the core of excellence - malaysiastock.biz 02 2016 annual report corporate profile merge energy bhd...

ANNUAL REPORT 2016

THE CORE OFEXCELLENCE

Corporate Profile 02Corporate Information 03Corporate Structure 04Financial Highlights 05Chairman’s Statement 06Profile of Directors 08Statement on Corporate Social Responsibility 12Statement on Corporate Governance 14Other Compliance Information 22Audit Committee Report 23Statement on Risk Management and Internal Control 27Financial Statements 29List of Properties 100Shareholders’ Information 105Notice of Annual General Meeting 107Proxy Form

CONTENTS

02 2 0 1 6 A N N U A L R E P O R T

CORPORATE PROFILE

Merge Energy Bhd (“MEB”) is a strategic investment holding company listed on the Main Market of Bursa Malaysia Securities Berhad on 17 November 1998.

The Group was established as a construction group 35 years ago via Mewah Kota Sdn Bhd, which was involved in small and medium sized contracts for building of schools, houses, water treatment plants, pipe laying, security fencing and piling works. From then on, the Group gradually progressed to establish itself as a reliable contractor capable of undertaking bigger and more complex engineering and infrastructure projects nationwide. It has achieved good records in terms of quality and timely completion of works undertaken, all of which attributed to its recognition as a reputable contractor and project manager.

MEB’s core activities and expertise are in the construction, project management, trading and maintenance works in the following areas:• Water treatment plants• Sewage and sludge treatment plants and facilities• Pipe laying and reservoirs construction• Buildings• Refurbishment and maintenance works• Earthworks, roads and drainage

Over the years, MEB expanded its business by acquiring several companies to develop new potential market.

In 2013, MEB acquired Iris Synergy Sdn Bhd, a company providing support to the oil and gas industries. Its core business is to provide solution to all industrial water needs in the said industries including for petrochemical plant and rigs.

Through its other subsidiaries, MEB is also involved in valve supply, installation, maintenance and exercise; property development and property investment; and landscaping and integrated facilities management contract works.

MEB Group is accredited with the following licences, which include:• Construction Industry Development Board Malaysia

(“CIDB”) Grade G7• Bahagian Pembangunan Kontraktor dan Usahawan

(previously known as Pusat Khidmat Kontraktor) Taraf Bumiputra Grade G7

• Kementerian Kewangan Malaysia (“KKM”)• Suruhanjaya Perkhidmatan Air Negara (“SPAN”)• ISO 9001:2008 quality management system certification• Felda Holdings Bhd• Petronas License to supply product/service

Furthermore, MEB on quarterly basis is also being recognised as “Bumiputera-Controlled Public Listed Company” by Economic Planning Unit (“EPU”) of the Prime Minister’s Department.

Leveraging on its expertise and strong track record, MEB’s roadmap for the future lies in expanding its presence in both the public and private sectors.

02 2 0 1 6 A N N U A L R E P O R T

M E R G E E N E R G Y B H D 03

AUDIT COMMITTEE

Chairman Dato’ Sheah Kok Fah

MembersDr Fam Seng ChoyDato’ Kamarulzaman bin Jamil

NOMINATION COMMITTEE

ChairmanDato’ Sheah Kok Fah

MembersDr Fam Seng ChoyDato’ Kamarulzaman bin Jamil

REMUNERATION COMMITTEE

ChairmanDato’ Sheah Kok Fah

MembersDato’ Abdul Jalil bin Abdul Karim Dato’ Kamarulzaman bin Jamil

CORPORATE INFORMATION

BOARD OF DIRECTORS

Dato’ Said Ali bin Said Rastan Independent Non-Executive Chairman

Dato’ Abdul Jalil bin Abdul Karim Executive Director/Chief Executive Officer

Raizita binti Ahmad @ Harun Executive Director

Rusdi bin Mohamad Noor Executive Director

RISK MANAGEMENT COMMITTEE

ChairmanDr Fam Seng Choy

MembersDato’ Abdul Jalil bin Abdul Karim Raizita binti Ahmad @ HarunDato’ Kamarulzaman bin Jamil

EXECUTIVE COMMITTEE

ChairmanDato’ Abdul Jalil bin Abdul Karim MembersRaizita binti Ahmad @ HarunShahrizad bin Akashah

COMPANY SECRETARY

Yew @ Yeoh Siew Yen (MAICSA 7048094)

REGISTERED OFFICE AND BUSINESS ADDRESS

No. 2 Jalan Apollo U5/190Bandar Pinggiran Subang, Seksyen U540150 Shah AlamSelangor Darul EhsanTel : 603-7847 2900 Fax : 603-7845 3900 E-mail : [email protected] : www.merge-energy.com.my

SHARE REGISTRAR

Symphony Share Registrars Sdn Bhd (378993-D)Level 6 Symphony HousePusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling JayaSelangor Darul EhsanTel : 603-7849 0777 Fax : 603-7841 8151

AUDITORS

Baker Tilly Monteiro Heng Chartered Accountants Baker Tilly MH TowerLevel 10, Tower 1, Avenue 5, Bangsar South City59200 Kuala LumpurTel : 603-2297 1000 Fax : 603-2282 9980

BANKERS

Malayan Banking Berhad Maybank Islamic BerhadAmBank (M) Berhad

STOCK EXCHANGE LISTING

Bursa Malaysia Securities Berhad- Construction Sector, Main Market

Dato’ Sheah Kok Fah Senior Independent Non-Executive Director

Dr Fam Seng Choy Independent Non-Executive Director

Dato’ Kamarulzaman bin Jamil Independent Non-Executive Director

mailto:[email protected]

04 2 0 1 6 A N N U A L R E P O R T

CORPORATE STRUCTURE

100%Merge Highway Engineering Sdn Bhd (397911-X)

100%Merge Properties Sdn Bhd (29422-T)

100%Merge Readymix Sdn Bhd (397672-V)

60%Iris Synergy Sdn Bhd (742199-P)

100%Paramount Ventures Sdn Bhd (284451-V)

100%MEB Realty Sdn Bhd (231283-A)

100%MEB Development Sdn Bhd (419445-D)

100%Merge Energy O & G Sdn Bhd (403304-X)

100%Mewah Kota Sdn Bhd (76368-X)

100%Innovasi Hebat Sdn Bhd (546017-D)

100%Semarak Niaga Lanskap Sdn Bhd (416698-W)

100%Yakin Rantau Sdn Bhd (549750-H)


FINANCIAL HIGHLIGHTS

Audited

2012 2013 2014 2015 2016RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 109,543 136,100 122,054 92,344 118,226

Operating Profit/(Loss) 3,558 4,366 12,940 3,483 4,361

Profit/(Loss) before taxation & zakat 3,512 4,295 5,660 3,335 4,130

Accumulated losses (26,272) (22,692) (18,899) (16,727) (15,419)

Net Assets/Shareholders fund 48,441 52,021 55,813 57,986 59,294

Cash & Bank Balances 12,555 10,093 10,188 16,279 11,500

109,

543

136,

100

122

,054

92,

344

118

,226

2012 2013 2014 2015 2016

Revenue(RM’000)

48,4

41

12,5

55

52,0

21

10,0

93

55,8

13

10,18

8

57,9

86

16,2

79

59,2

94

11,5

00

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Net Assets/Shareholders Fund(RM’000)

3,5

12

4,2

95

5,6

60

3,3

35

4,1

30

2012 2013 2014 2015 2016

Profit/(Loss) Before Taxation & Zakat(RM’000)

Cash & Bank Balances(RM’000)

06 2 0 1 6 A N N U A L R E P O R T

CHAIRMAN’S STATEMENT

FINANCIAL PERFORMANCE

For the 14 months financial year ended 31 March 2016, the Group achieved a revenue of RM118.23 million and profit before tax of RM4.13 million against the revenue of RM92.34 million and profit before tax of RM3.34 million in the previous year 12 months period ended 31 January 2015. The increase in revenue stems from the recognition of additional two months of revenue. On a comparative 12 months period ended 31 January 2016, the Group achieved slightly higher revenue of RM94.93 million and higher profit before tax of RM5.03 million as compared to 2015. The increase was mainly due to higher progress billing and full recognition of profit for completed project during the year.

The construction segment remained the main contributor to the Group’s result for the financial year under review accounting for 77.45% of the Group’s revenue while the oil and gas segment contributed to 10.49% and the maintenance, facility management and services segment contributed to 12.06%.

The Group’s earnings per share (“EPS”) for financial year ended 31 March 2016 stood at 1.95 sen in comparison to EPS of 3.24 sen in the 12 months ended 31 January 2015. The net asset of the Group increase to RM59.29 million from the previous year ended 31 January 2015 of RM57.99 million.

DIVIDENDS

The Board of Directors has not recommended any payment of dividend for the financial year ended 31 March 2016.

REVIEW OF OPERATIONS

Construction Division

For the financial year under review, the Construction division achieved revenue of RM91.56 million and profit before tax of RM2.13 million.

The works for the Proposed Construction and Completion of Ganchong Water Treatment, Package 1 at Pekan, Pahang has been progressing smoothly, well managed and on schedule. The client, East Coast Economic Region Development Council (“ECERDC”) is satisfied with our work so far and has recognized Mewah Kota Sdn Bhd (“MKSB”), the main construction arm of the Group as one of their best contractor. With the support of a strong and competent project team at Ganchong, the project is expected to be completed in March 2017.

Other ongoing projects which will be completed soon are the development project for Pagoh Higher Education Hub in Muar, Johor and the Package 1 Jengka Water Treatment Plant in Batu Sawah, Pahang.

For year 2015, the Group managed to secure another project from ECERDC which is the Proposed Construction and Completion of Horizontal Collector Wells and Associated Works for Loji Rawatan Air Kelar (Phase 1) at Pasir Mas Halal Park, Kelantan.

The Group also achieved another milestone when MKSB was awarded a contract by the Ministry of Urban Wellbeing, Housing and Local Government (“the Ministry”) to repair and operate a Leachate Treatment Plant in Jinjang Utara, Kepong

To All Valued Shareholders of Merge Energy Bhd (“MEB or “the Company”),

On behalf of the Board of Directors of MEB, I am pleased to present the 2016 Annual Report and the Audited Financial Statements of MEB and its subsidiaries (“the Group”) for the financial year ended 31 March 2016.


CHAIRMAN’S STATEMENT (cont’d)

using Snowflake technology, which is a Korean technology. We are the first company in Malaysia to introduce such technology to the Ministry. The works have been progressing well and is almost due for completion. This job will serve as a good entry point for MKSB in leachate treatment as there are other similar and potential landfill jobs from the public sector.

The new projects secured will continue to contribute positively to the Group’s earnings for the coming financial year.

Oil and Gas Division

The Group’s Oil and Gas division which is undertaken by Iris Synergy Sdn Bhd (“Iris Synergy”), continued to face challenges with the cutback in capital expenditure, decline in crude oil prices and stiffer competition. Despite this adverse environment, for the financial year under review, Iris Synergy managed to registered revenue of RM12.39 million and profit before tax of RM2.43 million.

For the coming financial year and up to the second quarter of 2017, Iris Synergy will focus on the Maintenance, Repair and Overhaul (MRO) business and continue to provide after sales support to include spare parts and services. Furthermore, Iris Synergy will participate in refurbishment/upgrading work on their equipment installed at the existing facilities.

Maintenance, Facility Management and Services Division

For the financial year under review, the Maintenance, Facility Management and Services division recorded revenue of RM14.26 million and profit before tax of RM0.63 million.

The main activities for this division are landscaping, housekeeping and integrated facilities management services carried out by Semarak Niaga Lanskap Sdn Bhd (“SNLSB”), a company acquired by MEB in 2015. Recently, SNLSB has also expand its business to include pest control services which we are optimistic will be able to contribute to the returns of the Group in the coming years.

OUTLOOK AND PROSPECTS

Malaysia’s construction industry is expected to continue to moderate over the coming years, decelerating from an estimated 10.6% in 2015 to 7.6% in 2016 and 6.6% in 2017. The depreciation of Malaysian Ringgit against major foreign currencies, in particular the US dollar arising from the weakening of oil and commodity prices has impacted many Malaysian industries.

In spite of this challenging background, the Group will focus on delivery of its on-going projects and continue its effort to tender for new projects as a measure to enhance the financial position of the Group while ensuring sustainability of its businesses. It is imperative for us to continue to be prudent and embark on a

stringent cost management and control, preserving cash and become more competitive in existing businesses.

MOVING FORWARD

The Board, management and our workforce will endeavour to meet new challenges and improve our service as reflected in our logo where it signifies the merging of energy, unity and dynamic force. With our expertise and proven strong track record, we will pursue new horizons and seek new markets and business opportunities that are synergistic to our core competencies.

CORPORATE SOCIAL RESPONSIBILITY

The Group continues to embark on its corporate social responsibility activities during the year for the betterment of the community and to achieve satisfaction of our customers whilst delivering shareholders’ value and providing our employees with opportunities and a healthy and safe working environment. A detailed report on the corporate social responsibility activities undertaken for the financial year under review is set out in this Annual Report.

APPRECIATION

The Group’s achievements have been made possible with the efforts and contributions of our shareholders, customers, management, employees, and business associates. On behalf of the Board, I would like to place on record my sincere appreciation to our valued shareholders, customers, business associates, bankers, suppliers, contractors and subcontractors whose continuous support has enabled us to grow and create value for our business.

During the financial year under review, there were new appointments to the Board of MEB. On behalf of the Board, I wish to welcome Pn Raizita and En Rusdi as the Executive Directors of the Company together with Dato’ Kamarulzaman as the Independent Director of the Company.

We also wish to extend our appreciation to Dato’ Sri Raja Shah Zurin, our former Chairman and Tn Haji Mat Anuar, our former Independent Director for their invaluable services and contributions during their tenure with the Group.

And lastly, my special thanks to my fellow Board members, the management and employees for their continued hard work, commitment, unwavering support and dedication towards the growth of the Group.

Dato’ Said Ali bin Said Rastan Chairman

08 2 0 1 6 A N N U A L R E P O R T

PROFILE OF DIRECTORS

Left to right: Rusdi bin Mohamad Noor, Dato’ Sheah Kok Fah, Dato’ Abdul Jalil bin Abdul Karim, Dato’ Said Ali bin Said Rastan, Dr Fam Seng Choy, Raizita binti Ahmad @ Harun, Dato’ Kamarulzaman bin Jamil

DATO’ SAID ALI BIN SAID RASTANIndependent Non-Executive Chairman

Dato’ Said Ali, a Malaysian, aged 60, was appointed as the Independent Non-Executive Chairman of the Board of Merge Energy Bhd (“MEB”) on 17 September 2015. He obtained his Master of Business Administration (MBA) from University of Woodfield.

Dato’ Said Ali has served as Audit Manager in a few Chartered Accounting firms and he was also the Managing Partner of Dynamic Management Consultant, a secretarial firm. His experience covers matter related to auditing, accounting, secretarial and general management.

Dato’ Said Ali currently sits on the Board of Permodalan Kedah Berhad, RISDA Small Holders Development Sdn Bhd and is the Chairman of Yayasan Al Abrar.

He is also the Division Head of Pokok Sena Division of United Malay National Organisation (UMNO) and Chairman of Biro Agama Badan Perhubungan UMNO Negeri Kedah.

Dato’ Said Ali is not related to any director and/or major shareholder of the Company and does not have any conflict of interest with the Company. He attended all two (2) Board meetings held after his appointment to the MEB Board.


PROFILE OF DIRECTORS (cont’d)

DATO’ ABDUL JALIL BIN ABDUL KARIMExecutive Director/Chief Executive Officer

Dato’ Abdul Jalil, a Malaysian, aged 52, was appointed to the MEB Board on 14 February 2011. He graduated with a Bachelor of Science in Mechanical Engineering from University of Alabama, United States of America.

He has over 29 years of extensive experience in the water related industry at various levels including senior and board level of reputable companies locally and abroad. His expertise also includes areas in project consultancy and management and construction.

Dato’ Abdul Jalil was involved in various water supply projects including the Sungai Selangor (Phase 1), Sungai Johor WTP Privatisation, Sungai Semangar WTP (Phase 1), Non Revenue Water Reduction for SYABAS Phase 2 and Phase 3, Panching WTP, Kuantan (Package 2) and other small scale water supply projects. As Chief Executive Officer, Dato’ Abdul Jalil is responsible for implementation of MEB Group’s board operational strategies and policies. In addition, he also manages and oversees the daily conduct of the business to ensure its smooth operation.

Dato’ Abdul Jalil is also director and shareholder of few other private limited companies.

He is the Chairman of the Executive Committee and member of Risk Management Committee and Remuneration Committee.

Dato’ Abdul Jalil is not related to any director of the Company and does not have any conflict of interest with the Company. He has indirect interest in the Company via Desa Binapuri Sdn Bhd, the major shareholder of the Company. He attended all seven (7) Board meetings held in the financial year ended 31 March 2016.

RAIZITA BINTI AHMAD @ HARUNExecutive Director

Puan Raizita, a Malaysian, aged 48, was appointed as the Executive Director of the Company on 1 September 2015. She graduated with a degree of Bachelor of Science in Business Administration (Accountancy) from California State University, Sacramento in 1990.

Prior to her appointment as Executive Director, Puan Raizita was the Senior General Manager of Finance and Accounts Division of MEB Group, responsible for the overall financial management and affairs of MEB Group including formulation of policies, corporate finance, treasury, risk management, compliances and best practices of accounting policies.

She has more than twenty five (25) years working experience and twelve (12) years financial leadership position with MEB Group. Puan Raizita has advised MEB Board on numerous project-financing arrangements, structured debts and schemes of arrangements and represented MEB in several major corporate exercises. Given her strong communication and negotiation skills, she aggressively help the Group to seek new markets and business opportunities that are synergistic to the Group’s core competencies.

Puan Raizita is a member of Risk Management Committee and Executive Committee.

She is not related to any director of the Company and does not have any conflict of interest with the Company. She attended all three (3) Board meetings held after her appointment to the MEB Board.

10 2 0 1 6 A N N U A L R E P O R T


RUSDI BIN MOHAMAD NOORExecutive Director

Encik Rusdi, a Malaysian, aged 44, was appointed as the Executive Director of MEB on 1 September 2015. He graduated with a Degree in Education (Physical Education) from University Putra Malaysia in 1997. He also has a Diploma in Agriculture Engineering from University Pertanian Malaysia.

Encik Rusdi has more than 17 years of experience in management of oil palm plantation. He started his career with Austral Enterprises Berhad from 1997 to 2003 in which he was involved in oil palm estate management in Sarawak and Pahang.

From 2003 to 2013, Encik Rusdi joined LKPP Corporation Sdn Bhd, a subsidiary of Lembaga Kemajuan Perusahaan Pertanian Negeri Pahang where he was involved in the management and maintenance of oil palm plantation and estate development.

Encik Rusdi is not related to any director of the Company and does not have any conflict of interest with the Company. He has indirect interest in the Company via Desa Binapuri Sdn Bhd, the major shareholder of the Company. He attended two (2) out of three (3) Board meetings held after his appointment to the MEB Board.

DATO’ SHEAH KOK FAH Senior Independent Non-Executive Director

Dato’ Sheah Kok Fah, a Malaysian, aged 52, was appointed to the MEB Board on 16 November 2001. He holds a degree in LLB (Hons) from the University of Malaya and was admitted to the Bar in 1989.

Dato’ Sheah has an outstanding career, both as an advocate and solicitor and corporate practitioner. He has vast experience of 27 years in legal practice since 1988. He has been the partner of Messrs Sheah, Tan and Rahman since 1996.

Being a Senior Independent Director, Dato’ Sheah plays an important role in ensuring corporate accountability as he is instrumental in providing independent judgment taking into account the interests of MEB Group and all its stakeholders in which the Group conducts its business.

Dato’ Sheah is the Chairman of the Audit Committee, Remuneration Committee and Nomination Committee.

Dato’ Sheah is not related to any director and/or major shareholder of the Company and does not have any conflict of interest with the Company. He attended all seven (7) Board meetings held in the financial year ended 31 March 2016.


DR FAM SENG CHOY Independent Non-Executive Director

Dr Fam Seng Choy, a Malaysian, aged 49, was appointed to the MEB Board on 16 May 2012. He is a Chartered Accountant of the Malaysian Institute of Accountants (MIA) and Life Member of the Malaysian Association of Company Secretaries (MACS), Associate member of Chartered Tax Institute of Malaysia (CTIM), Fellow of Institute of Cooperative and Management Accountants, Malaysia (ICMA) and Associate member of the Institute of Certified Public Accountants in Ireland (CPA).

With an accounting, finance and taxation background, Dr Fam has extensive experience in financial accounting, company secretarial and taxation matters in the private sector. He started his own practice since 1996. He is an approved tax consultant under Section 153 of the Income Tax Act 1967 and Goods and Services Tax (GST) tax agent under Section 170 of the GST Act 2014 both approved by the Ministry of Finance.

Dr Fam is presently a member of the advisory panel of the School of Accounting, Finance and Quantitative Studies of the Faculty of Business & Management of Asia Pacific University (formerly known as APIIT).

He is the Chairman of the Risk Management Committee and a member of the Audit Committee and Nomination Committee.

Dr Fam is not related to any director and/or major shareholder of the Company and does not have any conflict of interest with the Company. He attended all seven (7) Board meetings held in the financial year ended 31 March 2016.

DATO’ KAMARULZAMAN BIN JAMILIndependent Non-Executive Director

Dato’ Kamarulzaman, a Malaysian, aged 61, was appointed as the Independent Non-Executive Director of MEB on 1 September 2015. He graduated with a Bachelor Degree in Economics from University Kebangsaan Malaysia.

Dato’ Kamarulzaman has extensive experience and knowledge in areas related to public services, human resource management and land administration as he has held various prominent position in his 35 years of services in various government departments/offices, among others in the Ministry of Transport, District and Land Offices, Public Services Department and Selangor Land and Mines Office.

Dato’ Kamarulzaman last held position was as the Director of Land and Mines with the Selangor Land and Mines Office where he served until he retired in January 2015.

He is a member of the Audit Committee, Nomination Committee, Remuneration Committee and Risk Management Committee.

