Statutory Financial Statements

Transcription

1 TRC SYNERGY BERHAD AND ITS SUBSIDIARY COMPANIES (Incorporated in Malaysia, Company No D) Statutory Financial Statements 31 December, 2004 KUMPULAN NAGA Chartered Accountants ( AF 0024 )

2 TRC SYNERGY BERHAD (Incorporated in Malaysia, Company No D) Statutory Financial Statements 31 December 2004 Index Pages No. Corporate Information 1 Directors' Report 2-7 Statement by Directors 8 Statutory Declaration 8 Auditors' Report 9 & 10 Balance Sheets 11 & 12 Income Statements 13 Statement of Changes in Equity - Group 14 Statement of Changes in Equity - Company 15 Cash Flow Statement - Group 16 & 17 Cash Flow Statement - Company 18 Notes to the Financial Statements 19-46

3 TRC Synergy Berhad (Incorporated in Malaysia) Corporate Information Board of Directors : Dato' Haji Sufri Bin Haji Mohd Zin : Abdul Aziz Bin Mohamad : Rahman Bin Ali : Noor Zilan Bin Mohamed Noor : Gen. (R) Dato' Seri Mohd Shahrom Bin Dato' Hj Nordin Secretaries : Dato' Tang Swee Guan : Abdul Aziz Bin Mohamed Auditors : Kumpulan Naga Chartered Accountants (M) Bankers : EON Bank Berhad : Affin Bank Berhad : AmFinance Berhad : Malayan Banking Berhad : Malaysian International Merchant Bankers Berhad : United Overseas Bank Berhad : RHB Bank Berhad : Southern Bank Berhad : Bumiputra-Commerce Bank Berhad : AmBank Berhad Registered Office/ : Wisma TRC Principal Place of Business 217 & 218, Jalan Negara 2, Taman Melawati, Ulu Klang, Selangor Darul Ehsan. TRC SYNERGY BERHAD. 1

4 Directors' Report The directors hereby present their report together with the audited financial statements of the Group and of the Company for the financial year ended. PRINCIPAL ACTIVITIES The principal activities of the Company are that of providing corporate, administrative and financial support services to the subsidiaries, investment holding and general contractors supplying labour. The principal activities of the subsidiaries are construction, manufacturing and trading of construction materials, hiring and servicing of machineries and vehicles and property development. There have been no significant changes in the nature of these activities during the year. RESULTS Group Company Profit/(loss) after taxation 40,503 (2,246,190) Minority interest Net profit/(loss) for the year 41,004 (2,246,190) There were no material transfers to or from reserves or provisions during the financial year. 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. SHARE CAPITAL During the financial year the Company increased its :- (i) authorised share capital from 100,000,000 to 200,000,000 through the creation of 100,000,000 ordinary shares of 1 each, and (ii) issued an paid up share capital from 70,000,000 to 92,400,000 by way of issuance of 22,400,000 ordinary shares as follows :- (a) private placement of 7,000,000 new shares representing up to 10% of the existing issued and paid-up share capital of the Company at an issue price of 2.30 per share for cash for additional working capital purposes. The share premium arising, after deducting the share issue costs of 372,270, amounted to 8,727,730 and this has been credited to the share premium account. (b) bonus issue of 15,400,000 new shares on the basis of one (1) new ordinary share for every five (5) existing shares held immediately after the Private Placement. The new ordinary shares issued during the financial year rank pari passu in all respects with the existing ordinary shares of the Company. TRC SYNERGY BERHAD. 2

5 Directors' Report DIVIDENDS The amount of dividends paid by the Company since 31 December 2003 were as follows : In respect of the financial year ended 31 December 2003 as reported in the directors' report of that year : First and final tax exempt dividend of 2.5 sen per share on 92,400,000 ordinary shares, paid on 16 July ,310,000 At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 December 2004, of 1.5% less 28% taxation on 92,400,000 ordinary shares, amounting to a dividend payable of 997,920 (1.08 sen net per ordinary share) will be proposed for shareholders' approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 December DIRECTORS The names of the directors of the Company since the date of the last report and at the date of this report are :- Dato' Haji Sufri Bin Haji Mohd Zin Abdul Aziz Bin Mohamad Rahman Bin Ali Noor Zilan Bin Mohamed Noor Gen. (R) Dato' Seri Mohd Shahrom Bin Dato' Hj Nordin DIRECTORS' BENEFITS Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors 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 any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 35 to the financial statements. TRC SYNERGY BERHAD. 3

