annual report 2010 - malaysiastock.biz annual report 2010 president/chief executive officer’s...

TEXCHEM RESOURCES BHDCOMPANY NO. 16318-K

Annual Report 2010

When ingenuity is in full bloom, progress will prosper throughout

CONTENTSCorporate Structure 2

President/Chief Executive Officer’s Message 3

Board Of Directors 7

Group Financial Highlights 12

Corporate Information 13

Executive Committee 14

Audit Committee Statement 14

Nomination Committee 18

Remuneration Committee 19

Notice Of Annual General Meeting 20

Statement Accompanying Notice Of Annual General Meeting 25

Guidelines Of The Scheme Of Payment Of Benefits To Directors Upon Retirement/Resignation (“Scheme”) 25

Corporate Governance Statement 26

Statement On Internal Control 33

Other Disclosures 34

Analysis Of Shareholdings 36

Particulars Of Properties 38

Financial Statements 40

Proxy Form Enclosed

TEXCHEM RESOURCES BHD (16318-K)

2 CORPORATE STRUCTURE


INDUSTRIAl DIvISION

Texchem Materials Sdn. Bhd.

• TexchemMalaysiaSdn.Bhd.• NewMaterial(Malaysia)Sdn.Bhd.

NewMaterialHongKongLimited• PT.TexchemIndonesia• TexchemMaterials(Thailand)Ltd.• TexchemMaterials(Vietnam)Co.,Ltd.• TexchemSingaporePrivateLimited• TexchemTrading(Wuxi)Co.,Ltd.

POlyMER ENGINEERING DIvISION(formerly known as Packaging Division)

Texchem-Pack Holdings (S) ltd.

• Texchem-Pack(Bangi)Sdn.Bhd.• TexchemPolymersSdn.Bhd.• EyeGraphicSdn.Bhd.

AlayaAsiaSdn.Bhd. EyeGraphic(Vietnam)Co.,Ltd.(in voluntary liquidation)

• Texchem-Pack(M)Bhd.Texchem-Pack(Johor)Sdn.Bhd.Texchem-Pack(KL)Sdn.Bhd.Texchem-Pack(PP)Sdn.Bhd.

TexchemAdvancedProductsIncorporatedSdn.Bhd.

Texchem-Pack(Thailand)Co.,Ltd.Texchem-Pack(Vietnam)Co.,Ltd.Texchem-Pack(Wuxi)Co.,Ltd.

Texchem Japan, Inc.

FAMIly CARE DIvISION

Fumakilla Malaysia Berhad

• TingTaiIndustries(Malaysia)Sdn.Bhd.• BloodProtectionCompany(Malaysia)Sdn.Bhd.

MyanmarTexcorpLimited• Technopia(Thailand)Ltd.

Acumen Scientific Sdn. Bhd.

PT. Technopia Jakarta

Technopia vietnam Pte. ltd.

FOOD DIvISION

Texchem Food Sdn. Bhd.

• SeaMasterTradingCo.Sdn.Bhd.OceanPioneerFoodSdn.Bhd.SeapackFoodSdn.Bhd.

• A.S.KAndamanLimited

RESTAURANT DIvISION

Sushi Kin Sdn. Bhd.

• MirakuSdn.Bhd.

Donburi House Sdn. Bhd.

ASSOCIATES

Texchem Corporation Sdn. Bhd.

M.A.C. Technology (Malaysia) Sdn. Bhd.

GMMI Texchem Sdn. Bhd.(jointly controlled entity)

Note:TheabovecorporatestructuredoesnotincludedormantsubsidiariesofTexchemResourcesBhd.Group.

ANNUAL REPORT 2010

3PRESIDENT/CHIEF EXECUTIVE OFFICER’S MESSAGE

Dear valued shareholders

Texchem Resources Bhd (“TRB”) Groupremains committed to a long-term approachto growth, based on sustainability, investmentin new technologies and prudent, resourcefulmanagement. This strategy has solidified theGroup’s fundamentals and has provided focusevenduringuncertaineconomiccircumstances.

The initial stages of 2010 were characterised bygraduallyincreasingoptimismastheUSeconomybegantostabiliseandChinamoveduparungtobecome the world’s second largest economy.Malaysia experienced healthy growth during thefirsthalfoftheyear,whichcooledslightlyduringthesecondhalfof2010.Againstthisbackdrop,theGrouptookproactivemeasurestostreamlineandconsolidate itsbusinessactivitieswhile investinginnewventureswhichintegratedintotheGroup’sexistingstrategies.


4

Financial performance

TheGroup’sperformanceforthefinancialyearending31December2010showedavastimprovementoverthepreviousyear;TRBachievedapre-taxprofitofRM2.7million representingasignificantshift fromthepre-tax lossesofRM5.2millionduringtheFY2009.Grouprevenuealsoincreasedby5%onthepreviousfinancialyeartoRM1,059.0million.ThereturntoprofitabilitywasadirectresultoftheGroup’sstreamliningexerciseandpositivesalesstrategies.

InvestinginnewtechnologiesandcapabilitiesishighontheGroup’sagenda,inordertoupgradetheintrinsicvalueoftheGroup’sbusiness.Intermsofcapitalexpenditure,TRBmadeasignificantinvestmentofRM33.9millionacrossthefourDivisionstosupportbusinessgrowthaswellastobuildcapacityforthefuture.

InlinewiththeGroup’sappreciationandlongtermcommitmenttoitsshareholders,theBoardhasrecommendedtwointerimgrossdividendsof2senpershareeach.Thetotalgrossdividendsfortheyearis4senpershare.

Industrial Division

StrongdemandfromtheMalaysianmanufacturingsectorbuoyedtheIndustrialDivision’sdistributionactivitiesduringthefirstsixmonthsof2010.Althoughtheprofitabilityofdomesticdistributionsloweddowninthesecondhalfoftheyear,improvementinperformanceofoverseassubsidiariesallowedtheDivisiontorecordrevenueofRM393.0millionandapre-taxprofitofRM8.7million.

TheDivision’seffectiveinternationalnetworkmadeanimportantcontributiontorevenue,withNewMaterialHongKongLimitedimprovingrevenuebyexpandingbusinessvolumewithexistingcustomersandacquiringnewaccountsintherobust China market. Effective sourcing for raw materials allowed Texchem Materials (Thailand) Ltd to capitalise onincreasedconsumerdemandinThailand.

Inthefuture,VietnameseoperationsarepoisedforgrowthasaresultofanextendedbusinesslicensewhichallowstheDivisionwholesaleandretailrightsintherapidlyexpandingVietnamesemarket.

While the lingeringuncertaintyofglobaldemand formanufacturedgoodswill continue in the foreseeable future, theDivisionwillcontinuetobroadenitscustomerbaseandkeepatightreinonoperatingcosts.

Polymer Engineering Division (Formerly known as Packaging Division)

IntandemwiththeGroup’soverallstrategy,2010wasayearofstreamliningandinvestmentforthePolymerEngineeringDivision,toimproveoperationalefficienciesaswellastoshifttheDivision’sR&Dandmanufacturingcapabilitiesfurtherupthevaluechain.Theinitialcontractionininternationaldemandforelectronicproductsbegantoshowpositivesignsofrecoveryin2010,allowingtheDivisiontorecordrevenueofRM202.2millionandapre-taxlossofRM6.6million.

ThegradualincreaseindemandfromtheHardDiskDrive,semi-conductorandconsumerelectronicindustriesallowedtheDivisiontoachieveahighersalesvolume,whileproactivestepsweretakentoimprovecostcontrol,includingtheclosureofEyeGraphic(Vietnam)CoLtdinSeptember2010,toreducenon-incomegeneratingactivities.

Toenhancemanufacturingandtechnicalcapabilities,theDivisioninvestedasubstantialsumofRM8.3millioninwafershippermanufacturing.Theinvestmentinthisnicheareaisalreadygeneratingrevenueandisexpectedtogrowfurther,asthemarketpotentialofwafershippers,otherthanforsemiconductorindustry,willalsobeextendedtoothersectorsincludinglightemittingdiode(LED)andsolarcellssectors.

InJuly2010,theDivisiontookpositivestepstoincreaseitsparticipationintherapidlyexpandingmedicaldevicesindustrybyenteringintoajointventurewithGMMISdnBhd.ThenewcompanyknownasGMMITexchemSdnBhdwillassumethesalesandmarketing responsibilities for theDivision, forparts,componentsandassemblyservicesspecific to themedicaldevicesindustry.

Thedecisionwastakenattheendof2010torenametheDivision-thePolymerEngineeringDivision.ThenamechangeprovidesamoreaccuratereflectionoftheDivision’sbusinessactivities,aswellasitscompetenciesinofferinghighervalue polymer engineering solutions. With the internal streamlining and capital investments, it is anticipated that theDivisionwillbeabletocapitaliseonanupswingindemandwhenglobaleconomicsentimentsimprove.

PRESIDENT/CHIEF EXECUTIVE OFFICER’S MESSAGE (CONT’D)

ANNUAL REPORT 2010

5

Family Care Division

TheFamilyCareDivisionunderwentachallengingyearwhereexportsalesofhouseholdinsecticideproductsandbusinessoperationsofsomeforeignsubsidiarieswereaffectedbypoliticalupheaval(inThailand)andadverseweatherconditions(dryspellsfollowedbyfloodingintheASEANregion).Despitetheseunfavourablecircumstances,theDivisionrecordedrevenueofRM153.4millionfortheFY2010andapre-taxprofitofRM3.0million.

TheDivisionlaunchedthreenewproductsduringtheyearincluding:

• DomestosNomosProtectorinIndonesia.Thisnewsupercoilistwiceaseffectiveasstandardmosquitocoils;• JumboMSuperAerosolwhichwassuccessfullylaunchedbyTechnopiaVietnamPteLtd;• FumakillaASuperCoilwaslaunchedintheMalaysianmarket.Bio-efficacytestsdemonstratedtheSuperCoil’shigh

efficacyandspeedinknockingdownmosquitoes–duetoanewactiveingredient.

ItisanticipatedthatthesenewproductswillmakeapositiveimpactintheirrespectivemarketsfortheDivision’sfuturerevenue.

AspartoftheDivision’sstrategytoexpanditsbusinessinanalyticaltestingandconsultancyservices,AcumenScientificSdnBhdsetupasecondlaboratoryinSelangorduetothegoodmarketpotentialprovidedbythehighconcentrationofindustrialandtechnologicalparksinthecentralregion.Thedemandforanalyticaltestingservicesisexpectedtoexpandfurther,asnewEUrulingsrequireallexportsintoEUtobetestedforhazardouschemicalmaterials.

Movingforward,theDivisionwillcontinuetofocusondevelopingnewhouseholdinsecticideproductstofurtherconsolidateitspositionasamarketleaderinASEAN.Enhancingmarketinganddistributionnetworksandcontainingoperationalcostswillcontinuetobeprioritised.

Food Division

TheFoodDivisioncontinueditsupwardtrajectorydespiteglobaluncertainties,drivenbytheperformanceofitsMalaysia-basedJapaneserestaurantchain.SushiKingiscurrentlyMalaysia’slargestchainofJapaneserestaurants.TheDivisionachievedrevenueofRM312.7millionandapre-taxprofitwhichimprovedby133%onthepreviousyear,toreachRM11.2million.

TheDivision’sseafoodprocessingbusinessperformedbetterinFY2010comparedtothepreviousyeardespitevolatilityinsupplyofrawmarineproductsfromMyanmarandMalaysia.TheDivision’sconcertedeffortstostreamlineandimproveefficienciesallowedittocapitaliseonhighersellingpricesoffishmealandSurimi.

InNovember2010,theDivisionsignedaMemorandumofUnderstandingwithChinaNationalChemicalFiberCorpwhichwasappointedastheDivision’ssoleimporterofcertainmarineproducts(includingsoftshellcrabs)forChina.ThedemandbyChineseconsumersforsafeandhighqualityseafoodproductshasbeenprojectedtoriseintandemwiththegrowthofChina’sincreasinglyaffluentmiddleclass.

InlinewiththeDivision’sstrategyofbringinghighquality,affordableJapanesefoodtomoreMalaysians,sixnewSushiKingrestaurantswereopenedbringingthetotalnumberofrestaurantsto65.Tosynergiserestaurantoperations,thefinediningrestaurant–MirakuSdnBhd–wasacquiredbySushiKinSdnBhd.TheDivisionisexpectedtoachievefurthergrowthin2011aslocalandglobaldemandofseafoodcontinuestoexpand.



6

Strategy and future prospects

Although the global economy has demonstrated some positive signs of recovery, the Group remains committed toprudent,well-managedgrowthasthereisstillsomewaytogobeforeglobalmarketsentimentsreturntonormal.On-goingstreamliningstrategies coupledwith investments in synergistic ventureswill enable theGroup tobenefit frommarketupswings.

TheGrouphasalsomadeasignificantendeavourtoincreaseitspresenceintheJapanesemarketbyestablishinganewwhollyownedsubsidiaryincorporatedinJapan.TexchemJapan,IncwillleverageontheGroup’sexpertisetoprovidearangeofrelatedservicesandproductsinthisimportantmarket.

To capitalise on the strong performance of the Food Division’s restaurant operations, the Restaurant Division wasestablishedat theendofFY2010,whenSushiKinSdnBhdacquiredMirakuSdnBhd.Thismovewill allow thenewDivisiontobemorefocusedonfurtherdevelopingandexpandingtheGroup’srestaurantbusinessindependently.

Appreciation

OnbehalfoftheChairmanandtheboardofdirectorsIwouldliketothankallourstakeholdersfortheirvaluedsupport.Iwouldalso liketo recordmysincereappreciationtoallTexchemersfor theircontinuedhardworkandperseverancetowardsthesuccessoftheGroup.

lee Siew Khee, JeffreyPRESIDENT/CHIEF EXECUTIVE OFFICER


ANNUAL REPORT 2010

7

FROMLEFTTORIGHT:

yap Kee Keong (EXECUTIVE DIRECTOR), Danny Goon Siew Cheang (INDEPENDENT NON-EXECUTIVE DIRECTOR), Brian Tan Guan Hooi (EXECUTIVE DIRECTOR), lee Siew Khee, Jeffrey (PRESIDENT/CHIEF EXECUTIVE OFFICER), Dato’ Seri Nazir Ariff bin Mushir Ariff (INDEPENDENT NON-EXECUTIVE DIRECTOR), Tan Sri Dato’ Seri Fumihiko Konishi (CHAIRMAN), Wong Kin Chai (EXECUTIVE

DIRECTOR), yong yoon Fook, Dick (INDEPENDENT NON-EXECUTIVE DIRECTOR)

BOARD OF DIRECTORS


8

Tan Sri Dato’ Seri Fumihiko Konishi

TanSriDato’SeriFumihikoKonishi,aJapanese,aged67,isthefounderoftheTexchemGroupofCompanies.HeistheChairmanofTexchemResourcesBhd.(“TRB”)andhasbeenappointedtotheBoardsince20February1974.

TanSriDato’SeriFumihikoKonishiobtainedaBachelorofPharmacyDegreefromTokyoUniversityofPharmacyandLifeScienceandsince1968,hasbeenlivinginMalaysiaformorethan40years.TanSriDato’SeriFumihikoKonishi’sentrepreneurialqualityhasplayedanimportantroleinthegrowthoftheTexchemGroupfromitssmallexistencetoadiversifiedmanufacturing,servicesandtradinggrouptoday.Besidesbeingactivelyinvolvedinthebusiness,heisalsoinstrumentalinbringinginandpromotingmanyotherJapanesejoint-venturegroupstoPenangandMalaysia.

In recognition of such efforts, Tan Sri Dato’ Seri Fumihiko Konishi was granted permanent residency status by theMalaysianGovernmentin1990.In1991,hewasbestowedtheDarjahJohanNegeri(D.J.N.)bytheGovernorofPenang;theDarjahSetiaPangkuanNegeri(D.S.P.N.) in1994,theDarjahGemilangPangkuanNegeri(D.G.P.N.) in2000andtheDarjahKebesaranPanglimaSetiaMahkota(P.S.M.)bytheSupremeRulerin2007.In2001,hewasbestowedanhonoraryfellowshipby theLimkokwingUniversityCollegeofCreativeTechnology (formerly knownasLimkokwing InstituteofCreativeTechnology).TanSriDato’SeriFumihikoKonishiistheChairmanoftheExecutiveCommittee,amemberoftheRemunerationCommitteeandhealsoheadsthenewlyestablishedRestaurantDivision.

TanSriDato’SeriFumihikoKonishialsositsontheBoardofFumakillaMalaysiaBerhad.

SaveasdisclosedintheAnalysisofShareholdingssectionofthisAnnualReport,hedoesnothaveanyfamilyrelationshipwithanyDirectorofTRB.HehaspersonalinterestviaTexchemHoldingsSdn.Bhd.(“THSB”),TexchemCorporationSdn.Bhd.(“Texcorp”),asubsidiaryofTHSB,andTexcorp’ssubsidiariesandassociatedcompanies(“RelatedCompanies”)inthebusinessarrangementsinvolvingtheRelatedCompanieswithTRBandTRB’ssubsidiaries.

Hehasnotbeenconvictedofanyoffenceswithinthepast10years.TanSriDato’SeriFumihikoKonishiattendedallBoardmeetingsheldduringthefinancialyearended31December2010.

Mr lee Siew Khee, Jeffrey

MrLeeSiewKhee,Jeffrey,aMalaysian,aged56,isthePresidentandChiefExecutiveOfficerofTexchemResourcesBhd.(“TRB”).HewasappointedtotheBoardon15January1986.HegraduatedfromtheUniversityofMalayain1979withaBachelorofScience(Honours)DegreeinChemistry.

MrJeffreyLeejoinedTRBin1979andwaspromotedtoMarketingDirectorin1986.Hehaswideexperienceinthefieldofmarketingparticularlyinthesalesofplasticsandchemicals.HewaspromotedtoManagingDirectoron1September1993andthereafterpromotedtobePresidentandChiefOperatingOfficeron1April2004.MrJeffreyLeerelinquishedhispositionasChiefOperatingOfficerwhenappointedasChiefExecutiveOfficeron1July2009.HeisalsoamemberoftheExecutiveCommittee.HewasamemberoftheAuditCommitteeuntilheresignedon8October2007.

MrJeffreyLeealsositsontheBoardsofTexchem-Pack(M)Bhd.andTexchem-PackHoldings(S)Ltd.Hedoesnothaveany family relationship with any Director and/or major shareholder of TRB, nor any personal interest in any businessarrangementsinvolvingTRB.

Hehasnotbeenconvictedofanyoffenceswithinthepast10years.MrJeffreyLeeattendedallBoardmeetingsheldduringthefinancialyearended31December2010.

BOARD OF DIRECTORS (CONT’D)

ANNUAL REPORT 2010

9

Mr Wong Kin Chai

MrWongKinChai,aMalaysian,aged51,isanExecutiveDirectorofTexchemResourcesBhd.(“TRB”).HewasappointedtotheBoardon1January2005.HeholdsaBachelorofScience(Honours)DegreeinChemistryfromUniversityofMalaya.In1994,heobtainedhisMastersinBusinessAdministrationfromUniversityofMalaya.

MrWongKinChaijoinedTRBGroupin1984.Overtheyears,hewaspromotedtoDeputyManagingDirector,ManagingDirectorandChiefOperatingOfficerofTexchemMaterialsSdn.Bhd.(“Texmat”).On1April2004,hewaspromotedtothepositionofPresidentandChiefExecutiveOfficerofTexmat.HeisalsoamemberoftheExecutiveCommitteeandthePresidentandChiefExecutiveOfficeroftheIndustrialDivision.

MrWongKinChaidoesnotsitontheBoardofanyotherpubliccompanies.HedoesnothaveanyfamilyrelationshipwithanyDirectorand/ormajorshareholderofTRB,noranypersonalinterestinanybusinessarrangementsinvolvingTRB.

Hehasnotbeenconvictedofanyoffenceswithinthepast10years.MrWongKinChaiattendedfive(5)outofsix(6)Boardmeetingsheldduringthefinancialyearended31December2010.

Mr yap Kee Keong

MrYapKeeKeong,aMalaysian,aged46,isanExecutiveDirectorofTexchemResourcesBhd.(“TRB”).HewasappointedtotheBoardon1January2006. HeholdsaBachelorofScience(Honours)Degree inPhysicsfromtheUniversityofMalayaandMastersofBusinessAdministrationfromtheUniversityofPortsmouth,UK.

MrYapKeeKeongjoinedTRBin1988.HewasappointedasaDirectorofTexchem-Pack(M)Bhd.(“TXPM”)inJanuary1999andthenpromotedtoExecutiveVicePresidentinJuly2004.Hehasmorethan22yearsofexperienceinthesales,marketinganddistributionofindustrialrawmaterialsandhasalsobeenactivelyinvolvedinthepolymermanufacturingindustryspecialisingintheelectronicandmedicaldevicessectors.HewasappointedasaDirectorofTexchemMaterialsSdn.Bhd.(“Texmat”)inNovember1999andre-designatedtoExecutiveDirectorinJanuary2003.HehassinceresignedasExecutiveDirectorbutremainsasaNon-ExecutiveDirectorofTexmatsinceJuly2004.HeiscurrentlythePresidentandChiefExecutiveOfficerofTXPM.HeisalsoamemberoftheExecutiveCommitteeandthePresidentandChiefExecutiveOfficerofthePolymerEngineeringDivision(formerlyknownasthePackagingDivision).

MrYapKeeKeongalsositsontheBoardsofTXPMandTexchem-PackHoldings(S)Ltd.HedoesnothaveanyfamilyrelationshipwithanyDirectorand/ormajorshareholderofTRB,noranypersonalinterestinanybusinessarrangementsinvolvingTRB.

Hehasnotbeenconvictedofanyoffenceswithinthepast10years.MrYapKeeKeongattendedallBoardmeetingsheldduringthefinancialyearended31December2010.



10

Mr Brian Tan Guan Hooi

MrBrianTanGuanHooi,aMalaysian,aged41,isanExecutiveDirectorofTexchemResourcesBhd.(“TRB”).HewasappointedtotheBoardon1January2004.HeholdsaBachelorofAccounting(FirstClassHonours)DegreefromtheUniversityofMalayain1993.In1998,heobtainedaMastersinBusinessAdministration(Distinction)fromtheUniversityofScience,Malaysia.HeisaCharteredAccountantregisteredwiththeMalaysianInstituteofAccountantsandaCertifiedPractisingAccountantregisteredwithCPAAustralia.

Prior to joining the Texchem Group, he was attached to KPMG. In 1993, he joined Texchem Corporation Sdn. Bhd.(“Texcorp”)asaGroupAccountantandhemovedontoassumethepositionofBusinessManagerinFumakillaMalaysiaBerhad(“FMB”)in1995.HewastransferredtothePresidentialDepartmentofTexcorpastheAssistantGeneralManagerin1999.In2000,heassumedthepositionofDeputyManagingDirectorandChiefOperationsOfficerandwasappointedastheManagingDirectorandChiefExecutiveOfficerofFMBinJanuary2002.On1April2004,hewaspromotedtobePresidentandChiefExecutiveOfficerofFMB.HehasassumedthepositionofDeputyChairmanofFMBsincehisresignationasPresidentandChiefExecutiveOfficerofFMBon1January2007.MrBrianTanwassubsequentlyappointedas theChiefExecutiveOfficerofFMBon1January2011.He iscurrently thePresident,ChiefExecutiveOfficerandManagingDirectorofTexchemFoodSdn.Bhd.since1January2007.HeisalsoamemberoftheExecutiveCommittee,thePresidentandChiefExecutiveOfficeroftheFoodDivisionandtheDeputyChairmanandChiefExecutiveOfficeroftheFamilyCareDivision.

MrBrianTanalsositsontheBoardofFMB.HedoesnothaveanyfamilyrelationshipwithanyDirectorand/ormajorshareholderofTRB,noranypersonalinterestinanybusinessarrangementsinvolvingTRB.

Hehasnotbeenconvictedofanyoffenceswithinthepast10years.MrBrianTanattendedallBoardmeetingsheldduringthefinancialyearended31December2010.

Dato’ Seri Nazir Ariff Bin Mushir Ariff

Dato’ Seri Nazir Ariff Bin Mushir Ariff, a Malaysian, aged 64, is an Independent Non-Executive Director of TexchemResourcesBhd.(“TRB”).

HewasappointedtotheBoardon12March2003.HeistheChairmanoftheRemunerationCommitteeandamemberoftheAuditCommitteeofTRB.

HeisanAccountantbytrainingandaFellowoftheBritishInstituteofManagement.HeattendedmanagementdevelopmentprogrammesinUnitedKingdom,UnitedStatesofAmericaandManila.HealsoreceivedintensivetrainingattheLondonMetalsExchangeinLondon.

Currently,Dato’SeriNazirisaDeputyChairman/ExecutiveDirectorofIvoryPropertiesGroupBerhad.HeisalsoaDirectorand Trustee of Socio-Economic and Environmental Research Institute (SERI), a council member of Wawasan OpenUniversityandanExecutiveDirectorofEscoyHoldingsBerhad.Dato’SeriNazirwasaformerDirectoroftheKualaLumpurCommodityExchange.

HeistheChairmanoftheMalaysianInternationalChamberofCommerceandIndustry(PenangandtheNorthernBranch)andisalsoinvolvedwithmanyvoluntaryorganisationsintheStateofPenang.HeisthepastPresidentofMajlisDato’Dato’PulauPinang,pastPresidentandfoundermemberofPenangHeritageTrustandiscurrentlyatrusteeofWWF-Malaysia.HeisamemberofthePenangServicesAdvisoryPanel,thePenangEconomicActionCouncilandthePenangInternationalHalalHubCommitteeandacouncilmemberofthePenangBusinessDevelopmentCommittee.HedoesnothaveanyfamilyrelationshipwithanyDirectorand/ormajorshareholderofTRB,noranypersonalinterestinanybusinessarrangementsinvolvingTRB.

Hehasnotbeenconvictedofanyoffenceswithinthepast10years.Dato’SeriNazirattendedfive(5)outofsix(6)Boardmeetingsheldduringthefinancialyearended31December2010.


ANNUAL REPORT 2010

11

Mr Danny Goon Siew Cheang

MrDannyGoonSiewCheang,aMalaysian,aged59,isanIndependentNon-ExecutiveDirectorofTexchemResourcesBhd.(“TRB”).

HewasappointedtotheBoardon5March2001.HeistheChairmanoftheAuditCommitteeandamemberoftheRemunerationCommitteeandtheNominationCommittee.

HeisaCharteredAccountantandworkedwithCoopers&Lybrand’sPenangandLondonofficesfrom1971to1979beforejoiningKennedyBurkill&CompanyBerhad.HewasitsManagingDirectorfrom1986to2007.MrGoonalsositsontheBoardsofEngTeknologiHoldingsBhd.,acompanylistedontheBursaMalaysiaSecuritiesBerhadandSungeiAraEstatesBerhad,whichisanon-listedpubliccompany.

MrGoonservedastheHonoraryTreasurerofthePenangSkillsDevelopmentCentre(PSDC)fromitsinceptionin1989till2006.HewastheSecretaryandTreasureroftheFreeIndustrialZone,Penang,Companies’Association(FREPENCA)from1982to2005andoftheMajlisDato’Dato’NegeriPulauPinangfrom1990to2007.HewasthefounderSecretaryoftheSquashRacketsAssociationofPenangin1979andcontinuestoserveonitsManagementCommittee.HehasbeentheChairmanoftheStChristopher’sSchoolAssociation,Penang,since1992.

MrGoondoesnothaveanyfamilyrelationshipwithanyDirectorand/ormajorshareholderofTRBnoranypersonalinterestinanybusinessarrangementinvolvingTRB.

Hehasnotbeenconvictedofanyoffenceswithinthepast10years.MrGoonattendedallBoardmeetingsheldduringthefinancialyearended31December2010.

Mr yong yoon Fook, Dick

MrYongYoonFook,Dick,aMalaysian,aged66,isanIndependentNon-ExecutiveDirectorofTexchemResourcesBhd.(“TRB”).

HewasappointedtotheBoardon30November2001.HeistheChairmanoftheNominationCommitteeandamemberoftheRemunerationCommitteeofTRB.HeisalsoamemberoftheAuditCommitteeofTRBwitheffectfrom8October2007.

HeholdsaLawDegreefromtheUniversityofSingapore.HewascalledtotheMalayanBarinJanuary1969.HewastheLegalPartnerinthefirmofKAhmad&YonguptoDecember2000.

MrDickYongdoesnotsitontheBoardofanyotherpubliccompanies.

MrDickYongdoesnothaveanyfamilyrelationshipwithanyDirectorand/ormajorshareholderofTRBnoranypersonalinterestinanybusinessarrangementinvolvingTRB.

Hehasnotbeenconvictedofanyoffenceswithinthepast10years.MrDickYongattendedallBoardmeetingsheldduringthefinancialyearended31December2010.



