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DAYA MATERIALS BERHAD

(636357-W)

w w w. d m b . c o m . m y

annual report

ANNUAL REPORT 2012

2012

DAYA MATERIALS BERHAD (636357-W)


D5-1-10, Solaris Dutamas No. 1, Jalan Dutamas 1, 50480 Kuala Lumpur Tel: 03 6205 3170 Fax: 03 6205 3171

we deliver we C.A.R.E.
Contents
Corporate Information Corporate Structure Financial Information The Team Profile of Directors Chairmans Statement Corporate Social Responsibility Corporate Governance Statement Statement on Risk Management and Internal Control Audit Committee Report

Committed Accountable Resolute Ethical

At DMB, we work hand in hand with our clients to deliver the best solutions any where, any time.

02 04 07 08 10 14 23 25 33 35

Financial Statements Directors Responsibilities Statement on Financial Statements Analysis of Shareholdings Additional Compliance Information List of Properties 2012 Notice of Tenth Annual General Meeting Form of Proxy

39 134 135 138 140 143

DAYA MATERIALS BERHAD (636357-W)

CORPORATE INFORMATION

BOARD OF DIRECTORS Dato Azmil Khalili Bin Dato Khalid Chairman/Independent Non-Executive Director Dato Mazlin Bin Md.Junid Executive Vice Chairman, President & Group Chief Executive Officer Nathan Tham Jooi Loon Group Managing Director Fazrin Azwar bin Md. Nor Senior Independent Non-Executive Director Dato Sri Koh Kin Lip JP Independent Non-Executive Director Lim Soon Foo Independent Non-Executive Director Ronnie Lim Hai Liang Alternate Director to Mr Lim Soon Foo AUDIT COMMITTEE Chairman Fazrin Azwar bin Md. Nor (Independent Non-Executive Director) Members Dato Azmil Khalili Bin Dato Khalid (Independent Non-Executive Director) Dato Sri Koh Kin Lip JP (Independent Non-Executive Director) COMPANY SECRETARIES Chin Ngeok Mui (MAICSA 7003178) Chen Bee Ling (MAICSA 7046517) REGISTERED OFFICE Level 8, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/46 47301 Petaling Jaya Selangor Darul Ehsan Tel : 03-7841 8000 Fax : 03-7841 8199

HEAD/MANAGEMENT OFFICE D5-1-10, Solaris Dutamas No.1, Jalan Dutamas 1 50480 Kuala Lumpur Malaysia Tel : 03-6205 3170 Fax : 03-6205 3171 Email : dmbmail@dayagroup.com.my Website : www.dmb.com.my PRINCIPAL BANKERS Hong Leong Bank Berhad AmIslamic Bank Berhad AmBank (M) Berhad Malayan Banking Berhad AUDITORS Ernst & Young (AF 0039) Chartered Accountants Level 23A, Menara Milenium Jalan Damanlela Pusat Damansara 50490 Kuala Lumpur Tel : 03-7495 8000 Fax : 03- 2095 5332 SHARE REGISTRAR Symphony Share Registrars Sdn Bhd Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/46 47301 Petaling Jaya Selangor Darul Ehsan Tel : 03-7841 8000 Fax : 03-7841 8150/8151 STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad Stock short name : DAYA Stock Code : 0091

ANNUAL REPORT 2012

Committed

DAYA MATERIALS BERHAD (636357-W)

CORPORATE STRUCTURE

Daya Materials Berhad (DMB) was incorporated in Malaysia under the Companies Act, 1965 on 8 December 2003 as a public limited company. The principal activities of DMB are that of investment holding and provision of management services to its subsidiary companies. The particulars of the subsidiaries, are as follows: Date and Issued and Effective Place of Paid-up Equity Incorporation Share Capital Interest Principal Activities 21-11-1994/ Malaysia RM6,000,000 100.00% Manufacturing of semi-conductive compounds and cross-linkable polyethylene compounds for cables and wires and trading of specialty chemicals, related polymer compounds and hardware. General trading, marketing and investment holding. Investment holding. Trading in petrochemicals products and investment holding. Providing industrial facilities management including builder works, facility operation and maintenance services, upgrade, retrofit, design and build plant facilities. Center for regional procurement and trading as well as international investments. Ownership and hiring of forklifts, cranes and heavy machineries and provision of related manpower services in the onshore and offshore oil & gas industry. Property investment holding. Supplying of equipment and specialty chemicals for oil & gas process plants, a provider of installation and maintenance services for air-conditioning and ventilation system, a provider for automatic welding services for offshore pipeline installation, a provider for maintenance services for both onshore plants and offshore facilities, a provider for warehousing and forwarding agency. Dealing in petroleum, oil & gas products and consulting services. Dealing in project management, installation and design engineering, fabrication, procurement and logistics, vessel operations, survey and diving operations. Provision of drilling services, geological, petroleum engineering, subsea and deep -water support services and operations and maintenance services. Trader of all kinds of building material, hardware equipment and other related products.

Subsidiary Companies 1 Daya Polymer Sdn. Bhd. (324073-U) (DPSB)

2 3 4 5

DMB Marketing & Trading Sdn. Bhd. (724943-U) (DMTSB) Meridian Orbit Sdn. Bhd. (780242-P) (MOSB) Daya Secadyme Sdn. Bhd. (188542-W) (DSSB) Daya CMT Sdn. Bhd. (208646-U) (DCMT)

27-02-2006/ Malaysia 09-07-2007/ Malaysia 25-10-1989/ Malaysia 28-11-1990/ Malaysia

RM2.00 RM100,000 RM1,008,000 RM8,000,000

100.00% 100.00% 67.00% 100.00%

6 7

DMB International Limited (DINL) Daya Proffscorp Sdn. Bhd. (173309-T) (DPRO) Daya Urusharta Sdn. Bhd. (863073-M) (DUSB) Daya OCI Sdn. Bhd. (291138-U) (DOCI)

13-8-2008/ Hong Kong 24-8-1988/ Malaysia 3-7-2009/ Malaysia 2-3-1994/ Malaysia

HKD 3,000,000 100.00% RM1,650,000 67.00%

8 9

RM100,000 RM5,000,000

100.00% 67.00%

10 Seca Chemicals and Catalysts Sdn. Bhd. (710772-A) (SCCSB) 11 Daya Offshore Construction Sdn Bhd (651398-P) (formerly known as SD Equipment Sdn. Bhd. ) (DOCSB) 12 Daya Petroleum Venture Sdn. Bhd. (736674-D) (formerly known as Metriwell Sdn. Bhd. ) (DPV) 13 Daya Land & Development Sdn. Bhd. (524602-D) (DLDSB) Held through subsidiaries 14 Daya Hightech Sdn. Bhd. (791561-V) (DHSB)

26-09-2005/ Malaysia 05-05-2004/ Malaysia

RM100,000 RM10,000

100.00% 100.00%

06-06-2006/ Malaysia 25-08-2000/ Malaysia

RM350,000

51.00%

RM500,000

100.00%

10-10-2007/ Malaysia

RM100,000

100.00%

Manufacturing of polymer compounds for cables and wires.

ANNUAL REPORT 2012

CORPORATE STRUCTURE
(contd)

Subsidiary Companies Held through subsidiaries

Date and Issued and Effective Place of Paid-up Share Equity Incorporation Capital Interest Principal Activities

15 Seca Engineering and Manpower 28-07-2005/ Services Sdn. Bhd. (704437-A) Malaysia (SEMSSB) 16 Daya Clarimax Sdn. Bhd. (597108-K) (DCLX) 17 Daya FMM Sdn. Bhd. (418776-U) (DFMM) 18 PT Daya Secadyme Indonesia (PTDSI) 19 Daya Proffscorp (Sabah) Sdn. Bhd. (922055-P) (DPROS) 20 Ultrafest Sdn. Bhd. (968989-X) (USB) 21 Zen Projects Sdn. Bhd. (974746-K ) (ZPSB) 22 Daya E&C Sdn. Bhd. (1024254-V ) (DECSB) 23 Daya OCI (Labuan) Limited. (LL09292 ) (formerly Known As Daya OCI (Labuan) Berhad.) (DOCIL) 24 Daya Maxflo Sdn Bhd (681714-M) (formerly known as Maxflo Energy Products Sdn Bhd) (DMSB) 28-10-2002/ Malaysia 27-01-1997/ Malaysia 14-01-2010/ Indonesia 15-11-2010/ Malaysia 20-11-2011/ Malaysia 11-01-2012/ Malaysia 9-11-2012/ Malaysia 19-11-2012/ Malaysia

RM100,000

67.00%

Providing engineering and manpower services.

RM2,000,000 RM350,004 USD100,000 RM450,002

100.00% 100.00% 67.00% 67.00%

Providing recycling of waste solvent and manufacturing of high purity electronics and technical solvents. General contractors and related services. Trading in petrochemicals products. Ownership and hiring of forklifts, cranes and heavy machineries and provision of related manpower services in the onshore and offshore oil & gas industry. Property development. Investment holding. Provision of electrical, mechanical engineering and construction works. Shipping leasing business and other related services to the oil and gas industry.

RM500,000 RM2.00 RM2.00 USD2.00

100.00% 100.00% 100.00% 67.00%

21/02/2005/ Malaysia

RM1,420,000

25.86%

Providing instrumentation and pipelines products specifically for oil & gas, refining, petro-chemical and energy industry. Property development.

25 Terra Hill Development Sdn. Bhd. 12-12-2011/ (971347-V) (THDSB) Malaysia Joint Venture Company 26 Daya NCHO International Limited (formerly known as Daya Clarimax International Limited) (DNIL) 27 Daya Sheffield Sdn. Bhd. (919845-U) (DSFSB) 28 Daya NCHO Sdn. Bhd (933292-U) (DNSB) 29 Daya Campo (Sabah) Sdn. Bhd (956357-W) (DCSB) 30 Semangat Global Sdn. Bhd. (802160-P) (SGSB) 26-8-2010/ Hong Kong

RM2.00

100.00%

HKD 100,000

60.00%

Investment holding to invest in tank services regionally.

26-10-2010/ Malaysia 22-2-2011/ Malaysia 9-8-2011/ Malaysia 8-1-2008/ Malaysia

RM100,000

34.17%

Recruiting and providing specialised, qualified and professional personnel for the onshore and offshore oil and gas industries. Providing ISO tank cleaning, repair and maintenance services. Investment holding. Construction and development of industrial, commercial and housing project and other related industry.

RM1,000,000 RM10,000 RM200,000

60.00% 40.20% 51.00%

DAYA MATERIALS BERHAD (636357-W)

CORPORATE STRUCTURE
contd

DHSB 100%

DPSB 100%

Polymer

SCCSB 100%

DMTSB 100%

Techn ical

l& Oi

Gas

DOCSB 100% DPV 51% DMSB 50.7% DPRO 67% DPROS 100%

DUSB 100% DINL 100% MOSB 100% DNIL 60%*

Se r vi ce
DCMT 100%

DSSB 67% DOCI 67% PTDSI 100% USB 100% DOCIL 100% DCSB 60%* DSFSB 51%* ZPSB 100%

SEMSSB 100%

DCLX 100% DNSB 60%*

DLDSB 100% DECSB 100% DFMM 100%

THDSB 100% SGSB 51%*

* Joint Venture Company

ANNUAL REPORT 2012

FINANCIAL INFORMATION

2008 RM000 Revenue EBITDA PBT PAT Total Equity Total Assets 224,345 19,883 18,284 12,148 113,393 204,273

2009 RM000 188,244 24,032 20,377 13,664 143,481 221,920

2010 RM000 174,223 29,206 22,733 16,966 177,156 292,050

2011 RM000 281,746 30,853 23,760 17,443 210,628 378,115

2012 RM000 276,929 35,704 28,387 20,116 230,914 399,217

REVENUE
(RM000)

EBITDA

(RM000)

PBT

(RM000)

281,746

276,929

35,704

224,345

30,853

29,206

188,244

24,032

174,223

08

09

10

11

12

19,883

08

09

10

11

12

18,284

20,377

22,733

23,760

08

09

10

11

12

PAT

(RM000)

SHAREHOLDERS' FUNDS
(RM000)

TOTAL ASSETS
(RM000)

20, 116

2 10, 62 8

230, 914

17, 44 3

1 43 ,4 81

17 7, 156

16 ,9 66

08

09

10

11

12

1 13 ,3 93

08

09

10

11

12

20 4, 273

12 ,14 8

22 1 ,92 0

1 3,6 64

2 92 ,05 0

3 78 ,11 5

08

09

10

11

12

399, 217

28,387

DAYA MATERIALS BERHAD (636357-W)

THE TEAM

ANNUAL REPORT 2012

From left to right: Dato Azmil Khalili Bin Dato Khalid, Ronnie Lim Hai Liang, Fazrin Azwar bin Md. Nor, Lim Soon Foo, Dato Sri Koh Kin Lip JP, Dato Mazlin Bin Md.Junid, Nathan Tham Jooi Loon

10

DAYA MATERIALS BERHAD (636357-W)

PROFILE OF DIRECTORS

Dato Azmil Khalili bin Dato Khalid


Malaysian, aged 52 He is an Independent Non-Executive Chairman of DMB. He was appointed to the Board on 19 September 2007. Dato Azmil graduated with a Bachelors Degree in Civil Engineering and subsequently with a Masters in Business Administration. He began his career with a United Kingdom company, Tarmac National Construction and upon his return to Malaysia worked for Trust International Insurance and Citibank NA. Dato Azmil is currently the President & Chief Executive Officer of AlloyMtd, following the rationalisation exercise between MTD Capital Bhd and its holding company, Alloy Consolidated Sdn Bhd. He concurrently holds the same position in the listed subsidiary of MTD Capital Bhd namely MTD ACPI Engineering Berhad and is also the Chairman of MTD Walkers PLC, a foreign subsidiary of MTD Capital Bhd listed on the Colombo Stock Exchange in the Republic of Sri Lanka. Dato Azmil holds directorships in other public companies namely, MTD Infraperdana Berhad and Metacorp Berhad, both are subsidiaries of MTD Capital Bhd; and ANIH Berhad, a toll concession company. Dato Azmil is also a director of Environment Idaman Sdn. Bhd., a solid waste concession company; and a Trustee of the Perdana Leadership Foundation. Dato Azmil also sits on the board of several private limited companies. Dato Azmil is the Chairman of the Nomination Committee and a member of the Audit Committee and Remuneration Committee of the Company. Dato Azmil attended five out of seven Board meetings held during the financial year ended 31 December 2012.

Dato Mazlin bin Md Junid


Malaysian, aged 51 He is DMBs Executive Vice Chairman, President & Group Chief Executive Officer. He was appointed to the Board on 16 August 2007. Dato Mazlin holds a Bachelor of Science in Mechanical Engineering from Brighton Polytechnic, Sussex, England and a Master in Business Administration from Cranfield University, England. He has extensive experience in corporate management, business and finance after serving Sime Darby Berhad and Aspac Executive Search Sdn. Bhd. as the Group Manager and the Managing Director respectively. Dato Mazlin was formerly an Independent, Non-Executive Director of Sapura Industrial Berhad and Sapura Technology Berhad. He was also formerly an Independent Non-Executive Director and Chairman of the Audit Committee of MTD Infraperdana Berhad. He is also a director of several private limited companies which he owns. Dato Mazlin attended all seven Board meetings held during the financial year ended 31 December 2012.

ANNUAL REPORT 2012

11

PROFILE OF DIRECTORS
(contd)

Nathan Tham Jooi Loon


Malaysian, aged 47 He is DMBs Group Managing Director. He was appointed to the Board on 30 May 2005. Mr. Tham joined DPSB in 2003 as a Director. He graduated from McGill University in Montreal, Canada in 1988 with a Master of Business Administration specialising in corporate finance. He is also a qualified Chartered Financial Analyst. He started his career as a credit analyst with Chase Manhattan Bank in Kuala Lumpur in 1989. In 1995, he joined UBS and later became its Executive Director responsible for Malaysian investment banking and Asia-Pacific Mergers and Acquisitions practices. In 2003, Mr. Tham was appointed as a Director of Tradewinds Corporation Berhad and PIHP (Selangor) Berhad, both posts he held until 2005. Presently, he is a Director of several private companies in Malaysia, Hong Kong and British Virgin Islands. Mr. Tham is the Chairman of the Risk Management Committee and a member of the Executive Committee (EXCO) of the Company. Mr. Tham attended all seven Board meetings held during the financial year ended 31 December 2012.

Fazrin Azwar Bin Md Nor


Malaysian, aged 46 He is the Senior Independent Non-Executive Director of DMB. He was appointed to the Board on 30 May 2005. En. Fazrin graduated from the University of Malaya with a Bachelor of Law (LLB) Honors Degree. He is an Advocate and Solicitor and a member of the Malaysian BAR. He is currently the Managing Partner of Messrs. Azwar & Associates. En. Fazrin is also currently an Independent Non-Executive Chairman of Mercury Industries Berhad, an Independent Non-Executive Director and Audit Committee member of both Poh Kong Holdings Berhad and Tong Herr Resources Berhad and an Independent Non-Executive Director of Ire-Tex Corporation Berhad, all listed on the Main Market of Bursa Securities. En. Fazrin is also an Independent Non-Executive Director of Times Offset (M) Sdn. Bhd. and a Non-Independent Non-Executive Director of the Kuchinta Holdings Group of Companies. En. Fazrin is also a chartered member of The Malaysian Institute of Directors and The Institute of Internal Auditors Malaysia. En. Fazrin is the Chairman of the Audit Committee and a member of the Nomination and Remuneration Committees of the Company. En. Fazrin attended all seven Board meetings held during the financial year ended 31 December 2012.

12

DAYA MATERIALS BERHAD (636357-W)

PROFILE OF DIRECTORS
(contd)

Dato Sri Koh Kin Lip JP


Malaysian, aged 64 He is an Independent Non-Executive Director of DMB. He was appointed to the Board on 22 December 2008. Dato Sri Koh graduated from Plymouth Polytechnic, UK with a Higher National Diploma in Business Studies and a Councils Diploma in Management Studies. He began his career in Standard Chartered Bank, Sandakan in 1977 as a trainee assistant. In 1978, he joined his family business and was principally involved in administrative and financial matters. In 1985, he assumed the role as a Chief Executive Officer of the family business. In 1987, he was pivotal and instrumental in the formation of Rickoh Holdings Sdn. Bhd., the flagship company of the family business which involves in activities ranging from properties investments, properties letting and property development, securities investments, oil palm plantations, sea and land transportation for crude palm oil and palm kernel, IT, hotel business, trading in golf equipment and accessories, and quarry operations. Presently, Dato Sri Koh is also a Director of NPC Resources Berhad and Cocoaland Holdings Berhad. Dato Sri Koh was formerly a Director of Malaysian AE Models Holdings Berhad. Dato Sri Koh is the Chairman of the Remuneration Committee and a member of the Audit Committee and Nomination Committee of the Company. Dato Sri Koh attended six out of seven Board meetings held during the financial year ended 31 December 2012.

Lim Soon Foo

Malaysian, aged 57 He is an Independent Non-Executive Director of DMB. He was appointed to the Board on 15 August 2011. Mr. Lim was admitted as member of The Chartered Institute of Shipbrokers, London since 1979 and currently serving as Chairman and Principal Advisor to Wajah Nichiei Sdn. Bhd., Optic Marine Services International Limited (Hongkong) and Optic Marine Engineering International Limited, providing highly specialized services in the optic fibre submarine cable industry which extend into many countries in Asia Pacific region. The Companies also worked alongside many Global Partners in the optic fibre submarine industry. Mr. Lim also sits in the board of several other private companies involved in plantation, logging and real estates. Mr. Lim is a member of the Remuneration Committee of the Company. Mr. Lim is the father of Mr. Ronnie Lim Hai Liang, who acts as his Alternate and a shareholder of the Company. Mr. Lim attended five out of seven Board meetings held during the financial year ended 31 December 2012.

ANNUAL REPORT 2012

13

PROFILE OF DIRECTORS
(contd)

Ronnie Lim Hai Liang


Malaysian, aged 32 He is an Alternate Director to Mr. Lim Soon Foo. He was appointed to the Board on 15 August 2011 as Alternate Director to Mr. Lim Soon Foo. Mr. Ronnie Lim graduated from the Flinders University of South Australia, Adelaide with a Bachelor of Commerce and Bachelor of Law. He began his career as Assistant Project Manager in small scale housing project developments in Adelaide. He later joined his family business as CEO of Wajah Nichiei Sdn. Bhd., Optic Marine Services International Limited (Hongkong) and Optic Marine Engineering International Limited in the optic fibre submarine cable industry. Mr. Ronnie Lim also sits in the board of a number of family owned companies. Mr. Ronnie Lim is the son of Mr. Lim Soon Foo, an Independent Non-Executive Director and a substantial shareholder of the Company. Mr. Ronnie Lim attended two out of seven Board meetings held during the financial year ended 31 December 2012.

Family Relationship and Major Shareholders Save as disclosed, none of the Directors of the Company have any family relationship with any director and/or major shareholders of the Company. Conflict of Interest None of the Directors of the Company has entered into any transaction, whether directly or indirectly, which has a conflict of interest with the Company. Conviction of Offences All the Directors have not been convicted of any offence within the past ten (10) years other than traffic offences, if any.

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DAYA MATERIALS BERHAD (636357-W)

CHAIRMANS STATEMENT

Dear Shareholders, 2012 was a successful year for our Group. Despite various challenges in some of our businesses, our core operations collectively achieved a solid performance.

ANNUAL REPORT 2012

15

CHAIRMANS STATEMENT
(contd)

We generated record pretax profits of RM28.4 million, representing a 19% increase from 2011, on the back of RM276.9 million in sales. Oil & Gas (O&G) continued to be the main earnings driver, accounting for almost 63% of our group profits. As O&G takes on ever greater significance,the strategy we set out a decade ago to venture into the business has been all but validated. Then, as the market leader in domestic specialised polymer sector, venturing into a new area such as O&G was neither easy nor clearcut. As it turned out, that was the most epiphanous decision we had ever made.
Fast forward to now and we have another milestone under our belt. 2012 was the seventh consecutive year in which we have posted unbroken earnings growth. Since our listing in 2005, we have achieved average compound growth rate of 38% in pretax earnings per annum. Looking ahead, we are quietly confident of yet another year of solid growth. Intensive marketing efforts have swelled our order book steadily over the past 12 months to almost RM1.5 billion. Barring any unforeseen circumstances, most of our order book will be completed within the next three years. If indeed all of these projects are executed smoothly and on schedule, 2013 will no doubt see the further crystallisation of our upstream strategy. To ensure that this happens, we have significantly built up our senior management ranks as well as project execution teams. On behalf of the Board, I would like to take this opportunity to warmly welcome Shahul Hamid, Mark Midgley, Jay Dorfman, Gan Boon Cheong, James Klopper, Patrick Gossett, Alan Broxson and all of our new colleagues to the fast-expanding Daya family.

REVIEW OF RESULTS
For the financial year ended December 2012, our Group achieved consolidated sales of RM276.9 million and profits before tax for FY2012 of RM28.4 million. Our fully diluted net earnings per share stood at 1.63 sen againts 1.45 sen in 2011, representing a growth of 12.4%.

SEGMENTAL ANALYSIS
Allow me to give you a more detailed evaluation of the operating performance of our three business divisions. To facilitate comparisons, all profitability and cash flow figures provided in this section are before management fees and corporate guarantee fees paid by the Divisions to the holding company.

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DAYA MATERIALS BERHAD (636357-W)

CHAIRMANS STATEMENT
(contd)

OIL & GAS DIVISION


After a robust 2011 in which our O&G sales expanded 97%, 2012 was another incrementally successful year for us. While our topline was flat, O&G PBT and PAT grew comfortably by 22% and 15% respectively in 2012. We achieved a good balance of growth in both our downstream and upstream businesses. On the downstream side, sale of chemicals and services remained strong as we continued to cement our market positions. On the upstream sector, the successful finalisation of several offshore projects contributed to 88% and 51% increase in upstream revenue and profitability respectively. The success of our upstream business has fortified our resolve to further invest and expand our capabilities, particularly in the areas of offshore construction, upstream production and well services. Since the middle of last year, we had set up two new entities to focus solely on such upstream opportunities. The first was Daya Petroleum Ventures Sdn Bhd (DPV). DPVs main aim is to secure and develop marginal fields under Petronas Risk Sharing Contract (RSC) framework and provide core upstream oilfield services. We partnered with Hydra Energy Private Limited of Australia in May 2012 to bid for a cluster of gas fields (a tender which was subsequently deferred) from Petronas. We have again been invited recently to jointly tender for new marginal fields in the latest round of RSC tenders. Through DPV, we also recently acquired a 50.7% stake in Daya Maxflo Sdn. Bhd., a niche but fast expanding player involving in well intervention and related upstream services. The second entity is Daya Offshore Construction Sdn Bhd (DOC). This unit is designed to carry out specialised subsea engineering, construction, installation, inspection, maintenance and repair activities. DOC operates a fleet of vessels, remotely operated vehicles and modulated diving systems, complemented by a fullyintegrated in-house engineering and project management capabilities. Already we have secured a sizeable subsea installation contract which forms an integral part of the Tapis Enhanced Oil Recovery & Rejuvenation project off the coast of Terengganu and is now in the midst of implementing it. This project is slated for completion by the 4th quarter of 2013. Overall, our tender book in the offshore installation & construction business now stands at over RM800 million, and we have good reasons to believe that some of these tenders will be converted into actual order book and realisable revenue streams over the next few months. Exciting prospects aside, I would also like to remind our shareholders that the road ahead in offshore construction business remains a daunting one. Subsea operations are invariably complex, with the risks involved typically several times larger than those in the downstream space which we have grown accustomed to. To manage these risks, we have beefed up our offshore resources considerably in scale, scope and headcount. We have also assembled a select group of proven international players to further strengthen our core engineering competencies. The additional of two new and technologically advance offshore subsea construction vessels, namely Siem Daya 1 and Bourbon Evolution 380on term charters has significantly enhanced our marine capabilities. To drive growth over the next 3 years, more resources will no doubt be committed in this area to enable us to realize our regional and global upstream aspirations.

ANNUAL REPORT 2012

17

Accountable

18

DAYA MATERIALS BERHAD (636357-W)

CHAIRMANS STATEMENT
(contd)

TECHNICAL SERVICES DIVISION


Our Technical Services (TS) Division, which consists of engineering & construction as well as recycling & tank cleaning business, had another stellar year in 2012. PBT and PAT increased 50% and 46% respectively in 2012 despite a marginal decline in sales. Our profit margin expanded to a healthy 9% as compared to 6% during the previous financial period. Another key performance metric is the build up in our order book which more than quadrupled to almost RM900 million. As we take on larger and longer gestation projects, our ability to control costs, manage our subcontractors, hedge price risks, and select quality clients becomes even more important. Our strategy in this business has never been to grow sales alone. Our main focus is about choosing the right clients, maintaining comfortable project margins while minimizing our risk exposure. While engineering & construction had performed strongly, our waste oil recycling unit, Daya Clarimax Sdn Bhd, had suffered from an extended delay in licensing and implementation. In fact, it only came on stream towards the 4th quarter of 2012. We are now ramping up its operations and 2013 will see its first full year of commercial operations. Ultimately, the key to the success of this business will be the amount of feedstock that we can secure to fully utilise our plant capacity. There have been questions about our decision to retain TS, in particular construction & engineering, in our portfolio as our core business is emphatically O&G. The truth is we happen to like this business despite its relatively thin margin and cyclicality. Our rationale is a simple one. It is a business that we do not have to commit new capital even as we take on bigger and bigger projects. The scalability of this business and the inherent quality of most of our multinational clients enable us to earn proportionately larger income stream with practically the same level of resource base. So long as we are able to manage and mitigate most of the risks I highlighted earlier, the income earned from this business can be readily redeployed into our core O&G business. Having said that, when the time is right and the opportunity presents itself, we are certainly open to explore other strategic initiatives such as a spinoff via public listing or a trade sale.

ANNUAL REPORT 2012

19

Resolute

20

DAYA MATERIALS BERHAD (636357-W)

CHAIRMANS STATEMENT
(contd)

SPECIALIZED POLYMER DIVISION


If you have been following our business, you will probably notice that Specialized Polymer (SP) has underperformed over the past few years. Unfortunately 2012 was no different. The reality is that the domestic cable polymer market in currently under a consolidation phase characterized by ultra thin margins and severe price competition. This difficult transformation is exacerbated by the influx of cheap imports. It is vital that we figure out a structural solution and explore ways where we can grow our structural position. The only consolation for us, if at all, is that SP is no longer our core business. Since our listing in 2005, our focus has largely shifted away from polymer into O&G. In 2012, SP accounted for only 7% of group sales (compared to over 30% some 3 years ago) and contributed virtually nothing to profitability. Notwithstanding this, our aim is to continue to explore ways to restore this business into the cash cow that it once was and spin it off.

Segmental Contribution Revenue 2012 OG TS SP 104,519 152,843 19,561 276,923 2011 OG TS SP 101,615 160,782 19,310 281,707 38% 55% 7% 100% 36% 57% 7% 100% EBITDA 28,759 15,496 323 44,577 24,064 10,369 2,279 36,712 65% 35% 1% 100% 66% 28% 6% 100% PBT 24,463 14,389 (245) 38,606 20,090 9,607 1,673 31,370 63% 37% -1% 100% 64% 31% 5% 100% PAT 18,748 11,658 (53) 30,353 16,288 7,983 1,358 25,629 62% 38% 0% 100% 64% 31% 5% 100%

Segmental Revenue 2012


7%

Segmental EBITDA 2012


1% 35% 38%

Segmental PBT 2012


-1% 37%

Segmental PAT 2012


0% 38%

SP

SP

SP

SP

TS

TS

TS

OG

55%

TS

65%

OG

63%

OG

62%

OG

Segmental Revenue 2011


7%

Segmental EBITDA 2011


6% 28%

Segmental PBT 2011


5% 31%

Segmental PAT 2011


5% 31% 64%

SP

SP

SP

SP

TS

TS

TS

36% 66% 57%

OG

OG

OG

64%

OG

TS

ANNUAL REPORT 2012

21

Ethical

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DAYA MATERIALS BERHAD (636357-W)

CHAIRMANS STATEMENT
(contd)

LIQUIDITY & FINANCING


Strong financial platform is the key to future growth. We monitor our financial requirement on a short to medium term basis and seek refinancing as and when appropriate. As at the end of 2012, the Groups borrowings amounted to RM81.3 million, consisting of RM40.3 million short-term loans and trade lines, and RM40.9 million in long-term financing. The Groups net debt to total shareholders funds stood at 6.1% as compared to 1.8% in 2011. With cash and cash equivalent of RM66.4 million as well as significant untapped debt capability, the Groups liquidity position remains strong. We would like to caution however that in the coming years as the projects we take on grow in scale and size, the amount of borrowings, especially those of the short-term nature, will invariably increase. Our considerable and expanding order book necessitates a significant ramp-up in working capital facilities, revolving credit and trade lines during the project execution phase. Barring unforeseen circumstances, these borrowings will be naturally and progressively extinguished during the completion phase.

