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SBC Corporation Berhad: Annual Audited Accounts 2006

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  • 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 2006. 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 1,047,197 149,820 DIVIDENDS Since the end of the previous financial year, the Company paid the following dividends:- (a) a dividend of 5.5% less 28% tax on the Irredeemable Convertible Cumulative Preference Shares (“ICCPS”) amounting to RM24,463 in respect of the previous financial year, in accordance with the terms of issue of the ICCPS; and (b) a first and final dividend of 1% less 28% tax on the ordinary shares amounting to RM593,527 in respect of the previous financial year. For the current financial year, the directors recommend the payment of a first and final dividend of 1% less 28% tax on the ordinary shares amounting to RM593,527. RESERVES AND PROVISIONS All material transfers to or from reserves or provisions during the financial year are disclosed in the financial statements. ISSUES OF SHARES AND DEBENTURES During the financial year, (a) there were no changes in the authorised and issued and paid-up share capital of the Company; and (b) there were no issues of debentures by the Company. Page 1
  • 2. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS’ REPORT 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. 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. 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. Page 2
  • 3. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P DIRECTORS’ REPORT CONTINGENT AND OTHER LIABILITIES The contingent liability of the Company is disclosed in Note 44 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 3
  • 4. 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’ ZAINOL ABIDIN BIN HAJI A. HAMID DATO’ LIM PHAIK GAN DATO’ DR. NORRAESAH BT HAJI MOHAMAD 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, Sia Teong Heng and Dato’ Zainol Abidin Bin Haji A. Hamid 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 Employee Share Option Scheme in the Company during the financial year are as follows:- NUMBER OF ORDINARY SHARES OF RM1 EACH AT AT 1.4.2005 BOUGHT SOLD 31.3.2006 DIRECT INTERESTS SIA KWEE MOW @ SIA HOK CHAI 1,480,800 - - 1,480,800 SIA TEONG HENG 2,517,992 - - 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 1.4.2005 GRANTED EXPIRED 31.3.2006 DIRECT INTERESTS SIA KWEE MOW @ SIA HOK CHAI 450,000 - (450,000) - SIA TEONG HENG 350,000 - (350,000) - Page 4
  • 5. 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 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 43 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. SIGNIFICANT EVENT DURING THE FINANCIAL YEAR The significant event during the financial year of the Company is disclosed in Note 49 to the financial statements. SIGNIFICANT EVENT SUBSEQUENT TO BALANCE SHEET DATE The significant event subsequent to the balance sheet date of the Company is disclosed in Note 50 to the financial statements. Page 5
  • 6. 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 2006 Sia Kwee Mow @ Sia Hok Chai Mun Chong Shing @ Mun Chong Tian Page 6
  • 7. 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 10 to 66 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 2006 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 2006 Sia Kwee Mow @ Sia Hok Chai Mun Chong Shing @ Mun Chong Tian STATUTORY DECLARATION I, Lee Yan Yaw, I/C No. 710315-10-5509, 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 10 to 66 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 Lee Yan Yaw, I/C No. 710315-10-5509, at Kuala Lumpur in the Federal Territory on this 20 July 2006 Lee Yan Yaw Before me Datin Hajah Raihela Wanchik (W275) Commissioner for Oaths Page 7
  • 8. 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 10 to 66. 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 2006 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 8
  • 9. 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 Mok Yuen Lok Firm No: AF 1018 Approval No: 1408/11/07 (J/PH) Chartered Accountants Partner Kuala Lumpur 20 July 2006 Page 9
  • 10. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P BALANCE SHEETS AT 31 MARCH 2006 THE GROUP THE COMPANY 2006 2005 2006 2005 NOTE RM RM RM RM NON-CURRENT ASSETS Investment in subsidiaries 6 - - 211,064,785 211,064,785 Interest in associates 7 111,816,402 112,262,828 2,400,000 2,400,000 Investment in joint venture 8 - - 712,500 - Property, plant and equipment 9 34,771,188 35,452,368 7,552 17,636 Investment properties 10 71,162,500 79,718,099 - - Other assets 11 86,300 276,107 - - Goodwill on consolidation 12 27,317,640 27,317,640 - - 245,154,030 255,027,042 214,184,837 213,482,421 CURRENT ASSETS Inventories 13 1,283,422 4,359,492 - - Property development costs 14 55,130,848 54,745,687 - - Receivables 15 42,574,730 28,150,859 226,427 143,077 Amount owing by contract customers 16 3,114,994 969,629 - - Amount owing by subsidiaries 17 - - 65,774,637 61,299,355 Amount owing by associates 18 5,399,534 5,399,534 11,434 11,434 Tax recoverable 19 1,551,225 6,607,700 3,206,127 8,597,916 Short term deposits with licensed banks 20 1,364,225 1,364,225 1,239,225 1,239,225 Cash and bank balances 21 9,205,230 5,612,658 8,150,432 4,027,843 119,624,208 107,209,784 78,608,282 75,318,850 CURRENT LIABILITIES Amount owing to contract customers 16 1,540,444 8,194 - - Payables 22 32,241,497 29,491,952 244,765 256,127 Amount owing to subsidiaries 17 - - 18,082,756 15,155,558 Amount owing to associates 18 16,711 547,586 - - Amount owing to a director 23 1,867,680 1,867,680 1,867,680 1,867,680 Short term borrowings 24 15,941,779 16,749,403 5,000,000 5,000,000 ABBA Bonds 25 2,478,450 2,478,450 2,478,450 2,478,450 Bank overdrafts 26 14,656,189 18,824,019 5,053,440 5,760,593 68,742,750 69,967,284 32,727,091 30,518,408 NET CURRENT ASSETS 50,881,458 37,242,500 45,881,191 44,800,442 296,035,488 292,269,542 260,066,028 258,282,863 The annexed notes form an integral part of these financial statements. Page 10
  • 11. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P BALANCE SHEETS AT 31 MARCH 2006 (CONT’D) THE GROUP THE COMPANY 2006 2005 2006 2005 NOTE RM RM RM RM FINANCED BY:- Share capital 27 82,435,000 82,435,000 82,435,000 82,435,000 Reserves 28 138,026,063 137,572,393 133,652,529 134,096,236 Shareholders’ equity 220,461,063 220,007,393 216,087,529 216,531,236 ABBA Bonds 25 43,978,499 41,751,627 43,978,499 41,751,627 Non-current liabilities 29 30,629,180 29,543,776 - - Deferred taxation 31 966,746 966,746 - - 296,035,488 292,269,542 260,066,028 258,282,863 NET ASSETS PER ORDINARY SHARE (RM) 32 2.67 2.67 The annexed notes form an integral part of these financial statements. Page 11
  • 12. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P INCOME STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 THE GROUP THE COMPANY 2006 2005 2006 2005 NOTE RM RM RM RM REVENUE 33 69,926,734 66,867,133 7,641,913 8,905,128 COST OF SALES 34 (56,847,233) (52,428,581) - - GROSS PROFIT 13,079,501 14,438,552 7,641,913 8,905,128 OTHER OPERATING INCOME 1,751,359 1,026,365 - 50,850 ADMINISTRATIVE EXPENSES (7,142,456) (7,541,549) (1,154,115) (1,200,429) OTHER OPERATING EXPENSES (1,262,033) (1,215,804) (289,792) (293,501) PROFIT FROM OPERATIONS 6,426,371 6,707,564 6,198,006 7,462,048 FINANCE COSTS (5,160,442) (4,953,038) (5,697,750) (5,602,597) SHARE OF PROFITS OF ASSOCIATES 266,591 1,566,728 - - PROFIT BEFORE TAXATION 35 1,532,520 3,321,254 500,256 1,859,451 TAXATION 36 (485,323) (1,070,825) (350,436) (621,822) PROFIT AFTER TAXATION 1,047,197 2,250,429 149,820 1,237,629 Earnings per share - basic 37 1.3 sen 2.7 sen - diluted 37 N/A N/A Dividend per ordinary share - final 38 1 sen 1 sen The annexed notes form an integral part of these financial statements. Page 12
