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2 Contents 01 Corporate Information 03 Directors Profile 06 Corporate Structure 07 Financial Highlights 08 Chairman s Statement 10 Products 17 Audit Committee Report 22 Statement On Corporate Governance 32 Statement on Risk Management and Internal Control 35 Financial Statements 104 Analysis of Shareholdings 106 Analysis of Warrantholdings 108 List of Properties Owned by the Group 109 Notice of Annual General Meeting 113 Proxy Form 2

3 Corporate Information Board Of Directors TAN SRI DATO AZIZAN BIN HUSAIN Chairman Independent Non-Executive Director LIM CHOO HONG CEO/Group Managing Director Non-Independent Executive Director LIM SOO KONG (LIM SOO CHONG) Non-Independent Non-Executive Director DATO BAHAR BIN AHMAD Non-Independent Executive Director KOK SAU CHUN Non-Independent Non-Executive Director DR TEH CHEE GHEE Independent Non-Executive Director MARGARET CHAK LEE HUNG Non-Independent Non-Executive Director Audit Committee TAN SRI DATO AZIZAN BIN HUSAIN Chairman Independent Non-Executive Director LIM SOO KONG (LIM SOO CHONG) Member Non-Independent Non-Executive Director DR TEH CHEE GHEE Member Independent Non-Executive Director Company Secretaries CHIN MEE FOON TAI YIT CHAN CHAN SU SAN Registered Office Lot 6.05, Level 6, KPMG Tower 8, First Avenue, Bandar Utama Petaling Jaya, Selangor Darul Ehsan Tel : (03) Fax : (03) Registrars TRICOR INVESTOR SERVICES SDN BHD Level 17, The Gardens North Tower Mid Valley City, Lingkaran Syed Putra Kuala Lumpur Tel : (03) Fax : (03) Auditors KPMG Level 10, KPMG Tower 8, First Avenue, Bandar Utama Petaling Jaya, Selangor Darul Ehsan Tel : (03) Fax : (03) Principal Bankers AMBANK (M) BERHAD CIMB ISLAMIC BANK BERHAD HSBC BANK MALAYSIA BERHAD OCBC BANK (MALAYSIA) BERHAD Stock Exchange Listing MAIN MARKET OF BURSA MALAYSIA SECURITIES BERHAD 01

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5 Directors Profile Tan Sri Dato Azizan Bin Husain (Chairman) / Malaysian Tan Sri Dato Azizan Bin Husain, 70, is an Independent Non-Executive Director and Chairman of Fiamma Holdings Berhad. He was appointed to the Board of Fiamma Holdings Berhad on 17 June He graduated from University Malaya, Kuala Lumpur with a Bachelor of Arts (Honours) in 1967 and Diploma in Public Administrations in He also holds a Master degree in Urban and Regional Planning from the University of Colorado, United States of America. He started his career in the Ministry of Agriculture before being posted to the Prime Minister s Department where he held the posts of Assistant Secretary, Centre for Development Studies and Principal Assistant Director, Economic Planning Unit and later as Sabah State Director of Development. On 1 February 1987, he assumed the post of Deputy Secretary-General to the Ministry of Land and Regional Development. After two and half years, he returned to the Prime Minister s Department as the Deputy Director-General (Sectoral) Economic Planning Unit. In late 1991, he was posted to the Ministry of Finance where he held the posts of Director, Public Sector Companies Monitoring Division and then as Deputy Secretary General (Operations). On 1 January 1996, he was appointed as the Secretary-General, Ministry of Defence until 28 February He also sits on the Board of TT Resources Berhad, Oriental Food Industries Holdings Berhad and CIMB Insurance Brokers Sdn Bhd. Tan Sri Dato Azizan is the Chairman of the Audit Committee and the Nomination Committee and is also the Senior Independent Director of Fiamma Holdings Berhad. He does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. He attended all the four board meetings held during the financial year ended 30 September Lim Choo Hong (Chief Executive Officer / Group Managing Director) / Malaysian Mr Lim Choo Hong, 57, is a Non-Independent Executive Director and the Chief Executive Officer/Group Managing Director of Fiamma Holdings Berhad. He is a founder member of the Fiamma Holdings Berhad Group and was appointed to the Board of Fiamma Holdings Berhad on 16 August He is a businessman and entrepreneur and he has more than 35 years of business experience dealing in home appliances. He also has more than 20 years experience in property development. Prior to his involvement in the Fiamma Holdings Berhad Group in 1979, he was involved in the retail business in Singapore. Mr Lim Choo Hong is a member of the Remuneration Committee. He also sits on the Board of some of the subsidiary companies of the Group. He is a shareholder of Casa Holdings Limited (a company listed on the Singapore Exchange Limited) which is a major shareholder of Fiamma Holdings Berhad. He is the spouse of Madam Kok Sau Chun. He attended all the four board meetings held during the financial year ended 30 September

6 Directors Profile Dato Bahar Bin Ahmad (Executive Director) / Malaysian Dato Bahar Bin Ahmad, 65, is a Non-Independent Executive Director of Fiamma Holdings Berhad. He graduated from University of Malaya, Kuala Lumpur with a Bachelor of Arts (Honours) in He was appointed to the Board of Fiamma Holdings Berhad on 14 April He served the Malaysian Government in the Malaysian Administrative and Diplomatic Service from April 1973 to December 1996 in various capacities, among others; Assistant Director of International Trade Division of Ministry of Trade and Industry (from 1973 to 1977); Assistant Trade Commissioner, Malaysia Trade Office in New York, United States of America (from 1977 to 1979); Trade Commissioner, Malaysia Trade Office, Manila, Philippines (from 1979 to 1981); Trade Commissioner, Malaysian Trade Commission, London, United Kingdom (from 1981 to 1986); Principal Assistant Director, International Trade Division, Ministry of International Trade and Industry (from 1986 to 1991) and Senior Trade Commissioner/Minister Counselor Malaysian High Commission, London, United Kingdom, and was admitted to the Court of St James as a Diplomat (from 1991 to 1996); Currently, he also sits on the Board of Kenyir Splendour Berhad, Rebak Island Marina Berhad, Horsedale Development Berhad and several private limited companies. He does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. He attended all the four board meetings held during the financial year ended 30 September Lim Soo Kong (Lim Soo Chong) (Non-Executive Director) / Singaporean Mr Lim Soo Kong (Lim Soo Chong), 68, is a Non-Independent Non-Executive Director of Fiamma Holdings Berhad. He is a founder member of the Fiamma Holdings Berhad Group and was appointed to the Board of Fiamma Holdings Berhad on 16 August He is a graduate in Mechanical Engineering from the Singapore Polytechnic. He is a businessman and entrepreneur and has more than 35 years of experience dealing in home appliances, granite, tiles, engineering, cables and trucks. He has more than 20 years experience in property development. Mr Lim Soo Kong is the Chairman of the Remuneration Committee and a member of the Audit Committee and Nomination Committee. He also sits on the Board of some of the subsidiary companies of the Group. He is a director and shareholder in Casa Holdings Limited, (a company listed on Singapore Exchange Limited), which is a major shareholder in Fiamma Holdings Berhad. He does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. He attended all the four board meetings held during the financial year ended 30 September Kok Sau Chun (Non-Executive Director) / Malaysian Madam Kok Sau Chun, 55, is a Non-Independent Non-Executive Director of Fiamma Holdings Berhad. She was appointed to the Board of Fiamma Holdings Berhad on 30 March She has held various administrative positions prior to her appointment. Madam Kok Sau Chun is the spouse of Mr Lim Choo Hong. She also sits on the Board of several subsidiary companies of the Group. She attended all the four board meetings held during the financial year ended 30 September

7 Directors Profile Dr Teh Chee Ghee (Non-Executive Director) / Malaysian Dr Teh Chee Ghee, 48, is an Independent Non-Executive Director of Fiamma Holdings Berhad. He was appointed to the Board of Fiamma Holdings Berhad on 4 July He is currently a Senior Lecturer in the Department of Accounting and Finance, School of Business, Monash University Malaysia ( MUM ). He holds a Doctor of Philosophy degree in Credit Management, a Master of Business Administration degree and an Honours Degree in Accounting, all from University of Malaya. He is a member of the Malaysia Institute of Accountants and the Malaysian Institute of Certified Public Accountants ( MICPA ) and has served as a Council Member of MICPA from the year 2002 to He is a fellow member of the Chartered Association of Certified Accountants ( FCCA ), United Kingdom and the Chartered Tax Institute of Malaysia. Dr Teh commenced his career in 1990 in Arthur Andersen-HRM (Management Services) Sdn Bhd as an Associate Consultant. He also served in the audit and business advisory division of Arthur Andersen & Co. between the years 1990 to He joined CWS Hygiene Sdn Bhd ( CWS ) as the Finance & Administration Manager in 1994 and when the Zuellig Group acquired CWS in 1995, he was appointed the Regional Financial Controller of Gold Coin Feedmills (M) Sdn Bhd. He joined Engtex Sdn Berhad as the Group Financial Controller in 1996 and was the Personal Assistant to the Group Managing Director and Company Secretary of Engtex Group Berhad between September 2002 and May He served TH Group Berhad from June 2006 to October 2010 as the Personal Assistant to the Group Managing Director. He was also the Acting Chief Operating Officer of NCI Hospital (now known as Nilai Medical Centre, owned by Asiaprise Biotech Sdn Bhd, a wholly-owned subsidiary of TH Group Berhad) from February 2010 to October He was the General Manager - Strategic Planning and Operations of TSH Resources Berhad from October 2010 to October He joined Monash University Malaysia ( MUM ) in October He is also the Co-ordinator-Finance, Department of Accounting and Finance, School of Business, MUM. In January 2014, Dr Teh was appointed as the Head of Research of the Socio-Economic Research Centre (SERC) on a retainer basis under MUM s pay-outside work arrangement. SERC Sdn. Bhd. is an independent think tank initiated by the Associated Chinese Chambers of Commerce and Industry of Malaysia ( ACCCIM ). Dr Teh also sits on the Board of Engtex Group Berhad as an Independent Non-Executive Director. Dr Teh is a member of the Audit Committee, Nomination and Remuneration Committee. He does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. He attended all the four board meetings held during the financial year ended 30 September Margaret Chak Lee Hung (Non-Executive Director) / Malaysian Ms Margaret Chak Lee Hung, 42, is a Non-Independent Non-Executive Director of Fiamma Holdings Berhad. She was appointed to the Board of Fiamma Holdings Berhad on 28 February She is the Group Financial Controller and Company Secretary of Casa Holdings Limited ( Casa ), a company listed on Singapore Exchange Limited, and is responsible for all aspects of financial management, accounting and company secretarial functions of the Casa Group. She joined Casa in October 2005 and has more than 18 years of experience in financial management and accounting. She holds a Bachelor of Economics (major in Accountancy) Degree from Macquarie University, Sydney and is a member of the Institute of Singapore Chartered Accountant. She does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. She attended all the four board meetings held during the financial year ended 30 September Other Information a. Conflict of interest The Company has entered into recurrent related party transactions with parties in which the directors of the Company, namely Lim Choo Hong and Lim Soo Kong (Lim Soo Chong) ( LSK ) have direct and/or indirect interest. Kok Sau Chun is interested in the recurrent related party transactions by virtue of being spouse to Lim Choo Hong. Margaret Chak Lee Hung is deemed to be a person connected to LSK as she is accustomed to act in accordance with the directions and instruction of LSK. Therefore, Margaret Chak Lee Hung is deemed interested in the recurrent related party transactions. Save for the above mentioned disclosure, none of the other directors have any conflict of interest with the Company.. b. Conviction of Offences None of the Directors have any conviction for offences within the past 10 years other than traffic offences, if any. 05

8 06 Corporate Structure as at 31 December 2014

9 Financial Highlights Profit for the Financial Year Attributable to Owners of the Company (RM 000) Basic Earnings per Share (sen) Net Assets per Share (RM) 14 41, , , , , Five Year Group Financial Summary RESULTS RM 000 RM 000 RM 000 RM 000 RM 000 Revenue 200, , , , ,161 Operating profit before depreciation, finance cost, foreign exchange gain/losses and tax 36,228 45,572 44,710 53,816 68,285 Profit before taxation 30,252 40,690 39,828 50,146 63,182 Profit for the financial year attributable to owners of the Company 20,482 27,782 26,919 34,694 41,396 EQUITY and ASSETS Share capital 125, , , , ,085 Total equity attributable to owners of the Company 189, , , , ,858 Total assets 278, , , , ,580 Cash and bank balances and deposits with financial institutions 26,228 37,798 43,897 91, ,709 FINANCIAL STATISTICS Basic earnings per share (sen) Gross dividend per share (sen) Dividend pay-out 6,485 9,053 9,193 10,747 12,320# Net assets per share (RM) # Interim and proposed final dividend. 07

10 Chairman s Statement On behalf of the Board of Directors of Fiamma Holdings Berhad, I take pleasure in presenting to you the Annual Report and Audited Financial Statements of the Group and Company for the financial year ended 30 September Financial Results For the financial year under review, the Group recorded a higher revenue of RM million, an increase of 15.5% compared to RM million recorded in the previous financial year. Consequently, the Group recorded a higher pre-tax profit of RM million which is 26% higher than pre-tax profit of RM million achieved in the previous financial year. The growth in revenue and pre-tax profit were mainly due to the contribution from the property development segment. Dividends In view of the good performance of the Group for the financial year 2014, your Board is pleased to recommend a final single tier tax exempt dividend of 6 sen per ordinary share in addition to the interim single tier tax exempt dividend of 3 sen per ordinary share paid on 28 June 2014, making a total of 9 sen per ordinary share for the financial year The final single tier tax exempt dividend of 6 sen per ordinary share is subject to shareholders approval at the forthcoming Annual General Meeting. Review of operations Global and domestic economy The global economy continued to expand at a moderate rate in the third quarter of 2014, with uneven growth performance across economies. While the US economy continued to show broader signs of improvements, growth in the euro area remained subdued amid persistent structural constraints and weakening sentiments. In Asia, economic activity continued to expand, although growth was more moderate in several economies. The Malaysian economy registered a growth of 5.6% in the third quarter of 2014 (2Q 2014: 6.5%), supported by private sector demand and continued positive growth in net exports of goods and services. On the supply side, growth in the major economic sectors was sustained, supported by trade and domestic activities. On a quarter-on-quarter seasonally adjusted basis, the economy grew by 0.9% (2Q 2014: 1.9%). (Source : Economic and Financial Developments in the Malaysian Economy in the Third Quarter of 2014, Bank Negara Malaysia). Trading and services The trading and services segment remained the main contributor to the Group s results for the financial year ended 30 September 2014, accounting for 81.2% and 65.6% respectively of the Group s revenue and pre-tax profit ( PBT ). The segment recorded a net revenue of RM million as compared to RM million recorded in the previous financial year, representing a growth of 4.2%. However, PBT recorded by this segment is RM million against RM million recorded for the previous financial year, representing a decrease of 4.7%. The decrease in PBT was attributable to higher operating expenses and inventories written down and written off in the current financial year. Property development The property development segment contributed 18.4% of the Group s revenue for the financial year ended 30 September The segment recorded a significant increase in net revenue from RM million recorded in the previous financial year to RM million in the current financial year, representing a growth of 121.2%. Consequently, this segment recorded a higher PBT of RM million against PBT of RM5.715 million achieved for the previous financial year, representing a significant increase of 245.2%. The current financial year s PBT of this segment represented 31.2% of the Group s total PBT. The revenue and PBT contribution was derived mainly from the Group s commercial development in Jalan Tuanku Abdul Rahman, Kuala Lumpur. Corporate Social Responsibility The Board recognises the importance of sustainability and its increasing impact on the business and is committed to creating a culture of sustainability within the Group and the community with an emphasis on integrating the 08

11 Chairman s Statement Environmental, Social and Governance ( ESG ) considerations in decision making. As an initial step, the Group has established a Sustainability Policy and the Group will set long term and short term targets for its ESG activities in order to achieve the right balance between the needs of the wider community, the requirements of shareholders and stakeholders and economic success. Prospects Going forward, global growth is expected to remain moderate. Growth across the advanced economies is expected to remain uneven. In Asia, growth will be underpinned by a continued expansion in domestic demand and exports. Nevertheless, there remains considerable downside risks to global growth. These include prolonged weakness in domestic demand and low inflation in a number of major economies, uncertainty over monetary policy adjustments in the key advanced economies and persistent geopolitical tensions that could heighten financial market volatility. While risks to growth have increased, the Malaysian economy is expected to remain on a steady growth path. Although exports will benefit from the recovery in the advanced economies and from regional demand, the trend is likely to moderate reflecting both the high base effect from 2013 and lower commodity prices. While private consumption may moderate, investment activity will be supported by continued flow of ongoing and new projects by the private and public sectors. Going forward, domestic demand will remain the key driver of growth. (Source: Economic and Financial Developments in Malaysia in the Third Quarter of 2014) With the above outlook, Fiamma expects the performance for the coming financial year to remain challenging as growth will be dependent on domestic demand as well as the external environment. For the trading and services segment, Fiamma will remain focused on its distribution business and will continue to build on its effective supply chain system and proven core competencies to remain a market leader for its products. It will continue to invest in promotional activities and brand building to strengthen and expand its distribution network for its various brands of home appliances, sanitaryware products, home furniture and medical devices and healthcare products. The proposed relocation and centralisation of the existing warehouse in Bandar Manjalara to a new and larger capacity warehouse to be built on the land acquired in Bukit Raja Industrial Hub, Klang is expected to improve efficiency as it will cater to all the Group s logistic operations under one roof. In addition, the new warehouse is expected to provide additional income stream from the provision of storage space and logistic services to third party customers. Construction of the new warehouse is expected to be completed and in operation by the beginning of the financial year For the property development segment, the commercial development located in Jalan Tuanku Abdul Rahman, Kuala Lumpur (which was completed in the first quarter of financial year 2015) and the on-going residential development in Kota Tinggi, Johor will contribute to the Group s revenue and profit for the financial year The on-going development of residential and commercial properties in Johor Bahru will contribute to the Group s revenue and profit for the financial years 2015 and The proposed new commercial developments in Jalan Yap Kwan Seng and the proposed redevelopment of the existing warehouse in Bandar Manjalara into commercial properties, both in Kuala Lumpur are expected to contribute to the Group s future income stream once these proposed developments are launched and sold. Acknowledgement On behalf of the Board and the Company, I would like to thank all our valued shareholders, dealers, suppliers, bankers, business associates and regulatory authorities for their confidence and continued support for the Group. I would also like to express my sincere appreciation to my fellow board members, our dedicated management team and all employees who have contributed to the Group through their loyalty, commitment, and hard work which has resulted in another successful year for the Group. TAN SRI DATO AZIZAN BIN HUSAIN Chairman 09

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18 R A ising Star in Bandar Manjalara Service Apartment Semi-D within a well-developed precinct in Taman Kota Jaya Type A1 Type Type Type

19 Audit Committee Report The Board of Directors ( Board ) of Fiamma Holdings Berhad is pleased to present the report on the Audit Committee for the financial year ended 30 September Composition and Attendance The Audit Committee during the financial year comprises the following members:- Members No. of meetings attended Tan Sri Dato Azizan bin Husain Chairman, Independent Non-Executive Director 4 Lim Soo Kong (Lim Soo Chong) Non-Independent Non-Executive Director 4 Dr Teh Chee Ghee Independent Non-Executive Director 4 The Audit Committee met four times during the financial year: on 26 November 2013, 19 February 2014, 19 May 2014 and 20 August Terms of Reference 2.1 Objectives The Audit Committee of Fiamma Holdings Berhad ( FHB or the Company ) was formed by the Board of Directors of the Company. Its primary function, in line with the Malaysian Code on Corporate Governance 2012, is to assist the Board of Directors in meeting its responsibilities relating to accounting and reporting practices of the Company and its subsidiary companies. In addition, the Audit Committee shall: Oversee and appraise the quality of the audits conducted both by the Company s internal and external auditors; Maintain open lines of communication between the Board of Directors, the internal auditors and the external auditors for the exchange of views and information, as well as to confirm their respective authority and responsibilities; and Determine the adequacy of the Group s administrative, operating and accounting controls. 2.2 Composition The members of the Audit Committee shall be appointed by the Directors from among their numbers which fulfils the following requirements: the Audit Committee must compose of no fewer than 3 members; a majority of the Audit Committee must be independent directors; and at least one member of the Audit Committee:- i) must be a member of the Malaysian Institute of Accountants; or ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years working experience and: he must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountant Act,1967; or he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act,

