SHL CONSOLIDATED BHD. annual report 2012 ( W) TEST OF ENDURANCE

Transcription

1 annual report 2012 SHL CONSOLIDATED BHD. ( W) TEST OF ENDURANCE

2 TEST OF ENDURANCE Like a bamboo that symbolises longevity, SHL Consolidated Bhd. s proven track record in the property development sector is testament of the Group s endurance as a respected brand with wide appeal, in an industry that is highly competitive and overcrowded. This is due to our ability to meet market expectations with quality properties that are highly sought-after.

3 CONTENTS NOTICE OF ANNUAL GENERAL MEETING/ NOTICE OF DIVIDEND PAYMENT CORPORATE STRUCTURE STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING GROUP FINANCIAL HIGHLIGHTS CORPORATE INFORMATION STATEMENT ON INTERNAL CONTROL CHAIRMAN S STATEMENT STATEMENT ON CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY BOARD OF DIRECTORS PROFILE AUDIT COMMITTEE REPORT FINANCIAL STATEMENTS * ANALYSIS OF SHAREHOLDINGS LIST OF PROPERTIES PROXY FORM

4 Notice of annual general meeting NOTICE IS HEREBY GIVEN that the 18th Annual General Meeting of SHL Consolidated Bhd. (the Company) will be held at Ballroom 1, Level 1, Corus Hotel Kuala Lumpur, Jalan Ampang, Kuala Lumpur, on Thursday, 6 September 2012 at a.m. for the purpose of transacting the following businesses: AS ORDINARY BUSINESS 1. To receive the Audited Financial Statements for the financial year ended 31 March 2012 together with the Reports of the Directors and the Auditors thereon. 2. To declare a First and Final Dividend of 8% less tax in respect of the financial year ended 31 March To approve the payment of Directors fees for the financial year ended 31 March To re-elect Dato Ir. Yap Chong Lee retiring in accordance with Article 88 of the Company s Articles of Association. 5. To re-appoint Chin Yu Cheng Yu Thou who retire pursuant to Section 129 of the Companies Act, 1965, to hold office until the conclusion of the next Annual General Meeting of the Company. 6. To re-appoint Messrs Khoo Wong & Chan as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration. Please refer to Note 2 Resolution 1 Resolution 2 Resolution 3 Resolution 4 Resolution 5 AS SPECIAL BUSINESS To consider and, if thought fit, to pass the following Ordinary Resolutions: 7. Proposed Shareholders Mandate for recurrent related party transactions of a revenue or trading nature (Proposed Shareholders Mandate) THAT subject always to Bursa Malaysia Securities Berhad s Main Market Listing Requirements, approval be and is hereby given to the Company and its subsidiaries (SHL Group) to enter into recurrent related party transactions of a revenue or trading nature with those related parties as set out in Sections 2.2 and 2.3 of the Circular to Shareholders dated 15 August 2012, which are necessary for the SHL Group s day-to-day operations subject further to the following: (i) (ii) the transactions are in the ordinary course of business and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company; and disclosure is made in the annual report a breakdown of the aggregate value of the recurrent transactions conducted pursuant to the Proposed Shareholders Mandate during the financial year, where: (a) (b) the consideration, value of the assets, capital outlay or costs of the recurrent transactions is RM1 million or more; or the percentage ratios of such recurrent transactions is 1% or more, whichever is the higher. And amongst others, based on the following information: the type of the recurrent transactions made; and the names of the related parties involved in each type of the recurrent transactions made and their relationship with the Company. 2 SHL CONSOLIDATED BHD. ( W)

5 AND THAT the authority conferred by the Proposed Shareholders Mandate shall continue to be in force until: (i) (ii) the conclusion of the next Annual General Meeting (AGM) of the Company following this AGM at which the Proposed Shareholders Mandate is approved, at which time it will lapse, unless by a resolution passed at the general meeting, the mandate is again renewed; the expiration of the period within the next AGM of the Company after that date is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (Act) (but must not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or (iii) revoked or varied by resolution passed by the shareholders in a general meeting, whichever is earlier; AND THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things as they may consider expedient or necessary to give effect to the Proposed Shareholders Mandate. Resolution 6 8. Authority to Directors to issue shares THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby empowered to issue 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 in any one financial year does not exceed ten (10) per cent of the issued capital of the Company for the time being and that the Directors be and are also empowered to obtain approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company. Resolution 7 9. Proposed Renewal of Share Buy-Back Authority of up to 10% of its own Issued and Paid-Up Share Capital of the Company ( Proposed Share Buy-Back Authority ) THAT subject to the Companies Act, 1965 ( Act ), provisions of the Memorandum and Articles of Association of the Company, the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Company be and is hereby authorised to purchase such number of ordinary shares of RM1.00 each in the Company as may be determined by the Directors of the Company from time to time through Bursa Malaysia Securities Berhad ( Bursa Securities ) upon such terms and conditions as the Directors may deem fit and expedient in the interest of the Company provided that: (i) (ii) The maximum aggregate number of ordinary shares which may be purchased by the Company shall not exceed ten per centum (10%) of the issued and paid-up share capital of the Company at any point in time; The maximum fund to be allocated by the Company for the purpose of purchasing its shares shall not exceed the retained profits and share premium account of the Company; (iii) The authority conferred by this resolution shall commence upon the passing of this resolution and shall continue to be in force until: (a) (b) (c) the conclusion of the next AGM of the Company following the general meeting at which the ordinary resolution for the Proposed Share Buy-Back Authority is passed, at which time the said authority will lapse, unless the authority is renewed by a resolution passed at the next AGM, either unconditionally or subject to conditions; or the expiration of the period within which the next AGM after that date is required by the Act to be held; or revoked or varied by ordinary resolution passed by the shareholders of the Company in a general meeting; Annual Report

6 notice of annual general meeting whichever occurs first; (iv) Upon completion of the purchase(s) of the Shares by the Company, the Shares shall be dealt with in the following manner: (a) (b) (c) (d) (e) cancel the Shares so purchased; retain the Shares so purchased as Treasury Shares; distribute the Treasury Shares as dividend to shareholders; resell the Treasury Shares on Bursa Securities in accordance with the relevant rules of Bursa Securities; and any combination of the above (a), (b), (c) and (d). AND THAT the Directors of the Company be and are hereby authorised to take all such steps and do all acts and enter in all agreements, arrangements and guarantees with any party or parties for and on behalf of the Company as are necessary to implement, finalise and to give full effect to the aforesaid purchase with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments in any manner as may be required by any relevant authorities from time to time or otherwise as they deem fit in the best interests of the Company. Resolution 8 To consider and, if thought fit, to pass the following Special Resolution: 10. Proposed Amendments to the Articles of Association of the Company THAT the Proposed Amendments to the Articles of Association of the Company as set out in Part C of the Circular to Shareholders dated 15 August 2012, be and are hereby approved. AND THAT the Directors and Secretaries of the Company be and are hereby authorised to take all steps as are necessary and expedient in order to implement, finalise and give full effect to the Proposed Amendments of the Articles of Association of the Company. Resolution To transact any other ordinary business of which due notice shall have been given. NOTICE OF DIVIDEND PAYMENT NOTICE IS ALSO HEREBY GIVEN that the First and Final Dividend of 8% less tax in respect of the financial year ended 31 March 2012, if approved, will be paid on 28 September 2012 to depositors registered in the Record of Depositors of the Company on 18 September A Depositor shall qualify for entitlement to the dividend only in respect of: a. Shares transferred into the Depositor s Securities Account before 4.00 p.m. on 18 September 2012 in respect of transfers; and b. Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad. By Order of the Board WINNIE CHOK KWEE WAH (MACS 00550) LIM CHEW SUAN (MAICSA ) Secretaries Kuala Lumpur 15 August SHL CONSOLIDATED BHD. ( W)

7 NOTE 1: A member entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two (2) proxies to attend and vote in his stead. A proxy need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 6th Floor, Wisma Sin Heap Lee, 346, Jalan Tun Razak, Kuala Lumpur not less than forty-eight (48) hours before the time set for the Annual General Meeting. Where the Proxy Form is executed by a corporation, it must be either under its Common Seal or under the hand of an attorney duly authorised. For the purpose of determining a member who shall be entitled to attend, speak and vote at the Annual General Meeting, the Company shall be requesting for the Record of Depositors as at 30 August Only a depositor whose name appears in the Record of Depositors as at 30 August 2012 shall be entitled to attend, speak and vote at the 18th Annual General Meeting or appoint a proxy/proxies to attend and vote instead of him. NOTE 2: To receive the Audited Financial Statements for the financial year ended 31 March 2012 together with the Reports of the Directors and the Auditors thereon. This item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require shareholders approval for the Audited Financial Statements. Henceforth, this item is not put forward for voting. NOTE 3: Resolution pertaining to the Proposed Shareholders Mandate for recurrent related party transactions of a revenue or trading nature. The Ordinary Resolution 6 proposed under item 7 is to seek a fresh shareholders mandate for the recurrent related party transactions comprising the shareholders mandate which has been obtained on 8 September 2011 as well as additional recurrent related party transactions. The proposed shareholders mandate will enable the SHL Group to enter into recurrent transactions of a revenue or trading nature which are necessary for the SHL Group s day-to-day operations, subject to the transactions being in the ordinary course of business and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company. Further information on the Proposed Shareholders Mandate is set out in Part A of the Circular to Shareholders dated 15 August 2012, which is despatched together with this Annual Report NOTE 4: Resolution pursuant to Section 132D of the Companies Act, The Ordinary Resolution 7 proposed under item 8 is to seek a fresh general mandate which will empower the Directors to issue shares in the Company up to an amount not exceeding in total ten (10) per cent of the issued capital of the Company for such purposes as the Directors consider would be in the best interest of the Company in order to avoid any delay and cost involved in convening a general meeting to approve such issue of shares. This authority, unless revoked or varied by the Company at a General Meeting, will expire at the conclusion of the next Annual General Meeting of the Company. This general mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/or acquisitions. The Company has not issued any shares pursuant to Section 132D of the Companies Act, 1965 under the previous general mandate which has been obtained on 8 September 2011 and which will lapse at the conclusion of the 18th AGM to be held on 6 September NOTE 5: Resolution pertaining to the Proposed Share Buy-Back Authority. The Ordinary Resolution 8 proposed under item 9 is to seek a shareholders approval to empower the Directors to purchase the Company s shares up to ten percent (10%) of the issued and paid-up share capital of the Company by utilising the funds allocated which shall not exceed the total retained profits and share premium account of the Company. Further information on the Proposed Share Buy-Back Authority is set out in Part B of the Circular to Shareholders dated 15 August 2012, which is despatched together with this Annual Report NOTE 6: Resolution pertaining to the Proposed Amendments to the Articles of Association. The Special Resolution 9 proposed under item 10 is to enable the Company to streamline the existing Articles of Association with current developments under the Listing Requirements and provide clarity in the Company s Articles of Association. Statement Accompanying notice of annual general meeting Directors who are standing for re-election at this AGM: 1. Director who is standing for re-election pursuant to Article 88 of the Company s Articles of Association is Dato Ir. Yap Chong Lee. 2. Director who is standing for re-election pursuant to Section 129 of the Companies Act, 1965 is Chin Yu Cheng Yu Thou. The details of the two (2) Directors who are standing for re-election are set out in the Directors Profiles on pages 8 to 10 of this Annual Report. The details of their interest in the securities of the Company are set out in the Analysis of Shareholdings on page 104 of this Annual Report. Annual Report

8 RESILIENT Through foresight and a sound understanding of business cycles, we remain resilient in weathering any economic storm.

9 Corporate information BOARD OF DIRECTORS Non-Executive Chairman Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Executive Directors Dato Yap Teiong Choon Dato Ir. Yap Chong Lee Non-Independent Non-Executive Directors Wong Tiek Fong Wong Yew Mei (alternate director to Wong Tiek Fong) Senior Independent Non-Executive Director Chin Yu Cheng Yu Thou Independent Non-Executive Director Souren Norendra AUDIT COMMITTEE SECRETARIES AUDITORS Chairman Chin Yu Cheng Yu Thou Members Wong Tiek Fong Souren Norendra REMUNERATION COMMITTEE Chairman Chin Yu Cheng Yu Thou Members Dato Yap Teiong Choon Souren Norendra NOMINATION COMMITTEE Chairman Chin Yu Cheng Yu Thou Member Souren Norendra Winnie Chok Kwee Wah (MACS 00550) Lim Chew Suan (MAICSA ) REGISTERED OFFICE 6th Floor, Wisma Sin Heap Lee 346, Jalan Tun Razak Kuala Lumpur Tel: Fax: enquiry@shlcb.com.my Homepage: SHARE REGISTRAR Bina Management (M) Sdn. Bhd. Lot 10, The Highway Centre Jalan 51/205, Petaling Jaya Selangor Darul Ehsan Tel : Fax : Khoo Wong & Chan Chartered Accountants , 8th Floor Plaza First Nationwide 161, Jalan Tun H. S. Lee Kuala Lumpur PRINCIPAL BANKERS Hong Leong Bank Berhad United Overseas Bank (Malaysia) Bhd. Malayan Banking Berhad CIMB Bank Berhad OCBC Bank (Malaysia) Berhad Bangkok Bank Berhad STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad Annual Report

10 Board of Directors profile Y.A.M. TENGKU ABDUL SAMAD SHAH IBNI ALMARHUM SULTAN SALAHUDDIN ABDUL AZIZ SHAH (Age 59, Malaysian) Chairman (Non-Independent Non-Executive Director) DATO YAP TEIONG CHOON (Age 59, Malaysian) Executive Director (Non-Independent Executive Director) Tengku Abdul Samad Shah was appointed to the Board on 1 March He had his early education in Victoria Institution, Kuala Lumpur and attended the Wolaroi College NSW, Australia from 1970 to He is currently the Chairman of the Company and a Director of several subsidiaries of the Company. He does not have any directorships in other public companies. Tengku Abdul Samad Shah attended all Board Meetings held during the financial year ended 31 March He has never been convicted of any offence within the past ten (10) years. He has no family relationship with any Director and/or major shareholder of the Company nor has he any conflict of interest with the Company. Dato Yap was appointed to the Board on 1 March He had his early education in Victoria Institution, Kuala Lumpur. He obtained a Bachelor of Commerce with double majors in Economics and Accounting in 1976 and a Master in Commerce with Honours majoring in Advance Accounting from the University of Canterbury, New Zealand in He is a Chartered Accountant by profession and is a member of the Malaysian Institute of Accountants, the New Zealand Society of Accountants, a Fellow of the Institute of Certified Public Accountants of Singapore and the Australian Society of Certified Practicing Accountants. He started his career with Messrs Hanafiah, Raslan and Mohamad in 1977 and subsequently left the accounting profession in 1982 and has since been managing the Sin Heap Lee Group of Companies. He is presently an Executive Director and a Director of several subsidiaries of the Company. He is also an Executive Director of Amplefield Limited, a Singapore public-listed company involved in engineering process out-sourcing operations. Dato Yap is a member of the Remuneration Committee of the Company. He attended four (4) out of five (5) Board Meetings held during the financial year ended 31 March He is the brother of Dato Ir. Yap Chong Lee, an Executive Director of the Company. He has never been convicted of any offence within the past ten (10) years nor has he any conflict of interest with the Company. 8 SHL CONSOLIDATED BHD. ( W)

11 DATO IR. YAP CHONG LEE (Age 58, Malaysian) Executive Director (Non-Independent Executive Director) CHIN YU CHENG YU THOU (Age 71, Malaysian) (Senior Independent Non-Executive Director) Dato Ir. Yap was appointed to the Board on 1 March He obtained a Bachelor of Technology majoring in Civil and Structural Engineering from Bradford University, England in 1978, a Master of Science majoring in Construction Management from Birmingham University, England in 1979 and a Postgraduate Certified Diploma in Accounting and Finance, England in He is a Fellow of both the Institution of Engineers, Malaysia and the Association of Consulting Engineers, Malaysia. His working career began in 1979, with a consulting engineering firm, Sepakat Setia Perunding (Sendirian) Berhad and was subsequently appointed as a Director of the firm in He has been involved in the management of Sin Heap Lee Group of Companies since May He is presently an Executive Director and a Director of several subsidiaries of the Company. He does not have any directorships in other public companies. Dato Ir. Yap attended four (4) out of five (5) Board Meetings held during the financial year ended 31 March He is the brother of Dato Yap Teiong Choon, an Executive Director of the Company. He has never been convicted of any offence within the past ten (10) years nor has he any conflict of interest with the Company. Mr Chin was appointed to the Board on 1 March He obtained a Diploma in Architecture from the Birmingham School of Architecture, Birmingham, England in He is a senior member of Pertubuhan Arkitek Malaysia and registered with Lembaga Arkitek Malaysia. He started his career in 1964 as a lecturer in the Department of Architecture, Technical College, Kuala Lumpur. Subsequently, he was appointed as an architect for Shell Malaysia Berhad, responsible for projects in Malaysia, Singapore and Brunei from 1966 to In 1971, he started his own practice, Messrs Arkitek Rakanan and has since been involved in a wide range of development projects from industrial and housing to commercial buildings. He does not have any directorships in other public companies. Mr Chin is the Chairman of the Audit Committee, Nomination Committee and Remuneration Committee of the Company. He attended all Board Meetings held during the financial year ended 31 March He has never been convicted of any offence within the past ten (10) years. He has no family relationship with any Director and/or major shareholder of the Company nor has he any conflict of interest with the Company. Annual Report

12 board of directors profile WONG TIEK FONG SOUREN NORENDRA WONG YEW MEI (Age 50, Malaysian) (Non-Independent Non-Executive Director) (Age 42, Malaysian) (Independent Non-Executive Director) (Age 54, Malaysian) (Non-Independent Non-Executive Director) Mr Wong was appointed to the Board on 1 April He obtained a Diploma in Commerce (Financial Accounting) from Tunku Abdul Rahman College, Kuala Lumpur in He is a Chartered Accountant by profession and a member of the Malaysian Institute of Accountants, the Chartered Tax Institute of Malaysia and a fellow of the Association of Chartered Certified Accountants, United Kingdom. His career began in 1985 with a firm of Chartered Accountants, Messrs Khoo Wong & Chan as an Audit Senior where he gained wide experience in corporate auditing and taxation of diverse industries. Prior to joining SHL Group in May 1989 as a Financial Accountant responsible for the financial accounting and management of SHL Group, he was attached to a firm of Chartered Accountants, KPMG as an Audit Senior. Subsequently, he was promoted as the Financial Controller of SHL Group in May Presently, he is the Group Financial Controller of SHL Group and a Director of several subsidiaries of the Company. He does not have any directorships in other public companies. Mr Wong is a member of the Audit Committee and Risk Management Committee of the Company. He attended all Board Meetings held during the financial year ended 31 March He has never been convicted of any offence within the past ten (10) years. He has no family relationship with any Director and/or major shareholder of the Company nor has he any conflict of interest with the Company. Mr Souren Norendra was appointed to the Board on 24 February He completed his secondary education at the Methodist Boys School, Kuala Lumpur and then proceeded to England where he read law and attained his LLB (Hon) from the University of Hull in He obtained his Certificate of Legal Practice (CLP) from University Malaya and was called to the Malaysian Bar in He has been practising as an advocate and solicitor in the firm of Messrs Norendra & Yap since being called to the Bar and is now a Partner of the firm. His areas of specialty are in corporate and conveyancing law. Mr Souren is a member of the Audit Committee, Nomination Committee and Remuneration Committee of the Company. He attended all Board Meetings held during the financial year ended 31 March He has never been convicted of any offence within the past ten (10) years. He has no family relationship with any Director and/or major shareholder of the Company nor has he any conflict of interest with the Company. Ms Wong was appointed as an alternate director to Mr Wong Tiek Fong on 2 April She obtained a Diploma in Technology (Building) from Tunku Abdul Rahman College, Kuala Lumpur in 1982 and a Master degree in Business Administration, University of East Asia, Macau in In 1982, she joined Messrs Hashim & Lim, a quantity surveying consulting firm in Kuala Lumpur in which she was exposed to all aspects of quantity surveying works on residential, hotels and high-rise buildings. In October 1986, she joined SHL Group as an Estimator and was involved in feasibility studies and estimates for the SHL Group s property development and construction projects. She was promoted as the Budget Controller for SHL Group in December 1988 and appointed as a Director of several subsidiaries of the Company in She does not have any directorships in other public companies. Ms Wong is a member of the Risk Management Committee of the Company. She attended all Board Meetings held during the financial year ended 31 March She has never been convicted of any offence within the past ten (10) years. She has no family relationship with any Director and/or major shareholder of the Company nor has she any conflict of interest with the Company. 10 SHL CONSOLIDATED BHD. ( W)

13 Corporate structure INVESTMENT AND SERVICES 100% 100% 100% 60% Integrated Management Corporation Sdn. Bhd. SHL Corporate Services Sdn. Bhd. SHL Realty Sdn. Bhd. Goodstock Land Sdn. Bhd. CONSTRUCTION 100% 100% 100% Sin Heap Lee Construction Sdn. Bhd. SHL Infra Sdn. Bhd. Soil-Mech Drillers Sdn. Bhd. SUPPLY AND LOGISTICS 100% 100% 100% 100% 100% Sin Heap Lee Company Sdn. Berhad Sin Heap Lee Brickworks Sdn. Bhd. Kajang Granite Quarry Sdn. Bhd. Senick Sdn. Bhd. Mercantile Corporation (M) Sdn. Bhd. (has been dissolved under Members Voluntary Winding Up pursuant to Section 272(5) of the Companies Act, 1965) DEVELOPMENT 100% 100% H.S.C. Sdn. Berhad (has been dissolved under of Members Voluntary Winding Up pursuant to Section 272(5) of the Companies Act, 1965) Ho Sin & Son Enterprise Sdn. Bhd. 100% 100% 100% Goodstock (Tawau) Sdn. Bhd. Sin Heap Lee Development Sdn. Bhd. Mayang Kiara Sdn. Bhd. 100% SHL-M Sdn. Bhd. 100% Sungai Long Golf Resort Berhad 100% Sukma Pesona Sdn. Bhd. 30% OPT Ventures Sdn. Bhd. 100% Wilayah Builders Sdn. Bhd. Annual Report

14 ESTABLISHED Our deeply rooted ties to the property development sector bear testament to our customers continued trust and confidence in us as an established developer.