12 GROUP FINANCIAL HIGHLIGHTS

2006RM’000

2007RM’000

2008RM’000

2009RM’000

2010RM’000

Revenue 1,051,778* 1,035,964* 1,174,735* 1,007,152* 1,058,695

OperatingProfit 40,694 47,427# 25,495 11,230 18,947

Profit(Loss)BeforeTax 22,537 29,435# 2,364 (5,213) 2,740

NetProfit(Loss)AttributabletoOwnersoftheCompany 16,312 18,084# (1,397) (9,256) (491)

TotalEquityAttributabletoOwnersoftheCompany 171,842 177,663 168,422 156,845 146,345

No.ofOrdinarySharesIssued(‘000) 124,099 124,099 124,099 124,099 124,099

NetDividends 8,997 10,945 9,233 4,654 3,723

GrossDividends(%) 10 12 10 5 4

Earnings/(Loss)PerShare(sen) 13.14 14.57 (1.13) (7.46) (0.40)

# IncludesGainonDisposalofaSubsidiaryandTrademarkofRM6.8Million* Restated

13

ANNUAL REPORT 2010

CORPORATE INFORMATION

REGISTERED OFFICE

Level 18, Menara Boustead Penang 39 Jalan Sultan Ahmad Shah10050 PenangTel : 604-2296000Fax: 604-2291430

SHARE REGISTRAR

AGRITEUM Share Registration Services Sdn. Bhd.2nd Floor, Wisma Penang Garden42 Jalan Sultan Ahmad Shah10050 PenangTel: 604-2282321Fax: 604-2272391

AUDITORS

KPMGChartered AccountantsPenangTel: 604-2272288Fax: 604-2271888

PRINCIPAL BANKERS HSBC Bank Malaysia BerhadMalayan Banking BerhadCIMB Bank BerhadRHB Bank BerhadHong Leong Bank BerhadOCBC Bank (Malaysia) Berhad

SOLICITORS

Presgrave & MatthewsZaid Ibrahim & Co.

AUTHORISED CAPITAL

RM500,000,000

PAID-UP CAPITAL

RM124,099,235

STOCK EXCHANGE LISTING

Main Market of Bursa Malaysia Securities Berhad Stock name: TEXCHEM Stock code: 8702Listing date: 17 May 1993

SUBSIDIARIES

Please refer to the Corporate Structure section of this Annual Report for the list of subsidiaries of the Company.

WEBSITE

www.texchemgroup.com

E-MAIL ADDRESS

[email protected]

BOARD OF DIRECTORS

Chairman Tan Sri Dato’ Seri Fumihiko Konishi

President and Chief Executive Officer Lee Siew Khee, Jeffrey

Executive DirectorsWong Kin ChaiYap Kee KeongBrian Tan Guan Hooi

Independent Non-Executive DirectorsDato’ Seri Nazir Ariff bin Mushir AriffDanny Goon Siew CheangYong Yoon Fook, Dick

EXECUTIVE COMMITTEE

ChairmanTan Sri Dato’ Seri Fumihiko Konishi

MembersLee Siew Khee, JeffreyWong Kin ChaiYap Kee KeongBrian Tan Guan Hooi

AUDIT COMMITTEE

ChairmanDanny Goon Siew Cheang

MembersDato’ Seri Nazir Ariff bin Mushir AriffYong Yoon Fook, Dick

NOMINATION COMMITTEE

ChairmanYong Yoon Fook, Dick

MemberDanny Goon Siew Cheang

REMUNERATION COMMITTEE

ChairmanDato’ Seri Nazir Ariff bin Mushir Ariff

MembersTan Sri Dato’ Seri Fumihiko KonishiDanny Goon Siew CheangYong Yoon Fook, Dick

COMPANY SECRETARIES

Jony RawLee Puay Img @ Eng Puay Img

14


EXECUTIVE COMMITTEE

TERMS OF REFERENCE

To assist the Board of Directors in decision-making by undertaking the necessary business deliberations and operational activities necessary for the day-to-day running of the organisation and to seek necessary board approvals where applicable.

AUDIT COMMITTEE STATEMENT

TERMS OF REFERENCE

Objective

1. The principal objective of the Audit Committee (AC) is to assist the Board in discharging its duties and responsibilities to ensure good corporate governance, business and public accountability.

Membership

2. The AC shall be appointed by the Board from among their members and shall consist of no fewer than three (3) non-executive directors. All the AC should be non-executive directors, with a majority of them being independent directors.

All members of the AC shall be financially literate and at least one (1) member should be a member of an accountancy association or body.

3. The members of the AC shall elect a Chairman from among their members who shall be an Independent Non-Executive Director. In the absence of the Chairman, the remaining members present shall among themselves elect a Chairman who must be an independent director to chair the meeting.

4. In the event of any vacancy in the AC resulting in the non-compliance with 2 above, the Board of Directors shall fill the vacancy within three months.

Authority

5. The AC is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee.

6. The AC is authorised by the Board to obtain external, legal or independent professional advice and to secure the attendance of such external advisors with relevant experience if considered necessary.

7. The AC is authorised to convene meetings with the external auditors, the internal auditors or both, without the presence of other directors and employees, whenever deemed necessary.

8. The AC is authorised to have direct communication channels with the external auditors and persons carrying out the internal audit function or activity.

15

ANNUAL REPORT 2010

AUDIT COMMITTEE STATEMENT (CONT’D)

Duties

9. The duties of the AC shall be

(a) to review:(i) with the external auditors, their audit plan;(ii) with the external auditors, their evaluation of the system of internal controls;(iii) with the external auditors, their audit report;(iv) with the external auditors, their management letter and management response;(v) with the external auditors, the adequacy of the co-operation given by the Company’s officers in the course of

audit;(vi) the quarterly and annual financial statements and consolidated financial statements of the Company and of

the Group and recommend to the Board of Directors for consideration;(vii) any related party transactions or conflict of interest situations that may arise within the Company or Group

including any transaction, procedure or course of conduct that raises questions of management integrity.

(b) to consider and recommend to the Board, the appointment of the external auditors, the audit fee and any question of resignation or dismissal.

(c) To do the following, in relation to the internal audit function:(i) Review the adequacy of the scope, functions, competency and resources of the internal audit function, and

that it has the necessary authority to carry out its work;(ii) Review the internal audit programme and results of the internal audit process and, where necessary, ensure

that appropriate actions are taken on the recommendations of the internal audit function;(iii) Review any appraisal or assessment of the performance of members of the internal audit function;(iv) Approve any appointment or termination of senior staff members of the internal audit function; and(v) Take cognizance of resignations of internal audit staff members and provide the resigning staff members an

opportunity to submit his reasons for resigning.

(d) To consider any other functions as may be agreed between the AC and the Board of Directors.

Attendance, Quorum and Frequency of Meeting

10. The Chairman of the AC should engage on a continuous basis with senior management, such as the Chairman, the Chief Executive Officer, the Chief Financial Officer, the Head of Internal Audit and the external auditors in order to be kept informed of matters affecting the Company.

11. The Chief Financial Officer, the Head of Internal Audit, and representatives of the external auditors shall normally attend meetings. Other Board members and employees may attend meetings upon the invitation of the AC. However, the AC shall meet with the external auditors without executive Board members present at least twice a year and whenever necessary.

12. In order to form a quorum in respect of a meeting of the AC, the majority of members present must be Independent Directors.

13. The Committee shall meet not less than 4 times a year. The external auditors may request for a meeting if they consider it necessary.

14. Questions arising at any meeting of the AC shall be decided by a majority of votes of the members present, and in the case of equality of votes, the Chairman of the AC shall have a second or casting vote.

16



Minutes

15. The Head of Internal Audit shall act as Secretary to the AC. The Minutes of each AC meeting shall be kept at the registered office and distributed to each member of the AC and also to the other members of the Board. The AC Chairman shall report on each meeting to the Board.

16. The Minutes of meetings of the AC shall be signed by the Chairman of the meeting at which the proceedings were held or by the Chairman of the next succeeding meeting.

AUDIT COMMITTEE REPORT

Membership

The composition of the Audit Committee was as follows:

Mr. Danny Goon Siew CheangChairman, Independent Non-Executive Director

Dato’ Seri Nazir Ariff bin Mushir AriffIndependent Non-Executive Director

Mr. Yong Yoon Fook, Dick Independent Non-Executive Director

Meetings

During the year, the Audit Committee convened a total of nine (9) meetings, of which two (2) meetings were with the external auditors without the presence of management.

All meetings were held with sufficient notification and with agendas being distributed to the members.

Mr. Danny Goon Siew Cheang and Mr.Yong Yoon Fook, Dick attended all the meetings whilst Dato’ Seri Nazir Ariff bin Mushir Ariff attended five meetings.

Summary of Activities during the Financial Year

During the year, the Audit Committee discharged its duties in accordance with its terms of reference as follows:

a) Reviewed with the external auditors’ their scope of work, audit plans and reporting requirements for the year,

b) Reviewed the unaudited interim financial statements and the audited annual financial statements before their presentation to the Board,

c) Reviewed with the external auditors their evaluation of the system of internal controls, their audit findings and their recommendations arising from the audit, and managements’ responses thereon,

d) Reviewed and approved the 2010 Internal Audit Plan and the quarterly internal audit reports and appraised the activities to ensure adequate monitoring of the internal control systems,

e) Reviewed the Group’s recurrent related party transactions for the year and noted that they were within the limits approved by the shareholders,

f) Reviewed the reappointments of the external auditors,

g) Reviewed the year end appraisal or assessment of the performance of members of the internal audit function,

h) Confirmed the appointment of an independent external consultant to assess the competency of the Group’s internal audit function, which was conducted from April to May 2010 and reviewed the External Quality Assessment Report dated 23 July 2010.

17

ANNUAL REPORT 2010


Internal Audit Function

The Group has an in-house Internal Audit Department, whose internal audit function is independent of the Group’s business activities, operating entities and divisions.

The Head of Internal Audit undertakes regular and systematic audit of the Group’s operating entities and divisions, reviewing the system of internal controls including enterprise risk management and governance processes so as to provide independent and objective assurance that such systems are effective and are operating satisfactorily, highlighting weaknesses and making appropriate recommendations to management for improvement. The Internal Audit also investigates complaints on matters affecting the Group’s operations.

The Internal Audit Department provides the Audit Committee with regular, independent and objective reports on the state of internal controls of the Group. The Department also ensures management’s compliance with the Group’s established policies and plans.

In 2010, the total cost of the Internal Audit function comprising staff payroll, travelling, office rental, Quality Assessment Review fees and all incidental costs amounted to approximately RM646,000 (2009: RM568,000).

18


NOMINATION COMMITTEE

TERMS OF REFERENCE

ObjectiveIn accordance with the Malaysian Code on Corporate Governance, the Nomination Committee is set up to provide recommendations to the Board of Directors (“Board”) on the candidates for all directorships of Texchem Resources Bhd. (“TRB”) to be filled by the shareholders or the Board. Final decision on the appointment of any directors of TRB shall be made by the Board.

The Nomination Committee shall be responsible in ensuring the appropriate Board balance and size, and that the Board has a required mix of responsibilities, skills and experience. An annual review of the mix of skills, experience and other core competencies of the Board shall be made by the Nomination Committee.

Size and CompositionThe Nomination Committee shall comprise wholly of Non-Executive Directors, the majority of whom are independent. The members of the Nomination Committee shall elect a Chairman from amongst any of its members.

MeetingsThe Nomination Committee shall meet as and when is necessary. The quorum for any meetings shall be two (2) members subject to any laws, guidelines or rules that may be imposed by Bursa Malaysia Securities Berhad and/or any other relevant authority(ies).

SecretariesThe Company Secretaries shall act as Secretaries to the Nomination Committee and shall be responsible for keeping minutes of meetings of the Nomination Committee and circulating them to the Nomination Committee members.

Duties and Responsibilities1) To review regularly the Board structure, size and composition and make recommendations to the Board with regard

to any adjustments thereof and/or the appointment of Directors as the Nomination Committee deems necessary.

2) To consider, in making its recommendations, candidates for directorships proposed by the President/Managing Director/Chief Executive Officer of TRB and within the bounds of practicability, by any other senior executive or any other Director or shareholder of TRB as well as make recommendations to put in place the plans for succession, in particular for the Chairman/President and the Managing Director/Chief Executive Officer.

3) To assist the Board to review the required mix of skills and experience and other qualities including core competencies which Non-Executive Directors should bring to the Board and to assess the effectiveness of the Board, any other committees of the Board and the contributions of each individual Director of TRB, based on the process and procedures laid out by the Board.

4) To recommend to the Board for continuation or discontinuation in service of Directors as an Executive Director or Non-Executive Director.

5) To recommend Directors who are retiring by rotation to be put forward for re-election.

6) To recommend to the Board, the Directors to fill the seats on any committees of the Board.

7) To recommend to the Board the employment of the services of such advisers as it deems necessary to fulfill the Board’s responsibilities.

8) To carry out other responsibilities, functions or assignments as may be defined by the Board from time to time.

19

ANNUAL REPORT 2010

REMUNERATION COMMITTEE

TERMS OF REFERENCE

ObjectiveIn accordance with the Malaysian Code on Corporate Governance, the Remuneration Committee is set up to provide recommendations to the Board of Directors (“Board”) on the remuneration of the Executive Directors in all its forms such that the component parts of remuneration are structured to link rewards to corporate and individual performance.

Executive Directors should play no part in decisions on their own remuneration while the remuneration of the Non-Executive Directors should be a matter for the Board as a whole to determine. The individuals concerned should abstain from discussion of and voting on their own remuneration.

Size and CompositionThe Remuneration Committee shall consist wholly or mainly of Non-Executive Directors. The members of the Remuneration Committee shall elect a Chairman from amongst its members who shall be a Non-Executive Director.

MeetingsThe Remuneration Committee shall meet as and when is necessary. The quorum for any meetings shall be two (2) Non-Executive Directors subject to any laws, guidelines or rules that may be imposed by Bursa Malaysia Securities Berhad and/or any other relevant authority(ies).

SecretariesThe Company Secretaries shall act as Secretaries of the Remuneration Committee and shall be responsible for keeping minutes of meetings of the Remuneration Committee and circulating them to the Remuneration Committee members.

Duties and Responsibilities1) To determine and recommend to the Board the framework or broad policy for the remuneration, in all forms, of the

Executive Directors and/or any other persons as the Remuneration Committee is designated to consider by the Board, drawing from outside advice as necessary.

2) To determine and recommend to the Board any performance related pay schemes for the Executive Directors and/or any other persons as the Remuneration Committee is designated to consider by the Board.

3) To determine the policy for and scope of service agreements for the Executive and Non-Executive Directors, termination payment and compensation commitments.

4) To produce any required reports as may be required from time to time.

5) To recommend to the Board the appointment of the services of such advisers or consultants as it deems necessary to fulfill its responsibilities.

6) To carry out other responsibilities, functions or assignments as may be defined by the Board from time to time.

20


NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Thirty-Seventh Annual General Meeting of the Company will be held at Pinang Ballroom, Level 3, Traders Hotel, Magazine Road, 10300 Penang on Thursday, 26 May 2011 at 10.30 a.m. for transacting the following businesses:-

1. To receive the Audited Financial Statements for the financial year ended 31 December 2010 together with the Reports of the Directors and Auditors thereon*.

2. To re-elect the following Directors retiring pursuant to Article 123 of the Company’s Articles of Association and who, being eligible, offer themselves for re-election:

(i) Mr Wong Kin Chai(ii) Mr Yap Kee Keong(iii) Mr Danny Goon Siew Cheang

Resolution 1Resolution 2Resolution 3

3. To approve the Directors’ remuneration of RM1,469,475 from the Company for the financial year ended 31 December 2010 (2009: RM1,551,672). Resolution 4

4. To re-appoint Messrs KPMG as Auditors for the ensuing year and to authorise the Directors to fix their remuneration Resolution 5

5. SPECIAL BUSINESS

To consider and if deemed fit to pass the following Resolutions:

(A) Ordinary Resolution Power to Issue Shares pursuant to Section 132D of the Companies Act, 1965

Resolution 6

THAT subject always to the Companies Act, 1965 (“Act”), Articles of Association of the Company and approvals of the relevant regulatory authorities, where such approval is necessary, the Directors be and are hereby empowered, pursuant to Section 132D of the Act, to allot and issue shares in the Company from time to time at such price, 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 pursuant to this Resolution does not exceed 10% of the total issued 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 AND THAT such authority as abovementioned shall continue in force until the conclusion of the next Annual General Meeting of the Company.

(B) Ordinary Resolution Proposed New Shareholders’ Mandate for Recurrent Related Party Transactions of

a Revenue or Trading Nature; and Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature including the provision of financial assistance (“Proposed Mandate”)

Resolution 7

THAT subject always to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“MMLR”), approval be and is hereby given to the Company and/or its subsidiaries, pursuant to paragraphs 8.23 and 10.09 read with Practice Note 12 of the MMLR,

(a) to enter into new recurrent related party transactions of a revenue or trading nature; and(b) to renew the shareholders’ mandate for recurrent related party transactions of a revenue

or trading nature including the provision of financial assistance for any of the aforesaid companies to enter into and to give effect to such transactions;

all with the related parties as set out in section 2.4 of the Circular to the Shareholders of the Company dated 4 May 2011 in relation to the Proposed Mandate, which are necessary for Texchem Resources Bhd. Group’s day-to-day operations provided that the transactions are in the ordinary course of business and are on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company;

21

ANNUAL REPORT 2010

NOTICE OF ANNUAL GENERAL MEETING (CONT’D)

and provided further that the disclosure for all such transactions is made in the annual report of the Company of the aggregate value of all such transactions conducted pursuant to the shareholders’ mandate during the financial year where:

(a) the consideration, value of the assets, capital outlay or costs of the aggregated transactions is equal to or exceeds RM1 million; or

(b) any one of the percentage ratios of such aggregated transactions is equal to or exceeds 1%,

whichever is the higher.

AND THAT such approval shall continue to be in force until:

(i) the conclusion of the next Annual General Meeting (“AGM”) of the Company following this AGM, at which time it will lapse, unless by a resolution passed at the next AGM of the Company, such authority is renewed;

(ii) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (“Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

(iii) revoked or varied by resolution passed by the shareholders of the Company in a general meeting,

whichever is the earlier.

AND FURTHER THAT the Directors of the Company and/or its subsidiaries, whether solely or jointly, be and are hereby authorised to complete and do all such acts and things including executing such relevant documents as they may consider expedient or necessary to give effect to the Proposed Mandate.

(C) Ordinary Resolution Proposed Revised Scheme of Payment of Benefits to Directors upon Retirement/

Resignation

Resolution 8

THAT the proposed revision to the existing Scheme of Payment of Benefits to Directors upon Retirement/Resignation (“Proposed Revised Scheme”) as set out in Annexure A attached hereto be and is hereby approved.

AND THAT the Directors and/or any other person(s) to be authorised by the Directors of the Company be and are authorised to take, whether solely or jointly, all such actions including but not limited to the execution of all such relevant documents as they may consider expedient or necessary to implement, finalise and/or give full effect to the Proposed Revised Scheme.

BY ORDER OF THE BOARD

JONY RAWLEE PUAY IMG @ ENG PUAY IMGCompany Secretaries

PenangDate: 4 May 2011

22



NOTES:

* This Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 (“Act”) does not require approval of the shareholders and hence, is not put forward for voting.

1. A Member of the Company entitled to attend and vote at the meeting may appoint up to two (2) proxies to attend and vote instead of him/her. A proxy may but need not be a Member of the Company and the provision of Section 149(1)(b) of the Act shall not apply to the Company. If a Member appoints two (2) proxies, the appointments shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy.

2. To be effective:-

(a) the instrument appointing a proxy; and(b) the authority (if any) under which it is executed or a copy of such authority certified notarially or in some other way

approved by the Directors of the Company,

must be deposited at the Registered Office of the Company at Level 18, Menara Boustead Penang, 39 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia at least forty-eight (48) hours before the time for holding the meeting.

3. If the Proxy Form is returned without any indication as to how the proxy shall vote, the proxy will vote or abstain as he/she thinks fit.

4. If the Proxy Form is returned without the name of the proxy indicated, the Proxy Form shall be invalid.

5. Where the person appointing the proxy is a corporation, the form must be either under seal or under the hand of a duly authorised officer or attorney of the corporation.

6. Explanatory notes on Special Business:-

(i) Ordinary Resolution (Resolution 6) 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 last Annual General Meeting (“AGM”) of the Company held on 26 May 2010 and the said mandate will lapse at the conclusion of this AGM.

This Ordinary Resolution, if passed, will give the Directors of the Company from the date of this AGM, the authority to allot and issue ordinary shares from the unissued share capital of the Company up to an aggregate of not exceeding 10% of the total issued share capital of the Company for the time being pursuant to Section 132D of the Act (“Renewed Mandate”). This Renewed Mandate, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the Company.

The Renewed Mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/or acquisitions without any delay and without incurring additional expenses in convening a general meeting to approve such issue of shares.

(ii) Ordinary Resolution (Resolution 7) This Ordinary Resolution, if passed, will empower the Company and/or each of its subsidiaries to enter into the

recurrent related party transactions of a revenue or trading nature which are necessary for the Company and/or its subsidiaries’ day-to-day operations including the provision of financial assistance provided that such transactions are being carried out in the ordinary course of business and are on normal commercial terms which are not more favourable to the related parties than those available to the public and are not to the detriment of the minority shareholders of the Company.

This authority, unless revoked or varied at a general meeting of the Company, will expire at the conclusion of the next AGM of the Company.

The details of this proposed Ordinary Resolution are set out in section 2.4 of the Circular to the Shareholders of the Company dated 4 May 2011.

23

ANNUAL REPORT 2010


(iii) Ordinary Resolution (Resolution 8) The Scheme of Payment of Benefits to Directors upon Retirement/Resignation (“Scheme”) was first approved by

the shareholders (“Shareholders”) of the Company in 1988 to provide benefits to all Executive and Non-Executive Directors of the Company in recognition of their services rendered based on their tenure as directors in the Company. In keeping with the growth and needs of the Company, various revisions to the Scheme were approved by the Shareholders at the Company’s general meetings in 1993, 1996, 2001 and 2004.

Currently, pursuant to the Scheme, an Executive Advisor, a Vice President and a Deputy Managing Director (collectively referred to as the “Reclassified Category”) are paid benefits under the category of Executive Chairman, Chairman, President, Chief Executive Officer, Executive Vice President, Chief Operating Officer and Managing Director (collectively referred to as “Category 1”).

After due consideration, the Board of Directors (“Board”) of the Company is of the view that the roles and responsibilities undertaken by the directors under the Reclassified Category are similar to those under the category of Executive and Working Directors (collectively referred to as “Category 2”) and not Category 1. In addition, the Board does not foresee any directors will be appointed as Executive Vice President in the future.

Pursuant thereto, the Board proposes the following:

(a) the benefits payable to directors under the Reclassified Category shall be the same benefits payable to the directors under Category 2, and

(b) the designation of Executive Vice President shall be deleted from Category 1.

The details of the proposed revision of the Scheme (“Proposed Revised Scheme”) are set out in Annexure A attached hereto. Save for the proposed change as set out in Annexure A, the Guidelines of the Scheme approved by the Shareholders since 1993 todate remain unchanged. The Guidelines of the Scheme are set out on page 25 of the Company’s Annual Report 2010.

The Board has resolved for the Proposed Revised Scheme to be tabled at the forthcoming AGM for the approval of the Company’s Shareholders. However, the Board is not making any recommendation in respect of the Proposed Revised Scheme in view of the Directors’ interest in the Proposed Revised Scheme.

The Directors of the Company namely Tan Sri Dato’ Seri Fumihiko Konishi, Mr Yap Kee Keong and Mr Brian Tan Guan Hooi and persons connected with Tan Sri Dato’ Seri Fumihiko Konishi namely Texchem Corporation Sdn. Bhd., Texchem Holdings Sdn. Bhd., Puan Sri Datin Seri Atsuko Konishi, Ms Mika Konishi and Ms Mari Konishi, all are shareholders of the Company, will abstain from voting in respect of their direct and/or indirect interest on the ordinary resolution pertaining to the Proposed Revised Scheme. The details of the abovesaid persons’ shareholdings are set out in the Analysis of Shareholdings section of the Company’s Annual Report 2010 and section 5 of the Company’s Circular to the Shareholders dated 4 May 2011. None of the other Directors of the Company is a shareholder of the Company.

The Proposed Revised Scheme, if approved by Shareholders at this AGM, will give the Board, from the date of this AGM, authority to make payment to the directors under the respective categories in accordance with the Proposed Revised Scheme as set out in Annexure A and the Guidelines of the Scheme.

24



Annexure A

This is Annexure A referred to in the Notice of Annual General Meeting dated 4 May 2011.

SCHEME OF PAYMENT OF BENEFITS TO DIRECTORS UPON RETIREMENT/RESIGNATION

The existing Scheme of Payment of Benefits to Directors upon Retirement/Resignation (“Scheme”) is set out below:

ClassShareholders’

Funds(RM)

Benefits payable per year of serviceExecutive Advisor/ Executive

Chairman/ Chairman/ President/ Chief Executive Officer/ Executive

Vice President/ Vice President/ Chief Operating Officer/ Managing Director/

Deputy Managing Director(RM)

Executive/ Working Director

(RM)

Non Executive Director

(RM)A3 Above 100M 30,000 20,000 10,000A2 Above 50M - 100M 24,000 16,000 8,000A1 Above 25M - 50M 18,000 12,000 6,000A Above 10M - 25M 12,000 8,000 4,000B Above 5M - 10M 6,000 4,000 2,000C 5M & below 3,000 2,000 1,000

Note: “M” stands for “Million”

The proposed revision of the Scheme is highlighted in bold or strikethrough as shown below:

ClassShareholders’

Funds(RM)

Benefits payable per year of service

Category 1 Category 2 Category 3

Executive Advisor/ Executive Chairman/ Chairman/ President/

Chief Executive Officer/ Executive Vice President/ Vice President/ Chief

Operating Officer/ Managing Director/ Deputy Managing Director

(RM)

Executive Advisor/ Vice

President/ Deputy Managing

Director/ Executive

Director/ Working Director

(RM)

Non Executive Director

(RM)A3 Above 100M 30,000 20,000 10,000A2 Above 50M - 100M 24,000 16,000 8,000A1 Above 25M - 50M 18,000 12,000 6,000A Above 10M - 25M 12,000 8,000 4,000B Above 5M - 10M 6,000 4,000 2,000C 5M & below 3,000 2,000 1,000

Note: “M” stands for “Million”

25

ANNUAL REPORT 2010

GUIDELINES OF THE SCHEME OF PAYMENT OF BENEFITS TO DIRECTORS UPON RETIREMENT/RESIGNATION (“SCHEME”)

The guidelines of the existing Scheme approved by the Shareholders of the Company since 1993 todate remain unchanged and are set out below:

i) Upgrading shall be based on audited accounts each year and shall take effect at the start of the financial year subject to General Meeting approval.

ii) Downgrading shall be subject to General Meeting approval if the Company falls below the qualifying level.

iii) The Scheme will be removed upon cessation of business and the Directors of the Company shall be paid accordingly up to cessation date.

iv) For directors appointed before the first increase in capital, calculation of benefits shall commence from the date of such increase. For directors appointed after such increase, calculation shall commence from their respective appointment dates.

v) A director holding two or more offices in the Company such as Chairman and Managing Director etc. shall be entitled to one benefit only (the higher benefit) in the Company.

vi) The benefit payable upon cessation of service as a director whether by retirement or resignation shall be determined by the Board of Directors at their absolute discretion.

vii) The Directors, may at their discretion, prepay the benefits to a director upon completion of every 10 years of continuous service. Upon actual cessation of service, the pro-rated benefit for any length of service remaining unpaid (if any) may at the discretion of the Directors be payable as soon as practicable.

viii) Directors who cease to hold office due to death or removal from office may also be entitled to the benefits which will be determined at the absolute discretion of the Board of Directors. Benefits payable in the event a director ceases to hold office due to death will be made to the director’s next-of-kin.

ix) Directors must serve more that 6 months to be entitled to benefits (6 months or less: Nil benefit).

x) For uniformity, the criteria of “above 6 months rounded to 1 year” in respect of length of service shall apply for calculation of benefits in all instances of promotion, Company upgrade/downgrade, cessation of service by director, cessation of business of Company etc.

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING(Pursuant to Paragraph 8.27(2) of Bursa Malaysia Securities Berhad’s Main Market Listing Requirements)

Details of individuals who are standing for election as Directors

No individual is seeking election as a Director (excluding Directors standing for a re-election) at the Thirty-Seventh Annual General Meeting of the Company.

26


CORPORATE GOVERNANCE STATEMENT

The Board of Directors continues with its commitment to achieve and maintain the highest standards of corporate governance throughout the Group. The Board views corporate governance as synonymous with three key concepts; namely transparency, accountability as well as corporate performance.

The Board is entirely committed to the maintenance of high standards of corporate governance by supporting and implementing the prescriptions of the principles and best practices set out in Parts 1 and 2 respectively of the Malaysian Code on Corporate Governance (Revised 2007) [the “Revised Code”]. In addition, the Board follows global developments of internationally recognised corporate governance practices and though the Board is in compliance with many respects already, it continually reviews the Group’s corporate governance processes and strives to make appropriate adjustments to reflect its position as a good corporate citizen. The key intent is to adopt the substance behind good governance and not merely the form, with the aim of ensuring Board effectiveness in enhancing shareholder value.

The Board is pleased to provide the following statements, which outline the main corporate governance practices that were in place throughout the financial year, unless otherwise stated.

