(Company No. 603770-D) fileLingkaran Syed Putra, 59200 Kuala Lumpur. Tel No :- 603 ... (2010: 7.2%)...

(Company No. 603770-D)

Content

Corporate Information ………………………………………………….... 2

Chairman’s Statement …………………………………………………..... 3

Profile of the Board of Directors ………………………………………... 5

Statement of Corporate Governance ………………………………….... 8

Statement of Internal Control ………………………………………….. 13

Audit Committee Report ………………………………………………... 14

Statement of Directors’ Responsibilities ……………………………… 17

Other Compliance Information ………………………………………… 18

Financial Statements …………………………………………………….. 19

Analysis of Shareholdings ………………………………………………. 74

List of Properties ……………………………………………………….... 76

Notice of Annual General Meeting …………………………………….. 77

Proxy Form ……………………………………………………………...... 89

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Board of DirectorsShahabuddin Bin Abdullah @ Lee Seng Pun Chairman

Eow Kwan Hoong Executive Director

Lee Seng Hoong Executive Director

Leom Chit Dein @ Lim Jit Teng Executive Director

Chow Pak Lim Non Independent, Non-Executive Director

Syed Abdullah Bin Syed Abd Kadir Non-Executive Director

Dato’ Mohamad Suparadi Bin Md Noor Non-Executive Director

Chan Feoi Chun Non-Executive Director

Corporate Information

Stock Exchange Listing

The Main Board of the Bursa Malaysia Securities Berhad

Registrar

Tricor Investor Services Sdn Bhd (formerly known as Epsilon Registration Services Sdn Bhd) Level 17, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur. Tel No :- 603 - 2264 3883 Fax No :- 603 - 2282 1886

Registered Office

Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia Tel No :- 603 - 2264 8888 Fax No :- 603 - 2282 2733

Corporate Business Office

Lot 30745, Jalan Pandan Indah, Pandah Indah, 55100 Kuala Lumpur. Tel No :- 603 - 4292 1288 Fax No :- 603 - 4291 0085

Company Secretaries

Ng Yen Hoong (LS 008016) Wong Peir Chyun (MAICSA 7018710)

Audit Committee

Syed Abdullah Bin Syed Abd Kadir - Chairman Dato’ Mohamad Suparadi Bin Md Noor - Member Chan Feoi Chun -Member

Nomination Committee

Dato’ Mohamad Suparadi Bin Md Noor - Chairman Syed Abdullah Bin Syed Abd Kadir - MemberRemuneration Committee

Syed Abdullah Bin Syed Abd Kadir - Chairman Eow Kwan Hoong - Member

Auditors

Baker Tilly Monteiro Heng (AF 0117) Chartered Accountants 22-1, Monteiro & Heng Chambers, Jalan Tun Sambathan 3, 50470 Kuala Lumpur, Malaysia. Tel No :- 603 - 2274 8988 Fax No :- 603 - 2260 1708

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On behalf of the Board of Directors of Versatile Creative Berhad (“VCB”), I hereby present theAnnual Report and Audited Financial Statements of the Group and of the Company for the financial year ended 31 December 2011.

Business Environment

In 2011 the Malaysian economy grew moderately in a challenging business environment marked by global uncertainties. The Malaysian GDP posted a growth of 5.1% (2010: 7.2%) while the manufacturing sector grew by a more moderate pace of 4.5% (2010: 11.4%). The pace of growth in the first half was lower mainly due to disruptions in the global supply chain arising from the earthquake in Japan. Growth in the second half improved due to stronger domestic demand.

For the year 2012, the Malaysian GDP is forecasted to grow by 4% to 5%, driven mainly by growth in domestic demand.

The Group expects to maintain its performance going into 2012. Capacity issues and the continuing destabilizing circumstances in the global environment, particularly the European currency crisis, political unrests in the Middle East, slower growth in East Asia and sustained high material prices can impact adversely on our performance.

Financial Performance

Revenue for the Group decreased by 5% to RM54.8 million for the year ended 31 December 2011 compared to RM57.5 million in the previous year. Both the paper and plastics segments registered negative growth due to softening demands from key customers.

The Group recorded a loss after tax of RM6.3 million as compared to a profit after tax of RM0.2 million in the previous year mainly attributable to higher operating costs and the impairment of goodwill of RM2.6 million. The previous year’s result was also improved by a RM1.4 million deferred tax write back versus a deferred tax charge of RM0.3 million in the current year.

Net assets as at 31 December 2011 stood at RM48.6 million (31 December 2010: RM54.3 million).

Operations Review

The Group remains focused on cost containment and productivity improvements. The difficult and uncertain business environment has hampered the Group’s plans to invest in major and new equipment during the year.

The Group continues its efforts to explore new business opportunities beyond our traditional markets and had made limited success in select markets. The Group expects business in this segment to grow in 2012.

The Group continues to be cautiously optimistic that the performance for the year 2012 will remain satisfactory.

Appreciation

On behalf of the Board and the management team, I wish to express our gratitude to our valued stakeholders,our valued customers, business partners and staff for their support and confidence in us.

Shahabuddin Bin Abdullah @ Lee Seng PunChairman

Chairman ’s Statement

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Revenue(RM'000)

Profit/(Loss) before tax (RM'000)

Shareholders' funds/Net assets(RM'000)

RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 54,785 57,518 52,574 65,825 72,388

Profit/(Loss)before tax (5,854) (1,150) 1,556 (13,750) (25,399)

Shareholders' funds/Net assets 48,630 54,335 54,547 52,927 65,762

2011 2010 2009 2008 2007

Chairman ’s Statement

20,000

57,518 54,78565,825

72,388

52,574

40,00060,00080,000RM’000

5000RM’000

5000

10,000

15,000

20,000

25,000

1,556

25,399

13,750

1,150 5,854

20,000

RM,000

54,33548,630

52,92765,762 54,547

40,00060,00080,00090,000100,000

Financial Highlights

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Profi le of The Board of Directors

Shahabuddin Bin Abdullah (Chairman and Non-Independent Executive Director,

Malaysian), aged 69, was appointed to the Board of VCB and elected as Chairman on

28 October 2003. He graduated from the University of Malaya with a Bachelor of Arts

(Hons) Degree in 1966 and started his career as Production Controller with Metal Box

Malaysia Bhd (“Metal Box”), a company which was principally involved in packaging. He

was promoted to Branch Manager in 1970. He was appointed as Director of Metal Box, Security Printing

Bhd and Plasticon Bhd in 1984. He has held various positions in the group including that of Operations

Director, Manufacturing Director, Technical and Strategic Planning Director during his career with Metal

Box. Encik Shahabuddin has more than thirty (30) years of experience in the printing and packaging

industry and with his extensive knowledge and competency, he has contributed to the sound management

and progress of the company. He is the brother of Mr Lee Seng Hoong and is deemed to be the Major

shareholder of VCB by virtue of his wife's (Noor Azmi bte Ahmad) 30% shareholding in Wisefield Resources

Sdn Bhd, which owns 100% of Versatile Credit & Leasing Sdn Bhd. He has no conflict of interest with VCB

and has no convictions for any offences within the past 10 years other than traffic offences.

Eow Kwan Hoong (Non-Independent Executive Director, Malaysian), aged 59, was

appointed to the Board on 28 October 2003. He was appointed as an Executive Director

of Versatile Paper Boxes Sdn Bhd and its subsidiaries in 1997. He is a member of the

Malaysian Institute of Accountants as well as a fellow member of the Chartered Institute

of Management Accountants, United Kingdom. He joined the Lion Group as an Accounts

Manager in 1982. After serving the Group for 17 years and holding the post of Group Chief Accountant, he

resigned in December 1997. Currently, he holds Directorships in IRIS Corporation Berhad, Delloyd Ventures

Berhad and Silverstone Corporation Berhad. In addition, he also sits on the Boards of several Malaysian

private limited companies. He is also the Immediate Past President of Chartered Institute of Management

Accountants Malaysia Division and Council member of Malaysian Institute of Accountants. He has no family

relationship with any other Director and/or substantial shareholder of VCB. He has no conflict of interest

with VCB and has no convictions for any offences within the past 10 years other than traffic offences.

Lee Seng Hoong (Non-Independent Executive Director, Malaysian), aged 63, was appointed

to the Board on 28 October 2003. He was appointed as an Executive Director of Versatile

Paper Boxes Sdn Bhd and its subsidiaries in 1997. He holds a Bachelor of Economics

(Hons) Degree from the University of Malaya. He started his career as an Officer with

Standard Chartered Bank, Malaysia in 1973 and has served the Bank in various capacities

including lending, trade finance, branch and retail banking. In 1989, he was seconded to Hong Kong as a

Senior Business Analyst responsible for the implementation of the Bank Group's core deposits processing

system. He returned to Malaysia in 1992 and headed the project which successfully implemented the

system for the Bank in Malaysia. In 1994, he was appointed as Head of the Cards Division, responsible for

the Bank's credit cards business in Malaysia. He left the Bank in 1996 and represented IRIS Technologies

(M) Sdn Bhd as an independent consultant in 1997 on the Multi-Purpose Card Advisory Panel formed

by Bank Negara Malaysia to advise the Government on the drafting of the Concept Request for Proposal

in relation to the national Multi-Purpose Card project. He has retired from his position as the

Executive Director, Operations for IRIS Corporation Berhad. He is also a Director of Versatile Smart

Components Sdn Bhd. He is the brother of Encik Shahabuddin Bin Abdullah. He has no conflict of interest

with VCB and has no convictions for any offences within the past 10 years other than traffic offences.