SHARE BUYBACK
In line with our share buyback strategy announced in the last Annual Report, we bought back a total of 13,888,600 shares from the market at an average price of 19.7 sen in 2012. None of these treasury shares have been cancelled or resold. As at 31 December 2012, we held a total of 15,675,700 shares as treasury shares. Given our growth prospects, we will continue to execute selective share buybacks at attractive price levels, balancing our desire to enhance the Groups long-term EPS and ongoing liquidity requirements.

DIVIDEND
In line with our Groups dividend policy, the Board has proposed a single tier final dividend of 2.5% for the financial year ended 31 December 2012 of 0.25 sen per share. This dividend will be paid in August 2013.

FUTURE PROSPECTS
The global economic landscape will be ever-changing with new challenges abound in the coming year. Malaysias economic performance will inevitably be shaped by external factors. As a whole, while the European situation remains a big concern, we expect positive economic growth both domestically and globally as a whole. Achieving a fine balance between operational growth and financial stability is always central to our strategy. Significant efforts have been made in our O&G business to ensure that we are well-positioned to capitalize on the opportunities arising from market. Petronas 5-year capital expenditure program of RM300 billion presents exciting opportunities for us. Our strategic expansion in the offshore construction and well services, among others, is designed to leapfrog us into the forefront of this arena. 2013 is shaping up to be a year of execution for us. If all our projects were to be clinically executed, significant growth in business volume and profitability can be realized. We are indeed on the precipice of a cataclysmic transformation. Time will tell. As always, we will be vigilant in our pursuit for growth.

ANNUAL REPORT 2012

23

CORPORATE SOCIAL RESPONSIBILITY

Social responsibility is neither a fad nor an optional extra. The interest in it is reflective of a deeper change in the relationship between companies and their stakeholders, including consumers. Faith in the benefits of profits to consumers has halved since the Seventies, as a viable basics of a relationship; that faith has been replace by a desire to see companies acting as active and responsible citizens. Healthy businesses require a healthy community and should be contributing to its creation and maintenance
- Stewart Lewis, Measuring Corporate Reputation, 1999

In ensuring the companys principle in delivering CARE, the DMB group of companies continued its efforts towards enriching the local communities. The year in review saw the various CSR activities within the DMB group. On 18 November 2012, the employees of DCMT led by their Chief Executive Officer participated in the Penang Bridge Marathon in an effort to raise funds for their CSR program. Together with the contributions from their business associates, they managed to raise RM24,480. Cash totaling to RM22,000 plus the balance of the which were utilized to purchase necessities and essential items, were thereafter channeled to four deserving homes. The team in DCMT together with the business associates spent over two days on the 30th& 31st January 2013, visiting these charitable organizations to send the donations and also to spend some time with them. The four organizations which were recipients of their contributions are: (i) Charis Hospice, a charitable organization which provides free medical support home care services to patients with terminal and advance illness, and also free loan of medical equipment.

(ii)

Persatuan Kebajikan Kanak-Kanak Cacat Yee Ran Jing Sheh, a center which houses about more than 60 handicapped residents aged between 5 to 40 years of age.

24

DAYA MATERIALS BERHAD (636357-W)

CORPORATE SOCIAL RESPONSIBILITY


(contd)

(iii)

St. Josephs Orphanage, which has about 34 children aged between 5 to 17 years of age. This home provides children who reside in and also children who are non-residents who are of poor social economic background, with vocational training so that they can be independent in the future.

(iv)

Persatuan Kebajikan Anak-Anak Islam, an orphanage that houses children aged between 4 to 17 years of age.

Circa December 2012, DPRO continued their CSR towards Pusat Pemulihan Dalam Komuniti (PDK) Kompleks Penyayang Kemaman for the second year. Activities carried out this time around were: (i) (ii) (iii) renovation works in the classrooms repair works replacing the doors in the hall and to replace 2 signage signs contribution of sports equipments and a PA system

These contributions were channeled to ensure that the students are not confined to the classroom but are also active in out of classroom activities. It is hoped that with the betterment of facilities in the center, the occupants of the center feel a sense of belonging and are being appreciated.

ANNUAL REPORT 2012

25

CORPORATE GOVERNANCE STATEMENT

The Board of Directors of Daya Materials Berhad (the Board) is committed towards achieving excellence in corporate governance and acknowledges that the prime responsibility for good corporate governance lies with the Board. The Board, in carrying out their roles and responsibilities, is firmly committed to ensuring that the highest standards of corporate governance and corporate conduct are adhered to, in order that the Group achieves strong financial performance for each financial year, and more importantly delivers long-term and sustainable value to shareholders. The Malaysian Code on Corporate Governance 2012 (the Code) sets out principles and recommendations on structures and processes that companies should adopt in making good corporate governance an integral part of their business dealings and culture. The Board reaffirms its support to the Code and believes that good corporate governance is fundamental in achieving the Groups objectives. To ensure that the best interests of shareholders and other stakeholders are effectively served, the Board continues to play an active role in improving governance practice and constantly monitors the development in corporate governance including in the Code. The Board is pleased to report to the shareholders, the manner in which the Group has applied and complied with the Principles and Recommendations of the Code for the financial year ended 31 December 2012. 1. DIRECTORS 1.1 Board Composition and Balance As at the date of this statement, the Board consists of six (6) members, comprising two (2) Executive Directors and four (4) Independent Non-Executive Directors with the appropriate mix of skills and experience. With this Board composition, the Company has thus complied with paragraph 15.02(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Securities) which requires that at least two (2) Directors or one-third (1/3) of the Board of Directors, whichever is the higher, to be Independent Directors. The Directors from different backgrounds and specialisation collectively bring depth and diversity in experience to the Groups operations. The Independent Non-Executive Directors are independent from management and have no family or business relationships with the Group that could interfere with the exercise of their independent judgment. They bring to bear objective and independent judgment to the decision making of the Board and provide an effective check and balance for the Executive Directors. In maintaining the independence of the Independent Directors of the Company, annual assessment is performed in order to mitigate risks arising from any possible conflict of interest situations or undue influence affecting their independence. In line with the recommendations of the Code, the tenure of an Independent Director of the Company should not exceed a cumulative term of nine (9) years. As at the date of this statement, none of the Independent Directors of the Company have exceeded their nine (9)-year term. The roles of the Chairman, the Vice Chairman and the Managing Director are separate with clear distinction of responsibilities between them to ensure balance of power and authority. The Chairman, who is a NonExecutive Director, is primarily responsible for the orderly conduct and working of the Board whilst the Vice Chairman and the Managing Director are responsible for the running of the business and operations and implementation of the Boards policies and decisions. The brief profiles of each Board member are set out under Profile of Directors on pages 10 to 13 of this Annual Report. 1.2 Duties and Responsibilities The Board is overall responsible for the corporate governance structure of the Group. Its primary responsibilities pursuant to the recommendations of the Code include: review and adopt a strategic plan for the Group; oversee the conduct of the Groups business to evaluate whether the business is being properly managed; identify principal risk and ensure the implementation of appropriate systems to manage these risks; implement succession planning, including appointing, training, xing the compensation of and where appropriate, replacing senior management; develop and implement an investor relations program or shareholders communications policy for the Group; and review the adequacy and the integrity of the Groups internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.

26

DAYA MATERIALS BERHAD (636357-W)

CORPORATE GOVERNANCE STATEMENT


contd

1.

DIRECTORS (contd) 1.2 Duties and Responsibilities (contd) The Board has delegated certain responsibilities to the Board Committees, such as the Audit Committee, Nomination Committee and Remuneration Committee, which operate within clearly defined terms of reference. These Board Committees have the authority to examine specific issues and forward their recommendations to the Board. At each Board meeting, minutes of the Board Committees meetings are presented to the Board. The respective Chairman of the Board Committees will also report to the Board on key issues deliberated by the Board Committees. The final decisions on all matters, however, rest with the Board. To ensure the effective discharge of its function and responsibilities, the Board also delegates some of the Boards authorities to the Executive Committee (EXCO), which represents the Management. The EXCO is entrusted with the responsibility of carrying out tasks which are assigned by the Board. The EXCO acts on behalf of the Board on matters concerning administrations, operations, capital expenditure, debt approvals and investments. It meets at regular intervals to review and decide on administrative and operational matters, budgets and investment strategies of the Group. The Board Charter is currently being drafted and will be posted on the Companys website after the Boards approval. Supply of Information The Board has unrestricted access to timely and accurate information necessary in the furtherance of their duties. All Directors are furnished with the meeting agenda and other documents on matters requiring their consideration prior to and in advance of each meeting. The documents are comprehensive and include qualitative and quantitative information to enable the Board members to make an informed decision. Senior Management may be invited to attend these meetings to explain and clarify to the Board on matters being tabled. The Chairman, with the assistance of the Management, undertakes primary responsibility for organising information necessary for the Board to deal with the agenda and in ensuring all Directors have full and timely access to the information relevant to the matters that will be deliberated at the Board meeting. Certain reports, such as those relating to the Companys financial results for statutory announcements, are submitted to the Audit Committee for their review and recommendation to the Board for approval thereafter. All proceedings from the Board meetings are recorded by way of minutes. The minutes are then confirmed by the Board and signed as correct records of the proceedings thereat by the Chairman of the meeting. All the Directors have access to the advice and services of the Company Secretary on procedural and regulatory requirements. If required, the Directors may seek independent external professional advice at the Groups expense, in the furtherance of their duties. During the financial year ended 31 December 2012, the Board met seven (7) times where it deliberated on and considered matters relating to the Groups financial performance, significant investments, change to management and control structure of the Group, corporate development, strategic issues and business plan. The attendance of each Director at Board meetings held during the financial year ended 31 December 2012 is set out below. No. of Board meetings attended 5/7 7/7 7/7 7/7 6/7 7/7 Percentage of attendance (%) 71 100 100 100 86 100

1.3

Name of Directors Dato Azmil Khalili bin Dato Khalid Dato Mazlin bin Md. Junid Nathan Tham Jooi Loon Fazrin Azwar bin Md. Nor Dato Sri Koh Kin Lip JP Lim Soon Foo (or Alternate, Ronnie Lim Hai Liang)

ANNUAL REPORT 2012

27

CORPORATE GOVERNANCE STATEMENT


contd

1.

DIRECTORS (contd) 1.3 Supply of Information (contd) None of the Directors was absent for more than 50% of the total Board meetings held under the financial year under review, hence complying with paragraph 15.05 of the Main Market Listing Requirements of Bursa Securities. Board Committees 1.4.1 Audit Committee The Board established the Audit Committee on 1 June 2005. The Audit Committee comprises of three (3) members, all of whom are Independent Non-Executive Directors. The composition, terms of reference and summary of activities of the Audit Committee during the financial year under review are disclosed in the Audit Committee Report as set out on pages 35 to 37 of this Annual Report. 1.4.2 Nomination Committee The Nomination Committee comprises three (3) members, all of whom are Independent Non-Executive Directors: Chairman : Dato Azmil Khalili bin Dato Khalid Member : Fazrin Azwar bin Md. Nor Dato Sri Koh Kin Lip JP (Independent Non-Executive Director) (Senior Independent Non-Executive Director) (Independent Non-Executive Director)

1.4

The Board was of the view that the Board Committees should be chaired by different Independent Non-Executive Directors. Hence, the Board agreed that Dato Azmil Khalili bin Dato Khalid to remain as Chairman of the Nomination Committee, while Encik Fazrin Azwar bin Md. Nor, who is the Senior Independent Non-Executive Director of the Company to continue to act as Chairman of the Audit Committee. The functions of the Nomination Committee are as follows: i) To review regularly the Board structure, size and composition and make recommendations to the Board with regards to any adjustments that are deemed necessary; ii) To propose and identify new nominees for appointment to the Board; iii) To assess Directors on an on-going basis, the effectiveness of the Board as a whole, the Board Committees and the contribution of each individual Director as well as the Chief Executive Officer; iv) To recommend to the Board, Directors to fill the seats on Board Committees; v) To review annually the Boards mix of skills and experience and other qualities including core competencies which non-executive Directors should bring to the Board; vi) To develop the criteria to assess independence of the Independent Directors of the Company; vii) To determine annually whether or not a Director is Executive, Non-Executive or Independent; viii) To recommend to the Board for continuation (or not) in service of executive Director(s) and Directors who are due for retirement by rotation; ix) To consider, in making its recommendations, candidates for directorships proposed by the Chief Executive Officer and, within the bounds of practicability, by any other senior executive or any Director or shareholder; and x) To orientate and educate new Directors on the nature of the business, current issues within the Group and the corporate strategy, the expectations of the Group concerning input from the Directors and the general responsibilities of Directors. During the financial year ended 31 December 2012, the Nomination Committee met two (2) times and the attendance of each member are as follows: No. of Nomination Committee meetings attended 2/2 2/2 2/2

Nomination Committee Dato Azmil Khalili bin Dato Khalid Fazrin Azwar bin Md. Nor Dato Sri Koh Kin Lip JP

28

DAYA MATERIALS BERHAD (636357-W)

CORPORATE GOVERNANCE STATEMENT


contd

1.

DIRECTORS (contd) 1.4 Board Committees (contd) 1.4.3 Remuneration Committee The Remuneration Committee comprises of four (4) members, all of whom are Independent NonExecutive Directors: Chairman Member : : : : Dato Sri Koh Kin Lip JP Dato Azmil Khalili bin Dato Khalid Fazrin Azwar bin Md. Nor Lim Soon Foo (Independent Non-Executive Director) (Independent Non-Executive Director) (Independent Non-Executive Director) (Independent Non-Executive Director)

The duties and functions of the Remuneration Committee are as follows: i) ii) iii) iv) v) To recommend to the Board the framework of Executive Directors remuneration and the remuneration package for each Executive Director, drawing from outside advise as necessary; To recommend to the Board, guidelines for determining remuneration/fees of Non-Executive Directors; To recommend to the Board any performance related pay schemes for Executive Directors; To review Executive Directors scope of service contracts; and To consider the appointment of the service of such advisers or consultants as it deems necessary to fulfill its functions.

During the financial year ended 31 December 2012, the Remuneration Committee met three (3) times and the attendance of each member are as follows:No. of Remuneration Committee meetings attended 3/3 3/3 3/3 -

Remuneration Committee Dato Azmil Khalili bin Dato Khalid Fazrin Azwar bin Md. Nor Dato Sri Koh Kin Lip JP Lim Soon Foo (appointed on 20.11.2012) 1.5 Appointments to the Board

The Board recognises its responsibility to carefully appraise and consider the appointment of new and existing Directors so as to continue functioning effectively. Thus, whilst the initial appraisal of new candidates is delegated to the Nomination Committee, the Board will assess and review the appointment or reappointment of each Director to ensure a good balance of skills and experience in the Board composition. The decision on appointment of new Directors rests with the Board after considering the recommendations of the Nomination Committee. As at the date of this statement, the Company has not established a policy formalising its approach to boardroom diversity. Hence, no gender diversity policies, targets and measures have been set. The Board, through the Nomination Committee will take the necessary steps to ensure that women candidates are sought as part of its recruitment exercise. Re-election of Directors In accordance with the Companys Articles of Association, one-third (1/3) or the number nearest to one-third (1/3) of the Directors shall retire from office and be eligible for re-election at the Annual General Meeting. Furthermore, each Director shall retire from office at least once in every three (3) years but shall be eligible for re-election. The Directors to retire each year are the Directors who have been longest in office since their last election.

1.6

ANNUAL REPORT 2012

29

CORPORATE GOVERNANCE STATEMENT


contd

1.

DIRECTORS (contd) 1.7 Directors Trainings All members of the Board have completed the Mandatory Accreditation Programme (MAP) which was conducted by the Research Institute of Investment Analysts Malaysia as required by Bursa Securities. The Board will undertake an assessment of the training needs of each Directors annually and the Directors will continue to undergo further Continuous Education Program to keep themselves abreast with the latest developments in the market place and enhance their professionalism in the discharge of their duties and responsibilities. Save for the under mentioned Directors who have attended the trainings as follows, the other Directors have not attended any training during the financial year ended 31 December 2012 due to their respective conflicting schedule and travel commitments: Dato Mazlin Bin Md. Junid 5 January 2012 Balance Scorecards Development organised by Daya Materials Berhad

Nathan Tham Jooi Loon 5 January 2012 Balance Scorecards Development organised by Daya Materials Berhad

Fazrin Azwar bin Md. Nor 14 March 2012 05 April 2012 05 April 2012 22 May 2012 18 June 2012 The Case For Diversity In The Boardroom round panel talk organised by CSR Asia and Bursa Malaysia Latest Developments In Technologies On Biomass Utilisation Prof Dr Ing Volker Thole - talk organised by Malaysian Palm Oil Board Potential Threat To The Oil Palm Industry In South East Asia Prof Dr Richard Martin Cooper - talk organised by Malaysian Palm Oil Board Role of the Audit Committee in Assuring Audit Quality talk organised by Malaysian Institute of Accountants and Bursa Malaysia Corporate Governance Blueprint and Malaysian Code of Corporate Governance 2012 talk organised by Institute of Internal Auditors Malaysia and Bursa Malaysia Making The Most of The Chief Financial Office Role: Everyones Responsibility? talk organised by ICAEW and Bursa Malaysia. Times Offset (M) Sdn Bhd Manufacturing Seminar organised by Times Publishing

04 July 2012 25 October 2012

23 November 2012 Prime Ministers 1Malaysia Economic Transformation Programme organised by Archer Consulting Group Sdn Bhd Dato Sri Koh Kin Lip JP 23 October 2012 2013 Budget Proposals and Recent Tax Development organised by Ernst & Young Tax Consultants Sdn. Bhd.

30

DAYA MATERIALS BERHAD (636357-W)

CORPORATE GOVERNANCE STATEMENT


contd

1.

DIRECTORS (contd) 1.8 Number of Directorship Pursuant to the Main Market Listing Requirements of Bursa Securities, Directors of the Company shall not hold more than (5) directorship in public listed companies by 1 June 2013. Prior to acceptance to new directorship in other public listed companies, the Directors are required to first notify the Chairman, including the estimated time commitment required, to ensure that such appointment would not affect their commitments and focus for an effective input to the Board. None of the Directors of the Company hold more than (5) directorship in public listed companies. The directorships of each Director are set out in the Profile of Directors on pages 10 to 13 of this Annual Report. 1.9 Qualified and Competent Company Secretary The Board is satisfied with the performances and support rendered by the Company Secretary to the Board in the discharge of its functions. The Company Secretary plays an advisory role to the Board in relation to the Companys constitution, Boards policies and procedures and compliance with the relevant regulatory requirements, codes or guidance and legislations. The Company Secretary supports the Board in managing the Companys governance model, ensuring its effective and relevant. The Company Secretary also ensures the deliberations and decisions made at the Board meetings are well captured and minuted. 1.10 Code of Ethics The Board is currently looking at formalising ethical standards through a code of conduct. The Group is committed in maintaining the highest standards of honesty, integrity and ethical conduct and is in the progress of establishing a code of conduct and Anti-Fraud and Whistle-Blower Protection Policy to ensure consistent and effective investigation, reporting and disclosure of fraud occurrence within the Group.

2.

DIRECTORS REMUNERATION The remuneration of Directors is determined at levels, which will enable the Company to attract and retain Directors with the relevant experience and expertise to run the Group successfully. The remuneration of Executive Directors is structured to link rewards to corporate and individual performance. The determination of the remuneration packages of non-executive directors, including non-executive chairman, is a matter for the Board as a whole. The details of the remuneration for Directors during the financial year ended 31 December 2012 are as below: Aggregate remuneration categorised into components: Executive Non-Executive Directors Directors RM Fees Salaries & other emoluments Total 58,000 3,138,290 3,196,290 RM 108,000 53,500 161,500

Total RM 166,000 3,191,790 3,357,790

The number of Directors whose total remuneration fall within the following bands:Executive Non-Executive Directors Directors 1 1 4 -

Range Below RM50,000 RM1,100,001 RM1,150,000 RM2,050,001 RM2,100,000

ANNUAL REPORT 2012

31

CORPORATE GOVERNANCE STATEMENT


contd

3.

INVESTORS RELATION AND SHAREHOLDERS COMMUNICATION The Company recognises the value of transparent, consistent and coherent communications with investment community consistent with commercial confidentiality and regulatory considerations. The Company aims to build long-term relationships with shareholders and potential investors through appropriate channels for the management and disclosure of information. These investors are provided with sufficient business, operations and financial information on the Group to enable them to make informed investment decisions. 3.1 Dialogue with shareholders and investors In maintaining the commitment to effective communication with the shareholders, the Company adopts the practice of comprehensive, timely and continuing disclosures of information to its shareholders as well as to the general investing public. Where possible and applicable, the Company also provides additional disclosure of information on a voluntary basis. The Company believes that consistently maintaining a high level of disclosure and extensive communication with its shareholders is vital to shareholders and investors to make informed investment decisions. The primary tools of communication with the shareholders of the Company are through the annual report, quarterly reports, announcements through Bursa Securities and circulars. The Companys website at www. dmb.com.my contains vital information concerning the Group which is updated on a regular basis and shareholders are able put questions to the Company through the website. The Board considers it is essential that investors are kept informed of all the latest financial results and developments of the Company and the Group and where appropriate, will provide disclosure that is in the best interest of the Company and also of the shareholders. All such reporting information can be obtained from the websites of the Company and Bursa Securities. In addition to the above, the Board has identified En. Fazrin Azwar bin Md. Nor as the Senior Independent Non-Executive Director to whom all concerns from the shareholders or investors may be conveyed. General Meetings At the Annual General Meeting and Extraordinary General Meeting, the Chairman gives shareholders ample opportunity to participate through questions on the prospects, performance of the Group and other matters of concern addressed to the Board. Notice of the general meetings and the Groups annual report are sent out to the shareholders within the period prescribed by the Companys Articles of Association. The notice of the meetings will also be advertised in the newspaper. The Company would conduct poll voting if demanded by shareholders at the general meetings.

3.2

4.

ACCOUNTABILITY AND AUDIT 4.1 Financial Reporting The Board is responsible for presenting a balanced and meaningful assessment of the Groups financial performance and prospects primarily through the annual report, financial statements and quarterly announcements of the Groups results. The Audit Committee assists the Board in ensuring accuracy, adequacy and completeness of information for disclosure. The Statement by Directors pursuant to Section 169 of the Companies Act, 1965 is set out on page 44 of this Annual Report and the Statement explaining the responsibility for preparing the annual audited financial statements is set out on page 134 of this Annual Report. Internal Control and Risk Management The Board is ultimately responsible for the overall system of internal controls, which includes not only financial controls but also controls relating to operations, compliance and risk management. The internal control system which is designed to meet the needs of the Company and to manage risks to which the Company is exposed can only provide reasonable and not absolute assurance against material misstatement, loss or fraud. Further details relating to internal control are set out in the Statement on Risk Management and Internal Control on pages 33 and 34 and the Audit Committee Report on pages 35 to 37 of this Annual Report.

4.2

32

DAYA MATERIALS BERHAD (636357-W)

CORPORATE GOVERNANCE STATEMENT


contd

4.

ACCOUNTABILITY AND AUDIT (contd) 4.3 Relationship with Auditors The external auditors, Messrs Ernst & Young, have continued to report to members of the Company on theirs findings which are included as part of the Companys financial reports with respect to each years audit on the statutory financial statements. In doing so, the Company has established a transparent arrangement with the auditors to meet their professional requirements. Key features underlying the relationship of the Audit Committee with the external auditor and internal auditor are included in the Audit Committee Report on pages 35 to 37 of this Annual Report.

5.

SUSTAINABILITY POLICY The Board promotes good corporate governance in the application of sustainability practices throughout the Group, the benefits of which are believed to translate into better corporate performance. A detailed report on sustainability activities, demonstrating the Companys commitment to the global environmental, social, governance and sustainability agenda, appears in the Corporate Responsibility Statement on pages 23 and 24 of this Annual Report.

ANNUAL REPORT 2012

33

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL


INTRODUCTION
The Board of Directors of Daya Materials Berhad (the Board) is pleased to provide the following statement on the state of risk management and internal control of Daya Materials and its subsidiaries (Group), which have been prepared in accordance with the Statement on Risk Management and Internal Control: Guidance for Directors of Public Listed Companies as adopted by the Bursa Malaysia Securities Berhad (Bursa Securities).

BOARD RESPONSIBILITY
The Board acknowledges its responsibility to maintain a sound system of internal control in the Group and to review the adequacy and integrity of the system to safeguard the shareholders investments and the Groups assets. As with the inherent limitations in any system of internal control, the Groups system too is designed to manage rather than eliminate the risk of failure to achieve its business objectives. The system of internal control is designed to provide reasonable assurance against material misstatement or loss. The Board confirms that there is an ongoing process for identifying, evaluating, monitoring and managing the significant risks faced by the Group. This process has been in place throughout the year. Such process is also applied consistently throughout the Group and is regularly reviewed by the Board.

THE GROUPS SYSTEM OF INTERNAL CONTROL


The Board has established an internal audit function which is carried out in-house via the Group Internal Audit Department. This audit function covers all principal areas of operations and continuously offers assurances on the system of internal control. The internal audit function is independent of the activities it audits and audits are performed with impartiality, proficiently and with due professional care. The internal audit function reports to the Audit Committee whose members are all independent and non-executive members of the Board. All reports are presented to the Audit Committee whom shall ensure that all risks identified are satisfactorily dealt with. It is the practice of the Board to review the internal audit functions scope of work, authority and resources as and when required. The internal audit function has adopted a risk-based approach in its audit work. The audit focused on areas with high risk, which were identified in the risk management framework, to ensure that the controls were functioning and where necessary, action plans were developed to improve on controls to manage significant risks. The Group has put in place the following key elements of internal control:i) ii) iii) iv) v) vi) There is a formal organization structure within the Group with delineated lines of responsibility, authority and accountability; Clearly documented internal policies, manuals, procedures and work instructions, and which are updated from time to time; Regular Board and management meetings are held where information is provided to the Board and management covering financial performances and operations; Major investments, acquisitions and disposals are appraised prior to approval by the EXCO or the Board; Regular training and development programs are being attended by employees with the objective of enhancing their knowledge and competency; and Management accounts and reports are prepared monthly for monitoring of actual performance versus budget. In this instance, material variances are explained and corrective actions, where necessary, are taken.

The Audit Committee established by the Board performs an oversight role in maintaining the integrity of the Groups system of internal control. The Audit Committee is assisted by the Group Internal Audit Department which performs regular audits to review the internal controls and risk management practices and also the external auditors which review the financial reporting controls. The internal control system will continue to be reviewed, added on or updated in line with the changes in the operating environment. The internal audit expense costs incurred for the financial year ended 31 December 2012 was RM129,932.50.

34

DAYA MATERIALS BERHAD (636357-W)

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL


(contd)

RISK MANAGEMENT
The Group has established a risk management framework, where a structured process to identify, evaluate, manage and communicate principal risks faced by the Group was formalized via the Risk Management Policy and Guidelines for adoption by all business units across the Group. The management is responsible for identifying, analyzing, managing and reporting on significant risks on an ongoing basis. These functions were carried out continuously during the year and significant risk matters together with the relevant systems of controls to manage those risks are reported to the Board for discussion on quarterly basis. The risk profile of the Group has been compiled to facilitate the Board and management to prioritize their focus on areas of high risks. Corresponding controls to manage the relevant identified risks have also been documented. Where there are deficiencies, action plans have been developed to improve the system of controls in order to effectively manage the risks.

CONTROL WEAKNESS
The management continues to take measures to strengthen the control environment. In the year under review, there was no material losses, incurred as a result of weakness in the internal control that would require disclosure in this annual report.

CONCLUSION
The Board is of the opinion that based on the current level of activities; the Groups system of internal control is adequate and accords with the guidance provided by the Internal Control Guidance adopted by the Bursa Securities. 22 April 2013

ANNUAL REPORT 2012

35

AUDIT COMMITTEE REPORT

COMPOSITION
Members of the Audit Committee, their respective designations and directorate are as follows:Chairman : FAZRIN AZWAR BIN MD. NOR Chairman, Independent Non-Executive Director Members : DATO SRI KOH KIN LIP JP Independent Non-Executive Director DATO AZMIL KHALILI BIN DATO KHALID Independent Non-Executive Director

MEMBERSHIP
The Audit Committee shall be appointed by the Board from amongst the Directors and shall consist of not less than three (3) members, where all members must be non-executive directors with a majority of whom shall be Independent Directors. The Board shall, within three (3) months of a vacancy occurring in the Audit Committee which results in the number of members reduced to below three (3), appoint such number of new members as may be required to make up the minimum number of three (3) members. The members of the Audit Committee shall elect a Chairman from among their members who shall be an Independent Director. An alternate Director must not be appointed as a member of the Audit Committee. The Board shall review the terms of office and performance of the Audit Committee and each of its members at least once (1) in every three (3) years to determine whether the Audit Committee and the members have carried out their duties in accordance with their terms of reference.

AUTHORITY
The Committee shall, in accordance with the procedure determined by the Board and at the cost of the Company have authority to investigate any matter within its terms of reference, full and unrestricted access to any information pertaining to the Company and all the resources required to perform its duties. The Committee shall have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity and be able to convene meetings or to obtain independent external professional advice or other advice and to secure the attendance of outsiders with relevant experience and expertise if it considers necessary.

MEETINGS
The Committee shall meet at least four (4) times in a year subject to the quorum of at least two (2) independent directors or more frequently as circumstances required or upon the request of any member of the Committee with due notice of issues to be discussed and shall record its deliberations and conclusions in discharging its duties and responsibilities. The Committee may invite any Board member or any member of management or any employee of the Company who the Committee thinks fit to attend its meetings to assist and to provide pertinent information as necessary. The Committee may regulate its own procedures, in particular: a) b) c) d) e) The calling of meetings; The notice to be given of such meetings; The voting and proceedings of such meetings; The keeping of minutes; and The custody, production and inspection of such minutes.

The Company Secretary shall act as Secretary of the Audit Committee and shall, with the concurrence of the Chairman, draw up the agenda of meetings. The notice of meetings and the meeting papers or explanatory documentation will be circulated to the Audit Committee members prior to each meeting. The Secretary shall also be responsible for recording the proceedings of the Audit Committee.

