To be a world class corporation providing excellent engineering and construction services.

Transcription

1 I

2 Vision To be a world class corporation providing excellent engineering and construction services. Mission We will deliver excellent engineering and construction services which meet our customers requirements through good corporate governance practices and superior technologies. We also strive to have an efficient, dedicated and trained workforce to serve our customers. Financial Highlights Revenue RM million Profit Before Tax RM million Earning Per Share Sen II

3 Contents Performance Review Financial Highlights Corporate Profile Corporate Information Corporate Structure Chairman s Statement Group Managing Director s Statement Profile of Directors Corporate Governance Corporate Governance Statement Statement of Directors Responsibility Statement on Risk Management & Internal Control 21 Audit Committee Report Additional Compliance Information Zecon s Project Corporate Social Responsibility Directors Report & Audited Financial Statements Analysis of Shareholdings Analysis of Warrant Holdings List of Properties Notice of Annual General Meeting Proxy Form Shareholders Equity RM million Total Assets RM million Net Asset Per Share RM

4 Corporate Information Board of Directors Tan Sri Datuk Amar (Dr.) Tommy Bin Hamid Bin Bugo Independent Non-Executive Chairman Datuk Dr. Haji Josree bin Haji Yacob Deputy Independent Non-Executive Chairman Datuk Haji Zainal Abidin bin Haji Ahmad Group Managing Director Haji Zainurin bin Haji Ahmad Deputy Managing Director Poh Lik Poh Li Thong Independent and Non-Executive Director Dato Haji Hamzah bin Haji Ghazalli Independent and Non-Executive Director (Resigned on 05 October 2012) Dato Abdul Majit bin Ahmad Khan Independent and Non-Executive Director Richard Kiew Jiat Fong Independent and Non-Executive Director Datuk Haji Bolhassan bin Ahmad bin Di Non Independent and Non-Executive Director Audit Committee Poh Lik Poh Li Thong (Chairman) Dato Abdul Majit bin Ahmad Khan Richard Kiew Jiat Fong Risk Management Committee Tan Sri Datuk Amar (Dr.) Tommy Bin Hamid Bin Bugo (Chairman) Dato Abdul Majit bin Ahmad Khan Haji Zainurin bin Haji Ahmad Remuneration & Nomination Committee Datuk Dr. Haji Josree bin Haji Yacob (Chairman) Tan Sri Datuk Amar (Dr.) Tommy Bin Hamid Bin Bugo Poh Lik Poh Li Thong Company Secretaries Koh Fee Lee (MAICSA ) Lim Poh Yen (MAICSA ) Share Registrar Symphony Share Registration Services Sdn Bhd ( D) Level 26, Menara Multi Purpose, Capital Square No. 8, Jalan Munshi Abdullah Kuala Lumpur. Tel : Fax : Principal Bankers Kuwait Finance House (Malaysia) Berhad Bank Kerjasama Rakyat Malaysia Berhad Affin Investment Bank Berhad Malaysia Building Society Berhad Bank Muamalat Malaysia Berhad Solicitors Reddi & Co. Advocates Azmi & Associates C.J. Eng Advocates Hisham, Sobri & Kadir Mary Bolhassan, Noreda Ahmad & Co Stock Exchange Listing Bursa Malaysia Securities Berhad, Main Market Stock Code : 7028 Stock Name : ZECON Registered Office 8th Floor, Menara Zecon No. 92, Lot 393, Section 5 KTLD Jalan Satok Kuching, Sarawak. Tel : Fax : headoffice@zecon.com.my Web-site: Branch Office Suite 2A-11-2, Level 11 Block 2A, Plaza Sentral Jalan Stesen Sentral 5 KL Sentral Kuala Lumpur. Tel : Fax : kloffice@zecon.com.my Auditors Messrs Ernst & Young Room , 3rd Floor Wisma Bukit Mata Kuching Jalan Tunku Abdul Rahman Kuching, Sarawak. Tel : Fax :

5 Corporate Structure ZECON BERHAD 100% Zecon Toll Concessionaire Sdn Bhd 100% Zecon Water Corporation Sdn Bhd 100% Zecon Land Sdn Bhd 100% Zecon Geotechnical Services Sdn Bhd 81.62% Zecon Demak Jaya Sdn Bhd 55.44% Zecon Petra Jaya Sdn Bhd 100% Zecon Assets Sdn Bhd 100% Zecon Construction (Sarawak) Sdn Bhd 100% Zecon Mutiara Sdn Bhd 100% Zecon International Limited 100% Zecon Medicare Sdn Bhd 100% Zecon Designtech Sdn Bhd 100% Zecon Piling Sdn Bhd 100% Zecon Engineering & Construction Sdn Bhd 100% Matang Highway Sdn Bhd 100% Zecon MidEast Ltd 100% Zecon (Saudi Arabia) International Ltd 100% Demak Concessionaires Sdn Bhd 100% Zecon Australia Pty Ltd 96% Zecon Resources Sdn Bhd 70% Zecon Dredging Sdn Bhd 55% Teknik PS Sdn Bhd 51% Zecon Energy Sdn Bhd 51% Zecon Fab Sdn Bhd 51% Zecon Construction Sdn Bhd 35% L.C.S Trading Co. Sdn Bhd 100% IR Concept (M) Sdn Bhd 100% ZPM Satu Sdn Bhd 100% Zalpoint Tanah Putih Sdn Bhd 100% Agrowell Quarry Sdn Bhd 50% Sarmax Sdn Bhd 100% TPS Medicare Sdn Bhd 51% Zecon Well Services Sdn Bhd 100% Creative Venture Sdn Bhd Subsidiary Companies Associate Companies 3

6 4 It is my pleasure to present the Annual Report and Audited Financial Statements for the financial year from 1 January 2012 to 30 June Financial Highlights During this 18 months financial period, the Group recorded a significant increase in revenue as compared to the previous 12 months financial period. In this period, ZECON recorded revenue of RM RM237.8 million as compared to RM152.3 million in Albeit the revenue had increased, ZECON recorded a loss of RM24 million. This was mainly due to impairments, high operational costs and direct costs of projects. However this financial situation will not have significant impact on ZECON current cash flow to implement existing projects and new projects in the future. Corporate Governance Good Corporate governance plays a crucial role in managing business during the difficult period and this is due to the numerous challenges being faced to achieve profitability. Our Board of Directors is committed to adhere to the Malaysia Code of Corporate Governance in all its conducts and practices. The Group s Corporate Governance Statement which contains the Internal Control and Risk Management, Financial Policies and Procedure Manual, Internal Audit Report, ISO 9001:2008 Compliance is laid out in this annual report. Our Human Capital We strongly believe that people are our greatest assets. Like other kinds of assets, it has to be managed efficiently and effectively. We strive to ensure that the right talents are positioned at the right places. We have remobilized existing and new personnel based on to their competencies and potential capabilities. Structured training and development programmes are being designed and developed to cater to the unique training requirements of our respective business divisions and operating units. We also encourage our employees to pursue courses and academic qualifications relevant to their roles and to the needs of the business. ZECON will continue to provide on job training to the students from various institutions of higher learning to enable them to gain relevant working experience. We will absorb some high potential trainees as our employees once they completed their studies. The on job training of students is now a part of ZECON corporate social responsibility. Health and Safety As a corporate player, ZECON is dedicated to ensure a safe environment in which it operates. We are very particular about our employees safety and gives extra attention to the safety of working environment especially at project sites. This is to ensure that our employees work in a safe environment and adhering to safety rules. We are upgrading our system into Integrated Management System, a combination of our current Quality Management System with Environment System and Occupational Health and Safety Management System. Corporate Social Responsibility (CSR) ZECON has been awarding students from Engineering Faculty at UNIMAS for the last past 12 years through ZECON Excellence Awards. This is part of the components of our Corporate Social Responsibility. This effort will continue and will be expanded to the primary and secondary school levels. ZECON put aside some allocation for financial assistance to deserving secondary school students from low income families who are staying at Yayasan Kemajuan Insan (YAKIN) hostel and from other schools within Kuching area. Besides, we are encouraging our employees children to excel in education by giving financial rewards for their excellence results in public examination. Outlook & Prospect The Malaysian economy performed better than in 2012, recording a strong growth of 5-6% in Based on the high growth of the Malaysian economy as well as the positive outlook of the just announced 2014 Budget, the Group will intensify its efforts to secure more infrastructural projects in 2014 and beyond. Building on what was achieved last year, the Group is gradually reaping the benefits of various initiatives as part of its transformation programme in streamlining its property development activities towards reducing the dependency on the construction sector alone. Measures were taken to strengthen risks and strategy processes and exercising strict risk assessment procedures for new and potential projects. The Group anticipates steady increase in revenue from the construction and property development sectors. This increase can be expected from the completion of current projects as well as the commencement of work for new projects, such as Petra Jaya Hospital, Two (2) storey commercial building (Mydin Supermall), PERMATA Children s Specialist Hospital (HUKM) and Ten (10) storey Sime Darby Melawati commercial building in year Appreciation I would like to thank all the employees and members of ZECON s Board of Directors for their dedicated services and commitments throughout the years. To all our shareholders, customers and business associates, I, on behalf of the Board of Directors, would like to extend my appreciation for their continuous support and cooperation. Thank you Tan Sri Datuk Amar (Dr.) Tommy Bin Bin Bugo Chairman

7 Chairman s Statement Measures were taken to strengthen risks and strategy processes and exercising strict risk assessment procedures for new and potential projects. Tan Sri Datuk Amar (Dr.) Tommy Bin Bugo@Hamid Bin Bugo 5

8 This financial period was indeed a challenging and exciting year for Zecon. Despite the challenges that we faced in 2012, it looks like our next financial year will be the year of opportunities for Zecon. We foresee some increase in revenue contribution from the construction sectors due to the commencement of work of the projects that we have successfully procured during the year. Zecon has made an announcement on 15 July 2013 to privatize and delist the company from Bursa Securities Malaysia Berhad (Bursa Malaysia) via a Selective Capital Reduction exercise. As all of you are aware, for the last 5 years, our shares had been trading substantially below par and no dividend has been declared by the company during this period. Zecon shares have been underperforming based on the Bursa Malaysia KLCI Index. The commencement of our Public Private Partnership project for the proposed construction of HUKM s PERMATA Children Specialist Hospital requires Zecon to utilize its cash for funding the operational requirements of this project hence no dividend is expected to be paid out until its completion. Culminating from all these reasons, our Board of Directors, save for the Interested Directors, had on 05 August 2013 approved for this proposed privatization exercise to be tabled in an Extraordinary General Meeting to be convened at a later date for our shareholders decision. Hospital project in Kuching, Sarawak, with a contract sum of RM495 million and this project is scheduled to be completed in November Our book order was further boosted with the award of tender by Sime Darby Property Berhad for the construction of ten (10)-storey commercial building in Selangor Darul Ehsan, for a contract sum of RM 83 million. In July 2013, Zecon Land Sdn Bhd, a wholly-owned subsidiary entered into a Sale and Purchase Agreement with Lembaga Tabung Haji for the sale of the proposed Supermall at a consideration of RM155.8 million. Subsequently, a wholly-owned subsidiary, Zecon Medicare Sdn Bhd, signed a Concession Agreement with Malaysian Government, represented by the Ministry of Education and Universiti Kebangsaan Malaysia for the construction of Children s Specialist Hospital. The concession period is for 30 years and the total construction cost is RM606 million. We anticipate the coming years to be more exciting and will continue to focus on our strategy to improve profitability by optimizing various cost and technological aspects in all our planned deliverables consistent with our mission and objectives. Construction & Infrastructure As shown in the financial report, there was an increase in construction sector s revenue as compared to previous year s revenue. The improvement in revenue was mainly derived from the construction of the Faculty of Medicine and Health Science of Universiti Malaysia Sarawak, Kapit Water Treatment Plant, Bintulu Compressor Station Building Works in Sarawak and Sg Triang Dam in Negeri Sembilan. Property Sector The property sector recorded revenue of RM12.8 million from the sales of properties at Vista Tunku Phases 1 and 2 during the financial year. Further sales are expected to be procured in the subsequent months. ACKNOWLEDGEMENTS We continue to emphasis that dedicated employees are a vital component of our success, more so in this period of revitalization and change. During the year under review, our people were called upon to do more than ever and they must be commended for their high levels of professionalism and commitment. We would like to express our gratitude to all those who have contributed positively to the Group, these include our clients, business associates, financiers, respective government agencies and suppliers. Last but not least, we wish to thank our shareholders, Board of Directors and staff for another year of dedication, support and commitment to Zecon. 6 Toll Concession The Toll Division is expected to continue to provide steady revenue from its Tun Salahuddin Bridge Toll. During this financial year, Toll Division recorded revenue of RM19.9 million as compared to RM11.9 million in the previous financial year. The increase was due to the upward revision in toll rates which was implemented on 1 January 2012 and increase in traffic volume. New Projects In April 2013, Zecon received a Letter of Award from Jabatan Kerja Raya,Malaysia for the construction of Petra Jaya Thank you. Datuk Haji Zainal Abidin bin Haji Ahmad Group Managing Director

9 Group Managing Director s Statement Dedicated employees are a vital component of our success, more so in this period of revitalization and change. Datuk Haji Zainal Abidin bin Haji Ahmad 7

10 Profile of Directors Tan Sri Datuk Amar (Dr.) Tommy bin Hamid Bin Bugo Age : 68 Nationality : Malaysian Qualification : Honoured with a Ph.D. (in Commerce) by Lincoln University, New Zealand B.A. (Economics) M.A. (Economics) University of Canterbury, New Zealand. Postgraduate Diploma in Teaching, Christchurch Teacher s College, New Zealand. Postgraduate Certificate in Business Studies from Harvard Institute of Development Studies, Boston, USA. Position held : Independent Non-Executive Chairman Working experience & occupation : Tan Sri Hamid was appointed to the Board on 2 August He has served in the public sector, holding various distinguished positions culminating in his appointment as State Secretary of Sarawak in the year He retired in the year 2000, and since then has held positions as Chairman and Director of several esteemed organisations. He is the Chairman of Yayasan Kemajuan Insan Sarawak (YAKIN), and Chairman of State Library Sarawak. Besides that, he is a council member of the Institute of Integrity Malaysia and National Water Resource Council and also a member of the Malaysian Anti-Corruption Commission Advisory Committee. He was the recipient of an Excellence Award from the American Association of Conservation Biology. Details of any board committee to : Chairman of Risk Management Committee which he belongs Member of Remuneration & Nomination Committee Other directorships in public companies : Sime Darby Berhad SapuraKencana Petroleum Berhad Sapura Resources Berhad Sarawak Consolidated Industries Berhad Securities holdings in the Company and : its subsidiaries Relationship with directors : None Relationship with substantial shareholders : None Conflict of interest : None List of convictions for offences within the past 10 years other than traffic offences : None No. of board meetings attended in the : 6/7 financial year Name Zecon Berhad Direct No. of shares 4,514,200 % 3.79 Indirect No. of shares % - - Datuk Dr. Haji Josree bin Haji Yacob Age : 57 Nationality : Malaysian Qualification : Degree in Doctor of Medicine (MD), UKM Master of Science in Public Health (MSc PH), NUS (Singapore) Position held : Deputy Independent Non-Executive Chairman Working experience & occupation : Datuk Dr. Yusof was appointed to the Board of Directors of the Company on 09 June He started his career in 1981 by joining Kuala Lumpur General Hospital as Medical Officer. He was in medical field for nine (9) years until he joined political sector in During his political arena, he held various positions within the UMNO and Barisan Nasional Division Sabah. From , he was appointed the Head of UMNO in Sipitang Division. He was elected as Member of Parliament of Sipitang, Sabah in 1996 and Dewan Rakyat Deputy Speaker till February From , he was appointed as member of Executive Central Committee of Commonwealth Parliamentarian Association. He was the Chairman of Bank Kerjasama Rakyat Malaysia Berhad from , Saham Sabah Berhad, Sabah Medical Centre and Sedcovest Holdings Sdn Bhd till Besides, he was also appointed to the Board of other private 8

11 Profile of Directors limited companies and charitable organizations. He is currently sitting in the Board of Sutera Harbour Golf and Country Club Berhad, Chairman of Afie Enterprise Sdn Bhd and Ahli Majlis MARA. Details of any board committee to : Chairman of Remuneration & Nomination Committee which he belongs Other directorships in public companies : None Securities holdings in the Company and its subsidiaries : None Relationship with directors : None Relationship with substantial shareholders : None Conflict of interest : None List of convictions for offences within the past 10 years other than traffic offences : None No. of board meetings attended in the : 6/7 financial year Datuk Haji Zainal Abidin bin Haji Ahmad Age : 55 Nationality : Malaysian Qualification : Master of Arts degree in Management from the University of Kent at Canterbury, England. University Diploma in Accounting from the University of Kent at Canterbury, England. Bachelor of Arts from Universiti Kebangsaan Malaysia. Position held : Group Managing Director Working experience & occupation : Datuk Zainal was appointed to the Board of Zecon on 28 July 1994 as Director and subsequently as Executive Chairman on 30 November On 24 April 2001, he was appointed the Group Managing Director/Chief Executive Officer. He started his career by joining the Sarawak Civil Service in 1981 until he move to private sector in Under his leadership, Zecon Group has undertaken dynamic diversification recent years and has even positioned itself for international ventures. Details of any board committee to : None which he belongs Other directorships in public companies : Sarawak Consolidated Industries Berhad Securities holdings in the Company and : its subsidiaries Name Direct Indirect Zecon Berhad Sarmax Sdn Bhd Teknik PS Sdn Bhd Zecon Construction Sdn Bhd No. of shares 3,655,200 30,000 34, Relationship with directors : Brother to Haji Zainurin bin Haji Ahmad Relationship with substantial shareholders : Director and major shareholder of Dawla Capital Sdn Bhd Conflict of interest : No conflict of interest apart for the related party transactions, which have been disclosed in the Notes to the Accounts. List of convictions for offences within the past 10 years other than traffic offences : None No. of board meetings attended in the : 5/7 financial year % No. of shares 65,689, %

12 Profile of Directors Haji Zainurin bin Haji Ahmad Age : 52 Nationality : Malaysian Qualification : Master of Commerce Degree in Business Administration from University of Canterbury, Christchurch, New Zealand. B Sc. in Business Administration from Indiana Institute of Technology, Indiana, USA. Diploma in Business Studies from Universiti Teknologi MARA. Position held : Deputy Managing Director Working experience & occupation : Haji Zainurin was appointed to the Board on 12 June 1998 as a Director and subsequently as Executive Director on 16 April He was appointed as Deputy Managing Director on 1 June Prior to joining Zecon, he spent 13 years in financial and commercial sectors where his last position was the General Manager of Advance Finance Berhad. Details of any board committee to : Member of Risk Management Committee which he belongs Other directorships in public companies : Nil Securities holdings in the Company and : its subsidiaries Name Zecon Berhad Direct No. of shares 525,000 Relationship with directors : Brother to Datuk Haji Zainal Abidin bin Haji Ahmad Relationship with substantial shareholders : None Conflict of interest : No conflict of interest apart for the related party transactions, which have been disclosed in the Notes to the Accounts. List of convictions for offences within the past 10 years other than traffic offences : None No. of board meetings attended in the : 6/7 financial year % 0.44 Indirect No. of shares % - - Poh Lik Poh Li Thong Age : 68 Nationality : Malaysian Qualification : B.Sc in Quantity Surveying from Reading University, London in Diploma in Quantity Surveying from College Of Estate Management, London in Fellow of the Royal Institution of Chartered Surveyors. Fellow of The Institution of Surveyors Malaysia. Position held : Independent Non-Executive Director Working experience & occupation : Appointed to the Board of Directors of the Company on 25 October He began his career as an Assistant Quantity Surveyor with Philip Pank & Partners ( PP&P ), London in From 1969 to 1973, he was with Jabatan Kerja Raya, Sarawak in Kuching Division. Subsequently, he started Contract Services Consultants and retired in 1988 as a Senior Partner. He is currently the Project Director of Jurudaya Construction Sdn Bhd, a post which he held since Details of any board committee to : Chairman of Audit Committee which he belongs Other directorships in public companies : None Securities holdings in the Company and : its subsidiaries Member of Remuneration & Nomination Committee Name Zecon Berhad Direct No. of shares 40,000 % 0.44 Indirect No. of shares %

13 Profile of Directors Relationship with directors : None Relationship with substantial shareholders : None Conflict of interest : None List of convictions for offences within the past 10 years other than traffic offences : None No. of board meetings attended in the : 7/7 financial year Dato Abdul Majit Bin Ahmad Khan Age : 67 Nationality : Malaysian Qualification : Bachelor of Economics (Hons) from University of Malaya Position held : Independent Non-Executive Director Working experience & occupation : Appointed to the Board of Directors of the Company on 16 May He had served in the Prime Minister s Department and the Ministry of Foreign Affairs as well as in several mission abroad and senior position in the Ministry of Foreign Affairs for thirty-four years. He was also the Under Secretary of West Asia and the OIC and has participated in several Ministerial and Prime Ministerial visits to West Asian Countries and OIC Meetings. He was also a Director General of ASEAN and he actively participated in the organization of the 30th ASEAN Ministerial Meeting held in Kuala Lumpur as well as the ASEAN Head of Summit and the 10+3 Summit Meetings in Malaysia. In 1998, he was appointed as the Ambassador of Malaysia to the People s Republic of China and concurrently accredited to the Democratic People s Republic of Korea until his retirement on 2 January He is currently the President of the Malaysia-China Friendship Association (PPMC), Exco Member of the Malaysia-China Business Council. Details of any board committee to : Member of Risk Management Committee which he belongs Member of Audit Committee Other directorships in public companies : Hong Leong Islamic Bank HL Asset HLG Unit Trust Berhad OSK Investment Bank Berhad OSK Holdings Berhad Securities holdings in the Company and its subsidiaries : None Relationship with directors : None Relationship with substantial shareholders : None Conflict of interest : None List of convictions for offences within the past 10 years other than traffic offences : None No. of board meetings attended in the : 6/7 financial year Richard Kiew Jiat Fong Age : 59 Nationality : Malaysian Qualification : A member of The Malaysian Institute of Accountants; Fellow of The Institute of Chartered Accountants in England and Wales; Fellow of The Association of Chartered Certified Accountants, United Kingdom; Fellow of The Institute of Certified Public Accountants of Singapore; and Fellow of The Chartered Tax Institute of Malaysia. Position held : Independent Non-Executive Director Working experience & occupation : Richard Kiew was appointed to the Board of Directors of the Company on 01 June He has seven years working experience in England with firms of Chartered Accountants. When he came back to Malaysia, he worked as an audit manager for four years before starting his own audit firm in 1986 as a sole practitioner. Details of any board committee to : Member of the Audit Committee which he belongs 11

14 Profile of Directors Other directorships in public companies : Sarawak Consolidated Industries Berhad Securities holdings in the Company and : its subsidiaries Name Direct Zecon Berhad No. of shares 63,000 % 0.05 No. of shares - Indirect % - Relationship with directors : None Relationship with substantial shareholders : None Conflict of interest : None List of convictions for offences within the past 10 years other than traffic offences : None No. of board meetings attended in the : 7/7 financial year Datuk Haji Bolhassan bin Ahmad bin Di Age : 60 Nationality : Malaysian Qualification : B. Eng, University of Sheffield, The United Kingdom. Position held : Non Independent & Non Executive Working experience & occupation : Datuk Bolhassan was appointed to the Board of Directors of the Company on 02 August He began his career as an Engineer with Sarawak Shell Berhad in In 1987, he was appointed Chairman to Miri Port Authority and then Kuching Port Authority, a post which he held until From 1998 to 2006, he was appointed the Assistant Minister in the Chief Ministers Department. In 2006, he was appointed Assistant Minister in the Chief Ministers Office and also Ministry of Infrastructure Development and Communication, a post he held until Details of any board committee to : None which he belongs Other directorships in public companies : None Securities holdings in the Company and : its subsidiaries Name Direct Indirect Relationship with directors : None Relationship with substantial shareholders : None Conflict of interest : None List of convictions for offences within the past 10 years other than traffic offences : None No. of board meetings attended in the : 6/7 financial year Zecon Berhad No. of shares 11,500,000 % 9.66 No. of shares - % - 12

