south malaysia industries berhad 2015. 5. 26. · 15th floor, menara smi no. 6, lorong p. ramlee...

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www.smib.com.my

• CorporateInformation.......................................... 002• GroupFinancialHighlights.................................... 003• Chairman’sStatement........................................... 005• Directors’Profiles................................................... 009• ReportofAuditCommittee................................... 012• StatementofCorporateGovernance.................. 016• AdditionalDisclosurePursuanttotheBursaMalaysiaSecuritiesBerhadListingRequirements......................................................... 023

• StatementonRiskManagementandInternalControl..................................................................... 024

• Financial StatementS..................................... 026• AnalysisofEquityShareholdings......................... 104• ListofPropertiesHeld........................................... 106• NoticeofAnnualGeneralMeeting....................... 108• StatementAccompanyingNoticeofAnnualGeneralMeeting..................................................... 110

• ProxyForm.............................................................. enc.

Table ofcontents

S O U T H M A L A Y S I A I N D U S T R I E S B E R H A D • A N N U A L R E P O R T 2 0 1 4

2

Corporateinformation

BOaRD OF DiRectORSTan Sri Dato’ Mohd Ramli Bin Kushairi Non-ExecutiveChairmanMr Leow Thang Fong ExecutiveDirectorMr Chong Heng Kiong ExecutiveDirectorDato’ Dr Abdullah Bin Sepien SeniorIndependentNon-ExecutiveDirectorDatuk Seri Ismail Bin Yusof IndependentNon-ExecutiveDirectorDatin Paduka Hajjah Rakibah Binti Haji Abd Manap IndependentNon-ExecutiveDirectorMs Tan Siew Poh Non-IndependentNon-ExecutiveDirector

aUDit cOmmitteeDato’DrAbdullahBinSepien(Chairman)DatukSeriIsmailBinYusofDatinPadukaHajjahRakibahBintiHajiAbdManapMsTanSiewPoh

nOminatiOn cOmmitteeDato’DrAbdullahBinSepien(Chairman)TanSriDato’MohdRamliBinKushairiDatukSeriIsmailBinYusofDatinPadukaHajjahRakibahBintiHajiAbdManap

RemUneRatiOn cOmmitteeTanSriDato’MohdRamliBinKushairi(Chairman)MrLeowThangFongDato’DrAbdullahBinSepienDatukSeriIsmailBinYusofDatinPadukaHajjahRakibahBintiHajiAbdManap

aUDitORSUHYSuite11.05,Level11TheGardensSouthTowerMidValleyCityLingkaranSyedPutra59200KualaLumpur

cOmPanY SecRetaRieSMsWooMinFongMsWongCheeYinMsTanSiewChin

SHaRe ReGiStRaRTricorInvestorServicesSdnBhdLevel17,TheGardensNorthTowerMidValleyCity,LingkaranSyedPutra59200KualaLumpurTel:03-22643883Fax:03-22821886

ReGiSteReD OFFiceSuite1301,13thFloor,CityPlazaJalanTebrau,80300JohorBahruJohorDarulTakzimTel:07-3322088Fax:07-3328096

HeaD OFFice15thFloor,MenaraSMINo.6,LorongP.Ramlee50250KualaLumpurTel:03-20781522Fax:03-20721509

PRinciPal BanKeRSBankIslamMalaysiaBerhadAffinIslamicBankBerhad

StOcK eXcHanGe liStinGMainMarketofBursaMalaysiaSecuritiesBerhad

WeBSitewww.smib.com.my


3

Group Financial Highlights

2014 2013 2012 2011 2010 Rm'000 Rm'000 Rm'000 Rm'000 Rm'000

ReSUltSRevenue 64,648 77,406 109,121 109,517 172,277EBITDA (5,417) (12,020) (3,106) (1,286) 3,796Profit/(loss)beforetax (9,670) (17,458) (7,709) (4,800) 247Profit/(loss)aftertax (10,006) (17,683) (7,785) (7,054) (5,722)Netprofit/(loss)attributabletoownersoftheparent

(9,587) (16,451) (6,355) (5,679) (6,282)

Financial POSitiOnTotalassets 212,161 220,328 235,726 229,426 284,765Totalliabilities 70,764 70,955 73,563 60,581 109,658Shareholdersequity 146,961 154,177 165,752 170,687 175,955

SHaRe inFORmatiOnBasicearningspershare(sen) (4.57) (7.84) (3.03) (2.71) (2.99)Netassestspershare(sen) 70.00 73.44 78.95 81.30 83.81Marketpricepershare(sen) 15.00 18.00 18.00 20.00 24.50

Financial RatiOReturnonequity(%) -6.5 -10.7 -3.8 -3.3 -3.6Returnontotalassets(%) -4.5 -7.5 -2.7 -2.5 -2.2Gearingratio(times) 0.18 0.19 0.18 0.06 0.22

146,

961

165,

752

154,

177

170,

687

175,

955

(9,

670)

(17

,458

)

(7,

709) (

4,80

0)

247

64,6

48

77,4

06

109,

121

109,

517

172,

277

2014 2013 2012 2011 2010

2014 2013 2012 2011 2010

(4.

57)

(7.

84)

(3.

03)

(2.

71)

2014 2013 2012 2011 2010

2014 2013 2012 2011 2010

(2.

99)

146,

961

165,

752

154,

177

170,

687

175,

955

(9,

670)

(17

,458

)

(7,

709) (

4,80

0)

247

64,6

48

77,4

06

109,

121

109,

517

172,

277

2014 2013 2012 2011 2010

2014 2013 2012 2011 2010

(4.

57)

(7.

84)

(3.

03)

(2.

71)

2014 2013 2012 2011 2010

2014 2013 2012 2011 2010

(2.

99)

146,

961

165,

752

154,

177

170,

687

175,

955

(9,

670)

(17

,458

)

(7,

709) (

4,80

0)

247

64,6

48

77,4

06

109,

121

109,

517

172,

277

2014 2013 2012 2011 2010

2014 2013 2012 2011 2010

(4.

57)

(7.

84)

(3.

03)

(2.

71)

2014 2013 2012 2011 2010

2014 2013 2012 2011 2010

(2.

99)

146,

961

165,

752

154,

177

170,

687

175,

955

(9,

670)

(17

,458

)

(7,

709) (

4,80

0)

247

64,6

48

77,4

06

109,

121

109,

517

172,

277

2014 2013 2012 2011 2010

2014 2013 2012 2011 2010

(4.

57)

(7.

84)

(3.

03)

(2.

71)

2014 2013 2012 2011 2010

2014 2013 2012 2011 2010

(2.

99)

RevenUe (Rm’000)

SHaReHOlDeRS eqUitY (Rm’000)

PROFit/lOSS BeFORe taX (Rm’000)

BaSic eaRninGS PeR SHaRe (Sen)


5

PERFORMANCE REVIEW

The Group recorded lower revenue of RM64.6 million for the financial year ended 31 December 2014, a 16% decrease as compared with RM77.4 million for the preceding financial year ended 31 December 2013. This was mainly attributable to lower contribution from the property division after the completion of two residential developments in the preceding financial year. The manufacturing and trading division’s revenue has however improved due to higher domestic demand arising from competitive pricing strategy.

Operating loss before tax of the Group for the financial year ended 31 December 2014 was lower at RM9.7 million as compared with a loss of RM17.5 million in the preceding financial year ended 31 December 2013 primarily due to fair value adjustment of the Group’s investment property and receivables of RM1.7 million and the absence of impairment of assets, fair value adjustment of receivables and additional project expenses incurred totaling RM6.3 million. Gross profit margin of the Group increased slightly from 11.3% for the financial year ended 31 December 2013 to 11.4% in the financial year ended 31 December 2014, mainly due to higher profit margin of the Group’s manufacturing activity.

As at 31 December 2014, the Group’s total assets was RM212.2 million and the equity attributable to owners of Company was RM147.0 million. Net Assets per share stood at RM0.70.

OPERATIONAL REVIEW

Manufacturing and trading

The Group’s manufacturing and trading activities were mainly carried out by SMI Wire Sdn Bhd (“SMIW”) which manufactures and trades in assorted steel wires including cold drawn, annealed, galvanized PVC coated steel wires and staple wires. The core product is galvanized steel wires and the main raw material is steel wire rods which are sourced both locally and from overseas.

Chairman’s Statement

For the financial year ended 31 December 2014, the manufacturing and trading division registered revenue of RM49.9 million and loss before tax of RM1.6 million as compared with RM48.1 million of revenue and loss before tax of RM2.0 million in the preceding financial year ended 31 December 2013. SMIW’s manufacturing revenue increased by 16% or RM7.0 million in 2014. However, this was offset by a decrease of RM5.2 million in trading revenue. Despite tough domestic competition, SMIW managed to register a 1.2% increase in gross profit margin through reduction of production costs.

In 2014, the local wire industry was grappling with excess capacity at a time when demand was slowing down. The oversupply situation which arose mainly from influx of cheap imports, mainly from China, and low domestic capacity utilization, has driven down selling prices of wire products. Despite the unfavourable market conditions, SMIW was able to offer competitive prices and maintain its strong customer base.

The outlook of the local wire industry is uncertain in 2015, but is expected to remain weak. The oversupply and price erosion which have plagued the wire industry are not expected to abate in the short term. Marginal profit margins and losses are expected due to the inability of manufacturers to gain from adjusted selling prices in order to maintain market share coupled with rising raw material and production costs.

Under such a tough operating environment, SMIW will place greater efforts to sustain its business by further reducing costs of production, increasing efficiency of production and balancing production capacity to suit market conditions. In order to maintain its market share and customers base, the manufacturing division would continue to improve products quality and optimize its products mix. SMIW will practise prudent working capital management by reducing stock holdings to the minimum and implement tight cost and credit control policies. SMIW will strive to maintain its plant and equipment in good working condition to retain its capability to scale-up quickly when the market conditions improve.

Property Development

The property development division recorded a lower revenue of RM13.5 million in the financial year ended 31 December 2014, a decrease of 49% from RM26.6 million in the preceding financial year 2013. The division posted a higher loss before tax of RM2.6 million in the financial year under review as compared to RM1.2 million in the financial year 2013. The weaker performance was mainly due to the completion of the Zenith Residences project and two phases of residential projects in Ipoh in 2013 and the delay in new project launches in 2014.

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present the 44th Annual Report and Financial Statements of the Group and the Company for the financial year ended 31 December 2014.


6

Chairman’s Statementcont’d

Zenith Corporate Park

This project comprises 80 units of 3 and 4 storey shop-offices (Phase 1), 2 blocks of 20-storey housing 26 units of retail lots, 358 units of condominiums - “Zenith Residences” (Phase 2) and 1 block of 13-storey corporate office suites (Phase 3). Zenith Corporate Park has a total gross development value (“GDV”) of approximately RM480 million. Phase 1 was completed in September 2010 and Phase 2 which was officially launched in October 2010, was completed in June 2013.

Meanwhile, due to weaker demand for corporate office suites, the plans for Phase 3 was revised. In its place is a mixed commercial development known as Pinnacle Kelana Jaya, a project which is expected to enhance value of the remaining land in Zenith Corporate Park. This project was effected vide a joint development agreement between Perantara Properties Sdn Bhd (“PPSB”) and Terra Mirus Kelana Sdn Bhd.

Pinnacle Kelana Jaya (“Pinnacle”)

Pinnacle is a commercial development comprising 9 units of shops and 228 units of loft offices with a GDV of approximately RM180 million. With the rising demand for multi-functional properties within Klang Valley, the loft offices which offer purchasers the flexibility of business and personal lifestyle concurrently, was launched in December 2014. Taking into consideration its prime location, distinctive design and exceptional connectivity, Pinnacle is well-received with 61% sales achieved to-date. Construction work has commenced and the project is expected to be completed in 2017.

Bandar Meru Raya (“BMR”)

BMR is a residential development undertaken by a subsidiary company, Anastoria Sdn Bhd (“Anastoria”) comprising 390 lots of terraced houses. This project is located in Bandar Meru Raya, Jelapang, Ipoh, a booming new township located between Jelapang and Chemor. Major federal government departments in Ipoh have been relocated and concentrated to this area. Anastoria’s BMR development started in late 2005 and is staggered over 8 phases. As at 31 December 2014, 7 phases comprising 321 units of double-storey terraced houses with a combined Gross Development Revenue of RM60.4 million have been completed and handed over to purchasers. Anastoria’s last phase in BMR, Phase M8, which comprises 64 units of double-storey terraced houses with a GDV of RM20.1 million, was launched in January 2014. This project is 100% sold and completion is scheduled in the second quarter of 2016.


7


Taman Saikat (“TS”)

TS is another residential development undertaken by Anastoria and Kok Development Sdn Bhd comprising 205 lots of terraced houses, 18 semi-detached lots and 1 bungalow lot with a total GDV of RM62.5 million. Located on a 10-acre site at the Gunung Rapat area, TS is within close proximity of the city centre. As at 31 December 2014, 7 phases comprising 171 units of double-storey terraced houses, 10 units of double-storey semi-detached houses and 1 double-storey bungalow with a combined GDV of RM 44.9 million has been developed. The 10 units of double-storey semi-detached houses and 1 unit of double-storey bungalow were launched in October 2014. The GDV of this project is RM6.2 million and the expected completion is the fourth quarter of 2016.

Taman Ipoh Jaya Timur 2 (“TIJ T2”)

TIJ T2, located at the convergence of two trunk roads (Jalan Wira Jaya and Lebuh Wira Jaya) is a new phase of commercial development undertaken by Anastoria. TIJ T2 comprising 16 units of double-storey shop-office, is scheduled for launch in the second quarter of 2015. The estimated GDV of this project is RM10.3 million.

Leisure and Entertainment

Due to low box office revenue as a result of competition from new multiplex cinemas in malls and shopping complexes, the Group ceased its cinema operation in Wuhan on 16 August 2013. The cinema premises were leased to a local party and converted into a restaurant cum budget hotel. Similarly, another cinema building in Shanghai together with its neighbouring premises had earlier been converted to commercial premises and rented out to a group of retailers since 2005.

The leisure and entertainment division recorded a loss before taxation of RM1.8 million in the financial year ended 31 December 2014, a 47% decrease as compared with a loss of RM3.4 million in 2013. The losses incurred by the division were mainly attributable to the depreciation and amortization costs of cinema premises. Following the division’s exit from the cinema business in the third quarter of 2013, operating costs were kept to the minimum level.

The Group will continue to enjoy a steady rental income and reduce losses from its operations in China in the current financial year.

CORPORATE DEVELOPMENTS

The Group did not undertake any corporate exercise or issue any debt or equity securities in the financial year ended 31 December 2014.

MATERIAL LITIGATION

A wholly-owned subsidiary company of the Company, PPSB has since year 2010, been involved in a dispute with the Joint Management Body (“JMB”) of Kelana Square, Petaling Jaya (a commercial project undertaken and completed in year 2000 by PPSB) involving the car parks of the said project (“Car Parks”), which has a carrying value of RM2 million in the books of PPSB. Prior to the trial of the case, PPSB has successfully applied to have the case struck out at the Kuala Lumpur High Court (“the Court”). However, the Court of Appeal has reinstated the case resulting in a trial.

The Court has on 18 July 2014 decided in favour of the JMB to the effect that the Car Parks is a common property of Kelana Square. However, PPSB has since filed an appeal to the Court of Appeal and the Court has granted the Stay of Execution pending the hearing of appeal on 18 August 2015.

CORPORATE SOCIAL RESPONSIBILITY

Employee Welfare

Employees are viewed as a source of strength to the Group. In this regard, the Group places great emphasis on the welfare of employees especially in providing them with a safe and conducive working environment. Employees are sent for regular trainings to ensure that they keep abreast with the latest developments in their respective fields. To encourage employees to stay in employment, “Long Service Awards” in the form of cash are awarded to employees in appreciation of their contribution and loyalty to the Group. In order to promote healthy lifestyle among employees, a social club was established and employees are encouraged to make use of the in-house gym facilities and to participate in regular activities organized by the social club, such as badminton, bowling and jungle trekking. Apart from an annual company trip, a short local trip teambuilding activities were also organized for staff is to foster stronger relationships upon returning to work.

Community Welfare

The Group supports activities for the betterment of the community in which it operates mainly in the form of contributions to approved welfare organizations and other charitable foundations.


8


Environment

Our management is aware of the impact of the Group’s business activities on the environment and strives to reduce the level of pollution. Environmental impact assessment (EIA) is carried out by the property division prior to undertaking development activities which may negatively impact the environment. Our wire manufacturing produces acid and acidic wastage and these are treated in the wastage treatment plant and schedule wastages are sent periodically to Kualiti Alam to be safely disposed off.

ECONOMIC OUTLOOK

The Malaysian economy recorded a 6.0% GDP growth in 2014, higher than the 4.7% registered in 2013, the key driver of the positive growth being domestic consumption. Household spending continued to be supported by stable employment and sustained wage growth. The Overnight Policy Rate (OPR) which was maintained at 3.25% since July 2014, was supportive of economic activity.

Bank Negara Malaysia (‘BNM”) forecasts a moderate GDP growth of 4.5% to 5.5% in 2015 amid lackluster external demand, lower fuel prices, weaker domestic demand and rising inflationary pressure going forward. BNM expects inflation to range between 2% to 3% taking into account weakening consumer spending. However, a slight increase in inflation is expected from the introduction of the Goods and Services Tax (“GST”) in April 2015. The OPR rate of 3.25% is expected to be maintained in 2015 as risks to growth increase.

PROPERTY SECTOR

The property sector grew marginally by 0.8% in market volume and 7.0% in market value in 2014, slight rebounds from contractions registered in 2013. Growth in prices of residential properties has softened to 4.6% in the third quarter of 2014 (fourth quarter 2013: 9.6%). The Government’s cooling measures such as imposition of higher Real Property Gains Tax to curb excessive speculation has resulted in moderation of market activities and prices in the last two years.

The property market outlook in 2015 is expected to remain lackluster i.e. broadly similar to 2014 due to the weaker economic outlook, stringent mortgage approval and the souring consumer sentiment post GST which in itself will reduce purchasers’ appetite for debt accumulation in 2015. The sales take-up rates are expected to decline but property prices are not expected to soften due to the implementation of GST and the inflationary effect on land and development costs.

With the reduced speculation activity, developers are expected to cut back or postpone launches of high value properties. Real demand is expected mainly from owner occupier (purchaser’s own use) and tenants. As affordability continues to be the major concern for homebuyers, building affordable homes priced below RM500,000 will be the way forward for developers. While there are increased opportunities within the affordable or mass market segment, there are risks of margin erosion due to raw material price hikes as a result of the weak currency and slowdown in demand for mid or high end segment due to tighter lending policies by banks.

With the lack of suitable and available land for development, land cost will continue to rise as demand continues to outstrip supply. To cater to the broader base of house buyers, the Group as a property developer will be looking to expanding its presence in less prime locations, offer properties at reasonable prices and invest in infrastructure to improve connectivity.

In the current financial year 2015, the Group will continue with the Pinnacle project in Kelana Jaya and projects in Ipoh. The Group will continue to seek out land suitable for immediate development and to build up its land bank either through outright purchase or joint venture with landowners. The Group will move forward by reorganizing its core business activities to remain resilient in these uncertain times and is looking at new avenues to expand its revenue streams through new products and markets.

DIVIDEND

The Board of Directors does not recommend the payment of any dividend for the financial year ended 31 December 2014.

APPRECIATION

I would like to take this opportunity to extend our appreciation to our valued customers, financiers, suppliers, business associates and shareholders for their support of the Group. I would also like to thank all the relevant Government agencies for their assistance and guidance.

To my fellow board members who have supported me with their valuable guidance and wise counsel, I wish to express my heartfelt gratitude. To the management team and all our employees, I wish to thank them for their unwavering commitment and their continued dedication and contributions throughout the financial year.

TAN SRI DATO’ MOHD RAMLI BIN KUSHAIRIPSM, DPMP, JMN, KMN

Chairman


9

tan SRi DatO’ mOHD Ramli Bin KUSHaiRinon-executive chairmanchairman of the Remuneration committeemember of nomination committee malaysian citizen, age 79Date of appointment: 19 January 1983

TanSriDato’Mohd.RamliBinKushairi,Malaysian,istheChairmanofSouthMalaysiaIndustriesBerhad.HeisalsocurrentlyaDirectorofMasscorpBerhadandwasalsoformerlyaDirectorofGamudaBerhad.HegraduatedfromtheHullUniversity,UnitedKingdom,withanHonoursDegreeinSocialScience,anddidhispost-graduatestudiesattheKing’sCollege,UniversityofLondon.HisprivatebusinessesincludepropertydevelopmentthroughPrimamudaHoldingsSdn.Bhd.(JalanBrickfieldsRedevelopment),andqualityandquantityinspectionservicestotheoilandgasindustrythroughPetrotechnicalInspectionSdn.Bhd.,anaffiliateoftheSGSGroupofCompaniesbasedinGeneva.

Hebeganhiscareerinthepublicservicein1961asAssistantSecretaryatBankNegaraMalaysiauntil1966.From1966to1972,heservedinseniorpositionsatTariffAdvisoryBoardandFederalAgriculturalMarketingAuthority.From1972to1983,hewasaDirectorandsubsequentlytheGroupManagingDirectorofKumpulanFIMABerhad,awholly-ownedGovernmentCompanythen.HewasalsothentheChairmanofUnitedPlantations,amajorandsuccessfulpalmoilcompany,inMalaysia.HewasthepastVicePresidentof theMalayChamberofCommerceMalaysiaandpastSecretary-Generalof theNationalChamberofCommerceandIndustryMalaysiaandASEAN-ChambersofCommerceandIndustryrespectively.HehasservedasUMNOLiaisonSecretaryforFederalTerritoryfrom1980to1982,andamemberoftheAdvisoryBoardofDewanBandaraya.HehasalsoservedasamemberoftheNationalStandards&AccreditationCouncilofMalaysiaandwastheChairmanoftheNationalStandardsCommitteeoftheCouncil.HewasawardedtheStandardsMalaysia 2014 Star AwardbyNational Standards&AccreditationCouncil ofMalaysia inDecember 2014 for hiscontributioninimprovingthequality,standardizationandaccreditationactivitiesinMalaysia.Hewasalsoawarded‘TheBrandLaureateMostEminentBrandICONLeadershipAward2014’byICONBrandLaureateinNovember2014.

TanSriRamlialsoservesonanumberofotherNon-Governmentorganizations.HewasappointedamemberoftheBoardofTrusteesofYayasanTuankuBainunon10thJune,2002,andYayasanSuluhBudimanUniversitiPendidikanSultanIdris,on1stOctober,2002.HeiscurrentlyamemberoftheBoardofDirectorsofUniversitiTeknologiMalaysia(UTM).HeisalsoamemberoftheExternalPlanningGroupoftheUniversityofHull,UnitedKingdom,since23rdJune,2003. TanSriRamli is currently thePresidentofEisenhowerFellowsAssociation,Malaysia, anaffiliateoftheEisenhowerFellowshipsUS.HeisalsoamemberoftheIndonesia-MalaysiaBusinessCouncil(IMBC)andtheChairmanoftheSub-CommitteeonInfrastructureoftheCouncil.

