TRC SYNERGY BERHAD AND ITS SUBSIDIARY COMPANIES (Incorporated in Malaysia, Company No. 413192 - D) Statutory Financial Statements 31 December, 2003 KUMPULAN NAGA Chartered Accountants ( AF 0024 )
TRC SYNERGY BERHAD (Incorporated in Malaysia, Company No. 413192 - D) Statutory Financial Statements 31 December 2003 Index Pages No. Corporate Information 1 Directors' Report 2-6 Statement by Directors 7 Statutory Declaration 7 Auditors' Report 8 Balance Sheets 9 & 10 Income Statements 11 Statement of Changes in Equity - Group 12 Statement of Changes in Equity - Company 13 Cash Flow Statement - Group 14 & 15 Cash Flow Statement - Company 16 Notes to the Financial Statements 17-41
TRC Synergy Berhad (Incorporated in Malaysia, Company No. 413192 - D) Corporate Information for the year ended Board of Directors : Dato' Haji Sufri Bin Haji Mohd Zin : Abdul Aziz Bin Mohamad : Rahman Bin Ali : Noor Zilan Bin Mohamed Noor Secretaries : 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, 53100 Ulu Klang, Selangor Darul Ehsan. 1
Directors Report for the year ended The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended. PRINCIPAL ACTIVITIES The principal activities of the Company are that of providing corporate, administrative and financial support services to the subsidiaries and investment holding. The principal activities of the subsidiaries are construction, manufacturing and trading of construction materials, hiring and servicing of machineries and vehicles, general contractors supplying labour and property development. There have been no significant changes in the nature of these activities during the year. RESULTS Group Company Profit after taxation 8,684,109 9,119,118 Minority interest 4 - Net profit for the year 8,684,113 9,119,118 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. SIGNIFICANT EVENTS On 26 September 2003, an announcement was made to Malaysia Securities Exchange Berhad ("MSEB") that the Company intends to undertake the following proposals :- (i) proposed private placement of up to 7,000,000 new TRCS shares representing up to 10% of theexisting issued and paid-up share capital of the Company; (ii) proposed bonus issue of 15,400,000 new TRCS shares on thebasis of one (1) new ordinary share for every five (5) existing TRCS shares held immediately after the Private Placement; (iii) proposed establishment of Employees' Share Option Scheme for employees and directors ("ESOS"). (iv) proposed increase in the authorised share capital of TRCS from 100,000,000 comprising 100,000,000 ordinary shares of 1.00 each to 200,000,000 comprising 200,000,000 ordinary shares of 1.00 each by the creation of an additional 100,000,000 ordinary shares of 1.00 each in TRCS. 2 TRC SYNERGY BERHAD
SIGNIFICANT EVENTS (Cont'd) The above said proposals have been approved by the Securities Commission vide its letter dated 13 January 2004 and the Private Placement was completed on 26 February 2004, being the date of listing of the placement shares. An Extraordinary General Meeting of the Company is scheduled to be held on 30 April 2004 to seek shareholders' approval on the proposed Bonus Issue, proposed ESOS and the proposed increase in the authorised share capital of the Company. DIVIDENDS The Directors proposed the payment of a first and final tax exempt dividend of 2.5 sen per share amounting to 2,310,000 for the current financial year. The dividend is based on the enlarged share capital of the Company upon completion of the private placement exercise and the bonus issue as mentioned in this directors' report. The dividend is subject to the approval of members at the forthcoming Annual General Meeting of the Company. 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 the shareholders' equity as an appropriation of retained profit in the next financial year ending 31 December 2004. The Company paid a final tax exempt dividend of 2.5 sen per share amounting to 1,750,000 (2002: Nil) on 30 July 2003 in respect of the financial year ended 31 December 2002. 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 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 34 to the financial statements. 3 TRC SYNERGY BERHAD