Dato’ Kamarulzaman is not related to any director and/or major shareholder of the Company and does not have any conflict of interest with the Company. He attended all three (3) Board meetings held after his appointment to the MEB Board.

Note:-

Save as disclosed above, none of the Directors:-

i) hold any directorship in other public companies; and ii) have any convictions for offences (other than traffic offences) within the past 10 years.


12 2 0 1 6 A N N U A L R E P O R T

STATEMENT ON CORPORATE SOCIAL RESPONSIBILITY

Workplace

The Group recognizes the importance of its human capital and strive to identify and retain the best talents and to groom them to assume bigger roles and responsibilities.

The Group always endeavours to achieve high standards in health and safety matters across all aspects of its operations in order to ensure a conducive working environment for all its people.

As a responsible employer, part of the benefits offered by the Group to all its employees include Group Hospitalization and Surgery (GHS) Insurance Scheme which is also extended to their spouse and children. Outpatient medical treatment benefits have also been extended to spouse and children of our employees. Employees are further covered under a Group Personal Accident (GPA) and Group Term Life (GTL) Insurance.

During the year, MEB developed both in-house and external training and development programmes as part of MEB Group’s effort to further enhance employees’ performance.

The management of MEB Group also believe that apart from work, a well balanced and healthy lifestyle is essential for the overall well-being of its employees. In this regards, the Group through its Kelab Sukan dan Kebajikan (MEB)

The management and staff of MEB and its subsidiaries (“Group”) strive to fulfill their responsibilities to shareholders and, the same time, aim to contribute to a sustainable society. In line with this basic view, we have continued with our corporate social responsibility (“CSR”) initiatives by focusing on the four focal areas ie workplace, community, marketplace and environment.


• Blood donation campaign participated by the Group employees and nearby community

• Visited old folks home in Puchong, Selangor and donated cash and basic necessities which were sponsored by MEB

Looking ahead, we will continue and increase our efforts to promote and inculcate a caring culture among our employees.

Marketplace and Environment

We are committed to ensure that the interests of all our important stakeholders ie our shareholders, supplier and customers are protected.

In the marketplace, the Group has continued to make every attempt to meet its stakeholder’s expectations by constantly evaluating, monitoring and improvising its projects’ processes and systems in order to ensure a credible delivery system for its products and services.

Information on our business activities and performance are disclose on a timely manner to keep our shareholders abreast on the latest development of the Group.

The Group has always recognized the global environmental challenges faced by our society. We are therefore committed in operating our businesses in a responsible manner in order to protect and enhance the conservation of natural environment as well as to play our part in maintaining a sustainable future.

Moving forward, we will continue to maintain the highest standard of corporate governance and aim to respect and abide by all legislation, regulations and guidelines as part of our efforts to practice and promote ethical business.

STATEMENT ON CORPORATE SOCIAL RESPONSIBILITY (cont’d)

Merge Energy (“KSKMEB”) organizes activities to further strengthen employees’ integration, whilst promoting better team spirit amongst employees. Some of the CSR activities undertaken by KSKMEB during the year are as follows:

1. Sports and Recreational Activities • Bowling tournament, badminton, futsal, table tennis,

‘congkak’ and cycling was organized during the year

2. Training and Staff Development Programme• In-house training for Contract Administration• Project Operation Management

3. Celebration • Staff Birthday gatherings• Majlis Berbuka Puasa and Hari Raya open house• Chinese New Year lunch treat• Awal Muharam

Moving forward, the Group will remain committed in its effort to create a conducive working environment for its employees. And the Group will also continue to enhance the knowledge, skills and competencies of its employees by organizing training and teambuilding exercises.

Community

The Group has recognized that its businesses have direct and indirect impact on the communities in which it operates, and is conscious of its responsibility to act as a good corporate citizen and to reach out to the local communities where it operate. Some of the CSR activities that were undertaken during the year are as follows:-

• During the Ramadhan fasting month, it has always been a tradition for the Group to distribute “Bubur Lambuk” which was cooked and prepared by the staff of the Group to the community. At the last Ramadhan, instead of “Bubur Lambuk”, the staff cooked “Fried Kuey Teow” and “Kuih Onde-Onde” and distributed to the community of Kampung Melayu Subang, including the nearby mosques and orphanages

14 2 0 1 6 A N N U A L R E P O R T

STATEMENT ON CORPORATE GOVERNANCE

The Board of Directors of Merge Energy Bhd (“MEB” of “Company”) acknowledges the importance of good corporate governance and is committed in ensuring that the Company and its subsidiaries (“Group”) practices good corporate governance in line with the Malaysian Code on Corporate Governance 2012 (“MCCG 2012”) issued by the Securities Commission of Malaysia.

This statement, which is made pursuant to paragraph 15.25 of the Main Market Listing Requirement (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Malaysia”), sets out the extent to which the Group has applied the principles and the recommendations of the MCCG 2012 throughout the financial year ended 31 March 2016.

DIRECTORS

The Board

The Board plays a key role in the governance process through its review and approval of the Group’s direction and strategy, monitoring of business performance and review of the adequacy and integrity of the Group’s internal control system. The Board believes that commitment to its fiduciary duties and responsibilities is critical to its goal of driving long term shareholders’ value.

The Board comprising members from wide range of professionalism, business and financial background, all of which provide the Group with a wealth of expertise, experiences and networks to draw upon. The profiles of the Directors are set out in pages 08 to 11 of this annual report.

Board Balance

The size and composition of the Board has been maintained in line with the needs of the Company and in compliance with MMLR of Bursa Malaysia . The Board has a balanced composition of Executive and Non-Executive Directors, with at least one third (1/3) Independent Non-Executive Directors.

The Board consists of seven (7) members, comprising three (3) Executive Directors and four (4) Non-Executive Directors. All the four (4) Non-Executive Directors are Independent Directors which complies with the MMLR of Bursa Malaysia.

Board balance is achieved with the contribution of the independent non-executive directors and the fair representation of the shareholders’ interests. The independent non-executive directors exercise their unbiased independent judgment freely and do not have any business or other relationships that could interfere with their duties. The Board also has an effective working partnership with Management in establishing the strategic direction.

The roles of Chairman and Executive Directors are separately held with each having distinct authority and responsibilities. The Independent Non-Executive Chairman is responsible for the effective running of the Board. The Chief Executive Officer, assisted by the Executive Directors are responsible for the effective running of the Group’s operations and implementation of the Board’s policies and decisions. This division of roles and responsibilities ensures that there is a balance of power and authority, such that there is no excessive concentration of power in the Chairman or the Executive Directors.

Duties and Responsibilities of the Board

The Board assumes the following principal responsibilities in discharging its fiduciary and leadership functions:-• Reviewing and adopting the strategic plan for the Group• Overseeing the conduct of the Group’s business to determine whether the business is being properly managed• Identifying principal risks and ensuring the implementation of appropriate systems to manage these risks• Reviewing the adequacy of the Group’s management information and internal control systems• Ensuring that the Company’s financial statements are true and fair and conform with the laws• Ensuring the Company adheres to high standards of ethics and corporate behavior

The Board is also mindful of the importance of building a sustainable business and therefore, takes into consideration its environmental, social and government impact when developing the corporate strategy of the Group.


Board Charter and Code of Ethics

The Company has established a Board Charter to promote high standards of corporate governance and the Board Charter is designed to provide guidance and clarity for Directors and management with regard to the role of the Board and its committees. A copy of the Board Charter is made available at the Group’s website www.merge-energy.com.my.

The Board adopts and observes the Code of Ethics for Company Directors established by the Companies Commission of Malaysia, as the Board is fully supportive of the principles of the said Code of Ethics and finds it suitable for the Company to uphold the same principles.

Board Meetings

The Board holds at least four (4) regularly scheduled meetings annually with additional meetings convened when necessary. Senior Management staff as well as professional advisers have been invited to attend the Board meetings to provide the Board with their views and clarifications on issues raised by the Directors.

During the financial year ended 31 March 2016, there were seven (7) meetings held and the details of attendance of each Director are as follows:

Name of Directors No. of Meetings Attended

Dato’ Said Ali bin Said Rastan (appointed on 17 September 2015) 2/2Dato’ Abdul Jalil bin Abdul Karim 7/7Raizita binti Ahmad @ Harun (appointed on 1 September 2015) 3/3Rusdi bin Mohamad Noor (appointed on 1 September 2015) 2/3Dato’ Sheah Kok Fah 7/7Dr Fam Seng Choy 7/7Dato’ Kamarulzaman bin Jamil (appointed on 1 September 2015) 3/3Dato’ Sri Raja Shah Zurin bin Raja Aman Shah (resigned on 1 September 2015) 2/3Haji Mat Anuar bin Hasan (resigned on 1 September 2015) 3/3

In between Board meetings, approval on matters requiring the sanction of the Board are sought by way of circular resolutions enclosing all relevant information to enable the Board to make informed decisions. The resolutions passed by way of such circular resolutions were then noted in the next Board meetings.

The Directors are to allocate sufficient time to the Company to perform their duties effectively including being prepare for the meetings and contributing effectively to the business of the Company. They should notify the Board before accepting any new directorships and such notification should include an indication of time that will be spent on the new appointment.

Appointments to the Board

The identification and appointment of new Directors undergo a process led by the Nomination Committee which reviews the required mix of skills, experience and other qualities of the Directors to ensure that the Board is functioning effectively and efficiently. The Board makes the final decision on the appointment of new Directors prior to release of announcements of the appointment to Bursa Malaysia.

During the financial year, four (4) new Directors were appointed to the Board of the Company.

Re-election and Re-appointment

In accordance with the Company’s Articles of Association (“Articles”), all Directors who are appointed by the Board either to fill a casual vacancy or as an addition to the existing Directors are subject to re-election by shareholders at the Annual General Meeting (“AGM”) following their appointment. The Articles also provide that one-third of the Directors shall retire from office at each AGM and all Directors shall retire from office at least once in every three years. All retiring Directors are eligible to offer themselves for re-election at the AGM. Directors over 70 years of age will be required to submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, 1965.

During the financial year under review, the Independent Non-Executive Directors did a self evaluation of their independence based on the criteria of independence of the Bursa Malaysia Listing Requirements and the Board had reviewed and assessed the results of the said self-evaluation.

STATEMENT ON CORPORATE GOVERNANCE (cont’d)

http://www.merge-energy.com.my

16 2 0 1 6 A N N U A L R E P O R T


Directors’ Training

All the Directors of the Company have attended the Mandatory Accreditation Program prescribed by Bursa Malaysia and the Board members will attend further training programmes/seminars from time to time to keep abreast with current developments in the market place and with new statutory and regulatory requirements. They are provided with updates from time to time on relevant new laws and regulations affecting their directorships and relevant compliances.

The training programmes and briefings attended by the Directors during the financial year ended 31 March 2016 are as follows:

Name of Directors Title of training/briefings/workshops

Dato’ Said Ali bin Said Rastan • Mandatory Accreditation Program

Dato’ Abdul Jalil bin Abdul Karim • Goods and Services Tax (GST) on Constructions• How to Claim Additional Time in Construction Contract• GST Post-Implementation Issues: What Directors Need to Know• Advocacy Sessions on Management Discussion & Analysis for Chief Executive

Officer and Chief Financial Officers• Borneo Water and Wastewater Exhibition & Conference 2015• Construction Contract Management

Raizita binti Ahmad @ Harun • Goods and Services Tax (GST) on Constructions• Mandatory Accreditation Program

Rusdi bin Mohamad Noor • Mandatory Accreditation Program• 8th International Planters Conference 2015

Dato’ Sheah Kok Fah • Goods and Services Tax (GST) on Constructions

Dr Fam Seng Choy • Goods and Services Tax (GST) on Constructions• Future of Audit Reporting – The Game Changer for Boardroom• Risk Management and Internal Control Workshop: Is Our Line of Defence

Adequate and Effective • 2016 Budget Seminar• National GST Conference 2015• National Tax Conference 2015• Seminar Percukaian Kebangsaan 2015• An Overview of the Proposed New Companies Act, 2015• Dialog dan Seminar Pengauditan Koperasi

Dato’ Kamarulzaman bin Jamil • Mandatory Accreditation Program

Supply of Information

The Directors have full and unrestricted access to all information pertaining to the Group’s business and affair to enable them to discharge their duties. The management is responsible for furnishing the Board with timely and accurate information that may assist the Board to facilitate informed decision making.

Board meetings for the ensuing financial year are scheduled in advance before the end of each financial year to enable the Directors to plan ahead and fit the year’s Board meetings into their respective schedules. Prior to the meetings of the Board and the Board Committees, Board papers, which include agenda and reports relevant to the issues of meeting, will be forwarded to all Directors in advance to enhance the quality of decisions recommended at the Board meetings. Any additional information requested by Directors is also readily available. The Company Secretary, who is qualified and experience, attends all Board meetings and ensures that accurate and adequate records of the proceedings of the Board meetings and decisions made are properly recorded.



The Board also note the decisions and salient issues deliberated by Board Committees through minutes of these Committees. The Board receives and reviews recommendations made by the Board Committees and grants approval, when required.

All Directors have access to the advice and services of the Company Secretary and Senior Management and may seek independent professional advice, at the Company’s expense, if required, in furtherance of their duties.

Committees

The Board has delegated certain responsibilities and duties to the following Committees to assist the Board in the efficient and effective discharge of its duties. Meetings of the Board Committees provide an avenue for members of the respective Committees to focus on specific issues to enable full and in-depth discussion of business operations of the Group.

The Board Committees exercise transparency and full disclosure in their proceedings. Where applicable, issues are reported to the Board with the appropriate recommendations by the Board Committees.

(a) Audit Committee

As at the date of this statement, the Audit Committee comprises three (3) Independent Directors.

The Audit Committee provides independent oversight of the Group’s financial reporting and internal control system and ensures that checks and balances are in place within the Group.

Every year, the external auditors, at one of the Audit Committee meetings, would confirm to the Audit Committee members their independence throughout the conduct of the audit engagement with the Company in accordance with the independence criteria set out by the Malaysia Institute of Accountants.

The Audit Committee Report is set out in pages 23 to 26 of this annual report.

(b) Remuneration Committee

As at the date of this statement, the Remuneration Committee comprises of the following three (3) members, of which two (2) are Independent Directors and one (1) is the Executive Director:-

• Dato’ Sheah Kok Fah (Chairman)• Dato’ Abdul Jalil bin Abdul Karim• Dato’ Kamarulzaman bin Jamil

The responsibilities of the Remuneration Committee are:• to recommend to the Board, the remuneration of each Director in all its form, with the respective Directors abstain

from deliberating their own remuneration; and

• to establish and review the remuneration packages of each individual Executive Director such that the levels of remuneration are sufficient to attract and retain the Directors needed to run the Group successfully.

During the financial year, the Remuneration Committee met once to review and recommend to the Board the remuneration package of the new Executive Directors.

(c) Nomination Committee

As at the date of this statement, the Nomination Committee comprises of the following three (3) members, all being Independent Directors:-

• Dato’ Sheah Kok Fah (Chairman)• Dr Fam Seng Choy• Dato’ Kamarulzaman bin Jamil

18 2 0 1 6 A N N U A L R E P O R T


The Nomination Committee has been given the responsibility to recommend new appointments to the Board and Board Committees of MEB. The Nomination Committee assesses the effectiveness and balance of the Board as a whole, the Committees of the Board and the contribution of each individual Director.

The Board is aware of the importance of boardroom diversity including diversity in ethnicity and age. However, the Board is of the view that the selection criteria of a Director, based on the candidates’ competency, skills, character, knowledge and experience should remain a priority.

The Board also supports gender diversity in the Board composition with the appointment of a woman Director to the Board during the financial year.

The Nomination Committee met thrice (3) during the financial year to review and recommend to the Board the appointment of new Directors, to propose the re-election of Directors retiring in accordance with the Company’s Articles of Association and to review and assess the mix of skills, experience and size of the Board, contribution of each Director and effectiveness of the Board as a whole and Board Committees. All assessments and evaluations carried out by the Nomination Committee were properly documented.

The Nomination Committee had conducted an evaluation on the re-appointment of Dato’ Sheah Kok Fah who has served as an Independent Non-Executive Director of the Company for more than nine years, and recommended him to continue in his capacity as an Independent Non-Executive Director of the Company based on the following justifications:-

(i) He has fulfilled the criteria under the definition of Independent Director as stated in the Listing Requirements of Bursa Malaysia, and therefore is able to bring independent and objective judgment to the Board.

(ii) He is an advocate and solicitor and corporate practitioner with vast experience of more than 26 years in legal practice. Hence, he would be able to provide the Board with a diverse set of experience, expertise, skill and competence.

(iii) The length of his service on the Board does not in any way interfere with his exercise of independent judgment and ability to act in the best interest of the Company.

(iv) He, having been with the Company for more than nine years, is familiar with the Group’s business operations which enable him to participate actively and contribute during deliberations or discussions at Board and Committee meetings without compromising his independence and objective judgment.

(v) He has contributed sufficient time and effort to attend all the Board and Committee meetings.

Therefore, based on the recommendation by the Nomination Committee, the Board recommended that Dato’ Sheah Kok Fah continue to act as Independent Non-Executive Director of the Company subject to shareholders’ approval at the Company’s forthcoming 19th AGM as he has fulfilled the criteria under the definition on Independent Director as stated in the MMLR of Bursa Malaysia.

(d) Risk Management Committee

As at the date of this statement, the Risk Management Committee comprises of four (4) members.

The Risk Management Committee is formed by the Company for the following objectives:• identify and evaluate risk exposures; • develop and implement risk management plan and strategies;• develop the Group’s risk management policy and procedures that affirm the Group’s commitment to safeguard its

shareholders’ investments and its assets;• review and revise the risk management plan and strategies and policy and procedures when needed;• review the Group’s overall objectives by assessing the current risk portfolio composition and determining the desired

exposures of each major area of risks; • formulate contingency plans and ad-hoc teams for worst case scenarios;• communicate risk management plan and strategy, policy and procedures and responsibilities to shareholders, Board

and all employees;• provide guidance to all departments on the Group’s and department’s risk appetite and capacity and other criteria,

which when exceeded trigger an obligation to report upward to the Board;• keep abreast with current risk management techniques and theories and any possible or actual changes in regulatory

environment that affects the Group;



• identify and allocate resources required (including budget, human resources and professional advice, if required) to support the above.

During the financial year, the Risk Management Committee convened two (2) meetings to review and evaluate the risk exposures of the Group.

(e) Executive Committee

The Executive Committee met five (5) times during the financial year ended 31 March 2016. Minutes of meetings and resolutions passed by the Executive Committee were tabled at the Board Meeting for notation.

The objectives of the Executive Committee are:• to attend and expedite all operational matters of the Group to ensure speedy processing of any issue which require

immediate decisions;

• to improve business performance and decision making;

• to provide assistance to the Board in fulfilling its fiduciary responsibilities in the areas relating to the Group’s accounting and management controls, financial reporting, operational issues, human resources policies and company secretarial matters and in safeguarding shareholders’ investment and the Group’s assets;

• to review and formulate policies and guidelines for the approval of the Board in order to ensure smooth management and administration of the Group and thereafter to implement the policies and guidelines accordingly; and

• to evaluate and recommend investment opportunities for the approval of the Board.

DIRECTORS’ REMUNERATION

Level and Make-up of Remuneration

The Group’s policy on Directors’ remuneration is to ensure that the Directors are adequately remunerated for the services they render. The performance of Directors is measured by their contribution and commitment to the Board and the Group.

The remuneration package of the Executive Director is structured to commensurate with corporate and individual performance, experience and scope of responsibility.

The remuneration packages of the Non-Executive Directors reflect their experience and they are paid fees which will be approved by the shareholders and attendance allowances to Board and Board Committee meetings.

Procedures

The Remuneration Committee will deliberate and submit its recommendation to the Board for endorsement. The Directors play no part in deciding their own remuneration and shall abstain from discussing or voting on their own remuneration. Directors’ fees are approved by the shareholders at AGM.

Disclosure

The aggregate Directors’ remuneration paid or payable or otherwise made available to the Directors of the Company as at the financial year ended 31 March 2016 is as follows:

Basic Salary(RM)

Bonus(RM)

Fees(RM)

Meeting Allowances

(RM)

Benefits in kind

(RM)

Executive Directors 1,158,204 247,343 – – 58,621

Non-Executive Directors – – 207,333 39,000 –

(The above disclosures include all Directors who held office during the financial year)

20 2 0 1 6 A N N U A L R E P O R T


The number of Directors of the Company whose total remuneration falls within the following bands:

Number of DirectorsBands of Remuneration Executive Director Non-Executive Director

RM50,000 and below – 5RM50,001 - RM100,000 – 1RM300,001 - RM350,000 1 –RM350,001 - RM400,000 – –RM400,001 - RM450,000 1 –RM650,001 - RM700,000 – –RM700,001 - RM750,000 1 –

(The above disclosures include all Directors who held officer during the financial year)

SHAREHOLDERS

Dialogue between the Company and Investors The Board believes in clear communication with the Company’s shareholders. The Group continuously ensures that it maintains a high level of disclosure and communication with its shareholders through various practicable channels. The annual reports and the announcements made quarterly and otherwise, are the primary modes of communication to report on the Group’s business, activities and financial performance to all its shareholders. In addition to various announcements made during the year, the timely release of financial results on a quarterly basis provides shareholders with an overview of the Group’s performance and operations.

MEB’s website at www.merge-energy.com.my also provides an avenue for shareholders and members of the public to assess information pertaining to the Group, which is being updated regularly.

The general meetings are opportunities to meet shareholders, to encourage them to interact and participate in getting to know the Company’s and the Group’s progress and/or performance better.

The Board has also established corporate disclosure policies and procedures to enable accurate and timely disclosures to the regulators, shareholders and stakeholders

Annual General Meeting

At least 21 days prior to the AGM, the Annual Report will be sent to the shareholders to inform them of the financial performance and other corporate information relating to the Group. Each item of special business included in the notice of the AGM will be accompanied by a full explanation of the effects of a proposed resolution to facilitate full understanding and evaluation of the issues involved.