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Leom Chit Dein @ Lim Jit Teng (Non-Independent Executive Director, Malaysian),

aged 58, was appointed to the Board on 28 October 2003. He was appointed as

a Director of Versatile Paper Boxes Sdn Bhd in 2002. He worked in the colour

separation industry for 15 years before setting up Imagescan Creative Sdn Bhd

("Imagescan") in 1992 with a small capital and a team of eight (8) supporting staff.

He is actively involved in the management and operation of the business. Imagescan grew over the

years and today has a diverse clientele which include international advertising agencies and overseas

publishing houses. He continues to play an important role in the formulation of corporate plans and

setting the directions of Imagescan. He has no family relationship with any other Director and/or

substantial shareholder of VCB. He has no conflict of interest with VCB and has no convictions for

any offences within the past 10 years other than traffic offences.

Chow Pak Lim (Non-Independent Non-Executive Director, Malaysian), aged 57, was

appointed to the Board on 28 October 2003. He was appointed as Managing Director

of Versatile Paper Boxes Sdn Bhd (“Versatile”) in 1982. He started his career with

Versatile in 1973 as a sales personnel and rose through rank and file to his current

position. He has extensive experience in the manufacturing and trading of paper box

packaging and offset printing, having worked in the printing and packaging industry for more than thirty

(30) years. He has no family relationship with any other Director and/or substantial shareholder of VCB.

He has no conflict of interest with VCB and has no convictions for any offences within the past 10 years

other than traffic offences.

Syed Abdullah Bin Syed Abd Kadir (Independent Non-Executive Director, Malaysian), aged 58, was

appointed to the Board on 28 October 2003 and is also the Senior Independent Non-Executive Director.

He was appointed as a Director of Versatile Paper Boxes Sdn Bhd in 1997. He graduated with a double

degree in Bachelor of Science (Engineering Production) and Bachelor of Commerce (Economics) from

the University of Birmingham, United Kingdom in 1977. He has extensive experience

in the banking and financial services sector, having worked in a commercial bank

(Hongkong and Shanghai Banking Corporation Ltd), a merchant bank (Bumiputera

Merchant Bankers Berhad) and a public listed company (Amanah Capital Partners) with

subsidiaries involved in, among others, discount house, money broking, unit trusts,

finance companies and fund management operations. Presently, he is also a Director of

IRIS Corporation Berhad, YTL Corporation Berhad, YTL Power International Berhad, YTL E-Solutions

Berhad, Extiva Communications Sdn Bhd and Stenta Films (M) Sdn. Bhd. He has no family relationship

with any other Director and/or substantial shareholder of VCB. He has no conflict of interest with VCB

and has no convictions for any offences within the past 10 years other than traffic offences.

Profi le of The Board of Directors

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Dato' Mohamad Suparadi Bin Md Noor (Independent Non-Executive Director,

Malaysian), aged 53, was appointed to the Board on 28 October 2003. He started his

career as Assistant Accountant with Bank Bumiputra (M) Berhad in 1983. In 1988, he

became a Dealer Representative in BBMB Securities Sdn Bhd. Subsequently, he became a

remisier in SJ Securities Sdn Bhd in 1990. Since 2002, he was appointed as the Chairman

of National Sports Complex, Bukit Jalil. Currently, he is the Chairman of Chart Plus (M) Sdn Bhd and

CPS Master Sdn Bhd and a Director of IRIS Corporation Berhad. He has no family relationship with any

other Director and/or substantial shareholder of VCB. He has no conflict of interest with VCB and has no

convictions for any offences within the past 10 years other than traffic offences.

Chan Feoi Chun (Independent Non-executive Director, Malaysian), age 59, was appointed

to the Board on 23 January 2009. He is a Fellow of the Chartered Institute of Management

Accountants, UK (CIMA), a Member of Malaysian Institute of Accountants and a

Graduate of the Institute of Chartered Secretaries and Administrators UK (ICSA). He

also holds a Master of Business Studies (Banking & Finance) from University College

Dublin, Ireland. He is an independent non-executive director of Perisai Petroleum Tecknologi Berhad

and Iris Corporation Berhad. He is currently employed as the Chief Executive Officer of Swiss Garden

International Vacation Club Bhd. He held various senior positions in PJD Holdings Berhad Group of

Companies. Prior to joining the PJD Group in 1994, he held senior management positions in the financial

services Group of MBF Holdings. He is currently the Deputy President of CIMA, Malaysia Division. He

has no family relationship with any other Director and/or substantial shareholder of VCB. He has no

conflict of interest with VCB and has no convictions for any offences within the past 10 years other than

traffic offences.

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The Board of Directors fully appreciates the importance of adopting high standards of corporate governance within the Group.

In this regard, the Board is fully committed to the maintenance of high standards of corporate governance by supporting and implementing the best practices of the Malaysian Code on Corporate Governance (“Code”).

The Board is pleased to provide the following statement, which outlines the main corporate governance

practices that were in place throughout the financial year.

Principle Statements

The following statements set out how the Company has applied the principles in Part 1 of the Code.

A. Directors

The Board

The Group recognises the important role played by the Board of Directors in sett ing out the direction and operations of the Group and ultimately the enhancement of long-term shareholder value. To fulfill this role, the Board is responsible for the overall corporate governance of the Group, including its strategic direction, establishing goals for management and monitoring the achievement of these goals, formulation of policies and overseeing and monitoring the investments and business of the Group.

Meetings

The Board schedules to meet at least four (4) times a year at quarterly intervals with additional meetings convened when necessary.

The Board meetings will deliberate upon and consider a variety of matters including the Group's financial results, major investments and strategic decisions and the business plan and directions of the Group.

The Board receives documents on matters requiring its consideration prior to and in advance of the meetings. All proceedings from the Board meetings are minuted.

Details of each Director’s meeting attendances during financial year are as follows:

Number of Board Meetings

Directors Attended

Shahabuddin Bin Abdullah @ Lee Seng Pun Chairman 4/4

Eow Kwan Hoong Executive Director 4/4

Lee Seng Hoong Executive Director 4/4

Leom Chit Dein @ Lim Jit Teng Executive Director 4/4

Chow Pak Lim Non-Independent, 4/4 Non-Executive Director

Syed Abdullah Bin Syed Abd Kadir Independent Non-Executive Director 2/4

Dato' Mohamad Suparadi Bin Md Noor Independent Non-Executive Director 4/4

Chan Feoi Chun Independent Non-Executive Director 4/4

Statement of Corporate Governance

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Board Committees

The Board of Directors delegates certain responsibilities to the Nomination Committee, Remuneration

Committee and Audit Committee.

All committees have written terms of reference and operating procedures, and the Board receives reports

of their proceedings and deliberations. The Chairmen of the various committees will report to the Board

the outcome of the Committee meetings and such reports are incorporated in the minutes of the full Board

meeting. These committees were formed in order to enhance business and operational efficiency as well

as efficacy. The Board retains full responsibility for the direction and control of the Company and of

the Group.

Board Balance

As at the date of this statement, the Board consists of eight (8) members comprising three (3) Independent

Non-Executive Directors, one (1) Non-Indepent Non-Executive Director and four (4) Executive Directors.

The concept of independence adopted by the Board is in tandem with the definition of an Independent

Director based on the Listing Requirements of Bursa Malaysia. The key elements for fulfilling the criteria

are the appointment of Directors who are not members of management (Non-Executive Directors) and who

are free of any relationship which could interfere with the exercise of independent judgment or the ability

to act in the best interests of the Company.

The Board is satisfied that the current Board composition fairly reflects the interests of minority shareholders

in the Company.

Supply of Information

The Board recognises that the decision making process is highly contingent on the strength of information

furnished. As such, Directors have unrestricted access to any information pertaining to the Company.

The Chairman plays a key role in ensuring that all Directors have full and timely access to information

with Board papers circulated in advance of the Board meetings. This ensures that Directors have sufficient

time to appreciate issues deliberated at the Board meetings and expedites the decision making process. A

comprehensive balance of financial and non-financial information is encapsulated in the papers covering

strategic, operational, regulatory, marketing and human resources issues.

Every Director has also unhindered access to the advice and services of the Company Secretaries.

The Board believes that the current Company Secretaries are capable of carrying out their duties to ensure

the effective functioning of the Board.

The Audit Committee reviews issues of accounting policies and presentations for external financial reporting

and ensures that an objective professional relationship is maintained with the external auditors.

Detailed periodic briefings on the industry outlook and Company performance are also conducted for the

Directors to ensure that the Board is well informed on the latest market and industry trends.

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Appointments to the BoardAppointment process The proposed appointment of new member(s) of the Board is recommended by the Nomination Committee, which is made up of three Non-Executive Directors.

The terms of reference of the Nomination Committee are as follow:

• To assess and recommend to the Board, the minimum requirements for the Board such as required mix of skills, experience, qualification and other core competencies required of a Director.

• To assess the suitability of candidates for appointment as members of the Board.

• To recommend the proposed appointment of new member(s) to the Board.

• To recommend to the Board, the members of any committees proposed to be established by the Board.

• To assess the effectiveness of the Board as a whole, the committees of the Board and the contribution of each individual Director through annual reviews.

• To consider and recommend any other measures for enhancing the effectiveness of the Board.

The Board appoints its members through a formal process, which is consistent with the Articles of Association of the Company. The Company Secretaries will ensure that all appointments are properly made, and that legal and regulatory obligations are met.

The Board believes that the current composition of the Board brings the required mix of skills and core competencies required for the Board to discharge its duties effectively.

