECURITIES ACCOUNT FOR MICHELLE CHEAH MIN TZE13 MAYBAN NOMINEES (TEMPATAN) SDN BHD 4,200,000 2.53

PLEDGED SECURITIES ACCOUNT FOR HAMIDON BIN ABDULLAH14 CIMSEC NOMINEES (TEMPATAN) SDN BHD 4,110,000 2.48

CIMB BANK FOR HAMIDON BIN ABDULLAH15 MAYBAN NOMINEES (TEMPATAN) SDN BHD 3,689,000 2.22

PLEDGED SECURITIES ACCOUNT FOR TAN SEOK HIEN16 EP PROPERTIES (M) SDN BHD 3,465,000 2.0917 CHEW SOO TON 3,341,900 2.0118 MAYBAN SECURITIES NOMINEES (TEMPATAN) SDN BHD 2,895,800 1.74

PLEDGED SECURITIES ACCOUNT FOR TAN SEOK HIEN

95

as at 14 May 2012 (cont’d)

30 lARGESt ShAREholDERS (CoNt’D)

No. NAMES No. oF % oF ShARES ShARES

19 MUTUAL CONCEPT SDN BHD 2,596,967 1.5620 MOHAMED BIN HASHIM 2,476,865 1.4921 LEE CHEE BENG 2,108,500 1.2722 DR LINDEN HAMIDON 1,200,000 0.7223 EP MANUFACTURING BHD 964,200 0.58

SHARE BUY BACK ACCOUNT24 LIM BONG HANG @ LIM MOH TENG 845,000 0.5125 YEOH KEAN HUA 550,000 0.3326 CITIGROUP NOMINEES (TEMPATAN) SDN BHD

PLEDGED SECURITIES ACCOUNT FOR TAN PEK HOOI 493,100 0.3027 ECML NOMINEES (TEMPATAN) SDN BHD 450,500 0.27

PLEDGED SECURITIES ACCOUNT FOR NG SIAU MEN28 JF APEX NOMINEES (TEMPATAN) SDN BHD 427,000 0.26

PLEDGED SECURITIES ACCOUNT FOR HON MENG HENG29 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 415,500 0.25

PLEDGED SECURITIES ACCOUNT FOR NG SIAU MEN30 MAYBANK NOMINEES (TEMPATAN) SDN BHD 380,700 0.23

PLEDGED SECURITIES ACCOUNT FOR THAM KOK SEONG

totAl 137,006,498 82.55

SuBStANtIAl ShAREholDERS

DIRECt INDIRECtNo. oF No. oF

NAME ShARES % ShARES %

HAMIDON BIN ABDULLAH 8,447,133 5.30 65,218,833* 40.93MUTUAL CONCEPT SDN BHD 61,753,833 38.76 - -

Note : * Deemed interest by virtue of his shareholdings in Mutual Concept Sdn Bhd and EP Properties (M) Sdn Bhd pursuant to Section

6A of the Companies Act, 1965.

DIRECtoRS’ ShAREholDINGS

DIRECt INDIRECtNo. oF No. oF

NAME ShARES % ShARES %

HAMIDON BIN ABDULLAH 8,447,133 5.30 65,218,833* 40.93SHAARI BIN HARON 20,000 0.01 - -DR LINDEN HAMIDON 1,329,384 0.83 - -DATO’ SERI ISMAIL BIN SHAHUDIN 372,000 0.23 - -DATO’ IKMAL HIJAZ BIN HASHIM - - - -HEW VOON FOO - - - -

Note : * Deemed interest by virtue of his shareholdings in Mutual Concept Sdn Bhd and EP Properties (M) Sdn Bhd pursuant to Section 6Aof the Companies Act, 1965.

Net Book Gross Floor value as at Age of Date of

title / location Description tenure land Area Area 31.12.2011 Building Acquisitionsq.m. sq.m. RM years

1 Lot 72 & 73 Land with Freehold 13,859 15,480 27,337,482 17 20/1/1997Hicom Glenmarie factory, storesIndustrial Park and officePhase 2AMukim of DamansaraDaerah KlangSelangor Darul Ehsan

2 G.M. No 4776 Industrial land Freehold 10,117 4,645 7,178,146 4 10/6/1997Lot No. 1401 & factoryMukim of Ulu Yam buildingsDistrict of Ulu SelangorSelangor Darul Ehsan

3 G.M. No. 5061 Industrial land Freehold 13,785 5,808 27,375,934 8 5/6/1997Lot No. 1410 with factory,Mukim of Ulu Yam stores and officeDistrict of Ulu SelangorSelangor Darul Ehsan

