hong kong/china - malaysiastock.biz filegrand-flo solution berhad ofﬁce: malaysia head office no...

Grand-Flo Solution Berhad Office:

MALAYSIAHEAD OFFICENO 3-5, BLOCK D2JALAN PJU 1/39DATARAN PRIMA47301 PETALING JAYASELANGOR MALAYSIAT: 603 7880 2222 F: 603 7880 3913www.grand-flo.com

KUALA LUMPUR OFFICEL1-1, WISMA EHSAN BINA3, JALAN KUCHAI MAJU 12KUCHAI ENTREPRENEURS PARK58200 KUALA LUMPUR, MALAYSIAT: 603 7980 8580 F: 603 7980 8790EMAIL: [email protected]

PENANG OFFICENO. G-9-2 & 3, LORONG BAYAN INDAH 1BAY AVENUE, QUEENSBAY11900 SUNGAI NIBONGPENANG, MALAYSIAT: 604 6456 991 F: 604 6456 993EMAIL: [email protected]

JOHOR OFFICE57-01, JALAN HARMONIUM 33/1TAMAN DESA TEBRAU81100 JOHOR BAHRU, MALAYSIAT: 607 3511 972 F: 607 3526 125EMAIL: [email protected]

MALACCA OFFICENO. 11-1, JALAN BU5TAMAN BACANG UTAMABACANG 75350MELAKA, MALAYSIAT: 606 2817 806 F: 606 2817 827EMAIL: [email protected]

SEREMBAN OFFICENO. 219 1ST FLOOR, JALAN S2 B8UPTOWN AVENUE, SEREMBAN 270300 SEREMBAN, NEGERI SEMBILANMALAYSIAT: 606 601 7221 F: 606 601 1083EMAIL: [email protected]

HONG KONG/CHINACL SOLUTIONS LIMITEDUNIT 4, G/FPO LUNG CENTRE11 WANG CHIU ROADKOWLOON BAYHONG KONGT: 852 2989 0300 F: 852 2754 3038EMAIL: [email protected]

GUANGZHOU CL SOLUTIONS LIMITEDROOM 3811, JIANGWAN BUSINESS CENTERNO 298 YANJIANG ZHONG ROAD GUANGZHOU510230 PRCT: 8620 8386 3338 F: 8620 8387 3355EMAIL: [email protected]

SINGAPORE180 PAYA LEBAR ROAD #10-01 YI GUANG BUILDING40932 SINGAPORET: 65 6593 3535 F: 65 6593 3534EMAIL: [email protected]

THAILANDSIMAT TECHNOLOGIES PUBLIC COMPANY LIMITEDNO. 123 CHALONGKRUNG 31 LADKRABANGINDUSTRIAL ESTATECHALONGKRUNG RD., LAMPLATIEWLADKRABANG BANGKOK 10520THAILANDT: 662 326 0999 F: 662 326 1013EMAIL: [email protected]

VIETNAMSINO CORPORATIONHIGH RICH TRADING & SERVICES CO.LTD27 DANG TAT STREETDISTRICT 1HO CHI MINHVIETNAMT: 848 848 2620 F: 848 404 6724EMAIL: [email protected]

Table of ConTenTs

01 Corporate Information02 Corporate Profile03 Corporate Structure04 Financial Highlights06 Message from the Chairman09 Management Review12 Calendar of Events13 Board of Directors14 Directors’ Profile17 Statement on Corporate Governance25 Audit Committee Report28 Statement on Risk Management and

Internal Control30 Other Compliance Information32 Statement of Directors’ Responsibility33 Financial Contents104 Analysis of Shareholdings107 Analysis of Warrantholdings109 List of Properties110 Notice of AGM Proxy Form

Cover raTionale

The years have seen Grand-Flo taking steps to expand the depth and breadth of our business.

Today, equipped with our comprehensive productrange and wide geographical spread, our focusis to gear up for the next phase to become the

preferred provider of tracking solutions in the region.

CORE VALUES

TeamCooperation

Loyalty

PositiveAttitude

Innovation

Commitment

Reliability

Integrity

CustomerSatisfactionVISION

To enhance global businesses with solution, innovation and

technology

MISSIONTo be the partner of choice and

trusted adviser in Enterprise Data Collection and Collation System

Grand-Flo Solution Berhad O�ce:

MALAYSIAHEAD OFFICENO 3-5, BLOCK D2JALAN PJU 1/39DATARAN PRIMA47301 PETALING JAYASELANGOR MALAYSIAT: 603 7880 2222 F: 603 7880 3913www.grand-�o.com

KUALA LUMPUR OFFICEL1-1, WISMA EHSAN BINA3, JALAN KUCHAI MAJU 12KUCHAI ENTREPRENEURS PARK58200 KUALA LUMPUR, MALAYSIAT: 603 7980 8580 F: 603 7980 8790EMAIL: sales@grand-�o.com

PENANG OFFICENO. G-9-2 & 3, LORONG BAYAN INDAH 1BAY AVENUE, QUEENSBAY11900 SUNGAI NIBONGPENANG, MALAYSIAT: 604 6456 991 F: 604 6456 993EMAIL: sales@grand-�o.com

JOHOR OFFICE57-01, JALAN HARMONIUM 33/1TAMAN DESA TEBRAU81100 JOHOR BAHRU, MALAYSIAT: 607 3511 972 F: 607 3526 125EMAIL: sales@grand-�o.com

MALACCA OFFICENO. 11-1, JALAN BU5TAMAN BACANG UTAMABACANG 75350MELAKA, MALAYSIAT: 606 2817 806 F: 606 2817 827EMAIL: sales@grand-�o.com

SEREMBAN OFFICENO. 219 [1ST FLOOR], JALAN S2 B8UPTOWN AVENUE, SEREMBAN 270300 SEREMBAN, NEGERI SEMBILANMALAYSIAT: 606 601 7221 F: 606 601 1083EMAIL: sales@grand-�o.com



SINGAPORE180 PAYA LEBAR ROAD #10-01 YI GUANG BUILDING40932 SINGAPORET: 65 6593 3535 F: 65 6593 3534EMAIL: adminsg@grand-�o.com



A N N U A L R E P O R T 2 0 1 2

Corporate information 1

Board of DirectorsTan Sri Datuk Adzmi bin Abdul Wahab Independent Non-Executive ChairmanTan Bak Hong Group Managing Director / Group PresidentCheng Ping Liong Executive DirectorYap Li Li Executive DirectorWan Kok Weng Executive DirectorTan Chuan Hock Non-Independent Non-Executive DirectorCheong Kee Yoong Senior Independent Non-Executive DirectorDato' Loo Yoong Haw @ Vanchai Virochpokha Independent Non-Executive DirectorYu Chee Sing Independent Non-Executive DirectorYek Deiw See Independent Non-Executive DirectorChan Pik Khew Alternate Director to Wan Kok Weng

audit CommitteeCheong Kee Yoong (Chairman)Yu Chee SingTan Chuan HockYek Deiw See

nomination CommitteeCheong Kee Yoong (Chairman)Tan Chuan HockYek Deiw See

remuneration CommitteeTan Chuan Hock (Chairman)Yek Deiw SeeYu Chee Sing

Company SecretariesTea Sor Hua (MACS 01324)Yong Yen Ling (MAICSA 7044771)

auditorsSJ Grant Thornton(Member of Grant Thornton International Ltd) Chartered AccountantsLevel 11, Sheraton Imperial CourtJalan Sultan Ismail50250 Kuala Lumpur, MalaysiaTel : 603-2692 4022Fax : 603-2691 5229

Share registrarTricor Investor Services Sdn. Bhd.Level 17, The Gardens North TowerMid Valley City, Lingkaran Syed Putra59200 Kuala Lumpur, MalaysiaTel : 603-2264 3883Fax : 603-2282 1886

principal BankersUnited Overseas Bank (Malaysia) BerhadPublic Bank BerhadPublic Bank (Hong Kong) LimitedMalayan Banking BerhadAlliance Bank Berhad

registered officeThird Floor No.79 (Room A)Jalan SS 21/60Damansara Utama47400 Petaling JayaSelangor Darul Ehsan, MalaysiaTel : 603-7728 4778Fax : 603-7722 3668

Business office3-5, Block D2, Jalan PJU 1/39Dataran Prima, 47301 Petaling JayaSelangor Darul Ehsan, MalaysiaTel : 603-7880 2222Fax : 603-7880 3913Email : [email protected] Website : www.grand-flo.com

Stock information Main Market of Bursa Malaysia Securities Berhad

Bursa Malaysia : GRANFLO / 0056Bloomberg Code : GFLO MKReuters Code : GRFL.KL

GRAND-FLO SOLUTION BERHAD

For over a decade, Grand-Flo Solution Berhad (“Grand-Flo”) has been establishing successful data management and collaboration solutions for corporations ranging from Fast Moving Consumer Goods (FMCG) businesses to financial institutions, education organisations and even multinational establishments. We have been empowering businesses to manage and collaborate their data efficiently no matter where its origins or capacity frequencies.

Grand-Flo specialises in providing comprehensive Enterprise Data Collection and Collation System (EDCSS), or tracking solutions, to businesses across all industrial sectors. Our One Stop EDCCS Solution Centre takes care of all your retail data tracking and management needs, ranging from hardware, middleware, software to media and consumables such as barcode ribbons and labels.

Our home-grown ManageSuite application solution is also an emerging product in the market. A comprehensive range of precision tools, ManageSuite has proven to increase efficiency, harvest market intelligence and facilitate sales force mobility while minimizing potential errors to almost zero. Complemented with any barcode products, ManageSuite enable users to manage and track assets in warehouses, retail outlets and office buildings.

Corporate profile2

ManageSuite

ManageLinkManageSales

ManageWare

ManageAssetManageLine

ManageSync

Getting your data to your backend server for processing and reporting has never been simpler. This tool allows you to link to the data you need in real-time or in scheduled format and extract the data from our products to your backend application.

A trend-setting Field Force Management system that allows mobile workers to perform their route sales, direct store deliveries as well as market and distribution checks e�ciently.

Your ultimate solution for Raw Materials and Finished Goods warehouse management. It o�ers the monitoring capabilities and traceability you need for ultimate delivery e�ciency and customer satisfaction.

This tool ensures awless data synchronisation between a mobile terminal and its server.The buit-in compression and encryption capabilities ensure rapid and secure data transfer.

You will never lose track of your assets, even when they are moved or rotated regularly. Tracking the whereabouts of your assets and identifying their condition is easy with this Asset Tracking system.

Operate your production oor with the support of a system that allows you to plan, execute and capture performance as well as assure exceptional traceability.

CHINA

HONG KONG

VIETNAM

PHILIPPINES

THAILAND

MALAYSIA

INDONESIA SINGAPORE

To date, the Group has established a strong regional network, with direct presence in Malaysia, Thailand, Singapore, Vietnam, Hong Kong, and China, and via value-added resellers in Indonesia and the Philippines.

In a reflection of the Group’s development over the years,Grand-Flo successfully transferred its listing status to the Main Market of Bursa Malaysia Securities Berhad on 26 September 2012, from the ACE Market previously.

With ManageSuite, many businesses have experienced transformation in their operations that leads to unlocking the full potential of their business growth.

A N N U A L R E P O R T 2 0 1 2

** Simat Soft Co Ltd has been granted certain privileges, including exemption from corporate tax for 8 years from date of first income, exemption from import duty for imports of machinery including computers and notebooks, and employment of foreigners as skilled technicians or experts.

Corporate StruCture 3

E-Tech IT Frontline Sdn Bhd60%

Simat TechnologiesPublic CompanyLimited

20.86%

Simat So� Co Ltd**100%

E- TechDistribution Co. Ltd

Vietsun Technologies& Investment JointStock Company

50%

CL Solutions Ltd.100% Grand-Flo ElectronicSystem Sdn Bhd100%

Grand-Flo SpritvestSdn Bhd100%

Grand-Flo DataCentrix Sdn Bhd(formerly known asData Centrix Sdn Bhd)

100%

Victor Group Ltd100%

Guangzhou CLSolutions Ltd 100%

CL Solutions(China) Ltd 100%

Grand-Flo CapitalSdn Bhd(formerly known asGrand-Flo RFID Sdn Bhd)

100%

Grand-Flo Systems (S)Pte Ltd100%

Labels NetworkSdn Bhd100%

Kopacklabels PressSdn Bhd100%

Kopacklabels (PG)Sdn Bhd80%

Kopacklabels (M)Sdn Bhd100%

Labels4U AutomationSdn Bhd 100%

Simat Label Co Ltd

High Rich Trading& Service Corporation 40%

Sino Trading & ServiceCorporation 40%

E- Tech IT Sdn Bhd60%85.88%

14.12%100%

Majority Stake

Minority Stake

Malaysia

China

�ailand

Singapore

Vietnam

EDCCS: Enterprise Data Collection & Collation System LABELS


finanCial highlightS4

revenue (rm’000) profit Before tax (rm’000)

36,850

46,534

68,647

74,676

87,691

2008

2009

2010

2011

2012

710

5,013

8,535

10,060

8,758

2008

2009

2010

2011

2012

net profit/loss (rm’000) Shareholders’ equity (rm’000)

(349)

3,186

7,392

9,391

7,831

2008

2009

2010

2011

2012

30,490

38,122

49,713

63,617

74,167

2008

2009

2010

2011

2012

total assets (rm’000) gross Dividend per Share (Sen)*

52,568

67,818

75,755

89,181

102,666

2008

2009

2010

2011

2012

0.5

0.6

1.0^

2010

2011

2012

* Adjusted for corporate exercises undertaken^ Proposed dividend subject to shareholders’ approval

A N N U A L R E P O R T 2 0 1 2

finanCial highlightS (cont’d) 5

Summarized group Comprehensive income Year ended 31 December (rm'000) 2008 2009 2010 2011 2012

Revenue 36,850 46,534 68,647 74,676 87,692EBITDA^ 2,296 6,179 9,637 11,250 9,444Operating Profit 769 4,943 7,982 9,125 6,911Profit Before Tax 710 5,013 8,535 10,060 8,758Profit After Tax 104 4,238 7,695 9,401 7,846Net Profit (349) 3,186 7,392 9,391 7,831^ Earnings Before Interest, Tax, Depreciation and Amortisation

Summarized group financial position as at 31 December (rm'000) 2008 2009 2010 2011 2012

Non-Current Assets 33,287 42,406 46,103 53,204 63,447Current Assets 19,281 25,412 29,652 35,977 39,219

Total Assets 52,568 67,818 75,755 89,181 102,666

Non-Current liabilities 5,169 4,748 4,823 5,194 6,028Current Liabilities 15,067 22,054 20,937 20,078 22,164

Total Liabilities 20,236 26,802 25,760 25,272 28,192

Shareholders' Equity 30,490 38,122 49,713 63,617 74,167Minority Interest 1,842 2,894 282 292 307

Total Equity and Liabilities 52,568 67,818 75,755 89,181 102,666

financial analysis Year ended 31 December 2008 2009 2010 2011 2012

Turnover Growth -43.0% 26.3% 47.5% 8.8% 17.4%Operating Profit Growth -90.5% >+100% 61.5% 14.3% (24.3%)Profit Before Tax Growth -92.0% >+100% 70.3% 17.9% (12.9%)Net Profit Growth >-100% >+100% >+100 27.0% (16.6%)Operating Profit Margin 2.1% 10.6% 11.6% 12.2% 7.9%Profit Before Tax Margin 1.9% 10.8% 12.4% 13.5% 10.0%

Net gearing (x) 0.29 0.24 0.20 0.11 0.08Cash and Cash Equivalents (RM'000) 2,168 4,314 4,959 5,150 6,256Return on Average Shareholders’ Equity (ROE) n/m 9.3% 16.8% 16.5% 11.3%Return on Average Total Assets (ROA) n/m 5.3% 10.3% 11.4% 8.2%

Share Capital Changes and Dilution

Date of allotment Capital exercise

Change in number of

Shares

total number of Shares of

rm0.10 each

11 Jan 2007 Employees’ Share Option Scheme 300,000 122,143,3338 Feb 2007 Private Placement 2,039,200 124,182,5338 May 2007 Employees’ Share Option Scheme 30,000 124,212,5333 Jan 2008 Employees’ Share Option Scheme 244,000 124,456,53328 Feb 2009 Issuance of new shares pursuant to the acquisition

of CL Solutions (China) Limited11,398,176 135,854,709

31 Mar 2010 Issuance of new shares pursuant to the acquisition of Labels Network Sdn Bhd

9,230,769 145,085,478

14 Jun 2011 Private Placement 14,367,347 159,452,82518 Jun 2012 Conversion of warrants 2010/2015 to ordinary

shares330,100 159,782,925

16 Jul 2012 1-for-1 Bonus Issue 159,782,925 319,565,850


6

Dear Shareholders,

On behalf of the Board of Directors of Grand-Flo Solution Berhad (Grand-Flo), I hereby present to you the 2012 Annual Report and the audited financial results for the financial year ended 31 December 2012 (FY2012).

The World Bank Report noted slower pace of global gross domestic product (GDP) growth in 2012, declining to 2.3% from 2.7% in 2011. While citing the Eurozone debt crisis and the delayed growth in the US as the main factors, it was also noted that developing countries posted among its slowest growth rates in recent years.

tan Sri Datuk aDzmi Bin aBDul WahaBChairman

A N N U A L R E P O R T 2 0 1 2

Amidst this, however, the Malaysian economy expanded its GDP by 5.6% in 2012 compared to 5.1% in the previous year, boosted by domestic demand and private sector investments. Enterprise spending in the information and communications technology (ICT) sector was also on the uptrend, exceeding RM9 billion in the year under review.

Notwithstanding the global economic uncertainty, Grand-Flo was able to sustain our operations by implementing the appropriate strategies in 2012. These measures included focusing on our maintenance services and upgrading our product mix to better serve our clientele.

I am also proud to announce that the Group attained a new milestone in the year under review, by transferring its listing status to the Main Market of Bursa Malaysia Securities Berhad (Bursa Malaysia) from the ACE Market on 26 September 2012. This not only marked the coming of age for the Group, but also raises our profile as we enter into higher gear in the future.

financial performance

In spite of the challenging outlook, group revenue continued its uptrend by growing 17.4% to RM87.7 million in FY2012, compared to RM74.7 million in the preceding year. This positive contribution was mainly driven by higher sales volume and maintenance services in the Enterprise Data Collection and Collation System (“EDCCS”) or tracking solutions segment in Malaysia.

The EDCCS segment contributed 75.7% or RM66.4million of the total FY2012 group revenue, while the labels segment made up the balance 24.3% or RM21.3 million.

However, the keener competition in both the domestic and regional markets led to a less-favourable sales mix in FY2012 as the Group strived to retain our clientele and market share. The Group also incurred one-off expenses relating to the Main Market transfer exercise.

These factors, therefore, resulted in group profit before tax declining 12.9% to RM8.8 million from RM10.1 million previously. Following this, group net profit reduced to RM7.8 million in FY2012, versus RM9.4 million in FY2011. Basic earnings per share decreased in tandem to 2.45 sen in FY2012 from 3.05 sen previously.

Nonetheless, the Group’s balance sheet remained healthy, with sustained total borrowings of RM13.9million and cash and fixed deposits stood at RM7.0 million. With shareholders’ equity of RM74.2 million, the Group’s net gearing improved to 0.09 as at end-2012 from 0.11 in the previous year end.

Dividend

The Board has proposed a first and final tax exempt dividend of 1 sen per share for shareholders’ approval at the upcoming Annual General Meeting (AGM). If approved, this will translate into a dividend payout of RM3.2 million representing 40.5% of FY2012 net profits. In so doing, the

Group has exceeded our dividend policy of distributing a minimum of 20% of net profit as dividends. We would like to take this opportunity to sincerely thank our shareholders for their constant support to the Group.

Corporate Developments

Completion of 1-for-1 Bonus Issue

On 17 July 2012, Grand-Flo completed the 1-for-1 Bonus Issue, which entailed the listing and quotation of 159.8 million Bonus shares and 67.6 million additional warrants on the ACE Market of Bursa Malaysia. These Bonus Shares and additional warrants were subsequently transferred to the Main Market of Bursa Malaysia on 26 September 2012.

Acquisition of 40% stake in High Rich Trading & Service Corporation (High Rich)

On 14 September 2012, Grand-Flo announced that its wholly-owned subsidiary Labels Network Sdn Bhd (Labels Network) acquired 42,800 ordinary shares of VND10,000 each representing 40% stake in High Rich, from Simat Label Company Limited. The purchase acquisition of USD150,000 (approximately RM461,985) was financed by internally-generated funds.

High Rich, incorporated in Vietnam, is principally engaged in the conversion of adhesive labels in Vietnam.

We believe that the acquisition will enable the enlarged Group to leverage on the combined experience to provide higher value-added solutions to our customers, in addition to creating tremendous cross-marketing opportunities. It is envisioned that the acquisition of High Rich will bring synergistic growth to the Group in the long-term. Award of Internet Service License to Simat Technologies Public Company Limited (Simat), the associate company of Grand-Flo by the National Broadcasting and Telecommunications Commission of Thailand (NBTC)

Grand-Flo had announced, on 27 February 2013, that Simat had been awarded the internet service (Type 3) license by NBTC of Thailand for a 10 year-term from December 2012 to 2022. This followed Simat’s completion of investment and installation of fibre optic network project in Nakornatchasima and Chiengmai provinces.

Further to that, Simat signed a Memorandum of Understanding (MOU) with Telecommunication of Thailand Corporation Public Company Limited (TOT), a well-established and popular telecommunication company, to establish a joint marketing partnership to provide high-speed internet services using the completed fibre network infrastructure in Nakornratchasima and Chiengmai provinces. The official agreement is expected to be sealed within ninety days from the date of MOU.

Further details of this venture are furnished in the Management Review in this Annual Report.

meSSage from the Chairman 7


Private placement of up to 16.0 million new ordinary shares of Simat

On 27 February 2013, Grand-Flo’s Thailand associate company Simat proposed a private placement of up to 16.0 million new ordinary shares of THB 1.00 each to various investors at a pre-determined unit price of THB 7.93 each. Proceeds from the private placement amounting to Thai Baht 126.9 million were allocated for working capital.

The private placement was deemed completed on 14 March 2013 with the listing and quotation of the 16.0 million new ordinary shares on the Stock Exchange of Thailand.

Disposal of 19,100,000 ordinary shares of THB1.00 each in Simat or approximately 9.59% equity interest in Simat (Share disposal)

Grand-Flo had on 9 April 2013, 10 April 2013, 2 May 2013 and 3 May 2013 disposed of 19.1 million ordinary shares of THB1.00 each in Simat representing approximately 9.59% equity interest in Simat via off-market transactions at THB8.00 per share for a total cash consideration of THB152.8 million (equivalent to RM16.0 million).

Upon Simat’s receipt of the internet service license, Simat was notified of the prohibition of business or management control by a foreign-based company as part of the terms and conditions of the internet service license.

Thus, the share disposal was undertaken to meet the aforesaid terms and conditions. At the same time, the disposal also provides an avenue for the Company to dispose of and unlock the value of its investment in Simat.

The exercise was completed on 3 May 2013 with the receipt of the entire consideration of RM16.0 million. Of this, RM6.0 million would be allocated for working capital and the balance RM10.0 million for investment in identified assets and/or new businesses.

With this, Grand-Flo’s shareholdings in Simat reduced to 41.5 million shares representing approximately 20.9% equity interest in Simat.

Proposed change of name

On 24 April 2013, the Board announced its proposal to change the name of the Company to “Grand-Flo Berhad”.

This proposed new name has been approved by the Companies Commission of Malaysia (CCM) and is subject to shareholders’ approval at the forthcoming AGM. If approved, the change of name will be effective from the date of issuance of the Certificate of Incorporation on Change of Name by CCM.

Business outlook

While the risks of the Eurozone crisis and US slowdown are expected to dissipate in 2013, the World Bank estimates only modest global recovery of 2.4% in the current financial year.

Despite this, however, South East Asia is widely favoured to remain resilient to post strong growth rates on the back of growing domestic demand. Specifically, the ICT sector is estimated to see higher spending of about 9% per year until 2015, even as Asian businesses and governments continue to scale up their operations and boost operational efficiencies.

Against this backdrop, Grand-Flo is optimistic of its prospects going into 2013, given our wide range of solutions, strong regional network, and strong reputation as an integrated tracking solutions provider.

Corporate Social responsibility (“CSr”)

Grand-Flo has continued to ensure our business goals and objectives are aligned with the values of our corporate social responsibility.

Our CSR efforts promote a vision of accountability to a wide range of stakeholders, including customers, suppliers, investors, as well as employees and the larger community.

In addition to donations in cash and kind to various charitable causes in the year under review, the Group contributed to the construction of a School of Dharma in Kuala Lumpur, a project by a charitable society. The school – aimed at serving the community by uplifting spiritual and human values – is targeted for completion by June 2013.

Corporate governance

Grand-Flo is dedicated towards promoting and inculcating proper corporate governance to uphold the interests of our stakeholders. We endeavour to reach high levels of transparency and effectiveness of our business activities to achieve long-term sustainability in our operations.

appreciation

I would like to extend my utmost appreciation to the Board of Directors and to the whole management team who have contributed tremendously to the Group.

On behalf of the Board of Directors, I would also like to express my deepest gratitude to our customers, valued shareholders, stakeholders, and business partners for the continuous support. We hope to count on our continued collaboration as we gear up for the next phase of this journey.

tan Sri Datuk aDzmi Bin aBDul WahaBIndependent Non-Executive Chairman

meSSage from the Chairman (cont’d)8

A N N U A L R E P O R T 2 0 1 2

9

even as the outlook in the South east asian region was largely affected by the ongoing economic uncertainty, i am pleased that grand-flo managed to hold its own to reinforce our position in the tracking solutions industry in the year under review.

tan Bak hongGroup President / Group Managing Director


Thailand & Vietnam

Our Thailand associate - Simat Technologies Public Co. Ltd (Simat) - successfully rode the rebound in economic development in the country, witnessing higher demand from MNCs in both retail and FMCG sectors, including from existing customers of Tesco, 7-11, Swensen’s, and DKSH.

This was aptly demonstrated in Simat’s revenue and net profit rising to THB 2,223.0 million and THB 96.9 million respectively in FY2012. By comparison, FY2011 posted revenue and net profit of THB 1,190.9 million and THB 38.7 milion respectively.

Simat also saw significant advancement in its fibre-optics venture in the country, having completed the installation of fibre-optics infrastructure in two provinces in Thailand – Nakornratchasima and Chiengmai – in the year under review.

Meanwhile, our Vietnam presence, represented by Simat’s associate companies – Sino Company Limited and High Rich – continued to ably support the Group’s tracking solutions projects as part of the MNCs regional rollout in the country.

research and Development (r&D)

Grand-Flo maintained its emphasis on innovation and modern development, evidenced by increased investment of RM2.0 million in R&D activities in FY2012, versus RM1.1 million in the previous year.

In addition to software upgrades, the Group also developed a solution to enable small and medium enterprises (SME) take the first steps to adopt tracking solutions for better scalability and efficiency in their operations. We believe that addressing the SME market is a step towards enhancing their competitive edge.

We are confident that our extensive R&D efforts will strengthen our position in the long run.

Domestic market

Commanding the lion’s share of group revenue contribution, the local market continued to be a positive catalyst for the Group in FY2012. I am glad to report that revenue from the Malaysia operations rose 16.6% to RM76.4 million in FY2012 versus RM65.5 million in the previous year ended 31 December 2011 (FY2011).

Indeed, this double-digit growth was mainly due to our ability to continuously support the expansion plans of our Multinational Corporation (MNC) customers from the retail, logistics, and Fast Moving Consumer Goods (FMCG) sectors.

