Sarawak Timber Industry Development Corporation

Transcription

1 Cash Flow Statements For the Year Ended 31 December 2007 (contd. Cash Flows from Investing Activities Purchase of investments (31,861,981 (18,010,820 (27,000,000 (14,372,360 Interest received 12,032,314 11,892,520 9,996,005 10,414,943 Net dividend received 8,080,139 5,382,471 8,589,125 6,994,649 Increase in project development expenditure (36,008,854 (17,568,361 (36,008,854 (17,571,961 (Decrease/increase in product development costs - 1, Purchase of property, plant and equipment (48,133,693 (32,209,233 (31,231,999 (1,920,705 Proceeds from disposal of property, plant and equipment 5,368,002 15,088,520 2,829, ,153 Proceeds from disposal of a subsidiary Proceeds from disposal of investments 34,458,274 26,671,751 27,430,645 13,459,190 Net cash inflow on acquisition of subsidiaries (Note 4 1,418, Net cash outflow from disposal of subsidiaries (Note 4 (3, Acquisition of interest in a subsidiary - - (310,002 (99,998 Additional investment in an associate (1,416,000 (2,584,000 (1,416,000 (2,583,998 Net cash used in investing activities (56,066,826 (11,335,587 (47,121,193 (5,245,087 Cash Flows from Financing Activities Donated funds utilised (132,000 - (132,000 - Government s contribution received 10,000,000 8,800,000 10,000,000 8,800,000 Drawdown of loans 2,896,348 2,695,550 2,896,348 2,695,550 Repayment of hire purchase financing (99,712 (525, Repayment of term loans (4,727,532 (5,330, Repayment of bankers acceptances - (802, Revolving funds received/(utilised 135,098 (185, ,098 (185,327 Dividend paid to minority shareholders (488,040 (549, Net cash generated from financing activities 7,584,162 4,103,655 12,899,446 11,310,223 Net Decrease in Cash and Cash Equivalents (249,976 (732,087 (6,507,895 (10,872,547 Cash and Cash Equivalents at Beginning of Year 357,145, ,877, ,604, ,477,264 Cash And Cash Equivalents At End of Year (Note ,895, ,145, ,096, ,604,717 The accompanying notes form an integral part of the financial statements. 10 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

2 1. Corporate Information The is a Sarawak State Government-owned statutory body incorporated in 1973 with the following objectives: To develop new policies, plans and strategies towards more active promotion and development of the timber industry and the marketing of high quality timber-based products suitable for both overseas and domestic markets; To develop economical and beneficial harvesting and utilisation of the forest resources of Sarawak; To create new concepts and strategies in the timber industry so as to ensure that the benefits from the harvesting of the State s forest resources will be fairly and equitably shared among the people of the State and the Nation; and To enable the State Government to have an instrument for the formulation, co-ordination and implementation of the overall timber industries development strategies and to act as a catalyst with private sector interests through the encouragement of new industries. The principal income comprises premium collected from timber operations, registration fees on timber and timber related activities, inspection and grading fees and interest from fixed deposits with financial institutions. The principal activities of the subsidiaries are shown in Note 4. There have been no significant changes in the nature of these activities during the financial year. The number of employees in the and in the at the end of the financial year were 1,268 (2006: 1,246 and 379 (2006: 386 respectively. The principal place of business of the is located at Wisma Sumber Alam, Jalan Stadium, Petra Jaya, Kuching, Sarawak. The financial statements were authorised for issue by the Board of Management on 30 August ANNUAL REPORT

3 2. Significant Accounting Policies (a Basis of Preparation The financial statements of the and of the have been prepared under the historical cost convention except for the revaluation of certain aircraft included under property, plant and equipment. The financial statements comply with the provisions of the Companies Act, 1965 and applicable Private Entities Reporting Standards in Malaysia. (b Basis of Consolidation (i Subsidiaries The consolidated financial statements include the financial statements of the and all its subsidiaries. Subsidiaries are those entities in which the has power to exercise control over the financial and operating policies so as to obtain benefits from their activities. Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting, the results of subsidiaries acquired or disposed of during the financial year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. The assets and liabilities of the subsidiaries are measured at their fair values at the date of acquisition. The difference between the cost of an acquisition and the fair value of the s share of the net assets of the acquired subsidiary at the date of acquisition is included in the consolidated balance sheet as goodwill or negative goodwill arising on consolidation. Negative goodwill is recognised in the income statement immediately. Intragroup transactions, balances and resulting unrealised gains are eliminated on consolidation and the consolidated financial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costs cannot be recovered. The gain or loss on disposal of a subsidiary company is the difference between net disposal proceeds and the s share of its net assets together with any unamortised balance of goodwill and exchange differences. Minority interests in the consolidated balance sheet consist of the minorities share of the fair value of the identifiable assets and liabilities of the acquiree as at acquisition date and the minorities share of movements in the acquiree s equity since then. 12 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