Forhisservicestothepublicandprivatesectors,TanSriwasawardedtheDarjahPanglimaSetiaMahkota(P.S.M.),whichcarriesthetitle“TanSri”byHisMajestytheYangDi-PertuanAgong,SultanSalahuddinAbdulAzizShah,on5thJune1999.HewasalsoawardedtheDarjahDato’PadukaMahkotaPerak(D.P.M.P),whichcarriesthetitle“Dato”byHisRoyalHighnesstheSultanofPerakon19thApril,1988.

mR leOW tHanG FOnGexecutive Directormember of the Remuneration committeemalaysian citizen, age 63Date of appointment: 26 September 1994

MrLeowThangFongisaFellowoftheInstituteofCharteredAccountantsofEnglandandWalesandamemberoftheMalaysianInstituteofAccountants.Hewasintheauditingprofessionforeightyears,afterwhichheleftHanafiahRaslan&Mohamed in1979.He then joined theCorporateFinanceDepartmentofCharteredMerchantBankersMalaysiaBerhadin1979afterwhichhejoinedAsianPacHoldingsBerhadtobecomeitsCompanySecretaryin1984.Hethenleftin1989andjoinedGulaPerakBerhadasaDirectoruntilJanuary2009.

Directors’ Profile


10

mR cHOnG HenG KiOnGexecutive Directormalaysian citizen, age 77Date of appointment: 26 September 1994

MrChongHengKiongisalsotheExecutiveDirectorofAnastoriaSdnBhd,awhollyownedsubsidiaryoftheCompany.MrChonggraduatedfromRoyalMelbourneInstituteofTechnology,AustraliawithaDegreeinCivilEngineeringandDiplomainIndustrialManagementin1968.HeisnowresponsibleforSMI’spropertydevelopmentoperations.Heholdsseveraldirectorshipsinbothlocalandoverseasincorporatedprivatecompanieswhichareinvolvedinrealestatedevelopment.

MrChongistheuncleofMrMahSauCheong,aSubstantialShareholderofSMI.

DatO’ DR aBDUllaH Bin SePienSenior independent, non-executive Directorchairman of the audit committeechairman of the nomination committeemember of the Remuneration committeemalaysian citizen, age 68Date of appointment: 26 September 1994

Dato’DrAbdullahBinSepienobtainedhisDoctorofPhilosophyinEconomicsandMastersDegreeinAgricultureDevelopmentEconomicsfromtheAustraliaNationalUniversity in1980and1975respectively;andaBachelorofScienceDegree in Agricultural Economics from Louisiana State University in 1971. He served Bank BumiputeraMalaysiaBerhad(“BBMB”)Groupformorethan12yearsinvariouscapacities.TheseincludedChiefEconomistofBBMBfrom1983to1985,ChiefExecutiveofBumiputeraLloydsLeasingBerhadfrom1985to1986,ChiefExecutiveofBumiputeraMerchantBankersBerhadfrom1986to1989andChiefGeneralManagerofBBMBfrom1989to1993.BeforejoiningBBMB,hewaswiththeRubberResearchInstituteofMalaysiafrom1967to1981,andwasHeadofEconomicsandStatisticsDivisionin1981.

Datin PaDUKa HaJJaH RaKiBaH Binti HaJi aBD manaPindependent, non-executive Directormember of the audit committeemember of the nomination committee member of the Remuneration committeemalaysian citizen, age 70Date of appointment: 2 February 2000

DatinPadukaHajjahRakibahBintiHajiAbdManapholdsaDiplomainBusinessManagement&FashionDesignfromSuginoCollegeinTokyo.PriortojoiningtheCompanyasdirector,shewasaStateAssemblywomanforKawasanHuluKelang,KawasanGombakSetiaandMemberofParliamentforShahAlamandSelangorStateExco.

Directors’ Profilecont’d


11

DatUK SeRi iSmail Bin YUSOFindependent, non-executive Directormember of the audit committeemember of the nomination committee member of the Remuneration committeemalaysian citizen, age 71Date of appointment: 15 February 1992DatukSeriIsmailBinYusofholdsaBachelorofArts(Honours)DegreefromUniversityofMalayain1967andservedinvariouscapacitieswiththeGovernmentfrom1967to1991.CurrentlyamemberoftheBoardofTrusteesandtheExecutiveVice-ChairmanoftheAlbukharyFoundation.Dato’SeriwasawardedtheDarjahKebesaranSeriMahkohtaWilayah (S.M.W),whichcarries the title “DatukSeri”byHisMajesty theYangDi-PertuanAgongAl-WathiquBillahTuankuMizanZainalAbidinIbniAl-MarhumSultanMahmudAl-MuktafiBillahShah,on1February2014.Presently,DatukSeriIsmailisadirectorofMINHOBerhad,BCBBerhadandUtusanMelayu(Malaysia)Berhad.

mS tan SieW POHnon independent, non-executive Directormember of the audit committeemalaysian citizen, age 51Date of appointment: 30 December 2008

MsTanSiewPohgraduatedfromtheUniversityofMelbourne,AustraliawithaBachelorofCommercemajoringinAccountingandEconomicsandisaCertifiedPractisingAccountant.SheisamemberoftheAustralianSocietyofCertifiedPractisingAccountantsandMalaysiaInstituteofAccountants.MsTanworkedwithPrudentialAssuranceBerhadintheInvestmentdivisionforaboutthreeyearsbeforemovingontojointheCorporateFinanceDivisioninAsianInternationalMerchantBankersBerhadin1990.MsTanthenjoinedRashidHusseinSecuritiesSdnBhdin1993andlastheldthepositionofAssistantGeneralManagerofCorporateFinance,beforemovingontooverseetheCorporatePlanningDivisionoftheCompanyin1996.

Presently,MsTanisalsoadirectorofAsianPacHoldingsBerhad.

Note:-

Save as disclosed above, none of the Directors have:-

i) Family relationship with any Director and/or substantial shareholder of the Company;ii) ConflictofinterestwiththeDirector;andiii) Convictionforoffences(otherthantrafficoffences)withinthepast10years.

Directors’ Profilecont’d


12

cOmPOSitiOn OF tHe aUDit cOmmittee

ThemembersoftheAuditCommitteeduringtheyearcomprisedthefollowingdirectors:-

chairmanDato’DrAbdullahBinSepien SeniorIndependentNon-ExecutiveDirector

membersDatukSeriIsmailBinYusof IndependentNon-ExecutiveDirectorDatinPadukaHajjahRakibah IndependentNon-ExecutiveDirectorBintiHajiAbdManapMsTanSiewPoh Non-IndependentNon-ExecutiveDirector

MsTanSiewPohisamemberoftheAustralianSocietyofCertifiedPractisingAccountantsandMalaysianInstituteofAccountants.

teRmS OF ReFeRence

a) composition of audit committee

The Committee shall be appointed by the Directors from among itsmembers which fulfills the followingrequirements:-

a) theauditcommitteemustbecomposedofnofewerthan3members;b) all the audit committeemustbenon-executivedirectors,with amajorityof thembeing independent

directors;c) noalternatedirectoroftheBoardshallbeappointedasmemberoftheCommittee;andd) atleastonememberoftheauditcommittee:-

(i) mustbeamemberoftheMalaysianInstituteofAccountants;or(ii) if he is not amemberof theMalaysian InstituteofAccountants, hemusthaveat least 3 years’

workingexperienceand:-

(aa) hemusthavepassedtheexaminationsspecifiedinPartIofthe1stScheduleoftheAccountantsAct1967;or

(bb) hemustbeamemberofoneoftheassociationsofaccountantsspecifiedinPartIIofthe1stScheduleoftheAccountantsAct1967;or

(iii) fulfilssuchotherrequirementsasprescribedorapprovedbytheExchange.

TheCommitteeshallelectachairmanfromamongitsmemberswhoshallbeanindependentdirector.

Intheeventthatamemberofanauditcommitteeresigns,diesorforanyotherreasonceasestobeamemberwiththeresultthatthenumberofmembersisreducedbelowthree(3),theBoardofDirectorsshall,withinthree(3)monthsofthatevent,appointsuchnumberofnewmembersasmayberequiredtomakeuptheminimumofthree(3)members.

B) meetings

TheCommitteeshallmeetatleastfourtimesayear.

The Chairman shall convene a meeting of the Committee if requested to do so by any member, themanagementortheinternalorexternalauditorstoconsideranymatterwithinthescopeandresponsibilitiesoftheCommittee.

TheCommitteeshallconvenemeetingswiththeexternalauditors,theinternalauditororboth,excludingtheattendanceofotherdirectorsandemployeesoftheGroup,wheneverdeemednecessary.

Report of audit committee


13

teRmS OF ReFeRence (cOnt’D)

c) Secretary to audit committee

TheCompanySecretaryshallbethesecretaryoftheCommittee.

D) quorum

Aquorumshallconsistofamajorityofmemberswhoareindependentdirectors.

e) authority

TheCommitteeisauthorisedbytheBoardtoinvestigateanyactivitywithinitstermsofreferenceandshallhaveunrestrictedaccesstoboththeinternalandexternalauditorsandtoallemployeesoftheGroup.TheCommitteeisalsoauthorizedbytheBoardtoobtainexternallegalorotherindependentprofessionaladviceasnecessary.

F) Duties and Responsibilities

ThedutiesandresponsibilitiesoftheCommitteeshallbe:-

i) ToreviewthequarterlyannouncementstotheBursaMalaysiaSecuritiesBerhadandyearendannualfinancialstatementsbeforesubmissiontotheBoard,focusingon:-.

• goingconcernassumption;• compliancewithaccountingstandardsandregulatoryrequirements;• anychangesinaccountingpoliciesandpractices;• significantissuesarisingfromtheaudit;and• majorjudgmentalareas.

ii) Toreviewwiththeexternalauditorsthefollowing:-

• theauditplan;• theirevaluationofthesystemofinternalcontrols;• theirauditreport;• problemsandreservationsarisingfromtheirinterimandfinalaudits;and• theassistancegivenbytheemployeesofthecompanyorgrouptotheexternalauditor.

iii) Toreviewtheinternalauditfunctionsonthefollowing:-

• adequacyofthescope,functions,competencyandresourcesoftheinternalauditdepartmentandthatithasthenecessaryauthoritytocarryoutitswork;

• the internal audit program, processes, the results of the internal audit program, processes orinvestigationundertakenandwhetherornotappropriateactionistakenontherecommendationsoftheinternalauditfunction;

• internalauditplan,considerthemajorfindingsofinternalaudit,fraudinvestigationsandactionsandstepstakenbymanagementinresponsetoauditfindings.

iv) Tomonitorrelatedpartytransactionandconflictofinterestsituationthatmayarisewithinthecompanyorgroupincludinganytransaction,procedureorcourseofconductthatraisesquestionsofmanagementintegrity.

v) Toreview:-

• anyletterofresignationfromtheexternalauditorsofthecompanyorgroup;and• whetherthereisreason(supportedbygrounds)tobelievethatthecompanyorgroup'sexternal

auditorisnotsuitableforre-appointment;• andrecommendthenominationofapersonorpersonsasexternalauditors.

vi) To assess the adequacy and effectiveness of the systems of internal control and accounting controlproceduresoftheCompanyandtheGroupbyreviewingtheexternalauditors'managementlettersandmanagementresponse.

vii) ToundertakesuchotherresponsibilitiesasmaybeagreedtobytheCommitteeandtheBoard.

viii) ToreporttotheBoarditsactivities,significantresultsandfindings.

Report of audit committeecont’d


14

attenDance at meetinGS

Duringthefinancialyearended31December2014, theAuditCommitteeheldatotaloffive (5)meetings.SomemembersofSeniorManagementandtherepresentativesfromExternalAuditorshaveattendedsomeoftheAuditCommitteemeetingsconductedduringthefinancialyear.

ThedetailsofattendanceoftheAuditCommitteemembersareasfollows:-

name Position

no. of meetings attended

Dato’DrAbdullahBinSepien Chairman 5/5DatukSeriIsmailBinYusof Member 4/5DatinPadukaHajjahRakibahBintiHajiAbdManap Member 5/5MsTanSiewPoh Member 5/5

SUmmaRY OF activitieS

TheactivitiesoftheAuditCommitteeduringthefinancialyearunderreviewaresummarizedasfollows:

• Reviewedtheauditplanandtoensureco-ordinationofauditofthevariouscompanieswithintheGroupwithdifferentexternalauditorstogetherwiththeexternalauditors,;

• Reviewedanysignificantfindingsinrelationtotheaudittogetherwiththeexternalauditors;• ConsideredandrecommendedtotheBoardforapprovaloftheauditfeespayabletotheexternalauditorsas

disclosedinNote24tothefinancialstatements;• Reviewedtheinternalauditplanandinternalauditreportsandconsideredthemajorfindingsofinternalaudit

reviewandmanagement’sresponse;• Reviewedanddiscussedtheinternalauditfunction,itsauthorities,resourcesandscopeofwork;• ReviewedtheAuditCommitteeReportbeforerecommendingforBoardapprovalforthepurposeofinclusion

intheAnnualReport;• Reviewed the extent of theGroup’s compliancewith the provisions set out under theMalaysian Code on

CorporateGovernanceforthepurposeofpreparingtheChairman’sStatementinclusiveofCorporateSocialResponsibility Statement, Corporate Governance Statement and the Statement on Risk Management andInternalControlbeforerecommendingforBoardapprovalforthepurposeofinclusionintheAnnualReport

• ReviewedtheQuarterlyReportsontheCompany’sunauditedconsolidatedresultsandtheyearendauditedfinancialstatementsbeforerecommendingtotheBoardfortheirapprovalforannouncementtoBursaMalaysiaSecuritiesBerhad,focusingparticularlyon:- theoverallperformanceoftheGroup- compliancewithaccountingstandardsandregulatoryrequirements- anychangesinaccountingpoliciesandpractices- significantissuesarisingfromtheaudit

inteRnal aUDit FUnctiOn

The internalaudit functionof theGroup isperformed in-houseand is independentfromthemainactivitiesandoperationsoftheGroup’soperatingunits.TheprincipalresponsibilityoftheInternalAuditDepartmentistoperformindependent,regularandsystematicreviewsofsystemsofinternalcontrolsthroughouttheGroupsoastoprovidereasonableassurancethatsuchsystemscontinuetooperateeffectivelyandefficiently.

It is the responsibility of the Internal Audit Department to provide the Audit Committeewith independent andobjectivereportsonthestateofinternalcontrolsofthevariousbusinessoperatingunitswithintheGroupandtheextentofcompliancewiththeGroup’spoliciesandproceduresaswellasrelevantstatutoryrequirements.



15

inteRnal aUDit FUnctiOn (cOnt’D)

Duringthefinancialyear,thefollowingactivitieswerecarriedoutbytheInternalAuditDepartment:

(i) Reviewedthesystemsofinternalcontrolsofthevariousbusinessoperatingunits;

(ii) Recommendedimprovementstotheexistingsystemsofinternalcontrolstothemanagement;

(iii) Followeduponimplementationanddispositionofallauditfindingsandrecommendations;

(iv) AscertainedtheextenttowhichtheCompany’sandtheGroup’sassetswereaccountedforandsafeguardedfromlosses;and

(v) Performedspecialreviewsasrequestedbythemanagement.

Thecost incurredfromthe internalaudit function inrespectofthefinancialyearended31December2014wasRM209,900.



16

The Malaysian Code on Corporate Governance 2012 (“the Code”) sets out the broad principles and specificrecommendations on structure and processes that companies should or encourage to adopt in making goodcorporategovernanceanintegralpartoftheirbusinessdealingsandculture.

TheBoardofDirectors(“Board”)hasalwaysrecognizedtheimportanceofadoptinggoodcorporategovernance.TheBoardiscommitted,insofarasitispracticable,toensurethatthehigheststandardsofcorporategovernancearepracticedthroughouttheGroup.TheBoardviewsthisasafundamentalpartofdischargingitsresponsibilitiestoprotectandenhancetheperformanceoftheCompanyandshareholders’value.

TheBoardispleasedtoreportbelowontheprinciplesandbestpracticesoftheCodewereappliedthroughoutthefinancialyearended31December2014.

PRinciPle 1 : eStaBliSH cleaR ROleS anD ReSPOnSiBilitieS

The Company has an experienced Board comprising two (2) Executive Directors, three (3) Independent, Non-ExecutiveDirectorsand two (2)Non-Independent,Non-ExecutiveDirectors, satisfying therequirementsofBursaMalaysiaSecuritiesBerhad,whereatleastonethirdoftheBoardconsistsofindependentdirectorswithexpertiseandskillsfromvariousfields.

TheBoardisprimarilyresponsibleforchartingandreviewingthestrategicdirectionoftheGroup.Itdelegatesandmonitorstheimplementationofthesedirectionstothemanagement.

The IndependentNon-ExecutiveDirectors are considered independent of any business or other relationship orcircumstancesthatcouldinterferewiththeexecutionoftheirindependentjudgementanddecisionmakinginthebestinterestsoftheCompany.

There is a cleardivisionof responsibilitiesbetween theChairmanand theExecutiveDirectors. TheChairman isresponsibleforensuringBoardeffectivenessandensuresthatconductandworkingoftheBoardisinanorderlyandeffectivemanner.TheBoardtakesfullresponsibilitiesindischargingitsfiduciaryandleadershipfunctions,amongstothers:

• EnsuringshareholdersarekeptinformedoftheCompany’sperformanceandmajordevelopmentaffectingitsstateofaffairs;

• Identifyingprincipal risksandensuring the implementationofappropriate internal controlsandmitigationmeasures;

• BeresponsiblefortheoverallcorporategovernanceoftheGroup,includingitsstrategicdirection,establishinggoalsforManagementandmonitoringtheachievementofthesegoals;

• Monitoring and reviewing Management processes aimed at ensuring the integrity of financial and otherreportingwiththeguidanceoftheAuditCommittee;and

• Ensuringthatsuccessionplanningoftheseniormanagementisinplace.

TheBoardcompositionrepresentsamixofknowledge,skills,andexpertisewhichassist theBoard ineffectivelydischargingitsstewardshipandresponsibilities.

PRinciPle 2 : StRenGtHen cOmPOSitiOn

TheBoardisresponsibleforthecontrolandpropermanagementoftheCompany.TheBoardhasdelegatedspecificresponsibilitiestothree(3)maincommitteesnamelytheAudit,Remuneration,andNominationCommittees,whichoperatewithintheapprovedtermsofreference.TheseCommitteeshavetheauthoritytoexamineparticularissuesandreporttotheBoardwiththeirrecommendations.Theultimateresponsibilityforthefinaldecisiononallmatters,however,lieswiththeentireBoard.

1. audit committee

TheCompositionandTermsofReferenceofthisCommitteetogetherwithitsreportispresentedfrompages12to15intheAuditCommitteeReport.

Statement of corporate Governance


17

PRinciPle 2 : StRenGtHen cOmPOSitiOn (cOnt’D)

2. nomination committee

TheGroupadoptsaformalandtransparentprocedurefortheappointmentofDirectorstotheBoardthroughtheNominationCommittee(“NC”).TheNCcomprisesexclusivelyofNon-ExecutiveDirectorsandmajorityofwhomareindependent.

name Position category

Dato’DrAbdullahBinSepien Chairman SeniorIndependent,Non-ExecutiveDirector

TanSriDato’MohdRamliBinKushairi Member Non-Independent,Non-ExecutiveDirector

DatukSeriIsmailBinYusof Member Independent,Non-ExecutiveDirector

DatinPadukaHajjahRakibahBintiHajiAbdManap Member Independent,Non-ExecutiveDirector

TheChairmanoftheNCistheSeniorIndependentNon-ExecutiveDirector.

TheNCcarriedoutanannualassessmentandevaluationontheeffectivenessoftheBoardasawholeandthecontributionofeachoftheindividualdirectors, includingIndependentNon-ExecutiveDirectors.TheNCalsomakeassessment,considerjustificationsandmakerecommendationsontheelementofindependenceofanIndependentDirectorshouldtheBoardwishtoretainasanIndependentDirector,apersonwhohasservedinthatcapacityformorethannineyears.AllassessmentscarriedoutbytheNCweredocumented.TheCommitteealsoreviewsthestructure,sizeandcompositionoftheBoard,andrecommendedtheretiringdirectorsforre-electionattheCompany’sforthcomingAnnualGeneralMeeting.

Duringtheyearunderreview,onemeetingwasheldwithmajorityofthemembersattendedthemeeting.TheBoardhasfoundthatthecurrentmixofskillsandexperienceofitsmembersaresufficientfortheeffectivedischargeofitsdutiesandresponsibilities.

3. Remuneration committee

TheRemunerationCommittee(“RC”)comprisesthree(3)IndependentNon-ExecutiveDirectors,one(1)Non-IndependentNon-ExecutiveDirectorandanExecutiveDirectoranditsmembersareasfollows:

name Position category

TanSriDato’MohdRamliBinKushairi Chairman Non-Independent,Non-ExecutiveDirector

MrLeowThangFong Member ExecutiveDirectorDato’DrAbdullahBinSepien Member SeniorIndependent,

Non-ExecutiveDirectorDatukSeriIsmailBinYusof Member Independent,

Non-ExecutiveDirectorDatinPadukaHajjahRakibahBintiHajiAbdManap Member Independent,

Non-ExecutiveDirector

TheRCprimaryresponsibilityistoensurethattheGroup’slevelofremunerationcommensuratewiththeskillsandresponsibilitiesexpectedofthedirectorconcernedandthatitissufficienttoattractandretaindirectorsneededtoruntheCompanysuccessfully.TheBoard,asawhole,determinestheremunerationoftheDirectorsandtheindividualDirectorisrequiredtoabstainfromdiscussinghisownremuneration.TheRCmeetsatleastonceayear.

InthecaseofExecutiveDirectors,theremunerationschemeisstructuredbasedoncorporateandindividualperformance.Ontheotherhand,thefeespayabletoNon-ExecutiveDirectorsareapprovedbyshareholdersateachAnnualGeneralMeeting.AllDirectorsarealsopaidallowanceforeachmeetingtheyattended.

Statement of corporate Governancecont’d


18

PRinciPle 2 : StRenGtHen cOmPOSitiOn (cOnt’D)

3. Remuneration committee (cont’d)

Duringthefinancialyearunderreview,onemeetingwasheldtoreviewanddiscusstheremunerationoftheDirectorsbeforerecommendingthemfortheBoard’sapproval.

ThedetailsofaggregateremunerationpayabletotheDirectorsoftheGroupforthefinancialyearended31December2014areasfollows:

executive Directors non-executive Directors

Rm Rm

Fees 5,000 527,000Salariesandotheremoluments 2,143,437 -Bonus 480,250 -

ThenumberofDirectorswhosetotalremunerationfallswithintherespectivebandareasfollows:

total Remuneration Band executive Directorsnon-executive

Directors

Upto100,000 - 2100,001–150,000 - 3500,001–1,000,000 1 -1,000,001–2,000,000 1 -

PRinciPle 3 : ReinFORcement inDePenDence

TheBoardthroughtheNCassessedtheindependenceofIndependentDirectorsonanannualbasis,withaviewtoensuretheIndependentDirectorsbringindependentandobjectivejudgementtotheBoardandthismitigatesarisingfromconflictofinterestorundueinfluencefrominterestedparties.Wherethereisalikelyconflictofinterestposition,theBoardwouldtakeappropriateactiontorectifythesituation.ShouldanyDirectorhasaninterestinanymatterunderdeliberation,heisrequiredtodisclosehisinterestandabstainfromparticipatinginthediscussionsandvotingonthematter.

