FINANCIAL INSTRUMENTS (continued)

REGISTERED OFFICE

26. FINANCIAL INSTRUMENTS (continued)

26.1 Categories of financial instruments

(continued)

Carrying

amount L&R/(OL) FVTPL

2010 RM RM RM

Financial assets Group

Other investments 1,814,854 - 1,814,854

Trade and other receivables 33,973,913 33,973,913 -

Cash and bank balances 120,416,790 120,416,790 -

156,205,557 154,390,703 1,814,854

Company

Trade and other receivables 12,287,045 12,287,045 -

Cash and bank balances 52,001,844 52,001,844 -

64,288,889 64,288,889 -

Financial liabilities Group

Borrowings ( 89,820,000) ( 89,820,000) -

Trade and other payables ( 44,856,866) ( 44,856,866) -

(134,676,866) (134,676,866) -

Company

Other payables ( 1,623,049) ( 1,623,049) -

26.2 Net (losses)/gains arising from financial instruments

Group Company

2011 2010 2011 2010

RM RM RM RM

Fair value through profit or loss

- held for trading ( 122,833) 21,125 - -

Loans and receivables 4,074,461 2,778,084 2,501,835 1,306,186 Financial liabilities

measured at amortised cost ( 4,153,447) ( 3,740,091) - -

( 201,819) ( 940,882) 2,501,835 1,306,186

126

NOTES TO THE FINANCIAL STATEMENTS

26. FINANCIAL INSTRUMENTS

(continued)

26.3 Financial risk management

The Group is exposed to the following risks from its use of financial instruments:

• Credit risk • Liquidity risk • Market risk

26.4 Credit risk

Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s exposure to credit risk arises principally from its receivables from customers. The Company’s exposure to credit risk arises principally from loans and advances to subsidiaries and financial guarantees given to banks for credit facilities granted to subsidiaries.

Receivables from third parties

Risk management objectives, policies and processes for managing the risk

Management has a credit risk policy in place to manage credit risk. Credit risk exposure is controlled and monitored on an on-going basis by setting appropriate credit limits and terms after credit

evaluations have been performed on customers on a case-by-case basis. Appropriate approval limits are set for different levels of credit limits and terms.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by their carrying amounts in the statement of financial position.

Management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are measured at their realisable values. A significant portion of these receivables are regular customers that have been transacting with the Group and the Company over long periods. The Group uses ageing analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due by more than 90 days, which are deemed to have higher credit risk, are monitored individually.

NOTES TO THE FINANCIAL STATEMENTS

127

26. FINANCIAL INSTRUMENTS

(continued)

26.4 Credit risk

(continued)

Impairment losses

The ageing of external receivables as at the end of the reporting period was:

Indvidual Collective

Gross impairmant impairmant Net

Group RM RM RM RM

2011

Not past due 29,017,157 - ( 129,223) 28,887,934

Past due 0 - 275 days 945,030 - ( 93,136) 851,894

Past due more than 275 days 655,158 - ( 374,299) 280,859

30,617,345 - ( 596,658) 30,020,687

2010

Not past due 31,997,616 - - 31,997,616

Past due 0 - 275 days 1,946,698 - ( 59,701) 1,886,997

Past due more than 275 days 459,786 - ( 370,486) 89,300

34,404,100 - ( 430,187) 33,973,913

Company 2011

Not past due 189,581 - - 189,581

Past due 0 - 275 days 7,131 - - 7,131

Past due more than 275 days 47,081 - - 47,081

243,793 - - 243,793

2010

Not past due 162,836 - - 162,836

Past due 0 - 275 days 23,150 - - 23,150

Past due more than 275 days 18,431 - - 18,431

204,417 - - 204,417

128

NOTES TO THE FINANCIAL STATEMENTS

26. FINANCIAL INSTRUMENTS

(continued)

26.4 Credit risk

(continued)

Impairment losses (continued)

The movements in the allowance for impairment losses on external receivables during the financial

year are:

Group Company

2011 2010 2011 2010

RM RM RM RM

At 1 January 430,187 746,372 - -

Impairment loss recognised 191,867 65,492 - -

Impairment loss reversed ( 25,396) ( 348,580) - -

Impairment loss written off - ( 33,097) - -

At 31 December 596,658 430,187 - -

An allowance account in respect of receivables is used to record impairment losses. Unless the Group is satisfied that recovery is possible, the amount considered irrecoverable is written off against the receivables directly.

