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Annual Report | 2009

www.degembhd.com

DeGem Berhad
(415726-T)

No. 42 First Floor, Jalan Maarof, Bangsar Baru, 59100 Kuala Lumpur

Tel: 603 2284 4794 Fax: 603 2284 4864 E-mail: info@degembhd.com
415726-T

CONTENTS
Notice of Annual General Meeting Statement Accompanying Notice of Annual General Meeting Corporate Information Group Structure Financial Highlights Directors Profile Other Disclosure Information Chairmans Statement Corporate Governance Statement Statement on Internal Control Audit Committee Report Corporate Social Responsibility Statement 3 6 7 8 10 11 14 16 18 24 26 31 Financial Statements Analysis of Shareholdings Substantial Shareholders Statement of Directors Shareholdings Properties of the Group Directory of DeGem Group Showrooms Proxy Form 34 99 102 103 104 105 enclosed

Notice of ANNUAL GENERAL MEETING


NOTICE IS HEREBY GIVEN THAT the Thirteenth Annual General Meeting of the members of the Company will be held at Dewan Perdana, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, off Jalan Damansara, 60000 Kuala Lumpur on Thursday, 17 June 2010, at 10.30 a.m. for the purpose of transacting the following businesses:1. To receive the Audited Financial Statements for the year ended 31 December 2009 together with the Reports of the Directors and Auditors thereon. To declare a final dividend of 4% less 25% tax in respect of the year ended 31 December 2009. To approve the Directors fees of RM316,000/- (2008: RM316,000/-) in respect of the year ended 31 December 2009. To re-elect the following Directors who retire pursuant to Article 100 of the Companys Articles of Association and, being eligible, offer themselves for re-election:(a) Mr. Choong Kai Soon (b) Mr. Choong Kay Cheong 5. To consider and, if thought fit, to pass the following resolution pursuant to Section 129 of the Companies Act, 1965:That Mr. Chuah Teong Aung, retiring pursuant to Section 129 of the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the next Annual General Meeting. 6. 7. To re-appoint Messrs. KPMG 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 resolutions as Ordinary Resolutions:(a) Ordinary Resolution 1 Authority to issue shares pursuant to Section 132D of the Companies Act, 1965 THAT subject always to the Companies Act 1965, Articles of Association of the Company and approvals of the relevant governmental/regulatory bodies where such approvals shall be necessary, the Directors be and are hereby authorised and empowered pursuant to Section 132D of the Companies Act, 1965 to allot and issue shares in the Company at any time until the conclusion of the next annual general meeting and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued capital for the time being of the Company and that the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad.

Resolution 1 Resolution 2 Resolution 3

2. 3. 4.

Resolution 4 Resolution 5 Resolution 6

Resolution 7

Resolution 8

annual report 2009

Notice of ANNUAL GENERAL MEETING

(contd)

(b) Ordinary Resolution 2 Proposed Renewal of Authority For Share Buy-Back THAT, subject to compliance with the Companies Act, 1965, the Memorandum and Articles of Association of the Company, the Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Securities), all other applicable laws, regulations and guidelines and the approvals of all relevant governmental and/or regulatory authorities, the Company be and is hereby authorised to allocate an amount not exceeding the total available retained profits of the Company for the purpose of and to purchase such amount of ordinary shares of RM0.50 each in the Company (Proposed Purchase) as may be determined by the Directors of the Company from time to time through Bursa Securities as the Directors may deem fit in the interest of the Company provided that the aggregate number of shares purchased and/or held pursuant to this resolution does not exceed ten percent (10%) of the total issued and paid-up share capital of the Company at the point of purchase; AND THAT upon completion of the purchase by the Company of its own shares (DeGem Shares), the Directors are authorised to retain the Degem Shares as treasury shares or cancel the DeGem Shares or retain part of the DeGem Shares so purchased as treasury shares and cancel the remainder. The Directors are further authorised to resell the treasury shares on Bursa Securities or distribute the treasury shares as dividends to the Companys shareholders or subsequently cancel the treasury shares or any combination of the three; AND THAT the Directors be and are hereby empowered to carry out the above immediately upon the passing of this resolution and from the date of the passing of this resolution until: (i) the conclusion of the next Annual General Meeting of the Company following the General Meeting at which this resolution was passed at which time it shall lapse unless by an ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions; or the expiration of the period within which the next Annual General Meeting after that date is required by law to be held; or

Resolution 9

(ii)

(iii) revoked or varied by ordinary resolution passed by the shareholders in General Meeting, whichever is the earliest but not so as to prejudice the completion of purchase(s) by the Company before the aforesaid expiry date and to take all steps as are necessary and/or to do all such acts and things as the Directors deem fit and expedient in the interest of the Company to give full effect to the Proposed Purchase with full powers to assent to any condition, modification, revaluation, variation and/or amendment (if any) as may be imposed by the relevant authorities. (c) Special Resolution Proposed Amendment to the Companys Articles of Association (PROPOSED AMENDMENT) THAT the existing Article137 of the Companys Articles of Association be deleted in its entirety and in substitution therefore the following new Article137:-

Resolution 10

DeGem Berhad

Notice of ANNUAL GENERAL MEETING

(contd)

Existing Article 137 - Payment of dividends by cheque Any dividend may be paid by cheque sent through the post to the registered address of the member or person entitled thereto. Every such cheque shall be made payable to the order of the person to whom it is sent, and payment of the cheque shall be a good discharge to the Company of the dividend to which it relates. New Article 137 - Payment of dividends Subject to the provisions of the Listing Requirements and the Rules, any dividend payable in cash may be paid by electronic means via direct crediting to the bank account as designated by the member or person entitled to such payment. In the event that such member or holder entitled to such payment does not provide the account information in accordance with the Rules, the dividend may be paid by cheque or warrant sent through the post to the registered address of the member or person entitled thereto. Every such mode of payment shall be made payable to the order of the person to whom it is sent and shall be a good discharge to the Company of the dividend to which it relates irrespective of any circumstances. AND FURTHER THAT the Directors be and are hereby authorised to take all such steps as they shall deem necessary and expedient to effect and complete the Proposed Amendment. 8. To transact any other business for which due notice has been given.

BY ORDER OF THE BOARD, SHA THIAM FOOK (MIA 1832) CHOW CHOOI YOONG (MAICSA 0772574) Secretaries Kuala Lumpur 26 May 2010

Notes: 1. A member of the Company entitled to attend and vote at this meeting is entitled to appoint up to two proxies to attend and vote instead of him/her. 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. Where a member appoints two (2) proxies, the appointment shall be invalid unless he/she specifies the proportion of his/her shareholdings to be represented by each proxy.

3.

In the case of a corporate body, the proxy appointed must be in accordance with the Memorandum and Articles of Association, and the instrument appointing a proxy shall be given under the Companys Common Seal or under the hand of an officer or attorney duly authorised.

4.

The Form of Proxy must be deposited at the Companys Registered Office at No. 42, 1st Floor, Jalan Maarof, Bangsar Baru, 59100 Kuala Lumpur not less than 48 hours before the time set for the meeting or any adjournment thereof.

annual report 2009

Notice of ANNUAL GENERAL MEETING

(contd)

5.

Explanatory Notes on Special Business: Resolution pursuant to Section 132D of the Companies Act, 1965 Resolution No. 8 proposed under item 7(a) is to seek a renewal of the general mandate for the issue of new ordinary shares pursuant to Section 132D of the Companies Act, 1965 which was approved by shareholders at the last years AGM. There was no issuance of new shares during the year. The proposed Resolution No. 8, if passed, will empower the Directors of the Company to issue and allot new shares in the Company at any time and for such purposes as the Directors considered would be in the interests of the Company up to an aggregate not exceeding 10% of the issued share capital of the Company without convening a general meeting. This authority unless revoked or varied at a general meeting will expire at the next AGM. At this juncture, there is no decision to issue new shares. If there should be a decision to issue new shares after the general mandate has been sought, the Company would make an announcement in respect of the purpose and utilisation of proceeds arising from such issue.

Resolution pursuant to Proposed Renewal of Authority For Share Buy-Back Resolution No. 9 proposed under item 7(b), if passed, will empower the Company to purchase and/or hold up to 10% of the issued and paid-up share capital of the Company. This authority will, unless revoked or varied by the Company in General Meeting, expire at the next Annual General Meeting. For further information, please refer to the Circular to Shareholders dated 26 May 2010 which is circulated together with this Annual Report. Resolution in respect of the Proposed Amendment to the Companys Articles of Association The Special Resolution proposed under item 7(c), if passed, will update Article 137 of the Companys Articles of Association to facilitate the implementation of Electronic Dividend Payment (eDividend) in line with the directive from Bursa Malaysia Securities Berhad pertaining to eDividend.

STATEMENT ACCOMPANYING Notice of ANNUAL GENERAL MEETING


(PURSUANT TO PARAGRAPH 8.27(2) OF THE LISTING REQUIREMENTS OF THE BURSA MALAYSIA SECURITIES BERHAD) 1. Directors who are standing for re-election/re-appointment at the Thirteenth Annual General Meeting of the Company Pursuant to Article 100 of the Companys Articles of Association (a) Mr. Choong Kai Soon (b) Mr. Choong Kay Cheong Pursuant to Section 129 of the Companies Act, 1965 (a) Mr. Chuah Teong Aung 2. Further details of Directors who are standing for re-election/re-appointment Further details of Directors who are standing for re-election/re-appointment are set out on pages 11 to 12 of the Annual Report.

DeGem Berhad

Corporate INFORMATION
Directors
Dato Hasan bin M. Taib
(Chairman) Principal Place of Business
No. 42, 1st Floor, Jalan Maarof, Bangsar Baru, 59100 Kuala Lumpur.

Stock Exchange Listing


Bursa Malaysia Securities Berhad Main Market-Stock Code 7119

Auditors
KPMG Level 8, KPMG Tower 8, First Avenue Bandar Utama 47800 Petaling Jaya Selangor, Malaysia.

Datuk Zainun Aishah binti Ahmad Choong Kai Soon Choong Kai Fatt Choong Khoi Onn Choong Kay Cheong Leou Thiam Lai Chuah Teong Aung
Secretaries
Sha Thiam Fook (MIA 1832) Chow Chooi Yoong (MAICSA 0772574)

Solicitor
Tay & Helen Wong Suite 703, Block F, Phileo Damansara, No. 9, Jalan 16/11, 46350 Petaling Jaya, Selangor Darul Ehsan. Nik Hussain & Partners 27th Floor, Menara KH, (Formerly Menara Promet) Jalan Sultan Ismail, 50250 Kuala Lumpur.

Share Registrars
Symphony Share Registrars Sdn Bhd Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya Selangor. Tel: 03-7841 8000 Fax: 03-7841 8008

Principal Bankers
Malayan Banking Berhad No. 66, 68 & 70, Jalan Maarof, Bangsar Baru, 59100 Kuala Lumpur. OCBC Bank (Malaysia) Berhad Ground Floor Menara Great Eastern 303 Jalan Ampang 50450 Kuala Lumpur Malaysia.

Registered Office
No. 42, 1st Floor, Jalan Maarof, Bangsar Baru, 59100 Kuala Lumpur. Tel: 03-2282 3618 Fax: 03-2284 4864 Email: info@degembhd.com Website: http://www.degembhd.com

annual report 2009

GROUP STRUCTURE
40%
Diamond & Platinum Sdn Bhd Diamond & Platinum (B) Sdn Bhd

100%

60%

D-Rewards Services Sdn Bhd

100%

Diamond & Platinum Pte Ltd Telenaga Sdn Bhd

100%

DeGem Masterpiece Sdn Bhd

100%

100%

DeGem Masterpiece Pte Ltd (Singapore)

30%

P.Y.T. Jewellers (Ampang) Sdn Bhd

90%

30% 60%

P.Y.T. Jewel & Time Sdn Bhd

100%

Inticraft Sdn Bhd

100%

Solireno Sdn Bhd

70%

Meca Jewellery Ltd

Tong Yek Jewellers Sdn Bhd

100%

DeGem Diamond Collection Sdn Bhd

100%

Grandmax Corporation Ltd (Hong Kong)

80%

Diamond Mart Sdn Bhd

100%

Fareway International Ltd (Hong Kong)

100%

DeGem Capital Sdn Bhd

100% 100%

Titanpuri Sdn Bhd

80%

V-Buyjewels Pte Ltd

100%

Jewelmart International Sdn Bhd

Jewel2Cash Pte Ltd

100%

DeGem Berhad

O.V.A.L
Lazare Diamonds Signature Collection

10

FINANCIAL HIGHLIGHTS
FOR THE PAST FIVE YEARS

Year Ended 31 December Revenue Profit Before Tax Taxation Profit After Tax Minority Interests Profit After Tax And Attributable To Shareholders Net Tangible Assets Per Share (Sen)

2009 (RM000) 189,385 22,168 (6,832) 15,336 34 15,370 *102.2

2008 (RM000) 209,214 20,033 (5,855) 14,178 (181) 13,997


#

2007 (RM000) 157,935 22,696 (4,699) 17,997 (234) 17,763


#

2006 (RM000) 143,936 17,156 (3,383) 13,772 (3) 13,769


#

2005 (RM000) 108,198 7,970 (3,293) 4,677 (69) 4,608


#

92.8

83.8

72.7

76.1

* Based on weighted average no. of shares in issued during the year. # Based on issued and paid up share capital of 134,000,000 of RM0.50 each.

209,214

22,696

189,385

22,168

17,763

157,935

20,033

13,769

143,936

108,198

7,970

17,156

05

06

07

08

09

05

06

07

08

09

4,608

13,997 07 08

05

06

09

Revenue (RM000)

Profit Before Tax (RM000)

Profit After Tax And Attributable To Shareholders (RM000)

DeGem Berhad

15,370

11

DIRECTORS PROFILE
Dato Hasan bin M. Taib Chairman (Non-Executive Director)
Dato Hasan bin M. Taib, aged 56, Malaysian, was appointed to the Board of Directors of Degem Berhad (Board) on 6 April 2001. Dato Hasan began his career in 1978 as a sales supervisor/computer coordinator for Redec Travel, which is the general sales agent for Malaysia Airline System in Jeddah, Saudi Arabia. In 1982, he left Redec Travel to start his own business in trading, property and investment in Saudi Arabia and Singapore. After returning to Malaysia in 1986, he formed Misbah Group of Companies, specializes in travel, property investment and development business in 1986. He obtained a degree in Science in 1997 from Pacific Western University, United States of America. He presently sits on the board of several other private limited companies. Dato Hasan bin M. Taib does not hold any directorship in any other public corporation other than DeGem Berhad.

- Diamond & Platinum

Mr Choong Khoi Onn (Executive Director)


Mr Choong Khoi Onn, aged 54, Malaysian, was appointed to the Board on 6 April 2001. He is a member of the Remuneration Committee. He obtained a diploma in Financial Accounting from Tunku Abdul Rahman College in 1979 and started his career as an audit assistant with a local audit firm before joining the Group in 1982. He is now responsible for the financial and administrative matters of the Group. He is actively involved in all major decision making of the Group. Mr Choong Khoi Onn does not hold any directorship in any other public corporation other than DeGem Berhad.

Mr Choong Kai Soon (Executive Director)


Mr Choong Kai Soon, aged 51, Malaysian, was appointed to the Board on 6 April 2001. He started his career working as a goldsmith in 1974. He is responsible for the manufacturing divisions of the Group as well as in enforcing quality control during manufacturing and on-the-job training to craftsmen in the Group. He is actively involved in all the major decision making of the Group. Mr Choong Kai Soon does not hold any directorship in any other public corporation other than DeGem Berhad.

Mr Choong Kay Cheong (Executive Director) Mr Choong Kai Fatt (Executive Director)
Mr Choong Kai Fatt, aged 49, Malaysian, was appointed to the Board on 6 April 2001. He is a member of the Remuneration Committee. He has more than 20 years experience in the jewellery business. He joined a subsidiary of the Group in 1983 and is a qualified gemologist since 1989, having studied gemology from the Gemological Institute of America. He is currently in charge of the purchasing and marketing operations of the Group. He is actively involved in all the decision making of the Group. Mr Choong Kai Fatt does not hold any directorship in any other public corporation other than DeGem Berhad. Mr Choong Kay Cheong, aged 47, Malaysian, was appointed to the Board on 31 March 2005. He graduated with a Bachelor Degree in Engineering (Civil) Hons from Universiti Teknologi Malaysia and a Masters in Engineering (Civil) from University of Auckland, New Zealand. He first started out as a project manager in the construction industry before co-founding Diamond & Platinum Sdn. Bhd, a subsidiary of the Group in 1999. He is also actively involved in the daily operation and decision making of the Group. Mr Choong Kay Cheong does not hold any directorship in any other public corporation other than DeGem Berhad.
annual report 2009

12

DIRECTORS PROFILE

(contd)

- Cocktail Bangle

She holds an Honours Degree in Economics from University Malaya. She began her career with Malaysia Industrial Development Authority (MIDA), the Malaysian governments principal agency for the promotion and coordination of industrial development in the country as an Economist where she worked for 35 years. In her 35 years of service, she has held various key positions in MIDA as well as in some of the countrys strategic council, notably her pivotal role as National Project Director in the formulation of Malaysias first industrial Master Plan and as a member of the Industrial Coordination Council in the implementation of the Second Industrial Master Plan. She was the Director-General of MIDA for 9 years and Deputy Director-General for 11 years. Whilst in MIDA, she was also a member of the Industrial Coordination Act Advisory Council, Defense Industry Council and National Committee on Business Competitiveness Council. She was also a Director of Tenaga Nasional Berhad, Kulim Hi-Tech Park and Malayan Banking Berhad. She is the Chairman of Scomi Engineering Berhad, a director of Microlink Solutions Berhad and an independant nonexecutive director of Berjaya Media Berhad, all public listed companies.

Mr Leou Thiam Lai (Independent Non-Executive Director)


Mr Leou Thiam Lai, aged 54, Malaysian, was appointed to the Board on 21 May 2001. He is the Chairman of the Audit, Nomination and Remuneration Committees. Mr Leou is a Chartered Accountant of the Malaysian Institute of Accountants, Fellow member of the Chartered Association of Certified Accountants (UK) and a Fellow member of the Chartered Tax Institute of Malaysia (formerly known as Malaysian Institute of Taxation). He was with Aljeffri, Siva, Heng and Monteiro from 1980 to 1981 and Baharom Hamdan from 1981 to 1984. He then set up his own Chartered Accountants firm, Leou & Associates, in 1988 and to date, he still serves as a partner of the firm. Currently, he also sits on the board of United Bintang Berhad, I-Power Berhad, Ramunia Holdings Berhad, Cosway Corporation Limited (formely known as Berjaya Holdings (HK) Limited), and Nextnation Communication Berhad.

