ANNUAL REPORT 2009 - Asia Brands · division, AB Retail management is expected to revamp Mickey Original (MO) concept going forward. AB Global reported significant Sales increase

ANNUAL REPORT 2009

contentsChairman’s Statement 3

Financial Statements 7

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ANNUAL REPORT 2009

ANNUAL REPORT 2009

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ANNUAL REPORT 2009

Ng Chin HuatDirector

Warmest regards from the Chairman’s desk. Onbehalf of the board of Directors, I am pleased topresent this Annual Report and AuditedFinancial Statements of Asia BrandsCorporation Berhad.

Market Trends and Development

Numerous events and happenings have elevated the volatility inthe marketplace, from the ongoing flux in the Malaysian socio-political scene, the instability of commodity and raw materialprices, the global credit crunch, and the fear of a high-inflationeconomy, they epitomise a very challenging 2008 as well astowards the near foreseeable future.

Albeit the challenges presented in this business and economiclandscape, ASIABRANDS is well positioned to ride out this waveof volatility and continue in its embarkation for sustainablebusiness growth and development.

The Group undertook a major corporate exercise in thefinancial year by taking the public-listed holding companyprivate to further optimise the Group’s value and excavate thelatent potential which we belief it so richly hold. The Group’sstrength and deep-seated values have not been more apparentwith encouraging results achieved in this environment.ASIABRANDS was officially delisted from Bursa Malaysia on13th March 2008.

In line with our strategic quest to diversify our business portfoliointo multiple-brand marketing and distribution that has led to thechange of name to ASIABRANDS, the Group has acquired thechildren apparel licensing rights for Disney’s “Mickey Mouse andFriends” character family. This has allowed us to add an iconicbrand to our children business division and synergize on ourclose business relationship with Disney.

The Group has constantly strived to be more nimble and reactiveto differing market conditions. The increasing unpredictability ofthe marketplace and accelerated nature of the adverse globalevents and happenings had somewhat catalyse the Group tofurther instil initiatives in many strategic and operational areas tomitigate any unforeseen risk deviation.

On this front, one of the major strategic decisions the Group undertook this year wasto outsource a majority of its frontline sales personnel to a pre-selected group ofsupervisor operators. This major shift in policy is intended to create entrepreneurshipfrom within. This strategic move had indeed reaped great returns as the supervisoroperators became more involved and aggressive in their business approach. As a resultof the change, the Group’s total headcount also dropped from xxxx to xxx as of 31March 2008.

Financial Statements

Performance has far exceeded expectation this year and we are proud to haveachieved this on the back of such challenging business environment. The turnover for12 months ended 31 March 2008 is at RM172.2 million which represents a doubledigits growth of 14% from the last financial period. The growth is mainly contributed bythe Group’s baby division.

The Group posted a remarkable profit before tax (PBT) of RM23.8 million, representinga 63% improvement from previous financial period. Overall the better financialperformance was a result of aggressive outlet expansion strategy coupled with bettercost control measures taken during the year.

The Net Tangible Asset (NTA) per share had grown over the financial year from RM1.86to RM2.19 representing an 18% year-on-year increase.

Key Milestones

ASIABRANDS Retail achieved another monumental milestone for having surpassed100 operating stand-alone speciality baby centres under the “Anakku” brand name.

ASIABRANDS Trading having successfully implemented the Supervisor OperatorScheme (SOS) which in turned created the opportunity for many promoter supervisorsto become entrepreneurs and having greater empowerment and control on the upfront.

ASIABRANDS IT having successfully implemented the MADPOS point-of-salessoftware in all the stand-alone retail outlets replacing the old software system, POSPAC.The new system allows for a more efficient front-end to back-end data integration.

Acknowledgement

Last but not least, on behalf of the Board of Directors to our dedicated managementteam and all staff, my utmost appreciation for staying committed and unassailablethroughout the challenging times. I wish us all a good year ahead and may we reapbetter results in 2009.

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chairman’s statement

KEY INITIATIVESAND OBJECTIVES

CHALLENGES AND TRENDS OUTLOOK

PE

RFO

RM

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This had been a challenging year due to rising cost of raw materials and commodities across the globe in the first half of FY and the global financial meltdown in second half. The crisis had a huge impact in our local economy as exports plunged and the economy dipped into recession for the first time in 12 years.

Inspite of this, the Group was relatively fortunate to avoid general market malaise as our key businesses are in a recession-resilient industry

Asia Brands Corporation (ABC) reported a Sales Revenue increase of 8.5% to RM186.9m from RM172.2m.However, EBIDTA decreased 17.0% to RM20.1m from RM24.2m due to higher cost of raw materials and a weaker Ringgit versus Renmenbi resulting in higher cost of goods purchased.

PBT also decreased by 28.5% to RM17.0m from RM23.8m largerly due to increase in financial cost of RM2.7m from previous FY as a result of increased borrowing to fund the Group's privatisation exercise.

The Group generated positive cashflow of RM18.2m from business operations this FY. We believe this is sustainable in the coming year which will help pare down our overall borrowing that stands at 0.92x gearing ratio as at the end of FY.

We have also seek to mitigate the currency factor by re-negotiating the commission charged by our procurement partners in order to bring down the overall landed cost of goods.

ABC issued Commercial Paper and Medium Term Notes (CP/MTN) of up to RM70.0m in Aug 2008 to facilitate the Group's privatisation exercise carried out in the previous FY. Tenure for MTN is 7 years arranged by RHB Investment Bank. The facilities were given a MARC rating of 2/A+.

The main challenge the Group faced this year was to replace RM15.0m CIMB banking facilities which the latter decided to withdraw in January 2009 in a tight credit market due to the aftermath of global financial crisis.

This was subsequently resolved when RHB stepped in to become our principal banker replacing CIMB in May 2009.

Total utilisation of the CP/MTN as at the end of FY stood at RM55.0m.

Total finance cost increased to RM3.0m from RM0.3m.

We expect this to drop to approximately RM1.5m in this coming FY and consequently we expect the Group's gearing ratio to improve to 0.80x by the year end.

The Group initiated to outsource AB Trading's frontline resources in its Supervisor Operator Scheme (SOS) which was fully implemented in May 2008.

In 4QFY, AB Global also undertook a massive vendor outsourcing project codenamed Automated Procurement System (APS) with the aim to eliminate the need to keep stock in our warehouse by transfering the responsibility to our vendor partners.

One of the key challenges in rolling out SOS nationwide was the need for management to change paradigm in how we work with our frontline. A top-down approach is archaic and we needed to develop win-win partnerships with the Operators. As a result, AB Trading underwent an organisation restructuring during the FY.

As a direct result due to SOS, total headcount for the Group dropped from 972 to 164 post-implementation.

We expect the APS project to significantly reduce our warehouse stock holding to about RM4m from a pre-implementation average of about RM18m.

We also expect reduction in warehouse personnel and operation cost as a direct result of this.

the year in perspectivefor the financial year ended 31 march 2009 ANNUAL REPORT 2009

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SALES PERFORMANCE BUSINESS DYNAMICS OUTLOOK

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AB Trading reported Sales increase of 4.3% to RM162.0m from RM155.4m.

However, EBIDTA decreased by 9.0% to RM17.2m from RM19.0m. The erosion of this mainly came from COGS which increased by 10.4% to RM67.7m from RM61.3m.

PBT correspondingly dropped to RM13.9m from RM18.0m, a decrease of 22.9%.

Stock balance closed at RM31.6m compared to RM34.1m last FY.

Trade Debtors closed at RM26.8m from RM32.4m last FY whilst debtor collection period is shortened to 81 days compared to 133 days previously.

Baby: Sales decreased by 13.8%. However, with strict control on Opex, the division managed to close with an increase in PBT of 9.1%

Lingerie: Lingerie division also had a challenging FY with Sales decreased by 11.6% but with the drop in Opex the division managed to maintain PBT.

EM: Significant increase in Sales of 25.0% was diluted by increase in COGS and transport cost which lowered PBT by 49.4%.

Children: Sales increased by 107.6% but was mitigated by significant price markdown resulting in COGS of 64.6% compared to 41.9% previously. As a result, the division's loss widened to RM1.1m compared to a profit position of RM 1.0m last FY.

MTLT: A good FY for this division with Sales increased by 121.9%. By maintaining COGS and Opex, this gain went straight to PBT resulting an increase of 67.0%

The main challenge that AB Trading hopes to resolve in the coming FY is to find suitable candidates to head the Lingerie, Children and MTLT divisions which was left vacant as at the end of FY.

Without which, we expect these three divisions to face adverse challenges in highly compettitive market in the near term.

RE

TAIL

AB Retail reported significant Sales increase of 20.8% to RM62.4m from RM51.6m.

However, EBIDTA decreased by 6.4% to RM6.6m from RM7.0m. COGS is the main factor, which increased by 26.8% to RM26.7m from RM21.1m.

Correspondingly, PBT also dropped by 27.2% to RM4.1m from RM5.7m.

Stock balance closed at RM12.2m compared to RM12.3m preciously.

Trade Debtors closed at RM0.2m from RM0.5m last FY whilst debtor collection period is shortened to 31 days compared to 37 days previously

Baby/Children: Increase in Sales of 16.6% to RM54.2m from RM46.5m could not match the increase in COGS of 27.5% due to unfavourable exchange rate and higher purchasing cost. This has impacted poorly on PBT with a decrease of 31.3% to RM4.4m from RM6.4m last FY.

Lingerie: This division had a near turnaround year with Sales improving significantly by 58.4% to RM8.1m from RM5.1m. Losses narrowed this FY to RM0.3m compared to a loss of RM0.8m previously.

We expect the retail market to remain soft in the first half of new FY and the key challenge will be to maintain our sales productivity. On the positive note, we believe this is also a good opportunity to eye new locations given that the rental of key malls is expected to remain stable.

In order to cut further losses in the Children division, AB Retail management is expected to revamp Mickey Original (MO) concept going forward.

AB Global reported significant Sales increase of 55.1% to RM8.4m from RM5.4m.

This is translated to an increase in EBIDTA of 21.6% to RM2.8m from RM2.3m although COGS and Opex had escalated as well with increases of 135.9% and 40.7% respectively.

High BA utilisation had increased finance cost by 144.5%. As a result, PBT maintained at RM2.0m compare to last FY.

Stock balance stood at RM11.6m compared to RM14.6m previously.

Trade Debtors stood at RM0.6m with an average collection period of 50 days.