Other investment

Risk management objectives, policies and processes for managing the risk

Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to or better than the Group. Transactions involving derivative financial instruments are with approved financial institutions.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the Group has only invested in domestic securities. The maximum exposure to credit risk is represented by the carrying amounts of the securities in the statement of financial position.

Other investments of the Group (see Note 9) are categorised as fair value through profit or loss. The Group does not have overdue investments that have not been impaired.

The investments and other financial assets are unsecured.

Inter-company balances

Risk management objectives, policies and processes for managing the risk

The Company provides unsecured loans and advances to subsidiaries and monitors the results of the subsidiaries regularly.

NOTES TO THE FINANCIAL STATEMENTS

129

26. FINANCIAL INSTRUMENTS

(continued)

26.4 Credit risk

(continued)

Inter-company balances

(continued)

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

Impairment losses

As at the end of the reporting period, there was no indication that the loans and advances to subsidiaries are not recoverable, other than those on which an allowance for impairment loss has been made (see Note 8). The Company does not specifically monitor the ageing of loans and advances to subsidiaries and unless the Company is satisfied that recovery is possible, impairment loss has been provided for irrecoverable amounts.

Financial guarantees

Risk management objectives, policies and processes for managing the risk

The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to certain subsidiaries. The Company monitors on an ongoing basis the results of the subsidiaries and repayments made by the subsidiaries.

Exposure to credit risk, credit quality and collateral

The maximum exposure to credit risk amounts to RM81,860,000 (2010: RM89,820,000) representing the outstanding banking facilities of the subsidiaries as at the end of the reporting

period.

As at the end of the reporting period, there was no indication that any subsidiary would default on

repayment.

The financial guarantees have not been recognised since the fair value on initial recognition was not

material.

26.5 Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.

130

NOTES TO THE FINANCIAL STATEMENTS

Contractual Carrying interest rate/ ContractualUnder 1 - 2 2 - 5 More than amount coupon cash flows 1 year years years 5 years GroupRM % RM RM RM RM RM 2011 Non-derivative financial liabilities Unsecured term loan 11,860,000 4.80 13,069,340 2,725,847 6,523,213 3,820,280 - Secured term loan 70,000,000 4.80 75,692,500 22,875,000 52,817,500 - - Trade and other payables 66,006,472 - 66,006,472 66,006,472 - - - 147,866,472 - 154,768,312 91,607,319 59,340,713 3,820,280 - Company 2011 Non-derivative financial liabilities Trade and other payables 1,870,860 - 1,870,860 1,870,860 - - - Group 2010 Non-derivative financial liabilities Unsecured term loan 14,820,000 4.30 17,258,409 3,548,971 6,723,207 6,223,558 762,673 Secured term loan 75,000,000 4.30 83,307,750 8,135,000 42,560,250 32,612,500 - Trade and other payables 44,856,566 - 44,856,866 44,856,866 - - - 134,676,566 145,423,025 56,540,837 49,283,457 38,836,058 762,673 Company 2010 Non-derivative financial liabilities Trade and other payables 1,623,049 - 1,623,049 1,623,049 - - -

26 . FI NA NC IA L IN ST RU M EN TS

(continued)

26 .5 L iq ui di ty ri sk

(continued) Maturity analysis The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities as at the end of the reporting period based on undiscounted contractual payments: NOTES TO THE FINANCIAL STATEMENTS

131

26. FINANCIAL INSTRUMENTS

(continued)

26.6 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and other prices will affect the Group’s financial position or cash flows.

26.6.1 Currency risk

The Group and Company is not exposed to any foreign currency risk as it operates domestically and all its transactions are denominated in Ringgit Malaysia.