4 2. Significant Accounting Policies (contd. (b Basis of Consolidation (contd. (ii Associates Associates are those entities in which the exercises significant influence but not control, through participation in the financial and operating policy decision of the entities. Investments in associates are accounted for in the consolidated financial statements by the equity method of accounting based on the audited or management financial statements of the associates. Under the equity method of accounting, the s share of profits less losses of associates during the year is included in the consolidated income statement. The s interest in associates is carried in the consolidated balance sheet at cost plus the s share of post-acquisition retained profits or accumulated losses and other reserves. Unrealised gains on transactions between the and the associates are eliminated to the extent of the s interest in the associates. Unrealised losses are eliminated unless cost cannot be recovered. (c Investments in Subsidiaries, Associates and Other Non-Current Investments The s investments in subsidiaries, associates and other non-current investments are stated at cost less impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(l. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is recognised in the income statement. (d Property, Plant and Equipment and Depreciation Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(l. ANNUAL REPORT

5 2. Significant Accounting Policies (contd. (d Property, Plant and Equipment and Depreciation (contd. Long leasehold land and construction-in-progress are not depreciated. However, the nondepreciation on long leasehold land does not have any material effect on the financial statements. Short leasehold land is depreciated over the period of the respective leases which range from 20 years to 50 years. Depreciation of other property, plant and equipment is provided for on a straight line basis to write off the cost of each asset to its residual value over the estimated useful life at the following annual rates: Buildings 2% - 25% Aircraft and spare engines 10% Aircraft components 10% Office furniture, fittings & equipment 10% - 25% Plant & machinery 10% - 20% Transportation equipment & motor vehicles 15% - 25% Fully depreciated property, plant and equipment are retained in the financial statements until they are no longer in use and no further charge for depreciation is made in respect of these property, plant and equipment. Upon the disposal of an item of property, plant or equipment, the difference between the net disposal proceeds and the carrying amount is recognised in the income statement. (e Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined by the following methods: Aircraft spares - specific identification and weighted average Finished goods, timber logs and work-in-progress - weighted average Consumables - first-in, first-out 14 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

6 2. Significant Accounting Policies (contd. (e Inventories (contd. For processed timber and work-in-progress, cost includes raw material, direct labour and appropriate production overheads. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution. Industrial land lots including infrastructure works thereon held for resale are stated at the lower of cost and net realisable value. Cost is determined on the specific identification basis and includes costs of land, construction and appropriate development overheads. In arriving at the net realisable value, due allowance is made for all obsolete and slow-moving items. f Cash and Cash Equivalents For the purposes of cash flow statements, cash and cash equivalents include cash on hand and at bank, deposits at call and short term highly liquid investments which have an insignificant risk of changes in value, net of outstanding bank overdrafts. (g Leases A lease is recognised as a finance lease if it transfers substantially to the all the risks and rewards incident to ownership. All other leases are classified as operating leases. Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Company s incremental borrowing rate is used. Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised as an expense in the income statement over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. The depreciation policy for leased assets is consistent with that for depreciable property, plant and equipment as described in Note 2(d. ANNUAL REPORT

7 2. Significant Accounting Policies (contd. (h Income Tax Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date. Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of transaction, affects neither accounting profit nor taxable profit. Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill. (i Employee Benefits (i Short term benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the. 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. 16 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

8 2. Significant Accounting Policies (contd. (i Employee Benefits (contd. (ii Defined contribution plans As required by law, the s local subsidiaries make contributions to the Employees Provident Fund. In addition, the also contributes to the State Pension Scheme. Such contributions are recognised as an expense in the income statement as incurred. (j Revenue Recognition Revenue is recognised when it is probable that the economic benefits associated with transaction will flow to the enterprise and the amount of the revenue can be measured reliably. (i Revenue relating to sale of goods is measured at the fair value of the consideration receivable and is recognised net of sales taxes and discounts when the transfer of risks and rewards have been completed. (ii Revenue from services rendered is recognised in the income statement in proportion to the stage of completion is assessed by reference to services performed to date as a percentage to total services to be performed. (iii Commission on insurance policies written is recognised as income in full upon the issuance of the policies. No part of the commission is deferred to match possible subsequent cancellation of policies or reduction of sum insured. (iv Revenue from property development is accounted for by the percentage of completion method on properties sold. Where foreseeable losses are anticipated, full provision for these losses is made in the financial statements. (v Revenue from aviation services is recognised when services are rendered. vi Dividend income is recognised when the right to receive payment is established. (vii Interest income is recognised on a time proportion basis that reflects the effective yield on the asset. (viii Income from timber premium is recognised on accrual basis. ANNUAL REPORT

9 2. Significant Accounting Policies (contd. (k Foreign Currencies Transactions in foreign currencies are initially converted into Ringgit Malaysia at rates of exchange ruling at the date of the transaction. At each balance sheet date, foreign currency monetary items are translated into Ringgit Malaysia at exchange rates ruling at that date. Non-monetary items initially determined in foreign currencies, which are carried at historical cost are translated using the historical rate as of the date of acquisition and non monetary items which are carried at fair value are translated using the exchange rate that existed when the values were determined. All exchange rate differences are taken to the income statement. The principal exchange rates used for every unit of foreign currency ruling at balance sheet date used are as follows: United States Dollars European Dollars Singapore Dollars (l Impairment of Assets At each balance sheet date, the reviews the carrying amounts of its assets to determine whether there is any indication of impairment. If any such indication exists, impairment is measured by comparing the carrying values of the assets with their recoverable amounts. Recoverable amount is the higher of net selling price and value in use, which is measured by reference to discounted future cash flows. An impairment loss is recognised as an expense in 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 any available previously recognised revaluation surplus for the same asset. Reversal of impairment losses recognised in prior years is recorded when the impairment losses recognised for the asset no longer exist or have decreased. 18 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