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 1.1.2003 Bought Sold 31.12.2003 Direct interest : At Dato' Haji Sufri Bin Haji Mohd Zin 10,575,000 - - 10,575,000 Abdul Aziz Bin Mohamad 100,000 - - 100,000 Noor Zilan Bin Mohamed Noor 200,000 - (150,000) 50,000 Indirect interest : Dato' Haji Sufri Bin Haji Mohd Zin # 32,400,000 - - 32,400,000 # 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. 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. 4 TRC SYNERGY BERHAD
OTHER STATUTORY INFOATION (Cont'd) (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. (d) At the date of this report, thedirectors 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) 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 (ii) 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. 5 TRC SYNERGY BERHAD
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: 6 TRC SYNERGY BERHAD
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 Bhd., do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 9 to 41 are drawn up in accordance with applicable Approved Accounting Standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of 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. 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 TRC Synergy Bhd., do solemnly and sincerely declare that the financial statements set out on pages 9 to 41 are, in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true by virtue of the provisions of the Statutory Declarations Act, 1960. 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 HAJI MOHD ZIN Before me, Commissioner for Oaths 7 TRC SYNERGY BERHAD
Report of the Auditors to the members of TRC Synergy Berhad. We have audited the accompanying financial statements set out on pages 9 to 41. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with 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) (b) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Approved Accounting Standards in Malaysia so as to give a true and fair view of :- (i) (ii) 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 the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements ; and 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. 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. 0024 Chartered Accountants (M) T. Nagarajan C.A.(M), FCCA, AICA No: 824/04/04 (J) Kuala Lumpur, Malaysia Date: 8 TRC SYNERGY BERHAD
Balance Sheets as at FINANCED BY : Group Company 2003 2002 2003 2002 Notes Share Capital 3 70,000,000 70,000,000 70,000,000 70,000,000 Share Premium 4 12,885,471 12,885,471 12,885,471 12,885,471 Reserve on Consolidation 16,540,657 16,540,657 - - Retained Profits/(Accumulated Losses) 5 20,166,024 13,231,911 7,151,543 (217,575) Shareholders' Equity 119,592,152 112,658,039 90,037,014 82,667,896 Deferred Taxation 6 3,921,338 3,101,830 - - Hire Purchase and Lease Creditors 7 2,473,095 6,911,166 - - Term Loans 8 371,193 702,375 - - 126,357,778 123,373,410 90,037,014 82,667,896 NON-CURRENT ASSETS Property, Plant and Equipment 9 51,745,427 56,421,220 - - Investments 10 255,394 255,394 - - Investment in Subsidiaries 11 - - 89,999,828 82,678,401 Investment in Associate 12 921,586 - - - Expenditure Carried Forward 13 61,520-61,520 - CURRENT ASSETS Property development project costs 14 6,364,064 11,072,951 - - Inventories 15 264,541 533,942 - - Trade receivables 16 100,522,405 81,802,824 - - Other receivables 5,933,227 4,351,000 2,000 2,000 Gross amount due from customers 17 103,025,178 91,891,767 - - Deposits with licensed banks 18 50,288,723 34,720,963 - - Cash and bank balances 19 4,568,099 7,486,321 22,580 20,081 270,966,237 231,859,768 24,580 22,081 9 TRC SYNERGY BERHAD