During the AGM, the Board presents the financial performance of the Group. Shareholders are given the opportunity to seek and clarify any pertinent and relevant issues raised in the meeting in relation to the operations and performance of the Group and to exchange views with the Board. The external auditors are also present at the AGM to provide their professional and independent clarification on issues and concerns raised by the shareholders. Shareholders are also informed of their right to demand for a poll.

http://www.merge-energy.com.my



ACCOUNTABILITY AND AUDIT

Financial Reporting

In its financial reporting to shareholders and other interested parties by means of quarterly results announcement and the annual financial statements, the Board aims to present a balanced and understandable assessment of the Group’s financial position and prospects.

The Group’s performance and prospects in the Annual Report and financial results on a quarterly basis, prepared based on appropriate accounting standards and accounting policies, will be reviewed and deliberated by the Audit Committee prior to recommendation for adoption by the Board. The Audit Committee ensures that information to be disclosed is accurate, adequate and in compliance with the various disclosure requirements imposed by the regulatory authorities.

The Board takes responsibility in ensuring that the financial statements reflect a true and fair view of the state of affairs of the Group and the Company in accordance with the Companies Act 1965, the applicable approved accounting standards in Malaysia and the MMLR of Bursa Malaysia. This also applies to other price-sensitive public announcements and reports to the regulatory authorities.

Statement of Directors’ Responsibilities in respect of the Audited Financial Statements

The Board of Directors do hereby state that the preparation of financial statements for the year ended 31 March 2016 is the responsibility of the Directors. They are legally required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the Company and of their results and cash flow for the financial year then ended. In preparing those financial statements, the Directors have:

• adopted appropriate accounting policies and then applied them consistently;• made judgements and estimates that are prudent and reasonable; • ensured applicable accounting standards have been followed and complied with.

The Directors are responsible for ensuring proper accounting records are kept which discloses with reasonable accuracy at any time the financial position of the Company and its subsidiaries and to enable them to ensure that the financial statements comply with the Companies Act 1965.

The Directors also have the overall responsibilities to take all steps as are reasonably open to them to safeguard the assets of the Group to prevent and detect fraud and other irregularities.

Risk Management and Internal Control

The Board acknowledges its overall responsibility of the Group’s system of internal control that covers financial, operations, compliance with regulations as well as risk management to safeguard shareholders’ investment and the Group’s assets and more essentially, the need to review its effectiveness regularly. The Board recognises that risks cannot be eliminated completely, as such; the systems and processes put in place would have to be aimed at minimising and managing them.

This function is supported and reinforced through the various Committees established at the Board and management’s level. The Committees provide a strong check and balance and reasonable assurance on the adequacy of the Group’s internal control.

The Board has established an internal audit function and identified a head of internal audit, who reports directly to the Audit Committee.

Relationship with the Auditors

Through the Audit Committee, the Group has established a transparent and appropriate relationship with its external auditors in seeking their professional advice towards ensuring compliance with the applicable accounting standards. The external auditors are invited to attend the Audit Committee Meetings to brief the Audit Committee on specific issues. During the Audit Committee Meetings, they table the audit planning and highlight observations made during the course of audit to the Audit Committee members.

22 2 0 1 6 A N N U A L R E P O R T

1. Utilisation of Proceeds

There were no proceeds raised by the Company from any corporate proposals during the financial year.

2. Share Buybacks

The Company did not undertake any share buyback exercise during the financial year.

3. Options, Warrants or Convertible Securities

The Company has not issued any options, warrants or convertible securities during the financial year.

4. Depository Receipt Programme

The Company did not sponsor any depository receipt programme during the financial year.

5. Sanctions and/or Penalties

There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies.

6. Non-Audit Fees

For the financial year, the following non-audit fees will be payable to Messrs Baker Tilly Monteiro Heng, the external auditors and their affiliated companies:(i) Reviewing the Statement on Internal Control – RM6,500.00.(ii) Tax advisory services – RM17,800.00.(iii) Review of Realised and Unrealised Profit or Losses – RM4,000.00.

7. Variation in Results

The Group’s audited results for the financial year ended 31 March 2016 did not vary by 10% or more from the unaudited results which were announced to Bursa Malaysia Securities Berhad on 26 May 2016.

8. Profit Guarantee There was a shortfall of RM397,793.21 (“Shortfall”) in the profit guarantee provided by the previous shareholders of

Semarak Niaga Lanskap Sdn Bhd (“SNLSB”) to the Company during the financial year ended 31 March 2016. The Shortfall will be off-set against the balance consideration to be paid by the Company to the previous shareholders of SNLSB.

Save as disclosed above, there was no profit guarantee given or received by the Company in the financial year. 9. Material Contracts or Loans

There were no material contracts or loans entered into by the Group during the financial year that involve Directors’ or major shareholders’ interests.

10. Recurrent Related Party Transactions The Group did not enter into any significant recurrent related party transactions which require shareholders’ mandate

during the financial year.

11. Internal Audit Function

The Company’s internal audit function is performed in-house at RM98,528.20 for the financial year.

12. Employee Share Option Scheme The Company did not have any Employee Share Option Scheme during the financial year.

OTHER COMPLIANCE INFORMATION


The report of the Audit Committee of Merge Energy Bhd (“MEB” or “Company”) for the financial year ended 31 March 2016 is presented as follows:-

COMPOSITION

The Audit Committee comprised the following Directors during the financial year ended 31 March 2016:-

ChairmanDato’ Sheah Kok Fah - Senior Independent Director

MembersDr Fam Seng Choy - Independent DirectorDato’ Kamarulzaman bin Jamil - Independent Director

Throughout the financial year under review, the Audit Committee was made up of no fewer than three (3) members, who were all Independent Non-Executive Directors. Dr Fam Seng Choy is member of the Malaysian Institute of Accountants and Associate member of the Institute of Certified Public Accountants in Ireland.

TERMS OF REFERENCE

Composition

The Audit Committee shall be appointed by the Board from among their number and shall consist of not less than three members.

The majority of the Audit Committee members must be Independent Directors and all members must be Non-Executive Directors. At least one of the members must be a qualified accountant or fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad. The Chairman of the Audit Committee shall be appointed by the Board and shall be an Independent Director.

In the event of any vacancy in the Audit Committee resulting in the non-compliance of the above requirements, the vacancy shall be filled within three months.

All members of the Audit Committee, including the Chairman, shall hold office only so long as they serve as Directors of the Company. Should any member of the Audit Committee cease to be a Director of the Company, his membership in the Audit Committee would cease forthwith.

Meetings

The Audit Committee shall meet at least four times a year and such additional meetings as the Chairman shall decide in order to fulfill its duties. The quorum for a meeting shall be two members and the majority of members present must be Independent Directors.

Other Board members and the Head of Finance and Accounts may attend meetings upon the invitation of the Audit Committee. At least twice a year, the Audit Committee shall meet with the external auditors, the Head of Internal Audit or both without the presence of Executive Directors and other employees of the Company.

The Company Secretary shall be the Secretary of the Audit Committee.

Minutes of meetings shall be distributed to the Board. The Chairman shall report on each meeting to the Board.

AUDIT COMMITTEE REPORT

24 2 0 1 6 A N N U A L R E P O R T

AUDIT COMMITTEE REPORT (cont’d)

Authority

The Audit Committee is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Audit Committee. In addition, it shall have unrestricted access to both the internal and external auditors and to the Senior Management of the Group. The Audit Committee is also authorised by the Board to obtain legal or other professional advice where they consider it necessary to carry out their duties.

Duties and Responsibilities

1. To review the quarterly results and year end financial statements, prior to the approval by the Board, focusing particularly on:

(i) changes in or implementation of major accounting policy changes;(ii) significant matters highlighted including financial reporting issues, significant judgments made by management,

significant and unusual events or transactions, and how these matters are addressed; (iii) the going concern assumption;(iv) significant adjustments arising from the audit; and(v) compliance with Financial Reporting Standards and other legal requirements.

2. To review with the external auditors, the following:

(i) the audit plan;(ii) the audit report; (iii) their evaluation of the system of internal controls;(iv) problems and reservations arising from their interim and final audits, and any matter the external auditors may wish

to discuss (in the absence of Management where necessary); (v) the assistance given by the Company’s officers to the external auditors; and(vi) the external auditors’ management letter and management’s response.

3. To do the following in respect of internal audit functions:

(i) review the adequacy of the scope, functions, competency and resources of the Internal Audit Department and that it has the necessary authority to carry out its work;

(ii) review the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate actions are taken on the recommendations of the Internal Audit Department;

(iii) consider the findings of internal investigations and management’s response;(iv) review any appraisal or assessment of the performance of members of the Internal Audit Department;(v) approve any appointment or termination of senior staff member(s) of the Internal Audit Department; and(vi) take cognizance of resignations of internal audit staff member(s) and provide the resigning staff member an

opportunity to submit his reasons for resigning.

4. To consider 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.

5. To review:

(i) any letter of resignation from the external auditors of the Company;(ii) whether there is a reason (supported by grounds) to believe that the Company’s external auditors are not suitable for

re-appointment;(iii) any recommendation on the nomination of a person or persons as external auditors.

6. To carry out other functions as may be agreed by the Audit Committee and the Board.


MEETINGS AND ATTENDANCE

All Audit Committee members are provided with an agenda together with relevant reports and papers which are issued prior to the Audit Committee Meeting to enable the members to review the reports and papers as well as to obtain further information or explanation.

Minutes of Audit Committee Meetings were tabled during Board Meetings for the Board’s notation and endorsement. At the Board Meeting, the Chairman of the Audit Committee reports and highlights to the Board any pertinent issues discussed by the Audit Committee.

The Audit Committee held five (5) meetings during the financial year ended 31 March 2016. Details of attendance of each Audit Committee member are as follows:

Name of Audit Committee Member No. of Meetings Attended

Dato’ Sheah Kok Fah 5/5Dr Fam Seng Choy 5/5Dato’ Kamarulzaman bin Jamil (Appointed on 1 September 2015) 3/3Haji Mat Anuar bin Hasan (Resigned on 1 September 2015) 2/2

ACTIVITIES

During the financial year under review, the Audit Committee carried out the following activities:

1. Reviewed the audit plan of the external auditors on the scope of their audit including audit procedures, significant accounting and auditing issues, impact of new or proposed changes in Financial Reporting Standards and regulatory requirements on the financial statements;

2. Reviewed the unaudited quarterly financial reports before tabling to the Board for approval and release to Bursa Malaysia Securities Berhad and the Securities Commission;

3. Reviewed the year end unaudited financial reports before tabling to the Board for approval and release to Bursa Malaysia Securities Berhad;

4. Reviewed the audited financial statements of the Group and the Company together with the external auditors prior to submission to the Board for their consideration and approval;

5. Reviewed the audit findings by the external auditors;

6. Assessed the external auditors’ performance and audit fees prior to submission to the Board for their approval;

7. Reviewed and approved the annual audit plan presented by the internal auditor;

8. Reviewed the internal audit reports which highlighted the audit issues, recommendation and the Management’s responses and directed actions to be taken by the Management to improve the system of internal control;

9. Followed up on corrective actions taken by the Management on audit issues raised by the external auditors and the internal auditor;

10. Reviewed the Statement on Risk Management and Internal Control and the Audit Committee Report before tabling to the Board for approval to be published in the Annual Report;

11. Reported all pertinent issues to the Board.


26 2 0 1 6 A N N U A L R E P O R T

INTERNAL AUDIT FUNCTION

The Group has established the Internal Audit Department to support the Audit Committee and the Board in reviewing the Group’s system of internal control and governance process so as to provide assurance that such systems continue to operate satisfactorily and effectively.

The Internal Audit Department provides an independent assurance on risk management and internal control. It focuses on regular and systematic review of the internal control and management information systems, including compliance with applicable laws, regulations, rules, directives and guidelines.

The Internal Audit Department provides quarterly reports of the audit undertaken to the Audit Committee, reporting on the outcome of its audits. The Audit Committee reviews and evaluates the key issues raised by the Internal Audit Department and ensures that appropriate and prompt remedial actions are taken by the Management.

During the financial year under review, the activities of the Internal Audit Department included:

1. Prepared the annual audit plan based on risk approach method for deliberation by the Audit Committee;

2. Carried out audit work in liaison with the Management for optimisation of resources;

3. Carried out audit visits and follow up at the Group’s construction sites;

4. Made recommendations to improve the operations in the Group;

5. Ascertained the extent of compliance with the Group’s plans, policies, procedures and statutory requirements;

6. Ascertained the adequacy of controls for safeguarding the Group’s assets from losses of all kinds;

7. Reviewed and appraised the soundness, adequacy and application of financial and other controls to promote effective control in the Group.



RESPONSIBILITY

The Board believes the practice of good corporate governance is an important and continuous process and affirms its responsibilities to maintain a sound system of risk management and internal control to ensure its adequacy and effectiveness so as to safeguard shareholders’ investments and the Group’s assets.

In the pursuit of good governance process and business objectives, the Board and Management have implemented a risk management and internal control system designed to identify and manage risks facing the Group. This system provides reasonable but not absolute assurance against material misstatement of management and financial information or against financial losses or fraud.

RISK MANAGEMENT

The Board is pleased to disclose that there is an ongoing and systematic risk management process for identifying, evaluating and managing significant risks faced by the Group with the establishment of the Risk Management Working Committee (“RMWC”) and the Risk Management Committee (“RMC”).

For the period under review; the RMWC comprising the Group CEO, Executive Director, all Managers and Departmental Heads of the Group held two meetings to identify, evaluate and discuss plans to manage the various risk factors that could potentially and significantly impact the Group’s business objectives. Six key risk areas were identified and evaluated and specific risk ratings were defined with mitigating action plans for monitoring.

The RMWC tabulated and communicated these Group risk profile to the RMC for further deliberation and the reports were subsequently tabled to the Board. The RMC comprises two independent directors, the Group CEO, the Executive Director and the Group Senior Internal Auditor. During the year under review there were two RMC meetings held. Chaired by an independent director, the RMC functioned to ensure the adequate development of the risk management system and its effective implementation.

INTERNAL CONTROL SYSTEM

Attributes of the Group’s internal control system and assurance processes are described below.

Independent Audit Committee

The Audit Committee comprises of all non-executive directors, who are also independent of the Management. It has an overall responsibility to assist the Board in fulfilling its responsibilities for the financial reporting process, the system of internal control, the audit process and the Group’s process for monitoring compliance with laws and regulations.

Internal Audit Department

The Internal Audit Department serves as a corporate resource in support of the Audit Committee to fulfill its responsibilities. It independently reviews the control processes implemented by the Management and reports the findings and recommendations directly to the Audit Committee.

Approval of Major Decisions

All major decisions require the final approval of the Board and are only made after appropriate in-depth studies have been conducted. Matters that require the Board’s approval include acceptance and award of major contracts, major investments and financial decisions.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

28 2 0 1 6 A N N U A L R E P O R T

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (cont’d)

OTHER KEY ELEMENTS OF THE GROUP’S INTERNAL CONTROL SYSTEM

The other key elements of the Group’s internal control system include:

• A management structure with clear defined lines of responsibility and appropriate levels of delegation.

• Documented standard internal policies and operating procedures to regulate financial and operating activities.

• Regular and comprehensive information are communicated to the Board; covering the Group’s financial performance, key business indicators, business development and progress of projects.

• Quarterly management accounts and reports are tabled to the Board for their deliberation and approval.

• The reporting of operational, financial and compliance matters for all the businesses of the Group are discussed regularly at the Executive Committee (“EXCO”) meetings which are attended by the EXCO members. In addition, the EXCO also convenes, at the request of its members to discuss and approve matters that required immediate decisions.

• The holding of regular Management Committee meetings are attended by Executive Directors, Senior Management and Heads of Department to discuss and review operational performance and significant matters.

CONCLUSION

This Statement on Risk Management and Internal Control has been prepared in accordance with the Malaysian Code on Corporate Governance 2012 and paragraph 15.26(b) of the Bursa Malaysia Securities Berhad Listing Requirements. The External Auditors had reviewed this statement for inclusion in the Annual Report 2016 and had reported to the Board that the statement is consistent with their understanding of the process adopted by the Board in reviewing the adequacy and effectiveness of the system on Risk Management and Internal Control.

In addition, the Board had also received assurance from the Group CEO and Executive Director throughout the financial year that the Group Risk Management and Internal Control system is operating adequately and effectively.

The Board is therefore of the view that the current system on Risk Management and Internal Control of the Group that has been put in place is adequate and effective. Going forward; the Board will continue to monitor all risks faced by the Group including taking appropriate mitigating actions in its efforts to enhance the system of Risk Management and Internal Control.

This statement is made in accordance with the resolution of the Board of Directors dated 14 July 2016.

DIRECTORS’ REPORT 30

STATEMENTS OF FINANCIAL POSITION 34

STATEMENTS OF COMPREHENSIVE INCOME 36

STATEMENTS OF CHANGES IN EQUITY 37

STATEMENTS OF CASH FLOWS 38

NOTES TO THE FINANCIAL STATEMENTS 40

SUPPLEMENTARY INFORMATION ON REALISED AND UNREALISED PROFITS OR LOSSES 95

STATEMENT BY DIRECTORS 96

STATUTORY DECLARATION 97

INDEPENDENT AUDITORS’ REPORT 98

FINANCIAL STATEMENTS

30 2 0 1 6 A N N U A L R E P O R T

DIRECTORS’ REPORT

The directors hereby submit their report together with the audited financial statements of the Group and of the Company for the financial period ended 31 March 2016.

PRINCIPAL ACTIVITIES

The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are set out in Note 8 to the financial statements.

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

RESULTS

Group Company RM RM

Profit/(Loss) for the financial period, representing total comprehensive income/(loss) for the financial period

1,894,376 (795,918)

Attributable to:Owners of the Company 1,308,105 (795,918)Non-controlling interests 586,271 –

1,894,376 (795,918)

CHANGE OF FINANCIAL YEAR END

In 2016, the Company changed its financial year end from 31 January to 31 March and made up its financial statements for the 14 months period to 31 March 2016. Accordingly, comparative figures for the statements of comprehensive income, statements of changes in equity, statements of cash flows and the related notes are not entirely comparable with those for the current financial period.

DIVIDENDS

No dividend was paid or declared by the Company since the end of the previous financial year.

The directors do not recommend the payment of any dividends in respect of the financial period ended 31 March 2016.

RESERVES OR PROVISIONS

There were no material transfers to or from reserves or provisions during the financial period.

BAD AND DOUBTFUL DEBTS

Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and had satisfied themselves that all known bad debts had been written off and adequate allowance had been made for doubtful debts.

At the date of this report, the directors are not aware of any circumstances that would render the amount written off for bad debts, or the amount of the allowance for doubtful debts, in the financial statements of the Group and of the Company inadequate to any substantial extent.


DIRECTORS’ REPORT (cont’d)

CURRENT ASSETS

Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps to ensure that any current assets, other than debts, which were unlikely to be realised in the ordinary course of business, their values as shown in the accounting records of the Group and of the Company had been written down to an amount that they might be expected to realise.

At the date of this report, the directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

VALUATION METHODS

At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

CONTINGENT AND OTHER LIABILITIES

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

(i) any charge on the assets of the Group and of the Company that has arisen since the end of the financial period which secures the liabilities of any other person; or

(ii) any contingent liabilities in respect of the Group and of the Company that has arisen since the end of the financial period.

In the opinion of the directors, no contingent or other liabilities of the Group or of the Company has become enforceable, or is likely to become enforceable, within the period of twelve months after the end of the financial period which will or may substantially affect the ability of the Group or of the Company to meet their obligations as and when they fall due.

CHANGE OF CIRCUMSTANCES

At the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and of the Company that would render any amount stated in the financial statements misleading.

ITEMS OF AN UNUSUAL NATURE

The results of the operations of the Group and of the Company for the financial period were not, in the opinion of the directors, substantially affected by any item, transaction or event of a material and unusual nature.

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

ISSUE OF SHARES AND DEBENTURES

The Company has not issued any shares and debentures during the financial period.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up the unissued shares of the Company during the financial period.

32 2 0 1 6 A N N U A L R E P O R T


DIRECTORS

The directors in office since the date of the last report are:-

Dato’ Abdul Jalil Bin Abdul KarimDato’ Sheah Kok FahDr. Fam Seng ChoyRaizita Binti Ahmad @ Harun (Appointed on 1 September 2015)Rusdi Bin Mohamad NoorDato’ Kamarulzaman Bin JamilDato’ Said Ali Bin Said RastanDato’ Sri Raja Shah Zurin Bin Raja Aman Shah

(Appointed on 1 September 2015)(Appointed on 1 September 2015)(Appointed on 17 September 2015)(Resigned on 1 September 2015)

Haji Mat Anuar Bin Hasan (Resigned on 1 September 2015)

In accordance with Article 105 of the Company’s Articles of Association, Dato’ Abdul Jalil Bin Abdul Karim retire from the Board by rotation at the forthcoming Annual General Meeting and, being eligible, offer himself for re-election.

In accordance with Article 112 of the Company’s Articles of Association, Raizita Binti Ahmad @ Harun, Rusdi Bin Mohamad Noor, Dato’ Kamarulzaman Bin Jamil and Dato’ Said Ali Bin Said Rastan retire from the Board at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.

DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965 in Malaysia, the interests of directors in office at the end of the financial period in shares in the Company and its related corporations during the financial period as follows:-

Number of ordinary shares of RM1/- each At At

1.2.2015/ Bought Sold 31.3.2016 date of

appointment The Company

Indirect interest:Dato’ Abdul Jalil Bin Abdul Karim* 20,213,100 – – 20,213,100 Rusdi Bin Mohamad Noor* – 20,213,100 – 20,213,100

* Indirect interest by virtue of their interest in Desa Binapuri Sdn. Bhd..

By virtue of their interests in the ordinary shares of the Company and pursuant to Section 6A of the Companies Act, 1965 in Malaysia, Dato’ Abdul Jalil Bin Abdul Karim and Rusdi Bin Mohamad Noor are deemed to have an interest in the ordinary shares of the subsidiaries to the extent that the Company has an interest.

Other than stated above, none of the other directors in office at the end of the financial period had any interest in the ordinary shares of the Company and its related corporations during the financial period.