Director's Training

All the Directors of the Company have completed the Mandatory Accreditation Programme prescribed by Bursa Malaysia.

During the course of the year, they received briefings and updates on the Group’s businesses, operations, risk management, internal controls, finance and any new or changes to the companies and other relevant legislation, rules and regulations.

The Directors are encouraged to attend briefings, conferences, forums, trade fairs (locally and internationally), seminars and training to keep abreast with the latest developments in the industry and to enhance their skills and knowledge.

Amongst the training and seminar courses attended by some of the directors were as follows:

• Redefining the roles and functions of an Independent Director.

• ISO 27001: 2005 Business continuity management.

• Improving your organization’s bottomline through leadership driven high performance.

• Demystifying Fraud: What directors need to know.

Dato’ Mohamad Supardi Bin Md Noor did not attend any structured training and seminar/courses during the year due to his hectic travelling schedule.

The Directors will undertake to continue to attend relevant trainings and seminars courses in 2012

to enhance their skills and knowledge for the purpose of discharging their duties and responsibilities.


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B. Directors' remuneration

The Directors' remuneration is structured to attract, retain and motivate Directors of the quality required

to manage the business of the Company and to align the interests of the Directors with those of the

shareholders.

The Board appointed a Remuneration Committee with the following terms of reference:

• To review and recommend to the Board the terms of engagement and the remuneration packages of

the Executive Directors

• To review the performance of the Executive Directors

• To review and recommend to the Board the revisions and improvements of remuneration packages,

fringe benefits, perquisites and bonuses as considered appropriate for the Group's Executive Directors.

The remuneration committee meeting was held once subsequent to the financial year and was attended by

all the members of the Committee.

Details of the Directors’ remuneration

Details of remuneration paid to Directors of the Group for the financial year ended 31 December 2011,

are as follows:-

Basic salaryRM

BonusesRM

FeesRM

OthersRM

TotalRM

Non-Executive - - 76,192 - 76,192

Executive 447,936 - 51,000 - 498,936

Total 447,936 - 127,192 - 575,128

Remuneration(per annum)

Non-Executive Executive

RM 50,000 - below 5 -

RM 50,001 - RM 100,000 - 1

RM 100,000 - RM 150,000 - 2

RM 150,001 - RM 200,000 - -

RM 200,001 - RM 250,000 - 1

Executive Directors may receive bonuses based on the achievement of specific goals related to the

performance of the operating results. Non-Executive Directors do not receive any performance related

remuneration.

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C. Shareholders

The Board acknowledges the need for shareholders to be informed of all material business matters

affecting the Group. In addition to the various announcements made, the timely release of financial

results on a quarterly basis provides shareholders and the investing public with an overview of the

Group's performance and operations.

In addition, the Board encourages full participation by shareholders at every Annual General Meeting

and Extraordinary General Meeting of the Company and opportunity will be given to the shareholders

to ask questions and seek clarification on the Group's business activities and financial performance.

D. Accountability and Audit

Financial Reporting

The Board aims to provide and present a balanced and meaningful assessment of the Group's financial

performance and prospects at the end of the financial year, primarily through the annual financial

statements and quarterly announcement of results to the shareholders as well as the Chairman's

statement and review of operations in the annual report. The Board is assisted by the Audit Committee

to oversee the Group's financial reporting processes and the quality of its financial reporting.

In preparing the financial statements, the Directors have selected and applied consistently suitable

accounting policies and made reasonable and prudent judgments and estimates. The Directors also have

a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of

the Group and to prevent and detect fraud and irregularities.

Relationship with the Auditors

Key features underlying the relationship of the Audit Committee with the external auditors are included

in the Audit Committee's terms of reference.

A summary of the activities of the Audit Committee during the year are set out in the Audit Committee

Report.

Compliance Statement

Save and except where stated otherwise, the Company has complied throughout the financial year with

all the best practices of corporate governance.

E. Corporate Social Responsibilities

The Company recognizes its social obligation to society and strives for a balanced approach between fulfilling its key business objectives and contributing to society and the environment.

In playing its part to ensure a sustainable environment for future generations, the Company had

previously invested in a waste water treatment plant to treat potentially hazardous by products arising from its manufacturing operations. The Company also continuously strives to identify ways to make its

manufacturing processes more environmentally friendly. These demonstrate the Company’s commitment

and seriousness in taking on its corporate social responsibility through its daily business operations.

The Company’s employees also actively engage in CSR-related activities, such as working with the local

fire department to train a team of voluntary fire fighters that can be mobilized in times of need.

The Company also actively encourages its staff to perform voluntary work and had contributed resources

in supporting such activities.


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Introduction

Paragraph 15.27(b) of the Bursa Malaysia Listing Requirements require the Board of Directors of public listed companies to include in its annual reports a statement about the state of internal controls of the listed issuer as a group. The Board of Directors (“the Board”) of Versatile Creative Berhad (“Versatile” or “the Group”) is committed to maintaining a sound system of internal control in the Group and is pleased to provide the following statement, which outlines the nature and scope of internal control of the Group during the financial year.

Board Responsibility

The Board of Directors of Versatile acknowledges the importance of the systems of internal control and affirms that it is their responsibility to maintain a sound system of internal control including review of its adequacy and integrity in safeguarding the Group's value. In this respect, the Board of Directors assumes its responsibility for identifying principal risks, ensuring the implementation of appropriate systems to manage these risks and reviewing the adequacy and integrity of the Group's internal control system. However, it should be noted that such system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives. Therefore these systems can only provide reasonable and not absolute assurance against material misstatements or losses.

Internal Controls

The process of identifying, evaluating and managing significant risks faced by the Group was dealt with as part of the operations management, which was carried out by the subsidiaries' Managing Directors and senior management continuously throughout the year under review and is subject to on-going improvement. Meetings are held regularly at the Group's management level to review changes in the business environment and its impact on the operations.

Corporate issues and matters discussed at the Group's management levels are brought to the attention of the Board of Directors for further deliberation to ensure that risks are appropriately considered and addressed. Business strategies are reviewed and refined at the same time to ensure that strategies are in-line with the corporate expectation.

In order to assist the Board of Directors in reviewing the internal control system of the Group, the Audit Committee is tasked to review the compliance, control and audit issues with the assistance of both internal and external auditors. Issues and findings from the reviews are reported by the Audit Committee to the Board of Directors and steps are taken to improve the internal control system. Furthermore, the Group's key controls include the management review of performance of the Group to the Board of Directors. In addition, annual budget is prepared, approved and used as a yardstick of measurement of the Group's performance.

Weaknesses in Internal Controls that Result in Material Losses

There were no material losses incurred during the current financial year as a result of weaknesses in internal control. Management continues to take measures to strengthen the control environment.

Based on the above, the Board of Directors is of the opinion that the internal controls in place are adequate.

This Statement is made pursuant to a resolution of the Board of Directors dated 27 April 2012.

Internal Audit Function

Sterling Business Alignment Consulting Sdn Bhd (“Sterling”), an independent internal audit service provider, supports the Audit Committee, and by extension, the Board, by providing independent assurance on the effectiveness of the Group’s system of internal controls.

Sterling submits audit report and plan status for review and approval to the Audit Committee which included the reports with the recommended corrective measures on risks identified, if any, for implementation by the management of the business units and operation.

The internal audit work plan, which reflects the risk profile of the Group’s major business sectors is periodically reviewed and approved by the Audit Committee.

Statement of Internal Control

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Membership

The present members of the Audit Committee (the “Committee”) comprise:

Syed Abdullah bin Syed Abd Kadir

Dato' Mohamad Suparadi bin Md Noor

Chan Feoi Chun

Terms of Reference

The primary function of the Audit Committee is to assist the Board of Directors in fulfilling the following oversight objectives on the Group's activities:

a. Risk Management

• To review the adequacy and effectiveness of risk management, internal control and governance systems instituted in the Group.

b. Internal Audit Function

• To review the adequacy of the scope of the audits conducted by the Internal Auditors.

c. External Audit

• To evaluate the external auditors' audit plans, scope of their audits and their audit reports. • The performance of the external auditors and make recommendations to the Board of Directors on their appointment and remuneration.

d. Audit Reports

• Internal and external audit reports to ensure that remedial actions are taken by management on significant lapses in controls and procedures that are identified. • Significant internal and external audit findings and management's responses.

e. Financial Reporting

• To review the quarterly and annual financial statements of the Group for recommendation to the Board of Directors for approval, focusing particularly on: - changes in or implementation of new accounting policies and practices; - significant and unusual events; and - compliance with the applicable approved accounting standards and other legal and regulatory requirements.

f. Related Party Transactions

• Any related party transactions that may arise within the Group.

g. Other Matters

• Such other matters as the Committee considers appropriate or as authorised by the Board of Directors.

Audit Committee Report

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Meeting

The Committee convened four (4) meetings, and the attendance of each committee member is as

follows:-

Directors

Syed Abdullah Bin Syed Abd Kadir Chairman 2/4

Dato' Mohamad Suparadi Bin Md Noor Member 4/4

Chan Feoi Chun Member 4/4

The meetings were appropriately structured through the use of agendas, which were distributed to members with sufficient notification.

Summary of activities during the financial year

During the year, the Committee has carried out its duties in accordance with its terms of reference. The main activities undertaken by the Committee were as follows:

• Reviewed the external auditors' scope of work and audit plans for the year. Prior to the audit, representatives from the external auditors presented their audit strategy and plan.

• Reviewed with the external auditors the results of the audit, the audit report and the management letter, including management's response.

• Consideration and recommendation to the Board for approval of the audit fees payable to the external auditors.

