SBC Corporation Berhad: Annual Audited Accounts 2005

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SBC Corporation Berhad: Annual Audited Accounts 2005

  1. 1. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS’ REPORT The directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 March 2005. PRINCIPAL ACTIVITIES The Company is principally engaged in the businesses of investment holding and the provision of management and administrative services to the subsidiaries. The principal activities of the subsidiaries are disclosed in Note 6 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. RESULTS THE GROUP THE COMPANY RM RM Profit after taxation for the financial year 2,250,429 1,237,629 DIVIDENDS Since the end of the previous financial year, the Company paid a dividend of 5.5% per Irredeemable Convertible Cumulative Preference Share (“ICCPS”) less 28% tax amounting to RM270,587 in respect of the previous financial year, in accordance with the terms of issue of the ICCPS and a first and final dividend of 1% per ordinary share less 28% tax amounting to RM593,527 in respect of the previous financial year. For the current financial year, (a) the directors have declared the payment of a dividend of 5.5% per ICCPS less 28% tax amounting to RM24,463, in accordance with the terms of issue of the ICCPS; and (b) the directors recommend the payment of first and final dividend of 1% per ordinary shares less 28% tax amounting to RM593,527. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year except as disclosed in the financial statements. Page 1
  2. 2. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS’ REPORT ISSUES OF SHARES AND DEBENTURES During the financial year, (a) there were no changes in the authorised and issued and paid-up share capital of the Company except that the ICCPS were converted into 6,833,000 ordinary shares of RM1 each of the Company on their maturity date on 4 May 2004. The new shares which arose from the conversion of the ICCPS rank pari passu in all respects with the existing shares of the Company; and (b) there were no issues of debentures by the Company. EMPLOYEE SHARE OPTION SCHEME (“ESOS”) Pursuant to the ESOS which was implemented on 14 July 2000, the movement in the options to subscribe for new shares of RM1 each in the Company at an exercise price of RM1.40 per share is as follows:- NUMBER OF ORDINARY SHARES OF RM1 EACH UNDER OPTION At 1 April 2004 1,490,000 Exercised during the financial year - Lapsed during the financial year due to staff resignation (79,000) At 31 March 2005 1,411,000 The salient features of the ESOS are as follows:- (i) eligible employees are employees who have served in the employment of any company within the Group for at least one year of continuous service; (ii) the total number of new ordinary shares to be offered under the ESOS shall not exceed 10% of the total issued and paid-up ordinary share capital of the Company at any point of time during the existence of the ESOS which shall be in force for a period of 5 years from the date of offer; (iii) the possible allocation for any single eligible employee during the existence of the ESOS shall not be less than 1,000 or more than 450,000 shares subject to the maximum allowable allocation according to their respective categories; Page 2
  3. 3. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS’ REPORT EMPLOYEE SHARE OPTION SCHEME (“ESOS”) (CONT’D) (iv) the subscription price was based on the weighted average market price of the shares as shown in the Daily Official List of the Bursa Malaysia Securities Berhad for the 5 market days prior to the date of offer with an allowance for a discount of not more than 10% therefrom or at par value, whichever is higher; and (v) the shares to be allotted upon any exercise of an option will, upon allotment, rank pari passu in all respects with the existing issued and paid-up ordinary shares of the Company. The ESOS was expired on 13 July 2005. OPTIONS GRANTED OVER UNISSUED SHARES During the financial year, no options were granted by the Company to any person to take up any unissued shares in the Company, other than the existing options under the ESOS. BAD AND DOUBTFUL DEBTS Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and satisfied themselves that there are no known bad debts and that adequate allowance had been made for doubtful debts. At the date of this report, the directors are not aware of any circumstances that would require the writing off of bad debts, or additional allowance for doubtful debts in the financial statements of the Group and of the Company. CURRENT ASSETS Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps to ascertain that any current assets other than debts, which were unlikely to be realised in the ordinary course of business, including their values as shown in the accounting records of the Group and of the Company, have 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 which would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading. Page 3
  4. 4. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS’ REPORT VALUATION METHODS At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. CONTINGENT AND OTHER LIABILITIES The contingent liability of the Company is disclosed in Note 43 to the financial statements. At the date of this report, there does not exist:- (a) 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 (b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year. No contingent or other liability of the Group and of the Company has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations when they fall due. CHANGE OF CIRCUMSTANCES At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. ITEMS OF AN UNUSUAL NATURE The results of the operations of the Group and of the Company during the financial year were not, in the opinion of the directors, substantially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of the operations of the Group and of the Company for the financial year. Page 4
