R&A TELECOMMUNICATION GROUP BERHAD ( D)

Transcription

1 R&A TELECOMMUNICATION GROUP BERHAD ( D) R ~ 1 ~

2 TABLE OF CONTENTS FINANCIAL HIGHLIGHTS 2 CEO S STATEMENT 3 CORPORATE PROFILE 4 CORPORATE INFORMATION 6 DIRECTORS PROFILE 8 CORPORATE GOVERNANCE 10 ACCOUNTABILITY AND AUDIT 17 AUDIT AND RISK MANAGEMENT COMMITTEE REPORT 18 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL 22 CORPORATE SOCIAL RESPONSIBILITY 24 ADDITIONAL COMPLIANCE INFORMATION 25 FINANCIAL STATEMENTS 27 ANALYSIS OF SHAREHOLDINGS 103 ANALYSIS OF WARRANTHOLDINGS 106 LIST OF PROPERTIES 108 NOTICE OF ANNUAL GENERAL MEETING 109 PROXY FORM ~ 2 ~

3 FINANCIAL HIGHLIGHTS FIVE YEAR GROUP FINANCIAL SUMMARY FINANCIAL RESULTS (RM 000) Revenue 42,042 28,541 38,475 32,351 8,026 Operating profit / (loss) 12,272 (6,355) (3,447) (23,448) (86,361) Profit before tax / (Loss before taxation) 11,220 (7,830) (5,280) (26,467) (88,519) Profit after taxation / (Loss after taxation) 8,016 (7,302) (3,183) (26,661) (90,422) KEY BALANCE SHEET DATA (RM 000) Total Assets 128, , , ,312 13,042 Total Liabilities 34,721 29,047 38,573 45,925 38,077 Shareholders' equity 94,262 91,096 87,913 65,387 (25,035) SHARES INFORMATION Basic earnings per share (sen) 1.60 (0.83) (0.36) (0.03) (0.09) Net assets per share attributable to equity holders (RM) (0.03) ~ 2 ~

4 CEO S STATEMENT INDUSTRY OUTLOOK AND THE GROUP S FUTURE PROSPECTS As competition in the Telco Industry increases resulting in margin compression, the Telco Industry remains extremely challenging. As such, the Group is looking at various business opportunities to return to profitability. Currently, the Group is looking to enter the logistic industry via acquisition of an oil and gas logistics provider. Discussion is still ongoing but we hope to achieve a favourable outcome soon. ACKNOWLEDGEMENT AND APPRECIATION Dear Valued Shareholders, On behalf of the Board of Directors of R&A Telecommunication Group Berhad ( R&A ), I hereby present to you the Annual Report and Audited Financial Statements of the Company for the financial year ended 31 December The Group continues to experience severe financial constraints, which resulted in R&A being classified as a Guidance Note 3 ( GN3 ) company under the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) ( Listing Requirements ). The situation is exacerbated by stiff competition in the Telco Industry, resulting in the Group having to significantly rationalize its operations in 2015 as well as reductions in the Group s revenue across all its business segments. FINANCIAL PERFORMANCE The Group recorded consolidated revenue of RM8.026 million and loss before tax ( LBT ) of RM million for the financial year ended ( FYE ) 31 December 2015, against revenue of RM million and LBT of RM million for FYE 31 December Revenue derived from the Civil, mechanical and electrical works ( CME ) segment for FYE 31 December 2015 was RM4.373 million. Revenue derived from the Telecommunication equipment installation ( TI ) segment the FYE 31 December 2015 was RM0.012 million. Revenue derived from the In-building system ( IBS ) segment for FYE 31 December 2015 was RM3.641 million. ~ 3 ~ I would like to convey my sincere gratitude to the Board of Directors of the Company, both past and present, who have provided valuable insights, guidance and wise counsels to the Company. To our employees, a big thank you for all your tireless effort, loyalty, dedication and commitment in helping the Company to weather out these unsettling times. My gratitude also goes out to all our customers, bankers, contractors, business associates and shareholders for your invaluable support and confidence. I believe that with the combined effort of our Board of Directors, management team, employees and the continuous support from our business friends and associates, the Company would be looking at better times ahead Thank you. SIM KENG SIONG Chief Executive Officer

5 CORPORATE PROFILE At present, R&A Telecommunication Group structure is as follows: R&A TELECOMMUNICATION GROUP BERHAD 100% R&A METALS SDN BHD (In Creditors Liquidation) R&A 100% TELECOMMUNICATION SDN BHD 50% R&A-CSCOM SDN BHD (Company incorporated in Brunei) Our Subsidiary Companies R&A Telecommunication Sdn Bhd (RASB) RASB was established in 1993 and ventured into the telecommunication industry in RASB kicked off from a site engineering company involved mainly in site construction works and over the years, RASB has transformed into a full-fledged total turnkey solutions engineering company. RASB s principal business activities involved CME, TI and IBS. R&A Metals Sdn Bhd (RAMSB) (In Creditors Liquidation) As a wholly-owned subsidiary of R&A, RAMSB was established in the year RAMSB had on 17 March 2016 been served a sealed winding-up order dated 10 March 2016 and the Official Receiver was appointed as the Liquidator of RAMSB. RAMSB s principal business was fabrication and installation of telecommunication structures. ~ 4 ~

6 CORPORATE PROFILE OUR PRODUCTS & SERVICES Fabrication of Telecommunication Steel Structures and Materials Total Turnkey Solution For Wireless Industry Civil, Mechanical and Electrical Works ( CME ) Telecommunication Equipment Installation, Commissioning & Integration ( TI ) Radio Network Planning and Optimization In-building System ( IBS ) Managed Service Operations & Maintenance Outside Plant/ Fixed Network Solutions ~ 5 ~

7 CORPORATE INFORMATION BOARD OF DIRECTORS SIM KENG SIONG Chief Executive Officer / Executive Director FRANCIS TAN HOCK LEONG Executive Director LEE KOK TONG Independent Non-Executive Director YAP WEEI HAN Independent Non-Executive Director (Appointed on 4 November 2015) SELVA RASAN A/L DATO PUSPA DAS Independent Non-Executive Director (Appointed on 23 November 2015) TUNKU DATO ISKANDAR DZULKARNAIN BIN TUNKU ISMAIL Chairman/ Independent Non-Executive Director (Resigned on 4 November 2015) HAJI UMSERY@ANSARI BIN ABDULLAH Independent Non-Executive Director (Resigned on 4 November 2015) LIM CHYE GUAN Non-Independent Non-Executive Director (Resigned on 4 November 2015) SUNDARASAN A/L ARUMUGAM Independent Non-Executive Director (Resigned on 23 November 2015) AUDIT AND RISK MANAGEMENT COMMITTEE SELVA RASAN A/L DATO PUSPA DAS Independent Non-Executive Director (Chairman) (Appointed on 23 November 2015) LEE KOK TONG Independent Non-Executive Director (Member) YAP WEEI HAN Independent Non-Executive Director (Member) (Appointed on 4 November 2015) HAJI UMSERY@ANSARI BIN ABDULLAH Independent Non-Executive Director (Member) (Ceased on 4 November 2015) SUNDARASAN A/L ARUMUGAM Independent Non-Executive Director (Chairman) (Resigned on 23 November 2015) NOMINATION COMMITTEE SELVA RASAN A/L DATO PUSPA DAS Independent Non-Executive Director (Chairman) (Appointed on 23 November 2015) LEE KOK TONG Independent Non-Executive Director (Member) YAP WEEI HAN Independent Non-Executive Director (Member) (Appointed on 4 November 2015) HAJI UMSERY@ANSARI BIN ABDULLAH Independent Non-Executive Director (Member) (Ceased on 4 November 2015) SUNDARASAN A/L ARUMUGAM Independent Non-Executive Director (Chairman) (Resigned on 23 November 2015) ~ 6 ~

8 CORPORATE INFORMATION SPONSOR MERCURY SECURITIES SDN BHD (Appointed as Regularisation Sponsor on 2 December 2015) L-7-2, No. 2, Jalan Solaris, Solaris Mont Kiara, Kuala Lumpur, Wilayah Persekutuan Tel: Fax: COMPANY SECRETARIES CHUA SIEW CHUAN (MAICSA ) MAK CHOOI PENG (MAICSA ) STOCK EXCHANGE LISTING ACE Market of Bursa Malaysia Securities Berhad Stock Name: RA Stock Code: 0110 PRINCIPAL BANKERS AFFIN BANK BERHAD CIMB ISLAMIC BANK BERHAD MALAYAN BANKING BERHAD MAYBANK ISLAMIC BANKING BERHAD PUBLIC BANK BERHAD UNITED OVERSEAS BANK (MALAYSIA) BERHAD REGISTRAR SECURITIES SERVICES (HOLDINGS) SDN BHD Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, Kuala Lumpur, Wilayah Persekutuan Tel: Fax: AUDITORS SJ GRANT THORNTON (AF 0737) Level 11, Sheraton Imperial Court Jalan Sultan Ismail, P.O. Box Kuala Lumpur, Malaysia Tel: Fax: PRINCIPAL PLACE OF BUSINESS No. 2, Jalan Pengacara U1/48 Temasya Industrial Park Section U1, Shah Alam Selangor Darul Ehsan Tel: Fax: REGISTERED OFFICE Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, Kuala Lumpur, Wilayah Persekutuan. Tel: Fax: ~ 7 ~

9 DIRECTORS' PROFILE SIM KENG SIONG LEE KOK TONG Mr. Sim Keng Siong, aged 44, a Malaysian, is the Chief Executive Officer / Executive Director. He was appointed to the Board of R&A served as the Chairman of R&A Telecommunication Group Berhad since 8 January 2014 until 26 August 2014 and redesignation to Independent & Non-Executive Director from 26 August Mr. Sim was subsequently appointed as the Chief Executive Officer of R&A on 19 May Mr. Sim served as Group Managing Director of Envair Holding Berhad (formerly known as Ruby Quest Berhad) from 25 August 2005 to 5 May He joined the Quest Group in 1993 and retired as its Project Manager. Mr. Sim is the founder of Envair Technology Sdn. Bhd. ( ETSB ) and Envair Mecs Engineering Sdn. Bhd. ( EMECS ), two (2) of the wholly-owned subsidiaries of Envair Holding Berhad from 2005 until Both ETSB and EMECS are involved in the cleanroom technology services which represent the main drivers for the group s business activities. He has more than sixteen (16) years experience in the air filtration system and cleanroom industry. He has designed and successfully implemented various sizeable cleanroom projects in Malaysia. He is a graduate of the Tunku Abdul Rahman College majoring in Mechanical Engineering. Mr. Sim has been an Independent Non-Executive Director of Hytex Integrated Berhad (In Liquidation) since 14 February FRANCIS TAN HOCK LEONG Mr. Lee Kok Tong, aged 38, a Malaysian, is the Independent Non-Executive Director and was appointed to the Board of R&A on 25 March Mr. Lee is a graduate of the Chartered Institute of Marketing, United Kingdom. Mr. Lee began his career as a director of The Eternal Amphibious Machine Sdn. Bhd. ( TEAMSB ) in He was instrumental in developing the Malaysian market, undertaking the responsibilities of facilitating communication between the associates in Japan and Malaysia, as well as overseeing the financial plans and preparation of budget of TEAMSB. Subsequently, he joined Hydrel (M) Sdn. Bhd. ( HMSB ) and served as a director from year 2000 to His key responsibilities were to provide advice to the company and bridge the communication between the associates in China and Malaysia, in addition to providing them with relevant training of HMSB. In 2009, he advanced his career to Hong Kong by joining the board of directors of Wise Portal Investments Limited, in which he provided direction and advice to assist the corporation in achieving its goals. His contributions also include developing the China and Southeast Asia markets. At present, he is managing Alliz Well Marketing, a business registered with Company Commission of Malaysia. Since 2011, he has been guiding the business towards its goals where his main responsibilities include amending policy objectives, preparation of budget and monitoring the financial plans. Mr. Francis Tan Hock Leong, aged 50, a Malaysian, is the Group Founder and Executive Director. He was appointed to the Board of R&A as Chief Executive Officer on 27 June He was responsible for the entire business operations, strategic planning and directions of the Group. Mr. Francis was re-designated as Executive Director of R&A on 19 May Mr. Francis Tan holds the Malaysian High School Certificate. Mr. Lee is also a member of the Audit and Risk Management Committee and Nomination Committee of the Company. He is the founder and Chief Executive Officer of R&A Telecommunication Sdn. Bhd. ( RASB ). He founded RASB in 1993 together with his wife, Cheok Chun Lian. Prior to RASB, he was working for Public Bank Berhad before moving on to Orix Leasing Sdn Bhd. He is also the Director of R&A Metals Sdn. Bhd. ( RAMSB ) (In Creditor s Liquidation), another subsidiary company of the Group. ~ 8 ~

10 DIRECTORS PROFILE YAP WEEI HAN Mr. Yap Weei Han, aged 36, a Malaysian, is the Independent Non-Executive Director and was appointed to the Board of R&A on 4 November Mr. Yap obtained his Degree in Information Technology from Charles Sturt University, Australia in year Mr. Yap began his career in 2002 as a System Administrator with Setia Corporation Sdn Bhd. Two (2) years later, he joined Loh & Loh Corporation Berhad as the IT Manager where he provided onsite engineering and technical support. His other responsibilities include overseeing the budgeting and procurement of network equipment, initiating network enhancements to reduce downtime and working with the Software Engineer to provide better solutions for project management system. In year 2007, he moved to Grow IT Solutions Sdn Bhd as the Chief Technology Officer where his areas of responsibilities were overseeing the web design and visual design besides acting as a Web Consultant. Four (4) years later, he joined V Channel Sdn Bhd as a Director with similar job responsibilities as when he was with Grow IT Solutions Sdn Bhd. Mr. Selva has more than fifteen (15) years of audit and tax experience. He started his professional career with PricewaterhouseCooper and subsequently established his own practice, Selva & Associates, soon after he became a member of the Malaysian Institute of Accountants in year Mr. Selva is also the Managing Director of Cyrel Tax Care Sdn. Bhd., which provides taxation advisory, compliance and related services. Mr. Selva is the Chairman of the Audit and Risk Management Committee and Nomination Committee of the Company. Apart from serving as an Independent Non-Executive Director of the Company, he is also a Director of Asdion Berhad and Hytex Integrated Berhad (In Liquidation). Notes: (i) All the above Directors have not been convicted for any offences (other than traffic offences) within the past 10 years and they have no conflict of interest with the Company and its subsidiaries. Mr. Yap is also a member of the Audit and Risk Management Committee and Nomination Committee of the Company. (ii) Save for Mr. Francis Tan Hock Leong, being the spouse of Madam Cheok Chun Lian, who is a substantial shareholder of R&A, none of the other Directors have family relationships with any Directors and/or major shareholders of the Company. SELVA RASAN A/L DATO PUSPA DAS Mr. Selva Rasan a/l Dato Puspa Das, aged 44, a Malaysian, is the Independent Non-Executive Director and was appointed to the Board of R&A on 23 November He is a member of the Malaysian Institute of Accountants (MIA), the Chartered Tax Institute of Malaysia (CTIM), Financial Planning Association of Malaysia (FPAM), Institute of Public Accountants (IPA) (Australia), Chartered Institute of Public Finance and Accountancy (CIPFA) (United Kingdom), Institute of Financial Accountants (IFA) (United Kingdom), and associate member of Certified Practising Accountants (CPA) (Australia). He is also an affiliate member to the Malaysian Institute of Chartered Secretaries and Administrators. By virtue of his membership in MIA and CTIM, he carries with him the designate title as Chartered Accountant C.A.(M), and Chartered Tax Practitioner (CTP).He is an approved auditor, tax agent and GST tax agent, licensed by the Ministry of Finance (MOF). He is also an approved auditor, licensed by the Labuan Financial Services Authority (LFSA). (iii) Details of attendance of the Directors at the Board Meetings and their shareholdings are set out in this Annual Report. ~ 9 ~

11 CORPORATE GOVERNANCE The Board of Directors of R&A is fully committed towards ensuring that the principles and best practices as set out in the Malaysian Code on Corporate Governance 2012 ( the Code ) are applied and practiced by the Group. The Board is pleased to report to the shareholders on how the Group has applied all the eight (8) principles of the Code and the extent to which it has complied with the recommendations of the Code. BOARD OF DIRECTORS Roles and Principal Responsibilities The Board has is responsible for the corporate governance, proper conduct and strategic direction of the Group. The Board delegates authority and vests accountability for the Group s day to day operations to the management team led by the CEO. The Board, however, assumes responsibility for the following areas: a) Reviewing and adopting a strategic plan for the Group; b) Overseeing the conduct of the Group s business to evaluate whether the business is being properly managed; c) Identifying principal risks and ensuring the implementation of appropriate systems to manage these risks; d) Succession planning; e) Developing and implementing an investor relations programme and shareholder communications policy for the Group; and f) Reviewing the adequacy and the integrity of the Group s internal controls systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines. Composition and Balance The Group is led and managed by a well-balanced Board which consists of members with wide range of business, technical and financial background. This brings insightful experience and diversity to the Group to enable it to achieve the highest standard of performance, accountability and ethical behaviour as expected by its stakeholders. The Board is made up of five (5) members, consisting of two (2) Executive Directors and three (3) Independent Non-Executive Directors. The Board has a balanced composition of Executive Directors and Non-Executive Independent Directors such that no individual or group of individuals can dominate the Board s decision making powers and processes. All Board members carry an independent judgment to bear on issues of strategy, performance, resources and standard of conducts. A brief profile of each Director is set out in the Directors profile of this annual report. Code of Conduct The Board recognises the need to formalise and commit to ethical values through a code of conduct and ensure the implementation of appropriate internal systems to support, promote and ensure its compliance. The Board is in the midst of establishing a code of conduct. Appointment and Re-election The Company adopts a formal and transparent procedure for appointment of directors to the Board through assessment by the Nomination Committee and recommendation thereof to Board for consideration. In evaluating the suitability of candidates, the Nomination Committee considers, inter-alia, the competency, experience, commitment (including time commitment), contribution and integrity of the candidates, including, where appropriate, the criteria on assessing the independence of candidates appointment as Independent Non-Executive Directors. ~ 10 ~

