PERMAJU INDUSTRIES BERHAD...Permaju IndustrIes Berhad (379057-V) 2 Annual Report 2012 notice of...

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Permaju Industries Berhad(Company No: 379057-V)(Incorporated in Malaysia)Permaju Industries Berhad

(Company No: 379057-V)(Incorporated in Malaysia)

a n n u a l r e p o r t 2 0 1 2

E X P L O R E N E W P O S S I B I L I T I E S

1Permaju IndustrIes Berhad (379057-V) Annual Report 2012

contents 2012

02 NOTICE OF ANNUAL GENERAL MEETING

05 STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

06 CORPORATE INFORMATION

08 BOARD OF DIRECTORS

10 CHAIRMAN’S STATEMENT

12 AUDIT COMMITTEE REPORT

17 CORPORATE GOVERNANCE STATEMENT

25 DIRECTORS’ RESPONSIBILITY STATEMENT

26 STATEMENT ON RISk MANAGEMENT AND INTERNAL CONTROL

27 ADDITIONAL COMPLIANCE INFORMATION

29 FINANCIAL REPORTS

109 ANALYSIS OF SHAREHOLDINGS

112 LIST OF PROPERTIES

• FORM OF PROXY


notice of annual general meeting

nOtICe Is hereBY GIVen that the Seventeenth Annual General Meeting of Permaju Industries Berhad will be held at the Cempaka Room, 2nd Level, Hyatt Regency kinabalu, Jalan Datuk Salleh Sulong, 88994 kota kinabalu, Sabah on Monday, 3 June 2013 at 10.00 a.m. for the following purposes:

aGenda

1. To receive the Audited Financial Statements for the financial year ended 31 December 2012 together with the Reports of the Directors and Auditors thereon.

Please refer to note a

as OrdInarY BusIness

2. To approve the payment of Directors’ fees of RM279,166 for the financial year ended 31 December 2012.

(resolution 1)

3. To re-elect the following Directors who retire in accordance with Article 88 of the Company’s Articles of Association:

Dato’ Rahadian Mahmud bin Mohammad khalil (resolution 2)

4. To re-elect the following Directors who retire in accordance with Article 93 of the Company’s Articles of Association:

Lee Caw Cing (resolution 3)Dato’ Chua Tiong Moon (resolution 4)

5. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to determine their remuneration.

(resolution 5)

as sPeCIaL BusIness

To consider and if thought fit, to pass with or without modifications the following Ordinary Resolution:

6. Authority to continue in office as an Independent Non-Executive Director (resolution 6)

“THAT authority be and is hereby given to Brig. General (Ret.) Datuk Muhamad Yasin bin Yahya who has served as an Independent Non-Executive Director of the Company since 29 June 2004 and will reach the nine year term limit on 28 June 2013, to continue to act as an Independent Non-Executive Director of the Company until the conclusion of the next Annual General Meeting in accordance with the Malaysian Code of Corporate Governance 2012.”



7. To transact any other business of the Company of which due notice shall have been received.

By Order of the Board

mOLLY Gunn ChIt GeOK (maICsa 0673097)thaYaParan a/L m. rasIah (Ls 004642)Company Secretaries

kota kinabalu, SabahDate: 10 May 2013

note a

This Agenda Item is meant for discussion only as the provision of Section 169 (1) of the Companies Act 1965 does not require a formal approval of the shareholders and hence is not put forward for voting.

nOtes

1. A member entitled to attend and vote at the Annual General Meeting shall be entitled to appoint not more than two (2) proxies to attend and vote in his/her stead at the same meeting. A proxy need not be a member of the Company and if not a member he/she need not be a qualified legal practitioner, an approved company auditor or a person approved by the Registrar.

2. Where a member appoints two (2) proxies, the appointments shall be invalid unless he specifies the proportion of his holding to be represented by each proxy.

3. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

4. In the case of a corporate member, the instrument appointing a proxy must be executed either under its Common Seal or under the hand of its attorney duly authorised.

5. To be valid, the instrument appointing a proxy must be duly completed and deposited at the Registered Office of the Company at 5th Floor, Bangunan Indahsabah, Segama Commercial Complex, 88000 kota kinabalu, Sabah not less than forty-eight (48) hours before the time set for holding the Annual General Meeting or any adjournment thereof.

6. Only members registered in the Record of Depositors as at 24 May 2013 shall be eligible to attend the meeting or appoint proxies and vote on their behalf.



eXPLanatOrY nOtes On sPeCIaL BusIness

1. Resolution 6 - Authority to continue in office as an Independent Non-Executive Director

The Board of Directors has via the Nomination Committee conducted an annual performance evaluation and assessment of Brig. General (Ret.) Datuk Muhamad Yasin bin Yahya who has served as an Independent Non-Executive Director since 29 June 2004 and will reach the nine year term limit on 28 June 2013. Brig. General (Ret.) Datuk Muhamad Yasin bin Yahya has met the independence guidelines as set out in Chapter 1 of the Bursa Malaysia Securities Berhad Main Market Listing Requirements and the Board considers him to be independent and believes that he should be re-appointed and retained as Independent Non-Executive Director, in particular his experience and contributions to the Board.


Statement accompanying notice of annual general meetingpursuant to paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad

There are no individuals who are standing for election as Director (excluding Directors standing for re-election) at the forthcoming Annual General Meeting.


BOard OF dIreCtOrs

dato’ rahadian mahmud bin mohammad Khalil(Executive Chairman) dato’ Chai Kin Loong(Managing Director)(Resigned w.e.f. 7 February 2013) dato’ Chua tiong moon(Managing Director)(Appointed to the Board w.e.f. 23 November 2012)(Appointed as Managing Director w.e.f. 7 February 2013) Brig. General (ret.) datuk muhamad Yasin bin Yahya(Independent Non-Executive Director) Chua ah nye(Independent Non-Executive Director)(Resigned w.e.f. 6 July 2012) Boey tak Kong(Independent Non-Executive Director) datuk Chai Woon Chet (Executive Director) Chang Yew Kwong (Independent Non-Executive Director) Lee Caw Cing(Independent Non-Executive Director)(Appointed w.e.f. 9 August 2012)

corporate information

audIt COmmIttee

Boey tak Kong(Chairman) Brig. General (ret.) datuk muhamad Yasin bin Yahya(Member) Lee Caw Cing(Member)

nOmInatIOn COmmIttee

Brig. General (ret.) datuk muhamad Yasin bin Yahya(Chairman) Boey tak Kong(Member) Lee Caw Cing(Member)

remuneratIOn COmmIttee

Brig. General (ret.) datuk muhamad Yasin bin Yahya(Chairman) Lee Caw Cing (Member) dato’ Chua tiong moon(Member)


CORPORATE INFORMATION

COmPanY seCretarIes

molly Gunn Chit Geok (MAICSA 0673097) Thayaparan A/L M. Rasiah (LS004642)

reGIstered OFFICe

5th Floor, Bangunan IndahsabahSegama Commercial Complex88000 kota kinabalu, SabahTel No. : 088-250002Fax No. : 088-269292

PrInCIPaL BusIness address

5th Floor, Bangunan IndahsabahSegama Commercial Complex88000 kota kinabalu, SabahTel No. : 088-250002Fax No. : 088-269292

share reGIstrar

Tricor Investor Services Sdn. Bhd.Level 17, The Gardens North TowerMid Valley City, Lingkaran Syed Putra59200 kuala LumpurTel No. : 03-4041 6522Fax No. : 03-4043 9233

audItOrs

Ernst & YoungChartered AccountantsSuite 1-10-W1, 10th FloorCPS Tower, Centre Point SabahNo. 1 Jalan Centre Point88000 kota kinabalu, Sabah

PrInCIPaL BanKers

Hong Leong Bank BerhadHSBC Bank Malaysia Berhad sOLICItOrs

Messrs Satha & CoAdvocates & SolicitorsUnit A-19-3 Level 19 Tower AMenara UOA BangsarNo.5 Jalan Bangsar Utama 159200 kuala Lumpur

stOCK eXChanGe LIstInG

Main Market of Bursa Malaysia Securities BerhadStock code: 7080Stock name: PERMAJU


board of directors

Y. Bhg. dato’ rahadIan mahmud BIn mohammad KhalIl, Malaysian, aged 39 was appointed to the Board on 7 January 2005 and has been the Chairman and Executive Chairman of the Company since 7 January 2005 and 24 May 2005 respectively.

He is actively involved in the reforestation business as well as the construction and manufacturing sectors and is also well versed in the timber industry.

Dato’ Rahadian bin Mohammad Khalil also sits on the Boards of KYM Holdings Berhad, Sanbumi Holdings Berhad and Magna Prima Berhad.

Dato’ Rahadian bin Mohammad Khalil does not have any conflict of interest with Permaju Industries Berhad. He has no family relationship with any other directors and/or major shareholders of the company and has not been convicted for any offences within the past ten years except for traffic offences, if any.

Y. Bhg. dato’ Chua tIong moon, Malaysian aged 54 was appointed to the Board as an Executive Director on 23 November 2012 and as Managing Director on 07 February 2013. He is also a member of the Remuneration Committee.

Dato’ Chua Tiong Moon is a businessman and has been involved in the timber industry for over 35 years with extensive experience in timber extraction, sawmilling and plywood operations. He also has vast experience in financial and operational management of companies involved in property development, manufacturing and quarry business. He also sits on the Board of several other private limited companies.

He is also the Managing Director of Sanbumi Holdings Berhad.

Dato’ Chua Tiong Moon is a substantial shareholder of Permaju Industries Berhad. He does not have any family relationship with any other directors and/or substantial shareholders of the Company and has no convictions for offences within the past ten years.

BoeY taK Kong, Malaysian, aged 59 was appointed to the Board on 2 December 2008 as an Independent Non-Executive Director. He is the Chairman of the Audit Committee and member of the Nomination Committee.

Boey Tak Kong is a Chartered Accountant of the Malaysian Institute of Accountants, a Fellow of the Chartered Association of Certified Accountants, United Kingdom, an Associate of the Institute of Chartered Secretaries & Administrators, United Kingdom, a Member of the Malaysian Institute of Management and an Associate of the Institute of Marketing Malaysia. He has 28 years of senior financial management, internal audit and overseas business development experience with six public listed companies with listing in Malaysia, Singapore, United Kingdom, Australia and New Zealand. Presently, he is the Managing Director of Terus Mesra Sdn Bhd, a strategic management and leadership development training company.

Boey Tak Kong has no conflict of interest with Permaju Industries Berhad. He does not have any family relationship with any other directors and/or substantial shareholders of the Company and has no convictions for offences within the past ten years.

He sits on the Board of Dutch Lady Milk Industries Berhad, Gadang Holdings Berhad, Green Packet Berhad, Censof Holdings Berhad and Formis Resources Berhad.


board of directors

BrIg. general (ret.) datuK muhamad YasIn BIn YahYa, Malaysian, aged 65 was appointed as an Independent Non-Executive Director of the Company on 29 June 2004. He is presently the Chairman of the Nomination and Remuneration Committees and is also a member of the Audit Committee.

Brig. General (Ret.) Datuk Muhamad Yasin bin Yahya joined the military service in 1970 and was commissioned as a Second Lieutenant in the Royal Malay Regiment in 1971. He served as a Special Forces Officer and received training locally as well as in Australia, New Zealand and Indonesia. He is a graduate of the Malaysian Armed Forces Staff College and the Malaysian Armed Forces Defence College. During his military career he held a variety of command and staff positions and also served as a United Nations Military Observer in the Iran-Iraq border under UNIIMOG Mission.

Brig. General (Ret.) Datuk Muhamad Yasin bin Yahya does not have any conflict of interest with Permaju Industries Berhad. He has no family relationship with any other directors and/or major shareholders of the Company and has not been convicted for any offences within the past ten years except for traffic offences, if any.

Y. Bhg. datuK ChaI Woon Chet, Malaysian, aged 33 was appointed to the Board on 29 November 2010 as a Non-Independent Non-Executive Director and was appointed as an Executive Director on 25 May 2012.

He has a Diploma in Business Economics (KDU). He was a Marketing Manager of a leading timber exporter for 8 years during which time he was involved with buyers from Japan, Korea, Europe and South Africa. He is presently the Managing Director of Cergazam Sdn Bhd, Cergaz Autohaus Sdn Bhd, TP Auto Sdn Bhd, Capital Intertrade Sdn Bhd and Team Japs Sdn Bhd-all of which are wholly-owned subsidiaries of Permaju Industries Berhad.

He is also a director of several private companies involved in property development and the food industry.

Datuk Chai Woon Chet does not have any conflict of interest with Permaju Industries Berhad. He has no family relationship with any other directors of the Company and is the son of Y. Bhg. Tan Sri Datuk Chai Kin Kong and the nephew of Y. Bhg. Dato’ Chai Kin Loong and Chai Kim Chong, who are all substantial shareholders of the Company. He has not been convicted for any offences within the past ten years except for traffic offences, if any.

Chang YeW KWong, Malaysian, aged 56, was appointed to the Board on 02 March, 2011 as an Independent Non-Executive Director.

He holds a Bachelor of Arts(Accountancy) degree from the City of London Polytechnic. He spent more than 10 years working with a leading financial institution where he rose to the rank of Senior Manager in corporate loans and has vast experience in areas of loan documentation, financing and marketing of consumer and corporate loans. He is presently attached to an investment holding company where he coordinates and oversees the company’s financial matters.

Chang Yew Kwong does not have any conflict of interest with Permaju Industries Berhad. He has no family relationship with any other directors and/or major shareholders of the Company and has not been convicted for any offences within the past ten years except for traffic offences, if any.

lee CaW CIng, Malaysian, aged 40 was appointed to the Board on as an Independent Non-Executive Director. He is also a member of the Audit, Remuneration and Nomination Committees.

Lee Caw Cing graduated with a Bachelor of Science in Computer System Information from Arizona State University, United States of America. He started his career as an Analyst Programmer with an IT firm. Subsequently, he joined a public listed company as a technical consultant to provide consultancy and project management for Disaster Recovery Programme projects. Thereafter, he joined an International ERP solution provider to manage project development including customization and he was responsible for pre-sales technical supports and products business process flow.

Presently, he is the Director of Sales & Marketing in Era Baru Sdn Bhd where he is responsible for the overall sales and marketing aspects of all developments in the Era Baru Group. He is key player in planning, deciding and implementing the Era Baru Group’s sales and marketing strategies.

He has no conflict of interest with Permaju Industries Berhad. He does not have any family relationship with any other directors and/or substantial shareholders of the Company and has no convictions for offences within the past ten years.


chairman’s Statement

OVerVIeW

The Group’s principal activity during the year continued to be that of automobile distribution of the Volkswagen and Ford franchises. As expected, the new conditions imposed by the financial institutions on hire purchase loans had an adverse impact on the demand for motor vehicles and resulted in a lower than anticipated sales volume of both the franchises. Furthermore, competition from other brands and the introduction of new models contributed to the low margins generated from the sales of motor vehicles. However, revenue from workshop services increased significantly and the positive contribution helped to mitigate the adverse impact of the sales operations.

The Group’s property development activity carried out by it’s 70% subsidiary – Hardie Development Sdn Bhd, saw steady progress with the completion of site preparation works and the initial infrastructure works. Discussion and feasibility study works involving a proposed hypermarket project is still on-going.

FInanCIaL PerFOrmanCe

During the financial year under review the Group recorded a revenue of RM204.68 million and registered a loss after tax of RM11.22 million as compared to a revenue of RM190.37 million and a loss after tax of RM9.72 million for the previous corresponding period. This represents a 7.5% increase in revenue and a 15.4% higher loss after tax.

On behalf of the Board of directors of Permaju Industries Berhad, it gives me great pleasure to present the Annual Report and Financial Statements of the Group and the Company for the financial year ended 31 december 2012.


