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NOTES TO THE FINANCIAL STATEMENTS (cont’d)
31 DECEMBER 2012
37 MATERIAL LITIGATION
Gunung Resources Sdn. Bhd. (“GRSB”), a wholly-owned subsdiary, was served with a Summons and Statement of Claim
on 19 September 2006 by Seal Polymer Industries Berhad (“SPI”) for allegedly failing to refund a sum of deposits of
RM928,000 paid by SPI to GRSB together with interest pursuant to the Sales & Purchase Agreement (“SPA”) dated 17
August 2004 for an intended purchase of one of GRSB’s leasehold properties that has lapsed.
On 25 October 2007, the High Court in Taiping allowed SPI’s application for summary judgement for the refund of 10%
deposit paid by SPI to GRSB together with interest/damages/costs. GRSB’s solicitors had filed an appeal to the Court of
Appeal against the decision and application for stay of execution of the summary judgement on grounds that there
appears to have triable issues.
The Court of Appeal has ordered that a sum of RM928,000 to be deposited into a joint account with GRSB’s Solicitors
until the outcome of the Appeal before the Court of Appeal. GRSB later succeeded in setting aside the summary
judgement granted by the Taiping High Court on 14 October 2007 and secured the release of the sum of RM928,000
in the Solicitors’ joint account to be released to GRSB together with accumulated interest.
The case was fixed for full hearing on 24 - 25 of February 2011 at the Taiping High Court. On 28 April 2011, the Taiping
High Court has dismissed the claims made by SPI and ruled that SPI had failed to fulfil their obligations under the SPA
dated 17 August 2004. During the financial year ended 31 December 2011, GRSB has forfeited the deposit sum of
RM928,000 with costs and has recognised the amount as other income.
A Notice of Appeal has been filed to the Court of Appeal by SPI on 11 May 2011 against the Taiping High Court’s ruling.
On 10 April 2013, The Court of Appeal has dismissed SPI’s appeal on the same grounds of the Taiping High Court’s
ruling. GRSB was justified in forfeiting the deposit sum of RM928,000.
38 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s and the Company’s financial risk management policy seeks to ensure that adequate financial resources
are available for the development of its businesses and has adopted risk management policies that seek to mitigate
these risks in a cost-effective manner. The Group’s activities are exposed to interest rate risk, credit risk and liquidity
risk. The Group has minimal transactions in foreign currency and has no quoted investment; hence it is not exposed to
foreign currency risk and equity price risk.
(a) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s and of the Company’s financial
instruments will fluctuate because of changes in market interest rates.
The Group finances its operations through operating cash flows and borrowings which are principally denominated
in Ringgit Malaysia. The Group is exposed to interest rate risk mainly form their loans and borrowings and fixed
deposits with financial institutions. However, the financial assets are held for short to medium term, and as such,
interest rate fluctuations are not expected to have material impact on the carrying value of the said assets. The
Group’s borrowings comprise of mainly finance leases and hire purchase obligations, which are not subject to
interest rate risk. Short term bridging loan is obtained for only three months, and as such interest rate fluctuations
are not expected to have material impact.
As such there is no formal hedging policy in respect of interest rate exposure. The interest rate risk is monitored
on an on-going basis and the Group endeavours to keep the exposure at an acceptable level.
(b) Credit Risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on
its obligations. The Group’s exposure to credit risk arises primarily from trade and other receivables. The Group
manages its credit risk through the review and monitoring of outstanding amounts on an on-going basis.
Gunung Capital Berhad (330171-P)
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annual report | 2012