Compliance StatementThe Group has complied throughout the year ended 31 December 2010 with all the best practices of corporate governance set out in Part 2 of the Revised Code save as explained below:-

• Given the current composition of the Board, the Board does not consider it necessary to nominate a recognised Senior Independent Non-Executive Director to whom any matters of concern may be raised to the Board.

Principles Statement The following statement sets out how the Company has applied the principles in Part 1 of the Revised Code. The principles are dealt with under the following headings: Board of Directors, Directors’ Remuneration, Shareholders and Accountability and Audit.

A. BOARD OF DIRECTORS

Board Responsibilities The Group acknowledges the pivotal role played by the Board of Directors in the stewardship of its direction and

operations, and ultimately the enhancement of long-term shareholder value. To fulfil this role, the Board is responsible for the overall corporate governance of the Group, including its strategic direction, establishing goals for management and monitoring the achievement of these goals.

The Board has a formal schedule of matters reserved to itself for decision, which includes the acquisition and divestment policy, approval of major capital expenditure projects, consideration of significant financial matters and the review of the financial and operating performance of the Group. The schedule ensures that the governance of the Group is in the Board’s hands.

Meetings The Board ordinarily meets at least four (4) times a year with additional meetings convened when urgent and important

decisions need to be made in between the scheduled meetings. During the financial year ended 31 December 2010, the Board met on six (6) occasions; where it deliberated upon and considered various matters.

The Board also receives documents on matters requiring its consideration prior to and in advance of each meeting and vide circular resolutions. The Board papers and papers accompanying circular resolutions are comprehensive and encompass both quantitative and qualitative factors so that informed decisions can be made. All proceedings from the Board meetings are minuted and signed by the Chairman of the meeting.

27

ANNUAL REPORT 2010

CORPORATE GOVERNANCE STATEMENT (CONT’D)

A. BOARD OF DIRECTORS (cont’d)

Meetings (cont’d)

Details of each existing Director’s meeting attendances during the financial year are as follows:

MEETINGS ATTENDED (OUT OF 6)

Tan Sri Dato’ Seri Fumihiko Konishi Chairman 6/6

Lee Siew Khee, Jeffrey President and Chief Executive Officer 6/6

Wong Kin Chai Executive Director 5/6

Yap Kee Keong Executive Director 6/6

Brian Tan Guan Hooi Executive Director 6/6

Dato’ Seri Nazir Ariff bin Mushir Ariff Independent Non-Executive Director 5/6

Danny Goon Siew Cheang Independent Non-Executive Director 6/6

Yong Yoon Fook, Dick Independent Non-Executive Director 6/6

Board Committees The Board of Directors delegates certain responsibilities to the Board Committees, as follows:

Board Committee Key Functions

Executive Committee Explained in the Executive Committee : Terms of Reference section of this Annual Report.

Audit Committee Explained in the Audit Committee Statement : Terms of Reference section of this Annual Report.

Remuneration Committee Explained in the Remuneration Committee : Terms of Reference section of this Annual Report.

Nomination Committee Explained in the Nomination Committee : Terms of Reference section of this Annual Report.

All committees have written terms of reference. These committees are formed in order to enhance business and operational efficiency as well as efficacy. Prior to the establishment of the committees, part of their function was assumed by the Board as a whole. The Board retains full responsibility for the direction and control of the Company and the Group.

Board Balance As at the date of this statement, the Board consists of eight (8) members; comprising three (3) independent non-

executive Directors and five (5) executive Directors. A brief profile of each Director is presented in the Profile of Directors section of this Annual Report.

The concept of independence adopted by the Board is in tandem with the definition of an Independent Director in paragraph 1.01 of the Main Market Listing Requirements (“Listing Requirements”) of the Bursa Malaysia Securities Berhad (“Bursa Securities”) and Practice Note 13 of Bursa Securities’ Listing Requirements. The key elements for fulfilling the criteria are the appointment of independent Directors who are not members of management (non-executive) and who are free of any relationship which could interfere with the exercise of independent judgement or the ability to act in the best interests of the Company. The Board complies with paragraph 15.02 of the Listing Requirements which requires that at least two Directors or one-third of the Board of Directors of the Company, whichever is the higher, are independent Directors.

28




Board Balance (cont’d)

The Directors, with their different backgrounds and specialisations, collectively bring with them a wide range of experience and expertise in areas such as finance, corporate affairs, legal, marketing and operations. The executive Directors are responsible for implementing the policies and decisions of the Board, overseeing the operations as well as co-ordinating the development and implementation of business and corporate strategies. The independent non-executive Directors bring to bear objective and independent judgement to the decision making of the Board and provide a capable check and balance for the executive Directors. Together with the executive Directors who have intimate knowledge of the business, the Board is constituted of individuals who are committed to business integrity and professionalism in all its activities and have a proper understanding of and competence to deal with the current and emerging business issues.

The roles of Chairman and Chief Executive Officer are separated. The Chairman is responsible for running the Board and ensures that all Directors receive sufficient relevant information on financial and non-financial matters to enable them to participate actively in Board decisions whereas the Chief Executive Officer is responsible for the day to day management of the business as well as the implementation of Board policies and decisions.

The Revised Code recommends the appointment of a senior independent non-executive director to whom concerns may be conveyed. As explained in the compliance statement above, the Board has not appointed any independent non-executive Director to fulfil the role.

The Board is satisfied that the current Board composition fairly reflects the interests of minority shareholders in the Company.

Supply of Information The Board recognises that the decision making process is highly contingent on the quality of information furnished.

As such, all Directors have unrestricted access to any information pertaining to the Company and the Group.

The Chairman ensures that all Directors have full and timely access to information with Board papers distributed in advance of meetings. This ensures that Directors have sufficient time to appreciate issues to be deliberated at the Board meeting and expedites the decision making process.

Every Director also has unhindered access to the advice and services of the Company Secretaries. The Board believes that the current Company Secretaries are capable of carrying out their duties to ensure the effective functioning of the Board. In the event that either of the Company Secretaries fail to fulfil his/her functions effectively, the terms of appointment permit his/her removal and the appointment of a successor by the Board as a whole.

The Executive Committee, Audit Committee, Remuneration Committee and Nomination Committee play a pivotal role in channeling pertinent operational and assurance related issues to the Board. The Committees partly function as a filter to ensure that only pertinent matters are tabled at the Board level. There is also a formal procedure sanctioned by the Board of Directors, whether as a full board or in their individual capacity, for Directors to obtain independent professional advice at the Company’s expense.

APPOINTMENTS TO THE BOARD

Nomination Committee The Nomination Committee comprised the following members during the year:

Yong Yoon Fook, Dick - Chairman, Independent Non-Executive Director Danny Goon Siew Cheang - Independent Non-Executive Director

The Nomination Committee consists entirely of non-executive Directors, all of whom are independent.

The Nomination Committee is empowered by the Board and its terms of reference are to bring to the Board recommendations as to the appointment of new Directors. The Committee also keeps under review the Board structure, size and composition as well as considering the Board succession planning.

29

ANNUAL REPORT 2010



APPOINTMENTS TO THE BOARD (cont’d)

Nomination Committee (cont’d) The Nomination Committee systematically assesses the effectiveness of the Board, the committees of the Board

and the contribution of each individual Director on an annual basis. All assessments and evaluations carried out by the Nomination Committee in the discharge of all its functions are documented.

The Nomination Committee met once during the financial year. The Chairman of the Board and Dato’ Seri Nazir Ariff bin Mushir Ariff, our Independent Non-Executive Director, were invited by the Chairman of the Nomination Committee to attend the meeting.

The Terms of Reference of the Nomination Committee is set out in the Nomination Committee : Terms of Reference section of this Annual Report.

Appointment Process The Board through the Nomination Committee’s annual appraisal believes that the current composition of the Board

brings the required mix of skills and core competencies required for the Board to discharge its duties effectively.

New appointees will be considered and evaluated by the Nomination Committee. The Committee will then recommend the candidates to be approved and appointed by the Board. The Company Secretaries will ensure that all appointments are properly made and that legal and regulatory obligations are met.

Directors’ Training The Board through the Nomination Committee ensures that it recruits to the Board only individuals of sufficient calibre,

knowledge and experience to fulfil the duties of a Director appropriately. All Directors have attended and successfully completed the Mandatory Accreditation Programme (MAP) conducted currently by Bursatra Sdn Bhd. During the year under review, the Directors have attended various training programmes and seminars as set out below to enhance their knowledge and expertise:

• GST Transition Project and IFRS Convergence• Forum on “The Challenges of Implementing FRS 139”• Audit Committee Institute Roundtable Discussion titled : Going Forward : Risk & Reform – Implications for Audit

Committee Oversight• 2010 Tax Updates• The 6th Asia Pacific Audit & Governance Summit 2010• 2010 National Conference on Internal Auditing – New Directions for the New Decade• National Tax Seminar 2010• 18th World Congress of Accountants 2010 – Accountants : Sustaining Value Creation• Introduction to Forensic Accounting & Forensic Auditing• KPMG Tax Seminar 2010• Launch of the CG Week and Corporate Governance Roundtable

The Directors will continue to undergo other relevant training programmes to further enhance their skills and knowledge where relevant.

Re - Election The Articles of Association provide that at least one-third of the Board is subject to retirement by rotation at each

Annual General Meeting (“AGM”). The Directors to retire in each year are the Directors who have been longest in office since their appointment or re-appointment. A retiring Director is eligible for re-appointment. This provides an opportunity for shareholders to renew their mandates. The election of each Director is voted on separately. To assist shareholders in their decision, sufficient information such as personal profile and the shareholdings in the Group of each Director standing for election are furnished in a separate statement accompanying the Notice of the AGM.

Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act 1965.

30



B. DIRECTORS’ REMUNERATION

Remuneration Committee The Remuneration Committee comprised the following members during the year:

Dato’ Seri Nazir Ariff bin Mushir Ariff - Chairman Independent Non-Executive Director

Danny Goon Siew Cheang - Independent Non-Executive Director

Yong Yoon Fook, Dick - Independent Non-Executive Director

Tan Sri Dato’ Seri Fumihiko Konishi - Chairman of the Board

The Remuneration Committee met two (2) times during the financial year. The meetings were attended by all the members of the Remuneration Committee.

The Remuneration Committee consists mainly of non-executive Directors, the majority of whom are independent.

The Remuneration Committee is responsible for inter alia recommending to the Board the remuneration framework for Directors as well as the remuneration packages of executive Directors. The Terms of Reference of the Remuneration Committee is set out in the Remuneration Committee : Terms of Reference section of this Annual Report.

The executive Directors, during the year, did not participate directly in any way in determining their individual remuneration. The Board as a whole determines the remuneration of non-executive Directors with individual Directors abstaining from decisions in respect of their individual remuneration.

The policy practised on Directors’ remuneration by the Remuneration Committee is to provide the remuneration packages necessary to attract, retain and motivate Directors of the quality required to manage the business of the Company and to align the interest of the Directors with those of the shareholders.

Further details of Directors’ remuneration are set out below and in the Notes to the Financial Statements.

Details of the Directors’ Remuneration Details of the nature and amount of each major element of the remuneration of each Director of the Company holding

office during the financial year 2010 are as follows:

1. Aggregate remuneration of Directors categorised into appropriate components:

In RM Fees Salaries Bonus Benefits in Kind

Others Total

Company *- Executive Directors 380,000 596,100 67,061 28,770 172,544 1,244,475- Non-Executive Directors 150,000 – – – 75,000 225,000

Subtotal 530,000 596,100 67,061 28,770 247,544 1,469,475

Subsidiaries- Executive Directors 1,613,060 2,103,480 333,281 79,455 422,151 4,551,427- Non-Executive Directors – – – – – –

Subtotal 1,613,060 2,103,480 333,281 79,455 422,151 4,551,427

Total 2,143,060 2,699,580 400,342 108,225 669,695 6,020,902

*Subject to shareholders’ approval at this coming Annual General Meeting.

31

ANNUAL REPORT 2010


B. DIRECTORS’ REMUNERATION (cont’d)

Details of the Directors’ Remuneration (cont’d)

2. Number of Directors whose remuneration falls into the following bands:-

Number of Directors

Executive Non-Executive

RM50,001 to RM100,000 – 3

RM750,001 to RM800,000 2 –

RM900,001 to RM950,000 1 –

RM1,300,001 to RM1,350,000 1 –

RM2,000,001 to RM2,050,000 1 –

Executive Directors receive bonuses based on the achievement of specific goals related to the performance of the Group (including operational results). Independent Non-Executive Directors do not receive any performance related remuneration.

C. SHAREHOLDERS

The Company continues to build shareholders’ confidence by maintaining an active dialogue with them with the intention of giving shareholders as much as possible, a clear and complete picture of the Company’s performance and position.

The key element of the Company’s dialogue with its shareholders is the opportunity to gather views of, and answer questions from, both individual and institutional shareholders on all issues relevant to the Company at the AGM. It is also a requirement for the Company to send the Notice of the AGM and related papers to shareholders at least twenty one (21) days before the meeting. At the AGM, shareholders are encouraged to ask questions both about the resolutions being proposed or about the Group’s operations in general. Where it is not possible to provide immediate answers, the Chairman will undertake to furnish the shareholder with a written answer after the AGM. The Chairman of the Board also addresses the shareholders on the review of the Group’s operations for the financial year and outlines the prospects of the Group for the subsequent financial year.

Press conferences are also held to brief members of the media on key events of the Company. In addition, throughout the year, the Company has programmes for meetings or interviews with the investment community or press. The Company also institutionalised an Investors’ Newsletter which is sent to the investment community, shareholders and the press. This Investors’ Newsletter provides updates on the Group’s results and developments of the core business divisions on a quarterly basis.

The Company’s website, www.texchemgroup.com provides a comprehensive avenue for information dissemination, such as dedicated sections on corporate information including financial information, press releases and company news. Shareholders are able to put questions to the Company through its email published in the website and the Company will reply accordingly.

While the Company endeavours to provide as much information as possible to its shareholders and stakeholders, it is mindful of legal and regulatory framework governing the release of material and price-sensitive information. Such material and price-sensitive information are not released unless it has been duly announced or made public through proper channels.

32



D. ACCOUNTABILITY AND AUDIT

Financial Reporting The Board aims to provide and present a balanced and meaningful assessment of the Group’s financial performance

and prospects at the end of the financial year, primarily through the annual and quarterly financial statements to Bursa Malaysia as well as the President/Chief Executive Officer’s Message in the Annual Report. The Board is assisted by the Audit Committee to oversee the Group’s financial reporting processes and the quality of its financial reporting.

Directors’ Responsibility Statement in Respect of The Preparation of The Audited Financial Statements The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of

the Group and of the Company as at the end of the accounting period and of the operations results and cash flows for period then ended. In preparing the financial statements, the Directors have ensured that the applicable approved accounting standards for entities other than private entities issued by the Malaysian Accounting Standards Board and the provisions of the Companies Act, 1965 have been applied.

In preparing the financial statements, the Directors have selected and applied consistently suitable accounting policies and made reasonable and prudent judgements and estimates. The Directors also have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Internal Control The Board acknowledges its responsibilities for the Group’s systems of internal control covering not only financial

controls but also operational and compliance controls as well as risk management.

The Statement on Internal Control set out in that particular section of this Annual Report provides an overview on the state of internal controls within the Group.

Relationship with External Auditors The external auditors of the Company fulfil an essential role on behalf of Company’s shareholders in giving an

assurance to the shareholders of the reliability of the financial statements of the Group.

The external auditors have an obligation to bring to the attention of the Board of Directors, the Audit Committee and Company’s management any significant weaknesses in the Company’s system of reporting, internal control and compliance with the applicable approved accounting standards for entities other than private entities issued by the Malaysian Accounting Standards Board and regulatory requirements. The external auditors of the Company are invited to attend all of the Audit Committee’s meetings. During the year, the non-audit fees incurred by the Company and its subsidiaries for services rendered by the external auditors of the Company and its affiliated firms was approximately RM119,000 for providing corporate tax advisory and compliance services, preparation, review and submission of tax returns, attending audit committee meetings and reviewing of group consolidated financial statements and Statement on Internal Control.

The key features underlying the relationship of the Audit Committee with the external auditors are included in the Audit Committee’s terms of reference as detailed in the Audit Committee Statement in this Annual Report.

A summary of the activities of the Audit Committee during the financial year are set out in the Audit Committee Statement.

33

ANNUAL REPORT 2010

STATEMENT ON INTERNAL CONTROL

The Board is ultimately responsible for the Group’s overall system of corporate governance including risk management and internal controls, financial or otherwise which:

• Provides reasonable assurance on the achievement of the Group’s objectives and• Ensures the effectiveness and efficiency of operations, reliability of financial information and compliance with laws

and regulations.

The Board recognises that reviewing the Group’s system of internal controls is a concerted and ongoing process, designed to manage, rather than eliminate the risk of failure to achieve corporate objectives. Accordingly, it can provide only reasonable but not absolute assurance against material misstatement or loss. The system of internal controls includes, inter-alia, financial, budgetary, organisational, operational and compliance controls.

In order to achieve a strong control environment, the Group has established an organisational structure with defined lines of responsibility and delegation of authority. A hierarchical reporting system is in place which includes the establishment of appropriate authority limits, proper segregation of staff duties, annual budgeting, the monthly reporting of variances between the actual and budgeted results for corrective action to be taken and human resource management policies.

Reviewing the Group’s system of internal controls with the aim to strengthen the control environment is carried out regularly by the Internal Audit and the respective Divisional management in conjunction with the Audit Committee.

The Group has an Enterprise Risk Management (ERM) system as an integral part of the Group’s daily operations and long term strategic management practice. This ERM system is a continuous and systematic method to identify, assess, treat and monitor those significant risks affecting the Group’s business and achievement of its objectives.

Risks may be associated with a variety of internal or external factors including control breakdowns, disruption in information systems, competition, natural catastrophe and regulatory requirements. For the purpose of risk management, they are classified into two categories namely Type A which are catastrophic risks and Type B are those risks that hinder the Group from achieving its short-term objectives.

To foster greater ownership and effective management of risks, the respective Divisional Management is primarily responsible for the identification and management of major risks affecting their own business units including the design and implementation of suitable risk controls.

The entire ERM process is reviewed by the Divisional and Corporate management every half yearly in which significant risks which may inflict the Group in the ensuing 12 months are re-evaluated according to their likelihood of occurrence and severity of consequence. Existing controls to treat and manage these risks are then re-assessed and strengthened. The Chief Risk Officer would update the Board every 6 months on the Group’s ERM process and effectiveness of the risk controls in place.

The Group has an in-house Internal Audit Department which provides regular, independent and objective assurance to the Audit Committee and the Board that:

• The internal controls of the Group are appropriate for its business and operating as intended• Suitable controls are in place to manage major risks• Management responses to these risks are acceptable

During internal audit assignments, the Internal Audit Department also undertook, wherever relevant, the following:

• Assessment of operating efficiencies• Ensure compliance with the Group’s policies and relevant legislations

There were no material losses incurred during the current financial year as a result of weaknesses in internal control.

This Statement is issued in accordance with a resolution of Directors dated 26 April 2011.

34


OTHER DISCLOSURES

CORPORATE SOCIAL RESPONSIBILITY STATEMENT

TRB believes that sustainable corporate success requires the highest standard of corporate behaviour including measuring up to public expectations on corporate social responsibilities. In 2010, TRB continues with this commitment as a good and responsible corporate citizen.

Contribution to the community is important in TRB’s view as without the community, a company cannot sustain its businesses. In 2010, to foster and enhance goodwill and unity amongst the community, TRB had supported the Penang Japanese Association in conjunction with the Bon Odori and Sakura Charity Festival. Additionally, Anti Dengue Campaigns were organised in schools in various states in Malaysia in collaboration with the Ministry of Education to instill awareness amongst the younger generation on the dangers of Aedes.

TRB Group recognises that various of its activities may have an impact on the environment. Consequently, at all plants, TRB Group continues to ensure strict compliance with the environmental laws governing plant operations and maintenance in areas relating to environmental standards, emission standards, noise level management and treatment of plant effluents and waste water. Eight of TRB Group’s plants are certified with the international environmental management systems standard, ISO 14001:2004 Environmental Management System.

Shareholders of any company are a company’s lifeline since shareholders are stakeholders who believe in the company and have invested their hard-earned monies to support the company. As the TRB Group values all its shareholders who have invested into TRB, TRB takes its duties and responsibilities to them seriously. In line with this and to continuously be more transparent, since 2004, TRB has been sending newsletters to its shareholders to keep them updated on the developments of the TRB Group so that its shareholders can make informed decisions. These efforts continued in year 2010.

People are crucial in any company’s continuing growth and success. TRB Group recognises this and as a large workforce of the TRB Group are female staff, in October 1989, the Texchem Ladies’ Club was incepted, of which all ladies of the TRB Group are automatically members, with the objective of grooming female staff to be all rounders who are professional in all aspects of their day-to-day dealings, recognised and respected in the company and community. In year 2010, the Texchem Ladies Affairs (formerly known as Texchem Ladies’ Club) continued with its objective to hone the professional and personal skills of its female staff and promote a healthier lifestyle.

Communication between management and employees of the TRB Group is also crucial to the TRB Group’s success. For this purpose, an in-house magazine called “Texview” has been published on a quarterly basis since October 1989 to promote such communication. Besides informing the employees of the happenings and developments in the TRB Group, employees are free to share their creative ideas and air their views on various issues such as poems, new sport activities, various learning experiences and new self-developments.

The TRB Group is committed to providing and maintaining a healthy and safe work environment for its employees. Occupational Safety and Health Campaigns are implemented to ensure continuous improvements in health and safety in the TRB Group’s business operations. At the corporate head office of the TRB Group, safety system checks and drills are regularly conducted on all safety related equipment.

Going forward, as a socially responsible citizen of the business community, TRB is determined to become more engaged in being socially responsible by approaching the process of Corporate Social Responsibility as part of how the TRB Group family normally works and thinks.

STATUS OF UTILISATION OF PROCEEDS FROM THE ISSUANCE OF PRIVATE DEBT SECURITIES OF UP TO RM100 MILLION

The Company had obtained an approval dated 3 February 2005 from the Securities Commission (“SC”) for the issuance of private debt securities of up to RM100 million (“PDS Programme”) which was at that material time made up of Commercial Papers (“CPs”) of up to RM60 million and/or Medium Term Notes (“MTNs”) of up to RM100 million.

Subsequently, the Company had applied to the SC on 16 October 2006 for the removal of the CPs sub-limit of RM60 million and change the CPs’ limit to RM100 million. On 10 November 2006, the SC had approved the said removal and change whereby the PDS Programme can now consist of CPs of up to RM100 million and/or MTNs of up to RM100 million.

35

ANNUAL REPORT 2010

OTHER DISCLOSURES (CONT’D)

STATUS OF UTILISATION OF PROCEEDS FROM THE ISSUANCE OF PRIVATE DEBT SECURITIES OF UP TO RM100 MILLION (cont’d)

The details of the CPs sub-limit are as follows :

Date Sub-limitRM’000

As at 31 March 2007 100,000As at 31 March 2008 85,000As at 31 March 2009 70,000As at 31 March 2010 50,000As at 31 March 2011 30,000

Pursuant to the PDS Programme, the Company has to date issued CPs amounting to RM30 million. As at 26 April 2011, the proceeds from the issuance of RM30 million in previous years have been used to refinance the existing bank borrowings, finance acquisition of assets and for working capital.

PARTICULARS OF MATERIAL CONTRACTS INVOLVING DIRECTORS AND MAJOR SHAREHOLDERS’ INTERESTS DURING THE FINANCIAL YEAR

Save and except for the following, during the financial year, there were no material contracts entered into by the Company and/or its subsidiaries involving directors and major shareholders’ interests (not being contracts entered into in the ordinary course of business) :-

(a) Sea Master Trading Co. Sdn. Bhd. (“SMT”), a wholly owned subsidiary of Texchem Food Sdn. Bhd. (“TFSB”) which in turn is a wholly owned subsidiary of the Company, had on 17 September 2010 made an offer (“Offer”) to the following parties to acquire the entire issued and paid-up share capital (“Issued Shares”) of Seapack Food Sdn. Bhd. (“SFSB”), an approximately 95.92% owned subsidiary of Texchem Corporation Sdn. Bhd. (“Texcorp”), for a total cash consideration of RM100,000.00 (“Proposed Acquisition”):

Name of Vendors No. of Issued Shares of SFSB

Total Offer Price(RM)

1. Tan Sri Dato’ Seri Fumihiko Konishi(1), (2) 1,250 1.412. Mr. Brian Tan Guan Hooi(1) 1,250 1.413. Mr. Lim Kwee Seng 1,000 1.134. Encik Ridzuan Bin Ismail 1,000 1.135. Mr. Tang Ying Hoe 1,000 1.136. Texcorp(3) 84,844,649 95,923.707. Sugiyo Co. Ltd. 3,598,000 4,067.838. Mr. Masahito Shibata 1,000 1.139. The Estate of Yoshito Sugino (Deceased) 1,000 1.13

Total 88,450,149 100,000.00

Notes: (1) Tan Sri Dato’ Seri Fumihiko Konishi and Mr. Brian Tan Guan Hooi are directors of TFSB, SMT, SFSB and the Company. (2) Tan Sri Dato’ Seri Fumihiko Konishi is a major shareholder of the Company. He is also deemed a major shareholder

of Texcorp. Therefore he is deemed a major shareholder of the subsidiaries of the Company and of Texcorp. (3) Texcorp is a major shareholder of the Company and therefore deemed a major shareholder of the subsidiaries of

the Company.

Pursuant to the Proposed Acquisition, SMT assumed the net liabilities of SFSB amounting to approximately RM3,660,000.00 as at 31 August 2010.

(b) Share Sale Agreement dated 25 November 2010 between Texcorp and Sushi Kin Sdn. Bhd. (“SKSB”) for the acquisition of the entire issued and paid-up share capital of Miraku Sdn. Bhd. comprising 1,500,000 ordinary shares of RM1.00 each (par value) by SKSB from Texcorp at a total cash consideration of RM2,000,000.00 only.

RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE

Save as disclosed in Note 23 of the Notes to the Financial Statements as set out in this Annual Report and the Circular to Shareholders (Recurrent Related Party Transactions) dated 4th May 2011, there is no other transaction conducted pursuant to the shareholders’ mandate during the financial year ended 31 December 2010.

36


ANALYSIS OF SHAREHOLDINGSAs at 31 March 2011

Authorised Capital - RM500,000,000.00 Issued and Paid-up Capital - RM124,099,235.00 Class of Shares - Ordinary shares of RM1.00 each Voting Rights - On a show of hands - One vote for every shareholder - On a poll - One vote for every ordinary share held Number of Shareholders - 3,009

SHAREHOLDINGS STATISTICS

Size of Holdings No. of Shareholders Total Holdings %

Less than 100 162 7,190 0.006100 - 1,000 275 181,613 0.1461,001 - 10,000 2,024 7,678,008 6.18710,001 - 100,000 493 11,995,253 9.666100,001 to less than 5% of issued shares 51 43,426,844 34.9945% and above of issued shares 4 60,810,327 49.001

Total 3,009 124,099,235 100

SUBSTANTIAL SHAREHOLDERS AS PER REGISTER OF SUBSTANTIAL SHAREHOLDERS

No. NameNo. of Shares Held in the Company

Direct % Indirect %1 Texchem Corporation Sdn. Bhd. 25,564,709 20.60 – –2 Texchem Holdings Sdn. Bhd. 38,940,054 31.38 25,564,709 (a) 20.60 (a)

3 Tan Sri Dato’ Seri Fumihiko Konishi 6,932,018 5.59 69,602,285 (b) 56.09 (b)

DIRECTORS’ INTERESTS IN SHARES

No.. Name No. of Shares Held in the Company

Direct % Indirect %1 Tan Sri Dato’ Seri Fumihiko Konishi 6,932,018 5.59 69,602,285 (b) 56.09 (b)

2 Yap Kee Keong 8,250 0.01 – –3 Brian Tan Guan Hooi 6,039 0.01 – –

Notes:

(a) Deemed interest by virtue of Texchem Holdings Sdn. Bhd.’s direct interest in Texchem Corporation Sdn. Bhd. pursuant to Section 6A of the Companies Act, 1965 (“Act”).

(b) Deemed interest by virtue of Tan Sri Dato’ Seri Fumihiko Konishi’s direct and/or indirect interest in Texchem Holdings Sdn. Bhd. and Texchem Corporation Sdn. Bhd. (both are major shareholders of the Company) and via persons connected with him, ie. his wife, Puan Sri Datin Seri Atsuko Konishi and his daughters, Ms Mika Konishi and Ms Mari Konishi (all are shareholders of the Company) pursuant to Sections 6A and 122A of the Act respectively.

The details of the Directors’ interests (including the interests of the spouses and/or children of the Directors) in the Company’s related corporations as at 31 March 2011 (of those who were or are Directors during the financial year and the period commencing from 1 January 2011 until 31 March 2011), are the same as the details set out in the sections on Directors’ Interests and Subsequent Events in the Directors’ Report of this Annual Report.