15 Corporate Governance 13

16 Corporate Governance Statement The Board of Directors ( Board ) of Zecon Berhad ( Zecon or the Company ) acknowledges the importance of good corporate governance as fundamental in maintaining the long-term sustainable business growth, enhancing stakeholders value and increasing investors confidence. The Board is fully committed towards compliance with the principles and recommendations as set out in the Malaysian Code on Corporate Governance 2012 ( Code ) and the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( MLR ) with the ultimate aim of protecting and maximising shareholders and stakeholders value and the financial performance of the Zecon Group. BOARD CHARTER The Company had put in place the Board Charter ( Charter ) which in accordance with the Recommendation of the Code. The Charter provides guidance to the Board in the fulfilment of its obligations. It clearly outlines amongst others, the roles and responsibilities of the Board and Board Committees, separation of duties between Chairman and the Group Managing Director, code of ethics, the right balance and composition of the Board as well as the relationship between the Board with its management and shareholders. Forming part of the Charter is the Directors Code of Ethics which set out the principles and standards of business ethics and conduct of the Board in carrying out their duties and responsibilities in an ethical manner and to uphold the highest standards of professionalism and exemplary corporate conduct. The Board shall updates the Charter as and when need arises to reflect changes to the Company s policies, procedures as well as to comply with the latest regulations and legislations. The full Charter is available on our corporate website at 1. THE BOARD a) Board Composition and Balance There are currently eight (8) Directors on the Zecon Board which comprise of two (2) Executive Directors, five (5) Independent Non-Executive Directors ( ID ) and one (1) Non Independent Non-Executive Director ( NID ). The composition of the Board is in compliance with the independent directors criteria pursuant to paragraph of the MLR. The profiles of the Directors are set out on pages 8 to 12 of this Annual Report. A clear division of responsibilities between the Chairman and the Executive Directors exists to ensure a balance of power and authority. Formal position descriptions for the Chairman and the Executives Directors outlining their respective roles and responsibilities are set out in the Charter. The Chairman leads the Board and is responsible for ensuring the effectiveness of the Board. The Executive Directors are responsible for the implementation of the Board s policies and decisions monitoring the operations, managing the development and implementation of business and corporate strategies, as well as the running of the daily businesses. The ID and NID are not involved in the day-to-day management of the Company and there are free of any relationship which could materially interfere with the exercise of their independent judgement. No individual or group of individuals dominates the Board s decision making. In accordance with Recommendation 2.1 of the Code, the Deputy Independent Chairman, who is also the Chairman of the Remuneration & Nomination Committee ( RNC ), Datuk Dr. Haji Josree bin Haji Yacob had been appointed as the Senior Independent Director. In accordance with recommendation 3.2 of the Code, the tenure of an independent Director should not exceed nine (9) years cumulatively. Notwithstanding that Mr. Poh Lik Poh Li Thong has served on the Board for more than nine (9) years, the Board proposes to retain his status as an Independent Director of the Company. The Board holds the view that the ability of an independent Director to exercise independence is determined by his roles and responsibilities as an Independent Director, calibre, qualification and experience instead of his period of service as an Independent Director. b) Duties and Responsibilities of the Board The Board is responsible for governing the management of the Company, exercise their judgement to act in the manner they reasonably believe to be in the best interest of the Company. In general, the Board is responsible for amongst others, the following:- developing, reviewing, adopting and monitoring the implementation of the Group s strategic plans and policies; providing entrepreneurial leadership to the Group; ensuring that the internal control systems is adequate and is capable of identifying and managing principal risks to facilitate efficiency in operations and a stable financial environment; identifying principal risks and ensuring that appropriate risk management system is in place to manage the risks; formulating succession plans for the Group to ensure business continuity; and ensuring compliance with corporate governance practices; The ID play an important role in providing independent advice, judgement, ensuring an impartial Board decision making process as well as safeguarding the interests of other parties such as the minority shareholders, stakeholders etc. There is a clear separation of duties between the Chairman and the Group Managing Director. 14

17 Corporate Governance Statement c) Appointment and Re-election The identification and appointment of new Directors undergo a process led by the RNC. The details of the responsibilities of the RNC are set out on page xxx of this Annual Report. Thereafter upon approval by the Board, the Company provides an induction programme for the new Directors to allow them to understand the business and ultimately to enable them to contribute effectively at Board meetings. The Board will ensure that all newly appointed Directors undergo the Mandatory Accreditation Programme as required under the MLR within four (4) months after their appointments. In accordance to the Articles of Association of the Company, at least one-third (1/3) of the Board is subject to retirement by rotation at each Annual General Meeting ( AGM ). The retiring Directors can offer themselves for re-election. Directors who are appointed during the financial year shall hold office only until the next AGM and shall be eligible for re-election. The Board has no immediate plans to implement a gender diversity policy or target as it is of the view that Board membership is dependent on each candidate s skills, experience, core competencies and other qualities, regardless of gender. d) Board Meetings The Board Meetings are held at quarterly interval with additional meetings held as and when necessary. For the current financial period ended 30 June 2013 ( FY 2013 ), the Board had met four (4) times. All Directors had complied with the minimum fifty percent (50%) of attendance requirement in respect of Board Meeting as stipulated in the MLR. The attendance record of each Director for FY 2013 is as follows:- Name of Director Attendance 1. Tan Sri Datuk Amar (Dr.) Hamid bin Bugo 6/7 2. Datuk Dr. Haji Josree bin Haji Yacob 6/7 3. Datuk Haji Zainal Abidin bin Haji Ahmad 5/7 4. Haji Zainurin bin Haji Ahmad 6/7 5. Poh Lik Poh Lik Thong 7/7 6. Dato Haji Hamzah bin Haji Ghazalli 3/3 (Resigned on 05 October 2012) 7. Dato Abdul Majit bin Ahmad Khan 6/7 8. Richard Kiew Jiat Fong 7/7 9. Datuk Haji Bolhassan bin Ahmad bin Di 6/7 Based on the attendance record of the Directors at Board and Board Committee Meetings, the Board is contented with the level of time commitment given by the Directors in fulfilling their roles and responsibilities. Besides, the Directors also attend meetings, site visits with the relevant Ministries, Government Offices with regards to projects undertaken by the Company together with the management personnel. e) Directors Training The Board recognizes the importance for the Directors to continuously enhance their skills and knowledge to keep abreast of the latest development in the industry, economy and technology, regulations and legislations, to facilitate them to carry out their roles and responsibilities effectively. The Board is constantly being updated on the latest amendments and new statutory and regulatory requirements. All the Directors have attended the Mandatory Accreditation Program in accordance with the MLR. The Company has on an ongoing basis identified seminars and courses which are of relevance to the Directors in delivering their duties. In addition, each Director may determine the areas of training that he require for his personal enhancement as a Director or as a member of the Board Committees. The Company Secretary shall arrange for the Directors attendance at the training programmes, which are conducted either in-house or by external service provider. During the FY 2013, the Directors have attended numerous seminars and briefings which they considered useful in discharging their roles and responsibilities. The details of the seminars attended by the Directors are set out on pages 19 to 20 of this Annual Report. f) Supply of information The Company Secretary will ensure that notices, agendas and board papers of each meeting are distributed to the Directors in a timely manner prior to respective meetings and on an ongoing basis to enable the Directors to peruse, consider, obtain additional information and seek further clarification when necessary. 15

18 Corporate Governance Statement There is a list of matters, which are reserved specifically for Board s consideration and these include Group s strategic plans and policies, formulating succession plans for the Group to ensure business continuity, budgets for the Group and business development issues. Material acquisitions and disposals of assets, and potential investments by the Group are also considered extensively at Board level. Senior Management Officers were invited to attend Board Meetings or Committee Meetings when necessary to furnish the Board with explanations and clarifications on the matters tabled at the meetings. The Directors have full access to all information in relation to the Group s businesses and affairs to enable them to discharge their duties. They also have unrestricted access to the advice and services of the Senior Management and the Company Secretary. The Directors are encouraged to obtain independent professional advice from external consultants in the furtherance of their duties at the Company s expenses. The Directors will be constantly updated by the Company Secretary on latest amendments and new statutory and regulatory requirements relating to their duties and responsibilities. The Board will ensure that the Company Secretary attend all Board Meetings. g) Directors Remuneration In line with the Code, the Board has formally adopted the Remuneration Policy which outlines the terms and conditions for the employment and remuneration of the Board. This policy shall be reviewed on a yearly basis by the RNC of the Company. The remuneration of Directors is set at levels which enable the Group to effectively attract and retain Directors with the relevant experience and expertise required for stewardship of the Group. The remuneration of Executive Directors shall be reviewed by the RNC and recommended for Board s approval. The Executive Directors play no part in determining their own remuneration package. In the case of Non-Executive Directors, their remuneration package is decided by the Board upon recommendation by the RNC, individual Director do not participate in the discussion and decision of their own remuneration. The Company has provided an appropriate range of remuneration taking into account the experience, the specific role and responsibilities of the individual member and the amount of time that they are expected to devote to their role. The remuneration package of Non-Executive Directors comprises of Directors fees, monthly allowance, meeting allowances for attending Board/Board Committees meetings and hand phone allowance. The remuneration for Executive Director shall consist of a fixed salary, allowances, bonus, gratuity plan, benefitsin-kind i.e cars, healthcare, holiday package, insurance coverage. The Non-Executive Directors shall receive fees, allowances, and other benefits. The Directors shall also be entitled to be repaid all travelling and hotel expenses properly incurred by them respectively in discharging their duties as Directors. Whereas for the Executive Director s fixed salary, the NRC shall review the level of salary to ensure that it is competitive and provides proper compensation and incentives to the Executive Director In line with the MLR, the aggregate remuneration of the Directors is disclosed on pages 66 and 67 of this Annual Report. h) Company Secretary The Company Secretary is responsible for advising and updating the Board on issues relating to compliance with relevant regulatory requirements, codes, rules and regulations affecting the Company. She is also responsible for advising the Board on their obligations and duties pertaining to disclosure of interest in securities, disclosure of conflict of interest with regards to transaction involving the Company, prohibition on dealings in Company s securities, prohibition on insider trading, etc. 2. BOARD COMMITTEES Apart from the above, the Company Secretary attends Board and Board Committee meetings, ensure that all deliberations at the aforesaid meetings are well captured and minuted and subsequently communicated the Board s decisions for Management s attention and further action. The Company Secretary ensuring that all announcements are released to the Regulatory Bodies on a timely manner. All Directors have access to the advice and services of the Company Secretary. The Board delegates specific duties and responsibilities to the respective Committees of the Board namely, Audit Committee, Remuneration & Nomination Committee and Risk Management Committee in order to augment the business and corporate efficiency. 16

19 Corporate Governance Statement The Chairman of the relevant Board Committee will report to the Board on the key issues deliberated by the Board Committee at its Board Meeting and the minutes of the respective Board Committees Meetings shall be presented to the Board for information and decision. i) Audit Committee The Audit Committee ( AC ), comprising wholly of ID, is responsible to assist the Board in fulfilling its responsibilities relating to accounting and reporting practices of the Group and to monitor the work of the Internal Audit Function as well as ensuring that an objective professional relationship is maintained with the external auditors. Further details on the AC are set out in the AC Report on pages 23 to 25 of this Annual Report. ii) Remuneration & Nomination Committee The RNC comprises exclusively of Non-Executive Director, of whom all are ID The RNC is chaired by the Senior Independent Director of the Company. The responsibilities of the RNC include, amongst others, the following:- To develop, maintain and review the criteria to be used in the recruitment process and annual assessment of Directors. To recommend candidates for appointment to the Board and Board Committees and recommend to the Board for decision and approval; To determine the remuneration packages of the Directors and to ensure that their remuneration commensurate with their experience and performance; To review the composition of the Board and experiences and mix of skills of the directors and also to ensure that there is balance between executive, non-executive, and independent directors; To assess annually the effectiveness of the Board as a whole; To evaluate the terms and conditions of the employment of the Executive Directors; To formulate formal and transparent remuneration policies and procedures to attract and retain directors. For the FY 2013, the RNC had met twice with all members attended. The activities undertaken by RNC during the period under review include, amongst others, the following:- Reviewed and recommended to the Board for approval on the extension of service contract of the Vice President; Determined the necessity to appoint additional director to replace the outgoing director; Reviewed the remuneration packages for the Board; Annual Board assessment for the Board of the Company; Identified training courses for Directors; and Proposed Long Term Incentive Plan for Zecon Group. iii) Risk Management Committee ( RMC ) The RMC comprises of three (3) members, of whom majority are Independent Directors. The RMC reports its activities and findings directly to the Board for their information and further action, if necessary. The RMC is delegated with the following specific tasks:- i) Establish and maintain the risk management framework within the Group; ii) Assess and evaluate the risk management process on a periodic basis; iii) Set the risk appetite of the Group; and iv) Monitor and implement action plans to mitigate high risk areas within the Group 17

20 Corporate Governance Statement 3. SHAREHOLDER AND INVESTOR RELATIONS The Company maintains a regular policy of disseminating information that is material for shareholders attention. In line with the regulatory requirements, various announcements, which amongst others, quarterly financial results, annual report, change in the composition of Board and Audit Committee, award of contract, etc are made available at Bursa Malaysia s website and the Company s corporate website within the stipulated statutory timelines electronically, thus provide the shareholders and the investing public with an overview of the Group s performance and operations. The Company has established a corporate website ( which shareholders and members of the public can access the corporate information and updates relating to the Company and for channelling their queries. During the AGM of the Company, the Directors welcome the opportunity to gather the views of shareholders. Notices of each general meeting are issued in a timely manner to all shareholders, and in the case of special businesses, a statement explaining the effect of the proposed resolutions is provided. All Directors are available to respond to questions from shareholders during the meeting. The external auditor is also present to provide professional and independent clarifications on issues and concerns raised by the shareholders. Our Corporate Division personnel will provide on-going updates on the significant developments or activities of the Group with research/financial analysts, investors and institutional shareholders. The same presentation will also be made available to the media to capture a wider readership. However, discretion was exercised during these sessions to ensure sensitive information is not disclosed before the required announcement was released to Bursa Malaysia. 4. ACCOUNTABILITY AND AUDIT 4.1 Financial Reporting To ensure a fair and reasonable assessment of the Company s position and prospects, particularly in the financial reports, the Directors have implemented a quality control procedure to ensure that all financial reports have been prepared based on acceptable accounting standards and policies. These financial reports also undergo a review process by the AC prior to approval by the Board. The Board understands that in order to strengthen the accountability aspect of financial reporting, the Company needs to maintain a sound system of internal control to safeguard shareholders investment and the Group s assets. Hence the Company has developed a comprehensive system of internal control comprising of clear structures and accountabilities, well-understood policies and procedures and budgeting and review process. 4.2 Risk Management and Internal Control The effectiveness of the system of internal control is then scrutinised by an Internal Auditor, who is independent from the day-to-day operations of the Company and report the outcome of review directly to the AC. The Statement on Risk Management and Internal Control as set out from pages 21 to 22 of this Annual Report provides an overview of the mechanism and procedures of risk management and internal control within the Group. 4.3 Relationship with External Auditors The Board also maintains an appropriate relationship with the Company s External Auditor, through formal and transparent arrangement with the Audit Committee. These arrangements are stated on pages 23 to 25 of the AC Report. STATEMENT OF DIRECTORS RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS The Companies Act, 1965 requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of the affairs of the Group and the Company at the end of the financial year, and of the profit and cash flows of the Group and the Company for the financial year. In preparing the financial statements, the Directors are also responsible for the adoption of suitable accounting policies and their consistent use in the financial statements, supported where necessary by reasonable and prudent judgements. The Directors hereby confirm that the Company and Group s financial statements are drawn up in accordance with the applicable approved accounting standards and the Board of Directors has the responsibility of ensuring that the financial statements of the Company and the Group give a true and fair view of the affairs of the Company and the Group. The Directors also confirm that the Company maintains adequate accounting records and sufficient internal controls to safeguard the assets of the Group and the Company, and to prevent and detect fraud and other irregularities. This Directors Responsibility Statement is made in accordance with resolution of the Board of Directors dated 30 June This Corporate Governance Statement is made in accordance with the resolution of the Board of Directors dated 28 October

21 Training/Seminars Attended by Directors of Zecon Berhad During The Financial Year Ended 30 June 2013 No. Name of Director Type Course/Training Organiser Date 1. Tan Sri Datuk Amar (Dr.) a. In-House Directors Training Tricor Corporate 25 June 2012 Tommy Bin Hamid on Key Amendments to:- Services Sdn Bhd Bin Bugo i) Listing Requirements 2011; ( Tricor ) ii) Common Pitfalls Under Chapter 10 of Listing Requirement -Transactions iii) Key Recommendations from Malaysian Code on Corporate Governance 2012 iv) Directors Power, Duties and Responsibilities ( In-House Directors Training on Key Amendments ) b. Internal Auditing The Institute of June 2012 Internal Auditors Malaysia c. Regulatory Updates, Malaysian Institute 27 November 2012 Governance and Current of Corporate Issues for Directors of Governance PLCs and Body Corporate 2012 d. Nominating Committee Program Iclif Leadership And 14 May 2013 Governance Centre & Bursa Malaysia 2. Datuk Dr. Haji Yusof In-House Directors Training Tricor 25 June Josree bin Haji Yacob on Key Amendments 3. Datuk Haji Zainal Abidin a. In-House Directors Tricor 25 June 2012 bin Haji Ahmad Training on Key Amendments b. PPP Healthcare Infrastructure, Asia Executive 25 & 26 June 2013 Design & Construction Programs Conference & Exhibition Haji Zainurin bin Haji a. In-House Directors Training Tricor 25 June 2012 Ahmad on Key Amendments b. PPP Healthcare Infrastructure, Asia Executive 25 & 26 June 2013 Design & Construction Conference Programs & Exhibition Poh Lik In-House Directors Training on Tricor 25 June 2012 Poh Li Thong Key Amendments 6. Dato Abdul Majit bin a. CEO Conference 2012 OSK Holdings Bhd 13 January 2012 Ahmad Khan b. OSK Regional Management OSK Holdings Bhd 16 April 2012 c. Competition Act 2010 OSK Investment 07 May 2012 Bank Bhd d. The Malaysian Code on OSK Investment 10 May 2012 Corporate Governance Bank Bhd e. In-House Directors Tricor 25 June 2012 Training on Key Amendments 19

22 Training/Seminars Attended by Directors of Zecon Berhad During The Financial Year Ended 30 June 2013 No. Name of Director Type Course/Training Organiser Date f. FIDE Forum Roundtable Bank Negara, 15 October 2012 Discussion-Banking Industry Malaysia g. Sustainability Trainings For Directors Bursa Malaysia 7 March 2013 Bursa Malaysia Securities Berhad Securities Bhd h. Governance in Group Bank Negara, 2 & 25 March 2013 Malaysia i. Fraud Detection & Prevention, Bursanata Sdn Bhd 3, 17 & 18 April 2013 Board Oversight Responsibilities for Merger & Acquisition j. New Financial Services Act Hong Leong Bank 4 & 29 April 2013 Berhad 7. Richard Kiew Jiat Fong a. Highlights of Revised & Malaysian Institute of May 2012 Re-Drafted Clarified Standards Accountants b. Merger & Affiliation Malaysian Institute 20 June 2012 Seminars 2012 of Accountants c. In-House Directors Training Tricor 25 June 2012 on Key Amendments d. National Tax Conference 2012 Lembaga Hasil July 2012 Dalam Negeri Malaysia e. Seminar Percukaian Lembaga Hasil 11 October 2012 Kebangsaan 2012 Dalam Negeri Malaysia f. National Tax Conference 2013 Lembaga Hasil June 2013 Dalam Negeri Malaysia 8. Datuk Haji Bolhassan In-House Directors Tricor 25 June 2012 bin Haji Ahmad Training on Key bin Di Amendments 20

23 Statement On Risk Management & Internal Control BOARD S RESPONSIBILITY The Board of Directors (Board) is responsible for the system of risk management and internal control at Zecon Berhad Group (the Group). The system is designed to safeguard shareholders investments, the interest of customers, regulators, employees and the Group s assets. The system of risk management and internal control covers risk management, quality management system, finance, operations, management information systems and compliance with the relevant laws, regulations, policies and procedures. The system is designed to manage rather than eliminate risks that may impede the attainment of the Group s business objectives. Thus, the system only provides reasonable but not absolute assurance against material misstatement, loss or fraud. The Board has set a framework in place for identifying, evaluating and managing significant risks faced by the Group, except for associate companies and joint ventures which are not under the control of the Group. The framework and risk management processes are reviewed quarterly by the Risk Management Committee which reports to the Board. The Board is assisted by Management to ensure that internal controls and risk management practices are implemented within the Group. RISK MANAGEMENT The formation of the Risk Management Committee (RMC) was approved by the Board and established in May The RMC is headed by Zecon Berhad s Chairman together with the Deputy Managing Director and another Non-Executive Independent Director as members. The RMC reports its activities and findings to the Board. The RMC is entrusted with the following specific tasks:- i. Establish and maintain the risk management framework within the Group; ii. Assess, review and evaluate the risk management processes on a periodic basis; iii. Set the risk appetite of the Group; and iv. Monitor and implement action plans to mitigate high risk areas within the Group. CONTROL STRUCTURES The Board has established control structures and is committed to evaluating, enhancing and maintaining these to ensure effective strategic and operational control over the Group s business operations. The following key control structures are in place to assist the Board to maintain a proper control environment. Board and Management Committees To promote corporate governance, transparency and accountability, the Board has set up Board and Management Committees to assist in accomplishing the vision, mission, strategies and objectives set for the Group. The Committees oversee the areas assigned to them under their respective Terms of Reference. The Committees play an important role in directing, monitoring and ensuring that the plans and operations are in accordance with the Group s policies and its approved long-term and short-term business plans. The Committees are: Board Committee Audit Committee Remuneration & Nomination Committe Group Risk Management Committee Management Committee Quality Management System Committee Risk Management Committee at Subsidiary Level Tender Committee Organization Structure The Board has implemented a divisional structure for the Group. Clear lines of authority, responsibility and accountability have been established to support the Group in achieving its vision, mission, strategies and operational objectives. The divisional structure enhances the ability of each division to focus on its assigned core or support functions within the Group. The Board also reviews and refines the effectiveness of the Group s organization and control structures to enhance the Group s ability to achieve its strategic and operational objectives and manage challenges in its operating environment. Group Policies and Procedures The Board has approved policies and procedures to govern the financial and operational functions, and ethics of the Group. The policies ensure that ethics and internal control principles and mechanisms are embedded in operations. This enables the Group to respond quickly to evolving risks and immediately report on any significant control failure. The policies and procedures are also reviewed on a regular basis to ensure relevance and effectiveness. 21

24 Statement On Risk Management & Internal Control Among others, the policies and procedures implemented are as follows:- i. Group Financial Policies and Procedures ii. Quality Management System iii. Health & Safety Policy iv. Environmental Policy v. Employee s Handbook Manual vi. Risk Management Framework vii. Limits of Authority viii. Tendering and Contracting Procedures Financial and Operational Review The Audit Committee (AC) reviews the Group s quarterly financial performance together with Management and these are subsequently reported to the Board. The quarterly reviews enable the AC to deliberate and assess the Group s financial results and operational performance. Management also provides information on budget variances to enable AC to monitor and contribute towards improving performance. The AC also reviews and monitors the imminent implementation of the Malaysian Financial Reporting Standards (MFRS) Framework initiated by the Group Finance Division. Internal Audit Review The Internal Audit Department (IAD) was set up by the Board to provide independent assurance of the adequacy of risk management, internal control and governance systems. IAD reports functionally to the Board through the AC. Its activities are guided by the Internal Audit Charter which is approved by the AC. The AC also reviews and approves IAD s annual audit plans, budgets, competency and resources. This is to ensure adequate coverage of significant and high risk areas and resources. IAD carries out regular reviews of business processes to assess the adequacy and effectiveness of internal controls, compliance with regulations and the Group s policies and procedures and highlight significant risks and control weaknesses affecting the Group. IAD also performs strategic review/consultancy services where relevant to assist entities to improve their operational performance. Ad-hoc appraisals, investigations or reviews are also conducted as and when requested by the Board, AC and Management. AC meetings are held regularly to deliberate audit findings, Management response, corrective actions, and to monitor actions taken by Management in areas with significant control weaknesses. Follow-up audits are conducted to review the adequacy and effectiveness of corrective actions taken by Management on all significant matters raised. Quality Management System (QMS) The Group has also put in place QMS which provides work procedures on the implementation of projects. The verification body, United Registrar of Systems (URS) has certified the Group s QMS and awarded the ISO 9001 : 2008 certification in The system is well maintained and managed with regular audits conducted by the Group s appointed Quality Internal Auditors and External Auditor, URS. Currently, the Group is in the process of upgrading its system into Integrated Management System, which is a combination of its current QMS with Environment Management System and Occupational Health and Safety Management System. Related Party Transaction The Group has in place adequate procedures and processes to monitor, trace and identify related party transactions in a timely and orderly manner and such procedures and processes are reviewed on a yearly basis or whenever the need arises. ASSURANCE The Board has received reasonable assurance from the Chief Executive Officer and Chief Financial Officer that the Group s risk management and internal control system is operating adequately and effectively, in all aspects based on the risk management and internal control system of the Group. CONCLUSION The Board is of the view that the system of risk management and internal control is in place for the year under review and up to the date of approval of this Statement and is sound and sufficient to safeguard shareholders investment, the interests of customers, regulators, employees and other stakeholders, and the Group s assets. This Statement on Risk Management and Internal Control has been prepared in line with the Listing Requirements of Bursa Malaysia Securities Berhad and guided by the Statement on Risk Management and Internal Control: Guidance for Directors of Listed issuers. 22

