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the
esome whol
ness good
annual report
2005
contents
financial highlights of the group five-year summary corporate information directors profile chairmans statement penyata pengerusi events of the year statement on corporate governance statement on internal control 2 2 4 5 10 12 14 16 25 audit committee report statement on directors responsibilities financial statements group property particulars analysis of shareholdings notice of annual general meeting statement accompanying notice of thirty-second annual general meeting proxy form 84 27 30 32 75 77 80
directors profile
trusted choice,
natural goodness
1 annual report 05
2004 RM000
373,244 17,378 11,453
Financial Position
Working capital Net tangible assets Total tangible assets Paid-up capital Shareholders equity
Dividends
Net tangible assets (in RM) Earnings before tax (in sen) Earnings after tax (in sen) Dividend - Interim (net - in sen) - Final (net - in sen) * Tax exempt dividend.
Per share
five-year summary
2001 RM000 Group Sales After-Tax Profit Net Tangible Assets Total Dividends * 466,188 16,257 279,416 11,093 2002 RM000 446,196 14,108 287,648 10,171 2003 RM000 408,629 18,099 295,100 12,912 2004 RM000 373,244 11,453 295,064 14,705 2005 RM000 438,226 12,507 293,632 14,705
01
02
03
04
05
01
02
03
04
05
705
14,
16,
453
01
02
03
04
05
01
02
03
04
05
financial calendar
05 06
8 June
2004 Final Dividend Paid
1 September
2005 Interim Dividend Paid
31 December
Financial Year-End
21 February
Announcement of Year-End Results
3 April
Despatch of Annual Report
25 April
Annual General Meeting
9 June
2005 Final Dividend Payment Date
annual report 05
corporate information
Directors
Philip Ng Chee Tat (Chairman) Tjong Yik Min (Deputy Chairman) Ow Tin Nyap (Managing Director & Chief Executive Ofcer) Brigadier General (R) Dato Yahya bin Yusof Dato Mohamed Nizam bin Abdul Razak Dato N. Sadasivan A/L N.N. Pillay Razman Hafidz bin Abu Zarim Pearl Foong Lye Fong
Auditors
PricewaterhouseCoopers
Bankers
Citibank Berhad Standard Chartered Bank Malaysia Berhad Malayan Banking Berhad
Audit Committee
Dato Mohamed Nizam bin Abdul Razak (Chairman) Brigadier General (R) Dato Yahya bin Yusof Dato N. Sadasivan A/L N.N. Pillay Razman Hafidz bin Abu Zarim Pearl Foong Lye Fong
Solicitors
Raja, Darryl & Loh
Registrars
PFA Registration Services Sdn Bhd Level 13, Uptown 1, No.1, Jalan SS21/58, Damansara Uptown, 47400 Petaling Jaya, Selangor Darul Ehsan
Remuneration Committee
Brigadier General (R) Dato Yahya bin Yusof (Chairman) Dato Mohamed Nizam bin Abdul Razak Tjong Yik Min
Registered Office
7, Jalan Tandang, 46050 Petaling Jaya, Selangor Darul Ehsan Tel : (603) 7787 3888 Fax : (603) 7781 3509 (603) 7781 4242 Email : info@yeos.com Website : www.yeos.com
Nomination Committee
Dato N. Sadasivan A/L N.N. Pillay (Chairman) Brigadier General (R) Dato Yahya bin Yusof Razman Hafidz bin Abu Zarim Tjong Yik Min
Investment Committee
Dato Mohamed Nizam bin Abdul Razak (Chairman) Dato N. Sadasivan A/L N.N. Pillay Razman Hafidz bin Abu Zarim Tjong Yik Min
Company Secretary
Sau Ean Nee
directors profile
Mr Philip Ng Chee Tat Chairman Non-Independent / Non-Executive Age: 47 years
Mr Philip Ng Chee Tat is a Singaporean and was appointed to the Board on 1 June 2002 and as Chairman of the Company on 1 December 2002. He has a Degree in Civil Engineering, Kings College, London University, a Master of Science in Technology and Policy and Master in City Planning, Massachusetts Institute of Technology. Since 1986, Mr Ng has been a Director of Sino Land, Hong Kong, engaging in real estate activities in Hong Kong and China. In 1991, he was appointed Chief Executive Officer of Far East Organization, Singapore. Currently, Mr Ng is the Chairman, Managing Director and Chief Executive Officer of Yeo Hiap Seng Limited and Chairman of Orchard Parade Holdings Limited. In addition, he sits on various committees and statutory boards in Singapore, and he is the Chairman of Sentosa Development Corporation. He is also Singapores nonresident Ambassador to The Republic of Chile and Argentina. Mr Ng attended 6 out of the 6 Board meetings held in the year. Mr Ng is the son of Mr Ng Teng Fong and Madam Tan Kim Choo, substantial shareholders of Yeo Hiap Seng Limited, the penultimate holding company of the Company. Mr Ng has no conflict of interest with the Company and has not been convicted for offences within the past 10 years. Mr Tjong Yik Min Deputy Chairman Non-Independent / Non-Executive Age: 53 years Mr Tjong Yik Min is a Singaporean and he was appointed to the Board on 22 July 2002 and as Deputy Chairman on 23 January 2003. He holds a Bachelor of Engineering (Hons) (Class 1) (Industrial Engineering) degree from the University of Newcastle, Australia, a Bachelor of Commerce (Economics) degree from the University of Newcastle, Australia and a Masters in Science (Industrial Engineering) degree from the University of Singapore. Mr Tjong currently holds the position of President and Chief Operating Officer of Yeo Hiap Seng Limited, Singapore. Prior to this, he was the Executive Director and Group President of Singapore Press Holdings. Mr Tjong has also served in various capacities in the Singapore Civil Service. Mr Tjong sits on the Remuneration, Nomination and Investment Committees. Mr Tjong attended 6 out of the 6 Board meetings held in the year. He has no family relationship with any other directors/ major shareholders of the Company and has no conflict of interest with the Company. He has not been convicted for offences within the past 10 years.
annual report 05
Dato Mohamed Nizam bin Abdul Razak Director Independent / Non-Executive Age: 47 years
Dato Mohamed Nizam bin Abdul Razak is a Malaysian and he was appointed to the Board on 5 November 2002. He graduated with a Bachelor of Arts (Oxon) degree in Politics, Philosophy and Economics from the Oxford University, United Kingdom. Dato Nizam was attached to Bumiputra Merchant Bankers Berhad from 1981 to 1984 and to PB Securities Sdn Bhd from 1984 to 1998. He presently sits on the board of Mamee-Double Decker (M) Berhad, Delloyd Ventures Berhad, Hiap Teck Venture Berhad, Kamdar Group (M) Berhad and Deutsche Bank (M) Berhad. He also serves on the board of several private limited companies engaged in a wide range of activities and is actively involved in several charitable foundations. Dato Nizam is the Chairman of the Audit and Investment Committees and a member of the Remuneration Committee. Dato Nizam attended 6 out of the 6 Board meetings held in the year. He has no family relationship with any other directors/ major shareholders of the Company and has no conflict of interest with the Company. He has not been convicted for offences within the past 10 years.
Dato N. Sadasivan A/L N.N. Pillay Director Independent / Non-Executive Age: 66 years
Dato N. Sadasivan is a Malaysian and he was appointed to the Board on 13 August 2004. Dato N. Sadasivan, graduated with a Bachelor of Arts (Hons) in Economics from the University of Malaya in 1963. He began his career as an Economist with the Economic Development Board, Singapore in 1963 and was subsequently promoted to the position of Chief of the Industrial Facilities Division in 1965. In 1968, he joined the Malaysian Industrial Development Authority (MIDA) and served as the Deputy Director General from 1976 to 1983. From 1984 until his retirement in 1995, he was the Director-General of MIDA. He presently sits on the board of several private and public listed companies namely Chemical Company of Malaysia Berhad, Petronas Gas Berhad, APM Automotive Holdings Berhad, Leader Universal Holdings Berhad, Malaysian Airline System Berhad and Malaysian Industrial Development Finance Berhad. He is also a director of Bank Negara Malaysia. Dato N. Sadasivan is the Chairman of the Nomination Committee and a member of the Audit and Investment Committees. Dato N. Sadasivan attended 5 out of the 6 Board meetings held in the year. He has no family relationship with any other directors/ major shareholders of the Company and has no conflict of interest with the Company. He has not been convicted for offences within the past 10 years.
annual report 05
cool choice,
anytime, anywhere
9 annual report 05
chairmans statement
Dear Shareholders, On behalf of the Board of Directors of Yeo Hiap Seng (Malaysia) Berhad, I am pleased to present the Annual Report and the Audited Financial Statements of the Company and the Group for the financial year ended 31 December 2005.
Financial Results
For the financial year ended 31 December 2005, the Group recorded revenue of RM438 million, an increase of 17% compared to RM373 million recorded in the previous financial year. The Group achieved a net profit after taxation and minority interests of RM12.5 million, an increase of 9% compared to RM11.5 million in the previous year. The Group has no borrowings and has a healthy cash balance of RM76.5 million as at the end of the financial year. The Group continued to maintain its market leadership in the non-carbonated drinks segments and Yeos core brand beverages recorded a growth of 11.7%. During the year, the Group entered into a strategic alliance with Allswell Trading Pte Ltd to market and distribute Red Bull, a well known energy drink, which also contributed to the growth in the overall beverage segment. The food segment and exports recorded a healthy growth of 17.4% and 20% respectively. Net profit for the year was affected by raw material and fuel price increases, adverse forex impact and write off of bad debts. The Group continued to focus on productivity improvement and cost reduction measures to counter increasing cost pressures. During the year, an interim dividend of 5% (tax exempt) was declared and paid on 1 September 2005. The Board is pleased to recommend for shareholders approval, a final dividend of 9% less income tax for the year ended 31 December 2005.
Management Developments
On behalf of the Board, I welcome the appointment of Mr. Ow Tin Nyap, Owen as the Managing Director and Chief Executive Officer of the Company. In his illustrious and sterling career spanning 32 years, Owen brings with him strategic broad-based experience and many years of international exposure in the areas of business engineering, mergers and acquisitions, sales and marketing, logistics and manufacturing. Prior to his appointment, Owen spent 7 years with the Danone Group, working to grow Danones ASEAN portfolio and strategic market leadership. Owen has also previously held senior management positions in Sara Lee Asia and Boustead Holdings Berhad.
10
Appreciation
On behalf of the Board, I thank all the shareholders, distributors, wholesalers, customers and consumers for their continuing support and confidence for the Group. I also wish to express the Boards appreciation to the Management and all employees of the Group for their contribution, dedication and commitment.
11
annual report 05
penyata pengerusi
Kepada Pemegang-pemegang Saham, Bagi pihak Lembaga Pengarah Yeo Hiap Seng (Malaysia) Berhad, saya dengan sukacitanya membentangkan Laporan Tahunan dan Penyata Kewangan yang telah diaudit bagi Kumpulan dan Syarikat untuk tahun kewangan berakhir 31 Disember 2005.
Keputusan Kewangan
Bagi tahun kewangan berakhir 31 Disember 2005, Kumpulan telah mencatatkan perolehan sebanyak RM438 juta, iaitu peningkatan sebanyak 17% berbanding RM373 juta yang dicatatkan pada tahun kewangan sebelumnya. Kumpulan telah mencapai keuntungan bersih selepas cukai dan kepentingan minoriti sebanyak RM12.5 juta, iaitu peningkatan sebanyak 9% berbanding RM11.5 juta pada tahun sebelumnya. Kumpulan tiada pinjaman dan memiliki baki tunai sebanyak RM76.5 juta pada akhir tahun kewangan yang dikaji. Kumpulan terus mengekalkan kedudukannya sebagai peneraju pasaran dalam segmen minuman tanpa-karbonat. Minuman jenama utama Yeos telah mencatatkan pertumbuhan sebanyak 11.7%. Pada tahun tersebut, Kumpulan telah menjalinkan usaha sama strategik dengan Allswell Trading Pte Ltd untuk memasar dan mengedar Red Bull, sejenis minuman tenaga terkemuka, yang turut menyumbang kepada pertumbuhan keseluruhan segmen minuman. Segmen makanan dan eksport telah mencatatkan pertumbuhan yang memberangsangkan iaitu masing-masing 17.4% dan 20%. Keuntungan bersih bagi tahun 2005 dipengaruhi oleh kenaikan harga bahan mentah dan minyak, kesan negatif tukaran wang asing dan pelupusan hutang lapuk. Kumpulan terus memberikan tumpuan terhadap peningkatan produktiviti dan langkah pengurangan kos bagi mengimbangi kesan kenaikan kos. Pada tahun berkenaan, dividen sementara sebanyak 5% (dikecualikan cukai) telah diisytiharkan dan dibayar pada 1 September 2005. Lembaga Pengarah dengan sukacitanya mencadangkan, dengan kelulusan para pemegang saham, dividen akhir sebanyak 9% tolak cukai pendapatan bagi tahun kewangan berakhir 31 Disember 2005.