6 Directors' Report DIRECTORS' INTEREST According to the register of directors' shareholding required to be kept under Section 134 of the Companies Act, 1965, the interest of directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows :- Number of Ordinary shares of 1 each At Shares in the Company Bought Sold At Direct interest : Dato' Haji Sufri Bin Haji Mohd Zin 10,575,000 2,115,000-12,690,000 Abdul Aziz Bin Mohamad 100,000 20, ,000 Noor Zilan Bin Mohamed Noor 50,000 - (50,000) - Indirect interest : Dato' Haji Sufri Bin Haji Mohd Zin # 32,400,000 4,080,000-36,480,000 # Deemed interested by virtue of his substantial shareholdings in TRC Capital Sdn. Bhd. and Kolektif Aman Sdn. Bhd. By virtue of Dato' Haji Sufri Bin Haji Mohd Zin and Abdul Aziz Bin Mohamad having interests in the Company, they are deemed to be interested in shares of the subsidiaries to the extent the Company has an interest. EMPLOYEE SHARE OPTION SCHEME The Company has established a Share Option Scheme for Employees and Directors ("The Scheme") pursuant to the By-Laws which was approved by the shareholders at the Extraordinary General Meeting held on 30 April The Scheme shall remain in force for a duration of five (5) years commencing from 22 June The salient terms of the Scheme are as follows :- (i) the maximum number of the Company's new shares to be made available under the Scheme shall not exceed fifteen percent (15%) of the issued and paid up capital of the Company; (ii) (iii) not more than fifty percent (50%) of the Company's shares available under the Scheme shall be allocated to Directors and senior management; not more than ten percent (10%) of the Company's shares available under the Scheme shall be allocated to individual Director or eligible employees, who either singly or collectively through person connected to them holds twenty percent (20%) or more of the issued and paid-up capital of the Company. TRC SYNERGY BERHAD. 4

7 Directors' Report EMPLOYEE SHARE OPTION SCHEME (Cont'd) (iv) The eligible participants shall include eligible employees and Directors who as at the offer date have satisfied the following criteria :- a) b) c) d) is a confirmed employee or appointed director within the Group; has attained at lease age of eighteen (18); is employed full time and on the payroll of the Group; is under such category and of such criteria that the option committee may from time to time decide. (v) The option price for each share shall be based on the weighted average market price (WAMP) of the Company's share traded on the Exchange for the five (5) trading days preceding the date of offer with a discount if any, that does not exceed ten percent (10%) from the five (5) day of the Company's shares. The option under the Scheme was offered to the eligible employees and Directors on 22 June 2004 and 1 September 2004 at an offer price of 1.70 per option share. During the financial year ended the Company has not offered any option to the Non-Executive Directors. OTHER STATUTORY INFOATION (a) Before the income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps :- (i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and (ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business have been written down to an amount which they might be expected so to realise. (b) At the date of this report, the directors are not aware of any circumstances which would render:- (i) the amount written off for bad debts or the amount of the provision for doubtful debts inadequate to any substantial extent; and (ii) the values attributed to current assets in the financial statements of the Group and of the Company misleading. (c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. TRC SYNERGY BERHAD. 5

8 Directors' Report OTHER STATUTORY INFOATION (Cont'd) (d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial ` statements of the Group and of the Company which would render any amount stated in the financial statements misleading. (e) At the date of this report, there does not exist :- (i) (ii) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities 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. (f) In the opinion of the directors :- (i) no contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due; and (ii) 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 the operations of the Group and of the Company for the financial year in which this report is made. TRC SYNERGY BERHAD. 6

9 Directors' Report Auditors The auditors, Kumpulan Naga, have expressed their willingness to continue in office. On behalf of the Board, DATO' HAJI SUFRI BIN HAJI MOHD ZIN Director ABDUL AZIZ BIN MOHAMAD Director Kuala Lumpur, Malaysia Date: TRC SYNERGY BERHAD. 7

10 STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965 We, DATO' HAJI SUFRI BIN HAJI MOHD ZIN and ABDUL AZIZ BIN MOHAMAD, being two of the directors of TRC Synergy SYNERGY Bhd., BERHAD., do herebydo state hereby that, state in the that, opinion theofopinion directors, of the directors, the accompanying the accompanying financial financial statements statements set out onset pages out9 on to 41 pages are drawn 11 to up 46 in areaccordance drawn upwith in accordance applicable Approved with applicable Accounting MASBStandards Approved in Accounting Malaysia andstandards the provisions in Malaysia of the and Companies the provisions Act, 1965 of the so Companies as to give aact, true 1965 and fair so as view to give of the a true financial and fair position view of the financial Group andposition of the Company of the Group as at and 31of December the Company 2004as and at of 31the December results and 2004 theand cash of flows the results of theand Group the cash and of flows the Company of the Group for and the year of the then Company ended. for the year then ended. On behalf of the Board,... DATO' HAJI SUFRI BIN HAJI MOHD ZIN... ABDUL AZIZ BIN MOHAMAD Kuala Lumpur, Malaysia Date: STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965 I, DATO' HAJI SUFRI BIN HAJI MOHD ZIN, being the director primarily responsible for the financial management of TRCSynergy SYNERGY Bhd., BERHAD., do solemnlydo andsolemnly sincerelyand declare sincerely that the declare accompanying that the accompanying financial statements financial set statements out on pageset 9 out to 41onare, pages in my 11opinion to 46 are, correct, in myand opinion I make correct, this solemn and I declaration make this solemn conscientiously declaration believing conscientiously the same believing to true the by virtue same to of be the true provisions by virtue of of the the Statutory provisions Declarations of the Statutory Act, Declarations Act, Subscribed and solemnly declared by the abovenamed, } DATO' HAJI SUFRI BIN HAJI MOHD ZIN at Petaling Jaya } in the State of Selangor Darul Ehsan on }. } DATO' HAJI SUFRI BIN Before me, } HAJI MOHD ZIN Commissioner for Oaths TRC SYNERGY BERHAD. 8