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 benefits included in the aggregate amount of emoluments received or due and receivable by the directors as shown in the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest.



DIRECTORS’ BENEFITS (cont’d)

Neither during nor at the end of the financial period was the Company or any of its related corporations a party to any arrangement, whose object was to enable the directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

AUDITORS

The auditors, Messrs Baker Tilly Monteiro Heng, have expressed their willingness to continue in office.

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

…………………………………………………………………DATO’ ABDUL JALIL BIN ABDUL KARIMDirector

…………………………………………………………………RAIZITA BINTI AHMAD @ HARUNDirector

Date: 14 July 2016

34 2 0 1 6 A N N U A L R E P O R T

Group Company31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RMNote

ASSETSNon-current assetsProperty, plant and equipment 5 21,364,490 20,672,434 428,508 561,163 Investment properties 6 13,750,000 13,750,000 – – Intangible assets 7 1,003,901 1,010,410 – – Investment in subsidiaries 8 – – 32,886,265 27,284,058 Investment in an associate 9 2,319,383 2,270,145 – –

Total non-current assets 38,437,774 37,702,989 33,314,773 27,845,221

Current assetsAmounts due from customers for contract works 10 23,411,326 37,132,320 – – Inventories 11 78,194 88,884 – – Trade receivables 12 34,982,087 19,325,365 – – Other receivables, deposits and prepayments 13 2,987,431 4,715,044 27,086 23,598 Amount due from subsidiaries 14 – – 998,063 1,749,488 Amount due from an associate 15 141,430 141,430 – – Tax recoverable 53,882 145,138 – – Deposits placed with licensed banks 16 11,488,650 12,186,585 – – Cash and bank balances 7,315,382 4,092,109 47,558 24,375

Total current assets 80,458,382 77,826,875 1,072,707 1,797,461

TOTAL ASSETS 118,896,156 115,529,864 34,387,480 29,642,682

STATEMENTS OF FINANCIAL POSITION as at 31 March 2016


Group CompanyNote 31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RMEQUITY AND LIABILITIESEquityShare capital 17 67,000,000 67,000,000 67,000,000 67,000,000 Share premium 17 7,712,508 7,712,508 7,712,508 7,712,508 Accumulated losses (15,418,629) (16,726,734) (60,771,624) (59,975,706)

59,293,879 57,985,774 13,940,884 14,736,802 Non-controlling interest 1,916,444 1,930,173 – –

TOTAL EQUITY 61,210,323 59,915,947 13,940,884 14,736,802

Non-current liabilitiesLoans and borrowings 18 1,627,779 1,286,461 – – Deferred tax liabilities 21 244,492 248,001 – –

Total non-current liabilities 1,872,271 1,534,462 – –

Current liabilitiesAmounts due to customers for contract works 10 357,393 343,779 – – Trade payables 22 14,605,918 11,502,039 – – Other payables, accruals and deposits 23 31,896,125 41,428,073 2,656,828 53,035 Amount due to subsidiaries 14 – – 17,789,768 14,852,845 Loans and borrowings 18 8,340,093 452,162 – – Provision for taxation 614,033 353,402 – –

Total current liabilities 55,813,562 54,079,455 20,446,596 14,905,880

TOTAL LIABILITIES 57,685,833 55,613,917 20,446,596 14,905,880

TOTAL EQUITY AND LIABILITIES 118,896,156 115,529,864 34,387,480 29,642,682

The accompanying notes form an integral part of these financial statements.

STATEMENTS OF FINANCIAL POSITION (cont’d)as at 31 March 2016

36 2 0 1 6 A N N U A L R E P O R T

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

Note RM RM RM RM

Revenue 24 118,226,454 92,343,677 900,000 – Cost of sales 25 (101,126,192) (81,366,603) – –

Gross profit 17,100,262 10,977,074 900,000 –

Other operating income 2,776,148 3,882,522 – – Administrative expenses (15,515,374) (11,376,487) (1,695,918) (749,092)

Operating profit/(loss) 4,361,036 3,483,109 (795,918) (749,092)Finance costs 26 (279,735) (89,883) – – Share of result of associate 49,238 (58,075) – –

Profit/(Loss) before taxation and zakat 27 4,130,539 3,335,151 (795,918) (749,092)Income tax expenses 28 (2,072,723) (857,073) – – Zakat (163,440) (52,882) – –

Profit/(Loss) for the financial period, representing total comprehensive income/(loss) for the financial period 1,894,376 2,425,196 (795,918) (749,092)Profit/(Loss) attributable to:Owners of the Company 1,308,105 2,172,663 (795,918) (749,092)Non-controlling interest 586,271 252,533 – –

1,894,376 2,425,196 (795,918) (749,092)

Total comprehensive income/(loss) attributable to:Owners of the Company 1,308,105 2,172,663 (795,918) (749,092)Non-controlling interest 586,271 252,533 – –

1,894,376 2,425,196 (795,918) (749,092)

Earnings per ordinary share (sen)- Basic 29 1.95 3.24

- Diluted 29 1.95 3.24


STATEMENTS OF COMPREHENSIVE INCOMEfor the financial period ended 31 March 2016


Attributable to Owners of the Company Non-Distributable Distributable Non-

ShareCapital

SharePremium

Accumulated Losses

Total controllingInterest

Total Equity

RM RM RM RM RM RM

GroupAt 1 February 2014 67,000,000 7,712,508 (18,899,397) 55,813,111 1,402,236 57,215,347 Contribution paid by

Non-controlling interest – – – – 275,404 275,404 Total comprehensive income

for the financial year – – 2,172,663 2,172,663 252,533 2,425,196

At 31 January 2015 67,000,000 7,712,508 (16,726,734) 57,985,774 1,930,173 59,915,947 Dividend paid to Non-controlling interest – – – – (600,000) (600,000)Total comprehensive income

for the financial period – – 1,308,105 1,308,105 586,271 1,894,376

At 31 March 2016 67,000,000 7,712,508 (15,418,629) 59,293,879 1,916,444 61,210,323

Share Share Accumulated Total Capital Premium Losses Equity

Company RM RM RM RMAt 1 February 2014 67,000,000 7,712,508 (59,226,614) 15,485,894 Total comprehensive loss for the financial year – – (749,092) (749,092)

At 31 January 2015 67,000,000 7,712,508 (59,975,706) 14,736,802 Total comprehensive loss for the financial period – – (795,918) (795,918)

At 31 March 2016 67,000,000 7,712,508 (60,771,624) 13,940,884


STATEMENTS OF CHANGES IN EQUITYfor the financial period ended 31 March 2016

38 2 0 1 6 A N N U A L R E P O R T

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

Note RM RM RM RM

CASH FLOWS FROM OPERATING ACTIVITIES:Profit/(Loss) before taxation and zakat 4,130,539 3,335,151 (795,918) (749,092)Adjustments for: Bad debts written off 149,003 26,362 – – Depreciation of property, plant and equipment 1,344,612 931,478 132,645 113,695 Deposits written off 17,352 – – – Dividend income from a subsidiary – – (900,000) – Gain on disposal of property, plant and equipment (75,166) (56,397) – – Gain from fair value adjustment of investment properties – (2,929,890) – – Property, plant and equipment written off 40,842 – 10 – Impairment loss on: - trade receivables 335,319 – – –

- amount due from a subsidiary – – 762,819 – - goodwill 154,416 – – – Interest expense 279,735 89,883 – – Interest income (331,319) (234,915) – – Share of associate’s result (49,238) 58,075 – – Waiver of debt (136,989) (220,000) – –

5,859,106 999,747 (800,444) (635,397)

Changes in working capital: Receivables 5,170,830 7,499,795 (3,488) 10,634 Payables (8,271,804) (1,029,313) 2,603,793 (896) Inventories 31,115 (64,308) – –

2,789,247 7,405,921 1,799,861 (625,659) Interest paid (177,025) (22,306) – – Tax paid (2,073,175) (1,460,782) – – Tax refunded 127,168 55,803 – – Zakat paid (163,440) – – –

Net Operating Cash Flows 502,775 5,978,636 1,799,861 (625,659)

CASH FLOWS FROM INVESTING ACTIVITIES: Interest received 331,319 234,915 – – Investment in subsidiaries – – (5,602,207) (413,106) Contribution paid by Non-controlling interest – 275,404 – – Dividend paid to Non-controlling interest (600,000) – – – Dividend received from a subsidiary – – 900,000 – Acquisition of a subsidiary, net of cash acquired 8 (4,428,629) – – – Proceeds from disposal of property, plant and equipment 121,283 70,700 – – Purchase of property, plant and equipment (Note A) (611,827) (380,637) – –

Net Investing Cash Flows (5,187,854) 200,382 (4,702,207) (413,106)

STATEMENTS OF CASH FLOWSfor the financial period ended 31 March 2016


Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RM

CASH FLOWS FROM FINANCING ACTIVITIES: Interest paid (102,710) (67,577) – – (Repayment to)/advances from a director (196,584) 196,584 – – Advances from subsidiaries – – 2,925,529 1,050,050 Drawdown of trust receipt 615,920 – – – Placement of deposit pledged with licensed banks (4,359,095) (966,645) – – Repayment of hire purchase liabilities (286,829) (316,302) – – Repayment of short term borrowing (13,429) (11,207) – –

Net Financing Cash Flows (4,342,727) (1,165,147) 2,925,529 1,050,050

NET CHANGES IN CASH AND CASH EQUIVALENTS (9,027,806) 5,013,871 23,183 11,285 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD/YEAR 9,081,897 4,068,026 24,375 13,090 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD/YEAR 54,091 9,081,897 47,558 24,375 CASH AND CASH EQUIVALENTS Cash and bank balances 7,315,382 4,092,109 47,558 24,375 Bank overdrafts (7,304,261) (110,212) – – Deposits placed with licensed banks 11,488,650 12,186,585 – –

11,499,771 16,168,482 47,558 24,375 Less: Deposit pledged with licensed banks (11,445,680) (7,086,585) – –

54,091 9,081,897 47,558 24,375

NOTE

A. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RM

Purchase of property, plant and equipment 998,627 1,189,637 – – Less:-- Financed by hire purchase installment plans (386,800) (809,000) – –

Cash payments 611,827 380,637 – –

STATEMENTS OF CASH FLOWS (cont’d)for the financial period ended 31 March 2016

40 2 0 1 6 A N N U A L R E P O R T

1. CORPORATE INFORMATION

Merge Energy Bhd. (“the Company”) is a public limited liability company, incorporated and domiciled in Malaysia, and listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office and the principal place of business of the Company is located at No. 2, Jalan Apollo U5/190, Bandar Pinggiran Subang, Seksyen U5, 40150 Shah Alam, Selangor Darul Ehsan.

The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are set out in Note 8 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial period.

During the financial year, the Company changed its financial year end from 31 January to 31 March and made up its financial statements for the 14 month period to 31 March 2016. Accordingly, comparative figures for the statements of comprehensive income, statements of changes in equity, statements of cash flows and the related notes are not entirely comparable with those for the current financial period.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 14 July 2016.

2. BASIS OF PREPARATION

2.1 Statement of Compliance

The financial statements of the Group and the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

2.2 Adoption of amendments/improvements to MFRSs

The Group and the Company have adopted the following amendments/improvements to MFRSs that are mandatory for the current financial period:

Amendments/Improvements to MFRSsMFRS 3MFRS 8

Business CombinationsOperating Segments

MFRS 13MFRS 116

Fair Value MeasurementProperty, Plant and Equipment

MFRS 119 Employee BenefitsMFRS 124MFRS 138MFRS 140

Related Party DisclosuresIntangible AssetsInvestment Property

The adoption of the above amendments/improvements to MFRSs did not have any significant effect on the financial statements of the Group and the Company, and did not result in any changes to the Group’s and the Company’s existing accounting policies except for those as discussed below:-

Amendments to MFRS 3 Business Combinations

Amendments to MFRS 3 clarify that when contingent consideration meets the definition of financial instrument, its classification as a liability or equity is determined by reference to MFRS 132. They also clarify that contingent consideration that is classified as an asset or a liability shall be subsequently measured at fair value at each reporting date and changes in fair value shall be recognised in profit or loss.

In addition, Amendments to MFRS 3 clarify that MFRS 3 excludes from its scope the accounting for the formation of all types of joint arrangements (as defined in MFRS 11) in the financial statements of the joint arrangement itself.

NOTES TO THE FINANCIAL STATEMENTS


2. BASIS OF PREPARATION (cont’d)

2.2 Adoption of amendments/improvements to MFRSs (cont’d)

Amendments to MFRS 8 Operating Segments

Amendments to MFRS 8 require an entity to disclose the judgements made by management in applying the aggregation criteria to operating segments. This includes a brief description of the operating segments that have been aggregated and the economic indicators that have been assessed in determining that the aggregated operating segments share similar economic characteristics.

The amendments also clarify that an entity shall provide reconciliations of the total of the reportable segments’ assets to the entity’s assets if the segment assets are reported regularly to the chief operating decision maker.

Amendments to MFRS 13 Fair Value Measurement

Amendments to MFRS 13 relate to the IASB’s Basis for Conclusions which is not an integral part of the Standard. The Basis for Conclusions clarifies that when IASB issued IFRS 13, it did not remove the practical ability to measure short-term receivables and payables with no stated interest rate at invoice amounts without discounting, if the effect of discounting is immaterial.

The amendments also clarify that the scope of the portfolio exception of MFRS 13 includes all contracts accounted for within the scope of MFRS 139 or MFRS 9, regardless of whether they meet the definition of financial assets or financial liabilities as defined in MFRS 132.

Amendments to MFRS 116 Property, Plant and Equipment

Amendments to MFRS 116 clarify the accounting treatment for the accumulated depreciation when an asset is revalued. They clarify that:

• the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset; and

• the accumulated depreciation is calculated as the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses.

Amendments to MFRS 119 Employee Benefits

Amendments to MFRS 119 provide a practical expedient in accounting for contributions from employees or third parties to defined benefit plans.

If the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the related service is rendered, instead of attributing the contributions to the periods of service.

However, if the amount of the contributions is dependent on the number of years of service, an entity is required to attribute those contributions to periods of service using the same attribution method required by MFRS 119 for the gross benefit (i.e. either based on the plan’s contribution formula or on a straight-line basis).

Amendments to MFRS 124 Related Party Disclosures

Amendments to MFRS 124 clarify that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity.

NOTES TO THE FINANCIAL STATEMENTS (cont’d)

42 2 0 1 6 A N N U A L R E P O R T


2.2 Adoption of amendments/improvements to MFRSs (cont’d)

Amendments to MFRS 138 Intangible Assets

Amendments to MFRS 138 clarify the accounting treatment for the accumulated amortisation when an asset is revalued. They clarify that:

• the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset; and

• the accumulated amortisation is calculated as the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses.

Amendments to MFRS 140 Investment Property

Amendments to MFRS 140 clarify that the determination of whether an acquisition of investment property meets the definition of both a business combination as defined in MFRS 3 and investment property as defined in MFRS 140 requires the separate application of both Standards independently of each other.

2.3 New MFRSs and amendments/improvements to MFRSs that have been issued, but yet to be effective

The Group and the Company have not adopted the following new MFRSs and amendments/improvements to MFRSs that have been issued, but yet to be effective:

Effective for financial periods beginning on or after

New MFRSsMFRS 9MFRS 15MFRS 16

Financial InstrumentsRevenue from Contracts with CustomersLeases

1 January 20181 January 20181 January 2019

Amendments/Improvements to MFRSsMFRS 5 Non-current Asset Held for Sale and Discontinued Operations 1 January 2016MFRS 7 Financial Instruments: Disclosures 1 January 2016MFRS 10 Consolidated Financial Statements Deferred/1 January 2016MFRS 11 Joint Arrangements 1 January 2016MFRS 12 Disclosure of Interest in Other Entities 1 January 2016MFRS 101MFRS 107MFRS 112

Presentation of Financial StatementsStatement of Cash FlowsIncome Taxes

1 January 20161 January 20171 January 2017

MFRS 116 Property, Plant and Equipment 1 January 2016MFRS 119 Employee Benefits 1 January 2016MFRS 127 Separate financial statements 1 January 2016MFRS 128 Investments in Associates and Joint Ventures Deferred/1 January 2016MFRS 138MFRS 141

Intangible AssetsAgriculture

1 January 20161 January 2016

A brief discussion on the above significant new MFRSs and Amendments/Improvements to MFRSs are summarised below. Due to the complexity of these new MFRSs and Amendments/Improvements to MFRSs, the financial effects of their adoption are currently still being assessed by the Group and the Company.




2.3 New MFRSs and amendments/improvements to MFRSs that have been issued, but yet to be effective (cont’d)

MFRS 9 Financial Instruments

Key requirements of MFRS 9:-

• MFRS 9 introduces an approach for classification of financial assets which is driven by cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being applied to all financial instruments.

In essence, if a financial asset is a simple debt instrument and the objective of the entity’s business model within which it is held is to collect its contractual cash flows, the financial asset is measured at amortised cost. In contrast, if that asset is held in a business model the objective of which is achieved by both collecting contractual cash flows and selling financial assets, then the financial asset is measured at fair value in the statements of financial position, and amortised cost information is provided through profit or loss. If the business model is neither of these, then fair value information is increasingly important, so it is provided both in the profit or loss and in the statements of financial position.

• MFRS 9 introduces a new, expected-loss impairment model that will require more timely recognition of expected credit losses. Specifically, this Standard requires entities to account for expected credit losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a timelier basis. The model requires an entity to recognise expected credit losses at all times and to update the amount of expected credit losses recognised at each reporting date to reflect changes in the credit risk of financial instruments. This model eliminates the threshold for the recognition of expected credit losses, so that it is no longer necessary for a trigger event to have occurred before credit losses are recognised.

• MFRS 9 introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities, enabling entities to better reflect these activities in their financial statements. In addition, as a result of these changes, users of the financial statements will be provided with better information about risk management and the effect of hedge accounting on the financial statements.

MFRS 15 Revenue from Contracts with Customers

The core principle of MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with the core principle by applying the following steps:

(i) identify the contracts with a customer;(ii) identify the performance obligation in the contract;(iii) determine the transaction price;(iv) allocate the transaction price to the performance obligations in the contract; and(v) recognise revenue when (or as) the entity satisfies a performance obligation.

MFRS 15 also includes new disclosures that would result in an entity providing users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers.

The following MFRSs and IC Interpretations will be withdrawn on the application of MFRS 15:

MFRS 111 Construction ContractsMFRS 118 RevenueIC Interpretation 13 Customer Loyalty ProgrammesIC Interpretation 15 Agreements for the Construction of Real EstateIC Interpretation 18 Transfers of Assets from CustomersIC Interpretation 131 Revenue – Barter Transactions Involving Advertising Services


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MFRS 16 Leases

Currently under MFRS 117 Leases, leases are classified either as finance leases or operating leases. A lessee recognises on its statements of financial position assets and liabilities arising from the finance leases.

MFRS 16 eliminates the distinction between finance and operating leases for lessees. All leases will be brought onto its statements of financial position except for short-term and low value asset leases.

Amendments to MFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Amendments to MFRS 5 introduce specific guidance on when an entity reclassifies an asset (or disposal group) from held for sale to held for distribution to owners (or vice versa), or when held-for-distribution is discontinued.

Amendments to MFRS 7 Financial Instruments: Disclosures Amendments to MFRS 7 provide additional guidance to clarify whether servicing contracts constitute continuing

involvement for the purposes of applying the disclosure requirements of MFRS 7.

The amendments also clarify the applicability of Disclosure – Offsetting Financial Assets and Financial Liabilities (Amendments to MFRS 7) to condensed interim financial statements.

Amendments to MFRS 11 Joint Arrangements

Amendments to MFRS 11 clarify that when an entity acquires an interest in a joint operation in which the activity of the joint operation constitutes a business, as defined in MFRS 3, it shall apply the relevant principles on business combinations accounting in MFRS 3, and other MFRSs, that do not conflict with MFRS 11. Some of the impact arising may be the recognition of goodwill, recognition of deferred tax assets/ liabilities and recognition of acquisition-related costs as expenses. The amendments do not apply to joint operations under common control and also clarify that previously held interests in a joint operation are not re-measured if the joint operator retains joint control.

Amendments to MFRS 101 Presentation of Financial Statements

Amendments to MFRS 101 improve the effectiveness of disclosures. The amendments clarify guidance on materiality and aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies.

Amendments to MFRS 107 Statement of Cash Flows

Amendments to MFRS 107 require entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including changes from cash flows and non-cash changes. The disclosure requirement could be satisfied in various ways, and one method is by providing reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities.

Amendments to MFRS 112 Income Taxes

Amendments to MFRS 112 clarify that decreases in value of debt instrument measured at fair value for which the tax base remains at its original cost give rise to a deductible temporary difference. The estimate of probable future taxable profits may include recovery of some of an entity’s assets for more that their carrying amounts if sufficient evidence exists that it is probable the entity will achieve this.






Amendments to MFRS 112 Income Taxes (cont’d)

The amendments also clarify that deductible temporary differences should be compared with the entity’s future taxable profits excluding tax deductions resulting from the reversal of those deductible temporary differences when an entity evaluates whether it has sufficient future taxable profits. In addition, when an entity assesses whether taxable profits will be available, it should consider tax law restrictions with regards to the utilisation of the deduction.

Amendments to MFRS 116 Property, Plant and Equipment

Amendments to MFRS 116 prohibit revenue-based depreciation because revenue does not reflect the way in which an item of property, plant and equipment is used or consumed.

Amendments to MFRS 119 Employee Benefits

Amendments to MFRS 119 clarify that the high quality corporate bonds used to estimate the discount rate for post-employment benefit obligations should be denominated in the same currency as the liability and the depth of the market for high quality corporate bonds should be assessed at a currency level.

Amendments to MFRS 127 Separate Financial Statements

Amendments to MFRS 127 allow a parent and investors to use the equity method in its separate financial statements to account for investments in subsidiaries, joint ventures and associates, in addition to the existing options.