Mr Chuah Teong Aung (Independent Non-Executive Director)


Mr Chuah Teong Aung, aged 71, Malaysian, was appointed to the Board on 21 May 2001. He is a member of the Audit, Nomination and Remuneration Committees. He graduated with a Bachelor of Science (Electrical Engineering) degree from Taiwan University, Taiwan and a Masters in Science (Electrical Engineering) from the University of Manchester, United Kingdom in 1963 and 1965 respectively. He is a first grade engineer certified by Tenaga Nasional Berhad and also a chartered engineer certified by the Institute of Electrical Engineering, United Kingdom. He was attached with ABB, Sweden as an engineer in 1965 and was promoted to project manager before he left in 1973. Subsequently, he and his partner established TEG Engineering Sdn Bhd in 1973, a company that is principally involved in electrical, mechanical and civil engineering activities. Mr Chuah Teong Aung does not hold any directorships in any other public corporation other than DeGem Berhad.

Datuk Zainun Aishah binti Ahmad


(Independent Non-Executive Director) Datuk Zainun Aishah binti Ahmad, aged 62, Malaysian, was appointed to the Board on 1 August, 2007. She is a member of the Audit Committee.
DeGem Berhad

14

Other DISCLOSURE INFORMATION

- Soleluna

FAMILY RELATIONSHIP OF DIRECTORS Save as disclosed, none of the Directors has any family relationship with any Directors and/or substantial shareholders of the Company:Choong Khoi Onn, Choong Kai Soon, Choong Kai Fatt, Choong Kay Cheong and Choong Sin Cheong are brothers.

AMERICAN DEPOSITORY RECEIPT (ADR) OR GLOBAL DEPOSITORY RECEIPT (GDR) PROGRAMME During the financial year ended 31 December 2009, the Company did not sponsor any ADR or GDR programme. IMPOSITION OF SANCTIONS/PENALTIES There 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. NON AUDIT FEE The total amount of non-audit fees payable to external auditors by the Company and its subsidiaries for the financial year ended 31 December 2009 amounted to RM5,000.00. VARIATION IN RESULTS There was no material variance between the audited results for the financial year ended 31 December 2009 and the unaudited results previously announced. PROFIT GUARANTEE The Company did not issue any profit guarantee during the financial year ended 31 December 2009.

CONFLICT OF INTEREST Save as disclosed in Note 30 to the Financial Statements, none of the Directors has any conflict of interest with the Company.

CONVICTION OF OFFENCES None of the Directors has been convicted for any offences within the past ten years other than traffic offences. UTILISATION OF PROCEEDS The Company did not make any corporate proposal to raise proceed during the financial year ended 31 December 2009.

OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES No options, warrants or convertible securities were exercised in the financial year ended 31 December 2009.

DeGem Berhad

15

Other DISCLOSURE INFORMATION

(contd)

MATERIAL CONTRACTS There were no material contracts entered into by the Company and its subsidiary company which involve Directors and major shareholders interests either still subsisting at the end of the financial year ended 31 December 2009 or entered into since the end of the previous financial year. SHARE BUY-BACK Mandate for the share buy-back of the Companys shares was approved by the shareholders at the last Annual General Meeting held on 17 June 2009. For the financial year ended 31 December 2009, the Company had purchased a total of 450,700 units of its own shares and all of the units purchased have been retained as Treasury Shares. There were no cancellations or re-sale of treasury shares during the financial year. As at 30 April 2010, the Company had purchased a total of 1,527,100 units of its own shares and the details of purchases made showing the monthly breakdown are as follows:

Month of purchase 2009 November December 2010 January February March April

No. of Purchase Price Per Share (RM) Shares Purchased Lowest Highest Average

Total Consideration Paid (RM)

188,400 262,300

0.810 0.860

0.895 0.980

0.853 0.923

160,737.36 242,124.65

145,000 519,800 411,600

0.950 0.980 1.010

0.950 1.070 1.050

0.958 1.025 1.030

138,949.99 534,289.01 425,605.32

annual report 2009

16

Chairmans STATEMENT
Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present the Annual Report of DeGem Berhad (the Group) for the financial year ended 31 December 2009 (FY2009).
Stronger Financial Performance Despite Recession Year Despite the global economic downturn affecting the first half of the financial year 2009, the Group has managed to achieve satisfactory results in FY2009. For FY2009, the Group registered lower revenue of RM189.386 million, a marginal decrease of 9.5% from RM209.214 million in the financial year ended 31 December 2008 (FY2008). Profit before taxation was, however, higher at RM22.168 million in FY2009 compared to RM20.033 million in the previous year, an increase of 10.7% y-o-y. The Group registered a higher net profit attributable to shareholders of RM15.370 million in FY2009 against RM13.997 million in FY2008, which translated into earnings per share of 11.47 sen against 10.45 sen in FY2008. The Group shareholders fund has further strengthened to RM144.748 million as at end 2009 from RM132.284 million as at end 2008, a further improvement of +9.4%. Net assets per share increased further to RM1.11 per share from RM1.00 per share, a consistent improvement for the past 3 years. The total debt to equity ratio remained at a healthy level, fairly close to the previous financial year end of 0.23 times. More Resilient Consumer Sentiment Than Expected Overall, the demand for basic jewellery item remained resilient; the spending allocation for this jewellery has not been compromised significantly. Improved market sentiment and strong demand for fine jewellery towards the end of 2009 have contributed to impressive earnings performance in 2009.

- Earth

DeGem Berhad

17

CHAIRMANS STATEMENT

(contd)

- Flawless Collection

Reward to shareholders - Dividend The Board of Directors recommends a first and final gross dividend of 4% (2.0 sen per share) less 25% taxation, subject to the approval of the shareholders at the thirteenth Annual General Meeting. Prudent Financial Management The Group has focused on cash conservation, except for selected products range that witnessed robust demand from consumer. The Groups financial liquidity remained healthy with positive operating cash inflow of RM4.108 million, which was substantially lower than last years mainly due to higher repayment to creditors of RM13.412 million in FY2009. The investing cash outflow has reduced sharply to RM2.102 million in FY2009 against RM7.558 million in FY2008. Overall, the cash balance as at end of FY2009 was RM25.503 million against RM20.915 million as at end of FY2008. Share buyback programme The Group embarked on a share buyback programme in 20 November 2009 to manage its capital structure actively, given the Groups strong cash flow and financial position. As at 1 May 2010, a total of 1,527,100 ordinary shares have been bought from the open market to improve the Company earnings per share and return on equity. The Group believes that DeGem Berhads prevailing share price is trading at a discount to its intrinsic value and its share buyback programme aims to enhance the shareholders value in the long term. More Stable Outlook Moving Forward Towards the end of 2009, the market witnessed a broad recovery in the prices of raw material. The recovery of global equity markets, improved consumer sentiment, a more stable economy recovery outlook and job prospects, is expected to instil stronger confidence for the jewellery industry and will eventually augur well for the Group performance in the ensuing year. Acknowledgement On behalf of the Board, I would like to extend my heartfelt gratitude to our shareholders, bankers, customers, business partners and regulatory authorities for their continued support, guidance and assistance extended to the Group. The Board would like to express its appreciation to the management and employee of the Group for their hard work and dedication.

Dato Hasan bin M. Taib Chairman


annual report 2009

18

CORPORATE GOVERNANCE STATEMENT


The Board of Directors of DeGem Berhad (Board) is committed to ensure that the principles and best practices of corporate governance as set out in the Malaysian Code of Corporate Governance (Code) are observed throughout the Group so that the affairs of the Group are conducted with integrity and professionalism with the objective of safeguarding shareholders investment and ultimately enhancing shareholders value. Set out below is a statement of how the Group has applied the principles laid down in the Code and the extent of the Groups compliance with the best practices of the Code throughout the financial year ended 31 December 2009:The Group practices a division of responsibility between the Executive and Non-Executive Directors. The Executive Directors are responsible for implementing the policies and decisions of the Board, to oversee operations and to coordinate the development and implementation of business and corporate strategies. The role of the Independent Non-Executive Directors is particularly important in providing an independent view, advice and judgment to ensure that the interests of minority shareholders and the general public are given due consideration in the decision-making progress. In addition, Mr. Leou Thiam Lai continues to act as the Senior Independent Non-Executive Director serving as an alternative for shareholders to convey their concerns and seek clarifications from the Board. Supply of Information The Board is provided with appropriate and timely information to enable it to discharge its duties effectively. Every Director has unhindered access to the advice and services of the Company Secretary. The Directors in the furtherance of their duties may seek independent professional advice at the Companys expense. Re-election of Directors The Articles of Association of the Company provides that all directors shall retire by rotation once in every three (3) years or at least one-third (1/3) of the Board shall retire from office and be eligible to offer themselves for re-election at the Annual General Meeting (AGM). Directors over seventy years of age are required to submit themselves for re-appointment annually in accordance with Section 129 of the Companies Act 1965. Information of the Directors standing for election/re-appointment, their personal profile, meeting attendance, directorships in other companies and shareholdings in the Group are furnished in the Statement Accompanying the Notice of AGM, the Directors Profile and the Directors Report in this annual report.

BOARD OF DIRECTORS Principal Responsibilities The Board is responsible for the corporate governance and the overall performance of the Group, including its strategic directions, corporate and operational issues, acquisition and divestment policy, approval of major capital expenditure projects and consideration of significant financial matters. Composition of the Board The Board has eight (8) members comprising four (4) Executive Directors and four (4) Non-Executive Directors of which three (3) are Independent Non-Executive Directors. The composition of the Board complies with the Listing Requirements of the Bursa Malaysia Securities Berhad (Bursa Securities) that require at least two (2) directors or one-third of the total number of directors, whichever is the higher, to be independent. The profile of each Director is presented on pages 11 to 12. Board Balance The Chairman is primarily responsible for the working of the Board and to ensure that all Directors, executive and non-executive alike, are enabled and encouraged to play their full part in its activities.

DeGem Berhad

19

CORPORATE GOVERNANCE STATEMENT

(contd)

Directors Training The Company recognise the importance of continuous training for Directors to enable them to effectively discharge their duties. All Board members have completed the Mandatory Accreditation Programme in accordance with the Listing Requirements of Bursa Securities. The training programmes which were attended by the Directors during the year are as follows:

Seminar on Taxation 2009; Persidangan Cukai Malaysia and The ACCA Certificate in International Auditing Meetings The Board meets at least five (5) times a year, with additional meetings convened as and when necessary. All scheduled meetings held during the year were preceded with a formal agenda issued by the Company Secretary. During the financial year ended 31 December 2009, five (5) meetings were held. Details of the Directors attendance were as follows:Directors Attendance at the Board Meetings Attended *Held

Dato Hasan Bin M.Taib : Board Effectiveness: Redefining The Roles & Functions of an Independent Director Mr. Choong Kai Fatt : Board Effectiveness: Redefining The Roles & Functions of an Independent Director Mr. Choong Khoi Onn : Board Effectiveness: Redefining The Roles & Functions of an Independent Director Mr. Choong Kay Cheong : Board Effectiveness: Redefining The Roles & Functions of an Independent Director Mr. Chuah Teong Aung : Board Effectiveness: Redefining The Roles & Functions of an Independent Director Datuk Zainun Aishah binti Ahmad : Understanding the regulatory environment in Singapore what every director ought to know Mr. Leou Thiam Lai : Board Effectiveness: Redefining The Roles & Functions of an Independent Director; Corporate Governance: Constructing An Effective Board and Updates on Financial Reporting Standards; Taxation Seminar 2009; National Tax Conference 2009; National

Dato Hasan bin M. Taib Choong Kai Soon Choong Kai Fatt Choong Khoi Onn Choong Kay Cheong Leou Thiam Lai Chuah Teong Aung Datuk Zainun Aishah binti Ahmad

4 5 5 5 5 5 5 4

5 5 5 5 5 5 5 5

* reflect the number of meetings held during the time the Director held office.

The Board members are supplied with the relevant documents and information in advance of each meeting so that they have a comprehensive understanding of the matters to be deliberated upon to enable them to arrive at an informed decision. Senior management and advisers are invited to attend Board meetings, where necessary, to provide additional information and insights on the relevant agenda items tabled at Board meetings. All proceedings from the Board meetings are minuted and signed by the Chairman of the meeting.

annual report 2009

20

CORPORATE GOVERNANCE STATEMENT

(contd)

Board Committees The Board maintains specific Board Committees, namely the Audit Committee, Nomination Committee and Remuneration Committee to address specific Board agenda. However, in order to ensure that the control of the Group is firmly within the Board, the Board has defined the terms of reference for each Committee. The ultimate responsibility and decision on all matters deliberated in these Committees, however, rests with the Board.

During the financial year, the Nomination Committee had one (1) meeting and this meeting was attended by all members. In this meeting, the Nomination Committee conducted an annual appraisal which covered the assessment of the effectiveness of the composition of the Board, the participation of the Board members, the skill sets and experience of the Directors, effectiveness of the Board as a whole and the various Committees of the Board. (c) Remuneration Committee The Board has established a Remuneration Committee comprising the following Directors, a majority of whom are Independent NonExecutive Directors:Chairman : Leou Thiam Lai (Independent Non-Executive Director) Member : Datuk Zainun Aishah Binti Ahmad
(Independent Non-Executive Director)

(a) Audit Committee The Audit Committee reviews issues of accounting policy and presentation for external financial reporting, monitors the work of the internal audit function and ensures objective and professional relationship are maintained with the External Auditors, who in turn, have access at all times to the Chairman of the Committee. The composition of the Audit Committee complies with the Listing Requirements which requires the Audit Committee to be composed exclusively of Non-Executive Directors, a majority of whom are independent. A summary of the activities of the Committee during the financial year is described in the Audit Committee Report on pages 26 to 30 of this Annual Report. (b) Nomination Committee The Nomination Committee is established and maintained to ensure that there is a formal and transparent procedure for the appointment of new directors to the Board and assessing the effectiveness of the Board, its Committees and the contribution of each individual Director on an annual basis. The members of the Committee are as follows: Chairman : Leou Thiam Lai (Independent Non-Executive Director) Member : Chuah Teong Aung (Independent Non-Executive Director) Member : Datuk Zainun Aishah Binti Ahmad
(ndependent Non-Executive Director)
DeGem Berhad

Member : Chuah Teong Aung (Independent Non-Executive Director) Member : Choong Kai Fatt (Executive Director) Member : Choong Khoi Onn (Executive Director) The Board adopts the principles recommended by the Code in determining the Directors remuneration, whereby, the Executive Directors remuneration is designed to link rewards to the Groups performance whilst the remuneration of the Non-Executive Directors is determined in accordance with their experience and the level of responsibilities assumed. Annually, the Remuneration Committee reviews the remuneration of the Executive Directors to ensure that it commensurate with the market expectation, experience, competencies and the Group performance.

21

CORPORATE GOVERNANCE STATEMENT

(contd)

DIRECTORS REMUNERATION The remuneration of Executive Directors and Non-Executive Directors are reviewed by the Remuneration Committee and the Board respectively. All directors play no part in the decision of their own remuneration. An analysis of the aggregate remuneration paid or payable to all Directors of the Company for the financial year ended 31 December 2009, falls in successive bands of RM50,000 is set out as follows:
Remuneration Bands Executive Directors Non-Executive

RM50,000 and below RM50,001-RM100,000 RM500,001-RM550,000 RM700,001-RM750,000 RM900,001-RM950,000

3 1 1 2 1

- Diamond & Platinum

An analysis of the aggregate Directors remuneration of the Company, categorised into appropriate components is set out below: Fees (RM) Salaries and other emoluments (RM) Bonuses (RM) Benefit in Kind (RM) Total (RM)

Executive Directors Non-Executive Directors

282,000 154,000

2,926,830 -

3,208,830 154,000

SHAREHOLDERS Relationship with Shareholders and Investors The Board recognises the importance of an effective communication channel between the Board, shareholders and the investment community. Information about the Group is disseminated through various disclosures and announcements made to the Bursa Securities which includes the quarterly reports, annual reports, press releases. This information is accessible by the public through the Bursa Securities website at http://www.bursamalaysia.com. The Group has also established a comprehensive and current website at

http://www.degembhd.com to further enhance investor relations and shareholder communication. Annual General Meetings The Annual General Meeting is the principal forum for dialogue and interaction with all shareholders while the Extraordinary General Meetings are held as and when required. During the financial year, the Twelfth Annual General Meeting (AGM) was held on 17 June 2009. At this AGM, the Board encourages shareholders to participate in the question and answer session.
annual report 2009

22

CORPORATE GOVERNANCE STATEMENT

(contd)

Internal Audit The Board acknowledges that internal audit function is an integral part of an effective system of corporate governance. The internal audit function is currently outsourced to an independent internal audit service company. The Code outlines the requirements for the Internal Auditors to appraise the risk management, internal control and governance processes within the company. Internal Control The Board also affirms its responsibility for maintaining a sound system of internal control for the Group. The effectiveness of the system of internal control is reviewed by internal auditors, who operated independently from the activities of the Group under the purview of the Audit Committee. The information on the Groups state of internal control is reported in the Statement on Internal Control on page 24. Relationship with External Auditors To maintain a transparent and professional relationship with the Companys external auditors, the Audit Committee considers the appointment, performance and remuneration of the external auditors before recommending them to the shareholders for re-appointment in the AGM. The Audit Committee will convene meetings with the external auditors at twice a year without the presence of executive members of the Audit Committee.

ACCOUNTABILITY AND AUDIT Financial Reporting The Board is aware of its responsibilities to present a fair and balanced and understandable assessment of the Groups financial statements and quarterly reports to shareholders. The Audit Committee assists the Board in ensuring accuracy and adequacy of information by reviewing and recommending for adoption information for disclosure. Directors Responsibility Statement for Preparing the Financial Statements The Board is responsible for ensuring that the financial statements of the Group give a true and fair view of the state of affairs of the Company and of the Group as at the end of the financial year and of the results and cash flows of the Company and the Group for that period. The Board considers that the Company uses appropriate accounting policies that are consistently applied and supported by reasonable as well as prudent judgments and estimates, and that all applicable approved accounting standards in Malaysia have been followed during the preparation of the financial statements. The Board is responsible for ensuring that the Company keeps proper accounting records and that such records are disclosed with reasonable accuracy to ensure that the financial statements comply with the Companies Act, 1965. The Board has the general responsibility for taking such steps to safeguard the assets of the Group and to detect and prevent fraud as well as other irregularities.

