KOMARKCORP BERHAD (374265-A) Lot 132, Jalan 16/1, Kawasan Perindustrian Cheras Jaya 43200 Balakong, Selangor Darul Ehsan, Malaysia. Tel : [603]9080 3333 Fax : [603]9080 5233 Email : [email protected] KOMARKCORP BERHAD (374265-A) | ANNUAL REPORT 2014 www.komark.com.my CONTENTS Corporate Information Corporate Structure Chairman’s Statement Corporate Social Responsibility Distribution Network Five-Years Group Financial Highlights Notice of Annual General Meeting Profile of Directors of Komarkcorp Berhad Statement on Corporate Governance Statement on Risk Management and Internal Control Audit Committee Report Other Information Financial Statements Analysis of Shareholdings List of Properties Proxy Form 2 3 4 6 7 8 9 11 16 27 29 33 35 98 101 CORPORATE INFORMATION 2 DIRECTORS Tan Sri Ahmad bin Mohd Don Koh Hong Muan @ Koh Gak Siong Tan Kwe Hee Koh Chie Jooi Koh Chee Mian Lim Pei Tiam @ Liam Ahat Kiat Datuk Ng Peng Hong @ Ng Peng Hay Dato’ Yeow Wah Chin Ihsan bin Ismail MANAGEMENT TEAM Ong Ann Boon (Director) General Labels & Labelling Pte. Ltd. Chong Jiun Shyang (Group Financial Controller) Tan Kai Yee (Assistant General Manager) Yoong Chee Wah (Operation Manager) Michael Au Yong Wai Kong (Export Manager) General Label & Labelling (M) Sdn Bhd Komark International (M) Sdn Bhd REGISTERED OFFICE Lot 6.05, Level 6, KPMG Tower 8 First Avenue, Bandar Utama 47800 Petaling Jaya Selangor Darul Ehsan Tel: 03-7720 1188 Fax: 03-7720 1111 PRINCIPAL PLACE OF BUSINESS (Headquarters) Lot 132, Jalan 16/1 Kawasan Perindustrian Cheras Jaya 43200 Balakong Selangor Darul Ehsan Tel: 03-9080 3333 Fax: 03-9080 5233 (Chairman / Independent Non-Executive Director) (Group Chief Executive Officer / Executive Director) (Joint Group Chief Executive Officer / Executive Director) (Executive Director) (Executive Director) (Executive Director) (Senior Independent Non-Executive Director) (Non-Independent Non-Executive Director) (Independent Non-Executive Director) AUDIT COMMITTEE Datuk Ng Peng Hong @ Ng Peng Hay Chairman (Senior Independent Non-Executive Director) Tan Sri Ahmad bin Mohd Don Member of the Committee (Chairman/Independent NonExecutive Director) Dato’ Yeow Wah Chin Member of the Committee (Non-Independent Non-Executive Director) Ihsan bin Ismail Member of the Committee (Independent Non-Executive Director) REMUNERATION COMMITTEE Datuk Ng Peng Hong @ Ng Peng Hay Chairman (Senior Independent Non-Executive Director) REGISTRARS Boardroom Corporate Services (KL) Sdn Bhd (Company No. 3775-X) Lot 6.05 Level 6 KPMG Tower 8 First Avenue Bandar Utama 47800 Petaling Jaya Selangor Darul Ehsan Tel: 03-7720 1188 Fax : 03-7720 1111 PRINCIPAL BANKERS Standard Chartered Malaysia Bank Bhd (Company No. 115793-P) Bank of Shanghai Co Ltd Koh Hong Muan @ Koh Gak Siong Member of the Committee (Group Chief Executive Officer/ Executive Director) Tan Kwe Hee Member of the Committee (Joint Group Chief Executive Officer/ Executive Director) NOMINATION COMMITTEE Datuk Ng Peng Hong @ Ng Peng Hay Chairman (Senior Independent Non-Executive Director) Tan Sri Ahmad bin Mohd Don Member of the Committee (Chairman/Independent NonExecutive Director) Dato’ Yeow Wah Chin Member of the Committee (Non-Independent Non-Executive Director) Dato’ Yeow Wah Chin Member of the Committee (Non-Independent Non-Executive Director) Ihsan bin Ismail Member of the Committee (Independent Non-Executive Director) Ihsan bin Ismail Member of the Committee (Independent Non-Executive Director) KOM A R KCO R P B E R HAD AUDITORS Ong & Wong (AF0241) Chartered Accountants Unit C-20-5, Block C 20th Floor Megan Avenue II 12, Jalan Yap Kwan Seng 50450 Kuala Lumpur Tel: 03-21611000 Fax: 03-21669131 Malayan Banking Berhad (Company No. 3813-K) Kuwait Finance House (M) Bhd (Company No. 672174-T) COMPANY SECRETARIES Tai Yit Chan (MAICSA 7009143) Chan Yoke Peng (MAICSA 7053966) STOCK EXCHANGE LISTING Bursa Malaysia Securities Berhad (Company No. 635998-W) Main Market CORPORATE STRUCTURE 3 100% KOMARK (THAILAND) CO. LTD. (1554/2358) 100% GENERAL LABELS & LABELLING (M) SDN. BHD. (93225-V) 70% GENERAL LABELS & LABELLING (PENANG) SDN. BHD. 8.4% GENERAL LABELS & LABELLING PTE. LTD. 100% GENERAL LABELS & LABELLING (JB) SDN. BHD. (480867-X) (146231-W) (198300123C) 50% 30% GENERAL LABELS & LABELLING (IPOH) SDN. BHD. 1% 91.6% 50% (458045-W) PT KOMARK LABELS AND LABELLING INDONESIA 99% 100% 100% 100% KOMARK INTERNATIONAL (M) SDN. BHD. 49% (96626-V) KOMARK AUSTRALASIA PTY. LTD. (087852793) KOMARK INVESTMENT HOLDINGS LTD. (440077) KOMARK ENTERPRISE CO. LTD. (5053) 100% SHANGHAI KOMARK LABELS & LABELLING CO. LTD. (020411) 100% GUANGZHOU KOMARK LABELS & LABELLING CO. LTD. (100286) 100% KOMARK HONG KONG CO. LTD. (754596) ANNUA L R EPORT 2 0 1 4 CHAIRMAN’S STATEMENT 4 On behalf of the Board of Directors, I am pleased to present the Annual Report of Komarkcorp Berhad and its subsidiary Companies (“Group”) for the financial year ended 30 April 2014 (“FYE 2014”). PERFORMANCE REVIEW The FYE 2014 presented yet another challenging year for the Group. The Group recorded an increase of 4.24% in revenue to RM141.805 million compared to RM136.037 million recorded in preceding financial year. The Multinational Customers segment continued to contribute substantially to the Group’s turnover. The result of the Group for FYE 2014 had been adversely affected by an exercise in writing down of the value of plant and machinery to their economic net worth, writing off of obsolete inventories and making provision for slow moving inventories as well as writing off of bad debts and making provision for doubtful debts, writing off of unreconciled interGroup balances and writing off of development expenditure. These adjustments total RM27.211 million. Together with the loss from operations of RM1.493 million, the loss before taxation for the year came to RM28.704 million compared to a loss of RM2.273 million for the preceding financial year. The loss after taxation for the year was RM28.909 compared to a loss of RM4.831 million for the preceding financial year. Revaluation of land & building were also made as at the end FYE 2014 and resulted in a surplus of RM12.036 million. This amount was recognized as comprehensive income. MARKET AND BUSINESS OUTLOOK AND OPERATIONAL STRATEGIES The economic recovery in the developed economies is gaining momentum, but due to the expected slower growth in China, the overall growth momentum in Asia is projected to be moderate. The Malaysia economy is expected to register a GDP growth of 4.5 – 5.5% for 2014 compared to 4.7% achieved in 2013. With a diversified market in the Asia Pacific region (mainly Malaysia, China, Singapore, Thailand, Indonesia, India, Sri Lanka and Philippines), the Group is in a position to mitigate any impact of economic slowdown. The Group has put in place a turn-round plan intended to ensure that the Group is able to generate a sustainable profit commensurate with the capital employed. The measures include discontinuing unprofitable branches and operations, close monitoring of expenses, reducing wastages, reorganising workforce, reevaluating market segment to focus on, explore new market and a fund raising exercise to reduce borrowings. The Board is of the view that these efforts will bear fruits over the next three years. KOM A R KCO R P B E R HAD CHAIRMAN’S STATEMENT 5 (cont’d) DIVIDEND The Board of Directors is not recommending any dividend payment for the financial year ended 30 April 2014. CORPORATE DEVELOPMENT On 1 August 2014, the Company announced that it will carry out a corporate exercise which includes, inter-alia, the following proposals :1) Proposed par value reduction via the cancellation of RM0.75 of the par value of every existing ordinary share of RM1.00 each in the issued and paid-up share capital of the Company pursuant to Section 64 of the Company Act,1965; 2) Proposed renounceable right issue of up to 40,637,005 new ordinary shares of RM0.25 each in the Company at an indicative issue price of RM0.30 per right share on the basis of one (1) rights share for every two (2) existing share held, together with up to 40,637,005 free detachable warrants in the Company on the basis of one (1) free warrant for every one (1) right share subscribed for, on an entitlement date to be determined later after the proposed par value reduction; and 3) Proposed amendments to the memorandum and articles of Association of the Company These proposals have been approved by the shareholders at the Extraordinary General Meeting held on 25 September 2014 and the Board expects the proposed corporate exercise to be completed by the end of 2014. ACKNOWLEDGEMENTS On behalf of the Board of Directors, I wish to express our sincere appreciation to the Management and staff of the Group for their continued dedication, commitment and loyalty to the Group. I also wish to express our sincere appreciation to our valued shareholders, customers, business associates, government authorities and bankers for their continued support and cooperation. Last but not least, I regret to inform that Datuk Ng Peng Hong @ Ng Peng Hay has declined to stand for Director Re-election in this forthcoming AGM. I would like to take this opportunity to thank him for his contributions and services rendered to the Group since 1997 and wish him success on all his future endeavours. Ahmad bin Mohd Don Independent Non-Executive Chairman ANNUA L R EPORT 2 0 1 4 CORPORATE SOCIAL RESPONSIBILITY 6 The Group acknowledges and integrates the Corporate Social Responsibility (“CSR”) into its operations and decision making based on ethical values and respect for the environment, community, marketplace and employees’ welfare. a) The Environment The Group has undertaken various measures to mitigate the adverse impact from our manufacturing operations to the environment such as disposal of chemicals and compliance to Environment Act. The Group also encourages its staff to reduce the paper usage and recycle the wastage materials. b) The Community The Group continues to contribute to the charitable, social and welfare programs and authorities on ad hoc basis. c) The Marketplace The Group engages in ethical procurement practices by adopting a standard procedure in the vendor selection and ensures that the supplies are in accordance to the Group’s materials requirements. The Group also continues to strive to meet the expectation of its shareholders by enhancing the value of the Group in all possible ways. d) The Employees’ Welfare The Group recognises that employees are important assets. In line with this belief, the Group has in place a Safety Policy to provide a safe and healthy working environment to its employees with comprehensive occupational health and safety resources. The Group also believes in promoting employees’ morale through the proper human capital development. KOM A R KCO R P B E R HAD DISTRIBUTION NETWORK 7 MALAYSIA HEADQUARTERS - KUALA LUMPUR PENANG IPOH JOHOR BAHRU SHANGHAI LANGFANG GUANGZHOU SINGAPORE THAILAND INDONESIA ANNUA L R EPORT 2 0 1 4 FIVE -YEARS GROUP FINANCIAL HIGHLIGHTS 8 Year Ended 30 April Year ended 30 April 2014 2013 2012 2011 2010 Operating Result (RM'000) Turnover 141,805 123,346 112,968 111,998 Profit /(Loss) Before Tax (28,704) (2,273) 830 2,900 2,900 Profit /(Loss) After Tax (28,909) (4,831) 79 2,115 2,020 136,037 Key Balance Sheet Data (RM'000) Total Assets Total Interest Bearing Borrowings Total Liabilities 204,209 220,447 214,793 217,314 221,369 72,319 69,938 66,019 75,710 82,856 105,333 103,799 94,891 99,003 104,904 81,275 81,275 81,275 81,275 116,648 119,902 118,311 116,465 150000 111,998 0.00 90000 121.65 Net Assets Financial Ratio (%) (6.00) 0.10 -5000 0.50 0.00 143.52 147.53 -10000 60000 2014 2011 2010 2.65 2.53 0.00 0.00 145.57 143.30 -15000 Return on Equity (29.24) (4.14) 0.07 1.79 1.73 (14.16) (2.19) -20000 0.97 0.91 73.14 59.96 55.06 63.99 71.14 (28,704) 30000 0.04 -25000 0 2014 TURNOVER (RM’000) 2013 2012 2011 2010 -10000 -10000 -15000 -15000 -15000 -20000 -20000 -20000 -25000 -30000 -30000 (4,831) (28,909) 2,020 2,115 2,02079 0 -25000 2,115 0 2013 -5000 -30000 79 5000 2,020 2014 -10000 5000 2011 2010 0 -5000 -25000 2,115 2,900 79 2,900 (2,273) KOM A R KCO R P B E R HAD 2010 5000 -5000 (28,704) 2013 2014 2012 2013 2011 2012 2010 2011 830 0 0 (2,273) 2014 2014 2,900830 2,900 2010 5000 (28,704) 30000 111,998 30000 112,968 60000 0 111,998 123,346 60000 136,037112,968 90000 123,346 141,805 90000 136,037 141,805 120000 PROFIT/LOSS AFTER TAX (RM’000) 2013 2014 2012 2013 2011 2012 2010 2011 150000 120000 -30000 PROFIT/LOSS BEFORE TAX (RM’000) 5000 0 2012 Return on Total Assets Gearing ratio 150000 2013 (2,273) (35.60) 112,968 Basic EPS /(LPS) Gross Dividend (Recommended) 0 123,346 120000 Per share (sen) 136,037 141,805 Share Information 830 5000 2,900 81,275 98,876 2,900 Paid-Up Capital Shareholders' Equity 2012 NOTICE OF ANNUAL GENERAL MEETING 9 NOTICE IS HEREBY GIVEN THAT the Eighteenth Annual General Meeting of the Company will be convened and held at Perdana Room, Bukit Jalil Golf & Country Resort, Jalan 3/155B, Bukit Jalil, 57000 Kuala Lumpur on Tuesday, 28 October 2014 at 10.00 a.m. to transact the following businesses:AGENDA As Ordinary Business 1. To receive the Audited Financial Statements for the financial year ended 30 April 2014 together with the Directors’ and Auditors’ Reports thereon. Please refer to Note 1 of the Explanatory Notes 2. To approve the Directors’ Fees for the financial year ended 30 April 2014 and the payment thereof. Ordinary Resolution 1 3. To re-elect the following Directors who are retiring under Article 93.1 of the Articles of Association of the Company:(i) Mr Koh Hong Muan @ Koh Gak Siong (ii) Mr Koh Chie Jooi Ordinary Resolution 2 Ordinary Resolution 3 Datuk Ng Peng Hong @ Ng Peng Hay who retires in accordance with Article 93.1 of the Company’s Articles of Association has expressed his intention not to seek re-election. Hence, he will retain office until the conclusion of the Eighteenth Annual General Meeting. 4. To re-appoint Messrs Ong & Wong as Auditors of the Company and to authorise the Directors to fix their remuneration. Ordinary Resolution 4 As Special Business To consider and, if thought fit, to pass the following resolutions:5. Re-appointment of Director over Seventy (70) years of age “THAT Mr Tan Kwe Hee, who retires pursuant to Section 129(6) of the Companies Act, 1965, be and is hereby re-appointed as Director of the Company to hold office until the conclusion of the next Annual General Meeting of the Company.” 6. Ordinary Resolution 5 Proposed Authority under Section 132D of the Companies Act, 1965 for the Directors to issue shares “THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby authorised to issue shares in the Company at any time until the conclusion of the next AGM upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued does not exceed ten per centum (10%) of the issued share capital of the Company (excluding treasury shares) for the time being, subject always to the approval of all relevant regulatory bodies being obtained for such allotment and issue.” Ordinary Resolution 6 BY ORDER OF THE BOARD TAI YIT CHAN (MAICSA 7009143) CHAN YOKE PENG (MAICSA 7053966) Secretaries Selangor Darul Ehsan Date: 3 October 2014 ANNUA L R EPORT 2 0 1 4 NOTICE OF ANNUAL GENERAL MEETING 10 (cont’d) NOTES 1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. There shall be no restriction as to the qualification of the proxy. 2. A member may appoint not more than two (2) proxies to attend and vote at the same meeting. Where a member appoints two (2) proxies, the appointments shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy. 3. Where a member of the Company is an exempt authorised nominee which holds shares in the Company for multiple beneficial owners in one securities account (“omnibus account”) as defined under the Securities Industry (Central Depositories) Act, 1991, there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. 4. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its Common Seal or under the hand of the attorney. 5. The instrument appointing a proxy, with the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power or authority, must be deposited at the Registered Office of the Company at Lot 6.05, Level 6, KPMG Tower, 8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia not less than 48 hours before the time set for holding the meeting or any adjournment thereof. 6. In respect of deposited securities, only members whose names appear on the Record of Depositors on 16 October 2014 (General Meeting Record of Depositors) shall be eligible to attend, speak and/or vote at the meeting or appoint proxy(ies) to attend, speak and/or vote on his behalf. Explanatory Notes: (1) To receive the Audited Financial Statements Agenda item no. 1 is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of shareholders for the Audited Financial Statements. Hence, this item on the Agenda is not put forward for voting. (2) To re-appoint the Director over Seventy (70) years of age This proposed resolution is in accordance with Section 129(6) of the Companies Act, 1965 and if passed, Mr Tan Kwe Hee, who is over seventy (70) years of age, will be re-appointed as Director of the Company and will hold office until the conclusion of the next Annual General Meeting. (3) Proposed Authority under Section 132D of the Companies Act, 1965 for the Directors to issue shares The Company had, during its Seventeenth Annual General Meeting (“AGM”) held on 30 October 2013, obtained its shareholders’ approval for the general mandate for issuance of shares pursuant to Section 132D of the Companies Act, 1965 (“the Act”). The Company did not issue any shares pursuant to this mandate obtained. The Ordinary Resolution 6 proposed under item 6 of the Agenda is a renewal of the general mandate for issuance of shares by the Company under Section 132D of the Act. The mandate, if passed, will provide flexibility for the Company and empower the Directors to allot and issue new shares speedily in the Company up to an amount not exceeding in total 10% of the issued share capital of the Company (excluding treasury shares) for purpose of funding the working capital and future investment of the Group. This would eliminate any delay arising from and cost involved in convening a general meeting to obtain approval of the shareholders for such issuance of shares. This authority, unless revoked or varied by the Company at a general meeting, will expire at the next AGM. KOM A R KCO R P B E R HAD PROFILE OF DIRECTORS 11 of Komarkcorp Berhad Koh Hong Muan @ Koh Gak Siong Tan Kwe Hee Age : 66 Nationality : Malaysian Qualification : Malaysian Certificate of Education Directorate : Executive Director Designation : Group Chief Executive Officer Other Directorships of Public Companies : None Age : 70 Nationality : Malaysian Qualification : 1. Masters in Business Administration (Hull, United Kingdom) 2. Associate in Banking (Malaysia) 3. Associate of Malaysian Institute of Management The Date He Was First Appointed to the Board : 16 June 1997 The Details of Any Board Committee to Which He Belongs : Remuneration Committee of Komarkcorp Berhad Securities Holding in the Company : Direct : 6,519,900 ordinary shares Indirect : 10,906,889 ordinary shares Securities Holding in the Subsidiaries : Deemed to have interests in shares of all the subsidiaries to the extent Komarkcorp Berhad has an interest. Family Relationship With Any Director and / or Major Shareholders of the Company : Parent to Mr. Koh Chie Jooi and Mr. Koh Chee Mian. Directorate : Executive Director Designation : Joint Group Chief Executive Officer Other Directorships of Public Companies : Group Director of Bina Puri Holdings Bhd The Date He Was First Appointed to the Board : 16 August 2013 The Details of Any Board Committee to Which He Belongs : Remuneration Committee of Komarkcorp Berhad Securities Holding in the Company : Direct: 5,112,100 ordinary shares Indirect: 1,200,000 ordinary shares Securities Holding in the Subsidiaries : Deemed to have interests in shares of all the subsidiaries to the extent Komarkcorp Berhad has an interest Family Relationship With Any Director and / or Major Shareholders of the Company : None Conflict of Interest : None Conflict of Interest : None List of Convictions for Offences Within the Past 10 Years Other Than Traffic Offences : None Working Experience : Mr. Koh Hong Muan @ Koh Gak Siong is the founder of the Komarkcorp Group of Companies and is currently the Chief Executive Officer of Komarkcorp Group. He is responsible for formulating the overall business development and corporate strategies for the Group. Mr. Koh has been engaged in the manufacturing of pressure sensitive labels and automatic labelling systems for over 38 years during which he gained wide experience in product development and corporate management. He co-invented two sets of patented feeding mechanism in hand-held labellers and precision products feeding device with pneumatic logistic control systems in automatic labelling machines, respectively. Mr. Koh’s efforts were recognised by the Malaysian Government when General Labels & Labelling (M) Sdn Bhd and Komark International (M) Sdn Bhd, whollyowned subsidiaries of Komarkcorp Berhad, were granted Pioneer Status for the manufacturing of automatic labelling machines and hand-held labellers by Malaysia Industrial Development Authority (MIDA), Malaysia in 1991 and 1997, respectively. Mr. Koh is a member of The Institute of Printing of the United Kingdom. The Number of Board Meetings Attended in the Financial Year : 7 out of 7 List of Convictions for Offences Within the Past 10 Years Other Than Traffic Offences : None Working Experience : Mr. Tan Kwe Hee was appointed as executive director of Komarkcorp. Berhad on 16/8/2013 and is currently the Joint Group Chief Executive Officer of Komarkcorp Group. He is responsible for the overall financial matters. He is also Group Director of Bina Puri Holdings Bhd. Mr. Tan was retired as a Senior Banker who has served in UMBC Bank for 9 1/2 years and AFFIN Bank for 26 years. He has vast banking experience which covers branch banking, banking operations and loan recovery. He retired as Senior Vice President of AFFIN Bank in 2002. While still serving in AFFIN Bank, he was appointed by Bank Negara Malaysia (BNM) in August 1996 as Loan Recovery Advisor to the BNM recovery management team on RHB-RMBB Assets (the then Rakyat Merchant Bank). He joined Bina Puri Holdings as Group Financial Advisor in 2003 and later on appointed as Group Executive Director in March 2013. The Number of Board Meetings Attended in the Financial Year : 4 out of 4 ANNUA L R EPORT 2 0 1 4 PROFILE OF DIRECTORS 12 of Komarkcorp Berhad (cont’d) Koh Chie Jooi Koh Chee Mian Age : 36 Nationality : Malaysian Qualification : Degree in Bachelor of Commerce Directorate : Executive Director Designation : Nil Other Directorships of Public Companies : None The Date He Was First Appointed to the Board : 27 June 2002 Age : 34 Nationality : Malaysian Qualification : Degree in Bachelor of Engineering Directorate : Executive Director Designation : Nil Other Directorships of Public Companies : None The Date He Was First Appointed to the Board : 15 December 2003 The Details of Any Board Committee to Which He Belongs : None The Details of Any Board Committee to Which He Belongs : None Securities Holding in the Company : Indirect : 17,426,789 ordinary shares Securities Holding in the Company : Direct : 206,100 ordinary shares Securities Holding in the Subsidiaries : Deemed to have interests in shares of all the subsidiaries to the extent Komarkcorp Berhad has an interest. Indirect: 17,426,789 ordinary shares Family Relationship With Any Director and / or Major Shareholders of the Company : Child of Mr. Koh Hong Muan @ Koh Gak Siong and brother of Mr. Koh Chee Mian. Conflict of Interest : None List of Convictions for Offences Within the Past 10 Years Other Than Traffic Offences : None Working Experience : Mr. Koh Chie Jooi was appointed to the Board of Komarkcorp Berhad as an Executive Director on 27 June 2002. On 16 May 2011, he was appointed as Managing Director of the Komarkcorp Group. On 27 March 2014, he was redesignated as an Executive Director of Komarkcorp Berhad and as Managing Director at subsidiaries level and responsible for Asean Subsidiaries. He graduated from the University of Sydney, Australia with a degree in Bachelor of Commerce. Prior to joining Komarkcorp in December 2001 as Assistant Accounts Manager, he was attached to KPMG from February 2001 to November 2001, with his last held position as Audit Assistant. Mr Koh is currently assisting the Group Chief Executive Officer of Komarkcorp Group to oversee the overall operation except for China operations and in formulating the business development and corporate strategies for the Group. The Number of Board Meetings Attended in the Financial Year : 7 out of 7 KOM A R KCO R P B E R HAD Securities Holding in the Subsidiaries : Deemed to have interests in shares of all the subsidiaries to the extent Komarkcorp Berhad has an interest. Family Relationship With Any Director and / or Major Shareholders of the Company : Child of Mr. Koh Hong Muan @ Koh Gak Siong and brother of Mr. Koh Chie Jooi. Conflict of Interest : None List of Convictions for Offences Within the Past 10 Years Other Than Traffic Offences : None Working Experience : Mr Koh Chee Mian was appointed to the Board of Komarkcorp Berhad as an Executive Director on 15 December 2003. On 16 May 2011, he was appointed as Deputy Managing Director of Komarkcorp Group. On 27 March 2014, he was redesignated as an Executive Director of