4 G.M. No. 5062 Industrial land Freehold 13,405 - 1,284,377 - 5/6/1997Lot No. 1412 (vacant)Mukim of Ulu YamDistrict of Ulu SelangorSelangor Darul Ehsan

5 G.M. No. 4974 Industrial Freehold 8,979 - 1,196,471 - 28/10/1995Lot No. 1403 land with Batu 29, Jalan Ipoh car park44300 Batang KaliSelangor Darul Ehsan

6 G.M. No. 4973 Industrial land Freehold 11,002 7,834 12,404,593 15 28/10/1995Lot No. 1406 with factoryBatu 29, Jalan Ipoh44300 Batang KaliSelangor Darul Ehsan

7 G.M. No. 4956 stores, Freehold 13,786 11,952 19,983,570 7 28/10/1995Lot No. 1409 office andBatu 29, Jalan Ipoh guardhouse44300 Batang KaliSelangor Darul Ehsan

8 G.M. No. 5073 Industrial land Freehold 9,485 - 1,504,169 - 16/2/1996Lot No. 1404 (vacant)Mukim of Ulu YamDistrict of Hulu SelangorSelangor Darul Ehsan

9 G.M. No. 5072 Industrial land Freehold 11,508 11,808 17,776,949 5 16/2/1996Lot No.1407 with factory,Mukim of Ulu Yam lab, canteen,District of Hulu Selangor locker roomSelangor Darul Ehsan and guard

house



NotICE IS hEREBy GIvEN thAt the Sixteenth (16th) Annual General Meeting of EP Manufacturing Bhd will be held at Topas Room,The Saujana Kuala Lumpur, Saujana Resort, Jalan Lapangan Terbang SAAS, 40150 Shah Alam, Selangor Darul Ehsan on Friday, 29 June 2012 at 10.00 a.m. for the following purposes:

AGENDA

oRDINARy BuSINESS

1) To receive the Audited Financial Statements of the Company for the financial year ended 31 December2011 together with the Directors’ and Auditors’ Reports thereon.

2) To approve the payment of Directors’ fees of RM180,000 for the financial year ended 31 December 2011.

3) To approve the payment of a final tax exempt dividend of 2 sen per share for the financial year ended 31December 2011.

4) To re-elect the following Directors who retire by rotation in accordance with Article 100 of the Company’sArticles of Association and, being eligible, offer themselves for re-election:-

(a) Dato’ Seri Ismail Bin Shahudin (b) Dato’ Ikmal Hijaz Bin Hashim

5) To re-appoint KPMG as Auditors of the Company and to authorise the Directors to fix their remuneration.

SPECIAl BuSINESS

To consider and, if thought fit, to pass the following resolutions, with or without modifications:

6) ordinary ResolutionProposed renewal of authority for the Company to purchase its own shares (“Proposed Share Buy-Back”)

“thAt subject to the Company’s compliance with all applicable rules, regulations, orders and guidelinesmade pursuant to the Companies Act, 1965, the provision of the Company’s Memorandum and Articlesof Association and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“BursaSecurities”) and the approvals of all relevant authorities, the Company be and is hereby authorized tobuy back and hold such number of ordinary shares of RM1.00 each in the Company (“Proposed ShareBuy-Back”) as may be determined by the Directors of the Company from time to time through BursaSecurities upon such terms and conditions as the Directors may deem fit, necessary and expedient inthe interest of the Company, provided that:

(a) the aggregate number of ordinary shares which may be purchased and/or held by the Companyat any point of time pursuant to the Proposed Share Buy-Back shall not exceed ten per centum(10%) of the total issued and paid-up share capital of the Company;

(b) the maximum funds to be allocated by the Company for the Proposed Share Buy-Back shall notexceed the total sum of retained profits and share premium account of the Company for thefinancial year ended 31 December 2011; and

(c) such authority shall commence upon passing of this resolution and continue to be in force untilthe conclusion of the next Annual General Meeting (“AGM”) of the Company or upon the expirationof the period within which the next AGM is required by law to be held unless revoked or varied byresolution passed by the shareholders in general meeting, whichever is the earlier, but so as not toprejudice the completion of a purchase made before the aforesaid expiry date.