37

ANNUAL REPORT 2010

ANALYSIS OF SHAREHOLDINGS (CONT’D)As at 31 March 2011

THIRTY LARGEST SHAREHOLDERS

No. NameNo. of

Shares % of Shares

1 CIMB Group Nominees (Tempatan) Sdn. Bhd. 30,000,000 24.174Pledged Securities Account For Texchem Holdings Sdn. Bhd. (49857 Pegm)

2 Texchem Corporation Sdn. Bhd. 13,314,509 10.7293 HDM Nominees (Tempatan) Sdn. Bhd. 10,563,800 8.512

Pledged Securities Account for Texchem Corporation Sdn. Bhd. (m01)4 Fumihiko Konishi 6,932,018 5.5865 Permodalan Nasional Berhad 5,500,000 4.4326 Texchem Holdings Sdn. Bhd. 3,440,053 2.7727 Citigroup Nominees (Tempatan) Sdn. Bhd. 3,177,800 2.561

employees Provident Fund Board (PHeim)8 Bank Perusahaan Kecil & Sederhana Malaysia Berhad 2,905,900 2.3429 Mayban Securities Nominees (Tempatan) Sdn. Bhd. 2,772,468 2.234

malayan Banking Berhad For Texchem Holdings Sdn. Bhd. (25H)10 Mayban Nominees (Tempatan) Sdn. Bhd. 2,727,533 2.198

Pledged Securities Account For Texchem Holdings Sdn. Bhd. (407013500997)

11 Blood Protection (Holding) Co. Ltd. 2,339,884 1.88512 Atsuko Konishi 2,234,694 1.80113 Man Bin Mat 2,051,500 1.65314 HDM Nominees (Tempatan) Sdn. Bhd. 1,685,300 1.358

Pledged Securities Account For Texchem Corporation Sdn. Bhd. (m01)15 Mika Konishi 1,431,414 1.15316 Mari Konishi 1,431,414 1.15317 Multi-Purpose Holdings Berhad 1,102,000 0.88818 Koperasi Angkatan Tentera Malaysia Berhad 1,100,000 0.88619 CIMB Group Nominees (Asing) Sdn. Bhd. 999,702 0.806

Rapro Pack Co. Ltd. (49749 HdoF)

20 Mayban Nominees (Tempatan) Sdn. Bhd. 590,400 0.476Lay man Wan @ Lai mun Wan

21 Loh Phoy Yen Holdings Sdn. Bhd. 550,000 0.44322 Fumakilla Limited Japan 436,194 0.35123 Chang Eun, Ra 426,250 0.34324 Cheang Lai Seong 421,500 0.34025 United Formula Sdn. Bhd. 369,300 0.29826 Yutaka Yamanaka 359,893 0.29027 Marco Andrighetto 288,750 0.23328 Tam Lup Quon 287,775 0.23229 Lee Kuan Chen 265,500 0.21430 Yasuhiro Nishida 264,000 0.213

Total: 99,969,551 80.556

38


PARTICULARS OF PROPERTIES Held as at 31 December 2010

Location Tenure Area Description

ApproximateAge of Building

Expiry Date

Date of Acquisition/* Revaluation

Net bookValue

(RM’000)

Texchem Materials Sdn. Bhd.No 6 & 6A, Jalan Tampoi 7/4Kawasan Perusahaan Tampoi81200 Johor BahruJohor Darul Takzim

Freehold 110,462sq ft

Office &Warehouse

22 years N/A 2 September 1999

5,949

Texchem-Pack (M) Bhd.No. 1465, Mukim 11Lorong Perusahaan Maju 6Fasa 4, Kawasan Perindustrian Perai 13600 Perai, Penang

Leasehold60 years

4acres

Office & Factory

Between9 to 18 years

29 June 2052

*1 December 1994

7,374

Blok F107, Unit No. 4-2Jalan Pelangi 2, Taman Pelangi13600 Perai, Penang

Leasehold99 years

700 sq ft

Flat 15 years 22 April 2092

31 March 1996

33

Texchem-Pack (KL) Sdn. Bhd.No.1, Persiaran PerusahaanSeksyen 23, 40000 Shah AlamSelangor Darul Ehsan

Leasehold99 years

15,581sq m

Office & Factory

21 years 30 May 2098

*31 March 1992

6,304

Texchem-Pack (PP) Sdn. Bhd.Part of Lot 1241, Phase IIIBayan Lepas Free Industrial Zone11900 Penang

Leasehold60 years

3.78acres

Office & Factory

Between11 to 31 years

27 August 2041

*26 April 1983

5,466

Texchem-Pack (Johor) Sdn. Bhd.No. 3, Jalan Mutiara 7Taman Perindustrian Plentong81750 Masai, Johor Darul Takzim

Freehold 42,188sq ft

Office & Factory

Between 14 to 15 years

N/A 21 October 1998

4,383

Eye Graphic Sdn. Bhd.5, Lorong Perusahaan Maju 11Taman Perusahaan Pelangi13600 Perai, Penang

Freehold 1,073sq m

Office & Factory

14 years N/A 16 April 1996

995

Texchem-Pack (Bangi) Sdn. Bhd. Lot 3, Jalan P/6Kawasan Perindustrian Bangi43650 Bandar Baru BangiSelangor Darul Ehsan

Leasehold99 years

0.81ha

Office,Factory &Store

19 years 29 September 2086

*7 September 2004

5,741

Texchem-Pack (Thailand) Co., Ltd.234-237 Moo 2Bangpa-in Industrial EstateKlong-jigBangpa-in, Ayutthaya13160 Thailand

Freehold 34,648sq m

Office &Factory

17 years N/A 3 May 2007

12,919

Fumakilla Malaysia BerhadPlot No. 256, Mukim 1Lorong Perusahaan 10Perai Industrial Estate13600 Perai, Penang

Leasehold60 years

2,821sq m

Office &Factory

27 years 3 February 2035

*31 December 1994

1,193

39

ANNUAL REPORT 2010

PARTICULARS OF PROPERTIES (CONT’D) Held as at 31 December 2010

Location Tenure Area Description

ApproximateAge of Building

Expiry Date

Date of Acquisition/* Revaluation

Net bookValue

(RM’000)

Fumakilla Malaysia BerhadPlot No. 256Tingkat Perusahaan 5Kawasan Perindustrian Perai 213600 Perai, Penang

Leasehold60 years

286,248sq ft

Office,Factory &Warehouse

Between28 to 31years

7 March 20426 March 20413 February 2035

*31 December 1994

12,375

Flat Units No. C-2-1 to C-2-8 (inclusive) andFlat Units No. C-3-1 to C-3-8 (inclusive)Lorong Binjai, Taman Belimbing II14000 Bukit Mertajam, Penang

Freehold 1,200sq m

16 units ofThree (3)Bedroom Low MediumCost Flats

15 years N/A 12 February 1996

773

Technopia (Thailand) Ltd.323 Moo 6Ratchasima-Chokchai RoadSuranaree Industrial ProjectNong Rawiang SubdistrictMuang DistrictNakhonratchasima Province30000 Thailand

Freehold 28,800sq m

Office,Factory &Warehouse

11 years N/A 12 October 1999

6,117

Ting Tai Industries (Malaysia) Sdn. BerhadLot 885, Kg KelewekJalan Jedok 17500 Tanah Merah Kelantan Darul Naim

Leasehold 66 years

12,141sq m

Factory 21 years 26 October 2062

*15 March 1995

631

Sea Master Trading Co. Sdn. Bhd.47, Jalan TembikaiTaman Mutiara14000 Bukit Mertajam, Penang

Freehold 111sq m

3-StoreyShophouse

22 years N/A 1 July 1995

474

No. 2446, Mk1Solok Perusahaan SatuKawasan Perindustrian Perai13600 Perai, Penang

Leasehold60 years

1 acre Office &Factory

28 years 25 July 2042

15 July 1983

972

Plot 78(a) Bukit Minyak Industrial ParkDaerah Seberang Perai TengahPenang

Leasehold60 years

8,108.26sq ft

Factory 28 years 20 September 2070

7 May 2008

101

Ocean Pioneer Food Sdn. Bhd.31-P, Jalan PelantarPantai Remis34900 Perak Darul Ridzuan

Leasehold60 years

1.23acres

Office &Factory

33 years 28 November 2054

29 November 1994

579

PT Technopia JakartaJalan Terusan InterchangeDesa AnggaditaKecamatan KlariKabupaten Karawang41371 Jawa BaratIndonesia

Leasehold30 years

46,080sq m

Office &Factory

8 Years 28 August 2032

28 August 2002

9,139

40


FINANCIAL STATEMENTSDirectors’ Report 41

Consolidated Statement Of Financial Position 47

Consolidated Income Statement 48

Consolidated Statement Of Comprehensive Income 49

Consolidated Statement Of Changes In Equity 50

Consolidated Statement Of Cash Flows 52

Statement Of Financial Position 55

Income Statement 56

Statement Of Comprehensive Income 56

Statement Of Changes In Equity 57

Statement Of Cash Flows 58

Notes To The Financial Statements 60

Statement By Directors 121

Statutory Declaration 122

Independent Auditors’ Report 123

41

ANNUAL REPORT 2010

DIRECTORS’ REPORT for the year ended 31 December 2010

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the year ended 31 December 2010.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding whilst the principal activities of the subsidiaries are disclosed in Note 4 to the financial statements.

There has been no significant change in the nature of these activities during the financial year.

RESULTS

Group CompanyRM RM

(Loss)/Profit for the year attributable to :

Owners of the Company (490,972) 766,048Non-controlling interests (2,369,571) –

(2,860,543) 766,048

RESERVES AND PROVISIONS

There were no material transfer to or from reserves and provisions during the financial year except as disclosed in the financial statements.

DIVIDENDS

Since the end of the previous financial year, the Company paid :

i) a second interim dividend of 2% per share less 25% tax, totalling RM1,861,489 in respect of the financial year ended 31 December 2009 on 19 January 2010;

ii) a first interim dividend of 2% per share less 25% tax, totalling RM1,861,488 in respect of the financial year ended 31 December 2010 on 1 September 2010; and

iii) a second interim dividend of 2% per share less 25% tax, totalling RM1,861,488 in respect of the financial year ended 31 December 2010 on 27 January 2011.

No final dividend has been recommended by the Directors for the financial year ended 31 December 2010.

42


DIRECTORS’ REPORT (CONT’D) for the year ended 31 December 2010

DIRECTORS OF THE COMPANY

Directors who served since the date of the last report are :

• Tan Sri Dato’ Seri Fumihiko Konishi, PSM, DGPN, DSPN, DJN • Lee Siew Khee, Jeffrey • Wong Kin Chai• Yap Kee Keong• Brian Tan Guan Hooi• Dato’ Seri Nazir Ariff Bin Mushir Ariff, DGPN, DMPN, DSPN, PKT, PJM, JP• Danny Goon Siew Cheang• Yong Yoon Fook, Dick

In accordance with Article 123 of the Company’s Articles of Association, Mr Wong Kin Chai, Mr Yap Kee Keong and Mr Danny Goon Siew Cheang will retire by rotation from the Board of Directors at the forthcoming Annual General Meeting, and being eligible, offer themselves for re-election.

DIRECTORS’ INTERESTS

The interests in the shares in the Company and its related corporations (other than wholly owned subsidiaries) of those who were Directors at the end of the financial year (including the interests of the spouses and/or children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows :

Balance at Balance at1.1.2010 Bought (Sold) 31.12.2010

The Company Ordinary shares of RM1 each

- Direct interestTan Sri Dato’ Seri Fumihiko Konishi 6,932,018 – – 6,932,018Yap Kee Keong 8,250 – – 8,250Brian Tan Guan Hooi 6,039 – – 6,039

- Deemed interestTan Sri Dato’ Seri Fumihiko Konishi 69,597,585(h) 1,500(h) – 69,599,085(h)

Related corporations

Tan Sri Dato’ Seri Fumihiko Konishi- Direct interest

Ocean Pioneer Food Sdn. Bhd. 1,000(a) – – 1,000(a)

Brian Tan Guan Hooi- Direct interest

Texchem Homey Sdn. Bhd. 1(b) – – 1(b)

43

ANNUAL REPORT 2010


DIRECTORS’ INTERESTS (cont’d)

Balance at Balance at1.1.2010 Bought (Sold) 31.12.2010

Ordinary shares of Kyats 1,000 eachRelated corporations

Tan Sri Dato’ Seri Fumihiko Konishi- Direct interest

Myanmar Texchem Limited 1(c) – – 1(c)


Myanmar Texcorp Limited 1(d) – – 1(d)

Ordinary shares of USD 1 eachTan Sri Dato’ Seri Fumihiko Konishi

- Direct interestPT. Texchem Indonesia 1,000(c) – – 1,000(c)

Ordinary shares of USD 5,000 eachTan Sri Dato’ Seri Fumihiko Konishi

- Direct interestPT. Technopia Jakarta 1(e) – – 1(e)

Ordinary shares of Thai Baht 100 eachTan Sri Dato’ Seri Fumihiko Konishi

- Direct interestTexchem Materials (Thailand) Ltd. 1(c) – – 1(c)

Technopia (Thailand) Ltd. 1(f) – – 1(f)

Texchem Consumers (Thailand) Ltd. 1(f) – – 1(f)

Texchem-Pack (Thailand) Co., Ltd. 1(g) – – 1(g)

Lee Siew Khee, Jeffrey- Direct interest

Texchem Materials (Thailand) Ltd. 1(c) – – 1(c)

Yap Kee Keong- Direct interest


Texchem-Pack (Thailand) Co., Ltd. 1(g) – – 1(g)


Texchem Consumers (Thailand) Ltd. 1(f) – – 1(f)

Technopia (Thailand) Ltd. 1(f) – – 1(f)

Wong Kin Chai- Direct interest


44



DIRECTORS’ INTERESTS (cont’d)

Notes :

(a) Shares held in trust for Sea Master Trading Co. Sdn. Bhd.(b) Share held in trust for Texchem Food Sdn. Bhd.(c) Share(s) held in trust for Texchem Materials Sdn. Bhd.(d) Share held in trust for Blood Protection Company (Malaysia) Sdn. Bhd.(e) Share held in trust for Texchem Resources Bhd. (f) Share held in trust for Fumakilla Malaysia Berhad(g) Share held in trust for Texchem-Pack (M) Bhd.(h) Deemed interest by virtue of Tan Sri Dato’ Seri Fumihiko Konishi’s direct and/or indirect interest in Texchem Holdings

Sdn. Bhd. and Texchem Corporation Sdn. Bhd. (both are major shareholders of the Company) and also via persons connected with him, i.e. his wife, Puan Sri Datin Seri Atsuko Konishi and his daughters, Ms Mika Konishi and Ms Mari Konishi (all are shareholders of the Company), pursuant to Sections 6A and 122A of the Companies Act, 1965 respectively.

By virtue of his interests in the shares in the Company, Tan Sri Dato’ Seri Fumihiko Konishi is also deemed to be interested in the shares in the Company’s related corporations to the extent that the Company has an interest.

None of the other Directors holding office at 31 December 2010 had any interest in the ordinary shares in the Company and its related corporations during the financial year.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements of the Company and its related corporations) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest other than those transactions entered in the ordinary course of business between the Company and its related corporations with companies in which a Director is deemed to have a substantial financial interest as disclosed in Note 23 to the financial statements.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

ISSUE OF SHARES AND DEBENTURES

There were no changes in the issued and paid-up capital of the Company and no debentures were in issue during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued shares of the Company during the financial year.

OTHER STATUTORY INFORMATION

Before the income statements, statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

i) all known bad debts have been written off and adequate provision made for doubtful debts, and

ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise.

45

ANNUAL REPORT 2010


OTHER STATUTORY INFORMATION (cont’d)

At the date of this report, the Directors are not aware of any circumstances:

i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts, in the Group and in the Company inadequate to any substantial extent, or

ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or

iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or

iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading.

At the date of this report, there does not exist:

i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended 31 December 2010 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

The details of such events are disclosed in Note 30 to the financial statements.

SUBSEqUENT EVENTS

The details of such events are disclosed in Note 31 to the financial statements.

46



AUDITORS

The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Tan Sri Dato’ Seri Fumihiko KonishiPSM, DGPN, DSPN, DJN

Lee Siew Khee, Jeffrey

Penang,

Date: 26 April 2011

47

ANNUAL REPORT 2010

CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2010

Note 31.12.2010 31.12.2009 1.1.2009RM RM RM

(Restated) (Restated)Assets

Property, plant and equipment 3 193,704,080 207,074,811 221,647,810Investment in associates 4 20,684,343 19,589,296 21,706,309Investment in a jointly controlled entity 4 – – –Other investments 4 – – 3,500,000Intangible assets 5 55,526,665 54,929,997 54,929,997Deferred tax assets 6 2,953,935 1,727,374 1,046,558

Total non-current assets 272,869,023 283,321,478 302,830,674

Trade and other receivables 7 220,952,566 224,293,788 214,899,415Inventories 8 74,535,358 67,669,134 80,804,828Current tax assets 15,542,356 14,530,491 10,682,497Cash and cash equivalents 9 48,912,317 63,027,267 60,221,545Assets classified as held for sale 10 7,019,249 – –

Total current assets 366,961,846 369,520,680 366,608,285

Total assets 639,830,869 652,842,158 669,438,959

EquityShare capital 11 124,099,235 124,099,235 124,099,235Reserves 12 22,245,336 32,745,570 44,322,866

Total equity attributable to owners of the Company 146,344,571 156,844,805 168,422,101

Non-controlling interests 32,907,757 35,867,816 38,850,692

Total equity 179,252,328 192,712,621 207,272,793

LiabilitiesLoans and borrowings 13 47,371,543 102,512,795 119,235,723Deferred tax liabilities 6 5,655,075 5,590,601 7,007,159Deferred liabilities 14 4,516,831 4,998,752 4,759,535

Total non-current liabilities 57,543,449 113,102,148 131,002,417

Trade and other payables 15 143,345,494 157,865,237 149,806,355Provision 16 2,862,981 2,516,476 2,190,956Loans and borrowings 13 252,452,163 182,921,353 173,547,073Current tax liabilities 2,512,966 1,862,834 1,896,388Dividend payable 1,861,488 1,861,489 3,722,977

Total current liabilities 403,035,092 347,027,389 331,163,749

Total liabilities 460,578,541 460,129,537 462,166,166

Total equity and liabilities 639,830,869 652,842,158 669,438,959

The notes on pages 60 to 120 are an integral part of these financial statements.

48


CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2010

Note 2010 2009RM RM

(Restated)Continuing operations

Revenue 17 1,058,694,813 1,007,151,513

Operating profit 17 18,947,241 11,230,021

Finance costs 19 (14,702,049) (14,364,118)

Share of loss of a jointly controlled entity (100,000) –

Share of loss of equity accounted associates (1,404,761) (2,079,162)

Profit/(Loss) before tax 2,740,431 (5,213,259)

Income tax expense 20 (5,600,974) (5,310,098)

Loss for the year (2,860,543) (10,523,357)

Attributable to :

Owners of the Company (490,972) (9,256,243)Non-controlling interests (2,369,571) (1,267,114)

Loss for the year (2,860,543) (10,523,357)

Basic loss per ordinary share (sen) 21 (0.40) (7.46)

49

ANNUAL REPORT 2010

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2010

2010 2009RM RM

Loss for the year (2,860,543) (10,523,357)

Other comprehensive income/(expense), net of tax

Foreign currency translation differences of foreign operations (6,559,020) 2,748,512

Share of other comprehensive income/(expense) of equity accounted associates, net of tax 15,167 (37,851)

Total comprehensive expense for the year (9,404,396) (7,812,696)

Total comprehensive expense attributable to :

Owners of the Company (6,743,619) (6,671,556)Non-controlling interests (2,660,777) (1,141,140)

Total comprehensive expense for the year (9,404,396) (7,812,696)


50


CO

NS

OLI

DA

TE

D S

TAT

EM

EN

T O

F C

HA

NG

ES

IN E

qU

ITY

fo

r th

e ye

ar e

nd

ed 3

1 D

ecem

ber

201

0

Att

rib

uta

ble

to

ow

ner

s o

f th

e C

om

pan

y N

on

-dis

trib

uta

ble

D

istr

ibu

tab

le

No

teS

har

eca

pit

alS

har

e p

rem

ium

Rev

alu

atio

n

rese

rve

Tran

slat

ion

re

serv

eM

erg

erre

serv

eC

apit

alre

serv

eR

etai

ned

ea

rnin

gs

Tota

l

No

n-

con

tro

llin

g

inte

rest

sTo

tal

equ

ity

RM

RM

RM

RM

RM

RM

RM

RM

RM

RM

At

1 Ja

nu

ary

2009

124,

099,

235

25,5

67,7

751,

532,

190

(1,7

40,0

50)

1,09

1,77

83,

146,

078

14,7

25,0

9516

8,42

2,10

138

,850

,692

207,

272,

793

Tota

l com

preh

ensi

ve in

com

e/(e

xpen

se) f

or t

he y

ear

––

–2,

584,

687

––

(9,2

56,2

43)

(6,6

71,5

56)

(1,1

41,1

40)

(7,8

12,6

96)

Div

iden

ds22

––

––

––

(4,6

53,7

22)

(4,6

53,7

22)

(2,4

12,2

54)

(7,0

65,9

76)

Sub

scrip

tion

of s

hare

s in

a

subs

idia

ry b

y no

n-co

ntro

lling

in

tere

sts

––

––

––

––

318,

500

318,

500

Eff

ect

of a

cqui

ring

addi

tiona

l in

tere

st in

sub

sidi

arie

s–

––

––

–(2

52,0

18)

(252

,018

)25

2,01

8–

Tran

sfer

to

capi

tal r

eser

ve–

––

––

447,

934

(447

,934

)–

––

At

31 D

ecem

ber

200

912

4,09

9,23

525

,567

,775

1,53

2,19

084

4,63

71,

091,

778

3,59

4,01

211

5,17

815

6,84

4,80

535

,867

,816

192,

712,

621

Not

e 11

Not

e 12

Not

e 12

Not

e 12

Not

e 12

Not

e 12

Not

e 12

51

ANNUAL REPORT 2010

CO

NS

OLI

DA

TE

D S

TAT

EM

EN

T O

F C

HA

NG

ES

IN E

qU

ITY

(CO

NT

’D)

for

the

year

en

ded

31

Dec

emb

er 2

010

Att

rib

uta

ble

to

ow

ner

s o

f th

e C

om

pan

y

N

on

-dis

trib

uta

ble

D

istr

ibu

tab

le

No

teS

har

eca

pit

alS

har

e p

rem

ium

Rev

alu

atio

n

rese

rve

Tra

nsl

atio

n

rese

rve

Mer

ger

rese

rve

Cap

ital

rese

rve

Ret

ain

ed

earn

ing

s/(A

ccu

mu

late

d

loss

es)

Tota

l

No

n-

con

tro

llin

g

inte

rest

sTo

tal

equ

ity

RM

RM

RM

RM

RM

RM

RM

RM

RM

RM

At

1 Ja

nu

ary

2010

124,

099,

235

25,5

67,7

751,

532,

190

844,

637

1,09

1,77

83,

594,

012

115,

178

156,

844,

805

35,8

67,8

1619

2,71

2,62

1

Tota

l com

preh

ensi

ve e

xpen

se

for

the

year

––

–(6

,252

,647

)–

–(4

90,9

72)

(6,7

43,6

19)

(2,6

60,7

77)

(9,4

04,3

96)

Div

iden

ds22

––

––

––

(3,7

22,9

76)

(3,7

22,9

76)

(416

,176

)(4

,139

,152

)

Sub

scrip

tion

of s

hare

s in

a

subs

idia

ry b

y no

n-co

ntro

lling

in

tere

sts

––

––

––

––

83,2

5583

,255

Tran

sfer

to

capi

tal r

eser

ve–

––

––

220,

688

(254

,327

)(3

3,63

9)33

,639

–

At

31 D

ecem

ber

201

012

4,09

9,23

525

,567

,775

1,53

2,19

0(5

,408

,010

)1,

091,

778

3,81

4,70

0(4

,353

,097

)14

6,34

4,57

132

,907

,757

179,

252,

328

Not

e 11

Not

e 12

Not

e 12

Not

e 12

Not

e 12

Not

e 12

Not

e 12

The

note

s on

pag

es 6

0 to

120

are

an

inte

gral

par

t of

the

se fi

nanc

ial s

tate

men

ts.

52


CONSOLIDATED STATEMENT OF CASH FLOwS for the year ended 31 December 2010

Note 2010 2009RM RM

Cash flows from operating activities

Profit/(Loss) before tax from continuing operations 2,740,431 (5,213,259)

Adjustments for :

Depreciation of property, plant and equipment 3 33,508,490 33,672,155Impairment loss on unquoted bond 4 – 3,500,000Provision for Directors’ retirement/resignation benefits 14 746,289 725,058Property, plant and equipment written off 17 289,413 1,291,799Gain on disposal of property, plant and equipment 17 (373,250) (262,812)Interest income 17 (959,940) (489,575)Impairment loss on plant and equipment 17 640,962 1,090,340Interest expense 19 14,702,049 14,364,118Share of loss of equity accounted associates 1,404,761 2,079,162Share of loss of a jointly controlled entity 100,000 –

50,058,774 55,970,245

Operating profit before changes in working capital 52,799,205 50,756,986

Changes in working capital :Inventories (8,806,258) 13,686,108Trade and other receivables (1,037,667) (10,214,193)Trade and other payables (15,764,241) 10,167,415

Cash generated from operations 27,191,039 64,396,316

Income tax paid (5,453,261) (11,161,599)Directors’ retirement/resignation benefits paid 14 (1,183,946) (488,127)

Net cash from operating activities 20,553,832 52,746,590

53

ANNUAL REPORT 2010

CONSOLIDATED STATEMENT OF CASH FLOwS (CONT’D) for the year ended 31 December 2010

Note 2010 2009RM RM

Cash flows from investing activities

Acquisition of subsidiaries, net of cash and cash equivalents A (1,741,769) –Purchase of investment in a jointly controlled entity (100,000) –Proceeds from disposal of property, plant and equipment 1,459,902 1,766,499Purchase of property, plant and equipment B (29,061,972) (20,939,186)Interest received 959,940 489,575

Net cash used in investing activities (28,483,899) (18,683,112)

Cash flows from financing activities

Drawdown of term loans 9,832,639 15,240,357Repayment of term loans (8,614,103) (11,390,391)Repayment of commercial papers (20,000,000) (10,000,000)Repayment of finance lease liabilities (1,257,481) (1,365,091)Dividends paid to

- shareholders of the Company (3,722,977) (6,515,210)- non-controlling interests (416,176) (2,412,254)

Interest paid (14,702,049) (14,364,118)Drawdown/(Repayment) of borrowings (net) 28,673,591 (906,285)Proceeds from issuance of shares to non-controlling interests 83,255 318,500Withdrawal from debt service reserve account 237,439 267,955

Net cash used in financing activities (9,885,862) (31,126,537)

Net (decrease)/increase in cash and cash equivalents (17,815,929) 2,936,941Cash and cash equivalents at 1 January 54,388,464 51,419,661Effects of exchange differences on cash and cash equivalents (1,226,661) 31,862

Cash and cash equivalents at 31 December C 35,345,874 54,388,464

NOTES :

A. Acquisition of subsidiaries

During the year, the Company acquired the following subsidiaries : ASKA Marine Products Sdn Bhd (formerly known as Surimi Master Sdn Bhd), Seapack Food Sdn Bhd and Miraku Sdn Bhd via its wholly owned subsidiaries as disclosed in Note 30 to the financial statements.

The acquisitions have the following effect on the Group’s assets and liabilities on acquisition date. There were no significant fair value adjustments made to the carrying amount of the net identifiable assets and liabilities relating to the acquisitions.

54


CONSOLIDATED STATEMENT OF CASH FLOwS (CONT’D) for the year ended 31 December 2010)

A. Acquisition of subsidiaries (cont’d)

2010

Note

Recognised values on

acquisitionRM

Property, plant and equipment 3 585,117Inventories 73,834Trade and other receivables 1,765,491Cash and cash equivalents 837,896Provisions (52,000)Trade and other payables (5,593,122)Loans and borrowings (479,665)Current tax liabilities (22,559)Deferred tax asset 3,794,831

Net identifiable assets and liabilities 909,823Goodwill on acquisition 1,190,477

Consideration paid, satisfied in cash 2,100,300

Less : Cash and cash equivalents acquired (358,531)

Net cash outflow 1,741,769

B. Purchase of property, plant and equipment

During the year, the Group acquired property, plant and equipment with an aggregate cost of RM33,906,057 (2009 : RM20,912,618) of which RM2,169,239 (2009 : RM773,887) was acquired by means of finance lease, RM418,416 (2009 : RM325,520) for provision of restoration costs and RM3,196,932 (2009 : RM940,502) remained unpaid at the end of the reporting period.

