annual report 2003 ELBA HOLDINGS BERHAD ( T)

Transcription

1 AWARDED MALAYSIA 2003/2004 annual report 2003 ELBA HOLDINGS BERHAD ( T)

2 (Incorporated in Malaysia Company No: T) CONTENTS Corporate information 2 Notice of Annual General Meeting 3-4 Statement Accompanying Notice of Annual General Meeting 5 Board of Directors and Directors Profile 9-11 Executive Chairman s Statement Corporate Governance Statement Statement on the State of Internal Control 19 Audit Committee Report Directors Responsibility Statement 23 Directors Report Statement By Directors 29 Statutory Declaration 29 Report Of The Auditors 30 Consolidated Balance Sheet 31 Consolidated Income Statement 32 Consolidated Statement of Changes in Equity 33 Consolidated Cash Flow Statement Balance Sheet 36 Income Statement 37 Statement Of Changes In Equity 38 Cash Flow Statement 39 Notes To The Financial Statements Statement of Shareholdings List of Landed Properties Proxy Form 1

3 (Incorporated in Malaysia Company No: T) annual report 2003 Corporate information EXECUTIVE CHAIRMAN MANAGING DIRECTOR NON INDEPENDENT EXECUTIVE DIRECTORS INDEPENDENT NON-EXECUTIVE DIRECTORS Yeoh Chong Teng Yeoh Gar Beng Loke Siew Loke Lay Kim Yeoh Eng Hoe Haji Jamal Mohamed bin Haji A.M. Sickander Abd. Rashid bin V.K. Abd. Majid Cheah Kean Guan SECRETARIES Lim Seng Hin (MIA 12039) AUDITORS SOLICITOR PRINCIPAL BANKERS REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS Peter Chong & Co. Chartered Accountants Lim Cheng Poh, Lim & Rahim Affin Bank Berhad Malayan Banking Berhad Public Bank Berhad RHB Bank Berhad United Overseas Bank (Malaysia) Berhad Kompleks Adorna Gold , Jalan Gurdwara Penang Tel : Fax : REGISTRAR Plantation Agencies Sdn Bhd (2603 D) Standard Chartered Bank Chambers No.2 Beach Street Penang Tel : Fax : STOCK EXCHANGE LISTING Second Board of the Kuala Lumpur Stock Exchange AUDIT COMMITTEE Haji Jamal Mohamed bin Haji A.M. Sickander (Chairman) Abd. Rashid bin V.K. Abd. Majid (Member) Cheah Kean Guan (Member) Yeoh Gar Beng (Member) NOMINATION COMMITTEE Cheah Kean Guan (Chairman) Haji Jamal Mohamed bin Haji A.M. Sickander (Member) Abd. Rashid bin V.K. Abd. Majid (Member) REMUNERATION COMMITTEE Haji Jamal Mohamed bin Haji A.M. Sickander (Chairman) Cheah Kean Guan (Member) Yeoh Gar Beng (Member) 2

4 (Incorporated in Malaysia Company No: T) annual report 2003 Notice Of Eighth Annual General Meeting NOTICE IS HEREBY GIVEN that the Eighth Annual General Meeting of ELBA HOLDINGS BERHAD ( T) will be held at Miami Hall, Ferringhi Beach Hotel, Jalan Low Yat, Batu Ferringhi, Penang on Wednesday, 23 June 2004 at a.m. for the following purposes :- 1. To receive and adopt the Audited Financial Statements for the financial year ended 31 December 2003 together with the Directors and Auditors' Report thereon. 2. To approve the payment of Directors Fees for the financial year ended 31 December To re-elect Mr. Yeoh Gar Beng who retires as a Director of the Company pursuant to Article 101 of the Company's Articles of Association 4. To approve a resolution pursuant to Section 129 (6) of the Companies Act, 1965 to re-appoint Tuan Haji Jamal Mohamed Bin Haji A.M. Sickander as a Director of the Company to hold office until the next Annual General Meeting. 5. To re-appoint Messrs. Peter Chong & Co., the retiring Auditors and to authorise the Directors to determine their remuneration. Resolution 1 Resolution 2 Resolution 3 Resolution 4 Resolution 5 As Special Business :- To consider and if thought fit, to pass the following Ordinary Resolution :- 6. AUTHORITY TO ISSUE SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965 Resolution 6 THAT pursuant to Section 132D of the Companies Act, 1965 and subject to the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered to issue and allot shares in the Company, at any time 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 issued pursuant to this resolution does not exceed ten per centum (10%) of the issued share capital of the Company for the time being and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company. 7. To transact any other ordinary business of which due notice shall have been given. By Order of the Board Lim Seng Hin (MIA 12039) Company Secretary Penang 1 June

5 (Incorporated in Malaysia Company No: T) annual report 2003 Notice Of Annual General Meeting (cont d) NOTES : 1. A member of the Company who is entitled to attend and vote at this meeting is entitled to appoint a proxy and vote in his stead. A proxy need not be a member of the Company. 2. Where the Proxy Form is executed by a corporation, it must be either under its Common Seal or under the hand of an officer or attorney duly authorised. 3. The Proxy Form must be deposited at the Company s registered office at Kompleks Adorna Gold, Jalan Gurdwara, Penang not less than forty-eight (48) hours before the time set for holding the meeting or any adjournment thereof. EXPLANATORY NOTE ON SPECIAL BUSINESS : The proposed Ordinary Resolution No. 6, if passed, will empower the Directors to issue and allot shares up to ten per centum (10%) of the issued share capital of the Company for the time being for such purposes as the Directors may consider to be in the interest of the Company. This authority, unless revoked or varied by the Company in a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company or the expiration of period within which the next Annual General Meeting is required by law to be held, whichever is earlier. 4

6 (Incorporated in Malaysia Company No: T) annual report 2003 Statement Accompanying Notice Of Eighth Annual General Meeting Pursuant to Paragraph 8.28(2) of the Listing Requirements of the Bursa Malaysia Securities Berhad. 1. Names of Directors who are standing for re-election/re-appointment at the Company s Eighth Annual General Meeting Pursuant to Article 101 of the Company's Articles of Association (Retirement by rotation) Mr. Yeoh Gar Beng (Ordinary Resolution 3) Pursuant to Section 129 (6) of the Companies Act, 1965 (Re-appointment after attainment of 70 years of age) Tuan Haji Jamal Mohamed Bin Haji A.M. Sickander (Ordinary Resolution 4) 2. Details of Attendance of Directors at the Board Meetings There were six (6) Board Meetings held during the financial year ended 31 December 2003 and all the Board Meetings were held at the Company s registered office at Kompleks Adorna Gold , Jalan Gurdwara Penang. The attendance of each Director is shown below: - Name of Directors No. of Meetings Attended Mr. Yeoh Chong Teng 6 Mr. Yeoh Gar Beng 6 Mdm. Loke Siew Loke Lay Kim 6 Mr. Yeoh Eng Hoe 6 Tuan Haji Jamal Mohamed Bin Haji A. M. Sickander 6 Encik Abd Rashid Bin V K Abd Majid 6 Mr. Cheah Kean Guan 5 3. Date, Hour and Place of the Company s Eighth Annual General Meeting Date Hour Place 23 June a.m. Miami Hall, Ferringhi Beach Hotel Jalan Low Yat, Batu Ferringhi Penang 4. Further details of Directors standing for re-election/re-appointment at the Company s Eighth Annual General Meeting ++ : Name, No. of ordinary shares Age & Nationality Position of RM1.00 each held in the Company Mr. Yeoh Gar Beng 38, Malaysian Managing Director Nil Tuan Haji Jamal Mohamed Bin Haji A.M. Sickander Independent & 70, Malaysian Non-Executive Director Nil ++ Shareholders are requested to refer Directors Profiles on page 9 to 11 of this Annual Report of the Company for the following details :- working experience, qualification and occupation any other directorships of public companies family relationship with any director and/or major shareholder of the Company any conflict of interest that the above Directors have with the Company the list of convictions for any offences within the past ten (10) years other than traffic offences, if any 5

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8 Lot 10 Shopping Centre KL Sungei Wang KL Prangin Mall Penang Complex 7 Bukit Jambul Penang Kinta City Shopping Centre Ipoh Ipoh Parade Ipoh

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10 (Incorporated in Malaysia Company No: T) annual report 2003 Board Of Directors And Directors Profile MR. YEOH CHONG TENG 65 years of age, Executive Chairman Mr. Yeoh Chong Teng was appointed as the Executive Chairman of the Board of Elba Holdings Berhad on 30 April He is the founder of the Group. He has more than 48 years of working experience within the Group and his expertise in all aspects of the wholesale and retail garment trade has earned him the reputation as a prominent and respected local businessman, particularly in the garment industry. Over the years, he has devoted his full attention to the operations of the Group and is responsible for its successful development and formulation of strategic plans and policies. He attended all the six (6) Board Meetings held during the financial year ended 31 December MR. YEOH GAR BENG 38 years of age, Managing Director Mr. Yeoh Gar Beng joined the Board on 30 April 1997 and was subsequently appointed as the Managing Director of Elba Holdings Berhad. He is also a member of the Audit Committee, Remuneration Committee and Employee Share Option Scheme ( ESOS ) Committee. He obtained a Certificate in Business Computing from London Chamber of Commerce in He joined the Group in 1985 as a Marketing Executive and the following year was asked to set up the Kuala Lumpur branch overseeing the East and West Peninsular Malaysia marketing and merchandising divisions of the Group. He has contributed significantly to the Group s overall performance through his marketing networking and public relations. He has more than 19 years of working experience in the Group. He is extensively and directly involved in the day-to-day management, business operations, decision making process and overall business development which includes the formulation and implementation of the Group s strategic plans and policies. He attended all the six (6) Board Meetings held during the financial year ended 31 December MDM. LOKE SIEW LOKE LAY KIM 56 years of age, Executive Director Mdm. Loke Siew Loke Lay Kim was appointed to the Board on 30 April Since the commencement of operations in 1969, she was responsible for all aspects of the garment production activities of the Group. She has over 35 years of experience in the garment industry and possesses in-depth knowledge and expertise in all aspect of garment productions including pattern designing, fashion cutting, sewing techniques and styles, quality control and finishing. She attended all the six (6) Board Meetings held during the financial year ended 31 December

11 (Incorporated in Malaysia Company No: T) annual report 2003 Board Of Directors And Directors Profile (cont d) MR. YEOH ENG HOE 50 years of age, Executive Director Mr. Yeoh Eng Hoe was appointed to the Board on 30 April He has more than 32 years working experience in the wholesale industry. He is responsible for the administration and is also required to participate actively in merchandising and marketing operations. His familiarity with sourcing merchandises locally and overseas, importation of goods and wide marketing network, is a valuable asset to the Group. He is also overall in charge of the day-to-day management of Chong Chiaw (M) Sdn Bhd, a wholly-owned subsidiary of the Group. He attended all the six (6) Board Meetings held during the financial year ended 31 December TUAN HAJI JAMAL MOHAMED BIN HAJI A. M. SICKANDER SMP, KMN 70 years of age, Independent Non-Executive Director Tuan Haji Jamal Mohamed bin Haji A. M. Sickander was appointed to the Board as an Independent Non-Executive Director on 30 April 1997 and was appointed as Chairman of the Audit Committee on 30 April He was appointed to the Nomination Committee and Remuneration Committee on 20 December He graduated from the University of Malaya (Singapore) in 1958 with a Bachelor of Arts degree majoring in Economics and History. He served the Federal Land Development Authority (FELDA) as Secretary of FELDA from 1959 to 1967 and as Marketing Director from 1967 to In 1971, he joined Malaysia Building Society Berhad (MBSB) and was appointed as Director cum Chief Executive Officer of the Company. After serving MBSB for eighteen (18) years, he retired in During the period 1990 to 1996, he was the Chief Executive of Lembaga Totalisator Malaysia and from April 1997 to June 2000, he was the Chairman of Latitude Tree Holdings Berhad. He attended all the six (6) Board Meetings held during the financial year ended 31 December ENCIK ABD RASHID BIN V K ABD MAJID 55 years of age, Independent Non-Executive Director En. Abd Rashid bin V. K. Abd Majid was appointed to the Board as an Independent Non-Executive Director and a member of the Audit Committee on 1 September He was appointed to the Nomination Committee on 20 December En. Abd Rashid is a renowned entrepreneur from Penang in the distribution of hand woven Persian and Oriental carpets and rugs. During the period 1975 to present, he is currently holding the position as Director for Rashid Zen Concepts Sdn Bhd, Events Dot Comm Sdn Bhd and Bumiscope Sdn Bhd. He attended all the six (6) Board Meetings held during the financial year ended 31 December

