contents kuala lumpur golf & country club, no. 10, jalan 1/70d, off jalan bukit kiara, 60000...
TRANSCRIPT
Contents
2 – 3 Notice Of Annual General Meeting
4 – 5 Statement Accompanying Notice Of Annual General Meeting
6 Corporate Information
7 Corporate Structure
8 – 10 Profile Of Directors
11 – 13 Chairman’s Statement
14 – 18 Corporate Governance Statement
19 Directors’ Responsibility Statement
20 Other Compliance Information
21 – 23 Audit Committee Report
24 – 25 Statement On Internal Control
26 – 66 Financial Statements
67 – 68 List Of Properties
69 – 70 Analysis Of Shareholdings
Enclosed Proxy Form
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...........................Annua l Repor t 2002
2
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NOTICE IS HEREBY GIVEN that the Fifth Annual General Meeting of the Company will be held at the East VIPLounge, Kuala Lumpur Golf & Country Club, No. 10, Jalan 1/70D, Off Jalan Bukit Kiara, 60000 Kuala Lumpuron Thursday, 27 June 2002 at 10.00 a.m. for the following purposes:-
AS ORDINARY BUSINESS
1. To receive and adopt the Audited Financial Statements of the Company for the financialyear ended 31 January 2002 together with the Reports of the Directors and Auditorsthereon.
2. To approve the payment of Directors’ Fees for the financial year ended 31 January2002
“That the payment of Directors’ Fees of RM178,000 for the financial year ended 31January 2002 be and is hereby approved.”
3. To re-appoint Messrs BDO Binder as Auditors and to authorise the Directors to fixtheir remuneration.
4. To re-elect the following Director retiring pursuant to Article 105 of the Articles ofAssociation:-
(a) Dato’ Tan Huat Sheng
5. To re-elect the following Directors pursuant to Article 112 of the Articles of Association:-
(a) Dato’ Hj. Mohamad Satim Bin Diman(b) Mr Lee Kuang Chong(c) Mr Woo Yew Lam(d) Mr Sheah Kok Fah(e) Mr Tan Hoon Kai
AS SPECIAL BUSINESS
6. To consider and, if thought fit, to pass the following Ordinary Resolution:-
Authority to Allot and Issue Shares Pursuant to Section 132D of the Companies Act,1965
“That pursuant to Section 132D of the Companies Act, 1965 the Directors be and arehereby empowered to allot and issue shares in the Company at anytime and uponsuch terms and conditions and for such purposes as the Directors may, in their absolutediscretion, deem fit, provided that the aggregate number of shares issued pursuant tothis resolution in any one financial year does not exceed 10% of the issued capital ofthe Company for the time being and that the Directors be and are also empowered toobtain the approval for the listing of and quotation for the additional shares so issuedon the Kuala Lumpur Stock Exchange and that such authority shall continue to be inforce until the conclusion of the next Annual General Meeting of the Company.”
7. To consider and, if thought fit, to pass the following Special Resolution:-
Proposed amendment to the Articles of Association of the Company
“That the Articles of Association be altered by the insertion of the following Article127A after Article 127.”
127A: Teleconferencing
(a) All or any of the Directors may meet either in person in any Directors’meeting or any Committee meeting or participate by means of aconference telephone or any communication equipment which allowsall persons participating in the meeting to hear each other.
Notice Of Annual General Meeting
Resolution 1
Resolution 2
Resolution 3
Resolution 4
Resolution 5Resolution 6Resolution 7Resolution 8Resolution 9
Resolution 10
Resolution 11
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3...........................Annua l Repor t 2002
(b) A Director shall be regarded as present at a meeting where a meetingis conducted by conference telephone or other communicationequipment if the Director is able to hear the proceedings and can beheard himself by all others attending the meeting simultaneously;
(c) A meeting conducted by conference telephone or othercommunication equipment shall be deemed to be held at such placewhere the largest group of those participating is assembled, or if thereis no such group, where the Chairman of the meeting then is;
(d) A resolution passed by such a conference shall notwithstanding thatthe Directors are not present together at one place at the time of theconference be deemed to have been passed at a meeting of theDirectors held on the day and at the time of which the conferencewas held (and if not all Directors are in the same time zone, KualaLumpur time). The provisions of these present relating to proceedingsof Directors shall apply so far as they are able of application to suchconferences.
8. To transact any other business for which due notice shall have been given.
By Order of the Board
LIM HOOI MOOI (MAICSA 0799764)TAN ENK PURN (MAICSA 7045521)Joint Company Secretaries
Kuala Lumpur3 June 2002
Notes:-
1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and votein his stead. Where a member appoints more than one proxy the appointments shall be invalid unless he specifies theproportions of his holdings to be represented by each proxy. A member of the Company who is an authorisednominee as defined under the Securities Industry (Central Depositories) Act 1991 may appoint one (1) proxy inrespect of each securities account it holds with ordinary shares of the Company standing to the credit of the saidsecurities account.
2. A proxy need not be a member of the Company.
3. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorisedin writing or if such appointer is a corporation under its Common Seal or the hand of his attorney.
4. All forms of proxy must be deposited at the Registered Office of the Company at Suite 1701, 17th Floor, WismaHamzah-Kwong Hing, No. 1 Leboh Ampang, 50100 Kuala Lumpur, Malaysia not less than forty-eight (48) hoursbefore the time appointed for holding the Meeting or any adjournment thereof.
5. Explanatory Notes on Special Businesses
The proposed Resolution No. 10, if passed, is to authorise the Directors to issue up to 10% of the paid-up capital ofthe Company. This is to avoid any delay and cost involved in convening a general meeting to approve such an issueof shares. This authority will, unless revoked or varied by the Company in a General Meeting, expire at the conclusionof the next Annual General Meeting or the expiration of the period within which the next Annual General Meeting isrequired by law to be held, whichever is earlier.
The proposed Resolution No. 11, if passed, is to authorise amendment to the Articles of Association of the Company.The amendment proposed is to enable any Director to participate at the meeting of Directors by way of telephone orvideo conference or by means of other communication equipment whereby all persons participating in the meetingare able to hear each other, in which event such Director shall be deemed to be physically present at the meeting andshall be counted in the quorum.
Notice Of Annual General Meeting (Cont’d)
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...........................Annua l Repor t 2002
4
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1. Name of Directors standing for re-election
The Director retiring by rotation pursuant to Article 105 of the Articles of Association and seeking re-election is:-
• Dato’ Tan Huat Sheng
The new Directors appointed during the year seeking re-election pursuant to Article 112 of the Articles ofAssociation are:-
• Dato’ Hj. Mohamad Satim Bin Diman• Mr Lee Kuang Chong• Mr Woo Yew Lam• Mr Sheah Kok Fah• Mr Tan Hoon Kai
2. Details of Attendance of Directors at the Board of Directors’ Meetings
A total of six (6) Board meetings were held during the financial year ended 31 January 2002, the detailsand attendance are as follows:
Date 20.2.2001 22.3.2001 17.5.2001 27.6.2001 27.9.2001 11.12.2001Time 2:00 p.m. 11:30 a.m. 11:00 a.m. 12:00 noon 11:00 a.m. 11:00 a.m.
Dato’ Tan Huat Sheng � � � � � �Lee Kuang Chong n/a n/a n/a n/a n/a xWoo Yew Lam n/a n/a n/a n/a n/a �
Pang Ling � � x � � �
Ho Siong San n/a n/a n/a � � �
Sheah Kok Fah n/a n/a n/a n/a n/a �Tan Hoon Kai n/a n/a n/a n/a n/a n/aDato’ Hj. Mohamad
Satim Bin Diman n/a n/a n/a n/a n/a n/a
All the Board meetings were held at the Company’s business address at No 1 & 2, Jalan PS 1/1, BandarPinggiran Subang, Seksyen 1, 40150 Shah Alam, Selangor Darul Ehsan except for the Board meeting on27 June 2001 which was held at Kuala Lumpur Golf & Country Club, No. 10, Jalan 1/70D, Off Jalan BukitKiara, 60000 Kuala Lumpur.
Note:-
� : Present
x : Absent with apologies
n/a : Not a Director when Board meeting was held
Statement AccompanyingNotice Of Annual General Meeting
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5...........................Annua l Repor t 2002
3. Details of Directors standing for re-election
The shareholdings in the Company of the Directors standing for re-election are as follows (as at 30 April2002):-
Direct Interest Indirect InterestNo. of No. of
ordinary ordinaryshares of % of issued shares of % of issued
RM1.00 each share capital RM1.00 each share capital
Dato’ Tan Huat Sheng 323,758 0.48 16,764,379 25.02Dato’ Hj. Mohamad
Satim Bin Diman – – – –Lee Kuang Chong 2,680,001 4.00 23,544,999 35.14Woo Yew Lam 3,110,999 4.64 – –Sheah Kok Fah – – – –Tan Hoon Kai – – – –
The other details of the Directors seeking for re-election are set out in Profile of Directors from pages 8 to10 of the Annual Report.
Statement AccompanyingNotice Of Annual General Meeting (Cont’d)
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...........................Annua l Repor t 2002
6
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Corporate Information
CHAIRMAN
Dato’ Tan Huat Sheng
DIRECTORS
Lee Kuang ChongExecutive Director
Woo Yew LamExecutive Director
Pang LingExecutive Director
Dato’ Hj. Mohamad Satim Bin DimanIndependent Non-Executive Director
Ho Siong SanIndependent Non-Executive Director
Sheah Kok FahIndependent Non-Executive Director
Tan Hoon KaiIndependent Non-Executive Director
AUDIT COMMITTEE
Sheah Kok FahChairman
Ho Siong SanMember
Woo Yew LamMember
NOMINATION COMMITTEE
Ho Siong SanChairman
Sheah Kok FahMember
Dato’ Hj. Mohamad Satim Bin DimanMember
REMUNERATION COMMITTEE
Ho Siong SanChairman
Sheah Kok FahMember
Dato’ Hj. Mohamad Satim Bin DimanMember
SOLICITORS
KC Lim & Co.Sooriyar & Co.Shaw & Co.
COMPANY SECRETARIES
Lim Hooi MooiTan Enk Purn
REGISTERED OFFICE
Suite 1701, 17th FloorWisma Hamzah Kwong HingNo. 1, Leboh Ampang50100 Kuala LumpurTel: 03 – 2032 1300 Fax: 03 – 2031 2892
BUSINESS ADDRESS
No. 1 & 2, Jalan PS 1/1Bandar Pinggiran SubangSeksyen 1, 40150 Shah AlamSelangor Darul EhsanTel: 03 – 7847 2900 Fax: 03 – 7845 3900
SHARE REGISTRAR
Malaysian Share Registration Services Sdn. Bhd.7th Floor, Exchange SquareBukit Kewangan50200 Kuala LumpurTel: 03 – 2026 8099 Fax: 03 – 2026 3736
PRINCIPAL BANKERS
Hong Leong Bank BerhadStandard Chartered Bank Malaysia BerhadMalayan Banking BerhadAffin Bank Berhad
AUDITORS
BDO Binder15th Floor, Wisma Hamzah Kwong HingNo. 1, Leboh Ampang50100 Kuala Lumpur
STOCK EXCHANGE LISTING
Kuala Lumpur Stock Exchange – Main Board17 November 1998
DATE AND PLACE OF INCORPORATION
19 February 1997, Malaysia
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7...........................Annua l Repor t 2002
Corporate Structure
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...........................Annua l Repor t 2002
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Profile Of Directors
Dato’ Tan Huat Sheng Aged 60/Malaysian Non-Executive Chairman
Dato’ Tan is the Chairman of MEB and was appointed to the Board on 25 August 1998. He graduated with aBachelor of Science (Hons) degree in Hydraulic Engineering from Cheng Kung University, Taiwan in 1968. Heis registered as a Professional Engineer with the Board of Engineers, Malaysia and is also a Corporate Memberof the Institution of Engineers, Malaysia. Dato’ Tan has more than thirty-three (33) years of experience in theconstruction industry and, having been the Managing Director of Mewah Kota Sdn. Bhd. since its inception in1981 to 2000, has personally been involved in the implementation of all the projects undertaken.
Dato’ Tan has also served as the Advisor to the Kedah Chinese Chamber of Commerce and Industry and waselected its President for the term 2000 to 2003.
Dato’ Tan has an indirect interest of 25.02% in the Company. He does not have any family relationship withany Director of the Company. He has no conflict of interest with the Company and has not been convicted ofany offences within the past ten (10) years. He attended all the six (6) Board meetings held during the financialyear.
Lee Kuang Chong Aged 45/Malaysian Executive Director
Mr. Lee was appointed to the Board of MEB on 16 November 2001. He graduated with a Bachelor of Accounting(Hons) degree from Universiti Malaya in 1982. He is also a member of the Malaysian Institute of Accountants.Upon graduation, Mr. Lee worked as an auditor with a public accounting firms before becoming an Accountantwith a hardware trading company in 1983. In 1984, he ventured into the property sector when he joined aproperty development company as a Finance Manager and subsequently, he joined an investment holdingcompany from 1989 to 1995 as a Director and General Manager.
Mr. Lee is also the Managing Director of Merge Housing Bhd..
Mr. Lee is the brother of Mr. Lee Heng Choong, a major shareholder of the Company. He does not have anyfamily relationship with any Director of the Company. He has no conflict of interest with the Company and hasnot been convicted of any offences within the past ten (10) years. Only one (1) Board meeting was held duringthe period after his appointment and up until the financial year end of which he was absent. Mr. Lee vacatedoffice on 31 January 2002 pursuant to Article 115 of the Articles of Association of the Company. He was,however, re-appointed to the Board on 1 February 2002.
Woo Yew Lam * Aged 54/Malaysian Executive Director
Mr. Woo was appointed to the Board of MEB on 16 November 2001. He graduated from Universiti Malaya witha Bachelor of Engineering (Hons) degree. He is a registered Professional Engineer and a member of the Institutionof Engineers, Malaysia. Mr. Woo started his career with Jabatan Parit and Taliair Malaysia as an AssistantDistrict Engineer and Design Engineer. After four (4) years with the public sector, he joined a private consultingfirm in the late 1970’s as a Project Engineer. In early 1980’s, he joined a property development company as aProject Manager. Thereafter, he joined a property management and investment company as a Director andProject Manager.
Mr. Woo is also an Executive Director of Merge Housing Bhd..
Mr. Woo does not have any family relationship with any Director and/or major shareholder of the Company. Hehas no conflict of interest with the Company and has not been convicted of any offences within the past ten (10)years. He attended one (1) out of one (1) Board meeting held during the period after his appointment and upuntil the financial year end.
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9...........................Annua l Repor t 2002
Pang Ling Aged 35/Malaysian Executive Director
Ms. Pang was appointed to the Board of MEB on 25 August 1998. She graduated from Wilson University witha Bachelor of Science (Hons) degree in Economics and also holds a Certified Diploma in Accounting andFinance from Chartered Association of Certified Accountants, United Kingdom. Her career began when sheserved KPMG Management Consulting Sdn. Bhd. for six (6) years between 1990 and 1996 as a ManagingConsultant in the Corporate Finance Advisory Services Department. During her tenure of service, she hasgained a vast experience in corporate advisory work which includes public listing, corporate restructuring,mergers and acquisitions. Subsequently, she was attached to Kumpulan Kerjaya Berhad, a construction basedcompany, for 1 ½ years as a Corporate Manager. With her knowledge in corporate advisory, she is now involvedin the overall responsibility for corporate strategies, planning and development as well as the evaluation ofinvestment options for the MEB Group. Ms. Pang does not have any family relationship with any Director and/or major shareholder of the Company. She has no conflict of interest with the Company and has not beenconvicted of any offences within the past ten (10) years. She attended five (5) out of six (6) Board meetings heldduring the financial year.