The Group’s loss after tax was mainly attributable to the provision for impairment of receivables, the low and declining margins for automotive sales and an increase in the Group’s finance cost incurred during the year.

Future PrOsPeCts

The Group’s automobile business is expected to continue to face stiff competition from competitors of similar and other models with margins expected to remain minimal. Nevertheless, the Group proposes to initiate cost saving measures and to rationalise its procurement and marketing strategies with a view to improving margins and competitiveness. Further, consideration would be given to the prospects of placing more emphasis on automotive-related services which could generate better margins and contribute positively to the Group’s earnings.

In relation to the Group’s property development business sales of shops and residential houses in the first two phases is expected to commence in the second half of the financial year 2013.

COrPOrate resPOnsIBILtY

The Group is committed to its Corporate Responsibility initiatives. During the year the Group participated in a scholarship award programme called Project CHange administered by Messrs Crowe Howarth. Under this programme the Group agreed to sponsor one student undertaking a course in an institute of higher learning by paying a sum of RM10,000.00 per annum for a period of four(4) years towards the cost of the student’s tuition fees.

dIVIdends

The Board of Directors has not proposed any dividend in respect of the financial year ended 31 December 2012.

aPPreCIatIOn

On behalf of the Board of Directors I wish to thank our valued shareholders and customers for their continued support. To our suppliers, financiers, business associates and governmental agencies we wish convey our appreciation for your cooperation and understanding.

The Board wishes to take his opportunity to thank the Directors of the Group who left us during the year and also the management and staff of the Group for their contribution, dedication and hard work during the year.

datO’ rahadIan mahmud BIn mOhammad KhaLILExecutive Chairmankota kinabalu, Sabah.


audit committeereport

ChaIrman

Boey Tak kong (Independent Non-Executive Director)

memBers Brig. General (Ret.) Datuk Muhamad Yasin bin Yahya (Independent Non-Executive Director) Lee Caw Cing (Independent Non-Executive Director)

terms OF reFerenCe

1. COnstItutIOn

1.1 The Board shall establish a Committee of the Board to be known as the Audit Committee.

2. memBershIP

2.1 The Committee shall be appointed by the Board from amongst their members which fulfils the following requirements:

(a) the Committee must be composed of no fewer than 3 members, a majority of whom must be independent directors;

(b) all members of the Audit Committee shall be non-executive directors and should be financially literate; and(c) at least one member of the Committee:

(i) must be a member of the Malaysian Institute of Accountants; or(ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years’ working

experience and:(aa) he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act

1967; or (bb) he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of

the Accountants Act 1967.(iii) fulfils such other requirements as prescribed or approved by the Exchange.

2.2 The members of the Committee shall elect a Chairman from among themselves who shall be an independent director.

2.3 No alternate director should be appointed as a member of the Committee.

2.4 In the event of any vacancy in the Committee resulting in the non-compliance of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad pertaining to the composition of the Audit Committee, the Board of Directors shall within three months of that event fill the vacancy.

2.5 The term of office and performance of the Committee and each of its members must be reviewed by the Board of Directors at least once every 3 years to determine whether the Committee and its members have carried out their duties in accordance with their terms of reference.



terms OF reFerenCe (COnt’d)

3. authOrItY

3.1 The Committee is authorised by the Board:

(i) to investigate any activity within its terms of reference;

(ii) to seek any information it requires from any employee and all employees are directed to cooperate with any request made;

(iii) to have direct communication with and access to the external auditors and person(s) carrying out the internal audit function or activity;

(iv) to obtain external legal or other independent professional advice and secure attendance of outsiders with relevant experience and expertise – if it considers this necessary; and

(v) to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary.

3.2 The Committee does not have any executive powers. It shall report to the Board of Directors on the matters that it has considered and its recommendations and comments thereon.

4. sCOPe and FunCtIOns

4.1 The scope and functions of the Committee shall be:

(a) in respect of the appointment of external auditors:(i) to review whether there is reason (supported by grounds) to believe that the external auditors are not suitable

for reappointment;(ii) to consider the nomination of a person or persons as external auditors and to determine the audit fee;(iii) to consider any questions of resignation or dismissal of external auditors.

(b) (i) to discuss with the external auditor before the audit commences, the nature and scope of the audit and ensure co-ordination where more than one audit firm is involved;

(ii) to discuss problems and reservations arising from the audit with the auditors, without management presence – if necessary;

(iii) to review the external auditors’ management letter and management’s response.

(c) to review the quarterly and year end financial statements and focus on:(i) any changes in or implementation of major accounting policies and practices;(ii) significant audit adjustments;(iii) going concern assumptions; and(iv) compliance with accounting standards and other legal requirements.

(d) to report to the Board of Directors all pertinent issues which are necessary to be reported;



4. sCOPe and FunCtIOns (COnt’d)

4.1 The scope and functions of the Committee shall be (Cont’d):

(e) to perform the following duties in relation to the internal audit function exists:(i) review the adequacy of the scope, function, competency, resources and authority necessary to carry out the

work and that it reports directly to the Audit Committee;(ii) review the internal audit programme, processes and results and ensure that appropriate action is taken on

the recommendations;(iii) review and appraise the performance of members of the internal audit function;(iv) approve the appointment and termination of senior internal audit personnel;(v) review the resignations of internal audit personnel and give them the opportunity to submit reasons for their

resignations; and(vi) review the follow-up actions by management on the weaknesses of internal accounting procedures and

controls as highlighted by the internal auditors.

(f) to review any significant transactions which are not within the normal course of business and any related party transactions that may arise within the Company or Group;

(g) consider major findings of internal investigations and management’s response; and

(h) to perform any other work as may be directed by the Board from time to time.

5. meetInG, mInutes and rePOrtInG

5.1 Meeting shall be held not less than four (4) times a year. The Chief Financial Officer, the Head of Internal Audit and a representative of the external auditors shall normally be invited to attend the meeting. Other members of the Board may attend the meeting upon the invitation of the Committee. To form a quorum the majority of members present must be independent directors.

5.2 The Company Secretary shall be the Secretary of the Committee or in his absence, another person authorised by the Chairman of the Committee.

5.3 The Committee should meet with the external auditors without any executive Board members present at least twice a year.

5.4 The secretary shall keep minutes of each meeting which shall be distributed to each member of the Committee. The

Chairman of the Committee shall report to the Board on each meeting.




5. meetInG, mInutes and rePOrtInG (COnt’d)

5.5 The Committee shall regulate its own procedure, in particular:

(a) the calling of meetings;(b) the notice to be given of such meetings;(c) the voting and proceedings of such meetings;(d) the keeping of minutes; and(e) the custody, production and inspection of such minutes

detaILs OF attendanCe OF memBers at audIt COmmIttee meetInGs

During the financial year ended 31 December 2012, there were six (6) Audit Committee Meetings held. The details of the attendance of each member are as follows:

audit Committee meeting Feb ‘12 Apr ‘12 may ‘12 jun ‘12 aug ‘12 Nov ‘12

Committee members Position attendance total %

Boey Tak kong Chairman • • • • • • 6/6 100

Brig. General (Ret.) DatukMuhamad Yasin bin Yahya

Member X • • • • • 5/6 83

Lee Caw Cing (Appointed w.e.f. 9 August 2012)

Member N/A N/A N/A N/A • • 2/2 100

Chua Ah Nye (Resigned w.e.f. 6 July 2012)

Member • • • • N/A N/A 4/4 100

Total number of meetings held: 6

summarY OF aCtIVItIes

In discharging its functions and duties in accordance with its Terms of Reference, the Audit Committee had carried out the following activities during the financial year ended 31 December 2012:

(i) Reviewed and discussed the audit plan presented by the external auditors and ensured its scope was adequate;(ii) Reviewed and discussed the Group’s unaudited quarterly results together with the relevant reports and make recommendations

to the Board of Directors for approval;(iii) Reviewed the annual financial statements of the Company and its subsidiaries together with the external auditors’ reports and

discussed various audit and accounting issues; and(iv) Considered and recommended the reappointment and remuneration of the external auditors;



InternaL audIt FunCtIOn

The Group has been outsourcing the Internal Audit function to MAC & Associates for the whole year of 2012. The principal responsibility of the Internal Audit Department is to undertake regular and systematic reviews of the system of controls so as to provide reasonable assurance to the Committee on the adequacy of the internal controls and that they have been operating satisfactorily and effectively.

In attaining these objectives, the scope of activities of the Internal Audit function include the following:

(a) review and appraise the soundness, adequacy and application of the system of internal controls and recommend improvements thereon;

(b) ascertain the extent of compliance with established policies, procedures and statutory requirements;

(c) appraise the reliability, integrity and usefulness of financial and management information developed;

(d) review the controls for safeguarding assets and as appropriate, verify the existence of assets; and

(e) identify ways and opportunities to improve the effectiveness and efficiency of the operations and processes of the Group.

The total costs incurred for the Internal Audit function during the financial year ended 31 December 2012 amounted to RM16,290.



The Malaysian Code on Corporate Governance 2012 (“the Code”) sets out the broad principles and specific recommendations on structures and processes which companies should adopt in making good corporate governance an integral part of their business dealings and culture.

The Board of Directors (“the Board”) of Permaju Industries Berhad has always been supportive of the adoption of the principles as set out in the Code. The Board is committed to ensure that the highest standards of corporate governance are practised throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholders' value and the performance of the Company.

The Board is pleased to report to shareholders on the manner the Group has applied the principles, and the extent of compliance with the recommendations of the Code throughout the year ended 31 December 2012.

a. the BOard OF dIreCtOrs

(i) the Board

The Board consists of members from different backgrounds and diverse expertise in leading and directing the Group’s business operation. The Board is responsible for the control and proper management of the Company. The Board has delegated specific responsibilities to three main committees namely the Audit, Remuneration and Nomination Committees, which operate within the defined constitution or terms of reference approved by the Board. These Committees have the authority to examine particular issues and report to the Board with their recommendations. The ultimate responsibility for the final decision on all matters, however lies with the entire Board.

The Board has formally established a Board Charter that clearly sets out the roles and responsibilities, composition and processes related to key governance activities. The Board will periodically review the Board Charter which is published on the corporate website: www.permaju.com.my.

The Board has also formalised a Code of Conduct for its directors which is incorporated in the Board Charter. The Board would periodically review the said Code of Conduct.

(ii) Board Composition

The Board currently consists of three Executive Directors and four Independent Non-Executive Directors. The composition of the Board complies with paragraph 15.02 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“BMSB”).

The Group is led and controlled by an experienced Board, many of whom have intimate knowledge of the business. There is a clear division of responsibility between the Chairman and the Managing Director to ensure that there is a balance of power and authority. The management of the Group’s business and implementation of policies and day-to-day running of the business is delegated to the Executive Directors. The Independent Non-Executive Directors provide unbiased and independent views to safeguard the interests of shareholders.

The Board considers that the current size of the Board adequate and facilitates effective decision-making. The Nomination Committee has reviewed the present composition of the Board and the three main existing committees and is satisfied that they have adequately carried out their functions within their scope of work.

corporate goVernance Statement


a. the BOard OF dIreCtOrs (COnt’d)

(iii) Board meetings

The annual calendar of at least four (4) meetings is agreed at the beginning of each year, with additional meetings convened as and when necessary. Besides Board meetings, the Board also exercises control on matters that require Board’s approval through Directors’ Circular Resolutions. Amongst others, key matters such as approval of annual and quarterly results, financial statements, major acquisitions and disposals, major investments, appointment of Directors are discussed and decided by the Board.

During the financial year ended 31 December 2012, nine (9) Board Meetings were held. The attendance record of each Director is as follows:

Board of directors’ meeting Feb ’12

Apr ‘12

may ‘12

may ‘12

jun‘12

aug ’12

aug ‘12

Sep ‘12

Nov ‘12

directors Position attendance total %Dato’ RahadianMahmud binMohammad khalil

Executive Chairman

• • • • • • • • • 9/9 100

Dato’ Chua Tiong Moon (Appointed w.e.f. 23 November 2012) (Appointed as MD w.e.f.7 February 2013)

Managing Director

N/A N/A N/A N/A N/A N/A N/A N/A • 1/1 100

Brig. General (Ret.)Datuk Muhamad Yasin bin Yahya

Independent Non-Executive Director

X • • • • • • • • 8/9 89

Boey Tak kong Independent Non-Executive Director

• • • • • • • • • 9/9 100

Datuk Chai Woon Chet ExecutiveDirector

• • • • • • • • • 9/9 100

Chang Yew kwong Independent Non-Executive Director

• • • • • • • • • 9/9 100

Lee Caw Cing(Appointed w.e.f. 9 August 2012)


N/A N/A N/A N/A N/A • • • • 4/4 100

Dato’ Chai kin Loong(Resigned w.e.f. 7 February 2013)

Managing Director

• • X • • • • • X 7/9 78

Chua Ah Nye(Resigned w.e.f. 6 July 2012)


• • X • • N/A N/A N/A N/A 4/5 80


CORPORATE GOVERNANCE STATEMENT



(iv) Supply of Information

All Directors are provided with an agenda and a set of board papers issued in sufficient time prior to the Board meetings to ensure that the Directors can appreciate the issues to be deliberated and to obtain further explanations, where necessary.

In addition, there is a schedule of matters reserved specifically for the Board’s decision, including amongst others, the approval of corporate policies and procedures, Group operational plan and budget, acquisitions and disposals of undertakings and properties that are material to the Group, major investments, changes to management and control structure of the Group, including key policies, procedures and authority limits.

In exercising their duties, the Directors have access to all information within the Company. All Directors have access to the advice and services of the Company Secretaries and are updated on new statutory regulations or requirements concerning their duties and responsibilities. They may obtain independent professional advice at the Company’s expense in furtherance of their duties.

(v) Appointment to the Board

The Nomination Committee shall consist of not less than three (3) members and all members are to be Non-Executive with the majority being independent. The present members of the Nomination Committee are Brig. General (Ret.) Datuk Muhamad Yasin bin Yahya (Independent Non-Executive Director) who is the Chairman, Boey Tak kong (Independent Non-Executive Director) and Lee Caw Cing (Independent Non-Executive Director).

The Nomination Committee assists the Board on the following functions:

(1) to review regularly, and at least not less than once a year, the structure, size and composition of the Board and make recommendation to the Board as regards any changes that may, in their view, be beneficial to the company as well as review on its compositions to improve the gender diversity;

(2) to review the required mix of skills, experience and core competencies which Non-Executive Directors bring to the Board;

(3) to implement a process, to be carried out annually, to assess the effectiveness of the Board as a whole, committees of the Board and the contribution of individual directors;

(4) to be responsible for identifying and recommending to the Board candidates to fill Board vacancies;(5) to recommend to the Board directors who are retiring by rotation to be put forward for re-election; and(6) to recommend to the Board the continuation or not in service of any director who has reached the age of 70.




(v) Appointment to the Board (Cont’d)

During the year, the Nomination Committee had assisted the Board on the following functions:

(1) reviewed the structure, size and composition of the Board and make recommendation to the Board as regards any changes that may, in their view, be beneficial to the company;

(2) reviewed the required mix of skills, experience and core competencies which Non-Executive Directors bring to the Board;

(3) implemented a process, assessed the effectiveness of the Board as a whole, committees of the Board and the contribution of individual directors;

(4) identified and recommended to the Board candidates to fill Board vacancies; and(5) recommended to the Board directors who are retiring by rotation to be put forward for re-election.

During the financial year ended 31 December 2012, the Nomination Committee had four (4) meetings:

nomination Committees’ meetingFeb’12

may ‘12

aug ’12

Nov ‘12

directors Position attendance total %

Brig. General (Ret.) Datuk Muhamad Yasin bin Yahya Chairman X • • • 3/4 75

Boey Tak kong Member • • • • 4/4 100

Lee Caw Cing (Appointed w.e.f. 9 August 2012) Member N/A N/A • • 2/2 100

Chua Ah Nye (Resigned w.e.f. 6 July 2012) Member • • N/A N/A 2/2 100


(vi) Re-election of Directors

In accordance with the Company’s Articles of Association, one-third (1/3) of the Directors for the time being shall retire from office and an election of Directors shall take place. The Articles further provide that each Director shall retire once in every three (3) years but shall be eligible for re-election.

