Mieco Annual Report 2009 - Malaysiastock.biz · 5/27/2010 · 04 | The MIECO Story 06 | Group...

annual report 2009

Mieco ChipboardBerhad

MIECO will emphasize the development of value-added products as a clear differentiator from other industry players and enhance its relationships with its most critical customers.


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TheMIECO Story

Mieco Chipboard Berhad (MIECO), the manufacturing division of the Bandar Raya Developments Berhad Group of Companies, was incorporated in 1972 and commissioned its first production line in 1976. It pioneered the use of Rubberwood in the particleboard manufacturing industry in Malaysia. The company was listed on the Main Board of Bursa Malaysia Securities Berhad in 1998.


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TORY

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Thirty-seven years after its inception, MIECO has cemented its position as a world leader in the manufacture of particleboards with a special emphasis on the production of high quality, value-added wood-based products.

MIECO’s growth has come from its commitment to three operating fundamentals - a high quality product, an excellent delivery process, and a strong focus on customer service.

MIECO attained the ISO 9002 Quality Management System in 1998 and subsequently upgraded to the ISO 9001:2000 in 2002. In 2004, MIECO became the first company in the Malaysian wood-panel industry to receive the prestigious BS EN ISO 14001:1996 Environmental Management System. In line with this, MIECO attained the certification for the OSHAS 18001:1999 in 2005. The BS EN ISO 9001:2000 was upgraded to ISO 9001:2008 in early 2010. The integration of EMS ISO 14001:2004 & OHSAS 18001:2007 in the same year proved MIECO’s commitment to being a responsible manufacturer and employer in the areas of environment, health and safety.

MIECO has three factories located in Semambu, Gebeng and Kechau Tui, Pahang with a combined capacity of more than 900,000 cubic meters per annum.

MIECO also has one of the single largest particleboard lines in the Asia- Pacific

region, located at it’s latest plant in Kechau Tui, which started production in March 2005. The plant attained the BS EN ISO 9001:2000 Quality Management Systems in June 2005.

MIECO products are marketed in more than 20 countries around the world, and its global reach now covers Northern Asia, Southern Asia, the Indian Subcontinents, the Middle East as well as some parts of Africa and Australasia.

Having started out as a dedicated particleboard producer in 1976, MIECO has now developed and expanded into value-added products such as MIECO Decorative MFC, Electron Beam Foil Chipboard (EBFC), Polymer Faced Chipboard (PFC), MIECO Worktops, MIECO DPF Boards as well as value added services and DIY Furniture under the MIECO Livin’ Style brand name. With its technology partner from Pfleiderer Germany, MIECO introduced Decorative High Pressure Laminates Chipboard (HPLC) with unique high-pressure laminates incorporating anti-bacterial properties, micro-plus, and designs featuring high-gloss and high-abrasion resistance and stone textures.

All MIECO products conform to international quality standards such as European Community BS EN 312 Standard applicable for both moisture-resistant and non-moisture resistant boards with Super E0, E0, E1 and E2 formaldehyde emmision levels. The Super E0, E0 and E1 products have been certified under JIS A5908 as

F4-Star, F3-Star and F2-Star respectively. MIECO products carrying the JIS Mark signify that MIECO operations conform to the standard. MIECO E1 products have been further refined to meet the United States’ CARB Phase 1 & 2 requirements for conformance to low formaldehyde emissions.

MIECO has shown its commitment to the environment by being a responsible corporate citizen. In February 2009, MIECO achieved the Chain of Custody COC certification through SGS, Malaysia by meeting the PEFC Annex 4 requirements. PEFC-COC (Programme for Endorsement of Forest Certification schemes for Chain of Custody) system allows the tracking of PEFC certified materials from the forest to the consumer including all successive stages of process transformation, manufacturing and distribution. In April 2010, MIECO upgraded its MTCS-certified production capabilities to the ability to produce PEFC-certified products.

MIECO is also committed to the development of its more than 600 employees, and to building long-lasting mutually rewarding partnerships with its customers and stakeholder communities around the world. It is this commitment that has made MIECO a true global Malaysian champion.


Listed on Bursa Malaysia Securities Berhad

MIECOMANUFACTURING SDN BHD100%

MIECOMARKETINGSDN BHD100%

MIECO CHEMICALSSDN BHD100%

MIECO CHIPBOARDBERHAD

MIECO WOOD PRODUCTSSDN BHD100%

Group CorporStructureAs At 20 April 2010

MIECOREFORESTATIONSDN BHD100%

TUDORCAPITALSDN BHD100%

MIECO WOODRESOURCESSDN BHD100%


Board Of Directors

Dato’ Mohamed Moiz Bin J M Ali MoizExecutive Chairman

Dato’ Yong Seng YeowManaging Director

Dato’ Jaganath Derek Steven SabapathyNon-Independent Non-Executive Director

Datin Sri Maria Bettina Chua Binti AbdullahNon-Independent Non-Executive Director

Lt. Gen. (R) Dato’ Seri MohamedDaud Bin Abu BakarIndependent Non-Executive Director

Dato’ Dr Amarjit Singh A/L Santokh Singh Independent Non-Executive Director

Mr Vijeyaratnam A/L V. Thamotharam PillayIndependent Non-Executive Director

Mr Low Kim SengNon-Independent Non-Executive Director

Registered Office

31st Floor, Menara Multi-PurposeCapital Square, No. 8 Jalan Munshi Abdullah50100 Kuala Lumpur, MalaysiaTel: 603-2694 6622 Fax: 603-2694 1922

Bursa Malaysia Stock Number

MIECO 5001

International SecuritiesIdentification Number (ISIN)

MIECO MY5001OO002

Reuters Code

MIECO. KL

Secretary

Ho Swee Ling MAICSA No. 7009936

Registrars

Metra Management Sdn Bhd30.02, 30th Floor, Menara Multi-PurposeCapital Square, No. 8 Jalan Munshi Abdullah50100 Kuala Lumpur, MalaysiaTel: 603-2698 3232 Fax: 603-2698 0313

Auditors

Messrs PricewaterhouseCoopers

Bankers

Alliance Bank Malaysia BerhadAmBank (M) BerhadOCBC Bank (Malaysia) BerhadMalayan Banking BerhadHSBC Bank Malaysia Berhad

MIECO MARKETING (S) PTE LTD100%

ASPIREBENCHMARKSDN BHD100%

rate

MIECO INTERNATIONAL(H.K.) LIMITED 100%


Dato’ JaganSabapathy,Non-Independent Non-ExecutiveDirector

Mr T Vijeyaratnam,IndependentNon-Executive Director

Datin SriBettina ChuaAbdullah, Non-Independent Non-ExecutiveDirector

Dato’ Seri Mohamed Daud,Independent Non-ExecutiveDirector

Dato’ S Y Yong,Managing Director

Dato’ MohamedMoiz,ExecutiveChairman


Mr KS Low,Non-IndependentNon-Executive Director

Dato’ Dr AmarjitSingh,IndependentNon-ExecutiveDirector

DirectorsBoard of


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Board of Directors’ Profile Dato’ Mohamed Moiz Bin J M Ali Moiz, a Malaysian, aged 49, was appointed to the

Board on 14 November 2000 and as Chairman on 15 August 2002. He was subsequently redesignated as Executive Chairman on 1 January 2007. He graduated with a Bachelor of Science degree in Business Administration and International Finance in 1985. He joined Timbco Sdn Bhd, a company involved in timber trading, processing and forestry management, as Project Manager from 1985 to 1986. In 1987, he was appointed as Chief Executive Officer of the Tradium group of companies, which have interests in property development, fashion retailing, manufacturing, F & B and equity investments. In 1999, he was appointed as Chief Executive Officer of Effective Capital Sdn Bhd, a company which successfully undertook the migration of the CLOB securities from the Central Depository (Pte) Limited in June 2000.

Currently, Dato’ Mohamed Moiz also sits on the boards of Bandar Raya Developments Berhad (Chairman) and several other private limited companies. He is a member of the Executive Committee of the Company.

Dato’ Mohamed Moiz is a deemed major shareholder of the Company by virtue of his interest in Ambang Sehati Sdn Bhd.

Dato’ Yong Seng Yeow, a Malaysian, aged 57, was appointed as Executive Director on 1 January 1994. He was subsequently redesignated as Managing Director on 1 January 2007. Dato’ Yong has over 25 years of experience in sales and marketing in building materials and furniture industries.

Currently, Dato’ Yong also sits on the boards of Century Logistics Holdings Berhad and several subsidiaries in the Mieco Chipboard Berhad Group. He is a member of the Executive Committee of the Company.

Dato’ Mohamed Moiz Bin J M Ali Moiz, Executive Chairman

Dato’ Yong Seng Yeow,Managing Director


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Dato’ Jagan Sabapathy, a Malaysian, aged 53, was appointed to the Board on 15 September 1999. He attended Edinburgh University in the United Kingdom and holds a Master of Arts majoring in Corporate Finance and International Trade. Upon graduation in 1981, he joined a leading London firm of Chartered Accountants, Price Waterhouse, where he articled and qualified as a Chartered Accountant.

Dato’ Jagan returned to Malaysia in 1984 and joined KPMG Peat Marwick. He was admitted a Partner of KPMG Malaysia and a Director of Peat Marwick Consultants in 1990.

Whilst at KPMG Peat Marwick, he was involved in a wide range of assignments covering audit, investigations, management consultancy and corporate finance, in Malaysia, the ASEAN countries, North America and Europe. He sat on a variety of KPMG International Committees including committees for Mergers and Acquisitions, Privatisation and Management Consultancy. He was also an examiner for the professional examinations of the Malaysian Association of Certified Public Accountants.

He left the partnership in late 1994 and took up a senior appointment with a Malaysian public listed plantation company. At the end of 1995, he left and led a group of Australian and British investors to successfully privatise the overseas operations of Tasmania’s Hydro Electric Commission. He joined the boards of Prime Utilities Berhad and Indah Water Konsortium Sdn Bhd, Malaysia’s privatised national wastewater utility in September 1997 as Managing Director, a position he held to August 1999.

Currently, Dato’ Jagan also sits on the boards of Bandar Raya Developments Berhad (Chief Executive Officer) and several subsidiaries in the Bandar Raya Developments Berhad Group. He is a member of the Executive Committee, Remuneration Committee and Nomination Committee of the Company.

Dato’ Jaganath Derek Steven Sabapathy,Non-Independent Non-Executive Director

Datin Sri Maria Bettina Chua Binti Abdullah, a Malaysian, aged 44, was appointed to the Board on 23 February 2010. Datin Sri Bettina graduated from Chapman University in California in 1988, with a Bachelor of Arts degree in Communications. In 1990, she began a 15-year career in business television broadcasting. From her first assignment at Malaysia’s TV3, Datin Sri Bettina went on to become Malaysia’s first ever international business journalist with CNBC Asia, based both in Singapore and London. Her final position was as Chief Anchor of CNBC Asia’s flagship morning programme Squawk Box, from which she retired in 2005, having twice won the coveted Presenter of Year awards at the Asian Television Awards. Datin Sri Bettina is currently the Executive Director of Bandar Raya Developments Berhad. She is also an advisor to the Lim Kok Wing University of Creative Arts, and serves on the Council of Advisors at Green School in Bali, Asia’s first carbon-neutral educational institute.

Currently, Datin Sri Bettina also sits on the boards of several subsidiaries in the Bandar Raya Developments Berhad Group.

She is the spouse of Dato’ Sri Akbar Khan Bin Hj Mohamed Khan, the father of Mr Sascha Saleem Khan and Ms Tania Aishah Khan, who are both deemed major shareholders of the Company.

Datin Sri Maria Bettina Chua Binti Abdullah, Non-Independent Non-Executive Director


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Mr Vijeyaratnam A/L V. Thamotharam Pillay, a Malaysian, aged 58, was appointed to the Board on 1 October 2007. He was subsequently redesignated as Independent Non-Executive Director on 23 February 2010. He is a member of the Audit Committee of the Company.

He is a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Malaysian Institute of Accountants. Mr Vijeyaratnam has considerable experience covering areas of auditing, financial planning, general management and corporate advisory in various business environments. He is currently the Managing Director of his own corporate advisory and consultancy company.

Presently, Mr Vijeyaratnam also sits on the boards of Bandar Raya Developments Berhad, Multi-Purpose Holdings Berhad, Eastern & Oriental Berhad, Fututech Berhad and several other private limited companies in Malaysia.

Mr Vijeyaratnam A/L V. Thamotharam Pillay,Independent Non-Executive Director

Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar, a Malaysian, aged 74, was appointed to the Board on 24 March 1997. He graduated from the world-renowned Royal Military Academy, Sandhurst, United Kingdom in December 1956, the Army Staff College, Camberley, United Kingdom and the Royal College of Defence Studies, United Kingdom and has served the Malaysian Army with distinction for 36 years. During his military career, he was appointed to various key command and staff appointments both in the field headquarters and in the Ministry of Defence and has also served in various military committees at national and international levels.

Currently, Dato’ Seri Mohamed Daud also sits on the boards of other private limited companies. He is the Chairman of the Audit Committee and a member of the Remuneration Committee and Nomination Committee of the Company.

Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar, Independent Non-Executive Director


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Mr Low Kim Seng, a Malaysian, aged 55, was appointed to the Board on 25 April 1991. He is a member of the Malaysian Institute of Accountants. Mr Low qualified as a Management Accountant in 1978 and has working experience in accounting, corporate finance and general management. He worked with two Malaysian public listed companies prior to joining Bandar Raya Developments Berhad (“BRDB”) in 1989 and is currently the Chief Financial Officer of BRDB. He is a member of the Executive Committee of the Company.

Notes:

1) Save as disclosed above, none of the Directors has any family relationship with any director and/or major shareholder of the Company.

2) None of the Directors has: • any conflict of interest with the Company. • any conviction for offences within the past ten years.

Mr Low Kim Seng, Non-Independent Non-Executive Director

Dato’ Dr Amarjit Singh A/L Santokh Singh, a Malaysian, aged 60, was appointed to the Board on 3 April 1997. He graduated as a Doctor with a degree in Bachelor of Medicine and Bachelor of Surgery, from Bombay University, India in 1973. He also obtained post-graduate certificates in Sports Medicine and Genito-Urinary Medicine from the College of General Practitioners of Malaysia in 1988 and 1989, respectively. In addition, he is a Fellow of the Royal Society of Health, United Kingdom. In 1990 he established his own practice in Kuala Lumpur.

He is a former National Cricket Captain and currently the Deputy President of the Malaysian Cricket Association. He is also the President of the Malaysian Association of Sports Medicine and past Chairman of the Society of Sports Medicine of the Malaysian Medical Association.

Dato’ Dr Amarjit is a member of the Audit Committee, Remuneration Committee and Nomination Committee of the Company.

Dato’ Dr Amarjit Singh A/L Santokh Singh,Independent Non-Executive Director


We are confident that our focus on value-added, sustainable products will help us leverage our strength as a major particleboard producer and emerge in a stronger financial position when the market turns around.


Letter to OurShareholders

Dear shareholders and stakeholders of the MIECO global community,

2009 was again a tough year for MIECO and the entire global wood based manufacturing industry. But despite the market conditions, or perhaps because of them, we were able to take advantage of some opportunities, particularly in the way we managed our raw material sourcing. As this report goes to print, we are seeing positive signs of a market turnaround, and are confident that we will be able to make improvements to our business standing in the coming year.

It is therefore with cautious optimism and confidence that I present to you, on behalf of the Board of Directors, the Annual Report and Audited Financial Statements for the MIECO Chipboard Group (“MIECO” or “the Group”) for the financial year ended 31 December 2009. 2009 : Making the best of what we have MIECO’s revenue in 2009 fell year on year, from RM370.2 million in 2008 to RM185.7 million in 2009, mainly attributable to decreased selling prices and lower sales volume of particleboard and related products, despite a better sales mix.

However, the Group recorded a lower pre-tax loss of RM16.5 million against a RM36.3 million loss in 2008, primarily due to reduced operational costs from more stringent cost containment measures, as well as a drop in raw material prices from falling global demand.

MIECO’s performance continues to be a challenge; the industry is still reeling but we are optimistic having been able to trim losses significantly in 2009. We expect the market to stabilize soon and for the stronger brands to lead the way. Our plan is for MIECO to be at the forefront of this return.


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To meet this objective, we focused our efforts in 2009 on containing the fallout from the global meltdown and the corresponding impact it had on the property market, which affected furniture exports to the US and Europe. This in turn impacted our business, causing most Asia-Pacific manufacturers to experience an average 40% drop in sales.

Our efforts to contain costs by making the most efficient use of our plants and negotiating better rates for raw materials, in a depressed market, helped contain our losses. Our decision to temporarily stop production at our Kuala Lipis plant, to mitigate the drop in demand, also helped manage our losses. During the closure of our plant in Kuala Lipis, we focused our attention on our plant in Gebeng and we are seeing positive results there.

Raw material prices, particularly glue, wax and wood, were favourable to MIECO in 2009 and we took advantage of these prices as best we could.

Despite reduced demand, we continued to stay focused on our strategy of introducing value-added products that cement our differentiation in the marketplace, and rolled out three new designs for the 2009 MIECO Decorative MFC Collection – the Congo Wenge, Marinus Walnut and American White Ash ranges. Response to these products has been encouraging, and we remain confident that this strategy will help us weather the storm.

We also continued with our R&D efforts, focusing on developing environmentally-sensitive products, which are seeing an


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Global ChallengesHit Home

increase in demand from markets like the US, Europe and Japan. This is a key differentiator for the MIECO brand, and has helped us sustain our business through these troubled times.

The Japan Industrial Standards (JIS) certification we secured in April 2009 has also enabled MIECO to differentiate ourselves from our rivals and plans are afoot to develop an even stronger operating base. Thanks to our R&D team, we were able to supply our customers with F*** (E0) and F**** (Super E0) rated boards and other high quality products, which conform to the Japanese JIS A5908 standard – strategic products to tap into the stringent Japanese market as well as other developed nations.

All in, 2009 was a tough year, but we achieved some very satisfying goals, especially in the area of cost containment, which helped reduce our losses.

Dividend

Based on our performance in 2009 and due to various financial covenants, the directors are not in a position to recommend the payment of dividends for the financial year ending 31 December 2009.

2010 : Emerging stronger, better

For 2010, we are still taking a conservative view, but are cautiously optimistic. The market is clearly showing signs of improvement, and we have finally come to a point where we are able to better manage our raw material cost, which has been our bane in the past.

Despite the real possibility of raw material price fluctuations in 2010, we are putting great effort in better managing raw material pricing and making the most of current low prices by securing longer supply contracts where possible.

The price of glue is expected to be on the upward trend in the 2nd quarter of 2010, due to the increase in the price of methanol and urea, both key components. But we expect a drop later in the year.

The price of wax is on the upward trend, as it is closely linked to the price of crude oil. Wood, on the other hand, is stable for the moment but we envisage a slight increase later in the year. However, we do not expect major price fluctuations, as market intelligence tells us that there is sufficient wood to meet demand. We will, however, continue to explore the utilization of rubber wood and sustainable forest timber waste as key raw material components, which will reduce our dependency on current sources.

Operational efficiencies have improved. We have been able to control material over-usage and have implemented various process optimisation efforts to improve productivity and better manage reject rates.

To meet this objective, we focused our efforts in 2009 on containing the fallout from the global meltdown and the corresponding impact it had on the property market, which affected furniture exports to the US and Europe. This in turn impacted our business, causing most Asia-Pacific manufacturers to experience an average 40% drop in sales.


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For 2010 we plan to focus on our value added products and keep up with our R&D efforts to launch new products that, based on market research, we hope will be well-received by the marketplace. We are looking at possibilities of expanding our value added capacity and will also focus on improving our product standards and technical specifications to meet international requirements; especially the needs of the increasingly stringent US, European and Japanese markets. Our target is to achieve E1 CARB phase 2 by mid-2010.

Given the current improvement in market condition, we are actively looking at the reopening of our Kuala Lipis plant, which conditions pemit thing, should be by year end.

We have a strong and loyal base of Malaysian customers in MIECO, who contribute over 55% of our business and give us better margins – we will focus on building and growing these relationships, whilst taking advantage of emerging markets.

Most importantly, we have a passionate, strong and enthusiastic team working hard to help us achieve our goals.

Market Outlook

MIECO’s domestic market outlook is promising as the Malaysian economy is slowly but surely showing signs of a turnaround. Prime Minister Datuk Seri Najib Tun Razak’s economic stimulus packages launched in 2009 have spurred certain sectors of the economy, and there are signs that this has had a spillover effect on domestic consumption. An expected rise in domestic consumption will give our business a much-needed boost, as we expect to see a rise in both residential and commercial developments.

The United States, always a barometer for global economic performance, is turning around, and coupled with the resurgence of Asia, in particular India and China, will mitigate the challenges faced by Greece, Iceland, Spain and other European countries still mired in financial problems.We are also encouraged by the positive

outlook for India and China, as both have growing middle-classes with an increasingly global outlook that will surely drive demand for lifestyle products. Both these countries are important markets for MIECO.

We expect the emphasis on environmentally-sensitive products to keep growing, and in this, we are well-positioned to take advantage of opportunities.