Ho Siong San * # ^ Aged 39/Malaysian Independent Non-Executive Director
Mr. Ho was appointed to the Board of MEB on 17 May 2001. He is a member of the Malaysian Institute ofAccountants and a Fellow Member of the Association of Chartered Certified Accountants, United Kingdom. Mr.Ho has over fourteen (14) years of working experience in the fields of accounting, auditing and taxation includingnumerous years of service with reputable international accounting firms like Coopers & Lybrand as well asJayson Newman, London. Upon returning to Malaysia in 1995, he joined a property development company asthe Accountant. In 1999, he joined Arab-Malaysian Securities Sdn. Bhd. as a Dealer’s Representative.
Mr. Ho does not have any family relationship with any Director and/or major shareholder of the Company. Hehas no conflict of interest with the Company and has not been convicted of any offences within the past ten (10)years. He attended all the three (3) Board meetings held during the period after his appointment and up until thefinancial year end.
Sheah Kok Fah * # ^ Aged 37/Malaysian Independent Non-Executive Director
Mr. Sheah was appointed to the Board of MEB on 16 November 2001. He holds a degree in LLB (Hons) fromUniversiti Malaya and was admitted to the Bar in 1989. Mr. Sheah is an Advocate and Solicitor and has been inlegal practice since 1988. He has been the Partner of Messrs. Sheah, Tan and Rahman (formerly known asJeffrey, Tan & Co., and Messrs. Ooi, Sheah & Tan) since 1996. He was also appointed as MPPJ Councillor fortwo (2) years term from 1998 to 2000.
Mr. Sheah does not have any family relationship with any Director and/or major shareholder of the Company.He has no conflict of interest with the Company and has not been convicted of any offences within the past ten(10) years. He attended one (1) out of one (1) Board meeting held during the period after his appointment andup until the financial year end.
Tan Hoon Kai Aged 53/Malaysian Independent Non-Executive Director
Mr. Tan was appointed to the Board of MEB on 31 December 2001. He graduated from Universiti Malaya witha Bachelor of Engineering (Hons) degree. He is a member of the Institution of Engineers, Malaysia. Mr. Tanstarted his career with Jabatan Parit and Taliair Malaysia as an Assistant District Engineer and Design Engineerincharge of design, supervision and contract administration of projects. After serving two (2) years with theGovernment, Mr. Tan joined a private consultant engineering firm engaging in design and supervision of varioustypes civil and structural engineering works.
Mr. Tan does not have any family relationship with any Director and/or major shareholder of the Company. Hehas no conflict of interest with the Company and has not been convicted of any offences within the past ten (10)years. He did not attend any Board meetings during the financial year as no Board meetings were held duringthe period after his appointment and up until the financial year end.
Profile Of Directors (Cont’d)
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...........................Annua l Repor t 2002
10
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Dato’ Hj. Mohamad Satim Bin Diman # ^ Aged 46/Malaysian Independent Non-Executive Director
Dato’ Hj. Mohamad Satim was appointed to the Board of MEB on 1 March 2002. He holds a Diploma in BahasaMalaysia & Logistic from Universiti Pertanian Malaysia and a Diploma in Business Studies from Institut TeknologiMalaysia. Dato’ Hj. Mohamad Satim spent most of the earlier years of his career with Universiti PertanianMalaysia as an Assistant Administrator. From 1986 to 1994, he was the Head of UMNO Taman Sri Serdangbranch and in 1995 was appointed the State Executive Committee Member for Puchong, a post which heserves until now.
Dato’ Hj. Mohamad Satim also holds key positions in various social and welfare organisations and they includeserving as Chairman for Majlis Belia Daerah Petaling and “Pesaka” Negeri Selangor and as Treasurer for“Pemadam” Negeri Selangor.
Dato’ Hj. Mohamad Satim does not have any family relationship with any Director and/or major shareholder ofthe Company. He has no conflict of interest with the Company and has not been convicted of any offenceswithin the past ten (10) years. He did not attend any Board meetings during the financial year as he wasappointed to the Board subsequent to the financial year end.
Note:
* Member of Audit Committee# Member of Nomination Committee^ Member of Remuneration Committee
Profile Of Directors (Cont’d)
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11...........................Annua l Repor t 2002
Chairman’s Statement
Dear Shareholders,
On behalf of the Board of Directors of Merge Energy Bhd. (“MEB”), I am pleased to present to you the AnnualReport of the Company and the Group for the financial year ended 31 January 2002.
FINANCIAL PERFORMANCE
The Group continues to encounter a difficult and challenging year with a lower turnover of RM31.784 millionrecorded for the financial year under review compared with RM35.815 million recorded in the previous year.
The Group suffered a loss before tax of RM38.589 million compared to RM20.321 million last year which ismainly due to losses on projects, provision for doubtful debts, provision for diminution in value of quotedinvestment, writing off of goodwill on consolidation and writing off of bad debts.
DIVIDENDS
The Board of Directors does not recommend a dividend to be paid for the financial year ended 31 January2002.
CORPORATE HIGHLIGHTS
(a) Directorate
The Board of Directors went through some changes with the following resignation and appointmentsince the last report:
• Resignation of the Group Managing Director, En. Jamal Bin Mohd. Aris
• Resignation of Non-Executive Directors Datuk Hj. Wan Mohd Hanafiah Bin Wan Mohd Saman,Mr. Tan Hoi Chon, Mr. Teh Kok Leong and En. Jamsari Bin Mohamad Aris
• Appointment of Mr. Lee Kuang Chong and Mr. Woo Yew Lam as Executive Directors
• Appointment of Mr. Sheah Kok Fah, Mr. Tan Hoon Kai and Dato’ Hj. Mohamad Satim Bin Dimanas Independent Non-Executive Directors
On behalf of the Board of Directors, I would like to record our appreciation to the resigning directors fortheir valuable services during their tenure as directors.
The Board would also like to take this opportunity to welcome the appointment of new members to theBoard.
(b) Restructuring and Consolidating Resources
During the year, emphasis and efforts of the management were focused on the following areas consideredto be of significance, both in terms of risks and challenges, to the Group:
• Reviewing of business strategy of the Group, including the consideration to cease operations ofcertain unprofitable subsidiaries and the disposal of idle machinery;
• Consolidating resources, including assets and manpower, to achieve operational efficiency andeffectiveness;
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• Improving liquidity with aggressive collection from debtors and disposal of surplus assets andproperties; and
• Securing businesses and identifying new opportunities.
(c) Notice of Conditional Mandatory Offer
On 8 March 2002, the Company received a notice of conditional mandatory offer (“Notice”) from SouthernInvestment Bank Berhad for and on behalf of Mr. Lee Heng Choong (“the Offeror”) to extend a conditionalmandatory offer to acquire the remaining 37,377,001 ordinary shares of RM1.00 each, representingapproximately 55.79% of the issued and paid-up share capital of MEB not already owned by the Offerorand parties acting in concert with the Offeror, namely Mr. Lee Kuang Chong and Mr. Woo Yew Lam (whoare both directors of MEB), at an offer price of RM0.65 per share payable in cash (“Offer”).
A copy of the Notice containing the principal terms and conditions of the Offer was sent to all shareholdersby MEB in a notification to shareholders dated 14 March 2002. The Board of Directors has appointedErnst & Young as the Independent Adviser of the shareholders of MEB in relation to the Offer.
On 2 May 2002, the Foreign Investment Committee (“FIC”) has approved and the Kuala Lumpur StockExchange (“KLSE”) has given its clearance on the Offeror’s proposal in relation to the Offer. The FIC’sapproval is subject to the condition that MEB increasing its Bumiputera shareholdings to at least 30% by31 December 2003. The approval of the Securities Commission (“SC”) in relation to the Offer was obtainedon 21 May 2002.
The Offer document has been despatched to the shareholders on 22 May 2002.
PROSPECTS
The Malaysian economy has stabilised and turnaround with growth expected at 3.5% for the year. Theconstruction sector, in particular, is expected to sustain its growth at 2.4%, driven by the civil engineering andresidential sub-sectors.
With the revival in economic activities and the Government’s relentless efforts to expedite the implementationof major infrastructure and new government projects, the Board is cautiously optimistic that the Group will beable to contribute and benefit from the improved conditions, especially in the areas of building constructionand water supply system.
During the period under review, the Group adopted a prudent strategy of consolidating resources and monitoringthe value of the Group, with the long-term aim of enhancing shareholders’ value. Continued efforts will bemade to focus on maximising resources, increase operational efficiency and securing new businesses to improveperformance.
With focused strategies, favourable measures and barring any unforeseen circumstances, the Group anticipatesa better performance in the coming year.
Chairman’s Statement (Cont’d)
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13...........................Annua l Repor t 2002
APPRECIATION
On behalf of the Board, I would like to express our gratitude to the management and employees for theircontinued support and commitment during the challenging times.
I would also like to extend our sincere gratitude to our shareholders, business associates, bankers, suppliers andcustomers for their continued confidence and support for the Group.
DATO’ TAN HUAT SHENGChairman22 May 2002
Chairman’s Statement (Cont’d)
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...........................Annua l Repor t 2002
14
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Corporate Governance Statement
The Board of Directors is committed to ensuring that the highest standard of corporate governance are practisedas fundamental part of discharging its responsibilities to protect and enhance shareholder value and the financialperformance of the Group.
DIRECTORS
I The Board
The responsibilities of the Board include strategic planning, monitoring business performance, identifyingand managing risks, succession planning, developing and implementing investor relations programmeand shareholders communication policy and internal control system.
The following committees have been established to assist the Board in the discharge of its duties. Eachcommittee operates under its respective terms of reference.
Audit Committee
The Audit Committee was established by the Board of Directors on 16 April 1999, as a sub-committee ofthe Board. Further details on the Audit Committee are set out on pages 21 to 23.
Nomination Committee
The Nomination Committee, set up on 27 September 2001, comprises exclusively Non-Executive Directors,a majority of whom are independent. The Committee is entrusted with the following responsibilities:
• recommend to the Board candidates for all directorships to be filled by the shareholders or theBoard
• consider, in making recommendations, candidates for directorships proposed by the ManagingDirector or by any other senior executive or any director or shareholder
• recommend to the Board, directors to fill the seats on Board committees
• assess the effectiveness and balance of the Board as a whole and the committees of the Board
• assess the contribution of each individual director
• review, at least annually, the required mix of skills and experience and other qualities, includingcore competencies which non-executive directors should bring to the Board
During the year ended 31 January 2002, the following Directors were/are the members of the NominationCommittee:
Ho Siong San (Chairman)Datuk Hj. Wan Mohd Hanafiah Bin Wan Mohd Saman (Chairman) (resigned on 31.12.2001)Jamsari Bin Mohamad Aris (resigned on 31.12.2001)Dato’ Hj. Mohamad Satim Bin Diman (appointed on 28.3.2002)Sheah Kok Fah (appointed on 28.3.2002)
The Committee had one (1) meeting during the financial year which was attended by two (2) of the three(3) members.
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15...........................Annua l Repor t 2002
Remuneration Committee
The Remuneration Committee was set up on 27 September 2001 and currently comprises wholly of Non-Executive Directors. It is the responsibility of the Committee to recommend to the Board the remunerationof each of the Director in all its form, drawing from outside advice as necessary.
During the year ended 31 January 2002, the following Directors were/are the members of the NominationCommittee:-
Ho Siong San (Chairman)Jamsari Bin Mohamad Aris (resigned on 31.12.2001)Tan Hoi Chon (resigned on 31.12.2001)Dato’ Hj. Mohamad Satim Bin Diman (appointed on 28.3.2002)Sheah Kok Fah (appointed on 28.3.2002)
II Board Balance
The Board currently has eight (8) members, comprising the Chairman who is a Non-Executive Director,four (4) Independent Non-Executive Directors and three (3) Executive Directors. The Board’s compositioncomplies with the Code that requires a minimum of one-third of the Board to be independent directors.
There is a clearly accepted division of responsibilities between the Chairman and the Group ManagingDirector to ensure that there is a balance of power and authority.
The Non-Executive Directors are individuals of calibre, credibility and have the necessary skill andexperience to bring an independent judgement to bear on the issues of strategy, performance and resourcesincluding key appointments and standards of conduct.
All the Independent Non-Executive Directors are independent of management and free from any businessor other relationship that could materially interfere with the exercise of their independent judgement.
The profile of the members of the Board are presented on pages 8 to 10.
The Board has at least four (4) regularly scheduled meetings annually, with additional meetings for particularmatters convened as and when necessary. During the financial year ended 31 January 2002, six (6) Boardmeetings were held, the attendance of which are as follows:-
No. of BoardNo. of Board meetings
Director meetings held * attended
Dato’ Tan Huat Sheng 6 6Jamal Bin Mohd Aris (resigned on 1.3.2002) 6 6Pang Ling 6 5Datuk Hj. Wan Mohd Hanafiah
Bin Wan Mohd Saman (resigned on 31.12.2001) 6 5Tan Hoi Chon (resigned on 31.12.2001) 6 4Jamsari Bin Mohamad Aris (resigned on 31.12.2001) 6 5Teh Kok Leong (resigned on 16.11.2001) 5 5Ho Kim Shing (resigned on 20.3.2001) 1 1Goh Ceah Chuang (resigned on 20.3.2001) 1 1Ho Siong San (appointed on 17.5.2001) 3 3Sheah Kok Fah (appointed on 16.11.2001) 1 1Lee Kuang Chong (appointed on 16.11.2001) 1 –
(vacated on 31.1.2002) #
(re-appointed on 1.2.2002) #
Woo Yew Lam (appointed on 16.11.2001) 1 1Tan Hoon Kai (appointed on 31.12.2001) – –
* during directors’ tenure in office# Mr. Lee vacated office on 31 January 2002 pursuant to Article 115 of the Articles of Association of
the Company. He was, however, re-appointed to the Board on 1 February 2002.
Corporate Governance Statement (Cont’d)
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...........................Annua l Repor t 2002
16
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III Supply of Information
All Directors review a Board report prior to the Board meeting. This is issued in sufficient time to enablethe Directors to obtain further explanations, where necessary, in order to be briefed properly before themeeting. The Board report includes, among others, the following details:
• quarterly financial results
• performance report of the Group
• business plans and budgets
• major operational and financial matters
• updates on statutory regulations and requirements affecting the Company
• movement in shareholding of Directors
In addition, there is a schedule of matters reserved specifically for Board’s decision, including the approvalof corporate plans and budgets, material acquisitions and disposal of assets, major capital projects,financial results, dividend recommendations and Board appointments.
Where necessary, the Directors may obtain independent professional advice whether as a full Board or intheir individual capacity, in furtherance of their duties, at the Company’s expense. All Directors haveaccess to the advice and services of the Company Secretary.
IV Appointments to the Board
The Board has set a formal procedure for appointment of new Board members via the establishment ofthe Nomination Committee composed exclusively of Non-Executive Directors, a majority of whom areindependent, with the responsibility for proposing new nominees for the full Board’s consideration.
V Re-election
In accordance with the Company’s Memorandum and Articles of Association, at the first annual generalmeeting, all the Directors shall retire from office, and at the annual general meeting in every subsequentyear one-third of the Directors, or, if their number is not three (3) or a multiple of three (3), then thenumber nearest to one-third (1/3) , shall retire from office, but may offer themselves for re-election.
Directors who are appointed by the Board are subject to re-election by the shareholders at the nextAnnual General Meeting held following their appointment.
VI Directors’ Training
All Directors have attended the Mandatory Accreditation Programme (MAP) prescribed by the KualaLumpur Stock Exchange with the exception of Dato’ Hj. Mohamad Satim Bin Diman who is expected tocomplete the programme by June 2002. Directors will continue to receive relevant training from time totime to further enhance their skills and knowledge particularly on relevant new laws and regulations.