  5. 5. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS’ REPORT DIRECTORS The directors who served since the date of the last report are as follows:- SIA KWEE MOW @ SIA HOK CHAI SIA TEONG HENG MUN CHONG SHING @ MUN CHONG TIAN DATO’ LIM PHAIK GAN DATO’ DR. NORRAESAH BT HAJI MOHAMAD DATO’ ZAINOL ABIDIN BIN HAJI A. HAMID AHMAD FIZAL BIN OTHMAN Pursuant to Section 129 of the Companies Act, 1965, Sia Kwee Mow @ Sia Hok Chai and Dato’ Lim Phaik Gan retire at the forthcoming Annual General Meeting and offer themselves for re-appointment under the provisions of Section 129(6) of the said Act to hold office until the next Annual General Meeting of the Company. Pursuant to Article 77 of the Articles of Association of the Company, Mun Chong Shing @ Mun Chong Tian and Dato’ Dr. Norraesah Bt Haji Mohamad retire by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election. DIRECTORS’ INTERESTS According to the register of directors’ shareholdings, the interests of directors holding office at the end of the financial year in shares and options under the ESOS in the Company during the financial year are as follows:- NUMBER OF ORDINARY SHARES OF RM1 EACH AT AT 1.4.2004 BOUGHT SOLD 31.3.2005 DIRECT INTERESTS SIA KWEE MOW @ SIA HOK CHAI 1,480,800 - - 1,480,800 SIA TEONG HENG 1,327,992 1,190,000 - 2,517,992 MUN CHONG SHING @ MUN CHONG TIAN 21,782 - - 21,782 INDIRECT INTERESTS SIA KWEE MOW @ SIA HOK CHAI 19,498,523 - - 19,498,523 SIA TEONG HENG 19,498,523 - - 19,498,523 NUMBER OF ORDINARY SHARES OF RM1 EACH UNDER OPTION AT AT 1.4.2004 GRANTED EXERCISED 31.3.2005 DIRECT INTERESTS SIA KWEE MOW @ SIA HOK CHAI 450,000 - - 450,000 SIA TEONG HENG 350,000 - - 350,000 Page 5
  6. 6. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS’ REPORT DIRECTORS’ INTERESTS (CONT’D) By virtue of their interests in the Company, Sia Kwee Mow @ Sia Hok Chai and Sia Teong Heng are deemed to have interests in the shares in the subsidiaries to the extent of the Company’s interest, in accordance with Section 6A of the Companies Act, 1965. None of the other directors holding office at the end of the financial year had any interest in shares or options under the ESOS of the Company or its related corporations during the financial year. DIRECTORS’ BENEFITS Since the end of the previous financial year, no director has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by directors as 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 the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest except for any benefits which may be deemed to arise from transactions entered into in the ordinary course of business with companies in which certain directors have substantial financial interests as disclosed in Note 42 to the financial statements. Neither during nor at the end of the financial year was the Company or its subsidiaries a party to any arrangements whose object is to enable the directors to acquire benefits by means for the acquisition of shares in or debentures of the Company or any other body corporate except for the share options granted pursuant to the ESOS. SIGNIFICANT EVENT DURING THE FINANCIAL YEAR The significant event during the financial year of the Company is disclosed in Note 47 to the financial statements. Page 6
  7. 7. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS’ REPORT AUDITORS The auditors, Messrs. Horwath, have expressed their willingness to continue in office. SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORS DATED 20 JULY 2005 Sia Kwee Mow @ Sia Hok Chai Mun Chong Shing @ Mun Chong Tian Page 7
  8. 8. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P STATEMENT BY DIRECTORS We, Sia Kwee Mow @ Sia Hok Chai and Mun Chong Shing @ Mun Chong Tian, being two of the directors of SBC Corporation Berhad, state that, in the opinion of the directors, the financial statements set out on pages 11 to 67 are drawn up in accordance with applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 March 2005 and of their results and cash flows for the financial year ended on that date. SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORS DATED 20 JULY 2005 Sia Kwee Mow @ Sia Hok Chai Mun Chong Shing @ Mun Chong Tian STATUTORY DECLARATION I, Ng Kee Chye, I/C No. 640324-06-5691, being the officer primarily responsible for the financial management of SBC Corporation Berhad, do solemnly and sincerely declare that the financial statements set out on pages 11 to 67 are, 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 Ng Kee Chye, I/C No. 640324-06-5691, at Kuala Lumpur in the Federal Territory on this 20 July 2005 Ng Kee Chye Before me, Datin Hajah Raihela Wanchik (W275) Commissioner for Oaths Page 8
  9. 9. REPORT OF THE AUDITORS TO THE MEMBERS OF SBC CORPORATION BERHAD (Incorporated In Malaysia) Company No : 199310 - P We have audited the financial statements set out on pages 11 to 67. The preparation of the financial statements is the responsibility of the Company’s directors. It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report. We conducted our audit in accordance with approved standards on auditing in Malaysia. These standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. Our audit included examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. Our audit also included an assessment of the accounting principles used and significant estimates made by the directors as well as evaluating the overall adequacy of the presentation of information in the financial statements. We believe our audit provides a reasonable basis for our opinion. In our opinion, (a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to give a true and fair view of:- (i) the state of affairs of the Group and of the Company at 31 March 2005 and their results and cash flows for the financial year ended on that date; and (ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements of the Group and of the Company; and (b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company and by the subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the said Act. We have considered the financial statements and the auditors’ reports thereon of the subsidiaries for which we have not acted as auditors, as indicated in Note 6 to the financial statements. Page 9
  10. 10. REPORT OF THE AUDITORS TO THE MEMBERS OF SBC CORPORATION BERHAD (CONT’D) (Incorporated in Malaysia) Company No : 199310 - P 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 consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The audit reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comments made under Section 174(3) of the said Act. Horwath Onn Kien Hoe Firm No: AF 1018 Approval No: 1772/11/06 (J/PH) Chartered Accountants Partner Kuala Lumpur 20 July 2005 Page 10