The MIECO Team

Our MIECO team has worked tirelessly in facing up to the challenges that we have faced. They have toiled to reduce costs, improve efficiency and productivity, push for higher sales prices and volume, introduce new product ranges and better manage raw material prices. Credit must be given to the MIECO team for what they have managed to achieve during these trying times.

We acknowledge the personal sacrifices that have been made by some members of the MIECO team as a result of the


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temporary shutdown of our plant in Kuala Lipis. We are hopeful that the plant will be up and running soon.

On behalf of the Board of Directors of MIECO, I would like to thank each and every member of the MIECO family for your loyalty, your steadfastness to duty and for your commitment during some truly difficult times. This has not gone unnoticed nor unappreciated, and we hope that together, we will see much better times and prospects ahead.

Going forward, we will need to continue to improve operational efficiencies, better manage our costs, spur efforts to develop new products, protect our market-share and build on customer loyalty programmes, and make inroads into greenfield markets.

To our loyal customers, all around the world we say a big thank you. Our very survival through turbulent times has been due to your support of the MIECO brand. We made a commitment to see the challenges through for you and we truly

appreciate the same commitment you have given us. We will continue to work hard to produce high quality, value-added products that bring positive returns to your business and brand.

To my fellow board members, thank you for your guidance and stewardship of MIECO over the past year. We have been given the responsibility to steer this global Malaysian champion through some turbulent times, and you have been worthy friends and partners through this journey.

To all our shareholders, we thank you for your patience and loyalty to MIECO. You have supported us during these difficult times and please rest assured that all of us at MIECO are committed to working tirelessly to turn the company around.

Dato’ Mohamed Moiz bin J M Ali MoizChairmanMIECO Chipboard Berhad20 April 2010


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Surat KepadaPemegang Saham

Para pemegang saham dan pemegang taruh masyarakat MIECO yang dihormati,

Tahun 2009 masih lagi merupakan tahun yang sukar untuk MIECO dan keseluruhan industri berasaskan kayu di seluruh dunia.Walaubagaimanapun, kami telah mengambil kesempatan dari kesan ekonomi dari pelbagai sudut; salah satunya di dalam pengurusan pembelian bahan-bahan mentah. Sewaktu lapuran ini sedang diproses, kami telah melihat tanda-tanda positif yang pasaran bertambah pulih, dan kami yakin bahawa kami boleh memperbaiki perniagaan kami pada tahun akan datang.

Oleh itu, saya agak optimis dan yakin mewakili pihak Lembaga Pengarah untuk membentangkan Lapuran Tahunan dan Penyata Kewangan Berodit bagi Kumpulan MIECO Chipboard (“MIECO” atau “Kumpulan”) untuk tahun kewangan yang berakhir pada 31 Disember 2009.


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Gelora EkonomiYang Melanda

Semenjak kemelesetan global yang melanda negara kita, terutamanya di dalam suku kedua tahun 2009, MIECO terpaksa berdepan dengan cabaran kenaikan harga bahan mentah dan kos bahan api, serta menangani tekanan terhadap kemerosotoan permintaan di pasaran global, harga jualan yang rendah bagi papan serpai dan produk berkaitan, serta keengganan pasaran untuk menerima kenaikan harga jualan.

2009: Melakukan yang terbaik

Hasil MIECO pada tahun 2009 telah menurun dari tahun sebelumnya, iaitu dari RM370.2 juta pada tahun 2008 kepada RM185.7 juta pada tahun 2009, disebabkan oleh penurunan harga jualan serta penurunan permintaan papan serpai dan produk yang berkaitan; meskipun campuran jualan produk yang dapat dijual adalah lebih baik.

Bagaimanapun, kumpulan ini merekodkan jumlah kerugian sebelum cukai yang lebih rendah, RM16.5juta berbanding dengan RM36.3juta pada tahun 2008, sebahagian besarnya kerana penurunan kos operasi hasil dari pengawalan kos yang lebih ketat, serta penurunan harga kawalan bahan mentah kerana kekurangan permintaan diseluruh dunia.

Prestasi MIECO masih lagi merupakan satu cabaran, industri ini masih lagi belum pulih sepenuhnya, tetapi kami lebih optimistic kerana jumlah kerugian telah dapat dikurangkan secara ketara pada tahun 2009. Kami menjangkakan pasaran akan lebih stabil di dalam masa terdekat dan jenama yang lebih unggul


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akan muncul. Kami merancang MIECO untuk kembali ke pasaran sebagai sebuah syarikat unggul dan terbaik.

Untuk mencapai objektif ini, kami telah memberi fokus didalam membendung kerugian yang banyak dari penurunan ekonomi dunia yang telah memberi kesan yang mendalam kepada bidang hartanah, yang mana juga memberi kesan kepada ekspot perabut ke Amerika dan Eropah. Ini telah menyebabkan penurunan di dalam perniagaan kami, di masa kebanyakan perniagaan di Asia-Pasifik mengalami penurunan penjualan sebanyak 40%.

Usaha kami untuk di dalam mengawal kos dengan menggunakan loji kami secara

lebih efektif serta mendapatkan harga bahan mentah yang lebih baik sewaktu pasaran yang merundum telah berjaya mengurangkan kerugian pada tahun ini. Disamping itu, penutupan sementara kilang di Kuala Lipis untuk mengurangkan kesan penurunan permintaan, juga telah dapat mengurangkan kadar kerugian. Sewaktu penutupan kilang di Kuala Lipis, kami memberi fokus kepada loji kami di Gebeng dan kami telah melihat kesan yang positif di sana.

Harga bahan mentah, terutama bahan pelekat, cecair lilin dan kayu, berpihak kepada MIECO pada tahun 2009, dan kami telah mengambil kesempatan dari penurunan harga ini dengan sepenuhnya.

Walaupun permintaan telah menurun di dalam tahun 2009, kami tetap meneruskan strategi untuk memberikan produk yang berlainan dari pasaran. Oleh itu, tiga rekaan terbaru untuk MIECO Decorative MFC Collection – koleksi Congo Wenge, Marinus Walnut dan White Ash. Pasaran telah memberi respon yang baik kepada rekaan terbaru, dan kami yakin strategi ini akan menolong MIECO untuk mengharungi cabaran masakini.

Kami juga meneruskan usaha penyelidikan kami dengan memberi fokus kepada produk yang mesra alam, yang menunjukkan penigkatan permintaan dari pasaran di Amerika, Eropah dan Jepun. Ini merupakan kelainan utama di dalam jenama MIECO, dan menolong kami untuk meneruskan perniagaan sewaktu krisis ekonomi ini.

Kami telah menerima pengkitirafan Japan Industial Standard pada bulan April 2009, yang mana terus memberi MIECO satu kelainan dari pesaing-pesaing di pasaran, serta mendahului yang lain di dalam operasi kami. Terima kasih kepada pihak R&D, kami kini telah berjaya membekalkan pelanggan kami dengan produk F** (E0) dan F**** (Super E0) dan produk berkualiti yang lain, yang menepati piawaian JIS A5908 – produk yang strategik, yang membolehkan kami untuk memasuki pasaran Jepun yang amat ketat serta pasaran di negara-negara maju yang lain.

Secara keseluruhan, tahun 2009 merupakan tahun yang sukar, bagaimanapun, kami telah berjaya mencapai beberapa sasaran yang baik, terutama dari segi penurunan dan kawalan


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kos. Ini telah dapat menurunkan jumlah kerugian.

Dividen

Berdasarkan prestasi kami pada tahun 2009, serta berbagai perjanjian dan kontrak kewangan, pihak Pengarah tidak dapat untuk menyarankan bayaran dividen bagi tahun kewangan yang berakhir pada 31 Disember 2009.

2010: Muncul lebih baik, lebih unggul

Kami masih mengambil pandangan yang konservatif, tetapi agak lebih optimistik untuk tahun 2010.

Pasaran telah menunjukkan petanda yang lebih baik, dan kami telah sampai ditahap dimana kami dapat mengawal kos bahan mentah yang baik, yang mana merupakan masaalah yang berterusan diwaktu dahulu.

Walaupun terdapat kemungkinan besar harga bahan mentah akan berubah-ubah pada tahun 2010, kami akan berusaha untuk menguruskannya dengan cara terbaik, dan jika boleh, mengikat kontrak jangka panjang dengan menggunakan harga yang rendah sekarang. Harga bahan pelekat dijangka akan naik pada suku kedua tahun ini kerana kenaikan harga kedua-dua bahan utama, methanol dan urea. Bagaimanapun, kami menjangkakan harga tersebut akan menurun selepas suku kedua 2010.

Harga cecair lilin dijangkakan akan naik kerana ianya berkait rapat dengan kenaikan harga minyak mentah.

Harga kayu dijangkakan stabil buat masa ini, namun, kemungkinan terdapat sedikit kenaikan pada penghujung tahun. Bagaimanapun, kami menjangkakan harga kayu tidak akan berubah terlalu banyak, oleh kerana sumber penyelidikan menujukkan bekalan kayu adalah cukup untuk permintaan dipasaran. Bagaimanapun, kami tetap meneruskan usaha untuk mempelbagaikan sumber kayu yang mana akan menolong kami mengembangkan sumber-sumber untuk bahan mentah.

Keberkesanan operasi kami telah semakin

meningkat. Kami telah berjaya mengawal penggunaan bahan mentah, dan kami telah menaikkan produktiviti serta menurunkan kadar produk defektif dengan memperbaiki beberapa proses, serta mencapai keluaran yang optimum.

Pada tahun 2010, kami juga akan memberi fokus kepada produk tambah-nilai, dan meneruskan usaha penyelidikan untuk melancarkan produk baru, yang mana, kami berharap, bakal mendapat sambutan yang baik berdasarkan kajiselidik pasaran. Kami juga melihat kemungkinan untuk menambahkan kapasiti bagi produk tambah-nilai, memberi fokus untuk menambah-baikkan spesifikasi kualiti dan teknikal bagi mencapai piawaian antarabangsa, terutamanya dengan piawaian yang lebih ketat di Amerika, Eropah dan Jepun. Sasaran kami untuk mencapai E1 CARB ‘Phase’ 2 pada pertengahan 2010.

Di Malaysia, kami mempunyai pelanggan yang kukuh dan setia bersama MIECO, yang mana telah menyumbangkan lebih 55% keuntungan kepada syarikat, dengan kadar keuntungan yang lebih baik – kami akan memberikan fokus untuk terus membina perhubungan dengan mereka, serta mengambil kesempatan di dalam pasaran yang akan datang.

Dan yang paling penting, kami mempunyai satu kumpulan yang padu, bersugguh-sungguh dan bersemangat, yang bekerja keras untuk menjadikan sasaran kami satu realiti.

Pasaran

Pasaran domestik menjanjikan sesuatu yang positif, di mana keadaan ekonomi Malaysia menunjukkan tanda-tanda akan semakin pulih pada tahun 2010. Stimulus ekonomi yang dilancarkan oleh Yang Amat Berhormat Perdana Menteri, Datuk Seri Najib bin Abdul Razak telah berjaya menggerakkan beberapa sektor ekonomi, dan kesannya turut dirasai dengan pertambahan permintaan domestik. Permintaan domestik yang lebih baik akan memangkinkan perkembangan perniagaan kami; kerana kami menjangkakan perkembangan di dalam sektor perumahan dan komersial.Amerika Syarikat, yang sentiasa menjadi

ukuran bagi keadaan ekonomi global, telah menunjukkan tanda-tanda untuk pulih, dan bersama-sama dengan perkembangan baik di Asia, terutama di India dan China, akan mengurangkan kesan masalah kewangan yang dihadapi oleh Greece, Iceland, Spain dan negara-negara Eropah yang lain.

Kami juga teruja dengan pasaran di India dan China amat memberasangkan, kerana kedua-dua negara ini mempunyai penduduk kelas pertengahan yang bertambah, yang mana meningkatkan permintaan untuk produk-produk `cara hidup’. Kedua-dua Negara ini merupakan pasaran yang penting bagi MIECO.

Kami juga menjangkakan permintaan untuk produk mesra alam akan terus meningkat, dan kami telah berada di posisi yang baik untuk memenuhi permintaan tersebut.


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Warga MIECO

Kumpulan warga kami di MIECO telah bekerja tanpa mengira penat lelah di dalam mengharungi cabaran yang kami hadapi, mereka bekerja keras untuk menurunkan kos, menambahkan keberkesanan dan produktiviti, mendapatkan permintaan dan harga jualan yang lebih tinggi, mengenalkan produk baru dan mengawal harga bahan mentah dengan lebih baik. Penghargaan kepada warga MIECO yang telah bercapai mencapai semua ini sewaktu di dalam keadaan yang serba mencabar.

Kami juga menghargai pengorbanan yang telah dibuat oleh individu-individu tertentu di MIECO di atas penutupan sementara kilang di Kuala Lipis. Kami berharap kilang tersebut dapat dibuka semula tidak lama lagi.

Bagi pihak Lembaga Pengarah MIECO, saya mengucapkan terima kasih kepada setiap individu di dalam keluarga MIECO kerana kesetiaan, kesungguhan bekerja dan komitmen yang ditunjukkan di waktu yang sukar ini. Kami amat hargai pengorbanan

anda, dan berharap untuk sama-sama meraikan kejayaan yang baik di masa akan datang.

Memandang ke hadapan, kami masih perlu untuk terus memperbaiki keberkesanan operasi, mengawal kos dengan baik, menggalakkan usaha untuk mengenalkan produk baru, dan memastikan pasaran dan pelanggan kami yang sedia ada akan sentiasa dapat dikekalkan, disamping menerokai pasaran baru.

Kepada pelanggan yang setia bersama kami; ucapan terima kasih tidak terhingga dari kami. Dengan sokongan anda kepada jenama MIECO, kami dapat meneruskan perniagaan kami walaupun di dalam keadaan ekonomi yang sungguh sukar. Kami telah memberi komitmen untuk terus mengharungi cabaran bersama anda, dan kami amat menghargai komitmen yang sama yang telah diberikan kepada MIECO. Kami akan terus mengeluarkan produk yang bermutu serta produk tambah-nilai yang bakal memberi pulangan yang baik kepada perniagaan dan jenama anda.Kepada rakan Lembaga Pengarah, terima kasih di atas tunjuk ajar dan bimbingan

yang diberikan kepada MIECO selama ini. Kami telah dipertanggungjawabkan untuk mengendalikan sebuah syarikat yang unggul diwaktu yang sukar ini, dan anda semua merupakan rakan yang sangat berharga di dalam perjalanan ini.

Kepada semua pemegang saham, terima kasih di atas kesabaran anda dan kesetiaan kepada MIECO.Anda telah menyokong kami di waktu yang sukar ini, dan kami di MIECO berjanji akan memberi komitment untuk terus bekerja bagi memulihkan prestasi MIECO kembali.

Dato’ Mohamad Moiz bin J M Ali MoizChairmanMIECO Chipboard Berhad20 April 2010


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Review ofOperations

2009 continued to be a turbulent year for MIECO; the effects of the economic downturn were especially harsh on the wood-based manufacturing industry, already reeling from the dual hits of intense competition and rising cost of raw materials.

Our focus during the year was to increase productivity, trim losses and make the most of opportunities that came few and far between.


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2009 continued to be a turbulent year for MIECO; the effects of the economic downturn were especially harsh on the wood-based manufacturing industry, already reeling from the dual hits of intense competition and rising cost of raw materials.

Our focus during the year was to increase productivity, trim losses and make the most of opportunities that came few and far between.

Our financial results : Minimizing losses

For the year ended 31 December 2009, MIECO’s revenue was RM185.7 million, down 49.84% from the RM370.2 million we achieved in 2008. This was mainly attributable to decreased selling prices and lower sales volume of particleboard and related products, despite a better sales mix.

Our cost containment efforts and the drop in global prices for raw materials saw us managing to minimize losses, from RM36.3 million in 2008 to RM16.5 million in 2009; a difference of over 54.55%.

We are beginning to see a turnaround in market fortunes and believe that 2010 and beyond will be much better years for the MIECO brand. The wood-based manufacturing industry is a viable and sustainable business, and we believe the downturn the industry has experienced will result in a market consolidation, with stronger brands emerging.

Business activities : 3 strategies in anticipation of a market turnaround

In 2009, we continued with our long-term strategy to weather the effects

of a depressed market environment – we continued to actively implement programmes to contain costs and improve productivity, we focused on building our differentiation in the marketplace through R&D efforts to create value-added products that meet the most stringent of international standards, and we worked hard to protect and cement the relationships we had with long-term customers. These 3 strategies are designed to help us to prepare for a market turnaround we anticipate will happen very soon.

In the area of cost containment and productivity, we explored more efficient use of our plants, and stopped production at the plant in Kuala Lipis, to mitigate the drop in demand.

Given the current improvement in market condition, we are actively looking at the reopening of our Kuala Lipis plant, which conditions pemit thing, should be by year end.

We implemented several initiatives at Plants 1 and 2 in Kuantan to make the most of our resources there. This included forming task forces to address critical problems such as reject rates more effectively, and we improved operational efficiency at the chip preparation section. We encouraged more employee involvement and thus accountability by holding brainstorm sessions to review day to day performance and to look for areas of improvement, as well as to address specific problem areas.

MIECO also improved its shift reporting system, and implemented a system where problem areas were reviewed and

discussed on-site, as opposed to a central office, to make sure that solutions were arrived at and implemented faster, and that any issues were addressed immediately.

We also promoted the “Hands-on” management concept and approach to emphasize ownership and accountability of each activity and machine and instituted an Inspector Individual Performance System, ensuring that each product inspector was well versed in managing his role. We enhanced cost savings by introducing materials only after staging proper pilot tests and trials to prevent quality issues, especially in the area of low cost materials such as resins, hardeners, packing materials, chipper knives, lubrication oil and shaving materials.

We also worked with our team to build their understanding and skills in the area of cost controls, and introduced tighter controls in the area of purchasing.

We are currently putting in place processes to control material over-usage and to implement process optimization in order to improve productivity, and this should help us realize further cost savings in 2010.

We put in place tighter systems to measure daily performance, and made process owners fully accountable for daily performance, which has ensured more consistent delivery, and reduced the incidence of defects.

We took advantage of the slower market to negotiate better raw material prices, especially for glue, wax and wood. We continue to look for opportunities to manage these costs in 2010.


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The US and European markets were hardest hit by the global recession; we reduced our marketing efforts in these high-cost countries and focused our efforts on India and China, which remained relatively resilient. We are continuing to actively build our brand and market share in Malaysia, which gives us better margins and a more stable operating environment.

Product innovation continues to be our main differentiator, and in 2009, we focused on extending our range of value-added products which gives us a better profit margin, and improving our technical specifications to meet increasing global standards.

We rolled out 3 new designs under the 2009 Collection for MIECO Decorative MFC, comprising Congo Wenge, Walnut and American White Ash. The response to these new products has been very encouraging.

We also started to produce an improved V313 P5 product for domestic worktops and a new Panasonic EBFC/PU combination for Japan.

We are currently working on 5 new colours and designs, which will be rolled out in 2010, and will expand our MFC capacity to meet the expected high demand in this segment.

We also continued with our R&D efforts, with a focus on developing environmentally-sensitive products, which are seeing an increase in demand from markets like the US, Europe and Japan. This is a key differentiator for the MIECO brand, and has helped sustain our business through these troubled times.

We secured the Japan Industrial Standards (JIS) certification in April 2009, to enable MIECO to differentiate itself from its rivals.


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This allows us to supply our customers with F*** (E0) and F**** (Super E0) rated boards and other high quality products, which conform to the Japanese JIS A5908 standard – a strategic product to tap into manufacturing industry working to build and grow the MIECO brand.

These measures have made a difference to our business, not just in minimizing losses, but ensuring that we are well positioned to meet demand with the resurgence of the market, which we are confident is imminent.

People : A year of great teamwork

In 2009, we took advantage of the slower market to improve the knowledge and skills base of our employees.

A total of 557 employees attended various in-house and external training programmes, ranging from technical, quality, safety and security, as well as other job-related training. Besides the formal training sessions, employees also underwent on-the-job refresher and new skills training in the plants.

A formal succession planning process was introduced to allow career development

opportunities for key employees, and ensure a better rate of employee retention.

We increased the number of employee engagement sessions, and instituted quarterly meetings with supervisors and union representatives. This, coupled with meet-the-employee sessions held by the Chairman and Managing Director, helped keep employees abreast of market conditions, the impact and progress made by the cost containment programme, and also encouraged discussion and debate on the effectiveness of our productivity improvements.

We created better teamwork between different sections by rotating project leadership and chairmanship of key projects and meetings, and stepped up recognition efforts for achievements, especially in the area of cost containment and productivity. These sessions helped boost morale and kept employees focused on the things that matter, which in turn ensured our business strategies stayed on track. We will continue with this programme in 2010.


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The MIECO team really stepped up to the challenge in 2009, and we take confidence in knowing that we have some of the best and brightest in the wood-based manufacturing industry working to build and grow the MIECO brand.

Community : Giving back, cementing ties with the communities in which we operate

MIECO’s relationships with the communities it operates in have always been close, and despite market conditions and cost containment measures, we continued our efforts in this area in 2009.