  • 13. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P STATEMENTS OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 SHARE SHARE RETAINED CAPITAL CAPITAL PREMIUM PROFITS RESERVE TOTAL NOTE RM RM RM RM RM THE GROUP Balance at 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 1.4.2005 Profit after taxation for the financial year - - 1,047,197 - 1,047,197 Dividend 38 - - (593,527) - (593,527) Balance at 31.3.2006 82,435,000 111,412,895 25,413,169 1,199,999 220,461,063 THE COMPANY Balance at 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 82,435,000 111,412,895 22,683,341 - 216,531,236 31.3.2005/1.4.2005 Profit after taxation for the financial year - - 149,820 - 149,820 Dividend 38 - - (593,527) - (593,527) Balance at 31.3.2006 82,435,000 111,412,895 22,239,634 - 216,087,529 The annexed notes form an integral part of these financial statements. Page 13
  • 14. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 THE GROUP THE COMPANY 2006 2005 2006 2005 NOTE RM RM RM RM CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 1,532,520 3,321,254 500,256 1,859,451 Adjustments for:- Amortisation of bonds expenses 279,708 275,709 279,708 275,709 Depreciation of property, plant and equipment 424,695 459,128 10,084 17,792 Interest expense/ finance charges 5,058,620 4,844,740 5,671,876 5,583,651 Impairment loss on interest in an associate 549,434 330,565 - - Other investment written off - 45,000 - - Dividend income - - (5,000,000) (5,404,800) (Gain)/Loss on disposal of property, plant and equipment (132,283) 19,177 - - Gain on disposal of investment properties (812,642) (15,082) - - Interest income (261,016) (203,425) (204,859) (1,389,168) Write-back of allowance for doubtful debts - (7,506) - - Share of profits in associates (266,591) (1,566,728) - - Operating profit before working capital changes 6,372,445 7,502,832 1,257,065 942,635 Decrease in inventories 3,076,070 4,245,239 - - Decrease/(Increase) in property development costs 6,171,242 (3,028,141) - - (Increase)/Decrease in receivables (14,234,064) 547,631 (83,350) 65,973 Increase/(Decrease) in payables 2,695,419 1,291,820 (11,362) 25,202 Net (increase)/decrease in amount owing by contract customers (613,115) 2,213,504 - - CASH FROM OPERATIONS 3,467,997 12,772,885 1,162,353 1,033,810 Interest paid (571,134) (544,034) (1,184,390) (1,282,945) Tax refunded 4,734,735 1,256,001 6,441,353 4,116,757 NET CASH FROM OPERATING ACTIVITIES CARRIED FORWARD 7,631,598 13,484,852 6,419,316 3,867,622 The annexed notes form an integral part of these financial statements. Page 14
  • 15. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 (CONT’D) THE GROUP THE COMPANY 2006 2005 2006 2005 NOTE RM RM RM RM NET CASH FROM OPERATING ACTIVITIES BROUGHT FORWARD 7,631,598 13,484,852 6,419,316 3,867,622 CASH FLOWS FOR INVESTIING ACTIVITIES Acquisition of joint venture - - (712,500) - Advances to subsidiaries - - (4,475,282) (5,380,264) Interest received 261,016 203,425 204,859 1,389,168 Dividends received from subsidiaries - - 3,600,000 3,456,000 Dividends received from associates - 435,456 - 435,456 Purchase of property, plant and equipment 39 (318,295) (408,819) - - Purchase of investment properties - (1,640,541) - - Proceeds from disposal of property, plant and equipment 132,370 7,700 - - Proceeds from disposal of investment properties 4,211,187 556,200 - - Incidental expenses on investment properties (342,356) (424,603) - - Placement of cash in sinking fund account (4,097,229) (2,015,883) (4,097,229) (2,015,883) NET CASH FOR INVESTING ACTIVITIES (153,307) (3,287,065) (5,480,152) (2,115,523) BALANCE CARRIED FORWARD 7,478,291 10,197,787 939,164 1,752,099 The annexed notes form an integral part of these financial statements. Page 15
  • 16. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P CASH FLOW STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 (CONT’D) THE GROUP THE COMPANY 2006 2005 2006 2005 Note RM RM RM RM BALANCE BROUGHT FORWARD 7,478,291 10,197,787 939,164 1,752,099 CASH FLOWS FOR FINANCING ACTIVITIES Payment of bonds expenses (61,872) (57,871) (61,872) (57,871) Repayment of bonds 25 (2,478,450) (2,478,450) (2,478,450) (2,478,450) Repayment to directors - (582,801) - (100,000) Net repayment by associates (530,875) 603,742 - - Advances from subsidiaries - - 2,927,198 2,592,235 Dividend paid to shareholders of the company (593,527) (593,527) (593,527) (593,527) Dividend paid to holders of ICCPS - (295,050) - (295,050) Repayment of revolving credit (1,600,000) (1,350,000) - - Drawdown of term loans 3,600,000 - - - Repayment of term loans (2,077,764) (3,460,283) - - Repayment of hire purchase obligations (72,630) (87,784) - - NET CASH FOR FINANCING ACTIVITIES (3,815,118) (8,302,024) (206,651) (932,663) NET INCREASE IN CASH AND CASH EQUIVALENTS 3,663,173 1,895,763 732,513 819,436 CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR (15,873,019) (17,768,782) (4,519,408) (5,338,844) CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 40 (12,209,846) (15,873,019) (3,786,895) (4,519,408) The annexed notes form an integral part of these financial statements. Page 16
  • 17. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 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 2006. 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 is exposed to foreign exchange risk on investments and bank balances that are denominated in foreign currencies. The Group’s foreign currency transactions and balances are substantially denominated in Thai Baht. The Group does not seek to hedge this exposure as the Group is of the opinion that the fluctuations of the Thai Baht do not have a significant impact on the financial statements. (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 17
  • 18. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 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 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. The MASB standards nomenclature has been changed to Financial Reporting Standards (“FRS”) nomenclature for financial periods beginning on or after 1 January 2005. This change to the new nomenclature did not result in any significant change in the accounting policies adopted by the Group and has no financial effects on the financial statements of the Group and of the Company for the financial year ended 31 March 2006. Page 18
  • 19. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 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 2006. 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 of 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 19
  • 20. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 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) Investment in Joint Venture A joint venture represents a business arrangement formed under contract with a third party to undertake specific projects. The investment in the joint venture is accounted for using the proportionate consolidation method whereby assets, liabilities and the income statement of the joint venture are consolidated in the Group's financial statements in the proportion to the Group's interest in the venture. Page 20