C. Cash and cash equivalents

Cash and cash equivalents included in the consolidated statement of cash flows comprise the following consolidated statement of financial position amounts :

Note 2010 2009RM RM

Short term deposits with licensed banks (excluding debt service reserve account) 1,934,795 2,793,556

Cash and bank balances 9 46,267,563 59,286,313Bank overdrafts 13 (12,856,484) (7,691,405)

35,345,874 54,388,464


55

ANNUAL REPORT 2010

STATEMENT OF FINANCIAL POSITION as at 31 December 2010

Note 2010 2009RM RM

AssetsPlant and equipment 3 1,349,519 1,819,914Investments in subsidiaries 4 246,644,764 233,066,712Investments in associates 4 26,729,303 26,729,303Investment in a jointly controlled entity 4 100,000 –Other investments 4 – –

Total non-current assets 274,823,586 261,615,929

Trade and other receivables 7 41,440,664 61,494,211Current tax assets 6,612,027 9,076,519Cash and cash equivalents 9 1,342,414 3,169,139

Total current assets 49,395,105 73,739,869

Total assets 324,218,691 335,355,798

EquityShare capital 11 124,099,235 124,099,235Reserves 12 52,691,821 55,648,749

Total equity 176,791,056 179,747,984

Loans and borrowings 13 32,435,356 88,613,583Deferred liabilities 14 969,983 831,983

Total non-current liabilities 33,405,339 89,445,566

Trade and other payables 15 18,982,581 8,713,966Loans and borrowings 13 93,178,227 55,586,793Dividend payable 1,861,488 1,861,489

Total current liabilities 114,022,296 66,162,248

Total liabilities 147,427,635 155,607,814

Total equity and liabilities 324,218,691 335,355,798


56


INCOME STATEMENT for the year ended 31 December 2010

Note 2010 2009RM RM

Revenue 17 12,762,346 16,962,081

Operating profit 17 8,481,756 10,378,335

Finance costs 19 (8,119,867) (8,677,981)

Profit before tax 361,889 1,700,354

Income tax expense 20 404,159 (382,490)

Profit for the year 766,048 1,317,864

STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2010

Note 2010 2009RM RM

Profit for the year 766,048 1,317,864

Other comprehensive income for the year – –

Total comprehensive income for the year 766,048 1,317,864


57

ANNUAL REPORT 2010

STATEMENT OF CHANGES IN EqUITY for the year ended 31 December 2010

Non-distributable Distributable

Sharecapital

Share premium

Retained earnings

Total equity

RM RM RM RM

At 1 January 2009 124,099,235 25,567,775 33,416,832 183,083,842

Total comprehensive income for the year – – 1,317,864 1,317,864

Dividends to owners of the Company (Note 22) – – (4,653,722) (4,653,722)

At 31 December 2009 124,099,235 25,567,775 30,080,974 179,747,984

Total comprehensive income for the year – – 766,048 766,048

Dividends to owners of the Company (Note 22) – – (3,722,976) (3,722,976)

At 31 December 2010 124,099,235 25,567,775 27,124,046 176,791,056

Note 11 Note 12 Note 12


58


STATEMENT OF CASH FLOwS for the year ended 31 December 2010

Note 2010 2009RM RM

Cash flows from operating activities

Profit before tax from continuing operations 361,889 1,700,354

Adjustments for :Depreciation of plant and equipment 3 494,772 673,156Impairment loss on unquoted bond 4 – 3,500,000Provision for Directors’ retirement/resignation benefits 14 138,000 150,000Interest income 17 (1,089,430) (1,910,371)Dividend income 17 (12,762,346) (16,962,081)Gain on disposal of plant and equipment 17 (27,057) (9,686)Interest expense 19 8,119,867 8,677,981

Operating loss before changes in working capital (4,764,305) (4,180,647)Changes in working capital :

Trade and other receivables 5,635,584 11,961,849Trade and other payables 559,188 (278,753)

Cash generated from operations 1,430,467 7,502,449Dividends received 12,912,104 12,481,332Income tax refunded 4,935,800 2,453,200

Net cash from operating activities 19,278,371 22,436,981

Cash flows from investing activities

Purchase of investments in subsidiaries A (376,996) (1,606,069)Purchase of plant and equipment (28,320) (10,336)Purchase of investment in a jointly controlled entity (100,000) –Interest received 1,089,430 1,910,371Proceeds from disposal of plant and equipment 31,000 46,008Advances from subsidiaries 8,709,427 2,500,000

Net cash from investing activities 9,324,541 2,839,974

59

ANNUAL REPORT 2010

STATEMENT OF CASH FLOwS (CONT’D) for the year ended 31 December 2010

Note 2010 2009RM RM

Cash flows from financing activities

Drawdown of term loan – 5,500,000Repayment of term loans (1,457,535) (2,384,000)Repayment of commercial papers (20,000,000) (10,000,000)Repayment of finance lease liabilities (29,258) (235,867)Dividends paid (3,722,977) (6,515,210)Interest paid (8,119,867) (8,677,981)Drawdown/(Repayment) of other borrowings (net) 2,900,000 (3,000,000)Withdrawal from debt service reserve account 237,439 267,955

Net cash used in financing activities (30,192,198) (25,045,103)

Net (decrease)/increase in cash and cash equivalents (1,589,286) 231,852Cash and cash equivalents at 1 January 2,221,741 1,989,889

Cash and cash equivalents at 31 December B 632,455 2,221,741

NOTES :

A. Purchase of investment in subsidiaries

During the year, the Company acquired additional shares in Fumakilla Malaysia Berhad for a total purchase consideration of RM2,496 and incorporated a new wholly owned subsidiary, Texchem Japan, Inc. with a paid-up capital of RM374,500. The Company also increased its investment in Technopia Vietnam Pte. Ltd. (“TVPL”) by RM13,201,056 by way of capitalisation of the same amount due from TVPL.

In the previous year, the Company acquired the entire issued and paid-up share capital of Acumen Scientific Sdn. Bhd. and the entire share capital of Technopia Vietnam Pte. Ltd. for a total purchase consideration of RM1,000,000 and RM12,121,371 respectively. The total purchase consideration for the above acquisitions was settled in the following manner as disclosed below.

2010 2009RM RM

- Settled in cash 376,996 1,606,069- Set-off against dividend receivable from Fumakilla Malaysia Berhad – 11,515,302- Set-off against balance due from TVPL 13,201,056 –

13,578,052 13,121,371

B. Cash and cash equivalents

Cash and cash equivalents included in the statement of cash flows comprise the following statement of financial position amount :

Note 2010 2009RM RM

Cash and bank balances 9 632,455 2,221,741


60


NOTES TO THE FINANCIAL STATEMENTS

Texchem Resources Bhd. is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The address of its registered office and principal place of business is as follows :

Level 18, Menara Boustead Penang 39 Jalan Sultan Ahmad Shah10050 Penang

The consolidated financial statements of the Company as at and for the year ended 31 December 2010 comprise the Company and its subsidiaries (together referred to as “the Group” and individually referred to as “Group entities”) and the Group’s interest in associates and a jointly controlled entity. The financial statements of the Company as at and for the year ended 31 December 2010 do not include other entities. The principal activity of the Company is investment holding whilst the principal activities of the subsidiaries are stated in Note 4 to the financial statements.

The financial statements were authorised for issue by the Board of Directors on 26 April 2011.

1. BASIS OF PREPARATION

(a) Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards (“FRS”), generally accepted accounting principles and the Companies Act, 1965 in Malaysia.

The Group and the Company have not applied the following accounting standards, amendments and interpretations that have been issued by the Malaysian Accounting Standards Board (“MASB”) but are not yet effective for the Group and the Company :

Amendments effective for annual periods beginning on or after 1 March 2010• Amendments to FRS 132, Financial Instruments: Presentation – Classification of Rights Issues*

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2010

• FRS 1, First-time Adoption of Financial Reporting Standards (revised) • FRS 3, Business Combinations (revised)• FRS 127, Consolidated and Separate Financial Statements (revised)• Amendments to FRS 2, Share-based Payment *• Amendments to FRS 5, Non-current Assets Held for Sale and Discontinued Operations • Amendments to FRS 138, Intangible Assets• IC Interpretation 12, Service Concession Agreements *• IC Interpretation 16, Hedges of a Net Investment in a Foreign Operation *• IC Interpretation 17, Distribution of Non-cash Assets to Owners *• Amendments to IC Interpretation 9, Reassessment of Embedded Derivatives

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2011• Amendments to FRS 1, First-time Adoption of Financial Reporting Standards - Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters - Additional Exemptions for First-time Adopters• Amendments to FRS 2, Group Cash-settled Share Based Payment Transactions *• Amendments to FRS 7, Financial Instruments: Disclosures – improving Disclosures about Financial

Instruments• IC Interpretation 4, Determining whether an Arrangement contains a Lease• IC Interpretation 18, Transfers of Assets from Customers *• Improvements to FRSs (2010)

Interpretations and amendments effective for annual periods beginning on or after 1 July 2011• IC Interpretation 19, Extinguishing Financial Liabilities with Equity Instruments• Amendments to IC Interpretation 14, Prepayments of a Minimum Funding Requirement #

FRS and Interpretations effective for annual periods beginning on or after 1 January 2012• FRS 124, Related Party Disclosures (revised)• IC Interpretation 15, Agreements for the Construction of Real Estate #

61

ANNUAL REPORT 2010

NOTES TO THE FINANCIAL STATEMENTS (CONT’D)

1. BASIS OF PREPARATION (cont’d)

(a) Statement of compliance (cont’d)

The Group has chosen to early adopt the following FRSs which are effective for annual periods beginning on or after 1 July 2010 in the current financial year :

FRS 3 Business Combinations (revised)FRS 127 Consolidated and Separate Financial Statements (revised)

With the adoption of FRS 127 (revised), losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. Prior to the adoption of FRS 127 (revised), where losses applicable to the non-controlling interests exceed their interest in the equity of a subsidiary, the excess, and any further losses are charged against the Group’s interest except to the extent that the non-controlling interests has a binding obligation to make additional investment to cover the losses. The adoption has been applied prospectively in accordance with the transitional provision provided by the standard and does not have any impact on the profit or loss of the Group in prior years.

The adoption of FRS 127 (revised) resulted in approximately RM1.17 million losses being allocated to non-controlling interests during the current financial year that would otherwise be charged against the Group’s interest had the Group not early adopt the revised standard.

The Group and the Company plan to apply the abovementioned standards, amendments and interpretations:

• from the annual period beginning 1 January 2011 for those standards, amendments or interpretations that will be effective for annual periods beginning on or after 1 March 2010, 1 July 2010 and 1 January 2011, except for those marked “ * ” which are not applicable to the Group and the Company; and

• from the annual period beginning 1 January 2012 for those standards, amendments or interpretations that will be effective for annual periods beginning on or after 1 July 2011 and 1 January 2012, except for those marked “ # ” which are not applicable to the Group and the Company.

The initial application of a standard, an amendment or an interpretation, which will be applied prospectively or which requires extended disclosures, is not expected to have any financial impacts to the current and prior periods financial statements upon their first adoption.

The initial application of a standard, an amendment or interpretation, which will be applied retrospectively are not expected to have any material impact on the Group’s and the Company’s financial statements.

The initial application of the remaining standards, improvements and amendments is not expected to have any material impact on the financial statements of the Group and the Company.

Following the announcement by the MASB on 1 August 2008, the Group’s financial statements will be prepared in accordance with the International Financial Reporting Standards (IFRS) framework for annual periods beginning on 1 January 2012. The change of the financial reporting framework is not expected to have any significant impact on the financial position and performance of the Group and the Company.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis other than as disclosed in Note 2 to the financial statements and on the assumption that the Group will continue to operate as a going concern. At 31 December 2010, the current liabilities of the Group and of the Company exceeded the current assets by RM36,073,246 and RM64,627,191 respectively.

In October 2010, the Company had appointed one of its bankers to raise a RM100 million Islamic Bond to repay the outstanding balance of the Commercial Papers of RM20 million and Collateralised Loan Obligations of RM35 million which are due on 31 March 2011 and 10 October 2011 respectively. The Company has also applied to Danajamin Nasional Berhad (“Danajamin”) for a RM100 million AL-Kafalah Guarantee in relation to the proposed issuance of the Islamic Bond. The application to Danajamin is currently in progress.

62



1. BASIS OF PREPARATION (cont’d)

(b) Basis of measurement (cont’d)

Pending the approval by Danajamin, the appointed banker had provided a short-term bridging loan of RM20 million for the repayment of the Commercial Papers due on 31 March 2011. The short-term bridging loan is due for repayment in September 2011.

At the date of this report, the Group has only utilised approximately 64% of its total banking facilities. Additionally, as disclosed in Note 31 to the financial statements, the Group also expects to receive approximately RM13.7 million from the disposal of a subsidiary’s leasehold land and building upon completion of the disposal.

The Management is of the opinion that the Group’s banking facilities will continue to be available from its lenders and that the Group will be able to generate cash flows from its operations to meet its liabilities as and when they fall due pending the proposed issuance of the RM100 million Islamic Bond. Based on the above, the Directors consider it appropriate to prepare the financial statements of the Group and of the Company on a going concern basis.

(c) Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional currency. All information is presented in RM unless otherwise stated.

(d) Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes :

• Note 3.3 - Impairment of property, plant and equipment;• Note 5 - Intangible assets; • Note 8 - Inventories; and• Note 30(8) – Significant events during the year

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to the periods presented in these financial statements, and have been applied consistently by the Group entities, other than those disclosed in the following notes :

• Note 2 (c) - Financial instruments• Note 2 (e) - Leased assets• Note 2 (h) - Receivables• Note 2 (m) - Borrowing costs• Note 2 (q) - Operating segments

63

ANNUAL REPORT 2010


2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(a) Basis of consolidation

(i) Subsidiaries Subsidiaries are entities, including unincorporated entities, controlled by the Group. Control exists when the

Group has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Subsidiaries are consolidated using the acquisition method of accounting except for Texchem-Pack (M) Bhd. which is accounted for using the pooling-of-interests method of accounting.

Under the acquisition method of accounting, the financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Under the pooling-of-interests method of accounting, the results of entities or businesses under common control are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established. The assets and liabilities acquired were recognised at the carrying amounts recognised previously in the Group’s controlling shareholder’s consolidated financial statements. The difference between the cost of acquisition and the nominal value of the shares acquired together with the share premium are taken to merger reserve (or adjusted against any suitable reserve in the case of debit differences). The other components of equity of the acquired entities are added to the same components within Group equity. Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale.

(ii) Accounting for business combinations From 1 January 2010, the Group has applied FRS 3, Business Combinations (revised) in accounting for

business combinations. The change in accounting policy has been applied prospectively in accordance with the transitional provisions provided by the standard.

Acquisitions on or after 1 January 2010

For acquisitions on or after 1 January 2010, the Group measures goodwill at the acquisition date as :

• the fair value of the consideration transferred; plus• the recognised amount of any non-controlling interests in the acquiree; plus• if the business combination is achieved in stages, the fair value of the existing equity interest in the

acquiree; less• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities

assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

64




(a) Basis of consolidation (cont’d)

(ii) Accounting for business combinations (cont’d) For acquisitions between 1 January 2006 and 1 January 2010, goodwill represents the excess of the cost

of the acquisition over the Group’s interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess was negative, a bargain purchase gain was recognised immediately in profit or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with business combinations were capitalised as part of the cost of the acquisition.

Acquisitions prior to 1 January 2006

For acquisitions prior to 1 January 2006, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the fair values of the net identifiable assets and liabilities.

(iii) Accounting for acquisitions of non-controlling interests The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as

equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

(iv) Loss of control The Group applied FRS 127, Consolidated and Separate Financial Statements (revised) since the beginning

of the reporting period in accordance with the transitional provisions provided by the standard and does not have impact on earnings per share. Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

In the previous years, if the Group retained any interest in the previous subsidiary, such interest was measured at the carrying amount at the date that control was lost and this carrying amount would be regarded as cost on initial measurement of the investment.

(v) Associates Associates are entities, including unincorporated entities, in which the Group has significant influence, but

not control, over the financial and operating policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method less any impairment losses. The cost of the investment includes transaction costs. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the equity accounted associates, after adjustments, if any, to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest including any long-term investments is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Investments in associates are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale. The cost of the investment includes transaction costs.

65

ANNUAL REPORT 2010



(a) Basis of consolidation (cont’d)

(vi) Jointly-controlled operation and assets The interest of the Company and of the Group in unincorporated joint ventures and jointly-controlled assets

are brought to account by recognising in the financial statements the assets it controls and the liabilities that it incurs, and the expenses it incurs and its share of income that it earns from the sale of goods or services by the joint venture.

(vii) Non-controlling interests Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable

directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company.

Since the beginning of the reporting period, the Group has applied FRS 127, Consolidated and Separate Financial Statements (revised) where losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. This change in accounting policy is applied prospectively in accordance with the transitional provisions of the standard and does not have impact on earnings per share.

In the previous years, where losses applicable to the non-controlling interests exceed their interests in the equity of a subsidiary, the excess, and any further losses applicable to the non-controlling interests, were charged against the Group’s interest except to the extent that the non-controlling interests had a binding obligation to, and was able to, make additional investment to cover the losses. If the subsidiary subsequently reported profits, the Group’s interest was allocated with all such profits until the non-controlling interests’ share of losses previously absorbed by the Group has been recovered.

(viii) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group

transactions, are eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the associates. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currency

(i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of the Group entities

at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting period are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are translated at exchange rates at the dates of the transactions except for those that are measured at fair value, which are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments or a financial instrument designated as a cash flow hedge of currency risk, which are recognised in other comprehensive income.

(ii) Operations denominated in functional currencies other than Ringgit Malaysia The assets and liabilities of operations denominated in functional currencies other than RM, including goodwill

and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period, except for goodwill and fair value adjustments arising from business combinations before 1 January 2006 which are reported using the exchange rates at the dates of the acquisitions. The income and expenses of foreign operations excluding operations in hyperinflationary economies are translated to RM at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve (FCTR). When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss as part of the profit or loss on disposal.

66




(b) Foreign currency (cont’d)

(ii) Operations denominated in functional currencies other than Ringgit Malaysia (cont’d) When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while

retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investments in an associate or jointly controlled entity that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the FCTR within equity.

(c) Financial instruments

Arising from the adoption of FRS 139, Financial Instruments: Recognition and Measurement, with effect from 1 January 2010, financial instruments are categorised and measured using accounting policies as mentioned below. Before 1 January 2010, different accounting policies were applied. Significant changes to the accounting policies are discussed in Note 32 to the financial statements.

(i) Initial recognition and measurement A financial asset or a financial liability is recognised in the statement of financial position when, and only

when, the Group or the Company becomes a party to the contractual provisions of the instrument.

A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

(ii) Financial instrument categories and subsequent measurement The Group and the Company categorise financial instruments as follows:

Financial assets

(a) Financial assets at fair value through profit or loss Fair value through profit or loss category comprises financial assets that are held for trading, including

derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial assets that are specifically designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.

Other financial assets categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.

(b) Loans and receivables Loans and receivables category comprises debt instruments that are not quoted in an active market.

Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method.

67

ANNUAL REPORT 2010



(c) Financial instruments (cont’d)

(ii) Financial instrument categories and subsequent measurement (cont’d)

(c) Held-to-maturity investments Held-to-maturity investments category comprises debt instruments that are not quoted in an active

market and the Group or the Company has the positive intention and ability to hold to maturity.

Financial assets categorised as held-to-maturity investments are subsequently measured at amortised cost using the effective interest method.

All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see Note 2(g)(i)).

Financial liabilities

All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprises financial liabilities that are held for trading, derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities that are specifically designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.

Other financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.

(iii) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse

the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Financial guarantee contracts are classified as deferred income and are amortised to profit or loss using a straight-line method over the contractual period or, when there is no specified contractual period, recognised in profit or loss upon discharge of the guarantee. When settlement of a financial guarantee contract becomes probable, an estimate of the obligation is made. If the carrying value of the financial guarantee contract is lower than the obligation, the carrying value is adjusted to the obligation amount and accounted for as a provision.

(iv) Regular way purchase or sale of financial assets A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms

require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting. Trade date accounting refers to:

(a) the recognition of an asset to be received and the liability to pay for it on the trade date, and (b) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a

receivable from the buyer for payment on the trade date.

(v) 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.

68




(c) Financial instruments (cont’d)

(v) 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.

(d) Property, plant and equipment

(i) Recognition and measurement Items of property, plant and equipment are measured at cost/valuation less any accumulated depreciation

and any accumulated impairment losses.

The Group has availed itself to the transitional provision when the MASB first adopted International Accounting Standards 16, Property, Plant and Equipment in 1998. Certain leasehold land and buildings were revalued in 1983, 1992/93 and 1994/95 and no later valuation has been recorded for these property, plant and equipment (except in the case of impairment adjustments based on a valuation).

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour and for qualifying assets, borrowing costs are capitalised in allowance with the accounting policy on borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

The cost of property, plant and equipment recognised as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged between knowledgeable willing parties in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of other items of plant and equipment is based on the quoted market prices for similar items when available and replacement cost when appropriate.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income” or “other operating expenses” respectively in profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.

(ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount

of the item if it is probable that the future economic benefits embodied within the part will flow to the Group or the Company and its cost can be measured reliably. The carrying amount of the replaced parts is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

(iii) Depreciation Depreciation is calculated over the depreciable amount, which is the cost of an asset or other amount

substituted for cost, less its residual value.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use.

69

ANNUAL REPORT 2010



(d) Property, plant and equipment (cont’d)

(iii) Depreciation (cont’d)

The principal annual rates used for the current and comparative periods are as follows :

%Buildings, office renovation and land improvements 2 - 20Plant and machinery and other equipment 10 - 33 1/3

Furniture, fittings and equipment 10 - 33 1/3

Motor vehicles 16 - 20

Leasehold land are depreciated over the lease period ranging from 60 years to 99 years. Depreciation methods, useful lives and residual values are reviewed and adjusted as appropriate at the end of the reporting period.

(e) Leased assets

(i) Finance lease Leases in terms of which the Group and the Company assume substantially all the risks and rewards of

ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

(ii) Operating lease Leases, where the Group does not assume substantially all the risks and rewards of the ownership are

classified as operating leases and the leased assets are not recognised on the Group’s statement of financial position.

In the previous years, a leasehold land that normally has an indefinite economic life and title was not expected to pass to the lessee by the end of the lease term was treated as an operating lease. The payment made on entering into or acquiring a leasehold land that was accounted for as an operating lease represents prepaid lease payments, except for leasehold land classified as investment property.

The Group has adopted the amendment made to FRS 117, Leases in 2010 in relation to the classification of lease of land. Leasehold land which in substance is a finance lease has been reclassified and measured as such retrospectively.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred.

(f) Intangible assets

(i) Goodwill Goodwill arises on business combinations is measured at cost less any accumulated impairment losses. In

respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity accounted investee.

70




(f) Intangible assets (cont’d)

(ii) Research and development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical

knowledge and understanding, is recognised in profit or loss when incurred.

Expenditure on development activities, whereby the application of research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development.

The expenditure capitalised includes the cost of materials, direct labour and overheads costs that are directly attributable to preparing the asset for its intended use. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Other development expenditure is recognised in profit or loss as incurred.

Capitalised development expenditure is measured at cost less any accumulated amortisation and any accumulated impairment losses.

(g) Impairment

(i) Financial assets All financial assets (except for financial assets categorised as fair value through profit or loss, investments

in subsidiaries, associates and jointly controlled entity) are assessed at each reporting date 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. Losses expected as a result of future events, no matter how likely, are not recognised. For an equity instrument, a significant or prolonged decline in the fair value below its cost is an objective evidence of impairment.

An impairment loss in respect of loans and receivables and held-to-maturity investments 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 asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account.

An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been recognised in the other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity and recognised to profit or loss.

An impairment loss in respect of unquoted equity instrument that is carried at cost 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 current market rate of return for a similar financial asset.

Impairment losses recognised in profit or loss for an investment in an equity instrument is not reversed through profit or loss.

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss.

71

ANNUAL REPORT 2010



(g) Impairment (cont’d)

(ii) Other assets The carrying amounts of other assets (except for inventories and deferred tax asset) are reviewed at the end

of each reporting period to determine whether there is any indication of impairment.

If any such indication exists, then the asset’s recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

(h) Receivables

Prior to 1 January 2010, receivables were initially recognised at their costs and subsequently measured at cost less allowance for doubtful debts.

Following the adoption of FRS 139, trade and other receivables are categorised and measured as loans and receivables in accordance with Note 2(c).

(i) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in, first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of work-in-progress and manufactured inventories, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

(j) Cash and cash equivalents

Cash and cash equivalents consist of cash in hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.

Cash and cash equivalents (other than bank overdrafts) are categorised and measured as loans and receivables in accordance with policy Note 2(c).

72




(k) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

(i) Restructuring A provision for restructuring is recognised when the Group has approved a detailed formal restructuring plan,

and the restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.

(ii) Site restoration A provision for restoration is recognised when the Company has the obligation to return its rental premises

to its original state upon expiry of the lease term.

(iii) Contingent liabilities Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be

estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(l) Revenue and other income

(i) Goods sold Revenue from the sale of goods is measured at fair value of the consideration received or receivable, net of

returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

(ii) Services rendered Revenue from services rendered is recognised in profit or loss when services are performed.

(iii) Rental income Rental income is recognised in profit or loss on a straight-line basis over the term of the lease. Lease

incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from subleased property is recognised as other income.

(iv) Dividend income Dividend income is recognised in profit or loss on the date that the Group’s or the Company’s right to receive

payment is established, which in the case of quoted securities is the ex-dividend date.

(v) Interest income Interest income is recognised as it accrues using the effective interest method in profit or loss except for

interest income arising from temporary investment of borrowings taken specifically for the purpose of obtaining a qualifying asset which is accounted for in accordance with the accounting policy on borrowing costs.

(vi) Commissions When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue

recognised is the net amount of commission made by the Group.

(m) Borrowing costs

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Before 1 January 2010, all borrowing costs were recognised in profit or loss using the effective interest method in the period in which they are incurred.

73

ANNUAL REPORT 2010



(m) Borrowing costs (cont’d) Following the adoption of revised FRS 123, Borrowing Costs, borrowing costs directly attributable to the

acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

(n) Income tax

Income tax expense comprises current and deferred tax. Tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill and the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or tax loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same taxation authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A tax incentive that is not a tax base of an asset is recognised as a reduction of tax expense in profit or loss as and when it is granted and claimed. Any unutilised portion of the tax incentive is recognised as a deferred tax asset to the extent that it is probable that future taxable profits will be available against which the unutilised tax incentive can be utilised.

(o) Employee benefits

(i) Short-term employee benefits Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick

leave are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(ii) State plans The Group’s contribution to statutory pension funds are charged to profit or loss in the year to which they

relate. Once the contributions have been paid, the Group has no further payment obligations.

74




(o) Employee benefits (cont’d)

(iii) Directors’ retirement/resignation benefits The Group operates an unfunded defined benefit scheme for its Directors. Provision is made based on the

length of service and fixed sum approved by the Board of Directors.

(iv) Termination benefits Termination benefits are recognised as an expense when the Group is demonstrably committed, without

realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised if benefits are payable more than 12 months after the reporting period, then they are disclosed to their present value, if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

(p) Earnings per share

The Group presents basic earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

(q) Operating segments

In the previous years, a segment was a distinguishable component of the Group that was engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment) which was subject to risks and rewards that were different from those of other segments.

Following the adoption of FRS 8, 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 chief operating decision maker, which in this case is the Chief Executive Officer of the Group, to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

(r) Equity instruments

Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently.

Issue expenses

Costs directly attributable to issue of instruments classified as equity are recognised as a deduction from equity.

(s) Non-current asset held for sale

Non-current assets (or disposal group comprising assets and liabilities) that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale.

Immediately before classification as held for sale, the assets (or components of a disposal group) are remeasured in accordance with the Group’s accounting policies. Thereafter generally the assets (or disposal group) are measured at the lower of their carrying amount and fair value less costs to sell.

Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment property, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

75

ANNUAL REPORT 2010

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TAT

EM

EN

TS

(CO

NT

’D)

3.