11 REPORT OF THE AUDITORS TO THE MEMBERS OF TRC SYNERGY BERHAD (Incorporated in Malaysia) We have audited the financial statements set out on pages 11 to 46. These financial statements are the responsibility of the Company's directors. It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report. We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion :- (a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable MASB Approved Accounting Standards in Malaysia so as to give a true and fair view of :- (i) the financial position of the Group and of the Company as at and of the results and the cash flows of the Group and of the Company for the year then ended; and (ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and (b) the accounting and other records and the registers required by the Act to be kept by the Company and by its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. TRC SYNERGY BERHAD. 9

12 REPORT OF THE AUDITORS (Cont'd) TO THE MEMBERS OF TRC SYNERGY BERHAD We have considered the financial statements and the auditors' report of a subsidiary company of which we have not acted as auditors, as indicated in Note 11 to the financial statements, being financial statements that have been included in the consolidated financial statements. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The auditors' reports on the financial statements of the subsidiaries were not subject to any qualification material to the consolidated financial statements and did not include any comment required to be made under section 174(3) of the Act. Kumpulan Naga A.F. No Chartered Accountants (M).. T. Nagarajan C.A.(M),FCCA,FTII,AICMA No: 824/04/06 (J) Kuala Lumpur, Malaysia Date: TRC SYNERGY BERHAD. 10

13 Balance Sheets As at FINANCED BY : Group Company As Restated Notes Share Capital 3 92,400,000 70,000,000 92,400,000 70,000,000 Share Premium 4 6,213,201 12,885,471 6,213,201 12,885,471 Reserve on Consolidation 16,540,657 16,540, Exchange Fluctuation Reserve (3,828) Retained Profits 5 11,497,497 13,766,493 2,595,353 7,151,543 Shareholders' Equity 126,647, ,192, ,208,554 90,037,014 Minority Interest (500) ,647, ,192, ,208,554 90,037,014 Deferred Taxation 6 2,767,633 3,469, Hire Purchase and Lease Creditors 7 941,198 2,473, Term Loans 8 40,003, ,193 40,000, ,359, ,506, ,208,554 90,037,014 NON-CURRENT ASSETS Property, Plant and Equipment 9 41,709,264 51,745, Investments 10 4,255, ,394 4,000,000 - Investment in Subsidiaries ,596,297 89,999,828 Investment in Associate , , Expenditure Carried Forward ,333 61, ,333 61,520 CURRENT ASSETS Property development project costs ,246 6,364, Inventories , , Trade receivables ,447, ,899, Other receivables 5,784,989 5,556,325 66,628 2,000 Gross amount due from customers 17 97,961, ,025, Deposits with licensed banks 18 45,851,022 50,288, Cash and bank balances 19 3,295,280 4,568,099 36,389 22, ,520, ,966, ,017 24,580 TRC SYNERGY BERHAD. 11

14 Balance Sheets (Cont'd) As at Group Company Notes CURRENT LIABILITIES Trade payables 20 46,470,980 68,104, Other payables 4,780,295 7,881, ,988 38,189 Hire purchase and lease creditors 7 2,484,154 6,183, Short term borrowings 21 75,345, ,431, Taxation 8,332,960 12,646,032 9,200 9,200 Due to a director , ,647 8,239 - Dividends payable 2,666 1,525 2,666 1, ,564, ,443, ,093 48,914 NET CURRENT ASSETS/(LIABILITIES) 122,955,544 66,522,255 (313,076) (24,334) 170,359, ,506, ,208,554 90,037,014 The annexed notes form an integral part of these financial statements. TRC SYNERGY BERHAD. 12

15 Income Statements For The Year Ended Group Company Notes Revenue ,438, ,683,952 5,268,190 9,600,000 Cost of Sales 23 (291,112,923) (295,768,077) (4,098,153) - Gross Profit 13,325,445 28,915,875 1,170,037 9,600,000 Other Operating Income 1,679,585 1,656,188 6,038 - Administration Expenses (11,834,316) (12,410,972) - - Selling Expenses (63,271) (201,425) - - Other Operating Expenses - - (1,510,923) (480,882) Operating Profit/(Loss) 3,107,443 17,959,666 (334,848) 9,119,118 Finance Cost (7,247,253) (7,584,387) (1,911,342) - Share of results of an associated company (405,182) 1,209, Profit on disposal of Property, Plant and Equipment 4,923,803 1,481, Profit/(Loss) Before Taxation ,811 13,065,607 (2,246,190) 9,119,118 Taxation 25 (338,308) (4,381,498) - - (Loss)/Profit After Taxation 40,503 8,684,109 (2,246,190) 9,119,118 Minority interest Net (loss)/profit for the year 41,004 8,684,113 (2,246,190) 9,119,118 - Earnings per share ( sen ) Basic Diluted The annexed notes form an integral part of these financial statements. TRC SYNERGY BERHAD. 13