COMPLIANCE WITH BEST PRACTICES Other than the disclosure of detailed remuneration of each director, the Board of Directors believes that the best practices of corporate governance as set out in Part 2 of the Code have been complied with during the current financial year. The Board views that the transparency in respect of the Directors remuneration has been appropriately dealt with by the band disclosure presented on the previous page.

DeGem Berhad

24

STATEMENT ON INTERNAL CONTROL


INTRODUCTION In line with the Malaysian Code on Corporate Governance which requires companies listed on the Bursa Malaysia Securities Berhad to maintain a sound system of internal control, the Board of Directors of DeGem Berhad (The Board), in compliance with the Bursa Securities Listing Requirements (BSLR), Para 15.26(b), is pleased to present the following statement. RISK MANAGEMENT The Group has ongoing processes for identifying, evaluating and managing significant risks faced by the organization. These processes are embedded as part of the Groups business management processes and form the functional responsibility of all executive directors and the management. Risk management processes are focused towards sales and promotions, customer relationship programs, product quality and human resource. To complement the current risk management processes, the management, with the assistance and facilitation of the internal auditors, has conducted a risk assessment exercise during the financial year. In this exercise, possible key risks that could affect the achievement of the Groups objectives, corresponding controls and mitigating action plans were identified and documented. The review mechanism is overseen by the Audit Committee. Besides reviewing the system of internal control, the Audit Committee also reviews the financial information and reports produced by the management. The Audit Committee, in consultation with the management and the Executive Directors, deliberates the integrity of the financial results, annual report and audited financial statements before recommending to the Board for distribution to the shareholders and public investors.

BOARD RESPONSIBILITIES The Board acknowledges the importance of a system of internal control and acknowledges that it is the Boards responsibility to maintain a sound system of internal control to safeguard the Groups assets. In this respect, the Board assumes its responsibility for identifying principal risks and reviewing the adequacy and integrity of the Groups systems of internal control. In any case, it shall be noted that all risk management systems and systems of internal control could only manage rather than eliminate risks of failure to achieve business objectives. Therefore, a system of internal control and risk management of the Group can only provide reasonable but not absolute assurance against material misstatements, fraud and losses.

- Charm Collection

DeGem Berhad

25

STATEMENT ON INTERNAL CONTROL

(contd)

- Charm Collection

INTERNAL AUDIT FUNCTION The presence of an internal audit function supports the Audit Committees review of the system of internal control. The Groups internal audit function is outsourced to external consultants. The outsourced internal auditors assist the Board and the Audit Committee in providing an independent assessment of the adequacy, efficiency and effectiveness of the Groups internal control system. On a quarterly basis, the internal audit function reports its audit findings and recommendations to the Audit Committee. OTHER KEY INTERNAL CONTROL PROCESSES The key processes of the Groups system of internal control include the following: a. b. c. d. Defined lines of accountability and delegated authority; Management reporting covering operating and financial performance; Monthly monitoring of sales budgets and targets; Operations review meetings are held by the respective divisions to monitor the progress of the operations, deliberate significant issues and formulate corrective measures;

e.

Physical and electronic security measures for monitoring and ensuring authorized access to the Groups assets and records, complemented by daily inventory and cash counts; and ISO 9001:2000 Quality Management System programmes in Inticraft Sdn. Bhd., the manufacturing arm of the Group. Internal quality audits are conducted by the management while annual surveillance audits are conducted by a certification body to provide assurance of compliance with the ISO 9001:2000 Quality Management System.

f.

CONCLUSIONS The Board is of the view that the existing level of the Groups systems of internal control is adequate to enable the Group to achieve its business objectives and safeguard shareholders investments and the Groups assets. However, the Board recognizes that the Groups system of internal control and risk management processes must continuously evolve to meet the changing and challenging business environment. Therefore, the Board will put in place appropriate action plans to strengthen its system of internal control progressively.

annual report 2009

26

AUDIT COMMITTEE REPORT


COMPOSITION Chairman Member : : Leou Thiam Lai (Independent Non-Executive Director) Chuah Teong Aung (Independent Non-Executive Director) Datuk Zainun Aishah binti Ahmad (Independent & Non-Executive Director) TERMS OF REFERENCE 1) POLICY The policy of the Audit Committee is to ensure that internal and external audit functions are properly conducted and that audit recommendations are being carried out effectively by the DEGEM BERHAD group of companies. 2) OBJECTIVES The objectives of this policy are:3.4) 2.1) to assure the shareholders of the Company that the Directors of the Company have complied with Malaysian financial standards and required disclosure policies developed and administered by Bursa Malaysia Securities Berhad (Bursa Securities); to ensure consistency with Bursa Securities commitment to encourage high standards of corporate disclosure and to adopt best practices aimed at maintaining appropriate standards of corporate responsibility, integrity and accountability to all the Companys shareholders; and 3.3) 3.2) 2.3) to assist the Board of Directors in the review of the results of internal and external audit activities and to ensure that audit findings are brought to the highest level for consideration.

3) MEMBERSHIP 3.1) The Committee shall be appointed by the Board from amongst the directors of the Company and shall be composed exclusively of Non-Executive Directors of no fewer than three members, of whom the majority shall be independent. The Committee shall include at least one person who is a member of the Malaysian Institute of Accountants or alternatively a person who must have at least 3 years working experience and have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967 or is a member of one of the associations of accountants specified in Part II of the said Schedule or alternatively a person who has fulfill such other requirements as prescribed or approved by Bursa Securities. No alternate director shall be appointed as a member of the Committee. The members of the Committee shall elect from among their number a chairman who is non-executive and independent, as defined above. If one or more members of the Committee resign, die or for any other reason cease to be a member with the result that the Listing Requirements of the Bursa Securities are breached, the Board shall, within three months of the event, appoint such number of new members as may be required to correct the breach. The Board shall review the term of office of Committee members no less than once every three years.

3.5)

2.2)

3.6)

DeGem Berhad

27

AUDIT COMMITTEE REPORT

(contd)

4) AUTHORITY The Committee is authorised by the Board, in accordance with the procedures to be determined by the Board (if any) and at the cost of the Company, to: (a) investigate any activity within the Committees terms of reference; have resources which are reasonably required to enable it to perform its duties; have full and unrestricted access to any information pertaining to the Company or the Group; have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity; obtain outside legal or other independent professional advice and secure the attendance of outsiders with relevant experience and expertise if it considers this necessary; convene meetings with the external auditors, internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary.

(b) (c)

the evaluation of the system of internal controls; the assistance given by the employees to the external auditors; the nomination or re-appointment of the external auditors and their audit fees as well as matters pertaining to resignation or change of the external auditors; the adequacy of the scope, functions, competency and resources of the internal audit function and that it has the necessary authority to carry out its work; 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;

(d)

(b)

(e)

(c)

(f)

(d)

(e)

(f)

- Diamond & Platinum

5) FUNCTIONS The functions of the Committee shall be, amongst others, to review the following and report the same to the Board:(a) the scope of the audit and the audit plan of the external auditors, the results of the annual audit, their audit report and management letter together with managements response;

annual report 2009

28

AUDIT COMMITTEE REPORT

(contd)

6) OVERSEEING THE INTERNAL AUDIT FUNCTION 6.1) The Committee shall establish an internal audit function which is independent of the activities it audits. The Committee shall oversee all internal audit functions and is authorised to commission investigations to be conducted by internal audit as it deems fit. The internal auditor shall report directly to the Committee and shall have direct access to the Chairman of the Committee. All proposals by management regarding the appointment, transfer or dismissal of the internal auditor shall require the prior approval of the Committee.

6.2)

6.3) 6.4)
- Flawless Collection

5) FUNCTIONS (contd) 7) QUORUM FOR MEETINGS (g) the quarterly results and year end financial statements, prior to the approval by the Board of Directors, focusing particularly on:(i) (ii) (iii) (iv) (v) (h) any changes in or implementation of major accounting policy changes; significant adjustments arising from the audit; significant and unusual events; the going concern assumption; and compliance with accounting standards and other legal requirements; The quorum shall be formed only if there is a majority of members present at the meeting who are independent directors. 8) ATTENDANCE AT MEETINGS The Head of Finance, the Head of Internal Audit, and a representative of the External Auditors shall normally attend meetings by invitation of the Committee. Other Board members and employees may attend any particular meeting only at the Committees invitation, specific to the relevant meeting. However, at least twice a year the Committee shall meet with the External Auditors without executive Board members present. 9) FREQUENCY OF MEETINGS The Chairman shall call for meetings, to be held not less than four times a year. The External Auditors may request a meeting if they consider one necessary.

any related party transaction and conflict of interest situation that may arise within the Company or the group including any transaction, procedure or course of conduct that raises questions of management integrity; and (i) any other matters as directed by the Board.

DeGem Berhad

29

AUDIT COMMITTEE REPORT

(contd)

10) PROCEEDINGS OF MEETINGS 10.1) A member may at any time and the Secretary shall on the requisition of a member summon a meeting of the Audit Committee by giving the members not less than seven days notice thereof unless such requirement is waived. 10.2) In the absence of the Chairman, the Committee shall appoint one of its members present to chair that meeting. 11.4) 10.3) A resolution put to vote shall be decided by a majority of votes of the members present, each member having one vote.

compliance (if any) and the alternatives adopted in such areas; (c) Statement on the Boards responsibility for preparing the annual audited accounts; and Statement about the state of internal control of the Group.

(d)

The Committee may report any breaches of the Listing Requirements, which have not been satisfactorily resolved, to the Bursa Securities.

11) REPORTING PROCEDURES 11.1) The Company Secretary shall be the Secretary of the Committee. He shall record attendance of all members and invitees and take minutes to record the proceedings of every meeting of the Committee. All minutes of meetings shall be circulated to every member of the Board. The Committee shall prepare an annual report to the Board that provides a summary of the activities of the Committee for inclusion in the Companys annual report. The Committee shall assist the Board in preparing the following for publication in the Companys annual report: (a) Statement on the Companys application of the principles set out in Part 1 of the Malaysian Code on Corporate Governance; Statement on the extent of compliance with the Best Practices in Corporate Governance set out in Part 2 of the Malaysian Code on Corporate Governance, specifying reasons for any areas of non-

The Audit Committee met five (5) times during the financial year ended 31 December 2009. The details of Audit Committees meetings held and attended by the Committee during the financial year are as follows: Name of Member Chairman: Leou Thiam Lai (Independent Non-Executive Director) Members: Chuah Teong Aung (Independent Non-Executive Director) Datuk Zainun Aishah binti Ahmad (Independent Non-Executive Director) No of Audit Committee MeetingsAttended/Held*

11.2)

5/5

11.3)

5/5 4/5

(b)

* reflect the number of meetings held during the time the Audit Committee member held office.

annual report 2009

30

AUDIT COMMITTEE REPORT

(contd)

SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE DURING THE FINANCIAL YEAR ENDED 31 DECEMBER 2009 The Audit Committee carried out its duties in accordance with its Terms of Reference. During the financial year ended 31 December 2009, the activities of the Audit Committee included the following:(a) Reviewed the unaudited quarterly financial results and announcements of the Company and the Group prior to submission to the Board of Directors for consideration and approval; Reviewed the audited financial statements for the financial year ended 31 December 2008; Reviewed the external auditors reports for the financial year ended 31 December 2008 in relation to audit and accounting issues arising from the audit and the managements response; Reviewed the assistance given by the employees to the external auditors in respect of the audit for the financial year ended 31 December 2008; Reviewed the external auditors audit plan and scope of audit for the financial year ended 31 December 2009; Met with the external auditors twice during the financial year ended 31 December 2009 without presence of any executive members of the Board; Considered the nomination of external auditors for recommendation to the Board for re-appointment and reviewed the audit fees; Reviewed the Group Internal Audit Plan, internal audit reports of the Company and its operating subsidiaries and management implementation of audit recommendations;

(i)

Reviewed the disclosure statements on Corporate Governance, Audit Committee Report and the Statement on Internal Control for the financial year ended 31 December 2008 and recommended their adoption to the Board; and Considered the impact of any unusual transactions including significant related party transactions.

(j)

INTERNAL AUDIT FUNCTION For the financial year ended 31 December 2009, the Group has outsourced its internal audit function to an independent internal audit service company and the selected team is independent of the activities audited by the external auditors. The cost incurred for the internal audit function in respect of the financial year ended 31 December 2009 is RM102,200.00. The principal responsibility of the internal audit function is to undertake regular and systematic review of the systems of controls so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively in the Group. The internal auditor undertakes internal audit function based on the audit plan that was reviewed and approved by the Audit Committee. During the financial year under review, the internal auditor has conducted audit on all operating subsidiaries with recommended improvements to the existing system of controls and submitted his findings to the Audit Committee. These internal audit reports together with responses by management were circulated to all members of the Audit Committee. All internal audit reports were reviewed by the Audit Committee and discussed at Audit Committee Meetings and recommendations were duly acted upon by the management.

(b)

(c)

(d)

(e)

(f)

(g)

(h)

DeGem Berhad

31

CORPORATE SOCIAL RESPONSIBILITY STATEMENT


DeGem Berhad and its subsidiary companies (the Group) recognises that in addition to its corporate responsibilities, it is morally accountable for the effect that its operations will have on its employees, the community, the environment and the marketplace. As such, the Group seeks to balance its social responsibilities with its obligations to create value for its investors. Welfare of Employees The wellbeing of its employees is paramount to the Groups productivity and is fundamental to the success of the Group. The Group therefore undertakes concerted efforts to groom its employees towards realising their fullest potential. The Group also recognises that a safe and healthy work environment is crucial to the wellbeing of its employees and in optimising their productivity. In this aspect, the Group continues to fine-tune its health and safety policy to ensure that the environment for its employees, as well as for its customers, visitors and the general public at its premises is free from preventable hazards. Contributions to Community DeGem Berhad continues its involvement in the community to enhance the quality of life of the less fortunate. During the year, the Group continued its involvement in support of the Breast Cancer Welfare Association (BCWA). The Group hosted the DeGem Pink Afternoon Tea at its flagship boutique in Bangsar for more than 30 of its esteemed guests; a fundraiser in tandem with efforts by BCWA and National Cancer Society Malaysia (NCSM)s inaugural Jamuan Teh Malaysia. Proceeds from the event were donated to BCWA and NCSM. In addition, the Group also participated in Estee Lauders Breast Cancer Awareness Campaign 2009 by sponsoring its product for the Breast Cancer Awareness Gala Dinner, as well as donated part of the proceeds from the sale of pink ribbon pins towards the campaign. Other than that, the Group also made numerous financial contributions towards the Masjid Saidina Ab Bakar, the Inner Wheel Club of KL, Yik Ching High Schools Shi Tai Yi Yuan, Yayasan Orang Kurang Upaya Kelantan and the Tuanku Najihah Foundation. The Group also strived to expand knowledge of its industry by collaborating with certain colleges in sponsoring and training students who are taking industry-related courses. The students will be offered employment opportunity with the Group upon graduation. Protection of Environment DeGem Berhad seeks to protect its environment by ensuring that the waste from its manufacturing activities are properly treated. Where that is not possible, procedures to ensure safe disposal of the waste are in place. In addition, the Group also actively encourages a culture of recycling and energy saving amongst its employees to minimise any negative impact to the environment. Responsibility to Marketplace DeGem Berhad continues its efforts to ensure that high standards of social responsibility are upheld in its relationship with its stakeholders. The Group requires assurances from their suppliers of diamonds that their sources are certified under the Kimberley Process Certification Scheme (KPCS). KPCS is a process set out by the international diamond industry which is designed to certify the origin of rough diamonds from sources which are free of conflict.

annual report 2009

The Flawless Collection

FINANCIAL STATEMENTS
Directors Report Balance Sheet Income Statement Statement Of Changes In Equity Cash Flow Statement Notes To The Financial Statements Statement By Directors / Statutory Declaration Independent Auditors Report Analysis of Shareholdings Substantial Shareholders Statement of Directors Shareholdings Properties of the Group Directory of DeGem Group Showrooms Proxy Form 34 39 41 43 44 47 95 97 99 102 103 104 105

DIRECTORS REPORT
FOR THE YEAR ENDED 31 DECEMBER 2009

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the year ended 31 December 2009. Principal activities The Company is principally engaged in investment holding and the provision of management services, whilst the principal activities of the subsidiaries are as stated in Note 6 to the financial statements. There has been no significant change in the nature of these activities during the financial year. Results Group RM 15,336,434 34,060 15,370,494 Company RM 940,031 940,031

Net profit after tax before minority interest Minority interest Net profit after tax and minority interest attributable to the shareholders of the Company Reserves and provisions

There were no material transfers to or from reserves and provisions during the financial year under review except as disclosed in the financial statements. Dividend Since the end of the previous financial year, the Company paid a final ordinary dividend of 2.5 sen per ordinary share less tax at 25% totalling RM2,512,498 (1.88 sen net per ordinary share) in respect of the year ended 31 December 2008 on 1 September 2009. The final ordinary dividend recommended by the Directors in respect of the year ended 31 December 2009 is 2.0 sen per share less tax at 25% totalling RM2,003,240 (1.5 sen net per ordinary share) subject to the approval of the shareholders at the forthcoming Annual General Meeting, based on the issued and paid up share capital (excluding treasury shares) of 133,549,300 ordinary shares of RM0.50 each as at 31 December 2009. Directors of the Company Directors who served since the date of the last report are: Dato Hasan bin M. Taib Datuk Zainun Aishah binti Ahmad Choong Kai Soon Choong Kai Fatt Choong Kay Cheong Choong Khoi Onn Leou Thiam Lai Chuah Teong Aung 34
DeGem Berhad

DIRECTORS REPORT
FOR THE YEAR ENDED 31 DECEMBER 2009
(contd)

Directors interests The interest and deemed interest in the shares of the Company and of its related corporations (other than wholly-owned subsidiaries) of those who were Directors at year end (including the interests of the spouses or children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors Shareholdings are as follows: Number of ordinary shares of RM0.50 each At At 1.1.2009 Bought Sold 31.12.2009 Shareholdings in which the Directors have interests The Company Dato Hasan bin M. Taib - direct interest Choong Khoi Onn - direct interest - indirect interest* Choong Kay Cheong - direct interest - indirect interest* Choong Kai Soon - indirect interest* Choong Kai Fatt - indirect interest*

3,000,000

3,000,000

760,000 69,300,002

760,000 69,300,002

2,000,000 69,300,002

2,000,000 69,300,002

69,300,002

69,300,002

69,300,002

69,300,002

* Deemed to have interest by virtue of their direct shareholdings in the holding company, Legion Master Sdn. Bhd.

annual report 2009

35

DIRECTORS REPORT
FOR THE YEAR ENDED 31 DECEMBER 2009
(contd)

Number of ordinary shares of RM1 each At At 1.1.2009 Bought Sold 31.12.2009 Holding company Legion Master Sdn. Bhd. Direct interest Choong Kai Soon Choong Kai Fatt Choong Khoi Onn Choong Kay Cheong

434,434 410,077 306,743 67,461

434,434 410,077 306,743 67,461

By virtue of their interest in the shares of the Company, Choong Kai Soon, Choong Kai Fatt, Choong Khoi Onn and Choong Kay Cheong are also deemed to have interests in the shares of the subsidiaries during the financial year to the extent that DeGem Berhad has an interest. None of the other Directors holding office at 31 December 2009 had any interest in the ordinary shares of the Company and of its related corporations during the financial year. Directors benefits Since the end of the previous financial year, no Director of the Company has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of the Company or of related corporations) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member or with a company in which the Director has a substantial financial interest. There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Issue of shares There were no changes in the authorised, issued and paid-up capital of the Company during the financial year.