Balance Sheets as at (cont'd.) Group Company 2003 2002 2003 2002 Notes CURRENT LIABILITIES Trade payables 20 68,104,864 46,346,358 - - Other payables 7,881,898 5,728,878 38,189 23,386 Hire purchase and lease creditors 7 6,183,999 8,781,586 - - Short term borrowings 21 109,431,017 98,369,403 - - Taxation 5,794,436 5,922,100 9,200 9,200 Due to a director 22 194,647 14,647 - - Proposed dividend 1,525-1,525-197,592,386 165,162,972 48,914 32,586 NET CURRENT ASSETS/(LIABILITIES) 73,373,851 66,696,796 (24,334) (10,505) 126,357,778 123,373,410 90,037,014 82,667,896 The annexed notes form an integral part of these financial statements. 10 TRC SYNERGY BERHAD
Income Statements for the year ended Group Company 2003 2002 2003 2002 Notes Revenue 23 324,683,952 303,225,466 9,600,000 - Cost of Sales 23 (295,768,077) (264,862,365) - - Gross Profit 28,915,875 38,363,101 9,600,000 - Other Operating Income 1,656,188 6,873,156-34,525 Administration Expenses (12,410,972) (12,067,251) - - Selling Expenses (201,425) (109,693) - - Other Operating Expenses - - (480,882) (230,202) Operating Profit/(Loss) 17,959,666 33,059,313 9,119,118 (195,677) Finance Cost (7,584,387) (7,996,619) - - Share of results of an associated company 1,209,222 195,615 - - Profit on disposal of Property, Plant and Equipment 1,481,106 474,841 - - Profit/(Loss) Before Taxation 24 13,065,607 25,733,150 9,119,118 (195,677) Taxation 25 (4,381,498) (5,552,080) - (9,200) Profit/(Loss) After Taxation 8,684,109 20,181,070 9,119,118 (204,877) Minority interest 4 - - - Pre-acquisition profit of subsidiary acquired - (2,395,461) - - Net profit/(loss) for the year 8,684,113 17,785,609 9,119,118 (204,877) - Earnings per share ( sen ) - Basic/diluted 26 12.41 37.88 - - The annexed notes form an integral part of these financial statements. 11 TRC SYNERGY BERHAD
Statement of Changes in Equity - Group for the year ended Non-Distributable Distributable Share Share Capital Retained Note Capital Premium Reserves Profits Total At 1 January 2002 2 - - (12,698) (12,696) Net profit for the year - - - 17,785,609 17,785,609 Prior year adjustment - - - (4,541,000) (4,541,000) Issue of shares 69,999,998 12,885,471 16,540,657-99,426,126 At 31 December 2002 70,000,000 12,885,471 16,540,657 13,231,911 112,658,039 At 1 January 2003 70,000,000 12,885,471 16,540,657 13,231,911 112,658,039 Net profit for the year - - - 8,684,113 8,684,113 Dividend 27 - - - (1,750,000) (1,750,000) At 70,000,000 12,885,471 16,540,657 20,166,024 119,592,152 The annexed notes form an integral part of these financial statements. 12
Statement of Changes in Equity - Company for the year ended (Accumulated Share Share Losses)/ Note Capital Premium Retained Profit Total At 1 January 2002 2 - (12,698) (12,696) Net loss for the year - - (204,877) (204,877) Issue of shares 69,999,998 12,885,471-82,885,469 At 31 December 2002 70,000,000 12,885,471 (217,575) 82,667,896 At 1 January 2003 70,000,000 12,885,471 (217,575) 82,667,896 Net profit for the year - - 9,119,118 9,119,118 Dividend 27 - - (1,750,000) (1,750,000) At 70,000,000 12,885,471 7,151,543 90,037,014 The annexed notes form an integral part of these financial statements. 13
Cash Flow Statement - Group for the year ended Note 2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 13,065,607 25,733,150 Adjustments for :- Deferred expenditure written off - 13,563 Depreciation 9,401,735 7,232,285 Gain on disposal of property, plant and equipment (1,481,106) (474,841) Share of results of an associated company (1,209,222) (155,952) Interest expense 6,639,664 7,083,726 Interest income (1,269,965) (1,215,652) Provision for bad debts written back - (5,500,000) Pre-acquisition profit before tax - (3,335,573) Property, plant and equipment written off 176,458 - Realisation of unrealised profit on development activities (5,924,751) - OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 19,398,420 29,380,706 Gross amount due from customers (11,133,411) (34,681,872) Associated company - 5,399,402 Inventories 269,401 (108,464) Receivables (20,301,808) (19,262,967) Payables 23,911,526 13,791,173 Directors' account 180,000 14,647 Property development project costs 10,633,638 (16,816,145) Cash generated from/(used in) operations 22,957,766 (22,283,520) Taxation paid (3,402,018) (8,121,261) Interest paid (6,639,664) (7,083,726) Interest received 1,269,965 1,215,652 Net cash generated from/(used in) operating activities 14,186,049 (36,272,855) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (6,811,293) (12,353,763) Proceeds from disposal of property, plant and equipment 3,389,999 23,044,267 Acquisition of subsidiary net of cash acquired 28 4 (58,829,668) Net cash used in investing activities (3,421,290) (48,139,164) 14 TRC SYNERGY BERHAD