We supported the training and development of local students in colleges and universities in and around Kuantan, reaching out to students from Universiti Malaysia Pahang (UMP), Universiti Teknologi Mara (UiTEM) and other universities. This included talks on how we were focusing on developing environmentally-sensitive products, and reducing our carbon footprint, as well as other impact from our business on the environment.

We also accepted student trainees from various colleges and universities, as part of our commitment to training and supporting the development of the community’s future generations. This allowed to also get a head start in identifying local talent who could be potential MIECO team members in the future.

We continued to work closely with the Balok Makmur community in 2009, meeting their representatives regularly and also organizing a combined `sembahyang hajat’ at the Balok Makmur mosque. We also invited some of their members to join us at the the `buka puasa’ event that we organised at MIECO plant in Gebeng .

2009 was another challenging year for MIECO, but we saw much improvement from our performance in 2008, and also more positive indications of an impending market turnaround. This gives us much optimism, and we are focused on continuing to improve our market differentiation and managing our costs, as we are confident we are back on track in our journey to be a global Malaysian champion.


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2009 was another challenging year for MIECO, but we saw much improvement from our performance in 2008, and also more positive indications of an impending market turnaround. This gives us much optimism, and we are focused on continuing to improve our market differentiation and managing our costs, as we are confident we are back on track in our journey to be a global Malaysian champion.


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2009 marked MIECE Chipboard’s 37th year in operation as one of Malaysia’s leading particlebaord makers and arguably one of its most challenging since its inception. The countinuing global financial uncertainties notwithstanding, CSR initiatives at MIECO continued to receive hight priority on our agenda

Engaging with Our Communities in 2009

MIECO recognises that as a leader, it must continue to support and engage with its communities, and will continue to do so despite market challenges. Its employees and local communities will be its main priority, as it recognises that its success and future are very much dependent on the support and belief of its immediate partners, if it is to become the global champion it is setting out to be.

Despite challenging market conditions in 2009, MIECO continued with its efforts to reach out to and engage with the communities in which it operates, with particular emphasis on Pahang, where all three of its plants are located.

In line with its aim to develop local skills and talent, MIECO supported the training and development of local students in colleges and universities in and around Kuantan, Pahang, reaching out to students from Universiti Malaysia Pahang (UMP), Universiti Teknologi Mara (UiTEM) and other universities and colleges.

This included talks and briefings on how MIECO was developing environmentally-sensitive products, reducing its carbon footprint, as well as mitigating other impact from their business on the environment.

This move helped students understand and appreciate not just the research that goes into being a responsible manufacturer, but also how to adapt and change to meet the new and emerging needs of markets and customers around the world.

MIECO also accepted student trainees from various colleges and universities as part of

its commitment to training and supporting the development of the community’s future generations.

The company continued to work closely with the Balok Makmur community in 2009, meeting their representatives regularly and also organizing a combined `sembahyang hajat’ at the Balok Makmur mosque. Members of the community were also invited to join the `buka puasa’ event organised at MIECO plant in Gebeng. Inresponse to a call by Hospital Tengku Ampuan Afzan, the main public healthcare centre in Kuantan, for help to fill their blood bank’s reserves, MIECO held a blood donation drive at one of its facilities. And as an extension to this healthcare initiative, the company also provided free health screenings in Mieco,Gebeng, organised by Kuantan Medical Centre for members of its community, which were widely commended and well received.

Employee engagement was high on the the agenda in 2009. To complement its programme of formal employee engagement sessions, MIECO also put together a rewarding programme of extracurricular activities for its employees. These helped bring together the


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for bowling, participation in a monthly community bowling competition was headed with a MIECO bowling tournament in Kuantan.

A company-wide retreat to Genting Highlands was also organised by sports club, to build staff rapport and allow employees from the different plants to meet and mingle.

Showing their kinship though good times and the bad, the MIECO family came together to give their condolensces to the family of the late Asistant Manager QA/RA, Mohammad Esa, who passed away in a drowning accident. Dato’ Yong presented a cheque to the family in appreciation of Mohammad Esa’s contribution to MIECO.

MIECO recognises that as a leader, it must continue to support and engage with its communities, and will continue to do so despite market challenges. Its employees and local communities will be its main priority, as it recognises that its success and future are very much dependent on the support and belief of its immediate partners, if it is to become the global champion it is setting out to be.

company’s employee community and increase the group spirit across the facilities.

Activities included a fishing competition in Taman Pertanian Indera Mahkota, as well as a badminton tournament and a takraw tournament which were both held in Dewan Indera Mahkota. The Gebeng facility also participated in table tennis tournament organised by a local college that was sponsored by ILP Kuantan.As the company has a particular penchant


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Group Corporate Calendar


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Attained Japanese Industrial Standards certificate, JIS 5908:2003 from the Ministry of Economy, Trade and Industry, Japan.

Upgrade of Quality Management System to MS ISO 9001:2008, which was awarded by AJA EQS Certification (M) Sdn Bhd and accredited by Standards Malaysia.

Appointment of Datin Sri Maria Bettina Chua Binti Abdullah as Director of the Company.

Redesignation of Mr Vijeyaratnam A/L V. Thamotharam Pillay as Independent Non-Executive Director from Non-Independent Non-Executive Director.

Participated in the 16th Malaysia International Furniture Fair held at the Putra World Trade Centre, Kuala Lumpur and rolled out 5 new designs for 2010 collection in MIECO DECORATIVE MFC. ‘MIECO Partners’ Night’ held at the Concorde Hotel Kuala Lumpur on 2nd March 2010 in appreciation of support from customers and distributors.

Thirty-Sixth Annual General Meeting of MIECO.

Upgrade to California Air Resources Board Phase 2 certificate by Professional Service Industries Inc, USA.

Upgrade of Environmental Management System to MS ISO 14001:2004 and Occupational Health and Safetyto OHSAS 18001:2007, whichwere awarded by AJA EQS Certification (M) Sdn Bhd and accredited by Standards Malaysia.

Received Quality Excellence Award appreciation certificate from AJA EQS Certification (M) Sdn Bhd in conjunction with World Quality Day.

30 April 2009

24 June 2009

7 August 2009

16 September 2009

23 February 2010

2-6 March2010

12 November 2009

10 November 2009


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Financial HighlightsFinancial Statistics 2005-2009

2009 2008 2007 2006 2005 RM’000 RM’000 RM’000 RM’000 RM’000 ASSETSNon-current assets Property, plant and equipment 486,039 507,003 513,145 514.438 524,395Prepaid lease rentals 17,149 17,385 17,622 17,862 16,523Investment properties - 7,417 8,396 6,878 7,302Deferred tax assets 446 455 490 412 523Associated companies - - - - 673

503,634 532,260 539,653 539,590 549,416Current assets 80,290 163,064 167,522 154,985 105,349Non-current asset held for sale - - 1,672 1,750 -

TOTAL ASSETS 583,924 695,324 708,847 696,325 654,765

EQUITY AND LIABILITIES Equity attributable to equity holders of the Company

Share capital 210,000 210,000 210,000 210,000 210,000Reserves 106,288 120,592 148,224 148,422 142,240

Total equity 316,288 330,592 358,224 358,422 352,240

Non-current liabilities 196,245 177,199 190,584 77,631 125,345Current liabilities 71,391 187,533 160,039 260,272 177,180

Total liabilities 267,636 364,732 350,623 337,903 302,525

TOTAL EQUITY AND LIABILITIES 583,924 695,324 708,847 696,325 654,765

GROUP RESULTSRevenue 185,739 370,216 351,372 330,424 258,986(Loss)/profit before taxation (16,516) (36,261) 561 10,030 (6,423)Tax credit/(expense) 1,837 8,308 1,750 (3,535) (1,755)(Loss)/profit after taxation (14,679) (27,953) 2,311 6,495 (8,178)Dividend paid - - 2,100 - 15,750Retained (loss)/ profit (14,679) (27,953) 211 6,495 (23,928)

SELECTED RATIOS(Loss)/ earnings per share - basic (sen) (6.99) (13.31) 1.10 3.09 (3.89)Proposed dividend per share (sen) - - - 1.00 -Net tangible assets per share (RM) 1.51 1.57 1.71 1.71 1.68


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(Loss)/profit after taxation(RM’000)

Shareholders’ funds(RM’000)

Revenue(RM’000)

185,739

370,216351,372

330,424

258,986

2005 2006 20082007 2009

500,000

400,000

300,000

200,000

100,000

0

(14,679)

(27,953)

2,3116,495

(8,178)

2005 2006 20082007 2009

40,000

30,000

20,000

10,000

0,000

316,288

330,592

358,224358,422352,240

2005 2006 20082007 2009

360,000

340,000

320,000

300,000

0

Total assets(RM’000)

695,324708,847696,325654,765

2005 2006 20082007 2009

750,000

600,000

450,000

300,000

150,000

0

583,924


Share Performance

Volume

(‘000)

26,000

24,000

22,000

20,000

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

Price

(RM)

1.3

1.2

1.1

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0

May 09 Sep 09 Jan 10Jul 09 Nov 09 Mar 10Jun 09 Oct 09 Feb 10Aug 09 Dec 09 Apr 10

1,24926,03111,88212,2572,36914,7433,0359945,4566402,800978

0.270.23

0.280.32

0.390.41 0.42

0.37

0.46 0.450.40

High

Low

Volume

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0.39

0.47

0.35

0.490.46

0.66

0.48

0.61 0.600.64

0.470.50

0.50

40


42 | Corporate Governance Statement46 | Audit Committee Report49 | Statement on Internal Control

CorporateStatements


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The Board of MIECO (“the Board”) is committed to ensuring that good corporate governance is practised throughout the Group with the fundamental objective of protecting and enhancing shareholder value and the financial performance of the Group.

The Board is pleased to report on the application of the principles of corporate governance contained in the Malaysian Code on Corporate Governance (“the Code”) and the extent of compliance with the best practices of the Code throughout the financial year ended 31 December 2009.

BOARD OF DIRECTORS The Board is overall responsible for the direction and control of the Group as it formulates policies, sets strategic directions and oversees the investments and operations of the Group.

Duties And Responsibilities Of The BoardThe Board retains full and effective overall control over the affairs of the Group and the Company. The principal duties and responsibilities of the Board are: • formulating the business direction and objectives of the Group;• reviewing, adopting and approving the Group’s annual budgets, strategic plans, key operational initiatives, major investments and funding decisions;• overseeing the conduct of business of the Group;• reviewing the risk management process within the Group;• assuming responsibility in succession planning within the Group; and• reviewing and ensuring the adequacy and effectiveness of internal control systems and management information systems to ensure compliance with applicable standards, laws and regulations.

Board Composition And BalanceAs at 31 December 2009, the Board has seven (7) members. Subsequent to the financial year, a new member was appointed to the Board, namely Datin Sri Maria Bettina Chua Binti Abdullah as Non-Independent Non-Executive Director on 23 February 2010. On the same date, Mr Vijeyaratnam A/L V. Thamotharam Pillay was re-designated as Independent Non-Executive Director from Non-Independent Non-Executive Director. Consequently, the Board now has eight (8) members, comprising two (2) Executive Directors and six (6) Non-Executive Directors, of whom three (3) are independent. The Company is in compliance with the Listing Requirements of Bursa Malaysia Securities Berhad (“BMSB”) which requires one third (1/3) of the board members to comprise of Independent Directors. Together, the Directors bring a wide range of business experience and expertise which are vital for the continued successful direction of the Group. A brief profile of each Director is set out on pages 10 to 13 of this Annual Report. The roles of the Executive Chairman and the Managing Director are

distinct and separate to ensure that there is a proper balance of power and authority. The presence of the three (3) Independent Directors fulfils the pivotal role in corporate accountability in ensuring that not only the interests of the shareholders, but also of employees, customers, suppliers and the many communities in which the Group conducts business are given due consideration in the decision-making process.

The Board is of the opinion that it is not necessary to designate a senior Independent Non-Executive Director to whom concerns may be conveyed. The Board operates in an open environment in which opinions and information are freely exchanged and in these circumstances any concerns need not be focused on a single Director as all members of the Board fulfil this role collectively.

Board Meetings And Supply Of InformationBoard meetings are scheduled in advance at the beginning of each new financial year to enable the Directors to plan ahead and fit the year’s meetings into their own schedules. The Board meets at least five (5) times a year. Additional meetings are held as and when necessary.

During the financial year ended 31 December 2009, five (5) Board meetings were held. The details of attendance of each Director are set out below:

Total Number of Meetings Attended

4/5

5/5

5/5

N/A*

5/5

5/5

4/5

5/5

Name of Director

Dato’ Mohamed Moiz Bin J M Ali Moiz

Dato’ Yong Seng Yeow

Dato’ Jaganath Derek Steven Sabapathy

Datin Sri Maria Bettina Chua Binti Abdullah

Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar

Dato’ Dr Amarjit Singh A/L Santokh Singh

Mr Vijeyaratnam A/L V. Thamotharam Pillay

Mr Low Kim Seng

# Datin Sri Maria Bettina Chua Binti Abdullah was appointed to the Board on 23 February 2010.

Corporate Governance Statement


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In advance of each Board meeting, the agenda together with the relevant board papers are forwarded to all Directors for them to review matters to be deliberated and to facilitate informed decision making by the Directors. The Board also has a formal schedule of matters reserved specifically for the Board’s decision, including the approval of corporate plans and budgets, acquisitions and disposals of assets that are material to the Group, major investments, changes to management and control structure of the Group, including key policies, procedures and authority limits. The Board also notes the decisions and salient issues deliberated by the Audit Committee through the minutes of Audit Committee meetings, which are tabled to the Board.

Senior management personnel are invited to attend the Board meetings, where necessary, to provide additional information and insights on the relevant agenda items tabled at Board meetings.

The Directors have full access to senior management for information and assistance and the advice and services of the Company Secretary who is responsible for ensuring that the Board meeting procedures are followed and that applicable rules and regulations are complied. In addition, the Directors may also seek independent professional advice in the furtherance of their duties at the Company’s expense, if required.

Directors’ TrainingDuring the financial year under review, all members of the Board have attended various training programmes and seminars, to keep abreast with the various changes in regulations and business environment. The training programmes and seminars attended by the Directors were on areas relating to corporate governance and financial reporting.

Appointments To The BoardThe appointment of new Directors is under the purview of the Nomination Committee (“NC”), which is responsible for making the necessary recommendations to the Board on suitable candidates for appointment.

The NC currently comprises three (3) Non-Executive Directors; Dato’ Jaganath Derek Steven Sabapathy (Non-Independent Non-Executive Director), Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar (Independent Non-Executive Director) and Dato’ Dr Amarjit Singh A/L Santokh Singh (Independent Non-Executive Director).

BOARD COMMITTEES

The Board has established the following committees to assist in the execution of its responsibilities. The committees have the authority to examine particular issues and report back to the Board with their recommendation. The ultimate responsibility for the final decision on all matters, however, lies with the entire Board.

Audit Committee (“AC”)The terms of reference of the AC are disclosed in the AC Report.

NCThe NC is responsible for identifying and recommending new Directors to the Board. In addition, the NC is also responsible for reviewing annually the mix of skills and experience and the effectiveness of the Board as a whole and the committees of the Board and contribution of each individual Director.

Remuneration Committee (“RC”)The RC is responsible for recommending to the Board the remuneration and compensation of the Executive Directors of the Company. The RC currently comprises three (3) Non-Executive Directors; Dato’ Jaganath Derek Steven Sabapathy (Non-Independent Non-Executive Director), Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar (Independent Non-Executive Director) and Dato’ Dr Amarjit Singh A/L Santokh Singh (Independent Non-Executive Director).

Executive Committee (“EXCO”)The EXCO comprises 4 Directors; Dato’ Mohamed Moiz Bin J M Ali Moiz, Dato’ Yong Seng Yeow, Dato’ Jaganath Derek Steven Sabapathy and Mr Low Kim Seng. The primary role of the EXCO is to assist the Board in overseeing the financial and business affairs of the Group.

RE-ELECTION

The Company’s Articles of Association (“AA”) provides that one-third (1/3) of the Directors for the time being shall retire from office at every Annual General Meeting (“AGM”) and be eligible for re-election provided always that all Directors shall retire from office at least once every three (3) years but shall be eligible for re-election. Directors who are appointed to the Board during the financial year are subject to re-election by shareholders at the next AGM held following their appointments.

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

DIRECTORS’ REMUNERATION

The remuneration of Directors is determined at levels that enable the Group to attract and retain Directors with the relevant experience and expertise needed to assist in managing the Group effectively and successfully. The RC reviews annually the performance of the Executive Directors and furnishes recommendations to the Board on specific adjustments and/or reward payments.


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The remuneration of the Non-Executive Directors reflects the level of responsibilities undertaken by the particular Director concerned in the Company and in the Group and after considering directors’ remuneration of comparable organisations. The determination of the remuneration of the Non-Executive Directors is a matter for the Board as a whole. A sitting allowance is also paid to Non-Executive Directors for each Board or committee meeting they attend. All Directors receive Directors’ fees from the Company which are subject to shareholders’ approval at the AGM. In view of the financial position of MIECO for 2009, Dato’ Mohamed Moiz, Dato’ Yong Seng Yeow, Dato’ Jagan Sabapathy and Mr Low Kim Seng who are salaried directors/employees of MIECO/BRDB have decided to decline their Directors’ fees for the financial year ended 31 December 2009. The Board has recommended that the three (3) Independent Directors continue to be remunerated for their services. The proposed payment of Directors’ fees to the Independent Directors will be submitted to shareholders for approval at the forthcoming AGM.

The details of the Directors’ remuneration for the financial year ended 31 December 2009 are set out on pages 98 and 99 of this Annual Report. The number of Directors whose remuneration fall within the following bands is as follows:

1

-

1

ExecutiveDirector

4

1

-

Non-ExecutiveDirectorRange of Remuneration

Below RM50,000

RM50,001 – RM100,000

RM700,001 – RM750,000

The Board is of the view that the transparency and accountability aspects of corporate governance as applicable to the Directors’ remuneration are appropriately served by the band disclosure made.

INVESTOR RELATIONS

Dialogue Between The Company And InvestorsThe Board recognises the need for and the importance of effective communication with shareholders as well as potential investors and the public. The Group communicates with its shareholders and stakeholders regularly through timely release of financial results on a quarterly basis, press releases and announcements which provide an overview of the Group’s performance and operations and disclosure of material information. In addition, the Group has established a website (www.mieco.com.my) which shareholders and members of the public can access for corporate information and news/events relating to the Group and for channelling their queries.

AGMThe AGM represents the principal forum for dialogue and interaction with all shareholders. Shareholders are welcome to attend the Company’s AGMs and to actively participate in the proceedings. Every opportunity is given to shareholders to ask questions and seek clarification on the business and performance of the Group and the Company.

ACCOUNTABILITY AND AUDIT

Financial ReportingIn presenting the annual financial statements and quarterly announcements to shareholders, the Board takes responsibility to present a balanced and understandable assessment of the Group’s and the Company’s position and prospects.

Statement Of Directors’ Responsibility In Respect Of Audited Financial StatementsThe Directors are responsible for ensuring that the annual audited financial statements of the Group and the Company are drawn up in accordance with the requirements of the applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standard Board, the provisions of the Companies Act, 1965 and the Main Market Listing Requirements of BMSB.

The Directors are also responsible for ensuring that the annual audited financial statements of the Group and the Company are prepared with reasonable accuracy from the accounting records of the Group and the Company so as to give a true and fair view of the state of affairs of the Group and the Company at the end of the financial year, and of the results and cash flows of the Group and the Company for the financial year.

In preparing the annual audited financial statements, the Directors have:• applied the appropriate and relevant accounting policies on a consistent basis;• made judgements and estimates that are reasonable and prudent; and• prepared the annual audited financial statements on a going concern basis as the Directors have a reasonable expectation, having made enquiries, that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future.

The Directors are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Group and the Company to prevent and detect fraud and other irregularities.

Corporate Governance Statement(Continued)


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Internal ControlThe Group’s Internal Control Statement is set out on pages 49 and 50 of this Annual Report.

Relationship With AuditorsThe external auditors, Messrs PricewaterhouseCoopers have continued to report to the shareholders of the Group. Through the AC, the Company has established a transparent relationship with the external auditors to meet their professional requirements. From time to time, the external auditors have highlighted to the AC and the Board matters that require the AC’s and the Board’s attention.

The role of the AC in relation to the external auditors is set out in the AC Report on pages 46 to 48 of this Annual Report.

ADDITIONAL COMPLIANCE INFORMATION

Share BuybacksThe Company did not buy back any of its shares during the financial year ended 31 December 2009.

Exercise Of Options, Warrants Or Convertible Securities MIECO warrants 2004/2009 had expired on 21 April 2009 without any warrants being exercised.

American Depository Receipt Or Global Receipt ProgrammeDuring the financial year, the Company did not participate in any American Depository Receipt or Global Receipt Programme.

Sanctions Or PenaltiesThere were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory bodies during the financial year ended 31 December 2009.

Non-Audit FeesNon-audit fees paid/payable to the external auditors by the Group for the financial year ended 31 December 2009 amounted to RM18,500.

Variation In ResultsThere were no variances of 10% or more between the audited results for the financial year ended 31 December 2009 and the unaudited results previously announced.