Amendments to MFRS 138 Intangible Assets

Amendments to MFRS 138 introduce a rebuttable presumption that the revenue-based amortisation method is inappropriate. This presumption can be overcome only in the following limited circumstances:

• when the intangible asset is expressed as a measure of revenue, i.e. in the circumstance in which the predominant limiting factor that is inherent in an intangible asset is the achievement of a revenue threshold; or

• when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated.

Amendments to MFRS 10 Consolidated Financial Statements and MFRS 128 Investments in Associates and Joint Ventures

These amendments address an acknowledged inconsistency between the requirements in MFRS 10 and those in MFRS 128, in dealing with the sale or contribution of assets between an investor and its associate or joint venture.

The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business, as defined in MFRS 3. A partial gain or loss is recognised when a transaction involves assets that do not constitute a business.

Amendments to MFRS 10 Consolidated Financial Statements, MFRS 12 Disclosures of Interests in Other Entities and MFRS 128 Investments in Associates and Joint Ventures

These amendments address the following issues that have arisen in the application of the consolidation exception for investment entities:

• Exemption from presenting consolidated financial statements: the amendments clarify that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value.

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Amendments to MFRS 10 Consolidated Financial Statements, MFRS 12 Disclosures of Interests in Other Entities and MFRS 128 Investments in Associates and Joint Ventures (cont’d)

• Consolidation of intermediate investment entities: the amendments clarify that only a subsidiary is not an investment entity itself and provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value.

• Policy choice for equity accounting for investments in associates and joint ventures: the amendments allow a non-investment entity that has an interest in an associate or joint venture that is an investment entity, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interest in subsidiaries, or to unwind the fair value measurement and instead perform a consolidation at the level of the investment entity associate or joint venture.

2.4 Functional and presentation currency

The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which they operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (“RM”), which is also the Company’s functional currency.

2.5 Basis of measurement

The financial statements of the Company have been prepared on the historical cost basis, except as otherwise disclosed in Note 3.

2.6 Use of estimates and judgement

The preparation of financial statements in conformity with MFRSs requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of the revenue and expenses during the reporting period. It also requires directors to exercise their judgement in the process of applying the Group’s and the Company’s accounting policies. Although these estimates and judgement are based on the directors’ best knowledge of current events and actions, actual results may differ.

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

3. SUMMARY OF SIGNIFICANT ACCOUTING POLICIES

Unless otherwise stated, the following accounting policies have been applied consistently to all the financial years presented in the financial statements of the Group and of the Company.

3.1 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. The financial statements of the subsidiaries and associates used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

(a) Subsidiaries and business combination

Subsidiaries are entities (including structured entities) over which the Group is exposed, or has rights, to variable returns from its involvement with the acquirees and has the ability to affect those returns through its power over the acquirees.



3. SUMMARY OF SIGNIFICANT ACCOUTING POLICIES (cont’d)

3.1 Basis of consolidation (cont’d)

(a) Subsidiaries and business combination (cont’d)

The financial statements of subsidiaries are included in the consolidated financial statements from the date the Group obtains control of the acquirees until the date the Group loses control of the acquirees.

The Group applies the acquisition method to account for business combinations from the acquisition date.

For a new acquisition, goodwill is initially measured at cost, being the excess of the following:

• the fair value of the consideration transferred, calculated as the sum of the acquisition-date fair value of assets transferred (including contingent consideration), the liabilities incurred to former owners of the acquiree and the equity instruments issued by the Group. Any amounts that relate to pre-existing relationships or other arrangements before or during the negotiations for the business combination, that are not part of the exchange for the acquiree, will be excluded from the business combination accounting and be accounted for separately; plus

• the recognised amount of any non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date (the choice of measurement basis is made on an acquisition-by-acquisition basis); plus

• if the business combination is achieved in stages, the acquisition-date fair value of the previously held equity interest in the acquiree; less

• the net fair value of the identifiable assets acquired and the liabilities (including contingent liabilities) assumed at the acquisition date.

The accounting policy for goodwill is set out in Note 3.7.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss at the acquisition date.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

If the business combination is achieved in stages, the Group remeasures the previously held equity interest in the acquiree to its acquisition-date fair value, and recognises the resulting gain or loss, if any, in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss or transferred directly to retained earnings on the same basis as would be required if the acquirer had disposed directly of the previously held equity interest.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, the Group uses provisional fair value amounts for the items for which the accounting is incomplete. The provisional amounts are adjusted to reflect new information obtained about facts and circumstances that existed as of the acquisition date, including additional assets or liabilities identified in the measurement period. The measurement period for completion of the initial accounting ends as soon as the Group receives the information it was seeking about facts and circumstances or learns that more information is not obtainable, subject to the measurement period not exceeding one year from the acquisition date.

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any gain or loss arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an associate, a joint venture, an available-for-sale financial asset or a held for trading financial asset.


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3.1 Basis of consolidation (cont’d)

(a) Subsidiaries and business combination (cont’d)

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The difference between the Group’s share of net assets before and after the change, and the fair value of the consideration received or paid, is recognised directly in equity.

(b) Non-controlling interests

Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company and are presented separately in the consolidated statement of financial position within equity.

Losses attributable to the non-controlling interests are allocated to the non-controlling interests even if the losses exceed the non-controlling interests.

(c) Associates

Associates are entities over which the Group has significant influence, but not control, to the financial and operating policies.

Investment in associates are accounted for in the consolidated financial statements using the equity method.

Under the equity method, the investment in associates are initially recognised at cost. The cost of investment includes transaction costs. Subsequently, the carrying amount is adjusted to recognise changes in the Group’s share of net assets of the associate.

When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest including any long-term investments is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate.

When the Group ceases to have significant influence over an associate, any retained interest in the former associate at the date when significant influence is lost is measured at fair value and this amount is regarded as the initial carrying amount of an available-for-sale financial asset or a held for trading financial asset. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

When the Group’s interest in an associate decreases but does not result in a loss of significant influence, any retained interest is not remeasured. Any gain or loss arising from the decrease in interest is recognised in profit or loss. Any gains or losses previously recognised in other comprehensive income are also reclassified proportionately to the profit or loss if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets or liabilities.

(d) 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 associates and joint ventures are eliminated against the investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same ways as unrealised gains, but only to the extent that there is no evidence of impairment.

3.2 Separate financial statements

In the Company’s statements of financial position, investment in subsidiaries and associates are measured at cost less any accumulated impairment losses, unless the investment is classified as held for sale or distribution. The policy for the recognition and measurement of impairment losses shall be applied on the same basis as would be required for impairment of non-financial assets as disclosed in Note 3.11(b).




3.3 Financial instruments

Financial instruments are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contract provisions of the financial instrument.

Financial instruments are recognised initially at fair value, except for financial instruments not measured at fair value through profit or loss, they are measured at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial instruments.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised as fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with the policy applicable to the nature of the host contract.

(a) Subsequent measurement

The Group and the Company categorise the financial instruments as follows:

(i) Financial assets

Financial assets at fair value through profit or loss

Financial assets are classified as financial assets at fair value through profit or loss when the financial assets are either held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or are designated into this category upon initial recognition.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value with the gain or loss recognised in profit or loss.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at costs.

Loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method less accumulated impairment losses, if any. Gains and losses are recognised in profit or loss through the amortisation process.

Held-to-maturity investments

Financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold them to maturity.

Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method less accumulated impairment losses, if any. Gains and losses are recognised in profit or loss through the amortisation process.

Available-for-sale financial assets

Available-for-sale financial assets comprise investment in equity and debt securities that are designated as available-for-sale or are not classified in any of the three preceding categories.


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3.3 Financial instruments (cont’d)

(a) Subsequent measurement (cont’d)

(i) Financial assets (cont’d)

Available-for-sale financial assets (cont’d)

Subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except for impairment losses and foreign exchange gains and losses arising from monetary items and gains and losses of hedged items attributable to hedge risks of fair values hedges which are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established.

Unquoted equity instruments carried at cost

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less accumulated impairment losses, if any.

(ii) Financial liabilities

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities designated into this category upon initial recognition.

Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value with the gain or loss recognised in profit or loss.

Derivatives that are linked to and must be settled by delivery of equity instruments that do not have a quoted price in an active market for identical instruments whose fair values otherwise cannot be reliably measured are measured at cost.

Other financial liabilities

Subsequent to initial recognition, other financial liabilities are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss through the amortisation process.

(b) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation.





(c) Regular way purchase or sale of financial assets

A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting (i.e. the date the Group and the Company themselves purchase or sell an asset). Trade date accounting refers to:

(i) the recognition of an asset to be received and the liability to pay for it on the trade date; and

(ii) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date.

(d) Derecognition

A financial asset or a part of it is derecognised when, and only when, the contractual rights to receive the cash flows from the financial asset expire or control of the asset is not retained or substantially all of the risks and rewards of ownership of the financial asset are transferred to another party. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged, cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

(e) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is presented in the statements of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

(f) Hedge accounting

Fair value hedge

In a fair value hedge, the gain or loss from remeasuring the hedging instrument at fair value or the foreign currency component of its carrying amount translated at the exchange rate prevailing at the reporting date is recognised in profit or loss. For a hedged item that is otherwise measured at cost, the gain or loss attributable to the hedged risk shall adjust the carrying amount of the hedged item and be recognised in profit or loss. For a hedged item categorised as available-for-sale, the fair value gain or loss attributable to the hedged risk is recognised in profit or loss.

Fair value hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, the hedge is no longer highly effective or the hedge designation is revoked.

Cash flow hedge

In a cash flow hedge, the effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income and the ineffective portion is recognised in profit or loss.


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(f) Hedge accounting (cont’d)

Cash flow hedge (cont’d)

Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss in the same period or periods during which the hedged forecast cash flows affect profit or loss. If the forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income are transferred from equity and included in the initial amount of the asset or liability.

Cash flow hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, the hedge is no longer highly effective, the forecast transaction is no longer expected to occur or the hedge designation is revoked. If the hedge is for a forecast transaction, the cumulative gain or loss on the hedging instrument remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, any related cumulative gain or loss recognised in other comprehensive income on the hedging instrument is reclassified from equity into profit or loss.

Hedge of a net investment

In a net investment hedge, the effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income and the ineffective portion is recognised in profit or loss.

The cumulative gain or loss recognised in other comprehensive income is reclassified from equity to profit or loss on disposal of the foreign operation.

3.4 Property, Plant and Equipment and Depreciation

Property, plant and equipment are initially stated at cost. After initial recognition, property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. The policy for the recognition and measurement of impairment losses is in accordance with Note 3.11(b).

Cost includes expenditure that is directly attributable to the acquisition of the asset and any other costs that are 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.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

The cost of replacing part of an item of property, plant and equipment is included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss as incurred.

Property, plant and equipment are depreciated on straight line basis by allocating their depreciable amounts over their remaining useful lives.

Useful lives (years)

Long term leasehold properties 50 yearsPlant and machineries 5 – 10 yearsMotor vehicles 5 – 10 yearsFurniture, fittings and office equipment 3 – 20 yearsOffice renovation 20 years




3.4 Property, Plant and Equipment and Depreciation (cont’d)

Long term leasehold properties are depreciated over the lease term as the Group has not been able to segregate the cost of the building from the cost of the related long term leasehold land. The directors are of the opinion that the depreciation of the building has no material effect on the financial statements of the Group.

The residual values, useful lives and depreciation methods are reviewed at each reporting period and adjusted as appropriate.

Fully depreciated assets are retained in the accounts until the assets are no longer in use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognised profit or loss.

3.5 Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets.

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. All other leases that do not meet this criterion are classified as operating leases.

(a) Lessee accounting

If an entity in the Group is a lessee in a finance lease, it capitalises the leased asset and recognises the related liability. The amount recognised at the inception date is the fair value of the underlying leased asset or, if lower, the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that assets.

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are charged as expenses in the periods in which they are incurred.

The capitalised leased asset is classified by nature as property, plant and equipment or investment property.

For operating leases, the Group does not capitalise the leased asset or recognise the related liability. Instead lease payments under an operating lease are recognised as an expense on the straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the user’s benefit.

Any upfront lease payments are classified as land use rights within intangible assets.

3.6 Investment properties

Investment properties are investment in land and buildings that are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group.

Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at fair value. Gains and losses arising from changes in the fair values of investment properties are recognised in profit or loss for the period in which they arise.

Cost includes purchase price and directly attributable costs incurred to bring the property to its present location and condition intended for use as an investment property. The cost of a self-constructed investment property includes the cost of materials, direct labour and any other direct attributable costs to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.


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3.6 Investment properties (cont’d)

Investment properties are derecognised when either they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds, if any and the carrying amount of the assets is recognised in profit or loss in the period of the retirement or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property carried at fair value to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. For a transfer from owner-occupied property to investment property, any difference arising on the date of change in use between the carrying amount of the item immediately prior to the transfer and its fair value is recognised directly in equity as a revaluation of property, plant and equipment.

3.7 Goodwill

Goodwill arising from business combinations is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

In respect of equity-accounted associates and joint ventures, goodwill is included in the carrying amount of the investment and is not tested for impairment individually. Instead, the entire carrying amount of the investment is tested for impairment as a single asset when there is objective evidence of impairment.

3.8 Inventories

Inventories are measured at the lower of cost and net realisable value.

Costs includes the actual cost of purchase and other costs incurred in bringing the inventories to their present location and condition.

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.

3.9 Construction work-in-progress

Construction work-in-progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognised to date less progress billing and recognised losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s and the Company’s contract activities based on operating capacity.

Construction work-in-progress is presented as part of contract assets as amount owing by contract customers in the statements of financial position for all contracts in which costs incurred plus recognised profits exceed progress billings. If progress billings exceed costs incurred plus recognised profits, then the difference is presented as amount owing to contract customers which is part of the contract liabilities in the statement of financial position.

3.10 Cash and cash equivalents

For the purpose of the statements of cash flows, cash and cash equivalents comprise cash on hand, bank balances and deposits and other short-term, highly liquid investments with a maturity of three months or less, that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents are presented net of bank overdrafts.




3.11 Impairment of assets

(a) Impairment and uncollectibility of financial assets

At each reporting date, all financial assets (except for financial assets categorised as fair value through profit or loss and investment in subsidiaries and associates) are assessed whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the financial asset that can be reliably estimated. Losses expected as a result of future events, no matter how likely, are not recognised.

Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Loans and receivables and held-to-maturity investments

The Group and the Company first assess whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If no objective evidence for impairment exists for an individually assessed financial asset, whether significant or not, the Group and the Company may include the financial asset in a group of financial assets with similar credit risk characteristics and collectively assess them for impairment. Financial assets that are individually assessed for impairment for which an impairment loss is or continues to be recognised are not included in the collective assessment of impairment.

The amount of impairment loss is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the financial asset is reduced through the use of an allowance account and the loss is recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases due to an event occurring after the impairment that was recognised, the previously recognised impairment loss is then reversed by adjusting an allowance account to the extent that the carrying amount of the financial asset does not exceed what the amortised cost would have been had the impairment not been recognised.

Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group and the Company. If a write-off is later recovered, the recovery is credited to the profit or loss.

Available-for-sale financial assets

In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value below its cost is considered to be objective evidence of impairment. The Group and the Company use their judgement to determine what is considered as significant or prolonged decline, evaluating past volatility experiences and current market conditions.

Where a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised in other comprehensive income shall be reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognised. The amount of cumulative loss that is reclassified from equity to profit or loss shall be the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss.


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3.11 Impairment of assets (cont’d)

(a) Impairment and uncollectibility of financial assets (cont’d)

Available-for-sale financial assets (cont’d)

Impairment losses on available-for-sale equity investments are not reversed through profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss, is recognised in other comprehensive income.

For available-for-sale debt investments, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to a loss event occurring after the recognition of the impairment loss in profit or loss.

(b) Impairment of non-financial assets

The carrying amounts of non-financial assets (except for inventories, amount due from customers for contract work, deferred tax assets, assets arising from employee benefits, investment properties measured at fair value, biological assets and non-current assets or disposal groups classified as held for sale) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the Group and the Company make an estimate of the asset’s recoverable amount. For goodwill and intangible assets that have indefinite useful life and are not yet available for use, the recoverable amount is estimated at each reporting date.

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 non-financial assets or cash-generating units (“CGUs”). Subject to an operating segment ceiling test, for the purpose of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to a CGU or a group of CGUs that are expected to benefit from the synergies of business combination.

The recoverable amount of an asset or a CGU is the higher of its fair value less costs of disposal and its value-in-use. 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 or CGU. In determining the fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.

Where the carrying amount of an asset exceed its recoverable amount, the carrying amount of asset is reduced to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

Impairment losses are recognised in profit or loss, except for assets that were previously revalued with the revaluation surplus recognised in other comprehensive income. In the latter case, the impairment is recognised in other comprehensive income up to the amount of any previous revaluation.

Impairment losses in respect of goodwill are not reversed. For other assets, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. An impairment loss is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase.




3.12 Share capital

Ordinary shares

Ordinary shares are equity instruments. An equity instrument is a contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

3.13 Employee benefits

(a) Short-term employee benefits

Short-term employee benefit obligations in respect of wages, salaries, social security contributions, annual bonuses, paid annual leave, sick leave and non-monetary benefits are recognised as an expense in the financial year where the employees have rendered their services to the Group.

(b) Defined contribution plans

As required by law, the Group and the Company contribute to the Employees Provident Fund (“EPF”), the national defined contribution plan. Such contributions are recognised as an expense in the profit or loss in the period in which the employees render their services.

3.14 Revenue and other income

The Group and the Company recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Group and the Company expect to be entitled in exchange for those goods or services.

The Group and the Company measure revenue from a sale of goods or a service transaction at the fair value of the consideration received or receivable, which is usually the invoice price, net of any trade discounts and volume rebates given to the customer. If the transaction price includes variable consideration, the Group and the Company use the expected value method by estimating the sum of probability-weighted amounts in a range or possible consideration amounts, or the most likely outcome method, depending on which method the Group and the Company expect to better predict the amount of consideration to which it is entitled.

(a) Sale of goods

Revenue from sale of goods is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(b) Construction contracts

For a construction service contract with a customer, when control of the promised construction service is transferred over time to the customer (and hence the performance obligation is satisfied over time), revenue is recognised in profit or loss over time or progressively by reference to the stage of completion in a performance obligation. The stage of completion is measured using the costs incurred for work performed to date bear to the estimated total costs (an input method). When the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

(c) Interest income

Interest income is recognised using the effective interest method.


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3.14 Revenue and other income (cont’d)

(d) Dividend income

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

(e) Rental income

Rental income from investment property is recognised on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.

3.15 Borrowing costs

Borrowing costs are interests and other costs that the Group and the Company incur in connection with borrowing of funds.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

The Group and the Company begin capitalising borrowing costs when the Group and the Company have incurred the expenditures for the asset, incurred related borrowing costs and undertaken activities that are necessary to prepare the asset for its intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on

qualifying assets is deducted from the borrowing costs eligible for capitalisation.

3.16 Income tax

Income tax expense in profit or loss comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

(a) Current Tax

Current tax is the expected taxes payable or receivable on the taxable income or loss for the financial year, using the tax rates that have been enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.

(b) Deferred Tax

Deferred tax is recognised using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the statements of financial position. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, unutilised tax losses and unused tax credits, to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax is not recognised if the temporary differences arise from the initial recognition of assets and liabilities in a transaction which is not a business combination and that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.




3.16 Income tax (cont’d)

(b) Deferred Tax (cont’d)

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, branches, associates and interests in joint ventures, except where the Group is able to control the reversal timing of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

Where investment properties are carried at fair value in accordance with the accounting policy as disclosed in Note, the amount of deferred tax recognized is measured using the tax rates that would apply on sale of those assets at their carrying value at the reporting date unless the property is depreciable and is held within the business model whose objective is to consume substantially all the economic benefits embodied in the property over time, rather than through sale.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority on the same taxable entity, or on different tax entities, but they intend to settle their income tax recoverable and income tax payable on a net basis or their tax assets and liabilities will be realised simultaneously.

3.17 Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Chief Executive Officer of the Group, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the chief operating decision maker that makes strategies decisions.

3.18 Fair value measurements

Fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

For a non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.


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3.18 Fair value measurements (cont’d)

When measuring the fair value of an asset or a liability, the Group and the Company use observable market data as far as possible. Fair value is categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group and the Company can access at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

The Group and the Company recognise transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers.

4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

Significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have significant effect in determining the amount recognised in the financial period include the following:

(a) Classification between investment properties and property, plant and equipment

Certain property comprises a portion that is held to earn rental income or capital appreciation, or for both, whilst the remaining portion is held for use in the production or supply of goods and services or for administrative purposes. If the portion held for rental and/or capital appreciation could be sold separately (or leased out separately as a finance lease), the Group and the Company account for that portion as an investment property. If the portion held for rental and/or capital appreciation could be sold or leased out separately, it is classified as an investment property only if an insignificant portion of the property is held for use in the production or supply of goods and services or for administrative purposes. Management uses judgement to determine whether any ancillary services are of such significance that a property does not qualify as an investment property.

(b) Construction contract

Significant judgement is used in determining the stage of completion, the extent of the contract costs incurred, the estimated total contract revenue (for contracts other than fixed price contracts) and costs, as well as the recoverability of the contracts. Total contracts revenue also includes an estimation of the work that are recoverable from the customers. In making judgements, the Group and the Company evaluate based on the past experience and work of specialists.

The carrying amounts of amount owing by contract customers and amount owing to contract customers are disclosed in Note 10.

(c) Depreciation and useful lives of property, plant and equipment

As disclosed in Note 3.4, the Group and the Company review the residual values, useful lives and depreciation methods at the end of each reporting period. Estimates are applied in the selection of the depreciation method, the useful lives and the residual values. The actual consumption of the economic benefits of the property, plant and equipment may differ from the estimates applied and therefore, future depreciation charges could be revised.

The carrying amounts of the Group’s and the Company’s property, plant and equipment are disclosed in Note 5.



4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (cont’d)

(d) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the statements of financial position cannot be measured based on quoted prices in active markets, their fair value are measured using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values.

Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

The information on the fair value measurements of financial assets and liabilities are disclosed in Note 32.