20 Audit Committee Report The members of the Audit Committee shall elect a chairman from among their number who shall be an independent director. In the event of any vacancy in the Audit Committee resulting in the non-compliance of item to above, the vacancy must be filled within 3 months of that event. The Board of Directors must review the term of office and performance of the Audit Committee and each of its members at least once every 3 years to determine whether the Audit Committee and members have carried out their duties in accordance with the terms of reference. 2.3 Frequency of Meetings Meetings shall be held at least four (4) times in each financial year. More meetings may be conducted if the need arises. 2.4 Secretary The Secretary of the Company shall be secretary (the Secretary ) of the Committee Functions The functions of the Audit Committee are as follows: To review the following and report the same to the Board:- with the external auditors, the audit plan; with the external auditors, his evaluation of the system of internal controls; with the external auditor, his audit report; the assistance given by the Company s employees to the external auditors; and any related party transaction and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity To consider the appointment and independence of the external auditor, the audit fee and any questions of resignation or dismissal; To discuss with the external auditor before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved; To discuss the contracts for the provision of non-audit services which can be entered into and procedures that must be followed by the external auditors To review quarterly reporting and year-end financial statements of the Group, focusing particularly on:- any changes in accounting policies and practices; significant adjustments arising from the audit; the going concern assumption; integrity of financial statements; and compliance with accounting standards and other legal requirements To discuss problems and reservations arising from the interim and final audits, and any matter the auditor may wish to discuss (in the absence of management where necessary); To review the external auditor s management letter and management s response; To review the adequacy of the Group s risk management framework and assess the resources and knowledge of the Management and employees involved in the risk management process; To review the Group s risk profile and risk tolerance;

21 Audit Committee Report To review the following in respect of the internal audit function:- Adequacy of the scope, functions and resources of the internal audit function, and that it has the necessary authority to carry out its work; Internal audit programme and results of the internal audit process and where necessary, ensure that appropriate action is taken on the recommendations of the internal audit function; Appraisal or assessment of the performance of members of the internal audit function; Approve any appointments or termination of senior staff members of the internal audit function; and Resignations of senior internal audit staff members and providing the resigning internal auditor an opportunity to submit his reasons for resigning To consider the major findings of internal investigations and management s response; To ensure the internal audit function is independent of the activities it audits and the Head of Internal Audit reports directly to the Committee To report promptly any matters resulting in the breach of the Bursa Securities Listing Requirements to the Board. Where the Committee is of the opinion that such matter reported by it to the Board has not been satisfactorily resolved, the Committee shall promptly report such matter to Bursa Securities; and To consider other areas as defined by the Board. 2.6 Rights of the Audit Committee The Audit Committee is, authorised by the Board (wherever necessary and reasonable for the Company), and at the cost of the Company to: have authority to investigate any matter within its terms of reference; have the resources which are required to perform its duties; have full and unrestricted access to any information pertaining to the Company; have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any); be able to obtain independent professional or other advice, at the expense of the Company; and be able to convene meetings with external auditors (without the presence of executive Board members) at least twice a year and whenever deemed necessary. 3. Summary of Activities During The Financial Year The main activities undertaken by the Audit Committee during the financial year ended 30 September 2014 were as follows:- 3.1 Reviewed the quarterly reports and annual financial statements of the Group and the Company prior to submission to the Board for consideration and approval and subsequent release to Bursa Malaysia Securities Berhad; 3.2 Reviewed the external auditors scope of work and audit plan for the financial year, prior to the commencement of audit work; 3.3 Reviewed with the external auditors, the audit findings, the audit report and management letters including management s response; 3.4 Reviewed and approved the internal audit plan for the financial year, reviewed the internal audit reports and discussed the findings and recommendations by the internal auditors; 19

22 Audit Committee Report 3.5 Reviewed the Group s key operational and business risks areas and the Group s risk management policies in place to address and minimise these risks; 3.6 Reviewed the annual budget of the Group tabled by the management for the financial year ended 30 September 2014; 3.7 Reviewed the related party transactions entered into by the Group and the Company; 3.8 Reviewed the proposals and circular to shareholders in connection with recurrent related party transactions of a revenue or trading nature; 3.9 Reviewed and recommended to the Board the following for approval and inclusion in the Company s Annual Report: Audit Committee Report; Statement on Risk Management and Internal Control; and Statement on Corporate Governance Met with external auditors (without the presence of executive board members) on 26 November 2013 to discuss audit findings for the financial year ended 30 September 2013 and on 20 August 2014 to discuss audit planning for the financial year ended 30 September Internal Audit Function The Audit Committee is supported by the internal audit function. The internal audit function ( IA ) is considered an integral part of the assurance framework and its primary mission is to provide assurance on the adequacy and effectiveness of the risk, control and governance framework of the Company and Group. The IA is independent of the activities and operations of the Group. The IA reports directly to the Audit Committee. The total cost incurred in managing the internal audit function in financial year 2014 was RM155,000. The main role of the IA is to assist the Audit Committee and the Board in monitoring and managing risks and internal controls of all the companies in the Group by undertaking regular and systematic reviews of the system of internal control so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively in the Group. The Internal Audit Manager meets and reports to the Audit Committee at least four times in a financial year. The Group s IA adopts a risk-based approach to the implementation and monitoring of the effectiveness of the Group s internal control systems. This monitoring process will form the basis for continually improving the risk management process of the Group in meeting its overall goals. 20

23 Audit Committee Report 5. Continuing Education During the financial year, members of the Audit Committee attended the following training programmes:- Directors Tan Sri Dato Azizan bin Husain Lim Soo Kong (Lim Soo Chong) Training Programmes Managing Goods and Services Tax ( GST ) Risk and Complying with Good Corporate Governance. Managing Goods and Services Tax ( GST ) Risk and Complying with Good Corporate Governance. Dr Teh Chee Ghee Goods and Services Tax Symposium Monash University Malaysia Bursa Malaysia s briefing session on Corporate Governance Guide: Towards Boardroom Excellence (2nd Edition) An Update. Managing Goods and Services Tax ( GST ) Risk and Complying with Good Corporate Governance. Nominating Committee Program by Bursa Malaysia. Mitigating the minimum wage impact through productivity and quality initiative. 21

24 Statement on Corporate Governance The Board of Directors ( Board ) of Fiamma Holdings Berhad ( Fiamma ) recognises the importance of adopting high standards of corporate governance in order to safeguard shareholders interest and to enhance shareholders value. As such, the Board of Fiamma strives to promote a strong culture of transparency, accountability, integrity as well as corporate performance within the Group and to ensure that the relevant principles and recommendations of the Malaysian Code on Corporate Governance 2012 ( MCCG 2012 or the Code ) are applied throughout the Company and its subsidiaries. The Board is pleased to present below, a statement on the application of the principles and the extent to which the Company has complied with the recommendations in the Code throughout the financial year ended 30 September 2014 except where it is stated otherwise. 1. Establish Clear Roles and Responsibilities a) Functions of the Board and Management The Board is overall responsible for corporate governance, strategic direction, establishing corporate goals and monitoring the achievement of these goals in order to foster long term success of the Group. The Board delegates the responsibility of implementing the Group s strategies, business plans, policies and decisions to the Management which is led by the Chief Executive Officer/Group Managing Director ( CEO/GMD ). b) Principal Responsibilities of the Board The Board comprises members with extensive experience in the Group s business as well as qualified individuals and professionals. The Board assumes the following responsibilities: Reviewing and adopting the Group s strategic plan. Overseeing the conduct of the Group s businesses. Identifying principal risks and ensuring the implementation of an appropriate internal control and risk management system to manage the risks. Overseeing the succession planning of key management. Overseeing the development and implementation of a shareholder communications policy. Reviewing the adequacy and integrity of the Group s management information and internal control systems. Ensuring that the Company adheres to high standards of ethics and corporate behaviour. c) Board Charter The Board had on 27 November 2012 formally adopted the Board Charter which serves as a guide to the Board of Fiamma. The Board Charter sets out the Board s strategic intent and outlines the Board s roles and responsibilities. The Board Charter is a source of reference providing insights and perspective to board members and senior management. The Board Charter is available on the Company s corporate website. The Board Charter was reviewed on 26 November d) Code of Conduct and Code of Ethics The Board is mindful of its role to establish a corporate culture which inculcates ethical conduct that permeates throughout the Group. Accordingly, the Board had formalised a Code of Conduct (for Directors, Management and Staff) and a Code of Ethics for Directors. The Code of Conduct and the Code of Ethics for Directors are available on the Company s corporate website. e) Whistleblowing Policy The Company has in place a whistleblowing policy to inculcate the culture of good business ethics and governance within the Group and provides employees with an accessible avenue to disclose any improper 22

25 Statement On Corporate Governance conduct or any action that is or could be harmful to the reputation of the Group and/or compromise the interest of stakeholders. This policy covers improprieties or irregularities in matters of financial reporting, suspected fraud or criminal offences, unlawful activities such as corruption or blackmail, misuse or misappropriation of the Group s funds or assets, failure to comply with legal or regulatory requirements, breach of confidentiality, breaches of any group policies, sexual harassment and deliberate concealment of any or a combination of the above matters. This policy addresses the Group s commitment to integrity and ethical behaviour by helping to foster and maintain an environment where employees can act appropriately without fear of retaliation. f) Sustainability Policy The Board recognises the importance of sustainability and its increasing impact to the business and is committed to understanding and implementing sustainable practices. The Group had formalised the Sustainability Policy and the Group will set long term and short term targets for its sustainability efforts in order to achieve the right balance between the needs of the wider community, the requirements of shareholders and stakeholders and economic success. The Group acknowledges its corporate social responsibility in the community and has supported and will continue to support worthy causes. The Group practises equal opportunity for all employees and the selection criteria for appointment or promotion will be based on skills, experience and knowledge, regardless of gender, ethnicity and age, subject to the current retirement age of sixty years. g) Access to Information and Advice All Directors have full access to information concerning the Company and the Group. The Directors are provided with the relevant agenda and a set of Board papers in sufficient time prior to every Board meeting to enable them to obtain further information and explanation, where necessary in order to be adequately informed before the meeting. The Board papers circulated include quarterly financial reports and annual financial statements, minutes of meetings of all committees of the Board, report on recurrent related party transactions, Directors and substantial shareholders share dealings, updates from all regulatory authorities, internal and external audit reports and the annual budget. All matters requiring the Board s approvals are also circulated prior to the Board Meetings and, during Board Meetings these matters are duly discussed and deliberated with senior management and advisers where necessary, before decisions are made. The Directors have access to members of the senior management team, the advice and services of the Company Secretaries and the external auditors as well as to independent professional advisers, to enable them to discharge their responsibilities. h) Company Secretary The Board is supported by the Company Secretary who advises the Board on their obligations matters relating to corporate governance, compliance with the Listing Requirements and related regulations, maintenance of statutory records and preparation and conduct of the Board, Board Committees and General Meetings. 2. Strengthening Board Composition The Board is assisted by the Board Committees in carrying out its duties and responsibilities. The following Board Committees have been established to assist the Board in the selection and retention of board members. a) Nomination Committee The Nomination Committee ( NC ) was established in May 2001 and comprises exclusively of Non-Executive Directors. The Committee meets at least once during the financial year. The members of the NC who served during the financial year were: No. of meetings Directors attended Tan Sri Dato Azizan Bin Husain Non-Executive Director Independent (Chairman) 1 Lim Soo Kong (Lim Soo Chong) Non-Executive Director Non-Independent 1 Dr Teh Chee Ghee Non-Executive Director Independent 1 23

26 Statement On Corporate Governance The Board has also identified Tan Sri Dato Azizan bin Husain as the Senior Independent Director of Fiamma to whom concerns may be conveyed. The main duties of the NC are to: Recommend new appointment/re-election of directors to the Board. Recommend appointment of members to Board Committees. Review the Board structure, size and composition. Evaluate the performance and effectiveness of the Board, its Board Committees and individual Directors and to determine their training needs. Review of Board s succession plans of key personnel within the Group. Facilitate board induction and training programme for newly appointed Directors. The NC met once during the financial year to: Review and revise its terms of reference for approval by the Board. Review the composition of the Board in terms of its balanced mix of skills, experience and expertise. Review the attendance of Directors in respect of attending meetings of the Board and its Committees. Review the effectiveness of the Board and Board Committees and the performance of each Director. b) Appointment, Re-election and Assessment of Directors The Board has entrusted the NC to assess the suitability of candidates for new appointment and re-election to the Board. A Directors Assessment Policy had been adopted by the Board which provides guidelines on the assessment criteria of the Chairman, Group Managing Director ( GMD ), Executive Directors, Independent Directors and Board Committees. The appointment of a new member to the Board is only made after assessment and recommendations by the NC. In considering candidates as potential Directors, the NC will take into account the following criteria: Skills, knowledge, expertise and experience. Time, commitment, character, professionalism and integrity. Diversity in age, gender, ethnicity and ability to contribute to the Board. Number of directorships in companies outside the Group. In accordance with Article 89 of the Company s Articles of Association, all Directors appointed by the Board are subject to re-election by the shareholders at the first Annual General Meeting ( AGM ) after their appointment. One-third of the existing remaining Directors including the CEO/GMD are required to submit themselves for re-election by rotation at least once every three years at each AGM. Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with Section 129(2) of the Companies Act, Shareholders are provided with sufficient time and information in the Annual Report, such as individual Director s personal profile, Board meeting attendance and shareholdings in the Company, in order to promote well-informed decision making by the Company s shareholders. The Board is aware of the importance of boardroom diversity including diversity in ethnicity and age. However, the Board is of the view that the selection criteria of a Director, based on effective blend of competencies, skills, experience and knowledge should remain a priority. While the Board appreciates the importance of women participation on the Board, the Board has not established any gender diversity policy. Nevertheless, the Board is pleased with the participation and contribution of two (2) women Directors in the composition of the Board of seven (7) Directors. The NC has conducted by way of formal assessments during the financial year, the effectiveness of the Board, its Committees and individual Directors, and is satisfied with the current composition of the Board and its Committees in respect of their balanced mix of skills, experience and expertise, as well as individual Director s personal attributes and contribution to the Board. 24

27 Statement On Corporate Governance c) Remuneration Committee The Remuneration Committee ( RC ) was established in May 2001 and comprises a majority of Non-Executive Directors, which is in accordance with its terms of reference which requires all or majority of its members to be Non-Executive Directors. The RC meets at least once during the financial year. The members of the RC who served during the financial year were: Directors No. of meetings attended Lim Soo Kong (Lim Soo Chong) Non-Executive Director Non-Independent 1 Lim Choo Hong CEO/Group Managing Director ( GMD ) 1 Dr Teh Chee Ghee Non-Executive Director Independent 1 The RC recommends to the Board the remuneration framework and remuneration package of the Executive Directors. The level of remuneration reflects the experience and level of responsibilities undertaken by the Executive Directors. The determination of the fees of the Non-Executive Directors is decided by the Board as a whole. The RC met once during the financial year to review the basis and quantum of the Executive Directors remuneration package and to recommend to the Board for approval. d) Directors remuneration The aggregate Directors remuneration paid or payable to all Directors of the Company by the Group for the financial year ended 30 September 2014, and categorised into appropriate components and bands are as follows: - Salaries, Allowance Benefits- Fees and EPF Bonus In-Kind Total (RM) (RM) (RM) (RM) (RM) Executive Directors 515,250 1,209, ,000 59,800 2,164,250 Non-Executive Directors 468,750 48, ,750 Total : 984,000 1,257, ,000 59,800 2,681,000 No. of Directors Remuneration Bands Executive Non-Executive Total RM1 RM50, RM50,000 RM100, RM150,000 RM200, RM350,000 RM400, RM1,600,000 RM1,650, RM1,700,000 RM1,800, Total:

28 Statement On Corporate Governance 3. Reinforce Independence a) Appointment of Independent Directors The Board currently has seven members comprising two (2) Independent Non-Executive Directors, three (3) Non-Independent Non-Executive Directors and two (2) Executive Directors. The Board is led by an experienced Non-Executive Chairman, Tan Sri Dato Azizan bin Husain. The Board has complied with Paragraph of the Main Market Listing Requirements ( LR ) of Bursa Malaysia Securities Berhad ( Bursa Securities ) which requires that at least two Directors or one-third of the Board, (whichever is the higher) to be Independent Directors. The presence of Independent Directors provides objectivity and independent judgement to the decision making process. The Board is well balanced, comprising experienced businessmen and qualified professionals. The Directors with their differing backgrounds, collectively bring with them extensive experience and expertise in areas such as business development, finance, corporate affairs, marketing and operations. A brief profile of each Director is presented on pages 3 to 5 of the Annual Report. b) Assessment of Independent Directors The Board acknowledges that the presence of Independent Directors by itself does not ensure the exercise of independent and objective judgement as independent judgement can be compromised by amongst others, familiarity or long term relationship with other board members. The Board with the assistance of the NC, conduct annual review of the Independent Directors and all Independent Directors also made annual declaration on the status of their respective independence to the Board. The Code recommends that the tenure of Independent Directors should not exceed a cumulative term of nine years. Upon completion of the nine years, an Independent Director may continue, to serve on the Board subject to the Directors re-designation as a Non-independent director. The Board may seek shareholders approval to retain him or her as an Independent Director in the next AGM if the Board is satisfied that he or she is able to continue to bring independent judgment to the Board s deliberations. The two Independent Directors namely, Tan Sri Dato Azizan bin Husain and Dr Teh Chee Ghee who have each attained a cumulative term of nine years, have been recommended by the Board to be retained as Independent Directors on the grounds that they are able to bring independent and objective judgements to the Board s deliberations and their positions in the Board have not been compromised by their familiarity and long term relationship with other board members. The Board will seek shareholders approval to retain them as Independent Directors in the coming AGM. The Board through the NC will continue to assess the independence of the two Independent Directors on a yearly basis to determine their suitability to continue as Independent Directors. c) Distinct Roles between the Board Chairman and the CEO/GMD There is a distinct and clear division of responsibility between the Chairman who is an Independent, Non- Executive Director and the CEO/GMD. The Chairman is responsible for ensuring Board effectiveness and conduct whilst the CEO/GMD has overall responsibilities over the operating units, organisational effectiveness and implementation of Board s policies and decisions as well as developing and implementing business and corporate strategies. The Independent Non-Executive Directors provide independent judgment and views and advice for the interest of the Group as well as the shareholders and investors. The roles and responsibilities of the Board Chairman and CEO/GMD are prescribed in the Board Charter which is available on the Company s corporate website. 26

29 Statement On Corporate Governance 4. Foster Commitment Directors should devote adequate time to carry out their board responsibilities. The annual schedule of Board, Board Committee meetings and the AGM are set out at the beginning of each financial year to enable Directors to plan ahead. Additional meetings are scheduled as and when necessary. a) Board Meetings The Board ordinarily meets at least four times in a financial year with additional meetings being convened as necessary. The Board met four times during the financial year ended 30 September 2014: on 26 November 2013, 19 February 2014, 19 May 2014 and 20 August The members of the Board and their attendance at the Board meetings were as follows: - Directors No. of meetings attended Tan Sri Dato Azizan Bin Husain (Chairman)* 4 Lim Choo Hong 4 Dato Bahar Bin Ahmad 4 Lim Soo Kong (Lim Soo Chong) 4 Kok Sau Chun 4 Dr Teh Chee Ghee* 4 Margaret Chak Lee Hung 4 * Denotes Independent Non-Executive Director The attendance record of the Directors on the meetings of the Audit Committee, NC and RC are stated in the Audit Committee Report (on page 17) and Para 2(a) and 2(c) of this statement (on pages 23 and 25). b) Directors Training The NC is responsible for evaluating and determining the training needs of its Directors to enhance the Directors knowledge and to keep abreast with developments in the market place to enable the Directors to discharge their duties and responsibilities more effectively. All the Directors have attended the Mandatory Accreditation Programme prescribed by Bursa Securities. The Board is responsible for evaluating and determining the training needs of its Directors on a continuous basis. 27

30 Statement On Corporate Governance All the Directors have attended at least one training programme for the financial year ended 30 September An in-house training programme was held on 19 May 2014 which was attended by all the Directors. The training programmes attended by the Directors during the financial year ended 30 September 2014 included the following: Directors Tan Sri Dato Azizan bin Husain Lim Choo Hong Lim Soo Kong (Lim Soo Chong) Dato Bahar bin Ahmad Kok Sau Chun Training Programmes Managing Goods and Services Tax ( GST ) Risk and Complying with Good Corporate Governance Managing Goods and Services Tax ( GST ) Risk and Complying with Good Corporate Governance Managing Goods and Services Tax ( GST ) Risk and Complying with Good Corporate Governance Managing Goods and Services Tax ( GST ) Risk and Complying with Good Corporate Governance Managing Goods and Services Tax ( GST ) Risk and Complying with Good Corporate Governance Dr Teh Chee Ghee Goods and Services Tax Symposium Monash University Malaysia 2014 Bursa Malaysia s briefing session on Corporate Governance Guide: Towards Boardroom Excellence (2nd Edition) An Update Managing Goods and Services Tax ( GST ) Risk and Complying with Good Corporate Governance Nominating Committee Program by Bursa Malaysia Mitigating the minimum wage impact through productivity and quality initiative Margaret Chak Lee Hung Goods and Services Tax Symposium Monash University Malaysia 2014 Managing your inter-company tax position in Malaysia Managing Goods and Services Tax ( GST ) Risk and Complying with Good Corporate Governance Seminar on Personal Data Protection Act Workshop on Personal Data Protection Act Uphold Integrity in Financial Reporting a) Financial Reporting and Directors Responsibilities The Board is committed to presenting a balanced, clear and meaningful assessment of the Group s financial performance and prospects at the end of the financial year, primarily through the annual financial statements and quarterly announcement of the financial results to Bursa Securities. The Board is responsible for ensuring that the financial statements give a true and fair view of the financial position of the Group and Company as at the financial year end and of their financial performance and cash flows of the Group and Company for the financial year then ended. In preparing the financial statements, the Directors have ensured that financial statements have been drawn up in accordance with applicable financial reporting standards and the Companies Act, b) Audit Committee The Board is assisted by the Audit Committee ( AC ) to ensure accuracy, adequacy and completeness of the information to be disclosed. The AC must amongst others ensure that the Group s financial statements comply with applicable financial reporting standards as this is integral to the reliability of financial statements.