  11. 11. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P BALANCE SHEETS AT 31 MARCH 2005 THE GROUP THE COMPANY 2005 2004 2005 2004 NOTE RM RM RM RM NON-CURRENT ASSETS Investment in subsidiaries 6 - - 211,064,785 211,064,785 Interest in associates 7 112,262,828 112,064,656 2,400,000 2,400,000 Property, plant and equipment 8 35,452,368 36,246,114 17,636 35,428 Investment properties 9 79,718,099 41,391,466 - - Other assets 10 276,107 247,107 - - Goodwill on consolidation 11 27,317,640 27,317,640 - - 255,027,042 217,266,983 213,482,421 213,500,213 CURRENT ASSETS Inventories 12 4,359,492 8,604,731 - - Property development costs 13 54,745,687 50,449,300 - - Receivables 14 28,150,859 66,593,226 143,077 209,050 Amount owing by contract customers 15 969,629 4,775,992 - - Amounts owing by subsidiaries 16 - - 61,299,355 55,919,091 Amount owing by associates 17 5,399,534 5,533,926 11,434 11,434 Tax recoverable 18 6,607,700 8,331,990 8,597,916 11,823,151 Short term deposits with licensed banks 19 1,364,225 1,407,125 1,239,225 1,239,225 Cash and bank balances 20 5,612,658 3,474,278 4,027,843 2,012,100 107,209,784 149,170,568 75,318,850 71,214,051 CURRENT LIABILITIES Amount owing to contract customers 15 8,194 1,601,053 - - Payables 21 29,491,952 28,718,800 256,127 230,925 Amounts owing to subsidiaries 16 - - 15,155,558 12,563,323 Amounts owing to associates 17 547,586 78,236 - - Amounts owing to directors 22 1,867,680 2,450,481 1,867,680 1,967,680 Dividend payable - 270,587 - 270,587 Short term borrowings 23 16,749,403 19,301,127 5,000,000 5,000,000 ABBA Bonds 24 2,478,450 2,478,450 2,478,450 2,478,450 Bank overdrafts 25 18,824,019 20,640,185 5,760,593 6,580,169 69,967,284 75,538,919 30,518,408 29,091,134 NET CURRENT ASSETS 37,242,500 73,631,649 44,800,442 42,122,917 292,269,542 290,898,632 258,282,863 255,623,130 The annexed notes form an integral part of these financial statements. Page 11
  12. 12. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P BALANCE SHEETS AT 31 MARCH 2005 (CONT’D) THE GROUP THE COMPANY 2005 2004 2005 2004 NOTE RM RM RM RM FINANCED BY:- Share capital 26 82,435,000 82,435,000 82,435,000 82,435,000 Reserves 27 137,572,393 135,939,954 134,096,236 133,476,597 Shareholders’ equity 220,007,393 218,374,954 216,531,236 215,911,597 ABBA Bonds 24 41,751,627 39,711,533 41,751,627 39,711,533 Non-current liabilities 28 29,543,776 31,845,399 - - Deferred taxation 31 966,746 966,746 - - 292,269,542 290,898,632 258,282,863 255,623,130 NET TANGIBLE ASSETS PER ORDINARY SHARE (RM) 32 2.34 2.44 The annexed notes form an integral part of these financial statements. Page 12
  13. 13. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P INCOME STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 THE GROUP THE COMPANY 2005 2004 2005 2004 NOTE RM RM RM RM TURNOVER 33 66,867,133 86,316,639 8,905,128 7,220,737 COST OF SALES 34 (52,428,581) (68,900,779) - - GROSS PROFIT 14,438,552 17,415,860 8,905,128 7,220,737 OTHER OPERATING INCOME 1,026,365 3,911,925 50,850 - ADMINISTRATIVE EXPENSES (7,541,549) (7,420,741) (1,200,429) (891,180) OTHER OPERATING EXPENSES (1,215,804) (3,270,390) (293,501) (326,746) PROFIT FROM OPERATIONS 6,707,564 10,636,654 7,462,048 6,002,811 FINANCE COSTS (4,953,038) (7,263,617) (5,602,597) (5,533,390) SHARE OF PROFITS OF ASSOCIATES 1,566,728 3,623,112 - - PROFIT BEFORE TAXATION 35 3,321,254 6,996,149 1,859,451 469,421 TAXATION 36 (1,070,825) (4,923,154) (621,822) (821,855) PROFIT/(LOSS) AFTER TAXATION 2,250,429 2,072,995 1,237,629 (352,434) Earnings per share - basic 37 2.7 sen 2.4 sen - diluted 37 N/A N/A Dividend per ordinary share - final 38 - 1 sen The annexed notes form an integral part of these financial statements. Page 13
  14. 14. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P STATEMENTS OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 SHARE SHARE RETAINED CAPITAL CAPITAL PREMIUM PROFITS RESERVE TOTAL NOTE RM RM RM RM RM THE GROUP Balance at 1.4.2003 82,435,000 111,412,895 22,068,982 1,199,999 217,116,876 Profit after taxation for the financial year - - 2,072,995 - 2,072,995 Dividends 38 - - (814,917) - (814,917) Balance at 31.3.2004/ 1.4.2004 82,435,000 111,412,895 23,327,060 1,199,999 218,374,954 Profit after taxation for the financial year - - 2,250,429 - 2,250,429 Dividends 38 - - (617,990) - (617,990) Balance at 31.3.2005 82,435,000 111,412,895 24,959,499 1,199,999 220,007,393 THE COMPANY Balance at 1.4.2003 82,435,000 111,412,895 23,231,053 - 217,078,948 Loss after taxation for the financial year - - (352,434) - (352,434) Dividends 38 - - (814,917) - (814,917) Balance at 31.3.2004/1.4.2004 82,435,000 111,412,895 22,063,702 - 215,911,597 Profit after taxation for the financial year - - 1,237,629 - 1,237,629 Dividends 38 - - (617,990) - (617,990) Balance at 31.3.2005 82,435,000 111,412,895 22,683,341 - 216,531,236 The retained profits of the Group are attributable to/(absorbed by):- 2005 2004 RM RM The Company 22,683,341 22,063,702 Subsidiaries (15,098,921) (15,582,983) Associates 17,375,079 16,846,341 24,959,499 23,327,060 The annexed notes form an integral part of these financial statements. Page 14
  15. 15. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 THE GROUP THE COMPANY 2005 2004 2005 2004 NOTE RM RM RM RM CASH FLOWS FROM/ (FOR) OPERATING ACTIVITIES Profit before taxation 3,321,254 6,996,149 1,859,451 469,421 Adjustments for:- Allowance for doubtful debts - 828,553 - - Amortisation of bonds expenses 275,709 303,272 275,709 303,272 Depreciation of property, plant and equipment 459,128 446,060 17,792 23,474 Interest expense/ finance charges 4,844,740 7,110,435 5,583,651 5,506,995 Impairment loss on interest in an associate 330,565 - - - Plant and equipment written off - 13,663 - - Other investment written off 45,000 135,000 - - Dividend income - - (5,404,800) (4,928,000) Loss/(Gain) on disposal of property, plant and equipment 19,177 (313,882) - - (Gain)/Loss on disposal of investment properties (15,082) 1,557,400 - - Interest income (203,425) (107,322) (1,389,168) (612,688) Write-back of allowance for doubtful debts (58,356) - (50,850) - Share of profits in associates (1,566,728) (3,623,112) - - Operating profit before working capital changes 7,451,982 13,346,216 891,785 762,474 Decrease in inventories 4,245,239 5,505,180 - - (Increase)/Decrease in property development costs (3,028,141) 4,712,161 - - Decrease/(Increase) in receivables 598,481 658,195 116,823 (85,088) Increase/(Decrease) in payables 1,291,820 1,707,814 25,202 (100,567) Net decrease/(increase) in amount owing by contract customers 2,213,504 (7,259,250) - - CASH FROM OPERATIONS 12,772,885 18,670,316 1,033,810 576,819 Interest paid (544,034) (3,402,444) (1,282,945) (1,375,706) Tax refundable/(paid) 1,256,001 (6,780,583) 4,116,757 - NET CASH FROM/(FOR) OPERATING ACTIVITIES CARRIED FORWARD 13,484,852 8,487,289 3,867,622 (798,887) The annexed notes form an integral part of these financial statements. Page 15