DIRECTORS’ REMUNERATION
The Board has set up the Remuneration Committee with the responsibility for recommending to the Board theremuneration of the Directors. In this respect, the Committee has established a formal and transparent procedurefor developing policy on Directors’ remuneration.
Corporate Governance Statement (Cont’d)
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17...........................Annua l Repor t 2002
The Committee, in its recommendation to the Board, takes into account that the component parts of remunerationshould be structured so as to link rewards to performance in the case of Executive Directors; and the experienceand level of responsibilities in the case of Non-Executive Directors.
Directors do not participate in decisions regarding their own remuneration packages. Directors’ fees are approvedat the Annual General Meeting by the shareholders.
The details of the remuneration of each of the Director during the financial year ended 31 January 2002 are asfollows:
EmployeeFees/ Provident
Director Salaries Funds Others * TotalRM RM RM RM
Executive
Jamal Bin Mohd Aris (resigned on 1.3.2002) 180,000 21,600 – 201,600Pang Ling 120,000 14,400 – 134,400Ho Kim Shing (resigned on 20.3.2001) 50,000 6,000 212,209 268,209Goh Ceah Chuang (resigned on 20.3.2001) 24,000 2,880 82,538 109,418Lee Kuang Chong (appointed on 16.11.2001) 12,500 1,503 – 14,003Woo Yew Lam (appointed on 16.11.2001) 12,500 1,503 – 14,003
Non-Executive
Dato’ Tan Huat Sheng 60,000 – – 60,000Datuk Hj. Wan Mohd
Hanafiah Bin WanMohd Saman (resigned on 31.12.2001) 22,000 – – 22,000
Tan Hoi Chon (resigned on 31.12.2001) 36,000 – – 36,000Jamsari Bin Mhamad Aris (resigned on 31.12.2001) 22,000 – – 22,000Teh Kok Leong (resigned on 16.11.2001) 25,000 – – 25,000Ho Siong San (appointed on 17.5.2001) 16,000 – – 16,000Sheah Kok Fah (appointed on 16.11.2001) 5,000 – – 5,000Tan Hoon Kai (appointed on 31.12.2001) 2,000 – – 2,000
* represents payment to the resigning directors (inclusive of statutory contribution) pursuant to the voluntaryseparation scheme undertaken by the Company in March 2001
SHAREHOLDERS
I Dialogue between the Company and Investors
The Group values dialogue with investors. The following are the channels of communication of theCompany to its shareholders, stakeholders, analysts and the public:
• the distribution of annual reports and circulars to shareholders
• timely quarterly results announcements made to the Kuala Lumpur Stock Exchange
• the Company has established a website at www.MergeEnergy.com.my which shareholders canaccess for information
In addition, Mr. Sheah Kok Fah, the Chairman of the Audit Committee, acts as the senior IndependentNon-Executive Director. Any concerns concerning the Group may be conveyed to him.
Corporate Governance Statement (Cont’d)
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...........................Annua l Repor t 2002
18
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II Annual General Meeting
Notice of Annual General Meeting and related papers are sent out to shareholders at least 21 days beforethe date of the meeting.
At each Annual General Meeting, the Board presents the progress and performance of the business andencourages shareholders to participate in the question and answer session. Executive Directors, whereappropriate, the Chairman of the Audit Committee are available to respond to shareholders’ questionsduring the meeting. Where appropriate, the Chairman will undertake to provide a written answer to anysignificant question that cannot be readily answered on the spot.
Each item of special business included in the notice of the meeting will be accompanied by a fullexplanation of the effects of a proposed resolution. Separate resolutions are proposed for substantiallyseparate issues at the meeting and the Chairman declares the number of proxy votes received both forand against each separate resolution.
ACCOUNTABILITY AND AUDIT
I Financial Reporting
The Directors aim to present a balanced and understandable assessment of the Group’s performance andprospects through the annual financial statements and quarterly announcements. The statement of theBoard pursuant to Section 169 of the Companies Act 1965 is set out on page 31 of this Annual Report.
II Internal Control
The Board of Directors recognises the importance of a sound system of internal control to safeguardshareholders’ investments and the Group’s assets. The Board has overall responsibility over the effectivenessof the Group’s internal control system and for reviewing the adequacy and integrity of the system. Itshould be noted, however, that such a system is designed to manage rather than eliminate the risk offailure to achieve business objectives, and can only provide reasonable assurance of effective operationsand compliance with laws and regulations and not absolute assurance against material misstatement orloss.
The Group’s Statement on Internal Control is set out on pages 24 and 25.
III Relationship with the Auditors
Through the Audit Committee, the Group has established a transparent and appropriate relationship withthe Group’s auditors, both external and internal.
The Audit Committee Report, encompassing the Terms of Reference, is set out on pages 21 to 23.
Corporate Governance Statement (Cont’d)
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19...........................Annua l Repor t 2002
The Directors are required to prepare financial statements for each financial year to their best knowledge andbelief for the purpose of expressing an opinion as to whether the accounts are drawn up in accordance withapplicable approved accounting standards in Malaysia so as to give a true and fair presentation of the state ofaffairs of the Company and the Group as at the end of the financial year and of the results and cash flows of theCompany and of the Group for the year then ended.
The Directors consider that, in preparing these financial statements, the Company and the Group have usedappropriate accounting policies, consistently applied and supported by reasonable and prudent judgementsand estimates, and that all accounting standards which they consider to be applicable have been followed.
The Directors are responsible for ensuring that the Company and the Group keep proper accounting recordswhich enable them to ensure that the financial statements comply with the provisions of the Companies Act,1965 and the applicable approved accounting standards in Malaysia.
Directors’ Responsibility Statement
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...........................Annua l Repor t 2002
20
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Other Compliance Information
To comply with the Kuala Lumpur Stock Exchange Listing Requirements, the following additional informationare provided:
1. Directors’ remuneration
The details of the remuneration of Directors of the Company comprising remuneration received from theCompany and the subsidiary companies during the financial year ended 31 January 2002 are as follows:-
Aggregate remuneration of Directors of the Company categorised into appropriate components:
EmployeeFees/ Provident
Category Salaries Funds Others * TotalRM RM RM RM
Executive 399,000 47,886 294,747 741,633Non-Executive 188,000 – – 188,000
* represents payment to the resigning directors (inclusive of statutory contribution) pursuant to thevoluntary separation scheme undertaken by the Company in March 2001
Number of Directors who served during the financial year whose remuneration falls into the followingbands:
Number of DirectorsRange of Remuneration Executive Non-Executive
Below RM50,000 4 7RM50,001 to RM100,000 – 1RM100,001 to RM150,000 1 –RM150,001 to RM200,000 1 –
2. Non-audit fees paid to external auditors
There were no non-audit fees paid to the external auditors during the year.
3. Share buyback
The Company does not have a share buyback programme in place.
4. Imposition of sanctions and/or penalties
There were no sanctions and/or penalties imposed on the Company or its subsidiaries, Directors ormanagement by the relevant regulatory bodies.
5. Profit estimate, forecast or projection or unaudited results
The Company did not make any release on the profit estimate, forecast or projection for the financialyear. There were no unaudited results released which differ by 10 per cent or more from the auditedresults.
6. Profit guarantee
No profit guarantee was given by the Company during the financial year.
7. Material contracts or loans
There were no material contracts or loans entered into by the Company and its subsidiaries that involveDirectors’ or major shareholders’ interests.
8. Revaluation policy on landed properties
Revaluation of landed properties will be conducted at regular intervals of at least once every five (5)years with additional valuation in the intervening years where market conditions indicate that the carryingvalue of the revalued assets are materially different from the market value.
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21...........................Annua l Repor t 2002
Audit Committee Report
COMPOSITION
The Audit Committee was established by the Board of Directors on 16 April 1999, as a sub-committee of theBoard.
For the financial year ended 31 January 2002, the Audit Committee comprised the following members:
Chairman Datuk Hj. Wan Mohd Hanafiah Bin Wan Mohd Saman appointed on 1 June 2001Independent Non-Executive Director resigned on 31 December 2001
Teh Kok Leong resigned on 1 June 2001Independent Non-Executive Director
Members Jamal Bin Mohd Aris resigned on 1 March 2002Managing Director
Ho Siong San appointed on 1 June 2001Independent Non-Executive Director
The present Audit Committee comprises the following members:
Chairman Sheah Kok Fah appointed on 1 March 2002Independent Non-Executive Director
Members Woo Yew Lam appointed on 1 March 2002Executive Director
Ho Siong SanIndependent Non-Executive Director
MEETINGS
The Committee had a total of five (5) meetings during the financial year ended 31 January 2002. The details ofthe attendance of the Audit Committee members during the financial year and their tenure as Audit Committeemembers are as follows:
No. of Audit No. of AuditCommittee Committee
Audit Committee member meetings held meetings attended
Teh Kok Leong 3 3Datuk Hj. Wan Mohd Hanafiah Bin Wan Mohd Saman 5 5Jamal Bin Mohd Aris 5 5Ho Siong San 2 2
TERMS OF REFERENCE
Composition
The Audit Committee shall be appointed by the Board from among their number and shall consist of not lessthan three (3) members. The Chairman of the Committee shall be appointed by the Board.
If a member of the Audit Committee ceases to be a member with the result that the number is reduced belowthree (3), the Board shall within three (3) months of that event, appoint such number of new members as maybe required to make up the minimum number of three (3) members.
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...........................Annua l Repor t 2002
22
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Audit Committee Report (Cont’d)
The term of office for all Audit Committee members is subject to renewal on a yearly basis.
The Company Secretary shall be the Secretary of the Audit Committee.
Meetings
The Audit Committee will meet at least four (4) times a year and such additional meetings as the Chairman shalldecide in order to fulfill its duties. A quorum shall be two (2) members including the Chairman.
The Director responsible for the financial management of the Company, the head of the Finance & Accounts,the head of Internal Audit and a representative of the external auditors shall normally attend meetings. At leastonce a year the Audit Committee shall meet with the external auditors.
Authority
The Audit Committee is authorised by the Board to investigate any activity within its terms of reference. It isauthorised to seek any information it requires from any employee and all employees are directed to co-operatewith any request made by the Audit Committee. In addition, it shall have unrestricted access to both theinternal and external auditors and to the senior management of the Group. The Audit Committee is also authorisedby the Board to obtain legal or other professional advice where they consider it necessary to carry out theirduties.
Duties and Responsibilities
(1) To review and report the following to the Board of Directors of the Company:
(a) the audit plan with the external auditor;
(b) the audit report with the external auditor;
(c) with the external auditor, his evaluation of the system of internal controls;
(d) the assistance given by the Company’s officers to the external auditors;
(e) the external auditors’ management letter and management’s response;
(f) to discuss problems and reservations arising from the interim and final audits, and any matter theauditor may wish to discuss (in the absence of management where necessary);
(g) the internal audit function:
(i) the adequacy of scope, functions and resources of the internal audit functions and that it hasthe necessary authority to carry out its work;
(ii) the internal audit programme, processes, the results of the internal audit programme, processesor investigation undertaken and whether or not appropriate action is taken on therecommendations of the internal audit function;
(iii) any appraisal or assessment of the performance of members of the internal audit function;
(iv) approve any appointment or termination of senior staff members of the internal audit function;
(v) inform itself of resignations of internal audit staff members and provide the resigning staffmember an opportunity to submit his reasons for resigning; and
(vi) consider the major findings of internal investigations and management’s response;
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23...........................Annua l Repor t 2002
Audit Committee Report (Cont’d)
(h) the quarterly results and year end financial statements, prior to the approval by the board of directors,focusing particularly on:
(i) changes in or implementation of major accounting policy changes;
(ii) significant and unusual events;
(iii) the going concern assumption;
(iv) significant adjustments arising from the audit; and
(v) compliance with accounting standards and other legal requirements;
(i) any related party transaction and conflict of interest situation that may arise within the listed issueror group including any transaction, procedure or course of conduct that raises questions ofmanagement integrity;
(j) any letter of resignation from the external auditors of the Company; and
(k) whether there is a reason (supported by grounds) to believe that the Company’s external auditors isnot suitable for re-appointment.
(2) To recommend the nomination of a person or persons as external auditors.
(3) To carry out any such other functions as may be agreed by the Audit Committee and the Board.
ACTIVITIES
During the year, the Audit Committee carried out its duties as set out in the terms of reference, focusing particularlyon the following:
1. review of and discussion with the external auditors on the audited accounts for the financial year ended31 January 2001;
2. review of quarterly financial result announcements prior to the Board of Directors’ approval;
3. review of audit strategy and plan of the external auditors;
4. review of the revised Audit Committee’s Terms of Reference in compliance with the Revamped KualaLumpur Stock Exchange Listing Requirements;
5. review of the Internal Audit Department’s Terms of Reference; and
6. consider and recommend the re-election of the external auditors.
INTERNAL AUDIT FUNCTION
The Group has established the Internal Audit Department as an independent appraisal function. The InternalAudit function is overall responsible in providing assurance to the Audit Committee and the Board on theadequacy and effectiveness of the internal control systems and risk management in the Company. This functionalso acts as a source to assist the Audit Committee and the Board to strengthen and improve current managementand operating style in pursuit of best practices.
The Internal Audit Department undertakes internal audit functions based on the audit plan that is reviewed andapproved by the Audit Committee. The audit plan is developed based on a risk assessment model and coversthe review of adequacy of operational controls, compliance with rules and regulations, adequacy of controlsfor safeguarding of assets and resource and effectiveness of administrative and financial controls, amongstothers.
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...........................Annua l Repor t 2002
24
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Statement Of Internal Control
The Board of Directors recognises the importance of a sound system of internal control to safeguard shareholders’investments and the Group’s assets. The Board has overall responsibility over the effectiveness of the Group’sinternal control system and risk management and for reviewing the adequacy and integrity of the system. Itshould be noted, however, that such a system is designed to manage rather than eliminate the risk of failure toachieve business objectives, and can only provide reasonable assurance of effective operations and compliancewith laws and regulations and not absolute assurance against material misstatement or loss.
With the establishment of the Internal Audit Department in April 2001, the Board has set in place the mechanismto assist the Audit Committee and the Board in the on-going process for identifying, evaluating and managingthe significant risks faced by the Group. This process is regularly reviewed by the Board.
The Board now has in place the following mechanisms to assist it in reviewing the adequacy and the integrityof the Group’s system of internal control:
AUDIT COMMITTEE
The Audit Committee is overall responsible in providing assurance to the Board of Directors as an independentparty on the effectiveness of the internal control systems and risk management in the Group. It will also beresponsible to review the work of the internal audit department which is carried out in accordance with theaudit plan approved by the Audit Committee and by the Board.
INTERNAL AUDIT
The Internal Audit function is overall responsible in providing assurance to the Audit Committee and the Boardon the adequacy and effectiveness of the internal control systems and risk management in the Company. Thisfunction also acts as a source to assist the Audit Committee and the Board to strengthen and improve currentmanagement and operating style in pursuit of best practices.
The review of the adequacy and the integrity of the Group’s system of internal control by the Internal AuditDepartment commenced in the current financial year upon the establishment of the Internal Audit Departmentin accordance with the Audit Plan of the Internal Audit Department.
RISK MANAGEMENT FRAMEWORK
Risk management framework of the Group encompasses the following salient processes:
• Risk Management Policy
• Risk Assessment Model
• Risk Mapping
• Risk & Control Matrix
The long-range and annual Audit Plan are developed based on the outcome of risk assessment of areas ofpotential risk. Risk assessment will be performed every year and the long-range audit plan will be updated toallow for changes in the Group’s operating environment.
POLICIES AND PROCEDURES
Major policies and procedures are documented of which the operations must comply. Corporate values, whichemphasise ethical behavior, quality products and services, are set out in the Company Manual.