12 (Incorporated in Malaysia Company No: T) annual report 2003 Board Of Directors And Directors Profile (cont d) MR. CHEAH KEAN GUAN 36 years of age, Independent Non-Executive Director Mr. Cheah Kean Guan was appointed to the Board as an Independent Non-Executive Director and a member of the Audit Committee on 2 July He was appointed to the Nomination Committee and Remuneration Committee on 20 December He obtained his Bachelor of Accounting degree from the University of Utara Malaysia in He started his career in accountancy with Kassim Chan & Co., a leading local audit firm for 2 1/2 years before joining a local manufacturing company, Chow Choon (M) Sdn Bhd as a Group Accountant in 1995 to Subsequently, he worked as a Senior Manager in Chow Choon Corporation (M) Sdn Bhd from 1998 until now. He is a member of Malaysian Institute of Accountants (MIA). He attended five (5) of the six (6) Board Meetings held during the financial year ended 31 December All the above Directors are Malaysians. Save for Mr. Yeoh Chong Teng, Mdm. Loke Siew Loke Lay Kim, Mr. Yeoh Gar Beng and Mr. Yeoh Eng Hoe who are related, none of the Directors are related to each other and / or major shareholders of the Company. In addition, all the above Directors have no conflict of interest with the Group and have never been charged for any offence other than traffic offences, if any, during the past ten (10) years. 11

13 (Incorporated in Malaysia Company No: T) annual report 2003 EXECUTIVE CHAIRMAN S STATEMENT Dear Valued Shareholders On behalf of the Board of Directors of Elba Holdings Berhad ( Elba ), I hereby present the Annual Report and Financial Statements of Elba and its subsidiaries ( Elba Group ) for the financial year ended 31 December BUSINESS ENVIRONMENT AND OPERATION IN 2003 The year 2003 has been a challenging year to the market. As the local economy was still reeling from the adverse effects of the post Iraq war, there was a sudden outbreak of the Severe Acute Respiratory Syndrome ( SARS ). Thus, the losses incurred by the manufacturing division and the increase of finance cost have made the Elba Group to have a more challenging year. The effects of the SARS outbreak have caused many uncertainties to the already competitive business environment of Elba Group. It has resulted in lower sales margin during the period concerned which directly affected the performances of the Group. Apart from that, the apparel sector is currently facing the rising costs of production which is mainly due to the tight labour market and the increased wages of workers in the country. The losses incurred by the manufacturing division were due to the shortage of skilled labour coupled with high operations and maintenance costs for its plant and machinery. The increase in finance cost was mainly arising from the additional interest costs on Collateral Loan Obligation ( CLO ) which has helped the Elba Group in its business expansion and aggressiveness in enhancing its revenue levels. In a nutshell, Elba Group is still maintaining its important role in the domestic apparels market while overcoming the changing business environment to remain competitive. REVIEW OF FINANCIAL RESULTS AND OPERATIONS In spite of a challenging year, the Elba Group managed to increase its revenue by thirty percent (30%) for the financial year under review as compared to the preceding financial year. The Group total revenue was higher due to encouraging trading sales from the festive season sales which the Group had actively promoted to counter the low seasons and the revenue generated by some subsidiaries which were dormant in the previous financial year. For the financial year under review, the Group experienced a loss before taxation of RM1.9 million. Despite it being a challenging year, the Board of Directors and the management team of Elba have always encouraged its employees at all levels to persevere and remain committed to working towards a better year ahead. The Board of Directors will continuously educate its employees on the need to strive harder so as to overcome the challenges that the Elba Group may face in the coming years. Apart from any unforeseen circumstances, the Elba Group is confident of improving its performance for the coming financial year. DIVIDEND The Board after giving due consideration to the funding requirements of the Group, does not recommend any dividend in respect of the current financial year. 12

14 (Incorporated in Malaysia Company No: T) annual report 2003 EXECUTIVE CHAIRMAN S STATEMENT (cont d) CORPORATE EXERCISES On behalf of the Board of Directors of Elba, I am pleased to inform that Elba has completed its Bonus Issue and Employee Share Option Scheme ( ESOS ) in The paid up share capital of the Company has been increased to RM42,750,000 as at 31 December Hence, the Company has met the minimum share capital requirement of RM40 million for companies listed on the Second Board of the Bursa Malaysia Securities Berhad. With the completion of the Bonus Issue and ESOS Scheme, the Board of Directors of Elba believes that shareholders and employees are both rewarded accordingly for their continual support over the years. FUTURE PROSPECTS In an environment of heightened uncertainty in the global economy, the management of Elba has to reorganise their business strategies by exploring other possible business ventures. In view of this, the Company has already embarked on various business proposals and strategies so as to remain relevant and innovative in an ever changing and competitive textile and apparel market. APPRECIATION Despite it being a very challenging year, the Board of Directors recognises the effort and commitment demonstrated by the management team and its employees. On behalf of the Board, I would like to express our heartfelt appreciation and thanks to all members of the management team and our employees for their continuing dedication, commitment and invaluable contributions during the year. I would also like to express our sincere appreciation to our shareholders, valuable customers, financial institutions, business associates and government authorities for their continued support and confidence in the Elba Group. Last but not least, I would like to take this opportunity to thank my fellow Directors for their invaluable contributions throughout the year. YEOH CHONG TENG Executive Chairman 13

15 (Incorporated in Malaysia Company No: T) annual report 2003 CORPORATE GOVERNANCE STATEMENT Introduction and Objective The Board of Directors of Elba Holdings Berhad is committed to ensure a high standard of Corporate Governance are practiced throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholders value and financial performance of Elba Holdings Berhad. The Listing Requirements of the Bursa Malaysia Securities Berhad ( BMSB ), which came into effect in June 2001 made it mandatory for listed companies to disclose their compliance with the Code. Set out below is a statement of how the Company has applied these principles and its compliance with the best practices in corporate governance in so far as is applicable to the Group. 1. DIRECTORS i) The Board The Board assumes responsibility for leading and controlling the Group towards realising long term shareholders values. The Board has the overall responsibility for reviewing and adopting strategic plans for the Group, overseeing the conduct of the Group s business, implementing an appropriate system of risk management and ensuring the adequacy and integrity of the Company s system of internal control. The Board meets on a quarterly basis, with additional meetings convened as necessary. During the financial year ended 31 December 2003, six (6) Board meetings were held. Details of attendance by Directors are set out in the Directors Profile. ii) Board Balance The Board currently has seven (7) members comprising four (4) Executive Directors (which includes the Executive Chairman) and three (3) Independent Non-Executive Directors. All the Directors have an equal responsibility for the Group s operations, but the role of the independent non-executive Directors is particularly important to ensure that the decisions made are fully discussed and examined taking into consideration the long-term interest of the shareholders and the Company. There is a clear division of responsibility between the Executive Chairman and the Managing Director to ensure that no one individual has unfettered power of decision. Elba Holdings Berhad thus complies with the BMSB Listing Requirements on Board composition. The profiles of all Directors are set out on Page 9 to 11 of this Annual Report. Tuan Haji Jamal Mohamed Bin Haji A.M. Sickander acts as the senior independent non-executive Director. Any concerns regarding the Group may be conveyed to him. iii) Supply of Information The agenda will be prepared and circulated before each Board meeting. The Company Secretary maintains minutes of the Board meetings. All directors have access to the advice and services of the Company Secretary who is responsible for ensuring that board procedures and the relevant rules and regulations are observed. Directors are entitled to seek independent professional advice about the Company's affairs at the Company's expense. iv) Appointments and Re-election of the Board In accordance with the Company s Articles of Association, one third (1/3) of the Directors shall retire from the Board and offer themselves for re-election. In practice, this means that every Director will stand for re-election at least once every three (3) years. Directors due to retire by rotation at the forthcoming Annual General Meetings are shown on page 3 of the Notice of Meeting (Ordinary Resolutions 3 to 4). 14

16 (Incorporated in Malaysia Company No: T) annual report 2003 CORPORATE GOVERNANCE STATEMENT (cont d) 2. DIRECTORS REMUNERATION i) Aggregate remuneration of Directors for the financial year ended 2003 categorised into appropriate components are as follows:- Salaries and Contribution Group Fees Emoluments Bonus Statutory Total RM 000 RM 000 RM 000 RM 000 RM 000 Executive Directors Non-Executive Directors ii) The number of Directors of the Company whose total remuneration for financial year ended 2003 falls within the following bands is summarized as follows: Range of remuneration Number of Directors Executive Non-Executive RM50,000 and below 2 2 RM50,001 to RM100, RM100,001 to RM150, RM150,001 to RM250, The detailed remuneration package of each director is not disclosed, as such information is considered sensitive & confidential. iii) Directors Training All the Directors have attended the Mandatory Accreditation Programme ( MAP ) pursuant to paragraph of the Listing Requirements of the Bursa Malaysia Securities Berhad (BMSB). The Directors are committed to attend the Continuous Education Program (CEP) to keep abreast with any changes in the regulatory requirements and developments in the market place. 3. SHAREHOLDERS i) Dialogue with Investors Recognizing the importance of timely dissemination of information to shareholders and other stakeholders, the Board is committed to ensure that the shareholders and other stakeholders are well informed of major developments of the Group and the information is communicated to them through the following methods: (i) The Annual Report; (ii) The various disclosures and announcements made to Bursa Malaysia Securities Berhad; and (iii) Elba Holdings Berhad s website at ii) General Meetings The Company s Annual General Meeting ( AGM ) serves as a principal forum for dialogue with shareholders, which shareholders are encouraged to raise questions pertaining to the operations and financials of the Group. A copy of the Annual Report and notice of the AGM are sent to the shareholders at least twenty-one (21) days before the AGM. Extraordinary General Meetings ( EGM ) is held as and when required. 15

17 (Incorporated in Malaysia Company No: T) annual report 2003 CORPORATE GOVERNANCE STATEMENT (cont d) 4. ACCOUNTABILITY AND AUDIT i) Financial Reporting The Directors are responsible to ensure that the financial statements prepared are drawn up in accordance with the provision of the Companies Acts, 1965; and applicable approved accounting standards in Malaysia. In presenting the annual financial statements and quarterly announcement to the shareholders, the Company has used appropriate accounting policies, consistently applied and supported by reasonable judgements and estimates. The quarterly and annual financial results were reviewed by the Audit Committee and approved by the Board of Directors to ensure that they presented a balanced and understandable assessment of the Group before they were released to the BMSB. They are responsible to ensure the accurate and timely dissemination of financial and corporate announcements for greater accountability and transparency. ii) Internal Control The Directors acknowledge responsibility of maintaining a reliable internal control system for the Group. This should be a continuing process including risk assessment, review of internal controls and internal audit checks on all companies of the Group. The purpose of this continuing process is to ensure that the Group s assets are safeguard in the interest of preserving the investment of the shareholders. The Directors also acknowledge that the system of internal controls however can provide reasonable but not absolute assurance against misstatements, frauds and loss. The Group has appointed an external professional firm to undertake the review of the existing internal audit system and carry out internal audit functions and risk management functions. Control Environment The internal control mechanism is embedded in the various work processes and procedures at appropriate levels in the Group. The Managing Director is accountable for ensuring the existence and effectiveness of internal control, and providing leadership and direction to senior management on the manner the Group controls. In developing the internal control system, consideration is given to the overall control environment of the Company, assessment of financial and operational risks and an effective monitoring mechanism. Information and Communication While the Management has full responsibility in ensuring the effectiveness of internal control, which it establishes, the Board of Directors has the authority to assess the state of internal control, as it deems necessary. In doing so, the Board has the right to request for information and clarification from the Management as well as to seek inputs from the Audit Committee, external and internal auditors, and other experts at the expense of the Company. Risk Management Apart from the above, the Group is in the process of formalising its existing risk management system to ensure that all high impact risks are adequately addressed at various levels within the Group. iii) Relationship with the Auditors The external auditors have unrestricted access to the Audit Committee, thus ensuring their independence. Meetings are held regularly and are attended by the external auditors and appropriate members of the executive management when necessary. The terms of reference together with the Audit Committee Report are disclosed in page 21 of the Annual Report. The external auditors have continued to report to the Audit Committee on their findings arising from their audit. In doing so, the Company has established a transparent arrangement with the auditors to meet their professional requirements. From time to time, the auditors highlight to the Audit Committee and Board of Directors on matters that require the Board s attention. Annual appointment or re-appointment of the external auditor is via shareholders resolution at the AGM on the recommendation of the Board. 16