  • 21. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (e) 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:- Plant and machinery, construction machinery and equipment, formwork, scaffoldings and containers 5% - 25% Office renovation, office equipment, computers, furniture and fittings, tools and sales office 5% - 20% Motor vehicles 20% (f) 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. (g) Impairment of Assets The carrying amounts of assets, other than those to which FRS 136 - Impairment of Assets does not apply, are reviewed at each balance sheet date for impairment when there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. 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. Page 21
  • 22. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (g) Impairment of Assets (Cont’d) 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. (h) 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. (i) 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 the 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. Page 22
  • 23. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (j) 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 comprises 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. (k) 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. 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 in the income statement immediately, including costs to be incurred over the defects liability period. Page 23
  • 24. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (l) 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. (m) 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. (n) 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. (o) 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. (p) 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. Page 24
  • 25. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (q) 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. (r) 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. 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. Page 25
  • 26. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (s) 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. The financial statements of the foreign joint venture are translated into Ringgit Malaysia using the closing rate for the balance sheet whilst the average rate is used for the translation of the income statement for consolidation purposes. All exchange differences arising from the retranslation are taken directly to equity as a movement in the foreign exchange fluctuation reserve. On the disposal of the foreign joint venture, such translation differences are recognised in the income statement as part of the gain or loss on disposal. (t) 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(e) 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. (u) 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. (v) 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. Page 26
  • 27. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (w) 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. (x) Employee Benefits (i) Short-term Benefits Wages, salaries, paid annual leave, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by employees of the Group. (ii) Defined Contribution Plans The Group’s contributions to defined contribution plans are charged to the income statement in the period to which they relate. Once the contributions have been paid, the Group has no further liability in respect of the defined contribution plans. Page 27
  • 28. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (y) 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. (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. (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. Page 28
  • 29. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (y) Income Recognition (Cont’d) (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. (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. (z) 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 29
  • 30. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 6. INVESTMENT IN SUBSIDIARIES THE COMPANY 2006 2005 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 2006 2005 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 30
  • 31. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 6. INVESTMENT IN SUBSIDIARIES (CONT’D) Name of Company Effective Equity Interest Principal 2006 2005 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 31
  • 32. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 7. INTEREST IN ASSOCIATES THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Unquoted shares, at cost 3,600,001 3,600,001 2,400,000 2,400,000 Impairment loss (880,000) (330,566) - - 2,720,001 3,269,435 2,400,000 2,400,000 Unquoted shares, at Group cost 91,618,314 91,618,314 - - Share of post acquisition reserves 17,478,087 17,375,079 - - 111,816,402 112,262,828 2,400,000 2,400,000 THE GROUP 2006 2005 RM RM The interest in associates comprises:- Group’s share of net tangible assets - at cost 65,800,432 66,246,858 - at fair value 45,952,003 45,952,003 Group’s share of intangible assets 63,967 63,967 111,816,402 112,262,828 Details of the associates, which are all incorporated in Malaysia, are as follows:- Effective Equity Principal Name of Company Interest Activities 2006 2005 % % 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. Pasti Bumi Sdn. Bhd.* ## 19.6 - Sales of plastic building materials. Page 32
  • 33. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 7. INTEREST IN ASSOCIATES (CONT’D) Effective Equity Principal Name of Company Interest Activities 2006 2005 % % 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 2006. ## Held by Paling Industries Sdn. Bhd. ### Held by South-East Best Sdn. Bhd. (“SEB”). 8. INVESTMENT IN JOINT VENTURE THE COMPANY 2006 2005 RM RM Unquoted shares, at cost 712,500 - Details of the joint venture, which is incorporated in Thailand, are as follows:- Name of Company Effective Equity Interest Principal 2006 2005 Activities % % Tri-Development Co., Ltd 50 - Property development. The share of results of the joint venture is based on the latest available unaudited management financial statements made up to 31 March 2006. Page 33
  • 34. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 9. PROPERTY, PLANT AND EQUIPMENT TRANSFER TO AT DEVELOPMENT DEPRECIATION AT 1.4.2005 ADDITIONS DISPOSALS COST CHARGE 31.3.2006 RM RM RM RM RM RM THE GROUP NET BOOK VALUE Freehold land 4,011,273 - (1,056,993) - 2,954,280 Land and hotel development expenditure 30,143,544 124,190 - - - 30,267,734 Plant and machinery, construction machinery and equipment, formwork, scaffoldings and containers 41,934 3,350 - - (16,556) 28,728 Office renovation, office equipment, computers, furniture and fittings, tools and sales office 1,084,924 134,641 (81) - (269,353) 950,131 Motor vehicles 170,693 538,414 (6) - (138,786) 570,315 Total 35,452,368 800,595 (87) (1,056,993) (424,695) 34,771,188 AT ACCUMULATED NET BOOK COST DEPRECIATION VALUE RM RM RM AT 31.3.2006 Freehold land 2,954,280 - 2,954,280 Land and hotel development expenditure 30,267,734 - 30,267,734 Plant and machinery, construction machinery and equipment, formwork, scaffoldings and containers 8,663,993 (8,635,265) 28,728 Office renovation, office equipment, computers, furniture and fittings, tools and sales office 4,886,531 (3,936,400) 950,131 Motor vehicles 2,145,096 (1,574,781) 570,315 Total 48,917,634 (14,146,446) 34,771,188 AT 31.3.2005 Freehold land 4,011,273 - 4,011,273 Land and hotel development expenditure 30,143,544 - 30,143,544 Plant and machinery, construction machinery and equipment, formwork, scaffoldings and containers 8,660,643 (8,618,709) 41,934 Office renovation, office equipment, computers, furniture and fittings, tools and sales office 4,759,653 (3,674,729) 1,084,924 Motor vehicles 2,020,927 (1,850,234) 170,693 Total 49,596,040 (14,143,672) 35,452,368 Page 34
