Sample Disclosure – Note On Realised And Unrealised Profits (25 February 2011)

Realised and Unrealised Profits

On 25 March 2010, Bursa Malaysia Securities Berhad (“Bursa Malaysia”) issued a directive to all listed issuers pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements. The directive requires all listed issuers to disclose the breakdown of the retained profits or accumulated losses as at the end of the reporting period, into realised and unrealised profits or losses.

On 20 December 2010, Bursa Malaysia further issued guidance on the disclosure and the format required.

The breakdown of retained profits of the Group and of the Company as at the reporting date, into realised and unrealised profits, pursuant to the directive, is as follows:

The determination of realised and unrealised profits is based on the Guidance of Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December 2010.

Accordingly, the unrealised retained profits of the Group and of the Company as disclosed above excludes translation gains and losses on monetary items denominated in a currency other than the functional currency and foreign exchange contracts, as these gains and losses are incurred in the ordinary course of business of the Group and of the Company, and are hence deemed as realised.

The disclosure of realised and unrealised profits above is solely for complying with the disclosure requirements stipulated in the directive of Bursa Malaysia and shall not be applied for any other purposes.

Sample Disclosure – Note On Reserves (17 February 2011)

RESERVES

i.             Share premium arose from the issuance of 10,575,000 shares of RM1.00 each at a premium of RM0.15 per share, net of listing expenses.

ii.            Asset revaluation surplus arose from revaluation of freehold land and buildings and leasehold building in the previous years.

iii.           In accordance with the Finance Act 2007, the single tier income tax system became effective from Year of Assessment 2008. Under this system, tax on profits of companies profit is a final tax, and dividends paid are exempted from tax in the hands of the shareholders. Unlike the previous imputation system, the recipient of the dividend would no longer be able to claim any tax credit.

Companies without Section 108 tax credit balance will automatically move to the single tier tax system on January 1, 2008. However, companies with such tax credits are given an irrevocable option to elect for the single tier tax system and disregard the tax credit or to continue to use the tax credits under Section 108 account to frank the payment of cash dividends on ordinary shares for a period of 6 years ending December 31, 2013 or until the tax credits are fully utilised, whichever comes first. During the transitional period, any tax paid will not be added to the Section 108 account and any tax credits utilised will reduce the tax credit balance. All companies will be in the new system on January 1, 2014.

As of the balance sheet date, the Company has not elected for the irrevocable option to disregard the Section 108 tax credits. Accordingly, subject to the agreement of the Inland Revenue Board and based on the prevailing tax rate applicable to dividend, the Company has sufficient Section 108 tax credit and tax exempt income as mentioned in Note XX to frank approximately RM525,000 of the Company‟s retained earnings as of 31 November 2010 if distributed by way of cash dividends without additional tax liability being incurred. Any dividend paid in excess of this amount during the transitional period will be under the single tier tax system as explained above.

Sample Disclosure – Note On Significant Event Subsequent To The Balance Sheet Date (12 February 2011)

SIGNIFICANT EVENT SUBSEQUENT TO THE BALANCE SHEET DATE

On 18 November 2010, the Group through its wholly-owned subsidiary company, DEF Sdn. Bhd., subscribed for the entire ordinary shares of GHI Sdn. BHd., for a total cash consideration of RM1,000, resulting in the latter becoming a wholly-owned subsidiary company of the Group.

Sample Disclosure – Accounting Policy Of Biological Assets, Forest Replanting Expenditure (11 February 2011)

Biological Assets – Forest planting expenditure

All direct and related expenses incurred on the development of the Company’s Sustainable Forest Ecology and Management Project under the licensed agreement entered into with the State Government of Wonderland is stated at cost and capitalised as biological assets. The expenditure is amortised upon the commencement of log extraction on the basis of the volume of logs extracted during the financial year as a proportion of the total estimated volume of the entire forest area.

Sample Disclosure – Accounting Policy Of Intangible Assets, Timber Rights (11 February 2011)

Intangible assets – timber rights

This represents the exclusive rights acquired by the Company to extract and purchase all commercial timber logs extractable from a designated timber concession area.

Timber rights are stated at cost less accumulated amoritsation and impairment loss, if any.

The timber rights are amortised on the basis of the volume of timber logs extracted during the financial year as a proportion of the total estimated timber logs extractable over the remaining period of timber extraction.

Sample Disclosure – Auditors’ Report With Adverse Opinion (9 February 2011)

ABC SDN. BHD.