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25...........................Annua l Repor t 2002
OTHER KEY ELEMENTS OF INTERNAL CONTROL
The other key elements of the Group’s internal control system are described below:
• A management structure exists with clearly defined lines of responsibility and the appropriate levels ofdelegation.
• Regular review by management of business and financial performance and other key indicators, such ascash flow performance, staff and machinery utilisation and project progress.
• The Executive Directors, Financial Controller and senior management meet on a regular basis to considerthe Group’s financial performance, business development, management and corporate issues.
• Periodic monitoring of actual performance against targeted results.
The Board takes cognisance of the importance of the system of internal control and risk management and placeemphasis on on-going process to adapt the Group’s existing internal control and risk management processestowards complying with the requirements of the Kuala Lumpur Stock Exchange’s Statement On Internal Control:Guidance for Directors of Public Listed Companies.
REVIEW OF EFFECTIVENESS
The Board believes that the Group’s system of internal control provides reasonable, but not absolute, assurancethat problems are identified on a timely basis and dealt with appropriately.
The Board has reviewed the effectiveness of the system of internal control through the monitoring process setout above and are not aware of any significant weaknesses during the period under review.
Statement Of Internal Control (Cont’d)
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...........................Annua l Repor t 2002
26
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Financial Statements
27 - 30 Directors’ Report
31 Statement By Directors
31 Statutory Declaration
32 Report Of The Auditors
33 – 34 Balance Sheets
35 Income Statements
36 Statements Of Changes In Equity
37 – 38 Cash Flow Statements
39 – 66 Notes To The Financial Statements
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27...........................Annua l Repor t 2002
Directors’ Report
The directors hereby submit their report together with the audited financial statements of the Group and of theCompany for the financial year ended 31 January 2002.
PRINCIPAL ACTIVITIES
The Company is principally engaged in investment holding. The principal activities of the subsidiary companiesare set out in Note 6 to the financial statements. There have been no significant changes in the nature of theseactivities during the financial year.
RESULTS
Group CompanyRM RM
Net (loss)/profit for the financial year (38,221,153) 4,639,718
DIVIDENDS
No dividend has been paid or declared by the Company since the end of the previous financial year. Thedirectors do not recommend any dividend in respect of the current financial year.
RESERVES AND PROVISIONS
There were no material transfers to or from reserves or provisions during the financial year other than thosedisclosed in the financial statements.
ISSUE OF SHARES AND DEBENTURES
The Company has not issued any new shares or debentures during the financial year.
DIRECTORS
The directors who held office since the date of the last report are:-
Dato’ Tan Huat ShengPang LingHo Siong SanLee Kuang Chong (Appointed on 16.11.2001);
Vacated office on 31.1.2002;Reappointed on 1.2.2002)
Woo Yew Lam (Appointed on 16.11.2001)Sheah Kok Fah (Appointed on 16.11.2001)Tan Hoon Kai (Appointed on 31.12.2001)Dato’ Hj. Mohamad Satim Bin Diman (Appointed on 1.3.2002)Jamal Bin Mohd Aris (Resigned on 1.3.2002)Datuk Hj. Wan Mohd Hanafiah Bin Wan Mohd Saman (Resigned on 31.12.2001)Jamsari Bin Mohamad Aris (Resigned on 31.12.2001)Tan Hoi Chon (Resigned on 31.12.2001)Teh Kok Leong (Resigned on 16.11.2001)
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...........................Annua l Repor t 2002
28
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Directors’ Report (Cont’d)
In accordance with Article 105 of the Company’s Articles of Association, Dato’ Tan Huat Sheng retires from theBoard by rotation at the forthcoming Annual General Meeting and, being eligible, offers himself for re-election.
In accordance with Article 112 of the Company’s Articles of Association, Messrs. Lee Kuang Chong, Woo YewLam, Sheah Kok Fah, Tan Hoon Kai and Dato’ Hj. Mohamad Satim Bin Diman retire from the Board at theforthcoming Annual General Meeting and, being eligible, offer themselves for re-election.
DIRECTORS’ INTERESTS
The directors holding office at the end of the financial year and their beneficial interests in the ordinary sharesof the Company and the related corporations during the financial year ended 31 January 2002, as recorded inthe Register of Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965were as follows:-
Number of ordinary shares of RM1.00 eachBalance
as at1.2.2001/ BalanceDate of as at
Shares in the Company appointment Bought Sold 31.1.2002
Direct interest
Dato’ Tan Huat Sheng 323,758 – – 323,758Woo Yew Lam 96,000 – – 96,000Tan Hoon Kai 1,000,000 – – 1,000,000
Indirect interest
Dato’ Tan Huat Sheng 19,016,379 – – 19,016,379Lee Kuang Chong 3,209,000 6,283,001 – 9,492,001Jamal Bin Mohd Aris 20,769,998 – (20,769,998) –
By virtue of their interests in the shares of the Company, Dato’ Tan Huat Sheng and Lee Kuang Chong aredeemed to have interests in the shares of all the subsidiary companies to the extent the Company has aninterest.
None of the other directors who held office at the end of the financial year had any shares or beneficial interestsin the shares of the Company or its related corporations during the financial year.
DIRECTORS’ BENEFITS
Since the end of the previous financial year, none of the directors has received or become entitled to receive abenefit (other than a benefit included in the aggregate amount of emoluments received or due and receivableby the directors shown in the financial statements) by reason of a contract made by the Company or a relatedcorporation with the director or with a firm of which the director is a member, or with a company in which thedirector has a substantial financial interest except for any benefits that may be deemed to be derived by virtueof transactions entered into with the related parties as shown in Note 33 to the financial statements.
There were no arrangements during and at the end of the financial year, to which the Company is a party, whichhad the object of enabling directors of the Company to acquire benefits by means of the acquisition of sharesin or debentures of the Company or any other body corporate.
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29...........................Annua l Repor t 2002
Directors’ Report (Cont’d)
OTHER STATUTORY INFORMATION REGARDING THE GROUP AND THE COMPANY:-
(I) AS AT THE END OF THE FINANCIAL YEAR
(a) Before the income statements and balance sheets of the Group and of the Company were madeout, the directors took reasonable steps:-
(i) to ascertain that proper action had been taken in relation to the writing off of bad debts andthe making of provision for doubtful debts and have satisfied themselves that all known baddebts had been written off and that adequate provision had been made for doubtful debts;and
(ii) to ensure that any current assets which were unlikely to realise their book values in theordinary course of business had been written down to their estimated realisable values.
(b) In the opinion of the directors, the results of the operations of the Group and of the Companyduring the financial year have not been substantially affected by any item, transaction or event ofa material and unusual nature.
(II) FROM THE END OF THE FINANCIAL YEAR TO THE DATE OF THIS REPORT
(c) The directors are not aware of any circumstances:-
(i) which would render the amount written off for bad debts or the amount of provision fordoubtful debts in the financial statements of the Group and of the Company inadequate toany material extent; or
(ii) which would render the values attributed to the current assets in the financial statements ofthe Group and of the Company misleading; and
(iii) which have arisen which would render adherence to the existing method of valuation ofassets or liabilities of the Group and of the Company misleading or inappropriate.
(d) In the opinion of the directors:-
(i) there has not arisen any item, transaction or event of a material and unusual nature likely toaffect substantially the results of the operations of the Group and of the Company for thefinancial year in which this report is made; and
(ii) no contingent or other liability has become enforceable, or is likely to become enforceable,within the period of twelve months after the end of the financial year which will or mayaffect the abilities of the Group and of the Company to meet their obligations as and whenthey fall due.
(III) AS AT THE DATE OF THIS REPORT
(e) There are no charges on the assets of the Group and of the Company which have arisen since theend of the financial year to secure the liabilities of any other person.
(f) There are no contingent liabilities of the Group and of the Company which have arisen since theend of the financial year.
(g) The directors are not aware of any circumstances not otherwise dealt with in the report or financialstatements which would render any amount stated in the financial statements of the Group and ofthe Company misleading.
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...........................Annua l Repor t 2002
30
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SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR
On 13 February 2001, the Company has disposed of 1,050,000 ordinary shares of RM1.00 each representing20% of the equity interest in an associated company, Juta Permai Sdn. Bhd., to Merge Housing Bhd. (“MHB”)for a total consideration of RM8,044,406 to be satisfied by the issuance of 6,447,000 ordinary shares of RM1.00each at approximately RM1.24 per ordinary share of MHB and cash consideration of RM50,000.
On 23 February 2001, the Company has subscribed for its Restricted Rights Issue entitlement of 1,878,000 newordinary shares of RM1.00 each at the price of RM1.24 per ordinary share in MHB.
In conjunction with the listing of MHB’s ordinary shares on the Main Board of the Kuala Lumpur Stock Exchange(“KLSE”), the Company has offered for sale 4,014,000 ordinary shares of MHB of RM1.00 each at an offer priceof RM1.80 per ordinary share to approved Bumiputera investors nominated by the Ministry of InternationalTrade and Industry. However, of the 4,014,000 ordinary shares offerred for sale by the Company, only 1,019,000ordinary shares have been accepted and paid for by several approved Bumiputera investors, leaving a balanceof 2,995,000 ordinary shares unsubscribed which are placed with Aseam Malaysia Nominees (Tempatan) Sdn.Bhd., as stakeholder, until such time when they are taken up by approved Bumiputera investors.
SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
On 8 March 2002, Southern Investment Bank Berhad had on behalf of Lee Heng Choong (“Offeror”), served aNotice of Conditional Mandatory Offer (“Notice”) on the Company to acquire the remaining 37,377,001 ordinaryshares of RM1.00 each in MEB (“Offer”), representing 55.79% of the issued and paid-up share capital of theCompany not already owned by the Offeror and persons acting in concert with the Offeror, namely Mr. LeeKuang Chong and Mr. Woo Yew Lam, at a cash price of RM0.65 per offer share payable in cash.
A copy of the Notice containing the principal terms and conditions of the Offer was sent to all shareholders bythe Company in a notification to shareholders dated 14 March 2002. The Board of Directors has appointed anIndependent Adviser to the shareholders of the Company in relation to the Offer.
On 2 May 2002, the Foreign Investment Committee (“FIC”) has approved and the Kuala Lumpur Stock Exchangehas given its clearance on the Offeror’s proposal in relation to the Offer. The FIC’s approval is subject to thecondition that the Company increasing its Bumiputra shareholdings to at least 30% by 31 December 2003.The approval of the Securities Commission in relation to the Offer was obtained on 21 May 2002.
The Offer document has been despatched to the shareholders on 22 May 2002.
AUDITORS
The retiring auditors, Messrs. BDO Binder, have expressed their willingness to continue in office.
Signed on behalf of the Board in accordance with a resolution of the directors.
.............................................................................)LEE KUANG CHONG )
)) DIRECTORS))
.............................................................................)WOO YEW LAM
Kuala Lumpur22 May 2002
Directors’ Report (Cont’d)
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31...........................Annua l Repor t 2002
In the opinion of the directors, the financial statements set out on pages 33 to 66 have been drawn up inaccordance with applicable approved accounting standards in Malaysia so as to give a true and fair view of:-
(i) the state of affairs of the Group and of the Company as at 31 January 2002 and of their results for thefinancial year then ended; and
(ii) the cash flows of the Group and of the Company for the financial year ended 31 January 2002.
On behalf of the Board,
.............................................................................)LEE KUANG CHONG )
)) DIRECTORS))
.............................................................................)WOO YEW LAM
Kuala Lumpur22 May 2002
Statutory Declaration
I, Lee Kuang Chong, being the director primarily responsible for the financial management of Merge EnergyBhd., do solemnly and sincerely declare that the financial statements set out on pages 33 to 66 are, to the bestof my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same tobe true and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly )declared by the abovenamed at )Kuala Lumpur this )22 May 2002 )
Before me:-
Statement By Directors
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...........................Annua l Repor t 2002
32
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We have audited the financial statements set out on pages 33 to 66. These financial statements are theresponsibility of the directors. Our responsibility is to express an opinion on the financial statements based onour audit.
We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by the directors, as well as evaluating the overall financial statements presentation.We believe that our audit provides a reasonable basis for our opinion.
In our opinion:-
(a) the financial statements have been properly drawn up in accordance with applicable approved accountingstandards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view ofthe state of affairs of the Group and of the Company as at 31 January 2002 and of their results and cashflows for the financial year then ended; and
(b) the accounting and other records and the registers required by the Act to be kept by the Company and byits subsidiary companies have been properly kept in accordance with the provisions of the Act.
We are satisfied that the financial statements of the subsidiary companies that have been consolidated with theCompany’s financial statements are in form and content appropriate and proper for the purposes of the preparationof the consolidated financial statements and we have received satisfactory information and explanations requiredby us for those purposes.
The auditors’ report on the financial statements of the subsidiary companies were not subject to any qualificationand did not include any comment made under subsection (3) of Section 174 of the Act.
BDO BINDERAF:0206Chartered Accountants
SIEW KAH TOONG1045/03/04 (J)Partner
Kuala Lumpur22 May 2002
Report Of The AuditorsTo The Members Of Merge Energy Bhd.
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33...........................Annua l Repor t 2002
Balance SheetsAs at 31 January 2002
Group Company2002 2001 2002 2001
NOTE RM RM RM RM
ASSETS EMPLOYED
PROPERTY, PLANTAND EQUIPMENT 5 15,554,670 20,386,145 2,191,020 2,372,636
INVESTMENT INSUBSIDIARY COMPANIES 6 – – 58,274,485 58,274,485
INVESTMENT IN ANASSOCIATED COMPANY 7 – 3,457,215 – 3,059,500
JOINT VENTURE 8 2,525,484 2,530,489 – –
OTHER INVESTMENTS 9 1,096,020 – 1,078,020 –
GOODWILL ONCONSOLIDATION 10 – 6,453,002 – –
INVESTMENT PROPERTIES 11 5,642,812 5,642,812 – –
DEFERRED EXPENDITURE 12 – – – –
CURRENT ASSETS
Inventories 13 – 54,947 – –Amounts due from customers
for contract works 14 8,603,066 6,116,644 – –Development expenditure – 91,656 – –Trade receivables 15 53,958,909 99,944,486 – –Other receivables, deposits
and prepayments 16 3,317,026 3,502,716 1,095,138 2,177,138Short term investments 17 3,174,700 – 3,174,700 –Tax recoverable 185,377 108,727 90,720 14,070Amounts owing by
subsidiary companies 18 – – 18,074,880 11,844,594Fixed deposits with licensedbanks 19 4,129,907 3,942,581 – –Cash and bank balances 256,233 496,677 20,127 3,656
73,625,218 114,258,434 22,455,565 14,039,458
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...........................Annua l Repor t 2002
34
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Balance Sheets (Cont’d)
As at 31 January 2002
Group Company2002 2001 2002 2001
NOTE RM RM RM RM
LESS: CURRENT LIABILITIES
Amounts due to customersfor contract works 14 2,148,571 4,514,746 – –
Trade payables 24,949,436 38,675,475 – –Other payables and accruals 20 5,054,690 3,938,900 1,181,555 232,197Hire-purchase creditors 21 163,814 436,498 – –Term loans – secured 22 169,886 206,490 – –Bank overdrafts – secured 23 21,141,350 21,021,884 2,896,230 2,974,733Taxation 2,043,929 2,387,397 307,240 64,000
55,671,676 71,181,390 4,385,025 3,270,930
NET CURRENT ASSETS 17,953,542 43,077,044 18,070,540 10,768,528
42,772,528 81,546,707 79,614,065 74,475,149
FINANCED BY
SHARE CAPITAL 24 67,000,000 67,000,000 67,000,000 67,000,000
RESERVES 25 (28,187,634) 10,033,519 12,114,867 7,475,149
SHAREHOLDERS’ EQUITY 38,812,366 77,033,519 79,114,867 74,475,149
DEFERRED AND LONGTERM LIABILITIES
Hire-purchase creditors 21 50,535 39,899 – –Term loans – secured 22 3,909,627 3,802,289 499,198 –Deferred taxation 26 – 671,000 – –
3,960,162 4,513,188 499,198 –
42,772,528 81,546,707 79,614,065 74,475,149
The attached notes form an integral part of the financial statements.