25 Report of Audit Committee The Audit Committee of Zecon Berhad is pleased to present its Audit Committee ( AC or Committee ) Report ( Report ) for the current financial year ended 30 June 2013 ( FY 2013 ). The Board has approved this Report via circular resolution dated 23 October Membership and Meetings During the FY 2013, the AC had held seven (7) meetings against the minimum of four (4) meetings as per its term of reference. The Internal Auditor who is the Secretary was in attendance during all the meetings. The Chief Financial Officer and other officers were invited to the meeting to deliberate on matters within their purview as and when requested by the AC. After each meeting, the AC Chairman submits a report on matters being deliberated to the Board of Directors for their information and actions where necessary. The Company Secretary shall record decisions made and circulate it to the Management for their further action. AC members, designation and attendances at the AC meetings held during the FY 2013 are as follows:- Committee Members Status of Directorship Attendance Poh Lik Poh Li Thong Independent Non-Executive Director 7/7 Chairman Dato Haji Hamzah Bin Haji Ghazalli Independent Non-Executive Director 4/4 (Resigned on 5 October 2012) Member Richard Kiew Jiat Fong Independent Non-Executive Director 7/7 Member Dato Abdul Majit Bin Ahmad Khan Independent Non-Executive Director 3/3 (Appointed on 5 October 2012) Member 2. Summary of Activities of Audit Committee In line with the terms of reference of the Committee, the following activities were carried out:- (i) External Audit Reviewed and approved the External auditor s audit plan and the scope of annual audit. Deliberated and reported the results of the annual audit to the Board of Directors. Attend to concerns raised by the External Auditor without the presence of Management. Assessed the performance of the External Auditors and recommended their appointment and remuneration to the Board of Directors. (ii) Internal Audit Reviewed and approved Internal Audit s structure, budget and Annual Audit Plan to ensure adequacy of resources, competencies and coverage of auditable entities with significant and high risks. Reviewed the internal audit reports issued by Internal Auditor on the effectiveness and adequacy of financial, operational and compliance process. Reviewed the adequacy and effectiveness of corrective actions taken by Management on all significant matters raised. (iii) Financial Results Reviewed the Quarterly and Annual Financial Statements of the Company and Group including announcements, and recommended them to the Board for approval. (iv) Related Party Transactions Reviewed the system for identifying, monitoring and disclosing related party transactions entered into by Zecon Berhad and its subsidiaries. (v) Annual Reporting Reviewed and recommended the Statement on Internal Control and AC Report to the Board for approval. 23

26 Report of Audit Committee 3. Summaries of Activities of the Internal Audit Division The Internal Audit Division was established on 1 April 2002 and it reports directly to the AC. For the FY 2013, the activities of the internal audit are as follows:- (i) Preparation of Audit Planning Memorandum and the Internal Audit Plan for the year. (ii) Conducting Risk Management activities and also act as Secretary and administrator to Risk Management Committee of Zecon Berhad and its Group of companies. (iii) Secretary to AC. (iv) Conduct internal audit assignments as per Internal Audit Plan and special audit assignments on an ad-hoc basis based on the requests of the Senior Management. (v) The General Manager for Internal Audit is also the Quality Management Representative (QMR) responsible in managing the Quality Management System. (vi) Preparation of AC Report and Statement of Internal Controls for the Company s Annual Report Terms of Reference (i) Composition a. The Committee shall be appointed by the Board and shall consist of not less than three (3) members; b. All the AC members must be non-executive directors and with a majority of them being independent directors; c. An alternate Director shall not be appointed as a member of the Committee; d. At least one member of the AC must be a member of the Malaysian Institute of Accountant; or if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years working experience and:- i. he must have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or ii. he must be a member of one (1) of the Associations of Accountants specified in Part II of the 1st Schedule of the Accountants Act e. The members of the Committee shall elect a Chairman from amongst their number who shall be an independent Director. f. If the number of members of the Committee is reduced below three (3), the Board shall within three (3) months appoint such number of new members as may be required to make up the minimum of three (3) members. (ii) Authority The Committee shall, in accordance with a procedure to be determined by the Board and at the cost of the Company:- a. have the authority to investigate any matter within its terms of reference; b. have the resources which are required to perform its duties; c. have full and unrestricted access to any information pertaining to the Company; d. have direct communication channels with both the external and internal auditors; e. be able to obtain independent professional opinion or other advice; and f. be able to convene meetings with the external auditors, excluding the attendance of the executive members of the Board, whenever deemed necessary. 24

27 Report of Audit Committee (iii) Duties The duties and scopes of the Committee shall be to review the following and report the same to the Board;- a. with the external auditors: (i) (ii) the scope of their audit plan; their evaluation of the system of internal control; (iii) the audit reports on the financial statements; (iv) the assistance given by the Company s employees to the external auditor; (v) any letter of resignation from the external auditors; and (vi) nomination of the external auditors and the determination of audit fees. b. the effectiveness of the internal control systems including the internal audit programmes, process, results of internal audit programmes, processes or investigation undertaken and whether or not appropriate actions have been taken on recommendations of internal audit functions. c. the quarterly results and year end financial statements of the Company and the Group, prior to submission to the Board for approval, focusing particularly on:- (i) (ii) changes in or implementation of accounting policy; significant and unusual event; and (iii) compliance with accounting standards and other legal requirements. d. any related party transactions and conflict of interest situation that may arise within the Company or Group. e. verifythe allocation of options to employees under the relevant criteria decided by the Option Committee. f. any other functions as may be agreed by the Committee and the Board or as may be required or empowered by statutory legislation or guidelines issued by the relevant governing authorities. Where the Committee is of the view that any matter reported to the Board has not been satisfactorily resolved resulting in breach of the MLR, the Committee must promptly report such matter to Bursa Malaysia Securities Berhad. The Committee members term of office and performance are subject to review by the Board every three (3) years to determine whether the Committee has carried out their duties in accordance with the Terms of Reference. (iv) Frequency and Attendance The Committee shall hold at least four (4) regular meetings a year and such additional meetings as the Chairman shall decide in order to fulfill its duties. The Committee at its discretion, may invite any person to its AC meeting. A quorum for the Committee shall be two (2) members and majority of members present must be independent directors. The General Manager for Internal Audit shall be the Secretary to the AC. The Chairman shall table any material issues raised in the AC meeting at the subsequent Board Meeting of the Company. 25

28 Additional Compliance Information 1. Share Buy-backs The Company did not enter into any share buy-back transaction during the financial year ended 30 June Options, Warrants or Convertible Securities There were no issuance of options, warrants or convertible securities by the Company for the financial year ended 30 June American Depository Receipt ( ADR ) or Global Depository Receipt ( GDR ) Programme The Company did not sponsor any ADR or GDR programme during the financial year ended 30 June Imposition of Sanctions or Penalties There were no sanctions or penalties imposed by the relevant regulatory bodies on the Company or its subsidiaries, directors or management during the financial year ended 30 June Non-Audit Fees The non-audit fees paid by the Company to the External Auditors, Messrs. Ernst & Young for the financial year ended 30 June 2013 was amounted to RM3, Variation in results There was no variance of 10% or more between the unaudited results announced and the audited results for the financial year ended 30 June Profit Guarantee There were no transactions that require profit guarantee during the financial year ended 30 June Material Contracts There were no material contracts of the Company and its subsidiaries involving directors and substantial shareholders either still subsisting at the end of the financial year ended 30 June 2013 or entered into since the end of previous financial year. 9. Recurrent Related Party Transactions of a Revenue or Trading Nature The Company had on 25 June 2012 obtained Shareholders Mandate for the Group to carry out the Recurrent Related Party Transactions of revenue or trading nature ( RRPT ). In accordance with Paragraph 3.15 of Practice Note 12 of the Bursa Malaysia Securities Berhad, the details of RRPT transacted during the financial year ended 30 June 2013 are as follows:- Related Party Interested Director/ Nature of Transaction Amount Connected person (RM) SCIB Concrete Datuk Haji Zainal Abidin bin Purchase of construction 835,308 Manufacturing Sdn Bhd Haji Ahmad materials Mary Bolhassan, Datuk Haji Zainal Abidin bin Haji Provision of legal and 55,915 Noreda Ahmad & Co Ahmad & Haji Zainurin bin Haji professional services Ahmad TKY Consultant Haji Abg Azahari bin Abg Osman Provision of engineering 2,127,808 Sdn Bhd consultancy and project management Perunding KAZ Sdn Bhd Datuk Haji Zainal Abidin bin Haji Engineering consultancy 113,571 Ahmad & Haji Zainurin bin Haji and project management Ahmad 26

29 Zecon s Project 27

30 Zecon s Project 2 - Storey Supermall (Mydin) Bintulu Compressor Station buildings Triang Watersupply Scheme Jelebu Negeri Sembilan PERMATA Children Specialist Hospital 28

31 Zecon s Project Petra Jaya Hospital Revised Route from Taman Matang Jaya to Demak ZECON Toll Faculty of Health Science, Unimas Institute of Health and Community Tun Salahuddin Bridge The construction & Completion of 12MLD Water Treatment Plant & Association Works Kapit Division 29

32 Corporate Social Responsibility Caring comes naturally for the Zecon Group of companies. We have always believed that the way towards a sustainable business is to strike a balance between profitability and our social conscience. Whether it is employee welfare, fulfilling our responsibilities to our various constituencies in the marketplace, improving the quality of life in the community or ensuring that the benefits of our business activities are not negated by any adverse effects on the environment, these are the fundamental elements of the Zecon Group s road map to sustainability. Building on this rich tradition of caring, holistic Corporate Social Responsibility (CSR) is something we practice on a daily basis and is always given due important alongside mainstream business issues. Charity begins at home and the Zecon Group demonstrates its commitment to this in many ways. The Group has always focused on the development of youth, and where better to start than with the kids of our own people. We are awarding our employees children when they achieved excellent results in public examination. This is to encourage them to go further in their future education. Every year Zecon continues to inspire scholars to excel in their studies especially those in engineering field. For the past 12 years, Zecon Excellence Awards given to graduating engineering students at University Malaysia Sarawak (UNIMAS). This scholarship is meant for students from low income families who excel in their studies. We recognize that our workforce is the Group s most important asset and we demonstrate this commitment by providing a conducive work environment. This commitment also involved upgrading of human capital by reserving a significant slice of the annual budget into training effort. Our people are known for their hard work, but there are times to be set aside for sports and other recreational activities. During the month of Ramadhan, the Zecon Group invited children from Yayasan Kemajuan Insan Sarawak (YAKIN) to Majlis Berbuka Puasa dan Solat Terawih. Other recreational activities have always been mainstays of our corporate calendar and serve as a useful platform for team building. Zecon Group organized several activities during the year which included Unity Teambuilding, Recycle Week, Jungle trekking at Gunung Gading, Blood Donation and Bowling Competition. This is to take our employees away from hectic workplace and positive inter departmental cooperation is nurtured. Furthermore, Zecon Sponsored Putri Berkaya Sri Urai in Sarawak Regatta. In Sarawak Regatta 2012, Putri Berkaya Sri Urai took the title of Raja Sungai. 30

33 Directors report & audited financial statements Directors Report 32 Statement by Directors and Statutory Declaration 35 Report of the Auditors 36 Statements of Comprehensive Income 38 Consolidated Statements of Financial Position 39 Company Statements of Financial Position 40 Consolidated Statement of Changes in Equity 41 Company Statement of Changes in Equity 43 Consolidated Statements of Cash Flows 44 Company Statements of Cash Flows 46 Notes to the Financial Statements 48 31

34 Directors Report The directors present their report together with the audited financial statements of the Group and of the Company for the financial period ended 30 June Change of financial year-end During the financial period, the Company changed its financial year end from 31 December to 30 June. Principal activities The principal activities of the Company are foundation engineering, civil engineering and building contracting works and their related activities. The principal activities of the subsidiaries are set out in Note 16 to the financial statements. There have been no significant changes in the nature of the principal activities of the Group and of the Company during the financial period. Results Group RM Company RM Loss for the period (24,939,647) (3,121) =========== ========== Attributable to: Equity holders of the Company (24,702,542) (3,121) Non-controlling interests (237,105) - (24,939,647) (3,121) =========== ========== There were no material transfers to or from reserves or provisions during the financial period other than those disclosed in the financial statements. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. Directors The names of the directors of the Company in office since the date of the last report and at the date of this report are: Tan Sri Datuk Amar (Dr.) Tommy Bin Hamid Bin Bugo Datuk Haji Josree Bin Haji Yacob Datuk Haji Zainal Abidin Bin Haji Ahmad Haji Zainurin Bin Haji Ahmad Poh Lik Poh Li Thong Dato Haji Hamzah Bin Haji Ghazalli (Resigned on ) Dato Abdul Majit Bin Ahmad Khan Datuk Haji Bolhassan Bin Ahmad Bin Di Richard Kiew Jiat Fong Directors benefits Neither at the end of the financial period, nor at any time during that period, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Note 9 to the financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 34 to the financial statements. Remuneration and Nomination Committee The Remuneration and Nomination Committee carries out the annual review of the Group s remuneration policy in general, and determines the remuneration packages of Executive Directors of the Company. The Remuneration and Nomination Committee proposes, subject to 32

35 Directors Report the approval of the Board of Directors of the Company, the remuneration to be paid to each Director for his services as a Member of the Board as well as committees of the Board. The members of the Remuneration and Nomination Committee comprising the independent Non-Executive Directors of the Company who have served since the date of the last report are: Datuk Haji Josree Bin Haji Yacob (Chairman) Tan Sri Datuk Amar (Dr.) Tommy Bin Hamid Bin Bugo Poh Lik Poh Li Thong The Company Direct interest Number of Ordinary Shares of RM1 Each Exercise At of At Acquired Options Sold Datuk Haji Zainal Abidin Bin Haji Ahmad 3,655, ,655,200 Poh Lik Poh Li Thong 40, ,000 Haji Zainurin Bin Haji Ahmad 525, ,000 Richard Kiew Jiat Fong 63, ,000 Tan Sri Datuk Amar (Dr.) Tommy Bin Hamid Bin Bugo 2,400,000 2,114, ,514,200 Datuk Haji Bolhassan Bin Ahmad Bin Di 8,500,000 3,000, ,500,000 Indirect interest Datuk Haji Zainal Abidin Bin Haji Ahmad 65,689, ,689,475 Dawla Capital Sdn. Bhd. Datuk Haji Zainal Abidin Bin Haji Ahmad - direct interest 250, ,000 Inas Kapital Sdn. Bhd. Datuk Haji Bolhassan Bin Ahmad Bin Di - indirect interest 3,000, (3,000,000) - Direct interest Teknik PS Sdn. Bhd. Datuk Haji Zainal Abidin Bin Haji Ahmad 34, ,000 Zecon Construction Sdn. Bhd. Datuk Haji Zainal Abidin Bin Haji Ahmad Sarmax Sdn. Bhd. Datuk Haji Zainal Abidin Bin Haji Ahmad 30, ,000 There were no other movements in shares and options of the Company or its related corporations during the financial period other than as disclosed. Datuk Haji Zainal Abidin Bin Haji Ahmad, by virtue of his interest in the Company, is also deemed interested in shares of all the Company s subsidiaries to the extent the Company has an interest. None of the other directors in office at the end of the financial period had an interest in shares and options in the Company or its related corporations during the financial period. 33

36 Directors Report Other statutory information (a) 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: (i) (ii) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the directors are not aware of any circumstances which would render: (i) (ii) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and the values attributed to the current assets in the financial statements of the Group and of the Company misleading. (c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. (d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. (e) As at the date of this report, there does not exist: (i) (ii) any charge on the assets of the Group or of the Company which has arisen since the end of the financial period which secures the liabilities of any other person; or any contingent liability of the Group or of the Company which has arisen since the end of the financial period. (f) In the opinion of the directors: (i) (ii) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial period which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial period and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial period in which this report is made. Subsequent events Details of subsequent events are disclosed in Note 16 and Note 38 of the financial statements. Auditors The auditors, Ernst & Young, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the directors dated Tan Sri Datuk Amar (Dr.) Tommy Bin Bugo Datuk Haji Zainal Hamid Bin Bugo Bin Haji Ahmad 34

37 Statement by Directors pursuant to Section 169(15) of the Companies Act, 1965 We, Tan Sri Datuk Amar (Dr.) Tommy Bin Hamid Bin Bugo and Datuk Haji Zainal Abidin Bin Haji Ahmad, being two of the directors of Zecon Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 38 to 102 are drawn up in accordance with the provisions of the Companies Act, 1965 and Financial Reporting Standards in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 June 2013 and of its financial performance and the cash flows of the Group and of the Company for the period then ended. The information set out in Note 39 to the financial statements have been prepared 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. Signed on behalf of the Board in accordance with a resolution of the directors dated Tan Sri Datuk Amar (Dr.) Tommy Bin Hamid Bin Bugo Datuk Haji Zainal Abidin Bin Haji Ahmad Statutory Declaration pursuant to Section 169(16) of the Companies Act, 1965 I, Jamil Bin Jamaludin, being the officer primarily responsible for the financial management of Zecon Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 38 to 102 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared by the abovenamed Jamil Bin Jamaludin at Kuching in the State of Sarawak on Jamil Bin Jamaludin Before me, 35

38 Independent Auditors Report to the Members of Zecon Berhad (Incorporated in Malaysia) Report on the financial statements We have audited the financial statements of Zecon Berhad, which comprise the statements of financial position as at 30 June 2013 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 period then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 38 to 102. Directors responsibility for the financial statements The directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is 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 whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company s preparation 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We 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 30 June 2013 and of their financial performance and cash flows for the period then ended in accordance with Financial Reporting Standards and 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) (b) (c) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditor have been properly kept in accordance with the provisions of the Act. We have considered the financial statements and the auditors reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 16 to the financial statements, being financial statements that have been included in the consolidated financial statements. We are satisfied that the accounts of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. (d) The auditors reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act. Other reporting responsibilities The supplementary information set out in Note 39 on page 102 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 Profit 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. 36

39 Independent Auditors Report to the Members of Zecon Berhad (Incorporated in Malaysia) Other matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. ERNST & YOUNG AF: 0039 Chartered Accountants YONG VOON KAR 1769/04/14 (J/PH) Chartered Accountant Kuching, Malaysia Date: 37

40 Statements of Comprehensive Income for the financial period ended 30 June 2013 Group Company Note to to to to RM RM RM RM Revenue 3 237,821, ,354, ,439, ,501,558 Cost of sales 4 (201,002,612) (123,800,017) (172,205,594) (101,183,324) Gross profit 36,818,439 28,554,355 9,233,985 10,318,234 Other income 5 4,059,040 2,242,658 8,777,978 4,219,934 Administrative expenses (20,090,743) (14,410,295) (17,582,972) (10,174,250) Other expenses (26,128,573) (209,752) - (1) Operating (loss)/profit (5,341,837) 16,176, ,991 4,363,917 Finance costs 6 (14,241,302) (10,210,300) (1,664,008) (4,151,939) Share of profit of associate 332,163 99, (Loss)/profit before taxation 7 (19,250,976) 6,065,836 (1,235,017) 211,978 Income tax expense 10 (5,688,671) (5,055,081) 1,231,896 (990,000) (Loss)/profit for the year (24,939,647) 1,010,755 (3,121) (778,022) Other comprehensive income: Foreign currency translation, net of tax 4,014 13, Net fair value changes on available for sale financial assets 51,285-51,285 - Other comprehensive income for the year, net of tax 55,299 13,782 51,285 - Total comprehensive income (24,884,348) 1,024,537 48,164 (778,022) ============ ============ ============ ============ (Loss)/profit attributable to: Equity holders of the Company (24,702,542) 1,279,862 (3,121) (778,022) Non-controlling interest (237,105) (269,107) - - (24,939,647) 1,010,755 (3,121) (778,022) ============ ============ ============ ============ Total comprehensive income attributable to: Equity holders of the Company (24,647,243) 1,293,644 48,164 (778,022) Non-controlling interest (237,105) (269,107) - - (24,884,348) 1,024,537 48,164 (778,022) ============ ============ ============ ============ Earnings per ordinary share attributable to equity holders of the Company (sen per share): Group Note to to Sen Sen Basic 11 (20.74) 1.07 ======= ======= Diluted 11 (20.74) 1.07 ======= ======= The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 38

41 Consolidated Statements of Financial Position for the financial period ended 30 June 2013 ASSETS Non-current assets Group Note As at As at RM RM Property, plant and equipment 12 15,259,174 22,263,510 Prepaid land lease payments , ,391 Land held for development 14(a) 113,165, ,528,496 Intangible assets 15 13,804,904 14,603,182 Investment in associates 17 1,228, ,532 Investment in jointly controlled entity 18-4,061,200 Other investments , ,458 Trade and other receivables ,520 - Deferred tax assets 29 4,317,175 3,973, ,452, ,724,317 Current assets Development costs 14(b) 33,535,396 26,487,634 Inventories 20 2,914,939 2,914,939 Other current assets 23 51,440,101 60,279,043 Trade and other receivables 22 81,750, ,959,019 Cash and bank balances 24 46,530,439 37,012, ,171, ,653,468 TOTAL ASSETS 364,623, ,377,785 =========== =========== EQUITY AND LIABILITIES Current liabilities Borrowings 25 35,805,606 74,441,343 Other current liabilities 28-27,317,821 Trade and other payables 27 93,548,594 82,685,806 Income tax payable 12,351,456 12,515, ,705, ,960,043 Net current assets 74,465,603 44,693,425 EQUITY AND LIABILITIES Non-current liabilities Borrowings ,524,369 58,087,466 Trade and other payables , , ,640,619 58,264,926 Total liabilities 253,346, ,224,969 Net assets 111,277, ,152,816 Equity attributable to equity holders of the Company Share capital ,106, ,106,150 Share premium 30 3,558,768 3,558,768 Other reserves 31 5,112,977 5,108,963 Fair value adjustments reserve 31 - (51,285) (Accumulated loss)/retained earnings 39 (20,437,268) 17,857, ,340, ,580,015 Non-controlling interests 3,936,837 4,572,801 Total equity 111,277, ,152,816 TOTAL EQUITY AND LIABILITIES 364,623, ,377,785 =========== =========== The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 39

42 Company Statements of Financial Position for the financial period ended 30 June 2013 ASSETS Company Note As at As at RM RM Non-current assets Property, plant and equipment 12 10,793,727 14,454,203 Prepaid land lease payments , ,391 Investment in subsidiaries 16 57,994,907 55,694,907 Investment in associates , ,000 Investment in jointly controlled entity Other investments , ,458 Deferred tax assets 29 4,836,775 4,836,775 Trade and other receivables ,520 60,923,756 74,477, ,482,490 Current assets Development costs 14(b) 65,616 - Inventories , ,000 Other current assets 23 10,365,890 14,382,574 Trade and other receivables ,841,226 57,776,138 Cash and bank balances 24 28,318,272 33,293, ,401, ,262,540 TOTAL ASSETS 216,878, ,745,030 ============ ============ EQUITY AND LIABILITIES Current liabilities Borrowings 25 22,043,203 58,866,842 Trade and other payables 27 98,417,279 83,805,869 Other current liabilities 28 18,962,752 21,928,414 Current tax payable 176, , ,599, ,544,125 Net current assets/(liabilities) 2,801,198 (59,281,585) Non-current liabilities Borrowings 25 1,147,346 1,117,876 Total liabilities 140,747, ,662,001 Net assets 76,131,193 76,083,029 Equity attributable to equity holders of the Company Share capital ,106, ,106,150 Share premium 30 3,558,768 3,558,768 Other reserves 31 5,109,686 5,109,686 Fair value adjustment reserves 31 - (51,285) Accumulated losses (51,643,411) (51,640,290) Total equity 76,131,193 76,083,029 TOTAL EQUITY AND LIABILITIES 216,878, ,745,030 =========== =========== The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 40

43 Consolidated Statement of Changes in Equity for the financial period ended 30 June 2013 Group Foreign Attribute to equity holders of the Company Non-Distributable Distributable Share Share exchange Other Revaluation Fair value Retained Total capital premium reserve reserves reserve adjustment earnings equity reserve (accumulated (Note 30) (Note 30) (Note 31) (Note 31) (Note 31) (Note 31) losses) RM RM RM RM RM RM RM RM RM Noncontrolling interest At 1 January ,106,150 3,558,768 (723) 4,416, ,832 (51,285) 17,857, ,580,015 4,572,801 Total comprehensive income for the period - - 4, ,285 (24,702,542) (24,647,243) (237,105) Transactions with non-controlling interests (Note 16(e) (13,592,145) (13,592,145) (398,859) At 30 June ,106,150 3,558,768 3,291 4,416, ,832 - (20,437,268) 107,340,627 3,936,837 =========== =========== =========== =========== =========== =========== =========== =========== =========== 41

44 Consolidated Statement of Changes in Equity for the financial period ended 30 June 2013 Group Foreign Attribute to equity holders of the Company Non-Distributable Distributable Share Share exchange Other Revaluation Fair value Retained Total capital premium reserve reserves reserve adjustment earnings equity reserve (Note 30) (Note 30) (Note 31) (Note 31) (Note 31) (Note 31) RM RM RM RM RM RM RM RM RM Noncontrolling interest At 1 January 2011 (restated) 119,106,150 3,558,768 (14,505) 4,416, ,832 (51,285) 16,563, ,272,589 4,841,908 Total comprehensive income ,293,644 1,307,426 (269,107) At 31 December ,106,150 3,558,768 (723) 4,416, ,832 (51,285) 17,857, ,580,015 4,572,801 =========== =========== =========== =========== =========== =========== =========== =========== =========== 42