31 Statement On Corporate Governance The AC was established in The composition, responsibilities, detailed terms of reference and the activities of the AC during the financial year are set out separately in the AC Report on pages 17 to 21 of the Annual Report. c) Relationship with the External Auditors The AC is responsible for reviewing the suitability and independence of the external auditors and the recommendation on their appointment and re-appointment. During the financial year, the Board has received confirmation from the external auditors that they are and have been, independent for the purpose of the audit in accordance with the terms of relevant professional and regulatory requirements. Through the AC, the Group has established a transparent and appropriate relationship with the Group s external auditors. The AC meets with the external auditors at least twice during a financial year to review audit plans, audit reports and to facilitate exchange of views on issues requiring attention. In addition, audit findings and reports are highlighted to the AC and Board. 6. Recognise and Manage Risks Risk Management and Internal Audit Function The Board acknowledges that it is responsible for maintaining a sound system of internal control and risk management and through its AC and Risk Management Committee carries out the ongoing process of identifying, evaluating and managing the key commercial and financial risks. The internal audit function which reports directly to the AC, assists the AC and the Board in this continuous process. The Statement on Risk Management and Internal Control of the Group as set out on Pages 32 and 33 of the Annual Report provides an overview of the main features and state of internal controls and risk management within the Group for the financial year. 7. Timely and Quality Disclosure The Board is committed to providing timely and accurate information to the shareholders in compliance with the disclosure requirements as set out in the LR of Bursa Securities. The Group has in place an Investor Relations Policy aimed at developing and maintaining a positive relationship with all shareholders and promote a high standard of integrity and transparency through timely, accurate and quality disclosure. The Company s corporate website at has dedicated sections under Corporate Structure, Corporate Information and Investor Relations where the investors and general public can have convenient access to the Group s corporate, financial and governance information. 8. Relations with Shareholders and Investors The Group is fully aware of the importance of effective and timely communication with shareholders and investors to keep them informed on the Group s latest financial performance, business and corporate developments. Such information is disseminated via the Company s annual reports, quarterly financial reports, circulars to shareholders and public announcements made to Bursa Securities during the year. The AGM remains the principal avenue for dialogue with shareholders and investors, where they may seek clarifications on the Group s performance, major developments of the Group as well as on the resolutions being proposed. Members of the Board as well as the external auditors are present to answer questions raised. The CEO/ GMD and/or authorised senior management meet occasionally with institutional investors to provide updates on the Group s progress and to address any concerns being raised. In addition, shareholders and investors can access the Group s website at for information on the Group. The shareholders and investors are also able to access the latest corporate, financial and market information of the Company via the Bursa Malaysia Berhad website at The Board will encourage shareholder participation and poll voting and the Chairman of the general meeting will inform shareholders of their right to demand a poll vote in the forthcoming AGM and future general meetings of the Company. 29

32 Statement On Corporate Governance 9. Other Information a) Non-Audit Fees The amount of non-audit fees paid and payable to external auditors by the Company and its subsidiaries for the financial year ended 30 September 2014 amounted to RM18, b) Share Buy-back The Company did not undertake any share buy-back for the financial year ended 30 September All the shares purchased by the Company to date were retained as treasury shares. As at 30 September 2014, a total of 7,234,900 shares were retained as treasury shares. c) Imposition of Sanctions/Penalties There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory authorities. d) Revaluation of Landed Properties The Group revalues its properties comprising land and buildings every five years and at shorter intervals whenever the fair value of the revalued assets is expected to differ materially from their carrying value. The last revaluation was done in September e) Material Contracts There were no material contracts entered into by the Group involving Directors or major shareholders interest during the financial year. f) Recurrent Related Party Transactions of a Revenue and Trading Nature Recurrent related party transactions of a revenue and trading nature of the Group conducted during the financial year ended 30 September 2014 were as follows:- Related Parties involved with Fiamma Holdings Berhad ( Fiamma ) and/or its subsidiaries Relationship Nature of Transactions RM 000 Fiamma Trading Sdn Bhd Note 1 Purchases of home appliances 368 ( FTSB ) Sales of sanitary ware and products 47 Rental paid office and showroom 286 Warehouse rental and charges paid 39 After sales service charges paid 1,141 Kinsmedic Sdn Bhd Note 2 Rental paid office and showroom 168 ( Kinsmedic ) Warehouse rental and charges paid 484 Sales of medical devices and healthcare products 13 Casa (S) Pte Ltd Note 3 Sales of electrical home appliances 193 ( Casa ) Arda (Zhejiang) Electric Co Ltd Note 4 Sales of kitchen appliances 8,530 ( Arda ) 30

33 Statement On Corporate Governance Notes: 1. FTSB is a 70% owned subsidiary of Fiamma. Ching Wooi Kong, the other shareholder is also the Managing Director of FTSB, reporting to the CEO/GMD, Lim Choo Hong( LCH ). LCH holds 23.44% equity interest in Fiamma. 2. Kinsmedic is a 100% subsidiary of Kingston Medical Supplies (Private) Limited ( Kingston ) which is a 70% subsidiary of Fiamma. Ching Wooi Kong, the other shareholder is also the MD of both Kingston and Kinsmedic, reporting to the CEO/GMD, LCH. LCH holds 23.44% equity interest in Fiamma. 3. Casa is a subsidiary of Casa Holdings Limited ( CHL ), which holds 25.05% equity interest in Fiamma. LCH is a director of Fiamma and holds 23.44% equity interest in Fiamma. He is also an indirect major shareholder of CHL by virtue of 51.0% shares in CHL held through Azzuri Holdings Pte Ltd ( Azzuri ). Lim Soo Kong (Lim Soo Chong) ( LSK ) is a director and shareholder of Fiamma. He is also a director and major shareholder of CHL and an indirect major shareholder of CHL by virtue of the 51.0% shares in CHL held through Azzuri. Margaret Chak Lee Hung is a director of Fiamma and Group Financial Controller of CHL. She is deemed to be a person connected to LSK as she is accustomed to act in accordance with the directions and instructions of LSK. 4. The shareholders of Arda are Hu Zhong Huai ( HZH ) and members of his immediate family. HZH is a Non- Executive Director and substantial shareholder of CHL. CHL is a substantial shareholder of Fiamma and HZH is a deemed substantial shareholder of Fiamma through CHL by virtue of his substantial interest in CHL. 10. Compliance Statement Pursuant to Paragraph of the LR of Bursa Securities, the Board is satisfied that the Company has complied with the Principles and the MCCG 2012 during the financial year with due regard to the recommendations supporting the Principles except as otherwise stated. This Statement is made in accordance with a resolution of the Board of Directors dated 26 November

34 Statement on Risk Management and Internal Control Paragraph 15.26(b) of the Listing Requirements requires the Board of Directors to make a statement in its annual report about the status of its risk management and internal control system as a group. This Statement which has been prepared by the Group Risk Management Committee is in accordance with the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers. Board Responsibility The Board of Directors of Fiamma Holdings Berhad recognises its responsibility for maintaining a sound risk management framework and internal control system in the Group and for reviewing its adequacy and integrity. These include financial, operational and compliance controls and risk management procedures and practices. The system of internal control is designed to manage the principal business risks that may impede the Group from achieving its business objectives. Due to the limitations that are inherent in any system of internal control, the Group s system of internal control can only manage rather than eliminate the risk of failure to achieve business objectives, and therefore, can only provide reasonable and not absolute assurance against material misstatement or loss. Risk Management The Board of Directors regards risk management as an integral part of the Group s business operations. Management is responsible for creating a risk-aware culture and for building the necessary knowledge for risk management. The Board confirms that there is an ongoing process for the identification, evaluation and mitigation of its significant risks. This process has been in place for the financial year under review and up to the date of approval of this statement for inclusion in the annual report. The Board has assigned the Audit Committee with the duty of reviewing and monitoring the effectiveness of the Group s system of internal control. The Group Risk Management Committee assists the Audit Committee and the Board in the continuous process of identifying, evaluating and managing the significant business risks faced by the Group. The Group s Risk Management Committee comprises the Chief Executive Officer/Group Managing Director, senior management and heads of department. The Group Risk Management Committee met two times during the financial year to review strategic and operational risks, assess losses incurred and risk mitigation plans. The Group Risk Management Committee also reviewed the Group s risk assessment and profile before presenting them to the Audit Committee and the Board for adoption. In addition, written confirmation has been provided by the heads of department on the effectiveness of internal control of their respective operating units on a quarterly basis. The Chief Executive Officer ( CEO ) and Chief Financial Officer ( CFO ) have provided assurance to the Board that the Group s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the risk management framework and internal control system of the Group. Key Features of The System of Internal Control The Board of Directors is committed to maintaining a strong system of internal control for the proper conduct of the Group s business operations to achieve the following objectives: n n n n Safeguard assets of the Group and shareholders interest; Identify and manage risks affecting the Group; Ensure compliance with regulatory requirements; and Ensure operational results are closely monitored and substantial variances are promptly explained. 32

35 Statement on Risk Management and Internal Control The key features of the Group s system of internal control are: n n n n n n n n n n n n An organisational structure with clearly defined lines of responsibility and delegated authority, which are properly communicated to all levels. Key responsibilities are properly segregated to ensure no one staff is in total control of the whole transaction. Financial results are reviewed quarterly by the Audit Committee and the Board. Key business risks are reviewed by the Board with the assistance of the Audit Committee, the Group Risk Management Committee and the Internal Auditors. The internal audit function, which reports directly to the Audit Committee conducts reviews on the system of internal control and the adequacy and effectiveness of the risk management process to identify, manage and report risks. Control deficiencies are properly communicated to management and staff to ensure prompt corrective actions are taken. The audit reports and the proposed corrective actions are consolidated and tabled at the quarterly Audit Committee meetings for deliberation and approval. These reports are also presented to the Board by the Audit Committee. The CEO meets with the individual heads of department once a month to discuss business and operational issues and all the heads of department at least two times a year to discuss group objectives and key management issues. The CEO, the Executive Director and the CFO meet monthly to review monthly financial performance and cash flows of the companies in the Group. There is an effective reporting system in place to ensure timely generation of financial information for management review. An annual budget is prepared to facilitate monitoring of the Group s financial performance and the actual performance is reviewed against the budget on a monthly basis. The Audit Committee review the Group s financial performance against the budget on a quarterly basis. The Group has put in place procedures to review and approve its purchases, operating and capital expenditure and has a centralised human resource function which outlines procedures for recruitment, training and appraisal. The Group has established a Code of Conduct which governs the standards of behaviour and provides guidance on ethical standards. The Group has established a Whistleblowing policy which encourages employees to report any wrongdoings to the proper authorities. Conclusion: The Board is of the view that the risk management and internal control system described in this statement is considered appropriate to the business operation. It should be noted that, due to the limitations that are inherent in any system of internal control, such arrangements do not eliminate all risks of failure to achieve business objectives. However, the risk management and internal control system that existed throughout the year is adequate and effective to provide a level of confidence on which the Board relies for reasonable assurance. This statement is made in accordance with a resolution of the Board of Directors dated 26 November

36

37 Financial Statements 36 Directors Report 40 Statements of Financial Position 42 Statements of Profit or Loss and other Comprehensive Income 43 Consolidated Statement of Changes in Equity 45 Statement of Changes in Equity 46 Statements of Cash Flows 48 Notes to the Financial Statements 101 Statement by Directors 101 Statutory Declaration 102 Independent Auditors Report

38 Directors Report for the financial year ended 30 September 2014 The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 30 September Principal Activities The Company is principally engaged in investment holding and property investment, whilst the principal activities of the subsidiaries are as stated in Note 7 to the financial statements. There has been no significant change in the nature of these activities during the financial year. Results Group Company RM 000 RM 000 Profit for the financial year attributable to: Owners of the Company 41,396 24,598 Non-controlling interest 4,077-45,473 24,598 Reserves and Provisions There were no material transfers to or from reserves and provisions during the financial year under review. Dividends Since the end of the previous financial year, the Company paid: i) a final single tier tax exempt dividend of 5 sen per ordinary share totalling RM6,843,000 in respect of the financial year ended 30 September 2013 on 4 April 2014; and ii) an interim single tier tax exempt dividend of 3 sen per ordinary share totalling RM4,105,000 in respect of the financial year ended 30 September 2014 on 28 June The Directors recommend a final single tier tax exempt dividend of 6 sen per ordinary share totalling RM8,215,000 in respect of the financial year ended 30 September Directors of the Company Directors who served since the date of the last report are: Tan Sri Dato Azizan bin Husain Lim Choo Hong Dato Bahar bin Ahmad Lim Soo Kong (Lim Soo Chong) Kok Sau Chun Dr Teh Chee Ghee Margaret Chak Lee Hung 36

39 Directors Report for the financial year ended 30 September 2014 Directors Interests The interests and deemed interests in the ordinary shares and warrants over shares of the Company and of its related corporations (other than wholly-owned subsidiaries) of those who were Directors at financial year end (including the interests of the spouses or children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors Shareholdings are as follows: Number of ordinary shares of RM1.00 each At At Bought Sold Shares in the Company Fiamma Holdings Berhad Lim Choo Hong - direct interest 30,090,000 2,000,000-32,090,000 Dato Bahar bin Ahmad - direct interest 130, ,000 Lim Soo Kong (Lim Soo Chong) - direct interest 4,131, ,131,000 Kok Sau Chun - deemed interest 30,090,000 2,000,000-32,090,000 Deemed interest through Casa Holdings Limited Lim Soo Kong (Lim Soo Chong) 34,301, ,301,000 Lim Choo Hong 34,301, ,301,000 Kok Sau Chun 34,301, ,301,000 Number of warrants over ordinary shares of RM1.00 each At At Granted Exercised Warrants in the Company Fiamma Holdings Berhad Lim Choo Hong - direct interest 9,040,056 - (2,000,000) 7,040,056 Lim Soo Kong (Lim Soo Chong) - direct interest 800, ,000 Kok Sau Chun - deemed interest 9,040,056 - (2,000,000) 7,040,056 Deemed interest through Casa Holdings Limited Lim Soo Kong (Lim Soo Chong) 12,356, ,356,000 Lim Choo Hong 12,356, ,356,000 Kok Sau Chun 12,356, ,356,000 37

40 Directors Report for the financial year ended 30 September 2014 Directors Interests (CONTINUED) By virtue of their interests in the ordinary shares of the Company, Lim Choo Hong, Kok Sau Chun and Lim Soo Kong (Lim Soo Chong) are also deemed interested in the ordinary shares of the subsidiaries during the financial year to the extent that Fiamma Holdings Berhad has an interest. The other Directors holding office at 30 September 2014 do not have any interest in the ordinary shares of the Company and of its related corporations during the financial year. Directors Benefits Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of the Company or of related corporations) 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, other than as disclosed in Note 30 to the financial statements. There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate apart from the unexercised warrants at the end of the financial year as disclosed below. Issue of Shares and Debentures During the financial year, the Company issued 2,512,500 new ordinary shares of RM1.00 each pursuant to the exercise of warrants by registered shareholders at a price of RM1.00 per ordinary share for every warrant held. There were no other changes in the authorised, issued and paid-up capital of the Company during the financial year. There were no debentures issued during the financial year. Options Granted Over Unissued Shares During the financial year, 2,512,500 warrants were exercised by registered shareholders to subscribe for 2,512,500 new ordinary shares at a price of RM1.00 per ordinary share. At the end of the financial year, 33,470,900 warrants remained unexercised. The warrants are in registered form and constituted by a deed poll and entitle the registered holder to subscribe for one (1) new ordinary share of RM1.00 each in the Company at a price of RM1.00 per ordinary share for every warrant held. The conversion ratio is subject to the aforesaid Deed Poll and can be exercised at any time during the ten year subscription period expiring on 26 November No further options were granted to any person to take up unissued shares of the Company during the financial year. Other Statutory Information Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that: i) all known bad debts have been written off and adequate provision made for doubtful debts, and ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise. 38

41 Directors Report for the financial year ended 30 September 2014 Other Statutory Information (CONTINUED) At the date of this report, the Directors are not aware of any circumstances: i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts in the Group and in the Company inadequate to any substantial extent, or ii) iii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading. At the date of this report, there does not exist: i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year. No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due. In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended 30 September 2014 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report. Significant Events The significant events during the financial year are disclosed in Note 31 to the financial statements. Auditors The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors: LIM CHOO HONG DATO BAHAR BIN AHMAD Kuala Lumpur, Date: 22 December

42 Statements of Financial Position as at 30 September 2014 Group Company Note RM 000 RM 000 RM 000 RM 000 Assets Property, plant and equipment 3 35,627 28, Investment properties 4 38,954 23,390 4,700 35,400 Intangible assets Land held for property development 6 16,837 16, Investments in subsidiaries , ,530 Deferred tax assets Total non-current assets 92,546 69, , ,991 Property development costs 9 121, , Inventories 10 53,236 59, Trade and other receivables 11 88,871 86,019 15,024 7,282 Prepayments Tax recoverable Cash and cash equivalents ,709 91,279 6,724 6,593 Total current assets 379, ,478 21,850 13,973 Total assets 471, , , ,964 Equity Share capital 144, , , ,572 Treasury shares (5,775) (5,775) (5,775) (5,775) Reserves 22,752 22, Retained earnings 159, ,348 62,353 48,703 Total equity attributable to owners of the Company , , , ,967 Non-controlling interest 16,212 13, Total equity 337, , , ,967 40