18 (Incorporated in Malaysia Company No: T) annual report 2003 CORPORATE GOVERNANCE STATEMENT (cont d) 5. BOARD COMMITTEES i) Audit Committee The Composition and terms of reference of this Committee together with its report are presented on pages 20 to 22 in this Annual Report. ii) Nomination Committee The Committee consists entirely of non-executive directors, all of whom are independent. The members of the Nomination Committee are as follows:- a) Cheah Kean Guan - Chairman b) Haji Jamal Mohamed bin Haji A. M. Sickander c) Abd. Rashid bin V.K. Abd. Majid The terms of reference of the Nomination Committee include the following:- Recommend to the Board, candidates for directorships to be filled. Consider, in making its recommendations, candidates for directorships proposed by the Chief Executive Officer and, within the bounds of practicability, by any other senior executive or director or shareholder. Recommend to the Board, Directors to fill the seats on Board Committees. Assist the board to review its required mix of skills and experience and other qualities on an annual basis, including core competencies, which Directors of the Company should bring to the Board. Assess the effectiveness of the Board of Directors as a whole and each individual directors/committees of the Board. To act in line with the directions of the Board of Directors. To consider and examine such other matters as the Nomination Committee considers appropriate. During the financial year ended 31 December 2003, one meeting was held which was attended by all members of the Nomination Committee. iii) Remuneration Committee The Committee consists of two (2) independent directors and one (1) executive director. The members of the Remuneration Committee are as follows:- a) Haji Jamal Mohamed bin Haji A. M. Sickander - Chairman b) Cheah Kean Guan c) Yeoh Gar Beng The terms of reference of the Remuneration Committee include the following:- To review, assess and recommend to the Board the remuneration packages of the executive directors in all forms, with or without other independent professional advice. To ensure the levels of remuneration are sufficiently attractive to retain directors needed to run the Group successfully. To structure the component parts of remuneration so as to link rewards to corporate and individual performance. 17

19 (Incorporated in Malaysia Company No: T) annual report 2003 CORPORATE GOVERNANCE STATEMENT (cont d) 5. BOARD COMMITTEES (cont d) iii) Remuneration Committee (cont d) The executive directors will abstain from deliberating on matters affecting their own remuneration and the determination of the remuneration of non-executive directors is a matter for the board as whole. The non-executive directors are also required to abstain from discussing their own remuneration During the financial year ended 31 December 2003, one meeting was held which was attended by all members of the Remuneration Committee. 6. ADDITIONAL COMPLIANCE INFORMATION a) Utilisation of Proceeds No proceeds were raised by the Company from any corporate proposal during the financial year. b) Share Buy-backs During the financial year, the Company did not enter into any share buy-backs transactions. c) Options, Warrants or Convertible Securities During the financial year, the paid-up capital of the Company has been increased from RM42,000,000 to RM42,725,000 as a result of the conversion of 725,000 warrants into ordinary shares of RM1.00 each per share. d) American Depository Receipt ( ADR ) or Global Depository Receipt ( GDR ) During the financial year, the Company did not sponsor any ADR or GDR programs. e) Sanctions and/or Penalties Imposed There were no sanctions and/or penalties imposed on the Company or its subsidiaries, directors or management by the relevant regulatory bodies during the financial year. f) Non-Audit Fees The amount of non-audit fees paid to the external auditors for the financial year ended 31 December 2003 amounted to RM 10, g) Variation in Results During the financial year, there were no profit estimates, forecasts, projection or unaudited results announced which differ by 10% or more from the audited results. h) Profit Guarantee During the financial year, there were no profit guarantees given by the Company. i) Material Contracts Awarded to Directors and Substantial Shareholders The Company and/or its subsidiaries do not have any material contracts involving the interest of its Directors and major shareholders during the financial year under review. This statement is made in accordance with a resolution of the Board of Directors dated 26 May

20 (Incorporated in Malaysia Company No: T) annual report 2003 STATEMENT ON THE STATE OF INTERNAL CONTROL Introduction The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of internal control to safeguard investments and the Group s assets. The Bursa Malaysia Securities Berhad ( BMSB ) Listing Requirements, Paragraph (b) requires directors of listed companies to include a statement about the state of Internal Control of the listed issuer as a group. The Board is committed to maintain a sound internal control system in the Group and is pleased to provide the statement which outlines the nature and scope of internal control for the Group during the financial year. Board Responsibility The Internal control system covers not only financial controls but operational and compliance controls, and risk management. The internal control system is designed to enable the Group to manage the risk of failure to achieve business objectives and to provide reasonable and not absolute assurance against material misstatement and losses. During the financial year, internal audit work was performed on areas identified in the audit plan. The internal audit reports encompassing findings and recommendations were then presented to the Audit Committee. Actions were agreed in response to the recommendations and these were followed up to ensure satisfactory control is maintained. The audit plan shall be reviewed annually as the risks the Group faces are continually changing as the Group s objectives, the organization and the environment in which it operates are continuously evolving. In reviewing the adequacy and integrity of the system of the internal control and management information system, the Board has taken account of the results of all the audit work carried in the Group. The Board believes that the Group complies with the requirements of the Malaysian Code of Corporate Governance relating to Internal controls as set out in Statement of Internal Control : Guidelines for Directors of Public Listed Companies. Key elements of the Internal Control The current system of Internal Control has the following key elements: Periodic board and management meetings to review financial performance and business operations of the Group; An organization structure with defined reporting lines. An operational structure with defined lines of responsibility and delegation of authority is in place. A process of hierarchical reporting has been established which provides for a documented and auditable trail of accountability; Internal policies and procedures are in place and regularly updated to reflect changing risks or resolve operational deficiencies. Instances of non-compliance with such policies and procedures are reported thereon by its internal audit function to the Board via the Audit Committee. The external auditors review on the statutory requirements on financial statements and their underlying controls and records. The group has a risk management framework to identify and profile its operational risks. Due to the changing business needs it has to be dynamic rather static. A number of minor internal control weaknesses were identified during the period, all of which have been, or are being addressed. None of the weaknesses have resulted in any material losses during the financial year. The management continues to take measures to strengthen the internal control environment. The Board believes that the development of the system of internal control is an ongoing process and has taken steps throughout the year to improve its internal control system and will continue to do so. This statement is made in accordance with a resolution of the Board of Directors dated 26 May

21 (Incorporated in Malaysia Company No: T) annual report 2003 AUDIT COMMITTEE REPORT a) COMPOSITION The composition of the Audit Committee ( or Committee ) is as follows: Chairman Haji Jamal Mohamad bin Haji A.M. Sickander - Independent Non-Executive Director Members Abd Rashid bin V. K. Abd Majid - Independent Non-Executive Director Cheah Kean Guan - Independent Non-Executive Director Yeoh Gar Beng - Non-Independent Executive Director The term and performance of the Audit Committee and each of its members shall be reviewed by the Board at least once every three (3) years to determine whether the Audit Committee and its members have carried out their duties in accordance with their terms of reference. b) ATTENDANCE OF MEETINGS During the financial year ended 31 December 2003, six (6) Audit Committee meetings were held. Details of attendance of the members of the Audit Committee at the meetings held during the financial year ended 31 December 2003 are as follows: - Date and Time of Meeting Name of Members a.m a.m a.m a.m a.m a.m. Haji Jamal Mohamed Bin Haji A. M. Sickander P P P P P P 6/6 Abd Rashid Bin V. K. Abd Majid P P P P P P 6/6 Cheah Kean Guan P P P P A P 5/6 Yeoh Gar Beng P P P P P P 6/6 Notes: - P = Present A = Absent with Apologies 20

22 (Incorporated in Malaysia Company No: T) annual report 2003 AUDIT COMMITTEE REPORT (cont d) c) TERMS OF REFERENCE Objective To assist and ensure the Board of Directors to discharge its duties and responsibilities as stated in paragraph (d). Secretary The Company Secretary shall act as the secretary of Audit Committee. The Company Secretary is responsible to coordinate the administrative function in ensuring the meetings are being held accordingly. The Company Secretary shall also be responsible for keeping the minutes of the Audit Committee, and circulating them to the Committee members and to the other members of the Board, where applicable. Meetings The Committee meets at least four (4) times a year. At the request of the Chairman of Audit Committee, Executive Directors and other management staff will be invited to attend the Committee meetings or for selected agenda items. Representatives of the external auditors may also be invited. The Audit Committee Chairman shall report all matters discussed each meeting to the Board of Directors. In addition, the Committee shall regulate its own procedures, in particular, the calling of meetings, the notice to be given of such meetings, the voting and proceeding of such meetings, the keeping of minutes and the custody, production and inspection of such minutes. Quorum In order to form a quorum in respect of a meeting of an Audit Committee, the majority of members present must be independent directors. Authority The Board authorizes the Committee to investigate any activity within its terms of reference. It is authorized to seek any information it requires from any employee and all employees are directed to cooperate with any request made by the Committee. In addition, the Committee is authorized by the Board to obtain outside legal or other independent professional advice if it considers this necessary. The Committee always has the direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity. d) DUTIES AND RESPONSIBILITIES The Committee shall be responsible for assisting the Board in fulfilling its fiduciary responsibility in areas relating to financial reporting matters and to the accounting and management controls of the Company and its subsidiaries. The duties of Audit Committee shall among others, include the following: - 1. To consider the appointment and removal of the external auditors, the audit fees and any questions of resignation or dismissal; 2. To discuss with the external auditors before the audit commences the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved and review the plan; 3. To review the quarterly and annual financial statements before submission to the Board; 4. To review with the internal and external auditors their audit report; 5. To review the effectiveness of management information and other systems of control within the Company; 6. To keep under review the effectiveness of the internal control systems; 7. To act in line with the directors of the Board of Directors; and 8. To report its findings on the financial and management performance and other material matters to the Board of Directors. 21

23 (Incorporated in Malaysia Company No: T) annual report 2003 AUDIT COMMITTEE REPORT (cont d) e) SUMMARY OF ACTIVITIES During the financial year 2003, the Audit Committee carried out the following activities in the discharge of its functions and duties: 1. Reviewed the quarterly unaudited financial results and Annual Report of the Group before recommending them for the Board s approval. 2. Reviewed with the external auditors the results of the audit, the audit report and the management letter, including management s response. 3. Discussed with the external auditors changes and developments on accounting practices and standards issued by the Malaysian Accounting Standards Board. 4. Reviewed the extent of the Group s compliance with the provisions set out under the Malaysian Code of Corporate Governance for the purpose of preparing the Corporate Governance Statement and the Statement on Internal Control pursuant to the BMSB Listing Requirements. 5. Reviewed and discussed with the external consulting firm engaged to undertake the internal audit functions of the Group, the internal audit activities carried out during the year and their assessment, findings and recommendations on the system of internal controls and risk management. 6. Attended a briefing by the management on the proposed implementation of the Group s Electronic Business website (E-Business) that will enable customers to place orders through the Internet. Statement by Audit Committee on the Group s Employees Share Option Scheme ( ESOS ) Appendix 9C Part A Item No. 25 of the Listing Requirements of the BMSB requires a statement by the Audit Committee in relation to the allocation of options pursuant to any share scheme for employees as required under paragraph 8.21A. The Audit Committee has reviewed and is of the view that the criteria for allocation of the Group s ESOS for the financial year under review. a. has been made known to all eligible employees; and b. the allocation of the said Share Option is made in compliance with the criteria for set out in the ESOS Policy Guidelines and the ESOS Bye-laws of the Company. INTERNAL AUDIT FUNCTION The group has outsourced the internal audit function to Focus Internal Audit Solution, which reports to the Audit Committee and assists the Board of Directors in monitoring and managing risks and Internal Controls. The Audit Committee approves the internal audit plan during the Audit Committee meeting each year. The scope of Internal Audit covers the audits of all critical units of the operations, including its subsidiaries. A numbers of minor internal control weaknesses were identified during the period, all of which have been, or being addressed. None of the issues warrant any further disclosure in the Group s annual report. The group has introduced a risk-based approach to the implementation and monitoring of controls at the beginning of the period. The monitoring process also forms the basis for continually improving the risk management process in the context of the Group s overall goals. 22