(vii) Directors’ Training

As required under the Main Market Listing Requirements of Bursa Securities, all the Directors have attended the Directors’ Mandatory Accreditation Programme. The Directors will continue to attend various professional programmes necessary to enhance their professionalism in the discharge of their duties.




(vii) Directors’ Training (Cont’d)

During the financial year ended 31 December 2012, the Directors have evaluated their own training needs on a continuous basis and attended the following:

dato’ rahadian mahmud bin mohammad Khalil

• Business Sustainability – Making a Difference in Performance 25 May 2012

dato’ Chua tiong moon


Brig. General (ret.) datuk muhamad Yasin bin Yahya


Boey tak Kong

• Corporate Governance The Competitive Advantage 16 April 2012

• Directors & Officers Liability: The Key Trend in D&O Liability 19 April 2012

• Accountants For Business Forum: Diversity Driving Performance In Global Business 14 May 2012

• Malaysian Forum On Business Sustainability 24 May 2012

• 10th Women Summit 2012 – Break New Ground 17 July 2012

• Malaysian Code On Corporate Governance 2012 6 September 2012

• Corporate Commercial Laws Update • Corporate Fraud In Malaysia & Corporate Health Check• Corporate Governance & Whistle Blowing• Security: Kidnapping & Extortion

31 October 2012 to2 November 2012

• Too Many Bosses, Too Few Leaders 6 November 2012

datuk Chai Woon Chet


Chang Yew Kwong


Lee Caw Cing

• Mandatory Accreditation Programme for Directors of Public Listed Company (Pursuant to Paragraph 15.09 of Bursa Securities Listing Requirements)

7 & 8 November 2012



B. dIreCtOrs’ remuneratIOn

(i) remuneration Committee

The Remuneration Committee shall consist of not less than three members. The present members of the Remuneration Committee are Brig. General (Ret.) Datuk Muhamad Yasin bin Yahya (Independent Non-Executive Director) who is the Chairman, Dato’ Chua Tiong Moon (Managing Director) appointed to the Remuneration Committee on 22 February 2013 and Mr Lee Caw Cing (Independent Non-Executive Director) was appointed to the Remuneration Committee on 9 August 2012.

During the financial year ended 31 December 2012, one meeting was held on 23 November 2012. All the members attended the meeting.

(ii) remuneration Policy

The Remuneration Committee determines and agrees with the Board the broad policy for remuneration of the Company’s Managing Director, Executive Directors and senior members of the Company as the Committee is directed to consider. The Remuneration Committee also determines and recommends to the Board any performance related pay schemes for Executive Directors.

(iii) details of the directors’ remuneration

The aggregate remuneration of the Directors based on the Company and Group levels for the financial year ended 31 December 2012 is set out below:

A. Aggregate Remuneration

Company GroupExecutive directors

rm

Non-Executive directors

rm

Executive directors

rm


rmSalary and other emoluments 403,200 18,000 935,820 18,000Fees 108,333 170,833 108,333 178,833Bonus - - 44,800 -Benefits-in-kind - - - -total 511,533 188,833 1,088,953 196,833



B. dIreCtOrs’ remuneratIOn (COnt’d)

(iii) details of the directors’ remuneration (Cont’d)

B. Band (RM)

Company Group

Band (rm)Executive directors


Executive directors


RM50,000 and below 2 5 1 6RM50,001 - RM100,000 0 0 0 0RM100,001 – RM200,000 1 0 0 0RM200,001 – RM300,000 1 0 1 0RM300,001 – RM400,000 0 0 1 0RM400,001 – RM500,000 0 0 1 0total 4 5 4 6

The Board is of the opinion that the disclosure of Directors’ remuneration through the “band disclosure” is sufficient to meet the objectives of the Code. They feel that it is inappropriate to disclose the remuneration of individual Directors and has opted not to do so.

C. reLatIOns WIth sharehOLders

The Company recognises the importance of keeping shareholders and investors informed of the Group’s business and corporate developments. The Company’s annual reports, quarterly financial results and any announcements on material corporate exercises are the primary modes of disseminating information on the Group’s business activities and financial performance.

Any queries and concerns regarding the Group may be conveyed to the following person:

Brig. General (Ret.) Datuk Muhamad Yasin bin Yahya : Senior Independent Non-Executive Director Telephone number : 088-250002 Facsimile number : 088-269292

Shareholders and members of the public are invited to access the Company’s website at www.permaju.com.my and Bursa Securities website at www.bursamalaysia.com.my to obtain the latest information on the Group.

The Annual General Meeting (“AGM”) is the principal forum for dialogue and interaction with individual shareholders and investors where they may seek clarifications on the Group’s businesses. Shareholders are notified of the meeting and provided with a copy of the Company’s Annual Report 21 days before the meeting. All Directors are available to provide responses to questions from shareholders during this meeting. External Auditors are also present to provide their professional and independent clarification on issues and concerns raised by shareholders. In the event that an answer cannot be readily given at the meeting, the Chairman will undertake to provide a written reply to the shareholder.



d. aCCOuntaBILItY and audIt

(i) Financial Reporting

In presenting the annual financial statements and quarterly announcements of results to shareholders, the Directors are committed to present a balanced and fair assessment of the Group’s position and prospects. The financial reports are also reviewed by the Audit committee to ensure adequacy of information disclosed prior to submission to the Board for approval.

The Board considers that in preparing the financial statements, the Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates. A statement by the Board of their responsibilities in preparing the financial statements is set out on page 25 of this Annual Report.

(ii) Internal Control

The Board continues to review and evaluate the effectiveness of the Group’s systems of internal control to safeguard the shareholders’ investment and the Group’s assets.

The information on the Group’s internal control is presented in the Statement on Risk Management & Internal Control set out on page 26 of this Annual Report.

(iii) Relationship with the External Auditors

The Board has established a close and transparent relationship with the External Auditors of the Company. Representatives of the External Auditors were invited to the Audit Committee Meetings to brief the Audit Committee on specific issues arising from the annual audit of the Group and to give appropriate advice in ensuring due compliance with the approved accounting standards. Significant issues raised were taken note by the Management for improvement.



Under the Companies Act, 1965, the Directors are required to prepare financial statements for each financial year to give a true and fair view of the state of affairs of the Group and the Company. In preparing the financial statements, the Directors have:

• adopted and used accounting policies consistently in dealing with items which are considered material in relation thereto;

• made accounting estimates where applicable that are prudent, just and reasonable; and

• ensured that the Company and the Group have taken reasonable steps to prevent and detect fraud and other irregularities.

DirEcTOrs’ rEsPOnsiBiLiTY Statement(Pursuant to paragraph 15.26 (a) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad)


Paragraph 15.27 (b) of the Main Market Listing Requirements of the BMSB requires the Board of a listed issuer to include in its Company’s Annual Report a “statement about the state of risk management and internal control of the listed issuer as a group”.

The Malaysian Code on Corporate Governance 2012 under Principal 6 states that the Board should establish a sound risk management framework and internal controls system.

The Board of Directors acknowledges that it has overall responsibility in maintaining a sound system of risk management and internal control, including reviewing its adequacy and reporting integrity. The Board also recognises that in establishing such system of risk management and internal control, the systems designed can only manage but not eliminate the risk of failure to achieve business objectives of the Group and that it can only provide reasonable assurance against material misstatement or loss.

The Board has received assurance from the Managing Director and the Chief Financial Officer that the Group’s risk management and internal control system is operating adequately, in all material aspects, based on the risk management and internal control framework of the Group.

Senior management of the Group has been entrusted to continuously monitor the effectiveness and integrity of the system of risk management and internal control, which among others, include the following processes:

• The Board regularly assess the risk issues affecting the Group and formulate risk management strategy to mitigate the potential risk.

• The Board receives and reviews regular reports on key financial data and performance indicators. Quarterly results are compared with the corresponding quarter of the preceding year as well as the preceding quarter and variances are dealt with accordingly.

• The Board also receives regular reports from the management on the Group’s regulatory matters to ensure that they are adequately dealt with.

• The Audit Committee reviews internal and external audit findings and holds discussions with the management on action taken on accounting and internal control issues identified by the internal audit function and the external auditors.

The Internal Audit function of the Group was outsourced to MAC & Associates. Internal audits were conducted on the internal control system of sales administration, inventory management and sales performance against budget of the Group’s automotive business operations in 2012.

During the financial year, there were no material losses, contingencies or uncertainties that would require disclosure in the Group’s Annual Report.

The above Statement on Risk Management and Internal Control was reviewed and approved by the Board on 26 April 2013.

Statement on riSK management and internal control


additional compliance information

During the financial year:

a) No proceeds were raised by the Company from any corporate proposal.

b) The Company did not sponsor any Depository Receipt programme.

c) The Company did not issue any options, warrants or convertible securities during the financial year ended 31 December 2012.

d) There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory bodies during the financial year ended 31 December 2012, which have material impact on the operations or financial position of the Group.

e) The Company did not release any profit estimate, forecast or projection for the financial year. There was no variance between the results for the financial year and the unaudited results previously released by the Company.

f) There was no profit guarantee given by the Company for the financial year ended 31 December 2012.

g) There were no material contracts of the Company and its subsidiaries involving Directors’ and major shareholders’ interests still subsisting at the end of the financial year or entered into since the end of the previous financial year.

Non-audit fee

No non-audit fee was paid to a company affiliated to the external auditors by the Group for the financial year ended 31 December 2012.

recurrent related Party transactions

During the financial year, the Company did not enter into any Recurrent Related Party Transaction.


Share buy-backs

During the financial year ended 31 December 2012, the Company bought back a total of 369,500 of its own shares for a total consideration of RM109,389.15. Details of the shares purchased are as follows:

month

no. of shares Purchased and

retained as treasury shares

highest Purchase Price

Per share(rm)

Lowest Purchase Price

Per share(rm)

Average Purchase Price

Per share(rm)

total Consideration*

(rm)

January 2012 172,500 0.3000 0.2900 0.3004 51,826.14

February 2012 - - - - -

March 2012 100,000 0.2950 0.2950 0.2972 29,715.85

April 2012 97,000 0.2850 0.2850 0.2871 27,847.16

May 2012 - - - - -

June 2012 - - - - -

July 2012 - - - - -

August 2012 - - - - -

September 2012 - - - - -

October 2012 - - - - -

November 2012 - - - - -

December 2012 - - - -

total 369,500 109,389.15

* Including brokerage, commission, clearing house fee and stamp duty.

The Company has not resold or cancelled its treasury shares during the financial year ended 31 December 2012.

ADDITIONAL COMPLIANCE INFORMATION


financial reports

30 DiRectoRs’ RepoRt

35 stAtement by DiRectoRs

35 stAtutoRy DeclARAtion

36 inDepenDent AuDitoRs’ RepoRt

38 stAtements of compRehensiVe income

39 stAtements of finAnciAl position

41 stAtements of chAnges in equity

44 stAtements of cAsh flows

47 notes to the finAnciAl stAtements

108 supplementARy infoRmAtion


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 31 December 2012.

PrIncIPal actIvItIes

The principal activities of the Company are the provision of management services and investment holding. The principal activities of the subsidiaries are stated in Note 18 to the financial statements. There have been no significant changes in the nature of the principal activities during the financial year.

results

Grouprm

companyrm

Loss net of tax (11,218,824) (9,421,831)

loss attributable to:Owners of the Company (10,850,255) (9,421,831)non-controlling interests (368,569) -

(11,218,824) (9,421,831)

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements.

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.

dIvIdend

No dividend has been paid or declared by the Company since the end of the last financial year.

No dividend is proposed in respect of the current financial year.


The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

directors’report

dIrectors

The names of the directors of the Company in office since the date of the last report and at the date of this report are:

Dato’ Rahadian Mahmud Bin Mohammad KhalilDato’ chua tiong moon (Appointed on 23 November 2012)Datuk Muhamad Yasin Bin YahyaBoey Tak KongDatuk chai woon chetChang Yew Kwonglee caw cing (Appointed on 9 August 2012)Dato’ Chai Kin Loong (Resigned on 7 February 2013)chua Ah nye (Resigned on 6 July 2012)

In accordance with the Company’s Articles of Association, Dato’ Rahadian Mahmud Bin Mohammad Khalil, Dato’ Chua Tiong Moon and Lee Caw Cing retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.

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 the 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 as shown in Note 11 to the financial statements) 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.


dIrectors’ Interests

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares in the Company during the financial year were as follows:

number of ordinary shares of rm1 each 1.1.2012 acquired sold 31.12.2012

name of director

Direct interest:Ordinary shares of the CompanyDato’ chua tiong moon 17,486,671 3,400,000 5,357,100 15,529,571

Deemed Interest:Ordinary shares of the Company• Datuk Chai Woon Chet 41,441,196 8,900,000 7,000,000 43,341,196

• The director is deemed to have an interest in the shares of the Company by virtue of his father, Tan Sri Datuk Chai Kin Kong’s and his uncles Dato’ Chai Kin Loong’s and Chai Kim Chong’s direct interest in the Company.

None of the other directors in office at the end of the financial year had any interest in shares in the Company during the financial year.

treasury shares

During the financial year, the Company repurchased 369,500 of its issued ordinary shares from the open market at an average price of RM0.30 per share. The total consideration paid for the repurchase including transaction costs was RM109,390. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.

As at 31 December 2012, the Company held as treasury shares a total of 8,672,500 of its 195,934,471 issued ordinary shares. Such treasury shares are held at a carrying amount of RM3,279,648 and further relevant details are disclosed in Note 27(b) to the financial statements.

directors’report


directors’report

other statutory InformatIon

(a) Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps:

(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 had 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 provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and

(ii) the values attributed to the 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.

(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) any charge on the assets of the Group or 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 or the Company which has arisen since the end of the financial year.

(f) In the opinion of the directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations 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 or of the Company for the financial year in which this report is made.


directors’report

audItors

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors dated 26 April 2013.

dato’ chua tiong moon dato’ rahadian mahmud Bin mohammad Khalil

Kuala Lumpur, Malaysia26 April 2013


We, Dato’ Chua Tiong Moon and Dato’ Rahadian Mahmud Bin Mohammad Khalil, being two of the directors of Permaju Industries Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 38 to 107 are drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2012 and of their financial performance and cash flows for the year then ended.

The information set out in Note 38 to the financial statements have been prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

Signed on behalf of the Board in accordance with a resolution of the directors dated 26 April 2013.

dato’ chua tiong moon dato’ rahadian mahmud Bin mohammad Khalil

Kuala Lumpur, Malaysia26 April 2013

statement bydirectors

statutorydeclaration

Pursuant to Section 169(15) of the Companies Act, 1965

Pursuant to Section 169(16) of the Companies Act, 1965

I, Chuk Chin Leong, being the officer primarily responsible for the financial management of Permaju Industries Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 38 to 108 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declaredby the abovenamed Chuk Chin Leong atKota Kinabalu in the State of Sabahon 26 April 2013 chuk chin leong

Before me,

No. S 099Abdul Karim Bin Abu BakarNo. 33, Tingkat Bawah, Jalan Tugu, Kg. Air,88000 Kota Kinabalu, Sabah


independent auditors’ reportTo the members of Permaju Industries Berhad (Incorporated in Malaysia)

rePort on the fInancIal statements

We have audited the financial statements of Permaju Industries Berhad, which comprise the statements of financial position as at 31 December 2012 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 38 to 107.

Directors’ responsibility for the financial statements

The directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2012 and of their financial performance and cash flows for the year then ended.


independent auditors’ reportTo the members of Permaju Industries Berhad (Incorporated in Malaysia)

rePort on other leGal and reGulatory requIrements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) 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.