• Reviewed independence, objectivity and effectiveness of services provided by the external auditors.

• Reviewed the internal audit reports, which highlighted the audit issues, recommendations and management's response. Discussed with management actions taken to improve the system of internal control based on improvement opportunities identified in the internal audit reports.

• Reviewed the application of corporate governance principles and the extent of the Group's compliance with the best practices set out under the Malaysian Code on Corporate Governance for the purpose of preparing the Corporate Governance Statement and Statement on Internal Control pursuant to the Listing Requirements.

• Reviewed the annual report and the audited financial statements of the Company prior to submission to the Board for their consideration and approval. The review was to ensure that the audited financial statements were drawn up in accordance with the provisions of the Companies Act 1965 and the applicable approved accounting standards for entities other than private entities issued by the Malaysian Accounting Standards Board. Any significant issues resulting from the audit of the financial statements by the external auditors were deliberated.

• Reviewed the quarterly unaudited financial results announcements before recommending them for the Board's approval.

• In respect of the quarterly and year end financial statements, reviewed the Company's compliance with the Listing Requirements of the Bursa Malaysia, Financial Reporting Standards and other relevant legal and regulatory requirements.

• Reviewed the related party transactions entered into by the Group.

Attended

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Internal audit function The internal audit function is independent of the activities or operations of other operating units. The principal role of this function is to undertake independent, regular and systematic reviews of the risk management, internal control and governance systems so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively. It is the responsibility of the internal audit function to provide the Audit Committee with independent and objective reports on the state of internal controls and governance of the various operating units within the Group and the extent of compliance of the units with the Group's established policies and procedures as well as relevant statutory requirements.

Composition

The Board shall elect and appoint Committee members from amongst their number, comprising no fewer than three (3) Directors, the majority of which shall be Independent Non-Executive Directors of the Company. The Board shall at all times ensure that at least one (1) member of the Committee shall be a member of the Malaysian Institute of Accountants.

If a member of the Committee resigns, dies or for any 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 the event appoint such number of new members as may be required to fill the vacancy.

The Chairman of the Committee shall be an Independent Non-Executive Director. No alternate Director may be appointed as a member of the Committee.

Quorum and Committee's procedures

Meetings shall be conducted at least four (4) times annually, or more frequently as circumstances dictate.

In order to form a quorum for the meeting, the majority of the members present must be Independent Non-Executive Directors. In the absence of the Chairman, the members present shall elect a Chairman for the meeting from amongst the members present.

The Company Secretaries shall be appointed Secretaries of the Committee.

The Committee may, as and when deemed necessary, invite other Board members and senior management members to attend the meetings.

The Chairman shall submit an annual report to the Board summarising the Committee's activities during the year and the related significant results and findings.

Authority

The Committee is authorised by the Board to seek any information it requires from the employees, who are required to cooperate with any request made by the Committee. The Committee shall have full and unrestricted access to any information pertaining to the Group.

The Committee shall have direct communication channels with the external auditors and with senior management of the Group and shall be able to convene meetings with the external auditors whenever it considers necessary.

Responsibilities and duties

In fulfilling its primary objectives, the Committee has undertaken their responsibilities and duties of reviewing with the external auditor, the audit scope and plan, including any changes to the planned scope of the audit plan and reviewing the adequacy of the internal audit scope and plan, functions and

that it has necessary authority to carry out its work.

Audit Comittee Report

17

The Directors are required by law to prepare financial statements for each financial year which give a

true and fair view of the state of affairs of the Group and of the Company at the end of the financial year

and of the results and cash flows of the Group and of the Company for the financial year then ended.

The Directors consider that, in preparing the financial statements for the financial year ended 31

December 2011, the Group has used appropriate accounting policies and applied them consistently

and made judgments and estimates that are reasonable and prudent. The Directors also consider that all

applicable approved accounting standards have been followed.

The Directors are responsible for ensuring that the Group and the Company keep accounting records

which disclose with reasonable accuracy at any time the financial position of the Group and of the

Company and which enable them to ensure that the financial statements comply with the provisions of

the Companies Act, 1965 and the applicable approved accounting standards in Malaysia.

The Directors are also responsible for taking reasonable steps to safeguard the assets of the Group and

of the Company to prevent and detect fraud and other irregularities.

This Statement is made pursuant to a resolution of the Board of Directors dated 27 April 2012.

Statement of Directors’ Responsibilities

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Material Contracts

There were no material contracts of the Company and its subsidiaries involving Directors and/or major

shareholders entered into since the end of the previous financial year.

Share Buybacks

There were no share buybacks by the Company.

Options, Warrants or Convertible Securities

There were no options, warrants or convertible securities issued or exercised during the financial year.

American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) Programme

The Company did not sponsor any ADR or GDR programme during the financial year.

Imposition of Sanctions/Penalties

There were no public sanctions and/or penalties imposed on the Company and its subsidiary companies,

Directors or management during the year.

Non-Audit Fees Paid to External Auditors or a firm or company affiliated to the auditors' firm

Non-audit fees paid to external auditors or a firm or company affiliated to the auditors' firm has been

disclosed under the notes to the financial statements.

Variation in Results

There were no profit estimates, forecasts or projections or unaudited results released which differ by

10% or more from the audited results.

Profit Guarantees

There were no profit guarantees received or given by the Company.

Revaluation of Landed Properties

The Group does not adopt any revaluation policy on the landed properties.

Contracts Relating to Loans

There were no contracts relating to loans made by the Company in respect of the abovementioned

contracts.

Other Compliance Information

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FINANCIAL STATEMENTS

Contents Page No

Directors’ Report 20

Financial Statements

Statements Of Financial Position 24

Statements Of Comprehensive Income 25

Statements Of Changes In Equity 26

Statements Of Cash Flows 27

Notes To The Financial Statements 29

Supplementary Information On The Breakdown Of Realised And Unrealised Losses 69

Statement By Directors 70

Statutory Declaration 71

Independent Auditors’ Report 72

19

20

VERSATILE CREATIVE BERHAD(Incorporated in Malaysia)

AND ITS SUBSIDIARIES DIRECTORS' REPORT FOR THE YEAR ENDED 31ST DECEMBER 2011

The directors hereby submit their report together with the audited financial statements of Versatile Creative Berhad (“the Company”) and its subsidiary companies (“the Group”) for the financial year ended 31st December 2011.

PRINCIPAL ACTIVITIESThe principal activity of the Company is investment holding. The principal activities of the subsidiary companies are disclosed in Note 7 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year.

RESULTS GROUP COMPANY RM RM

Loss for the financial year (6,274,330) ( 442,301)

Attributable to:

Owners of the Company (6,274,330) ( 442,301)

Non-controlling interests – –

(6,274,330) ( 442,301)

DIVIDENDNo dividend was paid or declared by the Company since the end of the previous financial year.

The directors do not recommend the payment of any dividend in respect of the financial year ended31st December 2011.

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

BAD AND DOUBTFUL DEBTSBefore 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 to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and had satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts.

At the date of this report, the directors are not aware of any circumstances that would render the amount 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.

CURRENT ASSETS

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 to ensure that any current assets, other than debts, which were unlikely to be realised 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 that they might be expected to be realised.

At the date of this report, the directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

21

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

CONTINGENT AND OTHER LIABILITIESAt the date of this report, there does not exist:-

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

(ii) any contingent liability in respect of the Group and of the Company that has arisen since the endof the financial year.

No contingent liabilities or other liabilities of the Group and of the Company 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 and of the Company to meet their obligations as and when they fall due.

CHANGE OF CIRCUMSTANCESAt the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and of the Company that would render any amount stated in the financial statements misleading.

ITEMS OF AN UNUSUAL NATUREThe results of the operations of the Group and of the Company for the financial year were not, in the opinion of the directors, substantially affected by any item, transaction or event of a material and unusual nature.

No item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and at the date of this report likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made.

ISSUE OF SHARES AND DEBENTURESThe Company did not issue any shares and debenture during the financial year.

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

Shahabuddin bin Abdullah @ Lee Seng Pun

Eow Kwan Hoong

Lee Seng Hoong

Chow Pak Lim

Leom Chit Dein @ Lim Jit Teng

Syed Abdullah bin Syed Abd Kadir

Dato’ Mohamad Suparadi bin Md Noor

Chan Feoi Chun

22

DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965, the interests of those directors who held office at the end of the financial year in shares in the Company during the financial year ended 31st December 2011 are as follows:-

Number of ordinary shares of RM1/- each At At 1.1.2011 Bought Sold 31.12.2011

Direct interest:

Chow Pak Lim 5,114,779 25,000 625,000 4 ,514,779

Leom Chit Dein @ Lim Jit Teng 3,265,552 - - 3,265,552

Chan Feoi Chun 50,000 - - 50,000

Indirect interests:

Chow Pak Lim * 197,000 - - 197,000

Deemed interest:

Chow Pak Lim ** 2,982,196 - 20,000 2,962,196

Shahabuddin bin Abdullah @ Lee Seng Pun *** 22,837,821 - - 22,837,821

* Miss Au Lai Yoong is the wife of Chow Pak Lim. In accordance with Section 134(12)(c) of the Companies Act, 1965, the interests of Miss Au Lai Yoong in the shares of the Company shall also be treated as the interests of Chow Pak Lim.

** Deemed interested by virtue of shares held by persons connected to Chow Pak Lim.

*** Cik Noor Azmi Binti Ahmad is the wife of Shahabuddin bin Abdullah @ Lee Seng Pun. In accordance with Section 134(12)(c) of the Companies Act, 1965, the interests of Cik Noor Azmi Binti Ahmad in the shares of the Company shall also be treated as the interests of Shahabuddin bin Abdullah @Lee Seng Pun.