TheCodealsorequiresanindependentdirectorwhohasservedtheBoardforaperiodofnine(9)yearscumulativelytobere-designatedasanon-independentdirector.However,subjecttotheassessmentoftheNominationCommitteeandshareholders’approvalatageneralmeeting,theindependentdirectormayremainasanindependentdirectorafterservinginthatcapacityformorethannine(9)years.Following the assessment by the Nomination Committee and the Board is of the view that the long serviceIndependentDirectorsnamely,Dato’DrAbdullahBinSepien,DatukSeriIsmailBinYusofandDatinPadukaHajjahRakibahBintiHaji AbdManap, remainobjective and independent in expressing their views andparticipating indeliberationsanddecisionmakingoftheBoardandBoardCommittees.ThelengthoftheirserviceontheBoarddoesnotinanywayinterferewiththeirexerciseofindependentjudgmentandabilitytoactinthebestinterestsoftheCompany.ApprovalhasbeenobtainedfromshareholdersatthelastAnnualGeneralMeetingtoretaintheirofficeasIndependentDirectors.Shareholders’approvalwillagainbesoughtattheforthcoming44thAGMtoretainthemasIndependentDirectorsoftheCompany.BriefprofileofeachDirectorispresentedfrompages9to11ofthisAnnualReport.

The Board is chaired by Tan Sri Dato’ Mohd Ramli Kuahairi, a non-independent director. The Code stipulatesthat if theChairman isnotan independentdirector, theBoardcompositionwillneed tocompriseamajorityofindependentdirectors.Assuch,theCompanywilltakethenecessarymeasurestocomplywiththisandindoingso,arestructuringoftheBoardmayberequiredwhentheneedarises.AlthoughtheBoardismindfulofsuchprinciplesandrecommendationsandincompliancewiththis,carefulconsiderationswereneededasitisimportanttoensureaneffectiveandsuitablecomposition,includingBoardsize,isachievedintheinterestoftheCompany.



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PRinciPle 3 : ReinFORcement inDePenDence (cOnt’D)

TheappointmentofanyadditionalDirectoristobemadeasandwhenitisdeemednecessarybytheexistingBoarduponrecommendationfromtheNCwithdueconsiderationgiventoadd-onexpertiseandexperiencerequiredforaneffectiveBoard.

NewDirectorsaresubjecttoelectionattheAnnualGeneralMeeting(“AGM”),followingtheirfirstappointment.Inaddition,anelectionofDirectorsshalltakeplaceeachyearandallDirectorsshallretirefromofficeeverythree(3)yearsbutshallbeeligibleforelection.Thishasbeenconsistentlypracticed.Thisalsoprovidesanopportunityforshareholderstorenewtheirmandate.TheelectionofeachDirectorisvotedseparately.Toassistshareholdersintheirdecision,sufficientinformationsuchaspersonalprofile,meetingattendanceandshareholdingintheGroupofeachDirectorstandingforelectionarefurnishedintheAnnualReport.Directorsoverseventyyearsofagearerequiredtosubmitthemselvesforre-appointmentannuallyinaccordancewithSection129(6)oftheCompaniesAct,1965.

PRinciPle 4 : FOSteR cOmmitment

TheBoard issatisfiedwiththe leveloftimecommitmentgivenbytheDirectorstowardsfulfillingtheirrolesandresponsibilitiesasDirectorsoftheCompany.

TheBoardmeetsonascheduledbasis,atleastfour(4)timesayeartooverseeandmonitorthedevelopmentoftheGroup.Additionalmeetingsareheldonanad-hocbasistodeliberateonmattersrequiringitsimmediateattention.TheagendaandmeetingpapersforeachitemaswellasminutesofpreviousmeetingsarecirculatedtotheBoardmeetingstogiveDirectorssufficienttimetoreviewandtodeliberateontheissuestoberaisedattheBoardmeetings.

Upon recommendation by themanagement/committeemembers, the Board will deliberate and discuss on allmatters before any decision aremade. All proceedings of the Boardmeetings areminuted and signed by theChairmanofthemeeting.

Atotaloffive(5)Boardmeetingswereheldinfinancialyearended31December2014.ThefollowingistherecordofattendancebytheBoardmembersduringthefinancialyear:-

name of Directorsnumber of meetings

attended/Held

TanSriDato’MohdRamliBinKushairi 4/5Non-ExecutiveChairman

MrLeowThangFong 5/5ExecutiveDirector

MrChongHengKiong 5/5ExecutiveDirector

Dato’DrAbdullahBinSepien 5/5SeniorIndependentNon-ExecutiveDirector

DatukSeriIsmailBinYusof 4/5IndependentNon-ExecutiveDirector

DatinPadukaHajjahRakibahBintiHajiAbdManap 4/5IndependentNon-ExecutiveDirector

MsTanSiewPoh 5/5Non-IndependentNon-ExecutiveDirector



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PRinciPle 4 : FOSteR cOmmitment (cOnt’D)

In the intervals between Boardmeetings, for exceptionalmatters requiring urgent Board decisions, the BoarddecisionsareobtainedviacircularresolutionstowhichsufficientinformationrequiredisattachedtofacilitatetheBoardinmakinginformeddecisions.

AllDirectorshaveattendedtheMandatoryAccreditationProgramme(“MAP”)asrequiredbyBursaMalaysiaSecuritiesBerhad(“BursaSecurities”)onalldirectorsoflistedcompanies.

TheDirectorsarealsoencouragetoattendtherelevanttrainingcoursesdeemednecessarysoastokeepabreastwiththechangesonguidelinesissuedbytherelevantauthoritiesaswellasthelatestdevelopmentsinthemarketplace,whichcancomplementtheirservicestotheGroup.TheDirectorsalsoupdatedbytheCompanySecretaryonanychangestolegalandgovernancerequirementsoftheGroup.

TheDirectorswillcontinuetoundergootherrelevanttrainingprogrammefromtimetotimetoenhancetheirskillsandknowledgewhererelevant.ThetrainingprogrammesattendedbytheindividualDirectorsduringthefinancialyearended31December2014areasfollows:

name of Directors Particulars of training attended Date

TanSriDato’MohdRamliKushairi - StrongLeadershipinCrisisManagement 16/12/2014

MrLeowThangFong - GSTIn-HouseTraining 2/12/2014

MrChongHengKiong - GSTIn-HouseTraining 2/12/2014

Dato’DrAbdullahSepien - AnnualDirectorDuties,GovernanceandRegulatorySeminar2014

22/4/2014

- NationalSeminaronAnti-MoneyLaunderingandAnti-TerrorismFinancing2014

24/11/2014

DatukSeriIsmailYusof - RelatedPartyTransactions 22/5/2014

Datin Paduka Hajjah Rakibah HajiAbdManap

- Nominating&RemunerationCommittee–WhatEveryDirectorShouldKnow

18/12/2014

MsTanSiewPoh - AnnualDirectorDuties,GovernanceandRegulatoryUpdatesSeminar2014

22/4/2014

- CorporateGovernanceStatementReportingWorkshop 6/5/2014- NationalSeminaronAnti-MoneyLaunderingandAnti-TerrorismFinancing2014

24/11/2014

- GSTIn-HouseTraining 2/12/2014

PRinciPle 5 : UPHOlD inteGRitY in Financial RePORtinG

Inpresentingtheannualfinancialstatementsandquarterlyannouncementofresultstotheshareholders,theBoardtakesresponsibilityandusedappropriateaccountingpoliciestopresentabalancedandunderstandableassessmentoftheGroup’spositionandprospects.TheAuditCommitteeassiststheBoardbyscrutinizingtheinformationtobedisclosed,toensureaccuracyandadequacy.Incarryingoutthetask,theyareaidedbytheExternalAuditorsandGroupAccountant.

In thecourseofpreparing thefinancial statements foreachfinancial year for theGroupand theCompany, theBoardrecognizestheresponsibilityforensuringthataccountingrecordsareproperlykeptandthatthefinancialstatementsarepreparedinaccordancewithapplicableapprovedaccountingstandardsinMalaysia,theprovisionoftheCompaniesAct,1965andtheListingRequirementsoftheBursaMalaysiaSecuritiesBerhad.



21

PRinciPle 5 : UPHOlD inteGRitY in Financial RePORtinG (cOnt’D)

TheBoardconsidersthatinpreparingthefinancialstatementsforthefinancialyearended31December2014setoutonpages33to102,theGrouphasusedappropriateaccountingpolicies,consistentlyappliedsuchpoliciesandaresupportedbyreasonableandprudentjudgmentsandestimates.ItistheresponsibilityoftheBoardtoensurethatfinancialstatementspresentatrueandfairviewofthestateofaffairsoftheGroupandtheCompanyattheendofthefinancialyearandoftheresultsandcashflowsoftheGroupandtheCompanyforthefinancialyear.TheBoardhasageneralresponsibilityfortakingsuchstepsasarereasonablyopentothemtosafeguardtheassetsoftheGroupandtopreventanddetectfraudandotherirregularitiesandmaterialmisstatements.Suchsystems,bytheirnature,canonlyprovidereasonableandnotabsoluteassuranceagainstmaterialmisstatement,lossandfraud.TheCompanyhasalwaysmaintaineda formalandtransparentrelationshipwith itsExternalAuditors inseekingtheirprofessionaladviceandensuringcompliancewiththeapplicableapprovedaccountingstandards,MalaysianFinancialReportingStandardsandtheCompaniesAct1965.

TheExternalAuditorscarryoutanimportantrolefortheshareholdersbygivingassuranceonthereliabilityofthefinancialstatement.TheExternalAuditorswillmeettheBoardwhenevernecessaryanditmeetstheAuditCommitteewithoutthepresenceofotherDirectorsandemployeesatleastonceayear.

PRinciPle 6 : RecOGniSe anD manaGe RiSKSTheBoardhas an effective riskmanagement systemwhich is overseenby aRiskManagementCommittee thatreports to theAudit Committee andultimately to theBoard. RiskManagement is regardedby theBoard tobeanintegralpartofthebusinessoperations.Keymanagementstaffandheadsofdepartmentareresponsibleformanagingtheidentifiedriskswithindefinedparametersandstandards.Intheperiodicmanagementmeetings,keyrisksandmitigatingcontrolsaredeliberated.

TheBoardisoverallresponsibleformaintainingandensuringtheintegrityofasoundsystemofInternalControlwhichsupportseffectiveandefficientoperationstosafeguardshareholders’interestsandtheGroup’sbusinessandassets.

FurtherdetailsoftheGroup’ssystemsofriskmanagementandinternalcontrolarereportedintheStatementonRiskManagementandInternalControlonpages24to25.

PRinciPle 7 : enSURe timelY anD HiGH qUalitY DiSclOSURe

TheCompanyrecognizestheimportanceoftimelydisseminationofrelevantcorporateandotherinformationtoandindealingwithshareholders,stakeholders,regulatorsandinvestingpublic.

TheBoardalwaysensure that theshareholdersare informedof thefinancialperformanceandmajorcorporateactivities of the Company. Such information is communicated to shareholders and investors theough variousdisclosure andannouncements toBursa Securities, including thequarterly financial results, annual reports andwhereappropriate,circularandpressrelease.

Apart fromthemandatoryannouncements through theBursaSecurities theCompanyalsomaintainsawebsitewww.smib.com.my towhich shareholders and investors can have access to information on the operations andbusinessactivitiesoftheGroup.



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PRinciPle 8 : StRenGtHen RelatiOnSHiP BetWeen cOmPanY anD SHaReHOlDeRSTheBoardrecognizestheimportanceofkeepingshareholders,investors,researchanalystandthepressinformedoftheGroup’sbusinessperformance,operationsandcorporatedevelopments.TheAnnualGeneralMeeting(“AGM”)servesasaprincipalformfordialoguewithshareholders.AllshareholdersareencouragedtoattendtheAGM,wheretheshareholderscanparticipateandgiventheopportunitytoaskquestionsregardingthebusinessoperationsandfinancialperformanceandpositionoftheGroup.

Inaddition,regularmeetings,sitesvisitarealsoscheduledtokeeptheinvestmentcommunityabreastoftheGroup’sbusinessdevelopmentsandfinancialperformance.

TheBoardhasappointedDato’DrAbdullahBinSepienastheSeniorIndependentNon-ExecutiveDirectortoreceiveanddealwithall shareholders/publicenquiries.Suchenquiriesmustbemade inwritingandbedirected to theSeniorIndependentNon-ExecutiveDirectorasfollows:-

SouthMalaysiaIndustriesBerhadSeniorIndependentNon-ExecutiveDirectorDato’DrAbdullahBinSepien15thFloor,MenaraSMINo.6LorongP.Ramlee50250KualaLumpurTel:603-20781522Fax:603-20721509



23

UtiliSatiOn OF PROceeDS

Duringthefinancialyear,noproceedswerereceivedfromtheCompany’scorporateproposal.

SHaRe BUYBacKS

Duringthefinancialyear,therewerenosharebuybacksbytheCompany.

OPtiOnS, WaRRantS OR cOnveRtiBle SecURitieS

Duringthefinancialyear,theCompanydidnotissueanyOptions,WarrantsorConvertibleSecurities.

ameRican DePOSitORY ReceiPt ("aDR") anD GlOBal DePOSitORY ReceiPt ("GDR")

Duringthefinancialyear,theCompanydidnotsponsoranyADRorGDRprogramme.

SanctiOnS anD/OR PenaltieS imPOSeD

Therewerenosanctionsand/orpenaltiesimposedontheCompanyanditssubsidiaries,DirectorsandManagementbytherelevantregulatoryauthoritiesduringthefinancialyear.

nOn-aUDit Fee

Duringthefinancialyear,non-auditfeespaidbytheGrouptotheExternalAuditorsamountedtoRM10,000.

vaRiatiOn in ReSUltSTheCompanydidnotreleaseanyprofitestimate,forecastorprojectionforthefinancialyearended31December2014.Therewerenomaterialvariancesbetweentheauditedresultsandtheunauditedresultsannouncedforthefinancialyearended31December2014.

PROFit GUaRantee

Duringthefinancialyear,therewerenoprofitguaranteesgivenbytheCompanyanditssubsidiaries.

mateRial cOntRactS invOlvinG DiRectORS’ anD SUBStantial SHaReHOlDeRS’ inteReSt

The Company and its subsidiaries did not enter into anymaterial contracts which involved the interest of theDirectors’orsubstantialshareholders’duringthefinancialyear.

ThisstatementismadeinaccordancewiththeresolutionoftheBoarddated27April2015.

Additional Disclosures Pursuant to the Bursa malaysia Securities Berhad

listing Requirements


24

intRODUctiOn

SouthMalaysiaIndustriesBerhadanditssubsidiaries(“theGroup”)’sRiskManagementandInternalControlsystemisdesignedtoimprovetheGroup’soperations.

The Board of Directors (‘the Board”) is committed tomaintaining a sound system of internal control and risksmanagement practices to safeguard the Group’s assets and shareholders’ interests. The Board is pleased toprovide the following Statement on RiskManagement and Internal Controlwhich outlines the key elements ofriskmanagementandinternalcontrolprocessesoftheGroupduringthefinancialyearended31December2014pursuanttoParagraph15.26(b)oftheBursaMalaysiaListingRequirements.

ReSPOnSiBilitY

The Group’s corporate objectives are to sustain existing operations and turnaround to profitability by optimalutilizationofitsavailableresourceswhilstmeetingtheneedsofcustomers,employeesandbusinesspartners,toidentifyandsecureassetsforlongtermgrowth.The Board affirms its overall responsibility for the Group tomaintain adequate system of internal control andeffectiveriskmanagementframeworkinachievingtheGroup’sobjective.GreateremphasisisgiventoriskmitigatingstrategyandcautiousplanningondeploymentoftheGroupavailableresources.

TheGrouphad inplaceanon-goingprocessfor identifying,evaluating,monitoringandmanagingthesignificantrisksaffectingtheachievementofitsbusinessobjectivesthroughouttheperiod.TheprocessisregularlyreviewedbytheBoard.

TheBoardrecognizestheinherentlimitationsinallsystemsofriskmanagementandinternalcontrolandconfirmedthatallsystemsaredesignedtomanageratherthaneliminatecompletelytherisksoffailuretoachievebusinessobjectives.Accordingly,itcanonlyprovideareasonableandnotabsoluteassuranceagainstmaterialmisstatementorloss.

RiSK manaGement

TheBoardhasmade riskmanagementanon-goingexercise toeffectivelymanageandmitigatesignificant risksfacedorlikelytobefacedbytheGroup.TheBoarddelegateditsroleonriskmanagementtoaRiskManagementCommittee(‘RMC’)comprisingseniormanagementfromallfunctionsandledbytheGroupChiefExecutiveOfficertoachievesuchobjective.TheGroup’sriskmanagementobjectivesare:

• Promoteriskawarenesscultureinthemanagementofalllevelsofoperations;

• Protectassetsandinterestsofallstakeholders;• Ensuresustainabilityofoperationsandcontinuityofsupplyofproductsandservices;

• Ensurecompliancewithrelevantguidelinesandallapplicablelaws;

TheRMCconductsbi-annualreviewoftheGroup’sbusinessrisksandidentifiesallpotentialareasthatcouldimpingeon the achievementof businessobjectives and failure to take advantageof opportunitieswhen they arise. TheGroup’sriskappetiteisatrade-offbetweenthecostofmanagingtherisksandthebenefitsorrewardsasaresultoftakingsuchrisks.TheGroupseekstomanageitsrisktoanacceptablelevelaimedatensuringminimuminterruptiontotheoperationsoftheGroup.

Theseniormanagersfromallfunctionsareresponsibleforimplementingmeasurestomanageandmitigaterisksidentified.TheGroupiscurrentlyusingariskmatrixof3x3(likelihoodofriskoccurringvs.theconsequencesoftheriskhappening)toanalyzerisks.TheinformationgatheredduringtheriskmanagementprocessisincludedintheRiskRegister,whichshallbeusedformanagingthetop-highdepartmentandprojectriskstoensureconsistencyofassessmentandreportingintheGroup.TheRMCmonitorsrisksonanongoingbasistoensureproperactionshavebeentakenandassesswhethertherearechangesintheconditionsassociatedwiththerisksidentified.

Statement on Risk Management and internal controlFinancialYearEnded31December2014


25

Statement on Risk Management and internal control

FinancialYearEnded31December2014cont’d

KeY elementS OF inteRnal cOntROl

FundamentalinternalcontrolentrenchedintheGroup’soperationsareasfollows:-• TheGrouphasanorganizationalstructurewhichclearlydefinesthelinesofresponsibilityanddelegationof

authority.Accordingly,managementatvariousadministrativeandoperationallevelswillfunctioninaccordancewiththepoliciesandproceduresestablishedbytheBoardfortheGroupasawhole;

• Theobjectives,authoritiesandresponsibilitiesdefinedundertheabovestructureareclearlydocumentedintheGroup’spoliciesandproceduresmanual;

• Regularinternalauditsarecarriedouttoreviewtheadequacyandeffectivenessoftheinternalcontrolsystembased on a detailed annual audit plan approved by the Audit Committee. The Internal Audit Departmentrecommendsonareasforimprovementandconductsfollow-upreviewstodeterminetheextenttowhichitsrecommendationhasbeenimplemented;

• AcomprehensivebusinessplanwhichsetsouttheGroup’smediumtermstrategy isupdatedannuallyandforms thebasis fromwhichdetailedbudgetsarebuiltupon.Budgetspreparedby theoperatingunits areapprovedboth at operating unit level andby theBoard. Actual performance ismonitored against budgetmonthlytoidentifysignificantvariancesandcorrectivemeasuresaretaken,wherenecessarytoaddressissuesandimproveperformance;

• Meetingsareheldatmanagementandoperational levelstodisseminateinformation,monitortheprogressof various business units, and to deliberate and decide upon operational matters. These include regularmanagementmeetingsandheadsofdepartmentmeetingswhicharerecordedintominutesandheldbasedonneeds.TheBoardisrepresentedbytheExecutiveDirectorwhochairsthemanagementmeetings,whosemembersare theseniormanagementandheadsofdepartment.Themeetingshelp to removebarriersofbureaucracy and assist in ensuringmore direct and effective implementation of all major and importantdecision.

RevieW OF tHe Statement BY tHe eXteRnal aUDitORS

Pursuanttoparagraph15.23oftheMainMarketListingRequirementsofBursaMalaysia,theExternalAuditorshavereviewedthisStatementofRiskManagementandInternalControlforinclusionintheGroup’sAnnualReportforthefinancialyearended31December2014.

cOnclUSiOn

TheBoard is satisfied that, during the yearunder reviewandup to thedateof this report, the systemsof riskmanagementandinternalcontrolbeinginstitutedthroughouttheGroupareinallmaterialaspects,adequateandeffectiveandhavereceivedthesameassurancefromtheChiefExecutiveOfficerandtheChiefFinancialOfficer.Notwithstandingthis,reviewsofallriskmanagementandcontrolprocedureswillbeanongoingexercisecarriedouttoensurethecontinuingeffectivenessofthepoliciesandproceduresunderchangingeconomicandregulatoryenvironmentinordertoachievetheGroup’scorporateobjectives.ThisstatementhasbeenapprovedbytheBoardon27April2015.

Financial ContentsDirectors’ Report ............................................................................. 027

Statement by Directors ................................................................... 030

Statutory Declaration ...................................................................... 030

Independent Auditors’ Report ........................................................ 031

Statements of Financial Position .................................................... 033

Statements of Profit or Loss and Other ........................................Comprehensive Income

034

Statements of Changes in Equity ................................................... 035

Statements of Cash Flows ............................................................... 038

Notes to the Financial Statements ................................................. 040

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

103


27

Directors’ Report

The Directors hereby present their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2014.

PRinCiPal aCtivities

The principal activities of the Company are those of property and investment holding, trading, property development and provision of management services.

The principal activities of the subsidiary companies and associate company are disclosed in Notes 7 and 8 respectively.

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

FinanCial Results

Group CompanyRM RM

Net (loss)/profit for the financial year (10,006,244) 1,982,652

Attributable to:Owners of the Parent (9,586,649) 1,982,652Non-controlling interests (419,595) -

(10,006,244) 1,982,652

DiviDenD

No dividend has been paid or declared by the Company since the end of the previous financial year. The Board of Directors does not recommend any dividend in respect of the current financial year.

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.

issue oF shaRes anD DebentuRes

There was no issuance of shares or debentures during the financial year.

oPtions GRanteD oveR unissueD shaRes

No options were granted to any person to take up unissued shares of the Company during the financial year.


