Notes to the Financial Statements - MalaysiaStock.Biz Notes to the Financial Statements for the financial year ended 31 May 2016 58 1. GENERAL INFORMATION ... Amendments to MFRS 116

Notes to the Financial Statements for the financial year ended 31 May 2016

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1. GENERAL INFORMATION

The Company is incorporated as a public company limited by shares under the Companies Act 1965 in Malaysia. The domicile of the Company is Malaysia. The registered office and principal place of business are as follows:-

Registered office : No 60-1, Jalan Lagenda 5

Taman 1 Lagenda

75400 Melaka

Principal place of business : 12A, Jalan 20

Taman Sri Kluang

86000 Kluang, Johor

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of

the directors dated 2 September 2016.

2. PRINCIPAL ACTIVITIES

The Company is principally engaged in the business of investment holding. The principal activities of its

subsidiaries are set out in Note 5 to the financial statements. There have been no significant changes in the

nature of these activities during the financial year.

3. BASIS OF PREPARATION

The financial statements of the Group 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 Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the

requirements of the Companies Act 1965 in Malaysia.

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ANNUAL REPORT 2016

Notes to the Financial Statements for the financial year ended 31 May 2016 cont‟d

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3. BASIS OF PREPARATION (Cont’d)

3.1 During the current financial year, the Group has early adopted the new accounting standards and

interpretations (including the consequential amendments, if any):-

MFRSs and/or IC Interpretations (Including The Consequential Amendments)

Amendments to MFRS 101: Presentation of Financial Statements – Disclosure Initiative

Amendments to MFRS 116 and MFRS 138: Clarification of Acceptable Methods of Depreciation and

Amortisation

Amendments to MFRS 116 and MFRS 141: Agriculture – Bearer Plants

Annual Improvements to MFRSs 2012 – 2014 Cycle

Amendments to MFRS 127 (2011): Equity Method in Separate Financial Statements

Amendments to MFRS 10 and MFRS 128 (2011): Sale or Contribution of Assets between an Investor

and its Associate or Joint Venture

Amendments to MFRS 11: Accounting for Acquisition of Interests in Joint Operations

The early adoption of the above accounting standards and interpretations (including the consequential

amendments, if any) are expected to have no material impact on the financial statements of the Group

upon their initial application.



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3. BASIS OF PREPARATION (Cont’d)

3.2 The Group has not applied in advance the following accounting standards and interpretations

(including the consequential amendments) that have been issued by the Malaysian Accounting

Standards Board (“MASB”) but are not yet effective for the current financial period:-

MFRSs and IC Interpretations (Including The Consequential Amendments) Effective Date

MFRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014) 1 January 2018

MFRS 15 Revenue from Contracts with Customers 1 January 2018

Amendments to MFRS 15: Effective Date of MFRS 15 1 January 2018

Amendments to MFRS 107: Disclosure Initiative 1 January 2017

Amendments to MFRS 112 : Recognition of Deferred Tax Assets for unrealised

losses 1 January 2017

MFRS 16 Leases 1 January 2019

The above mentioned accounting standards and interpretations (including the consequential

amendments, if any) are not expected to have any material impact on the Group‟s financial

statements upon their initial application.


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4. SIGNIFICANT ACCOUNTING POLICIES

4.1 Critical Accounting Estimates and Judgements

Estimates and judgements are continually evaluated by the directors and management and are based on

historical experience and other factors, including expectations of future events that are believed to be

reasonable under the circumstances. The estimates and judgements that affect the application of the

Group‟s accounting policies and disclosures, and have a significant risk of causing a material adjustment

to the carrying amounts of assets, liabilities, income and expenses are discussed below:-

(a) Depreciation of Property, Plant and Equipment

The estimates for the residual values, useful lives and related depreciation charges for the property,

plant and equipment are based on commercial and production factors which could change

significantly as a result of technical innovations and competitors‟ actions in response to the market

conditions.

The Group anticipates that the residual values of its property, plant and equipment will be

insignificant. As a result, residual values are not being taken into consideration for the computation

of the depreciable amount.

Changes in the expected level of usage and technological development could impact the economic

useful lives and the residual values of these assets, therefore future depreciation charges could be

revised.

(b) Income Taxes

There are certain transactions and computations for which the ultimate tax determination may be

different from the initial estimate. The Group recognises tax liabilities based on its understanding of

the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of

business. Where the final outcome of these matters is different from the amounts that were initially

recognised, such difference will impact the income tax and deferred tax provisions in the year in

which such determination is made.

(c) Impairment of Non-financial Assets

When the recoverable amount of an asset is determined based on the estimate of the value in use of

the cash-generating unit to which the asset is allocated, the management is required to make an

estimate of the expected future cash flows from the cash-generating unit and also to apply a suitable

discount rate in order to determine the present value of those cash flows.

(d) Write-down of Inventories

Reviews are made periodically by management on damaged, obsolete and slow-moving inventories.

These reviews require judgement and estimates. Possible changes in these estimates could result in

revisions to the valuation of inventories.


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4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

4.1 Critical Accounting Estimates and Judgements (Cont’d)

(e) Impairment of Trade and Other Receivables

An impairment loss is recognised when there is objective evidence that a financial asset is impaired.

Management specifically reviews its loans and receivables financial assets and analyses historical bad

debts, customer concentrations, customer creditworthiness, current economic trends and changes in the

customer payment terms when making a judgement to evaluate the adequacy of the allowance for

impairment losses. Where there is objective evidence of impairment, the amount and timing of future

cash flows are estimated based on historical loss experience for assets with similar credit risk

characteristics. If the expectation is different from the estimation, such difference will impact the carrying

value of receivables.

4.2 Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its

subsidiaries made up to the end of the reporting period.

Subsidiaries are entities (including structured entities, if any) controlled by the Group. The Group controls

an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the

entity and has the ability to affect those returns through its power over the entity.

Subsidiaries are consolidated from the date on which control is transferred to the Group up to the

effective date on which control ceases, as appropriate.

Intragroup transactions, balances, income and expenses are eliminated on consolidation. Where

necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of

accounting policies with those of the Group.


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4.2 Basis of Consolidation (Cont’d)

(a) Business Combinations

All subsidiaries are consolidated using the purchase method except for the subsidiary, Hexa Analisa

Sdn. Bhd., which are accounted for under the merger method.

Under the purchase method, the results of the subsidiaries acquired or disposed off are included

from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair values of

the subsidiaries‟ net assets are determined and these values are reflected in the consolidated

financial statements. The cost of acquisition is measured at the aggregate of the fair values, at the

date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by

the Group in exchange for control of the acquiree, plus any costs directly attributable to the business

combination.

Non-controlling interests are initially measured at their share of the fair values of the identifiable

assets and liabilities of the acquiree as at the date of acquisition.

Under the merger method of accounting, the results of subsidiaries are presented as if the merger

had been effected throughout the current and previous years. In the consolidated financial

statements, the cost of the merger is cancelled with the nominal values of the shares received. Any

resulting debit difference is shown as merger deficit.

(b) Non-controlling Interests

Non-controlling interests are presented within equity in the consolidated statement of financial

position, separately from the equity attributable to owners of the Company. Profit or loss and each

component of other comprehensive income are attributed to the owners of the Company and to the

non-controlling interests. Total comprehensive income is attributed to non-controlling interests even

if this results in the non-controlling interests having a deficit balance.

(c) Changes in Ownership Interests in Subsidiaries without Change of Control

All changes in the parent‟s ownership interest in a subsidiary that do not result in a loss of control are

accounted for as equity transactions. Any difference between the amount by which the non-

controlling interest is adjusted and the fair value of consideration paid or received is recognised

directly in equity and of the Group.

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4.2 Basis of Consolidation (Cont’d)

(d) Loss of Control

Upon the loss of control of a subsidiary, the Group recognises any gain or loss on disposal in profit or

loss which is calculated as the difference between:-

(i) the aggregate of the fair value of the consideration received and the fair value of any retained

interest in the former subsidiary; and

(ii) the previous carrying amount of the assets (including goodwill), and liabilities of the former

subsidiary and any non-controlling interests.

Amounts previously recognised in other comprehensive income in relation to the former

subsidiary are accounted for in the same manner as would be required if the relevant assets or

liabilities were disposed off (i.e. reclassified to profit or loss or transferred directly to retained

profits). The fair value of any investments retained in the former subsidiary at the date when

control is lost is regarded as the fair value on initial recognition for subsequent accounting under

MFRS 139 or, when applicable, the cost on initial recognition of an investment in an associate

or a joint venture.

4.3 Functional and Foreign Currencies

(a) Functional and Presentation Currency

The individual financial statements of each entity in the Group are presented in the currency of the

primary economic environment in which the entity operates, which is the functional currency.

The consolidated financial statements are presented in Ringgit Malaysia („„RM‟‟) which is the Company‟s

functional and presentation currency.

(b) Transactions and Balances

Transactions in foreign currencies are converted into RM on initial recognition, using the exchange

rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end

of the reporting period are translated at the rates ruling as of that date. Non-monetary assets and

liabilities are translated using exchange rates that existed when the values were determined. All

exchange differences are recognised in profit or loss.

(c) Foreign Operations

Assets and liabilities of foreign operations are translated to RM at the rates of exchange ruling at the

end of the reporting period. Income, expenses and other comprehensive income of foreign

operations are translated at exchange rates ruling at the dates of the transactions. All exchange

differences arising from translation are taken directly to other comprehensive income and

accumulated in equity; attributed to the owner of the Company and non-controlling interests, as

appropriate.

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4.3 Functional and Foreign Currencies (Cont’d)

(c) Foreign Operations (Cont’d)

Goodwill and fair value adjustments arising from the acquisition of foreign operations are treated as

assets and liabilities of the foreign operations and are recorded in the functional currency of the

foreign operations and translated at the closing rate at the end of the reporting period except for

those business combinations that occurred before the date of transition (1 June 2011) which are

treated as assets and liabilities of the Company and are not retranslated.

4.4 Financial Instruments

Financial assets and financial liabilities are recognised in the statements of financial position when the Group

has become a party to the contractual provisions of the instruments.

Financial instruments are classified as financial assets and financial liabilities or equity instrument 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 an expense or income. Distributions to holders

of financial instruments classified as equity are charged directly to equity.

Financial instruments are offset when the Group 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.

A financial instrument is recognised initially at its fair value. Transaction costs that are directly attributable to

the acquisition or issue of the financial instrument (other than a financial instrument at fair value through profit

or loss) are added to/deducted from the fair value on initial recognition, as appropriate. Transaction costs on

the financial instrument at fair value through profit or loss are recognised immediately in profit or loss.

Financial instruments recognised in the statements of financial position are disclosed in the individual policy

statement associated with each item.

(a) Financial Assets

On initial recognition, financial assets are classified as either financial assets at fair value through

profit or loss, held-to-maturity investments, loans and receivables financial assets, or available-for-

sale financial assets, as appropriate.

(i) Financial Assets at Fair Value Through Profit or Loss

Financial assets are classified as financial assets at fair value through profit or loss when the

financial asset is either held for trading or is designated to eliminate or significantly reduce a

measurement or recognition inconsistency that would otherwise arise. Derivatives are also

classified as held for trading unless they are designated as hedges.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or

losses arising on remeasurement recognised in profit or loss. Dividend income from this

category of financial assets is recognised in profit or loss when the Group‟s right to receive

payment is established.