Not only did EDCCS segment sales grow 33.3% to RM66.4 million in FY2012 versus RM49.8 million in FY2011, the year under review also saw higher billings from maintenance services amounting to RM6.8 million in FY2012 compared to RM4.7 million previously. This latter development is encouraging as it effectively strengthens our recurring income stream and reinforces our position as an end-to-end solution provider.

On the other hand, revenue from the local labels segment declined 14.4% to RM21.3 million in FY2012 compared to RM24.9 million in FY2011. This was in line with the general slowdown in orders from existing customers, particularly in the electrical & electronics (E&E) and semiconductor industries which were affected by the anaemic economic activity globally.

The Group recognizes the importance of continuous innovation in order to develop the labels segment further to support the EDCCS segment. These measures are elaborated in the subsequent pages.

regional market

Hong Kong & China

Through our subsidiary CL Solutions (China) Limited (CL Solutions), the Group continued to make inroads into the Hong Kong and China market, by retaining our customer base in Government-related and logistics sectors. Additionally, we also passed the proof-of-concept stage with a major Food & Beverage (F&B) brand, which bodes well for our future prospects in the region.

These positive developments culminated in the 23.1% increase in revenue from Hong Kong and China, from RM9.1 million in FY2011 to RM11.3 million in FY2012, accounting for 12.9% of total group revenue.

The EDCSS segment continued to improve, with sales rising 32.2% to RM9.7 million in the year under review as compared to RM7.3 million in FY2011.

However - similar to Malaysia - the labels business in Hong Kong and China was impacted by a decline in labels procurement from semiconductors and E&E sectors. Revenue contributions from this segment decreased correspondingly to RM1.5 million in FY2012 from RM1.9 million in the previous year.

management revieW10

A N N U A L R E P O R T 2 0 1 2

Business Strategies

The National ICT Association of Malaysia (PIKOM) forecasts for the local ICT sector to chart about 10% compounded growth rate from 2013 to 2017, by when it would generate about RM95.0 billion revenue and contribute 15.0% to Malaysia’s total GDP.

With this vibrant market outlook, Grand-Flo is committed to undertaking several strategies in order to boost our competitiveness and tap into markets that present opportunities for the Group both locally and regionally.

The Group’s strategies in the various markets are detailed below:

Malaysia

Equipped with our strong position and track record in our home ground, the Group intends to continue playing to our core competencies to further extend our product and services offering, as well as our customer base.

In this respect, we intend to strengthen our EDCCS clientele in the private and public sectors, as well as enhance our recurring income stream through our maintenance contracts.

For our labels division, we aim to secure new customers for cleanroom labels, while increasing the capacity of our standard labels to take on larger orders in the future.

Also, since early 2013, we embarked on label production on Original Equipment Manufacturer (OEM) basis for the Indonesian division of a barcode technology MNC. This demonstrates to the quality of our labels and accords us the prospect of supplying labels to other branches in the region.

In further moving up the value chain, we also plan to produce in-mould labels by June 2013 to cater to Malaysia-based food & beverage (F&B) manufacturers. As these products are currently sourced from overseas, we believe that producing these higher-grade labels represents an import-replacement opportunity that would diversify our customer mix and enhance the overall margins of this segment.

Hong Kong and China

On the EDCCS front, our Hong Kong and China operations are poised to capture further growth, mainly by securing new clients and new projects in the existing industries, namely the logistics, retail and Government-related sectors. We believe that our efforts in previous years will work to the Group’s advantage in securing our position in these markets.

Our labels segment is also making effort in new product development to expand our product lines. To this end, we are exploring the production of Radio Frequency Identification (RFID) garment labels for Sankei, the textile division of Itochu Group with factories in China and Vietnam. We anticipate a favourable outcome to this new venture by the end of the year.

Thailand and Vietnam

Our Thailand operations, through Simat, will seek to continue reinforcing its strength in implementing end-to-end EDCCS projects for customers, especially amongst MNC and Government-related corporations.

At the same time, Simat endeavours to build a new recurring revenue stream via its high-speed internet business.

As the sole owner of the fibre-optic networks in Nakornatchasima and Chiengmai provinces in Thailand since February 2013, Simat signed an MOU with TOT - a popular Government-owned telecommunications service provider - to jointly market fibre-optics high speed broadband internet services in two provinces on a revenue-sharing basis.

We are pleased to update you that the rollout of the fibre-optic internet service in two provinces has been successful, thereby making Simat the first fibre-optic hi-speed internet provider in Thailand. At present, both parties are keen to explore the possibility of expanding the high-speed internet service to other provinces in Thailand.

We believe that this development supports Simat’s position as a formidable player in the ICT sector in Thailand.

In Vietnam, we plan to further raise our profile and capacity to serve a bigger clientele. This is crucial as many MNCs are establishing operations in the country. Our labels factory there – though small - is growing rather rapidly and is set to contribute more to the Group with direct shareholding.

All said, these business strategies create a strong foundation for the Group to enhance our operations and derive long-term value in a sustainable manner. Going forward, we look forward to a prosperous financial year ahead.

tan Bak hongGroup President / Group Managing Director

management revieW (cont’d) 11


CalenDar of eventS12

Event: 2012 Grand-Flo’s Customer Appreciation Day, PenangVenue: Deluxcious Restaurant 15 - 17a Jalan Sultan Ahmad Shah 10050 George Town Penang, MalaysiaDate: 9 November 2012, Friday [6.00pm - 11.00pm]

Kindly RSVP by 25 October 2012* Invitation is extended to maximum 3 person/company

JOIN US @ DELUXCIOUS ON 9 NOVEMBER 2012, FRIDAY 6.00 P.M.

Organized by

CIO Malaysia Summit 2012

7 November 2012

Ritz Carlton Hotel

Kuala Lumpur, Malaysia

THE CIO INITIATIVE:

Strategic Growth Innovation

Collaboration Agility

Venue: Fu-Rin [Japanese Restaurant] Holiday Inn Kuala Lumpur, Glenmarie 1 Jalan Usahawan U1/8, Seksyen U1 40250 Shah Alam, SelangorDate: 2 November 2012, Friday [6.00pm - 11.00pm]Kindly RSVP by 19 October 2012

EVENT Seminar on Mobility Solution in the Oil & Gas and Chemical Industries

DATE 5 April 2012VENUE Empire Hotel Subang, Selangor

EVENT Grand-Flo Solution Team Building 2013

DATE 26 & 27 April 2013VENUE My Gopeng Resort, Perak

EVENT Grand-Flo Solution Bhd & Intermec Product Seminar

DATE 13 July 2012VENUE Casa Del Rio, Melaka

EVENT Mobile Solution SeminarDATE 20 September 2012VENUE Sunway Hotel Seberang Jaya,

Penang

EVENT 2012 Grand-Flo’s Customer Appreciation Dinner

DATE 2 November 2012VENUE Holiday Inn Kuala Lumpur,

Glenmarie

EVENT CIO Malaysia Summit 2012DATE 7 November 2012VENUE Ritz Carlton, Kuala Lumpur,

Malayisa

EVENT 2012 Grand-Flo’s Customer Appreciation Dinner, Penang

DATE 9 November 2012VENUE Deluxcious Restaurant,

Georgetown, Penang

EVENT Bank Tech Asia 2012DATE 27 & 28 November 2012VENUE KL Convention Centre, Kuala

Lumpur

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A N N U A L R E P O R T 2 0 1 2

Seated (from left-to-right)Dato' Loo Yoong Haw @ Vanchai Virochpokha Independent Non-Executive DirectorCheng Ping Liong Executive DirectorTan Sri Datuk Adzmi bin Abdul Wahab Independent Non-Executive ChairmanTan Bak Hong Group Managing Director / Group PresidentWan Kok Weng Executive Director Standing (from left-to-right)Yu Chee Sing Independent Non-Executive DirectorYek Deiw See Independent Non-Executive DirectorYap Li Li Executive DirectorCheong Kee Yoong Senior Independent Non-Executive DirectorChan Pik Khew Alternate Director to Wan Kok WengTan Chuan Hock Non-Independent Non-Executive Director

BOARD OF DIRECTORS

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tan Sri Datuk aDzmi Bin aBDul WahaBIndependent Non-Executive Chairman

Tan Sri Datuk Adzmi bin Abdul Wahab, a Malaysian, aged 70, is the Independent Non-Executive Chairman of the Company and was appointed to the Board on 1 July 2010. Tan Sri Datuk Adzmi holds a Master in Business Administration from University of Southern California. He is the Chairman and Director of three (3) public listed companies, namely Magna Prima Berhad, Dataprep Holdings Berhad and Lebtech Berhad and some private companies involved in information technology, automotive, construction, property development and franchise businesses.

Tan Sri Datuk Adzmi was appointed as the longest serving Managing Director of Edaran Otomobil Nasional Berhad from November 1992 until May 2005. In 2003, he was conferred Malaysia CEO of the Year by American Express and Business Times and Most PR Savvy CEO by Institute of Public Relations Malaysia. He served in Proton Holdings Berhad from 1985 to 1992 and his last position there was a Director/Corporate General Manager, Administration and Finance Division. Prior to that, he was a Manager, Corporate Planning Division of HICOM Holdings Berhad from 1982 to 1985 and was involved in the development of heavy industries projects.

Tan Sri Datuk Adzmi served the Malaysian Administrative and Diplomatic Service in the following capacities from 1967 to 1982: Central Procurement and Contract Management in Ministry of Finance; Investment Promotion in Pahang Tenggara Development Authority, Public Enterprise Management in Implementation Coordination Unit (Prime Minister’s Department), and Regional Planning in Klang Valley Planning Secretariat (Prime Minister’s Department).

tan Bak hongGroup Managing Director / Group President

Tan Bak Hong, a Malaysian, aged 50, is the Group Managing Director/Group President of the Company and was appointed to the Board on 1 December 2003. Mr. Tan graduated with a Bachelor in Engineering (Mechanical) from the University of Malaya in 1988 and possesses more than 20 years of experience in the field of automation and tracking solutions business.

Upon graduation, Mr. Tan started his career as a Sales and Application Engineer with an engineering firm mainly involved in the sales of system design, installation and commissioning of industrial automation project. In 1989, he founded Grand-Flo Engineering Supply & Service Sdn Bhd (“GFESS”), which was principally involved in fluid power and motion control business and distribution of hydraulic and pneumatic industrial products.

Mr. Tan noted that business processes of various industries in Malaysia were heavily dependent upon manual data collection system which could not produce critical data on time and which are labourious and error prone to

operate. With Mr. Tan’s business knowledge in the area, Mr. Tan envisioned the promising potential for the EDCCS solutions business in Malaysia to increase efficiency of organisations. In summary, Mr. Tan recognised that there is a significant untapped potential for the automation of business processes of various industries in Malaysia. In this respect, Mr. Tan together with Mr. Tan Bak Leng, founded the integrated EDCCS solutions business in 1996 as part of the expansion of product line for GFESS. In view of the expansion of the integrated EDCCS solutions business, Mr. Tan and Mr. Tan Bak Leng incorporated Grand-Flo Electronic System Sdn Bhd. Mr. Tan believed that the Group should move forward and develop its own in-house proprietary solutions in the Auto-ID business in order to further enhance its earnings base, and hence, successfully developed and launched its first customised in-house EDCCS solution “Asset Tracking System” in 2001.

Mr. Tan is the key person responsible for the strategic planning and management of the Group. Mr. Tan currently sits on the board of several private limited companies and Simat Technologies Public Company Limited, a public company listed on the Stock Exchange of Thailand.

Cheng ping liongExecutive Director

Cheng Ping Liong, a Malaysian, aged 48, is an Executive Director of the Company and was appointed to the Board on 29 September 2006. He graduated with a Bachelor of Business Administration in Finance from the University of Iowa, USA in 1988. His first employment was with RES Malaysia where he held the position of Trainee Programmer from 1989 to 1990. In 1990, he was promoted to the position of an Analyst Programmer and this was followed by his ascension to the position of System Analyst in 1991. During the years 1992 to 1995, he took on the role of a Technical Manager in RES Malaysia. It was in 1995 when he, together with En. Othman bin Bakri jointly incorporated Grand-Flo Spritvest Sdn Bhd. He spearheads Grand-Flo Spritvest Sdn Bhd’s R&D initiatives and plays a pivotal role in the conceptualisation of the enterprise data capture solution, namely Direct Store Delivery. He is actively involved in the formation of strategic alliances with business and technology partners for the company as well as formulating the company’s business strategies. In August 2007, Mr. Cheng was appointed the Chief Executive Officer of the integrated company between Grand-Flo Electronic System Sdn Bhd and Grand-Flo Spritvest Sdn Bhd. Mr. Cheng is currently a director of several private limited companies.

DireCtorS’ profile14

A N N U A L R E P O R T 2 0 1 2

Yap li liExecutive Director

Yap Li Li, a Malaysian, aged 46, is an Executive Director of the Company and was appointed to the Board on 22 April 2009. Madam Yap obtained a Bachelor of Arts (Economics) Degree from the University of Malaya in 1990. Upon graduation, Madam Yap joined a distribution company as an Administrative Executive. In 1991, she joined an insurance firm as a Junior Executive and was promoted to Assistant Manager in 1994. During these years, she was working in the marketing department, and was primarily responsible in developing agency network and ensuring achievement of sales targets for her team. She later moved to join GFESS as an Operations Manager and later appointed as a director, which she was responsible for overall operations of the group of companies under GFESS which includes strategic planning, administration and finance.

Madam Yap joined the Group in 1996 to head the Group’s operations and had been instrumental in our Group’s restructuring and streamlining exercises, as well as played an active role in the then, Group’s new business division namely, the automated identified system business. Madam Yap has also been active in the business expansion of the Group, including its mergers and acquisitions exercises. She possesses more than 15 years of experience in the roles of management, corporate planning and business expansion. Madam Yap currently sits on the board of several private limited companies.

Wan kok WengExecutive Director

Wan Kok Weng, a Malaysian, aged 51, is an Executive Director of the Company and was appointed to the Board on 26 February 2008. Mr. Wan is the founder of Labels Network Sdn Bhd, which has since then became the wholly-owned subsidiary of the Company. He brings with him more than 25 years of experience in the labels manufacturing business. Prior to setting up Labels Network Sdn Bhd, Mr. Wan was a Sales Manager in General Labels & Labelling (M) Sdn Bhd from 1990 to 1995 and moved on to become an Executive Director from 1995 to 1997. Currently, he is the Managing Director of Labels Network Sdn Bhd.

tan Chuan hoCkNon-Independent Non-Executive Director

Tan Chuan Hock, aged 52, is our Non-Independent Non-Executive Director and was appointed to our Board on 2 October 2004. Mr. Tan is the Chairman of the Remuneration Committee and a member of both the Audit Committee and Nomination Committee. He is a member of the Malaysian Institute of Accountants, Malaysian Institute of Taxation, and is a fellow member of the Association of Chartered Certified Accountants (“ACCA”).

Mr. Tan is the executive proprietor and also the founder of William C.H. Tan & Associates, a Chartered Accountants firm. He has more than 25 years of experience particularly in financial reporting, auditing, taxation and planning, company secretarial as well as corporate management and advisory services.

He holds several directorships in various limited companies. Presently, he sits as an Independent Non-Executive Director in PCCS Group Berhad, Careplus Group Berhad and EITA Resources Berhad. He also sits on the Board of Simat Technologies Public Company Limited, a public company listed on the Stock Exchange of Thailand.

Dato’ loo Yoong haW @ vanChai viroChpokhaIndependent Non-Executive Director

Dato’ Loo Yoong Haw @ Vanchai Virochpokha, a Malaysian, aged 44, is an Independent Non-Executive Director of the Company and was appointed to the Board on 8 September 2011. He has over 15 years of experience in the insurance technology sector specialising in Bank Negara Malaysia’s mandatory usage of electronic claims. He was responsible in providing the country’s first electronic accident claims system and with his excellent knowledge in the insurance industry and technology, he has founded the ‘National Automotive Workshop Administration Malaysia’ (NAWAM) portal that presently is tasked to elevate the standards of motor workshops in the country. Globally, he has worked with TIA Technology A/S Denmark, a leading insurance technology provider in the European region to design its Takaful version in order to cater for the increasingly growing Islamic Insurance sector.

Cheong kee YoongSenior Independent Non-Executive Director

Cheong Kee Yoong, a Malaysian, aged 45, is an Independent Non-Executive Director of the Company and was appointed to the Board on 30 June 2008. Mr. Cheong has been appointed as the Senior Independent Director of the Company on 24 April 2013. He is also the Chairman of Audit Committee and Nomination Committee. Mr. Cheong is a graduate of the Association of Chartered Certified Accountants (ACCA) UK and a member of the Malaysian Institute of Accountants (MIA). He has more than 20 years of working experience particularly in corporate planning, fund raising, treasury management, investors relation activities, tax planning, financial reporting and risk management in various industries and mainly attached to the corporate office of public listed companies. He is currently the General Manager, Corporate Affairs and Planning attached to the holding company of an established group of companies. One of the group’s subsidiary company is listed on the Main Market of Bursa Securities.

DireCtorS’ profile (cont’d) 15


Yu Chee SingIndependent Non-Executive Director

Yu Chee Sing, aged 50, is our Independent Non-Executive Director and was appointed to our Board on 2 October 2004. He is a member of our Audit Committee and Remuneration Committee. Mr. Yu obtained a Bachelor of Degree in Civil Engineering from University of Malaya in 1988, and has more than 24 years of experience in the construction and development industry. Upon graduation, he started his career as an Engineer in Design Deco Sdn Bhd. Subsequently, he joined Syarikat Murni Utara Sdn Bhd as a Project Manager in 1992. He left the company in 1995 and joined Lintasan Baru Sdn Bhd as a Project Coordinator. In 2001, he joined Dimensi Baru Sdn Bhd as a Project Director and had since accomplished many construction and development projects.

In 2007, Mr Yu expanded his forte in property development and construction through his appointment as Director of Delta Elegance Sdn Bhd, a property development company and was instrumental in the development of a housing estate located in Kuala Lumpur.

Mr. Yu is currently a director of several private limited companies.

Yek DeiW SeeIndependent Non-Executive Director

Yek Deiw See, a Malaysian, aged 50, is an Independent Non-Executive Director of the Company and was appointed to the Board on 29 December 2006. He is a member of the Audit Committee, Nomination Committee and Remuneration Committee. He obtained a Bachelor of Degree in Civil Engineering from University of Malaya in 1988. He has more than 20 years of experience in the management, marketing and business of building materials. Mr. Yek started his career with Panglobal Sistemaju Sdn Bhd to distribute and promote WANG computers. He later joined CMCM Perniagaan Sdn Bhd, a leading building materials trading firm in the region. In 1999, he jointly formed Vistagard Marketing Sdn Bhd, an established general building materials trading company, as an Executive Director. He is also currently a director of several private limited companies.

Chan pik kheWAlternate Director to Wan Kok Weng

Chan Pik Khew, a Malaysian, aged 42, was appointed to the Board as an alternate director to Mr. Wan Kok Weng on 26 February 2008. Madam Chan has more than 16 years of experience in the labels industry. She was instrumental in securing sales for KopackLabels Press Sdn Bhd, a wholly-owned subsidiary of Labels Network Sdn Bhd, which in turn is the wholly-owned subsidiary of the Company. Madam Chan started her career as a Sales Executive in General Labels & Labeling (M) Sdn Bhd in 1992. In 1995, she founded Kopack Enterprise and teamed up with Mr. Wan Kok Weng to co-found Labels Network Sdn Bhd. Together, they led the Labels Network Sdn Bhd and its subsidiary into a dynamic, well-managed and reputable company in the labeling industry. Currently, Madam Chan is also the Sales Director of Labels Network Sdn Bhd.

Notes:1. None of the directors have family relationship with other directors or major shareholders except of the following:-

a) Mr. Tan Bak Hong is the spouse of Madam Yap Li Li.b) Mr. Wan Kok Weng is the spouse of Madam Chan Pik Khew.c) Mr. Tan Bak Hong and Madam Yap Li Li who are the directors and shareholders of Grand-Flo Corporation Sdn Bhd, a major

shareholder of the Company.

2. None of the Directors have any personal interest in any business arrangement involving the Company and all the Directors have had no convictions for offences other than traffic offences for the past ten years.

DireCtorS’ profile (cont’d)16

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A N N U A L R E P O R T 2 0 1 2

Statement on Corporate GovernanCe

The Board of Directors (“Board”) of Grand-Flo Solution Berhad (“Grand-Flo” or “the Company”) is fully committed towards ensuring that the Company and its subsidiaries (“the Group”) applies the principles and recommendations of the Malaysian Code of Corporate Governance 2012 (“the Code”) and the extent of the Group’s compliance with the Code throughout the financial year ended 31 December 2012.

The compliance with the Code by the Board is the fundamental part of the Group’s responsibility to protect and enhance long term shareholders’ value and the financial performance of the Group, whilst taking into account the interest of other stakeholders.

The Board collectively leads and is responsible for the performance and affairs of the Group, including practising a high level of good governance. All Board members are expected to show good stewardship and act in a professional manner, as well as upholding the core values of integrity and enterprise with due regard to their fiduciary duties and responsibilities.

a. tHe BoarD

i. Composition and Balance

The strength of the Board lies in the composition of its members, who has a wide range of expertise, extensive experience and diverse background in business, finance and technical knowledge.

The current Board has ten (10) members, comprising four (4) Executive Directors, one (1) Non-Independent Non-Executive Director and five (5) Independent Non-Executive Directors. This composition complies with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”).

The profiles of the members of the Board are presented on Directors’ Profile section as set out in this Annual Report.

There is a clear separation of functions between the Board and management. The Group Managing Director/Group President and Executive Directors have the responsibility to manage the day-to-day operations of the business, implementation of Board policies and making strategic decisions for the expansion of the business. The Non-Executive Directors contribute their expertise and experiences to give independent judgment to the Board on issues of strategy, performance and resources, including major policies, key directions and standards of conduct.

The presence of Non-Executive Directors ensures that views, consideration, judgment and discretion exercised by the Board in decision making remains objective and independent whilst assuring the interest of other parties such as minority shareholders are fully addressed and adequately protected as well as being accorded with due consideration.

The Board retains full and effective control over the Group and ensures the Group moves towards its strategic direction in establishing goals and ultimately the enhancement of long-term shareholders’ value.

ii. Board Meetings

The Board meets at least four (4) times a year, with additional meetings to be convened whenever necessary. The Directors receive notices of meetings prior to the date of the meeting, highlighting the agenda complete with a full set of Board Papers to provide sufficient details of matters to be deliberated during the meeting. Information provided is not confined to financial data but also other non-financial information, both quantitative and qualitative, which is deemed to be critical in arriving at a sound and informed decision.

Minutes of Board meetings together with decisions made by way of resolution passed are duly recorded and properly kept by the Company Secretary.

During the financial year, five (5) Board meetings were held and all the Directors have complied with the requirements in respect of board meeting attendance as provided in the Company’s Articles of Association. During these meetings, the Board deliberated upon and considered a variety of matters including the Group’s corporate developments, financial results, investment and strategic decisions and direction of the Group.


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The meetings attendance record of the Directors is as follows:-

Director number of meetings attended

Tan Sri Datuk Adzmi bin Abdul Wahab 5 of 5Tan Bak Hong 5 of 5Yap Li Li 5 of 5Cheng Ping Liong 5 of 5Wan Kok Weng (Alternate: Chan Pik Khew) 4 of 5Tan Chuan Hock 4 of 5Cheong Kee Yoong 5 of 5Yu Chee Sing 5 of 5Yek Deiw See 4 of 5Dato’ Loo Yoong Haw @ Vanchai Virochpokha 5 of 5

The Board is satisfied with the level of time commitment given by the Directors of the Company towards fulfilling their duties and responsibilities. This is evidenced by the attendance record of the Directors as set out herein above.

iii. Board Responsibilities and Supply of Information

The Board is responsible for the overall corporate governance of the Group including reviewing, adopting and approving the Group’s overall strategic direction, business plans, key operational initiatives, annual budget, major acquisition or disposal of undertakings, capital commitments and funding decisions. Further, the Board also oversees the conduct and sustainability of the Group’s business, assuming the responsibility for succession planning, reviewing the risk management process and internal control systems to minimize the downside risk for the Group in its business endeavours and to ensure compliance with relevant rules and regulations.

The Board has full and unrestricted access to all of the Group’s information whether as a full board or in their individual capacity to enable them to discharge their duties to their full capacity pertaining to the Group’s affairs and business.

The Board is provided with comprehensive Board papers containing information pertaining to the business of the meeting in sufficient time to enable the Board to obtain further explanations, where necessary, in order to be properly briefed before meetings.

The Board appoints the Company Secretary, who plays an important advisory role, and ensures that the Company Secretary fulfils the functions for which he/she has been appointed. The Company Secretary is a central source of information and advice to the Board and its Committees on issues relating to compliance with laws, rules, procedures and regulations affecting the Company.

The Board recognizes the fact that the Company Secretary should be suitably qualified and capable of carrying out the duties required. The Board is satisfied with the service and support rendered by the Company Secretary to the Board in the discharge of her functions.

All Board Members have unrestricted access to the advice and services of the Company Secretary and Senior Management staff in the Group. The Directors also have access to the Internal and External Auditors of the Group, without Management present to seek explanations or additional information.

The Directors, collectively or individually, may seek independent professional advice and information in the furtherance of their duties at the Company’s expense, so as to ensure the Directors are able to make independent and informed decisions.

Statement on Corporate GovernanCe (cont’d)

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A N N U A L R E P O R T 2 0 1 2

iv. Division of roles and responsibilities between the Group Managing Director/Group President (“GMD/GP”) and the Chairman

The Board ensures that the Chairman is a non-executive member of the Board. The role of the Chairman and the GMD/GP are distinct and separate to ensure there is balance of power and authority. The Chairman is responsible for the leadership, effectiveness, conduct and governance of the Board while the GMD/GP has overall responsibility for the day-to-day management of the business and implementation of the Board’s policies and decisions. The GMD/GP is accountable to the Board for the overall organization, management, and staffing of the Company and / or Group and for the procedures in financial and other matters, including conduct and discipline. In addition, the Chairman was not previously a GMD/GP of the Company.

v. Directors’ Training

All Directors of the Company have attended and successfully completed the Mandatory Accreditation Programme (“MAP”) as required by Bursa Securities .

In addition to the MAP, the Directors are encouraged to attend relevant seminars and training programmes to equip themselves with the knowledge to effectively discharge their duties as Directors. The Board will assess the training needs of the Directors and ensure Directors have access to continuing education programme.

Seminars and conference attended by the Directors during the financial year ended 31 December 2012 are as follows:

Directors programmes attended

Tan Sri Datuk Adzmi Bin Abdul Wahab

- Malaysian Code on Corporate Governance 2012 – Adopt or Don’t Adopt?

Tan Bak Hong - Motorola – Product Update- 2012 APAC CEO Summit: Board of Advisory Meeting/Conference

Cheng Ping Liong - EDCCS Technical Update- Vistage: Succession Planning

Tan Chuan Hock - Seminar Percukaian Kebangsaan 2012- Tax Planning on Budget 2013 with PU Order 2011 to 2012 and Public

Rulings- Diagnosis on CP58 with Tax Planning and Limited Liability Partnership

Save as disclosed above, other Directors were not able to attend any trainings during this financial year due to busy schedule and overseas travelling. However, they have kept themselves abreast on financial and business matters through readings to enable them to contribute to the Board.