GLO

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Baby/Children: Sales increased by 55.2% to RM6.5m from RM4.1m. The top 3 countries contributed 81.8% of the sales namely Brunei, Cambodia and Vietnam.This is translated to a PBT increase of 36.9% to RM2.9m from RM2.0m.

Lingerie: Sales increased by 54.0% to RM1.8m from RM1.2m. Main contribution came from Vietnam which represented 72.0% of total sales. Cost of operation in Vietnam had also increased, resulting in a loss of RM0.1m from a profit of RM0.2m last FY.

AB Global suffered a forex loss of RM1.3m due to a rise in Renmenbi currency.

AB Global management had decided to switch focus to domestic market in lieu of export market given the challenging global climate in the near term.

The immediate task in the coming FY is to mitigate forex loss by re-negotiating landed commission with our procurement partners. This is expected to amount to an approximate cost savings of RM0.6m per year.

ANNUAL REPORT 2009

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sbu at a glancefor the financial year ended 31 march 2009

ANNUAL REPORT 2009

FINANCE

The department's biggest highlight in the FY was in securing the RM70.0m CP/MTN facilities just in time before the globalfinancial meltdown in Q3FY. This was followed immediately in Q4FY with the success of replacing one of our principal bankersCIMB, which decided to withdraw its RM15.0m short-term unsecured facilities in Jan 2009.

With the departure of Ms Ng Hui Theng as the previous Financial Controller, the department welcomes Mr Daniel Kok who joinedus on 2 Feb 2009 as the successor to lead the team going forward.

OPERATIONS AND INFORMATION SYSTEMS

The completion of MADPOS project in 1QFY which replaces the old point-of-sales system in AB Retail's front-end proved to bethe key highlight for the department. It was a major project undertaken by the team and the earlier roll-out was not without itsfair share of challenges. However, the initial hiccups in the system, which costed the company about RM26k, was finally ironedout during the year.

As we move towards the next FY, there are plans to develop B2B system capabilities to support the APS project with the aimto automate all sales ordering and handling processes using the web technology.

HUMAN RESOURCE

The key highlight of the department was in assisting the conversion of full-time paid promoters to outsourced under the SOSproject. This was achieved with proper procedural compliance and we are happy to report that our total Group headcountdrastically reduced to 1,155 as at the end of FY compared to 499 a year before.

The year also saw the departure of Ms Annie Yap in Jun 2008 as the previous HOD but welcomes Ms Lina Kik in assuming thepost to lead the team going forward.

CORPORATE COMMUNICATION

The year saw the newly created department helmed by Ms Karen Ho which aims to undertake all forms of corporatecommunication work within the Group.

One of the major projects initiated by the department is the ABpedia project, which is conceptualised as a web-based portalthat archives all intellectual property of the Group.

Another key project moving forward is to establish ground events that could further enhance communication within the Groupas well as between the Group and its key business alliances.

support initiativesfor the financial year ended 31 march 2009

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financial highlightsfor the financial year ended 31 march 2009 ANNUAL REPORT 2009

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FINANCIAL YEAR ENDED

2009 2008 2007 2006* 2004 2003 2002

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

REVENUE 232,786 212,448 150,958 173,077 124,925 120,699 39,838

GROSS PROFIT 77,759 78,859 75,47 88,117 61,692 56,352 16,697

PROFIT BEFORE TAX 20,061 25,643 14,585 12,414 6,061 4,433 3,151

Operating Margin 8.6% 12.1% 9.7% 7.2% 4.9% 3.7% 7.9%

Profit After Tax 15,046 19,232 11,421 8,809 4,154 3,132 1,680

Net Margin 6.5% 9.1% 7.6% 5.1% 3.3% 2.6% 4.2%

TOTAL ASSETS 101,777 113,531 114,084 116,581 133,083 125,687 68,639

RETURN ON ASSETS 19.7% 22.6% 12.8% 10.6% 4.6% 3.5% 4.6%

*15 Months results

COUNTER SALES

Business Segment

Strategic Business Unit

ANNUAL REPORT 2009

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SELLING AND DISTRIBUTION EXPENSES

Strategic Business Unit

Business Segment

Group

ANNUAL REPORT 2009

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simply refreshingsimply adorable

ANNUAL REPORT 2009

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simply refreshingsimply adorable

ANNUAL REPORT 2009

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Directors’ Report 14 Statement by Directors 20

Statutory Declaration 20 Independent Auditors’ Report 21

Balance Sheets 23 Income Statements 25

Statements of Changes in Equity 26

Cash Flow Statements 27

Notes to the Financial Statements 29

simple touchsimply the best

ANNUAL REPORT 2009

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financialstatements

directors’ report ANNUAL REPORT 2009

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The directors hereby submit their report and the audited financial statements of the Group and of the Company for thefinancial year ended 31 March 2009.

PRINCIPAL ACTIVITIES

The Company is principally engaged in the business of investment holding and the provision of management fees to itssubsidiaries. The principal activities of the subsidiaries are set out in Note 7 to the financial statements. There have beenno significant changes in the nature of these activities during the financial year.

RESULTSTHE GROUP THE COMPANY

RM RM

Profit after taxation for the financial year 11,996,371 45,734,599

DIVIDENDS

Since the end of the previous financial year, the Company declared the following dividends on 50,739,935 ordinaryshares on 1 August 2008 in respect of the current financial year:-

(a) a first interim dividend of RM0.62 per ordinary share less 25% tax amounting to RM23,594,070 which was paid on8 August 2008; and

(b) a second interim tax-exempt dividend of RM0.43 per ordinary share amounting to RM21,818,172 which was paidon 12 August 2008.

The directors do not recommend the payment of a final dividend for the current financial year.

RESERVES AND PROVISIONS

All material transfers to or from reserves or provisions during the financial year are disclosed in the financial statements.

ISSUES OF SHARES AND DEBENTURES

During the financial year,

(a) there were no changes in the authorised share capital of the Company;

(b) the Company increased its issued and paid-up capital from RM52,886,001 to RM52,908,335 by the conversion of 22,334 warrants into 22,334 ordinary shares of RM1.00 each at the conversion ratio of 1 warrant to 1 ordinary share at RM1.15. The new shares which arose from the conversion of the warrants rank pari passu in all respects with the existing shares of the Company; and

(c) there were no issues of debentures by the Company.

ANNUAL REPORT 2009

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directors’ report (cont’d)

TREASURY SHARES

The shareholders of the Company, by an ordinary resolution passed in a general meeting held on 30 September 2008,renewed their approval for the Company’s plan to repurchase its own shares. The directors of the Company arecommitted to enhance the value of the Company to its shareholders and believe that the share buy-back programmecan be applied in the best interest of the Company and its shareholders.

The total shares purchased under the share buy-back programme were financed by internally generated funds. Theshares repurchased were retained as treasury shares and are presented as a deduction from shareholders’ equity.

During the financial year, the Company did not repurchase any of its issued ordinary shares from the open market.

As at 31 March 2009, the Company held 2,168,400 of its own shares. The issued and paid-up share capital of theCompany with voting rights as at 31 March 2009 was 50,739,935 (2008 - 50,717,601) shares.

WARRANTS

The 2002/2012 Warrants are constituted by a Deed Poll dated 1 August 2001 executed by the Company. The mainfeatures of the 2002/2012 Warrants are as follows:

(a) Each warrant will entitle the registered holders to subscribe for a new ordinary share of RM1.00 each at par in the Company at an exercise price of RM1.15 each, subject to the adjustment from time to time in accordance with the conditions as stipulated in the Deed Poll.

(b) The warrants may be exercised at any time between 18 February 2003, being the date of the first anniversary of the issue of the warrants and the expiry date of ten (10) years from the date of issue of the rights to the allotment of warrants on 18 February 2002. Warrants not exercised during the exercise period will thereafter lapse and cease to be valid.

(c) The new ordinary shares of RM1.00 each to be issued pursuant to the exercise of the warrants will rank pari passu in all respects with the existing issued ordinary shares of the Company except that they shall not be entitled to any dividends, rights, allotments and/or other distributions, the record date of which is on or before the date of allotment and issue of the new ordinary shares of the Company pursuant to the exercise of the warrants.

For the purpose hereof, record date means the date as at the close of business on which the shareholders must beregistered as members of the Company in order to participate in any dividends, rights, allotments or any otherdistributions.

The movement of warrants is as follows:-

NUMBER OF WARRANTS

At 1 April 2008 6,155,333Conversions during the financial year (Note 21) (22,334)

At 31 March 2009 6,132,999


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OPTIONS GRANTED OVER UNISSUED SHARES

During the financial year, no options were granted by the Company to any person to take up any unissued shares inthe Company.

BAD AND DOUBTFUL DEBTS

Before the financial statements of the Group and of the Company were made out, the directors took reasonable stepsto ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance fordoubtful debts, and satisfied themselves that all known bad debts had been written off and that adequate allowancehad been made for doubtful debts.

At the date of this report, the directors are not aware of any circumstances that would require the further writing off ofbad debts, or the additional allowance for doubtful debts in the financial statements of the Group and of the Company.

CURRENT ASSETS

Before the financial statements of the Group and of the Company were made out, the directors took reasonable stepsto ascertain that any current assets other than debts, which were unlikely to be realised in the ordinary course ofbusiness, including their value as shown in the accounting records of the Group and of the Company, have been writtendown 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 which would render the values attributed tothe current assets in the financial statements of the Group and of the Company misleading.

VALUATION METHODS

At the date of this report, the directors are not aware of any circumstances which have arisen which render adherenceto the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

CONTINGENT AND OTHER LIABILITIES

The contingent liability of the Company is disclosed in Note 36 to the financial statements. At the date of this report,there does not exist:-

(i) any charge on the assets of the Group and of the Company that has arisen since the end of the financial year which secures the liabilities of any other person; or

(ii) any contingent liability of the Group and of the Company which has arisen since the end of the financial year.

No contingent or other liability of the Group and of the Company has become enforceable or is likely to becomeenforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors,will or may substantially affect the ability of the Group and of the Company to meet their obligations when they fall due.

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CHANGE OF CIRCUMSTANCES

At the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this report orthe financial statements of the Group and of the Company which would render any amount stated in the financialstatements misleading.

ITEMS OF AN UNUSUAL NATURE

The results of the operations of the Group and of the Company during the financial year were not, in the opinion of thedirectors, substantially affected by any item, transaction or event of a material and unusual nature.