PR

OP

ER

TY,

PLA

NT

AN

D E

qU

IPM

EN

T At

valu

atio

n

At

cost

Gro

up

Leas

eho

ld

lan

dB

uild

ing

sFr

eeh

old

lan

d

Bu

ildin

gs,

o

ffice

re

no

vati

on

an

d la

nd

imp

rove

men

ts

Pla

nt

and

mac

hin

ery

and

oth

ereq

uip

men

t

Furn

itu

re,

fitt

ing

san

deq

uip

men

tM

oto

rve

hic

les

Cap

ital

exp

end

itu

re-

in-p

rog

ress

Tota

lR

MR

MR

MR

MR

MR

MR

MR

MR

MC

ost

/Val

uat

ion

At

1 Ja

nuar

y 20

09, r

esta

ted

20,1

51,0

305,

086,

865

15,1

54,6

2910

2,20

9,40

125

2,91

6,28

143

,133

,673

21,5

68,4

655,

093,

323

465,

313,

667

Add

ition

s–

––

4,23

2,83

011

,229

,031

3,24

2,01

31,

531,

105

677,

639

20,9

12,6

18D

ispo

sals

(129

,648

)–

–(5

89,9

70)

(1,9

07,1

80)

(333

,889

)(2

,614

,971

)–

(5,5

75,6

58)

Writ

ten

off

––

–(3

,247

,891

)(3

,950

,220

)(7

15,9

69)

(4,5

00)

(86,

579)

(8,0

05,1

59)

Exc

hang

e di

ffer

ence

375,

836

–14

4,32

067

3,53

12,

023,

096

1,34

4,40

31,

485,

931

(4,6

72)

6,04

2,44

5R

ecla

ssifi

catio

n–

––

2,73

4,02

32,

469,

852

34,4

94–

(5,2

38,3

69)

–

At

31 D

ecem

ber

2009

/ 1

Janu

ary

2010

, res

tate

d20

,397

,218

5,08

6,86

515

,298

,949

106,

011,

924

262,

780,

860

46,7

04,7

2521

,966

,030

441,

342

478,

687,

913

Add

ition

s–

––

3,39

9,77

919

,110

,681

4,78

4,08

83,

985,

020

2,62

6,48

933

,906

,057

Dis

posa

ls–

––

–(2

,287

,511

)(3

42,3

50)

(1,8

90,1

86)

–(4

,520

,047

)W

ritte

n of

f–

––

(263

,413

)(2

,327

,683

)(5

10,2

35)

(333

)(7

,838

)(3

,109

,502

)E

xcha

nge

diff

eren

ce(9

3,95

9)–

(57,

729)

(3,6

37,2

83)

(5,2

05,9

71)

(464

,151

)(2

67,8

71)

(41,

698)

(9,7

68,6

62)

Rec

lass

ifica

tion

––

–81

,549

323,

604

2,08

825

3,48

5(6

60,7

26)

–A

dditi

on t

hrou

gh a

cqui

sitio

n of

su

bsid

iarie

s–

––

351,

602

177,

986

5,10

450

,425

–58

5,11

7Tr

ansf

er t

o as

sets

hel

d fo

r sa

le(3

,750

,000

)–

–(5

,338

,270

)(1

0,56

0,96

0)(3

37,1

69)

–(1

3,84

0)(2

0,00

0,23

9)

At

31 D

ecem

ber

2010

16,5

53,2

595,

086,

865

15,2

41,2

2010

0,60

5,88

826

2,01

1,00

649

,842

,100

24,0

96,5

702,

343,

729

475,

780,

637

76


NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TAT

EM

EN

TS

(CO

NT

’D)

3.

PR

OP

ER

TY,

PLA

NT

AN

D E

qU

IPM

EN

T (

con

t’d

)

At

valu

atio

n

At

cost

Gro

up

Leas

eho

ld

lan

dB

uild

ing

sFr

eeh

old

la

nd

Bu

ildin

gs,

o

ffice

re

no

vati

on

an

d la

nd

imp

rove

men

ts

Pla

nt

and

mac

hin

ery

and

oth

ereq

uip

men

t

Furn

itu

re,

fitt

ing

san

deq

uip

men

tM

oto

rve

hic

les

Cap

ital

exp

end

itu

re-

in-p

rog

ress

Tota

lR

MR

MR

MR

MR

MR

MR

MR

MR

MA

ccu

mu

late

d d

epre

ciat

ion

an

d

im

pai

rmen

t lo

ss

Acc

umul

ated

dep

reci

atio

n3,

696,

417

1,57

7,07

0–

28,5

59,2

8516

2,89

0,23

031

,793

,882

13,4

82,1

2224

1,99

9,00

6A

ccum

ulat

ed im

pairm

ent

loss

––

–31

2,77

51,

343,

800

10,2

76–

–1,

666,

851

At

1 Ja

nuar

y 20

09, r

esta

ted

3,69

6,41

71,

577,

070

–28

,872

,060

164,

234,

030

31,8

04,1

5813

,482

,122

–24

3,66

5,85

7D

epre

ciat

ion

for

the

year

416,

493

104,

730

–4,

531,

749

21,1

27,6

344,

500,

785

2,99

0,76

4–

33,6

72,1

55Im

pairm

ent

loss

––

––

1,09

0,34

0–

––

1,09

0,34

0D

ispo

sals

(10,

372)

––

(58,

131)

(1,4

10,8

53)

(297

,589

)(2

,295

,026

)–

(4,0

71,9

71)

Writ

ten

off

––

–(2

,953

,327

)(3

,185

,046

)(5

70,4

87)

(4,5

00)

–(6

,713

,360

)E

ffec

t of

mov

emen

t in

exc

hang

e ra

tes

––

–30

0,68

492

0,08

81,

301,

662

1,44

7,64

7–

3,97

0,08

1

At

31 D

ecem

ber

2009

/1

Janu

ary

2010

, res

tate

d

Acc

umul

ated

dep

reci

atio

n4,

102,

538

1,68

1,80

0–

30,3

80,2

6018

0,34

2,05

336

,728

,253

15,6

21,0

07–

268,

855,

911

Acc

umul

ated

impa

irmen

t lo

ss–

––

312,

775

2,43

4,14

010

,276

––

2,75

7,19

1

4,10

2,53

81,

681,

800

–30

,693

,035

182,

776,

193

36,7

38,5

2915

,621

,007

–27

1,61

3,10

2

77

ANNUAL REPORT 2010

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TAT

EM

EN

TS

(CO

NT

’D)

3.

PR

OP

ER

TY,

PLA

NT

AN

D E

qU

IPM

EN

T (

con

t’d

)

At

valu

atio

n

At

cost

Leas

eho

ld

lan

dB

uild

ing

sFr

eeh

old

lan

d

Bu

ildin

gs,

o

ffice

re

no

vati

on

an

d la

nd

imp

rove

men

ts

Pla

nt

and

mac

hin

ery

and

oth

ereq

uip

men

t

Furn

itu

re,

fitt

ing

san

deq

uip

men

tM

oto

rve

hic

les

Cap

ital

exp

end

itu

re-

in-p

rog

ress

Tota

lG

rou

pR

MR

MR

MR

MR

MR

MR

MR

MR

M

At

1 Ja

nuar

y 20

10

Acc

umul

ated

dep

reci

atio

n4,

102,

538

1,68

1,80

0–

30,3

80,2

6018

0,34

2,05

336

,728

,253

15,6

21,0

07–

268,

855,

911

Acc

umul

ated

impa

irmen

t lo

ss

––

–31

2,77

52,

434,

140

10,2

76–

–2,

757,

191

4,10

2,53

81,

681,

800

–30

,693

,035

182,

776,

193

36,7

38,5

2915

,621

,007

–27

1,61

3,10

2

Dep

reci

atio

n fo

r th

e ye

ar28

3,72

627

5,03

012

8,68

44,

663,

295

21,2

31,0

574,

195,

528

2,73

1,17

0–

33,5

08,4

90Im

pairm

ent

loss

––

––

590,

291

50,6

71–

–64

0,96

2D

ispo

sals

––

––

(1,4

22,1

56)

(333

,513

)(1

,677

,726

)–

(3,4

33,3

95)

Writ

ten

off

––

–(2

60,1

54)

(2,0

61,7

27)

(497

,875

)(3

33)

–(2

,820

,089

)E

ffec

t of

mov

emen

t in

exc

hang

e ra

tes

––

–(9

40,9

14)

(2,9

16,7

59)

(394

,223

)(1

99,6

27)

–(4

,451

,523

)Tr

ansf

er t

o as

sets

hel

d fo

r sa

le(7

16,5

72)

––

(2,1

09,9

93)

(9,8

17,2

54)

(337

,171

)–

–(1

2,98

0,99

0)

At

31 D

ecem

ber

2010

Acc

umul

ated

dep

reci

atio

n3,

669,

692

1,95

6,83

012

8,68

431

,732

,494

185,

718,

751

39,3

71,2

7516

,474

,491

–27

9,05

2,21

7A

ccum

ulat

ed im

pairm

ent

loss

––

–31

2,77

52,

660,

894

50,6

71–

–3,

024,

340

3,66

9,69

21,

956,

830

128,

684

32,0

45,2

6918

8,37

9,64

539

,421

,946

16,4

74,4

91–

282,

076,

557

Car

ryin

g a

mo

un

ts

At

1 Ja

nuar

y 20

09, r

esta

ted

16,4

54,6

133,

509,

795

15,1

54,6

2973

,337

,341

88,6

82,2

5111

,329

,515

8,08

6,34

35,

093,

323

221,

647,

810

At

31 D

ecem

ber

2009

/1

Janu

ary

2010

, res

tate

d16

,294

,680

3,40

5,06

515

,298

,949

75,3

18,8

8980

,004

,667

9,96

6,19

66,

345,

023

441,

342

207,

074,

811

At

31 D

ecem

ber

2010

12,8

83,5

673,

130,

035

15,1

12,5

3668

,560

,619

73,6

31,3

6110

,420

,154

7,62

2,07

92,

343,

729

193,

704,

080

78



3. PROPERTY, PLANT AND EqUIPMENT (cont’d)

Furniture, Company Office fittings and Motor

renovation equipment vehicles TotalRM RM RM RM

CostAt 1 January 2009 3,536,438 332,420 1,796,495 5,665,353Additions – 10,336 – 10,336Disposals – (10,372) (78,470) (88,842)

At 31 December 2009/1 January 2010 3,536,438 332,384 1,718,025 5,586,847Additions – 28,320 – 28,320Disposals – (13,952) (59,022) (72,974)

At 31 December 2010 3,536,438 346,752 1,659,003 5,542,193

Accumulated depreciationAt 1 January 2009 1,633,040 197,626 1,315,631 3,146,297Depreciation for the year 392,938 33,548 246,670 673,156Disposals – (9,362) (43,158) (52,520)

At 31 December 2009/1 January 2010 2,025,978 221,812 1,519,143 3,766,933Depreciation for the year 392,937 35,287 66,548 494,772Disposals – (13,948) (55,083) (69,031)

At 31 December 2010 2,418,915 243,151 1,530,608 4,192,674

Carrying amounts

At 1 January 2009 1,903,398 134,794 480,864 2,519,056

At 31 December 2009/1 January 2010 1,510,460 110,572 198,882 1,819,914

At 31 December 2010 1,117,523 103,601 128,395 1,349,519

3.1 Property, plant and equipment under revaluation model

The leasehold land and buildings of the Group are shown at Directors’ valuation based on valuation exercises carried out in 1983, 1992/93 and 1994/95 by a firm of professional valuers on an open market value basis. Subsequent additions are stated at cost while deletions are at cost or valuation as appropriate.

Had the revalued leasehold land and buildings of the Group been carried at historical cost less accumulated depreciation, the carrying amounts of the revalued leasehold land and buildings that would have been included in the financial statements at the end of the year would be RM2,662,146 (2009 : RM5,739,614).

3.2 Assets under finance lease

Included in the carrying amounts of property, plant and equipment are the following assets acquired under finance leases :

Group Company2010 2009 2010 2009

RM RM RM RM

Motor vehicles 3,571,765 2,890,909 45,062 75,549Equipment – 43,865 – –

79

ANNUAL REPORT 2010


3. PROPERTY, PLANT AND EqUIPMENT (cont’d)

3.3 Impairment of property, plant and equipment

(a) Packaging division During the year, the Group reviewed the recoverable amount of its plant and equipment relating to the expanded

polystyrene business and flexo photopolymer printing plates operations of its subsidiaries in Malaysia and Vietnam and recognised an impairment loss of RM640,962 based on their fair value less cost to sell.

The impairment loss of RM1,090,340 recognised in the previous financial year was attributed to the Group’s injection moulding business.

(b) Food division The carrying amounts of property, plant and equipment of a subsidiary amounting to RM21.8 million are assessed

for impairment due to the subsidiary’s historical and current year operating losses incurred.

The recoverable amount of the property, plant and equipment of the above-mentioned subsidiary was estimated based on their value in use and management’s assessment of their estimated terminal value. The value in use was determined by discounting the future cash flows generated from the continuing use of the property, plant and equipment based on the subsidiary’s financial budget for 2011 and approved business plan covering a period of 5 years.

The financial budget and approved business plan are determined based on management’s expectations of market growth, anticipated improvement in production yield and the assumption that there will not be any significant increase in the operating costs caused by fluctuation in raw material and diesel price.

A pre-tax discount rate of 5.6% was applied in determining the recoverable amount of the property, plant and equipment. The discount rate was estimated based on the Group’s weighted average cost of capital.

Based on the impairment review performed, the management is of the opinion that the recoverable amount of the property, plant and equipment exceeded their carrying amounts.

4. INVESTMENTS

Group Company2010 2009 2010 2009

RM RM RM RMSubsidiaries

Quoted shares, at cost – – 32,919,722 32,919,722Unquoted shares, at cost – – 213,725,042 200,146,990

– – 246,644,764 233,066,712

Associates

Unquoted shares, at cost 33,807,780 33,807,780 26,729,303 26,729,303Share of post acquisition reserves (13,123,437) (14,218,484) – –

20,684,343 19,589,296 26,729,303 26,729,303Jointly controlled entity

Unquoted shares, at cost 100,000 – 100,000 –Share of post acquisition reserves (100,000) – – –

– – 100,000 –

80



4. INVESTMENTS (cont’d)

Group Company2010 2009 2010 2009

RM RM RM RMOther investments, at cost

less impairment losses

Unquoted bond, at cost – 3,500,000 – 3,500,000Less : Impairment loss – (3,500,000) – (3,500,000)

– – – –Held-to-maturity investments

Unquoted bond 3,500,000 – 3,500,000 –Less : Impairment loss (3,500,000) – (3,500,000) –

– – – –

20,684,343 19,589,296 273,474,067 259,796,015

Market value of quoted shares – – 23,371,000 32,204,000

The comparative figures as at 31 December 2009 have not been presented based on the new categorisation of financial assets resulting from the adoption of FRS 139 by virtue of the exemption given in FRS 7.44AA.

Details of the subsidiaries are as follows :

Name of subsidiariesCountry of

incorporation Principal activities

Effective ownership

interest2010 2009

% %

Texchem Materials Sdn. Bhd. Malaysia Trading of dyestuffs, textile auxiliaries and chemicals used in the electronics, plastics and other manufacturing industries, renting of properties and investment holding

100.00 100.00

Fumakilla Malaysia Berhad Malaysia Manufacture and sale of household insecticides and investment holding

87.29 87.29

Texchem Food Sdn. Bhd. Malaysia Investment holding and sale and marketing of marine products

100.00 100.00

Sushi Kin Sdn. Bhd. Malaysia Operation of a chain of retail sushi outlets

100.00 100.00

Texchem-Pack Holdings (S) Ltd. (1) Singapore Investment holding 70.48 70.48

PT. Technopia Jakarta (1) Indonesia Produce and sell mosquito coils for local and export markets

100.00(2) 100.00(2)

81

ANNUAL REPORT 2010





Effective ownership

interest2010 2009

% %

Technopia Vietnam Pte. Ltd. (1) Vietnam Produce and trade various kinds of household insecticides

100.00 100.00

Acumen Scientific Sdn. Bhd. (1) Malaysia Provision of chemical, microbiological and environment related analytical testing and consultancy services

100.00 100.00

Texchem Japan, Inc (3) and (4) Japan Provision of services, trading, sales, marketing, research and development, designing and product development

100.00 –

Subsidiaries of Texchem Materials Sdn. Bhd.Texchem Singapore Private Limited (1) Singapore Dealers in chemicals, plastic resins

and other products and sales commission agents

100.00 100.00

Myanmar Texchem Limited (1) Myanmar Dormant 100.00 100.00

Texchem Materials (Thailand) Ltd.(1) Thailand Trading of chemicals, dyestuffs and resins

100.00 100.00

Texchem Materials (Vietnam) Co., Ltd.(1)

Vietnam Conducting import and export of chemical and plastic materials

100.00 100.00

Texchem Malaysia Sdn. Berhad Malaysia Manufacture and sale of textile auxiliaries, chemicals and finishing resins

100.00 100.00

PT. Texchem Indonesia (1) Indonesia Trading in export and import of chemicals materials

100.00 100.00

Texchem Trading (Wuxi) Co., Ltd. (1) People’s Republic of

China

Trading of chemicals, dyestuffs and resins

100.00 100.00

New Material (Malaysia) Sdn. Bhd. Malaysia Trading and acting as agent of foreign and local electronic component parts and general merchandise

100.00 100.00

Subsidiary of New Material (Malaysia) Sdn. Bhd.New Material Hong Kong Limited (1) Hong Kong Trading and acting as agent of foreign

and local electronic component parts and general merchandise

100.00 100.00

82






Effective ownership

interest2010 2009

% %

Subsidiaries of Texchem-Pack Holdings (S) Ltd. Texchem-Pack (M) Bhd. Malaysia Investment holding and manufacture

and sale of thermoformed packaging products and embossed carrier tapes

70.48 70.48

Texchem Polymers Sdn. Bhd. Malaysia Manufacture and sale of extruded plastic sheets and polymer compounds and provide consultation services

70.48 70.48

Eye Graphic Sdn. Bhd. Malaysia Trading, design and manufacture of flexo photopolymer printing plates

70.48 70.48

Texchem-Pack (Bangi) Sdn. Bhd. Malaysia Manufacture of plastic engineering precision parts

70.48 70.48

Texchem-Pack (HK) Limited (1) Hong Kong Dormant 70.48 70.48

Subsidiaries of Texchem-Pack (M) Bhd.Texchem-Pack (Thailand) Co., Ltd. (1) Thailand Manufacture and sale of

thermoformed packaging products, precision injection moulded trays/parts and mould and tooling

70.48 70.48

Texchem-Pack (Johor) Sdn. Bhd. Malaysia Manufacture and sale of thermoformed packaging products

70.48 70.48

Texchem-Pack (Wuxi) Co., Ltd. (1) People’s Republic of

China

Manufacture and sale of thermoformed packaging products and precision injection moulded trays/parts

70.48 70.48

Texchem-Pack (KL) Sdn. Bhd. Malaysia Manufacture and sale of expanded polystyrene products, heavy duty triple wall corrugated carton products and thermoformed packaging products

70.48 70.48

Texchem-Pack (PP) Sdn. Bhd. Malaysia Manufacture and sale of shipping rails, profiles and precision injection moulded trays/parts

70.48 70.48

Texchem-Pack (Vietnam) Co., Ltd. (1) Vietnam Manufacture and sale of thermoformed packaging parts, precision injection moulded trays/parts and provision of packaging product design services

70.48 70.48

83

ANNUAL REPORT 2010





Effective ownership

interest2010 2009

% %

Subsidiary of Eye Graphic Sdn. Bhd.Eye Graphic (Vietnam) Co., Ltd. (1) and (5) Vietnam Design and manufacture of flexo

photopolymer printing plates. Ceased operations during the year.

70.48 70.48

Subsidiary of Texchem-Pack (PP) Sdn. Bhd.Texchem Advanced

Products Incorporated Sdn. Bhd.Malaysia Development of technology for

high precision/ultra clean injection moulded products for silicon wafer handling and transportation and market development of related products

35.94 35.94

Subsidiaries of Fumakilla Malaysia BerhadTexchem Consumers (Thailand) Ltd. (1) Thailand Dormant 87.29 87.29

Ting Tai Industries (Malaysia) Sdn. Berhad

Malaysia Renting of property, plant and equipment

87.29 87.29

Technopia (Thailand) Ltd. (1) Thailand Manufacture and trading of mosquito coils

83.72 83.72

Texchem Consumers (Cambodia) Ltd. (1)

Cambodia Dormant 87.29 87.29

Blood Protection Company (Malaysia) Sdn. Bhd.

Malaysia Trading of household insecticides, renting of machinery and rendering pest control services

87.29 87.29

Subsidiary of Blood Protection Company (Malaysia) Sdn. Bhd.Myanmar Texcorp Limited (1) Myanmar Agency, technical, business

management consulting and advisory services

87.29 87.29

84






Effective ownership

interest2010 2009

% %

Subsidiaries of Texchem Food Sdn. Bhd.A.S.K Andaman Limited (1) Myanmar Manufacture and marketing of

surimi, fishmeal and other marine products

90.00 90.00

Sea Master Trading Co. Sdn. Bhd. Malaysia Manufacture, wholesale and export of seafood products and acting as sales commission agent in sales of food products

100.00 100.00

Seapack Italia S.r.l (4) Italy Dormant 100.00 100.00

Texchem Homey Sdn. Bhd. Malaysia Dormant 100.00 100.00

ASKA Marine Products Sdn Bhd (formerly known as Surimi Master Sdn Bhd) (6)

Malaysia Dormant 100.00 –

Subsidiaries of Sea Master Trading Co. Sdn. Bhd.Ocean Pioneer Food Sdn. Bhd. Malaysia Manufacture, wholesale and export

of seafood products91.72 91.72

Seapack Food Sdn. Bhd. (7) Malaysia Sales and marketing of processed surimi and crab flavoured seafood products and frozen seafood products

100.00(9) –

Subsidiary of Sushi Kin Sdn. Bhd.Miraku Sdn. Bhd. (8) Malaysia Operation of a Japanese fine dining

restaurant100.00 –

Notes:(1) Not audited by KPmg (2) Shares held in trust for Texchem Resources Bhd. by Texchem Corporation Sdn. Bhd. (“Texcorp”) (3) incorporated on 10 September 2010(4) The unaudited management financial statements were consolidated in the group financial statements as these

subsidiaries were not required by the local legislation to have their financial statements audited(5) Commenced voluntary liquidation proceedings on 24 September 2010(6) Became a wholly owned subsidiary of Texchem Food Sdn. Bhd. with effect from 23 march 2010(7) Became a wholly owned subsidiary of Sea master Trading Co. Sdn. Bhd. (“SmT”) with effect from 15 November

2010(8) Became a wholly owned subsidiary of Sushi Kin Sdn Bhd with effect from 15 december 2010(9) Approximately 95.92% of the total issued shares are held in trust for SmT by Texcorp

85

ANNUAL REPORT 2010



Details of the associates are as follows :



Effective ownership

interest2010 2009

% %

Texchem Corporation Sdn. Bhd. (“Texcorp”)

Malaysia Investment holding and provision of management services for Texchem Group

49.88 49.88

M.A.C. Technology (Malaysia) Sdn. Bhd. (“MAC”) *

Malaysia Manufacture of all types of mechatronics components for electronics and automobile industries, precision mould for engineering parts, high-tech ceramics precision parts and ultra precision parts

21.14 21.14

*An associate company of Texchem-Pack Holdings (S) Ltd.

Summary financial information on associates:

Revenue Profit/(Loss) Total assets Total liabilities(100%) (100%) (100%) (100%)

RM RM RM RMGroup2010

Texcorp 17,810,749 2,735,059 57,909,614 29,903,616MAC 53,467,000 (670,000) 33,294,000 7,811,000

71,277,749 2,065,059 91,203,614 37,714,616

2009 (Restated)

Texcorp 13,862,225 (4,198,024) 61,603,455 34,793,753MAC 44,694,000 (2,570,000) 35,208,000 9,056,000

58,556,225 (6,768,024) 96,811,455 43,849,753

86




Details of the jointly controlled entity are as follows :

Name of jointly controlled entityCountry of


Effective ownership

interest2010 2009

% %

GMMI Texchem Sdn. Bhd. * Malaysia Research and development, marketing, sales, trading and distribution of components of medical devices

50.0 –

*Incorporated on 5 July 2010

Summary financial information on jointly controlled entity :

Group2010 2009

RM RMThe Group’s aggregate share of their income, expenses, assets and

liabilities of the jointly controlled entity is as follow :

Revenue – –

Expenses, including finance costs (615,157) –

(615,157) –

Current assets 30,515 –Non-current assets 601 –Current liabilities (446,273) –

Net liabilities (415,157) –

5. INTANGIBLE ASSETS - GROUP

Goodwill on consolidation

RMCost

At 1 January 2009 51,367,446

Acquisition of additional equity interests in subsidiaries 3,562,551

At 31 December 2009/1 January 2010 54,929,997

Acquisition of a subsidiary 596,668

At 31 December 2010 55,526,665

87

ANNUAL REPORT 2010


5. INTANGIBLE ASSETS - GROUP (cont’d)

Acquisition of subsidiary

During the financial year ended 31 December 2010, the Group acquired the entire equity interest of Miraku Sdn. Bhd. for a total cash consideration of RM2 million. Arising from the acquisition, the Group recognised a goodwill of RM596,668.

Impairment testing for cash generating units containing goodwill

The aggregate carrying amount of goodwill on consolidation is allocated to the respective cash generating units (“CGU”) for the purpose of annual impairment testing as described below.

(i) Packaging division (RM20.2 million)(ii) Industrial division (RM13.4 million)(iii) Family care division (RM9.5 million)(iv) Food division (RM12.4 million)

The Group has determined the recoverable amount of the goodwill relating to the above CGUs based on value in use calculations for each of the division. These calculations were determined using projected cash flows based on the 2011 financial budget and a five-year approved business plan prepare using growth rates determined based on historical experience, management’s assessment of future trends and expectations of market developments in the respective industries.

The key assumptions on which the cash flow projections are based on relate to discount rates, sales growth and changes in operating costs. The projected cash flows also took into consideration the estimated terminal values for property, plant and equipment of the respective divisions and the estimated market value of the trademarks owned by the family care division.

In determining the recoverable amount of the CGUs, the projected cash flows were discounted using pre-tax discount rates of 5.6%.

6. DEFERRED TAX - GROUP

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following :

2010 2009RM RM

deferred tax assets

Tax loss carry-forwards 59,483 61,183Other temporary differences 2,894,452 1,666,191

2,953,935 1,727,374

deferred tax liabilities

Property, plant and equipment - capital allowances 4,144,639 3,712,578- revaluation 3,324,790 3,341,002

Other temporary differences (1,814,354) (1,462,979)

5,655,075 5,590,601

88



6. DEFERRED TAX - GROUP (cont’d)

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 taxes relate to the same taxation authority.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the Group can utilise the benefits therefrom.

2010 2009RM RM

deferred tax assets

At 1 January (1,727,374) (1,046,558)Charged/(Credited) to profit or loss 644,732 (548,947)Acquisition of a subsidiary (1,903,999) (131,869)Exchange difference 32,706 –

At 31 December (2,953,935) (1,727,374)

deferred tax liabilities

At 1 January 5,590,601 7,007,159Charged/(Credited) to profit or loss 65,583 (1,417,051)Exchange difference (1,109) 493

At 31 December 5,655,075 5,590,601

Unrecognised deferred tax assets

No deferred tax assets have been recognised for the following items:

2010 2009RM RM

(Restated)

Tax loss carry-forwards 26,864,000 18,856,000Capital allowance carry-forwards 10,881,000 8,577,000Other temporary differences (6,110,000) (6,013,000)

31,635,000 21,420,000

The tax loss carry-forwards, capital allowance carry-forwards and other temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available against which the Group can utilise the benefits. The comparative figures have been restated to reflect the revised tax loss carry-forwards and capital allowance carry-forwards available to the Group.

89

ANNUAL REPORT 2010


7. TRADE AND OTHER RECEIVABLES

Group CompanyNote 2010 2009 2010 2009

RM RM RM RM

Trade

Trade receivables 185,863,816 186,601,738 – –Associates 7.2 2,132,136 4,701,337 – –

187,995,952 191,303,075 – –

Non-trade

Subsidiaries 7.1 – – 30,522,422 47,548,187Associates 7.2 930,746 1,399,514 7,424 891,774Deposits 7,319,610 6,573,741 226,120 225,120Prepayments 10,489,833 11,379,751 2,576,691 2,505,403Other receivables 14,216,425 13,637,707 5,602 4,415Dividend receivable from subsidiaries – – 8,102,405 10,319,312

32,956,614 32,990,713 41,440,664 61,494,211

220,952,566 224,293,788 41,440,664 61,494,211

7.1 Amount due from subsidiaries

Included in the amount due from subsidiaries is RM12,847,694 (2009 : RM22,041,694) which earns interest at 6.90% (2009 : 6.90% to 7.00%) per annum. Other than as disclosed above, the amount due from subsidiaries is unsecured, interest-free and repayable on demand.

7.2 Amount due from associates

The trade amount due from associates is subject to normal trade terms.

The non-trade amount due from associates is unsecured, interest free and repayable on demand.

8. INVENTORIES - GROUP

2010 2009RM RM

Raw materials 18,879,941 18,559,612Work-in-progress 1,768,264 2,875,201Manufactured inventories 23,238,947 21,828,534Trading inventories 21,753,253 17,916,554Food and beverages 8,894,953 6,489,233

74,535,358 67,669,134

The amount of inventories written back during the current financial year amounted to RM130,583 (2009 : RM582,288).

The amount written down or written back is based on management’s estimate of the inventories’ net realisable values after taking into consideration of the inventory holding period and other relevant factors.

90



9. CASH AND CASH EqUIVALENTS


RM RM RM RM

Short term deposits with licensed banks 9.1 2,644,754 3,740,954 709,959 947,398

Cash and bank balances 46,267,563 59,286,313 632,455 2,221,741

48,912,317 63,027,267 1,342,414 3,169,139

9.1 Short term deposits with licensed banks

Included in short term deposits with licensed banks of the Group and of the Company is RM709,959 (2009 : RM947,398) being amount invested in a debt service reserve account set aside solely for the payment of interest.

10. ASSETS CLASSIFIED AS HELD FOR SALE

2010 2009RM RM

Leasehold land 3,033,428 –Buildings and furniture and fittings 3,242,115 –Plant and machinery 743,706 –

7,019,249 –

During the year, management committed to a plan to dispose of the leasehold land together with the buildings erected thereon and the plant and machinery belonging to a subsidiary. The conditional Sale and Purchase Agreement to dispose of the leasehold land and buildings was entered into subsequent to the end of the reporting period (see Note 31).