36

DAYA MATERIALS BERHAD (636357-W)

AUDIT COMMITTEE REPORT


(contd)

DUTIES
The duties of the Audit Committee include the following: i) To review the quarterly results and the year-end financial statements, prior approval by the Board, focusing particularly on:

Changes in or implementation of accounting policies and practices; Significant adjustments or unusual events; Going concern assumption; and Compliance with applicable approved financial reporting standards, regulatory and other legal requirements; ii) To review with the external auditor, the audit scope and plan, including any changes to the planned scope of the audit plan, and to discuss to ensure co-ordination where more than one audit firm is involved; iii) To review with the external auditor, the results of the interim and final audits and the Managements response thereto, including the status of previous audit recommendations; iv) To review the assistance given by the Companys employees to the auditors, and any difficulties encountered in the course of audit work, including any restrictions on the scope of activities or access to required information (in the absence of management where necessary); v) To review the appointment and performance of external auditor, the audit fee and any question of resignation or dismissal before making recommendations to the Board; vi) To review with the external auditor, its evaluations of the system of internal controls; vii) To assess the suitability and independence of external auditors; viii) To review the adequacy of the internal audit scope, functions, authority, competency and resources of the internal audit function and that it has necessary authority to carry out its work; ix) To review the internal audit programme, processes and reports to evaluate the findings of the internal audit and to ensure that appropriate and prompt remedial action is taken by Management on the recommendations of the internal audit function; x) To review any appraisal or assessment of the performance of the internal audit function; xi) To approve any appointment or termination of internal audit function; xii) Take cognisance of resignations of internal audit function and provide an opportunity to submits its reasons for resigning; xiii) To consider any related party transaction and conflict of interest situation that may arise within the Group including any transaction, procedure or course of conduct that raises questions of management integrity; xiv) To verify the allocation of Employees Share Option Scheme (ESOS) in compliance with criteria as stipulated in the By laws of ESOS of the Company, if any; xv) To direct and, where appropriate, supervise any special projects or investigation considered necessary, and review investigation reports on any major defalcations, frauds and thefts; and xvi) Such other responsibilities as may be agreed to by the Audit Committee and the Board.

SUMMARY OF ACTIVITIES
During the financial year ended 31 December 2012, the Audit Committee met five (5) times and the attendance of each member is as follows: Name of Director Fazrin Azwar bin Md. Nor Dato Azmil Khalili bin Dato Khalid Dato Sri Koh Kin Lip JP No. of meetings attended 5/5 4/5 5/5

ANNUAL REPORT 2012

37

AUDIT COMMITTEE REPORT


(contd)

SUMMARY OF ACTIVITIES (contd)


During the financial year ended 31 December 2012, the Audit Committee have considered, reviewed and discussed the following: i) Reviewed the external auditors scope of work and audit plan for the financial year. Prior to the audit fieldwork, representatives from the external auditor presented their audit strategy and plan to the Audit Committee; ii) Reviewed with the external auditor the results of the interim and final audits, the management letter, including managements response and the evaluation of the system of internal controls; iii) Considered and recommended to the Board the re-appointment of the external auditor and approval of audit fees payable to the external auditor; iv) Met with external auditor twice (2) during the financial year without the presence of any Executive Directors, to discuss problems and reservations arising from the interim and final audits, if any, or any other matter the auditor may wish to discuss; v) Reviewed the internal audit functions resource requirements, adequacy of plan, functions and scope for the financial year under review; vi) Reviewed the performance and competency of internal audit function; vii) Reviewed the internal audit plan, processes and reports which highlighted the audit issues, recommendations and Managements response. Discuss with Management and ensure appropriate actions were taken to improve the system of internal controls based on improvement opportunities identified in the internal audit reports; viii) Reviewed the adequacy and effectiveness of the governance and risk management processes as well as the internal control system through risk assessment reports from the internal auditor. Significant risk issues were summarized and communicated to the Board for consideration and resolution; ix) Reviewed the unaudited quarterly financial results of the Group and making relevant recommendations to the Board for approval. The review and discussions were conducted with the Group Chief Financial Officer; x) Reviewed the audited financial statements of the Group prior to submission to the Board for its consideration and approval. The review was to ensure that the audited financial statements were drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable approved Financial Reporting Standards for entities other than private entities issued by the MASB. Any significant issues resulting from the audit of the financial statements by the external auditors were deliberated; xi) Reviewed related party transactions entered into by the Group, conflict of interest situations and report the same to the Board; xii) Reviewed the Statement on Risk Management and Internal Control and its recommendation to the Board for inclusion in the Annual report; and xiii) Pertinent issues of the Group which has significant impact on the results of the Group. The Company has implemented an Employees Share Option Scheme (ESOS) of up to 10% of its issued and paid-up share capital for the eligible directors and employees of the DMB Group on 26 February 2009. However, to date, no ESOS options have been granted. Therefore, no verification by the Audit Committee on the allocation of options granted to employees pursuant to the ESOS.

SUMMARY OF ACTIVITIES OF THE INTERNAL AUDIT FUNCTION


During the financial year ended 31 December 2012, the internal audit function carried out two (2) risk-based audit engagements involving Daya Polymer Sdn Bhd and Daya CMT Sdn Bhd and three (3) follow-up audits involving Daya Proffscorp Sdn Bhd, Daya OCI Sdn Bhd and Daya Secadyme Sdn Bhd. In addition, the internal audit function also conducted special audit review on the business operation in Indonesia involving P.T. Daya Secadyame (Indonesia). The results of the review were presented in the forms of reports to the Audit Committee during the quarterly Audit Committee meetings. The reports set out audit findings and recommendations for improvements and status of prior audit findings. The internal auditors also presented the internal audit plan for the financial year ending 31 December 2013 during one of the meetings. The internal audit plan will be revised and amended during the year (if required) to accommodate with the environmental changes within the Group.

Financial Statements
Directors' Report Statement by Directors Statutory Declaration Independent Auditors' Report Income Statements Statements of Comprehensive Income Statements of Financial Position Statements of Changes in Equity Statements of Cash Flows Notes to the Financial Statements Supplementary Information 40 44 44 45 47 48 49 51 53 56 133

40

DAYA MATERIALS BERHAD (636357-W)

DIRECTORS REPORT

The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2012. PRINCIpAL ACTIVITIES The principal activities of the Company are investment holding and provision of management services to its subsidiaries. The principal activities of the subsidiaries are set out in Note 13 to the financial statements. There have been no significant changes in the nature of the principal activities during the financial year. RESULTS Group RM Profit for the year Attributable to: Equity holders of the Company Non-controlling interests 20,170,784 (54,583) 20,116,201 2,010,046 2,010,046 20,116,201 Company RM 2,010,046

There were no material transfers to or from reserves or provisions during the financial year. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. DIVIdENdS The amount of dividends paid by the Company since 31 December 2011 in respect of the financial year ended 31 December 2011 as reported in the directors report of that year was as follows: RM Final tax exempt (single-tier) dividends of 2.5% 3,074,022 At the forthcoming Annual General Meeting, a single tier dividends of 2.5% in respect of the financial year ended 31 December 2012 will be proposed for shareholders approval. The financial statements for the current financial year do not reflect this proposed dividends. Such dividends, if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 December 2013. DIRECTORS The names of the directors of the Company in office since the date of the last report and at the date of this report are: Dato Azmil Khalili Bin Dato Khalid Dato Mazlin Bin Md. Junid Nathan Tham Jooi Loon Fazrin Azwar Bin Md. Nor Dato Sri Koh Kin Lip J.P. Lim Soon Foo Ronnie Lim Hai Liang (Alternate director to Lim Soon Foo)

ANNUAL REPORT 2012

41

DIRECTORS REPORT
(contd)

DIRECTORS BENEFITS Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement, to which the Company was a party, whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive any benefits (other than benefits included in the aggregate amount of emoluments received or due and receivables by the directors as shown in the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest, except as disclosed in Note 27 to the financial statements. DIRECTORS INTERESTS According to the register of directors shareholdings, the interests of directors in office at the end of the financial year in shares in the Company during the financial year were as follows: Number of ordinary shares of RM0.10 each 1.1.2012 The Company Direct interest Dato Mazlin Bin Md. Junid Nathan Tham Jooi Loon Fazrin Azwar Bin Md. Nor Dato Sri Koh Kin Lip J.P. Lim Soon Foo Deemed interest Dato Mazlin Bin Md. Junid (1) Nathan Tham Jooi Loon
(2)

Acquired

Disposed

31.12.2012

198,859,386 59,500,198 2,099,998 78,115,098 60,829,098

7,500,000 13,870,000 500,000

(68,000,000) (4,000,000) (1,700,000) -

138,359,386 69,370,198 399,998 78,115,098 61,329,098

18,000,720 4,709,998 279,000

2,000,000 -

20,000,720 4,709,998 279,000

(3)
(1) (2)

Lim Soon Foo (3)

None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year. ISSUE OF SHARES During the financial year, the Company increased its issued and paid-up share capital from RM119,915,854 to RM123,400,175 by way of the issuance of 34,843,206 new ordinary shares of RM0.10 each in the Company pursuant to the conversion of RM6 million Redeemable Convertible Secured Loan Notes at a conversion price of RM0.172 per share. The new ordinary shares issued during the year ranked pari passu in all respects with the existing ordinary shares of the Company.

Deemed interest through his son and daughter. Deemed interest through his spouse. Deemed interest through his son.

42

DAYA MATERIALS BERHAD (636357-W)

DIRECTORS REPORT
(contd)

EmpLOYEE SHARE OpTION SCHEmE At an Extraordinary General Meeting held on 26 February 2009, the shareholders of the Company approved the proposed establishment of an Employee Share Option Scheme (ESOS) for the eligible directors and employees of the Company and its subsidiaries. The ESOS will be administered by the ESOS Committee to be duly appointed and approved by the Board of Directors. The aggregate number of ESOS Options exercised and ESOS Options offered and to be offered under the scheme shall not exceed 10% of the issue and paid-up ordinary share capital of the Company at any point during the duration of the scheme. No options have been granted since the date of the establishment of the ESOS and at the date of reporting. OTHER STATUTORY INFORmATION (a) 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: (i) to ascertain that proper action has been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance for doubtful debts has been made; and to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the directors are not aware of any circumstances which would render: (i) the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company or the amount written off for bad debts inadequate to any substantial extent; and (ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading. (c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. (d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. (e) As at the date of this report, there does not exist: (i) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or (ii) any contingent liability of the Group and of the Company which has arisen since the end of the financial year. (f ) In the opinion of the directors: (i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due; and (ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made. SIgNIFICANT ANd SUBSEQUENT EVENTS Details of significant and subsequent events are disclosed in Note 32 and Note 34 to the financial statements. (ii)

ANNUAL REPORT 2012

43

DIRECTORS REPORT
(contd)

AUdITORS The auditors, Ernst & Young, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the directors dated 22 April 2013.

DATO MAZLIN BIN Md. JUNId NATHAN THAm JOOI LOON

44

DAYA MATERIALS BERHAD (636357-W)

STATEMENT BY DIRECTORS

Pursuant to Section 169(15) of the Companies Act, 1965

We, Dato Mazlin Bin Md. Junid and Nathan Tham Jooi Loon, being two of the directors of Daya Materials Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 47 to 132 are drawn up in accordance with Malaysian Financial Reporting Standards, International 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 at 31 December 2012 and of their financial performance and cash flows for the year then ended. The information set out in Note 36 to the financial statements on page 133 have been prepared in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and presented based on the format prescribed by Bursa Malaysia Securities Berhad. Signed on behalf of the Board in accordance with a resolution of the directors dated 22 April 2013.

DATO MAZLIN BIN Md. JUNId NATHAN THAm JOOI LOON

STATUTORY DECLARATION

Pursuant to Section 169(16) of the Companies Act, 1965

I, Nathan Tham Jooi Loon, being the director primarily responsible for the financial management of Daya Materials Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 47 to 133 are in my opinion 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 Nathan Tham Jooi Loon at Kuala Lumpur in the Federal Territory on 22 April 2013. NATHAN THAm JOOI LOON Before me,

ANNUAL REPORT 2012

45

to the members of Daya Materials Berhad (Incorporated in Malaysia)

INDEPENDENT AUDITORS REPORT

REpORT ON FINANCIAL STATEmENTS We have audited the financial statements of Daya Materials Berhad, which comprise the statements of financial position as at 31 December 2012 of the Group and of the Company, and the income statements, statements of comprehensive income, statements of changes in equity and statements of 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 132. Directors responsibility for the financial statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards, and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal controls 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 about 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 controls relevant to the entitys preparation of 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 entitys internal controls. 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 give a true and fair view of the financial position of the Group and of the Company as at 31 December 2012 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. REpORT ON OTHER LEgAL ANd REgULATORY REQUIREmENTS In accordance with the requirements of the Companies Act, 1965 (Act) in Malaysia, we also report the followings: (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 financial statements and the auditors reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 13 to the financial statements, being financial statements that have been included in the consolidated financial statements. (c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. (d) The auditors reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act. OTHER REpORTINg RESpONSIBILITIES The supplementary information set out in Note 36 to the financial statements on page 133 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (MIA Guidance) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

46

DAYA MATERIALS BERHAD (636357-W)

INDEPENDENT AUDITORS REPORT


(contd)

to the members of Daya Materials Berhad (Incorporated in Malaysia)

OTHER mATTERS As stated in Note 2.2 to the financial statements, Daya Materials Berhad adopted Malaysian financial Reporting Standards on 1 January 2012 with a transition date of 1 January 2011. These standards were applied retrospectively by directors to the comparative information in these financial statements, including the statements of financial position as at 31 December 2011 and 1 January 2011, and the income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows for the year ended 31 December 2011 and related disclosures. We were not engaged to report on the comparative information and it is unadited. Our responsibilities as part of our audit of the financial statements of the Group and of the Company for the year ended 31 December 2012 have, in these circumstances, included obtaining sufficient apporporiate audit evidence that the opening balances as at 1 January 2012 do not contain misstatements that materially affect the financial position as of 31 December 2012 and financial performance and cash flows for the year then ended. 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.

ERNST & YOUNg KUA CHOH LEANg AF : 0039 No. 2716/01/15(J) Chartered Accountants Chartered Accountant Kuala Lumpur, Malaysia 22 April 2013

ANNUAL REPORT 2012

47

for the nancial year ended 31 December 2012

INCOME STATEMENTS

Group 2012 Note Revenue Cost of sales Gross profit Other income Selling and distribution expenses Administrative expenses Operating profit Finance costs Share of results of jointly controlled entities Profit before tax Income tax expense Profit for the year Attributable to: Equity holders of the Company Non-controlling interests 20,170,784 (54,583) 20,116,201 Earnings per share (sen) - Basic - Diluted 8 8 1.65 1.63 1.50 1.45 17,381,905 60,697 17,442,602 2,010,046 2,010,046 5 14 6 7 3 4 RM 276,929,368 (221,486,285) 55,443,083 5,723,257 (980,368) (29,211,612) 30,974,360 (4,067,968) 1,480,297 28,386,689 (8,270,488) 20,116,201 2011 RM 281,745,931 (239,034,754) 42,711,177 6,432,415 (626,169) (22,178,763) 26,338,660 (3,973,337) 1,394,943 23,760,266 (6,317,664) 17,442,602 2012 RM 11,644,887 11,644,887 1,498,729 (8,757,292) 4,386,324 (1,448,136) 2,938,188 (928,142) 2,010,046

Company 2011 RM 23,492,181 23,492,181 1,307,891 (5,591,249) 19,208,823 (1,786,533) 17,422,290 (4,444,774) 12,977,516

12,977,516 12,977,516

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

48

DAYA MATERIALS BERHAD (636357-W)

STATEMENTS OF COMPREHENSIVE INCOME


for the nancial year ended 31 December 2012

Group 2012 RM Profit for the year Other comprehensive income: Foreign currency translation differences for foreign subsidiaries Total comprehensive income for the year, net of tax Total comprehensive income for the year attributable to: Equity holders of the Company Non-controlling interests 20,277,498 (54,583) 20,222,915 17,361,366 60,697 17,422,063 2,010,046 2,010,046 106,714 20,222,915 (20,539) 17,422,063 2,010,046 20,116,201 2011 RM 17,442,602 2012 RM 2,010,046

Company 2011 RM 12,977,516

12,977,516

12,977,516 12,977,516

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

ANNUAL REPORT 2012

49

STATEMENTS OF FINANCIAL POSITION


as at 31 December 2012

2012 Note Group Non-current assets Property, plant and equipment Land held for property development Investment properties Intangible assets Investment in jointly controlled entities Other receivables 9 10 11 12 14 16 105,582,004 10,474,825 1,195,405 83,896,892 2,390,589 728,096 204,267,811 Current assets Inventories Trade and other receivables Other current assets Tax recoverable Marketable securities Cash and cash equivalents 19 20 17 16 18 14,097,906 72,593,540 40,125,499 1,611,576 108,188 66,412,033 194,948,742 Total assets Equity and liabilities Equity Share capital Reserves Non-controlling interests Total equity Non-current liabilities Deferred tax liabilities Loans and borrowings Other payables 15 23 24 199,570 40,980,826 41,180,396 Current liabilities Loans and borrowings Trade and other payables Provisions Tax payable 23 24 25 40,348,313 85,637,534 324,694 811,789 127,122,330 Total liabilities Total equity and liabilities 168,302,726 399,216,553 21 22 123,400,175 107,568,235 230,968,410 (54,583) 230,913,827 399,216,553 RM

2011 RM

1.1.2011 RM

100,018,297 1,210,400 83,885,182 3,128,637 1,271,456 189,513,972

90,865,694 1,225,395 83,490,527 1,060,692 1,809,111 178,451,419

14,181,536 86,513,760 22,615,041 2,205,869 243,728 62,840,884 188,600,818 378,114,790

13,428,106 57,255,978 5,040,665 3,561,848 158,600 34,152,997 113,598,194 292,049,613

119,915,854 90,711,850 210,627,704 210,627,704

109,673,694 66,923,155 176,596,849 559,056 177,155,905

951,306 48,861,621 3,000,000 52,812,927

1,085,732 53,947,433 5,000,000 60,033,165

17,862,200 94,473,588 1,709,277 629,094 114,674,159 167,487,086 378,114,790

14,567,876 35,578,465 2,320,733 2,393,469 54,860,543 114,893,708 292,049,613

50

DAYA MATERIALS BERHAD (636357-W)

STATEMENTS OF FINANCIAL POSITION


as at 31 December 2012
(contd)

2012 Note Company Non-current assets Property, plant and equipment Intangible assets Investment in subsidiaries Deferred tax assets 9 12 13 15 841,573 44,549 172,852,567 44,313 173,783,002 Current assets Trade and other receivables Other current assets Tax recoverable Cash and cash equivalents 20 16 18 32,323,788 124,249 1,086,077 11,798,484 45,332,598 Total assets Equity and liabilities Equity Share capital Reserves Total equity Non-current liabilities Deferred tax liabilities Loans and borrowings Other payables 15 23 24 9,475,945 9,475,945 Current liabilities Loans and borrowings Trade and other payables 23 24 15,931,440 18,416,037 34,347,477 Total liabilities Total equity and liabilities 43,823,422 219,115,600 21 22 123,400,175 51,892,003 175,292,178 219,115,600 RM

2011 RM

1.1.2011 RM

825,658 55,923 172,851,767 173,733,348

295,606 171,740,329 172,035,935

24,995,827 174,000 633,112 5,224,754 31,027,693 204,761,041

13,662,428 136,014 1,900,530 7,400,676 23,099,648 195,135,583

119,915,854 53,303,070 173,218,924

109,673,694 33,966,405 143,640,099

45,201 19,036,841 3,000,000 22,082,042

40,557 29,983,153 5,000,000 35,023,710

6,034,001 3,426,074 9,460,075 31,542,117 204,761,041

6,407,067 10,064,707 16,471,774 51,495,484 195,135,583

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

Attributable to Equity Holders of the Company Non-distributable Share capital RM 9,997,856 10,225,000 1,257,840 (1,850,435) 19,630,261 19,630,261 2,515,679 26,000 22,171,940 130,374 278,464 106,714 (3,049,369) (2,732,320) (156,450) 286,824 171,750 (317,049) 286,824 171,750 (317,049) (20,539) 17,381,905 17,361,366 (2,877,982) (2,877,982) (317,049) (317,049) (1,850,435) (78,225) 2,921,775 60,697 (81,573) 68,180 68,180 (538,180) (470,000) (81,573) 2,921,775 (1,850,435) (317,049) (2,877,982) 17,422,063 - 210,627,704 - 210,627,704 (3,074,022) 20,170,784 5,843,550 26,000 (2,732,320) (3,074,022) 20,277,498 88,036,826 230,968,410 5,843,550 26,000 (2,732,320) (3,074,022) (54,583) 20,222,915 (54,583) 230,913,827 18,725,000 18,725,000 365,049 192,289 56,367,961 176,596,849 559,056 177,155,905 RM RM RM RM RM RM RM RM Equity Foreign Share component translation premium of RCSLN reserve Treasury shares Total equity Distributable retained profits Noncontrolling Total interests

Group

Note

As at 1 January 2011 8,500,000 1,742,160 -

109,673,694

Issuance of ordinary shares

21,22

Acquisition of non-controlling interests

13

Disposal of subsidiaries

Conversion of Redeemable Secured Loan Notes (RCSLN)

21,22

Transaction cost

22

Purchase of treasury shares

Dividends paid

33

Total comprehensive income for the year

As at 31 December 2011

119,915,854

70,940,064 210,627,704 70,940,064 210,627,704

As at 1 January 2012 3,484,321 -

119,915,854

Conversion of RCSLN

21,22

Transaction cost

22

Purchase of treasury shares

Dividends paid

33

Total comprehensive income for the year

As at 31 December 2012

123,400,175

ANNUAL REPORT 2012

STATEMENTS OF CHANGES IN EQUITY


for the nancial year ended 31 December 2012

51

52

(contd)

Non-distributable Share capital Note RM RM RM RM RM RM RM Equity Share component premium of RCSLN Treasury shares Capital reserve Total equity Distributable retained profits

Company 109,673,694 21, 22 21, 22 22 33 119,915,854 119,915,854 21, 22 22 33 123,400,175 22,171,940 130,374 26,000 (2,732,320) 3,484,321 2,515,679 (156,450) 19,630,261 286,824 (317,049) 17,256,197 (3,049,369) 17,256,197 19,630,261 286,824 (317,049) 17,256,197 (317,049) (2,877,982) 12,977,516 (1,850,435) 1,742,160 1,257,840 (78,225) 8,500,000 10,225,000 18,725,000 2,921,775 (1,850,435) (317,049) (2,877,982) 12,977,516 16,446,837 173,218,924 16,446,837 173,218,924 (3,074,022) 2,010,046 5,843,550 26,000 (2,732,320) (3,074,022) 2,010,046 15,382,861 175,292,178 9,997,856 365,049 17,256,197 6,347,303 143,640,099

DAYA MATERIALS BERHAD (636357-W)

As at 1 January 2011

Issuance of ordinary shares

Conversion of RCSLN

Transaction cost

Purchase of treasury shares

Dividends paid

Total comprehensive income for the year

As at 31 December 2011

for the nancial year ended 31 December 2012

As at 1 January 2012

Conversion of RCSLN

Transaction cost

Purchase of treasury shares

Dividends paid

Total comprehensive income for the year

STATEMENTS OF CHANGES IN EQUITY

As at 31 December 2012

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

ANNUAL REPORT 2012

53

STATEMENTS OF CASH FLOWS


for the nancial year ended 31 December 2012

Group 2012 Note Cash flows from operating activities Profit before tax Adjustments for: Depreciation of property, plant and equipment Depreciation of investment properties Amortisation on intangible assets Allowance for impairment loss Reversal of allowance for impairment loss (Reversal of discount)/Discount on convertible loan notes Finance cost Gain on disposal of property, plant and equipment Fair value changes on marketable securities Property, plant and equipment written off Dividends income Gain on disposal of marketable securities Gain on disposal of subsidiaries Share of results of jointly controlled entities Interest income Development expenditures incurred Unrealised foreign exchange loss/(gain) Operating profit/(loss) before working capital changes Changes in working capital: Inventories Trade and other receivables Other current assets Trade and other payables Provisions Cash generated from/(used in) operations Finance cost paid Tax (paid)/refund Net cash generated from/(used in) operating activities Cash flows from investing activities Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Purchase of land held for property development Purchase of intangible assets Purchase of marketable securities Proceeds from disposal of marketable securities Net cash outflow from disposal of subsidiaries 13 10 12 19 (a) (6,502,496) 3,483,443 (10,384,754) (98,425) 131,034 (16,725,054) 4,600,314 (399,925) (114,900) 62,000 (66,581) (138,874) 5 83,630 13,719,631 (17,510,458) (11,836,054) (1,384,583) 14,963,582 (4,067,968) (8,221,745) 2,673,869 (932,421) (28,677,489) (17,574,376) 60,540,583 (611,456) 37,777,779 (3,973,337) (6,841,264) 26,963,178 (7,414,990) 49,751 11,989,963 4,147,449 (1,448,136) (1,447,130) 1,252,183 6, 9 6, 11 6, 12 6, 16 6, 16 6 5 6 6 6 3, 6 6 6, 13 14 6 10 4,359,491 14,995 86,715 743,339 (90,008) (30,178) 4,067,968 (2,962,299) 11,540 7,854 (6,085) (7,034) (1,480,297) (1,211,827) (90,071) 90,624 31,891,416 4,442,883 14,995 5,270 230,439 (1,140,470) 74,170 3,973,337 (3,408,144) (18,428) 17,731 (5,400) (13,800) (496) (1,394,943) (1,343,461) (161,011) 25,032,938 242,959 11,374 (30,178) 1,448,136 (3,676,020) (1,498,763) 87,029 (477,275) 28,386,689 23,760,266 2,938,188 RM 2011 RM 2012 RM

Company 2011 RM

17,422,290 215,721 948 74,170 1,786,533 (118,000) (15,447,271) (1,189,891) (80,303) 2,664,197 (11,253,096) (37,986) (8,638,633) (17,265,518) (1,786,533) 708,327 (18,343,724)

(288,473) 280,000 (56,871) -

54

DAYA MATERIALS BERHAD (636357-W)

STATEMENTS OF CASH FLOWS


for the nancial year ended 31 December 2012
(contd)

Group 2012 Note Cash flows from investing activities contd Decrease/(Increase) in pledged deposits placed with licensed banks Decrease/(Increase) in deposits placed with licensed banks more than three months Acquisition of subsidiaries Increase in investment in subsidiaries Acquisition of a joint venture company Increase in investment in a jointly controlled entity Incorporation of a joint venture company Distribution of profits from a jointly controlled entity Acquisition of non-controlling interest Dividends received Interest received Net cash (used in)/generated from investing activities Cash flows from financing activities Repayment of loans and borrowings Proceeds from loans and borrowings Proceeds from issuance of shares Purchase of treasury shares Capital distribution from an investment in a jointly controlled entity Transaction costs paid for issuance of shares Dividends paid to owners of the Company Net cash generated from financing activities Net changes in cash and cash equivalents Effect of exchange rate fluctuations on cash held Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The cash and cash equivalents comprise: Short term investments Fixed deposits with licensed banks Cash and bank balances Bank overdraft Less: Deposits pledged Fixed deposits with maturity more than three months 20 20 20 23 20 20 3,620,798 29,781,427 33,009,808 (2,805,824) 63,606,209 (23,249,368) 40,356,841 3,707,582 41,231,219 17,902,083 (3,739,469) 59,101,415 (24,732,529) (1,807,500) 32,561,386 3,620,798 3,332,910 4,844,776 11,798,484 (3,332,910) 8,465,574 14 22 33 (9,808,911) 27,274,411 (2,732,320) (3,074,022) 11,659,158 7,688,741 106,714 32,561,386 40,356,841 (15,536,098) 13,706,195 18,725,000 (317,049) 250,000 (1,850,435) (2,877,982) 12,099,631 18,223,526 (20,539) 14,358,399 32,561,386 (5,907,220) 12,000,000 (2,732,320) (3,074,022) 286,438 7,311,045 1,154,529 8,465,574 13 13 14 14 14 14 13 3, 6 6 1,483,161 1,807,500 (6) 2,218,345 6,085 1,211,827 (6,644,286) (7,129,498) (1,807,500) (2) (5,998) (51,000) (550,000) 5,400 1,343,461 (20,839,283) (1,070,185) 1,807,500 (800) 3,676,020 1,498,763 5,772,424 RM 2011 RM 2012 RM

Company 2011 RM

(64,098) (1,807,500) (1,111,438) 11,585,454 1,189,891 9,726,965

(9,110,295) 18,725,000 (317,049) (1,850,435) (2,877,982) 4,569,239 (4,047,520) 5,202,049 1,154,529

680,155 4,070,225 474,374 5,224,754 (2,262,725) (1,807,500) 1,154,529

ANNUAL REPORT 2012

55

STATEMENTS OF CASH FLOWS


for the nancial year ended 31 December 2012
(contd)

(a)

During the year, the Group and the Company acquired property, plant and equipment which were financed as follows: Group 2012 Note Cash Hire purchase 9 RM 6,502,496 3,949,700 10,452,196 2011 RM 16,725,054 1,318,895 18,043,949 2012 RM 138,874 120,000 258,874 Company 2011 RM 288,473 619,300 907,773

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

56

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012

1. CORpORATE INFORmATION The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Level 8, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan. The principal place of business of the Company is located at D5-1-10, Solaris Dutamas, No.1, Jalan Dutamas 1, 50480 Kuala Lumpur. The consolidated financial statements of the Company as at and for the financial year ended 31 December 2012 comprise the Company and its subsidiaries (together referred to as the Group) and the Groups interest in joint ventures. The principal activities of the Company are investment holding and provision of management services to its subsidiaries. The principal activities of the subsidiaries are set out in Note 13. There have been no significant changes in the nature of the principal activities during the financial year. 2. SIgNIFICANT ACCOUNTINg pOLICIES 2.1 Basis of preparation (a) Statement of compliance The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (MFRSs), International Financial Reporting Standards and the Companies Act, 1965 in Malaysia. These are the Groups and the Companys first financial statements prepared in accordance with MFRSs and MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards has been applied. In the previous financial years, the financial statements of the Group and of the Company were prepared in accordance with Financial Reporting Standards (FRSs) in Malaysia. The adoption of MFRSs has no impact on the income statements, statements of comprehensive income, statements of financial position, statements of changes in equity and statements of cash flows of the Group and of the Company. The reclassification adjustments on the statements of financial position and statements of cash flows arising from the transition to MFRSs, are discussed in Note 2.2 (a). (b) (c) Basis of measurement The financial statements have been prepared on the historical cost basis unless otherwise as disclosed below. Functional and presentation currency The financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Companys functional currency. Use of estimates and judgements The preparation of the financial statements in conformity with MFRSs 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 estimates are revised and in any future periods affected.