(c) The auditors’ reports on the financial statements of subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.

other rePortInG resPonsIBIlItIes

The supplementary information set out in Note 38 on page 108 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respect, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

other matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

ernst & young yong voon KarAF: 0039 1769/04/14(J/PH)chartered Accountants chartered Accountant

Kota Kinabalu, Sabahmalaysia26 April 2013


statements of comprehensive incomeFor the financial year ended 31 December 2012

Group companynote 2012

rm2011

rm2012

rm2011

rm

revenue 4 204,684,762 190,373,991 - -

Cost of sales (202,150,887) (184,930,543) - -Gross profit 2,533,875 5,443,448 - -

other items of incomeInterest income 5 270,617 353,616 13,053 14,995Other income 6 13,092,966 13,758,817 260,326 1,644,295Dividend income 7 153,900 120,149 153,900 120,149

other items of expenseSelling and marketing expenses (5,135,112) (6,236,983) - -Administrative expenses (18,326,018) (21,807,080) (9,802,467) (8,571,907)finance costs 8 (3,157,104) (1,409,812) (14,889) (25,677)loss before tax 9 (10,566,876) (9,777,845) (9,390,077) (6,818,145)Income tax expense 12 (651,948) 54,824 (31,754) (648)loss for the year, net of tax, representing total

comprehensive loss for the year (11,218,824) (9,723,021) (9,421,831) (6,818,793)

loss attributable to:Owners of the Company (10,850,255) (9,517,743) (9,421,831) (6,818,793)non-controlling interests (368,569) (205,278) - -

(11,218,824) (9,723,021) (9,421,831) (6,818,793)

loss per ordinary share attributable to owners of the company (sen per share):

basic 13 (5.81) (5.30)



statements of financial positionAs at 31 December 2012


rm2011

rm2012

rm2011

rm

assets

non-current assetsProperty, plant and equipment 14 47,812,668 53,905,188 372,944 550,963Investment properties 15 4,204,545 4,213,808 - -biological assets 16 4,548,106 4,057,185 - -intangible assets 17 48,114,285 48,114,285 - -Investments in subsidiaries 18 - - 146,247,830 151,974,553

104,679,604 110,290,466 146,620,774 152,525,516

current assetsProperty development costs 19 39,931,045 18,663,330 - -inventories 20 79,008,653 85,265,141 - -Investment securities 21 6,950,910 7,257,105 6,950,910 7,257,105trade and other receivables 22 38,588,152 27,803,569 86,483,445 83,020,325Prepayments 283,376 303,329 - 14,999Tax recoverable 309,071 618,655 31,292 38,453cash and bank balances 23 12,526,111 15,135,253 274,246 548,240

177,597,318 155,046,382 93,739,893 90,879,122

total assets 282,276,922 265,336,848 240,360,667 243,404,638

equity and liabilities

current liabilitiesloans and borrowings 24 23,270,275 29,945,215 83,939 159,549trade and other payables 25 83,868,923 62,863,730 92,768,746 86,119,264

107,139,198 92,808,945 92,852,685 86,278,813

net current assets 70,458,120 62,237,437 887,208 4,600,309



rm2011

rm2012

rm2011

rm

non-current liabilitiesloans and borrowings 24 13,717,101 346,175 103,875 187,814Deferred tax liabilities 26 1,364,271 1,397,132 8,032 10,715

15,081,372 1,743,307 111,907 198,529

total liabilities 122,220,570 94,552,252 92,964,592 86,477,342

net assets 160,056,352 170,784,596 147,396,075 156,927,296

equity attributable to owners of the companyshare capital 27 195,934,471 195,934,471 195,934,471 195,934,471Share premium 27 3,805,990 3,805,990 3,805,990 3,805,990treasury shares 27 (3,279,648) (3,170,258) (3,279,648) (3,170,258)Accumulated losses (63,030,753) (52,180,498) (77,634,530) (68,212,699)Merger (deficit)/ relief reserve 28 (8,141,012) (8,141,012) 8,075,692 8,075,692Capital redemption reserve 29 20,494,100 20,494,100 20,494,100 20,494,100

145,783,148 156,742,793 147,396,075 156,927,296non-controlling interests 14,273,204 14,041,803 - -

total equity 160,056,352 170,784,596 147,396,075 156,927,296

total equity and liabilities 282,276,922 265,336,848 240,360,667 243,404,638

statements of financial positionAs at 31 December 2012



statements of changes in equityFor the financial year ended 31 December 2012

a

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non-distributable

noteequity

totalrm

sharecapital

rm

share premium

rm

treasury shares

rm

merger(deficit)/

relief reserve

rm

capital redemption

reserverm

accumulated losses

rm

2012company

opening balance at 1 january 2012 156,927,296 195,934,471 3,805,990 (3,170,258) 8,075,692 20,494,100 (68,212,699)

total comprehensive loss (9,421,831) - - - - - (9,421,831)

transactions with ownersPurchase of treasury shares (108,596) - - (108,596) - - -transaction costs (794) - - (794) - - -total transactions with

owners 27 (109,390) - - (109,390) - - -closing balance at 31 december 2012 147,396,075 195,934,471 3,805,990 (3,279,648) 8,075,692 20,494,100 (77,634,530)

opening balance at 1 january 2011 164,682,892 195,934,471 3,805,990 (2,233,455) 8,075,692 20,494,100 (61,393,906)

total comprehensive loss (6,818,793) - - - - - (6,818,793)

transactions with ownersPurchase of treasury shares (929,413) - - (929,413) - - -transaction costs (7,390) - - (7,390) - - -total transactions with

owners 27 (936,803) - - (936,803) - - -closing balance at 31 december 2011 156,927,296 195,934,471 3,805,990 (3,170,258) 8,075,692 20,494,100 (68,212,699)




statements of cash flowsFor the financial year ended 31 December 2012


rm2011

rm2012

rm2011

rm

operating activitiesLoss before tax (10,566,876) (9,777,845) (9,390,077) (6,818,145)

Adjustments for:finance costs 8 3,157,104 1,409,812 14,889 25,677Interest income 5 (270,617) (353,616) (13,053) (14,995)Dividend income 7 (153,900) (120,149) (153,900) (120,149)Amortisation of investment properties 15 9,263 9,262 - -Plant and equipment written off 14 18,696 526,852 - -Net gain on disposal of subsidiaries 6 - (1,651,359) - (1,260,996)Impairment of intangible assets 9 - 436,810 - -Net gain on disposal of investment securities 6 (260,326) (383,289) (260,326) (383,289)Net loss on disposal of property, plant and

equipment 9 65,199 519,806 - -Depreciation of property, plant and equipment 14 3,496,925 3,889,578 218,019 212,017Impairment loss on investments in subsidiaries 9 - - 7,126,653 5,758,558Net fair value loss on held for trading investment

securities 9 871,720 531,330 871,720 531,330Impairment loss on trade receivables 22 1,801,992 1,780,000 - -Impairment loss on other receivables 22 2,205,919 2,520,642 - 286,582Unrealised foreign exchange loss 9 10,944 176,816 - -Total adjustments 10,952,919 9,292,495 7,804,002 5,034,735

Operating cash flows before changes in working capital 386,043 (485,350) (1,586,075) (1,783,410)

changes in working capital:Increase in property development costs (21,267,715) (11,315,391) - -Decrease/(increase) in inventories 6,256,488 (25,115,566) - -(Increase)/decrease in trade and other

receivables (14,803,439) 23,619,483 (3,463,120) 21,648,850Decrease in prepayments 19,953 294,580 14,999 -increase in trade and other payables 21,005,193 21,571,169 6,649,483 13,315,499total changes in working capital (8,789,520) 9,054,275 3,201,362 34,964,349Cash flows (used in)/from operations carried

forward (8,403,477) 8,568,925 1,615,287 33,180,939




rm2011

rm2012

rm2011

rm

Cash flows (used in)/from operations brought forward (8,403,477) 8,568,925 1,615,287 33,180,939

interest received 270,617 353,616 13,053 14,995interest paid (3,157,104) (1,409,812) (14,889) (25,677)Income tax paid (503,888) (434,019) (27,276) -Income tax refunded 128,664 439,511 - -Net cash flows (used in)/from operating

activities (11,665,188) 7,518,221 1,586,175 33,170,257

Investing activitiesIncrease in investments in subsidiaries 18 - - (1,399,930) (1,100,000)Proceeds from disposal of subsidiaries - 1,097,557 - 1,261,006Proceeds from disposal of property, plant and

equipment 3,213,790 837,051 - -Purchase of property, plant and equipment 14 (594,409) (1,271,428) (40,000) -Proceeds from sale of investment securities 6,408,486 9,230,222 6,408,486 9,230,222Tree planting expenditure (208,601) (303,002) - -Net cash outflow on acquisition of a subsidiary 18 - (33,543,696) - (33,680,000)Purchase of investment securities (6,713,685) (8,702,004) (6,713,685) (8,702,004)Dividend received 153,900 112,987 153,900 112,987Net cash flows from/(used in) investing

activities 2,259,481 (32,542,313) (1,591,229) (32,877,789)




rm2011

rm2012

rm2011

rm

financing activitiesIssuance of share capital to non-controlling

interest of a subsidiary company 599,970 - - -Decrease of floor stock facility - (187,776) - -Purchase of treasury shares 27(b) (109,390) (936,803) (109,390) (936,803)Short-term deposits pledged for bank guarantees (448,079) (2,142,500) - -Proceeds from loans and borrowings 13,357,728 - - -Repayment from loan debtor - 14,500,000 - -Repayment of obligations under finance leases (319,947) (241,612) (159,550) (176,079)Net cash flows from/(used in) financing

activities 13,080,282 10,991,309 (268,940) (1,112,882)

Net increase/(decrease) in cash and cash equivalents 3,674,575 (14,032,783) (273,994) (820,414)

cash and cash equivalents at 1 january (21,723,249) (7,690,466) 548,240 1,368,654

cash and cash equivalents at 31 december (note 23) (18,048,674) (21,723,249) 274,246 548,240



notes to the financial statementsFor the financial year ended 31 December 2012

1. corPorate InformatIon

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on Bursa Malaysia Securities Berhad. The registered office of the Company is situated at 5th Floor, Bangunan Indahsabah, Segama Commercial Complex, 88000 Kota Kinabalu, Sabah.

The principal activities of the Company are the provision of management services and investment holding. The principal activities of the subsidiaries are stated in Note 18 to the financial statements. There have been no significant changes in the nature of the principal activities during the financial year.

2. summary of sIGnIfIcant accountInG PolIcIes

2.1 Basis of preparation

The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. At the beginning of the current financial year, the Group and the Company adopted new and revised FRS which are mandatory for financial periods beginning on or after 1 January 2012 as described fully in Note 2.2.

The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. The financial statements are presented in Ringgit Malaysia (RM).

2.2 changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except as follows:

On 1 January 2012, the Group and the Company adopted the following new and amended FRS and IC Interpretations mandatory for annual financial periods beginning on or after 1 January 2012.

description

FRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters FRS 124 Related Party DisclosuresIC Interpretation 19 Extinguishing Financial Liabilities with Equity InstrumentsAmendments to FRS 112 Deferred Tax: Recovery of Underlying AssetsAmendments to FRS 7 Disclosures about Transfer of Financial AssetsAmendments to IC Interpretation 14 Prepayments of a Minimum Funding Requirement



2. summary of sIGnIfIcant accountInG PolIcIes (cont’d)

2.3 standards issued but not yet effective

The standards and interpretations that are issued but not yet effective up to the date of issuance of the Group’s and the Company’s financial statements are disclosed below. The Group and the Company intend to adopt these standards, if applicable, when they become effective.

description effective for annual periods beginning on or after

FRS 101 Presentation of Items of Other Comprehensive Income (Amendments to FRS 101) 1 July 2012Amendments to FRS 101: Presentation of Financial Statements (Improvements to FRSs

(2012))1 January 2013

FRS 10 Consolidated Financial Statements 1 January 2013FRS 11 Joint Arrangements 1 January 2013FRS 12 Disclosure of interests in Other Entities 1 January 2013FRS 13 Fair Value Measurement 1 January 2013FRS 119 Employee Benefits 1 January 2013FRS 127 Separate Financial Statements 1 January 2013FRS 128 Investment in Associate and Joint Ventures 1 January 2013Amendment to IC Interpretation 2 Members’ Shares in Co-operative Entities and Similar

Instruments (Improvements to FRSs (2012))1 January 2013

IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2013Amendments to FRS 7: Disclosures - Offsetting Financial Assets and Financial Liabilities 1 January 2013Amendments to FRS 1: First-time Adoption of Malaysian Financial Reporting Standards -

Government Loans1 January 2013

Amendments to FRS 1: First-time Adoption of Malaysian Financial Reporting Standards (Improvements to FRSs (2012))

1 January 2013

Amendments to FRS 116: Property, Plant and Equipment (Improvements to FRSs (2012)) 1 January 2013Amendments to FRS 132: Financial Instruments: Presentation (Improvements to FRSs (2012)) 1 January 2013Amendments to FRS 134: Interim Financial Reporting (Improvements to FRSs (2012)) 1 January 2013Amendments to FRS 10: Consolidated Financial Statements: Transition Guidance 1 January 2013Amendments to FRS 11: Joint Arrangements: Transition Guidance 1 January 2013Amendments to FRS 12: Disclosure of Interests in Other Entities: Transition Guidance 1 January 2013Amendments to FRS 132: Offsetting Financial Assets and Financial Liabilities 1 January 2014Amendments to FRS 10, FRS 12 and FRS 127 Investment Entities 1 January 2014FRS 9 Financial Instruments 1 January 2015




2.3 standards issued but not yet effective (cont’d)

The directors expect that the adoption of the above standards and interpretations will have no material impact on the financial statements in the period of initial application except as discussed below:

FRS 12 Disclosures of Interests in Other Entities

FRS 12 includes all disclosure requirements for interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are required. This standard affects disclosures only and has no impact on the Group’s financial position or performance.

FRS 127 Separate Financial Statements

As a consequence of the new FRS 10 and FRS 12, FRS 127 is limited to accounting for subsidiaries, jointly controlled entities and associates in separate financial statements.

FRS 13 Fair Value Measurement

FRS 13 establishes a single source of guidance under FRS for all fair value measurements. FRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under FRS when fair value is required or permitted.

Upon adoption of FRS 13, the Group will take into consideration the highest and best use of certain properties in measuring the fair value of such properties. The adoption of FRS 13 is expected to result in higher fair value of certain properties of the Group.

Amendments to FRS 101: Presentation of Financial Statements (Annual Improvements 2009-2011 Cycle)

The amendments to FRS 101 change the grouping of items presented in other comprehensive income. Items that could be reclassified (or recycled) to profit or loss at a future point in time (for example, exchange differences on translation of foreign operations and net loss or gain on available-for-sale financial assets) would be presented separately from items which will never be reclassified (for example, actuarial gains and losses on defined benefit plans and revaluation of land and buildings). The amendment affects presentation only and has no impact on the Group’s financial position and performance.

FRS 9 Financial Instruments: Classification and Measurement

FRS 9 reflects the first phase of the work on the replacement of FRS 139 Financial Instruments: Recognition and Measurement and applies to classification and measurement of financial assets and financial liabilities as defined in FRS 139 Financial Instruments: Recognition and Measurement. The adoption of the first phase of FRS 9 will have an effect on the classification and measurement of the Group’s financial assets. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.




2.3 standards issued but not yet effective (cont’d)

malaysian financial reporting standards

On 19 November 2011, the Malaysian Accounting Standards Board (MASB) issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards (MFRS Framework).

The MFRS Framework is to be applied by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities that are within the scope of MFRS 141 Agriculture (MFRS 141) and IC Interpretation 15 Agreements for Construction of Real Estate (IC 15), including its parent, significant investor and venturer (herein called ‘Transitioning Entities’).