12 CORPORATE GOVERNANCE BOARD OF DIRECTORS (cont d) Appointment and Re-election (cont d) With respect to nomination and election process of new Directors, the responsibilities of the Nomination Committee shall include:- Gathering the nomination and selection of Directors for members of the Board. Reviewing the competencies, commitment, contribution and performance of the candidates/board members and the required mix of skills, experiences and gender and other qualities of the Directors. Making recommendations to the Board on candidates for appointment. Facilitate the relevant orientation and training programme for the new Board member. In the selection process, the Nomination Committee and the Board does not set any target on race, religion or gender diversity but endeavor to include any member who will improve the Board s overall compositional balance. The Board does not have any gender, ethnicity and age diversity policies and targets or set any measures to meet any target. Nevertheless, the Group is an equal opportunity employer and all appointments and employments are based strictly on merits and are not driven by any gender, ethnicity or age bias. The Board recognizes the need for gender diversity among its directors and will look into establishing a policy formalizing its approach to boardroom diversity. The Board through its Nomination Committee will take steps to ensure that women candidates are sought as part of its recruitment exercise. All newly appointed Directors will go through a series of necessary training programmes, including the Mandatory Accreditation Programme mandated by Bursa Securities. One third (1/3) of the Board shall retire from office and are eligible for re-election at each Annual General Meeting and all directors shall retire from office once in every three (3) years but shall be eligible for re-election. Directors over seventy (70) years of age are subject to re-appointment by shareholders on an annual basis in accordance with Section 129 of the Companies Act, Directors appointed by the Board during the financial year shall be subject to retirement and re-election by shareholders at the next Annual General Meeting held following their appointments. Upon the recommendation of the Nomination Committee and the Board of the Company, the Director due for retirement by rotation pursuant to Article 80 of the Articles of Association at the forthcoming AGM is Mr. Sim Keng Siong, and the Directors retiring pursuant to Article 85 of the Articles of Association at the forthcoming AGM are Mr. Yap Weei Han and Mr. Selva Rasan a/l Dato Puspa Das. All the retiring Directors being eligible for re-appointment, had offered themselves for re-election. Board Meetings and Supply of Information to the Board The Board will meet at least four (4) times annually with additional meetings being held as and when required. For FYE 31 December 2015, six (6) Board meetings were held. The agendas for the Board meetings were circulated in advance to the Directors. The Directors are also provided with the detailed reports and relevant supporting documents pertaining to the matters to be discussed such as financial performance, investments and strategic direction prior to the meetings for their perusal and to assist them in making well-informed decisions. All deliberations, issues discussed and decisions made at the Board meetings were properly recorded so as to provide a record and insight into those decisions. Senior management were invited to the Board meetings to enlighten the Board on matters tabled and if required, to advise and provide clarification on matters of concern raised by the Board. The Board is supported by the Board committees namely the Audit and Risk Management Committee and Nomination Committee. All Board committees discharged their duties within their terms of reference and make recommendation to the Board if matters are beyond their authority limit. ~ 11 ~

13 CORPORATE GOVERNANCE BOARD OF DIRECTORS (cont d) Board Meetings and Supply of Information to the Board (cont d) The Board members are given unrestricted access to all information pertaining to the Company; whether as a Board or individually to assist them in carrying out their duties. Should it be deemed necessary, the Directors are allowed to engage independent professionals at the Company s expense on specialized issues to enable the Board to discharge their duties with adequate knowledge on matters being deliberated. The attendance of the Directors at Board meetings during the financial year are as shown below: N o. Name of Members Designation Attendance Percentage of Attendance 1 Sim Keng Siong Executive Director / Chief 3/6 50% Executive Officer 2 Francis Tan Hock Leong Executive Director 6/6 100% 3 Lee Kok Tong Independent Non-Executive 5/5 100% Director 4 Yap Weei Han Independent Non-Executive 1/1 100% (Appointed on 4 November 2015) Director 5 Selva Rasan a/l Dato Puspa Das Independent Non-Executive 1/1 100% (Appointed on 23 November 2015) 6 Tunku Dato' Iskandar Dzulkarnain Bin Tunku Ismail (Resigned on 4 November 2015) 7 Lim Chye Guan (Resigned on 4 November 2015) 8 Sundarasan a/l Arumugam (Resigned on 23 November 2015) 9 Haji Umsery@Ansari bin Abdullah (Resigned on 4 November 2015) Directors Training Director Chairman / Independent Non-Executive Director Non-Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director 5/5 100% 5/5 100% 2/5 40% 4/5 80% All Directors have attended the Mandatory Accreditation Programme as required by Bursa Malaysia Securities Berhad. In addition, the Directors have also attended other training and education programmes individually in their own professional capacity. The Company will continuously arrange training for the Directors as part of the obligation to update and enhance their skills and knowledge in order to effectively carry out their duties and responsibilities. Board Charter The Board Charter, which sets out the responsibilities of the Board including management oversight, setting strategic direction premised on sustainability and promoting ethical conduct in business dealings is currently being drafted. Sustainability The Board is aware of the importance of business sustainability and will look into plans for promoting sustainability in developing its corporate strategies, taking into account the impact on the environmental, social, cultural and governance aspects of business operations. These strategies seek to create long term consumer, employee and stakeholder. ~ 12 ~

14 CORPORATE GOVERNANCE BOARD OF DIRECTORS (cont d) Company Secretaries Every Director has ready and unrestricted access to the advice and services of the Company Secretaries in ensuring the effective functioning of the Board. The Company Secretaries ensure that Board policies and procedures are both followed and reviewed regularly and have the responsibilities in law to ensure that each Director is made aware of and provided with guidance as to their duties, responsibilities and powers. The Directors were also regularly updated and advised by the Company Secretaries on new statutory and regulatory requirements issued by regulatory authorities, and the resultant implications to the Company and the Directors in relation to their duties and responsibilities. They are also responsible for ensuring the Group s compliance with the relevant statutory and regulatory requirements. BOARD COMMITTEES (a) Audit and Risk Management Committee The Audit and Risk Management Committee comprises three (3) Independent Non-Executive Directors. The Chairman of the Audit and Risk Management Committee is a qualified accountant and a member of the Malaysian Institute of Accountants. The role of the Audit and Risk Management Committee is to oversee the Company s financial reporting process, corporate governance process and provide the Board with assurance of the quality and reliability of financial information used by the Board and of the financial information issued publicly by the Company. The Audit and Risk Management Committee assumes the following fundamental responsibilities in the Company:- assessing the risks and control environment; overseeing financial reporting; evaluating the internal and external audit processes; and reviewing conflict of interest situations and related party transactions. The terms of reference of the Audit and Risk Management Committee are set out in this annual report. (b) Nomination Committee The Nomination Committee comprises exclusively Independent Non-Executive Directors as follows: Selva Rasan a/l Dato Puspa Das (Appointed on 23 November 2015) Yap Weei Han (Appointed on 4 November 2015) Lee Kok Tong Chairman Member Member The Nomination Committee considers and recommends to the Board suitable candidates whom the Committee feel would be of good value and a complementing addition to the Board. The appointment of the Directors remains the responsibility of the Board after taking into consideration the recommendations of the Nomination Committee. The assessment of the effectiveness of the Board collectively and individually is an on-going process undertaken by the Nomination Committee. Whenever deemed necessary, the Committee would forward the relevant recommendations for the Board consideration. In carrying out its duties and responsibilities, The Nomination Committee have full, free and unrestricted access to any information, record, properties and personnel of the Group. The Committee may seek external professional services to source for the right candidate for directorship or seek independent professional advice whenever necessary. The following activities were undertaken by the Nomination Committee during the financial year:- (i) Reviewed, assessed and recommended to the Board, the appointment of Tuan Haji Umsery@Ansari bin Abdullah, Mr. Lee Kok Tong, Mr. Yap Weei Han and Mr. Selva Rasan a/l Dato Puspa Das as Directors of the Company in view of their competency, working knowledge and experience. (ii) Reviewed, assessed and recommended to the Board, the re-election of the Directors who retired at the Eleventh (11th) Annual General Meeting of the Company. ~ 13 ~

15 CORPORATE GOVERNANCE BOARD COMMITTEES (cont d) (b) Nomination Committee (cont d) Nomination Committee had also carried out the following assessment in respect of financial year ended 31 December 2015:- (i) (ii) Evaluated the effectiveness of the Board as a whole and of the Committees of the Board and the contribution and performance of each individual Directors. Reviewed the independence of the Independent Directors. The Nomination Committee upon analysing the result of the Board and Board Committees assessment is satisfied that the Board is operating in uniformity, with good governance and maintains consistent communication at all times. The overall results of the assessment are acceptable. There is room for improvement and for the Board to function in a more efficient and inclusive manner. The Nomination Committee is also satisfied that all Board members are suitably qualified to maintain their positions as directors of the Board and members of the Committees in view of their respective academic background, experiences and qualities. Upon analysing the performance of each individual Directors, the Nomination Committee noted that in overall the Board have a high acceptance level, which resonates in terms of good communication and better understanding among them. It is pivotal that the Board maintains clarity and transparency in their dealings so as to ensure trust and confidence. DIRECTORS REMUNERATION The remuneration package is designed to support the Company s strategy and to provide an appropriate incentive to maximise individual and corporate performance, whilst ensuring that overall rewards are market competitive. The Executive Directors package consists of basic salary, contribution to the national pension fund and benefits-in-kind such as medical care, car allowance and fuel whilst the Non-Executive Directors package primarily consists of fees. The remuneration packages for the Directors for the financial year ended 31 December 2015 are as follows: Executive Directors (RM 000) Non-Executive Directors (RM 000) Salaries and other emoluments Fees The number of Directors whose remuneration falls into each band of RM50,000 are set as follows: Number of Directors Executive Non-Executive Directors Directors 1-50, , , , , , , , , , , , , , , , , , , ~ 14 ~

16 CORPORATE GOVERNANCE REINFORCED INDEPENDENCE The Non-Executive Directors are not employees of the Group and do not participate in the day-to-day management of the Group. As such they are able to express their views without any constraint. This strengthens the Board which benefits from the independent views expressed before any decisions are taken. The Board assesses the independence of the Independent Non-Executive Directors on an on-going basis taking into account the individual Director s ability to exercise independent judgement at all times and their contribution to the effective functioning of the Board. None of the current independent Board members have served the Company for more than nine (9) years. As per the recommendation of the Code, should the tenure of an independent Director exceed nine (9) years, shareholders approval will be sought at a General Meeting or if the services of the Director concerned is still required, the Director concerned will be re-designated as a Non-Independent Director. There is clear separation of powers between the Chairman and the CEO, and this further enhances the independence of the Board. Should any Director has any interest in any matter under deliberation, he is required to disclose his interest and abstain from participating in discussions on the matter. FOSTER COMMITMENT Time Commitment The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of the Company. This is evidenced by the attendance record of the Directors at the Board meetings. Directors are expected to have the relevant expertise in order to contribute positively to the Group s performance and to give sufficient time and attention to carry out their responsibilities to the Group. UPHOLD INTEGRITY IN FINANCIAL REPORTING Compliance with Applicable Financial Reporting Standards In presenting the annual audited financial statements and quarterly announcements of results to shareholders, the Board takes responsibility to present a balanced and meaningful assessment of the Group s position and prospect and to ensure that the financial statements are drawn up in accordance with the provisions of Companies Act, 1965 and applicable accounting standards in Malaysia. The Audit and Risk Management Committee assists the Board in scrutinising information for disclosure to ensure accuracy, adequacy and completeness. The Responsibility Statement by the Directors pursuant to the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) is set out in this Annual Report. Assessment of Suitability and Independence of External Auditors The Audit and Risk Management Committee undertakes an annual assessment of the suitability and independence of the external auditors. The Audit and Risk Management Committee meets with the external auditors at least once a year to discuss their audit plan, audit findings and the Company s financial statements. At least one of these meetings is held without the presence of the Executive Directors and the Management. The Audit and Risk Management Committee also meets with the external auditors additionally whenever it deems necessary. In addition, the external auditors are invited to attend the Annual General Meeting of the Company and are available to answer shareholders questions on the conduct of the statutory audit and the preparation and contents of their audit report. ~ 15 ~

17 CORPORATE GOVERNANCE SHAREHOLDERS Investors Relations and Shareholders Communication The Board recognizes the importance of keeping all shareholders informed of the Group s business and corporate developments. Such information is disseminated through the Group s quarterly results, annual reports and through various disclosures via Bursa Malaysia Securities Berhad s website. The forthcoming Annual General Meeting will be an avenue of meeting between the Board of Directors and shareholders. Annual General Meeting The Annual General Meeting is an important forum for communication and dialogue between the Group and the shareholders to raise questions or to inquire more information on the Group s development and financial performance. The Board members are present to address all shareholders queries on issues relevant to the Group. However, if the queries raised are not immediately answered during the AGM, the CEO will send a written letter containing the explanation after the AGM. Notice of the AGM is released to shareholders at least twenty one (21) days before the date of the meeting. The shareholders have direct access to the Board and are encouraged to participate in the open question and answer session. Poll Voting In line with Recommendation 8.2 of the Code, the Chairman informs the shareholders of their right to demand a poll vote at the commencement of all general meetings. This Statement on Corporate Governance has been approved by the Board on 3 May ~ 16 ~

18 ACCOUNTABILITY AND AUDIT FINANCIAL REPORTING The Board is satisfied that appropriate accounting policies have been consistently applied and supported by reasonable and prudent judgements and estimates. A balanced and understandable assessment of the Group s position and prospects is released through annual financial statements and quarterly financial results. Quarterly financial results and annual financial statements are reviewed by the Audit and Risk Management Committee and approved by the Board before being released to Bursa Malaysia Securities Berhad. INTERNAL CONTROL The Board recognises the importance of an effective system of internal controls covering the financial operations and compliance controls as well as risk management to safeguard the interests of the stakeholders of the Group. The Board reviews the effectiveness of the internal control system through the Audit and Risk Management Committee with the assistance of the outsourced independent Internal Auditors, who carried out risk assessment and auditing of different areas of the business covering financial, operational and compliance. The Internal Auditors tabled the internal audit reports to the Audit and Risk Management Committee for review and deliberation. RELATIONSHIP WITH AUDITORS The Audit and Risk Management Committee undertakes an annual assessment of the sustainability and independence of the external auditors. The Audit and Risk Management Committee s terms of reference formalises the relationship with the external auditors to report to the members of the Audit and Risk Management Committee on their findings. In doing so, the Group forges a transparent and professional relationship with the Company s external auditors. The Audit and Risk Management Committee met the external auditors to review and discuss the audit plan, scope and nature of the audit, audit findings and financial statements for FYE 31 December These meetings were conducted without the presence of the Executive Directors and the Company s management staff. This allows the Audit and Risk Management Committee and the external auditors the exchange of free and honest views and opinions in matters related to external auditors audit process and findings. The Audit and Risk Management Committee has considered the provision of non-audit services by the external auditors during the year and concluded that the provision of these services did not compromise the external auditors independence and objectivity as the amount of the fees paid for these services was not significant when compared to the total fees paid to the external auditors. DIRECTOR RESPONSIBILITY STATEMENT The Directors take responsibility in ensuring that the financial statements give a true and fair view of the Company s state of affairs for the financial year and of the results and cash flows of the Company for that period. The Board is also responsible for ensuring that the Group keeps proper accounting records and that such records are disclosed with reasonable accuracy to ensure that the financial statements comply with the Companies Act, The Board, with the assistance of the Internal Auditors, takes the responsibilities of safeguarding assets of the Company to prevent and detect fraud and other irregularities seriously. ~ 17 ~

19 AUDIT AND RISK MANAGEMENT COMMITTEE REPORT MEMBERSHIP Chairman Selva Rasan a/l Dato Puspa Das (Independent Non-Executive Director) (Appointed on 23 November 2015) Sundarasan a/l Arumugam (Independent Non-Executive Director) (Resigned on 23 November 2015) Members Lee Kok Tong (Independent Non-Executive Director) Yap Weei Han (Independent Non-Executive Director) (Appointed on 4 November 2015) Haji Umsery@Ansari bin Abdullah (Independent Non-Executive Director) (Ceased on 4 November 2015) TERMS OF REFERENCE OF AUDIT AND RISK MANAGEMENT COMMITTEE 1. Composition (a) (b) (c) (d) (e) (f) (g) (h) The Audit and Risk Management Committee shall be appointed by the Board from amongst themselves comprising not less than three (3) members where the majority of them shall be composed of independent non-executive directors and the CEO shall not be a member of the Audit and Risk Management Committee. The Committee shall include at least one (1) person who is a member of the Malaysian Institute of Accountants or possessing such financial related qualification or experience as may be required by Bursa Malaysia Securities Berhad. The term of office of the Audit and Risk Management Committee is two (2) years and may be re-nominated and appointed by the Board. The members of the Audit and Risk Management Committee shall elect a Chairman from amongst themselves who shall be an independent director. All members of the Audit and Risk Management Committee, including the Chairman, will hold office only so long as they serve as Directors of the Company. Should any member of the Audit Committee cease to be a Director of the Company, his membership in the Audit Committee would cease forthwith. No Alternate Director of the Board shall be appointed as a member of the Audit Committee. If the number of members of the Audit and Risk Management Committee for any reason be reduced to below three (3), the Board of Directors shall within three (3) months of the event, appoint such number of new members as may be required to make up the minimum number of three (3) members. The Board must review the term of office and performance of the Committee and each of its members at least once every three (3) years to determine whether such Committee and members have carried out their duties in accordance with their terms of reference. ~ 18 ~

20 AUDIT AND RISK MANAGEMENT COMMITTEE REPORT TERMS OF REFERENCE OF AUDIT AND RISK MANAGEMENT COMMITTEE (cont d) 2. Duties and Responsibilities The duties and responsibilities of the Committee shall include the followings: Matters relating to External Audit (a) (b) (c) (d) (e) (f) (g) (h) (i) To review the nomination of external auditors and their audit fees; To review the nature, scope and quality of external audit plan/arrangements; To review quarterly and annual financial statements of the Company, before submission to the Board, focusing in particular on the going concern assumption, compliance with accounting standards and regulatory requirements, any changes in accounting policies and practices, significant issues arising from the audit and major judgmental issues; To review the external auditors audit report; To review with the external auditors, their evaluation of the system of internal accounting controls; To review the Company s policies and procedures with Management and external auditors to ensure the adequacy of internal accounting and financial reporting controls; To review any letter of resignation from the external auditors; To consider and review whether there is reason (supported by grounds) to believe that the Company s external auditors are not suitable for re-appointment; and To review the assistance given by the Company s officers to the external auditors. Matters relating to Internal Audit function (a) (b) (c) (d) (e) To review the effectiveness of the internal audit function; To review the internal audit programme and results of the internal audit process; To review the follow up actions by the Management on the weakness of internal accounting procedures and controls; To review on all areas of significant financial risk and the arrangements in place to contain those risks to acceptable levels; and To review the assistance and co-operation given by the Group and its officers to the internal auditors. Risk Management and Internal Control (a) (b) (c) To review the adequacy of risk management framework and to provide independent assurance to the Board of Directors on the effectiveness of the Company s risk management processes; To evaluate the quality and effectiveness of the Company s internal controls and management information systems, including compliance with applicable laws, rules and guidelines; and To recommend to the Board of Directors the Statement of Internal Control and any changes to the said statement. ~ 19 ~