45 Company Statement of Changes in Equity for the financial period ended 30 June 2013 Non-Distributable Fair value Share Share Other adjustment Accumulated Total Capital premium reserves reserve losses equity (Note 30) (Note 30) (Note 31) (Note 31) RM RM RM RM RM RM At 1 January ,106,150 3,558,768 5,109,686 (51,285) (51,640,290) 76,083,029 Total comprehensive income for the period ,285 (3,121) 48,164 At 31 December ,106,150 3,558,768 5,109,686 - (51,643,411) 76,131,193 =========== =========== =========== =========== =========== =========== At 1 January ,106,150 3,558,768 5,109,686 (51,285) (50,862,268) 76,861,051 Total comprehensive income (778,022) (778,022) At 31 December ,106,150 3,558,768 5,109,686 (51,285) (51,640,290) 76,083,029 =========== =========== =========== =========== =========== =========== The accompanying accounting policies and explanatory notes form an integral part of the financial statements 43

46 Consolidated Statement of Cash Flows for the financial period ended 30 June 2013 Cash Flows From Operating Activities to to (Restated) Note RM RM (Loss)/profit before taxation (19,250,976) 6,065,836 Adjustments for: Amortisation of prepaid land lease payments 7 4,722 11,636 Bad debt written off 7 169,905 - Impairment loss on receivables 7 19,994,286 35,400 Depreciation of property, plant and equipment 7 3,829,461 7,193,182 Gain on disposal of property, plant and equipment 7 (1,369,524) (198,187) Interest expense 7 14,241,302 10,210,300 Interest income 7 (1,352,179) (822,386) Investment in joint venture written off 7 4,061,200 1 Impairment loss on goodwill 7 798,278 29,942 Impairment loss on investment in joint venture 7-800,000 Property, plant and equipment written-off Reversal of impairment loss on receivables 7 (18,432) (274,012) Share of results of associates (332,163) (99,170) Operating profit before working capital changes 20,775,881 22,952,542 Increase in development costs (6,554,566) (1,965,580) Decrease in land held for development 4,362,896 - Increase in amount due from customer on contract (10,445,920) (14,736,405) Decrease in receivables 12,951,519 11,873,641 Increase in payables 10,163,104 14,587,337 Cash generated from operations 31,252,914 32,711,535 Interest paid (17,566,316) (12,732,490) Interest received 1,235, ,386 Taxation paid, net of refund (6,195,914) (476,820) Net cash from operating activities 8,725,714 20,324,611 Cash Flows from Investing Activities Transaction with non-controlling interests (13,991,006) - Purchase of property, plant and equipment (400,906) (782,509) Proceeds from disposal of property, plant and equipment 2,851,638 8,183,900 Net cash (used in)/from investing activities (11,540,274) 7,401,391 44

47 Consolidated Statement of Cash Flows for the financial period ended 30 June to to (Restated) Note RM RM Cash Flows from Financing Activities Repayment of term loans (103,465,792) (28,191,167) Repayment of hire purchase payables (1,552,020) (1,190,985) Repayment of bankers acceptances and revolving credit facilities (75,933,090) (63,676,225) Proceeds from drawdown of term loans 122,843,723 - Proceeds from drawdown of bankers acceptances and revolving credit facilities 71,447,766 56,436,020 (Placement)/withdrawal of fixed deposits pledged, net (9,153,574) 8,286,739 Net cash from/(used in) financing activities 4,187,013 (28,335,618) Net increase/(decrease) in cash and cash equivalents 1,372,453 (609,616) Cash and cash equivalents at the beginning of the period/year 6,342,457 6,952,073 Cash and cash equivalents at the end of the period/year 24 7,714,910 6,342,457 =========== =========== (i) During the year, the Group acquired property, plant and equipment by the following means: Group As at As at (Restated) RM RM Cash 400, ,509 Hire purchase and finance lease arrangements 2,469, ,000 2,869,906 1,757,509 =========== =========== The accompanying accounting policies and explanatory notes form an integral part of the financial statements 45

48 Company Statement of Cash Flows for the financial period ended 30 June to to (Restated) Note RM RM Cash Flows from Operating Activities (Loss)/profit before taxation (1,235,017) 211,978 Adjustments for: Amortisation of prepaid land lease payment 7 4,722 11,636 Depreciation of property, plant and equipment 7 3,056,561 3,357,645 Gain on disposal of property, plant and equipment 7 (1,156,023) (143,134) Investment written-off 7-1 Reversal of impairment loss on receivables 7 (823,164) (274,012) Interest expense 7 1,664,008 4,151,939 Interest income 7 (1,004,476) (640,394) Operating profit before working capital changes 506,611 6,675,659 Decrease in amount due from customer on contract 5,828,804 3,057,209 Increase in development costs (3,491,264) - Decrease in receivables 19,894,778 3,176,556 (Decrease)/increase in payables 14,611,410 (3,844,232) Cash generated from operations 37,350,339 9,065,192 Interest paid (5,109,474) (5,790,606) Interest received 1,004, ,394 Taxation paid, net of refund 465,468 (196,493) Net cash from operating activities 33,710,809 3,718,487 Cash Flows from Investing Activities Purchase of property, plant and equipment (87,196) (54,485) Proceeds from disposal of property, plant and equipment 2,550,000 8,039,500 Additional investment in subsidiaries (2,300,000) - Net cash from investing activities 162,804 7,985,015 46

49 Company Statement of Cash Flows for the financial period ended 30 June to to (Restated) Note RM RM Cash Flows from Financing Activities Withdrawal/(placement) of fixed deposit pledged, net 1,591,190 (2,341,246) Proceeds from drawdown of term loans 6,778,513 - Repayment of term loans (35,466,376) (16,425,375) Repayment of hire purchase payables (1,098,485) (614,350) Proceeds from revolving credit facility 71,447,766 56,436,020 Repayment from bankers acceptances and revolving credit facilities (79,502,165) (46,702,532) Net cash used in financing activities (36,249,557) (9,647,483) Net (decrease)/increase in cash and cash equivalents (2,375,944) 2,056,019 Cash and cash equivalents at the beginning of the period/year 2,748, ,489 Cash and cash equivalents at the end of the period/year ,564 2,748,508 =========== =========== (i) During the year, the Company acquired property, plant and equipment by the following means: Company As at As at RM RM Cash 87,196 54,485 Hire purchase and finance lease arrangements 2,055, ,000 2,142,196 1,029,485 =========== =========== The accompanying accounting policies and explanatory notes form an integral part of the financial statements 47

50 Notes to the Financial Statements - 30 June Corporate Information 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 is located at 8th Floor, Menara Zecon, No. 92, Lot 393, Section 5, KTLD, Jalan Satok, Kuching, Sarawak. The principal activities of the Company are foundation engineering, civil engineering and building contracting works and their related activities. The principal activities of the subsidiaries are disclosed in Note 16 to the financial statements. There have been no significant changes in the nature of the principal activities of the Group and of the Company during the financial period. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 2. Significant Accounting Policies 2.1 Basis of Preparation The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. At the beginning of the current financial period, the Group and the Company adopted new and revised FRS which are mandatory for financial periods beginning on or after 1 January 2012 as described fully in Note 2.4. The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. The financial statements are presented in Ringgit Malaysia (RM). 2.2 Change in financial year-end The Group and the Company have changed their financial year-end from 31 December to 30 June. Consequently, the Statements of Comprehensive Income, Statements of Changes in Equity and Statements of Cash Flows as well as the notes to the financial statements of the Group and of the Company are for a period of 18 months from 1 January 2012 to 30 June 2013 and are not comparable to the previous 12 months ended 31 December The next financial statements will be for a period of 12 months commencing 1 July Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial period except as follows: On 1 January 2012, the Group adopted the following amended FRS standard mandatory for annual financial periods beginning on or after 1 January 2012: Amendments to FRS 101: Presentation of Items of Other Comprehensive Income The adoption of the above amended FRS did not have any material impact on the accounting policies, financial performance and position of the Group, except as discussed below: Amendments to FRS101, Presentation of Items of Other Comprehensive Income The amendments to FRS 101 changed the grouping of items presented in Other Comprehensive Income. Items that could be reclassified (or recycled ) to profit or loss at a future point in time has been presented separately from items that will never be reclassified. The amendment affects presentation only and has no impact on the Group s financial position and performance. 2.4 Amendments/standards issued but not yet effective The amendments/standards issued but not yet effective up to the date of issuance of the Group s financial statements are listed below. The Group intends to adopt these amendments/standards, if applicable, when they become effective. FRS effective for annual periods beginning on or after 1 January 2013 Amendments to FRS 1, First-Time Adoption of Financial Reporting Standards - Government Loans Amendments to FRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities FRS 10, Consolidated Financial Statements FRS 11, Joint Arrangements FRS 12, Disclosure of Interests in Other Entities Amendments to FRS 10, FRS 11 and FRS 12, Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance 48

51 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.4 Amendments/standards issued but not yet effective (contd.) FRS 13, Fair Value Measurement FRS 119, Employee Benefits FRS 127, Separate Financial Statements FRS 128, Investments in Associates and Joint Ventures Amendments to FRS 1, FRS 101, FRS 116, FRS 132 and FRS 134, (Improvements to FRSs (2012) Amendment to IC Interpretation 2, Members Shares in Co-operative Entities and Similar Instruments (Improvements to FRSs (2012) IC Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine FRS effective for annual periods beginning on or after 1 January 2014 Amendments to FRS 132, Offsetting Financial Assets and Financial Liabilities Amendments to FRS 10, FRS 12 and FRS 127, Investment Entities Amendments to FRS 136, Recoverable Amount Disclosures for Non-Financial Assets Amendments to FRS 139, Novation of Derivatives and Continuation of Hedge Accounting IC Interpretation 21, Levies FRS effective for annual periods beginning on or after 1 January 2015 FRS 9, Financial Instruments (IFRS 9 issued by IASB in November 2009) FRS 9, Financial Instruments (IFRS 9 issued by IASB in October 2010) The directors expect that the adoption of the amendments/standards above will have no material impact on the financial statements of the Group in the period of initial application. The nature of the impending changes in accounting policies on adoption of applicable amendments/standards are described below: Annual periods beginning on or after 1 January 2013 FRS 10, Consolidated Financial Statements FRS 10 replaces part of FRS 127, Consolidated and Separate Financial Statements that deals with consolidated financial statements and IC Interpretation 112 Consolidation - Special Purpose Entities. Under FRS 10, an investor controls an investee when (a) the investor has power over an investee, (b) the investor has exposure, or rights, to variable returns from its involvement with the investee, and (c) the investor has ability to use its power over the investee to affect the amount of the investor s returns. Under FRS 127 Consolidated and Separate Financial Statements, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. FRS 10 includes detailed guidance to explain when an investor has control over the investee. FRS 10 requires the investor to take into account all relevant facts and circumstances. The application of this new standard is expected to have no impact on the financial statements of the Group. FRS 11, Joint Arrangements FRS 11 replaces FRS 131 Interests in Joint Ventures and IC Interpretation 113 Jointly-Controlled Entities - Nonmonetary Contributions by Venturers. The classification of joint arrangements under FRS 11 is determined based on the rights and obligations of the parties to the joint arrangements by considering the structure, the legal form, the contractual terms agreed by the parties to the arrangement and when relevant, other facts and circumstances. Under FRS 11, joint arrangements are classified as either joint operations or joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. FRS 11 removes the option to account for jointly controlled entities ( JCE ) using proportionate consolidation. Instead, JCE that meet the definition of a joint venture must be accounted for using the equity method. The adoption of this standard is expected to have no impact on the financial statements of the Group. 49

52 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.4 Amendments/standards issued but not yet effective (contd.) FRS 12, Disclosures of Interests in Other Entities FRS 12 includes all disclosure requirements for interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are required. This standard affects disclosures only and has no impact on the Group s financial position or performance. FRS 13, Fair Value Measurement FRS 13 establishes a single source of guidance under FRS for all fair value measurements. FRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under FRS when fair value is required or permitted. The adoption of FRS 13 will affect some of the fair value of certain assets and liabilities and thus affecting the profit and equity of the Group. FRS 127, Separate Financial Statements As a consequence of the new FRS 10 and FRS 12, FRS 127 is limited to accounting for subsidiaries, jointly controlled entities and associates in separate financial statements. FRS 128, Investments in Associates and Joint Ventures As a consequence of the new FRS 11 and FRS 12, FRS 128 is renamed as FRS 128 Investments in Associates and Joint Ventures. This new standard describes the application of the equity method to investments in joint ventures in addition to associates. Amendments to FRS 7, Disclosures - Offsetting Financial Assets and Financial Liabilities The amendments require additional information to be disclosed to enable users of financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity s recognised financial assets and recognised financial liabilities, on the entity s financial position. The amendment affects disclosure only and has no impact on the Group s financial position or performance. Amendments to FRS 132, Offsetting Financial Assets and Financial Liabilities The amendments to FRS 132 clarified that a legally enforceable right to set off is a right of set of that must not be contingent on a future event; and must be legally enforceable in the normal course of business, the event of default and the event of insolvency or bankruptcy of the entity and all of the counterparties. The amendments further clarified that an entity will meet the net settlement criterion as provided in FRS 132 if the entity can settle amounts in a manner that the outcome is, in effect, equivalent to net settlement. Amendments to FRS 136, Recoverable Amount Disclosures for Non-Financial Assets The amendments to FRS 136 clarifies that recoverable amount (determined based on fair value less costs of disposal) is required to be disclosed only when an impairment loss is recognised or reversed. In addition, there are new disclosure requirements about fair value measurement when impairment or reversal of impairment is recognised. The amendments to FRS 136 are to be applied retrospectively for annual periods beginning on or after 1 January The amendments affect disclosures only and have no impact on the Group s financial position or performance. IC Interpretation 21, Levies The Interpretation clarifies that an entity should recognise a liability to pay a levy when it is within the scope of FRS 137 Provisions, Contingent Liabilities and Contingent Assets. It also explains that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. For example, if the activity that triggers the payment of the levy is the generation of revenue in the current period and the calculation of that levy is based on the revenue that was generated in the previous period, the obligating event for that levy is the generation of revenue in the current period. The generation of revenue in the previous period is necessary, but not sufficient, to create a present obligation. 50

53 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.4 Amendments/standards issued but not yet effective (contd.) IC Interpretation 21, Levies (contd.) The Interpretation also clarifies that the liability to pay a levy is recognised progressively if the obligating event occurs over a period of time. If an obligation to pay a levy is triggered when a minimum threshold is reached, the liability to pay a levy is recognised when that minimum activity threshold is reached. The Interpretation is to be applied retrospectively for annual periods beginning on or after 1 January The Group is currently assessing the impact that this standard will have on the financial position and performance of the Group. Annual periods beginning on or after 1 January 2015 FRS 9, Financial Instruments: Classification and Measurement FRS 9 reflects the first phase of the work on the replacement of FRS 139 Financial Instruments: Recognition and Measurement and applies to classification and measurement of financial assets and financial liabilities as defined in FRS 139 Financial Instruments: Recognition and Measurement. The adoption of the first phase of FRS 9 will have an effect on the classification and measurement of the Group s financial assets. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued. Malaysian Financial Reporting Standards On 19 November 2011, the Malaysian Accounting Standards Board (MASB) issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards (MFRS Framework). The MFRS Framework is to be applied by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities that are within the scope of MFRS 141 Agriculture (MFRS 141) and IC Interpretation 15 Agreements for Construction of Real Estate (IC 15), including its parent, significant investor and venturer (herein called Transitioning Entities ). Transitioning Entities will be allowed to defer adoption of the new MFRS Framework for an additional three years. Consequently, adoption of the MFRS Framework by Transitioning Entities will be mandatory for annual periods beginning on or after 1 January The Group falls within the scope definition of Transitioning Entities and accordingly, will be required to prepare financial statements using the MFRS Framework in its first MFRS financial statements for the year ending 30 June In presenting its first MFRS financial statements, the Group will be required to restate the comparative financial statements to amounts reflecting the application of MFRS Framework. The majority of the adjustments required on transition will be made, retrospectively, against opening retained profits. At the date of these financial statements, the Group has not completed its quantification of the financial effects of the differences between Financial Reporting Standards and accounting standards under the MFRS Framework due to the ongoing assessment by the project team. Accordingly, the financial performance and financial position as disclosed in these financial statements for the year ended 30 June 2013 could be different if prepared under the MFRS Framework. The Group considers that it is achieving its scheduled milestones and expects to be in a position to fully comply with the requirements of the MFRS Framework for the financial year ending 30 June Summary of Significant Accounting Policies (a) Subsidiaries and Basis of Consolidation (i) Subsidiaries Subsidiaries are entities over in which the Group has ability to control the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity. In the Company s separate financial statements, investments in subsidiaries are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss. 51

54 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (a) Subsidiaries and Basis of Consolidation (contd.) (i) Subsidiaries (contd.) Intra-group transactions, balances and resulting unrealised gains are eliminated on consolidation and the consolidated financial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costs cannot be recovered. The gain or loss on disposal of a subsidiary company is the difference between the net disposal proceeds and the Group s share of its net assets together with any unamortised balance of goodwill and exchange differences. (ii) Basis of Consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries 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. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Acquisitions of subsidiaries are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in other comprehensive income. The cost of a business combination is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the business combination. Any excess of the cost of business combination over the Group s share in the net fair value of the acquired subsidiary s identifiable assets, liabilities and contingent liabilities is recorded as goodwill on the statement of financial position. The accounting policy for goodwill is set out in Note 2.5(d)(i). Any excess of the Group s share in the net fair value of the acquired subsidiary s identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised as income in profit or loss on the date of acquisition. When the Group acquires a business, embedded derivatives separated from the host contract by the acquiree are reassessed on acquisition unless the business combination results in a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in profit or loss of the Group and within equity in the consolidated statements of financial position, separately from parent shareholders equity. Transactions with noncontrolling interests are accounted for using the entity concept method, whereby, transactions with noncontrolling interests are accounted for as transactions with owners. On acquisition of non-controlling interests, the difference between the consideration and book value of the share of the net assets acquired is recognised directly in equity. Gain or loss on disposal to non-controlling interests is recognised directly in equity. (b) Associates Associates are entities in which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not in control or joint control over those policies. Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investment in associate is carried in the consolidated statement of financial position at cost adjusted for post-acquisition changes in the Group s share of net assets of the associate. The Group s share of the net profit or loss of the associate is recognised in the consolidated profit or loss. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes. In applying the equity method, unrealised gains and losses on transactions between the Group and 52

55 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (b) Associates (contd.) the associate are eliminated to the extent of the Group s interest in the associate. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group s net investment in the associate. The associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess of the Group s share of the net fair value of the associate s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group s share of the associate s profit or loss in the period in which the investment is acquired. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any longterm interests that, in substance, form part of the Group s net investment in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The most recent available financial statements of the associates are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not coterminous with those of the Group, the share of results is arrived at from the last audited financial statements available and management financial statements to the end of the accounting period. Uniform accounting policies are adopted for like transactions and events in similar circumstances. In the Company s separate financial statements, investments in associates are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss. (c) Jointly Controlled Entities The Group has an interest in a joint venture which is a jointly controlled entity. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest. Investments in jointly controlled entities are accounted for in the consolidated financial statements using the equity method of accounting. In the Company s separate financial statements, investments in jointly controlled entities are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss. (d) Intangible Assets (i) Goodwill (ii) Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of business combination over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Toll Concession Zecon Toll Concessionaire Sdn. Bhd. ( ZTCSB ), a wholly-owned subsidiary of the Company, has entered into a Concession Agreement with the State Government of Sarawak on the 17th July In this agreement, the State Government of Sarawak commissioned ZTCSB under a privatisation Scheme to design, build, operate and maintain a dual three lane carriageway (Second Kuching Bridge crossing) over the Sarawak River in Kuching, Sarawak. 53

56 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (d) Intangible Assets (contd.) (ii) Toll Concession (contd.) As part of the consideration of the construction agreement, the State Government of Sarawak granted ZTCSB the right to collect toll for the usage over the Second Kuching Bridge for a period up to 2037 and a further 19 years at the option of the State Government of Sarawak. The Group considers the cost of the toll concession as the amount forgone in respect of the consideration receivable from the State Government of Sarawak under the Concession Agreement and is amortised over the concession period based on the following formula: Traffic volume to date Cost of toll Accumulated X concession less amortisation Estimated total traffic volume of the concession period The information on traffic volume is derived based on independent traffic consultant s report and the carrying value of the toll concession is subject to an annual review. (e) Property, Plant and Equipment and Depreciation All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Subsequent to recognition, property, plant and equipment, except for freehold land, are measured at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. Freehold land has an unlimited useful life and therefore is not depreciated. Leasehold land is depreciated over the remaining useful life. Depreciation of property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life at the following annual rates: % Motor vehicles 20 Vessels and dredgers 15 Office furniture, fittings, equipment and renovation /3 Plant, machinery and equipment Buildings 2 Work-in-progress is not depreciated as these assets are not available for use. The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in profit or loss and the unutilised portion of the revaluation surplus on that item is taken directly to retained earnings. 54

57 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (f) Land Held For Development And Development Costs (i) Land held for development Land held for development consists of land where no development activities have been carried out or where development activities are not expected to be completed within the normal operating cycle. Such land is classified within non-current assets and is stated at cost less any accumulated impairment losses. Land held for development is reclassified as development costs at the point when development activities have commenced and where it can be demonstrated that the development activities can be completed within the normal operating cycle. (ii) Property development costs Property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities. When the financial outcome of a development activity can be reliably estimated, property development revenue and expenses are recognised in profit or loss by using the stage of completion method based on certification by professional architects. The stage of completion is determined by the proportion that property development costs incurred for work performed to date bear to the estimated total property development costs. Where the financial outcome of a development activity cannot be reliable estimated, property development revenue is recognised only to the extent of property development costs incurred that is probable will be recoverable, and property development costs on properties sold are recognised as an expense in the period in which they are incurred. Any expected loss on a development project, including costs to be incurred over the defects liability period, is recognised as an expense immediately. Property development costs not recognised as an expense are recognised as an asset, which is measured at the lower of cost and net realisable value. The excess of revenue recognised in profit or loss over billings to purchasers is classified as accrued billings within trade receivables and the excess of billings to purchasers over revenue recognised in profit or loss is classified as progress billings within trade payables. (g) Construction Contracts Where the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs. Where the outcome of a construction contract cannot be reliably estimated, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. (h) When the total of costs incurred on construction contracts plus, recognised profits (less recognised losses), exceeds progress billings, the balance is classified as amount due from customers on contracts. When progress billings exceed costs incurred plus, recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts. Impairment of Non-financial Assets The carrying amounts of assets, other than construction contract assets, property development costs, inventories, and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated to determine the amount of impairment loss. 55

58 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (h) Impairment of Non-financial Assets (contd.) For goodwill, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each reporting date or more frequently when indicators of impairment are identified. For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs to. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s CGUs, or groups of CGUs, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. An asset s recoverable amount is the higher of an asset s or CGU s fair value less costs to sell 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. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down 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. An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset. Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase. (i) Inventories Inventories are stated at the lower of cost and net realisable value and are valued on a first-in-first-out basis. In arriving at the net realisable value due allowance is made for all damaged, obsolete and slow-moving items. Cost of work-in-progress and finished goods include cost of raw materials, direct labour and attributable production overheads. Cost of raw materials and factory supplies include expenses incurred in bringing them to their present location and condition. The cost of unsold properties comprises cost associated with the acquisition of land, direct costs and appropriate proportions of common cost. (j) Leases (i) Classification A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All leases that do not transfer substantially all the risks and rewards are classified as operating leases, with the following exceptions: - Property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a property-by-property basis and, if classified as investment property, is accounted for as if held under a finance lease; and - Land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. 56

59 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (j) Leases (ii) Finance Leases - the Group as Lessee Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the statement of financial position as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Group s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets. Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment, as disclosed in Note 2.5(e). (iii) Operating Leases - the Group as Lessee Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. In the case of a lease of land and buildings, the minimum lease payments or the up-front payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payment represents prepaid land lease payments and are amortised on a straight-line basis over the lease term. (iv) Operating Leases - the Group as Lessor Assets leased out under operating leases are presented on the statement of financial position according to the nature of the assets. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. (k) Income Tax Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted by the reporting date. Deferred tax is provided for, 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 financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that 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 difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. 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 that have been enacted or substantively enacted at the reporting date. Deferred tax is recognised as an income or an expense and included in profit or loss for the year, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or the amount of any excess of the acquirer s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities over the cost of the combination. 57

60 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (l) Employee Benefits (i) Short Term Benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. (ii) Defined Contribution Plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in profit or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund ( EPF ). Some of the Group s foreign subsidiaries also make contributions to their respective countries statutory pension schemes. (m) Foreign Currencies (ii) 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 the entity operates ( the functional currency ). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company s functional currency. (ii) Foreign Currency Transactions In preparing the financial statements of the individual entities, transactions in currencies other than the entity s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are translated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period except for exchange differences arising on monetary items that form part of the Group s net investment in foreign operation. Exchange differences arising on monetary items that form part of the Group s net investment in foreign operation, where that monetary item is denominated in either the functional currency of the reporting entity or the foreign operation, are initially taken directly to the foreign currency translation reserve within equity until the disposal of the foreign operations, at which time they are recognised in profit or loss. Exchange differences arising on monetary items that form part of the Group s net investment in foreign operation, where that monetary item is denominated in a currency other than the functional currency of either the reporting entity or the foreign operation, are recognised in profit or loss for the period. Exchange differences arising on monetary items that form part of the Company s net investment in foreign operation, regardless of the currency of the monetary item, are recognised in profit or loss in the Company s financial statements or the individual financial statements of the foreign operation, as appropriate. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity. 58