26.6.2 Interest rate risk

The primary interest rate risk to which the Group is exposed relates to the short term deposits which are fixed rate instruments placed with approved financial institutions. The exposure to a risk of change in their fair value due to changes in interest rates would not be significant as the deposits are usually placed for less than three months.

The Group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Short term receivables and payables are not significantly exposed to interest rate risk.

Risk management objectives, policies and process for managing the risk The Group monitors its exposure to changes in interest rates on a regular basis.

Borrowing are negotiated with a view to securing the best possible terms, including rates of interest, to the Group.

Exposure to interest rate risk

The interest rate profile of the Group and the Company’s significant interest-bearing financial instruments, based on their carrying amounts as at the end of the reporting period is:

Group Company

2011 2010 2011 2010

RM RM RM RM

Fixed rate

instruments

Financial assets

- Deposits with

banks 152,445,240 119,735,582 89,490,236 51,986,551

Floating rate

instruments

Financial liabilities

- Term loan ( 81,860,000) (89,820,000) - -

132

NOTES TO THE FINANCIAL STATEMENTS

26. FINANCIAL INSTRUMENTS

(continued)

26.6 Market risk

(continued)

26.6.2 Interest rate risk (continued)

Interest rate risk sensitivity analysis

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss and does not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss. The exposure to interest rate risk is consequently not material and hence sensitivity analysis is not presented.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points (bp) in interest rates at the end of the reporting period would have increased (decreased) post-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain

constant.

2011 2010

Profit or loss Profit or loss

100bp 100bp 100bp 100bp

increase decrease increase decrease

Group RM RM RM RM

Floating rate ( 818,600) 818,600 ( 898,200) 898,200

instruments

26.6.3 Other price risk

Equity price risk arises from the Group’s investments in equity securities.

Risk management objectives, policies and processes for managing the risk

Fair values of portfolio investments and unit trusts are based on quoted market price at the reporting date without any deduction for transaction costs. The portfolio investments and unit trusts have been written down to their fair values at the year and.

Equity price risk sensitivity analysis

The analysis assumes that all other variables remain constant and the Group’s equity investments moved in correlation with the FTSE Bursa Malaysia KLCI (FBMKLCI).

NOTES TO THE FINANCIAL STATEMENTS

133

26. FINANCIAL INSTRUMENTS

(continued)

26.7 Fair value of financial instruments

The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowings approximate fair values due to the relatively short term nature of these financial instruments.

The fair value of other investments is disclosed in Note 9, which is based on their quoted closing market prices at the reporting date.

The fair values of other financial assets and liabilities, together with the carrying amounts shown in the statement of financial position are as follows:

______2011______ _____2010 ______

Carrying Carrying

amount Fair value amount Fair value

RM RM RM RM

Group

Secured term loan (50,000,000) (46,398,811) (70,000,000) (64,000,779) Unsecured term loan ( 8,900,000) ( 8,015,052) (11,860,000) (10,575,197) Company

Amount due from

subsidiaries 6,484,726 6,484,726 12,082,628 12,082,628

The following summarises the methods used in determining the fair value of financial instruments reflected in the above table.

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period.

Interest rates used to determine fair value

The interest rates used to discount estimated cash flows, when applicable, are as follows:

2011 2010

Secured term loan 4.80% 4.30%

Unsecured term loan 4.80% 4.30%

26.7.1 Fair value hierarchy

Comparative figures have not been presented for 31 December 2010 by virtue of the exemption provided in paragraph 44G of FRS 7.

134

NOTES TO THE FINANCIAL STATEMENTS

26. FINANCIAL INSTRUMENTS

(continued)

26.7 Fair value of financial instruments

(continued)

26.7.1 Fair value hierarchy (continued)

The table below analyses financial instruments carried at fair value, by valuation method.

The different levels have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Level 2 Level 3 Total

RM RM RM RM

Group

2011

Investment in quoted 1,685,092 - - 1,685,092

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