(e) Impairment of goodwill

The Group assesses at each reporting date whether there is any indication that goodwill may be impaired. For the purpose of assessing impairment, assets (including goodwill) are grouped at the lowest level where there are separately identifiable cash flows (cash-generating units). In determining the value-in-use of a cash-generating unit, management estimates the discounted cash flows using reasonable and supportable inputs about sales, costs of sales and other expenses based on past experience, current events and reasonably possible future developments. Cash flows that are projected based on those inputs or assumptions and the discount rate applied in the measurement of value-in-use may have a significant effect on the Group’s financial position and results if the actual cash flows are less than the expected.

The carrying amount of the Group’s goodwill and key assumptions used to determine the recoverable amount for different cash-generating units, including sensitivity analysis, are disclosed in Note 7.

(f) Impairment of financial assets

The Group and the Company recognise impairment losses for loans and receivables using the incurred loss model. At the end of each reporting period, the Group and the Company assess whether there is any objective evidence that loans and receivables is impaired. Individually significant loans and receivables are tested for impairment separately by estimating the cash flows expected to be recoverable. All others are grouped into credit risk classes and tested for impairment collectively, using the Group’s and the Company’s past experience of loss statistics, ageing of past due amounts and current economic trends. The actual eventual losses may be different from the impairment made and this may affect the Group’s and the Company’s financial position and results.

(g) Measurement of income taxes

Significant judgement is required in determining the Group’s and the Company’s estimation for current and deferred taxes because the ultimate tax liability for the Group as a whole is uncertain. When the final outcome of the tax payable is determined with the tax authorities in each jurisdiction, the amounts might be different from the initial estimates of the taxes payables. Such differences may impact the current and deferred taxes in the period when such determination is made. The Group and the Company will make adjustments for current or deferred taxes in respect of prior years in the current period on those differences arise. The income tax expense of the Group and the Company are disclosed in Note 28.

(h) Deferred tax assets Deferred tax assets are recognised for deductible temporary differences, unused tax losses and unabsorbed capital

allowances based on the projected future profits of the subsidiaries to the extent that is probable that taxable profit will be available against which the temporary differences can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the future performance of the subsidiaries.


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4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (cont’d)

(i) Impairment of non-financial assets

The Group and the Company assess impairment of non-financial assets whenever the events or changes in circumstances indicate that the carrying amount of an asset may be recoverable i.e. the carrying amount of the asset is more than the recoverable amount.

Recoverable amount is measured at the higher of the fair value less cost of disposal for that asset and its value-in-use. The value-in-use is the net present value of the projected future cash flows derived from that asset discounted at an appropriate discount rate. Projected future cash flows are based on the Group’s and the Company’s estimates, taking into consideration factors such as historical and industry trends, general market and economic conditions and other available information. Cash flows that are projected based on those inputs or assumptions and the discount rate applied in the measurement of value-in-use may have a significant effect on the Group’s financial position and results if the actual cash flows are less than the expected.

5. PROPERTY, PLANT AND EQUIPMENT

Long Term Leasehold Properties

Plant and Machineries

Motor Vehicles

Fittings and Office

Equipment Office

Renovation Total Group RM RM RM RM RM RM

CostAt 1 February 2014 19,385,093 26,001 2,412,398 1,892,021 1,981,393 25,696,906 Additions – – 942,114 247,523 – 1,189,637 Disposals – – (307,045) – – (307,045)

At 31 January 2015 19,385,093 26,001 3,047,467 2,139,544 1,981,393 26,579,498 Acquisition of subsidiaries 691,811 47,028 313,399 72,762 – 1,125,000 Additions – 27,810 757,236 213,581 – 998,627 Disposals/write off – (26,001) (382,613) (982,716) (29,000) (1,420,330)

At 31 March 2016 20,076,904 74,838 3,735,489 1,443,171 1,952,393 27,282,795

Accumulated DepreciationAt 1 February 2014 758,834 26,000 1,591,909 1,541,103 1,350,483 5,268,329 Depreciation for the financial year 237,701 – 442,763 142,769 108,245 931,478 Disposals – – (292,743) – – (292,743)

At 31 January 2015 996,535 26,000 1,741,929 1,683,872 1,458,728 5,907,064 Depreciation for the financial period 301,144 25,864 695,392 199,414 122,798 1,344,612 Disposals/write off – (25,999) (336,495) (957,213) (13,664) (1,333,371)

At 31 March 2016 1,297,679 25,865 2,100,826 926,073 1,567,862 5,918,305

Net Book Value At 31 March 2016 18,779,225 48,973 1,634,663 517,098 384,531 21,364,490

At 31 January 2015 18,388,558 1 1,305,538 455,672 522,665 20,672,434



5. PROPERTY, PLANT AND EQUIPMENT (cont’d)

Furniture, Fittings and

Office Equipment

Office Renovation Total

Company RM RM RM

CostAt 1 February 2014 129,092 2,273,906 2,402,998 Additions – – –

At 31 January 2015 129,092 2,273,906 2,402,998 Disposal/write off (94,928) – (94,928)

At 31 March 2016 34,164 2,273,906 2,308,070

Accumulated DepreciationAt 1 February 2014 129,078 1,599,062 1,728,140 Depreciation for the financial year – 113,695 113,695

At 31 January 2015 129,078 1,712,757 1,841,835 Depreciation for the financial period – 132,645 132,645 Disposal/write off (94,918) – (94,918)

At 31 March 2016 34,160 1,845,402 1,879,562

Net Book Value At 31 March 2016 4 428,504 428,508

At 31 January 2015 14 561,149 561,163

Group

Included in property, plant and equipment are:-

(a) motor vehicles with net book value of RM1,592,157/- (31.1.2015: RM1,227,252/-) which are acquired under hire-purchase arrangements.

(b) leasehold land with net book value of RM11,384,000/- (31.1.2015: RM11,554,363/-) which are pledged to licensed banks for banking facilities granted to the subsidiaries.


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6. INVESTMENT PROPERTIES

Group31.3.2016 31.1.2015

At fair value RM RMFreehold land and buildingAt the beginning of the financial period/year 2,050,000 1,785,000 Net gains from fair value adjustments recognised in profit or loss – 265,000 At the end of the financial period/year 2,050,000 2,050,000

Leasehold land and buildingAt the beginning of the financial period/year 11,700,000 9,035,110 Net gains from fair value adjustments recognised in profit or loss – 2,664,890

At the end of the financial period/year 11,700,000 11,700,000

13,750,000 13,750,000

Included in freehold land and buildings is a property with carrying value of RM850,000/-(31.1.2015: RM850,000/-) pledged to bank for banking facility granted to a subsidiary.

Fair value information

Fair value of investment properties are categorised as level 2, which fair values of land and building have been derived using sales comparison approach. Sales price of comparable properties in close proximity are adjusted for differences in key attributes such as property size. The most significant inputs into this valuation approach is price per square foot of comparable properties.

The following are recognised in profit or loss in respect of investment properties:-

Group1.2.2015 1.2.2014

to to31.3.2016 31.1.2015

RM RM

Rental income 373,700 278,800 Direct operating expenses (320,146) (230,400)

7. INTANGIBLE ASSETS

GoodwillRM

GroupAt 1 February 2014 1,010,410 Addition –

At 31 January 2015 1,010,410 Acquisition of subsidiaries 147,907 Impairment loss (154,416)

At 31 March 2016 1,003,901



7. INTANGIBLE ASSETS (cont’d)

Impairment of goodwill

Management reviews the business performance based on the type of products and services of the strategic business units which represent its reportable operating segments. For the purpose of impairment testing, goodwill acquired through business combinations is allocated to the following Group’s cash generating units (“CGU”) which are also reportable operating segments, which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes.

The carrying amounts of goodwill allocated to the CGUs are as follow:-

Group31.3.2016 31.1.2015

RM RM

Oil and gas solution (“CGU 1”) 855,994 855,994 Water related trading and maintenance services (“CGU 2”) – 154,416 Maintenance, facility management and services (“CGU 3”) 147,907 –

1,003,901 1,010,410

The recoverable amount of the CGUs have been determined based on value-in-use calculations using cash flows projection from financial budgets which was approved by management covering a five year period. The same method has also been used in the previous financial year.

The carrying amount of the CGU 2 exceeds the estimated recoverable amount of the CGU 2. As a results, the Company has recognised an impairment loss of RM154,416/- in profit or loss. The carrying amount of the goodwill that relates to CGU 2 is reduced to zero.

The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:

(i) Gross Margin

The basis used to determine the value assigned to the budgeted gross margins is the average gross margins achieved in the year immediately before the budgeted year, adjusted for market and economic conditions and internal resource efficiency.

The gross margins used for CGU 1 and CGU 3 are 51% (31.1.2015: 51%) and 35% (31.1.2015: Nil) respectively.

(ii) Discount rate

The discount rates used are pre-tax and reflect specific risks relating to the relevant segments.

The discount rates used for CGU 1 and CGU 3 are 8% (31.1.2015: 8%) and 8% (31.1.2015: Nil) respectively.


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7. INTANGIBLE ASSETS (cont’d)

Impairment of goodwill (cont’d)

The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill: (cont’d)

(iii) Growth rate

The growth rate was assumed to be minimal based on the expected projection of the related segments.

The values assigned to the above key assumptions represent management’s assessment of future trends in the industry and are based on both external sources and internal source of information.

Based on the sensitivity analysis performed, management believes that no reasonable possible change in any of the above key assumptions would cause the carrying value of the goodwill to be materially higher than its recoverable amount.

8. INVESTMENT IN SUBSIDIARIES

Company31.3.2016 31.1.2015

RM RM

Unquoted shares, at cost 65,425,307 59,823,100 Less: Impairment losses (32,539,042) (32,539,042)

32,886,265 27,284,058 The Group’s equity interest in the subsidiaries which are all incorporated in Malaysia and their respective principal

activities are as below:-

Name of entity Ownership interest Principal activities31.3.2016 31.1.2015

Direct subsidiaries

Mewah Kota Sdn. Bhd. (“MKSB”) 100% 100% Contractor for various kinds of civil and structural, mechanical and electrical works and maintenance works.

Paramount Ventures Sdn. Bhd. (“PVSB”) 100% 100% General civil and structural, mechanical and electrical works and project management.

Merge Properties Sdn. Bhd. (“MPSB”) 100% 100% Property investment.

MEB Realty Sdn. Bhd. (“MEBR”) 100% 100% Property investment.

MEB Development Sdn. Bhd. (“MEBD”) 100% 100% Inactive.

Merge Readymix Sdn. Bhd. (“MRSB”) 100% 100% Inactive.

Merge Energy O&G Sdn. Bhd. (“MEOG”) 100% 100% Inactive.

Merge Highway Engineering Sdn. Bhd. (“MHE”) 100% 100% Inactive.



8. INVESTMENT IN SUBSIDIARIES (cont’d)

Name of entity Ownership interest Principal activities31.3.2016 31.1.2015

Direct subsidiaries (cont’d)

Iris Synergy Sdn. Bhd. (“ISSB”) 60% 60% Supply engineering equipment, spare parts and the provision of value added services and information technology solutions to the gas and petroleum industry.

Semarak Niaga Lanskap Sdn. Bhd. (“SNLSB”) * 100% – Nursery and landscaping, garden design, maintenance and beautification.

Indirect subsidiary

Subsidiary of Mewah Kota Sdn. Bhd. Innovasi Hebat Sdn. Bhd. (“IHSB”) 100% 100% Supply of valves, spare parts and provision

of related maintenance and replacement services.

Subsidiary of Semarak Niaga Lanskap Sdn. Bhd.

Yakin Rantau Sdn. Bhd. (“YRSB”) * 100% – Housekeeping

*Acquisition of Semarak Niaga Lanskap Sdn. Bhd. On 10 February 2015, the Company entered into a Share Purchase Agreement (“SPA”) to acquire 1,000,000 units of

ordinary shares of RM1/- each in Semarak Niaga Lanskap Sdn. Bhd. (“SNLSB”), representing the entire equity interest in SNLSB for a total cash consideration not exceeding RM6,000,000/-, subject to the conditions stipulated in SPA as follows:-

- RM1,000,000/- only shall be paid by the Company upon the Completion of SPA;- RM2,000,000/- only shall be settled by the Company upon the Vendors having produced the consolidated audited

accounts for the year ended 2014 evidencing that SNLSB has achieved consolidated profit after taxation of not less RM1,000,000.00;

- RM2,000,000/- only shall be settled by the Company upon the Vendors having produced the consolidated audited accounts for the year ending 2015 evidencing that SNLSB has achieved consolidated profit after taxation of not less than RM1,000,000/-;

- RM1,000,000/- shall be payable depending on the renewal or extension of specific contracts of SNLSB and YRSB; and

- If the actual profits is below the guaranteed level, the amount payable shall be decreased by the shortfall in profits.

The acquisition has been completed on 27 February 2015 and SNLSB became a wholly owned subsidiary of the Company.

SNLSB has a wholly-owned subsidiary, Yakin Rantau Sdn. Bhd. (“YRSB”) with an authorised share capital of RM5,000,000/- comprising 5,000,000 ordinary shares of RM1/- each, of which 100,000 ordinary shares of RM1/- each have been issued and fully paid-up. Therefore, following the acquisition of SNLSB, YRSB became a wholly owned indirect subsidiary of the Company.

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*Acquisition of Semarak Niaga Lanskap Sdn. Bhd. (cont’d)

(i) Fair value of consideration transferred:

RM

Cash consideration 1,000,000 Contigent consideration 4,602,207

5,602,207

(ii) Fair value of the identifiable assets acquired and liabilities recognised:

RM AssetsProperty, plant and equipment 1,125,000 Inventories 20,425 Trade receivables 5,696,270 Other receivables, deposit and prepayment 170,735 Deposit placed with licensed banks 42,770 Cash and bank balances 1,130,808

Total assets 8,186,008

LiabilitiesTrade payables (1,316,481)Other payables and accruals (860,827)Hire purchase liabilities (332,738)Provision for taxation (212,420)Deferred tax liabilities (9,242)

Total liabilities (2,731,708)

Total identifiable net assets acquired 5,454,300 Goodwill arising on acquisition 147,907

Fair value of consideration transferred 5,602,207

(iii) Effects of acquisition on cash flows:

RM

Fair value of consideration transferred 5,602,207 Less: Cash and bank (1,130,808) Deposit placed with licensed banks (42,770)

Cash outflow on acquisition, net of cash acquired 4,428,629




(iv) Effects of acquisition in statements of comprehensive income:

From the date of acquisition, the subsidiary’s contributed revenue and profit net of tax are as follows:

RM

Revenue 12,987,930 Profit for the financial period 602,207

(a) Non-controlling interest in subsidiaries

The Group’s subsidiary that has material non-controlling interests (“NCI”) is as follows:-

1.2.2015 1.2.2014to to

31.3.2016 31.1.2015RM RM

Iris Synergy Sdn. Bhd.NCI Percentage of ownership interest and voting interest 40% 40%Carrying amount of NCI 1,916,444 1,930,173

Profit allocated to NCI 586,271 252,533

Summarised financial information before intra-group elimination 31.3.2016 31.1.2015Non-current assets 1,287,285 1,056,689 Current assets 5,711,250 5,188,204 Non-current liabilities (722,265) (577,592)Current liabilities (1,485,158) (841,869)

Net assets 4,791,112 4,825,432

1.2.2015 1.2.2014to to

31.3.2016 31.1.2015RM RM

Revenue 12,393,277 7,766,381 Profit for the financial period/year 1,465,679 691,071 Total comprehensive income 1,465,679 691,071

Cash flows from operating activities 4,409,033 (136,419)Cash flows from investing activities (59,527) (23,638)Cash flows from financing activities (1,757,583) 487,810

Net increase in cash and cash equivalents 2,591,923 327,753

Dividends paid to NCI 600,000 –

70 2 0 1 6 A N N U A L R E P O R T


9. INVESTMENT IN AN ASSOCIATE

Group31.3.2016 31.1.2015

RM RM

Unquoted shares, at cost 2,530,489 2,530,489 Share of post acquisition loss (211,106) (260,344)

2,319,383 2,270,145

Name of entity Ownership interest Principal activity31.3.2016 31.1.2015

IJMP-MK JV 30% 30% Property development.

The summarised financial statements of the associate are as follows:-

31.3.2016 31.1.2015RM RM

Assets and liabilitiesCurrent assets 35,611,768 11,252,691

Current liabilities 36,315,455 3,685,541

ResultsExpenses 737,396 193,583

10. AMOUNTS DUE FROM/(TO) CUSTOMERS FOR CONTRACT WORKS

Group31.3.2016 31.1.2015

RM RM

Aggregate costs incurred to date 295,154,377 431,343,319 Add: Attributable profits 34,559,737 55,661,506

329,714,114 487,004,825 Less: Progress billings (306,660,181) (450,216,284)

23,053,933 36,788,541

Analysed as:Amount due from customers for contract works 23,411,326 37,132,320 Amount due to customers for contract works (357,393) (343,779)

23,053,933 36,788,541



11. INVENTORIES

Group31.3.2016 31.1.2015

RM RMAt costFinished goods 78,194 88,884

Recognised in profit or loss:Inventories recognised as cost of sales (15,000) (61,222)

12. TRADE RECEIVABLES

Group31.3.2016 31.1.2015

RM RM

Trade receivables 35,317,406 19,325,365 Less: Allowance for impairment (335,319) –

34,982,087 19,325,365

Trade receivables are non-interest bearing and normal credit terms offered by the Group ranging from 30 to 90 (31.1.2015: 30 to 90) days. Other credit terms are assessed and approved on a case by case basis.

As at the reporting date, the Group had significant concentration of credit risk in the form of outstanding balances due from 6 (31.1.2015: 5) customers representing 86% (31.1.2015: 79%) of the total trade receivables. The Group maintain an ageing analysis in respect of trade receivables only.

The ageing analysis of the Group’s trade receivables are as follows:

Group31.3.2016 31.1.2015

RM RM

Neither past due nor impaired * 20,710,567 9,688,838 1 to 30 days past due not impaired 660,012 104,737 31 to 60 days past due not impaired 1,085,365 515,463 61 to 90 days past due not impaired 80,232 4,817,288 91 to 120 days past due not impaired 10,285,525 3,896,366 More than 121 days past due not impaired 2,160,386 302,673

14,271,520 9,636,527 Impaired 335,319 –

35,317,406 19,325,365

* Included in neither past due nor impaired are retention sums for contract works amounting to RM10,070,628/- (31.1.2015: RM6,930,459/-).

72 2 0 1 6 A N N U A L R E P O R T

12. TRADE RECEIVABLES (cont’d)

(a) Receivables that are neither past due nor impaired

None of the Group’s trade receivables that are neither past due nor impaired have been renegotiated during the period.

(b) Receivables that are past due but not impaired

The Group has trade receivables amounting to RM14,495,200/- (31.1.2015: RM9,636,527/-) that are past due at the reporting date but not impaired.

Based on past experience and no adverse information to date, the directors of the Group are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in the credit quality and the balances are still considered fully recoverable.

(c) Receivables that are impaired

Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in significantly financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.

Movement in the impairment of trade receivables are as follows:-

Group31.3.2016 31.1.2015

RM RM

At the beginning of the financial period/year – – Impairment for the financial period 223,680 –

At the end of the financial period/year 223,680 –

13. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Group Company31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RM

Other receivables 617,898 166,701 – 1,350 Deposits 1,410,882 802,870 10,586 10,586 Prepayments 160,844 200,763 16,500 11,662 Advance to subcontractors 797,807 3,544,710 – –

2,987,431 4,715,044 27,086 23,598

(a) Advance to sub-contractors are made for on-going construction project purpose.

(b) Included in deposits is an amount of RM150,000/- (31.1.2015: Nil) representing a deposits paid for an acquisition of a property.



14. AMOUNTS DUE FROM/(TO) SUBSIDIARIES

Company31.3.2016 31.1.2015

RM RM

Amounts due from subsidiaries 14,723,123 14,711,729 Less: Impaired (13,725,060) (12,962,241)

998,063 1,749,488

Amounts due to subsidiaries 17,789,768 14,852,845

The amounts due from/(to) subsidiaries are non-trade in nature, unsecured, interest-free and repayable on demand.

Movement in the impairment of amount due from subsidiaries are as follows:-

Company31.3.2016 31.1.2015

RM RM

At the beginning of the financial period/year 12,962,241 12,962,241 Impairment for the financial period 762,819 –

At the end of the financial period/year 13,725,060 12,962,241

15. AMOUNT DUE FROM AN ASSOCIATE

Group

The amount due from an associate is non-trade in nature, unsecured, interest-free and repayable on demand.

16. DEPOSITS PLACED WITH LICENSED BANKS

Group

Included in deposits placed with licensed banks of the Group are:-

(a) an amount of RM11,161,025/- (31.1.2015: RM5,726,989/-) has been pledged to bank as security for the banking facilities granted to the subsidiaries.

(b) an amount of RM284,656/- (31.1.2015: RM830,453/-) has been pledged to bank as security for bank guarantee in favour of third party for project purposes.


74 2 0 1 6 A N N U A L R E P O R T

17. SHARE CAPITAL AND SHARE PREMIUM

(a) Share capital

Company31.3.2016 31.1.2015

Number Numberof Shares of Shares

Unit RM Unit RM

Ordinary shares of RM1/- each

Authorised: At the beginning/end of the financial period/year 100,000,000 100,000,000 100,000,000 100,000,000

Ordinary shares of RM1/- each Issued and fully paid: At the beginning/end of the financial period/year 67,000,000 67,000,000 67,000,000 67,000,000

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.

(b) Share Premium

The share premium is arrived at after accounting for the premium received over the nominal value of the shares issued.

18. LOANS AND BORROWINGS

Group31.3.2016 31.1.2015

RM RMCurrent NoteBank overdrafts 7,304,261 110,212 Trust receipt 615,920 –Hire purchase liabilities 19 407,820 330,482 Term loan - secured 20 12,092 11,468

8,340,093 452,162

Non-currentHire purchase liabilities 19 1,158,757 803,386 Term loan - secured 20 469,022 483,075

1,627,779 1,286,461

Total loans and borrowings 9,967,872 1,738,623



18. LOANS AND BORROWINGS (cont’d)

Bank overdrafts

(i) Bank overdrafts bears interest at 8.35% (31.1.2015: 8.35%) per annum.