43 Statements of Financial Position as at 30 September 2014 Group Company Note RM 000 RM 000 RM 000 RM 000 Liabilities Borrowings 14 3, Deferred tax liabilities 8 2,888 3, Total non-current liabilities 6,474 3, Trade and other payables 15 59,149 47, Provision for warranties Borrowings 14 65,350 65,421 8,700 5,500 Taxation 3,119 1, Total current liabilities 128, ,233 9,172 5,997 Total liabilities 134, ,429 9,172 5,997 Total equity and liabilities 471, , , ,964 The notes on pages 48 to 100 are an integral part of these financial statements. 41

44 Statements of Profit or Loss and Other Comprehensive Income for the financial year ended 30 September 2014 Group Company Note RM 000 RM 000 RM 000 RM 000 Revenue , ,884 13,976 26,839 Cost of sales (216,986) (189,879) (827) (877) Gross profit 121, ,005 13,149 25,962 Gain on disposal of investment property ,300 - Other income 3,868 3, Distribution expenses (33,238) (30,854) - - Administrative expenses (25,209) (21,591) (503) (440) Other expenses (1,321) (2,032) (150) (147) Results from operating activities 18 65,275 52,304 25,357 25,640 Finance costs 19 (2,093) (2,158) (267) (162) Profit before taxation 63,182 50,146 25,090 25,478 Tax expense 21 (17,709) (12,099) (492) 720 Profit for the financial year 45,473 38,047 24,598 26,198 Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign exchange translation difference (89) Total comprehensive income for the financial year 45,384 38,312 24,598 26,198 Profit for the financial year attributable to: Owners of the Company 41,396 34,694 24,598 26,198 Non-controlling interests 4,077 3, Profit for the financial year 45,473 38,047 24,598 26,198 Total comprehensive income for the financial year attributable to: Owners of the Company 41,333 34,881 24,598 26,198 Non-controlling interest 4,051 3, Total comprehensive income for the financial year 45,384 38,312 24,598 26,198 Basic earnings per ordinary share (sen) Diluted earnings per ordinary share (sen) The notes on pages 48 to 100 are an integral part of these financial statements. 42

45 Consolidated Statement of Changes in Equity for the financial year ended 30 September 2014 Attributable to owners of the Company Non-distributable Distributable Non- Share Treasury Share Capital Translation Revaluation Retained controlling Total Group Note capital shares premium reserve reserve reserve earnings Total interests equity RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 October ,567 (5,775) , , ,943 12, ,976 Total other comprehensive income for the financial year - Foreign exchange translation reserve Profit for the financial year ,694 34,694 3,353 38,047 Total comprehensive income for the financial year ,694 34,881 3,431 38,312 Contributions by and (distributions to) owners of the Company Exercise of warrants , ,005-5,005 Dividends to owners of the Company (13,223) (13,223) - (13,223) Changes in ownership in a subsidiary (391) (391) Total transactions with owners of the Company 5, (13,223) (8,218) (391) (8,609) Revaluation reserve transferred to retained earnings (1,295) 1, Deferred tax liabilities transferred to retained earnings Dividends paid by subsidiaries to non- controlling interest (1,172) (1,172) At 30 September ,572 (5,775) , , ,960 13, ,861 Note 13.1 Note 13.2 Note 13.3 Note 13.4 Note

46 Consolidated Statement Of Changes In Equity for the financial year ended 30 September 2014 Attributable to owners of the Company Non-distributable Distributable Non- Share Treasury Share Capital Translation Revaluation Retained controlling Total Group Note capital shares premium reserve reserve reserve earnings Total interests equity RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 October ,572 (5,775) , , ,960 13, ,861 Total other comprehensive income for the financial year - Foreign exchange translation reserve (63) - - (63) (26) (89) Profit for the financial year ,396 41,396 4,077 45,473 Total comprehensive income for the financial year (63) - 41,396 41,333 4,051 45,384 Contributions by and (distributions to) owners of the Company Exercise of warrants , ,513-2,513 Dividends to owners of the Company (10,948) (10,948) - (10,948) Total transactions with owners of the Company 2, (10,948) (8,435) - (8,435) Dividends paid by subsidiaries to non- controlling interest (1,740) (1,740) At 30 September ,085 (5,775) , , ,858 16, ,070 Note 13.1 Note 13.2 Note 13.3 Note 13.4 Note

47 Statement of Changes in Equity for the financial year ended 30 September 2014 Non-distributable Distributable Share Treasury Share Capital Retained Total Note capital shares premium reserve earnings equity Company RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 October ,567 (5,775) , ,987 Profit and total comprehensive income for the financial year ,198 26,198 Contributions by and (distributions to) owners of the Company Exercise of warrants , ,005 Dividends to owners of the Company (13,223) (13,223) Total transactions with owners of the Company 5, (13,223) (8,218) At 30 September 2013/ 1 October ,572 (5,775) , ,967 Profit and total comprehensive income for the financial year ,598 24,598 Contributions by and (distributions to) owners of the Company Exercise of warrants , ,513 Dividends to owners of the Company (10,948) (10,948) Total transactions with owners of the Company 2, (10,948) (8,435) At 30 September ,085 (5,775) , ,130 Note 13.1 Note 13.2 Note 13.3 The notes on pages 48 to 100 are an integral part of these financial statements. 45

48 Statements of Cash Flows for the financial year ended 30 September 2014 Group Company Note RM 000 RM 000 RM 000 RM 000 Cash flows from operating activities Profit before taxation 63,182 50,146 25,090 25,478 Adjustments for: Depreciation of property, plant and equipment 3 3,131 2, Dividend income (11,023) (24,210) Fair value adjustment on investment properties Gain on disposal of: - property, plant and equipment 18 (195) (101) investment properties 18 - (150) (12,300) - Impairment loss on trade receivables Interest expense 19 1,698 1, Interest income 18 (2,423) (1,268) (562) (265) Inventories written down 10 1, Inventories written off Property, plant and equipment written off Provision for warranties Reversal of impairment loss on trade receivables 25.4 (60) (97) - - Unrealised foreign exchange gains - net (79) (417) - - Operating profit before changes in working capital 68,490 55,226 1,516 1,285 Changes in working capital: Inventories 3,982 2, Prepayments 25 (30) (4) - Property development costs (8,655) (3,237) - - Trade and other receivables 131 (5,217) (7,742) (7,237) Trade and other payables 11,305 10, (2,225) Cash and bank balance held under Housing Development Account (317) (452) - - Cash generated from/(used in) operations 74,961 59,900 (6,147) (8,177) Dividends received ,023 24,210 Interest paid (1,698) (1,698) (266) (153) Provision for warranties utilised (541) (394) - - Tax paid net of refund (17,066) (13,602) (600) (372) 46 Net cash generated from operating activities 55,656 44,206 4,010 15,508

49 Statements of Cash Flows for the financial year ended 30 September 2014 Group Company Note RM 000 RM 000 RM 000 RM 000 Cash flows from investing activities Acquisition of property, plant and equipment 3 (9,936) (2,004) (16) - Deposit paid for acquisition of freehold land 31.2 (3,009) Increase in investments in subsidiaries (100) (4,045) Increase in capital contribution - net (2,568) Interest received 2,423 1, Construction of investment properties 4 (15,564) (9,338) - - Acquisition of non-controlling interests - (545) - - Proceeds from disposal of property, plant and equipment Proceeds from disposal of investment property Net cash (used in)/generated from investing activities (25,883) (10,098) 1,356 (6,348) Cash flows from financing activities Dividends paid to non-controlling interest (1,740) (1,172) - - Dividends paid to owners of the Company 23 (10,948) (13,223) (10,948) (13,223) (Repayment)/Drawdown of borrowings - net (92) 20,815 3,200 5,500 Proceeds from exercise of warrants ,513 5,005 2,513 5,005 Net cash (used in)/generated from financing activities (10,267) 11,425 (5,235) (2,718) Net increase in cash and cash equivalents 19,506 45, ,442 Effect of exchange rate fluctuation on cash held Cash and cash equivalents at 1 October i) 84,603 39,048 6, Cash and cash equivalents at 30 September i) 104,109 84,603 6,724 6,593 i) Cash and cash equivalents Cash and cash equivalents included in the statements of cash flows comprise the following statements of financial position amounts: Group Company Note RM 000 RM 000 RM 000 RM 000 Deposits placed with licensed banks 12 72,387 51,398-3,026 Cash and bank balances 12 42,322 39,881 6,724 3, ,709 91,279 6,724 6,593 Cash and bank balances held under Housing Development Account 12 (1,197) (880) - - Bank overdraft 14 (9,403) (5,796) ,109 84,603 6,724 6,593 The notes on pages 48 to 100 are an integral part of these financial statements. 47

50 Notes to The Financial Statements Fiamma Holdings Berhad is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The addresses of the principal place of business and registered office of the Company are as follows: Principal Place of Business Wisma Fiamma No. 20, Jalan 7A/62A Bandar Manjalara Kuala Lumpur Registered Office Lot 6.05, Level 6, KPMG Tower 8, First Avenue, Bandar Utama Petaling Jaya Selangor The consolidated financial statements of the Company as at and for the financial year ended 30 September 2014 comprise the Company and its subsidiaries (together referred to as the Group and individually referred to as Group entities ). The financial statements of the Company as at and for the financial year ended 30 September 2014 do not include other entities. The Company is principally engaged in investment holding and property investment, whilst the principal activities of the subsidiaries are as stated in Note 7. These financial statements were authorised for issue by the Board of Directors on 22 December Basis Of Preparation (a) Statement of compliance The financial statements of the Group have been prepared in accordance with Financial Reporting Standards ( FRSs ) and the requirements of the Companies Act, 1965 in Malaysia. The following are FRSs, amendments and interpretations that have been issued by the Malaysian Accounting Standards Board ( MASB ) but have not been adopted by the Group: FRSs, amendments and interpretations effective for annual periods beginning on or after 1 January Amendments to FRS 10, Consolidated Financial Statements: Investment Entities Amendments to FRS 12, Disclosure of Interests in Other Entities: Investment Entities Amendments to FRS 127, Separate Financial Statements (2011): Investment Entities Amendments to FRS 132, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities Amendments to FRS 136, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets Amendments to FRS 139, Financial Instruments: Recognition and Measurement - Novation of Derivatives and Continuation of Hedge Accounting IC Interpretation 21, Levies FRSs, amendments and interpretations effective for annual periods beginning on or after 1 July 2014 Amendments to FRS 1, First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements to FRSs Cycle) Amendments to FRS 2, Share-based Payment (Annual Improvements Cycle)

51 Notes to the Financial Statements 1. Basis Of Preparation (continued) (a) Statement of compliance (continued) FRSs, amendments and interpretations effective for annual periods beginning on or after 1 July 2014 (continued) Amendments to FRS 3, Business Combinations (Annual Improvements Cycle and Cycle) Amendments to FRS 8, Operating Segments (Annual Improvements Cycle) Amendments to FRS 13, Fair Value Measurement (Annual Improvements Cycle and Cycle) Amendments to FRS 116, Property, Plant and Equipment (Annual Improvements Cycle) Amendments to FRS 119, Employee Benefits - Defined Benefit Plans: Employee Contributions Amendments to FRS 124, Related Party Disclosures (Annual Improvements Cycle) Amendments to FRS 138, Intangible Assets (Annual Improvements Cycle) Amendments to FRS 140, Investment Property (Annual Improvements Cycle) FRSs, amendments and interpretations effective for annual periods beginning on or after 1 January 2016 Amendments to FRS 5, Non-current Assets Held for Sale and Discontinued Operations (Annual Improvements to FRSs Cycle) Amendments to FRS 7, Financial Instruments: Disclosures (Annual Improvements to FRSs Cycle) Amendments to FRS 10, Consolidated Financial Statements and FRS 128, Investments in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Amendments to FRS 11, Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations FRS 14, Regulatory Deferral Accounts Amendments to FRS 116, Property, Plant and Equipment and FRS 138, Intangible Assets - Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to FRS 119, Employee Benefits (Annual Improvements to FRSs Cycle) Amendments to FRS 127, Separate Financial Statements - Equity Method in Separate Financial Statements Amendments to FRS 134, Interim Financial Reporting (Annual Improvements to FRSs Cycle) FRSs, amendments and interpretations effective for annual periods beginning on or after 1 January 2018 FRS 9, Financial Instruments The Group and the Company plan to apply the abovementioned FRSs, amendments and interpretations: from the annual period beginning on 1 October 2014 for those FRSs, amendments and interpretations that are effective for annual periods beginning on or after 1 January 2014 and 1 July 2014, except for Amendments to Amendments to FRS 139, IC Interpretation 21 and Amendments to FRS 2, which are not applicable to the Company. from the annual period beginning on 1 October 2016 for those FRSs, amendments and interpretations that are effective for annual periods beginning on or after 1 January 2016 except for Amendments to FRS 11 and FRS 14 which are not applicable to the Company. The initial application of the FRSs, amendments and interpretations are not expected to have any material financial impacts to the current period and prior period financial statements of the Group. The Group has subsidiaries which fall within the scope of IC Interpretation 15, Agreements for the Construction of Real Estate. Therefore, the Group and these subsidiaries are currently exempted from adopting the Malaysian Financial Reporting Standards ( MFRSs ) and is referred to as a Transitioning Entity. Being a Transitioning Entity, the Group is required to adopt the MFRSs for annual period beginning on 1 January Hence, the Group s financial statements for annual period beginning on 1 October 2017 will be prepared in accordance with MFRSs issued by MASB and the International Financial Reporting Standards ( IFRSs ). As a result, the Company will not be adopting FRSs, amendments and interpretations that are effective for annual periods beginning on or after 1 January

52 Notes to the Financial Statements 1. Basis Of Preparation (continued) (b) Basis of measurement The financial statements have been prepared on the historical cost basis other than as disclosed in Note 2. (c) Functional and presentation currency These financial statements are presented in Ringgit Malaysia ( RM ), which is the Company s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated. (d) Use of estimates and judgements The preparation of the financial statements in conformity with FRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes: Note 4 - valuation of investment properties Note 5 - measurement of the recoverable amounts of cash-generating units Note 8 - recognition of unutilised tax losses and capital allowances Note 16 - provision for warranties 2. Significant Accounting Policies The accounting policies set out below have been applied consistently to the periods presented in these financial statements, unless otherwise stated. (a) Basis of consolidation (i) Subsidiaries Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Group adopted FRS 10, Consolidated Financial Statements in the current financial year. This resulted in changes to the following policies: Control exists when the Group is exposed, 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. In the previous financial years, control exists when the Group has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Potential voting rights are considered when assessing control only when such rights are substantive. In the previous financial years, potential voting rights are considered when assessing control when such rights are presently exercisable. 50 The Group considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee s return. In the previous financial years, the Group did not consider de facto power in its assessment of control.

53 Notes to the Financial Statements 2. Significant Accounting Policies (continued) (a) Basis of consolidation (continued) (i) Subsidiaries (continued) The change in accounting policy has been made retrospectively and in accordance with the transitional provision of FRS 10. The adoption of FRS 10 has no significant impact to the financial statements of the Group. Investments in subsidiaries are measured in the Company s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs. (ii) Business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group. For new acquisitions, the Group measures the cost of goodwill at the acquisition date as: the fair value of the consideration transferred; plus the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. (iii) Acquisitions of non-controlling interests The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves. (iv) Non-controlling interests Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and owners of the Company. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. (v) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. 51

54 Notes to the Financial Statements 2. Significant Accounting Policies (continued) (b) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss. (ii) Operations denominated in functional currencies other than Ringgit Malaysia ( RM ) The assets and liabilities of operations denominated in functional currencies other than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period. The income and expenses of foreign operations are translated to RM at exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve ( FCTR ) in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the noncontrolling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. 52 (c) Financial instruments (i) Initial recognition and measurement A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the instrument. A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. (ii) Financial instrument categories and subsequent measurement The Group and the Company categorise financial instruments as follows: Financial assets a) Financial assets at fair value through profit or loss Fair value through profit or loss category comprises financial assets that are held for trading, including derivatives or financial assets that are specifically designated into this category upon initial recognition. Financial assets categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss. b) Loans and receivables Loans and receivables category comprises debt instruments that are not quoted in an active market. Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method.

55 Notes to the Financial Statements 2. Significant Accounting Policies (continued) (c) Financial instruments (continued) (ii) Financial instrument categories and subsequent measurement (continued) b) Loans and receivables (continued) All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see Note 2(l)(i)). Financial liabilities All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit or loss. Fair value through profit or loss category comprises financial liabilities that are derivatives or financial liabilities that are specifically designated into this category upon initial recognition. Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss. (iii) Derecognition A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profit or loss. 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. (d) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost/valuation less any accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of selfconstructed 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. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. 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. The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within other income and other expenses respectively in profit or loss. Property, plant and equipment under the revaluation model The Group revalues its property comprising land and building every 5 years and at shorter intervals whenever the fair value of the revalued assets is expected to differ materially from their carrying value. Property acquired after the revaluation date is stated at cost until the next revaluation interval. 53

56 Notes to the Financial Statements 2. Significant Accounting Policies (continued) (d) Property, plant and equipment (continued) (i) Recognition and measurement (continued) Property, plant and equipment under the revaluation model (continued) Surpluses arising from revaluation are dealt with in the revaluation reserve account. Any deficit arising is offset against the revaluation reserve to the extent of a previous increase for the same property. In all other cases, a decrease in carrying amount is recognised in profit or loss. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings. (ii) Subsequent costs The cost of replacing a component 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 component will flow to the Group or the Company, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. (iii) Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset, then that component is depreciated separately. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use. The estimated useful lives for the current and comparative periods are as follows: leasehold land years buildings 50 years renovation 3-5 years plant and machinery, tools and piping 3-15 years office equipment, furniture and fittings 3-5 years motor vehicles 4-5 years computers 4 years moulds 2 years Depreciation methods, useful lives and residual values are reviewed at the end of the reporting period and adjusted as appropriate. 54 (e) Leased assets (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 leases. 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 the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. 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.