15 Group financial highlights IN RM MILLION Revenue Profit Before Taxation Earnings Per Share (sen) Shareholders' Equity Revenue (RM Million) 300 Profit Before Taxation (RM Million) Earnings Per Share (Sen) Shareholders Equity (RM Million) Annual Report

16 Statement on corporate governance THE BOARD REMAINS FULLY COMMITTED TO ACHIEVE AND MAINTAIN HIGH STANDARDS OF CORPORATE GOVERNANCE THROUGHOUT THE GROUP AS A FUNDAMENTAL PART OF DISCHARGING ITS RESPONSIBILITIES TO PROTECT AND ENHANCE SHAREHOLDERS VALUE AND FINANCIAL PERFORMANCE. THE BOARD CONFIRMED THAT THE CORPORATE GOVERNANCE ADOPTED BY THE COMPANY IS IN LINE WITH THE PRINCIPLES SET OUT IN PART I AND COMPLIED WITH THE BEST PRACTICES SET OUT IN PART II OF THE MALAYSIAN CODE OF CORPORATE GOVERNANCE (REVISED 2007). The Board is pleased to provide the following statement outlining the main Corporate Governance practices of the Group and the manner in which they have been applied throughout the twelve months ended 31 March BOARD OF DIRECTORS Composition of the Board The Board of Directors comprises six (6) members which includes two (2) Executive Directors, two (2) Non-independent Non-Executive Directors (including the Chairman) and two (2) Independent Non-Executive Directors. This is in compliance with Bursa Malaysia Securities Berhad Listing Requirements, which is to have at least one third of the Board consisting of Independent Directors. All Directors are from diverse professional backgrounds with wide experience and exposure in business environment coupled with their diversified background and skill. This will maintain the balance to ensure that the Board is able to provide strong and effective leadership and exercise control of the Group. A brief profile of each Director is set out in the Directors Profile. The functions of the Chairman and the Executive Directors are separately and clearly defined. The Chairman is responsible for running the Board and ensures that all Directors receive sufficient relevant information on financial and non-financial matters to enable them to participate actively in the Board decisions. The Executive Directors are responsible for the day-to-day management of the business as well as the implementation of Board s policies and decisions. The Non-Independent Non-Executive Directors are to provide the Company unbiased and independent view and judgement, after taking into consideration the interest of the shareholders, employees, suppliers and customers. The presence of Independent Non-Executive Directors of the calibre necessary to carry sufficient weight in all decisions made by the Board ensures that there is proper check and balance in the Board. Although all Directors have an equal responsibility for the Group s business and affairs, the role of Independent Non-Executive Directors is particularly important in ensuring that the strategies proposed by the Executive Directors are fully discussed and examined, with due regard to risk management. Mr Chin Yu Cheng Yu Thou has been appointed by the Board as the Senior Independent Non-Executive Director of the Board to whom any concerns may be conveyed. Duties and Responsibilities of the Board The SHL Group recognises the importance of having an effective and dynamic Board to lead and control the Group in enhancing not only long term shareholders value but ensuring that other stakeholders interest are also taken into consideration. The Board is primarily responsible for the Group s overall strategic plans for business performance, overseeing the proper conduct of business, risk management, investor relations programmes, succession planning, internal control and management information system. The Board has also reserved certain key matters for its decision and approval such as major capital expenditure, acquisition and disposal of business or equity, borrowings, corporate restructuring exercise, annual and interim results. 14 SHL CONSOLIDATED BHD. ( W)

17 The Board has delegated certain responsibilities to the Board Committees, namely the Audit Committee, the Nomination Committee and the Remuneration Committee, all of which have terms of reference to govern their responsibilities. The Board Committees will deliberate on and examine issues within their terms of reference and report to the Board. Board Meetings The Board meets at least five (5) times a year, with additional meetings convened when necessary to review matters that require the Board s urgent attention and decision. Meetings are scheduled at the beginning of each calendar year to enable the Board members to plan their schedules accordingly. During the financial year ended 31 March 2012, the Board met on five (5) occasions, where a formal agenda are forwarded to all Directors at least two (2) weeks before the meetings. All issues raised and discussed and decisions made at the Board Meetings are minuted, and are circulated to all Directors for their perusal prior to the confirmation of such minutes at the following Board Meetings. All Board Meetings during the financial year ended 31 March 2012 were held at the Conference Room, 18th Floor, Wisma Sin Heap Lee, 346 Jalan Tun Razak, Kuala Lumpur. All directors have complied with the minimum 50% attendance requirement in respect of the Board Meetings as stipulated by Bursa Malaysia Securities Berhad s Main Market Listing Requirements. The Directors attendance for the five (5) Board Meetings held during the financial year ended 31 March 2012 was as follows: Date of Meeting No. of Meetings Director Attended Y.A.M. Tengku Abdul Samad Shah 5/5 Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Dato Yap Teiong Choon 4/5 Dato Ir. Yap Chong Lee 4/5 Chin Yu Cheng Yu Thou 5/5 Wong Tiek Fong 5/5 Wong Yew Mei 5/5 Souren Norendra 5/5 Supply of Information The Board recognises that the decision making process is highly dependent on the quality of information furnished. As such, the Board has unrestricted access to any information pertaining to the Company. Updates on operational, financial, corporate issues and strategic matters as well as current development of the Group which require the Board members attention are disseminated without delay. The Chairman of the Audit Committee would brief the Board on matters deliberated by the Audit Committee which require the attention of the Board. Senior Management Officers and external advisers may be invited to attend Board Meeting when necessary, to furnish the Board with explanations and comments on the relevant agenda items tabled at the Board Meetings or to provide clarification on issue(s) that may be raised by any Director. All Directors have access to the advice and services of the Senior Management and Company Secretary and may seek independent professionals advice, at the Company s expenses, if required, in furtherance of their duties. Annual Report

18 statement on corporate governance Appointment to the Board Nomination Committee The Nomination Committee comprises two (2) Independent Non-Executive Directors, as follows: 1. Chin Yu Cheng Yu Thou Chairman 2. Souren Norendra Duties and responsibilities of the Nomination Committee include: a. to identify and recommend to the Board, suitable candidates for directorship of the Company; b. to recommend to the Board, directors to fill the seats on the Board Committees; c. to evaluate the effectiveness of the Board as a whole, the Board Committee and assessing the contribution of each individual director; and d. to ensure an appropriate framework and succession plans for members of the Board. Meeting of the Nomination Committee is held as and when required. The Nomination Committee is satisfied that the size of the Board is optimum and all the members are suitably qualified to hold their position as Directors of the Company in view of their respective professional qualifications and experience. Directors Training The Directors have participated and continue to undergo the relevant training programmes to further enhance their skill and knowledge as well as the latest statutory and/or regulatory requirements in discharging their fiduciary duties to the Company. Training programme attended by the Directors during the financial year ended 31 March 2012 is as follows: A Comprehensive Workshop On Deferred Taxation. Reasons for some of the Directors who are not able to participate in the continuing education programme are as follows: Very active involvement in the Group corporate and operational matters; and Unable to identify any relevant courses that provide specific property development methodologies, business models and delivery systems pertaining to property development industry. Re-Election In accordance with the Company s Articles of Association, all Directors who are appointed by the Board are subject to re-election by shareholders at the next ordinary meeting after their appointment. The Articles of Association also provide that nearest to one-third (1/3) of the Directors shall subject to retirement by rotation and be eligible for re-election at each Annual General Meeting. The Directors to retire shall be the Directors who have been longest in office since their last election, and the directors shall be subject to retirement at least once in every three (3) years. Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with Section 129 of the Companies Act, DIRECTORS REMUNERATION Remuneration Committee The Remuneration Committee consists of two (2) Independent Non-Executive Directors and one (1) Non-Independent Executive Director, as follows: 1. Chin Yu Cheng Yu Thou Chairman 2. Dato Yap Teiong Choon 3. Souren Norendra Duties and responsibilities of the Remuneration Committee include: a. to recommend the remuneration framework for Non-Executive Directors; b. to recommend the remuneration package of Executive Directors; and c. to ensure individual directors abstain from making decisions in respect of their individual remuneration. During the financial year ended 31 March 2012, the Remuneration Committee held only one meeting on 24 May 2011, to discuss and review the Executive and Non-Executive Directors Remuneration, whereupon recommendations are submitted to the Board for approval. The attendance of Members at the Remuneration Committee Meeting is reflected as follows: Name of members Attendance Chin Yu Cheng Yu Thou 1/1 Dato Yap Teiong Choon 1/1 Souren Norendra 1/1 16 SHL CONSOLIDATED BHD. ( W)

19 The Group Financial Controller attended the Remuneration Committee Meeting by invitation. The Board as a whole determines the remuneration of Non-Executive Directors and each individual Director abstains from the Board s decision on his own remuneration. All the Directors are paid annual Directors fees and traveling allowance for Board Meetings that they have attended. The Directors fees are approved by the shareholders at the AGM. The details of Directors remuneration paid and payable to the Directors of the Company for the financial year ended 31 March 2012, by category and in successive bands of RM50,000/- are as follows: Executive Non-Executive Directors Directors Independent Non-Independent Total RM RM RM RM Fees 40,000 40,000 40, ,000 Salaries 1,073, ,980 1,546,380 Bonuses 180,000 46, ,260 EPF 151,200 50, ,324 Benefits in kind & Allowances 34,000 10,000 17,000 61,000 TOTAL 1,478,600 50, ,364 2,154,964 Number of Directors Executive Independent Non-Independent Range of remuneration Non-Executive Non-Executive Below RM50,000 2 RM100,001 to RM150,000 1 RM200,001 to RM250,000 1 RM250,001 to RM300,000 1 RM700,001 to RM750,000 2 SHAREHOLDERS Dialogue between the Company and Investors The Company recognises the importance of being accountable to its investors and as such has maintained an active and constructive communication policy to enable the Board and Management to communicate effectively with its shareholders, stakeholders and the public generally. These, together with the announcement to Bursa Malaysia Securities Berhad, circulars to shareholders and, where appropriate, ad-hoc press statements and interviews are the principal channels for dissemination of information to its shareholders, stakeholders and the public generally. In addition, the Company has established a web site at which shareholders can access for information. The timely release of quarterly financial results of the Group and the issue of the Company s Annual Reports provide regular information on the state of affairs of the Group. Annual Report

20 statement on corporate governance General Meeting The Company s General Meetings are the principal avenue for the shareholders to meet and discuss the Company s affairs with the Directors. Shareholders are encouraged to attend and participate at these meetings. Shareholders who are unable to attend are allowed to appoint proxies. Members of the Board and the external auditors of the Company are present to answer queries raised at these meetings as well as to discuss with shareholders, invited attendees and members of the press. Any queries or concerns regarding the Group may be conveyed to the Chairman of the Audit Committee or the Company Secretary at the registered office of the Company. ACCOUNTABILITY AND AUDIT Audit Committee The Audit Committee of the Board comprises two (2) Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director. The composition and functions of the Audit Committee are set out in the Audit Committee Report. Financial Reporting In presenting the annual reports and audited financial statements and quarterly announcement to shareholders, the Board aims to provide and present an accurate, balanced and meaningful assessment of the Group s financial performance and prospects. The Board is assisted by the Audit Committee to oversee the Group s financial reporting processes and the quality of its financial reporting. Directors Responsibility Statement in respect of the preparation of the audited Financial Statements Directors have ensured that applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 have been applied. In preparing the financial statements, the Directors have selected and applied consistently suitable accounting policies and made reasonable and prudent judgements and estimates. State of Internal Control The Statement on Internal Control furnished on pages 23 to 24 of the Annual Report provides an overview on the state of internal controls within the SHL Group. Relationship with the Auditors Key features underlying the relationship of the Audit Committee with the external auditors are included in the Audit Committee s terms of references as set out in the Audit Committee Report. The SHL Group has always maintained a transparent relationship with its auditors in seeking professional advice and ensuring compliance with the appropriate accounting standards. COMPLIANCE WITH THE CODE The Board of Directors has taken measures to ensure that SHL Group fully complies with all the best practices of corporate governance as identified in the Code throughout the financial year ended 31 March STATEMENT OF CORPORATE GOVERNANCE The disclosure of this Statement on Corporate Governance has been approved by the Board during the Board Meeting held on 18 July The Directors are responsible for ensuring that the financial statements of the Group 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 the financial performance and cash flows of the Group and of the Company for the financial year then ended. In preparing the financial statements, the 18 SHL CONSOLIDATED BHD. ( W)

21 ADDITIONAL COMPLIANCE INFORMATION 1. Utilisation of Proceeds There were no proceeds raised by the Company from any corporate exercise during the financial year. 2. Share Buy-back The Company has obtained the Share Buy-Back Authority from its shareholder on 8 September 2011 and which will lapse at the conclusion of the forthcoming AGM unless approval for its renewal is obtained from the Shareholders at the forthcoming AGM. In connection thereto, the Proposed renewal of the Share Buy-Back Authority will be tabled at the forthcoming AGM. The Company has not purchased, resold or cancelled any of its own shares during the 12 months preceding the date of this Annual Report, and also does not hold any of its own shares as treasury shares. 3. Options, Warrants or Convertible Securities The Company has not issued any options, warrants or convertible securities during the financial year. 4. American Depository Receipt ( ADR ) or Global Depository Receipt ( GDR ) The Company has not sponsored any ADR or GDR programme during the financial year. 5. Sanction and Penalty During the financial year, no sanction or penalty has been imposed by any regulatory bodies on the Company and its subsidiaries, Directors or management of the Company. 8. Profit Guarantee There was no profit guarantee for the financial year. 9. Material Contracts Involving Directors / Substantial Shareholders Interests Besides the related party transactions covered under the Shareholders Mandate duly granted by shareholders at the last Annual General Meeting, the Company has not entered into any other contract with any Directors or substantial shareholders of the Company nor any persons connected to Directors or substantial shareholders of the Company. 10. Revaluation Policy The Group adopts the policy to revalue land and/or buildings held as property, plant and equipment at least once in every five (5) years or at such shorter period as may be considered to be appropriate based on the advice of external professional valuers and appraisers and/or Directors valuation. Any surplus or deficit arising from the revaluation exercise is to be dealt with in the revaluation reserve, except that a deficit is charged to the income statement to the extent that it is in excess of any surplus held in the former relating to previous revaluation of the same asset. On disposal of revalued assets, amounts in revaluation reserve relating to those assets are transferred to retained profits. Investment properties are stated at fair value and any gains or losses arising from changes in fair values are included in the income statement in the period in which they arise. 6. Non-audit Fees Payable to External Auditors No non-audit fees have been paid to the external auditors during the financial year. 7. Financial Forecast No profit forecast was issued by the Company during the financial year. Annual Report

22 Audit committee report MEMBERSHIP The present members of the Committee comprise: Chairman Chin Yu Cheng Yu Thou Senior Independent Non-Executive Director Members Wong Tiek Fong Non-Independent Non-Executive Director Souren Norendra Independent Non-Executive Director ESTABLISHMENT The Audit Committee was established on 26 March 1996 to act as a Committee of the Board of Directors. TERMS OF REFERENCE OF THE AUDIT COMMITTEE Objectives The primary objectives of the Audit Committee are: to assist the Board in the discharge of its responsibilities by reviewing the adequacy and integrity of the Company s and the Group s internal control systems, risk assessment and management information systems for compliance with applicable laws, regulations, rules, directives and guidelines; to reinforce the independence of the external auditors and thereby help ensure that they will have free rein in the audit process and to provide, by way of regular meetings, a line of communication between the Board and the external auditors; to provide emphasis on the internal audit function by increasing the objectivity and independence of the internal auditors and provide a forum for discussion that is independent of management; and to review related party transactions entered into by the Company and the Group to ensure that such transactions are undertaken on the Group s normal commercial terms and that the internal control procedures with regards to such transactions are sufficient. Composition The Board shall elect and appoint Committee members from amongst their numbers, comprising no fewer than three (3) Directors, all the audit committee members must be non-executive directors, with majority of them being independent directors. The Board shall at all times ensure that at least one (1) member of the Committee shall be: a member of the Malaysian Institute of Accountants (MIA); or if he or she is not a member of MIA, he must have at least three (3) years of working experience and: he or she must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act, 1967; or he or she must be a member of the associations of accountants specified in Part II of the 1st schedule of the Accountants Act, fulfils such other requirements as prescribed or approved by the Exchange. If a member of the Committee resigns, dies or for any reason ceases to be a member with the result that the number of members is reduced to below three (3), the Board shall within three (3) months of the event appoint such number of new members as may be required to fill the vacancy. The Chairman of the Committee shall be an independent non-executive Director. No alternate Director of the Board shall be appointed as a member of the Committee. The Board shall review the terms of office of each of its members at least once (1) every three (3) years. Quorum and Committee s Procedures Meetings shall be conducted at least four (4) times annually, or more frequently as circumstances dictate. In order to form a quorum for the meeting, the majority of the members present must be independent non-executive Directors. In the absence of the Chairman, the members present shall elect a Chairman for the meeting from amongst the members present. The Company Secretary shall be appointed Secretary of the Committee (the Secretary). The Secretary, in conjunction with the Chairman, shall draw up an agenda, which shall be circulated together with the relevant supporting papers, at least one (1) week prior to each meeting to the members of the Committee. The minutes of the meetings shall be circulated to members of the Board. 20 SHL CONSOLIDATED BHD. ( W)

23 The Committee may, as and when deemed necessary, invite other Board members and senior management members to attend the meetings. The Chairman shall submit an annual report to the Board summarizing the Committee s activities during the year and the related significant results and findings. The Committee shall meet at least once every year with the Head of Internal Audit and external auditors in separate sessions to discuss any matters with the Committee without the presence of any executive member of the Board. The Committee shall regulate the manner of proceedings of its meetings, having regard to normal conventions on such matter. Authority The Committee is authorised to seek any information it requires from employees, who are required to cooperate with any request made by the Committee. The Committee shall have full and unlimited access to any information pertaining to the Group. The Committee shall have direct communication channels with the internal and external auditors and with senior management of the Group and shall be able to convene meetings with the external auditors whenever deemed necessary. The Committee shall have the resources that are required to perform its duties. The Committee can obtain, at the expense of the Company, external legal or other independent professional advice it considers necessary. Responsibilities and Duties In fulfilling its primary objectives, the Committee shall undertake the following responsibilities and duties: a) to consider the appointment of the external auditors, the audit fee and any questions of resignation or dismissal; b) 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; c) to review the quarterly and annual financial statement of the Group, focusing particularly on: any changes in accounting policies and practices; significant accounting adjustments arising from the audit; the going concern assumption; and compliance with accounting standards and other legal requirements. d) to discuss problems and reservations arising from the interim and final audits, and any matter the auditors may wish to discuss (in the absence of management where necessary); e) to review the external auditors management letter and management s response; f) in relation to the internal audit function: review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary authority to carry out its work; review the internal audit program and results of the internal audit process and where necessary ensure that appropriate action is taken on the recommendations of the internal audit function; review any appraisal or assessment of the performance of members of the internal audit function; approve any appointment or termination of senior staff members of the internal audit function; and inform itself of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning. g) to consider any related party transactions that may arise within the Company or Group. h) to consider the major findings of internal investigations and management s response. i) to consider other topics as defined by the Board. j) to review procedures in place to ensure that the Group is in compliance with the Companies Act, 1965, Listing Requirements of Bursa Malaysia Securities Berhad and other legislative and reporting requirements. MEETINGS During the year ended 31 March 2012, the Audit Committee held its meetings on 24 May 2011, 14 July 2011, 24 August 2011, 22 November 2011 and 23 February 2012, a total of 5 meetings. The meeting attendance of the Committee members were as follows: Name of members Attendance Chin Yu Cheng Yu Thou 5/5 Wong Tiek Fong 5/5 Souren Norendra 5/5 Annual Report