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35...........................Annua l Repor t 2002
Income StatementsFor the financial year ended 31 January 2002
Group Company2002 2001 2002 2001
NOTE RM RM RM RM
Revenue 27 31,783,910 35,814,558 324,000 –
Cost of sales (44,451,679) (37,232,441) – –
Gross (loss)/profit (12,667,769) (1,417,883) 324,000 –
Other operating income 10,721,268 1,154,581 6,698,575 343,217
Administration anddistribution costs (4,912,252) (7,601,590) (1,070,474) (1,098,926)
Other operating expenses (28,933,435) (10,189,113) (722,160) –
(Loss)/Profit from operations (35,792,188) (18,054,005) 5,229,941 (755,709)
Finance costs (2,791,960) (3,251,415) (328,223) (271,871)
Share of results inassociated company – 984,095 – –
Share of results injoint venture (5,005) – – –
(Loss)/Profit before taxation 28 (38,589,153) (20,321,325) 4,901,718 (1,027,580)
Taxation- Company and
subsidiary companies 29 368,000 (123,217) (262,000) –- Share of taxation in
associated company – (116,800) – –
368,000 (240,017) (262,000) –
Net (loss)/profit for thefinancial year (38,221,153) (20,561,342) 4,639,718 (1,027,580)
Earnings per ordinary share (sen) 30 (57.05) (30.69)
The attached notes form an integral part of the financial statements.
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...........................Annua l Repor t 2002
36
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Statements Of Changes In EquityFor the financial year ended 31 January 2002
RetainedOrdinary profit/
share Share Revaluation (Accumulatedcapital premium reserve loss) Total
RM RM RM RM RM
Group
Balance as at 31 January 2000 67,000,000 7,712,508 917,056 21,965,297 97,594,861
Net loss for the financial year – – – (20,561,342) (20,561,342)
Balance as at 31 January 2001 67,000,000 7,712,508 917,056 1,403,955 77,033,519
Net loss for the financial year – – – (38,221,153) (38,221,153)
Balance as at 31 January 2002 67,000,000 7,712,508 917,056 (36,817,198) 38,812,366
Company
Balance as at 31 January 2000 67,000,000 7,712,508 – 790,221 75,502,729
Net loss for the financial year – – – (1,027,580) (1,027,580)
Balance as at 31 January 2001 67,000,000 7,712,508 – (237,359) 74,475,149
Net profit for the financial year – – – 4,639,718 4,639,718
Balance as at 31 January 2002 67,000,000 7,712,508 – 4,402,359 79,114,867
The attached notes form an integral part of the financial statements.
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37...........................Annua l Repor t 2002
Cash Flow StatementsFor the financial year ended 31 January 2002
Group Company2002 2001 2002 2001RM RM RM RM
CASH FLOWS FROMOPERATING ACTIVITIES
(Loss)/Profit before taxation (38,589,153) (20,321,325) 4,901,718 (1,027,580)
Adjustments for:-
Allowance for doubtful debts 2,276,141 8,819,851 – –Allowance for doubtful debts
no longer required (1,969,274) – – –Amortisation and write-off
of goodwill on consolidation 6,453,002 626,539 – –Bad debts written off 12,430 47,559 – –Deferred expenditure written off – 11,330 – –Depreciation of property,
plant and equipment 2,146,694 4,013,973 181,616 178,375Development expenditure written off 91,656 – – –Discount given to debtors 19,353,054 – – –Gross dividend received from
investments in quoted shares (324,800) – (324,000) –Gain on disposal of an
associated company, net ofreal property gain tax (3,580,541) – (3,985,899) –
Gain on disposal of investmentsin quoted shares (2,392,216) – (2,392,216) –
Gain on disposal of property,plant and equipment (1,940,165) (53,592) – –
Interest expense 2,771,092 3,073,203 327,414 270,920Interest income (193,303) (385,850) (320,460) (343,217)Property, plant and
equipment written off 5,483 148,671 – –Provision for diminution
in value of investmentsin quoted shares 722,160 – 722,160 –
Share of results in joint venture 5,005 – – –Share of results in associated company – (984,095) – –
Operating loss beforeworking capital changes (15,152,735) (5,003,736) (889,667) (921,502)Decrease in inventories 54,947 69,576 – –(Increase)/Decrease in amounts
due from customers forcontract works (2,486,422) 9,516,631 – –
Decrease in trade receivables 24,422,670 14,577,288 – –(Increase)/Decrease in other
receivables, deposits andprepayments (706,591) 3,735,696 (2,000) 23,411
Decrease in amounts due tocustomers for contract works (2,366,175) (7,438,942) – –
Decrease in trade payables (3,563,538) (9,950,423) – –Increase/(Decrease) in other payables
and accruals 55,009 (1,794,623) (49,522) 204,406Decrease in amounts owing to directors – (2,331) – –
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...........................Annua l Repor t 2002
38
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Cash Flow Statements (Cont’d)
For the financial year ended 31 January 2002
Group Company2002 2001 2002 2001RM RM RM RM
Cash generated from/(used in) operations 257,165 3,709,136 (941,189) (693,685)Interest paid (2,318,967) (2,123,076) (266,707) (270,920)Interest received 53,753 247,413 53,753 68,157Tax paid (607,498) (2,092,155) (4,690) (14,070)
Net cash used in operating activities (2,615,547) (258,682) (1,158,833) (910,518)
CASH FLOWS FROMINVESTING ACTIVITIES
Acquisition of additional sharesin associated company – (50,000) – (50,000)
Acquisition of additional sharesin subsidiary company – – – (850,000)
Dividend received 234,080 – 233,280 –Interest received 139,550 138,437 – –Investment in joint venture – (2,530,489) – –Placement of fixed deposits
with licensed banks (187,326) (845,880) – –Proceeds from disposal of
associated company 50,000 – 50,000 –Proceeds from disposal of
investment in quoted shares 1,834,200 – 1,834,200 –Proceeds from disposal of
property, plant and equipment 2,324,530 1,911,521 – –Purchase of investments in
quoted shares (2,346,720) – (2,328,720) –Purchase of property, plant and
equipment (Note 31) (264,900) (1,738,342) – (106,071)
Net cash from/(used in) investing activities 1,783,414 (3,114,753) (211,240) (1,006,071)
CASH FLOWS FROMFINANCING ACTIVITIES
Amount received from profitguarantee debtors 1,084,000 1,084,000 1,084,000 1,084,000
Drawdown of term loan 2,328,720 – 2,328,720 –Interest paid (452,125) (464,127) (60,707) –Net repayments to subsidiary companies – – (57,444) (691,273)Repayment of hire-purchase creditors (498,048) (667,741) – –Repayment of term loans (1,990,324) (187,133) (1,829,522) –
Net cash from/(used in) financing activities 472,223 (235,001) 1,465,047 392,727
Net (decrease)/increase in cash andcash equivalent (359,910) (3,608,436) 94,974 (1,523,862)
Cash and cash equivalents as atbeginning of financial year (20,525,207) (16,916,771) (2,971,077) (1,447,215)
Cash and cash equivalents as atend of financial year (Note 32) (20,885,117) (20,525,207) (2,876,103) (2,971,077)
The attached notes form an integral part of the financial statements.
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39...........................Annua l Repor t 2002
Notes To The Financial Statements31 January 2002
1. GENERAL INFORMATION
The Company is a public limited liability company, incorporated and domiciled in Malaysia.
The registered office of the Company is located at Suite 1701, 17th Floor, Wisma Hamzah Kwong Hing,No. 1, Leboh Ampang, 50100 Kuala Lumpur.
The principal place of business of the Company is located at No. 1 & 2, Jalan PS 1/1, Bandar PinggiranSubang, Seksyen 1, 40150 Shah Alam, Selangor Darul Ehsan.
The financial statements are presented in Ringgit Malaysia.
2. PRINCIPAL ACTIVITIES
The Company is principally engaged in investment holding. The principal activities of the subsidiarycompanies are set out in Note 6 to the financial statements. There have been no significant changes inthe nature of these activities during the financial year.
3. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS
The financial statements of the Group and of the Company have been prepared in accordance withapplicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965.
4. SIGNIFICANT ACCOUNTING POLICIES
4.1 Basis of accounting
The financial statements of the Group and of the Company have been prepared under the historicalcost convention (as modified by the revaluation of certain land and building) unless otherwiseindicated in the significant accounting policies.
The preparation of financial statements in conformity with applicable approved accounting standardsin Malaysia and the provisions of the Companies Act, 1965 requires the directors to make estimatesand assumptions that affect the reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Actual results could differ from those estimates.
4.2 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and allits subsidiary companies made up to the end of the financial year. Inter-company transactions andbalances are eliminated on consolidation and the consolidated financial statements reflect externaltransactions only. The Group adopts both merger and acquisition methods of consolidation, asappropriate.
Subsidiary companies which satisfy the criterion for the merger method of consolidation areaccounted for using merger accounting principles. Where the cost of investment is greater thanthe nominal value of the shares transferred the difference is set off against retained profits. Theresults of subsidiary companies consolidated under this method are accounted for as if the companieshad been merged throughout the current and previous financial years.
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...........................Annua l Repor t 2002
40
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Notes To The Financial Statements (Cont’d)
31 January 2002
4. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
4.2 Basis of consolidation (Cont’d)
Where the acquisition method is adopted, the results of the subsidiary companies acquired areincluded in the consolidated financial statements from the date of acquisition and up to the date ofdisposal. The difference between the aggregate cost of investment in the subsidiary companiesand their underlying fair value of net assets at the date of acquisition is treated as goodwill orreserve on consolidation as appropriate. Goodwill and reserve on consolidation are amortisedover a period of 20 years and are written off when there is no expected future economic benefits.
4.3 Property, plant and equipment and depreciation
The gross carrying amounts of property, plant and equipment are initially measured at cost. Landand buildings which have been subsequently revalued, are stated at valuation less accumulateddepreciation and accumulated impairment losses. All other property, plant and equipment arestated at cost less accumulated depreciation and accumulated impairment losses.
Land and buildings stated at valuation are revalued at a regular interval of at least once in everyfive years with additional valuations in the intervening years where market conditions indicate thatthe carrying values of the revalued land and buildings materially differ from the market values.
Surplus arising from such valuations will be credited to shareholders’ equity as a revaluation surplusand any deficit will be charged against such surplus to the extent that the decrease offsets anyincrease. In all other cases, the deficit will be charged to the income statement.
Freehold land is not depreciated. Long term leasehold land is amortised over the terms of leaseperiod ranging from 89 to 99 years. The lease period of land which is more than 50 years areconsidered long term. All other property, plant and equipment are depreciated on a straight linebasis which are intended to write off their costs or valuation over their estimated useful lives. Theprincipal annual rates of depreciation used are as follows:-
Buildings 2%Plant and machinery 10% to 20%Motor vehicles 10% to 20%Furniture, fittings and office equipment 05% to 25%Office renovation 5%
4.4 Investments
(i) Subsidiary companies
Investment in subsidiary companies which are eliminated on consolidation are stated at costless provision for permanent diminution in value, if any.
(ii) Associated companies
An associated company is a company in which the Group and the Company have a longterm equity interest of between 20% to 50% and where the Group is in a position to exercisesignificant influence over the financial and operating policies of the investee company.
The Group and the Company’s investment in associated companies are stated at cost lessprovision for permanent diminution in value, if any.
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41...........................Annua l Repor t 2002
Notes To The Financial Statements (Cont’d)
31 January 2002
4. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
4.4 Investments (Cont’d)
(ii) Associated companies (cont’d)
Premium or reserve arising on acquisition represents the difference between the cost ofinvestment and the Group’s share of the value of net assets of the associated companies atthe date of acquisition. The premium or reserve arising from acquisition of associatedcompanies are amortised over a period of 20 years.
The Group’s share of results and reserves in the associated companies acquired or disposedof are included in the consolidated financial statements from the effective date of acquisitionor up to the effective date of disposal. The Group’s interest in the associated companies isstated at cost plus adjustments to reflect changes in the Group’s share of the net assets of theassociated companies.
The Group’s share of post-acquisition results and reserves of its associated companies isbased on the latest available management financial statements.
(iii) Jointly controlled entity
The Group’s interest in jointly controlled entity, which is entity in which the Group has shortduration contractual arrangements with third parties to undertake construction and otherprojects, are accounted for in the consolidated financial statements using the equity methodof accounting where the Group’s share of the post acquisition reserves and results of thejointly controlled entity is included in the consolidated financial statements.
Interest in joint venture is stated at cost less provision for any diminution in value, if any. TheGroup’s share of results in the joint venture is included in the income statement and theGroup’s interests in the joint venture is stated at cost plus the Group’s share of the net assets.
(iv) Other investments
Investment in quoted shares held as long term investments are stated at cost less provisionfor permanent diminution in value, if any.
Short term investments are stated at the lower of cost and market value on a portfolio basis.
4.5 Investment properties
The investment properties consist of land and buildings which are held for their investment potentialand rental income. The investment properties are stated at cost and are not depreciated. Theinvestment properties will be revalued at regular intervals of at least once in every 5 years withadditional valuation in the intervening years where market conditions indicate that the carryingvalue of the revalued asset is materially different from the market value. Surpluses arising fromsuch revaluation are credited to shareholders’ funds as revaluation reserve and any deficit shall becharged against such surpluses to the extent that decrease offset any increase. All other deficits arecharged to the income statement.
4.6 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis. The cost of raw material comprises the original cost of purchase plus the cost ofbringing the inventories to their present location and condition. The cost of finished goods includesthe cost of raw materials, direct labour, direct expenses and an appropriate proportion of productionoverheads.
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...........................Annua l Repor t 2002
42
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Notes To The Financial Statements (Cont’d)
31 January 2002
4. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
4.7 Receivables
Known bad debts are written off while specific allowance is made for debts considered to bedoubtful of collection.
4.8 Amounts due from/to customers for contract works
The amounts due from customers for contract works represents contract costs, comprises directcosts and related overheads incurred on uncompleted contracts, plus attributable profits lessforeseeable losses and progress billings received and receivable. The excess of progress billingsover the costs incurred plus attributable profits less foreseeable losses is shown as amounts due tocustomers for contract works.
When the outcome of a construction contract can be estimated reliably, contract revenue andcontract costs associated with the construction contract are recognised as revenue and expensesrespectively by reference to the stage of completion of the contract activity at the balance sheetdate.
When the outcome of a construction contract cannot be estimated reliably, contract revenue arerecognised only to the extent of contract costs incurred that it is probable to be recoverable andcontract costs are recognised as an expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected lossis recognised as an expense immediately.
The stage of completion of a construction contract is determined based on the proportion thatcontract costs incurred for work performed to date bear to the estimated total contract costs.
4.9 Assets acquired under hire-purchase agreements
Assets financed by hire-purchase arrangements which transfer substantially all the risks and rewardsof ownership to the Group are capitalised as property, plant and equipment and the correspondingobligations are treated as liabilities. The property, plant and equipment capitalised are depreciatedon the same basis as owned assets.
Finance charges are allocated to the income statement over the period of the agreements to give aconstant periodic rate of charge on the remaining hire-purchase liabilities.
4.10 Deferred taxation
Deferred taxation is provided for under the liability method at the current tax rate in respect of allmaterial timing differences except where it is reasonably probable that such timing differences willnot crystallise in the foreseeable future.