(d)

ANNUAL REPORT 2012

57

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.1 Basis of preparation (contd) (d) Use of estimates and judgements (contd) Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value-in-use of the cash-generating units (CGUs) to which goodwill is allocated. Estimating a value-in-use amount requires management to make an estimate of the expected future cash flows from the CGUs and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amounts of goodwill as at 31 December 2011 and 31 December 2012 were RM83,490,527. Further details are disclosed in Note 12(b). Impairment of loans and receivables The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Groups trade and other receivables at the reporting date is disclosed in Note 16. Construction contract The Group recognises construction contract revenue and expenses in the income statements by using the stage of completion method. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs. Significant judgement is required in determining the stage of completion, the extent of the construction contract costs incurred, the estimated total construction contract revenue and costs, as well as the recoverability of the construction contract costs. In making the judgement, the Group evaluates based on past experience and by relying on the work of specialists. The carrying amounts of assets and liabilities of the Group arising from construction activities are disclosed in Note 18. Provision for defect liability cost The Group recognises provision for defect liability for future work expected to be carried out subsequent to the projects completion as part of their defect liability obligations. In making the judgement, the Group evaluates based on past experience and by relying on the work of specialists. The carrying amount of the Groups provision for defect liability cost at the reporting date and further details are disclosed in Note 25. If the actual defect liability cost differ by 10% from management estimates, the Groups provision for defect liability cost will increase by RM32,469 (2011: RM170,928).

(ii)

(iii)

(iv)

58

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.2 First-time adoption of Malaysian Financial Reporting Standards (MFRSs) (a) Transition to MFRSs As stated in Note 2.1(a), these are the first financial statements of the Group and of the Company prepared in accordance with MFRSs. The accounting policies set out in Note 2.1 have been applied in preparing the financial statements of the Group and of the Company for the financial year ended 31 December 2012, the comparative information presented in these financial statements for the financial year ended 31 December 2011 and in the preparation of the opening MFRSs statement of financial position at 1 January 2011 (the Groups date of transition to MFRSs). MFRS 1: First-time Adoption of Malaysian Financial Reporting Standards allows first-time adopters certain exemptions from the retrospective application of certain MFRSs and the Group and the Company have applied the following exemptions: (a) MFRS 1 provides the option to apply MFRS 3 Business Combinations prospectively from the date of transition or from a specific date prior to the date of transition. This provides relief from full retrospective application of MFRS 3 which would require restatement of all business combinations prior to the date of transition. The Group has elected to apply MFRS 3 prospectively from the date of transition. In respect of acquisitions prior to the date of transition: (i) (ii) The classification of former business combinations under FRSs is maintained; There is no re-measurement of original fair values determined at the time of business combination (date of acquisition); and

(b)

(iii) The carrying amount of goodwill recognised under FRSs is not adjusted. The estimates at 1 January 2011 and at 31 December 2011 are consistent with those made for the same dates in accordance with FRSs and the estimates used by the Group and the Company to present these amounts in accordance with MFRSs reflect conditions at 1 January 2011, and as of 31 December 2011.

The adoption of MFRSs has no impact on the financial statements of the Group and of the Company. Accordingly, no notes related to the statements of financial position as at the date of transition to MFRSs are presented, except as discussed below: (i) First-time adoption of MFRS 107: Statement of Cash Flows In accordance with MFRS 107, cash and cash equivalents are held for the purpose of meeting short-term cash commitments (such as cash in hand, at banks and deposits with a maturity of three months or less) rather than investment. In the previous financial year, the Group designated its cash in hand and bank balances and all its deposits as cash and cash equivalents. The Group and the Company have applied this standard retrospectively. Consequently, certain comparatives have been restated. The following are reclassification effects to the notes to the statements of cash flows for the year ended 31 December 2012 arising from the change in accounting policy stated above. The following comparatives have been restated: FRS as at RM Group 31 December 2011 Notes to the statements of financial position Cash and cash equivalents 34,368,886 (1,807,500) 32,561,386 Adjustments RM MFRS as at RM

ANNUAL REPORT 2012

59

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.2 First-time adoption of Malaysian Financial Reporting Standards (MFRSs) (contd) (a) Transition to MFRSs (contd) (i) First-time adoption of MFRS 107: Statement of Cash Flows (contd) The following comparatives have been restated: (contd) FRS as at RM Group 31 December 2011 Statements of cash flows Net, movement in fixed deposits with licensed banks Cash and cash equivalents at end of year 1 January 2011 Notes to the statements of financial position Cash and cash equivalents Statements of cash flows Net, movement in fixed deposits with licensed banks Cash and cash equivalents at end of year Company 31 December 2011 Notes to the statement of financial position Cash and cash equivalents Statement of cash flows Net, movement in fixed deposits with licensed banks Cash and cash equivalents at end of year 1 January 2011 Notes to the statement of financial position Cash and cash equivalents Statement of cash flows Net, movement in fixed deposits with licensed banks Cash and cash equvalents at end of year 5,202,049 5,202,049 5,202,049 5,202,049 2,962,029 1,807,500 (1,807,500) 1,807,500 1,154,529 2,962,029 (1,807,500) 1,154,529 14,358,399 14,358,399 14,358,399 14,358,399 34,368,886 1,807,500 (1,807,500) 1,807,500 32,561,386 Adjustments RM MFRS as at RM

60

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.2 First-time adoption of Malaysian Financial Reporting Standards (MFRSs) (contd) (b) MFRSs and Amendments to MFRSs issued but not yet effective

The standards and interpretations that are issued but not yet effective up to the date of issuance of the Groups and the Companys financial statements are disclosed below. The Group and the Company intend to adopt these standards, if applicable, when they become effective. Effective for annual periods beginning on or after 1 July 2012 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2014 1 January 2014

Description MFRS 101: Presentation of Items of Other Comprehensive Income (Amendments to MFRS 101) Amendments to MFRS 101: Presentation of Financial Statements (Annual Improvements 20092011 Cycle) MFRS 3: Business Combinations (IFRS 3 Business Combinations issued by IASB in March 2004) MFRS 10: Consolidated Financial Statements MFRS 11: Joint Arrangements MFRS 12: Disclosure of Interests in Other Entities MFRS 13: Fair Value Measurement MFRS 119: Employee Benefits MFRS 127: Separate Financial Statements MFRS 128: Investment in Associate and Joint Ventures MFRS 127: Consolidated and Separate Financial Statements (IAS 127 revised by IASB in December 2003) Amendments to IC Interpretation 2: Members Shares in Co-operative Entities and Similar Instruments (Annual Improvements 2009-2011 Cycle) IC Interpretation 20: Stripping Costs in the Production Phase of a Surface Mine Amendments to MFRS 7: Disclosures - Offsetting Financial Assets and Financial Liabilities Amendments to MFRS 1: First-time Adoption of Malaysian Financial Reporting Standards Government Loans Amendments to MFRS 1: First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements 2009-2011 Cycle) Amendments to MFRS 116: Property, Plant and Equipment (Annual Improvements 2009-2011 Cycle) Amendments to MFRS 132: Financial Instruments: Presentation (Annual Improvements 20092011 Cycle) Amendments to MFRS 134: Interim Financial Reporting (Annual Improvements 2009-2011 Cycle) Amendments to MFRS 10: Consolidated Financial Statements: Transition Guidance Amendments to MFRS 11: Joint Arrangements: Transition Guidance Amendments to MFRS 12: Disclosure of Interests in Other Entities: Transition Guidance Amendments to MFRS 132: Offsetting Financial Assets and Financial Liabilities Amendments to MFRS 10, MFRS 12 and MFRS 127: Investment Entities

MFRS 9: Financial Instruments 1 January 2015

ANNUAL REPORT 2012

61

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.2 First-time adoption of Malaysian Financial Reporting Standards (MFRSs) (contd) (b) MFRSs and Amendments to MFRSs issued but not yet effective (contd) The initial application of the standards and interpretations is not expected to have any material financial impacts to the current and prior periods financial statements upon their first adoption, except as discussed below: (i) MFRS 3 Business Combinations (IFRS 3 Business Combinations issued by IASB in March 2004) and MFRS 127 Consolidated and Separate Financial Statements (IAS 27 as revised by IASB in December 2003) An entity shall apply these earlier versions of MFRS 3 and MFRS 127 only if the entity elected to do so as allowed in MFRS 10 Consolidated Financial Statements. The adoptions of these standards are not expected to have any significant impact to the Group and the Company. MFRS 9 Financial Instruments MFRS 9 reflects the first phase of the work on the replacement of MFRS 139 Financial Instruments: Recognition and Measurement and applies to classification and measurement of financial assets and financial liabilities as defined in MFRS 139 Financial Instruments: Recognition and Measurement. The adoption of the first phase of MFRS 9 will have an effect on the classification and measurement of the Groups financial assets. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued. MFRS 10 Consolidated Financial Statements MFRS 10 replaces part of MFRS 127 Consolidated and Separate Financial Statements that deals with consolidated financial statements and IC Interpretation 112 Consolidation - Special Purpose Entities. Under MFRS 10, an investor controls an investee when: (i) (ii) (iii) (iv) the investor has power over an investee, the investor has exposure, or rights, to variable returns from its involvement with the investee, and the investor has ability to use its power over the investee to affect the amount of the investors returns.

(ii)

(iii)

Under MFRS 127 Consolidated and Separate Financial Statements, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activites. MFRS 10 includes detailed guidance to explain when an investor has control over the investee. MFRS 10 requires the investor to take into acocunt all relevant facts and circumstaces. MFRS 11 Joint Arrangements MFRS 11 replaces MFRS 131 Interests in Joint Ventures and IC Interpretation 113 Jointly-Controlled Entities Non-monetary Contributions by Venturers. The classification of joint arrangements under MFRS 11 is determined based on the rights and obligations of the parties to the joint arrangements by considering the structure, the legal form, the contractual terms agreed by the parties to the arrangement and when relevant, other facts and circumstances. Under MFRS 11, joint arrangements are classified as either joint operations or joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

MFRS 11 removes the option to account for jointly controlled entities (JCE) using proportionate consolidation. Instead, JCE that meet the definition of a joint venture must be accounted for using the equity method.

62

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.2 First-time adoption of Malaysian Financial Reporting Standards (MFRSs) (contd) (b) MFRSs and Amendments to MFRSs issued but not yet effective (contd) (v) MFRS 12 Disclosures of Interests in Other Entities MFRS 12 includes all disclosure requirements for interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are required. This standard affects disclosures only and has no impact on the Groups financial position or performance. MFRS 13 Fair Value Measurement MFRS 13 establishes a single source of guidance under MFRSs for all fair value measurements. MFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under MFRS when fair value is required or permitted. Upon adoption of MFRS 13, the Group will take into consideration the highest and best use of certain properties in measuring the fair value of such properties. The adoption of MFRS 13 is expected to result in higher fair value of certain properties of the Group.

(vi)

(vii) Amendments to MFRS 101 Presentation of Financial Statements (Annual Improvements 2009 - 2011 Cycle) The amendments to MFRS 101 change the grouping of items presented in other comprehensive income. Items that could be reclassified (or recycled) to profit or loss at a future point in time (for example, exchange differences on translation of foreign operations and net loss or gain on available-for-sale financial assets) would be presented separately from items which will never be reclassified (for example, actuarial gains and losses on defined benefits plan and revaluation of land and buildings). The amendment affects presentation only and has no impact on the Groups financial position and performance.

(viii) MFRS 127 Separate Financial Statements As a consequence of the new MFRS 10 and MFRS 12, MFRS 127 is limited to accounting for subsidiaries, jointly controlled entities and associates in separate financial statements.

2.3 Summary of significant accounting policies (a) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances. Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition and up to the effective date of disposal, as appropriate. The total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtain control, and continue to be consolidated until the date that such control ceases. Acquisition under Group re-organisation One of the subsidiaries, Daya Polymer Sdn. Bhd., is consolidated using the merger method of accounting as the combination is an internal group reorganisation. Under the merger method of accounting, shares acquired, the cost of investment on the Companys financial statements is recorded at the fair value of shares issued and the difference between the carrying value of the investment and the nominal value of shares acquired is treated as merger reserve or merger deficit. Where the carrying value of investment is less than the nominal value of shares acquired, the merger reserve should be treated as reserve on consolidation.

ANNUAL REPORT 2012

63

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (a) Basis of consolidation (contd) (i) Business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group. Acquisitions on or after 1 January 2011 For acquisitions on or after 1 January 2011, the Group measures the cost of 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. For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquirees identifiable net assets at the acquisition date. Transaction costs, 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. Acquisitions before 1 January 2011 As part of its transition to MFRS, the Group elected not to restate those business combinations that occurred before the date of transition to MFRSs, which is 1 January 2011. Goodwill arising from acquisitions before 1 January 2011 has been carried forward from the previous FRS framework as at the date of transition.

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the subsidiary, any noncontrolling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in income statements. 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. Transaction with non-controlling interests Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in profit or loss of the Group and within equity in the consolidated statements of financial position, separately from parent shareholders equity. Transactions with non-controlling interests are accounted for using the entity concept method, whereby, transactions with non-controlling interests are accounted for as transactions with owners. On acquisition of non-controlling interests, the difference between the consideration and book value of the share of the net assets acquired is recognised directly in equity. Gain or loss on disposal to non-controlling interests is recognised directly in equity. Subsidiaries Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.

(b)

(c)

In the Companys separate financial statements, investments in subsidiaries are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in the income statements.

64

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (d) Joint venture (i) Jointly-controlled entities Jointly-controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Joint ventures are accounted for in the consolidated financial statements using the equity method unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). The consolidated financial statements include the Groups share of the profit or loss of the equity accounted joint ventures, after adjustments to align the accounting policies with those of the Group, from the date that joint control commences until the date that joint control ceases. When the Groups share of losses exceeds its interest in an equity accounted joint venture, the carrying amount of that interest (including any long-term investments) is reduced to nil 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 joint venture. In the Companys separate financial statements, investments in jointly-controlled entities are stated at cost less impairment losses, unless the investment is classified as held for sale. On disposal of such investment, the difference between net disposal proceeds and the carrying amount is included in profit or loss. Jointly-controlled operations and assets A jointly controlled operation is a joint venture carried on by each venturer using its own assets in pursuit of the joint operations. The consolidated financial statements include the assets that the Group controls and the liabilities that it incurs in the course of pursuing the joint operation, and the expenses that the Group incurs and its share of the income that it earns from the joint operation.

(ii)

(e)

Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statements during the financial year which they are incurred. Subsequent to recognition, property, plant and equipment except for freehold land and capital-in-progress are stated at cost less accumulated depreciation and any accumulated impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.3(h).

Freehold land has an unlimited useful life and therefore is not depreciated. Capital-in-progress are not depreciated as these assets are not available for use. Depreciation of other property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, at the following annual rates: Leasehold land Over lease period Building, renovation and electrical installation 2% - 20% Cranes, parts and forklifts 4% - 20% Plant and machinery 4% - 10% Factory equipment 10% - 30% Furniture, fittings, computer and office equipment 10% - 30% Motor vehicles 20%

ANNUAL REPORT 2012

65

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (e) Property, plant and equipment (contd) The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future benefits embodied in the items of property, plant and equipment. All item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in the income statements. Investment properties Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Such properties are measured initially at cost, including transaction costs. Following initial recognition, investment properties are carried at cost less any accumulated depreciation and accumulated impairment losses. Freehold land is not subject to depreciation while the building on the freehold land is depreciated at 2% per annum on a straight-line method. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or losses on the retirement or disposal of an investment property are recognised in income statements in the year in which they arise. A property interest under an operating lease is classified and accounted for as an investment property on a propertyby-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at cost less accumulated depreciation and any accumulated impairment losses. Intangible assets (i) Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of business combination over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Software Software is recognised on a cost model basis where the asset is to be carried at cost less any accumulated amortisation and accumulated impairment loss. The software is amortised over 5 years. The carrying value is reviewed for impairment annually when the asset is not yet in use or more frequently when an indication of impairment arises during the reporting year. Research and development costs All research costs are recognised in the income statements as incurred. Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development. Product development expenditures which do not meet these criteria are expensed when incurred.

(f)

(g)

(ii) (iii)

Development costs, considered to have finite useful lives, are stated at cost less any impairment losses and are amortised using the straight-line basis over five years. Impairment is assessed whenever there is an indication of impairment and the amortisation period and method are also reviewed at least at each reporting date.

66

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (h) Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the assets recoverable amount. An assets recoverable amount is the higher of an assets fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units (CGU)). In assessing value in use, the estimated future cash flows expected to be generated by the asset 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. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a Cash Generating Unit (CGU) or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis. Impairment losses are recognised in income statements. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in income statements unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period. Financial assets Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. (i) Financial assets at fair value through profit or loss Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in income statements. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in income statements as part of administrative expenses or other income. Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that is held primarily for trading purposes are presented as current whereas financial assets that is not held primarily for trading purposes are presented as current or non-current based on the settlement date. The Groups and the Companys financial assets at fair value through profit or loss is disclosed in Note 19.

(i)

ANNUAL REPORT 2012

67

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (i) Financial assets (contd) (ii) Loans and receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current. Held-to-maturity investments Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process. Held-to-maturity investments are classified as non-current assets, except for those having maturity within 12 months after the reporting date which are classified as current. The Group and the Company did not have any held-to-maturity investments during the year ended 31 December 2012. Available-for-sale financial assets Available-for-sale financial assets are financial assets that are designated as available for sale or are not classified in any of the three preceding categories. After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in income statements. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to income statements as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in income statements. Dividends on an available-for-sale equity instrument are recognised in income statements when the Groups and the Companys right to receive payment is established. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss. Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date. The Group and the Company did not have any available-for-sale financial assets during the year ended 31 December 2012.

(iii)

(iv)

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in income statements.

68

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (i) Financial assets (contd) Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date, the date that the Group and the Company commit to purchase or sell the asset. Impairment of financial assets The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. (i) Trade and other receivables and other financial assets carried at amortised cost To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, receivables that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Groups and the Companys past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables. If any such evidence exists, the amount of impairment loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the financial assets original effective interest rate. The impairment loss is recognised in income statements. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in income statements. Unquoted equity securities carried at cost If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods. Available-for-sale financial assets Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired. If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in income statements, is transferred from equity to income statements.

(j)

(ii)

(iii)

ANNUAL REPORT 2012

69

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (j) Impairment of financial assets (contd) (iii) Available-for-sale financial assets (contd)

(k)

Impairment losses on available-for-sale equity investments are not reversed in income statements in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For available-for-sale debt investments, impairment losses are subsequently reversed in income statements if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in income statements. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, balances and deposits with banks and highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. For the purpose of the statements of cash flows, cash and cash equivalents are presented net of bank overdrafts, pledged deposits and deposits with maturity more than three months. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. The cost of raw materials comprises costs of purchase. The cost of finished goods and work-in-progress comprises cost of raw materials, direct labour, other direct costs and appropriate proportion of production overheads. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to completion and the estimated costs necessary to make the sale. Provisions Provisions for liabilities are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 139, are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. (i) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through profit or loss. Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in income statements. Net gains or losses on derivatives include exchange differences. The Group and the Company did not have any financial liabilities at fair value through profit or loss during the year ended 31 December 2012.

(l)

(m)

(n)

70

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (n) Financial liabilities (contd) (ii) Other financial liabilities The Groups and the Companys other financial liabilities include trade payables, other payables and loans and borrowings. Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Loans and borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. For other financial liabilities, gains and losses are recognised in income statements when the liabilities are derecognised, and through the amortisation process. A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in income statements.

(o)

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 are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognised in income statements in the period in which they are incurred. Employee benefits (i) Short term benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in the income statements as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (EPF).

(p)

(ii)

(q)

Leases (i) Classification A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purpose of lease classification. All leases that do not transfer substantially all the risks and rewards are classified as operating leases.

ANNUAL REPORT 2012

71

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (q) Leases (contd) (ii) Finance leases - the Group as Lessee Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the statements of financial position as loans and borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Groups incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets. Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the income statements over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 2.3(e). Operating leases - the Group as Lessee Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. In the case of a lease of land and buildings, the minimum lease payments or the up-front payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term. Operating leases - the Group as Lessor Assets leased out under operating lease are presented on the statements of financial position according to the nature of the assets. Contingent rent is recognised as income in the period in which they are earned as stated in Note 2.3(s). Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased assets and recognised on a straight line basis over the lease term.

(iii)

(iv)

(r)

Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. (i) Sale of goods Revenue is recognised net of discounts upon transfer of significant risks and rewards of ownership to the buyer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. Management fees Management fees are recognised when services are rendered. Dividends income Dividends income is recognised when the Groups and the Companys right to receive payment is established.

(ii) (iii)

72

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (r) Revenue recognition (contd) (iv) Contract revenue Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs. Where the outcome of a construction contract cannot be reliably estimated, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the total of costs incurred on construction contracts plus, recognised profits (less recognised losses), exceeds progress billings, the balance is classified as amount due from customers on contracts. When progress billings exceed costs incurred plus, recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts. Services Revenue from services rendered is recognised net of service taxes and discounts as and when the services are performed. Interest income Interest income is recognised on an accrual basis using the effective interest method.

(v) (vi) (s)

Rental income Rental income from investment property is recognised in the income statements 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. Income taxes (i) Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current taxes are recognised in income statements except to the extent that the tax relates to items recognised outside income statements, either in other comprehensive income or directly in equity. Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all temporary differences, except: - where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

(t)

(ii)

ANNUAL REPORT 2012

73

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (t) Income taxes (contd) (ii) Deferred tax (contd) Deferred tax liabilities are recognised for all temporary differences, except: (contd) - in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: - where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(u)

Share capital An equity instrument is any contract that evidences a residual interest in the assets of the Group and of the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. Treasury shares When shares of the Company, that have not been cancelled, recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity. Reacquired shares are classified as treasury shares and presented as a deduction from total equity. No gain or loss is recognised in income statements on the purchase, sale, issue or cancellation of treasury shares. When treasury shares are reissued by resale, the difference between the sales consideration and the carrying amount is recognised in equity.

(v)

74

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

2. SIgNIFICANT ACCOUNTINg pOLICIES (contd) 2.3 Summary of significant accounting policies (contd) (w) Redeemable convertible secured loan notes The redeemable convertible secured loan notes are regarded as compound instruments, consisting of a liability component and an equity component. The component of redeemable convertible secured loan notes that exhibits characteristics of a liability is recognised as a financial liability in the statements of financial position, net of transaction costs. On issuance of the redeemable convertible secured loan notes, the fair value of the liability component is determined using a market rate for an equivalent non-convertible debt and this amount is carried as a financial liability in accordance with the accounting policy for financial liabilities as set out in Note 2.3(n). The residual amount, after deducting the fair value of the liability component, is recognised and included in shareholders equity, net of transaction costs. Transaction costs are apportioned between the liability and equity components of the redeemable convertible secured loan notes based on the allocation of proceeds to the liability and equity components when the instruments were first recognised. Foreign currency transactions In preparing the financial statements of the individual entities, transactions in currencies other than the entitys functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are translated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in income statements for the period except for exchange differences arising on monetary items that form part of the Groups net investment in foreign operation. These are initially taken directly to the foreign currency translation reserve within equity until the disposal of the foreign operations, at which time they are recognised in income statements. Exchange differences arising on monetary items that form part of the Companys net investment in foreign operation are recognised in income statements in the Companys separate financial statements or the individual financial statements of the foreign operation, as appropriate. Exchange differences arising on the translation of non-monetary items carried at fair value are included in income statements for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity. Segment reporting For management purposes, the Group is organised into operating segments according to the nature of the products and services provided which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the chief operating decision makers, which in this case is the Executive Committee of the Group who regularly review the segment results in order to allocate resources to the segments and to assess the segment performances. 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. Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation.

(x)

(y)

(z)

ANNUAL REPORT 2012

75

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

3. REVENUE Group 2012 Note Sale of goods Management fees Dividends income Contract revenue Service revenue Others 27 6,27 RM 86,141,013 6,085 153,378,871 37,403,399 2011 RM 71,519,086 5,400 149,060,365 61,127,650 33,430 2012 RM 7,944,867 3,676,020 24,000 Company 2011 RM 8,044,910 15,447,271 -

276,929,368 281,745,931 11,644,887 23,492,181 4. COST OF SALES Group 2012 RM Cost of inventories sold Contract costs Cost of services rendered 53,000,160 149,162,526 19,323,599 2011 RM 53,828,950 145,938,674 39,267,130

221,486,285 239,034,754 5. FINANCE COSTS Group 2012 Note Interest expense on advances from subsidiaries Interest expense on loans and borrowings Coupon interest expense on RCSLN Others 27 RM 3,762,393 220,671 84,904 2011 RM 3,511,004 445,589 16,744 2012 RM 431,097 752,316 220,671 44,052 Company 2011 RM 155,237 1,185,707 445,589 -

29 4,067,968 3,973,337 1,448,136 1,786,533

76

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

6.

PROFIT BEFORE TAX The following amounts have been included in arriving at profit before tax: Group 2012 Note Amortisation of intangible assets (Reversal of discount)/Discount on convertible loan notes Auditors remuneration: - Statutory audit - Other services Allowance for impairment loss Fair value changes on marketable securities Depreciation: - Property, plant and equipment - Investment properties Property, plant and equipment written off Remuneration for the Companys directors Remuneration for the Companys past directors Directors fees for the Companys directors Directors fees for the Companys past directors Directors benefits in kind Employees benefit expense Foreign exchange loss - realised - unrealised Rental expense and after crediting: Gain on disposal of property, plant and equipment Gain on disposal of subsidiaries Foreign exchange gain - Realised - Unrealised Fair value changes on marketable securities Gain on disposal of marketable securities Interest income Dividends income from subsidiaries Dividends income Reversal of allowance for impairment loss 3,27 3 16 19 1,861 7,034 1,211,827 6,085 90,008 34,619 161,011 18,428 13,800 1,343,461 5,400 1,140,470 1,498,763 3,676,020 80,303 1,189,891 15,447,271 13 2,962,299 3,408,144 496 118,000 709,048 92,485 2,154,056 2,099,682 100 87,029 177,000 81,600 28 27 27 27 27 9 11 4,359,491 14,995 7,854 3,191,790 166,000 23,950 22,190,428 4,442,883 14,995 17,731 2,077,360 534,505 165,000 15,000 47,900 17,652,506 242,959 2,766,519 156,000 23,950 5,249,197 215,721 1,691,220 334,505 141,000 15,000 47,900 3,411,084 16 19 242,402 14,029 743,339 11,540 252,147 38,000 230,439 38,000 14,029 38,000 38,000 12 RM 86,715 (30,178) 2011 RM 5,270 74,170 2012 RM 11,374 (30,178) Company 2011 RM 948 74,170

Rental income 11 348,118 329,063 24,000

ANNUAL REPORT 2012

77

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

7. INCOmE TAX EXpENSE The major components of income tax expense for the years ended 31 December 2012 and 2011 are: Group 2012 Note Malaysian income tax Current income tax (Over)/Underprovision in prior years 9,017,775 (19,042) 8,998,733 Deferred tax Relating to origination and reversal of temporary differences Overprovision in prior years 15 (449,327) (278,918) (728,245) 760,149 (875,353) (115,204) (59,946) (6,077) (66,023) 101,218 (77,352) 23,866 6,464,650 (31,782) 6,432,868 1,043,951 (49,786) 994,165 4,375,195 45,713 4,420,908 RM 2011 RM 2012 RM Company 2011 RM

8,270,488 6,317,664 928,142 4,444,774 Reconciliation between tax expense and accounting profit The reconciliation between tax expense and the product of accounting profit multiplied by the appplicable corporate tax rate for years ended 31 December 2012 and 2011 is as follows: Group 2012 RM Profit before tax Tax at Malaysian statutory tax rate of 25% (2011: 25%) Different tax rates in other countries Income not subject to tax Expenses not deductible for tax purposes Deferred tax assets not recognised during the year Utilisation of current years capital allowances Utilisation of previously unrecognised tax losses Overprovision of deferred tax in prior years (Over)/Underprovision of income tax in prior years 28,386,689 7,096,672 62,788 (122,371) 1,680,170 83,480 (7,873) (224,418) (278,918) (19,042) 2011 RM 23,760,266 5,940,067 70,948 (91,946) 1,392,609 21,262 (139) (108,002) (875,353) (31,782) 2012 RM 2,938,188 734,547 (74,282) 323,740 (6,077) (49,786) Company 2011 RM 17,422,290 4,355,573 (75,970) 254,097 (57,287) (77,352) 45,713

8,270,488 6,317,664 928,142 4,444,774 Domestic income tax is calculated at the Malaysian statutory tax rate of 25% (2011: 25%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.