16 Statement Of Changes In Equity - Group For The Year ended At 1 January 2003 Non-Distributable Distributable Exchange Share Share Capital Fluctuation Retained Note Capital Premium Reserves Reserve Profits Total As previously reported 70,000,000 12,885,471 16,540,657-13,231, ,658,039 Prior year adjustments (6,399,531) (6,399,531) As restated 70,000,000 12,885,471 16,540,657-6,832, ,258,508 Net profit for the year ,684,113 8,684,113 Dividend (1,750,000) (1,750,000) At 31 December ,000,000 12,885,471 16,540,657-13,766, ,192,621 At 1 January 2004 As previously reported 70,000,000 12,885,471 16,540,657-20,166, ,592,152 Prior year adjustments (6,399,531) (6,399,531) As restated 70,000,000 12,885,471 16,540,657-13,766, ,192,621 Net profit for the year ,004 41,004 Issue of shares Private Placement 7,000,000 9,100, ,100,000 Bonus issue 15,400,000 (15,400,000) Share issue costs - (372,270) (372,270) Exchange fluctuation reserves (3,828) - (3,828) Dividend (2,310,000) (2,310,000) At 92,400,000 6,213,201 16,540,657 (3,828) 11,497, ,647,527 The annexed notes form an integral part of these financial statements. TRC SYNERGY BERHAD. 14

17 Statement Of Changes In Equity - Company For The Year ended Share Share Retained Note Capital Premium Profit Total At 1 January ,000,000 12,885,471 (217,575) 82,667,896 Net profit for the year - - 9,119,118 9,119,118 Dividend (1,750,000) (1,750,000) At 31 December ,000,000 12,885,471 7,151,543 90,037,014 At 1 January ,000,000 12,885,471 7,151,543 90,037,014 Net loss for the year - - (2,246,190) (2,246,190) Issue of shares 22,400,000 (6,672,270) - 15,727,730 Dividend (2,310,000) (2,310,000) At 92,400,000 6,213,201 2,595, ,208,554 The annexed notes form an integral part of these financial statements. TRC SYNERGY BERHAD. 15

18 Cash Flow Statements - Group For The Year Ended Note CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 378,811 13,065,607 Adjustments for :- Amortisation of expenditure carried forward 116,667 - Exchange reserve arising due to retranslation of financial statements in foreign currency (3,828) - Depreciation 8,369,189 9,401,735 Gain on disposal of property, plant and equipment (4,923,803) (1,481,106) Share of results of an associated company 405,182 (1,209,222) Interest expense 4,753,030 6,639,664 Interest income (1,384,237) (1,269,965) Property, plant and equipment written off 14, ,458 Realisation of unrealised profit on development activities (49,788) (5,924,751) OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 7,675,750 19,398,420 Gross amount due from customers 5,063,637 (11,133,411) Inventories 18, ,401 Receivables (5,777,050) (20,301,808) Payables (24,735,487) 23,911,526 Directors' account (46,761) 180,000 Property development project costs 5,480,606 10,633,638 Cash (used in)/generated from operations (12,321,019) 22,957,766 Taxation paid (5,350,468) (3,402,018) Interest paid (4,753,030) (6,639,664) Interest received 1,384,237 1,269,965 Net cash (used in)/generated from operating activities (21,040,280) 14,186,049 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment (4,000,000) - Purchase of property, plant and equipment (1,856,238) (6,811,293) Proceeds from disposal of property, plant and equipment 8,432,488 3,389,999 Acquisition of subsidiary net of cash acquired Net cash generated from/(used in) investing activities 2,576,251 (3,421,290) TRC SYNERGY BERHAD.16

19 Cash Flow Statements - Group (Cont'd) For The Year Ended CASH FLOWS FROM FINANCING ACTIVITIES Fixed deposits 4,437,701 (15,567,760) (Repayment of)/proceeds from short term borrowings (28,991,380) 2,408,291 Proceeds from issue of shares 15,727,730 - Repayment of term loans 39,577,150 (331,182) Expenditure carried forward (980,480) (61,520) Repayment of hire purchase creditors (5,231,742) (7,035,658) Dividend paid (2,308,859) (1,748,475) Net cash generated from/(used in) financing activities 22,230,120 (22,336,304) Net increase/(decrease) in cash and cash equivalents 3,766,091 (11,571,545) Cash and cash equivalents at the beginning of the year (50,076,081) (38,504,536) Cash and cash equivalents at the end of the year (46,309,990) (50,076,081) Cash and cash equivalents at end of year comprise the following :- Cash and bank balances 3,295,280 4,568,099 Bank overdrafts (49,605,270) (54,644,180) (46,309,990) (50,076,081) The annexed notes form an integral part of these financial statements. TRC SYNERGY BERHAD.17