There has not arisen in the interval between the end of the financial year and the date of this report any item, transactionor event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of theoperations of the Group and of the Company for the financial year.

HOLDING COMPANY

The holding company is Everest Empayar Sdn. Bhd., a company incorporated in Malaysia.

DIRECTORS

The directors who served since the date of the last report are as follows:-

DATO’ NG TIONG SENGNG CHIN HUATYAP SU P’INGNG HUI TIENG (RESIGNED ON 23.1.2009)

ANNUAL REPORT 2009

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DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, the interests of directors holding office at the end of the financialyear in shares in the Company and its related corporations during the financial year are as follows:-

NUMBER OF ORDINARY SHARES OF RM1 EACHAT AT

1.4.2008 BOUGHT SOLD 31.3.2009THE COMPANY

DIRECT INTERESTNG CHIN HUAT 6,025,000 - - 6,025,000

INDIRECT INTERESTSDATO’ NG TIONG SENG * 12,817,997 - - 12,817,997NG CHIN HUAT ** 29,935,436 1,961,502 - 31,896,938

* Deemed interest through spouse’s and family members’ shareholdings as well as through Dato’ Ng Tiong Seng’s interest in Ng Tiong Seng Corporation Sdn. Bhd. by virtue of Section 6A of the Companies Act 1965

** Deemed interest through spouse’s and his shareholding in the holding company.

By virtue of their shareholdings in the Company, Dato’ Ng Tiong Seng and Ng Chin Huat are deemed to have interestsin shares in the subsidiaries to the extent of the Company’s interest, in accordance with Section 6A of the CompaniesAct, 1965.

The other director holding office at the end of the financial year did not have any interest in shares in the Company orits related corporations during the financial year.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no director has received or become entitled to receive any benefit (otherthan benefits included in the aggregate amount of emoluments received or due and receivable by directors as shownin the financial statements, or the fixed salary of a full-time employee of the Company or a related corporation) by reasonof a contract made by the Company or a related corporation with the director or with a firm of which the director is amember, or with a company in which the director has a substantial financial interest except for any benefits which maybe deemed to arise from transactions entered into in the ordinary course of business with related parties as disclosedin Note 34 to the financial statements.

Neither during nor at the end of the financial year was the Company or any of its subsidiaries a party to anyarrangements whose object is to enable the directors to acquire benefits by means of the acquisition of shares in ordebentures of the Company or any other body corporate.

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AUDITORS

The auditors, Messrs. Horwath, have expressed their willingness to continue in office.

SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORSDATED

Ng Chin Huat

Yap Su P’ing

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We, Ng Chin Huat and Yap Su P’ing, being two of the directors of Asia Brands Corporation Berhad, state that, in theopinion of the directors, the financial statements set out on pages 13 to 58 are drawn up in accordance with FinancialReporting Standards and the Companies Act 1965 in Malaysia so as to give a true and fair view of the state of affairsof the Group and of the Company at 31 March 2009 and of their results and cash flows for the financial year ended onthat date.

SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORSDATED

Ng Chin Huat Yap Su P’ing

I, Kok Tai Meng, I/C No. 670325-71-5075, being the officer primarily responsible for the financial management of AsiaBrands Corporation Berhad, do solemnly and sincerely declare that the financial statements set out on pages 13 to 58are, to the best of my knowledge and belief, correct, and I make this solemn declaration conscientiously believing thesame to be true and by virtue of the provisions of the Statutory Declarations Act 1960.

Subscribed and solemnly declared by Kok Tai Meng, I/C No. 670325-71-5075, at Kuala Lumpur in the Federal Territory on

Kok Tai MengBefore me

statutory declaration

statement by directors

ANNUAL REPORT 2009

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Report on the Financial Statements

We have audited the financial statements of Asia Brands Corporation Berhad, which comprise the balance sheets asat 31 March 2009 of the Group and of the Company, and the income statements, statements of changes in equity andcash flow statements of the Group and of the Company for the financial year then ended, and a summary of significantaccounting policies and other explanatory notes, as set out on pages 13 to 58.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation and fair presentation of these financial statements inaccordance with Financial Reporting Standards and the Companies Act 1965 in Malaysia. This responsibility includesdesigning, implementing and maintaining internal control relevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriateaccounting policies, and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on our judgement, including the assessment of risks of materialmisstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we considerinternal control relevant to the Company’s preparation and fair presentation of the financial statements in order to designaudit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overallpresentation of the financial statements.

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

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standardsand the Companies Act 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and ofthe Company as of 31 March 2009 and of their financial performance and cash flows for the financial year then ended.

Auditors’ Report

ANNUAL REPORT 2009

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Report on Other Legal and Regulatory Requirements

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

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

(b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(c) Our audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

Other Matters

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

Horwath James Chan Kuan CheeFirm No: AF 1018 Approval No: 2271/10/09 (J)Chartered Accountants Partner

Kuala Lumpur

auditors’ report (cont’d)

ANNUAL REPORT 2009

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balance sheets as at 31 march 2008

THE GROUP THE COMPANY2009 2008 2009 2008

NOTE RM RM RM RM

ASSETSNON-CURRENT ASSETSInvestments in subsidiaries 7 - - 67,088,972 67,088,972Property, plant and equipment 8 25,386,964 25,970,081 - -Other investments 9 106,200 195,143 106,200 195,143Trademarks 10 - - - -Goodwill on consolidation 11 4,205,000 4,205,000 - -Deferred tax assets 12 - 560,000 - -

29,698,164 30,930,224 67,195,172 67,284,115

CURRENT ASSETSInventories 13 55,415,482 60,900,219 - -Trade receivables 14 27,646,436 35,163,066 - -Other receivables, deposits and

prepayments 15 10,625,270 5,644,867 832,463 260,096Amount owing by holdingcompany 16 14,424,712 - - -

Amount owing by subsidiaries 17 - - 52,723,197 12,164,876Tax refundable 2,684,147 464,126 44,662 85,309Fixed deposits with licensed

banks 18 1,303,464 24,179 1,289,785 -Short-term deposit with a

licensed bank 19 1,960,000 650,000 - -Cash and bank balances 20 13,596,785 10,352,635 362,450 827,223

127,656,296 113,199,092 55,252,557 13,337,504

TOTAL ASSETS 157,354,460 144,129,316 122,447,729 80,621,619

EQUITY AND LIABILITIESEQUITYShare capital 21 52,908,335 52,886,001 52,908,335 52,886,001Share premium 22 8,698,533 8,695,183 8,698,533 8,695,183Retained profits 23 22,581,292 55,997,163 7,189,973 6,867,616Treasury shares 24 (2,376,367) (2,376,367) (2,376,367) (2,376,367)

TOTAL EQUITY 81,811,793 115,201,980 66,420,474 66,072,433

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NOTE RM RM RM RM

NON-CURRENT LIABILITIESMedium term notes 25 15,000,000 - 15,000,000 -Deferred taxation 26 1,619,283 513,000 - -

16,619,283 513,000 15,000,000 -

CURRENT LIABILITIESTrade payables 27 4,491,784 7,522,696 - -Other payables and accruals 7,933,600 9,026,130 451,967 400,511Amount owing to holding

company 16 - 927,500 575,288 927,500Amount owing to subsidiaries 17 - - - 13,221,175Provision for taxation - 1,018,010 - -Commercial papers 25 40,000,000 - 40,000,000 -Bankers’ acceptances 28 6,498,000 9,920,000 - -

58,923,384 28,414,336 41,027,255 14,549,186

TOTAL LIABILITIES 75,542,667 28,927,336 56,027,255 14,549,186

TOTAL EQUITY AND LIABILITIES 157,354,460 144,129,316 122,447,729 80,621,619

balance sheets (cont’d)

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income statementsfor the financial year ended 31 march 2008


NOTE RM RM RM RM

REVENUE 29 186,873,144 172,244,972 61,697,275 1,292,310

COST OF SALES (92,497,865) (81,328,470) - -

GROSS PROFIT 94,375,279 90,916,502 61,697,275 1,292,310

OTHER INCOME 742,788 1,505,088 2,119,874 15,319

95,118,067 92,421,590 63,817,149 1,307,629

SELLING AND DISTRIBUTIONEXPENSES (68,007,357) (60,943,054) - -

ADMINISTRATIVE AND OTHEROPERATING EXPENSES (7,059,314) (7,305,951) (3,037,048) (4,082,195)

FINANCE COSTS (3,012,047) (342,894) (2,288,982) (5)

PROFIT/(LOSS) BEFORETAXATION 30 17,039,349 23,829,691 58,491,119 (2,774,571)

INCOME TAX EXPENSE 31 (5,042,978) (7,315,443) (12,756,520) (105,632)

PROFIT/(LOSS) AFTERTAXATION 11,996,371 16,514,248 45,734,599 (2,880,203)

ATTRIBUTABLE TO:Equity holders of the Company 11,996,371 16,514,248 45,734,599 (2,880,203)

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statements of changes in equityfor the financial year ended 31 march 2008

ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANYNON-DISTRIBUTABLE DISTRIBUTABLE

SHARE SHARE TREASURY RETAINEDNOTE CAPITAL PREMIUM SHARES PROFITS TOTAL

THE GROUP RM RM RM RM RM

Balance at 1.4.2007 52,874,667 8,693,483 (2,376,367) 39,482,915 98,674,698Issuance of shares pursuant to

conversion of warrants 11,334 1,700 - - 13,034Profit after taxation for the

financial year - - - 16,514,248 16,514,248

Balance at 31.3.2008/1.4.2008 52,886,001 8,695,183 (2,376,367) 55,997,163 115,201,980Issuance of shares pursuant to


financial year - - - 11,996,371 11,996,371Dividends 32 - - - (45,412,242) (45,412,242)

Balance at 31.3.2009 52,908,335 8,698,533 (2,376,367) 22,581,292 81,811,793

THE COMPANY

Balance at 1.4.2007 52,874,667 8,693,483 (2,376,367) 9,747,819 68,939,602Issuance of shares pursuant to

conversion of warrants 11,334 1,700 - - 13,034Loss after taxation for the

financial year - - - (2,880,203) (2,880,203)

Balance at 31.3.2008/1.4.2008 52,886,001 8,695,183 (2,376,367) 6,867,616 66,072,433Issuance of shares pursuant to


financial year - - - 45,734,599 45,734,599Dividends 32 - - - (45,412,242) (45,412,242)

Balance at 31.3.2009 52,908,335 8,698,533 (2,376,367) 7,189,973 66,420,474

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cash flow statements for the financial year ended 31 march 2008