78

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

7. INCOmE TAX EXpENSE (contd) Tax savings during the financial year arising from: Group 2012 RM Utilisation of current year tax losses Utilisation of previously unrecognised tax losses 274,593 224,418 499,011 2011 RM 108,002 108,002 2012 RM 274,593 274,593 Company 2011 RM 57,287 57,287

8. EARNINgS pER SHARE (a) Basic earnings per share Basic earnings per share is calculated by dividing profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year. Group 2012 2011

Profit attributable to ordinary equity holders of the Company (RM) Weighted average number of ordinary shares in issue

20,170,784 1,220,349,464

17,381,905 1,161,920,542 1.50

Basic earnings per share (sen) 1.65 (b) Diluted earnings per share

Diluted earnings per share amounts are calculated by dividing profit for the year, net of tax, attributable to owners of the parent (after adjusting for interest expense on redeemable convertible secured loan notes) by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Group 2012 Profit attributable to ordinary equity holders of the Company (RM) Effect of dilution (RM) Adjusted net profit for the period attributable to ordinary equity holders of the Company (RM) Weighted average number of ordinary shares in issue Effect of dilution Adjusted weighted average number of shares in issue 20,170,784 8,539 20,179,323 1,220,349,464 14,994,003 1,235,343,467 2011 17,381,905 94,328 17,476,233 1,161,920,542 40,507,215 1,202,427,757

Diluted earnings per share (sen) 1.63 1.45

9. PROpERTY, pLANT ANd EQUIpmENT

Freehold land Total RM RM RM RM RM RM RM RM RM

Building, renovation and Leasehold electrical land installation Motor vehicles Capital in progress

Furniture, fittings, Cranes, computer parts and Plant and Factory and office forklifts machinery equipment equipment

Group

Note

RM

2012

Cost 8,345,833 8,345,833 37,019,035 57,530,102 6,781,619 2,904,914 2,775,875 (35,961) (12,643) (47,067) (10,164) 6,912,583 1,492,463 (3,916,766) (672,658) 932,238 4,164,157 75,212 808,991 526,312 1,214,349 2,730,937 (1,492,463) 34,594,334 57,318,672 6,719,050 2,142,990 2,259,727 6,370,892 10,409,790 129,762,262 10,452,196 (4,589,424) (105,835) 11,648,264 135,519,199

As at 1 January

1,600,974

Additions

29

Disposals

Reclassification

Written off

As at 31 December

1,600,974

Accumulated depreciation 641,288 117,446 758,734 4,489,052 12,380,653 5,369,239 (30,915) (10,325) (47,067) 1,525,054 (3,411,629) 811,738 1,639,762 287,553 199,703 3,677,314 14,183,435 5,092,011 1,372,418 1,449,057 256,764 (9,674) 1,696,147 3,328,442 1,046,525 (656,651) 3,718,316 29,743,965 4,359,491 (4,068,280) (97,981) 29,937,195

As at 1 January

Charge for the year

6, 29

Disposals

Reclassification

Written off

As at 31 December

Net carrying amount 7,587,099 32,529,983 45,149,449 1,412,380 1,379,860 1,079,728 3,194,267 11,648,264 105,582,004

As at 31 December

1,600,974

ANNUAL REPORT 2012

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

79

80

9. PROpERTY, pLANT ANd EQUIpmENT (contd)

(contd)

Freehold land Total RM RM RM RM RM RM RM RM RM

Building, renovation and Leasehold electrical land installation Motor vehicles Capital in progress

Furniture, fittings, Cranes, computer parts and Plant and Factory and office forklifts machinery equipment equipment

Group

Note

RM

DAYA MATERIALS BERHAD (636357-W)

2011

Cost 8,345,833 8,345,833 34,594,334 57,318,672 6,719,050 2,142,990 2,259,727 6,370,892 (133,362) (118) (133,081) (3,564,593) (621,754) (4,256) (12,415) (2,788,193) (847,868) (2,415,681) (66,212) (58,812) 3,401,130 5,003,737 145,068 440,167 135,986 1,922,993 6,994,868 32,174,153 56,012,890 9,611,417 1,773,291 2,195,086 7,236,092 3,414,922 122,364,658 18,043,949 (3,388,573) (7,124,292) (133,480) 10,409,790 129,762,262

As at 1 January

1,600,974

Additions

29

Disposals of subsidiaries

Disposals

Written off

for the nancial year ended 31 December 2012

As at 31 December

1,600,974

Accumulated depreciation 532,597 108,691 641,288 3,677,314 14,183,435 5,092,011 (115,737) (13,845) (3,444,133) (335,411) (7,943) 108,581 1,372,418 (9,274) (130,800) (3,959) 782,680 1,464,518 546,580 202,653 2,917,753 16,278,787 5,011,642 1,073,086 1,320,790 263,235 (5,978) (108,581) (12) 1,449,057 4,364,309 1,074,526 (20,397) (2,110,393) 3,328,442 31,498,964 4,442,883 (150,011) (5,932,122) (115,749) 29,743,965

As at 1 January

Charge for the year

6, 29

Disposals of subsidiaries

Disposals

Reclassification

Written off

NOTES TO THE FINANCIAL STATEMENTS

As at 31 December

Net carrying amount 7,704,545 30,917,020 43,135,237 1,627,039 770,572 810,670 3,042,450 10,409,790 100,018,297

As at 31 December

1,600,974

ANNUAL REPORT 2012

81

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

9. PROpERTY, pLANT ANd EQUIpmENT (contd) Furniture, fittings, computer and office equipment Company 2012 Cost As at 1 January Additions As at 31 December Accumulated depreciation As at 1 January Charge for the year As at 31 December Net carrying amount As at 31 December 2011 Cost As at 1 January Additions Disposals As at 31 December Accumulated depreciation As at 1 January Charge for the year Disposals As at 31 December Net carrying amount As at 31 December 23,501 802,157 825,658 6 32,186 11,887 (17,655) 26,418 558,332 203,834 (486,000) 276,166 590,518 215,721 (503,655) 302,584 58,530 9,044 (17,655) 49,919 827,594 898,729 (648,000) 1,078,323 886,124 907,773 (665,655) 1,128,242 112,228 729,345 841,573 6 26,418 24,873 51,291 276,166 218,086 494,252 302,584 242,959 545,543 49,919 113,600 163,519 1,078,323 145,274 1,223,597 1,128,242 258,874 1,387,116 Note RM

Motor vehicles RM

Total RM

82

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

9.

PROpERTY, pLANT ANd EQUIpmENT (contd) (a) Capitalisation of borrowing costs Included in the Groups property, plant and equipment is interest capitalised amounting to RM878,885 (2011: RM499,051).

(b) Assets pledged as security The net book value of the Groups and of the Companys property, plant and equipment pledged to financial institutions as securities for bank facilities as disclosed in Note 23 are as follows: Group 2012 RM Freehold land Leasehold land Building, renovation and electrical installation Cranes, parts and forklifts Plant and machinery Factory equipment Furniture, fittings, computer and office equipment Motor vehicles Capital in progress 1,549,010 6,478,931 27,313,440 22,862,036 237,229 283,003 140,856 3,010,679 11,648,264 73,523,448 (c) Assets held under finance lease The net book value of the Groups and of the Companys assets held under finance lease as at the reporting date is as follows: Group 2012 RM Cranes, parts and forklifts Motor vehicles 4,309,853 3,007,032 2011 RM 840,533 2,680,381 2012 RM 693,921 Company 2011 RM 730,814 2011 RM 1,549,010 5,081,691 21,966,211 24,984,389 304,767 331,024 163,819 2,719,917 10,068,697 67,169,525 2012 RM 693,921 693,921 Company 2011 RM 730,814 730,814

7,316,885 3,520,914 693,921 730,814

ANNUAL REPORT 2012

83

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

10. LANd HELd FOR pROpERTY dEVELOpmENT Group 2012 Note Cost Freehold land, at cost Development expenditures 10,384,754 90,071 10,474,825 As at 1 January Acquisition of freehold lands Development expenditure incurred 10,384,754 90,071 RM 2011 RM

As at 31 December 29 10,474,825 11. INVESTmENT pROpERTIES Freehold land Group 2012 Cost As at 1 January/31 December Accumulated depreciation As at 1 January Charge for the year As at 31 December Net carrying amount As at 31 December Investment properties, at fair value As at 31 December 279,851 1,406,783 1,686,634 113,446 1,081,959 1,195,405 6, 29 149,796 14,995 164,791 149,796 14,995 164,791 113,446 1,246,750 1,360,196 Note RM Building RM Total RM

84

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

11. INVESTmENT pROpERTIES (contd) Freehold land Group 2011 Cost As at 1 January/31 December Accumulated depreciation As at 1 January Charge for the year As at 31 December Net carrying amount As at 31 December Investment properties, at fair value As at 31 December 279,851 1,406,783 1,686,634 Investment properties comprise commercial properties which are leased out for rental income. Each of the leases contains an initial non-cancellable leases of the period between 1 to 5 years. All leases include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market conditions. The following are recognised in income statements in respect of investment properties: Group 2012 Note Rental income 6 RM 348,118 2011 RM 329,063 113,446 1,096,954 1,210,400 6, 29 134,801 14,995 149,796 134,801 14,995 149,796 113,446 1,246,750 1,360,196 Note RM Building RM Total RM

Depreciation on investment properties 6 14,995 14,995

ANNUAL REPORT 2012

85

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

12. INTANgIBLE ASSETS Goodwill Group 2012 Cost As at 1 January Additions As at 31 December Accumulated amortisation As at 1 January Amortisation during the year As at 31 December Net carrying amount As at 31 December 2011 Cost As at 1 January Additions As at 31 December Accumulated amortisation As at 1 January Amortisation during the year As at 31 December Net carrying amount As at 31 December 83,490,527 394,655 83,885,182 6, 29 5,270 5,270 360,022 360,022 360,022 5,270 365,292 29 83,490,527 83,490,527 399,925 399,925 360,022 360,022 83,850,549 399,925 84,250,474 83,490,527 406,365 83,896,892 6, 29 5,270 86,715 91,985 360,022 360,022 365,292 86,715 452,007 29 83,490,527 83,490,527 399,925 98,425 498,350 360,022 360,022 84,250,474 98,425 84,348,899 Note RM Software RM Development Costs RM Total RM

86

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

12. INTANgIBLE ASSETS (contd) Software Company 2012 Cost As at 1 January/31 December Accumulated amortisation As at 1 January Amortisation during the year As at 31 December Net carrying amount As at 31 December 2011 Cost As at 1 January Additions As at 31 December Accumulated amortisation As at 1 January Amortisation during the year As at 31 December Net carrying amount As at 31 December (a) Impairment loss recognised The Group has not recognised any impairment loss on goodwill during the year. 55,923 55,923 6 948 948 948 948 56,871 56,871 56,871 56,871 44,549 44,549 6 948 11,374 12,322 948 11,374 12,322 56,871 56,871 Note RM Total RM

ANNUAL REPORT 2012

87

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

12. INTANgIBLE ASSETS (contd) (b) Impairment tests for goodwill Allocation of goodwill

Goodwill has been allocated to the Groups cash generating units (CGUs) identified according to the business segments as follows: Group 2012 RM Oil & gas Technical services 72,850,883 10,639,644 83,490,527 Key assumptions used in value-in-use calculations The recoverable amount of the CGU is determined based on value-in-use calculations using cash flow projections approved by management covering a five years period. Cash flows beyond the five years period are extrapolated using a growth rate of 3.20% (2011: 3.38%) per annum. The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill: i. ii. Budgeted gross margin The basis used to determine the value assigned to the budgeted gross margin is the average gross margin achieved in the year immediately before the budgeted year increased for expected efficiency improvements. Selling price The selling price used to calculate the cash inflows from operations was determined after taking into consideration of price trends in the industries which the CGU is exposed. Values assigned are consistent with the external sources of information. Discount rate and growth rate 2011 RM 72,850,883 10,639,644 83,490,527

iii.

The discount rate applied to the cash flow projections is based on the cost of borrowings of the Group throughout the calculation period. The growth rate used is consistent with the projected growth rate of the CGUs industry and economy. Following are the rates for the calculations of the value-in-use for each of the business segments for the next five years. Business segments Oil & gas Discount rate 10.12% Technical services 10.72%

Growth rate 5.00% 5.00% Sensitivity to changes in assumptions Barring any unforeseen circumstances, the management believes that no reasonable change in the above assumptions would cause the net carrying amount of goodwill to materially exceed its recoverable amount.

88

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

13. INVESTmENT IN SUBSIdIARIES Company 2012 Note Unquoted shares at cost As at 1 January Acquisition of subsidiaries Increase in investment in subsidiaries At 31 December a b 172,851,767 800 172,852,567 171,740,329 1,111,438 172,851,767 RM 2011 RM

Certain of the Companys investment in subsidiaries with total carrying amounts of RM112,308,946 (2011: RM112,308,946) and RM28,488,131 (2011: RM28,488,131) have been pledged to a financial institution for banking facilities granted to the Company and for the issuance of the Redeemable Convertible Secured Loan Notes (RCSLN) respectively as disclosed in Note 23. Details of subsidiaries as at 31 December 2012 and 2011 are as follows: Effective equity interest Country of 2012 2011 incorporation Principal activities Held by the Company Daya Polymer Sdn. Bhd. 100% 100% Malaysia Manufacturer of semicon and XLPE compounds for cable and wire and trading in specialty chemicals, related polymer compounds and hardware. General trading, marketing and investment holding. Investment holding. Trading in petrochemicals products and investment holding. Providing industrial facilities management including builder works, facility operation and maintenance services, upgrade, retrofit, design and build plant facilities. Principally engaged in ownership and hiring of forklifts, cranes and heavy machinery and provision of related manpower services in the onshore and offshore oil and gas industry. Property investment holding. Center for regional procurement and trading as well as international investments. Supplying of equipment and specialty chemicals for oil and gas process plants, a provider of installation and maintenance services for air-conditioning and ventilation system, a provider for automatic welding services for offshore pipeline installation, a provider for maintenance services for both onshore plants and offshore facilities, a provider for warehousing and forwarding agency.

DMB Marketing & Trading Sdn. Bhd. 100% Meridian Orbit Sdn. Bhd. Daya Secadyme Sdn. Bhd.*** Daya CMT Sdn. Bhd. 100%

100% 100%

Malaysia Malaysia Malaysia Malaysia

75.1% 100% 100% 100%

Daya Proffscorp Sdn. Bhd.

100%

100%

Malaysia

Daya Urusharta Sdn. Bhd. DMB International Limited* Daya OCI Sdn. Bhd.***

100% 100%

100% 100%

Malaysia Hong Kong Malaysia

75.1% 100%

ANNUAL REPORT 2012

89

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

13. INVESTmENT IN SUBSIdIARIES (contd) Details of subsidiaries as at 31 December 2012 and 2011 are as follows: (contd) Effective equity interest Country of 2012 2011 incorporation Principal activities Held by the Company (contd) Daya Petroleum Ventures Sdn. Bhd. (Formerly known as Metriwell Sdn. Bhd.) Held through subsidiaries Daya Hightech Sdn. Bhd. Seca Chemicals and Catalysts Sdn. Bhd.*** 100% 100% Malaysia Malaysia Malaysia Manufacturer of compounds for cable and wire. Dealing in petroleum, oil and gas products, and consulting services. Dealing in project management, installation and design engineering, fabrication, procurement and logistics, vessel operations, survey and diving operations. Providing engineering and manpower services. General contractors and related services. Trader of all kinds of building materials, hardware equipment and other related products. Providing recycling of waste solvent and manufacturing high purity electronics and technical solvent. Provision of drilling services, geological, petroleum engineering, subsea and deep-water support services, and operations and maintenance services. Principally engaged in ownership and hiring of forklifts, cranes and heavy machinery and provision of related manpower services in the onshore and offshore oil and gas industry. Property development. Investment holding. Property development. Provision of electrical, mechanical engineering and construction works. Shipping leasing business and other related services to the oil and gas industry. 80% Malaysia Provision of drilling services, geological, petroleum engineering, subsea and deep-water support services, and operations and maintenance services.

75.1% 100%

Daya Offshore Construction Sdn. Bhd. 75.1% 100% (Formerly known as SD Equipment Sdn. Bhd.)*** Seca Engineering and Manpower Services Sdn. Bhd.*** Daya FMM Sdn. Bhd. 75.1% 100% 100% 100% 100% 100% 80%

Malaysia Malaysia Malaysia Malaysia Malaysia

Daya Land & Development Sdn. Bhd. 100% Daya Clarimax Sdn. Bhd. Daya Petroleum Ventures Sdn. Bhd. (Formerly known as Metriwell Sdn. Bhd.) Daya Proffscorp (Sabah) Sdn. Bhd. 100% -

100%

100%

Malaysia

Ultrafest Sdn. Bhd. Zen Projects Sdn. Bhd. Terra Hill Development Sdn. Bhd. Daya E&C Sdn. Bhd.** Daya OCI (Labuan) Limited. (Formerly known as Daya OCI (Labuan) Berhad)**

100% 100% 100% 100% 100%

100% -

Malaysia Malaysia Malaysia Malaysia Malaysia

PT Daya Secadyme Indonesia* 75.1% 100% Indonesia Trading in petrochemicals products.


* **

***

Audited by firms of auditors other than Ernst & Young. These companies were incorporated on November 2012 and will prepare its first set of audited financial statements for the year ending on 31 December 2013. The interests in Daya OCI Sdn. Bhd. (DOCI) and Daya Secadyme Sdn. Bhd. (DSSB) were remained consolidated at 100%. Accordingly, the Group has not recognized any share of non-controlling interest in the income statements and statements of financial position.

90

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

13. INVESTmENT IN SUBSIdIARIES (contd) (a) Acquisition of subsidiaries i. On 2 August 2012, through the Internal Group Re-Organisation Plan, the Company acquired 800 ordinary shares of RM1.00 each in Daya Petroleum Ventures Sdn. Bhd. (formerly known as Metriwell Sdn. Bhd.) (DPV), a sub-subsidiary of a subsidiary of the Company, Daya Secadyme Sdn. Bhd. representing 80% of the issued and paid-up share capital of DPV for a cash consideration of RM800 from a wholly-owned sub-subsidiary of the Company, Seca Engineering and Manpower Services Sdn. Bhd. On 14 February 2012, the Group, via its direct wholly owned subsidiary, Daya CMT Sdn. Bhd. acquired 2 ordinary shares of RM1 each in Zen Projects Sdn. Bhd. (ZPSB) and Terra Hill Development Sdn. Bhd. (THDSB) for a total consideration of RM2 each, representing 100% equity interest in ZPSB and THDSB. On 30 November 2012, the Group, via its direct wholly owned subsidiary, Daya CMT Sdn. Bhd. acquired 2 ordinary shares of RM1 each in Daya E&C Sdn. Bhd. (DECSB), for a total cash consideration of RM2 from Mr. Nathan Tham Jooi Loon and Mr. Tham Wooi Loon, representing 100% equity interest in DECSB. On 22 February 2011, the Group, via its sub-subsidiary, Daya Clarimax Sdn. Bhd. (DCLX), a wholly owned subsidiary of Meridian Orbit Sdn. Bhd., acquired one (1) ordinary share of RM1.00 in Daya NCHO Sdn. Bhd. (DNSB), for a total cash consideration of RM1 from Chai Churn Hwa. On 15 March 2011, DCLX has further subscribed 599,999 ordinary shares of RM1.00 each in DNSB through capitalisation of an amount of RM599,999 out of the total fixed assets transferred from DCLX. On 15 December 2011, the Group via its sub-subsidiary, Daya Land & Development Sdn. Bhd. (formerly known as IHP Supply Sdn. Bhd.) (DLD), a wholly-owned subsidiary of Daya CMT Sdn. Bhd., acquired two (2) ordinary shares of RM1.00 in Ultrafest Sdn. Bhd (USB), representing 100% equity interest from Hasniza Binti Wazer and Fatimah Binti Sulaiman, for a total consideration of RM2 only.

ii.

iii.

iv.

v.

(b) Increase in investment in subsidiaries i. On 27 January 2011, the Company increased investment in its wholly owned subsidiary, Daya Urusharta Sdn. Bhd. (DUSB) via the subscription of an additional 99,998 ordinary shares of RM1.00 each at par for working capital purposes. The new ordinary shares subscribed in DUSB ranked pari passu in all respects with the existing ordinary shares of DUSB. On 15 November 2011, the Company increased investment in its wholly owned subsidiary, DMB International Limited (DINL) via the subscription of an additional 2,500,000 ordinary shares of HKD1.00 each. The new ordinary shares subscribed in DINL ranked pari passu in all respects with the existing ordinary shares of DINL. On the same date, an amount of HKD2,500,000 (equivalent to RM1,011,440) due from DINL was applied in paying up in full 2,500,000 ordinary shares of HKD1.00 each which were allotted and distributed as fully paid to the Company.

ii.

(c) Acquisition of non-controlling interests On 30 November 2011, the Group, via its direct wholly-owned subsidiary, Daya CMT Sdn. Bhd. (DCMT) acquired a total of 200,000 ordinary shares of RM1.00 each of Daya Land & Development Sdn. Bhd. (formerly known as IHP Supply Sdn. Bhd.) (DLD) representing 40% of the total issued and paid-up share capital of DLD, from Soon Kok Lum, Ruby A/P Gnanabaranamand and Hor Ching Siew, respectively for a total cash consideration of RM550,000. Subsequent to the acquisition, DLD had becomed a 100% wholly owned subsidiary of DCMT. The Group recognised a decrease in noncontrolling interests of RM538,180.

(d) Incorporation of subsidiaries The Group had on 19 November 2012, via its subsidiary, Daya OCI Sdn. Bhd. incorporated a limited liability company known as Daya OCI (Labuan) Limited (formerly known as Daya OCI (Labuan) Berhad) (DOCIL). The principal activities of DOCIL is to involve in the shipping leasing business and other related services to the oil and gas industry.

ANNUAL REPORT 2012

91

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

13. INVESTmENT IN SUBSIdIARIES (contd) (e) Partial disposal of shares in subsidiaries The Company had on 21 September 2012 completed its disposal of 250,992 ordinary shares of RM1.00 each in Daya Secadyme Sdn. Bhd. (DSSB) and 1,245,000 ordinary shares of RM1.00 each in Daya OCI Sdn. Bhd. (DOCI) representing 24.9% of the issued and paid-up share capital of DSSB and DOCI respectively to Rancak Nikmat Sdn. Bhd. for a total cash consideration of RM19,000,000 and RM11,500,000 respectively. The non-controlling interests in DOCI and DSSB by way of the Sales and Purchases Agreement dated 25 May 2012 has agreed to forgo its claim on the assets and profits of DOCI and DSSB. Accordingly, the Group has not recognized any share of noncontrolling interest in the income statement and statement of financial position. Disposal of subsidiaries i. On 15 September 2011, the Group via its direct wholly owned subsidiary, DMB International Limited disposed of 40,000 ordinary shares of HKD1.00 each in Daya NCHO International Limited (formerly known as Daya Clarimax International Limited) (DNIL) representing 40% of the issued and paid-up share capital of DNIL to NCHO Sdn. Bhd. for a total consideration of HKD40,000. Subsequent to the disposal, DNIL had ceased to be a subsidiary and become a jointly controlled entity. On 8 November 2011, Daya NCHO Sdn. Bhd. (DNSB) issued an additional 320,000 ordinary shares at RM1.00 each to NCHO Sdn. Bhd. (NSB) through capitalisation of an amount of RM320,000 out of advances owing to NSB (Shares Issuance). Upon the completion of Shares Issuance, the authorised share capital of DNSB is to increase to RM1,000,000 comprising 1,000,000 ordinary shares of RM1.00 each of which 1,000,000 ordinary shares of RM1.00 each have been issued and fully subscribed by its shareholders, Daya Clarimax Sdn. Bhd. (DCLX) (60%) and the joint venture partner, NSB (40%) in accordance with the provisions of the Joint Venture Agreement dated 27 January 2011 entered into between DCLX and NSB. The assets and liabilities disposed are as follows: Group 2011 Note Property, plant and equipment Inventories Trade and other receivables Cash and bank balances Trade and other payables RM 3,238,562 178,991 1,028,404 82,282 (3,806,295) 721,944 Less : Transfer to investment in jointly controlled entities Non-controlling interests 14 (625,166) (81,573) 15,205 Gain on disposal of subsidiaries Consideration received, satisfied in cash Cash disposed of Net cash outflows 6 496 15,701 (82,282) (66,581)

(f)

ii.

92

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

14. INVESTmENT IN jOINTLY CONTROLLEd ENTITIES Group 2012 Note Unquoted shares, at cost At 1 January Acquisition of a joint venture company Increase in investment in a jointly controlled entity Incorporation of a joint venture company Capital distribution from an investment in a jointly controlled entity Transfer from investment in subsidiaries At 31 December Shares of post acquisition reserve At 1 January Share of results of jointly controlled entities Reversal of provision on foreseeable losses Distribution of profits from a jointly controlled entity As at 31 December 29 1,946,471 1,480,297 (2,218,345) 1,208,423 310,692 1,394,943 240,836 1,946,471 13 a a b 1,182,166 1,182,166 750,000 2 5,998 51,000 (250,000) 625,166 1,182,166 RM 2011 RM

Share of net assets 29 2,390,589 3,128,637 The aggregate amounts of each of the current assets, non-current assets, current liabilities, non-current liabilities, income and expenses related to the Groups interests in the jointly-controlled entities are as follows: Group 2012 RM Assets and liabilities Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Income and expenses Income Expenses Share of results of jointly controlled entities 6,592,532 (5,112,235) 1,480,297 8,092,138 (6,697,195) 1,394,943 3,452,890 2,111,241 5,564,131 1,966,891 1,206,651 3,173,542 5,423,601 2,185,787 7,609,388 3,019,337 1,461,414 4,480,751 2011 RM

ANNUAL REPORT 2012

93

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

14. INVESTmENT IN jOINTLY CONTROLLEd ENTITIES (contd) Details of the jointly controlled entities as at 31 December 2012 and 2011 are as follows: Effective equity interest Country of 2012 2011 incorporation Held through subsidiaries Daya-Sheffield Sdn. Bhd. DOCI-KWH** Terengganu Crude Oil Terminal** Daya NCHO International Limited** Daya NCHO Sdn. Bhd.** 38.3%* 51% Malaysia Supplying of services and equipments to exploration and extraction companies in the oil and gas industry.

Principal activities

50% Unincorporated Provision of repair for Sour Crude Tank and Slop Tank.

25.5%* 34% Unincorporated Installation of pipeline from Angsi field, offshore Terengganu to Terengganu Crude Oil Terminal in Kerteh. 60% 60% 60% 60% Hong Kong Malaysia Investment holding to invest in tank services regionally. Provision of ISO tank cleaning, repair and maintenance services.

Daya Campo (Sabah) Sdn. Bhd. 45%* 60% Malaysia Investment holding.
* **

(a) Acquisition of a joint venture company (i) On 28 September 2011, the Group, via its direct wholly owned subsidiary, Daya OCI Sdn. Bhd. (DOCI) acquired two (2) ordinary shares of RM1.00 in Daya Campo (Sabah) Sdn. Bhd. (DCSB) representing 100% of the issued and paidup share capital of DCSB from Kamalukhair Abdullah and Dato Mazlin Bin Md. Junid, for a total consideration of RM2 only. On 5 October 2011, DOCI entered into a Joint Venture Agreement with Campo Sdn. Bhd. (Campo) (The Joint Venture). The Joint Venture was undertaken through DCSB. On 3 February 2012, DCSB had further issued additional 5,998 and 4,000 ordinary shares of RM1.00 each in DCSB to DOCI and Campo. On 22 February 2011, the Group, via its direct wholly owned subsidiary, Daya Clarimax Sdn. Bhd. (DCLX), acquired one (1) ordinary share of RM1.00 in Daya NCHO Sdn. Bhd. (DNSB), for a total cash consideration of RM1 from Chai Churn Hwa. On 15 March 2011, DCLX has further subscribed 599,999 ordinary shares of RM1.00 each in DNSB through capitalisation of an amount of RM599,999 out of the total fixed assets transferred from DCLX. On 8 November 2011, DNSB issued an additional 320,000 ordinary shares at RM1.00 each to NCHO Sdn. Bhd. (NSB) through capitalisation of an amount of RM320,000 out of advances owing to NSB (Shares Issuance). Upon the completion of Shares Issuance, the authorised share capital of DNSB is RM1,000,000 comprising 1,000,000 ordinary shares of RM1.00 each of which 1,000,000 ordinary shares of RM1.00 each have been issued and fully subscribed by its shareholders, DCLX (60%) and the joint venture partner, NSB (40%) in accordance with the provisions of the Joint Venture Agreement dated 27 January 2011 entered into between DCLX and NSB.

The effective shareholdings of these jointly controlled entities reduced following the shares disposal in Daya OCI Sdn. Bhd. on 21 September 2012. Audited by firms of auditors other than Ernst & Young

(ii)

(b) Incorporation of a joint venture company On 26 October 2010, the Group, via its subsidiary, Daya OCI Sdn. Bhd. (DOCI) incorporated a joint venture company under the name of Daya OCI-Ascent Sdn. Bhd (DASB) with Ascent Offshore (Singapore) Pte Ltd. DASB was incorporated on 26 October 2010 as a private limited liability company with an authorised and fully paid-up share capital of RM100,000 divided into 100,000 ordinary shares of RM1.00 each. DASBs issued and fully paid-up share capital is 51% owned by DOCI and 49% owned by Ascent Offshore (Singapore) Pte. Ltd. The principal activities of DASB are in supplying of services and equipments to exploration and extraction companies in the oil and gas industry.

94

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

14. INVESTmENT IN jOINTLY CONTROLLEd ENTITIES (contd) (b) Incorporation of a joint venture company (contd) On 10 November 2011, DOCI entered into a Supplemental Joint Venture Agreement to the Joint Venture Agreement (JVA) dated 25 August 2010 between DOCI, Sheffield Offshore Services Pte. Ltd. (Sheffield) and Ascent Offshore (Singapore) Pte. Ltd. (Ascent). Ascent shall cease to be a party and Sheffield shall take the place of Ascent as a party to the JVA. Sheffield shall pay to Ascent the sum of RM49,000 only in consideration of the transfer by Ascent to Sheffield of 49,000 ordinary shares of par value RM1.00 each in DASB. Daya OCI-Ascent Sdn. Bhd was subsequently changed to Daya Sheffield Sdn. Bhd. and all cost incidental to this change of name shall be borne by DASB.

(c) Completion of a jointly controlled operation On 26 April 2012, the Group via its subsidiary, Daya OCI Sdn. Bhd. (DOCI) concluded a mutual agreement with KWH Technologies Sdn. Bhd to close their jointly controlled operation known as DOCI-KWH. The assets of DOCI-KWH has been distributed by way of capital distribution in cash to DOCI amounted to RM250,000 in the prior year.

15.

DEFERREd TAX Assets 2012 Group At 1 January Recognised in income statements Recognised in equity At 31 December 29 7 Note RM 1,198,845 112,792 1,311,637 2011 RM 1,301,871 (103,026) 1,198,845 Assets 2012 Company At 1 January Recognised in income statements Recognised in equity At 31 December 7 Note RM 44,860 50,759 95,619 2011 RM 73,433 (28,573) 44,860 Liabilities 2012 RM 2,150,151 (615,453) (23,491) 1,511,207 2011 RM 2,387,603 (218,230) (19,222) 2,150,151 2012 RM (951,306) 728,245 23,491 (199,570) Net 2011 RM (1,085,732) 115,204 19,222 (951,306) Net 2012 RM (45,201) 66,023 23,491 44,313 2011 RM (40,557) (23,866) 19,222 (45,201) RM 113,990 (4,707) (19,222) 90,061

Liabilities 2012 RM 90,061 (15,264) (23,491) 51,306 2011

The components and movements of deferred tax liabilities and deferred tax assets during the financial year prior to offsetting are as follows: At 31 December 2011/ Recognised At 1 January Recognised in income 31 December 2012 in equity statements 2012 RM RM RM RM

Group

At Recognised 1 January Recognised in income 2011 in equity statements RM RM RM

Deferred Tax Liabilities Property, plant and equipment RCSLN Others

2,307,502 93,716 (13,614) 2,387,604

(19,222) (19,222)

(205,532) (26,313) 13,614 (218,231)

2,101,970 48,181 2,150,151

(23,491) (23,491)

(602,881) (13,950) 1,378 (615,453)

1,499,089 10,740 1,378 1,511,207

ANNUAL REPORT 2012

95

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

15.

