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| 31EnGAGInG WITH OUR COMUnITIES In 2010MIECO AnnUAL REPORT 2010
11 Mar 2010
Plant Visit by 2 lecturers and 38 students
from Universiti Teknologi Mara, Jengka.
• to expose them on chipboard production
and processes.
16 Mar 2010
Plant Visit by 4 lecturers and 27 students
from Universiti Putra Malaysia.
• to expose them on chipboard production
and processes.
25 May 2010
Donation to Rejimen Ke 1
Kor Armor Di Raja, Kem Batu 10, Kuantan.
• 40 pieces of 18mm x 12’ x 18’ of blister
boards – to construct platform for family day.
25 Aug 2010
Invite representatives from Department
of Environment, Police and Tmn Balok
Makmur Residents Committee members
to attend ‘Majlis Berbuka Puasa’.
This event was attended by Dato’ Yong
Seng Yeow, managers and workers from
Gebeng and Semambu plant.
PARTS OF KSSM ACTIVITIES CONDUCTED
IN 2010
11 Apr 2010
Fishing competition and Telematch for
children at Pantai Balok open for KSSM
members.
17 Apr 2010
Football friendly match between MIECO
KSSM and Beserah Selatan Football Club.
KSSM won 2-1.
27 June 2010
Close Sepak Takraw and Badminton Match
between club members.
24 – 26 Sep 2010
Trip to Tioman Island.
32 | GROUP CORPORATE CALEnDARMIECO AnnUAL REPORT 2010
GROUP CORPORATE CALEnDAR
| 33GROUP CORPORATE CALEnDARMIECO AnnUAL REPORT 2010
24 June 2010
Thirty-Seventh Annual General Meeting of MIECO.
1 October 2010
Resignation of Datin Sri Maria Bettina Chua Binti Abdullah as Director of MIECO.
31 October 2010
MIECO launched 3 new designs for MIECO Decorative MFC 2010 Millenium collection.
5 January 2011
MIECO recommenced operations at its Plant 3 in Kechau Tui, Kuala Lipis, which had ceased temporarily in late 2008 due to the global financial crisis.
MIECO introduced to the market wood products endorsed with California Air Resource Board (“CARB”) Phase II certification which are in compliance with California Code of Regulations for the US market.
1 to 5 March 2011
MIECO participated in the 17th Malaysia International Furniture Fair (MIFF) held at Putra World Trade Centre, Kuala Lumpur and rolled out 3 new MIECO Decorative MFC color designs and 1 new surface texture for its 2011 collection.
‘MIECO Partners’ nite’ held at Seri Pacific Hotel Kuala Lumpur on 1 March 2011 in appreciation of the continuous support from customers and distributors.
34 | FInAnCIAL HIGHLIGHTSMIECO AnnUAL REPORT 2010
FInAnCIAL HIGHLIGHTSFInAnCIAL STATISTICS 2006-2010
2010 2009 2008 2007 2006 Restated* Restated* RM’000 RM’000 RM’000 RM’000 RM’000
ASSETS
Non current assets
Property, plant and equipment 489,406 503,188 524,388 513,145 514,438Prepaid lease rentals - - - 17,622 17,862 Investment properties - 7,417 8,396 6,878Deferred tax assets 491 446 455 490 412
489,897 503,634 532,260 539,653 539,590
Current assets 85,463 80,290 163,064 167,522 154,985 Non-current assets held for sale - - - 1,672 1,750
TOTAL ASSETS 575,360 583,924 695,324 708,847 696,325
EQUITY AND LIABILITIES
Equity attributable to equity holders of the Company Share capital 210,000 210,000 210,000 210,000 210,000 Reserves 108,519 106,288 120,592 148,224 148,422 Total equity 318,519 316,288 330,592 358,224 358,422 Non-current liabilities 181,236 196,245 177,199 190,584 77,631 Current liabilities 75,605 71,391 187,533 160,039 260,272 Total liabilities 256,841 267,636 364,732 350,623 337,903 TOTAL EQUITY AND LIABILITIES 575,360 583,924 695,324 708,847 696,325 GROUP RESULTS Revenue 174,208 185,739 370,216 351,372 330,424
Profit / (loss) before taxation 1,646 (16,516) (36,261) 561 10,030 Tax (expense) / credit (30) 1,837 8,308 1,750 (3,535)
Profit / (loss) after taxation 1,616 (14,679) (27,953) 2,311 6,495 Dividend paid - - - 2,100 -
Retained profit / (loss) 1,616 (14,679) (27,953) 211 6,495 SELECTED RATIOS Basic earnings / (loss) per share 0.77 (6.99) (13.31) 1.10 3.09Proposed dividend per share (sen) - - - - 1.00net tangible assets per share (RM) 1.52 1.51 1.57 1.71 1.71
* Restated in accordance with the adoption of FRS 117 (note 36)
| 35FInAnCIAL HIGHLIGHTSMIECO AnnUAL REPORT 2010
REVENUE(In RM’000)
330,424
2006
351,372
2007
370,216
2008
185,739
2009
174,208
2010
400,000
300,000
200,000
100,000
0
696,325
2006
708,847
2007
695,324
2008
583,924
2009
575,360
2010
750,000
600,000
450,000
300,000
150,000
0
TOTAL ASSETS(In RM’000)
SHAREHOLDERS’ FUNDS(In RM’000)
358,422
2006
358,224
2007
330,592
2008
316,288
2009
318,519
2010
360,000
340,000
320,000
300,000
PROFIT / (LOSS) AFTER TAxATION (In RM’000)
6,4952,311
(27,953)
(14,679)
1,616
40,000
30,000
20,000
10,000
02006 2007 2008 2009 2010
36 | SHARE PERFORMAnCEMIECO AnnUAL REPORT 2010
SHARE PERFORMAnCE
VOLUME
(MILLIOn)
200
175
150
100
50
25
0
PRICE(RM)
1.00
0.75
0.50
0.25
0
High
Low
Volume
nov 10
16.86
0.53
0.68
Dec 10
25.30
0.53
0.635
Feb 11
11.02
0.52
0.69
Jan 11
30.32
0.565
0.69
May 10
5.172
0.37
0.445
Jun 10
5.085
0.38
0.45
Jul 10
3.391
0.375
0.42
Aug 10
137.05
0.40
0.97
Sep 10
0.685
0.78
Oct 10
21.13
0.59
0.725
Apr 11
59.87
0.66
0.795
Mar 11
179.81
0.48
0.83
40.88
38 Corporate Governance Statement
42 Audit Committee Report
45 Statement on Internal Control
CORPORATESTATEMEnTS
38 | CORPORATE GOVERnAnCE STATEMEnTMIECO AnnUAL REPORT 2010
CORPORATE GOVERnAnCE STATEMEnTThe Board of MIECO (“the Board”) remains firmly committed to
ensuring an appropriate and sound system of good corporate
governance throughout the Group with the fundamental objective
of protecting and enhancing shareholder value and the financial
performance of the Group.
The Board is pleased to report on the application of the principles
of corporate governance contained in the Malaysian Code on
Corporate Governance (“the Code”) and the extent of compliance
with the best practices of the Code throughout the financial year
ended 31 December 2010.
BOARD OF DIRECTORS
Responsibilities Of The Board
The Board is overall responsible for the direction and control of
the Group as it formulates policies, sets strategic directions and
oversees the investments and operations of the Group.
The Board retains full and effective overall control over the
affairs of the Group and the Company. The principal duties and
responsibilities of the Board are:
• formulating the business direction and objectives of the Group;
• reviewing, adopting and approving the Group’s annual budgets,
strategic plans, key operational initiatives, major investments
and funding decisions;
• overseeing the conduct of business of the Group;
• reviewing the risk management process within the Group;
• assuming responsibility in succession planning within the
Group; and
• reviewing and ensuring the adequacy and effectiveness of
internal control systems and management information systems
to ensure compliance with applicable standards, laws and
regulations.
The Board has established dedicated Board committees which
operate with clear terms of reference to assist the Board in the
execution of its responsibilities. The Board committees include
Audit Committee, Executive Committee, nomination Committee
and Remuneration Committee. The respective committees have
the authority to examine particular issues and report back to the
Board with their recommendations. The ultimate responsibility
for the final decision on all matters, however, lies with the Board.
Board Composition And Balance
During the financial year under review, Dato’ Mohamed Moiz
Bin J M Ali Moiz relinquished his position as Executive Chairman
and was re-designated as non-Executive Chairman of MIECO.
Datin Sri Maria Bettina Chua Binti Abdullah who was appointed
to the Board on 23 February 2010 resigned from the Board on
1 October 2010. As at the date of this statement, the Board
has seven (7) members, comprising one (1) Executive Director
and six (6) non-Executive Directors, of whom three (3) are
independent. The Company is in compliance with the Listing
Requirements of Bursa Malaysia Securities Berhad (“Bursa
Securities”) which requires one third (1/3) of the board members
to comprise Independent Directors. The Directors collectively
bring a wide range of business experience and expertise which
are vital for the continued successful direction of the Group.
A brief profile of each Director is set out on pages 10 and 11
of this Annual Report. The roles of the non-Executive Chairman
and the Managing Director are distinct and separate to ensure
that there is a proper balance of power and authority. The
Chairman is entrusted with the task of running the Board while
the Managing Director is primarily responsible for managing the
Group’s day-to-day operations and implementing the policies and
strategies adopted by the Board.
The three (3) Independent Directors have the experience and
business acumen necessary to carry sufficient weight in the
Board’s decisions and their presence bring an additional element
of balance to the Board as they do not participate in the
day-to-day running of the Company. They fulfil the pivotal role
in corporate accountability in ensuring that not only the interests
of the shareholders, but also of employees, customers, suppliers
and the many communities in which the Group conducts
business are given due consideration in the decision-making
process.
The Board is of the opinion that it is not necessary to designate
a senior Independent non-Executive Director to whom concerns
may be conveyed. The Board operates in an open environment
in which opinions and information are freely exchanged and
in these circumstances any concerns need not be focused on
a single Director as all members of the Board fulfil this role
collectively.
Board Meetings And Supply Of Information
Board meetings are scheduled in advance at the beginning of
each new financial year to enable the Directors to plan ahead and
fit the year’s meetings into their own schedules. The Board meets
at least five (5) times a year. Additional meetings are held as and
when necessary.
| 39CORPORATE GOVERnAnCE STATEMEnTMIECO AnnUAL REPORT 2010
During the financial year ended 31 December 2010, five (5)
Board meetings were held. The details of attendance of each
Director are set out below:
In advance of each Board meeting, the agenda together with the
relevant board papers are forwarded to all Directors for them
to review matters to be deliberated and to facilitate informed
decision making by the Directors. The Board also has a formal
schedule of matters reserved specifically for the Board’s
decision, including the approval of corporate plans and budgets,
acquisitions and disposals of assets that are material to the
Group, major investments, changes to management and control
structure of the Group, including key policies, procedures and
authority limits. The Board also notes the decisions and salient
issues deliberated by the Audit Committee (“AC”) through the
minutes of the AC, which are tabled to the Board.
Senior management personnel are invited to attend the Board
meetings, where necessary, to provide additional information
and insights on the relevant agenda items tabled at Board
meetings.
The Directors have full access to senior management for
information and assistance and the advice and services of the
Company Secretary who is responsible for ensuring that the
Board meeting procedures are followed and that applicable rules
and regulations are complied. In addition, the Directors may also
seek independent professional advice in the furtherance of their
duties at the Company’s expense, if required.
Directors’ Training
The Directors are mindful that they shall receive appropriate
training to broaden their knowledge and to keep abreast with the
various changes in laws, regulations and business environment.
During the financial year under review, all members of the Board
have attended various training programmes and seminars. The
training programmes and seminars attended by the Directors
were on areas relating to corporate governance, corporate
development, forensic accounting and fraud.
The Company Secretary facilitates the organisation of Directors’
training programmes and their attendance, and keeps a complete
record of the training received or attended by the Directors.
Appointments To The Board
The appointment of new Directors is under the purview of
the nomination Committee (“nC”) which is responsible for
making the necessary recommendations to the Board on
suitable candidates for appointment. In addition, the nC is
also responsible for reviewing annually the mix of skills and
experience and the effectiveness of the Board as a whole
and the committees of the Board and contribution of each
individual Director. The nC currently comprises three (3) non-
Executive Directors: Dato’ Jaganath Derek Steven Sabapathy
(non-Independent non-Executive Director), Lt. Gen. (R) Dato’
Seri Mohamed Daud Bin Abu Bakar (Independent non-Executive
Director) and Dato’ Dr Amarjit Singh a/l Santokh Singh
(Independent non-Executive Director).
RE-ELECTION
The Company’s Articles of Association provides that at least one-
third (1/3) of the Directors for the time being shall retire from
office at every Annual General Meeting (“AGM”) and be eligible
for re-election provided always that all Directors shall retire from
office at least once every three (3) years but shall be eligible for
re-election. Directors who are appointed to the Board during the
financial year are subject to re-election by shareholders at the
next AGM held following their appointments.
Directors over seventy (70) years of age are required to
submit themselves for re-appointment annually at the AGM in
accordance with Section 129(6) of the Companies Act, 1965.
Name of DirectorTotal Number of
Meetings Attended
Dato’ Mohamed Moiz Bin J M Ali Moiz 5/5
Dato’ Yong Seng Yeow 5/5
Dato’ Jaganath Derek Steven Sabapathy 5/5
Datin Sri Maria Bettina Chua Binti Abdullah 3/3*
Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar
5/5
Dato’ Dr Amarjit Singh A/L Santokh Singh 5/5
Mr Vijeyaratnam A/L V. Thamotharam Pillay 5/5
Mr Low Kim Seng 5/5
* Datin Sri Maria Bettina Chua Binti Abdullah was appointed on 23 February 2010 and resigned on 1 October 2010
40 | CORPORATE GOVERnAnCE STATEMEnTMIECO AnnUAL REPORT 2010
DIRECTORS’ REMUNERATION
The remuneration of Directors is determined at levels that
enable the Group to attract and retain Directors with the relevant
experience and expertise needed to assist in managing the
Group effectively and successfully. The Remuneration Committee
(“RC”) reviews annually the performance of the Executive
Directors and furnishes recommendations to the Board on
specific adjustments and/or reward payments. The RC currently
comprises three (3) non-Executive Directors: Dato’ Jaganath
Derek Steven Sabapathy (non-Independent non-Executive
Director), Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar
(Independent non-Executive Director) and Dato’ Dr Amarjit Singh
a/l Santokh Singh (Independent non-Executive Director). The
remuneration of the non-Executive Directors reflects the level of
responsibilities undertaken by the particular Director concerned
in the Company and in the Group and after considering directors’
remuneration of comparable organisations. The determination
of the remuneration of the non-Executive Directors is a matter
for the Board as a whole. A sitting allowance is also paid to
non-Executive Directors for each Board or committee meeting
they attend. All fees payable to the Directors are subject to
shareholders’ approval at the AGM. The Board, after considering
the Company’s financial position for 2010, decided to only
recommend the payment of Directors’ fee to the 3 Independent
Directors. The proposed payment of Directors’ fees to the 3
Independent Directors will be submitted to shareholders for
approval at the forthcoming AGM.
The details of the Directors’ remuneration for the financial year
ended 31 December 2010 are set out on pages 98 and 99 of this
Annual Report. The number of Directors whose remuneration fall
within the following bands is as follows:
The Board is of the view that the transparency and accountability
aspects of corporate governance as applicable to the Directors’
remuneration are appropriately served by the band disclosure
made.
CORPORATE GOVERnAnCE STATEMEnT(COnTInUED)
INVESTOR RELATIONS
Dialogue Between The Company And Investors
The Board recognises the need for and the importance of
effective communication with shareholders as well as potential
investors and the public. The Group communicates with its
shareholders and stakeholders regularly through timely release
of financial results on a quarterly basis, press releases and
announcements which provide an overview of the Group’s
performance and operations and disclosure of material
information. In addition, the Group has established a website
(www.mieco.com.my) which shareholders and members of the
public can access for corporate information and news/events
relating to the Group and for channelling their queries.
AGM
The AGM represents the principal forum for dialogue and
interaction with all shareholders. Shareholders are welcome to
attend the Company’s AGMs and to actively participate in the
proceedings. Every opportunity is given to shareholders to ask
questions and seek clarification on the business and performance
of the Group and the Company.
ACCOUNTABILITY AND AUDIT
Financial Reporting
In presenting the annual financial statements and quarterly
announcements to shareholders, the Board takes responsibility
to present a balanced and understandable assessment of the
Group’s and the Company’s position and prospects.
Statement Of Directors’ Responsibility In Respect Of Audited
Financial Statements
The Directors are responsible for ensuring that the annual
audited financial statements of the Group and the Company are
drawn up in accordance with the requirements of the applicable
approved Financial Reporting Standards issued by the Malaysian
Accounting Standard Board, the provisions of the Companies
Act, 1965 and the Main Market Listing Requirements of Bursa
Securities.
Range of RemunerationExecutive Directors
Non-Executive Directors
Below RM50,000 - 6
RM50,001 - RM100,000 - 1
RM750,001 - RM800,000 1 -
| 41CORPORATE GOVERnAnCE STATEMEnTMIECO AnnUAL REPORT 2010
The Directors are also responsible for ensuring that the annual
audited financial statements of the Group and the Company are
prepared with reasonable accuracy from the accounting records
of the Group and the Company so as to give a true and fair view
of the state of affairs of the Group and the Company at the end
of the financial year, and of the results and cash flows of the
Group and the Company for the financial year.
In preparing the annual audited financial statements, the
Directors have:
• applied the appropriate and relevant accounting policies on a
consistent basis;
• made judgements and estimates that are reasonable and
prudent; and
• prepared the annual audited financial statements on a going
concern basis as the Directors have a reasonable expectation,
having made enquiries, that the Group and the Company have
adequate resources to continue in operational existence for the
foreseeable future.
The Directors are also responsible for taking such steps as
are reasonably open to them to safeguard the assets of the
Group and the Company to prevent and detect fraud and other
irregularities.
Internal Control
The Group’s Internal Control Statement is set out on pages 45
and 46 of this Annual Report.
Relationship With Auditors
The external auditors, Messrs PricewaterhouseCoopers have
continued to report to the shareholders of the Group. Through
the Audit Committee (“AC”), the Company has established a
transparent relationship with the external auditors to meet their
professional requirements. From time to time, the external
auditors have highlighted to the AC and the Board matters that
require the AC’s and the Board’s attention.