10 2. Significant Accounting Policies (contd. (m Project Development Expenditure Project development expenditure comprises all costs that are directly attributable to the project. The costs will be matched against government grants when the related project is completed. (n Product Development Costs Product development costs are recognised as an asset to the extent that such costs are expected to generate future economic benefits. Capitalised development costs are amortised on a systematic basis over 5 years. Amortisation commences when the product is available for sales or use. (o Donated Funds Shares donated to the are taken up in the financial statements at their par value. (p Government Grants Government grants are recognised initially at their fair value in the balance sheet as deferred income when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Grants that compensate the for expenses incurred are recognised as income over the periods necessary to match that grant on a systematic basis to the costs that it is intended to compensate. Grants that compensate the for the cost of an asset are recognised as income on a systematic basis over the useful life of the asset. Funds received from the Government for the operation or maintenance of the s activities are credited to Government s Contribution Account. (q Other non-current investments Non-current investments other than investments in subsidiaries and associates are stated at cost less impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2(l. On disposal of an investment, the difference between net disposal proceeds and its carrying amount is charged or credited to the income statement. ANNUAL REPORT

11 2. Significant Accounting Policies (contd. (r Trade receivables receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date. (s Trade payables Trade payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received. (t Interest-bearing borrowings Interest-bearing bank loans and overdrafts are recorded at the amount of proceeds received, net of transaction costs. Borrowing costs directly attributable to the acquisition and construction of property, plant and equipment are capitalised as part of the cost of those assets, until such time as the assets are ready for their intended use or sale. All other borrowing costs are recognised as an expense in the income statement in the period in which they are incurred. 20 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

12 3. Property, Plant and Equipment Office Aircraft, furniture, Spare Engines Transportation Land & fittings & Plant & and Aircraft equipment & Construction buildings * equipment machinery components motor vehicles in progress Total Cost At 1 January ,028,673 11,199,464 36,866, ,694,070 23,111,569 31, ,930,864 Additions 30,342, , ,446 14,437,665 1,447,904 1,017,673 48,168,693 Disposals (645,051 (387,253 (179,954 (1,304,609 (4,605,818 - (7,122,685 Disposal of subsidiaries (Note 4 (3,110,741 (22,902 (3,315, (6,449,148 Reclassification 519, (519,007 - Written off - (38,184 (999,968 - (95,512 - (1,133,664 At 31 December ,134,834 11,246,184 32,798, ,827,126 19,858, , ,394,060 Accumulated Depreciation At 1 January ,546,910 9,108,833 27,948,953 31,799,865 9,724, ,129,117 Charge for the year 3,972, ,667 1,526,178 13,379,338 2,712,234-22,167,330 Disposals (249,830 (294,892 (161,151 (1,304,607 (1,518,054 - (3,528,534 Disposal of subsidiaries (Note 4 (67,625 (4,621 (658, (730,491 Written off - (37,110 (995,419 - (95,512 - (1,128,041 At 31 December ,202,368 9,348,877 27,660,316 43,874,596 10,823, ,909,381 Net Book Value At 31 December ,932,466 1,897,307 5,137, ,952,530 9,034, , ,484,679 At 31 December ,481,763 2,090,631 8,917, ,894,205 13,387,013 31, ,801,747 Depreciation charge for ,775, ,843 2,091,696 10,953,732 2,369,693-19,734,739 ANNUAL REPORT

13 3. Property, Plant and Equipment (contd. * Land and Buildings Long term Short term leasehold leasehold land land Buildings Total Cost At 1 January ,679,785 22,929, ,419, ,028,673 Additions 9,110,151-21,232,795 30,342,946 Disposals - - (645,051 (645,051 Disposals of subsidiaries - (3,110,741 - (3,110,741 Transfer , ,007 At 31 December ,789,936 19,819, ,525, ,134,834 Accumulated Depreciation At 1 January ,342,618 4,967,102 40,237,190 46,546,910 Charge for the year 198, ,803 3,346,765 3,972,913 Disposals - - (249,830 (249,830 Disposals of subsidiaries - (67,625 - (67,625 At 31 December ,540,963 5,327,280 43,334,125 50,202,368 Net Book Value At 31 December ,248,973 14,491,796 87,191, ,932,466 At 31 December ,337,167 17,962,715 69,181, ,481,763 Depreciation charge for , ,430 3,096,411 3,775, SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

14 3. Property, Plant and Equipment (contd. Office Long term furniture, Transportation leasehold fittings & Plant & equipment & land Buildings equipment machinery motor vehicles Total Cost At 1 January ,381,757 67,377,022 7,720,528 1,990,248 17,253,917 98,723,472 Additions 9,110,151 21,202, , ,533 31,231,999 Disposals - - (212,573 (24,037 (4,281,678 (4,518,288 At 31 December ,491,908 88,579,193 7,870,099 1,966,211 13,529, ,437,183 Accumulated Depreciation At 1 January ,460 20,909,232 6,128, ,542 4,776,298 33,370,543 Charge for the year 102,046 1,377, , ,444 2,182,837 4,276,518 Disposals - - (120,213 (11,638 (1,193,914 (1,325,765 At 31 December ,506 22,286,334 6,423, ,348 5,765,221 36,321,296 Net Book Value At 31 December ,576,402 66,292,859 1,446,212 1,035,863 7,764,551 89,115,887 At 31 December ,568,297 46,467,790 1,592,517 1,246,706 12,477,619 65,352,929 Depreciation charge for ,635 1,331, , ,551 1,909,254 3,903,449 (a (b Net book values of plant and machinery and motor vehicles of the held under hire purchase arrangements are 58,660 (2006: 158,215 and 224,278 (2006: 269,021 respectively. During the year, the acquired property, plant and equipment with an aggregate cost of 48,168,693 (2006: 32,496,237 of which 35,000 (2006: 287,004 were acquired by means of hire purchase arrangements. ANNUAL REPORT