28

Directors’ Reportcont’d

DiReCtoRs

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

Tan Sri Dato’ Mohd Ramli Bin Kushairi, PSM, DPMP, JMN, KMNDatuk Seri Ismail Bin Yusof, SMW, DSNS, KMNDato’ Dr. Abdullah Bin Sepien, SJMK, DIMP, DJMKDatin Paduka Hajjah Rakibah Binti Hj Abd. Manap, DSSA, AMN, PJKLeow Thang FongChong Heng KiongTan Siew Poh

DiReCtoRs’ inteRests

The interests and deemed interests in the shares of the Company and of its related corporations (other than wholly-owned subsidiary companies) of those who were Directors at financial year end (including their spouses or children) according to the Register of Directors’ Shareholdings are as follows:

no. of ordinary shares of RM1.00 eachat 1.1.2014 acquired Disposed at 31.12.2014

south Malaysia industries berhadDirect interest Tan Sri Dato’ Mohd Ramli Bin Kushairi 549,000 - - 549,000Leow Thang Fong 1,791,250 - - 1,791,250Tan Siew Poh 833 - - 833

indirect interest Leow Thang Fong 422,000 - - 422,000Chong Heng Kiong 1,269,491 - - 1,269,491

None of the other Directors holding office at the end of the financial year had any interest in the ordinary shares of the Company or its related corporations during the financial year under review.

DiReCtoRs’ beneFits

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

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

otheR statutoRy inFoRMation

(a) Before the statements of financial position and statements of profit or loss and other comprehensive income of the Group and of the Company were made out, the Directors took reasonable steps:

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


29

Directors’ Reportcont’d

otheR statutoRy inFoRMation (Cont’D)

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

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

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

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

(iii) not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading; or

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

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

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

(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year other than those arising in the normal course of business of the Group and of the Company.

(d) In the opinion of the Directors:

(i) 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 of the Company to meet its obligations as and when they fall due;

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

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

auDitoRs

The Auditors, Messrs UHY, have expressed their willingness to continue in office.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors dated 27 April 2015.

leoW thanG FonG ChonG henG KionG


30

We, the undersigned, being two of the Directors of the Company, do hereby state that, in the opinion of the Directors, the financial statements set out on pages 33 to 102 are drawn up in accordance with Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2014 and of their financial performance and cash flows for the financial year then ended.

The supplementary information set out in Note 35 to the financial statements on page 103 have been compiled in accordance with 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, as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors dated 27 April 2015.

leoW thanG FonG ChonG henG KionG

Statutory DeclarationPursuant To Section 169(16) of the Companies Act, 1965

I, Yau Sek Fun, being the Officer primarily responsible for the financial management of South Malaysia Industries Berhad, do solemnly and sincerely declare that the financial statements set out on pages 33 to 103 are to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by )the abovenamed at Kuala Lumpur in )the Federal Territory on 27 April 2015 ) yau seK Fun

Before me,

baloo a/l t. PiChai (no. 663) CoMMissioneR FoR oaths

Statement by DirectorsPursuant to Section 169(15) of the Companies Act, 1965


31

RePoRt on the FinanCial stateMents

We have audited the financial statements of South Malaysia Industries Berhad, which comprise the statements of financial position as at 31 December 2014 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 33 to 102.

Directors’ Responsibility for the Financial Statements

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

Auditors’ Responsibility

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

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

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

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 2014 and of their financial performance and cash flows for the financial year then ended in accordance with Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

RePoRt on otheR leGal anD ReGulatoRy RequiReMents

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

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiary companies 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’ report of all the subsidiary companies of which we have not acted as auditors, which are indicated in Note 7.

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

(d) The audit reports on the financial statements of the subsidiary companies did not contain any qualification or any adverse comment made under Section 174 (3) of the Act.

Independent auditors’ Reportto the Members of South Malaysia Industries Berhad


32

Independent auditors’ Reportto the Members of South Malaysia Industries Berhad cont’d

otheR RePoRtinG ResPonsibilities

The supplementary information set out in Note 35 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 Disclosures 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 MatteR

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

uhy Firm Number: AF 1411Chartered Accountants

Chan Jee PenGApproved Number: 3068/08/16 (J)Chartered Accountant

KUALA LUMPUR

27 April 2015


33

Statements of Financial Positionas at 31 December 2014

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

Group Company2014 2013 2014 2013

note RM RM RM RMassetsnon-current assetsProperty, plant and equipment 3 47,189,276 47,354,574 964,204 525,256Prepaid lease payments 4 755,624 853,853 - -Investment properties 5 30,553,157 29,153,157 30,235,000 28,835,000Land held for property development 6 6,349,442 9,085,471 - -Investment in subsidiary companies 7 - - 102,132,685 105,132,685Investment in an associate company 8 - - - -Available-for-sale financial assets 9 25,315,628 23,200,868 10,635,680 8,701,920Intangible assets 10 - - - -Trade and other receivables 11 7,309,515 7,009,515 7,309,515 7,009,515

117,472,642 116,657,438 151,277,084 150,204,376Current assetsProperty development costs 12 12,431,756 9,847,400 - -Inventories 13 15,647,160 11,472,931 - -Trade and other receivables 11 26,760,057 34,433,624 12,472,867 14,418,952Tax recoverable 916,956 1,628,354 103,890 569,382Available-for-sale financial assets 9 1,010,233 - 1,010,233 -Deposits, bank and cash balances 14 37,921,926 46,288,477 6,885,456 5,002,246

94,688,088 103,670,786 20,472,446 19,990,580

total assets 212,160,730 220,328,224 171,749,530 170,194,956

equityShare capital 15 209,940,112 209,940,112 209,940,112 209,940,112Share premium 16 34,299,055 34,299,055 34,299,055 34,299,055Reserves 17 25,214,192 22,843,488 6,044,464 4,109,240Accumulated losses (122,492,019) (112,905,370) (105,815,774) (107,798,426)

Equity attributable to owners of the parent 146,961,340 154,177,285 144,467,857 140,549,981

Non-controlling interests 18 (5,564,215) (4,803,932) - -

total equity 141,397,125 149,373,353 144,467,857 140,549,981

liabilitiesnon-Current liabilitiesLoans and borrowings 19 15,392,997 16,961,314 14,769,904 16,037,741Deferred tax liabilities 20 832,084 808,991 - -

16,225,081 17,770,305 14,769,904 16,037,741Current liabilitiesTrade and other payables 21 43,217,453 40,195,147 10,709,054 11,954,957Loans and borrowings 19 11,291,947 12,942,831 1,802,715 1,652,277Tax payable 29,124 46,588 - -

54,538,524 53,184,566 12,511,769 13,607,234

total liabilities 70,763,605 70,954,871 27,281,673 29,644,975

total equity and liabilities 212,160,730 220,328,224 171,749,530 170,194,956


34

Statements of Profit or Loss and OtherComprehensive incomefor the Financial Year Ended 31 December 2014


Group Company2014 2013 2014 2013

note RM RM RM RM

Revenue 22 64,648,046 77,406,273 12,899,844 27,967,230

Cost of sales- property development costs (5,921,253) (17,314,958) - -- others (51,345,327) (51,293,099) (2,428,257) (6,784,984)

Gross profit 7,381,466 8,798,216 10,471,587 21,182,246Other income 5,657,307 4,936,537 2,223,220 280,108Selling and distribution costs (2,194,451) (3,406,930) (6,215) (599)Administrative expenses (17,761,061) (18,096,669) (4,889,514) (4,815,709)Other operating expenses (966,662) (7,803,655) (4,604,105) (4,359,180)

(Loss)/Profit from operations (7,883,401) (15,572,501) 3,194,973 12,286,866Finance costs 23 (1,786,380) (1,885,684) (1,218,083) (1,303,507)

(Loss)/Profit before taxation 24 (9,669,781) (17,458,185) 1,976,890 10,983,359

Taxation 25 (336,463) (225,103) 5,762 (2,774,998)

Net (loss)/profit for the financial year (10,006,244) (17,683,288) 1,982,652 8,208,361

other comprehensive income for the financial year, net of taxation

Items that are or may be reclassified subsequently to profit or loss- Exchange differences on translating

foreign operations 94,792 1,218,578 - -- Fair value of available-for-sale

financial assets 1,935,224 3,675,149 1,935,224 3,675,149

2,030,016 4,893,727 1,935,224 3,675,149Total comprehensive income for the

financial year (7,976,228) (12,789,561) 3,917,876 11,883,510

Net (loss)/profit attributable to:Owners of the parent (9,586,649) (16,450,597) 1,982,652 8,208,361Non-controlling interests (419,595) (1,232,691) - -

(10,006,244) (17,683,288) 1,982,652 8,208,361

Total comprehensive income attributable to: Owners of the parent (7,215,945) (11,575,196) 3,917,876 11,883,510Non-controlling interests (760,283) (1,214,365) - -

(7,976,228) (12,789,561) 3,917,876 11,883,510

Loss per share attributable to owners of the Parent (sen):

Basic / Diluted 26 (4.57) (7.84)


35

Statements of Changes in equityfor the Financial Year Ended 31 December 2014

att

ribu

tabl

e to

ow

ners

of t

he P

aren

t<-

------

------

------

------

---- n

on-D

istr

ibut

able

-----

------

------

------

----- >

shar

eCa

pita

lsh

are

Prem

ium

Fore

ign

Exch

ange

Re

serv

esRe

valu

atio

n Re

serv

esFa

ir v

alue

Re

serv

esa

ccum

ulat

ed

loss

esto

tal

non

-Co

ntro

lling

in

tere

sts

tota

leq

uity

RMRM

RMRM

RMRM

RMRM

RM

Gro

up

At 1

Janu

ary

2014

209,

940,

112

34,2

99,0

5517

,565

,942

1,16

8,30

64,

109,

240

(112

,905

,370

)15

4,17

7,28

5(4

,803

,932

)14

9,37

3,35

3

Exch

ange

diff

eren

ces

on tr

ansl

atin

g fo

reig

n op

erat

ions

--

435,

480

--

-43

5,48

0(3

40,6

88)

94,7

92Fa

ir v

alue

of a

vaila

ble-

for-

sale

fin

anci

al a

sset

s-

--

-1,

935,

224

-1,

935,

224

-1,

935,

224

Oth

er c

ompr

ehen

sive

inco

me

for

the

finan

cial

yea

r-

-43

5,48

0-

1,93

5,22

4-

2,37

0,70

4(3

40,6

88)

2,03

0,01

6

Net

loss

for

the

finan

cial

yea

r-

--

--

(9,5

86,6

49)

(9,5

86,6

49)

(419

,595

)(1

0,00

6,24

4)To

tal c

ompr

ehen

sive

inco

me

for

the

finan

cial

yea

r-

--

-1,

935,

224

(9,5

86,6

49)

(7,2

15,9

45)

(760

,283

)(7

,976

,228

)

At 3

1 D

ecem

ber

2014

209,

940,

112

34,2

99,0

5518

,001

,422

1,16

8,30

66,

044,

464

(122

,492

,019

)14

6,96

1,34

0(5

,564

,215

)14

1,39

7,12

5


36

Statements of Changes in equityfor the Financial Year Ended 31 December 2014cont’d

att

ribu

tabl

e to

ow

ners

of t

he P

aren

t<-

------

------

------

------

---- n

on-D

istr

ibut

able

-----

------

------

------

----- >

shar

eCa

pita

lsh

are

Prem

ium

Fore

ign

Exch

ange

Re

serv

esRe

valu

atio

n Re

serv

esFa

ir v

alue

Re

serv

esa

ccum

ulat

ed

loss

esto

tal

non

-Co

ntro

lling

in

tere

sts

tota

leq

uity

RMRM

RMRM

RMRM

RMRM

RM

Gro

up

At 1

Janu

ary

2013

209,

940,

112

34,2

99,0

5516

,365

,690

1,16

8,30

643

4,09

1(9

6,45

4,77

3)16

5,75

2,48

1(3

,589

,567

)16

2,16

2,91

4

Exch

ange

diff

eren

ces

on tr

ansl

atin

g fo

reig

n op

erat

ions

--

1,20

0,25

2-

--

1,20

0,25

218

,326

1,21

8,57

8Fa

ir v

alue

of a

vaila

ble-

for-

sale

fin

anci

al a

sset

s-

--

-3,

675,

149

-3,

675,

149

-3,

675,

149

Oth

er c

ompr

ehen

sive

inco

me

for

the

finan

cial

yea

r-

-1,

200,

252

-3,

675,

149

-4,

875,

401

18,3

264,

893,

727

Net

loss

for

the

finan

cial

yea

r-

--

--

(16,

450,

597)

(16,

450,

597)

(1,2

32,6

91)

(17,

683,

288)

Tota

l com

preh

ensi

ve in

com

e fo

r th

e fin

anci

al y

ear

--

1,20

0,25

2-

3,67

5,14

9(1

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0,59

7)(1

1,57

5,19

6)(1

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,365

)(1

2,78

9,56

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1 D

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2013

209,

940,

112

34,2

99,0

5517

,565

,942

1,16

8,30

64,

109,

240

(112

,905

,370

)15

4,17

7,28

5(4

,803

,932

)14

9,37

3,35

3


37

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361

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11,8

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Statements of Changes in equityfor the Financial Year Ended 31 December 2014

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38

Statements of Cash Flows for the Financial Year Ended 31 December 2014

Group Company2014 2013 2014 2013

RM RM RM RM

Cash Flows From operating activities(Loss)/Profit before taxation (9,669,781) (17,458,185) 1,976,890 10,983,359Adjustments for:Receivables- Bad debts written off 18,000 38,184 - 4,838- Fair value adjustment - 2,000,000 - 2,000,000- Write-back of impairment (46) (79,671) - -Subsidiary companies- Impairment of amount owing - - 1,600,000 2,300,000- Impairment loss of investment in subsidiary - - 3,000,000 -Property, plant and equipment- Depreciation 3,681,268 3,836,554 175,323 295,344- (Gain)/Loss on disposal (186,076) 349,651 (2,801) -- Write-off 75,536 13,044 4,105 -- Impairment loss - 810,243 - -Impairment of amount owing by associate

company 11,965 29,211 - -Loss on disposal of available-for-sale

financial assets - 21,455 - 21,455Net unrealised foreign exchange loss/(gain) 40,693 120,197 - -Amortisation of lease rental 151,125 142,309 - -Inventories written down 9,179 87,537 - -Write-back of liquidated ascertained damages (42,070) (64,210) - -Reversal of over-accrued expenses (95,640) (1,138,868) - -Fair value gain on derivatives - (30,055) - -Fair value adjustment of investment property (1,400,000) - (1,400,000) -Gross dividend income:- Subsidiary companies - - (9,000,000) (19,800,000)- Others (105,457) (39,302) (105,457) (39,302)Finance costs 1,786,380 1,885,684 1,218,083 1,303,507Finance income- Receivables (300,000) - (300,000) -- Others (1,365,732) (1,236,317) (414,192) (205,519)

2,279,125 6,745,646 (5,224,939) (14,119,677)

operating loss before working capital changes (7,390,656) (10,712,539) (3,248,049) (3,136,318)

Change in working capital:Property development costs 276,397 1,972,064 - -Inventories (4,183,406) 175,532 - -Advance to associate company (11,965) (29,211) - -Trade and other receivables 7,640,117 12,392,648 (2,921,824) (3,865,247)Trade and other payables 1,888,139 (2,141,089) 1,780,470 (18,861,677)

5,609,282 12,369,944 (1,141,354) (22,726,924)


39

Statements of Cash Flows for the Financial Year Ended 31 December 2014

cont’d


Group Company2014 2013 2014 2013

note RM RM RM RM

Cash (used in)/generated from operations (1,781,374) 1,657,405 (4,389,403) (25,863,242)

Interest paid (1,544,009) (1,894,687) (997,610) (1,312,510)Tax refund /(paid) 380,564 (290,473) 471,254 -

(1,163,445) (2,185,160) (526,356) (1,312,510)

Net cash used in operating activities (2,944,819) (527,755) (4,915,759) (27,175,752)

Cash Flows From investing activitiesInterest received 1,381,227 1,244,707 435,255 190,627Expenditure on land held for property

development (124,724) (546,649) - -Proceeds from disposal of available-for-

sale financial assets - 4,181,030 - 4,181,030Purchase of available-for-sale

financial assets (1,008,769) (39,302) (1,008,769) (39,302)Purchase of property, plant and

equipment 3(iv) (2,639,588) (1,193,579) (130,575) (9,382)Proceeds from disposal of property,

plant and equipment 264,080 776,509 63,000 -Net dividend received 105,457 39,302 9,105,457 16,839,302

Net cash (used in)/from investing activities (2,022,317) 4,462,018 8,464,368 21,162,275

Cash Flows From Financing activitiesLoans and borrowings, net repayment (2,984,688) (790,388) (1,586,842) (1,492,959)Repayment of finance lease payables (424,574) (443,681) (78,557) (47,411)

Net cash used in financing activities (3,409,262) (1,234,069) (1,665,399) (1,540,370)

Effect of exchange rate changes on cash and cash equivalents 367,786 382,009 - -

net (DeCRease)/inCRease in Cash anD Cash equivalents DuRinG the FinanCial yeaR (8,008,612) 3,082,203 1,883,210 (7,553,847)

Cash anD Cash equivalents at the beGinninG oF the FinanCial yeaR 45,930,538 42,848,335 5,002,246 12,556,093

Cash anD Cash equivalents at the enD oF the FinanCial yeaR 14 37,921,926 45,930,538 6,885,456 5,002,246


40

Notes to the Financial statements

1. CoRPoRate inFoRMation

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

The principal place of business is located at 15th Floor, Menara SMI, No. 6, Lorong P. Ramlee, 50250 Kuala Lumpur.

The address of the registered office of the Company is at Suite 1301, 13th Floor, City Plaza, Jalan Tebrau, 80300 Johor Bahru, Johor Darul Takzim.

The principal activities of the Company are those of property and investment holding, trading, property development and provision of management services. The principal activities of the subsidiary companies and associate company are disclosed in Notes 7 and 8 respectively. There have been no significant changes in the nature of these activities of the Company and its subsidiary companies during the financial year.

2. basis oF PRePaRation anD siGniFiCant aCCountinG PoliCies

2.1 statement of Compliance

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

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

adoption of new and amended standards and iC interpretation

During the financial year, the Group and the Company have adopted the following amendments to FRSs and IC Interpretation issued by the Malaysian Accounting Standards Board (“MASB”) that are mandatory for current financial year:

Amendments to FRS 10, FRS 12 and FRS 127

Investment Entities

Amendments to FRS 132 Offsetting Financial Assets and Financial LiabilitiesAmendments to FRS 136 Recoverable Amount Disclosures for Non-Financial AssetsAmendments to FRS 139 Novation of Derivatives and Continuation of Hedge AccountingIC Interpretation 21 Levies

Adoption of above amendments to FRSs and IC Interpretation did not have any significant impact on the financial statements of the Group and of the Company.

Notes to the Financial Statementscont’d


41

2. basis oF PRePaRation anD siGniFiCant aCCountinG PoliCies (Cont’D)

2.1 statement of Compliance (cont’d)

Standards issued but not yet effective

The Group and the Company have not applied the following new FRSs and amendments to FRSs that have been issued by the MASB but are not yet effective for the Group and the Company:

Effective date for financial periods

beginning on or after

Amendments to FRS 119 Defined Benefits Plans: Employee Contributions

1 July 2014

Annual Improvements to FRSs 2010 – 2012 Cycle 1 July 2014Annual Improvements to FRSs 2011 – 2013 Cycle 1 July 2014FRS 14 Regulatory Deferral Accounts 1 January 2016Amendments to FRS 11 Accounting for Acquisitions of Interests

in Joint Operations1 January 2016

Amendments to FRS 116 and FRS 138 Clarification of Acceptable Methods of Depreciation and Amortisation

1 January 2016

Amendments to FRS 116 and FRS 141 Agriculture: Bearer Plants 1 January 2016Amendments to FRS 127 Equity Method in Separate Financial

Statements1 January 2016

Amendments to FRS 10 and FRS 128 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

1 January 2016

Annual Improvements to FRSs 2012–2014 Cycle 1 January 2016Amendments to FRS 10, FRS 12

and FRS 128Investment Entities: Applying the

Consolidation Exception1 January 2016

FRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014)

1 January 2018

The Group and the Company intend to adopt the above FRSs when they become effective.

The initial application of the abovementioned FRSs are not expected to have any significant impacts on the financial statements of the Group and the Company except as mentioned below:

FRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014)

FRS 9 (IFRS 9 issued by IASB in July 2014) replaces earlier versions of FRS 9 and introduces a package of improvements which includes a classification and measurement model, a single forward looking ‘expected loss’ impairment model and a substantially reformed approach to hedge accounting. FRS 9 when effective will replace FRS 139 Financial Instruments: Recognition and Measurement.



42


2.1 statement of Compliance (cont’d)

FRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014) (cont’d)

FRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income not reclassified subsequently to profit or loss. There is now a new expected credit losses model that replaces the incurred loss impairment model used in FRS 139. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. FRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under FRS 139.

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.

New Malaysian Financial Reporting Standards (“MFRS Framework”) issued but not yet effective

On 19 November 2011, the MASB issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards (“MFRS Framework”). The MFRS Framework is to be applied by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities that are within the scope of MFRS 141 Agriculture and IC Interpretation 15 Agreements for Construction of Real Estate, including its parent, significant investor and venturer (hereinafter called “Transitioning Entities”).

Transitioning Entities will be allowed to defer adoption of the new MFRS Framework and continue to use the existing FRS Framework. The adoption of the MFRS Framework by Transitioning Entities will be mandatory for annual periods beginning on or after 1 January 2017.

The Group and the Company fall within the scope definition of Transitioning Entities and accordingly, will be required to prepare financial statements using the MFRS Framework in their first MFRS financial statements for the financial year ending 31 December 2017. In presenting their first MFRS financial statements, the Group and the Company will be required to restate the comparative financial statements to amounts reflecting the application of the MFRS Framework. The majority of the adjustments required on transition will be made, retrospectively, against opening retained earnings.

The Group and the Company are currently assessing the implications and financial impact of transition

to the MFRS Framework. Accordingly, the consolidated and separate financial performance and financial position as disclosed in these financial statements for the financial year ended 31 December 2014 could be different if prepared under the MFRS Framework.

2.2 Functional and presentation currency

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

2.3 Significant accounting judgments, estimates and assumptions

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.



43


2.3 Significant accounting judgments, estimates and assumptions (cont’d)

Judgments

There are no significant areas of critical judgement in applying accounting policies that have significant effect on the amounts recognised in the financial statements.

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below.

(i) Useful lives of property, plant and equipment (Note 3)

The Group regularly review the estimated useful lives of property, plant and equipment based on factors such as business plan and strategies, expected level of usage and future technological developments. Future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned above. A reduction in the estimated useful lives of property, plant and equipment would increase the recorded depreciation and decrease the value of property, plant and equipment.

(ii) Estimation of fair value of properties (Note 5)

In the absence of current prices in an active market for similar properties, the Group considers information from a variety of sources, including:

(a) current prices in an active market for properties of a different nature, condition or location, adjusted to reflect those differences; or

(b) recent prices of similar properties based on less active market, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices.

(iii) Impairment of investment in subsidiary companies

The Company has recognised impairment loss in respect of its investments in subsidiary companies. The Company carried out the impairment test based on the estimation of the higher of the value-in-use or the fair value less cost to sell of the cash-generating units to which the investments in subsidiary companies belong to. Estimating the recoverable amount requires the Company to make an estimate of the expected future cash flows from the cash-generating units and also to determine a suitable discount rate in order to calculate the present value of those cash flows.

The carrying amount at the reporting date for investments in subsidiary companies is disclosed in Note 7.

