VASSETI (UK) PLC CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2014

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1 CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2014

2 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (All Amounts in Ringgit Malaysia) 6 Months ended 6 Months ended 30-Jun 30-Jun unaudited unaudited REVENUE 48,506, ,903,416 COST OF SALES (15,081,393.28) (9,973,253) GROSS PROFIT 33,425,078 21,930,163 OTHER OPERATING INCOME 4, ,159 GOODWILL WRITTEN-OFF - - OTHER OPERATING EXPENSES (8,799,294.98) (5,372,962) EARNINGS BEFORE INTEREST, TAX & DEPRECIATIO 24,630,012 16,676,359 FINANCE COSTS (1,880,000.00) (1,451,000) DEPRECIATION AND AMORTISATION (18,111,460.23) (13,053,500) EARNINGS BEFORE INCOME TAXES 4,638,552 2,171,859 TAXATION (1,240,000) (564,683) PROFIT AFTER TAXATION 3,398,552 1,607,176 MINORITY INTEREST (102,000.00) (49,983) NET INCOME 3,296,552 1,557,193

3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (All Amounts in Ringgit Malaysia) As at As at 30-Jun 31-Dec unaudited audited CURRENT ASSETS Cash & cash equivalent 10,656, ,791,000 Fixed deposit - - Inventories - - Trade receivables 37,798, ,648,000 Other receivables 1,039, ,582,000 49,494,158 60,021,000 NON-CURRENT ASSETS Property, plant & equipment 513,232, ,584,000 Investment in subsidiaries - - Investment in unqouted shares - - Goodwill on consolidation - - Network development costs 534,300, ,711,000 TOTAL ASSETS 1,097,026,774 1,113,316,000 CURRENT LIABILITIES Trade payables 34,306, ,157,000 Other payables 10,050,123 9,194,000 Bank borrowings 24,968, ,658,000 Amount owing to directors 29,001,000 29,001,000 Amount owing to subsidiary - - Hire-purchase and lease payables 149, ,000 Tax Liabilities 1,159,176 1,398,000 99,633, ,600,000 NON-CURRENT LIABILITIES Hire-purchase and lease payables 575, ,000 Bank borrowings 394,677, ,758,000 Other payables 23,147, ,730,000 Deferred taxation 7,932,500 7,933,000 TOTAL LIABILITIES 525,968, ,554,000 SHAREHOLDERS' EQUITY Share capital - Ordinary shares 656,145, ,145,000 Currency translation reserve 257, ,000 Merger reserve (245,145,000) (245,145,000) Retained earnings 402,552 (2,894,000) 411,659, ,363,000 Minority Interests 159,399, ,399,000 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 1,097,026,774 1,113,316,000

4 CONSOLIDATED STATEMENT OF CASH FLOWS (All Amounts in Ringgit Malaysia) As at As at 30-Jun 31-Dec unaudited audited Cash from operations Profit/ (loss) before taxation 4,638,552 (2,984,000) Adjustments for items not requiring an outflow of funds: Bad debts written off - 2,011,000 Loss on loss of control of subsidiary company - 247,000 Deposit written-off - 4,000 Unrealised (gain)/ loss on foreign exchange - - Gain from disposal of property, plant & equipment - - Gain from disposal of subsidiary companies - (1,265,000) Property, plant & equipment impaired - - Share of loss on associate company - 122,000 Goodwill impairment charge - 13,828,000 Interest expenses 1,880,000 87,000 Interest income (4,229) (145,000) Depreciation 18,111,460 28,932,000 Operating profit/ (loss) before changes in working capital 24,625,783 40,837,000 Changes in working capital: Decrease/ (increase) in trade and other receivables 10,392,070 (32,081,000) Increase in inventories - - Increase/ (decrease) in trade and other payable (20,030,680) 101,302,000 Amount owing to directors - (27,000) Interest paid (1,880,000) (337,000) Interest received 4, ,000 Exchange translation on foreign currency - 1,236,000 Income taxes refunded - 12,000 Income taxes paid (22,500) (17,000) Net cash from operating activities 13,088, ,070,000 Investing activities Proceeds from sale of property, plant & equipment - - Increase in assets under construction (1,589,239) (321,713,000) Redemption of other investment - - Net cash inflow from disposal of subsidiaries - 477,000 Net cash inflow from acquisition of subsidiary companies - - Purchase of property, plant & equipment (10,937,514) (10,429,000) Net cash used in investing activities (12,526,752) (331,665,000) Financing activities Proceeds from issue of preference shares - Loan from related company - 3,000 Redeemed on preference shares - - Drawdown of bank borrowings - 200,000,000 Dividends paid on preference shares - - Repayment of bank borrowings (567,000) (1,000,000) Net repayment of hire purchase payables (129,922) (244,000) Release/ (Increase) in pledged fixed deposits - 3,087,000 Net cash from financing activities (696,922) 201,846,000 (Decrease)/ increase in cash & cash equivalents (134,773) (18,749,000) Currency translation differences (37,000) Cash and cash equivalents at 1 January 7,133,000 25,919,000 Cash & cash equivalents at 6,998,227 7,133,000