The Directors will continue to attend other relevant training programmes as appropriate to enhance their skills and knowledge.

vi. Appointments to the Board and Re-election of Directors

The members of the Board are appointed in a formal and transparent practice as endorsed by the Code. The Nomination Committee assists the Board in ensuring that the Board is comprised of individuals of a required caliber whose background, skills, experience, integrity and professionalism will augment the present Board and meet its future needs. Where there is a need to appoint new Directors, the Nomination Committee will assess the suitability of candidates and recommend to the Board for appointment. The Company Secretary will ensure that all appointments are properly made and that all legal and regulatory obligations are satisfied and complied.

All Board members shall notify the Chairman of the Board before accepting any new Directorship in other companies. The notification shall include an indication of time that will be spent on the new appointment. The Chairman shall also notify the Board if he has any new Directorship or significant commitments outside the Company.

In accordance with the Company’s Articles of Association, all Directors appointed by the Board are subject to re-election by the shareholders at the annual general meeting following their appointment. At least one third of the Directors are required to retire from office by rotation annually and shall be eligible for re-election at each annual general meeting.



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Directors who are over seventy (70) years of age are required to submit themselves for annual re-appointment in accordance with Section 129(6) of the Companies Act, 1965. The Board has accepted the Nomination Committee’s recommendation to seek for re-appointment of Tan Sri Datuk Adzmi bin Abdul Wahab who is of or over the age of seventy years in accordance with Section 129(6) of the Companies Act, 1965 at the forthcoming annual general meeting of the Company.

Tan Sri Datuk Adzmi has, during his tenure as the Independent Non-Executive Chairman of the Board, provided a strong leadership and responsible for ensuring the adequacy and effectiveness of the Board’s governance process.

vii. Tenure of Independent Director

The tenure of an Independent Director shall not exceed a cumulative term of nine years. However, upon completion of the nine years, the Independent Director may continue to serve the Board subject to the Director’s re-designation as a Non-Independent Director. In the event the Director is to remain designated as an Independent Director, the Board shall first justify and obtain shareholders’ approval on a year to year basis.

Mr. Yu Chee Sing is an Independent Director of the Company who had been serving in the Board since 2 October 2004. The Nomination Committee has assessed and evaluated all facts and circumstances which will be considered in determining his independence.

Following the evaluation, the Nomination Committee is satisfied that Mr. Yu Chee Sing has satisfactorily demonstrated that he is independent from the management and free from any business or other relationships with the Group that could materially affect or interfere with the exercise of objective, unfettered or independent judgment to act in the best interests of the Group.

The Board accepted the recommendation of the Nomination Committee to retain Mr. Yu Chee Sing as an Independent Director of the Company and the shareholders’ approval will be sought at the forthcoming annual general meeting of the Company. The Board considers the contribution and independent judgments as provided by Mr. Yu and recommends his continuing position as an Independent Director of the Company on the following justifications:

a. He fulfilled the criteria under the definition of Independent Director as stated in the Main Market Listing Requirements of Bursa Securities and therefore would be able to function as a check and balance and bring an element of objectivity to the Board.

b. He has vast experience in respective industries which could provide the Board with a diverse set of experience, expertise and independent judgment.

c. He devoted sufficient time and attention to his responsibilities as an Independent Director of the Company.

d. He understands the main drivers of the Group’s business in a detailed manner.

e. He has exercised due care during his tenure as an Independent Director of the Company and carried out his duties in the best interest of the Company and Shareholders of the Company.

viii. Board Diversity Policy

The Board acknowledges the need for gender diversity for good governance practices and to enhance the efficient functioning of the Board. The Board believes the appointment of a new member is guided by the skills, experiences, competency and knowledge of the individual candidate and it shall review any potential candidate wherever reasonably possible.

The Board currently already has two (2) female Board Members which are represented by Ms. Yap Li Li and Ms. Chan Pik Khew.


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A N N U A L R E P O R T 2 0 1 2

ix. Evaluation of the Directors and the Board and Board Committees as a whole

The Board recognizes the importance of assessing the effectiveness of individual Directors, the Board as a whole and its Committees. The Nomination Committee is given the task to review and evaluate the individual Director’s performance and the effectiveness of the Board and the Board’s Committees on an annual basis. In assessing the suitability of candidates, considerations will be given to the competencies, commitment, contribution and performance.

The Nomination Committee is required to report annually to the Board an assessment of the Board’s and its Committees’ performance. This will be discussed with the full Board. Every year, the Nomination Committee will evaluate each individual Director’s contributions to the effectiveness of the Board and the relevant Board Committees.

x. Annual Assessment of Independence

The Board had conducted an evaluation of level of independence of the five (5) Independent Non-Executive Directors of the Company and the Board is satisfied with the level of independence demonstrated by them and their ability to act in the best interest of the Company and the Group.

xi. Committees of the Board

The Board delegates certain responsibilities to the Board Committees to assist in the discharge of its responsibilities. The Board Committees are:-

● Audit Committee● Nomination Committee● Remuneration Committee

Each Committee operates in accordance with written terms of reference approved by the Board. The Board appoints the members and Chairman of each Committee. A brief description of each Committee is as follows:

a. audit Committee

The Audit Committee of the Company consists of the following members who are appointed by the Board:-

name of Committee members Designation

Cheong Kee Yoong, Chairman Senior Independent Non-Executive DirectorYu Chee Sing, Member Independent Non-Executive DirectorYek Deiw See, Member Independent Non-Executive DirectorTan Chuan Hock, Member Non-Independent Non-Executive Director

The Audit Committee’s objectives are, among others, providing an additional assurance to the Board by giving an objective and independent review of financial, operational and administrative controls and procedures, establishing and maintaining internal controls and reinforce the independence of the Company’s external auditors, thereby ensuring that the auditors have free reign in the audit process.

The Audit Committee Report is set forth in pages 25 to 27 of this Annual Report.

b. nomination Committee

The role of the Nomination Committee is to review annually the optimum size, required mix of skills, experience and other qualities of the Directors and to recommend the new appointment, if any, to the Board.

The Nomination Committee of the Company is responsible to oversee the selection and assessment of directors. The Committee’s responsibilities include assessing and making recommendations to the Board who will thereon assess the shortlisted candidates and arrive at a decision on the appointment of the director.



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b. nomination Committee (cont’d)

In arriving at these recommendations, due consideration is given to the competencies, required mix of skills, expertise, experience and contribution that the proposed director(s) shall bring to complement the Board.

The Nomination Committee of the Company comprises the following members:-

name of Committee members Designation

Cheong Kee Yoong, Chairman (Appointed on 24 April 2013)

Senior Independent Non-Executive Director

Yek Deiw See, Member Independent Non-Executive DirectorTan Chuan Hock, Member Non-Independent Non-Executive DirectorTan Sri Datuk Adzmi bin Abdul Wahab, Chairman

(Revoked on 24 April 2013)Independent Non-Executive Chairman

The Nomination Committee meets as and when required. The Nomination Committee met once during the financial year under review.

During the meeting held in August 2012, the Nomination Committee had undertaken the following activities:

● The Nomination Committee evaluated the balance of skills, knowledge and experience of the Board, in the light of this evaluation, reviewed the role of the Non-Executive Chairman and GMD/GP to ensure balance of power and authority, and a clear division of responsibilities as the head of the Company.

● The Nomination Committee, collectively carried out the assessment and rating of each Director’s performances against the criteria as set out in the annual assessment form. The performance of non-executive Directors was also carefully considered, including whether he could devote sufficient time to the role.

● The Nomination Committee has also undertaken an effectiveness evaluation exercise of its Committee with the objective of assessing the effectiveness of the Committee as a whole.

c. remuneration Committee

The Remuneration Committee is principally responsible for assessing and reviewing the remuneration packages of the GMD/GP and Executive Directors and subsequently furnishes their recommendations to the Board for adoption.

The Remuneration Committee comprises the following members:-

name of Committee members DesignationTan Chuan Hock, Chairman Non-Independent Non-Executive DirectorYu Chee Sing, Member Independent Non-Executive DirectorYek Deiw See, Member Independent Non-Executive Director

B. DIreCtorS’ remUneratIon

The Board, the through Remuneration Committee, had established formal and transparent remuneration policies and procedures to attract and retain Directors.

The Board will determine the level of remuneration of Board Members, taking into consideration the recommendations of the Remuneration Committee for executive Board Members and/or the GMD/GP. The remuneration of the GMD/GP and Executive Directors are reward and performance based.

Non-executive Directors of the Company will be paid a basic fee as ordinary remuneration based on their responsibilities in Committees and the Board, their attendance and/or special skills and expertise they bring to the Board. The fee shall be fixed in sum and not by a commission on or percentage of profits or turnover.


23

A N N U A L R E P O R T 2 0 1 2

Each individual Director shall abstain from the deliberation and voting on his/her own remuneration/fee.

The Board is of the view that the disclosure of remuneration by appropriate components and bands are sufficient to meet the objectives set out in the Main Market Listing Requirements of Bursa Securities.

The remuneration of the Directors for the financial year under review is as follows:

Directors Fees(rm)

Salaries &Benefits

in Kind(rm)

Bonuses(rm)

total(rm)

Executive Directors - 2,345,786 323,094 2,668,880Non-Executive Directors 176,000 - - 176,000

totaL 176,000 2,345,786 323,094 2,844,880

range of remuneration (rm) executiveDirectors

non-executive Directors

RM50,000 and below - 6RM150,001 – RM200,000 1 -RM350,001 – RM400,000 2 -RM450,001 – RM500,000 1 -RM501,001 – RM550,000 1 -

C. reLatIonSHIp WItH SHareHoLDerS anD InveStorS

The Group values the importance of dialogue between the Group and its investors in order to provide them with the clearest and most complete picture of the Group’s performance and financial position. The Group communicates with its shareholders and investors primarily through its annual general meeting (“AGM”), Annual Report, Quarterly Financial Statements, Research Reports and the various Announcements made to Bursa Securities.

The Board will ensure that the general meetings of the Company are conducted in an efficient manner and serve as a mode in shareholders communications. These include the supply of comprehensive and timely information to shareholders and the encouragement of active participation at the general meetings.

The annual general meeting remains as a principal forum used by the Company for communication with its shareholders. At the AGM, the shareholders are encouraged to participate and to raise questions on the resolutions proposed and the Group’s operations in general.

D. aCCoUntaBILItY anD aUDIt

i. Financial reporting

The Board has overall responsibility for the quality and completeness of the financial statements of the Company and the Group, both quarterly and year-end, and has a duty to ensure that those financial statements are prepared based on appropriate and consistently applied accounting policies, supported by reasonably prudent judgment and estimates and in accordance to the applicable financial reporting standards.

In presenting the annual financial statements and quarterly unaudited results, the Board aims to present a fair assessment of the Group’s position and prospects to the shareholders. The Audit Committee assists the Board in scrutinizing information for disclosure to ensure accuracy, adequacy and completeness.

ii. Internal Control and risk management

The Board acknowledges their responsibility in maintaining an internal control system that provides reasonable assurance of effective and efficient operations, and compliance with laws and regulations as well as internal procedures and guidelines.



24

Management is responsible for implementing the processes for identifying, evaluating, monitoring and reporting of risks and internal control, taking appropriate and timely corrective actions as needed, and for providing assurance to the board that the processes have been carried out.

The Audit Committee has been entrusted by the Board to ensure effectiveness of the Group’s internal control systems. The activities of the outsourced Internal Auditors are reported regularly to the Audit Committee which provides the Board with the required assurance in relation to the adequacy and integrity of the Group’s system of internal controls.

iii. relationship with auditors

The Group has established a transparent and appropriate relationship with the Internal Auditors and External auditors. Such relationship allows the Group to seek professional advice on matters relating to compliance and corporate governance. The internal audit function of the Group is outsourced to third party. Similar to the External Auditors, Internal Auditors too have direct reporting access to the Audit Committee to ensure that issues highlighted are addressed independently, objectively and impartially without any undue influence of the management.

The Audit Committee of the Company undertakes an annual review of the suitability and independence of the External auditors. Having assessed their performance, the Audit Committee will make its recommendation to the Board, upon which the shareholders’ approval will be sought at the AGM of the Company.

e. Statement oF CompLIanCe WItH tHe BeSt praCtICeS oF tHe CoDe

The Company is committed in achieving high standards of corporate governance throughout the Company and the Group and highest level of integrity and ethical standards in all of its business dealings.

The Board will continue to strive for the full compliance with the Code in the coming financial year.

This statement is made in accordance with the resolution of the Board dated 24 April 2013.


25

A N N U A L R E P O R T 2 0 1 2

CompoSItIon anD DeSIGnatIon oF aUDIt CommIttee

The Audit Committee (“the Committee”) comprises the following:

Chairman:Cheong Kee Yoong Senior Independent Non-Executive Director

members:Tan Chuan Hock Non-Independent Non-Executive DirectorYu Chee Sing Independent Non-Executive DirectorYek Deiw See Independent Non-Executive Director

oBJeCtIveS

The primary objective of the Committee is to assist the Board of Directors in discharging its statutory duties and responsibilities, among others, providing an additional assurance to the Board by giving an objective and independent review of financial, operational and administrative controls and procedures, establishing and maintaining internal controls and reinforce the independence of the Company’s External Auditors, thereby ensuring that the auditors have free reign in the audit process.

SUmmarY oF tHe termS oF reFerenCe

i. membership

The Committee shall be appointed by the Board from among its members and shall comprise not less than three (3) members, whereby all members must be non-executive directors with a majority of them being Independent Directors.

At least one member of the Committee must be a member of Malaysia Institute of Accountants or he must have at least three (3) years working experience and have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967 or is a member of one of the associations of accountants specified in Part II of the said Schedule or a person who has fulfilled such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad (“Bursa Securities”).

No alternate director of the Board shall be appointed as a member of the Committee. In the event of any vacancy of Committee resulting in the non-compliance with the Listing Requirements of Bursa Securities, the Board shall appoint a new member within three (3) months.

ii. meetings and attendance

The Committee shall meet not less than four (4) times a year. Additional meetings may be called at any time if so requested by any Committee members, management or the internal and external auditors. Other Board members, Senior Management, Internal and External Auditors may be invited to attend meetings.

The Company Secretary shall be the Secretary of the Committee. The Secretary shall ensure that all appointments of the Committee are properly made; the Committee receives information and papers in a timely manner to enable full and proper consideration to be given to issues; prepare and circulate the minutes of the Committee meetings promptly to all members of the Board; and ensure that the minutes are properly kept and produced for inspection if required.

aUDIt CommIttee report


26

iii. Functions

The functions of the Committee are as follows:

1. To consider the appointment of External Auditors, the audit fee and any questions of resignation or dismissal.

2. To review with the External Auditors:a) The audit plan, scope and nature of the audit of the Company and its subsidiaries (“Group”).b) Their evaluation and findings of the system of internal controls; and the audit reports on the financial

statements.

3. To review the adequacy of the scope, function, competency and resources of internal audit and to ensure that it has the necessary authority to carry its work.

4. To review any appraisal or assessment of the performance of the internal audit functions and the internal audit function should report directly to the Committee.

5. To review the quality, adequacy and effectiveness of the Group’s internal control environment.

6. To review the findings of the Internal and External auditors.

7. To review the quarterly and year end financial statements of the Company, focusing particularly on any changes in or implementation of major accounting policies and practices, significant adjustments arising from the audit, the going concern assumption and compliance with applicable approved accounting standards and other legal and regulatory requirements.

8. To review the related party transactions of the Group.

9. To review the External Auditors’ management letter and management’s response.

10. To review and verify the allocation of options pursuant to the Employees’ Share Option Scheme (“ESOS”) in compliance with the criteria as stipulated in the by-law of ESOS of the Group, if any.

11. Any other function that may be mutually agreed upon by the Committee and the Board which would be beneficial to the Company and ensure the effective discharge of the Committee’s duties and responsibilities.

authority

The Committee is authorised by the Board to investigate any activity within its term of reference at the cost of the Company:

1. To secure full and unrestricted access to any information pertaining to the Group.

2. To communicate directly with the External and Internal Auditors and all employees of the Group.

3. To seek and obtain independent professional advice and to secure the attendance of outsiders with relevant experience and expertise as it considers necessary.

4. To convene meetings with the External and Internal Auditors or both excluding the attendance of other Directors and employees of the Company, whenever deemed necessary.

aUDIt CommIttee report (cont’d)

27

A N N U A L R E P O R T 2 0 1 2

SUmmarY oF aCtIvItIeS oF tHe CommIttee DUrInG tHe FInanCIaL Year enDeD 31 DeCemBer 2012

During the financial year under review, the Committee convened five (5) meetings and the attendance of Committee members at meetings is set out as follows:

Committee members no. of meetings attended

Cheong Kee Yoong 5 of 5Tan Chuan Hock 4 of 5Yu Chee Sing 5 of 5Yek Deiw See 4 of 5

The Committee had carried out the following activities during the five (5) meetings in discharging their duties and responsibilities:-

1. Reviewed the Company’s unaudited quarterly results and the audited financial results together with the relevant announcements thereon and ensured compliance with approved accounting standards and adherence to other legal regulatory requirements as well as making relevant recommendation to the Board for approval.

2. Reviewed with External Auditors on the results and issues arising from their audit of the financial year end statements and their resolutions of such issues highlighted in their report to the Committee.

3. Reviewed with the Internal Auditor, the internal audit plan, work done and reports, for the internal audit function and considered the findings of internal audit investigations and management responses thereon, and ensure that appropriate actions are taken on the recommendations raised by the Internal Auditors.

4. Reviewed the related party transactions that transpired during the financial year under review.

InternaL aUDIt FUnCtIon

Internal audit function of the Group is outsourced to an independent professional services firm to carry out internal audit services for the Group. Internal audit reports are presented, together with Management’s response and proposed action plans to the Committee on a quarterly basis.

The Internal Auditors undertake internal audit functions based on the operational, compliance and risk based audit plan approved by the Committee. The risk-based audit plans covers the review of the key operational and financial activities including the efficacy of risk management practices, efficiency and effectiveness of operational controls and compliance with relevant laws and regulations. Scheduled audits are carried out on various subsidiaries of the Company in accordance to the approved Internal Audit Plan. A risk-based methodology is adopted to evaluate the adequacy and effectiveness of the risk management, financial, operational and governance processes.

The internal audits conducted did not reveal any weakness which would result in material losses, contingencies or uncertainties that would require disclosure in the annual report.

aUDIt CommIttee report (cont’d)


28

IntroDUCtIon

The Malaysian Code on Corporate Governance 2012 (“the Code”) requires listed companies to maintain a sound system of internal control to safeguard shareholders’ investments and company’s assets. Paragraph 15.26(b) of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) requires the Board of Directors to include in its annual report a statement on the state of internal control.

The Board of Directors of the Company (“Board”) recognizes the importance of good practice of corporate governance and is committed to maintain a sound system of internal control to safeguard shareholders’ investments and the Company and its subsidiaries’ (“Group”) assets and is pleased to provide the following statement, which outlines the nature and scope of internal control of the Group for the financial year ended 31 December 2012.

BoarD reSponSIBILItY

The Board recognizes the importance of a sound system of internal control and effective risk management practices to good corporate governance. The Board affirms its overall responsibility and reviews the adequacy and integrity of the system of internal control. However, it is recognized that such system is designed to manage rather than eliminate risk. It can only provide reasonable but not absolute assurance against material misstatement or loss.

KeY eLementS oF InternaL ControL

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

• ClearlydefinedorganizationalstructurewithclearlinesofdelegationofresponsibilitytoCommitteesoftheBoard,management and operating subsidiaries.

• Experiencedandcompetentstaffareplacedinareasofresponsibilitytosupportandcontinuouslymonitortheeffectiveness of the Group’s system of internal control.

• RegularmeetingsareheldtodiscussontheoverallGroupandoperatingsubsidiaries’operationalmattersandtoresolve key operational, financial, human resource and other related issues.

• TimelygenerationoffinancialandoperationsreportsforManagementreview.

• Regularinternalauditreviewsarecarriedouttoidentifyanyareaofimprovement,besidescompliancewithinternalpractices, guidelines and objectives. The internal audits were performed in accordance with accepted auditing practices in reviewing effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations.

• The Audit Committee reviews the quarterly and annual financial statements and announcements and recommended to the Board for approval.

• BudgetisreviewedandapprovedbythemanagementofeachsubsidiarybeforeconsolidationintotheGroup’sbudget for the Board’s review.

• RegularvisitstooperatingsubsidiariesbymembersoftheBoardandseniormanagementwheneverappropriate.

The Board is satisfied that, during the financial year under review, there is an ongoing process of identifying, evaluating and managing significant risks faced by the Group. The Board is of the view that the existing system of internal controls is sound and adequate to safeguard the Group’s operations and assets at the existing level of operations of the Group.

Statement on rISK manaGement anD InternaL ControL

29

A N N U A L R E P O R T 2 0 1 2

Statement on rISK manaGement anD InternaL ControL (cont’d)

InternaL aUDIt FUnCtIonS

In accordance with the Code, the Group in its efforts to provide adequate and effective internal control system had appointed an independent consulting firm to review the adequacy and integrity of its system of internal control. The independent consulting firm acts as internal auditor and reports directly to the Audit Committee.

The internal auditors develop its audit plan in accordance with accepted auditing practices in which addresses critical business processes, identified risks and internal control gaps, assessed the effectiveness and adequacy of the existing state of internal control of the Group and recommended possible improvements to the internal control process. This is to provide reasonable assurance that such systems continue to operate satisfactorily and effectively within the Group. The audit plan is presented to Audit Committee of the Company for approval.

Follow-up visits were also carried out to ensure weaknesses identified have been or are being addressed. Periodic audit reports and status reports on follow up management action plans were tabled to the Audit Committee for review on quarterly basis. For the financial year ended 31 December 2012, the total costs incurred for the outsourced internal audit function is RM25,568.90.

rISK manaGement

Risk management is an integral part of our business operations and this process goes through a review process by the Board. Based on the assessment of the internal control systems of the Group, the Board is of the view that there is an on-going process for identifying, evaluating, monitoring and managing the significant risks affecting the achievement of its business objectives in their daily activities throughout the financial year up to the date of approval of the annual report. The system of internal controls that the Group intends to enhance throughout the financial year provides a level of confidence on which the Board relies on for assurance.

The Board has received assurance from the Group Managing Director/Group President and Financial Controller that the Group’s risk management and internal control systems are operating adequately and effectively, in all material aspects, based on the risk management and internal control system of the Group.

revIeW BY eXternaL aUDItorS

The External Auditors have reviewed this Statement on Internal Control and reported to the Board that nothing has come to their attention that causes them to believe that the Statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the Group internal control system.


30

Share Buyback

During the financial year, the Company repurchased 217,800 of its issued ordinary shares plus the 238,700 treasury shares brought forward from the previous financial year, total to 456,500 shares were re-sold in the open market. Subsequent to the resale, the Company repurchased 1,393,200 of its issued ordinary shares and are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.

Details of the share bought back and retained as treasury shares as well as treasury shares resold by the Company during the financial year under review are set out as below:-

Date

no. of Sharespurchased and

retained astreasury Shares/

(re-Sold) from treasury Shares

Highest price (rm)

Lowest price (rm)

average price (rm)

totalamount paid*

(rm)

09.01.2012 30,000 0.395 0.400 0.398 12,037.1910.01.2012 30,400 0.390 0.405 0.395 12,098.8011.01.2012 11,100 0.400 0.405 0.405 4,536.3016.01.2012 16,000 0.390 0.405 0.399 6,438.8420.01.2012 25,000 0.390 0.410 0.406 10,224.9530.01.2012 20,000 0.405 0.405 0.405 8,160.0309.02.2012 18,300 0.400 0.420 0.405 7,474.6714.02.2012 17,000 0.400 0.420 0.412 7,051.0215.02.2012 20,000 0.410 0.420 0.413 8,310.9817.02.2012 25,000 0.405 0.420 0.408 10,275.2622.02.2012 5,000 0.520 0.520 0.520 2,643.7818.06.2012 (456,500) (0.45) (0.46) (0.45) (204,569.85)23.08.2012 10,000 0.245 0.250 0.247 2,513.7508.10.2012 100,000 0.225 0.225 0.225 22,664.7509.10.2012 42,000 0.220 0.230 0.225 9,519.5410.10.2012 43,000 0.225 0.230 0.225 9,748.1211.10.2012 50,100 0.225 0.230 0.225 11,356.0312.10.2012 50,000 0.220 0.225 0.223 11,232.2515.10.2012 35,100 0.220 0.225 0.220 7,779.0022.10.2012 12,300 0.220 0.225 0.224 2,799.8923.10.2012 30,000 0.220 0.220 0.220 6,648.9824.10.2012 30,300 0.220 0.225 0.220 6,716.5425.10.2012 30,100 0.220 0.225 0.220 6,671.3310.12.2012 150,000 0.210 0.210 0.210 31,730.4511.12.2012 150,000 0.210 0.215 0.214 32,356.3712.2012.12 63,300 0.215 0.215 0.215 13,709.2513.12.2012 120,000 0.205 0.215 0.211 25,484.9914.12.2012 130,000 0.210 0.210 0.210 27,499.9917.12.2012 42,000 0.210 0.215 0.212 8,985.1618.12.2012 40,000 0.210 0.215 0.214 8,633.0019.12.2012 50,000 0.210 0.215 0.214 10,778.4120.12.2012 40,000 0.210 0.215 0.214 8,612.8721.12.2012 35,000 0.215 0.215 0.215 7,580.4124.12.2012 35,000 0.215 0.215 0.215 7,580.4126.12.2012 35,000 0.215 0.215 0.215 7,580.4127.12.2012 35,000 0.215 0.215 0.215 7,580.4128.12.2012 35,000 0.215 0.215 0.215 7,580.41

* Including brokerage, commission, clearing house fee and stamp duty.

None of the treasury shares held was cancelled during the financial year under review.

otHer CompLIanCe InFormatIon

31

A N N U A L R E P O R T 2 0 1 2

otHer CompLIanCe InFormatIon (cont’d)

options, Warrants or Convertible SecuritiesThe Company did not issue any warrants or convertible securities during the financial year under review.

american Depository receipt (“aDr”) or Global Depository receipt (“GDr”) programThe Company did not sponsor any ADR or GDR program during the financial year under review.

Imposition of Sanctions/penaltiesThere were no public sanctions and/or public penalties imposed on the Company and its subsidiaries, directors or management by the relevant regulatory bodies during the financial year under review.

non-audit FeesThere was non-audit fee of RM25,345 for non-audit related work paid to the external auditors by the Group for the financial year under review.

variation in resultsThere was no profit estimation, forecast or projection made or released by the Company during the financial year under review. There was no material variance in the audited results from the unaudited results announced for the financial year under review.

profit GuaranteeThe Company did not give any profit guarantee during the financial year under review.

material Contracts Involving Directors’ and major Shareholders’ InterestsDuring the financial year under review, there were no material contracts entered by the Company and its subsidiaries which involved Directors’ or major shareholders’ interests.

revaluation policy on Landed propertyLand is shown at fair values, based on valuations by external independent valuers, less subsequent accumulated depreciation on buildings and any accumulated impairment losses. Valuations are performed with sufficient regularity, usually every five years, to ensure that the carrying amount does not differ materially from the fair value of the land and buildings at the end of the reporting period.

recurrent related party transactionsThe recurrent transactions of a revenue or trading nature and were at arm’s length entered in the ordinary course of business during the financial year under review on terms not more favourable to the related party than those generally available to the public following were as follows:-

rm

Sales to a major shareholder 2,344,727

Utilisation of proceeds from Corporate exerciseNo corporate exercise involving fund raising was carried out during the financial year under review.