11. SHARE CAPITAL – GROUP/ COMPANY

2010 2009 Amount

RMNumber of

sharesAmount

RMNumber of

sharesOrdinary shares of RM1 each :

Authorised 500,000,000 500,000,000 500,000,000 500,000,000

Issued and fully paid 124,099,235 124,099,235 124,099,235 124,099,235

91

ANNUAL REPORT 2010


12. RESERVES


RM RM RM RM

Non-distributable :Share premium 25,567,775 25,567,775 25,567,775 25,567,775Revaluation reserve 12.1 1,532,190 1,532,190 – –Foreign currency translation

reserve 12.2 (5,408,010) 844,637 – –Merger reserve 1,091,778 1,091,778 – –Capital reserve 12.3 3,814,700 3,594,012 – –

26,598,433 32,630,392 25,567,775 25,567,775

Distributable :(Accumulated losses)/ Retained

earnings 12.4 (4,353,097) 115,178 27,124,046 30,080,974

22,245,336 32,745,570 52,691,821 55,648,749

The movements in the reserves are disclosed in the statements of changes in equity.

12.1 Revaluation reserve

The non-distributable revaluation reserve of the Group represents unrealised surplus on revaluation of properties.

12.2 Foreign currency translation reserve

The foreign currency translation reserve comprises the foreign currency differences arising from the translation of the financial statements of foreign operations.

12.3 Capital reserve

The non-distributable capital reserve of the Group represents the statutory reserve of foreign subsidiaries as required by the respective foreign legislations.

12.4 Section 108 tax credit and exempt income account

Subject to agreement with the Inland Revenue Board, the Company has sufficient Section 108 tax credit and exempt income to frank/distribute its entire retained earnings at the end of the reporting period if paid out as dividends.

The Finance Act, 2007 introduced a single tier company income tax system with effect from year of assessment 2009. Effective 1 January 2008, the Company is given the option to make an irrevocable election to move to a single tier system or continue to use its tax credit under Section 108 of the Income Tax Act, 1967 for the purpose of dividend distribution. The Company has not made this election. As such, the Section 108 tax credit as at 31 December 2010 will be available to the Company until such time the credit is fully utilised or upon expiry of the transitional period on 31 December 2013, whichever is earlier.

92



13. LOANS AND BORROWINGS

Group Company2010 2009 2010 2009

RM RM RM RMUnsecured

Current :

Bank overdrafts 12,856,484 7,691,405 – –Bankers’ acceptances 63,245,001 57,682,000 – –Revolving credit 95,210,761 82,044,522 37,000,000 34,100,000Term loans

- Fixed rate 1,705,600 1,732,080 – –- Variable rate 8,278,195 6,808,228 1,158,000 1,457,535

Trust receipts 7,171,972 3,850,250 – –Commercial papers 20,000,000 20,000,000 20,000,000 20,000,000Collateralised loan obligations 35,000,000 – 35,000,000 –Other borrowings 7,907,627 2,157,535 – –

251,375,640 181,966,020 93,158,000 55,557,535

Finance lease liabilities 1,076,523 955,333 20,227 29,258

252,452,163 182,921,353 93,178,227 55,586,793

Unsecured

Non-current :

Commercial papers 30,000,000 50,000,000 30,000,000 50,000,000Term loans

- Fixed rate 2,525,600 4,255,968 – –- Variable rate 12,787,328 11,982,946 2,412,000 3,570,000

Collateralised loan obligations – 35,000,000 – 35,000,000

45,312,928 101,238,914 32,412,000 88,570,000

Finance lease liabilities 2,058,615 1,273,881 23,356 43,583

47,371,543 102,512,795 32,435,356 88,613,583

The current amounts of the Commercial Papers (“CP”) of RM20 million and Collateralised Loan Obligations (“CLO”) of RM35 million are due for repayment on 31 March 2011 and 10 October 2011 respectively.

The Company is currently in the process of arranging for the refinancing of its Commercial Papers and the Collateralised Loan Obligations as disclosed in Note 1(b).

93

ANNUAL REPORT 2010


13. LOANS AND BORROWINGS (cont’d)

13.1 Covenants

The Commercial Papers are subject to the fulfilment of the following covenants :

i) The Group’s Debt Service Cover Ratio shall not be less than 1.4 times (2009 : 1.2 times); and

ii) The Group’s Debt to Equity Ratio shall not exceed 2.8 : 1 for the first three years and 2.3 : 1 from the fourth year to the seventh year.

13.2 Finance lease liabilities

Finance lease liabilities are payable as follows:

2010 2009 Minimum

lease payments Interest Principal

Minimumlease

payments Interest PrincipalGroup RM RM RM RM RM RM

Less than 1 year 1,223,820 147,297 1,076,523 1,093,001 137,668 955,333Between 1 and 5 years 2,259,553 200,938 2,058,615 1,368,872 102,117 1,266,755Over 5 years – – – 9,464 2,338 7,126

3,483,373 348,235 3,135,138 2,471,337 242,123 2,229,214

Company

Less than 1 year 21,684 1,457 20,227 31,819 2,561 29,258Between 1 and 5 years 23,469 113 23,356 45,153 1,570 43,583

45,153 1,570 43,583 76,972 4,131 72,841

The finance lease liabilities are secured as the rights to the assets under the finance lease that revert to the lessor in the event of default.

14. DEFERRED LIABILITIES

Directors’ retirement/resignation benefits

Group Company2010 2009 2010 2009

RM RM RM RM

Balance at beginning of year 4,998,752 4,759,535 831,983 681,983Provision made during the year (Note 17) 746,289 725,058 138,000 150,000Amount paid during the year (1,183,946) (488,127) – –Exchange difference (44,264) 2,286 – –

Balance at end of year 4,516,831 4,998,752 969,983 831,983

94



15. TRADE AND OTHER PAYABLES

Group Company2010 2009 2010 2009

Note RM RM RM RMTrade

Trade payables 82,333,393 100,020,124 – –Associates 15.1 61,726 20,063 – –

82,395,119 100,040,187 – –

Non-trade

Subsidiaries 15.1 – – 16,711,285 7,000,000Associates 15.1 2,028,466 799,081 6,706 2,472Other payables 31,506,917 26,385,479 868,349 954,635Accrued expenses 27,414,992 30,640,490 1,396,241 756,859

60,950,375 57,825,050 18,982,581 8,713,966

143,345,494 157,865,237 18,982,581 8,713,966

15.1 Amount due to subsidiaries and associates

The trade payables due to associates are subject to normal trade terms.

The non-trade amounts due to subsidiaries and associates are unsecured, interest-free and payable on demand other than the amount due to subsidiaries of RM16,709,427 (2009 : RM7,000,000) which are subject to fixed interest rates ranging from 4.57% to 7.55% (2009 : 5.00%) per annum.

16. PROVISION - GROUP

2010 2009RM RM

Provision for restoration costs

Balance at beginning of year 2,516,476 2,190,956

Acquisition of a subsidiary 52,000 –Provision made during the year 418,416 325,520Utilised during the year (123,911) –

346,505 325,520

Balance at end of year 2,862,981 2,516,476

95

ANNUAL REPORT 2010


17. OPERATING PROFIT

2010 2009RM RM

(Restated)Group

Revenue- Invoiced value of goods sold less discounts and returns 1,050,558,086 1,000,893,887- Commission income 4,185,232 3,827,261- Service income 3,951,495 2,430,365

1,058,694,813 1,007,151,513

Cost of sales (826,683,082) (795,260,916)

Gross profit 232,011,731 211,890,597

Distribution costs (117,840,036) (109,503,350)Administrative expenses (122,139,673) (114,279,564)Other income 26,915,219 23,122,338

Operating profit 18,947,241 11,230,021

Company

Revenue - Dividend income 12,762,346 16,962,081Administrative expenses (5,381,497) (8,503,803)Other income 1,100,907 1,920,057

Operating profit 8,481,756 10,378,335

Operating profit is arrived at:

Group Company2010 2009 2010 2009

RM RM RM RMAfter charging :

Impairment loss on trade receivables – 259,292 – –Auditors’ remuneration (statutory audit)- KPMG Malaysia

- current year 262,517 252,064 18,000 18,000- Non KPMG

- current year 497,311 451,826 – –- prior year – (1,020) – –

Bad debts written off 1,161 23,223 – –

96



17. OPERATING PROFIT (cont’d)

Group Company2010 2009 2010 2009

RM RM RM RMDirectors’ emoluments

Directors of the Company- fees 2,143,060 2,302,154 530,000 530,000- others 3,718,071 4,104,940 910,705 984,088Other Directors- fees 1,976,158 1,852,687 – –- others 11,529,276 9,273,862 – –

Directors’ retirement/ resignation benefits (Note 14) 746,289 725,058 138,000 150,000

Property, plant and equipment- Depreciation (Note 3) 33,508,490 33,672,155 494,772 673,156- Impairment loss (Note 3) 640,962 1,090,340 – –- Written off 289,413 1,291,799 – – Impairment loss on unquoted bond (Note

4)– 3,500,000 – 3,500,000

Loss on foreign exchange, net 3,379,277 – 18,461 3,432Rental of equipment and premises 22,410,402 19,286,606 68,773 68,773Research and development expenses 969,167 976,757 – –Severance costs – 611,228 – –

And crediting :

Impairment loss on trade receivables written back 191,019 – – –

Bad debts recovered – 84,987 – –Dividends (gross) receivable from

subsidiaries – – 12,762,346 16,962,081Gain on disposal of property, plant and

equipment 373,250 262,812 27,057 9,686Interest income 959,940 489,575 1,089,430 1,910,371Inventories written back (Note 8) 130,583 582,288 – –Rental income 1,705,447 1,430,215 – –Gain on foreign exchange - Realised, net – 178,456 – –- Unrealised, net – 150,907 – –

97

ANNUAL REPORT 2010


18. EMPLOYEE INFORMATION

Group Company2010 2009 2010 2009

RM RM RM RM

Staff cost (excluding executive Directors) 111,601,667 103,924,851 1,021,568 1,187,850

Staff costs and Directors’ emoluments of the Group and of the Company include contributions to the Employees’ Provident Fund of RM7,774,606 (2009 : RM6,713,562) and RM165,784 (2009 : RM183,815) respectively.

19. FINANCE COSTS

Group Company2010 2009 2010 2009

RM RM RM RMInterest expense :

Term loans 1,134,300 1,240,971 299,328 345,298Commercial papers 3,186,024 4,252,026 3,186,024 4,252,026Bank overdrafts 1,119,890 714,231 22,659 3,339Collateralised loan obligations 2,415,000 2,415,000 2,415,000 2,415,000Other borrowings 6,846,835 5,741,890 2,196,856 1,662,318

14,702,049 14,364,118 8,119,867 8,677,981

20. INCOME TAX EXPENSE

Recognised in profit or loss

Group Company2010 2009 2010 2009RM RM RM RM

Income tax expense on continuing operations 5,600,974 5,310,098 (404,159) 382,490

98



20. INCOME TAX EXPENSE (cont’d)

Major components of tax expense include :

Group Company2010 2009 2010 2009

RM RM RM RMCurrent income tax expense

Malaysian tax

- current year 5,275,338 4,424,807 182,604 400,618- prior years (1,928,778) (50,007) (586,763) (18,128)

3,346,560 4,374,800 (404,159) 382,490

Foreign tax

- current year 1,659,985 2,317,017 – –- prior years (115,886) 584,279 – –

1,544,099 2,901,296 – –

Total current tax 4,890,659 7,276,096 (404,159) 382,490

Deferred tax expense

- origination and reversal of temporary differences 248,546 (1,583,856) – –- prior years 461,769 (382,142) – –

Total deferred tax 710,315 (1,965,998) – –

Total income tax expense 5,600,974 5,310,098 (404,159) 382,490

99

ANNUAL REPORT 2010


20. INCOME TAX EXPENSE (cont’d)

Reconciliation of effective income tax expense

Group Company2010 2009 2010 2009

RM RM RM RM

(Loss)/Profit for the year (2,860,543) (10,523,357) 766,048 1,317,864Total income tax expense 5,600,974 5,310,098 (404,159) 382,490

Profit/(Loss) excluding tax 2,740,431 (5,213,259) 361,889 1,700,354

Tax calculated using Malaysian tax rate at 25% 685,108 (1,303,315) 90,472 425,089

Effect of change in tax rate – 37,063 – –Effect of different tax rates in foreign

jurisdictions * 515,470 (94,662) – –Non deductible expenses 6,012,478 6,419,495 1,215,570 1,553,210Share of loss of a jointly controlled entity 25,000 – – –Share of loss of equity accounted

associates 351,190 519,791 – –Losses not available for Group set-off 24,936 789,141 – –Tax exempt income/dividends (383,932) (1,134,016) (1,123,438) (1,539,902)Tax incentives (2,491,296) (1,642,452) – –Deferred tax assets not recognised 2,553,742 1,675,250 – –Other items (108,827) (108,327) – (37,779)(Over)/Under provision in prior years (1,582,895) 152,130 (586,763) (18,128)

Income tax expense 5,600,974 5,310,098 (404,159) 382,490

*The tax rates in the foreign jurisdictions in which certain foreign subsidiaries operate are different from that of the Malaysian tax rate.

21. BASIC LOSS PER ORDINARY SHARE - GROUP

The calculation of basic loss per ordinary share is based on the net loss attributable to ordinary shareholders of RM490,972 (2009 : RM9,256,243) and the weighted average number of ordinary shares outstanding during the year of 124,099,235 (2009 : 124,099,235).

100



22. DIVIDENDS

Dividend recognised in the current year by the Company are :

Sen per share (net of tax)

Total amount Date of payment

RM2010

First interim ordinary 1.50 1,861,488 1 September 2010Second interim ordinary 1.50 1,861,488 27 January 2011

3,722,976

2009

First interim ordinary 2.25 2,792,233 25 August 2009Second interim ordinary 1.50 1,861,489 19 January 2010

4,653,722

23. RELATED PARTIES

23.1For the purposes of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to 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 or common significant influence. Related parties may be individuals or other entities.

i) Its subsidiaries and associates as disclosed in Note 4 to the financial statements.

ii) Companies in which a Director, Tan Sri Dato’ Seri Fumihiko Konishi is deemed to have a substantial financial interest:

- Texchem Holdings Sdn. Bhd. and its subsidiary

Texchem Holdings Sdn. Bhd. and its subsidiary, Texchem Corporation Sdn. Bhd. are also the substantial shareholders of the Company.

iii) Key management personnel

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group and of the Company either directly or indirectly. The key management personnel include the executive Directors of the Group and of the Company respectively.

101

ANNUAL REPORT 2010


23. RELATED PARTIES (cont’d)

23.2 Significant transactions with related parties other than those disclosed elsewhere in the financial statements are as follows:

i) Transactions between the Company and its subsidiaries:

2010 2009RM’000 RM’000

- Advances from 9,709 2,500- Advances to 1,000 1,400- Rental reimbursed from subsidiaries 528 528- Interest expense 713 258- Interest income 1,034 1,859- Acquisition of interest in a subsidiary – 12,121- Subscription of shares in a subsidiary 13,201 –

ii) Transactions with Texchem Holdings Sdn. Bhd.

2010 2009RM’000 RM’000

Company

- Rental paid 648 648- Dividends paid/payable 1,558 1,947

Group

- Rental paid 828 828

iii) Transactions with associates

2010 2009RM’000 RM’000

Company

- Dividends paid/payable 1,022 1,278- Management fee payable 360 210- Information technology costs 11 11- Insurance premium payable 120 152

102



23. RELATED PARTIES (cont’d)

iii) Transactions with associates (cont’d)

2010 2009RM’000 RM’000

Group

- Acquisition of subsidiaries 2,100 –- Dividend paid/payable 1,022 1,278- Information technology costs 134 142- Management fees payable 6,690 6,298- Sales 36,580 34,483- Purchases 590 260- Security service charges payable 1,132 1,119- Rental expense 1,068 952- Insurance premium payable 3,132 2,827- Commission payable 5 424- Sale of moulds 548 37- Technical fee receivable 316 302

iv) There were no transactions with the key management personnel other than the remuneration package paid to them in accordance with the terms and conditions of their appointment as follows:

Group Company2010 2009 2010 2009

RM RM RM RMDirectors- Fees 3,731,259 3,726,360 380,000 380,000- Remuneration 15,124,943 13,268,797 835,705 909,088- Benefits-in-kind 443,807 321,230 28,770 37,584

19,300,009 17,316,387 1,244,475 1,326,672

23.3 The non-trade balances of the Group and of the Company with related parties outstanding at the end of the reporting period are as disclosed in Note 7 and Note 15 to the financial statements.

All the amounts outstanding are unsecured and are expected to be settled in cash. There were no impairment losses established in respect of related party balances at the end of the reporting period.

103

ANNUAL REPORT 2010


24. OPERATING SEGMENTS

The Group has four reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s Chief Executive Officer (the chief operating decision maker) reviews internal management reports at least on a quarterly basis. The following summary describes the operations in each of the Group’s reportable segments:

• Industrial• Packaging• Family care• Food

Performance is measured based on segment profit before tax, as included in the internal management reports that

are reviewed by the Group’s Chief Executive Officer (the chief operating decision maker). Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

Other non-reportable segment represents the investment holding activities of the Group.

Segment assets

The total of segment asset is measured on all assets (including goodwill) of a segment as included in the internal management reports that are reviewed by the Group’s Chief Executive Officer. Segment total asset is used to measure the return of assets of each segment.

Segment liabilities

Segment liabilities information is neither included in the internal management reports nor provided regularly to the Chief Executive Officer. Hence, no disclosure is made on segment liability.

104


NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TAT

EM

EN

TS

(CO

NT

’D)

24.

OP

ER

AT

ING

SE

GM

EN

TS

(co

nt’

d)

Ind

ust

rial

P

acka

gin

gFa

mily

car

eFo

od

Oth

ers

Elim

inat

ion

sTo

tal

RM

RM

RM

RM

RM

RM

RM

2010

Rev

enue

fro

m e

xter

nal c

usto

mer

s39

0,43

6,13

620

2,16

2,54

615

3,38

1,40

031

2,71

4,73

1–

–1,

058,

694,

813

Inte

r-seg

men

t re

venu

e2,

574,

441

72,6

8668

,469

––

(2,7

15,5

96)

–

Tota

l rev

enu

e39

3,01

0,57

720

2,23

5,23

215

3,44

9,86

931

2,71

4,73

1–

(2,7

15,5

96)

1,05

8,69

4,81

3

Pro

fit/(L

oss)

bef

ore

shar

e of

loss

of

equi

ty a

ccou

nted

as

soci

ates

and

a jo

intly

con

trol

led

entit

y8,

681,

126

(6,2

55,6

35)

3,01

9,68

311

,200

,475

(12,

400,

457)

–4,

245,

192

Sha

re o

f lo

ss o

f a

join

tly c

ontr

olle

d en

tity

–(1

00,0

00)

––

––

(100

,000

)

Sha

re o

f lo

ss o

f eq

uity

acc

ount

ed a

ssoc

iate

s–

(200

,095

)–

–(1

,204

,666

)–

(1,4

04,7

61)

Pro

fit/(L

oss)

bef

ore

tax

(seg

men

t pr

ofit/

(loss

))8,

681,

126

(6,5

55,7

30)

3,01

9,68

311

,200

,475

(13,

605,

123)

–2,

740,

431

Incl

uded

in t

he m

easu

re o

f se

gmen

t pr

ofit/

(loss

) are

:- I

nven

torie

s w

ritte

n do

wn/

(writ

ten

back

)49

,907

325,

111

(154

,067

)(3

51,5

34)

––

(130

,583

)- (

Rev

ersa

l of

impa

irmen

t lo

ss)/I

mpa

irmen

t lo

ss o

n tr

ade

rece

ivab

les

(56,

731)

(183

,973

)44

,388

5,29

7–

–(1

91,0

19)

- Im

pairm

ent

loss

on

prop

erty

, pla

nt a

nd e

quip

men

t–

640,

962

––

––

640,

962

- Dep

reci

atio

n1,

565,

564

12,2

44,8

477,

473,

336

11,2

79,9

7194

4,77

2–

33,5

08,4

90

Seg

men

t as

sets

130,

618,

743

188,

953,

696

154,

147,

467

140,

252,

515

25,8

58,4

48–

639,

830,

869

Incl

uded

in t

he m

easu

re o

f se

gmen

t as

sets

are

:- I

nves

tmen

t in

ass

ocia

tes

–6,

945,

693

––

13,7

38,6

50–

20,6

84,3

43- A

dditi

ons

to p

rope

rty,

pla

nt a

nd e

quip

men

t2,

134,

343

16,0

57,5

035,

428,

222

10,2

57,6

6928

,320

–33

,906

,057

105

ANNUAL REPORT 2010

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TAT

EM

EN

TS

(C

ON

T’D

)

24.

OP

ER

AT

ING

SE

GM

EN

TS

(co

nt’

d)

Ind

ust

rial

P

acka

gin

gFa

mily

car

eFo

od

Oth

ers

Elim

inat

ion

sTo

tal

RM

RM

RM

RM

RM

RM

RM

(Res

tate

d)

(Res

tate

d)

2009

Rev

enue

fro

m e

xter

nal c

usto

mer

s37

9,35

7,26

817

6,18

2,04

615

5,06

9,30

929

6,54

2,89

0–

–1,

007,

151,

513

Inte

r-seg

men

t re

venu

e3,

927,

396

426,

823

29,4

73–

–(4

,383

,692

)–

Tota

l rev

enu

e38

3,28

4,66

417

6,60

8,86

915

5,09

8,78

229

6,54

2,89

0–

(4,3

83,6

92)

1,00

7,15

1,51

3

Pro

fit/(L

oss)

bef

ore

shar

e of

loss

of

equi

ty a

ccou

nted

as

soci

ates

9,36

0,79

2(6

,121

,356

)4,

042,

478

4,84

6,71

6(1

5,26

2,72

7)–

(3,1

34,0

97)

Sha

re o

f lo

ss o

f eq

uity

acc

ount

ed a

ssoc

iate

s–

(802

,027

)–

–(1

,277

,135

)–

(2,0

79,1

62)

Pro

fit/(L

oss)

bef

ore

tax

(seg

men

t pr

ofit/

(loss

))9,

360,

792

(6,9

23,3

83)

4,04

2,47

84,

846,

716

(16,

539,

862)

–(5

,213

,259

)

Incl

uded

in t

he m

easu

re o

f se

gmen

t pr

ofit/

(loss

) are

:- I

nven

torie

s w

ritte

n do

wn/

(writ

ten

back

)(3

8,06

2)(6

34,4

34)

460,

809

(370

,601

)–

–(5

82,2

88)

- (R

ever

sal o

f im

pairm

ent

loss

)/Im

pairm

ent

loss

on

trad

e

re

ceiv

able

s(1

26,4

42)

288,

901

96,8

33–

––

259,

292

- Im

pairm

ent

loss

on

prop

erty

, pla

nt a

nd e

quip

men

t–

1,09

0,34

0–

––

–1,

090,

340

- Dep

reci

atio

n1,

738,

968

12,5

66,7

807,

362,

101

11,3

31,1

5067

3,15

6–

33,6

72,1

55

Seg

men

t as

sets

144,

912,

181

191,

375,

900

158,

043,

277

128,

528,

479

29,9

82,3

21–

652,

842,

158

Incl

uded

in t

he m

easu

re o

f se

gmen

t as

sets

are

:- I

nves

tmen

t in

ass

ocia

tes

–7,

145,

789

––

12,4

43,5

07–

19,5

89,2

96- A

dditi

ons

to p

rope

rty,

pla

nt a

nd e

quip

men

t1,

020,

624

7,53

6,59

34,

379,

274

7,96

5,79

110

,336

–20

,912

,618

106



24. OPERATING SEGMENTS (cont’d)

Geographical segments

In presenting information on the basis of geographical segments, segment revenue is based on geographical location of customer. Segment assets are based on the geographical location of the assets. The amounts of non-current assets do not include financial instruments (including investment in associates) and deferred tax assets.

RevenueNon-current

assetsRM’000 RM’000

Geographical information

2010

Malaysia 483,900 139,669Singapore 86,444 13,377Thailand 124,160 34,250Vietnam 53,431 18,635China 88,129 5,125Myanmar 7,076 19,681Indonesia 39,577 18,494Others 175,978 –

1,058,695 249,231

2009

Malaysia 462,832 140,402Singapore 73,970 13,521Thailand 113,026 35,975Vietnam 52,205 21,819China 84,292 6,519Myanmar 5,987 23,706Indonesia 39,754 20,063Others 175,085 –

1,007,151 262,005

25. DIRECTORS’ BENEFITS-IN-KIND

The estimated monetary value of benefits receivable by certain Directors otherwise than in cash are as follows:

Group Company2010 2009 2010 2009

RM RM RM RM

Directors of the Company 107,054 115,796 28,770 37,584Other Directors 336,753 205,434 – –

443,807 321,230 28,770 37,584

107

ANNUAL REPORT 2010


26. CAPITAL MANAGEMENT The Group’s objectives when managing capital is to maintain a strong capital base and safeguard the Group’s ability

to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business.

There were no changes in the Group’s approach to capital management during the year.

The Group is also required to comply with the covenants as disclosed in Note 13.1, failing which, the bank may call an event of default. The Group has complied with these covenants.

27. CAPITAL COMMITMENTS - GROUP

2010 2009RM’000 RM’000

Property, plant and equipment

Approved but not contracted for 1,230 2,043Contracted but not provided for in the financial statements - within one year 6,675 5,978

7,905 8,021

28. OPERATING LEASES

Non-cancellable operating lease rentals are as follows :

Group Company2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

Less than 1 year 16,092 17,292 2,181 2,166Between 1 and 5 years 18,880 20,626 6,211 7,794More than 5 years 141 1,248 – 599

35,113 39,166 8,392 10,559

The Group and the Company leased land, office space, warehouse, equipment and related outlets under operating leases. The leases typically run for an initial period of 1 to 10 years with an option to renew.

The annual rate for leasing a piece of land by a subsidiary is subject to review every 5 years and the revised rate will not increase by more than 15% from the prevailing rate.

The lease payments for certain related outlets of a subsidiary are based on fixed lease rental amount or a percentage of between 8% to 12% of the subsidiary’s net turnover, whichever is higher. The lease commitment disclosed above is aggregated based on the minimum lease rental payable.

108



29. FINANCIAL INSTRUMENTS Certain comparative figures have not been presented for 31 December 2009 by virtue of the exemption given in

paragraph 44AA of FRS 7.

29.1 Categories of financial instruments

Trade and other receivables (excluding prepayments) and cash and bank balances are categorised as loans and receivables while trade and other payables, provision, dividend payable and loans and borrowings are categorised as other liabilities.

29.2 Financial risk management

The Group has exposure to the following risks from its use of financial instruments:

• Credit risk • Liquidity risk • Market risk

29.3 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 and investment securities. The Company’s exposure to credit risk arises principally from advances to subsidiaries and financial guarantees given to banks for credit facilities granted to subsidiaries.

Receivables

Risk management objectives, policies and processes for managing the risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Normally, credit evaluations are performed on customers requiring credit over a certain amount.

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 the 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. The Group uses ageing analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due more than 120 days, which are deemed to have higher credit risk, are monitored individually.

109

ANNUAL REPORT 2010


29. FINANCIAL INSTRUMENTS (cont’d)

29.3 Credit risk (cont’d)

The exposure of credit risk for trade receivables as at the end of the reporting period by geographic region was:

Group2010

RM’000

Domestic 80,045Thailand 26,709Peoples’ Republic of China 12,797Singapore 15,477Vietnam 7,198Myanmar 12,540United States 19,449Others 13,781

187,996

impairment losses

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

GrossIndividual

impairmentCollective

impairment NetRM’000 RM’000 RM’000 RM’000

Group

2010Not past due 139,641 – – 139,641Past due 0 – 30 days 25,420 (41) – 25,379Past due 31 – 120 days 22,868 (263) – 22,605Past due more than 120 days 737 (366) – 371

188,666 (670) – 187,996

The movements in the allowance for impairment losses of trade receivables during the financial year were :

Group Company2010 2010

RM’000 RM’000

At 1 January 1,244 –

Impairment loss recognised 101 –Impairment loss reversed (292) –Impairment loss written off (355) –Exchange difference (28) –

At 31 December 670 –

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

110




29.3 Credit risk (cont’d)

Financial guarantees


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 amounted to RM60.4 million (2009 : RM43.8 million) representing the outstanding banking facilities of the subsidiaries as at the end of the reporting period.

The Group also issued a corporate guarantees to the suppliers of certain subsidiaries amounting to RM31.9 million (2009 : RM33.7 million).

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.

Inter company balances

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

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 statements of financial position.

impairment losses As at the end of the reporting period, there was no indication that the advances to the subsidiaries are not

recoverable. The Company does not specifically monitor the ageing of the advances to the subsidiaries. Nevertheless, these advances are not considered to be overdue and are repayable on demand.

111

ANNUAL REPORT 2010



29.4 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.

In the management of liquidity risk, the Group and the Company monitor and maintain a level of cash and cash equivalents deemed adequate by management to finance the Group’s and Company’s operations and to mitigate any adverse effects of fluctuations in cash flows.