15 3. Property, Plant and Equipment (contd. (b Net book values of property, plant and equipment of the that were pledged to banks for borrowings as referred to in Note 14 are as follows: Aircraft 55,738,699 63,174,600 Leasehold land - 3,043,116 Building - 637,500 Plant and machinery - 2,675,541 55,738,699 69,530,757 d The title deeds to certain leasehold land and buildings with net book value amounted to 5,318,090 (2006: 8,361,206 are in the process of being transferred or issued to the subsidiaries. (e The title deeds to the leasehold land and buildings acquired by the with net book value amounted to 139,334 (2006: 142,373 are in the process of being transferred or issued to the. 4. Investment in Subsidiaries Unquoted shares at cost 56,834,857 58,154,857 Less: Accumulated impairment losses (2,250,030 (2,250,030 54,584,827 55,904,827 Details of the subsidiaries, all of which are incorporated in Malaysia, are as follows: Effective Interests Held (% Name of Subsidiaries Principal Activities Hornbill Skyways Sdn. Bhd Aviation services Harwood Timber Sdn. Bhd Timber trading STIDC Belian Holdings Sdn. Bhd Hillog Sdn. Bhd Woodworking and related timber-processing services Tanjong Manis Furniture Sdn. Bhd Furniture manufacturer Elmhurst Sdn. Bhd Landscaping and reforestation Teratim Sdn. Bhd Timber logging 24 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

16 4. Investment in Subsidiaries (contd. Effective Interests Held (% Name of Subsidiaries Principal Activities Tanjung Manis Development Sdn. Bhd Project management Tanjung Manis Sawmill Sdn. Bhd Log trading Tanjong Manis Moulding Industries Sdn. Bhd Manufacturing of wood plastic composite product Tanjong Manis Realty Sdn. Bhd Planning, operating, managing and marketing of realty projects Amra Timbers Sdn. Bhd Kestrel Sdn. Bhd Tinamou Sdn. Bhd Balamra Sdn. Bhd 75 - Budi Kiara Sdn. Bhd Tanjung Manis Timber Training Centre Sdn. Bhd Tanjung Manis Particle Board Sdn. Bhd Tanjong Manis Woodworking Sdn. Bhd Dormant Tanjung Manis Timber Exporter Sdn. Bhd Tanjung Manis Engineering Works Sdn. Bhd Tanjong Manis Pulp & Paper Sdn. Bhd Tanjong Manis Holdings Sdn. Bhd Tanjong Manis Timber Yard Sdn. Bhd Tanjong Manis Warehouse Sdn. Bhd Tanjong Manis Trading Sdn. Bhd Tanjong Manis Enterprise Sdn. Bhd Tanjong Manis Construction Sdn. Bhd ANNUAL REPORT

17 4. Investment in Subsidiaries (contd. Effective Interests Held (% Name of Subsidiaries Principal Activities Tanjong Manis Resources Sdn. Bhd Production of wood chip Saratim Insurance Agency Services Sdn. Bhd Insurance agency Tanjong Manis Shipping Sdn. Bhd Transportation and wharfing services, trading in construction materials and construction works Subsidiaries of Harwood Timber Sdn. Bhd. Bigwood Sdn. Bhd Extraction and sale of timber logs Giovanni Wood Industries Sdn. Bhd Assemblying, importing and sale of furniture, and provision of reupholstery services Harwood Timber Products Sdn. Bhd Production and sale of sawn timber and moulding products Acquisition of subsidiaries During the year, the acquired the following subsidiaries for a total consideration of 310,002: Name of Subsidiaries Purchase consideration Kestrel Sdn. Bhd. 125,000 Amra Sdn. Bhd. 70,000 Tinamou Sdn. Bhd. 70,000 Balamra Sdn. Bhd. 45,000 Budi Kiara Sdn. Bhd ,002 The acquisition had the following effect on the s financial results for the year: 2007 Revenue 295,401 Loss from operations (176,340 Net loss for the year (181, SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

18 4. Investment in Subsidiaries (contd. The acquisition had the following effect on the financial position of the as at the end of the year: 2007 Trade and other receivables 60,222 Cash and bank balances 1,225,563 Trade and other payables (51,331 Minority interests (51,399 s share of net assets 1,183,055 The fair values of the assets acquired and liabilities assumed from the acquisition of the subsidiaries were as follows: At date of acquisition Trade and other receivables 76,486 Cash and bank balances 1,728,477 Trade and other payables (280,740 Fair value of total net assets 1,524,223 Less: Minority interests (60,201 s share of net assets 1,464,022 Negative goodwill (605, ,733 Less: Share of post-acquisition retained profits of associates (428,731 Less: Cost of investment in associates (120,000 Cost of acquisition 310,002 Cash inflow arising on acquisition: Purchase consideration satisfied by cash 310,002 Less: Cash and cash equivalents of subsidiary acquired (1,728,477 Net cash inflow of the (1,418,475 ANNUAL REPORT