32 Statement oF DIreCtorS’ reSponSIBILItY

The Board is fully accountable to ensure that the financial statements are drawn up in accordance with Companies’ Act, 1965 and the applicable approved accounting standards set by Malaysian Accounting Standards Board so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2012 and of the results and cash flows of the Group and Company for the financial year ended on that date.

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

a. Applied relevant and appropriate accounting policies consistently and in accordance with applicable approved accounting standards;

b. Made judgments and estimates that are prudent and reasonable; and

c. Used the going concern basis for the preparation of the financial statements.

The Directors are responsible for ensuring that proper accounting records are kept in accordance with the Act. The Directors also have overall responsibility in taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

This statement is made in accordance with a resolution of the Board of Directors dated 24 April 2013.

FInanCIaL ContentS

34 Directors’ Report

39 Statement by Directors and Statutory Declaration

40 Independent Auditors’ Report

42 Statements of Financial Position

44 Statements of Comprehensive Income

45 Statements of Changes in Equity

47 Statements of Cash Flows

49 Notes to the Financial Statements


34 DIreCtorS’ report

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

prInCIpaL aCtIvItIeS

The principal activities of the Company are the provision of information technology solutions and investment holding. The principal activities of the subsidiaries and associates are disclosed in Note 5 and Note 6 to the financial statements respectively.

There have been no significant changes in the nature of these activities of the Company and its subsidiaries during the financial year.

FInanCIaL reSULtS

Group Companyrm rm

Net profit/(loss) for the year 7,846,370 (1,353,413)

Attributable to:-Owners of the parent 7,831,492Non-controlling interest 14,878

7,846,370

DIvIDenDS

The amount of dividends paid and declared since the end of the last financial year was as follows:

rm

In respect of financial year ended 31 December 2011:First and final dividend of 1.2 per sen ordinary share comprising a gross dividend of 0.037 sen per

share less 25% income tax and a tax exempt dividend of 1.163 sen per share, paid on 31 July 2012 1,902,617

The Board of Directors has proposed a final tax exempt dividend of one (1) sen per share amounting to RM3,181,727 for the financial year ended 31 December 2012. The proposed dividend is subject to the approval of the shareholders of the Company at the forthcoming annual general meeting. This proposed dividend is not reflected in the current year’s financial statements and if approved by the shareholders will be accounted for in shareholders’ equity as appropriation of retained earnings in the financial year ending 31 December 2013.

reServeS anD provISIonS

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

35

A N N U A L R E P O R T 2 0 1 2

DIreCtor

The Directors in office since the date of the last report are:

Tan Sri Datuk Adzmi Bin Abdul WahabTan Bak HongCheng Ping LiongYap Li LiWan Kok WengTan Chuan HockCheong Kee YoongYu Chee SingYek Deiw SeeDato’ Loo Yoong Haw @ Vanchai Virochpokha Chan Pik Khew (Alternate Director to Wan Kok Weng)

DIreCtorS’ IntereStS

According to the Register of Directors’ Shareholdings, the beneficial interest of those who were Directors at the end of the financial year in the shares and warrants of the Company were as follows:

number of ordinary shares of rm0.10 eachBalance at Balance at

the Company 1.1.2012 Bonus issue Bought Sold 31.12.2012

Direct interests:-Tan Bak Hong 743,000 743,000 285,900 - 1,771,900Cheng Ping Liong 296,667 296,667 - - 593,334Tan Chuan Hock 4,200,000 4,200,000 - - 8,400,000Wan Kok Weng 6,115,385 6,115,385 - (247,300) 11,983,470Chan Pik Khew 4,615,384 4,615,384 - - 9,230,768

Deemed interests:-Tan Bak Hong 1 34,085,326 34,085,326 - - 68,170,652Yap Li Li 2 34,828,326 34,828,326 285,900 - 69,942,552Tan Chuan Hock 3 4,000,000 4,000,000 - - 8,000,000Wan Kok Weng 4 4,615,384 4,615,384 - - 9,230,768Chan Pik Khew 5 6,115,385 6,115,385 - (247,300) 11,983,470

1 Deemed interested by virtue of his interest in Grand-Flo Corporation Sdn. Bhd.2 Deemed interested by virtue of her spouse, Mr. Tan Bak Hong and by virtue of her and Mr. Tan Bak Hong’s interest

in Grand-Flo Corporation Sdn. Bhd.3 Deemed interested by virtue of his interest in AI Capital Sdn. Bhd.4 Deemed interested by virtue of the interest of his spouse, Ms. Chan Pik Khew’s interest in the Company5 Deemed interested by virtue of the interest of her spouse, Mr. Wan Kok Weng’s interest in the Company

By virtue of Mr. Tan Bak Hong’s and Ms. Yap Li Li’s interest in the shares of the Company, they are deemed to have interest in the subsidiaries under Section 6A of the Companies Act, 1965 to the extent that the Company has an interest.

DIreCtorS’ report (cont’d)


36 DIreCtorS’ report (cont’d)

number of warrants

Balance at1.1.2012

additional warrants

issued pursuant to

Bonus issue Bought SoldBalance at 31.12.2012

Direct interests:Tan Bak Hong 10,417,368 10,417,368 - - 20,834,736Cheng Ping Liong 1,764,200 1,764,200 - - 3,528,400Tan Chuan Hock 2,100,000 2,100,000 - - 4,200,000Wan Kok Weng 790,700 790,700 - (1,581,400) -

Indirect interests:Tan Bak Hong 1 4,345,600 4,345,600 - - 8,691,200Yap Li Li 2 14,762,968 14,762,968 - - 29,525,936Tan Chuan Hock 3 2,000,000 2,000,000 - - 4,000,000Chan Pik Khew 4 790,700 790,700 - (1,581,400) -

1 Deemed interested by virtue of his interest in Grand-Flo Corporation Sdn. Bhd.2 Deemed interested by virtue of her spouse, Mr. Tan Bak Hong’s interest in the Company and by virtue of her and

Mr. Tan Bak Hong’s interest in Grand-Flo Corporation Sdn. Bhd.3 Deemed interested by virtue of his interest in AI Capital Sdn. Bhd.4 Deemed interested by virtue of her spouse, Mr. Wan Kok Weng’s interest in the Company.

Each Warrant 2010/2015 entitled the registered holder to subscribe for two ordinary shares at the exercise price of RM0.25 each at any time within five years from the date of issue on 22 April 2010.

Other than as disclosed above, no other Directors in office at the end of the financial year held any interest in the shares of the Company or its related corporations during the financial year.

DIreCtorS’ BeneFItS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or objects of enabling the Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive any benefits (except as disclosed in Notes 34 and 38 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

ISSUe oF SHareS anD DeBentUreS

During the financial year, the following shares of RM0.10 each were issued by way of private placement through placement agent:

Date of issue purpose of issue Class of share number of shares term of issue

18 June 2012 Working capital Ordinary shares 330,100 Cash16 July 2012 Bonus issue Ordinary shares 159,782,925 Non cash

The new ordinary shares issued during the financial year ranked pari passu in all respect with the existing ordinary shares of the Company.

There were no debentures issued during the financial year.

37

A N N U A L R E P O R T 2 0 1 2


treaSUrY SHareS

The shareholders of the Company, by an ordinary resolution passed in an annual general meeting held on 22 June 2012, approved the Company’s plan to repurchase its own shares.

During the financial year, the Company repurchased 217,800 of its issued ordinary shares from the open market at an average price of RM0.41 per share. These repurchased shares plus the 238,700 treasury shares brought forward from the previous financial year total to 456,500 shares were re-sold in the open market at an average price of RM0.45 per share. Subsequent to the resale, the Company repurchased 1,393,200 of its issued ordinary shares from the open market at an average price of RM0.22 per share. The total consideration paid for the repurchase including transaction costs was RM303,343. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.

Of the total 319,565,850 issued and fully paid ordinary shares as at 31 December 2012, 1,393,200 are held as treasury shares by the Company. As at 31 December 2012, the number of outstanding ordinary shares in issue after the setoff is therefore 318,172,650 ordinary shares of RM0.10 each.

WarrantS 2010/2015

On 22 April 2010, the Company allotted and issued 67,912,455 new Warrants 2010/2015 at an issue price of RM0.02 each on the basis of 1 Warrant 2010/2015 for every 2 existing ordinary shares held in the Company on 30 March 2010 (“Rights Issue of Warrants”). Each Warrant 2010/2015 entitles the registered holder to subscribe for 1 new ordinary share in the Company at any time on or after 22 April 2010 to 21 April 2015, at an exercise price of RM0.25 in accordance with the Deed Poll. Any Warrant 2010/2015 not exercised by the date of maturity will lapse thereafter and cease to be valid for all purposes.

The ordinary shares issued from the exercise of Warrants 2010/2015 shall rank pari passu in all respects with the existing issue ordinary shares of the Company except that they shall not be entitled to any dividends, rights, allotments and/or other distributions declared, the entitlement date of which is prior to the date of allotment of the new shares arising from the exercise of Warrants 2010/2015.

The Warrants 2010/2015 are constituted by a Deed Poll dated 12 March 2010.

On 17 July 2012, a total of 67,582,355 warrants 2010/2015 were issued pursuant to the Company’s bonus issue exercise.

otHer StatUtorY InFormatIon

Before the Statements of Comprehensive Income and Statements of Financial Position of the Group and of the Company were made out, the Directors took reasonable steps:

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

(b) to ensure that any current assets which were unlikely to be realised in the ordinary course of business including their values as shown in the accounting records of the Group and of the Company have been written down to an amount which they might be expected so to realise.

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

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

(b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; or

(d) not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.


38

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

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

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

In opinion of the Directors:

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

(b) the results of the Group’s and the Company’s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(c) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and the Company for the financial year in which this report is made.

SIGnIFICant eventS DUrInG tHe FInanCIaL Year

The significant events during the financial year are disclosed in Note 46 to the Financial Statements.

eventS aFter tHe reportInG Date

The events after the reporting period is disclosed in Note 47 to the Financial Statements.

aUDItorS

The Auditors, Messrs SJ Grant Thornton have expressed their willingness to continue in office.

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

...................................................................... )tan BaK HonG ) ) ) ) ) ) DIRECTORS ) ) ) ) )...................................................................... ) CHenG pInG LIonG )

Kuala Lumpur24 April 2013


39

A N N U A L R E P O R T 2 0 1 2

Statement BY DIreCtorS

In the opinion of the Directors, the financial statements set out on pages 42 to 102 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards 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 the Company as at 31 December 2012 and of their financial performance and cash flows for the financial year then ended.

In the opinion of the Directors, the information set out on page 103 to the financial statements had been compiled in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

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

............................................................. ............................................................ tan BaK HonG CHenG pInG LIonG


StatUtorY DeCLaratIon

I, Tan Bak Hong, being the Director primarily responsible for the financial management of Grand-Flo Solution Berhad, do solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on pages 42 to 102 are correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by )the abovenamed at Kuala Lumpur in )the Federal Territory this day of )24 April 2013 ) ........................................................................ tan BaK HonG

Before me:

Commissioner for Oaths


40InDepenDent aUDItorS’ reportto tHe memBerS oF GranD-FLo SoLUtIon BerHaD (Incorporated in Malaysia)

report on the Financial Statements

We have audited the financial statements of Grand-Flo Solution Berhad, which comprise the Statements of Financial Position as at 31 December 2012 of the Group and of the Company, and the Statements of Comprehensive Income, Statements of Changes in Equity and Statements of Cash Flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes as enumerated in Notes 1 to 48 and set out on pages 42 to 102.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 2012 and of their financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

report on other Legal and regulatory requirements

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

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries 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, as disclosed 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 statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(d) The auditors’ reports on the financial statements of the subsidiaries incorporated in Malaysia did not contain any qualification or any adverse comment made under Section 174 (3) of the Act.

41

A N N U A L R E P O R T 2 0 1 2

InDepenDent aUDItorS’ report (cont’d)to tHe memBerS oF GranD-FLo SoLUtIon BerHaD

(Incorporated in Malaysia)

other reporting responsibilities

The supplementary information set out on page 103 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

other matters

As stated in Note 48 to the financial statements, Grand-Flo Solution Berhad adopted Malaysian Financial Reporting Standards on 1 January 2012 with a transition date of 1 January 2011. These standards were applied retrospectively by Directors to the comparative information in these financial statements, including the Statements of Financial Position as at 31 December 2011 and 1 January 2011, and the Statements of Comprehensive Income, Statements of Changes in Equity and Statements of Cash Flows for the financial year ended 31 December 2011 and related disclosures. We were not engaged to report on the Malaysian Financial Reporting Standards transition comparative information, and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Group and of the Company for the financial year ended 31 December 2012 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 January 2012 do not contain misstatements that materially affect the financial position as at 31 December 2012 and financial performance and cash flows for the financial year ended.

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

SJ Grant tHornton nG CHee HoonG (NO. AF: 0737) CHARTERED ACCOUNTANT CHARTERED ACCOUNTANTS (NO: 2278/10/14(J)) PARTNER



42StatementS oF FInanCIaL poSItIonas at 31 December 2012

Group Companynote 31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rm

aSSetSnon-current assetsProperty, plant and

equipment 4 19,802,884 13,581,851 12,053,354 40,794 40,357 9,991Investment in subsidiaries 5 - - - 36,545,523 36,545,523 36,315,508Investment in associates 6 17,723,968 14,575,362 10,562,562 7,213,688 7,213,688 4,402,288Other investment 7 68,230 70,031 71,830 - - -Development costs 8 2,967,140 1,728,811 1,197,739 2,967,140 1,728,811 1,197,739Goodwill on consolidation 9 22,447,722 22,447,722 22,217,707 - - -Deferred tax assets 10 437,000 800,000 - 339,000 339,000 -

Total non-current assets 63,446,944 53,203,777 46,103,192 47,106,145 45,867,379 41,925,526

Current assetsInventories 11 9,464,235 11,363,688 8,211,318 - - -Trade receivables 12 19,556,071 17,009,865 15,410,325 6,000 1,006,000 -Other receivables 13 1,714,848 615,091 522,009 10,350 15,218 45,673Amount due from

subsidiaries 14 - - - 170,617 839,904 571,516Amount due from

associates 15 102,379 87,597 145,776 13,794 61,227 64,614Amount due from

related party 16 925,400 429,250 - - - -Tax recoverable 407,157 333,429 403,451 98,633 98,633 98,633Fixed deposits with

licensed banks 17 645,505 625,747 484,068 - - -Cash and bank balances 18 6,403,115 5,512,319 4,474,560 106,008 64,750 12,268

Total current assets 39,218,710 35,976,986 29,651,507 405,402 2,085,732 792,704

total assets 102,665,654 89,180,763 75,754,699 47,511,547 47,953,111 42,718,230

eQUItY anD LIaBILItIeS

eQUItYEquity attributable to

owners of the parent:Share capital 19 31,956,585 15,945,282 14,508,548 31,956,585 15,945,282 14,508,548Share premium 19 3,639,189 19,586,565 15,030,846 3,639,189 19,586,565 15,030,846Treasury shares 20 (303,343) (94,079) (109,203) (303,343) (94,079) (109,203)Warrant reserves 21 1,174,271 1,180,873 1,180,873 1,174,271 1,180,873 1,180,873Other reserves 22 1,109,451 1,109,451 1,109,451 - - -Foreign exchange

fluctuation reserve (283,106) (127,037) (226,990) - - -Revaluation reserve 23 4,929,691 - - - - -Retained earnings 24 31,944,451 26,015,576 18,218,864 5,636,421 8,892,451 3,999,049

74,167,189 63,616,631 49,712,389 42,103,123 45,511,092 34,610,113Non-controlling interest 306,569 291,691 282,246 - - -

total equity 74,473,758 63,908,322 49,994,635 42,103,123 45,511,092 34,610,113

43

A N N U A L R E P O R T 2 0 1 2

Group Companynote 31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rm

LIaBILItIeSnon-current liabilitiesFinance lease liabilities 25 1,216,387 1,284,450 833,053 - - -Term loans 26 2,027,946 2,848,676 3,537,711 - - -Deferred tax liabilities 10 2,783,528 1,061,270 452,070 - - -

Total non-current liabilities 6,027,861 5,194,396 4,822,834 - - -

Current liabilitiesTrade payables 27 7,700,226 7,199,564 6,899,278 - - -Other payables 28 2,147,823 3,622,496 2,943,850 130,766 809,261 334,890Amount due to Directors 29 - - 476,250 - - 476,250Amount due to

subsidiaries 30 - - - 5,277,658 1,632,758 6,664,519Amount due to related

parties 31 631,786 113,531 - - - -Finance lease liabilities 25 986,731 844,738 909,723 - - -Borrowings 32 10,633,481 8,101,645 9,606,542 - - 632,458Tax payable 63,988 196,071 101,587 - - -

Total current liabilities 22,164,035 20,078,045 20,937,230 5,408,424 2,442,019 8,108,117

total liabilities 28,191,896 25,272,441 25,760,064 5,408,424 2,442,019 8,108,117

total equity and liabilities 102,665,654 89,180,763 75,754,699 47,511,547 47,953,111 42,718,230

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

StatementS oF FInanCIaL poSItIon (cont’d)

as at 31 December 2012


44


StatementS oF CompreHenSIve InComefor the Financial Year ended 31 December 2012

Group Companynote 2012 2011 2012 2011

rm rm rm rm

Revenue 33 87,691,284 74,676,148 1,719,085 8,481,642

Costs of sales (63,919,779) (49,751,123) (823,016) (585,593)

Gross profit 23,771,505 24,925,025 896,069 7,896,049

Other income 643,716 804,211 2,760 240,524

Administration expenses (14,520,807) (14,191,053) (2,120,895) (1,801,598)

Distribution expenses (2,809,661) (2,413,397) (131,347) (135,767)

Other expenses (173,255) - - -

Finance costs (714,404) (595,455) - (9,358)

Share of profit of associates 2,560,943 1,531,065 - -

Profit/(Loss) before tax 34 8,758,037 10,060,396 (1,353,413) 6,189,850

Tax (expense)/income 35 (911,667) (659,711) - 298,080

Net profit/(loss) for the year 7,846,370 9,400,685 (1,353,413) 6,487,930

Other comprehensive income :Revaluation of freehold and leasehold

land and building, net of tax 4,929,691 - - -Exchange translation differences (156,069) 99,953 - -

Total comprehensive income/(loss) for the financial year 12,619,992 9,500,638 (1,353,413) 6,487,930

Profit/(loss) for the financial year attributable to :

Owners of the parent 7,831,492 9,391,240 (1,353,413) 6,487,930Non-controlling interest 14,878 9,445 - -

7,846,370 9,400,685 (1,353,413) 6,487,930

Total comprehensive income/(loss) attributable to :

Owners of the parent 12,605,114 9,491,193 (1,353,413) 6,487,930Non-controlling interest 14,878 9,445 - -

12,619,992 9,500,638 (1,353,413) 6,487,930

Earning per share attributable to owners of the parent (sen):-

Earning per share - Basic 36 2.45 3.07

- Diluted 36 1.72 4.26

45

A N N U A L R E P O R T 2 0 1 2

StatementS oF CHanGeS In eQUItYfor the Financial Year ended 31 December 2012

att

rib

utab

le t

o o

wne

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f th

e p

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on-

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Bal

ance

at

1 Ja

nuar

y 20

1114

,508

,548

15,0

30,8

46(1

09,2

03)

1,18

0,87

3-

1,10

9,45

1(2

26,9

90)

18,2

18,8

6449

,712

,389

282,

246

49,9

94,6

35

Tota

l com

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ive

inco

me

for

the

year

--

--

--

99,9

539,

391,

240

9,49

1,19

39,

445

9,50

0,63

8

Tran

sact

ions

with

ow

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:Is

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f ord

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1,43

6,73

44,

485,

306

--

--

--

5,92

2,04

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5,92

2,04

0Is

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f tre

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-70

,413

494,

744

--

--

-56

5,15

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565,

157

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-(4

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--

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cost

s-

-(5

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--

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37)

--

--

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1,43

6,73

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--

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Bal

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at

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Dec

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,586

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1,18

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1,10

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15,5

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291,

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63,9

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--

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4,92

9,69

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19,9

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-(6

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--

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-82

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--

--

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-21

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184,

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--

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1,95

6,58

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58


46StatementS oF CHanGeS In eQUItY (cont’d)for the Financial Year ended 31 December 2012

non-Distributable DistributableShare

capitalShare

premiumtreasury

sharesWarrant

reservesretainedearnings total

rm rm rm rm rm rm

Company

Balance at 1 January 2011 14,508,548 15,030,846 (109,203) 1,180,873 3,999,049 34,610,113

Total comprehensive income for the year - - - - 6,487,930 6,487,930

Transactions with owners:Issuance of treasury shares - 70,413 494,744 - - 565,157Share repurchased - - (473,771) - - (473,771)Transaction costs - - (5,849) - - (5,849)Dividend paid (Note 37) - - - - (1,594,528) (1,594,528)Issuance of ordinary shares 1,436,734 4,485,306 - - - 5,922,040

Total transactions with owners 1,436,734 4,555,719 15,124 - (1,594,528) 4,413,049

Balance at 31 December 2011 15,945,282 19,586,565 (94,079) 1,180,873 8,892,451 45,511,092

Total comprehensive income for the year - - - - (1,353,413) (1,353,413)

Transactions with owners:Issuance of treasury shares - 21,239 184,209 - - 205,448Share repurchased - - (389,643) - - (389,643)Transaction costs - (46,439) (3,830) - - (50,269)Dividend paid (Note 37) - - - - (1,902,617) (1,902,617)Bonus issue of shares 15,978,293 (15,978,293) - - - -Issuance of ordinary shares 33,010 56,117 - (6,602) - 82,525

Total transactions with owners 16,011,303 (15,947,376) (209,264) (6,602) (1,902,617) (2,054,556)

Balance at 31 December 2012 31,956,585 3,639,189 (303,343) 1,174,271 5,636,421 42,103,123


47

A N N U A L R E P O R T 2 0 1 2

Group Company2012 2011 2012 2011

rm rm rm rm

CaSH FLoWS From operatInG aCtIvItIeS

Profit/(Loss) before tax 8,758,037 10,060,396 (1,353,413) 6,189,850

adjustments for:-Amortisation of development cost 776,126 553,235 776,126 553,235Amortisation of other investment 1,801 1,799 - -Bad debts written off 61,541 9,135 - -Depreciation 1,754,087 1,570,107 5,663 3,383Dividend income - - (729,214) (4,462,585)Gain on disposal of property, plant and

equipment (206,158) (125,049) - -Gain on deemed disposal of associate - (79,432) - -Impairment loss on trade receivables 3,235 13,107 - -Impairment loss on trade receivables

no longer required (19,515) (17,528) - -Interest income (35,058) (17,337) (2,760) (6,029)Inventories written off 89,797 - - -Interest expense 714,404 595,455 - 9,358Share of profit of associates (2,560,943) (1,531,065) - -Unrealised loss/(gain) on foreign exchange 896 (271) - -

Operating profit/(loss) before working capital changes 9,338,250 11,032,552 (1,303,598) 2,287,212

Changes in working capital:-Inventories 1,809,656 (3,152,370) - -Receivables (3,691,224) (1,697,337) 1,004,868 (975,545)Payables (974,907) 976,799 (678,495) 471,967Subsidiaries - - 4,314,187 (5,300,149)Associates (152,890) (79,929) 47,433 3,387Directors - (476,250) - (476,250)Related company 22,105 (315,719) - -

Cash generated from/(used in) operations 6,350,990 6,287,746 3,384,395 (3,989,378)

Tax refund 151,004 - - -Tax paid (826,453) (686,004) - (40,920)

Net cash from/(used in) operating activities 5,675,541 5,601,742 3,384,395 (4,030,298)

StatementS oF CaSH FLoWSfor the Financial Year ended 31 December 2012


48

Group Companynote 2012 2011 2012 2011

rm rm rm rmCaSH FLoWS From InveStInG

aCtIvItIeSAdditional investment in a subsidiary - (230,015) - (230,015)Additional investment in associate (587,663) (2,811,400) - (2,811,400)Development costs incurred (2,014,455) (1,084,307) (2,014,455) (1,084,307)Dividend received from associate 138,108 547,205 729,214 409,097Dividend received from subsidiaries - - - 4,053,488Interest received 35,058 17,337 2,760 6,029Proceeds from disposal of property,

plant and equipment 618,181 231,155 - -Placement of fixed deposit (19,069) 22,571 - -Purchase of property, plant and

equipment A (801,505) (1,772,305) (6,100) (33,749)

Net cash (used in)/from investing activities (2,631,345) (5,079,759) (1,288,581) 309,143

CaSH FLoWS From FInanCInG aCtIvItIeSInterest paid (714,404) (595,455) - (9,358)Net drawndown/(repayment) of term

loans and short term borrowings 1,906,688 (2,113,035) - (630,054)Purchase of treasury shares (389,643) (473,771) (389,643) (473,771)Repayment of finance lease payables (983,070) (1,022,007) - -Dividend paid (1,902,617) (1,594,528) (1,902,617) (1,594,528)Proceed from isssuance of shares 82,525 5,922,040 82,525 5,922,040Proceed from issuance of treasury

shares 205,448 565,157 205,448 565,157Share issuance expenses (50,269) (5,849) (50,269) (5,849)

Net cash (used in)/from financing activities (1,845,342) 682,552 (2,054,556) 3,773,637

Effect of foreign exchange translation (272,278) 152,414 - -

CaSH anD CaSH eQUIvaLentSNet increase 926,576 1,356,949 41,258 52,482

As at beginning of the year:-As previously reported 4,546,388 3,265,886 64,750 12,268Effect of foreign exchange translation 160,491 (76,447) - -

As restated 4,706,879 3,189,439 64,750 12,268

As at end of the year B 5,633,455 4,546,388 106,008 64,750

a. pUrCHaSe oF propertY, pLant anD eQUIpment

During the financial year, the Group and the Company acquired property, plant equipment with aggregate costs of RM1,858,505 and RM6,100 (2011: RM3,180,724 and RM33,749) respectively of which RM1,057,000 and Nil (2011: RM1,408,419 and Nil) respectively were financed by finance lease facilities respectively. Cash payments of RM801,504 and RM6,100 (2011: RM1,722,305 and RM33,749) for the Group and the Company respectively were made to purchase property, plant and equipment.

B. CaSH anD CaSH eQUIvaLentS

Cash and cash equivalents included in the Statements of Cash Flows comprise the following:-

Group Company2012 2011 2012 2011

rm rm rm rm

Cash and bank balances 6,403,115 5,512,319 106,008 64,750Fixed deposits with licensed banks 645,505 625,747 - -Bank overdrafts (Note 32) (792,920) (988,502) - -

6,255,700 5,149,564 106,008 64,750Less: Fixed deposits with licensed banks

(Note 17) (622,245) (603,176) - -5,633,455 4,546,388 106,008 64,750

StatementS oF CaSH FLoWS (cont’d)for the Financial Year ended 31 December 2012

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1. GeneraL InFormatIon

The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Third Floor, No. 79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan. The principal place of business of the Company is located at No. 3-5, Block D2, Jalan PJU 1/39, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan.

The principal activities of the Company are the provision of information technology solutions and investment holding. The principal activities of the subsidiaries and associates are disclosed in Note 5 and Note 6 to the financial statements respectively.

There have been no significant changes in the nature of these activities of the Company and its subsidiaries during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors passed on 24 April 2013.

2. BaSIS oF preparatIon

2.1 Statement of Compliance

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

2.2 Basis of measurement

The financial statements of the Group and of the Company are prepared under the historical cost convention, unless otherwise indicated in the summary of significant accounting policies.

2.3 Functional and presentation Currency

The financial statements are presented in Ringgit Malaysia (RM) which is the Company’s functional currency and all values are rounded to the nearest RM except when otherwise stated.