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4.4 Financial Instruments (Cont’d)

(a) Financial Assets (Cont’d)

(i) Financial Assets at Fair Value Through Profit or Loss (Cont’d)

Financial assets at fair value through profit or loss could be presented as current assets or non-

current assets. Financial assets that are held primarily for trading purposes are presented as

current assets whereas financial assets that are not held primarily for trading purposes are

presented as current assets or non-current assets based on the settlement date.

As at the end of the reporting period, there were no financial assets classified under this category.

(ii) Held-to-maturity Investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable

payments and fixed maturities that the management has the positive intention and ability to

hold to maturity. Held-to-maturity investments are measured at amortised cost using the

effective interest method less any impairment loss, with interest income recognised in profit or

loss on an effective yield basis.

Held-to-maturity investments are classified as non-current assets, except for those having

maturity within 12 months after the reporting date which are classified as currents assets.

As at the end of the reporting period, there were no financial assets classified under this

category.

(iii) Loans and Receivables Financial Assets

Trade receivables and other receivables that have fixed or determinable payments that are not

quoted in an active market are classified as loans and receivables financial assets. Loans and

receivables financial assets are measured at amortised cost using the effective interest method,

less any impairment loss. Interest income is recognised by applying the effective interest rate,

except for short-term receivables when the recognition of interest would be immaterial.

Loans and receivables financial assets are classified as current assets, except for those having

settlement dates later than 12 months after the reporting date which are classified as non-

current assets.

(iiii) Available-for-sale Financial Assets

Available-for-sale financial assets are non-derivative financial assets that are designated in this

category or are not classified in any of the other categories.

After initial recognition, available-for-sale financial assets are remeasured to their fair values at

the end of each reporting period. Gains and losses arising from changes in fair value are

recognised in other comprehensive income and accumulated in the fair value reserve, with the

exception of impairment losses. On derecognition, the cumulative gain or loss previously

accumulated in the fair value reserve is reclassified from equity into profit or loss.

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(a) Financial Assets (Cont’d)

(iiv) Available-for-sale Financial Assets(Cont’d)

Dividends on available-for-sale equity instruments are recognised in profit or loss when the

Group‟s right to receive payments is established.

Investments in equity instruments whose fair value cannot be reliably measured are measured

at cost less accumulated impairment losses, if any.

Available-for-sale financial assets are classified as non-current assets unless they are

expected to be realised within 12 months after the reporting date.

As at the end of the reporting period, there were no financial assets classified under this

category.

(b) Financial Liabilities

All financial liabilities are initially at fair value plus directly attributable transaction costs and

subsequently measured at amortised cost using the effective interest method other than those

categorised as fair value through profit or loss.

Fair value through profit or loss category comprises financial liabilities that are either held for trading

or are designated to eliminate or significantly reduce a measurement or recognition inconsistency

that would otherwise arise. Derivatives are also classified as held for trading unless they are

designated as hedges.

Financial liabilities are classified as current liabilities unless the Group has an unconditional right to

defer settlement of the liability for at least 12 months after the reporting date.

(c) Equity Instruments

Equity instruments classified as equity are measured at cost and are not remeasured subsequently.

Ordinary shares

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity

as a deduction, net of tax, from proceeds.

Dividends on ordinary shares are recognised as liabilities when approved for appropriation.

(d) Derecognition

A financial asset or part of it is derecognised when, and only when, the contractual rights to the cash

flows from the financial asset expire or the financial asset is transferred to another party without

retaining control or substantially all risks and rewards of the asset. On derecognition of a financial

asset, the difference between the carrying amount and the sum of the consideration received

(including any new asset obtained less any new liability assumed) and any cumulative gain or loss

that had been recognised in equity is recognised in profit or loss.


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(d) Derecognition (Cont‟d)

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the

contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference

between the carrying amount of the financial liability extinguished or transferred to another party and

the consideration paid, including any non-cash assets transferred or liabilities assumed, is

recognised in profit or loss.

4.5 Investments in Subsidiaries

Investments in subsidiaries are stated at cost in the statement of financial position of the Company, and

are reviewed for impairment at the end of the reporting period if events or changes in circumstances

indicate that the carrying values may not be recoverable. The cost of the investments includes transaction

costs.

On the disposal of the investments in subsidiaries, the difference between the net disposal proceeds and

the carrying amount of the investments is recognised in profit or loss.

4.6 Property, Plant and Equipment

Property, plant and equipment, other than freehold land, are stated at cost less accumulated depreciation

and impairment losses, if any.

Freehold land is stated at cost less impairment losses, if any and is not depreciated.

Depreciation is charged to profit or loss (unless it is included in the carrying amount of another assets) on the

straight-line method to write off the depreciable amount of the assets over their estimated useful lives.

Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the

asset is fully depreciated. The principal annual rates used for this purpose are:-

Building 3%

Plant and machinery 10% - 20%

Motor vehicles 10%

Office equipment, furniture and fittings 10%

The depreciation method, useful life and residual values are reviewed, and adjusted if appropriate, at the end

of each reporting period to ensure that the amounts, method and periods of depreciation are consistent with

previous estimates and the expected pattern of consumption of the future economic benefits embodied in the

items of the property, plant and equipment.

Subsequent costs are included in the assets‟ carrying amount or recognised as a separate asset, as

appropriate, only when the cost is incurred and it is probable that the future economic benefits associated

with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying

amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant

and equipment are recognised in profit or loss as incurred. Cost also comprises the initial estimate of

dismantling and removing the asset and restoring the site on which it is located for which the Group is

obligated to incur when the asset is acquired, if applicable.

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4.6 Property, Plant and Equipment (Cont’d)

Plant and machinery under construction represents assets which are not ready for commercial use at the end

of the reporting period. Plant and machinery under construction are stated at cost, and are depreciated

accordingly when the assets are completed and ready for commercial use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic

benefits are expected from its use. Any gain or loss arising from derecognition of the asset being the

different between the net disposal proceeds and the carrying amount is recognised in the profit or loss.

4.7 Intangible Assets

(a) Research and Development Expenditure

Research expenditure is recognised as an expense when it is incurred.

Development expenditure is recognised as an expense except that expenditure incurred on

development projects are capitalised as non-current assets to the extent that such expenditure is

expected to generate future economic benefits. Development expenditure is capitalised if, and only if,

an entity can demonstrate all of the following:-

(i) its ability to measure reliably the expenditure attributable to the asset under development;

(ii) the product or process is technically and commercially feasible;

(iii) its future economic benefits are probable;

(iv) its intention to complete and the ability to use or sell the developed asset; and

(v) the availability of adequate technical, financial and other resources to complete the asset under

development.

Capitalised development expenditure is measured at cost less accumulated amortisation and

impairment losses, if any. Development expenditure initially recognised as an expense is not

recognised as assets in the subsequent period.

The development expenditure is amortised on a straight-line method over a period of 5 years when

the products are ready for sale or use. In the event that the expected future economic benefits are

no longer probable of being recovered, the development expenditure is written down to its

recoverable amount.

The amortisation method, useful life and residual value are reviewed, and adjusted if appropriate, of

the end of each reporting period.

(b) Industrial Operating Right

Industrial operating right represent costs incurred by the Group to obtain certifications for capabilities

to design, construct and develop low-voltage switchboards to meet international standards. As the

certifications do not have any expiry date, the Group does not amortise these costs. Instead,

impairment is tested annually or more frequently if events or changes in circumstances indicate that

the industrial operating right might be impaired.


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4.8 Impairment

(a) Impairment of Financial Assets

All financial assets (other than those categorised at fair value through profit or loss), are assessed at

the end of each reporting period whether there is any objective evidence of impairment as a result of

one or more events having an impact on the estimated future cash flows of the asset. For an equity

instrument, a significant or prolonged decline in the fair value below its cost is considered to be an

objective evidence of impairment.

An impairment loss in respect of loans and receivables financial assets is recognised in profit or loss

and is measured as the difference between the asset‟s carrying amount and the present value of

estimated future cash flows, discounted at the financial asset‟s original effective interest rate.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be

related objectively to an event occurring after the impairment was recognised, the previously

recognised impairment loss is reversed through profit or loss to the extent that the carrying amount

of the financial asset at the date the impairment is reversed does not exceed what the amortised

cost would have been had the impairment not been recognised.

(b) Impairment of Non-Financial Assets

The carrying values of assets, other than those to which MFRS 136 - Impairment of Assets does not

apply, are reviewed at the end of each reporting period for impairment when an annual impairment

assessment is compulsory or 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. When the

carrying amount of an asset exceeds its recoverable amount, the asset is written down to its

recoverable amount and an impairment loss shall be recognised. The recoverable amount of the

assets is the higher of the assets' fair value less costs to sell and their value-in-use, which is

measured by reference to discounted future cash flow using a pre-tax discount rate, where it is not

possible to estimate the recoverable amount of an individual asset, the Group estimates the

recoverable amount of the cash-generating unit to which the asset belongs.

An impairment loss is recognised in profit or loss immediately.

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 profit or loss immediately.

4.9 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost of raw materials is determined on

the first-in-first-out basis and comprises the cost of materials and incidentals incurred in bringing the

inventories to their present location and condition. Cost of finished goods and work-in-progress includes

the cost of materials, labour and an appropriate proportion of production overheads.

Net realisable value represents the estimated selling price less the estimated costs of completion and the

estimated costs necessary to make the sale.

ANNUAL REPORT 2016


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4.10 Income Taxes

Income taxes for the reporting period comprise current tax and deferred tax.

Current tax is the expected amount of income taxes payable in respect of the taxable profit for the

reporting period and is measured using the tax rates that have been enacted or substantively enacted at

the end of the reporting period.

Deferred tax liabilities are recognised for all taxable temporary differences.

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 future taxable profits will be available against which

the deductible temporary differences, unused tax losses and unused tax credits can be utilised. The

carrying amounts of deferred tax assets are reviewed at the end of each reporting period and reduced to

the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or

part of the deferred tax assets to 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

substantively enacted at the end of the reporting period.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax

assets against current tax liabilities and when the deferred income taxes relate to the same taxable entity

and the same taxation authority.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss.

Deferred tax items are recognised in correlation to the underlying transactions either in other

comprehensive income or directly in equity and deferred tax arising from a business combination is

adjusted against goodwill or excess of the acquirer‟s interest in the net fair value of the acquiree‟s

identifiable assets, liabilities and contingent liabilities over the business combination costs.

4.11 Cash and Cash Equivalents

Cash and cash equivalents comprise cash in hand, bank balances and demand deposits that are readily

convertible to known amounts of cash and which are subject to an insignificant risk of changes in value

with original maturity periods of three months or less.

4.12 Employee Benefits

(a) Short-term Benefits

Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are

measured on an undiscounted basis and are recognised in profit or loss in the period in which the

associated services are rendered by employees of the Group.

(b) Defined Contribution Plans

The Group‟s contributions to defined contribution plans are recognised in profit or loss 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.


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4.13 Related Parties

A party is related to an entity (referred to as the „„reporting entity‟‟) if:-

(a) A person or a close member of that person‟s family is related to a reporting entity if that person:-

(i) has control or joint control over the reporting entity;

(ii) has significant influence over the reporting entity; or

(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting

entity.

Close members of the family of an individual are those family members who may be expected to

influence, or be influenced by, that individual in their dealings with the entity.

(b) An entity is related to a reporting entity if any of the following conditions applies:-

(i) The entity and the reporting entity are members of the same group (which means that each parent,

subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a

member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting

entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the

sponsoring employers are also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person identified in (a) above.