36

DeGem Berhad

DIRECTORS REPORT
FOR THE YEAR ENDED 31 DECEMBER 2009
(contd)

Treasury shares The Company by a resolution passed in an Extraordinary General Meeting held on 17 June 2009, obtained an approval from the shareholders of the Company to repurchase its own ordinary shares. The Directors of the Company are committed to enhancing the value of the Company for its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders. During the financial year, the Company repurchased 450,700 ordinary shares of RM0.50 each of its issued shares from the open market at an average price of RM0.89 per ordinary share. The total consideration paid for the repurchase was RM402,862. The repurchase transactions were fully financed by internally generated funds. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965. Of the total 134,000,000 issued and fully paid ordinary shares of RM0.50 each as at 31 December 2009, 450,700 are held as treasury shares by the Company. The treasury shares are held at a carrying amount of RM402,862. None of the treasury shares held are resold or cancelled during the year ended 31 December 2009. Other statutory information Before the balance sheets and income statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that: i) ii) all known bad debts have been written off and adequate provision made for doubtful debts, and all current assets have been stated at the lower of cost and net realisable value.

At the date of this report, the Directors are not aware of any circumstances: i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts, in the Group and in the Company inadequate to any substantial extent, or that would render the value attributed to the current assets in the Group and in the Company financial statements misleading, or which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading.

ii) iii)

iv)

annual report 2009

37

DIRECTORS REPORT
FOR THE YEAR ENDED 31 DECEMBER 2009
(contd)

Other statutory information At the date of this report, there does not exist: i) ii) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due. In the opinion of the Directors, the results of the operations of the Group and of the Company for the financial year ended 31 December 2009 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report. Significant events The significant events are disclosed in Note 29 to the financial statements. Auditors The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Choong Kai Fatt

Choong Khoi Onn Kuala Lumpur, Date: 19 April 2010 38

DeGem Berhad

BALANCE SHEETS
AT 31 DECEMBER 2009

Group Assets Property, plant and equipment Prepaid lease payments Investment properties Investments in subsidiaries Goodwill on consolidation Deferred tax assets Note 2009 RM 2008 RM

Company 2009 RM

2008 RM

3 4 5 6 7 8

24,899,240 1,718,282 1,430,437 7,887,756 2,073,564 38,009,279

25,646,598 1,732,843 1,469,098 7,887,756 2,259,725 38,996,020 138,621,143 11,578,132 726,750 20,914,795 171,840,820 210,836,840

31,427 54,399,998 54,431,425 53,006,744 21,311 2,935,437 55,963,492 110,394,917

46,741 54,399,998 54,446,739 58,922,518 54,542 745,327 59,722,387 114,169,126

Total non-current assets Inventories Receivables, deposits and prepayments Current tax assets Cash and cash equivalents 9 10 11

138,740,007 11,567,194 733,126 25,502,860 176,543,187 214,552,466

Total current assets Total assets Equity Share capital Share premium Foreign currency translation reserve Treasury shares Retained earnings Total equity attributable to shareholders of the Company Minority interest Total equity

12 14 14 13 15

67,000,000 10,435,536 191,153 (402,862) 67,524,318 144,748,145 4,494,447 149,242,592

67,000,000 10,435,536 181,617 54,666,322 132,283,475 1,525,756 133,809,231

67,000,000 10,435,536 (402,862) 10,393,029 87,425,703 87,425,703

67,000,000 10,435,536 11,965,496 89,401,032 89,401,032

annual report 2009

39

BALANCE SHEETS
AT 31 DECEMBER 2009
(contd)

Group Liabilities Loans and borrowings Deferred tax liabilities Total non-current liabilities Loans and borrowings Payables and accruals Tax liabilities 16 17 Note 2009 RM 2008 RM

Company 2009 RM

2008 RM

16 8

21,583,196 16,034 21,599,230 12,260,623 30,257,423 1,192,598 43,710,644 65,309,874 214,552,466

23,993,269 27,571 24,020,840 7,046,271 44,343,848 1,616,650 53,006,769 77,027,609 210,836,840

14,850,640 421 14,851,061 7,604,636 513,517 8,118,153 22,969,214 110,394,917

17,565,329 421 17,565,750 6,678,538 523,806 7,202,344 24,768,094 114,169,126

Total current liabilities Total liabilities Total equity and liabilities

The notes set out on pages 47 to 94 are an integral part of these financial statements.

40

DeGem Berhad

INCOME STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2009

Group Revenue Cost of sales Note 18 2009 RM 189,385,467 (124,466,567) 64,918,900 4,175,462 (38,763,196) (6,840,978) 19 20 22 23,490,188 (1,321,811) 22,168,377 (6,831,943) 15,336,434 2008 RM 209,213,688 (142,398,239) 66,815,449 2,548,902 (39,095,032) (8,534,059) 21,735,260 (1,702,010) 20,033,250 (5,855,123) 14,178,127

Company 2009 RM 4,241,471 4,241,471 (1,619,778) (26,518) 2,595,175 (1,036,307) 1,558,868 (618,837) 940,031

2008 RM

3,026,764 3,026,764 3,822 (1,802,896) 1,227,690 (1,450,194) (222,504) (38,828) (261,332)

Gross profit Other income Administrative expenses Other operating expenses Results from operating activities Finance costs Profit/(Loss) before tax Tax expense Profit/(Loss) for the year Attributable to: Shareholders of the Company Minority interest Profit/(Loss) for the year Basic earnings per ordinary share (sen) Dividend per share (sen) - Gross (sen) - Net (sen)

15,370,494 (34,060) 15,336,434

13,996,966 181,161 14,178,127

940,031 940,031

(261,332) (261,332)

23 24

11.47

10.45

2.50 1.88

2.50 1.85

The notes set out on pages 47 to 94 are an integral part of these financial statements.

annual report 2009

41

Consolidated statement of changes in equity


for the year ended 31 December 2009

Group

/----------------Attributable to shareholders of the Company-----------------/


Non-distributable Distributable

Note

Share capital RM
67,000,000 -

Treasury shares RM
-

Share Translation premium reserve RM RM


10,435,536 (387,639) 569,256 -

Retained earnings RM
43,148,356 13,996,966 (2,479,000)

Total RM
120,196,253 569,256 13,996,966 (2,479,000)

Minority interest RM
1,319,305 25,290 181,161 -

Total equity RM
121,515,558 594,546 14,178,127 (2,479,000)

At 1 January 2008 Foreign exchange translation differences Profit for the year Dividends to shareholders At 31 December 2008/ 1 January 2009 Foreign exchange translation differences Profit/ (loss) for the year Shares repurchased Dilution of interest in a subsidiary Issuance of ordinary shares of a subsidiary to minority shareholders Dividends to shareholders Dividends to minority interest At 31 December 2009

24

67,000,000 -

(402,862) -

10,435,536 -

181,617 9,536 -

54,666,322 15,370,494 -

132,283,475 9,536 15,370,494 (402,862) -

1,525,756 (258,970) (34,060) 12,621

133,809,231 (249,434) 15,336,434 (402,862) 12,621

24

67,000,000 Note 12

(402,862) Note 13

10,435,536 Note 14

191,153 Note 14

(2,512,498) 67,524,318 Note 15

(2,512,498) 144,748,145

3,324,100 (75,000) 4,494,447

3,324,100 (2,512,498) (75,000) 149,242,592

The notes set out on pages 47 to 94 are an integral part of these financial statements.

42

DeGem Berhad

STATEMENT OF CHANGES IN EQUITY


FOR THE YEAR ENDED 31 DECEMBER 2009

Company At 1 January 2008 Loss for the year Dividends to shareholders

Note

Share capital RM 67,000,000 67,000,000 67,000,000 Note 12

Non-Distributable Treasury shares RM (402,862) (402,862) Note 13

Share premium RM 10,435,536 10,435,536 10,435,536 Note 14

Distributable Retained earnings RM 14,705,828 (261,332) (2,479,000) 11,965,496 940,031 (2,512,498) 10,393,029 Note 15

Total RM 92,141,364 (261,332) (2,479,000) 89,401,032 940,031 (402,862) (2,512,498) 87,425,703

24

At 31 December 2008/ 1 January 2009 Profit for the year Shares repurchased Dividends to shareholders

24

At 31 December 2009

The notes set out on pages 47 to 94 are an integral part of these financial statements.

annual report 2009

43

CASH FLOW STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2009

Group Cash flows from operating activities Profit/(Loss) before tax Adjustments for: Amortisation of prepaid lease payments Depreciation of property, plant and equipment Depreciation of investment properties Dividend income Finance costs Gain on disposal of property, plant and equipment Impairment loss on investment properties Interest income Loss on dilution of interest in a subsidiary Property, plant and equipment written off Unrealised foreign exchange (gain)/ loss Allowance for slow moving inventories Reversal of allowance for slow moving inventories Operating profit/(loss) before working capital changes Changes in working capital: Inventories Receivables, deposits and prepayments Payables and accruals Cash generated from operations 2009 RM 2008 RM

Company 2009 RM

2008 RM

22,168,377

20,033,250

1,558,868

(222,504)

14,561 3,089,786 38,661 1,321,811 (203,407) (114,553) 12,621 269,642 (674,582) 171,999 (80,243) 26,014,673 (210,620) 10,938 (13,411,843) 12,403,148

14,561 2,146,242 41,395 1,702,010 (2,090) 147,643 (86,585) 713,266 174,517 1,008,118 (30,845) 25,861,482 218,677 (1,359,396) 7,224,326 31,945,089

15,314 (1,707,800) 1,036,307 (2,533,671) (1,630,982) 5,915,774 (10,289) 4,274,503

15,314 1,450,194 (3,026,764) (1,783,760) 12,729,017 (527,565) 10,417,692

The notes set out on pages 47 to 94 are an integral part of these financial statements.

44

DeGem Berhad

CASH FLOW STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2009
(contd)

Group Cash generated from operations (continued) Interest paid Income taxes paid Interest received Dividend received Net cash generated from operating activities 2009 RM 12,403,148 (1,321,811) (7,087,747) 114,553 4,108,143 2008 RM 31,945,089 (1,702,010) (5,669,845) 86,585 24,659,819

Company 2009 RM 4,274,503 (1,036,307) (585,606) 2,533,671 1,707,800 6,894,061

2008 RM

10,417,692 (1,450,194) (15,354) 3,026,764 11,978,908

Cash flows from investing activities Proceeds from sale of property, plant and equipment Acquisition of property, plant and equipment Net cash used in investing activities 248,547 (2,351,037) (2,102,490) (2,512,498) (75,000) 1,204,883 (220,771) (402,862) 3,324,100 1,317,852 3,323,505 (255,607) 20,914,795 23,982,693 54,000 (7,611,825) (7,557,825) (2,479,000) (6,189,314) (242,429) (8,910,743) 8,191,251 577,028 12,146,516 20,914,795 (2,512,498) (1,788,591) (402,862) (4,703,951) 2,190,110 745,327 2,935,437 (2,479,000) (10,402,507) (12,881,507) (902,599) 1,647,926 745,327

Cash flows from financing activities Dividend paid Dividend paid to minority interest Net proceeds/ (repayment) of loans and borrowings Repayment of hire purchase liabilities Purchase of treasury shares Proceeds from issuance of shares to minority interest of a subsidiary Net cash generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Effects of exchange rate fluctuations on cash held Cash and cash equivalents at 1 January

Cash and cash equivalents at 31 December

The notes set out on pages 47 to 94 are an integral part of these financial statements.

annual report 2009

45

CASH FLOW STATEMENTS


FOR THE YEAR ENDED 31 DECEMBER 2009
(contd)

i)

Cash and cash equivalents Cash and cash equivalents included in the cash flow statements comprise the following balance sheet amounts:

Cash and bank balances Deposits placed with licensed banks Bank overdrafts

Group Note 11 11 16 2009 RM 15,343,745 10,159,115 (1,520,167) 23,982,693 2008 RM 10,801,163 10,113,632 20,914,795

Company 2009 2008 RM RM 631,506 2,303,931 2,935,437 745,327 745,327

ii)

Acquisition of property, plant and equipment During the year, the Group acquired property, plant and equipment with an aggregate cost of RM2,651,037 (2008 - RM7,911,825) of which RM300,000 (2008 - RM300,000), were acquired by means of hire purchase arrangements.

The notes set out on pages 47 to 94 are an integral part of these financial statements.

46

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


DeGem Berhad is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The address of its registered office and principal place of business is as follows: Registered office/Principal place of business No. 42, 1st Floor Jalan Maarof Bangsar Baru 59100 Kuala Lumpur Malaysia The consolidated financial statements as at and for the year ended 31 December 2009 comprise the Company and its subsidiaries (together referred to as the Group). The financial statements of the Company as at and for the year ended 31 December 2009 do not include other entities. The Company is principally engaged in investment holding and the provision of management services, whilst the principal activities of the subsidiaries are as stated in Note 6 to the financial statements. The holding company during the financial year was Legion Master Sdn. Bhd., a company incorporated in Malaysia. The financial statements were approved by the Board of Directors on 19 April 2010. 1. Basis of preparation (a) Statement of compliance These financial statements have been prepared in accordance with Financial Reporting Standards (FRS), accounting principles generally accepted and the Companies Act, 1965 in Malaysia. The Group and the Company have not applied the following accounting standards, amendments and interpretations that have been issued by the Malaysian Accounting Standards Board (MASB) but are not yet effective for the Group and the Company: FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2009 FRS 8, Operating Segments FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2010 FRS 4, Insurance Contracts FRS 7, Financial Instruments: Disclosures FRS 101, Presentation of Financial Statements (revised) FRS 123, Borrowing Costs (revised) FRS 139, Financial Instruments: Recognition and Measurement
annual report 2009

47

NOTES TO THE FINANCIAL STATEMENTS


1. Basis of preparation (contd) (a) Statement of compliance (contd)

(contd)

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2010 (contd) Amendments to FRS 1, First-time Adoption of Financial Reporting Standards Amendments to FRS 2, Share-based Payment: Vesting Conditions and Cancellations Amendments to FRS 7, Financial Instruments: Disclosures Amendments to FRS 101, Presentation of Financial Statements Puttable Financial Instruments and Obligations Arising on Liquidation Amendments to FRS 127, Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate Amendments to FRS 132, Financial Instruments: Presentation - Puttable Financial Instruments and Obligations Arising on Liquidation - Separation of Compound Instruments Amendments to FRS 139, Financial Instruments: Recognition and Measurement - Reclassification of Financial Assets - Collective Assessment of Impairment for Banking Institutions Improvements to FRSs (2009) IC Interpretation 9, Reassessment of Embedded Derivatives IC Interpretation 10, Interim Financial Reporting and Impairment IC Interpretation 11, FRS 2 - Group and Treasury Share Transactions IC Interpretation 13, Customer Loyalty Programmes IC Interpretation 14, FRS 119 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 March 2010 Amendments to FRS 132, Financial Instruments: Presentation- Classification of Rights Issues FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2010 FRS 1, First-time Adoption of Financial Reporting Standards (revised) FRS 3, Business Combinations (revised) FRS 127, Consolidated and Separate Financial Statements (revised) Amendments to FRS 2, Share-based Payment Amendments to FRS 5, Non-current Assets Held for Sale and Discontinued Operations Amendments to FRS 138, Intangible Assets IC Interpretation 12, Service Concession Agreements IC Interpretation 15, Agreements for the Construction of Real Estate IC Interpretation 16, Hedges of a Net Investment in a Foreign Operation IC Interpretation 17, Distribution of Non-cash Assets to Owners Amendments to IC Interpretation 9, Reassessment of Embedded Derivatives 48
DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


1. Basis of preparation (contd) (a) Statement of compliance (contd) FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2011 Amendments to FRS 1, First-time Adoption of Financial Reporting Standards- Limited Exceptions from Comparatives FRS 7 Disclosures for First-time Adopters Amendments to FRS 7, Financial Instrument: Disclosures- Improving Disclosures about Financial Instruments

(contd)