2.4 First-time adoption of mFrSs

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

The explanation and financial impacts on transition to MFRSs are disclosed in Note 48.

2.5 Standards Issued But not Yet effective

The Group and the Company have not applied the following MFRSs that have been issued by the Malaysian Accounting Standards Board (“MASB”) but are not yet effective for the Group and the Company:

amendments to mFrS effective 1 July 2012

MFRS 101 Presentation of Financial Statements - Presentation of Items of Other Comprehensive Income

mFrSs effective 1 January 2013

MFRS 10 Consolidated Financial StatementsMFRS 11 Joint ArrangementsMFRS 12 Disclosure of Interests in Other EntitiesMFRS 13 Fair Value MeasurementMFRS 119 Employee Benefits (International Accounting Standard (“IAS”) 19 as amended by

International Accounting Standards Board (“IASB”) in June 2011)

noteS to tHe FInanCIaL StatementS31 December 2012


50NOTES TO THE FINANCIAL STATEMENTS (cont’d)31 December 2012

2. BaSIS oF preparatIon (Cont’D)

2.5 Standards Issued But not Yet effective (cont’d)

mFrSs effective 1 January 2013 (cont’d)

The Group and the Company have not applied the following MFRSs that have been issued by the Malaysian Accounting Standards Board (“MASB”) but are not yet effective for the Group and the Company (cont’d):

MFRS 127 Separate Financial Statements (IAS 27 as amended by IASB in May 2011)MFRS 128 Investments in Associates and Joint Ventures (IAS 28 as amended by IASB in

May 2011)IC Interpretation 20 Stripping Costs in the Production of A Surface Mine

amendments to mFrSs effective 1 January 2013

MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards - Government LoansMFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and Financial

LiabilitiesMFRS 10, 11 and Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in

12 Other Entities: Transition GuidanceAnnual Improvements 2009 – 2011 Cycle issued in July 2012

amendments to mFrS effective 1 January 2014

MFRS 10, 12 and Consolidated Financial Statements, Disclosure of Interests in Other Entities and 127 Separate Financial Statements: Investment Entities

amendments to mFrS effective 1 January 2014

MFRS 132 Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities

mFrSs effective 1 January 2015

MFRS 7 Financial Instruments : Disclosures – Mandatory Date of MFRS 9 and Transition Disclosures

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

IC Interpretation 20 is not applicable to the Group’s operations.

MFRS 10 and IC Interpretation 20 are not applicable to the Company’s operations.

The initial application of the above standards, are not expected to have any financial impacts to the financial statements of the Group and of the Company upon the first adoption except for:

MFRS 9 Financial Instruments

MFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in MFRS 139 Financial Instruments: Recognition and Measurement. MFRS 9 requires financial assets to be classified into two measurement categories: fair value and amortised cost, determined at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. Most of the requirements for financial liabilities are retained, except for cases where the fair value option is taken, the part of a fair value change due to an entity’s own risk is recorded in other comprehensive income rather than profit or loss, unless this creates an accounting mismatch.

The adoption of MFRS 9 will result in a change in accounting policy. The Group is currently examining the financial impact of adopting MFRS 9.

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NOTES TO THE FINANCIAL STATEMENTS (cont’d)31 December 2012


2.5 Standards Issued But not Yet effective (cont’d)

The initial application of the above standards, are not expected to have any financial impacts to the financial statements of the Group and of the Company upon the first adoption, except for (cont’d):

MFRS 11 Joint Arrangements

MFRS 11 supersedes the FRS 131 Interest in Joint Ventures. It aligns more closely the accounting by the investors with their rights and obligations relating to the joint arrangement. In addition, FRS 131’s option of using proportionate consolidation for joint ventures has been eliminated. MFRS 11 now requires the use of the equity accounting method, which is currently used for investment in associates.

The adoption of MFRS 11 will result in a change in accounting policy as the Group is currently applying proportionate method in the consolidation of its jointly-controlled entity. The Group is currently examining the financial impact of adopting MFRS 11.

MFRS 13 Fair Value Measurement

MFRS 13 does not affect which items are required to be fair-valued, but clarifies the definition of fair value and provides related guidance and enhance disclosures about fair value measurements. It replaces the existing fair value guidance in different MFRSs.

The adoption of MFRS will result in a change in accounting policy for the items measured at fair value in the financial statements. The Group is currently examining the financial impact of adopting MFRS 13.

2.6 Significant accounting estimates and Judgements

Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Group’s accounting policies and reported amounts of assets, liabilities, income and expenses, and disclosures made. Estimates and underlying assumptions are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.

2.6.1 estimation Uncertainty

Information about significant judgements, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses are discussed below.

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

revaluation of property, plant and equipment

The Group measures its land and buildings at revalued amount with changes in fair value being recognised in other comprehensive income. The Group engaged independent valuation specialists to determine fair values as at 31 December 2012.

The carrying amount of the land and buildings at the end of the reporting period, and the relevant revaluation bases, are disclosed in Note 4 to the financial statements.

Useful lives of depreciable assets

Management estimates the useful lives of the property, plant and equipment to be within 2 to 82 years and reviews the useful lives of depreciable assets at end each of the reporting period. At 31 December 2012 management assesses that the useful lives represent the expected utility of the assets to the Group. Actual results, however, may vary due to change in the expected level of usage and technological developments, which resulting the adjustment to the Group’s assets.




2.6 Significant accounting estimates and Judgements (cont’d)

2.6.1 estimation Uncertainty (cont’d)

Useful lives of depreciable assets (cont’d)

The carrying amount of the Group’s property, plant and equipment at the end of the reporting period is disclosed in Note 4 to the financial statements.

A 2% (2011: 4%) difference in the expected useful lives of the property, plant and equipment from the management’ estimates would result in approximately 1% (2011: 1%) variance in the Group’s profit for the financial year.

Impairment of goodwill

Impairment loss is recognised for the amount by which the asset’s or cash generating unit’s carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual result may vary, and may cause significant adjustments to the Group’s assets within the next financial year.

Further details of the carrying values, key assumptions applied in the impairment assessment of goodwill and sensitivity analysis to changes in the assumptions are disclosed in Note 9 to the financial statements.

Impairment of property, plant and equipment and prepaid land lease payments

The Group carried out impairment tests where there are indications of impairment based on a variety of estimation including value-in-use of cash-generating unit to which the property, plant and equipment and the prepaid land lease payments are allocated. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from cash-generating unit and also to choose a suitable discount rate in order to calculate present value of those cash flows.

Inventories

Inventories are measured at the lower of cost and net realisable value. In estimating net realisable values, management takes into account the most reliable evidence available at the times the estimates are made. The Group’s core business is subject to economical and technology changes which may cause selling prices to change rapidly, and the Group’s profit to change.

The carrying amount of the Group’s inventories at the end of the reporting period is disclosed in Note 11 to the financial statements.

The management expects that the estimated net realisable value of the inventories would not have material difference from the management’s estimates and hence it would not result in material variance in the Group’s profit for the financial year.

Fair value of financial instruments

Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the notes regarding financial assets and liabilities. In applying the valuation techniques management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm’s length transaction at the end of the reporting period.

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2.6.1 estimation Uncertainty (cont’d)

Impairment of loans and receivables

The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. Factors such as probability of insolvency or significant financial difficulties of the receivables and default or significant delay in payments are considered in determining whether there is objective evidence of impairment.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics.

The carrying amount of the Group’s loans and receivables at the reporting date is disclosed in Notes 12 and 13 to the Financial Statements.

Deferred tax assets

Deferred tax assets are recognised for all deductible temporary differences, unutilised tax losses, unabsorbed capital allowances and unused tax credits to the extent that it is probable that taxable profit will be available against which all the deductible temporary differences, unutilised tax losses and unabsorbed capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

Deferred tax assets

Assumptions about generation of future taxable profits depend on management’s estimates of future cash flows. These depend on estimates of future production and sales volume, operating costs, capital expenditure, dividends and other capital management transactions. Judgement is also required about application of income tax legislation. These judgements and assumptions are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised in the Statement of Financial Position and the amount of unrecognised tax losses and unrecognised temporary differences.

The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group’s latest approved budget forecast, which is adjusted for significant non-taxable income and expences and specific limits to the use of any unused tax loss or credit. The tax rules in the numerous jurisdictions in which the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on specific facts and circumstances.

2.6.2 Significant management Judgement

The following are significant management judgement in applying the accounting policies of the Group that have the most significant effect on the financial statements.

Development costs

Management monitors progress of internal research and development projects by using a project management system. Significant judgement is required in distinguishing research from the development phase. Development costs are recognised as an asset when all the criteria are met, whereas research costs are expensed as incurred.

To distinguish any research-type project phase from the development phase, it is the Group’s accounting policy to also require a detailed forecast of sales or cost savings expected to be generated by the intangible asset. The forecast is incorporated into the group’s overall budget forecast as the capitalisation of development costs commences. This ensures that managerial accounting, impairment testing procedures and accounting for internally-generated intangible assets is based on the same data.





2.6.2 Significant management Judgement (cont’d)

Development costs (cont’d)

The Group’s management also monitors whether the recognition requirements for development costs continue to be met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems after the time of recognition.

Leases

In applying the classification of leases in MFRS 117, management considers some of its leases of leasehold land as finance lease arrangements. The lease transaction is not always conclusive, and management uses judgement in determining whether the lease is a finance lease arrangement that transfers substantially all the risks and rewards incidental to ownership, whether the lease term is for the major part of the economic life of the asset even if title is not transferred and others in accordance with MFRS 117 Leases.

3. SIGnIFICant aCCoUntInG poLICIeS

The Group and the Company apply the significant accounting policies as summarised below, consistently throughout all periods presented in the financial statements and in preparing their opening MFRS statements of financial position at 1 January 2011 (the transition date to MFRS framework), unless otherwise stated.

3.1 Basis of consolidation

The Group financial statements consolidate the audited financial statements of the Company and all of its subsidiaries, which have been prepared in accordance with the Group’s accounting policies. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. The financial statements of the Company and its subsidiaries are all drawn up to the same reporting period.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective.

Business combinations are accounted for using the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.

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

The Group elects for each individual business combination, whether non-controlling interest in the acquiree, if any, is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree net identifiable assets.

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

Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases.

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3. SIGnIFICant aCCoUntInG poLICIeS (Cont’D)

3.1 Basis of consolidation (cont’d)

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

Non-controlling interest in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company.

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

3.2 Subsidiaries

A subsidiary is a company in which the Group or the Company has the power to exercise control over the financial and operating policies so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

Investment in subsidiaries is stated at cost less any impairment losses in the Company’s statement of financial position.

Upon the disposal of investment in a subsidiary, the differences between the net disposal proceed and its carrying amount is included in profit of loss.

3.3 associates

Associates are entities in which the Group has significant influence, but no control, over their financial and operating policies.

The Group’s investments in associates are accounted for using the equity method. Under the equity method, investment in an associate is carried in the statement of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment.

The share of the result of an associate is reflected in profit or loss. This is the profit attributable to equity holders of the associate and therefore is the profit after tax and non-controlling interests in the subsidiaries of the associate. When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest including any long-term investment is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate.

Where there has been a change recognised directly in the equity of an associate, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The financial statements of the associates are prepared as of the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies of the associates in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investments in its associates. The Group determines at each end of the reporting period whether there is any objective evidence that the investments in the associate are impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associates and their carrying value and recognise the amount in the “share of profit of associates” in profit or loss.




3.3 associates (cont’d)

Upon loss of significant influence over an associate, the Group measures and recognises any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognised in profit or loss.

In the Company’s separate financial statements, investments in associates are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

3.4 Foreign currency translation

The Group’s consolidated financial statements are presented in RM, which is also the parent company’s functional currency.

3.4.1 Foreign currency transactions and balances

Transactions in foreign currencies are initially recorded at the functional currency rates prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date.

All differences are taken to the profit or loss with the exception of all monetary items that forms part of a net investment in a foreign operation. These are recognised in other comprehensive income until the disposal of the net investment, at which time they are reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising in translation of non-monetary items is recognised in line with the gain or loss of the item that gave rise to the translation difference (translation differences on items whose gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss respectively).

3.4.2 Foreign operations

The assets and liabilities of foreign operations are translated into RM at the rate of exchange prevailing at the reporting date and their profit or loss and other comprehensive income are translated at average rate over the reporting period. The exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the profit or loss.

Any goodwill arising on the acquisition of a foreign operation subsequent to 1 January 2011 and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Prior to 1 January 2011, the date of transition to MFRS, the Group treated goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition as assets and liabilities of the parent. Therefore, those assets and liabilities are non-monetary items already expressed in the functional currency of the parent and no further translation differences occur.

3.5 property, plant and equipment and depreciation

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

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3.5 property, plant and equipment and depreciation (cont’d)

All property, plant and equipment, except for land and building, are subsequently stated at cost less accumulated depreciation and less any impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such costs as individual assets with specific useful lives and depreciation, respectively. All other repair and maintenance costs are recognised in profit or loss as incurred.

Land is shown at fair values, based on valuations by external independent valuers, less subsequent accumulated depreciation on buildings and any accumulated impairment losses. Valuations are performed with sufficient regularity, usually every five years, to ensure that the carrying amount does not differ materially from the fair value of the land and buildings at the end of the reporting period.

As at the date of revaluation, accumulated depreciation, if any, is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Any revaluation surplus arising upon appraisal of land is recognised in other comprehensive income and credited to the ‘revaluation reserve’ in equity. To the extent that any revaluation decrease or impairment loss has previously been recognised in profit or loss, a revaluation increase is credited to profit or loss with the remaining part of the increase recognised in other comprehensive income. Downward revaluations of land are recognised upon appraisal or impairment testing, with the decrease being charged to other comprehensive income to the extent of any revaluation surplus in equity relating to this asset and any remaining decrease recognised in profit or loss. Any revaluation surplus remaining in equity on disposal of the asset is transferred to other comprehensive income.

Buildings that are leasehold property are also included in property, plant and equipment if they are held under a finance lease. Such assets are depreciated over their expected useful lives (determined by reference to comparable owned assets) or over the term of the lease, if shorter.

Depreciation is recognised on the straight line method in order to write off the cost or valuation of each asset over its estimated useful life. Freehold land with an infinite life is not depreciated. Other property, plant and equipments are depreciated based on the estimated useful lives of the assets as follows:

Leasehold land Over the lease term of 82 yearsBuildings 2%Computers 20% - 60%Renovation 8% - 20%Motor vehicles 20%Factory/office furniture and equipment 8% - 25%Plant and machinery 10%

Restoration cost relating to an item of the property, plant and equipment is capitalised only if such expenditure is expected to increase the future benefits from the existing property, plant and equipment beyond its previously assessed standard of performance.

Property, plant and equipment are written down to recoverable amount if, in the opinion of the Directors, it is less than their carrying value. Recoverable amount is the net selling price of the property, plant and equipment i.e. the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.

The residual values, useful life and depreciation method are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable, or at least annually to ensure that the amount, method and period of depreciation are consistent with previous estimates and expected pattern of consumption of future economic benefits embodied in the items of property, plant and equipment.

Property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Gains or losses on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets are recognised in profit or loss.




3.6 Goodwill

Goodwill represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary, associate and jointly controlled entities at the date of acquisition.

Goodwill arising on the acquisition of subsidiaries is presented separately in the Consolidated Statement of Financial Position while goodwill arising on the acquisition of associate is included within the carrying amount of investment in associate.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying values may be impaired.

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

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

An impairment loss recognised for goodwill should not be reversed in subsequent period. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

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

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

3.7 Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the

arrangement at the inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or asset or the arrangement conveys a right to use the asset, even if that right is not explicitly specific in an arrangement.

For arrangements entered into prior to 1 January 2011, the date of inception is deemed to be 1 January 2011 in accordance with the MFRS 1.

3.7.1 Finance lease

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments.

Minimum lease payments made under finance leases are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the profit or loss. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

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3.7 Leases (cont’d)

3.7.1 Finance lease (cont’d)

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

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

3.7.2 operating lease

Leases, where the Group or the Company does not assume substantially all the risks and rewards of ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred.

3.8 Financial instruments

3.8.1 Initial recognition and measurement

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.

Financial assets and financial liabilities are measured initially at fair value plus transactions costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value. Financial assets and financial liabilities are measured subsequently as described below.

Embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

3.8.2 Financial assets - Categorisation and Subsequent measurement

For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition:

a) financial assets at fair value through profit or loss;b) held-to-maturity investments; c) loans and receivables; andd) available-for-sale financial assets.

The category determines subsequent measurement and whether any resulting income and expense is recognised in profit or loss or in other comprehensive income.

All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each end of the reporting period. Financial assets are impaired when there is any objective evidence that a financial asset or a Group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets.




3.8 Financial instruments (cont’d)

3.8.2 Financial assets - Categorisation and Subsequent measurement (cont’d)

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

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. Gains or losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the end of the reporting period which are classified as non-current.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group’s available-for-sale financial assets include listed securities, debentures and the equity instruments.

Available-for-sale financial assets are measured at fair value subsequent to the initial recognition. Gains and losses are recognised in other comprehensive income and reported within the available-for-sale reserve within equity, except for impairment losses and foreign exchange differences on monetary assets, which are recognised in profit or loss. When the asset is disposed of or is determined to be impaired the cumulative gain or loss recognised in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income.

Interest calculated using the effective interest method and dividends are recognised in profit or loss. Dividends on an available-for-sale equity are recognised in profit or loss when the Group and the Company’s right to receive payment is established.

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

Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the end of the reporting period.

3.8.3 Financial liabilities - Categorisation and Subsequent measurement

After the initial recognition, financial liability is classified as:

(a) financial liability at fair value through profit or loss;(b) other financial liabilities measure at amortised cost using the effective interest method; and (c) financial guarantee contracts.

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

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3.8 Financial instruments (cont’d)

3.8.3 Financial liabilities - Categorisation and Subsequent measurement (cont’d)

Other liabilities measured at amortised cost

The Group’s other liabilities include borrowings, trade and other payables.

Other liabilities are subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

3.8.4 offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the statements of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

3.8.5 Fair value of financial instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market process or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; a discounted cash flow analysis or other valuation models.

An analysis of fair values of financial instruments and further details as how they are measured are provided in Notes 42 and 43 to the financial statements.

3.9 Impairment of assets

3.9.1 non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Group’s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of three years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the third year.

Impairment losses of continuing operations, including impairment on inventories, are recognised in the profit or loss in those expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.




3.9 Impairment of assets (cont’d)

3.9.1 non-financial assets (cont’d)

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for asset in prior years. Such reversal is recognised in the profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

Goodwill is tested for impairment annually as at the end of each reporting period, and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

Intangible assets with indefinite useful lives are tested for impairment annually as at the end of each reporting period, either individually or at the cash-generating unit level, as appropriate and when circumstances indicate that the carrying value may be impaired.

3.9.2 Financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable date indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continue to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

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3.9 Impairment of assets (cont’d)

3.9.2 Financial assets (cont’d)

Financial assets carried at amortised cost (cont’d)

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the profit or loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the profit or loss.

Available-for-sale financial assets

For available-for-sale financial assets, the Group assesses at each reporting period whether there is objective evidence that an investment or a group of investment is impaired.

In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. “Significant” is evaluated against the original cost of the investment and “prolonged” against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the profit or loss - is removed from other comprehensive income and recognised in the profit or loss. Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairments are recognised directly in other comprehensive income.

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in profit or loss.

Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the profit or loss, the impairment loss is reversed through profit or loss.

3.10 research and development expenditure

All research costs are recognised in profit or loss as incurred. Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group or the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development. Product development expenditure which do not meet these criteria are expensed off when incurred.

Development costs, considered to have finite useful lives, are stated at cost less any impairment losses and are amortised using the straight-line basis over the commercial lives of the underlying products not exceeding five years. Impairment is assessed whenever there is an indication of impairment and the amortisation period and method are also reviewed at least once at each reporting date.




3.11 Inventories

Inventories comprising raw materials and finished goods are stated at the lower of cost and net realisable value after adequate provision has been made by Directors for deteriorated, obsolete and slow-moving inventories.

Cost of raw material is determined on a weighted average basis. The cost of finished goods comprise costs of raw materials, direct labour, other direct costs and appropriate proportions of manufacturing overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary cost of business less the estimated costs of completion and the estimated costs necessary to make the sale.

3.12 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, bank balances, short term demand deposits, bank overdraft and highly liquid investments which are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value.

Bank overdrafts are shown in current liabilities in the statements of financial position.

For the purpose of the statements of financial position, cash and cash equivalents restricted to be used to settle a liability of 12 months or more after the reporting date are classified as non-current asset.

3.13 equity, reserves and dividend payments

An equity instrument is any contract that evidences a residual interest in the assets of the Group and of the Company after deducting all of its liabilities. Ordinary shares are equity instruments.

Share capital represents the nominal value of shares that have been issued.

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

The revaluation reserve within equity comprises gains and losses due to the revaluation of property, plant and equipment. Foreign currency translation differences arising on the translation of the Group’s foreign entities are included in the exchange translation reserve. Gains and losses on certain financial instruments are included in reserves for available-for-sale financial assets and cash-flow hedges respectively.

Retained earnings include all current and prior period retained profits.

Dividends on ordinary shares are accounted for in shareholder’s equity as an appropriation of retained earnings.

All transactions with owners of the parent are recorded separately within equity.

3.14 treasury shares

When issued share of the Company are repurchased, the consideration paid, including directly attributable costs is presented as a change in equity. Repurchased shares that have not been cancelled are classify as treasury shares and presented as a deduction from equity. No gain or loss is recognised in profit or loss on the sale, reissuance or cancellation of treasury shares.

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

When treasury shares are reissued by resale, the difference between the sale consideration net of directly attributable costs and the carrying amount of the treasury shares is shown as a movement in equity.

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3.15 provisions

Provisions are recognised when there is a present obligation, legal or constructive, as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as separate asset. However, this asset may not exceed the amount of the related provision.

Provisions are reviewed at each end of the reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. Where the effect of the time of money is material, provision are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

3.16 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

Other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds.

3.17 Interest-bearing borrowings

Interest-bearing borrowings are recorded at the amount of proceeds received, net of transaction costs incurred.

3.18 employee benefits

3.18.1 Short term employee benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the financial year in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

A provision is made for the estimated liability for leave as a result of services rendered by employees up to the end of the reporting period.

3.18.2 Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into independent entities of funds and will have no legal or constructive obligation to pay further contribution if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years.

Such contributions are recognised as an expense in the profit or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (“EPF”). Some of the Group’s foreign subsidiaries also make contributions to their respective countries’ statutory pension schemes.




3.19 revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received and receivables.

3.19.1 Sale of goods/ services

Revenue from sale of goods is recognised upon delivery of products and customers’ acceptance, or performance of services, and after eliminating sales within the Group.

3.19.2 management fee income

Management fees are recognised when the services are rendered.

3.19.3 rental income

Rental income is recognised when the rent is due.

3.19.4 Dividend income

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

3.19.5 Interest income

Interest income is recognised in profit or loss as it accrues, taking into account the effective yield on the asset.

3.20 tax expenses

Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

3.20.1 Current tax

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

Current tax is recognised in the statement of financial position as a liability (or an asset) to the extent that it is unpaid (or refundable).

3.20.2 Deferred tax

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

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. The amount of deferred tax recognised is measured using the tax rates that would apply on sale of those assets at their carrying value at the reporting date unless the property is depreciable and is held with the objective to consume substantially all of the economic benefits embodied in the property over time, rather than through sale.

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3.20 tax expenses (cont’d)

3.20.2 Deferred tax (cont’d)

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

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

3.21 Segmental results

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

3.22 Contingencies

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

3.23 related parties

A related party is a person or entity that is related to the Group. A related party transaction is a transfer of resources, services or obligations between the Group and its related party, regardless of whether a price is charged.

(a) A person or a close member of that person’s family is related to the Group if that person:

(i) has control or joint control over the Group;(ii) has significant influence over the Group; or(iii) is a member of the key management personnel Group.

(b) An entity is related to the Group if any of the following conditions applies :

(i) the entity and the Group are members of the same group.(ii) one entity is an associate or joint venture of the other entity.(iii) both entities are joint ventures of the same third party.(iv) one entity is a joint venture of a third entity and the other entity is an associate of the

third entity.(v) the entity is a post-employment benefit plan for the benefits of employees of either the

Group or an entity related to the Group.(vi) the entity is controlled or jointly-controlled by a person identified in (a) above.(vii) a person identified in (a)(i) above has significant influence over the Group or is a

member of the key management personnel of the entity.



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222,

141

347,

069

754,

153

187,

186

1,57

0,10

7E

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--

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At

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1/1

Janu

ary

2012

-33

,582

261,

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573,

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1,88

7,83

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869,

845

644,

109

6,27

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232,

945

383,

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850,

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227,

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72,0

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31 D

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201

2-

45,1

5530

9,86

480

5,95

92,

203,

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3,34

8,77

686

7,64

97,

580,

442

net

car

ryin

g a

mo

unt

1 Ja

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y 20

1167

2,40

196

8,44

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185,

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312,

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992,

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1,18

5,72

612

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31 D

ecem

ber

201

1/1

Janu

ary

2012

672,

401

956,

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2,13

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31,

735,

167

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4,68

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579,

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13,5

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31 D

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295

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81,

634,

658

5,74

9,48

91,

526,

081

19,8

02,8

84

69

A N N U A L R E P O R T 2 0 1 2


4. propertY, pLant anD eQUIpment (Cont’D)

Company renovationFurniture and

fittingsoffice

equipment totalrm rm rm rm

Cost

At 1 January 2011 - - 11,786 11,786Additions 20,170 8,087 5,492 33,749

At 31 December 2011/1 January 2012 20,170 8,087 17,278 45,535Additions - 1,100 5,000 6,100

At 31 December 2012 20,170 9,187 22,278 51,635

accumulated depreciation

At 1 January 2011 - - 1,795 1,795Charge for the year 1,210 549 1,624 3,383

At 31 December 2011/1 January 2012 1,210 549 3,419 5,178Charge for the year 2,420 1,069 2,174 5,663

At 31 December 2012 3,630 1,618 5,593 10,841

net carrying amount

1 January 2011 - - 9,991 9,991

31 December 2011/1 January 2012 18,960 7,538 13,859 40,357

31 December 2012 16,540 7,569 16,685 40,794

(i) Freehold and leasehold land, and buildings of the Group were revalued in the financial year 2012 by Raine & Horne International Zaki + Partners Sdn. Bhd., a register valuer. The comparison method was adopted in arriving at the market value of the freehold land and land buildings.

Had the buildings been stated at historical cost less accumulated depreciation, the net carrying amount would have been RM2,089,377 (2011: RM2,137,362, 1 January 2011: RM2,185,347).

Had the freehold land been stated at historical cost, the net carrying amount would have been RM672,401.

Had the leasehold land been stated at historical cost less accumulated depreciation, the net carrying amount would have been RM945,300 (2011: RM956,873, 1 January 2011: RM968,446).

Freehold, leasehold land and building of the Group have been pledged to licensed banks for banking facilities granted to the Group.



4. propertY, pLant anD eQUIpment (Cont’D)

(ii) The net carrying amounts of property, plant and equipment under finance lease arrangements are as follows:-

Group31.12.2012 31.12.2011 1.1.2011

rm rm rm

Plant and machinery 3,122,734 2,935,273 2,656,443Motor vehicles 675,090 845,603 312,825

5. InveStment In SUBSIDIarIeS

Company31.12.2012 31.12.2011 1.1.2011

rm rm rmUnquoted shares, at cost - in Malaysia 26,054,427 26,054,427 25,824,412 - outside Malaysia 10,549,311 10,549,311 10,549,311

36,603,738 36,603,738 36,373,723Less: Impairment loss (58,215) (58,215) (58,215)

36,545,523 36,545,523 36,315,508

Details of the subsidiaries are as follows:-

Country of equity interestCompanies incorporation 31.12.2012 31.12.2011 1.1.2011 principal activities

% % %

Grand-Flo Electronic System Sdn. Bhd.