Profit GuaranteeThere were no profit guarantees given by the Company during the financial year.

Material Contracts Involving Directors’ And Major Shareholders’ InterestsThere were no material contracts entered into by the Company and its subsidiaries involving Directors’ and major shareholders’ interests either subsisting as at 31 December 2009 or entered into since the end of the previous financial year.

This statement was approved by the Board of at its meeting held on 20 April 2010


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Audit Committee Report

MEMBERSHIP AND ATTENDANCE OF MEETINGS The Audit Committee (“AC”) members and details of attendance of each member at the AC meetings held during the financial year ended 31 December 2009 are as follows:

b) all the AC members must be Non-Executive Directors, with a majority of them being Independent Directors;

c) at least one (1) member of the AC:

i) must be a member of the Malaysian Institute of Accountants (“MIA”); or ii) if he is not a member of the MIA, he must have at least three (3) years’ working experience and:

(aa) he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or

(bb) he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967; or

iii) fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad (“BMSB”).

d) No alternate Director shall be appointed as a member of the AC.

e) If a member of the AC resigns or for any other reason ceases to be a member with the result that the number of members is reduced below three (3), the Board of Directors shall, within three (3) months of that event, appoint such number of new members as may be required to make up the minimum number of three (3) members.

f) The term of office and performance of the AC and each of its members shall be reviewed by the Board no less than once every three (3) years.

ChairmanThe members of the AC shall elect a Chairman from amongst their number who shall be an Independent Director.

SecretaryThe Company Secretary shall act as the Secretary of the AC.

FUNCTIONS OF THE AC

The functions of the AC are as follows: a) to review with the external auditors the audit plan, audit report and their evaluation of the system of internal controls; and the assistance given by the employees to the external auditors in discharging their duties;

COMPOSITION AND TERMS OF REFERENCE OF THE AC

The primary objectives of the AC are:

a) to assist the Board in the discharge of its responsibilities by reviewing the adequacy and integrity of the Group’s and the Company’s internal control systems and management information systems for compliance with applicable laws, regulations, rules, directives and guidelines;

b) to reinforce the independence of the external auditors and thereby help ensure that they will have free reign in the audit process and to provide by way of regular meetings, a line of communication between the Board and the external auditors; and

c) to provide emphasis on the internal audit function by increasing the objectivity and independence of the internal auditors and provide a forum for discussion that is independent of management.

MembershipThe AC shall be appointed by the Directors from amongst their number which fulfils the following requirements:

a) the AC shall be composed of not fewer than three (3) members;

Number of AC Meetings

Held

6

6

6

Attended

6

6

5

Name of AC Member

Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar – Chairman/Independent Non-Executive Director

Dato’ Dr Amarjit Singh A/L Santokh Singh – Member/Independent Non-Executive Director

Mr Vijeyaratnam A/L V. Thamotharam Pillay – Member/Non-Independent Non-Executive Director (re-designated as Independent Non-Executive Director on 23 February 2010)


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b) to review the quarterly and year-end financial statements of the Company and the Group, focusing particularly on: • changes in or implementation of accounting policies and practices; • significant adjustments arising from the audit; • the going concern assumption; and • compliance with accounting standards and other legal requirements.

c) to discuss problems and reservations arising from the interim and final audits, and any matter the external auditors may wish to discuss (in the absence of management where necessary);

d) to review the external auditors’ management letters and management’s response;

e) to review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary authority to carry out its works;

f) to review the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function;

g) to consider any related party transaction and conflict of interest situation that may arise within the Group or the Company including any transaction, procedure or course of conduct that raises questions of management integrity;

h) to consider the major findings of internal investigations and management’s response;

i) to consider the nomination and appointment of external auditors and any questions of resignation or dismissal;

j) to report promptly to BMSB on any matter reported by the AC to the Board of Directors which has not been satisfactorily resolved resulting in a breach of the Main Market Listing Requirements of BMSB; and

k) to consider and examine other topics as may be defined by the Board of Directors.

RIGHTS OF THE AC

Wherever necessary and reasonable for the performance of its duties, the AC shall in accordance with a procedure to be determined by the Board of Directors and at the cost of the Company:

a) have authority to investigate any matter within its terms of reference;

b) have the resources which are required to perform its duties;

c) have full and unrestricted access to any information pertaining to the Group and the Company;

d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity;

e) be able to obtain independent professional or other advice and to secure the attendance of outsiders with relevant experience and expertise it considers necessary; and

f) be able to convene meetings with the external auditors, the internal auditors or both, without the presence of other Directors and employees of the Company, whenever deemed necessary.

MEETINGS AND REPORTING PROCEDURES

a) The AC shall meet as often as the Chairman deems necessary but not less than four (4) times a year.

b) The quorum for an AC meeting shall be at least two (2) members; the majority of the members present must be Independent Directors.

c) The internal auditors shall be in attendance at meetings to present and discuss the audit reports and other relevant matters and the recommendations relating thereto and to follow up on all relevant decisions made.

d) The AC may invite the external auditors, any non-member Directors or employees of the Group to attend its meetings to assist in its deliberations and resolutions of matters raised.

e) The AC shall, at least twice a year, meet with the external auditors without any executive Board member present. At the request of the external auditors or internal auditors, the Chairman shall convene an AC meeting to consider any matter that the external auditors or internal auditors believe should be brought to the attention of the Board or shareholders.

f) The Secretary is responsible for sending out notices of meetings and preparing and keeping minutes of meetings.

g) The AC meeting minutes are to be extended to all members of the Board.


SUMMARY OF ACTIVITIES

During the financial year ended 31 December 2009, six (6) AC meetings were held. The internal auditors attended five (5) AC meetings to present their internal audit reports. The external auditors were present at two (2) of the AC meetings.

Minutes of AC meeting were tabled for confirmation at the next AC meeting and subsequently distributed to the Board for notation. The AC Chairman conveyed to the Board matters of significant concern as and when raised by the external auditors or internal auditors.

The AC has carried out its duties in accordance with its terms of reference during the financial year ended 31 December 2009. The activities carried out by the AC included the following:

i) reviewed the risk-based internal audit plan with the internal auditors to ensure adequate scope and coverage on their activities;

ii) reviewed the annual audit plan with the external auditors, prior to the commencement of the annual audit as to their scope of work and audit strategy;

iii) reviewed and approved the Audit Committee Report for inclusion in the Company’s Annual Report;

iv) reviewed the quarterly unaudited financial results and year- end audited financial statements of the Group before recommending them to the Board for approval;

v) reviewed the audit memorandum, issues and management’s response to the external auditors;

vi) reviewed internal audit reports with the internal auditors, especially with regard to the issues raised, audit recommendations and management’s response. Where necessary, the AC has directed action to be taken by management to rectify and improve the system of internal controls and procedures;

vii) reviewed related party transactions of the Group; and

viii) had private discussions with the external auditors without the presence of the Executive Directors and management.

Audit Committee Report(Continued)

INTERNAL AUDIT FUNCTION

The AC is supported by an outsourced internal audit function in discharging its duties and responsibilities. The outsourced internal audit function conducts regular and systematic reviews of the key controls and processes in the operating units and assesses compliance with the established policies and procedures. This provides reasonable assurance that such systems would continue to operate satisfactorily and effectively in the Group. In addition, the internal audit function also conducts investigations and special reviews at the request of management.

During the financial year, the internal auditors carried out various audit assignments on the Group. The areas audited included procurement of wood and glue at Plant 2 and follow-up audit on sales order processing report in 2008.

In addition, the internal auditors reviewed policies and procedures in respect of inventory control systems for raw materials, plain boards and finished stocks, as well as supervised the physical inventory counts conducted in April 2009, October 2009 and December 2009 for raw materials, plain boards, finished stocks and spare parts for Plants 1, 2 and 3.

The resulting reports of the audits undertaken were issued to the management of the respective operating companies concerned, incorporating audit recommendations and management’s response. There were no material losses incurred during the financial year as a result of weaknesses in internal control and management continues to take measures to strengthen the control environment.

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Statement On Internal Control

INTRODUCTION

The Board of MIECO (“the Board”) is committed to maintaining a sound system of internal control within the Group and is pleased to provide the following statement which outlines the nature and scope of internal control of the Group during the financial year under review pursuant to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

BOARD RESPONSIBILITY

The Board affirms its overall responsibility for maintaining a sound system of internal control and for reviewing their adequacy and integrity so as to safeguard shareholders’ investment and the Group’s assets. The system of internal control covers inter-alia, financial, operational and compliance system controls and risk management. However, in view of the limitations that are inherent in any system of internal control, the system of internal control is designed to manage rather than to eliminate the risk of failure to achieve business objectives. Accordingly, the internal control system can only provide reasonable and not absolute assurance against material misstatement of losses and fraud.

The Board is pleased to disclose that there is an on-going process for identifying, evaluating and managing significant risks faced by the Group throughout the financial year under review and this process includes enhancing the system of internal controls when there are changes to business environment. This process is regularly reviewed by the Board.

RISK MANAGEMENT

The Board recognises that risk management is an integral part of the Group’s business operations and that the identification and management of such risks are important to ensure the achievement of the Group’s corporate objectives. The Group has put in place a risk management framework for the on-going process of identifying, evaluating, monitoring and managing the significant risks affecting the achievements of its business objectives. The on-going framework enhancement process is essential and imperative to keep abreast with the better practices and constant changes in the environment in which the Group is operating.

Regular meetings of the Board, Board Committees and management represent the main platform by which the Group’s performance and conduct are monitored. The Board is responsible for setting the business directions and overseeing the conduct of the Group’s operations. The daily running of the business is entrusted to the Executive Chairman, the Managing Director and senior management teams. The Board is informed of all matters pertaining to risk and control through periodic meetings and reports.

INTERNAL AUDIT FUNCTION

The Group’s internal audit function (“IA”) is outsourced to Lefis Consulting Sdn Bhd whose principal duty and responsibility is to examine the adequacy and effectiveness of the Group’s system of internal control, risk management process and compliance framework on behalf of the Board. The outsourced IA carries out internal audits based on a risk-based audit plan approved annually by the Audit Committee (“AC”). Based on these reports, the IA provides the AC with periodic reports highlighting observations, recommendations and management action plans to improve the system of internal controls. In addition, the AC also reviews and deliberates on any matters relating to internal control highlighted by the external auditors in the course of their statutory financial audit of the Group.

Costs amounting to RM199,500 were incurred for the internal audit function of the Group in respect of the financial year ended 31 December 2009.

CONTROL STRUCTURE AND ENVIRONMENT

The Board is fully committed to ensuring that a proper control environment is maintained within the organisation to govern the manner in which the Group and its employees conduct themselves. The Group’s internal control system encompasses the following key control processes:

a) The Board has set up several Board Committees to assist the Board in performing its oversight functions. Specific responsibilities have been delegated to these Board Committees, all of which have formalised terms of reference. These Committees have the authority to examine all matters within their scope and report to the Board with their recommendations.

b) There is an organisational structure with formally defined responsibility lines and delegation of authority to ensure proper identification of accountabilities and segregation of duties.

c) The Group has defined an Authority Chart that provides the limits authorised to the executive directors and management within the Group in respect of day-to-day operations, including banking and financing operations, investments, acquisitions and disposal of assets.

d) There are documented internal policies and procedures covering the critical and significant facets of the Group’s business processes and they form an integral part of the internal control framework to safeguard shareholders’ investment and the Group’s assets against material loss. These policies and procedures are reviewed and updated from time to time to meet the operational needs.

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e) Human resource policies and guidelines are established to provide support to the Group’s vision. These policies provide guidance to employees on areas such as hiring and termination of staff, code of conduct and discipline, employee performance appraisals and other related matters. On-going training is provided to improve employees’ competencies and skills.

f) The Group adopts a strategic planning, annual budgeting and target setting process that includes forecasts for each area of business. The Board reviews and approves the Annual Management Plan and Budget. The Board’s evaluation includes assessment of risks and opportunities identified by management in the course of the annual budgeting process. Monthly reporting of actual results and review against budget is prepared for monitoring by management.

g) Regular Board and Committee meetings are held to assess and monitor the business performance and operational controls. Senior management meets on a monthly or periodic basis with managers of business units to consider the Group’s operational, business development, financial performance and risk related management matters.

h) In furtherance of the Group’s commitment to the environment and to meet the needs and expectations of customers, Mieco Manufacturing Sdn Bhd (“MMSB”), a wholly-owned subsidiary of MIECO has obtained the Japanese Industrial Standards (“JIS”) Certification JIS 5908 : 2003 in April 2009, evidencing MIECO’s product reliability for the Japanese market. In addition, MMSB has, after having achieved the California Air Resource Board (“CARB”) Phase I Certification in October 2008, gone on to attain CARB Phase II Certification in November 2009. These certifications demonstrate compliance of MIECO’s composite wood products with California Code of Regulations, enabling products derived from MIECO’s particleboard to enter the US market.

REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS

The external auditors have reviewed this Statement on Internal Control for inclusion in the Annual Report of the Company for the financial year ended 31 December 2009 and reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls.

Statement On Internal Control(Continued)

CONCLUSION

The Board is of the view that the existing system of internal controls in place for the year under review and up to the date of the issuance of the financial statements is sound and adequate to safeguard the shareholders’ investment, the interest of customers, employees and the Group’s assets.

The Board recognises the need for the system of internal control to be subject to periodic review in line with the growth and dynamics of the Group. To this end, the Board remains committed towards striving for continuous improvement to put in place appropriate action plans where necessary, to further enhance the Group’s internal control system.

This statement was approved by the Board at its meeting held on 20 April 2010

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Directors’ report

The Directors hereby submit their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2009.

PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and provision of management services.

The principal activities of the subsidiaries are shown in Note 9 to the financial statements.

There have been no significant changes in the nature of these activities during the financial year.

FINANCIAL RESULTS Group Company RM’000 RM’000 Net loss for the financial year (14,679) (1,783)

DIVIDENDS

No dividends had been paid or declared by the Company since 31 December 2008.

The Directors do not recommend the payment of any dividend for the financial year ended 31 December 2009.

RESERVES AND PROVISIONS

All material transfers to or from reserves and provisions during the financial year are shown in the financial statements.

DIRECTORS

The Directors who have held office during the period since the date of the last report are as follows:

Dato’ Mohamed Moiz Bin J M Ali MoizDato’ Yong Seng YeowDato’ Jaganath Derek Steven SabapathyDatin Sri Maria Bettina Chua Binti Abdullah (appointed on 23 February 2010)

Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu BakarDato’ Dr. Amarjit Singh A/L Santokh SinghVijeyaratnam A/L V. Thamotharam PillayLow Kim Seng

In accordance with Article 81 of the Company’s Articles of Association, Dato’ Mohamed Moiz Bin J M Ali Moiz and Dato’ Dr. Amarjit Singh A/L Santokh Singh retire by rotation and being eligible, offer themselves for re-election at the forthcoming Annual General Meeting.

In accordance with Article 88 of the Company’s Articles of Association, Datin Sri Maria Bettina Chua Binti Abdullah, who was appointed during the period, retires and being eligible, offers herself for election at the forthcoming Annual General Meeting.

In accordance with Section 129(2) of the Companies Act, 1965, Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar retires, having attained the age of seventy, and the Board of Directors recommends that he be re-appointed in accordance with Section 129(6) of the Companies Act, 1965.

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than Directors’ remuneration disclosed in Note 30 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except as disclosed in Note 33 to the financial statements.

DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings, particulars of interests of Directors in office at the end of the financial year in shares and warrants in the Company and its related corporations during the financial year were as follows:


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DIRECTORS’ INTERESTS (CONTINUED)

Shares Held in the Company

Number of ordinary shares of RM1.00 each

At 1.1.2009 Bought Sold At 31.12.2009

Direct Interest

Dato’ Yong Seng Yeow 130,000 0 0 130,000Low Kim Seng 10,000 0 0 10,000Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar 16,000 0 0 16,000Dato’ Dr. Amarjit Singh A/L Santokh Singh 100,000 0 0 100,000

Indirect interest

Dato’ Mohamed Moiz Bin J M Ali Moiz 119,193,971* 0 0 119,193,971*Dato’ Dr. Amarjit Singh A/L Santokh Singh 70,000** 0 0 70,000**


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Directors’ report(Continued)

DIRECTORS’ INTERESTS (CONTINUED)

Warrants Held in the Company

Number of warrants 2004/2009

At 1.1.2009 Bought Expired At 31.12.2009 Direct Interest

Dato’ Yong Seng Yeow 6,666 0 (6,666) 0Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar 5,333 0 (5,333) 0Low Kim Seng 3,333 0 (3,333) 0

Indirect interest

Dato’ Mohamed Moiz Bin J M Ali Moiz 40,100,230* 0 (40,100,230*) 0Dato’ Dr. Amarjit Singh A/L Santokh Singh 16,666** 0 (16,666**) 0

The Company’s warrants 2004/2009 had expired on 21 April 2009.

Shares Held in Holding Company- Bandar Raya Developments Berhad

Number of ordinary shares of RM1.00 each

At 1.1.2009 Bought Sold At 31.12.2009 Direct interest

Low Kim Seng 57,000 0 0 57,000

Indirect interest

Dato’ Mohamed Moiz Bin J M Ali Moiz 92,070,812* 0 0 92,070,812*

Warrants Held in Holding Company- Bandar Raya Developments Berhad

Number of warrants 2007/2012

At 1.1.2009 Bought Sold At 31.12.2009

Direct interest

Low Kim Seng 25,650 0 0 25,650

Indirect interest

Dato’ Mohamed Moiz Bin J M Ali Moiz 41,431,865* 0 0 41,431,865*Vijeyaratnam A/L V. Thamotharam Pillay 170,000** 0 0 170,000**

* Indirect interest held through Ambang Sehati Sdn. Bhd.

** Indirect interest held through spouse

Other than as disclosed above, none of the Directors in office at the end of the financial year had any interest in shares and warrants in the Company and its related corporations during the financial year.


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SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

(a) On 11 May 2009, the Company entered into a Sale and Purchase Agreement with its holding company, Bandar Raya Developments Berhad, for the disposal of a condominium unit identified as 457 Upper East Coast Road, #10-05, The Summit, Singapore 466503 for cash consideration of S$1,950,000. The transaction was completed on 15 May 2009.

(b) On 11 May 2009, Aspire Benchmark Sdn Bhd, a wholly-owned subsidiary of the Company, entered into a Sale and Purchase Agreement with its ultimate holding company, Bandar Raya Developments Berhad, for the disposal of a duplex penthouse condominium unit identified as Unit Nos. 14C-A and 14C-B, “Impiana On The Waterfront” Condominium, 1 Tasik Ampang, Jalan Hulu Kelang, 68000 Ampang, Selangor Darul Ehsan for cash consideration of RM2,400,000. The transaction was completed on the same date.

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the income statements and balance sheets of the Group and of the Company were made out, the Directors took reasonable steps:

(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and

(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and of the Company had been written down to an amount which they might be expected so to realise.

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

(a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or

(b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or

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

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, in the opinion of the Directors, will or may substantially affect the ability of the Group or of the Company to meet their obligations when they fall due.

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

(a) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liability of any other person; or

(b) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.

OTHER STATUTORY INFORMATION

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.

In the opinion of the Directors:

(a) the results of the Group’s and of the Company’s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.

GENERAL INFORMATION

The Company is a public limited liability company, which is incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad.

The holding company is Bandar Raya Developments Berhad, a company incorporated in Malaysia.

The address of the registered office is 31st Floor, Menara Multi-Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur.


GENERAL INFORMATION (CONTINUED)

The addresses of the principal place of business are as follows:

(a) 30.01, 30th Floor, Menara Multi-Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur;

(b) Lot 77-83, Semambu Industrial Estate, P.O. Box 169, 25720 Kuantan, Pahang Darul Makmur;

(c) Lot 74, Kawasan Perindustrian Gebeng, 26080 Kuantan, Pahang Darul Makmur; and

(d) Lot 3, Kawasan Perindustrian Kechau Tui, 27100 Padang Tengku, Pahang Darul Makmur.

AUDITORS

The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

In accordance with a resolution of the Board of Directors dated 20 April 2010.