21 AUDIT AND RISK MANAGEMENT COMMITTEE REPORT TERMS OF REFERENCE OF AUDIT AND RISK MANAGEMENT COMMITTEE (cont d) 3. Authority The Committee shall in accordance with a procedure to be determined by the Board and at the expense of the Company: (a) (b) (c) (d) (e) (f) (g) have explicit authority to investigate any matter within its terms of reference; have the resources which the Committee needs to perform the duties; have full access to any information which the Committee requires in the course of performing its duties; have unrestricted access to all employees of the Group; have direct communication channels with the external auditors; be able to obtain outside legal or independent professional advice in the performance of its duties at the cost of the Company; and be able to invite outsiders with relevant experience to attend its meetings, if necessary. 4. Meetings and Minutes The Committee shall hold not less than four (4) meetings a year to review the quarterly results and year-end financial statements. In order to form the quorum for each meeting, a minimum of two (2) members present shall be Independent Directors. In addition to the Committee members, the head of internal audit shall normally attend the meetings. Representatives of the external auditors shall attend meetings where matters relating to the audit of the statutory accounts and/or the external auditors are to be discussed. Minutes of each meeting shall be kept and distributed to each member of the Committee and also to the other members of the Board. The Committee Chairman shall report on each meeting to the Board. The Secretary to the Committee shall be the Company Secretary. 5. Internal Audit Function The Company s internal audit function is outsourced to an independent professional internal audit service provider, which reports directly to the Audit and Risk Management Committee. The Internal Auditors adopt a risk-based approach when preparing its annual audit plan and strategy. The principal role of the internal audit is to conduct independent and regular reviews of the various operations of the Company and to provide objective reports on the state of the internal controls to the Audit and Risk Management Committee. All internal audit reports will be presented to the Audit and Risk Management Committee for deliberation. The Audit and Risk Management Committee would then make the relevant recommendations for the management s further action. During the year, the internal auditors have conducted an internal control system assessment of the Group and presented its review to the Audit and Risk Management Committee. The total costs incurred for the outsourced internal audit function during the year was RM6, ~ 20 ~

22 AUDIT AND RISK MANAGEMENT COMMITTEE REPORT SUMMARY OF AUDIT AND RISK MANAGEMENT COMMITTEE ACTIVITIES During the FYE 31 December 2015, in line with the terms of reference, the Committee carried out the following activities in the discharge of its functions and duties:- 1. Reviewed with the External Auditors, the audited financial statements for the financial year ended 31 December 2014; 2. Reviewed the audit reports of the Group prepared by the External Auditors and considered the major findings by the auditors and management s responses thereto; 3. Reviewed the quarterly and year-end financial results of the Group prior to submission to the Board for consideration and approval; 4. Reviewed the recurrent related party transactions, if any; 5. Reviewed the audit plan, nature and scope of the External Auditors and considering their audit fee; 6. Reviewed the audit plan, nature and scope as proposed by the Internal Auditors and considering their fee; 7. Reviewed the audit reports presented by the Internal Auditors on the findings and recommendations and ensure that they are duly acted upon by the management. MEETING ATTENDANCE The Committee held six (6) meetings during the FYE 31 December Details of the attendance are as follows: Directors No. of meetings attended Selva Rasan a/l Dato Puspa Das (Independent Non-Executive Director) 1/1 (Appointed on 23 November 2015) Lee Kok Tong (Independent Non-Executive Director) 5/5 Yap Weei Han (Independent Non-Executive Director) (Appointed on 4 November 2015) Sundarasan a/l Arumugam (Independent Non-Executive Director) (Resigned on 23 November 2015) Haji Umsery@Ansari bin Abdullah (Independent Non-Executive Director) (Resigned on 4 November 2015) 1/1 2/5 4/5 ~ 21 ~

23 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Rule 15.26(b) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad requires the Board of Directors to include in its annual report a statement about the state of the risk management and internal controls of the Group. The Malaysian Code on Corporate Governance 2012 under Principle 6 states that the Board should establish a sound risk management framework and internal controls systems. BOARD RESPONSIBILITIES The Board recognizes the importance of maintaining a good system of risk management and internal controls and risk management to safeguard shareholders investment and the Group s assets. The Board acknowledges its overall responsibility for reviewing the adequacy and integrity of the Company s system of risk management and internal control, identifying principal risks and establishing an appropriate control environment and framework to manage risks and evaluating the Group s operational effectiveness and efficiency. The Board has reviewed the adequacy and effectiveness of the system of internal controls of the Group. It recognizes that due to inherent limitations, the internal control systems are designed to manage rather than to eliminate the risk of business failure. As such, these systems could only provide reasonable but not absolute assurance against material misstatements or losses. SYSTEM OF RISK MANAGEMENT The Board acknowledged that all areas of the Group s activities involve some degree of risks and recognises that effective risk management is part of good business management practice for the successful achievement of the Group s business objectives. Operationally, the respective department heads and key management staff are responsible for managing the risks of their departments and periodic management meetings are held to address significant issues faced by the Group so as to ensure significant risks are closely monitored and appropriately addressed. Significant risks are highlighted to the Board on an exception basis. The abovementioned practices/initiatives serves as the on-going process used to identify, evaluate and manage significant risks that affect the achievement of the Group s business objectives. SYSTEM OF INTERNAL CONTROL The key measures implemented by the Group are as follows: i. A well-defined organisational structure with distinct lines of accountability that sets out the authority delegated to the board and management committees. ii. iii. iv. Performance reports such as quarterly financial review, business development and other corporate matters are regularly provided to the Directors for discussion and deliberations at Board meetings. Review of quarterly and annual financial results by the Audit and Risk Management Committee. Regular meetings by the management team to discuss and review reports and business developments and to resolve key operational and managements issues. v. Review the adequacy and effectiveness of the system of internal control, with the assistance of the internal audit function. ~ 22 ~

24 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL INTERNAL AUDIT FUNCTION The Group has outsourced its internal audit function to an independent professional internal audit service provider to review the adequacy and integrity of the internal control systems of the Group. The functions of the internal audit are as follows: 1. Perform audit work in accordance with the pre-approved internal audit plan. 2. Carry out review on the system of internal controls of the Company. 3. Review and comment on the effectiveness and adequacy of the existing control policies and procedures. 4. Provide recommendations, if any, for the improvement of the control policies and procedures. 5. Review and comment on the implementation status of the recommendation by the internal audit function. The internal audit function reports directly to the Audit and Risk Management Committee and is independent of the management. The internal audit reports are submitted to the Audit and Risk Management Committee who would review and deliberate on the findings before making the necessary recommendations to the Board to strengthen its internal control systems and policies. ASSURANCE PROVIDED BY THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER In line with the Guidelines, the Chief Executive Officer and Chief Financial Officer have provided assurance to the Board that the Group s risk management and internal control systems have operated adequately and effectively, in all material aspects, to meet the Group s objectives during the financial year under review. CONCLUSION The Board is committed towards operating a sound system of internal control and effective risk management practices throughout the Group and is of the view that they are adequate to safeguard shareholders investments and the Group s assets. There were no material losses incurred during the financial year as a result of weaknesses in internal control that would require a separate disclosure in the annual report. The Board will, when necessary, take the necessary steps to further enhance the Company s system of risk management and internal control to adapt to the ever changing and challenging business environment. REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS The external auditors have reviewed the Statement on Risk Management and Internal Control and reported to the Board that nothing has come to their attention that caused them to believe that the Statement on Risk Management and Internal Control is not prepared, in all material aspects, in accordance with the disclosures required by the Guidelines for Directors of Listed Issuers on the Statement on Risk Management and Internal Control. This Statement was made in accordance with a resolution of the Board dated 3 May ~ 23 ~

25 CORPORATE SOCIAL RESPONSIBILITY Due to the Company s GN3 condition and having ceased operation, focus was placed on identifying business proposals with the view to regularise its GN3 condition and to maintain the Company s listing status. With the Group s expenses kept to the minimal, the Group did not undertake any corporate social responsibility activities in ~ 24 ~

26 ADDITIONAL COMPLIANCE INFORMATION A) STATUS OF UTILISATION OF PROCEEDS There were no proceeds raised from any proposal during the financial year under review. B) SHARE BUY-BACKS There was no share buy-back arrangement during the financial year. C) OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES None of the Warrants 2012/2017 have been exercised during the financial year and the total number of warrants that remained unexercised is 87,896,600. D) DEPOSITORY RECEIPT PROGRAMME During the financial year, the Group did not sponsor any depository programme. E) IMPOSITION OF SANCTIONS AND PENALTIES There were no material sanctions and penalties imposed on the Group, Directors or management by the relevant regulatory bodies. F) NON-AUDIT FEES The amount of non-audit fees incurred for services rendered to the Company by its external auditors for the financial year ended 31 December 2015 was RM4, G) VARIANCE IN RESULTS The annual audited financial statements of the Group for the financial year ended 31 December 2015 did not deviate more than 10% from the unaudited results announced to Bursa Malaysia Securities Berhad on 29 February H) PROFIT ESTIMATES, FORECAST OR PROJECTION The Group did not issue any profit estimate, forecast or projection for the financial year. I) PROFIT GUARANTEE No profit guarantee was given by the Group in respect of the financial year. J) MATERIAL CONTRACTS INVOLVING DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS During the financial year, there were no material contracts or loans entered into by the Company and its subsidiaries involving the interests of the Directors and major shareholders during the financial year under review. ~ 25 ~

27 ADDITIONAL COMPLIANCE INFORMATION K) CONTRACTS RELATING TO LOAN WITH DIRECTORS AND/ OR MAJOR SHAREHOLDER During the financial year, there were no contracts relating to a loan by the Company and/ or its subsidiary companies involving the interests of the Directors and major shareholders during the financial year under review. This report is made in accordance with a resolution of the Board of Directors dated 3 May ~ 26 ~

28 FINANCIAL STATEMENTS DIRECTORS REPORT 28 STATEMENT BY DIRECTORS 33 STATUTORY DECLARATION 33 INDEPENDENT AUDITORS REPORT 34 STATEMENTS OF FINANCIAL POSITION 37 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 39 STATEMENTS OF CHANGES IN EQUITY 40 STATEMENTS OF CASH FLOWS 41 NOTES TO THE FINANCIAL STATEMENTS 43 ~ 27 ~

29 DIRECTORS REPORT The Directors hereby submit their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The principal activities of the Company consist of the provision of management services and engaged in the business of investment holding. The principal activities of its subsidiaries are disclosed in Note 7 to the financial statements. There have been no significant changes in the nature of these activities of the Company and its subsidiaries during the financial year. RESULTS Group RM Company RM Loss for the financial year 90,421,886 77,441,984 Attributable to:- Owners of the Company 90,421,886 77,441,984 RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year. DIVIDENDS There were no dividends proposed, declared or paid by the Company since the end of the previous financial year. DIRECTORS The Directors in office since the date of the last report are:- Francis Tan Hock Leong Sim Keng Siong Lee Kok Tong (Appointed on ) Yap Weei Han (Appointed on ) Selva Rasan A/L Dato Puspa Das (Appointed on ) J Abd Jalil Maraicar Bin P M Jahabar (Resigned on ) Lim Chye Guan (Resigned on ) Sundarasan A/L Arumugam (Resigned on ) Tunku Dato Iskandar Dzulkarnain Bin Tunku Ismail (Resigned on ) Haji Ansari Bin Abdullah (Resigned on ) ~ 28 ~

30 DIRECTORS REPORT DIRECTORS INTERESTS According to the Register of Directors Shareholdings, the interests and deemed interests in the shares of the Company of those who were Directors at year end (including their spouses or children) are as follows: Number of ordinary shares of RM0.05 each At Bought Sold At Interests in the Company Direct interests Francis Tan Hock Leong 87,822,053 - (25,237,000) 62,585,053 Indirect interests Francis Tan Hock Leong (#) 13,381, ,381,838 (#) deemed interest by virtue of shares held by spouse. By virtue of his interests in the shares of the Company, Francis Tan Hock Leong is deemed interested in the shares of all the subsidiaries during the financial year to the extent that the Company has an interest under Section 6A of the Companies Act, Number of warrants At Bought Sold At Direct interests Francis Tan Hock Leong 7,489, ,489,375 Indirect interests Francis Tan Hock Leong (#) (#) deemed interest by virtue of shares held by spouse. None of the other Directors in office at the end of the financial year had any interest in shares of the Company or its related corporations during the financial year. DIRECTORS BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Since the end of the previous financial year, no Director has received or become entitled to receive any benefits (other than as disclosed in Notes 26 and 29 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. ~ 29 ~

31 DIRECTORS REPORT ISSUE OF SHARES AND DEBENTURES There was no issuance of shares or debentures during the financial year. WARRANTS There were no warrants issued during the financial year. The salient terms of the warrants are disclosed in Note 18 to the financial statements. The warrants were constituted under the Deed Poll dated 8 March No warrants were exercised during the financial year and the total number of warrants that remain unexercised was 87,896,600. Details of warrants issued to Directors are disclosed in the section on Directors interests in this report. OTHER STATUTORY INFORMATION Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps:- (a) (b) to ascertain that 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 be realised in the ordinary course of business including their values as shown in the accounting records of the Group and of the Company have been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances:- (a) (b) (c) (d) which would render the amounts 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; or which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or 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; or not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading. ~ 30 ~

32 DIRECTORS REPORT OTHER STATUTORY INFORMATION At the date of this report, there does not exist:- (a) (b) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liability of any other person; or any contingent liability of the Group and of the Company which has arisen since the end of the financial year. In the opinion of the Directors:- (a) (b) (c) Other than as disclosed in Note 2 and 35, 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 year which, in the opinion of the Directors, will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due; the results of operations of the Group and of the Company during the financial year were substantially affected by items, transactions or events of material and unusual nature as disclosed in Note 26 to the financial statements; and there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the current financial year in which this report is made. ~ 31 ~

33 DIRECTORS REPORT AUDITORS The Auditors, Messrs SJ Grant Thornton have expressed their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with a resolution of the Board of Directors.... ) SIM KENG SIONG ) ) ) ) ) ) ) DIRECTORS ) ) ) )... ) FRANCIS TAN HOCK LEONG Kuala Lumpur 3 May 2016 ~ 32 ~

34 STATEMENT BY DIRECTORS In the opinion of the Directors, the financial statements set out on pages 37 to 101 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2015 and of their financial performance and cash flows for the financial year then ended. In the opinion of the Directors, the information set out on page 102 has been compiled in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad. Signed on behalf of the Board of Directors in accordance with a resolution of the Board of Directors SIM KENG SIONG FRANCIS TAN HOCK LEONG Kuala Lumpur 3 May 2016 STATUTORY DECLARATION I, Sim Keng Siong, being the Director primarily responsible for the financial management of R&A Telecommunication Group Berhad, do solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on pages 37 to 101 and the information set out on page 102 are correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provision of the Statutory Declarations Act, Subscribed and solemnly declared by ) the abovenamed at Kuala Lumpur in ) the Federal Territory this day of ) 3 May 2016 )... SIM KENG SIONG Before me: S. Arulsamy (W.490) Commissioner for Oaths ~ 33 ~

35 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF R&A TELECOMMUNICATION GROUP BERHAD Report on the Financial Statements We were engaged to audit the financial statements of R&A Telecommunication Group Berhad, which comprise statements of financial position as at 31 December 2015 of the Group and of the Company, and statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 37 to 101. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal controls as the Directors determine 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 conducting the audit in accordance with approved standards on auditing in Malaysia. Because of the matters described in the Basis for Disclaimer of Opinion paragraphs, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Basis for Disclaimer of Opinion We draw your attention to the followings:- (i) As disclosed in Note 2 to the financial statements, the Group and the Company incurred net losses during the financial year ended 31 December 2015 of approximately RM90.42 million and RM77.44 million respectively and, as of that date, the Group had net current liabilities of approximately RM25.32 million and recorded capital deficiencies of approximately RM25.03 million. On 5 May 2015, the Company announced that it is a GN3 Company pursuant to Paragraph 2.1(f) of Guidance Note 3 ( GN3 ) under the ACE Market Listing Requirements ( ACE LR ) of Bursa Malaysia Securities Berhad ( Bursa Securities ). The Company is required to submit its Proposed Regularisation Plan ( PRP ) to the relevant authorities by 5 May The Company has not announced or submitted any PRP to Bursa Securities as at the date of the report. (ii) (iii) The Company and its subsidiaries were unable to meet their borrowings obligations during the financial year. The Company and its subsidiaries received writ of summon, statement of claim and letter of demand from the creditors and lenders, as disclosed in Note 35 to the financial statements. Included in the trade receivables of the Group are amounts of RM1.37 million which have exceeded their terms of repayment and have been long outstanding. Impairment amounting RM9.89 million have been made in respect of the trade receivables. The Directors believe that no further impairment required as the amount is recoverable. However, we are unable to obtain satisfactory explanation and information as to whether the amounts are recoverable and to ascertain the adequacy of the impairment made. ~ 34 ~

36 INDEPENDENT AUDITORS REPORT Report on the Financial Statements (cont d) Basis for Disclaimer of Opinion (cont d) In view of the matters set out above, there are material uncertainties that may cast significant doubt on the ability of the Group and of the Company to continue as a going concern. We were unable to obtain sufficient appropriate audit evidence to support the going concern basis of preparation of financial statements. The ability of the Group and of the Company to continue as going concern is highly dependent on the timely and successful formulation, approval and implementation of the PRP, the continuing support from their lenders and creditors, achieving sustainable and viable operations and generating adequate cash flows from its operating activities and the future project. In the event that these are not forthcoming, the Group and the Company may be unable to realise their assets and discharge their liabilities in the normal course of business. Accordingly, the financial statements may require adjustments relating to the recoverability and classification of recorded assets and liabilities that may be necessary should the Group and the Company be unable to continue as a going concern. Opinion Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraphs, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements. 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) Because of the matters as discussed in the Basis for Disclaimer of Opinion paragraphs, the accounting and other records have not been properly kept by the Company and the subsidiaries in accordance with the provisions of the Act. The registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act. Our audit reports on the accounts of the subsidiaries contain qualification made under section 174(3) of the Act, as disclosed in Note 7 to the financial statements. Other Reporting Responsibilities The supplementary information set out on page 102 is disclosed to meet the requirements 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 Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ( MIA Guidance ) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. ~ 35 ~