  16. 16. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 (CONT’D) THE GROUP THE COMPANY 2005 2004 2005 2004 NOTE RM RM RM RM NET CASH FROM/ (FOR) OPERATING ACTIVITIES BROUGHT FORWARD 13,484,852 8,487,289 3,867,622 (798,887) CASH FLOWS (FOR)/ FROM INVESTIING ACTIVITIES Interest received 203,425 107,322 1,389,168 612,688 Dividends received from subsidiaries - - 3,456,000 2,304,000 Dividends received from associates 435,456 1,526,883 435,456 1,244,160 Purchase of property, plant and equipment (408,819) (924,876) - (5,750) Purchase of investment properties (1,640,541) (3,110,115) - - Proceeds from disposal of property, plant and equipment 7,700 345,560 - - Proceeds from disposal of investment properties 556,200 1,910,000 - - Incidental expenses on investment properties (424,603) (20,000) - - (Placement)/Withdrawal of cash in sinking fund account (2,015,883) 3,188,398 (2,015,883) 3,188,398 NET CASH (FOR)/FROM INVESTING ACTIVITIES (3,287,065) 3,023,172 3,264,741 7,343,496 BALANCE CARRIED FORWARD 10,197,787 11,510,461 7,132,363 6,544,609 The annexed notes form an integral part of these financial statements. Page 16
  17. 17. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 (CONT’D) THE GROUP THE COMPANY 2005 2004 2005 2004 Note RM RM RM RM BALANCE BROUGHT FORWARD 10,197,787 11,510,461 7,132,363 6,544,609 CASH FLOWS FOR FINANCING ACTIVITIES Payment of bonds expenses (57,871) (71,722) (57,871) (71,722) Repayment of bonds 24 (2,478,450) (2,478,450) (2,478,450) (2,478,450) Repayment to directors (582,801) - (100,000) - Net repayment by associates 603,742 3,994 - - Net advances to subsidiaries - - (2,788,029) (3,346,586) Dividend paid to shareholders of the company (593,527) (544,330) (593,527) (544,330) Dividend paid to holders of ICCPS (295,050) (270,587) (295,050) (270,587) Repayment of revolving credit (1,350,000) (500,000) - - Repayment of loans (3,460,283) (6,460,269) - - Repayment to hire purchase payables (87,784) (87,784) - - NET CASH FOR FINANCING ACTIVITIES (8,302,024) (10,409,148) (6,312,927) (6,711,675) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,895,763 1,101,313 819,436 (167,066) CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR (17,768,782) (18,870,095) (5,338,844) (5,171,778) CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 39 (15,873,019) (17,768,782) (4,519,408) (5,338,844) The annexed notes form an integral part of these financial statements. Page 17
  18. 18. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 1. GENERAL INFORMATION The Company is a public company limited by shares and is incorporated under the Malaysian Companies Act, 1965. The domicile of the Company is Malaysia. The registered office, which is also the principal place of business, is at Wisma Siah Brothers, 74A, Jalan Pahang, 53000 Kuala Lumpur. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors dated 20 July 2005. 2. PRINCIPAL ACTIVITIES The Company is principally engaged in the businesses of investment holding and the provision of management and administrative services to the subsidiaries. The principal activities of the subsidiaries are disclosed in Note 6 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. 3. FINANCIAL RISK MANAGEMENT POLICIES The Group's financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group's business whilst managing its foreign currency, interest rate, market, credit, liquidity and cash flow risks. The policies in respect of the major areas of treasury activity are as follows:- (a) Foreign Currency Risk The Group does not have material foreign currency transactions, assets or liabilities and hence is not exposed to any significant or material currency risks. (b) Interest Rate Risk The Group obtains financing through bank borrowings and hire purchase facilities. Its policy is to obtain the most favourable interest rates available. Surplus funds are placed with licensed financial institutions at the most favourable interest rates. Page 18
  19. 19. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 3. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (c) Market Risk The Group’s principal exposure to market risks arises mainly from changes in quoted equity prices. The Group does not use derivative instruments to manage equity risk. (d) Credit Risk The Group's exposure to credit risks, or the risk of counterparties defaulting, arises mainly from receivables. The maximum exposure to credit risks is represented by the total carrying amount of these financial assets in the balance sheet reduced by the effects of any netting arrangements with counterparties. The Group does not have any major concentration of credit risk related to any individual customer or counterparty. The Group manages its exposure to credit risk by investing its cash assets safely and profitably, and by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis. (e) Liquidity and Cash Flow Risk The Group's exposure to liquidity and cashflow risks arises mainly from general funding and business activities. It practises prudent liquidity risk management by maintaining sufficient cash balances and the availability of funding through certain committed credit facilities. 4. BASIS OF ACCOUNTING The financial statements are prepared under the historical cost convention and modified to include other bases of valuation as disclosed in other sections under significant accounting policies, and in compliance with applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965. Page 19
  20. 20. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 5. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries made up to 31 March 2005. A subsidiary is defined as an enterprise in which the Company has the power, directly or indirectly, to exercise control over the financial and operating policies so as to obtain benefits from its activities. All subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting, the results of subsidiaries acquired or disposed off are included from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair value of the subsidiaries’ net assets are determined and these values are reflected in the consolidated financial statements. Intragroup transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group. (b) Goodwill or Negative Goodwill On Consolidation Goodwill represents the excess of the fair value of the purchase consideration over the Group’s share of the fair values of the separable net assets of subsidiaries at the date of acquisition. Negative goodwill represents the excess of the Group’s share of the fair values of the separable net assets of subsidiaries at the date of acquisition over the fair value of the purchase consideration. Goodwill is stated net of negative goodwill. The net carrying amount of goodwill is reviewed annually, and is written down for impairment where it is considered necessary. The impairment value of goodwill is taken to the consolidated income statement. Page 20