DATO’ MOHAMED MOIZ BIN J M ALI MOIZ DIRECTOR

DATO’ YONG SENG YEOW DIRECTOR

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Balance Sheets As At 31 December 2009

Group Company

2009 2008 2009 2008 Note RM’000 RM’000 RM’000 RM’000

ASSETS

NON CURRENT ASSETS Property, plant and equipment 6 486,039 507,003 253 370Prepaid lease rentals 7 17,149 17,385 0 0Investment properties 8 0 7,417 0 4,867Investment in subsidiaries 9 0 0 51,220 52,008 Amount due from a subsidiary 10 0 0 483,519 479,874Deferred tax assets 20 446 455 356 299 503,634 532,260 535,348 537,418

CURRENT ASSETS Inventories 11 40,578 74,282 0 0Receivables, deposits and prepayments 12 32,893 52,357 1,853 1,922Marketable securities 13 49 36 0 0Tax recoverable 1,633 1,047 0 0Short term deposits 14 2,549 25,131 965 206Cash and bank balances 14 2,588 10,211 119 156

80,290 163,064 2,937 2,284

TOTAL ASSETS 583,924 695,324 538,285 539,702

EQUITY AND LIABILITIES

CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

Share capital 16 210,000 210,000 210,000 210,000Reserves 17 106,288 120,592 131,523 133,306

TOTAL EQUITY 316,288 330,592 341,523 343,306

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Balance Sheets As At 31 December 2009 (Continued)

Group Company

2009 2008 2009 2008 Note RM’000 RM’000 RM’000 RM’000

NON CURRENT LIABILITIES Provisions 18 8,288 8,618 111 70Borrowings 19 144,618 139,151 144,372 138,741Deferred tax liabilities 20 7,580 9,430 0 0Amount due to holding company 23 35,759 20,000 35,759 20,000 196,245 177,199 180,242 158,811

CURRENT LIABILITIES Trade and other payables 21 35,483 79,583 8,233 8,636Borrowings 19 33,850 105,854 6,238 26,853Taxation 2,058 2,096 2,049 2,096

71,391 187,533 16,520 37,585

TOTAL LIABILITIES 267,636 364,732 196,762 196,396 TOTAL EQUITY AND LIABILITIES 583,924 695,324 538,285 539,702

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Income Statements For The Financial Year Ended 31 December 2009

Group Company

2009 2008 2009 2008 Note RM’000 RM’000 RM’000 RM’000

Revenue 24 185,739 370,216 2,816 10,488Other operating income 4,471 2,192 62 230Changes in inventories of finished goods and work in progress 33,704 (25,351) 0 0Raw materials and consumables used (151,767) (244,589) 0 0Hiring of vehicles and equipment (2,074) (7,838) 0 0Cost of investment disposed 0 (536) 0 0Staff costs 25 (23,637) (30,811) (2,285) (2,322)Depreciation of property, plant and equipment (18,838) (17,982) (159) (124)Amortisation of prepaid lease rentals (236) (237) 0 0Fair value loss on investment properties (348) (979) (198) (979)Write back/(loss) on impairment of:- non-current asset held for sale 0 (77) 0 0- property, plant and equipment (1,658) 0 0 0- subsidiaries 0 0 (788) (487)- marketable securities 13 (21) 0 0Upkeep, repairs and maintenance of assets (2,063) (8,920) (115) (144)Utilities (11,696) (20,163) (3) (2)Research and development expenses (12) (188) 0 0Other operating expenses (16,688) (36,600) (1,183) (1,826)

(Loss)/profit from operations 26 (5,090) (21,884) (1,853) 4,834Finance costs 27 (11,452) (14,419) (9,723) (11,700)Finance income 27 26 42 9,727 11,701

(Loss)/profit before taxation (16,516) (36,261) (1,849) 4,835Tax credit/(expense) 28 1,837 8,308 66 (118)

Net (loss)/profit for the financial year (14,679) (27,953) (1,783) 4,717

Attributable to equity holders of the Company (14,679) (27,953) (1,783) 4,717

Loss per share (sen) 29 (6.99) (13.31)

Diluted earnings per share (sen) 29 N.A N.A

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Consolidated Statement Of Changes In EquityFor The Financial Year Ended 31 December 2009

Attributable to equity holders of the Company Issued and fully paid ordinary shares of RM1 each

Foreign Number Nominal Share currency Retained Warrant Total of shares value premium reserve earnings reserve equity ’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2008 210,000 210,000 5,866 (722) 129,101 13,979 358,224

Foreign currency translation, representing net income recognised directly in equity 0 0 0 321 0 0 321Net loss for the financial year 0 0 0 0 (27,953) 0 (27,953)

Total recognised income and expenses for the financial year 0 0 0 321 (27,953) 0 (27,632) At 31 December 2008 210,000 210,000 5,866 (401) 101,148 13,979 330,592

At 1 January 2009 210,000 210,000 5,866 (401) 101,148 13,979 330,592Foreign currency translation, representing net income recognised directly in equity 0 0 0 375 0 0 375Expiry of warrants 0 0 0 0 13,979 (13,979) 0Net loss for the financial year 0 0 0 0 (14,679) 0 (14,679)

Total recognised income and expenses for the financial year 0 0 0 375 (700) (13,979) (14,304)

At 31 December 2009 210,000 210,000 5,866 (26) 100,448 0 316,288

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Company Statement Of Changes In EquityFor The Financial Year Ended 31 December 2009

Issued and fully paid Non- ordinary shares of RM1 each distributable Distributable Number Nominal Share Retained Warrant Total of shares value premium earnings reserve equity ’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2008 210,000 210,000 5,866 108,744 13,979 338,589

Net profit for the financial year 0 0 0 4,717 0 4,717

At 31 December 2008 210,000 210,000 5,866 113,461 13,979 343,306 At 1 January 2009 210,000 210,000 5,866 113,461 13,979 343,306

Expiry of warrants 0 0 0 13,979 (13,979) 0

Net loss for the financial year 0 0 0 (1,783) 0 (1,783) At 31 December 2009 210,000 210,000 5,866 125,657 0 341,523

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Cash Flow StatementsFor The Financial Year Ended 31 December 2009

Group Company

2009 2008 2009 2008 Note RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss)/profit for the financial year (14,679) (27,953) (1,783) 4,717Adjustments for:Fair value loss on investment properties 348 979 198 979Impairment loss on:- property, plant and equipment 1,658 0 0 0- non-current asset held for sale 0 77 0 0- subsidiaries 0 0 788 487(Write back)/allowance for impairment loss on marketable securities (13) 21 0 0Depreciation of property, plant and equipment 6 18,838 17,982 159 124Amortisation of prepaid lease rentals 7 236 237 0 0Loss on disposal of property, plant and equipment 635 7,295 0 34(Write back)/allowance for bad and doubtful debts (264) 7,242 0 0Allowance for inventories obsolescence/inventories written off 3,327 2,150 0 0Finance costs 27 11,452 14,419 9,723 11,700Finance income 27 (26) (42) (9,727) (11,701)Provision for staff retirement benefits 817 1,195 134 95 Tax (credit)/expense (1,837) (8,308) (66) 118Dividend income (2) (2) 0 (6,659)Gain on disposal of marketable securities 0 (904) 0 0 Loss on wood concession 474 0 0 0Unrealised (gain)/loss on foreign exchange (963) 1,573 0 (2)

20,001 15,961 (574) (108)Changes in working capital:

Decrease/(increase) in inventories 30,377 (27,501) 0 0Decrease/(increase) in receivables 19,076 26,291 69 (62)(Decrease)/increase in payables (43,364) 640 (731) 481Decrease/(increase) in inter company balances 477 297 (3,976) (14,185)

26,567 15,688 (5,212) (13,874)Payments of staff retirement benefits (1,147) (551) (93) (306)(Payments)/refund on income tax (628) 726 (38) 872 Net cash flows from/(used in) operating activities 24,792 15,863 (5,343) (13,308)


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Group Company

2009 2008 2009 2008 Note RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment 6 (578) (17,693) (42) (356)Interest received 23 42 9,727 11,701Proceeds from disposal of property, plant and equipment 411 153 0 110Proceeds from disposal of marketable securities 0 1,440 0 0Proceeds from disposal of investment properties 7,069 0 4,669 0Dividend income received 2 2 0 6,659

Net cash flows from/(used in) investing activities 6,927 (16,056) 14,354 18,114

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of hire purchase liabilities (164) (163) 0 0Interest paid (10,038) (14,563) (7,964) (11,700)Repayment of term loan (14,325) (13,130) (14,325) (13,130)Net (repayment of)/proceeds from bankers acceptance (46,879) 759 0 0Loan from the holding company 14,000 20,000 14,000 20,000Net (repayment of)/proceeds from revolving credit (3,000) 3,000 0 0Net (repayment of)/proceeds from promissory note (8,341) 8,341 0 0 Net cash flows (used in)/from financing activities (68,747) 4,244 (8,289) (4,830)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (37,028) 4,051 722 (24)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 35,342 31,321 362 384

EFFECTS OF EXCHANGE RATE CHANGES (8) (30) 0 2 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 14 (1,694) 35,342 1,084 362


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Notes To The Financial Statements For the Financial Year Ended 31 December 2009

1 PRINCIPAL ACTIVITIES

The principal activities of the Company are investment holding and provision of management services.

The principal activities of the subsidiaries consist of:

- manufacturing, selling and marketing of chipboards and related products - reforestation, harvesting, extraction, supply and procurement of rubber wood - investment holding - investment trading and property investment

There were no changes in the activities of the Group during the financial year.

2 BASIS OF PREPARATION

The financial statements of the Group and the Company have been prepared in accordance with the Companies Act, 1965 and Financial Reporting Standards, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities.

The financial statements have been prepared under the historical cost convention except as disclosed in the significant accounting policies below.

The preparation of financial statements in conformity with Financial Reporting Standards requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ.

The areas involving a higher degree of judgement or complexity, or area where assumptions and estimates are significant to the financial statements, are disclosed in Note 4 to the financial statements.

(a) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company and are effective

There are no new accounting standards, amendments to published standards and interpretations to existing standards effective for the Group and the Company’s financial year ended 31 December 2009 and applicable to the Group and the Company.

(b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Company but not yet effective

The new standards, amendments to published standards and IC Interpretations that are applicable to the Group and the Company, but which the Group and the Company have not early adopted, are as follows:

• The revised FRS 3 “Business combinations” (effective prospectively from 1 July 2010). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by- acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non- controlling interest’s proportionate share of the acquiree’s net asset. All acquisition-related costs should be expensed. The application of this standard is not anticipated to have any significant impact on the financial statements of the Group in the year of initial application.

• FRS 8 “Operating Segments” (effective for annual period beginning on or after 1 July 2009). FRS 8 replaces FRS 1142004 “Segment Reporting”. The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. The Group will apply this standard from financial year beginning on 1 January 2010. The application of this standard is not anticipated to have any significant impact on the financial statements of the Group in the year of initial application.

• The revised FRS 101 “Presentation of financial statements” (effective from 1 January 2010) prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity. ‘Non-owner changes in equity’ are to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).

Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period.


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2 BASIS OF PREPARATION (CONTINUED)(b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Company but not yet effective (continued)

It is likely that both the income statement and statement of comprehensive income will be presented as performance statements.

• FRS 123 “Borrowing Costs” (effective for annual periods beginning on or after 1 January 2010) which replaces FRS 1232004, requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed. The Group and the Company will apply this standard from financial year beginning on 1 January 2010. The application of this standard is not anticipated to have any significant impact on the financial statements of the Group and the Company in the year of initial application.

• The revised FRS 127 “Consolidated and separate financial statements” (effective prospectively from 1 July 2010) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. The application of this standard is not anticipated to have any significant impact on the financial statements of the Group in the year of initial application.

• FRS 139 “Financial Instruments: Recognition and Measurement” (effective from 1 January 2010) establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Hedge accounting is permitted under strict circumstances. The amendments to FRS 139 provide further guidance on eligible hedged items. The amendments provide guidance for two situations. On the designation of a one-sided risk in a hedged item, the amendment concludes that a purchased option designated in its entirety as the hedging instrument of a one-sided risk will not be perfectly effective. The designation of inflation as a hedged risk or portion is not permitted unless in particular situations. The improvement to FRS 139 clarifies that the scope exemption in FRS 139 only applies to forward contracts but not options for business combinations that are firmly

committed to being completed within a reasonable timeframe.

• IC Interpretation 9 “Reassessment of Embedded Derivatives” (effective from 1 January 2010) requires an entity to assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. The improvement to IC Interpretation 9 (effective from 1 July 2010) clarifies that this interpretation does not apply to embedded derivatives in contracts acquired in a business combination, businesses under common control or the formation of a joint venture.

• FRS 7 “Financial Instruments: Disclosures” (effective from 1 January 2010) provides information to users of financial statements about an entity’s exposure to risks and how the entity manages those risks. The improvement to FRS 7 clarifies that entities must not present total interest income and expense as a net amount within finance costs on the face of the income statement.

• IC Interpretation 10 “Interim Financial Reporting and Impairment” (effective from 1 January 2010) prohibits the impairment losses recognised in an interim period on goodwill and investments in equity instruments and in financial assets carried at cost to be reversed at a subsequent balance sheet date. The application of this standard is not anticipated to have any significant impact on the financial statements of the Group and the Company in the year of initial application.

The Group and Company have applied the transitional provision in the respective standards which exempts entities from disclosing the possible impact arising from the initial application of the following standards and interpretations on the financial statements of the Group and Company.

- FRS 139, Amendments to FRS 139 on eligible hedged items, Improvement to FRS 139 and IC Interpretation 9 - FRS 7 and Improvement to FRS 7

The following amendments are part of the Malaysian Accounting Standards Board’s (“MASB”) improvement projects:

• FRS 5 “Non-current Assets Held For Sale And Discontinued Operations” - Improvement effective from 1 January 2010 clarifies


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Notes To The Financial Statements For the Financial Year Ended 31 December 2009 (Continued)

2 BASIS OF PREPARATION (CONTINUED)(b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Company but not yet effective (continued) that FRS 5 disclosures apply to non-current assets or disposal groups that are classified as held for sale and discontinued operations. - Improvement effective from 1 July 2010 clarifies that all of a subsidiary’s assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met.

• FRS 107 “Statement of Cash Flows” (effective from 1 January 2010) clarifies that only expenditure resulting in a recognised asset can be categorised as a cash flow from investing activities.

• FRS 110 “Events After The Balance Sheet Date” (effective from 1 January 2010) reinforces existing guidance that a dividend declared after the reporting date is not a liability of an entity at that date given that there is no obligation at that time.

• FRS 116 “Property, Plant And Equipments” (consequential amendment to FRS 107 “Statement of cash flows”) (effective from 1 January 2010) requires entities whose ordinary activities comprise of renting and subsequently selling assets to present proceeds from the sale of those assets as revenue and should transfer the carrying amount of the asset to inventories when the asset becomes held for sale. A consequential amendment to FRS 107 states that cash flows arising from purchase, rental and sale of those assets are classified as cash flows from operating activities.

• FRS 117 “Leases” (effective from 1 January 2010) clarifies that the default classification of the land element in a land and building lease is no longer an operating lease. As a result, leases of land should be classified as either finance or operating, using the general principles of FRS 117.

• FRS 118 “Revenue” (effective from 1 January 2010) provides more guidance when determining whether an entity is acting as a ‘principal’ or as an ‘agent’.

• FRS 119 “Employee Benefits” (effective from 1 January 2010) clarifies that a plan amendment that results in a change in the extent to which benefit promises are affected by future salary increases is a curtailment, while an amendment that changes benefits attributable to past

service gives rise to a negative past service cost if it results in a reduction in the present value of the defined benefit obligation. The definition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excluded from measurement of the defined benefit obligation. • FRS 120 “Accounting for Government Grants” (effective from 1 January 2010) clarifies that the benefit of a below market rate government loan is accounted for in accordance with FRS 120.

• FRS 127 “Consolidated and separate financial statements” (effective from 1 January 2010) clarifies that where an investment in a subsidiary that is accounted for under FRS 139 is classified as held for sale under FRS 5, FRS 139 would continue to be applied.

• FRS 134 “Interim financial reporting” (effective from 1 January 2010) clarifies that basic and diluted earnings per share (“EPS”) must be presented in an interim report only in the case when the entity is required to disclose EPS in its annual report.

• FRS 136 “Impairment of Assets” (effective from 1 January 2010) clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment before the aggregation of segments with similar economic characteristics. The improvement also clarifies that where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value in use should be made.

The above amendments arising from the MASB improvement projects are not expected to have a material impact to the financial statements of the Group and the Company.

(c) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and are not relevant to the Group and the Company

- Effective for annual periods beginning on or after 1 January 2010: • FRS 4 “Insurance Contracts”

• Amendments to FRS 1 “First-time Adoption of Financial Reporting Standards” and FRS 127 “Consolidated and Separate Financial Statements:


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2 BASIS OF PREPARATION (CONTINUED)(c) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and are not relevant to the Group and the Company (continued) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate”

• Amendments to FRS 2 “Share-based Payment: Vesting Conditions and Cancellations”

• Amendments to FRS 132 “Financial instruments: Presentation” and FRS 101(revised) “Presentation of financial statements” – “Puttable financial instruments and obligations arising on liquidation”

• IC Interpretation 11 “FRS 2 Group and Treasury Share Transactions” • IC Interpretation 12 “Service Concession Agreements”

• IC Interpretation 13 “Customer Loyalty Programmes”

• IC Interpretation 14 “FRS 119 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”

- Effective for annual periods beginning on or after 1 July 2010:

• IC Interpretation 15 “Agreements for Construction of Real Estates”

• IC Interpretation 16 “Hedges of a Net Investment in a Foreign Operation”

• IC Interpretation 17 “Distribution of Non-Cash Assets to Owners”

The following amendments are part of the Malaysian Accounting Standards Board’s (“MASB”) improvement projects:

- Effective from 1 January 2010:

• FRS 128 “Investment in Associates”

• FRS 128 “Investment in Associates” and FRS 131 “Interest in Joint Ventures” (consequential amendments to FRS 132 “Financial Instruments: Presentation” and FRS 7 “Financial instruments: Disclosure”

• FRS 129 “Financial Reporting in Hyperinflationary Economies”

• FRS 138 “Intangible Assets”

• FRS 140 “Investment Property”

3 SIGNIFICANT ACCOUNTING POLICIES

3.1 Economic entities in the Group

(a) Subsidiaries

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to the end of the financial year. Subsidiaries are the companies in which the Group has the power to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are consolidated using the purchase method of accounting. Under the purchase method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The cost of an acquisition is measured as fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired at the date of acquisition is reflected as goodwill. See accounting policy Note 3.2 on goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Where more than one exchange transaction is involved, any adjustment to the fair values of the subsidiary’s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation.

Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated.


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3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1 Economic entities in the Group (continued) (a) Subsidiaries (continued) Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred.

The gain or loss on disposal of a subsidiary, which is the difference between net disposal proceeds and the Group’s share of its net assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary’s is recognised in the consolidated income statement.

(b) Associates Associates are those companies in which the Group exercises significant influence, but which it does not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not the power to exercise control over those policies. Investments in associates are accounted for by using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. See accounting policy Note 3.2 on goodwill.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence on impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group.

3.2 Goodwill

Goodwill represents the excess of the cost of acquisition of subsidiaries and associates over the fair value of the Group’s share of the identifiable net assets at the date of acquisition.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose.

Goodwill on acquisitions of associates is included in investments in associates. Such goodwill is tested for impairment as part of the overall balance. See accounting policy Note 3.7 on impairment of non-financial assets.

3.3 Investments

Investments in subsidiaries and associates are shown at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 3.7 on impairment of non-financial assets.

Marketable securities (within current assets) are carried at the lower of cost and market value, determined on an aggregate portfolio basis. Market value is calculated by reference to stock exchange quoted selling prices at the close of business on the balance sheet date. Movements in the carrying amount of marketable securities are recognised in the income statement.

On disposal of an investment, the difference between net disposal proceeds and its carrying amount is recognised in the income statement.

3.4 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it


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3.4 Property, plant and equipment (continued) 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 statement during the financial year in which they are incurred.

Property plant and equipment are depreciated on a straight- line basis to write off the cost of the assets, or their revalued amounts, if any, to their residual values over their estimated useful lives, summarised as follows:

Buildings 34 – 98 years Plant and machinery 3 – 30 years Furniture, fittings, office renovation and equipment 5 – 10 years Motor vehicles 5 years

Capital work-in-progress is not depreciated. Depreciation commences when the assets are ready for their intended use.

The residual values and useful lives of the assets are reviewed, and adjusted if appropriate, at each balance sheet date.

At each balance sheet date, the Group assesses whether there is any indication of impairment. If such indication exists, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. See accounting policy Note 3.7 on impairment of non-financial assets.

Gains and losses on disposals of the assets are determined by comparing the proceeds with the carrying amounts and are recognised in the income statement.

Borrowing costs are capitalised in accordance with Note 3.20.

3.5 Prepaid lease rentals

Prepaid lease rentals are amortised in equal instalments over the period of lease from 66 to 99 years. The up-front payments made for the leasehold land represents prepaid lease rentals and are amortised on a straight-line basis over the lease term.

3.6 Investment properties

Investment properties, comprising principally buildings, are held for long-term rental yields or for capital appreciation or both and are not occupied by the Group.

Investment properties are stated at fair value, representing open-market value determined annually by external valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. These valuations are reviewed annually by external valuers. Changes in fair values are recorded in the income statement.

On disposal of an investment property or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal, it shall be derecognised (eliminated from the balance sheet). The difference between the net disposal proceeds and the carrying amount is recognised in the income statement in the financial year of the retirement or disposal.

3.7 Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there is separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

The impairment loss on the asset is charged to the income statement and any subsequent increase in recoverable amount is recognised in the income statement to the extent of its original costs. Impairment loss on goodwill are not reversed.

3.8 Non-current assets (or disposal groups) classified as assets held for sale

Non-current assets (or disposal groups) are classified as assets held for sale and stated at the lower of carrying


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3.8 Non-current assets (or disposal groups) classified as assets held for sale (continued) amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through continuing use.

