KANGER INTERNATIONAL BERHAD (Company No.: D) (Incorporated in Malaysia) FINANCIAL STATEMENTS

Transcription

1 KANGER INTERNATIONAL BERHAD (: D) (Incorporated in Malaysia) FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FROM 27 AUGUST 2012 (DATE OF INCORPORATION) TO 31 DECEMBER 2013 Registered office: 2-1, Jalan Sri Hartamas 8 Sri Hartamas Kuala Lumpur Wilayah Persekutuan

2 KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FROM 27 AUGUST 2012 (DATE OF INCORPORATION) TO 31 DECEMBER 2013 INDEX ***** Page No. DIRECTORS REPORT 1-5 STATEMENT BY DIRECTORS STATUTORY DECLARATION 6 7 INDEPENDENT AUDITORS REPORT TO THE MEMBERS 8-10 STATEMENTS OF FINANCIAL POSITION STATEMENTS OF COMPREHENSIVE INCOME 13 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 14 STATEMENTS OF CHANGES IN EQUITY 15 STATEMENTS OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS SUPPLEMENTARY INFOATION ON THE DISCLOSURE OF REALISED AND UNREALISED PROFITS OR LOSSES 59

3 - 1 - KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) DIRECTORS REPORT The Directors have pleasure in submitting their report together with the audited financial statements of the Group for the financial year ended 31 December 2013 and the audited financial statements of the Company for the financial period from 27 August 2012 (date of incorporation) to 31 December Incorporation and Commencement of Business The Company was incorporated on 27 August 2012 under the Companies Act, 1965 in Malaysia and its principal activity is investment holding. The principal activities of its subsidiary companies are disclosed in Note 6 to the financial statements. There have been no significant changes in the nature of these activities during the financial year/period. On 5 February 2013, the Company had changed its status from a private limited company to public limited company and hence changed its name from Kanger International Sdn. Bhd. to Kanger International Berhad. On 23 December 2013, the Company was listed on ACE Market of Bursa Malaysia Securities Berhad. Financial Results Group Company Profit/(Loss) for the financial year/period 4,962,409 (2,694,561) Attributable to: Owners of the parent 4,962,409 Reserves and Provisions There were no material transfers to or from reserves or provisions during the financial year/period.

4 - 2 - Dividend There were no dividends proposed, declared or paid by the Company since the date of incorporation. The Board of Directors does not recommend any dividend in respect of the current financial period. Issue of Shares and Debentures At the date of incorporation, the Company issued 2 ordinary shares of 1.00 each as subscribers shares. During the financial period, the authorised share capital of the Company was split from 1.00 to 0.10 and has been subsequently increased from 100,000 to 50,000,000 by the creation of the 499,000,000 new ordinary shares of 0.10 each. During the financial period, the Company also issued: (a) (b) 349,999,980 new ordinary shares of 0.10 each for a total cash consideration of 34,999,980 as consideration to acquire two subsidiary companies; and 80,000,000 new ordinary shares of 0.10 each at 0.25 for a total cash consideration of 20,000,000 for capital expenditure, research and development expenditure, repayment of bank borrowings, payment of listing expenses and working capital purposes. The new ordinary shares issued during the financial period rank pari passu in all respects with the existing ordinary shares of the Company. There were no issues of debentures during the financial period. Options Granted Over Unissued Shares No options were granted to any person to take up unissued shares of the Company during the financial period. Directors The Directors who served since the date of incorporation are as follows: Dato Paduka Sharipah Hishmah Binti Sayed Hassan (appointed on ) Leng Xingmin (appointed on ) Prof. Datuk Seri Dr. Md Zabid Haji Abdul Rashid (appointed on ) Prof. Dr. Paul Cheng Chai Liou (appointed on ) Syed Hazrain bin Syed Razlan Jamalullail (appointed on ) Dato Izudin bin Ishak (appointed on ) Vemalan a/l Naraynan (first Director, resigned on ) Fong Nyuk Lean (first Director, resigned on )