61 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (m) Foreign Currencies (iii) Foreign Operations The results and financial position of foreign operations that have a functional currency different from the presentation currency (RM) of the consolidated financial statements are translated into RM as follows: - Assets and liabilities for each statement of financial position presented are translated at the closing rate prevailing at the reporting date; - Income and expenses for each statement of comprehensive income are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions; and - All resulting exchange differences are taken to the foreign currency translation reserve within equity. (n) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (i) Property Development Revenue from sale of properties is accounted for by the stage of completion method as described in Note 2.5(f). (ii) Construction Contracts Revenue from construction and other contracts is accounted for by the percentage of completion method as described in Note 2.5(g). (iii) Toll Revenue Toll revenue is accounted for as at when toll is chargeable for the usage of the Second Kuching Bridge crossing. (iv) Sale of Goods Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. (v) Dividend Income Dividend income is recognised when the Group s right to receive payment is established. (vi) Interest Income Interest income is recognised on a time proportion basis that reflects the effective yield on the asset. (o) Routine Maintenance Costs (p) Routine maintenance costs on the toll bridge shall be charged to profit or loss when incurred. Provisions Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost. 59

62 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (q) Borrowing Costs Borrowing costs 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 added to the cost of those assets, until such time as the assets are substantially ready for their 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. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. (r) Financial Assets Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. (a) Financial assets at fair value through profit or loss Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income. Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current whereas financial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date. (b) 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. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current. (c) Held-to-maturity investments Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process. Held-to-maturity investments are classified as non-current assets, except for those having maturity within 12 months after the reporting date which are classified as current. 60

63 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (r) Financial Assets (contd.) (d) Available-for-sale financial assets Available-for-sale are financial assets that are designated as available for sale or are not classified in any of the three preceding categories. After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method 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 and the Company s right to receive payment is established. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss. Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date. A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset. (s) Impairment of Financial Assets The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. (a) Trade and other receivables and other financial assets carried at amortised cost To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group s and the Company s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss. 61

64 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (s) Impairment of Financial Assets (contd.) (b) Unquoted equity securities carried at cost If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods. (c) Available-for-sale financial assets Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired. If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss. Impairment losses on available-for-sale equity investments are not reversed in 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 in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss. (t) Financial Liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of FRS 139, are recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. (a) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profit or loss. Net gains or losses on derivatives include exchange differences. The Group and the Company have not designated any financial liabilities as at fair value through profit or loss. (b) Other financial liabilities The Group s and the Company s other financial liabilities include trade payables, other payables and loans and borrowings. Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. 62

65 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.5 Summary of Significant Accounting Policies (contd.) (t) Financial Liabilities (contd.) A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. (u) 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. Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, 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. (v) Segment Reporting For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 33, including the factors used to identify the reportable segments and the measurement basis of segment information. (w) Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group. Contingent liabilities and assets are not recognised in the statements of financial position of the Group. 2.6 Significant accounting judgments and estimates The preparation of the Group s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) Key sources of estimation uncertainty (i) Impairment of goodwill on consolidation Goodwill is tested for impairment annually and at other times when such indicators exist. This requires an estimation of the value in use of the cash-generating units to which goodwill and brands are allocated. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the carrying value, the key assumptions applied in the impairment assessment of goodwill and sensitivity analysis to changes in the assumptions are given in Note

66 Notes to the Financial Statements - 30 June Significant Accounting Policies (contd.) 2.6 Significant accounting estimate and judgement (contd.) (a) Key sources of estimation uncertainty (contd.) (ii) Constructions contracts and property development The Group recognises construction contracts and property development revenue and expenses in the statement of comprehensive income by using the stage of completion method. The stage of completion is determined by the proportion that construction contracts costs and property development costs incurred for work performed to date bear to the estimated total construction costs and property development costs. Significant judgement is required in determining the stage of completion, the extent of the construction costs and property development costs incurred, the estimated total construction and property development revenue and costs, as well as the recoverability of the construction and property development costs. In making the judgement, the Group evaluates based on past experience and by relying on the work of specialists. The carrying amounts of assets and liabilities of the Group arising from construction contracts and property development activities are disclosed in Note 21 and 14(b) respectively. (iii) Useful life of property, plant and equipment Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of the property, plant and equipment to be within 3 to 50 years. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. The cost of plant and machinery is depreciated on a straight-line basis over the assets useful lives. Management estimates the useful lives of these plant and machinery to be within 7 to 10 years. These are common life expectancies applied in the construction industry. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. (iv) Deferred tax assets Deferred tax assets are recognised for all unused tax losses and unabsorbed capital allowances to the extent that it is probable that future taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Assumptions about generation of future taxable profits depend on management s estimates of future cash flows. These depend on estimates of future production and sales volume, operating costs, capital expenditure, dividends and other capital management transactions. Judgement is also required about application of income tax legislation. These judgements and assumptions are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised in the statements of financial position and the amount of unrecognised tax losses and unrecognised temporary differences. (v) Impairment of loans and receivables The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group s loans and receivable at the reporting date is disclosed in Note

67 Notes to the Financial Statements - 30 June Revenue Group Company to to to to RM RM RM RM Construction contracts 204,987, ,200, ,439, ,501,558 Toll concession 19,893,257 11,867, Property development 12,787,670 9,171, Others 152, , ,821, ,354, ,439, ,501,558 ============ ============ ============ ============ 4. Cost of Sales Group Company to to to to RM RM RM RM Construction contract costs 188,950, ,848, ,205, ,183,324 Toll concession 2,999,996 2,174, Property development 8,346,761 6,766, Others 705,335 11, ,002, ,800, ,205, ,183,324 ============ ============ ============ ============ 5. Other Income Group Company to to to to RM RM RM RM Interest income 1,352, ,386 1,004, ,394 Gain on disposal of property, plant and equipments 1,369, ,187 1,156, ,134 Management fee received , ,000 Rental income 996, ,963 2,248,385 2,970,394 Reversal of impairment loss on receivable 18, ,012 4,305, ,012 Others 322, ,110 45,744-4,059,040 2,242,658 8,777,978 4,219,934 ============ ============ ============ ============ 6. Finance Costs Group Company to to to to RM RM RM RM Interest expense on: Bank borrowings 17,596,523 12,608,657 4,942,030 5,725,030 Hire purchase and finance lease liabilities 232, , ,444 65,576 Trade payables 375, Total interest expense 18,204,790 12,732,490 5,109,474 5,790,606 Less: Interest capitalised in qualifying assets: Costs of construction contracts (Note 21) (3,482,966) (1,687,081) (3,445,466) (1,638,667) Property development costs (Note 14) (480,522) (835,109) - - Interest expense (Note 7) 14,241,302 10,210,300 1,664,008 4,151,939 ============ ============ ============ ============ 65

68 Notes to the Financial Statements - 30 June (Loss)/profit Before Taxation The following amounts have been included in arriving at (loss)/profit before taxation: Group Company to to to to RM RM RM RM Amortisation of prepaid land lease payments (Note 13) 4,722 11,636 4,722 11,636 Auditors remuneration Statutory audit - current year 357, , ,000 65,000 - over provision in prior year 19,693-5,000 - Bad debt written off 169, Depreciation of property, plant and equipment (Note 12) 3,829,461 7,193,182 3,056,561 3,357,645 Employee benefits expense (Note 8) 20,299,842 14,053,065 6,060,490 4,104,646 Gain on disposal of property, plant and equipment (1,369,524) (198,187) (1,156,023) (143,134) Impairment loss on goodwill 798,278 29, Impairment loss on receivables 19,994,286 35,400 4,468,345 - Investment in jointly controlled entity written off (Note 18) 4,061, Impairment loss on investment in jointly controlled entity (Note 18) - 800, Interest expense (Note 6) 14,241,302 10,210,300 1,664,008 4,151,939 Interest income (1,352,179) (822,386) (1,004,476) (640,394) Non-executive directors remuneration (Note 9) 357, , , ,300 Property, plant and equipment written-off Reversal of impairment loss on receivables (18,432) (274,012) (823,164) (274,012) Rental expense 1,292, ,974 1,270, ,774 ============ ============ ============ ============ 8. Employee Benefits Expense Group Company to to to to RM RM RM RM Salaries, allowances, bonus and wages 16,401,074 11,146,596 4,620,059 2,416,625 Executive directors remuneration (note 9) 1,884,496 1,436, ,082 1,168,131 Provident fund contributions 1,548,144 1,081, , ,914 Social security costs 396, ,875 31,123 17,976 20,229,842 14,053,065 6,060,490 4,104,646 ============ ============ ============ ============ Number of employees at the end of the year ============ ============ ============ ============ 9. Directors Remuneration Group Company to to to to RM RM RM RM Executive Salaries, bonus and other emoluments 1,683,365 1,265, ,715 1,025,715 Fees 35,920 28,800 25,920 28,800 Defined contribution plan 165, ,416 73, ,616 Total executive Directors remuneration 1,884,496 1,436, ,082 1,168,131 66

69 Notes to the Financial Statements - 30 June Directors Remuneration (contd.) Group Company to to to to RM RM RM RM Non-Executive Fees 112, , , ,900 Other emoluments 244, , , ,400 Total non-executive Directors remuneration (Note 7) 357, , , ,300 Total Directors remuneration (Note 34) 2,242,096 1,814,231 1,200,682 1,544,431 ============ ============ ============ ============ The number of directors of the Company whose total remuneration during the financial period/year fell within the following bands is analysed below: Number of directors Range of remuneration Executive Non-Executive Group Company to to to to Below 50, RM50,001 - RM100, RM100,001 - RM150, RM150,001 - RM200, RM200,001 - RM250, RM250,001 - RM300, RM300,001 - RM350, RM350,001 RM400, RM400,001 RM450, RM450,001 RM500, RM500,001 RM550, RM550,001 RM600, RM600,001 - RM750, ============ ============ ============ ============ 10. Income Tax Expense Group Company to to to to RM RM RM RM Current income tax: Malaysian income tax 7,424,974 2,671, , ,000 (Over)/under provision in prior years (1,392,676) 2,162,161 (1,352,896) - 6,032,298 4,833,578 (1,231,896) 790,000 Deferred taxation (Note 29) (Over)/under provision in prior years (280,103) 32, Relating to origination and reversal of temporary differences (63,524) 189, ,000 (343,627) 221, ,000 Total income tax expense 5,688,671 5,055,081 (1,231,896) 990,000 ============ ============ ============ ============ Domestic income tax is calculated at the Malaysian statutory tax rate of 25% (2011: 25%) of the estimated assessable profit for the period/year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. During the current financial period/year, the income tax rate applicable to the subsidiary in Australia is 30% (2011: 30%). 67

70 Notes to the Financial Statements - 30 June Income Tax Expense (contd.) A reconciliation of income tax expense applicable to (loss)/profit 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 is as follows: Group to to RM RM (Loss)/profit before taxation (19,250,976) 6,065,836 ============ ============ Taxation at statutory tax rate of 25% (2011: 25%) (4,812,744) 1,516,459 Effect of expenses not deductible for tax purposes 11,773,639 1,409,708 Utilisation of previously unutilised business losses and unabsorbed capital allowances (28,315) (65,750) Deferred tax assets not recognised on unabsorbed capital allowances and business losses 428,870 - (Over)/under provision of deferred tax in prior years (280,103) 32,503 (Over)/under provision of income tax expense in prior years (1,392,676) 2,162,161 Income tax expense for the period/year 5,688,671 5,055,081 ============ ============ Company (Loss)/profit before taxation (1,235,017) 211,978 ============ ============ Taxation at Malaysian statutory tax rate of 25% (2011: 25%) (308,754) 52,995 Effect of expenses not deductible for tax purposes 504, ,005 Income not subject to tax (74,696) - Utilisation of previously unrecognised unabsorbed capital allowances - (50,000) Over provision of income tax expense in prior year (1,352,896) - Income tax expense for the period/year (1,231,896) 990,000 ============ ============ 11. Earnings Per Share (a) Basic Basic earnings per share amounts are calculated by dividing (loss)/profit for the period/year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial period/ year to to (Restated) RM RM (Loss)/profit attributable to ordinary equity holders of the Company (24,702,542) 1,279,862 ============ ============ Weighted average number of ordinary shares in issue 119,106, ,106,150 ============ ============ to to (Restated) sen sen Basic earnings per share for: (Loss)/profit for the period/year (21.62) 1.07 ===== ===== There are no dilutive potential ordinary shares. As such, the diluted earnings per share of the group is equivalent to basic earnings per share. 68

71 Notes to the Financial Statements - 30 June Property, Plant and Equipment Office furnitures Plant fittings, machinery Vessels equipment Freehold leasehold Motor and and and Land land Building vehicles equipment dredging renovation Total RM RM RM RM RM RM RM RM Group 2013 Cost At 1 January ,000 6,651,507 11,317,079 40,290,613 1,400,000 9,572,755 69,947,954 Additions ,527 2,218, ,783 2,869,906 Disposals - - (1,644,341) (479,247) (434,600) - (1,380) (2,559,568) Transfer ,153 - (338,153) - At 30 June ,000 5,007,166 11,308,359 42,412,762 1,400,000 9,414,005 70,258,292 Accumulated depreciation At 1 January ,371 1,127,398 9,307,328 28,429,220 1,400,000 7,259,127 47,684,444 Depreciation charge for the period - 20, ,101 1,456,278 5,758,850-1,000,634 8,392,128 Recognised in profit or loss (Note 7) - 20, , ,833 3,038, ,942 3,829,461 Capitalised in development Costs (Note 14(b)) ,674 12,674 Capitalised in construction costs (Note 21) ,207,445 2,720, ,018 4,549,993 Disposals - - (250,364) (461,608) (364,769) - (713) (1,077,454) Transfer ,853 - (199,853) - At 30 June ,636 1,033,135 10,301,998 34,023,154 1,400,000 8,059,195 54,999,118 Net carrying amount At 30 June ,364 3,974,031 1,006,361 8,389,608-1,354,810 15,259,174 ========== ========== ========== ========== ========== ========== ========== ========== Group 2011 Cost At 1 January ,060, ,000 8,941,507 11,540,966 38,706,466 1,400,000 9,404,768 75,769,707 Additions ,584, ,362 1,757,509 Disposals (5,060,000) - (2,290,000) (223,887) - - (5,375) (7,579,262) At 31 December ,000 6,651,507 11,317,079 40,290,613 1,400,000 9,572,755 69,947,954 69

72 Notes to the Financial Statements - 30 June Property, Plant and Equipment (contd.) Office furnitures Plant fittings, machinery Vessels equipment Freehold leasehold Motor and and and Land land Building vehicles equipment dredging renovation Total RM RM RM RM RM RM RM RM Group Accumulated depreciation At 1 January ,862 1,086,190 8,212,226 23,581,201 1,225,000 6,458,846 40,711,325 Depreciation charge for the - 13, ,358 1,232,914 4,848, , ,382 7,193,182 year Recognised in profit or loss (Note 7) - 13, , ,003 2,982, , ,617 3,820,603 Capitalised in construction costs (Note 21) ,006,911 1,865, ,765 3,372,579 Disposals - - (80,150) (137,812) - - (2,101) (220,063) At 31 December ,371 1,127,398 9,307,328 28,429,220 1,400,000 7,259,127 47,684,444 Net carrying amount At 31 December ,629 5,524,109 2,009,751 11,861,393-2,313,628 22,263,510 ========== ========== ========== ========== ========== ========== ========== ========== Company 2013 Cost At 1 January ,000 6,651,507 5,125,436 29,120,166 1,400,000 4,316,611 47,329,720 Additions ,300 2,055,000-83,896 2,142,196 Disposals - - (1,644,341) (1,644,341) At 30 June ,000 5,007,166 5,128,736 31,175,166 1,400,000 4,400,507 47,827,575 Accumulated depreciation At 1 January ,371 1,127,398 4,651,564 21,594,739 1,400,000 3,940,445 32,875,517 Depreciation charge for the period - 20, , ,227 3,776, ,882 4,408,695 Recognised in profit or loss (Note 7) - 20, ,101 70,267 2,648, ,973 3,056,561 Capitalised in construction costs (Note 21) ,960 1,127,265-38,909 1,352,134 Disposals - - (250,364) (250,364) At 30 June ,636 1,033,135 4,907,791 25,370,959 1,400,000 4,140,327 37,033,848 Net carrying amount At 30 June ,364 3,974, ,945 5,804, ,180 10,793,727 ========== ========== ========== ========== ========== ========== ========== ========== 70

73 Notes to the Financial Statements - 30 June Property, Plant and Equipment (contd.) Office furnitures Plant fittings, machinery Vessels equipment Freehold leasehold Motor and and and Land land Building vehicles equipment dredging renovation Total RM RM RM RM RM RM RM RM Company 2011 Cost At 1 January ,060, ,000 8,941,507 5,125,436 28,145,166 1,400,000 4,262,126 53,650,235 Additions ,000-54,485 1,029,485 Disposals (5,060,000) - (2,290,000) (7,350,000) At 31 December ,000 6,651,507 5,125,436 29,120,166 1,400,000 4,316,611 47,329,720 Accumulated depreciation At 1 January ,862 1,086,190 4,390,700 18,272,009 1,225,000 3,735,843 28,857,604 Depreciation charge for the year - 13, , ,864 3,322, , ,602 4,098,063 Recognised in profit or loss (Note 7) - 13, , ,862 2,770, , ,214 3,357,645 Capitalised in construction costs (Note 21) , ,028-35, ,418 Disposals - - (80,150) (80,150) At 31 December ,371 1,127,398 4,651,564 21,594,739 1,400,000 3,940,445 32,875,517 Net carrying amount At 31 December ,629 5,524, ,872 7,525, ,166 14,454,203 ========== ========== ========== ========== ========== ========== ========== ========== During the financial period/year, the Group and the Company acquired property, plant and equipment at aggregate costs of RM2,869,906 (2011: RM1,757,509) and RM2,142,196 (2011: RM1,029,485), respectively, of which RM2,469,000 (2011: RM975,000) and RM2,055,000 (2011: RM975,000), respectively, were acquired by means of hire purchase and finance lease arrangements. Net carrying amounts of property, plant and equipment held under hire purchase and finance lease arrangements are as follows: Group Company As at As at As at As at RM RM RM RM Plant, machinery and equipment 2,477,875 1,023,438 2,477,875 1,023,438 Motor vehicles 862,386 1,070, , ,899 3,340,261 2,093,686 2,686,709 1,410,337 ============ ============ ============ ============ Details of the terms and conditions of the hire purchase and finance lease arrangements are disclosed in Note

74 Notes to the Financial Statements - 30 June Prepaid land lease payments Cost GroupCompany As at As at RM RM At 1 January 170, ,000 Disposal - (550,000) At 30 June/31 December 170, ,000 ========== ========== Accumulated amortisation At 1 January 37, ,950 Amortisation for the year (Note 7) 4,722 11,636 Disposal - (119,977) At 30 June/31 December 42,331 37,609 ========== =========== Net carrying amount At 30 June/31 December 127, ,391 ========== ========== Amount to be amortised: - not later than one year 3,148 3,148 - later than one year but not later than five year 12,592 12,592 - later than five years 111, ,651 ========== ========== 14. Land Held for Property Development and Developments Costs (a) Land Held for Property Development Short- term Long-term Freehold Leasehold Land Land Total Group RM RM RM 2013 Cost At 1 January ,159, ,369, ,528,496 Disposal - (4,362,896) (4,362,896) At 30 June ,159, ,006, ,165,600 ============ ============ ============ 2011 Cost At 1 January/31 December 1,159, ,369, ,528,496 ============ ============ ============ Leasehold land with carrying values of RM29,352,013 (2011: RM33,714,909) have been pledged as security for banking facilities granted to the Group (Note 25). 72

75 Notes to the Financial Statements - 30 June Land Held for Property Development and Developments Costs (contd.) (b) Development Costs (contd.) Leasehold Development Group Land Costs Total RM RM RM 2013 Cumulative development costs At 1 January ,837,174 28,722,347 33,559,521 Costs incurred during the period - 11,134,177 11,134,177 At 30 June ,837,174 39,856,524 44,693,698 Cumulative costs recognised in statements of comprehensive income At 1 January ,071,888 7,071,888 Recognised during the period - 4,086,414 4,086,414 At 30 June ,158,302 11,158,302 Development costs at 30 June ,837,174 28,698,222 33,535,396 ============ ============ ============ Cumulative costs recognised in statement of comprehensive income 2011 Cumulative development costs At 1 January ,837,174 19,155,597 23,992,771 Costs incurred during the year - 9,566,750 9,566,750 At 31 December ,837,174 28,722,347 33,559,521 Cumulative costs recognised in statements of comprehensive income At 1 January , ,826 Recognised during the year - 6,766,061 6,766,061 At 31 December ,071,887 7,071,887 Development costs at 31 December ,837,174 21,650,460 26,487,634 Company Cumulative development costs At 1 January Costs incurred during the period - 65,616 65,616 Development costs at 30 June ,616 65,616 ============ ============ ============ Included in property development costs incurred during the financial period/year are: Group Company RM RM RM RM Depreciation of property, plant and equipment (Note 12) 12, Directors remuneration 934, , Interest expense (Note 6) 480, , Staff costs 1,350, ============ ============ ============ ============ 73

76 Notes to the Financial Statements - 30 June Intangible Assets Toll Group Goodwill Concessions Total RM RM RM Cost At 1 January 2012/11 and at 30 June 2013/ 31 December ,757,114 13,117,032 15,874,146 Accumulated amortisation and impairment At 1 January ,241,022 1,241,022 Impairment (Note 7) 29,942-29,942 At 31 December ,942 1,241,022 1,270,964 Impairment (Note 7) 798, ,278 At 30 June ,220 1,241,022 2,069,242 Net carrying amount At 30 June ,928,894 11,876,010 13,804,904 ============ ============ ============ At 31 December ,727,172 11,876,010 14,603,182 ============ ============ ============ (a) Impairment tests for goodwill Allocation of goodwill Goodwill has been allocated to the Group s CGUs identified according to the business segment as follows: At 30 June 2013 Total RM Property development 1,928,894 ============ At 31 December 2011 Construction 431,685 Property development 1,928,894 Others 396,535 2,757,114 ============ Key assumptions used in value-in-use calculations The recoverable amount of the respective segment units have been determined base on a value in use calculation using the cash flow projections from financial budgets approved by senior management covering a five-year period. The discount rate used are pre-tax and reflect specific risks relating to the relevant segments. Discount rates Discount rates reflect the current market assessment of the risks specific to the business segment. The discount rate was estimated based on the average percentage of a weighted average cost of capital for the industry. This rate was further adjusted to reflect the market assessment of any risk specific to the cash-generating unit for which future estimates of cash-flows have not been adjusted. With regard to the assessment of value-in-use of the segment units, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount. 74

77 Notes to the Financial Statements - 30 June Investment in Subsidiaries Company As at As at RM RM Unquoted shares at cost 57,994,907 55,694,907 ============ ============ Details of the subsidiaries are as follows: Proportion of ownership Country of interest Name of subsidiaries incorporation Principle activities As at As at % % Held by the Company Zecon Toll Concessionaire Malaysia Operation and Sdn. Bhd.* maintenance of toll bridge and collection of toll revenue Zecon Water Corporation Malaysia Water related services Sdn. Bhd.* Zecon Land Sdn. Bhd.* Malaysia Property development Zecon Geotechnical Malaysia Foundation engineering Services Sdn. Bhd.* and piling Zecon Resources Sdn. Bhd.* Malaysia Property development Teknik PS Sdn. Bhd.* Malaysia Dormant Zecon International Limited* British Foundation engineering Virgin and construction Islands Zecon Piling Sdn. Bhd.* Malaysia Dormant Zecon Mutiara Malaysia Construction of medium Sdn. Bhd.* and low cost houses Zecon Dredging Sdn. Malaysia Sand, dredging, Bhd.* earthworks and material transportation services Zecon Energy Sdn. Bhd.* Malaysia Energy management and other energy related services Zecon Assets Sdn. Bhd.* Malaysia Management, maintenance and rental services in relation to machineries, motor vehicles and hardware of every descriptions Zecon Australia Australia Dormant Pty. Ltd.*** Zecon Construction Malaysia Dormant Sdn. Bhd.* Zecon Construction Malaysia Construction and housing (Sarawak) Sdn. Bhd.* development 75