The role of the AC in relation to the external auditors is set out
in the AC Report on pages 42 to 44 of this Annual Report.
ADDITIONAL COMPLIANCE INFORMATION
Share Buybacks
The Company did not buy back any of its shares during the
financial year ended 31 December 2010.
Exercise Of Options, Warrants Or Convertible Securities
The Company has not granted any options or issued any
warrants or convertible securities during the financial year ended
31 December 2010.
Depository Receipt Programme
The Company did not sponsor any depository receipt programme
during the financial year ended 31 December 2010.
Sanctions Or Penalties
There were no sanctions and/or penalties imposed on the
Company and its subsidiaries, Directors or management by the
relevant regulatory bodies during the financial year ended 31
December 2010.
Non-Audit Fees
non-audit fees paid/payable to the external auditors by the
Group for the financial year ended 31 December 2010 amounted
to RM27,000.
Variation In Results
There were no variances of 10% or more between the audited
results for the financial year ended 31 December 2010 and the
unaudited results previously announced.
Profit Guarantee
There were no profit guarantees given by the Company during
the financial year ended 31 December 2010.
Material Contracts Involving Directors’ And Major
Shareholders’ Interests
There were no material contracts entered into by the Company
and its subsidiaries involving Directors’ and major shareholders’
interests either subsisting as at 31 December 2010 or entered
into since the end of the previous financial year.
This statement was approved by the Board at its meeting
held on 27 April 2011.
42 | AUDIT COMMITTEE REPORT MIECO AnnUAL REPORT 2010
MEMBERSHIP AND ATTENDANCE OF MEETINGS
The Audit Committee (“AC”) members and details of attendance
of each member at the AC meetings held during the financial year
ended 31 December 2010 are as follows:
COMPOSITION AND TERMS OF REFERENCE
Objectives
The primary objectives of the AC are:
a) to assist the Board of MIECO (“the Board”) in the discharge of
its responsibilities by reviewing the adequacy and integrity
of the Group’s and the Company’s internal control systems
and management information systems for compliance with
applicable laws, regulations, rules, directives and guidelines;
b) to reinforce the independence of the external auditors and
thereby help ensure that they will have free reign in the audit
process and to provide by way of regular meetings, a line of
communication between the Board and the external auditors;
and
c) to provide emphasis on the internal audit function by
increasing the objectivity and independence of the internal
auditors and provide a forum for discussion that is
independent of management.
Membership
The AC shall be appointed by the Directors from amongst their
number which fulfils the following requirements:
(a) the AC shall be composed of not fewer than three (3)
members;
(b) all the AC members must be non-Executive Directors, with a
majority of them being Independent Directors;
(c) at least one (1) member of the AC:
(i) must be a member of the Malaysian Institute of
Accountants (“MIA”); or
(ii) if he is not a member of the MIA, he must have at least
three (3) years’ working experience and:
(aa) he must have passed the examinations specified
in Part I of the 1st Schedule of the Accountants Act
1967; or
(bb) he must be a member of one of the associations of
accountants specified in Part II of the 1st Schedule
of the Accountants Act 1967; or
(iii) fulfils such other requirements as prescribed or
approved by Bursa Malaysia Securities Berhad (“Bursa
Securities”).
(d) no alternate Director shall be appointed as a member of the
AC.
(e) If a member of the AC resigns or for any other reason ceases
to be a member with the result that the number of members
is reduced below three (3), the Board shall, within three (3)
months of that event, appoint such number of new members
as may be required to make up the minimum number of
three (3) members.
(f) The term of office and performance of the AC and each of its
members shall be reviewed by the Board no less than once
every three (3) years.
Chairman
The members of the AC shall elect a Chairman from amongst
their number who shall be an Independent Director.
Name of AC MemberNumber of AC Meetings
Held Attended
Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar– Chairman/Independent
non-Executive Director
6 6
Dato’ Dr Amarjit Singh A/L Santokh Singh – Member/ Independent
non-Executive Director
6 6
Mr Vijeyaratnam A/L V. Thamotharam Pillay – Member/ Independent
non-Executive Director
6 6
AUDIT COMMITTEE REPORT
| 43AUDIT COMMITTEE REPORT MIECO AnnUAL REPORT 2010
Secretary
The Company Secretary shall act as the Secretary of the AC.
FUNCTIONS OF THE AC
The functions of the AC are as follows:
(a) to review with the external auditors the audit plan, audit report
and their evaluation of the system of internal controls; and the
assistance given by the employees to the external auditors in
discharging their duties;
(b) to review the quarterly and year-end financial statements of the
Group and the Company, focusing particularly on:
• changes in or implementation of accounting policies and
practices;
• significant adjustments arising from the audit;
• the going concern assumption; and
• compliance with accounting standards and other legal
requirements.
(c) to discuss problems and reservations arising from the interim
and final audits, and any matter the external auditors may wish
to discuss (in the absence of management where necessary);
(d) to review the external auditors’ management letters and
management’s response;
(e) to review the adequacy of the scope, functions, competency
and resources of the internal audit function, and that it has the
necessary authority to carry out its works;
(f) to review the internal audit programme, processes, the results
of the internal audit programme, processes or investigation
undertaken and whether or not appropriate action is taken on
the recommendations of the internal audit function;
(g) to consider any related party transaction and conflict of interest
situation that may arise within the Group or the Company
including any transaction, procedure or course of conduct that
raises questions of management integrity;
(h) to consider the major findings of internal investigations and
management’s response;
(i) to consider the nomination and appointment of external auditors
and any questions of resignation or dismissal;
(j) to report promptly to Bursa Securities on any matter reported by
the AC to the Board which has not been satisfactorily resolved
resulting in a breach of the Main Market Listing Requirements of
Bursa Securities; and
(k) to consider and examine other topics as may be defined by the Board.
RIGHTS OF THE AC
Wherever necessary and reasonable for the performance of its duties,
the AC shall in accordance with a procedure to be determined by the
Board and at the cost of the Company:
(a) have authority to investigate any matter within its terms of
reference;
(b) have the resources which are required to perform its duties;
(c) have full and unrestricted access to any information pertaining to
the Group and the Company;
(d) have direct communication channels with the external auditors
and person(s) carrying out the internal audit function or activity;
(e) be able to obtain independent professional or other advice and to
secure the attendance of outsiders with relevant experience and
expertise it considers necessary; and
(f) be able to convene meetings with the external auditors, the
internal auditors or both, without the presence of other Directors
and employees of the Company, whenever deemed necessary.
MEETINGS AND REPORTING PROCEDURES
(a) The AC shall meet as often as the Chairman deems necessary but
not less than four (4) times a year.
(b) The quorum for an AC meeting shall be at least two (2) members;
the majority of the members present must be Independent
Directors.
(c) The internal auditors shall be in attendance at meetings to
present and discuss the audit reports and other relevant matters
and the recommendations relating thereto and to follow up on all
relevant decisions made.
(d) The AC may invite the external auditors, any non-member
Directors or employees of the Group to attend its meetings to
assist in its deliberations and resolutions of matters raised.
44 | AUDIT COMMITTEE REPORT MIECO AnnUAL REPORT 2010
(e) The AC shall, at least twice a year, meet with the external
auditors without any executive Board member present. At
the request of the external auditors or internal auditors, the
Chairman shall convene an AC meeting to consider any matter
that the external auditors or internal auditors believe should be
brought to the attention of the Board or shareholders.
(f) The Secretary is responsible for sending out notices of meetings
and preparing and keeping minutes of meetings.
(g) The AC meeting minutes are to be extended to all members of
the Board.
SUMMARY OF ACTIVITIES
During the financial year ended 31 December 2010, six (6) AC
meetings were held. The details of attendance of the AC members are
set out on page 42 of the Annual Report.
Internal auditors attended four (4) AC meetings to present their
internal audit reports. The external auditors were present at two (2)
of the AC meetings.
Minutes of AC meeting were tabled for confirmation at the next AC
meeting and subsequently distributed to the Board for notation. The
AC Chairman conveyed to the Board matters of significant concern as
and when raised by the external auditors or internal auditors.
The AC has carried out its duties in accordance with its terms of
reference during the financial year ended 31 December 2010. The
activities carried out by the AC included the following:
(i) reviewed the risk-based internal audit plan with the internal
auditors to ensure adequate scope and coverage on their
activities;
(ii) reviewed the annual audit plan with the external auditors, prior
to the commencement of the annual audit as to their scope of
work and audit strategy;
(iii) reviewed and approved the Audit Committee Report for inclusion
in the Company’s Annual Report;
(iv) reviewed the quarterly unaudited financial results and year-end
audited financial statements of the Group before recommending
them to the Board for approval;
(v) reviewed the audit memorandum, issues and management’s
response to the external auditors;
(vi) reviewed internal audit reports with the internal auditors,
especially with regard to the issues raised, audit
recommendations and management’s response. Where
necessary, the AC has directed action to be taken by
management to rectify and improve the system of internal
controls and procedures;
(vii) reviewed related party transactions of the Group; and
(viii) had private discussions with the external auditors without the
presence of the Executive Directors and management.
INTERNAL AUDIT FUNCTION
The AC is supported by an outsourced internal audit function in
discharging its duties and responsibilities. The outsourced internal
audit function conducts regular and systematic reviews of the
key controls and processes in the operating units and assesses
compliance with the established policies and procedures. This
provides reasonable assurance that such systems would continue
to operate satisfactorily and effectively in the Group. In addition,
the internal audit function also conducts investigations and special
reviews at the request of management.
During the financial year, the internal auditors carried out audit
assignments over a wide range of operational areas and support
services functions of the Group based on the approved audit plan.
These included Customer Service, Procurement and Finance. Follow
up audits were also carried out to ensure that management’s
corrective actions were implemented appropriately. At the request
of management, the internal auditors also performed reviews of
specific policies and procedures to further improve internal controls,
conducted a control and risk awareness workshop and attended
quarterly stock takes to ensure due processes had been observed
and complied with.
The resulting reports of the audits undertaken, incorporating audit
recommendations and management’s response were presented to
the AC. There were no material losses incurred during the financial
year as a result of weaknesses in the system of internal controls and
management continues to take measures to strengthen the control
environment.
AUDIT COMMITTEE REPORT
| 45STATEMEnT On InTERnAL COnTROLMIECO AnnUAL REPORT 2010
STATEMEnT On InTERnAL COnTROLINTRODUCTION
The Board of MIECO (“the Board”) is committed to maintaining a
sound system of internal controls within the Group and is pleased
to provide the following statement which outlines the nature and
scope of internal controls of the Group during the financial year
under review pursuant to the Main Market Listing Requirements
of Bursa Malaysia Securities Berhad.
BOARD RESPONSIBILITY
The Board affirms its overall responsibility for maintaining
a sound system of internal controls and for reviewing their
adequacy and integrity so as to safeguard shareholders’
investment and the Group’s assets. The system of internal
controls covers inter-alia, financial, operational and compliance
system controls and risk management. However, in view of
the limitations that are inherent in any system of internal
controls, the system of internal controls is designed to manage
rather than to eliminate the risk of failure to achieve business
objectives. Accordingly, the system of internal controls can only
provide reasonable and not absolute assurance against material
misstatement of losses and fraud.
The Board is pleased to disclose that there is an on-going process
for identifying, evaluating and managing the significant risks
faced by the Group throughout the financial year under review
and this process includes enhancing the system of internal
controls as and when there are changes to business environment
or regulatory guidelines. This process is regularly reviewed by
the Board. Management assists the Board in the implementation
of the Board’s policies and procedures on risks and controls by
identifying and evaluating the risks faced, and in the design,
operation and monitoring of suitable internal controls to mitigate
and control these risks.
RISK MANAGEMENT
The Board recognises that risk management is an integral part
of the Group’s business operations and that the identification
and management of such risks are important to ensure the
achievement of the Group’s corporate objectives.
Regular meetings of the Board, Board committees and
management represent the main platform by which the
Group’s performance and conduct are monitored. The Board is
responsible for setting the business directions and overseeing
the conduct of the Group’s operations. With the assistance of the
internal audit function, the Board, through the Audit Committee
(“AC”), continually reviews the adequacy and integrity of the risk
management processes in place within the various operating
businesses.
The daily running of the business is entrusted to the Managing
Director and senior management teams. The Board is informed
of all matters pertaining to risk and control through periodic
meetings and reports.
INTERNAL AUDIT FUNCTION
The Group’s internal audit function is outsourced to Lefis
Consulting Sdn Bhd whose principal duty and responsibility is to
examine the adequacy and effectiveness of the Group’s system
of internal controls, risk management process and compliance
framework on behalf of the Board. The outsourced internal audit
function carries out internal audits based on a risk-based audit
plan approved annually by the AC. Based on these audits, the
internal audit function provides the AC with periodic reports
highlighting observations, recommendations and management
action plans to improve the system of internal controls. In
addition, the AC also reviews and deliberates on any matters
relating to internal controls highlighted by the external auditors
in the course of their statutory financial audit of the Group.
Costs amounting to RM253,500 were incurred for the internal
audit function of the Group in respect of the financial year ended
31 December 2010.
CONTROL STRUCTURE AND ENVIRONMENT
The key processes that have been established in reviewing the
adequacy and integrity of the system of internal controls include
the following:
a. The Board has set up several Board committees to assist
the Board in performing its oversight functions. Specific
responsibilities have been delegated to these Board
committees, all of which have formalised terms of reference.
These committees have the authority to examine all matters
within their scope and report to the Board with their
recommendations.
b. There is an organisational structure with formally defined
responsibility lines and delegation of authority to ensure
proper identification of accountabilities and segregation of
duties.
46 | STATEMEnT On InTERnAL COnTROLMIECO AnnUAL REPORT 2010
c. The Group has defined an Authority Chart that provides the
limits authorised to the Executive Directors and management
within the Group in respect of day-to-day operations,
including banking and financing operations, investments,
acquisitions and disposal of assets.
d. There are documented internal policies and procedures
covering the critical and significant facets of the Group’s
business processes and they form an integral part of the
internal control framework to safeguard shareholders’
investment and the Group’s assets against material loss.
These policies and procedures are reviewed and updated
from time to time to meet the operational needs.
e. Human resource policies and guidelines are established
to provide support to the Group’s vision. These policies
provide guidance to employees on areas such as hiring and
termination of staff, code of conduct and discipline, employee
performance appraisals and other related matters. On-going
training is provided to improve employees’ competencies and
skills.
f. The Group adopts a strategic planning, annual budgeting
and target setting process that includes forecasts for each
area of business. The Board reviews and approves the
Annual Management Plan and Budget. The Board’s evaluation
includes assessment of risks and opportunities identified by
management in the course of the annual budgeting process.
Monthly reporting of actual results and review against budget
is prepared for monitoring by management.
g. Regular Board and AC meetings are held to assess and
monitor the business performance and operational controls.
Operational meetings and management meetings are held
on a weekly and monthly basis to consider the Group’s
operational, business development, financial performance
and risk related management matters.
h. The Group, whilst continuing to maintain MIECO Quality
Management System, Environmental Management System
and Occupational Health and Safety Management System
certifications, has gone on to achieve the following milestones
in furtherance of its commitment towards the environment
and to meet the needs and expectations of customers:
• Japanese Industrial Standards, JIS 5908, evidencing MIECO’s
product reliability for the Japanese market.
• Programme for the Endorsement of Forest Certification,
providing assurance that MIECO’s products come from
sustainable managed forests.
• California Air Resource Board (“CARB”) Phase II Certification,
demonstrating compliance of MIECO’s composite wood
products with California Code of Regulations for the US
market.
• Singapore Green Label Certification for its melamine
laminated products, a recognition and validation of MIECO’s
environmental friendly products.
REVIEW OF THE STATEMENT BY ExTERNAL AUDITORS
The external auditors have reviewed this Statement on Internal
Control for inclusion in the Annual Report of the Company for
the financial year ended 31 December 2010 and reported to
the Board that nothing has come to their attention that causes
them to believe that the statement is inconsistent with their
understanding of the process adopted by the Board in reviewing
the adequacy and integrity of the system of internal controls.
CONCLUSION
The Board is of the view that the existing system of internal
controls in place for the year under review and up to the date of
the issuance of the financial statements is sound and adequate
to safeguard the shareholders’ investment, the interest of
customers, regulators and employees, and the Group’s assets.
The Board recognises the need for the system of internal
controls to be subject to periodic review in line with the growth
and dynamics of the Group. To this end, the Board remains
committed towards striving for continuous improvement to put
in place appropriate action plans where necessary, to further
enhance the system of internal controls.
This statement was approved by the Board at its meeting
held on 27 April 2011.
STATEMEnT On InTERnAL COnTROL(COnTInUED)
48 Directors’ Report
52 Statements of Financial Position
54 Statements of Comprehensive Income
56 Consolidated Statement of Changes in Equity
57 Company Statement of Changes in Equity
58 Statements of Cash Flows
60 notes to the Financial Statements
105 Statement by Directors
106 Statutory Declaration
107 Independent Auditors’ Report
FInAnCIALSTATEMEnTS
48 | DIRECTORS’ REPORT MIECO AnnUAL REPORT 2010
DIRECTORS’ REPORTThe Directors have pleasure in submitting their report together with the audited financial statements of the Group and of the Company
for the financial year ended 31 December 2010.
PRINCIPAL ACTIVITIES
The principal activities of the Company are investment holding and provision of management services.
The principal activities of the subsidiaries are shown in note 8 to the financial statements. During the financial year, a subsidiary of
the Company ceased its property investment activities.
There were no other significant changes in the nature of these activities during the financial year.
FINANCIAL RESULTS Group Company
RM’000 RM’000
net profit/(loss) for the financial year 1,616 (241)
DIVIDENDS
no dividends had been paid or declared by the Company since 31 December 2009.
The Directors do not recommend the payment of any dividend for the financial year ended 31 December 2010.
RESERVES AND PROVISIONS
All material transfers to or from reserves and provisions during the financial year are shown in the financial statements.
DIRECTORS
The Directors who have held office during the period since the date of the last report are as follows:
Dato’ Mohamed Moiz Bin J M Ali Moiz
Dato’ Yong Seng Yeow
Dato’ Jaganath Derek Steven Sabapathy
Datin Sri Maria Bettina Chua Binti Abdullah
(resigned on 1 October 2010)
In accordance with Article 81 of the Company’s Articles of Association, Low Kim Seng and Vijeyaratnam a/l V. Thamotharam Pillay
retire by rotation and being eligible, offer themselves for re-election at the forthcoming Annual General Meeting.