24 audit committee report The meetings were appropriately convened with agendas and Board papers distributed to members with sufficient notification. The Secretary was present in all the meetings. Representatives of the external auditors and the Head of Internal Audit also attended the meetings upon invitation. SUMMARY OF ACTIVITIES DURING THE FINANCIAL YEAR The main activities undertaken by the Committee were as follows: Reviewed the external auditors scope of work and audit plans for the year. Prior to the audit, representatives from the external auditors presented their audit strategy and plan. Reviewed with the external auditors the results of the audit, the audit report and the management letter, including management s response. Consideration and recommendation to the Board for approval of the audit fees payable to the external auditors as disclosed in Note 6 to the financial statements. Reviewed the independence and objectivity of the external auditors and the services provided, including non-audit services. Reviewed the internal audit department s resources requirements, programmes and plans for the financial year under review and the annual assessment of the internal audit department s performance. Reviewed the internal audit reports, which highlighted the audit issues, recommendations and management s response. Discussed with management actions taken to improve the system of internal control based on improvement opportunities identified in the internal audit reports. Recommended to the Board improvement opportunities in internal control, procedures and risk management. Met with the external auditors and internal auditors at least twice a year without the presence of any executive Board member. Reviewed the annual report and the audited financial statements of the Company prior to submission to the Board for their consideration and approval. The review was to ensure that the audited financial statements were drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards approved by the Malaysian Accounting Standards Board (MASB). Reviewed the Company s compliance in particular the quarterly and annual financial statements with the Listing Requirements of Bursa Malaysia Securities Berhad, MASB and other relevant legal and regulatory requirements. Reviewed pertinent issues of the Group which had a significant impact on the results of the Group which included enhancement and further development in existing products and services offered, cost rationalisation measures, reorganisation of business units and human resource development. Reviewed the quarterly financial statements before recommending the same for the Board s approval. The review and discussions were conducted with the Group Financial Controller. Reviewed on a quarterly basis the related party transactions entered into by the Group. Reviewed the extent of the Group s compliance with the provisions set out under the Malaysian Code on Corporate Governance for the purpose of preparing the Corporate Governance Statement and Statement on Internal Control pursuant to the Listing Requirements of Bursa Malaysia Securities Berhad. Recommended to the Board action plans to address the identified gaps between the Group s existing corporate governance practices and the prescribed corporate governance principles and best practices under the Code. STATEMENT ON EMPLOYEES SHARE OPTION SCHEME (ESOS) BY THE COMMITTEE There is no new ESOS established for the employees during the year ended 31 March INTERNAL AUDIT FUNCTION The internal audit department is independent of the activities or operations of other operating units. The principal role of the department is to undertake independent regular and systematic reviews of the systems of internal control, risk management and governance frameworks within the Group so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively. It is the responsibility of the internal audit department to provide the Audit Committee with independent and objective reports on the state of internal control of the various operating units within the Group and the extent of compliance of these units with the Group s established policies and procedures as well as relevant statutory requirements. Further details of the activities of the internal audit department are set out in the Statement on Internal Control on pages 23 to SHL CONSOLIDATED BHD. ( W)

25 Statement on internal control INTRODUCTION The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of internal control to safeguard shareholders investments and the Group s assets. The Listing Requirements of Bursa Malaysia Securities Berhad require directors of listed companies to include a statement in their annual reports on the state of internal controls of the listed issuer as a Group. Bursa Malaysia Securities Berhad s Statement on Internal Control: Guidance for Directors of Public Listed Companies (Guidance) provides guidance for compliance with these requirements. Set out below is the Board of Directors Internal Control Statement, which has been prepared in accordance with the Guidance. BOARD RESPONSIBILITY The Directors acknowledge their ultimate responsibility for the Group s system of internal controls, which is designed to identify and manage the risks faced by its business units in pursuit of its objectives but the purview does not cover its associated company where the Group does not have full management control. However, the Group s interest are served through representations on the board of associated company. The system of internal controls covers risk management, operational, organisational, financial and compliance controls to safeguard the Group s assets and shareholders investments. The system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. ENTERPRISE RISK MANAGEMENT FRAMEWORK The Board has established an ongoing process for identifying, evaluating and managing significant risks faced by the Group. This process has been in place throughout the year and up to the date of approval of the annual report and financial statements. The Board fully supports the contents of the Internal Control Guidance and through the Audit Committee, continually reviews the adequacy and effectiveness of the risk management process within the various operating business units. The Group Management is responsible for the management of risk, developing, operating and monitoring the system of internal control and providing assurance to the Board that it has done so in accordance with the policies adopted by the Board. The formalisation of the enterprise risk management framework involved the following initiatives: A formal risk policy and guidelines have been established and communicated to all employees throughout the Group. A risk management structure which outlines the lines of reporting and responsibility at the Board, Audit Committee, Group Risk Management Committee and management levels have been established. The risk management structure enhances risk oversight and monitoring process. Chief Risk Officers have been appointed to continuously carry out their responsibilities to identify, assess and prioritise the risks faced by the Group based on the likelihood of occurrence and magnitude of impact and also to assist management in identifying procedures or steps to be taken to manage or control these risks. The Group Management s implementation of a groupwide risk assessment process identifies the key risks facing each business, the potential impact and likelihood of those risks occurring, the control effectiveness and the action plans being taken to manage those risks to the desired level. The risk profile for the Group and individual business units is produced by an automated risk management system, and together with the risk registers, are reported through the Group Risk Management Committee to the Audit Committee on a half yearly basis. The Chairman of the Audit Committee reports the significant risks and control issues to the Board for its consideration. Ongoing risk management education and training is provided at management and staff levels. The Board is satisfied that there is an ongoing process of identifying, evaluating and managing significant risks that may affect the achievement of the Group s business objectives. The system of internal control will continue to be reviewed and updated in line with changes in the operating environment. Annual Report

26 INTERNAL AUDIT FUNCTION The Group has an Internal Audit Department (Internal Audit) which provides assurance to the Board on the effectiveness and adequacy of its risk management, system of internal controls and governance frameworks. Internal Audit function focuses on areas of priority as identified by risk analysis and in accordance with an annual plan approved each year by the Audit Committee. Internal Audit independently reviews the risk identification procedures and control processes implemented by the Group Management, and report to the Audit Committee on a regular basis. Internal Audit also undertakes a review of the Company s compliance with principles and best practices of the Code. The results and any corrective action which may be necessary are reported to the Audit Committee. The Audit Committee reviews the risk monitoring and compliance procedures and presents its findings to the Board on a regular basis. During the financial year, the cost involved in performing in-house internal audit function is approximately RM146,000/-. KEY ELEMENTS OF THE GROUP S INTERNAL CONTROL SYSTEM The internal controls are designed to give reasonable assurance with respect to: the reliability of financial information used within the business or for publication; the maintenance of proper accounting records; safeguarding of assets against unauthorised use or disposition; The Group s internal control and monitoring procedures include: clearly laid down system and procedures, both financial and operational, including maintenance of good financial controls and the production of accurate and timely financial management information. detailed budgeting and reporting of financial results, financial positions and cash flows, with regular review by the management of variances from budgets. regular internal audit visits to monitor compliance with procedures and assess the integrity of financial information provided. Standard Operating Policies and Procedures are systematically documented, revised and made available to guide staff in their day-to-day work. Senior Management meet on a regular basis with managers of business units to consider the Group s operational, business development, financial performance and risk related matters. There are regular Board and Management meetings to assess, review and monitor performances and controls in all facets of operations. REVIEW OF THE STATEMENT BY THE EXTERNAL AUDITORS The External Auditors have reviewed the Statement on Internal Control and reported to the Board that nothing has come to their attention that causes them to believe the Statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls. the business being operated efficiently and effectively; and compliance with statutory laws and regulations. 24 SHL CONSOLIDATED BHD. ( W)

27 SUCCESSFUL Our passion for excellence has enabled us to nurture a culture of success throughout the Group as evidened by our ability to soar to greater heights.

28 Chairman s statement ON BEHALF OF THE BOARD OF DIRECTORS OF SHL CONSOLIDATED BHD., I AM PLEASED TO PRESENT THE ANNUAL REPORT AND THE AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH OVERVIEW OPERATIONS REVIEW The Malaysian economy registered a steady growth of 5.1% in 2011 (2010: 7.2%) despite the uncertainty and deteriorating economic landscape from the escalation in the Eurozone sovereign debt crisis. The construction sector recorded a moderate growth at 3.5% in 2011 (2010: 5.1%) as a result of slower activity in the civil engineering and non-residential sub-sectors. The improved performance in the residential sub-sector was recorded in 2011 with the average national house price increased by 9.9% (2010: 6.7%). FINANCIAL PERFORMANCE For the financial year under review, the Group s revenue decreased to RM78.0 million, 59% lower than the revenue of RM190.2 million recorded in the previous financial year as a result of the completion of a few phases and timing on launching of new phases of the Group s housing development projects. Nevertheless, the margin on sales has improved compared to prior year. Correspond to the drop in the Group s revenue, the Group registered a Profit Before Taxation of RM25.3 million, 33% lower than that in prior year. However, the Group s net assets have increased marginally by 2% from RM548.1 million to million. During the financial year under review, the Group s property development section has attained a total revenue of RM64.3 million for its projects in Alam Budiman, Shah Alam; Bandar Sungai Long, Cheras and Taman Universiti Indah, Seri Kembangan, all situated in the state of Selangor. SHL Realty Sdn. Bhd., a wholly-owned subsidiary of SHL Consolidated Bhd., has completed the construction of a private hospital building known as Hospital Sungai Long located in the commercial zone of Bandar Sungai Long, Cheras. SHL Realty Sdn. Bhd. has leased the private hospital building to a licensed operator and the additional rental income will provide a source of sustainable recurring income to the Group. OPT Ventures Sdn. Bhd., an associate of Sin Heap Lee Development Sdn. Bhd. (a wholly-owned subsidiary of SHL Consolidated Bhd.), has launched 474 units of 23 storey apartments known as G Residence in Desa Pandan, Kuala Lumpur, of which more than 85% of the units have been sold. The units range from 1,080 to 1,545 square feet. In addition, G Residence would have retail outlets to serve its residents and the public. It is anticipated that the Group s revenue will rise in the coming years as the Group plan to launch for sale of about 270 terrace houses and 140 affordable homes in Bandar 26 SHL CONSOLIDATED BHD. ( W)

29 Sungai Long, Cheras, 540 affordable homes in Alam Budiman, Shah Alam and 100 units of industrial factories in Sungai Choh, all situated in the Klang Valley. DIVIDEND Subject to the approval by shareholders at the forthcoming Annual General Meeting, the Board of Directors is pleased to recommend a first and final dividend of 8 sen per share less 25% tax in respect of the financial year ended 31 March The primary objective of the increased proposed rate of the first and final dividend as compared to 7 sen per share less 25% tax paid in the previous year is to reward the shareholders for their long term investment in our Company. PROSPECTS Based on the prevailing low interest rate, low unemployment rate and high demand for landed properties in the mid-range housing segments, it is anticipated that the Group s on-going and new housing development projects will contribute positively to future earnings growth. Barring any unforeseen circumstances and any adverse situation in the Eurozone, the Group aims to deliver results that are consistent with the shareholder s expectation. ACKNOWLEDGEMENT AND APPRECIATION On behalf of the Board of Directors, I would like to extend our sincere appreciation to the management and staff for their untiring effort, dedication and loyalty extended during the year and look forward to their valuable contribution to the Group in the future. The Malaysian economy is expected to remain stable, with projected Gross Domestic Product (GDP) of 4 % to 5% in Domestic demand continues to be the anchor for growth. The construction sector is expected to grow at 6.6% (2011: 3.5%) driven by the civil engineering sub-sector, reflecting by the launch of key infrastructure projects and Special Stimulus Package promoted by the Malaysian Government. The Klang Valley will continue to be our primary market, given the concentration of economic activities and population migration. I would like to express my gratitude to all our shareholders, valuable customers, bankers, suppliers, contractors, business associates and government agencies for their confidence and continued support to the Group. Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Chairman Kuala Lumpur 18 July 2012 Annual Report

30 Corporate Social responsibility AS PART OF OUR COMMITMENT TO BE A RESPONSIBLE CORPORATE CITIZEN, THE GROUP CONTINUES TO PLACE GREAT EMPHASIS ON CORPORATE SOCIAL RESPONSIBILITY AND EMBARKED ON ITS MISSION BY FOCUSING ON THREE PRIMARY AREAS NAMELY WORKPLACE, ENVIRONMENT AND COMMUNITY. Trip to Sungai Lembing, Kuantan WORKPLACE We believe that employees are a crucial asset and major contributor to our success. The Group sponsors employees to attend external seminars, occupational safety and health training as well as management and financial skill upgrading programmes to strengthen their competencies, skills and knowledge with the aim to embed the high standard required to enhance work quality and achieve optimal job performance. Trip to Kuala Gula, Taiping Health and safety is given the highest priority within the Group s operations. Benefits extended to all employees include accident and disability insurance, maternity/paternity leave and medical coverage for employees non-working spouses. At construction sites, all employees, contractors and sub-contractors are required to comply with good safety practices and be properly attired with safety devices. To encourage unity and teamwork among all employees, sports activities and trips were organised to encourage employees to mingle and interact with one another to foster goodwill and build closer working relationships. ENVIRONMENT As a responsible property developer, the Group is committed to preserve the environment and minimise any harmful environmental impact by conforming to the regulations set by the Department of Environment. Before starting any major property development projects, the Group engages independent consultants to conduct environment impact assessments in accordance with the Environment Quality Act. Trip to Sungai Lembing, Kuantan In order to conserve energy and prevent global warming, the Group has introduced ways of cutting electricity consumption by turning off light and air conditioners during lunch break and to reduce waste, the Group encourages the use of recycled papers. COMMUNITY The Group contributed in cash and in kind to underprivileged and disable groups. Trip to Kuala Gula, Taiping 28 SHL CONSOLIDATED BHD. ( W)

31 FINANCIAL STATEMENTS DIRECTORS REPORT STATEMENT BY DIRECTORS STATUTORY DECLARATION INDEPENDENT AUDITORS REPORT STATEMENTS OF COMPREHENSIVE INCOME 44 NOTES TO THE FINANCIAL STATEMENTS STATEMENTS OF FINANCIAL POSITION STATEMENTS OF CHANGES IN EQUITY STATEMENTS OF CASH FLOWS

32 Directors Report for the year ended 31 March 2012 Your Directors have pleasure in submitting the Directors report and the audited financial statements of the Group and of the Company for the year ended 31 March PRINCIPAL ACTIVITIES SHL Consolidated Bhd. is an investment holding company and it provides strategic, financial and corporate planning services. SHL Consolidated Bhd. and its subsidiaries are an integrated commercial and residential property development group which are also involved in granite quarrying and manufacturing of aggregates, general building construction, earthworks, infrastructure works, renting out of plant and machineries, the ownership and operation of a golf resort, the manufacture of clay bricks, supply of finished brickworks of wall and other brick structures, the provision of professional construction management and geo-technical services, the marketing and distribution of building materials, rental of properties and money lending business. There has been no significant change in the nature of these principal activities during the financial year. FINANCIAL RESULTS Group RM'000 Company RM'000 Profit before taxation 25,273 21,534 Malaysian taxation (6,309) (5,419) Profit for the year 18,964 16,115 Other comprehensive income, net of tax 3,182 Total comprehensive income for the year 22,146 16,115 Total comprehensive income for the year attributable to: equity holders of the Company 21,686 16,115 non-controlling interests ,146 16,115 In the opinion of the Directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. DIVIDENDS The amounts of dividends paid and proposed since the end of the previous financial year were as follows: RM'000 Dividend paid: Final dividend of 7 Sen gross per share less tax in respect of financial year ended ,712 Dividend proposed: Final dividend of 8 Sen gross per share less tax in respect of financial year ended , SHL CONSOLIDATED BHD. ( W)

33 MOVEMENTS OF RESERVES AND PROVISIONS There were no material transfers to or from reserves and provisions during the financial year. SHARE CAPITAL There were no changes in the authorised, issued and paid-up capital of the Company during the financial year. SHARE OPTIONS There were no share options granted during the financial year or unissued shares under option at the end of the financial year, in respect of shares in the Company. DIRECTORS The Directors in office since the date of the last report are: Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Dato Yap Teiong Choon Dato Ir. Yap Chong Lee Chin Yu Cheng Yu Thou Wong Tiek Fong Wong Yew Mei (Alternate Director to Wong Tiek Fong) Souren Norendra DIRECTORS INTERESTS According to the Register of Directors Shareholdings, particulars of interests in the shares in the Company and its related corporations during the financial year of those Directors holding office at the end of the financial year are as follows: Ordinary shares of RM1/- each 1 April 31 March Company 2011 Addition Disposal 2012 Direct Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah 100, ,000 Dato Yap Teiong Choon 5,283,869 5,283,869 Dato Ir. Yap Chong Lee 3,224,319 6,200 3,230,519 Chin Yu Cheng Yu Thou 35,500 35,500 Wong Tiek Fong 73,800 73,800 Wong Yew Mei (Alternate Director to Wong Tiek Fong) 236, ,150 Indirect Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah 21,222,437 21,222,437 Dato Yap Teiong Choon 57,659,844 57,659,844 Dato Ir. Yap Chong Lee 82,116,643 72,834,655 68,992,155 85,959,143 Annual Report

34 DIRECTORS INTERESTS (CONT D) By virtue of their interests in the Company, the following Directors are also deemed to be interested in the shares of all the subsidiaries to the extent of the shares held by the Company, and there were no changes in these interests. Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Dato Yap Teiong Choon Dato Ir. Yap Chong Lee 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 a benefit included in the aggregate amount of emoluments received or due and receivable by Directors shown in the financial statements, or the fixed salary of a full-time employee of the Company) 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 the financial statements. Neither during nor at the end of the financial year, was the Company a party to any arrangements whose object is to enable the Directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. OTHER STATUTORY INFORMATION Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps: (a) (b) to ascertain the action taken in relation to the writing off of bad debts and the making of provision for doubtful debts and had satisfied themselves that there were no known bad debts and that adequate provision had been made for doubtful debts; and to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business had been written down to their expected realisable values. At the date of this report, the Directors are not aware of any circumstances: (a) (b) which would render it necessary to write off any bad debts or the amount of the provision for doubtful debts inadequate to any substantial extent or the values attributed to current assets of the Group and of the Company misleading; and 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. In the interval between the end of the financial year and the date of this report: (a) (b) no item, transaction or event of a material and unusual nature has arisen which, in the opinion of the Directors, would substantially affect the results of the operations of the Group and of the Company for the current financial year; and no charge has arisen on the assets of the Group and of the Company which secures the liability of any other person nor has any contingent liability arisen in the Group and in the Company. 32 SHL CONSOLIDATED BHD. ( W)

35 OTHER STATUTORY INFORMATION (CONT D) No contingent or other liability of the Group and of the Company 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 when they fall due. 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 amount stated in the financial statements misleading. ULTIMATE HOLDING COMPANY The Company is not a subsidiary of another corporation at the end of the financial year. AUDITORS Messrs. Khoo Wong & Chan have indicated their willingness to continue in office. On behalf of the Board, Dato Yap Teiong Choon Dato Ir. Yap Chong Lee Kuala Lumpur, 18 July 2012 Annual Report

36 Statement by Directors We, Dato Yap Teiong Choon and Dato Ir. Yap Chong Lee being the Directors of SHL Consolidated Bhd. do hereby state on behalf of the Board of Directors that in our opinion, the financial statements set out on pages 37 to 102 are drawn up in accordance with Financial Reporting Standards in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 March 2012 and of their financial performance, changes in equity and cash flows for the year ended on that date. The information set out in Note 41 to the financial statements has been prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements as issued by the Malaysian Institute of Accountants. On behalf of the Board, Dato Yap Teiong Choon Dato Ir. Yap Chong Lee Kuala Lumpur, 18 July 2012 Statutory Declaration I, Wong Tiek Fong, I/C No , being the Director primarily responsible for the accounting records and financial management of SHL Consolidated Bhd. do solemnly and sincerely declare that the financial statements set out on pages 37 to 102 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 ) Wong Tiek Fong I/C No ) at Kuala Lumpur in the Federal Territory ) on 18 July 2012 ) Wong Tiek Fong Before me, Mohan A.S. Maniam (W521) Commissioner for Oaths 34 SHL CONSOLIDATED BHD. ( W)