19 4. Investment in Subsidiaries (contd. Disposal of Subsidiaries During the year, the disposed of its 100% equity interest in Tanjong Manis Holdings Sdn. Bhd. for a total cash consideration of 2 and its equity interest in Tanjong Manis Moulding Industries Sdn. Bhd., was diluted to 39.6% thus became an associate. The disposal/dilution had the following effects on the financial position of the as at the end of the year: Property, plant and equipment (Note 3 5,718,657 Production development costs 547,447 Trade and other receivables 171,117 Inventories 142,229 Cash and bank balances 3,504 Trade and other payables (3,425,614 Borrowings (2,347,061 Less: Minority interest (246,235 Net assets disposed 564,044 Share of post-acquisition reserve retained in associate (1,239,467 Total disposal proceeds (2 Gain on disposal/dilution to the (675,425 Cash outflow arising on disposal/dilution: Cash consideration 2 Cash and cash equivalent of subsidiaries disposed/diluted (3,504 Net cash outflow from disposal/dilution (3, Investment in Associates Unquoted shares at cost 22,860,000 19,814,000 22,785,000 61,835,537 Share of post acquisition retained profits 60,478,267 52,299,427 83,338,267 72,113,427 22,785,000 61,835,537 Less: Accumulated impairment losses - - (42,096,537 83,338,267 72,113,427 22,785,000 19,739, SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

20 5. Investment in Associates (contd. Represented by: Share of net tangible assets 81,001,816 69,846,207 Goodwill on acquisition 2,336,451 2,267,220 83,338,267 72,113,427 Details of associates, all of which are incorporated in Malaysia, are as follows: Effective Interests Held (% Name of Associates Principal Activities Bintulu Adhesive & Chemical Sdn. Bhd Manufacturing of adhesives and chemicals Amra Timbers Sdn. Bhd Kestrel Sdn. Bhd Tinamou Sdn. Bhd Selah Timber Sdn. Bhd Timber extraction and sale Balamra Sdn. Bhd Houting Sdn. Bhd Shin Yang Industries (Bintulu Sdn. Bhd Shin Yang Plywood (Bintulu Sdn. Bhd Plywood manufacturing and trading Tanjong Manis Moulding Industries Sdn. Bhd Manufacturing of wood plastic composite product PUSAKA KTS Forest Plantation Sdn. Bhd Reforestation and oil palm plantation Polima Compressed Wood Bintulu Sdn. Bhd To produce compression moulded pallet blocks and core plugs utilizing wood waste Stapok Sdn. Bhd Constructions and constructing Associate of STIDC Belian Holdings Sdn. Bhd. KTS Timber Processing Sdn. Bhd Processing and sale of sawn timber ANNUAL REPORT

21 6. Other Investments (i (ii (iii (iv Quoted unit trusts at cost 77,926,912 70,260,512 51,938,372 42,202,196 Less: Accumulated impairment losses (100,859 (78,259-77,826,053 70,182,253 51,938,372 42,202,196 Unquoted shares at cost 63,249,086 21,213,580 60,235,037 18,470,500 Less: Accumulated impairment losses (43,622,918 (1,526,381 (42,121,537 (25,000 19,626,168 19,687,199 18,113,500 18,445,500 Quoted shares at cost 15,789,425 10,298,980 13,928,556 8,217,600 Less: Accumulated impairment losses (5,769,138 (58,182 (5,710,956-10,020,287 10,240,798 8,217,600 8,217,600 Investments managed by ASSAR Asset Management Sdn. Bhd. 10,399,556 16,108,502 7,550,535 13,351,115 Less: Accumulated impairment losses (3,661,736 (8,592,072 (3,136,664 (8,067,000 6,737,820 7,516,430 4,413,871 5,284,115 (v Bond 10,266,324 10,266,324 10,266,324 10,266,324 (vi Structured investment 11,000,000-11,000,000 - Total 135,476, ,893, ,949,667 84,415,735 Market value of: (i Quoted unit trusts 84,296,816 75,139,800 58,281,102 45,993,557 (ii Quoted shares 21,768,912 20,762,852 19,966,225 18,874,162 (iii Investments managed by ASSAR Assets Management Sdn. Bhd. 6,737,819 5,859,994 4,413,870 3,488,207 Unit trusts of the amounting to 1,395,000 (2006: 1,395,000 have been pledged to a banker to secure bank guarantee facilities granted to a subsidiary. 30 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

22 7. Project Development Expenditure At 1 January 184,280, ,708, ,280, ,708,574 Addition 36,008,854 17,571,961 36,008,854 17,571,961 At 31 December 220,289, ,280, ,289, ,280, Product Development Costs At 1 January 547, ,474 Amortisation - (136,862 Disposal of subsidiaries (547,447 - Insurance rebate - factory equipment - (5,165 At 31 December - 547, Long Term Loan Receivables i Interest free loan to: Sarawak Medical Centre Sdn. Bhd. 6,900,000 6,900,000 6,900,000 6,900,000 (ii Soft loan to Elmhurst Sdn. Bhd., with interest at 5% p.a ,177,793 1,177,793 6,900,000 6,900,000 8,077,793 8,077,793 Less: Provision for doubtful debts (6,900,000 - (8,077, ,900,000-8,077,793 ANNUAL REPORT