By virtue of their interests in the shares of the Company, Chow Pak Lim, Leom Chit Dein @ Lim Jit Teng and Shahabuddin bin Abdullah @ Lee Seng Pun, are also deemed interested in the shares of the subsidiary companies during the financial year to the extent that the Company has an interest.

Other than as stated above, none of the other directors in office at the end of the financial year had any interest in the shares of the Company and its related corporations during the financial year.

DIRECTORS' BENEFITS

Since the end of the previous financial year, no director of the Company has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full employee of the Company as shown in Note 21 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 the director is a member, or with a company in which the director has a substantial financial interest.

Neither during nor at the end of the financial year was the Company or any of its related corporations a party to any arrangement, whose object was to enable the directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

23

AUDITORS

The auditors, Messrs Baker Tilly Monteiro Heng, have expressed their willingness to continue in office.

On behalf of the Board,

………………………………………………………………

SHAHABUDDIN BIN ABDULLAH @ LEE SENG PUN

Director

………………………………………………………………

EOW KWAN HOONG

Director

KUALA LUMPUR

Date: 27 April 2012

24


AND ITS SUBSIDIARIESSTATEMENTS OF FINANCIAL POSITION

AS AT 31ST DECEMBER 2011

GROUP COMPANY Note 2011 2010 2011 2010 RM RM RM RMASSETS

Non-current assetsProperty, plant and equipment 4 29,833,871 33,517,853 10,798 10,011Goodwill on consolidation 5 16,136,305 18,770,596 - -Leasehold land 6 1,399,339 1,426,510 - -Investment in subsidiary companies 7 - - 21,777,173 21,777,173Other investments 8 17,636,161 17,067,250 - -Total non-current assets 65,005,676 70,782,209 21,787,971 21,787,184

Current assetsInventories 9 6,867,270 8,990,229 - -Trade and other receivables 10 13,542,735 13,740,910 5,355,865 5,681,366Prepayments 587,344 524,192 - -Tax recoverable 86,548 124,819 4,200 4,200Other investments 8 1,959,573 1,896,365 - -Fixed deposits 11 674,578 656,689 - -Cash and bank balances 1,034,230 943,994 29,421 78,920Total current assets 24,752,278 26,877,198 5,389,486 5,764,486TOTAL ASSETS 89,757,954 97,659,407 27,177,457 27,551,670

EQUITY AND LIABILITIES

Equity attributable to owners of the CompanyShare capital 12 110,643,081 110,643,081 110,643,081 110,643,081Capital redemption reserve 13 3,000,000 3,000,000 - -Fair value reserve 14 124,060 (444,851) - -Accumulated losses (65,137,195) (58,862,865) (83,773,644) (83,331,343)SHAREHOLDERS' FUND 48,629,946 54,335,365 26,869,437 27,311,738

Non-current liabilitiesLoans and borrowings 15 4,059,329 5,566,954 - -Deferred tax liabilities 16 2,485,294 2,150,624 - - 6,544,623 7,717,578 - -Current liabilitiesPayables and accruals 17 11,704,986 10,820,959 308,020 239,932Loans and borrowings 15 22,878,399 24,785,505 - -Total current liabilities 34,583,385 35,606,464 308,020 239,932

Total liabilities 41,128,008 43,324,042 308,020 239,932

TOTAL EQUITY AND LIABILITIES 89,757,954 97,659,407 27,177,457 27,551,670

The accompanying notes form an integral part of these financial statements.

25


AND ITS SUBSIDIARIESSTATEMENTS OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31ST DECEMBER 2011

GROUP COMPANY 2011 2010 2011 2010 Note RM RM RM RMREVENUE 18 54,785,722 57,518,042 572,202 633,200Cost of sales 19 (48,812,255) (51,333,547) - -

GROSS PROFIT 5,973,467 6,184,495 572,202 633,200

Other income 998,826 1,547,116 - 324,556Distribution expenses (2,425,961) (1,881,310) - -Administrative expenses (5,623,610) (5,026,328) (1,014,503) (865,319)Other expenses (2,760,709) (49,427) - -Finance costs (net) 20 (2,015,826) (1,924,112) - -

(LOSS)/PROFIT BEFORE TAXATION 21 (5,853,813) (1,149,566) (442,301) 92,437

Taxation 22 (420,517) 1,383,117 - -

(LOSS)/PROFIT FOR THE (6,274,330) 233,551 (442,301) 92,437 FINANCIAL YEAR

Other comprehensive incomeNet gain/(loss) on available-for sale financial assets - Gain/(loss) on fair value changes 568,911 (444,851) - -Total comprehensive (loss)/profit for the financial year (5,705,419) (211,300) (442,301) 92,437(Loss)/profit attributable to:Owners of the company (6,274,330) 233,551 (442,301) 92,437Non-controlling interests - - - - (6,274,330) 233,551 (442,301) 92,437Total comprehensive (loss)/profit attributable to:Owners of the company (5,705,419) (211,300) (442,301) 92,437Non-controlling interests - - - - (5,705,419) (211,300) (442,301) 92,437(Loss)/earning per ordinary share (sen) - basic 23 (5.67) 0.21 - diluted ( 5.67) 0.21


26


AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 31ST DECEMBER 2011

<- - - - - - - A t t r i bu t ab l e to owne r s o f t he Company --- - - - ->

GroupBalance at 1st January 2010 110,643,081 3,000,000 - (59,096,416) 54,546,665Total comprehensive income for the financial year - - (444,851) 233,551 (211,300)Balance at 31st December 2010 110,643,081 3,000,000 (444,851) (58,862,865) 54,335,365Total comprehensive loss for the financial year - - 568,911 (6,274,330) (5,705,419)Balance at 31st December 2011 110,643,081 3,000,000 124,060 (65,137,195) 48,629,946

CompanyBalance at 1st January 2010 110,643,081 (83,423,780) 27,219,301Total comprehensive income for the financial year - 92,437 92,437Balance at 31st December 2010 110,643,081 (83,331,343) 27,311,738Total comprehensive loss for the financial year - (442,301) (442,301)

Balance at 31st December 2011 110,643,081 (83,773,644) 26,869,437


ShareCapital

RM

ShareCapital

RM

AccumulatedlossesRM

TotalRM

CapitalRedemption

ReserveRM

FairValue

ReservesRM

AccumulatedlossesRM

TotalRM

27



STATEMENTS OF CASH FLOW FOR THE FINANCIAL YEAR ENDED 31ST DECEMBER 2011

GROUP COMPANY

2011 2010 2011 2010 RM RM RM RMOPERATING ACTIVITIES:(Loss)/profi t before taxation (5,853,813) (1,149,566) (442,301) 92,437Adjustments for: -Amortisation of leasehold land 27,171 27,172 - -Depreciation ofproperty, plant and equipment 4,784,922 4,974,361 4,049 4,797Deposit written off - 1 ,556 - -Gain on disposal ofproperty, plant and equipment (90,007) (132,707) - -Bad debts recovered (33,612) (1,131,720) - -Impairment loss on trade and otherreceivables 457,082 289,802 - -Impairment loss on investmentin subsidiary companies - - - (324,556)Impairment loss on goodwill 2,634,291 - - -Net fair value (gain)/losson other investments (63,208) 49,427 - -Gain on disposal of other investments - (94,818) - -Property, plant and equipment writen off 137 - - -Unrealised loss on foreign exchange 8,125 44,517 - -Interest income (12,670) (18,276) - -Interest expense 2,028,496 1,942,388 - -Dividend received (563,213) - - -

Operating cash fl ows before changes in working capital 3,323,701 4,802,136 (438,252) (227,322)Changes in working capital:

Inventories 2,122,959 (1,566,452) - -Receivables (296,572) (686,738) (31,525) -Payables 884,027 (405,074) 68,088 4,658

Net cash fl ows from operations 6,034,115 2,143,872 (401,689) (222,664)Interest received 12,670 18,276 - -Interest paid (984,218) (874,596) - -Income tax paid (47,576) (98,617) - (175)Income tax refund - 242,443 - -

Net cash fl ows from/(used in) operating activities 5,014,991 1,431,378 (401,689) (222,839)

28



STATEMENTS OF CASH FLOW FOR THE FINANCIAL YEAR ENDED 31ST DECEMBER 2011 (Continued)

GROUP COMPANY

2011 2010 2011 2010 RM RM RM RMINVESTING ACTIVITIES:Acquisition of property, plantand equipment (Note 24) (590,887) (1,355,328) (4,836) -Acquisition of other investment - (948,180 - -Fixed deposit held as security value (17,889) (17,638) - -Dividend received 563,213 - - -Proceeds from disposal ofproperty, plant and equipment 105,200 218,470 - -Proceed from disposal of otherinvestments - 1,042,993 - -Net cash fl ows from/(used in) investing activities 59,637 (1,059,683) (4,836) -FINANCING ACTIVITIES:Drawndowns of the term loans - 1,995,000 - -Interest paid (1,044,278) (1,067,792) - -Repayment from subsidiaries companies - - 357,026 284,315Repayment of borrowings (2,234,446) (1,937,642) - -Payment of hire purchase liabilities (1,383,202) (1,216,342) - -Net cash fl ows (used in)/from fi nancing activities (4,661,926) (2,226,776) 357,026 284,315NET CHANGE IN CASH AND CASH EQUIVALENTS 412,702 (1,855,081) (49,499) 61,476

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR (3,992,779) (2,137,698) 78,920 17,444

CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR (3,580,077) (3,992,779) 29,421 78,920

ANALYSIS OF CASH AND CASH EQUIVALENTS:Cash and bank balances 1,034,230 943,994 29,421 78,920Fixed deposits 674,578 656,689 - -Less: Bank overdraft (4,614,307) (4,936,773) - - Fixed deposits held as security value (674,578) (656,689) - - (3,580,077) (3,992,779) 29,421 78,920


29



NOTES TO THE FINANCIAL STATEMENTS - 31ST DECEMBER 2011

1. GENERAL INFORMATION

The principal activity of the Company is investment holding. The principal activities of the subsidiary companies are disclosed in Note 7 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of the Bursa Malaysia Securities Berhad.