Komarkcorp Berhad and as Managing Director at subsidiaries level in charge for China subsidiaries. He graduated from the King’s College London, United Kingdom with a degree in Bachelor of Engineering. Currently, Mr Koh is the person-in-charge of the overall operations for China. The Number of Board Meetings Attended in the Financial Year : 7 out of 7 PROFILE OF DIRECTORS 13 of Komarkcorp Berhad (cont’d) Lim Pei Tiam @ Liam Ahat Kiat Age : 68 Nationality : Malaysian Qualification : 1. Diploma in Banking from Institute of Bankers, London 2. Senior Associate of Institute of Bankers, Malaysia Directorate : Executive Director Designation : Company Director Other Directorships of Public Companies : Poh Huat Resources Holdings Berhad The Date He Was First Appointed to the Board : 16 August 2013 The Details of Any Board Committee to Which He Belongs : None Securities Holding in the Company : Direct : 9,938,800 ordinary shares Securities Holding in the Subsidiaries : Deemed to have interests in shares of all the subsidiaries to the extent Komarkcorp Berhad has an interest. Family Relationship With Any Director and / or Major Shareholders of the Company : None Conflict of Interest : None List of Convictions for Offences Within the Past 10 Years Other Than Traffic Offences : None Working Experience : Mr Lim Pei has 20 years of experience in large commercial group and position last held was Branch Manager of UMBC Bank. In 1998, Mr Lim set up his own trading business in both Thong Thye Siang Sdn Bhd. and Great Plus Enterprise Sdn. Bhd. The Number of Board Meetings Attended in the Financial Year : 3 out of 4 Datuk Ng Peng Hong @ Ng Peng Hay D.M.SM., D.SM., P.J.K. Age : 62 Nationality : Malaysian Qualification : Malaysian Certificate of Education Directorate : Senior Independent Non-Executive Director Designation : Company Director Other Directorships of Public Companies : Bonia Corporation Berhad Farm’s Best Berhd Wellcall Holdings Berhad ICapital.Biz Berhad The Date He Was First Appointed to the Board : 16 June 1997 The Details of Any Board Committee to Which He Belongs : Audit Committee, Remuneration Committee and Nomination Committee of Komarkcorp Berhad Securities Holding in the Company : Nil Securities Holding in the Subsidiaries : Nil Family Relationship With Any Director and / or Major Shareholders of the Company : None Conflict of Interest : None List of Convictions for Offences Within the Past 10 Years Other Than Traffic Offences : None Working Experience : Datuk Ng Peng Hong @ Ng Peng Hay was appointed to the Board of Komarkcorp Berhad on 16 June 1997. He was the State Assemblyman for Tengkera Constituency under Barisan Nasional between 1982 and 1986. He then served as a Senator in the Malaysian Parliament from 1987 to 1993. His first involvement in social activities was upon completing his secondary education. Datuk Ng has been appointed as the Investment Co-ordinator of the Malacca State Development Corporation to handle direct investments in the State of Melaka since 1988. Together with his team of officials and his excellent public relations, he has helped in attracting numerous Taiwanese, Singaporean and Chinese investors into the State of Melaka. In recognition of his efforts and dedication, Datuk Ng was conferred the Darjah Mulia Seri Melaka by his Excellency, the Governor of Melaka in 1992. On 17 July 1999, the Taiwanese Government awarded him the Economic Medal. Datuk Ng is the Chairman of MCA, 7th Branch Melaka since 1982. Presently, he is the Chairman of Koperasi Jayadiri Malaysia Berhad and is a Board Member of Malaysian Investment Development Authority (MIDA) and Director of The Tun Hussein Onn National Eye Hospital. The Number of Board Meetings Attended in the Financial Year : 6 out of 7 ANNUA L R EPORT 2 0 1 4 PROFILE OF DIRECTORS 14 of Komarkcorp Berhad (cont’d) Tan Sri Ahmad Bin Mohd Don Dato’ Yeow Wah Chin Age : 67 Nationality : Malaysian Qualification : 1. Bachelor of Economics & Business (First Class Hons) Aberystwyth University, United Kingdom 2. Fellow of the Institute of Chartered Accountants in England and Wales (ICAEW) 3. Members of the Malaysian Institute of Certified Public Accountants Directorate : Independent Non-Executive Director Designation : Chairman Other Directorships of Public Companies : 1. MAA Group Berhad 2. United Malacca Berhad 3. Hap Seng Plantations Holdings Berhad The Date He Was First Appointed to the Board : 16 August 2013 Age : 54 Nationality : Malaysian Qualification : 1. Bachelor of Economics (Hons) University Kebangsaan Malaysia 2. Bachelor of Laws (LL.B) (Hons) University of Wales, United Kingdom 3. Certificate in Legal Practice Directorate : Non-Independent Non-Executive Director Designation : Company Director Other Directorships of Public Companies : Bina Puri Holdings Bhd The Date He Was First Appointed to the Board : 16 August 2013 The Details of Any Board Committee to Which He Belongs : Audit Committee and Remuneration Committee of Komarkcorp Berhad Securities Holding in the Company : Nil Securities Holding in the Subsidiaries : Nil Family Relationship With Any Director and / or Major Shareholders of the Company : None Conflict of Interest : None List of Convictions for Offences Within the Past 10 Years Other Than Traffic Offences : None Working Experience : Tan Sri Ahmad Bin Mohd Don, is the Independent NonExecutive Chairman of Komarkcorp Berhad. He was first appointed as an Independent Non-Executive Director on 16 August 2013 and became the Chairman on 11 September 2013. Tan Sri Ahmad graduated summa cum laude in Economics and Business from the Aberystwyth University, United Kingdom. He is fellow of the Institute of Chartered Accountants in England and Wales and a member of the Malaysian Institute of Certified Public Accountants. Tan Sri Ahmad has extensive experience in finance and banking, having worked in various capacities with Pernas Securities Sdn Bhd, Permodalan Nasional Berhad and Malayan Banking Berhad. He was the Group Managing Director and Chief Executive Officer of Malayan Banking Berhad from 1991 to 1994 before assuming the position as the Governor of Bank Negara Malaysia from May 1994 to August 1998. The Number of Board Meetings Attended in the Financial Year : 3 out of 4 KOM A R KCO R P B E R HAD The Details of Any Board Committee to Which He Belongs : Audit Committee and Nomination Committee of Komarkcorp Berhad Securities Holding in the Company : Direct: 520,000 ordinary shares Securities Holding in the Subsidiaries : Nil Family Relationship With Any Director and / or Major Shareholders of the Company : None Conflict of Interest : None List of Convictions for Offences Within the Past 10 Years Other Than Traffic Offences : None Working Experience : Dato’ Yeow Wah Chin, was appointed to the Board on 16 August 13. A lawyer by profession, Dato’ Yeow holds a Bachelor of Economics (Hons) degree from University Kebangsaan Malaysia in 1984 and worked with Malayan Banking Bhd. for a few years before he went for further studies to read law at the University College of Wales, Aberystwyth, United Kingdom in September, 1989 where he graduated with LLB (Hons) degree in 1991. Upon his return he continued to serve Malayan Banking Bhd. for two years before he set up his own legal practice, Messrs Yeow & Salleh in 1994. He specialises in banking and commercial law. He has been appointed as a member of Advocates and Solicitors’ Disciplinary Committee for some years and had also served as a committee member of the Conveyancing Practice Committee of the Bar Council. As an experienced practising lawyer, he had also been appointed to serve as Legal Advisor for the Society of Interpreters of the Deaf in Selangor and Wilayah Persekutuan and Yeow See Association in Melaka. He is a member of the Board of the Company. He also sits as a member of the Board of Bina Puri Holdings Berhad. Dato’ Yeow is currently the Lions Clubs International, Multiple District 308 Council Chairperson and also the Chairperson of the Lions Education Foundation The Number of Board Meetings Attended in the Financial Year : 3 out of 4 PROFILE OF DIRECTORS of Komarkcorp Berhad (cont’d) 15 Ihsan bin Ismail Age : 51 Nationality : Malaysian Qualification : 1. Master in Business Administration California State University, School of Business Administration, 2. Bachelor of Science in Business Administration Oregon State University, School of Business Administration Directorate : Independent Non-Executive Director Designation : Company Director Other Directorships of Public Companies : None The Date He Was First Appointed to the Board : 1 January 2009, resigned on 16 August 2013 and reappointed on 23 September 2013. The Details of Any Board Committee to Which He Belongs : Audit Committee, Remuneration Committee and Nomination Committee of Komarkcorp Berhad Securities Holding in the Company : Nil Securities Holding in the Subsidiaries : Nil Family Relationship With Any Director and / or Major Shareholders of the Company : None Conflict of Interest : None List of Convictions for Offences Within the Past 10 Years Other Than Traffic Offences : None Working Experience : Encik Ihsan bin Ismail was reappointed to the Board of Komarkcorp Berhad on 23 September 2013 after resignation from his first appointment on 16 August 2013. He joined Lembaga Tabung Haji as an investment officer after graduating from California State University, USA in 1987 with a Master in Business Administration. Encik Ihsan was attached to Lembaga Tabung Haji for 9 years from 1987 to 1996 and he was a special assistant to Deputy Director General in Investment and an assistant director of corporate affair prior to setting up his own business. He also represented Tabung Haji in several companies namely Syarikat Peladang Tabung Haji Sdn Bhd for 7 years from 1989 to 1996 and Syarikat Times Offset Malaysia Sdn Bhd for 15 years from 1992 to 2007. Encik Ihsan has wide experience in investment management and project evaluations. The Number of Board Meetings Attended in the Financial Year : 2 out of 2 ANNUA L R EPORT 2 0 1 4 STATEMENT ON CORPORATE GOVERNANCE 16 The Board of Directors appreciates the importance of adopting high standards of corporate governance within the Group. The Board views corporate governance as synonymous with three key concepts: namely transparency, accountability and corporate performance. As such, the Board strives to adopt the substance behind corporate governance prescriptions and not merely the form. This Statement outlines the key aspects of how the Company has applied and taken into account the Principles enumerated under the Malaysian Code of Corporate Governance 2012 (the “Code”) during the financial year ended 2013. Where there are gaps in the Company’s observation of any of the Recommendations of the Code, these are disclosed herein with explanations. Principles Statement The following statement sets out how the Group has applied and the extent of its compliance with the best practices set out in the Code. A. Establish Clear Roles and responsibilities The Group acknowledges the pivotal role of the Board of Directors in the stewardship of its direction and operations, and ultimately the enhancement of long-term shareholder value. To fulfil 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. The role and function of the Board, as well as the differing roles of executive directors and non-executive directors are clearly delineated and defined. The Board has a formal schedule of matters reserved to itself for decision, which includes the overall Group strategy and direction, acquisition and investment policy, approval of major capital expenditure, consideration of significant financial matters and its review of the financial and operating performance of the Group. The schedule ensures that the governance of the Group is firmly in the Board’s hands. Board Charter and Board Committees The Board Charter of the Company is in place which sets out how its roles, responsibilities, composition and processes, having regard to principles of good corporate governance and requirements of Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”). The Board Charter further defines the matters that are reserved for the Board and its committees as well as the roles and responsibilities of the Chairman, Group Chief Executive Officer and Group Joint Chief Executive Officer. Steps will be taken to upload the salient features of the Board Charter on the Company’s website at www.komark. com.my. As set out in the Board Charter, the Board is responsible for: • • • • • • • • • reviewing and adopting strategic plan, monitoring corporate performance and implementation of strategies and policies and ensuring that the strategies promote sustainability; overseeing the conduct of the Company’s business and build sustainable value for shareholders; reviewing the procedures to identify principal risks and ensuring the implementation of appropriate internal controls and mitigation measures; succession planning, including appointing, assessing, training, fixing the compensation of and where appropriate, replacing senior management; developing and implementing a Corporate Disclosure Policy (including an investor relations programme) for the Group; reviewing the adequacy and the integrity of the internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines; ensuring that the Company’s financial statements are true and fair and conform with the accounting standards; monitoring and reviewing policies and procedures relating to occupational health and safety and compliance with relevant laws and regulations; and Ensuring that the Company adheres to high standards of ethics and corporate behaviour. KOM A R KCO R P B E R HAD STATEMENT ON CORPORATE GOVERNANCE 17 (cont’d) To assist the Board in carrying out its fiduciary duties and to enhance business and operational efficiency, the Board of Directors delegates certain duties to its committees, namely the Audit Committee, Nomination Committee and Remuneration Committee. Each Board Committee operates in accordance with the written terms of reference approved by the Board. The Board receives reports of their proceedings and deliberations. The Chairman of the various committees will report to the Board the outcome of the Committee meetings which will be recorded in the minutes of the Board meeting. The ultimate responsibility for decision making, however, lies with the Board. Code of Conduct The Group Code of Conduct (‘COC’) is in place that is applicable to all its Directors and employees. The Board noted the importance of the Code of Ethics and Conduct of the Group that emphasized the Group’s commitment to ethical practices and compliance with the applicable laws and regulations which also governs the standards of ethics and good conduct expected from the Directors and employees of the Group. Sustainability The Board recognises the importance of sustainability and its increasing significance in the business. The Board is committed to understanding and implementing sustainable practices and to exploring the benefits to the business whilst attempting to achieve the right balance between the needs of the wider community, the requirements of shareholders and stakeholders and economic success. The Company has in place a Sustainability Policy which aims to endeavour to integrate the principles of sustainability into the Company’s strategies, policies and procedures and ensure that the Board and senior management are involved in implementation of this policy, review the sustainability performance and create a culture of sustainability within the Company, and the community, with an emphasis on integrating the environmental, social and governance considerations into decision making and the delivery of outcomes. Supply and Access to Information The Chairman ensures that all directors have full and timely access to information. Prior to the meetings of the Board and the Board Committees, notice of agenda together with previous minutes and other relevant information were circulated to all directors on a timely basis in order to enable the directors to be well informed and briefed before the meetings. All directors also have full and free access to information within the Group and can as individuals or as a full Board seek independent professional advice, in furtherance of their duties, at the expense of the Group. Every director also has 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. In the event that any one of the Company Secretaries fails to fulfil her functions effectively, the terms of the appointment permits her removal and appointment of successor which is a matter for the Board to decide. Company Secretaries The Company Secretaries plays an advisory role to the Board in relation to the Company’s constitution, the Board’s policies and procedures, and compliance with the relevant regulatory requirements, codes or guidance and legislations. The Company Secretaries are suitably qualified, competent and capable of carrying out the duties required and has attended training and seminars conducted by The Malaysian Institute of Chartered Secretaries and Administrators (MAICSA) to keep abreast with the relevant updates on statutory and regulatory requirements and updates on the MMLR of Bursa Securities, Related Party Transactions and Corporate Disclosure Guide. The Company Secretaries also serves notice to the Directors and Principal Officers to notify them of closed periods for trading in the Company’s shares, in accordance with Chapter 14 of the MMLR of Bursa Securities. Deliberations during the Board and Board Committees’ meetings were properly minuted and documented by the Company Secretaries. B. Strengthen composition The Board consists of nine (9) Directors, comprising an Independent Non-Executive Chairman, five (5) Executive Directors, one (1) Non-Independent Non-Executive Director and three (3) Independent Non-Executive Directors. One third (1/3) of the Board comprises of Independent Non-Executive Directors, in compliance with Paragraph 15.02(1) of the MMLR of Bursa Securities. The profile of each Directors is set out on pages 11 to 15 of this Annual Report. ANNUA L R EPORT 2 0 1 4 STATEMENT ON CORPORATE GOVERNANCE 18 (cont’d) Nomination Committee The Company’s Nomination Committee (“NC”) comprised of three (3) Members, all of whom are Non-Executive Directors, with a majority being Independent. The current NC Chairman is independent and able to contribute effectively to the NC in view of his wide and vast experience in the industry. During the financial year ended 30 April 2014, five (5) NC meetings were held and the attendances are as follows: Number of meetings attended/held No Name of Committee Members 1. Datuk Wira Jalilah Binti Baba (1) (Chairman, Independent Non-Executive Director) 4/4 2. Datuk Ng Peng Hong @ Ng Peng Hay (2) (Chairman, Senior Independent Non-Executive Director) 4/5 3. Mr Chew Chee Chek (3) (Member, Independent Non-Executive Director) 1/3 4. Dato’ Yeow Wah Chin (4) (Member, Non-Independent Non-Executive Director) 1/1 5. Encik Ihsan Bin Ismail (5) (Member, Independent Non-Executive Director) N/A Notes: (1) Appointed as Chairman of the NC on 1 April 2013. Ceased as Chairman of NC following her resignation as Independent Non-Executive Chairman on 30 August 2013. (2) Resigned as Chairman of NC and remain as member of NC on 1 April 2013. Redesignated as Chairman of NC on 23 September 2013. (3) Ceased as member of NC following his resignation as Independent Non-Executive Director on 16 August 2013. (4) Appointed as member of the NC on 30 August 2013. (5) Appointed as member of the NC on 23 September 2013. There was no meeting held since his appointment as NC member during the financial year. The NC makes recommendations to the Board on suitable candidates for appointment as Board members, member of Board Committees and Chief Executive Officer/Executive Director of the Company based on the following evaluation criteria: ● skills, knowledge, expertise and experience; ●professionalism; ● time commitment to effectively discharge his/her role as a director; ● contribution and performance; ● character, integrity and competence; ● boardroom diversity including gender diversity; and ● in the case of candidates for the position of independent non-executive directors, the NC shall also evaluate the candidates’ ability to discharge such responsibilities/functions as are expected from independent nonexecutive directors. The NC will arrange for the induction of any new Directors appointed to the Board to enable them to have a full understanding of the nature of the business, current issues within the Company and corporate strategies as well as the structure and management of the Company. The Board has via the NC reviewed and assessed the size of Board, required mix of skills, experience, performance and contribution of Directors; effectiveness of the Board as a whole; independence of Independent Directors and training courses required by the Directors, and is satisfied with the current composition and performance of the Board. KOM A R KCO R P B E R HAD STATEMENT ON CORPORATE GOVERNANCE 19 (cont’d) The Board has no specific policy on setting targets on female candidates to be appointed to the Board. The evaluation of the suitability of candidates is based on the candidates’ competency, character, time commitment, integrity and experience in meeting the needs of the Company. With the current composition, the Board feels that its members have the necessary knowledge, experience, requisite range of skills and competence to enable them to discharge their duties and responsibilities effectively. All Directors on the Board have gained extensive experience with their many years of experience on company Boards and/or also as professionals in their respective fields of expertise. The NC will however continue to take steps to ensure suitable female candidates are sought as part of its recruitment exercise. Remuneration Committee The Remuneration Committee (“RC”) comprises five (5) Members, in which majority are Non-Executive Directors. The RC is responsible for evaluating, deliberating and recommending to the Board the compensation and benefits that are fairly guided by market norms and industry practices for the business the company is in. The RC is also responsible for evaluating the Executive Directors’ remuneration which is linked to the performance of the Executive Director and performance of the Group. Individual Directors do not participate in the decisions regarding his or her individual remuneration. The RC recommends the Director’s fee payable to members of the Board and are deliberated at the Board before it is presented at the Annual General Meeting (“AGM”) for shareholders’ approval. The Board and RC strive to ensure a fair structure of compensation for an organization of this size and market sector and business complexity. It is also aimed at attracting and retaining Directors who have the right calibre, skills and experience to contribute meaningfully towards the success of the business. During the financial year ended 30 April 2014, two (2) RC meetings were held and the attendance is as follows: Number of meetings attended/held No Name of Committee Members 1. Datuk Wira Jalilah Binti Baba (1) (Chairman, Independent Non-Executive Director) 1/1 2. Datuk Ng Peng Hong @ Ng Peng Hay (2) (Chairman, Senior Independent Non-Executive Director) 2/2 3. Mr Chew Chee Chek (3) (Member, Independent Non-Executive Director) 0/1 4. Mr Koh Hong Muan @ Koh Gak Siong (Member, Executive Director) 2/2 5. Tan Sri Ahmad Bin Mohd Don (4) (Member, Independent Non-Executive Director) 1/1 6. Mr Tan Kwe Hee (4) (Member, Executive Director) 1/1 7. Encik Ihsan Bin Ismail (5) (Member, Independent Non-Executive Director) N/A Notes: (1) Appointed as Chairman of the RC on 1 April 2013. Ceased as Chairman of RC following her resignation as Independent Non-Executive Chairman on 30 August 2013. (2) Resigned as Chairman of RC and remain as member of RC on 1 April 2013. Redesignated as Chairman of RC on 23 September 2013. (3) Ceased as member of RC following his resignation as Independent Non-Executive Director on 16 August 2013. (4) Appointed as members of the RC on 30 August 2013. (5) Appointed as member of the RC on 23 September 2013. There was no meeting held since his appointment as RC member during the financial year. ANNUA L R EPORT 2 0 1 4 STATEMENT ON CORPORATE GOVERNANCE 20 (cont’d) The RC has reviewed and recommended to the Board the Directors’ fees for the Non-Executive Directors. The Directors’ fees are subject to shareholders’ approval at the Company’s forthcoming Annual General Meeting pursuant to the Articles of Association of the Company. Details of remuneration of Directors of the Company for the financial year ended 30 April 2014 are as follows: Executive Non-Executive RM’000 RM’000 Directors’ Fees Salaries & Bonuses Defined Contribution Plan Other Benefits Total 907 1,011 20 1,938 180 180 The number of directors of the Company in each remuneration band is as follows: Band (RM) Below 50,000 50,001 – 100,000 150,001 - 200,000 350,001 – 400,000 950,001 – 1,000,000 Total Executive Non-Executive 1 1 2 1 5 6 6 C. Reinforce Independence The Board recognises the importance of independence and objectivity in its decision making process which is in line with the Code. The directors with their different backgrounds and specialisation, collectively bring with them a wide range of experience and expertise in areas such as finance, corporate affairs, marketing and operations. The executive directors are responsible for implementing the policies and decisions of the