20 Cash Flow Statement - Company For The Year Ended CASH FLOWS FROM OPERATING ACTIVITIES Net (loss)/profit before taxation (2,246,190) 9,119,118 Adjustment for :- Amortisation of expenditure carried forward 116,667 - Operating (loss)/profit before working capital changes (2,129,523) 9,119,118 Working Capital Changes :- Receivables (64,628) - Payables 357,799 14,803 Directors' account 8,239 - Net cash (used in)/generated from operating activities (1,828,113) 9,133,921 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment (4,000,000) - Acquisition of subsidiary companies (8,239) - Advances to subsidiary companies (46,588,230) (7,321,427) Net cash used in investing activities (50,596,469) (7,321,427) CASH FLOWS FROM FINANCING ACTIVITIES Dividend paid (2,308,859) (1,748,475) Proceeds from share issue 15,727,730 - Expenditure carried forward (980,480) (61,520) Term loans 40,000,000 - Net cash generated from/(used in) financing activities 52,438,391 (1,809,995) Net increase in cash and cash equivalents 13,809 2,499 Cash and cash equivalents at the beginning of the year 22,580 20,081 Cash and cash equivalents at the end of the year 36,389 22,580 The annexed notes form an integral part of these financial statements. TRC SYNERGY BERHAD. 18

21 1. CORPORATE INFOATION The principal activities of the Company are that of investment holding, general contrcators supplying labour and providing corporate, administrative and financial support services to the subsidiaries. The principal activities of the subsidiaries are disclosed in Note 11 to the financial statements. The number of employees of the Group as at year end were 604 (2003 : 907). The number of employees of the Company as at year end was 90 (2003: 6). The Company is a public limited liability company incorporated and domiciled in Malaysia and listed on the Main Board of Bursa Malaysia Securities Berhad. The registered office and the principal place of business of the Company are located at :- Wisma TRC 217 & 218, Jalan Negara 2, Taman Melawati, Ulu Klang, Selangor Darul Ehsan. 2. PRINCIPAL ACCOUNTING POLICIES The financial statements of the Group and of the Company have been prepared in accordance with applicable Approved Accounting Standards issued by the Malaysian Accounting Standards Board (MASB) and comply with the provisions of the Companies Act, The principal accounting policies of the Group are as follows:- (a) Basis of Preparation of Financial Statements The financial statements of the Group and of the Company are prepared under the historical cost convention except for revaluation of certain properties included under property, plant and equipment. (b) Basis of Consolidation The consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to 31 December. Subsidiaries are those companies in which the Group has the power to exercise control over the financial and operating policies so as to obtain benefits from their activities. Subsidiaries are consolidated using the acquisition method of accounting under which the results of subsidiaries acquired or disposed of are included in the consolidated financial statements from the date of acquisition or up to the date of disposal. Goodwill or reserve on consolidation represents the difference between the consideration paid for the shares in the subsidiaries and the fair value of attributable net assets acquired, as applicable. TRC SYNERGY BERHAD. 19

22 2. PRINCIPAL ACCOUNTING POLICIES (Cont'd) (b) Basis of Consolidation (Cont'd) Goodwill arising on consolidation is reflected in the consolidated balance sheet. The carrying amount of such goodwill is assessed in the year it arises, and periodically, including when economic conditions indicate that the carrying amount may be impaired. To the extent deemed impaired, such goodwill is written off by a charge to the income statement. All intercompany transactions, balances and unrealised gains or transactions between the companies within the Group are eliminated. The reserve on consolidation represents the excess of the share of assets of subsidiary companies on acquisition date over the consideration paid for their acquisition. (c) Subsidiary Companies Subsidiaries are those companies in which the Group has a long term equity interest and where it has power to exercise control over the financial and operating policies so as to obtain benefits therefrom. Investments in subsidiary companies are stated in the financial statements of the Group at cost unless, in the opinion of the directors, there has been a permanent diminution in value, in which case an appropriate provision is made. (d) Associated Company Associate is a company in which the Group has a long term equity interest and where it exercises significant influence over the financial and operating policies. Investments in associate are accounted for in the consolidated financial statements by the equity method of accounting based on the audited or management financial statements of the associate. Under the equity method of accounting, the Group's share of profits less losses of associates during the year is included in the consolidated income statement. The Group's interest in associates is carried in the consolidated balance sheet at cost plus the Group's share of post-acquisition retained profits or accumulated losses and other reserves as well as goodwill on acquisition. Unrealised gains on transactions between the Group and the associate are eliminated to the extent of the Group's interest in the associate. Unrealised losses are eliminated unless cost cannot be recovered. (e) Long Term Investments Long term investments are stated at cost unless in the opinion of the directors there has been a permanent diminution in value, in which case provision is made for the diminution in value. TRC SYNERGY BERHAD. 20