57 Notes to the Financial Statements 2. Significant Accounting Policies (continued) (e) Leased assets (continued) (i) Finance lease (continued) Leasehold land which in substance is a finance lease is classified as property, plant and equipment, or as investment property if held to earn rental income or for capital appreciation or for both. (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 the leased assets are not recognised on the statement of financial position. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of 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. (f) Investment properties (i) Investment properties carried at fair value Investment properties are properties which are owned to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment properties are measured initially at cost and subsequently at fair value with any change therein recognised in profit or loss for the period in which they arise. Where the fair value of the investment property under construction is not reliably determinable, the investment property under construction is measured at cost until either its fair value becomes reliably determinable or construction is complete, whichever is earlier. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs. An investment property is derecognised on its disposal, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period in which the item is derecognised. (ii) Reclassification to/from investment property 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. When the use of a 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. 55

58 Notes to the Financial Statements 2. Significant Accounting Policies (continued) (g) Land held for property development Land held for property development consists of land or such portions thereof on which no development activities have been carried out or where development activities are not expected to be completed within the Group s normal operating cycle of 2 to 3 years. Such land is classified as non-current asset and is stated at cost less accumulated impairment losses, if any. Land held for property development is reclassified as property development costs at the point when development activities have commenced and where it can be demonstrated that the development activities can be completed within the Group s normal operating cycle of 2 to 3 years. 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. (h) Property development costs Property development costs comprise costs associated with the acquisition of land and all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities. Property development costs not recognised as an expense is recognised as an asset and is stated at the lower of cost and net realisable value. The excess of revenue recognised in the profit or loss over billings to purchasers is shown as accrued billings under trade and other receivables and the excess of billings to purchasers over revenue recognised in the profit or loss is shown as progress billings under trade and other payables. (i) Intangible assets Intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less any accumulated amortisation and any accumulated impairment losses. Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred. Amortisation Amortisation is based on the cost of an asset less its residual value. Intangible assets with indefinite useful lives are not amortised but are tested for impairment annually and whenever there is an indication that they may be impaired. Other intangible assets are amortised from the date that they are available for use. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted, if appropriate. (j) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is measured based on weighted average cost formula, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of work-in-progress and finished goods, cost includes an appropriate share of production overheads based on normal operating capacity. 56

59 Notes to the Financial Statements 2. Significant Accounting Policies (continued) (j) Inventories (continued) 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. Developed properties Completed properties held for sale are stated at the lower of cost and net realisable value. Cost consists of costs associated with the acquisition of land, direct costs and appropriate proportions of common costs attributable to developing the properties to completion. (k) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, balances and deposits with banks. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits. (l) Impairment (i) Financial assets All financial assets (except for financial assets categorised as fair value through profit or loss and investments in subsidiaries) 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. Losses expected as a result of future events, no matter how likely, are not recognised. If any such objective evidence exists, then the impairment loss of the financial asset is estimated. An impairment loss in respect of loans and receivables is recognised in profit or loss and is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the asset s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset s carrying amount 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 the reversal is recognised in profit or loss. (ii) Other assets The carrying amounts of other assets (except for inventories, deferred tax asset and investment property measured at fair value) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. For 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. 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 its related cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cashgenerating units are allocated to reduce the carrying amounts of the assets in the cash-generating unit (groups of cash-generating units) on a pro rata basis. 57

60 Notes to the Financial Statements 2. Significant Accounting Policies (continued) (l) Impairment (continued) (i) Other assets (continued) 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 if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to profit or loss in the financial year in which the reversals are recognised. (m) Equity instruments Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently. (i) Ordinary shares Ordinary shares are classified as equity. (ii) Repurchase of share capital (treasury shares) When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares that are not subsequently cancelled are classified as treasury shares in the statement of changes in equity. Where treasury shares are sold or reissued subsequently, the difference between the sales consideration net of directly attributable costs and the carrying amount of the treasury shares is recognised in equity. (n) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. Warranties A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities. 58 (o) Revenue and other income (i) Goods sold Revenue from the sale of goods in the course of ordinary activities is measured at fair value of the consideration received or receivable, net of returns and allowances, trade discount and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred 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, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised. (ii) Services Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the end of the reporting period.

61 Notes to the Financial Statements 2. Significant Accounting Policies (continued) (o) Revenue and other income (continued) (iii) Property development Revenue from property development activities is recognised based on the stage of completion measured by survey of work completed. Where the financial outcome of a property 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 the development units sold are recognised as an expense in the period in which they are incurred. Any expected loss on a development project, including costs to be incurred over the defects liability period, is recognised immediately in profit or loss. (iv) Rental income Rental income from investment property and subleased property is recognised in profit or loss on a straightline basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. (v) Dividend income Dividend income is recognised in profit or loss on the date that the Group s or the Company s right to receive payment is established. (vi) Interest income Interest income is recognised as it accrues using the effective interest method in profit or loss. (p) Employee benefits (i) Short-term employee benefits Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. (ii) State plans The Group s contributions to statutory pension funds are charged to profit or loss in the financial year to which they relate. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. (q) Borrowing costs Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Borrowing costs directly attributable to the acquisition, construction or production of qualifying 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. 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. 59

62 Notes to the Financial Statements 2. Significant Accounting Policie (continued) (r) Tax expense Tax expense comprises current and deferred tax. Current tax and deferred tax are 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 financial years. Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period. Where investment properties are carried at their fair value in accordance with the accounting policy set out in Note 2(f), the amount of deferred tax recognised is measured using the tax rates that would apply on sale of those assets at their carrying value at the reporting date unless the property is depreciable and is held with the objective to consume substantially all of the economic benefits embodied in the property over time, rather than through sale. In all other cases, the amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. 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. (s) Earnings per ordinary share The Group presents basic and diluted earnings per share data for its ordinary shares ( EPS ). Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding adjusted for own shares held for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees. (t) Operating segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group s other components. An operating segment s operating results are reviewed regularly by the chief operating decision maker, which in this case is the Group Managing Director of the Group, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. 60

63 Notes to the Financial Statements 2. Significant Accounting Policies (continued) (u) Contingent liabilities Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of 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 liabilities unless the probability of outflow of economic benefits is remote. (v) Fair value measurement From 1 January 2013, the Group adopted FRS 13, Fair Value Measurement which prescribed that fair value of an asset or a liability, except for lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial asset, the fair value measurement takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. In accordance with the transitional provision of FRS 13, the Group applied the new fair value measurement guidance prospectively, and has not provided any comparative fair value information for new disclosures. The adoption of FRS 13 has not significantly affected the measurements of the Group s assets or liabilities other than the additional disclosures. 61

64 Notes to the Financial Statements 3. Property, Plant and Equipment Plant and Office Long term machinery, equipment, leasehold tools and furniture Motor Group land Buildings Renovation piping and fittings vehicles Computers Moulds Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Cost/Valuation At 1 October ,727 10,618 1,598 13,159 5,352 3,651 4, ,678 Additions , ,004 Disposals (391) - - (391) Write off - - (222) (254) (98) - (236) - (810) Exchange difference At 30 September 2013/ 1 October ,727 10,618 1,430 12,941 5,363 4,666 4, ,524 Additions - 7, , ,936 Disposals (30) (425) (40) - (495) Write off - - (275) (14) (546) - (186) - (1,021) Exchange difference (4) (3) (4) - (11) At 30 September ,727 18,391 1,288 12,927 5,096 4,776 5, ,933 62

65 Notes to the Financial Statements 3. Property, Plant and Equipment (continued) Plant and Office Long term machinery, equipment, leasehold tools and furniture Motor Group land Buildings Renovation piping and fittings vehicles Computers Moulds Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Depreciation At 1 October ,231 7,087 4,821 2,542 3, ,701 Depreciation for the financial year ,942 Disposals (391) - - (391) Write off - - (132) (254) (93) - (229) - (708) Exchange difference At 30 September 2013/ 1 October ,259 7,836 5,030 2,737 3, ,582 Depreciation for the financial year ,131 Disposals (28) (420) (39) - (487) Write off - - (235) (14) (478) - (184) - (911) Exchange difference (4) (2) (3) - (9) At 30 September ,134 8,754 4,792 2,962 4, ,306 Carrying amounts At 1 October ,565 10, , , ,977 At 30 September 2013/ 1 October ,403 10, , , ,942 At 30 September ,241 17, , ,814 1, ,627 63

66 Notes to the Financial Statements 3. Property, Plant and Equipment (continued) Plant and Office machinery equipment, Company tools and furniture Renovation piping and fittings Total RM 000 RM 000 RM 000 RM 000 Cost At 1 October 2012/30 September 2013/ 1 October ,785 Additions Write off (1) - - (1) At 30 September ,800 Depreciation At 1 October ,595 Depreciation for the financial year At 30 September 2013/1 October ,724 Depreciation for the financial year Write off (1) - - (1) At 30 September ,768 Carrying amounts At 1 October At 30 September 2013/1 October At 30 September

67 Notes to the Financial Statements 3. Property, Plant and Equipment (continued) 3.1 Property, plant and equipment under the revaluation model Included in the Group s property, plant and equipment are land and buildings valued at RM20,025,000 (2013: RM20,465,000) which was revalued in September 2011 by independent professionally qualified valuers based on comparison method. The professionally qualified valuers compared the land and buildings with similar properties that were either transacted recently or listed for sale within the same location or other comparable localities. In comparing properties, due consideration was given to factors such as location, size, building differences, improvement and amenities, time element and other relevant factors to arrive at the value. Had the buildings been carried under the cost model, the carrying amounts would have been RM14,888,000 (2013: RM15,262,000). 3.2 Securities Certain land and buildings of the Group totalling RM23,387,000 (2013: RM15,985,000) are charged to banks as security for credit facilities granted to subsidiaries of the Group (See Note 14). 3.3 Leasehold land Leasehold land of the Group with carrying amount of RM10,232,000 (2013: RM10,394,000) has an unexpired lease period of more than 50 years. 4. Investment Properties Group Company RM 000 RM 000 RM 000 RM 000 At 1 October 23,390 14,794 35,400 35,400 Additions 15,564 9, Disposals (Note 31.1) - (270) (30,700) - Fair value adjustment - (472) - - At 30 September 38,954 23,390 4,700 35,400 Included in the above are: At fair value At cost Leasehold land with unexpired lease period of more than 50 years - - 3,450 10,730 Buildings 14,052 14,052 1,250 24,670 14,052 14,052 4,700 35,400 Buildings under construction 24,902 9, ,954 23,390 4,700 35,400 65

68 Notes to the Financial Statements 4. Investment Properties (continued) 4.1 Investment properties under fair value model Investment properties carried at fair value comprise commercial properties that are leased to third parties (see Note 27). The investment properties are measured at fair value obtained from an external independent valuation firm having appropriate recognised professional qualifications and experience in the valuation of properties. The fair value is determined by the external independent valuation firm using the comparison method. 4.2 Investment properties under cost model Investment properties carried at cost comprise commercial properties under construction. The fair value of the investment properties under construction cannot be reliably determined, hence it is measured at cost until either its fair value becomes reliably determinable or construction is completed, whichever is earlier. 4.3 Transactions recognised in profit or loss The following are recognised in profit or loss in respect of investment properties: Group Company RM 000 RM 000 RM 000 RM 000 Rental income 1,554 1,310 2,953 2,629 Direct operating expenses - income generating investment properties Securities Certain land and buildings of the Group and of the Company totalling RM14,052,000 (2013: RM14,052,000) and Nil (2013: RM30,700,000) respectively are charged to banks as securities for credit facilities granted to subsidiaries of the Group (See Note 14). 4.5 Fair value information Fair value of investment properties are all categorised as Level 3. 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. Level 1 fair value Level 1 fair value is derived from quoted price (unadjusted) in active markets for identical investment properties that the entity can access at the measurement date. Level 2 fair value Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the investment property, either directly or indirectly. 66

69 Notes to the Financial Statements 4. Investment Properties (continued) 4.5 Fair value information (continued) Transfer between Level 1 and 2 fair values There is no transfer between Level 1 and 2 fair values during the financial year. Level 3 fair value Level 3 fair value is estimated using unobservable inputs for the investment property. The following table shows a reconciliation of Level 3 fair values: Group Company 2014 RM 000 RM 000 At 1 October 2013/30 September ,052 4,700 The following table shows the valuation techniques used in the determination of fair values within Level 3, as well as the significant unobservable inputs used in the valuation models. Significant Inter-relationship between Valuation Technique unobservable significant unobservable input inputs and fair value measurement The valuation method consider the fair Adjustment to the The estimated fair value value of similar properties that were listed historical sales would increase/(decrease) if: for sale/sold within the same locality or transaction price the adjustment made by the other comparable localities, size and etc. of property valuer were higher or lower as compared to the Group s and the in vicinity compared the historical sales transaction Company s investment properties. made by the valuer. prices were higher or lower Valuation processes applied by the Group for level 3 fair value The Group s and the Company s investment properties were valued during the year by independent professional valuation firms, using the comparison method of valuation. Assessment of the fair values of the Group s and the Company s investment properties is undertaken annually. The changes in level 3 fair values are analysed by the management based on the assessment undertaken. 5. Intangible Assets Group Acquired trademark RM 000 Costs At 1 October 2012/30 September 2013/1 October 2013/30 September Impairment losses At 1 October 2012/30 September 2013/1 October 2013/30 September Carrying amounts At 1 October 2012/30 September 2013/1 October 2013/30 September Impairment test for acquired trademark The MEC trademark which has been in use for more than 15 year is assessed to have an indefinite useful life as there is no foreseeable limit to the period over which the trademark is expected to generate net cash flow for the Group. The recoverable amount of the cash-generating unit of the MEC trademark was determined to be higher than its carrying amounts and no impairment loss was recognised. 67

70 Notes to the Financial Statements 6. Land Held for Property Development Group RM 000 RM 000 At 1 October 16,837 74,292 Transfer to property development costs (Note 9) - (57,455) At 30 September 16,837 16,837 Included in the above are: Freehold land 16,837 16, Investments in Subsidiaries Cost of Capital Company investment contribution Total RM 000 RM 000 RM 000 Cost At 1 October ,501 95, ,574 Addition 4,045 2,568 6,613 At 30 September 2013/1 October ,546 97, ,187 Addition (Note 7.1) ,090 42,190 At 30 September , , ,377 Impairment losses At 1 October 2012/30 September 2013/ 1 October 2013/30 September ,057 1,657 Carrying amount At 1 October ,901 94, ,917 At 30 September 2013/1 October ,946 96, ,530 At 30 September , , ,720 Note 7.2 Note Additions Included in addition of capital contribution during the financial year is the remaining consideration receivable from a wholly-owned subsidiary for the disposal of investment properties amounting to RM42,090,000 (Note 31.1) which is deemed as capital contribution to the said wholly-owned subsidiary. 68

71 Notes to the Financial Statements 7. Investments in Subsidiaries (continued) 7.2 Cost of investment Details of the subsidiaries are as follows: Effective Country of Principal ownership Name of subsidiary incorporation activities interest and voting interest % % Fiamma Sdn. Bhd. Malaysia Distribution of electrical home appliances Fimaco Sdn. Bhd. Malaysia Distribution of electrical home appliances Active Edge Sdn. Bhd. Malaysia Property development Fiamma Trading Sdn. Bhd. Malaysia Distribution of electrical home appliances, sanitaryware and bathroom accessories Itatech Sdn. Bhd.* Malaysia Dormant FHB Management Sdn. Bhd. Malaysia Property management Fiamma Land Sdn. Bhd. Malaysia Property development Fiamma Development Sdn. Bhd. Malaysia Property development Enex Sdn. Bhd.* Malaysia Dormant Kingston Medical Supplies Singapore Distribution of (Private) Limited* medical devices and healthcare products Uniphoenix Jaya Sdn. Bhd.* Malaysia Property development Oaksvilla Sdn. Bhd.* Malaysia Property development Affluent Crafts Sdn. Bhd. Malaysia Property development Fiamma Properties Sdn. Bhd.* Malaysia Dormant Sterling Skills Sdn. Bhd.* Malaysia Dormant Ebac Home Sdn. Bhd.# Malaysia Distribution of home furniture, electrical home appliances and fittings Sunrise Stream Sdn. Bhd.** Malaysia Dormant

72 Notes to the Financial Statements 7. Investments in Subsidiaries (continued) 7.2 Cost of investment (continued) Details of the subsidiaries are as follows: (continued) Effective Country of Principal ownership Name of subsidiary incorporation activities interest and voting interest Subsidiaries of Fiamma Sdn. Bhd % % Fiamma Logistics Sdn. Bhd. Malaysia Provision of warehousing and logistics services Exact Quality Sdn. Bhd. Malaysia Provision of after sales services of electrical home appliances Ebac Kitchen Sdn. Bhd. Malaysia Distribution of pre-fabricated kitchen cabinets and electrical home appliances Subsidiary of Fiamma Trading Sdn. Bhd. Haustern Sdn. Bhd. Malaysia Distribution of electrical home appliances, sanitaryware and bathroom accessories Subsidiary of Kingston Medical Supplies (Private) Limited Kinsmedic Sdn. Bhd. Malaysia Distribution of medical devices and healthcare products * Not audited by KPMG. ** The effective ownership interest held in Sunrise Stream Sdn. Bhd. ( Sunrise Stream ) is Nil in 2014 and 2013 as Sunrise Stream is under liquidation and the Company can no longer exercise significant influence over Sunrise Stream. Sunrise Stream had ceased operations in April The Final Meeting of Sunrise Stream was held in September 2014 and Sunrise Stream is expected to be dissolved in December # Ebac Home increased its issued and paid up share capital from RM2 to RM100,000 during the financial year. 7.3 Capital contribution Capital contribution represents the difference between the cost and fair value of amount due from subsidiaries on initial recognition which has been recognised as additional capital investment in the subsidiaries of the Company. 70

73 Notes to the Financial Statements 7. Investments in Subsidiaries (continued) 7.4 Non-controlling interest in subsidiaries The Group s subsidiaries that have material non-controlling interests ( NCI ) are as follows: Kingston Medical Fiamma Supplies Other Trading (Private) subsidiaries Sdn. Bhd. Limited with and its and its immaterial 2014 subsidiary subsidiary NCI Total NCI percentage of ownership interest and voting interest 30% 30% RM 000 RM 000 RM 000 RM 000 Carrying amount of NCI 9,425 6,838 (51) 16,212 Profit allocated to NCI 2,490 1,587-4,077 Summarised financial information before intra-group elimination As at 30 September Non-current assets 429 8,561 Current assets 41,362 24,982 Non-current liabilities (78) (3,646) Current liabilities (10,296) (7,104) Net assets 31,417 22,793 Financial year ended 30 September Revenue 59,290 47,101 Profit for the financial year 8,302 5,290 Total comprehensive income 8,302 5,201 Cash flows from operating activities 6,986 4,249 Cash flows from investing activities (55) (2,919) Cash flows from financing activities (6,330) (3,768) Net increase/(decrease) in cash and cash equivalents 601 (2,438) Dividends paid to NCI 1,

74 Notes to the Financial Statements 7. Investments in Subsidiaries (continued) 7.4 Non-controlling interest in subsidiaries (continued) Kingston Medical Fiamma Supplies Other Trading (Private) subsidiaries Sdn. Bhd. Limited with and its and its immaterial 2013 subsidiary subsidiary NCI Total NCI percentage of ownership interest and voting interest 30% 30% RM 000 RM 000 RM 000 RM 000 Carrying amount of NCI 8,204 5,748 (51) 13,901 Profit allocated to NCI 2,030 1,323-3,353 Summarised financial information before intra-group elimination As at 30 September Non-current assets Current assets 39,444 29,437 Non-current liabilities - (42) Current liabilities (12,556) (10,618) Net assets 27,349 19,160 Financial year ended 30 September Revenue 53,645 40,260 Profit for the financial year 6,766 4,408 Total comprehensive income 6,766 4,673 Cash flows from operating activities 1,588 5,234 Cash flows from investing activities Cash flows from financing activities (73) (478) Net increase in cash and cash equivalents 2,055 5,243 Dividends paid to NCI

75 Notes to the Financial Statements 7. Investments in Subsidiaries (continued) 7.4 Non-controlling interest in subsidiaries (continued) The non-controlling interest in Fiamma Trading Sdn. Bhd. and its subsidiary include the non-controlling interest in Fiamma Trading Sdn. Bhd. and Haustern Sdn. Bhd., whereas the non-controlling interest in Kingston Medical Supplies (Private) Limited and its subsidiary include the non-controlling interest in Kingston Medical Supplies (Private) Limited and Kinsmedic Sdn. Bhd. 8. Deferred Tax (Assets)/Liabilities Recognised deferred tax (assets) and liabilities Assets Liabilities Net Group RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Property, plant and equipment (45) (41) 1,299 1,342 1,254 1,301 Other items (583) (102) 1,589 1,854 1,006 1,752 Net tax (assets)/liabilities (628) (143) 2,888 3,196 2,260 3,053 Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items (stated at gross): Group RM 000 RM 000 Unutilised tax losses (150) (150) The unutilised tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of this item because it is not probable that future taxable profit will be available against which the group entities can utilise the benefits there from. Movement in temporary differences during the financial year Recognised Recognised At Recognised At in profit directly / in profit At or loss in equity or loss Group RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Property, plant and equipment 4,547 (3,246) - 1,301 (47) 1,254 Other items 755 1,351 (354) 1,752 (746) 1,006 5,302 (1,895) (354) 3,053 (793) 2,260 Note 21 Note 21 Company Property, plant and equipment 1,207 (1,207) Note 21 Note 21 73