23 10. Inventories At cost: Processed timber - plywood and sawn timber 2,655,651 1,780, Timber logs 685, , Consumable 213, , Industrial land lots 39,753,979 37,940,244 39,753,979 37,940,244 43,308,736 40,540,776 39,753,979 37,940,244 At net realisable value: Aircraft spares 3,253,382 3,126, Processed timber - plywood and sawn timber 116, , Industrial land lots 12,000,000 12,000, Condominium 190, ,868,543 55,780,961 39,753,979 37,940, Trade Receivables Trade receivables 61,708,828 51,022,513 33,606,296 33,225,520 Due from subsidiaries ,000 - Due from associates - 329, ,630 61,708,828 51,352,143 33,715,296 33,555,150 Less: Provision for doubtful debts (6,249,850 (6,637,035 (5,218,299 (5,218,299 55,458,978 44,715,108 28,496,997 28,336, SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

24 12. Other Receivables Due from subsidiaries ,882,457 11,757,942 Due from associates 47,616 47,820 47,616 47,820 Dividend receivable 905,200 1,308, ,200 1,308,920 Tax refundable 16,575,896 12,797,333 15,093,409 10,521,307 Sundry receivables 31,498,652 28,487,889 20,790,162 24,473,443 49,027,364 42,641,962 48,718,844 48,109,432 Less: Provision for doubtful debts (6,559,281 (6,572,643 (18,014,281 (18,026,843 42,468,083 36,069,319 30,704,563 30,082,589 The amounts due from subsidiaries and associates are unsecured, interest-free and have no fixed assets of repayments. 13. Cash and Cash Equivalents Cash on hand and at banks 7,591,175 13,209,593 3,117,610 7,206,038 Deposits with: licensed banks 346,564, ,097, ,979, ,623,263 licensed finance companies 3,056,878 62,080,910-57,775,416 Cash and bank balances 357,212, ,387, ,096, ,604,717 Less: Bank overdrafts (Note 14 (317,132 (242, Cash and cash equivalents 356,895, ,145, ,096, ,604,717 The interest rates of deposits during the financial year were as follows: % % Licensed banks Licensed finance companies The fixed deposits of the amounting to 1,861,917 (2006: 1,815,062 are pledged to the banks to secure banking facilities granted as referred to in Note 14. ANNUAL REPORT

25 14. Borrowings Short Term Borrowings Secured: Bank overdrafts 317, , Term loans 5,460,000 5,748, Hire purchase payables (Note 15 73,114 95, ,850,246 6,081, Unsecured: Bank overdrafts - 5, ,850,246 6,087, Long Term Borrowings Secured: Term loans 27,360,000 34,146, Hire purchase payables (Note 15 69, , ,429,444 34,262, Unsecured: Loan payable to the State Government of Sarawak with interest at 6.5% p.a. 47,061,899 44,165,551 47,061,899 44,165,551 74,491,343 78,428,206 47,061,899 44,165,551 Total Borrowings Bank overdrafts (Note , , Term loans 32,820,000 39,894, Hire purchase payables 142, , Loan payable to the State Government of Sarawak with interest at 6.5% p.a. 47,061,899 44,165,551 47,061,899 44,165,551 80,341,589 84,515,288 47,061,899 44,165, SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

26 14. Borrowings (contd. Maturity of borrowings (excluding hire purchase: Within one year 41,472,640 28,117,651 35,695,508 22,126,492 More than 1 year and less than 2 years 16,406,391 16,313,502 11,366,391 10,672,668 More than 2 years and less than 5 years 15,891,529 28,281,929-11,366,391 5 years or more 6,428,471 11,589, ,199,031 84,302,937 47,061,899 44,165,551 The secured bank overdrafts and bankers acceptances are secured by way of the fixed deposits pledged as referred to in Note 13 and guarantee by the directors of a subsidiary. The term loans bore interest during the financial year of between 3.75% to 7.80% (2006: 4.65% to 8.00% per annum. The term loans are secured by the following: (a Leasehold land and buildings, plant and machinery and aircraft as referred to in Note 3; (b Fixed deposits as referred to in Note 13; (c Guarantee by the directors of a subsidiary. 15. Hire Purchase Payables Minimum lease payments: Not later than 1 year 75, ,740 Later than 1 year and not later than 2 years 31,699 65,457 Later than 2 years and not later than 5 years 35,198 42,415 Later than 5 years 5,434 14, , ,979 Less: Future finance charges (5,446 (11,628 Present value of finance lease liabilities 142, ,351 Analysed as: Due within 12 months (Note 14 73,114 95,923 Due after 12 months (Note 14 69, , , ,351 The hire purchase bore interest during the financial year of 4.3% to 8.0% (2006: 4.3% to 8.0% per annum. ANNUAL REPORT

27 16. Other Payables Due to subsidiaries - - 1,325, ,490 Due to associates 1,276,132 1,636, , ,133 Sundry payables 85,356,935 50,769,093 74,324,152 44,168,256 86,633,067 52,405,226 76,094,010 45,810,879 The amounts due to subsidiaries and associates are unsecured, interest-free and have no fixed terms of repayment. 17. Donated Funds Donated funds comprise surplus arising on valuation of free shares received by the. These shares are revalued to their par value. The fund is transferred to the income statement on the disposal of these shares. 18. Revolving Funds The revolving funds represent funds received from the Ministry of Industrial Development allocated for the development of small to medium scale industries in Sarawak. 19. Government Grants / At 1 January 144,282, ,282,807 Addition - - At 31 December 144,282, ,282,807 The government grants received are for the purpose of project development as disclosed in Note SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