Board, overseeing the operations as well as co-ordinating the development and implementation of business and corporate strategies. The nonexecutive directors play key supporting roles, contributing their knowledge and experience towards formulating policies and in the decision-making process. They do not engage in day-to-day management of the Company and do not participate in any business dealings with the Company. The independent non-executive directors bring with them objective and independent judgement to decision-making and provide a capable check and balance for the executive directors. The Board is also satisfied that its composition fairly reflects the investment of minority shareholders in the Company. Annual Assessment of Independence The concept of independence adopted by the Board is in tandem with the definition of an independent director in paragraph 1.01 of the MMLR of Bursa Securities and the Practice Note 13 issued pursuant to the MMLR. The key element for fulfilling the criteria is the appointment of an independent director who is not a member of management and who is free of any relationship which could interfere with the exercise of independent judgement or the ability to act in the best interest of the Company. The Board, via NC assesses Independent Director’s independence to ensure ongoing compliance with this requirement annually. Any Director who considers that he has or may have a conflict of interest or a material personal interest or a direct or indirect interest or relationship that could reasonably be considered to influence in a material way the Director’s decisions in any matter concerning to the Company is required to immediately disclose to the Board and to abstain from participating in any discussion or voting on the respective matter. KOM A R KCO R P B E R HAD STATEMENT ON CORPORATE GOVERNANCE 21 (cont’d) For the financial year ended 30 April 2014, the Board assessed the independence of its Independent Non-Executive Directors based on the criteria set out in the MMLR of Bursa Securities. The Board is satisfied with the level of independence demonstrated by all the Independent Directors and their ability to act in the best interest of the Company. Tenure of Independent Directors The Board is mindful of the recommendation of the Code on limiting the tenure of Independent Directors to nine (9) years of service. In line with the Code and to enable a balance of power and authority in the Board, the Board Charter, which has been adopted by the Company, sets out the restriction on the tenure of an Independent Director to a cumulative term of nine (9) years. However, an Independent Director may continue to serve the Board upon reaching the 9-year limit subject to the Independent Director’s re-designation as a Non-Independent Non-Executive Director. In the event the Board intends to retain the Director as Independent after the latter has served a cumulative term of nine (9) years, the Board must justify the decision and seek shareholders’ approval at general meeting. In justifying the decision, the NC is entrusted to assess the candidate’s suitability to continue as an Independent Non-Executive Director based on the criteria on independence. Shareholders’ Approval for the Re-Appointment of Non-Executive Director Following an assessment by the NC and deliberation at its meeting held in 23 September 2013, Datuk Ng Peng Hong @ Ng Peng Hay who served as an Independent Non-Executive Director of the Company for a cumulative term of more than 9 years as at the end of the financial year under review had been recommended by the Board to continue to act as Independent Non-Executive Director subject to shareholders’ approval at the forthcoming Annual General Meeting of the Company. Key justifications for his recommended continuance as an Independent Non-Executive Director are as follows: • • • • he fulfils the criteria under the definition on Independent Director as stated in the MMLR of Bursa Securities and therefore is able to bring independent and objective judgment to the Board; his experience enables him to provide the Board and AC with a pertinent set of experience, expertise, skills and competence; he has been with the Company long and therefore understands the Company’s business operations which enables him to contribute actively and effectively during deliberations or discussions at AC and Board meetings; and he has exercised due care during his tenure as Independent Non-Executive Director of the Company and carried out his professional duties in the interest of the Company. Chairman and Group Chief Executive Officer The positions of Chairman and Group Chief Executive Officer are held by different individuals. The Chairman is responsible for the leadership, effectiveness, conduct and governance of the Board while the Group Chief Executive Officer is an Executive Director, who manages the business and operations of the Group and implements the Board’s decisions. The distinct and separate roles of the Chairman and Group Chief Executive Officer, with a clear division of responsibilities, ensure a balance of power and authority, such that no one individual has unfettered powers of decision-making. In view of the current composition of the Board, particularly the separation of the roles of the Chairman and Group Chief Executive Officer, and the presence of other independent directors, the Board does not consider it necessary to nominate a Senior Independent Non-Executive Director to whom concerns of shareholders may be conveyed. D. Fostering commitment Time commitment The Board endeavours to meet at least four (4) times a year, at quarterly intervals which are scheduled well in advance at the commencement of the financial year to help facilitate the Directors in planning their meeting schedule for the year. Additional meetings are convened where necessary to deal with urgent and important matters that require attention of the Board. Where appropriate, decisions are also made by way of circular resolutions in between scheduled meetings during the financial year. Senior management staff and/or external advisors may be invited to attend Board meetings to advise the Board and to furnish the Board with information and clarification needed on relevant items on the agenda to enable the Directors to arrive at a considered decision. ANNUA L R EPORT 2 0 1 4 STATEMENT ON CORPORATE GOVERNANCE 22 (cont’d) All Board meetings are furnished with proper agendas with due notice issued and board papers and reports are prepared by the Management which provides updates on financial, operational, legal and circulated prior to the meetings to all Directors with sufficient time to review them for effective discussions and decision making during the meetings. The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities which is evidenced by the satisfactory attendance record of the Directors at Board meetings. The Board members are required to notify the Board prior to their acceptance of new directorships in other companies with indication of time that will be spent on the new appointment. All pertinent issues discussed at the Board meetings in arriving at the decisions and conclusions are properly recorded by the Company Secretaries. The Board met seven (7) times during the financial year under review. The details of Directors’ attendance are set out as follows: Number of Board meetings attended/ held during the Director’s term in office No Name of Directors 1. Tan Sri Ahmad Bin Mohd Don (Independent Non-Executive Chairman) - Appointed on 16 August 2013 and redesignated as Chairman on 11 September 2013 3/4 2. Mr Koh Hong Muan @ Koh Gak Siong (Group Chief Executive Officer/Executive Director) - Redesignated as Group Chief Executive Officer on 27 March 2014 7/7 3. Mr Tan Kwe Hee (Joint Group Chief Executive Officer/Executive Director) - Appointed on 16 August 2013 and redesignated as Joint Chief Executive Officer on 30 August 2013 and as Joint Group Chief Executive Officer on 27 March 2014 4/4 4. Mr Lim Pei Tiam @ Liam Ahat Kiat (Executive Director) - Appointed on 16 August 2013 3/4 5. Mr Koh Chie Jooi (Executive Director) - Redesignated from Managing Director to Executive Director on 27 March 2014 7/7 6. Mr Koh Chee Mian (Executive Director) - Redesignated from Deputy Managing Director to Executive Director on 27 March 2014 7/7 7. Datuk Ng Peng Hong @ Ng Peng Hay (Senior Independent Non-Executive Director) - Identified as Senior Independent Non-Executive Director on 27 March 2014 6/7 8. Dato’ Yeow Wah Chin (Non-Independent Non-Executive Director) - Appointed on 16 August 2013 3/4 9. Encik Ihsan bin Ismail (Independent Non-Executive Director) - Resigned on 16 August 2013 and re-appointed on 23 September 2013 2/2 10. Datuk Wira Jalilah Binti Baba (Independent Non-Executive Chairman) - Appointed on 1 April 2013 and resigned on 30 August 2013 4/4 KOM A R KCO R P B E R HAD STATEMENT ON CORPORATE GOVERNANCE 23 (cont’d) Number of Board meetings attended/ held during the Director’s term in office No Name of Directors 11. Mr Chew Chee Chek (Independent Non-Executive Director) - Resigned on 16 August 2013 1/3 12. Mr Koh Chee Kian (Executive Director) - Resigned on 16 August 2013 2/3 13. Mr Koh Chee Hao (Executive Director) - Resigned on 16 August 2013 2/3 Directors’ Training All Directors have completed the Mandatory Accreditation Program as prescribed by Bursa Securities. The Board fully supports the need for its members to further enhance their skills and knowledge on relevant new laws and regulations and changing commercial risks to keep abreast with the developments in the economy, industry, technology and the changing business environment within which the Group operates. Throughout their period in office, the Directors are continually updated on the Group’s business and the regulatory requirements. The Group acknowledges the fact that continuous education is vital for the Board members to gain insight into the state of economy, technological advances in our core business, latest regulatory developments and management strategies. Therefore, the Directors are encouraged to evaluate their own training needs on a continuous process and to determine the relevant programmes, seminars and briefings that would enhance their knowledge to enable the Directors to discharge their responsibilities more effectively. For the financial year ended 30 April 2014, the trainings attended by the Directors are as follows:Director Course Title Tan Sri Ahmad Bin Mohd Don Directors Training : ‘Economic and Capital Market Review’ organised by MAA Group Berhad on 14 May 2013. Sunway Managers Conference 2013 – Leading with Passion, Living it out by Sunway Group on 23 November 2013. Koh Hong Muan @ Koh Gak Siong Seminar on Governance and Enterprise Risk Management organised by Malaysian Investor Relations Association and Boardroom Corporate Service Sendirian Berhad on 17 September 2013. Tan Kwe Hee Seminar on Enterprise Risk Management – What it is and implications to Boards and Management of listed issuer organised by KPMG on 23 October 2013. Seminar on Enhanced Understanding of Risk Management and Internal Control for CFOs, Internal Auditors and Risk Officers organised by Bursa Malaysia Berhad on 26 November 2013. Koh Chie Jooi Seminar on Governance and Enterprise Risk Management organised by Malaysian Investor Relations Association and Boardroom Corporate Service Sendirian Berhad on 17 September 2013. Seminar on Cost Accounting Techniques for Cost Monitoring and Control organised by Malaysian Institute of Accountants on 19 & 20 February 2014. Datuk Ng Peng Hong One day training on Competition Law Compliance “Understaing Competition Law and @ Ng Peng Hay Its Implication On Business” organised by First Competition Consulting on 5 September 2013. “Manufacturing Process of Rubber Hose” organised by Wellcall Holdings Berhad on 25 November 2013. ANNUA L R EPORT 2 0 1 4 STATEMENT ON CORPORATE GOVERNANCE 24 (cont’d) In addition, the Company Secretaries circulated the relevant guidelines on regulatory requirements from time to time for the Board’s reference and briefed the Board quarterly on these updates at the Board Meetings. E. Uphold integrity in financial reporting Financial Reporting The Board upholds integrity in financial reporting by ensuring that shareholders are provided with reliable information of the Company’s financial performance, its position and future prospects, in the Annual Audited Financial Statements and quarterly financial reports. The Audit Committee (“AC”) is entrusted with the responsibility of assisting the Board in meeting its responsibilities relating to accounting and reporting practices of the Company and its subsidiary companies. One of the key responsibilities of the AC is to ensure that the financial statements of the Group and Company comply with applicable financial reporting standards in Malaysia. Such financial statements comprise the quarterly financial report announced to Bursa Securities and the annual statutory financial statements. In addition, the AC shall:(a) Oversee and appraise the quality of the audits conducted both by the Company’s internal and external auditors; (b) Maintain open lines of communication between the Board of Directors, the internal auditors and external auditors for the exchange of views and information, as well as to confirm their respective authority and responsibilities; and (c) Determine the adequacy of the Group’s administrative, operating and accounting controls. The AC comprises of four (4) members of whom all are Non-Executive Directors with majority Independent NonExecutive Directors. The composition of the AC, including its roles and responsibilities are set out on pages 29 to 32 under AC Report of this Annual Report. The composition of the AC is as follows: 1. 2. 3. 4. 5. 6. Tan Sri Ahmad Bin Mohd Don (Member, Independent Non-Executive Director; appointed as Chairman of the AC on 30 August 2013 and redesignated as member of the AC on 23 September 2013). Datuk Ng Peng Hong @ Ng Peng Hay (Chairman, Independent Non-Executive Director, redesignated from Chairman to member of the AC on 30 August 2013 and subsequently redesignated as Chairman of the AC on 23 September 2013). Encik Ihsan bin Ismail (Member, Independent Non-Executive Director; ceased as member of the AC following his resignation as Independent Non-Executive Director on 16 August 2013 and subsequently appointed as member of the AC on 23 September 2013). Datuk Wira Jalilah Binti Baba (Member, Independent Non-Executive Director, appointed as member of the AC on 1 April 2013 and ceased as member of the AC following her resignation as Independent Non-Executive Chairman on 30 August 2013). Chew Chee Chek (Member, Independent Non-Executive Director, ceased as member of the AC following his resignation as Independent Non-Executive Director on 16 August 2013). Dato’ Yeow Wah Chin (Member, Non-Independent Non-Executive Director, appointed as member of the AC on 23 September 2013). Suitability and Independence of Internal and External Auditors To ensure independence, the AC members have met with the External Auditors without the presence of the Management during the financial year to discuss issues arising from any audit exercises or other matters, which the External Auditors may wish to raise. The External Auditors have also confirmed that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the independence criteria set out by the Malaysian Institute of Accountants. The Board has outsourced the independent internal audit function to MAC & Associates that reports directly to the AC. The key activities covered by the internal audit function during the financial year under review is provided in the AC Report of the Company as set out on pages 29 to 32 of this Annual Report. KOM A R KCO R P B E R HAD STATEMENT ON CORPORATE GOVERNANCE 25 (cont’d) F. Recognise and manage risks The Company has in place an on-going process for identifying, evaluating and managing significant risks that may affect the achievement of the business objectives of the Group. Reviews on the key risks identified were conducted to ensure proper management of risks and that measures are taken to mitigate any weaknesses in the control environment. The Board has mandated the AC with the overall responsibility of ensuring adequacy, completeness and effectiveness of the internal control system. The AC undertakes periodic reviews and monitors the compliance to these systems via the Internal Audit Function who carries out audit checks on such control processes and provides feedback on its effectiveness and compliance at the operating level. Any weaknesses or variances reported by the Internal Auditor to the AC will be turned into management actions to rectify any weaknesses in those control processes. The outsourced Internal Auditor acts as a unit independent of management to carry out the audit of management processes and business transactions of the operating units and reports its findings back to the AC. This independent mechanism provides independent feedback of the accountability, adequacy and effectiveness of the system of internal controls in place, giving the assurance that the Board needs to fulfill its responsibility. The key activities covered by the internal audit function during the financial year under review is provided in the AC Report of the Company as set out on pages 29 to 32 of this Annual Report. G. Timely and high quality disclosure The Board is aware of the need to establish corporate disclosure policies and procedures to enable comprehensive, accurate and timely disclosures relating to the Group to the regulators, shareholders and stakeholders. Steps will be taken to formalise pertinent corporate disclosure policies to comply with the disclosure requirements as stipulated in the MMLR of Bursa Securities, and to set out the persons authorised and responsible to approve and disclose material information to shareholders and stakeholders. To augment the process of disclosure, the Board has established a dedicated section for corporate information on the Company’s website where information on the Company’s announcements, financial information and the Company’s Annual Report may be accessed. H. Strengthen relationship between company and shareholders The Company aims to ensure that the shareholders and investors are kept informed of all major corporate developments, financial performance and other relevant information by promptly disseminating such information to shareholders and investors via announcements to Bursa Securities, which is in line with Bursa Securities’ objectives of ensuring transparency and good corporate governance practices, through dialogue with analysts and the media. The AGM is the principal forum for dialogue with the shareholders. Shareholders are notified of the meeting and provided with a copy of the Company’s Annual Report before the meeting. All shareholders are encouraged to attend the Annual General Meeting and participate in its proceedings. Every opportunity is given to the shareholders to ask questions and seek clarification on the business and performance of the Group. The AC is available at the AGM to answer questions and consider suggestions. The External Auditors are also present to provide their professional and independent clarification on issues of concern raised by the shareholders, if any. The annual report and the quarterly announcements are the primary mode of communications to report on the Group’s business activities and financial performance to all shareholders. The Company also maintains an effective communication channel between the Board, shareholders and the general public through timely dissemination of all material information. Minority shareholders may communicate with the Company through the Company’s website (www.komark.com. my). ANNUA L R EPORT 2 0 1 4 STATEMENT ON CORPORATE GOVERNANCE 26 (cont’d) The Notice of AGM will be circulated at least twenty-one (21) days before the date of the meeting to enable shareholders sufficient time to peruse the Annual Report and papers supporting the resolutions proposed. The Board encourages participation at general meetings and will generally carry out resolutions by show of hand, except for Related Party Transaction if any (wherein poll will be conducted) and unless otherwise demanded by shareholders in accordance with the Articles of Association of the Company. The Chairman of the Board will inform the shareholders of their right to demand a poll vote at the commencement of the general meeting. While the Company endeavours to provide as much information as possible to its shareholders and stakeholders, the Company is mindful of the legal and regulatory framework governing the release of material and price sensitive information. Directors’ Responsibility Statement in Respect of the Preparation of the Audited Financial Statements The Board is responsible for ensuring that the financial statements of the Group give a true and fair view of the state of affairs of the Group and of the Company as at the accounting period and of their profit or loss and cashflow for the period then ended. In preparing the financial statements, the Directors have ensured that applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 have been applied. In preparing the financial statements, the Directors have applied consistently suitable accounting policies and made reasonable and prudent judgements and estimates. The Directors also have a general responsibility for taking such steps as are reasonably available to them to safeguard the assets of the Group and to prevent fraud and other irregularities. KOM A R KCO R P B E R HAD STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL 27 The Board of Directors is ultimately responsible for the Group’s risk management and internal controls system and review its effectiveness during the year pursuant to paragraph 15.26 (b) of the Bursa Securities Main Market Listing Requirements (“MMLR”). The risk management and internal controls system is primarily designed to cater for the business needs and manage the potential business risks of the Group. The Board has overall responsibility to establish a sound risk management and internal controls system to safeguard shareholders’ investments and the Group’s assets. The Board further affirms to embed risk management in all aspects of the Group’s activities and review the adequacy and integrity of these systems in mitigating risks within the Group’s acceptable risk appetite. In view of the limitations that are inherent in any systems of risk management and internal control, such systems are designed to manage rather than eliminate the risk of failure to achieve its’ business objectives. Accordingly, these systems can provide only reasonable and not absolute assurance against material misstatement, frauds or loss. The concept of reasonable assurance also recognizes that the cost of control procedures should not exceed the expected benefits. There are always opportunities to further improve the current risk management and internal control systems of the Group. A program of actions to enhance the risk management and internal control systems was undertaken in line with corporate governance compliance. The Company has also outsourced the internal audit function of the Group to a professional firm, who reports directly to the Audit Committee on its findings and recommendations for improvement. The Internal Auditor’s main role is to independently assess the adequacy and integrity of such system of risk management and internal control established by the Management based on the audit plan approved by the Audit Committee and to make appropriate recommendations for Management’s implementation. In financial year ended 30 April 2014, the total cost incurred for the internal audit function was RM12,090.50. In addition, a Risk Management Committee which comprises of Executive Directors and Senior Management of the Group has also been set up. In seeking to achieve the objectives of the risk management and internal control systems, the following key elements will be considered: Control Environment and Activities It is imperative that the Group should operate on a sound system of internal control. In general, the overall line of communications across the business should be defined and there is an appropriate integrity in risk management. There is also a limit on authority that clearly defines authorisation limits to ensure proper identification of accountabilities and segregation of duties. Operation control procedures have been established according to ISO 9001 standard. This will ensure that the business process flow is accordingly and properly executed. Risk Management The Board recognises that the management of principal risks plays an important and integral part of the Group’s daily operations and that the identification and the management of such risk will affect the achievement of the Group’s corporate objectives. As an ongoing process, business issues faced by the Group are identified and evaluated and consideration is given on the potential impact of achieving the business objectives. This includes examining business issues in critical areas, assessing the likelihood of material exposures and identifying the measures taken to mitigate the risks arising from these issues. ANNUA L R EPORT 2 0 1 4 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL 28 (cont’d) Key Internal Control Processes The following are the key processes that have been established as part of the Group’s internal control effort: (a) (b) (c) (d) (e) (f) A clearly defined organisation and hierarchical structure outlining line of reporting and job responsibilities with strong risk control culture at the operational level. In ensuring that each operating unit is functioning efficiently, emphasis is placed on personnel employed where the integrity and competence of personnel are ensured through recruitment evaluation process. Financial reports are supplied to the Audit Committee and the Board on a quarterly basis for review and if necessary correction action to be taken. The Board, Audit Committee and Management meet regularly to review the internal audit reports and monitor the status of the implementation of recommendations to address internal control weakness noted. Regular reporting made to the Board by the Management of corporate, legal, accounting and environmental developments. Regular training and development programs attended by employees with the objective of enhancing their knowledge and competency. Conclusion In reviewing the risk management and internal control system of the Group, the Board has, through the Audit Committee, received reports from Internal Auditors and Risk Management Committee in relation to findings on risk and internal audit control system. The Board has also received assurance from the Group Chief Executive Officer, Joint Group Chief Executive Officer and Group Financial Controller that the Group’s risk management and internal control system are operating adequately and effectively in all material aspects, based on the risk management and internal control system of the Group. KOM A R KCO R P B E R HAD AUDIT COMMITTEE REPORT 29 COMPOSITION Datuk Ng Peng Hong @ Ng Peng Hay Tan Sri Ahmad Bin Mohd Don Dato’ Yeow Wah Chin Ihsan bin Ismail Chairman/Senior Independent Non-Executive Director Independent Non-Executive Director Non-Independent Non-Executive Director Independent Non-Executive Director TERMS OF REFERENCE 1.OBJECTIVE The objective of the Audit Committee is to assist the Board of Directors in meeting its responsibilities relating to accounting and reporting practices of the Company and its subsidiary companies. In addition, the Audit Committee shall:a) Oversee and appraise the quality of the audits conducted both by the Company’s internal and external auditors; b) Maintain open lines of communication between the Board of Directors, the internal auditors and the external auditors for the exchange of views and information, as well as to confirm their respective authority and responsibilities; and c) Determine the adequacy of the Group’s system of risk management and internal controls including administrative, operating and accounting controls. 