The Group and Company plan to apply the abovementioned standards, amendments and interpretations from the annual period beginning 1 January 2010 for those standards, amendments or interpretations that will be effective for annual periods beginning on or after 1 July 2009 or 1 January 2010, except for FRS 4, Amendments to FRS 2, IC Interpretation 11, IC Interpretation 13 and IC Interpretation 14 which are not applicable to the Group or to the Company. The Group and Company plan to apply those standards, amendments or interpretations that will be effective for annual periods beginning 1 January 2011 for those standards, amendments or interpretations that will be effective beginning on or after 1 March 2010, 1 July 2010 and 1 January 2011, except for Amendments to FRS 2, IC Interpretation 12, IC Interpretation 15, IC Interpretation 16 and IC Interpretation 17 which are not applicable to the Group or to the Company. The impacts and disclosures as required by FRS 108.30(b), Accounting Policies, Changes in Accounting Estimates and Errors, in respect of applying FRS 7 and FRS 139 are not disclosed by virtue of the exemptions given in these respective FRSs. The amendments to FRS 132 remove the transitional provision that exempted an entity from separating the liability and equity components of a compound instrument issued before 1 January 2003. As a result of the amendments, an entity shall separate a compound financial instrument into its liability and equity components when the entity first applies FRS 139, Financial Instruments: Recognition and Measurement. The initial application of other standards, amendments and interpretations, which will be applied perpetually, is not expected to have any material financial impact to the current and prior years financial statements upon their first adoption. Material impacts of initial application of a standard, an amendment or an interpretation, which will be applied retrospectively, are disclosed below: (i) FRS 8, Operating Segments FRS 8 replaces FRS 1142004, Segment Reporting and requires the identification and reporting of operating segments based on internal reports that are regularly reviewed by the chief operating decision maker of the Group in order to allocate resources to the segment and to assess its performance. Currently, the Group presents segment information in respect of its geographical segments (see Note 26).

annual report 2009

49

NOTES TO THE FINANCIAL STATEMENTS


1. Basis of preparation (contd) (a) Statement of compliance (contd) (ii) Improvements to FRSs (2009)

(contd)

Improvements to FRSs (2009) contain various amendments that result in accounting changes for presentation, recognition or measurement and disclosure purposes which will become effective for the Group and the Companys financial statements for the year ending 31 December 2010. Amendment that has a material impact is: FRS 117, Leases The amendments clarify the classification of lease of land and require entities with existing leases of land and buildings to reassess the classification of land as finance or operating lease. Leasehold land which in substance is a finance lease will be reclassified to property, plant and equipment. The adoption of these amendments will result in a change in accounting policy which will be applied retrospectively in accordance with the transitional provisions. This change in accounting policy will result in the reclassification of lease of land amounting to RM1,718,282 as at 31 December 2009 from prepaid lease payments to property, plant and equipment. (b) Basis of measurement The financial statements have been prepared on the historical cost basis except as disclosed in the notes to the financial statements. (c) Functional and presentation currency These financial statements are presented in Ringgit Malaysia (RM), which is the Companys functional currency. (d) Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have a significant effect on the amounts recognised in the financial statements, other than those disclosed in Note 7 impairment test on goodwill. 50
DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


2. Significant accounting policies

(contd)

The accounting policies set out below have been applied consistently to the periods presented in these financial statements, and have been applied consistently by Group entities, unless otherwise stated. (a) Basis of consolidation (i) Subsidiaries Subsidiaries are entities, controlled by the Group. Control exists when the Group has the ability to exercise its power, directly or indirectly to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Subsidiaries are consolidated using the purchase method of accounting. Under the purchase method of accounting, the financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Investments in subsidiaries are stated in the Companys balance sheet at cost less impairment losses. (ii) Minority interest Minority interests at the balance sheet date, being the portion of the net identifiable assets (excluding goodwill) of subsidiaries attributable to equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated balance sheet and statement of changes in equity within equity, separately from equity attributable to the equity shareholders of the Company. Minority interests in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the year between minority interests and the equity shareholders of the Company. Where losses applicable to the minority exceed the minoritys interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Groups interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profits, the Groups interest is allocated all such profits until the minoritys share of losses previously absorbed by the Group has been recovered. (iii) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Groups interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

annual report 2009

51

NOTES TO THE FINANCIAL STATEMENTS


2. Significant accounting policies (contd) (b) Foreign currency (i) Foreign currency transactions

(contd)

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in the income statements. (ii) Operations denominated in functional currencies other than Ringgit Malaysia The assets and liabilities of operations in functional currencies other than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the balance sheet date. The income and expenses of foreign operations are translated to RM at exchange rates at the dates of the transactions. Foreign currency differences are recognised in translation reserve. On disposal, accumulated translation differences are recognised in the consolidated income statement as part of the gain or loss on sale. (c) Derivative financial instruments The Group holds derivative financial instruments to hedge its foreign currency risk exposures. Derivative financial instruments such as foreign exchange contracts are used as hedges to manage operational exposures to foreign exchange risks. The Group does not hold derivative instruments for trading purposes. The difference between the forward exchange contracts and the prevailing exchange rates would be recognised in the income statements upon realisation of receipts or payments, or upon maturity, whichever is earlier.

52

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


2. Significant accounting policies (contd) (d) Property, plant and equipment (i) Recognition and measurement Freehold land is stated at cost. Other items of property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

(contd)

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within other income or other operating expenses respectively in the income statements. (ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statements as incurred. (iii) Depreciation Depreciation is recognised in the income statements on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use. The estimated useful lives for the current and comparative periods are as follows: Buildings Renovations Plant, equipment and fittings Motor vehicles 33 1/ 3 to 50 years 5 - 10 years 4 to 10 years 5 years

Depreciation methods, useful lives and residual values are reassessed at the balance sheet date.
annual report 2009

53

NOTES TO THE FINANCIAL STATEMENTS


2. Significant accounting policies (contd) (d) Property, plant and equipment (contd) (iv) Change in estimates

(contd)

During the year ended 31 December 2009, the Group conducted a review over the useful life of its renovations of trading subsidiaries, which resulted in changes in the expected usage of the non-current asset (see Note 3). (e) Leased assets Operating leases Leases where the Group does not assume substantially all the risks and rewards of the ownership are classified as operating lease and lease assets are not recognised on the Groups balance sheet. Leasehold land that normally has an indefinite economic life and title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted for as prepaid lease payments. Payments made under operating leases are recognised in the income statements on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. (f) Intangible assets Goodwill Goodwill arises on business combinations and is measured at cost less any accumulated impairment losses. For acquisitions prior to 1 January 2006, goodwill represents the excess of the cost of the acquisition over the Groups interest in the fair values of the net identifiable assets and liabilities. For the business acquisitions beginning from 1 January 2006, goodwill represents the excess of the cost of the acquisition over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. Any excess of the Groups interest in the net fair value of acquirees identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in income statement. Goodwill is tested for impairment annually and whenever there is an indication that it may be impaired. 54
DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


2. Significant accounting policies (contd) (g) Investment properties Investment property carried at cost Investment properties are properties which are owned to earn rental income or for capital appreciation or for both. These include land (other than leasehold land) held for a currently undetermined future use. Properties that are occupied by the companies in the Group are accounted for as owner-occupied rather than as investment properties.

(contd)

Investment properties are stated at cost less any accumulated depreciation and any accumulated impairment losses, consistent with the accounting policy for property, plant and equipment as stated in accounting policy note 2(d). Depreciation is charged to the income statements on a straight-line basis over the estimated useful life of 50 years for buildings. Freehold land is not depreciated. (h) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in, first-out method, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. The cost of finished goods and work-in-progress comprise costs of raw materials, direct labour, other direct costs and appropriate proportions of manufacturing overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. (i) Receivables Receivables including amounts due from subsidiaries are initially recognised at their cost when the contractual right to receive cash or another financial asset from another entity is established. Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts. Receivables are not held for the purpose of trading. (j) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in value. For the purpose of the cash flow statement, cash and cash equivalents are presented net of bank overdrafts and pledged deposits, if any.
annual report 2009

55

NOTES TO THE FINANCIAL STATEMENTS


2. Significant accounting policies (contd) (k) Impairment of assets

(contd)

The carrying amounts of assets, except for financial assets, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the assets recoverable amount is estimated. For goodwill, recoverable amount is estimated usually at each reporting date. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount unless the asset is carried at a revalued amount, in which case the impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. Impairment losses are recognised in the income statements. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have determined, net of depreciation or amortisation, if no impairment loss has been recognised. Reversal of impairment losses are credited to the income statements in the year in which the reversals are recognised. (l) Loans and borrowings Loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statements over the period of the loans and borrowings using the effective interest method. (m) Hire purchase liabilities Property, plant and equipment acquired under hire purchase arrangements are capitalised at their purchase cost and depreciated on the same basis as owned assets. The corresponding obligations relating to the remaining capital payments are treated as a liability. The interest element of the hire purchase agreements is amortised over the period of the agreements on the sum of digits method.

56

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


2. Significant accounting policies (contd) (n) Payables

(contd)

Payables, including amounts due to subsidiaries and holding company, are measured initially and subsequently at cost. Payables are recognised when there is a contractual obligation to deliver cash or another financial asset to another entity. (o) Rewards redemption programme The Group operates its own rewards redemption programme named D Rewards which awards members based on accumulated points. The Group accrues for the liability under the programme and recognises in the income statement the amount equal to the points earned multiplied by the applicable rates. Upon redemption by members or expiration of the points award, the accrual is reduced and revenue is recognised accordingly. (p) Revenue recognition (i) Goods sold Revenue from sale of goods are measured at the fair value of the consideration receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. (ii) Interest income Interest income is recognised as it accrues, using the effective interest method. (iii) Management fees Management fees are recognised when services are rendered. (iv) Rental income Rental income from investment property is recognised on a straight-line basis over the term of the lease. The aggregate cost of incentives provided to lessees is recognised as a reduction of rental income, over the lease term on a straight-line basis. (v) Dividend income Dividend income is recognised when the right to receive payment is established.
annual report 2009

57

NOTES TO THE FINANCIAL STATEMENTS


2. Significant accounting policies (contd) (q) Employee benefits Short term employee benefits

(contd)

Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. The Groups contribution to the statutory pension funds are charged to the income statements in the year to which they relate. Once the contributions have been paid, the Group has no further payment obligations. (r) Lease payments Payments made under operating leases are recognised in the income statements on a straight line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. (s) Borrowing costs All borrowing costs are recognised in the income statements using the effective interest method, in the period in which they are incurred. (t) Tax expense Tax expense comprises current and deferred tax. Tax expense is recognised in the income statements except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

58

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


2. Significant accounting policies (contd) (t) Tax expense (contd) Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit (tax loss). Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax liability is recognised for all taxable temporary differences.

(contd)

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (u) Earnings per share The Group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. (v) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

annual report 2009

59

NOTES TO THE FINANCIAL STATEMENTS


3. Property, plant and equipment Group Cost Freehold land RM 8,485,044 8,485,044 8,485,044 Buildings RM 4,549,121 4,549,121 642,329 5,957,672 11,149,122

(contd)

Plant, equipment and fittings RM 9,445,776 899,841 (96,899) (941,203) 15,157 9,322,672 767,884 (63,355) (445,156) 9,115 9,591,160

Renovations RM 2,630,073 507,930 (350,736) 17,261 2,804,528 628,572 (219,659) 3,106 3,216,547

Motor vehicles RM 3,317,161 546,382 (51,800) 1,716 3,813,459 612,252 (632,256) 597 3,794,052

Capitalworkin-progress RM 5,957,672 5,957,672 (5,957,672) -

Total RM 28,427,175 7,911,825 (96,899) (1,343,739) 34,134 34,932,496 2,651,037 (695,611) (664,815) 12,818 36,235,925

At 1 January 2008 Additions Disposals Written off Exchange differences At 31 December 2008/ 1 January 2009 Additions Disposals Reclassification Written off Exchange differences At 31 December 2009

60

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


3. Property, plant and equipment (contd) Group Freehold land Accumulated depreciation RM At 1 January 2008 Depreciation for the year Disposals Written off Exchange differences At 31 December 2008/ 1 January 2009 Depreciation for the year Disposals Written off Exchange differences At 31 December 2009 Carrying amounts At 1 January 2008 At 31 December 2008/ 1 January 2009 At 31 December 2009 8,485,044 8,485,044 8,485,044 3,918,857 3,819,461 10,334,707 4,885,175 4,123,921 3,335,386 1,830,738 1,778,680 1,304,756 1,508,859 1,481,820 1,439,347 5,957,672 20,628,673 25,646,598 24,899,240 Buildings RM 630,264 99,396 729,660 84,755 814,415 Plant, equipment and fittings RM 4,560,601 1,066,737 (44,989) (392,613) 9,015 5,198,751 1,361,461 (18,216) (289,849) 3,627 6,255,774 Renovations RM 799,335 360,225 (140,967) 7,255 1,025,848 988,489 (105,324) 2778 1,911,791 Motor vehicles RM 1,808,302 619,884 (96,893) 346 2,331,639 655,081 (632,255) 240 2,354,705 Capitalworkin-progress RM -

(contd)

Total RM 7,798,502 2,146,242 (44,989) (630,473) 16,616 9,285,898 3,089,786 (650,471) (395,173) 6,645 11,336,685

annual report 2009

61

NOTES TO THE FINANCIAL STATEMENTS


3. Property, plant and equipment (contd) Company Cost At 1 January 2008/31 December 2008/ 1 January 2009/31 December 2009 Accumulated depreciation At 1 January 2008 Depreciation for the year At 31 December 2008/1 January 2009 Depreciation for the year At 31 December 2009 Carrying amounts At 1 January 2008 At 31 December 2008/1 January 2009 At 31 December 2009 i)

(contd)

Renovations RM

Plant, equipment and fittings RM

Total RM

40,305 24,182 4,030 28,212 4,030 32,242 16,123 12,093 8,063

112,833 66,901 11,284 78,185 11,284 89,469 45,932 34,648 23,364

153,138 91,083 15,314 106,397 15,314 121,711 62,055 46,741 31,427

The Group acquired a building which was under construction during the financial year ended 2008. The construction of the building was completed during the financial year ended 31 December 2009. The costs incurred up to 31 December 2009 amounted to RM6,600,000 (2008 - RM5,957,671). The building is pledged as security for borrowing facilities extended by financial institutions to a subsidiary. The issuance of the strata title for the building is still pending as at 31 December 2009.

ii) The land and buildings of the Group with a carrying amount of RM18,819,751 (2008 - RM18,262,177) are pledged as security for borrowing facilities extended by financial institutions to the subsidiaries. iii) During the financial year, the Group acquired property, plant and equipment at aggregate cost of RM 2,651,037 (2008 - RM7,911,825) of which RM 300,000 (2008 - RM300,000) were acquired by means of hire purchase arrangements. Motor vehicles of the Group with net book value of RM656,718 (2008 - RM926,336) are held under hire purchase arrangements as at year end.

62

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


3. Property, plant and equipment (contd) Change in estimates

(contd)

During the year ended 31 December 2009, the Group conducted a review over the useful life of its renovations of trading subsidiaries, which resulted in changes in the expected usage of the non-current asset. Renovations, which management previously intended to use for more than ten years, are now expected to remain in use for a period of five years from the date of purchase. The effect of the change on depreciation expense in current and future periods is as follows: 2009 RM000 Increase/ (Decrease) in depreciation expense 4. Prepaid lease payments Leasehold land with unexpired period more than 50 years Group 2009 RM 791 2010 RM000 52 2011 RM000 39 2012 RM000 (30) Later RM000 (852)

Cost At 1 January 2008/31 December 2008/1 January 2009/31 December 2009 1,791,090

Accumulated amortisation At 1 January 2008 Amortisation for the year At 31 December 2008/1 January 2009 Amortisation for the year At 31 December 2009 43,686 14,561 58,247 14,561 72,808

Carrying amounts At 1 January 2008 At 31 December 2008/1 January 2009 At 31 December 2009 1,747,404 1,732,843 1,718,282
annual report 2009

63

NOTES TO THE FINANCIAL STATEMENTS


4. Prepaid lease payments (contd)

(contd)

The leasehold land of a subsidiary with a carrying amount of RM1,718,282 (2008 - RM1,732,843) is pledged as security for borrowing facilities extended by financial institutions to the subsidiary. 5. Investment properties Group Cost At 1 January 2008/31 December 2008/ 1 January 2009/ 31 December 2009 Accumulated depreciation and accumulated impairment losses At 1 January 2008 Depreciation for the year Impairment loss At 31 December 2008/1 January 2009 Accumulated depreciation Accumulated impairment loss 136,706 136,706 136,706 136,706 136,706 Carrying amounts At 1 January 2008 At 31 December 2008/1 January 2009 At 31 December 2009 64
DeGem Berhad

Freehold land RM Buildings RM Total RM

136,706

2,069,730

2,206,436

548,300 41,395 10,937 589,695 10,937 600,632 38,661 628,356 10,937 639,293 1,521,430 1,469,098 1,430,437

548,300 41,395 147,643 589,695 147,643 737,338 38,661 628,356 147,643 775,999 1,658,136 1,469,098 1,430,437

Depreciation for the year At 31 December 2009 Accumulated depreciation Accumulated impairment loss

136,706 -

NOTES TO THE FINANCIAL STATEMENTS


5. Investment properties (contd) Market value The market value of the investment properties presented on an aggregated basis, is as follows: Market value of investment properties

(contd)

Group 2009 RM 1,790,000

2008 RM

1,469,098

The market value of the investment properties of the Group was derived at by reference to market indication of transaction prices for similar properties within the same/adjacent location. The Directors estimated the fair values of the Groups investment properties without involvement of independent valuers. Impairment loss Impairment loss was recognised for an investment property which has ceased to generate rental income in 2008, with costs of RM273,414. 6. Investments in subsidiaries Unquoted shares, at cost Company 2009 RM 54,399,998 2008 RM 54,399,998

annual report 2009

65

NOTES TO THE FINANCIAL STATEMENTS


6. Investments in subsidiaries (contd) Details of the subsidiaries are as follows: Name of company
P.Y.T. Jewel & Time Sdn. Bhd. Diamond & Platinum Sdn. Bhd. Tong Yek Jewellers Sdn. Bhd. DeGem Masterpiece Sdn. Bhd. DeGem Capital Sdn Bhd Inticraft Sdn. Bhd. Diamond Mart Sdn. Bhd.** P.Y.T. Jewellers (Ampang) Sdn. Bhd. DeGem Diamond Collection Sdn. Bhd. Telenaga Sdn. Bhd. ** Titanpuri Sdn. Bhd. D Rewards Services Sdn. Bhd.