23 2. PRINCIPAL ACCOUNTING POLICIES (Cont'd) (f) Property, Plant and Equipment Property, plant and equipment are stated at cost modified by the revaluation of certain land and buildings, less accumulated depreciation and amortisation. Freehold land is not depreciated. Leasehold land is amortised over the period of leases ranging from years. Depreciation on other property, plant and equipment is calculated on the original cost or subsequent valuation of the property, plant and equipment and is charged on a straight line basis at varying rates to write off the cost of each asset to its residual value over the estimated useful life. The principal annual depreciation rates applied are as follows:- Buildings 2% Motor vehicles 20% Plant and machinery 10% Office equipment 20% Furniture and fittings 10% Renovation 10% Telecommunication equipment 20% Computers 20% (g) Leased and Hired Assets Assets acquired under finance leases and hire purchase arrangements which in substance transfer substantially all the risks and benefits of ownership of the assets to the Company are capitalised as property, plant and equipment. The property, plant and equipment and corresponding lease obligations are recorded at the lower of the net present value of minimum lease payments or the fair value of the lease assets at the beginning of the respective lease terms. Leases and hire assets which do not meet such criteria are classified as operating lease. Finance charge of finance leases and hire purchase are charged to the income statement over the period of hire purchase or lease. Rental payable under operating leases are accounted for in the income statement on a straight line basis over the periods of the respective leases. (h) Inventories Inventories are valued at the lower of cost and net realisable value. Cost comprises the cost of purchase plus the cost of bringing the inventories to its present condition. Net realisable value is the estimate of the selling price in the ordinary course of business less the cost of completion and selling expenses. TRC SYNERGY BERHAD. 21

24 2. PRINCIPAL ACCOUNTING POLICIES (Cont'd) (i) Development Properties Development properties include all expenditure directly related to development together with an appropriate portion of other indirect expenses and are stated at the lower of cost and net realisable value. (j) Receivables Receivables are carried at their anticipated realisable values. Bad debts are written off in the year in which they are considered irrecoverable and provision is made for specific doubtful debts, if any. (k) Land Held For Development Land held for development include all expenditure directly related to development together with an appropriate portion of other indirect expenses and are stated at cost. (l) Payables Payables are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group. (m) Foreign Currency Translation (i) Foreign Currency Transaction Foreign currency assets and liabilities are translated to Ringgit Malaysia at the rates of exchange ruling at the balance sheet date and profit and loss items, where applicable, are converted at rates ruling on the transaction dates. Differences on exchange are taken to the income statement. (ii) Foreign Entities Financial statements of foreign consolidated subsidiaries are translated at year-end exchange rates with respect to the assets and liabilities, and at exchange rates at the dates of the transactions with respects to the income statement. All resulting translation differences are recognised in equity. TRC SYNERGY BERHAD. 22

25 2. PRINCIPAL ACCOUNTING POLICIES (Cont'd) (n) Income Tax Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date. Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deffered tax liabilities are recognised for all taxable temporary differences and deffered tax assets are recognised for all deductable temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deffered tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liabilty in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is an acquisition in which case the deferred tax is included in the resulting goodwill or negative goodwill. (o) Cash and Cash Equivalents For the purposes of the cash flow statement, cash and cash equivalents include cash on hand and at bank, deposits at call and short term highly liquid investments which have an insignificant risk of changes in value, net of outstanding bank overdrafts. (p) Revenue Recognition Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of the revenue can be measured reliably. (i) Dividend Income Dividend income from long-term investments and, in respect of the Company, from subsidiaries and associated companies, is recognised in the income statement upon the right to receipt of such dividends being established. TRC SYNERGY BERHAD. 23

26 2. PRINCIPAL ACCOUNTING POLICIES (Cont'd) (p) Revenue Recognition (Cont'd) (ii) Construction Contract Contract revenue is recognised by reference to the stage of physical completion of the contract. Contract revenue and costs are recognised as revenue and expense in the income statement in the accounting period in which the work is performed. The contract revenue is matched with the contract costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed. Profits expected to be realised on construction contracts are based on estimates of total revenue and costs at completion. These estimates are reviewed and revised periodically throughout the lives of the construction contracts and adjustment to the profits resulting from such revisions are recorded in the accounting period in which the revisions are made. If estimates of costs to complete the construction contract indicate losses, provision is made for the full losses anticipated in the period in which they are identified. (iii) Sale of Goods Revenue on sales of goods is recognised upon the transfer of risks and rewards. (iv) Interest Income / Rental Income / Management Fee Interest income, and rental rental income income and are management recognised fee on an are accrual recognised basis. on an accrual basis. (q) Impairment At each balance sheet date, the Group reviews the carrying amounts of its assets (other than inventories, deferred tax assets, assets arising from employee benefits and financial assets which are reviewed pursuant to the relevant accounting policies) to determine whether there are any indications that those assets have suffered an impairment loss. If any such indication exists, impairment is measured by comparing the carrying values of the assets with their recoverable amounts. Recoverable amount is the higher of net selling price and value in use, which is measured by reference to discounted future cash flows. Recoverable amounts are estimated for individual assets or, if it is possible, for the cash-generating unit to which the asset belongs. An impairment loss is charged to the income statement immediately, unless the asset is carried at revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of any available previously recognised revaluation surplus for the same asset. TRC SYNERGY BERHAD. 24