28 20. Deferred Tax At 1 January 2,311,984 (1,006,706 (16,000 (16,000 Acquisition of a subsidiary Recognised in the income statement (Note 25 (637,055 (1,305, At 31 December (2,949,039 (2,311,984 (16,000 (16,000 Presented after appropriate offsetting as follows: Deferred tax assets 832, , , ,000 Deferred tax liabilities (3,781,039 (3,278,984 (400,000 (400,000 (2,949,039 (2,311,984 (16,000 (16,000 The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows: Deferred Tax Liabilities of the : Accelerated Capital Allowances At 1 January ,860,984 Recognised in the income statement 3,382,055 At 31 December ,243,039 Deferred Tax Assets of the : Tax losses and Unabsorbed Capital Allowances At 1 January ,549,000 Recognised in the income statement 2,745,000 At 31 December ,294,000 ANNUAL REPORT

29 20. Deferred Tax (contd. Deferred Tax Liabilities of the : Accelerated Capital Allowances At 1 January 2007 (400,000 Recognised in the income statement - At 31 December 2007 (400,000 Unabsorbed Capital Allowances At 1 January ,000 Recognised in the income statement - At 31 December ,000 Deferred tax assets have not been recognised in respect of the following items: Accelerated capital allowances 2,710,000 1,223,000 Unused tax losses 10,792,000 11,594,000 Unabsorbed capital allowances 5,821,000 8,274,000 19,323,000 21,091,000 The availability of the unused tax losses and unabsorbed capital allowances for offsetting against future taxable profits of the Company are subject to no substantial changes in shareholdings of the respective subsidiaries under the Income Tax Act, 1967 and guidelines issued by the authority. 38 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

30 21. Revenue Revenue of the and of the consists of the following: Aviation services 40,267,257 44,761, Doubtful debts recovered 128, Gain on accretion of interest in a subsidiary Gain on disposal of other investments 20,933,048 2,205,495 20,745,198 - Gain on disposal/dilution of subsidiaries (Note 4 675,425 6, General repair and maintenance services 90,563 95, Gross dividends - other investments 5,709,589 2,856,674 9,048,785 6,149,199 - subsidiaries - - 2,808,000 2,942,375 Interest income 12,032,314 11,892,520 9,996,005 10,414,943 Landscaping - 1, Management fees 1,023,134 1,243, ,734 1,118,623 Negative goodwill recognised 605, Other operating income 16,433,012 17,503,242 12,872,912 1,237,555 Other services 31,047,588 33,037, , ,430 Registration fees 703, , , ,065 Rental income 1,468, , ,975 - Sale of construction, furniture and hardware materials 271, , Sale of woodchips, timber logs, sawn timber and peat swamp logs 74,178,075 71,537, Sales of aircraft spares 124,160 62, Sales of wood plastic composite product - 73, Timber premium 24,357,732 25,391,206 24,356,675 25,386, ,048, ,875,839 83,075,350 48,578,934 ANNUAL REPORT

31 22. Cost of Sales Cost of sales of the and of the consists of the following: Cost of construction, furniture and hardware material sold 712, , Cost of industrial land lots sold 2,594,733-2,594,733 - Cost of woodchips, timber logs, sawn timber and peat swamp logs sold 68,207,180 68,322, Cost of aviation services 33,773,467 36,362, Cost of other services 6,591,206 12,877, Cost of manufacturing wood plastic composite product - 883, Others 99, , ,978, ,410,494 2,594, Profit from Operations Profit from operations is stated after charging: Staff costs 43,001,137 41,919,774 16,324,945 15,331,165 Auditors remuneration - current year 121, ,240 11,207 10,640 - underprovision in prior years 1, Amortisation of product development costs - 136, Bad debts written off 29,011 31, Depreciation of property, plant and equipment 22,167,330 19,734,739 4,276,518 3,903,449 Directors remuneration - fees 830, ,050 30, other emoluments 478, , SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

32 23. Profit from Operations (contd. Profit from operations is stated after charging: (contd. Expenses in connection with winding up of Borneo Pulp & Paper Sdn. Bhd. 2,561, ,099 2,561, ,099 Inventories written off 26, , Lease rental of equipment 81,966 68,941 32,889 29,954 Loss on disposal of property, plant and equipment 362,640 14, ,640 - Loss on foreign exchange - realised 60,223 60, Property, plant and equipment written off 5,623 3, Impairment losses on investments 803, ,621 - Loss on disposal of investment - 1,411,837-1,411,837 Provision for doubtful debts 6,942, ,429 8,086,872 - Rental of aircraft 634,550 5,402, Rental of premises 629, ,733 43,200 43,200 Rental of photocopy machine - 3, Reversal of impairment losses on property, plant and equipment - 40, And crediting: Creditors written off 10, Doubtful debts recovered 128, Gain on foreign exchange - realised 116,055 9, Gain on disposal of property, plant and equipment 2,136,491 14,986, ,533 Impairment losses on investment written back - 3, ANNUAL REPORT