(Resolution 1)

(Resolution 2)

(Resolution 3)

(Resolution 4)(Resolution 5)

(Resolution 6)

(cont’d)


AND thAt the Directors of the Company be and are hereby authorized to deal with the ordinary sharesbought back in their absolute discretion in all or any of the following manner:

(i) cancel all or part of the ordinary shares so purchased; and/or(ii) retain all or part of the ordinary shares so purchased as treasury shares; and/or(iii) distribute the treasury shares as dividend to the shareholders; and/or(iv) resell the treasury shares on Bursa Securities.

AND thAt the Directors of the Company be and are hereby authorized to take all such steps as arenecessary and expedient to implement and to give effect to the Proposed Share Buy-Back with full powersto assent to any conditions, modifications, variations or amendments (if any) as may be imposed by therelevant authorities from time to time or as the Directors may in their discretion deem necessary and todo all such acts and things as the Directors may deem fit and expedient in the best interest of theCompany.”

7) ordinary Resolution

Proposed renewal of shareholders’ mandate for Recurrent Related Party transactions of a Revenueor trading Nature (“Proposed Shareholders’ Mandate”)

“thAt the Company and its subsidiaries (“EPMB Group”) be and are hereby authorized to enter intorecurrent related party transactions from time to time involving the interest of Directors, MajorShareholders or persons connected with Directors and/or Major Shareholders of the EPMB Group(“Related Parties”) as stated in Section 2.4 of Part B of the Circular to Shareholders dated 5 June 2012subject to the followings:-

i) the transactions are of a revenue or trading nature which are necessary for day to day operationsof the Company and its subsidiaries, carried out in the ordinary course of business on normalcommercial terms which are not more favourable to the Related Parties than those generallyavailable to the public and are not to the detriment of the minority shareholders.

ii) disclosure is made in the annual report of the aggregate value of transactions conducted duringthe financial year pursuant to the Proposed Shareholders’ Mandate.

AND thAt such authority shall continue to be in force until:-

(a) the conclusion of the next Annual General Meeting (“AGM”) of the Company at which time the saidauthority will lapse unless by a resolution passed at a general meeting of the Company, theauthority is renewed;

(b) the expiration of the period within which the next AGM is required to be held pursuant to Section143(1) of the Companies Act, 1965 (the “Act”) (but shall not extend to such extension as may beallowed pursuant to Section 143(2) of the Act); or

(c) revoked or varied by resolution passed by the shareholders in general meeting;

whichever is the earlier.

AND thAt the Directors of the Company be and are hereby authorized to complete and take all suchsteps and do all acts and things in such manner as they may deem fit or expedient or necessary to giveeffect to the Proposed Shareholders’ Mandate.”

(Resolution 7)

(Resolution 8)

(cont’d)


(cont’d)

To consider and, if thought fit, to pass the following resolution as Special Resolution:

8) Special Resolution

Proposed Amendments to the Articles of Association of the Company (“Proposed Amendments”)

“that the amendments to the Articles of Association of the Company as set out in Appendix II of theCircular to Shareholders dated 5 June 2012 be and are hereby approved.”

9) To transact any other business for which due notice shall have been given.

NotICE oF DIvIDEND ENtItlEMENt AND PAyMENt

NotICE IS hEREBy GIvEN thAt a final tax exempt dividend of 2 sen per share for the financial year ended 31 December 2011, if approved by the shareholders at the 16th Annual General Meeting, will be paid on 17 July 2012 to the Depositors registered in the Record of Depositors at the close of business on 4 July 2012.

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

a) Shares transferred into the Depositor’s securities account before 4.00 p.m. on 4 July 2012 in respect ofordinary transfers.

b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules ofBursa Malaysia Securities Berhad.

By Order of the Board

tay li liSecretary

Selangor5 June 2012

(Resolution 9)


Notes:

1. A member entitled to attend and vote at the meeting shall be entitled to appoint any person as his proxy to attend and vote in his stead.Where a member appoints two (2) or more proxies to attend the same meeting, a member shall specify the proportions of his shareholdingsto be represented by each proxy.

2. Where a member is an exempt authorized nominee under the Central Depositories Act, there is no limit to the number of proxies which theexempt authorized nominee may appoint in respect of each omnibus account it holds.

3. The instrument appointing a proxy, in the case of an individual, shall be signed by the appointer or his attorney duly authorized in writing,and in the case of a corporation, shall be either given under the corporation’s seal or under the hand of an officer or attorney of the corporationduly authorized.

4. The instrument appointing a proxy or proxies must be deposited at the Company’s Registered Office at No. 8 & 10, Jalan Jurutera U1/23,Seksyen U1, Kawasan Perindustrian Hicom Glenmarie, 40150 Shah Alam, Selangor Darul Ehsan not less than 48 hours before the time set forholding the Meeting or at any adjournment thereof.