Cash Flow Statement - Group for the year ended ( Cont'd ) Note 2003 2002 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares - 30,547,746 Repayment of term loans (331,182) (241,037) Expenditure carried forward (61,520) (1,428,144) Repayment of hire purchase creditors (7,035,658) (276,263) Dividend paid (1,748,475) - Net cash (used in)/generated from financing activities (9,176,835) 28,602,302 Net increase/(decrease) in cash and cash equivalents 1,587,924 (55,809,717) Cash and cash equivalents at the beginning of the year (55,809,715) 2 Cash and cash equivalents at the end of the year (54,221,791) (55,809,715) Cash and cash equivalents at end of year comprise the following :- Cash and bank balances 4,568,099 7,486,321 Deposits with licensed banks 50,288,723 34,720,963 Bank overdrafts (26,934,066) (27,150,080) Bankers acceptance (45,904,000) (41,215,000) Revolving credit (5,000,000) (5,000,000) Bridging loan (556,898) (1,440,450) Medium term credit - (4,370,692) Overdraft - non chequeing (27,710,114) (18,840,777) Revolving term loan (2,369,180) - Domestic factoring (604,355) - (54,221,791) (55,809,715) The annexed notes form an integral part of these financial statements. 15 TRC SYNERGY BERHAD
Cash Flow Statement - Company For the year ended Note 2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES Net profit/(loss) before taxation 9,119,118 (195,677) OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES Receivables - (2,000) Payables 14,803 (685,789) Subsidiary companies (7,321,427) (28,229,620) Deferred expenditure - 696,477 Net cash generated from/(used in) operating activities 1,812,494 (28,416,609) CASH FLOWS FROM FINANCING ACTIVITIES Dividend paid (1,748,475) - Proceeds from share issue - 30,547,746 Expenditure carried forward (61,520) (2,111,058) Net cash (used in)/generated from financing activities (1,809,995) 28,436,688 Net increase in cash and cash equivalents 2,499 20,079 Cash and cash equivalents at the beginning of the year 20,081 2 Cash and cash equivalents at the end of the year 22,580 20,081 The annexed notes form an integral part of these financial statements. 16 TRC SYNERGY BERHAD
Notes to the Financial Statements 1. CORPORATE INFOATION The principal activities of the Company are that of investment holding and the provision of full 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 907 (2002 : 874). The number of employees of the Company as at year end was 6 (2002: 8). The Company is a public limited liability company incorporated and domiciled in Malaysia and listed on the Main Board of Malaysia Securities Exchange Berhad ("MSEB"). The registered office and the principal place of business of the Company is located at :- Wisma TRC 217 & 218, Jalan Negara 2, Taman Melawati, 53100 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, 1965. 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. 17
Notes to the Financial Statements (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 theconsolidated 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. 18
Notes to the Financial Statements (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 55-99 years. Depreciation on other property, plant and equipment is calculated on the original cost or subsequent valuation of property, plant and equipment is charged on a straight line basis at varying rates to write off assets over their estimated economic lives. 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 therisks and benefits of ownership of the assets to thecompany 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. 19