Perkembangan Pengurusan
Bagi pihak Lembaga Pengarah, saya mengalu-alukan pelantikan Encik Ow Tin Nyap, Owen sebagai Pengarah Urusan dan Ketua Pegawai Eksekutif Syarikat. Sepanjang kerjaya cemerlang beliau selama 32 tahun, Owen membawa bersama pengalaman luas dalam bidang strategik dan pendedahan selama bertahun-tahun di peringkat antarabangsa dalam bidang kejuruteraan perniagaan, penggabungan dan pemerolehan, jualan dan pemasaran, logistik dan pengeluaran. Sebelum menyertai Syarikat, Owen berkhidmat dengan Kumpulan Danone selama 7 tahun, bertanggungjawab mengembangkan portfolio Danone dan peneraju pasaran strategik di rantau ASEAN. Owen juga pernah menyandang jawatan kanan pengurusan di Sara Lee Asia dan Boustead Holdings Berhad.
12
Penghargaan
Bagi pihak Lembaga Pengarah, saya ingin mengucapkan terima kasih yang tidak terhingga kepada pemegang saham, pengedar, pemborong, pelanggan dan pengguna atas sokongan dan keyakinan berterusan terhadap Kumpulan. Saya juga ingin menyampaikan penghargaan Lembaga Pengarah kepada pihak Pengurusan dan semua kakitangan Kumpulan atas sumbangan, dedikasi dan komitmen masing-masing.
13
annual report 05
nancial statements
directors report
declaration 44 / report of the auditors to the members of Yeo Hiap Seng (Malaysia) Berhad
40 /
statement by directors
44 /
statutory
46 / balance sheets 47 / statement of changes in equity 49 / cash ow statements 51 / notes to the nancial statements 53
income statements
45 /
40
directors report
The Directors have pleasure in submitting their annual report together with the audited nancial statements of the Group and Company for the nancial year ended 31 December 2006. PRINCIPAL ACTIVITIES The Company is principally involved in the production, marketing and sale of beverage and food products. The principal activities of the subsidiaries are shown in Note 16 to the nancial statements. There have been no signicant changes in the nature of these activities of the Group and Company during the nancial year. FINANCIAL RESULTS GROUP RM000 Prot for the nancial year Attributable to: Equity holders of the Company Minority interest 24,371 24,366 5 24,371 DIVIDENDS The dividends paid or declared by the Company since 31 December 2005 were as follows: RM000 In respect of the nancial year ended 31 December 2005 as shown in the Directors report of that nancial year: Final gross dividend of 9 sen per share, less income tax of 28%, paid on 9 June 2006 In respect of the nancial year ended 31 December 2006: Interim dividend of 5 sen per share, tax exempt, paid on 1 September 2006 6,404 14,705 The Directors now recommend the payment of a nal gross dividend of 9 sen per share on 152,710,370 ordinary shares (after proposed bonus issue and less treasury shares), less income tax of 28%, in respect of the nancial year ended 31 December 2006, amounting to RM9,895,632 subject to the approval of shareholders at the forthcoming Annual General Meeting of the Company. The book closure and the payment dates for the dividend entitlement will be determined at a later date. As mentioned in Note 38(i) to the nancial statements, the Directors has proposed a bonus issue of up to 25,619,109 new ordinary shares of RM1.00 each in the Company by way of capitalisation of share premium to be credited as fully paid up on the basis of one bonus share for every ve existing shares held by entitled shareholders on an entitlement date to be determined and announced at a later date. The bonus shares to be issued shall, upon allotment and issue, rank equally in all respect with the existing ordinary shares, as such will be entitled to the nal dividend payment of the Company for the nancial year ended 31 December 2006. The proposed bonus issue is subject to the approvals of the shareholders of the Company and the relevant authorities. COMPANY RM000 15,630 15,630 15,630
8,301
41
directors report
RESERVES AND PROVISIONS All material transfers to or from reserves and provisions during the nancial year are shown in the nancial statements. TREASURY SHARES During the nancial year, the Company purchased 616,300 of its own shares from the open market on the Bursa Malaysia Securities Berhad for RM1,347,104. The average price paid for the shares purchased was approximately RM2.19 per share. Details of the treasury shares are set out in Note 30(a) to the nancial statements. DIRECTORS The Directors who have held ofce during the period since the date of the last report are as follows: Philip Ng Chee Tat Tjong Yik Min Ow Tin Nyap Dato Mohamed Nizam bin Abdul Razak Brigadier General (R) Dato Yahya bin Yusof Dato N. Sadasivan a/l N.N. Pillay Razman Hadz bin Abu Zarim Pearl Foong Lye Fong In accordance with Article 75 of the Companys Articles of Association, Tjong Yik Min and Dato N. Sadasivan a/l N.N.Pillay will retire at the forthcoming Annual General Meeting and being eligible, offer themselves for re-election. In accordance with Section 129 of the Companies Act, 1965, Brigadier General (R) Dato Yahya bin Yusof, being over seventy years of age, will retire at the forthcoming Annual General Meeting and being eligible offers himself for re-appointment to hold ofce until the conclusion of the next Annual General Meeting. DIRECTORS BENEFITS During and at the end of the nancial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benets by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Since the end of the previous nancial year, no Director has received or become entitled to receive a benet (other than Directors remuneration as disclosed in Note 8 to the nancial statements) by reason of a contract made by the Company or a related corporation with the Director or with a rm of which he is a member, or with a company in which he has a substantial nancial interest except that certain Directors received remuneration from the Companys immediate and penultimate holding companies. DIRECTORS INTERESTS IN SHARES According to the register of Directors shareholdings, particulars of interests of Directors who held ofce at the end of the nancial year in shares in the Company is as follows: Number of ordinary shares of RM1.00 each in the Company At 1.1.2006 Bought Sold At 31.12.2006 Ow Tin Nyap 15,000 15,000
Other than disclosed above, according to the register of Directors shareholdings, the Directors in ofce at the end of the nancial year did not hold any interest in shares in the Company or shares of its related companies during the nancial year.
42
directors report
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS Before the income statements and balance sheets were made out, the Directors took reasonable steps: (a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satised themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and (b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and Company had been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances: (a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the nancial statements of the Group and Company inadequate to any substantial extent; or (b) which would render the values attributed to current assets in the nancial statements of the Group and Company misleading; or (c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and Company misleading or inappropriate. 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 nancial year which, in the opinion of the Directors, will or may affect the ability of the Group or Company to meet their obligations when they fall due. At the date of this report, there does not exist: (a) any charge on the assets of the Group or Company which has arisen since the end of the nancial year which secures the liability of any other person; or (b) any contingent liability of the Group or Company which has arisen since the end of the nancial year. At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the nancial statements which would render any amount stated in the nancial statements misleading. In the opinion of the Directors: (a) the results of the Groups and Companys operations during the nancial year were not substantially affected by any item, transaction or event of a material and unusual nature; and (b) except as disclosed in Note 38 to the nancial statements, there has not arisen in the interval between the end of the nancial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and Company for the nancial year in which this report is made.
43
directors report
IMMEDIATE, PENULTIMATE AND ULTIMATE HOLDING COMPANIES The Directors regard YHS (Singapore) Pte. Ltd., a company incorporated in Singapore, as the immediate holding company and Yeo Hiap Seng Limited, a company incorporated in Singapore, as the penultimate holding company. The Directors regard Far East Organization Pte Ltd., a company incorporated in Singapore, as the ultimate holding company. AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in ofce. Signed on behalf of the Board of Directors in accordance with their resolution dated 28 February 2007.
44
statement by directors
pursuant to section 169(15) of the companies act, 1965
We, Dato Mohamed Nizam bin Abdul Razak and Ow Tin Nyap, two of the Directors of Yeo Hiap Seng (Malaysia) Berhad, state that, in the opinion of the Directors, the nancial statements set out on pages 46 to 91 are drawn up so as to give a true and fair view of the state of affairs of the Group and Company as at 31 December 2006 and of the results and cash ows of the Group and Company for the nancial year ended on that date in accordance with the provisions of the Companies Act, 1965 and the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities. Signed on behalf of the Board of Directors in accordance with their resolution dated 28 February 2007.
statutory declaration
pursuant to section 169(16) of the companies act, 1965
I, Ong Chay Seng, the ofcer primarily responsible for the nancial management of Yeo Hiap Seng (Malaysia) Berhad, do solemnly and sincerely declare that the nancial statements set out on pages 46 to 91 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.
ONG CHAY SENG Subscribed and solemnly declared by the abovenamed Ong Chay Seng, At: Petaling Jaya On: 15 March 2007 Before me: G. VIJAYAN @ BASKARAN PPN COMMISSIONER FOR OATHS
45
We have audited the nancial statements set out on pages 46 to 91. These nancial statements are the responsibility of the Companys Directors. It is our responsibility to form an independent opinion, based on our audit, on these nancial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report. We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the nancial statements. An audit also includes assessing the accounting principles used and signicant estimates made by Directors, as well as evaluating the overall nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the nancial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities so as to give a true and fair view of: (i) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the nancial statements; and
(ii) the state of affairs of the Group and Company as at 31 December 2006 and of the results and cash ows of the Group and Company for the nancial year ended on that date; and (b) the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. The names of the subsidiaries of which we have not acted as auditors are indicated in Note 16 to the nancial statements. We have considered the nancial statements of these subsidiaries and the auditors reports thereon. We are satised that the nancial statements of the subsidiaries that have been consolidated with the Companys nancial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated nancial statements and we have received satisfactory information and explanations required by us for those purposes. The auditors reports on the nancial statements of the subsidiaries were not subject to any qualication and did not include any comment made under subsection (3) of Section 174 of the Act.
PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants LEE TUCK HENG (No. 2092/09/08 (J)) Partner of the rm Kuala Lumpur 15 March 2007
46
income statements
for the nancial year ended 31 december 2006
GROUP Note Revenue Changes in inventories of nished goods and work-in-progress Raw materials and consumables used Staff costs Depreciation of property, plant and equipment Depreciation of investment properties Amortisation of intangible asset Supplies and utilities Repair and maintenance Selling and promotional expenses Royalty, technical and management fees Other operating expenses Other operating income Prot from operations Income from other investments and nance Share of results of associates Prot before tax Tax expense Prot for the nancial year Attributable to: Equity holders of the Company Minority interest Prot for the nancial year Basic earnings per share (sen) Gross dividends per ordinary share (sen) 12 13 7 2006 RM000 517,687 23,215 (351,816) (50,967) 14 15 19 (12,390) (532) (1,921) (10,506) (8,886) (59,189) (6,901) (20,552) 13,041 30,283 2,207 (897) 31,593 (7,222) 24,371 24,366 5 24,371 19.0 14.00 2005 RM000 418,911 (14,205) (246,496) (43,872) (14,358) (532) (1,309) (8,456) (8,050) (42,314) (6,002) (22,488) 3,064 13,893 2,671 (448) 16,116 (3,610) 12,506 12,507 (1) 12,506 9.8 14.00
COMPANY 2006 RM000 289,940 10,158 (216,477) (28,934) (8,530) (388) (2,083) (9,194) (7,479) (4,737) (3,476) (10,203) 7,445 16,042 3,773 19,815 (4,185) 15,630 15,630 15,630 14.00 2005 RM000 250,486 (6,421) (177,742) (23,699) (11,286) (388) (1,418) (7,735) (6,846) (3,353) (3,001) (12,710) 10,770 6,657 2,475 9,132 (2,808) 6,324 6,324 6,324 14.00
9 10 17 11
47
balance sheets
as at 31 december 2006
GROUP Note NON-CURRENT ASSETS Property, plant and equipment Investment properties Investments in subsidiaries Investments in associates Other investments Intangible asset Deferred tax assets 14 15 16 17 18 19 28 2006 RM000 123,664 13,132 828 5,345 18,576 2,405 163,950 CURRENT ASSETS Inventories Trade and other receivables Amount due from associates Amount due from immediate holding company Amount due from subsidiaries Amount due from fellow subsidiaries Tax recoverable Deposits, bank and cash balances Non-current assets held for sale 20 21 17 22 22 22 23 24 87,090 133,409 23,125 1,379 3,889 70,630 319,522 891 320,413 LESS: CURRENT LIABILITIES Trade and other payables Amount due to penultimate holding company Amount due to subsidiaries Amount due to fellow subsidiaries Tax payable 25 22 22 22 145,341 100 904 146,345 NET CURRENT ASSETS NON-CURRENT LIABILITIES Provision for retirement benets Long term payables Deferred tax liabilities NET ASSETS 26 27 28 6,085 3,658 5,632 15,375 322,643 5,618 3,624 3,052 12,294 314,350 174,068 2005 RM000 124,165 13,664 3,400 5,354 20,497 2,552 169,632 57,658 91,552 20,825 1,158 2,790 76,480 250,463 250,463 87,759 5,131 10 551 93,451 157,012
COMPANY 2006 RM000 97,691 4,100 93,037 560 4,134 20,137 219,659 51,897 5,777 23,729 329,227 1,379 365 54,733 467,107 891 467,998 80,116 98 360,824 441,038 26,960 3,147 3,658 5,093 11,898 234,721 2005 RM000 98,457 4,488 92,091 560 4,143 22,220 221,959 34,932 8,501 21,655 265,955 1,158 72,042 404,243 404,243 45,236 5,724 330,256 551 381,767 22,476 2,940 3,624 2,728 9,292 235,143
48
balance sheets
as at 31 december 2006
GROUP Note CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY Share capital Reserves Treasury shares MINORITY INTEREST TOTAL EQUITY 2006 RM000 2005 RM000
30 31 30
49
Attributable to equity holders of the Company Issued and paid-up Foreign share Share Capital exchange Retained capital premium reserves reserves earnings RM000 RM000 RM000 RM000 RM000
Note GROUP As at 1 January 2005 Currency translation differences Prot for the nancial year Dividends for the nancial year ended: 13 - 31 December 2004 (Final) - 31 December 2005 (Interim) Purchase of treasury shares 30(a) As at 31 December 2005 Currency translation differences Prot for the nancial year Dividends for the nancial year ended: 13 - 31 December 2005 (Final) - 31 December 2006 (Interim) Purchase of treasury shares 30(a) As at 31 December 2006
128,096 -
59,897 -
1 -
3,008 (541) -
125,868 12,507
128,096 -
59,897 -
1 -
2,467 (26) -
(2)
128,096
59,897
2,441
(1,347)
(1,349) 322,417
226 322,643
50
Nondistributable Issued and paid-up share capital RM000 Share premium RM000
Note COMPANY As at 1 January 2005 Prot for the nancial year Dividends for the nancial year ended: 13 - 31 December 2004 (Final) - 31 December 2005 (Interim) Purchase of treasury shares 30(a) As at 31 December 2005 Prot for the nancial year Dividends for the nancial year ended: 13 - 31 December 2005 (Final) - 31 December 2006 (Interim) Purchase of treasury shares 30(a) As at 31 December 2006
Total RM000
128,096 -
59,897 -
55,533 6,324
243,526 6,324
128,096 -
59,897 -
(2) (2) -
128,096
59,897
(1,347) (1,349)
51
cash ow statements
for the nancial year ended 31 december 2006
GROUP Note CASH FLOWS FROM OPERATING ACTIVITIES Prot for the nancial year Adjustments for non cash items: Property, plant and equipment: - depreciation - written off - gain on disposal Gain on disposal of non-current assets held for sale Depreciation of investment properties Inventories: - written off - net allowance for obsolescence Net allowance for/(writeback of) doubtful receivables: - trade - others - associates Net bad debts (recovered)/written off Amortisation of intangible asset Share of loss/(prot) of associates Net provision for retirement benets Interest income Unrealised gain on foreign exchange Allowance for diminution in value of investments in subsidiaries Loss on liquidation of subsidiaries Impairment in value of investments Dividend income: - associates - other investments Tax expense 2006 RM000 24,371 2005 RM000 12,506
4,173 (4) 4 (114) 1,309 448 635 (2,550) (193) (121) 3,610 39,407
3,292 (4) 4 8 1,418 341 (2,475) (189) 421 149 2,808 25,496
52
cash ow statements
for the nancial year ended 31 december 2006
GROUP Note Changes in working capital: Inventories Trade and other receivables Penultimate holding company Immediate holding company Fellow subsidiaries Subsidiaries Trade and other payables Cash ows from operations Tax paid Tax refund Retirement benets paid Net cash ows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Property, plant and equipment: - proceeds from disposal - additions Proceeds from disposal of non-current assets held for sale Interest received Dividends received from an associate Dividend received from quoted investment Purchase of other investment Purchase of treasury shares Investment in subsidiary Net cash ows from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid Repayment of long term payables Net cash ows from nancing activities NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS Currency translation differences CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 23 2006 RM000 (33,641) (42,750) (5,031) (2,299) (231) 52,120 10,263 (4,792) 135 (275) 5,331 2005 RM000 (17,554) (30,211) (914) (2,577) 633 29,333 18,117 (5,513) 1,127 (273) 13,458
COMPANY 2006 RM000 (18,969) 2,393 (5,636) (2,799) (284) (33,180) 31,759 2,153 (2,662) (189) (698) 2005 RM000 (6,671) (4,814) (140) (5,697) 639 (18,229) 11,595 2,179 (628) 760 (161) 2,150
238 (11,232) 14,075 2,062 1,674 124 (1,347) 5,594 (14,705) (1,806) (16,511) (5,586) (264) 76,480 70,630
368 (13,120) 2,412 279 (4,013) (2) (14,076) (14,705) (14,705) (15,323) 91,803 76,480
84 (5,510) 3,875 2,070 1,674 (1,347) (946) (100) (14,705) (1,806) (16,511) (17,309) 72,042 54,733
347 (4,418) 2,336 279 (4,013) (2) (5,471) (14,705) (14,705) (18,026) 90,068 72,042
53
GENERAL INFORMATION The principal activities of the Company are in the production, marketing and sale of beverage and food products. The principal activities of the subsidiaries are shown in Note 16 to the nancial statements. The number of employees at the end of the nancial year in the Group was 1,468 (2005: 1,397) and in the Company was 716 (2005: 702). The Company is a public limited liability company, incorporated and domiciled in Malaysia. The ultimate holding company of the Company is Far East Organization Pte Ltd., a company incorporated in Singapore. The address of the registered ofce of the Company and principal place of business is as follows: No. 7, Jalan Tandang 46050 Petaling Jaya Selangor Darul Ehsan
BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The nancial statements of the Group and Company have been prepared in accordance with the provisions of the Companies Act 1965 and Financial Reporting Standards, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities. The nancial statements have been prepared under the historical cost convention except as disclosed in this summary of signicant accounting policies. The preparation of nancial statements in conformity with Financial Reporting Standards requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the nancial statements, and the reported amounts of revenues and expenses during the reported nancial year. It also requires Directors to exercise their judgment in the process of applying the Companys accounting policies. Although these estimates and judgment are based on the Directors best knowledge of current events and actions, actual results may differ. The areas involving higher degree of judgment or complexity, or areas where assumptions and estimates are signicant to the nancial statements, are disclosed in Note 5.
54
BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (a) Standards, amendments to published standards and interpretations that are effective The new accounting standards, amendments to published standards and IC Interpretations (IC) to existing standards effective for the Companys nancial year beginning on or after 1 January 2006 are as follows: FRS 1 First-time Adoption of Financial Reporting Standards FRS 2 Share-based Payment FRS 3 Business Combinations FRS 5 Non-current Assets Held for Sale and Presentation of Discontinued Operations FRS 101 Presentation of Financial Statements FRS 102 Inventories FRS 108 Accounting Policies, Changes in Accounting Estimates and Errors FRS 110 Events After the Balance Sheet Date FRS 116 Property, Plant and Equipment FRS 121 The Effect of Changes in Foreign Exchange Rates FRS 127 Consolidated and Separate Financial Statements FRS 128 Investments in Associates FRS 131 Interests in Joint Ventures FRS 132 Financial Instruments: Disclosure and Presentation FRS 133 Earnings Per Share FRS 136 Impairment of Assets FRS 138 Intangible Assets FRS 140 Investment Property Amendment to FRS 1192004 Employee Benets Actuarial Gains and Losses, Group Plans and Disclosures in relation to the asset ceiling test IC 107 Introduction of the Euro IC 110 Government Assistance - No Specic Relation to Operating Activities IC 112 Consolidation Special Purpose Entities IC 113 Jointly Controlled Entities Non-Monetary Contributions by Venturers IC 115 Operating Leases Incentives IC 121 Income Taxes Recovery of Revalued Non-Depreciable Assets IC 125 Income Taxes Changes in the Tax Status of an Entity or its Shareholders IC 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease IC 129 Disclosure Service Concession Arrangements IC 131 Revenue Barter Transactions Involving Advertising Services IC 132 Intangible Assets Web Site Costs
All changes in accounting policies have been made in accordance with the transition provisions in the respective standards, amendments to published standards and interpretations. All standards, amendments and interpretations adopted by the Group require retrospective application other than: (i) FRS 5 prospectively to non-current assets (or disposal groups) that meet the criteria to be classied as held for sale and to operations that meet the criteria to be classied as discontinued on/after 1 January 2006 ;
(ii) FRS 116 the exchange of property, plant and equipment is accounted at fair value prospectively; (iii) FRS 121 prospective accounting for fair value adjustments as part of foreign operations. A summary of the impact of the new accounting standards, amendments to published standards and interpretations to existing standards on the nancial statements of the Group and Company is set out in Note 32.
55
BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (b) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have not been early adopted The new standards, amendments to published standards and interpretations that are mandatory for the Groups nancial years beginning on or after 1 January 2007 or later years, but which the Group has not early adopted, are as follows: (i) FRS 117 Leases (effective for nancial years beginning on or after 1 October 2006). This standard requires the classication of leasehold land as prepaid lease payments. The Group will apply this standard from nancial years beginning on 1 January 2007.
(ii) FRS 124 Related Party Disclosures (effective for nancial years beginning on or after 1 October 2006). This standard will affect the identication of related parties and some other related party disclosures. The Group will apply this standard from nancial years beginning 1 January 2007. (iii) Amendment to FRS 1192004 Employee Benets Actuarial Gains and Losses, Group Plans and Disclosures (effective for nancial years beginning on or after 1 January 2007). This amendment introduces the option of an alternative recognition approach for actuarial gains and losses. It may impose additional recognition requirements for multiemployer plans where insufcient information is available to apply dened benet accounting. It also adds new disclosure requirements. As the Group does not intend to change the accounting policy adopted for recognition of actuarial gains and losses and does not participate in any multiemployer plans, adoption of this amendment will only impact the format and extent of disclosures presented in the nancial statements. The Group will apply this amendment from nancial years beginning on 1 January 2007. (iv) Amendment to FRS 121 The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operations (effective for accounting periods beginning on or after 1 July 2007). This amendment requires exchange differences on monetary items that form part of the net investment in a foreign operation to be recognised in equity instead of in prot or loss regardless of the currency in which these items are denominated in. The Group will apply this amendment from nancial periods beginning on 1 January 2008. (v) FRS 139 Financial Instruments : Recognition and Measurement (effective date yet to be determined by Malaysian Accounting Standards Board). This new standard establishes principles for recognising and measuring nancial assets, nancial liabilities and some contracts to buy and sell non-nancial items. Hedge accounting is permitted only under strict circumstances. The Group will apply this standard when effective. (c) Standards and interpretations to existing standards that are not yet effective and not relevant for the Groups operations (i) FRS 6 Exploration for and Evaluation of Mineral Resources (effective for nancial years beginning on or after 1 January 2007).
(ii) IC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities (effective for accounting periods beginning on or after 1 July 2007). (iii) IC 8 Scope of FRS 2 (effective for accounting periods beginning on or after 1 July 2007). (iv) IC 2 Members Shares in Co-operative Entities and Similar Instruments (effective for accounting periods beginning on or after 1 July 2007). (v) IC 5 Rights to Interests arising from Decommission, Restoration and Environmental Rehabilitation Funds (effective for accounting periods beginning on or after 1 July 2007). (vi) IC 6 liabilities arising from Participating in a Specic Market - Waste Electrical and Electronic Equipment (effective for accounting periods beginning on or after 1 July 2007). (vii) IC 7 Applying the Restatement Approach under FRS 1292004 Financial Reporting in Hyperinationary Economies (effective for accounting periods beginning on or after 1 July 2007).
56
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unless otherwise stated, the following accounting policies have been used consistently in dealing with items that are considered material in relation to the nancial statements. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Economic entities in the Group (i) Subsidiaries The consolidated nancial statements include the nancial statements of the Company and its subsidiaries made up to the end of the nancial year. Subsidiaries are companies in which the Group has power to exercise control over the nancial and operating policies so as to obtain benets from their activities, generally accompanying a shareholding of more than half of the voting rights. Subsidiaries are consolidated using the purchase method of accounting. Under the purchase method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Identiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Groups share of the identiable net assets acquired at the date of acquisition is reected as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement. Minority interest represents that portion of the prot or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent. It is measured at the minorities share of the fair value of the subsidiaries identiable assets and liabilities at the acquisition date and the minorities share of changes in the subsidiaries equity since that date. Intragroup transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Groups share of its net assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary is recognised in the consolidated income statement. (ii) Transactions with minority interests The Group applies a policy of treating transactions with minority interests as transactions with equity owners of the Group. For purchases from minority interests, the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired is deducted from equity. Gains or losses on disposals to minority interests are also recorded in equity. For disposals to minority interests, differences between any proceeds received and the relevant share of minority interests are also recorded in equity.