NOTE RM RM RM RM

CASH FLOWS FROM/(FOR)OPERATING ACTIVITIES

Profit/(Loss) before taxation 17,039,349 23,829,691 58,491,119 (2,774,571)

Adjustments for:-Allowance for doubtful debts 2,272,469 383,739 - -Allowance for obsoleteinventories 1,148,685 426,660 - -Allowance for

impairment losses on otherinvestments 88,943 91,597 88,943 91,597

Bad debts written off 295,871 132,245 - -Depreciation of property, plant

and equipment 3,646,661 4,186,688 - 43,565Inventories written off 3,702,087 2,918,038 - -Interest expense 3,012,047 342,894 2,288,982 5Property, plant and equipment

written off 177,243 43,852 - -Dividend income (13,275) (5,310) (58,433,275) (5,310)Gain on disposal of property,

plant and equipment (30,238) (10,400) - (7,333)Interest income (36,416) (47,629) (2,119,860) (4,591)Write-back of allowance for

obsolete inventories (906,326) (667,275) - -Write-back of doubtful debts (454,367) (610,541) - -

Operating profit/(loss) before working capital changes 29,942,733 31,014,249 315,909 (2,656,638)

Decrease/(Increase) in inventories 1,540,291 (22,294,749) - -Decrease/(Increase) in trade

and other receivables 422,254 (6,402,685) (572,367) 1,173Increase/(Decrease) in trade

and other payables (4,123,442) 8,065,517 51,456 (137,243)Increase in amount owing

by subsidiaries - - (3,264,000) -

CASH FROM/(FOR) OPERATIONS 27,781,836 10,382,332 (3,469,002) (2,792,708)Income tax paid (6,614,726) (6,403,667) (12,715,873) (1,434)Interest paid (3,012,047) (342,894) (2,288,982) (5)

NET CASH FROM/(FOR)OPERATING ACTIVITIES/BALANCE CARRIED FORWARD 18,155,063 3,635,771 (18,473,857) (2,794,147)

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NOTE RM RM RM RM

BALANCE BROUGHT FORWARD 18,155,063 3,635,771 (18,473,857) (2,794,147)

CASH FLOWS (FOR)/FROMINVESTING ACTIVITIES

Additional investment in a subsidiary - - - (2)Dividend received 13,275 5,310 58,433,275 5,310Interest received 36,416 47,629 2,119,860 4,591Proceeds from disposal of

property, plant and equipment 37,420 175,850 - 10,701Purchase of property, plant and

equipment (3,247,969) (4,550,003) - (140,345)(Advances to)/Repayment from

subsidiaries - - (37,294,321) 906,277

NET CASH (FOR)/FROMINVESTING ACTIVITIES (3,160,858) (4,321,214) 23,258,814 786,532

CASH FLOWS (FOR)/FROMFINANCING ACTIVITIES

Proceeds from issuance of shares 25,684 13,034 25,684 13,034Net advances (to)/from

holding company (15,352,212) 927,500 (352,212) 927,500(Repayment to)/Advances from

subsidiaries - - (13,221,175) 1,591,146Repayment to directors - (218,302) - (218,302)Drawdown of bankers’ acceptances 48,831,000 48,149,980 - -Drawdown of bank borrowings 65,000,000 - 65,000,000 -Repayment of bank borrowings (10,000,000) - (10,000,000) -Repayment of bankers’ acceptances (52,253,000) (44,150,980) - -Dividends paid (45,412,242) - (45,412,242) -

NET CASH (FOR)/FROMFINANCING ACTIVITIES (9,160,770) 4,721,232 (3,959,945) 2,313,378

NET INCREASE IN CASHAND CASH EQUIVALENTS 5,833,435 4,035,789 825,012 305,763

CASH AND CASH EQUIVALENTSAT BEGINNING OF THE FINANCIAL YEAR 11,026,814 6,991,025 827,223 521,460

CASH AND CASH EQUIVALENTSAT END OF THE FINANCIAL YEAR 33 16,860,249 11,026,814 1,652,235 827,223

cash flow statements (cont’d)

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notes to the financial statementsfor the financial year ended 31 march 2008

1. GENERAL INFORMATION

The Company is a public company limited by shares and is incorporated under the Companies Act 1965 in Malaysia. The domicile of the Company is Malaysia. The registered office and principal place of business are as follows:-

Registered office : Level 7, Menara Milenium, Jalan Damanlela,Pusat Bandar Damansara, Damansara Heights,50490 Kuala Lumpur.

Principal place of business : Lot 10449, Jalan Nenas, Batu 4?, Kampung Jawa, 41000 Klang, Selangor Darul Ehsan.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors dated 9 September 2009

2. PRINCIPAL ACTIVITIES

The Company is principally engaged in the business of investment holding and the provision of management fees to its subsidiaries. The principal activities of the subsidiaries are set out in Note 7 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

3. HOLDING COMPANY

The holding company is Everest Empayar Sdn. Bhd., a company incorporated in Malaysia.

4. FINANCIAL RISK MANAGEMENT POLICIES

The activities of the Group expose it to certain financial risks, including market, credit, liquidity and cash flow risks. The overall financial risk management objective of the Group is to maximise shareholders’ value by minimising the potential adverse impact of these risks on its financial position, performance and cash flows.

The Board of Directors explicitly assumes the responsibilities of financial risk management which is carried out mainly through risk reviews and internal control systems.

(a) Market Risk

(i) Foreign Currency Risk

The Group’s exposure to currency risk arises mainly from normal trading transactions that are denominated in foreign currencies.

The Group’s primary currency exposure is in United States (“US”) Dollar.

Foreign currency risk is monitored closely and managed to an acceptable level.

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notes to the financial statements (cont’d)

4. FINANCIAL RISK MANAGEMENT POLICIES (Cont’d)

(a) Market Risk (Cont’d)

(ii) Interest Rate Risk

The Group’s exposure to interest rate risk arises mainly from deposits and borrowings. Its policy is to obtain the most favourable interest rates available.

Surplus funds are placed with financial institutions at the most favourable interest rates.

The Group does not use any derivative financial instruments to manage its exposure to interest rate risk as the directors are of the opinion that the net exposure is not significant.

(iii) Price Risk

The Group has investments in quoted shares which are subject to market risk as the market values of these investments are affected by changes in market prices.

The Group manages its exposure to market risk by maintaining a portfolio of equities with different risk profiles.

(b) Credit Risk

The Group’s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from receivables. The maximum exposure to credit risk is represented by the total carrying amount of this financial asset in the balance sheet reduced by the effects of any netting arrangements with counterparties.

The Group’s concentration of credit risk relates to the amount owing by the holding company which made up approximately 27% of the total receivables at the balance sheet date.

The Group manages its exposure to credit risk by seeking to invest cash assets safely and profitably, assessing counterparties’ financial standings on a going concern basis, and by the application of credit approvals, credit limits, credit terms and monitoring procedures on an ongoing basis.

(c) Liquidity and Cash Flow Risks

The Group’s exposure to liquidity and cash flow risks arises mainly from general funding and business activities.

The Group practises prudent liquidity risk management by maintaining sufficient cash balances and the availability of funding through certain committed credit facilities.

5. BASIS OF PREPARATION

The financial statements of the Group and of the Company are prepared under the historical cost convention andmodified to include other bases of valuation as disclosed in other sections under significant accounting policies, and in compliance with Financial Reporting Standards (“FRSs”) and the Companies Act 1965 in Malaysia.

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5. BASIS OF PREPARATION (Cont’d)

(a) During the current financial year, the Group has adopted the following:

(i) FRSs issued and effective for financial periods beginning on or after 1 July 2007:-

FRS 107 Cash Flow StatementsFRS 111 Construction ContractsFRS 112 Income TaxesFRS 118 RevenueFRS 120 Accounting for Government Grants and Disclosure of Government AssistanceFRS 134 Interim Financial ReportingFRS 137 Provisions, Contingent Liabilities and Contingent Assets

FRS 111, FRS 120 and FRS 134 are not relevant to the Group’s operations. The adoption of the other standards did not have any material impact on the form and content of disclosures presented in the financial statements.

(ii) Amendment to FRS 121 - The Effects of Changes in Foreign Exchange Rates Net Investment in a Foreign Operation issued and effective for financial periods beginning on or after 1 July 2007.

This amendment is not relevant to the Group’s operations.

(iii) IC Interpretations issued and are effective for financial periods beginning on or after 1 July 2007:-

IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities IC Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments IC Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental

Rehabilitation Funds IC Interpretation 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and

Electronic Equipment IC Interpretation 7 Applying the Restatement Approach under FRS 1292004 Financial Reporting in

Hyperinflationary Economies IC Interpretation 8 Scope of FRS 2

The above IC Interpretations are not relevant to the Group’s operations.

(b) The Group has not adopted the following FRSs and IC Interpretations that have been issued as at the date of authorisation of these financial statements but are not yet effective for the Group:

(i) FRS issued and effective for financial periods beginning on or after 1 July 2009:

FRS 8 Operating Segments

FRS 8 is not relevant to the Company’s operations.


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5. BASIS OF PREPARATION (Cont’d)

(ii) FRSs issued and effective for financial periods beginning on or after 1 January 2010:

FRS 4 Insurance ContractsFRS 7 Financial Instruments: Disclosures FRS 123 Borrowing Costs FRS 139 Financial Instruments: Recognition and Measurement

FRS 4 is not relevant to the Group’s operations. The possible impacts of FRS 7 and FRS 139 on the financial statements upon their initial application are not disclosed by virtue of the exemptions given in these standards.

The possible impact of FRS 123 on the financial statements upon its initial application is not disclosed as the existing accounting policies of the Group are consistent with the requirements under this new standard.

(iii) Amendments issued and effective for financial periods beginning on or after 1 January 2010:

Amendments to FRS 1 Cost of an Investment in a Subsidiary, Jointlyand FRS 127 Controlled Entity or Associate

Amendment to FRS 2 Vesting Conditions and Cancellations

The above amendments are not relevant to the Group’s operations.

(iv) IC Interpretations issued and effective for financial periods beginning on or after 1 January 2010:

IC Interpretation 9 Reassessment of Embedded Derivatives IC Interpretation 10 Interim Financial Reporting and Impairment IC Interpretation 11 FRS 2: Group and Treasury Share TransactionsIC Interpretation 13 Customer Loyalty ProgrammesIC Interpretation 14 FRS 119: The Limit on a Defined Benefit

Asset, Minimum Funding Requirements and their Interaction

The above IC Interpretations are not relevant to the Group’s operations.