(iv) Impairment of investment in associate company

The Company has recognised impairment loss in respect of its investments in associate company. The Company carried out the impairment test based on the estimation of the higher of the value-in-use or the fair value less cost to sell of the cash-generating units to which the investments in associate company belong to. Estimating the recoverable amount requires the Company to make an estimate of the expected future cash flows from the cash-generating units and also to determine a suitable discount rate in order to calculate the present value of those cash flows.

The carrying amount at the reporting date for investments in subsidiary companies is disclosed in Note 8.



44



Key sources of estimation uncertainty (cont’d)

(v) Impairment of available-for-sale financial assets (Note 9)

The Group reviews its available-for-sale financial assets at each reporting date to assess whether they are impaired. The Group also records impairment changes on available-for-sale equity investments when there has been a significant decline in the fair value below their costs. In making this judgement, the Group evaluates, among other factors, historical share price movements and the duration and extent to which the fair value of an investment is less than its cost.

(vi) Impairment of goodwill on consolidation

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value-in-use of the cash-generating units to which the goodwill is allocated. Estimating the value-in-use amount requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The impairment assessment of goodwill is disclosed in Note 10.

(vii) Impairment of non-financial assets

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

In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.

(viii) Impairment of loans and receivables

The Group assesses at the end of each reporting period whether there is any objective evidence that a receivable is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the receivable and default or significant delay in payments.

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 amounts at the reporting date for loans and receivables are disclosed in Notes 11.

(ix) Property development costs (Note 12)

The Group recognises property development revenue and expenses in profit or loss by using the stage of completion method. The stage of completion is determined by the proportion that property development costs incurred for work performed to date bear to the estimated total property development costs. Significant judgement is required in determining the stage of completion, the extent of the property development costs incurred, the estimated total property development revenue and costs, as well as the recoverability of the development projects. In making the judgement, the Group evaluates based on past experience and by relying on the work of specialists.



45



Key sources of estimation uncertainty (cont’d)

(x) Income taxes

Judgment is involved in determining the provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business.

The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Details of income tax expense are disclosed in Note 25.

The Group and the Company apply the significant accounting policies set out below, consistently throughout all periods presented in the financial statements unless otherwise stated.

2.4 basis of consolidation

(i) Subsidiary companies

Subsidiary companies are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiary companies are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed off in profit or loss as incurred.

If the business combination is achieved in stages, previously held equity interest in the acquiree is re-measured at its acquisition date fair value and the resulting gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with FRS 139 Financial Instruments: Recognition and Measurement either in profit or loss or other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Inter-company transactions, balances and unrealised gains or losses on transactions between Group companies are eliminated. Unrealised losses are eliminated only if there is no indication of impairment. Where necessary, accounting policies of subsidiary companies have been changed to ensure consistency with the policies adopted by the Group.



46


2.4 basis of consolidation (cont’d)

(i) Subsidiary companies (cont’d)

In the Company’s separate financial statements, investments in subsidiary companies are stated at cost less accumulated impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts are recognised in profit or loss. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 2.16 to the financial statements on impairment of non-financial assets.

(ii) Changes in ownership interests in subsidiary companies without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions i.e. transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary company is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(iii) Disposal of subsidiary companies

If the Group loses control of a subsidiary company, the assets and liabilities of the subsidiary company, including any goodwill, and non-controlling interests are derecognised at their carrying value on the date that control is lost. Any remaining investment in the entity is recognised at fair value. The difference between the fair value of consideration received and the amounts derecognised and the remaining fair value of the investment is recognised as a gain or loss on disposal in profit or loss. Any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities.

(iv) Goodwill on consolidation

The excess of the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary company acquired (ie. a bargain purchase), the gain is recognised in profit or loss.

Following the initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment annually or more frequent when there is objective evidence that the carrying value may be impaired. See accounting policy Note 2.16 to the financial statements on impairment of non-financial assets.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

2.5 investments in associates

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.



47


2.5 investments in associates (cont’d)

On acquisition of an investment in an associate, any excess of the cost of investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill and included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities of the investee over the cost of investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of associate’s profit or loss for the period in which the investment is acquired.

An associate is equity accounted for from the date on which the investee becomes an associate. Under the equity method, on initial recognition the investment in an associate is recognised at cost, and the carrying amount is increased or decreased to recognise the Group’s share of profit or loss and other comprehensive income of the associate after the date of acquisition. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

Profits or losses resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group’s consolidated financial statements only to the extent of unrelated investors’ interests in the associate. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the assets transferred.

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

After application of the equity method, the Group applies FRS 139 to determine whether it is necessary to recognise any additional impairment loss with respect to its net investment in the associate. When necessary, the entire carrying amount of the investment is tested for impairment in accordance with FRS 136 Impairment of Assets as a single asset, by comparing its recoverable amount (higher of value-in-use and fair value less costs to sell) with its carrying amount. Any impairment loss is recognised in profit or loss. Reversal of an impairment loss is recognised to the extent that the recoverable amount of the investment subsequently increases.

Upon loss of significant influence over the associate, the Group measures and recognises any retained 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 retained 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 accumulated impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts are recognised in profit or loss. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 2.16 to the financial statements on impairment of non-financial assets.

2.6 Foreign currency

(i) Foreign currency transactions and balances

Transactions in foreign currency are recorded in the functional currency of the respective Group entities using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.



48


2.6 Foreign currency (cont’d)

(i) Foreign currency transactions and balances (cont’d)

Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are included in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation. These are initially taken directly to the foreign currency translation reserve within equity until the disposal of the foreign operations, at which time they are recognised in profit or loss. Exchange differences arising on monetary items that form part of the Company’s net investment in foreign operation are recognised in profit or loss in the Company’s financial statements or the individual financial statements of the foreign operation, as appropriate.

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

(ii) Foreign operations

The assets and liabilities of foreign operations denominated in functional currencies other than RM are translated to RM at the rate of exchange prevailing at the reporting date and income and expenses, excluding foreign operations in hyperinflationary economies, are translated to RM at exchange rates at the dates of the transactions.

Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2006 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date.

Goodwill and fair value adjustment which arose on the acquisition of foreign subsidiaries before 1 January 2006 are deemed to be assets and liabilities of the parent company and are recorded in RM at the rates prevailing at the date of acquisition.

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

When the Group disposes of only part of its interest in a subsidiary company that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

2.7 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The policy of recognition and measurement of impairment losses is in accordance with Note 2.16.



49


2.7 Property, plant and equipment (cont’d)

(i) Recognition and measurement

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

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

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

Property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss. On disposal of a revalued asset, the amounts in revaluation reserve relating to those assets are transferred to retained earnings.

(ii) Subsequent costs

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

(iii) Depreciation

Depreciation is recognised in the profit or loss on a straight-line basis over the estimated useful lives of property, plant and equipment. Freehold land is not depreciated. Leased assets are depreciated over the shorter of the lease term and their useful lives.

Property, plant and equipment are depreciated on the straight line basis to write off the cost of each asset to its residual value over the estimated useful life, at the following annual rates:

Buildings on the freehold land 2%Leasehold land and buildings Over the remaining lease periodOffice furniture and equipment 8% - 20%Renovations 15% - 50%Plant and machinery 6% - 50%Computer hardware and software 10% - 25%Tools and implements 10% - 15%Motor vehicles 10% - 20%

The depreciable amount is determined after deducting the residual value.

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



50


2.8 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.

(i) Finance lease

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

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

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

(ii) Operating lease

Leases, where the Group 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.

Leasehold land which in substance is an operating lease is classified as prepaid lease payments.

2.9 investment properties

Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value. Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss in the year in which they arise. The fair values are determined by external professional valuers with sufficient experience with respect to both the location and the nature of the investment property and supported by market evidence.

Investment properties are derecognised when either they are disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from the disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in the profit or loss in the year of retirement or disposal.

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



51


2.9 investment properties (cont’d)

When an item of inventory or property development is transferred to investment property following a change in its use, any difference between the fair value of the property at the date of transfer and its carrying amount immediately prior to the transfer is recognised in profit or loss.

When the use of an investment property changes such that it is reclassified as property, plant and equipment or inventories, its fair value at the date of reclassification becomes its cost for subsequent accounting.

2.10 land and property development costs

(i) Land held for property development

Land held for property development consists of land held for future development activities where no significant development has been undertaken or where development activities are not expected to be completed within normal operating cycle. Such land is classified as non-current assets and is stated at cost less any accumulated impairment losses. The policy of recognition and measurement of impairment losses is in accordance with Note 2.16.

Land held for property development is reclassified as current asset when the development activities have commenced and where it can be demonstrated that the development activities can be completed within the normal operating cycle.

Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties, commissions, conversion fees and other relevant levies.

(ii) Property development costs

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

Property development costs shall be classified as non-current asset where no development activities have been carried out or where development activities are not expected to be completed within the normal operating cycle.

Property development costs shall be reclassified to current asset when the development activities have commenced and expected to be completed within the normal operating cycle.

When the financial outcome of development activity can be reliably estimated, property development revenue and expenses are recognised in profit or loss by using the stage of completion. The stage of completion is determined by the proportion that property development costs incurred for work performed to date bear to the estimated total property development costs.

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

Property development cost not recognised as an expense is recognised as an asset, which is measured at the lower of cost and net realisable value.

Any expected loss on a development project including costs to be incurred over the defects liability period shall be recognised as an expense immediately.

When the revenue recognised in profit or loss exceeds billings to purchaser, the balance is shown as accrued billings under current assets. When the billings to purchaser exceed the revenue recognised in profit or loss, the balance is shown as progress billings under current liabilities.



52


2.11 Financial assets

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

Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value. Transaction costs for financial assets at fair value through profit or loss are recognised immediately in profit or loss.

The Group and the Company classify their financial assets depending on the purpose for which the financial assets were acquired at initial recognition, into the following categories:

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those maturing later than 12 months after the end of the reporting period which are classified as non-current assets.

After initial recognition, financial assets categorised as loans and receivables are measured at amortised cost using the effective interest method, less impairment losses. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

(ii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the assets within 12 months after the end of the reporting period.

After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends from an available-for-sale equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established.

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

Regular way purchase or sale of financial assets

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

Derecognition of financial assets

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



53


2.12 Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definition of financial liabilities.

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

The Group and the Company classify their financial liabilities at initial recognition, into the following category:

(i) Other financial liabilities measured at amortised cost

The Group’s and the Company’s other financial liabilities comprise trade and other payables and loans and borrowings.

Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and 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 reporting date.

Gains and losses on financial liabilities measured at amortised cost are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

2.13 Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is 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.

2.14 inventories

Raw materials, work-in-progress, finished goods and completed properties are stated at the lower of cost and net realisable value.

Cost of raw material is determined on a first-in-first out basis. Cost of finished goods and work-in-progress consists of direct material, direct labour and an appropriate proportion of production overheads (based on normal operating capacity).

The cost of completed properties includes costs of land and related development cost or its purchase costs and incidental cost of acquisition.

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

2.15 Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, bank overdraft and highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. For the purpose of statement of cash flows, cash and cash equivalents are presented net of bank overdrafts.



54


2.16 impairment of assets

(i) Non-financial assets

The carrying amounts of non-financial assets (except for inventories, amount due from contract customers, deferred tax assets, assets arising from employee benefits, investment property measured at fair value and non-current assets (or disposal groups) classified as held for sale) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives, or that are not yet available for use, the recoverable amount is estimated each period at the same time.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units. Subject to operating segment ceiling test, for the purpose of goodwill impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to a cash-generating unit or a group of cash-generating units that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its value-in-use and its fair value less costs of disposal. 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 or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Impairment loss is recognised in profit or loss, unless the asset is carried at a revalued amount, in which such impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of cash-generating units) and then to reduce the carrying amounts of the other assets in the cash-generating unit (group of cash-generating units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed only if there has been a change in the estimates used to determine the 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 or amortisation, 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.

(ii) Financial assets

All financial assets, other than those categorised as fair value through profit or loss, investments in subsidiary companies, associates and joint ventures, are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset.



55


2.16 impairment of assets (cont’d)

(ii) Financial assets (cont’d)

Financial assets carried at amortised cost

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the receivable and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with defaults on receivables.

If any such evidence exists, the amount of impairment loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of impairment loss is recognised in profit or loss. Receivables together with the associated allowance are written off when there is no realistic prospect of future recovery.

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

Available-for-sale financial assets

Significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired. A significant or prolonged decline in the fair value of investments in equity instruments below its cost is also an objective evidence of impairment.

If an available-for-sale financial asset is impaired, the amount of impairment loss is recognised in profit or loss and is measured as the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously. When a decline of fair value of an available-for-sale financial asset has been recognised in other comprehensive income, the cumulative loss is reclassified from equity to profit or loss.

Impairment losses on available-for-sale equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value of equity instrument, if any, subsequent to impairment loss is recognised in other comprehensive income. For available-for-sale debt investments, impairment losses are subsequently reversed in profit or loss, if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss.

2.17 share capital

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

Dividends on ordinary shares are accounted for in equity as appropriation of retained earnings and recognised as a liability in the period in which they are declared.



56


2.18 Derivatives

Derivatives relate to fair value hedges on financial assets held through profit or loss. Derivatives are initially recognised at fair values on the date the contract is entered into and is subsequently carried at fair value.

The fair value hedges are not designated as effective hedging investments, therefore changes in fair value are recognised immediately in profit or loss.

2.19 Employee benefits

(i) Short term employee benefits

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

The expected cost of accumulating compensated absences is measured as additional amount expected to be paid as a result of the unused entitlement that has accumulated at the end of the reporting period.

(ii) Defined contribution plans

As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund (“EPF”). Some of the Group’s foreign subsidiary companies also make contributions to their respective countries’ statutory pension schemes. Such contributions are recognised as an expense in the profit or loss as incurred. Once the contributions have been paid, the Group has no further payment obligations.

2.20 Revenue recognition

(i) Sales of tickets

Sales of tickets arising from operating of multiplex cinemas and Dynamic Motion Simulator (“DMS”) rides are recognised when tickets are used or expired.

(ii) Sales of development properties

Sales of development properties are recognised on the percentage of completion method determined on the proportion of development cost incurred to date against total estimated cost where the outcome of the projects can be reliably estimated. All anticipated losses are provided for in full.

(iii) Sales of goods

Revenue is measured at the fair value of consideration received or receivable, net of returns and allowances, trade discount and volume rebates. Revenue from sale of goods is recognised when the transfer of significant risk and rewards of ownership of the goods to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

(iv) Carpark income

Carpark income is recognised as and when the services are rendered.



57


2.20 Revenue recognition (cont’d)

(v) Management fee

Management fee is recognised on an accrual basis when these services are performed.

(vi) Dividend income

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

(vii) Rental Income

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

(viii) Interest Income

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

2.21 borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

2.22 Income taxes

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

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using

tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the liability method for all temporary differences between the carrying

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



58


2.22 Income taxes (cont’d)

The measurement of deferred tax is based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, at the end of the reporting period, except for investment properties carried at fair value model. For investment properties measured using fair value model, the amount of deferred tax recognised is measured using the tax rates that would apply on sale of those assets at their carrying amounts at the reporting date unless the property is depreciable and is held with the objective to consume substantially all of the economic benefits embodied in the property over time, rather than through sale. Deferred tax assets and liabilities are not discounted.

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

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

Unutilised reinvestment allowance and investment tax allowance, being tax incentives that is not a tax

base of an asset, is recognised as a deferred tax asset to the extent that it is probable that the future taxable profits will be available against the unutilised tax incentive can be utilised.

2.23 segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segment makes strategic decisions based on operating segments’ results. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments.

2.24 Contingencies

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



59

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61

3. PROPERty, PlaNt aNd EquIPMENt (cONt’d)

Office furniture

and equipment Renovations

Plant and machinery

Computer hardware

andsoftware

Motor vehicles total

Company RM RM RM RM RM RM

2014CostAt 1 January 2014 665,429 1,944,686 9,300 139,724 869,023 3,628,162Additions 45,065 22,900 - 7,130 603,480 678,575Disposal - - - - (601,990) (601,990)Written off (28,308) (67,059) - (20,877) - (116,244)

At 31 December 2014 682,186 1,900,527 9,300 125,977 870,513 3,588,503

Accumulated depreciationAt 1 January 2014 598,808 1,756,939 9,300 123,969 613,890 3,102,906Charge for the financial year 24,807 96,120 - 12,259 42,137 175,323Disposal - - - - (541,791) (541,791)Written off (27,543) (63,719) - (20,877) - (112,139)

At 31 December 2014 596,072 1,789,340 9,300 115,351 114,236 2,624,299

Carrying amountAt 31 December 2014 86,114 111,187 - 10,626 756,277 964,204

2013CostAt 1 January 2013 683,181 1,944,686 9,300 136,510 869,023 3,642,700Additions 5,648 - - 3,734 - 9,382Written off (23,400) - - (520) - (23,920)

At 31 December 2013 665,429 1,944,686 9,300 139,724 869,023 3,628,162

accumulated depreciationAt 1 January 2013 592,417 1,560,238 9,300 109,769 559,758 2,831,482Charge for the financial year 29,791 196,701 - 14,720 54,132 295,344Written off (23,400) - - (520) - (23,920)

At 31 December 2013 598,808 1,756,939 9,300 123,969 613,890 3,102,906

Carrying amountAt 31 December 2013 66,621 187,747 - 15,755 255,133 525,256



62

3. PROPERty, PlaNt aNd EquIPMENt (cONt’d)

(i) Leasehold land and building of a subsidiary company was revalued by the Directors based on an independent professional valuation revised by the government valuer in year 1983 based on an open market value basis.

As allowed by the transitional provisions of the MASB Approved Accounting Standard IAS 16 (Revised): Property, plant and equipment, this asset continue to be stated at its 1983 valuation less accumulated depreciation and impairment loss.

Had the leasehold land and building been carried at historical cost less accumulated depreciation, the carrying amounts of the revalued asset that would have been included in the financial statements at the end of the financial year was RM1,116 (2013: RM1,186).

(ii) The carrying amount of the property, plant and equipment of the Group pledged to licensed banks as security for credit facilities granted to the Group as disclosed in Note 19 is as follows:

Group2014 2013

RM RM

Freehold land and building 211,896 213,856Leasehold land and building 2,551,624 2,703,282Plant and machinery 8,837,232 9,598,089Motor vehicles 31,370 31,370Office furniture and equipment, computer software and hardware 135,859 84,077Tools and implements 53,193 78,595

11,821,174 12,709,269

(iii) Included in the property, plant and equipment are plant and machinery of the Group and of the Company acquired under finance lease with carrying amount of RM2,626,006 and RM756,277 (2013: RM2,241,479 and RM194,934) respectively.

(iv) The aggregate additional cost for the property, plant and equipment of the Group and of the Company during the financial year under finance lease financing and cash payments are as follows:

Group Company2014 2013 2014 2013

RM RM RM RM

Aggregate costs 3,187,588 2,102,579 678,575 9,382Less:Finance lease financing (548,000) (909,000) (548,000) -

Cash payments 2,639,588 1,193,579 130,575 9,382

(v) In the previous financial year, impairment loss of property, plant and equipment was in respect of Hubei Smile Insun Entertainment Co., Ltd due to the cessation of its cinema business operations.



63

4. PRePaiD lease PayMents

Group2014 2013

RM RMCostAt 1 January 3,130,794 2,876,063Exchange fluctuation 193,953 254,731

At 31 December 3,324,747 3,130,794

accumulated amortisationAt 1 January 2,276,941 1,960,953Charge for the financial year 151,125 142,309Exchange fluctuation 141,057 173,679

At 31 December 2,569,123 2,276,941

Carrying amount 755,624 853,853

Prepaid lease payments represent up-front payments made by the Group for leasehold land with remaining leasehold period of 5 years (2013: 6 years).

5. investMent PRoPeRties

Group Company2014 2013 2014 2013

RM RM RM RMat fair valueFreehold propertyAt 1 January 28,600,000 28,600,000 28,600,000 28,600,000Fair value adjustment 1,400,000 - 1,400,000 -

At 31 December 30,000,000 28,600,000 30,000,000 28,600,000

Leasehold properties At 1 January/31 December 553,157 553,157 235,000 235,000

Total investment properties 30,553,157 29,153,157 30,235,000 28,835,000

(i) The freehold investment property of the Group and of the Company with a carrying amount of RM30,000,000 (2013: RM28,600,000) was revalued by an independent firm of professional valuers on 31 December 2014. The fair value is within level 2 of the fair value hierarchy. Valuation was based on the Comparison and Cost Method of Valuation where reference was made to comparable properties in the neighbourhood and making adjustments for differences.

The increase in the fair value of RM1,400,000 (2013: Nil) has been recognised in the profit or loss during the financial year.

The property is pledged to a licensed bank for credit facility granted to the Company as disclosed in Note 19.



64

5. investMent PRoPeRties (Cont’D)

(ii) In the previous financial year, the leasehold investment properties of the Company with a carrying amount of RM235,000 (2013: RM235,000) have been adjusted to fair value based on a valuation report dated 5 January 2011 issued by an independent professional valuer. Valuation was based on the Comparison Method of Valuation where reference was made to sale transactions as well as asking prices of comparable properties available for sale in the neighbourhood or like economic areas. The fair value of the investment properties approximates the carrying value of the property as at the end of the financial period. The remaining lease period for the said properties is 67 years (2013: 68 years).

(iii) The fair value of the investment property of the subsidiary company amounting to RM318,157 (2013: RM318,157) as at the end of the financial period is based on the Directors’ assessment with reference to available market prices of similar property. The remaining lease period for the said property is 81 years (2013: 82 years).

(iv) The following amounts have been recognised in the statements of profit or loss:

Group Company2014 2013 2014 2013

RM RM RM RM

Rental and car park income 1,242,266 1,121,839 1,414,232 1,173,229Direct operating expenses (977,691) (980,329) (977,691) (980,329)

264,575 141,510 436,541 192,900

6. lanD helD FoR PRoPeRty DeveloPMent

Group2014 2013

RM RMFreehold landAt 1 January 1,567,412 1,567,412Transferred to property development costs (Note 12) (1,477,004) -

At 31 December 90,408 1,567,412

leasehold landAt 1 January 4,667,868 5,386,694Transferred to property development costs (Note 12) (477,777) (718,826)

At 31 December 4,190,091 4,667,868

Development costsAt 1 January 2,850,191 2,655,653Addition during the financial year 124,724 546,649Transferred to property development costs (Note 12) (905,972) (352,111)

At 31 December 2,068,943 2,850,191

Total land held for property development 6,349,442 9,085,471

Land held for property development of the Group with an amount of RM1,054,294 (2013: RM3,309,741) are pledged to licensed banks for credit facilities granted to a subsidiary company as disclosed in Note 19.