  21. 21. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (c) Associates Associates are enterprises in which the Group exercises significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not control over those policies. Interest in associates are accounted for in the consolidated financial statements by the equity method of accounting. Equity accounting involves recognising in the income statement the Group’s share of the results of the associates for the period. The Group’s interest in associates is carried in the balance sheet at an amount that reflects its share of the assets of the associates and includes goodwill on acquisition. At the date of acquisition, the fair values of the associates’ net assets are determined and these values are reflected in the consolidated financial statements. Equity accounting is discontinued when the carrying amount of the interest in an associate reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence on impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group. (d) Property, Plant and Equipment Property, plant and equipment, other than freehold land, are stated at cost less accumulated depreciation and impairment loss, if any. Freehold land is stated at cost and is not depreciated. The long term leasehold land has an unexpired term of more than fifty years and is not amortised. The non-amortisation of the long term leasehold land has no material effect on the financial statements. Depreciation is calculated under the straight-line method to write off the cost of the assets over their estimated useful lives. The principal annual rates used for this purpose are:- Sales office 20% Plant and machinery, construction machinery and equipment 5% - 20% Formwork, scaffoldings and containers 10% - 25% Office renovation, office equipment, computers, furniture and fittings, tools and fittings 5% - 20% Motor vehicles 20% Page 21
  22. 22. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (e) Land and Hotel Development Expenditure Land is stated at cost or revalued amount less impairment losses, if any. Development expenditure comprises construction and other related development costs and administrative overheads relating to the property development. Interest costs on borrowings taken to finance the relevant development projects are included in the development expenditure from commencement to the completion of the development projects. (f) Impairment of Assets The carrying amounts of assets, other than those to which MASB 23 - Impairment of Assets does not apply, are reviewed at each balance sheet date for impairment when there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. An impairment loss is charged to the income statement immediately unless the asset is carried at its revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of a previously recognised revaluation surplus for the same asset. In respect of assets other than goodwill, and when there is a change in the estimates used to determine the recoverable amount, a subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately, unless the asset is carried at its revalued amount. A reversal of an impairment loss on a revalued asset is credited directly to the revaluation surplus. However, to the extent that an impairment loss on the same revalued asset was previously recognised as an expense in the income statement, a reversal of that impairment loss is recognised as income in the income statement. (g) Investments The investments in subsidiaries, associates and joint ventures are initially stated at cost in the balance sheet of the Company, and are reviewed for impairment at the end of the financial year if events or changes in circumstances indicate that their carrying values may not be recoverable. Page 22
  23. 23. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (h) Investment Properties Investment properties consist of investments in land and buildings that are not substantially occupied for use by, or in the operations, of the Company/Group. Investment properties are treated as long term investments. They are initially stated at cost and are subject to revaluations which are carried out by an independent valuer on a regular basis. Any revaluation increase is recognised in equity as a revaluation surplus; any decrease is first offset against any unutilised previously recognised revaluation surplus in respect of the same investment property, and the balance is thereafter recognised as an expense. A revaluation increase is recognised as income to the extent that it reverses a revaluation decrease of the same property previously recognised as an expense. On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged to the income statement; any amount in revaluation reserve relating to that investment property is transferred to retained earnings. (i) Inventories Inventories are stated at the lower of cost and net realisable value. The unsold completed properties are stated at the lower of cost and net realisable value. For finished goods and work-in-progress, cost includes direct labour and appropriate production overheads. The cost of unsold completed properties comprise the relevant cost of land, development expenditure and related interest cost incurred during the development period. In arriving at net realisable value, due allowance is made for all damaged, obsolete and slow-moving items. (j) Property Development Costs Property development costs comprise costs associated with the acquisition of land and all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities. Property development costs that are not recognised as an expense are recognised as an asset and carried at the lower of cost and net realisable value. Page 23