5 - 3 - Directors Interests The interests and deemed interests in the shares and options over shares of the Company and of its related corporations (other than wholly-owned subsidiary companies) of those who were Directors at year end (including their spouses or children) according to the Register of Directors Shareholdings are as follows: No. of ordinary shares of 0.10 each (after the share split of which was 1.00 initially) At date of At incorporation Acquired Disposed Direct interest: Leng Xingmin - 237,210, ,210,905 Indirect interest: Dato' Paduka Sharipah Hishmah binti Sayed Hassan 1-13,756,959-13,756,959 1 Deemed interests pursuant to Section 134(12)(c) of the Companies Act, 1965 in compliance with the Companies (Amendment) Act, 2007 by virtue of their spouse and/or child direct interests in the Company. Directors Benefits Since the date of incorporation, no Director of the Company has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of remunerations 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 period, was the Company a party to any arrangement the object of which is to enable the Directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

6 - 4 - Other Statutory Information (a) Before the statements of comprehensive income and statements of financial position of the Group and the Company were made out, the Directors took reasonable steps: (i) (ii) to ascertain that action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that there were no known bad debts to be written off and no allowance for doubtful debts was required; and to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the Directors are not aware of any circumstances which would render: (i) (ii) (iii) (iv) it necessary to write off any bad debts or to make any provision for doubtful debts in the financial statements of the Group and of the Company; the values attributed to the current assets in the financial statements of the Group and of the Company misleading; any amount stated in the financial statements of the Group and of the Company misleading; and 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) (ii) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year/period which secures the liabilities of any other person; and any contingent liability in respect of the Group and of the Company which has arisen since the end of the financial year/period. (d) No contingent or other liabilities of the Group and of the Company have become enforceable, or are likely to become enforceable within the period of twelve months after the end of the financial year/period which, in the opinion of the Directors, will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

7 - 5 - Other Statutory Information (Cont d) (e) In the opinion of the Directors: (i) (ii) the results of operations of the Group and of the Company during the financial year/period were not substantially affected by any item, transaction or event of a material and unusual nature; and there have not arisen in the interval between the end of the financial year/period 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 current financial year/period in which this report is made. Significant and Subsequent Events The significant and subsequent events of the Group are disclosed in Note 30 to the financial statements. Auditors The Auditors, Messrs UHY, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the Directors dated 16 April DATO PADUKA SHARIPAH HISHMAH BINTI SAYED HASSAN PROF. DATUK SERI DR. MD ZABID HAJI ABDUL RASHID

8 - 6 - KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) STATEMENT BY DIRECTORS Pursuant to Section 169(15) of the Companies Act, 1965 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 11 to 58 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2013 and for the financial period from 27 August 2012 (date of incorporation) to 31 December 2013 respectively and of their financial performance and cash flows for the financial year/period then ended. The supplementary information set out in page 59 have been compiled in accordance with Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad. Signed on behalf of the Board in accordance with a resolution of the Directors dated 16 April DATO PADUKA SHARIPAH HISHMAH BINTI SAYED HASSAN PROF. DATUK SERI DR. MD ZABID HAJI ABDUL RASHID

9 - 7 - KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) STATUTORY DECLARATION Pursuant to Section 169(16) of the Companies Act, 1965 I, PROF. DATUK SERI DR. MD ZABID HAJI ABDUL RASHID, being the Director responsible for the financial management of KANGER INTERNATIONAL BERHAD, do solemnly and sincerely declare that the financial statements set out on pages 11 to 58 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, Subscribed and solemnly declared by the abovenamed PROF. DATUK SERI DR. MD ZABID HAJI ABDUL RASHID at KUALA LUMPUR in the Federal Territory on 16 April 2014 ) ) ) ) PROF. DATUK SERI DR. MD ZABID HAJI ABDUL RASHID Before me, NO. W 521 MOHAN A.S. MANIAM COMMISSIONER FOR OATHS

10 - 8 - INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF KANGER INTERNATIONAL BERHAD (: D) (Incorporated in Malaysia) Report on the Financial Statements We have audited the financial statements of KANGER INTERNATIONAL BERHAD, which comprise the statements of financial position as at 31 December 2013 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the financial year ended 31 December 2013 of the Group and for the financial period from 27 August 2012 (date of incorporation) to 31 December 2013 of the Company, and a summary of significant accounting policies and other explanatory information, as set out on pages 11 to 58. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

11 - 9 - INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF KANGER INTERNATIONAL BERHAD (CONT D) (: D) (Incorporated in Malaysia) Opinion In our opinion, the financial statements have been properly drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2013 and of their financial performance and cash flows for the financial year ended 31 December 2013 and the financial period from 27 August 2012 (date of incorporation) to 31 December 2013 respectively. Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following: (a) (b) (c) (d) 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. We have considered the accounts and the auditors report of the all the subsidiary companies of which we have not acted as auditors, as disclosed in Note 6 to the financial statements. We are satisfied that the financial statements 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. 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. Other Reporting Responsibilities The supplementary information set out on page 59 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ("MIA Guidance") and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

12 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF KANGER INTERNATIONAL BERHAD (CONT D) (: D) (Incorporated in Malaysia) 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 1411 Chartered Accountants YEOH AIK CHUAN Approved Number: 2239/07/14 (J) Chartered Accountant KUALA LUMPUR 16 APRIL 2014

13 KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2013 Non-Current Assets Group Company Note Property, plant and equipment 4 11,775,966 - Intangible assets 5 1,500,000 - Investments in subsidiary companies 6-34,999,998 13,275,966 34,999,998 Current Assets Inventories 7 21,803,194 - Trade receivables 8 3,374,763 - Other receivables 9 8,437,146 - Amounts due from subsidiary companies 10-15,989,295 Fixed deposits with licensed banks 11 7,964,992 - Cash and bank balances 11 29,075, ,146 70,655,192 16,517,441 Total Assets 83,931,158 51,517,439 Equity Share capital 12 43,000,000 43,000,000 Share premium 13 11,000,000 11,000,000 Other reserves 13 (9,283,685) - Retained earnings/(accumulated losses) 13,364,659 (2,694,561) Total Equity 58,080,974 51,305,439

14 KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2013 (CONT D) Group Company Note Current Liabilities Trade payables 14 1,303,460 - Other payables , ,000 Amount due to a Director ,630 - Bank borrowings 17 22,293,320 - Tax payable 1,400,942 - Total Liabilities 25,850, ,000 Total Equity and Liabilities 83,931,158 51,517,439 The accompanying notes form an integral part of the financial statements.

15 KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 AND FOR THE PERIOD FROM 27 AUGUST 2012 (DATE OF INCORPORATION) TO 31 DECEMBER 2013 Group Company to Note Revenue 18 50,180,564 - Cost of sales (38,182,554) - Gross profit 11,998,010 - Other income 872,748 3,262 Administrative expenses (2,965,195) (506,382) Distribution expenses (631,304) - Other operating expenses (2,201,765) (2,191,441) Finance costs 19 (678,714) - Profit/(Loss) before tax 20 6,393,780 (2,694,561) Taxation 21 (1,431,371) - Net profit/(loss) for the financial 4,962,409 (2,694,561) Other comprehensive income - Foreign currency translation 3,067,248 - Profit/(Loss) for the financial year/period, representing total comprehensive income for the financial year/period 8,029,657 (2,694,561) Earnings per share (sen) Basic The accompanying notes form an integral part of the financial statements.

16 KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 Non - Distributable Distributable Exchange Share Share Merger Revaluation Translation Retained Capital Premium Reserve Reserve Reserve Earnings Total Group At 1 January (333,249) 8,402,250 8,069,003 Profit for the financial year ,962,409 4,962,409 Foreign translation reserve ,067,248-3,067,248 Revaluation reserve , ,738 Total comprehensive income for the financial year ,738 3,067,248 4,962,409 8,817,395 Transaction with owners: Issuance of shares 8,000,000 11,000, ,000,000 Issued of share for share exchange for merger exercise 34,999,998 - (12,805,422) ,194,576 42,999,998 11,000,000 (12,805,422) ,194,576 At 31 December ,000,000 11,000,000 (12,805,422) 787,738 2,733,999 13,364,659 58,080,974 The accompanying notes form an integral part of the financial statements.

17 KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD FROM 27 AUGUST 2012 (DATE OF INCORPORATION) TO 31 DECEMBER 2013 Non - Distributable Share Share Accumulated Capital Premium Losses Total Company At date of incorporation Loss for the financial period, representing total comprehensive income for the financial period - - (2,694,561) (2,694,561) Transaction with owners: Issuance of shares 8,000,000 11,000,000-19,000,000 Issued of share for share exchange for merger exercise 34,999, ,999,998 42,999,998 11,000,000-53,999,998 At 31 December ,000,000 11,000,000 (2,694,561) 51,305,439 The accompanying notes form an integral part of the financial statements.

18 KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 AND FOR THE PERIOD FROM 27 AUGUST 2012 (DATE OF INCORPORATION) TO 31 DECEMBER 2013 Cash Flows From Operating Activities Group Company to to Profit/(Loss) before tax 6,393,780 (2,694,561) Adjustments for: Depreciation of property, plant and equipment 970,719 - Interest expenses 678,714 - Interest income (185,561) (3,262) Property, plant and equipment written off 21,664 - Operating profit/(loss) before working capital changes 7,879,316 (2,697,823) Changes in working capital: Inventories (3,765,589) - Receivables (3,557,377) - Payables 1,180, ,000 Amounts owing by/to subsidiary companies - (15,989,295) Amount owing to a Director 353,630 - (5,789,056) (15,777,295) 2,090,260 (18,475,118) Cash generated from/(used in) operations Interest received 185,561 3,262 Interest paid (678,714) - Tax paid (829,890) - (1,323,043) 3,262 Net cash generated from/(used in) operating activities 767,217 (18,471,856) Cash Flows From Investing Activities Purchase of property, plant and equipment (96,685) - Acquisition of intangible assets (1,500,000) - Net cash used in investing activities (1,596,685) -

19 KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 AND FOR THE PERIOD FROM 27 AUGUST 2012 (DATE OF INCORPORATION) TO 31 DECEMBER 2013 (CONT D) Group Company to to Cash Flows From Financing Activities Drawdown of bank borrowings 18,992,610 - Proceeds from issuance of shares 19,000,000 19,000,000 Repayment of bank borrowings (15,529,570) - Net cash generated from financing activities 22,463,040 19,000,000 Net increase in cash and cash equivalents 21,633, ,144 Cash and cash equivalents at beginning of the financial year/date of incorporation 11,575,007 2 Effect of exchange translation difference on cash and cash equivalents 3,831,510 - Cash and cash equivalents at end of the financial year/period 37,040, ,146 Cash and cash equivalents at end of the financial year/period comprises: Fixed deposits with licensed banks 7,964,992 - Cash and bank balances 29,075, ,146 37,040, ,146 The accompanying notes form an integral part of the financial statements.

20 KANGER INTERNATIONAL BERHAD (Incorporated in Malaysia) NOTES TO THE FINANCIAL STATEMENTS 1. Corporate Information The Company was incorporated on 27 August 2012 under the Companies Act, 1965 in Malaysia and its principal activity is investment holding. The principal activities of its subsidiary companies are disclosed in Note 6. There have been no significant changes in the nature of these activities during the financial year/period. On 5 February 2013, the Company had changed its status from a private limited company to a public limited company and hence changed its company name from Kanger International Sdn. Bhd. to Kanger International Berhad. On 23 December 2013, the Company was listed on ACE Market of Bursa Malaysia Securities Berhad ( Bursa Securities ) as further detailed in Note 30. The registered office of the Company is located at 2-1, Jalan Sri Hartamas 8, Sri Hartamas, Kuala Lumpur, Wilayah Persekutuan. 2. Basis of Preparation (a) Statement of Compliance The financial statements of the Group and the Company have been prepared on the historical cost convention except as disclosed in the notes to the financial statements and in accordance with Malaysian Financial Reporting Standards ( MFRSs ), International Financial Reporting Standards and the Companies Act, 1965 in Malaysia. Since the date of incorporation, the Group and the Company have adopted all the applicable MFRSs issued by the Malaysian Accounting Standards Board ( MASB ). The Group and the Company have not applied the following MFRSs, Issues Committee ( IC ) Interpretation and amendments to MFRSs that have been issued by the MASB but are not yet effective:

21 Basis of Preparation (Cont d) (a) Basis of preparation (Cont d) Effective dates for financial periods beginning on or after Amendments to Investment Entity 1 January 2014 MFRS 10 Amendments to Investment Entities 1 January 2014 MFRS 12 Amendments to Investment Entities 1 January 2014 MFRS 127 Amendments to Offsetting Financial Assets and 1 January 2014 MFRS 132 Financial Liabilities Amendments to Recoverable Amount 1 January 2014 MFRS 136 Disclosures for Non-Financial Assets Amendments to Novation of Derivatives and 1 January 2014 MFRS 139 Continuation of Hedging IC Interpretation 21 Levies 1 January 2014 Amendments to MFRS 119 Defined Benefits Plans: Employee Contributions 1 July 2014 Amendments to MFRSs contained in the document 1 July 2014 entitled Annual Improvements Cycle Amendments to MFRSs contained in the document 1 July 2014 entitled Annual Improvements Cycle Amendments to MFRS 7 Mandatory Date of MFRS 9 and Transition Disclosures To be announced by MASB MFRS 9 (IFRS 9 (2009)) Financial Instruments (IFRS 9 issued by IASB in November 2009) To be announced by MASB MFRS 9 (IFRS 9 (2010)) Financial Instruments (IFRS 9 issued by IASB in October 2010) To be announced by MASB The Group and the Company intend to adopt the above MFRSs, IC Interpretation as well as amendments to MFRSs when they become effective. The initial application of the MFRSs, IC Interpretation as well as amendments to MFRSs are not expected to have any financial impacts to the financial statements of the Group and the Company except as discussed below:

22 Basis of Preparation (Cont d) (a) Basis of preparation (Cont d) MFRS 9 Financial Instruments MFRS 9 (IFRS 9 (2009)) replaces the guidance in MFRS 139 Financial Instruments: Recognition and Measurement on classification and measurement of financial asset. MFRS 9 requires financial asset to be measured at fair value or amortised cost. The classification depends on the entity s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. MFRS 9 (IFRS 9 (2010)) includes the requirements for the classification and measurement of financial liabilities and for derecognition. Measurement for financial liability designated as at fair value through profit or loss, requires the amount of change in the fair value of the financial liability, that is attributable to the change of credit risk of that liability, is presented in other comprehensive income, unless the recognition of the effects of changes in the liability s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Under MFRS 139, the entire amount of the change in fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss. The adoption of MFRS 9 will result in a change in accounting policy. The Group and the Company are currently examining the financial impact of adopting MFRS 9. (b) Functional and presentation currency These financial statements are presented in Ringgit Malaysia ( ), which is the Group s and the Company s functional currency. (c) Significant accounting estimates and judgements The summary of accounting policies as described in Note 3 are essential to understand the Group s and the Company s results of operations, financial position, cash flows and other disclosures. Certain of these accounting policies require critical accounting estimates that involve complex and subjective judgements and the use of assumptions, some of which may be for matters that are inherently uncertain and susceptible to change. Directors exercise their judgement in the process of applying the Group s accounting policies.

23 Basis of Preparation (Cont d) (c) Significant accounting estimates and judgements (Cont d) Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Group s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on historical experience and other relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results The key assumptions concerning the future and other key sources of estimation or uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below: (i) Depreciation of property, plant and equipment The costs of property, plant and equipment are depreciated on a straight-line basis over the useful lives of the assets. Management estimates the useful lives of the property, plant and equipment as disclosed in Note 3(c)(iii). These are common life expectancies applied in the industry. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. The carrying amount of the Group s property, plant and equipment as at 31 December 2013 is disclosed in Note 4. (ii) Development costs Initial capitalisation of development costs is based on Management s judgement that technical and economical feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalised, Management makes assumptions regarding the expected future cash generations of the project, discount rates to be applied and the expected period of benefits.