37 Independent Auditors Report to the Members of SHL Consolidated Bhd. REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of SHL Consolidated Bhd., which comprise the statements of financial position as at 31 March 2012 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 37 to 102. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act 1965 in Malaysia, and for such internal control as the Directors of the Company determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved Standards on Auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 March 2012 and of their financial performance, changes in equity and cash flows for the year then ended. Annual Report

38 REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following: (a) (b) (c) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the said Act. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. Our audit reports on the financials statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act. OTHER REPORTING RESPONSIBILITIES The supplementary information set out in Note 41 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (MIA Guidance) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. OTHER MATTERS This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Khoo Wong & Chan Chartered Accountants (AF: 0736) Kuala Lumpur, 18 July 2012 Chan Kee Hwa Partner 1367/6/13(J/PH) Chartered Accountant 36 SHL CONSOLIDATED BHD. ( W)

39 Statements of Comprehensive Income for the year ended 31 March 2012 Group Company Note RM'000 RM'000 RM'000 RM'000 Revenue 5 77, ,167 22,022 79,937 Cost of sales (53,624) (142,443) Gross profit 24,333 47,724 22,022 79,937 Other operating income 6,434 5,759 Distribution costs (1,458) (2,434) Administration expenses (5,522) (8,283) (488) (626) Impairment losses on: investment in subsidiaries (27,035) intangible assets (5,115) (5,115) (27,035) Profit from operations 23,787 37,651 21,534 52,276 Finance costs (159) (158) Profit/(loss) from associate 1,645 (8) Profit before taxation 6 25,273 37,485 21,534 52,276 Taxation 7 (6,309) (9,647) (5,419) (2,863) Profit for the year 18,964 27,838 16,115 49,413 Other comprehensive income, net of tax: effect of a change in imposition of tax rate relating to revaluation of land 3,182 Total comprehensive income for the year 22,146 27,838 16,115 49,413 Profit for the year attributable to: equity holders of the Company 18,504 27,370 16,115 49,413 non-controlling interests ,964 27,838 16,115 49,413 Total comprehensive income for the year attributable to: equity holders of the Company 21,686 27,370 16,115 49,413 non-controlling interests ,146 27,838 16,115 49,413 Sen Sen Earnings per share 8 Basic and fully diluted The annexed notes form an integral part of the financial statements. Annual Report

40 Statements of Financial Position as at 31 March 2012 Group Company Note RM'000 RM'000 RM'000 RM'000 ASSETS Non-current assets Property, plant and equipment 9 219, ,618 Prepaid lease payments ,014 Investment in subsidiaries , ,187 Investment in associate 12 2,894 1,249 Investment properties 13 66,702 66,702 Land held for property development 14 5,895 3,246 Intangible assets 15 Investments 16 7, Trust account 1,433 1,334 Deferred tax assets 17 4,155 2, , , , ,187 Current assets Prepaid lease payments Amounts due from subsidiaries 18 90, ,602 Property development costs , ,092 Inventories 20 8,558 13,030 Trade receivables 21 24,142 35,385 Other receivables 22 8,207 7, Current tax assets 5,554 1, Cash and deposits , ,779 17, , , , , , , , ,068 The annexed notes form an integral part of the financial statements. 38 SHL CONSOLIDATED BHD. ( W)

41 Statements of Financial Position as at 31 March 2012 (cont d) Group Company Note RM'000 RM'000 RM'000 RM'000 EQUITY AND LIABILITIES Equity attributable to equity holders of the Company Share capital , , , ,124 Reserves , , , , , , , ,612 Non-controlling interests 18,114 17,654 TOTAL EQUITY 575, , , ,612 Non-current liabilities Deferred tax liabilities 17 10,832 13,327 Finance lease liabilities 26 1,267 1,290 Club establishment fund 27 16,233 16,278 28,332 30,895 Current liabilities Amounts due to subsidiaries , ,437 Trade payables 28 16,646 31,784 Other payables 29 6,467 5, Current tax liabilities 159 1,081 Finance lease liabilities ,252 39, , ,456 TOTAL LIABILITIES 52,584 69, , ,456 TOTAL EQUITY AND LIABILITIES 627, , , ,068 The annexed notes form an integral part of the financial statements. Annual Report

42 Statements of Changes in Equity for the year ended 31 March 2012 Total attributable to equity Non- Group Note Share Share *Other Retained holders of controlling Total 2012 capital premium reserves profits the Company interests equity RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 At 1 April ,124 1,225 (68,679) 373, ,072 17, ,726 Total comprehensive income for the year 3,182 18,504 21, ,146 Transfer within reserves: realisation of revaluation surplus (8,286) 8,286 Transaction with owners: dividends 30 (12,712) (12,712) (12,712) At 31 March ,124 1,225 (73,783) 387, ,046 18, , At 1 April ,124 1,225 (68,679) 358, , ,414 Total comprehensive income for the year 27,370 27, ,838 Transaction with owners: dividends 30 (12,712) (12,712) (12,712) non-controlling interests arising from business combinations 17,186 17,186 At 31 March ,124 1,225 (68,679) 373, ,072 17, ,726 *Analysis of other reserves: Revaluation Capital Merger Group surplus reserves deficit Total 2012 RM'000 RM'000 RM'000 RM'000 At 1 April ,745 11,040 (130,464) (68,679) Total comprehensive income for the year 3,182 3,182 Transfer within reserves: realisation of revaluation surplus (8,286) (8,286) At 31 March ,641 11,040 (130,464) (73,783) 2011 At 1 April ,745 11,040 (130,464) (68,679) Total comprehensive income for the year At 31 March ,745 11,040 (130,464) (68,679) The annexed notes form an integral part of the financial statements. 40 SHL CONSOLIDATED BHD. ( W)

43 Statements of Changes in Equity for the year ended 31 March 2012 (cont d) Company Note Share Share *Other Retained Total 2012 capital premium reserves profits equity RM'000 RM'000 RM'000 RM'000 RM'000 At 1 April ,124 1,225 27, , ,612 Total comprehensive income for the year 16,115 16,115 Transaction with owners: dividends 30 (12,712) (12,712) At 31 March ,124 1,225 27, , , At 1 April ,124 1,225 27, , ,911 Total comprehensive income for the year 49,413 49,413 Transaction with owners: dividends 30 (12,712) (12,712) At 31 March ,124 1,225 27, , ,612 *Analysis of other reserves: Merger Capital Company reserve reserve Total 2012 RM'000 RM'000 RM'000 At 1 April 2011 and 31 March ,377 23,361 27, At 1 April 2010 and 31 March ,377 23,361 27,738 The annexed notes form an integral part of the financial statements. Annual Report

44 Statements of Cash Flows for the year ended 31 March 2012 Group Company Note RM'000 RM'000 RM'000 RM'000 Cash flows from operating activities Profit before taxation 25,273 37,485 21,534 52,276 Adjustments for: Depreciation and amortisation 1,757 2,410 Gain on disposal of property, plant and equipment (195) (236) Derecognition of property, plant and equipment 5 7 Impairment losses on subsidiaries 27,035 Loss on disposal of investment properties 80 Impairment loss on intangible assets 5,115 Gain on disposal of investments (3) Interest expenses Interest income (5,349) (4,188) (22) (82) Dividend income (22,000) (79,855) Gain on bargain purchase (217) (Profit)/loss from associate (1,645) 8 Operating profit/(loss) before working capital changes 20,024 40,648 (488) (626) (Increase)/decrease in inventories and property development costs 31 (977) 76,629 (Increase)/decrease in receivables 10,858 15,219 12,800 (26,983) Increase/(decrease) in payables (13,949) (23,581) 6 (15,904) Cash generated from/(absorbed by) operations 15, ,915 12,318 (43,513) Tax paid (12,171) (12,095) (5,500) (2,933) Tax refunded Interest paid (75) Net cash from/(used in) operating activities 3,924 96,993 6,923 (46,341) The annexed notes form an integral part of the financial statements. 42 SHL CONSOLIDATED BHD. ( W)

45 Statements of Cash Flows for the year ended 31 March 2012 (cont d) Group Company Note RM'000 RM'000 RM'000 RM'000 Cash flows from investing activities Claim received from trust account (99) (87) Purchase of: property, plant and equipment 32 (394) (625) prepaid lease payments (7) investment in subsidiaries (25,563) investment properties (7,635) land held for property development (13) (5) investments (7,701) Net cash flow on acquisition of subsidiaries 11.1 (22,599) Proceeds from disposal of: property, plant and equipment investment properties 2,000 investments 96 Interest received 5,441 4, Dividends received 22,000 79,855 Net cash from/(used in) investing activities (2,574) (24,356) 22,022 54,374 Cash flows from financing activities Repayment of club members' deposits (45) (831) Payment of finance lease liabilities (1,068) (928) Interest paid (178) (120) Dividends paid to shareholders of the Company (12,712) (12,712) (12,712) (12,712) Net cash from/(used in) financing activities (14,003) (14,591) (12,712) (12,712) Net increase/(decrease) in cash and cash equivalents (12,653) 58,046 16,233 (4,679) Cash and cash equivalents at 1 April 174, , ,606 Cash and cash equivalents at 31 March 162, ,779 17, Analysis of cash and cash equivalents Cash and deposits 162, ,779 17, The annexed notes form an integral part of the financial statements. Annual Report

46 Notes to the Financial Statements 31 March 2012 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. GENERAL INFORMATION 1.1 Principal activities The Company is an investment holding company and it provides strategic, financial and corporate planning services. The Group is an integrated commercial and residential property developer and is also involved in granite quarrying and manufacturing of aggregates, general building construction, earthworks, infrastructure works, renting out of plant and machineries, the ownership and operation of a golf resort, the manufacture of clay bricks, supply of finished brickworks of wall and other brick structures, the provision of professional construction management and geo-technical services, the marketing and distribution of building materials, rental of properties and money lending business. 1.2 Legal form and domicile The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad. 1.3 Registered office and principal place of business The addresses of the registered office and principal place of business are as follows: Registered office 6th Floor, Wisma Sin Heap Lee, 346 Jalan Tun Razak, Kuala Lumpur. Principal place of business 16th Floor, Wisma Sin Heap Lee, 346 Jalan Tun Razak, Kuala Lumpur. 1.4 Authorisation for issue The financial statements were authorised for issue by the Directors on 18 July FINANCIAL RISK MANAGEMENT POLICIES The Group and the Company's financial risk management policies seek to ensure that adequate financial resources are available for the development of the Group and of the Company's businesses whilst managing their risks. The Group and the Company operate within clearly defined guidelines that are approved by the Board and the Group and the Company's policies are to forbid speculative transactions. The main areas of financial risks faced by the Group and by the Company and the policies in respect of the major areas of treasury activity are set out as follows: 2.1 Foreign currency risk The Group and the Company are exposed to foreign currency risk as a result of their normal trading activities, where the currency denomination differs from the local currency, Ringgit Malaysia (RM). The Group and the Company s policies are to keep their foreign currency risk exposure to an acceptable level. 44 SHL CONSOLIDATED BHD. ( W)

47 2. FINANCIAL RISK MANAGEMENT POLICIES (CONT D) 2.2 Interest rate risk The Group and the Company place surplus funds in the form of short-term deposits with reputable financial institutions to earn interest income based on prevailing market rates. The Group and the Company manage their interest rate risk by placing such funds for the maturity periods of 12 months or less. The Group and the Company's policies are to borrow principally on the floating rate basis but to retain a proportion of fixed rate debt. The objectives for the mix between floating and fixed rate borrowings are set to reduce the impact of an upward change in interest rates while enabling benefits to be enjoyed if interest rates fall. 2.3 Market risk The Group and the Company s principal exposure to market risk arises mainly from the changes in equity prices. The Group and the Company manage the risk of unfavourable changes by cautious review of the investments before investing and continuous monitoring of their performance and risk profiles. 2.4 Credit risk The credit risk is controlled by the application of credit approvals, limits and monitoring procedures. This is done through reference to published credit ratings by prime financial institutions. In the absence of published ratings, an internal credit review is conducted if the credit risk is material. 2.5 Liquidity and cash flow risks The Group and the Company seek to achieve a balance between certainty of funding even in difficult times for the markets or the Group and the Company and a flexible, cost-effective borrowing structure. This is to ensure that at the minimum, all projected net borrowing needs are covered by committed facilities. Also, the objective for debt maturity is to ensure that the amount of debt maturing in any one year is within the Group and the Company's means to repay and refinance. 3. BASIS OF PREPARATION 3.1 Statement of compliance The financial statements comply with Financial Reporting Standards (FRSs) and the provisions of the Companies Act 1965 in Malaysia. These financial statements also comply with the applicable disclosure provisions of the Listing Requirements of the Bursa Malaysia Securities Berhad. 3.2 Basis of measurement The financial statements of the Group and of the Company have been prepared under the historical cost basis, unless otherwise indicated in the following significant accounting policies. 3.3 Functional and presentation currency The financial statements are presented in Ringgit Malaysia (RM), which is the Group and the Company s functional currency. All financial information presented in RM had been rounded to the nearest thousand. Annual Report

48 3. BASIS OF PREPARATION (CONT D) 3.4 Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying amounts of assets and liabilities that are rarely apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. Estimates and judgements The following are the estimates and judgements made by management in the process of applying the Group and the Company s accounting policies that have the most significant effect on the amounts recognised in the financial statements. (a) Estimated useful lives of property, plant and equipment The Group reviews annually the estimated useful lives of property, plant and equipment based on factors such as business plan and strategies, expected level of usage and future technological developments. Future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned. A reduction in the estimated useful lives of property, plant and equipment increase recorded depreciation and decrease property, plant and equipment or vice versa. (b) Classification between investment properties and property, plant and equipment The Group has developed certain criteria based on FRS 140 in making judgement whether a property qualifies as an investment property. Investment property is a property held for earning rentals or capital appreciation or both. Judgement is made on an individual property basis to determine whether the property qualifies as an investment property. (c) Fair value of investment properties Fair value of investment properties is determined by the Directors by comparing their current value with recent sale of similar properties in the vicinity with appropriate adjustments made to differences in location, floor area and other relevant factors before arriving at the fair value of the investment properties. The determination of appropriate adjustments to the recent sale value involves a degree of judgement before arriving at the respective investment property s fair value. (d) Impairment of intangible assets The Group tests intangible assets for impairment annually in accordance with its accounting policy. More regular reviews are performed if events indicate that this is necessary. This requires an estimation of the value in use of the cash-generating units ( CGU ) to which intangible assets are allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of those cash flows. 46 SHL CONSOLIDATED BHD. ( W)

49 3. BASIS OF PREPARATION (CONT D) 3.4 Use of estimates and judgements (cont d) (e) Property development and construction contracts The Group recognises property development and contract revenue and costs in profit or loss by using the percentage of completion method. The percentage of completion is determined by reference to surveys of work performed. Significant judgement is required in determining the percentage of completion, the extent of property development and contract costs incurred, the estimated total property development and contract revenue and costs, as well as the recoverability of the development and contract projects. In making the judgement, the Group evaluates by relying on past experience and the work of specialists. (f) Legal proceedings The Group reviews outstanding legal proceedings to assess the need for provisions in the financial statements by considering the following factors: Nature of the litigation, claim or assessment; Legal processes and potential level of damages in the jurisdiction where the litigation, claim or assessment has been brought; Progress of the legal proceedings; Opinions or views of legal counsel and other advisers; Experience of similar cases; and Decision as to how the Group will respond to the litigation, claim or assessment. Application of accounting principles to legal proceedings is inherently difficult, given the complex nature of the facts and law involved as it requires the Group to make determinations about various factual and legal matters beyond its control. The Group recognises provision in the statement of financial position for pending litigation when: An unfavourable outcome is probable; and A reliable estimate of the amount can be made. In instances where the above criteria remain unmet, a contingent liability may be disclosed in notes to the financial statements. Annual Report

50 4. SIGNIFICANT ACCOUNTING POLICIES 4.1 Financial Reporting Standards (FRSs) A. Revised FRSs, Amendments to FRSs and Improvements to FRSs that are effective for current financial year The following standards are applicable to the Group and the Company, which are effective for the Group and the Company s financial year beginning on 1 April 2011: Revised FRSs FRS 3 FRS 127 Business Combinations (Revised) Consolidated and Separate Financial Statements (Revised) Amendments to FRSs and Improvements to FRSs FRS 7 Financial Instruments: Disclosures FRS 138 Intangible Assets Improvements to FRSs (2010) The Group and the Company have adopted the above standards prospectively on 1 April The initial application of these standards has immaterial impact on the financial statements of the Group and the Company, except those disclosed below: Standard FRS 3 Impact of initial application This standard introduces a number of changes to the accounting for business combinations that will impact the amount of goodwill recognised. The revised FRS 3 applies prospectively to acquisitions occurring on or after 1 April 2011, and therefore has no impact on the financial statements of the Group and the Company, other than a change in accounting policy as disclosed in Note 4.3. FRS 127 This standard revises the accounting for: changes in the level of ownership interest in a subsidiary; loss of control of a subsidiary. The revised FRS 127 applies prospectively to loss of control occurring on or after 1 April 2011, and therefore has no impact on the financial statements of the Group and the Company, other than a change in accounting policy as disclosed in Note 4.3. Amendments to FRS 7 The application of the amended FRS 7 has immaterial impact on the financial statements of the Group and the Company, other than enhanced disclosures about fair value measurement and liquidity risk in Note 34 to the financial statements. 48 SHL CONSOLIDATED BHD. ( W)

51 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.1 Financial Reporting Standards (FRSs) (cont d) B. New and revised FRSs and Amendments to FRSs that are yet to be effective for current financial year No early adoption is made by the Group and the Company on the following standards that are expected to have application to the Group and the Company s operations. These standards have been issued by the MASB, but yet to be effective: New and revised FRSs Effective for financial periods beginning on or after FRS 9 Financial Instruments 1 January 2015 FRS 10 Consolidated Financial Statements 1 January 2013 FRS 12 Disclosure of Interests in Other Entities 1 January 2013 FRS 13 Fair Value Measurement 1 January 2013 FRS 119 Employee Benefits (Revised) 1 January 2013 FRS 124 Related Party Disclosures (Revised) 1 January 2012 FRS 127 Separate Financial Statements (Revised) 1 January 2013 FRS 128 Investment in Associates and Joint Ventures (Revised) 1 January 2013 Amendments to FRSs FRS 7 Financial Instruments: Disclosures 1 January 2012 FRS 7 Financial Instruments: Disclosures 1 April 2012 FRS 7 Financial Instruments: Disclosures 1 January 2013 FRS 101 Presentation of Financial Statements 1 July 2012 FRS 112 Income Taxes 1 January 2012 FRS 132 Financial Instruments: Presentation 1 January 2014 The initial application of these standards is expected to have immaterial impact on the Group and the Company s financial statements, except those disclosed below: Standard FRS 9 Impact of initial application FRS 9 specifies the requirements for the classification and measurement of financial assets and financial liabilities. In March 2012, MASB issued the amendments to FRS 9 deferring the effective date of FRS 9 from 1 January 2013 to 1 January The amendments to FRS 9 also provide relief from the requirement to restate comparative financial statements on the initial application of FRS 9. Originally, the relief was only made available to companies that opt to apply FRS 9 prior to The initial application of FRS 9 may have material impact on amounts reported in respect of the Group and the Company s financial assets and financial liabilities. However, it is impracticable to provide reasonable estimate of that effect until a detailed review has been completed. Annual Report