(vii) A person identified in (a)(i) above has significant influence over the entity or is a member of the key

management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides by management personnel

services to the reporting entity or to parent of reporting entity.

Related parties also include key management personnel defined as those persons having authority

and responsibility for planning, directing and controlling the activities of the reporting entity either

directly or indirectly, including its director (whether executive or otherwise) of that entity.

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4.14 Contingent Liabilities

A contingent liability is a possible obligation that arises from past events and whose existence will only be

confirmed by the occurrence of one or more uncertain future events not wholly within the control of the

Group. It can also be a present obligation arising from past events that is not recognised because it is not

probable that an outflow of economic resources will be required or the amount of obligation cannot be

measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a

change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as

a provision.

4.15 Earning Per Ordinary Shares

Basic earnings per ordinary share is calculated by dividing the consolidated profit or loss attributable to

ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding

during the reporting period, adjusted for own shares held.

4.16 Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date, regardless of whether that price is

directly observable or estimated using a valuation technique. The measurement assumes that the

transaction takes place either in the principal market or in the absence of a principal market, in the most

advantageous market. For non-financial asset, the fair value measurement takes into account a market

participant‟s ability to generate economic benefits by using the asset in its highest and best use or by

selling it to another market participant that would use the asset in its highest and best use.

For financial reporting purposes, the fair value measurements are analysed into level 1 to level 3 as

follows:-

Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liability that the

entity can access at the measurement date;

Level 2: Inputs are inputs, other than quoted prices included within level 1,that are observable for the

asset or liability, either directly or indirectly; and

Level 3: Inputs are unobservable inputs for the asset or liability.

The transfer of fair value between levels is determined as of the date of the event or change in

circumstances that caused the transfer.


74


4.17 Revenue and Other Income

(a) Sale of Goods

Revenue is recognised upon delivery of goods and customers‟ acceptance and where applicable,

net of goods and service tax returns, cash and trade discounts.

(b) Dividend Income

Dividend income from investment is recognised when the right to receive dividend payment is

established.

(c) Interest Income

Interest income is recognised on an accrual basis using the effective interest method.

4.18 Operating Segments

An operating segment is a component of the Group that engages in business activities from which it may

earn revenues and incur expenses, including revenues and expenses that relate to transactions with any

of the Group‟s other components. An operating segment‟s operating results are reviewed regularly by the

directors to make decisions about resources to be allocated to the segment and assess its performance,

and for which discrete financial information is available.


ANNUAL REPORT 2016


75

5. INVESTMENT IN SUBSIDIARIES

The Company 2016 2015 RM‟000 RM‟000 Unquoted shares, at cost - in Malaysia 10,129 10,129 - outside Malaysia 1 1

10,130 10,130

Accumulated impairment loss (1,000) -

9,130

10,130

The details of the subsidiaries are as follows:-

Name of Companies

Country of Incorporation

Effective Equity Interest

Principal Activities

2016 2015 Direct subsidiaries:

Hexa Analisa Sdn. Bhd. Malaysia 100% 100% Formulation of advanced polymer matrix fibre composites, manufacturing and sales of electrical

insulators, electrical enclosures and meter boards

Fibon UK Limited # UK 100% 100% Trading of electrical insulators and other relevant industry

products

Fibon Australia Pty Ltd * Australia 100% 100% Manufacturing and sales of electrical insulators and trading of relevant industry products

Fibon Electric (M) Sdn. Bhd. Malaysia 100% 100% Manufacturing, supplying and selling of switchboard equipment parts

Fibon Capital Sdn. Bhd. (Formerly known as OPES Management Sdn. Bhd.)

Malaysia 100% 100% Factoring, leasing, development finance and building credit activities

* Audited by auditor other than Crowe Horwath.

# Based on unaudited figures.


76

6. PROPERTY, PLANT AND EQUIPMENT

At Written Impairment Depreciation Exchange At

1.6.2015 Additions Transfer Disposal Off Loss Charge Difference 31.5.2016

The Group RM‟000 RM‟000 RM‟000 RM‟000 RM‟000 RM‟000 RM‟000 RM‟000 RM‟000

Net Book Value

Freehold land 1,100 - - - - - - - 1,100

Building 2,315 - - - - - (76) - 2,239

Plant and machinery 1,621 30 60 (1) - (248) (251) 3 1,214

Motor vehicles 328 - - - - - (60) - 268

Office equipment,

furniture and fittings 140 49

2

*

(6)

- (26)

(1) 158

Plant and machinery

under construction 59 17

(62)

-

-

- -

- 14

5,563 96 - (1) (6) (248) (413) 2 4,993

At Depreciation Exchange At

1.6.2014 Additions Transfer Disposal Charge Difference 31.5.2015

The Group RM‟000 RM‟000 RM‟000 RM‟000 RM‟000 RM‟000 RM‟000

Net Book Value

Freehold land 1,100 - - - - - 1,100

Building 2,392 - - - (77) - 2,315

Plant and machinery 1,642 53 193 (11) (252) (4) 1,621

Motor vehicles 511 69 - (184) (68) - 328

Office equipment, furniture

and fittings 156 9

-

* (25)

* 140

Plant and machinery under

construction 159 93

(193)

- -

- 59

5,960 224 - (195) (422) (4) 5,563

* LESS THAN RM1,000


ANNUAL REPORT 2016


77

6. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

Accumulated

At Accumulated Impairment Net Book

Cost Depreciation Losses Value

The Group RM‟000 RM‟000 RM‟000 RM‟000

At 2016

Freehold land 1,100 - - 1,100

Building 2,557 (318) - 2,239

Plant and machinery 2,880 (1,418) (248) 1,214

Motor vehicles 592 (324) - 268

Office equipment, furniture and fittings 284 (126) - 158

Plant and machinery under construction 14 - - 14 7,427 (2,186) (248) 4,993

At Accumulated Net Book Cost Depreciation Value The Group RM‟000 RM‟000 RM‟000 At 2015 Freehold land 1,100 - 1,100 Building 2,557 (242) 2,315 Plant and machinery 2,790 (1,169) 1,621 Motor vehicles 593 (265) 328 Office equipment, furniture and fittings 256 (116) 140 Plant and machinery under construction 59 - 59

7,355 (1,792) 5,563

[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]


78

7. INTANGIBLE ASSETS

Intangible assets can be broken down into:- The Group 2016 2015 RM‟000 RM‟000

Development expenditure 114 212 Industrial operating rights 877 927

991 1,139

The Group 2016 2015 RM‟000 RM‟000

(i) Development Expenditure

Net book value at 1 June 212 310 Amortisation charge for the year (98) (98)

Carrying value at 31 May 114 212

The Group 2016 2015 RM‟000 RM‟000

At cost 490 490 Accumulated amortisation (376) (278)

114 212

The Group 2016 2015 RM‟000 RM‟000 (ii) Industrial Operating Rights

At cost 877 927

ANNUAL REPORT 2016


79

7. Intangible Assets (Cont’d)

The Group has assessed the recoverable amounts of industrial operating rights and determined that no additional

impairment is required. Its recoverable amounts is determined using the value in use approach, and this is derived

from the present value of the future cash flows from manufacturing operation computed based on the projections

of financial budgets approved by management. Cash flow projections are based on 5 years financial budgets,

cash flow beyond 5th year are extrapolated to 50 years without a terminal growth rate. The other key assumptions

used in the determination of the recoverable amount are as follows:

Gross Margin Gross Rate Discount Rate 2016 2015 2016 2015 2016 2015 % % % % % % Industrial operating rights 66 68 - 5.0 9.6 13.5

(i) Budgeted gross margin Average gross margin achieved in 2 financial years

immediately before the forecast period.

(ii) Growth rate No growth rate (iii) Discount rate (pre-tax) Reflects specific risks relating to the relevant cash-generating

unit

The value assigned to the key assumptions represent management‟s assessment of future trends in the cash-

generating units and are based on the both external sources and internal historical data.

8. INVENTORIES

The Group

2016 2015

RM‟000 RM‟000

Raw materials 668 949

Work-in-progress 182 330

Finished goods 206 256

Trading goods 22 11

1,078 1,546

The Group

2016 2015

RM‟000 RM‟000

Recognised in profit or loss:-

Inventories recognised as cost of sales 6,158 4,541


80

9. TRADE RECEIVABLES

The Group 2016 2015 RM‟000 RM‟000

Trade receivables, net 8,071 4,156

Amount receivables within one year (8,071) (3,927)

Non-current portion - 229

Industrial Operating Rights

At cost - 229

The Group‟s normal trade credit terms range from 30 to 150 days (2015: 30 to 180 days). Other credit terms

are assessed and approved on a case-by-case basis.

10. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

The Group The Company 2016 2015 2016 2015 RM‟000 RM‟000 RM‟000 RM‟000 Other receivables 63 47 - - Deposits 31 31 1 1 Prepayments 11 26 - - Deposit paid for purchase of freehold land 803 803 - - Gst input tax receivables 74 - - -

982 907

1 1

11. AMOUNT OWING BY A SUBSIDIARY

The Company

2016 2015

Current RM‟000 RM‟000

Non-trade balance 2,000 -

The amount owing by a subsidiary is unsecured, interest free and repayable on demand. The amount owing is to

be settled in cash.

ANNUAL REPORT 2016


81

12. DEPOSITS WITH LICENSED BANKS

The deposits with licensed banks of the Group and of the Company at the end of the reporting period bore

effective interest rate of 0.30% to 4.00% and 0.30% to 4.00%, (2015: 0.10% to 3.58% and 0.10% to 3.58%) per

annum, respectively. The deposits have maturity periods of 30 to 90 days and 30 to 90 days (2015: 30 to 365

days and 30 to 90 days), respectively.

13. SHARE CAPITAL

The Company

2016 2015

Number Number

Par Of Share Par Of Share

Value Shares Capital Value Shares Capital

RM '000 RM‟000 RM '000 RM‟000

Ordinary Shares

Authorised 0.10 250,000 25,000 0.10 250,000 25,000

Issued and Fully Paid -Up 0.10 98,000 9,800 0.10 98,000 9,800

14. SHARE PREMIUM

The share premium is not distributable by way of cash dividends and may be utilised in the manner set out in

Section 60 (3) of the Companies Act 1965.

15. OTHER RESERVES

Foreign

Currency

Translation Merger

Reserve Deficit Total

RM‟000 RM‟000 RM‟000

At 1.6.2014 (15) (2,600) (2,615)

Movement during the year (54) - (54)

At 1.6.2015/31.5.2015 (69) (2,600) (2,669)

Movement during the year 135 - 135 At 31.5.2016 66 (2,600) 2,534


82

15. OTHER RESERVES(Cont’d)

The nature and purpose of the reserves are as follow:-

Foreign Currency Translation Reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of

the financial statements of foreign operation whose functional currencies are different from that of the Group‟s

presentation currency. It is also used to record the exchange differences arising from monetary items which form

part of the Group‟s net investment in foreign operations, where the monetary item is denominated in either the

functional currency of the reporting entity or the foreign operation.

Merger Deficit

The merger deficit in the financial year was related to the subsidiary which was consolidated under the merger

method of accounting.

The merger deficit arose from the difference between the carrying value of the investment and the nominal value

of the shares of the subsidiary upon consolidation using merger accounting principles.

16. RETAINED PROFITS

At the end of the reporting period, the Company will be able to distribute dividends out of its entire retained

profits under the single tier tax system.