33 24. Finance Costs Interest expense 5,084,872 5,304,663 3,477,877 3,271,390 Others 44,436 45, ,129,308 5,349,883 3,477,877 3,271, Taxation Tax expense for the year 9,248,491 7,158,543 6,100,000 4,500,000 Overprovided in prior years (349,256 (1,891,522 (363,394 (2,039,214 8,899,235 5,267,021 5,736,606 2,460,786 Deferred tax (Note 20: Relating to origination and reversal of temporary differences 623,837 1,413, Relating to changes in tax rates (90,749 (106, Under/(over provided in prior years 103,967 (2, ,055 1,305, Share of taxation of associates 1,679, , ,216,271 7,463,991 5,736,606 2,460,786 Income tax is calculated at the Malaysian statutory tax rate of 27% (2006: 28% of the estimated assessable profit for the year. 42 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

34 25. Taxation (contd. A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the and of the is as follows: Profit before taxation 60,760,809 42,971,136 31,526,962 7,638,065 Taxation at Malaysian statutory tax rate of 27% (2006: 28% 16,405,418 12,013,029 8,512,279 2,138,658 Income subject to lower tax rate of 20% (21,276 (39, Effect of changes in tax rates on opening balances of deferred tax (23,329 (62, Income not subject to tax (6,243,358 (604,088 (6,484,484 - Expenses not deductible for tax purposes 4,646,234 4,289,512 4,072,205 2,361,342 Effect of utilisation of current year s reinvestment allowance (4,613 (25, Effect of utilisation of previously unrecognised tax losses and unabsorbed capital allowances (2,000 ( Effect of double deduction of expenses (3,326,268 (2,519, Deferred tax assets not recognised in respect of current year s tax losses and unabsorbed capital allowances 92, , Prior year deferred tax assets now recognised on unutilised tax losses and unabsorbed capital allowances (19,000 (3,926, Reversal of deferred tax liabilities on revaluation of property, plant and equipment (33,000 (361, ANNUAL REPORT

35 25. Taxation (contd. A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the and of the is as follows: Under/(over provision of deferred tax in prior years: Company and subsidiaries 103,967 (2, Associates 3,227 (1, (Over/underprovision of tax expense in prior years: Company and subsidiaries (349,256 (1,891,522 (363,394 (2,039,214 Associates (12,867 9, Tax expense for the year 11,216,271 7,463,991 5,736,606 2,460, Commitments Capital expenditure: Property, plant & equipment: Authorised but not contracted for 2,500,000 2,567,990 Authorised and contracted for 27,105,927 13,600,000 29,605,927 16,167,990 Share of capital commitments of associates 4,609,378 1,310,649 34,215,305 17,478, Significant Related Party Transactions Management fees paid to subsidiary 4,149,000 4,075,041 Gross dividend income from subsidiaries (2,808,000 (2,942,375 The Board are of the opinion that all the transactions above have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties. 44 SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

36 Detailed Income Statements For the Year Ended 31 December Revenue Timber premium 24,356,675 25,386,744 Interest income 9,996,005 10,414,943 Registration fees 703, ,065 Services 683, ,430 Management fees 972,734 1,118,623 Dividends income - subsidiaries 2,808,000 2,942,375 - other investments 9,048,785 6,149,199 Other operating income 13,760,887 1,237,555 Gain on disposal of other investments 20,745,198-83,075,350 48,578,934 Cost of Sales (2,594,733 - Gross Profit 80,480,617 48,578,934 Administrative and Other Expenses Advertisement 96,369 84,787 Auditors remuneration 11,207 10,640 Books, newspaper and periodicals 97,168 86,023 Depreciation 4,276,518 3,903,449 Electricity and water 1,090, ,971 Entertainment 48,001 53,630 Expenses in connection with winding up of Borneo Pulp and Paper Sdn. Bhd: - Legal, professional and consultancy fees 2,561, ,099 Loss on disposal of investment - 1,411,837 Loss on disposal of property, plant and equipment 362,640 - General office expenses 268, ,407 Gifts and contributions 86, ,890 Hire of equipment 32,889 29,954 Insurance 936, ,493 Interest subsidies on staff loan 581, ,840 Interest on loan 2,896,349 2,695,550 Logistic 448,579 3,893,136 Maintenance of industrial estates 4,920,118 4,444,758 Market promotion 969, ,215 Miscellaneous 387, ,793 Museum expenses 87, ,378 Office rental 43,200 43,200 Printing and stationery 358, ,856 Professional and consultancy fees 68,970 61,548 Provision for doubtful debts 8,086,872 - ANNUAL REPORT

37 Detailed Income Statements For the Year Ended 31 December 2007 Administrative and Other Expenses (contd Provision for diminution in value of investment 780,621 - Rates and assessment 736,534 1,092,035 Repair and maintenance - motor vehicles 383, ,495 - office building and equipment 1,336,829 1,517,930 Staff - salaries and allowances 11,518,849 11,058,251 - medical 1,032,910 1,665,966 - members fees 30,600 30,600 - training and seminar 940, ,983 - uniform 50,872 56,645 - welfare 283, ,147 - overtime 209, ,582 - transport and travelling 2,258,126 1,577,991 Telephone, faxes and postages 245, ,352 Training for industry 360, ,438 48,884,677 40,940,869 Profit for the Year 31,595,940 7,638, SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

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