(contd)

Principal activities
Investment holding and trading in gold and jewellery Trading in diamonds and jewellery Investment holding and provision of management services Investment holding and trading in gold and jewellery Investment holding and trading in gold medals and badges Manufacturing and trading in gold and jewellery Property investment Trading in gold and jewellery Trading in diamonds and jewellery Property investment Trading in gold medals and badges Trading in diamonds and jewellery and the operation of a rewards redemption programme Trading in diamonds and jewellery Trading and manufacture of gold and jewellery

Country of incorporation
Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia

Effective ownership interest 2009 2008 % %


100 100 100 100 100 100 100 90 100 100 80 100 100 100 100 100 100 100 100 90 100 100 80 100

Diamond & Platinum (B) Sdn. Bhd. ## Solireno Sdn. Bhd. ##

Brunei Malaysia

100 70

100 70

66

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


6. Investments in subsidiaries (contd)
Name of company Jewelmart International Sdn. Bhd. Grandmax Corporation Limited (a) ## Fareway International Limited ## DeGem Masterpiece Pte Ltd ## Meca Jewellery Limited ## Diamond & Platinum Pte Ltd ## V-Buyjewels Pte Ltd * # ## Jewel2cash Pte Ltd * # ## Principal activities Investment holding Trading in gold and jewellery Has not commenced business operations Trading in gold and jewellery Trading in gold and jewellery Dormant Dormant Trading in gold and and jewellery Country of incorporation Malaysia Hong Kong Hong Kong Singapore Hong Kong Singapore Singapore Singapore Effective ownership interest 2009 2008 % % 100 80 100 60 60 100 100 100 100 91.43 100 60 60 100 -

(contd)

(a) During the year, the equity interest of Jewelmart International Sdn. Bhd., a wholly owned subsidiary of the Company, in Grandmax Corporation Limited, was diluted pursuant to the increase in Grandmax Corporation Limiteds issued and paid-up share capital from HK$7,000,000 to HK$8,000,000 by way of an additional allotment of 1,000,000 ordinary shares of HK$1.00 each at par to the minority shareholders. * The investments in Jewel2cash Pte. Ltd. and V-Buyjewels Pte. Ltd. have been consolidated based on the un-audited management financial statements of the subsidiaries for the period ended from 25 August 2009 and 9 January 2009 to 31 December 2009 respectively. The auditors report on the financial statements of the subsidiaries contained an emphasis on the reliance of these subsidiaries on the continuing financial support from the Company in order to continue operating as a going concern. Subsidiaries incorporated during the year.

**

## Subsidiaries not audited by KPMG

annual report 2009

67

NOTES TO THE FINANCIAL STATEMENTS


7. Goodwill on consolidation

(contd)

Group RM 7,887,756

Cost/ Carrying amount At 1 January 2008/31 December 2008/1 January 2009/31 December 2009 Impairment testing for goodwill

Goodwill has been allocated to the Groups cash-generating units, all operating in Malaysia, according to business segments as follows: Group 2009 RM 7,884,814 2,942 7,887,756

2008 RM

Trading Manufacturing

7,884,814 2,942 7,887,756

The carrying amount of the goodwill was assessed for impairment during the year. The recoverable amount of the goodwill is determined based on the value in use of the subsidiaries. Based on the assessment of the value in use, the recoverable amount is higher than the carrying amount of the investments in the subsidiaries, and accordingly, an allowance for impairment loss is not recognised. Key assumptions used in value-in-use calculations The recoverable amount was determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management covering a five-year period. The key assumptions used for each of the cash-generating units value-in-use calculations are as follows: (i) Gross margin The projected gross margin reflects the average historical gross margin, adjusted for projected market and economic conditions and internal resource efficiency. (ii) Growth rate A positive continuous growth rate, which reflects the average historical growth rate, is projected for the period from 2010 to 2014. (iii) Discount rate The discount rate used is 9% (2008 - 9%) which approximates the cash-generating units average cost of funds. 68
DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


7. Goodwill on consolidation (contd) Sensitivity to changes in assumptions Management recognises that the changes in the demand patterns and taste of customers for the subsidiaries merchandise as well as the possibility of new entrants could have a significant impact on growth rate assumptions. However, high capital costs could deter potential entrants form capturing a certain market share in the industry. Unless there is a sudden change in the demand patterns, the Group should be able to sustain its growth rate. 8. Deferred tax assets and liabilities Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Assets Group Property, plant and equipment Unrealised profits on inventories Allowance for slow-moving inventories Unrealised foreign exchange gain Others Tax (assets)/liabilities Set-off Net tax (assets)/liabilities Company Property, plant and equipment 421 421 421 421 2009 RM (5,179) (1,014,272) (1,192,626) (228,258) (2,440,335) 366,771 (2,073,564) 2008 RM (5,113) (961,124) (1,263,477) (141,376) (210,168) (2,581,258) 321,533 (2,259,725) Liabilities 2009 2008 RM RM 396,983 58,538 (72,716) 382,805 (366,771) 16,034 391,104 24,353 (66,353) 349,104 (321,533) 27,571 Net 2009 RM 391,804 (1,014,272) (1,192,626) 58,538 (300,974) (2,057,530) (2,057,530) 2008 RM 385,991 (961,124) (1,263,477) (117,023) (276,521) (2,232,154) (2,232,154)

(contd)

Deferred tax liabilities and assets are offset above where there is a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred taxes relate to the same taxation authority.

annual report 2009

69

NOTES TO THE FINANCIAL STATEMENTS


8. Deferred tax assets and liabilities (contd) Unrecognised deferred tax assets

(contd)

Deferred tax assets have not been recognised in respect of the following items: Group Unabsorbed capital allowances Unutilised tax losses 2009 RM 119,000 346,000 465,000 2008 RM 86,000 240,000 326,000

Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom. Movement in temporary differences during the year Recognised in income statement (Note 22) RM (63,039) (961,124) (143,938) (284,376) (62,497) (1,514,974) At 31.12.2008 RM 385,991 (961,124) (1,263,477) (117,023) (276,521) (2,232,154) Recognised in income statement (Note 22) RM 5,813 (53,148) 70,851 175,561 (24,453) 174,624

Group Property, plant and equipment Unrealised profits on inventories Allowance for slow-moving inventories Unrealised foreign exchange gain Others

At 1.1.2008 RM 449,030 (1,119,539) 167,353 (214,024) (717,180)

At 31.12.2009 RM 391,804 (1,014,272) (1,192,626) 58,538 (300,974) (2,057,530)

Company Property, plant and equipment 421 421 421

70

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


9. Inventories At cost: Raw materials Work-in-progress Finished goods At net realisable value Finished goods Group 2009 RM 9,632,612 3,461,053 120,853,221 133,946,886 4,793,121 138,740,007 2008 RM 15,938,708 2,892,880 114,993,256 133,824,844 4,796,299 138,621,143

(contd)

The Murabahah Underwritten Notes Issuance Facility (MUNIF) notes issued by the Company in financial year 2007 was secured by the assignment of the rights, title and interest to the insurance policy of the inventories of certain subsidiaries in 2008. 10. Receivables, deposits and prepayments
Note 2009 RM Group 2008 RM As restated 2009 RM Company 2008 RM

Trade Trade receivables Non-trade Amounts due from subsidiaries Other receivables Deposits Prepayments 10.1

7,810,878 373,240 2,426,351 956,725 3,756,316 11,567,194

7,968,074 468,186 2,365,455 776,417 3,610,058 11,578,132

52,989,744 1,000 16,000 53,006,744 53,006,744

58,845,191 60,327 17,000 58,922,518 58,922,518

10.1

Amounts due from subsidiaries The amounts due from subsidiaries of the Company bear interest at 6% to 7% (2008 - 6% to 7%) per annum, unsecured and have no fixed terms of repayment.
annual report 2009

71

NOTES TO THE FINANCIAL STATEMENTS


11. Cash and cash equivalents Cash and bank balances Deposits placed with licensed banks

(contd)

Group 2009 RM 15,343,745 10,159,115 25,502,860 2008 RM 10,801,163 10,113,632 20,914,795 2009 RM 631,506 2,303,931 2,935,437

Company 2008 RM 745,327 745,327

The fixed deposits placed with licensed banks earn interest ranging from 1.00% to 2.90% (2008 - 2.90% to 3.15%) per annum with maturity period of less than one year. 12. Share capital Ordinary shares of RM0.50 each: Authorised Issued and fully paid Amount 2009 RM Number of shares 2009 Amount 2008 RM Number of shares 2008

100,000,000 67,000,000

200,000,000 134,000,000

100,000,000 67,000,000

200,000,000 134,000,000

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

72

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


13. Treasury shares

(contd)

This amount represents the acquisition cost for the repurchase of the Companys ordinary shares, net of the proceeds received on their subsequent sale or issuance of the shares repurchased. The Company by a resolution passed in an Extraordinary General Meeting held on 17 June 2009, obtained an approval from the shareholders of the Company to repurchase its own ordinary shares. The Directors of the Company are committed to enhancing the value of the Company for its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders. During the financial year, the Company repurchased 450,700 ordinary shares of RM0.50 each (2008 - Nil) of its issued shares from the open market at an average price of RM0.89 (2008 - N/A) per ordinary share. The total consideration paid for the repurchase was RM402,862 (2008 - N/A). The repurchase transactions were fully financed by internally generated funds. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965. Of the total 134,000,000 issued and fully paid-up ordinary shares of RM0.50 each as at 31 December 2009, 450,700 (2008 - N/A) are held as treasury shares by the Company. The treasury shares are held at a carrying amount of RM402,862. None of the treasury shares held are resold or cancelled during the year ended 31 December 2009. 14. Reserves The descriptions of reserves are as follows: Share premium The share premium of the Group and of the Company represents premium arising from the issuance of ordinary shares of the Company at issue price above par value. Foreign currency translation reserve The foreign currency translation is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Groups presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Groups net investment in foreign operation, where the monetary items is denominated in either the functional currency of the reporting entity or the foreign operation.

annual report 2009

73

NOTES TO THE FINANCIAL STATEMENTS


15. Retained earnings

(contd)

Subject to agreement by the Inland Revenue Board, the Company has sufficient Section 108 tax credit to frank all of its retained earnings at 31 December 2009, if paid out as dividends. The Finance Act 2007 introduced a single tier company income tax system with effect from year of assessment 2008. As such, the Section 108 tax credit as at 31 December 2007 will be available to the Company until such time the credit is fully utilised or upon expiry of the six-year transitional period on 31 December 2013, whichever is earlier. 16. Loans and borrowings This note provides information about the contractual terms of the Groups and the Companys interest-bearing loans and borrowings. For more information about the Groups and Companys exposure to interest rate risk, see Note 27. Current Term loans - secured Term loan - unsecured Bank overdraft - unsecured Revolving credit - unsecured Hire purchase creditors Group 2009 RM 2008 RM 2009 RM Company 2008 RM

3,074,049 2,445,200 1,520,167 5,000,000 221,207 12,260,623

1,860,479 5,000,000 185,792 7,046,27 23,549,737 443,532 23,993,269 31,039,540

2,604,636 5,000,000 17,604,636 14,850,640 14,850,640 22,455,276

1,678,538 5,000,000 6,678,538 17,565,329 17,565,329 24,243,867

Non-current Term loans - secured Hire purchase creditors

21,095,850 487,346 21,583,196 33,843,819

74

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


16. Loans and borrowings (contd) Terms and debts repayment schedule Group 2009 Term loans - secured Term loan - unsecured Bank overdraft - unsecured Revolving credit - unsecured Year of maturity Carrying amount RM Under 1 year RM 1 - 2 years RM 2 - 5 years RM Over 5 years RM

(contd)

2018 - 2028 2009 2009 2009

24,169,899 2,445,200 1,520,167 5,000,000 33,135,266

3,073,953 2,445,200 1,520,167 5,000,000 12,039,320 1,860,479 5,000,000 6,860,479

3,076,348 3,076,348 1,952,991 1,952,991

8,953,148 8,953,148 6,540,737 6,540,737

9,066,450 9,066,450 15,056,009 15,056,009

2008 Term loans - secured Revolving credit - unsecured

2018 - 2028 2009

25,410,216 5,000,000 30,410,216

Company 2009 Term loans - secured Revolving credit - unsecured

2018 2009

17,455,276 5,000,000 22,455,276

2,604,636 5,000,000 7,604,636 1,678,538 5,000,000 6,678,538

2,604,636 2,604,636 1,677,977 1,677,977

7,813,908 7,813,908 5,625,213 5,625,213

4,432,096 4,432,096 10,262,139 10,262,139

2008 Term loans - secured Revolving credit - unsecured

2018 2009

19,243,867 5,000,000 24,243,867

annual report 2009

75

NOTES TO THE FINANCIAL STATEMENTS


16. Loans and borrowings (contd) Hire purchase liabilities are payable as follows: Group Less than one year Between one and five years Gross 2009 247,153 555,525 802,678 Term loans - secured

(contd)

Interest 2009 25,946 68,179 94,125

Principal 2009 221,207 487,346 708,553

Gross 2008 211,225 488,617 699,842

Interest 2008 25,433 45,085 70,518

Principal 2008 185,792 443,532 629,324

The first secured term loan of a subsidiary with an initial principal drawdown of RM4.95 million is subject to interest rate of 1.65% per annum below the lending banks base lending rate and is repayable monthly over a period of 240 months commencing 16 January 2009. The first term loan is secured by the following: (i) (ii) First party first fixed charge over a property of a subsidiary. Corporate guarantee by the Company.

The second secured term loan of the Company amounting to RM20.0 million is subject to interest of 1.25% per annum below the lending banks base lending rate and is repayable monthly over a period of 119 months commencing 23 May 2009. The second term loan is secured by the following : (i) (ii) Facilities agreement RM20.0 million together with interest, commission and other bank charges thereon. Third party fixed charge over properties of two subsidiaries.

The third secured term loan of a subsidiary amounting to RM2.1 million is repayable by 180 variable monthly instalments. The details of the interest rates are as follows: (i) (ii) at 3.38% fixed per annum on monthly rest basis for the first year. at 1% below the base lending rate (BLR) per annum on monthly rest basis for the second year.

(iii) at BLR per annum on monthly rest basis for the third year. (iv) at 0.5% above BLR per annum on monthly rest basis for the fourth year and thereafter. 76
DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


16. Loans and borrowings (contd) The third term loan is secured by the following: (i) (ii) Facility agreement for RM2.1 million together with interest, commission and other bank charges thereon. Loan Agreement and deed of assignment over a property of a subsidiary.

(contd)

(iii) First party first fixed charged over a property of a subsidiary. (iv) Power of attorney to enable the financier, inter alia, to accept and execute the transfer and charge upon issuance of the strata title. (v) Corporate guarantee by the Company Term loan unsecured The unsecured term loan of a subsidiary amounting to RM2,445,200 (2008: Nil) is subject to interest of 5% per annum (2008: Nil). Bank overdraft - unsecured Bank overdraft of a subsidiary is subject to interest rate of 1.50% per annum (2008: Nil) above the lenders base lending rate. Revolving credit - unsecured The unsecured revolving credit of the Company is subject to interest rate of 4.47% (2008 - 5.42%) per annum. Hire purchase liabilities Hire purchase liabilities are subject to flat interest rates varying between 2.29% to 3.78% (2008 - 1.98% to 4.00%) per annum.

annual report 2009

77

NOTES TO THE FINANCIAL STATEMENTS


17. Payables and accruals

(contd)

Group Note 2009 RM 2008 RM 2009 RM

Company 2008 RM

Trade Trade payables Non-trade Amount due to holding company Amounts due to subsidiaries Deposits received Accruals Other payables 17.1 17.2

17,353,208 4,602,337 2,309,912 5,991,966 12,904,215 30,257,423

27,491,281 222,451 10,541,133 2,148,559 3,940,424 16,852,567 44,343,848

339,820 128,206 45,491 513,517 513,517

339,820 139,128 44,858 523,806 523,806

17.3

17.1 Amount due to holding company The amount due to holding company is unsecured, bears interest at 6% to 7% (2008 - 6% to 7%) per annum and has no fixed terms of repayment. 17.2 Amounts due to subsidiaries The amounts due to subsidiaries of the Company are interest free, unsecured and have no fixed terms of repayment. 17.3 Other payables Included in other payables of the Group is an amount of RM431,497 (2008 - RM459,025) owing to Directors. These amounts are unsecured, interest free and have no fixed terms of repayments.