(ii) The bank overdrafts of the Group are secured by way of:

(a) Pledge of fixed deposit or sinking fund to be progressively place via deduction of 3% - 6% of each contract proceeds received;

(b) Deed of assignment of contract proceeds between the subsidiary and the bank; and

(c) Corporate guarantee by the Company.

Trust receipt

(i) Trust receipt bears interest at 8.35% (31.1.2015: Nil) per annum.

(ii) The trust receipt of the Group are secured by way of:

(a) Deed of assignment of contract proceeds between the subsidiary and the bank; and

(b) Corporate guarantee by the Company.

19. HIRE PURCHASE LIABILITIES

Group31.3.2016 31.1.2015

RM RM

Future minimum hire purchase payments- not later than one year 470,677 380,402 - later than one year and not later than five years 1,235,828 862,407 - later than five years 112,581 74,034

1,819,086 1,316,843 Less: Future interest charges (252,509) (182,975)

Present value of hire purchase liabilities 1,566,577 1,133,868

Represented by:-Current liabilities- not later than one year 407,820 330,482

Non-current liabilities- later than one year and not later than five years 1,067,205 741,006 - later than five years 91,552 62,380

1,566,577 1,133,868


76 2 0 1 6 A N N U A L R E P O R T

20. TERM LOAN - SECURED

Group31.3.2016 31.1.2015

RM RMCurrent liabilities - not later than one year 12,092 11,468

Non-current liabilities - later than one year but not later than five years 54,251 51,451 - later than five years 414,771 431,624

469,022 483,075

Total term loan - secured 481,114 494,543

The term loan bears interest at 4.55% (31.1.2015: 4.55%) per annum. The term loan is secured over a property of a subsidiary.

21. DEFERRED TAX LIABILITIES

Group31.3.2016 31.1.2015

RM RM

At the beginning of the financial period/year 248,001 102,006 Acquisition of subsidaries (Note 8) 9,242 – Transfer (to)/from profit or loss (Note 28) (12,751) 145,995

At the end of the financial period/year 244,492 248,001

Representing the tax effect of:-Revaluation on investment properties 235,250 235,250Temporary differences between net book value and corresponding tax written down value 9,242 12,751

244,492 248,001

22. TRADE PAYABLES

The credit terms available to the Group in respect of trade payables range from 30 to 90 (31.1.2015: 30 to 90) days.

23. OTHER PAYABLES, ACCRUALS AND DEPOSITS

Group Company31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RM

Other payables 16,039,643 10,238,694 2,609,828 8,035 Accruals 15,702,311 31,095,179 47,000 45,000 Deposits 154,171 94,200 – –

31,896,125 41,428,073 2,656,828 53,035



23. OTHER PAYABLES, ACCRUALS AND DEPOSITS (cont’d)

Group

(a) Included in other payables are:-

(i) an amount of RM13,026,734/- (31.1.2015:RM10,000,000/-) being advances received from customer in respect of a project.

(ii) an amount of Nil (31.1.2015: RM196,584/-) being due to a director of a subsidiary.

(b) Included in accruals is an amount of RM14,668,605/- (31.1.2015:RM30,590,952/-) represents project cost accrued for work performed.

Group & Company

(a) Included in other payables is an amount of RM2,602,207/- (31.1.2015: Nil) being payable to former shareholder of a subsidiary in relation to the acquisition of a subsidiary.

24. REVENUE

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RM

Contract revenue 104,157,002 71,621,721 – – Maintenance services 10,180,339 17,147,759 – – Rental income 63,000 30,900 – – Sales of goods 3,826,113 3,543,297 – – Dividend received from a subsidiary – – 900,000 –

118,226,454 92,343,677 900,000 –

25. COST OF SALES

Group1.2.2015 1.2.2014

to to31.3.2016 31.1.2015

RM RM

Contract work 91,497,651 64,580,339 Direct cost of services 7,120,523 14,272,895 Direct cost of properties 294,986 209,500 Cost of goods sold 2,213,032 2,303,869

101,126,192 81,366,603

26. FINANCE COSTS

Group1.2.2015 1.2.2014

to to31.3.2016 31.1.2015

RM RM

Interest expense on:- Bank overdrafts 177,025 22,306 - Hire purchase liabilities 76,786 45,184 - Term loan 25,924 22,393

279,735 89,883


78 2 0 1 6 A N N U A L R E P O R T

27. PROFIT/(LOSS) BEFORE TAXATION AND ZAKAT

Profit/(Loss) before taxation and zakat has been arrived at:

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RMAfter charging:-

Auditors’ remuneration:- Statutory audit - current year 120,600 100,800 36,500 34,500 - under accrual in prior year 3,500 14,300 2,000 6,000 - Non-statutory audit - current year 10,500 10,500 10,500 10,500 - under accrual in prior year – 1,500 – – Bad debt written off 149,003 26,362 – – Depreciation of property, plant and equipment 1,344,612 931,478 132,645 113,695 Deposits written off 17,352 – – – Directors’ remuneration - fees 207,333 180,000 207,333 180,000 - salaries and allowances 1,752,132 1,133,152 – – - bonuses 325,745 212,305 – – - defined contribution plan 274,965 183,895 – – - SOCSO contribution 4,029 2,479 – – Property,plant and equipment written off 40,842 – 10 – Impairment loss on:- trade receivables 335,319 – – – - amount due from a subsidiary – – 762,819 – - goodwill 154,416 – – – Rental of:- premises 109,885 65,954 – – - project site staff accomodation 2,280 300 – – - equipment 9,329 8,827 – – - motor vehicle – 1,500 – – Staff costs:- salaries and allowances 4,969,448 3,576,026 248,094 242,334 - bonus 918,156 328,778 26,458 10,500 - defined contribution plan 776,379 520,209 31,388 31,289 - SOCSO contribution 53,619 39,214 1,486 1,291 - staff welfare 277,275 191,258 57 7,399



27. PROFIT/(LOSS) BEFORE TAXATION AND ZAKAT (cont’d)

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RMand crediting:-Gain on disposal of property, plant and equipment 75,166 56,397 – – Gain on fair value adjustment of investment properties – 2,929,890 – – Interest income 331,161 234,915 – – Realised gain on foreign exchange 338,179 32,936 – – Rental of:- premises 379,700 247,900 – – - motor vehicle 64,000 143,100 – – Waiver of debt 136,989 220,000 – –

28. INCOME TAX EXPENSES

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RMIncome tax- current year 1,784,550 585,373 – – - prior years 300,924 125,705 – –

Deferred tax liabilitiescurrent year (12,751) 145,995 – – - prior years – – – –

2,072,723 857,073 – –

The income tax is calculated at statutory rate of 24% (31.1.2015: 25%) of the estimated assessable profit for the financial period.

A reconciliation of income tax expenses applicable to profit/(loss) before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company are as follows:-

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RM

Profit/(Loss) before taxation 4,130,539 3,335,151 (795,918) (749,092)


80 2 0 1 6 A N N U A L R E P O R T

28. INCOME TAX EXPENSES (cont’d)

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RM

Tax at the applicable rate of 24% (2015: 25%) 991,329 833,787 (191,020) (187,273)Tax effect arising from:- non-deductible expenses 774,418 302,508 49,626 187,273 - non-taxable income (24,006) (697,627) – – - origination/(reversal) of deferred tax not recognised 41,875 (250,674) 141,394 – - deferred tax recognised in different tax rate – 213,763 – – - revaluation of investment properties – 308,688 – – - under accrual in prior years 300,924 132,109 – – - share of associate’s result (11,817) 14,519 – –

Income tax expense for the financial year 2,072,723 857,073 – –

Further, the deferred tax assets have not been recognised for the following items:

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RM

Unutilised tax losses (21,846,876) (21,636,818) 587,949 –Taxable/(deductible) temporary differences 429,540 393,959 (11,153) (12,346)

(21,417,336) (21,242,859) 576,796 (12,346)

Potential deferred tax assets at 24% (2015: 24%) (5,140,161) (5,098,286) 138,431 (2,963)

29. EARNINGS PER ORDINARY SHARE

(a) Earnings per share are calculated by dividing net profit for the period attributable to owners of the Company by the weighted average number of ordinary shares on issue during the financial period.

Group1.2.2015 1.2.2014

to to31.3.2016 31.1.2015

Net profit attributable to owners of the Company (RM) 1,308,105 2,172,663

Weighted average number of ordinary shares on issue (number) 67,000,000 67,000,000

Earnings per share (sen) 1.95 3.24

(b) The diluted earnings per share are equivalent to the basic earnings per share as the Company does not have any dilutive potential ordinary share.



30. RELATED PARTY DISCLOSURES

(a) Identification of Related Parties

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.

The Company has controlling related party relationship with its subsidiaries and associate company.

(b) Significant Related Party Transactions and Balances

Other than the transactions detailed elsewhere in financial statements, the Group and the Company does not have any transaction with related parties during the financial period.

(c) Key Management Personnel Compensation

The remuneration of key management during the financial period is as follows:

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RM

Directors’ fees 207,333 180,000 207,333 180,000 Directors’ salaries and allowances 1,752,132 1,133,152 – – Directors’ bonuses 325,745 212,305 – – Defined contribution plan 274,965 183,895 – – SOCSO contribution 4,029 2,479 – –

2,564,204 1,711,831 207,333 180,000

There is no compensation to other key management personnel of the Company, other than the directors, as the authority and responsibility for planning, directing and controlling the activities of the entity is by the Board of Directors of the Company.

The number of Directors of the Company whose total remuneration per annum fall within the respective bands for the financial period ended 31 March 2016 are as follows:-

Range of remuneration per annum Number of DirectorsExecutive Non-Executive

RM100,000 and below – 6 RM100,001 - RM200,000 – –RM200,001 - RM300,000 – –RM300,001 - RM400,000 1 –RM400,001 - RM500,000 1 –RM500,001 - RM600,000 – –RM600,001 - RM700,000 – –RM700,001 - RM800,000 1 –

Total 3 6


82 2 0 1 6 A N N U A L R E P O R T

31. SEGMENT INFORMATION

The primary segment reporting format is determined to be business segments as the Group’s risks and returns are affected predominantly by differences in the services it produces.

(a) General information

For management purpose, the Group is organised into business segments based on their product and services, and has five reportable operating segments as follows:

Investment holding : Investment holdingConstruction : Construction of civil and structural, mechanical and electrical works and

project managementProperty investment : Investment propertiesMaintenance, facility management and services

: Supply of valves, spare parts and landscaping, garden management and provision of related maintenance.

Oil and gas : Supply engineering equipment, spare parts and the provision of value added services and information

Others : Inactive companies

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, liabilities and expenses.

No reporting by geographical segment is presented as the Group operates predominantly in Malaysia.



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84 2 0 1 6 A N N U A L R E P O R T31

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86 2 0 1 6 A N N U A L R E P O R T31

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31. SEGMENT INFORMATION (cont’d)

(b) Measurement (cont’d)

Notes

Nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements

(i) Inter-segment transactions are eliminated on consolidation.

(ii) Profit/(Loss) from other segment transactions are eliminated on consolidation.

(iii) The following items are deducted from segments assets to arrive at total assets reported in the consolidated statements of financial position:-

Group31.3.2016 31.1.2015

RM RMAssetsIntra group transactions (8,349,468) (8,361,884)Investment in subsidiaries (33,216,226) (27,614,018)Amount due from holding company (18,276,584) (15,367,670)Amount due from subsidiary companies (998,063) (1,749,487)Amount due from related companies (1,743,446) (701,502)

(62,583,787) (53,794,561)

(iv) The following items are added to/(deducted from) segment liabilities to arrive at total liabilities reported in consolidated statements of financial position:-

Group31.3.2016 31.1.2015

RM RMLiabilitiesIntra group transactions (265,000) (265,000)Amount due to holding company (14,723,123) (14,711,729)Amount due to subsidiary companies (18,276,584) (15,367,669)Amount due to related companies (27,330,763) (26,288,819)

(60,595,470) (56,633,217)

(v) The amortisation of assets is added to other information.

(vi) Gain/loss on revaluation of owner occupied properties is eliminated.

(vii) Impairment loss on amount due from a subsidairy is eliminated.


88 2 0 1 6 A N N U A L R E P O R T

31. SEGMENT INFORMATION (cont’d)

(c) Information about Major Customers

Major customers’ information is revenue from transactions with a single external customer amount to ten percent or more of the Group’s revenue. A group of entities known to a reporting entity to be under common control shall be considered a single customer, and a government and entities known to the reporting entity to be under the control of that government shall be considered a single customer.

The following are major customers with revenue equal or more than 10% of the Group’s total revenue:-

Revenue1.2.2015 1.2.2014

to to31.3.2016 31.1.2015

RM RM

Customer A 53,110,746 38,809,123 Customer B 10,841,416 13,635,376

32. FINANCIAL INSTRUMENTS

(i) Classification of Financial Instruments

The following table analyses the financial assets and liabilities in the statements of financial position by the class of financial instruments to which they are assigned, and therefore by the measurement basis:

31.3.2016 31.1.2015RM RM

GroupFinancial Assets:Loans and receivablesAmount due from customers for contract works 23,411,326 37,132,320 Trade receivables 34,982,087 19,325,365 Other receivables and refundable deposits 2,028,780 969,571 Amount due from an associate 141,430 141,430 Deposits placed with licensed banks 11,488,650 12,186,585 Cash and bank balances 7,315,382 4,092,109

Total financial assets 79,367,655 73,847,380

Financial Liabilities :At amortised costTrade payables 14,605,918 11,502,039 Other payables, deposits and accruals 18,869,391 31,428,073 Loans and borrowings 9,967,872 1,738,623

Total financial liabilities 43,443,181 44,668,735



32. FINANCIAL INSTRUMENTS (cont’d)

(i) Classification of Financial Instruments (cont’d)

31.3.2016 31.1.2015RM RM

CompanyFinancial Assets:Loans and receivablesOther receivables and refundable deposits 10,586 11,936 Amount due from subsidiaries 998,063 1,749,488 Cash and bank balances 47,558 24,375

Total financial assets 1,056,207 1,785,799

Financial Liabilities:At amortised costOther payables and accruals 2,656,828 53,035 Amount due to subsidiaries 17,789,768 14,852,845

Total financial liabilities 20,446,596 14,905,880

(ii) Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowings approximate fair values due to the relatively short term nature of these financial instruments.

The carrying amount and fair value of financial instruments, other than the carrying amounts which are reasonable approximation of fair values, are as follows:

31.3.2016 31.1.2015Carrying Fair Carrying Fairamount value amount value

RM RM RM RMGroupFinancial liabilitiesHire purchase liabilities 1,566,577 1,508,355 1,133,868 1,091,727

The above financial liabilities are measured at Level 3 under the measurement hierarchy. There has been no transfer between Level 1, Level 2 and Level 3 fair values during the financial period.

33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s financial risk management objective is to optimise value creation for shareholders whilst minimising the potential adverse impact arising from interest rates and the unpredictability of the financial markets. The Group’s policy is not to engage in speculative transactions.

The Group operates within an established risk management framework and clearly defined guidelines that are regularly reviewed by the Board of Directors and does not trade in derivative financial instruments. Financial risk management is carried through internal control systems and adherence to Group financial risk management policies. The Group is exposed mainly to liquidity risk, interest rate risk and credit risk.


90 2 0 1 6 A N N U A L R E P O R T

33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)

(a) Liquidity risk

Liquidity risk is the risk that the Group and the Company will not able to meet its financial obligation as they fall due. The Group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

The Group and the Company maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meets its liabilities when they fall due.

Analysis of the financial instruments by remaining contractual maturities

The table below summarises the maturity profile of the Group’s and the Company’s liabilities at the reporting date based on contractual undiscounted repayment obligations.

Contractual undiscounted cash flows

Carryingamount

Within 1 Year 1 – 5 Years > 5 Years Total

31.3.2016 RM RM RM RM RMGroupTrade payables 14,605,918 14,605,918 – – 14,605,918 Other payables, accruals and

deposits 31,896,125 31,896,125 – – 31,896,125 Bank overdrafts 7,304,261 7,304,261 – – 7,304,261 Trust receipt 615,920 615,920 – – 615,920 Hire purchase liabilities 1,566,577 470,677 1,235,828 112,581 1,819,086 Term loan - secured 481,114 33,732 168,660 573,444 775,836

CompanyOther payables and accruals 2,656,828 2,656,828 – – 2,656,828 Amount due to subsidiaries 17,789,768 17,789,768 – – 17,789,768

31.1.2015GroupTrade payables 11,502,039 11,502,039 – – 11,502,039 Other payables, accruals and

deposits 41,428,073 41,428,073 – – 41,428,073 Bank overdrafts 110,212 110,212 – – 110,212 Hire purchase liabilities 1,133,868 380,402 862,407 74,034 1,316,843 Term loan - secured 494,543 33,732 168,660 607,176 809,568

CompanyOther payables and accruals 53,035 53,035 – – 53,035 Amount due to subsidiaries 14,852,845 14,852,845 – – 14,852,845




(b) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market interest rates.

The Group’s exposure to interest rate risk arises primarily from its obligations under bank overdrafts, term loan and hire purchase liabilities. Borrowings issued at variable rates and fixed rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively.

The interest rate profile of the Group’s and the Company’s significant interest-bearing financial instruments, based on carrying amounts as the end of the reporting period were:

31.3.2016 31.1.2015RM RM

GroupFixed rate instrumentsFinancial assetDeposits placed with licensed banks 11,488,650 12,186,585

Financial liabilitiesHire purchase liabilities 1,566,577 1,133,868

Floating rate instrumentsFinancial liabilitiesBank overdrafts 7,304,261 110,212 Trust receipt 615,920 – Term loan - secured 481,114 494,543

Sensitivity analysis for interest rate risk

(i) Sensitivity analysis for fixed rate instruments

The Group does not perform sensitivity analysis for any fixed rate financial assets and financial liabilities as a change in interest rate at the end of the reporting date would not affected the profit or loss.

(ii) Sensitivity analysis for floating rate instruments

At the reporting date, if interest rates had been 10 basis points lower/higher, with all other variables held constant, the Group’s profit net of tax would have been RM8,401/- (2015: RM605/-) higher/lower, arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.


92 2 0 1 6 A N N U A L R E P O R T


(c) 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 and the Company’s exposure to credit risk arises primarily from its trade receivables. For other financial assets (including cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. For transactions that do not occur in the country of the relevant operating unit, the Group does not offer credit terms without the approval of the Head of Credit Control.

Exposure to credit risk

At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statements of financial position.

The Group determines concentration of credit risk by monitoring the profile of its trade receivables on an on-going basis.

Inter-company balances

The Company provides unsecured advances to its subsidiaries. The Company monitors the result of related companies regularly.

As at the end of the reporting date, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position.

Financial guarantee

The Company provide secured financial guarantees to banks in respect of banking facilities granted to certain subsidiaries. The Company monitors on an on-going basis the results of the subsidiaries and repayment made by the subsidiaries.

The maximum exposure to credit risk amounts to RM8,401,295/- (31.1.2015: RM604,755/-) representing the outstanding banking facilities of the subsidiaries as at the end of the reporting period.

As at the end of reporting date, there was no indication that any subsidiary would default on repayment.

The financial guarantees have not been recognised since the fair value on initial recognition was not material.



34. CAPITAL MANAGEMENT

The primary objective of the Group’s capital management is to ensure that it maintains a strong capital base and safeguard the Group’s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Group manages its capital structure by monitoring the capital and net debt on an ongoing basis.

The capital structure of the Group consists of equity attributable to owners of the parent, comprising share capital, share premium and accumulated losses.

Group Company31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RM

Total liabilities 57,685,833 55,613,917 20,446,596 14,905,880

Total equity attributable to the owners of the Company 59,293,879 57,985,774 13,940,884 14,736,802

Net debt-to-equity ratio 0.97 0.96 1.47 1.01

There were no changes in the Group’s approach to capital management during the financial period.

The Group is also required to comply with the disclosure and necessary capital requirements as prescribed in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.


94 2 0 1 6 A N N U A L R E P O R T

35. CORPORATE GUARANTEE

Company31.3.2016 31.1.2015

RM RMCompanyCorporate guarantee granted for banking facilities given to subsidiaries 62,055,750 50,705,750

36. CAPITAL COMMITMENTS

Capital expenditure as at the reporting date is as follows:-

Group31.3.2016 31.1.2015

RM RM

Capital expenditure approved and contracted but not provided for property, plant and equipment 910,000 –

37. COMPARATIVE FIGURES

During the financial year, the Company changed its financial year end from 31 January to 31 March and made up its financial statements for the 14 month period to 31 March 2016. Accordingly, comparative figures for the statements of comprehensive income, statements of changes in equity, statements of cash flows and the related notes are not entirely comparable with those for the current financial period.



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

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

Pursuant to the directive, the amounts of realised and unrealised profits or losses included in the accumulated losses of the Group and the Company as at 31 March 2016 are as follows:-

Group Company1.2.2015 1.2.2014 1.2.2015 1.2.2014

to to to to31.3.2016 31.1.2015 31.3.2016 31.1.2015

RM RM RM RM

Total accumulated losses of the Company and its subsidiaries- Realised (36,299,297) (41,433,031) (60,771,624) (59,975,706)- Unrealised 7,773,627 7,469,974 – –

(28,525,670) (33,963,057) (60,771,624) (59,975,706)

Total accumulated losses of the associate- Realised (211,106) (260,345) – – - Unrealised – – – –

(28,736,776) (34,223,402) (60,771,624) (59,975,706)Less: Consolidation adjustments 13,318,147 17,496,668 – – Total group accumulated losses as per statements of financial position (15,418,629) (16,726,734) (60,771,624) (59,975,706)

SUPPLEMENTARY INFORMATION ON REALISED AND UNREALISED PROFITS OR LOSSES

96 2 0 1 6 A N N U A L R E P O R T

We, DATO’ ABDUL JALIL BIN ABDUL KARIM and RAIZITA BINTI AHMAD @ HARUN, being two of the directors of Merge Energy Bhd., do hereby state that in the opinion of the directors, the accompanying financial statements set out on page 34 to 94 are properly drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 March 2016 and of their financial performance and cash flows for the financial period then ended.