In accordance with Section 129(2) of the Companies Act, 1965, Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar retires, having
attained the age of seventy, and the Board of Directors recommends that he be re-appointed in accordance with Section 129(6) of the
Companies Act, 1965.
Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar
Dato’ Dr. Amarjit Singh a/l Santokh Singh
Vijeyaratnam a/l V. Thamotharam Pillay
Low Kim Seng
| 49DIRECTORS’ REPORT MIECO AnnUAL REPORT 2010
DIRECTORS’ BENEFITS
During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the
object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of,
the Company or any other body corporate.
Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than Directors’
remuneration disclosed in note 29 to the financial statements) by reason of a contract made by the Company or a related corporation
with the Director or with a firm of which he or she is a member, or with a company in which he or she has a substantial financial
interest except as disclosed in note 32 to the financial statements.
DIRECTORS’ INTERESTS
According to the Register of Directors’ Shareholdings, the interests of Directors in office at the end of the financial year in shares and
warrants in the Company and its related corporations during the financial year were as follows:
number of ordinary shares of RM1.00 each
Shares Held in the Company At 1.1.2010 Bought Sold At 31.12.2010
Direct interest
Dato’ Yong Seng Yeow 130,000 0 0 130,000Low Kim Seng 10,000 0 0 10,000Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar 16,000 0 0 16,000Dato’ Dr. Amarjit Singh a/l Santokh Singh 100,000 0 0 100,000
Indirect interest
Dato’ Mohamed Moiz Bin J M Ali Moiz 119,193,971* 0 0 119,193,971*Dato’ Dr. Amarjit Singh a/l Santokh Singh 70,000** 0 0 70,000**
number of ordinary shares of RM1.00 each
At 1.1.2010 Bought Sold At 31.12.2010
Direct interest
Low Kim Seng 57,000 0 0 57,000
Indirect interest
Dato’ Mohamed Moiz Bin J M Ali Moiz 92,070,812* 0 0 92,070,812*
Shares Held in Holding Company- Bandar Raya Developments Berhad
50 | DIRECTORS’ REPORT MIECO AnnUAL REPORT 2010
DIRECTORS’ REPORT(COnTInUED)
Warrants Held in Holding Company - Bandar Raya Developments Berhad number of warrants 2007/2012
At 1.1.2010 Bought Exercised/Sold At 31.12.2010 Direct interest
Low Kim Seng 25,650 0 0 25,650
Indirect interest
Dato’ Mohamed Moiz Bin J M Ali Moiz 41,431,865* 0 0 41,431,865*Vijeyaratnam A/L V. Thamotharam Pillay 170,000** 0 0 170,000**
* Indirect interest held through Ambang Sehati Sdn. Bhd.
** Indirect interest held through spouse
Other than as disclosed above, none of the other Directors in office at the end of the financial year had any interest in shares and warrants in the Company and its related corporations during the financial year. SUBSEQUENT EVENT
In light of the steady recovery in demand for particleboard and related products and the improving economic conditions, a subsidiary of the Company had, in January 2011, recommenced operations of its Plant 3 located in Kechau Tui, Pahang.
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS
Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps:
(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and
(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business, their values as shown in the accounting records of the Group and of the Company had been written down to an amount which they might be expected so to realise.
At the date of this report, the Directors are not aware of any circumstances:
(a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or
(b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or
(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
no contingent or other liability has become enforceable, or is likely to become enforceable, within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group or of the Company to meet their obligations when they fall due.
| 51DIRECTORS’ REPORT MIECO AnnUAL REPORT 2010
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (CONTINUED)
At the date of this report, there does not exist:
(a) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liability of any other person; or
(b) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.
OTHER STATUTORY INFORMATION
At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.
In the opinion of the Directors:
(a) the results of the Group’s and of the Company’s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and
(b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.
GENERAL INFORMATION
The Company is a public limited liability company, which is incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad.
The holding company is Bandar Raya Developments Berhad, a company incorporated in Malaysia.
The address of the registered office is Level 10 Menara BRDB, 285 Jalan Maarof, Bukit Bandaraya, 59000 Kuala Lumpur.
The addresses of the principal place of business are as follows:
(a) Level 9 Menara BRDB, 285 Jalan Maarof, Bukit Bandaraya, 59000 Kuala Lumpur;
(b) Lot 77-83, Semambu Industrial Estate, P.O. Box 169, 25720 Kuantan, Pahang Darul Makmur;
(c) Lot 74, Kawasan Perindustrian Gebeng, 26080 Kuantan, Pahang Darul Makmur; and
(d) Lot 3, Kawasan Perindustrian Kechau Tui, 27100 Padang Tengku, Pahang Darul Makmur.
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
In accordance with a resolution of the Board of Directors dated 27 April 2011.
DATO’ MOHAMED MOIZ BIN J M ALI MOIZ DATO’ YONG SENG YEOWDIRECTOR DIRECTOR
52 | STATEMEnTS OF FInAnCIAL POSITIOn MIECO AnnUAL REPORT 2010
Group Company
2010 2009* 2008* 2010 2009 Restated Restated note RM’000 RM’000 RM’000 RM’000 RM’000
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 6 489,406 503,188 524,388 138 253Investment properties 7 0 0 7,417 0 0Investment in subsidiaries 8 0 0 0 51,220 51,220Amount due from a subsidiary 9 0 0 0 475,712 483,519Deferred tax assets 19 491 446 455 411 356
489,897 503,634 532,260 527,481 535,348
CURRENT ASSETS
Inventories 10 44,770 40,578 74,282 0 0 Receivables, deposits and prepayments 11 32,436 32,893 52,357 1,857 1,853 Marketable securities 12 0 49 36 0 0 Derivative financial instruments 13 76 0 0 0 0 Tax recoverable 1,808 1,633 1,047 0 0 Short term deposits 14 2,516 2,549 25,131 989 965 Cash and bank balances 14 3,857 2,588 10,211 153 119
85,463 80,290 163,064 2,999 2,937
TOTAL ASSETS 575,360 583,924 695,324 530,480 538,285
* Restated in accordance with the adoption of FRS 117 (note 36)
STATEMEnTS OF FInAnCIAL POSITIOnAS AT 31 DECEMBER 2010
| 53STATEMEnTS OF FInAnCIAL POSITIOn MIECO AnnUAL REPORT 2010
Group Company
2010 2009* 2008* 2010 2009 Restated Restated note RM’000 RM’000 RM’000 RM’000 RM’000
EQUITY AND LIABILITIES CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY Share capital 15 210,000 210,000 210,000 210,000 210,000Reserves 16 108,519 106,288 120,592 131,933 131,523
TOTAL EQUITY 318,519 316,288 330,592 341,933 341,523
NON CURRENT LIABILITIES Provisions 17 9,241 8,288 8,618 147 111Borrowings 18 126,834 144,618 139,151 126,738 144,372Deferred tax liabilities 19 7,582 7,580 9,430 0 0Amount due to holding company 20 37,579 35,759 20,000 37,579 35,759
181,236 196,245 177,199 164,464 180,242
CURRENT LIABILITIES
Trade and other payables 21 37,435 35,483 79,583 8,079 8,233Borrowings 18 36,055 33,850 105,854 13,889 6,238Taxation 2,115 2,058 2,096 2,115 2,049
75,605 71,391 187,533 24,083 16,520
TOTAL LIABILITIES 256,841 267,636 364,732 188,547 196,762
TOTAL EQUITY AND LIABILITIES 575,360 583,924 695,324 530,480 538,285
* Restated in accordance with the adoption of FRS 117 (note 36)
54 | STATEMEnTS OF COMPREHEnSIVE InCOME MIECO AnnUAL REPORT 2010
Group Company
2010 2009* 2010 2009 Restated note RM’000 RM’000 RM’000 RM’000
Revenue 23 174,208 185,739 2,919 2,816Other operating income 6,957 4,471 52 62Changes in inventories of finished goods and work in progress (4,192) 33,704 0 0Raw materials and consumables used (95,059) (151,767) 0 0Hiring of vehicles and equipment (1,344) (2,074) 0 0Fair value gain on financial assets held for trading 25 0 0 0Staff costs 24 (23,917) (23,637) (1,899) (2,285)Depreciation of property, plant and equipment (19,154) (19,074) (149) (159)Fair value loss on investment properties 0 (348) 0 (198)Write back of impairment/(impairment loss): - property, plant and equipment 0 (1,658) 0 0 - subsidiaries 0 0 0 (788) - marketable securities 0 13 0 0Upkeep, repairs and maintenance of assets (4,199) (2,063) (72) (115)Utilities (11,904) (11,696) (2) (3)Research and development expenses (1) (12) 0 0Other operating expenses (9,149) (16,688) (1,083) (1,183)
Profit/(loss) from operations 25 12,271 (5,090) (234) (1,853)
Finance costs 26 (10,648) (11,452) (9,700) (9,723)Finance income 26 23 26 9,719 9,727
Profit/(loss) before taxation 1,646 (16,516) (215) (1,849)
Tax (expense)/credit 27 (30) 1,837 (26) 66
net profit/(loss) for the financial year 1,616 (14,679) (241) (1,783) Other comprehensive (expense)/income:
Exchange differences on translating foreign subsidiaries (12) 375 0 0
Total comprehensive income/(loss) for the financial year 1,604 (14,304) (241) (1,783)
* Restated in accordance with the adoption of FRS 117 (note 36)
STATEMEnTS OFCOMPREHEnSIVE InCOMEFOR THE FInAnCIAL YEAR EnDED 31 DECEMBER 2010
| 55STATEMEnTS OF COMPREHEnSIVE InCOMEMIECO AnnUAL REPORT 2010
Group Company
2010 2009* 2010 2009 Restated note RM’000 RM’000 RM’000 RM’000
net profit/(loss) attributable to owners of the Company 1,616 (14,679) (241) (1,783)
Total comprehensive income/(loss) attributable to owners of the Company 1,604 (14,304) (241) (1,783)
Basic earnings/(loss) per share (sen) 28 0.77 (6.99)
Diluted earnings/(loss) per share (sen) 28 0.77 (6.99)
* Restated in accordance with the adoption of FRS 117 (note 36)
56 | COnSOLIDATED STATEMEnT OF CHAnGES In EQUITYMIECO AnnUAL REPORT 2010
Attributable to equity holders of the Company
Issued and fully paid ordinary shares of RM1 each
Foreign number nominal Share currency Retained Warrant Total of shares value premium reserve earnings reserve equity ’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 January 2009 210,000 210,000 5,866 (401) 101,148 13,979 330,592
Comprehensive income/(loss):- net loss for the financial year 0 0 0 0 (14,679) 0 (14,679)
Other comprehensive income:- Exchange differences on translating foreign subsidiaries 0 0 0 375 0 0 375
Total comprehensive income/(loss) 0 0 0 375 (14,679) 0 (14,304)
Expiry of warrants 0 0 0 0 13,979 (13,979) 0
At 31 December 2009 210,000 210,000 5,866 (26) 100,448 0 316,288
At 1 January 2010, as previously stated 210,000 210,000 5,866 (26) 100,448 0 316,288
Effects arising from the adoption of FRS 139 0 0 0 0 627 0 627
At 1 January 2010, as restated 210,000 210,000 5,866 (26) 101,075 0 316,915
Comprehensive income/(loss):- net profit for the financial year 0 0 0 0 1,616 0 1,616
Other comprehensive loss:- Exchange differences on translating foreign subsidiaries 0 0 0 (12) 0 0 (12)
Total comprehensive income/(loss) 0 0 0 (12) 1,616 0 1,604
At 31 December 2010 210,000 210,000 5,866 (38) 102,691 0 318,519
COnSOLIDATED STATEMEnT OF CHAnGES In EQUITYFOR THE FInAnCIAL YEAR EnDED 31 DECEMBER 2010
| 57COMPAnY STATEMEnT OF CHAnGES In EQUITYMIECO AnnUAL REPORT 2010
Issued and fully paid ordinary shares of non- RM1 each distributable Distributable number nominal Share Retained Warrant Total of shares value premium earnings reserve equity ’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2009 210,000 210,000 5,866 113,461 13,979 343,306
Comprehensive loss:- net loss for the financial year 0 0 0 (1,783) 0 (1,783)
Expiry of warrants 0 0 0 13,979 (13,979) 0
At 31 December 2009 210,000 210,000 5,866 125,657 0 341,523
At 1 January 2010, as previously stated 210,000 210,000 5,866 125,657 0 341,523
Effects arising from the adoption of FRS 139 0 0 0 651 0 651
At 1 January 2010, as restated 210,000 210,000 5,866 126,308 0 342,174 Comprehensive loss:- net loss for the financial year 0 0 0 (241) 0 (241)
At 31 December 2010 210,000 210,000 5,866 126,067 0 341,933
COMPAnY STATEMEnT OF CHAnGES In EQUITYFOR THE FInAnCIAL YEAR EnDED 31 DECEMBER 2010
58 | STATEMEnTS OF CASH FLOWSMIECO AnnUAL REPORT 2010
STATEMEnTS OF CASH FLOWSFOR THE FInAnCIAL YEAR EnDED 31 DECEMBER 2010
Group Company
2010 2009* 2010 2009 Restated note RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM OPERATInG ACTIVITIES
Profit / (loss) after taxation 1,616 (14,679) (241) (1,783)Adjustments for:Fair value gain on financial assets held for trading (25) 0 0 0Fair value loss on investment properties 0 348 0 198Impairment loss on:- property, plant and equipment 0 1,658 0 0- subsidiaries 0 0 0 788Write back of impairment loss on marketable securities 0 (13) 0 0Depreciation of property, plant and equipment 6 19,154 19,074 149 159Loss on disposal of property, plant and equipment 12 635 2 0Allowance for/(write back of) bad and doubtful debts 52 (264) 0 0(Write back of)/allowance for inventories obsolescence (476) 1,329 0 0Inventories (written back)/written off (260) 1,998 0 0Finance costs 26 10,648 11,452 9,700 9,723Finance income 26 (23) (26) (9,719) (9,727)Provision for staff retirement benefits 1,489 817 133 134Tax expense/(credit) 30 (1,837) 26 (66)Dividend income (1) (2) 0 0Fair value gain on derivative financial instruments (112) 0 0 0Loss on wood concession 0 474 0 0Unrealised gain on foreign exchange (3,707) (963) (10) 0
28,397 20,001 40 (574)Changes in working capital:(Increase)/decrease in inventories (3,456) 30,377 0 0Decrease/(increase) in receivables 276 19,076 (4) 69Increase/(decrease) in payables 2,846 (43,364) 565 (731)Decrease/(increase) in inter- company balances (208) 477 3,929 (3,976)
27,855 26,567 4,530 (5,212)Payments of staff retirement benefits (536) (1,147) (97) (93)Payments on income tax (191) (628) (15) (38)
net cash flows from/(used in) operating activities 27,128 24,792 4,418 (5,343)
* Restated in accordance with the adoption of FRS 117 (note 36)
| 59STATEMEnTS OF CASH FLOWSMIECO AnnUAL REPORT 2010
Group Company
2010 2009* 2010 2009 Restated note RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM InVESTInG ACTIVITIES
Purchase of property, plant and equipment 6 (5,391) (578) (36) (42)Interest received 23 23 9,719 9,727Proceeds from sales of property, plant and equipment 7 411 0 0Proceeds from disposal of financial assets held for trading 70 0 0 0Proceeds from disposal of investment properties 0 7,069 0 4,669Dividend income received 1 2 0 0
net cash flows (used in)/from investing activities (5,290) 6,927 9,683 14,354
CASH FLOWS FROM FInAnCInG ACTIVITIES
Repayment of hire purchase liabilities (182) (164) 0 0Interest paid (8,710) (10,038) (7,880) (7,964)Repayment of term loan (6,163) (14,325) (6,163) (14,325)Repayment of bankers acceptance (2,041) (46,879) 0 0Loan from the holding company 0 14,000 0 14,000Repayment of revolving credit 0 (3,000) 0 0Repayment of promissory note 0 (8,341) 0 0
net cash flows (used in)/from financing activities (17,096) (68,747) (14,043) (8,289)
nET InCREASE / (DECREASE) In CASH AnD CASH EQUIVALEnTS 4,742 (37,028) 58 722
CASH AnD CASH EQUIVALEnTS AT BEGInnInG OF THE FInAnCIAL YEAR (1,694) 35,342 1,084 362
EFFECTS OF EXCHAnGE RATE CHAnGES (101) (8) 0 0
CASH AnD CASH EQUIVALEnTS AT EnD OF THE FInAnCIAL YEAR 14 2,947 (1,694) 1,142 1,084
* Restated in accordance with the adoption of FRS 117 (note 36)
60 | nOTES TO THE FInAnCIAL STATEMEnTS MIECO AnnUAL REPORT 2010
nOTES TO THE FInAnCIAL STATEMEnTSFOR THE FInAnCIAL YEAR EnDED 31 DECEMBER 2010
1 GENERAL INFORMATION
The principal activities of the Company are investment holding and provision of management services.
The principal activities of the subsidiaries consist of:
- manufacturing, selling and marketing of chipboards and related products
- reforestation, harvesting, extraction, supply and procurement of rubber wood
- investment holding - investment trading
During the financial year, a subsidiary of the Company ceased its property investment activities. There were no other changes in the activities of the Group during the financial year.
The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 27 April 2011.
2 BASIS OF PREPARATION
The financial statements of the Group and the Company have been prepared in accordance with the Companies Act, 1965 and Financial Reporting Standards, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities.
The financial statements have been prepared under the historical cost convention except as disclosed in the significant accounting policies in note 3 to the financial statements.
The preparation of financial statements in conformity with Financial Reporting Standards requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ.
The areas involving a higher degree of judgement or complexity, or area where assumptions and estimates are significant to the financial statements, are disclosed in note 4 to the financial statements.
(a) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company and are effective.