17. DEFERRED TAX LIABILITIES

The Group

2016 2015

RM‟000 RM‟000

At 1 June

As previously stated 519 472

Revaluation of land and building 173 173

As restated 692 645

Recognised in profit or loss (Note 23) (37) 47

Exchange difference * * At 31 May 655 692

ANNUAL REPORT 2016


83

17. DEFERRED TAX LIABILITIES (Cont’d)

The deferred taxation arises as a result of:-

The Group

2016 2015

RM‟000 RM‟000

Deferred tax liabilities

An excess of carrying value over tax base 464 499

Intangible assets capitalised 238 228

Revaluation of land and building 151 151 Gross deferred tax liabilities 853 878

Deferred tax assets Unabsorbed tax losses 105 116

Unutilised capital allowances 93 70 Gross deferred tax assets 198 186 Net deferred tax liabilities 655 692

* Less than RM1,000.

At the end of the reporting period, the Group has unabsorbed tax losses and unutilised capital allowances of

approximately RM438,000 and RM387,000 (2015: RM483,000 and RM291,000) respectively that are available for

offset against future taxable profits of the subsidiary in which the losses and capital allowances arose. No

deferred tax assets are recognised in respect of these items as it is not probable that taxable profits of the

subsidiary will be available against which the deductible temporary differences can be utilised.

18. TRADE PAYABLES

The normal trade credit terms granted to the Group ranging from 90 to 150 days (2015: 30 to 90 days).

19. OTHER PAYABLES AND ACCRUALS

The Group The Company

2016 2015 2016 2015

RM‟000 RM‟000 RM‟000 RM‟000

Other payables 523 103 2 -

Accrued expenses 136 142 32 56

Payroll liabilities 380 254 87 -

GST output tax payable 6 - 3 -

1,045 499 124 56


84

20. REVENUE


2016 2015 2016 2015

RM‟000 RM‟000 RM‟000 RM‟000

Dividend income - - 2,000 4,000

Management fee received - - - 600 601

Sale of goods 16,904 13,588 - -

16,904 13,588 2,600 4,601

21. PROFIT BEFORE TAX


2016 2015 2016 2015

RM‟000 RM‟000 RM‟000 RM‟000

Profit before tax is arrived at after

charging/(crediting):-

Audit fee 76 74 19 19

Amortisation of development expenditure 98 98 - -

Bad debts written off - 6 - -

Depreciation of property, plant and equipment 413 422 * *

Directors‟ fee 301 270 301 270

Directors‟ non-fee emoluments 1,938 1,390 6 6

Loss on disposal of plant and equipment - 8 - -

Equipment written off 6 - - -

Rental of premises 89 61 - -

Research and development expenditure 734 666 - -

Research and development expenditure

written off 50 - -

-

Loss on foreign exchange - unrealised 18 - - -

Gain on foreign exchange

- realised

- unrealised

(1,521)

-

(589)

(45)

(77)

-

14

30

Impairment of investment in a

subsidiary

-

-

1,000

-

Impairment of equipment 248 - - -

Interest income on financial assets not at fair

value through profit or loss

(573)

(460)

(128)

(82)

* Less than RM1,000.

ANNUAL REPORT 2016


85

21. PROFIT BEFORE TAX (Cont’d)

Included in research and development expenditure of the Group are employee benefits which comprised:-

- Director‟s remuneration - EPF contribution of RM94,164(2015 : RM83,904) - Director‟s remuneration - emoluments of RM496,220 (2015 : RM442,220) - Staff costs of RM132,184 (2015 : RM139,385)

22. EMPLOYEE BENEFITS


2016 2015 2016 2015

RM‟000 RM‟000 RM‟000 RM‟000

Short-term employee benefits 4,129 3,432 222 227

Contribution to a defined contribution plan 567 446 27 28

4,696 3,878 249 255

Included in employee benefits is key management personnel compensation as disclosed in Note 29 to the

financial statements.

23. INCOME TAX EXPENSE


2016 2015 2016 2015

RM‟000 RM‟000 RM‟000 RM‟000

Current tax expense:-

- for the current financial year 1,747 1,345 77 62

- under/(over) provision in previous financial years

19

34

(1)

(7)

- foreign tax 95 127 - -

1,861 1,506 76 55

Deferred tax (Note 17):

- Relating to origination or reversal of temporary differences (17) (4) - -

- (Over)/Under provision in previous financial years (20) 51 - -

(37) 47 - -

Total tax expense 1,824 1,553 76 55


86

23. INCOME TAX EXPENSE (Cont’d)

A reconciliation of income tax expense applicable to the profit before taxation at the statutory tax rate to income

tax expense at the effective tax rate of the Group and the Company is as follows:-


2016 2015 2016 2015

RM‟000 RM‟000 RM‟000 RM‟000

Profit before tax 6,826 5,204 1,035 3,922

Tax at the statutory tax rate of 24% (2015 – 25%) 1,638 1,301 248 981

Tax effects of:-

Non-deductible expenses 193 123 309 81

Non-taxable income - - (480) (1,000)

Deferred tax assets not recognised during the financial year 22 24 - -

Under/(Over) provision in previous financial year:

- income tax 19 34 (1) (7)

- deferred taxation (20) 51 - -

Utilisation of deferred tax assets previously not recognised (43) - - -

Effect of different tax rates in foreign jurisdiction 15 20 - -

Tax expense for the financial year 1,824 1,553 76 55

24. EARNINGS PER SHARE

The basic earnings per share (“EPS”) is arrived at by dividing the Group‟s profit attributable to the equity holders of the Company of RM5,002,000 (2015: RM3,651,000) by the weighted average number of ordinary shares in issue during the financial year of 98,000,000 (2015: 98,000,000).

The fully diluted earnings per share for the Group are not presented as there were no potential dilutive ordinary shares outstanding at the end of the reporting period.

ANNUAL REPORT 2016


87

25. DIVIDENDS

The Group/

The Company 2016 2015

RM‟000 RM‟000

Recognised during the financial year:-

- first and final single tier dividend of 1.05 sen per ordinary share in respect of

financial year ended 31 May 2015

1,029

-

- first and final single tier dividend of 1.10 sen per ordinary share in respect of

financial year ended 31 May 2014

-

1,078

1,029 1,078

At the forthcoming Annual General Meeting, a first and final single tier dividend of 1.25 sen per ordinary share

amounting to RM1,225,000 in respect of the financial year ended 31 May 2016 will be proposed for shareholders‟

approval. The financial statements for the current financial year will not reflect this proposed dividend. Such

dividend, if approved by the shareholders, will be accounted for as a liability in the financial year ending 31 May

2017.

26. CASH AND CASH EQUIVALENTS

For the purpose of the statements of cash flows, cash and cash equivalents comprise the followings:-


2016 2015 2016 2015

RM‟000 RM‟000 RM‟000 RM‟000

Fixed deposits with licensed banks 12,459 16,650 3,442 4,453

Cash and bank balances 15,800 9,388 414 379

28,259 26,038 3,856 4,832

27. OPERATING SEGMENTS

Operating segments are prepared in a manner consistent with the internal reporting provided to the Group‟s

management as its managing director in order to allocate resources to segments and to assess their performance

on a quarterly basis. For management purposes, the Group is organised into business units based on their

products and services provided.

The Group is organised into two main reportable segments as follows:-

(i) Sales of goods - manufacturing and trading of electrical insulators, electrical enclosures, switchboard

equipment parts and meter boards.

(ii) Financing income – engaging in financial business of factoring activities.


88

27. OPERATING SEGMENTS (Cont’d)

Transactions between operating segments are at arm‟s length basis in a manner similar to transactions with third

parties. The effects of such inter-segment transactions are eliminated on consolidation.

(a) By Business Segment:- SALES OF FINANCING

GOODS INCOME ELIMINATIONS CONSOLIDATED

RM‟000 RM‟000 RM‟000 RM‟000

2016

SEGMENT REVENUE

Revenue from external customers 16,262 642 - 16,904

Inter-segment revenue 4,089 - (4,089) -

Total revenue 20,351 642 (4,089) 16,904

SEGMENT RESULTS

Segment results 6,465 361 - 6,826

Finance costs - 36 (36) -

Profit before tax 6,826

Tax expense (1,824)

Profit after tax 5,002

Segment profit before interest and taxation includes the following:-

Depreciation of property, plant and equipment

413

*

-

413

Impairment of equipment 248 - - 248

Interest expense - 36 (36) -

Loss on foreign exchange

- unrealised 18 - - 18

Gain on foreign exchange

- realised (1,521) - - (1,521)

Interest income (546) (27) 36 (573)

* Less than RM1,000

ANNUAL REPORT 2016


89


(a) By Business Segment (Cont‟d):-

SALES OF

GOODS

FINANCING

INCOME

Consolidated

RM‟000 RM‟000 RM‟000

2016

CONSOLIDATED STATEMENT OF FINANCIAL

POSITION

Segment assets 53,903 2,790 56,693

Consolidation adjustments (12,319)

Consolidated total assets 44,374

Additions to non-current assets other than financial

instruments are:-

Property, plant and equipment 91 5 96

Segment liabilities 3,818 801 4,619

Unallocated liabilities 930

Consolidation adjustments (2,996)

Consolidated total liabilities 2,553

Sales of Financing

Goods Income Eliminations Consolidated

RM‟000 RM‟000 RM‟000 RM‟000

2015

SEGMENT REVENUE

Revenue from external customers 13,503 85 - 13,588

Inter-segment revenue 1,614 - (1,614) -

Total revenue 15,117 85 (1,614) 13,588

SEGMENT RESULTS

Segment results 5,344 (140) - 5,204

Profit before tax 5,204

Tax expense (1,553)

Profit after tax 3,651

Segment profit before interest and taxation includes the following:-

Depreciation of property, plant and equipment

520

-

-

520

Interest income (460) - - (460)


90


(a) By Business Segment (Cont‟d):-

SALES OF

GOODS

FINANCING

INCOME

Consolidated

RM‟000 RM‟000 RM‟000

2015

CONSOLIDATED STATEMENT OF FINANCIAL

POSITION

Segment assets 37,748 1,798 39,546

Unallocated asset 338

Consolidation adjustments (197)

Consolidated total assets 39,687

Additions to non-current assets other than financial

instruments are:-

Property, plant and equipment 224 - 224

Segment liabilities

Unallocated liabilities 1,326 98 1,424

Consolidation adjustments 747

(197)

Consolidated total liabilities 1,974

(b) By Geographical Segment:-

The Group

2016 2015

RM‟000 RM‟000

Sales revenue by geographical market:-

- Malaysia 4,735 3,694

- Singapore 5,479 4,851

- Australia 2,236 2,375

- Indonesia 1,936 800

- Others 2,518 1,868

16,904 13,588

ANNUAL REPORT 2016


91


(c) Major Customers

The following are major customers with revenue equal to or more than 10% of Group revenue:-

Revenue Segment

2016 2015

RM‟000 RM‟000

Customer 1 1,806 - Sales of goods

Customer 2 1,780 1,616 Sales of goods

28. SIGNIFICANT RELATED PARTY DISCLOSURES

(a) Identities of Related Parties

Parties are considered to be related to the Group if the Group or the Company has the ability, directly or

indirectly, to control or jointly control the party or exercise significant influence over the party in making

financial and operating decisions, or vice versa, or where the Group or the Company and the party are

subject to common control.

In addition to the information detailed elsewhere in the financial statements, the Company has related

party relationships with its directors, key management personnel and entities within the same group of

companies.

(b) Other than those disclosed elsewhere in financial statements, the Group and the Company carried out

the following transactions with its related parties during the financial year:-


2016 2015 2016 2015

RM‟000 RM‟000 RM‟000 RM‟000

(i) Subsidiaries

Dividend received/ receivable from a

subsidiary

-

-

2,000

4,000

Management fee received/receivable

from subsidiaries

-

-

600

601

Information regarding outstanding balances arising from related party transactions as at 31 May 2016 is

disclosed in Note 11 to the financial statements.


92

29. KEY MANAGEMENT PERSONNEL COMPENSATION

The key management personnel of the Group and the Company include executive directors and certain member

of senior management of the Group and the Company.

(a) The key management personnel compensation during the financial year are as follow:-


Directors 2016 2015 2016 2015

RM‟000 RM‟000 RM‟000 RM‟000

Executive directors:-

Short-term employee benefits:

- Fees 205 195 205 195

- Salaries, bonus and other emoluments 2,123 1,607 - -

Defined contribution benefits 399 303 - -

2,727 2,105 205 195

Non-executive directors:-

Short-term employee benefits:

- Fees 96 75 96 75

- Other emoluments 6 6 6 6

102 81 102 81

Total directors‟ remuneration 2,829 2,186 307 276

Other Key Management Personnel


2016 2015 2016 2015

RM‟000 RM‟000 RM‟000 RM‟000

Short-term employee benefits 310 251 222 184

Defined contribution plan 26 22 23 22

Total compensation for other key

management personnel 336 273 245 206

ANNUAL REPORT 2016


93

29. KEY MANAGEMENT PERSONNEL COMPENSATION (Cont’d)

(b) The number of the Company‟s directors with total remuneration falling in bands of RM50,000 are as follows:-

The Company

2016 2015

Executive Directors Number of directors

Below RM50,000 3 3

RM100,001 – RM150,000 1 1

4 4

Non-executive Directors

Below RM50,000 4 4

30. CAPITAL COMMITMENT

THE GROUP

2016 2015

RM‟000 RM‟000

Purchase of property, plant and equipment:-

Approved and contracted for 7,101 7,101

31. FINANCIAL INSTRUMENTS

The Group‟s activities are exposed to a variety of market risks (including foreign currency risk, interest rate risk

and equity price risk), credit risk and liquidity risk. The Group‟s overall financial risk management policy focuses

on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group‟s

financial performance.

31.1 Financial Risk Management Policies

The Group‟s policies in respect of the major areas of treasury activity are as follows:-

(a) Market Risk

(i) Foreign Currency Risk

The Group is exposed to foreign currency risk on transactions and balances that are

denominated in currencies other than Ringgit Malaysia. The currencies giving rise to this

risk are primarily Singapore Dollar (“SGD”), Australian Dollar (“AUD”), United States Dollar

(“USD”) and Pound Sterling (“GBP”). Foreign currency risk is monitored closely on an

ongoing basis to ensure that the net exposure is at an acceptable level. The Group holds

cash and cash equivalent‟s denominated in foreign currencies for working capital

purposes.


94

31. FINANCIAL INSTRUMENTS (Cont’d)

31.1 Financial Risk Management Policies (Cont’d)

(a) Market Risk (Cont’d) (i) Foreign Currency Risk (Cont’d)

The Group‟s exposure to foreign currency is as follows:-

Singapore

Australian

United

States

Pound

Dollar Dollar Dollar Sterling Others Total

The Group RM‟000 RM‟000 RM‟000 RM‟000 RM‟000 RM‟000

2016

Financial assets

Trade receivables 2,722 59 912 - - 3,693

Deposit with licensed banks - 2,819 - 492 - 3,311

Cash and bank balances 5,794 3,637 3,050 208 267 12,956

8,516 6,515 3,962 700 267 19,960

Financial liabilities

Trade payables (15) - (268) - - (283)

(15) - (268) - - (283)

Currency exposure 8,501 6,515 3,694 700 267 19,677

Singapore

Australian

United

States

Pound

Dollar Dollar Dollar Sterling Others Total

The Group RM‟000 RM‟000 RM‟000 RM‟000 RM‟000 RM‟000

2015

Financial assets

Trade receivables 1,504 24 489 - - 2,017

Deposits with licensed banks - 2,606 - 452 - 3,058

Cash and bank balances 2,943 2,278 2,073 305 233 7,832

4,447 4,908 2,562 757 233 12,907

Financial liabilities

Trade payables (15) - (409) - - (424)

(15) - (409) - - (424)

Currency exposure 4,432 4,908 2,153 757 233 12,483

ANNUAL REPORT 2016


95




The Company‟s exposure to foreign currency is as follows:-

Australian Pound

Dollar Sterling Total

The Company RM‟000 RM‟000 RM‟000

2016

Financial assets

Deposits with licensed banks 871 - 871

Cash and bank balances 126 207 333

Net currency exposure 997 207 1,204

Australian Pound

Dollar Sterling Total


2015

Financial assets

Deposits with licensed banks 803 - 803

Cash and bank balances 57 305 362

Net currency exposure 860 305 1,165



96




Foreign Currency Risk Sensitivity Analysis

The following table details the sensitivity analysis to a reasonably possible change in the

foreign currencies as at the end of the reporting period, with all other variables held

constant:-


2016 2015 2016 2015 RM‟000 RM‟000 RM‟000 RM‟000 Effects on profit after taxation Australian Dollar: - strengthened by 6% (2015: 7%) 297 274 46 48 - weakened by 6% (2015: 7%) (297) (274) (46) (48)

Singapore Dollar: - strengthened by 10% (2015: 6%) 646 190 - - - weakened by 10% (2015: 6%) (646) (190) - -

United States Dollar: - strengthened by 13% (2015: 2%) 365 28 - - - weakened by 13% (2015: 2%) (365) (28) - -

Pound Sterling:

- strengthened by 7% (2015: 4%) 37 23 11 9 - weakened by 7% (2015: 4%) (37) (23) (11) (9)


ANNUAL REPORT 2016


97



(a) Market Risk (Cont’d)

(ii) Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument

will fluctuate because of changes in market interest rates. The Group‟s exposure to interest

rate risk arises mainly from deposits with licensed banks with variable rates. The Group‟s

policy is to obtain the most favourable interest rates available.

Interest rate risk sensitivity analysis

The following table details the sensitivity analysis to a reasonably possible change in the

interest rates as at the end of the reporting period, with all other variables held constant:-


2016 2015 2016 2015

RM‟000 RM‟000 RM‟000 RM‟000

Effects on profit after taxation Increase of 100 basis points (bp)

(2015: 100bp) 104 118 26 33

Decrease of 100 bp (2015: 100bp) (102) (115) (26) (33)

(iii) Equity Price Risk

The Group does not have any quoted investments and hence is not exposed to equity

price risks.


98



(b) Credit Risk

The Group‟s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from

trade and other receivables. The Group manages its exposure to credit risk by the application

of credit approvals, credit limits and monitoring procedures on an ongoing basis. For other

financial assets, the Group minimises credit risk by dealing exclusively with high credit rating

counterparties.

The Group use ageing analysis to monitor the credit quality of the trade receivables. Any

receivables having significant balances past due or more than 365 days, which are deemed to

have higher credit risk, are monitored individually.

The Group establishes an allowance for impairment that represents its estimate of incurred

losses in respect of the trade and other receivables as appropriate. The main component of

this allowance is a specific loss component that relates to individually significant exposures.

Impairment is estimated by management based on prior experience and the current economic

environment.

Credit Risk Concentration Profile

The Group‟s major concentration of credit risk relates to the amounts owing by one (1) (2015:

one (1)) customers which constituted approximately 32% (2015: 14%) of its trade receivables

as at the end of the reporting period.

In addition, the Group also determines concentration of credit risk by monitoring the

geographical region of its trade receivables on an ongoing basis. The credit risk concentration

profile of trade receivables at the end of the reporting period is as follows:-

The Group

2016 2015

RM‟000 RM‟000

Asia 7,462 3,607

Australia and Oceania 554 497

Others 55 52

8,071 4,156

ANNUAL REPORT 2016


99



(b) Credit Risk

Exposure to Credit Rrisk

As the Group does not hold any collateral, the maximum exposure to credit risk is represented by the carrying amount of the financial assets as at the end of the reporting period.

Ageing Analysis

The ageing analysis of the Group‟s trade receivables is as follows:-

Carrying Value

2016 2015

The Group RM‟000 RM‟000

Not past due 6,279 3,104

Past due:-

less than 3 months 1,542 683

3 to 6 months 153 263

6 to 9 months 26 29

9 to 12 months 71 77

8,071 4,156

The Group believes that no impairment allowance is necessary in respect of these trade

receivables that are past due but not impaired because they are companies with good collection

track record and no recent history of default.



100



(c) Liquidity Risk Liquidity risk arises mainly from general funding and business activities. The Group practises

prudent risk management by maintaining sufficient cash balances and the availability of funding

through certain committed credit facilities.

Maturity Analysis

The following table sets out the maturity profile of the financial liabilities as at the end of the

reporting period based on contractual undiscounted cash flows:-

Contractual

Carrying Undiscounted Within

Amount Cash Flows 1 Year

The Group RM‟000 RM‟000 RM‟000

2016

Trade payables 578 578 578

Other payables and accruals 1,045 1,045 1,045

1,623 1,623 1,623

Contractual



The Group RM‟000 RM‟000 RM‟000

2015 Trade payables 728 728 728

Other payables and accruals 499 499 499

1,227 1,227 1,227

ANNUAL REPORT 2016


101



(c) Liquidity Risk (Cont’d)

Contractual




2016


Contractual




2015


31.2 Capital Risk Management

The Group manages its capital to ensure that entities within the Group will be able to maintain an optimal

capital structure so as to support their businesses and maximise shareholders‟ value. To achieve this

objective, the Group may make adjustments to the capital structure in view of changes in economic

conditions, such as adjusting the amount of dividend payment, returning of capital to shareholders or

issuing new shares.

The Group manages its capital based on debt-to-equity ratio. As the Group has significant cash and cash

equivalents but a relatively small debt, the debt-to-equity ratio may not provide a meaningful indicator of

the risk of borrowings.

Under the requirement of Bursa Malaysia Practice Note No. 17/2005, the Company is required to

maintain a consolidated shareholders‟ equity (total equity attributable to owners of the Company)

more than the 25% of the issued and paid-up share capital. The Company has complied with this

requirement.


102


31.3 Classification Of Financial Instruments

The Group

2016 2015

RM‟000 RM‟000

Financial Assets

Loans and Receivables Financial Assets

Trade receivables (Note 9) 8,071 4,156

Other receivables and deposits (Note 10) 897 881

Deposits with licensed banks (Note 12) 12,459 16,650

Cash and bank balances 15,800 9,388

37,227 31,075

Financial Liabilities

Other Financial Liabilities

Trade payables (Note 18) 578 728

Other payables and accruals (Note 19) 1,039 499

1,617 1,227

The Company

2016 2015

RM‟000 RM‟000

Financial Assets

Loans and Receivables Financial Assets

Other receivables and deposits (Note 10) 1 1

Amount owing by a subsidiary (Note 11) 2,000 -

Deposits with licensed banks (Note 12) 3,442 4,453

Cash and bank balances 414 379

5,857 4,833

Financial Liabilities

Other Financial Liabilities

Other payables and accruals (Note 19) 121 56

121 56

ANNUAL REPORT 2016


103


31.4 Fair Values Information

At the end of the reporting period, there were no financial instruments carried at fair values in the

statement of financial position.