65

7. investMent in subsiDiaRy CoMPanies

(i) Investment in subsidiary companies

Company2014 2013

RM RMin MalaysiaUnquoted shares, at cost 113,833,403 124,225,403Less: Accumulated impairment (11,704,000) (19,096,000)

102,129,403 105,129,403

outside MalaysiaUnquoted shares, at cost 3,282 3,282

102,132,685 105,132,685

(ii) The subsidiary companies and shareholdings therein are as follows:

Effectiveinterest

name of company 2014 2013 Principal activities% %

Direct holding:incorporated in Malaysia

Anastoria Sdn. Bhd.* 100 100 Property developmentBeauland Sdn. Bhd. - 100 DormantKam Kok Development Sdn. Bhd.* 100 100 Property developmentPerantara Properties Sdn. Bhd. 100 100 Property development & car park operationSMI Cityhome Sdn. Bhd. 100 100 Property developmentSMI Wire Sdn. Bhd. 100 100 Manufacturing and trading of assorted wiresSMI Project Management Sdn. Bhd. 100 100 Dormant

incorporated in hong KongSouth Malaysia Industries

(Hong Kong) Ltd*100 100 Investment holding

held by anastoria sdn bhd:incorporated in Malaysia

Kinta Setia Holdings Sdn. Bhd. * 100 100 DormantLimpah Murni Sdn. Bhd. * 100 100 Dormant

held by sMi Cityhome sdn bhd:incorporated in Malaysia

Sejagat Tenaga Sdn. Bhd.* 100 100 Dormant

held by south Malaysia industries (hong Kong) ltd:

incorporated in hong Kong SMI Leisure and Entertainment Ltd

(“SMILE”)* 60 60 Leisure and entertainment

Golden Fame Enterprises Ltd (“GFEL”)* 60 60 Investment holding

incorporated in british virgin islandsPacific Asia Development Inc. 100 100 Investment holding



66

7. investMent in subsiDiaRy CoMPanies (Cont’D)

(ii) The subsidiary companies and shareholdings therein are as follows:

name of companyEffectiveinterest Principal activities

2014 2013% %

held by sMile:incorporated in China

Hubei Smile Insun Entertainment Co., Ltd*

42 42 Operation of multiplex cinema - dormant

Shanghai Yonglian International Entertainment Co., Ltd*

60 60 Dormant

Shanghai Yinxin Film Culture Entertainment Ltd*

39.6 39.6 Dormant

held by GFel:incorporated in hong Kong

Jenor International Ltd* 42 42 Investment holding

held by Jenor international ltd:incorporated in China

Shanghai Ping An Entertainment Ltd* 21.84 21.84 Operation of Dynamic Motion Simulator theatres - dormant

* Subsidiary companies not audited by UHY.

(iii) On 13 March 2014, the Company’s wholly-owned dormant subsidiary company, Beauland Sdn. Bhd. has been struck off from the register of Companies Commission of Malaysia pursuant of Section 308(4) of the Companies Act, 1965.



67


(iv) Summarised financial information of subsidiaries with material non-controlling interests (“NCI”):

2014 sMile Group GFel Group total

nCi percentage of ownership and voting interest 40% 40%

RM RM RMAccumulated NCI (5,434,524) (129,691) (5,564,215)(Loss)/Profit allocated to NCI (1,915,049) 1,154,766 (760,283)

Summarised financial information before intra-group elimination

as at 31 December 2014Total assets 8,600,574 6,185,993Total liabilities (64,276,189) (9,722,281)

Net liabilities (55,675,615) (3,536,288)

Equity attributable to:Owner of the parent (50,241,091) (3,406,597)Non-controlling interests (5,434,524) (129,691)

year ended 31 December 2014Revenue 22,041 -

Net (loss)/profit before tax (2,642,255) 278,393Taxation (36,028) -Net (loss)/profit for the financial year (2,678,283) 278,393Other comprehensive income (858,147) 517,459

Total comprehensive income (3,536,430) 795,852

Net cash (used in)/generated from operating activities (759,448) 567,042

Net cash generated from investing activities 203,722 186,465

Net (decrease)/increase in cash and cash equivalents (555,726) 753,507



68


(iv) Summarised financial information of subsidiaries with material non-controlling interests (“NCI”) (cont’d):

2013sMile Group GFel Group total

nCi percentage of ownership and voting interest 40% 40%

RM RM RM

Accumulated NCI (4,088,566) (715,366) (4,803,932)(Loss)/Profit allocated to NCI (1,563,911) 349,546 (1,214,365)

Summarised financial information before intra-group elimination

as at 31 December 2013Total assets 10,033,729 5,058,718Total liabilities (59,783,861) (9,117,619)

Net liabilities (49,750,132) (4,058,901)

Equity attributable to:Owner of the parent (45,661,566) (3,343,535)Non-controlling interests (4,088,566) (715,366)

year ended 31 December 2013Revenue 1,592,471 -

Net (loss)/profit before tax (3,996,558) 598,587Taxation 27,779 -Net (loss)/profit for the financial year (3,968,779) 598,587Other comprehensive income 23,601 (5,275)

Total comprehensive income (3,945,178) 593,312

Net cash generated from operating activities 585,351 256,608Net cash generated from investing activities 103,248 127,699

Net increase in cash and cash equivalents 688,599 384,307

There are no significant restrictions on the ability of the subsidiary companies to transfer funds to the Group in the form of repayment of loans and advances.

8. investMent in an assoCiate CoMPany

(i) Investment in an associate company

Group2014 2013

RM RMUnquoted shares, at cost

Outside Malaysia 18,843 18,843Less: Accumulated impairment (18,843) (18,843)

- -



69

8. investMent in an assoCiate CoMPany (Cont’D)

(ii) The associate company and shareholding therein are as follows:

name of companyCountry of

incorporationEffectiveinterest Principal activity

2014 2013indirect holding: % %

held through south Malaysia industries (hong Kong) ltd:

Priory Investments (Mauritius)Ltd* Mauritius 50 50 Investment holding

* Associate company not audited by UHY.

(iii) The summarised financial information of the associate company is as follows:

Group2014 2013

RM RMassets and liabilitiesNon-current assets 133,867 15,990,228Current assets 2,189 6,392

Total assets 136,056 15,996,620

Non-current liabilities 43,042,241 40,368,312Current liabilities 4,554 10,187

Total liabilities 43,046,795 40,378,499

ResultsRevenue - -Net loss for the financial year 10,264 25,389

(iv) The unrecognised share of losses of the associate company is as follows:

Group2014 2013

RM RM

At 1 January 22,241,249 22,228,554Addition during the financial year 5,132 12,695

At 31 December 22,246,381 22,241,249



70

9. available-FoR-sale FinanCial assets

Group Company2014 2013 2014 2013

RM RM RM RM

non-CurrentShares quoted in Malaysia 10,635,680 8,701,920 10,635,680 8,701,920Shares unquoted outside Malaysia 14,679,948 14,498,948 - -

25,315,628 23,200,868 10,635,680 8,701,920

CurrentUnit trusts quoted in Malaysia 1,010,233 - 1,010,233 -

1,010,233 - 1,010,233 -

26,325,861 23,200,868 11,645,913 8,701,920

The Group, via its Hong Kong subsidiary company, has an investment in unquoted securities outside Malaysia, representing 14.7% equity interest in a company, whose activities among others include a mixed development project in Queenstown, New Zealand. Since the end of the financial year 2002, the progress of the development activities of this project has been slow mainly due to a number of planning changes.

During the financial year, the Directors have reviewed the information received from the investee company concerned, including the latest financial information and updated information on property valuation by the investee company in the previous year and the latest progress of the development activities and are of the opinion that no further impairment is required as at 31 December 2014.

10. intanGible assets

Group2014 2013

RM RMCostAt 1 January 22,909,890 22,909,890Struck-off a subsidiary (Note 7) (1,858,224) -

At 31 December 21,051,666 22,909,890

less: accumulated amortisationAt 1 January (22,909,890) (22,909,890)Struck-off a subsidiary (Note 7) 1,858,224 -

At 31 December (21,051,666) (22,909,890)

Carrying amount - -

Intangible assets represent goodwill on consolidation.



71

11. tRaDe anD otheR ReCeivables

Group Company2014 2013 2014 2013

RM RM RM RMnon-CurrentOther receivables (Note a) 7,309,515 7,009,515 7,309,515 7,009,515

CurrentTrade receivables (Note b) 22,464,876 28,149,808 519,885 3,047,716Less: Accumulated impairment (79,659) (79,659) - -

22,385,217 28,070,149 519,885 3,047,716Accrued billings 454,876 - - -

22,840,093 28,070,149 519,885 3,047,716

Other receivables (Note a) 3,278,543 5,317,893 246,363 176,391Less: Accumulated impairment (490,008) (490,054) (15,942) (15,942)

2,788,535 4,827,839 230,421 160,449Deposits 635,807 486,134 48,280 48,360Prepayments 495,622 1,049,502 24,640 46,505

3,919,964 6,363,475 303,341 255,314Amount owing by subsidiary

companies (Note c) - - 119,993,852 117,860,133Less: Accumulated impairment - - (108,344,211) (106,744,211)

- - 11,649,641 11,115,922Amount owing by an associate

company (Note d) 21,077,114 21,065,149 - -Less: Accumulated impairment (21,077,114) (21,065,149) - -

- - - -26,760,057 34,433,624 12,472,867 14,418,952

(a) Other Receivables

Other receivables of the Group and of the Company of RM8,966,599 (2013: RM10,191,006) and RM7,309,515 (2013: RM7,009,515) respectively are secured over the unquoted shares of third parties.

Movements in the allowance for impairment losses of other receivables are as follows:

Group Company2014 2013 2014 2013

RM RM RM RM

At 1 January 490,054 614,997 15,942 15,942Reversal of impairment (46) (79,671) - -Written off - (45,272) - -

At 31 December 490,008 490,054 15,942 15,942

Other receivables that are individually determined to be impaired at the reporting date relate to debtors that are in significant financial difficulties and have defaulted on payments.



72

11. tRaDe anD otheR ReCeivables (Cont’D)

(b) Trade Receivables

The Group’s normal trade credit terms range from 14 to 180 days (2013: 14 to 180 days). Other credit terms are assessed and approved on a case to case basis.

Trade receivables are recognised at their original invoice amounts which represent their fair value on initial recognition.

Included in the trade receivables of the Group are amount due from stakeholders under Housing Development (Control and Licensing) Regulations 1989 of RM7,354,256 (2013: RM11,439,454).

Movements in the allowance for impairment losses of trade receivables are as follows:

Group2014 2013

RM RM

At 1 January/31 December 79,659 79,659

Analysis of the trade receivables ageing as at the end of the financial year is as follows:

Group Company2014 2013 2014 2013

RM RM RM RM

Neither past due nor impaired 13,701,409 20,181,342 167,997 486,008Past due not impaired:Less than 30 days 4,760,946 3,528,989 221,214 806,70931 to 60 days 2,401,361 2,361,578 130,674 881,24661 to 90 days 1,280,125 1,264,209 - 873,753More than 90 days 241,376 734,031 - -

8,683,808 7,888,807 351,888 2,561,708

22,385,217 28,070,149 519,885 3,047,716Impaired 79,659 79,659 - -

22,464,876 28,149,808 519,885 3,047,716

Receivables that are neither past due nor impaired

Trade receivables that are neither past due nor impaired are creditworthy debtors 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.

Receivables that are past due but not impaired

As at the end of the reporting period, the Group and the Company have trade receivables amounting to RM8,683,808 (2013: RM7,888,807) and RM351,888 (2013: RM2,561,708) respectively that are past due but not impaired. These relate to a number of customers for whom there is no recent history of default. The receivables are unsecured in nature. No impairment has been made on these amounts as the Group is closely monitoring these receivables and is confident of their eventual recovery.

The maximum exposure to credit risk at 31 December 2014 is the carrying value of each class of receivables mentioned above.



73

11. tRaDe anD otheR ReCeivables (Cont’D)

(c) Amount Owing by Subsidiary Companies

This represents unsecured, interest free advances and is repayable on demand.

Movements in the allowance for impairment losses of amount owing by subsidiary companies are as follows:

Company 2014 2013

RM RM

At 1 January 106,744,211 104,477,098Impairment during the financial year 1,600,000 2,300,000Written off - (32,887)

At 31 December 108,344,211 106,744,211

(d) Amount Owing by an Associate Company

This represents unsecured, interest free advances and is repayable on demand.

Movements in the allowance for impairment losses of amount owing by an associate company are as follows:

Group 2014 2013

RM RM

At 1 January 21,065,149 21,035,938Impairment during the financial year 11,965 29,211

At 31 December 21,077,114 21,065,149

12. PRoPeRty DeveloPMent Costs

Group 2014 2013

RM RMFreehold land, at costAt 1 January 1,121,523 1,121,523Transferred from land held for property development (Note 6) 1,477,004 -Reversal of completed projects (1,081,001) -

At 31 December 1,517,526 1,121,523



74

12. PRoPeRty DeveloPMent Costs (Cont’D)

Group 2014 2013

RM RMlong term leasehold land, at costAt 1 January 3,119,917 7,741,412Transferred from land held for property development (Note 6) 477,777 718,826Reversal of completed projects (739,966) (5,340,321)

At 31 December 2,857,728 3,119,917

Property development costsAt 1 January 18,871,012 121,628,299Addition during the financial year 5,644,856 15,342,895Transferred from land held for property development (Note 6) 905,972 352,111Reversal of completed projects (10,644,889) (118,452,293)

At 31 December 14,776,951 18,871,012

Less: Costs recognised in the statement of profit or loss At 1 January 13,265,052 119,742,708 Recognised during the financial year 5,921,253 17,314,958

19,186,305 137,057,666 Less: Completed projects (12,465,856) (123,792,614)

At 31 December 6,720,449 13,265,052

total property development costs 12,431,756 9,847,400

The property development cost of the Group with a carrying amount of RM3,297,711 (2013: RM1,497,387) have been pledged to a licensed bank as security for credit facilities granted to the Group as disclosed in Note 19.

13. inventoRies

Group 2014 2013

RM RMat costRaw materials 6,462,355 2,649,899Work-in-progress 1,840,541 1,662,089Finished goods 4,755,528 2,433,056Unsold units of completed properties 2,446,816 2,446,816

15,505,240 9,191,860at net realisable valueFinished goods 141,920 2,281,071

15,647,160 11,472,931

The inventories of the Group with a carrying amount of RM13,197,387 (2013: RM9,023,170 have been pledged to a licensed bank as security for credit facilities granted to the Group as disclosed in Note 19.



75

14. Cash anD Cash equivalents

Group Company2014 2013 2014 2013

RM RM RM RMShort-term deposits with:- Licensed banks 7,344,861 10,355,288 - -- Licensed financial institutions 6,275,830 13,711,377 5,643,895 3,874,898Cash and bank balances 24,301,235 22,221,812 1,241,561 1,127,348

Deposits, bank and cash balances 37,921,926 46,288,477 6,885,456 5,002,246Bank overdrafts (Note 19) - (357,939) - -

Cash and cash equivalents 37,921,926 45,930,538 6,885,456 5,002,246

Included in the cash and bank balances of the Group are cash held under Housing Development Account balances amounting to RM12,827,040 (2013: RM16,520,319) pursuant to Housing Development (Control and Licensing) Act, 1966 and are restricted from use in other operations.

Deposits of the Group and of the Company have an average maturity period of 77 days (2013: 62 days) and 9 days (2013: 7 days) respectively.

Deposits and bank balances of the Group and of the Company amounting to RM6,729,825 (2013: RM3,334,205) and RM1,072,314 (2013: RM1,030,830) respectively are placed as collateral for loans and borrowings granted to the Group and the Company as stated in Note 19.

Group Company2014 2013 2014 2013

% % % %Weighted average effective interest

rate per annum:- Deposits with licensed banks 3.65 2.95 - -- Deposits with licensed financial

institutions 3.26 3.09 3.26 3.03

15. shaRe CaPital

Group/Companynumber of shares amount

2014 2013 2014 2013unit unit RM RM

Ordinary shares of RM1.00 each:

authorisedAt beginning/end of the year 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000

issued and fully paidAt beginning/end of the year 209,940,112 209,940,112 209,940,112 209,940,112

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company’s residual assets.



76

16. shaRe PReMiuM

Share premium comprises the premium paid on subscription of shares in the Company over and above the par value of the shares.

17. ReseRves

Group Company2014 2013 2014 2013

RM RM RM RM

Foreign exchange reserves (Note a) 18,001,422 17,565,942 - -Revaluation reserves (Note b) 1,168,306 1,168,306 - -Fair value reserves (Note c) 6,044,464 4,109,240 6,044,464 4,109,240

25,214,192 22,843,488 6,044,464 4,109,240

(a) Foreign exchange reserves

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

(b) Revaluation reserves

The revaluation reserve represents increase in the fair value of leasehold land and building based on an independent professional valuation and revised by the government valuer in year 1983 based on an open market value basis.

(c) Fair value reserves

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

18. non-ContRollinG inteRests

Earnings and losses of the subsidiaries are attributed to the parent and the non-controlling interest, even if the attribution of losses to the non-controlling interest results in a debit balance in the shareholders’ equity. Profit or loss attribution to non-controlling interests for prior years is not restated.

19. loans anD boRRoWinGs

Group Company2014 2013 2014 2013

RM RM RM RMsecuredTerm loans (Note a) 15,992,304 17,579,146 15,992,304 17,579,146Bankers’ acceptance (Note a) 9,188,752 10,586,598 - -Bank overdrafts (Note a) - 357,939 - -Finance lease payables (Note b) 1,503,888 1,380,462 580,315 110,872

26,684,944 29,904,145 16,572,619 17,690,018



77

19. loans anD boRRoWinGs (Cont’D)

Group Company2014 2013 2014 2013

RM RM RM RM

non-currentSecured:- Term loan (Note a) 14,312,789 15,976,669 14,312,789 15,976,669- Finance lease payables (Note b) 1,080,208 984,645 457,115 61,072

15,392,997 16,961,314 14,769,904 16,037,741CurrentSecured:- Term loan (Note a) 1,679,515 1,602,477 1,679,515 1,602,477- Bankers’ acceptance (Note a) 9,188,752 10,586,598 - -- Bank overdrafts (Note a) - 357,939 - -- Finance lease payables (Note b) 423,680 395,817 123,200 49,800

11,291,947 12,942,831 1,802,715 1,652,277

26,684,944 29,904,145 16,572,619 17,690,018

(a) Term loan, bankers’ acceptance and bank overdrafts

Term loan of the Group and of the Company are secured by legal charges over certain property, plant and equipment (Note 3), investment property (Note 5) and certain deposits and bank balances (Note 14).

Bankers’ acceptance and bank overdrafts of the Group are secured by legal charges over certain property, plant and equipment (Note 3), land held for property development (Note 6), property development costs (Note 12), deposits and bank balances (Note 14) and a debenture over the entire assets of a subsidiary company.

Summary of the carrying amount of the assets of the Group which are secured under the debenture over the assets of a subsidiary is as follows:

Group2014 2013

RM RM

Property, plant and equipment 10,690,817 11,510,874Inventories 13,197,387 9,023,170Trade and other receivables 11,866,331 10,911,845Tax recoverable 197,413 197,413Deposits, bank and cash balances 5,477,539 567,652

41,429,487 32,210,954



78


(a) Term loan, bankers’ acceptance and bank overdrafts (cont’d)

Maturity profile of the term loan is as follows:

Group Company2014 2013 2014 2013

RM RM RM RM

Within one year 1,679,515 1,602,477 1,679,515 1,602,477Later than one year but not later

than two years 1,804,220 1,720,029 1,804,220 1,720,029Later than two years but not later

than five years 6,287,835 5,951,541 6,287,835 5,951,541Later than five years 6,220,734 8,305,099 6,220,734 8,305,099

15,992,304 17,579,146 15,992,304 17,579,146

The weighted average effective interest rates per annum are as follows:

Group Company2014 2013 2014 2013

% % % %Bank overdrafts 8.55 8.30 - -Bankers’ acceptance 4.53 4.05 - -Term loan 7.35 7.10 7.35 7.10

(b) Finance lease payables

Group Company2014 2013 2014 2013

RM RM RM RM

Minimum lease payments Within one year 481,704 456,694 142,140 53,880Later than one year but not

later than two years 428,567 393,444 97,193 53,880Later than two years but not

later than five years 589,222 660,460 264,780 8,933Later than five years 139,740 4,288 139,740 -

1,639,233 1,514,886 643,853 116,693Less: Future finance charges (135,345) (134,424) (63,538) (5,821)

Present value of lease payment liabilities 1,503,888 1,380,462 580,315 110,872



79


(b) Finance lease payables

Group Company2014 2013 2014 2013

RM RM RM RM

Present value of lease payment Within one year 423,680 395,817 123,200 49,800Later than one year but not later

than two years 391,054 352,668 82,711 52,188Later than two years but not later

than five years 553,129 627,703 238,379 8,884Later than five years 136,025 4,274 136,025 -

1,503,888 1,380,462 580,315 110,872

analysed as:Within twelve months 423,680 395,817 123,200 49,800After twelve months 1,080,208 984,645 457,115 61,072

1,503,888 1,380,462 580,315 110,872

The weighted average effective interest rate per annum of the Group and of the Company is 4.50% (2013: 5.09%) and 3.60% (2013: 4.81%) respectively.

20. DeFeRReD tax liabilities

Group2014 2013

RM RM

At 1 January 808,991 876,309 Recognised in profit or loss (Note 26) 23,093 (67,318)

At 31 December 832,084 808,991

Presented after appropriate offsetting as follows:Deferred tax liabilities 3,686,286 3,719,122 Deferred tax assets (2,854,202) (2,910,131)

832,084 808,991



80

20. DeFeRReD tax liabilities (Cont’D)

The components and movements of deferred tax liabilities and assets of the Group are as follows: Deferred tax liabilities of the Group:

accelerated capital

allowances

Property development

costs totalRM RM RM

At 1 January 2014 3,288,749 430,373 3,719,122 Recognised in profit or loss (29,454) (3,382) (32,836)

At 31 December 2014 3,259,295 426,991 3,686,286

At 1 January 2013 2,981,251 539,786 3,521,037 Recognised in profit or loss 307,498 (109,413) 198,085

At 31 December 2013 3,288,749 430,373 3,719,122

Deferred tax assets of the Group:

unutilisedCapital

allowances

unutilised Reinvestment

allowances tax losses others totalRM RM RM RM RM

At 1 January 2014 (1,200,000) (1,000,000) (644,000) (66,131) (2,910,131) Recognised in profit

or loss (153,000) - 214,000 (5,071) 55,929

At 31 December 2014 (1,353,000) (1,000,000) (430,000) (71,202) (2,854,202)

At 1 January 2013 (928,000) (923,000) (434,000) (359,728) (2,644,728)Recognised in profit

or loss (272,000) (77,000) (210,000) 293,597 (265,403)

At 31 December 2013 (1,200,000) (1,000,000) (644,000) (66,131) (2,910,131)

Deferred tax assets have not been recognised in respect of the following temporary differences:

Group Company2014 2013 2014 2013

RM RM RM RM

Unutilised capital allowances 1,069,000 850,000 904,000 847,000Unutilised tax losses 19,522,000 11,964,000 11,453,600 8,670,000

20,591,000 12,814,000 12,357,600 9,517,000



81

20. DeFeRReD tax liabilities (Cont’D)

Deferred tax assets have not been recognised in respect of the following temporary differences (cont’d):

Deferred tax assets have not been recognised in respect of the above unutilised capital allowances and unutilised tax losses because it is not probable that future taxable profits will be available against which the Group and the Company can utilise the benefits. The unutilised capital allowance and unutilised tax losses are subject to the agreement of tax authorities.