  • 35. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 9. PROPERTY, PLANT AND EQUIPMENT (CONT’D) Land and hotel development expenditure consists of:- 2006 2005 RM RM At cost:- Long leasehold land 27,691,066 27,691,066 Hotel development expenditure 2,576,668 2,452,478 30,267,734 30,143,544 AT DEPRECIATION AT 1.4.2005 CHARGE 31.3.2006 RM RM RM THE COMPANY NET BOOK VALUE Office equipment, computers, furniture and fittings 17,635 (10,084) 7,551 Motor vehicles 1 - 1 17,636 (10,084) 7,552 AT ACCUMULATED NET BOOK COST DEPRECIATION VALUE RM RM RM AT 31.3.2006 Office equipment, computers, furniture and fittings 370,553 (363,002) 7,551 Motor vehicles 376,950 (376,949) 1 747,503 (739,951) 7,552 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 The motor vehicles of the Group acquired under hire purchase terms were carried at a total net book value of RM449,135 (2005 - RM20,602) at the balance sheet date. Page 35
  • 36. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 10. INVESTMENT PROPERTIES THE GROUP 2006 2005 RM RM Leasehold land, at cost 20,607,424 20,607,424 Expenditure on land 4,499,249 4,710,272 25,106,673 25,317,696 Freehold land and buildings, at cost 52,501,437 52,810,544 Leasehold land and buildings, at cost 2,498,141 2,803,145 54,999,578 55,613,689 Disposed of during the financial year (3,444,341) (661,600) Transfer to property development costs (Note 14) (5,499,410) (551,686) 46,055,827 54,400,403 71,162,500 79,718,099 Included in investment properties is a leasehold land amounting to RM8,550,889 (2005 - RM8,486,514) which is charged to a financial institution for the issuance of the ABBA Bonds granted to the Company. 11. OTHER ASSETS THE GROUP 2006 2005 RM RM Other assets - 189,807 Other investments, at cost Quoted shares in Malaysia 12,300 12,300 Unquoted shares - - Investment in club membership 74,000 74,000 86,300 86,300 86,300 276,107 Market value of quoted shares 8,370 5,400 Page 36
  • 37. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 11. OTHER ASSETS (CONT’D) 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. 12. GOODWILL ON CONSOLIDATION THE GROUP 2006 2005 RM RM At 31 March 27,317,640 27,317,640 13. INVENTORIES THE GROUP 2006 2005 RM RM Unsold completed properties, at cost 1,283,422 4,359,492 None of the inventories is carried at net realisable value. Page 37
  • 38. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 14. PROPERTY DEVELOPMENT COSTS THE GROUP 2006 2005 RM RM Balance at beginning of the financial year: - land 31,334,481 30,903,465 - development costs 77,920,310 43,978,441 109,254,791 74,881,906 Costs incurred during the year: - transferred from investment properties (Note 10) 5,499,410 551,686 - transferred from property, plant and equipment 1,056,993 716,560 - land - 151,034 - development costs 43,078,726 41,773,802 158,889,920 118,074,988 Disposal of land during the year - (315,040) 158,889,920 117,759,948 Reversal of development costs of completed projects during the year: - land - (673,224) - development costs - (7,831,933) - (8,505,157) 158,889,920 109,254,791 Cost recognised as an expense in the income statement: - previous year (54,509,104) (24,432,606) - current year (49,249,968) (38,581,655) - adjustment to completed project during the year - 8,505,157 (103,759,072) (54,509,104) 55,130,848 54,745,687 Included in development expenditure is interest expense capitalised during the financial year amounting to RM1,820,090 (2005 - RM1,846,203). Leasehold land of a subsidiary costing RM7,674,555 (2005 - RM7,674,555) is charged to a licensed bank for a term loan facility granted to the subsidiary. Page 38
  • 39. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 14. PROPERTY DEVELOPMENT COSTS (CONT’D) The foreign currency exposure profile of the property development costs is as follows:- THE GROUP 2006 2005 RM RM Thai Baht 131,603 - 15. RECEIVABLES THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Trade receivables 46,168,072 35,127,293 - - Retention receivable 2,376,762 1,387,398 - - Total trade receivables 48,544,834 36,514,691 - - Allowance for doubtful debts At 1 April 2005/2004 (13,466,689) (13,474,195) - - Write-back - 7,506 - - At 31 March (13,466,689) (13,466,689) - - Net trade receivables 35,078,145 23,048,002 - - Other receivables, deposits and prepayments 10,996,707 8,602,979 2,579,164 2,495,814 Allowance for doubtful debts (3,500,122) (3,500,122) (2,352,737) (2,352,737) Net other receivables, deposits and prepayments 7,496,585 5,102,857 226,427 143,077 Total receivables 42,574,730 28,150,859 226,427 143,077 Page 39
  • 40. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 15. RECEIVABLES (CONT’D) The foreign currency exposure profile of the receivables is as follows:- THE GROUP 2006 2005 RM RM Thai Baht 430,725 - Included in trade receivables at the balance sheet date are the following amounts:- 2006 2005 RM RM Related party: - Ligamas Sdn. Bhd. 4,923,055 * 4,774,941 * Sabah State Government 18,054,059 5,997,229 * relates to retention receivable. The amount owing by the Sabah State Government is in respect of the construction of an office building for the Land and Survey Department (Jabatan Tanah dan Ukur) for a value of RM29,069,000. Upon the completion of the office building, the entire trade receivables due from the Sabah State Government will be set off against an equivalent amount owing to the Sabah State Government, the details of which are disclosed in Note 29 to the financial statements. Details of the related party relationship and the nature of the transactions and balances are set out in Note 43 to the financial statements. Included in other receivables is an amount of RM1,070,828 (2005 - RM1,517,957) due from sub-contractors for the purchase of building materials. The amount owing is unsecured, interest-free, and is to be repaid through deductions against future claims for work to be performed by the sub-contractors. Credit terms of trade receivables range from 14 to 90 days. Page 40
  • 41. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 16. AMOUNT OWING BY/(TO) CONTRACT CUSTOMERS THE GROUP 2006 2005 RM RM Amount owing by contract customers Contract costs incurred to date 79,943,257 96,138,039 Attributable profits 6,327,355 19,419,469 86,270,612 115,557,508 Progress billings (83,155,618) (114,587,879) Amount owing by contract customers 3,114,994 969,629 Amount owing to contract customers Contract costs incurred to date 75,241,385 43,414,193 Attributable profits 10,587,249 1,311,336 85,828,634 44,725,529 Progress billings (87,369,078) (44,733,723) Amount owing to contract customers (1,540,444) (8,194) 17. AMOUNT OWING BY/(TO) SUBSIDIARIES THE COMPANY 2006 2005 RM RM Amount owing by: Non-trade - Interest-bearing 12,403,758 7,904,141 - Interest-free 53,370,879 53,395,214 65,774,637 61,299,355 Amount owing to: Non-trade - Interest-free 18,082,756 15,155,558 The above amounts owing are unsecured and not subject to fixed terms of repayment. The interest-bearing amount is subject to interest at 8.5% (2005 - 8.5%) per annum. Page 41