3.9 Research and development

Research expenditure is recognised as an expense when incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when the following criteria are fulfilled:

(a) it is technically feasible to complete the intangible asset so that it will be available for use or sale;

(b) management intends to complete the intangible asset and use or sell it;

(c) there is an ability to use or sell the intangible asset;

(d) it can be demonstrated how the intangible asset will generate probable future economic benefits;

(e) adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and

(f) the expenditure attributable to the intangible asset during its development can be reliably measured. Other development expenditure that do not meet these criteria are recognised as an expense when incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

3.10 Employee benefits

(a) Short term employee benefits Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the financial year in which the associated services are rendered by the employees of the Group.

(b) Post-employment benefits

The Group has various post-employment benefit schemes in accordance with local conditions and practices in the countries in which it operates. These benefits plans are either defined contribution or defined benefit plans.

A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation.

Defined contribution plan

The Group’s contributions to defined contribution plans are charged to the income statement in the financial year to which they relate. Once the contributions have been paid, the Group has no further payment obligations. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Defined benefit plan-unfunded

The liability in respect of a defined benefit plan is the present value of the defined benefit obligation at the balance sheet date together with adjustments for actuarial gains/losses and past service cost. The Group determines the present value of the defined benefit obligation with sufficient regularity such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the balance sheet date.

The defined benefit obligation, calculated using the projected unit credit method, is determined by independent actuaries, considering the estimated future cash outflows using market yields at the balance sheet date of government securities which have currency and terms to maturity approximating the terms of the related liability.

Actuarial gains and losses arise from experience adjustments and changes in actuarial assumptions. The amount of net actuarial gains and losses recognised in the income statement is determined by the corridor method in accordance with FRS 1192004 “Employee Benefits” and is charged or credited to the income statement over the average remaining service lives of the related employees participating in the defined benefit plan.

Under this scheme, the benefits due to the eligible employees are determined based on the length of service at predetermined factors in accordance with the Group Employee’ s Handbook.


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3.11 Inventories

Inventories are stated at the lower of cost and net realisable value. The cost of raw materials and finished goods comprise standard costs whereas the cost of spares and consumables comprise cost of purchase. The cost of finished goods and work-in-progress includes raw materials, labour and related production overheads (based on normal operating capacity). It excludes borrowings costs. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and applicable variable selling expenses.

3.12 Receivables

Trade receivables are carried at invoiced amount less an allowance for doubtful debts. The allowance is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Known bad debts are written off in the financial year in which they are identified.

3.13 Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short term and highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the balance sheets.

3.14 Income tax

Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and include all taxes based upon the taxable profits, including withholding taxes and real property gains taxes payable upon disposal of properties, if any.

Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences or unused tax losses can be utilised.

Deferred tax is recognised on temporary differences arising on investments in subsidiaries and associates except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

3.15 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed (for example, under an insurance contract), the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

3.16 Share capital

(a) Classification

Ordinary shares are classified as equity. Distributions to the holders of a financial instrument classified as an equity instruments is charged directly to equity.


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3.16 Share capital (continued) (b) Dividends Dividends on ordinary shares are recognised as liabilities in the financial year in which they are declared. Dividends proposed after balance sheet date but before the financial statements are authorised for issue are not recognised as liability at the balance sheet date.

3.17 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

(a) Sale of goods

Revenue relating to sale of goods is recognised upon delivery of products and customer acceptance, net of returns, rebates and discounts.

(b) Investment trading

Revenue relating to the disposal of marketable securities is recognised when the disposal contracts become unconditional and on a receivable basis. Proceeds from disposal of marketable securities are net of stamp duties, brokerage and clearing fees.

(c) Interest income

Interest income is recognised on a time proportion basis, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group.

(d) Dividend income

Dividend income is recognised when the Group’s right to receive payment is established.

(e) Management fee

Management fee from subsidiaries is recognised on the accrual basis.

3.18 Foreign currencies

(a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in Ringgit Malaysia, which is the Company’s functional and presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the dates of the transactions. Foreign currency gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(c) Group companies

The results and financial position of all the group companies (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of transactions); and

• all resulting exchange differences are recognised as a separate component of equity.


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3.18 Foreign currencies (continued) (c) Group companies (continued) On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

3.19 Hire purchase liabilities

Property, plant and equipment held under hire purchase agreements are capitalised in the balance sheet and are depreciated in accordance with the policy set out in Note 3.4. Outstanding obligations due under the hire purchase agreements after deducting finance charges are included as liabilities in the financial statements.

Hire purchase finance charges are allocated to the income statement over the hire purchase period so as to give a constant periodic rate of interest on the remaining liabilities.

3.20 Borrowings

(a) Classification

Borrowings are initially recognised based on the proceeds received, net of transaction costs incurred. In subsequent financial years, borrowings are stated at amortised cost using the effective yield method; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings.

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 balance sheet date.

(b) Capitalisation of borrowing costs

Borrowing costs are actual borrowing costs incurred on the borrowings during the financial year less any investment income on the temporary investment of those borrowings.

Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised as part of the cost of the assets during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs are expensed to the income statement.

3.21 Financial instruments

(a) Description

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise.

A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable.

(b) Financial instruments recognised on the balance sheet

The particular recognition method adopted for financial instruments recognised on the balance sheet is disclosed in the individual accounting policy statements associated with each item.

(c) Financial instruments not recognised on the balance sheet

The Group is a party to financial instruments that comprise foreign currency forward contracts. This instrument is not recognised in the financial statements on inception.

The Group enters into foreign currency forward contracts to protect the Group from movements in exchange rates by establishing the rate at which a foreign currency asset or liability will be settled.

Exchange gains and losses on contracts are recognised when settled at which time they are included in the measurement of the transaction hedged.

(d) Fair value estimation for disclosure purposes

The fair value of publicly traded derivatives and securities is based on quoted market prices at the balance sheet date. The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date.

The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group for similar instruments.


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3.21 Financial instruments (continued) (d) Fair value estimation for disclosure purposes (continued) The face values of the financial assets (less any estimated credit adjustments) and financial liabilities with a maturity period of less than one year are assumed to approximate their fair values.

3.22 Segment reporting

Segment reporting is presented for enhanced assessment of the Group’s risks and returns. A business segment is a group of assets and operations engaged in providing products or services that are subject to risk and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those components operating in other economic environments.

Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment. Segment revenue, expense, assets and liabilities are determined before intragroup balances and intragroup transactions are eliminated as part of the consolidation process, except to the extent that such intragroup balances and transactions are between group enterprises within a single segment. Inter-segment pricing is based on similar terms as those available to other external parties.

3.23 Contingent liabilities and contingent assets

The Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably.

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise

contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain. In the acquisition of subsidiaries by the Group under a business combinations, the contingent liabilities assumed are measured initially at their fair value at the acquisition date, irrespective of the extent of any minority interest.

The Group recognises separately the contingent liabilities of the acquirees as part of allocating the cost of a business combination where their fair values can be measured reliably. Where the fair values cannot be measured reliably, the resulting effect will be reflected in the goodwill arising from the acquisitions. Subsequent to the initial recognition, the Group measures the contingent liabilities that are recognised separately at the date of acquisition at the higher of the amount that would be recognised in accordance with the provisions of FRS 137 “Provisions, Contingent Liabilities, and Contingent Assets” and the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with FRS 118 “Revenue”.

3.24 Finance leases

Lease of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases.

Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a periodic constant rate of interest on the balances outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Property, plant and equipment acquired under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

(a) Estimated impairment of property, plant and equipment

The Group assesses impairment of property, plant and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be


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4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) (a) Estimated impairment of property, plant and equipment (continued) recoverable, i.e. the carrying amount of the asset is higher than the recoverable amount. Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-in-use.

Projected future cash flows used in impairment testing of property, plant and equipment are based on the Group’s estimates calculated based on historical, sector and industry trends, general market and economic conditions and other available information.

The assumptions used, results and impact of possible change in the key assumptions of the impairment assessment of the property, plant and equipment are disclosed in Note 6 to the financial statements.

(b) Recognition of deferred tax asset

Deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. This involves judgement regarding the future financial performance of the Group and the Company in which the deferred tax asset has been recognised.

As at 31 December 2009, the Group and the Company recorded a deferred tax asset of RM446,000 (2008: RM455,000) and RM356,000 (2008: RM299,000) respectively. The Group and the Company also had investment tax allowances and unutilised tax losses in an aggregate amount of RM437.3 million (2008: RM435.8 million) and RM4.8 million (2008: RM4.5 million) respectively, for which no deferred tax asset has been recognised on the balance sheet as at 31 December 2009. Based on management’s projections of the future results of the Group and the Company, it is not probable that taxable profits will be available to utilise against the investment tax allowances and unutilised tax losses in the foreseeable future.

5 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its

foreign currency exchange risk, interest rate risk, credit risk, liquidity and cash flow risk. The Group operates within clearly defined authority limits that have been approved by the Board of Directors. Further financial risk management is carried out through risk reviews, internal control systems and insurance programme.

Foreign currency exchange risk The Group incurs foreign currency risk on sales and purchases that are denominated in a currency other than Ringgit Malaysia. The Group covers a portion of foreign trade receivables and payables denominated in foreign currency with foreign exchange forward contracts when the need arises. All foreign exchange contracts are for the purpose of hedging to protect the Group from foreign currency fluctuations and the Group is not allowed to trade, other than for the purpose of hedging.

Interest rate risk The Group’s income and operating cash flows are substantially independent of changes in market interest rates. Interest rate exposure arises from the Group’s borrowing and deposits. Interest rates of the Group’s borrowings are managed through fixed and floating rates. Investments in financial assets are short term in nature and are mostly placed as short-term deposits with licensed financial institutions.

Credit risk The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requesting credit with clear approval authority and limits. Customers with credits granted above specific limits are required to provide collateral in the form of fixed deposits and/or bank guarantees. The credit policy also spells out clearly the guidelines on extending credit terms to customers, including monitoring the process, assessing and valuation of customer’s credit reliability and periodic review of their financial status to determine the credit limits to be granted.

The Group seeks to invest cash assets safely and profitably in reputable financial institutions. The Group considers the risk of material loss in the event of non-performance by these financial institutions to be unlikely.

At balance sheet date, there were no significant concentration of credit risk.

Liquidity and cash flow risk The Group’s policy on liquidity risk management is to maintain sufficient cash and have available funding through adequate amounts of committed credit facilities, credit lines, and funding through continuing financial support from the holding company for working capital requirements.


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Furniture fittings, office renovation Capital Plant and and Motor work-in- Buildings machinery equipment vehicles progress TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Net book valueAt 1 January 2009 120,448 383,058 1,458 1,850 189 507,003Additions 180 251 128 19 0 578Disposals/write offs (66) (146) (221) (424) (189) (1,046)Impairment loss 0 (1,658) 0 0 0 (1,658)Depreciation charge for the financial year (1,481) (16,432) (583) (342) 0 (18,838)

At 31 December 2009 119,081 365,073 782 1,103 0 486,039

At 31 December 2009Cost 133,490 568,479 12,687 5,987 0 720,643Accumulated depreciation (14,409) (197,713) (11,905) (4,884) 0 (228,911)Accumulated impairment loss 0 (5,693) 0 0 0 (5,693)

Net book value 119,081 365,073 782 1,103 0 486,039

Furniture fittings, office renovation Capital Plant and and Motor work-in- Buildings machinery equipment vehicles progress TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Net book valueAt 1 January 2008 121,242 387,690 1,557 2,467 189 513,145Additions 675 16,411 607 0 0 17,693Reclassification (Note 15) 0 1,595 0 0 0 1,595Disposals/write offs 0 (7,293) (11) (144) 0 (7,448)Depreciation charge for the financial year (1,469) (15,345) (695) (473) 0 (17,982)

At 31 December 2008 120,448 383,058 1,458 1,850 189 507,003

At 31 December 2008Cost 133,389 568,479 13,802 6,885 189 722,744Accumulated depreciation (12,941) (181,386) (12,344) (5,035) 0 (211,706)Accumulated impairment loss 0 (4,035) 0 0 0 (4,035)

Net book value 120,448 383,058 1,458 1,850 189 507,003

6 PROPERTY, PLANT AND EQUIPMENT


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Furniture and fittings, office renovation and Motor equipment vehicles TotalCompany RM’000 RM’000 RM’000 Net book value

At 1 January 2009 370 0 370Additions 42 0 42Depreciation charge for the financial year (159) 0 (159) At 31 December 2009 253 0 253 At 31 December 2009Cost 5,371 0 5,371Accumulated depreciation (5,118) 0 (5,118) Net book value 253 0 253 Net book value

At 1 January 2008 138 144 282Additions 356 0 356Depreciation charge for the financial year (124) 0 (124)Disposals (0) (144) (144)

At 31 December 2008 370 0 370

At 31 December 2008Cost 5,341 0 5,341Accumulated depreciation (4,971) 0 (4,971)

Net book value 370 0 370

Property, plant and equipment under hire purchase

Group

2009 2008 RM’000 RM’000

Motor vehicles under hire purchase:- net book value at end of financial year 595 718

6 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)


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6 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Impairment test for property, plant and equipment During the financial year, management performed an impairment assessment of the carrying value of a plant of a subsidiary (“Plant 3”) in view of the temporary closure of Plant 3 in November 2008. Based on management’s assessment, the recoverable amount of Plant 3 based on value-in-use (“VIU”) is RM406 million, which is in excess of its carrying value of RM380 million.

On this basis, management is of the view that no impairment is necessary with respect to Plant 3.

(a) Key assumptions used in the VIU calculation

The recoverable amount of Plant 3 is determined based on its VIU.

The VIU calculation applied a discounted cash flow model using cash flow projections based on projections approved by the Directors covering the estimated remaining useful life of Plant 3 of 25 years. These projections reflect management’s best estimate of the future results of Plant 3 based on past experience and future outlook.

The key estimates used in the cash flow projections are the selling prices of the products, certain components of the raw material prices and the weighted average cost of capital specific to the Group’s industry. The key assumptions of the projections are as follows:

• Production re-commences in the second half of 2010.

• Selling prices and major raw material prices beyond the sixth year are extrapolated to the end of the useful life based on a 5% year-on-year increase.

• Sales and production volumes beyond the sixth year are assumed to remain constant.

• A discount rate of 6% has been applied to the cash flow projections.

(b) Impact of possible change in key assumptions

The Group’s impairment assessment includes an assessment of changes in key assumptions that would impact the financial statements.

If the discount rate used was 6.5%, the recoverable amount would be lower by RM25 million. If the selling price differs by 0.5% from management’s estimates, the recoverable amount would be higher or lower by RM20 million.

If the raw material price differs by 0.5% from management’s estimates, the recoverable amount would be higher or lower by RM10 million.

If the sales volume differs by 0.5% from management’s estimates, the recoverable amount would be higher by RM1 million or lower by RM2 million.


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Long Short leasehold leasehold land land TotalGroup RM’000 RM’000 RM’000

At 1 January 2009 10,852 6,533 17,385Amortisation charge for the financial year (118) (118) (236)

At 31 December 2009 10,734 6,415 17,149

At 31 December 2009Cost 11,910 7,794 19,704Accumulated amortisation (1,176) (1,379) (2,555)

Net book value 10,734 6,415 17,149

At 1 January 2008 10,971 6,651 17,622Amortisation charge for the financial year (119) (118) (237)

At 31 December 2008 10,852 6,533 17,385

At 31 December 2008Cost 11,910 7,794 19,704Accumulated amortisation (1,058) (1,261) (2,319)

Net book value 10,852 6,533 17,385

8 INVESTMENT PROPERTIES

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000 At 1 January 7,417 8,396 4,867 5,846Disposals (7,069) 0 (4,669) 0Fair value loss (348) (979) (198) (979)

At 31 December 0 7,417 0 4,867 Properties held for rental or for capital appreciation or both and not occupied by the Group are classified as investment properties. These properties are stated at fair value representing open market value estimated by independent professionally qualified valuers. Gains or losses arising from changes in the fair value of investment properties are recognised in the income statement in the financial year in which they arise.

During the financial year, all investment properties were sold to the ultimate holding company, Bandaraya Developments Berhad, for a total cash consideration of RM7.1 million.

7 PREPAID LEASE RENTALS


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Company

2009 2008 RM’000 RM’000

Unquoted shares, at cost 52,495 52,495Allowance for impairment loss (1,275) (487)

51,220 52,008

The shares in the subsidiaries are held directly by the Company. Details of the subsidiaries are as follows:

Effective interest

2009 2008 Name of company % % Principal activities

# Mieco Manufacturing Sdn. Bhd. 100 100 Manufacturing and marketing of chipboards and related products# Mieco Marketing Sdn. Bhd. 100 100 Selling and marketing of chipboards and related products* Mieco Marketing (S) Pte. Ltd. 100 100 Dormant# Mieco Chemicals Sdn. Bhd. 100 100 Dormant# Mieco Wood Products Sdn. Bhd. 100 100 Reforestation# Mieco Reforestation Sdn. Bhd. 100 100 Reforestation, harvesting, extraction and supply of rubber wood# Mieco Wood Resources Sdn. Bhd. 100 100 Investment holding and procurement of rubber wood** Mieco International (HK) Limited 100 100 Dormant# Tudor Capital Sdn. Bhd. 100 100 Investment trading# Aspire Benchmark Sdn. Bhd. 100 100 Property investment

All the subsidiaries are incorporated in Malaysia, except for Mieco Marketing (S) Pte. Ltd. and Mieco International (HK) Limited, which are incorporated in Singapore and Hong Kong respectively.

Note:

#Audited by PricewaterhouseCoopers, Malaysia

* Audited by a firm other than PricewaterhouseCoopers, Malaysia and member firms of PricewaterhouseCoopers International Limited

** Company is dormant. As such no statutory audit is required under Hong Kong Companies Ordinance.

9 INVESTMENT IN SUBSIDIARIES


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Company

2009 2008 RM’000 RM’000

Receivable within two to five years 157,875 185,594Receivable later than five years 325,644 294,280

483,519 479,874

The effective interest rates of the interest-bearing amounts due from a subsidiary as at the balance sheet range from 5.20% to 5.35% (2008: 5.15% to 6.67%) per annum.

The estimated fair value for the amount due from a subsidiary as at the balance sheet date was RM326.513 million(2008: RM311.967 million).

11 INVENTORIES

Group

2009 2008 RM’000 RM’000

At cost: Raw materials 10,725 22,224Work-in-progress 1,030 1,052Finished goods 6,236 14,150Spares and consumables 22,587 21,875

40,578 59,301At net realisable value: Finished goods 0 14,981

Total 40,578 74,282

10 AMOUNT DUE FROM A SUBSIDIARY

The amount due from a subsidiary is unsecured, denominated in Ringgit Malaysia, is repayable after a year, and is interest free except for funds amounting to RM186.370 million (2008: RM185.842 million) which are interest bearing as these funds are sourced by the Company from (a) external parties to part finance the construction of a plant of a subsidiary, and (b) the holding company for loan repayment of the Company and working capital purposes of the subsidiary. The finance expenses charged to the Company for the current financial year on these borrowings amounting to RM9.723 million (2008: RM11.700 million) are re-charged to the subsidiary.

The repayment terms of the amount due from a subsidiary are as follows:


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Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Trade receivables 38,122 54,376 1,328 1,328Allowance for doubtful debts (6,730) (6,761) (1,328) (1,328)

31,392 47,615 0 0

Amounts due from subsidiaries 0 0 2,408 2,486Allowance for doubtful debts 0 0 (683) (683)

0 0 1,725 1,803

Other receivables 8,768 11,991 158 149Allowance for doubtful debts (7,627) (8,143) (54) (54)

1,141 3,848 104 95Deposits 225 225 14 14Prepayments 135 669 10 10

1,501 4,742 128 119

Total 32,893 52,357 1,853 1,922

The credit terms of the trade receivables range from 1 to 60 days (2008: 1 to 60 days).

The amounts due from subsidiaries are unsecured, interest free and have no fixed terms of repayment.

The currency exposure profile of receivables, deposits and prepayments is as follows:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 27,376 43,464 1,853 1,702- US Dollar 4,886 7,806 0 0- Singapore Dollar 631 1,087 0 124- HK Dollar 0 0 0 96

32,893 52,357 1,853 1,922

Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large number of customers. The Group’s historical experience in collection of accounts receivable falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Group’s trade receivables.

12 RECEIVABLES, DEPOSITS AND PREPAYMENTS


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13 MARKETABLE SECURITIES Group

2009 2008 RM’000 RM’000

Quoted in Malaysia

Share in corporations, at cost 66 66Less: Allowance for impairment losses (17) (30)

49 36

At market value

Shares in corporations, quoted in Malaysia 49 36

14 CASH AND CASH EQUIVALENTS

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Deposits with licensed banks 2,516 25,099 965 206Deposits with licensed discount houses 33 32 0 0

2,549 25,131 965 206Cash and bank balances 2,588 10,211 119 156Bank overdraft (Note 19) (6,831) 0 0 0 (1,694) 35,342 1,084 362

Included in deposits, cash and bank balances are monies subject to usage restriction 2,516 7,569 965 166

The weighted average interest rates of deposits that were effective at the balance sheet date were as follows:

Group Company

2009 2008 2009 2008 % % % %

Deposits with licensed banks 2.39 2.72 2.19 3.56Deposits with licensed discount house 1.88 3.12 0 0 Deposits of the Group and the Company have an average tenure to maturity of 276 days (2008:125 days) and 141 days (2008: 301 days) respectively.