(Incorporated in Malaysia)

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ABC SDN. BHD.

Report on the Financial Statements

We have audited the financial statements of ABC SDN. BHD., which comprise the balance sheets as at 30 September 2010 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 the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages X to XX.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting 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. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We could not obtain sufficient and appropriate audit evidence in the course of our audit and therefore an adverse opinion is expressed.

Basis for Adverse Opinion

1.    As disclosed in Note XX to the financial statements, the accounting records of the Company and its subsidiary companies were destroyed by the previous management. The current management attempted to reconstruct the Company’s accounting records based on information and documents available to them and also based on the best estimates made by the directors, in situations that such estimates are required to be made. The Company’s financial statements produced using this basis has been provided to us for audit. However, the current management is unable to reconstruct the accounting records of its subsidiary companies. As a result, no consolidated financial statements have been prepared and this is not in compliance with FRS 127 Consolidated Financial Statements which requires the Company as a parent entity to prepare consolidated financial statements.

2.    We were unable to obtain sufficient and appropriate audit evidence as to the balances of trade & other payables and borrowings of the Company due to lack of supporting documentary evidence made available to us for our verification due to the matters mentioned in paragraph 1 above.

3.    As disclosed in Note XX and Note XX to the financial statements, the Company reported a total borrowings of RM158,653,000 (2009 – RM167,500,000) and the relevant interest accrued of RM23,567,000 (2009 – RM14,573,200). As disclosed in Note XX to the financial statements, the Company provided corporate guarantees of RM56,789,000 (2009 – RM56,789,000) to licensed banks in respect of the bank borrowings facilities granted to its subsidiary companies. The subsidiary companies have defaulted their repayment obligation and therefore the Company as the issuer of the corporate guarantees, is required to reimburse the licensed banks in respect of the banks’ losses suffered.

The financial statements of the current year and of the previous year did not include any provision for penalty interest and financial guarantees due by the Company to the licensed banks. This is not in compliance with the requirements of FRS 137 Provisions, Contingent Liabilities and Contingent Assets which require such provision for penalty interest and financial guarantees to be recognised in the financial statements of the Company.

We are therefore unable to satisfy ourselves that the total bank borrowings and the relevant liabilities reflected in the financial statements are fairly stated.

4.    To date of this report, we have not received replies from certain licensed banks to our letters requesting these banks to confirm the bank balances and any related liabilities (including contingent liabilities, if any). There were no other alternative means for us to carry out the relevant verification work to confirm the completeness of bank balances recorded in the financial statements and any related liabilities or contingent liabilities of the Company.

5.    The relevant tax returns of the Company from 2005 to 2009 have not been prepared and therefore no tax returns have been submitted to the Inland Revenue Board of Malaysia and this has violated the requirements of the Income Tax Act, 1967 in Malaysia to submit such tax returns within the stipulated time frame and hence penalty on the outstanding tax payable, if there is any tax payable, and also penalty for non-filing of tax returns are expected to be imposed on the Company.

6.    Due to the matters highlighted in paragraphs 1 to 5, we are unable to satisfy ourselves that all the relevant tax payables, penalties and their related disclosure notes have been included in the financial statements of the Company and disclosed accordingly.

7.    We have expressed an adverse opinion in our audit report in respect of our audit of the previous financial year’s financial statements because of similar matters described in paragraphs 1 to 6 above.

Adverse Opinion

Because of the matters described in the Basis for Adverse Opinion paragraphs above, we could not express an opinion on the consolidated financial statements as no such financial statements have been prepared and made available for our audit, and we are of the opinion that the financial statements of the Company do not give a true and fair view of the financial position of the Company as at 31 December 2010 and of its financial performance and cash flows for the year then ended in accordance with the Financial Reporting Standards in Malaysia.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we report that in our opinion:

a)       The accounting and other records have not been properly kept as described in Basis for Adverse Opinion above. However, the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

b)       The financial statements of the subsidiary companies have not been prepared due to the matters highlighted in paragraph 1 of Basis for Adverse Opinion above and no consolidated financial statements have been prepared and provided to us for our audit. Therefore, we are unable to comment and satisfy ourselves as to the appropriateness of the financial statements of the subsidiary companies included in the consolidated financial statements.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

[ AF : 0012345 ] [ 123/01/13(J) ]
AUDITORS & ASSOCIATES AWANG BIN SALLEH
Chartered Accountants Chartered Accountant

Wonderland

Dated: