There have been no significant changes in the nature of the activities of the Company and of its subsidiary companies during the financial year.

Transcription

1 TAFI INDUSTRIES BERHAD (Incorporated in Malaysia) DIRECTORS' REPORT The directors of TAFI INDUSTRIES BERHAD have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended December 31, PRINCIPAL ACTIVITIES The Company is principally involved in investment holding and provision of management services. The principal activities of the subsidiary companies are as disclosed in Note 14 to the Financial Statements. There have been no significant changes in the nature of the activities of the Company and of its subsidiary companies during the financial year. RESULTS OF OPERATIONS The results of operations of the Group and of the Company for the financial year are as follows: RM The Company RM Profit before tax 6,066, ,104 Income tax expense (968,418) (3,943) Profit for the year 5,097, ,161 In the opinion of the directors, the results of operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature. DIVIDENDS A first interim dividend of 3%, less tax, amounting to RM871,188 in respect of the current financial year was paid by the Company on July 28, A second interim dividend of 1.5%, less tax, amounting to RM439,982 was declared by the directors in respect of the current financial year but remains unpaid as at December 31, 2008 by the Company. 1

2 The directors do not recommend the payment of any final dividend in respect of the current financial year. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. ISSUE OF SHARES AND DEBENTURES The Company has not issued any new shares or debentures during the financial year. SHARE OPTIONS No options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company. No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As of the end of the financial year, there were no unissued shares of the Company under options. OTHER FINANCIAL INFORMATION Before the income statements and the balance sheets of the Group and of the Company were made out, the directors took reasonable steps: (a) (b) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and had satisfied themselves that there were no known bad debts to be written off and that no allowance for doubtful debts was necessary; 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 estimated realisable values. At the date of this report, the directors are not aware of any circumstances: (a) (b) which would require the writing off of bad debts or the making of allowance for doubtful debts in the financial statements of the Group and of the Company; or which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or 2

3 (c) (d) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; or not otherwise dealt with in this report or financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading. At the date of this report, there does not exist: (a) (b) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year and secures the liability of any other person; or any contingent liability of the Group and of the Company which has arisen since the end of the financial year. No contingent or other liability has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due. In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of operations of the Group and of the Company for the succeeding financial year. DIRECTORS The following directors served on the Board of the Company since the date of the last report: Saw Eng Guan (Executive Chairman) Terk Yew Tee Tan Sri Dato Syed Jalaludin bin Syed Salim Goh Choon Hock Tan Chuan Yong Dato Haji Zainal Rahim bin Dato Haji Darus Tuan Haji Azhar bin Nayan Ng Siew Thong Kamaruddin bin Koskani Abdul Hamid (alternate to Dato Haji Zainal Rahim bin Dato Haji Darus) In accordance with Article 84 of the Company s Articles of Association, Messrs. Saw Eng Guan, Tuan Haji Azhar bin Nayan and Dato Haji Zainal Rahim bin Dato Haji Darus retire by rotation at the forthcoming Annual General Meeting of the Company and, being eligible, offer themselves for re-election. 3

4 DIRECTORS INTERESTS The shareholdings in the Company of those who were directors at the end of the financial year, as recorded in the Register of Directors' Shareholdings kept by the Company under Section 134 of the Companies Act, 1965, are as follows: Shares in the Company Registered in name of directors No. of shares of RM0.50 each Balance at Bought Sold Balance at Saw Eng Guan (Executive Chairman) 3,112, ,112,500 Terk Yew Tee 20,356, ,356,000 Tan Sri Dato Syed Jalaludin bin Syed Salim 62, ,500 Tuan Haji Azhar bin Nayan 62, ,500 Goh Choon Hock 62, ,500 Deemed interest Saw Eng Guan 17,332,400 * ,332,400 * * Registered in the name of director s family member. By virtue of their interests in the shares of the Company, the abovementioned directors are deemed to have an interest in the shares of the subsidiary companies to the extent the directors have their interest. Other than as disclosed above, none of the other directors held shares or had beneficial interests in the shares of the Company or its related companies during and at the end of the financial year. DIRECTORS' BENEFITS Since the end of the previous financial year, none of the directors of the Company has received or become entitled to receive any benefit (other than those disclosed as directors remuneration in the financial statements) by reason of a contract made by the Company with the director or a related corporation of which he is a member, or with a company in which he has a substantial financial interest except for any benefit which may be deemed to have arisen by virtue of the transactions as disclosed in Notes 14 and 20 to the Financial Statements. During and at the end of the financial year, no arrangement subsisted to which the Company was a party whereby directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. 4

5 AUDITORS The auditors, Messrs. Deloitte KassimChan, have indicated their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the Directors, TERK YEW TEE SAW ENG GUAN Muar March 25,

6 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF TAFI INDUSTRIES BERHAD (Incorporated in Malaysia) Report on the Financial Statements We have audited the financial statements of TAFI Industries Berhad, which comprise the balance sheets as of December 31, 2008 of the Group and of the Company and the income statements, statements of changes in equity and cash flow statements 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 9 to 45. Directors Responsibility for the Financial Statements The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with the applicable Malaysian Accounting Standards Board approved accounting standards and the Companies Act, 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit and to report our opinion to you, 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 towards any other person for the contents of this report. 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. (Forward) 6

7 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence that 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 the applicable Malaysian Accounting Standards Board approved accounting standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of December 31, 2008 and of their financial performance and cash flows for the year then ended. 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) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiary companies of which we have acted as auditors, have been properly kept in accordance with the provisions of the Act; (b) We have considered the accounts and auditors report of the subsidiary company, of which we have not acted as auditors, as mentioned in Note 14 to the Financial Statements, being accounts that have been included in the financial statements of the Group; (c) We are satisfied that the accounts of the subsidiary companies that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group, and we have received satisfactory information and explanations required by us for those purposes; and (Forward) 7

8 (d) The auditors reports on the accounts of the subsidiary companies were not subject to any qualification and did not include any comment made under Section 174(3) of the Act. DELOITTE KASSIMCHAN AF 0080 Chartered Accountants TEO SWEE CHUA Partner 2846/01/10 (J) Chartered Accountant March 25,

9 TAFI INDUSTRIES BERHAD (Incorporated in Malaysia) AND ITS SUBSIDIARY COMPANIES INCOME STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 The Company Note RM RM RM RM Revenue 5 62,056,338 54,276, ,000 9,800,000 Other operating income 9 1,830,706 1,004, , ,823 Changes in inventories of finished goods and work-in-progress (108,782) (1,534,971) - - Raw materials and consumables used (34,897,007) (27,382,183) - - Directors remuneration 7 (896,380) (825,800) (179,500) (203,000) Staff costs 8 (9,522,476) (7,611,769) (401,632) (349,552) Depreciation of property, plant and equipment 13 (1,637,344) (1,221,085) - - Other operating expenses 9 (10,758,622) (9,355,500) (370,148) (165,414) Profit from operations 6,066,433 7,349, ,104 9,318,857 Finance costs 10 (150) (1,279) - - Profit before tax 6,066,283 7,348, ,104 9,318,857 Income tax expense 11 (968,418) (1,125,699) (3,943) (2,584,586) Profit for the year 5,097,865 6,222, ,161 6,734,271 Basic earnings per ordinary share of RM0.50 (sen) The accompanying Notes form an integral part of the Financial Statements. 9

10 TAFI INDUSTRIES BERHAD (Incorporated in Malaysia) AND ITS SUBSIDIARY COMPANIES BALANCE SHEETS AS OF DECEMBER 31, 2008 ASSETS The Company Note RM RM RM RM Non-current assets Property, plant and equipment 13 23,641,803 19,719, Investment in subsidiary companies ,913,781 26,913,781 Investment property 15 1,380,000 1,380, Other investment , ,200 - Prepaid lease payments 17 2,031, , Total non-current assets 27,844,859 21,984,322 27,704,981 26,913,781 Current assets Inventories 18 5,984,076 5,180, Trade receivables 19 7,819,644 10,273, Other receivables, deposits and prepaid expenses 19 1,384,569 1,165,754 10, ,082 Tax recoverable 349, ,137 89,871 46,040 Amount due from subsidiary companies ,801,302 8,437,038 Fixed deposits, cash and bank balances 21 22,946,819 25,391,094 3,334,646 13,265,060 Total current assets 38,484,398 42,371,951 19,236,190 21,877,220 TOTAL ASSETS 66,329,257 64,356,273 46,941,171 48,791,001 (Forward) 10