The principal place of the Company is located at Lot 30745, Jalan Pandan Indah, Pandah Indah, 55100 Kuala Lumpur.

The registered office of the Company is located at Level 18, The Gardens, North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 27 April 2012

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation

The financial statements of the Group and of the Company have been prepared under the historical cost convention unless otherwise indicated in the accounting policies set out in Note 2.3 to the financial statements, and comply with the Financial Reporting Standards (“FRSs”) and the Companies Act, 1965 in Malaysia.

At the beginning of current financial year, the Group and the Company adopted new and revised FRSs which are mandatory for financial periods beginning on or after 1 January 2011 as describe fully in Note 2.2(a) to the financial statements.

The preparation of financial statements in conformity with FRSs requires the use of certain accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and reported amounts of the revenue and expenses during the reported financial year. It also requires the directors’ best knowledge of current events and actions, and therefore actual results may differ.

The areas involving high degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3 to the financial statements.

30

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.2 New and Revised FRSs, Amendments/Improvements to FRSs, New IC Interpretations (“IC Int”), Amendments to IC Int and New Malaysian Accounting Standards Board (“MASB”) Approved Accounting Standards, Malaysian Financial Reporting Standards (“MFRSs”)

(a) Adoption of Revised FRSs, Amendments/Improvements to FRSs, New IC Int and Amendments to IC Int

The Group and the Company had adopted the following revised FRSs, amendments/improvements to FRSs, new IC Int and amendments to IC Int that are mandatory for the current financial year:-

Revised FRSs

FRS 1 First-time Adoption of Financial Reporting Standards

FRS 3 Business Combinations

FRS 127 Consolidated and Separate Financial Statements

Amendments/Improvements to FRSs

FRS 1 First-time Adoption of Financial Reporting Standards

FRS 2 Share-based Payment

FRS 3 Business Combinations

FRS 5 Non-current Assets Held for Sale and Discontinued Operations

FRS 7 Financial Instruments : Disclosures

FRS 101 Presentation of Financial Statements

FRS 121 The Effects of Changes in Foreign Exchange Rates

FRS 128 Investments in Associates

FRS 131 Interests in Joint Ventures

FRS 132 Financial Instruments : Presentation

FRS 134 Interim Financial Reporting

FRS 138 Intangible Assets

FRS 139 Financial Instruments : Recognition and Measurement

New IC Int

IC Int 4 Determining Whether an Arrangement contains a Lease

IC Int 12 Service Concession Arrangements

IC Int 16 Hedges of a Net Investment in a Foreign Operation

IC Int 17 Distribution of Non-cash Assets to Owners

IC Int 18 Transfers of Assets from Customers

Amendments to IC Int

IC Int 9 Reassessment of Embedded Derivatives

IC Int 13 Customer Loyalty Programmes

31


2.2 New and Revised FRSs, Amendments/Improvements to FRSs, New IC Interpretations (“IC Int”), Amendments to IC Int and New Malaysian Accounting Standards Board (“MASB”) Approved Accounting Standards, Malaysian Financial Reporting Standards (“MFRSs”) (Continued)

(a) Adoption of Revised FRSs, Amendments/Improvements to FRSs, New IC Int and Amendments to IC Int (Continued)

The main effects of the adoption of the above revised FRSs, amendments/improvements to FRSs, new IC Int and amendments to IC Int are summarised below:-

FRS 3 Business Combinations (Revised)

The adoption of the FRS 3 affects the way in which the Group accounts for business combinations. The main changes made in this revised standard were:

• All the acquisition-related costs incurred by the acquirer in connection with the business combination shall be recognised as expense in the profit or loss in the period in which the costs are incurred (rather than included in goodwill);

• All considerations transferred by the acquirer, including contingent considerations, in a business combination shall be measured at fair value as at the acquisition date. Subsequent changes in the fair value of contingent consideration classified as liabilities are recognised in accordance with FRS 139, FRS 137 or other FRSs, as appropriate (rather than by adjusting goodwill);

• An acquirer is no longer permitted to recognise contingencies acquired in a business combination that do not meet the definition of a liability;

• For each business combination, the acquirer must measure any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. Previously, only the latter was permitted;

• For a business combination achieved in stages, the equity interests held by the acquirer in the acquiree immediately before achieving control are re-measured at its acquisition-date fair value with any corresponding gain or loss recognised in profit or loss; and

• Goodwill arising from the business combination is measured as the difference between the aggregate fair value of consideration transferred, any non-controlling interest in the acquiree, and the fair value at acquisition date of any previously-held equity interest in the acquiree, and the fair value of identifiable assets acquired and liabilities assumed (including contingent liabilities) at acquisition date.

This revised FRS 3 shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1st July 2010. There is no financial impact on the financial statements of the Group for the current financial year as there were no business combinations during the financial year.

32



(a) Adoption of Revised FRSs, Amendments/Improvements to FRSs, New IC Int and Amendments to IC Int (Continued)

FRS 127 Consolidated and Separate Financial Statements (Revised)

The revised FRS 127 requires that any changes in a parent’s ownership interest in a subsidiary company that do not result in the loss of control are accounted for within equity. When the Group loses control of a subsidiary company, any remaining interest retained in the former subsidiary company will be measured at fair value and any resulting gain or loss is recognised in profit or loss. Total comprehensive income will be proportionately allocated to the owners of the parent and to the non-controlling interests even if it results in the non-controlling interests having a deficit balance.

The revised FRS 127 shall be applied prospectively to business combinations for which the acquisition date is on or after 1st July 2010. There is no financial impact on the financial statements of the Group for the current financial year as there were no business combinations during the financial year.

Amendments to FRS 7 Financial Instruments: Disclosures

Disclosures on fair value and liquidity have been enhanced upon the adoption of this amendment. In particular, financial instruments measured at fair value are disclosed by class in a three-level fair value measurement hierarchy, with specific disclosures related to transfers between levels in the hierarchy and detailed disclosures on level three of the fair value hierarchy. Certain disclosures on liquidity are also modified. The adoption of this amendment resulted in additional disclosures in the financial statements but did not have any financial impact on the Group and the Company.

IC Int 4 Determining Whether an Arrangement Contains a Lease

This IC Int clarifies that when the fulfilment of an arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset, then the arrangement should be accounted for as a lease under FRS 117, even though it does not take the legal form of a lease. This interpretation did not have any financial impact on the Group and the Company.

33



(b) New and Revised FRSs, Amendments/Improvements to FRSs, New IC Int and Amendments to IC Int that are issued, not yet effective and have not been adopted early

The Group and Company have not adopted the following new and revised FRSs, amendments/improvements to FRSs, new IC Int and amendments to IC Int that have been issued as at the date of authorisation of these financial statements but are not yet effective for the Group and the Company:-

New FRSs

FRS 9 Financial Instruments 1 January 2015

FRS 10 Consolidated Financial Statements 1 January 2013

FRS 11 Joint Arrangements 1 January 2013

FRS 12 Disclosures of Interests in Other Entities 1 January 2013

FRS 13 Fair Value Measurement 1 January 2013

Revised FRSs

FRS 119 Employee Benefits 1 January 2013

FRS 124 Related Party Disclosures 1 January 2012

FRS 127 Separate Financial Statements 1 January 2013

FRS 128 Investments in Associates and Joint Ventures 1 January 2013

Amendments/Improvements to FRSs

FRS 1 First-time Adoption of Financial Reporting Standards 1 January 2012

FRS 7 Financial Instruments : Disclosures 1 January 2012

and

1 January 2013

FRS 101 Presentation of Financial Statements 1 July 2012

FRS 112 Income Taxes 1 January 2012

FRS 132 Financial Instruments : Presentation 1 January 2014

Effective for financial periods

beginning on or after

34



(b) New and Revised FRSs, Amendments/Improvements to FRSs, New IC Int and Amendments to IC Int that are issued, not yet effective and have not been adopted early (Continued)

New IC Int

IC Int 19 Extinguishing Financial Liabilities with Equity Instruments 1 July 2011

IC Int 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2013

Amendments to IC Int

IC Int 14 FRS 119 – The Limit on a Defined Benefit Asset, Minimum 1 July 2011 Funding Requirements and their Interaction

A brief discussion on the above significant new and revised FRSs, amendments/improvements to FRSs, IC Int and amendments to IC Int are summarised below. Due to the complexity of these new standards, the financial effects of their adoption are currently still being assessed by the Group and the Company.

FRS 9 Financial Instruments

FRS 9 specifies how an entity should classify and measure financial assets and financial liabilities.

This standard requires all financial assets to be classified based on how an entity manages its financial assets (its business model) and the contractual cash flow characteristics of the financial asset. Financial assets are to be initially measured at fair value. Subsequent to initial recognition, depending on the business model under which these assets are acquired, they will be measured at either fair value or at amortised cost.