  • 42. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 18. AMOUNT OWING BY/(TO) ASSOCIATES The amounts owing are unsecured, interest-free and not subject to fixed terms of repayment. 19. TAX RECOVERABLE Subject to agreement with the tax authorities, the Company has tax recoverable of RM1,236,606 and RM1,969,521 at the balance sheet date in respect of the financial years ended 31 March 1997 to 31 March 2000 and 31 March 2005 to 31 March 2006 respectively. At the date of this report, the amount is still pending agreement with the tax authorities. 20. SHORT TERM DEPOSITS WITH LICENSED BANKS The weighted average effective interest rates of deposits at the balance sheet date were as follows: THE GROUP THE COMPANY 2006 2005 2006 2005 % % % % Licensed bank 2.81 2.80 2.30 2.77 Deposits of the Group and the Company have an average maturity period of 30 days (2005 - 30 days). The deposits of the Company have been pledged as security for the ABBA Bonds as disclosed in Note 25 to the financial statements. 21. CASH AND BANK BALANCES THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Cash and bank balances 1,082,118 1,586,775 27,320 1,960 Sinking fund account (Note 40) 8,123,112 4,025,883 8,123,112 4,025,883 9,205,230 5,612,658 8,150,432 4,027,843 Page 42
  • 43. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 21. CASH AND BANK BALANCES (CONT’D) The foreign currency exposure profile of the cash and bank balances is as follows:- THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Thai Baht 268,831 - 25,879 - Included in the cash and bank balances of the Group is RM701,950 (2005 - RM1,380,169) maintained under the Housing Development Accounts pursuant to Section 7A of the Housing Development (Control and Licensing ) Act, 1966. The sinking fund account is maintained with a financial institution, and forms part of the security for the repayment of the ABBA Bonds. 22. PAYABLES THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Trade payables 22,580,762 23,344,850 - - Retention payable 6,641,013 4,267,934 - - Total trade payables 29,221,775 27,612,784 - - Other payables and accruals 2,922,532 1,836,104 244,765 256,127 Hire purchase payables (Note 29a) 97,190 43,064 - - 32,241,497 29,491,952 244,765 256,127 The foreign currency exposure profile of the payables is as follows:- THE GROUP 2006 2005 RM RM Thai Baht 93,595 - Page 43
  • 44. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 22. PAYABLES (CONT’D) Credit terms of trade payables range from 30 to 60 days. Included in other payables is an amount owing to a related party of RM169,367 (2005 - RM169,819). The details of the transaction and the balance are disclosed in Note 43 to the financial statements. 23. AMOUNT OWING TO A DIRECTOR The above amount owing is unsecured, not subject to fixed terms of repayment and bore interest at 5.5% (2005 - 5.5%) per annum. 24. SHORT TERM BORROWINGS THE GROUP 2006 2005 SECURED UNSECURED TOTAL SECURED UNSECURED TOTAL RM RM RM RM RM RM Term loans (Note 30) 2,597,379 - 2,597,379 1,805,003 - 1,805,003 Revolving credits - 13,344,400 13,344,400 - 14,944,400 14,944,400 2,597,379 13,344,400 15,941,779 1,805,003 14,944,400 16,749,403 THE COMPANY 2006 2005 SECURED UNSECURED TOTAL SECURED UNSECURED TOTAL RM RM RM RM RM RM Revolving credits - 5,000,000 5,000,000 - 5,000,000 5,000,000 The weighted average effective interest rates at the balance sheet date for borrowings which bear interest at floating rates, were as follows:- THE GROUP THE COMPANY 2006 2005 2006 2005 % % % % Term loans 8.25 7.92 - - Revolving credits 6.25 6.07 7.50 7.65 Page 44
  • 45. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 25. ABBA BONDS THE GROUP/THE COMPANY 2006 2005 RM RM Al-Bai Bithaman Ajil Bonds (nominal value) 61,961,250 61,961,250 Less: ABBA Bonds issuance expenses (1,281,283) (1,223,412) Finance charges on bonds issue (21,961,250) (21,961,250) Net proceeds 38,718,717 38,776,588 Additional ABBA Bonds issuance expenses (61,872) (57,871) 38,656,845 38,718,717 Cumulation of amortisation of ABBA Bonds issuance expenses 993,053 713,345 Cumulation of amortisation of finance charges on ABBA Bonds issue 15,481,626 10,994,140 55,131,524 50,426,202 Cumulative repayments:- At 1 April (6,196,125) (3,717,675) Repayment made during the year (2,478,450) (2,478,450) At 31 March (8,674,575) (6,196,125) 46,456,949 44,230,077 Analysis of the ABBA Bonds: - Not later than one year 2,478,450 2,478,450 - Later than one year and not later than five years 43,978,499 41,751,627 46,456,949 44,230,077 On 13 September 2002, the Company issued RM61,961,250 nominal value Al-Bai Bithaman Ajil Bonds (“ABBA Bonds”) comprising RM49,569,000 nominal value Primary Bonds and 10 equal tranches of Secondary Bonds with RM12,392,250 nominal value. The Primary Bonds are redeemable at maturity. Each Primary Bond is supported by 10 Secondary Bonds which are redeemable in semi-annual instalments commencing 6 months from the date of the first issue of the Secondary Bonds. The ABBA Bonds were placed out to a licensed financial institution via a private placement. The tenure of the ABBA Bonds is 5 years from the date of issue. The profit margin on the ABBA Bonds is fixed at 5% per annum, payable in arrears on a semi-annual basis represented by the Secondary Bonds. The ABBA Bonds are issued based on a 10% per annum yield to maturity. Page 45
  • 46. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 25. ABBA BONDS (CONT’D) The ABBA Bonds are secured in the following manner:- (i) by a third party first legal charge over certain properties of a subsidiary; (ii) by a third party first legal charge over all the shares held by a wholly-owned subsidiary in an associate; (iii) by a first party charge over a reserve account which is an Islamic banking account opened for the placement of all monies received from dividends, unappropriated profits and bonus shares accruing to a subsidiary; and (iv) by a first party charge over a sinking fund account and a Mudharabah Account of the Company. 26. BANK OVERDRAFTS THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Bank overdrafts (unsecured) (Note 40) 14,656,189 18,824,019 5,053,440 5,760,593 The weighted average effective interest rates at the balance sheet date for bank overdrafts were as follows:- THE GROUP THE COMPANY 2006 2005 2006 2005 % % % % Bank overdrafts 8.64 8.19 8.70 8.22 Page 46
  • 47. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 27. SHARE CAPITAL THE COMPANY 2006 2005 2006 2005 NUMBER OF SHARES RM RM AUTHORISED Ordinary shares of RM1 each:- At 1 April/31 March 193,167,000 193,167,000 193,167,000 193,167,000 5.5% ICCPS of RM1 each:- At 1 April/31 March 6,833,000 6,833,000 6,833,000 6,833,000 Total authorised share capital 200,000,000 200,000,000 200,000,000 200,000,000 ISSUED AND FULLY PAID-UP ORDINARY SHARES OF RM1 EACH:- At 1 April 82,435,000 75,602,000 82,435,000 75,602,000 Issuance of new shares arising from conversion of ICCPS - 6,833,000 - 6,833,000 At 31 March 82,435,000 82,435,000 82,435,000 82,435,000 5.5% ICCPS OF RM1 EACH At 1 April - 6,833,000 - 6,833,000 Conversion into ordinary shares during the year - (6,833,000) - (6,833,000) At 31 March - - - - Total issued and fully paid-up share capital 82,435,000 82,435,000 82,435,000 82,435,000 In the previous financial year, the ICCPS were converted into 6,833,000 ordinary shares of RM1 each of the Company on their maturity date on 4 May 2004. Page 47