11 The Company Note RM RM RM RM EQUITY AND LIABILITIES Capital and reserves Issued capital 22 40,000,000 40,000,000 40,000,000 40,000,000 Treasury shares 22 (795,737) (610,583) (795,737) (610,583) Reserves 23 19,361,016 15,574,321 7,070,290 8,271,299 Total equity 58,565,279 54,963,738 46,274,553 47,660,716 Non-current liability Deferred tax liability 24 1,466,410 1,161, Current liabilities Trade payables 25 2,575,777 4,085, Other payables and accrued expenses 25 3,230,009 3,272, , ,976 Dividend payable 439, , , ,309 Tax liability 51, Total current liabilities 6,297,568 8,230, ,618 1,130,285 Total liabilities 7,763,978 9,392, ,618 1,130,285 TOTAL EQUITY AND LIABILITIES 66,329,257 64,356,273 46,941,171 48,791,001 The accompanying Notes form an integral part of the Financial Statements. 11

12 TAFI INDUSTRIES BERHAD (Incorporated in Malaysia) AND ITS SUBSIDIARY COMPANIES STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2008 Note Non- Distributable Reserve - Distributable Reserve - Issued Share Treasury Unappropriated Capital Premium Shares Profit Total RM RM RM RM RM Balance as of January 1, ,000,000 2,809,166 (453,420) 8,277,894 50,633,640 Profit for the year ,222,544 6,222,544 Shares buy-back (157,163) - (157,163) Dividends (1,735,283) (1,735,283) Balance as of December 31, ,000,000 2,809,166 (610,583) 12,765,155 54,963,738 Balance as of January 1, ,000,000 2,809,166 (610,583) 12,765,155 54,963,738 Profit for the year ,097,865 5,097,865 Shares buy-back (185,154) - (185,154) Dividends (1,311,170) (1,311,170) Balance as of December 31, ,000,000 2,809,166 (795,737) 16,551,850 58,565,279 (Forward) 12

13 The Company Note Non- Distributable Reserve - Distributable Reserve - Issued Share Treasury Unappropriated Capital Premium Shares Profit Total RM RM RM RM RM Balance as of January 1, ,000,000 2,809,166 (453,420) 463,145 42,818,891 Profit for the year ,734,271 6,734,271 Shares buy-back (157,163) - (157,163) Dividends (1,735,283) (1,735,283) Balance as of December 31, ,000,000 2,809,166 (610,583) 5,462,133 47,660,716 Balance as of January 1, ,000,000 2,809,166 (610,583) 5,462,133 47,660,716 Profit for the year , ,161 Shares buy-back (185,154) - (185,154) Dividends (1,311,170) (1,311,170) Balance as of December 31, ,000,000 2,809,166 (795,737) 4,261,124 46,274,553 The accompanying Notes from an integral part of the Financial Statements. 13

14 TAFI INDUSTRIES BERHAD (Incorporated in Malaysia) AND ITS SUBSIDIARY COMPANIES CASH FLOW STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 The Company RM RM RM RM CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES Profit before tax 6,066,283 7,348, ,104 9,318,857 Adjustments for: Depreciation of property, plant and equipment 1,637,344 1,221, Unrealised (gain)/loss on foreign exchange (490,769) 305, Amortisation of prepaid lease payments 19,714 19, Property, plant and equipment written off , Changes in fair value of investment property - 3, Impairment loss in value of other investment 168, ,800 - Finance costs 150 1, Gain on disposal of property, plant and equipment (6,587) (3,944) - - Allowance for doubtful debts no longer required - (11,358) - - Interest income (911,791) (783,998) (315,384) (236,823) Dividend income from subsidiary company - - (450,000) (9,500,000) Operating Profit/(Loss) Before Working Capital Changes 6,483,474 8,116,358 (482,480) (417,966) (Increase)/Decrease in: Inventories (803,819) 2,262, Trade receivables 2,944,834 (397,321) - - Other receivables, deposits and prepaid expenses (246,815) 37,654 98, ,309 (Forward) 14