78 Notes to the Financial Statements - 30 June Investment in Subsidiaries (contd.) Proportion of ownership Country of interest Name of subsidiaries incorporation Principle activities As at As at % % Held by the Company (contd.) Zecon Designtech Malaysia Dormant Sdn. Bhd.* Zecon Fab Sdn. Bhd.* Malaysia Engineering, design, onshore/offshore fabrication, platform installation, pipe laying, production facility hookup and platform maintenance Matang Highway Sdn. Bhd.* Malaysia Special purpose vehicle for financing purposes Zecon MidEast Ltd.* Labuan Dormant Zecon (Saudi Arabia) Labuan Dormant International Ltd.* Demak Concessionaires Malaysia Dormant Sdn. Bhd.* Zecon Medicare Malaysia General construction, Sdn. Bhd.* and dealing with all kind medical and surgical equipment Held through subsidiaries: Subsidiary of Zecon Resources Sdn. Bhd. Sarmax Sdn. Bhd.* Malaysia Dormant Subsidiary of Teknik PS Sdn. Bhd. TPS Medicare Sdn. Bhd.* Malaysia Dormant Subsidiary of Zecon Land Sdn. Bhd. Zecon Petra Jaya Sdn. Bhd.* Malaysia Property development Zecon Demak Jaya Malaysia Property development Sdn. Bhd.* Subsidiary of Zecon International Ltd. IR Concept (M) Sdn. Bhd.* Malaysia Supplier of electrical or electronic equipment and services ZPM Satu Sdn. Bhd.* Malaysia Property sales and management Zalpoint Tanah Putih Malaysia Property development Sdn. Bhd.* 76

79 Notes to the Financial Statements - 30 June Investment in Subsidiaries (contd.) Proportion of ownership Country of interest Name of subsidiaries incorporation Principle activities As at As at % % Held through subsidiaries: (contd.) Subsidiary of Zecon Mutiara Sdn Bhd. IR Concept (M) Sdn. Bhd.* Malaysia Supplier of electrical or electronic equipment and services ZPM Satu Sdn. Bhd.* Malaysia Property sales and management Zalpoint Tanah Putih Malaysia Property development Sdn. Bhd.* Agrowell Quarry Malaysia Dormant Sdn. Bhd. * Subsidiary of Zecon Energy Sdn. Bhd. Zecon Well Services Sdn. Bhd.* Malaysia Oil and gas services Subsidiary of Zalpoint Tanah Putih Sdn. Bhd. Creative Venture Sdn. Bhd.** Malaysia Dormant * Audited by Ernst & Young, Malaysia * * Audited by firms of auditors other than Ernst & Young *** Not audited due to auditor yet to be appointed (a) Acquisition of subsidiaries Zecon Engineering & Construction Sdn. Bhd. On August 2013, Zecon Berhad has acquired 3 ordinary shares of RM1 each of Zecon Engineering & Construction Sdn Bhd, representing 100% of equity interest, for a total consideration of RM3. (b) Restructuring of subsidiaries On February 2013, Zecon International Limited, a subsidiary company of the Group disposed the ordinary shares of the following companies to Zecon Mutiara Sdn. Bhd, which is also a subsidiary company of the Group:- i) 100,000 ordinary shares of RM1.00 each in IR Concept (M) Sdn. Bhd., representing 100% of equity interest, for a total consideration of RM2.00; (c) ii) iii) 2 ordinary shares of RM1.00 each in ZPM Satu Sdn. Bhd., representing 100% of equity interest, for a total consideration of RM2.00; 1,000,000 ordinary shares of RM1.00 each in Zalpoint Tanah Putih Sdn. Bhd., representing 100% of equity interest, for a total consideration of RM2.00. Acquisition of subsidiaries Zecon Medicare Sdn. Bhd. On July 2012, Zecon Berhad has acquired 2 ordinary shares of RM1 each of Zecon Medicare Sdn Bhd, representing 100% of equity interest, for a total consideration of RM2. The acquisition of subsidiary has been accounted for as an acquisition of assets and liabilities. 77

80 Notes to the Financial Statements - 30 June Investment in Subsidiaries (contd.) (d) Acquisition of subsidiaries Creative Venture Sdn. Bhd. On November 2012, Zalpoint Tanah Putih Sdn. Bhd., a subsidiary company of the Group, acquired 2 ordinary shares of RM1 each of Creative Venture Sdn Bhd, representing 100% of equity interest, for a total consideration of RM2. The acquisition of subsidiary has been accounted for as an acquisition of assets and liabilities. (e) Transactions with non-controlling interests On 30 June 2013, Zecon Land Sdn. Bhd. entered into supplementary agreements to partially revoke the former Share Sale Agreements dated 22 December 2009 and 31 December 2007 entered with the former purchasers relating to the sale of 116,213 ordinary shares of RM1 each in Zecon Demak Jaya Sdn. Bhd. ( ZDJ ), previously sold for a consideration of RM12,396,004 and 44,406 ordinary shares of RM1 each in Zecon Petra Jaya Sdn. Bhd. ( ZPJ ), previously sold for a total purchase consideration of RM1,595,000, respectively. Accordingly, the investments in ZDJ has increased from 70% to 82% and the investment ZPJ has increased from 51% to 55%. The following summarises the effect of the changes in the Group s ownership interest on equity attributable to owners of the parent: ZDJ ZPJ Total RM RM RM Consideration paid 12,396,004 1,595,000 13,991,004 Decrease in equity attributable to non-controlling interests (331,176) (67,683) (398,859) Decrease in equity attributable to owners of the parent 12,064,828 1,527,317 13,592,145 ============ ============ ============ 17. Investment in Associates Group Company As at As at As at As at RM RM RM RM Unquoted shares at cost 12,541,128 12,541,128 12,541,128 12,541,128 Shares of post-acquisition reserves (11,312,433) (11,644,596) - - 1,228, ,532 12,541,128 12,541,128 Impairment in value of investment - - (12,366,128) (12,366,128) 1,228, , , ,000 ============ ============ ============ ============ Details of the associates are as follows: Proportion of ownership Name of entities Country of interest incorporation Principle activities As at As at % % L.C.S. Trading Malaysia Trading in hardware, Co. Sdn. Bhd. building materials and related products 78

81 Notes to the Financial Statements - 30 June Investment in Associates (contd.) The summarised financial information of the Group s investment in associates are: Assets and liabilities Group As at As at RM RM Current assets 12,478,638 10,613,929 Non-current assets 3,052,673 3,112,562 Total assets 15,531,311 13,726,491 ========== ========== Current liabilities 10,120,060 9,901,176 Non-current liabilities 87,800 74,233 Total liabilities 10,207,860 9,975,409 ========== ========== Group Result As at As at RM RM Revenue 40,784,840 29,341,377 Profit for the year 1,294,323 99,170 ========== ========== 18. Investment in Jointly Controlled Entity Group Company As at As at As at As at RM RM RM RM Unquoted share at cost 4,061,200 4,861,201-1 Less: Written off (Note 7) (4,061,200) (1) - (1) Less: Accumulated impairment losses (Note 7) - (800,000) ,061, ========= ========= ========= ========= Details of the jointly controlled entity are as follows: Proportion of ownership Name of entities Country of interest incorporation Principle activities As at As at % % Ramco-Zecon WLL Qatar Dormant

82 Notes to the Financial Statements - 30 June Other Investments Group/Company As at As at RM RM Quoted shares at fair value 265, ,458 Changes in fair value 51, , ,458 Unquoted shares at cost 400, ,000 Impairment loss on value of investment (400,000) (400,000) 316, ,458 Subordinated Bonds - 4,500,000 Impairment loss on value of investment - (4,500,000) Total 316, ,458 ========= ========= Market value of quoted shares 316, ,773 ========= ========= The investment in bonds relates to the Subordinated Bonds (maturity date: 20 September 2010) issued under the Primary Collateralised Loan Obligation Programme as disclosed in Note 25 to the financial statements. The loan was fully settled during the financial year 2011, and the Subordinated Bonds was discharged. 20. Inventories Group Company As at As at As at As at RM RM RM RM At cost: Properties held for sale 2,914,939 2,914, , ,000 ========= ========= ========= ========= 21. Amounts Due from/(to) Customer on Contract Group Company As at As at As at As at RM RM RM RM Construction contract costs incurred to date 724,178, ,758, ,789, ,623,940 Attributable profits less recognised losses 79,965,958 76,225,688 57,670,465 47,970, ,414, ,984, ,459, ,594,734 Less: Progress billings (752,704,249) (710,023,162) (859,056,824) (673,140,574) 51,440,101 32,961,222 (8,596,862) (7,545,840) ============ ============ ============ ============ Presented as: Amount due from customer on contract (Note 23) 51,440,101 60,279,043 10,365,890 14,382,574 Amount due to customer on contract (Note 28) - (27,317,821) (18,962,752) (21,928,414) 51,440,101 32,961,222 (8,596,862) (7,545,840) ============ ============ ============ ============ 80

83 Notes to the Financial Statements - 30 June Amounts Due from/(to) Customer on Contract (contd.) Group Company As at As at As at As at RM RM RM RM Retention sum on contracts, included within trade payables (Note 27) 9,493,935 9,629, ,374 5,011,656 ============ ============ ============ ============ Retention sum on contracts, included within trade receivables (Note 22) 1,634,403 4,598,949 1,617,270 1,979,147 ============ ============ ============ ============ The costs incurred to date as construction contracts include the following charges made during the year: Depreciation of property, plant and equipment (Note 12) 4,549,993 3,372,579 1,352, ,418 Hire of equipment, plant and machinery 1,279,236 2,093, Rental expense of buildings 158, , Interest expense (Note 6) 3,482,966 1,687,081 3,445,466 1,638,667 Directors remuneration - 263, ,203 Staff costs 8,092,261 6,295, ,517 - ============ ============ ============ ============ 22. Trade and Other Receivables Group Company As at As at As at As at Trade receivable RM RM RM RM Trade receivables 115,525,394 94,699,525 34,461,358 11,858,949 Progress billings receivables 3,584,651 24,901,842 3,217,882 24,901,842 Amount due from subsidiaries ,229,826 25,586,576 Amount due from associates 866, , , ,275 Retention sums (Note 21) 1,634,403 4,598,949 1,617,270 1,979, ,610, ,081,590 69,392,685 65,207,794 Less: Allowance for impairment (59,516,257) (38,967,040) (14,900,205) (10,549,204) Trade receivables, net 62,094,540 86,114,550 54,492,480 54,658,585 ============ ============ ============ ============ Other receivable Non Current Other receivables 232, ,520 - Amount due from related companies ,869, , ,520 69,869,885 Less : Allowance for impairment (8,946,129) 232, ,520 60,923,756 81

84 Notes to the Financial Statements - 30 June Trade and Other Receivables (contd.) Group Company As at As at As at As at Other receivable (contd.) RM RM RM RM Current Other receivables 29,171,543 38,125,266 10,266,356 8,460,386 Interest receivable 117, Amount due from joint ventures 7, ,155 7, ,155 Amount due from subsidiaries ,467, ,062 29,296,433 39,058,421 58,741,192 9,719,603 Less : Allowance for impairment (9,640,589) (10,213,952) (10,392,446) (6,602,050) 19,655,844 28,844,469 48,348,746 3,117,553 Other receivables, net 19,888,364 28,844,469 48,581,266 64,041,309 ============ ============ ============ ============ Total trade and other receivables, net 81,982, ,959, ,073, ,699,894 ============ ============ ============ ============ Analysis: Current 81,750, ,959, ,841,226 57,776,138 Non-current 232, ,520 60,923,756 Total receivables, net 81,982, ,959, ,073, ,699,894 Add: Cash and bank balances (Note 24) 46,530,439 37,012,833 28,318,272 33,293,828 Total loans and receivables 128,513, ,971, ,392, ,993,722 ============ ============ ============ ============ (a) Trade receivables The Group and the Company s normal trade credit terms range from 30 to 90 days (2011: 30 to 90 days). Other credit terms are assessed and approved on a case-by-case basis. The Group and the Company have significant concentration of credit risk that may arise from exposures to a single debtor or to groups of debtors. However, the Board does not consider this to pose significant credit risk to the Group and the Company. Ageing analysis of trade receivables The ageing analysis of the Group s and Company s trade receivables is as follows: Group Company As at As at As at As at RM RM RM RM Neither past due nor impaired 2,832,146 13,708,260 39,117,639 11,137,334 1 to 30 days past due not impaired 10,155,770 9,085,684 8,439,435 8,813, to 60 days past due not impaired 5,677, ,615,009 3,700, to 90 days past due not impaired 3,006,583 34,417-4,538,918 More than 91 days past due not impaired 40,422,994 63,285,641 3,320,397 15,918,647 Total 59,262,394 72,406,290 15,374,841 32,972,047 Impaired 59,516,257 38,967,040 14,900,205 10,549, ,610, ,081,590 69,392,685 54,658,585 ============ ============ ============ ============ 82

85 Notes to the Financial Statements - 30 June Trade and Other Receivables (contd.) (a) Trade receivables (contd.) Receivables that are neither past due nor impaired Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group and the Company. None of the Group s and the Company s trade receivables that are neither past due nor impaired have been renegotiated during the financial year. Receivables that are past due but not impaired The Group and the Company have trade receivables amounting to RM59,262,394 (2011: RM72,406,290) and RM15,374,841 (2011: RM32,972,047), respectively, that are past due at the reporting date but not impaired. Receivables that are impaired The Group s and Company s trade receivables that are individually impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows: Group Company As at As at As at As at RM RM RM RM Trade receivables 121,610,797 97,348,159 69,392,685 15,683,407 Less: Allowance for impairment (59,516,257) (38,967,040) (14,900,205) (10,549,204) 62,094,540 58,381,119 54,492,480 5,134,203 ============ ============ ============ ============ Movement in allowance accounts: Group Company RM RM RM RM At 1 January 2012/ ,327,837 38,977,595 10,549,204 10,549,204 Charge for the year 18,206,852 5,400 4,369,433 - Written off - (15,955) - - Reversal (18,432) - (18,432) - At 30 June 2013/31 December ,516,257 38,967,040 14,900,205 10,549,204 ============ ============ ============ ============ Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in financial difficulties and have defaulted on payments. The directors are in the opinion that the allowance for impairment is adequate. (b) Amount due from related companies/subsidiaries/associates/joint venture The amounts due from related companies/subsidiaries/associates/joint ventures are unsecured, interest-free and have no fixed term of repayment. 23. Other Current Assets Group Company As at As at As at As at RM RM RM RM Amount due from customers on contract (Note 21) 51,440,101 60,279,043 10,365,890 14,382,574 ============ ============ ============ ============ 83

86 Notes to the Financial Statements - 30 June Cash and Bank Balances Group Company As at As at As at As at RM RM RM RM Cash on hand and at banks 8,207,302 8,326,380 1,348,066 4,732,432 Fixed deposit at banks 483, Deposits with licensed banks 37,840,027 28,686,453 26,970,206 28,561,396 Cash and bank balances 46,530,439 37,012,833 28,318,272 33,293,828 ============ ============ ============ ============ Deposits with licensed banks of the Group and of the Company are pledged to bankers as borrowings and bankers guarantees granted to the Group and the Company. The interest rate for deposits with licensed banks and fixed deposit at bank range from 3.5% to 5.0%. Included in the deposits with licensed banks is a sinking fund account, amounting to RM37,814,196 (2011: RM11,300,751), created for the purpose of capturing the progressive monthly remittance of funds from the project revenue account. Such funds shall be utilised towards the repayment of the revolving credit facility. For the purpose of the cash flow statements, cash and cash equivalents comprise the following as at the reporting date: Group Company As at As at As at As at RM RM RM RM Cash on hand and at banks 8,207,302 8,326,380 1,348,066 4,732,432 Fixed deposits at bank 483, Bank overdrafts (Note 25) (975,502) (1,983,923) (975,502) (1,983,924) Total cash and cash equivalents 7,714,910 6,342, ,564 2,748,508 ============ ============ ============ ============ 25. Borrowings Short term Group Company As at As at As at As at RM RM RM RM Secured: Term loan (i) 256, , , ,092 Term loan (ii) - 5,300, Term loan (iv) - 2,017,787-2,017,787 Term loan (v) 6,778,513-6,778,513-7,035,259 7,531,881 7,035,259 2,231,879 Bank overdrafts 975, , , ,784 Revolving credits 26,406,891 27,991,715 12,903,755 18,057,654 Hire purchase payables (Note 26) 1,287, ,014 1,028, ,575 35,705,606 37,258,393 21,943,203 21,683,892 Unsecured: Term loan (iii) - 33,186,310-33,186,310 Bank overdrafts - 996, ,140 Revolving credits 100,000 2,000, ,000 2,000,000 Bankers acceptances - 1,000,500-1,000, ,000 37,182, ,000 37,182,950 35,805,606 74,441,343 22,043,203 58,866,842 ============ ============ ============ ============ 84

87 Notes to the Financial Statements - 30 June Borrowings (contd.) Long term Group Company As at As at As at As at RM RM RM RM Secured: Term loan (i) 139, , , ,306 Term loan (ii) - 56,634, ,373 57,078, , ,306 Ijarah Facility 110,000, Hire purchase payables (Note 26) 1,384,996 1,008,956 1,007, , ,524,369 58,087,466 1,147,346 1,117,876 ============ ============ ============ ============ Total borrowings Bank overdrafts (Note 24) 975,502 1,983, ,502 1,983,924 Revolving credits 26,506,891 29,991,715 13,003,755 20,057,654 Bankers acceptances - 1,000,500-1,000,500 Term loans 7,174,632 97,796,701 7,174,632 35,862,495 Ijarah Facility 110,000, Hire purchase payables (Note 26) 2,672,950 1,755,970 2,036,660 1,080, ,329, ,528,809 23,190,549 59,984,718 ============ ============ ============ ============ The remaining maturities of the loans and borrowings as at period/year end are as follows: On demand or within one year 35,805,606 74,441,343 22,043,203 58,866,842 More than 1 year and less than 2 years 29,383,635 57,796, , ,361 More than 2 years and less than 5 years 82,140, , , , ,329, ,528,809 23,190,549 59,984,718 ============ ============ ============ ============ Term Loan (i) Term loan (i) is secured by a deed of assignment over certain landed properties of the Group. Term loan (ii) Term loan (ii) is granted to a wholly owned subsidiary to redeem the Bai Bithaman Ajil Islamic Debt Securities and to finance the Company s purchase of land and building from an associate. The term loan is secured by a first fixed and floating charge by way of debenture over all the present and future assets, rights and interest and undertakings of the issuer, and corporate guarantee from the Company. The term loan was fully settled during the period. Term loan (iii) Term loan (iii) is obtained under a Primary Collateralised Loan Obligation Programme and partly secured by Subordinated Bonds as disclosed in Note 19. The term loan is fully settled during the period. Term loan (iv) and Term loan (v) Term loan (iv) and (v) is secured by the contract proceeds receivable by the Group and a legal charge over the project and sinking fund account. Term loan (iv) is fully settled during the period. Bank overdrafts The bank overdrafts of the Group and of the Company amounting to RM975,502 (2011: RM987,783) are secured by certain landed properties of a subsidiary. 85

88 Notes to the Financial Statements - 30 June Borrowings (contd.) Revolving Credit The revolving credits of the Group are secured by certain landed properties of a subsidiary, pledge by way of Memorandum of Deposit over Fixed Deposit Receipt and assignment over contract proceeds receivable by the Company from its client in respect of the project financing. Ijarah Facility The principal portion of Ijarah Facility shall be payable on monthly basis commencing on the twenty-fifth (25th) month from the first drawdown date in accordance with the following schedule: Month Principal amount Tenor (years) (primary notes) RM th 36th 6, th 48th 6, th 60th 6, st 72nd 6, th 84th 6, th 96th 6, th 108th 6, th 120th 6, th 132th 10, th 144th 10, th 156th 11, th 168th 12, th 179th 12, th xxth 3, ,000 ========= The Ijarah facility obtained by one of the subsidiary represents Islamic Financing Facility obtained from Kuwait Finance House (Malaysia) Berhad. The borrowing is secured by: (i) (ii) (iii) (iv) transfer of beneficial/ownership in against the 339-metre Tun Abang Salahuddin Bridge operated and maintained by one of the subsidiary as the concessionaire and corporate guarantee from the company. fixed deposits of RM10.1 million debenture over fixed and floating assets of the subsidiary legal charge over the designated account of the subsidiary The interest rates of the Group and of the Company are as follows: Group Company As at As at As at As at % % RM RM Bankers acceptances Bank overdrafts Hire purchase payables Ijarah facility Revolving credits Term loans ============ ============ ============ ============ 86

89 Notes to the Financial Statements - 30 June Hire Purchase Payables Future minimum lease payments: Group Company As at As at As at As at RM RM RM RM Not later than 1 year 1,411, ,595 1,125, ,252 Later than 1 year and not later than 2 years 1,008, , , ,576 Later than 2 years and not later than 5 years 449, , , ,270 2,869,664 1,904,873 2,178,703 1,180,098 Less: Future finance charges (196,714) (148,903) (142,043) (99,953) Present value of finance lease liabilities (Note 25) 2,672,950 1,755,970 2,036,660 1,080,145 ========== ========== ========== ========== Analysis of present value of finance lease liabilities: Not later than 1 year 1,286, ,014 1,027, ,575 Later than 1 year and not later than 2 years 955, , , ,150 Later than 2 years and not later than 5 years 431, , , ,420 2,672,950 1,755,970 2,036,660 1,080,145 Less: Amount due within 12 months (1,287,954) (747,014) (1,028,687) (406,575) Due after 12 months 1,384,996 1,008,956 1,007, ,570 ========== ========== ========== ========== The Group has finance leases and hire purchase contracts for various items of property, plant and equipment (see Note 12). 27. Trade and Other Payables Group Company As at As at As at As at Trade payable RM RM RM RM Current Trade payables 41,755,441 60,105,990 19,615,558 9,974,959 Retention sums (Note 21) 9,493,935 9,629, ,374 5,011,656 Amount due to subsidiaries 28,614,658-46,906,052 48,840,637 79,864,034 69,735,210 67,212,984 63,827,252 Trade payables, net 79,864,034 69,735,210 67,212,984 63,827,252 ========== ========== ========== ========== Other payables Non Current Other payables - 38, Deferred revenue 116, , , , Current Other payables 12,982,120 12,935,596 4,621,429 5,815,886 Deferred revenue 15,000 15, Amount due to subsidiaries ,533,900 14,162,731 Amount due to associate 48,966-48,966 - Interest payable 638, ,684,560 12,950,596 31,204,295 19,978,617 Other payables, net 13,800,810 13,127,516 31,204,295 19,978,617 ========== ========== ========== ========== Total payables, net 93,664,844 82,862,726 98,417,279 83,805,869 ========== ========== ========== ========== 87

90 Notes to the Financial Statements - 30 June Trade and Other Payables (contd.) Analysis: Group Company As at As at As at As at RM RM RM RM Current 93,548,594 82,685,806 98,417,279 83,805,869 Non-current 116, , Total payables, net 93,664,844 82,863,266 98,417,279 83,805,869 Add: borrowings (Note 25) 147,329, ,528,809 23,190,549 59,984,718 Total financial liabilities carried at amortised cost 240,994, ,392, ,607, ,790,587 ========== ========== ========== ========== (a) Trade payables The normal trade credit terms granted to the Group and to the Company range from 30 to 90 days (2011: 30 to 90 days). Included in the trade payable of the Group was an amount of RM5,472,771 (2011: Nil) which bore interest at 8.05% (2011: Nil) per annum and was repayable on demand. This unsecured amount was fully settled during the financial period. The remaining trade payables are unsecured, interest free and are repayable on demand. (b) Other payables Included in the other payables of the Group and the Company are amounts due to directors of RM1,750,000 (2011: RM1,750,000 and RM1,400,000 (2011: RM1,400,000), respectively. (c) Amounts due to subsidiary/associate The amounts due to subsidiaries/associates are unsecured, interest-free and have no fixed term of repayment. 28. Other Current Liabilities Group Company As at As at As at As at RM RM RM RM Amount due to customers on contract (Note 21) - 27,317,821 18,962,752 21,928,414 ========== ========== ========== ========== 29. Deferred Tax Group Company As at As at As at As at RM RM RM RM At 1 January (3,973,548) (4,195,051) (4,836,775) (5,036,775) Recognised in income statement (Note 10) (343,627) 221, ,000 At 30 June/31 December (4,317,175) (3,973,548) (4,836,775) (4,836,775) ========== ========== ========== ========== Presented after appropriate offsetting as follows: Deferred tax assets (6,068,155) (6,003,976) (5,992,976) (5,992,976) Deferred tax liabilities 1,750,980 2,030,428 1,156,201 1,156,201 (4,317,175) (3,973,548) (4,836,775) (4,836,775) ========== ========== ========== ========== 88

91 Notes to the Financial Statements - 30 June Deferred Tax (contd.) The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows: Deferred tax liabilities Group Property, plant and equipment RM Total RM At 1 January ,030,428 2,030,428 Recognised during the period (279,448) (279,448) At 30 June ,750,980 1,750,980 ========== ========== At 1 January ,997,925 1,997,925 Recognised during the year 32,503 32,503 At 1 January ,030,428 2,030,428 ========== ========== Company At 1 January 2012/2011 and at 30 June 2013/December ,156,201 1,156,201 ========== ========== Deferred tax assets Group Unutilised tax losses and unabsorbed capital allowances RM Total RM At 1 January 2012 (6,003,976) (6,003,976) Recognised during the period (64,179) (64,179) At 30 June 2013 (6,068,155) (6,068,155) ========== ========== At 1 January 2011 (6,192,976) (6,192,976) Recognised during the year 189, ,000 At 31 December 2011 (6,003,976) (6,003,976) ========== ========== Company: At 1 January 2012 and at 30 June 2013 (5,992,976) (5,992,976) ========== ========== At 1 January 2011 (6,192,976) (6,192,976) Recognised during the year 200, ,000 At 31 December 2011 (5,992,976) (5,992,976) ========== ========== 89