  • 48. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 28. RESERVES THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Share premium (Note a) 111,412,895 111,412,895 111,412,895 111,412,895 Capital reserve (Note b) 1,199,999 1,199,999 - - Retained profits (Note c) 25,413,169 24,959,499 22,239,634 22,683,341 138,026,063 137,572,393 133,652,529 134,096,236 (a) The share premium is not available for distribution by way of cash dividends. (b) The capital reserve arose from a bonus issue of ordinary shares on 21 August 1992 by a former subsidiary, and is not available for distribution by way of dividends. (c) Subject to agreement with the tax authorities, at the balance sheet date, the Company has:- (i) tax-exempt income of approximately RM233,000 (2005 - RM233,000) available for the purpose of paying tax-exempt dividends; and (ii) tax credits under Section 108 of the Income Tax Act, 1967 to frank the payment of dividends of approximately RM14,457,000 (2005 - RM13,114,000) out of its entire retained profits without incurring any additional tax liabilities. Page 48
  • 49. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 29. NON-CURRENT LIABILITIES THE GROUP 2006 2005 RM RM Term loans (Note 30) 1,200,000 470,140 Hire purchase payables (Note a) 360,180 4,636 Amount owing to the Sabah State Government (Note b) 29,069,000 29,069,000 30,629,180 29,543,776 (a) Hire purchase payables Future minimum hire purchase payments: - repayable not later than one year 113,549 54,458 - repayable later than one year and not later than five years 397,581 5,885 511,130 60,343 Future finance charges (53,760) (12,643) Present value of hire purchase payables 457,370 47,700 Present value of hire purchase payables are payable as follows:- Not later than one year (Note 22) 97,190 43,064 Later than one year and not later than five years 360,180 4,636 457,370 47,700 The hire purchase payables at the balance sheet date were subject to interest at rates ranging from 2.28% to 5.35% (2005 - 5.25% to 5.35%) per annum. Page 49
  • 50. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 29. NON-CURRENT LIABILITIES (CONT’D) (b) Amount owing to the Sabah State Government The amount owing arose from the acquisition of a subsidiary, South-East Best Sdn. Bhd. (“SEB”). The amount owing shall be paid in the form of 130 units of properties to be developed and completed within a period of five years from the commencement of their construction as consideration in kind pursuant to a joint venture contract entered into by SEB with the State Government. The contract, dated 5 September 1994, stated that SEB is committed to jointly develop with the Sabah State Government a parcel of state land covering an area of approximately 26 acres into residential apartments, townhouses, condominiums and a hotel. On 16 July 2002, the Sabah State Government agreed to execute the change of their entitlement for the outstanding amount of RM29,069,000. The change of entitlement is in the form of the construction of an office building for the Land and Survey Department (Jabatan Tanah dan Ukur) and part of a building for the Ministry of Finance at a value equivalent to the amount outstanding of RM29,069,000. On 21 October 2002, SEB was requested to prepare the Contract Document and Estimation for the above project. On 17 December 2004, SEB entered into an supplemental agreement with the Sabah State Government to execute a change of the former’s entitlement. The change of entitlement is in the form of the construction by SEB of an office building for the Land and Survey Department (Jabatan Tanah dan Ukur) at a value equivalent to the amount outstanding of RM29,069,000. SEB had commenced the construction work in the previous financial year. Page 50
  • 51. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 30. TERM LOANS THE GROUP 2006 2005 RM RM Current portion: - repayable within one year (Note 24) 2,597,379 1,805,003 Non-current portion: - repayable between two to five years (Note 29) 1,200,000 470,140 3,797,379 2,275,143 Details of the term loans outstanding at the balance sheet date are as follows:- THE GROUP 2006 2005 Term loan RM RM 1 197,379 - 2 3,600,000 1,745,143 3 - 530,000 3,797,379 2,275,143 Number of Monthly Interest Rate Date of Term loan Monthly Instalment Per Annum Commencement Instalments Amount % of Repayment RM 1 9 400,000 8.25% October 2006 2 17 141,667 8.25% July 2005 3 15 130,000 to 180,000 8.50% April 2004 The term loans are secured as follows:- (a) by way of a first and second legal charge over 3 pieces of converted residential land of a subsidiary; and (b) by the personal guarantee of one of the directors of the Company. The borrowings of the subsidiaries are further secured by corporate guarantees from the Company and South-East Best Sdn. Bhd. Page 51
  • 52. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 31. DEFERRED TAXATION The deferred taxation is in respect of the revaluation surplus on leasehold land of a subsidiary. 32. NET ASSETS PER ORDINARY SHARE The net assets per ordinary share is calculated based on the net assets value of RM220,461,063 (2005 - RM220,007,393) attributable to ordinary shares divided by the number of ordinary shares in issue at the balance sheet date of 82,435,000 (2005 - 82,435,000) shares. 33. REVENUE THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Revenue from construction contracts 9,776,216 15,383,973 - - Proportionate sales value of development properties 59,880,059 51,370,658 - - Rental income 20,000 - - - Dividend income - - 5,000,000 5,404,800 Interest income 204,859 112,502 204,859 112,502 Other interest income - - 1,009,232 1,276,666 Management and administrative charges 45,600 - 1,427,822 2,111,160 69,926,734 66,867,133 7,641,913 8,905,128 34. COST OF SALES THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Construction costs 39,692,674 46,727,012 - - Land and development expenditure 17,028,912 5,081,343 - - Direct costs 79,117 552,048 - - Management and administrative charges 46,530 68,178 - - 56,847,233 52,428,581 - - Page 52
  • 53. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 35. PROFIT BEFORE TAXATION THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Profit before taxation is arrived at after charging/ (crediting):- Amortisation of bonds expenses 279,708 275,709 279,708 275,709 Auditors’ remuneration - for the financial year 75,400 70,100 13,000 13,000 - (over)/underprovision in the previous financial year (2,300) 29,109 - - Depreciation of property, plant and equipment 424,695 459,128 10,084 17,792 Directors’ benefits-in- kind 16,925 16,925 16,925 16,925 Directors’ fees 93,000 93,000 93,000 93,000 Directors’ remuneration 1,110,940 1,339,020 651,292 787,140 Finance charges on bonds 4,487,486 4,300,706 4,487,486 4,300,706 Interest expense - bank borrowings 443,418 290,761 1,081,668 1,179,770 - hire purchase 14,845 126,307 - - - loans 112,871 126,966 102,722 103,175 Impairment loss on interest in associate 549,434 330,566 - - Loss on foreign exchange - realised 137 - - - Rental expense - premises 4,600 15,329 12,000 12,000 - machinery and equipment 9,608 8,315 - - Page 53