Malaysia 100 100 100 Supply and installation of Enterprise Data Collection and Collation System and hardware, information technology solutions, computer related accessories, integrating computer system and hardware

Grand-Flo Spritvest Sdn. Bhd.

Malaysia 100 100 100 Provision of information technology solutions specialising in automated data collection processes and mobile computing

Grand-Flo Data Centrix Sdn. Bhd. (formerly known as Data Centrix Sdn. Bhd.)

Malaysia 100 100 100 Research and development of software application

Grand-Flo Systems (S) Pte. Ltd. *

Singapore 100 100 100 Dormant

Grand-Flo RFID Sdn. Bhd.

Malaysia 100 100 100 Dormant

Labels Network Sdn. Bhd.

Malaysia 100 100 100 Investment holding and trading of price marker system, equipment and paper rolls

71

A N N U A L R E P O R T 2 0 1 2


5. InveStment In SUBSIDIarIeS (Cont’D)

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

Country of equity interestCompanies incorporation 31.12.2012 31.12.2011 1.1.2011 principal activities

% % %

CL Solutions (China) Limited *

Hong Kong, China

100 100 100 Investment holding and provision of IT solutions and related services

Subsidiaries of Labels network Sdn. Bhd.

Kopacklabels Press Sdn. Bhd.

Malaysia 100 100 100 Adhesive labels and stickers printing

Kopacklabels (PG) Sdn. Bhd.

Malaysia 80 80 80 Adhesive labels and stickers printing

Kopacklabels (M) Sdn. Bhd.


Labels4u Automation Sdn. Bhd.


Subsidiaries of CL Solutions (China) Limited

CL Solutions Limited *

Hong Kong, China

100 100 100 Provision of supply chain solutions and related services

Victor Group Limited *

Hong Kong, China

100 100 100 Investment holding

Subsidiary of victor Group Limited

Guangzhou CL Solutions Limited *

People’s Republic of

China

100 100 100 Provision of supply chain solutions and related services

* Not audited by SJ Grant Thornton

6. InveStment In aSSoCIateS

Group Company31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rm

Quoted shares outside Malaysia, at cost 7,213,688 7,213,688 4,402,288 7,213,688 7,213,688 4,402,288

Unquoted shares outside Malaysia, at cost 1,079,183 491,520 491,520 - - -

8,292,871 7,705,208 4,893,808 7,213,688 7,213,688 4,402,288Share of post-acquisition

reserves 9,431,097 6,870,154 5,668,754 - - -

17,723,968 14,575,362 10,562,562 7,213,688 7,213,688 4,402,288

Market value of quoted shares 37,349,668 10,870,485 10,739,453



6. InveStment In aSSoCIateS (Cont’D)

Details of the associates are as follows:-

Companies Country of equity interest principal activitiesincorporation 31.12.2012 31.12.2011 1.1.2011

% % %

Simat Technologies Public Co., Ltd.*

Thailand 33.17 33.17 33.17 Trading of computer hardware, software, network accessories and computer system development

through Labels network Sdn. Bhd.Simat Label Co.,

Ltd. *Thailand 14.12 14.12 20.00 Adhesive labels and stickers

printing

High Rich Trading & Services Corporation *

Vietnam 40.00 - - Wholesaler for barcode, productions and RFID, papers and related supplies

* Not audited by SJ Grant Thornton

The summarised financial information of the associates is as follows:-

31.12.2012 31.12.2011 1.1.2011rm rm rm

assets and liabilitiesTotal assets 135,066,311 114,951,535 68,963,958Total liabilities 87,460,528 76,646,287 43,937,308

results Revenue 225,927,340 121,707,383 116,720,793Net profit for the year 10,177,506 4,289,255 3,397,480

7. otHer InveStment

Group31.12.2012 31.12.2011 1.1.2011

rm rm rmGolf club membershipCostAt 1 January / 31 December 89,986 89,986 89,986

accumulated amortisationAt 1 January 19,955 18,156 16,357Amortisation for the year 1,801 1,799 1,799

At 31 December 21,756 19,955 18,156

Net carrying amount 68,230 70,031 71,830

73

A N N U A L R E P O R T 2 0 1 2


8. DeveLopment CoStS

Group and Company31.12.2012 31.12.2011 1.1.2011

Cost rm rm rm

At 1 January 2,766,175 1,681,868 743,276Additions 2,014,455 1,084,307 938,592

At 31 December 4,780,630 2,766,175 1,681,868

accumulated amortisation

At beginning of year 1,037,364 484,129 148,655Amortisation for the year 776,126 553,235 335,474

At end of year 1,813,490 1,037,364 484,129

Net carrying amount 2,967,140 1,728,811 1,197,739

The development costs relate to the expenditure incurred for the development of “Warehouse Management Systems” Solutions and other software products of the Group and of the Company.

Included in development costs incurred during the financial year are as follows:-

Group and Company2012 2011

rm rm

Salaries 848,032 796,648Contribution to defined contribution plan 97,002 98,407Social security contributions 5,655 5,850

9. GooDWILL on ConSoLIDatIon

Group31.12.2012 31.12.2011 1.1.2011

rm rm rm

At 1 January 22,447,722 22,217,707 22,214,574Additional investment in subsidiary - 230,015 3,133

At 31 December 22,447,722 22,447,722 22,217,707

In prior financial year, goodwill arose from the additional investment in existing subsidiary as a result of agreed additional consideration based on actual profit after tax achieved as contained in the Share Acquisition Agreement date 18 December 2007.



9. GooDWILL on ConSoLIDatIon (Cont’D)

Impairment tests for goodwill

Goodwill has been allocated to the Group’s cash-generating units (“CGU”) identified according to the subsidiaries, as follows:-

Group31.12.2012 31.12.2011 1.1.2011

Subsidiaries rm rm rm

Grand-Flo Spritvest Sdn. Bhd. andGrand-Flo Data Centrix Sdn. Bhd. (formerly known as Data Centrix Sdn. Bhd.) 10,338,457 10,338,457 10,338,457

Labels Network Sdn. Bhd. 4,636,472 4,636,472 4,406,457Kopacklabels Press Sdn. Bhd. 447,154 447,154 447,154Kopacklabels (PG) Sdn. Bhd. 678,598 678,598 678,598CL Solutions (China) Limited 6,301,318 6,301,318 6,301,318CL Solutions Limited 45,723 45,723 45,723

22,447,722 22,447,722 22,217,707

The recoverable amounts of the investment in the subsidiaries are based on its value in use and the recoverable amounts are higher than the carrying amount of the investment. Thus, there is no impairment loss recognised for the financial year ended 31 December 2012.

Key assumptions used in value-in-use calculations The recoverable amount of CGU is determined based on value-in-use calculations using cash flow projections

based on financial budgets approved by management covering a five years period. Cash flows beyond the five years period are extrapolated using the estimated growth rate stated below. The growth rate does not exceed the average historical growth rate over the long term for the industry. The key assumptions used for value-in-use calculations are:-

Growthrate Gross margin Discount rate2012 2012 2011 2012 2011

% % % % %

Grand-Flo Spritvest Sdn. Bhd. and Grand-Flo Data Centrix Sdn. Bhd. (formerly known as Data Centrix Sdn. Bhd.) 8 12 20 5 5

Labels Network Sdn. Bhd. 8 44 45 5 5Kopacklabels Press Sdn. Bhd. 8 14 16 5 5Kopacklabels (PG) Sdn. Bhd. 8 19 18 5 5CL Solutions (China) Limited and CL

Solutions Limited 8 37 43 5 5

75

A N N U A L R E P O R T 2 0 1 2


9. GooDWILL on ConSoLIDatIon (Cont’D)

Key assumptions used in value-in-use calculations (cont’d)

The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:-

(a) Budgeted growth rate

The budgeted growth rate is determined based on the industry trends and past performances of the segments.

(b) Budgeted gross margin

The basis used to determine the value assigned to the budgeted gross margin is the average gross margin achieved in the year immediately before the budgeted year increased for expected efficiency improvements.

(c) Discount rate

The discount rate used is pre-tax and reflect specific risks relating to the relevant segments.

The Group believes that any reasonably possible changes in the above key assumptions applied are not likely to materially cause recoverable amount to be lower than its carrying amount.

10. DeFerreD taX aSSetS/(LIaBILItIeS)

Deferred tax assets

Group Company2012 2011 2012 2011

rm rm rm rm

At 1 January 800,000 - 339,000 -Recognised in profit or loss (Note 35) (363,000) 800,000 - 339,000

At 31 December 437,000 800,000 339,000 339,000

Deferred tax assets comprise the following:-

Carrying amount of qualifying property, plant and equipment in excess of their tax base (43,250) (31,000) (11,000) (11,000)

Pioneer losses 245,000 245,000 245,000 245,000Unabsorbed tax losses 235,250 572,250 105,000 105,000Unutilised capital allowances - 13,750 - -

437,000 800,000 339,000 339,000



10. DeFerreD taX aSSetS/(LIaBILItIeS) (Cont’D)

Deferred tax liabilities

Group2012 2011

rm rm

At 1 January (1,061,270) (452,070)Recognised in profit or loss (Note 35) (83,352) (609,200)Recognised in other comprehensive income (1,643,229) -Foreign exchange translation 4,323 -

At 31 December (2,783,528) (1,061,270)

Group31.12.2012 31.12.2011 1.1.2011

rm rm rm

Deferred tax liabilities comprise the following:-Carrying amount of qualifying property, plant and

equipment in excess of their tax base (1,144,854) (1,084,270) (529,070)Provisions 4,555 4,000 4,000Revaluation of property, plant and equipment (1,643,229) - -Unutilised capital allowances - 19,000 73,000

(2,783,528) (1,061,270) (452,070)

Deferred tax assets have not been recognised in respect of the following items:-

Group Company2012 2011 2012 2011

rm rm rm rm

Carrying amount of qualifying property, plant and equipment in excess of their tax base 38,800 32,220 12,800 -

Pioneer losses (1,472,000) - (1,472,000) -Unabsorbed tax losses (908,000) (119,000) (788,000) -Unutilised capital allowances (16,000) - (16,000) -

(2,357,200) (86,780) (2,263,200) -

The deductible temporary differences, unabsorbed tax losses and unutilised capital allowances are available indefinitely for offset against future taxable profits of the Company and the subsidiaries in which those items arose. Deferred tax assets have not been recognised in respect of these items as they may not be used to offset taxable profits of the subsidiaries in the Group and they have arisen in the subsidiaries that have a recent history of losses.

77

A N N U A L R E P O R T 2 0 1 2


11. InventorIeS

Group31.12.2012 31.12.2011 1.1.2011

rm rm rm

Raw materials 2,068,459 1,304,142 598,439Finished goods 7,395,776 10,059,546 7,612,879

At carrying amount 9,464,235 11,363,688 8,211,318

12. traDe reCeIvaBLeS

Group Company31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011

rm rm rm rm rm

Trade receivables 19,608,787 17,091,233 15,499,349 6,000 1,006,000Less: Allowance for impairment (52,716) (81,368) (89,024) - -

Net trade receivables 19,556,071 17,009,865 15,410,325 6,000 1,006,000

Movement in allowance for impairment losses of trade receivables:-

Group31.12.2012 31.12.2011

rm rm

At 1 January 81,368 89,024Impairment loss recognised 3,235 13,107Impairment loss reversed (19,515) (17,528)Impairment loss written off (12,372) (3,235)

At 31 December 52,716 81,368

The foreign currency exposure profile of trade receivables are as follows:-

Group31.12.2012 31.12.2011 1.1.2011

rm rm rm

United States Dollar 141,004 86,047 315,458Hong Kong Dollar 1,112,059 1,517,064 1,789,784Singapore Dollar 83,471 79,118 75,357

The normal trade credit terms granted by the Group ranging from 30 days to 120 days. Other credit terms are assessed and approved on a case-by-case basis.



13. otHer reCeIvaBLeS

Group Company31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rm

Advance payment to suppliers 255,741 3,360 - - - -

Non-trade receivables 609,341 22,531 14,154 3,800 - -Deposits 558,082 334,523 279,006 6,550 6,550 1,750Prepayments 291,684 254,677 228,849 - 8,668 43,923

1,714,848 615,091 522,009 10,350 15,218 45,673

Included in non-trade receivables of the Group are balance of the proceeds from disposal of a equipment amounting to RM590,000 (2011: Nil).

14. amoUnt DUe From SUBSIDIarIeS

Company31.12.2012 31.12.2011 1.1.2011

rm rm rmAmount due from subsidiaries- Trade - 1,183,195 852,973- Non-trade 170,617 (343,291) (281,457)

170,617 839,904 571,516

The outstanding amounts which are trade in nature have credit terms ranging from 30 to 60 days. The outstanding amounts which are non-trade in nature are unsecured, bear no interest and repayable on demand.

15. amoUnt DUe From aSSoCIateS

Group Company31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rm

Amount due from associates

- Non-trade 102,379 87,597 145,776 13,794 61,227 64,614

The outstanding amounts which are non-trade in nature are unsecured, bear no interest an repayable on demand.

16. amoUnt DUe From reLateD partIeS

Group Company31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rm

Amount due from related party

- Trade 925,400 429,250 - - - -

The outstanding balances are trade in nature have credit terms of 30 days.

79

A N N U A L R E P O R T 2 0 1 2


17. FIXeD DepoSItS WItH LICenSeD BanKS

The fixed deposits with licensed banks of RM622,245 (31.12.2011: RM603,176, 1.1.2011: RM377,196) of the Group have been pledged to licensed banks as security for banking facilities granted to the Group.

The fixed deposits bear interest rates at 3.1% to 3.15% (31.12.2011: 2.3% to 2.5% and 1.1.2011: 2.1% to 2.3%)

per annum.

18. CaSH anD BanK BaLanCeS

The currency exposure profile of the cash and bank balances other than balances denominated in the Company’s functional currency, is as follows (foreign currency balances are unhedged):-

Group31.12.2012 31.12.2011 1.1.2011

rm rm rm

United States Dollar 52,697 28,300 67,751Singapore Dollar - 1,203 2,254Hong Kong Dollar 3,184,503 2,930,523 2,573,964

19. SHare CapItaL anD SHare premIUm

Group and Companynumber of ordinary

shares of rm0.10 each amount2012 2011 2012 2011

rm rm

authorised:-At 1 January/31 December 500,000,000 500,000,000 50,000,000 50,000,000

number ofordinary

shares ofrm0.10 each amount Share capital Share capital Share premium total

rm rm rm

Issued and fully paid:-As at 1 January 2011 145,085,478 14,508,548 15,030,846 29,539,394Ordinary shares issued during the year:- 14,367,347 1,436,734 4,485,306 5,922,040Pursuant to issuance of treasury

shares (Note 20) - - 70,413 70,413

As at 31 December 2011 159,452,825 15,945,282 19,586,565 35,531,847Ordinary shares issued during the year 330,100 33,010 56,117 89,127Pursuant to exercise of bonus issue 159,782,925 15,978,293 (15,978,293) -Pursuant to issuance of treasury

shares (Note 20) - - (25,200) (25,200)

As at 31 December 2012 319,565,850 31,956,585 3,639,189 35,595,774



20. treaSUrY SHareS

The shareholders of the Company, by an ordinary resolution passed in an annual general meeting held on 22 June 2012, approved the Company’s plan to repurchase its own shares.

During the financial year, the Company repurchased 217,800 of its issued ordinary shares from the open market at an average price of RM0.41 per share. These repurchased shares plus the 238,700 treasury shares brought forward from the previous financial year total to 456,500 shares were re-sold in the open market at an average price of RM0.45 per share. Subsequent to the resale, the Company repurchased 1,393,200 of its issued ordinary shares from the open market at an average price of RM0.22 per share. The total consideration paid for the repurchase including transaction costs was RM303,343. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.

Of the total 319,565,850 issued and fully paid ordinary shares as at 31 December 2012, 1,393,200 are held as treasury shares by the Company. As at 31 December 2012, the number of outstanding ordinary shares in issue after the setoff is therefore 318,172,650 ordinary shares of RM0.10 each.

21. Warrant reServeS

On 22 April 2010, the Company allotted and issued 67,912,455 new Warrants 2010/2015 at an issue price of RM0.02 each on the basis of 1 Warrant 2010/2015 for every 2 existing ordinary shares held in the Company on 30 March 2010 (“Rights Issue of Warrants”). Each Warrant 2010/2015 entitles the registered holder to subscribe for 1 new ordinary share in the Company at any time on or after 22 April 2010 to 21 April 2015, at an exercise price of RM0.25 in accordance with the Deed Poll. Any Warrant 2010/2015 not exercised by the date of maturity will lapse thereafter and cease to be valid for all purposes. All Warrants 2010/2015 were fully exercised during the financial year.

On 17 July 2012, a total of 67,582,355 warrants 2010/2015 were issued pursuant to the Company’s bonus issue exercise.

22. otHer reServeS

Group31.12.2012 31.12.2011 1.1.2011

rm rm rm

Non-distributable:-Capital reserve 990,796 990,796 990,796Legal reserve 118,655 118,655 118,655

1,109,451 1,109,451 1,109,451

Capital reserve represents share dividend received from a foreign associate.

Legal reserve represents net profit of foreign associate set aside.

23. revaLUatIon reServe

Group31.12.2012 31.12.2011 1.1.2011

rm rm rm

Arising from revaluation of freehold land and buildings 2,506,915 - -Arising from revaluation of leasehold land and buildings 2,422,776 - -

4,929,691 - -

The revaluation reserve was in respect of the revaluation surplus of freehold and leasehold land, and building and is not available for distribution as dividends.

81

A N N U A L R E P O R T 2 0 1 2


24. retaIneD earnInGS

Subject to agreement by the Inland Revenue Board, the Company has sufficient tax exempt credits under Section 108 of the Income Tax Act, 1967 to frank the payment of dividends out of its entire retained earnings as at 31 December 2012 without incurring additional tax liabilities.

The Malaysian Budget 2008 introduced a single tier company income tax system with effect from year of assessment 2008. As such, the Section 108 tax credit as at 31 December 2012 will be available to the Company until such time the credit is fully utilised or upon expiry of the six-year transitional period on 31 December 2013, whichever is earlier.

As at the reporting date, the Company has not elected to adopt the Single Tier Income Tax System.

25. FInanCe LeaSe LIaBILItIeS

Group31.12.2012 31.12.2011 1.1.2011

rm rm rm

Minimum lease payments - not later than 1 year 1,100,684 969,817 934,662 - later than 1 year but not later than 5 years 1,301,272 1,344,885 959,366

2,401,956 2,314,702 1,894,028Less: Future finance charges (198,838) (185,514) (151,252)

2,203,118 2,129,188 1,742,776

Present value of finance lease liabilities - not later than 1 year 986,731 844,738 909,723 - later than 1 year but not later than 5 years 1,216,387 1,284,450 833,053

2,203,118 2,129,188 1,742,776

The Group’s finance lease liabilities interests are charged at rates ranging from 2.42% to 4.90% (31.12.2011: 2.26% to 4.35% and 1.1.2011: 2.30% to 4.40%) per annum.

26. term LoanS

Group Company31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rmSecuredTerm loans 2,891,507 3,608,027 5,060,317 - - 632,458Less: Repayable within

the next twelve months (Note 32) (863,561) (759,351) (1,522,606) - - (632,458)

Repayable after the next twelve months 2,027,946 2,848,676 3,537,711 - - -



26. term LoanS (Cont’D)

Group Company31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rm

Repayments due:-Not later than 1 year 863,561 759,351 1,522,606 - - 632,458Later than 1 year but not

later than 5 years 1,772,689 2,418,920 3,192,756 - - -Later than 5 years 255,257 429,756 344,955 - - -

2,891,507 3,608,027 5,060,317 - - 632,458

The term loans bear interest at rates ranging from 5.10% to 7.60% (31.12.2011: 3.40% to 9.00% and 1.1.2011: 5.20% to 9.05%) per annum for the Group.

The term loans are repayable through monthly installment and the securities are as disclosed in Note 32 to the financial statements.

27. traDe paYaBLeS The normal trade credit terms granted to the Group ranging from 30 days to 120 days.

The foreign currency exposure profile of trade payables of the Group is as follows:-

31.12.2012 31.12.2011 1.1.2011rm rm rm

United States Dollar 1,670,386 1,321,027 2,011,795Hong Kong Dollar 588,586 1,840,813 1,340,077Singapore Dollar - 676 -

28. otHer paYaBLeS

Group Company31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rm

Non-trade payables 247,663 413,290 723,134 - - -Accruals 1,362,610 2,708,910 1,582,348 130,766 809,261 334,890Deferred revenue 310,696 270,406 - - - -Deposits received 226,854 229,890 638,368 - - -

2,147,823 3,622,496 2,943,850 130,766 809,261 334,890

29. amoUnt DUe to DIreCtorS

The amount due to Directors are unsecured, bears no interest and are repayable upon demand.

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30. amoUnt DUe to SUBSIDIarIeS

Company31.12.2012 31.12.2011 1.1.2011

rm rm rm

Amount due to subsidiaries - Trade (1,390,936) (352,869) (297,067)- Non-trade 6,668,594 1,985,627 6,961,586

5,277,658 1,632,758 6,664,519

The outstanding amounts which are trade in nature have credit terms ranging from 30 to 60 days. The outstanding amounts which are non-trade in nature are unsecured, bear no interest and repayable on demand.

31. amoUnt DUe to reLateD partIeS

Group Company31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rm

Amount due to related parties

- Trade 631,786 113,531 - - - -

The outstanding balances are trade in nature have credit terms of 30 days.

32. BorroWInGS

Group Company31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rm

Secured: Bankers’ acceptance 8,977,000 6,353,792 7,016,941 - - - Bank overdrafts 792,920 988,502 1,066,995 - - - Term loans (Note 26) 863,561 759,351 1,522,606 - - 632,458

10,633,481 8,101,645 9,606,542 - - 632,458

The effective annual interest rates at the reporting date for borrowings were as follows:-

31.12.2012 31.12.2011 1.1.2011% % %

Bankers’ acceptance 3.47 – 5.25 2.25 – 5.50 2.25 – 5.50Bank overdrafts 6.70 – 8.35 6.75 – 8.25 6.75 – 8.25



32. BorroWInGS (Cont’D)

The bank borrowings are secured by way of:-

(a) legal charge over certain property, plant and equipment of the Group;(b) legal charge over leasehold property of the Group;(c) a pledge on the fixed deposits of the Group;(d) joint and several guarantee by certain Directors of the Group; (e) guarantee by the Company;(f) facilities agreement;(g) memorandum of deposit for pledge of entire paid out ordinary share of certain subsidiary companies; and(h) dividends attributable to certain subsidiaries’ shares pledged by way of revocable and irrevocable Letter of

Undertaking.

33. revenUe

Group Company2012 2011 2012 2011

rm rm rm rm

Dividend income from:- associate - - - 409,097- subsidiaries - - 729,214 4,053,488Sales of goods 76,019,695 66,296,910 989,871 4,019,057Maintenance income 11,671,589 8,379,238 - -

87,691,284 74,676,148 1,719,085 8,481,642

Revenue of the Group consists of gross invoiced value of sales of information technology products, adhesive labels and sticker printing and related services rendered, net of discounts and returns.

Revenue of the Company consists of gross invoiced value of sales of information technology products and related

services rendered, net of discounts and returns and dividend income.

34. proFIt/(LoSS) BeFore taX

Profit/(Loss) before tax has been determined after charging/(crediting), amongst others, the following items:-

Group Company2012 2011 2012 2011

rm rm rm rm

Auditors’ remuneration - auditors of the company 74,000 71,000 13,000 13,000 - overprovision in prior year (4,500) - - - - other auditors 53,535 45,407 - -Amortisation of:- development costs 776,126 553,235 776,126 553,235- other investment 1,801 1,799 - -Bad debts written off 61,541 9,135 - -Depreciation 1,754,087 1,570,107 5,663 3,383Directors’ remuneration- fees 176,000 167,533 176,000 167,533- other emoluments 2,668,880 3,195,393 578,435 1,019,981

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34. proFIt/(LoSS) BeFore taX (Cont’D)

Profit/(Loss) before tax has been determined after charging/(crediting), amongst others, the following items (cont’d):-

Group Company2012 2011 2012 2011

rm rm rm rm

Gain on disposal of property, plant and equipment (206,158) (125,049) - -

Gain on deemed disposal of associate - (79,432) - -Impairment loss on trade receivables 3,235 13,107 - -Impairment loss on trade receivables no

longer required (19,515) (17,528) - -Interest expense- bankers’ acceptance 323,964 234,505 - -- finance lease 132,238 134,369 - -- overdraft 61,583 63,847 - -- term loan 196,619 162,734 - 9,358Interest income (35,058) (17,337) (2,760) (6,029)Inventories written off 89,797 - - -Realised gain on foreign exchange (6,899) (218,792) - (234,495)Rental expenses 435,960 337,194 28,900 17,600Rental income (249,600) (202,900) - -Unrealised (loss)/gain on foreign

exchange 896 (271) - -

35. taX eXpenSe/(InCome)

Group Company2012 2011 2012 2011

rm rm rm rm

Current year provision- Malaysian income tax 381,702 685,662 - 40,920- Overseas taxation 187,599 199,284 - -Overprovision in prior year (103,986) (34,435) - -Transferred from deferred tax (Note 10) - (800,000) - (339,000)Transferred to deferred tax (Note 10) 446,352 609,200 - -

911,667 659,711 - (298,080)

Malaysian income tax is calculated at the statutory tax rate of 25% of the estimated assessable profits for the current financial year. Taxation for other jurisdictions is calculated at the tax rates prevailing in the respective jurisdictions.

The current tax expense of the Company is in respect of dividend. There is no tax charge on business income of the Company as the Company has been granted Multimedia Super Corridor status, which qualifies the Company for the Pioneer Status under the Promotion of Investments Act, 1986. The Company enjoys exemption from income tax on its statutory income from pioneer activities for five years, commencing from 14 May 2004 to 13 May 2009. The Multimedia Super Corridor status of the Company has been extended to 13 May 2014.



35. taX eXpenSe/(InCome) (Cont’D)

Pioneer losses, unabsorbed tax losses and unutilised capital allowances carried forward, subject to the agreement of the Inland Revenue Board are as follows:-

Group Company2012 2011 2012 2011

rm rm rm rm

Pioneer losses (2,452,000) (980,000) (2,452,000) (980,000)Unabsorbed tax losses (1,757,000) (2,408,000) (1,208,000) (420,000)Unutilised capital allowances (65,000) (55,000) (16,000) -

(4,274,000) (3,443,000) (3,676,000) (1,400,000)

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

Group Company2012 2011 2012 2011

rm rm rm rm

Profit/(Loss) before tax 8,758,037 10,060,396 (1,353,413) 6,189,850

Income tax at rate of 25% 2,189,509 2,515,099 (338,353) 1,547,463

Tax effect in respect of:-Effect of different tax rates in overseas

subsidiaries (70,972) (112,952) - (61,365)Expenses not deductible for tax

purposes 754,385 424,443 458,848 198,889Income not subject to income tax (1,183,452) (691,086) (686,295) (1,337,067)Deferred tax assets not recognised

during the year 580,800 (104,955) 565,800 (343,000)Utilisation of deferred tax assets

previously not recognised 17,465 (303,000) - (303,000)Tax saving arising from reinvestment

allowances (145,000) (185,000) - -Pioneer income not subject to tax (1,090,265) (848,403) - -Overprovision of tax expense in prior

years (154,803) (34,435) - -Under provision deferred tax in prior

year 14,000 - - -

Total tax expense/(income) 911,667 659,711 - (298,080)

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36. earnInGS per SHare

(a) Basic

Basic earnings per share is calculated by dividing profit for the year attributable to owners of the parent with the weighted average number of ordinary shares in issue during the financial year (excluding treasury shares held by the Company).