  24. 24. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (j) Property Development Costs (Cont’d) When the financial outcome of a development activity can be reliably estimated, the amount of property revenues and expenses recognised in the income statement are determined by reference to the stage of completion of development activity at the balance sheet date. When the financial outcome of a development activity cannot be reliably estimated, the property development revenue is recognised only to the extent of property development costs incurred that will be recoverable. The property development costs on the development units sold are recognised as an expense in the period in which they are incurred. Where it is probable that property development costs will exceed property development revenue, any expected loss is recognised as an expense immediately, including costs to be incurred over the defects liability period. (k) Progress Billings/Accrued Billings In respect of progress billings:- (i) where revenue recognised in the income statement exceeds the billings to purchasers, the balance is shown as accrued billings under current assets; and (ii) where billings to purchasers exceed the revenue recognised to the income statement, the balance is shown as progress billings under current liabilities. (l) Amount Owing By/To Contract Customers The amount owing by/to contract customers is stated at cost plus profits attributable to contracts in progress less progress billings and allowance for foreseeable losses, if any. Cost includes direct materials, labour and applicable overheads. (m) Receivables Receivables are carried at anticipated realisable value. Bad debts are written off in the period in which they are identified. An estimate is made for doubtful debts based on a review of all outstanding amounts at the balance sheet date. Page 24
  25. 25. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (n) Payables Payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received. (o) Interest-bearing Borrowings Interest-bearing bank loans and overdrafts are recorded at the amount of proceeds received, net of transaction costs. Borrowing costs directly attributable to the acquisition and construction of development properties and property, plant and equipment are capitalised as part of the cost of those assets, until such time as the assets are ready for their intended use or sale. All other borrowing costs are charged to the income statement as an expense in the period in which they are incurred. (p) Bonds Bonds issued by the Company and the Group are initially recognised based on proceeds received, net of issuance expenses incurred and are adjusted in subsequent years for amortisation of premium and/or accretion of discount to maturity, using the effective yield method. The premium amortised and/or discount accreted is recognised in the income statement over the period of the bonds. (q) Taxation Taxation for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted or substantially enacted at the balance sheet date. Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Page 25
  26. 26. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (q) Taxation (Cont’d) Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantially enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill. The carrying amounts of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax assets to be utilised. (r) Foreign Currencies Transactions in foreign currencies are converted into Ringgit Malaysia at the approximate rates of exchange ruling at the transaction dates. Monetary assets and liabilities in foreign currencies at the balance sheet date are translated at the rates ruling as of that date. All exchange differences are taken to the income statement. (s) Assets under Hire Purchase Equipment acquired under hire purchase are capitalised in the financial statements and are depreciated in accordance with the policy set out in Note 5(d) above. Each hire purchase payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. Finance charges are allocated to the income statement over the periods of the respective hire purchase agreements. Page 26
  27. 27. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (t) Equity Instruments Ordinary shares are classified as equity. Dividends on ordinary shares are recognised as liabilities when declared before the balance sheet date. A dividend proposed or declared after the balance sheet date, but before the financial statements are authorised for issue, is not recognised as a liability at the balance sheet date but as an appropriation from retained earnings and treated as a separate component of equity. Upon the approval of the proposed dividend, it will be accounted for as a liability. (u) Cash and Cash Equivalents Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, deposits pledged with financial institutions, bank overdrafts and short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (v) Financial Instruments Financial instruments are recognised in the balance sheet when the Group and the Company has become a party to the contractual provisions of the instruments. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Group and the Company has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously. Financial instruments recognised in the balance sheet are disclosed in the individual policy statement associated with each item. Page 27
  28. 28. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (w) Employee Benefits (i) Short-term Benefits Wages, salaries, paid annual leave, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by employees of the Company. (ii) Defined Contribution Plans The Company’s contributions to defined contribution plans are charged to the income statement in the period to which they relate. Once the contributions have been paid, the Company has no further liability in respect of the defined contribution plans. (x) Income Recognition (i) Construction Contracts Revenue on contracts is recognised on the percentage of completion method unless the outcome of the contract cannot be reliably determined, in which case revenue on contracts is only recognised to the extent of contract costs incurred that are recoverable. Foreseeable losses, if any, are provided for in full as and when it can be reasonably ascertained that the contract will result in a loss. The stage of completion is determined based on surveys of work performed. Page 28