15 The Company Note RM RM RM RM Increase/(Decrease) in: Trade payables (1,509,449) 40, Other payables and accrued expenses (42,191) (19,442) (30,340) 51,776 Cash Generated From/(Used In) Operations 6,826,034 10,040,393 (414,799) (213,881) Finance costs paid (150) (1,279) - - Income tax paid (600,161) (915,030) (47,774) (55,396) Net Cash From/(Used In) Operating Activities 6,225,723 9,124,084 (462,573) (269,277) CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES Interest received 939, , , ,136 Proceeds from disposal of property, plant and equipment 7,130 37, Purchase of property, plant and equipment (5,560,268) (1,692,968) - - Additions to prepaid lease payments (1,167,000) Dividend received from subsidiary company ,000 6,935,000 Purchase of other investment (960,000) - (960,000) - (Increase)/Decrease in amount due from subsidiary companies - - (7,364,264) 857,163 Acquisition of a subsidiary company * (2) Net Cash From/(Used In) Investing Activities (6,740,347) (863,307) (7,538,190) 8,012,297 CASH FLOWS USED IN FINANCING ACTIVITIES Dividends paid (1,744,497) (2,047,511) (1,744,497) (2,047,511) Shares buy-back (185,154) (157,163) (185,154) (157,163) Increase in fixed deposits pledged with licensed banks (56,936) (37,563) - - Net Cash Used In Financing Activities (1,986,587) (2,242,237) (1,929,651) (2,204,674) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (2,501,211) 6,018,540 (9,930,414) 5,538,346 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 24,341,593 18,323,053 13,265,060 7,726,714 CASH AND CASH EQUIVALENTS AT END OF YEAR 29 21,840,382 24,341,593 3,334,646 13,265,060 (Forward) 15

16 * ANALYSIS OF ACQUISITION OF SUBSIDIARY COMPANY On April 27, 2007, the Company acquired the entire equity interest in Billion Metric Sdn. Bhd. which subsequently changed its name to Home & Office Furniture Sdn. Bhd. The fair value of the assets acquired are as follows: Unaudited April 27, 2007 RM Cash on hand 2 Net assets acquired 2 Less: Cash on hand (2) Cash outflows on acquisition, net of cash acquired - The accompanying Notes form an integral part of the Financial Statements. 16

17 TAFI INDUSTRIES BERHAD (Incorporated in Malaysia) AND ITS SUBSIDIARY COMPANIES NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Second Board of Bursa Malaysia Securities Berhad. The Company is principally involved in investment holding and provision of management services. The principal activities of the subsidiary companies are as disclosed in Note 14. There have been no significant changes in the nature of the activities of the Company and of its subsidiary companies during the financial year. The registered office of the Company is located at 35-1 (Room A), Jalan Dato Hj. Hassan, Muar, Johor. The principal place of business of the Company is located at PLO 3, Kawasan Perindustrian Bukit Pasir, Mukim Sungai Raya, Bukit Pasir, Muar, Johor. The financial statements of the Group and of the Company were authorised for issue by the Board of Directors in accordance with a resolution of the directors dated March 25, BASIS OF PREPARATION OF FINANCIAL STATEMENTS The financial statements of the Group and of the Company have been prepared in accordance with the applicable Malaysian Accounting Standards Board ( MASB ) approved accounting standards and the provisions of the Companies Act, 1965 in Malaysia. Adoption of new and revised Financial Reporting Standards During the financial year, the Group and the Company adopted the following new and revised FRSs, Amendment to FRS and IC Interpretations issued by the MASB that are relevant to the Group s and the Company s operations: FRS 107 Cash Flow Statements Effective for accounting periods beginning on or after July 1,

18 FRS 112 Income Taxes Effective for accounting periods beginning on or after July 1, 2007 FRS 118 Revenue Effective for accounting periods beginning on or after July 1, 2007 FRS 121 Amendments to FRS 121 The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation Effective for accounting periods beginning on or after July 1, 2007 FRS 134 Interim Financial Reporting Effective for accounting periods beginning on or after July 1, 2007 FRS 137 Provisions, Contingent Liabilities and Contingent Assets Effective for accounting periods beginning on or after July 1, 2007 The adoption of these FRSs, Amendment to FRS and IC Interpretations did not result in significant changes in the accounting policies and has no significant financial effect on the financial statements of the Group and of the Company in the current and prior years. Accounting Standards and IC Interpretations Issued But Not Effective As of the date of authorisation of the financial statements of the Group and of the Company, the following new and revised FRSs and IC Interpretations have been issued but not yet effective until future periods: FRS 4 Insurance Contracts Effective for accounting periods beginning on or after January 1, 2010 FRS 7 Financial Instruments: Disclosures Effective for accounting periods beginning on or after January 1, 2010 FRS 8 Operating Segments Effective for accounting periods beginning on or after July 1, 2009 FRS 139 Financial Instruments: Recognition and Measurement 18 Effective for accounting periods beginning on or after January 1, 2010