DEFERREd TAX (contd) At Recognised 1 January in income 2011 statements RM Deferred Tax Assets Deductible temporary differences Tax losses Provisions 569,721 297,200 434,950 1,301,871 (236,562) 287,000 (153,464) (103,026) 333,159 584,200 281,486 1,198,845 153,454 159,650 (200,312) 112,792 486,613 743,850 81,174 1,311,637 RM December 2011/ Recognised At 1 January in income 31 December 2012 statements 2012 RM RM RM

Group

Company

At Recognised 1 January in income Recognised 2011 statements in equity RM RM RM

At 31 December 2011/ Recognised At 1 January in income Recognised 31 December 2012 statements in equity 2012 RM RM RM RM

Deferred Tax Liabilities Property, plant and equipment RCSLN

22,905 91,085 113,990

18,975 (23,682) (4,707)

(19,222) (19,222)

41,880 48,181 90,061

(1,314) (13,950) (15,264)

(23,491) (23,491)

40,566 10,740 51,306

Deferred Tax Assets Deductible temporary differences

(73,433)

28,573

(44,860)

(50,759)

(95,619)

Deferred tax assets have not been recognised in respect of the following items: Group 2012 RM Unutilised tax losses Unabsorbed capital allowances Other temporary differences 1,143,048 36,200 7,000 1,186,248 2011 RM 821,328 24,000 7,000 852,328

96

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

16. TRAdE ANd OTHER RECEIVABLES Group 2012 Note Non-current Non-trade Staff loan Current Trade Trade receivables Amount due from subsidiaries b c Less: Allowance for impairment loss 30 Non-trade Deposits Staff loans Sundry receivables Less: Allowance for impairment loss e Amount due from subsidiaries b d a 7,312,717 560,900 16,929,245 (350,000) 16,579,245 24,452,862 Total current trade and other receivables Total trade and other receivables Add: Cash and cash equivalents 30 20 72,593,540 73,321,636 66,412,033 2,529,969 550,740 9,186,638 (350,000) 8,836,638 11,917,347 86,513,760 87,785,216 62,840,884 57,490 510,296 510,296 28,296,010 28,863,796 32,323,788 32,323,788 11,798,484 182,350 716,953 716,953 21,188,080 22,087,383 24,995,827 24,995,827 5,224,754 48,605,287 48,605,287 (464,609) 48,140,678 74,982,630 74,982,630 (386,217) 74,596,413 3,459,992 3,459,992 3,459,992 2,908,444 2,908,444 2,908,444 a 728,096 1,271,456 RM 2011 RM 2012 RM Company 2011 RM

Total loans and receivables 139,733,669 150,626,100 44,122,272 30,220,581 (a) Staff loans Staff loans are unsecured and non-interest bearing except for the amount of RM1,271,695 (2011: RM1,809,111) which is a housing loan to a director and subject to interest rate at 5.55% (2011: 5.55%) per annum.

(b) Amount due from subsidiaries The amount due from the subsidiaries is unsecured, repayable on demand and non-interest bearing except for the amount of RM27,492,209 (2011: RM20,806,947) which subject to interest rate at 8.60% (2011: 8.30-8.60%) per annum. Further details on related party transactions are disclosed in Note 27.

ANNUAL REPORT 2012

97

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

16. TRAdE ANd OTHER RECEIVABLES (contd) (c) Aging analysis of trade receivables The ageing analysis of the Groups and of the Companys trade receivables is as follows: Group 2012 RM Neither past due nor impaired Past due not impaired: - 1 to 30 days - 31 to 60 days - 61 to 90 days - 91 to 120 days - More than 121 days 8,505,580 3,858,612 2,548,121 850,291 1,602,379 17,364,983 Impaired 464,609 48,605,287 Receivables that are neither past due nor impaired Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group and the Company. None of the Groups and of the Companys trade receivables that are neither past due nor impaired have been renegotiated during the financial year. Receivables that are past due but not impaired The Group and the Company have trade receivables amounting to RM17,364,983 (2011: RM8,229,068) and RM1,023,037 (2011: RM290,039) respectively that are past due at the reporting date but not impaired. No allowance for impairment is made as in the opinion of the management, significant portions of the outstanding debts is in line with the norm in the construction industry and would be collected in full within the next twelve months. Receivables that are impaired The Groups trade and other receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows: Group Individually impaired 2012 RM Trade and other receivables - nominal amounts Less: Allowance for impairment loss 814,609 (814,609) 2011 RM 736,217 (736,217) 3,499,941 1,465,861 1,876,821 1,133,526 252,919 8,229,068 386,217 74,982,630 153,877 869,160 1,023,037 3,459,992 134,156 155,883 290,039 2,908,444 30,775,695 2011 RM 66,367,345 2012 RM 2,436,955 Company 2011 RM 2,618,405

98

DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

16. TRAdE ANd OTHER RECEIVABLES (contd) (c) Aging analysis of trade receivables (contd) Receivables that are impaired (contd) Movement in allowance accounts: Group 2012 Note At 1 January Allowance for impairment loss Reversal of allowance for impairment loss Bad debts written off At 31 December The Groups allowance accounts arise from: Group 2012 RM Trade receivables Sundry receivables 464,609 350,000 814,609 (d) There is no allowance for impairment made for the Company during the year and prior year. 6 6 RM 736,217 743,339 (90,008) (574,939) 814,609

2011 RM 1,646,248 230,439 (1,140,470) 736,217

2011 RM 386,217 350,000 736,217

Trade receivables that are impaired relate to individually determined debtors that are in significant financial difficulties and have defaulted on payment. These receivables are not secured by any collateral or credit enhancements. Deposits Included in deposits of the Group is the deposit made for the purchase of commercial properties amounted to RM4,701,322 (2011: Nil).

(e) Sundry receivables Included in sundry receivables of the Group are amount due from a jointly controlled entity and receivables from legal suit against Mohd Akbar B Hj. Johari, AJ Premier Holdings Sdn. Bhd., Aims Mission Sdn. Bhd., Global Max Trading Sdn. Bhd. and Azrul Bin Mohd Nasir representative of Rasa Indah Trading amounted to RM2,454,533 (2011: RM3,538,459) and RM1,922,250 (2011: RM1,942,250) respectively.

ANNUAL REPORT 2012

99

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

16. TRAdE ANd OTHER RECEIVABLES (contd) (f) Receivables denominated in foreign currencies Included in trade and other receivables are the following trade and other receivables amounts denominated in a currency other than the functional currency of the entity to which they relate: Group 2012 Note RM 2011 RM 2012 RM Company 2011 RM

Hong Kong Dollar Indonesian Rupiah United States Dollar European Dollar 30(c)

4,477 1,694,861 915,410 2,614,748

280,095 32,273 25,479,628 25,791,996

2,798,027 2,798,027

1,876,219 1,876,219

17. INVENTORIES Group 2012 RM At cost: Raw materials Work-in-progress Finished goods Goods in-transit Consumables 5,401,146 51,513 8,245,516 399,731 5,102,660 74,466 5,736,952 116,152 3,151,306 2011 RM

14,097,906 14,181,536 Assets pledged as security The Groups inventories amounted to RM5,674,929 (2011: RM6,835,341) have been pledged to a licensed bank as securities for the bank facilities as disclosed in Note 23.

100 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

18. OTHER CURRENT ASSETS Group 2012 Note Amount due from customers on contracts Prepayments a RM 38,765,323 1,360,176 2011 RM 22,074,506 540,535 2012 RM 124,249 Company 2011 RM 174,000 174,000

40,125,499 22,615,041 124,249 (a) Amount due from customers on contracts Group 2012 RM Aggregate costs incurred to date Add: Attributable profits 267,751,020 32,689,305 300,440,325 Less: Progress billings (261,675,002) 38,765,323 2011 RM 305,500,193 61,919,970 367,420,163 (345,345,657) 22,074,506 2012 RM -

Company 2011 RM -

Included in the amount due from customers on contracts during the year is the hiring costs of plant and machinery amounting to RM2,183,536 (2011: RM2,249,736). 19. MARkETABLE SECURITIES Group 2012 Note Financial assets at fair value through profit or loss Shares quoted in Malaysia At cost As at 1 January Additions Disposals As at 31 December Accumulated fair value changes As at 1 January Fair value changes on marketable securities Disposals As at 31 December Market value of quoted shares 6 37,028 (11,540) (32,200) (6,712) 108,188 18,600 18,428 37,028 243,728 206,700 (91,800) 114,900 140,000 114,900 (48,200) 206,700 RM 2011 RM

ANNUAL REPORT 2012 101

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

19.

MARKETABLE SECURITIES (contd) Fair value hierarchy The Group uses the following hierarchy for determining the fair value of all financial instruments carried at fair value: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 - Inputs that are observable market data, either directly or indirectly Level 3 - Inputs that are not based on observable market data As at the reporting date, the Group held the following financial assets that are measured at fair value: Level 1 RM 31 December 2012 Group Financial assets Financial assets at fair value through profit or loss Quoted shares 31 December 2011 Group Financial assets Level 2 RM Level 3 RM Total RM

108,188

108,188

Financial assets at fair value through profit or loss Quoted shares 243,728 243,728 20. CASH ANd CASH EQUIVALENTS 2012 Note Group Short term investments Fixed deposits with licensed banks Cash and bank balances 30, a 30, b 3,620,798 29,781,427 33,009,808 3,707,582 41,231,219 17,902,083 62,840,884 2011 RM 2,422,352 21,115,259 10,615,386 34,152,997 1.1.2011 RM RM 2011 RM 1.1.2011 RM

16, 31 66,412,033 2012 Note Company Short term investments Fixed deposits with licensed banks Cash and bank balances 16, 31 30, a 30, b 3,620,798 3,332,910 4,844,776 11,798,484 RM

680,155 4,070,225 474,374 5,224,754

2,341,905 2,198,627 2,860,144 7,400,676

102 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

20. CASH ANd CASH EQUIVALENTS (contd) For the purposes of the statements of cash flows, cash and cash equivalents comprise the following as at the reporting date: 2012 RM Group Cash and cash equivalents Less: Fixed deposits pledged Fixed deposits with licensed banks with maturity more than three months Bank overdraft 66,412,033 (23,249,368) (2,805,824) 40,356,841 Company Cash and cash equivalents Less: Fixed deposits pledged Fixed deposits with licensed banks with maturity more than three months 11,798,484 (3,332,910) 5,224,754 (2,262,725) (1,807,500) 7,400,676 (2,198,627) 62,840,884 (24,732,529) (1,807,500) (3,739,469) 32,561,386 34,152,997 (17,603,031) (2,191,567) 14,358,399 2011 RM 1.1.2011 RM

8,465,574 1,154,529 5,202,049 (a) Short term investments (b) The information on financial risks of short term investments are disclosed in Note 30. Fixed deposits with licensed banks The Group and the Companys fixed deposits amounted to RM23,249,368 (2011: RM24,732,529) and RM3,332,910 (2011: RM2,262,725) respectively have been pledged to licensed banks for banking facilities granted to the Company and its subsidiaries. The interest rates of the fixed deposits are disclosed in Note 30.

(c) Cash and cash equivalents denominated in foreign currencies Included in cash and cash equivalents are the following cash and cash equivalents amounts denominated in a currency other than the functional currency of the entity to which they relate: Group 2012 Note Hong Kong Dollar Indonesian Rupiah European Dollar United States Dollar RM 34,931 18,163 152,051 598,657 2011 RM 59,660 429,786 96,230 2012 RM 1,893 Company 2011 RM -

30(c) 803,802 585,676 1,893

ANNUAL REPORT 2012 103

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

21. SHARE CAPITAL Group and Company Number of ordinary shares of RM0.10 each Note 2012 2011 2012 RM Authorised: At 1 January/31 December Issued and fully paid: At 1 January Ordinary shares issued during the year: Issued for cash Conversion of RCSLN At 31 December a b 34,843,206 1,234,001,750 85,000,000 17,421,603 1,199,158,544 3,484,321 123,400,175 8,500,000 1,742,160 119,915,854 1,199,158,544 1,096,736,941 119,915,854 109,673,694 2,000,000,000 2,000,000,000 200,000,000 200,000,000 Amount 2011 RM

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Companys residual assets. On 26 February 2009, the shareholders of the Company had approved the proposed establishment of an Employee Share Option Scheme for the eligible directors and employees of the Company and its subsidiaries. However, no options have been awarded at the date of reporting. (a) Ordinary shares issued for cash The issuance of 85,000,000 new ordinary shares of RM0.10 each in the Company in the prior year is through a private placement to identified investors. The shares premium of RM10,225,000 arising from the issuance of ordinary shares and the share issue costs of RM1,850,435 have been included in the share premium account. The new ordinary shares rank pari passu in all respects with the existing ordinary shares of the Company.

(b) Conversion of Redeemable Convertible Secured Loan Notes On 20 January 2012, the Company announced that 17,421,603 new ordinary shares of RM0.10 each in the Company (DMB Shares) were issued pursuant to the conversion of RM3 million Redeemable Convertible Secured Loan Notes at a conversion price of RM0.1722 per DMB share were listed on Bursa Malaysia Securities Berhad on 25 January 2012.

Subsequently, on 14 May 2012, the Company announced that a further 17,421,603 of new DMB Shares were issued pursuant to the conversion of RM3 million Redeemable Convertible Secured Loan Notes at a conversion price of RM0.1722 per DMB share were listed on Bursa Malaysia Securities Berhad on 15 May 2012.

104 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

22. RESERVES Group 2012 Note Distributable reserve: Retained profits Non-distributable reserves: Capital reserve Foreign translation reserve Treasury shares Equity component of Redeemable Convertible Secured Loan Notes Share premium b c d e f 278,464 (3,049,369) 130,374 22,171,940 107,568,235 171,750 (317,049) 286,824 19,630,261 90,711,850 17,256,197 (3,049,369) 130,374 22,171,940 51,892,003 17,256,197 (317,049) 286,824 19,630,261 53,303,070 36,a 88,036,826 70,940,064 15,382,861 16,446,837 RM 2011 RM 2012 RM Company 2011 RM

(a) Retained profits Prior to the year of assessment 2008, Malaysian companies adopt the full imputation system. In accordance with the Finance Act 2007 which was gazetted on 28 December 2007, companies shall not be entitled to deduct tax on dividends paid, credited or distributed to its shareholders, and such dividends will be exempted from tax in the hands of the shareholders (single tier system). However, there is a transitional period of six years, expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders under limited circumstances. Companies also have an irrevocable option to disregard the 108 balance and opt to pay dividends under the single tier system. The change in the tax legislation also provides for the 108 balance to be locked-in as at 31 December 2007 in accordance with Section 39 of the Finance Act 2007. The Company may distribute dividends out of its entire retained profits as at 31 December 2012 under the single tier system. The Company has, pending agreement with the tax authorities, tax-exempt income of approximately RM145,000 (2011: RM145,000) as at 31 December 2012 available for distribution by way of tax-exempt dividends.

(b) Capital reserve (c) The capital reserve represents the fair value adjustments on previously held interest in subsidiaries. Foreign translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of the Group entities with functional currencies other than RM.

(d) Treasury shares The shareholders of the Company, by a special resolution passed in a general meeting held on 20 June 2011, approved the Companys plan to repurchase its own shares. The Directors of the Company are committed to enhance the value of the Company to its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders. For the year ended 31 December 2012, the Company repurchased 13,888,600 (2011: 1,787,100) of its issued share capital from the open market. The average price paid for the shares repurchased was RM0.20 (2011: RM0.18) per share. The repurchase transactions were financed by internally generated funds. The shares repurchased were retained as treasury shares. As at 31 December 2012, the issued and paid up capital of the Company comprising 1,234,001,750 (2011: 1,199,158,544) ordinary shares of RM0.10 each of which 15,675,700 (2011: 1,787,100) ordinary shares of RM0.10 each are held as treasury shares.

ANNUAL REPORT 2012 105

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

22. RESERVES (contd) (e) Equity component of Redeemable Convertible Secured Loan Notes Group and Company 2012 Note At 1 January Conversion to share capital At 31 December 23 RM 286,824 (156,450) 130,374 2011 RM 365,049 (78,225) 286,824

This reserve represents the fair value of the equity component of the Redeemable Convertible Secured Loan Notes, net of deferred tax, as determined on the date of issue.

(f) Share premium This amount arose from premium on the issue of ordinary shares above par value. The movement in share premium account is as follows: Group and Company 2012 RM At 1 January Ordinary shares issued during the year: Issued for cash Pursuant to conversion of RCSLN Transaction cost Current year Overprovision in prior year 26,000 26,000 At 31 December 22,171,940 (1,850,435) (1,850,435) 19,630,261 2,515,679 10,225,000 1,257,840 19,630,261 2011 RM 9,997,856

106 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

23. LoANS ANd BoRRoWINgS Group 2012 Note Secured Non-current Term loans Hire purchase payables Redeemable Convertible Secured Loan Notes a b 30, c 36,535,857 4,444,969 40,980,826 Current Term loans Hire purchase payables Bankers acceptance Bank overdraft Redeemable Convertible Secured Loan Notes a b 30 30 30, c 20,118,085 1,181,371 11,286,000 2,805,824 4,957,033 40,348,313 Total loans and borrowings 24, 29 30, 31 81,329,139 10,099,036 753,695 3,270,000 3,739,469 17,862,200 66,723,821 10,858,282 116,125 4,957,033 15,931,440 25,407,385 5,950,348 83,653 6,034,001 25,070,842 36,142,404 1,911,947 10,807,270 48,861,621 9,000,000 475,945 9,475,945 7,757,500 472,071 10,807,270 19,036,841 RM 2011 RM 2012 RM Company 2011 RM

(a) Term loans Included in the term loans is an amount of RM7,874,070 (2011: RM6,050,207) which is the term loan approved under the Green Technology Financing Scheme (GTFS). Under the GTFSs approved term loan, the Government of Malaysia is to bear 2.00% of the total interest rate and a guarantee of 60% on the term loan via Credit Guarantee Corporation Malaysia Berhad. The securities given for the term loans are disclosed in Note 23 (d).

ANNUAL REPORT 2012 107

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

23. LoANS ANd BoRRoWINgS (contd) (b) Hire purchase payables Group 2012 Note Minimum lease payment Not later than 1 year Later than 1 year and not later than 2 years Later than 2 years and not later than 5 years 1,768,954 1,216,996 3,323,712 6,309,662 Future finance charges Present value of hire purchase liabilities Present value of hire purchase liabilities Not later than 1 year Later than 1 year and not later than 2 years Later than 2 years and not later than 5 years 1,181,371 1,144,834 3,300,135 5,626,340 Analysed as Due within 12 months Due after 12 months 30 1,181,371 4,444,969 5,626,340 753,695 1,911,947 2,665,642 116,125 475,945 592,070 83,653 472,071 555,724 753,963 896,239 1,015,440 2,665,642 116,125 122,182 353,763 592,070 83,653 88,276 383,795 555,724 (683,322) 5,626,340 885,480 986,591 1,091,594 2,963,665 (298,023) 2,665,642 141,504 141,504 376,661 659,669 (67,599) 592,070 108,576 108,576 419,381 636,533 (80,809) 555,724 RM 2011 RM 2012 RM Company 2011 RM

(c) Redeemable Convertible Secured Loan Notes (RCSLN) On 3 December 2009, the Company issued RM20,000,000 of 4-year Redeemable Convertible Secured Loan Notes for the funding on future synergistic acquisitions of the Group to meet the working requirements of the Group, and to defray the expenses incidental to the RCSLN issue. The terms of the RCSLN are as follows: (i) The registered holder(s) of the RCSLN will have the option to convert the nominal value of the RCSLN into new ordinary shares of RM0.10 each in the Company at any time during the conversion period, in the following manner: - - (ii) Within the first two (2) years from the issue date of the RCSLN, up to RM3 million nominal value of the RCSLN per month; and Thereafter, all or part of the outstanding RCSLN at the registered holder(s) discretion.

The RCSLN are convertible into new ordinary shares of RM0.10 each in the Company (DMB Shares) at a conversion price of RM0.31 per new DMB share. The conversion price of the RCSLN of RM0.31 was arrived at based on a premium of approximately 22% to the 30-day volume weighted average closing price of DMB Shares of RM0.2537 up to and including 16 April 2009 being the date the terms of the RCSLN were mutually agreed upon. On 25 June 2009, the conversion price of the RCSLN of RM0.31 was adjusted to RM0.2067 pursuant to the bonus issue of 270,595,514 DMB shares, credited as fully paid up, on the basis of 1 DMB Share for every 2 DMB Shares held on 24 June 2009. Unless previously redeemed or converted, upon the close of business on the maturity date, all outstanding RCSLN (excluding the RCSLN to be converted on the maturity date) will be redeemed at par by cash and in one lump sum.

(iii)

108 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

23. LoANS ANd BoRRoWINgS (contd) (c) Redeemable Convertible Secured Loan Notes (RCSLN) (contd) (iv) The Company shall have the option to either repurchase or nominate another party to purchase up to RM3 million nominal value of the RCSLN in each calendar month from the registered holder(s) at any time after the second anniversary of the issue date of the RCSLN at a price of 130% of the RCSLNs nominal value. The RCSLN bear interest at 4% per annum payable quarterly in arrears during the tenure of the RCSLN applicable to those RCSLN which have not been converted prior to the maturity of the RCSLN. The RCSLN constitute direct, unconditional, unsubordinated and secured obligations of the issuer ranking pari passu without discrimination, preference or priority with other secured obligations of the issuer, in priority to all present and future unsecured obligations of the issuer from time to time subject to those preferred by law.

(v) (vi)

(vii) The RCSLN is secured by way of a pledge of 100% unquoted shares over the entire issued and paid up capital of one of its subsidiaries with a carrying amount of RM28,488,131 (2011: RM28,488,131) as disclosed in Note 13. (viii) On 3 July 2010, the conversion price of the RCSLN of RM0.2067 was adjusted to RM0.1722 pursuant to the bonus issue of 176,122,823 new DMB shares, credited as fully paid up, on the basis of 1 DMB Share for every 5 DMB Shares held on 2 July 2010. The proceeds received from the issue of the RCSLN have been split between the liability component and the equity component, representing the fair value of the conversion option. The RCSLN are accounted for in the statements of financial position of the Group and of the Company as follows: 2012 Note Nominal value As at 1 January Less: Conversion to new ordinary shares As at 31 December Less: Unamortised discount 30 Current Non-current 11,000,000 (6,000,000) 5,000,000 (42,967) 4,957,033 4,957,033 4,957,033 14,000,000 (3,000,000) 11,000,000 (192,730) 10,807,270 10,807,270 10,807,270 RM 2011 RM

ANNUAL REPORT 2012 109

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

23. LoANS ANd BoRRoWINgS (contd) (c) Redeemable Convertible Secured Loan Notes (RCSLN) (contd) The carrying amount of the liability component of RCSLN at the reporting date is arrived at as follows: Group and Company 2012 Note Face value of RCSLN Equity component - Equity component, net of deferred tax - Deferred tax liability Liability component at initial recognition Total interest expense recognised to date Total interest paid to date Liability component at 31 December 22 (130,374) (10,740) 4,858,886 1,522,692 (1,424,545) 4,957,033 (286,824) (48,181) 10,664,995 1,302,021 (1,159,746) 10,807,270 RM 5,000,000 2011 RM 11,000,000

Interest expense on the convertible notes is calculated on the effective yield basis by applying the coupon interest rate of 4.00% (2011: 4.00%) per annum.

(d) Security Group The bank borrowings and other facilities are secured by way of: (i) (ii) (iii) (iv) (v) legal charges over subsidiaries freehold land and buildings; corporate guarantee by the Company; a debenture over all assets of certain subsidiaries; a pledge on the Company and subsidiaries fixed deposits; and

a pledge of 100% unquoted shares over the entire issued and paid-up share capital of certain subsidiaries with a carrying amount of RM112,308,946 (2011: RM112,308,946) as disclosed in Note 13. Company The term loan are secured by way of: (i) (ii) (iii) (iv) a facility agreement to be executed between the Company and the bank; a pledge of 100% unquoted shares over the entire issued and paid-up capital of certain subsidiaries with a carrying amount of RM112,308,946 (2011: RM112,308,946) as disclosed in Note 13. third party secured legal charge over a subsidiarys freehold land and building; and

a pledge on the Companys fixed deposits. Other information on financial risks of loans and borrowings are disclosed in Note 30.

110 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

24. TRAdE ANd oTHER PAYABLES Group 2012 Note Non-current Other payables Deposits Current Trade payables Third parties Other payables Accruals Deposits Other payables Amount due to directors Amount due to subsidiaries d a c 5,681,771 3,000,000 51,620,704 213,953 60,516,428 Total current trade and other payables Total trade and other payables Add: Loans and borrowings Total financial liabilities carried at amortised cost (a) 30 23 85,637,534 85,637,534 81,329,139 166,966,673 3,193,328 2,000,000 37,551,491 42,744,819 94,473,588 97,473,588 66,723,821 164,197,409 490,412 3,000,000 98,074 213,953 14,613,598 18,416,037 18,416,037 18,416,037 25,407,385 43,823,422 994,625 2,000,000 580 430,869 3,426,074 3,426,074 6,426,074 25,070,842 31,496,916 b 25,121,106 51,728,769 a 3,000,000 3,000,000 RM 2011 RM 2012 RM Company 2011 RM

Deposits Included in deposits are sums placed by vendors in lieu of the profit guarantees amounted to RM3,000,000 (2011: RM5,000,000) meant for the acquired subsidiary.

(b) Trade payables (c) The normal trade credit terms granted to the Group from the trade payables are ranging from 14 to 90 days (2011: 30 to 90 days). Other payables Included in other payables are advance payments received from customers amounted to RM11,614,600 (2011: RM23,000,000) and retention sum retained from subcontractors amounted to RM6,100,455 (2011: RM6,849,640).

(d) Amount due to subsidiaries Included in amounts due to subsidiaries are loan and advances amounting to RM14,263,921 (2011: RM222,511) that are subject to interest rate at 5.00% per annum (2011: 4.75% - 5.00%). The amounts are repayable on demand.

ANNUAL REPORT 2012 111

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

24. TRAdE ANd oTHER PAYABLES (contd) (e) Trade and other payables denominated in foreign currencies Included in trade and other payables are the following trade and other payables amounts denominated in a currency other than the functional currencies of the entities to which they relate: Group 2012 Note Hong Kong Dollar Indonesian Rupiah United States Dollar European Dollar Singaporean Dollar 30(c) RM 59,824 8,097 612,402 1,008,785 1,689,108 2011 RM 410,599 20,037,367 430,902 20,878,868 2012 RM Company 2011 RM -

25. PRoVISIoNS Group 2012 RM Defect liability At 1 January Arose during the year Utilised/Reversal 1,709,277 98,823 (1,483,406) 2,320,733 995,551 (1,607,007) 2011 RM

At 31 December 324,694 1,709,277 The provision for defect liability relates to the construction works done by the technical services segment. The provision is based on estimates made from historical defect claims data from the past construction works. 26. CommITmENTS (a) Capital commitments Capital expenditure as at the reporting date is as follows: Group 2012 RM Contracted and not provided for Property, plant and equipment Approved but not contracted for Property, plant and equipment 11,738,370 2011 RM 1,501,687 2012 RM 145,970 Company 2011 RM 321,793

1,209,100

1,606,902

112 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

26. CommITmENTS (contd) (b) Operating lease commitments - as lessee As at 31 December, the Group and the Company had future minimum lease payments payable under non-cancellable operating leases in respect of its buildings which fall due as follows: Group 2012 RM Not later than 1 year Later than 1 year but not later than 5 years 470,096 243,938 714,034 (c) 2011 RM 83,800 86,250 170,050 2012 RM 204,000 238,000 442,000 Company 2011 RM -

Operating lease commitments - as lessor The Group has entered into commercial property leases on its investment properties. These non-cancellable leases have remaining lease terms of between 1 to 5 years. All leases include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market conditions. Future minimum rentals receivable under non-cancellable operating leases at the reporting date are as follows: Group 2012 RM Not later than 1 year Later than 1 year but not later than 5 years More than 5 years 326,292 1,286,360 570,378 2,183,030 2011 RM 339,892 1,348,760 819,270 2,507,922

(d)

Finance lease commitments The Group and the Company have finance lease for certain of its property, plant and equipment. The future minimum lease payments under finance leases together with the present value of the net minimum lease payments are disclose in Note 23.

27. RELATEd PARTY dISCLoSURES (a) In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company have the following transactions with related parties during the financial year: 2012 RM Group Purchases of raw materials from a company in which a director of a subsidiary has an has an interest - Oticom Corporation Purchases of commercial properties from a director Interest income charged on housing loan to a director 3,192,400 86,872 2,409,775 99,344 2011 RM

ANNUAL REPORT 2012 113

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

27. RELATEd PARTY dISCLoSURES (contd) (a) In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company have the following transactions with related parties during the financial year: (contd) 2012 Note Company Subsidiaries: - Dividends received - Management fees received/receivable - Interest received/receivable - Interest paid/payable - Advances received - Advances given - Rental received/receivable - Rental paid/payable (b) 5 3, 6 3 3,676,020 7,944,867 1,333,700 431,097 17,000,000 5,578,641 24,000 177,000 15,447,271 8,044,910 996,631 155,237 4,738,168 42,000 RM 2011 RM

The directors are of the opinion that these transactions have been entered into in the normal course of business and have been established under negotiated terms. The information on outstanding balances in respect of the above transactions is disclosed in Note 16 and 24. Compensation of key management personnel The remuneration of directors and other members of key management personnel during the year was as follow: Group 2012 Note Short term employee benefits Pension costs - Defined contribution plan 841,208 10,030,235 Included in the total compensation of key management personnel are: - Remuneration for the Companys directors - Remuneration for the Companys past directors - Directors fees for the Companys directors - Directors fees for the Companys past directors 6 6 6 6 3,191,790 166,000 2,077,360 534,505 165,000 15,000 2,766,519 156,000 1,691,220 334,505 141,000 15,000 554,939 6,952,171 461,646 4,582,206 300,733 3,076,103 RM 9,189,027 2011 RM 6,397,232 2012 RM 4,120,560 Company 2011 RM 2,775,370

The key management personnel comprise persons having authority and responsibility for planning, directing and controlling the activities of the Group entities either directly or indirectly.

114 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

28. EmPLoYEE BENEfIT EXPENSE Group 2012 Note Wages and salaries Social security costs Pension costs - defined contribution plans Overtime and allowances RM 18,877,302 120,749 1,881,751 1,310,626 2011 RM 14,955,988 134,376 1,498,437 1,063,705 2012 RM 4,484,951 8,657 542,572 213,017 Company 2011 RM 2,945,119 6,395 344,531 115,039

6 22,190,428 17,652,506 5,249,197 3,411,084 29. SEgmENTAL REPoRTINg (a) Reporting format For management purposes, the Groups primary segment is organised into business units based on their business industry and products and services produced, and has three reportable segments as follow: (i) (ii) The polymer segment is involved in manufacturing of advanced materials for the power cables and wires industry and the trading of various other related polymer compounds.