  29. 29. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (x) Income Recognition (Cont’d) (ii) Property Development Revenue from property development is recognised from the sale of completed and uncompleted development properties. Revenue from the sale of completed properties is recognised when the sale is contracted. Revenue on uncompleted properties contracted for sale is recognised based on the stage of completion method unless the outcome of the development cannot be reliably determined in which case the revenue on the development is only recognised to the extent of development costs incurred that are recoverable. The stage of completion is determined based on the proportion that the development costs incurred for work performed to date bear to the estimated total development costs. Foreseeable losses, if any, are recognised immediately in the income statement. Foreseeable losses, if any, are provided for in full as and when it can be reasonably ascertained that the development will result in a loss. (iii) Revenue from Sales of Goods Sales are recognised upon delivery of goods and customers’ acceptance, and where applicable, net of returns and trade discounts. (iv) Revenue from Services Revenue is recognised upon rendering of services and when the outcome of the transaction can be estimated reliably. In the event the outcome of the transaction could not be estimated reliably, revenue is recognised to the extent of the expenses incurred that are recoverable. Page 29
  30. 30. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (x) Income Recognition (Cont’d) (v) Management Fee and Administrative Charges Management fee and administrative charges are recognised on an accrual basis. (vi) Rental Income Rental income is recognised on an accrual basis. (vii) Dividend Income Dividend income from investments is recognised when the right to receive payment is established. (viii) Interest Income Interest income is recognised on an accrual basis, based on the effective yield on the investment. Interest income on late payment is recognised on a receipt basis. (y) Segmental Information Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of property, plant and equipment (net of accumulated depreciation, where applicable), other investments, inventories, receivables, and cash and bank balances. Most segment assets can be directly attributed to the segments on a reasonable basis. Segment assets and liabilities do not include income tax assets and liabilities respectively. Segment revenues, expenses and results include transfers between segments. The prices charged on intersegment transactions are based on normal commercial terms. These transfers are eliminated on consolidation. Page 30
  31. 31. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 6. INVESTMENT IN SUBSIDIARIES THE COMPANY 2005 2004 RM RM Unquoted shares, at cost 211,064,785 211,064,785 Details of the subsidiaries, which are all incorporated in Malaysia, are as follows:- Name of Company Effective Equity Interest Principal 2005 2004 Activities % % Syarikat Siah Brothers 100 100 General building Trading Sdn. Bhd. contractor and investment holding. Syarikat Siah Brothers 100 100 Building and civil Construction Sdn. Bhd. engineering works. Lifeplus - Siah Brothers Trading 100 100 Project management JV Sdn. Bhd. and its related technical services. Siah Brothers Enterprise 100 100 Building contractor. Sdn. Bhd. * Siah Brothers Land 100 100 Investment holding. Sdn. Bhd. Seri Ampangan Realty 100 100 Property development. Sdn. Bhd. Sinaran Naga Sdn. Bhd. 100 100 Property development. Siah Brothers Development 100 100 Proposed property Sdn. Bhd. * development. Tiara Development 100 100 Proposed property Sdn. Bhd.* development. SBC Homes Sdn. Bhd.* 100 100 Proposed property development. Page 31
  32. 32. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 6. INVESTMENT IN SUBSIDIARIES (CONT’D) Name of Company Effective Equity Interest Principal 2005 2004 Activities % % Mixwell (Malaysia) 100 100 Project management Sdn. Bhd. and property development. Winsome Ventures 100 100 Proposed property Sdn. Bhd. management. Siah Brothers Properties 100 100 Investment holding. Sdn. Bhd.* Aureate Construction 100 100 Property investment. Sdn. Bhd.* SBC Leisure Sdn. Bhd.* 100 100 Property development. SBC Towers Sdn. Bhd.* 100 100 Property development. Siah Brothers Project 100 100 Provision of Management Sdn. Bhd.* management services. Siah Brothers Industries 100 100 Investment holding. Sdn. Bhd. * South-East Best 100 100 Property development. Sdn. Bhd. Gracemart Resources 100 100 Property development. Sdn. Bhd. Sutrati Development Sdn. Bhd. 100 100 Dormant. Masahmura Sdn. Bhd.* 51 51 Manufacturing of material handling equipment and metal frames. Masahmura Sales & 51 51 Trading of light Service Sdn. Bhd. industrial handling equipment and metal frames. * Not audited by Messrs. Horwath Page 32
  33. 33. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 7. INTEREST IN ASSOCIATES THE GROUP THE COMPANY 2005 2004 2005 2004 RM RM RM RM Unquoted shares, at cost 3,600,001 3,600,001 2,400,000 2,400,000 Impairment loss (330,566) - - - 3,269,435 3,600,001 2,400,000 2,400,000 Unquoted shares, at Group cost 91,618,314 91,618,314 - - Share of post acquisition reserves 17,375,079 16,846,341 - - 112,262,828 112,064,656 2,400,000 2,400,000 THE GROUP 2005 2004 RM RM The interest in associates comprises:- Group’s share of net tangible assets - at cost 66,246,858 66,048,686 - at fair value 45,952,003 45,952,003 Group’s share of intangible assets 63,967 63,967 112,262,828 112,064,656 Details of the associates, which are all incorporated in Malaysia, are as follows:- Effective Equity Principal Name of Company Interest Activities 2005 2004 % % Ligamas Sdn. Bhd.# 50.0 50.0 Property development. Varich Industries 50.0 50.0 Dormant. Sdn. Bhd.* Paling Industries Sdn. Bhd.# 40.0 40.0 Manufacturing of plastic building materials. Page 33
  34. 34. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 7. INTEREST IN ASSOCIATES (CONT’D) Effective Equity Principal Name of Company Interest Activities 2005 2004 % % Liga Canggih Sdn. Bhd.*## 40.0 40.0 Dormant. Sri Berjaya Development 33.3 33.3 Investment and Sdn. Bhd.* development of landed properties. Sri Rawang Properties 22.2 22.2 Investment in properties Sdn. Bhd.* and rubber estates. Sam & Lau Plantation 50.0 50.0 Tree plantation and Sdn. Bhd.*### nursery operators. * The results of these associates have not been equity accounted as the amounts involved are insignificant. # The share of results of these associates is based on the latest available unaudited management financial statements made up to 31 March 2005. ## Held by Paling Industries Sdn. Bhd. ### Held by South-East Best Sdn. Bhd. (“SEB”). Page 34