78

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


18. Revenue Group 2009 RM 189,385,467 189,385,467 2008 RM 209,213,688 209,213,688 2009 RM 1,707,800 2,533,671 4,241,471 Company 2008 RM 3,026,764 3,026,764

(contd)

Sale of goods Dividend income Interest income

19. Finance costs Group Note 2009 RM 2008 RM 2009 RM Company 2008 RM

Interest expense: - hire purchase liabilities - term loans - loan from holding company - revolving credit - Munif Notes

19.1

25,124 1,073,417 223,270 1,321,811

28,048 830,826 10,412 197,310 635,414 1,702,010

813,037 223,270 1,036,307

617,470 197,310 635,414 1,450,194

19.1 The Murabahah Underwritten Notes Issuance Facility (MUNIF) notes with face value of RM35 million issued by the Company with a tenure of 3-6 months matured in June 2008. The MUNIF notes were redeemed by the Company on 2008 and the cancellation of the facility was completed on 11 February 2009.

annual report 2009

79

NOTES TO THE FINANCIAL STATEMENTS


20. Profit/(Loss) before tax

(contd)

Group 2009 RM 2008 RM 2009 RM

Company 2008 RM

Profit/ (Loss) before tax is arrived at after charging: Amortisation of prepaid lease payments Auditors remuneration - audit services by the holding company auditors - other services by holding company auditors - audit services by other auditors Depreciation of investment properties Depreciation of property, plant and equipment Impairment loss on investment properties Loss on dilution of interest in a subsidiary Rental of premises Sales commission Allowance for slow moving inventories Personnel expenses (including key management personnel) - Contribution to Employees Provident Fund - Wages, salaries and others Property, plant and equipment written off Unrealised foreign exchange loss After crediting: Rental income Rental receivable from operating leases other than those relating to investment properties Reversal of allowance for slow moving inventories Interest income Gain on disposal of property, plant and equipment Realised foreign exchange gain Unrealised foreign exchange gain

14,561 126,000 5,000 45,070 38,661 3,089,786 12,621 7,441,196 4,889,438 171,999 1,854,871 19,864,362 269,642 137,400 609,000 80,243 114,553 203,407 2,186,626 674,582

14,561 126,000 5,000 40,500 41,395 2,146,242 147,643 9,508,751 3,045,590 1,008,118 2,037,019 19,306,087 713,266 174,517 132,000 601,750 30,845 86,585 2,090 1,063,888 -

30,000 5,000 15,314 60,000 85,536 1,028,800 -

30,000 5,000 15,314 60,000 99,792 1,035,544 -

80

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


21. Key management personnel compensation The key management personnel compensations are as follows: Executive Directors - Fees - Remuneration Non-executive directors remunerations - Fees Group 2009 RM 2008 RM 2009 RM Company 2008 RM

(contd)

282,000 2,926,830 3,208,830 154,000 3,362,830

282,000 2,169,673 2,451,673 154,000 2,605,673

162,000 712,800 874,800 154,000 1,028,800

162,000 712,800 874,800 154,000 1,028,800

Key management personnel comprises directors of Group entities, having authority and responsibility for planning, directing and controlling the activities of the entities either directly or indirectly. 22. Tax expense Group 2009 RM 2008 RM 2009 RM Company 2008 RM

Current tax expense Malaysian - current - prior year

5,909,490 354,927 6,264,417

6,640,919 46,221 6,687,140 732,797 (49,840) 682,957 7,370,097

426,950 191,887 618,837 618,837

38,828 38,828 38,828

Overseas

- current - prior year

354,893 38,009 392,902 6,657,319

annual report 2009

81

NOTES TO THE FINANCIAL STATEMENTS


22. Tax expense (contd)

(contd)

Group 2009 RM 2008 RM 2009 RM

Company 2008 RM

Deferred tax expense Origination and reversal of temporary differences - current - prior year Effect of changes in tax rate

155,559 19,065 174,624 6,831,943

(1,540,767) 10,890 14,903 (1,514,974) 5,855,123

618,837

38,828

Reconciliation of tax expense Group 2009 RM 22,168,377 5,542,094 (70,469) 913,567 34,750 6,419,942 392,936 19,065 6,831,943 2008 RM 20,033,250 5,208,645 (188,465) (154,444) (34,798) 952,993 44,764 19,157 5,847,852 (3,619) 10,890 5,855,123 2009 RM 1,558,868 389,717 30,679 6,554 426,950 191,887 618,837 Company 2008 RM (222,504) (57,851) 95,041 38,828 38,828

Profit/(Loss) before tax Income tax using Malaysian tax rate @ 25% (2008: 26%)* Effect of different tax rate in other jurisdictions Effect of different tax rate for small and medium scale companies** Income not subject to tax Non deductible expenses Effect of deferred tax assets not recognised Others Under/ (Over) provision of income tax in prior year Under provision of deferred tax in prior year

82

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


22. Tax expense (contd) * The corporate tax rates are 26% for year of assessment 2008, 25% for year of assessment 2009 and for the subsequent years of assessment. Consequently, deferred tax assets and liabilities are measured using these tax rates.

(contd)

** With effect from year of assessment 2004, companies with paid-up capital of RM2.5 million and below at the beginning of the basis period for a year of assessment are subject to corporate tax at 20% on chargeable income up to RM500,000. However, with effect from year of assessment 2009, the 20% tax rate will not be applicable for companies which are controlled by another company with paid up capital exceeding RM2.5 million. 23. Earnings per share Basic earnings per share The calculation of basic earnings per ordinary share was based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares in issue during the financial year: 2009 RM 15,370,494 134,000,000 (34,403) 133,965,597 2008 RM 13,996,966 134,000,000 -

Profit for the year attributable to ordinary equity holders of the Company (RM) Weighted average number of ordinary shares in issue Effect of shares repurchased Total weighted average number of ordinary shares in issue

Group Basic earnings per share 2009 Sen 11.47 2008 Sen 10.45

The Company does not have any potential dilutive ordinary shares. Accordingly, the diluted earnings per share is not presented.

annual report 2009

83

NOTES TO THE FINANCIAL STATEMENTS


24. Dividends

(contd)

Dividends recognised in the current year by the Company are:

2009 Final 2008 ordinary 2008 Final 2007 ordinary Proposed final dividend for the year ended 31 December 2009

Sen per share (net of tax)

Total amount RM

Date of payment

1.88

2,512,498

1 September 2009

1.85

2,479,000

16 September 2008

The Directors have recommended a first and final dividend of 4% (2.00 sen) less 25% tax per ordinary share of RM0.50 each totaling RM2,003,240 in respect of the year ended 31 December 2009, which will be paid after the financial year end subject to approval by the shareholders at the forthcoming Annual General Meeting, based on the issued and paid-up share capital (excluding treasury shares) of 133,549,300 ordinary shares of RM0.50 each as at 31 December 2009. The proposed final dividend has not been accounted for in the financial statements of the Group and of the Company as at 31 December 2009. Since the end of the previous financial year, the Company paid a final dividend of 5% (2.50 sen) less 25% tax per ordinary share of RM0.50 each totalling RM2,512,498 in respect of the year ended 31 December 2008 on 1 September 2009, based on the issued and paid-up share capital (excluding treasury shares) of 134,000,000 ordinary shares of RM0.50. Dividends per ordinary share The calculation of dividends per ordinary share is based on the proposed gross final dividend for the financial year ended 31 December 2009 of RM2,670,986 (2008 RM3,350,000) on the issued and paid-up share capital (excluding treasury shares) of 133,549,300 ordinary shares of RM0.50 each (2008 134,000,000 ordinary shares of RM0.50 each ) as at 31 December 2009.

84

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


25. Contingent liability Company Guarantees to financial institutions in respect of banking facilities granted to a subsidiary Continuing financial support 2009 Sen 6,714,528 2008 Sen 6,166,349

(contd)

The Company has undertaken to provide financial support to certain subsidiaries to enable them to meet their financial obligations as and when they fall due. 26. Segmental reporting Segment information is presented in respect of the Groups geographical segments. The primary format, geographical segments is based on the Groups management and internal reporting structure. Inter-segment pricing is determined based on negotiated terms. The Group operates only in one business segment which is the manufacturing and trading in gold and jewellery. The Groups operation in investment holding and property investment are not of sufficient size to be reported separately. Accordingly, information by business segments is not presented. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Geographical segments In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are also based on the geographical location of assets. The following table provides an analysis of the Groups revenue, results and depreciation and amortization expense by geographical segment: Segment profit before tax 2009 2008 RM RM 21,754,457 413,920 22,168,377 17,798,664 2,234,606 20,033,270 Segment depreciation and amortization 2009 2008 RM RM 2,842,201 300,807 3,143,008 1,968,769 233,429 2,202,198

Malaysia Overseas

Segment revenue 2009 2008 RM RM 157,874,528 31,510,939 189,385,467 165,931,306 43,282,382 209,213,688

annual report 2009

85

NOTES TO THE FINANCIAL STATEMENTS


26. Segmental reporting (contd)

(contd)

The following is an analysis of the carrying amount of segment assets, segment liabilities and capital expenditure, analysed by geographical segments. Segment liabilities 2009 2008 RM RM 52,464,554 12,845,320 65,309,874 50,226,748 26,800,861 77,027,609 Segment capital expenditure 2009 2008 RM RM 1,924,244 726,793 2,651,037 7,840,592 71,233 7,911,825

Malaysia Overseas

Segment assets 2009 2008 RM RM 181,381,481 33,170,985 214,552,466 178,348,855 32,487,985 210,836,840

27. Financial instruments Financial risk management objectives and policies The Groups financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Groups business whilst managing its interest rate risks (both fair value and cash flow), foreign exchange risk, liquidity risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. It is and has been throughout the year under review, the Groups policy that no trading in derivative financial instruments shall be undertaken. Credit risk The majority of the Groups debtors are from the retail sector. The Groups retail business does not engage in long term contracts with its customers. Thus, there was no significant concentration of credit risk at balance sheet date other than a trade receivable owing from one major customer of RM4,525,741 (2008: RM3,305,718). The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Liquidity risk The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from financial institutions and balances its portfolio with some short term funding so as to achieve overall cost effectiveness. 86
DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


27. Financial instruments (contd) Interest rate risk The Groups primary interest rate risk relates to interest-bearing debts. The investment in financial assets are mainly short term in nature and have been placed in fixed deposits, marketable securities or occasionally in short term commercial papers. The Group actively reviews its debt portfolio, taking into account the investment holding period and nature of its assets. Borrowings are monitored and varied according to changes in interest rates to ensure that the Groups cost of financing is kept at the lowest possible. The Group does not hedge interest rate risks.

(contd)

The information on carrying amounts, weighted average effective interest rates and remaining maturities of the Groups and the Companys financial instruments that are exposed to interest rate risk are disclosed in their respective notes. Effective interest rates and repricing analysis In respect of interest earning financial assets and interest-bearing financial liabilities, the following table indicates their average effective interest rates at the balance sheet date and the periods in which they mature, or if earlier, repriced. Group 2009 Financial assets Deposits placed with licensed banks Financial liabilities Bank overdraft - unsecured Revolving credit - unsecured Unsecured term loan Secured term loans 2008 Financial assets Deposits placed with licensed banks Financial liabilities Revolving credit - unsecured Secured term loans 3.00 5.42 5.70 10,113,632 5,000,000 25,410,216 10,113,632 5,000,000 25,410,216 87 Average effective interest rate % p.a. Total RM Less than 1 year RM

2.00 1.50 4.70 5.00 4.75

10,159,115 1,520,167 5,000,000 2,445,200 24,169,899

10,159,115 1,520,167 5,000,000 2,445,200 24,169,899

annual report 2009

NOTES TO THE FINANCIAL STATEMENTS


27. Financial instruments (contd) Interest rate risk (contd) Effective interest rates and repricing analysis (contd)

(contd)

Company 2009 Financial assets Deposits placed with licensed banks Financial liabilities Revolving credit - unsecured Secured term loans 2008

Average effective interest rate % p.a.

Total RM

Less than 1 year RM

1.25 4.70 4.75

2,303,931 5,000,000 17,455,276

2,303,931 5,000,000 17,455,276

Financial liabilities Revolving credit - unsecured Secured term loans Foreign exchange risk

5.42 5.50

5,000,000 19,243,867

5,000,000 19,243,867

The Group is exposed to transactional currency risk primarily through purchases that are denominated in a currency other than the functional currency of the operations to which they relate, mainly United States Dollars, Hong Kong Dollars, Singapore Dollars and Euro Dollars. Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are kept to an acceptable level. The Group does not have a fixed policy to hedge its purchases in forward contracts. However, the exposure to foreign currency risk is monitored from time to time by management.

88

DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


27. Financial instruments (contd) Foreign exchange risk (contd) The net unhedged financial assets and financial liabilities of the Group that are not denominated in its functional currencies are as follows: Functional currency 2009 Receivables Cash and bank balances Payables 2008 Receivables Cash and bank balances Payables 444,960 246,801 (5,378,696) 1,294,724 1,347,424 (8,685,497) 4,884,634 324,447 (414,648) 319,557 169,841 (1,110) (997) 6,624,318 2,408,070 (14,480,948) Singapore Dollars RM United States Dollars RM Hong Kong Dollars RM

(contd)

Brunei Dollars RM

Euro Dollars RM

Japanese Yen RM

Total RM

283,394 6,243,126 (706,043)

768,287 670,158 (12,871,087)

4,645,123 31,809 (3,386,622)

401,591 -

4 (530)

5,696,804 7,346,688 (16,964,282)

Precious metals and stones risk The jewellery industry is generally affected by fluctuations in the price and supply of precious metals and stones. The supply and price of diamonds in the principal world market are significantly influenced by a single entity, The Diamond Trading Company, a subsidiary of De Beers Consolidated Mines Limited. To date, there has been no material impact on the availability and pricing of and demand for diamonds.

annual report 2009

89

NOTES TO THE FINANCIAL STATEMENTS


27. Financial instruments (contd) Fair values Recognised financial instruments

(contd)

The aggregate fair values of certain financial assets and financial liabilities carried on the balance sheet as at 31 December are represented in the following table. Group Financial assets Deposits placed with licensed banks Financial liabilities Term loans - secured Term loan unsecured Revolving credit - unsecured Company Financial assets Deposits placed with licensed banks Financial liabilities Term loans - secured Revolving credit - unsecured 2009 Carrying amount RM 2009 Fair value RM 2008 Carrying amount RM 2008 Fair value RM

10,159,115 24,169,899 2,445,200 5,000,000 2009 Carrying amount RM

10,159,115 24,169,899 2,445,200 5,000,000 2009 Fair value RM

10,113,632 25,410,216 5,000,000 2008 Carrying amount RM

10,113,632 25,410,216 5,000,000 2008 Fair value RM

2,303,931 17,455,276 5,000,000

2,303,931 17,455,276 5,000,0000

19,243,867 5,000,000

19,243,867 5,000,000

The carrying amount of cash and cash equivalents, receivables, deposits and prepayments, other payables and accruals and short term borrowings, approximate fair value due to the relatively short-term nature of these financial instruments. It is not possible to establish the fair value of the amounts due from subsidiaries as the amounts are interest free, unsecured and have no fixed terms of repayment. In respect of the long-term borrowings with variable interest rates, the carrying amounts approximate fair values as they are repriced to market interest rates for liabilities with similar risk profiles. 90
DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


27. Financial instruments (contd) Unrecognised financial instruments Forward exchange contracts The outstanding forward foreign exchange contracts not recognized in the balance sheets as at 31 December with maturity dates within 1 year are as follow: 2009 2009 2008 2008 Nominal Value Fair Value Nominal Value Fair Value RM000 RM000 RM000 RM000 Forward foreign exchange Purchase contracts USD 1,949 (5) 5,496 214

(contd)

Any difference arising from the movement in the currency of the above forward foreign exchange contracts would be deferred until the related payments. However, if such payments do not occur, the difference at the maturity of these forward foreign exchange contracts would be recognized in the income statement. All gains and losses are dealt with through the income statement upon realization. There is minimal credit and market risk because the contracts are entered into with reputable banks. The valuation of the financial instruments not recognized in the balance sheet reflects their current market rates at the balance sheet date. 28. Operating leases Leases and lessee The future aggregate minimum lease payments under non-cancellable operating lease contracted for as at the balance sheet date but not recognised as liabilities and the total of future aggregate minimum sublease receipts expected to be received under non-cancellable subleases, are as follows: Future minimum rental payable: Less than one year Between one and five years Group 2009 RM 5,103,629 5,516,509 10,620,139 Future minimum sublease receipts 179,500 2008 RM

5,891,376 5,790,137 11,681,513 609,000

The lease payments and sublease receipts recognised as income or expense during the financial year are disclosed in Note 20.
annual report 2009

91

NOTES TO THE FINANCIAL STATEMENTS


28. Operating leases (contd) Leases as lessor

(contd)

The future aggregate minimum lease payments receivable under non-cancellable operating lease contracted for as at the balance sheet date but not recognised as receivables, are as follows: Future minimum rental receivable: Less than 1 year Investment property rental income recognised as income during the financial year are disclosed in Note 20. 29. Significant events 29.1) Jewel2cash Pte. Ltd. (JCPL), a wholly-owned subsidiary of the Company, was incorporated on 9 January 2009 as a private company limited by shares in Singapore with an authorised and initial paid up share capital of SGD2 comprising of 2 ordinary shares of SGD1 each. JCPL is principally engaged in the pawn broking business in Singapore. On 2 February 2009, Grandmax Corporation Limited (GCL), increased its issued and paid-up share capital from HK$7,000,000 to HK$8,000,000 by an additional allotment of 1,000,000 ordinary shares of HK$1.00 each at par to its minority shareholders. The proceeds from the allotment was utilised as working capital in GCL. The allotment diluted Jewelmart Interntational Sdn. Bhd.s (JISB), a wholly owned subsidiary of the Company, equity interest in GCL from 91.43% to 80.0%. On 24 August 2009, a wholly-owned company of the Company, Jewelmart International Sdn. Bhd. (JISB), incorporated a new whollyowned subsidiary, V-Buyjewels Pte Ltd (VBPL) in Singapore. The issued and paid-up share capital of VBPL is SGD2.00 divided into 2 ordinary shares of SGD1.00 each held wholly by JISB. VBPL is currently dormant. 2009 RM 118,800 2008 RM 66,000

29.2)

29.3)

30. Related parties 30.1 Identity of related parties For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel includes all the Directors of the Group. 92
DeGem Berhad

NOTES TO THE FINANCIAL STATEMENTS


30. Related parties (contd) 30.2 Transactions with key management personnel Key management personnel compensation

(contd)

Key management personnel compensation is disclosed in Note 21 to the financial statements. There are no other transactions, other than compensation with key management personnel. 30.3 Other related party transactions The significant related party transactions of the Group and of the Company, other than key management personnel compensation, are as follows: Group and Company Holding company Legion Master Sdn. Bhd. Interest payable A person connected to a director Sales Company Transactions with subsidiaries: Rental payable Dividend income Interest receivable 60,000 (1,707,800) (2,525,224) 60,000 (3,123,814) Transaction amount for the year ended 31 December 2009 2008 RM RM

514,078

10,412 707,965

These transactions have been entered into in the normal course of business and have been established under negotiated terms. The outstanding net amounts due from/(to) holding company and subsidiaries as at 31 December are disclosed in Note 10 and Note 17. There are no allowance for doubtful receivables made and no bad or doubtful receivables recognised for the years ended 31 December 2008 and 2009 in respect of the above related party balances.

annual report 2009

93

NOTES TO THE FINANCIAL STATEMENTS


31. Comparative figures Restatement of balances

(contd)

Certain comparative figures have been amended and reclassified to conform with the current year presentation requirements. A summary of the changes in comparative figures are as follows: Trade receivables Other receivables As restated RM 7,968,074 468,186 As previously stated RM 7,001,479 1,434,781

94

DeGem Berhad

STATEMENT BY DIRECTORS
PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965

In the opinion of the Directors, the financial statements set out on pages 39 to 94 are drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company at 31 December 2009 and of their financial performance and cash flows for the year then ended.

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

Choong Kai Fatt

Choong Khoi Onn

Kuala Lumpur, Date: 19 April 2010

annual report 2009

95

STATEMENT BY DIRECTORS
PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965

I, Choong Khoi Onn, the Director primarily responsible for the financial management of DeGem Berhad, do solemnly and sincerely declare that the financial statements set out on pages 39 to 94 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named in Kuala Lumpur on 19 April 2010.