24 Basis of Preparation (Cont d) (c) Significant accounting estimates and judgements (Cont d) (ii) Development costs (Cont d) Detailed sensitivity analysis has been carried out and the Directors are confident that the carrying amount of the asset will be recovered in full. This situation will be closely monitored and adjustments will be made in future periods, if the market activity indicates that such adjustments are appropriate. (iii) Income taxes There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. Significant judgement is involved especially in determining tax base allowances and deductibility of certain expenses in determining the Group-wide provision for income taxes. 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 provisions in the financial period in which such determination is made. 3. Significant Accounting Policies (a) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and all its subsidiary companies, which have been prepared in accordance with the Group s accounting policies, and are all drawn up to the same reporting period. (i) Subsidiary companies Subsidiary companies are those companies in which the Group has long term equity interest and has the power, directly or indirectly, to govern the financial and operating policies so as to obtain benefits from its activities, generally accompanying a shareholding of more than one half of the voting rights. Investments in subsidiary companies is stated at cost less any impairment losses in the Company s statement of financial position. The cost of investments includes transaction costs. Upon the disposal of investment in a subsidiary, the difference between the net disposal proceeds and its carrying amount is included in profit or loss.

25 Significant Accounting Policies (Cont d) (a) Basis of consolidation (Cont d) (ii) Consolidation Subsidiary companies are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Changes in the Company owners ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent. Under the merger method of accounting, the results of subsidiary companies are presented as if the merger had been effected throughout the current year. The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer. On consolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting credit differences is classified as equity and regarded as a non-distributable reserve. Any resulting debit difference is adjusted against any suitable reserve. Any share premium, capital redemption reserve and any other reserves which are attributable to share capital of the merged entities, to the extent that they have not been capitalised by a debit difference, are reclassified and presented as movement in other capital reserves. (b) Foreign currency translation (i) Foreign currency translation 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.

26 Significant Accounting Policies (Cont d) (b) Foreign currency translation (Cont d) (i) Foreign currency translation and balances (Cont d) Non-monetary items denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date on which the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are translated using the rate at the date of transaction. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period. Exchange differences arising on the translation of nonmonetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of nonmonetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such nonmonetary items are also recognised directly in equity. (ii) Foreign operations The assets and liabilities of foreign operations are translated into at the rate of exchange prevailing at the reporting date, the date of transition to MFRS, which are treated as assets and liabilities of the Company. Income and expenses items are translated at the average rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rate at the dates of the transactions are used. Exchange differences arising from the translation are recognised in other comprehensive income. On disposal of a foreign operation, the cumulative amount of exchange differences relating to that foreign operation, recognised in other comprehensive income and accumulated in equity shall be reclassified to profit or loss when the gain or loss on disposal is recognised. (c) Property, plant and equipment Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The policy of recognition and measurement of impairment losses is in accordance with Note 3(i). (i) Recognition and measurement Cost includes expenditures that are directly attributable to the acquisition of the assets and any other costs directly attributable to bringing the asset to working condition for its intended use, cost of replacing component parts of the assets, and the present value of the expected cost for the decommissioning of the assets after their use.

27 Significant Accounting Policies (Cont d) (c) Property, plant and equipment (Cont d) (i) Recognition and measurement (Cont d) 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. Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment losses recognised after the date of the revaluation. Valuations are performed with sufficient regularity, usually every five years, to ensure that the carrying amount does not differ materially from the fair value of the land and buildings at the end of the reporting period. As at the date of revaluation, accumulated depreciation, if any, is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Any revaluation surplus arising upon appraisal of land is recognised in other comprehensive income and credited to the revaluation reserve in equity. To the extent that any revaluation decrease or impairment loss has previously been recognised in profit or loss, a revaluation increase is credited to profit or loss with the remaining part of the increase recognised in other comprehensive income. Downward revaluations of land are recognised upon appraisal or impairment testing, with the decrease being charged to other comprehensive income to the extent of any revaluation surplus in equity relating to this asset and any remaining decrease recognised in profit or loss. Any revaluation surplus remaining in equity on disposal of the asset is transferred to other comprehensive income.