The fair values of the financial assets and financial liabilities of the Group and the Company that maturing

within the next 12 months approximated their carrying amounts due to the relatively short-term maturity

of the financial instruments.

32. SIGNIFICANT EVENTS OCCURING AFTER THE REPORTING PERIOD

The wholly owned subsidiary of the Company, Fibon Capital Sdn. Bhd. (“FCSB”) had on 25 July 2016 entered

into a Sales of Shares Agreement (“Agreement”) to acquire 60 ordinary shares of JPY 50,000 each, representing

its entire issued and paid-up capital of Beep Co. Ltd. (“BEEP”) Masami Yoshiura, for a total cash consideration

of RM3,888.48 (“Proposed Acquisition”), subject to the liability of BEEP not exceed RM272,193.60.

Upon the completion of the proposed acquisition, BEEP shall become a subsidiary of Fibon Berhad.



104

33. SUPPLEMENTARY INFORMATION – DISCLOSURE OF REALISED AND UNREALISED PROFITS

The breakdown of the retained profits of the Group and of the Company as at the end of the reporting period into

realised and unrealised profits are presented in accordance with the directive issued by Bursa Malaysia

Securities Berhad and prepared in accordance with Guidance on Special Matter No. 1, Determination of

Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities

Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants, as follows:-

The Group

2016 2015

RM‟000 RM‟000

Total retained profits:

- realised 34,521 30,522

- unrealised (673) (647)

At 31 May 33,848 29,875

The Company

2016 2015

RM‟000 RM‟000

Total retained profits:

- realised 4,344 4,384

- unrealised - 30

At 31 May 4,344 4,414


ANNUAL REPORT 2016

Analysis of Shareholdings as at 25 August 2016

105

Issued and Paid-Up Share Capital : RM9,800,000

Class of Shares : Ordinary Shares of RM0.10 each

Voting Rights : One vote per share

DISTRIBUTION OF SHAREHOLDINGS

Size of Shareholdings No. of holders % No. of holdings %

Less than 100 61 3.26 1,449 0.00

100 to 1,000 978 52.19 347,291 0.35

1,001 to 10,000 482 25.72 3,011,836 3.07

10,001 to 100,000 319 17.02 10,052,962 10.26

100,001 to less than 5% of

issued shares

30 1.60 33,316,024 34.00

5% and above of issued shares 4 0.21 51,270,438 52.32

Total 1,874 100.00 98,000,000 100.00

DIRECTOR’S SHAREHOLDINGS

Direct Indirect

Name No. of

Shares Held

% of Issued

Capital

No. of

Shares Held

% of Issued

Capital

Pang Chee Khiong 21,560,552 22.00 - -

Pang Fok Seng 17,330,488 17.68 *104,900 0.11

Datin Pang Nyuk Yin 2,940,000 3.00 ^400,422 0.41

Lim Wai Kiew 1,470,000 1.50 *104,900 0.11

Datuk Mohamad Saleh bin

Mohd Ghazali - - - - -

Chong Peng Khang 322 0 - -

Chong Chee Siong 54,826 0.06 - -

* Deemed interest by virtue of their son’s, Pang Jun Ming’s shareholdings in the Company

^ Deemed interest by virtue of her daughter, Wong Zi Yan’s shareholdings in the Company

Analysis of Shareholdings as at 25 August 2016 cont‟d

106

THIRTY LARGEST SHAREHOLDERS

Name No. of

Shares Held

% of Issued

Capital

1. Pang Chee Khiong 21,560,552 22.00

2. CIMSEC Nominees (Tempatan) Sdn. Bhd.

CIMB For Pang Fok Seng (PB)

16,312,618 16.65

3. Expedient Equity Ventures Sdn. Bhd. 6,975,319 7.12

4. Malaysia Venture Capital Management Berhad 6,421,949 6.55

5. Maybank Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account for Koh Kin Lip

4,888,800 4.99

6. Kenanga Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account For Koh Siew Kong

4,700,500 4.80

7. Kenanga Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account For Junior Koh Siew Hui

4,413,800 4.50

8. Pang Yoke Wah 4,386,384 4.48

9. Pang Nyuk Yin 2,940,000 3.00

10. Pang Yoke Lian 2,940,000 3.00

11. CIMSEC Nominees (Asing) Sdn. Bhd.

CIMB For Frigate Equities Ltd. (PB)

2,139,548 2.18

12. Lim Wai Kiew 1,470,000 1.50

13. Pang Fok Seng

14. Yap Booi Lek

1,017,870

600,000

1.04

0.61

15. AMSEC Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account For Ng Siew Yann

452,200

0.46

16. Wong Zi Yan

17. HLB Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account For Chim Hua Lam

400,422

321,100

0.41

0.33

18. Wong Seau Han @ Stella Wan Seau Han 220,100 0.22

19. Alliancegroup Nominees (Tempatan) Sdn. Bhd.

Pledged Securities Account For Koay Chee Hong (7000520)

200,000 0.20

20. Chang Yoke King 200,000 0.20

21. Pang Yoke Wah 197,600 0.20


Pledged Securities Account For Tan Eng Hock (100100)

193,000 0.20

23. Koh Kian Chun

24. Liew Lee Kien

190,000

160,000

0.19

0.16


Pledged Securities Account For Hee Yau Sing

157,700 0.16

26. Tee Bryan

27. Chai Sad Lian

28. Gan Chin Chooi

155,000

150,000

138,400

0.16

0.15

0.14

29. Chew Chin Hong 126,100 0.13

30. Lee Chooi Yoke 123,000 0.13

ANNUAL REPORT 2016

Analysis of Shareholdings as at 25 August 2016 cont‟d

107

SUBSTANTIAL SHAREHOLDERS

As Per Register of Substantial Shareholders

Direct Indirect

Name No. of

Shares Held

% of Issued

Capital

No. of

Shares Held

% of Issued

Capital

Pang Chee Khiong 21,560,552 22.00 - -

Pang Fok Seng 17,330,488 17.68 104,900 (1)

0.11

Expedient Equity

Ventures Sdn. Bhd.

6,975,319 7.12 - -

Malaysia Venture Capital

Management Berhad

6,421,949 6.55 6,975,319 (2)

7.12

(1) Deemed interest by virtue of his son, Pang Jun Ming

(2) Deemed interest by virtue of its substantial shareholding in Expedient EquityVentures Sdn Bhd


List of Properties as at 31 May 2016

108

Location

Tenure/

Expiry

Date

Area (Sq.

Ft.)

Build-up

Area

(Sq. Ft.)

Description

Approximate

Age of

building

(years)

Date of

Acquisition

Net Book

Value as

at 31 May

2016

(RM’000)

No.12A, Jalan 20,

Taman Sri Kluang,

86000 Kluang,

Johor.

Freehold 50,870 35,979 Factory and

office

building

17 13.7.2010 3,068

No. 18, Jalan 1,

Taman Sri Kluang,

86000 Kluang,

Johor.

Freehold 3,080 1,540 Double

storey shop

house

10 11.1.2014 271


ANNUAL REPORT 2016

Share Buy-Back Statement

109

SHARE BUY-BACK STATEMENT Statement Accompanying Notice of Annual General Meeting Pursuant to Paragraph 12.06 (2)(a) of Main Market Listing Requirements of Bursa Malaysia Securities Berhad

1. Disclaimer Statement

Bursa Malaysia Securities Berhad (“Bursa Securities”) has not perused the Share Buy-Back Statement (“Statement”) prior to its issuance as it is an exempt document. Bursa Securities takes no responsibility for the contents of this Statement, makes no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Statement.

2. Rationale for renewal of authority from the shareholders of the Company to enable the Company to

purchase and/or hold up to 10% of its issued and paid-up share capital pursuant to Section 67A of the Companies Act, 1965

The share buy-back would enhance value for shareholders from a resultant reduction in the number of shares in the market (unless the purchased shares are resold on Bursa Securities or distributed as share dividends). Consequently (whether the shares purchased are held as treasury shares or cancelled) all else being equal, the earnings per share of the Company may be enhanced as the earnings of the Group would be divided by a reduced number of shares. The Company may utilise the treasury shares as future dividend payout to the Company‟s shareholders and/or for sale in the market should opportunities arise in the future. The shares purchased may also be cancelled at such time(s) when the Board of Directors view that there is excess share capital and wish to reduce the number of shares in circulation.

3. Retained Profits and Share Premium

As at 25 August 2016, the issued and paid-up of FIBON is RM9,800,000.00 comprising 98,000,000 Shares. The Proposed Share Buy-Back will enable the Company to purchase up to a maximum of 9,800,000 Shares, representing 10% of the enlarged and paid-up ordinary share capital.

The maximum amount of funds to be utilized for any purchase of the Company‟s own Shares must not exceed the aggregate of the retained profits and/or share premium account of the Company based on the latest audited financial statements and/or latest management accounts of the Company (where applicable) available at the time of the purchase(s). Based on the audited financial statements for the financial year ended 31 May 2016, the Company‟s retained profits and share premium account amounted to RM4,344,000.00 and RM707,000.00 respectively.

4. Source of Funds

The funding for the purchase of shares will be sourced wholly from internally generated funds of the Company and/or external borrowings, the portion of which is to be utilised will depend on the actual number of shares purchased, the price of shares and the availability of funds at the time of purchase(s). If the borrowings are used for the Proposed Share Buy-Back, the Board ensures that the Group has sufficient funds to repay the external borrowings and that the repayment will not have a material effect on the Group‟s cash flows.

Share Buy-Back Statement cont‟d

110

5. Interest of Directors and Substantial Shareholders and/or Persons Connected to them

The following table illustrates the effects on the shareholdings of the substantial shareholders and Directors of FIBON as at 25 August 2016, being the most practicable date prior to the printing of this Circular, assuming the Proposed Share Buy-Back is implemented in full –

Directors As at 25 August 2016 After Proposed Share Buy-Back*

Number of Fibon Shares Held Number of Fibon Shares Held

Direct % Indirect % Direct % Indirect %

Pang Chee Khiong

Pang Fok Seng

21,560,552

17,330,488

22.00

17.68

-

104,900(1)

-

0.11

21,560,552

17,330,488

24.45

19.65

-

104,900(1)

-

0.12

Datin Pang Nyuk Yin

Lim Wai Kiew

Chong Peng Khang

Chong Chee Siong

2,940,000

1,470,000

322

54,826

3.00

1.50

#

0.06

400,422(2)

104,900(1)

-

-

0.41

0.11

-

-

2,940,000

1,470,000

322

54,826

3.33

1.67

#

0.06

400,422(2)

104,900(1)

-

-

0.45

0.12

-

-

Substantial Shareholders

Pang Chee Khiong

Pang Fok Seng

21,560,552

17,330,488

22.00

17.68

-

104,900(1)

-

0.11

21,560,552

17,330,488

24.45

19.65

-

104,900(1)

-

0.12

Expedient Equity Ventures

Sdn Bhd

Malaysian Venture Capital

Management Berhad

6,975,319

6,421,949

7.12

6.55

-

6,975,319

-

7.12

6,975,319

6,421,949

7.91

7.28

-

6,975,319

-

7.91

Persons Connected to Directors and/or Substantial Shareholders

Pang Yoke Lian

Pang Yoke Wah

Tee Boon Seng

Tiu Ka Han

Pang Jun Ming

Tee Bryan

Lim Teck Cheong

Wong Zi Yan

Richard Foster Holly

2,940,000

4,583,984

44,822

322

104,900

155,000

322

400,422

1,000

3.00

4.68

0.05

#

0.11

0.16

#

0.41

#

1,000(3)

199,822(4)

4,738,984(5)

-

-

-

-

-

2,940,000(6)

#

0.20

4.84

-

-

-

-

-

3.00

2,940,000

4,583,984

199,822

322

104,900

155,000

322

400,422

1,000

3.33

5.20

0.23

#

0.12

0.18

#

0.45

#

1,000(3)

199,822(4)

4,583,984(5)

-

-

-

-

-

2,940,000(6)

#

0.23

5.20

-

-

-

-

-

3.33

Notes: (1) Deemed interest by virtue of their son, Pang Jun Ming. (2) Deemed interest by virtue of her daughter, Wong Zi Yan. (3) Deemed interest by virtue of her spouse, Richard Foster Holly. (4) Deemed interest by virtue of her spouse, Tee Boon Seng and her son, Tee Bryan. (5) Deemed interest by virtue of his spouse, Pang Yoke Wah and his son, Tee Bryan . (6) Deemed interest by virtue of his spouse, Pang Yoke Lian.