37 INDEPENDENT AUDITORS REPORT 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. SJ GRANT THORNTON (NO. AF: 0737) CHARTERED ACCOUNTANTS SUNG FONG FUI (NO: 2971/08/17 (J)) CHARTERED ACCOUNTANT Kuala Lumpur 3 May 2016 ~ 36 ~

38 STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2015 Group Company Note RM RM RM RM ASSETS Non-current assets Property, plant and equipment 5 836,185 11,841,810-9,074,000 Investment property 6-497, Investment in subsidiaries ,800,000 Intangible assets 8-51,758, Deferred tax assets 9-2,097, Total non-current assets 836,185 66,194,969-78,874,000 Current assets Inventories 10-1,057, Accrued billings 11-7,789, Work-in-progress 12 12,653 8,549, Trade receivables 13 1,574,032 19,199, Other receivables ,654 3,016,971 6, ,233 Amount due from a subsidiary ,226,329 Fixed deposits with licensed banks 16-5,421, Cash and bank balances 681,894 81,910 6,801 5,484 Total current assets 2,758,233 45,116,757 12,801 7,705,046 Non-current assets held for sales 6 9,448,000-9,048,000 - Total assets 13,042, ,311,726 9,060,801 86,579,046 EQUITY AND LIABILITIES Equity attributable to owners of the Company:- Share capital 17 48,343,100 48,343,100 48,343,100 48,343,100 Reserves 18 42,664,775 42,664,775 38,342,275 38,342,275 Accumulated losses (116,042,823) (25,620,937) (77,955,132) (513,148) Total equity (25,034,948) 65,386,938 8,730,243 86,172,227 The accompanying notes form an integral part of the financial statements. ~ 37 ~

39 STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2015 Group Company Note RM RM RM RM LIABILITIES Non-current liabilities Deferred tax liabilities , , Finance lease liabilities , , Total non-current liabilities 546, , Current liabilities Trade payables 21 2,920,685 3,047, Other payables 22 2,361,680 4,409, , ,819 Amount due to directors 23 53,051-53,051 - Bank borrowings 24 31,910,424 37,075, Finance lease liabilities , , Tax payable - 271, Total current liabilities 37,531,136 45,257, , ,819 Total liabilities 38,077,366 45,924, , ,819 Total equity and liabilities 13,042, ,311,726 9,060,801 86,579,046 The accompanying notes form an integral part of the financial statements. ~ 38 ~

40 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 Group Company Note RM RM RM RM Revenue 25 8,026,274 32,351, Cost of sales (7,619,678) (31,968,399) - - Gross profit 406, , Other income 2,243,946 1,165,172 46,006 2,070 Administrative expenses (2,656,591) (4,680,141) (132,653) (236,652) Staff costs (3,489,062) (6,978,285) (203,981) (203,185) Distribution costs (239,847) (1,276,298) - - Other expenses (82,626,293) (12,061,172) (77,151,356) (188,640) Finance costs (2,158,014) (3,018,972) - - Loss before tax 26 (88,519,265) (26,466,874) (77,441,984) (626,407) Tax expense 27 (1,902,621) (194,379) - - Loss for the financial year (90,421,886) (26,661,253) (77,441,984) (626,407) Total comprehensive loss for the financial year (90,421,886) (26,661,253) (77,441,984) (626,407) Loss per share (sen) - Basic 28 (0.09) (0.03) - Diluted 28 * * * anti-dilution in nature The accompanying notes form an integral part of the financial statements. ~ 39 ~

41 STATEMENTS OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 Attributable to owners of the Company Non-distributable Group Share Share Other Revaluation Accumulated capital premium reserve reserve losses Total RM RM RM RM RM RM Balance at 1 January ,896,600 3,897,679-4,322,500 (8,203,393) 87,913,386 Capital reduction (43,948,300) - 34,704,591-9,243,709 - Private placement 4,394,800 (259,995) ,134,805 Loss for the financial year (26,661,253) (26,661,253) Other comprehensive income Total comprehensive loss for the financial year (26,661,253) (26,661,253) Balance at 31 December ,343,100 3,637,684 34,704,591 4,322,500 (25,620,937) 65,386,938 Loss for the financial year (90,421,886) (90,421,886) Other comprehensive income Total comprehensive loss for the financial year (90,421,886) (90,421,886) Balance at 31 December ,343,100 3,637,684 34,704,591 4,322,500 (116,042,823) (25,034,948) Company Balance at 1 January ,896,600 3,897, (9,130,450) 82,663,829 Capital reduction (43,948,300) - 34,704,591-9,243,709 - Private placement 4,394,800 (259,995) ,134,805 Loss for the financial year (626,407) (626,407) Other comprehensive income Total comprehensive loss for the financial year (626,407) (626,407) Balance at 31 December ,343,100 3,637,684 34,704,591 - (513,148) 86,172,227 Loss for the financial year (77,441,984) (77,441,984) Other comprehensive income Total comprehensive loss for the financial year (77,441,984) (77,441,984) Balance at 31 December ,343,100 3,637,684 34,704,591 - (77,955,132) 8,730,243 The accompanying notes form an integral part of the financial statements. ~ 40 ~

42 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 Group Company Note RM RM RM RM OPERATING ACTIVITIES Loss before tax (88,519,265) (26,466,874) (77,441,984) (626,407) Adjustments for :- Bad debts written off 1,714,702 7,161, Depreciation 1,430,651 2,630,522 26,000 26,000 Impairment loss on receivables 10,522, , Impairment loss on development cost 2,034,005 2,034, Impairment loss on investment in subsidiary ,800,000 - Impairment on goodwill 49,724, Impairment on amount due from subsidiary - - 6,633,928 - Impairment on accrued billings 7,789, Impairment on inventories 1,280, Impairment on work-in-progress 8,536, Impairment on non-current assets held for sales 82, Interest expense 2,158,014 2,994, Interest income (76,007) (168,517) (6) (2,070) Gain on disposal of property, plant and equipment (1,133,313) (121,470) - - Property, plant and equipment written off 2 2,531, Reversal of impairment loss on receivables - (1,019,844) - - Operating loss before working capital changes (4,455,285) (10,150,529) (982,062) (602,477) Changes in working capital :- Inventories (222,562) 5, Customer - 4,095, Accrued billings - 2,176, Receivables 7,915,309 (3,706,934) 467,233 (400,833) Payables (2,174,441) 382,056 (129,312) 187,325 Director 53,051-53,051 - Cash generated from/(used in) operations 1,116,072 (7,197,561) (591,090) (815,985) Tax paid (77,288) (1,846,510) - - Interest paid (2,158,014) (2,994,932) - - Net cash used in operating activities (1,119,230) (12,039,003) (591,090) (815,985) INVESTING ACTIVITIES Advances to subsidiary (3,337,308) Purchase of property, plant and equipment A - (569,551) - - Interest received 76, , ,070 Proceeds from disposal of property, plant and equipment 1,675, , Net cash from/(used in) investing activities 1,751,845 (233,715) 6 (3,335,238) The accompanying notes form an integral part of the financial statements. ~ 41 ~

43 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 Group Company Note RM RM RM RM FINANCING ACTIVITIES Repayment of finance lease liabilities (289,232) (1,087,475) - - Drawndown of borrowings - 1,700, Proceed from issuance of ordinary shares - 4,394,800-4,394,800 Share issuance expenses - (259,995) - (259,995) Subsidiary ,401 - Repayment of bank borrowings (9,757,316) Net cash (used in)/from financing activities (10,046,548) 4,748, ,401 4,134,805 CASH AND CASH EQUIVALENTS Net changes (9,413,933) (7,524,682) 1,317 (16,418) Brought forward (21,814,597) (14,289,915) 5,484 21,902 Carried forward B (31,228,530) (21,814,597) 6,801 5,484 NOTES TO THE STATEMENTS OF CASH FLOWS A. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT Group Company RM RM RM RM Total purchase of property, plant and equipment - 836, Less: Acquisitions through finance lease arrangements - (267,000) - - Net cash payments - 569, B. CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the statements of cash flows comprise the following:- Group Company RM RM RM RM Fixed deposits with licensed banks (Note 16) - 5,421, Cash and bank balances 681,894 81,910 6,801 5,484 Bank overdrafts (Note 24) (31,910,424) (27,318,241) - - (31,228,530) (21,814,597) 6,801 5,484 The accompanying notes form an integral part of the financial statements. ~ 42 ~

44 - 31 DECEMBER GENERAL INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the ACE Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, Kuala Lumpur. The principal place of business is located at No. 2, Jalan Pengacara U1/48, Temasya Industrial Park, Section U1, Shah Alam, Selangor Darul Ehsan. The principal activities of the Company consist of the provision of management services and engaged in the business of investment holding. The principal activities of its subsidiaries are disclosed in Note 7 to the financial statements. There have been no significant changes in the nature of these activities of the Company and its subsidiaries during the financial year. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors passed on 3 May GOING CONCERN The Group and the Company incurred net losses of RM90,421,886 and RM77,441,984 respectively for the financial year ended 31 December At the date, the Group had net current liabilities of RM25,324,903 and a deficit in shareholders funds of RM25,034,948. The Group and the Company have defaulted in their borrowing obligation as disclosed in Note 35. The Company had trigged the prescribed criteria pursuant to rule 8.04(2) and paragraph 2.1(f) of Guidance Note 3 ( GN3 ) under the ACE Market Listing Requirements ( ACE LR ) of Bursa Malaysia Securities Malaysia ( Bursa Securities ) on 5 May The Company is required to submit to Bursa Securities a regulatisation plan by 5 May The Company is in the midst of formulating a restructuring plan to regularize its financial condition and is currently in discussions with prospective investors on potential assets for injection. These factors raise substantial doubt as to whether the Group and the Company will be able to continue as going concerns and, therefore, that the Group and the Company may be unable to realise its assets and discharge its liabilities in the normal course of business. However, the management of the Company believe that the Group and the Company are able to continue as a going concern. ~ 43 ~

45 2. GOING CONCERN The validity of going concern assumption on which the financial statements are prepared is dependent on the outcome of the successful formulation, approval and implementation of the restructuring plan. In view of these factors, continuation of the Group and Company as going concerns is dependent on financial support from their creditors and bankers and/or on the Group and Company attaining sufficient cash inflows to sustain their operations. 3. BASIS OF PREPARATION 3.1 Statement of compliance The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRSs ), International Financial Reporting Standards ( IFRSs ) and the requirements of the Companies Act, 1965 in Malaysia. 3.2 Basis of measurement The financial statements of the Group and of the Company are prepared under the historical cost convention, unless otherwise indicated in the summary of significant accounting policies. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial market takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. ~ 44 ~

46 3. BASIS OF PREPARATION 3.2 Basis of measurement (cont d) All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to their fair value measurement as a whole:- Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities. Level 2 - Valuation techniques for which the lowest level input that is significant to their fair value measurement is directly or indirectly observable. Level 3 - Valuation techniques for which the lowest level input that is significant to their fair value measurement is unobservable. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to their fair value measurement as a whole) at the end of each reporting date. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of fair value hierarchy as explained above. 3.3 Functional and presentation currency The financial statements are presented in Ringgit Malaysia ( RM ) which is the Company s functional currency and all values are rounded to the nearest RM except when otherwise stated. 3.4 Malaysian Financial Reporting Standards (MFRSs) Adoption of Amendments to MFRSs and IC Interpretations ( IC Int ) Except for the changes below, the Group and the Company have consistently applied the accounting policies set out in Note 4 to all periods presented in these financial statements. At the beginning of the current financial year, the Company adopted amendments to MFRSs and IC Int which are mandatory for the financial periods beginning on or after 1 January Initial application of the amendments to the standards and IC Int did not have material impact to the financial statements. ~ 45 ~

47 3. BASIS OF PREPARATION 3.5 Standards issued but not yet effective At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published by the Malaysian Accounting Standards Board but are not yet effective, and have not been adopted by the Company. Management anticipates that all of these relevant pronouncements will be adopted in the Company s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Company s financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Company s financial statements. The initial application of the above standards, amendments and interpretation are not expected to have any financial impacts to the financial statements, except for:- MFRS 9 Financial Instruments - Effective 1 January 2018 MFRS 9 replaces MFRS 139 Financial Instruments: Recognition and Measurement and all previous version of MFRS 9. The new standard introduces extensive requirements and guidance for classification and measurement of financial assets and financial liabilities which fall under the scope of MFRS 9, new expected credit loss model under the impairment of financial assets and greater flexibility has been allowed in hedge accounting transactions. Upon adoption of MFRS 9, financial assets will be measured at either fair value or amortised cost. It is also expected that the Group s investment in unquoted shares will be measured at fair value through other comprehensive income. The adoption of MFRS 9 will result in a change in accounting policy. The Group and the Company are currently examining the financial impact of adopting MFRS 9. MFRS 15 Revenue from Contracts with Customers - Effective 1 January 2017 MFRS 15 presents new requirements for the recognition of revenue, replacing the guidance of MFRS 111 Construction Contracts, MFRS 118 Revenue, IC Interpretation 13 Customer Loyalty Programmes, IC Interpretation 15 Agreements for Construction of Real Estate, IC Interpretation 18 Transfers of Assets from Customers and IC Interpretation 131 Revenue Barter Transaction Involving Advertising Services. The principles in MFRS 15 provide a more structured approach to measuring and recognising revenue. It establishes a new five-step model that will apply to revenue arising from contracts with customers. ~ 46 ~

48 3. BASIS OF PREPARATION 3.5 Standards issued but not yet effective (cont d) The initial application of the above standards, amendments and interpretation are not expected to have any financial impacts to the financial statements, except for (cont d):- MFRS 15 Revenue from Contracts with Customers - Effective 1 January 2017 (cont d) Under MFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The adoption of MFRS 15 will result in a change in accounting policy. The Group is currently assessing the impact of MFRS 15 and plans to adopt the new standards on the required effective date. 3.6 Significant accounting estimates and judgements Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Company s accounting policies and reported amounts of assets, liabilities, income and expenses, and disclosures made. Estimates and experience assumptions are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results Estimation uncertainty The information about significant judgements, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses are discussed below. Useful lives of depreciable assets Management estimates the useful lives of the property, plant and equipment to be within 5 to 50 years and reviews the useful lives of depreciable assets at the end of each reporting date. At 31 December 2015, management assesses that the useful lives represent the expected utility of the assets to the Group and the Company. Actual results, however, may vary due to change in the expected level of usage and technological developments, which resulting the adjustment to the Group s and the Company s assets. ~ 47 ~

49 3. BASIS OF PREPARATION 3.6 Significant accounting estimates and judgements (cont d) Estimation uncertainty (cont d) Useful lives of depreciable assets (cont d) The carrying amount of the Group s and the Company s property, plant and equipment at the end of the reporting date are disclosed in Note 5 to the financial statements. Impairment of non-financial assets An impairment loss is recognised for the amount by which the asset s or cashgenerating unit s carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows management makes assumptions about future operating results. The actual results may vary, and may cause significant adjustments to the Group s assets within the next financial year. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to assetspecific risk factors. Further details of the carrying values and key assumptions applied in the impairment assessment of investment in subsidiary, goodwill and sensitivity analysis to changes in the assumptions are disclosed in Note 7 and 8 respectively to the financial statements. Impairment of loans and receivables The Group and the Company assess at end of 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 and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtors 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 of assets with similar credit risk characteristics. The carrying amount of the Group s and the Company s loans and receivables at the end of the reporting date is as summarised in Note 11, 13, 14 and 15 to the financial statements. ~ 48 ~

50 3. BASIS OF PREPARATION 3.6 Significant accounting estimates and judgements (cont d) Estimation uncertainty (cont d) Deferred tax assets Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which all the deductible temporary differences can be utilised. Significant management estimation 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. The unrecognised deferred tax assets of the Group and of the Company are disclosed in Note 9 to the financial statements Significant management judgements The following are significant management judgements in applying the accounting policies of the Group and of the Company that have the most significant effect on the financial statements. Internally generated research and development costs Significant judgement is required in distinguishing research from the development phase. Development costs are recognised as an asset when all the criteria are met, whereas research costs are expensed as incurred. To distinguish any research-type project phase from the development phase, it is the Group s accounting policy to also require a detailed forecast of sales or cost savings expected to be generated by the intangible asset. The forecast is incorporated into the Group s overall budget as the capitalisation of development costs commences. This ensures that managerial accounting, impairment testing procedures and accounting for internally-generated intangible assets is based on the same data. The Group s management also monitors whether the recognition requirements for development costs continue to be met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems after the time of recognition. ~ 49 ~

51 4. SIGNIFICANT ACCOUNTING POLICIES The Group and the Company apply the significant accounting policies, as summarised below, consistently throughout all periods presented in the financial statements. 4.1 Consolidation Subsidiary Subsidiaries are entities, including structured entities, controlled by the Company. Control exists when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. Besides, the Group considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee s return. Investment in subsidiary is stated at cost less any impairment losses in the Company s financial position, unless the investment is held for sale or distribution. Upon the disposal of investment in a subsidiary, the difference between the net disposal proceeds and its carrying amount is included in profit or loss Basis of consolidation The Group financial statements consolidate the audited financial statements of the Company and all of its subsidiaries, which have been prepared in accordance with the Group s accounting policies. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. The financial statements of the Company and its subsidiaries are all drawn up to the same reporting date. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. Changes in the Company owners ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent. ~ 50 ~

52 4. SIGNIFICANT ACCOUNTING POLICIES 4.1 Consolidation (cont d) Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes in the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with MFRS 139 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of MFRS 139, it is measured in accordance with the appropriate MFRS. Goodwill in initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. ~ 51 ~

53 4. SIGNIFICANT ACCOUNTING POLICIES 4.1 Consolidation (cont d) Business combinations and goodwill (cont d) Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained Loss of control Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained Non-controlling interests Non-controlling interests at the end of the reporting date, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if that results in a deficit balance. 4.2 Foreign currency translation The Group s financial statements are presented in RM, which is also the Group s functional currency. ~ 52 ~

54 4. SIGNIFICANT ACCOUNTING POLICIES 4.2 Foreign currency translation (cont d) Foreign currency transactions and balances Transactions in foreign currencies are initially recorded at the functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when fair value is determined. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profits 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. 4.3 Property, plant and equipment Property, plant and equipment are measured at cost less accumulated depreciation and less any impairment losses. 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 the initial recognition, freehold land and building are stated at their revalued amount, being its fair value at the date of revaluation, less subsequent accumulated depreciation and subsequent impairment losses, if any. Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the financial year. Any revaluation increase arising from the revaluation is credited to revaluation reserves account, except when the increase is recognised in the profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. Any revaluation decrease arising from the revaluation is recognised in profit or loss, except when the decrease is debited to the revaluation reserves account to the extent of any credit balance existing in the revaluation reserves account in respect of that asset. Revaluation surplus is transferred directly to retained profits when the asset is retired or disposed of. ~ 53 ~