Notes to the Financial Statements (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. (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) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 20
Notes to the Financial Statements (n) Foreign Currency Translation 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. (o) 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. (p) 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. 21
Notes to the Financial Statements (q) 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. (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. 22
Notes to the Financial Statements (r) 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. 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. (s) 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 thegroup 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. 23
Notes to the Financial Statements (t) 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. 3. SHARE CAPITAL Authorised:- Group and Company 2003 2002 Ordinary shares of 1.00 each At 1 January 100,000,000 100,000 Created during the year - 99,900,000 At 31 December 100,000,000 100,000,000 Issued and fully paid :- Ordinary shares of 1.00 each At 1 January 70,000,000 2 Issued during the year - 69,999,998 At 31 December 70,000,000 70,000,000 4. SHARE PREMIUM Group and Company 2003 2002 Balance as at 1 January 12,885,471 - Arising during the year - 12,885,471 Balance as at 31 December 12,885,471 12,885,471 5. RETAINED PROFITS As at, the Company has tax exempt profits available for distribution of approximately 7,551,525 (2002: Nil), subject to the agreement of the Inland Revenue Board. 24
6. DEFERRED TAXATION Notes to the Financial Statements Group 2003 2002 At 1 January 3,101,830 - Prior year adjustment - 4,541,000 Transfer from/(to) income statement 819,508 (1,439,170) At 31 December 3,921,338 3,101,830 7. HIRE PURCHASE AND LEASE CREDITORS Group 2003 2002 Portion repayable not later than 1 year 6,183,999 8,781,586 Portion repayable later than 1 year and not later than 5 years 2,473,095 6,911,166 8,657,094 15,692,752 8. TE LOANS Group 2003 2002 Term loans - secured 723,597 1,054,779 Less : Due within 12 months included in short term borrowings ( Note 21 ) (352,404) (352,404) 371,193 702,375 The term loans bear :- i) interest at a rate of approximately 1.5% (2002: 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 2000. ii) interest at the rate of 6.5% (2002:6.5%) 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 2000. 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. 25
Notes to the Financial Statements 9. PROPERTY, PLANT AND EQUIPMENT Leasehold Capital Freehold land and work in Plant and Motor Office Furniture Telecommunication Cost land buildings Buildings progress machinery vehicles equipment and fittings Renovation Computers equipment Total At 1 January 2003 4,835,200 3,850,000 3,127,300-71,735,825 17,955,810 3,812,798 765,184 1,331,607 68,534 1,250 107,483,508 Additions - - - 3,035,160 3,072,147 360,400 223,869 7,504 110,803 1,410-6,811,293 Disposals - - - - (6,365,616) (1,657,396) (219,274) (74,510) (57,949) - - (8,374,745) At 4,835,200 3,850,000 3,127,300 3,035,160 68,442,356 16,658,814 3,817,393 698,178 1,384,461 69,944 1,250 105,920,056 Accumulated Depreciation At 1 January 2003-211,480 214,513-34,827,097 11,723,988 2,850,847 480,446 695,304 58,425 188 51,062,288 Depreciation charge for the year - 60,477 62,546-7,021,786 1,732,599 316,744 66,592 137,263 3,478 250 9,401,735 Disposals - - - - (4,488,775) (1,534,415) (184,832) (46,648) (34,724) - - (6,289,394) At - 271,957 277,059-37,360,108 11,922,172 2,982,759 500,390 797,843 61,903 438 54,174,629 Net Book Value At 4,835,200 3,578,043 2,850,241 3,035,160 31,082,248 4,736,642 834,634 197,788 586,618 8,041 812 51,745,427 At 31 December 2002 4,835,200 3,638,520 2,912,787-36,908,729 6,231,822 961,951 284,738 636,302 10,109 1,062 56,421,220 26 TRC SYNERGY BERHAD (No.Tempatan: 413192-D)