76 Notes to the Financial Statements 9. Property Development Costs Group RM 000 RM 000 At 1 October 112,818 52,126 Additions 59,535 28,917 Transfer from land held for property development (Note 6) - 57,455 Charged to profit or loss (50,880) (25,680) At 30 September 121, ,818 Included in the above are: Land 73,212 73,212 Development costs 113,744 60,905 Borrowing cost capitalised Accumulated costs charged to profit or loss (66,035) (21,650) 121, , Securities In 2013, land under development of the Group amounting to RM13,738,000 was charged to banks as securities for credit facilities granted to a subsidiary of the Group (see Note 14). The security has been discharged in August Inventories Group RM 000 RM 000 Spare parts and consumables Work-in-progress Finished goods 51,378 57,889 Developed properties held for sale 890 1,149 53,236 59,586 Recognised in profit and loss: Inventories recognised as cost of sales 168, ,506 Write-down to net realisable value 1, Inventories written off The inventories written down and written off are included in cost of sales. 74

77 Notes to the Financial Statements 11. Trade and Other Receivables Group Company Note RM 000 RM 000 RM 000 RM 000 Trade Trade receivables ,401 81, Accrued billings 1,803 2, ,204 84, Non-trade Amount due from subsidiaries ,960 7,250 Other receivables and deposits ,544 1, Derivative financial assets ,667 1,935 15,024 7,282 88,871 86,019 15,024 7,282 Included in the above are: Loans and receivables 88,748 85,589 15,024 7,282 Financial assets at fair value through profit or loss - held for trading, including derivatives ,871 86,019 15,024 7, Amount due from subsidiaries The amount due from subsidiaries is unsecured, interest free and is repayable on demand Other receivables and deposits Included in other receivables and deposits is a deposit paid by a subsidiary for the acquisition of freehold land amounting to RM3,009, Derivative financial assets Nominal Nominal value Assets value Assets Group RM 000 RM 000 RM 000 RM 000 Derivatives held for trading at fair value through profit or loss - Forward exchange contracts 3, , Forward exchange contracts are used to manage the foreign currency exposure arising from the Group s payables denominated in currencies other than the functional currencies of the Group. Most forward exchange contracts have maturities of less than 1 year after the end of the reporting period. Where necessary, the forward contracts are rolled over at maturity. 75

78 Notes to the Financial Statements 12. Cash and Cash Equivalents Group Company RM 000 RM 000 RM 000 RM 000 Deposits placed with licensed banks 72,387 51,398-3,026 Cash and bank balances 42,322 39,881 6,724 3, ,709 91,279 6,724 6,593 Included in cash and bank balances of the Group is an amount of RM1,197,000 (2013: RM880,000), the utilisation of which is subject to the Housing Developers (Housing Development Account) (Amendment) Regulations Capital and Reserves 13.1 Share capital Group and Company Number Number Amount of shares Amount of shares RM RM Ordinary shares of RM1 each Authorised 200, , , ,000 Issued and fully paid At 1 October 141, , , ,567 Shares issued due to exercise of warrants 2,513 2,513 5,005 5,005 At 30 September 144, , , ,572 The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company and rank equally with regard to the Company s residual assets. In respect of the Company s treasury shares that are held by the Group (see below), all rights are suspended until those shares are reissued. During the financial year, 2,512,500 (2013: 5,005,000) warrants were exercised by registered shareholders to subscribe for 2,512,500 (2013: 5,005,000) new ordinary shares at a price of RM1.00 (2013: RM1.00) per ordinary share. New ordinary shares issued during the year confers the holders to one vote per share at meetings of the Company and rank equally with the existing issued and paid up ordinary shares with regards to the Company s residual assets. At the end of the financial year, 33,470,900 (2013: 35,983,400) warrants remained unexercised. 76

79 Notes to the Financial Statements 13. Capital and Reserves (continued) 13.2 Treasury shares The owners of the Company, by a special resolution passed in the Annual General Meeting held on 19 February 2014, approved the Company s plan to repurchase its own shares. The Directors of the Company are committed to enhancing the value of the Company to its owners and believe that the repurchase plan can be applied in the best interests of the Company and its owners. For the financial year ended 30 September 2014, the Company did not repurchase any of its issued share capital from the open market. The total number of shares repurchased from the open market as at the end of the financial year was 7,234,900 (2013: 7,234,900). These shares repurchased are held as treasury shares Share premium Share premium comprises the premium paid on subscription of shares in the Company over and above the par value of the shares Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations Revaluation reserve The revaluation reserve relates to the revaluation of property, plant and equipment at interval of 5 years. The previous revaluation was carried out in Borrowings Group Company RM 000 RM 000 RM 000 RM 000 Non-current Secured: Term loan 3, Current Unsecured: Bankers acceptances 32,159 41, Trust receipts 1,182 1, Revolving credits 8, Secured: Bank overdraft 9,403 5, Revolving credits 13,700 16,700 8,700 5,500 Term loan ,350 65,421 8,700 5,500 68,936 65,421 8,700 5,500 77

80 Notes to the Financial Statements 14. Borrowings (continued) Securities The borrowings are secured over: i) a leasehold land with a block of 11 storey office building and one warehouse block erected thereon, held under HS(D) 51592, Lot No. PT44653 in the Mukim of Batu, Kuala Lumpur, known as Wisma Fiamma, No. 20, Jalan 7A/62A, Bandar Manjalara, Kuala Lumpur registered in the Company s name (see Note 3 and Note 4); and ii) 2 units of office and warehouse situated at 35, Tannery Road, Ruby Industrial Complex, Singapore registered in a subsidiary s name (see Note 3). iii) In 2013, six (6) parcels of freehold land under development held under Geran 8518, 8519, 8520, 36116, and H.S.(D) , Lot No. 1400, 1401, 1402, 4110, 1106 and PT142, all located in Seksyen 46, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Negeri Wilayah Persekutuan, registered in the subsidiary s name. The security has been discharged in August 2014 (see Note 9). 15. Trade and Other Payables Group Company Note RM 000 RM 000 RM 000 RM 000 Trade Trade payables 13,720 13, Progress billings 5, ,780 13, Non-trade Other payables 6,161 5, Deposit received Accrued expenses ,361 27, ,369 33, ,149 47, Accrued expenses mainly related to selling expenses. 16. Provision for Warranties The provision for warranties relates to electrical home appliances sold by the Group. The provision is based on estimates made from historical warranty data associated with similar products and services. The Group expects to incur most of the liability over the next financial year. Note Group RM 000 RM 000 At 1 October Provisions made during the financial year Provisions used during the financial year (541) (394) At 30 September

81 Notes to the Financial Statements 17. Revenue Group Company RM 000 RM 000 RM 000 RM 000 Sales of goods 274, , Rental income from investment properties 1,554 1,310 2,953 2,629 Property development 62,168 28, Dividends ,023 24, , ,884 13,976 26, Results from Operating Activities Results from operating activities are arrived at after charging: Auditors remuneration: Group Company Note RM 000 RM 000 RM 000 RM Audit fees KPMG in Malaysia - current year under/(over) accrued in prior year 5 (1) - - Other auditors Non-audit fees KPMG in Malaysia Bad debts written off Depreciation of property, plant and equipment 3 3,131 2, Fair value adjustment on investment properties Impairment loss on trade receivables Losses on foreign exchange: - realised unrealised Property, plant and equipment written off Provision for warranties Personnel expenses (including key management personnel): - contributions to Employees Provident Fund 3,508 3, wages, salaries and others 29,019 26, Rental expenses in respect of: - property 5,390 3, plant and machinery

82 Notes to the Financial Statements 18. Results from Operating Activities (continued) Group Company and after crediting: Note RM 000 RM 000 RM 000 RM 000 Bad debts recovery Dividend income from subsidiaries ,023 24,210 Gain on disposal of: - investment property , property, plant and equipment Gains on foreign exchange: - realised 640 1, unrealised Interest income of financial assets that are not at fair value through profit or loss 2,423 1, Rental income from investment properties 1,554 1,310 2,953 2,629 Reversal of impairment losses on trade receivables Unrealised gains on derivative financial assets Finance Costs Group Company RM 000 RM 000 RM 000 RM 000 Interest expense on financial liabilities that are not at fair value through profit or loss: - Bankers acceptance 1,102 1, Bank overdraft Revolving credits Trust receipts Term loan ,698 1, Other finance costs Recognised in profit or loss 2,093 2,

83 Notes to the Financial Statements 20. Key Management Personnel Compensation The key management personnel compensations are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Directors of the Company - Fees Remuneration 1,637 1, Other short-term employee benefits (including estimated monetary value of benefits-in-kind) Directors of the subsidiaries 2,681 2, Fees Remuneration Other short-term employee benefits (including estimated monetary value of benefits-in-kind) Other key management personnel: 1, Remuneration 1,559 1, Other short-term employee benefits (including estimated monetary value of benefits-in-kind) ,198 2, ,074 5, Other key management personnel comprise persons other than the Directors of Group entities, having authority and responsibility for planning, directing and controlling the activities of the entity either directly or indirectly. The estimated monetary value of Directors benefit-in-kind is RM60,000 (2013: RM51,000). 81

84 Notes to the Financial Statements 21. Tax Expense Recognised in profit or loss Group Company RM 000 RM 000 RM 000 RM 000 Income tax expense 17,709 12, (720) Major components of income tax expense include: Current tax expense Malaysian - current year 18,268 13, prior year (43) Overseas - current year prior year (29) (76) - - Total current tax recognised in profit or loss 18,502 13, Deferred tax expense (Note 8) Origination and reversal of temporary differences (793) (1,895) - (1,207) Total income tax expense 17,709 12, (720) Reconciliation of tax expense Profit before taxation 63,182 50,146 25,090 25,478 Income tax using Malaysian tax rate of 25% 15,795 12,536 6,273 6,369 Effect of tax rates in foreign jurisdiction* (271) (241) - - Non-deductible expenses 2, Tax exempt income (122) (78) (5,831) (6,052) Changes in deferred tax liability (1,207) Other items - (617) ,781 12, (720) Over provision in prior years (72) (32) ,709 12, (720) * A subsidiary operates in a tax jurisdiction with lower tax rates. 82

85 Notes to the Financial Statements 22. Earnings per Ordinary Share Basic earnings per ordinary share The calculation of basic earnings per ordinary share at 30 September 2014 was based on the profit attributable to owners of the Company and the weighted average number of ordinary shares outstanding, calculated as follows: Group RM 000 RM 000 Profit for the financial year attributable to owners of the Company 41,396 34, Weighted average number of ordinary shares net of treasury shares: At 1 October 134, ,332 Effect of exercise of warrants 1,465 2,176 At 30 September 135, , Sen Sen Basic earnings per ordinary share Diluted earnings per ordinary share The calculation of diluted earnings per ordinary share at 30 September 2014 was based on profit attributable to owners of the Company and the weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows: Group Weighted average number of ordinary shares (basic) at 30 September 135, ,508 Effect of exercise of warrants 15,592 11,817 Weighted average number of ordinary shares (diluted) at 30 September 151, , Sen Sen Diluted earnings per ordinary share

86 Notes to the Financial Statements 23. Dividends Dividends recognised by the Company: Sen Total Date of per share amount payment RM Final 2013 ordinary (single tier tax exempt) 5.0 6,843 4 April 2014 First interim 2014 ordinary (single tier tax exempt) 3.0 4, June , Final 2012 ordinary (single tier tax exempt) 7.0 9,193 5 April 2013 First interim 2013 ordinary (single tier tax exempt) 3.0 4, June ,223 After the end of the reporting period, the following dividends were proposed by the Directors. These dividends will be recognised in the subsequent financial period upon approval by the owners of the Company. Sen per share Total amount RM 000 Final 2014 ordinary (single tier tax exempt) 6.0 8, Operating Segments The Group has three 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 based on the Group s management and internal reporting structure. For each of the strategic business units, the Group Managing Director (the chief operating decision maker) reviews internal management reports at least on a monthly basis. The following summary describes the operations in each of the Group s reportable segments: Investment holding and property investment Property development Trading and services The long term investment in unquoted shares and property investment Property development Distribution and servicing of electrical home appliances, sanitaryware, other household products, bathroom accessories, home furniture, medical devices and healthcare products Other non-reportable segments comprise operations related to corporate assets. Performance is measured based on segment profit before tax, interest and depreciation as included in the internal management reports that are reviewed by the Group Managing Director. 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.

87 Notes to the Financial Statements 24. Operating Segments (continued) Segment assets The total of segment assets is measured based on all assets of a segment, as included in the internal management reports that are reviewed by the Group Managing Director. Segment total assets are used to measure the return of assets of each segment. Segment liabilities The total of segment liabilities is measured based on all liabilities of a segment, as included in the internal management reports that are reviewed by the Group Managing Director. Segment total liabilities are used to measure the gearing of each segment. Investment holding Trading and Property and property investment development services Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Segment profit 25,981 26,714 27,873 10,947 43,488 51,645 97,342 89,306 Included in the measure of segment profit are: Revenue from external customers 1,554 1,310 62,168 28, , , , ,884 Inter-segment revenue 14,993 27,820 23,541 14,125 14,880 16,208 53,414 58,153 Inventories written down and written off (2,368) (1,254) (2,368) (1,254) Not included in the measure of segment profit but provided to Group Managing Director: Depreciation (495) (578) (97) (120) (2,539) (2,244) (3,131) (2,942) Interest expense (266) (153) (261) (384) (1,171) (1,161) (1,698) (1,698) Interest income , ,423 1,268 Segment assets 248, , , , , , , ,496 Included in the measure of segment assets are: Deferred tax assets Tax recoverable Segment liabilities (44,969) (18,555) (62,724) (53,086) (84,570) (83,503) (192,263) (155,144) 85

88 Notes to the Financial Statements 24. Operating Segments (continued) Reconciliations of reportable segment revenues, profit or loss, assets and other material items RM 000 RM 000 Profit or loss Total profit or loss for reportable segments 97,342 89,306 Elimination of inter-segment profits (31,754) (35,788) Depreciation (3,131) (2,942) Interest expense (1,698) (1,698) Interest income 2,423 1,268 Consolidated profit before tax 63,182 50,146 External Interest Interest Segment Segment revenue Depreciation expense income assets liabilities 2014 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Total reportable segments 338,161 (3,131) (1,698) 2, ,388 (192,263) Other non-reportable segments (6,007) Elimination of inter-segment transactions and balances (278,497) 63,760 Consolidated total 338,161 (3,131) (1,698) 2, ,580 (134,510) 2013 Total reportable segments 292,884 (2,942) (1,698) 1, ,496 (155,144) Other non-reportable segments (4,885) Elimination of inter-segment transactions and balances (193,416) 41,600 Consolidated total 292,884 (2,942) (1,698) 1, ,290 (118,429) Geographical segments The Group operates primarily in Malaysia and as such, no geographical segment disclosures are made. Major customers The Group does not have any major customer with revenue equal or more than 10% of the Group s total revenue. 86

89 Notes to the Financial Statements 25. Financial Instruments 25.1 Categories of financial instruments The table below provides an analysis of financial instruments categorised as follows: (a) Loans and receivables ( L&R ); (b) Financial liabilities measured at amortised cost ( FL ); and (c) Fair value through profit or loss ( FVTPL ) - Held for trading, including derivatives ( HFT ). Group Carrying FVTPL Note amount L&R FL - HFT Financial assets RM 000 RM 000 RM 000 RM Trade and other receivables 11 88,871 88, Cash and cash equivalents , , , , Trade and other receivables 11 86,019 85, Cash and cash equivalents 12 91,279 91, , , Financial liabilities 2014 Borrowings 14 (68,936) - (68,936) - Trade and other payables 15 (59,149) - (59,149) - (128,085) - (128,085) Borrowings 14 (65,421) - (65,421) - Trade and other payables 15 (47,713) - (47,713) - (113,134) - (113,134) - 87

90 Notes to the Financial Statements 25. Financial Instruments (continued) 25.1 Categories of financial instruments (continued) Company Financial assets 2014 Carrying Note amount L&R FL RM 000 RM 000 RM 000 Trade and other receivables 11 15,024 15,024 - Cash and cash equivalents 12 6,724 6, ,748 21,748 - Trade and other receivables 11 7,282 7,282 - Cash and cash equivalents 12 6,593 6,593-13,875 13,875 - Financial liabilities 2014 Borrowings 14 (8,700) - (8,700) Trade and other payables 15 (462) - (462) (9,162) - (9,162) 2013 Borrowings 14 (5,500) - (5,500) Trade and other payables 15 (379) - (379) (5,879) - (5,879) 25.2 Net gains and losses arising from financial instruments Net gains/(losses) arising on: Group Company RM 000 RM 000 RM 000 RM 000 Loans and receivables 2, Financial liabilities measured at amortised cost (1,700) (698) (266) (153) Fair value through profit or loss - held for trading, including derivatives Financial risk management The Group and the Company have exposure to the following risks from their use of financial instruments: Credit risk Liquidity risk Market risk

91 Notes to the Financial Statements 25. Financial Instruments (continued) 25.4 Credit risk Credit risk is the risk of a financial loss to the Group and the Company 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 trade receivables from customers. The Company s exposure to credit risk arises principally from amount due from subsidiaries and financial guarantees given to banks for credit facilities granted to subsidiaries. Trade receivables Risk management objectives, policies and processes for managing the risk Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. For trading and services segment, normally financial guarantees given by banks, shareholders or directors of customers are obtained, and credit evaluations are performed on customers requiring credit over a certain amount. For property development segment, vacant procession of properties sold are not delivered until full settlement of the purchase consideration. In the event of a default by the purchaser, the sales and purchase agreement for the property sold would be terminated and the subject property will be resold to other purchasers. Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk arising from trade receivables is represented by the carrying amounts in the statements of financial position. Management has taken reasonable steps to ensure that trade receivables that are neither past due nor impaired are measured at their realisable values. A significant portion of trade receivables for trading and services segment are regular customers that have been transacting with the Group whilst significant portion of trade receivables for property development segment are purchasers that are backed by financiers. The Group uses ageing analysis to monitor the credit quality of the trade receivables. Any trade receivables having significant balances past due more than 90 days or not backed by financier, in the case of trade receivables from property development segment, which are deemed to have higher credit risk, are monitored individually. For the trading and services segment, the Group receives financial guarantees given by banks, shareholders or directors of customers in managing exposure to credit risks. At the end of the reporting period, trade receivables amounting to RM51,299,000 (2013: RM49,127,000) are supported by financial guarantees given by banks, shareholders or directors of the customers. For the property development segment, trade receivables amounting to RM1,847,000 (2013: RM4,018,000) are owing from buyers that are backed by financiers. The remaining balance of trade receivables are not secured by any collateral or supported by any other credit enhancements. The exposure of credit risk for trade receivables as at the end of the reporting period mainly arose domestically. Impairment losses The Group maintains an ageing analysis in respect of trade receivables only. The ageing of trade receivables as at the end of the reporting period was: Group Individual Gross impairment Net 2014 RM 000 RM 000 RM 000 Not past due 55,928-55,928 Past due 1-60 days 21,732-21,732 Past due days 1,862 (12) 1,850 Past due more than 90 days 3,294 (403) 2,891 82,816 (415) 82,401 Note 11 89

92 Notes to the Financial Statements 25. Financial Instruments (continued) 25.4 Credit risk (continued) Trade receivables (continued) Impairment losses (continued) Group Individual Gross impairment Net 2013 RM 000 RM 000 RM 000 Not past due 54,626 (68) 54,558 Past due 1-60 days 21,336-21,336 Past due days 2,094-2,094 Past due more than 90 days 4,173 (619) 3,554 82,229 (687) 81,542 Note 11 The movements in the allowance for impairment losses of trade receivables during the financial year were: Note Group RM 000 RM 000 At 1 October Impairment loss recognised Impairment loss reversed 18 (60) (97) Impairment loss written off (421) (538) At 30 September The allowance account in respect of trade receivables is used to record impairment losses. Unless the Group is satisfied that recovery of the amount is possible, the amount considered irrecoverable is written off against the trade receivables directly. Financial guarantees Risk management objectives, policies and processes for managing the risk The Company provides financial guarantees to banks in respect of banking facilities granted to certain subsidiaries. The Company monitors the results of the subsidiaries and repayments of banking facilities made by the subsidiaries on an ongoing basis. 90