Transitioning Entities will be allowed to defer adoption of the new MFRS Framework for an additional two years. Consequently, adoption of the MFRS Framework by Transitioning Entities will be mandatory for annual periods beginning on or after 1 January 2014.

The Group falls within the scope definition of Transitioning Entities and accordingly, will be required to prepare financial statements using the MFRS Framework in its first MFRS financial statements for the year ending 31 December 2014.

The Group has established a project team to plan and manage the adoption of the MFRS Framework.

At the date of these financial statements, the Group has not completed its quantification of the financial effects of the differences between Financial Reporting Standards and accounting standards under the MFRS Framework due to the ongoing assessment by the management. Accordingly, the consolidated financial performance and financial position as disclosed in these financial statements for the year ended 31 December 2012 could be different if prepared under the MFRS Framework.

The Group considers that it is achieving its scheduled milestones and expects to be in a position to fully comply with the requirements of the MFRS Framework for the financial year ending 31 December 2014.




2.4 Basis of consolidation and business combinations

a) Basis of consolidation

Basis of consolidation from 1 January 2011

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the end of the reporting period. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

With the exception of business combinations involving entities under common control, acquisitions of subsidiaries are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognized as expenses in the periods in which the costs are incurred and the services are received.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.

Basis of consolidation prior to 1 January 2011

Certain of the above-mentioned requirements were applied on a prospective basis. The following differences, however, are carried forward in certain instances from the previous basis of consolidation:

Acquisition of non-controlling interests, prior to 1 January 2011, was accounted for using the parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired were recognized in goodwill.

Losses incurred by the Group were attributed to the non-controlling interest until the balance was reduced to nil. Any further losses were attributed to the Group, unless the non-controlling interest had a binding obligation to cover these. Losses prior to 1 January 2011 were not reallocated between non-controlling interest and the owners of the Company.

Upon loss of control, the Group accounted for the investment retained at its proportionate share of net asset value at the date control was lost. The carrying value of such investments as at 1 January 2011 has not been restated.




2.4 Basis of consolidation and business combinations (cont’d)

b) Business combinations

Business combinations from 1 January 2011

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or a liability, will be recognised in accordance with FRS 139 either in the income statement or as a change to other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity.

In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in the income statement.

The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.

Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of noncontrolling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquire (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill. The accounting policy for goodwill is set out in Note 17 In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in the income statement on the acquisition date.

Business combinations involving entities under common control are accounted for by applying the pooling-of-interest method.The assets and liabilities of the combining entities are reflected at their carrying amounts reported in the consolidated financial statements of the controlling holding company. Any difference between the consideration paid and the share capital of the acquired entity is reflected within equity as merger reserve. The income statement reflects the results of the combining entities for the full year, irrespective of when the combination takes place. Comparatives are presented as if the entities had always been combined since the date the entities had come under common control. No adjustments are made to reflect the fair values on the date of combination, or recognise any new assets or liabilities.

No additional goodwill is recognised as a result of the combination.




2.4 Basis of consolidation and business combinations (cont’d)

b) Business combinations (cont’d)

Business combinations before 1 January 2011

In comparison to the above mentioned requirements, the following differences applied:

Business combinations are accounted for by applying the purchase method. Transaction costs directly attributable to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the proportionate share of the acquiree’s identifiable net assets.

Business combinations achieved in stages were accounted for as separate steps. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity. When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree are not reassessed on acquisition unless the business combination results in a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.

Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognised as part of goodwill.

2.5 subsidiaries

Subsidiaries are entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

2.6 transactions with non-controlling interests

Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in profit or loss of the Group and within equity in the consolidated statements of financial position, separately from parent shareholders’ equity. Transactions with non-controlling interests are accounted for using the entity concept method, whereby, transactions with non-controlling interests are accounted for as transactions with owners. On acquisition of non-controlling interests, the difference between the consideration and book value of the share of the net assets acquired is recognised directly in equity. Gain or loss on disposal to non-controlling interests is recognised directly in equity.




2.7 foreign currency

(i) functional and presentation currency

The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.

(ii) foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

2.8 Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Subsequent to recognition, plant and equipment and furniture and fixtures are measured at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs are recognised in profit or loss as incurred.




2.8 Property, plant and equipment (cont’d)

Depreciation is computed on a straight-line basis over the estimated useful-life of the assets as follows:

leasehold land - over the remaining period of the leasebuildings - 5 to 50 yearsPlant and machinery - 3 to 20 yearsmotor vehicles - 3 to 10 yearsFurniture, fixtures, renovation and equipment - 4 to 10 yearssignage - 1 to 6 yearselectrical wiring and lighting installation - 1 to 6 yearsComputer hardware and software - 1 to 10 years

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.

2.9 Investment properties

Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment losses. The depreciation policy for investment properties is in accordance with that for depreciable property, plant and equipment as described in Note 2.8.

A property interest under an operating lease is classified and accounted for as an investment property on a property-by-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at fair value.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in profit or loss in the year of retirement or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 2.8 up to the date of change in use.




2.10 Intangible assets

Intangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial acquisition, intangible assets are measured at cost less any accumulated amortisation and accumulated impairment losses.

Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss.

Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually, or more frequently if the events and circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

construction rights

This represents the exclusive rights granted to a subsidiary of the Company to develop a parcel of development land in Menggatal, Kota Kinabalu into a mixed development area known as Princess Heights. The construction rights is stated at cost less accumulated amortisation and impairment losses and is amortised on a systematic basis to reflect the pattern in which the asset’s economic benefits are consumed.

2.11 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units (“CGU”)).

In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated to reduce the carrying amount of the assets in the unit or groups of units on a pro-rata basis.




2.11 Impairment of non-financial assets (Cont’d)

Impairment losses are recognised in profit or loss except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the assets is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period.

2.12 Biological assets

tree planting expenditure

The tree planting expenditure is in respect of the planting of trees on three parcels of agriculture land located in Mukim Setul, District of Seremban, Negeri Sembilan Darul Khusus. All direct and related expenses incurred is recorded at cost and capitalised as biological assets. The expenditure will be amortised upon commencement of log extraction on the basis of the volume of logs extracted during the financial year as a proportion of the estimated volume available.

2.13 financial assets

Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets.




2.13 financial assets (cont’d)

a) Financial assets at fair value through profit or loss

Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income.

Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current whereas financial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date.

b) loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current.

c) held-to-maturity investments

Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Company has the positive intention and ability to hold the investment to maturity.

Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.

Held-to-maturity investments are classified as non-current assets, except for those having maturity within 12 months after the reporting date which are classified as current.




2.13 financial assets (cont’d)

d) Available-for-sale financial assets

Available-for-sale financial assets are financial assets that are designated as available for sale or are not classified in any of the three preceding categories.

After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group and the Company’s right to receive payment is established.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date.

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset.




2.14 Impairment of financial assets

The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired.

a) Trade and other receivables and other financial assets carried at amortised cost

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio over the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

b) Available-for-sale financial assets

Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss.

Impairment losses on available-for-sale equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For available-for-sale debt investments, impairment losses are subsequently reversed in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss.




2.15 cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cash management.

2.16 Inventories

Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and condition comprised purchase costs on a first-in first-out basis.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

2.17 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 economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

2.18 financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.

Financial liabilities, within the scope of FRS 139, are recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

a) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profit or loss. Net gains or losses on derivatives include exchange differences.

The Group and the Company have not designated any financial liabilities as at fair value through profit or loss.




2.18 financial liabilities (cont’d)

b) Other financial liabilities

The Group’s and the Company’s other financial liabilities include trade payables, other payables and loans and borrowings.

Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

2.19 Borrowing costs

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds.

2.20 Employee benefits

a) Defined contribution plans

The Group makes contributions to the Employees Provident Fund (“EPF”) in Malaysia, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.

b) employee leave entitlement

Employee entitlements to annual leave are recognised as a liability when they accrue to the employees. The estimated liability for leave is recognised for services rendered by employees up to the reporting date.




2.20 Employee benefits (Cont’d)

c) Termination benefit

Termination benefits are payable when employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefits is based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after reporting date are discounted to present value.

2.21 leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

a) as lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

b) as lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.23(d).




2.22 Property development costs

Property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities.

When the financial outcome of a development activity can be reliably estimated, property development revenue and expenses are recognised in profit or loss by using the stage of completion method. The stage of completion is determined by the proportion that property development costs incurred for work performed to date bear to the estimated total property development costs.

Where the financial outcome of a development activity cannot be reliably estimated, property development revenue is recognised only to the extent of property development costs incurred that is probable will be recoverable, and property development costs on properties sold are recognised as an expense in the period in which they are incurred.

Any expected loss on a development project, including costs to be incurred over the defects liability period, is recognised as an expense immediately.

Property development costs not recognised as an expense are recognised as an asset, which is measured at the lower of cost and net realisable value.

The excess of revenue recognised in the profit or loss over billings to purchasers is classified as accrued billings within trade receivables and the excess of billings to purchasers over revenue recognised in profit or loss is classified as progress billings within trade payables.

2.23 revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

a) sale of goods

Revenue is recognised net of sales taxes and upon transfer of significant risks and rewards of ownership to the buyer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

b) revenue from services

Revenue from services rendered is recognised net of service taxes and discounts as and when the services are rendered.

c) Interest income

Interest is recognised using the effective interest method.




2.23 revenue recognition (cont’d)

d) rental income

Rental income is accounted for on a straight-line basis over the lease terms. The aggregate cost of inventives provided to leases is recognised as a reduction of rental income over the lease on a straight-line basis.

e) dividend income

Dividend income is recognised when the Group’s right to receive payment is established.

2.24 Income taxes

a) current tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.

b) deferred tax

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

- where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.




2.24 Income taxes (cont’d)

b) deferred tax (cont’d)

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

- where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

c) sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

- Where the sales tax incurred in a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

- Receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statements of financial position.




2.25 segment reporting

For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 36, including the factors used to identify the reportable segments and the measurement basis of segment information.

2.26 share capital and share issuance expenses

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Ordinary shares are equity instruments.

Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

2.27 treasury shares

When shares of the Company, that have not been cancelled, recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity. Reacquired shares are classified as treasury shares and presented as a deduction from total equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of treasury shares. When treasury shares are reissued by resale, the difference between the sales consideration and the carrying amount is recognised in equity.

2.28 contingencies

A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events not wholly within the control of the Group.

Contingent liabilities and assets are not recognised in the statements of financial position of the Group.



3. sIGnIfIcant accountInG judGements and estImates

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

a) useful lives of property, plant and equipment

The cost of property, plant and equipment is depreciated on a straight-line basis over the assets’ estimated economic useful lives. Management estimates the useful lives of these property, plant and equipment to be within 1 to 50 years. Changes in the expected level of usage could impact the economic useful lives and the residual values of these assets, therefore, future depreciation charges could be revised. The carrying amount of the Group’s property, plant and equipment at the reporting date is disclosed in Note 14. A 5% difference in the expected useful lives of these assets from management’s estimates would result in approximately 1.8% (2011: 2.1%) variance in the Group’s loss for the year.

b) Impairment of construction rights

Construction rights are tested for impairment annually and at other times when such indicators exist. This requires an estimation of the value in use of the cash-generating units to which construction rights are allocated.

When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the carrying value, the key assumptions applied in the impairment assessment of construction rights and sensitivity analysis to changes in the assumptions are given in Note 17.

c) Impairment of loans and receivables

The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the reporting date is disclosed in Note 22.



4. revenue

Group company2012

rm2011

rm2012

rm2011

rm

Sale of logs - 4,748,900 - -Sale of motor vehicles 194,936,339 171,861,297 - -Sale of spare parts, repairs and maintenance service income 9,748,423 13,763,794 - -

204,684,762 190,373,991 - -

5. Interest Income

Group company2012

rm2011

rm2012

rm2011

rm

Interest income from:Trust fund 13,053 14,995 13,053 14,995Fixed deposits 248,080 261,703 - -others 9,484 76,918 - -

270,617 353,616 13,053 14,995

6. other Income

Group company2012

rm2011

rm2012

rm2011

rm

Compensation from closure of showroom - 1,265,000 - -Net gain on disposal of investment securities 260,326 383,289 260,326 383,289Realised gain on foreign exchange - 273,202 - -Net gain on disposal of subsidiaries - 1,651,359 - 1,260,996Handling fee income 898,918 820,347 - -Sales incentive income 7,631,695 4,824,343 - -Rental income from investment property 97,700 92,800 - -Rental income from property 4,204,327 3,871,496 - -miscellaneous - 576,981 - 10

13,092,966 13,758,817 260,326 1,644,295



7. dIvIdend Income

Group company2012

rm2011

rm2012

rm2011

rm

Dividend income from:Held for trading investments- Equity instruments (quoted in Malaysia) 153,900 120,149 153,900 120,149

8. fInance costs

Group company2012

rm2011

rm2012

rm2011

rm

Interest expense on:- Bank overdrafts 3,123,562 1,369,160 - -- Obligations under finance leases 25,733 40,652 14,889 25,677- bank loans 309,442 - - -- others 7,809 - - -

3,466,546 1,409,812 14,889 25,677Less: Interest expense capitalised in:- Development property (Note 19) (309,442) - - -Total finance costs 3,157,104 1,409,812 14,889 25,677



9. loss Before tax

The following items have been included in arriving at loss before tax:

Group company2012

rm2011

rm2012

rm2011

rm

Amortisation of investment properties (Note 15) 9,263 9,262 - -Auditors’ remuneration:- current year 127,000 99,050 33,000 28,000- over provision in prior years (9,926) (1,900) (1,500) -Depreciation of property, plant and equipment

(Note 14) 3,496,925 3,889,578 218,019 212,017Employee benefits expense (Note 10) 7,136,394 7,877,143 651,850 478,444Non-executive directors’ remuneration (Note 11) 196,833 144,000 188,833 144,000Impairment of intangible assets (Note 17) - 436,810 - -Net fair value loss on held for trading investment

securities 871,720 531,330 871,720 531,330Net loss on disposal of property, plant and

equipment 65,199 519,806 - -Allowance of impairment loss on financial assets:- Trade receivables (Note 22) 1,801,992 1,780,000 - -- Other receivables (Note 22) 2,205,919 2,520,642 - 286,582Impairment loss on investments in subsidiaries - - 7,126,653 5,758,558Plant and equipment written off 18,696 526,852 - -Realised foreign exchange loss 449 104,671 - -Rental of premises 4,201,531 5,207,586 - -Unrealised foreign exchange loss 10,944 176,816 - -



10. emPloyee BenefIts exPense

Group company2012

rm2011

rm2012

rm2011

rm

Salaries, wages and allowances 4,452,140 5,315,007 590,378 463,310Sales commission 1,848,502 1,781,997 - -Employees Provident Fund contributions 734,045 678,537 55,951 14,008social security contributions 58,599 101,602 1,421 1,126Other benefits 43,108 - 4,100 -

7,136,394 7,877,143 651,850 478,444

Included in employee benefits expense of the Group and of the Company are executive directors’ remuneration amounting to RM1,088,953 (2011: RM1,027,420) and RM511,533 (2011: RM346,800) respectively as further disclosed in Note 11.