57
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Economic entities in the Group (Continued) (iii) Associates Associates are companies in which the Group exercises signicant inuence, but which it does not control, generally accompanying a shareholding of beweeen 20% and 50% of the voting rights. Signicant inuence is the power to participate in the nancial and operating policy decisions of the associates but not the power to exercise control over those policies. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Groups investment in associates includes goodwill identied on acquisition, net of any accumulated impairment loss. The Groups share of its associates post-acquisition prots or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Groups share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Groups interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence on impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the nancial statements of associates to ensure consistency of accounting policies with those of the Group. Dilution gains and losses in associates are recognised in the income statement. (b) Revenue recognition Revenue for the Group comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services, net of goods and services tax and discounts, and after eliminating sales within the Group. The Group recognised revenues when the amount of revenue can be realiably measured, it is probable that the future economic benets will ow to the entity and specic criteria have been met as described below. The amount of the revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specics of each arrangement. (i) Sale of goods Revenue from sale of goods is recognised when a Group entity has delivered the products to the customer, the customer has accepted the products and collectibility of the related receivables is reasonably assured. (ii) Contract manufacturing fees Contract manufacturing fees is recognised upon manufacturing of goods and when signicant risks and rewards have been transferred to the customer. (iii) Interest income Interest income is recognised on a time proportion basis, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. (iv) Dividend income Dividend income is recognised when the Groups right to receive payment is established.
58
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Foreign currencies (i) Functional and presentation currency Items included in the nancial statements of each of the Groups entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The nancial statements are presented in Ringgit Malaysia, which is the Companys functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. (iii) Group companies The results and nancial position of all the group entities (none of which has the currency of a hyperinationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to Foreign exchange reserve in shareholders equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale. (d) Income taxes Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and include all taxes based upon the taxable prots, including withholding taxes payable by a foreign subsidiary company or associate on distribution of retained earnings to companies in the Group and real property gains taxes payable on disposal of properties. Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the nancial statements. Deferred tax assets are recognised to the extent that it is probable that taxable prot will be available against which the deductible temporary differences or unused tax losses can be utilised. Deferred tax is recognised on temporary differences arising on investments in subsidiaries and associates except where timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
59
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) Property, plant and equipment Property, plant and equipment are stated at historical cost/valuation less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benets associated with the item will ow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the nancial period in which they are incurred. The Directors have applied the transitional provisions of International Accounting Standard No. 16 (Revised) Property, Plant and Equipment as adopted by the Malaysia Accounting Standard Board which allows the land and building to be stated at their valuation less depreciation and does not require the asset to be revalued on a periodic basis. Accordingly, these valuations have not been updated. Freehold land is not depreciated as it has an innite life. Land under long leases are amortised evenly over the term of the lease. Depreciation of all other property, plant and equipment is computed on the straight-line method based on the estimated useful lives of the various assets. The annual depreciation rates are as follows: % Land under long leases Buildings and improvements Machinery and equipment Furniture, xtures and ttings, and ofce equipment Vehicles and vehicles under hire-purchase 1.00 2.00 2.00 10.00 6.67 25.00 10.00 20.00 20.00
Depreciation on assets under construction commences when the assets are ready for their intended use. Residual values and useful lives of assets are reviewed and adjusted if appropriate, at each balance sheet date. With effect from the current nancial year, the Group revised the useful lives of its plant and machinery from 10 years to 15 years and computers from 3 years to 5 years. The revision was accounted for as change in accounting estimates and as a result, the Groups and Companys depreciation charge for the current and future nancial years have reduced by approximately RM3,443,000 and RM3,015,000 respectively. Gain or loss arising from the disposal of an asset is determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset, and is recognised in the income statement. At each balance sheet date, the Group assesses whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. See accounting policy Note 3(j) on impairment of assets
60
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f) Investment properties Investment properties, comprising principally land and ofce buildings, are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group. Investment properties are stated at cost less any accumulated depreciation and impairment losses. Freehold land is not depreciated and buildings are depreciated on the straight line basis to write off the cost of the buildings to their residual values over their estimated useful lives at annual depreciation rates ranges between 2.00% to 10.00%. On disposal of an investment property, or when it is permanently withdrawn from use and no future economic benets are expected from its disposal, it shall be derecognised (eliminated from the balance sheet). The difference between the net disposal proceeds and the carrying amount is recognised in prot or loss in the period of the retirement or disposal. (g) Leases Assets acquired under nance lease arrangements are included in property, plant and equipment and the capital element of the leasing commitments is shown under borrowings. The lease rentals are treated as consisting of capital and interest element. The capital element is applied to reduce the outstanding obligations and the interest element is charged to income statement so as to give a constant periodic rate of interest on the outstanding liability at the end of each accounting period. Assets acquired under nance lease are depreciated over the useful lives of equivalent owned assets in accordance with the property, plant and equipment policy in Note 3(e) above. (i) Finance leases Leases of property, plant and equipment where the Group assumes substantially all the benets and risks of ownership are classied as nance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and nance charges so as to achieve a periodic constant rate of interest on the balance outstanding, The corresponding rental obligations, net of nance charges, are included in borrowings. The interest element of the nance charge is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liabiltity for each period. Property, plant and equipment acquired under nance leases is depreciated over the shorter of the estimated useful life of the asset and the lease term. (ii) Operating leases Leases of assets where a signicant portion of the risks and rewards of ownership are retained by the lessor are classied as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on the straight line basis over the lease period.
61
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (h) Investments Investments in subsidiaries and associates are shown at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 3(j) on impairment of assets. Investments in other non-current investments are shown at cost and an allowance for diminution in value is made where, in the opinion of the Directors, there is a decline other than temporary in the value of such investments. Where there has been a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the nancial year in which the decline is identied. On disposal of an investment, the difference between net disposal proceeds and its carrying amount is charged/ credited to the income statement. (i) Intangible asset Intangible asset represents the rights acquired to manufacture products and is shown at cost. The rights acquired have a nite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method over its estimated useful life of 15 years (2005: 20 years). At each balance sheet date, the Group assesses whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. See accounting policy Note 3(j) on impairment of assets. (j) Impairment of assets Assets that have an indenite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there is separately identiable cash ows (cash-generating units). Nonnancial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each nancial year end. The impairment loss is charged to the income statement unless it reverses a previous revaluation in which case it is charged to the revaluation surplus. Impairment losses on goodwill are not reversed. In respect of other assets, any subsequent increase in recoverable amount is recognised in the income statement unless it reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus. (k) Inventories Inventories are stated at the lower of cost (determined using the weighted average cost formula) and net realisable value. The cost of raw materials and other inventories comprises the original cost of purchase plus cost of bringing the inventories to their present location. The cost of nished goods and work-in-progress includes the cost of raw materials, direct labour and related manufacturing overheads. It excludes borrowing costs. Net realisable value represents the estimated selling price in the ordinary course of business, less selling and distribution costs and all other estimated costs to completion.
62
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (l) Non-current assets classied as assets held for sale Non-current assets held for sale are classied as assets held for sale and stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through a continuing use. (m) Receivables Trade and other receivables are stated at invoice amount as reduced by the appropriate allowances for estimated irrecoverable amounts. Allowance for doubtful receivables is made based on estimates of possible losses which may arise from non-collection of certain receivable accounts. (n) Cash and cash equivalents The Group and Company adopt the indirect method in the preparation of the cash ow statement. For the purpose of the cash ow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short term, highly liquid investments with original maturities of three months or less. (o) Share capital (i) Classication Ordinary shares are classied as equity. Distribution to holders of a nancial instrument classied as an equity instrument are charged directly to equity. (ii) Dividends to shareholders of the Company Dividends on ordinary shares are recognised as liabilities when declared before the balance sheet date. A dividend declared after the balance sheet date, but before the nancial statements are authorised for issue, is not recognised as a liability at the balance sheet date. Upon the dividend becoming payable, it will be accounted for as a liability. (iii) Purchase of own shares Where the Company or its subsidiaries purchases the Companys equity share capital, the consideration paid, including any attributable incremental external costs, net of tax, is deducted from total shareholders equity as treasury shares until they are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received net of any directly attributable incremental external cost and the related tax effect, is included in shareholders equity.
63
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (p) Employee benets (i) Short term employee benets The Group recognises a liability and an expense for bonuses, based on a formula that takes into consideration the prot attributable to the Companys shareholders after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary benets are accrued in the period in which the associated services are rendered by employees of the Group. (ii) Post-employment benets Dened benet plan Post employment benets relate to retirement benets given to employees and is a non-contributory unfunded retirement benets scheme for employees who are eligible under a collective bargaining agreement. The liability in respect of a dened benet plan is the present value of the dened benet obligation at the balance sheet date, together with adjustments for actuarial gains/losses and past service cost. The Group determines the present value of the dened benet obligation every 3 years such that the amounts recognised in the nancial statements do not differ materially from the amounts that would be determined at the balance sheet date. The dened benet obligation, calculated using the projected unit credit method, is determined by independent actuaries, considering the estimated future cash outows using market yields at balance sheet date of government securities which have currency and terms to maturity approximating the terms of the related liability. Actuarial gains and losses arise from experience adjustments and changes in actuarial assumptions. The amount of net actuarial gains and losses recognised in the income statement is determined by the corridor method in accordance with FRS 1192004 and is charged or credited to income over the average remaining service lives of the related employees participating in the dened benet plan. Past service costs are recognised immediately in income, unless the changes to the plan are conditional on the employees remaining in service for a specied period of time (the vesting period). In this case, the past service costs are amortised on a straight line basis over the vesting period. Dened contribution plans A dened contribution plan is a pension plan under which the Group pays xed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufcient assets to pay all employees benets relating to employee service in the current and prior periods. The dened contribution plan of the Group relates to the contribution to the Employee Provident Fund, the national dened contribution plan. The Groups contributions to dened contribution plans are charged to the income statement in the period to which they relate. Once the contributions have been paid, the Group has no further payment obligations.
64
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (q) Financial instruments (i) Description A nancial instrument is any contract that gives rise to both a nancial asset of one enterprise and a nancial liability or equity instrument of another enterprise. A nancial asset is any asset that is cash, a contractual right to receive cash or another nancial asset from another enterprise, a contractual right to exchange nancial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. A nancial liability is any liability that is a contractual obligation to deliver cash or another nancial asset to another enterprise, or to exchange nancial instruments with another enterprise under conditions that are potentially unfavourable. (ii) Financial instruments recognised on the balance sheet The particular recognition method adopted for nancial instruments recognised on the balance sheet is disclosed in the individual policy statement associated with each item. (iii) Financial instruments not recognised on the balance sheet The Group is a party to nancial instruments which comprise foreign currency forward contracts. The instrument is not recognised in the nancial statements on inception. Exchange gains and losses on foreign currency forward contracts are recognised when settled at which time they are included in the measurement of the transaction hedged. (iv) Fair value estimation for disclosure purposes The fair value of nancial liabilities with maturity of more than one year is estimated by discounting the future contractual cash ows at the current market interest rate available to the Company for similar nancial instruments. The fair values of nancial assets (less any estimated credit adjustments) and nancial liabilities with a maturity of less than one year are assumed to approximate their fair values. The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date. (r) Segment reporting Segment reporting is presented for enhanced assessment of the Groups risks and returns. A business segment is a group of assets and operations engaged in providing products or services that are subject to risk and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those components operating in other economic environments. Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment. Segment revenue, expense, assets and segment liabilities are determined before intragroup balances and intragroup transactions are eliminated as part of the consolidation process, except to the extent that such intragroup balances and transactions are between group enterprises within a single segment.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (s) Contingent liabilities and contingent assets The Group does not recognise a contingent liability but discloses its existence in the nancial statements. A contingent liability is a possible obligation that arises from past events whose existence will be conrmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or present obligation that is not recognised because it is not probable that an outow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare circumstances where there is a liability that cannot be recognised because it cannot be measured reliably. A contingent asset is a possible asset that arises from past events whose existence will be conrmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inows of economic benets are probable, but not virtually certain.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The operations of the Group is subject to a variety of nancial risks, including foreign currency exchange risk, interest rate risk, cash ow risk, market risk, credit risk and liquidity risk. The Group has formulated risk management framework whose principal objective is to minimise the Groups exposure to risk and/or costs associated with nancing, investing and operating activities of the Group. Various risk management policies are made and approved by the Board for observation in the day-to-day operations for the controlling and management of the risks associated with nancial instruments. The Groups activities expose it to a variety of nancial risks, including: foreign currency exchange risk - risk that the value of a nancial instrument will uctuate due to changes in foreign exchange rates; interest rate risk - risk that the value of a nancial instrument will uctuate due to changes in market interest rates; cash ow risk - risk that future cash ows associated with a nancial instrument will uctuate. market risk - risk that the value of a nancial instrument will uctuate as a result of changes in market prices, whether those changes are caused by factors specic to the individual instrument or its issuer or factors affecting all instruments traded in the market. credit risk - risk that one party to a nancial instrument will fail to discharge an obligation and cause the other party to incur a nancial loss; and liquidity risk (funding risk) - risk that an enterprise will encounter difculty in raising funds to meet commitments associated with nancial instruments.