5 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (All Amounts in Ringgit Malaysia) Share Capital Merger Reserve Currency Translation Reserve Retained Earnings Non- Controlling Interest Total Equity Year ended 31 December 2013 At 1st January ,145,000 (245,145,000) 255,000 12,412, ,842, ,509,000 Total comprehensive income for ,000 (7,384,000) 172,000 (7,210,000) Transactions with shareholders: Effect from disposal of subsidiary companies Loss of control of subsidiary ,168,000 4,168,000 Redemption of preference shares Preference dividend paid by subsidiaries (7,922,000) (783,000) (8,705,000) At 31 December ,145,000 (245,145,000) 257,000 (2,894,000) 159,399, ,762,000 At 1 January ,145,000 (245,145,000) 257,000 (2,894,000) 159,399, ,762,000 Total comprehensive income for Jun ,296, ,296,552 Transactions with shareholders: Effect from disposal of subsidiary companies Redemption of preference shares Preference dividend paid by subsidiaries At 30 Jun ,145,000 (245,145,000) 257, , ,399, ,058,552

6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE 6 MONTHS ENDED 30 JUNE Accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated below. 1.1 Basis of preparation and going concern The financial statements are prepared under the historical cost convention and on a going concern basis. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union ( IFRS ) and in accordance with applicable company law. The parent company s financial statements have also been prepared in accordance with IFRS. The financial statements are presented in Malaysian Ringgit () which is the groups functional currency. Going concern After making appropriate enquiries and examining those areas which could give rise to financial exposure the directors are satisfied that no material or significant exposures exist and that the group has adequate resources to continue its operations for the foreseeable future. For this reason the directors continue to adopt the going concern basis in preparing the company s and group s financial statements. 1.2 Basis of consolidation and comparative information presented The consolidated financial statements incorporate the financial statements of the company and its subsidiary undertakings. The financial information of the subsidiaries is prepared for the same reporting period as the parent company using consistent accounting policies. Intragroup sales, transactions and results are eliminated on consolidation. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions are eliminated fully on consolidation. The gain or loss on disposal of a subsidiary company is the difference between net disposals proceeds and the group's share of its net assets together with any goodwill and exchange differences. 1.3 Goodwill Goodwill represents amounts arising on the acquisitions of subsidiaries and is stated at cost less any accumulated impairment losses. Goodwill represents the excess of the cost of an acquisition of a subsidiary over the fair value of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Any impairment on goodwill is recognised immediately in the income statement and is not subsequently reversed. Gains and losses on the disposal of a subsidiary include the carrying amount of goodwill relating to the subsidiary sold.

7 Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash generating units or groups of cash generating units that are expected to benefit from the business combination in which the goodwill arose. 1.4 Property, plant and equipment Property, plant and equipment are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows: Computer and software Building and condominium Furniture and fittings and office communication systems Office equipment and electrical fittings and mobile phone Renovations Ethernet systems Motor vehicles and carts Fibre infrastructure and Xaraxa 3 10 years 50 years 10 years 5 years 4 5 years 20 years 5 years 20 years Leasehold buildings are depreciated over the remaining lease period. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Profits or losses on disposals of property, plant and equipment are determined by comparing proceeds with the carrying amount and are included in the income statement. Property, plant and equipment are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset s net selling price and value in use. 1.5 Investments Investments in subsidiary companies are included in the parent company s balance sheet at cost less provision for impairment in value. 1.6 Available-for-sale investments Available-for-sale investments are investments in unquoted securities which are stated at cost less impairment losses. Impairment is provided where there is a decline in the value of such investments. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. 1.7 Inventories Inventories are valued at the lower of cost and net realisable value. 1.8 Impairment of assets The group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the group makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s or cash-generating unit s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value of money and the risks

8 specific to the asset. Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset. 1.9 Cash and cash equivalents Cash and cash equivalents are carried in the statement of financial position at cost and comprise cash in hand, cash at bank, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included within borrowings in current liabilities on the statement of financial position. For the purposes of the cash flow statement, cash and cash equivalents also include the bank overdrafts but does not include cash at bank that has been pledged as security for bank facilities Trade receivables Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the assets carrying amount and the recoverable amount. Provisions for impairment of receivables are included in the income statement Leasing and hire purchase liabilities Leases and hire purchase liabilities where a significant portion of the risks and rewards of ownership are retained by the lease are classified as operating leases (e.g. property leases). Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease Borrowings Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings. 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 year end date Deferred taxation Deferred income taxes are provided in full, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income taxes are determined using tax rates that have been enacted or substantially enacted and are expected to apply when the related deferred income tax asset is realised or the related deferred income tax liability is settled. The principal temporary differences arise from depreciation on property, plant and equipment and tax losses carried forward. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised Equity instruments Ordinary shares are classed as equity. Costs directly attributable to the issue of new shares or share options are shown in equity as a deduction from the proceeds.