24 (Incorporated in Malaysia Company No: T) annual report 2003 DIRECTORS RESPONSIBILITY STATEMENT Statement of Directors responsibilities in relation to Financial Statements (in respect of the Annual Audited Financial Statements pursuant to Paragraph (a) of the Bursa Malaysia Securities Berhad ( BMSB ). Under the Companies Act 1965, the Directors are required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of the results and cash flows of the Group and of the Company for the financial year then ended. In preparing the financial statements for the financial year ended 31 December 2003, the Directors have:- used appropriate accounting policies and applied them consistently; made judgements and estimates that are reasonable and prudent; stated whether applicable approved accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and reviewed and confirmed the financial statements have been prepared on a going concern basis. The Directors are responsible for ensuring proper accounting records are kept and which disclose with reasonable accuracy the financial position of the Group and the Company and to enable them to ensure the financial statements comply with the provisions of Companies Act, The Directors have a general responsibility for taking reasonable steps to safeguard the assets of the Group and the Company, and to prevent and detect fraud and other irregularities. 23

25 (Incorporated in Malaysia Company No: T) annual report 2003 Directors Report The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31st December PRINCIPAL ACTIVITIES The principal activities of the Company are investment holding and provision of management consultancy services. The principal activities of its subsidiary companies are disclosed in Note 5 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year. FINANCIAL RESULTS Group RM Company RM Net loss for the financial year (1,979,062) (242,813) DIVIDENDS No dividend has been paid or declared by the Company since the end of the previous financial year. The directors do not recommend the payment of any dividend in respect of the current financial year. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements. BAD AND DOUBTFUL DEBTS Before the income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and have satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts. At the date of this report, the directors are not aware of any circumstances, which would render the amount written off for bad debts, or the amount of allowance for doubtful debts, in the financial statements of the Group and of the Company inadequate to any substantial extent. CURRENT ASSETS Before the income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps to ensure that any current assets, which were unlikely to realise their value in the ordinary course of business as shown in the accounting records of the Group and of the Company, have been written down to an amount which they might be expected so to realise. At the date of this report, the directors are not aware of any circumstances, which would render the values attributed to the current assets in the financial statements misleading. 24

26 (Incorporated in Malaysia Company No: T) annual report 2003 Directors Report (cont d) VALUATION METHODS At the date of this report, the directors are not aware of any circumstances 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. CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist: (a) (b) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liability of any other person; or any contingent liability of the Group and of the Company which has arisen since the end of the financial year. No contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, 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. CHANGE OF CIRCUMSTANCES At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements, which would render any amounts stated in the financial statements misleading. ITEMS OF AN UNUSUAL NATURE In the opinion of the directors, (a) (b) other than the impact of the change in accounting policy stated in Note 30 to the financial statements, the results of the operations of the Group and of the Company for the financial year ended 31st December 2003 were not, substantially affected by any item, transaction or event of a material and unusual nature. there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the financial year ended 31st December ISSUE OF SHARES AND DEBENTURES During the financial year, (a) (b) the authorised share capital of the Company was increased from RM50,000,000 to RM100,000,000 by the creation of an additional 50,000,000 ordinary shares of RM1.00 each. the issued and paid-up capital of the Company was increased from RM28,000,000 to RM42,725,000 via: (i) a bonus issue of 14,000,000 new ordinary shares on the basis of one (1) new ordinary share for every two (2) existing shares in the Company, and (ii) the issuance of 725,000 ordinary shares of RM1.00 arising from the exercise of 725,000 warrants. The new shares rank pari passu with the then existing ordinary shares. The Company has not issued any debentures during the financial year. 25

27 (Incorporated in Malaysia Company No: T) annual report 2003 Directors Report (cont d) WARRANTS The Company, issued 14,000,000 warrants at no cost to the entitled shareholders of the Company, other than the guarantors and person connected to guarantors, to release the guarantors obligations under the Profit Guarantee and Stakeholder Agreement that had been completed on 19th November During the financial year, the guarantors offered to buy back the warrants at 59 sen each and have bought back 725,000 warrants from the entitled shareholders. On 26th December 2003, the entire 725,000 warrants had been exercised by the guarantors. The main features of the warrants, are as follows: (a) Each warrant will entitle its registered holder during the exercise period of 10 years expiring on 27th November 2012 to subscribe for one (1) new ordinary share at the exercise price, which has been fixed at RM1.00 each. Warrants not exercised during the exercise period will thereafter lapse and cease to be valid. (b) The new ordinary shares of RM1.00 each to be issued pursuant to the exercise of the warrants will rank pari passu in all respects with the existing issued ordinary shares of the Company. The movements of the warrants are disclosed in Note 13 to the financial statements. EMPLOYEES SHARE OPTION SCHEME The Company s Employees Share Option Scheme ( ESOS ) was approved by the shareholders at the Extraordinary General Meeting held on 30th June 2003 and became effective on 17th October 2003 for a period of 5 years. The details of the ESOS are set out in Note 13 to the financial statements. The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the list of option holders and their holdings except for the employees who have been granted with 100,000 options or more during the financial year. As at 31st December 2003, the Company has not granted any ESOS to its eligible employees. DIRECTORS OF THE COMPANY The directors who have held office since the date of the last report are: Yeoh Chong Teng Yeoh Gar Beng Loke Siew Loke Lay Kim Yeoh Eng Hoe Haji Jamal Mohamed bin Haji A.M. Sickander Abd. Rashid bin V.K. Abd. Majid Cheah Kean Guan Yeoh Han Chye (resigned on ) Kwek Soak Eng (resigned on ) Tuan Haji Jamal Mohamed bin Haji A.M. Sickander, retires at the annual general meeting in accordance with Section 129 of the Companies Act, 1965, and being eligible, offers himself for re-election. In accordance with Article 101 of the Company s Articles of Association, Mr. Yeoh Gar Beng retires by rotation and being eligible, offers himself for re-election. 26

28 (Incorporated in Malaysia Company No: T) annual report 2003 Directors Report (cont d) DIRECTORS BENEFITS Since the end of the previous financial year, no director of the Company has received or become entitled to receive any benefit (other than directors remuneration as disclosed in the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest other than those disclosed in Note 21 to the financial statements. During and at the end of the financial year, no arrangements subsisted to which the Company or a related corporation was a party, whereby directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. DIRECTORS INTEREST According to the register of directors shareholdings, the interest of directors in office at the end of the financial year in shares and warrants of the Company and its related corporations were as follows:- Number of ordinary shares of RM1.00 each Shareholdings in Balance at Bonus Warrants Balance at the Company issue exercised Bought Sold Direct interest Yeoh Chong Teng 810, , ,215,000 Yeoh Eng Hoe 215, , ,500 Indirect interest Yeoh Chong Teng 12,910,000 6,455, , ,090,000 Loke Siew Loke Lay Kim 13,410,000 6,705, , ,840,000 Yeoh Gar Beng 13,410,000 6,705, , ,840,000 Number of warrants Balance at Balance at Indirect interest in warrants Bought Exercised Yeoh Chong Teng - 725,000 (725,000) - Loke Siew Loke Lay Kim - 725,000 (725,000) - Yeoh Gar Beng - 725,000 (725,000) - By virtue of their interest in shares of the Company, Messrs. Yeoh Chong Teng, Loke Siew Loke Lay Kim and Yeoh Gar Beng are also deemed to be interested in the shares of all the subsidiary companies to the extent the Company has an interest. None of the other directors in office at the end of the financial year held or dealt in shares/warrants of the Company and its related corporations during the financial year. 27

29 (Incorporated in Malaysia Company No: T) annual report 2003 Directors Report (cont d) AUDITORS The auditors, Messrs. Peter Chong & Co., Chartered Accountants, have indicated their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the Directors Yeoh Chong Teng Director Yeoh Gar Beng Director Georgetown, Penang Dated: 26 April

30 (Incorporated in Malaysia Company No: T) annual report 2003 Statement By Directors Pursuant to Section 169(15) of the Companies Act, 1965 We, Yeoh Chong Teng and Yeoh Gar Beng, being the directors of ELBA HOLDINGS BERHAD do hereby state that, in the opinion of the directors, the financial statements set out on pages 31 to 66 are properly drawn up in accordance with the applicable approved accounting standards in Malaysia so as to give a true and fair view of the state of affairs as at 31st December 2003 and of the results and the cash flows of the Group and of the Company for the financial year then ended. Signed on behalf of the Board in accordance with a resolution of the Directors Yeoh Chong Teng Director Yeoh Gar Beng Director Georgetown, Penang Dated: 26 April 2004 Statutory Declaration Pursuant to Section 169(16) of the Companies Act, 1965 I, Yeoh Cheong Yeow, being the officer primarily responsible for the financial management of ELBA HOLDINGS BERHAD, do solemnly and sincerely declare that the financial statements set out on pages 31 to 66 are, to the best of my knowledge and belief, correct and I make this solemn declaration, conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared by ) the abovenamed Yeoh Cheong Yeow ) at Georgetown in the State of Penang ) on 26 April 2004 ) Yeoh Cheong Yeow Before me: Ahmad Anwar bin Ishak, PJM (P052) Commissioner for Oaths Georgetown, Penang 29

31 (Incorporated in Malaysia Company No: T) annual report 2003 Report Of The Auditors To The Members Of ELBA HOLDINGS BERHAD And Its Subsidiary Companies We have audited the financial statements set out on pages 31 to 66. The preparation of the financial statements is the responsibility of the Company s directors. Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with approved Standards on Auditing in Malaysia. These standards require that we plan and perform the audit to obtain all the information and explanations, which we consider necessary to provide us with sufficient evidence to give reasonable assurance that the financial statements are free of material misstatement. Our audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. Our audit also includes an assessment of the accounting principles used and significant estimates made by the directors as well as evaluating the overall adequacy of the presentation of information in the financial statements. We believe our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards in Malaysia so as to give a true and fair view of: (i) (ii) the state of affairs of the Group and of the Company as at 31st December 2003 and of the results and the cash flows of the Group and of the Company for the financial year then ended; and the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements of the Group and of the Company. (b) the accounting and other records and the registers required by the Act to be kept by the Company and by its subsidiary companies for which we have acted as auditors have been properly kept in accordance with the provisions of the Act. We have considered the financial statements and the Auditors' Reports of all the subsidiary companies for which we have not acted as auditors as indicated in Note 5 to the financial statements included in the consolidated financial statements. We are satisfied that the financial statements of the subsidiary companies that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements, and we have received satisfactory information and explanations as required by us for those purposes. The Auditors Reports on the financial statements of the subsidiary companies were not subject to any qualification and did not include any comment made under sub-section (3) of Section 174 of the Companies Act, Peter Chong & Co. No. AF 0165 Chartered Accountants Peter Chong Ton Nen No. 394/03/06 (J/PH) Partner of the Firm Georgetown, Penang Dated: 26 April

32 (Incorporated in Malaysia Company No: T) annual report 2003 Consolidated Balance Sheet At 31st December 2003 Restated Note RM RM PROPERTY, PLANT AND EQUIPMENT 4 22,768,022 23,354,438 INVESTMENTS 6 4,500,000 4,500,001 CURRENT ASSETS Inventories 7 66,865,911 60,121,242 Receivables 8 50,867,814 33,897,398 Tax assets 9 42,907 11,754 Cash and cash equivalents 10 8,961,819 10,293, ,738, ,323,903 CURRENT LIABILITIES Payables 11 19,377,113 12,545,822 Borrowings 12 36,443,884 15,620,503 Tax liabilities 9 2,665,946 6,479,385 58,486,943 34,645,710 NET CURRENT ASSETS 68,251,508 69,678,193 Financed by: 95,519,530 97,532,632 CAPITAL AND RESERVES Share capital 13 42,725,000 28,000,000 Reserves 14 4,880,688 20,859,750 SHAREHOLDERS EQUITY 47,605,688 48,859,750 LONG TERM AND DEFERRED LIABILITIES Borrowings 12 47,105,844 47,541,679 Deferred taxation ,998 1,131,203 95,519,530 97,532,632 The attached notes form an integral part of these financial statements. 31

33 (Incorporated in Malaysia Company No: T) annual report 2003 Consolidated Income Statement For The Financial Year Ended 31st December 2003 Restated Note RM RM REVENUE 16 73,790,181 57,131,211 COST OF SALES 16 (55,033,651) (38,624,970) GROSS PROFIT 18,756,530 18,506,241 OTHER OPERATING INCOME 795, ,486 DISTRIBUTION COSTS (7,020,632) (6,233,522) ADMINISTRATION EXPENSES (8,009,128) (7,822,825) PROFIT FROM OPERATIONS 17 4,522,078 5,242,380 FINANCE COSTS 19 (6,395,765) (3,611,846) (LOSS)/PROFIT BEFORE TAXATION (1,873,687) 1,630,534 TAXATION 9 (105,375) (748,879) NET (LOSS)/PROFIT FOR THE FINANCIAL YEAR (1,979,062) 881,655 (LOSS)/EARNINGS PER SHARE (SEN) 20 - Basic - Diluted (4.71) 2.10 (4.62) 2.09 The attached notes form an integral part of these financial statements. 32