52 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.1 Financial Reporting Standards (FRSs) (cont d) B. New and revised FRSs and Amendments to FRSs that are yet to be effective for current financial year (cont d) Standard FRS 10 Impact of initial application This standard sets out the requirements on how to apply the control principles in the preparation of consolidated financial statements. The initial application of FRS 10 may have material impact on the consolidated financial statements. The Group and the Company are in the process of making an assessment of the impact of this standard. FRS 12 FRS 12 is a combined disclosure standard for interests in subsidiaries, associates, joint ventures and unconsolidated structured entities. The initial application of FRS 12 is expected to have immaterial impact on the Group and the Company s financial statements, other than enhanced related party disclosures in the financial statements. FRS 13 The standard defines fair value and sets out a framework for: measurement of fair value; and disclosure requirements about fair value. The initial application of this standard may affect the amounts reported in the financial statements and result in more extensive disclosures in the financial statements. FRS 124 This standard: simplifies the definition of a related party; clarifies its intended meaning and eliminates inconsistencies from the definition; and gives partial exemption from disclosure for government-related entities. The initial application of FRS 124 is expected to have immaterial impact on the Group and the Company s financial statements, other than more extensive related party disclosures. Amendments to FRS 7 The amendments increase the disclosure requirements for transactions involving transfer of financial assets In March 2012, MASB issued additional amendments to FRS 7 requiring: additional disclosures to help investors understand the effect of the initial application of FRS 9 on the classification and measurement of financial instruments; and enhanced disclosures to: help financial statements users to better assess the effect or potential effect of offsetting arrangements on a Company s financial position; improve transparency in the reporting of how companies mitigate credit risk, including disclosure of related collateral pledged or received. The initial application of FRS 7 is expected to have immaterial impact on the Group and the Company s financial statements, other than additional disclosures in the financial statements. 50 SHL CONSOLIDATED BHD. ( W)

53 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.1 Financial Reporting Standards (FRSs) (cont d) B. New and revised FRSs and Amendments to FRSs that are yet to be effective for current financial year (cont d) Standard Impact of initial application Amendments to The amendments to FRS 101: FRS 101 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements; and require additional disclosures about reclassification adjustments in the other comprehensive income section. The amendments are expected to have immaterial impact on the Group and the Company s financial statements upon their initial application, other than a change in presentation of items of comprehensive income. C. IC Interpretation and Amendments to IC Interpretation that are withdrawn in current financial year IC Interpretation 15 Agreements for the Construction of Real Estate Amendments to IC Interpretation 15 Agreements for the Construction of Real Estate This interpretation clarifies when and how revenue and related expenses from the sale of a real estate unit should be recognised if an agreement between a developer and a buyer is reached before the construction of the real estate is completed. Furthermore, the Interpretation provides guidance on how to determine whether an agreement is within the scope of FRS 111 Construction Contracts or FRS 118 Revenue. This IC Interpretation is to be applied retrospectively. The amendments to this interpretation merely defer the effective date and consequential amendments of this interpretation from 1 July 2010 to 1 January IC Interpretation 15 has been withdrawn by the MASB in conjunction with the transition to new MFRSs as disclosed in Note 4.2 to the financial statements. FRS will be the extant standard that sets the accounting for property development activities upon the withdrawal of IC Interpretation 15. The Group and the Company are expected to adopt IC Interpretation 15 for the financial period beginning on 1 April 2014 upon its transition to MFRSs. 4.2 Malaysian Financial Reporting Standards (MFRSs) To converge with International Financial Reporting Standards ( IFRSs ) in 2012, the MASB had on 19 November 2011, issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards ( MFRSs ), which are mandatory for financial periods beginning on or after 1 January 2012, with the exception of transitioning entities. Transitioning entities include: (a) entities that are within the scope of: MFRS 141 Agriculture; and IC Interpretation 15 Agreements for Construction of Real Estate (b) the parent, significant investor and venturer of entities as stated in (a) above. Annual Report

54 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.2 Malaysian Financial Reporting Standards (MFRSs) (cont d) On 30 June 2012, the MASB has announced that, all transitioning entities are allowed to further defer the adoption of MFRSs for additional two years. As a result, adoption of the MFRSs by transitioning entities is mandatory for financial periods beginning on or after 1 January The Group and the Company qualify as transitioning entities and thus expect to adopt the MFRS Framework for the financial period beginning on 1 April The Group and the Company are making an assessment of the financial impact and effects on disclosures and measurement ensuing from such convergence. 4.3 Consolidated financial statements (i) Subsidiaries Subsidiaries are those entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Subsidiaries are consolidated using the acquisition method of accounting, except for those subsidiaries acquired under common control. Under the acquisition method of accounting, the consideration transferred is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Contingent consideration is measured at fair value as part of the consideration transferred with subsequent adjustment resulting from events after the acquisition date recognised in profit or loss. Acquisition related costs are recognised as expenses in profit or loss in the period in which they are incurred. If a business combination is achieved in stages, the previously held equity interest in the acquiree is remeasured to the acquisition-date fair value. Any resulting gain or loss is recognised in profit or loss. Non-controlling interests that are present ownership interests entitling their holders to a proportionate share of the acquiree s net assets in the event of liquidation may be initially measured either: at fair value; or at the non-controlling interests proportionate share of the recognised amounts of the acquiree s identifiable net assets. The choice of measurement is made on a transaction-by-transaction basis. Other types of non-controlling interest are measured at fair value. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at acquisition-date fair value. Any excess of (a) over (b) below is recognised as goodwill in the statements of financial position: (a) (b) the sum of: the fair value of consideration transferred; the amount of non-controlling interests in the acquiree (if any); and the fair value of Group s previously held equity interests in the acquiree (if any). the Group s share of the fair value of the identifiable net assets acquired at the acquisition date. 52 SHL CONSOLIDATED BHD. ( W)

55 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.3 Consolidated financial statements (cont d) (i) Subsidiaries (cont d) In instances where (b) exceeds (a), the excess is recognised as a gain on bargain purchase directly in profit or loss on the acquisition date. All intragroup transactions, balances and unrealised gains and losses are eliminated in full. Intragroup unrealised losses may indicate an impairment that requires recognition in the consolidated financial statements. Loss of control Upon a loss of control, the Group derecognises the assets and liabilities of the subsidiary, any noncontrolling interests and the other components of equity related to the subsidiary. Any gain or loss arising from the loss of control of a subsidiary is recognised in profit or loss and measured as the difference between: aggregate of the fair value of the consideration received and the fair value of any retained interest and previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained. Transactions with non-controlling interests Non-controlling interests represent that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly by the Group. It is measured at: the non-controlling interests share of the fair value of the subsidiary s identifiable assets and liabilities at the acquisition date; and changes in the subsidiary s equity since that date. Total comprehensive income is attributed to the Group and the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Changes in the Group s ownership interest in a subsidiary without loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests is adjusted and the fair value of consideration paid or received is recognised directly in equity and attributed to the Group. (ii) Business combination under common control Business combinations under common control are accounted for using the predecessor method of merger accounting. Under the predecessor method of merger accounting, the profit or loss and other comprehensive income include the results of each of the combining entities from the earliest date presented or from the date when these entities came under the control of the common controlling party (if later). Annual Report

56 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.3 Consolidated financial statements (cont d) (ii) Business combination under common control (cont d) The assets and liabilities of the combining entities are recognised basing on the carrying amounts from the perspective of the common controlling party, or the combining entities if the common controlling party prepares no consolidated financial statements. The difference in the cost of combination over the aggregate carrying amounts of the assets and liabilities of the combining entities as at the date of the combination is recognised directly in equity. Transaction costs for the combination are recognised as expenses in the profit or loss. (iii) Associates Associates are entities in which the Group is in a position to exercise significant influence. Significant influence is the power to participate in the financial and operating policy decisions, but has no control over those policies. Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting and are initially measured at cost. The Group s investment in associates includes goodwill identified on acquisition net of any accumulated impairment loss. The Group assesses at each reporting date whether there is any objective evidence that an investment in the associate is impaired. If this is the case, the Group measures the amount of impairment as the difference between the recoverable amount of the associate and its carrying amount and recognises the amount in profit or loss. The Group s share of its associates post-acquisition profits or losses is recognised in the profit or loss, and its share of post-acquisition movements in reserves is recognised in other comprehensive income. Where necessary, adjustments are made to the results and net assets of associates to ensure consistency of accounting policies with those of the Group. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group s share of losses in an associate equals or exceeds its interest in the associate, the Group discontinues recognising further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. When significant influence ceases, the disposal proceeds, if any, and the fair value of any retained investment are compared to the carrying amount of the investment as at that date. The difference together with any accumulated exchange differences that relate to the associate is recognised in the profit or loss as gain or loss on disposal of the associate. The remaining investment retained in the previous associate is subsequently accounted for as an available-for-sale financial asset in accordance with FRS SHL CONSOLIDATED BHD. ( W)

57 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.4 Revenue recognition Revenue is recognised to the extent that: it is probable that the economic benefits will flow to the Group and the Company; and it can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (i) Investment income Dividend income from investments is recognised in profit or loss when the right to receive is established. (ii) Income from property development and construction contracts The Group recognises property development and construction contracts revenues using the percentage of completion method as described in Notes 4.16 and 4.17 respectively. (iii) Interest income and rental income Interest income and rental income are recognised on an accrual basis. (iv) Income from sales of goods and services Sales of goods are recognised when a Group entity has delivered products to the customer; the customer has accepted the products and collectibility of the related receivables is reasonably assured. Sales of services are recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. 4.5 Employee benefits (i) Short-term benefits Wages, salaries, bonuses and social security contributions are recognised as expenses in the period in which the associated services are rendered by employees of the Group and of the Company. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short-term nonaccumulating compensated absences such as sick leave are recognised when the absences occur. (ii) Defined contribution plans As required by law, the Group and the Company make contributions to the state pension scheme, the Employees Provident Fund ( EPF ). Such contributions are recognised as expenses in profit or loss as incurred. 4.6 Borrowing costs Borrowing costs incurred to finance the construction of any qualifying assets are capitalised as part of the cost of the assets during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs are recognised as expenses in profit or loss in which they are incurred. Annual Report

58 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.7 Income taxes Income tax expense represents the sum of the current tax and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to a business combination or items recognised directly in equity or in other comprehensive income. Current tax The current tax is the amount of income taxes payable in respect of the taxable profit for a period. The Group and the Company's liabilities for current tax are calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax Deferred tax is recognised in full, using the liability method, on temporary differences arising between the carrying amounts of assets and liabilities in the financial statements and their tax bases. No deferred tax is recognised for the temporary differences arising from: the initial recognition of goodwill; the initial recognition of assets or liabilities in a transaction other than a business combination and that affects neither accounting or taxable profit or loss. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax asset is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the assets is realised. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group and the Company intend to settle their current tax assets and liabilities on a net basis. 4.8 Foreign currencies The financial statements are presented in Ringgit Malaysia (RM). Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. At the reporting date, nonmonetary items are translated at historical rates or rates prevailing when the fair value of the assets was determined. Monetary items are translated at the closing rate. Foreign exchange gains and losses resulting from the settlement of such transactions and from there translation of monetary assets and liabilities at closing rate are recognised in profit or loss, except for foreign currency translation differences arising on the retranslation of available-for-sale equity instruments, which are recognised in other comprehensive income. Foreign currency translation differences for non-monetary items such as investment properties held at fair value through profit or loss, are recognised in profit or loss as part of the fair value gain or loss. Foreign currency translation differences for nonmonetary items such as property, plant and equipment at valuation are recognised directly in equity or profit or loss, where appropriate, as part of the revaluation surpluses or deficits. 56 SHL CONSOLIDATED BHD. ( W)

59 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.8 Foreign currencies (cont d) The exchange rate used for the main foreign currency in the Group and in the Company is as follows: Period end rate RM RM United States (US$1) Revaluations The Group and the Company adopt the policy to revalue the land and/or buildings held as property, plant and equipment at least once in every 5 years or at such shorter period as may be considered to be appropriate based on the advice of external professional valuers and appraisers and/or Directors valuation. A revaluation surplus is recognised in other comprehensive income and accumulated in equity under revaluation surplus, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on the same asset carried in the revaluation surplus, in which case the decrease is recognised in other comprehensive income and it reduces the amount accumulated in equity under revaluation surplus. On disposal of revalued asset, amount in revaluation surplus relating to that asset is transferred to retained profits Impairment of assets (i) Non-financial assets The carrying amounts of assets, except assets classified as construction contracts, property development costs, inventories, deferred tax assets and financial assets, are assessed for impairment when there is an indication that the assets might be impaired. For goodwill and intangible assets with indefinite useful life, the recoverable amount is estimated at each reporting date. Impairment is measured by comparing the carrying amounts of the assets with their recoverable amounts. The recoverable amount is the higher of an asset's net selling price and its value in use, which is measured by reference to discounted future cash flows. Recoverable amounts are estimated for individual assets, or if it is impossible, for the cash-generating unit (CGU). For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit ). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cashgenerating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised in profit or loss immediately, unless the asset is measured 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. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. Annual Report

60 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.10 Impairment of assets (cont d) (i) Non-financial assets (cont d) In respect of goodwill, no reversal is made for impairment loss previously recognised. In respect of other assets, subsequent increase in the recoverable amount of an asset is treated as reversal of the previous impairment loss. It 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. The reversal is recognised in profit or loss immediately, unless the asset is measured at revalued amount. A reversal of an impairment loss on a revalued asset is recognised in other comprehensive income and it increases the amount accumulated in equity under revaluation surplus. However, to the extent that an impairment loss on the same revalued asset was previously recognised as an expense in profit or loss, a reversal of that impairment loss is recognised as income in profit or loss. (ii) Financial assets The Group and the Company assess as at each reporting date whether there is any objective evidence that a financial asset is impaired. Available-for-sale financial assets (a) Quoted instruments: Equity instruments: In the case of equity investments classified as available-for-sale, objective evidence of impairment includes: significant financial difficulty of the issuer or obligor; information about significant changes with an adverse effect that has taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in equity instrument may by impaired; and significant or prolonged decline in the fair value of the investment below its costs. If an available-for-sale financial asset is impaired, an amount comprising the difference between its acquisition cost and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from other comprehensive income and recognised in profit or loss. No reversal of impairment losses in profit or loss on available-for-sale equity investments in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. Debt instruments: In the case of debt instruments classified as available-for-sale, impairment is assessed basing on the same criteria as financial assets measured at amortised cost. However, the amount recognised for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in profit or loss. Further interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recognised as part of finance income. If a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed in profit or loss. 58 SHL CONSOLIDATED BHD. ( W)

61 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.10 Impairment of assets (cont d) (ii) Financial assets (cont d) (b) Unquoted instruments: If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial asset s measured at cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. No reversal is made for such impairment losses in subsequent periods. Loans and receivables To assess whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as: probability of insolvency; significant financial difficulties of the debtor; and default or significant delay in payments For certain categories of financial assets, such as trade receivables, assets that are assessed to be unimpaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables includes: the Group and the Company s past experience of collecting payments; an increase in the number of delayed payments in the portfolio past the average credit period; and observable changes in national or local economic conditions that correlate with default on receivables If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is derecognised from the allowance account. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset is equal to or below its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss Property, plant and equipment Property, plant and equipment are measured at cost and valuation less accumulated depreciation and impairment losses. Depreciation is recognised in profit or loss on a straight line basis over the estimated useful lives of items of property, plant and equipment, except those leased under finance lease, where applicable. If there is no reasonable certainty that the ownership will be transferred to the Group by the end of the lease term, an item of property, plant and equipment is depreciated over the shorter of its useful life and the lease term. Annual Report

62 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.11 Property, plant and equipment (cont d) No depreciation is recognised for golf course and club house. Plant and machinery directly related to production is depreciated on a unit of production method whereby the rate used is based on the production during the period bear to the total estimated production to be obtained from the relevant asset. The principal annual rates adopted are as follows: Buildings 2% Plant & machinery 5% to 20% Motor vehicles 20% Furniture, fittings & equipment 10% to 20% On derecognition or disposal of an item of property, plant and equipment, the difference between net disposal proceeds, if any, and its carrying amount is recognised in profit or loss. Expenditure incurred to replace a component of an item of property, plant and equipment that is recognised separately, including major inspection and overhaul expenditure, is capitalised. Other subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditure is recognised in profit or loss as an expense as incurred Investments in subsidiaries and associates Investments in subsidiaries and associates are measured at cost less accumulated impairment losses. On loss of control of a subsidiary or significant influence of an associate, the difference between the fair value of considerations received, if any, and its carrying amount is recognised as gain or loss on derecognition in profit or loss Investment properties Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are measured at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss in the period which they arise. Investment property is derecognised when either it has been disposed of or when investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the disposal or retirement of an investment property is recognised in profit or loss in the period of disposal or retirement. Transfer is made to investment property when, and only when, there is a change in use, evidenced by ending of owner-occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment property when, and only when, there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale. 60 SHL CONSOLIDATED BHD. ( W)

63 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.13 Investment properties (cont d) For a transfer from investment property to owner-occupied property or inventories, the deemed cost of property for subsequent accounting is its fair value at the date of change in use. If the property occupied by the Group and by the Company as an owner-occupied property becomes an investment property, the Group and the Company account for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. For a transfer from inventories to investment property, any difference between the fair value of the property at that date and its previous carrying amount is recognised in profit or loss. When the Group and the Company complete the construction or development of a self-constructed investment property, any difference between the fair value of the property at that date and its previous carrying amount is recognised in profit or loss Intangible assets (i) Goodwill Goodwill is measured at cost less accumulated impairment losses. Goodwill arising from a business combination represents the excess of (a) over (b):- (a) the sum of: the fair value of consideration transferred; the amount of non-controlling interests in the acquiree (if any); and the fair value of the Group s previously held equity interest in the acquiree (b) the Group s share of the fair value of the identifiable net assets acquired at the acquisition date. Goodwill is allocated to each of the Group s cash-generating units that are expected to benefit from the synergies of the combination, for the purposes of impairment testing. In disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. (ii) Research and development Research expenditure is recognised as an expense in profit or loss as incurred. Costs incurred on development projects relating to the design and testing of new or improved products are recognised as intangible assets to the extent that such expenditure is expected to generate future economic benefits. Other development expenditures are recognised as expenses in profit or loss as incurred. No reversal is made for such development expenditure in subsequent periods. Development costs that have been capitalised are amortised from the commencement of the commercial production of the product on a straight line basis over the period of their expected benefit of 25 years Exploration cost Exploration cost is recognised as an expense as incurred. When a decision is taken that a quarry property is economically feasible and should be developed for commercial production, all further directly attributable exploration cost is recognised as tangible assets to the extent that such expenditure is expected to generate future economic benefits. Exploration cost is derecognised to profit or loss when it is determined that: further exploration activities will yield no commercial quantities of reserves, or no further exploration drilling is planned; or the right to explore in the specific area has expired or is surrendered. Capitalised exploration cost is measured at cost less accumulated impairment losses. Annual Report

64 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.16 Property development activities Property development revenue The Group recognises property development revenue using the percentage of completion method, determined primarily by reference to surveys of work performed. Where property development outcome is unable to be reliably determined, property development revenue is recognised only to the extent of the recoverable costs. Revenue recognition commences when a legal binding sale and purchase agreement is signed on property units. Additional revenue due to variation in development work is recognised if it is probable that the customer will approve the variation and the amount can be reliably measured. Land held for property development Land held for property development is measured at cost less accumulated impairment losses. Costs associated with the acquisition of land include the purchase price of the land, professional fees, stamp duties, commissions, conversion fees and other relevant levies. Such asset is transferred to property development costs when development activities have commenced and when it can be demonstrated that the development activities can be completed within the normal operating cycle. Property development costs Property development costs are measured at lower of cost and net realisable value. Property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities including borrowing costs. The property development costs on property units sold are recognised as expenses in the period in which they are incurred to match the attributable revenue recognised. If estimates of costs to complete property development (including costs to be incurred over the defects liability period) indicate losses, the expected losses are recognised as expenses fully in profit or loss. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion inclusive of expected loss and selling expenses. Property development costs expected to be incurred on property development are based on estimates of total property development costs at completion. These estimates are reviewed and revised periodically throughout the lives of the property development and adjustments to costs resulting from such revisions are recognised in the accounting period in which the revisions are made. Accrued and progress billings The excess of revenue recognised in profit or loss over the billings to purchasers is presented as an asset and classified as accrued billings. The excess of billings to purchasers over revenue recognised in profit or loss is presented as a liability and classified as progress billings. Completed property units Completed property units that remain unsold are transferred to inventories. The accounting policy in respect of inventories are set out in Note Transfer of land Where a land classified as property, plant and equipment is measured at valuation, such land is transferred to land held for property development and/or property development costs at its carrying amount as surrogate cost. 62 SHL CONSOLIDATED BHD. ( W)