55 4. SIGNIFICANT ACCOUNTING POLICIES 4.3 Property, plant and equipment (cont d) Cost includes expenditures that are directly attributable to the acquisition of the assets and any other costs directly attributable to bringing the asset to working condition for its intended use, cost of replacing component parts of the assets, and the present value of the expected cost for the decommissioning of the assets after their use. All other repair and maintenance costs are recognised in profit or loss as incurred. Depreciation is recognised on the straight line method in order to write off the cost or valuation of each asset over its estimated useful life. Freehold land with an infinite life is not depreciated. Other property, plant and equipment are depreciated based on the estimated useful lives of the assets as follows:- Building Plant and machinery Office equipment Motor vehicles Furniture and fittings Renovation 2% 20% 15% - 20% 20% 15% 15% The residual values, useful lives and depreciation method are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable, or at least annually 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 plant and equipment. Property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Gains or losses arising on the disposal of plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss. 4.4 Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or asset or the arrangement conveys a right to use the asset, even if that right is not explicitly specific in an arrangement. Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. ~ 54 ~

56 4. SIGNIFICANT ACCOUNTING POLICIES 4.4 Lease (cont d) Finance lease Minimum lease payments made under finance leases are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the profit or loss. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term Operating leases Leases, where the Group does not assume substantially all the risks and rewards of ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred. 4.5 Investment properties Investment properties are properties which are owned to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment properties are treated as long-term investment and are measured at cost, including transaction costs less any accumulated depreciation and impairment losses. Depreciation is recognised on the straight-line method in order to write off the cost over its estimated useful life and the depreciation rate of the investment properties is 2% per annum. ~ 55 ~

57 4. SIGNIFICANT ACCOUNTING POLICIES 4.5 Investment properties (cont d) The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Investment properties are derecognised when either they are disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from the disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in the profit or loss in the financial year of retirement or disposal. 4.6 Development costs The costs arising from development expenditures on an internally developed products are recognised as an intangible asset when it relates to the production of new or substantively improved products and when the Group can demonstrate the technical feasibility to develop the product so that it will be available for use or sale, its intention to complete and its ability to sell the product, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditures during development. Development expenditure not satisfying the criteria mentioned and expenditure arising from research or from the research phase of internal projects are recognised in profit or loss as incurred. Development expenditure of the Group comprises of labour and material costs incurred in the development of a prototype of the Group s new telecommunications network design and engineering. Development costs have a finite useful life of 5 years and are assessed for impairment whenever there is an indication that the development cost may be impaired. Development costs will be amortised once the products under development are commercialised. Development cost initially recognised as an expense is not recognised as an asset in subsequent periods. ~ 56 ~

58 4. SIGNIFICANT ACCOUNTING POLICIES 4.7 Financial instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the Group or the Company becomes a party to the contractual provisions of the financial instrument. Financial assets and financial liabilities are measured initially at fair value plus transactions costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value. Financial assets and financial liabilities are measured subsequently as described below Financial assets categorisation and subsequent measurement For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition:- (a) (b) (c) (d) financial assets at fair value through profit or loss; held-to-maturity investments; loans and receivables; and available-for-sale financial assets. The category determines subsequent measurement and whether any resulting income and expense is recognised in profit or loss or in other comprehensive income. All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at the end of each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets. A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profit or loss. At the reporting date, the Group and the Company carry only loans and receivables on their statements of financial position. ~ 57 ~

59 4. SIGNIFICANT ACCOUNTING POLICIES 4.7 Financial instruments (cont d) Financial assets categorisation and subsequent measurement (cont d) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. Gains or losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. The accrued billings, amount due from a subsidiary, cash and cash equivalents, trade and other receivables fall under this category of financial instruments. Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the end of the reporting date which are classified as non-current Financial liabilities categorisation and subsequent measurement After the initial recognition, financial liability is classified as:- (a) (b) (c) financial liability at fair value through profit or loss; other liabilities measure at amortised cost using the effective interest method; and financial guarantee contracts. A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. At the reporting date, the Group and the Company carry only other liabilities measured at amortised cost on their statements of financial position. Other liabilities measured at amortised cost The other liabilities include borrowings, amount due to a Director, finance lease liabilities, trade and other payables. Other liabilities are 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 end of the reporting date. ~ 58 ~

60 4. SIGNIFICANT ACCOUNTING POLICIES 4.7 Financial instruments (cont d) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. 4.8 Inventories Inventories are stated at the lower of cost and net realisable value after adequate allowance has been made for all damaged, obsolete and slow moving inventories. Inventories comprise raw materials and finished goods. Cost is determined on a first-in-first-out basis. The cost of raw materials shall comprise all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost of finished goods includes raw material, direct labour and an appropriate proportion of production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. 4.9 Impairment of assets Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s or cashgenerating unit s ( CGU ) 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 or CGU 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 using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. ~ 59 ~

61 4. SIGNIFICANT ACCOUNTING POLICIES 4.9 Impairment of assets (cont d) Impairment of non-financial assets (cont d) The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Group s cashgenerating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of ten years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the tenth year. A ten years projection cash flows are used as the Group is engaged in telecommunication industry in which its related products can last for more than 10 years. Products will be enhanced to overcome the rapid changes in the technology. Impairment losses of continuing operations, including impairment on inventories, are recognised in the profit or loss in those expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset s or cash-generating unit s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for asset in prior years. Such reversal is recognised in the profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. Goodwill is tested for impairment annually as at the end of each reporting date, and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. ~ 60 ~

62 4. SIGNIFICANT ACCOUNTING POLICIES 4.9 Impairment of assets (cont d) Impairment of non-financial assets (cont d) The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred loss event ) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Financial assets carried at amortised cost For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continue to be, recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the profit or loss. ~ 61 ~

63 4. SIGNIFICANT ACCOUNTING POLICIES 4.9 Impairment of assets (cont d) Impairment of non-financial assets (cont d) Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the profit or loss Customer contracts Long term contracts Construction contracts are contract negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised over the period of contract as revenue and expenses respectively by reference to the percentage of completion of the contract activity at the end of the reporting date. The Group uses the percentage of completion method to determine the appropriate amount of revenue and costs to be recognised in a period of the contract by reference to the proportion that contract costs incurred for work performed to date bear to the estimated total contract cost. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that is probably recoverable and contract costs are recognised as expenses in the period in which they are incurred. Irrespective whether the outcome of a construction contract can be estimated reliably, when it is probable that contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract work, claims and incentive payments to the extent that it is probably that they will result in revenue and they are capable of being reliably measured. The aggregate of the costs incurred and the profit/loss recognised on each contract is compared against the progress billings up to the year end. Where costs incurred and recognised profits (less recognised losses) exceed progress billings, the balance is shown as amounts due from customers under current assets. ~ 62 ~

64 4. SIGNIFICANT ACCOUNTING POLICIES 4.10 Customer contracts (cont d) Long term contracts (cont d) Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is shown as amounts due to customers under current liabilities. Short term contracts Included in the short term contracts are the costs incurred which referred to as work-in-progress. Work-in-progress comprises direct materials, costs of subcontractors and production overhead directly associated to bringing incomplete short term contracts to its present location and condition Accrued billings Accrued billings represent the fair values of projects completed and revenue recognised in the profit or loss in accordance with the Group s revenue recognition policies, but not yet invoiced at the end of the financial year Cash and cash equivalents Cash and cash equivalents comprise of cash in hand, bank balances, short-term demand deposits, bank overdrafts and highly liquid investments which are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown in current liabilities in the statement of financial position. For the purpose of the financial position, cash and cash equivalents restricted to be used to settle a liability of 12 months or more after the reporting date are classified as non-current assets Equity and reserves An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits. Accumulated losses include all current and prior year losses. Other reserve within equity derived from the capital reduction of share capital. ~ 63 ~

65 4. SIGNIFICANT ACCOUNTING POLICIES 4.14 Tax expense Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that they relates to a business combination or items recognised directly in equity or other comprehensive income. Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the temporary differences arising from the initial recognition of goodwill, the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting year. The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised Goods and Services Tax Goods and Services Tax ( GST ) is a consumption tax based on value-added concept. GST is imposed on goods and services at every production and distribution stage in the supply chain including importation of goods and services, at the applicable tax rate of 6%. Input GST that the Company paid on purchases of business inputs can be deducted from output GST. ~ 64 ~

66 4. SIGNIFICANT ACCOUNTING POLICIES 4.15 Goods and Services Tax (cont d) Revenues, expenses and assets are recognised net of the amount of GST except:- - Where the GST incurred in a purchase of assets or services is not recoverable from the authority, in which case the GST is recognised as part of the cost of acquisition of the assets or as part of the expense item as applicable; and - Receivables and payables that are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statements of financial position 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. Revenue is measured at the fair value of consideration received or receivable. Contract revenue Short term contracts Revenue from providing full turnkey design and engineering solutions for telecommunication networks is recognised when the work done has been completed. Long term contracts Revenue from long term construction contracts is accounted in accordance to the accounting policies as described in Note 4.10 to the financial statements. Rental income Rental income is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis. Interest income Interest income is recognised as it accrues using the effective interest method in profit or loss. ~ 65 ~

67 4. SIGNIFICANT ACCOUNTING POLICIES 4.17 Employee benefits Short-term employees benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the financial 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, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into independent entities of funds and will have no legal or constructive obligation to pay further contribution 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 the profit or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employee Provident Fund ( EPF ) Borrowing costs Borrowing costs consist of interest and other costs that the Group incurred in connection with the borrowing of funds. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the assets during the period of time that is necessary to complete and prepare the asset for its intended use or sale. The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed. All other borrowing costs are expensed in the period in which they are incurred. ~ 66 ~

68 4. SIGNIFICANT ACCOUNTING POLICIES 4.19 Contingencies Where it is not probable that an inflow or an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the asset or the obligation is not recognised in the statements of financial position and is disclosed as a contingent asset or contingent liability, unless the probability of inflow or outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent assets or contingent liabilities unless the probability of inflow or outflow of economic benefits is remote Related parties A related party is a person or entity that is related to the Group. A related party transaction is a transfer of resources, services or obligations between the Group and its related party, regardless of whether a price is charged. (a) A person or a close member of that person s family is related to the Group if that person:- (i) (ii) (iii) Has control or joint control over the Group; Has significant influence over the Group; or Is a member of the key management personnel of the ultimate holding company of the Group, or the Group. (b) An entity is related to the Group if any of the following conditions applies:- (i) (ii) (iii) (iv) (v) (vi) (vii) The entity and the Group are members of the same group; One entity is an associate or joint venture of the other entity; Both entities are joint ventures of the same third party; One entity is a joint venture of a third entity and the other entity is an associate of the third entity; The entity is a post-employment benefit plan for the benefits of employees of either the Group or an entity related to the Group; The entity is controlled or jointly-controlled by a person identified in (a) above; A person identified in (a)(i) above has significant influence over the entity or is a member of the key management personnel of the ultimate holding company or the entity; or (viii) The entity, or any member of a Company of which its part, provides key management personnel services to the Company or to the parents of the Company. ~ 67 ~

69 4. SIGNIFICANT ACCOUNTING POLICIES 4.21 Operating segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenue and expenses that relate to transactions with any of the Group s other components. All operating segments operating results are reviewed regularly by the chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available Earnings per ordinary share The Group presents basic and diluted earnings per share for its ordinary shares ( EPS ). Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees, if any. ~ 68 ~

70 5. PROPERTY, PLANT AND EQUIPMENT Group At Valuation At Cost Freehold land Building Plant and machinery Office equipment Motor vehicles Furniture and fittings Renovation Total Restated RM RM RM RM RM RM RM RM Cost or Valuation Balance as at ,800,000 1,300,000 3,129,621 9,696,736 5,018,564 91, ,652 27,139,308 Additions , , ,551 Disposals - - (104,657) (78,500) (98,968) - - (282,125) Written off - - (14,709) (6,099,870) (21,502) (12,436) - (6,148,517) Balance as at ,800,000 1,300,000 3,552,624 3,518,366 5,192,276 79, ,652 21,545,217 Disposals - - (938,498) (1,693,190) (4,416,358) - (102,652) (7,150,698) Written off (104,527) - - (104,527) Transferred to assets held for sales (7,800,000) (1,300,000) (9,100,000) Balance as at ,614,126 1,825, ,391 79,299-5,189,992 Accumulated depreciation Balance as at ,601,287 5,473,398 3,728,625 91,715 46,970 10,941,995 Charge for the year - 26, ,754 1,264, ,836-15,398 2,614,970 Disposals - - (63,590) (74,066) (98,620) - - (236,276) Written off - - (9,790) (3,573,570) (21,498) (12,424) - (3,617,282) Balance as at ,000 2,173,661 3,090,744 4,271,343 79,291 62,368 9,703,407 Charge for the year - 26, , , ,814-10,047 1,415,098 Disposals - - (559,950) (1,693,177) (4,282,631) - (72,415) (6,608,173) Written off (104,525) - - (104,525) Transferred to assets held for sales - (52,000) (52,000) Balance as at ,201,093 1,776, ,001 79,291-4,353,807 Net carrying amount ,033 48, , , ,800,000 1,274,000 1,378, , , ,284 11,841,810 ~ 69 ~

71 5. PROPERTY, PLANT AND EQUIPMENT Company Valuation Freehold land Building Total RM RM RM Cost or valuation Balance as at / ,800,000 1,300,000 9,100,000 Transferred to assets held for sales (7,800,000) (1,300,000) (9,100,000) Balance as at Accumulated depreciation Balance as at Charge for the year - 26,000 26,000 Balance as at ,000 26,000 Charge for the year - 26,000 26,000 Transferred to assets held for sales - (52,000) (52,000) Balance as at Net carrying amount ,800,000 1,274,000 9,074,000 The title deed of the freehold land and building is still under the name of its subsidiary and has yet to be transferred to the name of the Company as at the reporting date. Assets pledged as securities to licensed banks The freehold land and building of the Group and of the Company are pledged as securities to licensed banks for credit facilities granted to a subsidiary. Assets held under finance lease The details of assets under finance lease are:- Group RM RM Motor vehicle Additions - 294,182 Net carrying amount 373, ,594 Plant and machinery and office equipment Net carrying amount 78, ,959 Leased assets are pledged as security for the related finance lease liabilities. ~ 70 ~

72 5. PROPERTY, PLANT AND EQUIPMENT Revaluation of freehold land and building The Group s and the Company s freehold land and building are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent depreciation and subsequent accumulated impairment losses. There were no transfers between Level 1 and Level 2 during the financial year. Level 2 fair values of freehold land and building have been generally derived using Comparison Method of Valuation. There has been no change to the valuation technique during the year. Comparison Method of Valuation entails comparing the sales price of the properties in close proximity are adjusted for differences in key attributes such as property size. The most significant input into this valuation approach is price per square foot of comparable properties. An external, independent and qualified valuer was appointed to determine the fair value of the freehold land and building on 31 December The revaluation surplus net of applicable deferred tax was credited to other comprehensive income and is shown in Reserve under the equity. The revaluation deficit in relation to building was charged to profit or loss immediately. If freehold land and building were measured using the historical cost model, the carrying amount would be as follows:- Group RM RM Freehold land Cost 1,466,667 1,466,667 Less: Accumulated depreciation - - 1,466,667 1,466,667 Group RM RM Building Cost 1,533,333 1,533,333 Less: Accumulated depreciation (490,667) (460,000) 1,042,666 1,073,333 Total net carrying amount 2,509,333 2,540,000 The above freehold land and building have been reclassed to non-current assets held for sales as an auction on the properties will be conducted by the lender on 5 May 2016, as disclosed in Note 35 to the financial statements. ~ 71 ~

73 6. INVESTMENT PROPERTY/NON-CURRENT ASSETS HELD FOR SALES 6.1 Investment properties Building Group RM RM Cost At 1 January 724, ,024 Transferred to non-current asset held for sale (724,024) - At 31 December - 724,024 Less: Accumulated depreciation/amortisation At 1 January 226, ,665 Charge for the year 15,553 15,552 Impairment during the year 82,254 - Transferred to non-current asset held for sale (324,024) - At 31 December - 226,217 Net carrying amount - 497,807 Market value based on similar properties at proximity area - 796,000 The market value at the reporting date was obtained from the Director, determined by reference to similar buildings which have been sold or are being offered for sale. No independent valuation by professional valuer has been performed on these investment properties. This investment property had been disposed subsequent to the reporting date for a price of RM400,000 on 7 March As such, the asset has been transferred to noncurrent asset held for sale as at the reporting date. Investment properties under leases Investment properties comprise freehold shoplots that are leased to a third party and the lease contains a cancellable period of 2 years. Subsequent renewals are negotiated with the lessee on an average renewal period of 1 year. No contingent rents are charged. Group RM RM Rental income 16,500 31,500 Direct operating expense - 26,838 The investment properties are pledged to a licensed bank as security for credit facilities granted to a subsidiary. ~ 72 ~

74 6. INVESTMENT PROPERTY/NON-CURRENT ASSETS HELD FOR SALES 6.2 Non-current assets held for sales Group Company RM RM RM RM Transferred from investment property 400, Transferred from property, plant and equipment (Note 5) 9,048,000-9,048,000-9,448,000-9,048, INVESTMENT IN SUBSIDIARIES Company RM RM At cost:- Unquoted investment 69,800,000 69,800,000 Less: Impairment on investment in subsidiary (69,800,000) - Details of the subsidiaries are as follows:- - 69,800,000 Name Effective interest Principal activities 2015 % 2014 % R&A Telecommunication Sdn Providing full turnkey design and Bhd. # engineering solutions for telecommunication networks. R&A Metals Sdn. Bhd.* # Fabrication and installation of telecommunication infrastructure. * Wholly-owned subsidiary of R&A Telecommunication Sdn. Bhd. All the subsidiaries were incorporated in Malaysia. # Auditors had issued Disclaimer of opinion to its financial statements. For the purpose of impairment testing, the recoverable amount of the investment has been determined based on value in use calculations using cash-flow projections from financial budgets approved by management covering a 5 year period. The details of the assumptions used are disclosed in Note 8.2 to the financial statements. Investment in subsidiaries was impaired during the year as the subsidiaries have ceased their operations and there is no definite future plan yet. ~ 73 ~