9. PROPERTY, PLANT AND EQUIPMENT (Cont'd) Notes to the Financial Statements (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 :- 2003 2002 Freehold land 1,730,490 1,730,490 Freehold buildings 1,404,000 1,435,200 Leasehold land and buildings 4,372,563 4,431,943 7,507,053 7,597,633 (b) Security Certain land and buildings with a net carrying value of 8,178,675 (2002:9,797,072) 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 537,597 (2002: 543,488) 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 :- 2003 2002 Plant and machinery 18,305,707 10,922,459 Motor vehicle 4,526,631 5,707,521 22,832,338 16,629,980 27
Notes to the Financial Statements 10. INVESTMENTS At Cost: 2003 2002 - Shares quoted in Malaysia 111,394 111,394 - Corporate membership 144,000 144,000 255,394 255,394 Market value - Shares quoted in Malaysia 13,477 7,000 Group 11. INVESTMENT IN SUBSIDIARIES Company 2003 2002 Unquoted shares, at cost 54,448,781 54,448,781 Amount due from subsidiary companies 35,551,047 28,229,620 89,999,828 82,678,401 The details of the subsidiary companies are as follows :- Trans Resources Corporation Country of Incorporation Effective Interest (%) 2003 2002 Principal Activities Sdn. Bhd. Malaysia 100 100 Construction activities. TRC Development Sdn. Bhd. Malaysia 100 100 Property development. TRC Concrete Industries Sdn. Bhd. Malaysia 100 100 Manufacture of ready mixed concrete. TRC-PDI JV Sdn. Bhd. Malaysia 60 - Construction. * TRC Construction (Sarawak) Malaysia 100 - Construction. Sdn. Bhd. * Audited by another firm of auditors. 28
Notes to the Financial Statements 12. INVESTMENT IN ASSOCIATE Details of the Associated Company are as follows :- Principal Country of Percentage of equity Name Activity Incorporation 2003 2002 % % Andaman Budi Property Malaysia 40 40 Sdn. Bhd. development Group 2003 2002 Unquoted shares, at cost 200,000 200,000 Share of post - acquisition profit/(losses) 721,586 (200,000) 921,586 - The following amounts represent the Group's share of the assets, liabilities, revenue and expenses of the Associated Company : 2003 2002 Group Property, plant and equipment 28,498 54,590 Current assets 9,372,967 8,483,790 Current liabilities (8,479,184) (8,408,842) Long term liabilities (695) (205,963) Net assets/(liabilities) 921,586 (76,425) Share of net liabilities in excess of cost - 76,425 921,586 - Revenue 7,984,706 2,412,005 Profit before taxation 1,209,222 195,615 Taxation (287,636) - Profit after taxation 921,586 195,615 29
Notes to the Financial Statements 13. EXPENDITURE CARRIED FORWARD Company 2003 2002 Expenditure carried forward 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 Brought forward Group 2003 2002 - Land 13,384,152 - - Development costs 5,456,595 276,134 Incurred during the year 18,840,747 276,134 - Land 63,347 13,384,152 - Development costs 16,323,065 5,180,461 Recognised in income statement 35,227,159 18,840,747 Brought forward (7,767,796) - Current year (21,095,299) (7,767,796) 6,364,064 11,072,951 15. INVENTORIES At Cost : 2003 2002 Construction materials 234,042 352,569 Raw materials 30,499 181,373 264,541 533,942 Group 30
16. TRADE RECEIVABLES Notes to the Financial Statements Included in the trade receivables are related company balances and retention sums as follows :- Group 2003 2002 Amount due from an associated company 17,107,545 14,167,312 Amount due (to)/from a joint venture activity (2,971) 534,319 Retention sums 15,491,010 11,356,367 32,595,584 26,057,998 The retention sums are subject to satisfactory completion of the respective project defect liability periods. The Group's normal trade credit term ranges from 30 to 60 days. Other credit terms are assessed and approved on a case-by-case basis. 17. GROSS AMOUNT DUE FROM CUSTOMERS Group 2003 2002 Costs incurred to date 810,252,800 577,241,154 Add: Attributable profits 16,116,595 24,399,235 826,369,395 601,640,389 Less: Progress billings received and receivable (723,344,217) (509,748,622) 103,025,178 91,891,767 18. FIXED DEPOSITS The fixed deposits are placed with licenced financial institutions and have been charged to secure credit facilities granted to the subsidiary companies by the financial institutions. 19. CASH AND BANK BALANCES Included in the cash and bank balances of the Group are amounts of 2,016,980 (2002: 701,812) held pursuant to Section 7A of the Housing Development ( Control and Licensing ) Act 1966, and therefore restricted from use in other operations. 31