19 IC Interpretations 9 IC Interpretations 10 Reassessment of Embedded Derivatives Interim Financial Reporting and Impairment Effective for accounting periods beginning on or after January 1, 2010 Effective for accounting periods beginning on or after January 1, 2010 Except for FRS 139, the directors anticipate that the adoption of these new and revised FRSs and IC Interpretations in future periods will not have significant financial effect on the financial statements of the Group and of the Company. By virtue of the exemption in paragraph 103AB of FRS 139, the impact of applying FRS 139 on the financial statements of the Group and of the Company upon first adoption of this standard as required by paragraph 30(b) of FRS 108, Accounting Policies, Changes in Accounting Estimates and Errors is not disclosed. 3. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of the Group and of the Company have been prepared under the historical cost convention except as disclosed in this summary of accounting policies. Revenue and Income Recognition Revenue from sales of goods is recognised upon delivery of products and when the risks and rewards of ownership have passed to the customers. Sales represent gross invoiced value of goods sold net of sales tax, trade discounts and allowances. Dividend income represents gross dividends from unquoted investments and is recognised when the shareholder s right to receive payment is established. Management fee is accrued on a time basis. Foreign Currencies The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For purpose of consolidated financial statements, the results and financial position of each group entity are expressed in Ringgit Malaysia, which is the functional currency of the Company and the presentation currency for the consolidated financial statements. 19

20 In preparing the financial statements of the Group and of the Company, transactions in currencies other than the functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statements for the year. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the income statements for the year except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity. Employee Benefits and the Company are required by law to make monthly contributions to the Employees Provident Fund ( EPF ), a statutory defined contribution plan for all their eligible employees based on certain prescribed rates of the employees salaries. Once the contributions have been paid, the Group and the Company have no further payment obligations. s and the Company s contributions to EPF are disclosed separately. The employees contributions to EPF are included in staff costs. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statements because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. s and the Company s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences and unused tax credits can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. 20

21 The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits 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 year when the liability is settled or the asset realised. Deferred tax is charged or credited to the income statements, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group and the Company intend to settle its current tax assets and liabilities on a net basis. Investment Property Investment property which consists of long-term leasehold land is held to earn rentals and/or for capital appreciation and is measured initially at cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value. Gains or losses arising from changes in the fair value of investment property are included in the income statements for the period in which they arise. Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation of property, plant and equipment, except for freehold land which is not depreciated, is computed on the straight-line method at the following annual rates based on the estimated useful lives of the various assets. The annual depreciation rates are as follows: Buildings 2% - 10% Plant and machinery 10% Motor vehicles 10% - 20% Tools, equipment and electrical installation 10% - 20% Furniture, fixtures and fittings 10% The residual value, useful lives and depreciation method are reviewed at each financial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefit embodied in the property, plant and equipment. A gain or loss arising from the disposal of an asset is determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset, and is recognised in the income statements. 21

22 Prepaid Lease Payments Lease of land with title not expected to pass to the lessee by the end of the lease term is treated as an operating lease as land normally has an indefinite economic life. The upfront payments made on entering into a lease or acquiring leasehold land that is accounted for as an operating lease are accounted for as prepaid lease payments and are amortised over the lease term on a straight-line basis and charged to the income statements for the year. Impairment of Assets At each balance sheet date, the Group and the Company review the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group and the Company estimate the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statements, unless the relevant asset is carried at revalued amount, in which case the impairment loss is treated as revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the income statements, unless the relevant asset is carried at revalued amount, in which case the reversal of the impairment loss is treated as revaluation increase. 22

23 Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and all the subsidiary companies controlled by the Company made up to December 31, Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiary companies acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiary companies to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Investment in Subsidiary Companies Investments in unquoted shares of subsidiary companies, which are eliminated on consolidation, are stated in the Company s financial statements at cost less accumulated impairment losses. Other Investment Other investment, which represents unquoted investment, is stated at cost less impairment losses. Inventories Inventories are valued at the lower of cost and net realisable value. Cost is determined on the first-in first-out method. The cost of raw materials comprises the original purchase price plus the cost of bringing the inventories to their present location and condition. The cost of work-in-progress and finished goods includes the cost of raw materials, direct labour and a proportion of the manufacturing overheads. Net realisable value represents the estimated selling price in the ordinary course of business less selling and distribution costs and all other estimated costs to completion. Receivables Receivables are stated at nominal value as reduced by the appropriate allowance for estimated irrecoverable amounts. Allowance for doubtful debts is made based on estimates of possible losses which may arise from non-collection of certain receivable accounts. 23