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FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (i) Foreign currency exchange risk The Group has a natural hedge to the extent that payments for foreign currency payables is matched against receivables, or whenever possible, by intercompany arrangements and settlements. At 31 December 2006, the settlement dates on open forward contracts are within 1 month. There were no open forward contracts at 31 December 2005. The foreign currency amounts to be received and contractual exchange rates of the Groups outstanding contracts were as follows: HEDGED ITEM At 31 December 2006 Trade receivables: - SGD2,000,000 CURRENCY TO BE RECEIVED RM000 EQUIVALENT CONTRACTUAL RATE
SGD
4,582
RM1=SGD0.4365
The net unrecognised gain at 31 December 2006 on open contracts which hedge anticipated future foreign currency sales amounted to RM83,000 (31.12.2005: RM Nil). This net exchange gain is deferred until related sales are transacted, at which time they are included in the measurement of such transactions. (ii) Cash ow risk The Group is exposed to minimal cash ow risk in view of its healthy cash position. (iii) Market risk The Group has in place policies to manage the Groups exposure to uctuation in the prices of the key raw materials and commodities used in the operations. The Group enters into xed price contracts to establish determinable prices for raw materials and commodities used. (iv) Credit risk The Group has no major concentration of credit risk and manage these risks by monitoring credit ratings and limiting the aggregate nancial exposure to any individual counterparty. The Group extends credit to its customers based upon careful evaluation of the customers nancial condition and credit history. (v) Liquidity risk The Group practices prudent liquidity risk management to minimise the mismatch of nancial assets and liabilities and to maintain sufcient credit facilities for contingent funding requirements of its working capital.
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CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgments are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (a) Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by denition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Groups results and nancial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a signicant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next nancial year are outlined below. (i) Deferred tax assets Deferred tax asset is recognised to the extent that it is probable that future taxable prot will be available against which the temporary differences can be utilised. This involves judgment regarding the future nancial performance of the particular entity in which the deferred tax asset has been recognised. (ii) Depreciation for property, plant and equipment Depreciation of all property, plant and equipment is computed on the straight-line method based on the estimated useful lives of the various assets. This involves judgement regarding the useful lives and residual values for each category of property, plant and equipment in which the depreciation charged has been recognised.
SEGMENT REPORTING (a) Primary segment Business segments The Group is principally involved in one business segment which is the production, marketing and distribution of beverage and food products. As such, no information on the Groups operations by business segments is provided. (b) Secondary segment Geographical segments The Group operates in the following geographical areas: REVENUE 2006 RM000 Malaysia Singapore Indonesia Others 407,854 77,975 19,495 12,363 517,687 2005 RM000 336,976 70,767 1,402 9,766 418,911 TOTAL ASSETS 2006 RM000 446,055 12,199 19,815 478,069 2005 RM000 401,276 18,380 419,656 CAPITAL EXPENDITURE 2006 RM000 16,139 414 16,553 2005 RM000 18,556 18,556
In determining the geographical segments of the Group, sales are based on the region in which the customer is located. Total assets (which excludes deferred tax assets and tax recoverable) and capital expenditure are determined based on where the assets are located.
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REVENUE GROUP 2006 2005 RM000 RM000 Sale of goods Contract manufacturing fees 516,813 874 517,687 417,444 1,467 418,911 COMPANY 2006 2005 RM000 RM000 289,444 496 289,940 249,019 1,467 250,486
DIRECTORS REMUNERATION GROUP AND COMPANY 2006 2005 RM000 RM000 Executive director: Salaries and other allowances Non-executive directors: Fees Other emoluments Total 1,422 100 255 355 1,777 522 96 237 333 855
The estimated monetary value of benets provided to an executive director during the nancial year amounted to approximately RM37,000 (2005: RM21,000). The Directors of the Company in ofce during the nancial year were as follows: Philip Ng Chee Tat Tjong Yik Min Ow Tin Nyap Dato Mohamed Nizam bin Abdul Razak Brigadier General (R) Dato Yahya bin Yusof Dato N. Sadasivan a/l N.N. Pillay Razman Hadz bin Abu Zarim Pearl Foong Lye Fong The number of Directors of the Company whose total remuneration during the nancial year fall within the following bands are as follows: NUMBER OF DIRECTORS 2006 2005 Executive directors: RM500,001 RM550,000 1 RM1,400,001 RM1,450,000 1 Non-executive directors: RM0 RM50,001 RM100,000 3 4 3 4
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PROFIT FROM OPERATIONS The following amounts have been charged/(credited) in arriving at prot from operations: GROUP 2006 RM000 Auditors remuneration for auditors of the Company: - statutory audit - others Auditors remuneration for other auditors Directors remunerations (Note 8) Property, plant and equipment written off Gain on disposal of - property, plant and equipment - non current assets held for sale Allowance for diminution in value of investments in - subsidiaries - quoted shares Inventories written off Loss on liquidation of subsidiaries Net allowance for inventories obsolescence Allowance for doubtful receivables: - trade - associates Writeback of allowance for doubtful receivables: - trade - others Net bad debts (recovered)/written off Management fee receivable from subsidiaries Rental of machinery, equipment and motor vehicles payable Rental income of machinery and equipment receivable from immediate holding company (Note 29) Rental of premises payable Rental income of premises receivable from: - third party - subsidiary Net provision for retirement benets (Note 26) Contributions to Employees Provident Fund Foreign exchange (gain)/loss: - realised - unrealised 297 73 10 1,777 3 (234) (10,309) 9 2,648 1,561 1,140 (72) 3,141 (1,150) 1,391 (546) 742 4,480 (766) 1,481 2005 RM000 240 12 6 855 606 (258) 3,711 755 4,202 4 (29) (4) (114) 2,818 (1,138) 344 (472) 635 4,069 721 (193) COMPANY 2006 RM000 150 73 1,777 1 (5) (1,779) 9 1,835 169 210 (5,953) 1,602 (1,150) 875 (436) (284) 396 2,134 (741) 990 2005 RM000 125 12 855 603 (241) 421 726 149 637 3,319 4 (27) (4) 8 (7,345) 1,197 (1,138) 255 (358) (435) 341 1,811 676 (189)
Staff costs include salaries, bonuses, contributions to Employees Provident Fund, retirement benet, executive directors salary and bonus, and all other payroll costs.
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10 INCOME FROM OTHER INVESTMENTS AND FINANCE GROUP 2006 RM000 Interest income: Short-term deposits Subsidiary Others Early settlement credits Gross dividend from associated company Gross dividend from quoted investment 2,078 5 124 2,207 11 TAX EXPENSE Income tax expenses of the Group and Company are as follows: GROUP 2006 RM000 Current tax: - Malaysian tax - foreign tax Deferred tax (Note 28) 3,591 904 2,727 7,222 Current tax Current nancial year (Over)/under accrual in prior nancial years Deferred tax Origination and reversal of temporary differences Change in tax rate Under/(over) accrual in prior nancial years 1,830 (131) 1,028 7,222 (634) 782 3,610 1,707 (300) 958 4,185 925 675 2,808 3,860 635 3,551 (89) 1,820 1,206 2 2005 RM000 3,462 148 3,610 COMPANY 2006 RM000 1,820 2,365 4,185 2005 RM000 1,208 1,600 2,808 2005 RM000 2,134 4 412 121 2,671 COMPANY 2006 RM000 2,078 14 7 1,674 3,773 2005 RM000 2,134 4 337 2,475
The tax expense for the nancial year can be reconciled to the prot from ordinary activities before tax per income statements as follows: GROUP 2006 RM000 Prot before tax 31,593 2005 RM000 16,116 COMPANY 2006 RM000 19,815 2005 RM000 9,132
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11 TAX EXPENSE (CONTINUED) 2006 % Malaysian tax rate Tax effects of: - expenses not deductible for tax purposes - income not subject to tax - previously unrecognised tax losses - utilisation of reinvestment allowance - income subject to real property gains tax - different tax rate in respect of substantively enacted changes in statutory tax rate for YA 2007 and subsequent years Under/(over) accrual in prior nancial years Average effective tax rate 12 EARNINGS PER SHARE Basic earnings per share of the Group is calculated by dividing the prot attributable to ordinary equity holders of the Company for the nancial year by the weighted average number of ordinary shares in issue during the nancial year, excluding ordinary shares purchased by the Company and held as treasury shares (Note 30(a)). GROUP 2006 2005 RM000 RM000 Basic Prot attributable to ordinary equity holders of the Company Weighted average number of ordinary shares in issue (000) Basic earnings per share (sen) 13 DIVIDENDS Dividends declared or proposed in respect of ordinary shares for the nancial year are as follows: GROUP AND COMPANY 2006 2005 Amount of Amount of Gross per dividend net Gross per dividend net share of tax share of tax Sen RM000 Sen RM000 5.00 6,404 5.00 6,404 9.00 8,301 9.00 9,896 14.00 16,300 14.00 14,705 24,366 128,053 19.0 12,507 128,095 9.8 GROUP 2005 % 28 9 (10) (9) 4 22 COMPANY 2006 2005 % % 28 9 (5) (13) (2) (1) 5 21 28 12 (16) 7 31
At the forthcoming Annual General Meeting, a nal gross dividend in respect of the nancial year ended 31 December 2006 of 9 sen per share (2005: 9 sen per share), less income tax of 28% amounting to RM9,895,632 (2005: RM8,300,526) will be proposed for shareholders approval. These nancial statements do not reect this nal dividend which will be accounted for in the nancial year ending 31 December 2007 when approved by shareholders.
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14 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following: Furniture, xtures Long Leasehold Machinery and ttings, Assets Freehold leasehold buildings and and and ofce Construction- held for land land Buildings improvements equipment equipment Vehicles in-progress disposal RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 GROUP Net book value At 1 January 2006 Additions Disposals Written off Depreciation charge Reclassication At 31 December 2006
Total RM000
1,433 1,433
4,657 (4,657) -
At 31 December 2006 Cost Valuation 1,433 Accumulated depreciation Net book value 1,433 GROUP Net book value At 1 January 2005 Additions Disposals Written off Depreciation charge Reclassication At 31 December 2005
15,298 3,862
24,425 650
25,014 -
4,307 -
2,442 2,442
4,919 782 (12) (4) (1,622) (773) 3,290 21,411 (18,121) 3,290
At 31 December 2005 Cost Valuation 1,433 Accumulated depreciation Net book value 1,433
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14 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Furniture, xtures Long Leasehold Machinery and ttings, Assets Freehold leasehold buildings and and and ofce Construction- held for land land Buildings improvements equipment equipment Vehicles in-progress disposal Total RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 COMPANY Net book value At 1 January 2006 Additions Disposals Written off Depreciation charge Reclassication At 31 December 2006
1,433 1,433
2,987 (2,987) -
At 31 December 2006 Cost Valuation 1,433 Accumulated depreciation Net book value 1,433 COMPANY Net book value At 1 January 2005 Additions Disposals Written off Depreciation charge Reclassication At 31 December 2005
448 448
223,974 12,137
- (138,420) 97,691
61,921 6,321 (239) (602) (7,818) 549 60,132 146,734 (86,602) 60,132
3,643 589 (44) (1) (1,118) (755) 2,314 14,698 (12,384) 2,314
At 31 December 2005 Cost Valuation 1,433 Accumulated depreciation Net book value 1,433
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14 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) As at 31 December 2006, included in property, plant and equipment of the Group, are land and buildings with net carrying values totalling approximately RM7,422,000 (2005: RM10,703,000) which are currently not in active use. Land and buildings were last revalued on 3 December 1980 by Wong Choon Kee, member of Institute of Surveyors, Malaysia, a director with C.H. Williams, Talhar & Wong Sdn Bhd. Net book value of the revalued land and buildings, had these assets been carried at cost less accumulated depreciation are as follows: GROUP 2006 RM000 Net book value Freehold land Long leasehold land 458 2,435 2,893 2005 RM000 458 2,481 2,939 COMPANY 2006 RM000 458 1,743 2,201 2005 RM000 458 1,774 2,232
Included in property, plant and equipment of the Group and Company are fully depreciated plant and machinery which are still in use, with cost amounting to approximately RM54,584,000 and RM48,378,000 (2005: RM51,289,000 and RM44,803,000) respectively. 15 INVESTMENT PROPERTIES GROUP 2006 RM000 Net book value at beginning of nancial year Depreciation Net book value at end of nancial year Cost Less: Accumulated depreciation Net book value at end of nancial year 13,664 (532) 13,132 22,383 (9,251) 13,132 2005 RM000 14,196 (532) 13,664 22,383 (8,719) 13,664 COMPANY 2006 RM000 4,488 (388) 4,100 10,618 (6,518) 4,100 2005 RM000 4,876 (388) 4,488 10,618 (6,130) 4,488
The fair value of the properties was estimated at RM44,570,000 for the Group and RM16,635,000 for the Company based on valuation by an independent professionally qualied valuer. Valuations were based on current prices in an active market for all properties.