. Choong Khoi Onn

Before me: 19 April 2010

96

DeGem Berhad

Independent auditors report


Report on the Financial Statements We have audited the financial statements of DeGem Berhad, which comprise the balance sheets 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 the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 39 to 94. 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 Companys 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 Companys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2009 and of their financial performance and cash flows for the year then ended.

annual report 2009

97

Independent auditors report

(contd)

Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. We have considered the accounts and the auditors reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 6 to the financial statements. We are satisfied that the accounts of the subsidiaries that have been consolidated with the Companys 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. The audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

b)

c)

d)

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.

KPMG Firm Number: AF 0758 Chartered Accountants Petaling Jaya, Malaysia Date: 19 April 2010

Foong Mun Kong Approval Number: 2613/12/10(J) Chartered Accountant

98

DeGem Berhad

ANALYSIS OF SHAREHOLDINGS
AS AT 28 APRIL 2010

SHARE CAPITAL Authorised Share Capital Issued and fully paid-up capital Class of Shares No. of Shareholders Voting rights No. of Treasury Shares held : : : : : : RM100,000,000/RM67,000,000/Ordinary shares of RM0.50 each 1,186 1 vote per ordinary share 1,475,000 ordinary shares of RM0.50 each

ANALYSIS BY SIZE OF SHAREHOLDINGS Size of Shareholdings Less than 100 shares 100 - 1,000 shares 1,001 - 10,000 10,001 - 100,000 100,001 to less than 5% of issued shares 5% and above of issued shares No. of Shareholders 9 549 474 117 33 4 1,186 % 0.76 46.29 39.97 9.87 2.78 0.34 100.00 No. of Share Held 320 158,600 2,075,180 3,558,600 31,856,382 94,875,918 132,525,000 % 0.00 0.12 1.57 2.69 24.04 71.59 100.00

annual report 2009

99

ANALYSIS OF SHAREHOLDINGS
AS AT 28 APRIL 2010
(contd)

LIST OF THIRTY LARGEST SHAREHOLDERS No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. Name Legion Master Sdn. Bhd. CIMB Group Nominees (Tempatan) Sdn. Bhd. (Pledged Securities Account for Legion Master Sdn. Bhd.) HSBC Nominees (Asing) Sdn. Bhd. (Exempt an for BSI SA (BSI BK SG-NR) HSBC Nominees (Asing) Sdn. Bhd. (Exempt an for Morgan Stanley & Co. International Plc (Client) Amsec Nominees (Tempatan) Sdn. Bhd. (Pledged Securities Account for Cherie Sumana Weerasena) Amsec Nominees (Tempatan) Sdn. Bhd. (Pledged Securities Account for Teh Yean Teong) Amsec Nominees (Tempatan) Sdn. Bhd. (Pledged Securities Account for Mohamed Azhar bin Mohamed Taib Taib) Dato Hasan bin M. Taib Amsec Nominees (Tempatan) Sdn. Bhd. (Pledged Securities Account for Mohd Efindi bin Abdul Aziz) Amsec Nominees (Tempatan) Sdn. Bhd. Choong Kay Cheong Choong Sin Cheong Green Place Sdn. Bhd. Clearcal Sdn. Bhd. See Leong Chye @ Sze Leong Chye No. of Shares Held 37,800,002 `31,500,000 13,195,900 12,380,016 4,230,000 3,499,300 3,109,400 3,000,000 2,323,400 2,280,200 2,000,000 2,000,000 1,760,250 1,162,900 656,500 % 28.52 23.77 9.96 9.34 3.19 2.64 2.35 2.26 1.75 1.72 1.51 1.51 1.33 0.88 0.50

100

DeGem Berhad

ANALYSIS OF SHAREHOLDINGS
AS AT 28 APRIL 2010
(contd)

LIST OF THIRTY LARGEST SHAREHOLDERS (contd) No. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. Name Choong Khoi Onn Lai Moi Foong See Ewe Beng Peninsular Logistic Sdn. Bhd. Mayban Nominees (Tempatan) Sdn. Bhd. (Pledged Securities Account for See Choo Keong) Kenanga Nominees (Tempatan) Sdn. Bhd. (Pledged Securities Account for Green Place Sdn. Bhd.) Green Place Sdn. Bhd. Yeoh Moi Hoea Yeoh Kean Hua See Choo Keong Onn Kok Puay (Weng Guopei) Atlas Gain Sdn. Bhd. Tan Peng Chuen Chow Moong Keng Yeoh Mooi Geck No. of Shares Held 640,000 636,600 600,000 591,150 462,000 389,682 328,800 274,600 225,000 211,500 148,800 144,400 142,400 140,000 124,000 % 0.48 0.48 0.45 0.45 0.35 0.29 0.25 0.21 0.17 0.16 0.11 0.11 0.11 0.11 0.09

annual report 2009

101

SUBSTANTIAL SHAREHOLDERS
(As shown in the Register of Substantial Shareholders)

Name of Substantial Shareholders Legion Master Sdn. Bhd. Choong Kai Soon Choong Kai Fatt Choong Khoi Onn Choong Sin Cheong Choong Kay Cheong

Direct 69,300,002 760,000 2,000,000 2,000,000

No. of ordinary Shares of RM0.50 Each % Indirect 52.29 0.57 1.51 1.51 69,300,002 69,300,002 69,300,002 69,300,002 69,300,002

% 52.29 52.29 52.29 52.29 52.29

102

DeGem Berhad

STATEMENT OF DIRECTORS SHAREHOLDINGS


No. of ordinary Shares of RM0.50 Each % Indirect 2.26 0.57 1.51 69,300,002 69,300,002 69,300,002 69,300,002 -

Directors Name Dato Hasan bin M. Taib Choong Kai Soon Choong Kai Fatt Choong Khoi Onn Choong Kay Cheong Leou Thiam Lai Chuah Teong Aung Datuk Zainun Aishah binti Ahmad

Direct 3,000,000 760,000 2,000,000 -

% 52.29 52.29 52.29 52.29 -

annual report 2009

103

Properties of The Group


The Landed Properties of DeGem Group are as follows:
Registered Owner Description

Tittle/ Location

Tenure Freehold

Total Area sq.ft 3,113

Age of Build (Years) 9

NBV @ 31.12.2009 1,430,436

P.Y.T Jewel & Time

One Commercial Lot Located at Level 1 of Amcorp Mall

Level 1-30, Amcorp Mall HS(D) 39250 PA, No.4 Seksyen 26 Bandar PJ, Selangor PN 15979, Lot 13849, Pekan Kayu Ara, Daerah Petaling, Selangor Geran 917 & 918, No. Lot 22619 & 22620, Mukim KL, 40 & 42, Jalan Maarof, Bangsar Baru, 59100 KL Geran 915 & 916, No. Lot 22617 & 22618, Mukim KL, 44 & 46, Jalan Maarof, Bangsar Baru, 59100 KL HS(M)23248, PT 23208, Mukim Ampang, Daerah Hulu Langat Shophouse No.100, Lrg Mamanda 2, Tmn Dato Ahmad Razali 68000 Ampang, Selangor Parent Tittle Geran 7486, Lot No.1438, Geran 7491, Lot No. 323, Geran 1362, Lot 322 and C.T.1226, Lot No. 2145 (No.G14 and G22, Wisma Punca Emas, Jalan Yam Tuan, Seremban)

One Six Storeys Shop Office Located 10 Boulevard, Damansara

Leasehold

20,303

6,600,000

Diamond Mart

Two Continuous Three Storeys Mid Terraced Shop Offices

Freehold

2,040 each

16

7,170,415

Telenaga

Two Continuous Three Storeys Mid Terraced Shop Offices

Freehold

2,040 each

16

4,343,134

P.Y.T. Ampang

4 1/2 Storey Shophouse RM 2,558,700.00 Leasehold Land - 70% (Divide by 82 years) Leasehold Buildings -30%

Leasehold

1,650

21

2,409,920

Tong Yek

Two Continuous Commercial Lots Located on the Ground Floor of Wisma Punca Emas

Freehold

394

24

21,953,906

104

DeGem Berhad

Directory of Degem Group Showrooms Degem

www.degemdiamond.com

Kuala Lumpur
Bangsar Baru No. 40-46, Jalan Maarof, Bangsar Baru, 59100 Kuala Lumpur. Tel: 03-2282 3618 Fax: 03-2282 4960 Pavilion Pavilion, 3.02 Level 3, 168 Jalan Bukit Bintang, 55100 Kuala Lumpur Tel: 03-2141 1199 Fax: 03-2142 8180 The Gardens F-202, First Floor, The Gardens, Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur Tel: 03-2283 2618 Fax: 03-2282 9618

Selangor
1 Utama Shopping Complex G303 Ground Floor, High Street, 1, Persiaran Bandar Utama, 47800 Petaling Jaya, Selangor Tel: 03-7725 0977 Fax: 03-7725 8217 Ampang Point No. 100, Mezzanine & 1st Floor, Lorong Mamanda 2, Taman Dato Ahmad Razali, 68000 Ampang Selangor Tel: 03-4256 2227 Fax: 03-4256 2766

Singapore
Ngee Ann City 391B, Orchard Road # 14-09, Ngee Ann City, Tower B Singapore 238874 Tel: 02-6733 3082 Fax: 02-6732 3240

Indonesia (Under License)


Grand Hyatt Jakarta 3rd Floor (Lobby Level) Jalan M.H.Thamrin, Kav 28-30 Jakarta 10230 Indonesia Tel: 6221-3923 235 Fax: 6221-3923 607

annual report 2009

105

Directory of Degem Group Showrooms (CONTD) DIAMOND & PLATINUM


www.diamondnplatinum.com Kuala Lumpur
Mid Valley Megamall Lot No G-068 Ground Floor South Court Mid Valley Megamall, Mid Valley City Kuala Lumpur 58200 Kuala Lumpur Tel: 03-2938 3478 Fax: 03-2938 3480 Sungei Wang Plaza Lot LG107, Lower Ground Floor Sungei Wang Plaza Jalan Bukit Bintang 55100 Kuala Lumpur Tel: 03-2145 3478 Fax: 03-2145 3480 1 Utama Shopping Complex Lot F20B, 1st Floor, 1 Utama Shopping Complex Bandar Utama 47800 Petaling Jaya Selangor Tel: 03-7725 3478 Fax: 03-7726 3480 The Curve Mutiara Damansara Lot G60, Ground Floor, Jalan PJU 7/3, The Curve, Mutiara Damansara, 47800 Petaling Jaya, Selangor Tel: 03-7728 2478 Fax: 03-7728 3480 SACC Mall SACC Mall, GF20, Ground Floor Jalan Perbadanan 14/9, Seksyen 14, Pusat Bandar Shah Alam, 400000 Shah Alam Selangor Tel: 03-5510 3478 Fax: 03-5510 3480 AEON Bukit Tinggi Shopping Centre Lot F31, 1st Floor Aeon Bukit Tinggi Shopping Centre, No.1, Persiaran Batu Nilam, 1/KS6, Bandar Bukit Tinggi 2, 41200 Klang, Selangor Tel: 03-3326 2478 Fax: 03-3326 2480 Gurney Plaza 170-01-45 First Floor, Plaza Gurney, Persiaran Gurney 10250 Pulau Penang Tel: 04-226 3478 Fax: 04-227 3480

Perak
Ipoh Parade Lot G32, Ground Floor Ipoh Parade 105 Jalan Sultan Abdul Jalil, Greentown 30450 Ipoh Tel: 05 242 3478 Fax: 05 242 3480

Johor
AEON Tebrau City F50, 1st Floor, AEON Tebrau City Shopping Centre No.1 Jalan Desa Tebrau, Taman Desa Tebrau 81100 Johor Bahru Tel: 07-355 8478 Fax: 07-355 5478

Brunei
Abdul Razak Complex Lot G-05 & 06, Ground Floor The Mall, Abdul Razak Complex Gadong BE3519 Brunei Tel: 006732 428 478 Fax: 006732 443 480

Selangor
Sunway Pyramid Lot G1-10, Ground Floor Sunway Pyramid No 3, Jalan PJS11/15 Bandar Sunway 46150 Petaling Jaya Selangor Tel: 03-7492 2478 Fax: 03-7492 2480

Penang
Queensbay Mall Lot GF 107&108 Queensbay Mall Penang Persiaran Bayan Indah, 11900 Penang Tel: 04 642 2478 Fax: 04-642 2480

106

DeGem Berhad

PROXY FORM
I/We _____________________________________________________________________________________________________
(FULL NAME IN BLOCK LETTERS)

of ___________________________________________________________________________________________________________________________ (ADDRESS) being a member(s) of DEGEM BERHAD hereby appoint _______________________________________________________________________________________ ____________________________________________________________________________________________________________________________ (FULL NAME) of ___________________________________________________________________________________________________________________________ (ADDRESS) or failing him/her, ____________________________________________________________________________________________________________ (FULL NAME) of ___________________________________________________________________________________________________________________________ (ADDRESS) or failing him/her, the Chairman of the Meeting as *my/our proxy to vote for *me/us and on *my/our behalf at the Thirteenth Annual General Meeting of the Company to be held at Dewan Perdana, Bukit Kiara Equestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000 Kuala Lumpur on Thursday, 17 June 2010, at 10.30 a.m. and at any adjournment thereof.
(* strike out whichever is not desired)

My/Our proxy is to vote as indicated below:


NO. RESOLUTIONS FOR AGAINST

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

To receive the Audited Financial Statements and Reports Declaration of Final Dividend Approval of Directors fees Re-election of Mr. Choong Kai Soon as Director Re-election of Mr. Choong Kay Cheong as Director Re-appointment of Mr. Chuah Teong Aung as Director Re-appointment of Messrs. KPMG as Auditors Ordinary Resolution 1 Authority to issue shares pursuant to Section 132D of the Companies Act, 1965 Ordinary Resolution 2 Proposed Renewal of Authority For Share Buy-Back Special Resolution - Proposed Amendment to the Companys Articles of Association

Please indicate with an X in the spaces provided how you wish your vote to be cast. If no instruction as to voting is given, the Proxy will vote or abstain from voting at his discretion.

Dated this____________________ day of ____________________ 2010 No. of Shares Held: CDS Account No.: Tel. No. (during office hours)

Notes:
1. A member of the Company entitled to attend and vote at this meeting is entitled to appoint up to two proxies to attend and vote instead of him/her. A proxy may but need not be a member of the Company and the provisions of Section 149(a)(b) of the Companies Acts, 1965 shall not apply to the Company. 2. Where a member appoints two (2) proxies, the appointment shall be invalid unless he/she specifies the proportions of his/her shareholdings to be represented by each proxy. 3. In the case of a corporate body, the proxy appointed must be in accordance with the Memorandum and Articles of Association, and the instrument appointing a proxy shall be given under the Companys Common Seal or under the hand of an officer or attorney duly authorised. 4. The Form of Proxy must be deposited at the Companys Registered Office at No. 42, 1st Floor, Jalan Maarof, Bangsar Baru, 59100 Kuala Lumpur not less than forty eight (48) hours before the time set for the meeting or any adjournment thereof.

Signature

Fold this flap for sealing

STAMP

The Company Secretary

DeGem Berhad (415726-T)


No. 42 First Floor, Jalan Maarof, Bangsar Baru, 59100 Kuala Lumpur

Fold here

IDetGierrr llerhad
26 Mav 20

.''..

i0

Tor AII Shareholders ofDeGem Berhad


Dear Sir,A4adam-

RE: IMPLEMENTATION OF ELECTRONIC DIVIDEND PAYMENT (..eDIVIDEND'') Background Electronic drvidend palment or eDivrdend rel'ers to the patment of cash dividends br, a listed issucr to its sharchoiders directlv crediting the sharcholders' cash dividend entitlements utto thelr respectivc bantrl accounts.

bl

In tabling the F edcral Budget 2010- thc Prime Minister amounced that all lisled issucrs arr: requrred to olfer eDividend sen ices to thcir sharcholdcrs. lhe Sccurities Commission hale stated that shareholdq s are given aone year grace period kr provide thcir' bank account inlirmration to Bursa Malaysia Depositort Sdn Bhd ("Bursa Depositon") (as the repositon of such inlormation) and that eDividend nill be implemented in the third quarter of 2010. Thc main oblectives of inplenenting eDi\, idsnd in.e, amongst othcrs- to pronotc grcater elliciencv of the dividend parment sl'stm and to put the Malal'sian market on par rvith practices m other regional markets in relaliol] io the rcceipt ol dir.idqtd proceeds bI shareholders. A1 dtc same time- the move torvards cDividqrd is a lurther slp tollards the national agcnda of migrating to clectronio palmqrts as u'ell as adherenoc t() G-30's recornmendation on best practices of a paper'lcss envirornncnl and zefo-inten entlon process. Benefits ofeDividcnd
The benefits of

e'Dilidcld

to vou as a shareholder include:-

(a) Gl) (o) {d) (e) (1)

ldster access to vour cash dividcnds as vour entitlements rvill be dfecth credited to youi bank account. eliminatcs drc inconr.enjence ofdepositing the dividend checlucs: climinates incidents ofnisplaced. lost or erpired cheques: elimurates ncident ofunauthorised deposit ofdividurd cheques; the conlcnicttoc olltne<rlL'registration 1br entitlement to cash dividcnd lrom all listed issuers: ancl option to consolidate dividends from -\our Cenb al Dcpositorv Svstem ("CDS' ) accounts into one bank account for better account nanagement.

Rcgistration for eDividend


Registralion li)I cDividend u'ill commenoe on 19 April 2010 for a penod ol one _year until 18 April shareholdcls. Il vou lrtgister after the one vear grace pcriod. an ldministrativc charge will be imposed.
20.1

1- at no cost to the

To register lbr eDividend, vou are recluircd to pro\:rde to Ilursa Dqrositon tluough l'our stock broker. your bank actount number and other rnlonnation bv completing the prescribecl lom The aioresaid prescribed lorm can bc obtaine<l liom yoi1- stock brokel's office rvhere your Cl)S account is nlaintained. or dori'nload from Bursa Mala-vsia's rvebsite at w'l bursamalavsia com.

h its $'ebsite- Bursa Malavsiahas also pror,ided an inlolmation kit to thcilitate better undqstanding rvith regard to eDividcnd vou har,e anv furtlrer qucries. kindh' contact oul Share Regislrars. Symphony Shnrc Registrars Sdn B11d at03-2721 2222.
Thantrr vou.

If

Yours laithtulh'. DEGEM BERIIAD

Dato' I lasan bin


Chairman

Taib