65 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.17 Construction contracts Contract revenue The Group recognises contract revenue using the percentage of completion method, determined primarily by reference to surveys of work performed. A prudent estimate of the profit attributable to work performed is recognised once the outcome of the contract work can be assessed with reasonably certainty. Where contract work outcome is unable to be reliably determined, revenue is recognised to the extent of the recoverable costs and no profit is recognised. In all cases, expected losses are recognised as expenses fully in profit or loss. Profits expected to be realised on contract work are based on estimates of total revenues and cost at completion. These estimates are reviewed and revised periodically throughout the lives of the contract works and adjustments to profits resulting from such revisions are recognised in the accounting period in which the revisions are made. Claim for additional contract revenue is recognised if it is probable that the claim will result in additional revenue and the amount can be reliably estimated. Amount due from/to contract customers Construction contracts measured at costs plus attributable profits less expected losses and progress billings are presented as an asset and classified as amount due from contract customers. The excess of progress billings over costs plus attributable profits less expected losses is presented as a liability and classified as amount due to contract customers. Costs consist of direct materials, direct labour, direct overhead, sub-contract charges and attributable expenses Inventories Inventories are measured at the lower of cost and net realisable value. Cost is determined on the following bases: Category Completed property units Raw materials, goods for resale and spare parts Work in progress and finished goods Basis Specific identification or relative sale value FIFO (first-in-first-out) Weighted average Cost of completed property units comprises direct cost of construction and proportionate land and development costs. Cost comprises materials, direct labour cost and an appropriate proportion of production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Annual Report

66 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.19 Financial instruments Financial instruments are any contracts that give rise to both: a financial asset of one entity; and a financial liability or equity instrument of another entity Financial instruments are offset when the Group and the Company have: a legally enforceable right to set off the recognised amounts; and an intention either to settle on a net basis, or to realise the asset and settle the liability simultaneously (i) Financial assets The Group and the Company classify their financial assets at initial recognition into four categories, basing on the nature and purpose of the financial assets: Financial assets at fair value through profit or loss Available-for-sale financial assets Held-to-maturity investments Loans and receivables At the reporting date, the Group and the Company have only financial assets categorised as the following: Category Nature and purpose (a) Available-for-sale Financial assets that are either: financial assets designated as available-for-sale upon initial recognition; or precluded from classifying into any of the other three categories. Available-for-sale financial assets include equity and debt securities. (b) Loans and receivables Financial assets with fixed or determinable payments that are unquoted in an active market. Initial recognition and measurement Financial assets are recognised when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value plus transactions costs. 64 SHL CONSOLIDATED BHD. ( W)

67 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.19 Financial instruments (cont d) (i) Financial assets (cont d) Subsequent recognition and measurement Category Recognition and measurement principle (a) Available-for-sale These financial assets are subsequently measured at fair value. financial assets Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except the following which are recognised in profit or loss: impairment losses; foreign exchange gains and losses on debt instruments; gains and losses of hedged items attributable to hedge risks of fair value hedges; interest calculated for a debt instrument using the effective interest method. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Investment in equity instruments that have no quoted market price in an active market and whose fair value are unable to be reliably determined are measured at cost less accumulated impairment losses. (b) Loans and receivables These financial assets are measured at amortised cost using effective interest method, less impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. Derecognition A financial asset is derecognised when, and only when: the contractual rights to the cash flows from the financial asset expire; or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in the profit or loss. Annual Report

68 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.19 Financial instruments (cont d) (ii) Financial liabilities The Group and the Company classify their financial liabilities at initial recognition into two categories, basing on the nature and purpose for which they are issued: Financial liabilities at fair value through profit or loss Financial liabilities at amortised cost At the reporting date, the Group and the Company have only financial liabilities categorised as financial liabilities at amortised cost. Financial liabilities at amortised cost Accounting principle Classification Methodology These are financial liabilities other than those classified into financial liabilities at fair value through profit or loss. Financial liabilities at amortised cost include amounts due to subsidiaries, trade payables, other payables, finance lease liabilities and club establishment fund. Initial recognition and Measurement Financial liabilities at amortised cost are recognised when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. When financial liabilities at amortised cost are recognised initially, they are measured at fair value plus transactions costs. Subsequent recognition and measurement Financial liabilities at amortised cost are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. Derecognition A financial liability is derecognised when, and only when, the obligation specified in the contract is discharged, cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss. (iii) Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided. 66 SHL CONSOLIDATED BHD. ( W)

69 4. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 4.20 Financial guarantee contracts The Group and the Company have issued corporate guarantee to banks for borrowings of its subsidiaries. These guarantees are financial guarantees as they require the Group and the Company to reimburse the banks if the subsidiaries fail to make principal or interest payments when due in accordance with the terms of their borrowings. Financial guarantees are initially measured at their fair values plus transaction costs in the statements of financial position. Subsequent to initial measurement, financial guarantees are amortised to profit or loss over the period of the subsidiaries borrowings, unless it is probable that the Group and the Company will reimburse the bank for an amount higher than the unamortised amount. In this case, an estimate of the obligation is made and recognised as a provision in the statements of financial position Leases (i) Finance leases Leases in which the Group and the Company assume substantially all the risks and rewards of ownership are classified as finance leases. An item of property, plant and equipment leased by way of finance lease is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments at the inception of the lease. In calculating the present value of the minimum lease payments, the discount rate is the interest rate implicit in the lease, if this is practicable to determine; otherwise, the incremental borrowing rate of the Group and the Company is used. (ii) Operating leases 4.22 Provisions Leases under which all the risks and benefits of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are recognised as expenses in profit or loss on a straight line basis over the lease term. Leasehold land held for own use is classified as an operating lease and the up-front payment represents prepaid lease payments. These up-front payments are recognised as expenses in profit or loss to match the inflow of benefits accrued. Leasehold buildings held for own use remain classified as property, plant and equipment as they are finance leases, where substantially all the risks and rewards incidental to their ownership is transferred to the Group and the Company. The leasehold buildings are depreciated on a straight line basis over their lease terms. Provisions are recognised in the statement of financial position when the Group and the Company have a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation and when a reliable estimate of the amount can be made Cash and cash equivalents Cash and cash equivalents consist of bank balances, deposits repayable on demand and highly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value, against which the bank overdrafts are deducted. Annual Report

70 5. REVENUE Group Company RM'000 RM'000 RM'000 RM'000 Property development 64, ,598 Sales of goods 6,413 1,242 Services rendered 4,990 6,499 Dividend income 22,000 79,855 Others 2,249 1, , ,167 22,022 79,937 Revenue of the Group represents sales of goods and services derived from the principal activities, net of discounts, allowances, sales and service taxes. Revenue of the Company represents dividend and interest income. 6. PROFIT BEFORE TAXATION This is arrived at: Group Company RM'000 RM'000 RM'000 RM'000 After charging all expenses including: Directors' fee Auditors' remuneration: Audit fees: current year adjustments for prior years 8 (104) (6) Other professional fees Staff costs: Directors' emoluments: salaries and bonus 1,732 1,796 defined contribution plans others ,050 2, Other employees' emoluments and benefits: salaries and bonus 9,300 9,880 defined contribution plans 1,039 1,071 others ,248 11,905 Rent of land and buildings Interest expenses: finance lease others SHL CONSOLIDATED BHD. ( W)

71 6. PROFIT BEFORE TAXATION (CONT D) Group Company RM'000 RM'000 RM'000 RM'000 After charging all expenses including: (cont d) Depreciation 1,729 2,382 Amortisation of prepaid lease payments Allowance for impairment on receivables Bad debts written off 71 Impairment loss on subsidiaries 27,035 Property development expenses: property development costs 46, ,087 inventories 3,217 29,391 adjustment for prior years' expenses , ,708 Direct operating expenses of investment properties which generated rental income Direct operating expenses of investment properties which generated no rental income Derecognition of property, plant and equipment 5 7 Loss on disposal of investment properties 80 And crediting all income including: Gross dividends from subsidiaries 22,000 79,855 Rent of land and buildings from investment properties 2,198 1,586 Interest income 5,349 4, Gain on disposal of: property, plant and equipment investments 3 Gain on bargain purchase TAXATION Group Company RM'000 RM'000 RM'000 RM'000 Malaysian: Current tax expense/(income): current year 5,430 10,139 5,419 2,863 adjustment for previous year 2, ,539 10,159 5,419 2,863 Deferred tax expense/(income): Origination and reversal of temporary differences: current year 890 (514) adjustment for previous year (2,120) 2 (1,230) (512) 6,309 9,647 5,419 2,863 Annual Report

72 7. TAXATION (CONT D) Group Company RM'000 RM'000 RM'000 RM'000 Taxation based on Malaysian application statutory tax rate of 25% 6,318 9,371 5,383 13,069 Disallowable expenses for tax purposes ,824 Non-taxable income for tax purposes (472) (179) (17,030) Taxes for previous year (11) 22 Effect of controlled transfer assets (52) Benefit from previously unrecognised deferred tax assets (2) (227) Unrecognised deferred tax assets 37 Others (28) 27 Taxation recognised in profit or loss 6,309 9,647 5,419 2,863 Benefit from previously unrecognised deferred tax assets on the following deductible temporary differences is used to reduce tax expenses as follows: Group RM'000 RM'000 Current tax expense: Unabsorbed capital allowances Unutilised tax losses EARNINGS PER SHARE The calculation of basic earnings per share of the Group is based on the net profit attributable to ordinary shareholders amounting to approximately RM18,504,000/- (2011: RM27,370,000/-) and the number of ordinary shares outstanding during the financial year of RM242,124,000/- (2011: RM242,124,000/-). Diluted earnings per share Fully diluted earnings per share is the same as basic earnings per share as it is considered that there are no dilutive potential ordinary shares. 70 SHL CONSOLIDATED BHD. ( W)

73 9. PROPERTY, PLANT AND EQUIPMENT Furniture, *Land & Plant & Motor fittings & Group buildings machinery vehicles equipment Total 2012 RM'000 RM'000 RM'000 RM'000 RM'000 Cost/valuation: At 1 April ,607 73,435 7,255 5, ,576 Additions 1, ,540 Disposals (578) (298) (11) (887) Derecognition (142) (28) (1,591) (1,761) At 31 March ,607 73,914 7,185 3, ,468 Accumulated depreciation: At 1 April ,502 4,968 4,288 29,958 Charge for the year ,729 Disposals (578) (298) (7) (883) Derecognition (142) (28) (1,586) (1,756) At 31 March ,348 5,375 2,925 29,048 Carrying amount: At 31 March ,207 53,566 1, , Cost/valuation: At 1 April ,607 88,027 8,193 10, ,825 Additions 93 1, ,395 In respect of subsidiary acquired Disposals (4,911) (1,253) (10) (6,174) Derecognition (9,774) (845) (6,020) (16,639) At 31 March ,607 73,435 7,255 5, ,576 Accumulated depreciation: At 1 April ,970 6,317 9,964 50,251 Charge for the year 200 1, ,382 In respect of subsidiary acquired Disposals (4,911) (1,182) (6) (6,099) Derecognition (9,775) (845) (6,012) (16,632) At 31 March ,502 4,968 4,288 29,958 Carrying amount: At 31 March ,407 52,933 2, ,618 Annual Report

74 9. PROPERTY, PLANT AND EQUIPMENT (CONT D) *Analysis of land & buildings: Freehold land & buildings Group RM'000 RM'000 Cost/valuation: At 1 April and 31 March 163, ,607 Accumulated depreciation: At 1 April 200 Charge for the year At 31 March Carrying amount: At 31 March 163, ,407 Analysis of valuation of land & buildings: Group RM'000 RM'000 Freehold land and buildings: at cost at 2010 valuation 163, , , ,607 If the freehold land and buildings had been carried under the cost model, they would have been recognised at the following amounts: Group RM'000 RM'000 Freehold land and buildings: At cost 26,818 26,818 Accumulated depreciation 2,758 2,591 Carrying amount 24,060 24,227 The Group s freehold land and buildings were revalued by an independent professional valuer using open market value basis on 31 March SHL CONSOLIDATED BHD. ( W)

75 9. PROPERTY, PLANT AND EQUIPMENT (CONT D) The carrying amounts of assets leased under finance lease arrangements are as follows: Group RM'000 RM'000 Plant & machinery 1, Motor vehicles 1,810 2,287 3,318 3, PREPAID LEASE PAYMENTS Long Short leasehold leasehold Group land land Total 2012 RM'000 RM'000 RM'000 Carrying amount: At 1 April ,042 Addition 7 7 Amortisation for the year (10) (18) (28) At 31 March ,021 Analysed between: Current Non-current , Carrying amount: At 1 April ,070 Amortisation for the year (10) (18) (28) At 31 March ,042 Analysed between: Current Non-current , ,042 Annual Report

76 11. INVESTMENT IN SUBSIDIARIES Unquoted shares Company RM'000 RM'000 At cost: At 1 April 452, ,642 Addition 25,563 At 31 March 452, ,205 Accumulated impairment losses: At 1 April 32,018 4,983 Charge for the year 27,035 At 31 March 32,018 32,018 Carrying amount: At 31 March 420, ,187 Details of the subsidiaries, all of which are incorporated in Malaysia, are as follows: Issued Effective Name of company equity capital holding Principal activities RM % % Sin Heap Lee Development 90,000, Property development Sdn. Bhd. Sin Heap Lee Construction 90,000, Building construction works, earthworks and Sdn. Bhd. infrastructure works, renting out of plant and machineries, construction management services and money lending business Integrated Management 1,000, Provision of professional management Corporation Sdn. Bhd. services in commercial and industrial studies and planning, construction management and financial services Sin Heap Lee Company 3,900, Rental of properties, marketing agent of Sdn. Berhad bricks and building materials Sin Heap Lee Brickworks 30,000, Manufacturing of clay-bricks, supply of Sdn. Bhd. finished brickworks of wall and other brick structures SHL Realty Sdn. Bhd. 3,000, Property investment 74 SHL CONSOLIDATED BHD. ( W)

77 11. INVESTMENT IN SUBSIDIARIES (CONT D) Issued Effective Name of company equity capital holding Principal activities RM % % SHL Corporate Services 3,000, Providing strategic, financial and Sdn. Bhd. corporate planning services Goodstock (Tawau) Sdn. Bhd. 2,000, Property development Wilayah Builders Sdn. Bhd. 9,000, Property development Ho Sin & Son Enterprise Sdn. Bhd. 1,000, Property development Mayang Kiara Sdn. Bhd. 50, Property development H.S.C. Sdn. Berhad (Note 11.3) 1,000, Property development Sukma Pesona Sdn. Bhd. 500, Property development SHL Infra Sdn. Bhd. 4,000, Earthworks and infrastructure works Kajang Granite Quarry Sdn. Bhd. 5,000, Granite quarrying and manufacturing of aggregates Mercantile Corporation 872, Manufacturing of aluminium framed (M) Sdn. Bhd. (Note 11.3) doors and windows, contracting for renovation and installation works Soil-Mech Drillers Sdn. Bhd. 250, Property maintenance services Senick Sdn. Bhd Granite quarrying and manufacturing of aggregates Goodstock Land Sdn. Bhd. 1,500, Letting of properties Subsidiary of Sin Heap Lee Development Sdn. Bhd. SHL-M Sdn. Bhd. 45,000, Property development Subsidiary of SHL-M Sdn. Bhd. * Sungai Long Golf Resort Berhad 5,000, Golf resort operator Notes: Subsidiaries which are consolidated using merger method of accounting. * A wholly-owned subsidiary of SHL-M Sdn. Bhd. In year 2011, the Company conducted an impairment review on the investment of subsidiaries, which had resulted in the recognition of impairment losses on certain subsidiaries totalling RM27,035,000/- The impairment losses were determined with reference to the fair value less cost to sell basing on the best information available to reflect the amount that the Company could obtain from the disposal of subsidiaries in an arm s length transaction between knowledgeable willing parties. Annual Report

78 11. INVESTMENT IN SUBSIDIARIES (CONT D) 11.1 Acquisition of a subsidiary In May 2010, the Group acquired a new subsidiary, Goodstock Land Sdn. Bhd., a company incorporated in Malaysia, for a cash consideration of RM25,563,000/-. The details of assets acquired, liabilities assumed and cash flows arising from the acquisition were as follows: Group 2011 RM'000 Property, plant and equipment 113 Investment properties 45,000 Receivables 3,609 Current tax assets 80 Cash and deposits 2,964 Payables (715) Borrowings (6,000) Deferred tax liabilities (2,085) Non-controlling interests (17,186) Share of net assets acquired 25,780 Negative goodwill (217) Total purchase consideration 25,563 Less: Cash and deposits (2,964) Net cash flow on acquisition 22,599 The fair values of the subsidiary identifiable assets and liabilities approximated their carrying amounts. Accordingly, no fair value adjustments were made to account for the acquisition. The effects of the acquisition on the financial position at the end of previous year were as follows: Group 2011 RM'000 Property, plant and equipment 102 Investment properties 45,000 Receivables 233 Current tax assets 217 Cash and deposits 1,498 Payables (823) Deferred tax liabilities (2,092) Non-controlling interests (17,654) Increase in Group's net assets 26, SHL CONSOLIDATED BHD. ( W)

79 11. INVESTMENT IN SUBSIDIARIES (CONT D) 11.1 Acquisition of a subsidiary (cont d) The effects of the acquisition on the financial results in previous year were as follows: Group 2011 RM'000 Revenue 2,306 Cost of sales (577) Gross profit 1,729 Other operating income 40 Administration expenses (286) Profit from operations 1,483 Finance costs (20) Profit before taxation 1,463 Taxation (294) Profit for the year 1,169 Non-controlling interests (468) Increase in Group's profit Derecognition of a subsidiary In March 2011, the Group derecognised its subsidiary, SHL Ventures Sdn. Bhd. as the subsidiary had been struck off pursuant to Section 308(1) of the Companies Act The derecognition had insignificant impact on the financial results, financial position and cash flows to the Group Winding up of subsidiaries Mercantile Corporation (M) Sdn. Bhd. and H.S.C. Sdn. Berhad are in the process of Members Voluntary Winding Up pursuant to Section 254 of the Companies Act The two subsidiaries shall be dissolved on 26 July INVESTMENT IN ASSOCIATE Group RM'000 RM'000 Unquoted shares, at cost 1,305 1,305 Share of post-acquisition profits/(losses) 1,589 (56) 2,894 1,249 Share of net assets 2,894 1,249 There is no goodwill in the associate s own financial statements and on the acquisition of the Group s interest in the associate. Annual Report

80 12. INVESTMENT IN ASSOCIATE (CONT D) Details of associate are as follows: Name of company Effective holding Principal activities (Incorporated in Malaysia) % % OPT Ventures Sdn. Bhd Property development The following amounts represent the Group s share of assets, liabilities and profit or loss of the associate: Group RM'000 RM'000 Assets 22,470 12,289 Liabilities (19,576) (11,040) Net tangible assets 2,894 1,249 Revenue 8,212 Profit/(loss) for the year 1,645 (8) 13. INVESTMENT PROPERTIES Group RM'000 RM'000 At 1 April 66,702 16,147 Addition from subsequent expenditure 7,635 In respect of subsidiary acquired 45,000 Disposal (2,080) At 31 March 66,702 66,702 The fair values of the investment properties were based on valuation performed by an independent professional valuer on 31 March 2010 using open market value basis. The fair values of the investment properties approximate the carrying amounts. 78 SHL CONSOLIDATED BHD. ( W)

81 14. LAND HELD FOR PROPERTY DEVELOPMENT Land Development Group costs costs Total 2012 RM'000 RM'000 RM'000 At cost: At 1 April , ,246 Additions Transfer from property development costs 2,636 2,636 At 31 March , , At cost: At 1 April , ,446 Additions Transfer to property development costs (1,205) (1,205) At 31 March , , INTANGIBLE ASSETS Development Group Goodwill costs Total 2012 RM'000 RM'000 RM'000 Cost: At 1 April 2011 and 31 March ,145 8,145 Accumulated amortisation and impairment losses: At 1 April 2011 and 31 March ,145 8,145 Carrying amount: At 31 March Cost: At 1 April ,166 23,630 31,796 Derecognition (21) (23,630) (23,651) At 31 March ,145 8,145 Accumulated amortisation and impairment losses: At 1 April ,166 18,515 26,681 Impairment loss for the year 5,115 5,115 Derecognition (21) (23,630) (23,651) At 31 March ,145 8,145 Carrying amount: At 31 March 2011 Annual Report

82 16. INVESTMENTS Group RM'000 RM'000 Unquoted in Malaysia, at cost: redeemable preference shares 7,701 shares 7 7 club membership , DEFERRED TAX ASSETS AND LIABILITIES Deferred tax assets and liabilities shown in the statement of financial position after appropriate offsetting are as follows: Group RM'000 RM'000 Deferred tax assets (4,155) (2,238) Deferred tax liabilities 10,832 13,327 6,677 11,089 The deferred tax assets and liabilities are offset as: the Group and the Company have a legally enforceable right to set off current tax assets against current tax liabilities; and they relate to taxes levied by the same authority on the Group and on the Company. Deferred tax assets of the Group are recognised when the realisation of the related tax benefits through the future taxable profits is probable based on recent history of results of the Group. 80 SHL CONSOLIDATED BHD. ( W)