5. Only members whose names appear in the Record of Depositors as at 25 June 2012 will be entitled to attend and vote at the meeting.

6. Explanatory notes on Special Business:-

i) Proposed Share Buy-Back and Proposed Shareholders’ Mandate

For Ordinary Resolutions 7 and 8, further information on the Proposed Share Buy-Back and Proposed Shareholders’ Mandateare set out in the Statement/Circular to Shareholders dated 5 June 2012 despatched together with this Annual Report.

ii) Proposed Amendments

Special Resolution 9, if passed, will render the Articles of Association of the Company to be aligned with the Main Market ListingRequirements of Bursa Malaysia Securities Berhad.

(cont’d)


1. The Directors standing for re-election at the 16th Annual General Meeting of the Company are Dato’ Seri Ismail Bin Shahudin and Dato’ Ikmal Hijaz Bin Hashim. Further details of these Directors are set out in Directors’ Profile and Analysis of Shareholdings - Directors’ Shareholdings.

2. There were four (4) Directors’ meetings held during the financial year ended 31 December 2011. Details of attendance of theDirectors are set out in the Statement on Corporate Governance of this Annual Report.

3. The Sixteenth (16th) Annual General Meeting of the Company will be held at Topas Room, The Saujana Kuala Lumpur, SaujanaResort, Jalan Lapangan Terbang SAAS, 40150 Shah Alam, Selangor Darul Ehsan on Friday, 29 June 2012 at 10.00 a.m.

I/We(FULL NAME IN BLOCK AND I.C.NO./COMPANY NO.)

of(ADDRESS)

being a member/members of EP MANUFACTURING BHD hereby appoint

(FULL NAME IN BLOCK AND I.C.NO)

of(ADDRESS)

or failing whom,(FULL NAME IN BLOCK AND I.C.NO)

of(ADDRESS)

as my/our proxy to vote for me/us and on my/our behalf at the Sixteenth (16th) Annual General Meeting of the Company to be held atTopas Room, The Saujana Kuala Lumpur, Saujana Resort, Jalan Lapangan Terbang SAAS, 40150 Shah Alam, Selangor Darul Ehsan on Friday,29 June 2012 at 10.00 a.m. or at any adjournment thereof as indicated below:

RESolutIoN

For Against1 To receive Audited Financial Statements for the year ended 31 December 2011 and the

Reports thereon

2 Approval of Directors’ fees

3 To approve the payment of final dividend

4 Re-election of Dato’ Seri Ismail Bin Shahudin

5 Re-election of Dato’ Ikmal Hijaz Bin Hashim

6 Re-appointment of Auditors

7 Renewal of Authority for Share Buy-Back

8 Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions

9 Proposed Amendments to Articles of Association

(Please indicate with an “X” in the spaces provided how you wish your vote to be cast. If no instruction as to voting is given, the proxy willvote or abstain from voting at his/her discretion.)

Dated this day of 2012Signature/ Common Seal of Shareholder(s)

Notes:1. A member entitled to attend and vote at the meeting shall be entitled to appoint any person as his proxy to attend and vote in his stead. Where a member appoints two (2) or more

proxies to attend the same meeting, a member shall specify the proportions of his shareholdings to be represented by each proxy.

2. Where a member is an exempt authorized nominee under the Central Depositories Act, there is no limit to the number of proxies which the exempt authorized nominee may appointin respect of each omnibus account it holds.

3. The instrument appointing a proxy, in the case of an individual, shall be signed by the appointer or his attorney duly authorized in writing, and in the case of a corporation, shall beeither given under the corporation’s seal or under the hand of an officer or attorney of the corporation duly authorized.

4. The instrument appointing a proxy or proxies must be deposited at the Company’s Registered Office at No. 8 & 10, Jalan Jurutera U1/23, Seksyen U1, Kawasan Perindustrian HicomGlenmarie, 40150 Shah Alam, Selangor Darul Ehsan not less than 48 hours before the time set for holding the Meeting or at any adjournment thereof.

5. Only members whose names appear in the Record of Depositors as at 25 June 2012 will be entitled to attend and vote at the meeting.

EP MANuFACtuRING BhD (390116-T) (Incorporated in Malaysia) No of Shares held

The Company Secretary

EP MANuFACtuRING BhD 390116-T

No 8 & 10, Jalan Jurutera U1/23, Seksyen U1

Kawasan Perindustrian Hicom Glenmarie

40150 Shah Alam, Selangor Darul Ehsan

STAMP

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