24 Financial Assets A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. s and the Company s principal financial assets are trade and other receivables, intercompany indebtedness, fixed deposits, cash and bank balances and other investment. Financial Liabilities and Equity Instruments Debt and equity instruments are classified as either liabilities or equity in accordance with the substance of the contractual arrangement. A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. s and the Company s significant financial liabilities include trade and other payables and dividend payable, which are stated at their nominal values. Equity instruments are recorded based on the amount of proceeds received, net of direct issue costs. Cash Flow Statements and the Company adopt the indirect method in the preparation of the cash flow statements. Cash equivalents are short-term, highly liquid investments with maturities of three months or less from the date of acquisition and are readily convertible to cash with insignificant risks of changes in value. 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY Critical judgements in applying the Group s and the Company s accounting policies In the process of applying the Group s and the Company s accounting policies as described in Note 3 above, management is of the opinion that there are no instances of application of judgement that are expected to have a significant effect on the amounts recognised in the financial statements. 24

25 Key sources of estimation uncertainty Management believes that there are no key assumptions made concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. 5. REVENUE The Company RM RM RM RM Manufacturing and sales of furniture 62,056,338 54,276, Dividend income (gross) from subsidiary company ,000 9,500,000 Management fee from subsidiary company , ,000 62,056,338 54,276, ,000 9,800, SEGMENT REPORTING operates in a single industry in the business of manufacturing and marketing of furniture products predominantly in Malaysia. Accordingly, segmental information by industry and geographical segments has not been presented. 25

26 7. DIRECTORS REMUNERATION The Company RM RM RM RM Executive directors: Other emoluments 624, , EPF contributions 74,880 64, Fees 47,500 48,000 41,500 42, , ,800 41,500 42,000 Non-executive directors: Fees 150, , , , , , , ,000 The estimated monetary value of benefits-in-kind received and receivable by the directors from the Group amounted to RM27,017 (2007: RM27,017) during the financial year. 8. STAFF COSTS Staff costs include salaries, contributions to EPF and all other staff related expenses. Contributions to EPF by the Group and the Company amounted to RM643,623 (2007: RM548,287) and RM43,032 (2007: RM37,452) respectively during the financial year. 26

27 9. OTHER OPERATING INCOME/(EXPENSES) Included in other operating income/(expenses) are the following: The Company RM RM RM RM Interest income from: Fixed deposits with licensed banks 851, , , ,758 Short-term deposits with licensed banks 60, ,749 26,452 33,065 Unrealised gain/(loss) on foreign exchange 490,769 (305,397) - - Realised gain on foreign exchange 60,965 95, Bad debts recovered 22,518 20, Allowance for doubtful debts no longer required - 11, Gain on disposal of property, plant and equipment 6,587 3, Rental of premises (198,870) (185,943) - - Impairment loss in value of other investment (168,800) - (168,800) - Audit fee: Current (57,000) (46,000) (16,000) (14,000) Underprovision in prior year (2,500) (5,500) (1,000) (2,000) Amortisation of prepaid lease payments (19,714) (19,715) - - Property, plant and equipment written off (330) (16,939) - - Changes in fair value of investment property - (3,000) FINANCE COSTS RM RM Interest expense on bank overdrafts 150 1,279 27

28 11. INCOME TAX EXPENSE The Company RM RM RM RM Estimated tax payable: Current year 655, ,000-2,565,000 Underprovision in prior years 8,008 11,508 3,943 19, , ,508 3,943 2,584,586 Deferred tax (Note 24): Current year 459, , (Over)/Underprovision in prior years (155,091) 40, , , ,418 1,125,699 3,943 2,584,586 28

29 A numerical reconciliation of income tax expense to profit before tax at the applicable statutory income tax rate to income tax expense at the effective income tax rate is as follows: The Company RM RM RM RM Profit before tax 6,066,283 7,348, ,104 9,318,857 Tax at the applicable income tax rate of 26% (2007: 27%) 1,577,234 1,984,026 29,667 2,516,091 Tax effects of: Income not taxable in determining taxable profit (47,297) - (82,000) - Expenses not deductible in determining taxable profit 231, ,155 52,333 48,909 Utilisation of reinvestment allowances (367,640) Pioneer income exempted from income tax - (452,000) - - Expenses eligible for double deduction (220,000) (621,000) - - Changes in income tax rate (57,885) (42,421) - - (Over)/Underprovision in prior years: Current tax 8,008 11,508 3,943 19,586 Deferred tax (155,091) 40, Tax expense for the year 968,418 1,125,699 3,943 2,584,586 A subsidiary company was granted pioneer status under the Promotion of Investment Act, 1986 for the manufacture of wooden furniture for a period of five years from April 24, 2002 to April 23, By virtue of this pioneer status, 70% of the statutory income of the subsidiary company derived from the pioneer products during the pioneer period will be exempted from income tax. As of December 31, 2008, the subsidiary company has tax exempt income of approximately RM16,633,000 (2007: RM17,083,000) which, subject to the agreement of the tax authorities, will enable the subsidiary company to distribute tax-exempt dividends up to the same amount. During the financial year, the subsidiary company claimed reinvestment allowances of approximately RM1,414,000 (2007: RM Nil). As of December 31, 2008, the subsidiary company also has tax exempt income totalling RM1,874,000 (2007: RM460,000) from reinvestment allowances claimed and utilised and from chargeable income waived in 1999 in accordance with Section 12 of the Income Tax (Amended) Act, 1999 which subject to the agreement of the tax authorities, is distributable as tax exempt dividends of up to the same amount. 29