75 8. INTANGIBLE ASSETS Group RM RM Development costs - 2,034,005 Goodwill - 49,724, Development costs - 51,758,352 Group RM RM Cost At 1 January/31 December 4,068,011 4,068,011 Less: Amortisation At 1 January/31 December - - Less: Impairment At 1 January 2,034,006 - Charge for the year 2,034,005 2,034,006 At 31 December 4,068,011 2,034,006 Net carrying amount - 2,034,005 Development cost includes labour and material costs incurred by a subsidiary for the development of a prototype of the subsidiary s new telecommunications network design and engineering. No amortisation is provided as the prototype is under the development stage. The expected amortisation period of the development costs will be 5 years. For the purpose of impairment testing, the development costs have been allocated to cash generating units ( CGU ) according to the subsidiary s operation. The recoverable amounts of the CGU have been determined based on value in use calculations using cash-flow projections from financial budgets approved by management covering a 5 year period. The details of assumptions used are disclosed in Note 8.2 to the financial statements. 8.2 Goodwill Group RM RM Goodwill 49,724,347 49,724,347 Less: Impairment (49,724,347) - ~ 74 ~ - 49,724,347

76 8. INTANGIBLE ASSETS 8.2 Goodwill (cont d) Impairment testing for cash-generating units containing goodwill For the purpose of impairment testing, goodwill is allocated to the Group s operating divisions which represent the lowest cash-generating unit level within the Group at which the goodwill is monitored for internal management purposes. The recoverable amount for goodwill was based on its value in use and was determined by discounting the future cash flows generated from the continuing use of the Group s cash-generating unit and was based on the following key assumptions: - Cash flows were projected based on actual operating results and a 5 year business plan due to the Company is engaged in telecommunication industry which required longer period to reflect the profitability of the products. - Revenue was projected at anticipated capacity of Nil (2014: 80%) out of its total number of telecommunication poles and advertisement billboards. - Revenue was projected at anticipated average revenue growth of approximately Nil (2014: 83%). - A discount rate of Nil (2014: 3.5%) was applied in determining the recoverable amount of the unit. The discount rate was estimated based on the weighted average cost of capital of the Company plus a reasonable risk premium. With regards to the assessments of value-in-use of these CGU, management believes that no reasonably possible changes in any of the key assumptions would cause the carrying value of this unit to differ materially from their recoverable amounts except for the changes in prevailing operating environment which is not ascertainable. All intangible assets had been impaired during the year due to the fact that the Group had ceased operation during the financial year and no definite future plan at this moment. 9. DEFERRED TAX ASSETS Group RM RM At 1 January 2,097,000 2,097,000 -Recognised in profit or loss (2,097,000) - At 31 December - 2,097,000 ~ 75 ~

77 9. DEFERRED TAX ASSETS The deferred tax assets as at the end of the reporting period are made up of the temporary differences arising from:- Group RM RM Carrying amount of qualifying plant and equipment - (657,000) Unabsorbed business losses - 1,607,000 Unutilised capital allowances - 712,000 Impairment of receivables - 435,000 Unrecognised deferred tax assets - 2,097,000 Group RM RM Carrying amount of qualifying plant and equipment 50,000 (2,452,000) Unabsorbed business losses (43,411,000) (14,234,000) Unutilised capital allowances (5,874,000) (3,618,000) Impairment of receivables (11,659,000) 606,000 (60,894,000) (19,698,000) Company RM RM Unabsorbed business losses (2,192,000) (1,901,000) Unutilised capital allowances (2,300,000) (2,300,000) (4,492,000) (4,201,000) Deferred tax assets are not recognised in respect of these items as the Company has a recent history of losses. The unabsorbed business losses and unutilised capital allowances of the Group and of the Company can be carried forward to offset against future taxable profit of the subsidiaries and the Company respectively. ~ 76 ~

78 10. INVENTORIES Group RM RM Raw materials - 921,296 Finished goods - 136,216 At carrying amount - 1,057,512 Inventories recognised as cost of sales - 5,124, ACCRUED BILLINGS The accrued billings is detailed in Note 4.11 to the financial statements. 12. WORK-IN-PROGRESS The work-in-progress is detailed in Note 4.10 to the financial statements. 13. TRADE RECEIVABLES 2015 RM Group 2014 RM Trade receivables 11,459,305 20,039,714 Less: Impairment loss At 1 January (840,454) (1,820,553) Recognised (9,044,819) (39,745) Reversed - 1,019,844 At 31 December (9,885,273) (840,454) 1,574,032 19,199,260 Trade receivables are non-interest bearing and are generally on 60 days to 18 months (2014: 60 days to 18 months) term. They are recognised at their original invoice amounts which represent their fair values on initial recognition. RM8,776,610 (2014: RM8,427,266) of the trade receivables have been pledged as securities for banking facilities granted to a subsidiary by licensed banks. The trade receivables are impaired due to their recoverability are in doubt as a result of slow collection. ~ 77 ~

79 14. OTHER RECEIVABLES Group Company RM RM RM RM Non-trade receivables 2,021,098 2,127,285 6,000 - Less: Impairment loss - - At 1 January (414,213) (179,936) - - Recognised (1,477,715) (234,277) - - At 31 December (1,891,928) (414,213) ,170 1,713,072 6,000 - Deposits 360, , Prepayments - 520, , ,654 3,016,971 6, ,233 Other receivables are impaired due to their recoverability are in doubt as a result of slow collection. 15. AMOUNT DUE FROM A SUBSIDIARY Company Amount due from a subsidiary is non-trade related, unsecured, bears no interest and is repayable on demand. 16. FIXED DEPOSITS WITH LICENSED BANKS Group The fixed deposits with licensed banks are pledged as securities for banking facilities granted to a subsidiary. The interest rates ranges from Nil (2014: 2.55% to 3.30%) per annum. ~ 78 ~

80 17. SHARE CAPITAL Group and Company Number of ordinary shares of RM0.05 each RM RM Authorised:- At 1 January 6,000,000,000 1,500,000, ,000, ,000,000 Created during the financial year - 4,500,000, ,000,000 Capital reduction (75,000,000) At 31 December 6,000,000,000 6,000,000, ,000, ,000,000 Issued and fully paid:- At 1 January 966,862, ,966,000 48,343,100 87,896,600 Private placement - 87,896,000-4,394,800 Capital reduction (43,948,300) At 31 December 966,862, ,862,000 48,343,100 48,343,100 The holders of ordinary shares are 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 residual assets. 18. RESERVES Non-distributable Group Company RM RM RM RM Share premium At 1 January 3,637,684 3,897,679 3,637,684 3,897,679 Less: Issuance of shares expenses - (259,995) - (259,995) At 31 December 3,637,684 3,637,684 3,637,684 3,637,684 Capital reserve At 1 January 34,704,591-34,704,591 - Arising from capital reduction - 34,704,591-34,704,591 At 31 December 34,704,591 34,704,591 34,704,591 34,704,591 Revaluation reserve At 1 January/ 31 December 4,322,500 4,322, ,664,775 42,664,775 38,342,275 38,342,275 ~ 79 ~

81 18. RESERVES Non-distributable (cont d) Share premium Share premium represents the excess of the consideration received over the nominal value of shares issued by the Company. It is not to be distributed by way of cash dividends and its utilisation shall be in manner as set out in Section 60(3) of the Companies Act, Warrants reserve On 23 March 2012, the Company issued 87,896,600 warrants pursuant to the bonus issue of 1 warrant for every 10 existing ordinary shares held in the Company. The warrants were listed on the ACE Market of Bursa Malaysia Securities on 29 March The warrants issued are constituted by a Deed Poll dated 8 March The main features of the warrants are as follows:- (i) (ii) (iii) (iv) (v) Each warrant entitles the registered holder at any time during the exercise period to subscribe for one new ordinary share of RM0.10 each in the Company at an exercise price of RM0.10 per ordinary share. The exercise price and the number of warrants are subject to adjustment in the event of alteration to the share capital of the Company in accordance with the provisions set out in the Deed Poll. The warrants shall be exercisable at any time within the period commencing on and including the date of issue of the warrants until the last market day prior to the fifth anniversary of the date of issue of the warrants. All new ordinary shares to be issued arising from the exercise of the warrants shall rank pari passu in all respects with the then existing ordinary shares of the Company except that such new ordinary shares shall not be entitled to any dividends, rights, allotments and other distributions on or prior to the date of allotment of the new ordinary shares arising from the exercise of the warrants. At the expiry of the exercise period, any warrants which have not been exercised will lapse and cease to be valid for any purpose. The fair value of the 87,896,600 free warrants was valued at zero upon the issuance. No warrant was exercised since the date of issuance of the warrants. Capital reduction On 5 March 2015, the Proposed Par Value Reduction pursuant to Section 64 of the Companies Act, 1965 took effect with the lodgement of the Court Order with the Companies Commission of Malaysia. Pursuant to the Par Value Reduction, the par value of each existing shares in the Company has been reduced from RM0.10 to RM0.05 each comprising a reduction of the issued and paid-up share capital of the Company via the cancellation of RM0.05 of the par value of each ordinary share. ~ 80 ~

82 18. RESERVES Non-distributable (cont d) Revaluation reserve The revaluation reserve represents the increase in the fair value of freehold land, net of tax. 19. DEFERRED TAX LIABILITIES Group RM RM At 1 January/31 December 227, ,500 The deferred tax liabilities as at the end of the reporting period are made up of the temporary differences arising from revaluation surplus. 20. FINANCE LEASE LIABILITIES Group RM RM Minimum lease payments - less than 1 year 303, ,886 - between 1 and 5 years 276, ,193 - more than 5 years 85, , ,785 1,002,003 Less: Future finance charges on finance lease (61,759) (108,745) Present value of finance lease liabilities 604, ,258 Present value of finance lease liabilities - less than 1 year 285, ,812 - between 1 and 5 years 238, ,512 - more than 5 years 79, ,934 Total finance lease liabilities 604, ,258 The interest rates of the finance lease liabilities of the Group ranged from 2.48% to 5.25% (2014: 2.48% to 5.25%) per annum. The finance leases agreements are non-cancellable but do not contain any further restrictions. ~ 81 ~

83 21. TRADE PAYABLES Group Trade payables are non-interest bearing and are generally on 30 days to 90 days (2014: 30 days to 90 days) terms. 22. OTHER PAYABLES Group Company RM RM RM RM Non-trade payables 956,691 1,560, , ,819 Accruals 1,328,816 2,834,656 29,000 61,000 Deposits received 76,173 14, ,361,680 4,409, , ,819 Included in non-trade payables are accrued director fees amount to RM24,500 (2014: RM26,000). The Group has made arrangement with the relevant authority to repay the EPF by installment. 23. AMOUNT DUE TO DIRECTORS Amount due to Directors is non-trade related, unsecured, bears no interest and is repayable on demand. 24. BANK BORROWINGS Group RM RM Secured:- Current Bank overdrafts 31,910,424 27,318,241 Trust receipts - 9,757,316 31,910,424 37,075,557 (a) Bank overdrafts and trust receipts The above facilities were secured by the following:- (i) (ii) (iii) (iv) Facility agreement; Assets purchase agreement; Note of assignment cum instruction to remit all contract proceeds from a few customers; Joint and several guarantee by a Director of the Company and a person connected to the Director; ~ 82 ~

84 24. BANK BORROWINGS (a) Bank overdrafts and trust receipts (cont d) 25. REVENUE The above facilities were secured by the following (cont d):- (v) Corporate guarantee by the Company; (vi) First party second to fifth legal charge over freehold land and building of the Company; (vii) Loan agreement cum Deed of Assignment in respect of the land and building of the Company; (viii) First legal charge over the investment properties; (ix) Legal charge over fixed deposit to be placed by way of sinking fund equivalent to 5% of each net progress payment received and credited into project account; and (x) Charge on fixed deposits together with interest accrued. The bank overdraft bear interest rates ranged from Nil (2014: 8.10% to 8.35%) per annum. During the year, the Company has failed to meet the repayment obligations as disclosed in Note 35 to the financial statements. Group RM RM Sale of goods 236, ,159 Contract revenue:- - short term contracts 7,789,758 31,371, LOSS BEFORE TAX 8,026,274 32,351,221 Loss before tax has been determined after charging/(crediting) amongst others, the following items:- Group Company RM RM RM RM Auditors remuneration - statutory audit 45,000 82,000 24,000 29,000 - others 5,000 5, Bad debts written off 1,714,702 7,161, Depreciation:- - investment properties 15,553 15, property, plant and equipment 1,415,098 2,614,970 26,000 26,000 ~ 83 ~

85 26. LOSS BEFORE TAX Loss before tax has been determined after charging/(crediting) amongst others, the following items (cont d):- Group Company RM RM RM RM Directors:- - fee 244, , , ,000 - emoluments 225, , Impairment loss on development cost 2,034,005 2,034, Impairment on goodwill 49,724, Impairment loss on investment in subsidiary ,800,000 - Impairment loss on receivables 10,522, , Impairment on amount due from subsidiaries - - 6,633,928 - Impairment on accrued billings 7,789, Impairment on inventories 1,280, Impairment on work-in-progress 8,536, Impairment on non-currect assets held for sales 82, Interest expense on:- - bank overdrafts 2,039,124 2,088, trust receipts 77, , finance leases 40,926 97, Interest income (76,007) (168,517) (6) (2,070) Plant and equipment:- - written off 2 2,531, gain on disposal (1,133,313) (121,470) - - Realised loss on foreign exchange 6,371 7, Rental income (62,330) (128,125) - - Rental expense for:- - accommodation and office 104, , office equipment 73,209 88, motor vehicles 3,105 6, Reversal of impairment loss on receivables - (1,019,844) - - The Directors remuneration are detailed as below:- Group Company RM RM RM RM Executive Directors Salaries and allowances 204, , Social security contributions EPF 21,600 65, Fee 94, , , ~ 84 ~

86 26. LOSS BEFORE TAX Loss before tax has been determined after charging/(crediting) amongst others, the following items (cont d):- The Directors remuneration are detailed as below (cont d):- Group Company RM RM RM RM Non-Executive Directors Fee 149, , , ,000 Total 470, , , , TAX EXPENSE Group Company RM RM RM RM Current tax:- - (Over)/Under provision in prior year (194,379) 194, Deferred tax:- - Current year (Note 9) 2,097, ,902, , Malaysian income tax is calculated at the statutory rate of 25% (2014: 25%) of the estimated assessable profits. However, the above amounts are subject to the approval of the Inland Revenue Board of Malaysia. ~ 85 ~

87 27. TAX EXPENSE The numerical reconciliation between the income tax expense and the statutory tax rate are as follows:- Group Company RM RM RM RM Loss before tax (88,519,265) (26,466,874) (77,441,984) (626,407) At Malaysian statutory tax rate of 25% (22,129,816) (6,616,719) (19,360,496) (156,602) Non-allowable expenses 13,840,150 2,800,640 19,284,454 86,602 Changes in unrecognised deferred tax assets 10,307,749 3,663,436 73,000 70,000 Deferred tax recognised in difference tax rate 78, ,643 3,042 - (Over)/under provision in prior year (194,379) 194, LOSS PER SHARE Basic loss per ordinary shares 1,902, , Basic loss per share is calculated by dividing loss for the financial year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year, excluding treasury shares and including mandatorily convertible instruments held by the Company. Group RM RM Loss attributable to ordinary equity holders of the Company (90,421,886) (26,661,253) Weighted average number of ordinary shares at 31 December 966,862, ,597,123 Basic loss per ordinary shares (sen) (0.09) (0.03) ~ 86 ~

88 28. LOSS PER SHARE Diluted loss per ordinary shares Diluted loss per share is not applicable for the financial year as the unexercised convertible warrants were anti-dilution in nature. This is due to the average market share price of the Company being below the exercise price of warrants. 29. EMPLOYEE BENEFITS EXPENSE Group Company RM RM RM RM Directors emoluments 225, , Directors fee 244, , , ,000 Salaries, wages and other emoluments 3,013,111 6,816,288 47,694 73,446 Social security contributions 31,429 73, EPF 297, ,467 5,587 8,713 Other benefits 47, ,331 1,200 4, RELATED PARTY DISCLOSURES 3,860,095 8,501, , ,185 (a) Related party transaction There are no related party transaction during the financial year. (b) Outstanding balances arising from related party transactions The outstanding balances arising from related party transactions as at the reporting date were disclosed in Note 15 to the financial statements. (c) Compensation of key management personnel Key management personnel include Directors of the Company, and persons who have authority and responsibility for planning, directing and controlling the activities of the Company, either directly or indirectly. ~ 87 ~

89 30. RELATED PARTY DISCLOSURES (c) Compensation of key management personnel (cont d) The remuneration of key management personnel during the financial year is disclosed as follows:- Group Company RM RM RM RM Key management personnel Salaries and other emoluments 204, , Social security contributions 207 1, Fee 94, EPF 21,600 83, , , CONTINGENT LIABILITIES AND FINANCIAL GUARANTEE Secured Company RM RM Property, plant and equipment pledged for banking facilities granted to subsidiary - 9,074,000 Corporate guarantees granted to subsidiary - 37,075,557 Potential litigation claims - 96,204 The corporate guarantees do not have a determinable effect on the terms of the credit facilities due to the financial institutions requiring parent guarantee as a pre-condition for approving the credit facilities granted to the subsidiary. The actual terms of the credit facilities are likely to be the best indicator of at market terms and hence the fair value of the credit facilities are equal to the credit facilities amount received by the subsidiary. As such, there is no fair value on the corporate guarantees to be recognised in the financial statements as also mentioned in Note 33 to the financial statements. ~ 88 ~

90 32. OPERATING SEGMENTS Business segments For the management purposes, the Group is organised into business units based on their products and services, which comprises the following:- Civil, Mechanical and Electrical Works ( CME ) Telecommunication Equipment Installation ( TI ) (i) Infrastructure works (ii) Physical equipment installation (iii) Fixed network solutions (include outside plant, open trenching, micro-trenching, horizontal directional drilling for optical fiber installation) (i) Outdoor radio frequency design (ii) Drive-test, post processing, analysis and optimisation of coverage (iii) Equipment commissioning and integration (iv) Managed services operations and maintenance In-Building System ( IBS ) (i) Radio frequency design within buildings (ii) Equipment installation, commissioning and integration within buildings (iii) Managed services operations and maintenance within buildings (iv) Fixed network solutions within buildings Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain respects as explained in the table below, is measured differently from operating profit or loss in the financial statements. Transfer prices between operating segments are on a negotiated basis. ~ 89 ~