34 (Incorporated in Malaysia Company No: T) annual report 2003 Consolidated Statement Of Changes in Equity For The Financial Year Ended 31st December 2003 Share Share Retained capital premium profits Total RM RM RM RM At 1st January 2002 As previously stated 28,000,000 6,767,646 13,845,482 48,613,128 Change in accounting policy - - (635,033) (635,033) (Note 30) At restated 28,000,000 6,767,646 13,210,449 47,978,095 Net profit for the financial year , ,655 At 31st December ,000,000 6,767,646 14,092,104 48,859,750 At 1st January 2003 As previously stated 28,000,000 6,767,646 14,726,536 49,494,182 Change in accounting policy (Note 30) - - (634,432) (634,432) At restated 28,000,000 6,767,646 14,092,104 48,859,750 Net loss for the financial year - - (1,979,062) (1,979,062) Bonus issue 14,000,000 (6,625,945) (7,374,055) - Shares issue expenses written off against share premium - (141,701) 141,701 - Additional shares issued during the year 725, ,000 At 31st December ,725,000-4,880,688 47,605,688 The attached notes form an integral part of these financial statements. 33

35 (Incorporated in Malaysia Company No: T) annual report 2003 Consolidated Cash Flow Statement For The Financial Year Ended 31st December 2003 CASH FLOWS FROM OPERATING ACTIVITIES Note RM RM (Loss)/profit before taxation (1,873,687) 1,630,534 Adjustments: Bad debts written off 42,338 6,819 Depreciation of property, plant and equipment 1,428,146 1,657,727 Property, plant and equipment written off 17,409 - Profit on disposal of property, plant and equipment (17) (278,711) Negative goodwill on consolidation written off - (45) Interest expense 6,217,063 3,469,898 Interest income (572,267) (239,171) Investment written off 1 - Inventories written off 53,964 1,981 Inventories written down to net realisable value 832,057 - Operating profit before working capital changes 6,145,007 6,249,032 Inventories (7,630,690) (394,663) Receivables (16,821,329) (11,191,192) Payables 6,440,557 (5,334,994) Cash used in operation (11,866,455) (10,671,817) Tax paid 9 (4,273,172) (1,110,595) Tax refunded 9-8,208 Net cash used in operating activities (16,139,627) (11,774,204) The above consolidated cash flow statement is to be read in conjunction with the notes to the financial statements. 34

36 (Incorporated in Malaysia Company No: T) annual report 2003 Consolidated Cash Flow Statement (cont d) For The Financial Year Ended 31st December 2003 CASH FLOWS FROM INVESTING ACTIVITIES Note RM RM Investment in bond - (4,500,000) Acquisition of addition of equity interest in subsidiary companies from minority shareholders - (3) Purchase of property, plant and equipment 22 (773,271) (1,567,413) Proceeds from disposal of property, plant and equipment 212, ,580 Proceeds from exercise of warrants ,000 - Interest received 380, ,171 Net cash generated from/(used in) investing activities 545,565 (4,872,665) CASH FLOWS FROM FINANCING ACTIVITIES Movement in short term borrowings 13,001,177 (10,243,580) Repayment of lease and hire purchase obligations (942,550) (611,905) Proceeds from refinancing of assets under leasing 321,387 1,514,222 Proceeds from drawn down of term loan - 45,000,000 Repayment of term loans (192,150) (386,931) Interest paid (5,826,329) (4,408,865) Net cash generated from financing activities 6,361,535 30,862,941 Net (decrease)/increase in cash and cash equivalents (9,232,527) 14,216,072 Cash and cash equivalents brought forward 4,761,044 (9,455,028) Cash and cash equivalents carried forward 23 (4,471,483) 4,761,044 The above consolidated cash flow statement is to be read in conjunction with the notes to the financial statements. 35

37 (Incorporated in Malaysia Company No: T) annual report 2003 Balance Sheet At 31st December Note RM RM INVESTMENT IN SUBSIDIARY COMPANIES 5 17,048,767 17,048,767 INVESTMENTS 6 4,500,000 4,500,000 CURRENT ASSETS Receivables 8 71,949,170 71,679,733 Cash and cash equivalents 10 1,773,315 1,565,753 73,722,485 73,245,486 CURRENT LIABILITIES Payables , ,017 Tax liability 9 14,126 20, , ,894 NET CURRENT ASSETS 73,286,779 72,804,592 94,835,546 94,353,359 Financed by: CAPITAL AND RESERVES Share capital 13 42,725,000 28,000,000 Reserves 14 7,110,546 21,353,359 SHAREHOLDERS EQUITY 49,835,546 49,353,359 LONG TERM LIABILITIES Borrowings 12 45,000,000 45,000,000 94,835,546 94,353,359 The attached notes form an integral part of these financial statements. 36

38 (Incorporated in Malaysia Company No: T) annual report 2003 Income Statement For The Financial Year Ended 31st December Note RM RM REVENUE ,000 19,995,996 OTHER OPERATING INCOME 3,657, ,796 OTHER OPERATING EXPENSES (343,254) (396,416) PROFIT FROM OPERATIONS 17 3,590,146 19,899,376 FINANCE COSTS 19 (3,826,395) (340,130) (LOSS)/PROFIT BEFORE TAXATION (236,249) 19,559,246 TAXATION 9 (6,564) (5,070,458) NET (LOSS)/PROFIT FOR THE FINANCIAL YEAR (242,813) 14,488,788 The attached notes form an integral part of these financial statements. 37

39 (Incorporated in Malaysia Company No: T) annual report 2003 Statement Of Changes In Equity For The Financial Year Ended 31st December 2003 Share Share Retained capital premium profits Total RM RM RM RM At 1st January ,000,000 6,767,646 96,925 34,864,571 Net profit for the financial year ,488,788 14,488,788 At 31st December 2002/1st January ,000,000 6,767,646 14,585,713 49,353,359 Net loss for the financial year - - (242,813) (242,813) Bonus issue 14,000,000 (6,625,945) (7,374,055) - Shares issue expenses written off against share premium - (141,701) 141,701 - Additional shares issued during the year 725, ,000 At 31st December ,725,000-7,110,546 49,835,546 The attached notes form an integral part of these financial statements. 38

40 (Incorporated in Malaysia Company No: T) annual report 2003 Cash Flow Statement For The Financial Year Ended 31st December Note RM RM CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/Profit before taxation (236,249) 19,559,246 Adjustments: Interest expenses 3,825, ,000 Bad debt written off - 3,984 Interest income (3,652,634) (299,796) Dividend income - (19,719,996) Operating loss before working capital changes (63,883) (116,562) Receivables 161,988 (9,982) Payables (67,478) 75,740 Net cash generated from/(used in) operating activities 30,627 (50,804) CASH FLOWS FROM INVESTING ACTIVITIES Interest paid (3,755,959) (1,125,000) Investment in bond - (4,500,000) Tax paid 9 (13,315) (66,236) Interest received 3,461, ,796 Dividend received - 14,662,396 Proceeds from exercise of warrants ,000 - Advances to subsidiary companies (16,780,000) (56,123,869) Repayments from subsidiary companies 16,540,000 3,500,000 Net cash generated from/(used in) investing activities 176,935 (43,386,913) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from drawn down of term loan - 45,000,000 Net cash generated from financing activities - 45,000,000 Net increase in cash and cash equivalents 207,562 1,562,283 Cash and cash equivalents brought forward 1,565,753 3,470 Cash and cash equivalents carried forward 23 1,773,315 1,565,753 The above cash flow statement is to be read in conjunction with the notes to the financial statements. 39

41 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements For The Financial Year Ended 31st December GENERAL INFORMATION The principal activities of the Company are investment holding and provision of management consultancy services. The principal activities of the subsidiary companies are disclosed in Note 5. There have been no significant changes in the nature of these principal activities during the financial year. The total numbers of employees of the Group (excluding directors) at the end of the financial year was 474 (2002: 470). There was no employee in the Company at the end of the current and previous financial year. The Company is a public limited liability company, incorporated and domiciled in Malaysia, listed on the Second Board of Bursa Malaysia Securities Berhad. The address of the registered office and the principal place of business of the Company are at Kompleks Adorna Gold, , Jalan Gurdwara, Penang. The Board has authorised the issuance of the financial statements on 26th April FINANCIAL RISK MANAGEMENT POLICIES The Group is exposed to a variety of financial risks, including interest rate risk, credit risk, market risk, liquidity and cash flow risk. The Group s overall risk management objective is to ensure the Group creates value for its shareholders whilst minimising the potential adverse effects on the performance of the Group. The Group does not trade in financial instruments or engage in speculative transactions. Interest rate risk The Group is exposed to interest rate risk mainly from their fixed deposits and borrowings and interest bearing debts. The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate of borrowings. Credit risk The Group is exposed to credit risk mainly from receivables and investments. They are subject to continuous review. At balance sheet date, the maximum exposure for the Group was represented by the carrying amount of the financial assets. Market risk The Group s principal exposure to market risk arises mainly from the fluctuation in market price of its investment. The management monitors the performance of its investment closely to ensure its interest is preserved. Liquidity and cash flow risks The Group maintains sufficient cash, marketable securities, and the availability of funding through an adequate amount of committed credit facilities. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of accounting The financial statements of the Group and of the Company have been prepared under the historical cost convention, unless otherwise indicated in this summary of significant accounting policies. The financial statements comply with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act,

42 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) (a) Basis of accounting (cont d) The preparation of financial statements, in conformity with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act 1965, requires the directors to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. The accounting policies adopted by the Group and the Company have been consistent compared to those adopted in previous years except for the adoption of the following: - (i) (ii) (iii) MASB 25, Income Taxes, which is applied retrospectively. MASB 27, Borrowing cost, which is applied prospectively. MASB 29, Employee Benefits, which is applied prospectively. (b) Basis of consolidation Subsidiary companies are those companies in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities. Unless otherwise indicated, the Group is deemed to have power to exercise control over the financial and operating policies if the Company owns directly or indirectly through its subsidiary companies, more than one half of the voting power of the subsidiary companies. The consolidated financial statements include the financial statements of the Company and subsidiary companies made up to the end of the financial year. Financial statements of subsidiary companies are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date that control ceases. Financial statements of subsidiary companies are consolidated using the acquisition method of accounting, except for the financial statements of a subsidiary company which is consolidated using the merger method of accounting in accordance with Malaysian Accounting Standard No. 2 Accounting for Acquisitions and Mergers prevailing at that time, as disclosed in Note 5. The Group has adopted the transition provision as allowed by MASB 21- Business Combination and chosen to apply the standard prospectively. Accordingly, Business Combination entered into prior to 1st July 2001 has not been restated to comply with this standard. Under the acquisition method of accounting, the results of subsidiary companies acquired or disposed of during the year are included from the date of acquisition up to the date of disposal. At the date of acquisition, the fair values of the subsidiary companies net assets are determined and these values are reflected in the consolidated financial statements. The difference between the acquisition cost and the fair values of the subsidiary companies net assets is reflected as goodwill on consolidation and written off immediately to the income statement. Under the merger method of accounting, the results of the subsidiary companies are presented as if the merger had been effected throughout the current and previous financial years. On consolidation, the difference between the carrying values of the investment over the nominal value of the shares acquired is taken to merger reserve. Minority interest is measured at the minorities shares of the net results of its operations and the net assets of subsidiary company concerned. 41