83 17. DEFERRED TAX ASSETS AND LIABILITIES (CONT D) The movements and components of deferred tax assets and liabilities before appropriate offsetting are as follows: Revaluation Unabsorbed Land held Property, surplus on Unabsorbed industrial Property for plant and Development land and Unutilised capital building Investment development property Group equipment costs buildings tax losses allowances allowances properties costs development Total 2012 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 At 1 April ,917 5,483 (50) (8,102) 1,039 (435) (763) 11,089 Amount recognised in: profit or loss (285) (28) 950 (405) 508 (1,970) (1,230) other comprehensive income (3,182) (3,182) transfer 686 (686) At 31 March ,632 2,273 (50) (7,152) (405) 2,233 (3,091) (763) 6, At 1 April ,946 1,172 5,510 (50) (8,279) (1,040) (980) (763) 9,516 Amount recognised in profit or loss (35) (1,172) (27) (512) In respect of subsidiary acquired 6 2,079 2,085 At 31 March ,917 5,483 (50) (8,102) 1,039 (435) (763) 11,089 Unrecognised deductible temporary differences The amounts of deductible temporary differences for which no deferred tax assets have been recognised in the statement of financial position are as follows: Group RM'000 RM'000 Unabsorbed capital allowances 8,950 7,372 Unutilised tax losses 5,317 5,381 14,267 12,753 The above deductible temporary differences have no expiry date. No deferred tax assets have been recognised in respect of these deductible temporary differences because it is improbable that future profit will be available against which the Group can utilise the benefits therefrom. The estimated potential tax benefit of the unabsorbed reinvestment allowances for which no credit has been taken in the net income of the current or prior years is RM5,273,000/- (2011: RM5,273,500/-). Such benefit will only be obtained if the Group derives future assessable income of a nature and of amounts sufficient for them to be utilised. Annual Report

84 18. AMOUNTS DUE FROM/(TO) SUBSIDIARIES The unsecured outstanding amounts are non-interest-bearing and repayable on demand. 19. PROPERTY DEVELOPMENT COSTS Land Development Group costs costs Total 2012 RM'000 RM'000 RM'000 At cost: At 1 April , , ,399 Additions ,386 52,812 Transfer 150 (150) Transfer to inventories (431) (856) (1,287) Transfer to land held for property development (2,636) (2,636) Derecognition on completion of projects (31,260) (21,925) (53,185) At 31 March , , ,103 Cost recognised in profit or loss: At 1 April , , ,307 Charge for the year 11,308 34,768 46,076 Transfer 892 (892) Derecognition on completion of projects (31,260) (21,925) (53,185) At 31 March , , ,198 Carrying amount: At 31 March ,669 49, , At cost: At 1 April , , ,181 Additions 2,634 61,290 63,924 Transfer 8,789 (8,789) Transfer from land held for property development 1,205 1,205 Reversal (1,628) (1,628) Derecognition on completion of projects (2,694) (24,589) (27,283) At 31 March , , ,399 Cost recognised in profit or loss: At 1 April , , ,503 Charge for the year 12, , ,087 Derecognition on completion of projects (2,694) (24,589) (27,283) At 31 March , , ,307 Carrying amount: At 31 March ,360 31, , SHL CONSOLIDATED BHD. ( W)

85 19. PROPERTY DEVELOPMENT COSTS (CONT D) Included in the property development costs are: Group RM'000 RM'000 Interest expenses capitalised 8 20 INVENTORIES Group RM'000 RM'000 At cost: Completed property units 1,287 2,037 Raw materials Goods for resale Work in progress Finished goods 4,492 6,864 Spare parts 1,078 1,090 7,143 10,435 At net realisable value: Completed property units 1,415 2,595 8,558 13, TRADE RECEIVABLES Group RM'000 RM'000 Amount due from associate 6,359 9,052 Trade debtors 8,558 22,977 14,917 32,029 Less: Allowance for impairment (135) (169) 14,782 31,860 Amount due from customers for contract works 9,360 3,525 24,142 35,385 Trade receivables are non-interest-bearing and are generally on 14 to 90-day (2011: 14 to 90-day) terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition. Annual Report

86 21. TRADE RECEIVABLES (CONT D) The amount due from customers for contract works are as follows: Group RM'000 RM'000 Cost 9,360 3,525 Attributable profits/(losses) Amount due from customers for contract works 9,360 3,525 Analysed as: Amount due from customers for contract works 9,360 3,525 Amount due to customers for contract works (Note 28) 9,360 3,525 Ageing analysis of trade receivables The ageing analysis of trade receivables is as follows: Group RM'000 RM'000 Neither past due nor impaired 7,275 21,353 Past due unimpaired: 1 to 30 days past due over 30 days past due 6,873 10,316 7,507 10,507 Impaired ,917 32,029 Receivables that are neither past due nor impaired Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. None of the Group s trade receivables that are neither past due nor impaired have been renegotiated during the financial year. Receivables that are past due unimpaired Trade receivables that are past due unimpaired relate to customers that have good track record with the Group. Based on past experiences and no adverse information to date, the Directors of the Group are of the opinion that no allowance for impairment is necessary in respect of these balances as there has been no significant change in the credit quality and the balances are still considered fully collectible. 84 SHL CONSOLIDATED BHD. ( W)

87 21. TRADE RECEIVABLES (CONT D) Receivables that are impaired These receivables are impaired individually at the reporting date. The movements of the allowance accounts used to record the impairment are as follows: Group RM'000 RM'000 Movements in allowance accounts: At 1 April Charge for the year Derecognition (53) (25) Reversal (5) At 31 March Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that: are in significant financial difficulties and; have defaulted on payments. These receivables are unsecured by any collateral or credit enhancements. 22. OTHER RECEIVABLES Group Company RM'000 RM'000 RM'000 RM'000 Advances Deposits 5,298 4, Other debtors 1,664 1,497 7,262 6, Prepayments 945 1, ,207 7, The unsecured advances are non-interest-bearing and repayable on demand. 23. CASH AND DEPOSITS Group Company RM'000 RM'000 RM'000 RM'000 Deposits with licensed banks 111, , Cash and bank balances: housing development accounts 26,281 47,356 others 23,947 18,235 16, ,228 65,591 16, , ,779 17, Housing Development Accounts are held and maintained pursuant to Section 7A of the Housing Development Act, These accounts are restricted from use in other operations. Annual Report

88 24. SHARE CAPITAL Number of ordinary shares of RM1/- each Amount Amount RM'000 RM'000 Authorised 1,000,000 1,000,000 1,000,000 1,000,000 Issued and fully paid 242, , , , RESERVES Group Company RM'000 RM'000 RM'000 RM'000 Non-distributable: Share premium 1,225 1,225 1,225 1,225 Revaluation surplus 45,641 50,745 Merger reserve 4,377 4,377 Capital reserves 11,040 11,040 23,361 23,361 Merger deficit (130,464) (130,464) (72,558) (67,454) 28,963 28,963 Distributable: Retained profits 387, , , , , , , , Share premium Share premium represents premium on shares issued by the Company Revaluation surplus The revaluation surplus represents the surpluses arising from the revaluation of land and buildings of the subsidiaries net of related tax effects, if any Merger reserve The premium on the shares issued by the Company was credited to merger reserve where relief is available under Section 60 of the Companies Act On consolidation, the merger reserve is dealt with as merger adjustment by elimination Capital reserves Capital reserves of the Company represent gains arising from the disposal of investments in subsidiaries on Group restructuring. Capital reserve of the Group represents share premium of the subsidiaries and reserve capitalised by a subsidiary for bonus issue of shares. 86 SHL CONSOLIDATED BHD. ( W)

89 25. RESERVES (CONT D) 25.5 Merger deficit Merger deficit represents the difference between the nominal value of shares issued by SHL Consolidated Bhd. to effect the merger and the nominal value of the shares acquired from the merged entities and is arrived at as follows: RM'000 Nominal value of 176,263,799 ordinary shares of RM1/- each issued by SHL Consolidated Bhd. 176,264 Nominal value of 45,800,000 ordinary shares of RM1/- each acquired (45,800) Merger deficit 130, FINANCE LEASE LIABILITIES Group RM'000 RM'000 Minimum lease payments: 1 year or less 1, years or less but over 1 year 1,365 1,465 2,490 2,461 Future finance charge on finance leases (243) (292) Present value of finance lease liabilities 2,247 2,169 Present value of finance lease liabilities: 1 year or less years or less but over 1 year 1,267 1,290 2,247 2,169 The repayment periods of the finance lease liabilities range from 2 to 7 years (2011: 2 to 7 years) at the inception of the leases. Interest is levied at rates ranging from 2.49% to 6.97% (2011: 3.00% to 6.97%) per annum. The finance lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of default. 27. CLUB ESTABLISHMENT FUND Club establishment fund represents refundable deposits due to the members of the golf resort. 28. TRADE PAYABLES Group RM'000 RM'000 Amount due to customers for contract works (note 21) Trade creditors 16,646 31,784 16,646 31,784 Trade payables are non-interest-bearing and are normally on 30 to 75-day (2011: 30 to 75-day) terms. Annual Report

90 29. OTHER PAYABLES Group Company RM'000 RM'000 RM'000 RM'000 Accrued expenses 1,674 1, Others 4,793 3, ,467 5, DIVIDENDS Group Company RM'000 RM'000 RM'000 RM'000 Paid and payable: In respect of financial year ended 31 March 2011/2010: final dividend of 7 Sen gross per share less tax 12,712 12,712 12,712 12,712 Proposed: In respect of financial year ended 31 March 2012/2011: final dividend of 8 Sen (2011: 7 Sen) gross per share less tax 14,527 12,712 14,527 12,712 No recognition is made on the dividend proposed until it has been approved at the Annual General Meeting. The amount will be recognised as an appropriation of retained profits in the year in which it is approved. 31. ANALYSIS OF MOVEMENT OF INVENTORIES AND PROPERTY DEVELOPMENT COSTS Group RM'000 RM'000 Net movement 977 (76,629) Interest capitalised 8 Transfer from land held for property development 1, (75,416) 32. ANALYSIS OF ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT Group RM'000 RM'000 Cash payment Finance lease arrangement 1, ,540 1, SHL CONSOLIDATED BHD. ( W)

91 33. CAPITAL MANAGEMENT The primary objective of the management of the Group and the Company s capital structure is to maintain an efficient mix of debt and equity in order to achieve a low cost of capital, while taking into account the desirability of retaining financial flexibility to pursue business opportunities and adequate access to liquidity to mitigate the effect of unforeseen events on cash flows. The Directors regularly review the Group and the Company s capital structure and make adjustments to reflect economic conditions, business strategies and future commitments. The Group and the Company monitor capital using a gearing ratio, which is total debt divided by total capital. The Group and the Company are in no breach of any gearing covenants during the financial years ended 31 March 2012 and 31 March In the same period, no significant changes were made in the objectives, policies and processes relating to the management of the Group and the Company s capital structure. Group Company RM'000 RM'000 RM'000 RM'000 Finance lease liabilities 2,247 2,169 Total debts 2,247 2,169 Share capital 242, , , ,124 Reserves 314, , , ,488 Total capital 557, , , ,612 Gearing ratio (times) FINANCIAL INSTRUMENTS 34.1 Liquidity risk Liquidity risk refers to the risk that the Group and the Company will encounter difficulty in meeting financial obligations when they fall due. The table below summarises the maturity profile of the Group and the Company s financial liabilities as at the reporting date based on contractual undiscounted repayment obligations: Within One to More than Group one year five years five years Total 2012 RM'000 RM'000 RM'000 RM'000 Financial liabilities: Non-interest-bearing: trade payables 16,646 16,646 other payables 6,467 6,467 club establishment fund 16,233 16,233 23,113 16,233 39,346 Interest-bearing: finance lease liabilities: principal 980 1,267 2,247 interest ,125 1,365 2,490 Annual Report

92 34. FINANCIAL INSTRUMENTS (CONT D) 34.1 Liquidity risk (cont d) Within One to More than Group one year five years five years Total 2011 RM'000 RM'000 RM'000 RM'000 Financial liabilities: Non-interest-bearing: trade payables 31,784 31,784 other payables 5,278 5,278 club establishment fund 16,278 16,278 37,062 16,278 53,340 Interest-bearing: finance lease liabilities: principal 879 1,290 2,169 interest ,465 2,461 Company 2012 Financial liabilities: Non-interest-bearing: amount due to subsidiaries 101, ,437 other payables , , Financial liabilities: Non-interest-bearing: amount due to subsidiaries 101, ,437 other payables , , SHL CONSOLIDATED BHD. ( W)

93 34. FINANCIAL INSTRUMENTS (CONT D) 34.2 Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market interest rates. Sensitivity analysis for interest rate risk No sensitivity analysis has been presented as the Group and the Company s exposure to interest rate risk on the following interest-bearing instruments is insignificant: Fixed rate instruments These comprise short-term deposits and finance lease liabilities. The effective interest rates during the year are as follows: Group Company % % % % Short-term deposits Finance lease liabilities Credit risk Credit risk is the potential loss from a transaction in the event of default by the counterparty. At the reporting date, the Group and the Company s maximum exposure to credit risk is represented by: the carrying amount of each class of financial assets recognised in the statements of financial position; and utilised amounts of RM6,567,000/- (2011: RM2,755,000/-) relating to a corporate guarantee given by the Company to banks for credit facilities granted to subsidiaries, as disclosed in Note 36 to the financial statements. Credit risk is controlled by the application of credit approvals, setting of counterparty limits and monitoring procedures. Credit risk is minimised given the Group and the Company s policies of selecting only counterparties with high credit worthiness. The Group has no significant concentrations of credit risk with any single counterparty Fair values of financial instruments The fair value of a financial instrument is the amount at which the instrument can be exchanged or settled between knowledgeable and willing parties in an arm s length transaction, other than in forced liquidation or sale. As at the reporting date, the fair values of the Group and the Company s financial instruments approximate their carrying amounts unless it is impracticable to determine these values with sufficient reliability. Annual Report

94 34. FINANCIAL INSTRUMENTS (CONT D) 34.4 Fair values of financial instruments (cont d) Unquoted equity securities No fair value information has been disclosed for investment in unquoted securities of the Group as it is impracticable to estimate their fair values of the unquoted securities of the Group in the absence of quoted market prices in an active market. The Group believes that the carrying amounts represent recoverable amounts and the Group has no intention to dispose of the unquoted securities at the reporting date. Methods and assumptions used to estimate fair values The following methods and assumptions are used to estimate the fair value of each class of financial instruments: Financial instruments Fair values determination Trade and other receivables The carrying amounts of these financial instruments approximate fair Cash and deposits values due to the relatively short-term maturity of these instruments. Trade and other payables Amounts due from/(to) Subsidiaries Finance lease liabilities The carrying amounts of short-term finance lease liabilities approximate fair values because of the short period to maturity of these instruments. The fair values of long-term finance lease liabilities are estimated based on the current rates available for finance lease liabilities with the same maturity profile. The carrying amount of the long-term finance lease liabilities are reasonable approximations of fair values due to the insignificant impact of discounting. Trust account The carrying amounts of these financial instruments approximate fair Club establishment fund values, which represent the estimated amounts of the Group would receive or refund to members upon termination of investment contract Fair value hierarchy No fair value hierarchy is presented as the Group and the Company have no financial instruments that are measured at fair value subsequent to initial measurement. 92 SHL CONSOLIDATED BHD. ( W)

95 34. FINANCIAL INSTRUMENTS (CONT D) 34.6 Financial instruments by category The table below provides an analysis of financial instruments categorised as follows: Available- Financial for-sale liabilities at Total financial Loans and amortised carrying Group Note assets receivables cost amount 2012 RM'000 RM'000 RM'000 RM'000 Financial assets: investments 16 7,732 7,732 trust account 1,433 1,433 trade receivables 21 14,782 14,782 other receivables 22 7,262 7,262 cash and deposits , ,126 7, , ,335 Financial liabilities: finance lease liabilities 26 2,247 2,247 club establishment fund 27 16,233 16,233 trade payables 28 16,646 16,646 other payables 29 6,467 6,467 41,593 41, Financial assets: investments trust account 1,334 1,334 trade receivables 21 31,860 31,860 other receivables 22 6,911 6,911 cash and deposits , , , ,915 Financial liabilities: finance lease liabilities 26 2,169 2,169 club establishment fund 27 16,278 16,278 trade payables 28 31,784 31,784 other payables 29 5,278 5,278 55,509 55,509 Annual Report

96 34. FINANCIAL INSTRUMENTS (CONT D) 34.6 Financial instruments by category (cont d) Available- Financial for-sale liabilities at Total financial Loans and amortised carrying Company Note assets receivables cost amount 2012 RM'000 RM'000 RM'000 RM'000 Financial assets: amounts due from subsidiaries 18 90,802 90,802 other receivables cash and deposits 23 17,160 17, , ,035 Financial liabilities: amounts due to subsidiaries , ,437 other payables , , Financial assets: amounts due from subsidiaries , ,602 other receivables cash and deposits , ,582 Financial liabilities: amounts due to subsidiaries , ,437 other payables , , COMMITMENTS Non-cancellable operating lease commitments Group as lessor: Group RM'000 RM'000 Future minimum rental receivable: 1 year or less 3,662 2,540 5 years or less but over 1 year 4,971 5,057 8,633 7,597 The Group entered into commercial property leases on its portfolio of investment property consisting of commercial buildings. These leases have non-cancellable lease terms of 3 years (2011: 3 years). 94 SHL CONSOLIDATED BHD. ( W)

97 36. CONTINGENT LIABILITIES Group Company RM'000 RM'000 RM'000 RM'000 Unsecured: Corporate guarantees given to banks for credit facilities granted to subsidiaries 6,567 2, SEGMENT REPORTING Management has determined the operating segments based on reports reviewed by the Board of Directors and the working group that makes strategic decisions. Segment information is presented in respect of Group s business. No segment reporting by geographical segments has been provided as the Group is primarily involved in business operations in Malaysia. Inter-segment pricing is determined according to the normal course of business and has been established under the terms that are no less favourable than those arranged with external customers. Segment revenue, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Investment and Property Group services development Construction Trading Manufacturing Quarrying Eliminations Consolidated 2012 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Revenue Revenue from external customers 7,239 64,304 3, ,782 77,957 Inter segment revenue 11,899 6,808 31,988 23,523 7,056 (81,274) Total revenue 19,138 71,112 31,988 26,703 7,508 2,782 (81,274) 77,957 Results Segment results 1,453 10, ,600 2,604 17,821 Unallocated income 1,085 Unallocated expenses (468) Operating profit 18,438 Interest income 5,349 Finance costs (159) Profit from associate 1,645 Taxation (6,309) Profit after taxation 18,964 Non-controlling interests (460) Profit for the year 18,504 Annual Report

98 37. SEGMENT REPORTING (CONT D) Investment and Property Group services development Construction Trading Manufacturing Quarrying Eliminations Consolidated 2012 (cont d) RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Assets Segment assets 142, ,196 31,251 8,193 79,780 18,094 (22,295) 495,437 Investment in associate 2,894 2,894 Unallocated assets 129,413 Total assets 627,744 Liabilities Segment liabilities 2,554 20,934 14,126 6, (21,944) 23,089 Unallocated liabilities 29,495 Total liabilities 52,584 Others Capital expenditure 1, ,560 Non-cash expenses: depreciation and amortisation ,757 derecognition of property, plant and equipment Revenue Revenue from external customers 6, ,598 1, , ,167 Inter segment revenue 12,036 1,110 55,700 16,390 3,073 (88,309) Total revenue 18, ,708 55,700 17,475 3,475 1,787 (88,309) 190,167 Results Segment results 28,872 31,234 2,640 (164) (4,519) 1,565 59,628 Unallocated income 1,413 Unallocated expenses (27,578) Operating profit 33,463 Interest income 4,188 Finance costs (158) Loss from associate (8) Taxation (9,647) Profit after taxation 27,838 Non-controlling interests (468) Profit for the year 27, SHL CONSOLIDATED BHD. ( W)