Bank balances are held at call with licensed banks, which are non-interest bearing.


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14 CASH AND CASH EQUIVALENTS (CONTINUED)

The currency exposure profile of cash and cash equivalents is as follows: Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia (2,098) 33,904 1,057 337- US Dollar 29 1,009 17 0- Singapore Dollar 312 276 0 0- HK Dollar 53 128 0 0- Others 10 25 10 25 (1,694) 35,342 1,084 362

15 NON-CURRENT ASSET HELD FOR SALE

Group

2009 2008 RM’000 RM’000

Net book valueAt 1 January 0 1,672Impairment loss for the financial year 0 (77)Reclassification to property, plant and equipment (Note 6):Cost 0 (14,893)Accumulated depreciation 0 13,143Accumulated impairment loss 0 155 0 (1,595)

At 31 December 0 0

16 SHARE CAPITAL

Group and Company

2009 2008 RM’000 RM’000

Authorised:1,000,000,000 ordinary shares of RM1 each 1,000,000 1,000,000

Issued and fully paid: 210,000,000 ordinary share of RM1 each 210,000 210,000


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17 RESERVES

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Non-distributable: Share premium 5,866 5,866 5,866 5,866Foreign currency reserve (26) (401) 0 0

Warrant reserve Proceeds on issuance of warrants 0 14,500 0 14,500Expenses related to issuance of warrants 0 (521) 0 (521) 0 13,979 0 13,979

5,840 19,444 5,866 19,845 Distributable: Retained earnings 100,448 101,148 125,657 113,461

106,288 120,592 131,523 133,306

WarrantsThe Company issued 100,000,000 warrants 2004/2009 (“Warrants”) on 22 April 2004 as follows:

(a) 70,000,000 Rights Warrants at an issue price of RM0.10 per Warrant on the basis of 1 warrant for every 3 existing ordinary shares of RM1.00 each held in the Company; and(b) 30,000,000 Placement Warrants at an issue price of RM0.25 per Warrant.

Subject to the adjustments in accordance with the Deed Poll dated 20 February 2004, the Warrant holders are entitled to subscribe for new ordinary shares of RM1.00 each in the Company at any time during the 3-year period commencing from and inclusive of the second anniversary of the date of issue of the Warrants up to the fifth anniversary of the issue date (“Expiry Date”), at RM1.20 payable in cash in respect of each new share in the Company. Accordingly, the Warrants issued can be exercised from 22 April 2006 to 21 April 2009. Any exercise rights that have not been exercised by the Expiry Date will lapse and every Warrant will cease to be valid for any purpose.

The Warrant reserve arose from the issuance of 100,000,000 Warrants 2004/2009 comprising Rights Issue of 70,000,000 Warrants 2004/2009 and Private Placement of 30,000,000 Warrants 2004/2009 at the issue price of RM0.10 and RM0.25 per Warrant respectively resulting in proceeds amounting to RM14.5 million.

The proceeds have been set-off against the expenses related to the issuance of Warrants and the net proceeds have been recognised as Warrant reserve.

On the Expiry Date on 21 April 2009, there were no Warrants exercised. The Warrants were delisted on the following day on 22 April 2009.


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17 RESERVES (CONTINUED)

Retained earningsUnder the single-tier tax system which came into effect from the year of assessment 2008, companies are not required to have tax credits under Section 108 of the Income Tax Act 1967 for dividend payment purposes. Dividends paid under this system are tax exempt in the hands of shareholders.

Companies with Section 108 credits as at 31 December 2009 may continue to pay franked dividends until the Section 108 credits are exhausted or 31 December 2013 whichever is earlier unless they opt to disregard the Section 108 credits to pay single-tier dividends under the special transitional provisions of the Finance Act 2007. As at 31 December 2009, subject to agreement with the tax authorities, the Company has sufficient Section 108 tax credit and exempt account to frank approximately RM20 million (2008: RM19 million) andRM63 million (2008: RM63 million) respectively of the retained earnings of the Company as franked and exempt dividend.

18 PROVISIONS

Defined benefit plan of the Group

The Group operates an unfunded final salary defined benefit plan for its employees in Malaysia and Hong Kong. The latest actuarial valuations of the plan were carried out on 29 December 2009.

The movements during the financial year in the amounts recognised in the Group’s and Company’s balance sheet are as follows:

Group Company

RM’000 RM’000

At 1 January 2008 7,974 281

Charged to income statement (Note 25) 1,183 95 Foreign currency reserve 12 0Benefits paid (551) (306)

At 31 December 2008 8,618 70

Charged to income statement (Note 25) 817 134Benefits paid (1,147) (93)

At 31 December 2009 8,288 111


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18 PROVISIONS (CONTINUED)

Defined benefit plan of the Group (continued)

The amounts recognised in the balance sheets may be analysed as follows:

Group Company

RM’000 RM’000

At 31 December 2009Present value of unfunded obligations – non current 8,288 111

At 31 December 2008 Present value of unfunded obligations – non current 8,618 70

The expenses recognised in the income statement may be analysed as follows:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Current service cost 770 754 65 61Interest cost 499 429 31 34Amortisation of net loss 24 0 38 0Curtailment gain (476) 0 0 0

817 1,183 134 95

The principal actuarial assumptions used in respect of the Group’s and Company’s defined benefit plan were as follows:

Lump-sum retirement plan

2009 2008 % %

Discount rates 7.0 6.0Expected rate of salary increases 8.0 6.0


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19 BORROWINGS

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

CurrentBank overdraft (unsecured) (Note 14) 6,831 0 0 0Term loan (unsecured) 6,238 26,853 6,238 26,853Bankers acceptance (unsecured) 20,617 67,496 0 0Revolving credit (unsecured) 0 3,000 0 0Promissory note (unsecured) 0 8,341 0 0Hire purchase liabilities (secured) (Note 22) 164 164 0 0

33,850 105,854 6,238 26,853

Non-currentTerm loan (unsecured) 144,372 138,741 144,372 138,741Hire purchase liabilities (secured) (Note 22) 246 410 0 0

144,618 139,151 144,372 138,741

TotalBank overdraft (unsecured) (Note 14) 6,831 0 0 0Term loan (unsecured) 150,610 165,594 150,610 165,594Bankers acceptance (unsecured) 20,617 67,496 0 0Revolving credit (unsecured) 0 3,000 0 0Promissory note (unsecured) 0 8,341 0 0Hire purchase liabilities (secured) (Note 22) 410 574 0 0

178,468 245,005 150,610 165,594

The currency exposure profile of borrowings is as follows: Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 139,398 201,511 111,540 122,100- US Dollar 39,070 43,494 39,070 43,494

178,468 245,005 150,610 165,594

Bank overdraft, bankers acceptance, revolving credit and promissory note facilities, which are unsecured, are utilised to finance the purchase of raw materials and working capital.The estimated fair value of the non-current portion of term loan as at the balance sheet date was RM122.609 million (2008: RM118.881 million).



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19 BORROWINGS (CONTINUED)

The terms and debt repayment shedule of the borrowings are as follows:

Carrying Within 1-2 2-5 Over Year of Amount 1 year years years 5 years maturity RM’000 RM’000 RM’000 RM’000 RM’000

Group

2009Bank overdraft 2010 6,831 6,831 0 0 0Term loan 2015 150,610 6,238 14,259 103,377 26,736Bankers acceptance 2010 20,617 20,617 0 0 0Hire purchase liabilities 410 164 246 0 0

178,468 33,850 14,505 103,377 26,736 2008Term loan 2013 165,594 26,853 31,329 107,412 0Bankers acceptance 2009 67,496 67,496 0 0 0Revolving credit 2009 3,000 3,000 0 0 0Promissory note 2009 8,341 8,341 0 0 0Hire purchase liabilities 574 164 328 82 0

245,005 105,854 31,657 107,494 0

Company

2009Term loan 2015 150,610 6,238 14,259 103,377 26,736

2008Term loan 2013 165,594 26,853 31,329 107,412 0

Interests on borrowings which are subject to floating interest rates are contractually repriced at intervals between 1 to 3 months. Interest on borrowings at fixed rates are fixed until the maturity of the borrowings.


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19 BORROWINGS (CONTINUED)

The weighted average interest rates of the borrowings at the balance sheet date are as follows:

Group Company

2009 2008 2009 2008 % % % %

Bank overdraft 6.30 0 0 0Term loan 5.20 6.67 5.20 6.67Bankers acceptance 3.67 – 3.94 4.21 - 5.64 0 0Revolving credit 0 5.46 0 0Promissory note 0 7.25 0 0

The Company had successfully restructured its term loans with reduced repayment of the principal outstanding borrowings for the next two years. The holding company has provided a letter of guarantee (“LG”) on the due and punctual payment by the Company in respect of the said term loans in the next two years. After expiry of two years from the LG date, the LG shall be released subject to fulfilment of the following terms and conditions by the Company:

- compliance of all financial covenants under the term loans facility;- two reported consecutive quarters of net profit after tax of at least RM2 million each; and- provision of security to substitute the LG.

Accordingly, the Directors are of the view that it is appropriate to prepare the financial statements of the Group and of the Company as a going concern.

20 DEFERRED TAXATION

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the balance sheet:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Subject to income tax:Deferred tax assets 446 455 356 299Deferred tax liabilities (7,580) (9,430) 0 0

(7,134) (8,975) 356 299


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20 DEFERRED TAXATION (CONTINUED)

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

As start of financial year (8,975) (17,732) 299 332

Credited/(charged) to income statement (Note 28)- Property, plant and equipment 5,548 3,667 38 27- Provisions 224 167 8 (50)- Inventories (2,001) 2,551 0 0- Receivables (1,988) 1,982 0 1- Others 58 390 11 (11) 1,841 8,757 57 (33)

At end of financial year (7,134) (8,975) 356 299

Subject to income tax:

Deferred tax assets (before offsetting)Provisions 1,533 1,309 118 110Inventories 1,973 3,974 0 0Receivables 184 2,172 171 171Property, plant and equipment 73 33 67 29

3,763 7,488 356 310Offsetting (3,317) (7,033) 0 (11)

Deferred tax assets (after offsetting) 446 455 356 299

Deferred tax liabilities (before offsetting)Property, plant and equipment (10,875) (16,383) 0 0Others (22) (80) 0 (11)

(10,897) (16,463) 0 (11)Offsetting 3,317 7,033 0 11

Deferred tax liabilities (after offsetting) (7,580) (9,430) 0 0


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20 DEFERRED TAXATION (CONTINUED)

The amount of deductible temporary differences, unutilised tax losses and unutilised investment tax allowance (all of which have no expiry date) for which no deferred tax asset is recognised on the balance sheet are as follows:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Deductible temporary differences 1 1 0 0Unutilised tax losses 9,415 7,921 4,842 4,509Unutilised investment tax allowance 427,853 427,853 0 0

21 TRADE AND OTHER PAYABLES Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Trade payables 20,535 49,408 0 0Accrued expenses 325 731 0 0Other payables 10,646 26,011 2,106 2,836Amounts due to subsidiaries 0 0 3,346 3,247Amount due to holding company 2,577 2,348 2,577 2,348Payroll liabilities 1,400 1,085 204 205

35,483 79,583 8,233 8,636

Included in payroll liabilities is an accrual for contributions to the Employees Provident Fund amounting to RM270,215 (2008: RM369,639). Companies incorporated in Malaysia contribute to the Employees Provident Fund, the national defined contribution plan. Once the contributions have been paid, the Group has no further payment obligations.

Amounts due to subsidiaries and holding company are unsecured, interest free and have no fixed term of repayment.

The credit terms of trade and other payables range from 1 to 90 days (2008: 1 to 90 days).


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21 TRADE AND OTHER PAYABLES (CONTINUED)

The currency exposure profile of trade and other payables is as follows:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 32,170 71,807 7,969 8,636- US Dollar 552 1,947 264 0- Euro 2,744 5,804 0 0- Others 17 25 0 0

35,483 79,583 8,233 8,636

22 HIRE PURCHASE LIABILITIES Group

2009 2008 RM’000 RM’000

Payable within one year 182 182Payable between one to five years 273 455

455 637Less: Future finance charges (45) (63)

Present value of hire purchases liabilities 410 574

Hire purchase liabilities are classified as follows:Current (Note 19) 164 164Non-current (Note 19) 246 410

410 574

Hire purchase creditors are denominated in Ringgit Malaysia. The weighted average effective interest rate as at the year end is 4.19% (2008: 4.19%) per annum for the Group.

The estimated fair value of the hire purchase liabilities (non-current portion) at the balance sheet date was RM232,670 (2008: RM380,540). The fair value of the current portion of the hire purchase liabilities approximates its carrying value at the balance sheet date.

Hire purchase liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.


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23 AMOUNT DUE TO HOLDING COMPANY

The holding company is Bandar Raya Developments Berhad, a company incorporated in Malaysia.

Amount due to the holding company is denominated in Ringgit Malaysia, unsecured and is subordinated to the prior repayment of certain loans. The weighted average interest rate on the amount due to the holding company at the balance sheet date is 5.35% (2008: 5.15%) per annum as at 31 December 2009.

The estimated fair value of the amount due to holding company at the balance sheet date was RM26.16 million (2008: RM16.36 million).

24 REVENUE

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Sales of goods 185,739 368,776 0 0Sales of marketable securities 0 1,440 0 0Dividend income 0 0 0 6,659Management fee received fromsubsidiaries 0 0 2,816 3,829

185,739 370,216 2,816 10,488

25 STAFF COSTS Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Wages, salaries and bonus 13,992 18,135 1,737 1,709Defined contribution plan 1,765 2,299 210 214Defined retirement benefit plan (Note 18) 817 1,183 134 95Other employee benefits 7,063 9,194 204 304

23,637 30,811 2,285 2,322

Details of the defined benefit plan and defined contribution plan for the Group and the Company are set out in Note 18 and Note 21 to the financial statements, respectively.

Included in staff costs above are the Company’s Executive Director’s remuneration, excluding fees and estimated money value of benefits-in-kind, as further disclosed in Note 30 to the financial statement.


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26 (LOSS)/PROFIT FROM OPERATIONS

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

The following items have been charged/ (credited) in arriving at (loss)/profit from operations:Auditors’ remuneration (Note 31):- current financial year 128 119 35 35- under/(over) provision in prior year 16 (6) 10 0(Write back of)/allowance for bad and doubtful debts (264) 7,242 0 0Directors’ remuneration (excluding estimated monetary value of benefits in-kind) (Note 30) 846 1,493 840 1,294Recovery of bad and doubtful debts (283) (55) 0 0Rental of building 299 620 20 18Loss on disposal of property, plant and equipment 635 7,295 0 34Loss/(gain) on realised foreign exchange 4,555 499 1 (19)Unrealised (gain)/loss on foreign exchange (963) 1,573 0 (2)Allowance for inventories obsolescence/inventories written off 3,327 2,150 0 0Rental income (960) (1,059) (62) (165)Dividend income (2) (2) 0 (6,659)Gain on disposal of marketable securities 0 (904) 0 0Government grant received (1,163) 0 0 0(Write back)/allowance for impairment loss on marketable securities (13) 21 0 0Loss on wood concession 474 0 0 0

Direct operating expenses from investment properties that generated rental income for the Group and for the Company during the financial year amounted to RM0.225 million (2008: RM1.039 million) respectively.

Direct operating expenses from investment properties that did not generate rental income for the Group during the financial year amounted to RM0.364 million (2008: RM0.086 million).


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27 FINANCE COSTS AND FINANCE INCOME

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Finance costsInterest expense on:- Overdraft interest 389 5 0 0- Bankers acceptance 1,127 2,656 0 0- Revolving credit 7 8 0 0- Promissory note 139 2 0 0- Hire purchase liabilities 18 18 0 0- Term loan 7,964 11,299 7,964 11,299- Loan from holding company 1,759 401 1,759 401- Loan facility fee 49 30 0 0

11,452 14,419 9,723 11,700

Finance income- Recovery of interest from a subsidiary in respect of term loan 0 0 (7,964) (11,299)- Recovery of interest from a subsidiary in respect of loan from holding company 0 0 (1,759) (401)- Interest income (26) (42) (4) (1)

(26) (42) (9,727) (11,701)

Net finance costs/(income) 11,426 14,377 (4) (1)


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28 TAX CREDIT/(EXPENSE)

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Tax credit/(expense) for the financial year:

In respect of the current financial year- Malaysian income tax (8) (202) 0 0- Foreign tax (9) (143) (9) (20)- Deferred tax(Note 20) 3,530 8,253 81 (31)

3,513 7,908 72 (51)(Under)/over accrual in respect of prior years- Malaysian income tax (9) (104) 0 (65)- Foreign tax 22 0 18 0- Deferred tax (Note 20) (1,689) 504 (24) (2)

1,837 8,308 66 (118)

The effective tax rates of the Group and the Company differ from the statutory tax rate of 25% (2008: 26%) and are reconciled as below:

Group Company

2009 2008 2009 2008 % % % %

Statutory income tax rate of Malaysia (25) (26) (25) 26 Effects of: - Income not subjected to tax (1) (1) 0 (36)- Expenses not deductible for tax purposes 3 2 16 10- Different tax rate 0 1 0 0- Tax losses not recognised 2 2 5 1Under/(over) accrual in prior year 10 (1) 0 1

Effective tax rate (11) (23) (4) 2


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29 LOSS PER SHARE

(a) The loss per share of the Group is calculated based on the loss attributable to equity holders of the Company of RM14.68 million (2008: loss of RM27.95 million) divided by the weighted average number of 210,000,000 (2008: 210,000,000) ordinary shares in issue during the financial year.

(b) For the diluted earnings per share calculation, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive potential ordinary shares is in respect of the warrants issued. The warrants are assumed to have been converted into ordinary shares as at 31 December 2008. A calculation is done to determine the number of shares that could have been acquired at fair value (determined at the average share price of the Company’s shares) based on the exercise price of the warrants. The number of the shares calculated is compared with the number of shares that would have been issued assuming the exercise of the warrants. The difference is added to the denominator as an issue of ordinary shares for no consideration. This calculation serves to determine the ‘bonus’ element in the ordinary shares outstanding for the purpose of computing the dilution.

The diluted earnings per share is not applicable for 2009 as the warrants had expired on 21 April 2009. The diluted earnings per share is not applicable for 2008 as the effect of the assumed exercise of warrants was anti-dilutive.

30 DIRECTORS’ REMUNERATION

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Directors of the Company

Non-executive Directors:- fees 108 108 108 108- allowances and other emoluments 42 42 42 42

150 150 150 150

Executive Directors:- salaries and bonus 480 418 480 418- allowances and other emoluments 23 244 23 244- defined contribution plan 58 57 58 57- defined benefit retirement plan 0 306 0 306- other employee benefits 129 119 129 119- estimated money value of benefits-in-kind 46 80 46 80

736 1,224 736 1,224

Sub-total 886 1,374 886 1,374



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30 DIRECTORS’ REMUNERATION (CONTINUED)

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Directors of subsidiariesNon-executive Directors:- fees 6 6 0 0- salaries and bonus 0 171 0 0- defined contribution plan 0 21 0 0- other employee benefits 0 1 0 0- estimated money value of benefits-in-kind 0 7 0 0

Sub-total 6 206 0 0

Total 892 1,580 886 1,374

Total (excluding estimated moneyvalue of benefits-in-kind) 846 1,493 840 1,294

As stated in Note 25 to the financial statements, the Company’s Executive Directors’ remuneration (excluding fees and estimated money value of benefits-in-kind) have been included as part of staff costs.

Details of the defined benefit plan and defined contribution plan of the Group and the Company are set out in Note 18 and Note 21 to the financial statements, respectively.

31 AUDITORS’ REMUNERATION

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

PricewaterhouseCoopers Malaysia- statutory audit 103 93 32 32- other services 18 3 3 3

Firms other than PricewaterhouseCoopers,Malaysia and member firms of PricewaterhouseCoopersInternational Limited 7 23 0 0

Total remuneration 128 119 35 35


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32 CAPITAL COMMITMENTS

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Capital expenditure- approved and contracted for 26 213 0 0- approved but not contracted for 5,552 1,090 100 0

5,578 1,303 100 0

Analysed as follows:- property, plant and equipment 5,578 1,303 100 0

33 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES

In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions and balances. The related party transactions described below were carried out on terms and conditions negotiated between the Group and the related parties.

(a) Relationship with related parties

Related party Relationship

Bandar Raya Developments Berhad Holding company

Mieco Manufacturing Sdn Bhd Wholly-owned subsidiary

(b) Transactions with related parties

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Bandar Raya Developments Berhad

(i) Management fee payable to holding company 400 400 400 400 (ii) Borrowings from holding company 14,000 20,000 14,000 20,000 (iii) Interest expense on borrowings from holding company 1,759 401 1,759 401 (iv) Proceeds from disposal of investment properties to holding company 7,069 0 4,669 0



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33 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(b) Transactions with related parties (continued)

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Mieco Manufacturing Sdn. Bhd. (v) Borrowings to a subsidiary company 0 0 14,000 20,000 (vi) Interest expense on borrowings to a subsidiary company 0 0 9,723 11,700 (vii) Management fee receivable from a subsidiary 0 0 2,228 2,903

(c) Compensation of key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director of the Company.