20. TRADE PAYABLES Notes to the Financial Statements The normal trade credit terms granted to the Group range from 30 to 90 days. 21. SHORT TE BORROWINGS Secured: Group 2003 2002 Bankers acceptance 45,904,000 41,215,000 Bank overdrafts 26,934,066 27,150,080 Revolving credit facility 5,000,000 5,000,000 Medium term credit - 4,370,692 Bridging loan 556,898 1,440,450 Domestic factoring facilities 604,355 - Overdraft non chequing 27,710,114 18,840,777 Revolving term loan 2,369,180-109,078,613 98,016,999 Term loan repayable not later than one year 352,404 352,404 109,431,017 98,369,403 (a) Bank Overdrafts The bank overdrafts of the subsidiary companies are subject to interest at rates ranging from 1.25% to 2.5% (2002: 1.25% to 2.5%) per annum above the banks' base lending rates and are secured by fixed and floating charges over the subsidiary companies present and future assets, certain fixed deposits, freehold land and assignment of certain contract receipts of the subsidiary companies and a joint and several guarantee by the directors of the subsidiary companies and a corporate guarantee by a subsidiary company. (b) Revolving Credit Facility The revolving credit facility is subject to interest at the rate of 1.25% (2002: 1.25%) above the Kuala Lumpur Inter-Bank Offer Rates (KLIBOR) and is secured by assignment of contract by way of Letter of Undertaking from the Awarder to remit all proceeds and personal guarantee of a directors of a subsidiary company. 32
Notes to the Financial Statements 21. SHORT TE BORROWINGS (Cont'd) (c) Bankers Acceptance The bankers acceptances are subject to commission at rates of approximately 1.0% to 2.0% (2002: 10% to 2.0%) over the B.A. rate and are secured by fixed and floating charges over the subsidiary companies present and future assets, certain fixed deposits, freehold land and leasehold properties belonging to the subsidiary company, a joint and several guarantee by the directors' of the subsidiary companies and a corporate guarantee by a subsidiary company. (d) Bridging Loan The bridging loan is subject to interest at the rate of 1.5 % (2002: 1.5%) per annum above the bank's base lending rate and is secured by a property belonging to a subsidiary company and a personal guarantee by a director of the subsidiary company. (e) Other Short Term Trade Facilities The domestic factoring facility is subject to charges at a rate of 9.9% (2002: 9.9%) per annum above the bank's base lending rate. The non chequing overdraft facility bears interest at a rate of 1.5% (2002:1.5%) per annum above the bank's base lending rate. The facilities are jointly and severally guaranteed by the directors of the subsidiary company. (f) Revolving Term Loan The revolving term loan is subject to charges at a rate of 1.75% per annum above the bank's base lending rate and are secured by a corporate guarantee from the holding company, the assignment of certain contract receipts and project account, the project sinking fund account, certain fixed deposits of a subsidiary company placed with licensed financial institution and personal guarantee by a director of the subsidiary company. 22. AMOUNT DUE TO A DIRECTOR The amount due to a director is unsecured, interest free and has no fixed terms of repayment. 23. REVENUE AND COST OF SALES Revenue of the Group represents recognised contract revenue, sale of construction materials, hiring of machineries and motor vehicles, property development and supply of labour. Turnover of the Company comprises dividend income and management fee. Cost of sales of the Group consists of direct materials, direct labour, direct overhead, sub-contract charges and other directly attributable expenses. 33