6. SIGNIFICANT ACCOUNTING POLICIES

(a) Critical Accounting Estimates And Judgements

Estimates and judgements are continually evaluated by the directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that affect the application of the Group and the Company’s accounting policies and disclosures, and have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed below.


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6. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

(a) Critical Accounting Estimates And Judgements (Cont’d)

(i) Depreciation of Property, Plant and Equipment

The estimates for the residual values, useful lives and related depreciation charges for the property, plant and equipment are based on commercial and usage factors which could change significantly as a result of technical innovations and competitors’ actions in response to the market conditions.

The Group anticipates that the residual values of its property, plant and equipment will be insignificant. As a result, residual values are not being taken into consideration for the computation of the depreciable amount.

Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

(ii) Income Taxes

There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group recognises tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the year in which such determination is made.

(iii) Impairment of Assets

When the recoverable amount of an asset is determined based on the estimate of the value-in-use of the cash-generating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash flows from the cash-generating unit and also to apply a suitable discount rate in order to determine the present value of those cash flows.

(iv) Allowance for Doubtful Debts of Receivables

The Group makes allowance for doubtful debts based on an assessment of the recoverability of receivables. Allowances are applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Management specifically analyses historical bad debt, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the allowance for doubtful debts of receivables. Where the expectation is different from the original estimate, such difference will impact the carrying value of receivables.

(v) Allowance for Inventories

Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.

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(b) Financial Instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instruments.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to financial instruments classified as a liability are reported as an expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity.

Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

Financial instruments recognised in the balance sheet are disclosed in the individual policy statement associated with each item.

(c) Functional and Foreign Currency

(i) Functional and Presentation Currency

The functional currency of the Group and each of the Group’s entity is measured using the currency of the primary economic environment in which the Company or that entity operates.

The consolidated financial statements are presented in Ringgit Malaysia ("RM") which is the Company’s functional and presentation currency.

(ii) Transactions and Balances

Transactions in foreign currency are converted into the respective functional currencies on initial recognition, using the exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the balance sheet date are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. All exchange differences are taken to the income statement.

(d) Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to 31 March 2009.

A subsidiary is defined as a company in which the parent company has the power, directly or indirectly, to exercise control over its financial and operating policies so as to obtain benefits from its activities.

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(d) Basis of Consolidation (Cont’d)

All subsidiaries are consolidated using the purchase method. Under the purchase method of accounting, the results of the subsidiaries acquired or disposed of are included from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair values of the subsidiaries’ net assets are determined and these values are reflected in the consolidated financial statements. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.

Intragroup transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

(e) Goodwill on Consolidation

Goodwill on consolidation represents the excess of the fair value of the purchase consideration over the Group’s share of the fair values of the identifiable net assets of the subsidiaries at the date of acquisition.

Goodwill is measured at cost less accumulated impairment losses, if any. The carrying value of goodwill is reviewed for impairment annually. The impairment value of goodwill is recognised immediately in the consolidated income statement. An impairment loss recognised for goodwill is not reversed in a subsequent period.

If, after reassessment, the Group’s interest in the fair values of the identifiable net assets of the subsidiaries exceeds the cost of the business combinations, the excess is recognised immediately in the consolidated income statement.

(f) Investments in Subsidiaries

Investments in subsidiaries are stated at cost in the balance sheet of the Company, and are reviewed for impairment at the end of the financial year if events or changes in circumstances indicate that their carrying values may not be recoverable.

On the disposal of the investments in subsidiaries, the difference between the net disposal proceeds and the carrying amount of the investments is taken to the income statement.

(g) Property, Plant and Equipment

Property, plant and equipment, other than freehold land, are stated at cost less accumulated depreciation and impairment losses, if any.

Freehold land is stated at cost less impairment losses, if any and is not depreciated.

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(g) Property, Plant and Equipment (Cont’d)

Depreciation is calculated under the straight-line method to write off the depreciable amount of the assets over their estimated useful lives. Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. The principal annual rates used for this purpose are:-

Buildings 2%Furniture, fixtures, fittings and equipment 10% - 25%Sewing machines and equipment 10% - 25%Motor vehicles 20%Renovation 15%

The capital work-in-progress represents assets under construction, and which are not ready for commercial use at the balance sheet date. The capital work-in-progress is stated at cost, and will be transferred to the relevant category of long term assets and depreciated accordingly when the assets are completed and ready for commercial use.

The depreciation method, useful life and residual values are reviewed, and adjusted if appropriate, at each balance sheet date to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of the property, plant and equipment.

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

(h) Impairment of Assets

The carrying values of assets, other than those to which FRS 136 - Impairment of Assets does not apply, are reviewed at each balance sheet date for impairment when there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The recoverable amount of the assets is the higher of the assets’ net selling price and their value-in-use, which is measured by reference to discounted future cash flow.

An impairment loss is charged to the income statement immediately unless the asset is carried at its revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of a previously recognised revaluation surplus for the same asset.

In respect of assets other than goodwill, and when there is a change in the estimates used to determine the recoverable amount, a subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately, unless the asset is carried at its revalued amount. A reversal of an impairment loss on a revalued asset is credited directly to the revaluation surplus. However, to the extent that an impairment loss on the same revalued asset was previously recognised as an expense in the income statement, a reversal of that impairment loss is recognised as income in the income statement.

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(i) Other Investments

Other investments held on a long-term basis are stated at cost less allowance for permanent diminution in value.

On the disposal of these investments, the difference between the net disposal proceeds and the carrying amount of the investments is taken to the income statement.

(j) Trademarks

Trademarks purchased are stated at cost less accumulated amortisation and impairment losses, if any. The useful life of trademarks is estimated to be indefinite because based on the current market share of the brands, the management is of the opinion that there is no foreseeable limit to the period over which the trademarks are expected to generate net cash flows to the Group.

Trademarks are tested for impairment annually or more frequently when indicators of impairment are identified.

(k) Inventories

Inventories comprise goods held for trading and are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis, and comprises the purchase price and incidentals incurred in bringing the inventories to their present location and condition.

Net realisable value represents the estimated selling price less the estimated costs necessary to make the sale.

Where necessary, due allowance is made for all damaged, obsolete and slow-moving items.

(l) Receivables

Receivables are carried at anticipated realisable value. Bad debts are written off in the period in which they are identified. An estimate is made for doubtful debts based on a review of all outstanding amounts at the balance sheet date.

(m) Payables

Payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.

(n) Interest-bearing Borrowings

Interest-bearing borrowings and medium term notes are recorded at the amount of proceeds received, net of transaction costs.

All borrowing costs are charged to the income statement as expenses in the period in which they are incurred.

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(o) Commercial Papers (“CPs”)/Medium Term Notes (“MTNs”)

CPs/MTNs issued are initially recognised based on proceeds received, net of issuance expenses incurred and are adjusted in subsequent years for amortisation of discount and/or accretion of premium to maturity, using the effective yield method. The discount amortised and/or premium accreted is recognised in the income statement over the period of the CPs/MTNs.

(p) Equity Instruments

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds.

Dividends on ordinary shares are recognised as liabilities when approved for appropriation.

(q) Purchase of Own Shares

When the share capital recognised as equity is bought by the Company under the share buy-back programme, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Shares bought that are not subsequently cancelled are classified as treasury shares and are presented as a deduction from total equity.

(r) Cash and Cash Equivalents

Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, deposits pledged withfinancial institutions, bank overdrafts and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(s) Employee Benefits

(i) Short-term Benefits

Wages, salaries, paid annual leave, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by employees of the Group.

(ii) Defined Contribution Plans

The Group’s contributions to defined 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 liability in respect of the defined contribution plans.

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(t) Income Taxes

Income taxes for the year comprise current and deferred tax.

Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are recognised for all taxable temporary differences.

Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business combination costs or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.

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

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

Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly to equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business combination costs. The carrying amounts of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred tax assets to be utilised.

(u) Related Parties

Income taxes for the year comprise current and deferred tax.

A party is related to an entity if:-

(i) directly, or indirectly through one or more intermediaries, the party:-• controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries

and fellow subsidiaries); • has an interest in the entity that gives it significant influence over the entity; or• has joint control over the entity;

(ii) the party is an associate of the entity;

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(u) Related Parties (Cont’d)

(iii) the party is a joint venture in which the entity is a venturer;

(iv) the party is a member of the key management personnel of the entity or its parent;

(v) the party is a close member of the family of any individual referred to in (i) or (iv);

(vi) the party is an entity that controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or

(vii) the party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is a related party of the entity.

Close members of the family of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

(v) Contingent Liabilities and Contingent Assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that an outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision.

A contingent asset is a probable asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Company.

(w) Revenue Recognition

(i) Sale of Goods

Sales are recognised upon delivery of goods and customers’ acceptance and where applicable, net of sales discount and returns.

(ii) Dividend Income

Dividend income from other investments is recognised when the right to receive payment is established.

(iii) Interest Income

Interest income is recognised on an accrual basis, based on the effective yield on the investment.

(iv) Management Fee

Management fee is recognised on an accrual basis.

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7. INVESTMENTS IN SUBSIDIARIES

THE COMPANY2009 2008RM RM

Unquoted shares, at cost:-At 1.4.2008/2007 67,088,972 67,088,970Additional investment in a subsidiary - 2

At 31.3.2009/2008 67,088,972 67,088,972

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

EffectiveName of Company Equity Interest Principal activities

2009 2008

Asia Brands Trading Sdn. Bhd. (“ABT”) 100% 100% Trading in lingerie, ladies and children's wear, care and related products through Heavy Traffic Outlet (“HTO”) and distributors.

Asia Brands Retail Sdn. Bhd. (“ABR”) 100% 100% Retailing in lingerie, ladies and children's wear, care and related products through outlets.

Asia Brands Global Sdn. Bhd. (“ABG”) 100% 100% Procuring children’s wear, care and related products, lingerie and ladies’ wear to trading and retail division and providing advertisement and promotional activities and export business.

Asia Brands W&D Services Sdn. Bhd. (“ABWD”) 100% 100% Providing warehouse and distribution services

Asia Brands Management Services 100% 100% Providing management services including Sdn. Bhd. (“ABMS”) finance, accounting and administrative services.

Asia Brands Assets Management 100% 100% Providing asset management services and letting Sdn. Bhd. (“ABAM”) of assets.