In respect of the financial liabilities, the requirements are generally similar to of the former FRS 139. However, this standard requires that for financial liabilities designated as at fair value through profit or loss, changes in fair value attributable to the credit risk of that liability are to be presented in other comprehensive income, whereas the remaining amount of the change in fair value will be presented in the profit or loss.

FRS 10 Consolidated Financial Statements and FRS 127 Separate Financial Statements (Revised)

FRS 10 replaces the consolidation part of the former FRS 127 Consolidated and Separate Financial Statements. The revised FRS 127 will deal only with accounting for investment in subsidiaries, joint ventures and associates in the separate financial statements of an investor and require the entity to account for such investments either at cost, or in accordance with FRS 9.

FRS 10 brings about convergence between FRS 127 and SIC-12, which interprets the requirements of FRS 10 in relation to special purpose entities. FRS 10 introduces a new single control model to identify a parent-subsidiary relationship by specifying that “an investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee”. It provides guidance on situations when control is difficult to assess such as those involving potential voting rights, or in circumstances involving agency relationships, or where the investor has control over specific assets of the entity, or where the investee entity is designed in such a manner where voting rights are not the dominant factor in determining control.

FRS 13 Fair Value Measurement

FRS 13 defines fair value and sets out a framework for measuring fair value, and the disclosure requirements about fair value. This standard is intended to address the inconsistencies in the requirements for measuring fair value across different accounting standards. As defined in this standard, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Amendments to FRS 112 Income Taxes

This amendment to FRS 112 addresses the measurement approach for deferred tax assets and liabilities in respect of investment properties which are measured at fair value. The amendment introduces a rebuttable presumption that the investment property is recovered entirely through sale. In such cases, deferred tax assets or liabilities are provided at tax rates applicable when recovering the property entirely through sale. If this presumption is rebutted, deferred tax assets or liabilities are provided based on tax rates applicable when consuming substantially the economic benefits embodied in the property over a period of time (for example via rental income).

Effective for financial periods

beginning on or after

35



(c) MASB Approved Accounting Standards, MFRSs

In conjunction with the planned convergence of FRSs with International Financial Reporting Standards as issued by the International Accounting Standards Board on 1st January 2012, the MASB had on 19th November 2011 issue a new MASB approved accounting standards, MFRSs (“MFRSs Framework”) for application in the annual periods beginning on or after 1st January 2012.

The MFRSs Framework is mandatory for adoption by all Entities Other Than Private Entities for annual periods beginning on or after 1st January 2012, with the exception of entities subject to the application of MFRS 141 Agriculture and/or IC Int 15 Agreements for the Construction of Real Estate (“Transitioning Entities”). The Transitioning Entities are given an option to defer adoption of the MFRSs framework for an additional one year. Transitioning Entities also includes those entities that consolidate or equity account or proportionately consolidate another entity that has chosen to continue to apply the FRSs framework for annual periods beginning on or after 1st January 2012.

Accordingly, the Group and the Company which are not Transitioning Entities are required to adopt the MFRSs framework for the next fi nancial year, being the fi rst set of fi nancial statements prepared in accordance with the MFRSs framework.

As at 31st December 2011, all FRSs issued under the existing FRSs framework are equivalent to the MFRSs issued under MFRSs framework except for differences in relation to the transitional provisions as well as differences in effective dates contained in certain of the existing FRSs. As such, except those as discussed below, the main effects arising from the transition to the MFRSs Framework has been discussed in Note 2.2(b)to the fi nancial statements. The effect is based on the Group’s and the Company’s best estimates at reporting date. The fi nancial effect may change or additional effects may be identifi ed, prior to the completion of the Group’s and the Company’s fi rst MFRSs based fi nancial statements.

Application of MFRS 1: First-time Adoption of Malaysian Financial Reporting Standards (“MFRS 1”)

MFRS 1 requires comparative information to be restated as if the requirements of MFRSs effective for annual periods beginning on or after 1st January 2012 have always been applied, except when MFRS 1 allows certain elective exemptions from such full retrospective application or prohibits retrospective application of some aspects of MFRSs. The Group and the Company are currently assessing the impact of adoption of MFRS 1, including identifi cation of the differences in existing accounting policies as compared to the new MFRSs and the use of optional exemptions as provided for in MFRS 1. As at the date of authorisation of issue of the fi nancial statements, accounting policy decisions or elections have not been fi nalised. Thus, the impact of adoption of MFRS 1 cannot be determined and estimated reliably until the process is completed.

MFRS 141 Agriculture

MFRS 141 requires a biological asset shall be measured on initial recognition and at the end of each reporting period at its fair value less costs to sell, except where the fair value cannot be measured reliably. MFRS 141 also requires agricultural produce harvested from an entity’s biological assets shall be measured at its fair value less costs to sell at the point of harvest. Gains or losses arising on initial recognition of a biological asset and the agricultural produce at fair value less costs to sell and from a change in fair value less costs to sell of a biological asset shall be included in the profi t or loss for the period in which it arises. The Group does not expect any impact on the fi nancial statements arising from the adoption of this standard.

IC Int 15 Agreements for the Construction of Real Estate

IC Int 15 establishes the developer will have to evaluate whether control and signifi cant risks and rewards of the ownership of work in progress, can be transferred to the buyer as construction progresses before revenue can be recognised. The Group is currently assessing the impact of the adoption of this Interpretation.

36

2.3 SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Consolidation

(i) Subsidiary companies

Subsidiary companies are entities, including unincorporated entities, controlled by the Group Control exists when the Group has the ability to exercise its power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

Investments in subsidiary companies are measured in the Company’s statement of fi nancial position at cost less any impairment losses, unless the investment is held for sale or distribution. The cost of investments includes transaction costs.

The accounting policies of subsidiary companies are changed when necessary to align them with the policies adopted by the Group.

(ii) Accounting for business combinations

Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group.

The Group has changed its accounting policy with respect to accounting for business combinations.

From 1st January 2011 the Group has applied FRS 3, Business Combinations (revised) in accounting for business combinations. The change in accounting policy has been applied prospectively in accordance with the transitional provisions provided by the standard and does not have impact on earnings per share.

Acquisition on or after 1st January 2011

For acquisition on or after 1st January 2011, the Group measures goodwill at the acquisition date as:

• The fair value of the consideration transferred; plus

• The recognised amount of any non-controlling interests in the acquiree; plus

• If the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less

• The net recognised amount (generally fair value) of the identifi able assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profi t or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profi t or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classifi ed as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profi t or loss.

(ii) Accounting for business combinations

Acquisition between 1st January 2006 and 1st January 2011

For acquisition between 1st January 2006 and 1st January 2011, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the recognised amount (generally fair value) of the identifi able assets, liabilities and contingent liabilities of the acquire. When the excess was negative, a bargain purchase gain was recognised immediately in profi t or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with business combinations were capitalised as part of the cost of the acquisition.

Acquisitions prior to 1st January 2006

For acquisition prior to 1 January 2006, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the fair values of the net identifi able assets and liabilities.

36

37

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)2.3 Signifi cant Accounting Policies (Continued)

(a) Basis of Consolidation (Continued)

(iii) Accounting for acquisitions of non-controlling interests

The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interests holders. Any difference between the Group’s share of net assets before and after the change and any consideration received or paid, is adjusted to or against Group reserves.

(iv) Loss of control

The Group applied FRS 127, Consolidated and Separate Financial Statements (revised) since the beginning of the fi nancial year in accordance with the transitional provisions provided by the standard and does not have impact on earnings per share. Upon the loss of control of a subsidiary, the Group derecognised the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or defi cit arising on the loss of control is recognised in profi t or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for-sale fi nancial asset depending on the level of infl uence retained.

In the previous years, if the Group retained any interest in the previous subsidiary, such interest was measured at the carrying amount at the date that control was lost and this carrying amount would be regarded as cost on initial measurement of the investment.

(v) Non-controlling interests

Non-controlling interests at the reporting date, being the equity in a subsidiary not attributable directly or indirectly to the owners of the Company, are presented in the consolidated statement of fi nancial position and consolidated statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of comprehensive income as an allocation of the profi t or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company.

Since the beginning of the fi nancial year, the Group has applied FRS 127, Consolidated and Separate Financial Statements (revised) where losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a defi cit balance. This change in accounting policy is applied prospectively in accordance with the transitional provisions of the standard and does not have impact on earnings per share.

In the previous years, where losses applicable to the non-controlling interests exceed the their interests in the equity of a subsidiary, the excess and any further losses applicable to the non-controlling interests had a binding obligation to, and was able to make additional investment to cover the losses. If the subsidiary reported profi ts, the Group’s interest was allocated with all such profi ts until the non-controlling interests share of losses previously absorbed by the Group had been recovered.

(vi) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated fi nancial statements. Unrealised gains arising from transactions with equity accounted associates are eliminated against the investment to the extent of the Group’s interest in the associates. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Property, Plant and Equipment and Depreciation

Property, plant and equipment are stated at cost or valuation less accumulated depreciation and impairment losses, if any. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.3(k) to the fi nancial statements.

Cost includes expenditure that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When signifi cant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

The cost of replacing part of an item of property, plant and equipment is included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that the future economic benefi ts associated with the part will fl ow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the profi t or loss as incurred.

38

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.3 Signifi cant Accounting Policies (Continued)

(b) Property, Plant and Equipment and Depreciation (Continued)

The Group has availed itself to the transitional provision when the MASB fi rst adopted IAS 16, Property, Plant and Equipment in 1998. Certain leasehold land and building were revalue in March 1998 and no later valuation has been recorded for these properties.