The new and revised accounting standards and amendment to published standards which are effective for the Group’s and the Company’s financial year ended 31 December 2010 and are applicable to the Group and the Company are as follows:
• FRS 7 Financial Instruments: Disclosures • FRS 8 Operating Segments • FRS 101 (Revised) Presentation of Financial Statements • FRS 123 Borrowings • FRS 139 Financial Instruments: Recognition and
Measurement • Amendments to FRS 1 First-Time Adoption of Financial
Reporting Standards and FRS 127 Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
• Amendments to FRS 132 Financial Instruments: Presentation
• Amendments to FRS 139 Financial Instruments: Recognition and Measurement, FRS 7 Financial Instruments: Disclosure and IC Interpretation 9 Reassessment of Embedded Derivatives
• IC Interpretation 10 Interim Financial Reporting and Impairment
• IC Interpretation 14 FRS 119 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
• Improvements to FRS issued in 2009
- IC Interpretation 9 Reassessment of Embedded Derivatives - FRS 5 non-Current Assets Held for Sale and
Discontinued Operations - FRS 7 Financial Instruments: Disclosures - FRS 8 Operating Segments - FRS 107 Statements of Cash Flows - FRS 108 Accounting Policies, Changes in Accounting
Estimates and Errors - FRS 110 Events after the Reporting Period - FRS 116 Property, Plant and Equipment - FRS 117 Leases - FRS 118 Revenue - FRS 119 Employee Benefits - FRS 120 Accounting for Government Grants and
Disclosures of Government Assistance - FRS 123 Borrowing Costs - FRS 127 Consolidated and Separate Financial Statements - FRS 128 Investment in Associates - FRS 131 Interest in Joint Ventures - FRS 134 Interim Financial Reporting - FRS 136 Impairment of Assets - FRS 138 Intangible Assets
All changes in accounting policies have been made in accordance with the transition provisions in the respective standards and amendment to published standard. All standards and amendment adopted by the Group and the Company require retrospective application except for FRS 7 and FRS 139.
The adoption of the above accounting standards and amendment to published standard has resulted in changes of certain accounting policies and classification adopted by the Group and the Company as well as presentation of financial statements as follows:
| 61nOTES TO THE FInAnCIAL STATEMEnTSMIECO AnnUAL REPORT 2010
2 BASIS OF PREPARATION (CONTINUED)
(a) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company and are effective (continued)
(i) FRS 7 Financial Instruments: Disclosures
Prior to 1 January 2010, information about financial instruments was disclosed in accordance with the requirements of FRS 132 Financial Instruments: Disclosure and Presentation. FRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk.
The Group and the Company have applied FRS 7 prospectively in accordance with the transitional provisions. Hence, the new disclosures have not been applied to the comparatives. The new disclosures are included throughout the Group’s and the Company’s financial statements for the financial year ended 31 December 2010.
(ii) FRS 8 Operating Segments
FRS 8, which replaces FRS 114 Segment Reporting, requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. The Group concluded that the reportable operating segments determined in accordance with FRS 8 are the same as the business segments previously identified under FRS 114.
(iii) FRS 101 Presentation of Financial Statements (Revised)
The revised FRS 101 “Presentation of financial statements” (effective from 1 January 2010) prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity. ‘non-owner changes in equity’ are to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the statements of comprehensive income and statement of comprehensive income). The Group and the Company have elected to present this statement as one single statement.
In addition, where entities restate or reclassify comparative information, they will be required to present restated statements of financial position as at the beginning comparative period in addition to
the current requirement to present statements of financial position at the end of the current period and comparative period.
(iv) FRS 139 Financial Instruments: Recognition and Measurement
FRS 139 establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. The Group and the Company have adopted FRS 139 prospectively on 1 January 2010 in accordance with the transitional provisions. The effects arising from the adoption of this Standard have been accounted for by adjusting the opening balance of retained earnings as at 1 January 2010. Comparatives are not restated.
The adoption of FRS 139 has resulted in financial instruments of the Group and the Company to be categorised and measured using the accounting policies summarised below:
• Initial recognition and measurement
A financial instrument is recognised in the financial statements when, and only when, the Group and the Company become a party to the contractual provisions of the instruments.
A financial instrument is recognised initially at its fair value. In the case of a financial instrument not categorised as fair value through profit or loss, the financial instrument is initially recognised at its fair value plus transaction costs that are directly attributable to acquisition or issue of the financial instrument.
An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised as fair value through profit or loss. In the event that the embedded derivative is recognised separately, the host contract is accounted for in accordance with the policy applicable to the nature of the host contract.
• Financial assets
(i) Financial assets at fair value through profit or loss
Fair value through profit or loss category comprises financial assets that are held for trading or are designated as such upon initial recognition. Financial assets held for trading includes derivatives, unless they are designated as hedges. Financial assets at fair value through profit or loss are subsequently measured at fair value with gain or loss recognised in profit or loss. This category of financial assets is classified as current assets.
62 | nOTES TO THE FInAnCIAL STATEMEnTS MIECO AnnUAL REPORT 2010
2 BASIS OF PREPARATION (CONTINUED)
(a) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company and are effective (continued)
(iv) FRS 139 Financial Instruments: Recognition and Measurement (continued)
• Financial assets (continued)
(ii) Loans and receivables
Loans and receivables category comprises trade and other receivables and cash and cash equivalents. Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method. This category of financial assets is classified as current assets unless the maturities are greater than twelve months in which case they are classified as non-current assets.
(iii) Available-for-sale financial assets
Available-for-sale financial assets comprise investment in equity and debt securities that are not held for trading. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Other available-for-sale financial assets are subsequently measured at fair value with gain or loss recognised in other comprehensive income.
• Financial liabilities
Financial liabilities of the Group and the Company comprise trade and other payables, borrowings and derivative financial liabilities. All financial liabilities are subsequently measured at amortised cost using effective interest method other than derivative financial liabilities which are categorised as fair value through profit or loss. Derivative financial liabilities are subsequently measured at their fair values with the gain or loss recognised in profit or loss.
The details of the changes in accounting policies and the effect arising from the adoption of FRS 139 are as follows:
(i) Investments
Prior to 1 January 2010, marketable securities were carried at the lower of cost and market value, determined on an individual portfolio basis.
With the adoption of FRS 139, marketable securities are now categorised as financial assets held for trading and measured at fair value through profit or loss.
(ii) Derivative financial instruments
Prior to 1 January 2010, outstanding financial derivatives as at reporting date were not recognised in the financial statements. They were only recognised on settlement dates.
Upon the adoption of FRS 139, derivative financial instruments are recognised in the financial statements when, and only when, the Group and the Company becomes a party to the contractual provisions of those instruments. A derivative financial instrument is categorised as fair value through profit or loss and measured at its fair value with gain or loss recognised in profit or loss.
(iii) Payables
Prior to 1 January, payables were recorded at cost in the Group’s and the Company’s financial statements. Upon the adoption of FRS 139, the payables are recognised initially at a fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. As at 1 January 2010, the Group and the Company have remeasured the payables at amortised cost and the difference is recognised as adjustments to the opening balance of retained earnings as at that date.
Following the adoption of FRS 139, the effect of the changes to accounting policies relating to recognition and measurement of the Group’s financial instruments are as follows :-
nOTES TO THE FInAnCIAL STATEMEnTSFOR THE FInAnCIAL YEAR EnDED 31 DECEMBER 2010 (COnTInUED)
Balance as Effects Balance as at 1 January adoption of at 1 January 2010 before of FRS 139 2010 after the adoption Increase/ the adoption FRS 139 (decrease) of FRS 139 RM’000 RM’000 RM’000
Group
Retained earnings 100,448 627 101,075Amount due to holding company - current 2,577 (651) 1,926Derivative financial instruments 0 36 36Borrowings – hire purchase creditors 246 (12) 234 Company
Retained earnings 125,657 651 126,308Amount due to holdingcompany - current 2,577 (651) 1,926
| 63nOTES TO THE FInAnCIAL STATEMEnTSMIECO AnnUAL REPORT 2010
2 BASIS OF PREPARATION (CONTINUED)
(a) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company and are effective (continued)
(v) FRS 117 Leases
Prior to the adoption of the Amendment to FRS 117, the Group’s leasehold land was treated as operating leases. The considerations paid were classified and presented as prepaid lease payments. With the adoption of the Amendment to FRS 117, the Group has reassessed and determined that all leasehold land of the Group, amounting to RM17.1 million as at 1 January 2010 meet the criteria of a finance lease and has reclassified the said amount to property, plant and equipment. The change in accounting policy has been made retrospectively in accordance with the transitional provisions of the amendment. The reclassification has no effect to the profit or loss of the current financial year ended 31 December 2010 or the comparative periods.
The impact of the reclassification on the Group’s statement of financial position and statement of comprehensive income is disclosed in note 36.
(b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Company but not yet effective
The new standards, amendments to published standards and IC Interpretations that are applicable to the Group and the Company, but which the Group and the Company have not early adopted, are as follows:
The Group and the Company will apply the above new standards, amendments to published standards and IC Interpretations from annual period beginning 1 January 2011.
The adoption of the above standards and interpretations are not expected to have any significant impact on the financial statements of the Group and the Company in the year of initial application except for the following:
(i) FRS 3 Business Combinations (Revised) and Amendments to FRS 127 Consolidated and Separate Financial Statements
The revised FRS 3 Business Combinations (Revised) is effective for annual periods beginning on or after 1 July 2010. The revised FRS 3 introduces a number of changes in the accounting for business combinations occurring after 1 July 2010. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. The Amendments to FRS 127 require that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as an equity transaction. Therefore, such transactions will no longer give rise to goodwill, nor will they give rise to a gain or loss. Furthermore, the amended standard changes accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. Other consequential amendments have been made to FRS 107 Statement of Cash Flows, FRS 112 Income Taxes, FRS 121 The Effects of Changes in Foreign Exchange Rates, FRS 128 Investments in Associates and FRS 131 Interests in Joint Ventures. The changes from revised FRS 3 and Amendments to FRS 127 will affect future acquisitions or loss of control and transactions with minority interests.
(c) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and are not relevant to the Group and the Company
- Effective for annual periods beginning on or after 1 July 2010:
• Amendments to FRS 2: Share-based Payment • Amendments to FRS 5: non-current Assets Held for Sale
and Discontinued Operations • Amendments to FRS 138: Intangible Assets • IC Interpretation 12: Service Concession Arrangements • FRS 1: First-time Adoption of Financial Reporting Standards
- Effective for annual periods beginning on or after 1 January 2011:
• Amendments to FRS 2: Group Cash-settled Share-based Payment Transactions
• IC Interpretation 18: Transfer of Assets from Customers
- Effective for annual periods beginning on or after 1 July 2011: • IC Interpretation 14: FRS 119 - The limit on a defined
benefit assets, minimum funding requirements and their interaction
• IC Interpretation 19: Extinguishing financial liabilities with equity instruments
Description
Effective for annual periods beginning
on or after
FRS 3: Business Combinations (Revised) 1 July 2010Amendments to FRS 127: Consolidated and Separate Financial Statements
1 July 2010
Amendments to IC Interpretation 9: Reassessment of Embedded Derivatives
1 July 2010
IC Interpretation 16: Hedges of a net Investment in a Foreign Operation
1 July 2010
IC Interpretation 17: Distribution of non-cash Assets to Owners
1 July 2010
Amendments to FRS 132: Classification of Right Issues
1 March 2010
Amendments to FRS 7: Improving Disclosures about Financial Instruments
1 January 2011
IC Interpretation 4: Determining Whether an Arrangement contains a Lease
1 January 2011
Amendments to FRS 7: Improving Disclosures about Financial Instruments
1 January 2011
IC Interpretation 4: Determining Whether an Arrangement contains a Lease
1 January 2011
Improvement to FRS 101: Presentation of financial statements
1 January 2011
FRS 124 (Revised): Related party disclosures
1 January 2012
64 | nOTES TO THE FInAnCIAL STATEMEnTS MIECO AnnUAL REPORT 2010
2 BASIS OF PREPARATION (CONTINUED)
(c) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and are not relevant to the Group and the Company (continued)
- Effective for annual periods beginning on or after 1 January 2012:
• IC Interpretation 15: Agreements for construction of real estates
3 SIGNIFICANT ACCOUNTING POLICIES
Unless otherwise stated, the following accounting policies have been applied consistently in dealing with items that are considered material in relation to the financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
3.1 Economic entities in the Group
(a) Subsidiaries
The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to the end of the financial year. Subsidiaries are the companies in which the Group has the power to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are consolidated using the purchase method of accounting. Under the purchase method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The cost of an acquisition is measured as fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired at the date of acquisition is reflected as goodwill. See accounting policy note 3.2 on goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income.
Where more than one exchange transaction is involved, any adjustment to the fair values of the subsidiary’s
identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation.
Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred.
The gain or loss on disposal of a subsidiary, which is the difference between net disposal proceeds and the Group’s share of its net assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary is recognised in the consolidated statement of comprehensive income.
(b) Associates
Associates are those companies in which the Group exercises significant influence, but which it does not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not the power to exercise control over those policies.
Investments in associates are accounted for by using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. See accounting policy note 3.2 on goodwill.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the statement of comprehensive income, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence on impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the financial statements of the associates to ensure consistency of accounting policies with those of the Group.
3.2 Goodwill
Goodwill represents the excess of the cost of acquisition of subsidiaries and associates over the fair value of the Group’s share of the identifiable net assets at the date of acquisition.
nOTES TO THE FInAnCIAL STATEMEnTSFOR THE FInAnCIAL YEAR EnDED 31 DECEMBER 2010 (COnTInUED)
| 65nOTES TO THE FInAnCIAL STATEMEnTSMIECO AnnUAL REPORT 2010
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.2 Goodwill (continued)
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose.
Goodwill on acquisitions of associates is included in investments in associates. Such goodwill is tested for impairment as part of the overall balance. See accounting policy note 3.9 on impairment of non-financial assets.
3.3 Investments in subsidiaries, joint ventures and associates
Investments in subsidiaries and associates are shown at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy note 3.9 on impairment of non-financial assets.
On disposal of the investment, the difference between net disposal proceeds and its carrying amount is recognised in the statement of comprehensive income.
3.4 Property, plant and equipment
Property, plant and equipment are initially stated at cost. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of comprehensive income during the financial year in which they are incurred.
When an asset’s carrying amount is increased as a result of a revaluation, the increase is recognised in other comprehensive income as a revaluation surplus reserve. When the asset’s carrying amount is decreased as a result of a revaluation, the decrease is recognised in profit or loss. However, the decrease is recognised in other comprehensive
income to the extent of any credit balance existing in the revaluation surplus reserve of that asset.
Freehold land is not depreciated as it has an infinite life. Leasehold land classified as finance lease (refer to accounting policy note 3.5 on finance leases) is amortised in equal instalments over the period of the respective leases that range from 66 to 99 years.
Property plant and equipment are depreciated on a straight-line basis to write off the cost of the assets, or their revalued amounts, if any, to their residual values over their estimated useful lives, summarised as follows:
Leasehold land 66 – 99 years Buildings 34 – 98 years Plant and machinery 3 – 30 years Furniture, fittings, office renovation
and equipment 5 – 10 years Motor vehicles 5 years
Capital work-in-progress is not depreciated. Depreciation commences when the assets are ready for their intended use.
The residual values and useful lives of the assets are reviewed, and adjusted if appropriate, at each reporting date.
At each statements of financial position date, the Group assesses whether there is any indication of impairment. If such indication exists, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. See accounting policy note 3.9 on impairment of non-financial assets.
Gains and losses on disposals of the assets are determined by comparing the proceeds with the carrying amounts and are recognised in the statement of comprehensive income.
Borrowing costs are capitalised in accordance with note 3.22.
3.5 Leases
Finance leases
Lease of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases.
Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a periodic constant rate of interest on the balances outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
66 | nOTES TO THE FInAnCIAL STATEMEnTS MIECO AnnUAL REPORT 2010
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.5 Leases (continued)
Finance leases (continued)
Property, plant and equipment acquired under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating leases
Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on the straight line basis over the lease period.
Prepaid lease rentals are amortised in equal instalments over the period of lease from 66 to 99 years. The up-front payments made for the leasehold land represents prepaid lease rentals and are amortised on a straight-line basis over the lease term.
Change in accounting policy
Following the adoption of the improvement to FRS 117 “Leases”, leasehold land in which the Group has substantially all the risks and rewards incidental to ownership has been reclassified retrospectively from operating lease to finance lease. Previously, leasehold land was classified as an operating lease unless title is expected to pass to the lessee at the end of the lease term. Refer to note 2 (a) (v) and note 36 for the impact of the change in accounting policy.
3.6 Investment properties
Investment properties, comprising principally buildings, are held for long-term rental yields or for capital appreciation or both and are not occupied by the Group.
Investment properties are stated at fair value, representing open-market value determined annually by external valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. These valuations are reviewed annually by external valuers. Changes in fair values are recorded in the statement of comprehensive income.
On disposal of an investment property or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal, it shall be derecognised (eliminated from the statement of financial position). The difference between the net disposal proceeds and the carrying amount is recognised in the statement of comprehensive income in the financial year of the retirement or disposal.
3.7 Financial assets
Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.
The Group and the Company classify their financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification on its financial assets at initial recognition.
(a) Financial assets at fair value through profit or loss
Fair value through profit or loss category comprises financial assets that are held for trading including derivatives, unless they are designated as hedges. This category of financial assets is classified as current assets.
Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gain/loss arising from changes in fair value are recognised in profit or loss. net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income.
(b) Loans and receivables
Loans and receivables category comprises receivables and cash and cash equivalents. These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. This category of financial assets is classified as current assets unless the maturities are greater than twelve months in which case they are classified as non-current assets.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when then loans and receivables are derecognised or impaired, and through the amortisation process.
(c) Available-for-sale financial assets
Available-for-sale financial assets comprise investment in equity and debt securities that are not held for trading. These assets are non-derivative that are either designated in this category or not classified in any of the other categories. They are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date.
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3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.7 Financial assets (continued)
(c) Available-for-sale financial assets (continued)
After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established.
Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.
Financial assets are derecognised if the Group’s and the Company’s contractual rights to the cash flows from the financial assets expire or if the Group and the Company transfer the financial asset to another party without retaining control or transfers substantially all the risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group and the Company commit themselves to purchase or sell the asset.
3.8 Impairment of financial assets
The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired.
(a) Assets carried at amortised cost
A financial asset or a group of financial assets is impaired only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
The criteria that the Group and the Company use
to determine that there is objective evidence of an impairment loss include:
• Significant financial difficulty of the issuer or obligor; • A breach of contract, such as a default or delinquency in
interest or principal payments;
• The Group and the Company, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;
• It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
• The disappearance of an active market for that financial asset because of financial difficulties; or
• Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:
(i) Adverse changes in the payment status of borrowers in the portfolio; and
(ii) national or local economic conditions that correlate with defaults on the assets in the portfolio.