Asia Brands HR Services Sdn. Bhd. 100% 100% Providing employment placement, career (“ABHR”) development and all human resource related

services.

Pelita Hebat Sdn. Bhd. (“PHSB”) 100% 100% Investment holding and letting of properties

AIMB Cottonshop Sdn. Bhd. (“CS”) # 100% 100% Dormant.

Anakku Holdings Sdn. Bhd. (“AHSB”) 100% 100% Dormant.

Asia Brands IT Services Sdn. Bhd. (“ABIT”) 100% 100% Computer software consultancy and Information Technology ("IT") management services.

# - Held through ABWD.

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8. PROPERTY, PLANT AND EQUIPMENT

AT WRITTEN DEPRECIATION AT1.4.2008 ADDITIONS DISPOSALS OFF CHARGE 31.3.2009

RM RM RM RM RM RMTHE GROUP

NET BOOK VALUE

Freehold land 3,413,032 - - - - 3,413,032Buildings 7,678,077 - - - (187,736) 7,490,341Furniture, fixtures,

fittings and equipment 9,882,929 2,407,541 (7,180) (97,547) (2,303,970) 9,881,773Motor vehicles 322,335 411,500 (2) - (167,862) 565,971Renovation 4,673,708 428,928 - (79,696) (987,093) 4,035,847

25,970,081 3,247,969 (7,182) (177,243) (3,646,661) 25,386,964

ACCUMULATEDACCUMULATED IMPAIRMENT NET BOOK

COST DEPRECIATION LOSS VALUERM RM RM RM

At 31.3.2009

Freehold land 3,413,032 - - 3,413,032Buildings 9,386,801 (1,896,460) - 7,490,341Furniture, fixtures, fittings and

equipment 36,678,279 (26,631,506) (165,000) 9,881,773Motor vehicles 1,017,927 (451,956) - 565,971Renovation 7,590,841 (3,554,994) - 4,038,847Capital work-in-progress 381,024 (381,024) - -

58,467,904 (32,915,940) (165,000) 25,386,964

At 31.3.2008

Freehold land 3,413,032 - - 3,413,032Buildings 9,386,801 (1,708,724) - 7,678,077Furniture, fixtures, fittings and

equipment 39,479,025 (29,431,096) (165,000) 9,882,929Motor vehicles 714,336 (392,001) - 322,335Renovation 7,271,208 (2,597,500) - 4,673,708Capital work-in-progress 381,024 (381,024) - -

60,645,426 (34,510,345) (165,000) 25,970,081

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8. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

AT DEPRECIATION AT1.4.2007 ADDITION DISPOSALS CHARGE 31.3.2008

RM RM RM RM RMTHE COMPANY

NET BOOK VALUE

Furniture, fixtures,fittings and equipment 405,011 140,345 (515,476) (29,880) -

Motor vehicles 1 - (1) - -Renovation 318,232 - (304,547) (13,685) -

723,244 140,345 (820,024) (43,565) -

AT ACCUMULATEDCOST DEPRECIATION TOTAL

RM RM RMAt 31.3.2009

Capital work-in-progress 381,024 (381,024) -

At 31.3.2008

Capital work-in-progress 381,024 (381,024) -

The property, plant and equipment at the balance sheet date were charged to a financial institution as security for banking facilities granted to the Company as disclosed in Note 25 to the financial statements.

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9. OTHER INVESTMENTS

THE GROUP/THE COMPANY2009 2008RM RM

Quoted shares in Malaysia, at cost 521,837 521,837Less: Accumulated impairment losses (415,637) (326,694)

106,200 195,143

Accumulated impairment losses:-At 1.4.2008/2007 (326,694) (235,097)Addition for the financial year (91,598) (112,837)Write-back during the financial year 2,655 21,240

At 31.3.2009/2008 (415,637) (326,694)

Market value of quoted shares 106,200 195,143

10. TRADEMARKSTHE GROUP THE COMPANY

2009 2008 2009 2008RM RM RM RM

Trademarks, at cost 973,822 973,822 636,290 636,290Less: Accumulated

amortisation andimpairment losses (973,822) (973,822) (636,290) (636,290)

- - - -

11. GOODWILL ON CONSOLIDATION

Goodwill on consolidation arose from the acquisition of ABAM, ABG, ABHR, ABMS, ABR ABT, ABWD and AHSBin the previous financial years.

Goodwill on consolidation is stated at cost and reviewed for impairment annually.

Goodwill on consolidation has been allocated for impairment testing to the Group’s cash-generating unit (“CGU”).

During the financial year, the Group assessed the recoverable amount of the goodwill on consolidation, and determined that the goodwill on consolidation is not impaired.

The recoverable amount of a CGU is determined based on the value-in-use calculations. These calculations use post-tax cash flow projections based on financial budgets approved by management covering a period of five years.

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11. GOODWILL ON CONSOLIDATION (Cont’d)

The key assumptions underpinning the value-in-use calculations are as follows:

Gross margin 49 to 50%Growth rate 8 - 9%Discount rate 7%

Management determined the budgeted gross margin based on the past performance and its expectations of market development. The growth rate used is based on the past years’ achievement and the expected contracts to be secured. The discount rate used is based on the borrowing rates.

12. DEFERRED TAX ASSETS

THE GROUP THE COMPANY2009 2008 2009 2008RM RM RM RM

At 1.4.2008/2007 560,000 493,300 - 149,100Recognised in income

statement (Note 31) (560,000) 66,700 - (149,100)

At 31.3.2009/2008 - 560,000 - -

Deferred tax assets comprise:-

Accelerated capitalallowance - 560,000 - -

13. INVENTORIES

THE GROUP2009 2008RM RM

Finished goods, carried at net realisable value 55,415,482 60,900,219

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14. TRADE RECEIVABLES


Trade receivables 30,064,354 38,438,367Less: Allowance for doubtful debts (2,417,918) (3,275,301)

27,646,436 35,163,066

Allowance for doubtful debts:-At 1.4.2008/2007 (3,275,301) (6,078,067)Addition during the financial year (2,272,469) (383,739)Write-off during the financial year 2,675,485 2,575,964Write-back during the financial year 454,367 610,541

At 31.3.2009/2008 (2,417,918) (3,275,301)

The Group’s normal trade credit terms range from 30 to 60 days. Other credit terms are assessed and approved on a case-by-case basis.

The foreign currency exposure profile of the trade receivables at the balance sheet date is as follows:-


Brunei Dollar 220,520 -United States Dollar 183,014 207,450

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15. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS


Other receivables, deposits andprepayments 10,661,748 5,681,345 832,463 260,096

Less: Allowance fordoubtful debts (36,478) (36,478) - -

10,625,270 5,644,867 832,463 260,096

Allowance for doubtful debts:-At 1.4.2008/2007 (36,478) (151,405) - -Write-off during the

financial year - 114,927 - -

At 31.3.2009/2008 (36,478) (36,478) - -

16. AMOUNTS OWING BY/(TO) HOLDING COMPANY

The amounts owing are unsecured, interest-free and repayable on demand. The amounts owing are to be settled in cash.

17. AMOUNTS OWING BY/(TO) SUBSIDIARIES2009 2008RM RM

Amount owing by:Trade 3,264,000 - Non-trade 49,459,197 12,164,876

52,723,197 12,164,876

Amount owing to:Non-trade - 13,221,175

The trade amounts owing are subject to the normal credit terms granted by the Company.

The non-trade amounts owing are unsecured, interest-free and repayable on demand.

The amounts owing are to be settled in cash.

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18. FIXED DEPOSITS WITH LICENSED BANKS

The fixed deposits with licensed banks of the Group bore a weighted average effective interest rate of 3.19% (2008 - 3.17%) per annum at the balance sheet date. The fixed deposits have maturity periods ranging from 30 to 90 days (2008 - 30 to 90 days).

19. SHORT-TERM DEPOSIT WITH A LICENSED BANK

The short-term deposit with a licensed bank of the Group bore a weighted average effective interest rate of 2.12% (2008 - 2.4%) per annum at the balance sheet date. The short-term deposit has maturity periods of 4 to 8 days (2008 - 8 days).

20. CASH AND BANK BALANCES

The foreign currency exposure profile of the cash and bank balances at the balance sheet date is as follows:-


Australian Dollar 4,531 254Brunei Dollar 2,793 2,637Chinese Renminbi 3,615 4,876Hong Kong Dollar 3,393 3,640Indonesian Rupiah 1,493 -Korean Won 2 -New Taiwan Dollar 63 64Philippine Peso 344 344Singapore Dollar 1,244 1,982Thai Baht 1,133 1,105United States Dollar 936 3,200Vietnamese Dong 1,728 -

21. SHARE CAPITALTHE GROUP/THE COMPANY

2009 2008 2009 2008RM RM RM RM

ORDINARY SHARES OFRM1 EACH:-

AUTHORISED 100,000,000 100,000,000 100,000,000 100,000,000

ISSUED AND FULLY PAID-UPAt 1.4.2008/2007 52,886,001 52,874,667 52,886,001 52,874,667Issuance of shares pursuant to

conversion of warrants 22,334 11,334 22,334 11,334

At 31.3.2009/2008 52,908,335 52,886,001 52,908,335 52,886,001

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21. SHARE CAPITAL (Cont’d)

During the financial year, the Company increased its issued and paid-up capital from RM52,886,001 to RM52,908,335 by the conversion of 22,334 warrants into 22,334 ordinary shares of RM1 each at the conversion ratio of 1 warrant to 1 ordinary share at RM1.15. The new shares which arose from the conversion of the warrants rank pari passu in all respects with the existing shares of the Company.

22. SHARE PREMIUM

THE GROUP/COMPANY2009 2008RM RM

At 1.4.2008/2007 8,695,183 8,693,483Premium arising from conversion of warrants 3,350 1,700

At 31.3.2009/2008 8,698,533 8,695,183

This relates to the premium arising from shares issued and is not distributable by way of cash dividends.

23. RETAINED PROFITS

The Company has elected for the irrevocable option for the single tier tax system. Therefore, at the balance sheet date, the Company will be able to distribute dividends out of its entire retained profits under the single tier tax system.

24. TREASURY SHARES

The shareholders of the Company, by an ordinary resolution passed in a general meeting held on 30 September 2008, renewed their approval for the Company’s plan to repurchase its own shares. The directors of the Company are committed to enhancing the value of the Company to its shareholders and believe that the share buy-back programme can be applied in the best interest of the Company and its shareholders.