ANNUAL REPORT 2016


111

6. Potential Advantages and Disadvantages

The potential advantages of any purchase of the Company‟s own shares are as follows: a) Company‟s flexibility in achieving the desired capital structure, in terms of debt and equity

composition and the size of equity; and

b) stabilise the supply and demand of the Shares and reduce the volatility of the shares price.

The potential disadvantages of any purchase of the Company‟s own shares are as follows: a) any purchase will reduce the financial resources of the Group and may result in the Group‟s foregoing

other better alternative investment opportunities that may emerge in the future.

b) as any purchase can only made out of retained profits and/or share premium accounts of the Company, it may reduce the amount available for distribution as dividends.

Nevertheless, the Company will purchase its own shares only after careful consideration of the financial resources of the Company and its resultants impact.

7. Financial Effects

The effects of the Proposed Share Buy-Back on the share capital, net assets, working capital, earnings and shareholdings of Directors and substantial shareholders of our company are set out below:

7.1 Share Capital

The purchase of Shares will have no effect on the issued and paid up share capital of the Company if the purchased shares are retained as treasury shares or re-sell in the open market or distributed to its shareholders as share dividend. Based on the Company‟s issued and paid-up share capital as at 25 August 2016, the proforma effects of the Proposed Share Buy-Back, assuming that all the purchase of FIBON Shares will be cancelled are as follows:-

However, if all the Shares purchased are retained as treasury shares, the share re-purchase would not have any effect on the share capital of FIBON, although substantially all rights attached to the shares held as treasury shares would be suspended.

7.2 Net Assets

The effect of the Proposed Share Buy-Back on the consolidated net assets per FIBON Share will depend on the purchase price of shares, the effective funding cost to the Group to finance the purchase of Shares or any loss in interest income to the Group and whether the Shares purchased are cancelled or retained as treasury shares.

In the event that all the Shares purchased are cancelled, the Proposed Share Buy-Back would reduce the net assets per FIBON Share if the purchase price per share exceeds the net assets per FIBON Share at the relevant point in time. Conversely, the Proposed Share Buy-Back would increase the net assets per share if the purchase price is less than the net assets per FIBON Share at the relevant point in time.

No of FIBON Shares RM Issued and paid-up share capital as at 25 August 2016

98,000,000 9,800,000

Cancellation of purchased Shares 9,800,000 980,000

After Proposed Share Buy-Back 88,200,000 8,820,000


112

For the Shares so purchased which are retained as treasury shares, upon their resale, the net assets per FIBON Share will increase assuming that a gain has been realised. The quantum of the increase in net assets per FIBON Share will depend on the selling price of the treasury shares and the number of treasury shares resold.

7.3 Working Capital

The Proposed Share Buy-Back is likely to reduce the working capital of FIBON, the quantum of which depends on the purchase prices of FIBON Share, the actual number of shares purchased and any associated costs incurred in making the purchase.

For share purchased which kept as treasury shares, upon their resale, the working capital and cash flow of the Group will increase upon the receipt of the proceeds of the resale. The quantum of such increase will depend on the actual selling price(s) of treasury shares and the number of treasury shares resold.

7.4 Earnings Per Share

The effect of the Proposed Share Buy-Back on the earnings of the Company would depend on the purchase price(s) and the number of the shares purchased as well as the effective funding cost to finance such purchases and/or loss in interest income to the Company if internally generated funds are utilised.

Should the shares so purchased are treated as treasury shares, the extent of the subsequent effect on earnings of FIBON will depend on the actual selling prices, the number of treasury shares resold and the effective gain or interest savings arising.

If the purchased shares are cancelled, the share buy-back will increase the earnings per share of the Company provided that the income foregone and interest expenses incurred on the purchased Shares is less than the earnings per share before the share buy-back.

7.5 Dividends

Assuming the Proposed Share Buy-Back is implemented in full, dividends would be paid on the remaining issued and paid-up capital of FIBON (excluding the shares already purchased) .The Proposed Share Buy-Back may reduce the cash available which may otherwise be used for dividend payments. Nonetheless, the treasury shares purchased may be distributed as dividends to the shareholders of the Company, if the Company so decides.

8. Implication Under the Malaysian Code on Take-Overs and Mergers 2010 (“the Code”)

In the event the Proposed Share Buy-Back results in any major shareholder and/or persons acting in concert with him/her who already holds more than 33% but less than 50% of the voting shares of the Company increasing by more than 2% in any 6 months period, pursuant to the Code, the affected major shareholder and/or persons acting in concert will be obliged to make a mandatory offer for the remaining Shares not held by them.

It is not the intention of the Company to cause any shareholders to trigger an obligation to undertake a mandatory general offer under the Code and we will be mindful of the above implications of the Code in making any purchase of our own shares pursuant to the Proposed Share Buy-Back.

Nevertheless, the affected major shareholder and/or person acting in concert with him/her may apply for an exemption from the Securities Commission Malaysia under the Paragraph 24.1 of Practice Note 9 of the Code from a mandatory offer obligation arising from the purchase of the Company‟s own Shares.

ANNUAL REPORT 2016


113

9. Purchase, Resale and Cancellation of shares made in the previous twelve (12) months

There were no share buy-back, resale or cancellation of treasury shares during the financial year ended 31 May 2016.

10. Public Shareholding Spread

The public shareholding spread of the Company according to the Record of Depositors as at 25 August 2016 was 47.36%. The Board undertakes that any purchase of the Company‟s own shares would only be conducted in accordance with laws prevailing at the time of the purchase, including compliance with the 25% public shareholding spread as required by the Main Market Listing Requirements.

11. Directors’ Statement

This Statement has been seen and approved by the Board of Directors and they individually and

collectively accept full responsibility for the accuracy of the information given in this Statement and confirm that, after making reasonable enquires, to the best of their knowledge and belief, there are no other facts the omission which would make any statement herein misleading.

12. Directors’ Recommendation

The Board, after having considered all aspects of the Proposed Share Buy-Back is of the opinion that the Proposed Share Buy-Back is fair, reasonable and in the best interest of the Company. Accordingly, the Board recommends that you vote in favour of the resolution to be tabled at the forthcoming AGM to give effect to the Proposed Share Buy-Back.

13. Other Information

There is no other information concerning the Proposed Share Buy-Back as shareholders and their professional advisers would reasonably require and expect to find in this Statement for the purpose of making informed assessment as to the merits of approving the Proposed Share Buy-Back and the extent of the risks involved in doing so.


FIBON BERHAD (Company No. 811010-H) (Incorporated in Malaysia)

NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Ninth Annual General Meeting (“AGM”) of the Company will be held at the Ballroom of Tiara Melaka Golf & Country Club, Jalan Gapam, Bukit Katil, 75760 Melaka on Tuesday, 25 October 2016 at 10:00 a.m. for the following purposes:-

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 31 May 2016 together with the Reports of the Directors and the Auditors thereon.

[Please refer to Note (i)]

2. To approve the declaration of a Single Tier Final Dividend of 1.25 sen per share for the financial year ended 31 May 2016.

(Resolution 1)

3. To approve the payment of Directors‟ fees of RM300,600.00 for the financial year ended 31 May 2016.

(Resolution 2)

4. To re-elect the following Directors who are retiring in accordance to Article 121 of the Company‟s Articles of Association and being eligible, have offered themselves for re-election:- (a) Mr. Pang Fok Seng (b) Mr. Chong Peng Khang

(Resolution 3) (Resolution 4)

5. To appoint Auditors and authorise the Directors to fix their remuneration. Notice of Nomination pursuant to Section 172(11) of the Companies Act, 1965, a copy of which is annexed hereto, has been received by the Company for the nomination of Messrs. BDO, who have given their consent to act, for appointment as Auditors and of the intention to propose the following ordinary resolution: “THAT Messrs. BDO be and are hereby appointed as the Auditors of the Company in place of the retiring Auditors, Messrs. Crowe Horwath, to hold office until the conclusion of the next Annual General Meeting at a remuneration to be agreed between the Directors and the Auditors.”

(Resolution 5)

AS SPECIAL BUSINESS

6. To consider and, if thought fit, to pass the following ordinary resolution pursuant to Section 129(6) of the Companies Act, 1965:- THAT pursuant to Section 129(6) of the Companies Act, 1965, Datuk Mohamad Saleh bin Mohd. Ghazali, who has exceeded the age of 70 years be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the next AGM.

(Resolution 6)

7. To consider and, if thought fit, with or without any modification, to pass the following resolutions as Special/Ordinary Resolutions:

Special Resolution

- Proposed Amendments to the Articles of Association THAT the following proposed amendments to the Articles of Association of the Company be hereby approved:-

(Resolution 7)

Article No.

Existing Provision Amended Provision

164 Profit and loss account The Directors shall from time to time in accordance with Section 169 of the Act cause to be prepared and to be laid before the Company in general meeting such profit and loss accounts, balance sheets, group accounts (if any) and reports as are referred to in the Section. The interval between the close of a financial year of the Company and the issue of annual audited accounts relating to it shall not exceed four (4) months.

Profit and loss account and balance sheet The Directors shall from time to time in accordance with Section 169 of the Act cause to be prepared and to be laid before the Company in general meeting such profit and loss accounts, balance sheets, group accounts (if any) and reports as are referred to in the Section Act or such period as may be prescribed by the Listing Requirements. The interval between the close of a financial year of the Company and the issue of annual audited accounts relating to it shall not exceed four (4) months.

165 Balance sheet A copy of every balance sheet (including every document required by law to be annexed thereto) which is to laid before the Company in general meeting and of the Directors‟ and Auditors‟ reports in printed form or in CD-ROM form or in such other form of electronic media, shall before the date of the meeting, be delivered or sent by post to every Member and debenture holder of the Company of whose address as described in the Register of Members or Record of Depositors the Company is aware and to the Company‟s Auditors. In the event a Member requires a printed form of such documents, the Company shall provide such documents to its members upon request, whether verbal or written, within four (4) market days from the date of receipt of such request. The requisite number of copies of each of these documents shall at the same time be forwarded to each stock exchange upon which the Company‟s shares are listed.