Deferred tax benefits are recognised in the financial statements only when there is reasonableassurance of their realisation.
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43...........................Annua l Repor t 2002
Notes To The Financial Statements (Cont’d)
31 January 2002
4. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
4.11 Revenue recognition
(i) Construction contracts
Revenue from construction contracts is recognised in the income statement based on stageof completion. The stage of completion of a construction contract is determined based onthe proportion that contracts costs incurred for work performed to date bear to the estimatedtotal contract cost.
(ii) Sales of goods
Revenue from sales of goods are recognised in the income statement upon delivery of goodsand customers’ acceptance.
(iii) Rental income
Revenue from rental income is recognised in the income statement on accrual basis unlesscollectibility is in doubt.
(iv) Dividend income
Dividends are recognised when the shareholders’ right to receive payment is established.
4.12 Cash and cash equivalents
Cash and cash equivalents include cash and bank balances, bank overdrafts, deposits and othershort-term, highly liquid investments which are readily convertible to cash and which are subjectto insignificant risk of changes in value.
5. PROPERTY, PLANT AND EQUIPMENT
Group Balance Balanceas at Written as at
2002 1 February Additions Disposals Off 31 JanuaryRM RM RM RM RM
Cost unless otherwise stated
Freehold land and buildings- at 1998 valuation 3,260,000 – – – 3,260,000Long term leasehold
land and buildings 8,733,005 1,900,000 (2,663,511) – 7,969,494Plant and machinery 17,724,763 500,900 (9,669,173) – 8,556,490Motor vehicles 4,922,786 – (2,424,138) – 2,498,648Furniture, fittings and
office equipment 1,486,289 – (35,425) (12,327) 1,438,537Office renovation 1,922,924 – (131,176) – 1,791,748
38,049,767 2,400,900 (14,923,423) (12,327) 25,514,917
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...........................Annua l Repor t 2002
44
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Notes To The Financial Statements (Cont’d)
31 January 2002
5. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
ChargeGroup Balance for the Balance
as at financial Written as at2002 1 February year Disposals Off 31 January
RM RM RM RM RM
Accumulated depreciation
Freehold land and buildings- at 1998 valuation 127,840 31,960 – – 159,800Long term leasehold
land and buildings 292,356 99,263 (77,789) – 313,830Plant and machinery 12,321,316 1,511,238 (7,678,047) – 6,154,507Motor vehicles 3,950,277 268,658 (2,050,810) – 2,168,125Furniture, fittings and
office equipment 843,538 143,149 (22,262) (6,844) 957,581Office renovation 128,295 92,426 (14,317) – 206,404
17,663,622 2,146,694 (9,843,225) (6,844) 9,960,247
Balance Balanceas at Written as at
2001 1 February Additions Disposals Off Adjustments 31 JanuaryRM RM RM RM RM RM
Cost unlessotherwise stated
Freehold landand buildings
- at 1998 valuation 3,260,000 – – – – 3,260,000Long term leasehold
land and buildings 7,803,652 1,144,640 (215,287) – – 8,733,005Plant and machinery 18,391,063 941,000 (1,607,300) – – 17,724,763Motor vehicles 6,456,074 228,181 (1,761,469) – – 4,922,786Furniture, fittings and
office equipment 1,897,820 55,898 (453,119) (14,310) – 1,486,289Office renovation 2,097,559 96,451 – (164,356) (106,730) 1,922,924
39,906,168 2,466,170 (4,037,175) (178,666) (106,730) 38,049,767
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45...........................Annua l Repor t 2002
Notes To The Financial Statements (Cont’d)
31 January 2002
5. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
ChargeBalance for the Balance
as at financial Written as at2001 1 February year Disposals Off Adjustments 31 January
RM RM RM RM RM RM
Accumulateddepreciation
Freehold land andbuildings
- at 1998 valuation 95,880 31,960 – – – 127,840Long term leasehold
land and buildings 207,500 92,892 (8,036) – – 292,356Plant and machinery 10,549,101 2,800,890 (1,028,675) – – 12,321,316Motor vehicles 4,140,520 797,500 (987,743) – – 3,950,277Furniture, fittings and
office equipment 809,008 196,495 (154,792) (7,173) – 843,538Office renovation 56,881 130,776 – (22,822) (36,540) 128,295
15,858,890 4,050,513 (2,179,246) (29,995) (36,540) 17,663,622
2002 2001RM RM
Net book value
Freehold land and buildings- at 1998 valuation 3,100,200 3,132,160Long term leasehold land and buildings 7,655,664 8,440,649Plant and machinery 2,401,983 5,403,447Motor vehicles 330,523 972,509Furniture, fittings and office equipment 480,956 642,751Office renovation 1,585,344 1,794,629
15,554,670 20,386,145
Company Balance Balanceas at as at
2002 1 February Additions 31 JanuaryRM RM RM
Cost
Motor vehicle 262,000 – 262,000Furniture, fittings and office equipment 148,072 – 148,072Office renovation 2,244,456 – 2,244,456
2,654,528 – 2,654,528
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...........................Annua l Repor t 2002
46
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Notes To The Financial Statements (Cont’d)
31 January 2002
5. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Company Balance Charge for Balanceas at the financial as at
2002 1 February year 31 JanuaryRM RM RM
Accumulated depreciation
Motor vehicle 122,267 52,400 174,667Furniture, fittings and office equipment 23,312 16,993 40,305Office renovation 136,313 112,223 248,536
281,892 181,616 463,508
Balance Balanceas at as at
2001 1 February Additions 31 JanuaryRM RM RM
Cost
Motor vehicle 262,000 – 262,000Furniture, fittings and office equipment 138,452 9,620 148,072Office renovation 2,148,005 96,451 2,244,456
2,548,457 106,071 2,654,528
Balance Charge for Balanceas at the financial as at
2001 1 February year 31 JanuaryRM RM RM
Accumulated depreciation
Motor vehicle 69,867 52,400 122,267Furniture, fittings and office equipment 6,800 16,512 23,312Office renovation 26,850 109,463 136,313
103,517 178,375 281,892
2002 2001RM RM
Net book value
Motor vehicle 87,333 139,733Furniture, fittings and office equipment 107,767 124,760Office renovation 1,995,920 2,108,143
2,191,020 2,372,636
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47...........................Annua l Repor t 2002
Notes To The Financial Statements (Cont’d)
31 January 2002
5. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
(a) The freehold land and buildings were revalued by the directors on 1 February 1998 based on avaluation performed by independent professional valuers using the open market basis.
Had the revalued assets been carried at cost less accumulated depreciation, the carrying amountswould have been as follows:-
Accumulated Net bookGroup Cost depreciation value
RM RM RM
2002
Freehold land and buildings 2,519,295 428,281 2,091,014
2001
Freehold land and buildings 2,519,295 377,895 2,141,400
(b) Included in the net book value of property, plant and equipment are assets acquired under hire-purchase arrangements:-
Group2002 2001
RM RM
At net book value:-Plant and machinery 361,500 586,850Motor vehicles 30,137 149,284
391,637 736,134
(c) The property, plant and equipment of certain subsidiary companies which have been pledged tofinancial institutions for banking facilities granted to the Group are as follows:-
Group2002 2001
RM RM
At net book value:-Freehold land and buildings 3,100,200 3,132,160Long term leasehold land and buildings 4,757,816 6,568,746
7,858,016 9,700,906
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...........................Annua l Repor t 2002
48
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Notes To The Financial Statements (Cont’d)
31 January 2002
6. INVESTMENT IN SUBSIDIARY COMPANIES
Company2002 2001
RM RM
Unquoted shares - at cost 58,274,485 58,274,485
The subsidiary companies, all of which are incorporated in Malaysia, are as follows:-
Interest inequity held by
Name of Company the Company Principal activities2002 2001
Mewah Kota Sdn. Bhd. 100% 100% Contractor for various kindsof building, structural andcivil engineering works
Merge Properties Management 100% 100% InactiveServices Sdn. Bhd.
Merge Properties Sdn. Bhd. 100% 100% Property investment
MEB Development Sdn. Bhd. 100% 100% Inactive
MEB Management Sdn. Bhd. 100% 100% Inactive
Merge Environmental Engineering 100% 100% InactiveSdn. Bhd.
MEB Realty Sdn. Bhd. 100% 100% Property investment
Paramount Ventures Sdn. Bhd. 100% 100% Building and generalconstruction
Merge Readymix Sdn. Bhd. 100% 100% Production of concrete andcement mix
Merge Concrete Technologies 100% 100% Manufacturing of sand bricksSdn. Bhd.
Merge Trading Sdn. Bhd. 100% 100% Trading and marketing ofbuilding materials andequipment
Merge Highway Engineering 100% 100% Civil engineering andSdn. Bhd. infrastructure construction
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49...........................Annua l Repor t 2002
Notes To The Financial Statements (Cont’d)
31 January 2002
7. INVESTMENT IN AN ASSOCIATED COMPANY
Group Company2002 2001 2002 2001RM RM RM RM
Unquoted shares - at cost – 3,059,500 – 3,059,500Amortisation of goodwill on acquisition – (285,197) – –Share of post acquisition profits
less losses – 682,912 – –
– 3,457,215 – 3,059,500
Group2002 2001RM RM
The Group’s investment in associated company is represented by:-
Group’s share of net assets – 1,149,716Goodwill on acquisition less amortisation – 2,307,499
– 3,457,215
The Group’s share of net assets and profit after taxation of the associated company are as follows:-
Group2002 2001RM RM
Property, plant and equipment – 49,775Land and development expenditure – 65,773Current assets – 4,479,769Current liabilities – (3,445,581)Revaluation surplus – (20)
Net assets – 1,149,716
Profit before taxation – 984,095Taxation – (116,800)
Profit after taxation – 867,295
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...........................Annua l Repor t 2002
50
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Notes To The Financial Statements (Cont’d)
31 January 2002
7. INVESTMENT IN AN ASSOCIATED COMPANY (CONT’D)
The associated company, which is incorporated in Malaysia, is as follows:-
Interest inequity held by
Name of Company the Company Principal activity2002 2001
Juta Permai Sdn. Bhd. – 20% Property development
The associated company has been disposed of during the financial year.
8. JOINT VENTURE
Group2002 2001RM RM
Cost of investment 2,530,489 2,530,489Share of results (5,005) –
2,525,484 2,530,489
The Group’s share of net assets and loss for the financial year of the joint venture are as follows:-
Group2002 2001RM RM
Property, plant and equipment 781 –Land and development expenditure 1,633,012 –Current assets 1,584,341 2,530,489Current liabilities (692,650) –
Net assets 2,525,484 2,530,489
Loss for the financial year (5,005) –
The details of the jointly controlled entity are as follows:-
Interest inName of Joint Venture Joint Venture Principal activity
2002 2001
IJMP-MK JV 30% 30% Property development
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51...........................Annua l Repor t 2002
Notes To The Financial Statements (Cont’d)
31 January 2002
9. OTHER INVESTMENTS
Group Company2002 2001 2002 2001RM RM RM RM
At cost
Shares quoted in Malaysia 1,279,080 – 1,261,080 –Less: Provision for diminution in value (183,060) – (183,060) –
1,096,020 – 1,078,020 –
Market value:-
Shares quoted in Malaysia 1,088,620 – 1,078,020 –
Investments of the Company with a carrying amount of RM1,071,660 (2001: Nil) have been pledged assecurity by way of a memorandum of deposit for the term loan facility granted to the Company.
10. GOODWILL ON CONSOLIDATION
Group2002 2001RM RM
Cost
Balance as at 1 February 7,378,356 10,630,294Amount recoverable under profit guarantee – (3,251,938)
Balance as at 31 January 7,378,356 7,378,356
Accumulated amortisation
Balance as at 1 February (925,354) (428,450)Current year amortisation and write-off (6,453,002) (496,904)
Balance as at 31 January (7,378,356) (925,354)
– 6,453,002
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...........................Annua l Repor t 2002
52
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Notes To The Financial Statements (Cont’d)
31 January 2002
11. INVESTMENT PROPERTIES
Group2002 2001RM RM
At cost
Freehold land and buildings 5,642,812 5,642,812
The freehold land and buildings of a subsidiary company costing RM5,642,812 (2001: RM5,642,812)have been charged to a licensed bank for credit facilities granted to the Company.
The directors are of the opinion that the carrying value of the investment properties fairly reflect thecurrent market value.
12. DEFERRED EXPENDITURE
Group2002 2001RM RM
Pre-operating expenses – 11,330Written off during the financial year – (11,330)
– –
13. INVENTORIES
Group2002 2001RM RM
At cost
Raw materials – 40,340Finished goods – 14,607
– 54,947
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53...........................Annua l Repor t 2002
Notes To The Financial Statements (Cont’d)
31 January 2002
14. AMOUNTS DUE FROM/(TO) CUSTOMERS FOR CONTRACT WORKS
Group2002 2001RM RM
Contract costs incurred to date 267,336,753 316,669,011Add: Attributable profits 13,486,889 32,311,215
280,823,642 348,980,226Less: Progress billings (274,369,147) (347,378,328)
6,454,495 1,601,898
Represented by:-
Amounts due from customers for contract works 8,603,066 6,116,644Amounts due to customers for contract works (2,148,571) (4,514,746)
6,454,495 1,601,898
Included in the contract costs of the Group is depreciation of RM724,596 (2001: RM1,542,880).
15. TRADE RECEIVABLES
Group2002 2001RM RM
Trade receivables 64,066,183 109,754,337Less: Allowance for doubtful debts (10,107,274) (9,809,851)
53,958,909 99,944,486
Included in trade receivables of the Group is retention sum for contract works of RM19,286,571 (2001:RM19,942,986).
The allowance for doubtful debts is net of bad debts written off of RM1,969,274 (2001: RM8,516,164).
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...........................Annua l Repor t 2002
54
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Notes To The Financial Statements (Cont’d)
31 January 2002
16. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
Group Company2002 2001 2002 2001RM RM RM RM
Other receivables 1,805,864 685,272 – –Less: Allowance for doubtful debts (9,444) – – –
1,796,420 685,272 – –Profit guarantee debtors 1,083,938 2,167,938 1,083,938 2,167,938Deposits 409,686 566,496 11,200 9,200Prepayments 26,982 83,010 – –
3,317,026 3,502,716 1,095,138 2,177,138
17. SHORT TERM INVESTMENTS
Group Company2002 2001 2002 2001RM RM RM RM
At cost
Shares quoted in Malaysia 3,713,800 – 3,713,800 –Less: Provision for diminution
in value (539,100) – (539,100) –
3,174,700 – 3,174,700 –
Market value:-
Shares quoted in Malaysia 3,174,700 – 3,174,700 –
18. AMOUNTS OWING BY SUBSIDIARY COMPANIES
Company
The amounts owing by subsidiary companies represent advances which bear interest at 1.91% (2001:2.45%) per annum are unsecured and have no fixed terms of repayment.
19. FIXED DEPOSITS WITH LICENSED BANKS
Group
The fixed deposits of the Group of RM4,129,907 (2001: RM3,942,581) have been pledged to licensedbanks to secure banking facilities granted to subsidiary companies.