If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amounts is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.
(b) Assets classified as available for sale
Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired.
If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss.
Impairment losses on available-for-sale equity investments are
not reversed in profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For available-for-sale debt investments, impairment losses are subsequently reversed in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss.
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3.9 Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there is separately identifiable cash flows (cash generating units). non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
The impairment loss on the asset is charged to the statement of comprehensive income and any subsequent increase in recoverable amount is recognised in the statement of comprehensive income to the extent of its original costs. Impairment loss on goodwill is not reversed.
3.10 Non-current assets (or disposal groups) classified as assets held for sale
non-current assets (or disposal groups) are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through continuing use.
3.11 Research and development
Research expenditure is recognised as an expense when incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when the following criteria are fulfilled:
(a) it is technically feasible to complete the intangible asset so that it will be available for use or sale;
(b) management intends to complete the intangible asset and use or sell it;
(c) there is an ability to use or sell the intangible asset; (d) it can be demonstrated how the intangible asset will
generate probable future economic benefits; (e) adequate technical, financial and other resources
to complete the development and to use or sell the intangible asset are available; and
(f) the expenditure attributable to the intangible asset during its development can be reliably measured.
Other development expenditure that do not meet these criteria are recognised as an expense when incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
3.12 Employee benefits
(a) Short term employee benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the financial year in which the associated services are rendered by the employees of the Group.
(b) Post-employment benefits
The Group has various post-employment benefit schemes in accordance with local conditions and practices in the countries in which it operates. These benefits plans are either defined contribution or defined benefit plans.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation.
Defined contribution plan
The Group’s contributions to defined contribution plans are charged to the statement of comprehensive income in the financial year to which they relate. Once the contributions have been paid, the Group has no further payment obligations. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Defined benefit plan-unfunded
The liability in respect of a defined benefit plan is the present value of the defined benefit obligation at the reporting date together with adjustments for actuarial gains/losses and past service cost. The Group determines the present value of the defined benefit obligation with sufficient regularity such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the reporting date.
The defined benefit obligation, calculated using the projected unit credit method, is determined by independent actuaries, considering the estimated future cash outflows using market yields at the reporting date of government securities which have currency and terms to maturity approximating the terms of the related liability.
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3.12 Employee benefits (continued)
(b) Post-employment benefits (continued)
Defined benefit plan-unfunded (continued)
Actuarial gains and losses arise from experience adjustments and changes in actuarial assumptions. The amount of net actuarial gains and losses recognised in the statement of comprehensive income is determined by the corridor method in accordance with FRS 1192004 “Employee Benefits” and is charged or credited to the statement of comprehensive income over the average remaining service lives of the related employees participating in the defined benefit plan.
Under this scheme, the benefits due to the eligible employees are determined based on the length of service at predetermined factors in accordance with the Group Employee’s Handbook.
3.13 Inventories
Inventories are stated at the lower of cost and net realisable value. The cost of raw materials and finished goods comprise standard costs whereas the cost of spares and consumables comprise cost of purchase. The cost of finished goods and work-in-progress includes raw materials, labour and related production overheads (based on normal operating capacity). It excludes borrowings costs. net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and applicable variable selling expenses.
3.14 Receivables
Trade receivables are recognised at fair value and subsequently measured at amortised cost. An allowance for doubtful debts is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Known bad debts are written off in the financial year in which they are identified.
3.15 Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short term and highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the statement of financial position.
3.16 Income tax
Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and include all taxes based upon the taxable profits, including withholding taxes and real property gains taxes payable upon disposal of properties, if any.
Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences or unused tax losses can be utilised.
Deferred tax is recognised on temporary differences arising on investments in subsidiaries and associates except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
3.17 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed (for example, under an insurance contract), the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.
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3.18 Share capital
(a) Classification
Ordinary shares are classified as equity. Distributions to the holders of a financial instrument classified as an equity instruments is charged directly to equity.
(b) Dividends
Dividends on ordinary shares are recognised as liabilities in the financial year in which they are declared. Dividends proposed after reporting date but before the financial statements are authorised for issue are not recognised as liability at the reporting date.
3.19 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of returns, rebates and discounts and after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
(a) Sale of goods
Revenue relating to sale of goods is recognised upon delivery of products and customer acceptance, net of returns, rebates and discounts.
(b) Investment trading
Prior to the adoption of FRS 139, revenue relating to the disposal of marketable securities is recognised when the disposal becomes unconditional and on a receivable basis. Proceeds from disposal of marketable securities are net of stamp duties, brokerage and clearing fees. Following the adoption of FRS 139 with effect from 1 January 2010, marketable securities are designated as financial assets held for trading and are recorded at fair value. They are subsequently measured at fair value with gain or loss recognised in profit or loss.
(c) Interest income
Interest income is recognised on a time proportion basis, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group.
(d) Dividend income
Dividend income is recognised when the Group’s right to receive payment is established.
(e) Management fee
Management fee from subsidiaries is recognised on the accrual basis.
3.20 Foreign currencies
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in Ringgit Malaysia, which is the Company’s functional and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the dates of the transactions. Foreign currency gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.
(c) Group companies
The results and financial position of all the group companies (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
• assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
• income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of transactions); and
• all resulting exchange differences are recognised as a separate component of equity.
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3.20 Foreign currencies (continued)
(c) Group companies (continued)
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the statement of comprehensive income as part of the gain or loss on sale.
3.21 Hire purchase liabilities
Property, plant and equipment held under hire purchase agreements are capitalised in the statement of financial position and are depreciated in accordance with the policy set out in note 3.4. Outstanding obligations due under the hire purchase agreements after deducting finance charges are included as liabilities in the financial statements.
Hire purchase finance charges are allocated to the statement of comprehensive income over the hire purchase period so as to give a constant periodic rate of interest on the remaining liabilities.
3.22 Borrowings
(a) Classification
Borrowings are initially recognised based on the proceeds received, net of transaction costs incurred. In subsequent financial years, borrowings are stated at amortised cost using the effective yield method; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
(b) Capitalisation of borrowing costs
Borrowing costs are actual borrowing costs incurred on the borrowings during the financial year less any investment income on the temporary investment of those borrowings.
Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised as part of the cost of the assets during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs are expensed to the statement of comprehensive income.
3.23 Derivative financial instruments and hedging activities
The Group holds derivative financial instruments to hedge its foreign currency risk exposures. Embedded derivatives are separated from host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivative are measured at fair value, and changes therein are accounted for as described below:
(a) Cash flow hedge
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. The amount recognised in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affects profit or loss under the same line item in profit or loss as the hedged item. Any ineffective portion of changes in fair value of the derivative is recognised immediately in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other comprehensive income and presented in the hedging reserve in equity remains there until the forecast transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognised. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive income is recognised immediately in profit or loss. In other cases, the amount recognised in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.
(b) Other non-trading derivatives
When a derivative financial instrument is not held for trading, and is not designated in a qualifying hedge relationship, all changes in its fair value are recognised immediately in profit or loss.
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3.24 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities
3.25 Segment reporting
For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the Chief Operating Decision Maker of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in note 33, including the factors used to identify the reportable segments and the measurement basis of segment information.
3.26 Contingent liabilities and contingent assets
The Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably.
A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain.
In the acquisition of subsidiaries by the Group under a business combinations, the contingent liabilities assumed are measured initially at their fair value at the acquisition date, irrespective of the extent of any minority interest.
The Group recognises separately the contingent liabilities of the acquirees as part of allocating the cost of a business combination where their fair values can be measured reliably. Where the fair values cannot be measured reliably, the resulting effect will be reflected in the goodwill arising from the acquisitions.
Subsequent to the initial recognition, the Group measures the contingent liabilities that are recognised separately at the date of acquisition at the higher of the amount that would be recognised in accordance with the provisions of FRS 137 “Provisions, Contingent Liabilities, and Contingent Assets” and the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with FRS 118 “Revenue”.
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Group’s results and financial positions are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are outlined below:
(a) Estimated impairment of property, plant and equipment
The Group assesses impairment of property, plant and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, i.e. the carrying amount of the asset is higher than the recoverable amount. Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-in-use.
Projected future cash flows used in impairment testing of property, plant and equipment are based on the Group’s estimates calculated based on historical, sector and industry trends, general market and economic conditions and other available information.
The assumptions used, results and impact of possible change in the key assumptions of the impairment assessment of the property, plant and equipment are disclosed in note 6 to the financial statements.
(b) Recognition of deferred tax asset
Deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. This involves judgement regarding the future financial performance of the Group and the Company in which the deferred tax asset has been recognised.
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(b) Recognition of deferred tax asset (continued)
As at 31 December 2010, the Group and the Company recorded a deferred tax asset of RM491,000 (2009: RM446,000) and RM411,000 (2009: RM356,000) respectively. The Group and the Company also had investment tax allowances and unutilised tax losses in an aggregate amount of RM439.7 million (2009: RM437.3 million) and RM4.8 million (2009: RM4.8 million) respectively, for which no deferred tax asset has been recognised on the statements of financial position as at 31 December 2010. Based on management’s projections of the future results of the Group and the Company, it is not probable that taxable profits will be available to utilise against the investment tax allowances and unutilised tax losses in the foreseeable future.
5 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its foreign currency exchange risk, interest rate risk, credit risk, liquidity and cash flow risk. The Group operates within clearly defined authority limits that have been approved by the Board of Directors. Further financial risk management is carried out through risk reviews, internal control systems and insurance programme.
Foreign currency exchange risk
The Group incurs foreign currency risk on sales and purchases that are denominated in a currency other than Ringgit Malaysia.
The Group covers a portion of foreign trade receivables and payables denominated in foreign currency with foreign exchange forward contracts when the need arises. All foreign exchange contracts are for the purpose of hedging to protect the Group from foreign currency fluctuations and the Group is not allowed to trade, other than for the purpose of hedging.
The Group’s and the Company’s exposures to foreign currencies as at 31 December 2010 is as follows:
US Singapore Dollar Dollar Euro Others* RM’000 RM’000 RM’000 RM’000
As at 31 December 2010 Group
Trade and other receivables 2,106 1,077 0 4 Cash and cash equivalents 695 90 0 22 Borrowings (33,707) 0 0 0 Trade and other payables (2,002) (35) (3,045) (46)
Gross currency exposures (32,908) 1,132 (3,045) (20) Less: net financial assets denominated in respective entities’ functional currencies 0 (77) 0 0
Net currency exposures (32,908) 1,055 (3,045) (20)
Company
Trade and other receivables 4 0 0 4 Cash and cash equivalents 0 0 0 22 Borrowings (33,707) 0 0 0 Trade and other payables (253) 0 0 0
Net currency exposures (33,956) 0 0 26
* Other currencies comprise Swiss Franc, Japanese Yen and Chinese Renminbi.
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5 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Foreign currency exchange risk (continued)
If the relevant foreign currencies estimated at a 5% strengthening against the respective functional currencies of the Group entities, it would decrease the Group’s profit before tax (and retained profits) by approximately RM1.9 million. A 5% weakening in foreign currencies against respective Group entities’ functional currencies would have an equal but opposite effect.
If the relevant foreign currencies estimated at a 5% strengthening against the functional currency of the Company, it would decrease the Company’s profit before tax (and retained profits) by approximately RM1.7 million. A 5% weakening in foreign currencies against functional currency of the Company would have an equal but opposite effect.
Interest rate risk
The Group’s income and operating cash flows are substantially independent of changes in market interest rates. Interest rate exposure arises from the Group’s borrowing and deposits. Interest rates of the Group’s borrowings are managed through fixed and floating rates. Investments in financial assets are short term in nature and are mostly placed as short-term deposits with licensed financial institutions.
Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s exposure to credit risks arises primarily from cash and bank balances, trade and other receivables. The Group seeks to control credit risk by having in place policies for credit control which cover, inter-alia, credit evaluation on all customer credit over a certain amount, imposition of collateral or security and strict adherence to credit approval limits. Regular reviews and monitoring of credit risk exposure and management of delinquent debtors form part of the operational controls implemented by the Group to reduce such risk.
Concentrations of credit risk with respect to receivables are limited due to the Group’s large number of customers. The Group’s historical experience in collection of accounts receivable falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Group’s receivables. Deposits with banks and other financial institutions that are neither past due nor impaired are placed with reputable financial institutions with high credit ratings and no history of default.
The maximum exposure to credit risk is represented by the carrying amount of each class of financial instruments presented on the statement of financial position, including derivatives with positive fair values.
(a) Financial assets that are neither past due nor impaired
Deposits with banks and other financial institutions that are neither past due nor impaired are placed with reputable financial institutions with high credit ratings and no history of default.
Trade receivables that are neither past due nor impaired is disclosed in note 11.
Other receivables are predominantly neither past due nor impaired and are substantially from companies with good payment record with the Group.
(b) Financial assets that are past due but not impaired
There is no other class of financial assets that is past due but not impaired except certain trade receivables as disclosed in note 11. The Company has not impaired the amounts due from subsidiaries as these amounts are expected to be recovered in the near future.
Liquidity and cash flow risk
The Group’s policy on liquidity risk management is to maintain sufficient cash and have available funding through adequate amounts of committed credit facilities, credit lines, and funding through continuing financial support from the holding company for working capital requirements.
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Capital management
The primary objective of the Group’s and the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.
The Group and the Company define capital as the share capital and the level of borrowings of the Group and the Company. The Group and the Company manage the capital structure and make adjustments to it, in light of changes in economic condition. To maintain or adjust capital structure, the Group and the Company may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares or share buy-backs. The Group and the Company’s approach in managing capital are based on defined guidelines that are approved by the Board of Directors.
There were no changes in the Group’s and the Company’s approach to capital management during the financial year.
Contractual cash flows
Carrying Within Between After 5 amount Total 1 year 1-5 years years As at 31 December 2010 RM’000 RM’000 RM’000 RM’000 RM’000
Group Trade and other payables 37,435 37,435 37,435 0 0 Borrowings 162,889 181,547 44,001 137,546 0 Amount due to holding company 37,579 48,497 0 0 48,497
237,903 267,479 81,436 137,546 48,497
Company Trade and other payables 8,079 8,079 8,079 0 0 Borrowings 140,627 158,804 21,354 137,450 0 Amount due to holding company 37,579 48,497 0 0 48,497
186,285 215,380 29,433 137,450 48,497
5 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Liquidity and cash flow risk (continued)
The following are the maturity profile of the Group’s and the Company’s financial liabilities based on contractual undiscounted cash flow.
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Furniture fittings, Capital Leasehold Plant and office renovation Motor work-in- land Buildings machinery and equipment vehicles progress TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Net book valueAs at 1 January 2010 - as previously reported 0 119,081 365,073 782 1,103 0 486,039Effects of adoption of amendments to FRS 117 (note 36) 17,149 0 0 0 0 0 17,149
As at 1 January 2010 – as restated 17,149 119,081 365,073 782 1,103 0 503,188Additions 0 172 2,405 149 2,665 0 5,391Disposals / write offs 0 0 0 (19) 0 0 (19)Depreciation charge for the financial year (236) (1,496) (16,730) (389) (303) 0 (19,154)
At 31 December 2010 16,913 117,757 350,748 523 3,465 0 489,406
At 31 December 2010
Cost 19,704 133,662 570,884 12,560 8,652 0 745,462Accumulated depreciation (2,791) (15,905) (214,443) (12,037) (5,187) 0 (250,363)Accumulated impairment loss 0 0 (5,693) 0 0 0 (5,693)
net book value 16,913 117,757 350,748 523 3,465 0 489,406
Furniture fittings, Capital Leasehold Plant and office renovation Motor work-in- land Buildings machinery and equipment vehicles progress TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Net book value As at 1 January 2009 – as previously reported 0 120,448 383,058 1,458 1,850 189 507,003Effects of adoption of amendments to FRS 117 (note 36) 17,385 0 0 0 0 0 17,385
As at 1 January 2009 – as restated 17,385 120,448 383,058 1,458 1,850 189 524,388Additions 0 180 251 128 19 0 578Disposals / write offs 0 (66) (146) (221) (424) (189) (1,046)Impairment loss 0 0 (1,658) 0 0 0 (1,658)Depreciation charge for the financial year (236) (1,481) (16,432) (583) (342) 0 (19,074)
At 31 December 2009 17,149 119,081 365,073 782 1,103 0 503,188
At 31 December 2009
Cost 19,704 133,490 568,479 12,687 5,987 0 740,347Accumulated depreciation (2,555) (14,409) (197,713) (11,905) (4,884) 0 (231,466)Accumulated impairment loss 0 0 (5,693) 0 0 0 (5,693)
net book value 17,149 119,081 365,073 782 1,103 0 503,188
6 PROPERTY, PLANT AND EQUIPMENT
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Furniture and fittings, office renovation and equipment TotalCompany RM’000 RM’000 Net book value
At 1 January 2010 253 253Additions 36 36Disposals / write-offs (2) (2)Depreciation charge for the financial year (149) (149) At 31 December 2010 138 138 At 31 December 2010Cost 5,315 5,315Accumulated depreciation (5,177) (5,177) Net book value 138 138
Net book value
At 1 January 2009 370 370Additions 42 42Depreciation charge for the financial year (159) (159)
At 31 December 2009 253 253
At 31 December 2009Cost 5,371 5,371Accumulated depreciation (5,118) (5,118)
Net book value 253 253
Property, plant and equipment under hire purchase Group
2010 2009 RM’000 RM’000
Motor vehicles under hire purchase:- net book value at end of financial year 471 595
6 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
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6 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Impairment test for property, plant and equipment
A plant of a subsidiary (‘Plant 3”) recommenced operation in January 2011. Management performed an impairment assessment of the Plant 3 in view of the temporary closure of Plant 3 in november 2008. Based on management’s assessment, the recoverable amount of Plant 3 as at 31 December 2010, based on value-in-use (“VIU”) is RM398 million, which is in excess of its carrying value of RM366 million by RM32 million.
On this basis, management is of the view that no impairment is necessary with respect to Plant 3.
(a) Key assumptions used in the VIU calculation
The VIU calculation applied a discounted cash flow model using cash flow projections based on an approved 5-year budget and projections covering the remaining useful life of Plant 3 of 24 years. These projections reflect management’s best estimate of the future results of Plant 3 based on past experience and future outlook.