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16 INVESTMENTS IN SUBSIDIARIES
COMPANY 2006 RM000 Unquoted shares, at cost Less: Accumulated impairment losses 95,641 (2,604) 93,037 The subsidiaries, which are all incorporated in Malaysia (except where indicated), are as follows: 2005 RM000 94,695 (2,604) 92,091
EFFECTIVE EQUITY INTEREST Direct subsidiaries Bestcan Food Technological Industry Sdn Bhd Esin Canning Industry Sdn Bhd YHS Manufacturing Berhad Yeo Hiap Seng (Sarawak) Sdn Bhd Yeo Hiap Seng Trading Sdn Bhd Yeo Hiap Seng (Perak) Sdn Bhd Yeo Hiap Seng (Middle East) Co. Ltd. E.C.*
(Incorporated in Bahrain)
Principal activities Production of instant noodles Ceased operations Procurement company Production of sauces and non-alcoholic beverages Distribution of food and beverages Investment holding Dormant Dormant Dormant Distribution of food and beverages
2006 % 99.42 100 100 100 100 100 100 100 100 100
2005 % 99.42 100 100 100 100 100 100 100 100 -
(Incorporated in Indonesia)
Not audited by PricewaterhouseCoopers, Malaysia. The nancial statements of this company is audited by a member rm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers, Malaysia.
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17 INVESTMENTS IN ASSOCIATES/ AMOUNT DUE FROM ASSOCIATES GROUP 2006 2005 RM000 RM000 Unquoted investment, at cost Share of post acquisition reserves Less: Accumulated impairment losses Share of net assets 1,784 (956) 828 828 828 1,787 1,613 3,400 3,400 3,400 COMPANY 2006 2005 RM000 RM000 1,784 1,784 (1,224) 560 1,787 1,787 (1,227) 560
The associates, which are all incorporated in Malaysia (except where indicated) are as follows: EFFECTIVE EQUITY INTEREST 2006 2005 % % 23.85 49 GROUP 2006 2005 RM000 RM000 Amount due from associates Less: Allowance for doubtful receivables 846 (846) 861 (861) 23.85 35 49
Principal activities Senawang Edible Oil (Sendirian) Berhad * Yakin Aneka Sdn. Bhd. W.Y. Company Limited
(Incorporated in Thailand)
The amount due from associates mainly represents expenses paid on behalf. The expenses paid on behalf have been fully provided for as at 31 December 2006.
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17 INVESTMENTS IN ASSOCIATES/ AMOUNT DUE FROM ASSOCIATES (CONTINUED) The Groups share of prot/(loss), assets and liabilities of associates are as follows: 2006 RM000 Revenue Loss after tax Non-current assets Current assets Current liabilities Net assets 2,874 (897) 260 1,097 (529) 828 2005 RM000 14,114 (448) 295 3,219 (114) 3,400
The Groups share of losses in two associates has been recognised to the extent of the carrying amount of the investments. The cumulative and current years unrecognised share of losses in excess of carrying amount is RM3,000,000 (2005: RM2,805,000) and RM195,000 (2005: RM195,000) respectively. 18 OTHER INVESTMENTS Other investments of the Group and Company consist of the following: GROUP 2006 2005 RM000 RM000 Quoted shares in Malaysia: At cost Less: Allowance for diminution in value Quoted Malaysian Government bonds, at cost Quoted shares outside Malaysia, at cost Unquoted shares in Malaysia, at cost Total Market value on: Quoted shares in Malaysia Quoted Malaysian Government bonds Quoted shares outside Malaysia 121 5,223 5,344 1 5,345 108 7,363 7,471 129 (120) 9 121 5,223 5,353 1 5,354 1 111 5,926 6,038 COMPANY 2006 2005 RM000 RM000 121 4,013 4,134 4,134 108 5,537 5,645 129 (120) 9 121 4,013 4,143 4,143 1 111 4,019 4,131
The fair values of quoted investments at the balance sheet date approximated their market values.
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19 INTANGIBLE ASSET GROUP RM000 Net book value At 1 January 2005 Amortisation charge At 31 December 2005 Amortisation charge At 31 December 2006 At 31 December 2006 Cost Accumulated amortisation Net book value At 31 December 2005 Cost Accumulated amortisation Net book value 26,167 (5,670) 20,497 23,638 (1,418) 22,220 26,167 (7,591) 18,576 23,638 (3,501) 20,137 21,806 (1,309) 20,497 (1,921) 18,576 23,638 (1,418) 22,220 (2,083) 20,137 COMPANY RM000
Intangible asset represents the rights acquired to manufacture products for YHS (Singapore) Pte Ltd. The remaining amortisation period of the intangible assets at the end of nancial year is 10.67 years. 20 INVENTORIES 2006 RM000 Group At cost: Finished goods and trading merchandise Raw materials Packing materials Work-in-progress Spare parts and consumables Company At cost: Finished goods Raw materials Packing materials Work-in-progress Spare parts and consumables 32,051 6,666 11,095 1,133 952 51,897 22,352 4,125 6,795 674 986 34,932 64,756 7,823 12,028 1,513 970 87,090 42,181 5,019 7,920 873 1,665 57,658 2005 RM000
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21 TRADE AND OTHER RECEIVABLES GROUP 2006 2005 RM000 RM000 Trade receivables Less: Allowance for doubtful receivables Other receivables Less: Allowance for doubtful receivables Deposits Prepayments 129,684 (5,434) 124,250 6,397 (116) 6,281 1,678 1,200 133,409 GROUP 2006 RM000 The currency exposure prole of trade and other receivables is as follows: - Ringgit Malaysia - Indonesia Rupiah - Singapore Dollar - Brunei Dollar - US Dollar - Hong Kong Dollar - Euro Dollar 115,616 13,252 2,301 1,321 650 249 20 133,409 88,952 1,853 747 91,552 3,678 84 1,287 571 157 5,777 5,950 1,808 743 8,501 2005 RM000 87,649 (4,364) 83,285 3,200 (1,486) 1,714 1,518 5,035 91,552 COMPANY 2006 2005 RM000 RM000 6,163 (3,539) 2,624 1,879 (116) 1,763 439 951 5,777 5,895 (3,329) 2,566 2,601 (1,486) 1,115 173 4,647 8,501
The credit terms of trade receivables range from 14 to 90 days (2005: 14 to 90 days). The Group generally has no signicant concentrations of credit risk.
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22 AMOUNTS DUE FROM/(TO) HOLDING COMPANIES, SUBSIDIARIES AND FELLOW SUBSIDIARIES Amounts due from/(to) holding companies, subsidiaries and fellow subsidiaries mainly comprise of trade transactions. The amounts due from/(to) holding companies, subsidiaries and fellow subsidiaries are interest free and the credit terms range from 90 to 180 days (2005: 90 to 180 days). The amount due from immediate holding company and amount due to penultimate holding company are denominated in Singapore Dollar. The currency exposure prole of amount due from subsidiaries is as follows: COMPANY 2006 2005 RM000 RM000 - Ringgit Malaysia - Indonesia Rupiah - Singapore Dollar - US Dollar 308,416 14,557 4,587 1,667 329,227 The currency exposure prole of amount due from fellow subsidiaries is as follows: GROUP AND COMPANY 2006 2005 RM000 RM000 - Ringgit Malaysia - US Dollar - Hong Kong Dollar 21 19 1,339 1,379 The currency exposure prole of amount due to subsidiaries is as follows: COMPANY 2006 2005 RM000 RM000 - Ringgit Malaysia - Singapore Dollar - US Dollar 285,571 73,930 1,323 360,824 The amount due to fellow subsidiaries is denominated in US dollar. 257,547 72,709 330,256 20 1,138 1,158 265,955 265,955
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23 CASH AND CASH EQUIVALENTS GROUP 2006 2005 RM000 RM000 Cash and bank balances Short-term deposits with licensed banks Deposits, bank and cash balances 26,618 44,012 70,630 16,729 59,751 76,480 COMPANY 2006 2005 RM000 RM000 10,721 44,012 54,733 12,291 59,751 72,042
The weighted average interest rate per annum of short-term deposits with licensed banks of the Group and Company that was effective as at the balance sheet date was 3.15% (2005: 2.69%). Short-term deposits with licensed banks of the Group and Company have an average maturity of 75 days (2005: 53 days). Bank balances are deposits held at call with banks. The currency exposure prole of deposits, bank and cash balances is as follows: GROUP 2006 2005 RM000 RM000 - Ringgit Malaysia - Singapore Dollar - US Dollar - Indonesia Rupiah 59,093 3,761 1,800 5,976 70,630 24 NON-CURRENT ASSETS HELD FOR SALE Non-current assets held for sale comprise land and buildings, which have been presented as held for sale following the approval of the Groups management and shareholders to sell the land and buildings. The completion date for the transaction is expected by end of the next nancial year. GROUP AND COMPANY 2006 2005 RM000 RM000 Freehold land and buildings Leasehold land and buildings 45 846 891 73,412 1,532 1,536 76,480 COMPANY 2006 2005 RM000 RM000 49,353 3,757 1,623 54,733 68,977 1,528 1,537 72,042
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25 TRADE AND OTHER PAYABLES GROUP 2006 2005 RM000 RM000 Trade payables Other payables Accrued expenses 83,963 22,897 38,481 145,341 The currency exposure prole of trade and other payables is as follows: GROUP 2006 2005 RM000 RM000 - Ringgit Malaysia - Indonesia Rupiah - Singapore Dollar - US Dollar - Canadian Dollar - Others 128,935 3,753 9,601 1,940 786 326 145,341 79,187 4,807 3,117 533 115 87,759 COMPANY 2006 2005 RM000 RM000 67,309 9,777 1,920 785 325 80,116 37,048 4,800 2,740 533 115 45,236 51,217 8,316 28,226 87,759 COMPANY 2006 2005 RM000 RM000 55,603 10,943 13,570 80,116 30,923 4,777 9,536 45,236
Included in other payables of the Group and Company are creditors under deferred payment schemes (Note 27), which are repayable within the next 12 months, amounting to RM5,287,000 (2005: RM1,812,000). The average credit term granted to the Group and Company for trade purchases is 60 days (2005: 60 days). 26 PROVISION FOR RETIREMENT BENEFITS The movements during the nancial year in the amounts recognised in the balance sheet in respect of the Groups and Companys lump sum retirement benet plan are as follows: GROUP 2006 2005 RM000 RM000 At 1 January Net amount charged to income statement (Note 9) Contributions paid to retired staff At 31 December 5,618 742 (275) 6,085 5,256 635 (273) 5,618 COMPANY 2006 2005 RM000 RM000 2,940 396 (189) 3,147 2,760 341 (161) 2,940
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26 PROVISION FOR RETIREMENT BENEFITS (CONTINUED) The amount recognised in the Groups and Companys balance sheet may be analysed as follows: GROUP 2006 2005 RM000 RM000 Present value of unfunded obligations/ Liability in the balance sheet 6,085 5,618 COMPANY 2006 2005 RM000 RM000 3,147 2,940
The retirement benet plan of the Group and Company is not funded. There are no plan assets or actual returns on plan assets. The current service cost and interest cost recognised in the Groups income statement in respect of provision for retirement benets amounted to RM353,000 and RM389,000 (2005: RM316,000 and RM331,000) respectively. There is no unused amount reversed to the Groups income statement in current nancial year (2005: RM12,000). The current service cost and interest cost recognised in the Companys income statement in respect of provision for retirement benets amounted to RM185,000 and RM211,000 (2005: RM164,000 and RM177,000) respectively. The latest actuarial valuation of the plan was carried out at 31 December 2003. The principal actuarial assumptions used in respect of the Groups and Companys dened plan were discount rate at 7% (2005: 7%) and expected rate of salary increases at 6% (2005: 6%). The Group and Company have a contributory unfunded retirement benet scheme for those employees who are eligible under a collective bargaining agreement. 27 LONG TERM PAYABLES This represents the outstanding purchase consideration arising from purchase of machinery and equipment under interest free deferred payment schemes, which are repayable between 3 to 4 years. GROUP AND COMPANY 2006 2005 RM000 RM000 Total balance outstanding Amount payable within 12 months (Note 25) Amount payable after 12 months 8,945 (5,287) 3,658 5,436 (1,812) 3,624
The estimated fair values of the amount payable after 12 months of the Group and Company is RM3,395,000 (2005: RM3,276,000).