The cost of property, plant and equipment recognised as a result of business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of other items of plant and equipment is based on the quoted market prices for similar terms.

Depreciation is calculated on a straight line method so as to write off the costs of the property, plant and equipment over their expected useful lives. The principal annual rates used for this purpose are as follows:-

Motor vehicles 20 – 25%

Plant and machinery 10 – 20%

Offi ce equipment 10 – 20%

Furniture and fi ttings 10%

Renovation 10 – 20%

Buildings 2.00%

No depreciation is provided on the freehold land as it has an infi nite useful life.

The residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each reporting date. The effects of any revisions of the residual values, useful lives and depreciation method are included in the profi t and loss for the fi nancial year in which the changes arise.

Fully depreciated assets are retained in the accounts until the assets are no longer in use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected from its use or disposal. Gain and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income” or “other expenses” respectively in the profi t or loss. When revalue assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

(c) Goodwill on Consolidation

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-generating units that are expected to benefi t from the synergies of the combination.

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the profi t or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the cash-generating unit retained.

(d) Inventories

Inventories comprise raw materials, consumables, work-in-progress and fi nished goods that are stated at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost principle, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

Cost in the case of fi nished goods and work-in-progress include cost of raw materials, direct labour and an appropriate proportion of fi xed and variable production overheads.

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

39



(e) Equity instruments

(i) Ordinary shares

Ordinary shares are classifi ed as equity. Dividends on ordinary shares are recognised as liabilities when declared before the reporting date. A dividend proposed or declared after the reporting date, but before the fi nancial statements are authorised for issue, is not recognised as a liability at the reporting date.

The transaction costs of an equity transaction are accounted for as deductions from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided.

(ii) Preference shares

Preference shares are classifi ed as equity if they are non-redeemable, or are redeemable but only at the Company’s option and dividends are discretionary at the option of the issuers. Dividends thereon are recognised as distributions within equity. Preference shares are classifi ed as liability if they are redeemable on a specifi c date or at the option of the shareholders and dividends thereon are recognised in the profi t or loss as interest expense. Preference shares that are compound instruments are split into liability and equity components. Each component is accounted for separately. Dividends on preference shares are recognised on an accrual basis.

(f) Employee Benefi ts

(i) Short term employee benefi ts

Wages, salaries, social security contribution, bonuses and non-monetary benefi ts are accrued in the period in which the associated services are rendered by the employees. Short-term accumulating compensated absences such as paid annual leave are their entitlement to future compensated absences. Short-term non-accumulating compensated absences sick leave, maternity and paternity leave are recognised when absences occur.

(ii) Post-employment benefi ts

The Group contributes to the Employee’s Provident Fund, the national defi ned contribution plan. The contributions are charged to the profi t or loss in the period to which they are related. Once the contributions have been paid, the Group has no further payment obligations.

(g) Leases

(i) Finance leases

Leases of property, plant and equipment where the Group assumes substantially all the benefi ts and risks of ownership are classifi ed as fi nance leases.

Assets acquired by way of hire purchase or fi nance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses, if any. The corresponding liability is included in the statement of fi nancial position as borrowings. In calculating the present value of the minimum lease payments, the discount factor used in the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Group’s incremental borrowings rate is used. Any initial direct costs are also added to the carrying amount of such assets.

Lease payments are apportioned between the fi nance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profi t or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 2.3(b) to the fi nancial statements.

40



(g) Leases (Continued)

(ii) Operating leases

Leases of assets where a signifi cant portion of the risks and rewards of ownership are retained by the lessor are classifi ed as operating leases.

The Group had previously revalue its leasehold land and has retained the unamortised revalue amount as the surrogate carrying amount of leasehold land in accordance with the transitional provisions in FRS 117.67A. Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefi t of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

The Group determines that all leasehold land as disclosed in Note 6 to the fi nancial statements that had an indefi nite economic life and title was not expected to pass to the leases by the end of the lease term are operating leases.

(h) Taxation

The tax expense in the profi t or loss represents the aggregate amount of current tax and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profi t for the year and is measured using the tax rates that have been enacted at the reporting date, and adjustment of tax payable in respect of the previous fi nancial year.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the reporting date. Deferred tax is recognised in the profi t or loss, except when it arises from transaction which is recognised in other comprehensive income or directly in equity, in which case the deferred tax is charged or credited in other comprehensive income or directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill.

(i) Foreign Currency Translation

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

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate at that date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profi t or loss.

Non-monetary items are measured in terms of historical cost in a foreign currency or translated using the exchange rates as at the date of the initial transaction. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that fair value determined. Foreign currency differences arising on retranslation are recognised in the profi t or loss.

(j) Financial Instruments

Financial instruments are recognised in the statements of fi nancial position when, and only when, the Group and the Company become a party to the contract provisions of the fi nancial instruments.

A fi nancial instrument is recognised initially, at its fair value, plus, in the case of a fi nancial instrument not at fair value through profi t or loss, transaction costs that are directly attributable to the acquisition or issue of the fi nancial instrument.

The Group and the Company categorise the fi nancial instruments as follows:-

(i) Financial Assets:-

Financial assets at fair value through profi t or loss

Financial assets are classifi ed as fair value through profi t or loss if they are held for trading, including derivatives, or are designated as such upon initial recognition.

A fi nancial asset is classifi ed as held for trading if it is acquired principally for the purpose of selling in the near future or part of a portfolio of identifi ed fi nancial instruments that are managed together and for which there is evidence of a recent actual pattern of short term profi t taking.

Subsequent to initial recognition, fi nancial assets at fair value through profi t or loss are measured at fair value with the gain or loss recognised in statement of comprehensive income. Exchange differences, interest and dividend income on fi nancial assets at fair value through profi t or loss are recognised as other gains or losses in profi t or loss.

41



(j) Financial Instruments (Continued)

(i) Financial Assets:- (Continued)

Loans and receivables

Financial assets with fi xed or determinable payments that are not quoted in an active market, trade and other receivables and cash and cash equivalents are classifi ed as loans and receivables.

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

Held-to-maturity investments

Financial assets with fi xed or determinable payments and fi xed maturity and the Group have the positive intention and ability to hold the investment to maturity is classifi ed as held-to-maturity investments.

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

Available-for-sale fi nancial assets

Available-for-sale are fi nancial assets that are designated as available for sale or are not classifi ed in any of the three preceding categories.

After initial recognition, available-for-sale fi nancial assets are measured at fair value with the gain or loss recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profi t or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassifi ed from equity to profi t or loss as a reclassifi cation adjustment when the fi nancial asset is derecognised.

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

(ii) Financial Liabilities

All fi nancial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profi t or loss.

Fair value through profi t or loss comprises fi nancial liabilities that are held for trading, derivatives except for a derivative that is a fi nancial guarantee contract or a designated and effective hedging instrument) or fi nancial liabilities that are specifi cally designated as fair value through profi t or loss upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.

Other fi nancial liabilities categorised as fair value through profi t or loss are subsequently measured at their fair values with the gain or loss recognised in profi t or loss.

(iii) Financial Guarantee Contracts

A fi nancial guarantee contract is a contract that requires the issuer to make specifi ed payments to reimburse the holder for a loss it incurs because a specifi ed debtor fails to make payment when due in accordance with the original or modifi ed terms of a debt instrument.

Subsequent to initial recognition, fi nancial guarantee contracts are recognised as income in profi t or loss over the period of the guarantee. If the debtor fails to make payment relating to fi nancial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation.

(iv) Derecognition

A fi nancial asset is derecognised when the contractual right to receive cash fl ows from the asset has expired or is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a fi nancial asset, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profi t or loss.

A fi nancial liability is derecognised when the obligation specifi ed in the contract is discharged or cancelled or expires. On derecognition of a fi nancial liability, the difference between the carrying amount and the consideration paid is recognised in profi t or loss.

42



(k) Impairment of Assets

(i) Impairment of Financial Assets

All fi nancial assets (except for fi nancial assets categorised as fair value through profi t or loss and investment in subsidiary companies) are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash fl ows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised. For an equity instrument, a signifi cant or prolonged decline in the fair value below its cost is an objective evidence of impairment.

An impairment loss in respect of loans and receivables and held-to-maturity investments is recognised in profi t or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account.

An impairment loss in respect of available-for-sale fi nancial assets is recognised in the profi t or loss and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale fi nancial asset has been recognised in the other comprehensive income, the cumulative loss in other comprehensive income is reclassifi ed from equity and recognised to profi t or loss.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profi t or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the current market rate of return for a similar fi nancial asset.

(ii) Impairment of Non-fi nancial Assets

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

For goodwill that has an indefi nite useful life and are not available for use, the recoverable amount is estimated at each reporting date or more frequently when indicators of impairment are identifi ed.

An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less cost to sell and its value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risk specifi c to the asset. Where the carrying amounts of an asset exceed its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated fi rst to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

An impairment loss is recognised in the profi t or loss in the period in which it arises.

Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed its carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in the profi t or loss.

(l) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the revenue can be reliably measured. The following specifi c recognition criteria must also be met before revenue is recognised.

(i) Sales of Goods

Revenue from sale of goods is measured at the fair value of the consideration received or receivable for the sale of goods, net of return and allowance, trade discounts and volume rebates. Revenue is recognised when the signifi cant risks and rewards of ownership of the goods have been transferred to the buyer.

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(Company No. 603770-D) fileLingkaran Syed Putra, 59200 Kuala Lumpur. Tel No :- 603 ... (2010: 7.2%)...

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