92 Notes to the Financial Statements - 30 June Deferred Tax (contd.) Deferred tax assets have no t been recognised in respect of the following items: Group Company As at As at As at As at RM RM RM RM Unutilised tax losses 10,570,785 9,812,000 7,374,738 9,690,000 Unabsorbed capital allowances and industrial building allowances 1,536,949 9,279,000-8,939,000 12,107,734 19,091,000 7,374,738 18,629,000 ========== ========== ========== ========== The availability of the unutilised tax losses and unabsorbed capital and industrial building allowances for offsetting against future taxable profit of the Group and the company are subject to no substantial changes in shareholdings of the Group and the company under Section 44(5A) and (5B) of Income Tax Act, Share Capital and Share Premium Issued and fully paid Number of Ordinary Shares of RM1 Each Amount Group/Company RM Share premium RM At 1 January 2012 and 30 June ,106, ,106,150 3,558,768 =========== =========== ========== At 1 January 2011 and 31 December ,106, ,106,150 3,558,768 =========== =========== ========== Authorised share capital Number of Ordinary Shares of RM1 Each Amount RM RM At 1 January 2012/2011 and at 30 June2013/ 31 December ,000, ,000, ,000, ,000,000 =========== =========== =========== ========== The holders of ordinary shares entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company s residual assets. 31. Other Reserves Group Asset Revaluation Foreign Fair Reserve- Currency Value Freehold Translation Warrant Adjustment Total Land Reserve Reserve Reserve Reserves RM RM RM RM RM At 1 January ,832 (723) 4,416,854 (51,285) 5,057,678 Net fair value change on available for sale financial aseets ,285 51,285 Foreign currency translation - 4, ,014 At 30 June ,832 3,291 4,416,854-5,112,977 ========== ========== ========== ========== ========== At 1 January ,832 (14,505) 4,416,854 (51,285) 5,043,896 Foreign currency translation - 13, ,782 At 31 December ,832 (723) 4,416,854 (51,285) 5,057,678 ========== ========== ========== ========== ========== 90

93 Notes to the Financial Statements - 30 June Other Reserves (contd.) Company Asset Revaluation Fair Value Reserve- Warrant Adjustment Total Freehold Land Reserve Reserve Reserves RM RM RM RM At 1 January 2011/2012 and at 31 December ,832 4,416,854 (51,285) 5,058,401 Net fair value change on available for sale financial aseets ,285 51,285 At 30 June ,832 4,416,854-5,109,686 ========== ========== ========== ========== The nature and purpose of each category of reserve are as follows: (a) Asset revaluation reserve The asset revaluation reserve is used to record increases in the fair value of freehold land and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in equity. (b) Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group s presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Group s net investment in foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation. (c) Warrant reserve On 6 March 2007, the Company undertook a renounceable rights issue of 44,168,540 new Warrants ( Warrants ) at an issue price of RM0.10 per Warrant on the basis of one (1) new Warrant for every two (2) existing ordinary shares of RM1 each held in the Company. The Warrants were subsequently listed on the Main Market of Bursa Malaysia Securities Berhad on 13 March (d) Fair value adjustment reserve Fair value adjustment reserve represents the cumulative fair value changes, net of tax, of available-for-sale financial assets until they are disposed or impaired. 32. Contingent Liability On 12 April 2005, Zalpoint Tanah Putih Sdn. Bhd. ( ZTPSB ), a wholly-owned subsidiary of Zecon International Limited (ZTPSB was formerly a wholly-owned subsidiary of Zecon Land Sdn Bhd ( ZLSB ), which is in turn a wholly-owned subsidiary of the Company, was served with a Writ of Summons dated 30 March 2005 by Estatequest Sdn. Bhd. ( Estatequest ), for damages on loss of profits totalling RM12,968,780, declaratory orders, interests and costs. According to Estatequest, ZTPSB had breached the Memorandum of Agreement ( MOA ) dated 19 August 1999 entered between ZTPSB and Estatequest relating to, inter-alia, the charging of the land for the Tanah Putih Development Project ( Project ) by ZTPSB. Estatequest being the Sub-developer of the said Project at the material time alleged that ZTPSB had failed to make partial redemption of the sub-lots or parcels allocated to Estatequest and as a result, they could not continue with the remaining development of the Project. ZTPSB had instructed their solicitors, Messrs Reddi & Co Advocates, to vigorously defend the claim made by the Sub-developer. Under the Share Sale Agreement (SSA) entered between the vendors of ZTPSB ( Vendors ) and ZLSB dated 15 December 2003, the Vendors had provided an indemnity clause in the SSA, to hold ZLSB harmless from and against any damages, deficiencies, losses, costs, liabilities and expenses (including legal fees and disbursements) resulting from and arising out of any breach of presentations, warranties, covenants and agreements made by the Vendors. In addition, counter-claims were made by ZTPSB on 12 May 2005 against both Estatequest and directors of Estatequest for breach of contract and personal liability as guarantors, respectively. The full trial has been disposed of on 13 April 2009 and the Court passed judgement on 24 April 2009 dismissing the Plaintiff s (Estatequest s) claim and ZTPSB s counter claim. Both Estatequest being the Plaintiff and ZTPSB being the Defendant filed Notice of Appeal on their claims and counter claims on 7 May 2009 and 19 May 2009 respectively. 91

94 Notes to the Financial Statements - 30 June Contingent Liability (contd.) Hearing for both appeals was heard by the Court of Appeal sitting in Kuching on 13 February 2012 whereby the decision of the High Court has been upheld. Estatequest has thirty (30) days from issuance of the sealed order by the Court of Appeal to file an application for leave to appeal to the Federal Court if they wish to do so. The said sealed order is not extracted yet however leave to appeal (if applied by Estatequest) is very unlikely to be granted by the Federal Court in this case as the appeal is not based on question of laws but instead interpretation of contract. As at the balance sheet date, no appeal has been filed by the Plaintiff. Therefore in essence ZTPSB being the proprietor of the land is now free to deal with the land. 33. Segmental Reporting (a) Reporting format The primary segment reporting format is determined to be business segments as the Group s risks and rates of return are affected predominantly by differences in the products and services produced. No geographical analysis has been prepared as the Group s business interests are mainly located in Malaysia. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and services and different markets. (b) Business segments The Group comprises the following main business segments: (i) (ii) (iii) (iv) Construction - piling works, foundation engineering and building construction; Property development - property holding and development; Toll concession - operation and maintenance of toll bridge and collection of toll revenue; and Others - management services. The directors are of the opinion that all inter-segment transactions having been entered into in the normal course of business and have been transacted on normal commercial terms. 92

95 Notes to the Financial Statements - 30 June Segmental Reporting (contd.) 30 June 2013 Property Toll Group Construction development concession Others Eliminations Total RM RM RM RM RM RM Revenue Sales to external customers 204,987,603 12,787,670 19,893, , ,821,051 Inter-segment sales 149,654, ,638,274 (152,292,377) - Total revenue 354,641,706 12,787,670 19,893,257 2,790,795 (152,292,377) 237,821,051 =========== ========== ========== ========== ============ ============ Results Segment results (22,621,914) 2,679,571 16,063,011 (1,462,505) - (5,341,837) Finance costs (14,241,302) Share of profit of associates 332,163 Profit before taxation (19,250,976) Income tax expense (5,688,671) Profit for the year (24,939,647) ============ Assets Segment assets 352,369, ,683, ,778,899 17,015,001 (377,380,993) 361,466,150 Investments in associates 1,228,695 Unallocated assets 1,928,894 Total assets 364,623,739 ============ Liabilities Segment liabilities/total liabilities 292,660, ,693, ,756,281 24,450,919 (352,214,358) 253,346,275 =========== ========== ========== ========== ============ ============ Other segment information Capital expenditure 2,577,572 6, ,589 37,529-2,869,906 Depreciation 7,917,978 57, , ,789-8,392,128 Amortisation 4, ,722 Other significant non-cash expenses: Provisions 20,490,432 15,102, , ,771 (15,897,777) 19,994,286 =========== ========== ========== ========== ============ ========== 93

96 Notes to the Financial Statements - 30 June Segmental Reporting (contd.) 31 December 2011 Property Toll Group Construction development concession Others Eliminations Total RM RM RM RM RM RM Revenue Sales to external customers 131,200,731 9,171,622 11,867, , ,354,372 Inter-segment sales 78,660, ,762,611 (81,423,380) - Total revenue 209,861,500 9,171,622 11,867,669 2,876,961 (81,423,380) 152,354,372 =========== ========== ========== ========== ============ ========== Results Segment results 5,440,334 1,976,334 9,041,055 (280,757) - 16,176,966 Finance costs (10,210,300) Share of profit of associates 99,170 Profit before taxation 6,065,836 Income tax expense (5,055,081) Profit for the year 1,010,755 ========== Assets Segment assets 377,030, ,500, ,315,378 19,426,627 (350,558,911) 401,714,081 Investments in associates 896,532 Unallocated assets 2,727,172 Total assets 405,337,785 =========== Liabilities Segment liabilities/total liabilities 300,800, ,088,319 99,536,415 27,334,975 (338,535,558) 255,224,969 =========== ========== ========== ========== ============ =========== Other segment information Capital expenditure 1,600,516 3,037 74,295 79,661-1,757,509 Depreciation 6,736,653 43,934 86, ,459 (2,000) 7,193,182 Amortisation 11, ,636 Other significant non-cash expenses: Provisions 1,200,001 1,023, (988,340) 1,235,401 =========== ========== ========== ========== ============ ========== 94

97 Notes to the Financial Statements - 30 June Significant related party transactions During the financial period/year, the Group and the Company had, in the normal course of business transacted on normal commercial terms the following transactions: (a) Sales and purchases of goods and services The subsidiaries During the year, the subcontractor fees paid to Zecon Geotechnical Services Sdn. Bhd. is RM Nil (2011: RM11,818). During the period/year, the subcontractor fees paid to Zecon Water Corporation Sdn. Bhd. is RM39,985,156 (2011: RM30,453,535). During the period/year, the subcontractor fees paid to Zecon Fab Sdn. Bhd. is RM8,521,668 (2011: RM21,404,161). During the period/year, the subcontractor fees paid to Zecon Construction (Sarawak) Sdn. Bhd. is RM59,173,054 (2011: RM8,825,159). During the period/year, the subcontractor fees paid to and the rental income received from Zecon Dredging Sdn. Bhd. are RM43,306,389 (2011: RM23,357,057) and RM10,800 (2011: RM Nil) respectively. During the period/year, the rental income received from Zecon Assets Sdn. Bhd. on rental of plant and machinery is RM1,476,443 (2011: RM Nil). During the period/year, the rental income received from Sarmax Sdn. Bhd. is RM18,000 (2011: RM12,000). There were no other transactions with the other subsidiaries during the financial period/year. The directors are of the opinion that all the transactions above have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties. The related parties LCS Trading Co. Sdn. Bhd., LCS Metals Works Sdn. Bhd., LCS Equipment Rental Sdn. Bhd., LCS Apex Sdn. Bhd., and Halifax Capital Bhd. are associated companies of the Company. Perunding KAZ Sdn. Bhd., Al Quds Travel Sdn. Bhd., SCIB Concrete Manufacturing Sdn. Bhd., Oricon Sdn. Bhd., Mary Bolhassan, Noreda Ahmad & Co., and TKY Consultant Sdn. Bhd. are companies in which the close family members of certain directors of the Company have substantial financial interests. Datuk Haji Zainal Abidin Bin Haji Ahmad has substantial financial interests in SCIB Concrete Manufacturing Sdn. Bhd. Haji Abang Azahari Abang Osman has substantial financial interests in TKY Consultant Sdn. Bhd. During the period/year, the travel agency services fees paid to Al Quds Travel Sdn. Bhd. is RM5,804 (2011: RM13,251). However, Al Quds Travel Sdn. Bhd. has been disposed by the Director. During the period/year, the purchase of construction materials paid to SCIB Concrete Manufacturing Sdn. Bhd. is RM835,308 (2011: RM6,398,458). There was an outstanding amount of RM3,862,160 (2011: RM5,062,100) at the reporting date. During the period/year, the legal and professional fees paid to Mary Bolhassan, Noreda Ahmad & Co. is RM55,915 (2011: RM15,917). During the period/year, the consultancy fees paid to TKY Consultant Sdn. Bhd. is RM2,127,808 (2011: RM1,106,184). There was an outstanding amount of RM836,417 (2011: RMNil) at the reporting date. During the period/year, the consultancy fees paid to Perunding KAZ Sdn. Bhd. is RM113,571 (2011: RM107,533). There was an outstanding amount of RM81,124 (2011: RMNil) at the reporting date. The directors are of the opinion that all the transactions above have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties. 95

98 Notes to the Financial Statements - 30 June Significant related party transactions (contd.) (b) Compensation of key management personnel The remuneration of directors and other members of key management during the year was as follows: Group Company As at As at As at As at RM RM RM RM Directors remuneration (Note 9) 2,242,096 1,814,231 1,200,682 1,544,431 Non director remuneration 2,591,416 1,991,153 2,171,647 1,716,133 4,833,512 3,805,384 3,372,329 3,260,564 =========== =========== =========== ========== 35. Financial risk management objectives and policies The Group s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group s businesses whilst managing its interest rate, foreign exchange, liquidity and credit risks. The Board reviews and agrees policies for managing each of these risks and they are summarised below. It is and has been throughout the year under review, the Group s policy that no trading in derivative financial instruments shall be undertaken. (a) Interest rate risk Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest-bearing financial assets, the Group s income and operating cash flows are substantially independent of changes in market interest rates. The Group s interest-bearing financial assets are mainly short term in nature and have been mostly placed in fixed deposits or occasionally, in short term commercial papers. The Group s interest rate risk arises primarily from interest-bearing borrowings. Borrowings at floating rates expose the Group to cash flow interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings. Sensitivity analysis for interest rate risk At the reporting date, it is estimated that a hundred basis points increase in interest rate, with all other variables held constant, would decrease the Group s and the companies profit net of tax by approximately RM388,324 (2011: RM552,707) and RM236,413 (2011:RM438,452), respectively, arising mainly as a result of higher interest expense on net floating borrowing position. A decrease in interest rate would have had the equal but opposite effect on the aforesaid amount, on the basis that all other variables remain constant. (b) Foreign currency risk The Group is exposed to currency risk in respect of its foreign investments in subsidiaries. These are, however, not significant. (c) Liquidity risk The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that refinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligation due to shortage of funds. The Group s and the Company s exposure to liquidity risk arise primarily from mismatches of the maturities of financial assets and liabilities. The Group s and the Company s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities. 96

99 Notes to the Financial Statements - 30 June Financial risk management objectives and policies (contd.) (c) Liquidity risk (contd.) Analysis of 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 obligation. As at 30 June 2013 On demand or within One to five Over five one year years years Total RM RM RM RM Group Financial liabilities Trade and other payables 93,548,594 60,000 56,250 93,664,844 Hire purchase payables 1,411,758 1,457,906-2,869,664 Borrowings 45,106,912 54,625, ,103, ,835,568 Total undiscounted financial liabilities 140,067,264 56,143, ,159, ,370,076 ========== ========== ========== ========== As at (Restated) Group Financial liabilities Trade and other payables 82,685,806 98,710 78,750 82,863,266 Hire purchase payables 842,595 1,062,278-1,904,873 Borrowings 75,486,297 21,202,152 35,934, ,622,652 Total undiscounted financial liabilities 159,014,698 22,363,140 36,012, ,390,791 ========== ========== ========== ========== As at Company Financial liabilities Trade and other payables 98,417, ,417,279 Hire purchase payables 1,125,906 1,052,797-2,178,703 Borrowings 22,727, ,373-22,867,061 Total undiscounted financial liabilities 122,270,873 1,192, ,463,043 ========== ========== ========== ========== As at (Restated) Company Financial liabilities Trade and other payables 83,805, ,805,869 Hire purchase payables 471, ,846-1,180,098 Borrowings 64,186, ,152-64,688,449 Total undiscounted financial liabilities 148,463,418 1,210, ,674,416 ========== ========== ========== ========== 97

100 Notes to the Financial Statements - 30 June Financial risk management objectives and policies (contd.) (d) 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 trade and other receivables. For other financial assets (including investment securities and cash and bank balances), the Group and the Company minimise credit risk by dealing with good 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 with good 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 and receivable balances are monitored on an ongoing basis. 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 statement of financial position. Credit risk concentration profile The Group and Company have significant exposure to any that may arise from exposures to a single debtor or to groups of debtors. However, the Board does not consider this to pose significant credit risk to the Group and the Company. Financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 22. Deposits with banks and other financial institutions that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default. 36. Fair value of financial instruments (a) Determination of fair value The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: (i) Cash and bank deposits, other receivables and other payables The carrying amounts of these balances approximate their fair values due to the relatively short term nature of these financial instruments. (ii) Trade receivables and trade payables The carrying amounts of trade receivables and trade payables approximate their fair values because they are subject to normal trade credit terms. (iii) Amounts due from/to related companies The carrying values of amounts due from/to related companies in current assets and current liabilities approximate their fair values due to the short term nature. No disclosure of fair value is made for non-current amounts due from/to related companies as it is not practicable to determine their fair values with sufficient reliability since these balances have no fixed terms of repayment. (iv) Investment securities The fair values of quoted investment securities are determined by reference to their stock exchange quoted closing bid price at the end of the reporting period. The unquoted investment securities do not have quoted market prices in an active market. In order to determine the fair value of such securities, the observable market prices in an open active market or dealer price quotations are used. The unquoted available-for-sale financial assets are carried at cost as there are no other methods of reasonably estimating the fair values. It is not practicable to estimate the fair values with sufficient reliability without incurring excessive costs. 98

101 Notes to the Financial Statements - 30 June Fair value of financial instruments (contd.) (a) Determination of fair value (contd.) The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: (contd.) (v) Bank borrowings and term loan The carrying values of bank borrowings and term loan approximate their fair values as they bear interest rates which approximate the current incremental borrowing rates for similar types of lending and borrowing arrangements. (vi) Financial guarantees Fair value is determined based on the probability weighted discounted cash flow method. The probability has been estimated and assigned for the following key assumptions: - The likelihood of the guaranteed party defaulting within the guaranteed period; - The exposure on the portion that is not expected to be recovered due to the guaranteed party s default; and - The estimated loss exposure if the party guaranteed were to default. (b) Fair value hierarchy The Group and Company use the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly; and Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy: Financial assets Note Level 1 Level 2 Level 3 Total RM RM RM RM Group/Company At 30 June 2013 Financial investment available-for-sales financial assets - Quoted investments (Note 19) 316, ,743 ========== ========== ========== ========== At 31 December 2011 Financial investment available-for-sales financial assets - Quoted investments (Note 19) 244, ,773 ========== ========== ========== ========== The methods and assumptions used by management to determine fair values of financial instruments other than those whose carrying amounts reasonably approximate their fair values are as follows: Other investments - Quoted shares The fair value of quoted shares is determined by reference to stock exchange quoted market bid prices at the close of the business on the reporting date. 99

102 Notes to the Financial Statements - 30 June Capital Management The primary objective of the Group s capital management is to ensure that it maintains a strong credit rating and healthy capital rations in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustment to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 30 June 2013 and 31 December The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group s policy is to keep the gearing ratio as minimal as possible. The Group includes within net debt, loans and borrowings (excluding convertibles redeemable preference shares), trade and other payables, less cash and bank balances. Capital includes equity attributable to the owners of parent less the fair value adjustment reserve. Group Company As at As at As at As at RM RM RM RM Loans and borrowings 147,329, ,528,809 23,190,549 59,984,718 Trade and other payables 93,664,844 82,863,266 98,417,279 83,805,869 Cash and bank balances (46,530,439) (37,012,833) (28,318,272) (33,293,828) Net debt 194,464, ,379,242 93,289, ,496,759 Total capital 107,340, ,580,015 76,131,193 76,083,029 Capital and net debt 301,805, ,959, ,420, ,579,788 ========== ========== ========== ========== Gearing ratio 64% 55% 55% 59% ========== ========== ========== ========== 38. Subsequent events (a) Concession agreement On 23 August 2013, the Company signed a Concession Agreement with the Government of Malaysia, represented by Ministry of Education and Universiti Kebangsaan Malaysia ( UKM ), for the planning, designing, financing, development, construction, landscaping, equipping, installation, completion, testing, commissioning of the Facilities and Infrastructure of a Children s Specialist Hospital located at UKM and to carry out the Asset Management Services ( the Agreement ). Under the terms and conditions of the Agreement, the Concession Period is for 30 years and the total construction cost for the said Facilities and Infrastructure is RM606 million. The construction for the Facilities and Infrastructure is expected to be completed within 54 months from the commencement of the construction period. The said Asset Management Services, which covers the Asset Management Programme and Maintenance Services to be provided in respect of the Facilities and Infrastructure, will commence upon the issuance of the Certificate of Acceptance on the Facilities and Infrastructure by the Government. The total estimated payment for the Maintenance Services Charges is RM4,477, per month. The project (comprising of construction of the Facilities and Infrastructure and Asset Management Services) is not expected to contribute positively towards the earnings and net assets of the Group for the next 4 ½ years. None of the Directors, major shareholders or persons connected to the directors and major shareholders of the Company have any interest, direct or indirect, in the Agreement. 100

103 Notes to the Financial Statements - 30 June Subsequent events (contd.) (b) Proposed privatisation On 15 July 2013, the Company announced the receipt of the letter ( Offer Letter ) from Dawla Capital Sdn Bhd ( DCSB ), Datuk Haji Zainal Abidin bin Haji Ahmad ( DZA ), in their capacity as the major shareholders of the Company, together with Tan Sri Datuk Amar (Dr.) Tommy bin Hamid bin Bugo ( TSH ) and Hj Zainurin bin Hj Ahmad ( HZA ) (collectively referred to as Non-Entitled Shareholders ), informing the Company s Board of Directors ( Board ) that the Non-Entitled Shareholders intend to privatise the Company and proposed that the Company undertakes the following corporate exercises: (i) (ii) a selective capital reduction and repayment exercise pursuant to Section 64 of the Companies Act, 1965 ( Act ) ( Proposed SCR ); and the acceleration of the maturity of all outstanding 2007/2017 warrants in the Company ( Warrants ) and cancellation thereof ( Proposed WAC ). As at 11 July 2013 ( LPD ), the Non-Entitled Shareholders hold in aggregate 74,383,875 ordinary shares of RM1 each in the Company s shares representing approximately 62.45% of the issued and paid-up share capital. Upon successful completion of the Proposals, the Non-Entitled Shareholders will hold 100% equity interest in the Company. Details pertaining to the Proposals are set out in below: (i) Proposed SCR The Proposed SCR shall involve the Company undertaking a selective share capital reduction and a corresponding capital repayment to all shareholders of the Company other than the Non-Entitled Shareholders ( Entitled Shareholders ) whose names appear in the Record of Depositors as at the close of business on an entitlement date to be determined at a later date ( Entitlement Date ). Under the Proposed SCR, all Entitled Shareholders will receive a total cash payment of RM35,777,820 which represents a cash repayment of RM0.80 for each of the Company s shares held by the Entitled Shareholders on the Entitlement Date ( SCR Offer Price ). As at the date of the financial statements, the Company s issued and paid-up share capital stand at RM119,106,150 comprising 119,106,150 shares of RM1 each. The issued and paid-up share capital of the Company will be reduced by way of cancellation of the Company s shares held by the Entitled Shareholders. Accordingly, 44,722,275 shares held by the Entitled Shareholders will be cancelled pursuant to the Proposed SCR and a total capital repayment of RM35,777,820 will be made to the Entitled Shareholders. This will result in the reduction of the issued and paid-up share capital of the Company from RM119,106,150 comprising 119,106,150 shares of RM1 each to RM74,383,875 comprising 74,383,875 shares. The Proposed SCR can be summarised as follows: Issued and paid-up No of Par ordinary Shares value share capital RM RM RM Existing issued and paid-up share 119,106, ,106,150 Shares to be cancelled pursuant to the Proposed SCR (44,722,275) 1.00 (44,722,275) Issued and paid-up share capital upon 74,383, ,383,875 completion of the Proposed SCR ========== ========== The Non-Entitled Shareholders have proposed that the total cash capital repayment under the Proposed SCR be funded by the Company s internally generated funds and/or via bank borrowings to be obtained by the Company. Upon successful completion of the Proposed SCR, the Non-Entitled Shareholders do not intend to maintain the listing status of the Company on the Main Market of Bursa Malaysia Securities Berhad ( Bursa Securities ). The Non-Entitled Shareholders have requested the Company to make an application to Bursa Securities to de-list and withdraw the Company from the Official List of Bursa Securities upon successful completion of the Proposed SCR. 101