93 Notes to the Financial Statements 25. Financial Instruments (continued) 25.4 Credit risk (continued) Financial guarantees (continued) Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk as represented by the outstanding banking facilities of the subsidiaries is as follows: Company RM 000 RM 000 Corporate guarantees issued to financial institutions for bank facilities granted to its subsidiaries 60,236 59,921 As at the end of the reporting period, there was no indication that any subsidiary would default on repayment. The financial guarantees have not been recognised as the fair value on initial recognition was not material. Inter-company loans and advances Risk management objectives, policies and processes for managing the risk The Company provides unsecured loans and advances to subsidiaries. The Company monitors the results of the subsidiaries regularly. Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position. Loans and advances are only provided to subsidiaries which are wholly-owned by the Company. Impairment losses As at the end of the reporting period, there was no indication that the loans and advances to the subsidiaries are not recoverable. The Company does not specifically monitor the ageing of current advances to subsidiaries. Nevertheless, these advances are not overdue Liquidity risk Liquidity risk is the risk that the Group and the Company will not be able to meet their financial obligations as they fall due. The Group s and the Company s exposure to liquidity risk arises principally from their trade and other payables and borrowings. The Group and the Company maintain a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that they will have sufficient liquidity to meet their liabilities when they fall due. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts. 91

94 Notes to the Financial Statements 25. Financial Instruments (continued) 25.5 Liquidity risk (continued) Maturity analysis The table below summarises the maturity profile of the Group s and the Company s financial liabilities as at the end of the reporting period based on undiscounted contractual payments: Group Carrying Contractual Contractual More amount interest cash Under 1-5 than rate flows 1 year years 5 years 2014 Non-derivative financial liabilities Revolving credit RM 000 % RM 000 RM 000 RM 000 RM secured 13, ,845 13, unsecured 8, ,108 8, Bank overdraft - secured 9, ,403 9, Bankers acceptance - unsecured 32, ,171 32, Trust receipts - unsecured 1, ,182 1, Term loan - secured 4, ,619 1,005 3,614 - Trade and other payables 59,149-59,149 59, Derivative financial assets 128, , ,863 3,614 - Forward exchange contract (net settled) - inflow (123) - (123) (123) , , ,740 3, Non-derivative financial liabilities Revolving credit - secured 16, ,915 16, Bank overdraft - secured 5, ,796 5, Bankers acceptance - unsecured 41, ,315 41, Trust receipts - unsecured 1, ,626 1, Trade and other payables 47,713-47,713 47, , , , Derivative financial assets Forward exchange contract (net settled) - inflow (430) - (430) (430) , , ,

95 Notes to the Financial Statements 25. Financial Instruments (continued) 25.5 Liquidity risk (continued) Maturity analysis (continued) Company Carrying Contractual Contractual More amount interest cash Under 1-5 than rate flows 1 year years 5 years 2014 Non-derivative financial liabilities RM 000 % RM 000 RM 000 RM 000 RM 000 Revolving credit - secured 8, ,773 8, Trade and other payables ,162 9,235 9, Non-derivative financial liabilities Revolving credit - secured 5, ,567 5, Trade and other payables ,879 5,946 5, Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and other prices will affect the Group s and the Company s financial position or cash flows Currency risk The Group is exposed to foreign currency risk on purchases that are denominated in a currency other than the respective functional currencies of Group entities. The currencies giving rise to this risk are primarily U.S. Dollar ( USD ) and Singapore Dollar ( SGD ). Risk management objectives, policies and processes for managing the risk The Group s exposure to foreign currency risk is monitored on an ongoing basis and the Group will use forward exchange contracts to hedge its foreign currency risk when necessary. Forward exchange contracts, if any, would have maturities of less than one year. Where necessary, the forward exchange contracts are rolled over at maturity. 93

96 Notes to the Financial Statements 25. Financial Instruments (continued) 25.6 Market risk (continued) Currency risk (continued) Exposure to foreign currency risk The Group s exposure to foreign currency (a currency which is other than the functional currencies of the Group entities) risk, based on carrying amounts as at the end of the reporting period was: Group RM 000 RM 000 Balances recognised in the statement of financial position Trade payables - denominated in USD (85) (2,959) Trade payables - denominated in SGD - (3,604) Foreign exchange contracts - denominated in USD Net exposure 38 (6,133) Currency risk sensitivity analysis Foreign currency risk arises from Group entities which have a Ringgit Malaysia ( RM ) functional currency. The exposure to currency risk of Group entities which do not have a RM functional currency is not material and hence, sensitivity analysis is not presented. A 10% (2013: 10%) weakening of the RM against the following currencies at the end of the reporting period would have decreased post-tax profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. This analysis assumes that all other variables, in particular interest rates, remained constant and ignores any impact of forecasted sales and purchases. Profit or loss Group RM 000 RM 000 USD (3) 222 SGD A 10% (2013: 10%) strengthening of the RM against the above currencies at the end of the reporting period would have had equal but opposite effect on the above currencies to the amounts show above, on the basis that all other variables remained constant 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 variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Risk management objectives, policies and processes for managing the risk The Group adopts a practice to continuously seek alternative banking facilities which provide competitive interest rates to finance and/or refinance its working capital requirements. 94

97 Notes to the Financial Statements 25. Financial Instruments (continued) 25.6 Market risk (continued) Interest rate risk (continued) Exposure to interest rate risk The interest rate profile of the Group s and the Company s significant interest-bearing financial instruments, based on carrying amounts as at the end of the reporting period was: Group Company RM 000 RM 000 RM 000 RM 000 Fixed rate instruments Financial assets 72,387 51,398-3,026 Financial liabilities (59,533) (59,625) (8,700) (5,500) Variable rate instruments 12,854 (8,227) (8,700) (2,474) Financial liabilities (9,403) (5,796) - - Interest rate risk sensitivity analysis Fair value sensitivity analysis for fixed rate instruments The Group and the Company do not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss. Cash flow sensitivity analysis for variable rate instruments A change in interest rates at the end of the reporting period would not significantly affect profit or loss in view that variable rate financial liabilities are not significant as at the reporting date Fair value information The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowings reasonably approximate fair values due to the relatively short term nature of these financial instruments. The table below analyses financial instruments not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the statement of financial position. Group Fair value of financial instruments Carrying 2014 Level 1 Level 2 Level 3 Total amount RM 000 RM 000 RM 000 RM 000 RM 000 Financial instruments carried at fair value Financial assets Forward exchange Contracts Financial instruments not carried at fair value Financial liabilities Term loan - - 4,340 4,340 4,492 * Comparative figures have not been analysed by levels, by virtue of transitional provision given in Appendix C2 of FRS

98 Notes to the Financial Statements 25. Financial Instruments (continued) 25.7 Fair value information (continued) 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. Level 1 fair value Level 1 fair value is derived from quoted price (unadjusted) in active markets for identical financial assets or liabilities that the entity can access at the measurement date. Level 2 fair value Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the financial assets or liabilities, either directly or indirectly. Derivatives The fair value of forward exchange contracts is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds). Transfers between Level 1 and Level 2 fair values There has been no transfer between Level 1 and 2 fair values during the financial year (2013: no transfer in either directions). Level 3 fair value Level 3 fair value is estimated using unobservable inputs for the financial assets and liabilities. Fair values within Level 3 are determined using the discounted cash flows valuation technique. 26. Capital Management The Group s objectives when managing capital is to maintain a strong capital base and safeguard the Group s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Directors monitor the adequacy of capital on an on-going basis and are determined to maintain an optimal debt-to-equity ratio that complies with debt covenants and regulatory requirements. During the financial year, the Group s strategy, which was unchanged from 2013, was to maintain the gearing ratio of below 1. The gearing ratios at 30 September 2014 and 30 September 2013 were as follows: Group RM 000 RM 000 Total borrowings (Note 14) 68,936 65,421 Total equity attributable to owners of the Company 320, ,960 Gearing ratio (times)

99 Notes to the Financial Statements 26. Capital Management (continued) There was no change in the Group s approach to capital management during the financial year. Under the requirement of Bursa Malaysia Practice Note No. 17/2005, the Company is required to maintain a consolidated shareholders equity equal to or not less than 25 percent of the issued and paid-up capital (excluding treasury shares) and such shareholders equity is not less than RM40 million. The Company has complied with this requirement. Certain subsidiaries are required to maintain a gearing ratio of not exceeding 1.5:1 to comply with a bank covenant; failing which, the bank may call an event of default. These subsidiaries have not breached this covenant at the end of the reporting period. 27. Operating Leases Leases as lessee Non-cancellable operating lease rentals are payable as follows: Group RM 000 RM 000 Less than one year Between one and five years The Group leased commercial properties under operating leases. The leases typically run for an initial period of one year, with an option to renew the leases after the date of expiration. None of the leases include contingent rentals. Leases as lessor The Group leases out its investment properties under operating leases (see Note 4). The future minimum lease receivables under non-cancellable leases are as follows: Group RM 000 RM 000 Less than one year 1,427 1,436 Between one and five years ,392 2,395 Each of the leases contains an initial non-cancellable period ranging between 1 to 3 years. Subsequent renewals are negotiated with the lessee. No contingent rents are charged. 97

100 Notes to the Financial Statements 28. Contingencies Company RM 000 RM 000 Guarantees for credit facilities granted to subsidiaries 60,236 59,921 In addition, the Company has issued letters of financial support to certain subsidiaries and have indicated its willingness to provide continuing financial support to these subsidiaries. The Directors are of the opinion that no provision is required in respect of the above matters as it is not probable that a future sacrifice of economic benefit will be required or the amount is not capable of reliable measurement. 29. Capital Commitments Group Company RM 000 RM 000 RM 000 RM 000 Investment properties Contracted but not provided for 6,226 21, Property, plant and equipment Contracted but not provided for 27, Land held for property development Authorised but not contracted for 48, Related Parties Identity of related parties For the purposes of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control or jointly 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 and of the Company either directly or indirectly. Key management personnel include all the Directors of the Group and of the Company, and certain members of senior management of the Group and of the Company. The Group and the Company has a related party relationship with its subsidiaries and key management personnel. Significant related party transactions Related party transactions have been entered into in the normal course of business under normal trade terms. The significant related party transactions of the Company are shown below. The balances related to the below transactions are shown in Note

101 Notes to the Financial Statements 30. Related Parties (continued) Significant related party transactions (continued) A. A company in which key management personnel have interest Group Company RM 000 RM 000 RM 000 RM 000 Sales B. Subsidiaries Dividend income received ,023 24,210 Rental income received - - 2,953 2,629 Key management compensation are disclosed in Note Significant Events 31.1 Disposal of leasehold land and building to a wholly-owned subsidiary On 18 October 2013, the Company terminated the Sale and Purchase Agreement ( previous SPA ) entered with a wholly-owned subsidiary on 3 October 2011 for the disposal of partial leasehold land measuring 12,270 square metres and building (currently used as a warehouse) held under title no. PN43494 for Lot in Mukim Batu, Daerah Kuala Lumpur for a total consideration of RM40,000,000. Upon termination of the previous SPA, the Company entered into a new Sales and Purchase Agreement ( new SPA ) on 18 October 2013 with the said wholly-owned subsidiary for the disposal of the entire leasehold land measuring 16,249 square metres and buildings (currently used as warehouse and office building) held under title no. PN43494 for Lot in Mukim Batu, Daerah Kuala Lumpur ( the Property ) for a total consideration of RM83,000,000. The Company intends to develop the Property into commercial properties. The transaction was deemed completed on 31 October Gain on disposal of investment properties Company 2014 RM 000 Total consideration for new SPA 83,000 Consideration for previous SPA (40,000) Remaining consideration receivable for new SPA 43,000 Carrying amount of investment properties disposed (Note 4) (30,700) Gain on disposal of investment properties 12,300 99

102 Notes to the Financial Statements 31. Significant Events (continued) 31.1 Disposal of leasehold land and building to a wholly-owned subsidiary (continued) Net cash inflow arising from disposal of investment properties 2014 Company RM 000 Remaining consideration receivable for new SPA 43,000 Consideration deemed as capital contribution (Note 7.1) (42,090) Proceeds from disposal of investment properties Acquisition of freehold land by a wholly-owned subsidiary On 16 May 2014, a wholly-owned subsidiary of the Company paid a deposit amounting to RM3,009,237 and entered into a Sale and Purchase Agreement with a third party for the proposed acquisition of freehold land in Bukit Raja Industrial Hub, Klang, Selangor for a total purchase consideration of RM30,092,370 ( the FL Acquisition ). The FL Acquisition is to cater for the relocation and centralisation of the Group s logistic operations, with allowance for future expansion. The FL Acquisition was completed on 16 December Acquisition of properties by a subsidiary In April 2014, a subsidiary of the Company has acquired 2 units of properties situated at Tannery Road, Singapore for a total consideration of SGD2,931,600 (equivalent to RM7,560,303). The properties were acquired for office and warehouse use. The transaction was completed on 21 July Supplementary Financial Information on The Breakdown of Realised and Unrealised Profits or Losses The breakdown of the retained earnings of the Group and of the Company as at 30 September, into realised and unrealised profits, pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements, are as follows: Group Company Total retained earnings of the Company and its subsidiaries: RM 000 RM 000 RM 000 RM realised 237, ,113 45,360 31,709 - unrealised 16,035 15,802 16,993 16, , ,915 62,353 48,703 Less: Consolidation adjustments (94,031) (70,567) - - Total retained earnings 159, ,348 62,353 48,703 The determination of realised and unrealised profits is based on the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December

103 Statement by Directors pursuant to Section 169(15) of the Companies Act, 1965 In the opinion of the Directors, the financial statements set out on pages 40 to 100 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 30 September 2014 and of their financial performance and cash flows for the financial year then ended. In the opinion of the Directors, the information set out in Note 32 on page 100 to the financial statements has been compiled in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors: LIM CHOO HONG DATO BAHAR BIN AHMAD Kuala Lumpur, Date: 22 December 2014 Statutory Declaration pursuant to Section 169(16) of the Companies Act, 1965 I, Chin Mee Foon, the officer primarily responsible for the financial management of Fiamma Holdings Berhad, do solemnly and sincerely declare that the financial statements set out on pages 40 to 100 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 above named at Kuala Lumpur in the state of Federal Territory on 22 December CHIN MEE FOON Before me: MANOHARAN A/L SELLAMUTHU Registered No. : W656 Commissioner for Oaths 101

104 Independent Auditors Report to the members of Fiamma Holdings Berhad Report on the Financial Statements We have audited the financial statements of Fiamma Holdings Berhad, which comprise the statements of financial position as at 30 September 2014 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 40 to 100. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with 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 30 September 2014 and of their financial performance and cash flows for the year then ended in accordance with Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. 102

105 Independent Auditors Report to the members of Fiamma Holdings Berhad 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 subsidiaries 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 reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 7 to the financial statements. We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. The audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act. Other Reporting Responsibilities Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information set out in Note 32 on page 100 to the financial statements has been compiled by the Company as required by the Bursa Malaysia Securities Berhad Listing Requirements and is not required by the Financial Reporting Standards in Malaysia. We have extended our audit procedures to report on the process of compilation of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants and presented based on the format prescribed by Bursa Malaysia Securities Berhad.. Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. KPMG Firm Number: AF 0758 Chartered Accountants LAM SHUH SIANG Approval Number: 3045/02/15(J) Chartered Accountant Petaling Jaya, Date: 22 December

106 Analysis of Shareholdings as at 31 December 2014 Authorised Share Capital : RM200,000,000 Issued and Paid-up Share Capita : RM144,144,800 Class of Shares : Ordinary Shares of RM1.00 each Voting Rights : One vote per share No. of % of No. of % of Issued Holdings Shareholders Shareholders Shares held Capital Less than 100 shares , to 1,000 shares , ,001 to 10,000 shares 1, ,218, ,001 to 100,000 shares ,597, ,001 to less than 5% of issued shares ,143, % and above of issued shares ,244, TOTAL 2, ,909,900* Note: *Excluding a total of 7,234,900 shares bought-back by the Company and retained as treasury shares. SUBSTANTIAL SHAREHOLDERS Direct Interest Indirect Interest No. of % of Issued No. of % of Issued Name Shares Held Capital* Shares Held Capital* Casa Holdings Limited 34,301, Lim Choo Hong 32,090, ,301,000# Ngo Wee Bin 13,422, Perdana Padu Sdn Bhd 9,538, Kok Sau Chun ,391,000^ Lim Soo Kong (Lim Soo Chong) 4,131, ,301,000# Hu Zhong Huai ,301,000# # Deemed interested by virtue of their interests in Casa Holdings Limited. ^ Deemed interested through shares held by spouse, Mr Lim Choo Hong. * Excluding a total of 7,234,900 shares bought-back by the Company and retained as treasury shares. DIRECTORS SHAREHOLDINGS Direct Interest Indirect Interest No. of % of Issued No. of % of Issued Name Shares Held Capital* Shares Held Capital* Tan Sri Dato Azizan Bin Husain Lim Choo Hong 32,090, ,301,000# Lim Soo Kong (Lim Soo Chong) 4,131, ,301,000# Dato Bahar Bin Ahmad 130, Kok Sau Chun ,391,000^ Dr Teh Chee Ghee Margaret Chak Lee Hung # Deemed interested by virtue of their interests in Casa Holdings Limited. ^ Deemed interested through shares held by spouse, Mr Lim Choo Hong. * Excluding a total of 7,234,900 shares bought-back by the Company and retained as treasury shares.