21. tRaDe anD otheR Payables

Group Company2014 2013 2014 2013

RM RM RM RM

Trade and bill payables 8,987,241 4,743,083 37,439 118,633Trade accruals 11,858,578 13,397,767 94,769 94,769

20,845,819 18,140,850 132,208 213,402

Other payables- amounts owing to minority

shareholders of subsidiary companies 13,254,661 12,823,864 - -- payroll liabilities 1,834,810 1,849,216 479,123 529,806- others 4,827,267 4,882,497 96,893 61,414

19,916,738 19,555,577 576,016 591,220Accruals 1,221,187 1,710,831 285,038 299,255Progress billings 426,543 223,095 - -Deposit received 807,166 564,794 463,845 243,372

22,371,634 22,054,297 1,324,899 1,133,847

Amount owing to subsidiary companies - - 9,251,947 10,607,708

43,217,453 40,195,147 10,709,054 11,954,957

Credit terms of trade payables granted to the Group and the Company range from 14 to 90 (2013: 14 to 90) days and 14 to 60 (2013: 14 to 60) days respectively. Other credit terms are assessed and approved on a case to case basis.

The amounts owing to minority shareholders of subsidiary companies are unsecured, interest free and are repayable on demand.

Included in the Group’s payroll liabilities are contributions payable to the Employees Provident Fund of RM338,040 (2013: RM239,438).

The amounts owing to subsidiary companies are unsecured, interest free and are repayable on demand.



82

22. Revenue

Group Company2014 2013 2014 2013

RM RM RM RM

Sale of development properties 9,725,356 22,844,977 - -Rental and car park income 4,961,598 4,825,542 1,414,232 1,173,229Sale of goods 49,939,052 48,143,283 1,441,612 5,974,001Sale of tickets 22,040 1,592,471 - -Dividend income from subsidiary

companies - - 9,000,000 19,800,000Management fees charged to subsidiary

companies - - 1,044,000 1,020,000

64,648,046 77,406,273 12,899,844 27,967,230

23. FinanCe Costs

Group Company2014 2013 2014 2013

RM RM RM RM

Interest expenses on:Term loan 1,205,985 1,298,200 1,205,985 1,297,038Bank overdrafts 38,901 50,770 - -Bankers’ acceptance 420,915 433,774 - -Finance lease 68,895 47,838 12,098 6,469Others 51,684 55,102 - -

1,786,380 1,885,684 1,218,083 1,303,507



83

24. (loss)/PRoFit beFoRe taxation

(Loss)/Profit before taxation is derived after charging/(crediting):

Group Company2014 2013 2014 2013

RM RM RM RM

Auditors’ remuneration:- Statutory audit 234,943 247,302 78,000 78,000- Non-Statutory audit 10,000 10,000 5,000 5,000Amortisation of lease rental 151,125 142,309 - -Receivables:- Bad debts written off 18,000 38,184 - 4,838- Fair value adjustment - 2,000,000 - 2,000,000- Write-back of impairment (46) (79,671) - -Subsidiary companies:- Impairment loss of investment in

subsidiary - - 3,000,000 -- Impairment of amount owing - - 1,600,000 2,300,000Property, plant and equipment:- Depreciation 3,681,268 3,836,554 175,323 295,344- (Gain)/Loss on disposal (186,076) 349,651 (2,801) -- Write- off 75,536 13,044 4,105 -- Impairment loss - 810,243 - -Net foreign exchange loss/(gain):- Realised 97,800 134,268 - -- Unrealised 40,693 120,197 - -Inventories written down 9,179 87,537 - -Impairment of amount owing by

associate company 11,965 29,211 - -Rental of premises 680,034 715,433 - -Write-back of liquidated ascertained

damages (42,070) (64,210) - -Loss on disposal of available-for-sale

financial assets - 21,455 - 21,455Reversal of over-accrued expenses (95,640) (1,138,868) - -Rental income (2,044,547) (1,780,943) - -Finance income - Others (1,365,732) (1,236,317) (414,192) (205,519)- Receivables (300,000) - (300,000) - Dividend income (105,457) (39,302) (105,457) (39,302)Fair value gain on derivatives - (30,055) - -Fair value adjustment of investment

property (1,400,000) - (1,400,000) -Staff cost *- Wages, salaries and bonus 11,653,917 12,358,724 2,996,207 2,864,565- Employees Provident Fund 1,413,503 1,499,818 359,863 339,669- Other employee benefits 753,301 742,355 140,174 135,526

* Included in staff costs is aggregate amount of remuneration received and receivable by the directors of the Company and of the subsidiary companies amounting to RM4,217,068 (2013: RM3,924,971) and RM1,948,000 (2013: RM1,880,300) respectively.



84

24. (loss)/PRoFit beFoRe taxation (Cont’D)

(a) Key Management Personnel Compensations

Key management personnel include personnel having authority and responsibility for planning, directing and controlling the activities of the entity.

Compensations to key management personnel are as follows:

Group Company2014 2013 2014 2013

RM RM RM RM

Directors of the CompanyNon-Executive Directors:- Fees 527,000 527,000 263,000 263,000

Executive Directors:- Fees 5,000 4,500 5,000 4,500- Salaries and bonus 2,298,250 2,165,710 1,500,000 1,440,000- Employees Provident Fund 325,437 305,010 180,000 172,800

2,628,687 2,475,220 1,685,000 1,617,300Directors of the subsidiary

companiesExecutive Directors:- Salaries and bonus 967,447 837,340 - -- Employees Provident Fund 93,934 85,411 - -

1,061,381 922,751 - -

Total 4,217,068 3,924,971 1,948,000 1,880,300



85

25. taxation

Group Company2014 2013 2014 2013

RM RM RM RMTax expense for the financial year:Malaysian tax:

Current tax provision 387,700 423,101 - 2,874,622Over provision in prior years (110,358) (102,901) (5,762) (99,624)

277,342 320,200 (5,762) 2,774,998Foreign tax:

Current tax provision 36,028 52,910 - -Over provision in prior years - (80,689) - -

36,028 (27,779) - -

313,370 292,421 (5,762) 2,774,998Deferred tax (Note 20) :

Relating to origination and reversal of temporary differences 14,593 (77,318) - -

Under provision in prior years 8,500 10,000 - -23,093 (67,318) - -

336,463 225,103 (5,762) 2,774,998

Domestic income tax is calculated at the Malaysian statutory tax rate of 25% (2013: 25%) of the estimated assessable profit for the financial year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

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

Group Company2014 2013 2014 2013

RM RM RM RM

(Loss)/Profit before taxation (9,669,781) (17,458,185) 1,976,890 10,983,359

Taxation at statutory tax rate of 25% (2,417,445) (4,364,546) 494,223 2,745,840Expenses for double tax deduction (4,161) (2,006) - -Expenses not deductible for tax purposes 6,812,006 4,121,199 1,515,542 1,139,698Income not subject to tax (5,956,279) (2,180,227) (2,719,840) (2,090,138)Tax savings on reinvestment allowance - (90,640) - -Deferred tax asset not recognised 1,944,260 2,629,403 710,075 1,079,222Utilisation of previously unrecognised

tax losses - (7,000) - -Effect of different tax rate in other

countries (18,560) 292,510 - -(Over)/Under provision in respect of

prior years: -- Taxation (110,358) (183,590) (5,672) (99,624)- Deferred taxation 87,000 10,000 - -

Tax expense for the financial year 336,463 225,103 (5,672) 2,774,998



86

25. taxation (Cont’D)

The Group and the Company has unutilised tax losses, unutilised capital allowances and unutilised reinvestment allowances available for carry forward to set-off against future taxable profits. The said amounts are subject to approval by the tax authorities.

Group Company2014 2013 2014 2013

RM RM RM RM

Unutilised tax losses 21,246,476 14,549,655 11,453,610 8,670,039Unutilised capital allowances 6,529,464 5,624,368 952,860 847,313Unutilised reinvestment allowances 3,997,875 3,997,875 - -

26. loss PeR shaRe

(i) Basic loss per share

The basic loss per share has been calculated based on the consolidated loss for the financial year attributable to the owners of the parent for the Group and the weighted average number of ordinary shares in issue during the financial year as follows:

Group2014 2013

RM RM

Net loss for the financial year attributable to owners of the parent (9,586,649) (16,450,597)

Weighted average number of ordinary shares in issue 209,940,112 209,940,112

Basic loss per share (sen) (4.57) (7.84)

(ii) Fully diluted (loss) / earnings per share

There is no diluted loss per share as the Group and the Company do not have any dilutive potential ordinary shares. There have been no other transaction involving ordinary shares or potential ordinary shares since the end of the reporting period and before the completion of these financial statements.

27. seGMent inFoRMation

The Group has four reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different expertise and marketing strategies. For each of the strategic business units, the Group’s Chief Executive Officer reviews internal management reports on at least a quarterly basis. The following describes the operations in each of the Group’s reportable segments:

Property development Development and sale of residential and commercial properties and car park operation

Investment holding Investment in properties and holding companyManufacturing and trading Manufacture and trading of assorted wiresLeisure and entertainment Cinema business



87

27. seGMent inFoRMation (Cont’D)

Other operations of the Group mainly comprise dormant companies which are not of sufficient size to be reported separately.

Performance is measured based on segment profit before tax, interest, depreciation and amortisation, as included in the internal management reports that are reviewed by the Group’s Chief Executive Officer, who is the Group’s chief operating decision maker. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

segment assets

Segments assets measured based on all assets (including intangible assets) of a segment, are included in the internal managements reports that are reviewed by the Group’s Chief Executive Officer for the measurement of the return of assets and financial position of each segment.

segment liabilities

Segments liabilities measured based on all liabilities of a segment, are included in the internal managements reports that are reviewed by the Group’s Chief Executive Officer for the measurement of the return of financial position of each segment.

Geographical information

Although the Group’s business segments are managed on a worldwide basis, they operate in two main geographical areas:

Malaysia* - Mainly property investment and development, and manufacturing and trading

China - Leisure and entertainment

* Company’s home country

Revenue non-Current assets capital Expenditure2014

RM2013

RM2014

RM2013

RM2014

RM2013

RM

Malaysia 64,626,006 75,813,802 77,316,483 77,846,789 3,185,012 1,437,911China 22,040 1,592,471 7,531,016 8,600,266 2,576 664,668

64,648,046 77,406,273 84,847,499 86,447,055 3,187,588 2,102,579

In determining the geographical segments of the Group, revenues are based on the countries in which the customers are located. There are no revenues between the segments. Non-current assets for this purpose consist of property, plant and equipment, prepaid lease payments, investment properties and land held for property development. Non-current assets and capital expenditure are determined based on where the assets are located.

All the inter-segment transactions were carried out on normal commercial basis and in the ordinary course of business.



88

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90

28. RelateD PaRty DisClosuRes

(a) Identifying related parties

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

Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group and chief executive officers of major subsidiary companies of the Group.

The Group and the Company have related party relationships with its subsidiary companies, associates and key management personnel.

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

2014 2013RM RM

GroupProgress billings charged to Directors or key management

personnel of the Group - 225,690Rental income received/receivable from related company 193,242 118,200

CompanyDividend income received/receivable from subsidiary companies 9,000,000 19,800,000Rental income received/receivable from subsidiary companies 171,966 51,390Rental income received/receivable from related company 193,242 118,200Management fees received/receivable from subsidiary companies 1,044,000 1,020,000Purchase of goods from a subsidiary company 1,195,488 568,886

29. ContinGent liabilities

Group Company2014 2013 2014 2013

RM RM RM RM

unsecuredCorporate guarantee for banking facilities

granted to subsidiary companies- Limit - - 19,305,868 20,460,868- Utilised - - 17,114,361 14,207,250

Bankers’ guarantee given to third parties 25,000 2,575,229 25,000 2,575,229

securedBankers’ guarantee given to third parties 1,336,200 2,473,600 - -



91

30. oPeRatinG lease CoMMitMents

The Group has entered into non-cancellable commercial leases with third parties for the rental of investment properties and operating equipments. The lease terms are between 2 to 7 years, and the majority of lease agreements are renewable at the end of the lease period at market rate. None of the leases includes contingent rentals.

The future aggregate minimum lease payments under non-cancellable operating leases contracted for as at the end of the reporting period but not recognised as liabilities are as follows:

Group2014 2013

RM RM

Not later than one year 783,873 978,901Later than one year but not later than five years 524,298 976,125Later than five years - 27,244

1,308,171 1,982,270

31. MateRial litiGation

A wholly-owned subsidiary company of the Company, Perantara Properties Sdn Bhd (“PPSB”), has, since year 2010, been involved in a dispute with the Joint Management Body (“JMB”) of Kelana Square, Petaling Jaya (a commercial project undertaken and completed in year 2000 by PPSB) involving the car parks of the said project (“Car Parks”), which has a carrying value of RM2 million in the books of PPSB. Prior to the trial of the case, PPSB has successfully applied to have the case struck out at the Kuala Lumpur High Court (“the Court”). However, the Court of Appeal has reinstated the case resulting in the trial of the actions.

The Court has on 18 July 2014 decided in favour of the JMB that the Car Parks is a common property of Kelana Square. However, PPSB has since filed an appeal to the Court of Appeal and the Court has granted the Stay of Execution pending the hearing of appeal on 18 August 2015.



92

32. FinanCial instRuMents

(a) Classification of financial instruments

Financial assets and financial liabilities are measured on an ongoing basis either at fair value or at amortised cost. The principal accounting policies in Note 2 describe how the classes of financial instruments are measured and how income and expense, including fair value gains and losses, are recognised. The following table analyses the financial assets and liabilities in the statements of financial position by the class of financial instruments to which they are assigned, and therefore by the measurement basis:

loans and receivables

available-for-sale

Financial liabilities at

amortised cost totalRM RM RM RM

Group2014Financial assetsAvailable-for-sale financial assets - 26,325,861 - 26,325,861Trade and other receivables 34,069,572 - - 34,069,572Deposits, bank and cash balances 37,921,926 - - 37,921,926

Total financial assets 71,991,498 26,325,861 - 98,317,359

Financial liabilitiesTrade and other payables - - 43,217,453 43,217,453Loans and borrowings - - 26,684,944 26,684,944

Total financial liabilities - - 69,902,397 69,902,397

2013Financial assetsAvailable-for-sale financial assets - 23,200,868 - 23,200,868Trade and other receivables 41,443,139 - - 41,443,139Deposits, bank and cash balances 46,288,477 - - 46,288,477






93

32. FinanCial instRuMents (Cont’D)

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

loans and receivables

available-for-sale

Financial liabilities at

amortised cost totalRM RM RM RM

Company2014Financial assetsAvailable-for-sale financial assets - 11,645,913 - 11,645,913Trade and other receivables 19,782,382 - - 19,782,382Deposits, bank and cash balances 6,885,456 - - 6,885,456




2013Financial assetsAvailable-for-sale financial assets - 8,701,920 - 8,701,920Trade and other receivables 21,428,467 - - 21,428,467Deposits, bank and cash balances 5,002,246 - - 5,002,246




(b) Financial risk management objectives and policies The Group’s and the Company’s activities expose it to a variety of financial risks: market risk (including

foreign currency exchange risk, interest rate risk and price risk), credit risk, and liquidity and cash flows risk. The Group’s and the Company’ overall financial risk management objectives are to ensure that there is sufficient level of liquidity and its ability to finance the Group’s and the Company’s operations, with a view of minimising potential adverse effects on the financial performance of the Group and of the Company and to create value for the shareholders. Financial risk management is carried out through risk reviews, internal control systems, insurance programme and adherence to the Group and the Company’s financial risk management policies. The management regularly reviews these risks and approves the treasury policies, which covers the management of these risks.



94


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

(i) 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. The Group’s exposure to credit risk arises principally from its receivables from customers and deposits with banks and financial institutions. The Company’s exposure to credit risk arises principally from loans and advances to subsidiary companies and financial guarantees given to banks for credit facilities granted to subsidiary companies.

Fixed deposits with licensed banks, cash held under Housing Development Account and cash at banks are placed with credit worthy financial institutions. The Group and the Company have adopted a policy of only dealing with creditworthy counterparties. Receivables are monitored on an ongoing basis via Company’s management reporting procedures and action will be taken for long outstanding debts.

The carrying amounts of the financial assets recorded in the statements of financial position at the end of the reporting period represents the Group’s and the Company’s maximum exposure to credit risk in relation to financial assets. None of the financial assets carry a significant exposure to credit risk.

Credit risk concentration profile

At 31 December 2014, the Group had approximately 34 (2013: 37) customers that owed the Group more than RM100,000 each and accounted for approximately 42% (2013: 40%) of trade receivables owing.

Financial assets that are neither past due nor impaired

Information regarding trade receivables that are neither past due nor impaired is disclosed in Note 11. Deposits with bank and financial institution that are neither past due nor impaired are placed with or entered into with licensed bank and licensed financial institutions, with no history of default.

(ii) Liquidity risk

The Group’s and the Company’s funding requirements and liquidity risk are managed with the objective of meeting business obligations on a timely basis. The Group and the Company monitor their cash flows and ensure that sufficient funding is in place to meet the obligations as and when they fall due.

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



95



(ii) Liquidity risk (cont’d)

on demandor within

1 year1 - 2

years2 - 5

yearsafter 5

years totalGroup RM RM RM RM RM2014Trade and other

payables 43,217,453 - - - 43,217,453Loans and borrowings 12,250,417 3,227,567 9,074,482 7,559,949 32,112,415

55,467,870 3,227,567 9,074,482 7,559,949 75,329,868

2013Trade and other


54,289,373 3,192,444 9,061,749 9,354,517 75,898,083

Company2014Trade and other


13,431,156 2,896,193 8,750,040 7,559,949 32,637,338

2013Trade and other


14,701,832 2,852,880 8,405,933 9,354,518 35,315,163

(iii) Market risks

Foreign currency exchange risk

The Group is exposed to foreign currency risk on transactions that are denominated in currencies other than the respective functional currencies of Group entities. The currencies giving rise to this risk are primarily the Chinese Renminbi (RMB), United States Dollar (USD), Singapore Dollar (SGD), Australian Dollar (AUD) and Hong Kong Dollar (HKD).

The Group has not entered into any derivative instruments for hedging or trading purposes. Where possible, the Group will apply natural hedging by selling and purchasing in the same currency. However, the exposure to foreign currency risk is monitored from time to time by management.



96



(iii) Market risks (cont’d)

Foreign currency exchange risk (cont’d)

The carrying amounts and the exposure profiles of the Group’s foreign currency denominated financial assets and financial liabilities at the end of the reporting period are as follows:

the Group’s currency exposure profilethe Group’s functional

currency RMb usD sGD auD hKD total

Financial assets2014trade receivablesRM - - 202,082 118,218 - 320,300

deposits, bank and cash balances

RM - 6,070 - - - 6,070RMB - - - - 54 54HKD 48,168 3,097 - - - 51,265

48,168 9,167 - - 54 57,389

total 48,168 9,167 202,082 118,218 54 377,689

2013trade receivablesRM - 153,654 230,480 113,361 - 497,495

deposits, bank and cash balances

RM - 1,819 - - - 1,819RMB - - - - 50 50HKD 23,267 2,907 - - - 26,174

23,267 4,726 - - 50 28,043

total 23,267 158,380 230,480 113,361 50 525,538



97




Foreign currency exchange risk (cont’d)

the Group’s currency exposure profilesthe Group’s functional

currency RM RMb usD sGD total

Financial liabilities2014trade and bill payables RM - - 4,109,185 214,826 4,324,011

trade accrualsRMB - - 165,890 - 165,890

other payablesHKD - 9,218,749 2,371 - 9,221,120

other accrualsUSD 1,997 - - - 1,997

total 1,997 9,218,749 4,277,446 214,826 13,713,018

2013trade and bill payables RM - - 207,813 - 207,813

trade accrualsRMB - - 156,213 - 156,213

other payablesHKD - 9,063,507 2,225 - 9,065,732

other accrualsUSD 2,005 - - - 2,005

total 2,005 9,063,507 366,251 - 9,431,763

Foreign currency risk sensitivity

A 10% strengthening of Ringgit Malaysia against the following foreign currencies at the end of the reporting period would increase/(decrease) the profit before taxation and other comprehensive income by the amount shown below. This analysis assumes that all other variables remain unchanged.



98




Foreign currency risk sensitivity (cont’d)

Increase/(decrease) In Profit Before taxationFunctional

currency RM RMb usD sGD auD hKD

Group2014RM - - (410,312) (1,274) 11,822 -RMB - - (16,589) - - 5HKD - (917,058) 73 - - -USD (200) - - - - -

2013RM - - (5,234) 23,048 11,336 -RMB - - (15,621) - - 5HKD - (904,024) 68 - - -USD (200) - - - - -

A 10% weakening of Ringgit Malaysia against the above foreign currencies at the end of the reporting period would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain unchanged.

Interest rate risk

The Group’s and the Company’s fixed rate deposits placed with licensed banks and 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.

The Group manages the interest rate risk of its deposits with licensed financial institutions by placing them at the most competitive interest rates obtainable, which yield better returns than cash at bank.

The Group’s policy is to obtain the financing with the most favourable interest rates in the market. The Group constantly monitors its interest rate risk and does not utilise interest swap contracts or other derivative instruments for trading or speculative purposes. At the end of the reporting period, there were no such arrangements, interest rate swap contracts or other derivative instruments outstanding.



99




Interest rate risk (cont’d)

The carrying amounts of the Group’s and of the Company’s financial instruments at floating rates that are exposed to interest rate risk are as follows:

2014 2013RM RM

GroupFinancial liabilitiesLoans and borrowings 25,181,056 28,523,683

CompanyFinancial liabilitiesLoans and borrowings 15,992,304 17,579,146

The Group and the Company are exposed to interest rate risk arising from its short and long term debts obligations.

Interest rate risk sensitivity

An increase in market interest rates by 1% on financial assets and financial liabilities of the Group and of the Company which have variable interest rates at the end of the reporting period would have decreased the profit before tax by RM252,000 (2013: RM285,000) and RM160,000 (2013: RM176,000) respectively. This analysis assumes that all other variables remain unchanged.

A decrease in market interest rates by 1% on financial assets and financial liabilities of the Group and of the Company which have variable interest rates at the end of the reporting period would have had the equal but opposite effect on the amounts shown above, on the basis that all other variables remain unchanged.

Equity Price risk

Market price risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market price (other than interest or exchange rates).

The Group is exposed to equity price risk arising from its investment in quoted instruments. These quoted instruments are listed on Bursa Malaysia and are classified as available-for-sale financial assets.

Management of the Group monitors investments in quoted instruments on a portfolio basis. Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Board of Directors of the Group.

At the end of the reporting period, if the FTSE Bursa Malaysia KLCI had been 5% higher/lower, with all other variables held constant, the Group’s reserve would have been RM582,000 (2013: RM435,000) higher/lower, as a result of an increase/decrease in the fair value of these investments.

The Group is also exposed to commodity price risk arising from transaction on the world commodity markets of iron ore and iron scrap. The raw materials of the Group’s product are mainly derived from iron ore and iron scrap.



100




Equity Price risk (cont’d)

At the end of reporting period, if the commodity price of iron ore and iron scrap had been 5% higher/lower, with all other variable held constant, the Group profit net of tax would have been RM211,000 (2013: RM85,000) higher/lower, as a result of an increase/decrease in the cost of sales.