27 2. PRINCIPAL ACCOUNTING POLICIES (Cont'd) (q) Impairment (Cont'd) Reversal of impairment losses recognised in prior years is recorded when there is an indication that the impairment losses recognised for the asset no longer exist or have decreased. The reversal is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately, unless the asset is stated at revaluation, in which case it is taken to revaluation surplus. However, to the extent that an impairment loss on the same revalued asset was previously recognised as an expense in the income statement, a reversal of that impairment loss is recognised in the income statement. (r) Financial Instruments Financial instruments carried in the balance sheet include cash and bank balances, investments, inventories, receivables, payables, leases and borrowings. The particular recognition methods adopted are disclosed in the individual policy statements for the relevant item. The financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instrument. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the assets and settle the liability simultaneously. (s) Construction Contracts Construction work in progress which is stated at cost plus attributable profits less anticipated losses and progress billings is shown as amount due from customers. The excess of progress billings over cost plus attributable profits less anticipated loses is shown as amount due to customers. Costs consist of direct materials, direct labour, direct overhead, sub-contract charge and attributable expenses. TRC SYNERGY BERHAD. 25

28 3. SHARE CAPITAL Authorised:- Group and Company Ordinary shares of 1.00 each At 1 January 100,000, ,000,000 Created during the year 100,000,000 - At 31 December 200,000, ,000,000 Issued and fully paid :- Ordinary shares of 1.00 each At 1 January 70,000,000 70,000,000 Issued during the year 22,400,000 - At 31 December 92,400,000 70,000,000 During the financial year, the issued and paid up share capital of the Company was increased from 70,000,000 to 92,400,000 by way of :- (i) issue of 7,000,000 new ordinary shares of 1.00 each through a Private Placement at an issue price of 2.30 per share for cash for additional working capital purposes. The share premium arising, after deducting the share issue costs of 372,270, amounted to 8,727,730 and this has been credited to the share premium account. (ii) Capitalisation of 15,400,000 from the share premium account for 15,400,000 bonus shares on the basis of one (1) bonus share for every five (5) existing ordinary shares of 1.00 each after the Private Placement. The new ordinary shares shall rank pari passu in all respects with the existing ordinary shares of the Company. TRC SYNERGY BERHAD. 26

29 4. SHARE PREMIUM Group and Company Balance as at 1 January 12,885,471 12,885,471 Arising from shares issued :- - On private placement at a premium of ,100, Share issue costs (372,270) 8,727,730 - Capitalisation of bonus issue (15,400,000) - Balance as at 31 December 6,213,201 12,885, RETAINED PROFITS The Company has tax exempt profits available for distribution of approximately 5,242,666 (2003:7,551,525), subject to the agreement of the Inland Revenue Board. The Company has sufficient tax credit under Section 108 of the Income Tax Act, 1967 to frank the payment of dividends of approximately 1,080,000 (2003:Nil) out of its retained profits without incurring additional tax liability. 6. DEFERRED TAXATION Group As Restated At beginning of financial year, as previously stated - 3,921,338 Prior year adjustments - over provision in prior years - (452,065) At beginning of financial year, as restated 3,469,273 3,469,273 Transfer to income statement (Note 25) (701,640) - At end of financial year 2,767,633 3,469, HIRE PURCHASE AND LEASE CREDITORS Group Portion repayable not later than 1 year 2,484,154 6,183,999 Portion repayable later than 1 year and not later than 5 years 941,198 2,473,095 3,425,352 8,657,094 TRC SYNERGY BERHAD. 27

30 8. TE LOANS Group Company a) Term loans - secured 300, , Less : Due within 12 months included in short term borrowings ( Note 21 ) (297,218) (352,404) - - 3, , b) Term loan - unsecured 40,000,000-40,000,000 - Total 40,003, ,193 40,000,000 - The term loans bear :- i) interest at a rate of approximately 1.5% (2003: 1.5%) above the bank's base lending rate and is secured by freehold land and building belonging to the subsidiary company and is jointly and severally guaranteed by the directors of the subsidiary company. The term loan is repayable by way of 60 equal monthly instalments of 29,855 inclusive of interest, with the repayments commenced from November ii) interest at the rate of 6.5% (2003:6.5%) per annum on a monthly rest basis as prescribed under the "Tabung Industri Kecil dan Serderhana" and is repayable by way of equal monthly instalments, commenced from December The facility is secured by a fixed deposit placed with a licensed bank as disclosed in Note (18) to the financial statements, a joint and several guarantee by the directors of the subsidiary company and a legal charge over leasehold land belonging to a subsidiary company. iii) interest at a rate of 8.15% per annum and is repayable in one lump sum on the last day of the Tenor of the Facility (ie : Not exceeding five (5) years commencing from date of the Advance of the Facility which is 3 June TRC SYNERGY BERHAD. 28