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55...........................Annua l Repor t 2002
Notes To The Financial Statements (Cont’d)
31 January 2002
20. OTHER PAYABLES AND ACCRUALS
Group Company2002 2001 2002 2001RM RM RM RM
Other payables 1,021,405 1,548,895 98,721 153,790Accruals 2,763,592 2,256,334 83,953 78,407Rental deposits received 116,912 133,671 – –Provision for real property gains tax 1,152,781 – 998,881 –
5,054,690 3,938,900 1,181,555 232,197
21. HIRE-PURCHASE CREDITORS
Group2002 2001RM RM
Minimum hire-purchase payments:-
- not later than one year 186,894 489,867- later than one year and not later than five years 57,168 47,078
244,062 536,945Less: Future interest charges (29,713) (60,548)
Present value of hire-purchase liabilities 214,349 476,397
Current:-- not later than one year 163,814 436,498
Non-current:-- later than one year and not later than five years 50,535 39,899
214,349 476,397
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...........................Annua l Repor t 2002
56
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Notes To The Financial Statements (Cont’d)
31 January 2002
22. TERM LOANS - SECURED
Group Company2002 2001 2002 2001RM RM RM RM
Repayable as follows:-
Within the next 12 months(included under current liabilities) 169,886 206,490 – –
After the next 12 months(included under long term liabilities)
- not later than two years 669,879 211,413 499,198 –- later than two years but not
later than five years 650,811 1,274,565 – –- later than five years 2,588,937 2,316,311 – –
3,909,627 3,802,289 499,198 –
4,079,513 4,008,779 499,198 –
The term loans bear interest at rates ranging from 7.20% to 8.55% (2001: 8.25% to 8.55%) per annum.
The repayment terms are as follows:-
2002 2001RM RM
Group
(a) Term loan of RM910,000 with interest at funding rateplus 1.50% per annum, repayable by 180 monthlyinstalments of RM10,834 each commencing February 1999 811,765 847,798
(b) Term loans of RM1,260,000 with interest at fundingrate plus 2.75% per annum, repayable by 180 monthlyinstalments of RM14,321 each commencing March 1997 1,055,474 1,097,205
(c) Term loans of RM1,220,000 with interest at fundingrate plus 2.00% per annum, repayable by 180 monthlyinstalments of RM12,389 each commencing February 1997 756,597 1,059,820
(d) Term loan of RM619,052 with interest at funding rateplus 2.00% per annum, repayable by 180 monthlyinstalments of RM7,075 each upon full drawdown ofthe term loan 629,160 623,923
(e) Term loan of RM500,000 with interest at funding rateplus 2.00% per annum, repayable by 120 monthlyinstalments of RM7,230 each commencing March 1997 327,319 380,033
Group and Company
(f) Term loan of RM2,328,720 with interest at fundingrate plus 2.50% per annum, repayable by one lumpsum on or before March 2003 499,198 –
4,079,513 4,008,779
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57...........................Annua l Repor t 2002
22. TERM LOANS - SECURED (CONT’D)
The term loans (a) to (e) are secured by first fixed charge over the long term leasehold land and buildingsof two subsidiary companies at net book value of RM3,595,564 (2001: RM5,393,710) and are jointlyand severally guaranteed by the former directors of the subsidiary companies, MEB Realty Sdn. Bhd. andParamount Ventures Sdn. Bhd..
The term loan (f) is secured by the investments in quoted shares of the Company with a carrying amountof RM1,071,660 (2001: Nil) by way of a memorandum of deposit.
23. BANK OVERDRAFTS - SECURED
Group and Company
The bank overdrafts are secured by:-
(a) first fixed charge over the investment properties costing RM5,642,812 (2001: RM5,642,812) of asubsidiary company;
(b) fixed charges over property, plant and equipment at net book value of RM4,262,452 (2001:RM4,307,196) of two subsidiary companies;
(c) pledge of fixed deposits amounting to RM4,099,619 (2001: RM3,913,529) of three subsidiarycompanies;
(d) deed of assignments by way of equitable assignment of proceeds from contracts of two subsidiarycompanies;
(e) debenture covering fixed and floating, present and future assets of two subsidiary companies,Mewah Kota Sdn. Bhd. and Paramount Ventures Sdn. Bhd.; and
(f) sinking fund on contract proceeds received and placed as fixed deposits pledged.
The bank overdrafts are jointly and severally guaranteed by the former directors of a subsidiary company,Paramount Ventures Sdn. Bhd..
The bank overdrafts bear interest at rates ranging from 8.90% to 9.30% (2001: 8.50% to 9.30%) perannum.
24. SHARE CAPITAL
Group & Company2002 2001RM RM
Authorised:-100,000,000 ordinary shares of RM1.00 each 100,000,000 100,000,000
Issued and fully paid:-
67,000,000 ordinary shares of RM1.00 each 67,000,000 67,000,000
Notes To The Financial Statements (Cont’d)
31 January 2002
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...........................Annua l Repor t 2002
58
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25. RESERVES
Group Company2002 2001 2002 2001RM RM RM RM
Non-distributable
Share premium 7,712,508 7,712,508 7,712,508 7,712,508Revaluation reserve 917,056 917,056 – –
8,629,564 8,629,564 7,712,508 7,712,508
Distributable
(Accumulated loss)/Retained profits (36,817,198) 1,403,955 4,402,359 (237,359)
(28,187,634) 10,033,519 12,114,867 7,475,149
Subject to the agreement of the Inland Revenue Board, the Company has tax exempt income amountingto approximately RM485,000 (2001: RM485,000) available for distribution of tax exempt dividends.
26. DEFERRED TAXATION
Group Company2002 2001 2002 2001RM RM RM RM
Balance as at 1 February 671,000 865,424 – –Transfer to income statement (Note 29) (671,000) (194,424) – –
Balance as at 31 January – 671,000 – –
The potential deferred tax benefits of the Group which are not recognised in the financial statements areas follows:-
Group2002 2001RM RM
Tax effect on timing differences in respect of:-
Excess of tax capital allowances over the correspondingdepreciation of property, plant and equipment 208,000 792,000
Unutilised tax losses (18,763,000) (4,479,000)Unabsorbed capital allowances (1,332,000) (1,571,000)
(19,887,000) (5,258,000)
The tax effect of the surplus on revaluation of freehold land and buildings in a subsidiary company ofRM257,000 (2001: RM257,000) has not been provided in the financial statements as the Group has nointention of disposing the revalued assets in the foreseeable future.
Notes To The Financial Statements (Cont’d)
31 January 2002
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59...........................Annua l Repor t 2002
27. REVENUE
Group Company2002 2001 2002 2001RM RM RM RM
Contract works 31,272,912 29,922,525 – –Sale of goods 162,648 5,762,633 – –Rental income 24,350 129,400 – –Dividend income 324,000 – 324,000 –
31,783,910 35,814,558 324,000 –
28. (LOSS)/PROFIT BEFORE TAXATION
Group Company2002 2001 2002 2001RM RM RM RM
(Loss)/Profit before taxationis stated at after charging:-
Allowance for doubtful debts 2,276,141 8,819,851 – –Amortisation and write-off of
goodwill on consolidation 6,453,002 626,539 – –Auditors’ remuneration- current year 85,300 85,300 17,000 17,000- underprovision in prior year 5,720 1,400 – –Bad debts written off 12,430 47,559 – –Deferred expenditure written off – 11,330 – –Depreciation of property, plant
and equipment 2,146,694 4,013,973 181,616 178,375Development expenditure written off 91,656 – – –Directors’ remuneration- fees 238,000 180,000 178,000 180,000- other emoluments 1,161,731 1,357,596 360,646 282,000Discount given to debtors 19,353,054 – – –Hire of machinery and vehicles 968,472 695,018 – –Interest expense- bank overdrafts 1,954,256 1,985,706 266,707 270,920- hire-purchase 63,046 118,752 – –- term loans 389,079 345,375 60,707 –- trust receipts – 8,938 – –- others 364,711 614,432 – –Property, plant and equipment
written off 5,483 148,671 – –Provision for diminution in value
of investments in quoted shares 722,160 – 722,160 –Rental of premises – 23,775 10,200 10,200
Notes To The Financial Statements (Cont’d)
31 January 2002
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...........................Annua l Repor t 2002
60
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28. (LOSS)/PROFIT BEFORE TAXATION (CONT’D)
Group Company2002 2001 2002 2001RM RM RM RM
And crediting:-
Allowance for doubtful debtsno longer required 1,969,274 – – –
Gain on disposal of an associatedcompany, net of real propertygain tax 3,580,541 – 3,985,899 –
Gain on disposal of investmentsin quoted shares 2,392,216 – 2,392,216 –
Gain on disposal of property,plant and equipment 1,940,165 53,592 – –
Gross dividend received frominvestments in quoted shares 324,800 – 324,000 –
Interest income- fixed deposits 139,550 138,437 – 4,140- profit guarantee 53,753 68,157 53,753 68,157- receivable from subsidiary companies – – 266,707 270,920- others – 179,256 – –Rental income 160,194 369,908 – –
Contract cost of the Group recognised as an expense during the financial year amounted to RM43,436,166(2001: RM18,796,922). Cost of inventories of the Group recognised as an expense during the financialyear amounted to RM1,015,513 (2001: RM18,435,519).
29. TAXATION
Group Company2002 2001 2002 2001RM RM RM RM
Current year taxation 245,000 – 245,000 –Underprovision of taxation in
respect of prior years 58,000 317,641 17,000 –Transfer from deferred
taxation (Note 26) (671,000) (194,424) – –
(368,000) 123,217 262,000 –
Although the Group incurred a loss in the current financial year, provision for taxation is required as theCompany has chargeable income and due to the non-availability of Group relief for the losses of subsidiarycompanies to offset against the chargeable income of the Company.
The effective tax rate of the Company in the financial year 2002 is lower than the statutory tax rate duemainly to certain gain which is not considered taxable for tax purposes.
No provision for taxation was made for the Group and the Company in financial year 2001 as the Groupand the Company have no chargeable income.
Notes To The Financial Statements (Cont’d)
31 January 2002
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61...........................Annua l Repor t 2002
29. TAXATION (CONT’D)
Subject to the agreement of Inland Revenue Board, the Group has unutilised tax losses and unabsorbedcapital allowance of approximately RM45,064,000 (2001: RM15,691,000) and RM4,392,000 (2001:RM5,368,000) respectively which are available for set-off against future taxable income.
30. EARNINGS PER ORDINARY SHARE
The earnings per ordinary share for the financial year has been calculated based on the consolidated lossafter taxation of RM38,221,153 (2001: RM20,561,342) and on the number of ordinary shares in issue of67,000,000 (2001: 67,000,000).
31. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT
Group Company2002 2001 2002 2001RM RM RM RM
Purchase of property, plant andequipment (Note 5) 2,400,900 2,359,440 – 106,071
Acquisition of property, plant andequipment by means of hire-purchase arrangements (236,000) (621,098) – –
Acquisition of property, plant andequipment by means ofsettlement of debts (1,900,000) – – –
264,900 1,738,342 – 106,071
32. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise the following balance sheet amounts:-
Group Company2002 2001 2002 2001RM RM RM RM
Fixed deposits with licensed banks 4,129,907 3,942,581 – –Cash and bank balances 256,233 496,677 20,127 3,656Bank overdrafts (21,141,350) (21,021,884) (2,896,230) (2,974,733)
(16,755,210) (16,582,626) (2,876,103) (2,971,077)
Less: Fixed deposits pledgedto licensed banks (4,129,907) (3,942,581) – –
(20,885,117) (20,525,207) (2,876,103) (2,971,077)
Notes To The Financial Statements (Cont’d)
31 January 2002
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...........................Annua l Repor t 2002
62
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33. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Group Company2002 2001 2002 2001RM RM RM RM
(a) Directors’ fees paid to:-
Dato’ Tan Huat Sheng 60,000 57,000 60,000 57,000Foo Whee Kin 20,000 – – –Hj. Ahamat @ Ahmad Bin Yusop 30,000 – – –Datuk Hj. Wan Mohd Hanafiah
Bin Wan Mohd. Saman 22,000 24,000 22,000 24,000Ho Siong San 16,000 – 16,000 –Jamsari Bin Mohamad Aris 22,000 24,000 22,000 24,000Sheah Kok Fah 5,000 – 5,000 –Tan Hoi Chon 36,000 33,000 26,000 33,000Tan Hoon Kai 2,000 – 2,000 –Teh Kok Leong 25,000 42,000 25,000 42,000
238,000 180,000 178,000 180,000
(b) Directors’ other emoluments paid to:-
Abdul Halim Bin Haji Hassan – 8,000 – –Chin Thai Tai 134,400 125,000 – –Dato’ Tan Huat Sheng – 28,236 – –Foo Whee Kin 76,763 139,400 – –Goh Ceah Chuang 109,418 150,000 – –Ho Kim Shing 268,209 312,500 – –Jamal Bin Mohd Aris 201,600 180,000 201,600 180,000Lee Kok Chong 120,960 125,460 – –Lee Kuang Chong 14,003 – 14,003 –Pang Ling 134,400 102,000 134,400 102,000Tan Chean Ping – 5,040 – –Tan Hoi Chon – 26,880 – –Tan Lean Choo – 15,680 – –Thai Pit Chong 87,975 139,400 – –Woo Yew Lam 14,003 – 10,643 –
1,161,731 1,357,596 360,646 282,000
(c) Revenue recognised from theconstruction contractsawarded by:-
Westcourt Corporation Sdn. Bhd. 9,767,062 – – –Feller Resources Sdn. Bhd. 5,778,456 – – –Talu Builders Management
Sdn. Bhd. 212,493 – – –Dataran Kesuma Sdn. Bhd. 620,956 – – –Talu Corporation Sdn. Bhd. 350,334 – – –
Notes To The Financial Statements (Cont’d)
31 January 2002
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63...........................Annua l Repor t 2002
33. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (CONT’D)
Group Company2002 2001 2002 2001RM RM RM RM
(d) Purchase of properties for debtssettlement from FellerResources Sdn. Bhd. 1,900,000 – – –
The above transactions have been entered in the ordinary course of business on a negotiated basis.
The relationship between the Group and the related parties are as follows:-
Identities of related parties Relationship with the Group
Westcourt Corporation Sdn. Bhd. }}
Feller Resources Sdn. Bhd. } Lee Kuang Chong and Woo Yew Lam, both} the directors of the Company, are directors
Talu Builders Management Sdn. Bhd. } and substantial shareholders of Merge} Housing Bhd., the holding company of
Dataran Kesuma Sdn. Bhd. } these companies.}
Talu Corporation Sdn. Bhd. }
34. CONTINGENT LIABILITIES - UNSECURED
Group Company2002 2001 2002 2001RM RM RM RM
Corporate guarantees given tolicensed banks for bankingand credit facilities granted tosubsidiary companies – – 31,904,526 32,404,526
Corporate guarantees given tolicensed banks for creditfacilities granted to a formerassociated company – 4,350,000 – 4,350,000
Corporate guarantees givento suppliers for credit facilitiesgranted to subsidiary companies – – 2,700,000 9,800,000
Corporate guarantees given tomain contractors for dueperformance of contract worksby subsidiary companies – – 1,086,453 2,406,238
– 4,350,000 35,690,979 48,960,764
Notes To The Financial Statements (Cont’d)
31 January 2002
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64
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35. NUMBER OF EMPLOYEES AND STAFF COSTS
(a) The number of employees of the Group and of the Company, including executive directors, at theend of the financial year are as follows:-
Group Company2002 2001 2002 2001RM RM RM RM
Number of employees
Administration 38 61 11 12Operation 11 38 – –
49 99 11 12
(b) Staff costs for the financial year are as follows:-
Group Company2002 2001 2002 2001RM RM RM RM
Staff costs
Administration 2,681,336 3,400,986 613,334 614,073Operation 688,122 1,562,793 – –
3,369,458 4,963,779 613,334 614,073
36. SEGMENT REPORTING
No segmental information is presented as the Group is primarily engaged in construction activities andoperates predominantly in Malaysia.