As at 31 December 2010, the current liabilities of the Group and of the Company exceeded the current assets by RM36,073,246 and RM64,627,191 respectively. Included in the current liabilities of the Group and of the Company are outstanding balances relating to the Commercial Papers/Medium Term Notes Programme (“Commercial Papers”) of RM20 million and Collateralised Loan Obligations (“CLO”) amounting to RM35 million which are due for repayment in March 2011 and October 2011 respectively. Details of the Commercial Papers and CLO are disclosed in Note 13 to the financial statements.




The Management are of the opinion that the Group’s banking facilities will continue to be available from its lenders and that the Group will be able to generate cash flows from its operations to meet its liabilities as and when they fall due pending the proposed issuance of the RM100 million Islamic Bond. Based on the above, the Directors are of the opinion that the refinancing exercise will be completed before October 2011.

112


NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TAT

EM

EN

TS

(C

ON

T’D

)

29.

FIN

AN

CIA

L IN

ST

RU

ME

NT

S (

con

t’d

)

29.4

Liq

uid

ity

risk

(co

nt’

d)

Th

e ta

ble

belo

w s

umm

aris

es th

e m

atur

ity p

rofil

e of

the

Gro

up’s

and

of t

he C

ompa

ny’s

fina

ncia

l lia

bilit

ies

as a

t the

end

of t

he re

port

ing

perio

d ba

sed

on u

ndis

coun

ted

cont

ract

ual

paym

ents

:

Car

ryin

g

amo

un

tC

on

trac

tual

in

tere

st r

ates

Co

ntr

actu

al

cash

flo

ws

Un

der

1

year

1 –

2 ye

ars

2 –

5 ye

ars

Mo

re t

han

5

year

s20

10R

M’0

00%

RM

’000

RM

’000

RM

’000

RM

’000

RM

’000

Gro

up

Non

-der

ivat

ive

finan

cial

liab

ilitie

sB

ank

over

draf

ts12

,856

6.00

- 1

2.23

12,8

5612

,856

––

–B

anke

rs’ a

ccep

tanc

es63

,245

1.20

- 5

.23

63,2

4563

,245

––

–R

evol

ving

cre

dit

95,2

112.

00 -

15.

2095

,211

95,2

11–

––

Trus

t re

ceip

ts

7,17

23.

48 -

5.7

57,

172

7,17

2–

––

Term

loan

s25

,297

1.29

- 8

.05

27,6

7411

,051

9,08

97,

534

–C

omm

erci

al p

aper

s50

,000

5.65

52,4

0121

,977

30,4

24–

–C

olla

tera

lised

loan

obl

igat

ions

35,0

006.

9036

,853

36,8

53–

––

Fina

nce

leas

e lia

bilit

ies

3,13

52.

32 -

5.7

03,

483

1,22

491

01,

349

–O

ther

bor

row

ings

7,

908

1.16

- 1

5.05

7,90

87,

908

––

–Tr

ade

and

othe

r pa

yabl

es14

3,34

5–

143,

345

143,

345

––

–

443,

169

450,

148

400,

842

40,4

238,

883

–

Co

mp

any

Non

-der

ivat

ive

finan

cial

liab

ilitie

sTe

rm lo

ans

3,57

07.

303,

984

1,38

11,

295

1,30

8–

Col

late

ralis

ed lo

an o

blig

atio

ns35

,000

6.90

36,8

5336

,853

––

–C

omm

erci

als

pape

rs

50,0

005.

6552

,401

21,9

7730

,424

––

Fina

nce

leas

e lia

bilit

ies

442.

3545

2222

1–

Rev

olvi

ng c

redi

t37

,000

4.17

- 4

.74

37,0

0037

,000

––

–O

ther

pay

able

s2,

273

–2,

273

2,27

3–

––

Adv

ance

s fr

om s

ubsi

diar

ies

16,7

094.

57 -

7.5

516

,709

16,7

09–

––

144,

596

149,

265

116,

215

31,7

411,

309

–

113

ANNUAL REPORT 2010



29.5 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.

29.5.1 Currency risk

The Group incurs foreign currency risk on sales, purchases and borrowings that are denominated in US Dollar, Japanese Yen and Singapore Dollar. In respect of other monetary assets and liabilities held in currencies other than RM, the Group ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances.

Exposure to foreign currency risk

The Group’s exposure to foreign currency (a currency which is other than the currency of the Group entities) risk, based on carrying amounts as at the end of the reporting period was:

USD JPY SGDRM’000 RM’000 RM’000

Group

2010

Trade and other receivables 58,060 1,751 262Trade and other payables (44,115) (5,900) (819)Cash and bank balances 13,908 96 171Loans and borrowings (25,875) – (7,670)

Net exposure 1,978 (4,053) (8,056)

Currency risk sensitivity analysis

A 5% strengthening of the RM against the following currencies at the end of the reporting period would have increased (decreased) pre-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remained constant and ignores any impact of forecasted sales and purchases. There is no impact to equity arising from exposure to currency risk.

Profit or lossGroup RM’000

2010

USD (99)JPY 203SGD 403

A 5% weakening of the RM against the above currencies at the end of the reporting period would have had equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remained constant.

114




29.5 Market risk (cont’d)

29.5.2 Interest rate risk

The Group’s investments in fixed rate debt securities and its fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Investments in equity securities and short term receivables and payables are not significantly exposed to interest rate risk.


The Group and the Company are presently enjoying competitive interest rates which are reviewed and negotiated on a yearly basis. The Group and the Company managed their interest rate risk by having a combination of borrowings with fixed and floating rates. The Group’s and the Company’s surplus funds are placed as short term deposits with licensed banks.

exposure to interest rate risk The interest rate profile of the Group’s and the Company’s significant interest-earning and interest-bearing

financial instruments, based on carrying amounts as at the end of the reporting period was :

Group Company2010 2010

RM’000 RM’000Fixed rate instruments

Financial assets – 12,848Financial liabilities (42,366) (51,753)

Floating rate instruments

Financial assets 2,645 710Financial liabilities (257,458) (90,569)

(254,813) 89,859

interest rate risk sensitivity analysis

(a) 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. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss.

(b) 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) pre-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remained constant. There is no impact to entity arising from exposures to interest rate risk.

115

ANNUAL REPORT 2010



29.5 Market risk (cont’d)

29.5.2 Interest rate risk (cont’d)

Profit or loss100 bp

increase100 bp

decrease2010 RM’000 RM’000

Group

Floating rate instruments (2,548) 2,548

Company

Floating rate instruments (898) 898

29.6 Fair values

Recognised financial instruments

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

The aggregate fair values of the other financial assets and liabilities carried on the statements of financial position as at 31 December are shown below :

2010 2009Carrying amount

Fair value

Carrying amount

Fair value

RM’000 RM’000 RM’000 RM’000Group

Financial liabilities(Fixed rate instruments)Unsecured:Term loans 4,231 4,140 5,988 5,845Collateralised loan obligations 35,000 # 35,000 #Finance lease liabilities 3,135 3,245 2,229 2,268

Company

Financial liabilities(Fixed rate instruments)Unsecured:Collateralised loan obligations 35,000 # 35,000 #Finance lease liabilities 44 43 73 72

116



29. FINANCIAL INSTRUMENTS (CONT’D)

29.6 Fair values (cont’d)

The fair value for finance lease liabilities is determined by reference to similar lease arrangements.

# It is not practicable to estimate the fair value of the unsecured fixed rate financial liability due to the lack of information on discount rate and the inability to estimate the fair value without incurring excessive costs. However, the Directors believe that there is no significant difference between the fair value and the book value of this financial liability.

30. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

1. On 8 February 2010, the Company made a proposal to Texchem-Pack Holdings (S) Ltd (“TXPS”), a 70.48% subsidiary of the Company, to seek for voluntary delisting from the Official List of the Singapore Exchange Securities Trading Limited. Pursuant to the proposed delisting, the Company will acquire by cash, S$0.135 per share for each TXPS share not already owned by the Company.

The proposed delisting was withdrawn on 15 June 2010.

2. On 23 March 2010, Texchem Food Sdn Bhd, a wholly owned subsidiary of the Company, acquired the entire equity interest of Surimi Master Sdn Bhd for a total cash consideration of RM300. On 25 March 2010, Surimi Master Sdn Bhd changed its name to ASKA Marine Products Sdn Bhd.

3. On 31 March 2010, the limit of the Commercial Papers was further reduced from RM70 million to RM50 million in accordance with the Commercial Papers and/or Medium Term Notes Programme.

4. On 10 September 2010, the Company incorporated a wholly owned subsidiary, Texchem Japan, Inc. with a paid-up capital of ¥9,999,990 or equivalent to RM374,500.

5. On 24 September 2010, Eye Graphic (Vietnam) Co., Ltd, a wholly owned subsidiary of Eye Graphic Sdn Bhd which in turn is a wholly owned subsidiary of Texchem-Pack Holdings (S) Ltd, a 70.48% owned subsidiary of the Company, has commenced voluntary liquidation proceedings. The voluntary liquidation is still in progress as at to-date.

6. On 15 November 2010, Sea Master Trading Co. Sdn Bhd, a wholly owned subsidiary of Texchem Food Sdn Bhd which in turn is a wholly owned subsidiary of the Company, acquired the entire equity interest in Seapack Food Sdn Bhd for a total cash consideration of RM100,000.

7. On 15 December 2010, Sushi Kin Sdn Bhd, a wholly owned subsidiary of the Company, acquired the entire equity interest of Miraku Sdn Bhd for a total purchase consideration of RM2 million.

8. Included in the Group’s current tax assets is RM7.3 million (2009 : RM4.4 million) being income tax paid by PT. Technopia Jakarta (“PTTJ”), a subsidiary of the Company pursuant to the tax audit conducted by the local tax authority for the assessment years 2006, 2007 and 2008. PTTJ which paid the income tax under protest, has submitted objection letters to the tax authority. The Directors of the Company, having relied on the opinion of the tax consultants, are of the opinion that the income tax paid under protest is recoverable.

117

ANNUAL REPORT 2010


31. SUBSEqUENT EVENTS

1. On 3 January 2011, the Company disposed of its jointly controlled company, GMMI Texchem Sdn Bhd to Texchem-Pack Holdings (S) Ltd, a 70.48% owned subsidiary of the Company for a total cash consideration of RM100,000.

2. On 11 January 2011, Texchem-Pack (KL) Sdn Bhd, a wholly owned subsidiary of Texchem-Pack (M) Bhd which in turn is a wholly owned subsidiary of Texchem-Pack Holdings (S) Ltd, a 70.48% subsidiary of the Company, entered into a conditional Sale and Purchase Agreement to dispose of a leasehold land together with the buildings erected thereon for a total cash consideration of RM13,752,466. The completion of the proposal is still pending as at to-date.

3. On 7 February 2011, the Company acquired the entire equity interest of Texa Protection Sdn Bhd for a total cash consideration of RM2.

4. On 4 March 2011, the Company acquired the entire equity interest of Donburi House Sdn Bhd for a total cash consideration of RM2.

5. On 16 March 2011, Eye Graphic Sdn Bhd, a wholly owned subsidiary of Texchem-Pack Holdings (S) Ltd which in turn is a 70.48% subsidiary of the Company, has incorporated a joint venture company, Alaya Asia Sdn Bhd with Alaya Inc for a total consideration of RM2.

6. On 31 March 2011, the limit of the Commercial Papers was further reduced from RM50 million to RM30 million in accordance with the Commercial Papers and/or Medium Term Notes Programme.

32. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES

32.1 FRS 139, Financial Instruments: Recognition and Measurement

The adoption of FRS 139 has resulted in several changes to accounting policies relating to recognition and measurement of financial instruments. Significant changes in accounting policies are as follows:

Financial guarantee contracts

Prior to the adoption of FRS 139, financial guarantee contracts were not recognised in the statement of financial position unless it becomes probable that the guarantee may be called upon. With the adoption of FRS 139, financial guarantee contracts are now recognised initially at their fair values and subsequently stated at their initially measured amount less cumulative amortisation. When settlement of a financial guarantee contract becomes probable, an estimate of the obligation is made.

inter-company loans Prior to the adoption of FRS 139, inter-company loans were recorded at cost. With the adoption of FRS 139,

inter-company loans are now recognised initially at their fair values, which are estimated by discounting the expected cash flows using the current market interest rate of a loan with similar risk and tenure. Finance income and costs are recognised in profit or loss using the effective interest method.

impairment of trade and other receivables Prior to the adoption of FRS 139, an allowance for doubtful debts was made when a receivable is considered

irrecoverable by the management. With the adoption of FRS 139, an impairment loss is recognised for trade and other receivables and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.

These changes in accounting policies have been made in accordance with the transitional provisions of FRS

139. In accordance to the transitional provisions of FRS 139 for first-time adoption, adjustments arising from remeasuring the financial instruments at the beginning of the financial year were recognised as adjustments of the opening balance of retained earnings or another appropriate reserve. Comparatives are not adjusted.

118



32. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES (CONT’D)

32.1 FRS 139, Financial Instruments: Recognition and Measurement (cont’d)

The adoption of FRS 139 in regards to the impairment of trade and other receivables did not have a significant impact on the financial statements of the Group and no adjustments were necessary arising from remeasuring the financial instruments at the beginning of the financial year to be adjusted against the opening balance of retained earnings or another appropriate reserve.

32.2 FRS 123, Borrowing Costs

Before 1 January 2010, borrowing costs were all expensed to profit or loss as and when they were incurred. With the adoption of FRS 123, the Group capitalises borrowing costs that are directly attributable to the acquisition, construction and production of a qualifying asset as part of the cost of the asset for which the commencement date of capitalisation is on or after 1 January 2010.

The change in accounting policy has been applied prospectively in accordance with the transitional provisions of FRS 123.

Hence, the adopting of FRS 123 does not affect the basic earnings per ordinary share for prior periods and has no material impact to current year’s basic earnings per ordinary share.

32.3 FRS 8, Operating Segments

As of 1 January 2010, the Group determines and presents operating segments based on the information that internally is provided to the Chief Executive Officer, who is the Group’s chief operating decision maker. This change in accounting policy is due to the adoption of FRS 8. Previously, operating segments were determined and presented in accordance with FRS 1142004, Segment Reporting.

Comparative segment information has been re-presented. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share.

32.4 FRS 101 (revised), Presentation of Financial Statements

The Group applies revised FRS 101 (revised) which became effective as of 1 January 2010. As a result, the Group presents all non-owner changes in equity in the consolidated statement of comprehensive income.

Comparative information has been re-presented so that it is in conformity with the revised standard. Since the change only affects presentation aspects, there is no impact on earnings per share.

32.5 FRS 101, Presentation of Financial Statements,(revised)

Arising from the adoption of FRS 101 (revised), income statements for the year ended 31 December 2009 have been re-presented as statement of comprehensive income. All non-owner changes in equity that were presented in the statements of changes in equity are now included in the statements of comprehensive income as other comprehensive income. Consequently, components of comprehensive income are not presented in the statement of changes in equity.

32.6 FRS 117, Leases

The Group has adopted the amendment to FRS 117. The Group has reassessed and determined that all leasehold land of the Group which in substance are finance leases and has reclassified the leasehold land to property, plant and equipment. The change in accounting policy has been made retrospectively in accordance with the transitional provisions of the amendment.

The reclassification does not affect the basic earnings per ordinary share for the current and prior periods.

119

ANNUAL REPORT 2010


32. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES (CONT’D)

32.7 Amendments to FRS 118, Revenue

The amendments to FRS 118 provides that in an agency relationship, the gross inflows of economic benefits include amounts collected on behalf of the principal which do not result in increases in equity for the entity. The amounts collected on behalf of the principal are not revenue but instead, revenue is the amount of commission earned by the entity in the capacity of an agent. The adoption of the amendments resulted in a change in accounting policy which requires the Group to present the commission derived in the capacity as an agent as revenue.

As the change only affects the presentation of revenue and cost of sales, the change does not have any impact on the profit or loss of the Group for the current and prior year.

32.8 FRS127 Consolidated and Separate Financial Statements (revised)

The Group early adopted FRS 127, (revised) during the year. Previously, where losses applicable to non-controlling interests exceed their interest in the equity of a subsidiary, the excess, and any further losses are charged against the Group’s interest except to the extent that the non-controlling interests has a binding obligation to make additional investment cover the losses.

With the adoption of FRS 127 (revised), losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interest to have a deficit balance. The adoption has been applied prospectively in accordance with the transitional provision provided by the standard and does not have any impact on the profit or loss of the Group in prior years.

33. COMPARATIVE FIGURES

The presentation and classification of items in the current year’s financial statements are consistent with the previous financial year except for the following comparative figures which have been restated for the effects of adopting the changes in accounting policies as disclosed in Note 2 and to conform with current year’s presentation:

(i) Effect of adoption of Amendments to FRS 117, Lease

As restated

As previously reported

RM RM

Prepaid lease payments – 16,294,680Property, plant and equipment 207,074,811 190,780,131

(ii) Effect of adoption of Amendments to FRS 118, Revenue

As restated

As previously reported

RM RM

Revenue 1,007,151,513 1,155,438,128Cost of sales 795,260,916 933,715,820Other income 23,122,338 13,290,627

120



34. SUPPLEMENTARY INFORMATION – BREAKDOWN OF RETAINED EARNINGS INTO REALISED AND UNREALISED

The breakdown of the retained earnings of the Group and of the Company as at 31 December 2010 into realised and unrealised profits is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 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’s Listing Requirements, as issued by the Malaysian Institute of Accountants.

Group2010

Company2010

RM RMTotal retained earnings/(accumulated losses) of the Company and its

subsidiaries:- Realised 17,350,944 27,124,046- Unrealised (2,800,218) –

14,550,726 27,124,046

Total share of accumulated losses from associates and jointly controlled entity:- Realised (18,714,514) –

(4,163,788) 27,124,046

Add: Consolidation adjustments (189,309) –

Total Group/Company (accumulated losses)/retained earnings (4,353,097) 27,124,046

Comparative figures are not required in the first year of implementation of Bursa Malaysia Securities Berhad’s directives.

121

ANNUAL REPORT 2010

STATEMENT BY DIRECTORS pursuant to Section 169(15) of the Companies Act, 1965

In the opinion of the Directors, the financial statements set out on pages 47 to 119 are drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company at 31 December 2010 and of their financial performance and cash flows for the year ended on that date.

In the opinion of the Directors, the information set out in Note 34 on page 120 to the financial statements has been compiled in accordance with the Guidance on Special Matter No. 1 Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad’s Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors :

Tan Sri Dato’ Seri Fumihiko Konishi, PSM, DGPN, DSPN, DJN

Lee Siew Khee, Jeffrey

Penang,

Date: 26 April 2011

122


STATUTORY DECLARATION pursuant to Section 169(16) of the Companies Act, 1965

I, Tan Peng Lam, the person primarily responsible for the financial management of Texchem Resources Bhd., do solemnly and sincerely declare that the financial statements set out on pages 47 to 120 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed at Georgetown in the State of Penang on 26 April 2011.

Tan Peng Lam

Before me:

Commissoner for Oaths

123

ANNUAL REPORT 2010

INDEPENDENT AUDITORS’ REPORT to the members of Texchem Resources Bhd. and its subsidiaries

Report on the Financial Statements

We have audited the financial statements of Texchem Resources Bhd., which comprise the statements of financial position as at 31 December 2010 of the Group and of the Company, and the income statements, statements of comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 47 to 119.

directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2010 and of their financial performance and cash flows for the year then ended.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1(b) to the financial statements which states that the current liabilities of the Group and of the Company exceeded the current assets by RM36,073,246 and RM64,627,191 respectively as at 31 December 2010. Included in the current liabilities of the Group and of the Company are outstanding balances of Commercial Papers of RM20 million and Collateralised Loan Obligations of RM35 million which are due for repayment in March 2011 and October 2011 respectively.



124


INDEPENDENT AUDITORS’ REPORT (CONT’D) to the members of Texchem Resources Bhd. and its subsidiaries


The Management is of the opinion that the Group’s banking facilities will continue to be available from its lenders and that the Group will be able to generate cash flows from its operations to meet its liabilities as and when they fall due pending the proposed issuance of the RM100 million Islamic Bond. Based on the above, the Directors consider it appropriate to prepare the financial statements of the Group and of the Company on a going concern basis.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

b) We have considered the accounts and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 4 to the financial statements.

c) We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

d) The audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

Other Reporting Responsibilities

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information set out in Note 34 to the financial statements has been compiled by the Company as required by the Bursa Malaysia Securities Berhad’s Listing Requirements and is not part of the financial statements. We have extended our audit procedures to report on the process of compilation of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad’s Listing Requirements, issued by the Malaysian Institute of Accountants and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMGAF 0758Chartered Accountants

Ooi Kok Seng2432/05/11 (J)Chartered Accountant

Date : 26 April 2011

Penang

PROXY FORM

I/We (full name in capital letters) NRIC No./Passport No./Company No.

of (full address)

being a member/members of TEXCHEM RESOURCES BHD. hereby appoint (full name and NRIC No./Passport No. in capital letters)

of (full address)

and/or failing him/her (full name and NRIC No./Passport No. in capital letters)

of (full address)

as my/our proxy/proxies to vote in my/our name(s) and on my/our behalf at the Thirty-Seventh Annual General Meeting of the Company to be held at Pinang Ballroom, Level 3, Traders Hotel, Magazine Road, 10300 Penang on Thursday, 26 May 2011 at 10.30 a.m. and any adjournment thereof.

My/Our proxy/proxies is/are to vote on either a show of hands or a poll as indicated below with an “X”.

NO. AGENDA(1) Receipt of Audited Financial Statements and Reports

RESOLUTIONS FOR AGAINST(2) Re-election of Directors who retire pursuant to Article 123 of the Company’s

Articles of Associationi) Mr Wong Kin Chai - Resolution 1ii) Mr Yap Kee Keong - Resolution 2

iii) Mr Danny Goon Siew Cheang - Resolution 3

(3) Approval of Directors’ remuneration payable by the Company - Resolution 4

(4) Re-appointment of Auditors and authorisation of Directors to fix their remuneration

- Resolution 5

(5A) Power to Issue Shares pursuant to Section 132D of the Companies Act, 1965

- Resolution 6

(5B) Proposed New Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature; and Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature including the provision of financial assistance

- Resolution 7

(5C) Proposed Revised Scheme of Payment of Benefits to Directors upon Retirement/Resignation

- Resolution 8

The proportion of my/our holding to be represented by my/our proxy/proxies is/are as follows:

First Proxy - % No. of shares held Second Proxy - % 100 %

Signed this day of 2011 Signature or Common Seal

Notes:1) A Member of the Company entitled to attend and vote at the meeting may appoint up to two (2) proxies to attend and vote instead

of him/her. A proxy may but need not be a Member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. If a Member appoints two (2) proxies, the appointments shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy.

2) To be effective:a) the instrument appointing a proxy; andb) the authority (if any) under which it is executed or a copy of such authority certified notarially or in some other way approved by

the Directors of the Company, must be deposited at the Registered Office of the Company at Level 18, Menara Boustead Penang, 39 Jalan Sultan Ahmad Shah,10050 Penang, Malaysia at least forty-eight (48) hours before the time for holding the meeting.

3) If the Proxy Form is returned without any indication as to how the proxy shall vote, the proxy will vote or abstain as he/she thinks fit.

4) If the Proxy Form is returned without the name of the proxy indicated, the Proxy Form shall be invalid.

5) Where the person appointing the proxy is a corporation, the form must be either under seal or under the hand of a duly authorised officer or attorney of the corporation.

Level 18, Menara Boustead Penang39 Jalan Sultan Ahmad Shah10050 Penang, MalaysiaTel: 604-229 6000 Fax: 604-229 1430


Stamp

fold this flap for sealing

2nd fold here

1st fold here

FOR

BU

RS

A U

SE

ON

LY

Ref

. No

Dat

e re

ceiv

ed

day

mon

thye

ar

Off

icer

in c

harg

e

Dat

e of

firs

t co

ntac

t w

ith c

ompl

aina

nt

day

mon

thye

ar

STA

TUS

AFT

ER

14

DA

YS

Res

olve

d

Pen

ding

Det

ails

CO

NT

AC

T D

ET

AIL

S

Cus

tom

er C

are

Cen

tre

Bur

sa M

alay

sia

Ber

had

Low

er G

roun

d Fl

oor

Exc

hang

e S

quar

e, B

ukit

Kew

anga

n50

200

Kua

la L

umpu

rTe

l: 60

3 27

32 0

067

Fax:

603

273

2 52

58

BU

RS

A M

ALA

YS

IA S

EC

UR

ITIE

S B

ER

HA

D

CO

MP

LAIN

T A

GA

INS

TP

UB

LIC

LIS

TED

CO

MP

AN

Y

This

fo

rm

is

inte

nded

to

fa

cilit

ate

the

lodg

emen

t of

co

mpl

aint

s w

ith

Bur

sa

Mal

aysi

a S

ecur

ities

B

erha

d (“

Bur

sa”)

, by

inv

esto

rs a

gain

st P

ublic

Lis

ted

Com

pani

es

(“P

LCs”

) in

Mal

aysi

a. In

vest

ors

are

enco

urag

ed, i

n th

e fir

st

inst

ance

, to

am

icab

ly s

ettle

any

diff

eren

ces

dire

ctly

with

th

e P

LCs

conc

erne

d.

q:

Wh

en c

an y

ou

mak

e a

com

pla

int?

A:

At

anyt

ime,

pre

fera

bly

as s

oon

as t

he p

robl

em o

ccur

s.

B

elow

are

som

e in

stan

ces

whe

n a

com

plai

nt m

ay

be

lodg

ed a

gain

st a

PLC

:

• M

isle

adin

g / i

nacc

urat

e / i

nsuf

ficie

nt d

iscl

osur

e of

info

rmat

ion;

• Fa

ilure

to

disc

lose

mat

eria

l inf

orm

atio

n in

fin

anci

al

stat

emen

ts o

r an

nual

rep

orts

;•

Act

ions

/ la

ck o

f act

ions

det

rimen

tal t

o th

e in

tere

stof

sha

reho

lder

s;•

Dire

ctor

s of

PLC

;•

Man

agem

ent

of P

LC;

• S

hare

Reg

istr

ar o

f P

LC;

an

d•

Oth

ers

(to

spec

ify)

q:

Wh

at a

re t

he

pro

ced

ure

s to

mak

e a

com

pla

int?

A:

Pro

cedu

re i

s ve

ry s

impl

e. F

or c

larit

y, i

t is

bes

t to

be

i

n w

ritte

n fo

rm

and

dire

cted

to

B

ursa

.

You

can

use

any

of

the

follo

win

g m

etho

ds t

o su

bmit

y

our

com

plai

nts:

•

Mai

l the

att

ache

d C

ompl

aint

For

m t

o B

ursa

; or

• Fa

x th

e C

ompl

aint

For

m t

o 60

3-27

32 5

258

q:

Ho

w w

ill B

urs

a h

and

le t

he

com

pla

int?

A:

Bur

sa

will

ha

ndle

th

e m

atte

r pr

ompt

ly

and

in

a

ny e

vent

, w

ill c

onta

ct t

he c

ompl

aina

nt n

ot la

ter

than

14

days

fro

m r

ecei

pt o

f th

e co

mpl

aint

.

TY

PE

S O

F C

OM

PLA

INT

M

isle

adin

g /

inac

cura

te

/ in

suff

icie

nt

disc

losu

re

of

info

rmat

ion;

Fa

ilure

to

disc

lose

mat

eria

l in

form

atio

n in

fin

anci

alst

atem

ents

or

annu

al r

epor

ts;

A

ctio

ns /

lack

of

actio

ns d

etrim

enta

l to

the

inte

rest

of

shar

ehol

ders

;

D

irect

ors

of P

LC;

M

anag

emen

t of

PLC

;

S

hare

Reg

istr

ar o

f P

LC; a

nd

O

ther

s (t

o sp

ecify

)

If o

ther

s, p

leas

e sp

ecify

:

MY

CO

MP

LAIN

T I

S A

S F

OLL

OW

S (

plea

se p

rovi

de a

de

taile

d ac

coun

t of

the

com

plai

nt i

n ch

rono

logi

cal

orde

r).

You

may

pr

ovid

e ad

ditio

nal

note

s in

a s

epar

ate

piec

e of

pa

per.

Ple

ase

atta

ch c

opie

s on

ly o

f al

l rel

evan

t do

cum

ents

.

Sig

natu

re D

ate

day

mon

thye

ar

DE

TA

ILS

OF

CO

MP

LAIN

AN

T

Nam

e:

(As

per

NR

IC /

Pas

spor

t / R

egis

trat

ion

Doc

umen

t) N

RIC

/ P

assp

ort /

Com

pany

No.

:

CD

S N

o.:

Add

ress

:

Tele

phon

e N

o.:

Hou

se:

B

usin

ess:

H

/Pho

ne:

Facs

imile

No.

: H

ouse

:

B

usin

ess:

DE

TA

ILS

OF

TH

E P

LC

Nam

e:

Add

ress

:

DE

TA

ILS

OF

CO

MP

LAIN

T

Hav

e yo

u tr

ied

to r

esol

ve t

his

com

plai

nt w

ith t

he r

elev

ant

PLC

?

Y

es

N

o

If y

es,

kind

ly i

ndic

ate

the

nam

e of

the

per

son

cont

acte

d an

d hi

s / h

er d

epar

tmen

t.

www.texchemgroup.com

annual report 2010 - malaysiastock.biz annual report 2010 president/chief executive officer’s...

Documents