31 TRC SYNERGY BERHAD. 29

32 9. PROPERTY, PLANT AND EQUIPMENT (Cont'd) (a) Revaluation Certain freehold and leasehold land and buildings of a subsidiary company were revalued by an independent professional valuer using the open market valuation basis. However in 2001, a proportion of this revaluation was deemed to be in excess of market values and was consequently subject to a downward revaluation during that year. The properties acquired subsequent to the said revaluation are however stated at cost, as the directors are of the opinion that the purchase consideration for the properties approximate their market values. Had the land and building affected been carried at their historical costs less accumulated depreciation, the carrying amounts of the revalued assets that would have been included in the financial statements at the end of the year are as follows : Freehold land 1,730,490 1,730,490 Freehold buildings 1,372,800 1,404,000 Leasehold land and buildings 1,637,021 4,372,563 4,740,311 7,507,053 (b) Security Certain land and buildings with a net carrying value of 6,851,465 (2003:8,178,675) have been charged to financial institutions as security for various credit facilities granted to a subsidiary company. A leasehold land with a net book value of 529,457 (2003: 537,597) has been pledged to a financial institution for borrowing facility granted to a subsidiary company. (c) Assets acquired under hire purchase and lease arrangements The net book value of property, plant and equipment of the subsidiary company acquired under hire purchase and lease arrangements are as follows : Plant and machinery 11,568,341 18,305,707 Motor vehicle 3,636,960 4,526,631 15,205,301 22,832,338 TRC SYNERGY BERHAD. 30

33 10. INVESTMENTS Group Company At Cost: - Shares quoted in Malaysia 111, , Corporate membership 144, , Subordinated bonds 4,000,000-4,000,000-4,255, ,394 4,000,000 - Market value - Shares quoted in Malaysia 15,337 13, INVESTMENT IN SUBSIDIARIES Company Unquoted shares, at cost 54,457,020 54,448,781 Amount due from subsidiary companies 82,139,277 35,551, ,596,297 89,999,828 The details of the subsidiary companies are as follows :- Country of Effective Principal Incorporation Interest (%) Activities Trans Resources Corporation Sdn. Bhd. Malaysia Construction activities. TRC Development Sdn. Bhd. Malaysia Property development. TRC Concrete Industries Sdn. Bhd. Malaysia Manufacture of ready mixed concrete. TRC-PDI JV Sdn. Bhd. Malaysia Construction. TRC Infra Sdn. Bhd. Malaysia 90 - Dormant * TRC Construction (Sarawak) Malaysia Construction. Sdn. Bhd. TRC Construction India Pte Ltd India Construction. ** TRC International Pte Ltd Malaysia Investment Holding TRC SYNERGY BERHAD. 31

34 11. INVESTMENT IN SUBSIDIARIES (Cont'd) * Audited by another firm of auditors. ** The financial statements of TRC International Pte Ltd have not been consolidated with the financial statements of the Group as the Directors are of the opinion that there will be of no real value in view of the insignificant effect on the financial statements of the Group. 12. INVESTMENT IN ASSOCIATE Details of the Associated Company are as follows :- Principal Country of Percentage of equity Name Activity Incorporation % % Andaman Budi Property Malaysia Sdn. Bhd. development Group Unquoted shares, at cost 200, ,000 Share of post - acquisition profit 313, , , ,586 The following amounts represent the Group's share of the assets, liabilities, revenue and expenses of the Associated Company : Group Property, plant and equipment 11,122 28,498 Current assets 12,972,198 9,372,967 Current liabilities (12,469,468) (8,479,184) Long term liabilities - (695) Net assets 513, ,586 Revenue 3,064,390 7,984,706 (Loss)/Profit before taxation (405,182) 1,209,222 Taxation (2,552) (287,636) (Loss)/Profit after taxation (407,734) 921,586 TRC SYNERGY BERHAD. 32

35 13. EXPENDITURE CARRIED FORWARD Group/Company Expenditure carried forward 925,333 61,520 Expenditure carried forward represents professional fees incurred in connection with the corporate exercises undertaken by the Company. This will be set off against the share premium account upon completion of the corporate exercises. 14. PROPERTY DEVELOPMENT PROJECT COSTS Group Brought forward - Land 13,447,499 13,384,152 - Development costs 21,779,660 5,456,595 35,227,159 18,840,747 Incurred during the year - Land 37,294 63,347 - Development costs 8,610,776 16,323,065 43,875,229 35,227,159 Recognised in income statement Brought forward (28,863,095) (7,767,796) Current year (14,078,888) (21,095,299) 933,246 6,364, INVENTORIES At Cost : Group Construction materials 196, ,042 Raw materials 49,454 30, , ,541 TRC SYNERGY BERHAD. 33