2.COMPOSITION The Audit Committee shall be appointed by the Directors from among their number (pursuant to a resolution of the Board of Directors) which fulfils the following requirements:a) the audit committee must be composed of no fewer than three (3) members; b) a majority of the audit committee must be independent directors; c) all members of the Audit Committee must be non-executive directors; d) all members of the Audit Committee should be financially literate and at least one member of the audit committee:i) must be a member of the Malaysian Institute of Accountants; or ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least thee (3) years’ working experience and:● ● iii) e) he must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act, 1967; or he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act, 1967; or fulfils the requirements as may be prescribed or approved by Bursa Malaysia Securities Berhad (“Bursa Securities”) and/or other relevant authorities from time to time; and no alternate Director shall be appointed as a member of Audit Committee. The members of the Audit Committee shall elect a chairman from among their number who shall be an independent director. In the event of any vacancy in the Audit Committee resulting in the non-compliance of item 2 (a) to (d) above, the vacancy must be filled within 3 months of that event. ANNUA L R EPORT 2 0 1 4 AUDIT COMMITTEE REPORT 30 (cont’d) The Board of Directors must review the term of office and performance of the Audit Committee and each of its members at least once every 3 years to determine whether the Audit Committee and members have carried out their duties in accordance with the terms of reference. 3.FUNCTIONS The functions of the Audit Committee are as follows:a) review the following and report the same to the Board of Directors:i) with the external auditors, the audit plan; ii) with the external auditors, their evaluation of the system of internal controls; iii) with the external auditors, their audit report; iv) the assistance given by the Company’s employees to the external auditors; and v) any related party transaction and conflict of interest situation that may arise within the Company or group including any transaction, procedure or course of conduct that raises questions of management integrity. b) To consider the appointment of the external auditors, the audit fee and any questions of resignation or dismissal and the letter of resignation from the external auditors, if applicable; c) To discuss with the external auditors before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved; d) To review the quarterly and year-end financial statements of the Company, focusing particularly on:● ● ● ● Any changes in accounting policies and practices; Significant adjustments arising from the audit; The going concern assumption; Compliance with accounting standards and other legal requirements; f) To discuss problems and reservations arising from the interim and final audits, and any matters the auditor may wish to discuss (in the absence of management where necessary); g) To discuss the contracts for the provision of non-audit services which can be entered into and procedures that must be followed by the external auditors. The contracts that cannot be entered into should include management consulting, policy and standard operating procedures documentation, strategic decision and internal audit. h) To review the adequacy and effectiveness of risk management, internal control and governance systems put in place in the Group, including information technology security and control, and to evaluate the systems with the internal and external auditors. i) To review the external auditors’ management letter and management’s response; j) To do the following in relation to the internal audit function:● ● ● ● ● ● Ensure the internal audit function is independent of the activities it audits and the head of internal audit reports directly to the Audit Committee. The head of internal audit will be responsible for the regular review and/or appraisal of the effectiveness of the risk management, internal control and governance processes within the Company and provide assurance to the Audit Committee that the internal controls are operating effectively; Review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary authority to carry out its work; Review the internal audit programme and results of the internal audit process and where necessary, ensure that appropriate action is taken on the recommendations of the internal audit function; Review any appraisal or assessment of the performance of members of the internal audit function; Approve any appointments or termination of senior staff members of the internal audit function; Take cognisance of resignations of internal audit staff members (for in-house internal audit function) or the internal audit service provider (for out-sourced internal audit function) and provide the resigning staff member or the internal audit service provider an opportunity to submit his reasons for resigning. KOM A R KCO R P B E R HAD AUDIT COMMITTEE REPORT 31 (cont’d) k) To consider any related party transaction that may arise within the Company and Group; l) To consider the major findings of internal investigations and management’s response; m) To consider other areas as defined by the Board, or as may be prescribed by Bursa Securities or any other relevant authority from time to time; and n) To perform any other functions/responsibilities as may be required of them by Bursa Securities or such other relevant authorities from time to time. 4. RIGHTS OF THE AUDIT COMMITTEE The Audit Committee shall, wherever necessary and reasonable for the Company to the performance of its duties, in accordance with a procedure to be determined by the Board of Directors and at the cost of the Company:- a) have authority to investigate any matter within its terms of reference; b) have the resources which are required to perform its duties; c) have full and unrestricted access to any information pertaining to the Company; d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity; e) be able to obtain independent professional or other advice; and f) be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary. The Chairman of the Audit Committee shall engage on a continuous basis with senior management, such as the chairman, the chief executive officer, the finance director, the head of internal audit and the external auditors in order to be kept informed of matters affecting the Company. 5.MEETINGS The Audit Committee shall meet at least four (4) times a year and such additional meetings as the Chairman shall decide in order to fulfil its duties. However, at least twice a year the Audit Committee shall meet with the external auditors without the presence of executive Board members. In addition, the Chairman may call a meeting of the Audit Committee if a request is made by any committee member, the Company’s Chief Executive, or the internal or external auditors. The Company Secretary or other appropriate senior official shall act as secretary of the Audit Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and circulating it, supported by explanatory documentation to committee members prior to each meeting. The Secretary shall also be responsible for keeping the minutes of meetings of the Audit Committee, and circulating them to committee members and to the other members of the Board of Directors. A quorum shall consist of a majority of independent directors. By invitation of the Audit Committee, the Company must ensure that other directors and employees attend any particular audit committee meeting specific to the relevant meeting. ANNUA L R EPORT 2 0 1 4 AUDIT COMMITTEE REPORT 32 (cont’d) DETAILS OF ATTENDANCE AT AUDIT COMMITTEE MEETINGS DURING THE FINANCIAL YEAR ENDED 30 APRIL 2014 Number of Audit Committee Meetings held for the financial year: Six (6) Attendance of the Audit Committee members are shown below:Name of Audit Committee member Number of meetings attended/held Datuk Ng Peng Hong @ Ng Peng Hay (1) 6/6 Tan Sri Ahmad Bin Mohd Don 3/4 (2) Dato’ Yeow Wah Chin (3) 3/3 Ihsan bin Ismail 3/3 (4) Notes: Redesignated from Chairman to member of the AC on 30 August 2013 and reappointed as Chairman of the AC on 23 September 2013. (2) Appointed as Chairman of the AC on 30 August 2013 and Redesignated from Chairman to member of the AC on 23 September 2013. (3) Appointed as member of the AC on 23 September 2013. (4) Reappointed as member of the AC on 23 September 2013 following his reappointment of Independent Non-Executive Director on the same day. (1) HIGHLIGHTS OF ACTIVITIES During the financial year, the activities of the Audit Committee included:1. Review of the quarterly financial results prior to the release of the announcements to Bursa Securities. 2. Assessment of the external auditors’ findings in relation to audit and accounting issues arising from the audit of the Group’s financial statements and updates on the changes in the reporting of financial statements. 3. Discussion of audit strategy and plan with the internal and external auditors. 4. Examined findings made by the internal auditors and management’s response. INTERNAL AUDIT FUNCTION AND SUMMARY OF ACTIVITIES The internal audit function of the Company has been outsourced to an independent professional firm, which assists the Audit Committee in discharging its duties and responsibilities. They act independently and with due professional care and report directly to the Audit Committee. During the financial year ended 30 April 2014, the Internal Auditors had carried out the following internal audit review:• Inventory management function of Pt Komark Labels & Labelling Indonesia • Inventory management function of General Labels & Labelling (M) Sdn Bhd and Komark International (M) Sdn Bhd The professional fees incurred for the internal audit function in respect of financial year ended 30 April 2014 amounted to approximately RM12,090.50. KOM A R KCO R P B E R HAD OTHER INFORMATION 33 In compliance with the Bursa Malaysia Securities Berhad’s Main Market Listing Requirements, the following additional information is provided: 1. Share Buy-Back There was no share buy-back during the financial year ended 30 April 2014. 2. Depository Receipt Programme During the financial year, the Company did not sponsor depository receipt programme. 3. Imposition of Sanctions and/or Penalties There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies. 4. Non-Audit Fees The amount of non-audit fee paid or payable to external auditors and their affiliated company for the financial year ended 30 April 2014 are as follows:RM 16,234 O & W Tax Consultants Sdn. Bhd. 5. Profit Estimate, Forecast or Projection There was no material variance between the results of the financial year and the unaudited results previously announced. The Company did not release any profit estimates, forecast or projections for the financial year. 6. Profit Guarantees During the financial year, there were no profit guarantees given or received by the Company. 7. Material Contracts During the financial year, there were no material contracts of the Company and its subsidiaries involving Directors’ and major shareholders’ interest. 8. Contracts Relating to Loans There were no material contracts relating to loans by the Company involving Directors and major shareholders. 9. Utilisation of Proceeds The Company did not implement any fund raising exercise during the financial year. 10. Options or Convertible Securities There were no options or convertible securities issued by the Company during the financial year under review. ANNUA L R EPORT 2 0 1 4 OTHER INFORMATION 34 (cont’d) 11. Revaluation Policy During the financial year, the Company and its subsidiaries have revalued it’s landed properties during the financial year ended 2014. The details of revaluation are as below:- Brief Description of No. Properties Valuer Value placed by valuer and Revaluation adopted by Surplus / Directors (Deficit) (RM ‘000) RM ‘000) 1. GM No.439, Lot 132, Mukim of Kajang District, Hulu Langat, Selangor Knight Frank Malaysia Sdn Bhd 14-Feb-14 20,623 32,000 11,377 2. H.S (D) KA 39335 P.T.NO 131760/23 Hala Rapat Baru 22, Kawasan Perindustrian Ringan Kinta Jaya, Perak Khong & Jaafar Sdn Bhd 16-May-14 173 350 177 3. Lot PTD 112290, Mukim of Plentong District Johor Bahru. Khong & Jaafar Sdn Bhd 16-May-14 623 1,100 477 21,419 33,450 12,031 TOTAL 12. Date of Valuation Report Unaudited Net Book Value as at 30 April 2014 (RM ‘000) Disclosure of Recurrent Related Party Transactions The details of the Recurrent Related Party Transactions of a revenue and trading nature carried out by the Group during the financial year ended 30 April 2014 are as follows: Nature of transaction Sale of labels and related products to Komark Enterprise Co. Ltd (“Komark Enterprise”) KOM A R KCO R P B E R HAD Company General Labels & Labelling (M) Sdn Bhd, Komark International Sdn Bhd (“KISB”) Transacting Parties Komark Enterprise (a 49%-owned associated company of KISB) Nature of relationship Koh Hong Muan @ Koh Gak Siong, a Director and Major Shareholder of Komarkcorp is also a director and shareholder of Komark Enterprise and a shareholder and director of Aimas Enterprise. Aimas Enterprise is a Major Shareholder of Komark Enterprise via Komarkcorp. Koh Chie Jooi who is a Director of Komarkcorp, is also a shareholder of Komark Enterprise and a director and shareholder of Aimas Enterprise and person connected to Koh Hong Muan @ Koh Gak Siong. Koh Chee Mian who is a Director and shareholder of Komarkcorp, is also a director and shareholder of Aimas Enterprise and person connected to Koh Hong Muan @ Koh Gak Siong. Apart from the above, Koh Chee Mian and Aimas Enterprise have no direct shareholdings in Komark Enterprise other than via Komarkcorp. Koh Hong Muan @ Koh Gak Siong and Koh Chie Jooi had disposed their shares on 25 August 2014 and their directorship was also ceased on the same day. Amount transacted during the financial year (RM’000) 403 35 FINANCIAL STATEMENTS Directors’ Report 36 Statement by Directors 40 Statutory Declaration 40 Independent Auditors’ Report 41 Statements of Financial Position 43 Statements of Profit or Loss and Other Comprehensive Income 44 Consolidated Statement of Changes in Equity 45 Statement of Changes in Equity 46 Statements of Cash Flows 47 Notes to the Financial Statements 49 ANNUA L R EPORT 2 0 1 4 DIRECTORS’ REPORT 36 for the year ended 30 April 2014 The directors present their report and the audited financial statements of the Group and of the Company for the financial year ended 30 April 2014. PRINCIPAL ACTIVITIES The Company is principally engaged in investment holding and provision of management services to its subsidiaries. The principal activities of the subsidiaries are as set out in Note 6 to the financial statements. There have been no significant changes in these activities during the financial year. RESULTS Group RM’000 Company RM’000 (Loss)/profit before taxation Taxation (28,704) (205) 1,169 - (Loss)/profit for the year (28,909) 1,169 DIVIDEND Since the end of the previous financial year, the Company paid a first and final single-tier dividend of 0.50 sen per ordinary shares of RM1 each totalling to RM406,367 in respect of the financial year ended 30 April 2013 on 13 December 2013. The directors do not recommend any dividend payment in respect of the financial year ended 30 April 2014. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year. ISSUE OF SHARES During the financial year, there was no issue of shares. TREASURY SHARES During the financial year, the Company repurchased 1,000 ordinary shares from the open market at an average price of approximately RM0.66 per share. The total consideration paid for the repurchase including transaction costs was RM656 and this was financed by internally generated funds. SHARE OPTION During the financial year, the Company did not grant any option to any person to take up the unissued shares of the Company. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR Details of significant events during the financial year are disclosed in Note 33 to the financial statements. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE Details of events subsequent to the balance sheet date are disclosed in Note 34 to the financial statements. KOM A R KCO R P B E R HAD DIRECTORS’ REPORT 37 for the year ended 30 April 2014 (cont’d) DIRECTORS The directors who served since the date of the last report are: Koh Hong Muan @ Koh Gak Siong Datuk Ng Peng Hong @ Ng Peng Hay Koh Chie Jooi Koh Chee Mian Ihsan Bin Ismail (appointed on 23.9.13) Tan Sri Ahmad Bin Mohd Don Tan Kwe Hee Lim Pei Tiam @ Liam Ahat Kiat Dato’ Yeow Wah Chin DIRECTORS’ INTERESTS IN SHARES According to the Register of Directors’ Shareholdings, the interests of directors in office at the end of the financial year in shares in the Company during the financial year were as follows: Number of ordinary shares of RM1 each Balance at Balance at 1.5.2013 Bought Sold 30.4.2014 (Direct Interest) Koh Hong Muan @ Koh Gak Siong Koh Chee Mian Lim Pei Tiam @ Liam Ahat Kiat Tan Kwe Hee Dato’ Yeow Wah Chin 6,010,300 206,100 9,938,800^ 4,747,000^ 520,000^ 509,600 20,000 - - 6,519,900 206,100 9,938,800 4,767,000 520,000 (Indirect Interest) Koh Hong Muan @ Koh Gak Siong Koh Chie Jooi Koh Chee Mian Tan Kwe Hee 10,906,889# 16,917,189* 16,917,189* 1,200,000*^ 509,600 509,600 - - 10,906,889# 17,426,789* 17,426,789* 1,200,000* ^ Shares held on date of appointment as director on 16 August 2013. # Deemed interested in shares held by an affiliated company, Aimas Enterprise Sdn. Bhd., a company incorporated in Malaysia, by virtue of Section 6A(4)(c) of the Companies Act, 1965. * Deemed interested in the shares held by persons connected under Section 122A(1)(a) of the Companies Act, 1965. By virtue of their interests in the shares of the Company, Koh Hong Muan @ Koh Gak Siong, Koh Chie Jooi, Koh Chee Mian, Lim Pei Tiam @ Liam Ahat Kiat, Tan Kwe Hee and Dato’ Yeow Wah Chin are also deemed to have an interest in the shares of all the subsidiaries of the Company to the extent the Company has an interest. Other than as disclosed above, none of the other directors in office at the end of the financial year had any interest in the shares of the Company or its related companies during the financial year. DIRECTORS’ BENEFITS Since the end of the previous financial year, no director has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the directors shown in the financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with any 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 except as disclosed in Note 22 to the financial statements. ANNUA L R EPORT 2 0 1 4 DIRECTORS’ REPORT 38 for the year ended 30 April 2014 (cont’d) DIRECTORS’ BENEFITS (cont’d) Neither during nor at the end of the financial year was the Company a party to any arrangements which 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. REMUNERATION COMMITTEE The members of the Remuneration Committee who have served since the date of the last report are: Datuk Ng Peng Hong @ Ng Peng Hay Koh Hong Muan @ Koh Gak Siong Tan Sri Ahmad Bin Mohd Don (appointed on 30.8.13) Tan Kwe Hee (appointed on 30.8.13) OTHER STATUTORY INFORMATION Before the Statements of Profit or Loss and Other Comprehensive Income and Statements of Financial Position of the Group and of the Company were made out, the directors took reasonable steps: i) to ascertain that proper action had been taken in relation to the writing off of bad debts and, the making of allowance for doubtful debts, and have satisfied themselves that all known bad debts had been written off and adequate allowance had been made for doubtful debts; and ii) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business had been written down to an amount which they might be expected so to realise. At the date of this report, the directors are not aware of any circumstances: i) which would render the amount written off for bad debts or the amount of allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; ii) which would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading; iii) which have arisen which render adherence to the existing methods of valuation of assets or liabilities in the financial statements of the Group and of the Company misleading or inappropriate; and iv) not otherwise dealt with in this report or in the financial statements of the Group and of the Company, that would render any amount stated in the respective financial statements misleading. At the date of this report, there does not exist: i) any charge on the assets of the Group and of the Company that has arisen since the end of the financial year which secures the liabilities of any other person; or ii) any contingent liability in respect of the Group and of the Company that has arisen since the end of the financial year. No contingent liability 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 its obligations as and when they fall due. KOM A R KCO R P B E R HAD DIRECTORS’ REPORT 39 for the year ended 30 April 2014 (cont’d) OTHER STATUTORY INFORMATION (cont’d) In the opinion of the directors: i) the results of the operations of the Group and of the Company for the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature; and ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made. AUDITORS The Auditors, ONG & WONG, have indicated their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the directors. KOH HONG MUAN @ KOH GAK SIONG TAN KWE HEE DirectorDirector Dated: 28 August 2014 Kuala Lumpur ANNUA L R EPORT 2 0 1 4 STATEMENT BY DIRECTORS 40 (Pursuant to Section 169[15] of the Companies Act, 1965) We, KOH HONG MUAN @ KOH GAK SIONG and TAN KWE HEE, being two of the directors of KOMARKCORP BERHAD, state that, in the opinion of the directors, the financial statements set out on pages 43 to 97 are drawn up in accordance with Malaysian Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 April 2014 and of the results and cash flows of the Group and of the Company for the financial year ended on that date. Further to the Statement by directors pursuant to Section 169(15) of the Companies Act, 1965, the information set out in Note 17 to the financial statements have been prepared in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants. Signed on behalf of the Board in accordance with a resolution of the directors. KOH HONG MUAN @ KOH GAK SIONG Director TAN KWE HEE Director Dated: 28 August 2014 Kuala Lumpur STATUTORY DECLARATION (Pursuant to Section 169[16] of the Companies Act, 1965) I, KOH HONG MUAN @ KOH GAK SIONG, being the director primarily responsible for the financial management of KOMARKCORP BERHAD, do solemnly and sincerely declare that the financial statements set out on pages 43 to 97 are drawn up, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by the abovenamed, at Kuala Lumpur in Wilayah Persekutuan on 28 August 2014 Before me, Commissioner for Oaths KOM A R KCO R P B E R HAD KOH HONG MUAN @ KOH GAK SIONG INDEPENDENT AUDITORS’ REPORT 41 to the Members of Komarkcorp Berhad (Company No: 374265-A) (Incorporated in Malaysia) Report on the Financial Statements We have audited the financial statements of Komarkcorp Berhad, which comprise the statements of financial position as at 30 April 2014 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 43 to 97. Directors’ Responsibility for the Financial Statements The directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at 30 April 2014 and of their financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. b) We have considered the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 6 to the financial statements. c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. d) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act, except as disclosed in Note 6 to the financial statements. ANNUA L R EPORT 2 0 1 4 INDEPENDENT AUDITORS’ REPORT 42 to the Members of Komarkcorp Berhad (Company No: 374265-A) (Incorporated in Malaysia) (cont’d) Other Reporting Responsibilities The supplementary information set out in Note 17 to the financial statements is disclosed to meet the requirement of Bursa Malaysia Securities Berhad. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. ONG & WONG AF 0241 Chartered Accountants Dated: 28 August 2014 Kuala Lumpur KOM A R KCO R P B E R HAD ONG KOON LIANG 2909/02/15(J) Partner of Firm STATEMENTS OF FINANCIAL POSITION 43 as at 30 April 2014 Group Company Note 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 3 4 5 6 7 8 9 10 121,242 1,758 229 1,750 123,509 1,706 4 1,971 1,750 31,683 - 31,683 - 124,979 128,940 31,683 31,683 28,929 39,874 836 105 9,486 37,777 42,480 2,193 124 8,933 6 42,963 - 42 42,362 3 79,230 91,507 42,969 42,407 204,209 220,447 74,652 74,090 81,275 -# 15,634 1,967 81,275 15,634 19,739 81,275 -# 15,634 (27,074) 81,275 15,634 (27,837) 98,876 116,648 69,835 69,072 14,840 554 8,877 2,654 - - 15,394 11,531 - - 30,763 57,479 1,697 29,730 61,061 1,477 302 1,460 3,055 - 560 1,300 3,158 - 89,939 92,268 4,817 5,018 105,333 103,799 4,817 5,018 204,209 220,447 74,652 74,090 ASSETS Non-current assets Property, plant and equipment Prepaid lease payments on land Investment property Investments in subsidiaries Investment in associate Other investment Development expenditure Goodwill on consolidation Current assets Inventories Trade and other receivables Amount due from related companies Amount due from associate company Tax recoverable Cash and bank balances 11 12 13 13 14 TOTAL ASSETS EQUITY AND LIABILITIES Equity attributable to equity holders of the Company Share capital Treasury shares Share premium Reserves 15 16 17 Total equity Non-current liabilities Borrowings Deferred tax liabilities Current liabilities Trade and other payables Amount due to related company Borrowings Tax payable Total liabilities TOTAL EQUITY AND LIABILITIES 18 19 20 13 18 # Amount less than RM1,000. The annexed notes form an integral part of these financial statements. ANNUA L R EPORT 2 0 1 4 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 44 for the year ended 30 April 2014 Group Note Revenue Cost of sales Gross profit Other operating income Depreciation and amortisation Staff costs and employee benefits Other operating expenses 21 (Loss)/profit from operations Finance costs (Loss)/profit before taxation Taxation 22 23 Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 141,805 (85,091) 136,037 (74,238) 2,865 - 2,494 - 56,714 1,112 (12,888) (25,708) (42,862) 61,799 1,549 (12,327) (22,507) (25,296) 2,865 (676) (782) 2,494 (1,199) (521) (23,632) (5,072) 3,218 (5,491) 1,407 (238) 774 (254) (28,704) (205) (2,273) (2,558) 1,169 - 520 - (28,909) (4,831) 1,169 520 12,031 - - - (Loss)/profit after taxation Other comprehensive income/(expenses): Item that will not be reclassified subsequently to profit or loss - Surplus on revaluation Item that is or may be reclassified subsequently to profit or loss - Foreign currency translation Total comprehensive (loss)/income for the year (488) 795 - - (17,366) (4,036) 1,169 520 (Loss)/profit for the year attributable to: - Equity holders of the Company (28,909) (4,831) 1,169 520 Total comprehensive (loss)/income for the year attributable to: - Equity holders of the Company (17,366) (4,036) 1,169 520 (35.6) (6.0) Basic loss per share attributable to equity holders of the Company (sen) 24 The annexed notes form an integral part of these financial statements. KOM A R KCO R P B E R HAD 25 16 16 - - -# 81,275 - -# - - - - - 81,275 -# 437 - - - (437) 81,275 Treasury shares RM’000 15,634 - - - 15,634 - 345 - 15,289 Share Premium RM’000 The annexed notes form an integral part of these financial statements. # Amount less than RM1,000. At 30 April 2014 At 30 April 2013 Appropriation of profit Total comprehensive loss for the year Treasury shares -repurchased Dividend At 30 April 2012/1 May 2012 Total comprehensive loss for the year Disposal of treasury shares Treasury shares -repurchased -sold Note Share capital RM’000 2,589 - - 886 1,703 - - - 1,703 4,037 - (488) - 4,525 - - 795 3,730 12,031 - 12,031 - - - - - - General Translation Revaluation reserve reserve reserve RM’000 RM’000 RM’000 (16,690) (406) (28,909) (886) 13,511 - - (4,831) 18,342 Retained profit RM’000 < ----------------------Attributable to Equity Holders of the Company -------------------------- > < ----------------- Non-distributable ------------------ > Distributable 98,876 -# (406) (17,366) - 116,648 -# 437 345 (4,036) 119,902 Total RM’000 - - - - - - - - - Noncontrolling interest RM’000 98,876 -# (406) (17,366) - 116,648 -# 437 345 (4,036) 119,902 Total equity RM’000 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30 April 2014 45 ANNUA L R EPORT 2 0 1 4 STATEMENT OF CHANGES IN EQUITY 46 for the year ended 30 April 2014 Note At 1 May 2012 Total comprehensive profit for the year Treasury shares -repurchased -sold At 30 April 2013/ 1 May 2013 Total comprehensive profit for the year Treasury shares -repurchased Dividend ----Distributable---Share Accumulated premium losses RM’000 RM’000 Share capital RM’000 Treasury shares RM’000 81,275 (437) 15,289 (28,357) 67,770 - - - 520 520 - -# 437 345 - -# 782 81,275 - 15,634 (27,837) 69,072 - - - 1,169 1,169 - -# - - (406) -# (406) 81,275 -# 15,634 (27,074) 69,835 16 16 25 At 30 April 2014 # Amount less than RM1,000. The annexed notes form an integral part of these financial statements. KOM A R KCO R P B E R HAD Total Equity RM’000 STATEMENTS OF CASH FLOWS 47 for the year ended 30 April 2014 Group Note CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/profit before taxation Adjustments for: Dividend income Unreconciled balances written off Allowance for impairment losses: - Amount due from related company - Development expenditure - Property, plant and equipment - Trade receivables Amount due from related company written off Amortisation of development expenditure Allowance for slow-moving manufactured inventories Amortisation of prepaid lease payment on land Bad debts written off Inventories written off Gain on disposal of property, plant and equipment Gain on disposal of investment property Loss on disposal of other investment Waiver of amount due from related company Property, plant and equipment written off Depreciation of property, plant and equipment Gain on foreign exchange, unrealised Interest expense Interest income Operating profit/(loss) before working capital changes Decrease/(increase) in inventories Decrease/(increase) in receivables Increase/(decrease) in payables Cash generated from/(absorbed by) operations Tax refund Tax paid Interest paid Interest received Net cash generated from/(used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Proceeds from disposal of investment property Proceeds from disposal of other investment Dividend received Development expenditure paid Net cash (used in)/generated from investing activities A 2014 RM’000 2013 RM’000 2014 RM’000 Company 2013 RM’000 (28,704) (2,273) 1,169 520 687 794 (2,865) 160 (2,494) - 1,071 12,512 1,012 805 518 866 8 - 53 - 816 47 1,548 - 1,608 44 1 1,805 - - (13) 1 (4) 12,036 (17) 5,072 (129) (903) (53) 28 11,417 (116) 5,491 (98) 238 - 254 - 6,740 8,032 720 1,033 19,129 (3,167) (7,129) 3,486 (1,290) (573) (258) (1,667) (1,458) (67) 16,525 78 (2,144) (5,072) 129 12,319 6 (1,036) (5,491) 98 (2,121) (238) - (3,192) (254) - 9,516 5,896 (2,359) (3,446) (3,291) (6,293) - - 2,894 3 (121) 4,525 243 (173) 2,865 - 2,494 - (515) (1,698) 2,865 2,494 ANNUA L R EPORT 2 0 1 4 STATEMENTS OF CASH FLOWS 48 for the year ended 30 April 2014 (cont’d) Group Note CASH FLOWS FROM FINANCING ACTIVITIES Purchase of treasury shares Decrease in deposits pledged with licensed banks Proceeds from term loans raised Proceeds from disposal of treasury shares Dividend paid Repayment of term loans and other borrowings Repayment of hire purchase and lease financing Net change in bills payable Net cash generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Effects of exchange rate changes Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year B Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 -# -# -# -# 575 20,388 (406) 2,110 14,480 782 - (406) 782 - (15,624) (8,875) - - (5,622) 3,611 (4,183) (2,081) - - 2,922 2,233 (406) 782 11,923 (3,565) 6,431 (757) 100 - (170) - (8,834) (14,508) (3,155) (2,985) (476) (8,834) (3,055) (3,155) # Amount less than RM1,000 NOTE A. ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT During the financial year, the Group and the Company acquired the property, plant and equipment by: Group Cash Hire purchase Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 3,291 5,202 6,293 4,552 - - 8,493 10,845 - - B. CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the statements of cash flows comprise the following amounts: Group Cash and bank balances Less: Deposits pledged with licensed banks Bank overdrafts KOM A R KCO R P B E R HAD Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 9,486 8,933 - 3 (2,166) (7,796) (2,741) (15,026) (3,055) (3,158) (476) (8,834) (3,055) (3,155) NOTES TO THE FINANCIAL STATEMENTS 49 30 April 2014 1. GENERAL INFORMATION The Company is principally engaged in investment holding and provision of management services to its subsidiaries. The principal activities of the subsidiaries are as set out in Note 6 to the financial statements. The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Malaysia”). The registered office is located at Lot 6.05, Level 6, KPMG Tower, 8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan. The principal place of business of the Company is located at Lot 132, Jalan 16/1, Kawasan Perindustrian Cheras Jaya, 43200 Balakong, Selangor Darul Ehsan 2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised Standards and Interpretations The financial statements for the financial year ended 30 April 2014 have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”). The accounting policies adopted by the Group and by the Company are consistent with those adopted in the previous financial year except for the adoption of the following new, revised MFRSs and amendments which are effective for annual period beginning on or after 1 January 2013. Effective for annual period beginning on or after Description MFRS 7 Financial Instruments: Disclosures (Amendments relating to Disclosures - Offsetting Financial Assets and Liabilities) 1 January 2013 MFRS 10 Consolidated Financial Statements 1 January 2013 MFRS 10 Consolidated Financial Statements (Amendments relating to Transition Guidance) 1 January 2013 MFRS 11 Joint Arrangements 1 January 2013 MFRS 11 Joint Arrangements (Amendments relating to Transition Guidance) 1 January 2013 MFRS 12 Disclosures of Interests in Other Entities 1 January 2013 MFRS 12 Disclosures of Interests in Other Entities (Amendments relating to Transition Guidance) 1 January 2013 MFRS 13 Fair Value Measurement 1 January 2013 MFRS 101 Presentation of Financial Statements (Amendments relating to Presentation of Items of Other Comprehensive Income) 1 July 2012 MFRS 119 Employee Benefits (IAS 19 as amended by IASB in June 2011) 1 January 2013 MFRS 127 Separate Financial Statements (IAS 27 as amended by IASB in May 2011) 1 January 2013 MFRS 128 Investments in Associates and Joint Ventures (IAS 28 as amended by IASB in May 2011) 1 January 2013 Amendments to MFRSs contained in the document entitled Annual Improvements 2009 - 2011 Cycle 1 January 2013 ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 50 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.1 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised Standards and Interpretations (cont’d) The adoption of the above Standards and Amendments has no material impact on the financial statements of the Group and of the Company, except as discussed below: (i) Amendments to MFRS 7: Offsetting Financial Assets and Financial Liabilities and the related disclosures The Group and the Company have applied the amendments to MFRS 7: Offsetting Financial Assets and Financial Liabilities and the related disclosures for the first time in the current year. The amendments to MFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement. The amendments have been applied retrospectively. As the Group and the Company do not have any offsetting arrangements in place, the application of the amendments has had no material impact on the disclosures or on the amounts recognised in these financial statements. (ii) New and revised Standards on consolidation, joint arrangements, associates and disclosures In November 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued comprising MFRS 10 Consolidated Financial Statements, MFRS 11 Joint Arrangements, MFRS 12 Disclosures of Interests in Other Entities, MFRS 127 (IAS 27 as revised by IASB in May 2011) Separate Financial Statements and MFRS 128 (IAS 28 as revised by IASB in May 2011) Investments in Associates and Joint Ventures. Subsequent to the issue of these standards, amendments to MFRS 10, MFRS 11 and MFRS 12 were issued to clarify certain transitional guidance on the first-time application of the standards. In current year, the Group and the Company have adopted for the first time MFRS 10, MFRS 11, MFRS 12, MFRS 127 (IAS 27 as revised by IASB in May 2011) and MFRS 128 (IAS 28 as revised by IASB in May 2011) together with the amendments to MFRS 10, MFRS 11 and MFRS 12 regarding the transitional guidance. As the Group and the Company do not have any joint arrangement and interest in other entities, the application of the amendments has had no impact on the disclosures or on the amounts recognised in these financial statements. (iii) MFRS 13 Fair Value Measurement The Group and the Company have applied MFRS 13 for the first time in the current year. MFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of MFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other MFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. MFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under MFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another technique. Also MFRS 13 includes extensive disclosure requirements. MFRS 13 requires prospective from 1 January 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. Other than additional disclosures, the application of MFRS 13 has not had any material impact on the amounts recognised in these financial statements. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 51 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.1 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised Standards and Interpretations (cont’d) (iv) Amendments to MFRS 101: Presentation of Items of Other Comprehensive Income The Group and the Company have applied the amendments to MFRS 101 Presentation of Items of Other Comprehensive Income for the first time in the current year. The amendments introduce new terminology, whose use is not mandatory, for the statement of comprehensive income and income statement. Under the amendments to MFRS 101, the “statement of comprehensive income” is renamed “statement of profit or loss and other comprehensive income” and the “income statement” is renamed as the “statement of profit or loss”. The amendments to MFRS 101 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to MFRS 101 require items of other comprehensive income to be grouped into two categories in the other comprehensive income section: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis - the amendments do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified accordingly to reflect the changes. Other than the abovementioned presentation changes, the application of the amendments to MFRS 101 has not resulted in any impact on profit or loss, other comprehensive income and total comprehensive income. (v) Amendments to MFRS 101 Presentation of Financial Statements (as part of the Annual Improvements to MFRSs 2009 - 2011 Cycle issued in July 2012) The Annual Improvements to MFRSs 2009 – 2011 have made a number of amendments to MFRSs. The amendments that are relevant to the Group and the Company are the amendments to MFRS 101 regarding when a statement of financial position as at the beginning of the preceding period (third statements of financial position) and the related notes are required to be presented. The amendments specify that a third statements of financial position is required when (a) an entity applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification of items in its financial statements, and (b) the retrospective application, restatement or reclassification has a material effect on the information in the third statements of financial position. The amendments specify that related notes are not required to accompany the third statements of financial position. In the current year, the Group and the Company did not applies any accounting policy retrospectively, or makes a retrospective restatement or reclassification of items in its financial statements, hence no third statements of financial position required. 2.2 Standards and IC Interpretations in Issue But Not Yet Effective At the date of authorisation for issue of the financial statements, the new and revised Standards and Amendments which were in issue but not yet effective and not early adopted by the Group and the Company are as listed below: Effective for annual period beginning on or after Description MFRS 7 Financial Instruments: Disclosures [Amendments relating to Mandatory Effective Date of MFRS 9 and Transition Disclosures (IFRS 9 issued by IASB in November 2009 and October 2010 respectively)] to be announced MFRS 9 Financial Instruments to be announced MFRS 119 Employee Benefits (Amendments relating to Defined Benefit Plans: Employee Contributions) 1 July 2014 ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 52 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.2 Standards and IC Interpretations in Issue But Not Yet Effective (cont’d) Effective for annual period beginning on or after Description MFRS 132 Financial Instruments: Presentation (Amendments relating to Offsetting Financial Assets and Financial Liabilities) 1 January 2014 MFRS 136 Impairment of Assets (Amendments relating to Recoverable Amount Disclosures for Non-Financial Assets) 1 January 2014 MFRS 139 Financial Instruments: Recognition and Measurement (Novation of Derivatives and Continuation of Hedge Accounting) 1 January 2014 Amendments to MFRS 10, MFRS 12 and MFRS 127 1 January 2014 Amendments to MFRS 10, MFRS 12 and MFRS 127 relating to Investment Entities 1 January 2014 Amendments to MFRSs contained in the document entitled Annual Improvements 2010 - 2012 Cycle 1 July 2014 Amendments to MFRSs contained in the document entitled Annual Improvements 2011 - 2013 Cycle 1 July 2014 The directors anticipate that abovementioned Standards and Amendments will be adopted in the annual financial statements of the Group and of the Company when they become effective and that the adoption of these Standards and Amendments will have no material impact on the financial statements of the Group and of the Company in the period of initial application, except as discussed below: (i) Amendments to MFRS 132: Offsetting Financial Assets and Financial Liabilities The amendments to MFRS 132 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and “simultaneous realisation and settlement”. The directors do not anticipate that the application of these amendments to MFRS 132 will have significant impact on the Group’s consolidated financial statements as the Group does not have any financial assets and financial liabilities that qualify for offset. (ii) MFRS 9 and Amendments relating to Mandatory Effective Date of MFRS 9 and Transition Disclosures MFRS 9 (IFRS issued by IASB in November 2009) introduces new requirements for the classification and measurement of financial assets. MFRS 9 (IFRS issued by IASB in October 2010) includes the requirements for the classification and measurement of financial liabilities and for derecognition. The amendments to MFRS 9 (IFRS 9 issued by IASB in November 2009 and October 2010 respectively) (“MFRS 9”) relating to “Mandatory Effective Date of MFRS 9 and Transition Disclosures” which became immediately effective on the issuance date of 1 March 2012 amended the mandatory effective date of MFRS 9 to annual periods beginning on or after 1 January 2015 instead of on or after 1 January 2013, which earlier application still permitted as well as modified the relief from restating prior periods. MFRS 7 which was also amended in tandem with the issuance of the aforementioned amendments introduces new disclosure requirements that are either permitted or required on the basis of the entity’s date of adoption and whether the entity chooses to restate prior periods. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 53 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.2 Standards and IC Interpretations in Issue But Not Yet Effective (cont’d) (ii) MFRS 9 and Amendments relating to Mandatory Effective Date of MFRS 9 and Transition Disclosures (cont’d) Key requirements of MFRS 9: • all recognised financial assets that are within the scope of MFRS 139 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. In addition, under MFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of equity instrument (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. • with regard to the measurement of financial liabilities designated as at fair value through profit or loss, MFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under FRS 139, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss. The directors anticipate that the application of MFRS 9 in the future may have impact on amounts reported in respect of the Group’s financial assets and financial liabilities that classified as availablefor-sales investments (if any) as they are to be measured at fair value at the end of subsequent reporting periods, with changes in the fair value being recognised in profit or loss. (iii) Amendments to MFRSs: Annual Improvements 2010 - 2012 Cycle The Annual Improvements 2010 - 2012 Cycle include a number of amendments to various MFRSs. The amendments to MFRSs include: • Amendments to MFRS 2 Share-based Payments; • Amendments to MFRS 3 Business Combinations; • Amendments to MFRS 8 Operating Segments; • Amendments to MFRS 116 Property, Plant and Equipment; • Amendments to MFRS 124 Related Party Disclosures; and • Amendments to MFRS 138 Intangible Assets. Amendments to MFRS 3 The amendments to MFRS 3 clarify the treatment of changes in fair value of contingent consideration. The directors do not anticipate that the amendments to MFRS 3 will have a significant effect on the Group’s and on the Company’s financial statements. Amendments to MFRS 8 The amendments to MFRS 8 require the disclosure of judgements made by management in applying the aggregation criteria in MFRS 8. The directors anticipate that the amendments to MFRS 8 may result in more disclosures being made with regard to operating segments. Amendments to MFRS 116 The amendments to MFRS 116 stipulate the treatment of an asset at the date of revaluation under revaluation model. The directors do not anticipate that the amendments to MFRS 116 will have a significant effect on the Group’s and on the Company’s financial statements. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 54 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.2 Standards and IC Interpretations in Issue But Not Yet Effective (cont’d) (iii) Amendments to MFRSs: Annual Improvements 2010 - 2012 Cycle (cont’d) Amendments to MFRS 124 The amendments to MFRS 124 added a new condition in which an entity is related to a reporting entity. The directors anticipate that the amendments to MFRS 124 may result in more disclosures being made with regard to related party transactions. Amendments to MFRS 138 The amendments to MFRS 138 clarify the treatment of the carrying amount of intangible assets upon revaluation. The directors do not anticipate that the amendments to MFRS 138 will have a significant effect on the Group’s and on the Company’s financial statements. (iv) Amendments to MFRSs: Annual Improvements 2011 - 2013 Cycle The Annual Improvements 2011 - 2013 Cycle include a number of amendments to various MFRSs. The amendments to MFRSs include: • Amendments to MFRS 3 Business Combinations; • Amendments to MFRS 13 Fair Value Measurement; and • Amendments to MFRS 140 Investment Property. Amendments to MFRS 3 The amendments to MFRS 3 clarify that this Standard does not apply to the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself. The directors do not anticipate that the amendments to MFRS 3 will have a significant effect on the Group’s and on the Company’s financial statements. Amendments to MFRS 13 The amendments to MFRS 13 allow other contracts within the scope of MFRS 139 Financial Instruments: Recognition and Measurement or MFRS 9 Financial Instruments to have similar application as financial assets and financial liabilities. The directors do not anticipate that the amendments to MFRS 13 will have a significant effect on the Group’s and on the Company’s financial statements. Amendments to MFRS 140 The amendments to MFRS 140 added that in applying this Standard, an entity has to exercise judgements in determine whether the acquisition of investment property is the acquisition of an asset or a group of assets or a business combination within the scope of MFRS 3 Business Combinations. These amendments are to be applied prospectively. 