99 37. SEGMENT REPORTING (CONT D) Investment and Property Group services development Construction Trading Manufacturing Quarrying Eliminations Consolidated 2011 (cont d) RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Assets Segment assets 125, ,879 30,026 4,868 80,819 18,233 (23,220) 520,881 Investment in associate 1,249 Unallocated assets 113,513 Total assets 635,643 Liabilities Segment liabilities 2,113 33,828 17,931 3, (21,753) 37,043 Unallocated liabilities 32,874 Total liabilities 69,917 Others Capital expenditure 8, ,035 Non-cash expenses: depreciation and amortisation ,410 derecognition of property, plant and equipment impairment loss on intangible assets 5,115 5, RELATED PARTY DISCLOSURES Identity of related parties The Company has related party relationship with its subsidiaries pursuant to the Companies Act The relationships between the Group and the related parties, except subsidiaries, are as follows: Period of business Related parties Relationship relationship Taipan Star Sdn. Bhd. A company in which Directors of the Company, 18 years Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah, Dato Yap Teiong Choon and Dato Ir. Yap Chong Lee have an interest. Glen Waverley Sdn. Bhd. A company in which Directors of the Company, 29 years Y.A.M. Tengku Abdul Samad Shah Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah, Dato Yap Teiong Choon and Dato Ir. Yap Chong Lee have an interest. Annual Report

100 38. RELATED PARTY DISCLOSURES (CONT D) Period of business Related parties Relationship relationship Unique Mix Sdn. Bhd. A company in which Directors of the Company, 13 years Dato Yap Teiong Choon and Dato Ir. Yap Chong Lee have an interest. The Directors ceased to have an interest in Unique Mix Sdn. Bhd. on 19 April Goodstock Land Sdn. Bhd. A company in which Directors of the Company, 29 years Dato Yap Teiong Choon and Dato Ir. Yap Chong Lee have an interest. In May 2010, it becomes a subsidiary of SHL Consolidated Bhd. Sin Heap Lee Land Sdn. Bhd. A company in which Directors of the Company, 23 years Dato Yap Teiong Choon and Dato Ir. Yap Chong Lee have an interest. Marusin Sdn. Bhd. A company in which Directors of the Company, 27 years Dato Yap Teiong Choon and Dato Ir. Yap Chong Lee have an interest. SHL Professional Services A company in which Directors of the Company, 14 years Sdn. Bhd. Dato Yap Teiong Choon and Dato Ir. Yap Chong Lee have an interest. Sin Heap Lee Mix Sdn. Bhd. A company in which Directors of the Company, 29 years Dato Yap Teiong Choon and Dato Ir. Yap Chong Lee have an interest. Sin Heap Lee Property A company in which Directors of the Company, 18 years Services Sdn. Bhd. Dato Yap Teiong Choon and Dato Ir. Yap Chong Lee have an interest. Sin Yan Properties Sdn. Bhd. A company in which Directors of the Company, 26 years Dato Yap Teiong Choon and Dato Ir. Yap Chong Lee have an interest. Integrated Perunding Sdn. Bhd. A company in which a Director of the Company, 29 years Dato Ir. Yap Chong Lee has an interest. Sepakat Setia Perunding A company in which a Director of the Company, 29 years (Sendirian) Bhd. Dato Ir. Yap Chong Lee has an interest. 98 SHL CONSOLIDATED BHD. ( W)

101 38. RELATED PARTY DISCLOSURES (CONT D) 38.1 Related party transactions During the year, the Group and the Company undertook a number of transactions with certain related parties. The more significant transactions are described below: Transactions with subsidiaries: Group Company RM'000 RM'000 RM'000 RM'000 Dividend income: Kajang Granite Quarry Sdn. Bhd. 16,267 SHL Realty Sdn. Bhd. 7,500 Sin Heap Lee Company Sdn. Bhd. 32,969 Ho Sin & Son Enterprise Sdn. Bhd. 4,932 Goodstock Tawau Sdn. Bhd. 195 Wilayah Builders Sdn. Bhd. 411 SHL Infra Sdn. Bhd ,000 Mayang Kiara Sdn. Bhd. 6,400 Sukma Pesona Sdn. Bhd. 9,181 Sin Heap Lee Construction Sdn. Bhd. 16,000 Sin Heap Lee Development Sdn. Bhd. 5,400 22,000 79,855 Rental of premises: Goodstock Land Sdn. Bhd Unsecured corporate guarantee: Maximum principal amount of corporate guarantee given to bankers for banking facilities granted to: Sin Heap Lee Company Sdn. Bhd. 17,645 17,645 Sin Heap Lee Brickworks Sdn. Bhd. 18,000 17,000 Sin Heap Lee Construction Sdn. Bhd. 57,000 57,000 Sin Heap Lee Development Sdn. Bhd. 6,000 6,000 98,645 97,645 Transactions with non-related corporations in which the Directors of the Company have significant influence in the financial and operating policy decisions: Group Company RM'000 RM'000 RM'000 RM'000 Expenses: Engineering consultancy services Integrated Perunding Sdn. Bhd. 2, Procurement of building materials Unique Mix Sdn. Bhd ,094 Annual Report

102 38. RELATED PARTY DISCLOSURES (CONT D) 38.2 Related party balances Group Company RM'000 RM'000 RM'000 RM'000 Trade payables: Unique Mix Sdn. Bhd. 321 Amounts due from subsidiaries: Sin Heap Lee Development Sdn. Bhd. 85,995 98,795 Sin Heap Lee Brickworks Sdn. Bhd. 3,592 3,592 SHL Corporate Services Sdn. Bhd. 1,215 1,215 90, ,602 Group Company RM'000 RM'000 RM'000 RM'000 Amounts due to subsidiaries: Sin Heap Lee Construction Sdn. Bhd. 100, ,244 Mercantile Corporation (M) Sdn. Bhd Goodstock Land Sdn. Bhd H.S.C. Sdn. Berhad , , Directors remunerations The aggregate amounts of remunerations received by the Directors of the Company during the financial year were as follows: Group Company RM'000 RM'000 RM'000 RM'000 Non-executive Directors Executive Directors Total Directors' fees Non-executive Directors Executive Directors 1,441 1,509 Total Directors' other emoluments 2,050 2, Total Directors' remunerations 2,170 2, SHL CONSOLIDATED BHD. ( W)

103 39. MATERIAL LITIGATIONS Apart from the below, the Group never engaged in any material litigation, claims or arbitration either as plaintiff or defendant, and the Directors are unaware of any proceedings, pending or threatened against the Group or of any facts likely to give rise to any proceedings which might materially or adversely affect the position or business of the Group. (a) On 12 April 2004, an indirect subsidiary of the Group, SHL-M Sdn. Bhd. instituted legal proceedings against the Director of Lands and Mines Selangor (State Authority) relating to the revision of quit rent rate. Both parties had different interpretations on the quit rent rate. SHL-M Sdn. Bhd. sought from the State Authority the following: declaring the invalidity of quit rent totalling RM583,680/- per year which the State Authority had imposed retrospectively to 1 January 1994; and recovering the sum of RM190,024/- per year from 1 January 1994 to 31 December 2007 on the grounds that the quit rent payable should be RM69,141/- per year only. On 10 February 2011, the case was decided in favour of SHL-M Sdn. Bhd., the Court declared that quit rent payable was as follows: Amount Total per annum amount Year RM'000 RM' ,216 The Court further ordered the State Authority to refund the excess sum of RM3,190,148/- with interest at the rate of 8.00% per annum. However, the State Authority has since lodged an appeal on 14 March 2011 against the decision vide Court of Appeal CA No. B On 21 June 2011, SHL-M Sdn. Bhd. filed the following Affidavits at the Shah Alam High Court: (i) an Affidavit objecting the State Authority s Appeal against the Court Order dated 10 February 2011 on the grounds that it was filed out of time. (ii) an Affidavit objecting the State Authority s Application for Stay of Execution of the Court Order dated 10 February The above Affidavits objecting the State Authority s Appeal were refused. The State Authority s Appeal is still pending a hearing and a record of Appeal has been filed by the State Authority on 4 April Annual Report

104 39. MATERIAL LITIGATIONS (CONT D) (b) A subsidiary of the Group, SHL Realty Sdn. Bhd. is defending an action brought by certain parties in Malaysia. The legal action relates to the leasing and/or sale of a private hospital owned by the subsidiary. Based on the legal advice, the Directors are of the opinion that: the subsidiary and its Director have a good defence to the said legal action; it is impossible to assess the possible financial and operational impact of the legal action at this preliminary stage As the legal action is premature, the subsidiary and the plaintiffs have been advised by their respective solicitors to file for mediation. The Court has fixed the matter for trial on 10 September 2012, 11 September 2012, 12 September 2012 and 29 September COMPARATIVE INFORMATION The following significant items of comparative information have been restated arising from a review of the disclosure requirements: Company As previously As restated reported RM'000 RM'000 Notes to the financial statements: Related party disclosures (Note 38.1): Unsecured corporate guarantee: Maximum principal amount of corporate guarantee given to bankers for banking facilities granted to: Sin Heap Lee Company Sdn. Bhd. 17,645 Sin Heap Lee Brickworks Sdn. Bhd. 17,000 Sin Heap Lee Construction Sdn. Bhd. 57,000 Sin Heap Lee Development Sdn. Bhd. 6,000 97,645 As restated RM'000 Group As previously reported RM'000 Commitments (Note 35): Non-cancellable operating lease commitments Group as lessor: Future minimum rental receivable: 1 year or less 2,540 5 years or less but over 1 year 5,057 7, SHL CONSOLIDATED BHD. ( W)

105 41. DISCLOSURE OF REALISED AND UNREALISED PROFITS On 25 March 2010, Bursa Malaysia Securities Berhad (Bursa Malaysia) issued a directive to all listed issuers pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements. The directive requires all listed issuers to disclose the breakdown of the retained profits as at the end of the reporting period, into realised and unrealised profits or losses. The breakdown of the retained profits of the Group and the Company as at 31 March 2012 and 31 March 2011, into realised and unrealised profits, pursuant to Bursa Malaysia Securities Berhad s Directive Ref: LD26/10 dated 20 December 2010 is tabulated below: Group Company RM'000 RM'000 RM'000 RM'000 Total retained profits of the Company and subsidiaries: realised 388, , , ,525 unrealised 25,468 22, , , , ,525 Total shares of retained profits from associate: realised 1,589 (56) unrealised 1,589 (56) Less: Consolidated adjustments (27,878) (26,298) Total retained profits 387, , , ,525 The determination of realised and unrealised profits is compiled based on Guidance of Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure pursuant to Bursa Malaysia Securities Berhad Listing requirements, issued by the Malaysian Institute of Accountants on 20 December The disclosure of realised and unrealised profits above is solely for complying with the disclosure requirements stipulated in the directive of Bursa Malaysia and should be applied for this purpose only. Annual Report

106 Analysis of Shareholdings as at 5 July 2012 SHARE CAPITAL Authorised Share Capital RM1,000,000, Issued and Fully Paid-up Capital RM242,123, Class of Shares Ordinary Shares of RM1.00 Each Voting Right One Vote Per Ordinary Share No. of Shareholders 2,732 DISTRIBUTION OF SHAREHOLDINGS No. of No. of Size of Shareholdings Shareholders % Shares % Less than , , , ,001 10,000 1, ,056, , , ,035, ,001 and below 5% ,206, % and above ,675, TOTAL 2, ,123, SUBSTANTIAL SHAREHOLDERS NRIC No./ Direct Holdings Indirect Holdings Name of Substantial Shareholders Registration No. No. of Shares % No. of Shares % 1 Y.A.M. Tengku Abdul Samad Shah , ,222, Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah 2 Dato' Yap Teiong Choon ,283, ,659, Dato' Ir. Yap Chong Lee ,235, ,166, Yap Teiong Choon Holdings Sdn Bhd U 3,411, ,247, Yap Chong Lee Holdings Sdn Bhd A 11,477, ,696, Sin Heap Lee Holdings Sdn Bhd D 51,519, Sin Heap Lee Capital Sdn Bhd H 43,976, Taipan Equity Sdn Bhd W 21,222, Unikburan Sdn Bhd X 16,611, Lembaga Tabung Haji ACT ,167, DIRECTORS' SHAREHOLDINGS Direct Holdings Indirect Holdings Name of Directors NRIC No. No. of Shares % No. of Shares % 1 Y.A.M. Tengku Abdul Samad Shah , ,222, Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah 2 Dato' Yap Teiong Choon ,283, ,659, Dato' Ir. Yap Chong Lee ,235, ,166, Chin Yu Cheng Yu Thou , Wong Tiek Fong , Wong Yew Mei , Souren Norendra SHL CONSOLIDATED BHD. ( W)

107 LIST OF THE THIRTY (30) LARGEST SHAREHOLDERS AS AT 5 JULY 2012 NRIC No./ Holdings Names Registration No. No. of Shares % 1 HSBC NOMINEES (TEMPATAN) SDN BHD D 47,919, Exempt An for BNP Paribas Wealth Management Singapore Branch (Local) 2 SIN HEAP LEE CAPITAL SDN BHD H 43,976, UNIKBURAN SDN BHD X 16,611, LEMBAGA TABUNG HAJI ACT ,167, TAIPAN EQUITY SDN BHD W 11,605, KOPERASI PERMODALAN FELDA MALAYSIA BERHAD 39 11,525, TAIPAN EQUITY SDN BHD W 9,616, YAP SIN YAN & SONS SDN BHD 4555-W 8,403, CITIGROUP NOMINEES (ASING) SDN BHD D 7,447, Exempt An for Nomura Securities Co Ltd (Client Ac) 10 YAP CHONG LEE HOLDINGS SDN BHD A 6,244, STEENSTED ENTERPRISE SDN BHD D 5,696, YAP CHONG LEE HOLDINGS SDN BHD A 5,233, HSBC NOMINEES (ASING) SDN BHD 4381-U 4,500, Exempt An for JPMorgan Chase Bank, National Association (JPM INTL BK LTD) 14 M & A NOMINEE (TEMPATAN) SDN BHD T 3,600, PFA Corporate Consultants Sdn Bhd for Sin Heap Lee Holdings Sdn Bhd 15 YAP TEIONG CHOON HOLDINGS SDN BHD U 3,411, DATO' YAP TEIONG CHOON ,929, YTC GLOBAL SDN BHD A 2,728, YAP TEONG SUAN ,492, DATO' IR. YAP CHONG LEE ,463, ENVIMATIC SDN BHD X 2,286, DATO' YAP TEIONG CHOON ,060, DATIN PHAN FOO BEAM ,000, CITIGROUP NOMINEES (TEMPATAN) SDN BHD M 1,852, Exempt An For Eastspring Investments Berhad 24 MAYBANK SECURITIES NOMINEES (TEMPATAN) SDN BHD P 1,171, Pledged Securities Account for Ng Peck Chin 25 CITIGROUP NOMINEES (ASING) SDN BHD D 1,008, CBNY For Dimensional Emerging Markets Value Fund 26 CHUAH CHIN HENG , DATO' IR. YAP CHONG LEE , KHER PEK CHOO , HSBC NOMINEES (ASING) SDN BHD 4381-U 439, BNYM SA/NV for Dimensional Funds II Plc 30 WONG SAM WONG YOKE FAI , Annual Report

108 List of Properties as at 31 March 2012 Tenure/ Net Date of Age of Land Book Acquisition/ Description Building Area Value Date of Location &/or Usage (Years) (Acres) RM 000 Revaluation Selangor Darul Ehsan P.T , & Lot Golf Course, Club Houses, Freehold , Mukim of Cheras Driving Range and 19 District of Hulu Langat Maintenance Building P.T , Mukim of Cheras Medical Centre Freehold , District of Hulu Langat 2 P.T , Mukim of Cheras Food Court Freehold , District of Hulu Langat 2 2½ Miles, Sungai Pelek Land and factory building Freehold , Sepang 15 & 22 Lot 64, 207, 208, 730, 1731 Clay reserve land Freehold , , 1737 & P.T. 63/2 Mukim and District of Sepang Lot 1465, 1467, 1468 & 1471 Clay reserve land 99 years P.T. 720 & 721 lease expiring Mukim and District of Sepang in 2083/ 2084/2087 Lot 7990, Mukim of Semenyih Quarry land Freehold , District of Hulu Langat P.T , Mukim of Semenyih Quarry land 30 years District of Hulu Langat lease expiring in 2027 Lot 1117, Mukim of Semenyih Agriculture land Freehold District of Hulu Langat Lot 1476, 2116, 3489 Land held for future Freehold , housing development Mukim of Cheras District of Hulu Langat P.T , 21226, Land held for future Freehold , & development Mukim of Cheras District of Hulu Langat Lot 4137 Land held for future 99 years Mukim of Cheras housing development lease expiring District of Hulu Langat in 2067 P.T Land held for future 99 years , Mukim of Batang Kali development lease expiring District of Hulu Selangor in 2089 Lot 1340, Mukim of Semenyih Agriculture land held Freehold , District of Hulu Langat for future development P.T. 405, 412, 413, 1586, 2053 Land held for future Freehold , 2305, , 2403 housing development & 2404, Mukim of Rawang District of Gombak 106 SHL CONSOLIDATED BHD. ( W)

109 Tenure/ Net Date of Age of Land Book Acquisition/ Description Building Area Value Date of Location &/or Usage (Years) (Acres) RM 000 Revaluation Selangor Darul Ehsan (cont d) P.T , Land held for future Freehold & housing development Mukim and District of Petaling Lot 7989, Mukim of Semenyih Ongoing development Freehold , District of Hulu Langat of housing scheme P.T Ongoing development Freehold , Mukim of Serendah of industrial park District of Ulu Selangor P.T Ongoing development Freehold , Mukim of Cheras of housing scheme District of Hulu Langat Lot Ongoing development Freehold , & 1495/1-1495/4 of housing scheme Mukim of Cheras District of Hulu Langat P.T & P.T Ongoing development 99 years , Mukim of Cheras of housing scheme lease expiring District of Hulu Langat in 2092 P.T Ongoing development 99 years , Mukim of Cheras of housing scheme lease expiring District of Hulu Langat in 2095/2096 Lot 2, 3 & 4 Section U10 Ongoing development 99 years Mukim Bukit Rajah of housing scheme lease expiring District of Petaling in 2102 Wilayah Persekutuan 10B, Antah Tower Condominium unit Freehold Jalan 3/57C, Off Jalan Kuching Kuala Lumpur Lot 251, Section 43 Commercial building Freehold , Wilayah Persekutuan 18 Kuala Lumpur Negeri Sembilan Lot 493, 497, 499, 502, 503 Agriculture land held Freehold , , 505, 506, 507, 510, 580 for future development 697, 698 & 699 Mukim of Parit Tinggi District of Kuala Pilah Annual Report

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111 Proxy Form I/We NRIC No./Passport No./Company No. SHL CONSOLIDATED BHD. (Company No: W) (Incorporated in Malaysia) of being a member of SHL CONSOLIDATED BHD. hereby appoint NRIC No./Passport No. of and/or NRIC No./Passport No. of or failing him/her the Chairman of the Meeting as my/our proxy to vote on my/our behalf at the 18th Annual General Meeting of the Company to be held on Thursday, 6 September 2012 at a.m. and at any adjournment thereof, and to vote as indicated below: Resolutions For Against Resolution 1 To approve the First and Final Dividend Resolution 2 To approve the payment of Directors fees Resolution 3 To re-elect Dato Ir. Yap Chong Lee as Director of the Company Resolution 4 To re-appoint Chin Yu Cheng Yu Thou as Director of the Company Resolution 5 To re-appoint Messrs Khoo Wong & Chan as Auditors of the Company and authorise the Directors to fix their remuneration Resolution 6 To approve the proposed Shareholders Mandate for SHL Group to enter into recurrent related party transactions of a revenue or trading nature Resolution 7 To approve the ordinary resolution pursuant to Section 132D of the Companies Act, 1965 Resolution 8 Resolution 9 To approve the proposed Renewal of Share Buy-Back Authority of up to 10% of the Issued and Paid-Up Share Capital of the Company To approve the Amendments to the Articles of Association Please indicate with X where appropriate against each resolution how you wish your votes to be cast. In the absence of specific directions, the proxy may vote or abstain from voting on the resolutions as he/she may think fit. Number of Shares Held Signature(s)/Common Seal of the Corporation Tel : Dated : Where a member appoints 2 proxies (refer to Note No. 2), please specify the proportions of the member s holdings to be represented by each proxy. Proxy No. of Shares % First Proxy Second Proxy NOTES: 1. A proxy need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. 2. A member shall be entitled to appoint not more than two (2) proxies to attend and vote at the same Annual General Meeting. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 3. For corporate members, this proxy form must be executed under the common seal of the corporation or under the hand of its attorney. 4. Unless voting instructions are indicated in the spaces provided above, the proxy may vote as he/she thinks fit. 5. For this proxy to be valid, it must be lodged at the Registered Office of the Company at 6th Floor, Wisma Sin Heap Lee, 346, Jalan Tun Razak, Kuala Lumpur, not less than 48 hours before the time appointed for holding the Annual General Meeting or at any adjournment thereof. 6. Only a depositor whose name appears in the Record of Depositors as at 30 August 2012 shall be entitled to attend, speak and vote at the 18th Annual General Meeting or appoint a proxy/proxies to attend and vote instead of him.