The supplementary information set out on page 95 to the financial statements have been compiled in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirement, issued by the Malaysian Institute of Accountants.

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

………………………………………………….DATO’ ABDUL JALIL BIN ABDUL KARIMDirector

………………………………………………….RAIZITA BINTI AHMAD @ HARUNDirector

Date: 14 July 2016

STATEMENT BY DIRECTORS


I, RAIZITA BINTI AHMAD @ HARUN, being the director primarily responsible for the financial management of Merge Energy Bhd., do solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on page 34 to 94 and the supplementary information set out on page 95 are 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 in Malaysia.

………………………………………………….RAIZITA BINTI AHMAD @ HARUN

Subscribed and solemnly declared by the above named at Kuala Lumpur in the Federal Territory on 14 July 2016.

Before me,

......................................................................ZULKIFLA MOHD DAHLIMW541Commissioner for Oaths

STATUTORY DECLARATIONSTATEMENT BY DIRECTORS

98 2 0 1 6 A N N U A L R E P O R T

Report on the Financial Statements

We have audited the financial statements of Merge Energy Bhd., which comprise the statements of financial position as at 31 March 2016 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial period ended 31 March 2016, and a summary of significant accounting policies and other explanatory information, as set out on pages 34 to 94.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal controls as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the Company’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 March 2016 and of their financial performance and cash flows for the financial period then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:-

(a) In our opinion, the accounting and other records and the registers required by the Companies Act, 1965 in Malaysia 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 Companies Act, 1965 in Malaysia.

(b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(c) Our audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Companies Act, 1965 in Malaysia.

INDEPENDENT AUDITORS’ REPORTto the members of Merge Energy Bhd(Incorporated in Malaysia)


INDEPENDENT AUDITORS’ REPORT (cont’d)to the members of Merge Energy Bhd(Incorporated in Malaysia)

Other Reporting Responsibilities

The supplementary information set out in page 95 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

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 contents of this report.

Baker Tilly Monteiro Heng Ng Boon HiangNo. AF 0117 No. 2916/03/18 (J)Chartered Accountants Chartered Accountant

Kuala Lumpur

Date: 14 July 2016

INDEPENDENT AUDITORS’ REPORTto the members of Merge Energy Bhd(Incorporated in Malaysia)

100 2 0 1 6 A N N U A L R E P O R T

LocationDescription

(Existing Use)

Tenure(Age of

Building)

Land Area(Built-Up Area)

sq. ft.

Net Book Value as at

31.3.2016RM

Date ofValuation/

Acquisition

Lots 727, 728 and 729No. 230, 231 and 232Jalan Kota Kenari 2Taman Kota Kenari09000 Kulim Kedah Darul Aman

3 units of 2-storey

shop house(rented)

Freehold(19 years)

5,764(6,492)

1,200,000 21.01.2015

No A3-31-3A, Soho Suite @ KLCCNo 20, Jalan Perak50450 Kuala Lumpur

Soho Suite Freehold(2 year)

(601) 850,000 29.01.2015

Lot 444No. 2 Jalan Apollo U5/190Seksyen U5 Bandar Pinggiran Subang40150 Shah Alam Selangor Darul Ehsan

2½-storeysemi-detached

factory(office)

LeaseholdExpiring on

7.12.2093(21 years)

18,238(5,400)

595,871 29.01.2015


2½-storeysemi-detached

factory(office)


7.12.2093(20 years)

17,668(5,400)

685,416 29.01.2015


3-storeydetached

factory(rented)


7.12.2093(22 years)

23,153(10,240)

5,200,000 29.01.2015

Lot 097(C)No. 1 Jalan Suria X U5/XSeksyen U5 Bandar Pinggiran Subang40150 Shah Alam Selangor Darul Ehsan

2-storeyshop office

(rented)

LeaseholdExpiring on16.07.2099(16 years)

7,280(3,610)

1,100,000 29.01.2015

Lot 043(E)No. 30 Jalan Matahari AA U5/AASeksyen U5 Bandar Pinggiran Subang40150 Shah Alam Selangor Darul Ehsan

3-storeyshop office

(vacant)

LeaseholdExpiring on25.01.2095

(15 years)

2,516(8,916)

1,100,000 29.03.2016

LIST OF PROPERTIES as at 31 March 2016


LIST OF PROPERTIES (cont’d)as at 31 March 2016

LocationDescription

(Existing Use)

Tenure(Age of

Building)


sq. ft.


31.3.2016RM

Date ofValuation/

Acquisition

Lot 071(E)No. 29 Jalan Matahari AA U5/AASeksyen U5 Bandar Pinggiran Subang40150 Shah Alam Selangor Darul Ehsan

3-storeyshop office

(vacant)


(15 years)

2,516(8,916)

1,100,000 29.03.2016

Lot 080No. 16 Jalan Dinar D U3/DSeksyen U3Taman Subang Perdana40150 Shah Alam Selangor Darul Ehsan

4-storeyshop office

(ground floor is rented)


(13 years)

1,760(7,040)

1,600,000 29.01.2015

Lot 081 No. 14 Jalan Dinar D U3/DSeksyen U3 Taman Subang Perdana40150 Shah Alam Selangor Darul Ehsan

4-storeyshop office

(ground floor is rented)


(13 years)

1,760(7,040)

1,600,000 29.01.2015

Lot 1259No. 2, Lorong Naluri Sukma 8/242300 Bandar Puncak Alam Selangor Darul Ehsan

Double Storey Terrace House

(rented)

Leasehold Expiring on08.07.2109(13 years)

3,387 225,971 02.06.2003

Lot 0940No 80, Lorong Naluri Sukma 8/11, Seksyen 8, 42300 Bandar Puncak Alam Selangor Darul Ehsan


(rented)


3,317 277,941 28.06.2003

Lot 0932No 65, Lorong Naluri Sukma 8/1042300 Bandar Puncak AlamSelangor Darul Ehsan


(vacant)


1400 154,946 28.08.2003

PN 31967, Lot 1487, Seksyen 20, Bandar Serendah, Daerah Ulu Selangor, Negeri Selangor Darul Ehsan

Industrial Land Leasehold Expiring on 10.09.2096

26,372 293,407 10.01.2012

102 2 0 1 6 A N N U A L R E P O R T

LocationDescription

(Existing Use)

Tenure(Age of

Building)


sq. ft.


31.3.2016RM

Date ofValuation/

Acquisition



26,361 265,061 10.01.2012



30,699 285,173 10.01.2012



39,428 354,122 10.01.2012


Industrial Land LeaseholdExpiring on10.09.2096

35,058 333,991 10.01.2012



30,774 371,424 10.01.2012



219,368 2,634,481 10.01.2012



51,010 626,406 10.01.2012



46,995 577,170 10.01.2012



LocationDescription

(Existing Use)

Tenure(Age of

Building)


sq. ft.


31.3.2016RM

Date ofValuation/

Acquisition



44,552 547,629 10.01.2012



39,504 478,699 10.01.2012



40,462 498,393 10.01.2012



38,621 468,946 10.01.2012



42,948 527,934 10.01.2012



44,982 547,629 10.01.2012



76,521 941,514 10.01.2012


Industrial Land LeaseholdLand

Expiring on10.09.2096

79,018 971,056 10.01.2012


104 2 0 1 6 A N N U A L R E P O R T

LocationDescription

(Existing Use)

Tenure(Age of

Building)


sq. ft.


31.3.2016RM

Date of Valuation /

Acquisition



84,873 1,040,875 10.01.2012



96,122 1,178,594 10.01.2012



47,544 577,170 10.01.2012



80,202 981,852 10.01.2012



80,600 991,689 10.01.2012



78,996 971,056 10.01.2012

PN 31993- PN32003, Lot 1469 – Lot 1479, Seksyen 20, Bandar Serendah, Daerah Ulu Selangor, Negeri Selangor Darul Ehsan

Shophouse Lot LeaseholdExpiring on10.09.2096

19,415 330,736 10.01.2012


Shophouse Lot Leasehold Expiring on10.09.2096

3,477 59,272 10.01.2012



SHAREHOLDERS’ INFORMATIONas at 30 June 2016

Authorised share capital : RM100,000,000Issued and paid-up share capital : RM67,000,000Class of shares : Ordinary SharesNominal value : RM1.00 per shareVoting rights : One voting right per ordinary share

Distribution of Shareholdings

Size of Holdings No. of Holders % No. of Shares %1 – 99 10 0.94 303 0.00100 – 1,000 357 33.62 337,933 0.501,001 – 10,000 436 41.05 2,100,467 3.1310,001 – 100,000 216 20.34 7,630,498 11.39100,001 – 3,349,999(less than 5% of issued shares)

40 3.77 18,502,699 27.62

3,350,000 and above(5% and above of issued shares)

3 0.28 38,428,100 57.36

Total 1,062 100 67,000,000 100.00

Thirty Largest Shareholders

No. Name of Shareholder No. of Shares %

1 Desa Binapuri Sdn Bhd 20,213,100 30.172 Sempena Juara Sdn Bhd 10,015,000 14.953 Ratus Harapan Sdn Bhd 8,200,000 12.244 Sasaran Abadi Sdn Bhd 3,032,000 4.535 Nusmakmur Development Sdn Bhd 2,500,000 3.736 SSF Venture Sdn Bhd 1,344,000 2.007 Solarcom Sdn Bhd 1,300,000 1.948 Chenderoh Jaya Sdn Bhd 850,700 1.279 Maybank Nominees (Tempatan) Sdn Bhd

- Lee Chong Hoon765,000 1.14

10 Chong Wei Binajaya Sdn Bhd 755,400 1.1311 Lee Lai Ming 684,000 1.0212 Hiap Huat Realty Sdn Bhd 605,497 0.9013 Lum Fook Seng 487,500 0.7314 AllianceGroup Nominees (Tempatan) Sdn Bhd

- Pledged securities account for Sak Kam Wah404,600 0.60

15 AllianceGroup Nominees (Tempatan) Sdn Bhd- Pledged securities account for Lee Heng Haw

365,200 0.55

16 Lee Yee Long 340,000 0.5117 Tan Huat Sheng 312,758 0.4718 Goh Beng Ee 300,000 0.4519 Lim Ah Gek @ Lim Chor Kheng 291,382 0.4320 Maybank Nominees (Tempatan) Sdn Bhd

- Pledged securities account for Wong Wing Kheong277,700 0.41

106 2 0 1 6 A N N U A L R E P O R T

No. Name of Shareholder No. of Shares %

21 Ng Tian Shinn 255,800 0.3822 Wong Wing Kheong 244,100 0.3623 Ang Swee Pian @ Ang Swee Yong 237,423 0.3524 Yuen Ching Eng 232,000 0.3525 RHB Nominees (Tempatan) Sdn Bhd

- Pledged securities account for Mohd Jeffry Hew bin Abdullah225,900 0.34

26 Tan Hoi Chon 215,839 0.3227 Chew Kok Hwee 207,000 0.3128 Hew Choy Yin 200,000 0.3029 Lee Soon Heng 186,300 0.2830 Chan Thye Thian 181,800 0.27

Total 55,229,999 82.43

Substantial Shareholders

Name of ShareholderDirect Interest Indirect Interest

No. of Shares % No. of Shares %

Desa Binapuri Sdn Bhd 20,213,100 30.17 – –Dato’ Abdul Jalil bin Abdul Karim – – 20,213,100(1) 30.17Rusdi bin Mohamad Noor – – 20,213,100(1) 30.17Sempena Juara Sdn Bhd 10,015,000 14.95 – –Mohamad Azmi bin Mohamad Khannas – – 10,015,000(2) 14.95Fatimah Soliha binti Nawawi @ Hassan – – 10,015,000(2) 14.95Ratus Harapan Sdn Bhd 8,200,000 12.24 – –Dato’ Mohd Said bin Mat Saman – – 8,200,000(3) 12.24Abd Rahim bin Aw. Kechik – – 8,200,000(3) 12.24

Directors’ Shareholdings

Name of DirectorDirect Interest Indirect Interest

No. of Shares % No. of Shares %

Dato’ Abdul Jalil bin Abdul Karim – – 20,213,100(1) 30.17Rusdi bin Mohamad Noor – – 20,213,100(1) 30.17Dato’ Said Ali bin Said Rastan – – – –Raizita binti Ahmad @ Harun – – – –Dato’ Sheah Kok Fah – – – –Dr Fam Seng Choy – – – –Dato’ Kamarulzaman bin Jamil – – – –

Notes:(1) Deemed interested by virtue of his interest in Desa Binapuri Sdn Bhd pursuant to Section 6A of the Companies Act, 1965.(2) Deemed interested by virtue of his/her interest in Sempena Juara Sdn Bhd pursuant to Section 6A of the Companies Act,

1965.(3) Deemed interested by virtue of his interest in Ratus Harapan Sdn Bhd pursuant to Section 6A of the Companies Act, 1965.

SHAREHOLDERS’ INFORMATION (cont’d)as at 30 June 2016


NOTICE IS HEREBY GIVEN THAT the Nineteenth Annual General Meeting of Merge Energy Bhd will be held at Board Room of the Company, No. 2 Jalan Apollo U5/190, Bandar Pinggiran Subang, Seksyen U5, 40150 Shah Alam, Selangor Darul Ehsan on Tuesday, 6 September 2016 at 10.00 a.m. for the following purposes:

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 31 March 2016 together with the Reports of the Directors and Auditors thereon.

Please see Explanatory Note on Agenda 1

2. To approve the payment of Directors’ fees for the financial year ended 31 March 2016. Resolution 1

3. To re-elect Dato’ Abdul Jalil bin Abdul Karim, retiring pursuant to Article 105 of the Company’s Articles of Association. Resolution 2

4. To re-elect the following Directors retiring pursuant to Article 112 of the Company’s Articles of Association:

(i) Dato’ Said Ali bin Said Rastan(ii) Raizita binti Ahmad @ Harun(iii) Rusdi bin Mohamad Noor(v) Dato’ Kamarulzaman bin Jamil

Resolution 3Resolution 4Resolution 5Resolution 6

5. To re-appoint Messrs Baker Tilly Monteiro Heng as Auditors and to authorise the Directors to fix their remuneration. Resolution 7

6. As Special BusinessTo consider and if thought fit, to pass the following resolutions as Ordinary Resolutions:

(a) Authority to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965

“THAT, subject to the Companies Act, 1965, Articles of Association of the Company and approval from Bursa Malaysia Securities Berhad and other Governmental or regulatory bodies, full authority be and is hereby given to the Board of Directors pursuant to Section 132D of the Companies Act, 1965 to allot and issue shares in the capital of the Company at any time upon such terms and conditions and for such purposes as the Board of Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed ten percentum (10%) of the issued share capital of the Company for the time being AND THAT such authority shall continue to be in force until the conclusion of the next Annual General Meeting of the Company.” Resolution 8

(b) Authority for Dato’ Sheah Kok Fah to Continue in Office as Independent Non-Executive Director

“THAT authority be and is hereby given to Dato’ Sheah Kok Fah who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years, to continue to act as an Independent Non-Executive Director of the Company until the conclusion of the next Annual General Meeting in accordance with the Malaysian Code of Corporate Governance 2012.” Resolution 9

7. To transact any other business of which due notice shall have been given.

NOTICE OF ANNUAL GENERAL MEETING

108 2 0 1 6 A N N U A L R E P O R T

By Order of the Board

Yew @ Yeoh Siew Yen MAICSA 7048094 Company SecretarySelangor Darul Ehsan28 July 2016

Notes:

1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

2. A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

4. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if such appointer is a corporation, under its Common Seal or the hand of its attorney.

5. The instrument appointing a proxy must be deposited at the registered office of the Company at No. 2 Jalan Apollo U5/190, Bandar Pinggiran Subang, Seksyen U5, 40150 Shah Alam, Selangor Darul Ehsan not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

6 For purpose of determining members’ eligibility to attend the meeting, only members whose names appear in the Record of Depositors as at 30 August 2016 shall be entitled to attend this meeting or appoint proxy(ies) to attend and vote on his behalf.

EXPLANATORY NOTES ON SPECIAL BUSINESS

1. To receive the Audited Financial Statement

Agenda item no. 1 is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of shareholders for the Audited Financial Statements. Hence, this item on the Agenda is not put forward for voting.

2. Authority to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965 The existing general mandate for the authority to issue shares pursuant to Section 132D of the Companies Act, 1965 was

approved by the shareholders of the Company at the 18th Annual General Meeting held on 28 July 2015. The Company did not issue any new shares pursuant to the general mandate obtained at the 18th Annual General Meeting.

The proposed Ordinary Resolution 8 is to renew the authority granted by the shareholders of the Company at the 18th Annual General Meeting. The proposed mandate, if passed, will give the Directors, authority to issue shares of not more than 10% of the issued share capital for such purposes as the Directors consider would be in the best interests of the Company. This is to avoid any delay and cost involved in convening a general meeting to approve such an issue of shares. This authority will, unless revoked or varied by the Company in a general meeting, expire at the conclusion of the next Annual General Meeting or will subsist until the expiration of the period within which the next Annual General Meeting is required by law to be held, whichever is earlier.

The proceeds raised from the mandate will provide flexibility to the Company for any possible fund raising activities for purpose of funding current/or future investment project(s), working capital and/or acquisition(s).

NOTICE OF ANNUAL GENERAL MEETING (cont’d)


NOTICE OF ANNUAL GENERAL MEETING (cont’d)

EXPLANATORY NOTES ON SPECIAL BUSINESS (cont’d)

3. Authority for Dato’ Sheah Kok Fah to Continue in Office as Independent Non-Executive Director In respect of Ordinary Resolution 9, the Board of Directors has via the Nomination Committee conducted an evaluation on

the re-appointment of Dato’ Sheah Kok Fah who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine years, and recommended him to continue to act as Independent Non-Executive Director of the Company based on the following justifications:-

(i) Dato’ Sheah Kok Fah has fulfilled the criteria under the definition of Independent Director as stated in the Listing Requirements of Bursa Malaysia Securities Berhad, and therefore is able to bring independent and objective judgment to the Board.

(ii) He is an advocate and solicitor and corporate practitioner with vast experience of more than 26 years in legal practice. Hence, he would be able to provide the Board with a diverse set of experience, expertise, skill and competence.

(iii) The length of his service on the Board does not in any way interfere with his exercise of independent judgment and ability to act in the best interest of the Company.

(iv) He, having been with the Company for more than nine years, is familiar with the Company’s business operations which enable him to participate actively and contribute during deliberations or discussions at Board and committee meetings without compromising his independence and objective judgment.

(v) He has contributed sufficient time and effort to attend all the Board and committee meetings.

STATEMENT ACCOMPANYING THE NOTICE OF ANNUAL GENERAL MEETING

Details of persons who are standing for election as Directors

No individual is seeking election as a Director at the 19th Annual General Meeting of the Company.

This page is intentionally left blank

(Incorporated in Malaysia)

PROXY FORM

I/We (full name in block capitals) __________________________________________________________________NRIC No./Company No _____________________________ CDS Account No. _______________________________of (full address) _______________________________________________________________________________being a *member/members of MERGE ENERGY BHD., hereby appoint (full name in block capitals) ________________________________________________________________ NRIC No. _____________________________________of (full address) _______________________________________________________________________________ and/or failing him/her _______________________________ NRIC No. _____________________________________of (full address) _______________________________________________________________________________and/or failing him/her, the Chairman of the meeting as *my/our proxy to vote for *me/us on *my/our behalf at the Nineteenth Annual General Meeting of the Company to be held at the Board Room of the Company, No. 2 Jalan Apollo U5/190, Bandar Pinggiran Subang, Seksyen U5, 40150 Shah Alam, Selangor Darul Ehsan on Tuesday, 6 September 2016 at 10.00 a.m., and at any adjournment thereof.

No. Resolution For Against1. Payment of Directors’ Fees for the financial year ended 31 March 2016.2. Re-election of Dato’ Abdul Jalil bin Abdul Karim as Director of the Company.3. Re-election of Dato’ Said Ali bin Said Rastan as Director of the Company.4. Re-election of Raizita binti Ahmad @ Harun as Director of the Company.5. Re-election of Rusdi bin Mohamad Noor as Director of the Company.6. Re-election of Dato’ Kamarulzaman bin Jamil as Director of the Company.7. To re-appoint Messrs Baker Tilly Monteiro Heng as Auditors and to authorise the Directors to fix

their remuneration.8. Authority to Directors to allot & issue shares pursuant to Section 132D of the Companies Act, 1965.9. Authority for Dato’ Sheah Kok Fah to continue in office as Independent Non-Executive Director

[Please indicate with an “X”, in the space provided whether you wish your vote to be casted for or against the resolution. Unless otherwise instructed, the proxy may vote as he or she shall think fit in respect of the resolution.]

*Delete if not applicable.

Signed this _______________ day of _______________ 2016

________________________________________________Signature/Seal of Shareholder

Notes:-

1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

2. A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

4. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if such appointer is a corporation, under its Common Seal or the hand of its attorney.

5. The instrument appointing a proxy must be deposited at the registered office of the Company at No. 2 Jalan Apollo U5/190, Bandar Pinggiran Subang, Seksyen U5, 40150 Shah Alam, Selangor Darul Ehsan not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

6. For purpose of determining members’ eligibility to attend the meeting, only members whose names appear in the Record of Depositors as at 30 August 2016 shall be entitled to attend this meeting or appoint proxy(ies) to attend and vote on his behalf.

No. of shares held

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The Company SecretaryMERGE ENERGY BHD. (420099-X)No. 2 Jalan Apollo U5/190Bandar Pinggiran SubangSeksyen U540150 Shah AlamSelangor Darul Ehsan

AFFIX STAMP

No. 2, Jalan Apollo U5/190, Bandar Pinggiran Subang, Seksyen U540150 Shah Alam, Selangor Darul Ehsan

Telephone +603 - 7847 2900Fax +603 - 7845 3900

www.merge-energy.com.my

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