104 Notes to the Financial Statements - 30 June Subsequent events (contd.) (b) Proposed privatisation (ii) Proposed WAC In conjunction with the Non-Entitled Shareholders proposal to take the Company private via the Proposed SCR, the Non-Entitled Shareholders had also proposed for the Company to undertake the Proposed WAC. The Proposed WAC involves the acceleration of the maturity of all outstanding Warrants and the cancellation of the Warrants. Under the Proposed WAC, all of the warrantholders (excluding the Non-Entitled Shareholders) whose names appear in the Record of Depositors as at the close of business on the Entitlement Date ( Entitled Warrantholders ) will receive a cash amount of 5 sen for each Warrant held on the Entitlement Date ( WAC Offer Price ). As at the date of the financial statements, the Company had 44,168,540 Warrants in issue, of which a total of 21,461,710 Warrants, representing approximately 48.59% of the Warrants in issue, are held directly by the Non- Entitled Shareholders. Accordingly, 44,168,540 Warrants held by the Entitled Warrantholders and the Non-Entitled Shareholders will be cancelled pursuant to the Proposed WAC and a cash payment of RM1,135,342 will be made to the Entitled Warrantholders. The Non-Entitled Shareholders shall waive their entitlements to any payment to be made for their holding of the Warrants pursuant to the Proposed WAC. The Non-Entitled Shareholders have proposed that the total cash consideration for the Proposed WAC be funded by the Company s internally generated funds and/or via bank borrowings to be obtained by the Company. To facilitate the implementation of the Proposed WAC, the warrant deed poll dated 9 January 2007 ( Warrant Deed Poll ) is to be modified by way of a memorandum of a supplemental deed, to allow for the early expiration of the Warrants. Pursuant to the terms of the Warrant Deed Poll, any modification to the Warrant Deed Poll is subject to the approval of the warrantholders at a general meeting to be convened. The Warrants will be de-listed from the Official List of Bursa Securities concurrently with the de-listing of the Company s shares upon the successful completion of the Proposed SCR and/or upon maturity of the Warrants pursuant to the Proposed WAC as approved by the Entitled Warrantholders. The Company has submitted the proposals to the Securities Commission Malaysia and Bursa Malaysia Securities Berhad on 11 October 2013 and is currently pending approval. 39. Supplementary information breakdown of retained earnings/(accumulated losses) into realised and unrealised The breakdown of the retained earnings/ (accumulated losses) of the Group and of the Company as at 30 June 2013/31 December 2011 into realised and unrealised (losses)/profits is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with 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, as issued by the Malaysian Institute of Accountants. Group Company As at As at As at As at RM RM RM RM Total (accumulated losses)/retained profit of the company and its subsidiaries - Unrealised 4,317,175 3,973,548 4,836,775 4,836,775 - Realised (25,086,606) 13,333,888 (56,480,186) (56,477,065) (20,769,431) 17,307,436 (51,643,411) (51,640,290) Total share of profit from associate - Realised 332, , (Accumulated losses)/ retained earnings as per financial statements (20,437,268) 17,857,419 (51,643,411) (51,640,290) ========== ========== ========== ========== 102

105 Analysis Of Shareholdings - as at 18 October 2013 SHARE CAPITAL Authorised Capital Issued and Paid up Capital Class of Share : RM500,000,000 : RM119,106,150 : Ordinary Shares of RM1.00 each DISTRIBUTION OF SHAREHOLDINGS Size of Shareholdings No. of Shareholders No. of Shares % of Shares Less than , to 1, , ,001 to 10, ,640, , , ,478, ,001 to less than 5% 33 29,692, % and above 2 77,189, TOTAL 1, ,106, SUBSTANTIAL SHAREHOLDERS AS PER REGISTER OF SUBSTANTIAL SHAREHOLDERS No. of Shares Held No. Name Direct % Indirect % 1. Dawla Capital Sdn Bhd 65,689, Datuk Haji Bolhassan bin Ahmad bin Di 11,500, Haji Zainal Abidin bin Haji Ahmad 3,655, ,689,475 * Note: * Deemed interested by virtue of his interest in Dawla Capital Sdn Bhd DIRECTORS INTERESTS No. of Shares Held Direct % Indirect % THE COMPANY Tan Sri Datuk Amar (Dr.) Tommy bin Hamid bin Bugo 4,514, Datuk Dr. Haji Josree bin Haji Yacob Datuk Haji Zainal Abidin bin Haji Ahmad 3,655, ,689,475* Haji Zainurin bin Haji Ahmad 525, Dato Abdul Majit bin Ahmad Khan Poh Lik Poh Li Thong 40, Richard Kiew Jiat Fong 63, Datuk Haji Bolhassan bin Ahmad bin Di 11,500, RELATED companies Teknik PS Sdn Bhd Datuk Haji Zainal Abidin bin Haji Ahmad 34, Zecon Construction Sdn Bhd Datuk Haji Zainal Abidin bin Haji Ahmad Sarmax Sdn Bhd Datuk Haji Zainal Abidin bin Haji Ahmad 30, Note: * Deemed interested by virtue of his interest in Dawla Capital Sdn Bhd 103

106 Analysis Of Shareholdings - as at 18 October 2013 THIRTY (30) LARGEST SHAREHOLDERS No. Name of Shareholders No of Shares % 1. Dawla Capital Sdn Bhd 65,689, Kenanga Nominees (Tempatan) Sdn Bhd 11,500, Pledged Securities Account For Bolhassan bin Ahmad bin Din 3. HSBC Nominees (Asing) Sdn Bhd 5,000, Exempt An for Credit Suisse 4. Maybank Nominees (Tempatan) Sdn Bhd 5,000, Pledged Securities Account for Lee Swee Eng 5. Maybank Nominees (Tempatan) Sdn Bhd 4,485, Pledged Securities Account for Tommy bin Hamid bin Bugo 6. Zainal Abidin bin Ahmad 2,967, Irene Tan Ai Leng 1,396, Maybank Nominees (Tempatan) Sdn Bhd 1,304, Ting Poi Ling 9. Victor Law Thian Teck 1,000, Affin Nominees (Tempatan) Sdn Bhd 888, Pledged Securities Account for Yu Kuan Chon 11. Alliancegroup Nominees (Tempatan) Sdn Bhd 651, Pledged Securities Account for Chan Sow Keng 12. Kenanga Nominees (Tempatan) Sdn Bhd 597, Pledged Securities Account for Zainal Abidin bin Ahmad 13. Zainurin bin Ahmad 525, Chuan Thong Huat 507, CIMSEC Nominees (Tempatan) Sdn Bhd 500, CIMB Bank for Yu Kuan Chon 16. Ng Hau Ching 445, Rachel Lim Li Mae 408, Alliancegroup Nominees (Tempatan) Sdn Bhd 400, Pledged Securities Account for Yu Kuan Chon 19. Pua Soon 400, Kenanga Nominees (Tempatan) Sdn Bhd 368, Pledged Securities Account for Hamni bin Juni 21. CIMSEC Nominees (Tempatan) Sdn Bhd 337, CIMB Bank for Mohamad Safri bin Sharkawi 22. AIBB Nominees (Tempatan) Sdn Bhd 285, Pledged Securities Account for Ho Swee Ming 23. Hui Kok Yuan 250, Ooi Ean Kheng 246, Maimunah binti Zailani 207, Alliancegroup Nominees (Tempatan) Sdn Bhd 192, Pledged Securities Account for Ang Yook Ang Yoke Fong 27. RHB Capital Nominees (Tempatan) Sdn Bhd 167, Pledged Securities Account for Chuan Chek Piow 28. Public Nominees (Tempatan) Sdn Bhd 166, Pledged Securities Account for Lee Cher Keam 29. Alliancegroup Nominees (Tempatan) Sdn Bhd 164, Pledged Securities Account for Cheong Swee Yong 30. Law Lee Koon 162, TOTAL 106,213,

107 Analysis Of Warrant Holdings - as at 18 October 2013 No. of Warrants in issued : 44,168,540 Exercise Price of Warrants : RM1.06 Expiry Date of Warrants : 05 March 2017 Voting Rights : One Vote per warrant held Size of warrant holdings Number of warrant holders Number of Warrants % of Warrants Less than to 1, , ,001 to 10, ,716, , , ,011, ,001 to less than 5% 39 12,248, % and above 1 21,145, TOTAL ,168, SUBSTANTIAL WARRANT HOLDERS AS PER REGISTER OF SUSTANTIAL WARRANT HOLDERS No. Name of Warrant Holders Direct No. of Warrants Held % Indirect % 1. Dawla Capital Sdn Bhd 21,145, Datuk Haji Zainal Abidin bin Haji Ahmad 188, ,145,380* Note: * Deemed interested by virtue of his interest in Dawla Capital Sdn Bhd LIST OF DIRECTORS WARRANT HOLDINGS No. of Warrants Held Direct % Indirect % 1. Datuk Haji Zainal Abidin bin Haji Ahmad 188, ,145,380* Note: * Deemed interested by virtue of his interest in Dawla Capital Sdn Bhd THIRTY (30) LARGEST WARRANT HOLDERS No. Name of Warrant Holders No. of Warrants % 1. Dawla Capital Sdn Bhd 21,145, Mohd Seth bin Haron 1,804, AIBB Nominees (Tempatan) Sdn Bhd 1,189, Pledged Securities Account for Ho Swee Ming 4. Woon Siew Lin 776, Lee Mee Kuen 700, Mohd Fauzi bin Mohd Anuar 518, Kenanga Nominees (Tempatan) Sdn Bhd 515, Pledged Securities Account for Hamni bin Juni 8. Digital Network Sdn Bhd 499, Saw Guat Ngoh 470, Lam Pun Ying 400,

108 Analysis Of Warrant Holdings - as at 18 October 2013 No. Name Warrant Holders % 11. Leong Hon Wah 400, Ong Chai Kin 300, Tan Lip Pin 293, UOB Kay Hian Nominees (Tempatan) Sdn Bhd 225, Exempt An for UOB Kay Hian Pte Ltd 15. Tay Mooi Ngen 220, Sim Geok Ngo 216, Tan Yee Kong 210, Ervina Goh Yuan Yuan 205, CIMSEC Nominees (Tempatan) Sdn Bhd 200, CIMB Bank for Hasnandi bin Mohamad Jennis 20. Lee Kim Seng 200, Maybank Securities Nominees (Tempatan) Sdn Bhd 198, Pledged Securities Account for Teo Kim Poh 22. Chong Sim Yuen 197, Zainal Abidin bin Ahmad 188, Public Nominees (Tempatan) Sdn Bhd 185, Pledged Securities Account for Lee Cher Keam 25. Mohd Hadi bin Mohamed Anuar 176, CIMSEC Nominees (Tempatan) Sdn Bhd 150, CIMB Bank for Leong Kok Weng 27. Seri Rahayu binti Samsudin 150, Lim Kam Yoke 145, Tan Ee Hung 140, Chang Tuck Fatt 137, TOTAL 32,154,

109 List of Properties LOCATION Area Tenure DESCRIPTION YEAR OF EXISTING NET BOOK VALUE ACQUISITION USE 30/6/2013 (RM) Lot 462, 463 & 464, Block 15, Leasehold (99 years), Leasehold Land 1999 Commercial & 73,243,200 Salak Land District, acre Mixed Zone Land, Residential Kuching, Sarawak expiring in Year 2098 Development Lot 4871, Block 18, Leasehold (99 years), Leasehold Land 1999 Commercial & 29,352,013 Salak Land Disctrict, acre Mixed Zone Land, Residential Kuching, Sarawak expiring in Year 2098 Development Lot 742, Section 64, 6.59 Leasehold (99 years), Leasehold Land 1999 Commercial & 11,984,864 KTLD, Kuching, acre Mixed Zone Land, Residential Sarawak expiring in Year 2098 Development Lot 2260 & 2003, Block 233, 3.21 Leasehold (60 years), Leasehold Land 1988 Residential 1,159,126 Kuching North Land acre Mixed Zone Land, expiring in Year 2048 Crown Land, 9.3 Leasehold (99 years), Leasehold Land 1991 Vacant Land 534,346 Lot No , 16th Miles, acre Mixed Zone Land, Simanggang Road, expiring inyear 2054 Kuching Town Land District Sublot No. 54, Lot Leasehold (60 years), Detached Lot 2005 Vacant Land 130,000 of Block 6, Matang Land sq metre Mixed Zone Land, District expiring inyear 2026 Sublot No.84, Title Lot 7907, Leasehold (60 years), Double-Storey 1994 Residential 127,669 Pelita Heights, Kuching sq metre Mixed Zone Land, Terrace House Sarawak expiring in Year 2054 Parcel No Strata Title Commercial Tower 2000 Office Premises 721,967 (Level 2) Riverbank Suites and sq metre Commercial Tower of Parent Lots 192, 193, 293 and 296 Section 48 KTLD Kuching Sarawak Survey Lot Leasehold (60 years), 3-Storey 2005 Office Premises 610,000 Private No. 7 sq metre Mixed Zone Land Intermediate Lot Shophouses 1465 & Part of Lot 1472 of Block 14, Salak Land District Kuching, Sarawak 107

110 List of Properties LOCATION Area Tenure DESCRIPTION YEAR OF EXISTING NET BOOK VALUE ACQUISITION USE 30/6/2013 (RM) Lot 948, Serian Town District 95.0 Leasehold (60 years), 2-Storey Corner 2002 Vacant 200,000 sq metre Mixed Zone Land Shop House Parcel No. 6B, 6C, 6D, 6E & 10A Strata Title Apartments 2006 Vacant 1,763,490 Lot 264 of Block 2, sq metre Jalan Salak District Parcel No. 2A-11-2, Strata Title Office suite 2006 Office Premise 1,488,573 11th Floor Plaza Sentral sq metre KL Building No. Block 2A, Lot 78, Section 70, Kuala Lumpur Parcel B7-1-9, B7-5-9, Strata Title Commerical 2002 Office Premises 2,104,938 B7-6-8, B7-B-9, B6-1-2a, sq metre Tower B6-2-1, B6-4-1, B6-4-2 of Lot 742, Section 64, KTLD, Kuching, Sarawak 108

111 Notice Of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the Twenty-Eighth (28th) Annual General Meeting ( AGM ) of Zecon Berhad ( Zecon or the Company ) will be held at Conference Room, 8th Floor, Menara Zecon, No. 92, Lot 393, Section 5 KTLD, Jalan Satok, Kuching, Sarawak on Monday, 16 December 2013 at noon for the following purposes: AGENDA 1. To receive the Audited Financial Statements for the financial year ended 30 June 2013 and the Reports of the Directors and Auditors thereon. 2. To approve the payment of Directors fees in respect of the financial year ended 30 June (See Note 1) Resolution 1 3. To re-elect the following Directors who retire in accordance with Article 87 of the Company s Articles of Association and being eligible, offer themselves for re-election:- i) Datuk Dr. Hj Josree bin Haji Yacob ii) Dato Abdul Majit bin Ahmad Khan iii) Poh Lik Poh Li Thong 4. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration for the ensuing year. Resolution 2 Resolution 3 Resolution 4 Resolution 5 As Special Business To consider and if thought fit, pass the following resolutions as Ordinary Resolution:- 5. AUTHORITY TO ISSUE SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965 Resolution 6 THAT pursuant to Section 132D of the Companies Act, 1965 and subject always to the approval of the relevant authorities, the Directors of the Company be and are hereby empowered to issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may deem fit provided that the aggregate number of shares to be issued during the preceding twelve (12) months pursuant to this resolution does not exceed 10% of the issued and paid-up share capital (excluding treasury shares) of the Company for the time being and that the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company unless revoked or varied by the Company at a general meeting. 6. CONTINUING IN OFFICE AS INDEPENDENT NON-EXECUTIVE DIRECTOR Resolution 7 THAT subject to passing of Ordinary Resolution 4, authority be and is hereby given to Mr. Poh Lik Poh Li Thong who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine years, to continue to serve as an Independent Non-Executive Director of the Company until the conclusion of the next Annual General Meeting. 7. PROPOSED RENEWAL OF SHAREHOLDERS MANDATE for RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE ( Proposed Shareholders Mandate ) Resolution 8 THAT, subject always to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ), the Company and its subsidiary companies shall be mandated to enter into the category of recurrent transactions of a revenue or trading nature and with those related parties as set out in the Circular to Shareholders dated 22 November 2013, provided that the transactions are in the ordinary course of business and are on terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company. THAT the authority conferred by the Proposed Shareholders Mandate shall only continue to be in force until:- a) the conclusion of the next Annual General Meeting ( AGM ) of the Company, at which time it will lapse, unless by a resolution passed at that meeting, the authority is renewed; b) the expiration of the period within which the next AGM of the Company after the date it is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Companies Act, 1965); or 109

112 Notice Of Annual General Meeting c) revoked or varied by resolution passed by the shareholders in general meeting, whichever is earlier; AND THAT the Directors of the Company and its subsidiaries be and are hereby authorised to complete and do such acts and things (including executing such documents as may be required) to give effect to the transactions contemplated and/or authorised by this Ordinary Resolution. 8. To transact any other ordinary business of which due notice shall have been given in accordance with the Company s Articles of Association and the Companies Act, By order of the Board Koh Fee Lee (MAICSA ) Lim Poh Yen (MAICSA ) Company Secretaries Kuching Date: 22 November 2013 Notes:- 1. Audited Financial Statements for the Financial Year Ended 30 June 2013 The Audited Financial Statements in item 1 of the Agenda is meant for discussion only as approval from shareholders is not required pursuant to the provision of Section 169(1) of the Companies Act, Hence, this Agenda is not put forward for voting by shareholders of the Company. 2. Appointment of Proxy i) In respect of deposited securities, only members whose names appeared in the Record of Depositors as at 9 December 2013 shall be eligible to attend, speak and vote at the Meeting. ii) A member entitled to attend and vote at this meeting is entitled to appoint not more than two (2) proxies to attend and vote in his stead. A proxy need not be a member of the Company and provision of Section 149 (1) (b) of the Companies Act, 1965 shall not apply to the Company. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at a meeting of the Company shall have the same rights as the Member to speak at the meeting iii) Where a Member of the Company is an authorised nominee as defined in the Securities Industry (Central Depositories) Act, 1991 ( SICDA ), it may appoint not more than two (2) proxies in respect of each securities account it holds in ordinary shares of the Company standing to the credit of the said securities account. iv) Where a Member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under the SICDA which is exempted from compliance with the provisions of subsection 25A(1) of SICDA. v) Where a Member or an authorised nominee or an exempt authorised nominee appoints two (2) or more proxies, the proportion of shareholdings to be represented by each proxy must be specified in the instrument appointing the proxies. vi) The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing, or if the appointor is a corporation, either under its Common Seal or under the hand of an officer or attorney duly authorised. vii) The instrument appointing a proxy must be deposited at the registered office of the Company at 8th Floor, Menara Zecon, No. 92, Lot 393, Section 5 KTLD, Jalan Satok, Kuching, Sarawak not less than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof. 110

113 3. Explanatory Notes on Special Business i) Ordinary Resolution 6 - Authority to Issue Shares pursuant to Section 132D of the Companies Act, 1965 The proposed Ordinary Resolution 6, if passed, will empower the Directors to issue shares from time to time provided that the aggregate nominal value of the shares to be issued during the preceding twelve (12) months does not exceeding 10% of the issued and paid-up share capital of the Company for the time being, for such purposes as the Directors consider would be in the interests of the Company. This authority unless revoked or varied at a general meeting will expire at the next Annual General Meeting ( AGM ). The Company has not issued any new shares pursuant to Section 132D of the Companies Act, 1965 under the general authority which was approved by the shareholders of the Company at the Twenty-Seventh (27th) AGM held on 25 June 2012 and which will lapse at the conclusion of the 28th AGM to be held on 16 December A renewal of this authority is being sought at the 28th AGM under Ordinary Resolution 6. The renewal of the general mandate is to provide flexibility to the Company to issue new securities without the need to convene separate general meeting to obtain its shareholders approval so as to avoid incurring additional cost and time. The purpose of this general mandate is for possible fund raising exercise including but not limited to further placement of shares for purpose of funding current and/or future investment projects, working capital, acquisition and/or for issuance of shares as settlement of purchase consideration. ii) Ordinary Resolution 7 Continuing in Office as Independent Non-Executive Director In accordance with the Malaysian Code on Corporate Governance 2012, the Remuneration & Nomination Committee recommended Mr. Poh Lik Poh Li Thong, who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine years, to continue to serve the Company in the same capacity, based on the following justifications:- a) he has met the criteria of an Independent Director pursuant to the Main Market Listing Requirement of Bursa Securities; b) he has devoted sufficient time and attention to his professional obligations as the Audit Committee Chairman. c) he being a highly qualified and calibre person has provided the Board with diverse set of experience, skills and expertise in exercising his roles and responsibilities. iii) Ordinary Resolution 8 - Proposed Shareholders Mandate The proposed Ordinary Resolution 8 if passed, will authorise the Company and its subsidiaries to enter into recurrent transactions pursuant to Paragraph of the Main Market Listing Requirements of Bursa Securities involving the interests of related parties, which are of a revenue or trading nature, subject to the transactions being carried out in the ordinary course of business and on terms not to the detriment of the minority shareholders of the Company. Further information on the Proposed Shareholders Mandate is set out in the Circular to Shareholders dated 22 November 2013, which is despatched together with the Company s Annual Report

114 This page has been intentionally left blank 112

115 ZECON BERHAD ( X) (Incorporated in Malaysia) PROXY FORM No. of Shares held I/We (PLEASE USE BLOCK LETTERS) NRIC No./Passport No./Company No. of being a member/members of ZECON BERHAD hereby appoint NRIC No./Passport No./Company No. of or failing him/her, the Chairman of the meeting as my/our proxy to vote for me/us on my/our behalf at the Twenty-Eighth Annual General Meeting of the Company to be held at Conference Room, 8th Floor, Menara Zecon, No. 92, Lot 393, Section 5 KTLD, Jalan Satok, Kuching, Sarawak on Monday, 16 December 2013 at noon and any adjournment thereof. My/Our proxy is to vote as indicated below :- Ordinary RESOLUTIONS 1. Payment of Directors fees 2. Re-election of Director Datuk Dr. Hj Josree bin Haji Yacob 3. Re-election of Director Dato Abdul Majit bin Ahmad Khan 4. Re-election of Director Mr. Poh Lik Poh Li Thong 5. Appointment of Auditors and authorising Directors to fix their remuneration 6. Authority to issue shares pursuant to Section 132D of the Companies Act, Continuing in office as an Independent Non-Executive Director - Mr. Poh Lik Poh Li Thong 8. Renewal of Shareholders Mandate for Recurrent Related Party Transactions of Revenue or Trading Nature FOR AGAINST Please indicate with X in the appropriate spaces how you wish your vote to be cast. If you do not indicate how you wish your proxy to vote on any resolution, the proxy shall vote as he thinks fit, or at his discretion, abstain from voting. Dated this day of, 2013 Signature/Common Seal of Shareholder Notes : i) In respect of deposited securities, only members whose names appeared in the Record of Depositors as at 9 December 2013 shall be eligible to attend, speak and vote at the Meeting. ii) A member entitled to attend and vote at this meeting is entitled to appoint not more than two (2) proxies to attend and vote in his stead. A proxy need not be a member of the Company and provision of Section 149 (1) (b) of the Companies Act, 1965 shall not apply to the Company. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at a meeting of the Company shall have the same rights as the Member to speak at the meeting. iii) Where a Member of the Company is an authorised nominee as defined in the Securities Industry (Central Depositories) Act, 1991 ( SICDA ), it may appoint not more than two (2) proxies in respect of each securities account it holds in ordinary shares of the Company standing to the credit of the said securities account. iv) Where a Member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under the SICDA which is exempted from compliance with the provisions of subsection 25A(1) of SICDA. v) Where a Member or an authorised nominee or an exempt authorised nominee appoints two (2) or more proxies, the proportion of shareholdings to be represented by each proxy must be specified in the instrument appointing the proxies. vi) vii) The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing, or if the appointor is a corporation, either under its Common Seal or under the hand of an officer or attorney duly authorised. The instrument appointing a proxy must be deposited at the registered office of the Company at 8th Floor, Menara Zecon, No. 92, Lot 393, Section 5 KTLD, Jalan Satok, Kuching, Sarawak not less than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof. 113

116 1 st fold here STAMP ZECON BERHAD ( X) 8th Floor, Menara Zecon, No. 92 Lot 393, Section 5 KTLD, Jalan Satok, Kuching, Sarawak, Malaysia. 2 nd fold here

117 Other Certifications, licenses and memberships include: Pusat Khidmat Kontraktor Class A Bumiputra Unit Pendaftaran Kontraktor Negeri Sarawak Construction Industries Development Board Grade G7 Master Builders Association Malaysia Federation of Public Listed Companies Sarawak Housing Developers Association Malaysian International Chamber of Commerce and Industry Registered Supplier of Equipment and Services to Petronas and its Subsidiaries Registered Subcontractor to Sime Darby Engineering Sdn Bhd Registered Contractor to Malaysia Marine And Heavy Engineering Sdn Bhd Registered Contractor to TH Properties Sdn Bhd Registered Contractor to Tenaga Nasional Berhad Registered Subcontractor to UEM BUILDERS Registered Panel Developers to MARA

118 116