37. PROFIT GUARANTEE
Pursuant to the Sale and Purchase Agreement dated 3 December 1998 for the acquisitions of ParamountVentures Sdn. Bhd., Merge Highway Engineering Sdn. Bhd., Merge Readymix Sdn. Bhd., Merge TradingSdn. Bhd. and Merge Concrete Technologies Sdn. Bhd. (collectively known as “PV Companies”) by theCompany, the vendors have jointly and severally warranted that the aggregate profit after taxation of thePV Companies collectively shall not be less than RM7,800,000 for a two years period from 1 January1998 to 31 December 1999.
Upon the finalisation of the financial statements of the PV Companies for the aforementioned two yearsperiod, there was a shortfall in the profit guaranteed amounting to RM3,251,938.
An amount of RM1,084,000 has been received from the vendors during the financial year. Subsequent tothe financial year, an amount of RM495,697 has been received, leaving a balance of RM588,241 whichis expected to be received by 30 June 2002.
Notes To The Financial Statements (Cont’d)
31 January 2002
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65...........................Annua l Repor t 2002
38. SIGNIFICANT EVENT DURING THE FINANCIAL YEAR
On 13 February 2001, the Company has disposed of 1,050,000 ordinary shares of RM1.00 eachrepresenting 20% of the equity interest in an associated company, Juta Permai Sdn. Bhd., to MergeHousing Bhd. (“MHB”) for a total consideration of RM8,044,406 to be satisfied by the issuance of 6,447,000ordinary shares of RM1.00 each at approximately RM1.24 per ordinary share of MHB and cashconsideration of RM50,000.
On 23 February 2001, the Company has subscribed for its Restricted Rights Issue entitlement of 1,878,000new ordinary shares of RM1.00 each at the price of RM1.24 per ordinary share in MHB.
In conjunction with the listing of MHB’s ordinary shares on the Main Board of the Kuala Lumpur StockExchange (“KLSE”), the Company has offered for sale 4,014,000 ordinary shares of MHB of RM1.00 eachat an offer price of RM1.80 per ordinary share to approved Bumiputera investors nominated by theMinistry of International Trade and Industry. However, of the 4,014,000 ordinary shares offerred for saleby the Company, only 1,019,000 ordinary shares have been accepted and paid for by several approvedBumiputera investors, leaving a balance of 2,995,000 ordinary shares unsubscribed which are placedwith Aseam Malaysia Nominees (Tempatan) Sdn. Bhd., as stakeholder, until such time when they aretaken up by approved Bumiputera investors.
39. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
On 8 March 2002, Southern Investment Bank Berhad had on behalf of Lee Heng Choong (“Offeror”),served a Notice of Conditional Mandatory Offer (“Notice”) on the Company to acquire the remaining37,377,001 ordinary shares of RM1.00 each in MEB (“Offer”), representing 55.79% of the issued andpaid-up share capital of the Company not already owned by the Offeror and persons acting in concertwith the Offeror, namely Mr. Lee Kuang Chong and Mr. Woo Yew Lam, at a cash price of RM0.65 peroffer share payable in cash.
A copy of the Notice containing the principal terms and conditions of the Offer was sent to all shareholdersby the Company in a notification to shareholders dated 14 March 2002. The Board of Directors hasappointed an Independent Adviser to the shareholders of the Company in relation to the Offer.
On 2 May 2002, the Foreign Investment Committee (“FIC”) has approved and the Kuala Lumpur StockExchange has given its clearance on the Offeror’s proposal in relation to the Offer. The FIC’s approval issubject to the condition that the Company increasing its Bumiputra shareholdings to at least 30% by 31December 2003. The approval of the Securities Commission in relation to the Offer was obtained on 21May 2002.
The Offer document has been despatched to the shareholders on 22 May 2002.
Notes To The Financial Statements (Cont’d)
31 January 2002
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...........................Annua l Repor t 2002
66
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40. COMPARATIVE FIGURES
The comparative figures which have been re-presented to conform with current financial year’s presentationare as follows:-
GroupAs
previously Asreported restated
RM RM
(a) Balance Sheets
Joint venture – 2,530,489Trade receivables 102,474,975 99,944,486
(b) Cash Flow Statements
Decrease in amounts due from customers forcontract works 3,620,569 9,516,631
Decrease in amounts due to customers forcontract works – (7,438,942)
Decrease in trade receivables 12,046,799 14,577,288Investment in joint venture – (2,530,489)
Notes To The Financial Statements (Cont’d)
31 January 2002
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67...........................Annua l Repor t 2002
List Of Properties
Date ofTenure Land Area Net Book Acquisition/
Description (Age of (Built-up Value @ Date of LastLocation (Existing Use) Building) Area) 31/1/2002 Valuation*
sq. ft. RM
Lot 000201 (GN 5078) 4 storey Freehold 2,185 803,383 31.12.1996 *Bandar Alor Setar, shophouse (17 years) (8,689)Daerah Kota Setar, (office)Kedah Darul Aman.
Lot 000202 (GN 5079) 4 storey Freehold 2,110 765,606 31.12.1996 *Bandar Alor Setar, shophouse (17 years) (8,480)Daerah Kota Setar, (office)Kedah Darul Aman.
Lot 000203 (GN 5080) 4 storey Freehold 2,110 765,606 31.12.1996 *Bandar Alor Setar, shophouse (17 years) (8,480)Daerah Kota Setar, (office)Kedah Darul Aman.
Lot 000204 (GN 5081) 4 storey Freehold 2,110 765,606 31.12.1996 *Bandar Alor Setar, shophouse (17 years) (8,480)Daerah Kota Setar, (office)Kedah Darul Aman.
H.S. (D) 544/96 to 552/96, 24 units of Freehold 38,595 5,642,812 24.12.1999 *Lots 747 to 755 shophouse (3 ½ years) (51,936)H.S. (D) 512/96 to 526/96, (vacant)Lots 715 to 729, Sek 41Mukim Kulim,District of Kulim,Kedah Darul Aman.
Lot 51, P.T. 14385 and 1 ½ storey Leasehold 3,000 461,218 17.7.1998 *Title No. H.S. (D) 80094 terrace factory expiring on (4,290)Mukim Damansara, (factory) 13.10.2092Daerah Petaling, (3 ½ years)Selangor Darul Ehsan.
Lot 52, P.T. 14385 and 1 ½ storey Leasehold 3,000 461,218 17.7.1998 *Title No. H.S. (D) 80094 terrace factory expiring on (4,290)Mukim Damansara, (factory) 13.10.2092Daerah Petaling, (3 ½ years)Selangor Darul Ehsan.
Lot 253, P.T. 14385 and 1 ½ storey Leasehold 2,000 289,178 17.7.1998 *Title No. H.S. (D) 80094 terrace factory expiring on (2,875)Mukim Damansara, (factory) 13.10.2092Daerah Petaling, (3 ½ years)Selangor Darul Ehsan.
Lot 254C, P.T. 14385 and 1 ½ storey Leasehold 3,964 614,469 17.7.1998 *Title No. H.S. (D) 80094 terrace factory expiring on (5,600)Mukim Damansara, (factory) 13.10.2092Daerah Petaling, (3 ½ years)Selangor Darul Ehsan.
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List Of Properties (Cont’d)
Date ofTenure Land Area Net Book Acquisition/
Description (Age of (Built-up Value @ Date of LastLocation (Existing Use) Building) Area) 31/1/2002 Valuation*
sq. ft. RM
Lot 354C, P.T. 31202 and Single storey Leasehold 3,379 119,136 17.7.1998 *Title No. H.S. (D) 92077 terrace factory expiring on (3,379)Mukim Sungai Buloh, (factory) 07.12.2093District of Petaling Jaya, (4 years)Selangor Darul Ehsan.
Lot 355, P.T. 31203 and Single storey Leasehold 1,700 102,200 17.7.1998 *Title No. H.S. (D) 92078 terrace factory expiring on (1,700)Mukim Sungai Buloh, (factory) 07.12.2093District of Petaling Jaya, (4 years)Selangor Darul Ehsan.
Lot 444, P.T. 31009 and 2 ½ storey Leasehold 18,238 720,920 4.9.2001 *Title No. H.S. (D) 91884 semi-detached expiring on (5,400)Mukim Sungai Buloh, factory 07.12.2093District of Petaling Jaya, (factory/office) (4 years)Selangor Darul Ehsan.
Lot 449, P.T. 31018 and 2 ½ storey Leasehold 17,668 827,223 4.9.2001 *Title No. H.S. (D) 91893 semi-detached expiring on (5,400)Mukim Sungai Buloh, factory 07.12.2093District of Petaling Jaya, (factory/office) (4 years)Selangor Darul Ehsan.
Lot 416, P.T. 31094 and 3 storey Leasehold 23,153 1,162,252 8.9.1997 *Title No. H.S. (D) 91969 detached factory expiring on (10,240)Mukim Sungai Buloh, (factory/office) 07.12.2093District of Petaling Jaya, (4 years)Selangor Darul Ehsan.
Parcel C-406, P.T. 1400 and One unit of Leasehold — 93,641 17.11.1999Title No. H.S. (D) 11044 5 storey medium expiring on (1,031)C-406, Pangsapuri cost apartment 28.01.2097Seri Teratai, (vacant) (2 ½ years)Jalan Kiambang 2B,Pinggiran Tasik Kiambang,48200 Serendah,Selangor Darul Ehsan.
Lot 097(C), P.T. 37998 and 2 storey Leasehold 7,280 925,556 7.6.2000Title No. H.S. (D) 138849 shop-office expiring on (3,610)Mukim Sungai Buloh, (vacant) 16.07.2099District of Petaling Jaya, (2 year)Selangor Darul Ehsan.
Lot 043(E), P.T. 31508 and 3 storey Leasehold 2,516 939,326 23.4.2001Title No. H.S. (M) 9741 shop-office expiring on (8,916)Mukim Sungai Buloh, (vacant) 25.01.2095District of Petaling Jaya, (6 year)Selangor Darul Ehsan.
Lot 071(E), P.T. 31479 and 3 storey Leasehold 2,516 939,326 23.4.2001Title No. H.S. (M) 9713 shop-office expiring on (8,916)Mukim Sungai Buloh, (vacant) 25.01.2095District of Petaling Jaya, (6 year)Selangor Darul Ehsan.
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69...........................Annua l Repor t 2002
As at 30 April 2002
Class of shares : OrdinaryNominal Value : RM1 per Ordinary ShareVoting Rights : 1 vote per Ordinary Share
ANALYSIS BY SIZE OF SHAREHOLDINGS
No. of % of No. of % ofSize of Holdings Shareholders Shareholders Shares Shares
Less than 1,000 2 0.14 4 0.001,000 to 10,000 1,320 89.79 3,368,000 5.0310,001 to 100,000 126 8.57 3,631,000 5.42100,001 to less than 5% of issued shares 17 1.16 13,391,000 19.985% and above of issued shares 5 0.34 46,609,996 69.57
1,470 100.00 67,000,000 100.00
SUBSTANTIAL SHAREHOLDERS
No. of Shares HeldNames Direct % Indirect %
Lee Heng Choong 23,544,999 35.14 2,680,001 4.00Hiap Huat Realty Sdn. Bhd. 16,472,997 24.59 – –Ho Kim Shing 5,542,000 8.27 – –Persada Angsana Sdn. Bhd. 4,824,000 7.20 – –Woo Yew Lam 3,110,999 4.64 – –Lee Kuang Chong 2,680,001 4.00 23,544,999 35.14Tan Huat Sheng 323,758 0.48 16,764,379 25.02Tan Hoi Chon 215,839 0.32 16,710,420 24.94Tan Lean Choo 539,598 0.81 16,472,997 24.59Hj Ahamat @ Ahamad Bin Yusop – – 4,824,000 7.20
THIRTY LARGEST SHAREHOLDERS
Names No. of Shares %
1. Hiap Huat Realty Sdn. Bhd. 14,472,997 21.602. Perdana Nominees (Tempatan) Sdn. Bhd.
(A/C for Lee Heng Choong) 13,817,999 20.623. Lee Heng Choong 8,995,000 13.434. Persada Angsana Sdn. Bhd. 4,824,000 7.205. Ho Kim Shing 4,500,000 6.726. Woo Yew Lam 3,110,999 4.647. Lee Kuang Chong 2,680,001 4.008. UOBM Nominees (Tempatan) Sdn. Bhd.
(A/C for Hiap Huat Realty Sdn. Bhd.) 2,000,000 2.999. Solarcom Sdn. Bhd. 1,300,000 1.94
10. RHB Capital Nominees (Tempatan) Sdn. Bhd.(A/C for Ho Kim Shing) 1,042,000 1.56
11. Tan Lean Choo 539,598 0.81
Analysis Of Shareholdings
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...........................Annua l Repor t 2002
70
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Names No. of Shares %
12. Kuala Lumpur City Nominees (Temp) Sdn. Bhd.(Othman & Associates for Lee Heng Choong) 513,000 0.77
13. Tan Huat Sheng 323,758 0.4814. Goh Beng Ee 300,000 0.4515. Lim Ah Gek @ Lim Chor Kheng 291,382 0.4316. Chong Kit Foong 243,000 0.3617. Ang Swee Pian @ Ang Swee Yong 237,423 0.3518. Tan Hoi Chon 215,839 0.3219. Amsec Nominees (Tempatan) Sdn. Bhd.
(A/C for Lee Heng Choong) 215,000 0.3220. Goh Ceah Chuang 160,000 0.2421. Phua Seng Lam 110,000 0.1622. Wong Nam Yun 109,000 0.1623. Amsec Nominees (Tempatan) Sdn. Bhd.
(A/C for Tan Kim Huat) 100,000 0.1524. Chong Liau Kong 100,000 0.1525. Hew Choy Yin 100,000 0.1526. JMR Construction Sdn. Bhd. 100,000 0.1527. Leong Ah Keow 93,000 0.1428. Fong Ah Choy 90,000 0.1329. Amsec Nominees (Tempatan) Sdn. Bhd.
(A/C for Tan Yap Mooi) 75,000 0.1130. Kenanga Nominees (Tempatan) Sdn. Bhd.
(A/C for Soh Cheong Fatt) 75,000 0.11
Analysis Of Shareholdings (Cont’d)
PROXY FORM
No. of shares held
I/We, I.C./Passport/Company No.
of
being a member of MERGE ENERGY BHD hereby appoint
I.C./Passport No.
or failing him, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the FifthAnnual General Meeting of the Company to be held at the East VIP Lounge, Kuala Lumpur Golf & CountryClub, No. 10, Jalan 1/70D, Off Jalan Bukit Kiara, 60000 Kuala Lumpur on Thursday, 27 June 2002 at 10:00 a.m.and at any adjournment thereof.
No. Resolutions For Against
1 Resolution 1
2 Resolution 2
3 Resolution 3
4 Resolution 4
5 Resolution 5
6 Resolution 6
7 Resolution 7
8 Resolution 8
9 Resolution 9
10 Resolution 10
11 Resolution 11
Dated this day of 2002Signature/Common Seal of Shareholder
Notes:
1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and votein his stead. A proxy need not be a member of the Company.
2. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorisedin writing or if such appointer is a corporation under its Common Seal or the hand of his attorney. The instrumentappointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.
3. All forms of proxy must be deposited at the Registered Office of the Company at Suite 1701, 17th Floor, WismaHamzah Kwong Hing, No. 1, Leboh Ampang, 50100 Kuala Lumpur, Malaysia not less than forty-eight (48) hoursbefore the time appointed for holding the Meeting or any adjournment thereof.
4. The signature of any joint holder is sufficient.
5. Unless voting instructions are indicated in the spaces provided above, the proxy may vote as he thinks fit.
(Company No. 420099-X)(Incorporated in Malaysia)
Fold this flap for sealing
Then fold here
1st fold here
THE SECRETARYMERGE ENERGY BHD.Suite 1701, 17th Floor
Wisma Hamzah-Kwong HingNo. 1 Leboh Ampang50100 Kuala Lumpur
AFFIXSTAMP
(420099-X)