Balance sheet Annual Report A copy of every balance sheet (including every document required by law to be annexed thereto) which is to laid before the Company in general meeting and of the Directors’ and Auditors’ reports in printed form or in CD-ROM form or in such other form of electronic media, shall before the date of the meeting, be delivered or sent by post to every Member and debenture holder of the Company of whose address as described in the Register of Members or Record of Depositors the Company is aware and to the Company’s Auditors. In the event a Member requires a printed form of such documents, the Company shall provide such documents to its members upon request, whether verbal or written, within four (4) market days from the date of receipt of such request. The requisite number of copies of each of these documents shall at the same time be forwarded to each stock exchange upon which the Company’s shares are listed. Subject to compliance with the requirements of Bursa Malaysia Securities Berhad and any other relevant laws and regulations, if any, the Company may issue its annual report in CD-ROM or in such other electronic format and if a member requires a printed form of the annual report, the Company shall send such document to the member within four (4) Market Days from the date of receipt of the member’s verbal or written request.

AND THAT the Board of Directors of the Company be and is hereby authorised to do all such acts, deeds and things as are necessary and/or expedient in order to give full effect to the Proposed Amendment with full powers to assent to any conditions, modifications and/or amendments as may be required by any relevant authorises.

Ordinary Resolution - Authority to Issue Shares pursuant to Section 132D of the Companies

Act, 1965 THAT subject to Section 132D of the Companies Act, 1965 (“the Act”) and approvals of the relevant governmental/regulatory authorities, the Directors be and are hereby empowered to issue and allot shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued does not exceed ten per centum (10%) of the total issued and paid-up share capital of the Company for the time being and that the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad (“Bursa Securities”). AND THAT such authority shall commence immediately upon the passing of this Resolution and continue to be in force until the conclusion of the next AGM of the Company.

(Resolution 8)

Ordinary Resolution - Proposed Renewal of Authority for Share Buy-Back THAT, subject to the compliance with Section 67A of the Act and all other applicable laws, rules and regulations, approval be and is hereby given to the Company, to purchase such amount of ordinary shares of RM1.00 each in the Company as may be determined by the Directors of the Company from time to time through Bursa Securities as the Directors may deem fit and expedient in the interest of the Company, provided that the aggregate number of shares to be purchased and held pursuant to this resolution does not exceed 10% of the existing issued and paid-up ordinary share capital of the Company including the shares previously purchased and retained as Treasury Shares (if any) and the maximum funds to be allocated by the Company for the purpose of purchasing its own shares shall not exceed the total retained profits and share premium account of the Company based on the latest audited financial statement, upon such terms and conditions as set out in the Statement to Shareholders. AND THAT such authority shall commence immediately upon the passing of this Ordinary Resolution and until the conclusion of the next AGM of the Company or the expiry of the period within which the next AGM is required by law to be held unless revoked or varied by Ordinary Resolution in the general meeting of the Company but so as not to prejudice the completion of a purchase made before such expiry date, in any event in accordance with the provisions of Bursa Securities Main Market Listing Requirements and any other relevant authorities. AND THAT authority be and is hereby given to the Directors of the Company to decide in their absolute discretion to retain the ordinary shares in the Company so purchased by the Company as Treasury Shares and/or to cancel them and/or to resell them and/or to distribute them as share dividends in such manner as may be permitted and prescribed by the provisions of Bursa Securities Main Market Listing Requirements and any other relevant authorities.

(Resolution 9)

AND THAT authority be and is hereby given to the Directors of the Company to take all such steps as are necessary to enter into any agreements, arrangements and guarantees with any party or parties to implement, finalise and give full effect to the aforesaid with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments (if any) as may be imposed by the relevant authorities and to do all such acts and things as the Directors may deem fit and expedient in the interests of the Company.

8. To transact any other business of which due notice shall have been given.

NOTICE OF DIVIDEND ENTITLEMENT NOTICE IS HEREBY GIVEN THAT a Single Tier Final Dividend of 1.25 sen per share in respect of the financial year ended 31 May 2016 will be payable on 29 December 2016 to depositors who are registered in the Record of Depositors at the close of business on 8 December 2016, if approved by shareholders at the forthcoming Ninth AGM on Tuesday, 25 October 2016. A Depositor shall qualify for entitlement only in respect of:- (a) Shares transferred into the Depositor‟s Securities Account before 4.00 p.m. on 8 December

2016 in respect of ordinary transfers; and (b) Shares bought on Bursa Securities on a cum entitlement basis according to the Rules of the

Bursa Securities. By Order of the Board CHUA SIEW CHUAN (MAICSA 0777689) SEAN NE TEO (LS 0008058) Company Secretaries Melaka 30 September 2016 Note

(i) This Agenda item is meant for discussion only, as the provision of Section 169(1) of the Act does not require a formal approval for the Audited Financial Statements from the shareholders. Hence, this Agenda item is not put forward for voting.

Proxy

(i) In respect of deposited securities, only members whose names appear in the Record of Depositors on 17 October 2016 (“General Meeting Record of Depositors”) shall be eligible to attend, speak and vote at the Meeting.

(ii) A member entitled to attend and vote at the Meeting is entitled to appoint not more than two (2) proxies to

attend and vote in his stead. A proxy may but does not need to be a member of the Company and the provision of Section 149 (1)(b) of the Act need not be complied with. Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting. Notwithstanding this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote instead of the member at the Meeting. There shall be no restriction as to the qualifications of the proxy.

(iii) In the case of a corporate member, the instrument appointing a proxy must be either under its common

seal or under the hand of its officer or attorney duly authorised. (iv) Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the

Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

(v) The instrument appointing a proxy must be deposited at the Registered Office at No. 60-1, Jalan Lagenda

5, Taman 1 Lagenda, 75400 Melaka not less than 48 hours before the time for holding the Meeting or at

any adjournment thereof.

Explanatory Notes to Special Business

(i) Resolution 6 Datuk Mohamad Saleh bin Mohd. Ghazali, who has exceed the age of 70 years, has

offered himself for re-election as a Director of the Company and to hold office until the conclusion of the next annual general meeting. The re-appointment, shall take effect if the proposed Resolution 6 is passed by a majority of not less than three-fourths of such members as being entitled to vote in person or, where proxies are allowed, by proxy at this Ninth AGM of which not less than 21 days‟ notice has been given.

(ii) Proposed Amendments to the Articles of Association of the Company (“Proposed Amendment”)

The Proposed Amendment is to streamline the Company‟s Articles of Association to be aligned with the amendment to Bursa Securities Main Market Listing Requirements.

(iii) Authority to Issue Shares pursuant to Section 132D of the Act

The Company wishes to seek a new mandate on the authority to issue shares pursuant to Section 132D of the Act at the Ninth AGM of the Company (hereinafter referred to as the “General Mandate”).

The purpose to seek the General Mandate is to enable the Directors of the Company to issue and allot shares at any time to such persons in their absolute discretion without convening a general meeting as it would be both time-consuming and costly to organise a general meeting. This authority unless revoked or varied by the Company in a general meeting, will expire at the next AGM. The General Mandate will provide flexibility to the Company for allotment of shares for any possible fund raising activities, including but not limited to further placing of shares for the purpose of funding future investment project(s), working capital and/or acquisition(s). As at the date of this Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the Eighth AGM held on 30 October 2015 and which will lapse at the conclusion of the Ninth AGM.

(iv) Proposed Renewal of Share Buy-Back Authority

The proposed Resolution 9, if passed, will allow the Company to purchase its own shares up to 10% of the total issued and paid-up capital of the Company by utilising the funds allocated which shall not exceed the aggregate of the retained profits and share premium account of the Company.



FIBON BERHAD (Company No: 811010-H)

(Incorporated In Malaysia)

PROXY FORM Number of Ordinary Shares Held

I/We, (FULL NAME AND NRIC/PASSPORT NO)

of (FULL ADDRESS)

being a member of FIBON BERHAD hereby appoint

(FULL NAME AND NRIC/PASSPORT NO)

of (FULL ADDRESS)

or failing him/her, the Chairman of the Meeting as *my/our proxy to attend and vote for *me/us and on *my/ our

behalf at the Ninth Annual General Meeting of the Company to be held at the Ballroom of Tiara Melaka Golf &

Country Club, Jalan Gapam, Bukit Katil, 75760 Melaka on Tuesday, 25 October 2016 at 10:00 a.m. or any

adjournment thereof.

NO. RESOLUTIONS FOR AGAINST 1. To approve the declaration of a single tier final dividend of 1.25 sen per share for the financial

year ended 31 May 2016.

2. To approve the payment of Directors’ fees of RM300,600.00 for the financial year ended 31 May 2016.

3. To re-elect Mr. Pang Fok Seng who retires pursuant to Article 121 of the Company’s Articles of Association.

4. To re-elect Mr. Chong Peng Khang who retires pursuant to Article 121 of the Company’s Articles of Association.

5. To appoint Messrs. BDO as Auditors of the Company in place of the retiring Auditors, Messrs. Crowe Horwath to hold office until the conclusion of the next AGM and to authorise the Directors to fix their remuneration.

6.

Special Business: Ordinary Resolution - Re-appointment of Datuk Mohamad Saleh bin Mohd. Ghazali pursuant to Section 129(6) of the Companies Act, 1965

7. Special Resolution – Proposed Amendments to the Articles of Association 8. Ordinary Resolution - Authority to Issue Shares pursuant to Section 132D of the Companies

Act, 1965

9 Ordinary Resolution - Proposed Renewal of Authority for Share Buy-Back

* Strike out whichever not applicable

Please indicate with an “X” in the spaces provided how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his/her discretion.

…………………………………………………….…. Signature of Member/Common Seal

Date: ………………………………………………. [Please refer to the next page for the “Notes on Appointment of Proxy”)

For appointment of two proxies, percentage of shareholdings to be represented by the proxies:

Percentage Proxy 1 % Proxy 2 _________% Total 100 %

Fold This Flap For Sealing

Then Fold here

1st Fold here

Notes on Appointment of Proxy:

(i) In respect of deposited securities, only members whose names appear in the Record of Depositors on 17 October 2016

(“General Meeting Record of Depositors”) shall be eligible to attend, speak and vote at the Meeting.

(ii) A member entitled to attend and vote at the Meeting is entitled to appoint not more than two (2) proxies to attend and

vote in his stead. A proxy may but does not need to be a member of the Company and the provision of Section 149

(1)(b) of the Act need not be complied with. Where a member appoints more than one proxy, the appointments shall

be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy. A proxy appointed

to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting. Notwithstanding

this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and

vote instead of the member at the Meeting. There shall be no restriction as to the qualifications of the proxy. (iii) In the case of a corporate member, the instrument appointing a proxy must be either under its common seal or under

the hand of its officer or attorney duly authorised.

(iv) Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies

which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

(vi) The instrument appointing a proxy must be deposited at the Registered Office at No. 60-1, Jalan Lagenda 5, Taman 1

Lagenda, 75400 Melaka not less than 48 hours before the time for holding the Meeting or at any adjournment thereof.

Affix Stamp

The Company Secretary

FIBON BERHAD (811011-H) No.60-1, Jalan Lagenda 5,

Taman 1 Lagenda,

75400 Melaka.


FIBON BERHAD (811010-H)

12A, JALAN 20,

TAMAN SRI KLUANG,

86000 KLUANG, JOHOR,

MALAYSIA

TEL : ( 607 ) 773 6918

FAX : ( 607 ) 774 2025

E-MAIL : [email protected]

Documents

Notes to the Financial Statements - MalaysiaStock.Biz Notes to the Financial Statements for the financial year ended 31 May 2016 58 1. GENERAL INFORMATION ... Amendments to MFRS 116