91 32. OPERATING SEGMENTS Business segments (cont d) Group 2015 CME TI IBS Eliminations Total Note Revenue External customers 4,372,801 12,531 3,640,942-8,026,274 Inter-segment i Total revenue 4,372,801 12,531 3,640,942-8,026,274 Results:- Interest income 76,007 Interest expense (2,158,014) Depreciation (1,430,651) Tax expenses (1,902,621) Other non-cash expenses ii (80,551,323) Segment loss (90,421,886) Assets:- Segment assets 13,042,418 Liabilities:- Segment liabilities 38,077, Revenue External customers 22,614,077 9,064, ,283-32,351,221 Inter-segment i 817, (817,551) - Total revenue 23,431,628 9,064, ,283 (817,551) 32,351,221 Results:- Interest income 168,517 Interest expense (2,994,932) Depreciation (2,630,522) Tax income (194,379) Other non-cash expenses ii (11,879,252) Segment loss (26,661,253) Assets:- Additions to non-current assets iii (1,197,455) Segment assets 111,311,726 Liabilities:- Segment liabilities 45,924,788 Notes to the nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements:- (i) Inter-segment revenues are eliminated on consolidation. ~ 90 ~

92 32. OPERATING SEGMENTS Business segments (cont d) Notes to the nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements (cont d):- (ii) Other material non-cash expenses consist of the following items:- Group RM RM Impairment loss on receivables (10,522,534) (274,022) Impairment loss on development cost (2,034,005) (2,034,006) Impairment on goodwill (49,724,347) - Impairment on inventories (1,280,074) - Impairment on work-in-progress (8,536,959) - Impairment on accrued billing (7,789,758) - Impairment on non-current assets held for sales (82,254) - Bad debts written off (1,714,702) (7,161,459) Property, plant and equipment written off (2) (2,531,235) Gain on disposal of property, plant and equipment 1,133, ,470 (iii) Additions to non-current assets consist of:- (80,551,322) (11,879,252) Group RM RM Property, plant and equipment - 836,551 Geographical information The Group s segmental information by geographical location is not shown as all the activities of the Group are in Malaysia. Major customers Revenue from two (2014: three) major customers contributed 100% (2014: 93%) arising from the CME segment, Nil (2014: single) customer contributed Nil (2014: 99%) arising from the TI segment, and Nil (2014: two) major customers contributed Nil (2014: 99%) arising from IBS segment. ~ 91 ~

93 33. FINANCIAL INSTRUMENTS 33.1 Financial risk management The Group is exposed to financial risks arising from their operations and the use of financial instruments. Financial risk management policy is established to ensure that adequate resources are available for the development of the Group s business whilst managing its risks. The Group operates within clearly defined policies and procedures that are approved by the Board of Directors to ensure the effectiveness of the risk management process. The main areas of financial risks faced by the Group and the Company and the policy in respect of the major areas of treasury activities are set out as follows:- (a) Credit risk Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It is the Group s policy to enter into financial instrument with a diversity of creditworthy counterparties. The Group does not expect to incur material credit losses of its financial assets or other financial instruments. Concentration of credit risk exists when changes in economic, industry and geographical factors similarly affect the group of counterparties whose aggregate credit exposure is significant in relation to the Group s total credit exposure. The Group s portfolio of financial instruments is broadly diversified along industry, product and geographical lines, and transactions are entered into with diverse creditworthy counterparties, thereby mitigate any significant concentration of credit risk. It is the Group s policy that all customers who wish to trade on credit terms is subject to credit verification procedures. The Group does not offer credit terms without the approval of the head of credit control. Receivables As at the end of the reporting date, the maximum exposure to credit risk arising from receivables is limited to the carrying amount in the statements of financial position. With a credit policy in place to ensure the credit risk is monitored on an ongoing basis, management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are stated at their realisable values. A significant portion of these receivables are regular customers that have been transacting with the Group. The Group uses aging analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due more than credit terms granted are deemed to have higher credit risk, and are monitored individually. Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. None of the Group s trade receivables that are neither past due nor impaired have been renegotiated during the financial year. ~ 92 ~

94 33. FINANCIAL INSTRUMENTS 33.1 Financial risk management (cont d) The main areas of financial risks faced by the Group and the Company and the policy in respect of the major areas of treasury activities are set out as follows (cont d):- (a) Credit risk (cont d) Receivables (cont d) As at 31 December 2015, trade receivables of RM1,544,361 (2014: RM15,266,543) were past due but not impaired. These relate to a number of independent customers from whom there is no recent history of default. No impairment has been made as the Board is of the view that the amounts are recoverable. The Group s policy is to make full provisions for all trade receivables that are in dispute, under legal action or where recoveries are considered to be doubtful. The ageing analysis of trade receivables are as follows:- Individually Group Gross impaired Net RM RM RM 2015 Not past due 29,671-29,671 Past due 0 to 30 days 32,054-32,054 Past due 31 to 60 days Past due 61 to 90 days 169, ,882 Past due 91 days to 1 year 1,341,915-1,341,915 Past due more than 1 year 9,885,273 (9,885,273) ,459,305 (9,885,273) 1,574,032 Not past due 3,932,717-3,932,717 Past due 0 to 30 days 2,897,506-2,897,506 Past due 31 to 60 days 901, ,427 Past due 61 to 90 days 135, ,339 Past due 91 days to 1 year 8,877,057-8,877,057 Past due more than 1 year 3,295,668 (840,454) 2,455,214 20,039,714 (840,454) 19,199,260 ~ 93 ~

95 33. FINANCIAL INSTRUMENTS 33.1 Financial risk management (cont d) The main areas of financial risks faced by the Group and the Company and the policy in respect of the major areas of treasury activities are set out as follows (cont d):- (a) Credit risk (cont d) Receivables (cont d) The net carrying amount of trade receivables is considered a reasonable approximate of fair value. The maximum exposure to credit risk is the carrying value of each class of receivables mentioned above. Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements. In respect of trade receivables, the Group is exposed to significant credit risk exposure to a single counterparty as 77% (2014: 66%) of the trade receivables were due from a single debtor (2014: 3 debtors). Intercompany balance The maximum exposure to credit risk is represented by its carrying amount in the statement of financial position of the Company. The Company provides unsecured loans and advances to its subsidiary, and monitors the results of the subsidiary regularly. As at the end of the reporting date, full impairment was made on the amount due from subsidiary. Accrued billings The maximum exposure to credit risk is represented by its carrying amount in the statement of financial position. As at the end of the reporting date, full impairment was made on the accrued billings. Deposits with licensed banks The credit risk for deposits with licensed banks is considered negligible since the counterparties are reputable banks with high quality external credit ratings. Financial guarantee The maximum exposure to credit risk by the Company amounted to RM31,910,424 (2014: RM37,075,557), represented by the outstanding banking facilities as at the end of the reporting date. ~ 94 ~

96 33. FINANCIAL INSTRUMENTS 33.1 Financial risk management (cont d) The main areas of financial risks faced by the Group and the Company and the policy in respect of the major areas of treasury activities are set out as follows (cont d):- (a) Credit risk (cont d) Financial guarantee (cont d) The Company provides corporate guarantee to banks in respect of the banking facilities granted to its subsidiary. The Company monitors on an on-going basis the results of the subsidiary and repayment made by the subsidiary. As at the end of the reporting date, the subsidiary had defaulted on repayment on the borrowings. Financial guarantees have not been recognised as there is no value on the corporate guarantees to be recognised in the financial statements as also mentioned in Note 31 to the financial statements. (b) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due as a result of shortage of funds. In managing its exposures to liquidity risk arises principally from its payables, loans and borrowings, the Group maintains a level of cash and cash equivalents and banking facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due. The Group aims at maintaining a balance of sufficient cash and deposits and flexibility in funding by keeping sources of committed and uncommitted credit facilities from various banks. The summary of the maturity profile based on the contractual undiscounted repayment obligations is as follows: Maturity Group Carrying amount Contractual cash flows Less than 1 year Between 1 and 5 years More than 5 years RM RM RM RM RM 2015 Non-derivative financial liabilities Unsecured:- Trade payables 2,920,685 2,920,685 2,920, Other payables 2,361,680 2,361,680 2,361, Amount due to a Director 53,051 53,051 53, Secured:- Bank borrowings 31,910,424 31,910,424 31,910, Finance lease liabilities 604, , , ,569 85,539 37,849,866 37,911,625 37,549, ,569 85,539 ~ 95 ~

97 33. FINANCIAL INSTRUMENTS 33.1 Financial risk management (cont d) The main areas of financial risks faced by the Group and the Company and the policy in respect of the major areas of treasury activities are set out as follows (cont d):- (b) Liquidity risk (cont d) The summary of the maturity profile based on the contractual undiscounted repayment obligations is as follows (cont d):- Group (cont d) Maturity Carrying Contractual Less than 1 Between 1 More than 5 amount cash flows year and 5 years years RM RM RM RM RM 2014 Non-derivative financial liabilities Unsecured:- Trade payables 3,047,751 3,047,751 3,047, Other payables 4,409,055 4,409,055 4,409, Secured:- Bank borrowings 37,075,557 37,075,557 37,075, Finance lease liabilities 893,258 1,002, , , ,924 Company 45,425,621 45,534,366 45,028, , ,924 The Company s liquidity risk arises principally from its payables. The maturity profile of the Company s financial liabilities based on contractual undiscounted cash flows is less than 1 year. (c) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group s financial instruments will fluctuate because of changes in market interest rates. The Group s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Investments in equity securities and short term receivables and payables are not significantly exposed to interest rate risk. The Group s interest rate management objective is to manage the interest expenses consistent with maintaining an acceptable level of exposure to interest rate fluctuation. In order to achieve this objective, the Group targets a mix of fixed and floating debt based on assessment of its existing exposure and desired interest rate profile. ~ 96 ~

98 33. FINANCIAL INSTRUMENTS 33.1 Financial risk management (cont d) The main areas of financial risks faced by the Group and the Company and the policy in respect of the major areas of treasury activities are set out as follows (cont d):- (c) Interest rate risk (cont d) The interest rate profile of the Group s significant interest-bearing financial instruments, based on carrying amounts as at end of the reporting date were:- Group RM RM Fixed rate instruments:- Financial asset - Fixed deposits with licensed banks - 5,421,734 Financial liability - Finance lease liabilities (604,026) (893,258) (604,026) 4,528,476 Floating rate instruments:- Financial liabilities - Bank overdrafts (31,910,424) (27,318,241) - Trust receipts - (9,757,316) Fair value sensitivity analysis for fixed rate instruments (31,910,424) (37,075,557) The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss does and not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the end of the reporting date would not affect profit or loss. Cash flow sensitivity analysis for variable rate instruments A change in 25 (2014: 25) basis point (bp) in interest rates at the end of the reporting date would have increased/decreased loss for the financial year and equity by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. Group 2015 Increase/(Decrease) in loss for the financial year Increase/(Decrease) in equity +25bp -25bp +25bp -25bp RM RM RM RM Floating rate instruments (79,776) 79,776 (79,776) 79,776 ~ 97 ~

99 33. FINANCIAL INSTRUMENTS 33.1 Financial risk management (cont d) The main areas of financial risks faced by the Group and the Company and the policy in respect of the major areas of treasury activities are set out as follows (cont d):- (c) Interest rate risk (cont d) Cash flow sensitivity analysis for variable rate instruments (cont d) Group 2014 Increase/(Decrease) in loss for the financial year Increase/(Decrease) in equity +25bp -25bp +25bp -25bp RM RM RM RM Floating rate instruments (92,689) 92,689 (92,689) 92, Fair value of financial instruments The carrying amounts of short-term receivables and payables, cash and cash equivalents and short-term borrowings approximate their fair values, due to the relatively short-term nature of these financial instruments and insignificant impact of discounting Fair value hierarchy No fair value hierarchy has been disclosed as the Group and the Company do not have financial instruments measured at fair value. 34. CAPITAL MANAGEMENT The Group s objectives when managing capital is to maintain a strong capital base and safeguard the Group s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Directors monitor and determine to maintain an optimal debt-to-equity ratio that complies with debt covenants and regulatory requirements. The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts. There were no changes in the Group s approach to capital management during the financial year. ~ 98 ~

100 35. MATERIAL LITIGATION As at the financial year 31 December 2015, save as disclosed below, to the best knowledge of the Board, the Company is not engaged in any material litigation, claims or arbitration either as plaintiff of defendant and our Directors have no knowledge of any proceeding pending or threatened against the Company or any facts likely to give rise to any proceeding which might materially affect the position and business of the Company:- (a) By various writ of summons together with Statement of Claim ( Claim ) filed by Maybank Islamic Berhad ( The Plaintiff ) against R&A Telecommunication Sdn. Bhd. ( RASB ) ( 1 st Defendant ), R&A Telecommunication Group Berhad ( 2 nd Defendant ) and Mr. Francis Tan Hock Leong ( 3 rd Defendant ):- (i) On 16 October 2015, the Company announced that R&A Telecommunication Sdn. Bhd. ( RASB ) has served a writ of summon and the Statement of Claim from Maybank Islamic Berhad ( Maybank ). Maybank issued a writ of summon and the Statement of Claim dated on 30 September 2015 and 29 September 2015 to the Company. In the writ of summon and the Statement of Claim, Maybank Claims RASB failing to settle the outstanding amount of RM30,543, being the outstanding amount for various Islamic financing facilities granted by the plaintiff including Murabahah Cashlines and Islamic Tradelines facilities. (ii) (iii) (iv) (v) On 21 October 2015, the Company announced that RASB s amount due and owing to Maybank as at 31 July 2015 is RM30,525, The amount of Ta widh or late payment charge due and owing to Maybank as at July 2015 is RM17, The amount of profit and Ta widh or late payment charge at the respective rates set out in the Statement of Claim for 1 August 2015 until date of full payment could not be quantified as the Company has yet to obtain the information from Maybank. On 1 December 2015, Maybank has obtained judgements against the Company, RASB and Mr Francis Tan Hock Leong for the sum of RM30,543, together with profit and Ta widh or late payment charge at the respective rates from 1 August 2015 until the date of full payment and costs. On 17 March 2016, the Company announced that Maybank Islamic Berhad has served a sealed order for the said civil suit from Messrs. Lee Hishammudin Allen & Gledhill, the solicitors acting for the plaintiff ( Sealed Order ). On 29 March 2016, the Company announced that sealed notice of application dated 15 March 2016 from Messrs. Lee Hishammudin Allen & Gledhill, the Solicitor acting for the plaintiff, in relation to the appointment of a Licensed Auctioneer to dispose off the properties. The appeal is fixed for hearing on 18 April 2016 and no update as at today. ~ 99 ~

101 35. MATERIAL LITIGATION (a) By various writ of summons together with Statement of Claim ( Claim ) filed by Maybank Islamic Berhad ( The Plaintiff ) against R&A Telecommunication Sdn. Bhd. ( 1 st Defendant ), R&A Telecommunication Group Berhad ( 2 nd Defendant ) and Mr. Francis Tan Hock Leong ( 3 rd Defendant ) (cont d):- (v) (cont d) Based on the sealed order, the High Court of Malaya, has allowed the Plaintiff s application to dispose off the properties via a public auction to fully settle the amount owing to the Plaintiff as at 4 February 2016 amounting owing to RM31,236, together with further profit and Ta widh or late payment charge on the amount owing at the respective rates set out in the sealed order. The auction will be conducted on 5 May (b) KVC Industrial Suppliers Sdn. Bhd. ( The Plaintiff ) against R&A Telecommunication Sdn. Bhd. ( 1 st Defendant ) and against Mr. Francis Tan Hock Leong ( 2 nd Defendant ):- (i) On 23 November 2015, the Company has been served a writ and Statement of Claim from KVC Industrial Suppliers Sdn. Bhd. dated 13 November The Plaintiff s seeking claim of RM35, and late payment interest on the amount of RM31, at a rate of 1.5% per month from 10 November 2015 until the date of full payment. (ii) On 21 December 2015, the Plaintiff obtained a judgement in Default of Appearance ( JID ) against the defendant for an amount of RM35, plus interest at 1.5% per month until the date of full payment. (c) Tecsys Product Sdn. Bhd. ( The Plaintiff ) against R&A Telecommunication Sdn. Bhd. ( The Defendant ):- On 22 December 2015, the Company announced that The Plaintiff has served a writ of summons and Statement of Claim dated 9 December The Plaintiff s seeking claim of RM93, and late payment interest of RM7, on the amount of RM93, at a rate 1.5% per month from 14 July 2014 to 31 August 2015 until the date of full payment. ~ 100 ~

102 35. MATERIAL LITIGATION (d) United Oversea Bank (Malaysia) Bhd. ( UOB ) ( The Plaintiff ) against R&A Telecommunication Group Berhad ( 1 st Defendant ) and R&A Telecommunication Sdn. Bhd. ( 2 nd Defendant ):- On 6 April 2016, the Company announced that UOB served a writ of summons and Statement of Claim dated 31 March The Plaintiff is seeking claim of RM776, together with interest thereon at a rate of 3.50% per annum above Plaintiff s Base Leading Rate ( BLR ) on monthly rest basis from 1 January 2016 until the date of full payment. The matter has been fixed for case management on 28 April No update as at the date of the report. (e) Sametech Solutions Sdn. Bhd. ( Sametech ) ( The Plaintiff ) against R&A Metals Sdn. Bhd. ( RMSB ) ( The Defendant ):- On 15 January 2016, the Company received Notice of demand from Sametech Solutions Sdn. Bhd. dated on 14 January The plaintiff is seeking payment of RM79, being judgement sum due and owing from RMSB to Sametech together with interest at the rate of 5% per annum from 19 August 2015 until 14 January 2016 amounted RM1, and cost of RM Under a judgement dated 19 August 2015 obtained by Sametech in the Kuala Lumpur Magistrate s Court Suite No. A72NCVC /2015. In accordance with the Notice of demand, if RMSB fails or refuse to pay the aggregate sum of RM81, due and owing as at 14 January 2016 to Sametech within twenty-one (21) days from the date of receipt of the notice of demand, RMSB shall be deemed to be unable to pay its debts within the meaning of Section 218 of the Act and winding-up proceedings shall be instituted against RMSB without further reference. (f) Orix Credit Malaysia Sdn. Bhd. ( Orix ) ( The Plaintiff ) against R&A Telecommunication Sdn. Bhd. ( RASB ) ( The Defendant ):- On 18 January 2016, the Company has been served a writ of summons and statement of claim dated on 4 January The Plaintiff is seeking claim of RM208, together with interest at a rate 0.065% per day on the amount of RM195, from 19 September 2015 until the date of full payment. ~ 101 ~