The total shares purchased under the share buy-back programme were financed by internally generated funds. The shares purchased were retained as treasury shares and are presented as a deduction from shareholders’ equity.

During the financial year, the Company had not repurchased any of its issued ordinary shares from the open market.

As at 31 March 2009, the Company held 2,168,400 of its own shares. The issued and paid-up share capital of the Company with voting rights as at 31 March 2009 was 50,739,935 (2008 - 50,717,601) shares.

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25. COMMERCIAL PAPERS (“CPS”)/MEDIUM TERM NOTES (“MTNS”)

THE GROUP/COMPANY2009 2008RM RM

Commercial papers 40,000,000 -

Medium term notes 15,000,000 -

The CP/MTN at the balance sheet date bore effective interest rates which ranged 6.14% and 7.97% respectively(2008 - Nil) per annum.

The principal terms of the CPs/MTNs Programme are as follows:-

(a) Tenure/Maturity 7 years from the date of first issuance under the CPs/MTNs Programme.

CPs - between 1 to 12 months as the Issuer may select, provided that the CPs mature prior to the expiry of the CPs/MTNs Programme.

MTNs - more than 1 year to 7 years as the Company may select, provided that the MTNs mature prior to the expiry of the CPs/MTNs Programme.

(b) Security (i) Assignment of all rights, title, benefits and interests to the Designed Accounts, comprising Master Revenue Account and Finance Service Revenue Account

(ii) A debenture over the fixed and floating assets of the Company and its subsidiaries which include third party fixed charge granted by a subsidiary over the land held under GRN20059, Lot 10449 Mukim Klang, Daerah Klang.

(c) Profit rate The profit rate of CPs/MTNs shall be determined at the point of issuance of the CPs/MTNs.

(d) Redemption At par on the respective maturity dates.

(e) Ranking of notes The CPs and/or MTNs (collectively known as “The Notes”) shall constitute direct, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu, without discrimination, preference or priority amongst themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer, subject to those preferred by law and the transaction documents.

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26. DEFERRED TAXATION

Details of revenue are as follows:-THE GROUP

2009 2008RM RM

At 1.4.2008/2007 513,000 787,200Recognised in income statement (Note 31) 1,106,283 (274,200)

At 31.3.2009/2008 1,619,283 513,000

The deferred taxation relates to temporary differences arising from accelerated capital allowances on qualifying capital expenditure.

27. TRADE PAYABLES

The normal trade credit terms granted to the Group range from 30 to 60 days.

The foreign currency exposure profile of the trade payables in the previous financial year was as follows:-


United States Dollar - 390,538

28. BANKERS’ ACCEPTANCES

The bankers’ acceptances of the Group are subject to a weighted average effective interest rate of 4.35% (2008 - 4.29%) per annum at the balance sheet date and are secured by way of:-

(i) a personal guarantee by a director of the Company; and

(ii) corporate guarantee of the Company

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29. REVENUE

Details of revenue are as follows:-THE GROUP THE COMPANY

2009 2008 2009 2008RM RM RM RM

Dividend:- quoted shares 13,275 5,310 13,275 5,310- subsidiaries - - 58,420,000 -Management services - - 3,264,000 1,287,000Trading 186,859,869 172,239,662 - -

186,873,144 172,244,972 61,697,275 1,292,310

30. PROFIT/(LOSS) BEFORE TAXATION

Profit/(Loss) before taxation is arrived at after charging/(crediting):-


Allowance for doubtful debts 2,272,469 383,739 - -Allowance for obsolete inventories 1,148,685 426,660 - -Allowance for impairment losses on

other investments 88,943 91,597 88,943 91,597Audit fee:- for the financial year 82,000 83,000 15,000 19,000- under/(over)provision

in the previous financial year 400 1,250 (4,000) -Bad debts written off 295,871 132,245 - -Depreciation of property,

plant and equipment 3,646,661 4,186,688 - 43,565Directors’ fee 72,000 231,000 72,000 231,000Directors’ non-fee emoluments 789,600 903,840 789,600 789,600Property, plant and

equipment written off 177,243 43,852 - -Interest expense:- bankers’ acceptances 723,065 341,868 - -- bank overdraft - 5 - 5- trust receipts - 1,021 - -- loan interest 2,288,982 - 2,288,982 -Inventories written off 3,702,087 2,918,038 - -Preliminary expenses written off - 3,750 - -Rental of premises 11,563,674 9,954,176 - 21,600Staff costs 13,593,479 25,425,941 213,593 840,034

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30. PROFIT/(LOSS) BEFORE TAXATION (Cont’d)

Profit/(Loss) before taxation is arrived at after charging/(crediting):-


Dividend income:- quoted shares (13,275) (5,310) (13,275) (5,310)- subsidiaries - - (58,420,000) -Gain on disposal of

property, plant and equipment (30,238) (10,400) - (7,333)Interest income (36,416) (47,629) (2,119,860) (4,591)Realised (gain)/loss on

foreign exchange (959) 18,177 - -Write-back of allowance

for obsolete inventories (906,326) (667,275) - -Write-back of doubtful debts (454,367) (610,541) - -

31. INCOME TAX EXPENSE THE GROUP THE COMPANY

2009 2008 2009 2008RM RM RM RM

Current tax:- for the financial year 5,036,170 7,590,362 12,755,139 -- (over)/underprovision in

previous financial years (1,659,475) 65,981 1,381 (43,468)

3,376,695 7,656,343 12,756,520 (43,468)

Deferred tax assets (Note 12):- for the financial year - (7,700) - 149,100- under/(over)provision in

the previous financial year 560,000 (59,000) - -

560,000 (66,700) - 149,100

Deferred taxation (Note 26): ,- for the financial year (118,604) (303,602) - -- underprovision in

the previous financial year 1,224,887 29,402 - -

1,106,283 (274,200) - -

5,042,978 7,315,443 12,756,520 105,632

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31. INCOME TAX EXPENSE (Cont’d)

During the current financial year, the statutory tax rate was reduced from 26% to 25%, as announced in the Malaysian Budget 2008.

As gazetted in the Finance Act 2009, certain of the subsidiaries of the Company will no longer enjoy the preferential tax rate of 20% on its chargeable income of up to RM500,000 effective from year of assessment 2009. Therefore, the corporate tax rate applicable to certain of the subsidiaries of the Company for the current financial year are 25%.

A reconciliation of income tax expense applicable to the profit/(loss) before taxation at the statutory tax rate to income tax expense at the effective tax rate of the Group and of the Company is as follows:-


Profit/(Loss) beforetaxation 17,039,350 23,829,691 58,491,119 (2,774,571)

Tax at the statutory taxrate of 25% (2008 - 26%) 4,259,837 6,195,719 14,622,780 (721,388)

Tax effects of:-Non-taxable gains (846) (658,109) (1,855,000) (1,724)Non-deductible expenses 813,571 2,012,922 467,024 329,980Deferred tax assets

not recognised duringthe financial year 366,017 242,077 - 542,232

Utilisation of deferred taxassets not recognised inthe previous financial year (519,907) (335,457) (479,665) -

(Over)/Underprovision inprevious financial years:

- current tax (1,659,475) 65,981 1,381 (43,468)- deferred taxation 1,783,781 (29,598) - -

Differential in tax rates - (178,092) - -

5,042,978 7,315,443 12,756,520 105,632

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31. INCOME TAX EXPENSE (Cont’d)

No deferred tax assets are recognised in the balance sheet for the following items:-


Allowance for doubtful debts 1,964,000 176,000 - -Allowance for inventory

obsolescence 750,000 - - -Allowance for unutilised

leave 72,000 95,000 - -Allowance for promotional

request form 1,419,000 2,477,000 - -Allowance for royalties 25,000 -Unutilised tax losses 86,000 1,664,000 86,000 1,664,000Unabsorbed capital

allowances 1,500 340,000 - 340,000

4,317,500 4,752,000 86,000 2,004,000

32. DIVIDENDS

THE GROUP/THE COMPANY2009 2008RM RM

In respect of the current financial year, the Company declared the following dividends on 1 August 2008:

- a first interim dividend of RM0.62 per ordinary share less 25% tax which was paid on 8 August 2008 23,594,070 -

- a second tax-exempt interim dividend of RM0.43 per ordinary share which was paid on 12 August 2008 21,818,172 -

45,412,242 -

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33. CASH AND CASH EQUIVALENTS

For the purpose of the cash flow statements, cash and cash equivalents comprise the following:-


Fixed deposits with licensed banks 1,303,464 24,179 1,289,785 -

Short-term deposit witha licensed bank 1,960,000 650,000 - -

Cash and bank balances 13,596,785 10,352,635 362,450 827,223

16,860,249 11,026,814 1,652,235 827,223

34. RELATED PARTY DISCLOSURES

For the purpose of these financial statements, the Group and the Company have related party relationships with its directors, key management personnel, entities of which the directors and/or key management have significant financial interests and entities within the same Group of companies.

The year-end balances of the related parties are disclosed in the respective notes to the financial statements.

In addition to the balances detailed elsewhere in the financial statements, the Group and the Company carried out the following transactions with the related parties during the financial year:


Dividend received from subsidiaries - - 58,420,000 -

Dividends paid to:- holding company 28,547,760 - 28,547,760 -- a director 5,392,375 - 5,392,375 -- Ng Tiong Seng

Corporation Sdn Bhd (1) 11,472,107 - 11,472,107 -

Management fees received from:- subsidiaries - - 3,264,000 1,287,000

Interest received from:- a subsidiary - - 2,109,192 -

Plant and equipment transferred to:- subsidiaries - - - 816,656

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34. RELATED PARTY DISCLOSURES (Cont’d)


Rental of office paid to:- a subsidiary - - - 21,600

Key management personnel compensation:- short-term employee benefits 1,752,574 1,748,952 789,600 789,600

A company in which Dato’ Ng Tiong Seng, spouse and family members of Dato’ Ng Tiong Seng are directors andhave substantial financial interests.

The outstanding amounts of the related parties will be settled in cash. No guarantees have been given or received. No expenses have been recognised during the financial year as bad and doubtful debts in respect of the amount owing by the related parties.