  • 54. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 35. PROFIT BEFORE TAXATION (CONT’D) THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Profit before taxation is arrived at after charging/ (crediting):- Staff costs 3,817,436 3,748,567 94,232 96,282 Unquoted shares written off - 45,000 - - Bad debts recovered - (50,850) - (50,850) (Gain)/Loss on disposal of property, plant and equipment (132,283) 19,177 - - Gain on disposal of investment properties (812,642) (15,082) - - Gross dividend income - subsidiaries (unquoted) - - (5,000,000) (4,800,000) - associates - - - (604,800) Interest income - licensed financial institutions (225,346) (138,190) (204,859) (112,502) - subsidiaries - - (1,009,232) (1,276,666) - others (35,670) (65,235) - - Rental of premises (223,112) (327,616) - - Waiver of debts (448,845) - - - Writeback of allowance for doubtful debts - (7,506) - - Page 54
  • 55. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 36. TAXATION THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Current 360,056 666,736 316,376 621,822 Share of associates’ taxation 163,583 602,535 - - Real property gains tax 53,156 - - - 576,795 1,269,271 316,376 621,822 (Over)/Underprovision in previous financial years (91,472) (198,446) 34,060 - 485,323 1,070,825 350,436 621,822 Subject to agreement with the tax authorities, the Group has unutilised tax losses and unabsorbed capital allowances of approximately RM3,795,700 (2005 - RM3,838,700) and RM546,000 (2005 - RM481,000) respectively available at the balance sheet date to be carried forward for offset against future taxable business income. No deferred tax assets is recognised on these items. Page 55
  • 56. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 36. TAXATION (CONT’D) A reconciliation of the income tax expense applicable to the profit before taxation at the statutory tax rate to the income tax expense at the effective tax rate of the Group and of the Company is as follows:- THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Profit before taxation 1,532,520 3,321,254 500,256 1,859,451 Tax at statutory tax rate of 28% 429,106 929,951 140,072 520,646 Tax effects of: Non-deductible expenses 392,266 658,281 173,647 97,182 Non-taxable gains (160,836) (2,060) - - Deferred tax assets not recognised during the financial year 116,739 87,733 - - Reversal of deferred tax assets not recognised (96,258) (291,490) - - Utilisation of tax losses brought forward (53,099) (131,070) - - (Over)/Underprovision in previous financial years (91,472) (198,446) 34,060 - Differential in tax rates (62,729) - - - Others 11,606 17,926 2,657 3,994 485,323 1,070,825 350,436 621,822 37. EARNINGS PER SHARE Basic earnings per share (“EPS”) is arrived at by dividing the profit after taxation attributable to shareholders after deducting the preference dividend of RM Nil (2005 - RM24,463) by the number of ordinary shares in issue at the balance sheet date of 82,435,000 (2005 - weighted average number of ordinary shares in issue at the balance sheet date of 81,798,501). Page 56
  • 57. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 38. DIVIDENDS THE COMPANY 2006 2005 RM RM Declared - dividend of 5.5% per ICCPS less 28% tax - 24,463 (2005 - 5.5% per ICCPS less 28% tax) Paid - dividend of 1% per ordinary share less 28% tax (2005 - 1% per ordinary share less 28% tax) 593,527 593,527 593,527 617,990 At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 March 2006 of 1 sen per ordinary share of RM1 each less 28% tax (2005 - 1 sen per ordinary share of RM1 each less 28% tax) amounting to RM593,527 (2005 - RM593,527) will be tabled for shareholders’ approval. These financial statements do not reflect this final dividend which will be accrued as a liability only upon approval by shareholders. 39. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT THE GROUP 2006 2005 RM RM Cost of property, plant and equipment purchased 800,595 408,819 Amount financed though hire purchase (482,300) - Cash disbursed for the purchase of property, plant and equipment 318,295 408,819 Page 57
  • 58. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 40. CASH AND CASH EQUIVALENTS For the purpose of the cash flow statements, cash and cash equivalents comprise the following:- THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Short term deposits (Note 20) 1,364,225 1,364,225 1,239,225 1,239,225 Cash and bank balances (Note 21) 9,205,230 5,612,658 8,150,432 4,027,843 Bank overdrafts (Note 26) (14,656,189) (18,824,019) (5,053,440) (5,760,593) (4,086,734) (11,847,136) 4,336,217 (493,525) Less: Cash placed in sinking fund account (Note 21) (8,123,112) (4,025,883) (8,123,112) (4,025,883) (12,209,846) (15,873,019) (3,786,895) (4,519,408) Page 58
  • 59. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 41. DIRECTORS’ REMUNERATION The aggregate amount of emoluments received and receivable by the directors of the Company during the financial year are as follows:- THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM DIRECTORS’ FEES:- 1. Mun Chong Shing @ Mun Chong Tian 18,000 18,000 18,000 18,000 2. Dato’ Zainol Abidin Bin Haji A. Hamid 19,000 19,000 19,000 19,000 3. Dato’ Lim Phaik Gan 19,000 19,000 19,000 19,000 4. Dato’ Dr. Norraesah Bt Haji Mohamad 19,000 19,000 19,000 19,000 5. Ahmad Fizal Bin Othman 18,000 18,000 18,000 18,000 93,000 93,000 93,000 93,000 DIRECTORS’ NON-FEES EMOLUMENTS:- 1. Sia Kwee Mow @ Sia Hok Chai 589,120 712,320 589,120 712,320 2. Sia Teong Heng 510,720 613,200 51,072 61,320 3. Mun Chong Shing @ Mun Chong Tian 1,500 2,100 1,500 2,100 4. Dato’ Zainol Abidin Bin Haji A. Hamid 1,500 1,800 1,500 1,800 5. Dato’ Lim Phaik Gan 3,000 2,700 3,000 2,700 6. Dato’ Dr. Norraesah Bt Haji Mohamad 2,400 3,600 2,400 3,600 7. Ahmad Fizal Bin Othman 2,700 3,300 2,700 3,300 1,110,940 1,339,020 651,292 787,140 Apart from the amounts disclosed under directors’ remuneration above, the estimated monetary value of other benefits-in-kind received by the following director during the financial year, otherwise than in cash is as follows:- THE GROUP THE COMPANY 2006 2005 2006 2005 RM RM RM RM Sia Kwee Mow @ Sia Hok Chai 16,925 16,925 16,925 16,925 Page 59
  • 60. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 42. RELATED COMPANY TRANSACTIONS THE COMPANY 2006 2005 RM RM Rental paid to a subsidiary 12,000 12,000 Dividend income received/receivable from subsidiaries 5,000,000 4,800,000 Interest received from subsidiaries 1,009,232 1,276,666 Management fee received from subsidiaries 1,427,822 2,111,160 43. RELATED PARTY TRANSACTIONS/BALANCES GROUP NATURE OF NAME OF RELATED PARTY NOTE TRANSACTION 2006 2005 RM RM Ligamas Sdn. Bhd (a) Progress billings received/receivable 8,033,114 12,591,593 Paling Industries Sdn. Bhd. (a) Purchase of materials 94,783 156,912 Gross dividend income received - 604,800 Smart Home Sdn. Bhd. (b) Debt settlement - 37,828,242 Sia Kwee Mow @ Sia Hok Chai (c) Interest paid/payable 102,722 103,174 Page 60
  • 61. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 43. RELATED PARTY TRANSACTIONS/BALANCES (CONT’D) RECEIVABLE PAYABLE GROUP GROUP NAME OF 2006 2005 2006 2005 RELATED PARTIES NOTE RM RM RM RM Ligamas Sdn Bhd. (a) 4,923,055 4,774,941 - - Sia Kwee Mow @ Sia Hok Chai (c) - - 102,722 103,174 Peak Marketing Sdn. Bhd. (d) - - 66,645 66,645 (a) Associates. (b) A company in which Sia Kwee Mow @ Sia Hok Chai, who is a director of the Company, has a direct interest. (c) A director of the Company. (d) A company in which Sia Teong Heng, who is a director of the Company, has a direct interest. In the opinion of the directors, the above transactions have been entered into in the ordinary course of business on terms mutually agreed between the parties. 44. CONTINGENT LIABILITY THE COMPANY 2006 2005 RM RM Corporate guarantee (unsecured) given to banks and other licensed financial institutions for credit facilities granted to subsidiaries 24,330,673 27,040,401 Page 61