2.3 Basis of Preparation The financial statements of the Group and of the Company have been prepared in accordance with MFRSs and the provisions of the Companies Act, 1965 in Malaysia. The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. The financial statements are presented in Ringgit Malaysia (“RM”). 2.4 Basis of Consolidation Business Combinations The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 55 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.4 Basis of Consolidation (cont’d) Business Combinations (cont’d) All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Acquisition of subsidiaries are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with MFRS 139 Financial Instrument: Recognition and Measurement, either in profit or loss or as change to other comprehensive income. If the contingent consideration is classified as equity, it is not to be remeasured until it is finally settled within equity. In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss. The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill. The accounting policy for the goodwill is set out in Note 2.7 to the financial statements. In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the acquisition date. 2.5 Foreign Currencies (i) Functional and Presentation Currency The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency. (ii) Foreign Currency Transactions Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 56 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.5 Foreign Currencies (cont’d) (ii) Foreign Currency Transactions (cont’d) Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity. The closing rates used in the translation of foreign currency monetary assets and liabilities and the financial statements of foreign operations are as follows: 1 United States Dollar (USD) 1 Singapore Dollar (SGD) 1 Renminbi Yuan (RMB) 1 Australia Dollar (AUD) 100 Thailand Baht (THB) 100 Hong Kong Dollar (HKD) 1000 Indonesia Rupiah (INR) 2014 RM 2013 RM 3.27 2.60 0.52 3.03 10.12 42.14 0.28 3.09 2.49 0.49 3.19 10.10 39.88 0.32 (iii) Foreign Operations The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the reporting date and income and expenses are translated at exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in other comprehensive income and accumulated in equity under foreign currency translation reserve relating to that particular foreign operation is recognised in the profit or loss. Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date. 2.6 Property, Plant and Equipment and Depreciation All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Subsequent to recognition, property, plant and equipment except for freehold land, are measured at cost less accumulated depreciation and accumulated impairment losses, if any. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the property, plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. Certain freehold and leasehold properties are stated at revalued amount, which is the fair value at the date of the revaluation less any accumulated impairment losses. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 57 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.6 Property, Plant and Equipment and Depreciation (cont’d) Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows: Buildings Plant and machinery Office equipment, furniture and fittings Motor vehicles Mould and die cutters Renovation 2% and 10% 5% to 20% 5% to 25% 10% to 20% 10% to 20% 10% to 20% The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual value, useful life and depreciation method are reviewed at each year-end, and adjusted prospectively, if appropriate. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised. 2.7 Intangible Assets Goodwill Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses, if any. 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 benefit 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 profit 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. Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2006 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.5 to the financial statements. Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2006 are deemed to be assets and liabilities of the Company and are recorded in RM at the rates prevailing at the date of acquisition. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 58 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.8 Development Expenditure (cont’d) Expenditure on development activities, where research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in profit or loss as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation. These expenditure are amortised and recognised as expenses on systematic basis from the date of commencement of commercial production so as to reflect the pattern in which the related economic benefits are recognised, which are over three (3) to five (5) years. 2.9 Impairment of Non-Financial Assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units (“CGU”)). In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first 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. Impairment losses are recognised in profit or loss except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period. 2.10Subsidiaries A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. In the Company’s separate financial statements, investment in subsidiaries are accounted for at cost less impairment losses, if any. 2.11Associate An associated company is defined as a company, not being a subsidiary company, in which the Company has a long term equity interest and where it exercises significant influence over the financial and operation policies. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 59 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.11 Associate (cont’d) Investment in associated company is accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investment in associated company is carried in the consolidated statement of financial position at cost adjusted for post-acquisition changes in the Group’s share of net assets of the associated company. The Group’s share of the net profit or loss of the associated company is recognised in profit or loss. Where there has been a change recognised directly in the equity of the associated company, the Group recognises its share of such changes. In applying the equity method, unrealised gains and losses on transactions between the Group and the associated company are eliminated to the extent of the Group’s interest in the associated company. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associate. The associated company is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associated company. When the Group’s share of losses in an associated company equals or exceeds its interest in the associate, including any long-term interests that, in substance, form part of the Group’s net investment in the associated company, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associated company. The most recent available audited financial statements of the associates are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not coterminous with those of the Group, the share of results is arrived at from the last audited financial statements available and management financial statements to the end of the accounting period. Uniform accounting policies are adopted for like transactions and events in similar circumstances. In the Company’s separate financial statements, investment in associated company is stated at cost less accumulated impairment losses. On disposal of such investments, the differences between net disposal proceeds and their carrying amounts is included in profit or loss. 2.12 Financial Assets Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables, held-tomaturity investments and available-for-sale financial assets. (i) Financial Assets at Fair Value through Profit or Loss Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income. Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current whereas financial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date. The Group and the Company have not designated any financial assets as at fair value through profit or loss. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 60 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.12 Financial Assets (cont’d) (ii) Loans and Receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current. (iii) Held-to-Maturity Investments Financial assets with fixed or determinable payments and fixed maturity are classified as held-tomaturity when the Group has the positive intention and ability to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-tomaturity investments are derecognised or impaired, and through the amortisation process. Held-to-maturity investments are classified as non-current assets, except for those having maturity within 12 months after the reporting date which are classified as current. The Group and the Company have not designated any financial assets as held-to-maturity investments. (iv) Available-for-Sale Financial Assets Available-for-sale financial assets are financial assets that are designated as available for sale or are not classified in any of the three preceding categories. After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an availablefor-sale equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss, if any. Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date. The Group classified its quoted investments as available-for-sale financial assets. A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 61 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.13 Impairment of Financial Assets The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. (i) Trade and Other Receivables and Other Financial Assets Carried at Amortised Cost To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss. (ii) Available-for-Sale Financial Assets Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired. If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss. Impairment losses on available-for-sale equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For available-for-sale debt investments, impairment losses are subsequently reversed in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss. 2.14 Cash and Cash Equivalents Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cash management. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 62 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.15 Inventories (cont’d) Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and condition are accounted for as follows: - - Raw materials: purchase costs on a first-in first-out basis. Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. These costs are assigned on a first-in first-out basis. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale. 2.16Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. 2.17 Financial Liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 139, are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. (i) Financial Liabilities at Fair Value through Profit or Loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profit or loss. Net gains or losses on derivatives include exchange differences. The Group and the Company have not designated any financial liabilities as at fair value through profit or loss. (ii) Other Financial Liabilities The Group’s and the Company’s other financial liabilities include trade payables, other payables and loans and borrowings. Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 63 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.17 Financial Liabilities (cont’d) (ii) Other Financial Liabilities (cont’d) For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. 2.18 Borrowing Costs Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds. 2.19 Employee Benefits (i) Short Term Benefits Wages, salaries, bonuses and social security contributions (“Socso”) are recognised as expenses in the year in which the associated services are rendered by employees of the Group and the Company. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. (ii) Defined Contribution Plans The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. The Malaysian companies in the Group make contributions to the Employee Provident Fund in Malaysia, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed. 2.20Leases As Lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 64 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.20 Leases (cont’d) As Lessee (cont’d) Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. 2.21Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable. (i) Sale of Goods Revenue from sales of goods is measured at the fair value of the receivable consideration and is recognised upon transfer of significant risks and rewards of ownership of the goods to the customer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. (ii) Interest Income Interest income is recognised on an accrual basis using the effective interest method. (iii) Dividend Income Dividend income is recognised when the right to receive payment is established. (iv) Rental Income Rental income is recognised on accrued basis. 2.22 Income Taxes (i) Current Tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. (ii) Deferred Tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: - where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and - in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 65 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.22 Income Taxes (cont’d) (ii) Deferred Tax (cont’d) Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: - where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and - in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. 2.23 Segment Reporting For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 26 to the financial statements, including the factors used to identify the reportable segments and the measurement basis of segment information. 2.24 Share Capital and Share Issuance Expenses An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. 2.25Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group. Contingent liabilities and assets are not recognised in the statements of financial position of the Group. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 66 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.26 Significant Accounting Judgements and Estimates The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. (i) Judgements Made in Applying Accounting Policies In the process of preparing the financial statements, there were no significant judgements made in applying the accounting policies of the Group which may have significant effects on the amounts recognised in the financial statements. (ii) Key Sources of Estimation Uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) Impairment of Investment in Subsidiaries The management determines whether the carrying amounts of its investments are impaired at reporting date. This involves measuring the recoverable amounts which includes fair value less costs to sell and valuation techniques. Valuation techniques include amongst others, discounted cash flows analysis and in some cases, based on current market indicators and estimates that provide reasonable approximations to the detailed computation or based on total shareholders’ equity of the subsidiaries. The carrying amount of investment in subsidiaries as at 30 April 2014 were RM31,683,419 (2013: RM31,683,419). Further details are disclosed in Note 6 to the financial statements. Based on management’s review, no further adjustment for impairment is required for the investment in subsidiaries by the Company during the current year. (b) Impairment of Investment in Associate The management determines whether the carrying amounts of its investments are impaired at reporting date. This involves measuring the recoverable amounts which includes fair value less costs to sell and valuation techniques. Valuation techniques include amongst others, discounted cash flows analysis and in some cases, based on current market indicators and estimates that provide reasonable approximations to the detailed computation or based on total shareholders’ equity of the associate. The carrying amount of investment in associate as at 30 April 2014 was RMNil (2013: RMNil). Further details are disclosed in Note 7 to the financial statements. Based on management review, no further adjustment for impairment is required for the investment in associate by the Company during the current year. (c) Impairment of Loans and Receivables The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables’ at the reporting date is disclosed in Note 12 to the financial statements. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 67 30 April 2014 (cont’d) 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.26 Significant Accounting Judgements and Estimates (cont’d) (ii) Key Sources of Estimation Uncertainty (cont’d) (d) Useful Lives of Property, Plant and Equipment (cont’d) The cost of property, plant and equipment is depreciated on a straight-line basis over the assets’ estimated economic useful lives. Management estimates the useful lives of these plant and equipment to be within 10 to 15 years. These are common life expectancies applied in the manufacturing industry. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. The carrying amount of the Group’s property, plant and equipment at the reporting date is disclosed in Note 3 to the financial statements. (e) Deferred Tax Assets Deferred tax assets are recognised for all unused tax losses, unabsorbed capital allowances, unutilised reinvestment allowances and other deductible temporary differences to the extent that it is probable that taxable profit will be available against which the losses, capital allowances and provisions can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. (f) Income Taxes There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group and the Company recognise tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the year in which such determination is made. (g) Write-down of Inventories Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 68 30 April 2014 (cont’d) 3. PROPERTY, PLANT AND EQUIPMENT As at 1.5.2013 RM’000 Addition/ Transfer RM’000 Disposal/ Exchange Write off Revaluation differences RM’000 RM’000 RM’000 As at 30.4.2014 RM’000 5,437 31,536 164,686 5,868 (1,790) 12,563 (532) - 594 3,860 18,000 31,598 172,624 10,150 2,041 17,052 5,771 412 316 1,836 61 (230) (58) - - 178 70 601 98 10,510 2,369 19,489 5,930 236,673 8,493 (2,078) 12,031 5,401 260,520 As at 1.5.2013 RM'000 Charge for the year RM'000 Disposal/ Exchange Exchange Write off differences differences RM'000 RM'000 RM'000 As at 30.4.2014 RM'000 6,738 80,375 665 8,665 (676) - 105 1,667 7,508 90,031 8,580 1,726 11,080 4,665 343 187 1,929 247 (227) (50) - - 182 49 409 107 8,878 1,912 13,418 5,019 113,164 12,036 (953) - 2,519 126,766 As at 1.5.2013 RM'000 Impairment loss for the year RM'000 Disposal/ Exchange Write off Revaluation differences RM'000 RM'000 RM'000 As at 30.4.2014 RM'000 - 10,997 - - - 10,997 - 2 1,513 - - - - 2 1,513 - - 12,512 - - - 12,512 Group 2014 COST Freehold land Buildings Plant and machinery Office equipment, furniture and fittings Motor vehicles Mould and die cutters Renovation ACCUMULATED DEPRECIATION Freehold land Buildings Plant and machinery Office equipment, furniture and fittings Motor vehicles Mould and die cutters Renovation ACCUMULATED IMPAIRMENT Freehold land Buildings Plant and machinery Office equipment, furniture and fittings Motor vehicles Mould and die cutters Renovation KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 69 30 April 2014 (cont’d) 3. PROPERTY, PLANT AND EQUIPMENT (CONT’D) As at 30.4.2014 RM’000 Net Book Value Freehold land Buildings Plant and machinery Office equipment, furniture and fittings Motor vehicles Mould and die cutters Renovation 18,000 24,090 71,596 1,630 457 4,558 911 121,242 As at 1.5.2012 RM’000 Addition/ Transfer RM’000 Disposal/ Exchange Write off differences RM’000 RM’000 As at 30.4.2013 RM’000 5,437 32,599 157,455 9,757 1,777 15,674 5,811 8,886 381 428 1,098 52 (1,355) (4,402) (176) (195) (205) 292 2,747 188 31 280 113 5,437 31,536 164,686 10,150 2,041 17,052 5,771 228,510 10,845 (6,333) 3,651 236,673 As at 1.5.2012 RM’000 Charge for the year RM’000 Disposal/ Exchange Write off differences RM’000 RM’000 As at 30.4.2013 RM’000 6,520 72,971 8,243 1,719 9,184 4,460 658 8,194 367 174 1,715 309 (487) (1,930) (174) (195) (187) 47 1,140 144 28 181 83 6,738 80,375 8,580 1,726 11,080 4,665 103,097 11,417 (2,973) 1,623 113,164 2013 COST Freehold land Buildings Plant and machinery Office equipment, furniture and fittings Motor vehicles Mould and die cutters Renovation ACCUMULATED DEPRECIATION Freehold land Buildings Plant and machinery Office equipment, furniture and fittings Motor vehicles Mould and die cutters Renovation ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 70 30 April 2014 (cont’d) 3. PROPERTY, PLANT AND EQUIPMENT (CONT’D) As at 30.4.2013 RM’000 Net Book Value Freehold land Buildings Plant and machinery Office equipment, furniture and fittings Motor vehicles Mould and die cutters Renovation 5,437 24,798 84,311 1,570 315 5,972 1,106 123,509 The net book value of the building of a subsidiary, Guangzhou Komark Labels & Labelling Co., Ltd. amounting to RM1,153,000 (2013: RM1,127,000) is built on a piece of land belonging to and leased from the authority of the People’s Republic of China. The lease term is due to expire in the year 2044. The net book value of plant and machinery and motor vehicles of the Group acquired under hire purchase agreements amounted to RM13,782,000 (2013: RM14,552,000) and RM367,000 (2013: RMNil) respectively. Freehold and leasehold land and buildings and plant and machinery of the Group amounting to RM34,603,000 (2013: RM22,982,000) and RM24,930,000 (2013: RM23,582,000) respectively are charged to licensed banks and financial institutions as security for borrowings granted to certain subsidiaries (Note 18 to the financial statements). 4. PREPAID LEASE PAYMENTS ON LAND Group 2014 RM’000 2013 RM’000 Cost At 1 May Exchange difference 2,013 115 1,956 57 At 30 April 2,128 2,013 Accumulated depreciation At 1 May Charge for the year Exchange difference (307) (47) (16) (255) (44) (8) At 30 April (370) (307) 1,758 1,706 Net carrying amount Leasehold land of the Group has been pledged as security to financial institution for banking facilities granted to the Group. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 71 30 April 2014 (cont’d) 5. INVESTMENT PROPERTY Group 6. 2014 RM’000 2013 RM’000 Cost At 1 May Disposal during the year - 337 (337) At 30 April - - Accumulated depreciation At 1 May Disposal during the year - 147 (147) At 30 April - - Net carrying amount - - INVESTMENTS IN SUBSIDIARIES Company Unquoted shares, at cost 2014 RM’000 2013 RM’000 31,683 31,683 The list of subsidiaries, their places of incorporation, their principal activities and the effective interest of the Company are as follows: Name of Company Country of incorporation Principal activities Effective equity interest 2014 2013 % % General Labels & Labelling (M) Sdn. Bhd. Malaysia Manufacturing of self adhesive labels and stickers, and labelling machines and trading of related products 100 100 Komark International (M) Sdn. Bhd. Malaysia Manufacturing of self adhesive labels 100 100 *#± General Labels & Labelling (Penang) Sdn. Bhd. Malaysia Manufacturing of self adhesive labels and stickers 100 100 # General Labels & Labelling (Ipoh) Sdn. Bhd. Malaysia Manufacturing of self adhesive labels and stickers, and trading of related products 100 100 Investment holding 100 100 Dormant 100 100 ^ Komark Investment Holdings Ltd. British Virgin Island ^ Komark Australasia Pty. Ltd. Australia ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 72 30 April 2014 (cont’d) 6. INVESTMENTS IN SUBSIDIARIES (cont’d) The subsidiaries of General Labels & Labelling (M) Sdn. Bhd. are as follows: Name of Company General Labels & Labelling (JB) Sdn. Bhd. Name of Company Country of incorporation Principal activities Malaysia Manufacturing of self adhesive labels and stickers, and trading of related products Country of incorporation Principal activities * General Labels & Labelling Pte Ltd Singapore * Komark (Thailand) Company Limited Thailand Effective equity interest 2014 2013 % % 100 100 Effective equity interest 2014 2013 % % Printer of labels and stickers 100 100 Manufacturing and selling of self adhesive labels 100 100 The subsidiaries of Komark Investment Holdings Ltd. are as follows: Name of Company Country of incorporation Principal activities Effective equity interest 2014 2013 % % * Shanghai Komark Labels & Labelling Co., Ltd. People’s Republic of China Manufacturing and selling of self adhesive labels 100 100 * Guangzhou Komark Labels & Labelling Co., Ltd. People’s Republic of China Manufacturing and selling of self adhesive labels 100 100 Hong Kong Dormant 100 100 *# Komark Hong Kong Company Limited The subsidiary of Komark International (M) Sdn. Bhd. is as follows: Name of Company *@ PT Komark Labels and Labelling Indonesia KOM A R KCO R P B E R HAD Country of incorporation Principal activities Indonesia Manufacturing and trading of self adhesive labels Effective equity interest 2014 2013 % % 100 100 NOTES TO THE FINANCIAL STATEMENTS 73 30 April 2014 (cont’d) 6. INVESTMENTS IN SUBSIDIARIES (CONT’D) * Audited by another firm of auditors. ^ Consolidated based on management financial statements as at 30 April 2014 in which we have reviewed for consolidation purposes. # Subsidiary with auditors’ report that is not qualified which contained an emphasis of matter on its going concern, which is dependent upon continuous financial support of its holding or ultimate holding company. @ Subsidiary with auditors’ report that is qualified on non-adoption of certain accounting standards. The directors are of the opinion that the effects of the adjustments, if any, on the financial statements of the subsidiary, have no material financial impact to the Group. ± Subsidiary with auditors’ report that contained disclaimer of opinion due to insufficient appropriate audit evidence obtainable on certain receivables and payables. The directors are of the opinion that the effects of the adjustments, if any, on the financial statements of the subsidiary, have no material financial impact to the Group. 