The key estimates used in the cash flow projections are the selling prices of the products, certain components of the raw material prices and the weighted average cost of capital specific to the Group’s industry. The key assumptions of the projections are as follows:
• Selling prices beyond the sixth year are extrapolated to the end of the useful life based on a 2% year-on-year increase.
• Cost of major raw material prices beyond the sixth year are extrapolated to the end of the useful life based on a 1.5% year-on-year increase.
• Sales and production volumes beyond the sixth year are assumed to remain constant, extrapolated to the end of the useful life based on a 2% year-on-year increase.
• A discount rate of 9.37% has been applied to the cash flow projections.
(b) Impact of possible change in key assumptions
The Group’s impairment assessment includes an assessment of changes in key assumptions that would impact the financial statements, as set out below:
• If the discount rate used was 10%, the recoverable amount would be lower by RM24 million.
• If the selling price differs by 1% from management’s estimates, the recoverable amount would be higher or lower by RM26 million.
• If the prices of key raw materials differs by 2% from management’s estimates, the recoverable amount would be higher or lower by RM24 million.
• If the sales volume differs by 1% from management’s
estimates, the recoverable amount would be higher or lower by RM26 million.
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7 INVESTMENT PROPERTIES
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 At 1 January 0 7,417 0 4,867 Disposals 0 (7,069) 0 (4,669) Fair value loss 0 (348) 0 (198)
At 31 December 0 0 0 0
All investment properties of the Group and the Company were sold in 2009 to the holding company, Bandaraya Developments Berhad, for a total cash consideration of RM7.1 million and RM4.7 million respectively.
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Company
2010 2009 RM’000 RM’000
Unquoted shares, at cost 52,495 52,495 Allowance for impairment loss (1,275) (1,275)
51,220 51,220
The shares in the subsidiaries are held directly by the Company. Details of the subsidiaries are as follows:
8 INVESTMENT IN SUBSIDIARIES
Effective interest
2010 2009 name of company % % Principal activities
# Mieco Manufacturing Sdn. Bhd. 100 100 Manufacturing and marketing of chipboards and related products# Mieco Marketing Sdn. Bhd. 100 100 Selling and marketing of chipboards and related products* Mieco Marketing (S) Pte. Ltd. 100 100 Dormant# Mieco Chemicals Sdn. Bhd. 100 100 Dormant# Mieco Wood Products Sdn. Bhd. 100 100 Reforestation# Mieco Reforestation Sdn. Bhd. 100 100 Reforestation, harvesting, extraction and supply of rubber wood# Mieco Wood Resources Sdn. Bhd. 100 100 Investment holding and procurement of rubber wood** Mieco International (HK) Limited 100 100 Dormant# Tudor Capital Sdn. Bhd. 100 100 Investment trading# Aspire Benchmark Sdn. Bhd. 100 100 Property investment
All the subsidiaries are incorporated in Malaysia, except for Mieco Marketing (S) Pte. Ltd. and Mieco International (HK) Limited, which are incorporated in Singapore and Hong Kong respectively.
note:
#Audited by PricewaterhouseCoopers, Malaysia
* Audited by a firm other than PricewaterhouseCoopers, Malaysia and member firms of PricewaterhouseCoopers International Limited
** Company is dormant. As such no statutory audit is required under Hong Kong Companies Ordinance.
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Company
2010 2009 RM’000 RM’000
Receivable within two to five years 140,627 157,875Receivable later than five years 37,579 28,495
178,206 186,370
The effective interest rates of the interest-bearing amount due from a subsidiary as at the reporting date range from 5.35% to 5.48% (2009: 5.20% to 5.35%) per annum.
The estimated fair value for the amount due from a subsidiary (which is interest bearing and not considered as part of net investment in a subsidiary) as at the reporting date approximates its carrying value.
10 INVENTORIES
Group
2010 2009 RM’000 RM’000
At cost: Raw materials 11,252 10,725Work-in-progress 1,417 1,030Finished goods 8,176 6,236Spares and consumables 23,925 22,587
44,770 40,578
9 AMOUNT DUE FROM A SUBSIDIARY
The amount due from a subsidiary of RM297.506 million (2009: 297.149 million) which is unsecured, denominated in Ringgit Malaysia and is interest free is considered as part of net investment in a subsidiary.
In addition to the above, the amount due from a subsidiary includes a balance amounting to RM178.206 million (2009: RM186.370 million) which is unsecured, denominated in Ringgit Malaysia and is interest bearing as these funds are sourced by the Company from (a) external parties to part finance the construction of a plant of the subsidiary, and (b) the holding company for loan repayment of the Company and working capital purposes of the subsidiary. The finance expenses charged to the Company for the current financial year on these borrowings amounting to RM9.700 million (2009: RM9.723 million) are re-charged to the subsidiary.
The repayment terms of the amount due from a subsidiary which is interest bearing are as follows:
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Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Trade receivables 31,647 38,122 0 1,328Allowance for doubtful debts (54) (6,730) 0 (1,328)
31,593 31,392 0 0
Amounts due from subsidiaries 0 0 2,474 2,408Allowance for doubtful debts 0 0 (683) (683)
0 0 1,791 1,725
Other receivables 8,112 8,768 100 158Allowance for doubtful debts (7,622) (7,627) (54) (54)
490 1,141 46 104Deposits 240 225 14 14Prepayments 113 135 6 10
843 1,501 66 128
Total 32,436 32,893 1,857 1,853
The credit terms of the trade receivables range from 1 to 60 days (2009: 1 to 60 days).
The amounts due from subsidiaries are unsecured, interest free and have no fixed terms of repayment.
Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large number of customers. The Group’s historical experience in collection of accounts receivable falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Group’s trade receivables.
The maximum exposure to credit risk for trade receivables at reporting date is the carrying amount of each class of receivable mentioned above. The Group holds as collaterals, bank guarantees deposited by certain debtors, as security.
The ageing analysis of the Group’s and the Company’s trade receivables is as follows: Group Company
Allowances Allowances Gross for doubtful Gross for doubtful amount receivables amount receivables
As at 31 December 2010 RM’000 RM’000 RM’000 RM’000
not past due 30,939 0 0 0Past due 1 – 30 days 289 0 0 0Past due 31 – 90 days 334 0 0 0More than 90 days 85 (54) 0 0
31,647 (54) 0 0
11 RECEIVABLES, DEPOSITS AND PREPAYMENTS
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Group Company
2010 2009 RM’000 RM’000
At 1 January 6,730 1,328Allowance made during the financial year 52 0Recovery of debts (56) 0Allowance written off (6,672) (1,328)
At 31 December 54 0
12 MARKETABLE SECURITIES Group
2010 2009 RM’000 RM’000Quoted in Malaysia
Share in corporations, at cost 0 66Less: Allowance for impairment losses 0 (17)
0 49
At market value
Shares in corporations, quoted in Malaysia 0 49
11 RECEIVABLES, DEPOSITS AND PREPAYMENTS (CONTINUED)
The Group and the Company believe that, generally no allowance for doubtful receivables is necessary in respect of trade receivables that are neither past due nor impaired as these receivables are mainly arising from trade debtors that have good records of payment in the past.
The change in allowance for doubtful receivables in respect of trade receivables during the financial year is as follows:
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13 DERIVATIVE FINANCIAL INSTRUMENTS
At 31 December 2010, the Group’s open forward contracts entered into as cover of anticipated future transactions were as follows:
At 31.12.2010 At 31.12.2009
Currency Average Currency AverageHedged to be RM’000 contractual to be RM’000 contractual items received/paid equivalent rate received/paid equivalent rate
Trade USD Dollar 2,168 3.1308 US Dollar receivables 0.692 million 1.427 million 4,819 3.378
Future sale USD Dollar 3,943 3.1349 US Dollar of goods 1.258 million 1.029 million 3,499 3.399
Trade nA nA nA Euro payables 0.452 million 2,276 5.032
Future purchase nA nA nA Euro of goods 0.088 million 441 5.032
6,111 11,035
The settlement dates of the above open forward contracts range between 1 and 6 months.
The derivative gain arising from the outstanding forward foreign currency exchange contracts as at 31 December 2010 is RM76,000, which has been recorded in the statement of financial position of the Group.
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14 CASH AND CASH EQUIVALENTS
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Deposits with licensed banks 2,516 2,516 989 965Deposits with licensed discount houses 0 33 0 0
2,516 2,549 989 965Cash and bank balances 3,857 2,588 153 119Bank overdraft (note 18) (3,426) (6,831) 0 0 2,947 (1,694) 1,142 1,084
Included in deposits, cash and bank balances are monies subject to usage restriction 2,516 2,516 989 965
The weighted average interest rates of deposits that were effective at the reporting date were as follows:
Group Company
2010 2009 2010 2009 % % % %
Deposits with licensed banks 2.96 2.39 2.85 2.19Deposits with licensed discount house 0 1.88 0 0
Deposits of the Group and the Company have an average tenure to maturity of 306 days (2009: 276 days) and 214 days (2009: 141 days) respectively.
Bank balances are held at call with licensed banks, which are non-interest bearing.
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13 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Forward foreign currency exchange contracts are entered into with licensed banks to hedge the Group’s exposure to foreign exchange risk in respect of its export sales and imported purchases by establishing the rate at which foreign currency assets or liabilities will be settled.
These contracts are executed with credit-worthy/reputable financial institutions in Malaysia and as such, credit risk and liquidity risk in respect of non-performance by counterparties to these contracts is minimal.
The fair value of the forward foreign currency exchange contracts are subject to market risk. The fair value of the forward contracts may decline if the exchange rate of the underlying currency decreases.
Forward foreign currency exchange contracts are recognised on the contract dates and are measured at fair value with changes in fair value recognised in profit or loss.
The unrecognised losses of the previous year, prior to the adoption of FRS139, on open contracts which hedged anticipated future foreign currency sales and purchases amounted to RM81,210 and RM56,142 respectively. The net exchange losses were then deferred until the related sales and purchases were transacted, at which time they were included in the measurement of such transactions.
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15 SHARE CAPITAL
Group and Company
2010 2009 RM’000 RM’000
Authorised:1,000,000,000 ordinary shares of RM1 each 1,000,000 1,000,000
Issued and fully paid: 210,000,000 ordinary share of RM1 each 210,000 210,000
16 RESERVES
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Non-distributable: Share premium 5,866 5,866 5,866 5,866Foreign currency reserve (38) (26) 0 0
5,828 5,840 5,866 5,866Distributable: Retained earnings 102,691 100,448 126,067 125,657
108,519 106,288 131,933 131,523
Retained earnings
Under the single-tier tax system which came into effect from the year of assessment 2008, companies are not required to have tax credits under Section 108 of the Income Tax Act 1967 for dividend payment purposes. Dividends paid under this system are tax exempt in the hands of shareholders.
Companies with Section 108 credits as at 31 December 2010 may continue to pay franked dividends until the Section 108 credits are exhausted or 31 December 2013 whichever is earlier unless they opt to disregard the Section 108 credits to pay single-tier dividends under the special transitional provisions of the Finance Act 2007. As at 31 December 2010, subject to agreement with the tax authorities, the Company has sufficient Section 108 tax credit and exempt account to frank approximately RM20 million (2009: RM20 million) and RM63 million (2009: RM63 million) respectively of the retained earnings of the Company as franked and exempt dividend.
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Group Company
RM’000 RM’000
At 1 January 2009 8,618 70
Charged to statement of comprehensive income (note 24) 817 134 Benefits paid (1,147) (93)
At 31 December 2009 8,288 111
Charged to statement of comprehensive income (note 24) 1,489 133Benefits paid (536) (97) At 31 December 2010 9,241 147
The amounts recognised in the statements of financial position may be analysed as follows:
Group Company
RM’000 RM’000 Present value of unfunded obligations – non current At 31 December 2010 9,241 147At 31 December 2009 8,288 111At 31 December 2008 8,618 70At 31 December 2007 7,974 281At 31 December 2006 7,232 151
17 PROVISIONS
Defined benefit plan of the Group
The Group operates an unfunded final salary defined benefit plan for its employees in Malaysia and Hong Kong. The latest actuarial valuations of the plan were carried out on 29 December 2009.
The movements during the financial year in the amounts recognised in the Group’s and Company’s statements of financial position are as follows:
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17 PROVISIONS (CONTINUED)
Defined benefit plan of the Group (continued)
The expenses recognised in the statements of comprehensive income may be analysed as follows:
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Current service cost 795 770 66 65Interest cost 666 499 35 31Amortisation of net loss 28 24 32 38Curtailment gain 0 (476) 0 0
1,489 817 133 134
The principal actuarial assumptions used in respect of the Group’s and Company’s defined benefit plan were as follows:
Lump-sum retirement plan
2010 2009 % %
Discount rates 7.0 7.0Expected rate of salary increases 8.0 8.0
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18 BORROWINGS
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
CurrentBank overdraft (unsecured) (note 14) 3,426 6,831 0 0Term loan (unsecured) 13,889 6,238 13,889 6,238Bankers acceptance (unsecured) 18,576 20,617 0 0Hire purchase liabilities (secured) (note 22) 164 164 0 0
36,055 33,850 13,889 6,238
Non-currentTerm loan (unsecured) 126,738 144,372 126,738 144,372Hire purchase liabilities (secured) (note 22) 96 246 0 0
126,834 144,618 126,738 144,372
TotalBank overdraft (unsecured) (note 14) 3,426 6,831 0 0Term loan (unsecured) 140,627 150,610 140,627 150,610Bankers acceptance (unsecured) 18,576 20,617 0 0Hire purchase liabilities (secured) (note 22) 260 410 0 0
162,889 178,468 140,627 150,610
Bank overdraft and bankers’ acceptance facilities, which are unsecured, are utilised to finance the purchase of raw materials and working capital.
The estimated fair value of the non-current portion of term loan as at 31 December 2009 was RM122.609 million.
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18 BORROWINGS (CONTINUED)
The terms and debt repayment shedule of the borrowings are as follows:
Carrying Within 1-2 2-5 Over Year of amount 1 year years years 5 years maturity RM’000 RM’000 RM’000 RM’000 RM’000
Group
2010Bank overdraft 2011 3,426 3,426 0 0 0Term loan 2015 140,627 13,889 62,501 64,237 0Bankers acceptance 2011 18,576 18,576 0 0 0Hire purchase liabilities 2012 260 164 96 0 0
162,889 36,055 62,597 64,237 0 2009Bank overdraft 2010 6,831 6,831 0 0 0Term loan 2015 150,610 6,238 14,259 103,377 26,736Bankers acceptance 2010 20,617 20,617 0 0 0Hire purchase liabilities 2012 410 164 246 0 0
178,468 33,850 14,505 103,377 26,736
Company
2010Term loan 2015 140,627 13,889 62,501 64,237 0
2009Term loan 2015 150,610 6,238 14,259 103,377 26,736
Interests on borrowings which are subject to floating interest rates are contractually repriced at intervals between 1 to 3 months. Interest on borrowings at fixed rates are fixed until the maturity of the borrowings.
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18 BORROWINGS (CONTINUED)
The weighted average interest rates of the borrowings at the repoting date are as follows:
Group Company
2010 2009 2010 2009 % % % %
Bank overdraft 7.05 6.30 0 0Term loan 5.48 5.20 5.48 5.20Bankers acceptance 3.64 – 4.12 3.67 – 3.94 0 0
The Company had, in the previous financial year, successfully restructured its term loans with reduced repayment of the principal outstanding borrowings. This reduced repayment shall end in the financial year ending 2012. The holding company has provided a letter of guarantee (“LG”) on the due and punctual payment by the Company in respect of the said term loans. After its expiry in 2012, the LG shall be released subject to the fulfilment of the following terms and conditions by the Company:
- compliance of all financial covenants under the term loans facility;- two reported consecutive quarters of net profit after tax of at least RM2 million each; and- provision of security to substitute the LG.
Accordingly, the Directors are of the view that it is appropriate to prepare the financial statements of the Group and of the Company as a going concern.
19 DEFERRED TAxATION
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the statements of financial position:
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Subject to income tax:Deferred tax assets 491 446 411 356Deferred tax liabilities (7,582) (7,580) 0 0
(7,091) (7,134) 411 356
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19 DEFERRED TAxATION (CONTINUED)
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
As start of financial year (7,134) (8,975) 356 299
Credited/(charged) to statement of comprehensive income (note 27)- Property, plant and equipment (154) 5,548 37 38- Provisions 293 224 17 8- Inventories (119) (2,001) 0 0- Receivables 0 (1,988) 0 0- Others 23 58 1 11 43 1,841 55 57
At end of financial year (7,091) (7,134) 411 356
Subject to income tax:
Deferred tax assets (before offsetting)Provisions 1,826 1,533 135 118Inventories 1,854 1,973 0 0Receivables 184 184 171 171 Property, plant and equipment 91 73 123 67Others 1 0 1 0
3,956 3,763 430 356Offsetting (3,465) (3,317) (19) 0
Deferred tax assets (after offsetting) 491 446 411 356
Deferred tax liabilities (before offsetting)Property, plant and equipment (11,047) (10,875) (19) 0Others 0 (22) 0 0
(11,047) (10,897) (19) 0Offsetting 3,465 3,317 19 0
Deferred tax liabilities (after offsetting) (7,582) (7,580) 0 0
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19 DEFERRED TAxATION (CONTINUED)
The amount of deductible temporary differences, unutilised tax losses and unutilised investment tax allowance (all of which have no expiry date) for which no deferred tax asset is recognised on the statement of financial position are as follows:
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Deductible temporary differences 0 1 0 0Unutilised tax losses 9,167 9,415 4,803 4,842Unutilised investment tax allowance 430,518 427,853 0 0
20 AMOUNT DUE TO HOLDING COMPANY
The holding company is Bandar Raya Developments Berhad, a company incorporated in Malaysia.
Amount due to the holding company is denominated in Ringgit Malaysia, unsecured and is subordinated to the prior repayment of certain loans. The weighted average interest rate on the amount due to the holding company at the reporting date is 5.35% (2009: 5.35%) per annum as at 31 December 2010.
The estimated fair value of the amount due to holding company as at 31 December 2009 was RM26.16 million.