Group2012 2011

Profit for the financial year attributable to owners of the parent (RM) 7,831,492 9,391,240

Weighted average number of ordinary shares in issue 319,263,789 305,522,368

Basic earnings per share (sen) 2.45 3.07

The weighted average number of additional shares pursuant to bonus issue and conversion of warrant during the financial year was 159,810,964 (2011: 7,675,706).

(b) Diluted

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

Group2012 2011

Profit for the financial year attributable to owners of the parent (RM) 7,831,492 9,391,240

Weighted average number of ordinary shares in issueWeighted average number of ordinary shares in issue (basic) 319,263,789 152,761,184Effect of conversion of warrants 135,164,710 67,912,455

Weighted average number of ordinary shares in issue (diluted) 454,428,499 220,673,639

Diluted earnings per share (sen) 1.72 4.26

37. DIvIDenDS

Group and Company2012 2011

rm rm

In respect of financial year ended 31 December 2011: First and final dividend of 1.2 per sen ordinary share comprising a gross

dividend of 0.037 sen per share less 25% income tax and a tax exempt dividend of 1.163 sen per share 1,902,617 -

In respect of financial year ended 31 December 2010: First and final tax exempt dividend of 1 sen per ordinary share - 1,594,528



38. empLoYee BeneFItS eXpenSe

Group Company2012 2011 2012 2011

rm rm rm rm

Wages and salaries and allowances 8,301,968 7,872,042 107,280 114,052Social security contributions 70,226 163,755 930 924Contributions to defined contribution

plan 756,873 654,386 13,292 71,568Other benefits 461,724 256,356 6,978 21,362

9,590,791 8,946,539 128,480 207,906

39. ContInGent LIaBILItIeS

Company2012 2011

rm rmUnsecured:-

Guarantees given to financial institutions in respect of facilities granted to subsidiaries 13,585,929 8,032,481

Following the adoption of FRS 139, the Company did not recognised the unexpired financial guarantees issued by the Company as financial liabilities as the financial guarantees granted are the pre-condition for getting credit facilities by the subsidiaries rather than in exchange for reducing interest rate.

40. SIGnIFICant reLateD partY DISCLoSUre

(a) Significant related party transactions during the financial year were as follows:-

Company2012 2011

rm rm

Dividend received from associates - 409,097Dividend received from subsidiaries 729,214 4,053,488Management fee charged to subsidiaries - -Sales to subsidiaries 989,870 3,013,056

(b) The remunerations of Directors during the financial year were as follows:-

Group Company2012 2011 2012 2011

rm rm rm rm

Salaries and bonus 2,606,445 3,134,773 516,000 959,361Fees 176,000 167,533 176,000 167,533Allowances 62,435 60,620 62,435 60,620

2,844,880 3,362,926 754,435 1,187,514

The Group and the Company have no other members of key management personnel apart from the Board of Directors.

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41. operatInG SeGment

Business Segments

eDCCS* Labels eliminations totalrm rm rm rm

2012

revenue Sales to external customers 66,368,287 21,322,997 - 87,691,284Inter-segment sales 11,572,366 4,634,702 (16,207,068) -

Total revenue 77,940,653 25,957,699 (16,207,068) 87,691,284

resultsInterest income 35,058 - - 35,058Finance cost 431,570 282,834 - 714,404Dividend income 729,214 - (729,214) -Depreciation and amortisation 1,342,203 1,189,811 - 2,532,014Share of results of associates 2,468,670 92,273 - 2,560,943Income tax expense 486,763 424,904 - 911,667Segment profit 6,641,909 1,933,675 (729,214) 7,846,370

31.12.2012

assets Segment assets 109,857,000 24,457,745 (32,493,248) 101,821,497Deferred tax assets 437,000 - - 437,000Tax recoverable 212,964 194,193 - 407,157

Consolidated assets 110,506,964 24,651,938 (32,493,248) 102,665,654

Liabilities Segment liabilities 42,375,266 8,818,826 (25,849,712) 25,344,380Deferred tax liabilities 984,227 1,799,301 - 2,783,528Tax payable 35,835 28,153 - 63,988

Consolidated liabilities 43,395,328 10,646,280 (25,849,712) 28,191,896



41. operatInG SeGment (Cont’D)

Business Segments (cont’d)

eDCCS* Labels eliminations totalrm rm rm rm

2011

revenue Sales to external customers 49,788,714 24,887,434 - 74,676,148Inter-segment sales 12,905,683 4,660,119 (17,565,802) -

Total revenue 62,694,397 29,547,553 (17,565,802) 74,676,148

resultsInterest income 17,337 - - 17,337Finance cost 396,892 198,563 - 595,455Dividend income 409,097 - (409,097) -Depreciation and amortisation 1,087,499 1,037,642 - 2,125,141Share of results of associates 1,571,023 (39,958) - 1,531,065Income tax expense 475,422 (1,135,133) - (659,711)Segment profit 7,870,343 1,830,342 (300,000) 9,400,685

31.12.2011

assets Segment assets 97,002,823 19,130,023 (28,085,512) 88,047,334Deferred tax assets 800,000 - - 800,000Tax recoverable 291,656 41,773 - 333,429

Consolidated assets 98,094,479 19,171,796 (28,085,512) 89,180,763

Liabilities Segment liabilities 34,783,306 8,110,511 (18,878,717) 24,015,100Deferred tax liabilities 164,270 897,000 - 1,061,270Tax payable 73,266 122,805 - 196,071

Consolidated liabilities 35,020,842 9,130,316 (18,878,717) 25,272,441

* Enterprise Data Collection and Collation System

Geographical Segments

Geographical segments Business activitiesMalaysia Mainly consists of supply and installation of Enterprise Data Collection and

Collation Systems and hardware, information technology solutions, computer related accessories, integrating computer system and hardware, trading of price marker system, equipment and paper rolls, information technology solutions specialising in automated data collection processes, mobile computing.

Hong Kong and China Mainly consists of provision of supply chain solutions and related services.

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41. operatInG SeGment (Cont’D)

Geographical Segments (cont’d)

revenue

Carryingamount of

segmentassets

Capitalexpenditure

rm rm rm2012

Malaysia * 76,418,200 96,976,810 1,801,653Hong Kong and China 11,273,084 5,688,844 56,851Other country - - -

87,691,284 102,665,654 1,858,504

2011

Malaysia * 65,542,561 81,820,703 3,135,309Hong Kong and China 9,133,587 7,358,857 45,415Other country - 1,203 -

74,676,148 89,180,763 3,180,724

* Company’s home country

major customers

The Group does not have any revenue from a single external customer which represents 10% or more of the Group’s revenue.

42. CateGorIeS oF FInanCIaL InStrUmentS The table below provides an analysis of financial instruments categorised as follows:-

i. Loans and receivables (L&R); ii. Available-for-sale financial assets (AFS); andiii. Other liabilities measured at amortised cost (AC)

Carryingamount L&r aFS aC

rm rm rm rm31.12.2012

Group

Financial assetsOther investment (Note 7) 68,230 - 68,230 -Trade and other receivables

(Notes 12 & 13) 20,979,235 20,979,235 - -Amount due from associates (Note 15) 102,379 102,379 - -Amount due from related party (Note 16) 925,400 925,400 - -Fixed deposits (Note 17) 645,505 645,505 - -Cash and bank balances (Note 18) 6,403,115 6,403,115 - -

29,123,864 29,055,634 68,230 -



42. CateGorIeS oF FInanCIaL InStrUmentS (Cont’D)


rm rm rm rm

Financial liabilitiesAmount due to related parties (Note 31) 631,786 - - 631,786Finance lease liabilities (Note 25) 2,203,118 - - 2,203,118Loans and borrowings (Notes 26 & 32) 12,661,427 - - 12,661,427Trade and other payables (Notes 27& 28) 9,537,353 - - 9,537,353

25,033,684 - - 25,033,684

31.12.2011


(Notes 12 & 13) 17,370,279 17,370,279 - -Amount due from associates (Note 15) 87,597 87,597 - -Amount due from related party (Note 16) 429,250 429,250 - -Fixed deposits (Note 17) 625,747 625,747 - -Cash and bank balances (Note 18) 5,512,319 5,512,319 - -

24,095,223 24,025,192 70,031 -

Financial liabilitiesAmount due to related parties (Note 31) 113,531 - - 113,531Finance lease liabilities (Note 25) 2,129,188 - - 2,129,188Loans and borrowings (Notes 26 & 32) 10,950,321 - - 10,950,321Trade and other payables (Notes 27 & 28) 10,551,654 - - 10,551,654

23,744,694 - - 23,744,694

1.1.2011Group


(Notes 12 & 13) 15,703,485 15,703,485 - -Amount due from associates (Note 15) 145,776 145,776 - -Fixed deposits (Note 17) 484,068 484,068 - -Cash and bank balances (Note 18) 4,474,560 4,474,560 - -

20,879,719 20,807,889 71,830 -

Financial liabilitiesFinance lease liabilities (Note 25) 1,742,776 - - 1,742,776Loans and borrowings (Notes 26 & 32) 13,144,253 - - 13,144,253Trade and other payables (Notes 27 &28) 9,843,128 - - 9,843,128Amount due to Directors (Note 29) 476,250 - - 476,250

25,206,407 - - 25,206,407

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42. CateGorIeS oF FInanCIaL InStrUmentS (Cont’D)


rm rm rm rm31.12.2012Company

Financial assetsTrade and other receivables

(Notes 12 & 13) 16,350 16,350 - -Amount due from subsidiaries (Note 14) 170,617 170,617 - -Amount due from associates (Note 15) 13,794 13,794 - -Cash and bank balances (Note 18) 106,008 106,008 - -

306,769 306,769 - -

Financial liabilitiesAmount due to subsidiaries (Note 30) 5,277,658 - - 5,277,658Other payables (Note 28) 130,766 - - 130,766

5,408,424 - - 5,408,424

31.12.2011

Financial assetsTrade and other receivables

(Notes 12 &13) 1,012,550 1,012,550 - -Amount due from subsidiaries (Note 14) 839,904 839,904 - -Amount due from associates (Note 15) 61,227 61,227 - -Cash and bank balances (Note 18) 64,750 64,750 - -

1,978,431 1,978,431 - -

Financial liabilitiesAmount due to subsidiaries (Note 30) 1,632,758 - - 1,632,758Other payables (Note 28) 809,261 - - 809,261

2,442,019 - - 2,442,019

1.1.2011Company

Financial assetsOther receivables (Notes 12 & 13) 1,750 1,750 - -Amount due from subsidiaries (Note 14) 571,516 571,516 - -Amount due from associates (Note 15) 64,614 64,614 - -Cash and bank balances (Note 18) 12,268 12,268 - -

650,148 650,148 - -

Financial liabilitiesLoan and borrowings (Note 32) 632,458 - - 632,458Other payables (Note 28) 334,890 - - 334,890Amount due from subsidiaries (Note 30) 6,664,519 - - 6,664,519Amount due to Directors (Note 29) 476,250 - - 476,250

8,108,117 - - 8,108,117



43. FInanCIaL InStrUmentS

Financial risks management

The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. Financial risk management policy is established to ensure that adequate resources are available for the development of the Group’s and the Company’s business whilst managing its credit risk, liquidity risk, foreign currency risk and interest rate risk. The Group and the Company operate within clearly defined policies and procedures that are approved by the Board of Directors to ensure the effectiveness of the risk management process.

The main areas of financial risks faced by the Group and Company and the policy in respect of the major areas of treasury activity are set out as follows:-

(a) 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 meet its contractual obligations. It is the Group’s policy to enter into financial instrument with a diversity of creditworthy counterparties. The Group does not expect to incur material credit losses of its financial assets or other financial instruments.

Concentration of credit risk exists when changes in economic, industry and geographical factors similarly

affect the group of counterparties whose aggregate credit exposure is significant in relation to the Group’s total credit exposure. The Group’s portfolio of financial instrument is broadly diversified along industry, product and geographical lines, and transactions are entered into with diverse creditworthy counterparties, thereby mitigate any significant concentration of credit risk.

It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. The Group does not offer credit terms without the approval of the head of credit control.

Following are the areas where the Group and the Company are exposed to credit risk:-

(i) receivables

As at the end of the reporting date, the maximum exposure to credit risk arising from receivables is limited to the carrying amounts in the statements of financial position.

With a credit policy in place to ensure the credit risk is monitored on an ongoing basis, management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are stated at their realisable values.

A significant portion of these receivables are regular customers that have been transacting with the Group. The Group uses ageing analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due more than credit terms granted are deemed to have higher credit risk and are monitored individually.

The ageing analysis of these trade receivables is as follows:

31.12.2012 IndividuallyGross Impaired net

Group rm rm rm

Not past due 9,135,542 - 9,135,542Past due for 1-30 days 4,498,918 - 4,498,918Past due for 31-60 days 2,367,841 - 2,367,841Past due for 61-90 days 1,247,944 - 1,247,944Past due for 91-120 days 695,944 - 695,944Past due for more than 121 days 1,662,598 52,716 1,609,882

19,608,787 52,716 19,556,071

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43. FInanCIaL InStrUmentS

Financial risks management (cont’d)

(a) Credit risk (cont’d)

(i) receivables (cont’d)

31.12.2011 IndividuallyGross Impaired net

Group rm rm rm

Not past due 8,053,424 - 8,053,424Past due for 1-30 days 4,226,465 - 4,226,465Past due for 31-60 days 2,321,873 - 2,321,873Past due for 61-90 days 682,345 - 682,345Past due for 91-120 days 431,887 - 431,887Past due for more than 121 days 1,375,239 81,368 1,293,871

17,091,233 81,368 17,009,865

1.1.2011 IndividuallyGross impaired net

Group rm rm rm

Not past due 6,665,474 - 6,665,474Past due for 1-30 days 5,217,542 - 5,217,542Past due for 31-60 days 1,924,163 - 1,924,163Past due for 61-90 days 768,415 - 768,415Past due for 91-120 days 245,620 - 245,620Past due for more than 120 days 678,135 89,024 589,111

15,499,349 89,024 15,410,325


Company rm rm rm

Past due for more than 120 days 6,000 - 6,000

6,000 - 6,000


Company rm rm rm

Not past due 1,006,000 - 1,006,000

1,006,000 - 1,006,000

The net carrying amount of trade receivables is considered a reasonable approximate of fair value. The maximum exposure to credit risk is the carrying value of each class of receivables mentioned above.

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

Trade receivables that are neither past due nor impaired are creditworthy receivables with good payment records with the Group. None of the Group’s trade receivables that are neither past due nor impaired have been renegotiated during the financial year.



43. FInanCIaL InStrUmentS (Cont’D)


(a) Credit risk (cont’d)

(i) receivables (cont’d)

As at 31 December 2012, trade receivables of the Group and of the Company of RM10,430,529 and RM6,000 respectively were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default.

In respect of trade and other receivables, the Group is not exposed to any single counterparty or any group of counterparties having similar characteristics, except for the Company which has amount due from a trade receivable which represents the total trade receivable of the Company. Trade receivables consist of a large number of customers in various industries and geographical areas. Based on the historical information about customer default rates, management consider the credit quality of trade receivables that are not past due or impaired to be good.

(ii) Intercompany loans and advances

The maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position.

The Company provides unsecured advances to subsidiaries and monitors their results regularly.

As at the end of the reporting date, there was no indication that advances to the subsidiaries is not recoverable.

(iii) Investments and other financial assets

The maximum exposure to credit risk is represented by the carrying amounts in the statements of financial position.

In view of the sound credit rating of counterparties, management does not expect any counterparty to fail to meet its obligations.

(iv) Financial/corporate guarantees

The maximum exposure to credit risk amounts to RM12,042,729 (31.12.2011: RM8,032,481, 1.1.2011: RM7,855,919) representing the outstanding banking facilities of the subsidiaries as at end of the reporting period.

The Company provides unsecured corporate guarantees to licensed banks in respect of banking facilities granted to certain subsidiaries. The Company monitors on an ongoing basis the results of the subsidiaries and repayments made by them. As at the end of the reporting period, there was no indication that any subsidiaries would default on repayment.

(b) Liquidity risk

Liquidity risk is the risk that the Group and the Company will not be able to meet their financial obligations as they fall due to shortage of funds.

In managing its exposures to liquidity risk arises principally from its various payables and bank borrowings, the Group and the Company maintain a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.

The Group and the Company aim at maintaining a balance of sufficient cash and deposits and flexibility in funding by keeping diverse sources of committed and uncommitted credit facilities from various banks.

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(b) Liquidity risk (cont’d)

Liquidity risk analysis

Group Current non-current

Within 1 year 2 to 5 yearsmore than

5 yearsrm rm rm

31.12.2012Bank borrowings 10,633,481 1,772,689 255,257Finance lease liabilities 1,100,684 1,301,272 -

Total 11,734,165 3,073,961 255,257

31.12.2011Bank borrowings 8,101,645 2,418,920 429,756Finance lease liabilities 969,817 1,344,885 -

Total 9,071,462 3,763,805 429,756

1.1.2011Bank borrowings 9,606,542 3,192,756 344,955Finance lease liabilities 934,662 959,366 -

Total 10,541,204 4,152,122 344,955

(c) Foreign currency risk

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

To mitigate the Group’s and the Company’s exposure to foreign currency risk, the Group and the Company is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies of Group entities. The currency giving rise to this risk is primarily US Dollar (USD), Hong Kong Dollar (HKD) and Singapore Dollar (SGD).

The Group is also exposed to currency translation risk arising from its net investment in foreign operation in Singapore, Hong Kong and Thailand. The investment not hedged as currency positions in HKD, SGD and Thai Baht is considered to be long-term in nature.

The following table demonstrates the sensitivity of the Group’s profit for the financial year to a reasonably possible change in the USD, HKD and SGD exchange rates against the respective functional currency of the Group and of the Company, with all other variables held constant.




(c) Foreign currency risk (cont’d)

Group Increase/(Decrease)

31.12.2012profit forthe year equity

rm rmUSD/RM - Strengthened 0.47% (6,419) 6,419- Weakened 0.47% 6,419 (6,419)

HKD/RM - Strengthened 0.45% (11,139) 11,139- Weakened 0.45% 11,139 (11,139)

SGD/RM - Strengthened 0.01% (11) 11- Weakened 0.01% 11 (11)

31.12.2011

USD/RM - Strengthened 0.28% (2,895) 2,895- Weakened 0.28% 2,895 (2,895)



1.1.2011

USD/RM - Strengthened 0.87% (13,102) 13,102- Weakened 0.87% 13,102 (13,102)



Exposures to foreign exchange rates vary during the financial year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group’s and the Company’s exposures to foreign currency risk.

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(d) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates.

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

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

Group 31.12.2012 31.12.2011 1.1.2011

rm rm rm

Fixed rate instrumentsFinancial liabilities (2,203,118) (2,129,188) (1,742,776)

Floating rate instruments Financial assets 645,505 625,747 484,068Financial liabilities (12,661,427) (10,950,321) (13,144,253)

(12,015,922) (10,324,574) (12,660,185)

Interest rate sensitivity analysis

At 31 December 2012, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. Other borrowings are at fixed interest rates. The exposure to interest rates for the Group’s short term placement is considered immaterial.

The following table illustrates the sensitivity of profit to a reasonably possible change in interest rates of +/- 100 basis points (“bp”). These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.

Group effect on profit for the year+100bp -100bp

rm rm

31 December 2012 (120,159) 120,159

31 December 2011 (103,246) 103,246

1 January 2011 (126,602) 126,602

Fair value of Financial Instruments

The carrying amounts of short term receivables and payable, cash and cash equivalents and short term borrowings approximate their fair values due to the relatively short term nature of these financial instruments and insignificant impact of discounting.




Fair value of Financial Instruments (cont’d)

It was not practicable to estimate the fair value of the Group’s investment in unquoted shares due to the lack of comparable quoted prices in active market. In addition, it is impracticable to use valuation technique to estimate the fair value reliably as a result of significant variability in the inputs of the valuation technique. The Group does not intend to dispose of this investment in the near future and intends to eventually dispose of this investment through sale to capital venture company.

The fair value of other financial assets and liabilities, together with the carrying amounts shown in the statements of financial position, are as follows:-

31.12.2012 31.12.2011 1.1.2011Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

rm rm rm rm rm rmGroupTerm loans 2,891,506 2,703,558 3,608,027 3,369,897 5,060,317 4,741,517Finance lease liabilities 2,203,118 2,059,915 2,129,188 1,988,662 1,742,776 1,632,981Borrowings 8,977,000 8,393,495 6,353,792 5,934,442 7,016,941 6,574,873

CompanyTerm loans - - - - 632,458 592,613

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

Fair value Hierarchy

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

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Level 2 Level 3 totalrm rm rm rm

31.12.2012

Group

available-for-sale financial assets

Other investment - 68,230 - 68,230

31.12.2011

Group



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Fair value of Financial Instruments (cont’d)

Level 1 Level 2 Level 3 totalrm rm rm rm

1.1.2011

Group



44. CommItmentS

Capital commitments

Group2012 2011

rm rmCapital expenditure

- Authorised and contracted for:-Property, plant and equipment 2,174,580 -

- Authorised and not contracted for:-Property, plant and equipment 171,000 -

Total 2,345,580 -

operating lease commitments – as lessor

The future minimum lease payments receivable under cancellable operating lease commitments are:

Group2012 2011

rm rmFuture minimum lease payments receivables:

Not later than one year 191,040 79,479Later than one year but not later than five year 191,040 - Total 382,080 79,479

Operating lease commitments represent rental receivables for the rent of the Group’s office. Leases are negotiated for terms of 1 to 2 years (2011: 1 to 2 years).

45. CapItaL manaGement

The Group’s objectives when managing capital is to maintain a strong capital base and safeguard the Group’s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business.

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



45. CapItaL manaGement (Cont’D)

Under the requirement of Bursa Malaysia PN17, the Group is required to maintain a consolidated shareholders’ equity equal to or not less than the 25% of the issued and paid-up capital (excluding treasury shares). The Company has complied with this requirement.

46. SIGnIFICant eventS DUrInG tHe FInanCIaL Year

(i) On 18 June 2012, the Warrant holders converted 330,100 warrants 2010/2015 to ordinary shares of RM0.10 each at an exercise price of RM0.25 per share. The new shares issued during the financial year rank pari passu in all respects with the existing ordinary shares of the Company.

(ii) On 30 June 2012, a subsidiary, Labels Network Sdn. Bhd., acquires 42,800 ordinary shares representing

40% of total paid-up charter capital of High Rich Trading & Service Corporation from Simat Label Co., Ltd for a total purchase consideration of USD150,000.

(iii) On 16 July 2012, the Company issued bonus issue of additional 159,782,925 new ordinary shares of

RM0.10 each to be credited as fully paid-up on the basis of one (1) bonus share for every one (1) to existing share. The consideration of the allotment of share to be capitalised from the share premium amount of the Company.

47. eventS aFter tHe reportInG perIoD

(i) On 27 February 2013, the Company made announcement that the Board of Simat had approved the proposed private placement of up to 16,000,000 new ordinary shares of Thai Baht 1.00 each to various investors at a pre-determined unit price of Thai Baht 7.93, representing not less than 90% of the 15-days weighted average market price between 4 February 2013 to 22 February 2013, to be subscribed by 4 March 2013. The proceeds from the proposed private placement amounting to Thai Baht 126,880,000.00 will be utilized as working capital.

Upon completion, the proposed private placement will result in the dilution of Grand-Flo’s shareholding in Simat from 33.17% to 30.26%.

(ii) On 10 April 2013, the Company proposed to dispose of 15,300,000 ordinary shares of THB1.00 each held in Simat Technologies Public Company Limited (“Simat”), an associate of the Company, representing approximately 7.69% of the total issued and paid up share capital of Simat, at THB8.00 per shares for a total consideration of THB122,400,000.

Upon completion of the disposal, the Company shareholding in Simat will be reduced to 45,337,500 Simat shares representing approximately 22.77% equity interest in Simat.

(iii) On 24 April 2013, the Company proposes to change its name from Grand-Flo Solution Berhad to Grand-Flo Berhad. The proposed change of name is subject to the shareholders’ approval at the forthcoming Annual General Meeting.

48. eXpLanatIon anD FInanCIaL ImpaCtS on tranSItIon to mFrS

As stated in Note 2.4 to the Financial Statements, these are the first financial statements of the Group and of the Company prepared in accordance with MFRSs.

The accounting policies set out in Note 3 have been applied in preparing the financial statements of the Group and of the Company for the financial year ended 31 December 2012, the comparative information presented in these financial statements for the financial year ended 31 December 2011 and in the preparation of the opening MFRS statements of financial position at 1 January 2011 (the date of transition to MFRSs).

The transition to MFRSs does not have financial impact to the financial statements of the Group and the Company.

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DISCLoSUre oF reaLISeD anD UnreaLISeD proFItS

Bursa Malaysia Securities Berhad has on 25 March 2010 and on 20 December 2010, issued directives require all listed corporations to disclose the breakdown of unappropriated profits or accumulated losses into realised and unrealised on Group and Company basis, as the case may be, in quarterly reports and annual audited financial statements.

The breakdown of unappropriated profits as at the reporting date that has been prepared by the Directors in accordance with the directives from Bursa Malaysia Securities Berhad stated above and the Guidance on Special Matter No. 1 issued on 20 December 2010 by the Malaysian Institute of Accountants are as follows:-

Group Company31.12.2012 31.12.2011 1.1.2011 31.12.2012 31.12.2011 1.1.2011

rm rm rm rm rm rm

Total retained earnings of the Company and its subsidiaries- Realised 32,625,195 31,384,493 24,359,979 5,636,421 8,892,451 3,999,049- Unrealised 2,346,528 261,270 663,879 - - -

34,971,723 31,645,763 25,023,858 5,636,421 8,892,451 3,999,049

Total share of retained earnings from the associates- Realised 6,602,493 5,572,615 3,998,160 - - -

Less: Consolidation adjustments 41,574,216 37,218,378 29,022,018 5,636,421 8,892,451 3,999,049(9,629,765) (11,202,702) (10,803,154) - - -

Total Group retained earnings as per consolidated financial statements 31,944,451 26,015,676 18,218,864 5,636,421 8,892,451 3,999,049

The disclosure of realised and unrealised profit or losses above is solely for complying with the disclosure requirements stipulated in the directive of Bursa Malaysia Securities Berhad and should not be applied for any other purposes.