43 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) (b) Basis of consolidation (cont d) All inter company transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless cost cannot be recovered. In the case where the accounting policies adopted by a subsidiary company is inconsistent with the Group s, the financial statements of the subsidiary companies have been restated to be compliance with the Group policies. In the event of disposal, gain or loss on disposal of a subsidiary company is determined by the difference between net disposal proceeds and the Group s share of its net assets together with any unamortised balance of goodwill on acquisition. (c) Property, plant and equipment and depreciation All property, plant and equipment, are stated at cost or valuation less accumulated depreciation and impairment loss, if any. An item is recognised as property, plant and equipment when it is probable that future economic benefits associated with the property, plant and equipment will flow to the Group. Surpluses arising on revaluation (net of tax) are credited to revaluation reserve. Any deficit arising from revaluation is charged against the revaluation reserve to the extent of a previous surplus held in the revaluation reserve for the same asset (net of tax). In all other cases, a decrease in carrying amount is charged to income statement. On disposal of revalued assets, amounts in revaluation reserve relating to those assets are transferred to retained profits. Subsequent to revaluation, any addition is stated at cost whilst disposal is at cost or valuation as appropriate. Previously, the tax impact for surplus on revaluation was not accounted for. The change in accounting policy is made to be in compliance with MASB 25 which is applied retrospectively. The financial impact of the change in accounting policy is disclosed in Note 30. The land and buildings have not been revalued since the date of the revaluation exercise as stated in Note 4. The Group has adopted the transitional provisions as allowed by the Malaysian Accounting Standards Board. The Group has retained the previous valuation as the gross carrying amount and subject to the continuing application of the current depreciation. Freehold land and capital work-in-progress are not depreciated. Gross carrying amount of property, plant and equipment are depreciated on a straight line basis to write off the carrying amount of each asset to their residual values over their following estimated useful lives: Number of years Freehold buildings 50 Long leasehold land and buildings 91 Plant and machinery 10 Motor vehicles 5 Counters, furniture and fittings 5-10 Office equipment and tools 5-10 Renovation and electrical installation 10 Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised as part of the costs of the asset during the period of time that is required to complete and prepare the asset for its intended use. 42

44 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) (d) Investments Investments in subsidiary companies and other non current investments are shown at cost and adjusted for impairment where the diminution in value is not temporary. Impairment loss is recognised as an expense in the period in which the diminution is identified. On disposal of an investment, the difference between net disposal proceeds and its carrying amount is charged or credited to the income statement. Investments in highly liquid investment, which are held for short term liquidity purposes, are stated at the lower of cost and net realisable value. An increase or decreases in the carrying value of these investments are taken to the income statement. (e) Trade receivables Trade receivables are carried at anticipated realisable value. All known bad debts are written off in the period in which they are identified. An estimate is made for doubtful debts based on a review of all outstanding amounts at the period end. (f) Finance lease Assets acquired under finance lease and hire purchase agreements that give rights approximating ownership are capitalised in the balance sheet, as if they had been purchased outright. Finance lease assets are capitalised at the lower of the fair value of the leased assets or the present value of the minimum lease payment, at the inception of the lease. Outstanding obligations due under these agreements after deducting finance expenses are included as liabilities in the financial statements. The excess of the lease payments over the recorded lease obligations is treated as finance charges which are amortised over each lease term to give a constant rate of charge on the remaining balance of the obligations. These assets are depreciated in accordance with the depreciation policy of the Group. Lease arrangements, which do not fulfill the above criteria, will be accounted for as operating lease where lease rental will be recognised as an expense as and when incurred. Operating lease Assets acquired under operating lease agreements that the lessor retains all the risks and benefits of ownership are classified as operating lease. Payments made under operating lease are charged to income statement on a straight line basis over the period of the lease. (g) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. The cost of raw material comprises the original cost of purchase plus the cost of bringing the inventories to their intended location and condition. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and an appropriate proportion of production overheads. Net realisable value is determined based on the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. 43

45 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) (h) Deferred taxation Deferred taxation liabilities and assets are accounted for using the liability method at the current tax rate in respect of all temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base including unused tax losses and capital allowances. A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. The carrying amount of a deferred tax asset is reviewed at each balance sheet date. If it is no longer probable that sufficient future taxable profit will be available to allow the benefit of part or that entire deferred tax asset to be utilised, the carrying amount of the deferred tax asset will be reduced accordingly. When it becomes probable that sufficient future taxable profit will be available, such reductions will be reversed. Previously, deferred taxation is provided using the liability method on all timing differences between accounting income and taxable income except where there is reasonable evidence that these timing differences will not reverse in the foreseeable future. Deferred tax benefits are recognised only if there is a reasonable expectation of their realisation in the foreseeable future. The change in accounting policy is made to be in compliance with MASB 25 which is applied retrospectively. The financial impact of the change in accounting policy is disclosed in Note 30. (i) Revenue recognition Sale of goods Revenue from sale of goods is measured at the fair value of the consideration receivable and is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer and it is probable that the economic benefits associated with the transactions will flow to the Group and the Company. Rendering of management services Revenue from rendering of services is measured at the fair value of consideration receivable and is recognised in the income statement when it is probable that the economic benefits associated with the transactions will flow to the Group and of the Company. Dividend income Dividend income is recognised as and when the shareholder s right to receive payment is established. Other revenues earned are recognised on the following bases: (i) Interest income - on an accrual basis (taking into account the effective yield on the assets) unless collectability is in doubt. (ii) Rental income - on an accrual basis in accordance with the substance of the relevant agreement unless collectability is in doubt. (j) Financial instruments Financial instrument is any contract that gives rise to both a financial asset of one company and a financial liability or equity instrument of another entity. Financial instruments carried on the balance sheet include cash and bank balances, investments, receivables, payables and borrowings. The particular recognition methods adopted are disclosed in the individual accounting policy statements associated with each item. 44

46 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) (k) Impairment of assets The carrying values of assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such an indication exists, the recoverable amount of each asset or cash generating unit is estimated based on the higher of its net selling price and its value in use, which is measured by reference to discounted future cash flows. An impairment loss is charged to the income statement immediately, unless the asset is carried at revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of previously recognised revaluation surplus for the same asset. Subsequent increase in the recoverable amount of an asset is treated as reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have determined (net of amortisation and depreciation) had no impairment loss been recognised. (l) Liabilities Borrowings, trade and other payables are stated at cost. (m) Provisions Provisions, if any, is recognised when it is probable that an out flow of resources embodying economic benefits will be required to settle a present obligation (legal or constructive) as a result of a past event and a reliable estimate can be made of the amount. (n) Employee benefits Short term employee benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. Defined contribution plans As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund ( EPF ). Such contributions are recognised as an expense in the income statement as incurred. (o) Capitalisation of borrowing costs Borrowing costs incurred on properties under development and in developing investment properties are capitalised. Capitalisation of borrowing costs will cease when the assets are ready for intended use. (p) Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, bank overdrafts and short term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. For the purpose of cash flow statement, cash and cash equivalents are presented net of bank overdrafts. (q) Comparatives Certain comparative figures were restated to comply with the additional requirements of the new applicable approved accounting standards adopted for the financial year ended 31st December The comparative figures have been restated where necessary to conform to the changes in presentation as disclosed in Note

47 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December PROPERTY, PLANT AND EQUIPMENT Renovation Freehold Leasehold Counters, Office and Capital land and land and Plant and Motor furniture equipment electrical work in Group buildings buildings machinery vehicles and fittings and tools installation progress Total RM RM RM RM RM RM RM RM RM Net carrying amount at 1st January ,024,526 1,612, , ,283 2,087,746 1,200, ,490 6,111,757 23,354,438 Additions ,529 77, , ,500 63,378 88,294 1,072,116 Disposals (203,326) - (534) (9,117) - (212,977) Written off (16,323) (1,086) - - (17,409) Depreciation (57,334) (18,357) (183,953) (130,271) (702,377) (285,826) (50,028) - (1,428,146) Net carrying amount at 31st December ,967,192 1,594, , ,508 2,013,639 1,078, ,723 6,200,051 22,768,022 At 31st December 2003 Cost 1,163, ,548 1,556,234 2,100,153 8,444,583 3,647, ,924 6,200,051 24,175,150 Valuation 10,239,375 1,242, ,482,081 Gross carrying amount 11,403,071 1,735,254 1,556,234 2,100,153 8,444,583 3,647, ,924 6,200,051 35,657,231 Accumulated depreciation (435,879) (141,054) (1,052,747) (1,876,645) (6,430,944) (2,569,739) (382,201) - (12,889,209) Net carrying amount 10,967,192 1,594, , ,508 2,013,639 1,078, ,723 6,200,051 22,768,022 At 31st December 2002 Cost 1,163, ,548 1,523,705 2,269,457 7,851,937 3,484, ,739 6,111,757 23,413,653 Valuation 10,239,375 1,242, ,482,081 Gross carrying amount 11,403,071 1,735,254 1,523,705 2,269,457 7,851,937 3,484, ,739 6,111,757 34,895,734 Accumulated depreciation (378,545) (122,697) (868,794) (1,790,174) (5,764,191) (2,284,646) (332,249) - (11,541,296) Net carrying amount 11,024,526 1,612, , ,283 2,087,746 1,200, ,490 6,111,757 23,354,438 46

48 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December PROPERTY, PLANT AND EQUIPMENT (cont d) (i) The net carrying amounts of the Group s land and buildings at valuation that would have been included in the financial statements at costs less accumulated depreciation are: Group RM RM Freehold land and buildings 4,870,279 4,922,546 Long term leasehold land and buildings 1,041,884 1,054,590 The freehold and leasehold land and buildings of the Group were revalued on 23rd June 1997 based on fair market value method carried out by Chartered and Registered Valuer, Tay Lai Hee (ARICS, MIS(M), IRRV) of Rahim & Co. and revised by the Government valuers. (ii) (iii) Titles to the freehold and leasehold land and buildings with net carrying amount of RM888,785 (2002: RM2,546,389) belonging to certain subsidiary companies have yet to be issued by the relevant authorities. Net carrying amount of assets pledged to banks for banking facilities granted to certain subsidiary companies as disclosed in Note 12(i) are as follows: Group RM RM Freehold land and buildings 10,967,192 11,024,526 Leasehold land and buildings 1,594,200 1,612,557 (iv) Net carrying amount of assets held under finance lease agreements and hire purchase plans: Group RM RM Finance lease: Counters, furniture and fittings 686, ,269 Hire purchase: Motor vehicles 222, ,434 47

49 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December INVESTMENT IN SUBSIDIARY COMPANIES Company RM RM Unquoted shares, at cost 17,048,767 17,048,767 The subsidiary companies, all of which are incorporated in Malaysia, are as follows: Gross equity interest at Subsidiary company Principal activities of the Company % % * Elba Group Sdn. Bhd Distributor, wholesaler and retailer of apparels and investment holding Subsidiary companies of Elba Group Sdn. Bhd. Chong Chiaw (Malaysia) Distributor, wholesaler and Sendirian Berhad retailer of apparels and investment holding Elba Corporation (Malaysia) Wholesaler and retailer of Sdn. Bhd. garments ** Chong Chiaw Enterprise Sdn. Bhd Investment holding The Edwin (Malaysia) Sdn. Bhd Dormant ** Old & Young Sdn. Bhd Fashion retailer Adax Corporation Sdn. Bhd Distributor, wholesaler and retailer of apparels Peco Industrial (Malaysia) Sdn. Bhd Wholesaler and retailer of garments Peco Apparel (Malaysia) Sdn. Bhd Manufacturer and supplier of all kinds of garment and apparels ** EVS Garment Industries Manufacturer and distributor of Sdn. Bhd. garments and apparels * Subsidiary company consolidated under merger method of accounting. ** The financial statements of these companies were examined by auditors other than the auditors of the Company. 48

50 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December INVESTMENTS At cost Group Company RM RM RM RM Unquoted bond 4,500,000 4,500,000 4,500,000 4,500,000 Unquoted share At 1st January 120, , Written off (120,000) At 31st December - 120, Less: Impairment loss At 1st January (119,999) (119,999) - - Reversal upon written off 119, At 31st December - (119,999) Total investments 4,500,000 4,500,001 4,500,000 4,500,000 As part of the terms and conditions of the RM45 million term loan taken by the Company, the Company is required to invest in the above unquoted bond, matures on 6th December The effective interest rate on the unquoted bond is disclosed in Note 25(i). 7. INVENTORIES Group At cost RM RM Textiles and accessories 12,693,794 10,082,000 Work in progress 507, ,178 Trading goods 47,635,773 49,427,064 At net realisable value 60,837,070 60,121,242 Trading goods 6,028,841-66,865,911 60,121,242 49