11. dIrectors’ remuneratIon

The details of remuneration receivable by directors of the Company during the year are as follows:

Group company2012

rm2011

rm2012

rm2011

rm

Executives:Salaries and other emoluments 935,820 874,220 403,200 268,800fees 108,333 86,000 108,333 78,000bonus 44,800 67,200 - -

Total executive directors’ remuneration (Note 10) 1,088,953 1,027,420 511,533 346,800

Non-Executives:fees 178,833 144,000 170,833 144,000Other emoluments 18,000 - 18,000 -

Total non-executive directors’ remuneration (note 9) 196,833 144,000 188,833 144,000Total directors’ remuneration 1,285,786 1,171,420 700,366 490,800



11. dIrectors’ remuneratIon (cont’d)

The number of directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below:

number of directors2012 2011

Executive directors:Below RM50,000 1 -RM50,001 to RM100,000 - -RM100,001 to RM200,000 - -RM200,001 to RM300,000 1 1RM300,001 to RM 400,000 1 1RM400,001 to RM500,000 1 1

Non-Executive directors:Below RM50,000 3 6RM50,000 3 -

12. Income tax exPense

major components of income tax expense The major components of income tax expense for the years ended 31 December 2012 and 2011 are:

Group company2012

rm2011

rm2012

rm2011

rm

statement of comprehensive income:

Current income tax:- Malaysian income tax 588,188 - 23,525 -- Under/(over) provision in respect of previous years 96,621 (147) 10,912 -

684,809 (147) 34,437 -

Deferred income tax (Note 26):- Origination and reversal of temporary differences (33,786) (52,603) (2,683) 2,722- Under/(over) provision in respect of previous years 925 (2,074) - (2,074)

(32,861) (54,677) (2,683) 648Income tax expense recognised in profit or loss 651,948 (54,824) 31,754 648



12. Income tax exPense (cont’d)

reconciliation between tax expense and accounting loss The reconciliation between tax expense and the product of accounting loss multiplied by the corporate tax rate for the years

ended 31 December 2012 and 2011 are as follows:

Group company2012

rm2011

rm2012

rm2011

rm

Accounting loss before tax (10,566,876) (9,777,845) (9,390,077) (6,818,145)

Tax at Malaysian statutory tax rate of 25% (2011: 25%) (2,641,719) (2,444,461) (2,347,519) (1,704,536)Adjustments:- Income not subject to taxation (234,623) (132,127) (91,870) (30,037)- Non-deductible expenses 3,338,083 2,372,180 2,441,380 1,684,754- Deferred tax assets not recognised 92,661 151,805 18,851 52,541- Under/(over) provision of income tax in respect of previous year 96,621 (147) 10,912 -- Under/(over) provision of deferred income tax in respect of previous year 925 (2,074) - (2,074)Income tax expense recognised in profit or loss 651,948 (54,824) 31,754 648

Domestic income tax is calculated at the Malaysian statutory tax rate of 25% (2011: 25%) of the estimated assessable profit for the year.



13. loss Per share

Basic

Basic loss per share amounts are calculated by dividing the loss attributable to owners of the Company by the weighted average number of ordinary shares in issue during the financial year.

The Company has no dilutive potential ordinary shares.

The following reflect the loss and share data used in the computation of basic loss per share for the years ended 31 December:

Group2012

rm2011

rm

Loss attributable to the owners of the Company (10,850,255) (9,517,743)

number of shares

number of shares

Weighted average number of ordinary shares in issue * 186,796,104 179,728,909

basic loss per share (sen) (5.81) (5.30)

* Weighted average number of shares takes into account the weighted average effect of charges in treasury shares transactions during the year.



14.

ProP

erty

, Pla

nt a

nd e

quIP

men

t

long

-term

le

aseh

old

land rm

Build

ings rm

Plan

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m

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rm

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ture

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and

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ge rm

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pute

r ha

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are

and

softw

are

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Grou

p

cost

:at

1 ja

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138

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,935

1,76

6,04

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6,45

1,75

220

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1,11

7,48

91,

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Acqu

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--

467,

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Addi

tions

-

--

30,0

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21,7

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8Di

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als-

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(647

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)(1

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(122

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(2,9

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Writ

ten

off

--

--

(215

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)(8

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1 de

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011

and

1 ja

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238

,981

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1,76

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1,49

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6,09

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--

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Disp

osals

(1,4

82,4

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--

(30,

000)

(3,4

46,6

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(9,3

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(322

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)-

(5,2

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Writ

ten

off

--

--

(109

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--

(109

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237

,499

,487

1,76

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8,70

217

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315,

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314

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14.

ProP

erty

, Pla

nt a

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quIP

men

t (c

ont’

d)

long

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le

aseh

old

land rm

Build

ings rm

Plan

t and

m

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mot

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furn

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and

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pute

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are

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are

rmto

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rm

Grou

p (c

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)

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mul

ated

dep

recia

tion:

at 1

janu

ary 2

011

1,11

0,82

61,

397,

623

75,4

95,9

214,

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5,16

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3,94

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274

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ss (n

ote 9

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3,26

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4,58

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,497

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282,

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Disp

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(442

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(82,

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r the

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177,

858

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257

309,

433

47,8

12,6

68



14. ProPerty, Plant and equIPment (cont’d)

Furniture,fixtures

andequipment

rm

motor vehicles

rmtotal

rm

company

Cost:at 1 january 2011 and at 31 december 2011 20,353 1,055,000 1,075,353Additions - 40,000 40,000at 31 december 2012 20,353 1,095,000 1,115,353

Accumulated depreciation:at 1 january 2011 16,373 296,000 312,373Depreciation charge for the year (Note 9) 1,017 211,000 212,017at 31 december 2011 and at 1 january 2012 17,390 507,000 524,390Depreciation charge for the year (Note 9) 1,019 217,000 218,019at 31 december 2012 18,409 724,000 742,409

Net carrying amount:At 31 December 2011 2,963 548,000 550,963At 31 December 2012 1,944 371,000 372,944

Assets held under finance leases

During the financial year, the Group acquired motor vehicles with an aggregate cost of RM390,000 (2011: Nil) by means of finance leases. The cash outflow on acquisition of property, plant and equipment amounted to RM594,409 (2011: RM1,271,428).

The carrying amount of motor vehicles of the Group and the Company held under finance leases at the reporting date were RM1,135,388 (2011: RM928,345) and RM252,000 (2011: RM548,000) respectively.

Leased assets are pledged as security for the related finance lease liabilities (Note 31).

Assets pledged as security

In addition to assets held under finance leases, the Group’s long-term leasehold land with a carrying amount of RM28,881,892 (2011: RM29,119,876) is mortgaged to secure the Group’s bank loans (Note 24).



15. Investment ProPertIes

Group2012

rm2011

rm

cost:At 1 January 4,317,780 4,317,780

accumulated depreciation:At 1 January 103,972 94,710Charge for the year (Note 9) 9,263 9,262At 31 December 113,235 103,972

net carrying amount:At 31 December 4,204,545 4,213,808

Analysed as:Long term leasehold land 3,603,003 3,603,003buildings 601,542 610,805

4,204,545 4,213,808

properties pledged as securities

Certain investment properties of the Group with an aggregate carrying value of RM3,603,003 (2011: RM3,603,003) are pledged to secure borrowings as stated in Note 24.

16. BIoloGIcal assets

Group2012

rm2011

rm

costAt 1 January 4,057,185 3,471,862Additions 490,921 585,323At 31 December 4,548,106 4,057,185

This represents the tree planting expenditure incurred on the three parcels of agricultural land located in Negeri Sembilan Darul Khusus. The expenditure incurred during the year includes amortisation of leasehold land of RM282,320 (2011: RM282,321).



17. IntanGIBle assets

Goodwill on business acquisition

rm

construction rights

rmtotal

rm

Group

cost:At 1 January 2011, 31 December 2011 and at 31 December 2012 436,810 48,114,285 48,551,095

accumulated amortisation and impairment:Impairment loss in 2011, at 31 December 2011 and at 31 December 2012 436,810 - 436,810

net carrying amount:At 31 December 2011 - 48,114,285 48,114,285

At 31 December 2012 - 48,114,285 48,114,285

Impairment testing of goodwill and construction rights

Goodwill and construction rights are related to the exclusive rights granted to develop a parcel of development land in Menggatal, Kota Kinabalu into a mixed development area known as Princess Heights.

The recoverable amount of the exclusive rights is determined based on value-in-use calculations using the cash flow projections approved by the management. The discount rates used are pre-tax and reflect specific risk relating to the property industry.

The key assumptions were determined based on management’s expectations of market development.

The above estimates are particularly sensitive in the following areas:

- Fluctuations in future planned revenues;- Fluctuations in the development costs arising from fluctuations of raw materials costs and construction costs; and- Fluctuation in the discount rate used.



18. Investments In suBsIdIarIes

Group2012

rm2011

rm

Shares, at costUnquoted ordinary shares 250,812,285 249,412,355Impairment loss (104,564,455) (97,437,802)

146,247,830 151,974,553

Details of the subsidiaries which are all incorporated in Malaysia are as follows:

Proportion (%) ofownership interest

name Principal activities 2012 2011

held by the company

Rintisan Bumi (M) Sdn. Bhd. ceased operation during the year 100 100

Cergazam Sdn. Bhd. Trading of motor vehicles and provision of related services

100 100

TP Auto Sdn. Bhd. Dormant 100 100

Cergaz Autohaus Sdn. Bhd. Trading of motor vehicles provision of related services

100 100

Team Japs Sdn. Bhd. Repairs and servicing of motor vehicles 100 100

Genbayu Gemilang Sdn. Bhd. Timber plantation 100 100

Fook Ngiap Sawmill Sdn. Berhad Dormant 100 100

Sungai Silinponpon (Blockboard) Sdn. Bhd. Dormant 100 100

Hasil Irama Sdn. Bhd. Dormant 100 100

Capital Intertrade Sdn. Bhd. Trading of motor vehicles and provision of related services

100 100

Iconworld Resources Sdn. Bhd. Dormant 100 100

Cergazam Autoworld Sdn. Bhd. Dormant 100 100

Hardie Development Sdn. Bhd. Property development 70 70

All subsidiaries are audited by Ernst & Young, Malaysia.



18. Investments In suBsIdIarIes (cont’d)

additional investment

During the year, the Company increased its investment in Hardie Development Sdn. Bhd. by subscribing to 70% of a further issuance of ordinary shares by the subsidiary at par for a cash consideration of RM1,399,930. As a result, the Company maintains its 70% equity interest in the subsidiary after the further issue.

acquisition of a subsidiary (2011)

On 11 March 2011, the Company acquired 70% equity interest in Hardie Development Sdn. Bhd. (“HDSB). Upon the acquisition, HDSB became a subsidiary of the Group. HDSB, an unlisted company incorporated in Malaysia, is involved in property development activity.

The fair values of the identifiable assets and liabilities of HDSB as at the date of acquisition were:

fair valuerm

carrying amount

rm

construction rights 48,114,285 -Property, plant and equipment 467,002 467,002Property development cost 7,347,939 7,347,939trade and other receivables 130,860 130,860Cash and cash equivalents 136,304 136,304

56,196,390 8,082,105trade and other payables (8,706,119) (8,706,119)Net identifiable assets 47,490,271 (624,014)

The effect of the acquisition on cash flows was as follows:

rm

consideration settled in cash 33,680,000Less: Cash and cash equivalents of subsidiary acquired (136,304)Net cash outflow on acquisition 33,543,696

Goodwill arising on acquisition

Fair value of net identifiable assets 47,490,271less: non-controlling interests (14,247,081)Group’s interest in fair value of net identifiable assets 33,243,190Goodwill on acquisition (Note 16) 436,810Cost of business combination 33,680,000



18. Investments In suBsIdIarIes (cont’d)

Impact of acquisition in Statement of comprehensive income (2011)

From the date of acquisition, HDSB has contributed RM684,262 to the Group’s loss net of tax in 2011. If the combination had taken place at the beginning of the financial year, the Group’s loss from continuing operations, net of tax would have been RM10,542,399.

disposal of subsidiaries (2011)

The Group disposed of its 100% equity interest in Pangkal Berseri Sdn. Bhd., Jernih Kembang Sdn. Bhd., Bidang Laksana Sdn. Bhd., Rich Forte Sdn. Bhd. and Reliance Pact Sdn. Bhd. on 31 March 2011 for a total cash consideration of RM1,261,006.

The disposal had the following effects on the financial position of the Group as at end of the year (2011):

2011rm

intangible asset 16,963,350trade and other receivables 203,477cash and bank balances 163,449trade and other payables (17,720,629)net assets disposed (390,353)total disposal proceeds (1,261,006)Gain on disposal of the Group (1,651,359)Cash inflow arising on disposal:cash consideration 1,261,006Cash and cash equivalents of subsidiaries (163,449)Net cash inflow on disposal 1,097,557



19. ProPerty develoPment costs

leaseholdland

rm

development costs

rmtotal

rm

Group

at 31 december 2012cumulative property development costsAt 1 January 2012 3,710,000 14,953,330 18,663,330costs incurred during the year 1,770,000 19,497,715 21,267,715At 31 December 2012 5,480,000 34,451,045 39,931,045Property development costs at 31 december 2012 5,480,000 34,451,045 39,931,045

at 31 december 2011Cumulative property development costsAcquisition of subsidiary 2,595,600 4,186,540 6,782,140costs incurred during the year 1,114,400 10,766,790 11,881,190At 31 December 2011 3,710,000 14,953,330 18,663,330Property development costs at 31 december 2011 3,710,000 14,953,330 18,663,330

Included in property development costs incurred during the financial year are:

Group2012

rm2011

rm

Interest expense (Note 8) 309,442 -

The leasehold land under development with carrying value of RM5,480,000 (2011: RM3,710,000) has been pledged as security for banking facilities of the Group (Note 24).



20. InventorIes

Group2012

rm2011

rm

costMotor vehicles held for sale 76,253,073 83,173,627spare parts 2,755,580 2,091,514Consumables 480,281 480,281finished goods 43,491 43,491

79,532,425 85,788,913Less: Provision for obsolescence (523,772) (523,772)

79,008,653 85,265,141

During the year, the amount of inventories recognised as an expense in cost of sales of the Group was RM191,229,601 (2011: RM170,050,377).

21. Investment securItIes

Group and company2012 2011

carrying amount

rm

market value of quoted

investmentsrm

carrying amount

rm

market value of quoted

investmentsrm

current Held for trading investments- Equity instruments (quoted in Malaysia) 6,950,910 6,950,910 7,257,105 7,257,105



22. trade and other receIvaBles

Group company2012

rm2011

rm2012

rm2011

rm

current

trade receivablesthird parties 38,060,054 24,769,172 - -Less: Allowance for impairment (4,277,623) (3,799,102) - -Trade receivables, net 33,782,431 20,970,070 - -

other receivablesAmounts due from subsidiaries - - 86,169,840 82,284,251interest receivables 4,979,195 4,979,195 - -log supply advances 4,400,211 4,377,761 - -other deposits paid 696,716 943,904 - -sundry receivables 4,435,355 4,032,476 313,605 1,022,656

14,511,477 14,333,336 86,483,445 83,306,907Less: Allowance for impairment on receivables (9,705,756) (7,499,837) - (286,582)Other receivables, net 4,805,721 6,833,499 86,483,445 83,020,325total trade and other receivables 38,588,152 27,803,569 86,483,445 83,020,325Add: Cash and bank balances (Note 23) 12,526,111 15,135,253 274,246 548,240total loans and receivables 51,114,263 42,938,822 86,757,691 83,568,565



22. trade and other receIvaBles (cont’d)

(a) trade receivables

Trade receivables are non-interest bearing and are generally on 30 to 90 day (2011: 30 to 90 day) terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition.

Ageing analysis of trade receivables

The ageing analysis of the Group’s trade receivables is as follows:

Group2012

rm2011

rm

Neither past due nor impaired 17,384,663 18,234,0331 to 30 days past due not impaired 57,620 166,26431 to 60 days past due not impaired 47,963 55261 to 90 days past due not impaired - 14,12491 to 120 days past due not impaired 15,880,191 15,836More than 121 days past due not impaired 411,994 2,539,261

16,397,768 2,736,037Impaired 4,277,623 3,799,102

38,060,054 24,769,172

Receivables that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group.

None of the Group’s trade receivables that are neither past due nor impaired have been renegotiated during the financial year.