35. OPERATING LEASE COMMITMENTS

The future minimum lease payments under the non-cancellable operating leases are as follows:-


Not later than one year 9,363,203 8,422,109Later than one year but not later than five years 3,488,519 4,271,637

Total 12,851,722 12,693,746

36. CONTINGENT LIABILITY THE COMPANY

2009 2008RM RM

Unsecured:-Corporate guarantees given to licensed banks for

banking facilities granted to subsidiaries 11,100,000 32,200,000

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36. CONTINGENT LIABILITY (Cont’d)

The principal closing foreign exchange rates used (expressed on the basis of one unit of foreign currency to RM equivalent, unless otherwise stated) for the translation of the foreign currency balances at the balance sheet date were as follows:-

2009 2008RM RM

Australian Dollar 2.93 2.93Brunei Dollar 2.31 2.31100 Chinese Renminbi 53.10 45.98100 Hong Kong Dollar 44.57 41.79Philippine Peso 8.52 0.12Singapore Dollar 2.31 2.31Thai Baht 10.11 10.52United States Dollar 3.48 3.36100 New Taiwan Dollar 10.72 10.80100 Korean Won 0.38 N/A 100 Vietnamese Dong 0.02 N/A 100 Indonesian Rupiah 0.03 N/A

N/A - Not applicable

38. FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair value is defined as the amount at which the financial instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction, other than in a forced sale or liquidation.

The following methods and assumptions are used to estimate the fair value of each class of financial instruments:

(a) Long-Term Bank Loans

The carrying amounts approximated their fair values as these instruments bear interest at variable rates.

(b) Short-Term Borrowings

The carrying amounts approximated their fair values because of the short period to maturity of these instruments.

(c) Cash And Cash Equivalents And Short-Term Receivables/Payables

The carrying amounts approximated their fair values due to the relatively short-term maturity of these financial instruments.

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38. FAIR VALUES OF FINANCIAL INSTRUMENTS

(d) Contingent Liability

The nominal amount and net fair value of the financial instrument not recognised in the balance sheets of the Company is as follows:

THE COMPANYNominal NetAmount Fair Value

As 31 March 2009 NOTE RM’000 RM’000

Contingent liability 36 11,100,000 *

At 31 March 2008

Contingent liability 36 32,200,000 *

* The net fair value of the contingent liability is estimated to be minimal as the subsidiaries are expected to fulfill their obligations to repay their borrowings.

i

ASIA BRANDS CORPORATION BERHAD(COMPANY NO. 163155 - W)

Audit Review Memorandum

For The Financial Year Ended 31 March 2009

19 October 2009

This Audit Review Memorandum has been prepared specifically by Horwath (“the Firm”) for the purpose ofreporting to the Board of Directors of Asia Brands Corporation Berhad .This Memorandum should not bereproduced, quoted or referred to in any public document or announcement without prior written consent from theFirm. Neither the Firm nor any member or employee of the Firm undertakes responsibility arising in any waywhatsoever to any other person in respect of this memorandum, including any errors or omissions therein, howevercaused. The Firm reserves the right to review all calculations included or referred to in respect of this memorandum.

ASIA BRANDS CORPORATION BERHAD (163155-W)

RESTRICTED CIRCULATIONFor use by the Board of Directors of

Asia Brands Corporation Berhad only

19 October 2009

ANNUAL REPORT 2009

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1. FINANCIAL PERFORMANCE

1.1 Material Fluctuations in Income Statement Items

2009 2008 Variance VarianceRM RM RM %

REVENUE- sales to third parties 186,859,869 172,244,972 14,614,897 8.5- others 13,275 - 13,275 -

186,873,144 172,244,972 14,628,172 8 .5

OTHER OPERATING INCOME 742,788 1,505,088 (762,300) (50.6)

COST OF SALES (92,497,865) (81,328,470) 11,169,395 13.7

SELLING ANDDISTRIBUTION EXPENSES (68,007,357) (60,943,054) 7,064,303 11.6

ADMINISTRATIVE ANDOTHER OPERATING EXPENSES (7,059,314) (7,305,951) (246,637) (3.4)

FINANCE COST (3,012,047) (342,894) 2,669,153 778.4

PROFIT BEFORETAXATION (“PBT”) 17,039,349 23,829,691 (6,790,342) (28.5)

INCOME TAX EXPENSE (5,042,978) (7,315,443) (2,272,465) (31.1)

PROFIT AFTERTAXATION (“PAT”) 11,996,371 16,514,248 (4,517,877) (27.4)

ANNUAL REPORT 2009

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1.2 Material Fluctuations in Balance Sheet Items

2009 2008 Variance VarianceRM RM RM %

NON-CURRENT ASSETSProperty, plant and

equipment 25,386,964 25,970,081 (583,117) (2.2)Other investments 106,200 195,143 (88,943) (45.6)Goodwill on consolidation 4,205,000 4,205,000 - -Deferred tax assets - 560,000 (560,000) -

29,698,164 30,930,224 (1,232,060 ) (4 .0)

CURRENT ASSETSInventories 55,415,482 60,900,219 (5,484,737) (9.0)Trade receivables 27,646,436 35,163,066 (7,516,630) (21.4)Others 44,594,378 17,135,807 27,458,571 160.2

127,656,296 113,199,092 14,457,204 12 .8

TOTAL ASSETS 157,354,460 144,129,316 13,225,144 9 .2

REPRESENTED BY:-SHAREHOLDERS’ EQUITY 81,811,793 115,201,980 (33,390,187) (29.0)

NON-CURRENTLIABILITIES 16,619,283 513,000 16,106,283 3139.6CURRENT LIABILITIESTrade payables 4,491,784 7,522,696 (3,030,912) (40.3)Others 54,431,600 20,891,640 33,539,960 160.5

58,923,384 28,414,336 30,509,048 107 .4

TOTAL LIABILITIES 75,542,667 28,927,336 46,615,331 161 .1

EQUITY AND LIABILITIES 157,354,460 144,129,316 13,225,144 9 .2

ANNUAL REPORT 2009

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1.3 Financial Performance

Financial Performance

Asia Brands Padini BoniaFYE 31 March FYE 30 June FYE 30 June

2009 2008 2008 2007 2008 2007

Profitability (%) PAT/Revenue 6.4 9.6 10.9 9.9 9.4 11.6

Assets Utilisation (%) Revenue/Total Net Assets 189.9 148.9 222.0 215.5 171.2 138.5

Equity Multiplier Total Net Assets/(Leveraging) (times) Total Equity 1.2 1.0 1.02 1.03 1.05 1.28

Return On Equity (%) PAT/Total Equity 14.7 14.3 24.6 22.0 16.9 20.6

Return On Assets (%) PAT/Total Assets 7.8 11.8 15.8 16.1 10.8 12.6(exclude goodwill)

Operating Performance

Asia Brands Padini Bonia

2009 2008 2008 2007 2008 2007

Turnover period

Trade receivables (days) 54 75 12 15 50 64

Inventories (months) 7.1 8.8 7.1 4.6 5.7 4.2

Trade payables (days) 18 34 72 71 37 32

ANNUAL REPORT 2009

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2. MATTERS REQUIRING ATTENTION

We intend to issue an unqualified audit opinion on the financial statements of ABCB for the FY2009.

The matters requiring attention have been addressed as follows:-

2.1 Extraction of information

Matter arising

We noted that time was taken to extract source documents required for audit verification purposes. After discussion with the management, we understand that this was due to bulky/voluminous documents of which the person-in-charge in the respective department spent more time to extract such information results from the following:-

(a) certain documents are stored in warehouse;

(b) unable to locate the source documents requested; and

(c) priority was given to daily operational work by person-in-charge from respective department.

Impact on the Company

The above has delay in delivery of documents required for audit purposes.

Recommendation

We would recommend if the management can look into the filing process to improve in extraction of documents.

2.2 Inventories

Provision for slow moving inventory

Matter arising

We noted that the stock aging provided by the management are in total lump sum based on the inventory categories. We are unable to identified the detailed breakdown of the individual stocks and therefore insufficient workdone to ensure provision for slow moving is adequate by the management.

ANNUAL REPORT 2009

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2. MATTERS REQUIRING ATTENTION (Cont’d)

2.2 Inventories (Cont’d)


There could be overstatement of stock value due to slow moving inventory.

Recommendation

We would recommend the Company to have a system to capture and generate such detail information so that the Company have more information on the inventory.

Monthly Sales Report (“MSR”) - Consignment

Matter arising

We understand that the promoter will perform stock take on monthly basis to generate a MSR report to confirm the stock quantity and sales quantity.

A third party was also engaged to observe the stock take performed by the promoters as at financial year end, but there is no report issued by such third party on the observation.

However, we noted that the Company is relying on the system figures when there are variances arise from MSR report as compared to the system figures. This was mainly due to MSR report is not reliable as it was manually done.


There could be under/overstatement of stock quantity.

Recommendation

We would recommend the Company to relook into the control process on MSR report to enable the Company/management have more accurate stock figures.

ANNUAL REPORT 2009

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2. MATTERS REQUIRING ATTENTION (Cont’d)

2.2 Inventories (Cont’d)

Negative Inventory Balances

Matter arising

We noted that the stock listing provided by the management comprises negative balances. This is mainly due to the following:-

i) Timing differences between physical stocks received in warehouse and systems records where the documentation in transit. The stocks have been sold before the systems recorded the stocks has initially been received.

ii) Stocks received have been recorded to wrong code.

iii) Stock code in the system has been changed to lump code but the product code on the price tag still maintains the old code.


There could be under/overstatement of stock value.

Recommendation

We would recommend the Company to relook into the control process to enable the Company/management have more accurate stock figures.

3. COMPLIANCE WITH ACCOUNTING STANDARDS

Based on our audit, the financial statements of ABCB and the Group comply with Financial Reporting Standards (“FRSs”) and the Companies Act 1965 in Malaysia. The accounting policies have been consistently applied, and there have been no significant changes in the accounting policies of ABCB.

ANNUAL REPORT 2009

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4. ACCOUNTING RECORDS AND CO-OPERATION

In carrying out our audit of ABCB, we have been granted full access to the accounting records and registers, and the management and staff of ABCB have extended their full assistance and co-operation to us. As such, the scope of our audit was not limited in this regard.

5. PROPOSED PRACTICE FOR FUTURE EXTERNAL AUDITS

We shall continue to liaise with the management in order to keep abreast with the developments of ABCB. Any new accounting standards that may have an impact on the financial statements of ABCB will be promptly brought to the attention of the management in order for such standards to be adopted in the preparation of the management financial statements.

Documents

ANNUAL REPORT 2009 - Asia Brands · division, AB Retail management is expected to revamp Mickey Original (MO) concept going forward. AB Global reported significant Sales increase