30 12. EARNINGS PER ORDINARY SHARE The basic earnings per ordinary share of RM0.50 for the Group has been calculated based on the Group s profit after tax of RM5,097,865 (2007: RM6,222,544) and the weighted average number of ordinary shares in issue during the financial year of 78,477,355 (2007: 78,815,888) of RM0.50 each. 13. PROPERTY, PLANT AND EQUIPMENT 2008 Cost Beginning Disposals / End of of Year Additions Write-offs Year RM RM RM RM Freehold land 3,852, ,852,475 Buildings 10,195,017 2,612,350-12,807,367 Plant and machinery 14,726,147 1,797,421-16,523,568 Motor vehicles 2,349, ,773-2,694,035 Tools, equipment and electrical installation 2,242, ,745 (9,700) 3,024,389 Furniture, fixtures and fittings 821,490 13,979 (6,574) 828,895 Accumulated Depreciation 34,186,735 5,560,268 (16,274) 39,730,729 Freehold land Buildings 2,295, ,946-2,496,129 Plant and machinery 9,101, ,499-9,976,671 Motor vehicles 1,379, ,636-1,582,621 Tools, equipment and electrical installation 1,146, ,618 (8,827) 1,455,887 Furniture, fixture and fittings 544,547 39,645 (6,574) 577,618 14,466,983 1,637,344 (15,401) 16,088,926 30

31 End of Beginning Year of Year Net Book Value RM RM Freehold land 3,852,475 3,852,475 Buildings 10,311,238 7,899,834 Plant and machinery 6,546,897 5,624,975 Motor vehicles 1,111, ,277 Tools, equipment and electrical installation 1,568,502 1,096,248 Furniture, fixtures and fittings 251, ,943 23,641,803 19,719, Cost Beginning of Year Disposals / Additions Write-offs Reclassification End of Year RM RM RM RM RM Freehold land 3,852, ,852,475 Buildings 10,132,575 62, ,195,017 Plant and machinery 13,867,985 1,060,462 (271,689) 69,389 14,726,147 Motor vehicles 2,317, ,424 (124,547) - 2,349,262 Tools, equipment and electrical installation 2,073, ,490 (143,104) (69,389) 2,242,344 Furniture, fixtures and fittings 789,965 32,150 (625) - 821,490 Accumulated Depreciation 33,033,732 1,692,968 (539,965) - 34,186,735 Freehold land Buildings 2,103, , ,295,183 Plant and machinery 8,652, ,286 (271,689) 64,703 9,101,172 Motor vehicles 1,329, ,115 (92,097) - 1,379,985 Tools, equipment and electrical installation 1,141, ,905 (124,794) (64,703) 1,146,096 Furniture, fixtures and fittings 506,921 38,251 (625) - 544,547 13,735,103 1,221,085 (489,205) - 14,466,983 31

32 Net Book Value End of Year RM Beginning of Year RM Freehold land 3,852,475 3,852,475 Buildings 7,899,834 8,028,920 Plant and machinery 5,624,975 5,212,113 Motor vehicles 969, ,418 Tools, equipment and electrical installation 1,096, ,659 Furniture, fixtures and fittings 276, ,044 19,719,752 19,298,629 Certain buildings of a subsidiary company with carrying values of approximately RM969,100 (2007: RM1,006,100) as of December 31, 2008 are charged to licensed banks for credit facilities granted to the Group as disclosed in Note 26. Included in property, plant and equipment of the Group are fully depreciated property, plant and equipment which are still in use, with an aggregate cost of approximately RM8,985,000 (2007: RM8,878,000) as of December 31, INVESTMENT IN SUBSIDIARY COMPANIES The Company RM RM Unquoted shares - at cost 26,913,781 26,913,781 32