51 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December RECEIVABLES Group Company RM RM RM RM Trade receivables 48,465,494 31,191, Other receivables 507, , ,425 44,000 Deposits and prepayments 1,894,812 2,017, ,000 1,106,000 Due from subsidiary companies - interest-bearing ,088,012 38,000,000 - interest free ,709,733 32,529, ,797,745 70,529,733 50,867,814 33,897,398 71,949,170 71,679,733 The amounts due from subsidiary companies are non-trade in nature, unsecured and have no fixed terms of repayment. The interest-bearing portion bears interest at 8.50% (2002: 8.50%)per annum. 9. TAXATION Group Company RM RM RM RM Net tax liabilities at 1st January (6,467,631) (6,949,250) (20,877) (74,255) Malaysian taxation - Charge for the year (252,551) (731,699) - (5,065,599) - Adjustment in respect of prior years (176,029) 110,931 (6,564) (4,859) Tax refunded - (8,208) - - Tax deducted at source ,057,600 Payment made during the year 4,273,172 1,110,595 13,315 66,236 Net tax liabilities at 31st December (2,623,039) (6,467,631) (14,126) (20,877) Disclosed as: Tax assets 42,907 11, Tax liabilities (2,665,946) (6,479,385) (14,126) (20,877) (2,623,039) (6,467,631) (14,126) (20,877) 50

52 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December TAXATION (cont d) Group Company Restated RM RM RM RM The taxation expense comprises: Current - Malaysian taxation 252, ,699-5,065,599 - Transfer to/(from) deferred taxation (Note 15) (304,205) 151, (51,654) 883,610-5,065,599 Non-current - Adjustment in respect of prior years 176,029 (110,931) 6,564 4,859 - Transfer from deferred taxation (Note 15) (19,000) (23,800) , ,879 6,564 5,070,458 Reconciliation of tax expense with accounting profit: Group Restated RM 000 % RM 000 % (Loss)/profit before taxation (1,874) 1,631 Tax at current income tax rate (525) Tax effect of expenses/(income) that is not deductible/(taxable) in determining taxable profits: - Non-allowable expenses 320 (18) Non-taxable income (188) 10 (92) (6) Deferred tax asset not recognised 673 (36) 83 5 Tax saving arising from lower tax rate on the 1st RM100,000 profits (12) Tax savings from utilisation of unutilised capital allowances (16) Under/(over) provision in prior years - Income Tax 176 (9) (111) (7) - Deferred tax (323) (6)

53 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December TAXATION (cont d) Reconciliation of tax expense with accounting profit: (cont d) Company Restated RM 000 % RM 000 % (Loss)/Profit before taxation (236) 19,559 Tax at current income tax rate (66) 28 5, Tax effect of expenses that is not deductible in determining taxable profits: - Non-allowable expenses 81 (34) Non-taxable income (5) 2 (466) (2) - Others (10) Income tax under provided in prior years 7 (3) 5-7 (3) 5, CASH AND CASH EQUIVALENTS Group Company RM RM RM RM Investment in unit trusts, quoted in Malaysia at cost 1,669,497 3,866, ,891 1,006,139 Fixed deposits with licensed banks 5,101,163 4,915, Deposits with licensed banks 600, , Cash and bank balances 1,591,075 1,211, , ,614 8,961,819 10,293,509 1,773,315 1,565,753 Group Company RM RM RM RM Market value Investment in unit trusts, quoted in Malaysia 1,669,497 3,866, ,891 1,006,139 Fixed deposits with licensed banks of RM5,077,273 (2002: RM4,882,455) have been pledged to licensed banks for banking facilities granted to certain subsidiary companies as disclosed in Note 12(i). 52

54 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December PAYABLES Group Company RM RM RM RM Trade payables 17,198,302 11,365, Other payables 987, ,574 16,739 - Accruals 1,190, , , ,017 19,377,113 12,545, , ,017 Included in trade payables is a debit balance of RM6,496,354 (2002: RM9,837,420). This balance represents raw materials supplied by the Group to the suppliers who in turn manufacture garment for Group in the ordinary course of business. Other payables are unsecured, interest free and have no fixed terms of repayment. 12. BORROWINGS Current Group Company RM RM RM RM Secured Bank overdrafts 12,673,629 5,219, Bankers acceptance 1,201,000 1,055, Finance lease and hire purchase obligations 805, , Term loans 228, , Trust receipts 17,223,666 6,437, ,131,886 13,823, Unsecured Bank overdrafts 759, , Bankers acceptance 1,348,000 1,017, Trust receipts 2,204, , ,311,998 1,797, Total 36,443,884 15,620, Non-current Secured Finance lease and hire purchase obligations 689,395 1,108, Term loans 1,416,449 1,432, ,105,844 2,541, Unsecured Term loan 45,000,000 45,000,000 45,000,000 45,000,000 Total 47,105,844 47,541,679 45,000,000 45,000,000 53

55 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December BORROWINGS (cont d) (i) (ii) The bank borrowings are secured as follows: - by way of fixed charge over freehold and leasehold land and buildings of certain subsidiary companies as disclosed in Note 4(iii). - fixed deposits with licensed banks of certain subsidiary companies as disclosed in Note joint and several guarantee by certain directors of the Company. Interests charged are as follows: - bank overdrafts 1.50% to 2.50% (2002: 1.75% to 2.50%) per annum above the lending banks base lending rate. - bankers acceptance 3.50% to 5.10% (2002: 3.50% to 6.30%) per annum. - secured term loans 1.75% to 2.10% (2002: 1.75% to 2.10%) per annum above the lending banks base lending rate. - trust receipts 5.00% to 8.50% (2002: 6.50% to 8.90%) per annum. - unsecured term loan 8.50% per annum. (iii) The implicit interest rates of finance lease and hire purchase obligations range from 6.24% to 12.67% (2002: 6.72% to 17.27%) per annum. (iv) The term loans as at the end of the financial year are repayable as follows: Group Company RM RM RM RM Not later than 1 year 228, , Between 1 to 2 years 183, , Between 2 to 5 years 46,232,788 45,393,742 45,000,000 45,000,000 Later than 5 years - 781, ,644,489 46,836,639 45,000,000 45,000,000 (v) Outstanding finance lease and hire purchase obligations: Group RM RM Minimum lease payments - not later than 1 year 910, ,147 - later than 1 year and not later than 5 years 739,834 1,262,639 1,650,005 2,108,786 Less: Unexpired term charges (155,059) (291,522) 1,494,946 1,817,264 Principal outstanding - current portion 805, ,466 - non-current portion 689,395 1,108,798 1,494,946 1,817,264 54

56 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December SHARE CAPITAL Group and Company No. of shares No. of shares RM RM Authorised Ordinary shares of RM1 each At 1st January 50,000,000 50,000,000 50,000,000 50,000,000 Created during the year 50,000,000-50,000,000 - At 31st December 100,000,000 50,000, ,000,000 50,000,000 Issued and fully paid Ordinary shares of RM1 each At 1st January 28,000,000 28,000,000 28,000,000 28,000,000 Bonus issue 14,000,000-14,000,000 - Issuance of shares arising from exercise of warrants 725, ,000 - At 31st December 42,725,000 28,000,000 42,725,000 28,000,000 Issue of warrants 2002/2012 The warrants are in registered form and constituted by a Deed Poll and the registered holder is entitled to subscribe for one (1) new ordinary share of RM1.00 each in the Company at a predetermined price of RM1.00 per ordinary share for every warrant held. The warrants can be exercised at any time during the ten (10) years subscription period expiring on 27th November During the financial year, the guarantors offered to buy back the warrant at 59 sen each and have bought back 725,000 warrants from the entitled shareholders. The movements in the Company s unissued number of shares under Warrants 2002/2012 during the financial year as follows: Number of ordinary shares of RM1.00 each Balance at Balance at *Issued Exercised Number of unissued shares under warrants 14,000,000 7,000,000 (725,000) 20,275,000 * In relation to bonus shares issued. Employees share option scheme The Company s Employees Share Option Scheme ( ESOS ) was approved by the shareholders at the Extraordinary General Meeting held on 30th June 2003 and became effective on 17th October 2003 for a period of 5 years. The salient features of the ESOS are as follows: (a) (b) (c) The total number of shares to be offered under the ESOS shall not exceed 10% of the issued and paid up share capital of the Company after the bonus issue. Eligible employees are those who have been confirmed in writing as an employee of the Group for at least one (1) year of continuous services at the date of the offer and an eligible director is a full time executive director of the Group. The employee or Executive Director must have attained the age of eighteen (18) years and is Malaysian citizen. 55

57 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December SHARE CAPITAL (cont d) (d) (e) The entitlement of a full time Executive Director under the ESOS shall be approved by the shareholders of the Company in a general meeting. The grantees may during the option period exercise the ESOS in the manner set out in the Bye-Laws subject to the following limits: Percentage of Total Options Exercisable Maximum ESOS entitlement Year 1 Year 2 Year 3 Year 4 Year 5 Below 20, % 33.3% 33.3% ,000 to less than 100,000 20% 20% 20% 20% 20% 100,000 and above 20% 20% 20% 20% 20% (f) (g) (h) Options exercisable in a particular year but not exercised can be carried forward to the subsequent year subject to the time limit of the ESOS. All the new ordinary shares issued arising from ESOS rank pari-passu in all respects with the existing issued and paid-up shares of the Company except that the shares so issued will not rank for any dividend, right and/or other distribution declared which entitlement date precedes that date of exercise of the Option. The grantees have no right to participate, by virtue of these options, in any share issue of any other company within the Group. As at 31st December 2003, the Company has not granted any ESOS to its eligible employees. 14. RESERVES Group Company (Restated) DISTRIBUTABLE RM RM RM RM Retained profits 4,880,688 14,092,104 7,110,546 14,585,713 NON DISTRIBUTABLE Share premium - 6,767,646-6,767,646 4,880,688 20,859,750 7,110,546 21,353,359 Subject to the agreement with the Inland Revenue Board, the Company has sufficient tax credit under Section 108 of the Income Tax Act, 1967 and tax exempt accounts to frank the distribution of its entire retained profits as dividends. 56

58 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December DEFERRED TAXATION Group Restated RM RM Deferred tax liability on cumulative temporary difference arising from revaluation assets At 1st January 634, ,033 Transferred to income statement (601) (601) At 31st December 633, ,432 Deferred tax liability on other cumulative temporary difference At 1st January 496, ,059 Current - Transferred from/(to) income statement (303,604) 152,512 Non-current - Tax assets not recognised in prior year (19,000) (23,800) At 31st December 174, ,771 Total deferred tax liabilities 807,998 1,131,203 Total deferred taxation transferred from/(to) income statement - current (Note 9) (304,205) 151,911 - non-current (Note 9) (19,000) (23,800) Deferred tax assets of certain subsidiaries of the Group have not been recognised in respect of the following items: Group RM RM Excess accounting depreciation over capital allowances 245, ,000 Unabsorbed tax losses 2,751,000 1,887,000 Unutilised capital allowances 1,041, ,000 4,037,000 2,965,000 Potential deferred tax assets calculated at 28% tax rate 1,130, ,000 57

59 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December REVENUE AND COST OF SALES Group Company RM RM RM RM Dividend income - tax exempt ,657,143 - non tax-exempt ,062, ,719,996 Sale of goods 73,715,181 57,059, Rental income 75,000 72, Rendering of management services , ,000 73,790,181 57,131, ,000 19,995,996 Cost of sales of the Group represents cost of inventories sold. 17. PROFIT FROM OPERATIONS The following items have been charged/(credited) in arriving at profit from operations: Group Company RM RM RM RM Auditors remuneration - audit fees - current year 57,100 57,100 20,000 20,000 - other services 10,320 54, Bad debts written off 42,338 6,819-3,984 Inventories written off 53,964 1, Inventories written down to net realisable value 832, Directors remuneration (Note 18) 944, ,789 96,000 96,000 Depreciation of property, plant and equipment 1,428,146 1,657, Interest income - subsidiary companies - - (3,301,547) (259,658) - other (572,267) (239,171) (351,087) (40,138) Profit on disposal of property, plant and equipment (17) (278,711) - - Negative goodwill on consolidation written off - (45) - - Rental of machinery - 28, Rental of premises 700, , Rental income (147,984) (176,930) - - Property, plant and equipment written off 17, Staff costs (excluding directors) 9,530,485 8,991,

60 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December DIRECTORS REMUNERATION Group Company RM RM RM RM Directors of the Company - directors fees 199, ,000 96,000 96,000 - directors emoluments 457, , , ,063 96,000 96,000 Other directors of subsidiary companies - directors fees 15,600 15, directors emoluments 271, , , ,789 96,000 96,000 Executive Non executive Executive Non executive Group Directors of the Company RM RM RM RM Directors fees 103,500 96,000 72,000 96,000 Directors emoluments - salaries 335, , bonus 37,310-40, statutory contribution 84,713-91, ,300 96, ,063 96,000 Executive Non executive Executive Non executive Company Directors of the Company RM RM RM RM Directors fees - 96,000-96,000 The number of directors of the Company in each of the relevant remuneration bands is as follows: *Executive Non executive Executive Non executive RM1 RM50, RM50,001 RM100, RM100,001 RM150, RM150,001 RM250, * Inclusive of two directors resigned on 31st December