28 Significant Accounting Policies (Cont d) (c) Property, plant and equipment (Cont d) (ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-today servicing of property, plant and equipment are recognised in the statements of comprehensive income as incurred. (iii) Depreciation Depreciation is recognised in the profit or loss on straight line basis to write off the cost or valuation of each asset to its residual value over its estimated useful life. Leased assets are depreciated over the shorter of the lease term and their useful lives. Property, plant and equipment are depreciated based on the estimated useful lives of the assets as follows: Leasehold land Building Plant and machinery Office equipment Motor vehicles Tools and equipment Over the remaining year of lease term of 45 years 20 years 3-10 years 3-10 years 5 years 3-5 years 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 property, plant and equipment. (d) Intangible assets Intangible assets acquired separately Intangible assets acquired separately are measured on initial recognition at cost. Subsequent expenditure is capitalised when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred.

29 Significant Accounting Policies (Cont d) (d) Intangible assets (Cont d) Intangible assets which have finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives. The useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each reporting date. Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses, are not amortised but tested for impairment annually. The assessment of indefinite useful lives is reviewed annually to determine whether the indefinite useful lives continue to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gain or losses arising from derecognition of intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit or loss when the asset is derecognised. (e) 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 as loan and receivables. Loan and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than 12 months after the end of the reporting period which are presented as non-current assets. After initial recognition, financial assets categorised as loans and receivables are measured at amortised cost using the effective interest method, less impairment losses. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

30 Significant Accounting Policies (Cont d) (e) Financial assets (Cont d) 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 Financial assets are derecognised when the contractual rights to receive cash flows from the financial assets have expired or have been transferred and the Group and the Company have transferred substantially all risks and rewards of ownership. On derecognition of a financial asset, the difference between the carrying amount and the sum of consideration received and any cumulative gains or loss that had been recognised in equity is recognised in the profit or loss. (f) Financial liabilities Financial liabilities are recognised on the statements of financial position when, and only when the Group and the Company become a party to the contractual provisions of the financial instrument. All financial liabilities are initially recognised at fair value plus transaction cost and subsequently carried at amortised cost using the effective interest method. Changes in the carrying value of these liabilities are recognised in the profit or loss. The Group and the Company classify their financial liabilities as other financial liabilities measured at amortised cost. Management determines the classification of its financial liabilities at initial recognition. Other financial liabilities are non-derivatives financial liabilities. The Group s and the Company s other financial liabilities comprise trade and other payables and borrowings. Financial liabilities are classified as current liabilities; except for maturities more than 12 months after the end of the reporting period, in which case they are classified as non-current liabilities.

31 Significant Accounting Policies (Cont d) (f) Financial liabilities (Cont d) Derecognition of financial liabilities A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. Offsetting of Financial Instruments A financial asset and financial liability are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. (g) Inventories Raw materials, work-in-progress and finished goods are stated at the lower of cost and net realisable value. Cost of raw material is determined on weighted average 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). 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. (h) 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 and pledged deposits.

32 Significant Accounting Policies (Cont d) (i) Impairment of assets (i) Non-financial assets The carrying amounts of non-financial assets are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists then the asset s recoverable amount is estimated. Intangible assets with indefinite useful lives is tested for impairment annually as at the end of each reporting period, either individually or at the cash-generating unit level, as appropriate and when circumstances indicate that the carrying value may be impaired. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment loss is recognised immediately 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. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. The recoverable amount of an asset or cash-generating units is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Previously recognised impairment losses are assessed at the end of each reporting period whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed only if there has been a change in the assumptions used to determine the asset s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the 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.