33 Details of the subsidiary companies, all incorporated in Malaysia, are as follows: Direct subsidiary companies Effective Equity Interest Principal Activities T.A. Furniture Industries Sdn. Bhd. 100% 100% Manufacturing and marketing of furniture products T.A. Systems Furniture Industries Sdn. Bhd. 100% 100% Investment holding Home & Office Furniture Sdn. Bhd. * 100% 100% General trading, manufacturing and exporting of furniture Indirect subsidiary companies Penquo Resources Sdn. Bhd. (Held through T.A. Furniture Industries Sdn. Bhd.) T.A. Furniture Trading Sdn. Bhd. (Held through T.A. Furniture Industries Sdn. Bhd.) Gerak Mahir Sdn. Bhd. (Held through T.A. Systems Furniture Industries Sdn. Bhd.) 100% 100% Investment in properties 100% - Trading of furniture products and provision of related services 100% 100% Property investment * The financial statements of this subsidiary company are audited by auditors other than the auditors of the Company. On September 12, 2008, the subsidiary company, T.A. Furniture Industries Sdn. Bhd., acquired the entire equity interest in T.A. Furniture Trading Sdn. Bhd., comprising 3 ordinary shares of RM1 each from certain directors of the Company for a purchase consideration of RM3. 33

34 The effect of the acquisition of the indirect subsidiary company during the year on the financial results of the Group for the current financial year is as follows: Post acquisition results of the indirect subsidiary company acquired: Revenue 72,000 Other operating expenses (55,111) Profit before tax 16,889 Income tax expense (3,862) Increase in Group s profit attributable to shareholders 13,027 The effect of the acquisition of the indirect subsidiary company during the year on the financial position of the Group as of December 31, 2008 is as follows: Property, plant and equipment 7,026 Cash and bank balances 797 Deferred tax liability (562) Accrued expenses (1,000) Tax liability (3,300) Group s share of net assets 2,961 RM RM 15. INVESTMENT PROPERTY RM RM At beginning of year 1,380,000 1,383,000 Changes in fair value of investment property - (3,000) At end of year 1,380,000 1,380,000 The fair value of the investment property was estimated by the directors at RM1,380,000 by reference to market evidence of transaction prices for similar properties. The said investment property is charged to licensed banks for credit facilities granted to the Group as disclosed in Note

35 16. OTHER INVESTMENT and The Company RM RM Unquoted investment: Cost 960,000 - Impairment loss (168,800) - 791, PREPAID LEASE PAYMENTS RM RM Cost At beginning of year 1,153,541 1,153,541 Addition during the year 1,167,000 - At end of year 2,320,541 1,153,541 Accumulated Amortisation At beginning of year (268,971) (249,256) Amortisation for the year (19,714) (19,715) At end of year (288,685) (268,971) Net 2,031, ,570 Prepaid lease payments relate to the lease of four parcels of land for the Group s factory and office buildings located in Muar, Johor and Beranang, Selangor. The leases will expire in year 2046, 2048, 2049 and 2085 respectively and the Group does not have an option to purchase the leased land upon the expiry of the lease periods. Included in prepaid lease payments are unamortised prepaid lease payments of RM286,894 (2007: RM294,044) representing leasehold land that has been charged to licensed banks for credit facilities granted to a subsidiary company as disclosed in Note

36 18. INVENTORIES RM RM At cost: Raw materials 4,089,550 3,122,184 Finished goods 1,502,027 1,394,646 Work-in-progress 163, ,777 Consumables 228, ,650 5,984,076 5,180, TRADE RECEIVABLES, OTHER RECEIVABLES, DEPOSITS AND PREPAID EXPENSES Trade receivables comprise amounts receivable for the sales of goods. The credit period granted for sales of goods ranges from 30 to 120 days (2007: 30 to 120 days). The foreign currency exposure profile of trade receivables is as follows: Ringgit Malaysia United States Dollar Singapore Dollar Total RM RM RM RM ,482 7,017,295 41,867 7,819, ,161,909 9,111,800-10,273,709 Other receivables, deposits and prepaid expenses consist of: The Company RM RM RM RM Other receivables 562, ,504 8, ,582 Prepaid expenses 415, , Refundable deposits 406, ,892 1,500 1,500 1,384,569 1,165,754 10, ,082 36