21 TRADE AND OTHER PAYABLES Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Trade payables 22,238 20,535 0 0Accrued expenses 302 325 0 0 Other payables 10,405 10,646 2,160 2,106Amounts due to subsidiaries 0 0 3,451 3,346Amount due to holding company 2,369 2,577 2,369 2,577Payroll liabilities 2,121 1,400 99 204
37,435 35,483 8,079 8,233
Included in payroll liabilities is an accrual for contributions to the Employees Provident Fund amounting to RM288,294 (2009: RM270,215). Companies incorporated in Malaysia contribute to the Employees Provident Fund, the national defined contribution plan. Once the contributions have been paid, the Group has no further payment obligations.
Amounts due to subsidiaries and holding company are unsecured, interest free and have no fixed term of repayment.
The credit terms of trade and other payables range from 1 to 90 days (2009: 1 to 90 days).
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22 HIRE PURCHASE LIABILITIES Group
2010 2009 RM’000 RM’000
Payable within one year 182 182Payable between one to five years 91 273
273 455Less: Future finance charges (13) (45)
Present value of hire purchases liabilities 260 410
Hire purchase liabilities are classified as follows:Current (note 18) 164 164non-current (note 18) 96 246
260 410
Hire purchase creditors are denominated in Ringgit Malaysia. The weighted average effective interest rate as at the year end is 4.19% (2009: 4.19%) per annum for the Group.
The estimated fair value of the hire purchase liabilities (non-current portion) at the reporting date was RM89,770 (2009: RM232,670). The fair value of the current portion of the hire purchase liabilities approximates its carrying value at the reporting date.
Hire purchase liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
23 REVENUE
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Sales of goods 174,208 185,739 0 0Management fee received fromsubsidiaries 0 0 2,919 2,816
174,208 185,739 2,919 2,816
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24 STAFF COSTS Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Wages, salaries and bonus 13,902 13,992 1,437 1,737 Defined contribution plan 1,817 1,765 177 210Defined retirement benefit plan (note 17) 1,489 817 133 134Other employee benefits 6,709 7,063 152 204
23,917 23,637 1,899 2,285
Details of the defined benefit plan and defined contribution plan for the Group and the Company are set out in note 17 and note 21 to the financial statements, respectively.
Included in staff costs above are the Company’s Executive Director’s remuneration, excluding fees and estimated money value of benefits-in-kind, as further disclosed in note 29 to the financial statement.
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25 PROFIT / (LOSS) FROM OPERATIONS
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
The following items have been charged / (credited) in arriving at profit / (loss) from operations:Auditors’ remuneration (note 30):- current financial year 150 128 46 35- under/(over) provision in prior year (5) 16 (5) 10Allowance for / (write back of) bad and doubtful debts 52 (264) 0 0Directors’ remuneration (excluding estimated monetary value of benefits-in-kind) (note 29) 1,254 846 897 840Recovery of bad and doubtful debts (61) (283) 0 0Rental of building 209 299 18 20Loss on disposal of property, plant and equipment 12 635 2 0(Gain) / loss on realised foreign exchange (801) 4,555 (43) 1Unrealised gain on foreign exchange (3,707) (963) (10) 0(Write back)/ allowances for inventories obsolescence (476) 1,329 0 0Inventories (written-back) / written-off (260) 1,998 0 0Rental income (1,060) (960) 0 (62)Fair value gain on derivative financial instruments (112) 0 0 0Fair value gain on financial assets held for trading (25) 0 0 0Dividend income (1) (2) 0 0Government grant received 0 (1,163) 0 0Write back for impairment loss on marketable securities 0 (13) 0 0Loss on wood concession 0 474 0 0
Direct operating expenses from investment properties that generated rental income for the Group and for the Company during the previous financial year was RM0.225 million.
Direct operating expenses from investment properties that did not generate rental income for the Group and for the Company during the previous financial year amounted to RM0.364 million.
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26 FINANCE COSTS AND FINANCE INCOME
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Finance costsInterest expense on:- Overdraft interest 113 389 0 0- Bankers acceptance 761 1,127 0 0- Revolving credit 0 7 0 0- Promissory notes 0 139 0 0- Hire purchase liabilities 44 18 0 0- Term loan 7,880 7,964 7,880 7,964- Loan from holding company 1,820 1,759 1,820 1,759- Loan facility fee 30 49 0 0
10,648 11,452 9,700 9,723
Finance income- Recovery of interest from a subsidiary in respect of term loan 0 0 (7,880) (7,964)- Recovery of interest from a subsidiary in respect of loan from holding company 0 0 (1,820) (1,759)- Interest income (23) (26) (19) (4)
(23) (26) (9,719) (9,727)
net finance costs/(income) 10,625 11,426 (19) (4)
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27 TAx (ExPENSE) / CREDIT
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
(Tax expense) / credit for the financial year:
In respect of the current financial year- Malaysian income tax (4) (8) 0 0- Foreign tax (6) (9) (6) (9)- Deferred tax (note 19) 52 3,530 55 81
42 3,513 49 72(Under)/over accrual in respect of prior years- Malaysian income tax (60) (9) (72) 0- Foreign tax (3) 22 (3) 18- Deferred tax (note 19) (9) (1,689) 0 (24)
(30) 1,837 (26) 66
The effective tax rates of the Group and the Company differ from the statutory tax rate of 25% (2009: 25%) and are reconciled as below:
Group Company
2010 2009 2010 2009 % % % %
Statutory income tax rate of Malaysia 25 (25) (25) (25)Effects of:- Income not subjected to tax (56) (1) 0 0- Expenses not deductible for tax purposes 33 3 7 16- Under accrual in prior year 4 10 35 0- (Utilisation of previously unrecognised tax losses)/tax losses not recognised (4) 2 (5) 5
Effective tax rate 2 (11) 12 (4)
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28 EARNINGS / (LOSS) PER SHARE
(a) The basic earnings per share of the Group is calculated based on the earnings attributable to equity holders of the Company of RM1.62 million (2009: loss of RM14.68 million) divided by the weighted average number of 210,000,000 (2009: 210,000,000) ordinary shares in issue during the financial year.
(b) There were no dilutive potential ordinary shares as at 31 December 2010 and 31 December 2009 as the warrants had expired on 21 April 2009. As such, the diluted earnings per share is the same as the basic earnings per share.
29 DIRECTORS’ REMUNERATION
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Directors of the Company
non-executive Directors:- fees 108 108 108 108- allowances and other emoluments 55 42 55 42
163 150 163 150
Executive Directors:- salaries and bonus 520 480 520 480- allowances and other emoluments 26 23 26 23- defined contribution plan 63 58 63 58- other employee benefits 125 129 125 129- estimated money value of benefits-in-kind 37 46 37 46
771 736 771 736
Sub-total 934 886 934 886
nOTES TO THE FInAnCIAL STATEMEnTSFOR THE FInAnCIAL YEAR EnDED 31 DECEMBER 2010 (COnTInUED)
| 99nOTES TO THE FInAnCIAL STATEMEnTSMIECO AnnUAL REPORT 2010
29 DIRECTORS’ REMUNERATION (CONTINUED)
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Directors of subsidiariesnon-executive Directors:- fees 6 6 0 0- salaries and bonus 304 0 0 0- allowances and other emoluments 8 0 0 0- defined contribution plan 37 0 0 0- other employee benefits 2 0 0 0- estimated money value of benefits-in-kind 27 0 0 0
Sub-total 384 6 0 0
Total 1,318 892 934 886
Total (excluding estimated moneyvalue of benefits-in-kind) 1,254 846 897 840
As stated in note 24 to the financial statements, the Company’s Executive Directors’ remuneration (excluding fees and estimated money value of benefits-in-kind) have been included as part of staff costs.
Details of the defined benefit plan and defined contribution plan of the Group and the Company are set out in note 17 and note 21 to the financial statements, respectively.
30 AUDITORS’ REMUNERATION
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
PricewaterhouseCoopers Malaysia- statutory audit 117 103 43 32- other services 27 18 3 3
Firms other than PricewaterhouseCoopers,Malaysia and member firms of PricewaterhouseCoopersInternational Limited 6 7 0 0
Total remuneration 150 128 46 35
100 | nOTES TO THE FInAnCIAL STATEMEnTS MIECO AnnUAL REPORT 2010
nOTES TO THE FInAnCIAL STATEMEnTSFOR THE FInAnCIAL YEAR EnDED 31 DECEMBER 2010 (COnTInUED)
31 CAPITAL COMMITMENTS
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Capital expenditure- approved and contracted for 3,045 26 0 0- approved but not contracted for 3,469 5,552 100 100
6,514 5,578 100 100
Analysed as follows:- property, plant and equipment 6,514 5,578 100 100
32 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions and balances. The related party transactions described below were carried out on terms and conditions negotiated between the Group and the related parties.
(a) Relationship with related parties
Related party Relationship
Bandar Raya Developments Berhad Holding company
Mieco Manufacturing Sdn Bhd Wholly-owned subsidiary
(b) Transactions with related parties
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Bandar Raya Developments Berhad
(i) Management fee payable to holding company 400 400 400 400 (ii) Borrowings from holding company 0 14,000 0 14,000 (iii) Interest expense on borrowings from holding company 1,820 1,759 1,820 1,759 (iv) Proceeds from disposal of investment properties
to holding company 0 7,069 0 4,669
| 101nOTES TO THE FInAnCIAL STATEMEnTSMIECO AnnUAL REPORT 2010
32 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(b) Transactions with related parties (continued)
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Mieco Manufacturing Sdn. Bhd. (v) Borrowings by a subsidiary 0 0 0 14,000 (vi) Interest expense on borrowings by a subsidiary 0 0 9,700 9,723 (vii) Management fee receivable from a subsidiary 0 0 2,273 2,228
(c) Compensation of key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director of the Company.
The remuneration of the Directors and other members of key management during the financial year were as follows:
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Remuneration and benefits 1,503 1,706 809 1,093 Post-employment benefits 0 317 0 94
1,503 2,023 809 1,187
Included in the total key management personnel are: Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Director’s remuneration and benefits 1,117 808 748 808
102 | nOTES TO THE FInAnCIAL STATEMEnTS MIECO AnnUAL REPORT 2010
nOTES TO THE FInAnCIAL STATEMEnTSFOR THE FInAnCIAL YEAR EnDED 31 DECEMBER 2010 (COnTInUED)
33 OPERATING SEGMENT
The Group operates principally within one industry, that is, manufacturing and sales of wood based products. Other operations of the Group mainly comprise investment holding, investment trading, property investment, all of which are not of sufficient size to be reported separately.
The Group operates in two main geographical areas.
Revenue Total assets Capital expenditure
2010 2009 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Malaysia 133,211 185,739 575,210 583,503 5,391 536Hong Kong and China 10,091 0 59 108 0 42Others 30,976 0 91 313 0 0
174,278 185,739 575,360 583,924 5,391 578
The carrying value of non-current assets located in foreign countries is not material as at the reporting date.
34 CONTINGENT LIABILITIES
Group Company
2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000
Corporate guarantees (unsecured) issued by the Company to licensed financial institutions for banking facilities to certain subsidiaries 0 0 78,000 78,000
35 FAIR VALUES
The carrying amounts of the financial assets and liabilities of the Group and Company at the statements of financial position date approximate their fair values except as disclosed in note 22 of the financial statements.
| 103nOTES TO THE FInAnCIAL STATEMEnTSMIECO AnnUAL REPORT 2010
36 CHANGES IN ACCOUNTING POLICIES
The following tables disclose the adjustments that have been made in accordance with the adoption of the amended FRS 117 to each of the line items in the Group’s statement of financial position and statement of comprehensive income:
(i) Impact on the Group’s statements of financial position:
Property, plant and equipment Prepaid lease rentals RM’000 RM’000
Balance as at 31 December 2008
As previously reported 507,003 17,385 Effects of adopting the amendments to FRS 117 17,385 (17,385)
As restated 524,388 0
Balance as at 31 December 2009
As previously reported 486,039 17,149 Effects of adopting the amendments to FRS 117 17,149 (17,149)
As restated 503,188 0
Increase / (decrease) to balances as at 31 December 2010
Effects of adopting the amendments to FRS 117 16,913 (16,913)
(ii) Impact on the Group’s statements of comprehensive income:
Depreciation of property, Amortisation of plant and equipment prepaid lease rentals RM’000 RM’000
For the financial year ended 31 December 2009
As previously reported 18,838 236 Effects of adopting the amendments to FRS 117 236 (236)
As restated 19,074 0
Increase / (decrease) for the financial year ended 31 December 2010
Effects of adopting the amendments to FRS 117 236 (236)
104 | nOTES TO THE FInAnCIAL STATEMEnTS MIECO AnnUAL REPORT 2010
Group Company
2010 2010 RM’000 RM’000
Total retained earnings of the Company and its subsidiaries - Realised 103,200 132,628- Unrealised (1,513) (6,561)
101,687 126,067Add: Consolidation adjustments 1,004 0
Retained earnings as per financial statements 102,691 126,067
The disclosure of realised and unrealised profits/(losses) above is solely for compliance with the directive issued by Bursa Malaysia Securities Berhad and should not be used for any other purpose.
37 SUPPLEMENTARY INFORMATION – BREAKDOWN OF RETAINED EARNINGS INTO REALISED AND UNREALISED
The breakdown of the retained earnings of the Group and the Company as at 31 December 2010 into realised and unrealised profits is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with Guidance on Special Matter no. 1, Determination of Realised and Unrealised Profits or Losses on the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.
nOTES TO THE FInAnCIAL STATEMEnTSFOR THE FInAnCIAL YEAR EnDED 31 DECEMBER 2010 (COnTInUED)
| 105STATEMEnT BY DIRECTORSMIECO AnnUAL REPORT 2010
STATEMEnT BY DIRECTORSPURSUAnT TO SECTIOn 169(15) OF THE COMPAnIES ACT, 1965
We, Dato’ Mohamed Moiz Bin J M Ali Moiz and Dato’ Yong Seng Yeow , being two of the Directors of Mieco Chipboard Berhad, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 52 to 103 are drawn up in accordance with MASB Approved Accounting Standards in Malaysia and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2010 and of their financial performance and cash flows for the financial year then ended.
The information set out in note 37 to the financial statements have been prepared in accordance with the Guidance on Special Matter no.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.
Signed on behalf of the Board in accordance with a resolution of the Directors dated 27 April 2011.
DATO’ MOHAMED MOIZ BIN J M ALI MOIZ DATO’ YONG SENG YEOWDIRECTOR DIRECTOR
106 | STATUTORY DECLARATIOn MIECO AnnUAL REPORT 2010
STATUTORY DECLARATIOnPURSUAnT TO SECTIOn 169(16) OF THE COMPAnIES ACT, 1965
I, Wong Weng Kwong, the officer primarily responsible for the financial management of Mieco Chipboard Berhad, do solemnly and sincerely declare that the financial statements set out on pages 52 to 104 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.
WONG WENG KWONG
Subscribed and solemnly declared by the above named Wong Weng Kwong at Kuala Lumpur on 27 April 2011.
Before me,
COMMISSIONER FOR OATHS
| 107InDEPEnDEnT AUDITORS’ REPORTMIECO AnnUAL REPORT 2010
InDEPEnDEnT AUDITORS’ REPORTTO THE MEMBERS OF MIECO CHIPBOARD BERHAD(InCORPORATED In MALAYSIA) (COMPAnY nO: 12849 K)
REPORT ON THE FINANCIAL STATEMENTS
We have audited the financial statements of Mieco Chipboard Berhad on pages 52 to 103 which comprise the statements of financial position as at 31 December 2010 of the Group and of the Company, and the statements of comprehensive income, changes in equity and cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on notes 1 to 36.
Directors’ Responsibility for the Financial Statements
The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965, and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2010and of their financial performance and cash flows for the financial year then ended.
108 | InDEPEnDEnT AUDITORS’ REPORT MIECO AnnUAL REPORT 2010
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:
(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
(b) We have considered the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in note 8 to the financial statements.
(c) 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.
(d) The 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 REPORTING RESPONSIBILITIES
The supplementary information set out in note 37 on page 104 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter no. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.