The oil & gas segment is involved in trading and distribution of specialty chemicals and catalysts, provision of heavy machineries and related manpower services, maintenance services for air-conditioning and ventilation system, and automatic welding services for offshore pipeline installation to the oil and gas industry. (iii) The technical services segment is involved in services in the construction, office maintenance and recycling services. This reporting segment has aggregated the construction and maintenance services segment, and recycling services segment, which are regarded by management to exhibit similar economic and business characteristics. Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss.

29. SEgmENTAL REPoRTINg (contd)

(b) Business segments The following table provides an analysis of the Groups revenue, results, assets and liabilities and other information by business segments: Oil & Gas 2012 RM RM RM RM RM RM RM RM 2011 2012 2011 2012 2011 2012 2011 RM Technical Services Others Group 2011

Polymer

2012

Note

RM

Revenue

Revenue from external customers 19,309,692 104,518,729 101,615,011 152,843,258 160,817,456 19,309,692 104,518,729 101,615,011 152,843,258 160,782,398 6,085 (35,058) (1,356,480) (381,200) (1,356,480) 1,362,565

19,561,296

414,630 278,285,848 282,156,789 (416,258)

Intersegment revenue

19,561,296

33,430 276,929,368 281,740,531

Results 1,130,425 21,181,136 16,862,250 11,819,959 6,232,685 (479,806) (640,382) 31,635,933 (661,573) 30,974,360 (4,067,968) 23,584,978 2,753,682 26,338,660 (3,973,337)

Segment results

(885,356)

Unallocated results

Profit from operations

Finance costs

Share of results of jointly controlled entities

14

1,480,297 28,386,689 (8,270,488) 20,116,201

1,394,943 23,760,266 (6,317,664) 17,442,602

Profit before tax

Income tax expense

Profit for the year

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

ANNUAL REPORT 2012 115

29. SEgmENTAL REPoRTINg (contd)

(contd)

(b) Business segments (contd)

The following table provides an analysis of the Groups revenue, results, assets and liabilities and other information by business segments: (contd) Oil & Gas 2012 RM RM RM RM RM RM RM RM 2011 2012 2011 2012 2011 2012 2011 RM Technical Services Others Group

Polymer 2011

2012

116 DAYA MATERIALS BERHAD (636357-W)

Note

RM

Assets and liabilities 21,581,993 120,003,472 128,889,346 148,274,733 126,906,184 9,089,835 4,718,635 298,347,221 282,096,158

Segment assets

20,979,181

Investment in jointly controlled entities

14

2,390,589 1,611,576 96,867,167

3,128,637 2,205,869 90,684,126 399,216,553 378,114,790

Tax recoverable

Unallocated assets

for the nancial year ended 31 December 2012

Total assets 640,756 11,128,899 26,992,794 70,417,238 65,390,020 123,824 387,139

Segment liabilities

516,566

82,186,527 3,775,701 81,329,139 811,789 199,570

93,410,709 5,772,156 66,723,821 629,094 951,306 168,302,726 167,487,086

Corporate liabilities

Loans and borrowings

23

Tax payable

NOTES TO THE FINANCIAL STATEMENTS

Deferred tax liabilities

15

Total liabilities

29. SEgmENTAL REPoRTINg (contd)

(b) Business segments (contd)

The following table provides an analysis of the Groups revenue, results, assets and liabilities and other information by business segments: (contd) Oil & Gas 2012 RM RM RM RM RM RM RM RM 2011 2012 2011 2012 2011 2012 2011 RM Technical Services Others Group

Polymer 2011

2012

Note

RM

Other information

Capital expenditure

Property, plant and equipment 250,863 7,495,858 6,744,734 2,290,574 6,951,586 639,895 4,096,766

25,869

10,452,196

18,043,949

Land held for property development 86,842 337,705 7,495,858 6,744,734 12,863,824 7,207,799 639,895 98,425 256,213 10,474,825 56,870 4,153,636

10

10,474,825 98,425 21,025,446

399,925 18,443,874

Intangible assets

12

25,869

Depreciation and amortisation

Property, plant and equipment 528,696 1,447 57,973 10,457 10,457 4,538 2,909,791 2,713,872 642,345 955,680 4,538 2,875

495,289

312,066 11,374

244,635 948 245,583

4,359,491 14,995 86,715 4,461,201

4,442,883 14,995 5,270 4,463,148

Investment properties

11

Intangible assets

12

17,368

512,657 530,143 2,920,248 2,724,329 704,856 963,093 323,440

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

ANNUAL REPORT 2012 117

118 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

29. SEgmENTAL REPoRTINg (contd) (c) Geographical segments: Revenue, segment assets and capital expenditures based on geographical location of customers and assets are as follows: Total revenue from external customers 2012 RM Malaysia Other Asian countries Consolidated 30. 276,218,426 710,942 276,929,368 2011 RM 280,961,616 784,315 281,745,931

Segment assets 2012 RM 295,390,060 2,957,161 298,347,221 2011 RM 282,029,260 66,898 282,096,158

Capital expenditure 2012 RM 21,025,446 21,025,446 2011 RM 18,376,976 66,898 18,443,874

The Groups operations are mainly located in Malaysia. FINANCIAL INSTRUmENTS (a) Financial risk management objectives and policies The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include interest rate risk, foreign currency risk, liquidity risk and credit risk. The Groups financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Groups business whilst managing its interest rate risk, foreign currency risk, liquidity risk and credit risk. The policies for managing each of these risks are summarised below. It is the Groups policy that no trading in derivative financial instruments shall be undertaken. The following sections provide details regarding the Groups and the Companys exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. (b) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Groups and of the Companys financial instruments will fluctuate because of changes in market interest rates. The Groups and the Companys exposure to interest rate risk arises primarily from their loans and borrowings and advances at floating rates given to related companies as the Group and the Company had no substantial long-term interest-bearing assets as at 31 December 2012. The investments in financial assets are mainly short term in nature and they are not held for speculative purposes. The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate on its loans and borrowings. The Group reviews its debt portfolio, taking into account the investment holding period and nature of its assets. This strategy allows it to capitalise on cheaper funding in a low interest rate environment and achieve a certain level of protection against rate hikes. At the reporting date, the Group and the Company do not have significant interest risk exposure except as disclosed below. Sensitivity analysis for interest rate risk

At the reporting date, if interest rates had been 100 basis points lower/higher, with all other variables held constant, the Groups and the Companys profit before tax would have been RM652,106 (2011: RM473,484) and RM30,092 (2011: RM75,567) higher/lower, arising mainly as a result of lower/higher interest expense on floating rate loan and borrowings and higher/ lower interest income from floating rate loans to related parties. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.

30. FINANCIAL INSTRUmENTS (contd) (b) Interest rate risk (contd)

The following tables set out the carrying amounts, the interest rates as at the reporting date and the remaining maturities of the Groups and of the Companys financial instruments that are exposed to interest rate risk: Interest rate 1-2 year RM RM RM RM RM RM 2-3 years 3-4 years 4-5 years Total % RM Within 1 year More than 5 years

Note

Group

At 31 December 2012

Fixed rate

Financial assets 2.15 - 3.29 29,781,427 29,781,427

Fixed deposits

20

Financial liabilities 7.60 2.34 - 4.72 4.00 4,957,033 1,181,371 1,144,834 956,611 724,559 302,619 326,437 352,129 379,843 409,738 632,752 143,624 986,213 1,914,390 5,626,340 4,957,033

Term loans

Hire purchase

23

RCSLN

23

Floating rate

Financial assets 1.83 - 2.95 5.55 592,427 600,352 3,620,798 78,916 3,620,798 1,271,695

Short term investments

20

Housing loan to a director

Financial liabilities 4.40 - 8.35 7.00 - 7.85 3.21 - 4.49 11,286,000 2,805,824 19,815,466 8,947,396 8,581,160 5,349,415 2,827,074 9,219,041 54,739,552 2,805,824 11,286,000

Term loans

Bank overdraft

23

NOTES TO THE FINANCIAL STATEMENTS

for the nancial year ended 31 December 2012

ANNUAL REPORT 2012 119

(contd)

Bankers acceptance

23

30. FINANCIAL INSTRUmENTS (contd) (b) Interest rate risk (contd)

(contd)

The following tables set out the carrying amounts, the interest rates as at the reporting date and the remaining maturities of the Groups and of the Companys financial instruments that are exposed to interest rate risk: (contd) Interest rate 1-2 year RM RM RM RM RM RM 2-3 years 3-4 years 4-5 years Total % RM Within 1 year More than 5 years

120 DAYA MATERIALS BERHAD (636357-W)

Note

Group

At 31 December 2011

Fixed rate

Financial assets 2.50 - 3.29 41,231,219 41,231,219

for the nancial year ended 31 December 2012

Fixed deposits

20

Financial liabilities 7.60 2.34 - 4.00 4.00 10,807,270 753,963 896,239 655,501 156,136 280,540 302,620 326,437 352,129 379,843 108,312 553,362 95,491 2,194,931 2,665,642 10,807,270

Term loan

Hire purchase

23

RCSLN

23

Floating rate

Financial assets 1.00 - 3.10 5.55 537,655 568,013 3,707,582 600,352 103,091 3,707,582 1,809,111

NOTES TO THE FINANCIAL STATEMENTS

Short term investments

20

Housing loan to a director

Financial liabilities 3.15 - 7.60 7.00 - 8.00 3,739,469 9,818,496 14,620,684 3,730,649 3,409,075 3,397,486 9,070,119 44,046,509 3,739,469 3,270,000

Term loans

Bank overdraft

23

Bankers acceptance 23 2.97 - 4.47 3,270,000

30. FINANCIAL INSTRUmENTS (contd) (b) Interest rate risk (contd)

The following tables set out the carrying amounts, the interest rates as at the reporting date and the remaining maturities of the Groups and of the Companys financial instruments that are exposed to interest rate risk: (contd) Interest rate 1-2 year RM RM RM RM RM RM 2-3 years 3-4 years 4-5 years Total % RM Within 1 year More than 5 years

Note

Company

At 31 December 2012

Fixed rate

Financial assets 3.10 3,332,910 3,332,910

Fixed deposits

20

Financial liabilities 2.44 - 2.60 4.00 4,957,033 116,125 122,182 128,239 129,767 88,266 7,491 592,070 4,957,033

Hire purchase

23

RCSLN

23

Floating rate

Financial assets 8.60 2.01 - 2.96 3,620,798 27,492,209 27,492,209 3,620,798

Amount due from subsidiaries

Short term investments

20

Financial liabilities 5.00 5.96 - 6.00 10,858,282 14,263,921 4,000,000 4,000,000 1,000,000 14,263,921 19,858,282

Amount due to subsidiaries

NOTES TO THE FINANCIAL STATEMENTS

for the nancial year ended 31 December 2012

ANNUAL REPORT 2012 121

Term loans

(contd)

30. FINANCIAL INSTRUmENTS (contd) (b) Interest rate risk (contd)

(contd)

The following tables set out the carrying amounts, the interest rates as at the reporting date and the remaining maturities of the Groups and of the Companys financial instruments that are exposed to interest rate risk: (contd) Interest rate 1-2 year RM RM RM RM RM RM 2-3 years 3-4 years 4-5 years Total % RM Within 1 year More than 5 years

122 DAYA MATERIALS BERHAD (636357-W)

Note

Company

At 31 December 2011

Fixed rate

Financial assets 2.85 - 3.10 4,070,225 4,070,225

for the nancial year ended 31 December 2012

Fixed deposits

20

Financial liabilities 2.50 - 3.77 4.00 10,807,270 83,653 88,276 92,899 97,522 97,615 95,759 555,724 10,807,270

Hire purchase

23

RCSLN

23

Floating rate

Financial assets 8.30 - 8.60 1.83 - 2.95 680,155 20,806,947 20,806,947 680,155

Amount due from subsidiaries

NOTES TO THE FINANCIAL STATEMENTS

Short term investments

20

Financial liabilities 4.75 - 5.00 5.63 - 6.00 5,950,348 222,511 7,757,500 222,511 13,707,848

Amount due to subsidiaries

Term loans

The other financial instruments of the Group and of the Company that are not included in the above tables are not subject to interest rate risk.

ANNUAL REPORT 2012 123

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

30. FINANCIAL INSTRUmENTS (contd) (c) Foreign exchange risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has transactional currency exposures arising from sales and purchases that are denominated in a currency other than the respective functional currencies of Group entities, primarily RM, Hong Kong Dollar (HKD) and Indonesian Rupiah (IDR). The foreign currencies in which these transactions are denominated are mainly United States Dollar (USD), European Dollar (EURO) and Singapore Dollar (SGD). Exposure to foreign currency risk The Groups and the Companys exposure to foreign currency (a currency which is other than the currency of the Group and of the Company) risk, based on carrying amounts as at the end of the reporting period was: 2012 Total Note Group Trade receivables Cash and cash equivalents Trade and other payables Exposure in the statement of financial position Approximate sales Approximate purchases 16(f ) 20(c) 24(e) 2,614,748 803,802 (1,689,108) 915,410 598,657 (612,402) 901,665 113,000 6,963,348 (6,850,348) 152,051 (1,008,785) (856,734) 231,140 681,135 (449,995) 2011 Total Note Group Trade receivables Cash and cash equivalents Trade and other payables Exposure in the statement of financial position Approximate sales Approximate purchases 16(f ) 20(c) 25,791,996 585,676 32,273 96,230 25,479,628 59,660 59,660 (430,902) (430,902) 193,974 (193,974) 280,095 429,786 709,881 784,315 784,315 RM USD RM denominated in EURO HKD SGD IDR 4,477 34,931 (59,824) (20,416) 15,607 (15,607) 1,694,861 18,163 (8,097) 1,704,927 710,942 710,942 RM USD RM denominated in EURO HKD SGD IDR

24(e) (20,878,868)

(410,599) (20,037,367) (282,096) 450,599 12,999,534 (12,548,935) 5,442,261 27,856,135 28,845,042 (988,907)

124 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

30. FINANCIAL INSTRUmENTS (contd) (c) Foreign exchange risk (contd) Exposure to foreign currency risk (contd) The Groups and the Companys exposure to foreign currency (a currency which is other than the currency of the Group and of the Company) risk, based on carrying amounts as at the end of the reporting period was: (contd) RM denominated in USD Note Company Trade and other receivables Cash and cash equivalents 16(f ) 20(c) 1,893 1,893 2,798,027 2,798,027 1,876,219 1,876,219 2012 2011 2012 HKD 2011

The Group is also exposed to currency translation risk arising from its net investments in foreign operations, including Hong Kong and Indonesia. The Groups net investment in Hong Kong and Indonesia are not hedged as currency position in HKD and IDR are considered to be long term in nature. At the reporting date, the Group and the Company do not have significant foreign currency risk exposure except as disclosed below. Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity of the Groups and of the Companys profit before tax to a reasonably possible change in the USD, EURO, SGD and IDR exchange rates against the respective functional currencies of the Group entities, with all other variables held constant.

Group 2012 Effect on profit before tax RM USD/RM - strengthen 10% (2011: 10%) USD/RM - weaken 10% (2011: 10%) EURO/RM - strengthen 10% (2011: 10%) EURO/RM - weaken 10% (2011: 10%) SGD/RM - strengthen 10% (2011: 10%) SGD/RM - weaken 10% (2011: 10%) IDR/RM - strengthen 10% (2011: 10%) IDR/RM - weaken 10% (2011: 10%) 90,167 (90,167) (85,673) 85,673 170,493 (170,493) 2011 Effect on profit before tax RM (28,210) 28,210 544,226 (544,226) (43,090) 43,090 70,988 (70,988)

The financial impact on the changes of the other currencies other than the above is not disclosed as it is not significant to the Group.

ANNUAL REPORT 2012 125

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

30. FINANCIAL INSTRUmENTS (contd) (c) Foreign exchange risk (contd) Sensitivity analysis for foreign currency risk (contd) Company 2012 Effect on profit before tax RM HKD/RM - strengthen 10% (2011: 10%) HKD/RM - weaken 10% (2011: 10%) 279,803 (279,803) 2011 Effect on profit before tax RM 187,622 (187,622)

(d) Liquidity risk Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Groups and the Companys exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Groups objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities. Analysis of financial instruments by remaining contractual maturities The table below summarises the maturity profile of the Groups and the Companys liabilities at the reporting date based on contractual undiscounted repayment obligations. 2012 Contractual cash flows Carrying amount Note Group Financial liabilities: Trade and other payables Loans and borrowings 24 23 85,637,534 81,329,139 166,966,673 Company Financial liabilities: Trade and other payables Loans and borrowings 24 23 18,416,037 25,407,385 43,823,422 18,416,037 16,641,469 35,057,506 9,284,722 9,284,722 18,416,037 25,926,191 44,342,228 85,637,534 41,893,480 127,531,014 39,157,422 39,157,422 4,162,015 4,162,015 85,637,534 85,212,917 170,850,451 RM On demand or within one year RM One to five years RM Over five years RM

Total RM

126 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

30.

FINANCIAL INSTRUmENTS (contd) (d) Liquidity risk (contd) Analysis of financial instruments by remaining contractual maturities (contd) The table below summarises the maturity profile of the Groups and the Companys liabilities at the reporting date based on contractual undiscounted repayment obligations. (contd) 2011 Contractual cash flows Carrying amount Note Group Financial liabilities: Trade and other payables Loans and borrowings 24 23 97,473,588 66,723,821 164,197,409 Company Financial liabilities: Trade and other payables Loans and borrowings 24 23 6,426,074 25,070,842 31,496,916 3,426,074 9,389,058 12,815,132 3,000,000 18,567,917 21,567,917 6,483 6,483 6,426,074 27,963,458 34,389,532 94,473,588 21,524,313 115,997,901 3,000,000 30,502,600 33,502,600 18,800,719 18,800,719 97,473,588 70,827,632 168,301,220 RM On demand or within one year RM One to five years RM Over five years RM

Total RM

(e) Credit risk Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Groups and the Companys exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including short term investments and cash and cash equivalents), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties. The Groups objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Groups policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Groups exposure to bad debts is not significant. Exposure to credit risk The carrying amount of each class of financial assets recognised in the statements of financial position. Information regarding credit enhancements for trade and other receivables is disclosed in Note 16(c).

ANNUAL REPORT 2012 127

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

30.

FINANCIAL INSTRUmENTS (contd) (e) Credit risk (contd) Credit risk concentration profile The Group determines concentrations of credit risk by monitoring the country of its trade receivables on an ongoing basis. The credit risk concentration profile of the Groups trade receivables at the reporting date are as follows: 2012 Note By country: Malaysia Other countries 16 46,445,817 1,694,861 48,140,678 96 4 100 74,284,045 312,368 74,596,413 100 100 RM % of total RM 2011 % of total

Financial assets that are neither past due nor impaired Information regarding trade receivables that are neither past due nor impaired is disclosed in Note 16. Deposits with banks and short term investments that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default. Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Note 16. Fair values of financial instruments (i) Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value 2012 Note Carrying amount RM Group Financial Redeemable Convertible Secured Loan Notes Company Financial liabilities Redeemable Convertible Secured Loan Notes 23 4,957,033 4,913,155 10,807,270 10,617,869 Fair value RM Carrying amount RM 2011 Fair value RM

(f)

23

4,957,033

4,913,155

10,807,270

10,617,869

The fair value of redeemable convertible secured loan note (RCSLN) has been determined using a valuation technique through the discounting of expected future cash flows throughout the terms of RCSLN at the rate of 6.00% (2011: 5.97%).

128 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

30.

FINANCIAL INSTRUmENTS (contd) (f) Fair values of financial instruments (contd) (ii) Determination of fair value Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value: Group 2012 Note Financial assets Trade and other receivables Cash and cash equivalents Financial liabilities Term loans Hire purchase payables Bankers acceptance Bank overdraft Trade and other payables 23 23 23 24 56,653,942 5,626,340 11,286,000 2,805,824 85,637,534 46,241,440 2,665,642 3,270,000 3,739,469 97,473,588 19,858,282 592,070 18,416,037 13,707,848 555,724 6,426,074 16 20 73,321,636 66,412,033 87,785,216 62,840,884 32,323,788 11,798,484 24,995,827 5,224,754 RM 2011 RM 2012 RM Company 2011 RM

As the current interest rates do not differ significantly from the intrinsic value of these financial instruments, the fair values of these financial instruments therefore, closely approximate their carrying values as at the reporting date.

31. CAPITAL mANAgEmENT The primary objective of the Groups capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholders value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividends payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2012 and 31 December 2011.

ANNUAL REPORT 2012 129

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

31. CAPITAL mANAgEmENT (contd) The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. Under the requirement of Bursa Malaysia Securities Berhads Practice Note No. 17/2005, the Group is required to maintain a consolidated shareholders equity equal to or not less than the 25% of the issued and paid-up capital (excluding treasury shares) and such shareholders equity is not less than RM40 million. The Group includes within net debt, loans and borrowings less cash and cash equivalents. Capital includes equity attributable to the owners of the parent. Group 2012 Note Loan and borrowings Less: Cash and cash equivalents Net debt Equity attributable to the owners of the parent Capital and net debt Gearing ratio 23 20 RM 81,329,139 (66,412,033) 14,917,106 230,968,410 245,885,516 6.07% 2011 RM 66,723,821 (62,840,884) 3,882,937 210,627,704 214,510,641 1.81% 2012 RM 25,407,385 (11,798,484) 13,608,901 175,292,178 188,901,079 7.20% Company 2011 RM 25,070,842 (5,224,754) 19,846,088 173,218,924 193,065,012 10.28%

32. SIgNIfICANT EVENTS Group (a) Purchase of commercial properties (i) On 15 August 2012, the Group, via its direct wholly owned subsidiary, Daya Urusharta Sdn. Bhd. entered into five conditional Sale and Purchase Agreements with Mr. Nathan Tham Jooi Loon, for the proposed acquisition of five office units of a stratified mixed commercial development in Dutamas, Daerah Kuala Lumpur with a total net area of approximately 5,016 square feets for a total consideration of RM3,192,400. On 8 November 2012, the Group via its direct wholly owned subsidiary, Daya Urusharta Sdn. Bhd. entered into six Sale and Purchase Agreements with Delight 2000 Holdings Sdn. Bhd. for the acquisition of two units of three storey shopoffice and four units of two storey shop office under the leasehold land of under P.N. 48236, Lot No. 42781 in Mukim of Petaling, Kuala Lumpur for a total consideration of RM8,400,000.

(ii)

(b) Purchase of land held for property development (c) On 9 January 2012, the Group via its sub-subsidiary, Ultrafest Sdn. Bhd. (USB) entered into Sale and Purchase Agreement to acquire a piece of land in the District of Paper, Sabah for total consideration of RM2,212,500. USB has also entered into a Trust Deed on 15 March 2012 with Junior Koh Siew Hui (Trustee) whereby the Trustee has purchased four parcels of land in the District of Paper, Sabah on behalf of USB for a total consideration of RM7,272,500. Group re-organisation on investment in Daya Petroleum Ventures Sdn. Bhd.

On 2 August 2012, through the Internal Group Re-Organisation Plan, the Company acquired 800 ordinary shares of RM1.00 each in Daya Petroleum Ventures Sdn. Bhd. (formerly known as Metriwell Sdn. Bhd.) (DPV), a sub-subsidiary of a subsidiary of the Company, Daya Secadyme Sdn. Bhd. representing 80% of the issued and paid-up share capital of DPV for a cash consideration of RM800 from a wholly-owned sub-subsidiary of the Company, Seca Engineering and Manpower Services Sdn. Bhd.

130 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

32. SIgNIfICANT EVENTS (contd) Group (contd) (d) Incorporation of a sub-subsidiary The Group had on 19 November 2012 via its subsidiary, Daya OCI Sdn. Bhd. incorporated a limited liability company known as Daya OCI (Labuan) Limited (formerly known as Daya OCI (Labuan) Berhad) (DOCIL). DOCIL is to principally engage in the shipping leasing business and other related services to the oil and gas industry.

(e) Acquisition of a sub-subsidiaries (i) On 14 February 2012, the Group, via its direct wholly owned sub-subsidiary, Daya Land & Development Sdn. Bhd. acquired 2 ordinary shares of RM1 each in Zen Projects Sdn. Bhd. (ZPSB) and Terra Hill Development Sdn. Bhd. (THDSB) for a total consideration of RM2 each, representing 100% equity interest in ZPSB and THDSB.

(ii)

(f)

On 30 November 2012, the Group, via its direct wholly owned subsidiary, Daya CMT Sdn. Bhd. acquired 2 ordinary shares of RM1 each in Daya E&C Sdn. Bhd. (DECSB), for a total cash consideration of RM2 from Mr. Nathan Tham Jooi Loon and Mr. Tham Wooi Loon, representing 100% equity interest in DECSB. The principal activities of DECSB are provision of electrical, mechanical engineering and construction works. DECSB has yet to commence operation. Joint Venture Agreement On 20 November 2012, the Group, via its direct wholly owned subsidiary, Daya Land & Development Sdn. Bhd. entered into a Shareholders Agreement with Chang Cheng Realty Sdn. Bhd. to jointly develop and construct one block of 28 storey retail/ showroom/service suites, forty blocks of four storey shop office and eight blocks of three storey shops on four parcels of empty land held located at Jalan Pintas in the District of Penampang, Sabah, Malaysia to be undertaken by a single-purpose joint venture company, Semangat Global Sdn. Bhd.

Company (a) Conversion of Redeemable Convertible Secured Loan Notes On 20 January 2012, the Company announced that 17,421,603 new ordinary shares of DMB Shares were issued pursuant to the conversion of RM3 million Redeemable Convertible Secured Loan Notes at a conversion price of RM0.1722 per DMB share and these shares were listed on Bursa Malaysia Securities Berhad on 25 January 2012. Subsequently, on 14 May 2012, the Company announced that a further 17,421,603 new DMB Shares were issued pursuant to the conversion of RM3 million Redeemable Convertible Secured Loan Notes at a conversion price of RM0.1722 per DMB share and these shares were listed on Bursa Malaysia Securities Berhad on 15 May 2012.

(b) Private Placement in 2011 On 11 May 2011, the Board announced that the Company proposes to issue up to 238,000,000 new ordinary shares of RM0.10 each in the Company (DMB Shares) representing up to 20.89% of the existing issued and paid-up share capital of the Company through a private placement exercise. A total of 85,000,000 DMB Shares were placed out to identify investors in three (3) tranches, at an issue price of RM0.225 for the first tranche and RM0.22 per share for the second and third tranches. On 23 November 2012, the Board announced that the Company does not intend to seek for any further extension of time for the implementation of the private placement which has lapsed on 24 November 2012.

(c) Shares Buy Back During the financial year, the Company acquired 13,888,600 (2011: 1,787,100) shares in the Company through purchases on the Bursa Malaysia Securities Berhad. The total amount paid to acquire the shares was RM2,732,320 (2011: RM317,049) and this was presented as a component within shareholders equity.

ANNUAL REPORT 2012 131

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

32. SIgNIfICANT EVENTS (contd) Company (contd) (d) Partial disposal of shares in subsidiaries The Company had on 21 September 2012 completed its disposal of 250,992 ordinary shares of RM1.00 each in Daya Secadyme Sdn. Bhd. (DSSB) and 1,245,000 ordinary shares of RM1.00 each in Daya OCI Sdn. Bhd. (DOCI) representing 24.9% of the issued and paid-up share capital of DSSB and DOCI respectively to Rancak Nikmat Sdn. Bhd. for a total cash consideration of RM19,000,000 and RM11,500,000 respectively. 33. DIVIdENdS Dividends in respect of year 2012 RM Proposed: Single tier dividends of 2.5% on 1,234,001,750 ordinary shares Single tier dividends of 2.5% on 1,199,158,544 ordinary shares Recognised during the year: Single tier dividends of 2.5% on 1,229,607,650 ordinary shares Single tier dividends of 2.4% on 1,199,158,544 ordinary shares 2011 RM Dividends recognised in year 2012 RM 2011 RM

3,085,004

2,997,896

3,074,022

3,085,004

2,997,896

3,074,022

2,877,982 2,877,982

At the forthcoming Annual General Meeting, a single tier dividends of 2.5% in respect of the financial year ended 31 December 2012 will be proposed for shareholders approval. The financial statements for the current financial year do not reflect this proposed dividends. Such dividends, if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 December 2013. 34. SUBSEQUENT EVENTS Group (a) Acquisition of a sub-subsidiary The Group, via its subsidiary, Daya Petroleum Ventures Sdn. Bhd. (formerly known as Metriwell Sdn. Bhd.) had on 18 March 2013 entered into a Subscription Agreement with Daya Maxflo Sdn. Bhd. (formerly known as Maxflo Energy Products Sdn. Bhd.) (Maxflo), Sales and Purchase Agreement with Jay Dorfman, Shareholders Agreement and Call and Put Option Agreement with Jay Dorfman and Visual Well Solutions Sdn. Bhd. for the proposed acquisition of 50.70% of the issued and paid up share capital of Maxflo for a cash consideration of RM1,900,000. The acquisition was completed on 5 April 2013.

132 DAYA MATERIALS BERHAD (636357-W)

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

34. SUBSEQUENT EVENTS (contd) Group (contd) b) Acquisition of a joint venture company On 20 November 2012, the Group, via its direct wholly owned sub-subsidiary, Daya Land & Development Sdn. Bhd. (DLD) entered into a Shareholders Agreement with Chang Cheng Realty Sdn. Bhd. to jointly develop and construct one block of 28 storey retail/showroom/service suites, forty blocks of four storey shop office and eight blocks of three storey shops on four parcels of empty land held located at Jalan Pintas in the District of Penampang, Sabah, Malaysia to be undertaken by a singlepurpose joint venture company, Semangat Global Sdn. Bhd. (SGSB). On 1 March 2013, the Group, via its direct wholly owned sub-subsidiary, DLD subscribed for 102,000 ordinary shares of RM1.00 each of SGSB for a cash consideration of RM102,000. Group re-organisation on investment in Seca Chemicals and Catalysts Sdn. Bhd. and Daya Offshore Construction Sdn. Bhd. (formerly known as SD Equipment Sdn. Bhd.) On 2 January 2013, through the Internal Group Re-organisation Plan, the Company acquired 100,000 and 10,000 ordinary shares of RM1.00 each in Seca Chemicals and Catalysts Sdn. Bhd. (SCCSB) and Daya Offshore Construction Sdn. Bhd. (formerly known as SD Equipment Sdn. Bhd.) (DOCSB), sub-subsidiaries of a subsidiary of the Company, Daya Secadyme Sdn. Bhd. (DSSB) representing 100% of the issued and paid-up share capital of SCCSB and DOCSB for a cash consideration of RM2,754,855 and RM10,000 respectively from DSSB.