  • 62. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 45. SEGMENTAL REPORTING THE GROUP 2006 MANUFACTURING PROPERTY INVESTMENT AND CONSTRUCTION DEVELOPMENT HOLDING TRADING ELIMINATIONS GROUP RM RM RM RM RM RM REVENUE: External revenue 9,776,216 59,945,659 204,859 - - 69,926,734 Intersegment revenue 34,490,468 - 12,533,054 - (47,023,522) - Total revenue 44,266,684 59,945,659 12,737,913 - (47,023,522) 69,926,734 Results: Segment results 3,287,027 3,259,681 11,648,179 (7,468) (11,761,048) 6,426,371 Finance costs (5,160,442) Share of results of associates - 584,224 - (317,633) - 266,591 Profit from ordinary activities before taxation 1,532,520 Taxation (485,323) Profit from ordinary activities after taxation 1,047,197 MANUFACTURING PROPERTY INVESTMENT AND CONSTRUCTION DEVELOPMENT HOLDING TRADING GROUP RM RM RM RM RM Other information Segment assets 19,729,796 310,142,520 23,216,181 10,138,516 363,227,013 Unallocated assets 1,551,225 364,778,238 Segment liabilities 41,026,145 44,646,717 12,183,528 3,836 97,860,226 Unallocated liabilities 46,456,949 144,317,175 Capital expenditure 404,652 395,943 - - 800,595 Depreciation 201,852 212,394 10,449 - 424,695 Amortisation of bonds expenses 279,708 Impairment loss on interest in associate 549,434 Page 62
  • 63. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 45. SEGMENTAL REPORTING (CONT’D) THE GROUP 2005 MANUFACTURING PROPERTY INVESTMENT AND CONSTRUCTION DEVELOPMENT HOLDING TRADING ELIMINATIONS GROUP RM RM RM RM RM RM REVENUE: External revenue 15,383,973 51,370,658 112,502 - - 66,867,133 Intersegment revenue 36,502,043 - 13,835,025 - (50,337,068) - Total revenue 51,886,016 51,370,658 13,947,527 - (50,337,068) 66,867,133 Results: Segment results 3,707,234 3,572,497 12,386,681 7,221 (12,966,069) 6,707,564 Finance costs (4,953,038) Share of results of associates - 2,151,912 - (585,184) - 1,566,728 Profit from ordinary activities before taxation 3,321,254 Taxation (1,070,825) Profit from ordinary activities after taxation 2,250,429 MANUFACTURING PROPERTY INVESTMENT AND CONSTRUCTION DEVELOPMENT HOLDING TRADING GROUP RM RM RM RM RM Other information Segment assets 18,159,410 306,751,573 20,261,994 10,456,149 355,629,126 Unallocated assets 6,607,700 362,236,826 Segment liabilities 41,049,469 44,042,754 12,902,797 4,336 97,999,356 Unallocated liabilities 44,230,077 142,229,433 Capital expenditure 79,951 328,868 - - 408,819 Depreciation 156,070 283,387 19,671 - 459,128 Amortisation of bonds expenses 275,709 Impairment loss on interest in associate 330,565 No segmental information is provided on a geographical basis as the Group’s activities are predominantly in Malaysia and the overseas segment does not contribute to more than 10% of the consolidated revenue and assets. Page 63
  • 64. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 46. NUMBER OF EMPLOYEES THE GROUP THE COMPANY 2006 2005 2006 2005 Number of employees at the balance sheet date 78 77 9 10 47. FOREIGN EXCHANGE RATE The principal closing foreign exchange rate used (expressed on the basis of one unit of foreign currency to Ringgit Malaysia equivalent) for the translation of the foreign currency balances at the balance sheet date is as follows:- 2006 2005 RM RM Thai Baht 0.095 - 48. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES Fair value is defined as the amount at which the financial instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction, other than in a forced sale or liquidation. The following methods and assumptions are used to estimate the fair value of each class of financial instruments:- (i) Bank balances and other liquid funds and short term receivables The carrying amounts approximated their fair values due to the relatively short term maturity of these instruments. (ii) Quoted and unquoted investments The fair values of quoted investments are estimated based on quoted market prices for these investments. For unquoted investments, it is not practicable to determine the fair values because of the lack of quoted market prices and the assumptions used in valuation models to value these investments cannot be reasonably determined. Page 64
  • 65. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 48. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES (CONT’D) (iii) Short term borrowings and other current liabilities The carrying amounts approximated their fair values because of the short period to maturity of these instruments. (iv) Long term bank loans The carrying amounts approximated their fair values as these instruments bear interest at variable rates. (v) Hire purchase obligations The fair value of hire purchase obligations is determined by discounting the relevant cash flow using current interest rates for similar instruments at the balance sheet date. There is no disclosure of fair value for investments in subsidiaries, associates, joint ventures and borrowings under the basis of Islamic banking principles as these are excluded from FRS 132 - Financial Instruments: Disclosure and Presentation. 49. SIGNIFICANT EVENT DURING THE FINANCIAL YEAR On 8 March 2006, the Company acquired and subscribed for 150,000 ordinary shares of 100 Bahts each, of which 50 Bahts were paid-up for each share, representing 50% of the issued and paid-up ordinary share capital of Tri-Development Co., Ltd. for a total cash consideration of RM712,500. 50. SIGNIFICANT EVENT SUBSEQUENT TO BALANCE SHEET DATE On 5 June 2006, the Company paid the remaining 50 Bahts of each share of the investment in Tri-Development Co., Ltd. as disclosed in Note 49 to the financial statements for a total cash consideration of RM723,750. Page 65
  • 66. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2006 51. COMPARATIVE FIGURES The following comparative figures have been reclassified to conform with the presentation of the current financial year:- THE COMPANY AS AS PREVIOUSLY RESTATED REPORTED RM RM Cash Flow Statements (Extract):- Advances to subsidiaries (5,380,264) - Advances from/(Repayment to) subsidiaries 2,592,235 (2,788,029) Net cash (for)/from investing activities (2,115,523) 3,264,741 Net cash for financing activities (932,663) (6,312,927) Page 66
  • 67. SBC CORPORATION BERHAD (Incorporated in Malaysia) Company No : 199310 - P FINANCIAL REPORT for the financial year ended 31 March 2006 CONTENTS Page Directors’ Report ................................................................................................... 1 Statement by Directors.......................................................................................... 7 Statutory Declaration............................................................................................. 7 Auditors’ Report .................................................................................................... 8 Balance Sheets .....................................................................................................10 Income Statements ...............................................................................................12 Statements of Changes in Equity..........................................................................13 Cash Flow Statements ..........................................................................................14 Notes to the Financial Statements ........................................................................17

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