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28 DEFERRED TAX Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the balance sheet: GROUP 2006 RM000 Deferred tax (liabilities)/assets Deferred tax assets Deferred tax liabilities: - subject to income tax - subject to capital gains tax 2,405 (5,580) (52) (5,632) (3,227) At 1 January (Charged)/credited to income statements (Note 11) - property, plant and equipment - provision for retirement benets - inventories - receivables - foreign exchange differences - tax losses (500) (3,568) 131 144 (7) 219 354 (2,727) At 31 December Subject to income tax Deferred tax assets (before offsetting) - property, plant and equipment - provision for retirement benets - inventories - receivables - foreign exchange differences - tax losses Offsetting deferred tax liabilities Deferred tax assets (after offsetting) 298 1,704 918 238 2,006 5,164 (2,759) 2,405 803 1,573 774 7 11 1,652 4,820 (2,268) 2,552 881 326 235 1,442 (1,442) 823 310 11 1,144 (1,144) (3,227) 2,552 (2,942) (110) (3,052) (500) (352) (1,909) 101 328 (450) 136 1,646 (148) (500) (5,043) (50) (5,093) (5,093) (2,728) (2,663) 58 16 224 (2,365) (5,093) (2,678) (50) (2,728) (2,728) (1,128) (1,698) 50 198 (279) 129 (1,600) (2,728) 2005 RM000 COMPANY 2006 2005 RM000 RM000
85
28 DEFERRED TAX (CONTINUED) GROUP 2006 2005 RM000 RM000 Deferred tax liabilities (before offsetting) - property, plant and equipment - foreign exchange differences Offsetting against deferred tax assets Deferred tax liabilities (after offsetting) Subject to capital gains tax Deferred tax liability - property, plant and equipment (52) (110) (50) (50) (8,329) (10) (8,339) 2,759 (5,580) (5,208) (2) (5,210) 2,268 (2,942) (6,485) (6,485) 1,442 (5,043) (3,822) (3,822) 1,144 (2,678) COMPANY 2006 2005 RM000 RM000
The amounts of deductible temporary differences, unused tax losses and reinvestment allowance (all of which have no expiry date) for which no deferred tax asset is recognised in the balance sheet are as follows: GROUP 2006 RM000 Deductible temporary differences Tax losses Reinvestment allowances 29 SIGNIFICANT RELATED PARTY TRANSACTIONS The Company is a subsidiary company of YHS (Singapore) Pte Ltd (immediate holding company), a company incorporated in Singapore. The Directors regard Yeo Hiap Seng Limited (YHSL), a company incorporated in Singapore, as the penultimate holding company. The Directors of the Group and Company are of the opinion that the transactions below have been entered in the normal course of business and have been established under terms that are no more favourable than those arranged with independent third parties. 2,401 13,753 2005 RM000 387 2,779 17,728 COMPANY 2006 2005 RM000 RM000 13,293 17,280
86
29 SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED) The nancial statements of the Group reect the following related party transactions: GROUP 2006 2005 RM000 RM000 Signicant related party transactions: (a) Royalty, technical and management fee payable to penultimate holding company (b) Sales of goods Immediate holding company Fellow subsidiaries YHS Trading (USA) Inc YHS Hong Kong (2000) Pte. Ltd. (c) Purchase of goods from immediate holding company (d) Rental income of machinery and equipment from immediate holding company (Note 9) Signicant outstanding balances arising from current transactions other than normal trade transactions: (a) Royalty, technical and management fee payable to penultimate holding company 30 SHARE CAPITAL GROUP AND COMPANY 2006 2005 RM000 RM000 Authorised: Ordinary shares of RM1.00 each,balance at beginning/end of nancial year Issued and paid-up: Ordinary shares of RM1.00 each, balance at beginning/end of nancial year (a) Treasury shares The shareholders of the Company, by an ordinary resolution passed at the Annual General Meeting held on 25 April 2006, approved the Companys proposal to purchase its own shares. The Directors of the Company are committed to enhancing the value of the Company to its shareholders and believe that the proposed share buy-back can be applied in the best interests of the Company and its shareholders. During the nancial year, the Company purchased 616,300 ordinary shares of its own shares from the open market on the Bursa Malaysia Securities Berhad for RM1,347,104 The average price paid for the shares purchased was approximately RM2.19 per share. As at 31 December 2006, the cumulative treasury shares held amounted to 617,300 shares. The total cumulative purchase cost amounted to RM1,349,160. 300,000 128,096 300,000 128,096 1,997 6,002 2,503 4,649 1,150 74 2,119 2,577 1,138 78,735 69,762 6,901 6,002
87
30 SHARE CAPITAL (CONTINUED) The purchased transactions were nanced by internally generated funds. The shares purchased are being held as treasury shares as allowed under Section 67A of Companies Act, 1965. The Company has the right to reissue these shares at a later date. As treasury shares, the rights attached as to voting, dividends and participation in other distributions are suspended. None of the treasury shares purchased has been sold or cancelled as at 31 December 2006. As at 31 December 2006, the number of outstanding ordinary shares in issue and which are all fully paid after setting treasury shares off against equity is 127,478,241 shares. 31 RESERVES GROUP 2006 2005 RM000 RM000 Distributable reserves: Retained earnings Non-distributable reserves: Share premium Capital reserve Foreign exchange reserve 133,331 59,897 1 2,441 62,339 195,670 (a) Retained earnings Based on estimated tax credits available and prevailing tax rates applicable to dividends, the retained earnings of the Company is available for distribution by way of cash dividends without additional tax liability being incurred. (b) Share premium The Companys share premium is relating to ordinary shares. (c) Capital reserve In 2002, an amount of Bahrain Dollar 60 equivalent to RM606 of a subsidiary company, Yeo Hiap Seng (Middle East) Co. Ltd. E.C., was transferred to the capital reserve. The capital reserve arose from the provisions of the Bahrain Commercial Companies Law 1975 (Amended), which required an amount equivalent to 10% of a subsidiary company, Yeo Hiap Seng (Middle East) Co. Ltd. E.C.s net prot before appropriation to be transferred to a non-distributable reserve account until such time as a minimum of 25% of the issued share capital had been set aside. (d) Foreign exchange reserve Exchange differences arising on translation of foreign controlled entities are taken to the foreign exchange reserve. The Group and Company has the sufcient tax credits and exempt income to frank all of its retained earnings as at 31 December 2006, if paid out as dividends. 123,670 59,897 1 2,467 62,365 186,035 COMPANY 2006 2005 RM000 RM000 48,077 59,897 59,897 107,974 47,152 59,897 59,897 107,049
88
32 CHANGES IN ACCOUNTING POLICIES The list of new accounting standards, amendments to published standards and ICs on existing standards that are effective for the Companys nancial years beginning on or after 1 January 2006 is set out in Note 2(a). The following describes the impact of new standards, amendments and interpretations on the nancial statements of the Group and Company. (a) Irrelevant or immaterial effect on nancial statements The adoption of FRS 1, 2, 3, 102, 108, 110, 116, 121,127, 128, 131, 132, 133, the asset ceiling amendment to FRS 1192004 and ICs did not have a material impact on the nancial statements of the Group and Company. In summary: (i) FRS 1 and the asset ceiling amendment to FRS 1192004 are not relevant to the Group and Companys Operations
(ii) FRS 2, 3, 102, 108, 110, 116, 121, 127, 128, 131, 132 and 133 and ICs had no material effect on the Group and Companys policies. (b) Reclassication of prior year comparatives Set out below are changes in accounting policies that resulted in reclassication of prior year comparatives but did not affect the recognition and measurement of the Group and Companys net assets: (i) FRS 101 has affected the presentation of minority interest. In the consolidated balance sheet, minority interest is now presented within equity, separately from parent shareholders equity. Prot or loss in the consolidated income statement as well as total income and expenses for the year recognised directly in equity are now allocated between minority interest and equity holders of the parent.
(ii) Under FRS 101, the Groups share of results of associates is now shown net of tax. (iii) FRS 140 resulted in the reclassication of certain land and buildings from property, plant and equipment to investment properties. The effect on the Groups and Companys nancial statements for the prior nancial year are set out in Note 33(b). (c) FRS 5 Non-current assets held for sale The adoption of FRS 5 has resulted in a change in accounting policy for non-current assets held for sale. The denition of non-current assets held for sale under FRS 5 has resulted in identication of assets of the Group and Company that meet the denition of non-current assets held for sale. These assets are now classied into a separate asset category on the balance sheet. Previously, non-current assets held for sale were included in property, plant and equipment. The effect of this standard on the Groups and Companys nancial statements for current nancial year may be found in Note 33(c). (d) FRS 140 Investment Property The adoption of FRS 140 has resulted in a change in accounting policy for investment properties. The denition of investment properties under FRS 140 has resulted in identication of assets of the Group and Company that meet the denition of investment properties. These properties are now classied into a separate asset category on the balance sheet. Previously, investment properties were included in property, plant and equipment. The effect of this standard on the Groups and Companys nancial statements for current nancial year may be found in Note 33(c).
89
33 RESTATEMENT OF THE INCOME STATEMENTS AND BALANCE SHEETS (a) Restatement of the Income Statements for the year ended 31 December 2005 The following table discloses the reclassication that has been made to conform with the current nancial year presentation to each of the line items in the Group income statement for the nancial year ended 31 December 2005. However, the reclassication has no impact to the prot before tax. As previously reported Reclassication RM000 RM000 Group Revenue Selling and promotional expenses 438,226 (61,629) 376,597 (19,315) 19,315 418,911 (42,314) 376,597
As restated RM000
The Group has previously classied distributor commission as distribution costs under selling expenses. However, the Group has now resolved that it is akin to a sales discount, hence the distributor commission has been reclassied to set off revenue. (b) Restatement of balance sheets as at 31 December 2005 The following table discloses the reclassication that has been made in accordance with the new provisions of FRS 140 to each of the line items in the Group and Companys balance sheets as at 31 December 2005. As previously reported RM000 Group At 31 December 2005 Property, plant and equipment Investment properties 137,829 137,829 Company At 31 December 2005 Property, plant and equipment Investment properties 102,945 102,945 (4,488) 4,488 98,457 4,488 102,945 (13,664) 13,664 124,165 13,664 137,829 FRS 140 Note 32(b) RM000
As restated RM000
90
33 RESTATEMENT OF THE INCOME STATEMENTS AND BALANCE SHEETS (CONTINUED) (c) Effect of changes in accounting policies on balance sheets at 31 December 2006 The following table discloses the impact of the reclassication that has been made in accordance with the new provisions of FRS 5 and 140 to the Group and Companys balance sheets as at 31 December 2006. FRS 5 Note 32(c) RM000 Group Property, plant and equipment Investment properties Non-current assets held for sale Total Company Property, plant and equipment Investment properties Non-current assets held for sale Total 34 CONTINGENT LIABILITIES (a) As of 31 December 2006, the subsidiaries of the Group have credit and loan facilities amounting to RM200,000 (2005: RM2,200,000) obtained from nancial institutions, which are guaranteed by the Company. Accordingly, the Company is contingently liable to the extent of the amount of the credit and loan facilities utilised by its subsidiaries. None of the credit and loan facilities are secured against the assets of the Company or of the Group. (b) In 2004, a legal action was initiated against the Company for an alleged infringement of copyright. The plaintiff has sought general damages, which the plaintiff has not quantied/disclosed but will be assessed by the Court. The Company is contesting the claim, and based on advice received from its legal advisors, the Directors are of the opinion that the Company has reasonable prospect of success. The Company has led for a counter claim against the plaintiff. Accordingly, no provision for loss has been made in the nancial statements. The case is pending court hearing. 35 CAPITAL COMMITMENTS As of the end of the nancial year, the Group and Company have commitments in respect of the following: GROUP 2006 2005 RM000 RM000 Property, plant and equipment: Approved and contracted for Approved but not contracted for 1,019 323 1,258 635 45 323 921 635 COMPANY 2006 2005 RM000 RM000 (2,987) 2,987 (4,100) 4,100 (7,087) 4,100 2,987 (4,657) 4,657 (13,132) 13,132 (17,789) 13,132 4,657 FRS 140 Note 32(d) RM000
Total RM000
91
36 NON CASH TRANSACTIONS The principal non-cash transaction during the nancial year is assets purchased under deferred payment schemes amounting to RM5,321,000 (2005: RM5,436,000). 37 FAIR VALUES The carrying amounts of nancial assets and liabilities of the Group and Company at the balance sheet date approximated their fair values except for other investments (Note 18) and long term payables (Note 27). 38 SUBSEQUENT EVENTS (i) On 31 January 2007, the Board of Directors has proposed a bonus issue of up to 25,619,109 new ordinary shares of RM1.00 each in the Company by way of capitalisation of share premium to be credited as fully paid up on the basis of one bonus share for every ve existing shares held by the entitled shareholders on an entitlement date to be determined and announced at a later date. The proposed bonus issue is subject to the approvals of the shareholders of the Company and the relevant authorities.
(ii) Subsequent to the nancial year end, the Company purchased 219,600 ordinary shares of its own shares from the open market on the Bursa Malaysia Securities Berhad for RM493,313. The average price paid for the shares purchased was approximately RM2.25 per share. 39 APPROVAL OF FINANCIAL STATEMENTS This nancial statements have been approved for issue in accordance with a resolution of the Board of Directors on 28 February 2007.
92
Listed below are the particulars of the properties referred to in Note 14 to the Financial Statements. Approximate Net Book Age of Value as at Building 31.12.2006 (years)* (RM000) 13 29 32 846 368 683
Location of Property 1. 2. 3.
Brief Description
Tenure 99 years lease expiring in year 2076 99 years lease expiring in year 2071 17 lots freehold, 3 lots with 60 years lease expiring in year 2045 60 years lease expiring in year 2033 60 years lease expiring in year 2048 60 years lease expiring in year 2033 60 years lease expiring in year 2048 99 years lease expiring in year 2094 99 years lease expiring in year 2094 99 years lease expiring in year 2058
Lot 58, Mukim Mergong Trading Depot Alor Setar, Kedah Lots 24, 29-31 MIEL Industrial Estate, Prai Mukim of Ulu Kinta and Sungei Raja, Perak Lot 66134, District of Kinta, Perak Lot 154475, District of Kinta, Perak Lot 65644, District of Kinta, Perak Lot 154474, District of Kinta, Perak Lot 6843 (PT 2987), Mukim Bidor, Daerah Batang Padang, Perak Trading Depot Farming Lands
4. 5. 6. 7. 8.