(c)

Company (a) Conversion of Redeemable Convertible Secured Loan Notes On 28 February 2013, the Company announced that 14,518,002 new ordinary shares of RM0.10 each in the Company (DMB Shares) were issued pursuant to the conversion of RM2.5 million Redeemable Convertible Secured Loan Notes at a conversion price of RM0.1722 per DMB share and these shares were listed on Bursa Malaysia Securities Berhad on 1 March 2013.

(b) Partial disposal of shares in subsidiaries The Company had on 8 March 2013 entered into four Share Sale Agreements with Wiramas Baiduri Sdn. Bhd. for the disposal of 81,648 ordinary shares of RM1.00 each in Daya Secadyme Sdn. Bhd. (DSSB) representing 8.10% of the issued and paid-up share capital of DSSB, 405,000 ordinary shares of RM1.00 each in Daya OCI Sdn. Bhd. (DOCI) representing 8.10% of the issued and paid-up share capital of DOCI, 544,500 ordinary shares of RM1.00 each in Daya Proffscorp Sdn. Bhd. (DPRO) representing 33% of the issued and paid-up share capital of DPRO and 101,500 ordinary shares of RM1.00 each in Daya Petroleum Ventures Sdn. Bhd. (formerly known as Metriwell Sdn. Bhd.) (DPV) representing 29% of the issued and paid-up share capital of DPV at the cash consideration of RM6,500,000, RM3,700,000, RM6,700,000 and RM101,500 respectively.

The disposal was completed on 5 April 2013. 35. AUTHoRISATIoN of fINANCIAL STATEmENTS foR ISSUE The financial statements for the year ended 31 December 2012 were authorised for issue in accordance with a resolution of the directors on 22 April 2013.

ANNUAL REPORT 2012 133

NOTES TO THE FINANCIAL STATEMENTS


for the nancial year ended 31 December 2012
(contd)

36. SUPPLEmENTARY INfoRmATIoN - BREAKdoWN of RETAINEd PRofITS INTo REALISEd ANd UNREALISEd The breakdown of the retained profits of the Group and of the Company as at 31 December 2012 and 2011 into realised and unrealised 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 and Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

Realised and unrealised profits/(losses) Group 2012 Note Total retained profits: - Realised - Unrealised 117,989,371 (290,195) 117,699,176 Less: Consolidation adjustments Total retained profits 22 (29,662,350) 88,036,826 102,239,534 (2,575,238) 99,664,296 (28,724,232) 70,940,064 15,425,577 (42,716) 15,382,861 15,382,861 16,622,273 (175,436) 16,446,837 16,446,837 RM 2011 RM 2012 RM Company 2011 RM

134 DAYA MATERIALS BERHAD (636357-W)

DIRECTORS RESPONSIBILITIES STATEMENT


on Financial Statements

In accordance with the Companies Act, 1965, the Directors of the Company are required to prepare financial statements for each financial year which shall give a true and fair view of the financial position of the Company and of the Group as at the end of the financial year and of their results and their cash flows of the Company and of the Group for the financial year. The Directors are responsible to ensure that the Company and the Group keep proper accounting records to enable the Company to disclose, with reasonable accuracy and without any material misstatement in the financial statements, the financial position, the results and the cash flows of the Company and of the Group. The Directors are also responsible to ensure that the financial statements comply with the Companies Act, 1965 and the relevant accounting standards. In preparing the financial statements for the financial year ended 31 December 2012, the Directors have:- - - - adopted the appropriate accounting policies, which are consistently applied; made judgements and estimates that are reasonable and prudent; ensured applicable accounting standards have been followed, subject to any material departures which will be disclosed and explained in the financial statements; and prepared the financial statements on the assumption that the Company and the Group will operate as a going concern.

The Directors have provided the auditors with every opportunity to take all steps, undertake all inspections and seek all explanations they considered to be appropriate for the purpose of enabling them to give their audit report on the financial statements.

ANNUAL REPORT 2012 135

ANALYSIS OF SHAREHOLDINGS
as at 30 April 2013

Authorised share capital : Issued and fully paid-up share capital : Class of Shares : Voting Rights : DISTRIBUTION OF SHAREHOLDINGS

2,000,000,000 ordinary shares of RM0.10 each 1,248,519,752 ordinary shares of RM0.10 each (including 15,720,700 ordinary shares of RM0.10 each retained as Treasury Shares) Ordinary shares of RM0.10 each One vote per ordinary share held

Size of Shareholdings 1-99 100-1,000 1,001-10,000 10,001-100,000 100,001-61,639,951* 61,639,952 and above** TOTAL
Notes: * ** - Less than 5% of issued shares - 5% and above of issued shares

No. of Shareholders 145 135 1,225 3,016 826 0 5,347

% of Shareholders 2.71 2.52 22.91 56.41 15.45 0 100.00

No. of Shares 8,069 59,820 9,231,840 122,433,695 1,101,065,628 0 1,232,799,052

% of Issued capital 0.00 0.00 0.75 9.93 89.31 0 100.00

SUBSTANTIAL SHAREHOLDERS AS AT 30 APRIL 2013 According to the Register of Substantial Shareholders required to be kept under Section 69L of the Companies Act, 1965, the following are the substantial shareholders of the Company: Number of Shares Held Name of Substantial Shareholders Dato Mazlin Bin Md Junid Dato Sri Koh Kin Lip JP Nathan Tham Jooi Loon Lim Soon Foo
*
^ #

Direct 134,359,386 78,115,098 69,370,198 61,329,098

% 10.90 6.34 5.63 4.98

Indirect 20,000,720^ 4,709,998


#

% 1.62 0.38 0.02

279,000*

Indirect Interest via the shareholdings of his children pursuant to Section 134 (12)(c) of the Companies Act, 1965 Indirect Interest via the shareholdings of his spouse pursuant to Section 134 (12)(c) of the Companies Act, 1965 Indirect Interest via the shareholdings of his son pursuant to Section 134 (12)(c) of the Companies Act, 1965

136 DAYA MATERIALS BERHAD (636357-W)

ANALYSIS OF SHAREHOLDINGS
as at 30 April 2013
contd

DIRECTORS INTEREST AS AT 30 APRIL 2013 According to the Register of Directors Shareholding required to be kept under Section 134 of the Companies Act, 1965, the Directors interest in the ordinary share capital of the Company are as follows: Direct Interest 134,359,386 78,115,098 69,370,198 199,998 61,329,098 279,000 Indirect Interest 20,000,720^ 4,709,998# 279,000* 61,329,098**

Name of Directors Dato Azmil Khalili Bin Khalid Dato Mazlin Bin Md Junid Dato Sri Koh Kin Lip JP Nathan Tham Jooi Loon Fazrin Azwar Bin Md. Nor Lim Soon Foo Ronnie Lim Hai Liang (Alternate Director to Lim Soon Foo)
* **
^ #

% 10.90 6.34 5.63 0.02 4.98 0.02

% 1.62 0.38 0.02 4.98

Indirect Interest via the shareholdings of his children pursuant to Section 134 (12)(c) of the Companies Act, 1965 Indirect Interest via the shareholdings of his spouse pursuant to Section 134 (12)(c) of the Companies Act, 1965 Indirect Interest via the shareholdings of his son pursuant to Section 134 (12)(c) of the Companies Act, 1965 Indirect Interest via the shareholdings of his father pursuant to Section 134 (12)(c) of the Companies Act, 1965

THIRTY LARGEST SHAREHOLDERS AS AT 30 APRIL 2013 No. of Shares 57,729,900 53,500,000 46,547,998 41,767,598 41,028,200 31,461,438 29,359,386 25,325,100 24,680,000 24,239,998 22,890,000 21,252,200 20,562,200 % of Issued capital 4.68 4.34 3.78 3.39 3.33 2.55 2.38 2.05 2.00 1.97 1.86 1.72 1.67

Name of Shareholders 1 2 3 4 5 6 7 8 9 RHB Capital Nominees (Asing) Sdn Bhd - Robert Yee Seng Lee EB Nominees (Tempatan) Sendirian Berhad - Pledged Securities Account for Mazlin bin Md Junid (SFC) CIMSEC Nominees (Tempatan) Sdn Bhd - CIMB Bank for Tham Jooi Loon (MM1102) HSBC Nominees (Asing) Sdn Bhd - Exempt An for Credit Suisse (SG BR-TST-ASING) Capital Nexus Sdn Bhd Amsec Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Koh Kin Lip Kenanga Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Mazlin bin Md Junid RHB Capital Nominees (Asing) Sdn Bhd - Pledged Securities Account for Lim Chai Beng (CEB) Kenanga Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Koh Siew Kong

10 Kenanga Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Tham Wooi Loon 11 Kenanga Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Koh Kin Lip 12 RHB Capital Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Tham Jooi Loon 13 RHB Capital Nominees (Tempatan) Sdn Bhd - Ng Chin San

ANNUAL REPORT 2012 137

ANALYSIS OF SHAREHOLDINGS
as at 30 April 2013
contd

THIRTY LARGEST SHAREHOLDERS AS AT 30 APRIL 2013 (contd) No. of Shares 19,000,000 18,000,000 17,740,822 17,640,000 14,500,000 13,593,600 13,000,000 12,948,600 12,283,200 12,000,000 11,000,000 10,951,500 10,350,000 10,312,000 10,293,300 8,610,000 8,479,198 661,046,238 % of Issued capital 1.54 1.46 1.44 1.43 1.18 1.10 1.05 1.05 1.00 0.97 0.89 0.89 0.84 0.84 0.83 0.70 0.69 53.62

Name of Shareholders 14 Maybank Securities Nominees (Asing) Sdn Bhd - Maybank Kim Eng Securities Pte Ltd for Firstlink Investments Corporation Limited 15 Citigroup Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Mazlin bin Md Junid (000190663) 16 Cartaban Nominees (Tempatan) Sdn Bhd - COPE-KPF Opportunities 1 Sdn Bhd 17 CIMSEC Nominees (Tempatan) Sdn Bhd - CIMB Bank for Koh Kin Lip (MY0502) 18 RHB Capital Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Mazlin bin Md Junid 19 RHB Capital Nominees (Tempatan) Sdn Bhd - Ganjaran Lebar Sdn Bhd 20 HLB Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Lim Chai Beng 21 Cartaban Nominees (Asing) Sdn Bhd - Exempt An for BOCI Securities Ltd (Clients A/C) 22 RHB Capital Nominees (Tempatan) Sdn Bhd - Tee Kiat Ann 23 Citigroup Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Tham Wooi Loon (010531334) 24 Alliancegroup Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Mazlin bin Md Junid (8079781) 25 RHB Capital Nominees (Tempatan) Sdn Bhd - Lim Soon Foo 26 Citigroup Nominees (Tempatan) Sdn Bhd - Pledged Securities Account for Mohd Zaidi bin Razali (005042294) 27 Lew Yuen Kee @ Lew Ah Kee 28 Koh Siew Kong 29 Lim Soon Foo 30 Song Tae Chin TOTAL

138 DAYA MATERIALS BERHAD (636357-W)

ADDITIONAL COMPLIANCE INFORMATION

SHARE BUY-BACK The details of shares bought back/cancelled for the financial year ended 31 December 2012 are as follows: Purchase Price Per Share (RM) Number of shares purchased retained in treasury (units) 355,000 41,100 541,500 1,669,400 3,296,000 6,036,000 77,900 600,000 1,271,700 13,888,600

Monthly Breakdown Brought Back April 2012 May 2012 June 2012 July 2012 August 2012 September 2012 October 2012 November 2012 December 2012 Total

Lowest 0.200 0.195 0.195 0.195 0.195 0.190 0.190 0.190 0.180

Highest 0.200 0.195 0.195 0.195 0.200 0.200 0.190 0.190 0.190

Average Cost Per Share (RM) 0.201 0.196 0.196 0.196 0.199 0.198 0.191 0.191 0.186 0.197

Total Consideration (RM) 71,518 8,074 106,364 327,519 657,019 1,195,722 14,909 114,832 236,363 2,732,320.46

Number of Treasury Shares Cancelled -

During the financial year under review, the Company purchased in the open market a total of 13,888,600 of its own issued shares and retained as treasury shares. None of the treasury shares has been resold or cancelled. As at 31 December 2012, the Company held a total of 15,675,700 ordinary shares as treasury shares. OPTIoNS, WARRANTS oR CoNVERTIBLE SECURITIES The Company did not issue any options, warrant or convertible securities during the financial year ended 31 December 2012. AmERICAN DEPoSIToRY RECEIPT (ADR)/GLoBAL DEPoSIToRY RECEIPT (GDR) PRogRAmmE The Company did not sponsor any ADR/GDR Programme during the financial year under review. ImPoSITIoN of SANCTIoNS ANd/oR PENALTIES There were no sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by any relevant regulatory bodies during the financial year under review. NoN-AUdIT FEES Non-audit fees totaling RM55,000 was paid to the external auditors, Messrs Ernst & Young, by the Group for the financial year ended 31 December 2012 for review of internal control and financial due diligence relating to an acquisition of a private limited company. PRofIT ESTImATES, FoRECAST oR PRojECTIoN The Company did not issue any profit estimate, forecast or projection for the financial year ended 31 December 2012.

ANNUAL REPORT 2012 139

ADDITIONAL COMPLIANCE INFORMATION


contd

VARIATIoN IN RESULTS There was no material variation between the audited results for the financial year ended 31 December 2012 and the unaudited results of the Group as previously announced. PRofIT GUARANTEE The Company did not issue any profit guarantee during the financial year under review. MATERIAL CoNTRACT INVoLVINg DIRECToRS ANd MAjoR SHAREHoLdERS There are no material contracts entered into by the Company and its subsidiaries which involved the interests of the Directors and major shareholders, either still subsisting at the end of the financial year ended 31 December 2012, or which were entered into since the end of the previous financial year. RECURRENT RELATEd PARTY TRANSACTIoNS of A REVENUE oR TRAdINg NATURE Details of the recurrent related party transactions of a revenue or trading nature entered into by the Group is disclosed in Note 27 to the financial statements on pages 112 and 113. MATERIAL CoNTRACT RELATINg To LoANS There are no material contracts relating to loan involving the interests of the Directors and major shareholders during the financial year under review. UTILISATIoN of PRoCEEdS Private Placement 2011 The Company raised approximately RM13.2 million from its private placement exercise proposed in year 2011. As at 31 December 2012, the Company has fully utilised the funds raised. Private Placement 2010 The Company raised approximately RM22.461 million from its private placement exercise proposed in year 2010. As at 31 December 2012, the Company has fully utilised the funds raised.

140 DAYA MATERIALS BERHAD (636357-W)

LIST OF PROPERTIES 2012

Registered Owner/Location Daya Polymer Sdn Bhd 1744, Jalan Industri Dua, Taman Industri Bukit Panchor, 14300 Nibong Tebal, Penang, Malaysia. Daya Secadyme Sdn Bhd Lot No. 5410, Kawasan Perindustrian, Teluk Kalong, 24007 Kemaman, Terengganu Darul Iman, Malaysia. Daya Secadyme Sdn Bhd Suite B-5-2, Setiawangsa Business Suites, Jalan Setiawangsa 11, Taman Setiawangsa, 54200 Kuala Lumpur, Malaysia. Daya Secadyme Sdn Bhd Lot PT 8052, Kawasan Perindustrian, Teluk Kalong, 24007 Kemaman, Terengganu Darul Iman, Malaysia. Daya CMT Sdn Bhd Plot 81 Lebuhraya Kampung Jawa, Bayan Lepas, 11900 Pulau Pinang, Malaysia. Daya CMT Sdn Bhd 72 Jalan Badlishah, 09100 Baling, Kedah Darul Aman, Malaysia. Daya CMT Sdn Bhd 16-1-10 Jalan Tun Dr. Awang MK 13, 11900 Penang, Malaysia. Daya CMT Sdn Bhd Lot No. 736 Mukim 1, Jalan Pulau Betong, Balik Pulau, Daerah Barat Daya Pulau Pinang, Malaysia.

Description And Existing Use Industrial land with factory, warehouse and office Industrial land with warehouse and office

Land/ Built Up Area (sq ft) 136,389/ 81,628

Tenure Freehold

Approximate Age of Building 15 years

Net Book Value as at 31.12.2012 (RM) 8,607,041

Date of Last Revaluation 13 October 2008

215,280/ 1,680

Leasehold 60 years expiring 7 September 2064

5 years

8,206,481

27 November 2008

Business/ Office

N/A/ 3,229

Freehold

6 years

539,730

4 October 2004

Industrial land

20,000/ N/A

Leasehold 60 years expiring 5 November 2069

3 year

1,184,556

NIL

Industrial land with warehouse and office 3 Storey shophouse

46,478/ 20,748

Leasehold 60 years expiring 2 November 2048 Freehold

13 years

2,116,054

7 July 2008

N/A/ 2,314

15 years

290,421

7 July 2008

Apartment

N/A/ 700 23,573/ N/A

Freehold

18 years

55,355

7 July 2008

Vacant Land

Freehold

17 years

51,964

7 July 2008

ANNUAL REPORT 2012 141

LIST OF PROPERTIES 2012


(contd)

Registered Owner/Location Daya Clarimax Sdn Bhd Lot No. 38, Jalan Sungai Pinang 5/1, Seksyen 5, Phase 2A, Taman Perindustrian Pulau Indah, 42920 Port Klang, Selangor Darul Ehsan, Malaysia. Daya Proffscorp Sdn Bhd Lot 3997, Kawasan Perindustrian, Teluk Kalong, 24007 Kemaman, Terengganu Darul Iman, Malaysia. Daya Proffscorp Sdn Bhd Lot 4597, Kawasan Perindustrian, Teluk Kalong, 24007 Kemaman, Terengganu Darul Iman, Malaysia. Daya Proffscorp Sdn Bhd Lot 4835, Kawasan Perindustrian, Teluk Kalong, 24007 Kemaman, Terengganu Darul Iman, Malaysia. Daya OCI Sdn Bhd No 9 & 11, Jalan P/8, Kawasan Perindustrian Bangi, Seksyen 13, 43650 Bandar Baru Bangi, Selangor, Malaysia. Daya OCI Sdn Bhd Unit No. B-3A-4, Block B, Level 3A, Unit 4, Megan Avenue II, No 12 Jalan Yap Kwan Seng, 50450 Kuala Lumpur, Malaysia. Daya Urusharta Sdn Bhd D5-1-6, D5-1-7, D5-1-8, D5-1-9, D5-1-10 Solaris Dutamas, No.1, Jalan Dutamas 1, 50480 Kuala Lumpur

Description And Existing Use Industrial land with warehouse and office

Land/ Built Up Area (sq ft) 113,053/ 28,364

Tenure Leasehold 99 years expiring on 14 February 2104

Approximate Age of Building 7 years

Net Book Value as at 31.12.2012 (RM) 8,941,962

Date of Last Revaluation 2 June 2008

Industrial land with warehouse and office

107,600/ 18,725

Leasehold 60 years expiring 26 March 2059

5 years

1,689,368

NIL

Industrial land with workshop

53,908/ 3,720

Leasehold 60 years expiring 10 September 2060 Leasehold 60 years expiring 28 January 2063

11 years

291,253

NIL

Industrial land

53,822/ 1,600

4 years

301,264

NIL

Industrial land with warehouse and office

21,312/ 13,701

99 years lease expiring on 29 Sept 2086

26 years

2,311,430

10 Aug 2010

Vacant Business/ Office

N/A/ 2,293

Grant-inperpetuiti (freehold)

14 years

408,000

27 Aug 2010

Business/ Office

N/A/ 5,178

Freehold

6 years

3,471,987

NIL

142 DAYA MATERIALS BERHAD (636357-W)

LIST OF PROPERTIES 2012


(contd)

Registered Owner/Location Ultrafest Sdn Bhd CL 025134883, Kampong Gadong Kimanis Off Jalan Kimanis-Keningau District of Papar, Sabah Ultrafest Sdn Bhd (Beneficially owner) NT 023097841 NT 023097850 NT 023097863 NT 023097878 Kampong Gadong Kimanis Off Jalan Kimanis-Keningau District of Papar, Sabah

Description And Existing Use Proposed development of industrial/ factory units Proposed development of industrial/ factory units

Land/ Built Up Area (sq ft) 385,506/ NA

Tenure Leasehold

Approximate Age of Building NA

Net Book Value as at 31.12.2012 (RM) 2,305,389

Date of Last Revaluation NIL

1,267,160/ NA

Freehold

NA

7,331,869

NIL

ANNUAL REPORT 2012 143

NOTICE OF TENTH ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Tenth Annual General Meeting of the Company will be held at MTD Group Building, Ground Floor, No. 1, Jalan Batu Caves, 68100 Batu Caves, Selangor Darul Ehsan on Tuesday, 18 June 2013 at 10.30 a.m. for the following purposes: AGENDA As Ordinary Business 1. 2. 3. 4. To receive the Audited Financial Statements for the financial year ended 31 December 2012 together with the Directors and Auditors Reports thereon. To approve the payment of a single tier final dividend of 2.5% for the financial year ended 31 December 2012. To approve the payment of Directors fees of RM156,000.00 for the financial year ended 31 December 2012. To re-elect the following directors retiring in accordance with Article 104 of the Companys Articles of Association: a) b) 5. Dato Azmil Khalili bin Khalid Mr. Nathan Tham Jooi Loon Ordinary Resolution 3 Ordinary Resolution 4 Ordinary Resolution 5 (Please refer to Explanatory Notes to the Agenda) Ordinary Resolution 1 Ordinary Resolution 2

To re-appoint Messrs Ernst & Young as the Companys auditors for the ensuing year and to authorise the Board of Directors to fix their remuneration. As Special Business To consider and, if thought fit, pass the following ordinary and special resolutions: 6. Authority for Directors to issue and allot shares in the Company pursuant to Section 132D of the Companies Act, 1965 THAT pursuant to Section 132D of the Companies Act, 1965, and subject always to the approval of the relevant authorities, the Directors be and are hereby empowered to issue and allot shares in the Company, from time to time to such persons and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed 10% of the 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 on Bursa Malaysia Securities Berhad (Bursa Securities) and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company. Proposed Renewal of Authority for the Purchase by the Company of its own ordinary shares of up to 10% of the issued and paid up share capital (Share Buy-Back) THAT, subject to the Companies Act, 1965 (the Act), provisions of the Companys Articles of Association (M&A) and the Listing Requirements of Bursa Securities, the Company be and is hereby authorised to purchase such number of ordinary shares of RM0.10 each in the Company subject to the following:(a) the aggregate number of the Companys shares which may be purchased or held by the Company shall not exceed ten per centum (10%) of the issued and paid-up ordinary share capital of the Company, subject to the restriction that the Company continues to maintain a shareholding spread that is on compliance with the Listing Requirements of Bursa Securities; the maximum funds to be allocated by the Company for the purpose of purchasing the Companys shares under the share Buy-Back shall not exceed the latest available audited retained profits and share premium of the Company;

Ordinary Resolution 6

7.

Ordinary Resolution 7

(b)

144 DAYA MATERIALS BERHAD (636357-W)

NOTICE OF TENTH ANNUAL GENERAL MEETING


contd

(c)

the authority conferred by this resolution to facilitate the Share Buy-Back will commence immediately upon the passing of this ordinary resolution and will continue to be in force until: (i) the conclusion of the next annual general meeting (AGM) of the Company at which time the authority would lapse unless renewed by ordinary resolution, either unconditionally or conditionally; or the expiration of the period within which the next AGM of the Company after that date is required by law to be held; or the authority is revoked or varied by ordinary resolution passed by the shareholders of the Company in a general meeting,

(ii) (iii) (d)

whichever occurs first; and upon completion of the purchase(s) of the Companys shares by the Company, the Directors of the Company be and are empowered to cancel or retain as treasury shares, any or all of the Companys shares so purchased, resell on Bursa Securities or distribute as dividends to the Companys shareholders and/or in any manner as prescribed by the Act, rules, regulations and orders made pursuant to the Act and the Listing Requirements of Bursa Securities and any other relevant authorities for the time being in force,

AND THAT the Directors of the Company be and are hereby authorised to take all such steps as are necessary or expedient to implement, finalise, complete or to effect the Share Buy-Back with full powers to assent to any conditions, modifications, resolutions, variations and/or amendments (if any) as may be imposed by the relevant authorities and/or to do all such acts and things as the Directors may deem fit and expedient in the best interest of the Company to give effect to and to complete the purchase of the Companys shares. To transact any other business of which due notice shall have been given in accordance with the Companys Articles of Association and the Companies Act, 1965.

8.

NOTICE OF DIVIDENDS ENTITLEMENT AND PAYMENT DATE NOTICE IS ALSO GIVEN that a single tier final dividend of 2.5% for the financial year ended 31 December 2012, if approved, will be paid on 15 August 2013 to shareholders whose names appear in the Record of Depositors of the Company at the close of business on 31 July 2013. A Depositor shall qualify for entitlement to dividend only in respect of:a) b) Shares deposited into the Depositors Securities Account before 4.00 p.m. on 31 July 2013 in respect of ordinary transfers; and Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad.

By Order of the Board

CHIN NGEOK MUI (MAICSA 7003178) CHEN BEE LING (MAICSA 7046517) Secretaries Selangor Darul Ehsan 20 May 2013

ANNUAL REPORT 2012 145

NOTICE OF TENTH ANNUAL GENERAL MEETING


contd

Notes: i) ii) In respect of deposited securities, only members/shareholders whose names appear in the Record of Depositors as at 12 June 2013 (General Meeting Record of Depositors) shall be eligible to attend, speak and vote at the Meeting. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote at the Meeting on his/her behalf. In the case of a corporation, a duly authorised representative to attend and vote in its stead. The proxy may but need not be a member of the Company and a member may appoint any person to be his/her proxy without limitation. A proxy/representative appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy. The instrument appointing a proxy shall be in writing under the hand of the appointer or if such appointer is a corporation, either under its Common Seal or under the hand of an officer or attorney duly authorised. The instrument appointing a proxy must be deposited at the Registered Office of the Company at Level 8, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan not less than forty-eight (48) hours before the time set for holding the Meeting or adjourned meeting. Where a member is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (omnibus account), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

iii) iv) v)

vi)

Explanatory Notes to the Agenda: Item 1 of the Agenda This item of the Agenda is meant for discussion only, as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this item of the Agenda is not put forward for voting. Item 6 of the Agenda - Ordinary Resolution 6 Authority for Directors to issue and allot shares in the Company pursuant to Section 132D of the Companies Act, 1965 Ordinary Resolution 6 is a renewal of the previous year mandate and if passed, will empower the Directors of the Company to issue and allot shares up to an aggregate amount not exceeding 10% of the issued share capital of the Company for the time being for such purposes as the Directors consider would be in the best interest of the Company. This authority unless revoked or varied by the Company at a general meeting will expire at the next Annual General Meeting. The renewal of this mandate would provide flexibility to the Company for any possible fund raising exercise, including but not limited for further placing of shares, for purpose of funding future investment projects, working capital and/or acquisitions. This authority is to avoid any delay and cost involved in convening a general meeting to approve such issuance if shares. The Company raised approximately RM13.2 million and RM22.461 million from its private placement exercise proposed in years 2011 and 2010 respectively. As at 31 December 2012, the Company has fully utilised the funds raised. Details of utilisation of proceeds are disclosed in Additional Compliance Information. Item 7 of the Agenda - Ordinary Resolution 7 Proposed Renewal of Authority for Share Buy Back Ordinary Resolution 7 if passed, will empower the Directors of the Company to buy-back and/or hold shares of the Company not exceeding ten percent (10%) of the issued and paid-up share capital of the Company from time to time being quoted on the Bursa Securities as may be determined by the Directors of the Company from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fit and expedient in the interest of the Company. Shareholders are advised to refer to the Statement to Shareholders dated 20 May 2013, which is circulated together with the 2012 Annual Report when considering Ordinary Resolution 7 on the Share Buy Back.

146 DAYA MATERIALS BERHAD (636357-W)

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DAYA MATERIALS BERHAD

(Company Number : 636357-W) (Incorporated in Malaysia under the Companies Act,1965)

TENTH ANNUAL GENERAL MEETING

FORM OF PROXY
CDS Account No. No. of shares held

I/We of being a member/members of the Daya Materials Berhad hereby appoint Mr/Mrs/Ms NRIC No. of NRIC No.

or failing him/her, Mr/Mrs/Ms

of or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us and on my/our behalf at the Tenth Annual General Meeting of the Company to be held at MTD Group Building, Ground Floor, No. 1, Jalan Batu Caves, 68100 Batu Caves, Selangor Darul Ehsan on Tuesday, 18 June 2013 at 10.30 a.m. and at any adjournment. In case of vote taken by a show of hands, my/our proxy shall vote on my/our behalf as indicated below : Resolution No. Ordinary Resolution 1 Ordinary Resolution 2 Ordinary Resolution 3 Ordinary Resolution 4 Ordinary Resolution 5 Ordinary Business Payment of a single tier final dividend of 2.5% Payment of Directors Fees Re-election of Dato Azmil Khalili bin Khalid as Director Re-election of Mr. Nathan Tham Jooi Loon as Director Re-appointment of Messrs Ernst & Young as the Companys auditors Special Business Ordinary Resolution 6 Authority to Directors to issue and allot shares in the Company pursuant to Section 132D of the Companies Act, 1965 For Against For Against

Ordinary Resolution 7 Proposed Renewal of Authority for the Share Buy-Back Please indicate with an (X) in the spaces provided above how you wish your vote to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his/her discretion. Dated this day of 2013 Signature/Common Seal of Shareholder


NOTES: i) ii)

In respect of deposited securities, only members/shareholders whose names appear in the Record of Depositors as at 12 June 2013 (General Meeting Record of Depositors) shall be eligible to attend, speak and vote at the Meeting. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote at the Meeting on his/her behalf. In the case of a corporation, a duly authorised representative to attend and vote in its stead. The proxy may but need not be a member of the Company and a member may appoint any person to be his/her proxy without limitation. A proxy/representative appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy. The instrument appointing a proxy shall be in writing under the hand of the appointer or if such appointer is a corporation, either under its Common Seal or under the hand of an officer or attorney duly authorised. The instrument appointing a proxy must be deposited at the Registered Office of the Company at Level 8, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan not less than forty-eight (48) hours before the time set for holding the Meeting or adjourned meeting. Where a member is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (omnibus account), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

iii) iv) v)

vi)

Fold This Flap For Sealing

Then Fold Here

AFFIX STAMP

The Secretary

DAYA MATERIALS BERHAD


Level 8, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/46 47301 Petaling Jaya Selangor Darul Ehsan

636357-W

1st Fold Here

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