  35. 35. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 8. PROPERTY, PLANT AND EQUIPMENT TRANSFER TO AT DEVELOPMENT DEPRECIATION AT 1.4.2004 ADDITIONS DISPOSALS COST CHARGE 31.3.2005 RM RM RM RM RM RM THE GROUP NET BOOK VALUE Freehold land 4,727,833 - - (716,560) - 4,011,273 Land and hotel development expenditure 30,024,354 119,190 - - - 30,143,544 Sales office 118,793 34,081 - - (37,004) 115,870 Plant and machinery, construction machinery and equipment 50,942 270 - - (13,223) 37,989 Formwork, scaffoldings and containers 6,448 - - - (2,503) 3,945 Office renovation, office equipment, computers, furniture and fittings, tools and fittings 1,067,267 200,770 (26,877) - (272,106) 969,054 Motor vehicles 250,477 54,508 - - (134,292) 170,693 Total 36,246,114 408,819 (26,877) (716,560) (459,128) 35,452,368 AT ACCUMULATED NET BOOK COST DEPRECIATION VALUE RM RM RM AT 31.3.2005 Freehold land 4,011,273 - 4,011,273 Land and hotel development expenditure 30,143,544 - 30,143,544 Sales office 182,757 (66,887) 115,870 Plant and machinery, construction machinery and equipment 4,343,727 (4,305,738) 37,989 Formwork, scaffoldings and containers 4,316,916 (4,312,971) 3,945 Office renovation, office equipment, computers, furniture and fittings, tools and fittings 4,576,896 (3,607,842) 969,054 Motor vehicles 2,020,927 (1,850,234) 170,693 Total 49,596,040 (14,143,672) 35,452,368 AT 31.3.2004 Freehold land 4,727,833 - 4,727,833 Land and hotel development expenditure 30,024,354 - 30,024,354 Sales office 148,676 (29,883) 118,793 Plant and machinery, construction machinery and equipment 4,343,457 (4,292,515) 50,942 Formwork, scaffoldings and containers 4,316,916 (4,310,468) 6,448 Office renovation, office equipment, computers, furniture and fittings, tools and fittings 4,633,477 (3,566,210) 1,067,267 Motor vehicles 2,005,751 (1,755,274) 250,477 Total 50,200,464 (13,954,350) 36,246,114 Page 35
  36. 36. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 8. PROPERTY, PLANT AND EQUIPMENT (CONT’D) Land and hotel development expenditure consists of:- 2005 2004 RM RM Long leasehold land, at cost 27,691,066 27,691,066 Hotel development expenditure, at cost 2,452,478 2,333,288 30,143,544 30,024,354 AT DEPRECIATION AT 1.4.2004 CHARGE 31.3.2005 RM RM RM THE COMPANY NET BOOK VALUE Office equipment, computers, furniture and fittings 35,427 (17,792) 17,635 Motor vehicles 1 - 1 35,428 (17,792) 17,636 AT ACCUMULATED NET BOOK COST DEPRECIATION VALUE RM RM RM AT 31.3.2005 Office equipment, computers, furniture and fittings 376,551 (358,916) 17,635 Motor vehicles 376,950 (376,949) 1 753,501 (735,865) 17,636 AT 31.3.2004 Office equipment, computers, furniture and fittings 376,551 (341,124) 35,427 Motor vehicles 376,950 (376,949) 1 753,501 (718,073) 35,428 The motor vehicles of the Group acquired under hire purchase terms were carried at a total net book value of RM20,602 (2004 - RM125,997) at the balance sheet date. Page 36
  37. 37. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 8. PROPERTY, PLANT AND EQUIPMENT (CONT’D) The carrying values of certain property, plant and equipment charged to financial institutions to secure banking facilities granted to the Group are as follows:- THE GROUP 2005 2004 RM RM Sales office - 118,793 Furniture and fittings - 137,332 Office and other equipment - 102,092 Land and hotel development expenditure - 30,024,354 Office renovation - 5,664 - 30,388,235 9. INVESTMENT PROPERTIES THE GROUP 2005 2004 RM RM Leasehold land, at cost 20,607,424 19,778,424 Expenditure on land 4,710,272 4,500,413 25,317,696 24,278,837 Freehold land and buildings, at cost 52,810,544 16,070,507 Leasehold land and buildings, at cost 2,803,145 4,509,522 55,613,689 20,580,029 Disposed of during the financial year (661,600) (3,467,400) Transfer to property development costs (551,686) - 54,400,403 17,112,629 79,718,099 41,391,466 Included in investment properties is a leasehold land amounting to RM8,486,514 (2004 - RM8,422,970) which are charged to a financial institution for the issuance of ABBA Bonds granted to the Company. Page 37
  38. 38. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 10. OTHER ASSETS THE GROUP 2005 2004 RM RM Other assets 189,807 189,807 Other investments, at cost Quoted shares in Malaysia 12,300 12,300 Unquoted shares - 45,000 Investment in club membership 74,000 - 86,300 57,300 276,107 247,107 Market value of quoted shares 5,400 4,590 Other assets are retention monies relating to amounts which are due and receivable after twelve months from the balance sheet date, upon expiry of the warranty period of the relevant contracts. 11. GOODWILL ON CONSOLIDATION THE GROUP 2005 2004 RM RM At 1 April 2004/2003 27,317,640 27,271,844 Goodwill arising from the acquisition of equity interest in a subsidiary in the previous financial year not accounted for - 45,796 At 31 March 27,317,640 27,317,640 12. INVENTORIES THE GROUP 2005 2004 RM RM Unsold completed properties, at cost 4,359,492 8,604,731 None of the inventories are carried at net realisable value. Page 38
  39. 39. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2005 13. PROPERTY DEVELOPMENT COSTS THE GROUP 2005 2004 RM RM Balance at beginning of the financial year: - land 30,903,465 31,209,528 - development costs 43,978,441 34,259,753 74,881,906 65,469,281 Cost incurred during the year: - transferred from investment properties 551,686 - - transferred from property, plant and equipment 716,560 - - land 151,034 - - development costs 41,773,802 19,138,472 118,074,988 84,607,753 Disposal of land during the year (315,040) - 117,759,948 84,607,753 Reversal in development costs of completed project during the year: - land - (306,063) - development costs - (9,012,369) - (9,318,432) Cost recognised as an expense in the income statement: - previous year (24,432,606) (10,731,119) - current year (38,581,655) (23,019,919) - adjustment to completed project during the year - 9,318,432 (63,014,261) (24,432,606) Sub-total 54,745,687 50,856,715 Transfer to inventories - (407,415) 54,745,687 50,449,300 Included in development expenditure is interest expense capitalised during the financial year amounting to RM1,846,203 (2004 - RM585,454). Leasehold land of a subsidiary costing RM7,674,555 (2004 - RM7,674,555) is charged to a licensed bank for a term loan facility granted to the subsidiary. Page 39

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