Factory and Trading Depot Factory and Trading Depot Factory and Trading Depot Factory and Trading Depot Industrial Land
35 35 35 35 -
9.
2,093,930
29.6.1996
} } }
1,016
1,482
7,047
10. 7, Jalan Tandang, Corporate Petaling Jaya, Selangor Ofce, Factory and Trading Depot 11. Lots 191 & 121, Shah Alam Industrial Estate, Shah Alam 12. Lot PT 645-650, Mukim Panchor, Daerah Kemumin Kota Bharu, Kelantan 13. Lot 147A, Kawasan Perindustrian Semambu, Kuantan, Pahang Factory and Trading Depot Trading Depot
125,235
8.9.1977
47
5,255
428,140
99 years lease expiring in year 2074 and 2073 respectively 66 years lease expiring in year 2048
25
5,573
52,830
11
1,015
Trading Depot
209,611
4.11.1980
24
806
93
Location of Property 14. Lots K-70 & 71, Temerloh Industrial Park (Phase One) Mentakab 15. Lot 2814, Mukim of Mentakab, Temerloh District, Pahang 16. H.S. (M) 2458 (formerly known as Lot 11511154), Mukim of Plentong, Johor 17. District of Kluang, Mukim Sungai Benut Johor 18. Lot 2050 (formerly known as Lots 13401346) Sec.66, Kuching, Sarawak 19. Lot 1347, Sec.66, Kuching, Sarawak 20. Lot 1348, Sec.66, Kuching, Sarawak 21. Lot 30, Block 19, Seduan Land District, Sibu, Sarawak
Approximate Net Book Age of Value as at Building 31.12.2006 (years)* (RM000) 10 952
Trading Depot
1,600
Freehold Land
17.10.1980
28
45
298,769
6.12.1990
36
10,639
Industrial Land
4,523,096
10.11.1994
7,054
144,550
12.11.1984
21
1,517
60 years lease expiring in year 2027 60 years lease expiring in year 2027 60 years lease expiring in year 2039 60 years lease expiring in year 2054
9 10 26
3,577
263
22. Lot 4183 (formerly Trading Depot known 1732-1750) Block 5, Lambir Land District, Miri, Sarawak 23. Lot 1632, Kemena Land District, Bintulu, Sarawak Industrial Land
95,347
29.8.1994
11
1,919
60,084
60 years lease expiring in year 2058 60 years lease expiring in year 2034
8.7.1998
384
24. Lot 71, Sedco Industrial Trading Depot Estate, Kota Kinabalu, Sabah Total
56,350
20.9.1990
15
876
51,317
* The approximate age of building denotes the age of the oldest building.
94
analysis of shareholdings
as at 28 february 2007
: : :
Distribution of Shareholdings No. of Holders 90 1,781 2,349 381 48 1 Total 4,650 Holdings 1 99 100 1,000 1,001 10,000 10,001 100,000 100,001 6,362,931 6,362,931 and above Total Holdings# 1,823 1,610,317 9,323,150 10,955,408 27,556,902 77,811,041 127,258,641 % 0.001 1.266 7.326 8.609 21.654 61.144 100.00
# Total Holdings is based on the issued and paid-up share capital less 836,900 Treasury Shares as at 28 February 2007. Statement of Directors Interest No. 1. 2. 3. 4. 5. 6. 7. 8. Name Philip Ng Chee Tat Tjong Yik Min Ow Tin Nyap Dato Mohamed Nizam bin Abdul Razak Brigadier General (R) Dato Yahya Bin Yusof Dato N. Sadasivan a/l N.N. Pillay Razman Hadz Bin Abu Zarim Pearl Foong Lye Fong No of Shares Held Nil Nil 15,000 Nil Nil Nil Nil Nil % Nil Nil Negligible Nil Nil Nil Nil Nil
Substantial Shareholder (as per register of substantial shareholders) No. 1. 2. Name YHS (Singapore) Pte. Ltd. Yeo Hiap Seng Limited No. of Shares Held 77,811,041 *77,811,041 % of Shareholdings 61.144 *61.144
95
analysis of shareholdings
as at 28 february 2007
List of Thirty Largest Shareholders No. of Shares Held 77,811,041 5,487,000 4,127,000 1,818,000 1,571,400 % of Shareholdings 61.144 4.312 3.243 1.429 1.235
No. 1. 2. 3. 4. 5.
Name YHS (Singapore) Pte. Ltd. Lembaga Tabung Angkatan Tentera Lembaga Tabung Haji F.I.T Nominees (Asing) Sdn Bhd Platinum Broking Co Ltd for Bendic Associates Amanah Raya Nominees (Tempatan) Sdn Bhd Amanah Saham Malaysia Permodalan Nasional Berhad Mayban Securities Nominees (Asing) Sdn Bhd Platinum Broking Company Limited for Vansbridge Ltd F.I.T Nominees (Asing) Sdn Bhd Platinum Broking Co Ltd for Culford Holdings Intl Ltd Alliancegroup Nominees (Tempatan) Sdn Bhd Pheim Asset Management Sdn Bhd for Employees Provident Fund Permodalan Nasional Berhad Shoptra Jaya (M) Sdn Bhd Cimsec Nominees (Asing) Sdn Bhd Exempt An for CIMB-GK Securities Pte Ltd (Retail Clients) Malaysian Reinsurance Berhad Afn Nominees (Asing) Sdn Bhd UOB Kay Hian Pte Ltd for Goi Seng Hui Inter-Pacic Equity Nominees (Asing) Sdn Bhd Kim Eng Securities Pte Ltd for Lee Kim Chong F.I.T Nominees (Asing) Sdn Bhd Platinum Broking Co Ltd for Vansbridge Ltd Bank Kerjasama Rakyat Malaysia Berhad Tan Jin Tuan Cartaban Nominees (Tempatan) Sdn Bhd Meridian Asset Management Sdn Bhd for Malaysian Assurance Alliance Bhd (A/C2 1/137 6) Amanah Raya Nominees (Tempatan) Sdn Bhd Sekim Amanah Saham Nasional Permodalan Nasional Berhad
6. 7. 8.
788,900 590,700 491,750 476,000 421,000 405,000 372,000 357,300 352,000 330,000
0.620 0.464 0.386 0.374 0.331 0.318 0.292 0.281 0.277 0.259
19.
310,400
0.244
96
analysis of shareholdings
as at 28 february 2007
List of Thirty Largest Shareholders (contd) No. of Shares Held 306,000 296,100 270,000 257,100 256,000 248,000 235,000 % of Shareholdings 0.240 0.233 0.212 0.202 0.201 0.195 0.185
Name Wong Yoon Tet Citigroup Nominees (Asing) Sdn Bhd CBNY for DFA Merging Markets Fund Zulkii Bin Hussain HSBC Nominees (Tempatan) Sdn Bhd HSBC (M) Trustee Bhd for MAAKL Al-Faid (4389) HSBC Nominees (Asing) Sdn Bhd HPBN for Hartlane Enterprises Inc HSBC Nominees (Tempatan) Sdn Bhd HSBC (M) Trustee Bhd for MAAKL Al-Fauzan (5170) Citigroup Nominees (Asing) Sdn Bhd Exempt An for Merrill Lynch Pierce Fenner & Smith Incorporated (Foreign) Malaysian Reinsurance Berhad Wong Yoon Chyuan Bank Kerjasama Rakyat Malaysia Berhad As Benecial Owner Amanah Raya Nominees (Tempatan) Sdn Bhd Dana Islamiah Afn
97
NOTICE IS HEREBY GIVEN THAT the Thirty-Third Annual General Meeting of Yeo Hiap Seng (Malaysia) Berhad (YHSM) will be held at Vintage Ballroom, Level 5, Holiday Villa Subang, 9, Jalan SS12/1, 47500 Subang Jaya, Selangor Darul Ehsan on Thursday, the 19th day of April, 2007 at 10.00 a.m. to transact the following business:-
1. 2. 3.
To receive the Audited Financial Statements for the year ended 31 December 2006 together with the Reports of the Directors and Auditors thereon; To sanction the declaration of a Final Dividend of 9% gross less Malaysian Income Tax in respect of the nancial year ended 31 December 2006; To re-elect the following Directors who retire pursuant to Article 75 of the Companys Articles of Association:(i) Tjong Yik Min (ii) Dato N. Sadasivan a/l N.N. Pillay
Resolution 1 Resolution 2
4. 5. 6.
To appoint Brigadier General (R) Dato Yahya bin Yusof who retires pursuant to Section 129 of the Companies Act, 1965 and to hold ofce until the next Annual General Meeting; To re-appoint Messrs. PricewaterhouseCoopers as auditors of the Company and to authorise the Directors to x their remuneration. As Special Business to consider and, if thought t, to pass the following resolutions:(a) Directors Fee THAT the payment of Directors Fee amounting to RM100,000 for the nancial year ended 31 December 2006 be and is hereby approved. (b) Authority to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965 THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby authorised to issue shares in the Company at any time until the conclusion of the next Annual General Meeting and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem t provided that the aggregate number of shares to be issued does not exceed ten per centum (10%) of the issued and paid-up ordinary share capital of the Company for the time being, subject always to the approvals of the relevant regulatory authorities.
Resolution 7
Resolution 8
98
Notes: 1. 2. 3. A member of the Company entitled to attend and vote at the abovementioned meeting is entitled to appoint one proxy to attend and vote in his stead. Such proxy need not be a member of the Company. The instrument of appointing a proxy, in the case of an individual, shall be signed by the appointer or by his attorney duly authorised in writing, and in the case of a corporation, shall be either given under the hand of an ofcer or attorney of the corporation duly authorised. The instrument appointing the proxy must be deposited at the registered ofce of the Company at No. 7, Jalan Tandang, 46050 Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less than forty-eight (48) hours before the time set for holding the meeting or any adjournment thereof.
Explanatory Notes on Special Business Ordinary Resolution 7 pertaining to Directors Fee The proposed Ordinary Resolution 7, if passed, will authorised the payment of Directors Fee amounting to RM100,000, which will be divisible equally among the Independent Non-Executive Directors for the nancial year ended 31 December 2006. Ordinary Resolution 8 pertaining to Authority to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965 The proposed Ordinary Resolution 8, if passed, will authorize the Directors to allot and issue shares up to 10% of the issued and paid-up capital of the Company for the time being for such purposes as the Directors consider would be in the best interest of the Company. This would avoid any delay and costs in convening a general meeting to specically approve such an issue of shares. This authority unless, revoked or varied at a general meeting, will expire at the next Annual General Meeting of the Company.
99
4. Further details of Directors who are standing for re-election Details of Directors who are standing for re-election are set out in the Directors Prole appearing on pages 20 to 23 of the Annual Report. Information relating to the Directors shareholdings in the Company and its subsidiaries is presented on page 94 of the Annual Report.
proxy form
I/We NRIC/Company No.
(Incorporated in Malaysia)
(full address)
being a member of Yeo Hiap Seng (Malaysia) Berhad hereby appoint NRIC No.
of
(full address)
or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the 33rd Annual General Meeting of the Company to be held at Vintage Ballroom, Level 5, Holiday Villa Subang, 9, Jalan SS12/1, 47500 Subang Jaya, Selangor Darul Ehsan on Thursday, the 19th day of April, 2007 at 10.00 a.m. and any adjournment thereof. My/Our proxy is to vote as indicated below:NO. 1. 2. 3. 4. 5. RESOLUTIONS Receipt of Reports and Audited Financial Statements Declaration of Final Dividend Re-election of Tjong Yik Min Re-election of Dato N. Sadasivan a/l N.N.Pillay Re-appoint Brigadier General (R) Dato Yahya bin Yusof as Director of the Company who retires pursuant to Section 129 of the Companies Act, 1965 and to hold ofce until the next Annual General Meeting Re-appointment of Messrs PricewaterhouseCoopers as Company Auditors Approval of the payment of Directors Fees Authority to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965 FOR AGAINST
6. 7. 8.
Signature of shareholder
Notes: 1. A member of the Company entitled to attend and vote at the abovementioned meeting is entitled to appoint one proxy to attend and vote in his stead. Such proxy need not be a member of the Company. 2. 3. The instrument of appointing a proxy, in the case of an individual, shall be signed by the appointer or by his attorney duly authorised in writing, and in the case of a corporation, shall be either given under the hand of an ofcer or attorney of the corporation duly authorised. The instrument appointing the proxy must be deposited at the registered ofce of the Company at No. 7, Jalan Tandang, 46050 Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less than forty-eight (48) hours before the time set for holding the meeting or any adjournment thereof.
Afx Stamp
www.yeos.com
Yeo Hiap Seng (Malaysia) Berhad (3405-X) No. 7, Jalan Tandang, 46050 Petaling Jaya, Selangor Darul Ehsan