9 1.15 Financial instruments Financial instruments (including redeemable preference shares) are recognised in the statement of financial position when the group has become a party to the contractual provisions of the instrument. Financial instruments (including redeemable preference shares) are classified as liabilities or equity in accordance with the substance of the contractual agreement and in accordance with the requirements of IAS 32 Financial Instruments: Presentation. Interest, dividends, gains and losses relating to a financial instrument classified as liabilities, are reported as expenses or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the group has a legally enforceable right to offset and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously Revenue 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. Revenue is measured at the fair value of consideration received or receivable net of any sales tax, returns, rebates or discounts and after eliminating sales with the group. Revenue is recognised as follows: (i) (ii) (iii) (iv) (v) Sales of goods Revenue is recognised net of sales taxes and upon transfer of significant risks and rewards of ownership to the buyer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. Services Revenue from services rendered is recognised in the statements of comprehensive income in proportion to the stage of completion of the transaction at the statements of financial position date. The stage of completion is assessed by reference to surveys of work performed. Rental income Rental income is recognised in the statements of comprehensive income on a straightline basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Dividend income Dividend income is recognised when the shareholder s right to receive payment is established. Interest income Interest income is recognised on a time proportion basis that takes into account the effective yield on the asset Financial income and expenses Financial income comprises interest receivable on cash balances and deposits. Interest income is recognised when the right to receive payments is established. Financial expenses comprise interest payable on bank loans, finance lease charges and other financial costs and charges. Interest payable is recognised on an accrual basis.

10 1.18 Foreign currency translation i) Functional and presentational currency Items included in the financial statements of each of the group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The functional currency is Malaysian Ringgit (). The consolidated financial statements are presented in Malaysian Ringgit, which is the company s presentational currency. ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement New IFRS standards and interpretations During the year no new accounting standards had a material effect on the financial statements of the group. At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective: IFRS 10 Consolidated Financial Statements 1 January 2013 IFRS 11 Joint Arrangement 1 January 2013 IFRS 12 Disclosure of Interests in Other Entities 1 January 2013 IFRS 13 Fair Value Measurement 1 January 2013 IAS 19 (revised) Employee Benefits 1 January 2013 IAS 27 (revised) Separate Financial Statements 1 January 2013 IAS 28 (revised) Investments in Associated and Joint Ventures 1 January 2013 IFRS1 (amendment) Government Loans 1 January 2013 IFRS7 (amendment) Disclosures: Offsetting Financial Assets & Liabilities 1 January 2013 IAS 32 (amendment) Offsetting Financial Assets and Financial Liabilities 1 January 2014 IFRS 9 Financial Instruments 1 January 2015 The group has not early adopted these amended standards and interpretations. The directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the group s financial statements in the periods of initial application. 2. Significant accounting judgements and estimates The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Judgements and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates may differ from the related actual results. The estimates and assumptions that have a risk of causing material adjustment to the carrying amounts of assets and liabilities within the future financial years are as follows:

11 Impairment of intangible assets Determining whether intangible assets are impaired requires an estimation of the recoverable amounts of estimated future cash flows expected to arise from the assets. Goodwill The group follows the requirements of IAS 36 Impairment of Assets and tests goodwill annually to determine when goodwill is impaired (see accounting policy in note 1 above and goodwill in note xx below). This determination requires significant judgment. In making this judgment, the group estimates the recoverable amount of the cash generating units to which goodwill has been allocated based on value-in-use calculations. The value-in-use calculations require the entity to estimate the future cash flows expected to arise from the cash generating units and a suitable discount rate in order to calculate present value. For the purpose of impairment testing, goodwill has been allocated to the company s subsidiaries. The recoverable amount was determined based on value in use and was determined at the cash generating unit which is based on financial budgets approved by the directors using the following key assumptions: a) Cash flows are projected based on expected revenue to be generated from the existing business model; b) Inflation rate of 3% per annum after the fifth year of forecasts; c) A pre-tax discount rate of 10% The above key assumptions represent the directors assessment of the future outlook based on their best estimates and they believe that it is unlikely that any significant variation in the above assumptions would significantly affect the recoverable amount of goodwill. Deferred tax The group estimates future profitability in arriving at the fair value of the deferred tax assets and liabilities. If the final tax outcome is different to the estimated deferred tax amount the resulting changes will be reflected in the income statement, unless the tax relates to an item charged to equity in which case the changes in tax estimates will also be reflected in equity. Depreciation, useful lives and residual values of non-current assets The directors estimate the useful lives and residual values of property, plant & equipment and intangible assets in order to calculate the depreciation charges. Changes in these estimates could result in changes being required to the annual depreciation charges in the income statements and the carrying values of the property, plant & equipment in the statements of financial position. Judgments In the process of applying the group s accounting policies, management has made the following significant judgments, apart from those involving estimations, which may have a significant effect on amounts recognised in the financial statements: impairment of assets (including receivables, intangible assets and property, plant and equipment).

RECRON (MALAYSIA) SDN. BHD. 1 RECORN (MALAYSIA) SDN. BHD.

RECRON (MALAYSIA) SDN. BHD. 1 RECORN (MALAYSIA) SDN. BHD. 2 RECRON (MALAYSIA) SDN. BHD. Independent Auditor s Report TO THE MEMBER OF RECRON (MALAYSIA) SDN. BHD. (Incorporated in Malaysia) (Company No.