Receivables that are past due but not impaired

The Group has trade receivables amounting to RM16,397,768 (2011: RM2,736,037) that are past due at the reporting date but not impaired.

At the reporting date, the receivables that are past due but not impaired are unsecured in nature.




(a) trade receivables (cont’d)

Receivables that are impaired

The Group’s trade receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows:

2012rm

2011rm

GroupTrade receivables – nominal amounts 4,277,623 3,799,102Less: Allowance for impairment (4,277,623) (3,799,102)

- -

Movement in allowance accounts:

Group2012

rm2011

rm

At 1 January 3,799,102 2,019,102Charge for the year (Note 9) 1,801,992 1,780,000Written off (1,323,471) -

At 31 December 4,277,623 3,799,102

Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.

(b) amounts due from subsidiaries

These amounts are unsecured, non-interest bearing and are repayable upon demand.

Other receivables that are impaired

At the reporting date, the Group has provided an allowance of RM9,705,756 (2011: RM7,499,837) for impairment of other receivables with a nominal amount of RM9,705,756 (2011: RM9,643,538).




(b) amounts due from subsidiaries (cont’d)

Other receivables that are impaired (Cont’d)

Movement in allowance accounts:

Group2012

rm2011

rm

At 1 January 7,499,837 4,979,195Charge for the year (Note 9) 2,205,919 2,520,642At 31 December 9,705,756 7,499,837

23. cash and BanK Balances

Group company2012

rm2011

rm2012

rm2011

rm

cash at banks and on hand 4,935,532 2,992,753 274,246 548,240Short-term deposits with licensed banks 7,590,579 12,142,500 - -cash and bank balances 12,526,111 15,135,253 274,246 548,240

Cash at banks earn interest at floating rates based on daily bank deposit rates. Short-term deposits are made for 12 months (2011: between 14 days and 12 months) depending on the immediate cash requirements of the Group, and earn interests at the respective short-term deposit rates. The weighted average effective interest rate as at 31 December 2012 for the Group was 2.93% (2011: 2.78%).

Short term deposits with licensed banks of the Group amounting to RM7,590,579 (2011: RM7,142,500) are pledged as securities for borrowings (Note 24).

For the purpose of the consolidated statement of cash flow, cash and cash equivalents comprise the following as at the reporting date:

Group company2012

rm2011

rm2012

rm2011

rm

Cash and short-term deposits 12,526,111 15,135,253 274,246 548,240Less: Short-term deposits pledged (7,590,579) (7,142,500) - -Less: Bank overdrafts (Note 24) (22,984,206) (29,716,002) - -Cash and cash equivalents (18,048,674) (21,723,249) 274,246 548,240



24. loans and BorrowInGs

Group companymaturity 2012

rm2011

rm2012

rm2011

rm

current

secured:Bank overdrafts (Note 23) On demand 22,984,206 29,716,002 - -Obligations under finance leases

(Note 31) 2013 286,069 229,213 83,939 159,54923,270,275 29,945,215 83,939 159,549

non-current

secured:Obligations under finance leases

(Note 31) 2014 -2015 359,373 346,175 103,875 187,814bank loan - Rm loan at BLR + 1.5% p.a 2014 -2017 13,357,728 - - -

13,717,101 346,175 103,875 187,814total loans and borrowings 36,987,376 30,291,390 187,814 347,363

The remaining maturities of the loans and borrowings as at 31 December 2012 are as follows:

Group company2012

rm2011

rm2012

rm2011

rm

On demand or within one year 23,270,275 29,945,215 83,939 159,549More than 1 year and less than 2 years 4,859,373 157,733 88,660 83,938More than 2 years and less than 5 years 8,857,728 188,442 15,215 103,876

36,987,376 30,291,390 187,814 347,363

Obligations under finance leases

These obligations are secured by a charge over the leased assets (Note 14). The average discount rate implicit in the leases is 5.04% p.a. (2011: 5.10% p.a.).

Bank overdrafts

Bank overdrafts are denominated in RM, bear interest at BLR + 1.5% p.a., BLR + 1.75% p.a. and BLR + 2% p.a. and are secured by a first party, first, second, third, fourth, fifth and sixth legal charges over the Group’s leasehold land under development (Note 19), and certain of the Group’s long-term leasehold land (Note 14), and short term deposits of the Group (Note 23).



24. loans and BorrowInGs (cont’d)

Bank loan - RM loan at BLR + 1.5% p.a.

This loan is secured by the following:

a) a first party, first, second, third, fourth, fifth and sixth legal changes over the leasehold land of the Group,b) a joint and several guarantee by a director of the Company and a third party,c) a corporate guarantee by the Company,d) a debenture incorporating first fixed and floating charges over all the present and future assets in relation to a property

development project undertaken by a subsidiary, ande) an assignment of the housing development account of the property development project.

The loan is repayable within 36 months commencing after 18 months from the reporting date.

25. trade and other PayaBles

Group company2012

rm2011

rm2012

rm2011

rm

current

trade payablesthird parties 68,519,702 40,570,855 - -

other payablesAccruals 7,315,546 14,705,735 8,153 10,530sundry payables 5,746,120 4,216,124 858,738 28,032other deposits 2,008,389 2,602,056 - -Amounts due to subsidiaries - - 91,622,689 85,858,702Amount due to director 279,166 768,960 279,166 222,000

15,349,221 22,292,875 92,768,746 86,119,264total trade and other payables 83,868,923 62,863,730 92,768,746 86,119,264Add: Loans and borrowings (Note 24) 36,987,376 30,291,390 187,814 347,363Total financial liabilities carried at amortised cost 120,856,299 93,155,120 92,956,560 86,466,627



25. trade and other PayaBles (cont’d)

(a) trade payables

These amounts are non-interest bearing. Trade payables are normally settled on 30 to 90 day (2011: 30 to 90 day) terms.

(b) sundry payables

These amounts are non-interest bearing. Sundry payables are normally settled on an average term of 6 months (2011: average term of 6 months).

(c) amounts due to subsidiaries and a director

These amounts are unsecured, non-interest bearing and are repayable on demand.

26. deferred tax

Deferred income tax as at 31 December relates to the following:

as at 1 january

2011rm

recognised in profit

or lossrm

as at 31 december

2011rm

recognisedin profit

or lossrm

as at 31december

2012rm

Group

deferred tax liability:Property, plant and equipment 1,451,809 (54,677) 1,397,132 (32,861) 1,364,271

company

deferred tax liability:Property, plant and equipment 10,067 648 10,715 (2,683) 8,032

Unrecognised tax losses and unabsorbed capital allowances

At the reporting date, the Group and the Company have tax losses of approximately RM24,214,548 (2011: RM23,387,911) and RM1,950,932 (2011: RM1,550,528) respectively and unabsorbed capital allowances of approximately RM10,752,282 (2011: RM10,742,177) and RM21,979 (2011: RM11,874) respectively that are available for offset against future taxable profits of the companies in which the losses arose, for which no deferred tax assets are recognised due to uncertainty of their recoverability. The availability of unused tax losses and unabsorbed capital allowances for offsetting against future taxable profits of the respective companies are subject to no substantial changes in shareholdings of those companies under the Income Tax Act, 1967 and guidelines issued by the tax authority.



27.

shar

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27. share caPItal, share PremIum and treasury shares (cont’d)

a) share capital

The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company residual assets.

b) treasury shares

Treasury shares relate to ordinary shares of the Company that are held by the Company. The amount consists of the acquisition costs of treasury shares net of the proceeds received on their subsequent sale or issuance.

The Company acquired 369,500 (2011: 2,632,300) shares in the Company through purchases on the Bursa Malaysia Securities Berhad during the financial year. The total amount paid to acquire the shares was RM109,390 (2011: RM936,803) and this was presented as a component within shareholders’ equity.

The directors of the Company are committed to enhancing the value of the Company for its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders. The repurchase transactions were financed by internally generated funds. The shares repurchased are being held as treasury shares.

28. MErGEr (DEFICIT)/rElIEF rEsErvE

Group company2012

rm2011

rm2012

rm2011

rm

At 1 January and 31 December (8,141,012) (8,141,012) 8,075,692 8,075,692

The merger reserve of the Company arose when the Company issued shares in exchange for the shares of subsidiaries being acquired, and represented the difference between the nominal value of the Company’s shares issued and the value of net assets of the subsidiaries acquired. For this acquisition the Company availed itself to the merger relief under Section 60(4) of the Companies Act, 1965.

29. caPItal redemPtIon reserve

This represents capital redemption reserve on the cancellation of 20,494,100 treasury shares.



30. related Party dIsclosures

Compensation of key management personnel

The remuneration of directors who are also the members of key management during the year was as follows:

Group company2012

rm2011

rm2012

rm2011

rm

Short-term employee benefits (Note 11) 1,088,953 1,027,420 511,533 346,800

31. commItments

a) operating lease commitments - as lessee

The Group has entered into commercial operating lease agreements on its premises and office building. These leases have an average tenure of between one to five years with no renewal or purchase option included in the contracts.

The future minimum rentals payable under non-cancellable operating leases at the reporting date are as follows:

Group2012

rm2011

rm

Not later than 1 year 1,368,946 1,605,295Later than 1 year but not later than 5 years 3,031,000 3,774,746

4,399,946 5,380,041 The lease payments recognised in profit or loss during the financial year are disclosed in Note 9.

b) operating lease commitments - as lessor

The Group has entered into commercial operating lease agreements on its premises and office building. These non-cancellable leases have remaining lease terms of between one and four years.

The future minimum rental receivable under non-cancellable operating leases at the reporting date are as follows:

Group2012

rm2011

rm

Not later than 1 year 792,800 1,492,800Later than 1 year but not later than 5 years 130,200 860,200

923,000 2,353,000

The rental income recognised in profit or loss during the financial year is disclosed in Note 6.



31. commItments (cont’d)

c) finance lease commitments

The Group and the Company have finance leases for motor vehicles (Note 14). These leases do not have terms of renewal, but have purchase options at nominal values at the end of the lease term.

Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

Group company2012

rm2011

rm2012

rm2011

rm

minimum lease payments:Not later than 1 year 312,336 254,820 92,004 174,312Later than 1 year and not later than 2 years 319,005 172,512 92,004 92,004Later than 2 years and not later than 5 years 52,028 194,495 15,314 107,318Total future minimum lease payment 683,369 621,827 199,322 373,634Less: Amounts representing finance charges (37,927) (46,439) (11,508) (26,271)Present value of minimum lease payments 645,442 575,388 187,814 347,363

Present value of payments:Not later than 1 year 286,069 229,213 83,939 159,549Later than 1 year and not later than 2 years 307,921 157,733 88,660 83,938Later than 2 years and not later than 5 years 51,452 188,442 15,215 103,876Present value of minimum lease payments 645,442 575,388 187,814 347,363Less: Amount due within 12 months (Note 24) (286,069) (229,213) (83,939) (159,549)Amounts due after 12 months (Note 24) 359,373 346,175 103,875 187,814

32. contInGencIes

Legal claim

An architect filed a civil suit against the Company and a subsidiary company for wrongful termination of his services, outstanding fees with interest and loss of income amounting to RM11.4 million.

The Company applied to strike out the action in the High Court. The High Court dismissed with cost the Company’s application which was also subsequently affirmed by the Court of Appeal. The Company appealed against the decision of the High Court of the Court of Appeal. The Court of Appeal dismissed the Company’s appeal with cost.

The Case is now fixed for case management on 7 May 2013.



32. contInGencIes (cont’d)

Legal claim (Cont’d)

The High Court Judge also directed that the claims by the subsidiary company and the architect be referred to arbitration. Upon the appointment of the Arbitrator, the High Court struck-off the claims of the subsidiary company and the architect in view of the arbitration proceedings. The date of hearing is fixed from 19 to 23 August 2013 at Kuala Lumpur and from 26 to 30 August 2013 at Kota Kinabalu.

The Group’s solicitors are of the view that the Company and subsidiary company have a strong and valid defense against the claims made by the architect.

33. faIr value of fInancIal Instruments

A. Fair value of financial instruments that are carried at fair value

The following table show an analysis of financial instruments carried at fair value by level of fair value hierarchy:

Group and companylevel 1

rmlevel 2

rmlevel 3

rmtotal

rm

financial asset

Investment securities- 2012 6,950,910 - - 6,950,910- 2011 7,257,105 - - 7,257,105

fair value hierarchy

The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy have the following levels:

- Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities,

- Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices), and

- level 3 - Inputs for the asset or liability that are not based on observable market date (unobservable inputs).

There has been no transfer from Level 1 and Level 2 to Level 3 for the financial years ended 31 December 2012 and 2011.



33. faIr value of fInancIal Instruments (cont’d)

B. Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value

Group company2012 2012

notecarrying amount

rmfair value

rm

carrying amount

rmfair value

rm

financial liabilities (non-current):- Obligations under finance leases 31 (c) 359,373 348,906 103,875 99,792- Fixed rate bank loans 24 13,357,728 13,743,120 - -

Group company2011 2011

notecarrying amount

rmfair value

rm

carrying amount

rmfair value

rm

financial liabilities (non-current):- Obligations under finance leases 31 (c) 346,175 323,047 187,814 175,059

c. determination of fair value

Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value

The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of their fair value:

note

trade and other receivables (current)- Amounts due from subsidiaries 22- interest receivables 22- log supply advances 22

loans and borrowings (current) 24trade and other payables (current)- Amounts due to subsidiaries 25- Amount due to director 25- Accruals 25- sundry payables 25



33. faIr value of fInancIal Instruments (cont’d)

c. determination of fair value (cont’d)

Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value (Cont’d)

The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values due to their short-term nature.

The carrying amounts of current portion of loans and borrowings are reasonable approximation of fair values due to the insignificant impact of discounting.

The fair value of current loans and borrowings are estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date.

finance lease obligations and bank loans

The fair values of these financial instruments are estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date.

Quoted investment securities

Fair value is determined directly by reference to their published market bid price at the reporting date.

financial guarantees

Fair value is determined based on probability weighted discounted cash flow method. The probability has been estimated and assigned for the following key assumptions:

- The likelihood of the guaranteed party defaulting within the guaranteed period;

- The exposure on the portion that is not expected to be recovered due to the guaranteed party’s default;

- The estimated loss exposure if the party guaranteed were to default.



34. fInancIal rIsK manaGement oBjectIves and PolIcIes

The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk and interest rate risk.

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its credit risk, liquidity risk and interest rate risks (both fair value and cash flow). The Board of Directors reviews and agrees policies for managing each of these risks. The audit committee provides independent oversight to the effectiveness of the risk management process.

It is, and has been throughout the current and previous financial year, the Group’s policy that no derivatives shall be undertaken.

The following sections provide details regarding the Group’s and the Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

a) credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including investment securities and cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

Exposure to credit risk At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying

amount of each class of financial assets recognised in the statements of financial position.

Credit risk concentration profile The Group determines concentrations of credit risk by monitoring the profile of its trade receivables on an ongoing

basis.

At the reporting date, approximately 68% (2011: 46%) of the Group’s trade receivables were due from 2 major customers and 1 supplier, who are automotive companies located in Malaysia.

Financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 22.

Deposits with banks and other financial institutions and investment securities that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.

Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Note 22.



34. fInancIal rIsK manaGement oBjectIves and PolIcIes (cont’d)

b) liquidity risk

Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.

The Group’s and the Company’s liquidity risk management policy is to maintain sufficient liquid financial assets and stand-by credit facilities. At the reporting date, approximately 63% (2011: 99%) of the Group’s loans and borrowings (Note 24) will mature in less than one year based on the carrying amount reflected in the financial statements.