(iv) Fair values of financial assets and financial liabilities

Analysis of financial instruments

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

Level 1 - fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - fair value measurements are those derived from inputs for the financial assets or liabilities that are not based on observable market data (unobservable inputs).

level 1 level 2 level 3 totalRM RM RM RM

at 31 December 2014Financial assets:GroupAvailable-for-sale financial

assets:- Quoted shares 10,635,680 - - 10,635,680- Quoted unit trusts 1,010,233 - - 1,010,233

11,645,913 - - 11,645,913CompanyAvailable-for-sale financial

assets:- Quoted shares 10,635,680 - - 10,635,680- Quoted unit trusts 1,010,233 - - 1,010,233

11,645,913 - - 11,645,913at 31 December 2013Financial assets:GroupAvailable-for-sale financial

assets:- Quoted shares 8,701,920 - - 8,701,920

CompanyAvailable-for-sale financial

assets:- Quoted shares 8,701,920 - - 8,701,920



101



(iv) Fair values of financial assets and financial liabilities (cont’d)

Policy on transfer between levels

The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer.

There were no transfers between levels during current and previous financial years.

Methodologies of fair values

The methodologies used in arriving at the fair values of the principal financial assets and financial liabilities of the Group and of the Company are as follows:

• Receivables and payables, cash and cash equivalents and short-term borrowings

The carrying amounts are considered to approximate their fair value due to the relatively short term nature of these financial instruments and insignificant impact of discounting.

• Other financial assets

Marketable securities quoted in an active market are carried at market value. Securities that are not quoted in an active market, for which there is no observable market data and fair value cannot be reliably measured, are carried at acquisition cost.

• Long-term borrowings

Fair value which is determined for disclosure purpose, 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.

• Contingent liabilities

It is not practical to estimate the fair value of contingent liabilities as disclosed in Note 29 due to the uncertainties of timing, costs and eventual outcome.



102



(iv) Fair values of financial assets and financial liabilities (cont’d)

Categories of financial instruments that are not carried at fair value

Fair value of financial instruments by categories that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value:

2014 2013Carrying amount

Fair value

Carrying amount Fair value

RM RM RM RMGroupFinancial liabilitiesnon-currentLoans and borrowings 1,080,208 1,086,540* 984,645 968,393*Contingent liabilities 1,361,200 @ 5,048,829 @

CompanyFinancial liabilitiesnon-currentLoans and borrowings 457,115 457,275* 61,071 59,888*Contingent lliabilities 17,139,361 @ 16,782,479 @

* Level 2@ It is not practicable to estimate the fair value of contingent liabilities reliably due to the

uncertainties of timing, cost and eventual outcome.

33. CaPital ManaGeMent

The Group and the Company’s management manage capital to ensure that the Group and the Company is able to continue as a going concern and maintains an optimal capital structure so as to maximise shareholders value. The management reviews the capital structure by considering the cost of capital and the risks associated with the capital.

The capital of the Group and of the Company consists of issued capital, cash and cash equivalents and bank borrowings.

The Group monitors capital using a gearing ratio. The Group’s policy is to maintain a prudent level of gearing ratio that complies with debt covenants. The Group’s and the Company’s gearing ratio are measured using total external borrowings over shareholders’ equity. As at reporting date, the Group’s and the Company’s gearing ratio are 0.18 times and 0.11 times (2013: 0.19 times and 0.13 times) respectively.

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

The Group and the subsidiary companies are not subject to any external imposed capital requirements.

34. Date oF authoRisation FoR issue

The financial statements of the Group and of the Company for the financial year ended 31 December 2014 were authorised for issue in accordance with a resolution of the Board of Directors on 27 April 2015.


103

35. suPPleMentaRy inFoRMation on the DisClosuRe oF RealiseD anD unRealiseD PRoFits oR losses

The following analysis of realised and unrealised accumulated losses of the Group and of the Company as at the reporting date is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad and prepared 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, as issued by the Malaysian Institute of Accountants.

The accumulated losses of the Group and of the Company as at 31 December 2014 is analysed as follows:

Group Company2014 2013 2014 2013

RM RM RM RM

Total accumulated losses- Realised (145,830,662) (144,472,898) (107,434,219) (107,549,105)- Unrealised 249,159 (1,915,526) 1,618,445 (249,321)

(145,581,503) (146,388,424) (105,815,774) (107,798,426)Less:

Consolidation adjustments 23,089,484 33,483,054 - -

Total (122,492,019) (112,905,370) (105,815,774) (107,798,426)

The disclosure of realised and unrealised profits 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.

Supplementary information


104

Analysis of equity shareholdingsas at 5 May 2015

Authorised Share Capital : RM1,000,000,000.00Issued and paid-up capital : RM209,940,112.00Class of Shares : Ordinary Shares of RM1.00 eachVoting Rights : One vote per Ordinary Share

DistRibution oF shaReholDinGs

size of holdings

no. of shareholders/

Depositors

% of shareholders/

Depositorsno. of

shares held% of issued

Capital

1 – 99 323 3.722 14,248 0.007100 – 1,000 2,378 27.402 2,068,664 0.9851,001 – 10,000 4,544 52.362 18,470,808 8.79810,001 – 100,000 1,241 14.301 40,116,092 19.108100,001 to less than 5% of issued shares 190 2.190 118,665,576 56.5245% and above of issued shares 2 0.023 30,604,724 14.578

total 8,678 100.000 209,940,112 100.000

list oF thiRty laRGest shaReholDeRs/DePositoRs

nameno. of

shares held% of

issued Capital

1 BH BUILDERS SDN BHD 19,548,750 9.3122 MAH SAU CHEONG 11,055,974 5.2663 CONTINENTAL PREMIUM SDN BHD 10,000,000 4.7634 PUNCAK DARUL NAIM SDN BHD 7,186,900 3.4235 BANK PERTANIAN MALAYSIA BERHAD 6,834,375 3.2556 MAH SIEW SEONG 5,270,051 2.5107 KENANGA NOMINEES (TEMPATAN) SDN BHD

Pledged Securities Account For Mah Sau Cheong 5,000,000 2.3828 ASIAN PAC HOLDINGS BERHAD 4,730,900 2.2539 KENANGA NOMINEES (TEMPATAN) SDN BHD

KKC For Gabriel Voon Shau Cheong 3,932,000 1.87310 MAYBANK NOMINEES (TEMPATAN) SDN BHD

Pledged Securities Account For Ong Kok Thye 3,357,600 1.60011 PUBLIC NOMINEES (TEMPATAN) SDN BHD

Pledged Securities Account For Ong Kok Thye 2,998,300 1.42812 SEBERANG DISTRIBUTORS SDN BHD 2,928,716 1.39513 RHB NOMINEES (TEMPATAN) SDN BHD

Pledged Securities Account For Chin Kiam Hsung 2,711,800 1.29214 KENANGA NOMINEES (TEMPATAN) SDN BHD

Pledged Securities Account For Wong Su Yong 2,615,700 1.24615 GONG CHIOK SIN 2,128,000 1.01416 LEOW THANG FONG 1,791,250 0.85317 CHIN KIAM HSUNG 1,643,833 0.78318 ASIA WIRE STEEL MESH MANUFACTURERS SDN BHD 1,500,000 0.715 19 CHANG SHAW CHUIN 1,450,000 0.69020 CHIN KIAN FONG 1,416,766 0.67521 TEO POH BOON 1,200,933 0.572


105

Analysis of equity shareholdingsas at 5 May 2015

cont’d

nameno. of

shares held% of

issued Capital

22 NG WANG @ NG CHIANG CHIN 1,200,000 0.57223 KUA SZE HOW 1,100,000 0.52424 SIEW YIN LENG 1,079,700 0.51425 ONG HSIEH YIN 1,050,000 0.50026 CITIGROUP NOMINEES (TEMPATAN) SDN BHD

Pledged Securities Account For Koay Kai Beng 1,017,000 0.48427 MAYBANK NOMINEES (TEMPATAN) SDN BHD

Pledged Securities Account For Tan Boon Huat 990,000 0.47128 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD

Pledged Securities Account For Ong Yoong Nyock 987,900 0.47029 ONG WAN CHIN 920,000 0.43830 QUAH SAY BENG 839,800 0.400

108,486,248 51.674

substantial shaReholDeRsas PeR ReGisteR oF substantial shaReholDeR

no. of shares heldDirect % indirect %

Asian Pac Holdings Berhad 4,730,900 2.253 19,548,750 ¹ 9.311Mah Sau Cheong 16,056,024 7.65 - -BH Builders Sdn Bhd 19,548,750 9.311 - - Note:1. Deemed interest by virtue of its major shareholdings in BH Builders Sdn Bhd.

DiReCtoRs’ inteRest

no. of shares heldDirect % indirect %

Tan Sri Dato’ Mohd Ramli Bin Kushairi 549,000 0.26 - -Leow Thang Fong 1,791,250 0.85 422,000 ¹ 0.20Chong Heng Kiong - - 1,269,491 ² 0.60Dato’ Dr Abdullah Bin Sepien - - - -Datuk Seri Ismail Bin Yusof - - - -Datin Paduka Hajjah Rakibah Bte Hj Abd Manap - - - -Tan Siew Poh 833 - - -

Note:1. Deemed interest through the shareholding of his sister, Leow Pek Fong.2. Deemed interest through the shareholding of his spouse, Siew Yin Leng and various other family members.


106

List of Properties heldas at 31 December 2014

book Date of Existing age of value Purchase/

location Description use area tenure building (RM’000) Completed

Lot 1214, Section 57 City of Kuala LumpurWilayah Persekutuan

Office Premises

Office 1,434sq.

meter

Freehold 29 30,000 1996

Lot 72687 & 72688PN 97182 & 97179Mukim Damansara Daerah Petaling Selangor

Ground & Basement

carpark

Car parkoperation

Approx. 37,069

Sq.meter

LeaseholdExpiring

2089

4 21,440 2010

Title No. 9918773District of Wuhan, China

Cinema Restaurant &Entertainment

Outlet

1,809sq.

meter

LeaseholdExpiring

2025

17 7,138 1997

Lot 6004 H.S. (D) 6010District of Johor BahruJohor Darul Takzim

Factory & Office

Factory &Office

1.93 hectares

LeaseholdExpiring

2030

43 2,552 1971

Lot 300380 -300405PN 230979 - 231004Lot 300406PN 231007Lot 300407-300518PN 231009 -231121Lot 300519 - 300523PN 231156 - 231160Lot 300524 - 300656PN 231162 - 231294Lot 300661 - 300718PN 231299 - 231356Mukim Tanjung TualangDaerah Kinta

Commercial/Residential

land

Vacant 15.1acres

LeaseholdExpiring

2098

N/A 2,027 2011

Lot 72686PN 97181Mukim DamansaraDaerah Petaling, Selangor

Ground and BasementCarpark

Carpark Operation

Approx55,000

sq.meter

LeaseholdExpiring

2089

14 1,986 2000

Lot No. 138995 - 139003PN. 53844 - 53852Lot No. 139005 - 139013PN. 53854 - 53862Lot No. 139412PN. 54261Lot No. 139770 - 139778PN. 52831 - 52839Lot No. 1951605 - 1951607PN. 369380 - 369382Lot No. 1951610PN. 369383HSD 216259 - 216260PT 251111 - 251112PN. 504324 - 504325Lot No. 362128 - 362129Lot No. 504326 - 504327PN. 347913 - 347914Lot No. 504328 - 504331PN. 347915 -347918Mukim Ulu Kinta,Daerah KintaTaman SaikatPerak Darul Ridzuan

Residential Land

Vacant 2.0acres

Leasehold Expiring

2085

N/A 1,232 2001


107

List of Properties heldas at 31 December 2014

cont’d

book Date of Existing age of value Purchase/

location Description use area tenure building (RM’000) Completed

Lot No. 101314 - 101317PN. 42552 - 42555Lot No. 101370 - 101371PN. 42608 - 42609Lot No. 101433PN. 42671Lot No. 101446PN. 99842Lot No. 101463PN. 99846Lot No. 101571 PN. 42778Lot No. 101136 - 101138PN. 42377 - 42379Lot No. 101140PN. 42381

Commercial / Residential

Land

Vacant 5,414sq.

meter

Leasehold Expiring

2080

N/A 619 1994

Lot 381824PN. 360859Mukim Ulu Kinta, IpohPerak Darul Ridzuan

656 sq. meter

Leasehold Expiring

2106

N/A 1994

H.S. (D) 85453PT No. 13944Mukim Sungai TerapPerak

Residential Land

Vacant 40,470sq.

meter

LeaseholdExpiring

2099

N/A 330 2000

H.S.(D) 2976 PT 2493Mukim UUKDaerah Kuala Selangor

Residential Land

Vacant 18,296 sq.ft

LeaseholdExpiring

2095

N/A 318 2002


108

Notice of annual General Meeting

NOTICE IS HEREBY GIVEN that the 44th Annual General Meeting of SOUTH MALAYSIA INDUSTRIES BERHAD (Co. No. 8482-D) will be held at Dewan Johor, 2nd Floor, Mutiara Johor Bahru, Jalan Dato’ Sulaiman, Taman Century, 80990 Johor Bahru, Johor Darul Takzim on Wednesday, 17 June, 2015 at 11:00 a.m. for the following purposes:

a G e n D a

oRDinaRy business

1. To receive the audited financial statements for the financial year ended 31 December 2014 together with the Reports of the Directors and Auditors thereon.

(Please refer Explanatory

note 1)

2. To approve the payment of Directors’ Fees for the financial year ended 31 December 2014. Resolution 1

3. To consider and if thought fit, pass the following resolutions pursuant to Section 129(6) of the Companies Act, 1965 as ordinary resolutions:

i. “THAT pursuant to Section 129(6) of the Companies Act, 1965, Tan Sri Dato’ Mohd Ramli Bin Kushairi be and is hereby re-appointed Director of the Company to hold office until the next Annual General Meeting of the Company.”

Resolution 2

ii. “THAT pursuant to Section 129(6) of the Companies Act, 1965, Mr. Chong Heng Kiong be and is hereby re-appointed Director of the Company to hold office until the next Annual General Meeting of the Company.”

Resolution 3

iii. “THAT pursuant to Section 129(6) of the Companies Act, 1965, Datuk Seri Ismail Bin Yusof be and is hereby re-appointed Director of the Company to hold office until the next Annual General Meeting of the Company.”

Resolution 4

iv. “THAT pursuant to Section 129(6) of the Companies Act, 1965, Datin Paduka Hjh Rakibah Binti Hj Abd Manap be and is hereby re-appointed Director of the Company to hold office until the next Annual General Meeting of the Company.”

Resolution 5

4. To re-elect Mr. Leow Thang Fong who retire by rotation and being eligible, offer himself for re-election in accordance with Article 94 of the Company’s Articles of Association.

Resolution 6

5. To re-appoint Messrs UHY as Auditors of the Company, to hold office until the conclusion of the next Annual General Meeting of the Company, at a remuneration to be determined by the Directors.

Resolution 7

sPeCial business

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

6. authority to issue and allot shares pursuant to Section 132d of the companies act, 1965 Resolution 8

“That pursuant to Section 132D of the Companies Act, 1965 and the Articles of Association of the Company, the Directors be and are hereby authorized to allot and to issue shares in the Company, from time to time, upon such terms and conditions, for such purposes and to such person or persons whomsoever as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued does not exceed 10% of the total issued share capital of the Company for the time being and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”


109

Notice of annual General Meetingcont’d

7. continuing in Office as Independent Non-Executive directors

(i) “THAT authority be and is hereby given to Dato’ Dr Abdullah Bin Sepien who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years to continue to act as an Independent Non-Executive Director of the Company.”

Resolution 9

(ii) “THAT subject to passing of Ordinary Resolution 4, authority be and is hereby given to Datuk Seri Ismail Bin Yusof who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years to continue to act as an Independent Non-Executive Director of the Company.”

Resolution 10

(iii) “THAT subject to passing of Ordinary Resolution 5, authority be and is hereby given to Datin Paduka Hajjah Rakibah Binti Haji Abd Manap who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years to continue to act as an Independent Non-Executive Director of the Company.”

Resolution 11

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

by oRDeR oF the boaRD

WOO MIN FONG WONG CHEE YIN TAN SIEW CHIN

Company secretariesJohor Bahru 26 May 2015

Notes:

1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 10 June 2015 (General Meeting Record of Depositors) shall be entitled to attend, speak and vote at this 44th AGM.

2. A member entitled to attend, speak and vote at the meeting is entitled to appoint not more than two (2) proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3. Where a member appoints two (2) proxies, the appointment shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy.

4. Where a member is an authorized nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

5. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

6. Where the Proxy Form is executed by a corporation, it must be either under its Common Seal or under the hand of an officer or attorney duly authorised.

7. The Proxy Form must be deposited with the Company Secretary at the Registered Office, Suite 1301, 13th Floor, City Plaza, Jalan Tebrau, 80300 Johor Bahru, Johor Darul Takzim not less than 48 hours before the time set for the Meeting.

Explanatory Notes on Ordinary Business

a) item 1 of the agenda

This Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this Agenda item is not put forward for voting.


110

Notice of annual General Meetingcont’d

b) item 3 of the agenda

Resolutions 2, 3, 4 & 5 – to re-appoint director pursuant to Section 129(6) of the companies act, 1965

Pursuant to Section 129(6) of the Companies Act, 1965, a person of or over the age of 70 years who is proposed for appointment as a Director of the Company, shall be appointed by a resolution passed by a majority of not less than three-fourth of the members of the Company present and voting in person or by proxy at a general meeting, and if so appointed, the Director shall hold office until the next Annual General Meeting of the Company.

The proposed Resolutions 2, 3, 4 & 5 if passed, will enable Tan Sri Dato’ Mohd Ramli Bin Kushairi, Mr. Chong Heng Kiong, Datuk Seri Ismail Bin Yusof and Datin Paduka Hjh Rakibah Binti Hj Abd Manap to hold office until the next Annual General Meeting of the Company.

Explanatory Notes on Special Business

c) item 6 of the agenda

Resolution 8 – authority to issue shares pursuant to Section 132d of the companies act 1965

The proposed Resolution No.8, if passed, is a renewal of General Mandate to empower the Directors to issue and allot shares up to an aggregate amount not exceeding 10% of the issued share capital of the Company for the time being, for the purpose as the Directors consider would be in the interests of the Company. This authority unless revoked or varied at a general meeting will expire at the next Annual General Meeting. With this authority, the Company will be able to raise capital from the equity market in a shorter period of time and the cost to be incurred will also be lower as the need to convene an Extraordinary General Meeting will be dispensed with.

As at the date of this Notice, no new shares in the Company were issued pursuant to the authority granted to the Directors at the last Annual General Meeting held on 25 June 2014 and which will lapse at the conclusion of the forthcoming Annual General Meeting.

The General Mandate will provide flexibility to the Company 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.

d) item 7 of the agenda

Resolutions 9, 10 and 11 – Continuing in Office as Independent Non-Executive Directors

The Ordinary Resolutions proposed under item 7 (Resolutions 9, 10 & 11) of the Agenda relate to the approval by shareholders for the named directors to continue in office as Independent Non-Executive Directors. The Board has assessed the independence of each of the directors who has served as Independent Non-Executive Directors of the Company for a cumulative term of more than nine (9) years. The Board is satisfied that each of these directors has met the Independence guidelines as set out in Chapter 1 of the Bursa Malaysia Securities Berhad Main Market Listing Requirements. The length of their service does not interfere with their ability and exercise of independent judgement as Independent Directors. Therefore, the Board has recommended that the approval of the shareholders be sought for Dato’ Dr Abdullah Bin Sepien, Datuk Seri Ismail Bin Yusof and Datin Paduka Hajjah Rakibah Binti Haji Abd Manap to continue to act as Independent Non-Executive Directors of the Company.

Details of Directors seeking re-election or re-appointment as mentioned in the Notice of Annual General Meeting are set out in their respective profiles which appears in the Directors’ Profile on pages 9 to 11 of this Annual Report. Directors’ interests in the securities of the Company are disclosed on page 105 of the Annual Report.

Statement Accompanyingnotice of annual General Meeting

I/We (NRIC No./ Co. No. )

of being a member/members of SOUTH MALAYSIA INDUSTRIES BERHAD (Co. No. 8482-D) do hereby appoint :-

Full Name (in Block) NRIC/Passport No. Proportion of ShareholdingsNo. of Shares %

Address

and / or (delete as appropriate)

Full Name (in Block) NRIC/Passport No. Proportion of ShareholdingsNo. of Shares %

Address

failing him, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the 44th Annual General Meeting of the Company to be held at Dewan Johor, 2nd Floor, Mutiara Johor Bahru, Jalan Dato’ Sulaiman, Taman Century, 80990 Johor Bahru, Johor Darul Takzim on Wednesday, 17 June 2015 at 11:00 a.m. and at any adjournment thereof. The proxy is to vote on the resolutions set out in the Notice of Annual General Meeting, as indicated with an “X” in the appropriate spaces.

no. Resolutions FoR aGainstoRDinaRy business:

1 To approve the payment of Directors’ Fees.Re-appointment/Re-election of the following Directors:

2 Tan Sri Dato’ Mohd Ramli Bin Kushairi - Section 129(6) of the Companies Act, 19653 Mr Chong Heng Kiong - Section 129(6) of the Companies Act, 19654 Datuk Seri Ismail Bin Yusof - Section 129(6) of the Companies Act, 1965 5 Datin Paduka Hajjah Rakibah Binti Haji Abd Manap - Section 129(6) of the Companies Act, 1965 6 Leow Thang Fong - Article 947 To re-appoint UHY as Auditors.

sPeCial business:8 Ordinary Resolution pursuant to Section 132D of the Companies Act, 19659 Continuing in Office as Independent Non-Executive Directors - Dato’ Dr Abdullah Bin

Sepien10 Continuing in Office as Independent Non-Executive Directors - Datuk Seri Ismail Bin Yusof 11 Continuing in Office as Independent Non-Executive Directors - Datin Paduka Hajjah

Rakibah Binti Haji Abd Manap

In the absence of any specific instructions, the proxy will vote or abstain from voting on the resolutions as he thinks fit.

Signed this day of , 2015 Signature of Member(s) Contact No. :

notes:1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 10 June 2015 (General Meeting Record of

Depositors) shall be entitled to attend, speak and vote at this 44th AGM.2. A member entitled to attend, speak and vote at the meeting is entitled to appoint not more than two (2) proxies to attend and vote in his stead.

A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3. Where a member appoints two (2) proxies, the appointment shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy.

4. Where a member is an authorized nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

5. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

6. Where the Proxy Form is executed by a corporation, it must be either under its Common Seal or under the hand of an officer or attorney duly authorised.

7. The Proxy Form must be deposited with the Company Secretary at the Registered Office, Suite 1301, 13th Floor, City Plaza, Jalan Tebrau, 80300 Johor Bahru, Johor Darul Takzim not less than 48 hours before the time set for the Meeting.

PROXY FORMnuMbeR oF shaRes helDCDs aCCount no.

1st fold here

2nd fold here

The Company Secretarysouth Malaysia inDustRies beRhaD (8482-D)

Suite 1301, 13th Floor, City Plaza,Jalan Tebrau,80300 Johor Bahru.

AFFIXSTAMPHERE

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T 2014

www.smib.com.my

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