OTHER MATTERS
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
PRICEWATERHOUSECOOPERS THAYAPARAN A/L S.SANGARAPILLAI(no. AF: 1146) (no. 2085/09/12 (J)) Chartered Accountants Chartered Accountant
Kuala Lumpur 27 April 2011
InDEPEnDEnT AUDITORS’ REPORTTO THE MEMBERS OF MIECO CHIPBOARD BERHAD(InCORPORATED In MALAYSIA) (COMPAnY nO: 12849 K) (COnTInUED)
110 Analysis of Shareholdings
114 List of Properties
115 notice of Annual General Meeting
118 Statement Accompanying notice of Annual
Form of Proxy
OTHERInFORMATIOn
110 | AnALYSIS OF SHAREHOLDInGS MIECO AnnUAL REPORT 2010
AnALYSIS OF SHAREHOLDInGSAS AT 25 APRIL 2011
Authorised Share Capital : RM1,000,000,000Issued and Fully Paid-Up Capital : RM210,000,000Class of Shares : Ordinary Shares of RM1.00 eachVoting Rights : 1 vote per ordinary share
DISTRIBUTION OF SHAREHOLDINGS
no. of Holders % of Holders no. of Shares % of Shares
Largest Shareholders 30 0.47 144,953,998 69.03
Size of HoldingsLess than 100 524 8.12 16,994 0.01 100 - 1,000 1,524 23.62 1,464,463 0.701,001 - 10,000 3,215 49.84 15,807,050 7.5210,001 - 100,000 1,067 16.54 32,710,514 15.58100,001 - less than 5% of issued shares 120 1.86 40,807,008 19.435% and above of issued shares 1 0.02 119,193,971 56.76
Total 6,451 100.00 210,000,000 100.00
DIRECTORS’ INTERESTS IN SHARES BASED ON THE REGISTER OF DIRECTORS’ SHAREHOLDINGS
Direct Interest Indirect Interest
no. of Shares % no. of Shares %
In the CompanyDato’ Mohamed Moiz Bin J M Ali Moiz - - 119,193,971** 56.76 **Dato’ Yong Seng Yeow 130,000 0.06 - -Dato’ Jaganath Derek Steven Sabapathy - - - -Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar 16,000 0.01 - -Dato’ Dr Amarjit Singh A/L Santokh Singh 100,000 0.05 70,000*** 0.03 ***Vijeyaratnam A/L V. Thamotharam Pillay - - - -Low Kim Seng 10,000 0.00 * - -
| 111AnALYSIS OF SHAREHOLDInGSMIECO AnnUAL REPORT 2010
DIRECTORS’ INTERESTS IN SHARES BASED ON THE REGISTER OF DIRECTORS’ SHAREHOLDINGS (Continued)
Direct Interest Indirect Interest
no. of Shares % no. of Shares %
In Holding Company, Bandar Raya Developments BerhadDato’ Mohamed Moiz Bin J M Ali Moiz - - 92,070,812 ** 18.92**Dato’ Yong Seng Yeow - - - -Dato’ Jaganath Derek Steven Sabapathy - - - -Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar - - - -Dato’ Dr Amarjit Singh A/L Santokh Singh - - - -Vijeyaratnam A/L V. Thamotharam Pillay - - - -Low Kim Seng 57,000 0.01 - -
* neglible percentage
** Indirect interest held through Ambang Sehati Sdn Bhd
*** Indirect interest held through spouse
THIRTY (30) MAJOR SHAREHOLDERS BASED ON THE RECORD OF DEPOSITORS
Name Shareholding %
1) Bandar Raya Developments Berhad 119,193,971 56.76
2) HSBC nominees (Asing) Sdn Bhd 7,858,900 3.74 [Exempt An for RBS Coutts Bank Ltd (SG Branch)]
3) HSBC nominees (Asing) Sdn Bhd 2,764,400 1.32 [Exempt An for Clariden Leu Ltd. (EX-CLAR BK, ZRH)]
4) Mayban Securities nominees (Tempatan) Sdn Bhd 1,204,600 0.57 [Pledged Securities Account for Leong Chee Kwong (REM 825)]
5) Yeoh Ah Tu 1,169,000 0.56
6) M & A nominee (Tempatan) Sdn Bhd 1,097,100 0.52 [Titan Express Sdn Bhd]
7) Tan Kong Heng 1,024,100 0.49
8) HDM nominees (Asing) Sdn Bhd 1,000,000 0.48 [Lim & Tan Securities Pte Ltd for Leyau Yew Teck (Liao Youde)]
9) Yuet Kam Alice Lin 780,000 0.37
112 | AnALYSIS OF SHAREHOLDInGS MIECO AnnUAL REPORT 2010
THIRTY (30) MAJOR SHAREHOLDERS BASED ON THE RECORD OF DEPOSITORS (Continued)
Name Shareholding %
10) Affin nominees (Tempatan) Sdn Bhd 750,000 0.36 [Pledged Securities Account for Tan Kek Hian (TAn8215C)]
11) Lim Lee Ling 720,000 0.34
12) Cimsec nominees (Tempatan) Sdn Bhd 500,000 0.24 [Pledged Securities Account for Law Kok Wah (Selayang JY-CL)]
13) AIBB nominees (Tempatan) Sdn Bhd 455,500 0.22 [Pledged Securities Account for Phua Sin Mo]
14) HLG nominee (Tempatan) Sdn Bhd 455,500 0.22 [Hong Leong Bank Bhd for Ong Bee Lin]
15) Public nominees (Tempatan) Sdn Bhd 450,400 0.21 [Pledged Securities Account for Koay Ean Chim (IMO/TAS)]
16) Lee Thian Fook @ Lee Tian Fook 421,000 0.20
17) Pang Ah Mooi 410,000 0.19
18) Shoptra Jaya (M) Sdn Bhd 402,000 0.19
19) Chang Chai Kin 400,000 0.19
20) Mayban nominees (Tempatan) Sdn Bhd 400,000 0.19 [Lee Yu Yong @ Lee Yuen Ying]
21) Choong Yean Yaw 372,000 0.18
22) Tam Shuk Yi 372,000 0.18
23) Yoong Oai Tai 370,000 0.17
24) M & A nominee (Asing) Sdn Bhd 359,300 0.17 [Pedigree Limited]
25) M. I. T nominees (Tempatan) Sdn Bhd 350,000 0.17 [Pledged Securities Account for Success Secrets Sdn Bhd (MG0179-192)]
26) Ong Boon Kung 350,000 0.17
27) TA nominees (Tempatan) Sdn Bhd 342,000 0.16 [Pldeged Securities Account for Koay Ean Chim]
28) Aliya Akbar Khawaja Mohd Akbar 341,400 0.16
29) Tan Kim Eng 328,027 0.16
30) Mayban Securities nominees (Tempatan) Sdn Bhd 312,800 0.15 [Pledged Securities Account for Ting Yuet May (REM 825)]
Total 144,953,998 69.03
AnALYSIS OF SHAREHOLDInGSAS AT 25 APRIL 2011 (COnTInUED)
| 113AnALYSIS OF SHAREHOLDInGSMIECO AnnUAL REPORT 2010
SUBSTANTIAL SHAREHOLDERS BASED ON THE REGISTER OF SUBSTANTIAL SHAREHOLDERS
Direct Interest Indirect Interest
no. of Shares % no. of Shares %
Bandar Raya Developments Berhad 119,193,971 56.76 - -Ambang Sehati Sdn Bhd - - 119,193,971 56.76(a) Dato’ Mohamed Moiz Bin J M Ali Moiz - - 119,193,971 56.76(b)
Abdul Sathar Bin M S M Abdul Kadir - - 119,193,971 56.76(c)
Sascha Saleem Khan - - 119,193,971 56.76(d)
Tania Aishah Khan - - 119,193,971 56.76(e)
notes:(a) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through Bandar Raya Developments Berhad. (b) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through 26% shareholding in Ambang Sehati Sdn Bhd (“ASSB”). (c) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through 25% shareholding in ASSB. (d) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through 24.5% shareholding in ASSB. (e) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through 24.5% shareholding in ASSB.
114 | LIST OF PROPERTIES MIECO AnnUAL REPORT 2010
LIST OF PROPERTIESAS AT 31 DECEMBER 2010
Lot 77-83 Semambu Industrial Estate, 25350 Kuantan, Pahang Darul Makmur
Lot 73, Gebeng Industrial Area, 26080 Kuantan, Pahang Darul Makmur
Lot 74, Gebeng Industrial Area, 26080 Kuantan, Pahang Darul Makmur
Lot 3, Kawasan Perindustrian Kechau Tui, 27100 Lipis, Pahang Darul Makmur
Lot 27, Kawasan Perindustrian Kechau Tui, Lipis, Pahang Darul Makmur
Lot 28, Kawasan Perindustrian Kechau Tui, Lipis, Pahang Darul Makmur
Lot 29, Kawasan Perindustrian Kechau Tui, Lipis, Pahang Darul Makmur
Lot 30, Kawasan Perindustrian Kechau Tui, Lipis, Pahang Darul Makmur
Leaseexpiring27.10.2041
Leaseexpiring18.08.2048
Leaseexpiring22.02.2097
Leaseexpiring2104
Leaseexpiring20.12.2105
Leaseexpiring20.12.2105
Leaseexpiring20.12.2105
Leaseexpiring20.12.2105
609,840 sq.ft.
653,670 sq.ft.
1,254,528 sq.ft.
2,178,000 sq.ft.
158,253 sq.ft.
299,257 sq.ft.
304,484 sq.ft.
281,398 sq.ft.
Chipboard factory
Industrial land
Chipboard factory
Chipboard factory
Industrial land
Industrial land
Industrial land
Industrial land
16 – 36
8 – 16
6
6,732
6,075
37,729
82,634
227
430
438
405
1975
26.10.1999
24.08.1995
05.12.2004
20.12.2006
20.12.2006
20.12.2006
20.12.2006
Location Tenure Land area Description
Approx.age of building(Years)
Net bookvalueRM’000
Acquisitiondate
PROPERTY, PLANT AND EQUIPMENT
PAHANG
| 115nOTICE OF AnnUAL GEnERAL MEETInG MIECO AnnUAL REPORT 2010
NOTICE IS HEREBY GIVEN that the Thirty-Eighth Annual General Meeting of Mieco Chipboard Berhad (“MIECO” or “the Company”) will
be held at Multi-Purpose Hall, 25th Floor, Menara Multi-Purpose, Capital Square, no. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur on
Thursday, 23 June 2011 at 10.00 a.m.
AGENDA
1) To receive the Report of the Directors and the Audited Financial Statements for the year ended 31 December 2010
together with the Report of the Auditors thereon.
2) To approve the payment of Directors’ fees of RM108,000.00 in respect of the year ended 31 December 2010 (2009
: RM108,000.00).
3) To re-elect the following Directors retiring in accordance with Article 81 of the Company’s Articles of Association:
a) Mr Low Kim Seng
b) Mr Vijeyaratnam a/l V. Thamotharam Pillay
4) To consider and if thought fit, to pass the following Ordinary Resolution in accordance with Section 129 of the
Companies Act, 1965:
“THAT Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar, retiring pursuant to Section 129 of the Companies Act,
1965 after having attained the age of seventy years, be and is hereby re-appointed a Director of the Company to
hold office until the next Annual General Meeting of the Company.”
5) To re-appoint Messrs PricewaterhouseCoopers as auditors of the Company and to authorise the Directors to fix their
remuneration.
AS SPECIAL BUSINESS:To consider and if thought fit, to pass the following resolutions:
6) Ordinary Resolution
Authority To Issue Shares Pursuant To Section 132D Of The Companies Act, 1965
“THAT subject always to the Companies Act, 1965, the Articles of Association of the Company and the approvals of
the relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered, pursuant to
Section 132D of the Companies Act, 1965, to issue shares in the Company from time to time and upon such terms
and conditions and for such purposes as the Directors may deem fit provided that the aggregate number of shares
issued pursuant to this resolution does not exceed ten per centum (10%) of the total issued capital of the Company
and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the
Company.”
7) Special Resolution
Proposed Amendment To Article 143 Of The Articles Of Association Of MIECO
“THAT the existing Article 143 of the Articles of Association of the Company be deleted in its entirety and be
substituted thereof with a new Article 143 as follows:
(Resolution 1)
(Resolution 2)
(Resolution 3)
(Resolution 4)
(Resolution 5)
(Resolution 6)
(Resolution 7)
nOTICE OF AnnUAL GEnERAL MEETInG
116 | nOTICE OF AnnUAL GEnERAL MEETInG MIECO AnnUAL REPORT 2010
BY ORDER OF THE BOARDHO SWEE LINGCompany SecretaryKuala Lumpur30 May 2011
notes:
1) A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.
2) A member who is an authorised nominee may appoint one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.
3) A member other than an authorised nominee shall be entitled to appoint not more than two (2) proxies to attend and vote at the same meeting.
4) Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.
5) If the appointor is a corporation, the form of proxy must be executed under its Common Seal or under the hand of an officer or attorney duly authorised.
6) To be valid, the duly completed original form of proxy must be deposited at the office of the Share Registrar, Metra Management Sdn Bhd, 30.02, 30th Floor, Menara Multi-Purpose, Capital Square, no. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur not less than 48 hours before the time for holding the meeting.
Fax copies of the duly executed form of proxy are not acceptable.
Existing Article 143 - Payment by cheque
Any dividend, interest or other money payable in cash in respect of shares may be paid by cheque or warrant, sent
through the post directed to the registered address of the holder or to such person and to such address as the
holder may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to
whom it is sent, and the payment of any such cheque or warrant shall operate as a good discharge to the Company
in respect of the money represented thereby, notwithstanding that it may subsequently appear that the same has
been stolen or that the endorsement thereon has been forged. Every such cheque or warrant shall be sent at the
risk of the person entitled to the money thereby represented.
new Article 143 - Mode of payment of dividend
Any dividend, interest or other money payable in cash in respect of shares may be paid by cheque or warrant, sent
through the post directed to the registered address of the Member or person entitled thereto or paid by direct
transfer or such other electronic means to the bank account provided by the Member whose name appears in the
Record of Depositors. Every such cheque or warrant shall be made payable to the order of the Member or person
entitled thereto, and the payment of any such cheque or warrant or the payment by direct transfer or such other
electronic means to the bank account provided by the Member whose name appears in the Record of Depositors
shall operate as a good discharge to the Company in respect of dividend represented thereby, notwithstanding that
it may subsequently appear that the cheque has been stolen or that the endorsement thereon or instruction for the
payment by direct transfer or such other electronic means has been forged. Every such cheque or warrant sent or
payment by direct transfer or such other electronic means shall be at the risk of the person entitled to the dividend
thereby represented.”
8) To transact any other business for which due notice shall have been given in accordance with the Company’s
Articles of Association and the Companies Act, 1965.
(Resolution 8)
nOTICE OF AnnUAL GEnERAL MEETInG(COnTInUED)
| 117nOTICE OF AnnUAL GEnERAL MEETInG MIECO AnnUAL REPORT 2010
ExPLANATORY NOTES ON SPECIAL BUSINESS
a) The proposed Resolution 7 is for the renewal of mandate for the Directors to issue shares pursuant to Section 132D of the Companies Act, 1965.
The mandate will enable the Directors to act speedily to conclude business transactions that may involved issue of new shares as consideration for
the purchase of new businesses or for the raising of new funds that may be required to meet urgent business needs. The proposed Resolution 7,
if passed, will give the Directors the flexibility to allot and issue shares in the Company, up to an amount not exceeding in aggregate ten percent
(10%) of the issued share capital of the Company for the time being. This authority, unless revoked or varied at a general meeting, will expire at the
conclusion of the next AGM of the Company.
As at the date of the notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the last AGM held on
24 June 2010 which will lapse at the conclusion of the forthcoming AGM to be held on 23 June 2011.
b) The proposed Resolution 8, if passed, will align Article 143 of the Company’s Articles of Association with Bursa Malaysia Securities Berhad’s
requirement that cash dividend must be paid to shareholders by direct credit into their bank accounts as provided to Bursa Malaysia Depository
Sdn Bhd.
118 | STATEMEnT ACCOMPAnYInG nOTICE OF AnnUAL GEnERAL MEETInGMIECO AnnUAL REPORT 2010
STATEMEnT ACCOMPAnYInG nOTICE OF AnnUAL GEnERAL MEETInG
1) Directors who are standing for re-election and re-appointment at the Thirty-Eighth Annual General Meeting
The directors retiring by rotation pursuant to Article 81 of the Articles of Association and seeking re-election are as follows:
a) Mr Low Kim Seng b) Mr Vijeyaratnam a/l V. Thamotharam Pillay The director who is seeking re-appointment pursuant to Section 129 of the Companies Act, 1965 is Lt. Gen. (R) Dato’
Seri Mohamed Daud Bin Abu Bakar.
The details of the abovenamed Directors who are standing for re-election and re-appointment are set out in the Board of Directors’ Profile appearing on pages 10 and 11 of this Annual Report. The details of the Directors’ securities holding in the Company are set out on pages 49 and 50 of this Annual Report.
2) Details of attendance of directors at board meetings
5 Board meetings were held during the financial year ended 31 December 2010. The details of attendance of the directors are as follows:
Total Number of Meetings Attended
5/55/55/53/35/5 5/55/55/5
Name of Director
Dato’ Mohamed Moiz Bin J M Ali MoizDato’ Yong Seng YeowDato’ Jaganath Derek Steven SabapathyDatin Sri Maria Bettina Chua Binti Abdullah*Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu BakarDato’ Dr Amarjit Singh A/L Santokh Singh Mr Vijeyaratnam A/L V. Thamotharam Pillay Mr Low Kim Seng
* Datin Sri Maria Bettina Chua Binti Abdullah was appointed on 23 February 2010 and resigned on 1 October 2010
3) Date, time and venue of the Thirty-Eighth Annual General Meeting
The Thirty-Eighth Annual General Meeting of Mieco Chipboard Berhad will be held at Multi-Purpose Hall, 25th Floor, Menara Multi-Purpose, Capital Square, no. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur on Thursday, 23 June 2011 at 10.00 a.m.
nOTES
nOTES
MIECO CHIPBOARD BERHAD (12849-K)
I/WE TEL nO. nRIC nO./COMPAnY nO.
OF
BEInG A MEMBER OF MIECO CHIPBOARD BERHAD, HEREBY APPOInT
nRIC nO.
OF
OR FAILInG HIM, nRIC nO.
OF
* Please indicate with an “X” how you wish your vote to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his discretion.
Notes:1) A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.2) A member who is an authorised nominee may appoint one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing
to the credit of the said securities account.3) A member other than an authorised nominee shall be entitled to appoint not more than two (2) proxies to attend and vote at the same meeting.4) Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each
proxy.5) If the appointor is a corporation, the form of proxy must be executed under its Common Seal or under the hand of an officer or attorney duly authorised.6) Any alteration made in the form of proxy must be initialled.7) To be valid, the duly completed original form of proxy must be deposited at the office of the Share Registrar, Metra Management Sdn Bhd, 30.02, 30th Floor.
Menara Multi-Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur not less than 48 hours before the time for holding the meeting. Fax copies of the duly executed form of proxy are not acceptable.
Signature of Shareholder
1)
2)
3)
4)
5)
6)
7)
8)
RESOLUTIONS
To receive the audited financial statements
To approve the payment of Directors’ fees
To re-elect Mr Low Kim Seng as a Director
To re-elect Mr Vijeyaratnam a/l V. Thamotharam Pillay as a Director
To re-appoint Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar as a Director
To re-appoint Messrs PricewaterhouseCoopers as auditors of the Company
To approve authority to Directors to issue shares pursuant to Section 132D, Companies Act, 1965
To approve amendment to Article 143 of the Articles of Association of MIECO
CDS ACCOUnT nUMBER
– –
As witness my/our hand(s) this day of , 2011.
Number of Shares Held
(FULL nAME In BLOCK CAPITALS)
(FULL nAME In BLOCK CAPITALS)
(FULL nAME In BLOCK CAPITALS)
(ADDRESS)
(ADDRESS)
(ADDRESS)
(FULL nAME In BLOCK CAPITALS)
FORM OF PROxY
*FOR *AGAINST
OR FAILInG HIM, THE CHAIRMAn OF THE MEETInG as my/our proxy to vote on my/our behalf at the Thirty-Eighth Annual General Meeting of the Company to be held at Multi-Purpose Hall, 25th Floor, Menara Multi-Purpose, Capital Square, no. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur on Thursday, 23 June 2011 at 10.00 a.m. and at any adjournment thereof.
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To: Share Registrar Metra Management Sdn Bhd 30.02, 30th Floor Menara Multi-Purpose, Capital Square no. 8 Jalan Munshi Abdullah 50100 Kuala Lumpur
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ANNUAL REPORT 2010
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