107 Analysis of Shareholdings as at 31 December 2014 Thirty largest shareholders Holdings No. of % of Issued Name of Shareholders Shares Capital* 1. Casa Holdings Limited 34,301, Lim Choo Hong 32,090, Ngo Wee Bin 13,315, Perdana Padu Sdn Bhd 9,538, Ng Chuei Yeen 4,400, Lim Soo Kong (Lim Soo Chong) 4,131, Corak Kukuh Sdn Bhd 4,127, Ng Hook 2,881, Citigroup Nominees (Tempatan) Sdn Bhd (Pledged securities account for Ng Hook) 2,014, Yap Seng Kuan 2,000, Maybank Nominees (Tempatan) Sdn Bhd (Etiqa Insurance Berhad) (Sharehldr s Fd) 1,910, Maybank Nominees (Tempatan) Sdn Bhd (Etiqa Insurance Berhad) (Life Non-Par Fd) 1,784, Maybank Nominees (Tempatan) Sdn Bhd (Etiqa Insurance Berhad) (Balance Fund) 1,727, Kenanga Nominees (Tempatan) Sdn Bhd (Pledged securities account for Chua Eng Ho Wa Chua Eng Wah) 900, HLB Nominees (Tempatan) Sdn Bhd (Pledged securities account for Ng Hook) 800, UOB Kay Hian Nominees (Tempatan) Sdn Bhd (Exempt An for UOB Kay Hian Pte Ltd (A/c clients)) 615, Ng Peck Kee 533, Amanahraya Trustees Berhad (Amanah Saham Bank Simpanan Nasional) 514, Amanahraya Trustees Berhad (BSN Dana Dividend Al-Ifrah) 420, Amanahraya Trustees Berhad (BSN Dana Dividend Al-Jadid) 420, HSBC Nominees (Asing) Sdn Bhd (Exempt An for Credit Suisse) (Sg Br-Tst-Asing) 400, JF Apex Nominees (Tempatan) Sdn Bhd (Pledged securities account for Teo Siew Lai) (Margin) 359, Chung Shan Kwang 340, RHB Nominees (Asing) Sdn Bhd (Maybank Kim Eng Securities Pte Ltd for Exquisite Holdings Limited) 315, Lee Seak Lee Seak Song 304, Lim York Lai 300, Maybank Nominees (Tempatan) Sdn Bhd (Chua Eng Ho Wa Chua Eng Wah) 274, HLIB Nominees (Tempatan) Sdn Bhd Hong Leong Bank Bhd for Teh Shiou Cherng 270, RHB Nominees (Tempatan) Sdn Bhd (Pledged securities account for How Beik Tin) 250, Teo Kwee Hock 230, TOTAL 121,468, Note: *Excluding a total of 7,234,900 shares bought-back by the Company and retained as treasury shares. 105

108 Analysis of Warrantholdings as at 31 December 2014 No. of warrants in issue : 52,406,400 Exercise of warrants : 18,995,500 Expiry date of the warrants : 26 November 2018 Exercise price of the warrants : RM1.00 No. of % of No. of % of Warrants Warrants Warrants Issued Holdings Holders Holders Held Warrants Less than 100 warrants to 1,000 warrants , ,001 to 10,000 warrants , ,001 to 100,000 warrants , ,001 to less than 5% of issued warrants ,373, % and above of issued warrants ,827, TOTAL ,410, DIRECTORS WARRANTHOLDINGS Direct Interest Indirect Interest No. of % of Issued No. of % of Issued Name Warrants Held Warrants Warrants Held Warrants Tan Sri Dato Azizan Bin Husain Lim Choo Hong 7,040, ,356,000# Lim Soo Kong (Lim Soo Chong) 800, ,356,000# Dato Bahar Bin Ahmad Kok Sau Chun ,396,056^ Dr Teh Chee Ghee Margaret Chak Lee Hung # Deemed interested by virtue of their interests in Casa Holdings Limited. ^ Deemed interested through warrants held by spouse, Mr Lim Choo Hong. 106

109 Analysis of Warrantholdings as at 31 December 2014 Thirty largest warrantholders Holdings No. of % of Issued Name of Warrantholders Warrants Warrants 1. 8Casa Holdings Limited 12,356, Ngo Wee Bin 9,093, Lim Choo Hong 7,040, Ng Hook 3,337, Lim Soo Kong (Lim Soo Chong) 800, Ng Peck Kee 573, Chin Kian Fong 24, Lim Tep Peow 20, Teck Trading Company Sendirian Berhad 18, Er Kek Siong 16, TA Nominees (Tempatan) Sdn Bhd (Pledged securities account for Koko Yong Yin Peng) 16, Khew Yit Len 14, Chee Meng Chuan 6, Chua Eng Ho Wa Chua Eng Wah 6, See Cheng Chong 5, Chua Wee Peng 5, Kay Ya Lan 4, Boon Kim Yu 4, Ooi Keng Long 4, Tan Ah Loon 4, Thang Hooi Chiew 4, Theo Kit Nai 4, Oon Choon Ken 3, Citigroup Nominees (Tempatan) Sdn Bhd (Pledged securities account for Koay Boon Bioh) 2, How Kian Huat 2, Maybank Nominees (Tempatan) Sdn Bhd (Pledged securities account for Ting Sii Ung) 2, Lim Ah Meng 2, Mohd Yusoh bin Mohd Alim 2, Ong Chow Wee 2, Wong Chin Chai 1, TOTAL 33,375,

110 List of Properties Owned by The Group as at 30 September 2014 Built up/ Existing Date of Age of Date of Last Land NBV Location Use Tenure Acquisition Building Revaluation Area (RM 000) Fiamma Holdings Berhad 1. Lot 13, Jalan E1/5 Office cum Leasehold (99 20/06/ 30 years 30/09/ 1,844 4,374 Usaha Ehsan Industrial Area service years, expiring sq. meters Kepong, Selangor D.E. centre on 09/07/2078) 2. No. 20, Jalan 7A/62A 11 storey Leasehold (99 26/06/ 9 years 30/09/ 3,979 29,705 Bandar Manjalara office building years, expiring months 2011 sq. meters Kuala Lumpur on 25/08/2077) Active Edge Sdn Bhd 3. No. 20, Jalan 7A/62A Warehouse Leasehold (99 26/06/ 9 years 30/09/ 12,270 31,767 Bandar Manjalara and land under years, expiring months 2011 sq. meters Kuala Lumpur development on 25/8/2077) Fiamma Development Sdn Bhd 4. Bandar Kuala Lumpur Land under Freehold 08/08/ ,701 9,247 Mukim Kuala Lumpur development and sq. ft. Wilayah Persekutuan KL (commercial 12/04/2011 (Jalan TAR) development) FHB Management Sdn Bhd 5. Bandar Kuala Lumpur 15 units office Freehold 26/04/ ,891 24,902 Mukim Kuala Lumpur suite and 3 retail & sq. ft. Wilayah Persekutuan KL lots under construction 14/08/13 (Jalan TAR) (Investment properties) Fiamma Land Sdn Bhd 6. Bandar Kuala Lumpur Land under Freehold 03/04/ ,422 42,276 Mukim Kuala Lumpur development sq. ft. Wilayah Persekutuan KL (Jalan Ampang) Uniphoenix Jaya Sdn Bhd 7. Mukim Kota Tinggi Land under Freehold 09/12/ /02/ ,806 8,841 Daerah Kota Tinggi development sq. ft. Johor (Taman Kota Jaya) Oaksvilla Sdn Bhd 8. Mukim Kota Tinggi Land under Freehold 09/12/ /02/ ,607 7,194 Daerah Kota Tinggi development sq. ft. Johor (Taman Kota Jaya 2) 9. Mukim Kota Tinggi Land held for Leasehold 09/12/ /02/ ,837 Daerah Kota Tinggi development (expiring on acres Johor (Tai Hong Land) 29/03/2911) Kingston Medical Supplies (Private) Limited , Tannery Road Office and Freehold 21/07/14 31 years - 4,886 7,734 #11-01/02, Tannery Block warehouse 10 months sq. ft. Ruby Industrial Complex Singapore

111 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the Thirty-Second Annual General Meeting of the Company will be convened and held at the Main Board Room, Level 10, Wisma Fiamma, No. 20, Jalan 7A/62A, Bandar Manjalara, Kuala Lumpur on Thursday, 26 February 2015 at 12 noon. AGENDA As Ordinary Business 1. To receive the Audited Financial Statements for the financial year ended 30 September 2014 together with the Reports of the Directors and the Auditors thereon. Note 7 2. To declare a final single tier dividend of 6.0 sen per ordinary share in respect of the financial year ended 30 September Ordinary Resolution 1 3. To approve the payment of Directors fees for the financial year ended 30 September Ordinary Resolution 2 4. To re-elect Dato Bahar Bin Ahmad who is retiring pursuant to Article 89 of the Articles of Association of the Company. Ordinary Resolution 3 5. To re-elect Mr Lim Soo Kong (Lim Soo Chong) who is retiring pursuant to Article 89 of the Articles of Association of the Company. Ordinary Resolution 4 6. To consider and if thought fit, to pass the following Ordinary Resolution in accordance with Section 129 of the Companies Act, 1965:- THAT Tan Sri Dato Azizan bin Husain, retiring pursuant to Section 129 of the Companies Act, 1965, be and is hereby re-appointed a Director of the Company to hold office until the next Annual General Meeting. Ordinary Resolution 5 7. To re-appoint Messrs KPMG as Auditors of the Company and to authorise the Directors to fix their remuneration. Ordinary Resolution 6 As Special Business To consider and, if thought fit, to pass the following Resolutions:- 8. Authority under Section 132D of the Companies Act, 1965 for the Directors to allot and issue shares. THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby authorised to allot and issue shares in the Company at any time until the conclusion of the next Annual General Meeting and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares to be issued does not exceed ten per centum (10%) of the issued share capital of the Company for the time being, subject always to the approval of all relevant regulatory bodies being obtained for such allotment and issuance. Ordinary Resolution 7 9. Proposed Renewal of Shareholders Mandate and Proposed New Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature ( Proposed Shareholders Mandate ). THAT, subject to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given for the Company and its subsidiaries, to enter into recurrent related party transactions of a revenue or trading nature with the related parties as specified in Section 2.1 of the Circular to Shareholders dated 30 January 2015 which are necessary for the day-to-day operations and/or in the ordinary course of business of the Company and its subsidiaries on terms not more favourable to the related parties than 109

112 Notice of Annual General Meeting those generally available to the public and are not detrimental to the non-controlling interests of the Company and that such mandate shall continue to be in force until:- (i) the conclusion of the next Annual General Meeting ( AGM ) of the Company following the forthcoming AGM at which the Proposed Shareholders Mandate will be approved, at which time it will lapse, unless by a resolution passed at the AGM, the mandate is again renewed; (ii) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Companies Act, 1965 ( Act ) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or (iii) revoked or varied by resolution passed by the shareholders in general meeting, whichever is the earlier. THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things as they may consider expedient or necessary to give effect to the Proposed Shareholders Mandate. 10. Proposed Renewal of Authority for Share Buy-Back Ordinary Resolution 8 THAT subject to the Companies Act, 1965 ( Act ), the Memorandum and Articles of Association of the Company, the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) and the approvals of all relevant governmental and/or regulatory authorities (if any), the Company be and is hereby authorised to utilise an amount not exceeding the audited retained earnings and/or share premium of the Company as at 30 September 2014 to purchase such amount of ordinary shares of RM1.00 each in the Company ( Proposed Share Buy-Back ) as may be determined by the Directors of the Company from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fit and expedient in the interest of the Company provided that the aggregate number of shares purchased and/or held pursuant to this resolution does not exceed ten per centum (10%) of the issued and paid-up share capital of the Company; AND THAT an amount not exceeding the Company s retained earnings and share premium accounts be allocated by the Company for the Proposed Share Buy-Back; AND THAT authority be and is hereby given to the Directors of the Company to decide at their absolute discretion to either retain the shares so purchased as treasury shares (as defined in Section 67A of the Act) and/or to cancel the shares so purchased and if retained as treasury shares, may resell the treasury shares and/or to distribute them as share dividend and/or subsequently cancel them; AND THAT the authority conferred by this Resolution will be effective immediately upon the passing of this Resolution and will expire at: (i) the conclusion of the next Annual General Meeting ( AGM ) of the Company following the forthcoming AGM at which time the said authority will lapse unless by an ordinary resolution passed at a general meeting of the Company, the authority is renewed, either unconditionally or subject to conditions; (ii) the expiration of the period within which the next AGM of the Company is required by law to be held; or (iii) revoked or varied by an ordinary resolution passed by the shareholders in a general meeting; whichever is the earlier but not so as to prejudice the completion of the purchase(s) by the Company before the aforesaid expiry date and in any event, in accordance with the provisions of the guidelines issued by Bursa Securities and/or any other relevant governmental and/or regulatory authorities (if any); AND THAT the Directors of the Company be authorised to take all steps necessary to implement, complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the Proposed Share Buy-Back as may be agreed or allowed by any relevant governmental and/or regulatory authority. Ordinary Resolution 9 110

113 Notice of Annual General Meeting 11. Retention of Independent Directors THAT the following Directors be retained as Independent Directors, in accordance with the Malaysian Code on Corporate Governance 2012 until the conclusion of the next Annual General Meeting:- (i) Tan Sri Dato Azizan Bin Husain Ordinary Resolution 10 (ii) Dr Teh Chee Ghee Ordinary Resolution 11 NOTICE OF DIVIDEND PAYMENT NOTICE IS ALSO HEREBY GIVEN THAT, subject to the approval of the shareholders at the Thirty-Second Annual General Meeting, a final single tier dividend of 6.0 sen per ordinary share in respect of the financial year ended 30 September 2014 will be paid to shareholders on 10 April The entitlement date for the said dividend shall be 16 March A Depositor shall qualify for entitlement to the Dividend only in respect of: a) Shares transferred to the Depositor s securities account before 4.00 p.m. on 16 March 2015 in respect of ordinary transfers. b) Shares bought on the Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of the Bursa Malaysia Securities Berhad. BY ORDER OF THE BOARD CHIN MEE FOON (MIA 2191) TAI YIT CHAN (MAICSA ) CHAN SU SAN (MAICSA ) Secretaries Selangor Darul Ehsan Date: 30 January

114 Notice of Annual General Meeting Notes: 1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy may but need not be a member of the Company. 2. A member of the Company may appoint two (2) proxies to attend at the same meeting. Where the member of the Company appoints two (2) proxies, the appointment shall be invalid unless the member specifies the proportion of his shareholdings to be represented by each proxy. 3. 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. An exempt authorised nominee refers to an authorised nominee defined under the Securities Industry (Central Depositories) Act 1991 ( SICDA ) which is exempted from compliance with the provisions of subsection 25A(1) of SICDA. 4. If the appointor is a corporation, the instrument appointing a proxy must be executed under its Common Seal or under the hand of an officer or attorney duly authorised. 5. The instrument appointing a proxy or the power of attorney or other authority (if any) under which it is signed or notarially certified copy of such power or authority, shall be deposited at the Registered Office of the Company at Lot 6.05, Level 6, KPMG Tower, 8 First Avenue, Bandar Utama, Petaling Jaya, Selangor Darul Ehsan not less than 48 hours before the time set for holding the meeting or any adjournment thereof. 6. For the purpose of determining who shall be entitled to attend this meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd to make available to the Company a Record of Depositors as at 17 February 2015 and only a Depositor whose name appears in such Record of Depositors shall be entitled to attend, speak and vote at this meeting and entitled to appoint proxy or proxies. 7. The Audited Financial Statements in Agenda 1 is meant for discussion only as approval from shareholders is not required pursuant to the provision of Section 169(1) of the Companies Act, Hence, this Agenda is not put forward for voting by shareholders of the Company. 8. EXPLANATORY NOTES ON SPECIAL BUSINESS (i) Ordinary Resolution 7 - Authority under Section 132D of the Companies Act, 1965 for the Directors to issue shares The Company had, at the Thirty-First Annual General Meeting ( AGM ) held on 19 February 2014, obtained its shareholders approval for the general mandate for issuance of shares pursuant to Section 132D of the Companies Act, 1965 ( the Act ). The Company did not issue any new shares pursuant to this mandate obtained as at the date of this notice. The Ordinary Resolution 7 proposed under item 8 of the Agenda is a renewal of the general mandate for issuance of shares by the Company under Section 132D of the Act. The Ordinary Resolution 7, if passed, will empower the Directors to allot and issue shares in the Company up to an amount not exceeding in total ten per centum (10%) of the Issued Share Capital of the Company for purpose of working capital or provide funding for future investments or undertakings. This authority, unless revoked or varied by the Company at a general meeting, will expire at the next AGM. At this juncture, there is no decision to issue new shares. If there should be a decision to issue new shares after the general mandate is obtained, the Company will make an announcement in respect of the purpose and utilisation of proceeds arising from such issue (ii) Ordinary Resolution 8 Proposed Renewal of Shareholders Mandate and Proposed New Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature The explanatory notes on Ordinary Resolution 8 are set out in the Circular to Shareholders dated 30 January (iii) Ordinary Resolution 9 Proposed Renewal of Authority for Share Buy-Back The explanatory notes on Ordinary Resolution 9 are set out in the Statement to Shareholders dated 30 January (iv) Ordinary Resolutions 10 and 11 Retention of Independent Directors (a) Tan Sri Dato Azizan Bin Husain (Tan Sri Dato Azizan) Tan Sri Dato Azizan was appointed as an Independent Director on 17 June Tan Sri Dato Azizan has served the Company for more than ten (10) years as at the date of the notice of this AGM. However, Tan Sri Dato Azizan has met the independence guidelines as set out in Chapter 1 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The Board, therefore, considers Tan Sri Dato Azizan to be independent and recommends Tan Sri Dato Azizan to remain as an Independent Director. (b) Dr Teh Chee Ghee (Dr Teh) Dr Teh was appointed as an Independent Director on 4 July Dr Teh has served the Company for more than ten (10) years as at the date of the notice of this AGM. However, Dr Teh has met the independence guidelines as set out in Chapter 1 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The Board, therefore, considers Dr Teh to be independent and recommends Dr Teh to remain as an Independent Director. 112

115 Proxy Form CDS account no. of authorised nominee FIAMMA HOLDINGS BERHAD Comapny No W (Incorporated in Malaysia) I/We* (name of shareholder as per NRIC, in capital letters) IC No./ ID No./ Company No.* / of (new / old) (full address) being a member(s) of the Company, hereby appoint (name of proxy as per NRIC, in capital letters) IC No. / of (new / old) (full address) and/or* failing him/ her*, (name of proxy as per NRIC, in capital letters) IC No. / of (new / old) (full address) or failing him/her*, the Chairman of the Meeting as my/our* proxy to vote for me/us* on my/our* behalf at the Thirty-Second Annual General Meeting of the Company to be held at the Main Board Room, Level 10, Wisma Fiamma, No. 20, Jalan 7A/62A, Bandar Manjalara, Kuala Lumpur on Thursday, 26 February 2015 at 12 noon and at each and every adjournment thereof. My/our* proxy is to vote as indicated below. RESOLUTIONS FOR AGAINST 1. Declaration of a final single tier dividend of 6.0 sen per ordinary share in respect of the financial year ended Resolution 1 30 September Approval of payment of Directors Fees for the financial year ended 30 September 2014 Resolution 2 3. Re-election of Dato Bahar Bin Ahmad as Director Resolution 3 4. Re-election of Mr Lim Soo Kong (Lim Soo Chong) as Director Resolution 4 5. Re-appointment of Tan Sri Dato Azizan Bin Husain Resolution 5 6. Re-appointment of Messrs KPMG as Auditors of the Company and to authorise the Directors to fix the Resolution 6 Auditors remuneration 7. Authority under Section 132D of the Companies Act, 1965 for the Directors to allot and issue shares Resolution 7 8. Proposed Renewal of Shareholders Mandate and Proposed New Shareholders Mandate for Recurrent Resolution 8 Related Party Transactions of a Revenue of Trading Nature 9. Proposed Renewal of Authority for Share Buy-Back Resolution Retention of Tan Sri Dato Azizan Bin Husain as an Independent Director in accordance with the Malaysian Resolution 10 Code on Corporate Governance Retention of Dr Teh Chee Ghee as an Independent Director in accordance with the Malaysian Code on Resolution 11 Corporate Governance 2012 *Strike out whichever is not applicable. (Please indicate with an X in the spaces provided how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his discretion.) Signature/Common Seal : Number of shares held : Date : For appointment of two proxies, percentage of shareholdings to be represented by the proxies: Percentage Proxy 1 % Proxy 2 % Total 100%

116 Notes: 1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy may but need not be a member of the Company. 2. A member of the Company may appoint two (2) proxies to attend at the same meeting. Where the member of the Company appoints two (2) proxies, the appointment shall be invalid unless the member specifies the proportion of his shareholdings to be represented by each proxy. 3. 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. An exempt authorised nominee refers to an authorised nominee defined under the Securities Industry (Central Depositories) Act 1991 ( SICDA ) which is exempted from compliance with the provisions of subsection 25A(1) of SICDA. 4. If the appointor is a corporation, the instrument appointing a proxy must be executed under its Common Seal or under the hand of an officer or attorney duly authorised. 5. The instrument appointing a proxy or the power of attorney or other authority (if any) under which it is signed or notarially certified copy of such power or authority, shall be deposited at the Registered Office of the Company at Lot 6.05, Level 6, KPMG Tower, 8 First Avenue, Bandar Utama, Petaling Jaya, Selangor Darul Ehsan not less than 48 hours before the time set for holding the meeting or any adjournment thereof. 6. For the purpose of determining who shall be entitled to attend this meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd to make available to the Company a Record of Depositors as at 17 February 2015 and only a Depositor whose name appears in such Record of Depositors shall be entitled to attend, speak and vote at this meeting and entitled to appoint proxy or proxies. Fold Here Affix Stamp The Secretary Fiamma Holdings Berhad (88716-W) Lot 6.05, Level 6 KPMG Tower 8, First Avenue Bandar Utama Petaling Jaya Selangor Darul Ehsan Fold Here

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