Analysis of financial instruments by remaining contractual maturities

The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities at the reporting date based on contractual undiscounted amounts:

on demand or within one year

rm

One to five years

rmtotal

rm

Group

2012financial liabilities:trade and other payables 83,868,923 - 83,868,923loans and borrowings 23,296,542 15,521,680 38,818,222Total undiscounted financial liabilities 107,165,465 15,521,680 122,687,145

2011financial liabilities:trade and other payables 62,863,730 - 62,863,730loans and borrowings 29,970,822 367,007 30,337,829Total undiscounted financial liabilities 92,834,552 367,007 93,201,559



34. fInancIal rIsK manaGement oBjectIves and PolIcIes (cont’d)

b) liquidity risk (cont’d)

Analysis of financial instruments by remaining contractual maturities (Cont’d)

on demand or within one year

rm

One to five years

rmtotal

rm

company

2012financial liabilities:Trade and other payables, excluding financial guarantees* 92,768,746 - 92,768,746loans and borrowings 92,004 107,318 199,322Total undiscounted financial liabilities 92,860,750 107,318 92,968,068

2011financial liabilities:Trade and other payables, excluding financial guarantees* 86,119,264 - 86,119,264loans and borrowings 174,312 199,322 373,634Total undiscounted financial liabilities 86,293,576 199,322 86,492,898

* At the reporting date, the counterparty to the financial guarantees does not have a right to demand cash as the default has not occurred. Accordingly, financial guarantees under the scope of FRS 139 are not included in the above maturing profile analysis.

c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates.

The Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and borrowings.

The Group’s policy is to manage interest cost using mainly fixed rate debts. At the reporting date approximately, 1.75% (2011: 1.90%) of the Group’s borrowings are at fixed rates of interest.

Sensitivity analysis for interest rate risk

At the reporting date, if interest rates had been 1% lower/higher, with all other variables held constant, the Group’s loss net of tax would have been RM367,087 (2011: RM158,974) lower/higher, arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings. The assumed movement percentage for interest rate sensitivity analysis is based on the currently observable market environment.



35. caPItal manaGement

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders or issue new shares. No changes were made in objectives, policies or processes during the years ended 31 December 2012 and 31 December 2011.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio between 20% and 50%. The Group includes within net debt, loans and borrowings. Capital includes equity attributable to the owners of the Company.


rm2011

rm2012

rm2011

rm

loans and borrowings 24 36,987,376 30,291,390 187,814 347,363trade and other payables 25 83,868,923 62,863,730 92,768,746 86,119,264less: cash and bank balances 26 (12,526,111) (15,135,253) (274,246) (548,240)net debt 108,330,188 78,019,867 92,682,314 85,918,387Equity attributable to the owners of the

Company 145,783,148 156,742,793 147,396,075 156,927,296total capital 145,783,148 156,742,793 147,396,075 156,927,296capital and net debt 254,113,336 234,762,660 240,078,389 242,845,683

Gearing ratio 43% 33% 39% 35%

36. seGment InformatIon

For management purpose, the Group is organised into business units based on their products and services, and has four reportable operating segments as follows:

i. Timber – sale of timber logs and related timber products and holding of timber concession and tree plantation.

ii. Automotive – sale and distribution of motor vehicles and provision of related services.

iii. Property – development and construction of property.

iv. Other – involved in Group-level corporate services, treasury functions and investments in investment securities.

Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain respects as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.



36.

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36. seGment InformatIon (cont’d)

note Nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements

A Other material non-cash expenses consist of the following items as presented in the respective notes to the financial statements:

note 2012rm

2011rm

Plant and equipment written off 9 18,696 526,850Unrealised foreign exchange loss 9 10,944 176,816Allowance for impairment loss on financial assets 9 4,007,911 4,300,642

4,037,551 5,004,308

b Additions to non-current assets consist of:

2012rm

2011rm

Property, plant and equipment 984,409 1,271,428biological assets 490,921 585,323

1,475,330 1,856,751

c The following item is deducted from segment assets to arrive at total assets reported in the consolidated statement of financial position:

2012rm

2011rm

Inter-segment assets 303,935,869 290,076,418

D The following item is deducted from segment liabilities to arrive at total liabilities reported in the consolidated statement of financial position:

2012rm

2011rm

Inter-segment liabilities 213,547,882 193,961,708



36. seGment InformatIon (cont’d)

Geographical information

Revenue information based on the geographical location of customers is as follows:

revenues2012

rm2011

rm

malaysia 204,684,762 178,940,791singapore - 11,433,200

204,684,762 190,373,991

37. authorIsatIon of fInancIal statements for Issue

The financial statements for the year ended 31 December 2012 were authorised for issue in accordance with a resolution of the directors on 26 April 2013.



38. suPPlementary InformatIon – BreaKdown of retaIned earnInGs Into realIsed and unrealIsed

The breakdown of the retained earnings of the Group and of the Company as at 31 December 2012 and 2011 into realised and unrealised profits is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

Grouprm

companyrm

2012Total accumulated losses of the Company and its subsidiaries- Realised (61,655,538) (77,626,498)- unrealised (1,375,215) (8,032)Accumulated losses as per financial statements (63,030,753) (77,634,530)

2011Total accumulated losses of the Company and its subsidiaries- Realised (50,606,550) (68,201,984)- unrealised (1,573,948) (10,715)Accumulated losses as per financial statements (52,180,498) (68,212,699)


AnAlysis Of shArehOldingsAs at 4 April 2013

share CaPItal as at 4 aPrIl 2013

Authorised Share Capital : RM1,000,000,000.00Issued and Paid-up Capital : RM187,261,971.00 *Class of Shares : Ordinary shares of RM1.00 each Number of Holders : 3,596 *Voting Right : One vote per ordinary share

* The issued and paid up capital is as per Record of Depositors as at 4 April 2013 exclusive of 8,672,500 Permaju Industries Berhad treasury shares bought back.

analYsIs OF sharehOldInGs BY ranGe GrOuPs as at 4 aPrIl 2013

size of holdings no. of shares% of total

Issued Capital no. of holders% of total

shareholders1 – 99 635 0.00 12 0.33100 – 1,000 819,652 0.44 851 23.671,001 – 10,000 8,970,200 4.79 1,491 41.4610,001 – 100,000 37,554,800 20.05 1,096 30.48100,001 – 9,363,097 * 116,106,084 62.00 144 4.009,363,098 and above ** 23,810,600 12.72 2 0.06

187,261,971 100.00 3,596 100.00

* Less than 5% of issued shares** 5% and above of issued shares

suBstantIal sharehOlders as at 4 aPrIl 2013(Based on register of substantial shareholders)

name of substantial shareholdersdirect Indirect

no. of shares % * no. of shares % *Dato’ Chai Kin Loong 13,810,600 7.37 # 27,130,596 14.49Tan Sri Datuk Chai Kin Kong 20,052,900 10.71 # 20,888,296 11.15Datuk Chai Woon Chet - - @ 40,941,196 21.86Chai Kim Chong 7,077,696 3.78 # 33,863,500 18.08Dato’ Chua Tiong Moon 15,529,571 8.29 - -

* Exclusive of treasury shares bought back.# Deemed interest by virtue of Dato’ Chai Kin Loong, Tan Sri Datuk Chai Kin Kong and Chai Kim Chong are brothers.@ Deemed interest by virtue of his father, Tan Sri Datuk Chai Kin Kong having a direct interest of 20,052,900 shares and his uncles,

Dato’ Chai Kin Loong having a direct interest of 13,810,600 shares and Chai Kim Chong having a direct interest of 7,077,696 shares.



dIrectors’ shareholdInGs as at 4 aPrIl 2013(Based on register of directors’ shareholdings)

name of directorsdirect Indirect

no. of shares % * no. of shares % *Dato’ chua tiong moon 15,529,571 8.29 - -Dato’ Rahadian Mahmud bin Mohammad Khalil - - - -Datuk Muhamad Yasin bin Yahya - - - -Boey Tak Kong - - - -Datuk chai woon chet - - @ 40,941,196 21.86Chang Yew Kwong - - - -lee caw cing - - - -

* Exclusive of treasury shares bought back.@ Deemed interest by virtue of his indirect interest of his father, Tan Sri Datuk Chai Kin Kong’s shareholdings and uncles, Dato’ Chai

Kin Loong’s and Chai Kim Chong’s shareholdings.

lIst of toP 30 securItIes account holders as at 4 aPrIl 2013

no nameno. of

shares held% of total

Issued capital1. Dato’ Chai Kin Loong 13,810,600 7.382. Amsec Nominees (Tempatan) Sdn Bhd

Pledged securities account for Tan Sri Datuk Chai Kin Kong 10,000,000 5.34

3. Maybank Nominees (Tempatan) Sdn Bhd Pledged securities account for Dato’ Chua Tiong Moon

8,128,571 4.34

4. OSK Nominees (Asing) Sdn Berhad DMG & Partners Securities Pte Ltd for Shining Victory Global Ltd

8,100,000 4.33

5. Chai Kim Chong 7,077,696 3.786. Mary Tan @ Tan Hui Ngoh 6,650,000 3.557. Maybank Nominees (Tempatan) Sdn Bhd

Pledged securities account for Tan Sri Datuk Chai Kin Kong5,900,000 3.15

8. Amsec Nominees (Tempatan) Sdn BhdPledged securities account for Bright Memory Sdn Bhd

5,055,700 2.70

9. Amsec Nominees (Tempatan) Sdn BhdPledged securities account for Dato’ Chua Tiong Moon

5,000,000 2.67

10. ECML Nominees (Tempatan) Sdn BhdPledged securities account for Tan Sri Datuk Chai Kin Kong

4,152,900 2.22

11. Datuk Lim Yen Ngiap 3,504,217 1.8712. Kenanga Nominees (Tempatan) Sdn Bhd

Pledged securities account for Tang Mei Leng3,036,800 1.62


lIst of toP 30 securItIes account holders as at 4 aPrIl 2013 (cont’d)

no nameno. of

shares held% of total

Issued capital13. AIBB Nominees (Tempatan) Sdn Bhd

Pledged securities account for Goldmatrix Resources Sdn Bhd2,880,100 1.54

14. AIBB Nominees (Tempatan) Sdn BhdPledged securities account for Julung Prestasi Sdn Bhd

2,564,000 1.37

15. Ting Sing Hong 2,450,000 1.3116. Kenanga Nominees (Tempatan) Sdn Bhd

Pledged securities account for Tay Poh2,431,700 1.30

17. AIBB Nominees (Tempatan) Sdn BhdPledged securities account for Dato’ Chua Tiong Moon

2,400,000 1.28

18. HDM Nominees (Tempatan) Sdn BhdPledged securities account for Chee Chi Vun

1,804,000 0.96

19. Amsec Nominees (Tempatan) Sdn BhdPledged securities account for Tan Kok Aun

1,752,300 0.94

20. Lee Chai Yieng 1,600,000 0.8521. AIBB Nominees (Tempatan) Sdn Bhd

Pledged securities account for Evergreen City Holdings Sdn Bhd1,255,800 0.67

22. Chai Min 1,250,000 0.6723. Sim Tze Jye 1,250,000 0.6724. Public Nominees (Asing) Sdn Bhd

Pledged securities account for Ong Soom Peng1,160,000 0.62

25. Tan Hock Huat 1,000,000 0.5326. Tee Yong 1,000,000 0.5327. Koh Kim Boon 979,500 0.5228. Ngui Meu Chuong 950,000 0.5129. Public Nominees (Tempatan) Sdn Bhd

Pledged securities account for Wong Nyuk Min902,900 0.48

30. Amsec Nominees (Tempatan) Sdn BhdPledged securities account for Numina Gem Sdn Bhd

867,000 0.46

108,913,784 58.16



list of propertiesAs at 31 December 2012

locationdescription and existing use tenure expiring date land area

(acre)

age of Building (years)

net Book value (rm)

1) CL105137068 Pasir Putih District of Tawau,

sabah

Sawmill/Plywood mill

99 31.12.2097 16.71 17-29 1,872,795


sabah

log storage yard 99 31.12.2079 2.43 N/A 214,740


Sabah.

blockboard mill 999 20.02.2940 12.24 18-23 1,535,182

4) Lot 1 of CL105103179 CL105101326 CL105102878

Pasir Putih District of Tawau, sabah

Timber Storage Warehouse/Film overlay plywood mill

999* 14.08.292719.02.292422.04.2924

8.45 16 1,623,532

5) TL107515935 Fajar Complex District of Tawau,

sabah

6 stories Intermediate Commercial building

999 31.12.2895 1950 sq ft 12 916,343

6) HSD 160571 to 160573, Lot PT Nos. 26665 to 26667

respectively, Mukim of Setul, Seremban, Negeri Sembilan

Timber Plantation 99 10.06.2103 299.98 acres N/A 25,126,525

* After subdivision of the parent titles, the issuance of land titles to individual subdivided lots would have a tenure of 99 years lease.

notes:

Date of last revaluation for items 1 to 4 : 06 October 1999Date of last revaluation of item 5 : 14 June 2002Date of acquisition of item 6 : 18 January 2010

This page has been intentionally left blank.

proxy form

resolutions for againstResolution 1 Approval of Directors’ fees of RM279,166

Re-election of Directors:Resolution 2 Dato’ Rahadian Mahmud bin Mohammad KhalilResolution 3 lee caw cingResolution 4 Dato’ chua tiong moonResolution 5 Re-appointment of Messrs Ernst & Young as Auditors and to authorise the Directors

to determine their remunerationResolution 6 Continuing in office for Brig. General (Ret.) Datuk Muhamad Yasin bin Yahya

(Please indicate with “X” in the spaces provided how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his/her discretion.)

Dated this day of 2013

#CDS account no. of authorised nominee

notes:1. A member entitled to attend and vote at the Annual General Meeting shall be

entitled to appoint not more than two (2) proxies to attend and vote in his/her stead at the same meeting. A proxy need not be a member of the Com-pany and if not a member he/she need not be a qualified legal practitioner, an approved company auditor or a person approved by the Registrar.

2. Where a member appoints two proxies, the proxies shall not be valid unless the member specifies the proportion of his shareholding to be represented by each proxy. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

Number of shares held

For appointment of two proxies, number of shares and percentage of shareholdings to be represented by the proxies:-

No. of shares percentageProxy 1 %Proxy 2 %

3. The form of proxy or power of attorney if executed by a corporation must be executed under Common Seal.

4. The instrument appointing a proxy or a power of attorney must be deposited at the Registered Office of the Company at 5th Floor, Bangunan Indahsabah, Segama Commercial Complex, 88000 Kota Kinabalu, Sabah not less than 48 hours before the time set for the meeting or any adjournment thereof.

5. If the space provided in the proxy form is not sufficient, an appendix attached to the proxy form duly signed by the appointer is acceptable.

6. Those proxy forms which are indicated with “√” in the spaces provided to show how the votes are to be cast will also be accepted.

7. Only members registered in the Record of Depositors as at 24 May 2013 shall be eligible to attend the meeting or appoint proxies and vote on their be-half.

# Applicable to shares held through a nominee account.

I/We (name of shareholder as per NRIC, in capital letters)

NRIC No. (new) (old)/ID No./Company No.

of (full address)

being a member(s) of the abovenamed Company, hereby appoint (name of proxy as per NRIC, in capital letters)

NRIC No. (new) (old) or failing him/her (name of proxy as per NRIC, in capital letters)

NRIC No. (new) (old) or failing him/her the CHAIRMAN OF THE MEETING as my/our proxy to vote for me/us on my/our behalf at the Seventeenth Annual General Meeting of the Company to be held at the Cempaka Room, 2nd Level, Hyatt Regency Kinabalu, Jalan Datuk Salleh Sulong, 88994 Kota Kinabalu, Sabah on Monday, 3 June 2013 at 10.00 a.m. and at any adjournment thereof. My/our proxy is to vote as indicated below:

Signature/Common Seal of Appointer Contact No. of Shareholder/ Proxy:

(Company No: 379057-V)

(Incorporated in Malaysia)

The Company Secretary

Permaju IndustrIes Berhad (379057-V)

5th Floor, Bangunan IndahsabahSegama Commercial Complex

88000 Kota Kinabalusabah

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