104anaLYSIS oF SHareHoLDInGSas at 30 april 2013

Authorised Capital : RM50,000,000.00Issued And Fully Paid-up Capital : RM31,956,585.00Class of Shares : Ordinary Shares of RM0.10 eachVoting Rights : One vote per share

DIStrIBUtIon SCHeDULe oF SHareHoLDerS

Size of Holdingsno. of

Holders %no. of

Shares *** %

1-99 2 0.20 62 0.00100-1,000 325 32.83 75,622 0.021,001-10,000 208 21.01 1,280,900 0.4010,001-100,000 351 35.46 12,903,900 4.04100,001-15,977,791 (*) 102 10.30 212,524,714 66.5115,977,792 AND ABOVE(**) 2 0.20 92,770,652 29.03

TOTAL: 990 100.00 319,555,850 100.00

* Less than 5% of Issued Shares** 5% and above of Issued Shares*** Excluding a total of 10,000 shares bought and retained as treasury shares

105

A N N U A L R E P O R T 2 0 1 2

anaLYSIS oF SHareHoLDInGS (cont’d)

as at 30 april 2013

SUBStantIaL SHareHoLDerS’ SHareHoLDInGSaS at 30 aprIL 2013(As per the Register of Substantial Shareholders)

no. of Shares Heldno. name of Shareholders Direct Interest %* Indirect Interest %*

1. Grand-Flo Corporation Sdn Bhd 68,170,652 21.33 - -2. Tan Bak Hong 1,914,900 0.60 69,170,652(1) 21.653. Yap Li Li 1,000,000 0.31 70,085,552(2) 21.934. Tan Chuan Hock 8,400,000 2.63 8,000,000(3) 2.505. Wan Kok Weng 11,983,470 3.75 9,230,768(4) 2.896. Chan Pik Khew 9,230,768 2.89 11,983,470(5) 3.757. Silver Oak Management Ltd 30,000,000 9.39 - -

Notes:-(1) Deemed interested by virtue of his spouse, Yap Li Li’s interest in the Company and by virtue of his and Yap Li Li’s

interests in Grand-Flo Corporation Sdn Bhd.(2) Deemed interested by virtue of her spouse, Mr. Tan Bak Hong’s interest in the Company and by virtue of her and

Mr. Tan Bak Hong’s interests in Grand-Flo Corporation Sdn Bhd.(3) Deemed interested by virtue of his interest in AI Capital Sdn Bhd.(4) Deemed interested by virtue of his spouse, Ms. Chan Pik Khew’s interest in the Company.(5) Deemed interested by virtue of her spouse, Mr. Wan Kok Weng’s interest in the Company.

DIreCtorS’ SHareHoLDInGSaS at 30 aprIL 2013(As per the Register of Directors’ Shareholdings)

no. of Shares Heldno. name of Directors Direct Interest %* Indirect Interest %*

1. Tan Bak Hong 1,914,900 0.60 69,170,652(1) 21.652. Yap Li Li 1,000,000 0.31 70,085,552(2) 21.933. Cheng Ping Liong 5,333,334 1.67 - -4. Wan Kok Weng 11,983,470 3.75 9,230,768(3) 2.895. Tan Chuan Hock 8,400,000 2.63 8,000,000(4) 2.506. Chan Pik Khew

(Alternate to Wan Kok Weng)9,230,768 2.89 11,983,470(5) 3.75

Notes:-(1) Deemed interested by virtue of his spouse, Yap Li Li’s interest in the Company and by virtue of his and Yap Li Li’s

interests in Grand-Flo Corporation Sdn Bhd.(2) Deemed interested by virtue of her spouse, Mr. Tan Bak Hong’s interest in the Company and by virtue of her and

Mr. Tan Bak Hong’s interests in Grand-Flo Corporation Sdn Bhd.(3) Deemed interested by virtue of his spouse, Ms. Chan Pik Khew’s interest in the Company.(4) Deemed interested by virtue of his interest in AI Capital Sdn Bhd.(5) Deemed interested by virtue of her spouse, Mr. Wan Kok Weng’s interest in the Company.


106anaLYSIS oF SHareHoLDInGS (cont’d)

as at 30 april 2013

Statement oF SHareHoLDInGStHIrtY LarGeSt reGIStereD SHareHoLDerS aS at 30 aprIL 2013(Without aggregating securities from different securities accounts belonging to the same person)

no. name Holdings % *

1. Grand-Flo Corporation Sdn. Bhd. 62,770,652 19.64

2. HSBC Nominees (Asing) Sdn. Bhd. Exempt an for BNP Paribas Wealth Management Singapore Branch (A/C Clients – FGN)

30,000,000 9.39

3. Asas Masyhur Sdn. Bhd. 15,148,300 4.74

4. Chuah Chew Hai 12,674,000 3.97

5. Lim Wee Chai 12,000,000 3.76

6. Wan Kok Weng 11,983,470 3.75

7. AIBB Nominees (Asing) Sdn. Bhd. Sun Hung Kai Investment Services Limited for CL Solutions Services Limited

11,796,352 3.70

8. Thongkam Manasilapapan 11,219,800 3.51

9. Chan Pik Khew 9,230,768 2.89

10. Tan Chuan Hock 8,400,000 2.63

11. Al Capital Sdn. Bhd. 8,000,000 2.50

12. Cartaban Nominees (Tempatan) Sdn. Bhd. Exempt an for Credit Industriel ET Commercial (AC Client MY R)

7,818,600 2.45

13. Mohammed Noor Bin Mohd Sham 6,000,000 1.88

14. Su Bee Leng 6,000,000 1.88

15. EB Nominees (Tempatan) Sendirian Berhad Pledged Securities Account for Grand-Flo Corporation Sdn. Bhd. (SFC)

5,400,000 1.69

16. Cheng Ping Liong 5,333,334 1.67

17. Tan Check Ee 5,000,000 1.56

18. HSBC Nominees (Asing) Sdn. Bhd. Exempt an for Credit Suisse (SG BR-TST-Asing)

4,800,000 1.50

19. Lee Kuan Meng 4,550,000 1.42

20. Vibrant Model Sdn. Bhd. 4,000,000 1.25

21. CIMSEC Nominees (Tempatan) Sdn Bhd CIMB Bank for Moi Ming Huei (MY0215)

3,800,000 1.19

22. HSBC Nominees (Tempatan) Sdn. Bhd. HSBC (M) Trustee Bhd for OSK-UOB Small Cap Opportunity Unit Trust (3548)

3,140,200 0.98

23. Lee Poh Lan 3,000,000 0.94

24. Cindy Chew Ai Mei 2,993,600 0.94

25. Moi Ming Huei 2,933,716 0.92

26. Lai Ming Chun @ Lai Poh Lin 2,800,000 0.88

27. Chua Sim Neo @ Diana Chua 2,633,100 0.82

28. Heitech Padu Berhad 2,229,294 0.70

29. Chong Tong Siew 2,000,000 0.63

30. CIMSEC Nominees (Tempatan) Sdn. Bhd. CIMB Bank for Phang Chet Ping (MY0322)

2,000,000 0.63

* All percentage shareholding computations are based on the issued and paid-up capital less treasury shares account (10,000 shares) arising from the share buy back exercise.

107

A N N U A L R E P O R T 2 0 1 2

anaLYSIS oF Warrant HoLDInGSas at 30 april 2013

Type of Securities : Warrants 2010/2015No. of Warrants Issued : 135,164,710Exercise Price : RM0.25 Exercise Period : 22 April 2010 to 21 April 2015

DIStrIBUtIon 2010/2015 Warrant HoLDInGS

Size of Holdings

no. ofWarrants

2010/2015 Holders %

no. ofWarrants

2010/2015 %

1-99 3 0.81 100 0.00100-1,000 28 7.59 10,048 0.011,001-10,000 56 15.18 354,700 0.2610,001-100,000 188 50.95 8,692,600 6.43100,001-6,758,234 (*) 92 24.93 93,414,162 69.116,758,235 AND ABOVE(**) 2 0.54 32,693,100 24.19

TOTAL: 369 100.00 135,164,710 100.00

* Less than 5% of Issued Warrants** 5% and above of Issued Warrants

DIreCtorS’ Warrant HoLDInGS aS at 30 aprIL 2013

no. of Warrants 2010/2015 Heldno. name of Directors Direct Interest % Indirect Interest %

1. Tan Bak Hong 20,834,736 15.41 8,691,200(1) 6.432. Yap Li Li - - 29,525,936(2) 21.843. Cheng Ping Liong 3,528,400 2.61 - -4. Tan Chuan Hock 4,200,000 3.11 4,000,000(3) 2.96

Notes:-(1) Deemed interested by virtue of his interest in Grand-Flo Corporation Sdn Bhd.(2) Deemed interested by virtue of her spouse, Mr. Tan Bak Hong’s interest in the Company and by virtue of her and

Mr. Tan Bak Hong’s interests in Grand-Flo Corporation Sdn Bhd.(3) Deemed interested by virtue of his interest in AI Capital Sdn Bhd.


108anaLYSIS oF Warrant HoLDInGS (cont’d)

as at 30 april 2013

tHIrtY LarGeSt 2010/2015 Warrant HoLDerS aS at 30 aprIL 2013(Without aggregating securities from different securities accounts belonging to the same person)

no. name Holdings %

1. CIMSEC Nominees (Tempatan) Sdn. Bhd. CIMB Bank for Tan Bak Hong (MM 0731)

18,602,100 13.76

2. Chuah Chew Hai 14,091,000 10.43

3. Lim Wee Chai 6,000,000 4.44

4. Grand-Flo Corporation Sdn. Bhd. 5,991,200 4.43

5. Othman Bin Bakri 5,546,466 4.10

6. Tan Chuan Hock 4,200,000 3.10

7. AI Capital Sdn. Bhd. 4,000,000 2.96

8. Lee Poh Lan 4,000,000 2.96

9. Cartaban Nominees (Tempatan) Sdn. Bhd. Exempt an for Credit Industriel ET Commercial (AC Client MY R)

3,909,300 2.89

10. Cheng Ping Liong 3,528,400 2.61

11. Alliancegroup Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Khor Jan Yeow (8083119)

3,221,600 2.38

12. Asas Masyhur Sdn Bhd 2,930,000 2.17

13. EB Nominees (Tempatan) Sendirian Berhad Pledged Securities Account for Grand-Flo Corporation Sdn. Bhd. (SEC)

2,700,000 2.00

14. Tan Check Ee 2,607,600 1.93

15. Yang Siew Wai 2,440,000 1.81

16. Chua Sim Neo & Diana Chua 2,126,800 1.57

17. Thongkam Manasilapapan 2,099,900 1.55

18. CIMSEC Nominees (Tempatan) Sdn. Bhd. CIMB Bank for Phang Chet Ping (MY 0322)

2,000,000 1.48

19. Vibrant Model Sdn. Bhd. 2,000,000 1.48

20. Sim Mui Khee 1,750,000 1.29

21. Khor Jan Yeow 1,690,000 1.25

22. Tan Bak Hong 1,489,636 1.10

23. Sieo Chee Wai 1,429,600 1.06

24. Saw Siew Tuan 1,406,000 1.04

25. JF Apex Nominees (Tempatan) Sdn. Bhd. Huatai Financial Holdings (HK) Limited for Huatai HK SPC-Huatai Von Malaysia Fund Segregated Portfolio

1,315,200 0.97

26. CIMSEC Nominees (Tempatan) Sdn. Bhd. CIMB Bank for Teh Swee Heng (MM1118)

1,200,000 0.89

27. Soh Ah Tee 1,191,400 0.88

28. Wui Mee Ling 1,079,000 0.80

29. Yeong Chin Chou 1,054,600 0.78

30. Liaw Ah Koon 1,000,000 0.74

109

A N N U A L R E P O R T 2 0 1 2

LISt oF propertIeS

title/LocationDescription/existing Use

Currentuse tenure

age of building (Years)

Land/Built-up

area

Carrying value as at 31.12.2012

(rm)Date of

acquisition

No.3-1, 3-2, 3-3, 3-4, Block D2 Jalan PJU 1/39, Dataran Prima47301 Petaling Jaya Selangor Darul Ehsan

Five storey shop office

Office Freehold 14years

771sqm

3,000,000 8-Dec-04

No. G-9-1, 2 & 3Lorong Bayan Indah 1, Bay Avenue, Queensbay, Sg. Nibong,11900 Penang,Malaysia

Three storey shop office

Office, laboratory

and warehouse

Freehold 4years

363sqm

2,800,000 17-Nov-05

No. 34 Jalan Utama 1/15 Taman Perindustrian Puchong Utama, Sek 1 47140 PuchongSelangor Darul Ehsan

Single storey industrial building

Office Leasehold for 99 years/Expires 16

August 2094

17years

148sqm

600,000 10-Dec-08


Single storey factory

Factory Leasehold for 99 years/Expires 16

August 2094

17years

148sqm

600,000 21-Aug-08




August 2094

17years

148sqm

560,000 21-Aug-08




August 2094

17years

148sqm

560,000 21-Aug-08




August 2094

17years

148sqm

560,000 21-Aug-08




August 2094

17years

148sqm

520,000 21-Aug-08




August 2094

17years

148sqm

520,000 21-Aug-08




August 2094

17years

148sqm

560,000 26-Nov-10

The Group measures its land and buildings at revalued amount by independent valuation specialists to determine their fair values as at 31 December 2012.


110 notICe oF annUaL GeneraL meetInG

notICe IS HereBY GIven that the Tenth Annual General Meeting of GRAND-FLO SOLUTION BERHAD (“Grand-Flo” or “the Company”) will be held at The Greens I, Golf Wing, Ground Level, Jalan Kelab Tropicana, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor Darul Ehsan on Thursday, 27 June 2013 at 3.00 p.m. to transact the following business:-

a G e n D a

1. To receive the Audited Financial Statements for the financial year ended 31 December 2012 together with the Reports of the Directors and Auditors thereon.

Please referto Note I

2. To declare a final tax exempt dividend of 1.0 sen per ordinary share for the financial year ended 31 December 2012.

(Resolution 1)

3. To approve the payment of Directors’ fees for the financial year ended 31 December 2012. (Resolution 2)

4. To re-elect the following Directors who retire in accordance with Article 104 of the Company’s Articles of Association :

i. Mr. Tan Bak Hong (Resolution 3)ii. Mr. Tan Chuan Hock (Resolution 4)iii. Mr. Yew Deiw See (Resolution 5)

5. To re-appoint Messrs. SJ Grant Thornton as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration.

(Resolution 6)

as Special Business :To consider and if thought fit, pass with or without any modifications, the following resolutions :-

6. ContInUInG In oFFICe aS InDepenDent non-eXeCUtIve DIreCtor (Resolution 7)

“THAT approval be and is hereby given to Mr. Yu Chee Sing who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine years, to continue to act as an Independent Non-Executive Director of the Company pursuant to Recommendation 3.3 of the Malaysian Code on Corporate Governance 2012.”

7. re-apppoIntment oF retIrInG DIreCtor pUrSUant to SeCtIon 129(6) oF tHe CompanIeS aCt, 1965

(Resolution 8)

“THAT pursuant to Section 129(6) of the Companies Act, 1965, Tan Sri Datuk Adzmi Bin Abdul Wahab be and is hereby re-appointed as Director of the Company to hold office until the conclusion of the next Annual General Meeting of the Company.”

8. orDInarY reSoLUtIon 1GeneraL aUtHorItY For tHe DIreCtorS to ISSUe SHareS pUrSUant to SeCtIon 132D oF tHe CompanIeS aCt, 1965

(Resolution 9)

“THAT pursuant to Section 132D of the Companies Act, 1965, and subject to the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered to allot and issue shares in the Company from time to time at such price, upon such terms and conditions, for such purposes and to such person or persons whomsoever as the Directors may deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being AND THAT the Directors be and are also empowered to obtain approval from the Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares so issued AND THAT such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”

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A N N U A L R E P O R T 2 0 1 2

notICe oF annUaL GeneraL meetInG (cont’d)

9. orDInarY reSoLUtIon 2propoSeD reneWaL oF tHe aUtHorItY For tHe CompanY to pUrCHaSe ItS oWn SHareS oF Up to ten perCent (10%) oF ItS ISSUeD anD paID-Up SHare CapItaL (“propoSeD reneWaL oF SHare BUY-BaCK aUtHorItY”)

(Resolution 10)

“tHat, subject always to the Companies Act, 1965 (“the act”), rules, regulations and orders made pursuant to the Act, provisions of the Memorandum and Articles of Association of the Company, the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“Listing requirements”) and the approvals of any other relevant governmental and/or regulatory authorities, the Company be and is hereby authorised to purchase and/or hold such amount of ordinary shares of RM0.10 each in the Company’s issued and paid-up share capital (“Grand-Flo Shares”) through Bursa Securities upon such terms and conditions as the Directors may deem fit and expedient in the interest of the Company provided that:

(i) the aggregate number of Grand-Flo Shares bought-back and/or held as treasury shares does not exceed ten percent (10%) of the total issued and paid up share capital of the Company subject to a restriction that the issued and paid up share capital of the Company does not fall below the public shareholding spread requirement of the Listing Requirements;

(ii) the maximum funds to be allocated for the share buy-back shall not exceed the aggregate of the retained earnings and the share premium accounts of the Company; and

(iii) the Grand-Flo Shares purchased pursuant to the Proposed Renewal of Share Buy-Back Authority are to be treated in any of the following manner:

(a) cancel the purchased Grand-Flo Shares;

(b) retain the purchased Grand-Flo Shares as treasury shares for distribution as share dividends to the shareholders of the Company and/or be resold through Bursa Securities in accordance with the relevant rules of Bursa Securities and/or be cancelled subsequently; or

(c) retain part of the purchased Grand-Flo Shares as treasury shares and cancel the remainder,

anD tHat such authority shall commence immediately upon the passing of this resolution until:

(i) the conclusion of the next Annual General Meeting (“aGm”) of the Company following the general meeting at which this resolution is passed, at which time it shall lapse, unless the authority is renewed by a resolution passed at the next AGM; or

(ii) the expiration of the period within which the next AGM after that date it is required by law to be held; or

(iii) revoked or varied by ordinary resolution passed by the shareholders of the Company at a general meeting of the Company,

whichever occurs first, but not so as to prejudice the completion of the purchase(s) by the Company of the Grand-Flo Shares before the aforesaid expiry date and made in any event, in accordance with the provisions of the guidelines issued by Bursa Securities and any prevailing laws, rules, regulations, orders, guidelines and requirements issued by any other relevant government and/or regulatory authorities;

anD FUrtHer tHat, the Directors of the Company be and are hereby authorised to take all such steps as are necessary or expedient to implement, finalise, complete or to effect the Proposed Renewal of Share Buy-Back Authority with full powers to assent to any conditions, modifications, resolutions, variations and/or amendments (if any) as may be imposed by the relevant authorities and to do all such acts and things as they may deem fit and expedient in the best interest of the Company to give effect to and to complete the purchase of the Grand-Flo Shares.”


112 notICe oF annUaL GeneraL meetInG (cont’d)

10. SpeCIaL reSoLUtIonpropoSeD CHanGe oF name oF CompanY From “GranD-FLo SoLUtIon BerHaD” to “GranD-FLo BerHaD” (“propoSeD CHanGe oF name”)

(Resolution 11)

“THAT the name of the Company be changed from “Grand-Flo Solution Berhad” to “Grand-Flo Berhad” to be effective from the date of issuance of the Certificate of Incorporation on Change of Name of Company by the Companies Commission of Malaysia AND THAT all reference in the Company’s Memorandum and Articles of Association to the name of “Grand-Flo Solution Berhad”, whenever the same may appear, shall be deleted and substituted with “Grand-Flo Berhad” AND the Memorandum and Articles of Association of the Company be amended accordingly AND THAT any one of the Directors and/or Secretaries of the Company be authorised to carry out all necessary formalities in giving effect to the Proposed Change of Name;

AND FURTHER THAT the Company’s Common Seal shall be altered to the new name and adopted as the official Common Seal of the Company.”

11. To transact any other business of which due notice shall have been given in accordance with the Companies Act, 1965.

notICe oF DIvIDenD entItLement

notICe IS aLSo HereBY GIven that a final tax exempt dividend of 1.0 sen per share for the financial year ended 31 December 2012, if approved by the shareholders at the Annual General Meeting of the Company, will be paid on 31 July 2013 to the shareholders whose names appear in the Record of Depositors of the Company at the close of business on 12 July 2013.

A depositor shall qualify for entitlement to the dividend only in respect of :-

i. Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 12 July 2013 in respect of ordinary transfers; and

ii. Shares bought on the Bursa Malaysia Securities Berhad on a cum-entitlement basis according to the Rules of the Bursa Malaysia Securities Berhad.

By order of the Board

tea Sor HUa (maCS 01324)YonG Yen LInG (maICSa 7044771)Company Secretaries

Date : 5 June 2013Petaling Jaya, Selangor Darul Ehsan

notes:

I. The Agenda No. 1 is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of shareholders and hence, is not put forward for voting.

II. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and the provisions of Sections 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company.

III. A shareholder shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a shareholder appoints two (2) proxies, he shall specify the proportion of his shareholdings to be represented by each proxy.

IV. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing. If the appointor is a corporation, the instrument must be executed under its Common Seal or under the hand of an officer or attorney so authorised.

113

A N N U A L R E P O R T 2 0 1 2

notICe oF annUaL GeneraL meetInG (cont’d)

V. The instrument appointing a proxy must be deposited at the registered office of the Company situated at Third Floor, No.79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

VI. The depositors whose names appear in the Record of Depositors as at 19 June 2013 shall be regarded as members and entitled to attend, speak and vote at the Tenth Annual General Meeting (“AGM”).

eXpLanatorY noteS to SpeCIaL BUSIneSS

1. The Nomination Committee has assessed the independence of Mr. Yu Chee Sing, who served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine years, and recommended him to continue to act as an Independent Non-Executive Director of the Company based on the following justifications:

(a) He fulfilled the criteria under the definition of Independent Director as stated in the Main Market Listing Requirements of Bursa Securities and therefore would be able to function as a check and balance and bring an element of objectivity to the Board of Directors of the Company (“the Board”).

(b) He has vast experience in respective industries which could provide the Board with a diverse set of experience, expertise and independent judgment.

(c) He devoted sufficient time and attention to his responsibilities as an Independent Non-Executive Director of the Company.

(d) He understands the main drivers of the business in a detailed manner.(e) He has exercised due care during his tenure as Independent Non-Executive Director of the Company and

carried out his duties in the best interest of the Company and Shareholders.

2. The Resolution proposed under item 7 of the Agenda is to seek shareholders’ approval pursuant to Section 129(6) of the Companies Act, 1965 for the re-appointment of a Director who is of or over the age of seventy years and retiring in accordance with Section 129(2) of the Companies Act, 1965. If passed, it will enable the Director to hold office until the next AGM of the Company.

3. The Ordinary Resolution 1 proposed under item 8 of the Agenda is a renewal of the general mandate for issuance of shares by the Company under Section 132D of the Companies Act, 1965. The Ordinary Resolution, if passed, will give the Directors of the Company from the date of the above meeting, authority to allot and issue ordinary shares from the unissued capital of the Company for such purposes as the Directors consider would be in the interest of the Company. The authority will, unless revoked or varied by the Company in General Meeting, expire at the next AGM.

This general mandate will provide flexibility to the Company for allotment of shares for any possible fund raising activities, including but not limited to further placing of shares, for the purpose of funding future investment project(s), working capital and/or acquisition(s).

As at the date of this Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the Ninth AGM held on 22 June 2012 which will lapse at the conclusion of the Tenth AGM.

4. The Ordinary Resolution 2 proposed under item 9 of the Agenda is to renew the shareholders’ mandate for the share buy-back by the Company. The said proposed renewal of shareholders’ mandate will empower the Directors to buy-back and/or hold up to a maximum of 10% of the Company’s issued and paid-up share capital at any point of time, by utilizing the amount allocated which shall not exceed the total retained profits and/or share premium account of the Company. This authority unless revoked or varied by the Company at a general meeting, will expire at the conclusion of the next AGM of the Company, or the expiration of period within which the next AGM is required by law to be held, whichever is earlier.

Please refer to the Share Buy-Back Statement to Shareholders dated 5 June 2013 for further details.

5. The Special Resolution proposed under item 10 of the Agenda is to seek shareholders’ approval for the proposed change of Company’s name from “Grand-Flo Solution Berhad” to “Grand-Flo Berhad”. The rationale for the proposed change of name is to reflect the new direction and corporate identity for the Company to undertake its existing business and to provide the flexibility to leverage on its new business focus going forward. Approval for the use of name had been obtained from Companies Commission of Malaysia (“CCM”). The change of name of the Company, if approved by shareholders, will be effective from the date of issuance of the Certificate of Incorporation on the Change of Name of the Company by CCM.

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PROXY FORM

I/We NRIC/Company No. (full name in capital letters)

of (full address)

being (a) member(s) of GRAND-FLO SOLUTION BERHAD hereby appoint

NRIC No. (full name in capital letters)

of (full address)

or failing him/her, NRIC No. (full name in capital letters)

of (full address)

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Tenth Annual General Meeting of the Company to be held at The Greens I, Golf Wing, Ground Level, Jalan Kelab Tropicana, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor Darul Ehsan on Thursday, 27 June 2013 at 3.00 p.m. and at any adjournment thereof.

Please indicate with an “X” in the appropriate spaces how you wish your votes to be cast. If no specific direction as to vote is given, the Proxy will vote or abstain from voting at his/her discretion.

no. resolutions For against1. Resolution 12. Resolution 23. Resolution 34. Resolution 45. Resolution 56. Resolution 67. Resolution 78. Resolution 89. Resolution 910. Resolution 1011. Resolution 11

Dated this ________ day of _______________ 2013

Signature of Member(s)/Common Seal

notes:

I. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and the provisions of Sections 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company.

II. A shareholder shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a shareholder appoints two (2) proxies, he shall specify the proportion of his shareholdings to be represented by each proxy.

III. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing. If the appointor is a corporation, the instrument must be executed under its Common Seal or under the hand of an officer or attorney so authorised.

IV. The instrument appointing a proxy must be deposited at the registered office of the Company situated at Third Floor, No.79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

V. The depositors whose names appear in the Record of Depositors as at 19 June 2013 shall be regarded as members and entitled to attend, speak and vote at the Tenth Annual General Meeting.

CDS Account NO. OF SHARES HELD

A main board listed company

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2nd fold here

The Company Secretary

Grand-Flo Solution Berhad (607392-W)

Third Floor, No 79 (Room A)Jalan SS 21/60Damansara Utama47400 Petaling JayaSelangor Darul Ehsan

AFFIXSTAMPHERE

Grand-Flo Solution Berhad Office:

MALAYSIAHEAD OFFICENO 3-5, BLOCK D2JALAN PJU 1/39DATARAN PRIMA47301 PETALING JAYASELANGOR MALAYSIAT: 603 7880 2222 F: 603 7880 3913www.grand-flo.com

KUALA LUMPUR OFFICEL1-1, WISMA EHSAN BINA3, JALAN KUCHAI MAJU 12KUCHAI ENTREPRENEURS PARK58200 KUALA LUMPUR, MALAYSIAT: 603 7980 8580 F: 603 7980 8790EMAIL: [email protected]

PENANG OFFICENO. G-9-2 & 3, LORONG BAYAN INDAH 1BAY AVENUE, QUEENSBAY11900 SUNGAI NIBONGPENANG, MALAYSIAT: 604 6456 991 F: 604 6456 993EMAIL: [email protected]

JOHOR OFFICE57-01, JALAN HARMONIUM 33/1TAMAN DESA TEBRAU81100 JOHOR BAHRU, MALAYSIAT: 607 3511 972 F: 607 3526 125EMAIL: [email protected]

MALACCA OFFICENO. 11-1, JALAN BU5TAMAN BACANG UTAMABACANG 75350MELAKA, MALAYSIAT: 606 2817 806 F: 606 2817 827EMAIL: [email protected]

SEREMBAN OFFICENO. 219 1ST FLOOR, JALAN S2 B8UPTOWN AVENUE, SEREMBAN 270300 SEREMBAN, NEGERI SEMBILANMALAYSIAT: 606 601 7221 F: 606 601 1083EMAIL: [email protected]



SINGAPORE180 PAYA LEBAR ROAD #10-01 YI GUANG BUILDING40932 SINGAPORET: 65 6593 3535 F: 65 6593 3534EMAIL: [email protected]



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