7. INVESTMENT IN ASSOCIATE Group Unquoted shares, at cost Share of post acquisition results Represented by: Group’s share of net assets 2014 RM’000 2013 RM’000 2 (2) 2 (2) - - - - The shares of the associate are held directly by one of the subsidiaries, namely Komark International (M) Sdn. Bhd. Details of the associate are as follows: Name of Company Country of incorporation * Komark Enterprise Co. Ltd. Thailand Effective equity interest 2014 2013 % % Principal activities 49 Trading of self adhesive labels and related tools and equipment 49 * Audited by another firm of auditors. 8. OTHER INVESTMENT Group 2014 RM’000 2013 RM’000 Quoted shares in Malaysia, at cost - 4 Quoted shares in Malaysia, at market value - 3 Available-for-sale financial assets: ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 74 30 April 2014 (cont’d) 9. DEVELOPMENT EXPENDITURE Group 2014 RM’000 2013 RM’000 Cost At 1 May Addition during the year 5,747 121 5,574 173 At 30 April 5,868 5,747 Accumulated amortisation At 1 May Charge for the year 3,992 805 3,178 814 At 30 April 4,797 3,992 Accumulated impairment At 1 May Impairment loss for the year 1,071 - At 30 April 1,071 - - 1,755 Automatic labelling machineries Net carrying amount Group 2014 RM’000 2013 RM’000 Cost At 1 May Exchange difference 3,779 216 3,673 106 At 30 April 3,995 3,779 Accumulated amortisation At 1 May Charge for the year Exchange difference 3,563 203 3,411 52 100 At 30 April 3,766 3,563 Net carrying amount 229 216 Total net carrying amount 229 1,971 Roto-gravure/offset combination labels press project The roto-gravure/offset combination labels press commenced its commercial production in December 2002. The amortisation represents the amount charged from the date of commercial production. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 75 30 April 2014 (cont’d) 10. GOODWILL ON CONSOLIDATION Group 2014 RM’000 2013 RM’000 Amount recognised on acquisitions Accumulated amortisation 2,413 (663) 2,413 (663) Net book value 1,750 1,750 Goodwill on consolidation Negative goodwill amounting to RM7,195,813 has been fully amortised and recognised in the statement of profit or loss and other comprehensive income in the previous financial year. Goodwill on consolidation is no longer amortised since financial year 2007, instead it is subject to impairment. There is no impairment as at the end of current financial year. 11.INVENTORIES Group 12. 2014 RM’000 2013 RM’000 Raw materials Work-in-progress Manufactured inventories Others 6,010 2,258 20,979 3,601 10,100 3,587 23,458 3,735 Less: Allowance for slow-moving manufactured inventories 32,848 (3,919) 40,880 (3,103) 28,929 37,777 TRADE AND OTHER RECEIVABLES Group 2013 RM’000 2014 RM’000 2013 RM’000 Trade receivables - Third parties - Associated company 36,534 1,573 38,636 - - - Less: Allowance for impairment 38,107 (3,050) 38,636 (2,002) - - Trade receivables, net 35,057 36,634 - - 4,817 5,846 6 42 39,874 42,480 6 42 Other receivables, deposits and prepayments Company 2014 RM’000 Trade receivables are non-interest bearing and are generally on 1 to 120 (2013: 1 to 120) days term. They are recognised at their original invoice amounts which represent their fair values on initial recognition. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 76 30 April 2014 (cont’d) 12. TRADE AND OTHER RECEIVABLES (cont’d) Ageing analysis of trade receivables The ageing analysis of the Group’s trade receivables is as follows: Group 1 - 90 days 91 - 180 days 181 days and above Impaired 2014 RM ‘000 2013 RM ‘000 33,026 1,063 968 35,057 3,050 32,483 1,668 2,483 36,634 2,002 38,107 38,636 Receivables that are not impaired Trade receivables that are not impaired are creditworthy debtors with good payment records with the Group. None of the Group’s trade receivables that are not impaired have been renegotiated during the year. Receivables that are impaired The Group’s trade receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows: Group Trade receivables - nominal amounts Less: Allowance for impairment losses 2014 RM ‘000 2013 RM ‘000 3,050 (3,050) 2,002 (2,002) - - Movements in allowance accounts: Group 2014 RM ‘000 2013 RM ‘000 At 1 May Charge for the year Write-off against allowance accounts Exchange difference 2,002 1,012 (4) 40 1,484 518 - At 30 April 3,050 2,002 Trade receivables that are collectively and individually determined to be impaired at the reporting date mainly relate to balances which have been significantly long outstanding. These receivables are not secured by any collateral or credit enhancements. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 77 30 April 2014 (cont’d) 13. AMOUNT DUE FROM/(TO) RELATED COMPANIES/ASSOCIATE COMPANY Company Amount due from related companies Less: Allowance for impairment 2014 RM’000 2013 RM’000 42,971 (8) 42,362 - 42,963 42,362 These balances are non-trade in nature, unsecured, non-interest bearing and are repayable on demand. 14. CASH AND BANK BALANCES Group Deposits with licensed banks Cash in hand and at banks Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 2,843 6,643 2,741 6,192 - 3 9,486 8,933 - 3 Included in deposits placed with licensed banks of the Group is RM2,165,657 (2013: RM2,740,738) pledged as security for borrowings granted to subsidiaries (Note 18 to the financial statements). During the financial year, the fixed deposits earned interest rates ranging from 0.70% - 3.20% per annum and have average maturities of 7 days - 36 months. 15. SHARE CAPITAL Group and Company Number of ordinary shares Amount 2014 2013 2014 2013 RM’000 RM’000 Ordinary shares of RM1 each Authorised At 1 May/30 April 500,000,000 500,000,000 500,000 500,000 Issued and fully paid At 1 May/30 April 81,275,010 81,275,010 81,275 81,275 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 78 30 April 2014 (cont’d) 16. TREASURY SHARES Group and Company 2014 2013 Number of ordinary shares of RM1 each At 1 May Repurchased during the year Sold during the year At 30 April Ordinary shares of RM1 each At 1 May Repurchased during the year Sold during the year At 30 April 1,000 - 1,538,000 2,000 (1,540,000) 1,000 - 2014 RM’000 2013 RM’000 -# - 437 -# (437) -# - # Amount less than RM1,000. During the financial year, the Company repurchased 1,000 (2013: 2,000) ordinary shares from the open market at an average price of RM0.66 (2013: RM0.33) per share. The total consideration paid for the repurchase was RM656 (2013: RM657). The repurchased transactions were financed by internally generated funds. 17.RESERVES Group Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 General reserve At 1 May Appropriation of profit 1,703 886 1,703 - - - At 30 April 2,589 1,703 - - Translation reserve At 1 May Foreign currency translation 4,525 (488) 3,730 795 - - At 30 April 4,037 4,525 - - Revaluation reserve At 1 May Surplus on revaluation 12,031 - - - At 30 April 12,031 - - - Total non-distributable reserves 18,657 6,228 - - Non-distributable KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 79 30 April 2014 (cont’d) 17. RESERVES (cont’d) Group Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 (Accumulated loss)/Retained profit At 1 May (Loss)/profit for the year Appropriation of profit Dividend 13,511 (28,909) (886) (406) 18,342 (4,831) - (27,837) 1,169 (406) (28,357) 520 - At 30 April (16,690) 13,511 (27,074) (27,837) 1,967 19,739 (27,074) (27,837) Distributable Total Reserves a. General Reserve Subsidiaries in the People’s Republic of China (“PRC”) are required to appropriate 10% of their after-tax profit (after offsetting prior year losses), based on the respective PRC statutory financial statements, to a general reserve fund until the balance of the fund reaches 50% of the Company’s registered capital. Thereafter, any further appropriation can be made at the Directors’ discretion. The general reserve fund can be utilised to offset prior year losses, or be utilised for the issuance of bonus shares on the condition that the general reserve fund shall be maintained at a minimum of 25% of the registered capital after such issuance. In accordance with the relevant rules and regulations in the PRC, the subsidiaries may also appropriate a portion of its after-tax profit (after offsetting prior year losses), based on the PRC statutory financial statements, to an enterprise expansion fund and a staff and workers’ bonus and welfare fund at the Director’s discretion. b. Translation Reserve This represents foreign currency exchange differences arising from the translation of the financial statements of subsidiaries which are denominated in currency other than the presentation currency of the Company, Ringgit Malaysia. c. Revaluation Reserve This represents surplus on revaluation arising from the revaluation of certain freehold and leasehold land and buildings of the Group by an independent valuer on 28 January 2014 and 16 May 2014. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 80 30 April 2014 (cont’d) 17. RESERVES (cont’d) d. Additional Disclosure Of Realised And Unrealised Profits Or Losses Group Total (accumulated loss)/retained profit of the Company and its subsidiary companies - Realised - Unrealised Total share of accumulated loss from associated company - Realised - Unrealised Less: Consolidation adjustments Total Group/Company (accumulated loss)/retained profit as per consolidated accounts Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 (14,230) (546) 22,740 (2,774) (27,074) - (27,837) - (14,776) 19,966 (27,074) (27,837) (2) - (2) - - - (14,778) (1,912) 19,964 (6,453) (27,074) - (27,837) - (16,690) 13,511 (27,074) (27,837) 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 7,764 32 13,891 5,221 1,427 1,565 22,233 5,346 12,628 2,398 14,188 1,317 3,506 22,956 4,068 3,055 - 3,158 - 57,479 61,061 3,055 3,158 10,691 4,149 2,148 1,100 5,629 - - 14,840 8,877 - - 72,319 69,938 3,055 3,158 18.BORROWINGS Group Current Bank overdrafts Bankers’ acceptance Term loans Short-term loans - secured unsecured secured unsecured secured secured unsecured Hire purchase liabilities Non-current Term loans Hire purchase liabilities KOM A R KCO R P B E R HAD - secured - unsecured Company NOTES TO THE FINANCIAL STATEMENTS 81 30 April 2014 (cont’d) 18. BORROWINGS (cont’d) a. Term loans and repayment schedule (i) Secured term loans Secured term loans consist of 7 (2013: 3) term loans. Their repayment schedule is as follows: Secured term loan of RM3,506,000 (2013: RM4,606,000) is repayable by 48 consecutive installments commencing February 2011. This term loan is obtained by a local subsidiary from a foreign bank. Rescheduled on April 2012 and repayable by 71 consecutive installments commencing from April 2012. Secured term loan of RM1,053,233 [equivalent to RMB2,019,000] (2013: RM1,491,896 [equivalent to RMB 3,028,000]) is repayable by quarterly installments over a period of four (4) years commencing February 2012. This term loan is obtained by a foreign subsidiary from a foreign bank. Secured term loan of RM501,700 [equivalent to USD153,600] (2013: RM653,439 [equivalent to USD211,250]) is repayable by quarterly installments over a period of three (3) years commencing April 2013. This term loan is obtained by a foreign subsidiary from a foreign bank. Additional secured term loan of RM7,000,000 is repayable by monthly installments over a period of twenty (20) years commencing September 2013. This term loan is obtained by a local subsidiary from a local bank. Secured short-term loans of RM1,565,100 [equivalent to RMB3,000,000], RM313,000 [equivalent to RMB600,000] and RM11,477,400 [equivalent to RMB22,000,000] respectively are repayable by one bullet payment after one (1) year from the date of first drawdown. These term loans are obtained by two foreign subsidiaries from three foreign banks. (ii) Unsecured term loans Unsecured term loans consist of 2 (2013: 3) term loans. Their repayment schedule is as follows: Unsecured short-term loan of RM6,651,450 [equivalent to RMB13,500,000] as at the end of the previous financial year has been fully settled during the current financial year. Unsecured short-term loan of RM2,608,500 [equivalent to RMB5,000,000] is rollovered and repayable within one (1) year commencing June 2013. This short-term loan is obtained by a foreign subsidiary from a foreign bank. Additional unsecured short-term loan of RM7,825,500 [equivalent to RMB15,000,000] is repayable within one (1) year commencing February 2014. This short-term loan is obtained by a foreign subsidiary from a local bank. b. Significant covenants for term loans granted to foreign subsidiaries In connection with the borrowing facilities agreements and their supplemental agreements, foreign subsidiaries have agreed on the following significant covenants with the lender: i) the ratio of the subsidiary’s total liabilities to net worth shall not exceed 200% at 30 April 2014 and at any time thereafter without prior consent of the lenders; ii) not to make any advances, loans or grant any credit (save in the ordinary course of business) to or for the benefit of any other persons (including any related company) or give any guarantee or indemnity to or for the benefit of any other person or otherwise voluntarily assume any liability, whether actual or contingent, in respect of any obligation of any other person without prior consent of the lenders. The foreign subsidiary shall notify the lenders on the ratio of said guarantees, if any over its net tangible assets; and iii) not to raise any additional financing from other financial institutions without prior consent from the lenders and such consent shall not be unreasonably withheld. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 82 30 April 2014 (cont’d) 18. BORROWINGS (cont’d) c. Other borrowings The Company’s bank overdrafts facilities are secured by legal charges over certain land and building of the Group. The Group’s other borrowings are secured by way of fixed charges over the freehold and leasehold land and buildings of the respective subsidiaries, certain machinery of a subsidiary, corporate guarantees from the Company, fixed deposits of the respective subsidiaries and jointly and severally guaranteed by certain directors of the Company. d. Hire purchase liabilities Group 2014 RM’000 2013 RM’000 5,967 4,515 4,807 5,973 Future finance charges on hire purchase 10,482 (987) 10,780 (1,083) Present value of hire purchase payables 9,495 9,697 Current Non-current 5,346 4,149 4,068 5,629 9,495 9,697 5,346 4,149 4,068 5,629 9,495 9,697 Minimum payment - not later than one year - later than one year and not later than five years Present value of hire purchase payables - not later than one year - later than one year and not later than five years 19. Hire purchase liabilities are subject to effective interest rates of 2.19% to 6.30% (2013: 2.19% to 6.30%). DEFERRED TAX Group Deferred tax liabilities At 1 May Transferred (to)/from statement of profit or loss and other comprehensive income (Note 23) At 30 April 2014 RM’000 2013 RM’000 2,654 1,406 (2,100) 1,248 554 2,654 Deferred tax liabilities and assets are offset where there is a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred taxes relate to the same taxation authority and same entity. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 83 30 April 2014 (cont’d) 19. DEFERRED TAX (cont’d) The net deferred tax liabilities/(assets) are in respect of the followings: Group Taxable temporary differences Allowances and provisions Unabsorbed capital allowances Unutilised tax losses Unutilised reinvestment allowances Others 2014 RM’000 2013 RM’000 1,610 (524) (281) (251) - 8,624 (1,459) (1,777) (535) (2,584) 385 554 2,654 As at 30 April 2014, the amount of estimated net deferred tax assets of the Group measured at current tax rate which are not recognised in the financial statements, are as follows: Group Temporary differences Unabsorbed capital allowances Unutilised tax losses Unutilised reinvestment allowances Allowance and provision 20. 2014 RM’000 2013 RM’000 (3,806) 2,962 3,288 8,865 (150) (108) 144 220 - 11,159 256 TRADE AND OTHER PAYABLES Group Trade payables Other payables, accrued expenses and deposit received Amount due to directors Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 23,091 19,307 - - 5,776 1,896 8,172 2,251 277 25 485 75 30,763 29,730 302 560 (a) Trade Payables Trade payables are non-interest bearing and are normally settled on 1 to 120 (2013: 1 to 120) days term. (b) Other Payables These amounts are non-interest bearing. Other payables are normally settled on an average term of 90 (2013: 90) days term. (c) Amount due to directors These balances are unsecured, non-interest bearing and are repayable on demand. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 84 30 April 2014 (cont’d) 21. OTHER OPERATING INCOME Group Gain on disposal of investment property Gain on disposal of property, plant and equipment Gain on foreign exchange -Realised -Unrealised Government grant Interest income Rental income Rental of equipment Waiver of amount due from related company Write-back of allowance for impairment of receivables Others Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 - 53 - - 13 903 309 17 72 129 (6) 3 201 116 98 17 - - - 4 - - - 425 146 161 - - 1,112 1,549 - - 22. (LOSS)/PROFIT BEFORE TAXATION The following items have been charged in arriving at (loss)/profit before tax: Group Allowance for impairment losses: - Amount due from related company - Development expenditure - Property, plant and equipment - Trade receivables Allowance for slow-moving manufactured inventories Amount due from related company written off Amortisation of development expenditure Amortisation of prepaid lease payments on land Auditors’ remuneration - Current year’s provision - Underprovision in prior years Bad debts written off Depreciation of property, plant and equipment Directors’ remuneration - Fees - Directors of the Company - Other emoluments - Directors of the Company - Other directors of subsidiary Factory rental Finance costs - Bank overdrafts - Hire purchase and finance lease - Short term borrowings - Term loans - Others KOM A R KCO R P B E R HAD Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 1,071 12,512 1,437 518 8 - - 816 1,608 - - 805 866 - 53 - 47 44 - - 155 6 1,548 134 1 14 1 - 14 - 12,036 11,417 - - 1,087 1,180 180 112 1,031 333 821 993 320 605 170 - 576 - 700 930 1,064 2,374 4 1,018 800 894 2,070 709 238 - 254 - NOTES TO THE FINANCIAL STATEMENTS 85 30 April 2014 (cont’d) 22. (LOSS)/PROFIT BEFORE TAXATION (CONT’D) Group Inventories written off Loss on disposal of other investment Loss on foreign exchange - Realised Property, plant and equipment written off Rental of equipment Rental of premises Staff costs - Salaries, allowances and others - Retirement benefits Unreconciled balances written off Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 1 1,805 - - - 506 4 299 321 28 504 - - 21,282 1,154 687 17,429 1,232 794 289 35 160 355 103 - 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 23.TAXATION Group Malaysian income tax - Current year - Underprovision in prior year Overseas income tax - Current year - Under/(over)provision in prior year - Withholding tax 7 14 30 7 - - 1,948 23 313 1,274 (1) - - - Deferred taxation (Note 19) 2,305 (2,100) 1,310 1,248 - - 205 2,558 - - Income tax expense recognised in statement of profit or loss and other comprehensive income Company The reconciliation between tax expense and the product of accounting (loss)/profit multiplied by the applicable corporate tax rate for the years ended 30 April is as follows: Group Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 (28,704) (2,273) 1,169 520 (7,176) (568) 292 130 (8) 3,015 4,024 313 758 1,113 (455) 1,704 - (292) (130) - - Underprovision of income tax in prior year 168 37 2,552 6 - - Tax expense 205 2,558 - - (Loss)/profit before taxation Taxation at Malaysian statutory tax rate of 25% (2013: 25%) Effect of different tax rates in foreign jurisdictions Non-deductible expenses Income not subject to tax Deferred tax assets not recognised Withholding tax ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 86 30 April 2014 (cont’d) 23. TAXATION (CONT’D) Domestic income tax is calculated at the Malaysian statutory tax rate of 25% (2013: 25%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. 24. LOSS PER SHARE The basic loss per share is calculated by dividing loss for the year net of tax attributable to equity holders of the Company by the weighted average number of ordinary shares of RM1 each in issue during the financial year excluding the weighted average treasury shares held by the Company. Group 2014 RM’000 2013 RM’000 Loss for the year attributable to equity holders of the Company (28,909) (4,831) Number of ordinary shares in issue at 1 May Effect of shares bought back and held as treasury shares 81,275 (1) 79,737 127 81,274 79,864 (35.6) (6.0) Basic loss per share (sen) There was no dilution of earnings per share during the financial year. 25.DIVIDEND Group and Company Net per share Amount RM RM’000 2014 First and final single-tier dividend in respect of: - financial year ended 30 April 2013 0.005 406 26. SEGMENT INFORMATION Segmental information is presented in respect of the Group’s business and geographical segments based on the Group’s management and internal reporting structure. Inter-segment pricing is determined based on negotiated basis in the normal course of business. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise of expenses and assets of the Company and its dormant subsidiaries. Business Segment The Group comprises the following main business segments: i) Manufacturing of self adhesive labels and stickers and trading of related products; and ii) Manufacturing of automatic labelling machineries. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 87 30 April 2014 (cont’d) 26. SEGMENT INFORMATION (CONT’D) Geographical segments Manufacturing of automatic labelling machineries is principally operated in Malaysia. Other geographical areas are involved in the manufacturing of self adhesive labels and stickers and trading of related products. In presenting information on the basis of geographical segments, segment revenue and segment assets are based on the geographical location of assets. a. Business Segment Manufacturing of self adhesive labels and Manufacturing stickers and of automatic trading of labelling related product machineries RM’000 RM’000 Elimination RM’000 Consolidation RM’000 2014 Revenue External sales Inter-segment sales 141,056 - 749 945 (945) 141,805 - Total revenue 141,056 1,694 (945) 141,805 (11,992) (10,311) - (22,303) (1,458) 129 Results Segment results Unallocated expenses Interest income Loss from operations Finance costs (23,632) (5,072) Loss before taxation Taxation (28,704) (205) Loss for the year Minority interest Loss attributable to equity holders of the Company (28,909) - Assets Segment assets Unallocated assets (28,909) 176,754 27,350 - 204,209 Total Assets Liabilities Segment liabilities Unallocated liabilities 101,929 1,153 - 103,082 2,251 105,333 Total Liabilities Other Information Capital expenditure Depreciation and amortisation 204,104 105 (11,117) (11,846) (121) (1,042) 2,624 (8,614) (12,888) ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 88 30 April 2014 (cont’d) 26. SEGMENT INFORMATION (CONT’D) a. Business Segment (cont’d) Manufacturing of self adhesive labels and Manufacturing stickers and of automatic trading of labelling related product machineries RM’000 RM’000 Elimination RM’000 Consolidation RM’000 2013 Revenue External sales Inter-segment sales 135,497 - 540 1,433 (1,433) 136,037 - Total revenue 135,497 1,973 (1,433) 136,037 4,520 306 - 4,826 (1,706) 98 Results Segment results Unallocated expenses Interest income Profit from operations Finance costs 3,218 (5,491) Loss before taxation Taxation (2,273) (2,558) Loss for the year Minority interest Loss attributable to equity holders of the Company (4,831) - Assets Segment assets Unallocated assets (4,831) 193,616 26,707 - 220,447 Total Assets Liabilities Segment liabilities Unallocated liabilities 97,973 1,695 KOM A R KCO R P B E R HAD - 99,668 4,131 103,799 Total Liabilities Other Information Capital expenditure Depreciation and amortisation 220,323 124 (10,595) (11,274) (423) (1,053) (11,018) (12,327) 26. b. Capital expenditure Segment assets by location of assets Revenue from external customers by location of customers 2013 Capital expenditure Segment assets by location of assets Revenue from external customers by location of customers 2014 Geographical Segment SEGMENT INFORMATION (CONT’D) China RM’000 Malaysia RM’000 108,090 (6,296) 203,727 (4,237) 69,718 (6,774) (1,745) 45,589 113,149 82,610 China RM’000 186,480 33,780 Malaysia RM’000 (251) 4,170 8,517 Singapore RM’000 (304) 4,554 8,605 Singapore RM’000 (234) 20,971 19,131 Thailand RM’000 (2,095) 22,525 21,251 Thailand RM’000 - 29,969 2,351 Others RM’000 (320) 30,696 3,746 Others RM’000 - (146,480) (9,269) Elimination RM’000 2,624 (153,195) (8,187) Elimination RM’000 (11,018) 220,447 136,037 Consolidation RM’000 (8,614) 204,209 141,805 Consolidation RM’000 NOTES TO THE FINANCIAL STATEMENTS 30 April 2014 (cont’d) 89 ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 90 30 April 2014 (cont’d) 27. CONTINGENT LIABILITIES Company Corporate guarantees in respect of credit facilities granted to subsidiaries 28. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES Controlling related party relationships are as follows: i) ii) 2014 RM’000 2013 RM’000 57,441 75,000 Its subsidiaries as disclosed in Note 6 to the financial statements. A director of the Company, Koh Hong Muan @ Koh Gak Siong. In addition to the related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties took place at terms agreed between the parties during the financial year: Group Holding company Komarkcorp Berhad - Dividend income Subsidiaries Komark International (M) Sdn. Bhd. - Sales General Labels & Labelling (M) Sdn. Bhd. - Sales - Rental income, premises General Labels & Labelling (JB) Sdn. Bhd. - Sales General Labels & Labelling (Penang) Sdn. Bhd. - Sales Guangzhou Komark Labels & Labelling Co., Ltd. - Sales Shanghai Komark Labels & Labelling Co., Ltd. - Sales General Labels & Labelling Pte Ltd - Sales General Labels & Labelling (Ipoh) Sdn. Bhd. - Sales Komark (Thailand) Company Limited - Sales Komark Investment Holdings Ltd. - Dividend income KOM A R KCO R P B E R HAD Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 2,865 2,094 2,865 2,094 159 274 - - 2,157 - 2,663 60 - - 3,924 3,959 - - - 931 - - 1,184 1,544 - - 540 520 - - 28 35 - - 51 159 - - 145 12 - - 3,139 1,212 - - NOTES TO THE FINANCIAL STATEMENTS 91 30 April 2014 (cont’d) 29. OPERATING LEASE COMMITMENTS The future aggregate minimum lease payments under non-cancellable operating leases contracted for at the reporting date but not recognised as liabilities are as follows: Group Not later than 1 year Later than 1 year but not later than 5 years 2014 RM’000 2013 RM’000 159 212 53 - 371 53 30. FAIR VALUE OF FINANCIAL INSTRUMENTS Determination of Fair Value Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value: Note Trade and other receivables Deposits with licensed banks Trade and other payables Borrowings (current) 12 14 20 18 The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are re-priced to market interest rates on or near the reporting date. The carrying amount of the current portion of borrowings is reasonable approximation of fair value due to the insignificant impact of discounting. Finance lease obligations The fair values of these financial instruments are estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date. Quoted equity instruments The fair value of these financial assets is determined by reference to the quoted closing bid price at the reporting date. 31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks. The Audit Committee provides independent oversight to the effectiveness of the risk management process. It is, and has been throughout the current and previous financial year, the Group’s policy that no derivatives shall be undertaken. The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 92 30 April 2014 (cont’d) 31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D) (a) Credit Risk Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including cash and bank balances), the Group minimise credit risk by dealing exclusively with high credit rating counterparties. The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. Exposure to credit risk At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statements of financial position. Information regarding credit enhancements for trade and other receivables is disclosed in Note 12 to the financial statements. Credit risk concentration profile The Group determines concentration of credit risk by monitoring the business segment of its trade receivables on an ongoing basis. At the reporting date, there was no significant concentration of credit risk for the Group and the Company other than those receivables as analysed in Note 12 to the financial statements. Financial assets that are not impaired Information regarding trade and other receivables that are not impaired is disclosed in Note 12 to the financial statements. Financial assets that are impaired Information regarding financial assets that are impaired is disclosed in Note 12 to the financial statements. (b) Liquidity Risk Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 93 30 April 2014 (cont’d) 31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D) (b) Liquidity Risk (cont’d) Analysis of Financial Instruments by Remaining Contractual Maturities The table below summarises the maturity profile of the Group’s and the Company’s liabilities at the reporting date based on contractual undiscounted repayment obligations. <---------------------------------30.4.2014-----------------------------> On demand or One to Over within one year five years five years Total RM’000 RM’000 RM’000 RM’000 Group Financial Liabilities Trade and other payables Borrowings 30,763 57,479 14,840 - 30,763 72,319 <---------------------------------30.4.2014-----------------------------> On demand or One to Over within one year five years five years Total RM’000 RM’000 RM’000 RM’000 Company Financial Liabilities Trade and other payables Borrowings 302 3,055 - - 302 3,055 <---------------------------------30.4.2013-----------------------------> On demand or One to Over within one year five years five years Total RM’000 RM’000 RM’000 RM’000 Group Financial Liabilities Trade and other payables Borrowings 29,730 61,061 8,877 - 29,730 69,938 <---------------------------------30.4.2013-----------------------------> On demand or One to Over within one year five years five years Total RM’000 RM’000 RM’000 RM’000 Company Financial Liabilities Trade and other payables Borrowings 560 3,158 - - 560 3,158 (c) Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 94 30 April 2014 (cont’d) 31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D) (c) Interest Rate Risk (cont’d) As the Group has no significant interest-bearing financial assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s interest-bearing financial assets are mainly short term in nature. The Group’s interest rate risk arises primarily from interest-bearing borrowings. Borrowings at floating rates expose the Group to cash flow interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. The Group manages its interest rate exposure by maintaining a mix of fix and floating rate of borrowings. The following tables set out the carrying amounts, effective interest rates as at the reporting date and the remaining maturities of the Group’s and the Company’s financial instruments that are exposed to interest rate risk: Effective interest rate % Total RM’000 Within 1 year RM’000 Financial assets Deposits with licensed banks 0.70 - 3.20 2,843 2,843 Financial liabilities Bank overdrafts Bankers’ acceptance Term loans Short-term loans 7.85 - 8.60 4.73 - 5.44 4.05 - 8.31 4.05 - 8.31 7,796 19,112 12,118 23,798 7,796 19,112 1,427 23,798 Financial assets Deposits with licensed banks 2.25 - 3.25 2,741 2,741 Financial liabilities Bank overdrafts Bankers’ acceptance Term loans Short-term loans 7.85 - 8.60 4.50 - 5.50 4.05 - 8.60 4.05 - 8.31 15,026 15,505 6,754 22,956 15,026 15,505 3,506 22,956 7.85 - 8.60 3,055 3,055 8.60 3,158 3,158 Group 2014 2013 Company 2014 Financial liabilities Bank overdrafts 2013 Financial liabilities Bank overdrafts KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 95 30 April 2014 (cont’d) 31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D) (d) Foreign Currency Risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group is exposed to transactional currency risk primarily through sales and purchases and borrowings that are denominated in currencies other than the functional currency of the operations to which they relate. The currencies giving rise to this risk are primarily United States Dollar, Renminbi Yuan and Singapore Dollar and a small percentage in other foreign currencies. Foreign exchange exposures in these transactional currencies other than functional currencies of the operating entities are kept to an acceptable level. The net unhedged financial assets and liabilities of the Group that are not denominated in the functional currency is as follows: Group 2014 RM 2013 RM 984,872 (19,377,615) 1,467,061 (1,933,314) 836,329 3,412,476 (13,269,886) 1,593,635 (496,457) 579,405 (18,022,667) (8,180,827) Net unhedged financial (liabilities)/assets: United States Dollar (“USD”) Renminbi Yuan (“RMB”) Singapore Dollar (“SGD”) Thailand Baht (“THB”) Indonesia Rupiah (“INR”) Sensitivity Analysis for Foreign Currency Risk The following table demonstrates the sensitivity of the Group’s profit to a reasonably possible change in the USD, RMB, SGD, THB and INR exchange rates against the respective functional currencies of the Group entities, with all other variables held constant. Gain/(loss) in profit or loss 2014 2013 RM RM USD/RM RMB/RM SGD/RM THB/RM INR/RM - strengthened 10% weakened 10% strengthened 10% weakened 10% strengthened 10% weakened 10% strengthened 2% weakened 2% strengthened 2% weakened 2% 98,487 (98,487) 1,937,762 (1,937,762) 146,706 (146,706) 38,666 (38,666) 16,727 (16,727) 341,248 (341,248) 1,326,989 (1,326,989) 159,364 (159,364) 9,929 (9,929) 11,588 (11,588) (e) Market Price Risk Market price risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices. The Group is exposed to market price risk arising from its investment in quoted shares listed on the Bursa Malaysia Securities Berhad. These instruments are classified as available-for-sale financial assets. The Group does not have exposure to commodity price risk. The Group holds low volume of investments in equity instruments for the current and previous financial year. Accordingly, performance of sensitivity analysis for market price risk is not meaningful to the Company. ANNUA L R EPORT 2 0 1 4 NOTES TO THE FINANCIAL STATEMENTS 96 30 April 2014 (cont’d) 32. CAPITAL MANAGEMENT The primary objective of the Group’s capital management is to ensure that entities of the Group would be able to continue as going concerns while maximising the return to shareholders through the optimisation of the debt and equity ratios. The overall strategy of the Group remains unchanged from that in the previous financial year. The Group monitors capital using gearing ratio, which is the amount of borrowings (Note 18 to the financial statements) divided by equity attributable to owners of the Company. The Group’s policy is to keep the gearing ratio within manageable levels. Capital represents equity attributable to the owners of the parent less the fair value adjustment reserve. Group Borrowings Total equity Gearing ratio (times) 33. 34. Company 2014 RM’000 2013 RM’000 2014 RM’000 2013 RM’000 72,319 98,876 0.73 69,938 116,648 0.60 3,055 69,835 0.04 3,158 69,072 0.05 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (a) On 24 June 2013, the Company announced that it proposes to undertake a private placement of up to 10% of the issued and paid-up share capital of the Company to third party investors to be identified later (“Proposed Private Placement”). On 26 June 2013, the Company announced that the application pursuant to the Proposed Private Placement has been submitted to Bursa Malaysia. On 28 June 2013, the Company announced that Bursa Malaysia had resolved to approve the listing and quotation for up to 8,127,501 new ordinary shares of RM1 each in the Company to be issued to the Private Placement subject to certain conditions. However, the Proposed Private Placement has lapsed upon 6 months expiry from approval on 27 December 2013. (b) On 25 April 2014, the Company announced that it proposes to undertake a renounceable two-call rights issue of up to 27,091,670 Rights Shares at an indicative issue price of RM1 per Rights Share on the basis of one (1) Rights Share for every three (3) existing shares held in the Company, together with up to 27,091,670 free detachable Warrants on the basis of one (1) free Warrant for every one (1) Rights Share subscribed for, on an entitlement date to be determined later. (c) On 27 August 2013, a subsidiary company subscribed an additional 234,000 ordinary shares of THB100 each in Komark (Thailand) Company Limited for a total consideration of RM1,805,538. The equity interest of the subsidiary company in Komark (Thailand) Company Limited remains at 100%. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE (a) On 24 June 2014, the Company announced that it proposes to undertake the following: (i) A par value reduction via the cancellation of RM0.75 of the par value of every existing ordinary share of RM1 each in the issued and paid-up share capital of the Company pursuant to Section 64 of the Act (“Proposed Par Value Reduction”); and (ii) A renounceable rights issue of up to 40,637,005 Rights Shares at an indicative issue price of RM0.30 per Rights Share on the basis of one (1) Rights Share for every two (2) existing shares held in the Company, together with up to 40,637,005 free Warrants on the basis of one (1) free Warrant for every one (1) Rights Share subscribed for, on an entitlement date to be determined later after the Proposed Par Value Reduction (“Proposed Rights Issue with Warrants”). On 1 August 2014, the Company announced that the listing application pursuant to the Proposed Rights Issue with Warrants has been submitted to Bursa Malaysia on even date. KOM A R KCO R P B E R HAD NOTES TO THE FINANCIAL STATEMENTS 97 30 April 2014 (cont’d) 34. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE (cont’d) On 15 August 2014, the Company announced that Bursa Malaysia had resolved to approve the following: (i) Admission to the Official List and the listing and quotation of up to 40,637,005 Warrants to be issued pursuant to the Proposed Rights Issue with Warrants; (ii) Listing and quotation of up to 40,637,005 new shares of the Company to be issued pursuant to the Proposed Rights Issue with Warrants; and (iii) Listing and quotation of up to 40,637,005 new shares of the Company to be issued pursuant to the exercise of Warrants. The above are subject to certain conditions. (b) On 1 July 2014, the Company announced that a valuation has been conducted on the Group’s investment properties in Malaysia to reflect the fair value of the freehold land and buildings. 35.COMPARATIVES Certain comparative figures have been restated to conform with current year’s presentation. 36. AUTHORISATION FOR ISSUE The financial statements of the Company for the financial year ended 30 April 2014 were authorised for issue in accordance with a resolution of the Board of Directors on 28 August 2014. ANNUA L R EPORT 2 0 1 4 ANALYSIS OF SHAREHOLDINGS 98 as at 29 August 2014 Authorised share capital Issued and paid-up share capital Class of shares Voting rights : : : : RM500,000,000.00 RM 81,275,010.00 Ordinary Shares of RM1.00 each One vote per share No. of Shareholders/ Depositors % of Shareholders/ Depositors No. of Shares held* % of Issued Capital 1 - 99 100 - 1,000 1,001 - 10,000 10,001 - 100,000 100,001 - 4,063,699 4,063,700 (5% of Issued Capital*) and above 442 520 1,813 480 47 3 13.37 15.73 54.86 14.52 1.42 0.09 15,930 431,020 8,241,999 14,247,421 32,379,851 25,957,789 0.02 0.53 10.14 17.53 39.84 31.94 TOTAL 3,305 100.00 81,274,010 100.00 Size of Holdings Note: * Excluding a total of 1,000 Ordinary Shares of RM1.00 each bought back by the Company and retained as treasury shares. SUBSTANTIAL SHAREHOLDERS AS AT 29 AUGUST 2014 Direct No. of Shares Capital (1) % of Issued Indirect No. of Shares Capital (1) % of Issued 10,906,889 13.42 - - Koh Hong Muan @ Koh Gak Siong 6,519,900 8.02 10,906,889 (2) 13.42 Lim Pei Tiam @ Lim Ahat Kiat 9,938,800 12.23 - - Tan Kwe Hee 5,112,100 6.29 1,200,000 (3) 1.48 Aimas Enterprise Sdn Bhd Notes: Based on the issued and paid-up share capital less 1,000 Ordinary Shares of RM1.00 each bought back by the Company and retained as treasury shares. (2) Deemed interested in the shares by virtue of Section 6A(4)(c) of the Companies Act, 1965 held through Aimas Enterprise Sdn Bhd. (3) Deemed interested in the shares by virtue of Section 6A of the Companies Act, 1965, held by his spouse, Ho Say Lan @ Hor Yoke Lan. (1) KOM A R KCO R P B E R HAD ANALYSIS OF SHAREHOLDINGS (cont’d) 99 THIRTY LARGEST SHAREHOLDERS/DEPOSITORS AS AT 29 AUGUST 2014 Name of Shareholders/Depositors 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. EB Nominees (Tempatan) Sendirian Berhad Pledged Securities Account for Aimas Enterprise Sdn Bhd (Jln Hang Lekiu) Lim Pei Tiam @ Liam Ahat Kiat Tan Kwe Hee EB Nominees (Tempatan) Sendirian Berhad Pledged Securities Account for Koh Hong Muan @ Koh Gak Siong (Jln Hang Lekiu) Lim Pay Kaon Ang Jwee Tong RHB Nominees (Tempatan) Sdn Bhd OSK Capital Sdn Bhd for Koh Hong Muan @ Koh Gak Siong Tan Chuan Ann Razali Bin Daud Myra Phung Pei Ling Globalised Market Traders Pte Ltd Ho Say Lan @ Hor Yoke Lan CIMSEC Nominees (Tempatan) Sdn Bhd CIMB Bank For Teh Swee Heng (MM1118) George Lee Sang Kian Ambank (M) Berhad Pledged Securities Account for Wong Ah Yong (SMART) Lim Ah Waa Yeow Wah Chin SJ Sec Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Lim Boon Hong (SMT) Ang Kiam Chai Lim Jia Chean Wong Ah Yong Hsu, Yao-Jih Mayban Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Tan Swee Ung Tan Kok Chiew CIMSEC Nominees (Tempatan) Sdn Bhd CIMB Bank for Wong Ah Yong (MY1278) Tan Kuan Kae Lim Kok Wah & Company Sdn Berhad Gina Gan Lee Yen Wei Maybank Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Chiah Tho Wak TOTAL No. of Shares % of Issued Capital * 10,906,889 13.42 9,938,800 5,112,100 3,680,000 12.23 6.29 4.53 3,309,000 3,293,500 2,839,900 4.07 4.05 3.49 1,980,800 1,700,800 1,665,600 1,590,400 1,200,000 1,100,100 2.44 2.09 2.05 1.96 1.48 1.35 820,700 553,333 1.01 0.68 550,000 520,000 500,033 0.68 0.64 0.62 500,000 500,000 463,866 400,000 344,000 0.62 0.62 0.57 0.49 0.42 309,100 300,000 0.38 0.37 288,000 280,000 251,600 250,000 235,000 0.35 0.34 0.31 0.31 0.29 55,383,521 68.14 Note: * Based on the issued and paid-up share capital less 1,000 Ordinary Shares of RM1.00 each bought back by the Company and retained as treasury shares. ANNUA L R EPORT 2 0 1 4 ANALYSIS OF SHAREHOLDINGS (cont’d) 100 DIRECTORS’ INTERESTS AS AT 29 AUGUST 2014 No. of Shares Director’s Name Koh Hong Muan @ Koh Gak Siong (2) Lim Pei Tiam @ Liam Ahat Kiat Tan Kwe Hee Dato’ Yeow Wah Chin Koh Chee Mian (2) Koh Chie Jooi (2) Tan Sri Ahmad Bin Mohd Don Datuk Ng Peng Hong @ Ng Peng Hay Ihsan bin Ismail Direct Interest % (1) Indirect Interest % (1) 6,519,900 9,938,800 5,112,100 520,000 206,100 - 8.02 12.23 6.29 0.64 0.25 - 10,906,889 (3) 1,200,000 (4) 17,426,789 (5) 17,426,789 (5) - 13.42 1.48 21.44 21.44 - Notes: (1) Based on the issued and paid-up share capital less of 1,000 Ordinary Shares of RM1.00 each bought back by the Company and retained as treasury shares. By virtue of their interests in shares of the Company, the Directors are also deemed to have an interest in the shares of all the subsidiaries of the Company to the extent the Company has an interest. (2) Deemed interested in the shares by virtue of Section 6A(4)(c) of the Companies Act, 1965, held through Aimas Enterprise Sdn Bhd. (3) Deemed interested in the shares by virtue of Section 6A of the Companies Act, 1965, held by his spouse, Ho Say Lan @ Hor Yoke Lan. (4) Deemed interested in the shares by virtue of Section 122A(1)(a) of the Companies Act, 1965, held through his parent, namely Koh Hong Muan @ Koh Gak Siong. (5) KOM A R KCO R P B E R HAD LIST OF PROPERTIES 101 Land Area/ Build Up Area Sq. Ft Age Of Building (Year) Tenure Net book Date of last Value as at revaluation/ 30.04.2014 acquisition RM (‘000) Existing usage Expiry Date Factory Cum Office (HQ) - L-147,756 B-150,000 12 Freehold 14/2/2014 32,000 9/3/2094 L-3,640 B-2,640 18 Leasehold 16/5/2014 350 Factory Cum Office - L-10,200 B-5,394 18 Freehold 16/5/2014 1,100 Title No: 229030 Second Floor, Building 2, Chunf Yie Road, Scientech Park Economic & Technological Development Zone, Guongzhou Factory Cum Office 9/11/2044 L-16,501 B-17,416 16 Leasehold 8/5/1998 1,153 Title No: 026381 No.1, Baosheng Road, Songjiang Industrial Zone, Songjiang, Shanghai 201600, China. Factory Cum Office 16/8/2052 L-89,222 B-76,751 8 Leasehold 19/4/2006 9,370 Owner Title No/Location Komark International (M) Sdn. Bhd GM No. 439, Lot 132, Mukim of Kajang District, Hulu Langat, Selangor. General Labels & Labelling (M) Sdn. Bhd H.S (D) KA 39335 Factory Cum P.T.NO 131760/23 Office Hala Rapat Baru 22, Kawasan Perindustrian, Ringan Kinta Jaya, Perak General Labels & Labelling (M) Sdn. Bhd Lot PTD 112290, Mukin of Plentong District, Johor Bahru. Guongzhou Komark Labels & Labelling Co. Ltd. Shanghai Komark Labels & Labelling Co. Ltd. ANNUA L R EPORT 2 0 1 4 This page has been left blank intentionally PROXY FORM CDS account no. of authorised nominee I/We (name of shareholder, in capital letters) (new) NRIC No./Passport No./ID No./Company No. (old) (full address) of being a member of KOMARKCORP BERHAD, hereby appoint (new) (name of proxy as per NRIC/Passport, in capital letters) NRIC No./Passport No. (old) of (full address) and/or failing him/her (name of proxy as per NRIC/Passport, in capital letters) NRIC No./Passport No. (new) (old) (full address) and/or failing him/her *the of Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Eighteenth Annual General Meeting of the Company to be held at Perdana Room, Bukit Jalil Golf & Country Resort, Jalan 3/155B, Bukit Jalil, 57000 Kuala Lumpur on Tuesday, 28 October 2014 at 10.00 a.m. and at each and every adjournment thereof. * Please delete the words “the Chairman of the Meeting” if you wish to appoint some other person to be your proxy. My/our proxy is to vote as indicated below: RESOLUTIONS FOR 1. Approval of Directors’ Fees and the payment thereof Ordinary Resolution 1 2. Re-election of Mr Koh Hong Muan @ Koh Gak Siong as Director Ordinary Resolution 2 3. Re-election of Mr Koh Chie Jooi as Director Ordinary Resolution 3 4. Re-appointment of Auditors Ordinary Resolution 4 5. Re-appointment of Mr Tan Kwe Hee as Director Ordinary Resolution 5 6. Proposed authority under Section 132D of the Companies Act, 1965 for the Directors to issue shares Ordinary Resolution 6 AGAINST (Please indicate with an “X” in the spaces provided how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his discretion.) Signature/Common Seal For appointment of two proxies, percentage of shareholdings to be represented by the proxies: No. of shares Number of shares held: Date: Proxy 1 Proxy 2 Total Percentage % % 100% Notes: 1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. There shall be no restriction as to the qualification of the proxy. 2. A member may appoint not more than two (2) proxies to attend and vote at the same meeting. Where a member appoints two (2) proxies, the appointments shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy. 3. Where a member of the Company is an exempt authorised nominee which holds shares in the Company for multiple beneficial owners in one securities account (“omnibus account”) as defined under the Securities Industry (Central Depositories) Act, 1991, there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. 4. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its Common Seal or under the hand of the attorney. 5. The instrument appointing a proxy, with the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power or authority, must be deposited at the Registered Office of the Company at Lot 6.05, Level 6, KPMG Tower, 8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia not less than 48 hours before the time set for holding the meeting or any adjournment thereof. 6. In respect of deposited securities, only members whose names appear on the Record of Depositors on 16 October 2014 (General Meeting Record of Depositors) shall be eligible to attend, speak and/or vote at the meeting or appoint proxy(ies) to attend, speak and/or vote on his behalf. Then fold here AFFIX STAMP HERE The Company Secretaries KOMARKCORP BERHAD (374265-A) Lot 6.05, Level 6, KPMG Tower 8 First Avenue, Bandar Utama 47800 Petaling Jaya Selangor Darul Ehsan Malaysia 1st fold here KOMARKCORP BERHAD (374265-A) Lot 132, Jalan 16/1, Kawasan Perindustrian Cheras Jaya 43200 Balakong, Selangor Darul Ehsan, Malaysia. Tel : [603]9080 3333 Fax : [603]9080 5233 Email : [email protected] KOMARKCORP BERHAD (374265-A) | ANNUAL REPORT 2014 www.komark.com.my
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