The remuneration of the Directors and other members of key management during the financial year were as follows:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Remuneration and benefits 1,706 1,979 1,093 1,139 Post-employment benefits 317 547 94 417

2,023 2,526 1,187 1,556

Included in the total key management personnel are:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Director’s remuneration and benefits 808 1,224 808 1,224


34 SEGMENT INFORMATION

Primary segment - Business segments

There is no disclosure of segment information by business segment as required by FRS 114, “Segment Reporting” as the Group operates principally within one industry, that is, manufacturing and sales of wood based products. Other operations of the Group mainly comprise investment trading, investment holding, property investment, all of which are not of sufficient size to be reported separately.

Secondary segment - Geographical segments

The Group operates in two main geographical areas.

Revenue Total assets Capital expenditure 2009 2008 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Malaysia 185,739 324,428 583,503 690,020 536 17,687Hong Kong and China 0 45,788 108 160 42 6Others 0 0 313 5,144 0 0

185,739 370,216 583,924 695,324 578 17,693

35 CONTINGENT LIABILITIES

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Corporate guarantees (unsecured) issued by the Company to licensed financial institutions for banking facilities to certain subsidiaries 0 0 78,000 10,000


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36 FOREIGN CURRENCY EXCHANGE RISK

At 31 December 2009, the Group’s open forward contracts entered into as cover of anticipated future transaction were as follows:

At 31.12.2009 At 31.12.2008

Currency Currency to be Average to be AverageHedged received/ RM’000 contractual received/ RM’000 contractualitems paid equivalent rate paid equivalent rate

Trade US Dollar US Dollarreceivables 1.427 million 4,819 3.378 2.366 million 8,557 3.616

Future sale US Dollar US Dollarof goods 1.029 million 3,499 3.399 18.451 million 61,669 3.342

Trade Euro Europayables 0.452 million 2,276 5.032 1.109 million 5,541 4.997

Future purchase Euro Euroof goods 0.088 million 441 5.032 0.491 million 2,433 4.952

The settlement date of the above open forward contracts range between 1 to 6 months.

The unrecognised losses at 31 December 2009 on open contracts which hedge anticipated future foreign currency sales and purchases amounted to RM81,210 (2008: RM2,281,580) and RM56,142 (2008: RM84,803) respectively. The net exchange losses are deferred until the related sales and purchases are transacted, at which time they are included in the measurement of such transactions.

37 FAIR VALUES

The carrying amounts of the financial assets and liabilities of the Group and Company at the balance sheet date approximate their fair values except as disclosed in Notes 10, 19, 22 and 23 of the financial statements.

38 APPROVAL OF FINANCIAL STATEMENTS

The financial statements have been approved for issue in accordance with a resolution of the Board of Director on 20 April 2010.


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Statement by DirectorsPursuant To Section 169(15) Of The Companies Act, 1965

We, Dato’ Mohamed Moiz Bin J M Ali Moiz and Dato’ Yong Seng Yeow, two of the Directors of Mieco Chipboard Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 52 to 103 are drawn up so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2009 and of the results and cash flows of the Group and the Company for the financial year ended on that date in accordance with the provisions of the Companies Act, 1965 and the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities.

In accordance with a resolution of the Board of Directors dated 20 April 2010.

DATO’ MOHAMED MOIZ BIN J M ALI MOIZ DATO’ YONG SENG YEOWDIRECTOR DIRECTOR


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Statutory DeclarationPursuant To Section 169(16) Of The Companies Act, 1965

I, Wong Weng Kwong, the officer primarily responsible for the financial management of Mieco Chipboard Berhad, do solemnly and sincerely declare that the financial statements set out on pages 52 to 103 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.

WONG WENG KWONG

Subscribed and solemnly declared by the above named Wong Weng Kwong at Kuala Lumpur on 20 April 2010.

Before me,

COMMISSIONER FOR OATHS


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REPORT ON THE FINANCIAL STATEMENTS

We have audited the financial statements of Mieco Chipboard Berhad, which comprise the balancesheets as at 31 December 2009 of the Group and of the Company, and the income statements,statements of changes in equity and cash flow statements of the Group and of the Company for thefinancial year then ended, and a summary of significant accounting policies and other explanatory notes,as set out on pages 52 to 103.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation and fair presentation of these financialstatements in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other thanPrivate Entities and the Companies Act, 1965. This responsibility includes: designing, implementing andmaintaining internal control relevant to the preparation and fair presentation of financial statements thatare free from material misstatement, whether due to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with approved standards on auditing in Malaysia. Those standardsrequire that we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on our judgement, including the assessmentof risks of material misstatement of the financial statements, whether due to fraud or error. In makingthose risk assessments, we consider internal control relevant to the entity’s preparation and fairpresentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’sinternal control. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by the Directors, as well as evaluating the overallpresentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with MASB ApprovedAccounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965so as to give a true and fair view of the financial position of the Group and of the Company as of 31December 2009 and of their financial performance and cash flows for the financial year then ended.

Independent Auditors’ ReportTo The Members of Mieco Chipboard Berhad(Incorporated In Malaysia) (Company No.12849 K)


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REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report thefollowing:

(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 9 to the financial statements.

(c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(d) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

OTHER MATTERS

This report is made solely to the members of the Company, as a body, in accordance with Section 174 ofthe Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to anyother person for the content of this report.

PRICEWATERHOUSECOOPERS THAYAPARAN A/L S.SANGARAPILLAI(No. AF: 1146) (No. 2085/09/10 (J)) Chartered Accountants Chartered Accountant

Kuala Lumpur 20 April 2010


110 | Analysis of Shareholdings114 | List of Properties115 | Notice of Annual General Meeting117 | Statement Accompanying Notice of Annual General Meeting Form of Proxy

OtherInformation


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Analysis Of Shareholdings As At 20 April 2010

Authorised Share Capital : RM1,000,000,000Issued and Fully Paid-Up Capital : RM210,000,000Class of Shares : Ordinary Shares of RM1.00 eachVoting Rights : 1 vote per ordinary share

DISTRIBUTION OF SHAREHOLDINGS

No. of Holders % of Holders No. of Shares % of Shares

Largest Shareholders 30 0.50 157,052,898 74.79

Size of HoldingsLess than 100 385 6.47 14,153 0.01 100 - 1,000 1,629 27.36 1,580,399 0.751,001 - 10,000 3,006 50.49 13,408,345 6.3810,001 - 100,000 821 13.79 25,129,005 11.97100,001 - less than 5% of issued shares 111 1.86 39,695,527 18.905% and above of issued shares 2 0.03 130,172,571 61.99

Total 5,954 100.00 210,000,000 100.00

DIRECTORS’ INTERESTS IN SHARES BASED ON THE REGISTER OF DIRECTORS’ SHAREHOLDINGS

Direct Interest Indirect Interest

No. of Shares % No. of Shares %

In the CompanyDato’ Mohamed Moiz Bin J M Ali Moiz - - 119,193,971** 56.76**Dato’ Yong Seng Yeow 130,000 0.06 - -Dato’ Jaganath Derek Steven Sabapathy - - - -Datin Sri Maria Bettina Chua Binti Abdullah - - - -Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar 16,000 0.01 - -Dato’ Dr Amarjit Singh A/L Santokh Singh 100,000 0.05 70,000*** 0.03***Vijeyaratnam A/L V. Thamotharam Pillay - - - -Low Kim Seng 10,000 0.00 * - -


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DIRECTORS’ INTERESTS IN SHARES BASED ON THE REGISTER OF DIRECTORS’ SHAREHOLDINGS (Continued)



In Holding Company, Bandar Raya Developments BerhadDato’ Mohamed Moiz Bin J M Ali Moiz - - 92,070,812 ** 19.32**Dato’ Yong Seng Yeow - - - -Dato’ Jaganath Derek Steven Sabapathy - - - -Datin Sri Maria Bettina Chua Binti Abdullah 70,000 0.01 - -Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar - - - -Dato’ Dr Amarjit Singh A/L Santokh Singh - - - -Vijeyaratnam A/L V. Thamotharam Pillay - - - -Low Kim Seng 57,000 0.01 - -

* Neglible percentage

** Indirect interest held through Ambang Sehati Sdn Bhd

*** Indirect interest held through spouse

THIRTY (30) MAJOR SHAREHOLDERS BASED ON THE RECORD OF DEPOSITORS

Name Shareholding %

1) Bandar Raya Developments Berhad 119,193,971 56.76

2) Lembaga Tabung Haji 10,978,600 5.23

3) HSBC Nominees (Asing) Sdn Bhd 7,858,900 3.74 [Exempt AN for RBS Coutts Bank Ltd (SG Branch)]

4) HSBC Nominees (Asing) Sdn Bhd 2,764,400 1.32 [Exempt AN for Clariden Leu Ltd. (EX-CLAR BK, ZRH)]

5) DB (Malaysia) Nominee (Tempatan) Sendirian Berhad 1,632,100 0.78 [ICapital. Biz Berhad]

6) HDM Nominees (Tempatan) Sdn Bhd [Pledged Securities Account for Oh Kim Sun (M12)] 1,432,600 0.68

7) Alliancegroup Nominees (Tempatan) Sdn Bhd [PHEIM Asset Management Sdn Bhd for Employees Provident Fund] 1,359,800 0.65

8) Yeoh Ah Tu 1,169,000 0.56

9) Tan Kong Heng 925,400 0.44


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Analysis Of Shareholdings As At 20 April 2010 (Continued)

THIRTY (30) MAJOR SHAREHOLDERS BASED ON THE RECORD OF DEPOSITORS (Continued)

Name Shareholding %

10) Lee Yu Yong @ Lee Yuen Ying 815,300 0.39

11) Yuet Kam Alice Lin 780,000 0.37

12) Lim Lee Ling 720,000 0.34

13) Sum Sang 649,100 0.31

14) M & A Nominee (Tempatan) Sdn Bhd 641,900 0.31 [Titan Express Sdn Bhd]

15) Mayban Securities Nominees (Tempatan) Sdn Bhd 609,600 0.29 [Pledged Securities Account for Leong Chee Kwong (REM825)]

16) Tey Soon Dee 584,800 0.28 17) HDM Nominees (Tempatan) Sdn Bhd 469,100 0.22 [Pledged Securities Account for Sleuths Holdings Sdn Bhd (M12)]

18) Lee Thian Fook @ Lee Tian Fook 421,000 0.20

19) BHLB Trustee Berhad 416,700 0.20 [Exempted - Trust Account for EPF Investment for Member Savings Scheme]

20) Shoptra Jaya (M) Sdn Bhd 402,000 0.19

21) M & A Nominee (Asing) Sdn Bhd 359,300 0.17 [Pedigree Limited]

22) Tam Shuk Yi 358,000 0.17

23) Aliya Akbar Khawaja Mohd Akbar 341,400 0.16

24) Malaysia Nominees (Tempatan) Sendirian Berhad 334,500 0.16 [Pledged Securities Account for Sleuths Holdings Sdn Bhd (01-00810-000)]

25) Wong Choong Loong 324,200 0.15

26) Choong Yean Yaw 311,500 0.15

27) Cheah Wei Jeng 311,000 0.15

28) Tan Kim Eng 308,027 0.15

29) Citigroup Nominees (Tempatan) Sdn Bhd 300,700 0.14 [Pledged Securities Account for Ng Ching Soong (470478)]

30) Lau Kah Ding & Sons Sdn Bhd 280,000 0.13

Total 157,052,898 74.79


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SUBSTANTIAL SHAREHOLDERS BASED ON THE REGISTER OF SUBSTANTIAL SHAREHOLDERS



Bandar Raya Developments Berhad 119,193,971 56.76 - -Ambang Sehati Sdn Bhd - - 119,193,971 56.76(a) Dato’ Mohamed Moiz Bin J M Ali Moiz - - 119,193,971 56.76(b)Abdul Sathar Bin M S M Abdul Kadir - - 119,193,971 56.76(c)Sascha Saleem Khan - - 119,193,971 56.76(d)Tania Aishah Khan - - 119,193,971 56.76(e)Lembaga Tabung Haji 10,978,600 5.23 - -

Notes:(a) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through Bandar Raya Developments Berhad.(b) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through 26% shareholding in Ambang Sehati Sdn Bhd (“ASSB”).(c) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through 25% shareholding in ASSB.(d) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through 24.5% shareholding in ASSB. (e) Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 held through 24.5% shareholding in ASSB.


List Of Properties As At 31 December 2009

Lot 77-83 Semambu Industrial Estate, 25350 Kuantan, Pahang Darul Makmur

Lot 73, Gebeng Industrial Area, 26080 Kuantan, Pahang Darul Makmur

Lot 74, Gebeng Industrial Area, 26080 Kuantan, Pahang Darul Makmur

Lot 3, Kawasan Perindustrian Kechau Tui, 27100 Lipis, Pahang Darul Makmur

Lot 27, Kawasan Perindustrian Kechau Tui, Lipis, Pahang Darul Makmur




Leaseexpiring27.10.2041



Leaseexpiring2104





609,840 sq.ft.

653,670 sq.ft.

1,254,528 sq.ft.

2,178,000 sq.ft.

158,253 sq.ft.

299,257 sq.ft.

304,484 sq.ft.

281,398 sq.ft.

Chipboard factory

Industrial land

Chipboard factory

Chipboard factory

Industrial land

Industrial land

Industrial land

Industrial land

15-35

7-15

5

6,950

6,185

38,013

83,566

230

435

442

409

1975

26.10.1999

24.08.1995

05.12.2004

20.12.2006

20.12.2006

20.12.2006

20.12.2006

Location Tenure Land area Description

Approx.age of building(Years)

Net bookvalueRM’000

Acquisitiondate

PROPERTY, PLANT AND EQUIPMENT & PREPAID LEASE RENTALS

PAHANG

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NOTICE IS HEREBY GIVEN that the Thirty-Seventh Annual General Meeting of Mieco Chipboard Berhad (“MIECO” or “the Company”) will be held at Multi-Purpose Hall, 25th Floor, Menara Multi-Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur on Thursday, 24 June 2010 at 10.00 a.m.

AGENDA

1) To receive the Report of the Directors and the Audited Financial Statements for the year ended 31 December 2009 together with the Report of the Auditors thereon.

2) To approve the payment of Directors’ fees of RM108,000/= in respect of the year ended 31 December 2009 (2008 : RM108,000/=).

3) To re-elect the following Directors retiring in accordance with the Company’s Articles of Association:

Article 81 a) Dato’ Mohamed Moiz Bin J M Ali Moiz b) Dato’ Dr Amarjit Singh A/L Santokh Singh

Article 88 c) Datin Sri Maria Bettina Chua Binti Abdullah

4) To consider and if thought fit, to pass the following Ordinary Resolution in accordance with Section 129 of the Companies Act, 1965: “THAT Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar, retiring pursuant to Section 129 of the Companies Act, 1965 after having attained the age of seventy years, be and is hereby re-appointed a Director of the Company to hold office until conclusion of the next Annual General Meeting of the Company.”

5) To re-appoint Messrs PricewaterhouseCoopers as auditors of the Company and to authorise the Directors to fix their remuneration.

AS SPECIAL BUSINESS:To consider and if thought fit, to pass the following resolution as Ordinary Resolution:

6) Authority To Issue Shares Pursuant To Section 132D Of The Companies Act, 1965 “THAT subject always to the Companies Act, 1965, the Articles of Association of the Company and the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered, pursuant to Section 132D of the Companies Act, 1965, to issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed ten per centum (10%) of the total issued capital of the Company and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”

(Resolution 1)

(Resolution 2)

(Resolution 3)(Resolution 4)

(Resolution 5)

(Resolution 6)

(Resolution 7)

(Resolution 8)

Notice ofAnnual General Meeting

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Notes:

1) A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

2) To be valid, the duly completed original form of proxy must be deposited at the registered office of the Company at 31st Floor, Menara Multi- Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than 48 hours before the time for holdng the meeting.

3) A member who is an authorised nominee may appoint one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

4) A member other than an authorised nominee shall be entitled to appoint not more than two (2) proxies to attend and vote at the same meeting.

5) Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

6) If the appointor is a corporation, the form of proxy must be executed under its Common Seal or under the hand of an officer or attorney duly authorised.

EXPLANATORY NOTES ON SPECIAL BUSINESS The proposed Ordinary Resolution 8 is for the renewal of mandate for the Directors to issue shares pursuant to Section 132D of the Companies Act, 1965.

The mandate will enable the Directors to act speedily to conclude business transactions that may involve issue of new shares as consideration for the purchase of new landbank/businesses or for the raising of new funds that may be required to meet urgent business needs. The proposed Ordinary Resolution 8, if passed, will give the Directors the flexibility to allot and issue shares in the Company, up to an amount not exceeding in aggregate ten percent (10%) of the issued share capital of the Company for the time being. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the Company.

As at the date of the Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the last AGM held on 24 June 2009 which will lapse at the conclusion of the forthcoming AGM to be held on 24 June 2010.

7) To transact any other business for which due notice shall have been given in accordance with the Company’s

Articles of Association and the Companies Act, 1965.

BY ORDER OF THE BOARDHO SWEE LINGCompany SecretaryKuala Lumpur31 May 2010

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Notice ofAnnual General Meeting(Continued)


Statement AccompanyingNotice of Annual General Meeting

1) Directors who are standing for re-election at the Thirty-Seventh Annual General Meeting

The directors retiring pursuant to the Articles of Association and seeking re-election are as follows:

Article 81 a) Dato’ Mohamed Moiz Bin J M Ali Moiz b) Dato’ Dr Amarjit Singh A/L Santokh Singh

Article 88 c) Datin Sri Maria Bettina Chua Binti Abdullah

The details of the abovenamed Directors who are standing for re-election are set out in the Board of Directors’ Profile appearing on pages 10 to 13 of this Annual Report. The details of the Directors’ securities holding in the Company are set out on pages 52 to 54 of this Annual Report.

2) Details of attendance of directors at board meetings

Five Board meetings were held during the financial year ended 31 December 2009. The details of attendance of the directors are as follows:

Total Number of Meetings Attended

4/55/55/5N/A5/55/54/55/5

Name of Director

Dato’ Mohamed Moiz Bin J M Ali MoizDato’ Yong Seng YeowDato’ Jaganath Derek Steven SabapathyDatin Sri Maria Bettina Chua Binti Abdullah #Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu BakarDato’ Dr Amarjit Singh A/L Santokh SinghMr Vijeyaratnam A/L V. Thamotharam PillayMr Low Kim Seng

# Datin Sri Maria Bettina Chua Binti Abdullah was appointed on 23 February 2010

3) Date, time and venue of the Thirty-Seventh Annual General Meeting

The Thirty-Seventh Annual General Meeting of Mieco Chipboard Berhad will be held at Multi-Purpose Hall, 25th Floor, Menara Multi-Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur on Thursday, 24 June 2010 at 10.00 a.m.

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Notes


MIECO CHIPBOARD BERHAD (12849-K)

I/WE TEL NO. NRIC NO./COMPANY NO.

OF

BEING A MEMBER OF MIECO CHIPBOARD BERHAD, HEREBY APPOINT

NRIC NO.

OF

OR FAILING HIM, NRIC NO.

OF

* Please indicate with an “X” how you wish your vote to be cast. If no speci c direction as to voting is given, the proxy will vote or abstain at his direction.

Notes:1) A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.2) To be valid, the duly completed original form of proxy must be deposited at the registered office of the Company at 31st Floor, Menara Multi-Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than 48 hours before the time for holdng the meeting.3) A member who is an authorised nominee may appoint one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.4) A member other than an authorised nominee shall be entitled to appoint not more than two (2) proxies to attend and vote at the same meeting.5) Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.6) If the appointor is a corporation, the form of proxy must be executed under its Common Seal or under the hand of an officer or attorney duly authorised.7) Any alteration made in the form of proxy must be initialled.

Signature of Shareholder

1)

2)

3)

4)

5)

6)

7)

8)

RESOLUTIONS

To receive the audited financial statements

To approve the payment of Directors’ fees

To re-elect Dato’ Mohamed Moiz Bin J M Ali Moiz as Director

To re-elect Dato’ Dr Amarjit Singh A/L Santokh Singh as Director

To re-elect Datin Sri Maria Bettina Chua Binti Abdullah as Director

To re-appoint Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu Bakar as Director

To re-appoint Messrs PricewaterhouseCoopers as auditors of the Company

To approve authority to Directors to issue shares pursuant to Section 132D, Companies Act, 1965

CDS ACCOUNT NUMBER

– –

As witness my/our hand(s) this day of , 2010.

Number of Shares Held

(FULL NAME IN BLOCK CAPITALS)



(ADDRESS)

(ADDRESS)

(ADDRESS)


FORM OF PROXY

*AGAINST*FOR

OR FAILING HIM, THE CHAIRMAN OF THE MEETING as my/our proxy to vote on my/our behalf at the Thirty-Seventh Annual GeneralMeeting of the Company to be held at Multi-Purpose Hall, 25th Floor, Menara Multi-Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur on Thursday, 24 June 2010 at 10.00 a.m. and at any adjournment thereof.


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