103 36. DISCLOSURE OF REALISED AND UNREALISED PROFIT/(LOSS) Bursa Malaysia Securities Berhad had on 25 March 2010 and 20 December 2010, issued directives requiring all listed corporations to disclose the breakdown of unappropriated profits or accumulated losses into realised and unrealised on Group and Company basis, as the case may be, in quarterly reports and annual audited financial statements. The breakdown of accumulated losses as at the reporting date that has been prepared by the Directors in accordance with the directives from Bursa Malaysia Securities Berhad stated above and Guidance on Special Matter No. 1 issued on 20 December 2010 by the Malaysian Institute of Accountants are as follows:- Group Company RM RM RM RM Total accumulated losses of the Company and its subsidiaries - Realised (122,051,860) (5,264,784) (77,955,132) (513,148) - Unrealised - 1,869, (122,051,860) (3,395,284) (77,955,132) (513,148) Less : Consolidation adjustments 6,009,037 (22,125,653) - - Total accumulated losses (116,042,823) (25,520,937) (77,955,132) (513,148) ~ 102 ~

104 ANALYSIS OF SHAREHOLDINGS AS AT 20 APRIL 2016 Authorised Share Capital : RM300,000, divided into 6,000,000,000 ordinary shares of RM0.05 each Issued and Paid-up Share Capital : RM48,343, divided into 966,862,000 ordinary shares of RM0.05 each Class of Shares : Ordinary Shares of RM0.05 each Voting Rights : One vote per ordinary share ANALYSIS BY SIZE OF SHAREHOLDINGS AS PER THE RECORD OF DEPOSITORS No. of % of No. of % of Issued Size of Shareholding Shareholders Shareholders Shares Held Share Capital , , ,001-10, ,352, , ,000 1, ,763, ,001-48,343,099 (*) 1, ,094, ,343,100 and above (**) ,592, Total 3, ,862, Remarks: * Less than 5% of issued holdings ** 5% and above of issued holdings LIST OF SUBSTANTIAL SHAREHOLDERS AS PER THE REGISTER OF SUBSTANTIAL SHAREHOLDERS No. of Shares Held Name of Substantial Shareholders Direct % Indirect % Francis Tan Hock Leong 62,585, ,381,838 (1) 1.38 Cheok Chun Lian 13,381, ,585,053 (2) 6.47 Nexgram Holdings Berhad 66,007, Note: (1) Francis Tan Hock Leong is deemed interested under Section 134(12)(c) of the Companies Act, 1965 by virtue of his spouse, Cheok Chun Lian s shareholdings in R&A Telecommunication Group Berhad. (2) Cheok Chun Lian is deemed interested pursuant to Section 6A of the Companies Act, ~ 103 ~

105 ANALYSIS OF SHAREHOLDINGS LIST OF DIRECTORS SHAREHOLDINGS AS PER THE REGISTER OF DIRECTORS SHAREHOLDINGS No. of Shares Held Name of Directors Direct % Indirect % Francis Tan Hock Leong 62,585, ,381,838 (1) 1.38 Sim Keng Siong Lee Kok Tong Yap Weei Han Selva Rasan a/l Dato Puspa Das Note: (1) Francis Tan Hock Leong is deemed interested under Section 134(12)(c) of the Companies Act, 1965 by virtue of his spouse, Cheok Chun Lian s shareholdings in R&A Telecommunication Group Berhad. ~ 104 ~

106 ANALYSIS OF SHAREHOLDINGS 30 LARGEST SECURITIES ACCOUNT HOLDERS AS AT 20 APRIL 2016 No. Name No. of shares % 1 NEXGRAM HOLDINGS BERHAD 66,007, FRANCIS TAN HOCK LEONG 62,585, AHMAD KOMAROLAILI BIN ABU 16,000, CHEOK CHUN LIAN 13,381, HSBC NOMINEES (ASING) SDN BHD 12,050, EXEMPT AN FOR BSI SA (BSI BK SG-NR) 6 HLIB NOMINEES (TEMPATAN) SDN BHD 9,334, PLEDGED SECURITIES ACCOUNT FOR LIM LAI HUAT 7 MAYBANK NOMINEES (TEMPATAN) SDN BHD 7,625, JEFRI BIN MAZENIN 8 AHMAD KAMARULZAMAN BIN ABU 7,534, MAYBANK NOMINEES (TEMPATAN) SDN BHD 7,088, PLEDGED SECURITIES ACCOUNT FOR NG KIAN BOON 10 RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD 6,850, PLEDGED SECURITIES ACCOUNT FOR PHOA BOON TING (CEB) 11 MAYBANK NOMINEES (TEMPATAN) SDN BHD 6,830, PLEDGED SECURITIES ACCOUNT FOR GOH PECK GEK 12 TEOH SEANG HIN 6,450, HLIB NOMINEES (TEMPATAN) SDN BHD 6,000, PLEDGED SECURITIES ACCOUNT FOR YONG HENG LOONG 14 CHAI CHAT LEONG 5,958, CHONG CHI BIN 5,000, CHOONG KAI WAI 5,000, HLIB NOMINEES (TEMPATAN) SDN BHD 5,000, PLEDGED SECURITIES ACCOUNT FOR TOH AH LOU 18 MANSOR BIN AHMAD 5,000, SU AN LEE 4,811, HLIB NOMINEES (TEMPATAN) SDN BHD 4,382, PLEDGED SECURITIES ACCOUNT FOR LIM LAI HUAT (CCTS) 21 MAYBANK NOMINEES (TEMPATAN) SDN BHD 4,000, PUA AIK HONG 22 RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD 4,000, PLEDGED SECURITIES ACCOUNT FOR TEO CHON SIN (MLK) 23 TAN SUI LAN 4,000, ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 3,895, PLEDGED SECURITIES ACCOUNT FOR YAP PING TIONG ( ) 25 PUBLIC NOMINEES (TEMPATAN) SDN BHD 3,729, PLEDGED SECURITIES ACCOUNT FOR WONG YEE SIONG (E-BPJ/JKA) 26 PUBLIC NOMINEES (TEMPATAN) SDN BHD 3,630, PLEDGED SECURITIES ACCOUNT FOR FAIZATUL IKMI BINTI ABD RAZAK (E-SLY) 27 LIM KIAN MIN 3,500, YONG KAI KUAN 3,350, CHIA KOOI SEONG 3,300, MAYBANK NOMINEES (TEMPATAN) SDN BHD 3,150, PLEDGED SECURITIES ACCOUNT FOR DER CHIN TONG ~ 105 ~

107 ANALYSIS OF WARRANTHOLDINGS AS AT 20 APRIL 2016 Total Warrants Issued : 87,896,600 Type of Securities : Warrants 2012/2017 Voting Rights : One vote per warrant in respect of a meeting of a warrant holders ANALYSIS BY SIZE OF WARRANTHOLDINGS AS PER THE RECORD OF DEPOSITORS No. of % of No. of % of Size of Warrant Holding Warrant Warrant Warrants Issued Holders Holders Held Warrant , , , ,001-10, ,063, , , ,456, ,001-4,394,829 (*) ,216, ,394,830 and above (**) ,889, Total 1, ,896, Remarks: * Less than 5% of issued holdings ** 5% and above of issued holdings LIST OF DIRECTORS WARRANTHOLDINGS AS PER THE REGISTER OF DIRECTORS WARRANTHOLDINGS No. of Shares Held Name of Directors Direct % Indirect % Francis Tan Hock Leong 7,489, (1) 0.00 Sim Keng Siong Lee Kok Tong Yap Weei Han Selva Rasan a/l Dato Puspa Das Note: (1) Francis Tan Hock Leong is deemed interested under Section 134(12)(c) of the Companies Act, 1965 by virtue of his spouse, Cheok Chun Lian s warrantholdings in R&A Telecommunication Group Berhad. ~ 106 ~

108 ANALYSIS OF WARRANTHOLDINGS 30 LARGEST WARRANT ACCOUNT HOLDERS AS AT 20 APRIL 2016 No. Name No. of shares % 1 FRANCIS TAN HOCK LEONG 7,489, TEY CHERN CHERN 6,400, SIAH BOON HUAT 3,300, MAYBANK NOMINEES (TEMPATAN) SDN BHD 2,000, CHENG SIEW FONG 5 LIM SOO JEE 1,975, PUBLIC NOMINEES (TEMPATAN) SDN BHD 1,510, PLEDGED SECURITIES ACCOUNT FOR FAIZATUL IKMI BINTI ABD RAZAK (E-SLY) 7 LOI SOW WAH 1,500, SIM CHIEW SHIA 1,295, AHMAD KOMAROLAILI BIN ABU 1,239, WONG WAI HONG 1,111, LIM SANG HEE 1,100, PUBLIC NOMINEES (TEMPATAN) SDN BHD 1,050, PLEDGED SECURITIES ACCOUNT FOR JANNET TING SING MEE (E-PLT) 13 AHMAD KOMAROLAILI BIN ABU 1,000, ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,000, PLEDGED SECURITIES ACCOUNT FOR LEE GUAT YEE ( ) 15 KHOR THING THIAM 1,000, NG SIAK HOOI 1,000, TAN KIAN GUAN 1,000, GAN SIEW KHIM 990, CIMSEC NOMINEES (TEMPATAN) SDN BHD 926, CIMB BANK FOR LIM CHEE KEONG (MY2109) 20 MAYBANK NOMINEES (TEMPATAN) SDN BHD 898, KAM MING LONG 21 TAN LEE TIONG 700, OOI AH CHIN 620, AFFIN HWANG NOMINEES (TEMPATAN) SDN BHD 600, PLEDGED SECURITIES ACCOUNT FOR LAM TOW LAN (LAM0158M) 24 LIM HENG KEAT 600, LYE MING ZH 600, TENG POK TENG FOOK SANG 600, TONG SIEW LING 600, YAP MUN HUAT 600, CITIGROUP NOMINEES (TEMPATAN) SDN BHD 500, PLEDGED SECURITIES ACCOUNT FOR KHOR THING THIAM (472926) 30 ABDUL TALIB BIN DRUS 500, UNIVERSITI TENAGA NASIONAL ~ 107 ~

109 LIST OF PROPERTIES HELD AS AT 31 DECEMBER 2015 Company Properties Area Tenure Expiry Description/ Approximate Net Date of (m2) Date Existing Age of Carrying Acquisition/ Use Buildings Amount Revaluation RM 000 R&A A corner double storey 2,041 Freehold N/A Commercial 20 years 9, Telecommunication semi-detached factor Group Berhad No. 2, Jalan Pengacara U1/48 Temasya Industrial Park Section U Shah Alam Selangor Darul Ehsan R&A 4 Storey Shop Office 505 Freehold N/A Property 19 years Telecommunication Lot 128G/56G, held for Sdn Bhd 56-1, 56-2A,56-2B, sale* 56-3A & 56-3B, Jalan S2, B5, Seremban Negeri Sembilan Darul Khusus * The sale was completed on 7 March ~ 108 ~

110 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Twelfth Annual General Meeting of the Company will be held at Petaling Room, Kelab Shah Alam, No. 1A, Jalan Aerobik 13/43, Shah Alam, Selangor Darul Ehsan on Thursday, 23 June 2016 at a.m. for the following purposes:- As Ordinary Business A G E N D A 1. To receive the Audited Financial Statements for the financial year ended 31 December (Please refer to 2015 together with the Reports of the Directors and Auditors thereon. Explanatory Note 1) 2. To approve the payment of Directors Fees for the financial year ended 31 December (Resolution 1) To re-elect Mr. Sim Keng Siong who retires by rotation pursuant to Article 80 (Resolution 2) of the Company s Articles of Association. 4. To re-elect the following Directors of the Company who retire in accordance with Article 85 of the Company s Articles of Association:- (a) Mr. Yap Weei Han (Resolution 3) (b) Mr. Selva Rasan a/l Dato Puspa Das (Resolution 4) 5. To re-appoint Messrs. SJ Grant Thornton as the Auditors of the Company and to (Resolution 5) authorise the Directors to fix their remuneration. As Special Business 6. To consider and, if thought fit, to pass the following Ordinary Resolution with or without modifications:- ORDINARY RESOLUTION - AUTHORITY TO ISSUE AND ALLOT SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965 THAT subject always to the Companies Act, 1965, Articles of Association of the Company and approvals from Bursa Malaysia Securities Berhad and any other governmental/regulatory bodies, where such approval is required, authority be and is hereby given to the Directors pursuant to Section 132D of the Companies Act, 1965 to issue not more than ten percent (10%) of the issued capital of the Company at any time upon any such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit or in pursuance of offers, agreements, options or other instruments to be made or granted by the Directors while this approval is in force until the conclusion of the next Annual General Meeting of the Company and that the Directors be and are hereby further authorised to make or grant offers, agreements, options or other instruments which would or might require shares to be issued after the expiration of the approval hereof. (Resolution 6) 7. To transact any other ordinary business of which due notice shall have been given. By Order of the Board CHUA SIEW CHUAN (MAICSA ) MAK CHOOI PENG (MAICSA ) Company Secretaries Kuala Lumpur 9 May 2016 ~ 109 ~

111 NOTICE OF ANNUAL GENERAL MEETING Notes:- 1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 16 June 2016 ( General Meeting Record of Depositors ) shall be eligible to attend, speak and vote at the Meeting. 2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend, speak and vote in his/her stead. A proxy may but need not be a member of the Company and the provision of Section 149(1) (b) of the Companies Act, 1965 shall not apply. 3. Where a member appoints two (2) or more proxies, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to be represented by each proxy. 4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one 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. Where an Exempt Authorised Nominee appoints more than one (1) proxy in respect of each Omnibus Account, the appointment shall not be valid unless the Exempt Authorised Nominee specifies the proportion of the shareholding to be represented by each proxy. 5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or, in the case of a corporate body, the proxy appointed must be in accordance with the Memorandum and Articles of Association, and the instrument appointing a proxy shall be given under the Common Seal of the Company or under the hand of an officer or attorney duly authorised. 6. The instrument appointing a proxy together with the power of attorney (if any) under which it is signed or an office copy or a notarially certified copy thereof must be deposited at the Registered Office at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, Kuala Lumpur, Wilayah Persekutuan at least 48 hours before the time appointed for holding the Meeting or at any adjournment. Explanatory Notes:- 1. Item 1 of the Agenda This Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this Agenda item is not put forward for voting. 2. Resolution 6 The Ordinary Resolution is proposed for the purpose of seeking a renewal of the general mandate to authorise the Directors of the Company to issue not more than 10% of the issued share capital of the Company subject to the approval of all the relevant governmental/regulatory bodies. This authorisation will empower the Directors of the Company to issue shares notwithstanding that the authorisation has ceased to be in force if the shares are issued in pursuance of an offer, agreement, option or other instrument made or granted by the Directors while the authorisation was in force. This authorisation will expire at the conclusion of the next Annual General Meeting of the Company. The general mandate will enable the Directors to take swift action for allotment of shares for any possible fund raising activities, including but not limited to further placing of shares, for the purpose of funding future investment project(s) and/ or working capital and to avoid delay and cost in convening general meetings to approve such issue of shares. This general mandate sought by the Company is to renew the general mandate given to the Directors at the Eleventh Annual General Meeting held on 25 June 2015 to issue shares pursuant to Section 132D of the Companies Act, As at the date of this Notice, no new shares in the Company were issued under the provision of the general mandate granted to the Directors at the Eleventh Annual General Meeting held on 25 June 2015, which will lapse at the conclusion of the Twelfth Annual General Meeting. Hence, no proceeds were raised therefrom. ~ 110 ~

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113 PROXY FORM R&A TELECOMMUNICATION GROUP BERHAD (Company No D) (Incorporated in Malaysia under the Companies Act, 1965) No. of Shares Held CDS Account No. Shareholder s Contact No. I/We,... NRIC No... (FULL NAME IN BLOCK CAPITALS) of... (FULL ADDRESS) being a member(s) of R&A TELECOMMUNICATION GROUP BERHAD, hereby appoint... (NRIC No...) (FULL NAME) of... (FULL ADDRESS) or failing him/her,... (NRIC No... ) (FULL NAME)... (FULL ADDRESS) or failing him/her, the Chairman of the Meeting, as my/our proxy to vote for me/us and on my/our behalf at the Twelfth Annual General Meeting of the Company to be held at Petaling Room, Kelab Shah Alam Selangor, No. 1A, Jalan Aerobik 13/43, Shah Alam, Selangor Darul Ehsan on Thursday, 23 June 2016 at a.m. or at any adjournment thereof. Please indicate an X in the space provided below on how you wish your votes to be casted. If no specific instruction as to voting is given, the Proxy will vote or abstain from voting at his/her discretion. No. RESOLUTIONS FOR AGAINS 1 To approve the payment of Directors Fees for the financial year ended 31 December To re-elect Mr. Sim Keng Siong as a Director of the Company. 3 To re-elect Mr. Yap Weei Han as a Director of the Company. 4 To re-elect Mr. Selva Rasan a/l Dato Puspa Das as a Director of the Company. 5 To re-appoint Messrs. SJ Grant Thornton as the Auditors of the Company and to authorise the Directors to fix their remuneration. 6 Special Business Ordinary Resolution - Authority to issue and allot shares pursuant to Section 132D of the Companies Act, 1965 Signed on this... day of Signature of Member(s)/Common Seal Notes: 1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 16 June 2016 ( General Meeting Record of Depositors ) shall be eligible to attend, speak and vote at the Meeting. 2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend, speak and vote in his/her stead. A proxy may but need not be a member of the Company and the provision of Section 149(1) (b) of the Companies Act, 1965 shall not apply. 3. Where a member appoints two (2) or more proxies, the appointment shall be invalid unless he/she specifies the proportion of his/ her holdings to be represented by each proxy. 4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one 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. Where an Exempt Authorised Nominee appoints more than one (1) proxy in respect of each Omnibus Account, the appointment shall not be valid unless the Exempt Authorised Nominee specifies the proportion of the shareholding to be represented by each proxy. 5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or, in the case of a corporate body, the proxy appointed must be in accordance with the Memorandum and Articles of Association, and the instrument appointing a proxy shall be given under the Common Seal of the Company or under the hand of an officer or attorney duly authorised. 6. The instrument appointing a proxy together with the power of attorney (if any) under which it is signed or an office copy or a notarially certified copy thereof must be deposited at the Registered Office at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, Kuala Lumpur, Wilayah Persekutuan at least 48 hours before the time appointed for holding the Meeting or at any adjournment thereof. ~ 1 ~

114 Fold this flap for sealing Then fold here AFFIX STAMP The Secretary R&A TELECOMMUNICATION GROUP BERHAD ( D) Level 7, Menara Milenium Jalan Damanlela, Pusat Bandar Damansara Damansara Heights, Kuala Lumpur Wilayah Persekutuan 1st fold here ~ 2 ~

115 R&A Telecommunication Group Berhad ( D) Corporate Office : No. 2, Jalan Pengacara U1/48, Temasya Industrial Park, Section U1, Shah Alam, Selangor Darul Ehsan, Malaysia Tel: Fax: ~ 3 ~