61 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December FINANCE COSTS Group Company RM RM RM RM Interests on: - bank overdrafts 961,733 1,218, lease and hire purchase 206, , term loans 3,965, ,083 3,825, ,000 - trade bills 1,067,993 1,565, others 15,297 11, ,217,063 3,469,898 3,825, ,000 Bank charges 178, ,948 1, ,395,765 3,611,846 3,826, , (LOSS)/EARNINGS PER SHARE Basic (Loss)/Earnings Per Share The basic (loss)/earnings per share of the Group is calculated based on the net (loss)/profit attributable to shareholders divided by the weighted average number of ordinary shares in issue as follows: Restated RM RM Net (loss)/profit attributable to shareholders (1,979,062) 881,655 At 1st January 28,000,000 28,000,000 Bonus issue (Note 13) 14,000,000 14,000,000 Issuance of shares arising from exercise of warrants 11,918 - At 31st December 42,011,918 42,000,000 The bonus issue is an issue without consideration, the issue is treated as if it had occurred prior to the beginning of 2002, the earliest period reported. Diluted (Loss)/Earnings Per Share The diluted (loss)/earnings per share of the Group is calculated based on the net (loss)/profit attributable to shareholders divided by the adjusted weighted average number of ordinary shares. 60

62 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December (LOSS)/EARNINGS PER SHARE (cont d) The weighted average number of ordinary shares is adjusted to assume conversion of remaining dilutive potential shares, namely restricted warrants issued on 19th November 2002 is arrived at as follows: Restated RM RM Weighted average number of ordinary shares issued 42,011,918 42,000,000 Weighted average number of ordinary shares under warrants 20,988, ,836 Weighted average number of ordinary shares that would have been issued at fair value (20,188,669) (738,062) Adjusted weighted average numbers of ordinary shares in issue 42,811,331 42,105, SIGNIFICANT RELATED PARTY DISCLOSURE Related parties relationship In addition to related party disclosure mentioned elsewhere in the financial statements, the related party transactions described below were carried out on the terms and conditions obtainable in transaction with unrelated parties unless otherwise stated. The Company regards the following parties as related parties: (i) Subsidiary companies as disclosed in Note 5. (ii) Winning Fashion Sdn. Bhd. is the major shareholder of the Company in which the following directors have financial interest:- Yeoh Chong Teng Loke Siew Loke Lay Kim Yeoh Gar Beng Yeoh Han Chye (resigned on ) (iii) Persons acting as Directors of the Company during the financial year:- Yeoh Chong Teng Abd. Rashid bin V.K. Abd. Majid Loke Siew Loke Lay Kim Yeoh Eng Hoe Yeoh Gar Beng Cheah Kean Guan Haji Jamal Mohamed bin Haji A.M. Sickander Yeoh Eng Lye Eng Chong (resigned on ) Yeoh Han Chye (resigned on ) Kwek Soak Eng (resigned on ) 61

63 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December SIGNIFICANT RELATED PARTY DISCLOSURE (cont d) Related parties relationship (cont d) (iv) Persons acting as Directors of the subsidiary companies during the financial year:- Yeoh Gar Teik Phung Sook Han Yeoh Geok Seng Yeoh Khek Chong Yeoh Geok Chye Yeoh Eng Joo Yeoh San Hai Yeoh Cheong Hean (resigned on ) Yeoh Gar Sun (resigned on ) Related parties transactions (i) In the normal course of business, the Company undertakes on agreed terms and prices, transactions with its related parties. Other than directors remuneration as dis closed in Note 18, the significant related parties transactions during the financial year are as follows: Group Company RM RM RM RM Dividends received from Elba Group Sdn. Bhd ,662,396 Management fees received from Elba Group Sdn. Bhd , ,000 Advances to: - Elba Group Sdn. Bhd ,000 39,309,181 - Chong Chiaw (Malaysia) Sdn. Bhd ,350,000 11,814,688 - Elba Corporation (Malaysia) Sdn. Bhd ,500,000 2,000,000 - EVS Garment Industries Sdn. Bhd ,500,000 - Old & Young Sdn. Bhd ,000 1,000,000 - Peco Industrial (M) Sdn. Bhd ,230, ,000 - Adax Corporation Sdn. Bhd ,000,000 - Repayment from: - Elba Group Sdn. Bhd ,070, Chong Chiaw (Malaysia) Sdn. Bhd ,720,000 3,500,000 - Elba Corporation (Malaysia) Sdn. Bhd ,400, EVS Garment Industries Sdn. Bhd , Old & Young Sdn. Bhd. 400, Peco Industrial (M) Sdn. Bhd , Adax Corporation Sdn. Bhd ,000 - Repayment of an amount due to a director of a subsidiary company: - Phung Sook Han - 30,

64 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December SIGNIFICANT RELATED PARTY DISCLOSURE (cont d) Related party transactions (cont d) Group Company RM RM RM RM Interest charged to: - Elba Group Sdn. Bhd ,842, ,944 - Chong Chiaw (Malaysia) Sdn. Bhd ,305 60,618 - Elba Corporation (Malaysia) Sdn. Bhd ,429 14,438 - EVS Garment Industries Sdn. Bhd ,447 10,829 Interest received from: - Old & Young Sdn. Bhd ,100 7,219 - Peco Industrial (M) Sdn. Bhd ,578 3,610 - Adax Corporation Sdn. Bhd ,898 - Acquisition of additional shares by Elba Group Sdn. Bhd. from - directors of the Company and subsidiary companies - Yeoh Gar Teik Yeoh Khek Chong and his family Proceeds received from the exercise of warrants: - Winning Fashion Sdn. Bhd. 725, ,000 - (ii) The Company is contingently liable for corporate guarantee granted to certain bankers for banking facilities granted to subsidiary companies as disclosed in Note PURCHASE OF PROPERTY, PLANT AND EQUIPMENT Group RM RM Total additions during the financial year 1,072,116 1,648,413 Financed by lease and hire purchase (298,845) (81,000) Cash payment 773,271 1,567, CASH AND CASH EQUIVALENTS FOR CASH FLOW STATEMENTS Group Company RM RM RM RM Represented by: Cash and cash equivalents (Note 10) 8,961,819 10,293,509 1,773,315 1,565,753 Bank overdrafts (13,433,302) (5,532,465) - - (4,471,483) 4,761,044 1,773,315 1,565,753 63

65 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December CONTINGENT LIABILITIES Unsecured The Company has provided corporate guarantees to certain licensed banks for banking facilities granted to its subsidiary companies up to a total limit of RM39,415,200 (2002:RM37,677,476) of which RM31,828,787 (2002:RM15,553,867) has been utilised as at the balance sheet date. 25. FINANCIAL INSTRUMENTS (i) Interest rate risk Other than those disclosed in the financial statements, the following financial assets are exposed to interest rate risk and their effective yield per annum is as follows: Financial assets Effective yield (%) Investment in bond 6.57 Investment in unit trusts Fixed deposits with licensed banks Deposits with licensed banks (ii) Credit risks Receivables The Group s normal trade receivables credit period ranges from 30 to 360 days. It is the Group s policy to maintain a large customer base to avoid concentration of credit exposure to any single customer. During the financial year there are amount owing by five (5) (2002: two (2)) major customers as at 31st December Credit given to these customers are continuously evaluated by the management from time to time, whilst steps are taken to spread out the customer base. Payables The normal trade credit period granted to the Group ranges from 30 to 90 days or such other period as negotiated with the suppliers. (iii) Fair values The carrying amounts of the financial assets and liabilities of the Group and the Company classified as current assets and current liabilities as at 31st December 2003 approximate their fair values due to the relatively short term maturity of these financial instruments. The method and assumptions to determine the fair value of other financial assets and liabilities are as follows: - The fair value of short term quoted investment is represented by the market values as disclosed in Note The fair value of long term borrowings is estimated based on the current rates available for borrowings with the similar maturity profile. The carrying amount of the long term borrowings approximates their fair value. 64

66 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December CAPITAL COMMITMENTS Group RM RM Authorised capital expenditure not provided in the financial statements Contracted for - Freehold land and buildings 976,000 1,064, PENDING LITIGATION A third party has claimed against a wholly-owned subsidiary company, Old & Young Sdn. Bhd. for a sum of RM675,450 with interest in arrears, being alleged outstanding rental under a tenancy agreement. Old & Young Sdn. Bhd. has counter-claimed against the said third party for RM320,349 being damages for breach of the same tenancy agreement and punitive damages. The case is pending court hearing. The Directors, upon consultation with solicitors, are of the opinion that the claim by the third party is not likely to succeed and therefore no provision has been made in the financial statements. 28. SEGMENTAL INFORMATION The Group operates principally in the garment industry in Malaysia. The Group manufactures, distributes and trades in apparels. The other business segments are not significant. Accordingly, information analysing geographical and industry segments is not presented. 29. SIGNIFICANT EVENTS DURING THE YEAR During the financial year, the Company has issued: (i) (ii) 14,000,000 ordinary shares of RM1.00 each to the existing shareholders as bonus issue by way of issuing one (1) new ordinary shares for every two (2) existing shares held by the capitalization of share premium account of RM6,625,945 and part of the retained profits amounting to RM7,374, ,000 ordinary shares of RM1.00 each arising from the exercise of warrants. 65

67 (Incorporated in Malaysia Company No: T) annual report 2003 Notes To The Financial Statements (cont d) For The Financial Year Ended 31st December CHANGE IN ACCOUNTING POLICY The Group adopted MASB 25 Income Taxes during the financial year which has been applied retrospectively. Opening balances of certain financial captions have been adjusted to account for the impact of change in accounting policies, as follows: As previously Effect of As reported change in policy restated RM RM RM Statement of changes in equity Retained profits at 1st January ,845,482 (635,033) 13,210,449 Retained profits at 1st January ,726,536 (634,432) 14,092,104 Balance sheet Reserves 21,494,182 (634,432) 20,859,750 Deferred taxation (496,771) (634,432) (1,131,203) Income statement Tax expense (749,480) 601 (748,879) Net profit for the financial year 881, ,655 66

68 (Incorporated in Malaysia Company No: T) annual report 2003 Statement of Shareholdings As At 30th April 2004 ANALYSIS OF SHAREHOLDINGS Authorised Capital : RM100,000,000 Issued and Fully Paid-Up Share Capital : RM42,725,000 Class of Equity Share : Ordinary Share of RM1.00 each fully paid Voting Rights : One vote per RM1.00 share DISTRIBUTION SCHEDULE OF SHAREHOLDERS Percentage Range of Shareholdings No. of Percentage No of of Issued Holders of Holders Shares Capital Less than to 1, , ,001 to 10,000 2, ,981, ,001 to 100, ,218, ,001 to less than 5% of issued shares ,715, % and above of issued shares ,666, TOTAL 2, ,725, SUBSTANTIAL SHAREHOLDERS According to the register required to be kept under Section 69L of the Companies Act, 1965, the following are the substantial shareholders of the Company. No. of Shares Held Substantial Shareholders Direct % Indirect % 1. Winning Fashion Sdn. Bhd. 19,625, Pearl Design Sdn. Bhd. 4,666, Yeoh Chong Teng 1,215, ,090,000(1) Yeoh Han Chye 465, ,840,000(2) Loke Siew Loke Lay Kim ,840,000(3) Yeoh Gar Beng ,840,000(4) Yeoh Gar Sun ,840,000(4) Yeoh Gar Keong ,840,000(4) Zul Azri Bin A. Aziz - - 4,666,500(5) Muhammad Bin Mohd Taib - - 4,666,500(5) Notes: (1) Deemed interested by virtue of his substantial shareholding in Winning Fashion Sdn Bhd and his brother Yeoh Han Chye s direct shareholdings in Elba. (2) Deemed interested by virtue of his brother Yeoh Chong Teng s substantial shareholdings in Winning Fashion Sdn Bhd. (3) Deemed interested by virtue of her spouse, Yeoh Chong Teng s shareholdings in Winning Fashion Sdn Bhd and her spouse s direct shareholdings in Elba. (4) Deemed interested by virtue of his father, Yeoh Chong Teng s substantial shareholdings in Winning Fashion Sdn Bhd and his father s direct shareholdings in Elba. (5) Deemed interested by virtue of their substantial shareholdings in Pearl Design Sdn. Bhd 67